April 28 (Bloomberg) -- Milan’s financial police seized 476 million euros ($620 million) of assets belonging to UBS AG, Deutsche Bank AG, JPMorgan Chase & Co. and Depfa Bank Plc amid a probe into alleged fraud linked to the sale of derivatives.
The police froze the banks’ stakes in Italian companies, real estate assets and accounts, the financial police said in a statement today. The assets seized yesterday also include those of an ex-municipality official and a consultant, the police said.
The City of Milan is suing the four banks after it lost money on derivatives it bought from the lenders in 2005. The securities swapped a fixed rate of interest on 1.7 billion euros of bonds for a variable rate that was losing the city 298 million euros as of June. Milan is among about 600 Italian municipalities that took out 1,000 derivatives contracts worth 35.5 billion euros in all, the Treasury said.
“Milan is an important case because it can be used as an example by others,” said Alfonso Scarano, who is heading a study into the trades by AIAF, a group representing Italian financial analysts. “This is a unique time for borrowers to shed light on their potential losses and renegotiate contracts” to take advantage of interest rates that have fallen to record lows. AIAF will next week testify before the Italian Senate’s inquiry into the cities’ use of derivatives contracts.
Officials at all four banks declined to comment. In January, JPMorgan filed a lawsuit against the city in London. The bank is seeking to have dispute heard in the U.K., according to two people familiar with the claims.
Cassa Depositi
A spokesman for Milan’s city council declined to comment. A report commissioned by the city last year into the derivatives trades didn’t identify the officials involved in the decision.
The banks reaped about 100 million euros in fees from the transactions, Milan’s financial police said today. Public officials, seeking to cut the cost of their debt and help fund their budgets, turned to the banks to refinance borrowings from the state-owned lender Cassa Depositi e Prestiti.
The 30-year bond carried annual interest of 4.019 percent. With the derivatives, the city swapped the fixed interest rate for a floating rate set at 12-month Euribor. Milan also agreed to repay the principal by annual payments instead of at maturity, according to the city’s report.
The banks and Milan later agreed on so-called interest-rate collars, under which the banks would pay the borrower if Euribor rose above a certain level, the so-called cap, while the borrower would pay the banks if Euribor fell below the so-called floor.
Credit-default Swaps
The banks misled municipal officials on the advantages of buying the derivatives, including the impact of the fees they charged on the contracts, the financial police have said. The banks made three times more money from the cap than Milan did from the floor, according to the city’s report.
Local governments often entered into derivative contracts without soliciting bids from competing buyers. In 2007, Milan also sold a credit-default swap, exposing itself to the risk that the Republic of Italy might default, the document shows.
The Milan case is among lawsuits filed by local governments from Germany to the U.S. amid allegations of mis-selling and fraud. Italy’s Senate is leading a review of the use of derivatives among local administrations.
Italian prosecutors can seize assets, subject to judicial approval, to prevent the worsening of the consequences of the crime or prevent further crimes being committed, according to Andrea Giannelli, a researcher at Milan’s Bocconi University.
‘Intimidating and unprecedented’
“Its use in this case is somewhat intimidating and unprecedented,” said Giannelli. “It’s a measure they may be using to accelerate a solution.”
Read Entire Article
Wednesday, April 29, 2009
2009 Silver Eagle Bullion Coins Scorching Hot
Total Silver Eagle Bullion Coin Sales, Jan-Apr (2000-2009)*
Sales of 2009 Silver Eagle Bullion Coins are blistering hot, with an incredible record-breaking pace of 9.64 million sold through Monday, April 27, according to the latest US Mint sales stats.
More silver eagles have been sold during February, March and even an unfinished April than any corresponding month since the American Eagle series was launched in 1986. What happened in January 2009? It was a great month for the eagles as well, coming in second place behind the record sales in January 2008.
Monthly Silver Eagle Bullion Coin Sales, Jan-Apr (2000-2009)*
2008 proved to be an exceptional year for the series, with historic sales at 19,583,500. At the current 2009 rate, more than half of that amount will be sold in just four months. There is a potential to shatter last year’s record.
Read Entire Article
Sales of 2009 Silver Eagle Bullion Coins are blistering hot, with an incredible record-breaking pace of 9.64 million sold through Monday, April 27, according to the latest US Mint sales stats.
More silver eagles have been sold during February, March and even an unfinished April than any corresponding month since the American Eagle series was launched in 1986. What happened in January 2009? It was a great month for the eagles as well, coming in second place behind the record sales in January 2008.
Monthly Silver Eagle Bullion Coin Sales, Jan-Apr (2000-2009)*
2008 proved to be an exceptional year for the series, with historic sales at 19,583,500. At the current 2009 rate, more than half of that amount will be sold in just four months. There is a potential to shatter last year’s record.
Read Entire Article
World Gold Markets - How Lack of Transparency Translates Into Poor Analysis
Every precious metals trader that has analyzed gold prices over the past several decades knows that a common ploy the IMF and leading global Central Banks utilize to suppress gold prices in the COMEX futures markets is to announce plans to sell gold despite their total lack of commitment to executing their announced plans.
For example, the Bank of Italy announced in late July, 2007 their plan to sell an estimated 1,740 tonnes of its gold reserves to help pay down its national debt. At this time, this announcement moved the gold futures markets lower because many analysts found this announcement shocking in light of the fact that Italy had always previously stated that its gold reserves were “untouchable”.
However, any gold analyst worth his or her weight in salt immediately knew that this announcement was a complete sham because Italy’s announced sales, as considerable as they were, would never have significantly contributed to its declared end goal of solving their national debt problem.
Thus, simply by drilling down to the facts behind the Bank of Italy’s surface level announcement, one would have easily deduced that an ulterior motive much different than the stated motive existed. Sure enough, the Bank of Italy never followed through its announcement to sell its gold reserves yet still achieved its likely ulterior motive of temporarily halting the rise in gold prices and driving them lower.
More recently, at a G20 meeting in late March 2009, the IMF announced its plan to sell 403 tonnes of gold reserves to address some problems of liquidity. Even though this news was merely old news that was being recycled from the end of 2008, the prominent forum which the IMF leveraged to re-release this old statement focused the attention of neophyte gold analysts on fears of gold supplies flooding the market in the future. And just like magic, we experienced déjà vu again when gold prices plummeted lower (from $928 per fine troy the day after the announcement to a low of about $880 an ounce just one week later on April 8th). When I heard this announcement, I was at once immediately very skeptical of the IMF’s commitment to execute this plan.
If the IMF truly makes good on its threat to sell 403 tonnes of gold in the future, the IMF would fail to accomplish their goal of flooding markets with gold supply and would accomplish nothing more than the transference of global wealth from Western nations to Eastern and Middle Eastern nations as I surmise that China, Russia, select OPEC nations and other nations with large trade surpluses or a desire to decrease their U.S. dollar exposure would be more than happy to absorb the available supply. Thus, I believe that the purpose of their announcement was nothing more than a smokescreen that will never experience full execution designed to temporarily drive the price of gold down.
China’s recent revelation that it secretly increased its gold reserves by 76% over the past several years also surprises me not in the slightest as I have predicted China’s engagement in such activities for a couple of years now*. China’s revelation proves that there is little transparency in global gold markets and that the “officially” reported numbers have little relevance as they can be, and most likely will continue to grossly misrepresent the truth.
As skeptical as I was about the Bank of Italy’s announcement and the IMF announcement when they occurred, I am equally skeptical of China’s announcement. Given China’s history of public comments about their grave concern regarding the stability of the U.S. dollar and their years of engaging in secretly increasing their gold reserves, when it finally publicly reveals a new gold reserve figure, for what reason should we give this announcement credibility as being truthful?
Governments take full advantage of the fact that they can easily convince millions of unthinking people to believe something as long as they print the statement in writing and in a “credible” newspaper. Ultimately, I suspect that China’s actual gold holdings of 1,054 tonnes, up from their last reported figure of 600 tonnes, are in reality, significantly higher than this amount (as this figure still only represents a tiny 1.6% of their overall reserves). Though I can only speculate about the timing and nature of China’s recent gold revelation, I believe that China made this revelation to “test the waters” and observe the impact of their announcement on gold markets. Ultimately such a revelation, even if it does not fully disclose China’s true gold position, will significantly assist its final determination of its end target percentage of gold reserves.
Furthermore, I am confident that China has not only been secretly supplementing their gold reserves, but that they have also been very quietly adding significantly to their silver reserves, their petroleum reserves, their agricultural reserves and their reserves in base metals. Though base metals will most likely continue to experience a longer timeline to significant recovery than precious metals, they too, will eventually strongly recover in the coming years.
The overwhelming majority of analysts state that China’s strategic hands are tied by its massive holdings of U.S. dollar denominated debt and that it can’t possibly dump their massive holdings of U.S. dollar denominated debt without hurting its own economy. This is just not true. There are plenty of means to hedge against eventual significant U.S. dollar decline and China has already revealed its partial hand with its significant additions to its gold reserve.
Just a few days ago, I wrote an article about deflation and gold investments in which I stated, “We’re likely to see some downward pressure in the gold and silver futures markets in the very near term and specifically next Monday [Monday April 27th]“. Indeed yesterday, gold dropped in the COMEX markets by $6.80 an ounce (the ask price closed at $907.20 an ounce), though silver actually ended up closing just about even, higher by one penny an ounce.
Furthermore, today, Tuesday, April 28th, I predict that the downward pressure in COMEX gold markets is likely to continue and I would not be surprised to see gold pushed below $900 an ounce at some point in intra-day trading today (author’s note - I released this article about 11 hours before COMEX markets opened in New York on Tuesday).
However, these two days of downward pressure (if another downward day materializes today as I believe to be likely) do not negate the likelihood of another strong leg higher in both gold and silver in May or June. While the gold markets were obviously buoyed at the end of last week as a result of China’s revelation, knowing that the gold markets would dip yesterday and very likely today, while also understanding that these dips do not signify a reversal in trend has nothing to do with fundamental nor technical analysis, but rather with understanding the complexities of the price suppression schemes that the U.S. Federal Reserve and the U.S. Treasury execute.
One has to understand all the games that are played in these markets to not be misled by the massive amounts of “white noise” that exist in precious metals markets that are purposely created by the financial oligarchs that control the U.S. Federal Reserve and her sister Central Banks. Unfortunately, the analytical world of gold is full of gold neophytes that have not put in the considerable amounts of research necessary to understand either the fundamentals of the gold market that drive its long-term behavior or the complex relationships among Central Banks’ gold reserves, currency markets, and the U.S. Treasury that drive its short-term behavior.
Read Entire Article
For example, the Bank of Italy announced in late July, 2007 their plan to sell an estimated 1,740 tonnes of its gold reserves to help pay down its national debt. At this time, this announcement moved the gold futures markets lower because many analysts found this announcement shocking in light of the fact that Italy had always previously stated that its gold reserves were “untouchable”.
However, any gold analyst worth his or her weight in salt immediately knew that this announcement was a complete sham because Italy’s announced sales, as considerable as they were, would never have significantly contributed to its declared end goal of solving their national debt problem.
Thus, simply by drilling down to the facts behind the Bank of Italy’s surface level announcement, one would have easily deduced that an ulterior motive much different than the stated motive existed. Sure enough, the Bank of Italy never followed through its announcement to sell its gold reserves yet still achieved its likely ulterior motive of temporarily halting the rise in gold prices and driving them lower.
More recently, at a G20 meeting in late March 2009, the IMF announced its plan to sell 403 tonnes of gold reserves to address some problems of liquidity. Even though this news was merely old news that was being recycled from the end of 2008, the prominent forum which the IMF leveraged to re-release this old statement focused the attention of neophyte gold analysts on fears of gold supplies flooding the market in the future. And just like magic, we experienced déjà vu again when gold prices plummeted lower (from $928 per fine troy the day after the announcement to a low of about $880 an ounce just one week later on April 8th). When I heard this announcement, I was at once immediately very skeptical of the IMF’s commitment to execute this plan.
If the IMF truly makes good on its threat to sell 403 tonnes of gold in the future, the IMF would fail to accomplish their goal of flooding markets with gold supply and would accomplish nothing more than the transference of global wealth from Western nations to Eastern and Middle Eastern nations as I surmise that China, Russia, select OPEC nations and other nations with large trade surpluses or a desire to decrease their U.S. dollar exposure would be more than happy to absorb the available supply. Thus, I believe that the purpose of their announcement was nothing more than a smokescreen that will never experience full execution designed to temporarily drive the price of gold down.
