STOCK MARKET WATCH, Tuesday August 7

[ozymandius]

Source: DU

Tuesday August 7, 2007

COUNTING THE DAYS
DAYS REMAINING IN THE * REGIME 534 LONG DAYS
DAYS SINCE DEMOCRACY DIED (12/12/00) 2405 DAYS
WHERE'S OSAMA BIN-LADEN? 2117 DAYS
DAYS SINCE ENRON COLLAPSE = 2078
Number of Enron Execs in handcuffs = 19
ENRON EXECS CONVICTED = 10
Enron execs conveniently deceased = 3
Other Arrests of Execs = 54

---

U.S. FUTURES & MARKETS INDICATORS
NASDAQ FUTURES-----------------------------S&P FUTURES

---

AT THE CLOSING BELL WHEN BUSH TOOK OFFICE on January 22, 2001
Dow - 10,578.24
Nasdaq - 2,757.91
S&P 500 - 1,342.90
Oil - $27.69/bbl
Gold - $266.70/oz.

AT THE CLOSING BELL ON August 6, 2007

Dow... 13,468.78 +286.87 (+2.18%)
Nasdaq... 2,547.33 +36.08 (+1.44%)
S&P 500... 1,467.67 +34.61 (+2.42%)
Gold future... 683.30 -1.10 (-0.16%)
30-Year Bond 4.91% +0.04 (+0.82%)
10-Yr Bond... 4.73% +0.03 (+0.66%)






GOLD, EURO, YEN, Loonie and Silver

---

PIEHOLE ALERT

Heads Up!
Preliminary info on appearances by Bush & Co. throughout the country. Details & links are added as they become available so check back. And if you know more, are organizing something, or would like to, contact [e-mail]

For information on protests and other actions Citizens For Legitimate Government

---

Read more: DU

[ozymandius]

1. no new WrapUp today n/t

[UpInArms]

2. dollar watch

http://quotes.ino.com/chart/?s=NYBOT_DX&v=i

Last trade 80.354 Change +0.044 (+0.05%)

Dollar's Fate In Fed's Hands

http://www.dailyfx.com/story/dailyfx_reports/daily_brief/Dollar_s_Fate_In_Fed_s_Hands_1186484566166.html

A very quiet night of trade in the currency market as a combination of a nearly empty economic calendar and the anticipation of the upcoming FOMC rate decision at 18:15 GMT kept most of the majors in very tight trading ranges throughout the Asian and European sessions. On the economic front German Industrial Production failed to meet expectations dropping -0.4% vs. 0.5% forecast, as some of the large Factory Orders seen in yesterday’s report did not make it through the system. Overall, IP did rise 5.1% on a year over year basis meeting analysts forecasts, but tonight’s news suggests that German GDP will see little growth contribution from the industrial sector in Q2 of 2007. The euro barely budged on the report as traders focus was fixed squarely on US economic developments rather than Euro-zone’s.

Yesterday’s rebound in US equities reversed the yen rally earlier in the day as investors speculated that the US government will take steps to ameliorate the growing crisis in mortgage lending. The latest bankruptcy amongst mortgage brokers with the collapse of AMH has had a chilling effect on the credit markets. While 10 year bonds rates have been falling, 30 year fixed jumbo mortgages jumped to 7.34% from 7.1% according to a survey by HSN Associates. The atypical divergence suggests a repricing of risk as lenders continue to worry about the credit worthiness of home buyers and will likely have ripple effects throughout the US economy slowing consumption and employment growth as we approach the fall season.

The Fed however is caught between a rock and a hard place, as it must on one hand continue to maintain its inflation fighting credibility and on the other make sure that current troubles in housing do not tip the US economy into a recession. Most market analysts expect no change of tone and certainly no change of policy from FOMC. However, as we noted in our weekly, “any change in the language by Dr. Bernanke and company that acknowledges the growing problem in the credit markets may be viewed as precursor to a rate cut and could cause further dollar selling.” Therefore, while trading has been lackluster so far, volatility may pick up considerably later in the day if the FOMC communiqué produces any surprises.

...more...

Think Oil Prices are Headed Back to $50? Trade USD/CAD

http://www.dailyfx.com/story/topheadline/Think_Oil_Prices_are_Headed_1186439058046.html

Being long oil over the past 1.5 years has paid off handsomely. Between January 2006 and July 2007, oil prices have risen as much as 55 percent. Earlier this month, the price of crude even hit an all-time high of $78.77 a barrel and since then, it has pulled back approximately 6 percent. Although percentage wise, this correction is not large compared to prior moves, but the fact that the top occurred 37 cents higher than the July 2006 peak makes it a good chance of a double top.

**This is apart of our Back to Basics Series

Fundamentally oil prices are also being hit by rising inventories and falling demand. In the past, speculative buying by hedge funds exacerbated the rally in oil, but the recent blowups of hedge funds will force these same speculators to be less aggressive, less leveraged and more apt to reduce risk or take profits on any sign of weakness. The last time oil prices topped out was in July 2006 and back then, crude prices fell from $78.40 to $49.90 in six months. The latest pullback could easily see a similar degree of weakness, but even if it doesn’t it will be important to know how to hedge your portfolio against a further drop in oil prices. The trade to turn to is of course, the Canadian dollar.

Canadian dollar – The trade to turn to if oil crashes

If oil crashes, there will be ripple effects across many economies. In theMiddle East, a lot of wealth and home valuations are tied to oil, making it even more important for those traders to look for hedging opportunities. The same is true here in North America. Canada’s booming economy has been fueled by the climb in oil which has benefited domestic corporate profitability. It has also sent the Canadian dollar to 30 year highs against the US dollar by boosting the international purchasing power of Canadians. As the world’s second largest holder of oil reserves, Canada has been one of the primary beneficiaries, which means that if oil crashes, it will also be the country and currency that suffers the most.

