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Lemley Yarling Management Co
15624 Lemley Drive
Soldiers Grove, Wi 54655
Bud: 312-925-5248       Kathy: 630-323-8422

March 31, 2010

Model Portfolio Value As of 31 March 2010

$ 637,402

Katie doing chores. Today she rode to Vanderpool Texas 85/60, no Verizon. April Fool’s Day it is 51 miles to Kerrville, Texas 78/58. April 2 is a rest day in Kerrville 76/47. Easter Sunday the women ride 65 miles to Blanco, Texas 76/56 and on Monday they ride 93 miles to Bastrop, Texas 88/60. They will get out of Texas on April 9.


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Thoughts

(Bloomberg)U.S. stock-index futures declined, indicating the Standard & Poor’s 500 Index will pare its fourth straight quarterly advance, after a private report showed employers unexpectedly cut jobs this month. Oracle Corp., Cisco Systems Inc. and JPMorgan Chase & Co. helped lead declines after ADP Employer Services said companies eliminated 23,000 jobs this month, compared with a gain of 40,000 forecast on average by economists in a Bloomberg survey. Goldman Sachs Group Inc. and Morgan Stanley fell as Keefe Bruyette & Woods Inc. cut earnings estimates on weaker investment banking results. “The ADP numbers disappointed investors,” said Peter Jankovskis, who helps manage about $1.8 billion as co-chief investment officer at Oakbrook Investments in Lisle, Illinois. “Jobs are key to turn consumer spending into something sustainable. Investors in the stock market will be in a wait- and-see mode.”
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Tuesday markets around the world were mildly higher. Last night Asian markets closed lower and European markets are higher at midday. Gold futures extended their gains on Wednesday, as the dollar fell further against its major rivals after data showed that companies in the U.S. private sector shed 23,000 jobs in March. Gold for April delivery rose $8.50 to $1,113 an ounce in electronic trading on Globex. Germany's jobless total fell by a seasonally-adjusted 31,000 in March, the Federal Labor Office reported Wednesday. On an unadjusted basis, the total fell by 75,000 to 3.568 million. Economists had expected the adjusted figure to rise by around 10,000.
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The Ford warrants were priced at $5. This morning Ford shares sold off again as the big boys and girls continued to play their games. We obviously were early reentering our Ford position but Ford is one stock that we think is an excellent play on the recovery. Ford is making money with car sales running at an annual rate of 11 million. When, not if, car sales return to an annual rate of 15 million Ford is going to earn $10 per share. That is what leverage does in the auto industry.

We bought Ford warrants (to buy shares at $9.20 which expire on 1/01/2013) at less than the offering price and also doubled our share position in the common at $1 per share lower than our last purchase. At some point we will exit the common and hold the warrants.
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Is it time for a correction?

Investors’ Intelligence has 48% bulls and 19% bears in it latest reporting period.
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In that same vein, the revolving door at Treasury provides access to the big boys and sometimes girls although not so much. It really is still a boys club. Or maybe the girls are too honest. This story is about a fellow named Ken Wilson. Notice that Wilson went from Goldman Sachs to the Treasury during the crisis (because he was just so invaluable to Hank) during which he talked with and took advice from the folks at Goldman and Black Rock. After his one year sojourn at Treasury during which he made the decisions that rescued all his former employers and current and gave a gold mine to his future employer Wilson moved on to Black Rock which is managing the Treasury’s portfolio of crappy investments that Wilson helped the Treasury to buy. But now Wilson is collecting pay as a Vice Chairman of Black Rock and not as a Treasury employee. Who said the Robber Barons are dead?
http://www.bloomberg.com/

http://www.davemanuel.com/2008/07/22/henry-paulson-needs-your-help/
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Drill Baby Drill: Obama cops out again, and the Repubs won’t be happy anyway. All the states where the offshore drilling will be allowed have Republican governors. Obama may be two-faced but he certainly isn’t stupid.

http://www.huffingtonpost.com/2010/03/31/obama-oil-drilling-plan-e_n_519553.html

http://enviroknow.com/2010/03/31/obama-takes-the-lead-on-drill-baby-drill/


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People turn table and rob a bank.
http://www.huffingtonpost.com/2010/03/30/paris-bank-robbers-dig-wa_n_518356.html
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European stocks fell after disappointing U.S. jobs data stoked concerns that official government figures later in the week will come in weaker than anticipated. Gold gained $10 to $115 and Oil was up $1.18 to $83.55.
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Big Business, GOP Complain That Health Reform Slashes Corporate Welfare (http://www.huffingtonpost.com/2010/03/31/corporate-america-squeals_n_519976.html)

The Republican Party and major corporations have joined forces in the first major rearguard attack on health care reform, charging that the cost of complying with "Obamacare" is resulting in hundreds of millions of dollars in added business expenses.

The crime that reform is guilty of: Slashing corporate welfare.

Under the previous system, major corporations were subsidized by the government to provide prescription drug coverage to their retired employees. At the same time, corporations could claim on their tax returns that it was they -- not the taxpayers -- who paid for the drug coverage, and could write the expense off as a tax deduction.

Health care reform cuts out that fat. The corporations still get taxpayer money to help pay for their drug coverage, but they can no longer continue the fiction that they're using their own money to do it.

Being forced to operate on a diet of leaner corporate welfare benefits will make U.S. companies less able to compete, Republicans argue. Removing the benefit will also force large corporations to compete on a level -- or at least closer to level -- playing field with small businesses, who don't get the subsidy. The charge-offs play into the line that Republicans are pushing -- namely that health care reform is a "job killer."

So far, Boeing, AT&T, AK Steel, 3M, Caterpillar, Deere, Prudential and Valero Energy have all said that reform is forcing them to take significant charge-offs on their balance sheet. The welfare cuts don't go into effect for several years, but accounting rules require the reduction to be taken in the year the law is passed.
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The major market measures close lower. Breadth was 2/1 negative and volume was holiday light except for Ford.


 

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March 30, 2010

Model Portfolio Value As of 30 March 2010

$ 639,276

Model Portfolio Update

March 29, 2010

Model Portfolio Value As of 29 March 2010

$ 639,811

This is a picture of Katie happy to be receiving mail from Kelle and Dana. Katie rode 111 miles on Sunday. The whole group made the total ride except the oldest rider who is 75 years of. She only rode 90 miles. They are all amazing women. We were reading a book all day. Tomorrow the women ride 49 miles from Brackettville, Texas 85/52 to Camp Wood Texas 83/49. On Wednesday they go from Camp Wood 39 miles to Vanderpool, Texas 83/58.


