Common-Sense-Investing

Personal Trades- Week of May 24th

noreply@blogger.com (C.J.) — Wed, 26 May 2010 10:00:00 +0000

The front page of "Money and Investing" section of the Wall Street Journal on Monday reported that the massive financial regulation bill, which is making its way through Congress now, will lower some big bank credit ratings, meaning their borrowing costs will be higher in the future. The banks mentioned specifically in the article were Citigroup and Bank of America.

I already had my eye on buying put options on Bank of America (BAC) prior to the article and when I saw that Bank of America stock was actually higher in the morning and afternoon session after reading it, my interest piqued even more so. This meant that their options might be trading abnormally cheaply, which made no sense to me, given the chaos of the Euro and of the European banking system as whole. So I looked into BAC's options pricing and, not surprisingly, liked what I saw. The news and the stock price contradicted itself, especially in light of the European financial situation.

I bought to open 10 BAC $15 June puts at $0.50 and 20 BAC $14 puts at $0.28.

Also, as I am long the iShares Silver Trust ETF (SLV) (at an average price of $12.45) but also believe that silver will continue to fall short-term against the dollar, due to flight to quality from the European situation, coupled with its dramatic recent run-up, I purchased 5 SLV $17 puts at $0.40 and 10 SLV $16 puts at $0.15.

I feel as though I received a good price-point for each of these contracts, although I would have liked to have paid $0.25 for the 20 BAC $14 puts. In hindsight, I feel as though I reached for that contract emotionally, rather than waiting for the price of volatility to swing back in favor, as, after all, there is still nearly a month until the contract expires. This is why people should write down rules to investing and adhere to them. I am working on developing mine with experience attached to it.

On May 25th I purchased to open 10 BAC $13 puts at $0.25, 25 SLV $15 puts at $0.08 and 5 CEDC $20 at $0.50.

I queued each of these orders prior to the market's open, knowing that the market would open much lower based on Asia and Europe's overnight activity. I entered the orders in hopes of grabbing them early in the session and quickly turning them over for a nice profit. Unfortunately, that nice profit came and went in the blink of an eye within the first 30 minutes of the session, and I was, of course, indisposed with other obligations at the time. A very poor mistake on my part.

It obvious that I reached for each of these contracts and might have hell to pay for them in the short-term. I am nervous that the market will open strong tomorrow, causing me to get crushed in the process, however, I believe that the correction we have experienced over the past few weeks is not over for the U.S. market, and I remain convinced that I will achieve a nice gain with the majority of these contracts. That is not to say, however, that I won't sell into major gains, in an effort to play with "house money." This is my objective, and it will always be my objective, especially in the volatile options market.

It is very evident that I should have created rules for myself regarding the options market prior to my delving into them. I know better than that and am disappointed in myself for that lapse of judgment. I plan on having template in place within the next day or so, specifically regarding enter and exit strategy, and then continuing to develop that plan as I gain more experience.

As of the close on May 25th, my holdings stood at (last trade price):

Short Sales:

- 300 shares of WFMI short at $40; ($39.54/share)

Put Options:

- 3 CEDC $25 at $0.45; ($2.90)
- 5 CEDC $20 at $0.50; ($0.50)

- 10 BAC $15 June puts at $0.50; ($0.59)
- 20 BAC $14 puts at $0.28; ($0.32)
- 10 BAC $13 puts at $0.25; ($0.19)

- 5 SLV $17 puts at $0.40; ($0.41)
- 10 SLV $16 puts at $0.15; ($0.18)
- 25 SLV $15 puts at $0.08; ($0.07)

Gold Rising as Euro Weakens Spurs More Speculation

noreply@blogger.com (C.J.) — Tue, 25 May 2010 15:00:00 +0000

http://www.bloomberg.com/apps/news?pid=20601087&sid=a6f.XxAJB0Rc

I have no doubt that the demand for gold will be strong for some time to come. One can hardly watch a news program without being inundated with gold commercials. However, unlike many pundits, I believe that the U.S. dollar index will increase in value against gold over the short- to mid-term, much as we are seeing in today's market.

We are in a deflationary environment and have been since 2007, when the housing bubble began to collapse. The dollar will remain king until there is no reason to believe it has value and/or we start to find true growth in the economy. Both of these instances are still far off on the horizon.

Check out the latest installment of My Prediction on the Economy and Market for insight into my simple 2-step approach on how you can conserve your wealth during this tumultuous time period... and how you can grow your wealth too!

Economists See Solid U.S. Growth

noreply@blogger.com (C.J.) — Tue, 25 May 2010 13:00:00 +0000

http://online.wsj.com/article/SB10001424052748704167704575258620270541194.html?KEYWORDS=economists+see

Even more reason to short the market in the time period ahead. Less consumer saving is a short-term economic solution, but it is also one that is quickly reversed, as we saw in 2008. The more optimistic economists and market pundits get, the more conviction I have that the market is due for a big correction.

Personal Trades- Week of May 10th

noreply@blogger.com (C.J.) — Tue, 25 May 2010 10:00:00 +0000

As pronounced in my recently published third installment of "My Prediction on the Economy & Market," I started to purchase put options against some of the more volatile stocks that I have had on my radar for quite some time.

As cited in May 11th's Bloomberg story posted here on Common-Sense-Investing, the Euro continued to weaken against the dollar after the EU and IMF extended a $1 trillion loan to Greece. To me, that triggered my instincts to look for a European company that might be dramatically effected by such news. I knew I already had one in a company that I have loved for over a decade, Central European Distribution Company (CEDC).

CEDC is the largest vodka manufacturer in Poland and Russia, as well as the owner of another large distillery in Hungary. It is based in the U.S. and started out as purely a distribution company in Poland but has recently delved into production of vodka, looking to increase its margins, while maintaining their already market-leading distribution position in Poland.

I became aware of CEDC in 2000 after doing some market research following a three-month internship in Poland. I thought of working there someday but hesitated to purchase its stock, after a bad experience in owning micro-cap stocks, which it was at the time with a market valuation of around $100 MM. For the next decade I kicked myself for not owning it, as the stock price shot up more than 20 times.

In 2008, I jumped at the chance to own the stock after it sunk from $70 to $20. I later sold it for around $30 and then jumped back in when it fell back to $20; however, I sold it that same day after Congress failed to pass TARP the first time around. I watched as my favorite little-known stock fell all the way to $6/share in March 2009. I listened to their quarterly call, which was ironically held around that time, and thought to purchase a small amount of it, remembering my plan to average cost purchase the shares, but instead hesitated. The stock jumped past $12 within days, and I hesitated the purchase the stock, knowing that the economic downturn was not over but overlooking the effect of government inflation. CEDC rose to over $40 most recently and remains one of my favorite long-term ideas.

I have maintained my knowledge of Polish knowledge since the days of 2000 and know that as Germany and Western Europe goes, so does Poland. Knowing that the Euro was going to continue to collapse after reading the Bloomberg article on May 10th, I jumped at the chance to buy put options on volatile CEDC, which had fell more than 15% two days prior due to a lowered outlook, then the next day rose 15% on news of the bailout.

I purchased 3 June $25 puts at $0.45 on May 10th without hesitation-- the stock was trading at $30, up from $26 the previous day-- not understanding why the market had priced them so cheaply, especially in light of the falling Euro. The options, which expire on June 25th last traded at $2.00.

In hindsight, I should have purchased many more options given the price, coupled with the news of the falling Euro, but I also understood just how quickly one could also lose money in options and hesitated. A lessen I hope to overcome the next time I see a steal.

On May 13th I read Whole Foods' conference call on Seeking Alpha and noted the companies exceedingly optimistic outlook for the remainder of the year and 2011. Knowing that the firm's sales had fallen dramatically during the latest recession, I knew that their comparable numbers, as also noted by management, were exceedingly low. I was stunned at the level of optimism of management and saw that the stock had been upgraded and was at a 52-week high (with an equally high P/E to boot) on the same day as a falling market, and checked out their options. I liked what I saw, even though the options were close to their expiration date.

I purchased 10 May $40 puts at $0.15, believing that the stock would fall along with the stock market out of fear of the collapsing Euro. WFMI was trading at $42.50 at the time, meaning that the market had discounted the stock's volatility by a ridiculous margin. I sold 5 options at $0.65 the next day and 2 at $1.00 on May 21st. I allowed the remaining 3 options to exercise and now hold 300 shares of WFMI short. The stock closed at $39.24 on May 21st.

I continue to have conviction that the stock market will fall for the foreseeable future, acknowledging that it will ebb and flow like all markets do. Therefore, I will remain cautious on short-term options and will continue to look for cheap, long-term put option contracts in which I can invest a significant amount of my portfolio. I have total conviction in my long-term outlook for the economy and plan on making money this time around after not being prepared the last time.

My Prediction on the Economy & Market (continued)

noreply@blogger.com (C.J.) — Mon, 24 May 2010 10:00:00 +0000

Based on my previous articles, right about now, you may be asking yourself, "If our country's finances are in such peril, why will the dollar strengthen? Why wouldn't gold or commodities, which traditionally have a negative correlation with the dollar, be the place to invest?"

As I discussed in my previous articles, nearly all goods, currencies and investments, including precious metals, fell in price during the market crash of 2008. This was due to people panicking, hoarding their currency and attempting to pay down their bills and/or save their cash on hand in preparation for more hard times to come. The government provided the banking industry with TARP and TALF, in hopes that rescuing them would give the banks the security needed to push them to lend again. As we now know, lending standards have increased dramatically since the mortgage bubble popped and, in turn, rather than lending out the government’s money, the banking industry has been using it and the Federal Reserve’s cheap lending rates to pad their own pockets and continue on their merry ways with the same risk taking that got them into their predicament in the first place.

Rather than selling securitized mortgages, these cheap loans to the banking industry are being swapped for Fed-subsidized derivatives, stocks and bonds and other investment vehicles, using the Fed's zero percent rate in order to make money off the backs of the government's artificial inflation and, thus, creating much of the rise in the stock market. In return, bank profits have soared, allowing them to quickly pay back the government’s (forced) loans and they are now, once again, back to their high times… on the coattails of investors who took their hype... and bait, hook, line and sinker.

In my opinion, the crash that happened just a few, short years will most certainly repeat itself. The financial industry will, once again, get caught with their pants down and be forced to sell securities all at the same time, just like occurred in 2008. Already nervous investors, who bought into the market hype, will once again find themselves grasping for anyone who willing to take their securities off their hands. Only this time, investors will be less willing to take on the risk, as major world currencies, led by the Western industrialized nations, lose investor confidence. We see this already happening with Greece and the Euro. Even after the IMF and Europe’s nearly $1 billion rescue, investors the next day sold the Euro in favor of precious metals and the U.S. dollar. The Euro has lost 20% to the dollar in the weeks since.

The U.S. dollar, in my opinion, will be the last Western currency to lose its value, even though it should probably be one of the first, due to our previously discussed perilous fiscal position. This will again be the case, just as it was in 2008, because investors view the U.S. dollar to be the safest currency on the planet, due to it being the world's reserve currency. Our treasuries are largely considered to be the single safest investment in the world, as is commonly referred to in the investment world as the “risk-free rate.”

This perception is not to be underestimated and, therefore, will, once again, be the single-most popular investment in the world. As witnessed already, this perception is the only reason why our bond yields have remained lower than most anywhere in the world, even though our supply of debt on the world market has increased dramatically, to stupefying levels. This is due to sovereign wealth funds still craving our treasuries. As such, even though a massive quantity of dollars is on the market and will be even more so in the future, demand, in my opinion, will outweigh supply, at least temporarily, and again push the U.S. dollar back to 2008 levels and higher.

Perception is not the only reason why the dollar will soar. Practicality is also at play. Investors, as well as much of the world’s industrialized population, are heavily in debt and since the U.S. dollar is still the most heavily used currency in the world for global transactions, the dollar will retain its value even more so than other currencies. Investors, corporations, and the world’s citizens still have bills to pay… and they will pay in dollars.

Mortgages will also play a part in strength of the dollar, but in a way that seems non-commonsensical to most. Personal, corporate and public bankruptcies will play a huge role in the strength of the dollar, as will the vaunted system called the fractional reserve banking system. As previously discussed, loose bank reserve requirements and loan underwriting allow banks to create credit out of thin air under the fractional reserve system, creating something called the money multiplier effect. However, in times of trouble, that credit can just as easily disappear.

When someone, for instance, defaults on a mortgage that credit is vaporized from the money supply just as quickly as it was created. As we saw just a few years ago, this creates a massive deflationary effect on the economy, since dollars are less plentiful. When the cause is a systemic dilemma, such as with the mortgage crisis, credit evaporates quickly, creating deflated prices almost instantaneously. This is partly the reason why nearly all good prices collapsed during the latest crisis, in conjunction with the U.S. dollar playing the role as the world's reserve currency.

The U.S. mortgage crisis still lingers beneath the surface more than most news people care to admit, and it will again play a large role in the coming period. As of February, nearly 25% of all mortgages were underwater, or the value of the mortgage was worth more than the underlying asset (home). When you factor in the number of adjustable rate and Alt-A mortgages that are due to reset this year, as shown here by Credit Suisse, it appears imminent that many more mortgages will be underwater, as the supply of homes onto the market dramatically overwhelms the number of buyers. Repossessions are expected to reach 1 million this year, according to RealityTrac. During the quarter ending in March alone, the number of repossessions was 16% higher than the year prior. The number of banks on the FDIC watch list now stands at 775, as of the end of March, versus 702 at the end of 2009.

Just like in 2008, I predict the FDIC will attempt to calm the populous as the number of banks on their continues to rise, however, as discussed in my last article, we already know that the FDIC is broke. There will be no way for the FDIC to continue to guarantee consumer certainty without intervention by the government.

Traditionally banks have offset defaults by creating additional loans, increased banking fees, decreased interest rates in checking accounts, etc. However, in times of mass uncertainty, such as during the recent mortgage crisis, banks become fearful of making another bad mortgage or loan, and resort to government for assistance or through calling its other mortgages or loans, as was done during the Great Depression.

The latter choice is one that, I believe, the banks will eventually have to take as, the public sentiment against rescuing the banking industry this time around will make it much more difficult to pass a TARP-like bill. Citizens have seen little return on their taxpayer investment and now realize that we cannot afford to further burden our already fragile economy and financial situation. More importantly, the world and the Federal Reserve understand that point as well, which will make a bailout option one that could literally break the back of our economy. It is during this time that I believe citizens will eventually realize that the FDIC is broke and as banks fail, they will understand the fragility of the fractional reserve banking system personally through loss of their once-believed safe FDIC-backed deposits.

The U.S. will face an interest rate dilemma and the turning point will most likely be when the U.S. government faces the option of either bailing out the banking industry again or biting the bullet and cutting entitlements and government spending, allowing the banks to fail. Based on the sentiment in the U.S. at the moment, it is my hope that the latter might occur before the former, but that could also be determined on when exactly the next crisis happens. It is much tougher for a politician to stand on principals, not spending, especially in an election year, but the nation is now aware that it is the right move, just as FDR's Secretary of Treasury, Henry Morgenthau, Jr. realized, eight years after he helped to create the New Deal. Whether the government will make the right decision may be too much to ask, although it is my hope that the people's voice will prevail.

There has been a lot of talk during the past couple of years about the dollar being replaced with a basket of currencies. During the impending economic environment, there will be more such talk; however, the world is not yet ready to make such a change. Everyone realizes that the emerging markets, the BRIC nations (Brazil, Russia, India, China), in particular, will be the world’s growth engine for decades to come, but none of these nations is ready to take on that responsibility or is able to absorb the dramatic transfer of wealth without creating a huge economic debacle for their own country.

China, for instance, is still a very poor nation with a population that traditionally saves approximately 40% of their income. China must transform its citizens from savers into spenders in order to grow its industry and, in turn, its economic wealth. China also has a significant problem with its disparity of wealth, as the nation’s wealth is in the hands of relatively few people. Most people don't realize that the per capita income of China is just $3,600. China must grow economically from within in order to expand its citizens’ purse pockets. Changing a culture takes time and China is no exception to that rule.

I could continue further as to why I believe the dollar will remain strong for the foreseeable future, at least temporarily, however, the above are my principal reasons. Yes, they are many of the same that contributed to the dollar’s strength in 2008 and will also, in my opinion, be the same explanations for why this pattern will repeat itself.