In contrast, the US stands to benefit greatly if oil prices slide. For months now, there has been a widespread fear that the rise in oil could exacerbate the problems already facing consumer spending. The lower the price of oil, the more stimulative it is for the US economy as the discretionary income of US consumers increase. This would come at a time when US consumers need every extra dollar that can get their hands on because mortgage payments are rising and lenders are tightening terms of credit. If oil does crash, it would at least be one less thing for consumers to worry about. Of course, this may bring up the question that since oil is priced in dollars, why wouldn’t the dollar suffer from a decreasing value of oil purchases. The answer is because a lot of central banks already hold reserves in dollars and the same is true for companies, which means they do not need to convert additional currency into dollars in order to fund new purchases.

This makes buying USD/CAD the perfect trade for taking advantage of or hedging against falling oil prices. The chart below shows the close correlation between Oil and USD/CAD (inverted in graph). When oil prices rise, USD/CAD falls and vice versa. Since the beginning of 2004, the correlation between these two products has been negative 90 percent. The reason for this strong correlation is because sliding oil prices would bring about improvements to the US economy and the prospects of stable US interest rates. On the other hand, lower oil prices would take away the primary factor that has been driving CAD strength over the past few years. The combination of falling oil prices and contagion from problems in the US could lead to serious underperformance in the Canadian economy in the months ahead.

...more...

[ozymandius]

22. FOREX-Dollar broadly up ahead of FOMC but market is edgy

LONDON, Aug 7 (Reuters) - The dollar strengthened against a basket of major currencies on Tuesday ahead of the Federal Reserve's decision on interest rates and accompanying statement later in the day.

The Federal Open Market Committee is widely expected to leave rates on hold at 5.25 percent, so the focus will be firmly on what policymakers say in their statement.

The broad return of risk appetite to financial markets over the past 36 hours -- Wall Street rallied late Monday and European stocks were sharply higher Tuesday -- partly reflects investors' belief policymakers will soothe concerns about the recent turbulence in credit and U.S. mortgage markets.

The dollar also drew support Tuesday from revived expectations they will reiterate their stance that controlling inflation remains the number one policy concern, thus trimming some of the more dovish bets placed in interest rate futures markets recently.

Still, against a backdrop of some below-consensus U.S. economic indicators and volatile credit markets, traders are discounting at least one quarter point rate cut this year and are far from convinced the credit-related volatility is over.

http://today.reuters.com/news/articleinvesting.aspx?type=usDollarRpt&storyID=2007-08-07T120239Z_01_L07509207_RTRIDST_0_MARKETS-FOREX-UPDATE-5.XML

[ozymandius]

3. Today's Reports

8:30 AM Productivity-Prel Q2
Briefing Forecast 2.2%
Market Expects 2.0%
Prior 1.0%

2:15 PM FOMC policy statement

3:00 PM Consumer Credit Jun
Briefing Forecast $3.5B
Market Expects $6.0B
Prior $12.9B

http://biz.yahoo.com/c/e.html

[UpInArms]

20. AM Productivity - Prel Q2 @ 1.8% vs 2.1% expected

01. U.S. Q2 unit labor costs y-o-yr rise highest since Q3 '00
8:30 AM ET, Aug 07, 2007 - 1 minute ago

02. U.S. Q2 unit labor costs up 4.5% y-o-yr vs 3.7% Q1
8:30 AM ET, Aug 07, 2007 - 1 minute ago

03. U.S. Q2 productivity up 0.6% y-o-y vs 0.4% Q1
8:30 AM ET, Aug 07, 2007 - 1 minute ago

04. U.S. Q1 unit labor costs revised up 3.0% from 1.8%
8:30 AM ET, Aug 07, 2007 - 1 minute ago

05. U.S. Q1 productivity revised to up 0.7% from 1.0%
8:30 AM ET, Aug 07, 2007 - 1 minute ago

06. U.S. Q2 unit labor costs up 2.1% vs 1.6% expected
8:30 AM ET, Aug 07, 2007 - 1 minute ago

07. U.S. Q2 productivity up 1.8% vs. 2.1% expected
8:30 AM ET, Aug 07, 2007 - 1 minute ago

[UpInArms]

59. FOMC

24. FOMC: Inflation still predominant policy concern
2:14 PM ET, Aug 07, 2007 - 1 hour ago

25. FOMC: Moderation in inflation not yet demonstrated
2:14 PM ET, Aug 07, 2007 - 1 hour ago

26. FOMC sees moderate growth ahead despite volatile markets
2:14 PM ET, Aug 07, 2007 - 1 hour ago

27. FOMC says downside risks to growth have increased
2:14 PM ET, Aug 07, 2007 - 1 hour ago

28. FOMC holds rates steady, keeps focus on inflation
2:14 PM ET, Aug 07, 2007 - 1 hour ago

[UpInArms]

60. US June Consumer Credit rises by 5.3% (charge!)

09. U.S. June revolving consumer credit rises by 8.4%
3:00 PM ET, Aug 07, 2007 - 22 minutes ago

10. U.S. June nonrevolving consumer credit rises by 5.3%
3:00 PM ET, Aug 07, 2007 - 22 minutes ago

11. U.S. June consumer credit rises by 6.5%
3:00 PM ET, Aug 07, 2007 - 22 minutes ago

[ozymandius]

4. Crude oil prices continue to decline

VIENNA, Austria - Crude oil prices slid further Tuesday on concerns about the U.S. economy as investors sold to lock in profits from last week's record-setting rally.

Gasoline steadied after dropping more than 10 cents.

The price declines began Friday after the government issued weaker-than-expected employment numbers. That data added to the sentiment from a series of other government reports that analysts say suggest the economy might be slowing.

Some analysts expect a repeat of last year, when oil prices dropped nearly $20 between early August and early October. Others say global demand remains strong.

http://news.yahoo.com/s/ap/oil_prices

[UpInArms]

5. National City unit suspends home equity loan offers

http://news.yahoo.com/s/nm/20070806/bs_nm/nationalcity_mortgages_dc

NEW YORK (Reuters) - National City Corp (NCC.N), a large U.S. midwest regional bank, said on Monday its National City Home Equity unit has temporarily suspended offering new home equity loans and lines of credit, citing tighter mortgage market conditions.