China’s recent revelation that it secretly increased its gold reserves by 76% over the past several years also surprises me not in the slightest as I have predicted China’s engagement in such activities for a couple of years now*. China’s revelation proves that there is little transparency in global gold markets and that the “officially” reported numbers have little relevance as they can be, and most likely will continue to grossly misrepresent the truth.
As skeptical as I was about the Bank of Italy’s announcement and the IMF announcement when they occurred, I am equally skeptical of China’s announcement. Given China’s history of public comments about their grave concern regarding the stability of the U.S. dollar and their years of engaging in secretly increasing their gold reserves, when it finally publicly reveals a new gold reserve figure, for what reason should we give this announcement credibility as being truthful?
Governments take full advantage of the fact that they can easily convince millions of unthinking people to believe something as long as they print the statement in writing and in a “credible” newspaper. Ultimately, I suspect that China’s actual gold holdings of 1,054 tonnes, up from their last reported figure of 600 tonnes, are in reality, significantly higher than this amount (as this figure still only represents a tiny 1.6% of their overall reserves). Though I can only speculate about the timing and nature of China’s recent gold revelation, I believe that China made this revelation to “test the waters” and observe the impact of their announcement on gold markets. Ultimately such a revelation, even if it does not fully disclose China’s true gold position, will significantly assist its final determination of its end target percentage of gold reserves.
Furthermore, I am confident that China has not only been secretly supplementing their gold reserves, but that they have also been very quietly adding significantly to their silver reserves, their petroleum reserves, their agricultural reserves and their reserves in base metals. Though base metals will most likely continue to experience a longer timeline to significant recovery than precious metals, they too, will eventually strongly recover in the coming years.
The overwhelming majority of analysts state that China’s strategic hands are tied by its massive holdings of U.S. dollar denominated debt and that it can’t possibly dump their massive holdings of U.S. dollar denominated debt without hurting its own economy. This is just not true. There are plenty of means to hedge against eventual significant U.S. dollar decline and China has already revealed its partial hand with its significant additions to its gold reserve.
Just a few days ago, I wrote an article about deflation and gold investments in which I stated, “We’re likely to see some downward pressure in the gold and silver futures markets in the very near term and specifically next Monday [Monday April 27th]“. Indeed yesterday, gold dropped in the COMEX markets by $6.80 an ounce (the ask price closed at $907.20 an ounce), though silver actually ended up closing just about even, higher by one penny an ounce.
Furthermore, today, Tuesday, April 28th, I predict that the downward pressure in COMEX gold markets is likely to continue and I would not be surprised to see gold pushed below $900 an ounce at some point in intra-day trading today (author’s note - I released this article about 11 hours before COMEX markets opened in New York on Tuesday).
However, these two days of downward pressure (if another downward day materializes today as I believe to be likely) do not negate the likelihood of another strong leg higher in both gold and silver in May or June. While the gold markets were obviously buoyed at the end of last week as a result of China’s revelation, knowing that the gold markets would dip yesterday and very likely today, while also understanding that these dips do not signify a reversal in trend has nothing to do with fundamental nor technical analysis, but rather with understanding the complexities of the price suppression schemes that the U.S. Federal Reserve and the U.S. Treasury execute.
One has to understand all the games that are played in these markets to not be misled by the massive amounts of “white noise” that exist in precious metals markets that are purposely created by the financial oligarchs that control the U.S. Federal Reserve and her sister Central Banks. Unfortunately, the analytical world of gold is full of gold neophytes that have not put in the considerable amounts of research necessary to understand either the fundamentals of the gold market that drive its long-term behavior or the complex relationships among Central Banks’ gold reserves, currency markets, and the U.S. Treasury that drive its short-term behavior.
Read Entire Article
Monday, April 27, 2009
China ups its gold reserves by 75%
Reuters
China revealed on Friday that it had quietly raised its gold reserves by three-quarters since 2003, increasing its holdings to 1,054 tonnes and confirming years of speculation it had been buying.
Hu Xiaolian, head of the State Administration of Foreign Exchange (SAFE), told Xinhua news agency in an interview that the country's reserves had risen by 454 tonnes from 600 tonnes since 2003, when China last adjusted its state gold reserves figure.
The world gold market has been buzzing with talk about China buying gold for years as the country's foreign exchange reserves have rocketed, and speculation has picked up since the global economic crisis threatened to weaken the value of those reserves.
Gold prices jumped on the news and were up 1 percent on the day at $910.80 an ounce at 0540 GMT. By a Reuters calculation, China's holding of gold would be worth $30.9 billion at current prices.
China recently reported the change in its gold holdings to the International Monetary Fund and would include the latest change in central bank reports and balance of payment statistics, Hu said.
China's reserves were now the fifth biggest in the world, with only six countries holding more than 1,000 tonnes, she said.
China had increased its stocks by buying on the domestic market and from domestic producers.
Gold market participants said Hu's revelation was good news for the market and signalled likely further buying.
"The comments indicate that China will buy more gold as reserve to improve its foreign reserve portfolio. This is a trend," said Yao Haiqiao, president of Longgold Asset Management.
Hou Huimin, vice general secretary of the China Gold Association, said China should build its reserves to 5,000 tonnes.
"It's not a matter of a few hundred, or 1,000 tonnes. China should hold more because of its new international status, and because of the financial crisis," he said.
"The financial crisis means the U.S. dollar value is changing fast, and it may retreat from being the international reserve currency. If that happens, whoever holds gold will be at an advantage."
The European Central Bank recommends its member banks hold 15 percent of their reserves in gold, but among Asian nations the percentage is far smaller, said Albert Cheng, World Gold Council managing director for the far east.
Read Entire Article
China revealed on Friday that it had quietly raised its gold reserves by three-quarters since 2003, increasing its holdings to 1,054 tonnes and confirming years of speculation it had been buying.
Hu Xiaolian, head of the State Administration of Foreign Exchange (SAFE), told Xinhua news agency in an interview that the country's reserves had risen by 454 tonnes from 600 tonnes since 2003, when China last adjusted its state gold reserves figure.
The world gold market has been buzzing with talk about China buying gold for years as the country's foreign exchange reserves have rocketed, and speculation has picked up since the global economic crisis threatened to weaken the value of those reserves.
Gold prices jumped on the news and were up 1 percent on the day at $910.80 an ounce at 0540 GMT. By a Reuters calculation, China's holding of gold would be worth $30.9 billion at current prices.
China recently reported the change in its gold holdings to the International Monetary Fund and would include the latest change in central bank reports and balance of payment statistics, Hu said.
China's reserves were now the fifth biggest in the world, with only six countries holding more than 1,000 tonnes, she said.
China had increased its stocks by buying on the domestic market and from domestic producers.
Gold market participants said Hu's revelation was good news for the market and signalled likely further buying.
"The comments indicate that China will buy more gold as reserve to improve its foreign reserve portfolio. This is a trend," said Yao Haiqiao, president of Longgold Asset Management.
Hou Huimin, vice general secretary of the China Gold Association, said China should build its reserves to 5,000 tonnes.
"It's not a matter of a few hundred, or 1,000 tonnes. China should hold more because of its new international status, and because of the financial crisis," he said.
"The financial crisis means the U.S. dollar value is changing fast, and it may retreat from being the international reserve currency. If that happens, whoever holds gold will be at an advantage."
The European Central Bank recommends its member banks hold 15 percent of their reserves in gold, but among Asian nations the percentage is far smaller, said Albert Cheng, World Gold Council managing director for the far east.
Read Entire Article
Massive insider selling taking place right now...
By Michael Tsang and Eric Martin
April 24 (Bloomberg) -- Executives and insiders at U.S. companies are taking advantage of the steepest stock market gains since 1938 to unload shares at the fastest pace since the start of the bear market.
Gap Inc.’s founding family sold $45 million of shares in the largest U.S. clothing retailer this month, according to Securities and Exchange Commission filings compiled by Bloomberg. Daniel Warmenhoven, the chief executive officer at NetApp Inc., liquidated the most stock of the storage-computer maker in more than six years. Sales by the co-founders of Bed Bath & Beyond Inc. were the highest since at least 2001
While the Standard & Poor’s 500 Index climbed 28 percent from a 12-year low on March 9, CEOs, directors and senior officers at U.S. companies sold $353 million of equities this month, or 8.3 times more than they bought, data compiled by Washington Service, a Bethesda, Maryland-based research firm, show. That’s a warning sign because insiders usually have more information about their companies’ prospects than anyone else, according to William Stone at PNC Financial Services Group Inc.
“They should know more than outsiders would, so you could take it as a signal that there is something wrong if they’re selling,” said Stone, chief investment strategist at PNC’s wealth management unit, which oversees $110 billion in Philadelphia. “Whether it’s a sustainable rebound is still in question. I’d prefer they were buying.”
Insiders Sell
Insiders from New York Stock Exchange-listed companies sold $8.32 worth of stock for every dollar bought in the first three weeks of April, according to Washington Service, which analyzes stock transactions of corporate insiders for more than 500 institutional clients.
That’s the fastest rate of selling since October 2007, when U.S. stocks peaked and the 17-month bear market that wiped out more than half the market value of U.S. companies began. The $42.5 million in insider purchases through April 20 would represent the smallest amount for a full month since July 1992, data going back more than 20 years show. That drop preceded a 2.4 percent slide in the S&P 500 in August 1992.
The index rose 1.7 percent to 866.23 today after the Federal Reserve said most banks that underwent stress tests hold enough capital and companies from Ford Motor Co. to American Express Co. posted better-than-estimated results.
Looking Forward
The S&P 500 has jumped 28 percent in 33 trading days, the sharpest rally since the 1930s, on speculation the longest recession since World War II will soon end.
Stocks rebounded as President Barack Obama outlined a $787 billion package of spending and tax cuts to stimulate growth, the Treasury unveiled plans to finance as much as $1 trillion in purchases of banks’ distressed assets and the Fed pledged to buy more than $1 trillion of Treasuries and bonds backed by mortgages to drive down interest rates.
With corporate America stuck in its seventh straight quarter of earnings decreases, the longest in seven decades, executives may have become too cautious, said Penn Capital Management’s Eric Green.
Investors are looking to the final quarter of the year, when S&P 500 companies will increase operating income by 71 percent, according to analyst estimates compiled by Bloomberg. They forecast profits will fall 33 percent in the second quarter and 21 percent in the third.
“Things are a lot better than they were,” said Green, director of research at Penn Capital, which oversees $3 billion in Cherry Hill, New Jersey. Recent history also shows that “insiders have been wrong,” he said.
Confidence Game
Jeffrey Immelt, CEO of General Electric Co., purchased 50,000 shares at prices from $16.41 to $16.45 on Nov. 13, when the stock closed at $16.86. The shares have since fallen 28 percent after the Fairfield, Connecticut-based company reduced its dividend for the first time since 1938 and lost the AAA credit rating from S&P that it held for more than 50 years.
Insiders of consumer and technology companies have been selling the most stock relative to the amount they purchased this month, data compiled by Washington Service show.
John Fisher, Robert Fisher and William Fisher, whose parents Donald and Doris Fisher founded San Francisco-based Gap in 1969, sold a combined 2.99 million shares at between $15.11 and $15.36 a share on April 3 and April 17, SEC filings show. Gap rebounded 55 percent from its low on March 6. The stock gained 1.1 percent since the Fishers’ last sale.
Reasons to Sell
Gap spokesman Bill Chandler said that “from time to time, based upon the advice of financial advisers, the members of the Fisher family will decide to sell stock.”
Warren Eisenberg and Leonard Feinstein, who founded Union, New Jersey-based Bed Bath & Beyond in 1971, sold 1.05 million and 1.1 million shares at $30.90 apiece on April 9, the most since at least December 2001, the filings show.
The offerings came one day after Bed Bath & Beyond surged 24 percent, the biggest advance in nine years, on a smaller than estimated decline in fourth-quarter profit. Spokesman Ken Frankel said Eisenberg and Feinstein, who currently serve as co- chairmen of the largest U.S. home-furnishings retailer, sold for “estate-planning purposes and diversification.”
At NetApp, Warmenhoven sold 1.25 million shares, the most since at least 2002, for about $21.3 million between April 3 and April 21 at prices from $16.10 to $18.10 a share, the SEC filings show. Shares of the Sunnyvale, California-based company, up 49 percent from $12.52 on the March 9 stock market low, gained 3.3 percent since then.
Moving On
Warmenhoven sold shares he received from exercising stock options that were due to expire next month, according to an e- mailed response by Lindsey Smith, a spokeswoman for NetApp. He reaped a profit of about $7.3 million selling the shares at an average price of $17.08 apiece, based on the conversion price of $11.25 for options he held, the data show.