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Thoughts

We will be traveling tomorrow and so there will be no post.
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Most Asian stock markets rose Monday, with China's markets surging after the launch date for stock index futures was set, but the Nikkei fell 0.1% on ex-dividend selling ahead of the end of the fiscal year. European shares traded slightly higher, with deal speculation boosting wireless-telecom giant Vodafone (VOD), while miners also advanced. Asian markets closed mostly higher, with China's market surging as the launch date for stock-index futures was set. U.S. stock futures rose Monday on optimism surrounding the global economy ahead of the release of nonfarm payrolls figures at the end of the week

U.S. consumer spending rose 0.3% in February, as expected, even though personal income didn't budge amid high joblessness, while inflation stayed benign. Personal income was flat compared to the prior month, the Commerce Department said Monday. Private wages and salaries posted a small increase of $2 billion, but proprietors' income fell. The saving rate slowed, as did a key gauge of inflation.

The Greek government moved to quickly test credit markets with the sale of a seven-year, euro-denominated bond after euro-zone leaders last week backed a joint European-International Monetary Fund standby bailout plan. News reports said guidance for the 5 billion euro ($6.7 billion) benchmark issue was at 310 basis points, equal to a yield of about 6%.

Ford Motor Co. (F) said Sunday it has reached an agreement to sell Volvo Car Corp. to Zhejiang Holding Group of China for $1.8 billion. The U.S. automaker has been in discussions to finalize the sale of its Swedish unit for months. The transaction is expected to close in the third quarter, Ford said in a statement.
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The United Auto Workers union is hoping to raise at least $1.3 billion for its retiree health trust by selling all of its 362 million warrants for Ford Motor Co. stock. The trust got the warrants in December 2009 as part of the UAW's contract with the automaker. The automaker and union agreed to the trust to help the company remove retiree health care costs from its books. The trust set a minimum price for each warrant at $3.50. Each warrant gives the holder the right to buy a Ford share at $9.20.

They should be selling the warrants at a premium, not a discount. In fact they should apply to list them. We would much rather own the warrants for the leverage. Some large investment bank is advising them and it is a stupid decision. Shares of Ford are off on the news and we bought Ford for a trade in most accounts. The warrants sale sets up an arbitrage situation but once the warrants are sold the share price should move higher.
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A discussion of large hedge funds and performance:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aG6Sm37czbss&pos=6
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Morgan Stanley Will Be Citi Stake Underwriter (CNBC)
Morgan Stanley will be responsible for selling the government’s 27 percent stake in Citi in what is known as a “dribble-out” process that could take the rest of the year. The plan is to sell between 8 percent and 10 percent of average daily volume each day. That will likely begin after Citi reports its next earnings on April 19.
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How dumb in the war in Afghanistan? Besides the tragedy of all the troops and civilians being killed and wounded the NYT reports:

The effort to win over Afghans on former Taliban turf in Marja has put American and NATO commanders in the unusual position of arguing against opium eradication, pitting them against some Afghan officials who are pushing to destroy the harvest.

From Gen. Stanley A. McChrystal on down, the military’s position is clear: “U.S. forces no longer eradicate,” as one NATO official put it. Opium is the main livelihood of 60 to 70 percent of the farmers in Marja, which was seized from Taliban rebels in a major offensive last month. American Marines occupying the area are under orders to leave the farmers’ fields alone.“Marja is a special case right now,” said Cmdr. Jeffrey Eggers, a member of the general’s Strategic Advisory Group, his top advisory body. “We don’t trample the livelihood of those we’re trying to win over.”

Of course if we win them over then we will destroy their crops. Until then we will let them sell their opium to drug traffickers and spend billions in the U.S. to try and apprehend drug kingpins. Up is down and round is square.
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Money for Grasshoppers: Can you imagine that Republicans want money for grasshoppers?

Wyoming’s all Republican Congressional delegation (one representative and two senators) doesn’t want the Feds telling them what to do–except when they want U.S. taxpayers to give them money to help with a problem in the state.

Farmers and ranchers across the West are bracing for a grasshopper infestation that could devastate millions of acres of crops and land used for grazing. ... To try to get ahead of the problem, Wyoming has allocated $2.7 million for suppression efforts, including aerial spraying of the pesticide Dimilin, which is fatal to maturing grasshoppers. But Wyoming's congressional delegation—concerned that's not nearly enough—has demanded federal help. "It does not appear as though the USDA has any sense of urgency in the face of this pending plague," the delegation wrote in a letter to Agriculture Secretary Tom Vilsack last month. Wyoming Gov. Dave Freudenthal this month weighed in as well, writing a public letter urging county, state and federal officials to join forces to prevent "economic and ecological damage." The forecast, he said, suggests an infestation "with disastrous implications."
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In the past few weeks every time Ford moved over $14 selling came into the market place. Now we think we understand why. Our guess is that some folks knew about the warrant deal and were setting up short positions either real or synthetic to lock in the guaranteed profit if the UAW is stupid enough to listen to investment advisors looking for a fee who are telling them to sell the warrants at $3.50 per warrant.
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Passover begins tonight. Chag Pesach Kasher veSameach!

In case you were wondering how it and Easter are determined; Easter is easy, Passover not so much: http://quasar.as.utexas.edu/BillInfo/ReligiousCalendars.html
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Europe closed higher. Gold gained $10 to $1125 and Oil was up $2.50 to $82.50.
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The major stock measures were mildly higher all day. Breadth was positive and volume was light. We will be back Wednesday.
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March 26, 2010

Model Portfolio Value As of 26 March 2010

$ 640,006

The sweep team bikers (Kathy, Katie, Patti) rode 60 miles to Marathon, Texas today 86/44. Saturday they ride 54 miles to Sanderson, Texas 76/44; Sunday 111 miles (flat and hopefully a tail wind) to Del Rio, Texas 77/47 and Monday 42 miles to Brackettville Texas 80/47. We were making fun of these little towns until we remembered we live in Soldiers Grove.