"We have taken a number of steps to help insure that our originations are in line with existing and anticipated market conditions," said Kristen Baird Adams, a National City spokeswoman. "We're certainly continuing to closely monitor the market, and will take appropriate steps."

Loans in the pipeline at National City Home Equity are "being looked at," she said.

The unit is separate from Cleveland-based National City's main mortgage unit, which has also taken steps to limit product offerings, Adams said.

...more...

[UpInArms]

6. Slovenia bank chief in subprime warning

http://news.yahoo.com/s/ft/20070806/bs_ft/fto080620071748367940

Marko Kranjec, Slovenia's central bank governor, caught other European central banks off guard on Monday when he warned that shockwaves from the US subprime mortgage crisis could threaten consumer demand across the eurozone.

"If there is stronger turbulence, the demand of households could well be influenced negatively," Mr Kranjec, a member of the European Central Bank's governing council, told FT Deutschland, the Financial Times' sister paper.

Mr Kranjec's comments suggest the ECB's governing council could have greater concerns about the crisis than previously declared. Only last week, Jean-Claude Trichet, ECB president, had tried to calm the markets.

Mr Trichet and other central bankers are trying to come to grips with the long and short-term effects of the crunch in credit markets. Many European investors have purchased securities linked to US subprime mortgages and some have been adversely affected, including IKB, the German bank that required a state-led bail-out last week.

Mr Kranjec echoed Mr Trichet's sentiment on Monday, though he added: "We might see some further bad news from credit markets - you never know."

...more...

[roamer65]

40. His statement has even more weight since Slovenia is now...

a member of the exclusive "Eurozone" club. Slovenia met ERM 2 requirements and has been using Euro as its national currency since 1 Jan 2007.

[ozymandius]

7. High-grade corporate bond market slows

NEW YORK - The investment-grade corporate bond market has ground to a halt, making it difficult for companies to access capital and hard for investors to find a place to put their money to work.

The problems in the high-grade market, which caters to companies with solid credit rankings, come amid turmoil in stock markets and high-yield bond and loan markets as investors, spooked by the troubles in the subprime mortgage market, turn their backs on risky assets. It amounts to a major repricing of risk after years of skimpy returns and low volatility.

"The market is just frozen up," said Jim Cusser, a portfolio manager at Waddell & Reed in Overland Park, Kan.

Activity has plummeted both in the secondary market, where existing bonds trade, and in the primary market, where companies sell new bonds to raise money for investment and working capital.

In a sign of the market's stress, some deals have even been pulled due to market conditions — meaning the issuer and its underwriters didn't think the deal could be done on favorable terms. The problems in the primary market could, if they persist, throw a serious wrench in the workings of corporate America, making it tougher for companies to finance, among other things, investments, buyouts and equity buybacks.

http://news.yahoo.com/s/ap/20070807/ap_on_bi_ge/corporate_bonds

[UpInArms]

8. RPT-TABLE-US chain store sales drop 0.3 pct in week-ICSC/UBS

http://www.reuters.com/article/bondsNews/idUSN0718859320070807

NEW YORK, Aug 7 (Reuters) - The International Council of
Shopping Centers and UBS Securities on Tuesday released the
following seasonally adjusted weekly data on U.S. chain store
retail sales:

WEEK ENDING  INDEX 1977=100  YEAR/YEAR CHANGE    WEEKLY CHANGE
                              (percent)         (percent)
Aug 4              485.0             3.1               -0.3
July 28            486.5             3.2                1.1
July 21            481.3             3.0               -0.2
July 14            482.1             3.4                0.3

...more...

[ozymandius]

9. edited for posting headbump

:hi:

[UpInArms]

15. Fed seen holding rates steady as mortgage pain deepens (puttin' it back - LOL!)

mornin' Ozy! - We both pulled the story on the correction of the headbump!



http://news.yahoo.com/s/afp/20070807/bs_afp/useconomybankrateforex

WASHINGTON (AFP) - The Federal Reserve is widely expected to keep US interest rates on hold at its meeting Tuesday despite increasing concerns about America's troubled housing and mortgage markets, economists say.

Ten members of the Federal Open Market Committee (FOMC), including Fed chairman Ben Bernanke, will have more than usual to debate as they convene inside the central bank's Beaux-Arts style headquarters in Washington.

In the past week, US stock markets have oscillated wildly, fears about the multitrillion-dollar mortgage market have mounted, Wall Street bankers have fretted about a related credit crunch, and the government has reported slower job growth.

Such turmoil alone would be enough to give Fed policymakers a headache, but they are also having to keep a close watch on inflationary risks triggered by high crude oil prices.

...more...

[UpInArms]

16. Fed highly unlikely to ride to markets' rescue

http://www.marketwatch.com/news/story/investors-shouldnt-expect-much-fed/story.aspx?guid=%7B70B9E9E9%2D1107%2D4F6F%2D8B2D%2D98A3D1581F03%7D&dist=morenews

WASHINGTON (MarketWatch) -- Participants in financial markets shouldn't get their hopes up that the Federal Reserve will intervene to alleviate the current market turmoil, a former Fed governor says.

"I think it is too early right now to think about any kind of intervention by the Fed," said Susan Phillips, now the dean of the George Washington University business school in Washington, in a telephone interview.

Phillips said that the financial markets' volatility is a painful but healthy "reality check" and that this has led to an overdue repricing of risk.

"We're in the middle of that process," Phillips said. "The Fed wants the market to find its own right place," she said.

"We're seeing some constriction in some of the high-risk markets, but quite frankly, that is probably appropriate," Phillips said.

...more...

[Hugin]

28. Free Marketeers to the death, eh?

"The Fed wants the market to find its own right place"

[mojavekid]

55. The Daily Pfenning: FOMC to Hold Rates (from early this morning)

http://www.dailyreckoning.com/Writers/Butler/Articles/080707.html

Good day… The dollar was stronger yesterday and picked up some more strength in early European trading as the markets wait for the Fed's announcement scheduled for 1:15 PM CST. As we have said over and over again, the Fed will keep rates unchanged, but the focus will be on the accompanying statement. Traders will be analyzing each word to try and figure out just how worried the Fed is about the credit crunch the markets are going through. Stock jockeys are all trying to convince the fed to lower rates, while the bond guys are still worried about inflation.

