October, Friday 07, 2011

DOW – 20 = 11,103
SPX – 9 = 1,155
NAS – 27 = 2,479
10 YR YLD = 2.06%
OIL - .84 = 81.75
GOLD – 11.60 = 1639.70
SILV -.66 = 31.37
PLATINUM – 18.00 = 1502.00

The U-6 unemployment rate — including people who must settle for part-time jobs or have given up searching entirely — has SURGED to 16.5%, the worst this year!

FORWARD LOOKING indicators of employment are deteriorating. Consumers just polled by the Conference Board said it was harder to find work now than at any point since 1983!

And job placement firm Challenger, Gray & Christmas tracked more than 115-thousand corporate layoff announcements last month alone, the most since April of 2009.

The headline unemployemnt rate held steady at 9.1%. The economy added 103,00 jobs last month. That is not enough jobs to lower the unemployment rate. The August number was revised from zero job gains to 57,000.

In September, the private sector added 137,000 jobs — decent but nothing to write home about -- while the government sector cut 34,000 jobs. Since January 2010, the private sector has added 2.556 million jobs while government has cut 503,000. In January 2010, 82.6 percent of payroll jobs were in the private sector; today, the total is 83.2 percent.

Meanwhile, the Federal Reserve reported total borrowing dropped $9.5 billion in August. In July, borrowing increased $11.9 billion. The overall decline lowered total borrowing to a seasonally adjusted $2.44 trillion. Borrowing is just 2.1 percent higher than the recent low hit in September of last year.

Thomson Reuters says same-stores sales at the 23 big retailers it tracks were up 5.1 percent in September 2011 from last year, putting a cap on the best back-to-school shopping season since 2006. 

Compared with September 2010, there are 1.78 million more private sector payroll jobs and 1.49 million more payroll jobs overall. In September, more people worked than did in August, and they worked a bit longer and for slightly higher wages -- reversing the trends of August. The average workweek for private sector workers rose by .1 hour, while average hourly earnings for private sector workers rose .2 percent, and average weekly wages rose .46 percent. More people are working than a year ago, for more hours, and at higher wages, and for more hours — that tends to translate into a higher level of consumer spending.

The jobs report was released before the opening bell, and the market initially moved higher – a little gift for people to sell before the weekend.

Why would you want to sell before the weekend? Let’s not forget Europe. Germany and France are already divided; it does not appear they are ready to agree on guidelines for a broad coordinated effort to deal with possible default by Greece or any other sovereign debtor.

France wants to draw on the European bailout fund, the European Financial Stability Facility, to rebuild bank capital. German leaders think national governments should take the lead. By some estimates it might require $400 billion dollars or more to protect banks from losses on government bonds, and if France (for example) is required to come up with the capital to shore up its own French banks, that would likely jeopardize France’s top-notch credit rating.

Today, Fitch Ratings cut Spain’s credit rating Friday by two levels, to AA- from AA+, it cited the “intensification” of the debt crisis along with slower growth and shaky regional finances. Fitch also downgraded Italy one level to A+, for the same reasons. Fitch maintained Portugal at BBB-, saying it would complete a review of that ranking in the fourth quarter.

Meanwhile, Moody's downgraded its ratings on nine Portuguese banks, citing the increased asset risk linked to their holdings of Portuguese government debt. Moody’s also cut its ratings on two British banks: Royal Bank of Scotland and Santander UK.

Meanwhile, S&P cut its rating on the French-Belgian bank Dexia. The rating was cut from super negative to suicide watch. Dexia is on the verge of its second taxpayer-financed bailout in three years, and possible nationalization or some sort of a breakup of the bank. In July Dexia breezed through an official stress test that was supposed to expose the vulnerable banks. That stress test covered 90 banks across 21 countries, or about 65% of the banking industry in the EU. Eight banks failed. Sixteen banks were considered border-line because their tier-one capital ratios were too weak. Dexia passed with flying colors, they even issued a statement saying “no need for Dexia to raise additional capital; that was in July

Does anybody really believe the European banks are well capitalized? I know the banks got helicopters full of cash from the Federal Reserve after the 2008 financial crisis. I know France and Germany and the UK have been pumping money into the banks in recent months, but seriously - Does anybody really believe the European banks are well capitalized?

And while we’re at it – does anybody really believe there is enough money to bail out the Euro banks and the debt of the Euro countries? The cost of a bailout just keeps going higher and higher. Estimates are now going as high as 4 –trillion euros. The European Financial Stability Fund currently is funded for about 240-billion-euros. The entire German GDP is only 2.5-trillion-euros. I just can’t see a way in which this ends well. I see a few possible scenaris where the problems get kicked down the road, and there is a chance it could all fall apart quickly.

