Fears about Portugal and Spain Grow

Portugal and Spain may need to join Ireland and Greece pursuing bailout money from the EU.  Friday bond holders dumped Portuguese and Spanish bonds in a panicked selling due to fears both countries will be forced to pursue bailouts.  It has been talked about for weeks that if Spain has to get bailed out, it could signal the end of the Euro and potentially the Eurpean Union. 

The draining confidence in Western Europe's weakest economies threatened to upend bond markets, destabilize the euro and drag out the global economic recovery if it is not quickly contained. 

The perceived risk caused rates at which the two countries can borrow near record highs.  This could cause a snowball effect making recovery more difficult for them.  [Read More...]

Russia and China Renounce the Dollar

Russian and China have decided to use their own currencies for bilateral trade, thus renouncing the U.S. dollar.  Both countries will still have to maintain dollars for trade between the U.S. and their countries but we are starting to see the slow chipping away of the U.S. dollar as a reserve currency.  This is how I would see it being done, little by little until the U.S. dollar as a reserve currency is really just a distinguished title rather than an advantage.  Both countries say the move is not meant to damage the U.S. dollar, rather to protect their domestic economies from the weakening dollar and poor monetary policy.  [Read More ...]

Russia has also started to add the Canadian dollar to its reserves so they can begin investing in assets denominated in the Canadian dollar.  This is another subtle move out of the U.S. dollar to purchase assets needed.  Russia also has its eyes on the Australian dollar, which would give the the ability to purchase from China, Canada and Australia in non-U.S. denominated currency.  The more Russia, China and others purchase in other currencies, the more the U.S. reserve currency status is reduced.  [Read More ...]

Is the Euro Game Up?

Hungary Pensions get an Ultimatum

In a Bloomberg article by By Zoltan Simon entitled "Hungary Follows Argentina in Pension-Fund Ultimatum, `Nightmare' for Some", Simon points out how Hungary is giving its people an ultimatum "hand over your private pensions to the state or lose your state pension".  

Economy Minister Gyorgy Matolcsy announced the policy yesterday, escalating a government drive to bring 3 trillion forint ($14.6 billion) of privately managed pension assets under state control to reduce the budget deficit and public debt. Workers who opt against returning to the state system stand to lose 70 percent of their pension claim.

I don't know about you, but handing over your life savings to an entity that is spending it faster than they can get it doesn't spell retirement down the road.  Most governments aren't very good at reducing their spending, seems like all they do is tax more and spend more.

“This is effectively a nationalization of private pension funds,” David Nemeth, an economist at ING Groep NV in Budapest, said in a phone interview. “It’s the nightmare scenario.”

 There have been numerous articles written this year suggesting the U.S. may do the same thing, this is literally the extraction of the wealth from the middle class.  [ Read More ... ]

Happy Thanks Giving

To all of the U.S. readers, happy thanksgiving.  This is a day we need to give thanks for all that we have and take a mental rest from all the economic news and turmoil.  Please keep you homeless shelters in mind this holiday season and bring food donations to them as I am sure they are running low from the additional person seeking refuge from this economy.

Affordable Housing Network

Matt Taibbi on the Impeding Mortgage Crisis

Weekly Fund Flows Munis In Trouble?

This week in the weekly fund flows some interesting things occurred.  For the week ended November 17th 2010 the amount of money coming out of domestic stocks shot back up to $2.797 billion dollars and $1.633 billion flowed into foreign stocks.  The interesting action though is what occurred in bonds.  Money flowing into Taxable Bonds slowed to $457 million dollars, down from a 4 week moving average of $4.457 billion dollars.  The other very interesting event that occurred is a massive move from Municipal bonds, in which $4.781 billion left muni's down massively from the positive inflow of $366 million 4 week moving average.