I would imagine that, given the recent market turmoil, the Fed will discuss the recent volatility of the credit markets and start to lean over toward the dovish side of the argument. If this occurs, the dollar will get hammered. If the Fed holds steady and re-iterates their recent statements that the economy will be able to weather this storm without FOMC intervention, then the dollar could hold on to these levels for a while. Again, I expect to see the Fed admit they may have to step in, and the dollar will get sold.

No matter what happens with the Fed, the ECB has already signaled the markets that another rate increase will occur next month. Europe's economy is doing much better than the U.S. economy, and the ECB will have to hike rates to keep prices stable. Technical analysts say the daily and weekly charts show that the euro (EUR) is poised to rise to $1.39 in the next few days.

The Japanese yen (JPY) has held onto some of its recent gains, trading in a tight range between 119 and 118.50. Japan's economy expanded at 0.9% in the second quarter, according to a survey, fast enough to encourage the central bank to raise interest rates as soon as this month. The Cabinet Office will release gross domestic product next week, and the report will be the last main indicator of the economy's strength before the central bank begins its next meeting to decide whether to raise its key overnight rate. Any increase in Japanese rates will be another beginning of the end for the carry trade.

more...

[mojavekid]

54. AP: Fed Leaves Key Interest Rate Unchanged

http://biz.yahoo.com/ap/070807/fed_interest_rates.html?.v=12

WASHINGTON (AP) -- The Federal Reserve left a key interest rate unchanged on Tuesday as worries about inflation trumped concerns about turbulent financial markets.
Fed Chairman Ben Bernanke and his colleagues voted unanimously to keep their target for the federal funds rate, the interest that banks charge each other, at 5.25 percent, where it has been for more than a year.

The Fed decision came after a volatile couple of weeks on Wall Street as investors have been beset by troubles in global credit markets stemming from a sharp rise in defaults on subprime mortgages.

In a brief statement, the Fed acknowledged the turbulence and said the downside risks to the economy had "increased somewhat."

But the Fed continued to state that the predominant risk remained that inflation "will fail to moderate as expected."

more...

[ozymandius]

10. U.S. stocks head for lower open

NEW YORK - U.S. stocks headed for a moderately lower open Tuesday a day after a big rally and as Wall Street waits to see whether the Federal Reserve will offer any reassurance for a market still jittery over concerns about the lending market.

The August meeting of the Fed's Open Market Committee, which sets short-term interest rates, follows two weeks of volatile trading amid concerns about the availability of credit and the health of subprime loans, those made to borrowers with weak credit.

While observers don't expect the Fed will move the benchmark rate from 5.25 percent, where it has been since last summer, many will be looking to the central bank's economic policy statement for comments on the recent concern enveloping the markets that has led to big swings in stocks and bonds. Some analysts are also debating whether the Fed will change its bias away from raising rates toward a neutral or lowering stance.

http://news.yahoo.com/s/ap/20070807/ap_on_bi_st_ma_re/wall_street

[ozymandius]

12. 8am pre-open numbers/blather

S&P futures vs fair value: -5.0. Nasdaq futures vs fair value: -3.5. Early indications suggest stocks will take a breather following yesterday's surprise rally. The S&P 500 surged 2.4% to lead the majors, logging its biggest percentage gain since April 2003, while the Dow rose 2.2% and posted its best day since June 2003. Aside from concerns the market may have once again gotten ahead of itself, investors are also showing some consternation ahead of a Fed decision (2:15 ET) which may not provide the easing bias and reflect the concerns about credit conditions that were partially priced into Monday's sizable advance.

[Roland99]

14. Anyone else sense 'sucker rally' yesterday?

[ozymandius]

19. Ooh! Me! Me! Me!

I also sense the PPT at work. How could bargain hunting drive the averages up to the point at which they plunged the day before? That would be a very lopsided boost to sectors not impacted by the mortgage industry trouble.

[DemReadingDU]

24. Somebody wants the market way up, before

the bottome drops out. Getting out with big profits, before there are no profits to take.

[burf]

32. But today was

my day to get a pony!

Good morning all. Have a great day and thanks for all you guys do.

[AnneD]

47. Morning Marketeers......

:donut: I am in a Union Steward meeting -so school starting cannot be far behind. It is a time when we look back at what we gained this years-and how we can ramp p for next year. I have been looking what has happened with our lobbying Congress in support of CHIPS (insurance for kids). We are making progress at a glacial pace (which today is a mixed blessing).

Was anyone else as disturbed by Nardeli's being hired to run the now private company of General Motors. I have the feeling that the auto workers are about to be screwed and tattooed. I know the shareholders at Home Depot have something to say about it.

I thought the markets have been rigged since the 80's and now the CEO positions are rigged too. Frankly I, as a shareholder am tired of these primadonna CEO's that get paid for driving the companies into the ground. Now they are trying to steal the money in the dark instead of the broad daylight like they have been doing.

Happy hunting and watch out for the bears.

[specimenfred1984]

51. Cerberus is known for leveraged buyouts that destroy companies

"Cerberus" was the devil's 5-headed dog, not exactly something a car would be named after, LOL.

[AnneD]

56. Cerberus....

rang all kinds of bells with me but I couldn't place it and had to look it up myself. Actually, I must have watched too many Omen and Exorocist movies because I had some strong reactions to that name. You chose a company name in part as a calling card to the world. What does this say about this private equity company. Just my Freudian $00.02 worth.

[kineneb]

68. info on Cerberus

Sorry for posting this so late, but I was out today.

I tried the search function, but couldn't find this. However, I had saved it on my computer...
(from DU)

Larger CIA and DoD Privatization Scandal Emerging from Walter Reed
Story and US Attorney Firing

Posted by leveymg on Fri Mar-09-07 09:56 AM
-----
Top GOP Figures Profited from Privatization of VA Hospital, CIA
Contracting

A large global hedge fund, Cerberus Capital Management (dba,
Cerberus-Gabriel), is at the center of an emerging Pentagon and CIA contracting
scandal that has the attention of three Congressional Committees.