“They’re going to say, ‘Thank you very much,’ and move on to cash or something else,” said David W. James, who helps manage about $2 billion at James Investment Research Inc. in Xenia, Ohio. “This is not a situation that suggests to us we’re seeing an economic recovery.”
Read Entire Article
April 24 (Bloomberg) -- Executives and insiders at U.S. companies are taking advantage of the steepest stock market gains since 1938 to unload shares at the fastest pace since the start of the bear market.
Gap Inc.’s founding family sold $45 million of shares in the largest U.S. clothing retailer this month, according to Securities and Exchange Commission filings compiled by Bloomberg. Daniel Warmenhoven, the chief executive officer at NetApp Inc., liquidated the most stock of the storage-computer maker in more than six years. Sales by the co-founders of Bed Bath & Beyond Inc. were the highest since at least 2001
While the Standard & Poor’s 500 Index climbed 28 percent from a 12-year low on March 9, CEOs, directors and senior officers at U.S. companies sold $353 million of equities this month, or 8.3 times more than they bought, data compiled by Washington Service, a Bethesda, Maryland-based research firm, show. That’s a warning sign because insiders usually have more information about their companies’ prospects than anyone else, according to William Stone at PNC Financial Services Group Inc.
“They should know more than outsiders would, so you could take it as a signal that there is something wrong if they’re selling,” said Stone, chief investment strategist at PNC’s wealth management unit, which oversees $110 billion in Philadelphia. “Whether it’s a sustainable rebound is still in question. I’d prefer they were buying.”
Insiders Sell
Insiders from New York Stock Exchange-listed companies sold $8.32 worth of stock for every dollar bought in the first three weeks of April, according to Washington Service, which analyzes stock transactions of corporate insiders for more than 500 institutional clients.
That’s the fastest rate of selling since October 2007, when U.S. stocks peaked and the 17-month bear market that wiped out more than half the market value of U.S. companies began. The $42.5 million in insider purchases through April 20 would represent the smallest amount for a full month since July 1992, data going back more than 20 years show. That drop preceded a 2.4 percent slide in the S&P 500 in August 1992.
The index rose 1.7 percent to 866.23 today after the Federal Reserve said most banks that underwent stress tests hold enough capital and companies from Ford Motor Co. to American Express Co. posted better-than-estimated results.
Looking Forward
The S&P 500 has jumped 28 percent in 33 trading days, the sharpest rally since the 1930s, on speculation the longest recession since World War II will soon end.
Stocks rebounded as President Barack Obama outlined a $787 billion package of spending and tax cuts to stimulate growth, the Treasury unveiled plans to finance as much as $1 trillion in purchases of banks’ distressed assets and the Fed pledged to buy more than $1 trillion of Treasuries and bonds backed by mortgages to drive down interest rates.
With corporate America stuck in its seventh straight quarter of earnings decreases, the longest in seven decades, executives may have become too cautious, said Penn Capital Management’s Eric Green.
Investors are looking to the final quarter of the year, when S&P 500 companies will increase operating income by 71 percent, according to analyst estimates compiled by Bloomberg. They forecast profits will fall 33 percent in the second quarter and 21 percent in the third.
“Things are a lot better than they were,” said Green, director of research at Penn Capital, which oversees $3 billion in Cherry Hill, New Jersey. Recent history also shows that “insiders have been wrong,” he said.
Confidence Game
Jeffrey Immelt, CEO of General Electric Co., purchased 50,000 shares at prices from $16.41 to $16.45 on Nov. 13, when the stock closed at $16.86. The shares have since fallen 28 percent after the Fairfield, Connecticut-based company reduced its dividend for the first time since 1938 and lost the AAA credit rating from S&P that it held for more than 50 years.
Insiders of consumer and technology companies have been selling the most stock relative to the amount they purchased this month, data compiled by Washington Service show.
John Fisher, Robert Fisher and William Fisher, whose parents Donald and Doris Fisher founded San Francisco-based Gap in 1969, sold a combined 2.99 million shares at between $15.11 and $15.36 a share on April 3 and April 17, SEC filings show. Gap rebounded 55 percent from its low on March 6. The stock gained 1.1 percent since the Fishers’ last sale.
Reasons to Sell
Gap spokesman Bill Chandler said that “from time to time, based upon the advice of financial advisers, the members of the Fisher family will decide to sell stock.”
Warren Eisenberg and Leonard Feinstein, who founded Union, New Jersey-based Bed Bath & Beyond in 1971, sold 1.05 million and 1.1 million shares at $30.90 apiece on April 9, the most since at least December 2001, the filings show.
The offerings came one day after Bed Bath & Beyond surged 24 percent, the biggest advance in nine years, on a smaller than estimated decline in fourth-quarter profit. Spokesman Ken Frankel said Eisenberg and Feinstein, who currently serve as co- chairmen of the largest U.S. home-furnishings retailer, sold for “estate-planning purposes and diversification.”
At NetApp, Warmenhoven sold 1.25 million shares, the most since at least 2002, for about $21.3 million between April 3 and April 21 at prices from $16.10 to $18.10 a share, the SEC filings show. Shares of the Sunnyvale, California-based company, up 49 percent from $12.52 on the March 9 stock market low, gained 3.3 percent since then.
Moving On
Warmenhoven sold shares he received from exercising stock options that were due to expire next month, according to an e- mailed response by Lindsey Smith, a spokeswoman for NetApp. He reaped a profit of about $7.3 million selling the shares at an average price of $17.08 apiece, based on the conversion price of $11.25 for options he held, the data show.
“They’re going to say, ‘Thank you very much,’ and move on to cash or something else,” said David W. James, who helps manage about $2 billion at James Investment Research Inc. in Xenia, Ohio. “This is not a situation that suggests to us we’re seeing an economic recovery.”
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AmEx Credit Rating Downgraded on Weaker Revenue
NEW YORK -- Moody's Investors Service Friday downgraded its ratings on American Express Co after the credit card company posted sharply lower first-quarter earnings as it struggled with bad loans.
Moody's cut its senior long-term debt on American Express by one notch to A3, the seventh-highest investment grade, from A2. The short-term rating was lowered to Prime-2 from Prime-1.
Moody's said the outlook for the long-term ratings of American Express is negative, indicating another rating cut is likely over the next 12 to 18 months.
The downgrades reflect the erosion of the company's asset quality and weaker revenue trends stemming from the severe U.S. recession, Moody's said in a statement.
The credit card company also has relatively high credit exposure in the states most heavily affected by the housing slump, particularly California and Florida, Moody's said.
The pervasive weakness of the U.S. economy and sharp rise in unemployment will continue to weigh on asset quality, increasing the need for additional loss provisions throughout 2009 and quite possibly well into 2010, Moody's said.
Spreads tightened on American Express's notes after it reported earnings, which though lower than the year-ago period, were better than expected.
The company's 7.3 percent notes due in 2013 tightened by 24 basis points on Friday to 555 basis points over Treasuries, according to MarketAxess.
Read Entire Article
Moody's cut its senior long-term debt on American Express by one notch to A3, the seventh-highest investment grade, from A2. The short-term rating was lowered to Prime-2 from Prime-1.
Moody's said the outlook for the long-term ratings of American Express is negative, indicating another rating cut is likely over the next 12 to 18 months.
The downgrades reflect the erosion of the company's asset quality and weaker revenue trends stemming from the severe U.S. recession, Moody's said in a statement.
The credit card company also has relatively high credit exposure in the states most heavily affected by the housing slump, particularly California and Florida, Moody's said.
The pervasive weakness of the U.S. economy and sharp rise in unemployment will continue to weigh on asset quality, increasing the need for additional loss provisions throughout 2009 and quite possibly well into 2010, Moody's said.
Spreads tightened on American Express's notes after it reported earnings, which though lower than the year-ago period, were better than expected.
The company's 7.3 percent notes due in 2013 tightened by 24 basis points on Friday to 555 basis points over Treasuries, according to MarketAxess.
Read Entire Article
Thursday, April 23, 2009
Obama Economic Adviser Warns Spending Could Create Double Digit Inflation
Harvard economist Martin Feldstein tells FOX Business Network Fed creation of 'high-powered' reserves will result in inflation, higher taxes.
Maybe there really is some independence on President Obama’s “independent” economic advisory board, because one member didn’t sugar-coat things for viewers of Fox Business Network in a recent appearance. Instead he warned of serious inflation and higher taxes down the road.
Harvard economist Martin Feldstein told FBN’s Stuart Varney April 21 that the Fed has built up “unprecedented” reserves that could cause inflation down the road.
“It is the reserves that can be used by the banks to create the money that could as you say whooshing around, pushing up demand, pushing up prices,” Feldstein said. “So it’s not a risk now because there’s so much slack in the economy, but once we start to recover those very high powered, uh, reserves can be turned into money and inflation.”
How bad could it get? Possibily into the double-digits like the 1970s, according to Feldstein.
“Now when you say inflation. I mean, I have visions of when I first came to America back in the 1970s where inflation was really out of control. It went up to 7, 8, 9 - even 10 percent for awhile. Are you talking about the same kind of inflation?” Stuart Varney asked Feldstein.
“Yes, certainly that could happen. We could go back to double-digit inflation. Now, that’s not built in,” Feldstein explained. “It depends on whether the Fed can control that, but that’s gonna be a technically difficult thing to do because of the way they have built up this large amount -- absolutely unprecedented amount -- of excess reserves.”
Varney asked the economist what the impact of Obama’s nearly $2 trillion deficit (this year) would be.
“Well, one impact, and its not just this year, is we’re gonna see deficits year after year for the next decade - doubling the share of the national debt relative to GDP,” Feldstein said. “One of the things that’s going to mean is much higher taxes going forward, just to pay the interest on that debt.”
Varney also asked Feldstein why he would lend his name to policies with “such dire consequences,” to which Feldstein replied “I’m not there to say its good policy, I’m there to try to make it better.”
Julia A. Seymour Business & Media InstituteThursday, April 23, 2009
Maybe there really is some independence on President Obama’s “independent” economic advisory board, because one member didn’t sugar-coat things for viewers of Fox Business Network in a recent appearance. Instead he warned of serious inflation and higher taxes down the road.
Harvard economist Martin Feldstein told FBN’s Stuart Varney April 21 that the Fed has built up “unprecedented” reserves that could cause inflation down the road.
“It is the reserves that can be used by the banks to create the money that could as you say whooshing around, pushing up demand, pushing up prices,” Feldstein said. “So it’s not a risk now because there’s so much slack in the economy, but once we start to recover those very high powered, uh, reserves can be turned into money and inflation.”
How bad could it get? Possibily into the double-digits like the 1970s, according to Feldstein.
“Now when you say inflation. I mean, I have visions of when I first came to America back in the 1970s where inflation was really out of control. It went up to 7, 8, 9 - even 10 percent for awhile. Are you talking about the same kind of inflation?” Stuart Varney asked Feldstein.
“Yes, certainly that could happen. We could go back to double-digit inflation. Now, that’s not built in,” Feldstein explained. “It depends on whether the Fed can control that, but that’s gonna be a technically difficult thing to do because of the way they have built up this large amount -- absolutely unprecedented amount -- of excess reserves.”
Varney asked the economist what the impact of Obama’s nearly $2 trillion deficit (this year) would be.
“Well, one impact, and its not just this year, is we’re gonna see deficits year after year for the next decade - doubling the share of the national debt relative to GDP,” Feldstein said. “One of the things that’s going to mean is much higher taxes going forward, just to pay the interest on that debt.”
Varney also asked Feldstein why he would lend his name to policies with “such dire consequences,” to which Feldstein replied “I’m not there to say its good policy, I’m there to try to make it better.”
Julia A. Seymour Business & Media InstituteThursday, April 23, 2009
Wednesday, April 22, 2009
European Central Bank Used Gold Sales to Buy Dollars
FRANKFURT (Reuters) -
The European Central Bank said on Tuesday it used proceeds from gold sales to boost its U.S. dollar reserves in 2008, although dollar holdings fell as a proportion of overall currency reserves.
Its foreign currency portfolio was worth 38.5 billion euros at the end of last year compared with 32.1 billion euros at the end of 2007, the ECB said in its annual report.
The share of the currency portfolio denominated in dollars fell to 77.5 percent from 79.7 percent in 2007, while the yen's share rose to 22.5 percent from 20.3 percent in 2007, boosted by the stronger Japanese currency.
The overall increase in reserves was funded by the sales of 30 tonnes of gold, which were announced in 2008. "The proceeds of the gold sales were added to the U.S. dollar portfolio," it said in its annual report.
The yen appreciated 30.8 percent and the dollar went up 5.8 percent against the euro in 2008, the ECB said. The euro also weakened 11.4 percent against the Chinese yuan, and 10.2 percent against the Swiss franc.