The caveat to my reasoning, however, is that the dollar will continue to gain in strength in the time period ahead and climax, just like it did in March 2009, but this time the it will collapse and there will be no other place to invest, save for one, precious metals.

It is my belief that we are on the prefaces of a total economic collapse. The world, for the most part, as a whole, has inflated their respective currencies in hopes of staving off imminent economic disaster. Rather than take the sound economic action in allowing businesses to fail and recessions to occur, world governments have chosen, instead, to take the political response by inflated their currencies and, in turn, created the beginning of a meltdown the likes of which the modern world has not seen. The Fall of Rome is imminent, and, in the end, gold and precious metals will prevail, just like it has for millenniums.

Of course, I am not a fortune teller, but this is my best hypothesis, using history as my guide, as to what will transpire in the coming period ahead. It will be a frightening time, but using patience, history, foresight and common sense, this will probably be the biggest transfer of wealth in U.S. history, surpassing even the formation of the Federal Reserve.

It is my belief that that transformation has already started, with the collapse of the Euro, subsequent fall of the world stock exchanges and rush to safety by investors to bonds, treasuries and cash.

Barring any significant changes to my investment thesis, below is the plan that I will be adhering to and the one that I am advocating to my friends and family. In my opinion, it is not only the most safe, but it is one that just about anyone can follow.

Basic 2-Step Plan:

1. As stated above and in previous articles, I believe that staying liquid is the easiest way that a person can protect themselves, for the time being, from the already begun collapse in the market. The best way to do this is two-fold: open a bank or trading account that holds short-term U.S. treasuries or keep cash in a non-safety deposit safe.

The reasoning is quite simple. U.S. short-term treasuries are the most safe, least interest rate sensitive securities in the world. They are able to be withdrawn in the event of a bank holiday and, since they have the full backing of the U.S. government, they are not subjected to FDIC protection limits. Holding short-term treasuries through one's bank or in a trading account/mutual fund is the best way to achieve safety.

Most people do not realize that holding cash in a bank's safety deposit boxes is not immune to bank seizure. It is for that reason, that I would suggest holding cash in a safe, secure location in an equally safe and secure apparatus. Quite obviously, keeping cash on hand is a strategy that one might like to keep to themselves, as it is one not immune to theft; however, it is a strategy that keeps your cash where it belongs-- in your possession.

(Gold will fall just like other goods during this time period, and I will explain why in my next article.)

2. The dollar will continue to strengthen for a given amount of time before it, too, collapses under the weight of our nation's massive debt. When it reaches its pinnacle, that is precisely when I will be putting a majority of my investments into gold and silver. How will I know when the pinnacle is reached? Obviously, I won't know the exact date, but this is where history offers me some clues.

When news about the strength of the dollar or the weakness of commodities, such as gold and oil, are in bold print on the front page of the Wall Street Journal that is just one pronounced buy signal to look for. Other signs will be those similar to the headlines at the end of 2008 and beginning of 2009.

Late-December of 2008 was the high-point for the U.S. dollar but the low-point of the U.S. stock market was in early March. Here are a few of the headlines as well as the Federal Reserve yields from that time period. Both of these are facts that I plan on using to my benefit in the coming period ahead.

Dollar High (12/28/08):
Federal Reserve Interest Rates- 12/28/09 (4-week & 3-month U.S. treasuries were both at 0.01%, the weeks prior, the 4-week was at 0.00% and the 3-month at 0.03%.)

"Gold, Not So Golden in 2008, Loses Chance to Be Market Star: 'Get-Me-Out Effect' Offsets Metal's Appeal as a Haven" - 12/29/08- WSJ

Dow Low (3/9/09):
Federal Reserve Interest Rates- 3/2/09 (4-week & 3-month treasuries rose to 0.18 & 0.30%, respectively.)

Korea's Crisis of Confidence - 3/4/09- WSJ

Mexico Steps Up Dollar Sales Central Bank's Move Seen as Effort to Stem Peso's Free Fall - 3/6/09- WSJ

Foreigners Sweat as Chinese Firms Teeter No Road Map Exists in Bankruptcy Cases; Like a Rubik's Cube- 3/5/09- WSJ

Will Value Investors Win the Day?: Wait Five Years and See. In today's market, people may lose a lot of money before they make more. Yet even times like these could prove profitable in the long run for value investors. - 3/4/09- WSJ

New Fears as Credit Markets Tighten Up - 3/9/09- WSJ

By this time, oil had risen to about $50/barrel from near $30/barrel at the end of December. Gold had risen from close to $700/oz to over $900/oz.

I expect a steeper curve the next time the dollar reaches its high-point, as I believe it will quickly thereafter lose its appeal, but above are similar headlines that I expect going-forward, although I feel there is a high likelihood that the headlines might be more striking going-forward, now that world governments have tried to spend their way out of a recession.

For the more advanced investor or risk taker, I would consider adding an additional step by including short selling and derivatives into your investment approach until the time to switch to gold arrives. I, personally, started to take this step last week by purchasing put options. I will detail my purchases in coming articles and in a timely manner.

However, while one can dramatically increase their wealth using these investment vehicles, it is important to note that one can also lose a lot of money too. Therefore, I would advise one to take small steps and to learn as much as one can about these approaches prior to using them. For most, the best approach will probably be to stick with the 2-step program, as conserving one's wealth is the most important part of investing.

In coming articles, I will further explain why I believe that gold is at a temporary high and why I believe it will fall, along with the other goods. I will also share my personal trades, both good and bad, so that you can learn with me through this tremulous period.

Toxic CDOs Beset FDIC as Banks Fail

noreply@blogger.com (C.J.) — Thu, 20 May 2010 10:00:00 +0000

http://online.wsj.com/article/SB10001424052748704314904575250811941096220.html?mod=WSJ_Heard_LEFTCarousel

Socialism will fail during the coming period ahead. It never has worked as an economic/political system, and it won't work here either. Runs on the bank will happen again and the FDIC won't be able to protect their banks. Expect higher limit guarantees ahead in order to prevent runs, but don't fall for it. Return here in the coming weeks to understand how you can protect yourself and your assets.

Gold Prices Dip as Investors Go for Cash

noreply@blogger.com (C.J.) — Wed, 19 May 2010 15:30:00 +0000

http://finance.yahoo.com/news/Gold-Prices-Dip-as-Investors-tsmf-1629084990.html?x=0&sec=topStories&pos=2&asset=&ccode=

Expect more of this to happen, folks.

I will be publishing my detailed outlook this weekend. Recent family matters have made my ability to write a bit more complicated, and I am still adjusting to these new changes. I apologize for my tardiness. It is my hope that my next article will not disappoint.

C.J.

Euro, Stocks, Commodities Retreat as Bailout Optimism Ebbs

noreply@blogger.com (C.J.) — Tue, 11 May 2010 15:30:00 +0000

http://www.bloomberg.com/apps/news?pid=20601087&sid=aoqf1g8oJEg4&pos=1

Friends, the not so shockingly little reported story about the bailout news over the weekend was that the Euro actually weakened yesterday against the U.S. dollar. Today that trend is continuing and there are rumblings already that the dollar and Euro might be valued on a 1:1 basis sooner rather than later.

EU Crafts $962 Billion Show of Force to Halt Crisis... Stocks Rally

noreply@blogger.com (C.J.) — Mon, 10 May 2010 13:00:00 +0000

http://preview.bloomberg.com/news/2010-05-10/eu-ministers-craft-928-billion-show-of-force-to-halt-crisis-buoy-euro.html

http://preview.bloomberg.com/news/2010-05-10/euro-gains-most-18-months-on-support-plan-stocks-surge-greek-bonds-soar.html

This is eerily familiar to the U.S. bailout of the financial industry just a few years ago. Prepare yourself for some very, very tough times ahead, folks. This is the U.S. financial industry on a global scale, starting with the continent of Europe!

Just as I did after the Bear Sterns failure, I will be using this upward momentum to sell stocks and get liquid. This time around, however, I will be buying puts and/or getting short the market. In case my economic and investment outlooks are incorrect, however-- I believe a deflationary depression is ahead of us, not an inflationary one, even though the governments of the world are trying their best to make it one-- I am considering buying a small portion of precious metals. It's always better to be safe than sorry, after all.

As I said in an earlier article, I plan on expediting the publishing of my investment thesis since the markets are beginning to resemble that of the U.S. in 2008. I will publish at least part of my investment strategy this week, so that in case something dire happens sooner rather than later, you can be well-informed or, better yet, prepared for the worst.

My Prediction on the Economy & Market (continued)

noreply@blogger.com (C.J.) — Sun, 09 May 2010 10:00:00 +0000

Let us continue now with our understanding of the U.S. Federal Reserve system...

The U.S. Federal Reserve Bank publishes two reports called the M1 and M2, which give the status of the U.S. money supply. The M1 reports the total of the amount of physical currency and checking accounts in U.S. banks. The M2 reports the total of M1 + savings and money market accounts and CDs.

Prior to 2006, the U.S. Federal Reserve Bank published the M3 report (the broadest measure of money), which included M1 + M2 and large deposits, institutional money market funds, and other large liquid assets.

As stated in my previous article, the U.S. Federal Reserve system is a fractional reserve system that allows for the expansion of the money supply via loans, thus multiplying the amount of currency in the economy based on the Federal Reserve's reserve requirements (money multiplier) -- the lower the reserve requirement, the higher the multiple created by the banking system. The broader based M2 and M3 expound upon the effects of the money multiplier and, therefore, show just how much credit is in the banking system.

According the St. Louis Federal Reserve, the M2 has increased more than 250% since 1995 alone, while the M3 increased by the same percentage, that is, until 2006, when the Federal Reserve discontinued the measurement because it believed that the "M3 does not appear to convey any additional information about economic activity that is not already embodied in M2 and has not played a role in the monetary policy process for many years. Consequently, the Board judged that the costs of collecting the underlying data and publishing M3 outweigh the benefits." Theorists believe that the Federal Reserve discontinued the M3 in order to mask the massive expansion in the credit market created by the Federal Reserve and its reserve requirement and lending policies.

Shadowstats continues to report the M3, based on government supplied data, as well as other government information. It reports that the M3 now stands at about $14 trillion, up from just above $4 trillion since 1995, an increase of 350% in just 15 years time.

While the M3 rate of growth has slowed since the mortgage crisis due to much tighter lending rates and loss in credit due to foreclosures, the Federal Reserve has increased the U.S. monetary base from $400 billion to $2 trillion from 1995 to present day, with the bulk of that increase occurring from the end of 2008 to 2010, when the Federal Reserve increased the monetary base from $800 billion to $2 trillion! That's an increase of 250% in little over one year! And that is before the money multiplier takes effect!

Just imagine what would happen to home prices or the price of gas if the lending market was as loose as it was just a few years ago. It is also important to remember that once currency is printed, it is rarely contracted from the system. Government likes currency in the system, so the money multiplier will have an effect on the system... it's just a matter of when.

To make matters worse, however, the Federal Reserve began buying mortgage-backed securities under the lesser known Term Asset-Backed Securities Loan Facility (TALF). Unbeknownst to most Americans, the TALF program, which was created by the Federal Reserve on November 25, 2008, will purchase up to $1 trillion (up from originally $200 billion) of AAA asset-backed securities. Since the facility was created by the Federal Reserve and not the U.S. Treasury department, it did not require congressional approval in order to be created.

This facility is in conjunction with the widely known $700 billion Troubled Asset Relief Program (TARP), which the U.S. Treasury Department used to bail out the banking industry and General Motors but also used to purchase collateralized debt obligations (CDOs), which were the highly illiquid, nearly impossible to value securities that the financial markets created to pool sub-par mortgages together in order to meet the AAA status of the rating agencies. CDOs were one of the main reasons for the failure of the mortgage market. It is widely thought that these securities will be deemed worthless, due to the lax ratings given to mortgages during the mortgage bubble.

It is my hope that these facts open your eyes to just how much power the Federal Reserve, a private institute, wields over each of us. The data above, coupled with the information provided in "The Creature from Jekyll Island" hopefully makes you more competent than 99% of the American population regarding the U.S. banking system and alerts you to just how fragile and manipulative our banking system really is.

Now that I have discussed the banking system and its issues from the creative and lending standpoint, please allow me to address FDIC and the false sense security that the government has used to give its citizens in the U.S. banking industry.

As I stated in my previous article, the government created the Federal Deposit Insurance Corporation (FDIC), which guarantees individual bank deposits up to a specified amount-- currently $250,000 per individual account, under the Glass-Steagall Act of 1933. The FDIC is able to guarantee this money by charging each bank a small fee to participate in the insurance program.

However, a little known fact is that the FDIC collected no premiums from 1996 to 2006, which is precisely when the housing bubble began and ended. In order to make up for this deficit, as well as to keep from having to dramatically raise premium rates, thus effecting bank profitability, Congress granted the FDIC the authority to borrow up to $500 billion from the U.S. Treasury, up from its previous $30 billion limit.

From December 2008 to March 2009, the deposit insurance fund reserves fell from a projected $55.2 (a reserve ratio of 1.25%) billion to just $13 billion (a 0.27% reserve ratio). In fact, it was reported less than six months later that the total insurance reserves reached a staggeringly low $684.1 million. Bank failure rates had increased so dramatically during that time that the FDIC was forced to revise its estimated cost of bank failure over the next four years to $100 billion from $70 billion and required insured banks to prepay $45 billion in premiums in order to replenish the fund. In effect, the fund was admitting that it was insolvent, even though the fund is required to keep a balance equivalent to 1.15% of insured deposits.

According to a Reuters article, the FDIC expects 2010 to be the height of bank foreclosures created because the real estate/mortgage bubble. Last year, 140 banks failed. In 2008 that number was 25. And in 2007, just 3 banks failed.

To date, 68 banks have failed this year-- double the rate of last year. According to a CBS Marketwatch article in February of this year, Gerard Cassidy, a banking analyst at RBC Capital Markets, who was one of the first analysts to warn of the bank failure situation in 2008, stated that "if the average bank that fails in 2010 has $1 billion in assets and it costs the FDIC 28% of those assets to shut it down, that means failures could cost $49 billion to $56 billion this year."

Using our data above, this could render the deposit insurance funds insolvent, especially if Mr. Cassidy's projections wind up being optimistic. Granted, the fund is able to borrow up to $500 billion of tax payer money in order to replenish its coffers; however, given what we know about the Fed's excessive monetary base creation and the CDO purchase programs by TARP and TALF, I believe it is safe to assume that the U.S. will be borrowing money for a long time to come and, in turn, devaluing our currency at break neck speed.

Before I dive into my thesis, please allow me to show you just how big of an issue our overspending has become...

In 2009 the U.S. gross domestic product, or our country's total economic output for the year, was between $14.2 and $14.4 trillion, depending on who is calculating the total. Our total output for the year was approximately 25% of the world's output; however, our total amount of external debt held in 2009 was $12.2 trillion, or about 94% of our GDP. While that is only roughly 23% of the world's external debt and other Western nations, such as the United Kingdom, are in much worse fiscal shape than we are in, our debt last year equaled our entire economic output for the year!

When you consider that our estimated national debt is supposed to rise $1 trillion per year over the next six years (2010 included)-- meaning that our external debt could be, conservatively, $18 trillion-- and our GDP, which is estimated to be equal to roughly the same amount, will in almost all likelihood grow much, much slower than the estimated 7% annual compound interest rate suggested by the government (it hasn't grown at or above 7% since 1959), our country's fiscal survival appears very grim.

Greece has recently experienced a debt crisis in which the premium of its bond rates over the historically stable German Bund have increased close to 100% during the course of 2010. As of the most recent data point in the CIA World Factbook, Greece's external debt as a percentage of GDP was 153 %. Ironically, Germany's was 185%. The U.K.'s, incidentally, is a mere 365%. This looks like peanuts compared to our 94%; however, keep in mind that the government's estimated 7% year-over-year GDP growth rate is drastically inflated, which leaves us, therefore, right in the eye of this hurricane, especially considering our propensity to spend and our ever-increasing appetite for entitlement (social) programs.

As the U.S. dollar continues to be the dominant currency of choice regarding world payments and is still considered a generally "safe" investment, we will probably stay in the eye of the storm longer than most. However, let me share a statistic that will, hopefully, prevent you from resting on your laurels.