This scandal involves the mismanagement of VA hospital facilities
privatized during the Bush-Cheney Administration, as well as
intelligence abuses by private CIA contractors with financial ties to
major GOP leaders and institutions..

In each case, the companies under investigation have links to
prominent GOP figures, including Vice President Dick Cheney, former
Vice President Dan Quayle, former Defense Secretary Donald Rumsfeld,
and several Republican Congressmen indicted for corruption involving
kickbacks from defense contractors. The Republican Congressional
Campaign Commitee (RCC) has also received substantial contributions
from conservative fund managers running Cerberus, a virually
unregulated $30 billion hedge fund, which owns the second largest bank
in Israel.

-more, if you can find it in the DU archives-
---

real funky kind of company... wouldn't want to be associated with them...

[susanna]

67. Chrysler, not GM. n/t

[specimenfred1984]

49. Fed speaks, Fed pumps via their big banks/funds

It's been that way for a few years now.

[Hugin]

25. I found the gains in...

The NASDAQ and the S&P to be very odd.

Almost if large chunks were being relocated.

[MattSh]

11. The Crash of 1929: Are We on the Verge of a Repeat?

I think this is posted off in some obscure corner of DU, but thought I'd give it a bit more visibility.....

From the article -------->

But the hyperreality does not end there, and by hyperreality I mean simply a reality that exists outside the one you live in, whoever you are. It can come in many forms. Film is one such simulation, network and cable news is another, and our two-party political machine, as Ron Suskind explains in the quote at the top of this article, is a finer-tuned one still. But they all collide and collude in the social space of Wall Street and its various markets, on the internet and on the trading floors of the New York Stock Exchange and onward.

Take Milken's favored high-yield junk bonds, for example, which are basically bonds that are rated below investment grade by ratings organizations like Standard and Poor's or Moody's and therefore subject to not only a much higher risk of default or other cash-sucking crashes but also higher paydays if you can make them work. To do that, you need a little help from your friends and unsuspecting investors, which is why Boesky and Milken went to jail for suckering friends and strangers into dense schemes that went nowhere.

And if that whole scam sounds familiar, that is because, as is always the case with hyperreality, it is happening again. Yet this time, it is happening in an information age in which 97 percent of stock transactions are conducted electronically. And this time it is not because of junk bonds, but because of hedge funds, mortgage-backed securities, subprime loans and a bizarro virtual scheme known as naked shorting, which has been around as long as - and played a role in - the 1929 crash, and according to some, could trigger the next one any day now.

"We've divorced the system from paper," explained Overstock.com CEO and hedge fund activist Patrick Byrne to me by phone, "and since then it's become easier to divorce it from reality. But the problem is that so much has been drained out of the system using these tools that the money is not there. If this gets exposed, the money is not there. It's been turned into Ferraris and mansions in the Hamptons. It can't be paid back. The system is going to vapor lock."

And a bit later---------->

"In short sales," Shapiro explained, "you don't own the share you sell; instead you borrow it. Then you replace it when you cover the short. If you're right and the price has gone down, you replace it at a lower price, and the difference between what you sold it for and what price you replaced it at is your profit. The problem with a naked short is that you don't borrow the share you sell. You sell it without ever borrowing it. In effect, you invent a share."

If this is beginning to sound like a game of Monopoly built on fake money, that's because it is. By injecting so many invented shares into the market using naked shorting, hedge funds have not only created an economy in which they can manipulate the stocks of companies smaller than Microsoft and Wal-Mart, but they have also created a market in which there are more shares than actual stocks. And that's about as hyperreal as an economy can get.

"It's essentially counterfeiting," Byrne added. "You're creating counterfeit shares in the system. It works like this. In a normal stock transaction, you give me money and I give you stock. And not paper stock anymore. It turns out that there is a loophole in the system: When I come to give you the stock that you bought, if I don't actually have any stock, I can give what is effectively an IOU. Now you never know about this unless you know the right question to ask your broker, but it's possible that all you really have in your account is an IOU from your brokerage account from a different broker working with a hedge fund."

It is precisely this imbalance between real and invented shares that Byrne and others argue is primed to explode the subprime collapse into a full-blown economic depression.

http://www.truthout.org/docs_2006/072607F.shtml

Interesting, and sobering reading, to be sure.....

[ozymandius]

13. Bear Stearns may be attractive for JPM, BofA, HSBC

NEW YORK (Reuters) - Banks including JPMorgan Chase, Bank of America and HSBC might be interested in buying Bear Stearns Cos at the right price, but there would be real obstacles to a deal happening anytime soon, analysts said.

Bear Stearns, the fifth largest Wall Street broker dealer by market value, has been cited as a potential takeover target after its leading position in mortgage trading has proven to be a liability as the subprime home loan market suffers from big delinquencies. Bear's shares have fallen 30 percent this year.

But Bear Stearns (BSC.N) would likely prefer not to sell itself when its shares trade at such a low valuation, and there are few obvious buyers that would be a perfect cultural or business fit, analysts said.

-cut-

Concerns about Bear's subprime exposure will likely keep most U.S. investment banks away and may keep everyone away until more clarity emerges about the full cost of Bear's exposure to subprime mortgages, analysts said.

http://news.yahoo.com/s/nm/20070806/bs_nm/bearstearns_acquisitions_dc

[ozymandius]

17. Mortgage Fears Drive Up Rates On Jumbo Loans

Turmoil in the U.S. home-mortgage market is starting to pinch even buyers of high-end homes with good credit records, in the latest sign of rising anxiety among lenders and investors.

This surge in rates on so-called jumbo loans is particularly notable because rates on 10-year Treasury bonds have been falling. Normally, mortgage rates move in tandem with Treasurys, but market jitters have caused investors to ditch mortgage securities.

Meanwhile, American Home Mortgage Investment Corp. finally succumbed yesterday to the mortgage-sector chaos that had crippled it in recent weeks and filed for protection from creditors under Chapter 11 of U.S. bankruptcy law. And executives at Fannie Mae, the government-sponsored entity that along with Freddie Mac provides funding for home loans, asked the companies' government overseer to raise the maximum amount of home mortgages and related securities Fannie can hold in its investment portfolio. The goal would be to boost demand for mortgages in general, proponents of the idea said.