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Thoughts

Holiday trading next week:

Passover in 2010 will start on Tuesday, the 30th of March and will continue for 7 days until Monday, the 5th of April.

Note that in the Jewish calendar, a holiday begins on the sunset of the previous day, so observing Jews will celebrate Passover on the sunset of Monday, the 29th of March.

Markets are closed Banks open on Good Friday April 2.

The prince and princess and entourage arrive on April 1 for a week.
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Greek banks rallied in the first trading day since euro-zone nations detailed an aid package it could offer if Greece was unable to sell bonds, while broader European stock markets were a bit weaker. Asian markets rose strongly Friday as worries about euro-zone debt problems eased. The euro's rebound boosted the Nikkei 1.6% to its highest finish in nearly 18 months.

J.P. Morgan upped Nokia (NOK) and Research In Motion (RIMM) to overweight from neutral, started Qualcomm(QCOM) at overweight and Motorola (MOT) and Ericsson (ERIC) at underweight in a research note arguing 2010 will be the year of the mobile computer, or smartphone. "Smartphone prices look likely to drop, but we find that price elasticity is high and believe this bodes well for industry health," the broker said. Google (GOOG) and Apple (AAPL) are well positioned for mobile content and advertising converging but Nokia, Research In Motion and Palm also have opportunities.

RadioShack Corp. (RSH) is considering a sale of the company that could fetch more than $3 billion, according to a Friday report in the New York Post that cited investment bankers close to the situation. (Money for buyouts is not stimulative; it is a zero sum game ☺)
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Final Fourth-quarter growth in U.S. GDP revised down to 5.6%; still fastest rate in six years. Consensus GDP was 5.9% and before that we had Preliminary GDP. We think Final is final unless it isn’t.
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Round up the usual suspects: (WSJ) More than a dozen banks and investment firms are suspected co-conspirators in a criminal probe by the Justice Department's Antitrust Division into alleged bid rigging and price fixing in the municipal derivatives market, according to a court filing. The list of banks was inadvertently filed earlier this week in U.S. District Court in Manhattan as part of a request for a bill of particulars in a criminal case against three former executives of CDR Financial Products Inc., a California municipal-bond broker. The executives, including CDR founder David Rubin, were indicted in October on conspiracy and fraud charges. They have denied wrongdoing. ... The banks and investment firms include units of J.P. Morgan Chase & Co., UBS AG, Citigroup Inc., Wells Fargo & Co., Bank of America Corp., General Electric Co. and Societe Generale. None of the alleged co-conspirators have been accused of criminal wrongdoing.
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Markets weaken:

SEOUL--A South Korean naval ship sank following an explosion near a disputed maritime border with North Korea in the Yellow Sea late Friday, prompting a rescue mission to save approximately 100 sailors. A short time later, a second naval ship later fired shots at an unidentified vessel, according to South Korea's Yonhap news agency. Defense officials were trying to determine what caused the explosion, which occurred about 10:45 p.m. local time. Korean TV reports speculated the ship was struck by a torpedo though there was no immediate official word.
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To some the stock market recovery seems divorced from the reality of the economy. But stocks are anticipatory and so the movement of the markets has worked as a predicator of events-- 4th quarter GDP up 5.7% after the markets had recovered 50%. The continued up move in the first quarter of this year would seem to indicate better times ahead.

One reason for recent markets improvement is the liquidity (money funds, hedge fund leverage, Fed creating cash) and the need for return. Short term rates at zero really don’t cut it for folks who live on there savings. There is so much money is flooding the markets and only so many places to place it. The old adage is that folks buy’em higher and sell’em lower and that is certainly holding true.

The action in the retailers is a good example. There was no economic reason for retail stocks to trade at going out of business prices last March. Sales were down but most were showing profits or manageable losses. But the hedge funds were shorting them with abandon as one of the only games in town. This March all the retail stocks are climbing like they are all moving to Rodeo Drive. Hedgies, having covered their last shorts in January and February, are buying with the same abandon they sold short last year. The same action is occurring in other areas of the stock market reinforcing Economics 101- too much money chasing too few goods.

In the real world we have earned a good return on our assets for now and we would rather be outside liking in than looking for the exits. We think stocks are mildly overpriced and we have no real feel for the economy going forward but we don’t think the economy is as health as stocks seem to suggest. Markets never crash off the top. And so we guess a correction of 5% to 8%, a tradable but failing rally and then a move lower into summer. Our emphasis is on the guess. Comfortably ensconced in cash if we are wrong we only give up gains not incur losses.
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Nobody said it would be free and AT&T can certainly afford it.

On March 23, 2010, the President signed into law comprehensive health care reform legislation under the Patient Protection and Affordable Care Act (HR 3590).  Included among the major provisions of the law is a change in the tax treatment of the Medicare Part D subsidy.  AT&T Inc. ("AT&T") intends to take (tax deductible) non-cash charge of approximately $1 billion in the first quarter of 2010 to reflect the impact of this change.  As a result of this legislation, including the additional tax burden, AT&T will be evaluating prospective changes to the active and retiree health care benefits offered by the company.
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This is their story and they are sticking to it, for now at least: (WSJ) France and Germany backed a deal under which European Union countries and the International Monetary Fund would play a joint role in any bailout of Greece. The compromise solution that brings reluctant Germans on board for a possible Greek aid package also puts the wealthy bloc in the embarrassing position of turning to an organization that typically engineers rescues in the developing world. French President Nicolas Sarkozy and German Chancellor Angela Merkel, meeting here ahead of a summit of all 27 EU leaders, reached an accord under which EU nations would direct a potential bailout of Greece--and contribute a majority of its funding--and the IMF would play a supporting role, people familiar with the matter said.
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These polls contain the seeds for several Polish jokes:

(Bloomberg) -- Tea Party activists, who are becoming a force in U.S. politics, want the federal government out of their lives except when it comes to creating jobs. More than 90 percent of Tea Party backers interviewed in a new Bloomberg National Poll say the U.S. is verging more toward socialism than capitalism, the federal government is trying to control too many aspects of private life and more decisions should be made at the state level. At the same time, 70 percent of those who sympathize with the Tea Party, which organized protests this week against President Barack Obama’s health-care overhaul, want a federal government that fosters job creation. They also look to the government to rein in Wall Street, with almost half saying the government should do something about executive bonuses. Supporters are also conflicted over whether private-enterprise elements should be introduced into government programs like Social Security and Medicare.
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(WSJ) Ayad Allawi’s predominantly Sunni alliance has won Iraq’s national election, narrowly edging out Prime Minister Nouri Al Maliki’s list to become the largest bloc in the country’s next parliament. The final preliminary results show Mr. Allawi’s Iraqiya bloc winning 91 seats in the 325-member parliament to 89 seats for Mr. Maliki’s State of Law. The upset threatens to end the lock on power that Iraq’s majority Shiites have enjoyed since the 2003 after decades of oppression under Saddam Hussein and could severely test the country’s fragile institutions. Before the announcement, Shiite politicians warned of violence should their parties lose the election.
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European stocks closed lower but up for the week. Oil lost 70 pennies to $79.92. Gold gained $12 to $1105. 1 Euro = 1.3343 U.S. dollars.
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Uncle Alan is the guy who in 2001 backed the huge Federal tax cut because he was worried that financial markets would collapse if the U.S. retired all its debt and there were no government bonds in which to invest.

http://thehill.com/blogs/on-the-money/budget/89363-greenspan-qdebt-which-we-have-never-seen-beforeq Alan Greenspan cautioned Friday the U.S. faces a mountain of debt, the likes of which the country "has never seen before." In an interview with Bloomberg Television, Greenspan, former Federal Reserve chairman, warned that the debt could dampen the economic recovery.

"There is basically this huge overhang of federal debt which we have never seen before," Greenspan said. "It is going to have a marked impact eventually unless it is contained, on long-term rates. That will make a housing recovery very difficult to implement and put a dampening on capital investment as well." The Congressional Budget Office estimated that under President Barack Obama's budget, the U.S. would have a $9.8 trillion deficit between 2011 and 2020. "One of the unfortunate fallouts from these huge amounts of money that we're putting in the budget and the Fed is that $1 billion is not what it used to be," Greenspan said. "You cannot turn someone's debt down who is requesting $20 million or $400 million when we are talking trillions."
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The major market measures were mixed at the close. The DJIA was up 10 points and the S&P 500 up 1 while the NAZZ was lower. Breath was flat and volume light.


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March 25, 2010

Model Portfolio Value As of 25 March 2010

$ 640,006

Only Katie (middle of picture) and her friends who are in the middle of nowhere would smile having to fix a flat tire. Today they rest.
Tomorrow katiebikingcoast2coast ride 60 miles to Marathon, Texas. 71/37.


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Thoughts

The dollar has eased up from its morning low so that it now trades with a 0.3% loss against competing currencies, but stock futures still point to a solid start for the session. The mood among premarket participants has been generally unaffected by the latest jobless claims tally. Initial jobless claims for the week ended Mar. 20 totaled 442,000, which is a bit less than the expected total of 450,000 and down 14,000 from the prior week. Continuing claims came in at 4.65 million, which is more than the 4.56 million continuing claims that had been expected, but down roughly 54,000 week-over-week.
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(http://www.marketwatch.com/) European shares notched fresh annual highs Thursday, with European officials set to discuss Greece's debt woes. In Asia, export-related stocks helped push the Japanese market slightly higher, while the Hang Seng Composite lost ground in Hong Kong.

Dubai's government said it will commit $9.5 billion to help Dubai World restructure its $23.5 billion of debt. The Dubai government said it would fund the Dubai World investment with its own capital and with $5.7 billion that remains from a loan the government of Abu Dhabi had made available. Dubai World presented its restructuring plan, which includes converting $8.9 billion of debt and claims into equity and injecting $1.5 billion into the firm to fund working capital and interest payments. Two tranches of new debt maturing in five and eight years will also be issued as part of the proposed restructuring.

Ambac Assurance Corp., the bond insurance unit of Ambac Financial Group is handing over to its state regulator control of troubled contracts on securities made up of souring mortgages, totaling about $35 billion that could potentially bleed the insurer dry and endanger its commitments to municipal bondholders. The Wisconsin Office of the Insurance Commissioner, will suspend payments totaling about $120 million for March to holders of these contracts. As long as the regulator is overseeing these contracts, monthly payments beyond March are also suspended. In 2009, Ambac paid out $1.4 billion in claims to policyholders, according to an annual filing with its regulator. These payments were primarily related to losses on securities made up of souring mortgage loans, according to people familiar with the matter. An Ambac spokeswoman was unavailable for comment.

The commissioner's office will seek to unwind those insurance contracts that Ambac sold to financial firms but can't fully pay off without jeopardizing claims of other policyholders. Those contracts being unwound were intended to protect investors mainly from losses on mortgage securities. .... Citigroup's exposure to Ambac, using a "fair value" estimate, is $4.5 billion, according to Citigroup's annual report. Citigroup has reserves of about $5.5 billion for exposure to so-called monoline insurers, including Ambac, in the event they are unable to fulfill their commitments. ... But, in the past decade, Ambac moved into the more lucrative (our comment -as in big bonus for executives on phantom earnings-) arena known as "structured finance." A big chunk of these were known as collateralized debt obligations, or CDOs, that pooled risky subprime bonds, whose value has deteriorated substantially. As of Sep. 2009, Ambac had exposure to $48.7 billion of CDOs. (Our comment- A year and a half ago this news would have caused the markets to swoon. Today it is a back page story in the WSJ. We think it means that Citi and other banks and insurance companies and pension funds are now at risk on $35 billion of financial instruments that have underlying mortgages in default on which they are no longer going to receive the interest payments. And they are going to lose all the money on the underlying principle. But what is $35 billion among friends?
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European stocks rose as sovereign debt concerns abated, pushing the main bourses to near-two-year highs and boosting the euro against the dollar. Oil was down 10 pennies to $80.40 and Gold was unchanged at $1090. 1 Euro = 1.3356 U.S. dollars.
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A European official said Greece is saved and stocks rallied. Then another European official said not so fast and the rally evaporated in the last hour. And that is how trading decisions are made. It was a race to bell in the final hour for the major market measures – the DJIA did; the NAZZ and S&P 500 didn’t to stay in positive territory. Breadth was negative and volume was moderate.
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March 24, 2010

Model Portfolio Value As of 24 March 2010

$ 639,998

Ft Davis, Texas 66/37 is a day of rest for katiebikingcoast2coast.