Entitlement programs, such as Social Security, Medicare, Medicaid and now health care reform, are issues and problems that our politicians have, honestly, no desire to talk about due to their polarizing nature. However, it is precisely these entitlement programs that are destined to be the demise of our magnificent nation unless they are dramatically cut and reformed. None of these programs have ever been paid for and their massive increase in our nation's debt is absolutely and unequivocally staggering.

Many U.S. citizens are unaware that these entitlement programs are listed under a heading called "unfunded liabilities" in one of our nation's two accounting books. Yes, the government uses more than one accounting book. It helps to mask the country's real problems to its citizens, you see. Of course, maintaining two sets of books is very illegal for corporations or citizens to do.

What it is that government is hiding is the tiny fact that our current unfunded liabilities is $108 trillion or $351,189 per citizen or 750% of our estimated 2010 GDP!

So, you see, our country's finances are in a heap of trouble-- seemingly, much more so than that of Greece, although, admittedly, I do not know the position of its unfunded liabilities. Luckily for us, however, Europe is leading us into this massive sovereign debt crisis. It is my belief that the dollar will strengthen for quite a while as Europe struggles but that we will also follow in Europe's footsteps. After all, our government has followed in Europe's economic and social policies, which have created similar (or worse) fiscal problems... why will our outcome, therefore, be any different?

In my next article, I will tell you why I believe this to be true, how you can prepare yourself for the volatile period to come and how you can able to profit from it. Until then, friends, be sure to stay abreast of the market and stay liquid, unless you feel comfortable shorting or wading into the derivatives market.

EU Finance Chiefs Race to Ready Emergency Fund Before Asian Markets Open

noreply@blogger.com (C.J.) — Sun, 09 May 2010 02:45:00 +0000

Does this seem eerily similar to TARP to anyone else?

Watch out below!!!

http://preview.bloomberg.com/news/2010-05-08/eu-finance-chiefs-race-to-ready-emergency-fund-before-asian-markets-open.html

http://online.wsj.com/article/SB10001424052748703338004575229763092666450.html?mod=WSJ_hps_MIDDLETopStories

Prechter and Rogers

noreply@blogger.com (C.J.) — Sat, 08 May 2010 14:30:00 +0000

I am on record as agreeing with Robert Prechter's theory of the economy and what to expect in the coming months and years ahead. Now, it appears, that Jim Rogers is also in the same camp, too. When both agree, I would heed their advice and try to make some gains in the market by shorting, buying puts or just staying in cash, and I will be echoing this advice in the coming weeks ahead.

U.S. stock markets will shed gains swiftly: Prechter

http://www.reuters.com/article/idUSTRE6465TI20100507

Jim Rogers' Latest Bearish Calls: Shorting U.S. and Emerging Market Indexes

http://seekingalpha.com/article/203844-jim-rogers-latest-bearish-calls-shorting-u-s-and-emerging-market-indexes?source=feed

My Prediction on the Economy & Market

noreply@blogger.com (C.J.) — Fri, 05 Mar 2010 11:00:00 +0000

(The following article was started on March 5th, 2010.)

I have been wrestling for months now about one question: inflation or deflation?

The other night, while chatting with a friend, it all finally came together for me. Epiphanies don't come around very often, but when they do, boy, does it feel good!

I have been following the likes of Peter Schiff (gold bug), Jim Rogers (agriculture bug) and others since my return to the States in 2007. I knew that something was seriously wrong with our economy then, just as I do now. Everywhere I turned, it seemed as though every well-proven prognosticator seemed to be on the side of inflation, due to the combination of the Fed running its printing presses 24/7 and our massive government and personal debt. However, during the crisis at the end of 2007 and beginning of 2008, all investment classes fell precipitously, save for one-- cash.

I understand that the demand for cash occurred prior to the stimulus package and was in the midst of the bank bailout package enacted by Congress, which created a huge influx on capital to the market-- all inflationary events. But while I understood that inflation will be present in the future, based on simple economics (supply/demand), however, I also couldn't stop asking myself, "why would 2007 not repeat itself during the next crisis?"

So I kept reading, researching and asking myself the same question over and over again, "inflation or deflation?"

Then I read "Conquer the Crash: You Can Survive and Prosper in a Deflationary Depression" by Robert Prechter. It is the only book that I have read or heard of, which states that deflation, not inflation, will be the problem of the future. After tearing through 400+ pages in less than three days, I let the question percolate-- "inflation or deflation?"

Then, finally, after months of thought, the answer hit me while I was explaining "Conquer the Crash" to a friend of mine. He asked me what I thought was in store for the economy in the months and years ahead. After regurgitating what I had been reading and hearing, he asked me again, "yeah, but what do you think?"

CLICK!

I present you with my thesis below-- exactly as I told my friend-- on what I expect to happen in the economy and investment community in the months and years ahead.

Before we delve right in, however, let's first take a look at the facts of the past:

At the end of 2006/beginning of 2007,
- The massive bubble in the housing market climaxed.
- Commodities reached all-time highs during this same period.
- Stocks reached all-time highs as well.

Then the housing market collapsed, essentially, overnight.
- Reason?
- Crisis in confidence in the hyper-inflated mortgage market.

Along with the housing market, the prices of everything else fell along with it, including precious metals, save one investment.
- U.S. Treasuries, T-bills and currency

Why?
- People were scared. They also had massive credit bills (mortgage, credit cards, loans) to pay-- only currency can pay off debt.

In return,
- The U.S. dollar became extremely expensive. So much so, in fact, that Warren Buffett stated in Berkshire Hathaway's annual report in 2008 that the "U.S. Treasury bond bubble of late 2008" might go down as an extraordinary event in financial history, just like the Internet bubble of the 1990s and housing bubbles of the 2000s.

Thesis:

The U.S. dollar is about to get much much more expensive. Then, it will become very, very cheap.

Unfortunately for Mr. Buffett, whose Berkshire Hathaway earlier this year made the largest acquisition in the firm's history with the purchase of what is widely considered to be the best-run railroad company in the U.S., Burlington Northern, and for the hoards of the gold and commodity bugs, all goods are about to get much, much cheaper than they were in March 2008, which was the market low during this latest crisis.

"But the government has been printing currency like crazy, there's no way that'll happen-- inflation is imminent!," you say.

I agree. The government is printing a lot of currency; however, it is creating much more credit than currency... and there is a BIG difference between the two.

Time for a classroom lesson:

Grab some caffeine, it's about to get boring... BUT I can virtually guarantee you that 99% of the people in the U.S. do not know what you're about to learn. Fortunately for you, it's information that will open your eyes to a brand new world, one that will allow you to understand just how significant the problems in the U.S. (and world) are and just how significant they will be in the coming months and years ahead. Sadly, this is information that no one in the media discusses or is anything that you will learn in college-- maybe not even in graduate school-- let alone high school. But it is information that literally affects all of us each and every day and, therefore, is information that we should grow up knowing and learning about.

Before we start, please allow me to make one distinction clear. In today's society, we tend to use the words money and currency interchangeably. However, there is a HUGE difference between the two.

Money is something that holds value, which can be exchanged for goods. Throughout history, only gold and silver have been continuously recognized as money. There have been times throughout history where other goods, such as salt, have also been considered money, but only gold and silver have remained constant.

Currency is a medium of exchange that one can use in order to purchase something that has value. It is derived from the word current and, therefore, must remain in movement in order to be valuable. The U.S. dollar is a currency because there is nothing valuable about a piece of paper standing on its own-- it's just a piece of paper. The U.S. dollar is valuable because it is backed by the full faith and credit of the United States. However, if U.S. dollars were to lose favor due to debasing its currency, for instance, it would become worth less and, if it were printed relentlessly by the U.S. Treasury, then it might become worth close to nothing at all. Currency must be spent in order to be valuable.

Now, let's start with some history...

Throughout history, only two items have consistently been accepted as money-- gold and silver. Gold and silver have always been rare metals, while other items, such as salt, have gone from once rare and in high demand (for its ability to store meat) to simple commonplace. However, gold is so rare that if you stacked up all of the gold that has ever been discovered, it would not fill two Olympic-size swimming pools. And although silver is not nearly as rare as gold, and, therefore, holds much less value, it is considered to be one of the best conduits of energy and, therefore, is used in nearly all electronics. While gold and silver have consistently held monetary value throughout time, both have been endured the treatment of being the forgotten children of civilization as well.

Generally speaking, whenever civilizations have found themselves in precarious situations, became greedy, or just plain manipulative, almost, without fail, they have found a way around the gold (and silver) standard. Straying from the gold and silver standard has come by using less of it in coinage, as the Romans did, or by creating currency valued in gold and then debasing it by allowing the gold standard to disappear completely, as we have now with the U.S. dollar and other currencies. Typically, this debasing has usually occurred toward the end of a civilization, mainly, from a civilization overextending itself militarily or by accumulating massive amounts of debt.

The U.S. dollar, except in a few instances, has always been backed in some fashion by gold and/or silver. Those instances were during the Civil War, during a short period from 1777-1788 and during the War of 1812. The gold standard in the U.S. was later breached in 1971 under President Nixon and has remained as such, making it the longest period of time that our nation has not adhered to the the historical standard, but more on that later.

Let's first talk about the Federal Reserve system...

The current Federal Reserve system was created under the Federal Reserve Act of 1913 by largely a Democrat partisan vote. The act created a private, decentralized system that was intended to put the monetary system outside the reach of Wall St. The Republicans favored a centralized bank, much like that of the European system, which would have kept the government in control of the system and, in turn, would have allowed Wall St and the financial industry to impact the country's monetary policy through lobbying and/or bribery, etc.

A not so well-known fact, however, is that Senator Nelson Aldrich, who was largely in charge of regulating the banking industry, was the person most responsible for the creation of the Federal Reserve system. Aldrich, whose daughter was married to John D. Rockefeller, Jr and was close friends with J.P. Morgan, created the framing for the Federal Reserve system at a secret meeting with some of the most powerful and influential financiers, who represented 25% of the world's wealth at the time, at a resort on Jekyll Island, GA in 1910. The Aldrich Plan was intended to create a central bank, which Aldrich himself had originally opposed prior to studying the European banking system. The plan was so reviled in Congress when it was introduced that it took three years to pass.

With the passing of the Federal Reserve Act of 1913, however, occurred one of the greatest transfers of wealth in world history. The reason? The fractional reserve baking system.

Fractional reserve banking is the banking practice by which banks are only required to keep a fraction of their deposits on reserve, currently about 10%, and are allowed to loan out the remaining amount. By loaning out their deposits, however, banks are, in fact, creating additional money supply that would not otherwise be in the marketplace, known as the money multiplier and, thus, the transfer of wealth begins.

An example of the money multiplier effect is as follows:

You deposit $100 into the bank. The bank is required by the Federal Reserve to maintain a minimum reserve of 10% of deposits. Therefore, the bank can lend out the other 90% of your initial deposit, which creates a maximum increase in the money supply of $900 from your original deposit.

A problem with this system, however, is that since only a fraction of a bank's deposits are required to be on reserve, if many people wish to withdraw their money from the bank simultaneously, also known as a "run on the bank," the bank might have a very difficult time coming up with all of the money requested. During the Great Depression runs caused many banks to fail and, in turn, many people to lose all of the money that they had in the bank. As a result, the government created the Federal Deposit Insurance Corporation (FDIC), which guarantees individual deposits up to a specified amount-- currently $250,000 per individual account. The FDIC is able to guarantee this money by charging each bank a small fee to participate in the insurance program.

Another piece of information that is hardly discussed is that typically a bank has the right to call one's outstanding mortgage at any time. While this tactic is atypical, it is one that many banks can should it need to come up with currency quickly, such as in the case of a run on the bank.

Before we continue, let me add a little known fact about the relationship between the U.S. Treasury and the Federal Reserve...

It is a little known fact that the U.S. Treasury must borrow money from the Federal Reserve, in the form of U.S. Treasuries, in order to print more money. Therefore, the U.S. Treasury cannot mathematically ever repay its debt to the Federal Reserve, at least in the form of U.S. dollars.

For a full history on the how the Federal Reserve was created and why, please check out "The Creature from Jekyll Island" by Edward Griffin. Griffin also gave a speech some years ago in Los Angeles that encapsulates the events and book in about an hour.

Grab another cup, the history lesson is now continuing...

Let's fast-forward a few years now to 1944. It was in that year that world leaders met at the United Nations Monetary and Financial Conference for three weeks in Bretton Woods, New Hampshire to discuss the world's monetary system. It was during this meeting that the allied nations agreed on the U.S. dollar as the world's reserve currency under the stipulation that it always be backed by gold.

As stated in my article "Seek Refuge in Modern Day Communism":

"The world understood that inflation was the enemy of any economy, having seen the extraordinary hyperinflation created by the Weimar Republic of Germany, where the money supply grew so rapidly that bills printed just a week prior were deemed worthless.

However, after enduring some of the complexities that maintaining a currency to a fixed price of gold created-- such as other countries' reserves growing more quickly than the United States', and the U.S.'s choice to pay for the Vietnam War and The Great Society programs through inflation and not increased tax revenues-- the gold standard officially ended in 1971, when the U.S. closed the gold window, thus making the dollar and gold nonconvertible."

Before we go any further, however, let me state something that many people might not remember:

In 1933 the government, under Executive Order 6102 during the Roosevelt administration, banned the ownership of gold-- except U.S. gold eagle coins, which were legal tender-- and fixed the price of U.S. dollars to gold at $35/oz. The executive order remained intact, even after President Nixon announced in 1971 that U.S. dollars would no longer be convertible into gold. The limitation on gold by U.S. citizens was repealed on December 31, 1974 under the Ford administration but by that time, the value of gold in the world market had soared in value to $186.50 on the London exchange, meaning the U.S. dollar had lost over 80% of its value during a 51-year time span on the global market.

Demand for gold over the next six years skyrocketed as U.S. citizens devoured supplies of gold, in hopes of protecting their already lost fortunes. Gold on January 21, 1980, the day after President Reagan was sworn into office, reached $850/oz-- a 450% increase in six years time on the world market and a whopping 2,400% increase from the U.S. fixed rate during the same time period.

Let us remember this lesson-- the U.S. government can change the rules at any time and will do so in order to preserve itself, regardless of how much damage it inflicts on its citizens.

In the coming weeks I plan to continue our history lesson, as well as give further insight into my investment thesis over the coming months and years. I will attempt to expedite my writing, as it appears that my thesis might just be on an expedited path, given the recent strength in the U.S. dollar due to the crisis in Greece and the heightened anxiety in Europe, as well as the anticipation that China is overheating. Until then, I suggest staying as liquid as possible.

More to come soon!
C.J.

Waiting for Better Times Is No Substitute for Action

noreply@blogger.com (C.J.) — Mon, 01 Feb 2010 11:00:00 +0000

Waiting for Better Times Is No Substitute for Action
By Mohamed El-Erian, CEO and co-CIO, PIMCO

Worthwhile Economist Articles

noreply@blogger.com (C.J.) — Wed, 30 Sep 2009 20:00:00 +0000

Below are some of the Economist articles that I found to be informative and/or interesting during the past two weeks. Enjoy!

Africa:

A catastrophe is looming (East Africa): Governments are at their wits’ end to keep their hungry people alive.

The Americas:

The strange chill in Chile: After presiding over Latin America's big success story for two decades, the centre-left Concertacion coalition looks tired and divided.

The Bachelet model (Chile): A politician on top of her game.

Economic vandalism: A protectionist move that is bad politics, bad economics, bad diplomacy and hurts America. Did we miss anything?

Playing with fire: By succumbing to domestic pressures, America has started an alarming trade row with China.

Charlie Rangel's taxes: Those who write the laws should obey them.

Creative tension (Google): The internet giant seeks new ways to foster innovation.

Stuck in the delta: Californians continue fighting over water, but vow to try making peace.

El Paso's small step: Reform advocates want an honest and open debate on drug policy.

Asia:

Driving in the right direction: Chinese motorists face unprecedented prices at the pump.

Poodle or Pekinese (Japan)?: Yukio Hatoyama has to clarify some contradictory messages to the world.

Fashion victims (Japan): Beleaguered firms are merging at last—but cost-cutting is still taboo.

Demonstration effec t (Nepal): Having walked out, the Maoists try to march back in.

Where power lies (Thailand): Coups are such an old-fashioned way of running things.