The ECB also confirmed it had not intervened in currency markets in 2008. The last time it intervened was in 2000.
The overall net value of the ECB's foreign reserves rose to 49.5 billion euros at the end of 2008 from 42.8 billion at the end of 2007, due to portfolio management and the depreciation of the euro against the dollar and the yen.
Gold and special drawing rights issued by the International Monetary Fund accounted for 11 billion euros of net foreign reserves, up from 10.7 billion euros in 2007 due to a 2.6 percent rise in the value of both gold and SDRs versus the euro.
China suggested in March that the dollar could eventually be replaced as the world's main reserve currency by the IMF's SDR.
"The objectives for the management of the ECB's foreign reserves are, in order of importance, liquidity, security and return," the annual report said.
The ECB said it had no losses in foreign reserves as a result of default of counterparties.
(Reporting by Sakari Suoninen; editing by David Stamp) ($1=.7748 Euro)
The European Central Bank said on Tuesday it used proceeds from gold sales to boost its U.S. dollar reserves in 2008, although dollar holdings fell as a proportion of overall currency reserves.
Its foreign currency portfolio was worth 38.5 billion euros at the end of last year compared with 32.1 billion euros at the end of 2007, the ECB said in its annual report.
The share of the currency portfolio denominated in dollars fell to 77.5 percent from 79.7 percent in 2007, while the yen's share rose to 22.5 percent from 20.3 percent in 2007, boosted by the stronger Japanese currency.
The overall increase in reserves was funded by the sales of 30 tonnes of gold, which were announced in 2008. "The proceeds of the gold sales were added to the U.S. dollar portfolio," it said in its annual report.
The yen appreciated 30.8 percent and the dollar went up 5.8 percent against the euro in 2008, the ECB said. The euro also weakened 11.4 percent against the Chinese yuan, and 10.2 percent against the Swiss franc.
The ECB also confirmed it had not intervened in currency markets in 2008. The last time it intervened was in 2000.
The overall net value of the ECB's foreign reserves rose to 49.5 billion euros at the end of 2008 from 42.8 billion at the end of 2007, due to portfolio management and the depreciation of the euro against the dollar and the yen.
Gold and special drawing rights issued by the International Monetary Fund accounted for 11 billion euros of net foreign reserves, up from 10.7 billion euros in 2007 due to a 2.6 percent rise in the value of both gold and SDRs versus the euro.
China suggested in March that the dollar could eventually be replaced as the world's main reserve currency by the IMF's SDR.
"The objectives for the management of the ECB's foreign reserves are, in order of importance, liquidity, security and return," the annual report said.
The ECB said it had no losses in foreign reserves as a result of default of counterparties.
(Reporting by Sakari Suoninen; editing by David Stamp) ($1=.7748 Euro)
Soaring U.S. Budget Deficit Will Mean Billions in Bond Sales
Millions of lost jobs mean billions in lost tax revenue for the U.S. government, and billions in additional Treasury debt to fund a federal budget deficit that may soar to more than four times last year’s record $454.7 billion.
Employers cut 3.7 million positions from their payrolls in the six months since the fiscal year began Oct. 1, and the unemployment rate reached a 25-year high of 8.5 percent in March. That suggests receipts for April — the biggest month for tax collection — are likely to come in well below April 2008, analysts said.
With spending on unemployment insurance and other safety- net programs rising, the deficit is already at a record $956.8 billion six months into the fiscal year. To help close that gap, the Treasury Department has more than quadrupled borrowing, pushing the government deeper into debt.
“Tax receipts are just collapsing,” said Chris Ahrens, head of interest-rate strategy at UBS Securities LLC in Stamford, Connecticut, one of 16 primary dealers required to bid at Treasury auctions. The need to sell more debt “is a big issue in the Treasury market and it is ongoing. The surging budget deficit is the primary cause.”
The government will have to sell $2.4 trillion in new bills, notes and bonds in fiscal 2009, according to UBS. From October through December, the Treasury sold a record $569 billion, up from $82 billion in the same period a year earlier, and auctioned another $493 billion in the last quarter, up from $156 billion. That helps to make up for the drop in tax receipts, pay for the rise in spending and refinance maturing debt. Along with the principal, the sales add additional interest costs to the deficit for years to come.
Unemployment Benefits
At the same time, government spending has climbed 33 percent in the fiscal year through March, as relief programs such as unemployment benefits expand. Labor Department expenditures have more than doubled to $52.7 billion and payments by the Department of Health and Human Services have risen by $40.6 billion, or 12 percent. Spending by the Agriculture Department, which runs the food-stamp program, is 18 percent higher, or $9.9 billion more than in the same period a year ago.
These increases will contribute to a record federal budget deficit this fiscal year. On March 20, the Congressional Budget Office forecast the shortfall will reach $1.85 trillion, dwarfing the previous peak. UBS estimates a budget deficit of $1.65 trillion, Ahrens said.
Plummeting Receipts
Rising unemployment and lower consumer spending helped drag income-tax receipts from individuals and small businesses down 15 percent in fiscal 2009 through March, compared with a year earlier. Data due in May will likely show that the recession curbed estimated-tax payments in the first quarter, while the drop in financial markets caused capital gains to shrink.
With the tax cuts from President Barack Obama’s stimulus package also taking effect in April, “that combination is going to give you weak tax revenues,” said Douglas Lee, chief economist at Economics From Washington, an independent consulting firm in Potomac, Maryland.
Michael McKeeBloombergWednesday, April 22, 2009
Full article here
Employers cut 3.7 million positions from their payrolls in the six months since the fiscal year began Oct. 1, and the unemployment rate reached a 25-year high of 8.5 percent in March. That suggests receipts for April — the biggest month for tax collection — are likely to come in well below April 2008, analysts said.
With spending on unemployment insurance and other safety- net programs rising, the deficit is already at a record $956.8 billion six months into the fiscal year. To help close that gap, the Treasury Department has more than quadrupled borrowing, pushing the government deeper into debt.
“Tax receipts are just collapsing,” said Chris Ahrens, head of interest-rate strategy at UBS Securities LLC in Stamford, Connecticut, one of 16 primary dealers required to bid at Treasury auctions. The need to sell more debt “is a big issue in the Treasury market and it is ongoing. The surging budget deficit is the primary cause.”
The government will have to sell $2.4 trillion in new bills, notes and bonds in fiscal 2009, according to UBS. From October through December, the Treasury sold a record $569 billion, up from $82 billion in the same period a year earlier, and auctioned another $493 billion in the last quarter, up from $156 billion. That helps to make up for the drop in tax receipts, pay for the rise in spending and refinance maturing debt. Along with the principal, the sales add additional interest costs to the deficit for years to come.
Unemployment Benefits
At the same time, government spending has climbed 33 percent in the fiscal year through March, as relief programs such as unemployment benefits expand. Labor Department expenditures have more than doubled to $52.7 billion and payments by the Department of Health and Human Services have risen by $40.6 billion, or 12 percent. Spending by the Agriculture Department, which runs the food-stamp program, is 18 percent higher, or $9.9 billion more than in the same period a year ago.
These increases will contribute to a record federal budget deficit this fiscal year. On March 20, the Congressional Budget Office forecast the shortfall will reach $1.85 trillion, dwarfing the previous peak. UBS estimates a budget deficit of $1.65 trillion, Ahrens said.
Plummeting Receipts
Rising unemployment and lower consumer spending helped drag income-tax receipts from individuals and small businesses down 15 percent in fiscal 2009 through March, compared with a year earlier. Data due in May will likely show that the recession curbed estimated-tax payments in the first quarter, while the drop in financial markets caused capital gains to shrink.
With the tax cuts from President Barack Obama’s stimulus package also taking effect in April, “that combination is going to give you weak tax revenues,” said Douglas Lee, chief economist at Economics From Washington, an independent consulting firm in Potomac, Maryland.
Michael McKeeBloombergWednesday, April 22, 2009
Full article here
Gold Set for Huge Rally
Seeking Alpha
The gold price is poised to break through $1,000 an ounce this week and could reach $1,500 before a price consolidation. On Monday gold and silver closed higher while global stock markets fell as the five-week rally ended.
This is an important trend reversal and marks a shift by investors to safe haven assets in advance of another plunge in equity values.
The US dollar also strengthened across the board and bond prices rose. It is unusual to see both gold and the dollar rising together but again this normally signals an important trend reversal.Money supply growth
The fundamental case for investment in precious metals has also become overpowering. Global bank bailout and stimulus packages have resulted in a huge increase in global money supply that has never had any effect except inflation in all history.
The gold supply by contrast is relatively fixed and production is actually falling. Supply is even tighter for silver – where stock levels are a hundredth of gold – and that is reason enough to expect the established pattern of silver outperforming gold will be repeated again.
As investors rotate their assets out of stocks and into alternative asset classes the best returns are therefore likely in precious metals, and such information tends to be self-fulfilling.
There are all sorts of minor trends supporting this basic trend, and like any true bull market there will be a compounding of supporting evidence: from a shortage of gold available for bank leasing to UK Prime Minister Gordon Brown’s call for IMF sales, often seen as a contrary indicator as his previous calls boosted gold prices.Trend is your friend
However, in all investment markets it is the trend that is really your friend. The next dilemma will be how to best leverage the upside to the gold price.
This will start with a debate about silver as a better alternative. But then gold and silver stocks will come under the microscope, and the value of the bombed-out junior stocks brought into focus.
It can be little consolation that great days lie ahead for gold for this signals the failure of the conventional investment universe, and that means further horrors ahead for currencies, stocks, bonds and real estate.
by: Peter Cooper April 21, 2009
The gold price is poised to break through $1,000 an ounce this week and could reach $1,500 before a price consolidation. On Monday gold and silver closed higher while global stock markets fell as the five-week rally ended.
This is an important trend reversal and marks a shift by investors to safe haven assets in advance of another plunge in equity values.
The US dollar also strengthened across the board and bond prices rose. It is unusual to see both gold and the dollar rising together but again this normally signals an important trend reversal.Money supply growth
The fundamental case for investment in precious metals has also become overpowering. Global bank bailout and stimulus packages have resulted in a huge increase in global money supply that has never had any effect except inflation in all history.
The gold supply by contrast is relatively fixed and production is actually falling. Supply is even tighter for silver – where stock levels are a hundredth of gold – and that is reason enough to expect the established pattern of silver outperforming gold will be repeated again.
As investors rotate their assets out of stocks and into alternative asset classes the best returns are therefore likely in precious metals, and such information tends to be self-fulfilling.
There are all sorts of minor trends supporting this basic trend, and like any true bull market there will be a compounding of supporting evidence: from a shortage of gold available for bank leasing to UK Prime Minister Gordon Brown’s call for IMF sales, often seen as a contrary indicator as his previous calls boosted gold prices.Trend is your friend
However, in all investment markets it is the trend that is really your friend. The next dilemma will be how to best leverage the upside to the gold price.
This will start with a debate about silver as a better alternative. But then gold and silver stocks will come under the microscope, and the value of the bombed-out junior stocks brought into focus.
It can be little consolation that great days lie ahead for gold for this signals the failure of the conventional investment universe, and that means further horrors ahead for currencies, stocks, bonds and real estate.
by: Peter Cooper April 21, 2009
Monday, April 20, 2009
Not All Economists Agree
By Peter Schiff
In a speech this week summarizing his administration’s economic policies, President Obama grossly overstated the support these policies enjoy by claiming, “economists on the left and right agree that the last thing the government should do during a recession is cut back on spending.”
There are a great many economists who were surprised to learn that, apparently, they now agree with the President. Reading straight from the Keynesian playbook, Obama justified the creation of multi-trillion dollar deficits by asserting that the government must fill the spending void left by the contraction of consumer and business spending.
As one of those mythical economists who do not agree with the President, I argue that it is precisely this type of boneheaded thinking that got us into this mess, and it’s the reason we are now headed for an inflationary depression. We do not need, nor should we attempt, to replace lost demand.
As Obama himself pointed out in the same speech, Americans have been borrowing and spending too much money. These actions created artificial demand, underpinned by the illusion of real wealth in overvalued stock and real estate markets. Given his intelligence and rhetorical training, it is hard to fathom how President Obama cannot notice the inherent contradiction in his argument.
While Obama commended millions of American families for making the hard choices to reduce spending, pay down debt and replenish savings, he later outlined the government’s intention to spend every American household deeper into debt, thereby undermining all the good that personal austerity would have otherwise produced.