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Thoughts

Action in Europe is mixed after Fitch lowered its sovereign credit rating on Portugal to AA- from AA. The announcement has also sent the euro sharply lower against the dollar. The announcement has generally overshadowed news that the latest assessment of eurozone services and manufacturing grew at the fastest pace since 2007 with the index measure coming in at a better-than-expected 55.5. Meanwhile, a report indicated that industrial orders in the 16-country eurozone fell 2% month-on-month in January. In Britain, the FTSE is flat at the moment. Xstrata is down considerably, but Anglo American is up after it was upgraded by analysts at JPMorgan. Banks are a bit mixed. In Germany, the DAX is currently up 0.1%. The bourse has been helped by a jump in German business confidence for March. The Wall Street Journal reported that Daimler AG (DAI) has agreed to pay $185 million to resolve a long-running U.S. investigation into allegations that the German auto maker paid tens of millions of dollars in bribes to secure business overseas, according to sources. In France, the CAC is currently down 0.5% amid relatively broad pressure. Total (TOT) is a primary source of weakness at the moment, but EADS is up after WEO said that the European reimbursable loan mechanism for aircraft subsidies is legal. In Asia, the MSCI Asia Pacific Index slipped 0.2%, but Japan's Nikkei tacked on 0.4%. Kyocera (KYO) and Canon (CAJ) were among the better performers, as was Mitsubishi Electric after it raised its earnings forecast. Shares of video game maker Nintendo were especially strong, though. In Hong Kong, the Hang Seng eked out a 0.1% gain. Upbeat results from Bank of China buoyed buying among banking stocks. In mainland China, the Shanghai Composite settled 0.1% higher.
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(WSJ) J.P. Morgan Chase & Co. is close to striking a deal for a tax refund of as much as $1.4 billion, due to a little-noticed clause in an economic stimulus bill, The Wall Street Journal reported, citing people familiar with the matter. The law in question allows companies to apply losses from 2008 or 2009 against taxes paid in the previous five years, instead of the previous two years, the report said. As a result, J.P. Morgan would seek more than half the total $2.6 billion in tax refunds that would apply to failed Seattle thrift Washington Mutual, which it bought in 2008. The report estimated that at least 250 other companies expect about $12 billion in federal tax refunds under the law.
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(MarketWatch - www.marketwatch.com) Demand for U.S.-made durable goods rose a seasonally adjusted 0.5% to $178.1 billion in February, the third straight increase in a key forward-looking indicator, according to Commerce Department data. New orders for machinery and civilian aircraft were strong in February, while new orders for autos, defense goods and electronics declined. The 0.5% increase in durable goods orders was weaker than the 1.7% gain expected by economists surveyed by MarketWatch. However, January's orders were revised higher, from a 2.6% gain to 3.9%. December's orders were also revised higher.

Fitch ratings downgraded Portugal's long-term credit rating to AA- from AA. Fitch said the outlook on Portugal's rating was negative, and cited "significant budgetary underperformance in 2009," as a key reason for the downgrade. "A sizeable fiscal shock against a backdrop of relative macroeconomic and structural weaknesses has reduced Portugal's creditworthiness," the rating agency said. (In our mind, a cut from AA to AA- is hardly earthshaking. And we still think the problems in Illinois and California and most of the other state budgets are a lot more negative for economic recovery.)
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(Bloomberg) -- Sales of new homes in the U.S. unexpectedly fell in February to a record low as blizzards, unemployment and foreclosures depressed the market. Purchases decreased 2.2 percent to an annual pace of 308.000, figures from the Commerce Department showed today in Washington. The median sales price climbed by the most in more than two years.
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Jamie Dimon Was Right (http://krugman.blogs.nytimes.com/2010/03/23/jamie-dimon-was-right/?dbk)

About the 19th century, that is.

Dimon was castigated by many people, me included, for saying that a financial crisis is “the type of thing that happens every five, ten, seven, years.” Hey, no big deal.

But that is the way banking worked once upon a time. I’m reading Gary Gorton’s Slapped by the Invisible Hand, which tells us that there were bank panics — systemic crises — in 1873, 1884, 1890, 1893, 1896, 1907, and 1914.

On the other hand, there were no systemic crises from 1934 to 2007.

The problem, as Gorton makes clear, is that the Quiet Period reflected a combination of deposit insurance and strong regulation — undermined by the rise of shadow banking. So we have a choice: restore effective regulation or go back to the bad old days.
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European stocks edged up to close at fresh multi-month highs, but the euro and pound tumbled amid more fiscal fretting in both the euro-zone and the U.K. oil ended down $1.31 at $80.60. Gold dropped $18 to $1086. 1 Euro = 1.3357 U.S. dollars
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Lose $9 billion make a millions- only on Wall Street:
http://www.zerohedge.com/article/why-does-john-mack-hate-volcker-rule-when-ms-prop-was-responsible-single-biggest-prop-loss-w

http://www.observer.com/2010/wall-street/howie-hubler-new-jersey-return-subprime-villain
*****

Stocks opened a bit higher out of the gate but traded mildly lower through the day. The major measures lost half of what they gained yesterday. With two steps forward and one back the bulls remain in control. Breadth was negative and volume was slight.
*****

 

March 23, 2010

Model Portfolio Value As of 23 March 2010

$ 639,998

The women ride 90 miles on Wednesday to Fort Davis, 68/36, where they spend Thursday, 66/36, as a well deserved rest day. The sign was posted at a pecan grove. The picture is courtesy of http://kirbyridesamerica.blogspot.com/ .