V not yet for victory (Vietnam): An impressive recovery may create problems of its own.

Europe:

Behind golden doors (Russia): President Dmitry Medvedev sets out a modernisation agenda, but he may yet be undercut by his prime minister, Vladimir Putin.

The Vladimir and Dmitry show: Vladimir Putin prepares the stage for his re-entry.

Global:

A bad climate for development: Poor countries’ economic development will contribute to climate change. But they are already its greatest victims.

Measuring what matters: Man does not live by GDP alone. A new report urges statisticians to capture what people do live by.

It's life, Jim: House prices are creeping up again. That may not last.

Middle East:

Not over yet: Three months after his disputed re-elections, Iran's president, Mahmoud Ahmadinejad, is still failing to reassert his-- and his government's-- grip.

Et Cetera:

Breathing more easily: The air inside airplanes could soon be cleaner and more comfortable to breathe.

Daddy's girl: A non-obvious explanation for why girls without fathers have sex earlier.

Norman Borlaug: With wheat and plough, he helped avert famine.

Noteworthy - Week of September 20th

noreply@blogger.com (C.J.) — Sat, 26 Sep 2009 20:00:00 +0000

The G-20 met in Pittsburgh, PA this week and agreed on a deal to coordinate economic policies; however, the deal does not include an enforcement mechanism. The group of 20 also came to a partial agreement on banking compensation and agreed to end energy subsidies but didn't set a deadline for the action. The U.S. was also able to persuade Europe to back a shift in the ownership of the IMF to the developing nations.

President Obama announced at the g-20 Summit on Friday that Iran is on a path toward global confrontation if it doesn't come clean with its nuclear activities when the two countries meet on October 1. Iran had admitted earlier that it had begun construction of a second enrichment facility but stated that it did not break the International Atomic Energy Agency rules in doing so. The U.S. and its allies had been watching the site for years.

Earlier in the week, the U.N. met in New York and adopted an antinuclear resolution targeting nations that use civilian nuclear technology for military purposes. Critics say that the measures are unenforceable. Notable speakers included: Libyan leader Moammar Gadhafi, who rambled incoherently at times during his first address at the U.N. in 40 years; Iranian president Mahmoud Ahmadinejad, who last week reiterated that the Holocaust is a myth, accused a small minority for causing trouble in the Middle East; Israeli Prime Minister Benjamin Netanyahu unleashed harsh words toward the U.N. for giving credence to Ahmadinejad by allowing him to speak while himself holding Nazi documents of the Holocaust; President Obama addressed the U.N. for the first time, called for a "new era of engagement" with the world. Critics lampooned the speech as one of the harshest toward Israel in their alliance as well as a weakening of the U.S. President's stance in world politics.

House Democrats, lead by Speaker Nancy Pelosi, continue to press for a public option in the health care reform bill.

Uncertainty about the strength of a global economic recovery is complicating the decision of when to end stimulus by central banks.

The Fed is looking at ways to rein in the flood of currency that it dumped on the market during the financial crisis without disrupting economic conditions. However, it extended the mortgage-purchase program this week, stating that consumer spending remains "constrained."

Lord Peter Mandelsohn, a leading international proponent of open markets, scrutinized foreign ownership of some British companies, stating that they might be a long-term disadvantage for the country. Mandelsohn's words come as Kraft is making a bid for Cadbury.

Long-term unemployment is taking its toll on citizens, making it tougher for them to find jobs and causing many to settle for union pensions and social security, rather than keep looking for work.

A vaccine that shows the first signs of preventing the spread of HIV is giving the health community hope that further breakthroughs aren't too far away.

Federal regulators said this week that banks and other institutions are facing $53 billion in losses on loans, triple that of the prior record set in 2002 and surpassing the total identified losses over the past eight years. The losses are expected to cause trouble for many banks, especially large regional institutions.

Credit-rating firms came under attack this week as lawmakers and regulators scrutinized their ratings process, after a former Moody's analyst came forward to state that inflated ratings continue within the firm.

The U.S. dollar was flat this week as risk-averse investors returned to it, briefly ending its decline.

U.S. bonds found earlier this year in Italy were, apparently, fake, according to a report by U.S. officials.

According to U.S. officials, the first al Qaeda cell in the U.S. since 9/11 has been discovered.

The U.S. is changing its approach toward Myanmar, enlisting a new set of sanctions and engagement policy in order to persuade the country's Junta to allow more democratic freedoms.

Three paper companies and the United Steelworkers filed an anti-dumping case against China and Indonesia this week.

The White House has delayed sending more troops to Afghanistan, as recommended by its appointed ground general there, in order to review its strategy.

The number of foreign-born residents of the U.S. declined this year for the first time since the 1970s.

The U.S. Air Force began its third attempt to buy $40 billion of tankers after controversy ended the two previous attempts.

Africa:

Oil-trading firm Trafigura Beheer said that it has agreed to pay $48.7 million in compensation to the people of the Ivory Coast, who say they were made ill by waste dumped there in 2006.

The Americas:

Protests erupted in Honduras this week as former president Manuel Zelaya returned to the country via means of the Brazilian embassy.

The dramatic rise in cocaine production in Peru has escalated fears that the violence and corruption associated with the trade will derail one of the fastest-growing economies in Latin America.

Oaktree won a $1 billion investment commitment from the China Investment Corp, which the L.A.-based company plans to invest in distressed debt and fixed-income assets.

Dell agreed to purchase Perot Systems for $3.9 billion. The assets of Perot Systems employee and H. Ross Perot friend, Reza Saleh, were frozen this week as the SEC accused him of insider trading.

Holiday jobs look to be scarce this year as pessimism reins over the retail market.

Teen retailers are designing stores to cater to parents.

Intel sees the PC market stabilizing this year.

Bank of America and J.P. Morgan Chase plan to loosen their overdraft policies amid recent uproar over the fees imposed by banks. Officials, however, plan to push forward on fee restrictions that banks can charge their customers.

Citigroup plans to narrow its focus to six major U.S. cities and will reduce its overall consumer lending credit card and "jumbo" mortgages in the U.S. and focus on affluent customers.

In a step toward measuring how as perform on social networking sites, Facebook agreed to a deal to provide ad data to Nielson.

Veteran Pepsi executive Michael White, who led the company's acquisition of its two biggest independent bottlers, is retiring by the end of the year.

The IRS extending is deadline for U.S. citizens to declare their foreign assets.

Small investors are placing big bets on currency markets.

Sara Lee agreed to sell its international skin-care and deodorants businesses to Unilever for $1.9 billion in order to focus on its food and drink businesses.

Marvel Entertainment Chief Executive Ike Perlmutter received stock options for more than one million shares of stock (a benefit to him of $34 million) after a subordinate opened discussions with Disney, which ultimately led to a merger.

HP is using the downturn in the technology market to undercut rivals' prices in order to gain market share.

Blackstone Group LP is looking into a possible deal to buy Anheuser-Busch InBev NV's theme parks, which could fetch the alcohol beverage company between $2-5 billion.

Asia:

Animosity toward the affluent is growing in China as the privileges of the sons and daughters of the rich become more apparent.

Computer makers such as Lenovo and HP are focusing on rural China as an area of growth.

L'Arc, a French themed casino owned by Macao casino magnate Stanley Ho, opened this week, driving casino shares in Hong Kong higher. Wynn Resorts is seeking to gain as much as $1.6 billion in its October IPO of its Macao assets.

Korean consumer sentiment is at a seven-year high. Strong department-store sales and mortgage demand has some believing that consumer habits there might be changing, as private consumption is expected to rise 4.2% this year.

South Korea will allow the sale of the iPhone there.

Long awaited South and North Korean reunions are set to begin this weekend with the hope that the program will bridge the two nations.

The Singaporean sovereign wealth fund said this week that they took in a $1.6 billion profit by selling 50% of their holdings in Citigroup earlier this month, benefiting from the U.S.'s bailout of the firm.

Commodities:

China's sovereign wealth fund, China Investment Corp., is becoming a large backer of natural-resources companies. The fund has bought billions of dollars worth of shares in companies during the past few months.

Chinese biggest steelmakers have given up hope on discounts for this year's iron ore prices and are now focusing on 2010 deliveries.

Europe:

The European Commission approved a $80.7 million aid package from Poland for Dell to build a factory there.

Siemens issued an ultimatum to the seven former executives tied to the bribery scandal, as the company tries to put the past behind it.

Russia welcomed foreign investment in developing a giant Artic gas project.

U.K.-based Tesco launched a "green" grocery store near Palm Springs, California this week under its Fresh and Easy brand in an effort to try to make name for itself in the U.S. Walmart and other retailers are also trying the same approach.

Oceania:

Australia's mining industry is struggling to fill jobs amid a quicker-than-expected recovery in the commodity sector.

A dispute over nearly $15 billion in allegedly misappropriated government money in Brunei by the youngest brother of the sultan of Brunei appears to be nearing a resolution.

Barron's:

This week's Barron's "Up & Down Wall Street" by Alan Albelson.

Barron's review of this week's market news and its preview of next week's market events.

Commodities Corner

Insider Transactions

The Economist:

The Economist's review of this week's politics and business news.

The Economist's Economic and Financial Indicators:
Overview
Output, prices and jobs
The Economist commodity-price index
Asia GDP growth forecasts
Trade, exchange rates, budget balances and interest rates
Markets
Unemployment benefits

Et Cetera:

Russia's richest man, Mikhail Prokhorov, has agreed to buy an 80% share of the New Jersey Nets basketball team and a 45% stake in the Brooklyn, New York arena and nearby residential and commercial towers for $700 million.

Educators are ramping up efforts to counter social isolation that some students experience by attending online high school. Doctors are also looking into how online isolation affects students.

Irving Kristol Obituary

Noteworthy - Week of September 13th

noreply@blogger.com (C.J.) — Sun, 20 Sep 2009 04:59:00 +0000

This week yet another undercover investigation into ACORN was made public. This time, the investigation made its way to San Bernardino, CA, where, once again, an employee there gave the young pimp and prostitute couple advice on how to set up a prostitution business involving underage illegal aliens. This time, however, the employee admits that she used to run a call girl business, that Heidi Fleiss is her idol, and that she was in a violent relationship with her ex husband until she killed him, seemingly admitting to premeditated murder.

The next day, the senate voted to 83-7 to end HUD and transportation funding to ACORN. The seven senators voting to continue ACORN funding were: Dick Durbin (D-IL), Roland Burris (D-IL), Robert Casey (D-PA), Kirsten Gillibrand (D-NY), Patrick Leahy (D-VT), Bernie Sanders (I-VT) and Sheldon Whitehouse (D-RI).

That same morning ABC news anchor Charlie Gibson stated on Chicago's WLS-AM 890 that he "didn't know" about the ACORN undercover investigations and allegations, although Senior ABC White House Correspondent Jake Tapper had reported on his blog that the senate was voting to stop HUD and transportation funding to ACORN.

Senator Mike Johanns (R-NE) wrote Attorney General Eric Holder requesting an investigation into ACORN and Representatives John Boehner (R-OH), Eric Cantor (R-VA) and Dave Camp (R-MI) sent a letter to IRS Commissioner Doug Schulman to sever ties with the agency, which they state has received over $50 million from taxpayers since 1994.

Japan's parliament named Yukio Hatoyama as the country's new prime minister and Hirohisa Fujii, the country's new finance minister, among other posts this week. Mr. Fujii recently stated that the government should reject weakening its currency in order to help exporters.

A lobby group representing the largest banks in the world urged the G-20 nations to continue their stimulus programs and recognize the steps that the financial industry is taking to improve its practices. The IMF issued guidelines this week for ending bank relief.

The Fed is likely to buy $1.45 trillion in mortgage-linked securities despite possible resistance by a few regional Fed presidents.

The U.S. Treasury stated this week that it will shrink the emergency debt program that it started during the crisis in order to avoid hitting the $12.1 trillion debt ceiling. There is concern that the Fed will have to sell securities or print money in order to pay for interest payments.

Anti-Fed activists, led by Texas Senator Ron Paul, continue push for an audit of the Federal Reserve.

Foreign demand for long-term U.S. financial assets fell in July. China, Japan and the U.K. increased their holdings, but Russia, Luxembourg, Switzerland, Ireland and oil exporting nations decreased. Foreign investors also shunned U.S. corporate and agency bonds, as well as Treasury bonds and notes.

In a speech on the anniversary of the Lehman Brothers collapse, President Obama told Wall Street to "embrace serious financial reform, not fight it."

Citigroup is considering a multi-billion dollar sale of shares in order to minimize the government's share of the company. Under the potential scenario, the government would sell its shares in Citigroup as the company sells additional shares, a move that could net taxpayers profit as much as $10 billion.

After threatening to restrict U.S. imports of chicken and auto products, China said that it would like to openly discuss a trade solution between China and the U.S. Last week, President Obama moved to place a 35% tariff on Chinese tires, sighting unfair competition. China believes the tariffs are to support U.S. unions, are unfair and, contacted the WTO last week after the tariffs were initiated.

The rise in Asian markets has brought back the theory of decoupling, which was prominent prior to the financial collapse in 2008.

Fed Chairman Ben Bernanke stated that the recession is "very likely over" but added that the recovery is likely to be so moderate that it wouldn't produce many jobs.

William White, the well-respected former chief economist at the Bank for International Settlements, warned of a double-dip recession earlier in the week.

Senate Finance Committee Chairman Max Baucus (D-MT) unveiled his health care reform proposal this week. Some prominent Democrats are threatening not to back the bill, which is without Republican support and is estimated to cost $880 billion. The bill mandates, among other things, that all citizens have health insurance, which is likely to pinch middle class Americans the most. President Obama is pushing for union support on the health care reform bill, which allegedly contains mandates for union funding.

Russian President Medvedev called for change in the nation's "primitive" economy and corrupt practices in an attempt to separate himself from former President Putin. Medvedev stated that he could run for president in 2012. Last week, Putin signaled that he might run for president again in 2012.

The bankruptcy estate of Lehman Brothers is claiming that executives of the firm worked with Barclays to give the U.K. bank a "windfall" of at least $8.2 billion when it bought Lehman's broker-dealer business amid its fall from grace last year.

Losses by the largest U.S. credit card issuers eased last month but not enough to indicate that the business is improving materially.

The U.S. said that it would discontinue its land base missile defense agreement with Poland and the Czech Republic in favor of a mobile defense system. The announcement came on the 70th anniversary of the Russian invasion of Poland at the onset of WWII and is said to have damaged relations between both countries and the U.S. Russia applauded the move.

Turkey said that it is planning to spend close to $1 billion for its first long-range missile defense program.

Former Fed Chairman Paul Volcker, the current chairman of the White House's Economic Recovery Advisory Board, said that banks should not be allowed to place bets against their capital, rather only with their client's funds, this week. The statement is certain to stimulate debate over the topic, which may put him at odds with the Obama administration, who is requesting more oversight of the banks but does not restrict the industry's abilities as much.

Under a new proposed policy, pay policies of the banking industry would require approval from the Federal Reserve, a decision traditionally reserved for the banks' corporate boards and executives.

Dairy farmers are asking antitrust regulators to investigate their industry. Milk prices have dropped 36% in the past year, bringing prices to their lowest level in three decades. European dairy farmers are requesting their governments help prop up their industry.

The EU nominated Jose Manuel Barroso to a second term of the European Commission.

The Brazilian financial exchange is pursuing agreements with its counterpart bourses in Chile, Columbia, and Peru that would allow for cross-trading of stocks and derivatives.

Investors are using the U.S. dollar as a carry-trade, a move traditionally reserved for the Japanese Yen.

U.S. household wealth grew by 3.9% during the 2nd quarter, the first growth in income in nearly two years.

The FCC proposed new rules that would treat all internet traffic the same, meaning that applications that drain bandwidth will be equal to that of lesser uses.

Complex U.S. tax laws are costing many small business owners millions of dollars in fines, as after receiving word from the government that their tax shelters are abusive in nature.

Big power producers are fighting the derivatives bill proposed by the Obama administration, stating that the changes would make it more difficult to hedge against swings in commodity prices.

Africa:

The World Bank managing director, Dr. Okonjo Iweala discussed how the financial crisis has effected Africa.

The Americas:

Argentina is in the process of passing a bill that would limit the power of media conglomerates.

A federal judge threw out the SEC's proposed settlement with Bank of America, which failed to disclose to shareholders Merrill Lynch's planned bonuses prior to their merger with the asset manager.