Among other signs of distress, Aegis Mortgage Corp., Houston, notified mortgage brokers that it is unable to provide funds for loans already in the pipeline, a spokeswoman said. And Luminent Mortgage Capital Inc. of San Francisco said it faced calls for repayments from creditors and is suspending its dividend.

-cut-

The higher costs for such loans will put further downward pressure on home prices in areas where homes typically bought by middle-class people can easily cost $500,000 to $700,000.

http://online.wsj.com/article/SB118644741706689960.html?mod=fpa_whatsnews

[Gregorian]

41. That's the "surge" I've been waiting for.

Slowly the system, like every system, starts to return to it's neutral equilibrium.

I've removed my diatribe. I hate what the low rates did to planet earth.

[Roland99]

44. "bought by middle-class people"

Who are these "middle-class people" of which this article speaks?

[Hugin]

50. I sometimes get a Jumbo sized softdrink...

Could it be me? :shrug:

[UpInArms]

18. Update: NovaStar Financial: Headed to Zero?

http://blogs.marketwatch.com/greenberg/2007/08/novastar-headed.html

f Friedman Billings Ramsey analyst Scott Valentin is right, the news goes from bad to worse for NovaStar Financial (nfi)-- no stranger to readers of my column or this blog. In a note to clients today, he reiterated his "underperform" on the subprime lender, saying that he is lowing its price target to zero, reflecting his belief there is a "high likelihood that NFI will be unable to continue operations."

Valentin, who has been early and right with his previous warnings on NovaStar, says "the combination of the recent precedent of companies suspending originations prior to closing and the significant deterioration in subprime market conditions...would result in no value for equity holders given NFI's excessive leverage and precipitous fall in subprime asset values."

On Friday, NovaStar confirmed media reports that it would stop funding new loans originated by wholesale borkers until August 7, "at which time the suspension wold be evaluated."

...more...

[ozymandius]

21. Wake up time for the Fed?

NEW YORK (CNNMoney.com) -- The Federal Reserve has been able to keep hitting the snooze alarm when it comes to interest rates for the past year, leaving the target on a key short-term interest rate at 5.25 percent since August 2006.

But given what's going on in the credit markets lately, is it time for the Fed to hit the panic button?

When Fed chair Ben Bernanke and the rest of the Fed's policy making committee meets on Tuesday August 7, investors widely expect the Fed to hold pat for the ninth consecutive meeting.

-cut-

The Fed is in a tough spot. The financial markets have been rocked in recent weeks on credit concerns, namely that the problems in the mortgage market may not be isolated to subprime borrowers. Several hedge funds and large banks have run into trouble because of exposure to subprime loans.

The fear now is that this could be just the tip of the iceberg in terms of loan problems. As a result, tightened credit standards could cause not just a pullback in consumer borrowing and spending but also could spell an end to the private equity buyout boom that has helped lift stock prices for the past year.

http://money.cnn.com/2007/08/03/news/economy/fed_preview/index.htm?postversion=2007080705

[roamer65]

39. I strongly believe Bernanke will sacrifice the dollar...

to keep the banks and economy afloat. Get ready for an M3 report that will knock your socks off in the near future...

[CatholicEdHead]

53. I thought they stopped publishing the M3 in 2005 or 2006

Or did that never happen?

[roamer65]

57. There are others who continue to run the Fed's old M3 measurements.

Get ready, its not a pretty picture.

http://www.shadowstats.com/cgi-bin/sgs/data

M3 growth is nearing 13 percent now. Inflation by the true, undoctored, 1980 measurement is between 10 and 11 percent.

[ozymandius]

23. 8:35 pre-open numbers/blather

S&P futures vs fair value: -9.0. Nasdaq futures vs fair value: -8.5. Futures indications weaken in response to this morning's economic data, now suggesting an even lower start for stocks. A preliminary read on Q2 productivity just checked in at a lower than expected 1.8% (consensus 2.0%) while productivity figures over the last three years were revised lower.

With high levels of resource utilization still a Fed focal point as having the potential to sustain inflation pressures, unit labor costs rose a higher than anticipated 2.1%, hardly sidelining wage-based inflation worries.

[UpInArms]

26. productivity figures over the last three years were revised lower (!!!)

Whoa! 3 years! These people are just such freakin' liars - 3 years! of "revised lower"!!!!!

:banghead:

[Hugin]

27. Especially since most of it has already been...

Revised over time.

Are these figures revisions of the already revised numbers? :crazy:

[AnneD]

58. These folks are liars....

and their numbers SO phony that they are having trouble keeping their stories straight.

[ozymandius]

30. I shudder to think what the "revised" figures will look like when

a new administration takes over. On one hand, I would not be surprised if the book cooking has been accelerated and aggressive during the Bush years. On the other hand, the figures that reflect what people on the front lines of the economy feel must surely be staggering.

[Hugin]

33. Believe me...

"people on the front lines of the economy feel"

They're already feeling it, but, they've been so marginalized and disenfranchised by the current
corporate oligarchy their voices aren't heard.

I'm hoping they'll gather together and discover they aren't alone and there's power in numbers.

[ozymandius]

65. A toast to the netroots!

:toast:

Power in numbers...

[ozymandius]

29. Markets are open for bidness.

9:30
Dow 13,414.80 Down 53.98 (0.40%)
Nasdaq 2,534.60 Down 12.73 (0.50%)
S&P 500 1,463.28 Down 4.39 (0.30%)
10-Yr Bond 4.737% Up 0.006
NYSE Volume 21,185,000
Nasdaq Volume 38,971,000

[ozymandius]

31. I cannot decide which term to use: "imploding" or "exploding"

9:36
Dow 13,384.48 Down 84.30 (0.63%)
Nasdaq 2,532.19 Down 15.14 (0.59%)
S&P 500 1,457.48 Down 10.19 (0.69%)
10-Yr Bond 4.743% Up 0.012
NYSE Volume 106,331,000
Nasdaq Volume 85,287,000

[Nimrod2005]

34. I will go with exploding...since it had been described a time bomb!

The subprime there is...