*****
Thoughts

Futures are currently still trying to find direction as they as they are only slightly lower at the moment. The Wall Street Journal reports that Secretary of Treasury, Timothy Geithner, will tell a congressional panel today that Fannie Mae (FNM) and Freddie Mac (FRE) won't be allowed to "return to a pre-crisis structure" that rewarded shareholders with big profits, but ultimately burdened tax holders with massive losses. In the ongoing saga between Google (GOOG) and China, CBS News reports that, in response to GOOG's decision to stop censoring the Internet for China by shifting its search engine off the mainland, the country has now accused GOOG of violating promises it made regarding filtering its searching service. Shares of GOOG are relatively unchanged in pre-market trading, although Baidu.com (BIDU) is trading higher by 3%. On the earnings front, Walgreens (WAG) reported Q2 earnings and revenue below consensus. WAG shares are currently trading slightly lower... In international news, Greece is again in the headlines, stating that it wants a European solution to its debt crisis and expects a positive result from the EU on March 25-26. Germany and its EU partners are in disagreement over financial support for Greece, whose debt load is seen hitting 120.4% of gross domestic product this year. Chancellor Angela Merkel continued to rebuff calls for a support deal this week. Reuters has reported that China will likely run a trade deficit of over $8 bln in March, which would make it China's first monthly deficit since April 2004. However, this is expected to be a one-time blip, rather than the beginning of a new trend. Surging domestic demand has grown faster than exports, which have been bogged down by a tepid worldwide recovery.

In overseas trading, the MSCI Asia Pacific Index closed unchanged in mixed trade. In Japan, the Nikkei closed -0.5% as the market played catch up after being closed yesterday. Shares of All Nippon Airways plunged 6% after the airline more than doubled its annual loss estimate. But Toshiba ended 3.5% higher on news it was in talks with a company backed by Microsoft Chairman Bill Gates to jointly develop advanced nuclear reactors... The Hang Seng closed +0.3% in Hong Kong, giving up some earlier gains as investors took profit in the afternoon session on worries mainland may further tighten liquidity through a rise in bank reserve ratios. Exporters outperformed on expectations overseas demand for their products would rise as the global economy recovered, dealers said... In mainland China, the Shanghai Composite closed -0.7% after it failed to breach a key technical resistance level, while investors cashed in gains from small-cap shares that had recently outperformed a market rebound... The Kospi closed +0.5% in South Korea as Samsung Electronics settled +1.0%. Construction issues rallied amid order expectations after local media reports South Korean builders were likely to win a significant portion of an estimated $6.6 bln order from Saudi Arabia... In India, the Sensex closed +0.2% rebounding from their steepest drop in six weeks, amid optimism that spending will drive demand, limiting the effect of the central bank's decision to raise interest rates... In Europe, the major markets there are trading with gains today as Great Britain's FTSE is up about 0.40%, Germany's DAX is higher by 0.15%, and France's CAC is also up 0.40%. Of note, Britain's consumer price inflation fell a half point in Feb. to 3%, although it remained above the government's annual target of 2%.
*****

The taxes that fund the new Health Care Bill:

(Bloomberg) -- President Barack Obama said on the campaign trail in October 2008 that he wanted to “spread the wealth around.” With Obama on the verge of signing sweeping health-care overhaul legislation, he’s about to do just that.

If the final version of the legislation passes the Senate, high-income investors will pay higher Medicare taxes, tax breaks for out-of-pocket medical deductions will be curtailed, and it will cost insurance companies more to pay executives millions of dollars. Those levies will help fund expansion of Medicaid services for the poor and subsidize health insurance to cover millions who don’t currently have benefits.

“It’s very clear that taxes are levied on the wealthy and the benefits will spread across the entire income distribution, with a lot going to expanded Medicaid distribution and expanding health insurance,” said Roberton Williams, an economist at the Tax Policy Center, a Washington research institute backed by the Urban Institute and Brookings Institution. “One couldn’t claim he didn’t keep that promise” to “spread the wealth around.”

In all, the bill would generate $409.2 billion in additional taxes by 2019, according to an analysis by the congressional Joint Committee on Taxation, a nonpartisan agency. The bill also imposes about $69 billion more in penalties for individuals and businesses who don’t meet mandates to buy insurance, according to the Congressional Budget Office, another nonpartisan agency.

Higher Medicare Taxes

Most of the revenue would come from higher Medicare taxes on about 1 million individuals earning more than $200,000 and about 4 million couples filing jointly who make more than $250,000.

The legislation would for the first time apply Medicare taxes to investment income received by these households, beginning in 2013. The 3.8 percent rate would apply to unearned income such as realized capital gains, dividends, interest, rents and royalties. It wouldn’t apply to other income subject to income taxes, including interest from municipal bonds and retirement accounts such as 401(k) plans until funds are withdrawn.

Obama’s budget proposes to allow the existing 15 percent tax rate on dividends and capital gains to rise to 20 percent in 2011 for the same high-earners. Layering a 3.8 percent Medicare tax on top of that would mean a new top rate on dividends and capital gains of 23.8 percent. The top tax rates on interest and rental income would rise to as high as about 44 percent, assuming other Obama tax increases on high-earners are enacted.

The bill also increases the individual’s share of Medicare tax currently imposed on salaries starting at $200,000 for individuals and $250,000 for couples to 2.35 percent, from 1.45 percent currently.

The combination of the new Medicare taxes and Obama’s budget proposals, if they were in place this year, would cost a married couple with a household income of $5 million an extra $287,100 in taxes, according to analysis by the consulting firm Deloitte Tax in Washington.

The Medicare taxes superseded an earlier Senate proposal to tax high-value employer-provided insurance coverage, dubbed “Cadillac plans.” That 40 percent excise tax was delayed until 2018, when it would begin to apply to benefits over $10,200 for individuals and $27,500 for couples.

Those thresholds would be indexed to inflation, which grows at a slower pace than the cost of health care, meaning more employers would likely face the levy over time.

Out-of-Pocket Costs

Other provisions likely to affect higher-income individuals would scale back tax preferences associated with paying out-of- pocket medical expenses. Starting in 2013, Americans under 65 won’t be able to deduct medical expenses until they exceed 10 percent of income, up from 7.5 percent now; retirees would keep the lower threshold.

The bill in 2011 places new restrictions on what can be purchased using special savings accounts funded with pre-tax dollars including health savings accounts. Improper withdrawals from the accounts also would be hit with a new 20 percent tax.

And the legislation for the first time would place a $2,500 limit on what can be contributed to employer-sponsored flexible spending accounts, another type of account funded with pre-tax dollars that can be used to pay for medicines, co-payments, and other expenses. Employers currently set their own limits, typically between $3,000 and $5,000 in the absence of a government cap. This change would cost an average worker about $625 in tax savings, according to WageWorks Inc., a San Mateo, California, company that administers 1.5 million accounts.