Obama also made the clear-eyed observation that the foundation of our economy was unsound and that a sturdier one needed to be laid. To do this, he even asserted that we need to import less and export more. This has been one of my fundamental points. Our economy is unsound precisely because it is built on a foundation of consumer debt. Instead of spending for today, we need to invest for tomorrow.
However, we cannot save more unless we spend less. Production requires capital, which only comes into existence when resources are not consumed. However, by interfering with this process, Obama prevents the very transformation he acknowledges must take place.
When the government spends what individuals save, private investment is crowded out. Society is deprived of the benefits such savings would otherwise have brought about. How can we lay a solid foundation if the government takes away all our cement?T his brings up an oft-repeated, but oft-forgotten, point: government does not have any money of its own. It only has what it takes from the rest of us.
If individuals repay their debts, but their government takes on additional debt, we are all simply swimming against the tide. All forward progress is lost as private debt is replaced by public debt, which must be repaid by private individuals. Whatever gains individuals hope to achieve are negated by the higher taxes or increased inflation necessary to repay their share of a larger national debt. Obama claims that much of the additional debt is not going to finance consumption, but rather “critical investment”. This is a vain hope.
In the first place, much of what he categorizes as investment, such as additional spending on education, is not investment at all. Yes, an educated workforce is important, but throwing more government money at education will do nothing to achieve this goal. Spending money on education and calling it an investment squanders resources that otherwise would have financed real investments.
In the second place, to the extent some government money is invested, those investments will likely be less efficient than those the private sector might otherwise have financed. There is absolutely no evidence that governments have the foresight or incentives to make investments that facilitate real economic growth. “Five year plans” didn’t work in the Soviet Union and they won’t work here.
If the government simply builds bridges to nowhere, society gains nothing.If we are going to rebuild our economy on a solid foundation, the market, not the government, needs to draw the plans. When private citizens invest their own capital, those who invest wisely are rewarded with profits, while those who do not are punished with losses. Bad investments are therefore abandoned, with capital reallocated to more successful ventures.
Conversely, when governments invest money, these checks and balances do not exist. There is nothing to correct bad investments, as losses are endlessly subsidized by taxpayers. In fact, the more a government plan fails, the more it tends to be funded in the hope that additional resources will finally achieve success.
Obama himself proves this by allocating still more funds to government-run schools and student loan subsidies. Other examples, such as Amtrak, the New York MTA, the U.S. Postal Service, Fannie/Freddie, and countless others, prove this process is never-ending – until perhaps the bureaucracy collapses under its own weight.
When it comes to government making tough choices, Obama talks a good game, but refuses to actually make any. However, once the dollar finally begins its collapse, he will have no choice but to match his rhetoric with action. It’s unfortunate that we cannot make these tough choices on our own terms, rather than waiting for our creditors to force our hand.
For a more in depth analysis of our financial problems and the inherent dangers they pose for the U.S. economy and U.S. dollar denominated investments, read Peter Schiff’s book "Crash Proof: How to Profit from the Coming Economic Collapse".
Read Entire Article
In a speech this week summarizing his administration’s economic policies, President Obama grossly overstated the support these policies enjoy by claiming, “economists on the left and right agree that the last thing the government should do during a recession is cut back on spending.”
There are a great many economists who were surprised to learn that, apparently, they now agree with the President. Reading straight from the Keynesian playbook, Obama justified the creation of multi-trillion dollar deficits by asserting that the government must fill the spending void left by the contraction of consumer and business spending.
As one of those mythical economists who do not agree with the President, I argue that it is precisely this type of boneheaded thinking that got us into this mess, and it’s the reason we are now headed for an inflationary depression. We do not need, nor should we attempt, to replace lost demand.
As Obama himself pointed out in the same speech, Americans have been borrowing and spending too much money. These actions created artificial demand, underpinned by the illusion of real wealth in overvalued stock and real estate markets. Given his intelligence and rhetorical training, it is hard to fathom how President Obama cannot notice the inherent contradiction in his argument.
While Obama commended millions of American families for making the hard choices to reduce spending, pay down debt and replenish savings, he later outlined the government’s intention to spend every American household deeper into debt, thereby undermining all the good that personal austerity would have otherwise produced.
Obama also made the clear-eyed observation that the foundation of our economy was unsound and that a sturdier one needed to be laid. To do this, he even asserted that we need to import less and export more. This has been one of my fundamental points. Our economy is unsound precisely because it is built on a foundation of consumer debt. Instead of spending for today, we need to invest for tomorrow.
However, we cannot save more unless we spend less. Production requires capital, which only comes into existence when resources are not consumed. However, by interfering with this process, Obama prevents the very transformation he acknowledges must take place.
When the government spends what individuals save, private investment is crowded out. Society is deprived of the benefits such savings would otherwise have brought about. How can we lay a solid foundation if the government takes away all our cement?T his brings up an oft-repeated, but oft-forgotten, point: government does not have any money of its own. It only has what it takes from the rest of us.
If individuals repay their debts, but their government takes on additional debt, we are all simply swimming against the tide. All forward progress is lost as private debt is replaced by public debt, which must be repaid by private individuals. Whatever gains individuals hope to achieve are negated by the higher taxes or increased inflation necessary to repay their share of a larger national debt. Obama claims that much of the additional debt is not going to finance consumption, but rather “critical investment”. This is a vain hope.
In the first place, much of what he categorizes as investment, such as additional spending on education, is not investment at all. Yes, an educated workforce is important, but throwing more government money at education will do nothing to achieve this goal. Spending money on education and calling it an investment squanders resources that otherwise would have financed real investments.
In the second place, to the extent some government money is invested, those investments will likely be less efficient than those the private sector might otherwise have financed. There is absolutely no evidence that governments have the foresight or incentives to make investments that facilitate real economic growth. “Five year plans” didn’t work in the Soviet Union and they won’t work here.
If the government simply builds bridges to nowhere, society gains nothing.If we are going to rebuild our economy on a solid foundation, the market, not the government, needs to draw the plans. When private citizens invest their own capital, those who invest wisely are rewarded with profits, while those who do not are punished with losses. Bad investments are therefore abandoned, with capital reallocated to more successful ventures.
Conversely, when governments invest money, these checks and balances do not exist. There is nothing to correct bad investments, as losses are endlessly subsidized by taxpayers. In fact, the more a government plan fails, the more it tends to be funded in the hope that additional resources will finally achieve success.
Obama himself proves this by allocating still more funds to government-run schools and student loan subsidies. Other examples, such as Amtrak, the New York MTA, the U.S. Postal Service, Fannie/Freddie, and countless others, prove this process is never-ending – until perhaps the bureaucracy collapses under its own weight.
When it comes to government making tough choices, Obama talks a good game, but refuses to actually make any. However, once the dollar finally begins its collapse, he will have no choice but to match his rhetoric with action. It’s unfortunate that we cannot make these tough choices on our own terms, rather than waiting for our creditors to force our hand.
For a more in depth analysis of our financial problems and the inherent dangers they pose for the U.S. economy and U.S. dollar denominated investments, read Peter Schiff’s book "Crash Proof: How to Profit from the Coming Economic Collapse".
Read Entire Article
The Earnings Boom is a False Spring
George Washington Blog
The Washington Post is saying the emperor has no clothes, and calling the Obama administration's bluff that the winter of the financial crisis has given way to a spring of bank stability and profitability:
The earnings bloom, however, is probably a false spring, according to bank executives and financial analysts...
"We don't see the light at the end of the tunnel," Edward "Ned" Kelly, Citigroup's chief financial officer, said in an interview, referring to the state of the economy....[JP Morgan’s chief said] "Eventually [loan losses] will peak, but they've been going up consistently. We've shown you here that they're going to go up even more. They're going to continue going up in all the home lending areas, mortgage and home equity and credit cards."
...Large banks have profited despite their problems because of accounting maneuvers and earnings from investment banking...Citigroup recorded revenue of $2.5 billion from a decline in the value of its own bonds. A 2007 change in accounting rules allowed the company to gain from its investors' loss because the company conceivably could buy back the debt at the lower value, paying less than it originally expected.Earlier this year, accounting rule-makers also loosened the rules that determine when a company must recognize a decline in an asset's value as a permanent loss. Citigroup said that change added about another $600 million to its bottom line.
...Analysts also caution that the combination of unusual investment banking profits and accounting benefits make it unlikely that banks can sustain profits at this level.
"I think we knew all along that the first quarter might not be indicative," said Nancy Bush, a financial analyst with NAB Research. She noted that investment banks benefited from demand for services that built up during the fall, when the capital markets largely were shuttered. Competition on Wall Street also was diminished by the collapse of Bear Stearns and the bankruptcy of Lehman Brothers, leaving more pie for the surviving firms.
Those talking heads saying the crisis is over our wrong.
The Washington Post is saying the emperor has no clothes, and calling the Obama administration's bluff that the winter of the financial crisis has given way to a spring of bank stability and profitability:
The earnings bloom, however, is probably a false spring, according to bank executives and financial analysts...
"We don't see the light at the end of the tunnel," Edward "Ned" Kelly, Citigroup's chief financial officer, said in an interview, referring to the state of the economy....[JP Morgan’s chief said] "Eventually [loan losses] will peak, but they've been going up consistently. We've shown you here that they're going to go up even more. They're going to continue going up in all the home lending areas, mortgage and home equity and credit cards."
...Large banks have profited despite their problems because of accounting maneuvers and earnings from investment banking...Citigroup recorded revenue of $2.5 billion from a decline in the value of its own bonds. A 2007 change in accounting rules allowed the company to gain from its investors' loss because the company conceivably could buy back the debt at the lower value, paying less than it originally expected.Earlier this year, accounting rule-makers also loosened the rules that determine when a company must recognize a decline in an asset's value as a permanent loss. Citigroup said that change added about another $600 million to its bottom line.
...Analysts also caution that the combination of unusual investment banking profits and accounting benefits make it unlikely that banks can sustain profits at this level.
"I think we knew all along that the first quarter might not be indicative," said Nancy Bush, a financial analyst with NAB Research. She noted that investment banks benefited from demand for services that built up during the fall, when the capital markets largely were shuttered. Competition on Wall Street also was diminished by the collapse of Bear Stearns and the bankruptcy of Lehman Brothers, leaving more pie for the surviving firms.
Those talking heads saying the crisis is over our wrong.
It Is Time to Dissolve All Central Banks
George Washington Blog
As previously noted, the Federal Reserve has failed on its own terms. Specifically, it has failed to provide the counter-cyclical influence on the economy which is its very justification for existing in the first place.
Moreover, prominent Wall Street economist Henry Kaufman says that the Federal Reserve is primarily to blame for the financial crisis:
"I am convinced that the misbehavior of some would have been much rarer -- and far less damaging to our economy -- if the Federal Reserve and, to a lesser extent, other supervisory authorities, had measured up to their responsibilities ...
Kaufman directly criticized former Federal Reserve Chairman Alan Greenspan for not using his position to dissuade big banks and others from taking big risks.
"Alan Greenspan spoke about irrational exuberance only as a theoretical concept, not as a warning to the market to curb excessive behavior," Kaufman said. "It is difficult to believe that recourse to moral suasion by a Fed chairman would be ineffective."
Partly because the Fed did not strongly oppose the repeal in 1999 of the Depression-era Glass-Steagall Act, more large financial conglomerates that were "too big to fail" have formed, Kaufman said, citing a factor that has made the global credit crisis especially acute.
"Financial conglomerates have become more and more opaque, especially about their massive off-balance-sheet activities," he said. "The Fed failed to rein in the problem."...
"Much of the recent extreme financial behavior is rooted in faulty monetary policies," he said. "Poor policies encourage excessive risk taking."
Even the head of the Federal Reserve bank of San Francisco - during a talk on how runaway bubbles can lead to depressions - admitted:
Fed monetary policy may also have contributed to the U.S. credit boom and the associated house price bubble ...
This is on top of the widely recognized fact that the Fed helped cause the Great Depression with its faulty monetary policy.
Indeed, if even half of what financial writer Ellen Brown says is true, central banks in all countries are parasitic organizations which do not have the best interest of their host nation in mind.
The central bank experiment has failed.
It is time to dissolve not only the Fed (as Ron Paul, Dennis Kucinich, Austrian school economists, and many others have demanded), but all central banks.
Whatever their motivation - whether selfish or altruistic - they have proven to be a net detriment to their respective economies.
As previously noted, the Federal Reserve has failed on its own terms. Specifically, it has failed to provide the counter-cyclical influence on the economy which is its very justification for existing in the first place.
Moreover, prominent Wall Street economist Henry Kaufman says that the Federal Reserve is primarily to blame for the financial crisis:
"I am convinced that the misbehavior of some would have been much rarer -- and far less damaging to our economy -- if the Federal Reserve and, to a lesser extent, other supervisory authorities, had measured up to their responsibilities ...