[mojavekid]

35. Spain's Central Bank sells another 25 tonnes of gold; what next?

http://www.mineweb.co.za/mineweb/view/mineweb/en/page33?oid=24838&sn=Detail

The latest figures from the Bank of Spain show that, after no gold sales cleared during June, gold reserves were reduced by another 800,000 ounces or 25 tonnes during July. This takes the Bank's disposals during this current calendar year to 134 tonnes and disposals under the second Central Bank Gold Agreement year-to-date to 4.8 million ounces or 149 tonnes.

It had originally been suggested that the Bank of Spain would, having sold roughly 100 tonnes between February and June, stop there. Clearly this was not the case and begs the question as to how much more the Bank is proposing to sell. The Bank has not publicised its intentions, although there have been some suggestion that it has been able to utilise the quota allocated for Germany, which has specified that it will, in this year at least (as was the case for the last two years) be selling only minimal amounts. The German option for the full five-year period is for up to 600 tonnes of gold sales, of which ten tonnes were completed in the first two years of this CBGA agreement. Remember though, that the rules of the Agreement specify that while a total of 2,500 tonnes may be sold across the whole membership over the five year period, sales should note exceed 500 tonnes in any one year.

This year's Agreement closes on 26th September, leaving us with seven more weeks of sales. Figures from the European Central Bank suggest that sales in the CBGA year to date amount to 353 tonnes (compared with 340 tonnes in the second CBGA year, when sales amounted to just short of 400 tonnes for the year as a whole). This means that if the full 500-tonne quota were to be met this CBGA year then the average weekly rate of sale from now on would have to amount to 21 tonnes, against an average to date of eight tonnes.

more...

[roamer65]

38. ...and the gold price is holding fairly steady.

Tells me that gold is ready for a major upturn in the near future.

[mojavekid]

36. Michael Panzner: Revenge of Frankenstein Finance

http://www.safehaven.com/article-8119.htm

A chimerical force has been rampaging through global markets in recent months, wreaking widespread havoc. Cobbled together from myriad agreements, assumptions, and transactions by academics, financiers, and marketers, this labyrinthine creation was once seen as an unmitigated success of new age financial alchemy.

But now, with changing economic and financial conditions exposing the derivatives-securitization monster to the harsh light of day, the nightmare of Frankenstein finance is coming home to roost.

For years, industry insiders and so-called experts have proclaimed the virtues of slicing, dicing, and repackaging risk. They waxed on about how borrowers and savers, and society as a whole, could only benefit from such machinations. They suggested any sort of exposure could be disbursed and dissipated to the point where it essentially disappeared. Some even claimed that the crises of the past would no longer exist.

snip...

The transformation of illiquid obligations into tradable securities and the emergence of markets for all sorts of exotic derivatives have created a dangerous illusion of rampant liquidity. In truth, with energy and resources drawn away from public exchanges and plain-vanilla products into a splintering array of pseudo-markets, the stage is set for these phantom trading venues to disappear -- suddenly, and all at once.

more...

[donkeyotay]

52. Oddly enough, those that profited from the new finance, sang its praises

The fees were earned, the assets grew, the profits laundered into real businesses, and now the public will pay. One sets of folks benefit, and another pays. Then the rich will continue to buy governments and lecture the poor about being lazy. No one in the ruling classes will be held accountable, and after the fallout from this debacle, there will be another. No wonder the rich get richer.

[mojavekid]

37. Puru Saxena: Is the End Nigh?

http://www.safehaven.com/article-8125.htm

Over the past few days, the ongoing credit-crunch in the US has grabbed all the media attention and the capital markets have responded with sharp declines. At present, there is an ongoing debate as to whether the sub-prime debacle will sink the US into the next "Great Depression". Not surprisingly, the bears are out of their dens again, forecasting the very end of capitalism! So, what should we make of the current situation and more importantly, how should we invest during these volatile times?

There is no doubt in my mind that the US economy is past its prime. Gone are the days when the international markets used to shudder in fear at the very thought of American investors withdrawing their capital from overseas. Remember, not so long ago, financial crises used to spawn in some far-flung "emerging" nations in Asia, Latin America and Eastern Europe. And the US establishment used to stand firm as the lender of last resort. This time around, however, it is ironic that the world's most influential nation is weighing down on the global economy and causing a mini-panic in the markets. A few years ago, the US was a creditor nation, but today it is the largest debtor nation the world has ever seen. Previously, Americans used to fund other less fortunate nations, however these developing nations are now funding the American way of life by financing those horrendous deficits! Based on these facts, it is clear to me that over the coming years, the over-leveraged American society will have to undergo some sort of adjustment. Moreover, I suspect that this adjustment will not be easy. In other words, I expect the standard of living in the US to gradually decline in the years ahead

snip...

I happen to believe that the US Dollar will be sacrificed in order to avoid a painful contraction in the economy and asset-prices. The necessary adjustment in the US economy will be stealth and is likely to occur through a weakening currency rather than an outright crash in asset-prices. Already, since 2002, American savings have depreciated by 50% against the major European currencies and even more so against the major commodity-producing economies (Canada, Australia and New Zealand). In the period ahead, I expect the US Dollar to diminish in value against the Asian and Latin American currencies, which are still grossly undervalued against the greenback.

more...

[UpInArms]

42. Impac Mortgage Holdings suspends making "alt-a" loans

http://www.reuters.com/article/bondsNews/idUSN0721929320070807

NEW YORK, Aug 7 (Reuters) - Impac Mortgage Holdings Inc. (IMH.N: Quote, Profile, Research), a mortgage lender whose shares have fallen 81 percent this year, said it has suspended making loans to people unable to document income, underscoring the difficult conditions in the mortgage market.

Impac is the latest mortgage lender to suffer as defaults among borrowers with weaker credit histories ratchet higher and mortgage investors become more risk averse.