 

 

Looking at the Bond money flows, it really prompts you to wonder why the massive outflow from municipal bonds?  Are Muni bond holders indicating that their is a problem with states and their bonds?  Only time will tell, as I have said before it will take more than one week of action to determine a new trend, but this was an outlier in the muni market and definitely gets your attention.

Monthly New Home Sales

Octobers New Home Sales numbers were worse than expected.  New Home Sales are the Annualized number of new single-family homes that were sold during the previous month. They are considered a leading indicator of economic health because of the ripple effects in jobs it has throughout the economy.  The forecast called for October to have at least 311k new homes sales, but the actual headline number came in at a disappointing 283k ( disappointing to Keynesian's, as we have to build new things all the time to sustain the current growth model.  Everlasting growth, cause the earths space is infinite).  

 

Month over Month shows that the West is doing the worse in terms of growth, followed quickly by the Midwest.  The Northeast did not perform well over the past month as well.

Year over Year New home sales were horrible for the West with the Northeast doing the best.  Year over year is a better measurement as it lines up seasonalities and tends to project a more accurate picture.

Monthly Personal Income, Disposable Income, Spending and Savings

The Personal Income, Disposable Income, Spending and Savings report was released covering the month of October.  The forecast for personal spending called for a 0.5% increase Month over Month, but it actually came in at 0.4% showing a slight slowdown in consumption.  The reports have gone through months and months of revisions again, therefore the data is changed (I have no idea why they revise numbers back to April, you'd think they would be pretty concrete by now, but they do).  As you can see all categories are up from the previous month, just not as much as economists would like.

The Personal Savings data show that savings is up slightly from the previous month, but revisions all the way back to April have changed the Personal Savings data wildly.

Now obviously Keynesian's want personal savings to be down (as that means people are not spending) and spending to be up much higher to spur a recovery.  Unfortunately as we are high levels of unemployment and everybody is worried about the future, the money is being reigned in perpetuating the problem (maybe we should consider a new system that doesn't involve spending yourself into oblivion).

Weekly Initial Claims

This weeks initial claim showed improvement, but before you get all giddy, consider that this is the Christmas hiring season so the numbers are very distorted currently as these are temporary jobs.  Initial Claims are the number of persons who filed for unemployment for the first time in the previous week.  The forecast number called for 434k and the actual headline number came in at 407k.  Until after the Christmas spending and returns season, we have to consider these numbers distortions.

 

The delta in revisions has come in considerably now that jobs have improved, I would expect them to get worse after the holiday spending season.

Monthly Durable Goods Don't Look So Good

Octobers Durable Goods numbers, released today, were less than impressive.  The Durable Goods number is the change in the total value of new purchase orders placed with manufacturers for durable goods. Durable goods are defined as hard products having a life expectancy of more than 3 years, such as automobiles, computers, appliances, and airplanes. Core Durable Goods are Durable Goods minus transportation.   Durable Goods forecast was for 0.2%, but actually came in -3.3%.  Core Durable Goods was forecast for 0.7%, but actually came in at -2.7%.

Monthly Existing Home Sales

The monthly Existing Home Sales was released yesterday for the Month of October. Existing Home Sales measures the annualized number of residential buildings that were sold during the previous month, excluding new construction. It is considered a leading indicator of economic health cause the transactions from one sale ripples throughout the financial industry (hence our problem in the first place).  The forecasted number called for 4.51 million, but the headline number disappointed by coming in at 4.43 million. 

A little TSA Humor

Well it seem the Japanese even think the U.S. TSA has gone to far and made a very comical skit on TSA and the pat downs.

Euro or U.S. with More Financial Trouble?

Dylan Ratigan on Property Rights

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FED POMO Purchase

The FED performed yet another POMO (Permanent Open Market Operation) purchase.  Today's purchase was $1.629 billion bringing the total cumulative purchases since August 17th 2010 to $123.493 billion dollars.