Kaufman directly criticized former Federal Reserve Chairman Alan Greenspan for not using his position to dissuade big banks and others from taking big risks.
"Alan Greenspan spoke about irrational exuberance only as a theoretical concept, not as a warning to the market to curb excessive behavior," Kaufman said. "It is difficult to believe that recourse to moral suasion by a Fed chairman would be ineffective."
Partly because the Fed did not strongly oppose the repeal in 1999 of the Depression-era Glass-Steagall Act, more large financial conglomerates that were "too big to fail" have formed, Kaufman said, citing a factor that has made the global credit crisis especially acute.
"Financial conglomerates have become more and more opaque, especially about their massive off-balance-sheet activities," he said. "The Fed failed to rein in the problem."...
"Much of the recent extreme financial behavior is rooted in faulty monetary policies," he said. "Poor policies encourage excessive risk taking."
Even the head of the Federal Reserve bank of San Francisco - during a talk on how runaway bubbles can lead to depressions - admitted:
Fed monetary policy may also have contributed to the U.S. credit boom and the associated house price bubble ...
This is on top of the widely recognized fact that the Fed helped cause the Great Depression with its faulty monetary policy.
Indeed, if even half of what financial writer Ellen Brown says is true, central banks in all countries are parasitic organizations which do not have the best interest of their host nation in mind.
The central bank experiment has failed.
It is time to dissolve not only the Fed (as Ron Paul, Dennis Kucinich, Austrian school economists, and many others have demanded), but all central banks.
Whatever their motivation - whether selfish or altruistic - they have proven to be a net detriment to their respective economies.
Treasury May Keep U.S. Bank Stakes After Buyback
April 17 (Bloomberg) -- The Treasury may retain an ownership interest in many U.S. banks even after the lenders buy back preferred stock the government currently holds as part of its rescue effort.
The government will continue to hold warrants, attached to every capital injection it has made, even after any share buybacks, Treasury officials said on condition of anonymity. Banks seeking to escape the government’s grip want to retire the warrants -- which give the right to buy stock in the future at a preset price -- at the same time they acquire the government- owned preferred shares. The government counters that companies must follow the two-step process described in contracts.
The officials said the U.S. would give up the warrants only after subsequent talks with appraisers and the banks to agree on a price. As long as the warrants remain, lenders would continue to face some federal constraints, including limits on hiring non-American citizens, the officials said. Lenders would be freed of restrictions on executive pay and dividends, they said.
“When this program was created, everything was done so fast, I don’t think people were contemplating they would be exiting this quickly,” said Diane Casey-Landry, chief operating officer of the American Bankers Association.
Banks Seek Exit
Escalating federal demands on the banks have spurred institutions including Goldman Sachs Group Inc. and JPMorgan Chase & Co. to seek an early exit from the Treasury’s rescue program. The warrants issue may be the latest complication in a $700 billion effort to unfreeze credit that has sparked an outcry among both lawmakers and some bankers.
The Treasury won’t hold onto the warrants longer than needed to complete the process outlined in contracts with the banks, said Andrew Williams, a spokesman for the department.
“Treasury is abiding by the process defined in our investment agreements and will continue to do so,” Williams said. “Any inference that we are slowing the process down is incorrect. Treasury is required by law to liquidate the warrants after repayment, and we obviously intend to honor this requirement.”
Most of the funds from the Troubled Asset Relief Program distributed so far have been used for buying stakes in financial companies. Warrants apply to all elements of TARP, and officials are still wrestling with how to include them in their plan to finance purchases of distressed assets.
Treasury representatives are working with the Federal Deposit Insurance Corp. and potential participants in the toxic- debt programs on how to apply the warrants requirement.
Read Entire Article
By Rebecca Christie
The government will continue to hold warrants, attached to every capital injection it has made, even after any share buybacks, Treasury officials said on condition of anonymity. Banks seeking to escape the government’s grip want to retire the warrants -- which give the right to buy stock in the future at a preset price -- at the same time they acquire the government- owned preferred shares. The government counters that companies must follow the two-step process described in contracts.
The officials said the U.S. would give up the warrants only after subsequent talks with appraisers and the banks to agree on a price. As long as the warrants remain, lenders would continue to face some federal constraints, including limits on hiring non-American citizens, the officials said. Lenders would be freed of restrictions on executive pay and dividends, they said.
“When this program was created, everything was done so fast, I don’t think people were contemplating they would be exiting this quickly,” said Diane Casey-Landry, chief operating officer of the American Bankers Association.
Banks Seek Exit
Escalating federal demands on the banks have spurred institutions including Goldman Sachs Group Inc. and JPMorgan Chase & Co. to seek an early exit from the Treasury’s rescue program. The warrants issue may be the latest complication in a $700 billion effort to unfreeze credit that has sparked an outcry among both lawmakers and some bankers.
The Treasury won’t hold onto the warrants longer than needed to complete the process outlined in contracts with the banks, said Andrew Williams, a spokesman for the department.
“Treasury is abiding by the process defined in our investment agreements and will continue to do so,” Williams said. “Any inference that we are slowing the process down is incorrect. Treasury is required by law to liquidate the warrants after repayment, and we obviously intend to honor this requirement.”
Most of the funds from the Troubled Asset Relief Program distributed so far have been used for buying stakes in financial companies. Warrants apply to all elements of TARP, and officials are still wrestling with how to include them in their plan to finance purchases of distressed assets.
Treasury representatives are working with the Federal Deposit Insurance Corp. and potential participants in the toxic- debt programs on how to apply the warrants requirement.
Read Entire Article
By Rebecca Christie
Venture Capital Investments Plunge 61% Amid Frozen IPO Market
April 20 (Bloomberg) -- U.S. venture capital investments fell 61 percent to $3 billion in the first quarter, the lowest level in 12 years, as the financial crisis chased away funding for technology and clean-energy deals.
Funding of clean technology -- coming off a surge of investments in 2007 and 2008 -- plunged 87 percent, according to the National Venture Capital Association. Total venture investments dropped 47 percent from the previous three months.
The freeze in initial public offerings kept startups from getting funding because investors weren’t sure how they would earn a return, said John Taylor, vice president of research at the Arlington, Virginia-based association. Venture capitalists are devoting more attention to companies they already own.
“We are in a very difficult, stressed time,” Taylor said on a conference call last week. “Everyone is trying to figure out what is going on.”
By Joseph Galante and Tim Mullaney
Read Entire Article
Funding of clean technology -- coming off a surge of investments in 2007 and 2008 -- plunged 87 percent, according to the National Venture Capital Association. Total venture investments dropped 47 percent from the previous three months.
The freeze in initial public offerings kept startups from getting funding because investors weren’t sure how they would earn a return, said John Taylor, vice president of research at the Arlington, Virginia-based association. Venture capitalists are devoting more attention to companies they already own.
“We are in a very difficult, stressed time,” Taylor said on a conference call last week. “Everyone is trying to figure out what is going on.”
By Joseph Galante and Tim Mullaney
Read Entire Article
Friday, April 17, 2009
Recession Likely to be Long, Recovery Slow - IMF
Thu Apr 16, 2009 3:50pm BST
WASHINGTON, April 16 (Reuters) - The current global recession is likely to be unusually long and severe and the recovery sluggish because it sprang from a financial crisis, the International Monetary Fund said on Thursday.
New IMF analysis shows recessions tied to a financial crisis, like the current one that has its roots in reckless lending for the U.S. housing market, are more difficult to shake because they are often held back by weak demand.
Worse still is that today's recession combines a financial crisis at the heart of the United States, the world's largest economy, with a broader global downturn making it unique, the Fund added.
"The analysis suggested that the combination of financial crisis and a globally synchronized downturn is likely to result in an unusually severe and long lasting recession," the IMF said in chapters of its World Economic Outlook, which is to be released in full on April 22.
It said counter-cyclical policies can help shorten recessions but its impact is limited in the presence of a financial crisis.
Fiscal stimulus can be particularly effective in shortening the life of a recession though not appropriate for countries with high debt levels, it added.
In its most recent forecast, the IMF said the world economy will shrink in 2009 by between 0.5 percent and 1.0 percent, the largest contraction since the Great Depression.
With advanced economies all in recession and growth in emerging market economies slowing abruptly, the IMF has urged countries to move quickly to clean up their financial sectors, in particular remove toxic assets from bank balance sheets, which would allow the economy to mend.
The IMF said dealing with the current global recession will require coordinated monetary, fiscal and financial policies.
(Reporting by Lesley Wroughton; Editing by Chizu Nomiyama)
Read Entire Article
WASHINGTON, April 16 (Reuters) - The current global recession is likely to be unusually long and severe and the recovery sluggish because it sprang from a financial crisis, the International Monetary Fund said on Thursday.
New IMF analysis shows recessions tied to a financial crisis, like the current one that has its roots in reckless lending for the U.S. housing market, are more difficult to shake because they are often held back by weak demand.
Worse still is that today's recession combines a financial crisis at the heart of the United States, the world's largest economy, with a broader global downturn making it unique, the Fund added.
"The analysis suggested that the combination of financial crisis and a globally synchronized downturn is likely to result in an unusually severe and long lasting recession," the IMF said in chapters of its World Economic Outlook, which is to be released in full on April 22.
It said counter-cyclical policies can help shorten recessions but its impact is limited in the presence of a financial crisis.
Fiscal stimulus can be particularly effective in shortening the life of a recession though not appropriate for countries with high debt levels, it added.
In its most recent forecast, the IMF said the world economy will shrink in 2009 by between 0.5 percent and 1.0 percent, the largest contraction since the Great Depression.
With advanced economies all in recession and growth in emerging market economies slowing abruptly, the IMF has urged countries to move quickly to clean up their financial sectors, in particular remove toxic assets from bank balance sheets, which would allow the economy to mend.
The IMF said dealing with the current global recession will require coordinated monetary, fiscal and financial policies.
(Reporting by Lesley Wroughton; Editing by Chizu Nomiyama)
Read Entire Article
William Pesek: China Isn't the Only Currency Manipulator
Geithner's Biggest Problem is Dollar, Not China
It's a bit rich for U.S. politicians to berate Treasury Secretary Timothy Geithner for not labeling China as a currency manipulator.
Perhaps Sen. Lindsey Graham, a South Carolina Republican, hasn't seen a newspaper in the last 12 months. With near-zero interest rates, the likely issuance of trillions of dollars of government debt and massive taxpayer-funded bailouts, the U.S. will soon make China look like a manipulation piker.
Memo to Graham and his ilk: Your economy has lost any moral high ground as it drags the world down with it. That will be even truer as the dollar eventually pays the price for ultra-loose monetary and fiscal policies. And it will.
Sure, China manipulates the yuan. Everyone knows that, including Geithner; he said so during his January confirmation hearing. It's also widely recognized that a stable yuan is propping up the U.S. financial system. Its $2 trillion of reserves are a direct result of China manipulating the yuan.
Geithner's climb-down from the manipulator charge is about pragmatism. He is aware of the fragility of international support for the dollar.
"I do not look for an immediate collapse," says Hans Goetti, chief investment officer at LGT Bank in Liechtenstein (Singapore) Ltd. "I am bearish longer term as the Fed will continue with their demolition job on their balance sheet."
The key distinction may be motive. China micromanages its currency on purpose to help exporters. The U.S.'s manipulation may be inadvertent. The end result will be the same.
By William Pesek Bloomberg News
Read Entire Article
It's a bit rich for U.S. politicians to berate Treasury Secretary Timothy Geithner for not labeling China as a currency manipulator.
Perhaps Sen. Lindsey Graham, a South Carolina Republican, hasn't seen a newspaper in the last 12 months. With near-zero interest rates, the likely issuance of trillions of dollars of government debt and massive taxpayer-funded bailouts, the U.S. will soon make China look like a manipulation piker.
Memo to Graham and his ilk: Your economy has lost any moral high ground as it drags the world down with it. That will be even truer as the dollar eventually pays the price for ultra-loose monetary and fiscal policies. And it will.
Sure, China manipulates the yuan. Everyone knows that, including Geithner; he said so during his January confirmation hearing. It's also widely recognized that a stable yuan is propping up the U.S. financial system. Its $2 trillion of reserves are a direct result of China manipulating the yuan.
Geithner's climb-down from the manipulator charge is about pragmatism. He is aware of the fragility of international support for the dollar.
"I do not look for an immediate collapse," says Hans Goetti, chief investment officer at LGT Bank in Liechtenstein (Singapore) Ltd. "I am bearish longer term as the Fed will continue with their demolition job on their balance sheet."