Tanning Salons

Consumers who frequent tanning salons would pay a 10 percent excise tax, and those who buy devices such as wheelchairs would pay a 2.3 percent excise tax. Drugmakers may pass on a $3 billion annual fee. Insurance companies would be denied deductions when they pay their executives over $500,000.

Under the reconciliation bill that is now before the Senate, individuals who don’t purchase insurance would be subject to a fine of $325 in 2015 and $695 in 2016. Individuals may be subject to a charge equal to as much as 2.5 percent of their income in 2016, if the total is greater than the flat payment.

Employers with 50 or more workers would pay $2,000 per worker if they don’t offer health insurance. The legislation offers a small business tax credit to help pay for employer- provided premiums.

Companies also would face more scrutiny from the Internal Revenue Service for using tax shelters.
*****

The NAR reports: February Existing-Home Sales Ease with Mixed Conditions Around the Country (http://www.calculatedriskblog.com/)

Existing-home, which are finalized transactions that include single-family, townhomes, condominiums and co-ops, slipped 0.6 percent nationally to a seasonally adjusted annual rate of 5.02 million units in February from 5.05 million in January, but are 7.0 percent higher than the 4.69 million-unit pace in February 2009.
...
Total housing inventory at the end of February rose 9.5 percent to 3.59 million existing homes available for sale, which represents an 8.6-month supply at the current sales pace, up from a 7.8-month supply in January. Raw unsold inventory is 5.5 percent below a year ago.
*****

1 Euro = 1.3482 U.S. dollars
*****

 

Killdeer and Meadowlarks arrived.
*****

 

We saw a male ring neck pheasant on our farm for the first time in twenty years.
*****

 

European stocks edged higher, though investors remained cautious ahead of the U.K. budget and the European Union summit later this week. Oil gained 34 pennies to $80.95. Gold was up $5 to $1106.
*****

Stocks were higher all day with the major measures up 1%. Breadth was 2/1 to the good and volume was moderate. The bulls remain in control and continue to climb the wall of worry.

 

 

*****

 

March 22, 2010

Model Portfolio Value As of 22 March 2010

$ 639,991

The picture is of Katie and friends entering Texas, 3 states down and five to go. Of course Texas is going to last a while.

Tuesday the tour heads 74 miles from Ft. Hancock to Van Horn, Texas 78/46.

Van Horn a town of 2500 folks, known for the famous Threemile Mountain and Fivemile Mountain.

In late 2006, the Wall Street Journal reported that Jeff Bezos, founder and CEO of amazon.com, had acquired 290,000 acres (1,200 km2) of land 25 miles (40.2 km) north of Van Horn to house his fledgling space tourism company, Blue Origin. As of 2008[update], Blue Origin had been expected to start commercial operations as early as 2010, aiming for 52 launches per year from the Van Horn, Texas facility. As of March 2010[update] however, Blue Origin and Bezos "have been very secretive about" the plans for the Van Horn facility for the past five years, having granted no interviews with news media since a single interview with the Van Horn Advocate in early 2005. In early 2010, NASA awarded Blue Origin US$3.7 million to work on an advanced technology, which detaches a crew cabin from its launcher if the shuttle malfunctions."


*****
Thoughts

Health Care passed. Most stuff like the mandated buying of insurance doesn’t’ take effect until after the presidential election in 2010. What a strange coincidence.
*****

(MarketWatch) U.S. stock futures pointed to a weaker start Monday with the insurance and pharmaceutical sectors in the spotlight as the House of Representatives passed a health reform bill, while continued jitters around Greek finances and India's rate tightening also played a role. Greek and Irish banking stocks paced a three straight drop for European equities, while Asian stocks fell in the first reaction to India's rate hike on Friday.
*****

Our sentiments exactly:
http://thetechnicaltakedotcom.blogspot.com/2010/03/investor-sentiment-going-forward.html

Investor Sentiment: Going Forward

In hindsight, the best strategy has been to "set it and forget it" - buy at the bottom in March, 2009 and let it ride. I am sure that is what everyone did! Going forward, the best strategy remains as it has been since October. It will be important to exercise patience and buy at the lows and sell at the highs to capture any profits from this market. While buying low and selling high is always a good policy, it is particularly important here. Extremes in bullish sentiment, as we are seeing now, imply that a price move is either nearing its end or the ascent of prices is surely to show. This is our expectation 85% of the time. The other 15% of the time or what I like to call "it takes bulls to make a bull market" scenario, the market will continue meaningfully higher despite increasing bullish sentiment. We saw this in 1995, 2003, and 2009 when the markets were coming off of long periods of underperformance. I am not banking on this time being different.
*****


*****

European bourses recovered after U.S. stocks turned higher. Gold lost $10 at $1095 and Oil gained pennies to $81.25.
*****

Stocks opened lower then rallied for the rest of the day into the close. With no horses in the race we just watched. Breadth was positive and volume light.


*****

 

St Joseph's Day 2010

Model Portfolio Value As of 19 March 2010

$ 639,931

The women ride 88 miles to Las Cruces, New Mexico on Saturday after their mountain climb today to Kingston, New Mexico, population 25. Hopefully Saturday’s ride is all downhill. Sunday they ride into Texas where they will spend the next 20 days. Their Sunday night stop after a 66 mile ride is El Paso followed by 47 miles on Monday to Fort Hancock.

Weather: Las Cruces 58/31; El Paso 66/40; Fort Hancock 78/46


*****
Thoughts

The economy is recovering but so have the markets over the last year. The S&P 500 is 72% higher than it was a year ago. At that time we commented that market conditions didn’t warrant a market level as low as it was and that we would hold stocks until they recovered to more reasonable levels. And we did. When the S&P 500 recovered to the 900 level we moved to cash. We missed the next 15% move. At year end after the major market measures had pulled back 9% we reestablished positions. Having gained 8% and more in accounts since mid December we have again chosen to return to cash since we think the greed/reward ratio tips toward greed.

Employment numbers have been flat (job losses = job gains) for the past two months but the employment that is now available is at significantly lower salaries than that of jobs lost. And with the turmoil in individual state budgets even the salaries and benefits of government employees and/or the number of employed are going to be reduced. The stimulus was too little and directed incorrectly but it was enough to stave off disaster. And with Social Security and Pension payments plus Medicare and other government programs a steady stream of spending –that was not available in the 1930s-continues to flow into the economy and will probably prevent any relapse into recession.