Google bought a Carnegie Mellon spinoff that will helps its effort to scan and newspapers and books for internet distribution.

Kodak is raising $700 million in cash via a debt investment from private equity firm KKR.

Wells Fargo CEO John Stumpf stated that Wachovia's losses are "in the same zip code" as the firm's original estimates.

Adobe is buying web-tracking firm Omniture for $1.8 billion. The deal will help customers track and make money from websites that were created with Adobe products.

Blockbuster is planning to close up to 40% of its stores during the next two years.

Best Buy raised its forecast for annual earnings and stated that holiday earnings for electronics could be stronger than expected.

Twenty-three people, including nine American Airlines employees, were indicted on cocaine trafficking allegations.

The Department of Defense endorsed sending more troops to Afghanistan, making it easier for President Obama to folllow General Stanley McChrystal's recommendation, against the wishes of the Democrat majority Congress.

Asia:

Chinese farmers are raising their rent prices for their land, raising rural income purchasing power.

Commodities:

Corn prices rose this week as fear of a frost late next week damaging an underdeveloped crop.

The CME is expected to urge the CFTC to apply commodity-position limits across different markets so that they cannot circumvent the CME to sell on another exchange.

Natural gas rose more than 25% this week.

Mining firms are starting to resume capital spending, as companies gain confidence that demand and prices for commodities are improving.

The Anadarko Group said that it found oil this week off the coast of Sierra Leone, which could potentially open up a new oil region in the world.

U.K. firm Tullow announced that it has found the largest oil discovery in the Lake Albert region of Uganda yet-- a region where it has already found more than 700 million barrels of oil.

Italian gas and oil company Eni has decided against buying rival firm Tullow, citing cost concerns.

Europe:

Auto makers are pushing European governments to continue their "cash for cl unkers" programs, fearing that sales could fall dramatically if the programs are allowed to expire.

The Italian government is offering the largest tax amnesty of all the nations thus far cracking down on tax evasion.

The Irish government proposed a plan to buy up to $132 billion in property loans from struggling banks in order to shore up their balance sheets and bring liquidity into the market. The country's recession is among the worst in Europe.

Turkey's central bank reduced its interest rates by 0.50% to 7.25% and suggested that it would continue to cut rates, even as news support that its economy is stabilizing.

Middle East:

Iran agreed to meet with the U.S., China, Russia, France, U.K. and Germany to discuss its nuclear program. The meeting will take place on October 1 but the location has not yet been finalized.

Oceania:

BHP Billiton, the world's largest miner, is hunting for mergers, having accrued more than $18 billion in cash during the last year.

Barron's:

This week's Barron's "Up & Down Wall Street" by Alan Albelson.

Barron's review of this week's market news and its preview of next week's market events.

The Economist:

The Economist's review of this week's politics and business news.

The Economist's Economic and Financial Indicators:
Overview
Output, prices and jobs
The Economist commodity-price index
Economic freedom
Trade, exchange rates, budget balances and interest rates
Markets
Foreign direct investment

Et Cetera:

In a study to determine how occupation affects happiness, business owners came out on top.

WSJ 2009 Technology Innovation Awards

Possible candidates for the Nobel Prize

Education for Executives

Patrick Swayze died of cancer at the age of 57. A video montage.

Worthwhile Articles

noreply@blogger.com (C.J.) — Thu, 17 Sep 2009 02:00:00 +0000

In thumbing my way through some past Economist and Foreign Policy magazines, I found a few articles that I thought would be worthwhile to share.

The Economist:

Dark Days Ahead-- The Looming Electricity Crunch in Great Britain

As Dr. Livingstone Presumed-- The Origins of Malaria

Don't Blame Your Genes-- The Origin of Diabetes: They may simply be getting bad instructions-- from you

Thanks be to D.C.-- Statewatch: Maryland

Where It All Began-- America's Housing Market: Signs of stabilisation should not obscure the big problems still ahead.

Tight Corners-- Monetary Policy: Which central bank will raise interest rates first?

A New Growth Industry?--The Virtues of Biochar: Biochar could enrich soils and cut greenhouse gases as well

Charge!-- Electric Cars: Car makers are shifting towards electric vehicles. Policymakers must do their part, too.

The Electric-Fuel-Trade Acid Test: After many false starts, battery-powered cars seem here to stay. Are they just an interesting niche product, or will they turn motoring upside down?

Lost in Transition: Japan's people are trapped in the past. Their new government must help secure them a future.

3-D: It's Nearly There

Foreign Policy:

Globalization

Axis of Upheaval:

The Most Dangerous Place in the World: Somalia

Reversal of Fortune: Russia

State of War: Mexico

Samuel Huntington: A Tribute

China's Team of Rivals

Asia's Rise

1979: The Great Backlash

The Death of Macho

The Fall and Rise and Fall Again of the Baltic States

The Failed States Index 2009

Danger Ahead

Oil: The Long Goodbye

Summer Reading of Our Discontent

Noteworthy - Week of September 6th

noreply@blogger.com (C.J.) — Sun, 13 Sep 2009 04:59:00 +0000

I apologize for adding commentary to the news this week. I usually oppose doing so, as I would like this blog to remain as neutral as possible, with regards to the news, but I couldn't help myself this week after the witnessing just how unresponsive the mainstream media has become today. To me, it is criminal how little they are reporting to the American people and how little they are questioning about what is really going on in our country. It's almost as though the media is willing giving up their 1st Amendment rights to the government.

With that said, here is the news from the past week:

President Obama's Green Energy Czar Van Jones stepped down at 12:01 AM on Sunday amid controversy surrounding his signing of a 9/11 Truther statement, which believes the U.S. allowed the 9/11 attacks to occur so that President Bush could go to war in the Middle East. Van Jones stated in his resignation that he was the target of a conservative smear campaign (although that it used his own words). The mainstream media had not published an article on the czar until the resignation, including the news that led to Mr. Jones' resignation. Fox News Commentator Glenn Beck had issued in-depth coverage of Mr. Jones in the weeks leading up to his resignation using clips of the Green Energy Czar, in his own words, to help his viewers understand Mr. Jones' background. As it turns out, Van Jones is a self-avowed communist, who believes that white people are poisoning minorities and, who produced a radical speech album entitled "Wartimes- Reports from the Opposition" with convicted cop killer and former black panther Mumia Abu-Jamal.

Why is it that the President handpicked Van Jones to be his advisor? Why has he selected other radical-type people as his advisors? Is Van Jones the type of person that represents America? And why did the mainstream media fail to cover or look into Mr. Jones? President Obama's senior advisor Valerie Jones said earlier this year that the White House had been following Van Jones since his early days in Oakland (when he was a well-known radical activist).

Here is a link to the video (Parts 1-5) in which Glenn Beck exposes that Van Jones had, indeed, signed a 9/11 Truther statement that, ultimately, led to his resignation.

On Wednesday, House Democrats succeeded in pushing forward the nomination of controversial Harvard law professor Cass Sunstein as the head of the White House Office of Information and Regulatory Affairs. Among Mr. Sunstein's controversial views are:

Animals should be able to sue their owners, with attorneys representing them, for violations of existing animal protection laws (as stated in his book Animal Rights in 2004);

The 1st Amendment needs to be reformulated

The belief in a 2nd Bill of Rights, which FDR supported, that would give Americans the right to right to an education, a right to a home, a right to health care, and a right to protection against monopolies;

Citizens should celebrate tax day since taxes bring liberty to a nation

The new FCC chief Julius Genachowski is coming under fire after hiring civil rights attorney, Mark Lloyd, who has been critical of corporate-owned media in the past, to promote diversity in media ownership. Mr. Lloyd has been critical of conservative viewpoints, especially in regards to talk radio, and has suggested that a fully funded U.S. network, such as the BBC in England, would give the government more power to choose what programs are aired. Other statements by Lloyd include him speaking out against the 1st Amendment and supporting Hugo Chavez's "incredible--dramatic-- revolution." Here is a video of Mr. Lloyd's words.

The role of White House Czars, which currently stand at more than 30 and are not subjected to Congressional approval or oversight, has sparked debate in Congress in light of the Van Jones controversy and President Obama's unusually high number of appointees.

On Thursday morning, a video came to light that essentially no mainstream media outlets, except Fox News, have reported about. The video, an under cover investigation into ACORN (Association of Community Organizations for Reform Now), shows a "pimp" and his 20-year old "prostitute" talking to two ACORN advisors in Baltimore, MD about a house, which they would like to setup for prostitution purposes. The couple mentions that 13 young illegal aliens from El Salvador will be coming to stay at the house and participate in the business as well. The ACORN advisors then devise a way for the duo to set up the business legally, acknowledging fully that what they are doing is illegal, and advises that the couple might be able to claim the girls as dependents but that they definitely should not claim any income that they earn.

On Friday, a similar video by the same pair was published online. This time, the under cover reporters investigated a Washington, D.C. ACORN office and had similar results there, too.

One has to wonder when (or if) the mainstream media will decide to cover these investigations into an organization with ties to President Obama, which is also receiving funding from the federal government, including up to $8.5 billion in stimulus money.

The Census Bureau announced on Friday that it had cut ties with ACORN after four employees were fired this week amid the undercover investigations in Baltimore and Washington D.C. ACORN is also being investigated for voter fraud in at least 13 states.

In other news, President Obama made his health care reform pitch before a full session of Congress on Wednesday evening. The speech was widely regarded as partisan in nature, although the President sent a message to all parties that it was time to work together to find the reform that America is looking for. Obama stated his plan would cost $900BB and money for funding would come from Medicare fraud reduction (which the President states is rampant), cost savings, and taxes.

One should question, however, why the President has not tackled the apparent rampant fraud in Medicare during his first eight months in office, especially if it could save the government millions of dollars in taxpayer revenue during the time of a financial crisis. He has tackled every other area of the economy and government, why not this one? Is it not (borderline) treasonous to fail to do so, considering the dire circumstances and uncertainty of our country?

According to the U.S. Census Bureau, citizens insured through the government grew by 1.2% last year to a total of 29% of the population or 87.4MM. Medicare, Medicaid and the Children Health Insurance Program, a federal program for children of low-income families not poor enough to qualify for Medicaid, were the main insurance groups.

Up to two million people marched on Washington D.C. on Saturday in protest of government spending, lack of fiscal responsibility and big government.

According to the stimulus bill passed earlier this year, the government plans on spending $100 million to map broadband availability-- a project some say should cost no more than $3.5 million.

The U.S. trade gap widened significantly during the month of July to 16.3% or $31.96BB. Imports surged 4.7% to $159.55BB, while exports gained only 2.2% to $127.59BB, creating concern that the U.S. economy will lag other nations out of the global recession.

The dollar sank to its lowest level this year this week, as investors continued to seek foreign and more risky assets, seeing green shoots in Asia and fearing the dollar is losing its place as the global standard.

The Census Bureau's annual report on living standards stated that the inflation-adjusted median household income fell 3.6% last year to $50,303, the steepest drop in forty years, and the poverty rate reached 13.2%, the highest level since 1997.

Job openings in July fell to the lowest number since tracking began in 2000 to 2.4 million jobs-- half the peak of the high of 4.8 million in mid-2007.

For the sixth consecutive month, Americans borrowed less , increasing concern that trend will continue and holding an economic recovery at bay.

Consumers and economists alike are feeling more confident about the economy according to preliminary University of Michigan results and a survey of forecasters by the Wall Street Journal.

Public unwillingness to send more troops to Afghanistan might pit the Democrat-majority Congress against the White House.

Iran rejected any compromise of its nuclear program this week and Ahmadinejad chastised the Obama administration for interfering in Iranian affairs. Venezuelan President Hugo Chavez was in Iran this week and promised the nation 20,000 barrels/day of refined gasoline to the nation, interfering with the U.S.'s sanctions against Iran, which is an oil-rich but gas poor nation. Russia stated this week that it wouldn't back any new rounds of sanctions against Iran and dismissed a U.S. timetable for the nation to end its nuclear power program.

The European Central Bank warned in its monthly bulletin for September, which was published on Thursday, that resurgent protectionism is a real threat to the economic global recovery.

Friday night, the Obama administration stated that the U.S. will begin placing a 35% tariff on Chinese tires, with a plan to reduce the tariff by 5% each of the next two years. The decision comes just two weeks before G-20 leaders are to meet in Pittsburgh in which trade tension and economic disputes are expected to be discussed. At the meeting the Obama administration is expected to ask for new sanctions on Iran to combat its nuclear program and China's vote in the UN Security Council is pivotal.

As a background, the Smoot-Hawley Tariff Act of 1930, is widely considered to have exacerbated the Great Depression, as many of the countries penalized by the U.S. retaliated to save their own economies. Are we going down the same path?

Multinational companies are fighting Argentina's proposed doubling of its value-added tax (to 21%) on electronic goods not produced in the Tierra del Fuego special economic zone.

The Obama administration is hoping to further deregulate international travel, allowing Japan and other nations within Europe to participate in an "open skies" program with U.S. airlines.

Chinese Premier Wen Jiabao pledged continued stimulus in China, stating that the world's third largest economy still faced persistent problems and uncertainties despite an upturn in growth.
China reported a 12.3% growth rate for August versus 10.8% in July-- the 4th consecutive month of acceleration in growth.

Chinese airlines and shippers are threatening to default on payments of oil-derivative contracts they entered into with foreign banks last year. Both industries lost hundreds of millions of dollars as oil prices turned south in late 2008. The Chinese government this week backed their decision to fight the derivative losses.

Taiwan's premier and cabinet members announced their resignations this week, a move not uncommon in the nations young democracy.

France is likely to start taxing carbon emissions on both household and corporations starting next year. As of January 1, a special tax of 17 Euro ($24.74) will be levied per metric ton of carbon dioxide emitted of fossil fuels, in hopes of transitioning the country toward more environmentally friendly goods. The tax falls short of the 32 Euro per metric ton and subsequent 5% annual increase until the tax reached 100 Euro per metric ton in 2030 that PM Sarkozy recommended. France's citizens support the special tax.

Three major oil manufacturers have agreed to develop the huge Gorgon natural gas field off the remote northeast coast of Australia. The field is expected to go online in 2014, more than 30 years after it was discovered. Australia is currently the sixth largest supplier of liquefied natural gas (LNG) but could become #1 in the world by 2020 and be a key supplier to the emerging markets in Asia. The field is expected to produce 15 million tons of gas per year, nearly twice as much as the next largest natural gas field in Australia.

The U.S. was able to successfully sell $70BB worth of Treasuries this week, as a slow economic recovery outlook continued to damper inflation expectations, allowing Treasury rates to stay low. The Treasury, however, remains concerned that Congress will not lift the nation's debt ceiling and is preparing for alternative measures should the legislative branch balk.

The FDIC's emergency guarantee program is set to end October 31, which will test the strength of the American banking system without extraordinary government assistance.

E-mails brought to light this week showed that UBS was concerned about CDOs in the summer and fall of 2007. A Connecticut judge ordered the company to set aside $35.5 million to cover a potential judgment against the company in a CDO case.

Senator Chris Dodd's decision to remain on the Senate Banking Committee raised the chances of an overhaul of the financial rules in the U.S.

Africa:

After a six-year trial, Former Zambian president, Frederick Chiluba, was cleared of corruption charges after a judge ruled the funds couldn't be traced to the government.

The Americas:

Brazil's GDP rose 1.9% during the second quarter, officially pulling the nation out of a recession. Monetary easing, government spending and tax cuts were responsible for the quick turnaround.

Mexico City's water supply is running dangerously low as drought has wreaked havoc on one of the world's most populated cities.

Mexico's oil output is falling faster than expected, increasing the likelihood that it will lose its status as a major oil exporter in the near future, worsening an already strained economy.

New Los Angeles school superintendent Ramon Cortines plans to expose the city's school system in hopes of creating enough embarrassment and outrage to break the logjam in the school board, city leadership and teachers union that has hindered past attempts at change.

Starting Tuesday, federal contractors will be required to use an electronic system to verify their employees' work eligibility in the U.S.

Regulators seized Corus Bank on Friday, making it the 91st bank to close its doors this year and the first to be done in by deteriorating construction and commercial real estate loans.

Harvard and Yale, two of the largest endowments in the U.S., both stated that they lost 30% of their value for the year ending June 30-- a combined $17.8BB drop for the universities. Columbia University announced a 21% decline in its endowment during the past year.

