Thursday, November 15, 2012 - Pick One or Pick All Four

Pick One or Pick All Four

by Sinclair Noe

DOW – 28 = 12,542
SPX – 2 = 1353
NAS – 9 = 2836
10 YR YLD =1.59%
OIL – 1.01 = 85.31
GOLD – 11.50 = 1717.10
SILV - .14 = 32.70

We had a few economic reports; they deserve mention; we also had a few flashpoints; we'll get to those soon.

Consumers paid somewhat higher prices for food, rent and housing in October, offsetting a decline in the price of gasoline at the pump. The consumer-price index edged up a seasonally adjusted 0.1% last month. Inflation-adjusted hourly wages, meanwhile, fell by 0.2% in October. Wages fell slightly, even as consumer prices rose, to account for the decline. Real wages have fallen 0.7% over the past 12 months, meaning consumers have less buying power compared with one year ago. Consumers got some relief in October, however, from the falling price of gasoline. The government’s price index of gas, which spiked 16.6% from July to September, tapered off 0.6% last month. The more important number to consumers — the actual cost of a gallon of gas — fell by almost 7% in October and retail prices continued to decline in the first two weeks of November. The average national cost is about $3.50 a gallon, down from nearly $4 a few months ago.

Hurricane Sandy contributed to negative readings for both Philadelphia- and New York-area manufacturing gauges in November; not a surprise.

First-time jobless claims soared by 78,000 to a seasonally adjusted 439,000 in the week ended Nov. 10; its the highest level for initial claims in 18 months; largely a side-effect of Hurricane Sandy.The bottom line is that in coming weeks the data will be extremely volatile and will likely not reflect the true picture of the labor market developments.

Tens of thousands of European workers take to the streets in a historic, concerted action to protest soaring unemployment and unprecedented austerity. The Bank of England's Mervyn King warns that the slump will be longer and more painful than imagined. It is slowly dawning on policy-makers in each region just what a mess they are in. Mervyn King warns that, five years after the collapse of Northern Rock,the British economy is still only halfway through the crisis. Meanwhile German Chancellor Angela Merkel talks of another half a decade of misery in the euro-zone.

The European Union statistics agency, Eurostat reports third-quarter euro-zone gross domestic product shrank 0.1% compared to the second quarter. That’s equal to an annualized contraction of around 0.4%. That follows a 0.2% quarterly contraction in the previous three months. A recession is widely defined as two consecutive quarters of shrinking GDP. The figures didn’t tell us anything we didn’t already know. However, they did confirm that things are at least as bad as we thought.

Greece's finance minister has written to the UK's finance minister asking for further information on Greek citizens who were recently revealed to hold offshore accounts with HSBC in the channel isle of Jersey.

"We had no idea about their existence and were surprised when their names were included on the list recently made public by HSBC," said a senior finance ministry official. "The minister sent the letter because he wants to get to the bottom of it. Tax evasion is one of our biggest problems."

An estimated 57,000 Greeks are believed to have transferred banks deposits abroad since the crisis' outbreak in Athens in late 2009.

In a separate development, the finance minister announced that the country was also poised to dispatch letters to some 15,000 Greeks who moved about €5bn abroad without declaring it to tax authorities. "More than €2bn of that amount could be recouped in taxes," said the finance ministry official. "Ordinary Greeks who are suffering from so much austerity want to see some action."

The International Monetary Fund drew a line in the sand on Greek debt negotiations today, saying the fund’s European bailout partners must do more to cut the ailing country’s debt for the sake of the global economy and the fund itself can’t offer any better loan terms. German chancellor Angela Merkel has once again rejected the idea that governments should take a loss on their loans to Greece.

There is still a lot of talk about the fiscal cliff. Nothing much changed today. We'll keep you posted. Federal Reserve Bank of Dallas President Richard Fisher said: “Only the Congress of the United States can now save us from fiscal perdition. The Federal Reserve cannot,” and he added the Federal Reserve won’t be there to bail out legislators if they fail. Fisher said: “Our Congress–past and present–has behaved disgracefully in discharging its fiscal duty.” Apparently Fisher missed the irony of his remark. Also, no notice of how similar Fisher's remarks sound to the IMF's warnings on Greek debt negotiations.