The key distinction may be motive. China micromanages its currency on purpose to help exporters. The U.S.'s manipulation may be inadvertent. The end result will be the same.
By William Pesek Bloomberg News
Read Entire Article
Obama's Wall Street Ties Doom Bank Rescue, Stiglitz Says
NEW YORK -- The Obama administration's plan to fix the U.S. banking system is destined to fail because the programs have been designed to help Wall Street rather than create a viable financial system, Nobel Prize-winning economist Joseph Stiglitz said.
"All the ingredients they have so far are weak, and there are several missing ingredients," Stiglitz said in an interview. The people who designed the plans are "either in the pocket of the banks or they're incompetent."
The Troubled Asset Relief Program, or TARP, isn't large enough to recapitalize the banking system, and the administration hasn't been direct in addressing that shortfall, he said. Stiglitz said there are conflicts of interest at the White House because some of President Obama's advisers have close ties to Wall Street.
"We don't have enough money, they don't want to go back to Congress, and they don't want to do it in an open way and they don't want to get control" of the banks, a set of constraints that will guarantee failure, Stiglitz said. The return to taxpayers from the TARP is as low as 25 cents on the dollar, he said. "The bank restructuring has been an absolute mess."
Rather than continually buying small stakes in banks, weaker banks should be put through a receivership where the shareholders of the banks are wiped out and the bondholders become the shareholders, using taxpayer money to keep the institutions functioning, he said.
Stiglitz, 66, won the Nobel in 2001 for showing that markets are inefficient when all parties in a transaction don't have equal access to critical information, which is most of the time. His work is cited in more economic papers than that of any of his peers, according to a February ranking by Research Papers in Economics, an international database.
By Michael McKee and Matthew BenjaminBloomberg NewsThursday, April 16, 2009
Read Entire Article
"All the ingredients they have so far are weak, and there are several missing ingredients," Stiglitz said in an interview. The people who designed the plans are "either in the pocket of the banks or they're incompetent."
The Troubled Asset Relief Program, or TARP, isn't large enough to recapitalize the banking system, and the administration hasn't been direct in addressing that shortfall, he said. Stiglitz said there are conflicts of interest at the White House because some of President Obama's advisers have close ties to Wall Street.
"We don't have enough money, they don't want to go back to Congress, and they don't want to do it in an open way and they don't want to get control" of the banks, a set of constraints that will guarantee failure, Stiglitz said. The return to taxpayers from the TARP is as low as 25 cents on the dollar, he said. "The bank restructuring has been an absolute mess."
Rather than continually buying small stakes in banks, weaker banks should be put through a receivership where the shareholders of the banks are wiped out and the bondholders become the shareholders, using taxpayer money to keep the institutions functioning, he said.
Stiglitz, 66, won the Nobel in 2001 for showing that markets are inefficient when all parties in a transaction don't have equal access to critical information, which is most of the time. His work is cited in more economic papers than that of any of his peers, according to a February ranking by Research Papers in Economics, an international database.
By Michael McKee and Matthew BenjaminBloomberg NewsThursday, April 16, 2009
Read Entire Article
Thursday, April 16, 2009
Foreclosures Jump 24%
March and first-quarter total filings were the highest monthly and quarterly totals on record. Repossessions fall 3%.
By Julianne Pepitone, CNNMoney.com contributing writer
Last Updated: April 16, 2009: 7:32 AM ET
NEW YORK (CNNMoney.com) -- Foreclosure activity skyrocketed in March and the first quarter of 2009 to their highest levels on record as banks lifted moratoria on filings.
Total foreclosure filings - which include default papers, auction sale notices and repossessions - reached 803,489 in the first quarter, according to a report released Thursday by RealtyTrac, on online marketer of foreclosed properties. That is a 24% jump over a year earlier and a 9% increase compared to the previous quarter.
Of those filings, 341,180 happened in March - a 17% increase from February and a 46% jump from March 2008.
The March and first quarter numbers were the highest monthly and quarterly totals since RealtyTrac began reporting in January 2005.
"In the month of March we saw a record level of foreclosure activity - the number of households that received a foreclosure filing was more than 12% higher than the next highest month on record," said James J. Saccacio, chief executive officer of RealtyTrac, in a statement.
"Since much of this activity was in new foreclosure actions, it suggests that many lenders and servicers were holding off on executing foreclosures due to industry moratoria and legislative delays," he added.
The one bright spot in the report was that fewer homes were lost to bank repossessions in March and the first quarter, falling 3% from February and 13% from the previous quarter, the report said.
Foreclosures have hit the economy hard. Housing prices have plummeted and some homeowners are severely underwater - meaning they owe more than their homes are worth. That can remove the incentive to keep up with mortgage payments.
Amid mass layoffs and pay cuts, soaring unemployment is a bigger reason for missed mortgage payments than high interest rates, according to a study from the Federal Reserve Bank of Boston.
Read Entire Article
By Julianne Pepitone, CNNMoney.com contributing writer
Last Updated: April 16, 2009: 7:32 AM ET
NEW YORK (CNNMoney.com) -- Foreclosure activity skyrocketed in March and the first quarter of 2009 to their highest levels on record as banks lifted moratoria on filings.
Total foreclosure filings - which include default papers, auction sale notices and repossessions - reached 803,489 in the first quarter, according to a report released Thursday by RealtyTrac, on online marketer of foreclosed properties. That is a 24% jump over a year earlier and a 9% increase compared to the previous quarter.
Of those filings, 341,180 happened in March - a 17% increase from February and a 46% jump from March 2008.
The March and first quarter numbers were the highest monthly and quarterly totals since RealtyTrac began reporting in January 2005.
"In the month of March we saw a record level of foreclosure activity - the number of households that received a foreclosure filing was more than 12% higher than the next highest month on record," said James J. Saccacio, chief executive officer of RealtyTrac, in a statement.
"Since much of this activity was in new foreclosure actions, it suggests that many lenders and servicers were holding off on executing foreclosures due to industry moratoria and legislative delays," he added.
The one bright spot in the report was that fewer homes were lost to bank repossessions in March and the first quarter, falling 3% from February and 13% from the previous quarter, the report said.
Foreclosures have hit the economy hard. Housing prices have plummeted and some homeowners are severely underwater - meaning they owe more than their homes are worth. That can remove the incentive to keep up with mortgage payments.
Amid mass layoffs and pay cuts, soaring unemployment is a bigger reason for missed mortgage payments than high interest rates, according to a study from the Federal Reserve Bank of Boston.
Read Entire Article
Silver - The Everyday Gold
Precious metals and commodities have been all the rage lately, with talks about a reflation play being a staple to every portfolio. But with all the talks about gold and oil being a safeguard against government spending destroying the value of the dollar, it is a wonder that silver has remained hidden for so long.
Many of the sharpest minds in the investment world have retained their bullish sentiment on precious metals, including well-known names like Marc Faber and George Soros. While the recent Wells Fargo announcement surprised all of Wall Street and gave glimmers of hope on the global economy, the fact of the matter is that nothing has fundamentally changed with the global financial system and the same systemic risks plaguing analysts before remain today.
It is all but an accepted fact that governments worldwide are willing to sacrifice the threat of inflation in order to stimulate economies and boost employment rates. With both gold and silver, demand has been constantly in flux depending on the current prevailing sentiment of risk aversion/appetite. But what makes silver look far more attractive as a store of wealth and a medium of diversification are the fundamental factors solely affecting silver. With all precious metals, risk aversion sentiment is a huge factor in driving up demand, but silver has seen a significant decrease in inventories and supply pressures. COMEX Dealers Silver Inventory has fallen sharply from nearly 80 million registered ounces at the end of November 2008 to around 70 million at the end of March.
Part of the factors attributed to the supply contraction can be pointed to its production. Silver is mined as a byproduct of base metals such as copper, lead, and zinc. As the industrial production continues to suffer, demand for base metals drop and therefore miners are less willing to mine base metals. Ironically enough, silver and gold demand at these moments increase as investors look to diversify their portfolios and hedge against suffering currencies.
While we have seen that price increase in all precious metals, gold is trading at 70 times the price of silver whereas it has historically traded around a ratio of 30 to 100 over the past three decades. Yet, what is unknown to most is that while gold is priced at 70 times silver, worldwide silver supply is only five times lesser than the supply of gold.
Unlike gold, which is held in significant amounts by governments worldwide, governments hold a tenth of their gold in silver, making a sudden and big sale of silver highly unlikely. In fact, including governments and all other major players, Warren Buffet is one of the bigger holders of silver.
Also a supply/demand factor involving silver is that unlike gold, which is seen as solely a store of value, silver has a large variety of industrial applications that make it indispensible. In fact, over the long term, while the physical stock of gold circulating only increases, silver has a consumption aspect of demand that over time decreases the physical stock of circulating silver. Industrial silver applications include heat and electrical conduction, light reflection, lubricant, alloy, and in fact several biomedical uses as well. Another driver is that future industrial consumption outlook is very positive in that all the new technologies, including solar, battery, laser, and water purification require silver.
With all these factors in line, it is no wonder where there are rumors circulating among silver analysts of price manipulation within the silver market. In fact, silver analyst Ted Butler accused giant financial institutions and singled out JP Morgan (JPM) as the leader of downward price manipulation of silver. While this worked out fine when supplies of silver were still relatively large, the dwindling silver inventories have made price manipulation a huge area of concern and should the price of silver be artificially deflated, there will be a huge upward spike in the price of silver to the market equilibrium.
Regardless of the rumors surrounding silver, one thing is for certain, and that is unlike gold with its constantly growing amounts in circulation, physical amounts of silver are limited and inventories are dwindling. With that in mind, any economist can tell you that silver supply must increase (driving up the price of production and therefore price of silver) or demand must decrease, which does not seem likely given the large variety of uses of silver, industrial and financial.
by: Bullish Bankers April 16, 2009
Read Entire Article
Many of the sharpest minds in the investment world have retained their bullish sentiment on precious metals, including well-known names like Marc Faber and George Soros. While the recent Wells Fargo announcement surprised all of Wall Street and gave glimmers of hope on the global economy, the fact of the matter is that nothing has fundamentally changed with the global financial system and the same systemic risks plaguing analysts before remain today.
It is all but an accepted fact that governments worldwide are willing to sacrifice the threat of inflation in order to stimulate economies and boost employment rates. With both gold and silver, demand has been constantly in flux depending on the current prevailing sentiment of risk aversion/appetite. But what makes silver look far more attractive as a store of wealth and a medium of diversification are the fundamental factors solely affecting silver. With all precious metals, risk aversion sentiment is a huge factor in driving up demand, but silver has seen a significant decrease in inventories and supply pressures. COMEX Dealers Silver Inventory has fallen sharply from nearly 80 million registered ounces at the end of November 2008 to around 70 million at the end of March.
Part of the factors attributed to the supply contraction can be pointed to its production. Silver is mined as a byproduct of base metals such as copper, lead, and zinc. As the industrial production continues to suffer, demand for base metals drop and therefore miners are less willing to mine base metals. Ironically enough, silver and gold demand at these moments increase as investors look to diversify their portfolios and hedge against suffering currencies.
While we have seen that price increase in all precious metals, gold is trading at 70 times the price of silver whereas it has historically traded around a ratio of 30 to 100 over the past three decades. Yet, what is unknown to most is that while gold is priced at 70 times silver, worldwide silver supply is only five times lesser than the supply of gold.
Unlike gold, which is held in significant amounts by governments worldwide, governments hold a tenth of their gold in silver, making a sudden and big sale of silver highly unlikely. In fact, including governments and all other major players, Warren Buffet is one of the bigger holders of silver.
Also a supply/demand factor involving silver is that unlike gold, which is seen as solely a store of value, silver has a large variety of industrial applications that make it indispensible. In fact, over the long term, while the physical stock of gold circulating only increases, silver has a consumption aspect of demand that over time decreases the physical stock of circulating silver. Industrial silver applications include heat and electrical conduction, light reflection, lubricant, alloy, and in fact several biomedical uses as well. Another driver is that future industrial consumption outlook is very positive in that all the new technologies, including solar, battery, laser, and water purification require silver.
With all these factors in line, it is no wonder where there are rumors circulating among silver analysts of price manipulation within the silver market. In fact, silver analyst Ted Butler accused giant financial institutions and singled out JP Morgan (JPM) as the leader of downward price manipulation of silver. While this worked out fine when supplies of silver were still relatively large, the dwindling silver inventories have made price manipulation a huge area of concern and should the price of silver be artificially deflated, there will be a huge upward spike in the price of silver to the market equilibrium.