I read a great line, attributed to Lech Walesa: it is easier to make fish soup from fish than to do the reverse.  

This week's sharp gains were built on improved hopes that European officials will get a handle on the euro-zone debt crisis. That fed a massive bout of short-covering as those betting against stocks were forced to buy shares to avoid losing money.

Next week, we get a little relief from the European rumors – oh there will still be rumors, there will still be a crisis, we just get a chance to look at earnings reports. Many earnings estimates have been trimmed by analysts in light of the turmoil in Europe, so there is a low bar – and it might provide positive news for US markets.

By now, you’ve heard about Occupy Wall Street. News coverage has been dismissive and minimal. Most of the news coverage makes the protesters look a little wacky. And yet the movement is getting bigger and bigger. 

Today, house Majority Leader Eric Cantor addressed the 2011 Values Voter Summit and expressed his concerns about the protests.

(clip)

Well, when it comes to pitting Americans against each other, it just seems like the mob in Washington DC doesn’t like the competition. For at least the past three years, the politicians have had the opportunity to try to straighten out the financial problems in this country. They have failed miserably. The politicians in Washington and the Masters of the Universe on Wall Street have a policy record that has been consistently and stunningly wrong; their actions nearly lead to the complete meltdown of the global financial system three years ago.

Politicians aren’t the only ones getting nervous; the banksters are hedging as well:

From JP Morgan’s website:

JPMorgan Chase recently donated an unprecedented $4.6 million to the New York City Police Foundation. The gift was the largest in the history of the foundation and will enable the New York City Police Department to strengthen security in the Big Apple. The money will pay for 1,000 new patrol car laptops, as well as security monitoring software in the NYPD’s main data center.

New York City Police Commissioner Raymond Kelly sent CEO and Chairman Jamie Dimon a note expressing “profound gratitude” for the company’s donation.

“These officers put their lives on the line every day to keep us safe,” Dimon said. “We’re incredibly proud to help them build this program and let them know how much we value their hard work.”

The banksters privatized profits and socialized losses and hoped the masses wouldn’t notice. That might have been a slight miscalculation. The people in charge of the economy seem to be good at only one thing – miscalculating. They have certainly miscalculated the mood of a whole lot of people – and referring to dis-satisfied Americans as a mob might be another miscalculation

And now the mob is coming to the Valley of the Sun.  The Occupy Wall Street protest movement is scheduled to make its way to Phoenix on October 15 at a demonstration downtown. “Occupy Phoenix plans to hold its “general assembly” demonstration at noon, on Saturday October 15^th at Cesar Chavez Plaza in Downtown Phoenix. The “pre-occupation march will start at 3 PM on october 14 at 424 N. Central Ave and proceed south to Cesar Chavez Plaza.

For more information you can visit the website occupyphoenix.net

EAT THE BANKERS -

Video - Dennis Kucinich - May 31, 2011

Brilliant 1-minute clip.  Kucinich takes to the House floor.

§  "We have plenty of money for war, Wall Street, and welfare for the rich."

§  "The Founders did NOT intend for America to be run by Wall Street."

Kucinich is correct.  The rationale for the Fed's existence is that Congress couldn't be trusted with the power to coin money, given their penchant for irresponsible spending.  The thinking goes that whichever party were in power would utilize massive spending (since deficits would no longer exist) as a means to guarantee (buy) their continued existence as the majority party.  So the Fed was created and the Constitutional authority to print our currency was handed to a group of private bankers.

The result was that all Federal deficits had to be borrowed and interest paid to the Federal Reserve, all to prevent the destruction of the dollar through wanton spending and printing by Congress via the U.S. Treasury.

I'm sure you see where I'm going here...

In the past 4 years, the Fed has completely abdicated their duty and charter to protect the dollar.  The Fed now prints with reckless abandon, under the guise of saving the economy, but the money is going to Wall Street and big banks in stealth QE maneuvers (and so-calledemergency bailout programs), and NOT to the people.

It's time for that experiment to end.  Our nation's 3rd central Bank (the Federal Reserve) needs to suffer a quick and excruciatingly painful death.  Congress couldn't do any worse of a job destroying the dollar and we would no longer owe anyone interest on the debt.  For example, a $1.5 trillion deficit could be printed away by Congress essentially for free.

Yes, there are dangers inherent in this proposal.  Banksters might also end up being the recipients of Congressional largesse in the same way they are the beneficiaries of Bernanke's helicopter, but after 4 years of money-printing for Wall Street, it's high time to give it a shot.

Honestly, at this point, and in the opinion of this author, it couldn't be any worse than Bernanke's never-ending, Wall Street-loving, QE-managed trainwreck.