Cadbury rejected a $16.73BB offer to be acquired by Kraft Foods early this week. The news, which was released by Kraft, is certain to draw the attention and stir bidding by the food giant's competitors. According to reports, Kraft is especially interested in Cadbury's established Latin America and Indian brands. Cadbury estimates that more than half of India's population has never tasted chocolate, providing the company with a huge potential of growth.

Wynn Resorts won regulatory approval to list its Macau assets on the Hong Kong stock exchange. The firm is expected to raise $1 billion in the IPO.

A group of Microsoft competitors are scrambling to acquire a set of patents formerly owned by the technology giant in order to avert any legal threat to the Linux operating system.

Steve Jobs appeared in public for the first time since receiving a liver transplant earlier this year, taking the stage at an event in San Francisco.

Monsanto said that it would cut more jobs as the world's largest seed company's Roundup herbicide revenue is suffering due to competitive generic Chinese products.

John Mack stepped down as CEO of Morgan Stanley this week; he will be succeeded by brokerage chief James Gordon. Mack plans to stay as chairman of the board.

Procter and Gamble announced that it will cut prices, expand overseas and reposition its Cheer brand as a low-price detergent in order to enhance its lackluster profits.

Bloomberg, as well as a few private equity companies, has expressed interest in McGraw-Hill's BusinessWeek assets.

A Greenwich Village restaurant in New York City is no longer accepting cash as payment in their establishment, unless it is as a tip for waiters. The high-end restaurant, Commerce, is adopting a strictly credit or debit card system.

Asia:

Kai-Fu Lee, an executive, who resigned from Google last week and has also worked for Microsoft, announced his plans to create a Chinese technology incubation company called Innovation Works, which he hopes will create five start-ups per year and allow the firm to keep a 10-20%+ stake in each. Mr. Lee plans to use $115MM in capitalization to start the company.

China will sell 600 billion Yuan ($878.4 MM) in debt on September 28th in Hong Kong, marking the first offering of Yuan sovereign debt outside of Mainland China.

China's $300BB sovereign wealth fund is considering a big investment in distressed U.S. real estate. Lower Manhattan is feeling the pain of the office-supply glut.

In a landmark case, a Hong Kong judge convicted a former Morgan Stanley banker of nine counts of insider dealing this week.

Inflationary pressures are causing the Indian central bank to reconsider its loose monetary policy stance.

Indian farmers are watching their crops wilt away, as India's drought continues to wreak havoc on agriculture there. Demand for products, such as sugar, have caused prices to increase dramatically and forced the nation to input many goods. India is the world's largest consumer of sugar.

India's largest cell phone provider by subscribers, Bhardi, raised its bid for South African MTN Group. The transaction would create one of the largest telecommunication companies in the world with more than 200MM subscribers and $20BB in revenue and be the largest cross-border deal in Indian history.

The Japanese economy grew less than initially reported in the second quarter. The Cabinet Office reported that GDP grew 2.3%, rather than the initially reported 3.7%.

Chen Shui-bian, Taiwan's former president, was sentenced to life in prison on charges of corruption.

Commodities:

EnCana will receive $3.5BB for spinning off its oil sands business.

Gold climbed to more than $1,000/oz. this week, as investors flocked to the precious metal amid uncertainty of the U.S. dollar and world economy. Silver continued its upward rise this week as well, ending the week near $17/oz.

Natural gas soared 15% on Thursday as a slightly smaller-than-expected increase in U.S. gas supplies versus last week was reported and investors turned their thoughts to the upcoming winter season. Meanwhile, many storage facilities and gas-related production companies are benefiting from the commodity's oversupply.

Europe:

A strengthening Euro is threatening to put a damper on the European recovery and tying the hands of the European Central Bank.

Major companies are pressing their weight on Ireland to approve the EU Treaty that the nation rejected just a year ago, arguing that the fragile state of the island's economy is too dire to further reject the so-called Lisbon Treaty again. Opponents argue that the country would be giving up its sovereignty.

Spain announced tax hikes and budget cuts in order to gain a better grip on the nation's struggling financial situation. The move follows similar actions by Ireland; England is considering taking action as well.

The Bank of England kept its interest rates and bond-buying program unchanged. The bank's key interest rate has been at 0.5% since March. A senior reporter of Dow Jones stated this week that investors might be discounting just how much inflation the central bank is willing to take on.

Deutsche Telekom and France Telecom plan to merge their U.K. operations to form the nation's largest cell phone operator.

Middle East:

Dubai opened its first driver-less, air-conditioned mass transit railway this week after four years of planning and construction. The transit system--the first in the UAE-- is expected to reduce traffic congestion by as much as 17%.

Oceania:

Australians in mining towns are starting to warm to Chinese investment in mines there, as many Western companies have suspended projects due to lack of financing and weakened commodity pricing.

Et Cetera:

This week's Barron's "Up & Down Wall Street" by Alan Albelson.

Barron's review of this week's market news and its preview of next week's market events.

The Economist's review of this week's politics and business news.

Peter Schiff Speaking at the Western Regional Mortgage Bankers Association (Nov 2006)

noreply@blogger.com (C.J.) — Wed, 09 Sep 2009 04:59:00 +0000

I recently came across a YouTube clip of Euro Pacific Capital founder Peter Schiff, who gained fame by warning investors early about the housing bubble and other economic events during the past two years, speaking at the Western Regional Mortgage Bankers Association Meeting in November 2006.

Video

In my opinion, the video (all 8 parts) is a MUST see for anyone wanting to understand what happened to the U.S. economy in the lead-up to the crisis of 2007/8 and what investors/citizens can expect going-forward. While many might not agree with Peter's predictions, it is hard to argue completely against him based on his proven foresight.

Noteworthy - Week of August 30th

noreply@blogger.com (C.J.) — Sun, 06 Sep 2009 04:59:00 +0000

After 50 years in power, Japanese voters ousted the Liberal Democratic Party in favor of the Democratic Party of Japan, which promises to stimulate the Japanese economy, reevaluate the country's ties to the U.S. and cut bureaucracy in the nation.

The August index of manufacturing data rose in the U.S., Australia, China, France and other major economies, while the rate of decline slowed in others, suggesting that the world economy might be turning around.

G-20 policy makers agreed that signs of a recovery are taking shape, however, stated that it was much too early to withdraw stimulus measures, fearing a "double dip" in the world economy without it. The finance ministers also discussed larger reserve requirements and caps on bonuses for banks.

Unemployment rose to its highest level since 1983 (9.7%) in August. State and local governments, once seen as safe havens, reduced payroll for the third consecutive month. States are shutting down offices one day per week in order to save cash. Temporary jobs appear to be leveling off, however.

Continued worry over mortgage defaults have raised concern that the Federal Housing Administration might need to be bailed out. The value of the agency's reserves, which are mandated by Congress, will be released on September 30th in the FHA's annual review. Commercial real estate still lurks in the background as the next potential mortgage crisis.

The Mortgage Bankers Association has recommended that Congress break up Fannie Mae and Freddie Mac into several smaller privately held companies that would issue government-guaranteed mortgage securities.

Senate Finance Committee Chairman Max Baucus (D-MT) plans to unveil a comprehensive health care reform bill to a bipartisan group of senators next week, as Congress returns from its August recess with a long "to-do" list. President Obama will address a joint session of Congress on Wednesday and is expected to relaunch his bid for health care reform, although there is debate over what he will propose after weeks of waffling.

China agreed to buy $50BB in International Monetary Fund bonds using the Yuan, making it the 1st nation to sign an agreement to buy the bonds.

The World Trade Organization ruled that Airbus received illegal subsidies from European governments, a ruling likely to help Chicago-based Boeing and provide the ammunition the firm is looking for to contest future funding for its largest competitor.

Trade ministers agreed to revive the Doha Round of trade talks, which stalled in July 2008, after the Obama administration named a new ambassador to the WTO this week.

BP lobbied the UK in late 2007 for a prisoner transfer agreement between Scotland and oil-rich Libya for convicted Lockerbie bomber, Abdel Basret al-Megrahi. Qatar lobbied Scotland in June of this year.

The SEC's inspector general released a 477-page report, which showed the extent to which the agency missed several red flags, some as early as 1992, into the Madoff Ponzi Scheme.

Two new antibodies in the AIDS virus may provide fresh leads in the quest for a vaccine.

Retail sales declined 2.9% during August. In a changing trend, however, sales of mid-priced retailers gained versus discounters. August's weak back-to-school sales do not bold well for holiday sales this year.

The Treasury Department backed away from its request for independence with regards to special inspector general of TARP, Neil Barofsky, who is in charge of tracking how TARP money is spent.

The World Bank is encouraging China to invest more in Africa, in an effort to boost economic growth in the continent.

China's market correction this week might threaten the latest run in equities.

The IRS is expanding a program designed to find inconsistencies between mortgage payments and declared income in its continued effort to find missing tax revenue.

Africa:

Gabon declared Ali Bongo Ondimba, son of the country's long-time ruler, the winner of its recent presidential election, amid allegations of voter fraud.

The Americas:

Brazilian beef giant JBS SA is set to acquire Pilgrim's Pride for roughly $2.5BB.

Columbia's Congress passed a bill allowing President Alvaro Uribe to seek a third consecutive term.

Google's YouTube is in discussion with major movie studios about streaming movies on a rental basis.

Pfizer pleaded guilty to improper marketing of its painkiller Bextra and agreed to pay $2.3BB in fines.

Pernod Ricard SA, the French liquor giant, which purchased the Absolut vodka brand for 5.3BB Euros last year, is struggling with sales amid the U.S. recession, as Americans are turning to less expensive brands.

Southwest Airlines will introduce a new $10 fee for priority boarding.

Las Vegas Sands secured $600MM in short-term financing through its bankers ahead of its planned Hong Kong IPO of its Macau assets.

In a cost saving measure, Walmart will start paying its employees via debit card if they decline direct deposit to a bank.

Ebay sold 65% of its Skype business to private investors for $2BB.

Disney has acquired Marvel for $4BB.

Tobacco firms are seeking to block various provisions of a new federal law that places the industry under the FDA umbrella, claiming that it violates their 1st Amendment rights.

Legal prostitution is under pressure in Rhode Island.

Marijuana plantations are on the rise in the U.S., as growers target U.S. forests amid a border crackdown.

Asia:

China will require music sites to seek approval from censors for all foreign songs distributed via the Internet.

China's environmental minister called for new measures to deal with heavy metal poisoning, following recent incidents of lead poisoning in children living near smelters.

Google is struggling amid intensifying competition in China.

Property developers in China are rushing to raise billions of dollars for investments that just a few months ago seemed to be doomed.

A Myanmar court will hear the appeal of Suu Kyi, who was convicted of violating the terms of her house arrest on August 11th.

The Dalai Lama visited Taiwan this week.

Morgan Stanley and Citigroup invested $100MM each to finance separate wind farms in August, possibly re-igniting growth in green energy.

Europe:

Champagne producers agreed to pick 32% fewer grapes this year, allowing the remaining harvest to go to waste, in order to counter reduced supply.

Angela Merkel's CDU party suffered heavy losses in regional elections last weekend, potentially putting her rein of chancellor at risk.

Llloyds PLC is considering moving away from a UK government program to guarantee its assets, citing the firm's rising stock price and slowing of loan defaults.

Middle East:

Israel announced that it would authorize the construction of hundreds of new homes in the West Bank, just as the U.S. and Israel had appeared close to deal that would halt settlement growth in the area and allow Israeli-Palestinian peace talks to continue.

Afghan civilians were hit during an air strike there this week, straining its alliance with the U.S. American public support of the war in Afghanistan is waning, putting pressure President Obama to rally support for the war.

Oceania:

Australia's trade deficit widened to $1.3BB USD in July to more than triple that of June's totals due to strengthened currency and increased consumer demand for imports.

Commodities:

BP announced a major find in the Gulf of Mexico in a continuing sign that the gulf remains one of the world's most promising exploration regions.

Baker Hughes has agreed to acquire BJ Services for $5.5BB, which will create a new rival to oil service giants Schlumberger and Halliburton.

Commodity prices rose during the week as the USD fell from poor job data and a stronger world economic outlook.

Et Cetera:

This week's Barron's "Up & Down Wall Street" by Alan Albelson.

Barron's review of this week's market news and its preview of next week's market events.

Noteworthy - Week of August 23rd

noreply@blogger.com (C.J.) — Sun, 30 Aug 2009 04:59:00 +0000

Japan is expected to vote out the Liberal Democratic Party after a 54 years of power in favor of the 11-year old Democratic Party of Japan (DPJ), a group of market reformers, union leaders and consumer activists, which has never held full political power. The DPJ plans to stimulate the Japanese economy, offer strong climate change rules, reduce bureaucracy, and reassess the nation's relationship with the U.S. Voters remain skeptical that the party will be able to enact the changes they have promised.

A $300MM incentive program for energy-efficient appliances, which was funded through the stimulus program, is unlikely to have the same impact as the "Cash for Clunkers" program, according to appliance producers.

Eight of the top 10 models under "Cash for Clunkers" program, which was intended to stimulate domestic car manufacturing, were foreign cars (the other two models were manufactured by Ford), while all of the top 10 "clunkers" turned in to dealers were domestic vehicles.

Consumer spending rose 0.2% in July versus June--the 3rd consecutive monthly rise-- thanks, in large part, to the "Cash for Clunkers" program.

World trade volume increased 2.5% month-to-month during June, the largest increase in a year.

President Obama has until September 17th to decide whether to accept the U.S. International Trade Commission's suggestion of a 55% tariff on Chinese tires, which came on the heals of the United Steelworkers complaining that the cheaper tires had cost more than 5,000 jobs in recent years.

The White House revised its 10-year deficit downward to $9 trillion, creating ever more c oncern over the future of the dollar.

President Obama nominated Ben Bernanke to a new term as Federal Reserve Chairman.

SAT scores fell slightly last year, raising questions about the effectiveness of the national education reform efforts.

Investors in hedge fund Cerberus, which made an unsuccessful multi-billion bet on the U.S. auto industry, are fleeing the fund in droves.

The FDIC added 111 banks to its endangered list during the last quarter to 416 or 5% of the nation's banks. The agency had 305 at the end of March and 117 one year ago.

According to an Agriculture Department forecast, U.S. farm profits will fall 38% this year.

Two-thirds of the country's biodiesel production is now unused, according to the National Biodiesel Board, which cites the global credit crisis, capacity glut, lower oil prices and delayed government rules on changes in mixtures as reasons for the problem.

The Commodity Futures Trading Commission is seeking more funding in order to expand it ambitious plans to regulate the futures markets.

The Fed and Treasury departments were told of Merrill Lynch's planned $3BB worth of bonuses as Bank of America requested more funds to complete its transaction of the brokerage house.

Africa:

Gabon will elect its first new leader in 41 years on Sunday. The iron-ore rich nation was misled by its previous leader, Omar Bongo Ondimba, who promised to until his death in June to use the nation's resources to develop it. The 23 candidates in the election have all pledged the same promise.

The Americas:

A federal appeals court tossed out a 2007 FCC rule, which limited cable companies to a 30% national market share. The court had rejected the same rule in 2001 and cited increased competition in the pay-television market as a reason behind the ruling.

Prior to the decision to merge with Live Nation, T icketmaster sought to team itself with several of the largest ticket scalpers in the country but the deal fell apart due to mutual distrust.

Toyota plans to close a California factory that it had owned jointly with the former GM. The closing is the first of its kind in the U.S. for a foreign manufacturer.

Anheuser-Busch InBev and MillerCoors are increasing beer prices despite flat volumes.

Hedge funds increased their ownership in financials by 55%, to $70BB, during the quarter according to a report issued by Goldman Sachs. The value gives the industry 3.7% of the financial sector's market capitalization-- an all-time high.

Apple's Snow Leopard operating system went on sale this week. The new OS offers many background features, including much more efficient coding-- to the tune of 7GB of saved HD space. The upgrade costs $29 for current product users and is a simple one for most newer Mac computers.

Wikipedia plans to place restrictions on who can edit the profiles of "high profile people."

Asia:

China Unicom agreed to a three-year deal with Apple to start selling its popular iPhone in China starting later this year.

China condemned the Dalai Lama's visit to Taiwan next week.