Impac focused on making "alt-a" loans, or loans to people with a decent credit history, but have difficulty documenting income, such as freelancers or small business owners. In a March filing, the company said 91 percent of the loans it transferred to its portfolio in 2006 were "alt-a" mortgages. American Home Mortgage Investment Corp., (AHM.N: Quote, Profile, Research) a mortgage lender that also made "alt-a" mortgages, filed for bankruptcy on Monday after the market value of its assets fell and its lenders demanded it put up more money as collateral, also known as margin calls.

Impac said that it has made all margin calls to date.

...more...

[Roland99]

46. "suspended making loans to people unable to document income"

What?!?! They're going to start requiring people to *document* their income?? They're no longer going to trust the consumer to tell them the truth??

What kind of business practice is this?!?!

[UpInArms]

43. Moody's holds conference call on subprime, US banks

http://www.reuters.com/article/bondsNews/idUSN0720690220070807

NEW YORK, Aug 7 (Reuters) - Moody's Investors Service is holding a conference call with investors on Tuesday to discuss its recent report that turmoil in the subprime mortgage market is not threatening major U.S. banks' credit ratings.

Moody's said in its report, released on Friday, that banks' overall exposure to the subprime sector is modest relative to their capital and liquidity. For details, see .

The conference call, titled "An Update on Subprime and Related Exposures at U.S. Investment Banks," is scheduled for 11:30 a.m. (1530 GMT). It is open to investors but closed to the media.

...more...

[Roland99]

45. 12:26pm -- Another lunch-time rescue

Dow 13,470.16 +1.38
Nasdaq 2,548.11 +0.78
S&P 500 1,472.71 +5.04
10 YR 4.74% +0.01
Oil $71.80 $-0.26
Gold $681.40 $-1.90

[mojavekid]

48. Fleckenstein: America follows Japan's misguided path

http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/AmericaFollowsJapansMisguidedPath.aspx

When Japan's Ministry of Finance last week stated that (a) "the subprime issue won't have an impact on the U.S. economy" and that (b) "Japan reserves the right to intervene in currency markets," I was really irritated.

The yen's modest strengthening to 118 yen to the dollar obviously got the attention of the authorities there -- as if they know anything about spotting potential credit implosions or don't have a weak enough currency already.

It got me to thinking just how much the world has changed, and not for the better, due to the irresponsible behavior on the part of the Bank of Japan and Alan Greenspan's Federal Reserve over the past 20 years or so. Thus, given all our problems related to debt, I thought it might be worthwhile, particularly for new readers, to provide a brief history leading up to where we are now.

Taking a big step back, the Bank of Japan acted foolishly throughout the 1980s, which caused that country to experience enormous real-estate and stock bubbles. Japan's stock bubble was really a residue of its real-estate bubble -- actually a credit bubble, as the banks lent money to any corporation with a pulse. (Does that sound familiar?)

more...

[roamer65]

61. FYI: July 2007 U6 unemployment up 0.1 percent...

to 8.3 percent.

http://www.bls.gov/news.release/empsit.t12.htm

[specimenfred1984]

62. "Hedge Funds Gone Wild" again today, 100 point swings in the DOW

I think the funds are feeding off each other now, it'll be interesting to see who's still in business 6 months from now.

[DemReadingDU]

63. "Hedge Funds Gone Wild"

So true

[ozymandius]

64. Thanks for coming back with your insights.

Many people here enjoy your news from the front.

[ozymandius]

66. all over but the blathering

Dow 13,504.30 Up 35.52 (0.26%)
Nasdaq 2,561.60 Up 14.27 (0.56%)
S&P 500 1,476.71 Up 9.04 (0.62%)
10-Yr Bond 4.743% Up 0.012
NYSE Volume 613,631,000
Nasdaq Volume 2,833,202,000

4:20 pm : Not surprising during a Fed day, especially under current market conditions, investors endured another roller coaster ride. The Dow swung more than 257 points intraday while the S&P 500 and Nasdaq traded in a 2.2-2.3% range. In the end, though, the major indices closed in positive territory following what was another volatile last hour of trading.

Per usual, all eyes were anxiously fixed on today's FOMC meeting; and, as expected, policy makers left rates unchanged at 5.25% for a ninth straight time. What wasn't a foregone conclusion, though, was whether the Fed would acknowledge the credit risks that have roiled financial markets of late.

Initially, a statement that showed far less concern about the credit and economic outlook than the financial markets had hoped prompted a knee-jerk reaction in equities and dropped the indices to session lows. A reiteration of the Fed's tightening bias and a mention that "downside risks to growth have increased somewhat" were also viewed in a negative light and further support our neutral Market View.

Nonetheless, even though the market was overly optimistic about the Fed coming to Wall Street's rescue, policy makers actually acknowledging the tightening credit conditions was eventually viewed as a net positive, especially for the battered Financial sector.

The latter got its initial lift from another short-covering rally in the Thrifts & Mortgage group while Goldman Sachs (GS 191.25 +3.46), one of the five large investment banks Moody's Investors Service said it does not plan to downgrade, denied talk that it was liquidating its Global Alpha hedge fund.

Brokerage stocks also got a lift amid reports that Bear Stearns' (BSC 117.20 +3.39) CEO has been calling other Wall Street executives to reassure them about the firm's financial health.

After being down 1.3% intraday amid concerns oil was still technically overbought following Monday's 4.5% plunge, crude rallied into the close to put an even stronger bid in an Energy sector that has lost about half of its value over the last three weeks. Crude for September delivery rose 0.5% to $72.42/bbl amid refinery disruptions and ahead of another expected build in weekly gas supplies.

Technology, which was in focus ahead of a Q4 report from Cisco Systems (CSCO 29.69 +0.19), was the only sector failing to participate in today's follow-through efforts. The sector's biggest blemish was Qualcomm (QCOM 40.50 -1.27), which lost its patent battle with Broadcom (BRCM 32.76 -0.68). DJ30 +35.52 NASDAQ +14.27 SP500 +9.04 NASDAQ Dec/Adv/Vol 1321/1742/2.65 bln NYSE Dec/Adv/Vol 1437/1873/2.09 bln