 Federal Reserve Chairman Ben Bernanke said today that banks' overly tight lending standards may be holding back the U.S. economy by preventing creditworthy borrowers from buying homes. 

Bernanke said: Some tightening of credit standards was needed after the 2008 financial crisis, but "the pendulum has swung too far the other way." Qualified borrowers are being prevented from getting home loans. Well, we know he's aware of the problem, the question is what will he do about it. In his speech, Bernanke gave no hint of what future moves the Fed might take. But he said officials at the central bank understood the problems still facing the US economy. Bernanke said the housing has shown signs of recovery this year. But he said construction activity, sales and prices remain much lower than they were before the crisis. About 20 percent of mortgage borrowers remain underwater.

Oh yeah, the Israelis and Palestinians are throwing bombs at each other across the Gaza border.

Fiscal Cliff, European recession, War in the Middle East, weak economic numbers in the US – Four flashpoints; pick one or pick all 4, and the world did not explode. It's a good day. 

BP has agreed to pay the largest criminal fine in US history – $4.5bn – to resolve all criminal charges arising from the fatal explosion and oil spill in the Gulf of Mexico.

BP agreed to pay $4bn to the US government over five years, and $525m to the Securities and Exchange Commission. That money will be paid over three years. The criminal settlement does not settle all of the claims against BP for the April 2010 blowout of the Deepwater Horizon, and the subsequent oil spill.

BP is not yet off the hook for environmental damage to the Gulf of Mexico, and could face billions in restoration costs to waters, coastline and marine life. The deal does limit BP's exposure to further criminal charges and penalties, and frees the company to focus on resolving those other civil claims.

The fine is the largest criminal penalty in US history, easily outstripping the previous record of $1.2 billion levied by the Justice Department against Pfizer over fraudulent marketing practices. In addition to the fines, the oil company agreed to plead guilty to 11 felony counts of misconduct or neglect of ships' officers, arising from the deaths aboard the Deepwater Horizon when the rig exploded and sank. It also agreed to single misdemeanour counts under the Clean Water Act and the Migratory Bird Act and one felony count of obstruction of Congress.

The settlement remains subject to US federal court approval.

Two BP employees will also face manslaughter charges over the 11 deaths in the oil-rig explosion that triggered the spill.

Notice that BP will not face charges of manslaughter, two employees will. Another reason why corporations are not people.

The US Census Bureau has released its report on “Income, Poverty, and Health Coverage in the United States:2011” Median household income declined, the poverty rate was not statistically different from the previous year and the percentage of people without health insurance coverage decreased. 

Real median household income in the United States in 2011 was $50,054, a 1.5 percent decline from the 2010 median and the second consecutive annual drop.

The nation's official poverty rate in 2011 was 15.0 percent, with 46.2 million people in poverty. After three consecutive years of increases, neither the poverty rate nor the number of people in poverty were statistically different from the 2010 estimates.

The number of people without health insurance coverage declined from 50.0 million in 2010 to 48.6 million in 2011, as did the percentage without coverage - from 16.3 percent in 2010 to 15.7 percent in 2011.

In 2011, the median earnings of women who worked full time, year-round ($37,118) was 77 percent of that for men working full time, year-round ($48,202) ─ not statistically different from the 2010 ratio. Real median earnings of both men and women who worked full time, year-round declined by 2.5 percent between 2010 and 2011. The rates of decline for men and women were not statistically different from one another.

Based on the Gini index, income inequality increased by 1.6 percent between 2010 and 2011; this represents the first time the Gini index has shown an annual increase since 1993, the earliest year available for comparable measures of income inequality. The Gini index was 0.477 in 2011. (The Gini index is a measure of household income inequality; zero represents perfect income equality and 1 perfect inequality.)

Income inequality also increased between 2010 and 2011 when measured by shares of aggregate household income received by quintiles. The aggregate share of income declined for the middle and fourth quintiles. The share of aggregate income increased 1.6 percent for the highest quintile and within the highest quintile, the share of aggregate income for the top 5 percent increased 4.9 percent. The changes in the shares of aggregate income for the lowest two quintiles were not statistically significant.

In 2011, 13.7 percent of people 18 to 64 (26.5 million) were in poverty compared with 8.7 percent of people 65 and older (3.6 million) and 21.9 percent of children under 18.