Chinese paramilitary forces were formally authorized to handle riots, terrorist attacks and other social disturbances under a law passed there this week.

Harley Davidson is preparing to take on the Indian motorcycle market by offering 12 models within the emerging market nation.

India's government has set its starting price for each of the four 3G bandwidths it plans to auction at $716MM. The country is also auctioning three slots of radio bandwidth for WiMAX starting at $350MM.

Thousands of people are returning to Myanmar from China, which had seen an influx in refugees from the neighboring country in recent weeks due to violence in the country.

North Korea agreed to allow reunions to restart after releasing a four-person fishing crew this week that it had held captive since July.

Europe:

The IMF approved disbursement of $278.5MM to Latvia, as the Baltic nation struggles with the world recession. Latvia's GDP dropped 20% during the 2nd quarter.

Diageo PLC said that it doesn't expect a recovery in the alcoholic beverages industry anytime soon, as the premium alcohol maker and its rivals have struggled with sales versus cheaper alternatives during the recession. The maker also announced this week that it will tackle India alone, as talks to acquire 15% of the country's largest liquor group, United Spirits, failed.

France has agreed to penalize traders who lose money for their firms after receiving a bonus, as well as to limit bonus payouts of financial services firms.

Middle East:

Many of Ahmadinejad's cabinet picks are being criticized by friends and foes alike, as the candidates filling them lack the experience or qualifications to fill the posts.

Oceania:

Australia environmentally approved the Gorgon liquefied natural gas project off its NW coast. The project could become the world's largest natural gas operations.

Commodities:

The glut of natural gas continues to weigh on its price.

The closing of several Chinese ore smelters due to pollution controls has given rise to lead prices, although analysts are not concerned about the supply of iron ore to the marketplace.

Industrial and investor demand have combined to increase silver prices but some believe that its price level is not sustainable.

Et Cetera:

This week's Barron's "Up & Down Wall Street" by Alan Albelson.

Barron's review of this week's market news and its preview of next week's market events.

Massachusetts Senator Ted Kennedy died this week of cancer.

Noteworthy - Week of August 16th

noreply@blogger.com (C.J.) — Sun, 23 Aug 2009 04:59:00 +0000

Oddly enough, the biggest story of the week, in my opinion, which broke late Friday afternoon, did not appear in either the Wall Street Journal or Financial Times print editions on Saturday, at least to the nearest I can tell. It certainly wasn't on the front page, like the story that housing rose 7.2% during the month of July. (Incidentally, foreclosures accounted for 31% of the sales.) Interestingly, on Friday the WSJ reported that 1 in 8 households with mortgages was in foreclosure or late on its payments-- up 1.1% from the previous quarter and 4.2% from the previous year.

In a week with a lot of news, the most noteworthy news of the week was that the Obama administration is raising its forecast for the 10-year federal budget deficit to $9 trillion from $7.1 trillion. To put it another way, that's $2,000 billion extra or a 14% rise from a previous estimate... less than six months ago. One has to wonder, especially the Chinese and Japanese, who are our largest debt holders, if another revision will follow later in the year or next year.

The revision is certain to have an impact on health care reform, which the White House can't seem to make up its mind if they will offer a public option or not when it comes to health care reform, regardless of the CBO's anticipated price tag of $1.6 trillion over the next 10-years. The House of Representative Democratic leadership can't even make up their mind what they want but have threatened to use their majority to push through legislation. Speaker Pelosi (D-CA) said this week, "There’s no way I can pass a bill in the House of Representatives without a public option." A day later, House Majority Leader, Steny Hoyer (D-MD), said that, "We believe the public option is a necessary, useful and very important aspect of this, but we’ll have to see because there are many other important aspects of the bill as well." Huh? (Read: Don't count on a public option passing any time soon.)

A battle is brewing between drug companies and Congress over the disclosure of drug prices.

Naturally, a growing deficit also largely affects the U.S. dollar's strength, as well as other budgetary, monetary and legislative decisions. The federal deficit will affect all of us in every aspect of our lives; therefore, it is this week's top story, regardless of what the WSJ or FT reports.

Fed Chairman Bernanke stated this week from a central banker's retreat in Jackson Hole, Wyoming that the global economy is leveling out and that the prospects of growth in the next year appear to be good.

Warren Buffett penned an op-ed piece in the NY Times this week stating his concerns with the economy and its (and the government's) effect on the U.S. dollar.

Not to be outdone, bond fund giant PIMCO also penned some interesting articles on the economy, U.S. dollar and emerging markets this week as well.

Swiss Bank UBS has agreed to terms in its tax-evasion case with the U.S. government and is now setting its sights on Hong Kong. A key informant in the trial received more than three years in jail for his role in the tax-evasion case. Separately, the Swiss government is exiting from its $5.6 billion stake in UBS with a $1.1 billion gain.

The "Cash for Clunkers" program will end Monday at 8 P.M. EST. The program is ending earlier than anticipated as government officials worry that there might not be enough money in the program to reimburse car dealers. Analysts worry that sales and manufacturing data will dissipate in the coming months.

The Federal Reserve and U.S. Treasury extended the $200 billion TALF program to March 2010 for newly issued ABS and legacy CMBS and June 2010 for new CMBS deals. The program allows the Fed to loan money to those wanting to buy securitized loans.

Spain's BBVA is hoping to use the banking crisis in the U.S. to expand in the southern states. This week it won an auction for the assets of Guaranty Financial. The FDIC has eased its rules to buy failed banks in order to ease the stress being put on it by the crisis. Pension funds are fighting the FDIC's new ruling, as private-equity buy-outs would require three times the tier one mandates as the banks.

Firms that match buyers and sellers of illiquid assets are thriving, as sellers of the once heavily sought assets are unable to sell through regular markets.

Officials arrested a 28-year old American man, along with two Russian accomplices, who are said to have stolen at least 130 million credit card numbers.

Africa:

Nigeria's central bank published a list of its top debtors this week, putting some of the country's rich and powerful on notice.

The Americas:

Mexico's output shrank faster than any time on record during the 2nd quarter, as GDP plummeted 10.3% from the same period one year ago. The U.S. recession, falling oil production and the H1N1 virus all contributed to the massive decline.

Mexico is easing its ban on drug possession. The U.S. charged 43 people with "major drug trafficking" crimes this week, including some major cartel leaders.

A pesticide lawsuit against Dole Foods in Nicaragua has been tainted by trial lawyer fraud.

Entrepreneurs are looking to harvest fish that could feed on the algae in current dead zones created by fertilizer run-off in hopes of processing them for their oil.

Sears posted a $94 million loss this week. Analysts scurried to revise their earnings downward.

Las Vegas Sands has filed an application for listing on the Hong Kong Exchange.

Starbucks is raising its prices on larger, complex drinks and lowering its price on smaller, more basic drinks.

Supermarket shoppers are losing patience with a growing average wait time in line.

Reader's Digest is filing for bankruptcy protection.

Universal Music secured the international rights to 38 albums of Frank Sinatra ahead of the 40th anniversary of the release of My Way.

Investment bankers and traders are seeking employment with boutique firms.

MySpace bought the iLike application, one of Facebook's most popular services, for $20 million.

Solar power in the U.S. is seen as the "next big thing" in the growing "green" space after languishing behind Europe during the economic downturn.

Wind power firms have been shaken by the financial meltdown.

Asia:

Chinese commodity imports are expected to slow during the 2nd half of the year, as impact of the country's stimulus package fades away.

China is putting an end to petitioning ahead of the 60th anniversary of the People's Republic.

The country is also issuing prison terms and fines for software piracy, in a positive move for industries involving copyrights.

China Mobile lost ground to smaller rivals during the 2nd quarter as the company reported its slowest growth since it listed in 1997. The firm reached a deal with Dell to sell the Texas-based company's smart phone.

Levi Strauss is the latest in a line of companies, which have made it possible for Indian customers to pay in installments for their products. The San Francisco-based company will allow its customers to pay in three monthly installments for products priced at Rs 1,599 ($33 USD) and above.

Indian conglomerate Essar has bid on three of Shell's European refineries.

Japan's GDP expanded 0.9% during the 2nd quarter but fears remained that reduced export demand and reduced government spending would dissipate the country's growth.

The UN warned Nepal's feuding political parties that social inequities must be addressed in order for the country to achieve a lasting and stable peace.

North Korea has agreed to reopen its border with South Korea, which would allow tourism and family reunions to resume.

Europe:

Scotland released a convicted bomber in the 1998 Lockerbie tragedy this week, citing his terminal prostate cancer. The release created a global public uproar.

Germany's investor confidence rose 16.6 points in August to 56.1-- the highest reading in three years. Europe's largest economy hopes that it has finally pulled out of its recession.

Richard Pipes, a professor of history at Harvard, issued an interesting report on Russia this week in the WSJ entitled "Pride and Power." The essay is a must-read for anyone thinking about investing in the country.

Former Porsche executives are being investigated for insider trading.

In a change of policy, Spain said that it would raise taxes on its rich in order to overcome its current deficit.

The EU is contemplating banning the fishing of blue fin tuna, as its numbers have collapsed amid growing demand from sushi lovers, according to the group's environmentalists.

Poland's treasury ministry is in talks with German utility firm RWE for a 67% stake in Enea, Poland's only listed utility company. RWE agreed to purchase Essent, a Dutch utility company, in June.

Middle East:

Afghanistan's presidential election on Thursday was effected by violence, low turnout and allegations of fraud.

Egyptian president Hosni Mubarak pressed President Obama to bring out his own initiative on the Middle East, especially as it pertains to Israel, this week.

Mahmoud Ahmadinejad said that he would nominate at least three female ministers to his cabinet, reaching out to the women who have been most active in post-election protests. The appointments would be the first time a woman has served in a cabinet in Iran.

Saudi Arabia convicted its first criminal of insider trading this week as the nation attempts to crack down on its market irregularities.

Dubai's malls are still bustling, but sales are suffering. The city's property market is faltering just as badly.

Lack of banking transparency in the region is bringing fears of hidden financial concerns.

Oceania:

Investment bank Macquarie sealed its largest foreign deal by purchasing Delaware Investments from Lincoln Financial for $428 million. The firm also reached a joint venture deal with China Everbright, a Chinese state-controlled offshore investment company, which plans to raise $1.5 billion to invest in infrastructure projects in China, Hong Kong and Taiwan.

Commodities:

Oil ended the week up 9.4%, trading near $74 by week's end.

Natural gas hit a 7-year low amid glut concerns, finishing the week down 11.8% for the week at $2.86m Btu. A hedge fund placed a multi-million dollar bet last week to buy contracts at $10m Btu in January and February of 2010 in the first bullish sign for the oil alternative in a long while.

Sugar remained nearly flat for the week at $21/pound.

According to the World Gold Council, demand for gold sank to a 5-1/2 year low during the 2nd quarter. While investment appeal remained strong, demand for jewelry fell by 20% compared to a year ago.

Industrial demand for silver is languishing, according to Fresnillo, a silver mining company, but investor demand for the metal is keeping its prices elevated. CEO Jamie Lomelin stated that the firm expects silver to stay within a $13-15/oz band for the remainder of the year.

Tea prices have risen more than 25% since January amid tighter supplies.

Et Cetera:

This week's Barron's "Up & Down Wall Street" by Alan Albelson.

Barron's review of this week's market news and its preview of next week's market events.

Columnist Robert Novak passed away this week.

The Ricketts family, who founded TD Ameritrade, has bought 95% of the Chicago Cubs for $845 million.

The FT ran an interesting article on how attitudes toward relocation are changing.

Noteworthy - Week of August 9th

noreply@blogger.com (C.J.) — Sat, 15 Aug 2009 22:00:00 +0000

Perhaps the biggest news of the week occurred going into the weekend when Colonial Bank, a regional bank with assets of $25 billion, was seized by regulators on Friday after it reached an agreement to sell its deposits and most of its assets to rival BB&T, which continues to grow amid others' peril. Colonial is the largest bank failure since Washington Mutual in September 2008 and is the 6th largest on record. The seizure of the regional bank is a sign that regulators may be giving up hope that some of them can be saved.

Swiss bank UBS and the IRS have settled its dispute over the disclosure of the bank's clients, although terms of the agreement have not yet been announced. Liechtenstein is in talks with Germany over transparency issues, and the UK has requested that its citizens come clean over their secret accounts in Liechtenstein.

Retail sales slide 0.1% in July, even with the positive effect from the "cash for clunkers" program, as consumers continued to rein in savings.

Reduced demand pushed electricity prices 40% lower during the 1st half of the year to $40/megawatt hour on average.

Consumer prices fell at its quickest rate on record in the Eurozone in July, even as Germany and France showed surprising signs of recovery during the second quarter.

U.S. food firms warned of a sugar shortage if the Obama administration doesn't ease import restrictions. The price of sugar is at a 28-year high, as droughts, especially in India, have affected the price of the commodity. A large coalition of food giants plan to draw attention to the government's "Cap and Trade" bill, stating that the bill could lead to higher food prices.

U.S. banks seek to gain $38.5 in overdraft charges this year, with most of the revenue coming from cash-strapped consumers. The amount is double the revenue produced in the year 2000. Bank policies are coming under fire by regulators and citizens alike.

Credit card companies are using a little known policy to cancel customer cards, as consumer delinquency rates continue to rise. The rule, which is perfectly legal, can be instituted if a customer is reevaluated as being too risky and has no bearing on the status the customer's current standing with the credit card company.

Distressed debt takeovers are soaring as companies head to bankruptcy court. Year-to-date, the deals have been valued at $84 billion, double the pace of 2008.

Distressed hotel loans have grown markedly in the past few months and many owners are participating in "jingle mail," otherwise known as sending their keys to their lender and walking away from their property.

The inspector general of the Department of Health and Human Services is investigating a conflict-of-interest allegation involving Janet Woodcock, the director of the FDA's Center for Drug Evaluation and Research.

Congress is retreating its proposed airplane purchases amid public outrage. Instead, Congress will seek only $220 million (from $550 million) for the purchase of one Gulfstream plane and three Boeing aircraft, which was originally requested by the Department of Defense.

President Obama defended the U.S.'s "Buy American" stance at a meeting with Canada and Mexico this week. Both countries are urging the U.S. to relinquish its protectionist policies.

The WTO ordered China to stop forcing U.S. owners of copyright material from having to deal only with state-controlled distribution companies, a ruling that could help the U.S. entertainment industry to fend of mass pirating in the world's most populous nation.

Two U.S. oil firms have been linked to by the U.S. government to a cross-border smuggling scheme, whereby thieves siphoned oil from Mexico's state-run oil company and brought them into the U.S.

U.S. Natural Gas Fund, a popular ETF, is considering moving to foreign exchanges in an attempt to avoid regulators' crackdown on speculation after the CTFC said last week that it plans to limit the size of natural gas derivatives contracts.

As TARP-funded entities struggle to please Pay Czar Kenneth Feinberg, Citigroup energy trader Andrew Hall has suggested a modification to his contract that would avert confrontation with the Obama administration. Hall made $100 million in 2008 and could make equal that amount in 2009 under his proposal.

The health care debate in the U.S. continues to flair as middle America finds its voice.

The Federal Bank of New York is in a hiring spree as its assets soar under Fed's purchasing program.

Representatives from the "Fastest Dying Cities" in America met this week in an attempt to figure how to deal with declining population and tax bases.

Africa:

Secretary of State Clinton condemned Nigeria's election process and high levels of corruption and pledged U.S. support in bringing peace to the oil-rich nation at a town hall meeting in the country's capital of Abuja this week. Separately, the country took over five banks during the week that failed its stress tests.

The Americas:

Five Detroit public school system employees were charged with multiple felonies in an investigation into alleged corruption and loss of millions of dollars.

Charter schools are being heavily promoted in the U.S. to lift education.

Ebay and GM are teaming up to offer customers the ability to negotiate for new car sales online with dealers. Paypal, a division of eBay, launched a student account this week that is linked to the parent's Paypal account and would allow parents to transfer money to their childrens' accounts.

Film makers are starting to tackle the cheap renting options for its products. Warner Bros. is intitating a 28-day delay on new releases to Redbox machines and is demanding a more lucrative deal with Netflix, following a growing trend of Hollywood producers. Redbox is suing the film makers over access to their releases.

Barnes and Noble is buying its college textbook sibling, Barnes and Nobles College Booksellers Inc., from chairman Leonard Riggio for $596 million in an effort to bolster its revenue.

