January, Wednesday 11, 2012

DOW –13 = 12449
SPX +0.4 = 1292
NAS + 8 = 2710
10 YR YLD -.07 = 1.90
OIL -.51 = 101.73
GOLD +10.80 = 1644.00
SILV + .03 = 30.07
PLAT + 30.00 = 1500.00

Fitch Ratings Agency reminds us all that Europe isn’t in good shape. Fitch says the ECB should take a more active role in buying Eurozone debt to avert a cataclysmic collapse. Fitch said they’re not really predicting a collapse of the Euro; just that it is a concern. Meanwhile, Fitch downgraded Hungary to junk status. The euro hit a 16 month low of $1.27. Germany reported its economy shrank in the fourth quarter. European regulators will recommend blocking the deal that would have seen Germany’s largest stock exchange buy the New York Stock Exchange. France says they have not been informed of an imminent decision to cut the country’s credit rating.  In Italy, the banks stopped lending and organized crime has stepped in to fill the void for short-term lending, meaning the Mafia has become the number one bank in Italy.  And the rest of the Eurozone seems determined to grind Greece into the ground. Grecian formula austerity has seen unemployment jump from 13% to 19%. Rates of homelessness, suicide, crime, and HIV have skyrocketed; and public hospitals are facing severe shortages – they’ve run out of bandages and similar necessities. And Germany’s Angela Merkel and the IMF’s Christine LaGrande warn that Greece won’t get any more bailout money if they don’t pull themselves up by the bootstraps. So, it’s not like Europe had a cataclysmic collapse – not today, anyway.

Back in the USSA, life is good. We have seen “ongoing improvements in economic conditions in recent months”, so says the Federal Reserve in the most recent Beige Book. Economic activity increased “at a modest to moderate pace.” Holiday sales were better this year. Price pressures are limited. Tourism is down because of a lack of snow in some areas. The Sierra Nevada region is experiencing the driest winter in more than 100 years. This results in winners and losers. Losers include tourism; in a few months the farmers will feel the effects; natural gas prices have dropped, in part due to the mild winter weather. One bright spot is construction, which is unhampered by the weather. A lack of snow and cold has allowed road building to go uninterrupted over at least 80% of the country.

But I digress: the White House is touting the economic growth trend and unveiling tax proposals aimed at encouraging US firms to keep jobs at home; they’ve come up with a catchy description – insourcing jobs. The new proposals include making research and development tax credits permanent, write-offs for new equipment, and hiring credits for adding new workers.

The Dodd-Frank financial oversight law included provisions to boost protection and segregation of customer collateral. Of course, not much of Dodd-Frank has actually been enacted because the bankers objected to the excessive regulation. Today, the Commodities Futures Trading Commission adopted a measure to protect swap traders’ collateral used in trades to reduce risk. The move prevents commingling customers funds with a firm’s own money, at least on swaps trades – no protection for the futures traders. Typically, large corporations and banks dominate OTC swaps; typically farmers and smaller traders are involved in the futures markets. What motivated the move to increase regulation? MF Global. The regulators still haven’t been able to find the money lost by MF Global; there’s $600 million to $1.2 billion floating around; they don’t know how much; they don’t know where it is; they don’t know how it disappeared; they don’t know blank from Shinola, but have no fear – the regulators are investigating; that’s unofficial but sources close to the situation say they are investigating.

At some point you have to think the regulators are being told to wear blinders, they must be forced to look the other way, they must have received direct orders to do anything other than their jobs.

Meanwhile, if you’re wondering whatever happened to the Dodd-Frank Act – well, it is still being debated. The banks are saying there will be dire consequences if they are forced to follow the rules, especially onerous is the Volker Rule, designed to prohibit banks from making risky trades for their own accounts with money they don’t have. The Volker Rule wouldn’t prohibit banks from making risky trades for their own accounts – just that if the risky trades go bad, they can’t come beggaring for bailouts from taxpayers; you know – like they did 3 years ago.

The Volker Rule, named after former Federal Reserve Chairman Paul Volker, who helped write the rule, would basically restore a little of the protections old Glass–Steagall Act. Here’s how Volker described the rule to keep the banks from gambling with taxpayer backed money: "If you are going to be a commercial bank, with all the protections that implies, you shouldn't be doing this stuff. If you are doing this stuff, you shouldn't be a commercial bank."

The financial industry has been fighting the Dodd-Frank Act and very specifically they have been fighting the Volker Rule – they say it would crash the economy. The former customers of MF Global know what a bummer a crash can be; they’re just thankful it’s not a cataclysmic collapse.

The journal “Nature” released results of a new report that shows the Milky Way has 100 billion stars and they updated earlier estimates that there are 50 billion planets circling those stars – Now they say a recount shows there are 160 billion planets. There might be more but the chief planet counter was tired and needed a vacation. Our galaxy is much bigger than you knew, which means the universe is infinitely bigger than we imagined; and you and I are just specks in the great beyond, and our own individual problems are nearly non-existent in the grand scheme of things.  So, prioritize and have a great day.