Regardless of the rumors surrounding silver, one thing is for certain, and that is unlike gold with its constantly growing amounts in circulation, physical amounts of silver are limited and inventories are dwindling. With that in mind, any economist can tell you that silver supply must increase (driving up the price of production and therefore price of silver) or demand must decrease, which does not seem likely given the large variety of uses of silver, industrial and financial.
by: Bullish Bankers April 16, 2009
Read Entire Article
Gold and the Impending Market Meltdown
Something wicked this way comes! So, be afraid. Be very afraid. (Unless you're a gold bug.)
The recent rally in American and Canadian equity markets is soon to give way to a gut-wrenching collapse that will push equities to shocking new lows, with gold prices reacting by rallying to new highs.
After having correctly anticipated the timing and extent of the March 9th to April 3rd market rally, this is the latest dire warning from Heiko Seibel, a leading German stock market strategist.
The Director of Research for Munich-based CM-Equity AG now believes that the U.S. benchmark S&P 500 Index will dramatically drop to an ultimate low of around 450 points in late June or in July. The odds favour him being proven right - that is if his talent for correctly anticipating market moves continues.
"Within a few weeks, we will see the stock lows of our lifetimes," he nonchalantly declares.
Indeed, he was right on the money when he told BNW Business Newswire on March 2nd that the S&P 500 Index was about to reverse a pronounced downward trend. He suggested at the time that it would rally to a high of not much more than 850 points during April before it begins an orderly retreat that soon turns into a panic-stricken rout.
Seibel believes that a growing sense of economic optimism shared by many U.S. investors and the Obama Administration, alike, is completely misplaced. He suggests that the rally during March and early April (with the Dow Jones Industrial Average closing at 8,018 points on April 3rd after enjoying the best four-week run since 1933) is merely a false dawn.
Soon enough investors will be seriously rattled yet again - this time by a devastating after-shock to October's global financial earthquake. One that will see the S&P 500 Index nose-dive up to 40% before it hits rock bottom at around the 450 points level. This bleak scenario contrasts starkly to the S&P's heady high of over 1,550 points in October of 2007.
A proponent of quantitative analysis, Seibel says this pending nightmarish sell-off will cause plenty of already shell-shocked investors to relinquish their remaining equity holdings. However, investors in gold bullion and gold-backed Exchange Traded Funds (ETFs) will likely be spared the widespread misery, Seibel believes.
"When there is a total loss in confidence in the stock market, then gold will rally. Gold bullion is historically an inverse proxy to the stock market. So, it's only logical that this will happen," he says.
"We should see a culmination of massive price weakness in stocks within weeks, which will cause gold to reverse its current trend to establish new highs beyond $1,000 early in the third quarter of this year - maybe even testing the $1,200 mark," he adds.
Interestingly, gold equities will not be immune to the market meltdown because investors will engage in "panic selling," to preserve whatever capital they have left, he predicts.
Meanwhile, the catalyst to the stock market's final capitulation during the coming months will be a combination of the collapse of more landmark U.S. companies, a renewed banking crisis, and other forms of "major economic upheaval," Seibel explains.
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The recent rally in American and Canadian equity markets is soon to give way to a gut-wrenching collapse that will push equities to shocking new lows, with gold prices reacting by rallying to new highs.
After having correctly anticipated the timing and extent of the March 9th to April 3rd market rally, this is the latest dire warning from Heiko Seibel, a leading German stock market strategist.
The Director of Research for Munich-based CM-Equity AG now believes that the U.S. benchmark S&P 500 Index will dramatically drop to an ultimate low of around 450 points in late June or in July. The odds favour him being proven right - that is if his talent for correctly anticipating market moves continues.
"Within a few weeks, we will see the stock lows of our lifetimes," he nonchalantly declares.
Indeed, he was right on the money when he told BNW Business Newswire on March 2nd that the S&P 500 Index was about to reverse a pronounced downward trend. He suggested at the time that it would rally to a high of not much more than 850 points during April before it begins an orderly retreat that soon turns into a panic-stricken rout.
Seibel believes that a growing sense of economic optimism shared by many U.S. investors and the Obama Administration, alike, is completely misplaced. He suggests that the rally during March and early April (with the Dow Jones Industrial Average closing at 8,018 points on April 3rd after enjoying the best four-week run since 1933) is merely a false dawn.
Soon enough investors will be seriously rattled yet again - this time by a devastating after-shock to October's global financial earthquake. One that will see the S&P 500 Index nose-dive up to 40% before it hits rock bottom at around the 450 points level. This bleak scenario contrasts starkly to the S&P's heady high of over 1,550 points in October of 2007.
A proponent of quantitative analysis, Seibel says this pending nightmarish sell-off will cause plenty of already shell-shocked investors to relinquish their remaining equity holdings. However, investors in gold bullion and gold-backed Exchange Traded Funds (ETFs) will likely be spared the widespread misery, Seibel believes.
"When there is a total loss in confidence in the stock market, then gold will rally. Gold bullion is historically an inverse proxy to the stock market. So, it's only logical that this will happen," he says.
"We should see a culmination of massive price weakness in stocks within weeks, which will cause gold to reverse its current trend to establish new highs beyond $1,000 early in the third quarter of this year - maybe even testing the $1,200 mark," he adds.
Interestingly, gold equities will not be immune to the market meltdown because investors will engage in "panic selling," to preserve whatever capital they have left, he predicts.
Meanwhile, the catalyst to the stock market's final capitulation during the coming months will be a combination of the collapse of more landmark U.S. companies, a renewed banking crisis, and other forms of "major economic upheaval," Seibel explains.
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Wednesday, April 15, 2009
White House: More American job losses ahead
WASHINGTON — Aiming to assert control over the nation’s economic debate, President Barack Obama today warned Americans eager for good news that “by no means are we out of the woods” and argued his broad domestic agenda is the path to recovery.
In a speech at Georgetown University, Obama aimed to juggle his recent glass-half-full takes on the economy with a determination to not be stamped as naive in the face lingering problems. He summarized actions his administration has taken to steady the limping economy and coupled that with a fresh overview of his domestic goals.
The speech, which key aides had signaled in advance would not contain any major announcements, came as Obama nears his symbolic 100-day mark in office, important because that has become a traditional marker by which to judge new administrations.
“There is no doubt that times are still tough,” Obama said. “But from where we stand, for the very first time, we are beginning to see glimmers of hope. And beyond that, way off in the distance, we can see a vision of an America’s future that is far different than our troubled economic past.”
Associated Press
April 14, 2009, 1:48PM
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In a speech at Georgetown University, Obama aimed to juggle his recent glass-half-full takes on the economy with a determination to not be stamped as naive in the face lingering problems. He summarized actions his administration has taken to steady the limping economy and coupled that with a fresh overview of his domestic goals.
The speech, which key aides had signaled in advance would not contain any major announcements, came as Obama nears his symbolic 100-day mark in office, important because that has become a traditional marker by which to judge new administrations.
“There is no doubt that times are still tough,” Obama said. “But from where we stand, for the very first time, we are beginning to see glimmers of hope. And beyond that, way off in the distance, we can see a vision of an America’s future that is far different than our troubled economic past.”
Associated Press
April 14, 2009, 1:48PM
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Krugman in Need of Remedial Education
Posted: 14 Apr 2009 01:42 PM PDT
Paul Krugman is back in his usual form of preaching sheer idiocy with his piece Time for bottles in coal mines.
Krugman is upset that Obama says stimulus projects under budget.
"By the end of next year our investment in highway projects alone will create or save 150,000 jobs, most of them in the private sector," Obama said during an appearance at the Transportation Department to plug his plan.
"What is most remarkable about this effort ... isn't just the size of our investment or the number of projects we're investing in. It is how quickly, efficiently and responsibly those investments have been made," Obama said.
"This government effort is coming in ahead of schedule and under budget," he said.
Obama said fierce competition for the projects had led to bids coming in under budget in many states around the country. The White House said bids have been 15 to 20 percent lower than expected on average.
"Because these projects are proceeding so efficiently, we now have more recovery dollars to go around, and that means we can fund more projects, revitalize more of our infrastructure, put more people back to work," he said.
Logic would dictate that getting more work done for less cost and employing more people to do it would be a good thing. But Noooooooo! Krugman says "Seriously: if the projects really are coming in cheaper than expected, that doesn’t mean we should bank the savings; it means that we need more projects."
Here's the deal. If a road needs patching then patch it. If a bridge needs fixing then fix it. The least amount of money spent the better. That is plain common sense that any eighth grader could easily understand.
Somehow Kurgman believes the more money is wasted on projects the better off we will be. Krugman even cites Keynes' Marginal Propensity To Consume absurdity that burying money in coal mines will stimulate the economy.
Mike "Mish" Shedlock
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Paul Krugman is back in his usual form of preaching sheer idiocy with his piece Time for bottles in coal mines.
Krugman is upset that Obama says stimulus projects under budget.
"By the end of next year our investment in highway projects alone will create or save 150,000 jobs, most of them in the private sector," Obama said during an appearance at the Transportation Department to plug his plan.
"What is most remarkable about this effort ... isn't just the size of our investment or the number of projects we're investing in. It is how quickly, efficiently and responsibly those investments have been made," Obama said.
"This government effort is coming in ahead of schedule and under budget," he said.
Obama said fierce competition for the projects had led to bids coming in under budget in many states around the country. The White House said bids have been 15 to 20 percent lower than expected on average.
"Because these projects are proceeding so efficiently, we now have more recovery dollars to go around, and that means we can fund more projects, revitalize more of our infrastructure, put more people back to work," he said.
Logic would dictate that getting more work done for less cost and employing more people to do it would be a good thing. But Noooooooo! Krugman says "Seriously: if the projects really are coming in cheaper than expected, that doesn’t mean we should bank the savings; it means that we need more projects."
Here's the deal. If a road needs patching then patch it. If a bridge needs fixing then fix it. The least amount of money spent the better. That is plain common sense that any eighth grader could easily understand.
Somehow Kurgman believes the more money is wasted on projects the better off we will be. Krugman even cites Keynes' Marginal Propensity To Consume absurdity that burying money in coal mines will stimulate the economy.
Mike "Mish" Shedlock
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The Great Geithner Coverup
Economist William K. Black of the University of Missouri appeared in an interview on PBS last week with Bill Moyers. He pulls no punches in spelling out who is really responsible for our current economic disaster, and why our own Treasury Secretary is leading the charge to keep the truth covered up.
Fed weighs news conferences in tranparency push
WASHINGTON (Reuters) - Officials at the U.S. Federal Reserve have discussed holding regular press briefings to help improve public understanding of unusual actions by the Fed in times of crisis, a Fed official said on Tuesday.
Press conferences have been weighed among other ideas, the official said. The Fed has sought during recent upheaval to explain its actions to a broader public, the official said, citing Chairman Ben Bernanke's recent television interview and willingness to take questions from reporters after a speech.
The Fed also took the unusual step on Tuesday of publishing excerpts of Bernanke's speech Tuesday at Morehouse College in Atlanta in a newspaper, USA Today.
By Mark Felsenthal
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Press conferences have been weighed among other ideas, the official said. The Fed has sought during recent upheaval to explain its actions to a broader public, the official said, citing Chairman Ben Bernanke's recent television interview and willingness to take questions from reporters after a speech.
The Fed also took the unusual step on Tuesday of publishing excerpts of Bernanke's speech Tuesday at Morehouse College in Atlanta in a newspaper, USA Today.
By Mark Felsenthal
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China Slows Purchases of U.S. and Other Bonds
HONG KONG — Reversing its role as the world’s fastest-growing buyer of United States Treasuries and other foreign bonds, the Chinese government actually sold bonds heavily in January and February before resuming purchases in March, according to data released during the weekend by China’s central bank.
China’s foreign reserves grew in the first quarter of this year at the slowest pace in nearly eight years, edging up $7.7 billion, compared with a record increase of $153.9 billion in the same quarter last year.
China has lent vast sums to the United States — roughly two-thirds of the central bank’s $1.95 trillion in foreign reserves are believed to be in American securities. But the Chinese government now finances a dwindling percentage of new American mortgages and government borrowing.
KEITH BRADSHER
The New York TimesApril 13, 2009
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China’s foreign reserves grew in the first quarter of this year at the slowest pace in nearly eight years, edging up $7.7 billion, compared with a record increase of $153.9 billion in the same quarter last year.
China has lent vast sums to the United States — roughly two-thirds of the central bank’s $1.95 trillion in foreign reserves are believed to be in American securities. But the Chinese government now finances a dwindling percentage of new American mortgages and government borrowing.
KEITH BRADSHER
The New York TimesApril 13, 2009
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