J.C. Penney's quarterly sales fell 7.9% but cost cutting rose the firm's profit to nearly break-even. Abercrombie and Fitch plans to cut more prices as it fends off the recession. Urban Outfitters' profits sank 14% in the second quarter but the firm beat expectations.

Las Vegas Sands Corp was able to amend its $3.3 billion Macau credit facility this week, the company said. The amendment will give the casino owner a higher interest rate for its loan but also more flexibility in selling minority stakes in its operations.

Dole Foods registered with the SEC on Friday for an IPO. The largest producer, marketer and distributor of fresh fruit and vegetables has been held privately since 2003 by David Murdock.

Boeing is downplaying continued trouble with its revolutionary 787 Dreamliner. The firm disclosed further structural issues with the fuel efficient airliner on Friday. Meanwhile, rival Airbus is struggling with capital in developing its A350 long-haul aircraft.

Having finally adopted the approach of thinking locally to act globally, Walmart is seeing serious growth abroad.

In a change of events, Republic Airway Holdings appears to be the top-dog in the bidding for Frontier Airlines' assets, as the Indianapolis-based regional airline outbid Southwest Airlines this week.

Frank DiPascali, a key lieutenant of Bernie Madoff's ponzi-scheme, pleaded guilty to 10 criminal charges and stated that the operation "was all fake; it was all fictitious" during a statement to a judge in a lower Manhattan court room this week.

Asia:

Earthquakes and typhoons struck large parts of Southeast Asia this week, wreaking havoc on Taiwan, mainland China, Japan and the Philippines.

North Korea released a South Korean that had crossed into the demilitarized zone more than four months ago in a continued sign that the Communist country is serious in starting international negotiations.

China National Petroleum and CNOOC Ltd have proposed to pay $17 billion for all of Repsol YPF SA's stake in YPF, its Argentine unit, in what would be the biggest foreign investment yet by the Chinese.

Australian mining company, Felix Resources Ltd, accepted a $2.95 billion takeover bid by Yanzhou Coal Mining Co.

Duke Energy signed a memorandum of understanding with China Huaneng Group to develop technology for clean coal and the capture and storage of greenhouse gases.

China is abandoning plans to force an internet filtering software on it citizens, instead giving them the option of voluntarily adding the software to their personal computers.

China's GDP growth slowed slightly in July as banks tightened new loans; however, most indicators showed that a strong recovery is underway in China.

The move of large financial institutions into micro loans has caused a credit bubble in some Indian slums.

Aung San Suu Kyi was sentenced to an additional 18 months house arrest after an uninvited American swam across a lake near her house and stayed with her. Ms. San Suu Kyi has been under house arrest for 14 of the last 20 years due to her outspoken support for democracy in the authoritarian nation of Myanmar. Later in the week, U.S. Senator Jim Webb (D-VA) became the first U.S. official to meet with the Junta, as he secured the release of that same American, who was sentenced to 7 years in jail (although many expected the country to deport him instead). Mr. Webb also was granted an hour with Ms. San Suu Kyi.

Europe:

Volkswagen concluded its purchase of Porsche this week, as the Wolfburg (Germany) company agreed to pay up to $4.7 billion for a 42% stake in the sports car maker, ending what has been a wild 10-month relationship between the two automakers.

Poland and Slovakia appear to be recovering, although South Central European nations continue to struggle.

Middle East:

The U.S. is pushing Afghan farmers to plant crops other than poppies. In a new $300 million effort, the U.S. will attempt to develop the infrastructure of the country and will sell fruit seeds and livestock to farmers at a heavy discount.

Oceania:

Australia's economy is growing faster than anticipated, causing its central bank to revise its GDP forecasts upward for the third and fourth quarters of 2009. Its recovery also makes Australia likely to be one of the first nations to start raising interest rates, a prediction that has caused its currency to increase markedly versus the dollar during the past few weeks.

Commodities:

Supply continues to weigh on wheat prices but demand could offset supply over the longer term.

India is struggling with a massive drought, which has pushed staple commodities there much higher in recent months.

Et Cetera:

This week's Barron's "Up & Down Wall Street" by Alan Albelson.

Barron's review of this week's market news and its preview of next week's market events.

WSJ Weekend Report: "The New American Dream: Renting"

Legendary guitar innovator Les Paul died this week.

Popular 80s film director John Hughes also passed away this week.

Noteworthy - Week of August 2nd

noreply@blogger.com (C.J.) — Sun, 09 Aug 2009 04:59:00 +0000

As the political turmoil in the States heats up over health care, the biggest news this week concerned the economy, as the national unemployment rate shrank unexpectedly for the first time since April 2008 with nonfarm payrolls shedding 247,000 jobs in July vs. 443,000 in June, lowering the official unemployment rate from 9.5% to 9.4%. Not surprisingly, President Obama, other politicians and Wall St. analysts saw the unemployment surprise as a sign that the economy is, indeed, improving, although during a press conference this week, White House Press Secretary Robert Gibbs stated that the White House still expects the unemployment level to reach 10%.

Earlier in the week, economists revised their GDP forecasts for the U.S. economy upward as the economy shrank at a better-than-expected 1% in June, citing the success of the "cash for clunkers" program and lean inventories. Analyst estimates ranged from 2.5-3% for the 2nd half of the year vs. a previously anticipated 1.5-2%. Accordingly, the Dow was up 2.2% for the week.

The Senate voted to add $2 billion to the "cash for clunkers" program this week. The program, which originally had a $1 billion budget, went through its reserves in just 4 days last month.

The White House unveiled a $2.4 billion grant plan to develop next-generation batteries for electric cars. Critics argue that very little of the money has been appropriated for recharging stations.

Congress awarded itself $500 million for 8 new private jets this week; this, at a time when it has strongly criticized the use of corporate jets by companies. The vote for the new jets has fueled a rift between the Congress and the Obama administration over the defense priorities of the nation. Earlier in the week, former President Clinton flew to North Korea on a private plane in order to rescue two American journalists there. The mission cost well over $200,000 for jet and fuel costs alone and was funded mainly by Dow Chemical and Hollywood mogul Steve Bing. Congress has apparently used the mission as stepping stone for its need for new planes. The rescue, according to the White House, is a sign that North Korea is warming to U.S. relations.

After arranging town hall meetings to gain support for the proposed health care reform plan in Congress, many politicians are opting for smaller gatherings, meetings by phone and one-on-one meetings in their office, as large town hall meetings have brought many protesters out of the woodwork. Democrats argue that the GOP is organizing the protests; however, there have been many occurrences of Democratic protesters at the meetings as well. House Speaker Nancy Pelosi stated that protesters were bringing swastikas and other ill-advised symbols to the meetings, while Illinois Senator Dick Durbin called the protesters "tea baggers" and "birthers" and denounced any suggestions that Americans are against health care reform. According to a recent CBS/ NY Times poll, however, Americans are very concerned that a government health care plan would lead to job cuts, quality and access to care and that it would require them to change doctors, although most agree that reform is needed. According to a report in the Wall Street Journal, doctors are now seeking upfront payments from patients after their visits.

Ironically, France is struggling to maintain its universal health care costs and is looking to the current U.S. system of co-pays for help in cutting expenses.

Not widely reported is the fact that many of President Obama's appointed secretaries and "czars" have many nontraditional views concerning health care, which should also concern Americans. One must question why these views are so prevalent among leading White House officials and how they will affect the administration's health care reform policies. In an upcoming article on my personal blog, I will dive into the their backgrounds and pose the question, "will their pasts dictate the future of health care?" I will allow you, the reader, to decide for yourself the answer to this important question. (Note: Although I believe this issue is very important, I would like this blog to remain related to business and investing and, therefore, will not publish anything politically-based on this website.)

Wall St. banks and lawyers could collect more than $1 billion in fees from the Federal Reserve Bank of New York and AIG to help manage and break apart the troubled insurer, according to a Wall St. Journal analysis. AIG reported its first quarterly profit since 2007, largely as a result of changes in how its assets are valued and improvements in the market.

Goldman Sachs reported on Wednesday that the company made at least $50 million per day during their latest quarter and only had two days of trading losses. The firm disclosed on the same day that the government has launched investigations into pay practices and credit-derivatives trading.

Morgan Stanley agreed to pay $950 million to buy back warrants issued to the federal government as part of its bailout plan. The warrants would have allowed the government to purchase MS's shares. According to John Mack, the firm's CEO, the government's stake in the company returned an annualized 20% to taxpayers.

According to company e-mails, Bank of America's loss projections for Merrill Lynch swelled to nearly $2 billion just two days before shareholders approved the merger. However, bank officials saw the losses as being not material enough to disclose to its shareholders prior to its merger vote with the Merrill. BOA also agreed to pay a $33 million fine in an SEC in a suit that alleged the company misled shareholders about billions of dollars in bonuses that it had promised Merrill Lynch employees when BOA bought the firm in 2008.

Retailers are bracing for a very week back-to-school season, as sales at stores open more than a year fell 5.1% last month, according to a survey of 30 major retailers by Thomson Reuters Inc. Among the hardest hit were teen retailers, whose sales fell 12.1% in July.

President Obama will meet with Mexican and Canadian leaders early next week to discuss the U.S.'s trade disputes with the nations concerning its "Buy American" policy.

The Treasury Department will sell more Treasury Inflation-Protected Securities (TIPS) to ensure demand from China and other investors. The central bank stated this week that it expects to borrow less money than previously expected during the third quarter, in part because banks have repaid their loans under the TARP.

The Bank of England has expanded its bond-buying program by $85 billion, creating doubt over the country's recent economic gains. The program is not unlike that instituted by the Federal Reserve, which I outlined in my latest article on gold and silver.

The European Central Bank kept its borrowing rate at 1%, and stated that Europe's economic outlook remains weak. Both the BOE and ECB are attempting to decipher recent data suggesting that Europe's economy may be on the mend, although both central banks remain extremely cautious.

China intends to continue its stimulus policy, bringing a sense of relief to those who feared the nation would cut some of its stimulus programs. According to the Financial Times, however, China's recent GDP growth doesn't add up.

Amid outrage by politicians, bankers are starting to pay their employees bonuses using toxic bonds and corporate loans. The plan, which was instituted by Credit Suisse, has returned 17% for the year, a far cry from most financial stock returns. The strong performance may trigger political pressure for firms to follow Credit Suisse's approach.

The head of the House Oversight and Government Reform Committee, Representative Edolphus Towns (D-New York), who has rejected a Republican call to subpoena records of a VIP program at Countrywide Financial Corp., which offered lower interest rate loans or lower origination fees than available to the public, has received two loans under the program, according to the Wall Street Journal.

Senators Christopher Dodd (D-CT) and Kent Conrad (D-ND) were cleared by the bipartisan Senate Select Committee on Ethics of improprieties in regards to VIP loans received from Countrywide Financial Corp. The committee said that it found "no credible evidence” that either senator knowingly sought out a special loan or treatment because of their standing.

Sonia Sotomayor was sworn in as the first Hispanic Supreme Court Justice this week.

Frank DiPascali, Bernie Madoff's CFO, is expected to plead guilty of fraud charges next week.

California is struggling with a federal order to release 40,000 inmates to reduce prison overcrowding.

Africa:

Violence in Northern Nigeria has spurred concern that a religious fundamentalist group there might represent a larger threat to the continent's most populous nation.

The Americas:

GE agreed to pay $50 million for fraudulent accounting activities between 2002-3.

News Corp, which reported a loss in its latest quarter, stated that it intends to start charging for on-line content.

Proctor and Gamble and Dutch consumer goods giant Unilever are taking aim at private labels as both firms struggle for growth amid the recession.

Berkshire Hathaway reported profitability during the second quarter amid an uptick in the markets.

Google Chief Executive, Eric Schmidt, resigned from Apple's board of directors this week, as both firms find themselves increasingly competing with each other. Google is starting to take on Apple in China and just acquired video compression software manufacturer On2 in order to take on Microsoft's operating system.

Target said that it plans to build its own website, ending a long time partnership with Amazon.com, as the firm struggles to find growth amid the recession.

Whole Foods said that it is returning to its original emphasis on organic foods, as the high-end grocer attempts to re-orient shoppers with healthy eating. Critics argue that the firm is picking the wrong time to wage such a commitment.

MGM reported a $212 million loss this week but says that it is seeing a pick up in bookings ahead of its massive City Center opening. The COO of Wynn Resorts sold more than $7 million in stock this week in a reversal of insider sentiment for the casino firm.

Pepsi has agreed to buyout terms with its bottlers after months of bargaining.

Morningstar launched its Indian subsidiary last week, as the investment research company expands into the global marketplace.

Former AIG CEO Hank Greenberg has agreed to pay $15 million in an SEC case alleging that the long-time boss knew of fraudulent accounting standards during his tenure.

Two University of Illinois trustees have resigned and a commission appointed by Illinois Governor Pat Quinn is expected to recommend that the remaining trustees step down, following charges that trustees relaxed admissions for hundreds of politically connected students.

Homeowners dealing with the negative effect of Chinese produced drywall, which has caused health concerns for many, are awaiting for government reports that could determine their fate.

High-end homes are not participating in the recent rebound in U.S. home sales.

Asia:

Chinese officials said that the general manager of the state-run China National Nuclear Corp. (CNNC) is under investigation for "alleged grave violations of discipline." The company, which is expanding its nuclear power, has attracted intense foreign interest.

Chinese e-commerce company Alibaba.com is planning to push its way into the U.S. market. The firm is considering a joint venture in India as well.

Rising real estate prices in China are generating concern that the nation might have another bubble on its hands.

Macau tycoon Stanley Ho's ailing health has caused concern over who will take over his stronghold on the Chinese gambling community.

Taiwan is set to unveil a plan to stabilize its struggling financial situation. The island nation stated that it could include more Chinese Renminbi in its currency reserves as it moves at a rapid pace to expand its ties to mainland China.

North Delhi Power Ltd., an Indian utility company, is having success in combating the nation's long-time tradition of power theft. The company credits insulated wires and neighborhood informants to its success in cutting theft rates from over 50% seven years ago to 15% today.

Europe:

A Russian judge blocked a probe into the 2006 murder of Russian investigative journalist, Anna Politkovskaya, who was a staunch critic of then president and current Prime Minister Vladimir Putin. Politkovskaya exposed human-rights abuses in Chechnya, accusing the region's Kremlin-backed president Ramzan Kadyrov of numerous crimes. The investigation into the reporter's death is a test for president Medvedev's vow to restore rule of law to the former communist nation.

Royal Bank of Scotland posted a $1.7 billion loss for the 1st half of 2009 and the firm's CEO stated that the state-controlled bank might not see an improvement in its results until 2011.

"Solar thermal" technology is heating up Spain's renewable energy market.

Middle East:

Unpopular Afghan President Hamid Karzai's penchant for deal making and conciliation is likely to win him another 5-year term.

Mahmoud Ahmadinejad was endorsed by Iran's Supreme Leader Ayatollah Ali Khamenei for a second four-year term as the country's president this week. Ahmadinejad's formal swearing in was snubbed by many political officials. Challengers to Ahmadinejad demanded that officials seek punishment for those accused of killing protesters.

Oceania:

Australia is attempting to fend off a housing bubble. The country's central bank said that it is no longer considering lower rates and has adopted a neutral stance amid a stronger-than-expected economy.

Commodities:

Chevron stated that has found a "significant" oilfield off the coast of Angola. The firm plans to start pumping crude from an earlier find in the Angolan waters within days.

The world's largest cotton trader by volume, Allenberg Cotton, is in talks to merge with rival Dunavant Enterprises.

India bought a record amount of wheat from farmers in the latest procurement season ending July 31.

Brazil plans to control its oil finds going-forward, a move that could have mixed results for state-controlled Petrobras, as the country abandons its policy of competitive bidding for projects.

Et Cetera:

This week's Barron's "Up & Down Wall Street" by Alan Albelson.

Barron's review of last week's market news and its preview of next week's market events.

Famous Executive Chef Gordon Ramsay is facing tough times during the recession, which has forced the celebrity chef to the brink of bankruptcy.

The Financial Times wrote an interesting article this week on how the wealth of one Chinese village transformed their community virtually overnight and the inner-workings of the aftermath.

Scientists are looking to the Zebrafish to rejuvenate hearing cells.