March, Tuesday 27, 2012

DOW – 43 = 13, 197
SPX – 3 = 1412
NAS – 2 = 3120
10 YR YLD -.06 = 2.19%
OIL - .52 = 106.81
GOLD – 9.30 = 1681.60
SILV -.25 = 32.69

PLAT + 6.00 = 1656.00

A flat trading day on Wall Street; weakness in financials compared to a little strength in tech; the weakness carried the day.

The Standard & Poor's/Case-Shiller index of 20 American cities fell 0.8% from December to January and 3.8% from January 2011. Sixteen cities tracked by the index posted declines. Eight cities saw average home prices hit new lows. Home values fell for the fifth-straight month and prices dropped to their lowest levels since 2003. In January, Washington, Miami and Phoenix were the only metro areas that posted monthly gains. Robert Shiller, a professor of economics at Yale University and co-creator of the Standard & Poor's/Case-Shiller Index, says the market has "a chance" of rebounding even though the downward momentum in the real estate market has accelerated in the past five years. Shiller says the problems facing mortgage giants Fannie Mae and Freddie Mac must be resolved before housing can bottom. There is speculation that Fannie and Freddie could sell bundles of foreclosed homes to hedge funds; both Fannie and Freddie are reportedly leaning toward principal mortgage write-downs and loan forgiveness, but don't hold your breath on that.

Of course you don't make your home buying decisions based on national averages. All real estate is local. There have been several calls of a housing bottom in the past few weeks. Maybe, maybe not; part of that is local. There is a better chance of a bottom in Phoenix than in Atlanta. A market bottoming out never feels like a buying opportunity, not unless you like the feeling of having your stomach twisted in knows, and certainly not with 28% of all mortgaged homes underwater, and certainly not with the prospect of rising foreclosures. Still, everybody has to live somewhere.

The nationwide average for a gallon of gas is $3.99, lots more in some places, like the gas station where you just filled up. And when you watch the numbers spinning at the pump, how does it make you feel? The Conference Board's monthly consumer confidence index slipped to 70.2 from 71.6 in February, mainly because of the rising gas prices. With more of their money spilling into their gas tanks, consumers may be less likely to spend.

The head of the Organization for Economic Cooperation and Development says the Euro-zone is not out of the woods despite signs of steadiness in the financial markets, and keeping the Euro-zone financially stable will require a bailout fund of at least $1.3 trillion -- "the mother of all firewalls". At least it will be the mother of all firewalls until the flames lap over the top. OECD Secretary-General Angel Gurria says the  current $664-billion commitments to the buffer funds won’t do the trick. Debt levels in Europe remain high, banks are vulnerable, austerity programs are difficult to implement and are likely to reduce economic output, add in high unemployment and weak consumer and investor confidence. Some nations' risk spreads are at unsustainable levels and "have showed signs of creeping up in the last few days." Gurria says a bigger bailout fund would give governments the breathing room to focus on jump-starting growth and competitiveness. So far, the proposals from the World Bank, the IMF, and the OECD haven't been so great at jump-starting anything.

Spain will present a new budget on Friday; the prime minister promises it will be very very austere. Spain is facing soaring unemployment and rising borrowing costs, and the prospect of a lost decade of growth. Spain has public debt at almost 70 percent of gross domestic product and one of the highest levels of private debt in the euro zone. The economy is more than twice the size of Ireland Greece and Portugal combined, and is seen as too large for the euro zone to let it fail. Spanish government borrowing costs have fallen from 14-year highs reached last year but with economic fears resurfacing the risk premium over German bonds has started to rise again.

Meanwhile, the Spanish private sector is deleveraging at the same time the government is pushing austerity. If someone thinks Spain is going to grow its way out of the economic problems, I'm not seeing how that can happen. There is a risk that eventually Spain will need to seek a bailout to borrow at reasonable rates of interest. And so, the mother of all firewalls might not be enough.

The Federal Trade Commission is calling for a new law that would allow people to review the vast amounts of information being collected about them as the Internet, smartphones and other technology make it easier to create digital dossiers of just about anyone's life.

The proposal comes a month after the Obama administration issued a proposed "Consumer Privacy Bill of Rights" and urged technology companies, consumer groups and others to work together on developing more safeguards.

The FTC said Congress needs to impose more controls over "data brokers" that profit from the collection and sale of files containing sensitive information that can affect people's ability to get a job or find a place to live. These data brokers range from publicly traded companies to a hodgepodge of small, regional services that may only have two or three employees.

An investigation by The Associated Press last year found that data brokers often store incorrect or outdated information, including criminal records. In some cases, people are denied jobs because data brokers incorrectly report them as convicted felons. Widespread complaints about inaccurate records triggered a class-action lawsuit that culminated in one database company, HireRight Solutions, to settle the case for $28.4 million last year.

The FTC is pushing for a law that would let consumers see their files and dispute personal data held by information brokers. It would be similar to current federal laws that guarantee consumers free access to their credit reports once a year.