 

 

Operation 1 - RESULTS

Operation Date:	11/23/2010
Operation Type:	Outright TIPS Purchase
Release Time:	10:15 AM
Close Time:	11:00 AM
Settlement Date:	11/24/2010
Maturity/Call Date Range:	07/15/2012 - 02/15/2040
Total Par Amt Accepted (mlns) :	$1,629
Total Par Amt Submitted (mlns) :	$8,592

Insiders Gettin Out While the Gettin is Good

My source for insider selling has disappeared, but Tyler Durden at zerohedge.com has posted the recent insiders selling.    Insider S&P selling was 8279.5 times more than insider buying, which has been the trend for months.  

Total Insider Selling:	$1,247,500,249
Total Insider Buying:	$150,673

Tyler says "There is no point to even discuss what this data point indicates", but I think the correlation is something average investors should be aware of.  Insiders have been selling while the FED has been executing its POMO purchases (holding up the market).  I suspect insiders know that this is their last chance to get out while the FED holds everything up.  ( Read More ... )

Battle for Property Routes

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Another FED POMO Purchase

The FED executed another POMO (Permanent Open Market Operation) purchase took place, with a purchase of $8.257 billion dollars bringing the total since August 17th 2010 to $121.864 billion dollars.

As we look at the cumulative graph, the curve is starting to point sharper.  I think we are going to see this move much sharper over the next few weeks (meaning accelerating printing).

Operation 1 - RESULTS

Operation Date:	11/22/2010
Operation Type:	Outright Coupon Purchase
Release Time:	10:15 AM
Close Time:	11:00 AM
Settlement Date:	11/23/2010
Maturity/Call Date Range:	02/15/2018 - 11/15/2020
Total Par Amt Accepted (mlns) :	$8,257
Total Par Amt Submitted (mlns) :	$33,513

Foreclosure Fraud How Did it Occur?

TSA Gone Too Far

Has the TSA gone to far in their security tactics?  I think in most thinking American's minds the answer is yes.  The strip searches seem unreal to most, but here is a video of a boy getting searched by the TSA, simply ridiculous.

The body scanners that are showing up in some airports blasting you with radiation is another sign we have gone overboard.  Most Americans won't think twice about it until they get cancer from over exposure to this radiation.  I for one will not be flying with my family for anything.  Americans need to let the TSA know that this is not going to be tolerated.

King World News Interviews

This week KWN interviews Pierre Lassonde, James Turk, Rick Rule and Art Cashin.

Pierre Lassonde - Discusses Gold prices and the correction in Gold that has happened or could happen.  Pierre estimates a 10-20% correction in Gold at some point, but in the long run it will continue higher.  Pierre talks about investing in small miners and the possibilities of them being gobbled up by the larger miners.
James Turk - Discusses Gold price suppression and how that is now changing due to the attention around price manipulation in the Gold and Silver markets.  James discusses the Bull market in the mining stocks and XAU and HUI due to the wealth that is being created.  James sees gold going to 8k and 400 silver by 2015.
Rick Rule - Discusses physical inventory of the silver market and how it will be tough to come by in coin form due to tightness.  This could cause the price to go higher.  Rick also discusses Agriculture and how we could experience food shortages in the future.
Art Cashin - Discusses the markets action over the past few weeks, commodities moving up and China starting to hoard base metals.  Art also brings up China's raising interest rates suppressing commodities pricing.

Unofficial Problem Bank List Hits 903

This week CalculatedRisks Unofficial Problem Bank List reached 903 institutions.  There were four removals (this includes the 3 that were on the FDIC's failed bank list).  The banks that failed this week, according to the FDIC failed bank list, were; First Banking Center in Burlington WI, Gulf State Community Bank in Carrabelle FL, Allegiance Bank of North America in Bala Cynwyd PA. The other removal was "the termination of a Supervisory Agreement against The First National Bank of Trenton in Trenton TX by the OCC (per Calculated Risk).  There was nine additions this week as well.  Click here to see the full story.