With unemployment holding at 10% the psychology of individual on the line workers probably entertains a little less fear of layoff. The recovery of stock portfolios and stabilization of housing prices, albeit at lower levels has created complacency in the markets. The rally in the last 12 months has been inexorable but not frantic. That has been a positive. But it is our take that at some point a correction of more that 9% will occur. We are content to have recovered and survived. We will leave the possible last 5% move higher before a significant pullback to those younger and more nimble than we.
*****


Davy Crockett R.I.P
.: http://www.nytimes.com/2010/03/19/arts/television/19parker.html?hpw




*****

(Yahoo) In Europe, stories related to proposed financial support for Greece continue to come across news wires, but any clear or official resolution remains absent. As for corporate news, Britain's Lloyds Banking Group (LYG) reported that it expects to post a profit in 2010, since provisions for bad assets are not as large as previously forecast. The news has helped lift other banking issues and supported a 0.7% gain for Britain's FTSE. Financial issues are also leading France's CAC, which is up 0.5% at the moment. BNP Paribas, Societe Generale, and Credit Agricole currently lead the list of top performers. In Germany, the DAX is up 0.4%. Deutsche Bank (DB) is a leader among advancing issues, which outnumber decliners by 3-to-1.

In Asia, Japan's Nikkei concluded the week with a 0.8% gain as its advancing issues outnumbered its decliners by 4-to-1. The broad-based advance helped the Nikkei finish the week on a positive note and solidify a modest weekly gain of 0.7%. Kyocera (KYO), Canon (CAJ), Honda Motor (HMC), and Sony (SNE) were primary sources of strength in the latest session. According to reports, Samsung Electronics predicted a strong 2010 and said it is aiming for double-digit sales growth from last year's record high. Hong Kong's Hang Seng had a more modest gain of 0.2% in its final session of the week. That helped it secure a weekly gain of 0.8%. Bank of China and China Construction Bank were primary sources of strength in the final session of the week. However, HSBC (HBC) was a key laggard. In mainland China, the Shanghai Composite closed Friday with a 0.7% gain and a 1.8% weekly gain.
*****

(WSJ) China's Geely said talks to acquire Ford Motor's Volvo unit have hit a snag because of unspecified delays at Ford, but added it still expects the deal to be completed.
*****

We’ve heard this before:

(WSJ) A potential spike in bad debts as a result of a government-backed lending surge is likely to be the biggest challenge for China's banks in the next few years, but lenders should be able to keep the problem at a "manageable level," Standard & Poor's Ratings Services said.
*****

Bad to worse:

(MarketWatch) Shares of Palm (PALM) dropped more than 15% in pre-market trading after issuing a revenue forecast for the current quarter that was far below market expectations. The company's inventory of its latest so-called smartphones has built up at wireless carriers and management expects future sales to be weak until it can clear out the channels. The company said its fiscal third-quarter loss narrowed to $18.5 million or 13 cents a share, from $95 million, or 89 cents a share, a year earlier.
*****

We decided to eliminate our final two positions and go to all cash. We sold Ford for a profit and Boston Scientific for a scratch profit/loss.
*****

Financials are lower because Goldman lowered its forecast for 2nd quarter bank profits by 155. The drop in financials ahs soured the entire market. Today ends Quintuple Witching.
*****

Headline: Fed must identify banks that needed bailout funds, appeals court says. http://www.bloomberg.com/apps/news?pid=20601087&sid=aUpIaeiWKF2s
*****

Penny wise:

(NYT) Arizona on Thursday became the first state to eliminate its Children's Health Insurance Program when Gov. Jan Brewer signed an austere budget that will leave nearly 47,000 low-income children without coverage.

The Arizona budget is a vivid reflection of how the fiscal crisis afflicting state governments is cutting deeply into health care. The state also will roll back Medicaid coverage for childless adults in a move that is expected to eventually drop 310,000 people from the rolls.

State leaders said they were left with few choices because of a $2.6 billion projected shortfall next year. But hospital officials and advocates for low-income people said they were worried that emergency rooms would be overrun by patients who had few other options for care, and that children might suffer enduring developmental problems because of inadequate medical attention.

Read more: http://swampland.blogs.time.com/2010/03/19/underplayed-story-of-the-day-arizona-drops-childrens-health-care-program/#ixzz0iecjH8FE
*****

The other side of the coin: Why stocks could continue to rise with the S&P 500 reaching 1225:

(Bloomberg)  The Standard & Poor’s 500 index has entered an “air pocket” of little resistance as it pushed to a 17-month high, according to analysts at Instinet, who say the benchmark could extend its rally.

The area of little resistance extends to between 1,180 and 1,200, where prices may keep rising even with low volume, said Instinet’s New York-based chief market technician John Schlitz.

The benchmark index for U.S. stocks broke out of a chart pattern known as an inverted head and shoulders in July, generating a price target of 1,225, Schlitz said in a telephone interview on March 17. That’s 5.1 percent higher than the S&P 500’s closing level of 1,165.83 yesterday, and could signal the measure will advance to about that point.

“Should the index eventually reach” 1,225, “we expect significant resistance to develop,” Schlitz said. The 61.8 percent Fibonacci retracement level of the bear market resides within 10 points of that level, he said.

Fibonacci analysis is based on a formula developed by 13th century mathematician Leonardo da Pisa, known as Fibonacci, who discovered the sequence while studying the reproduction rate of rabbits. Analysts use the indicator to determine levels where buy and sell orders may be clustered. Fibonacci ratios include 23.6, 38.2, 50, 61.8 and 76.4 percent moves.

The S&P 500 has recorded just one loss of more than 0.4 percent since Feb. 8. The S&P 500 closed above its daily mid- range in 23 of the 26 trading days during that span, Instinet said in a note co-written by Schlitz.

Stocks ‘Muscle Higher’

An “underlying sense of caution is generating intraday sell-offs which--although ultimately unsuccessful--are taking some of the pressure off the short-term overbought conditions,” Schlitz wrote. “That, together with light overhead resistance, is allowing the market to muscle higher on low volume.”

U.S. stocks rose March 17, sending the S&P 500 to its highest since September 2008, after a drop in producer prices supported the Federal Reserve’s assessment that the economic recovery isn’t stoking inflation. The benchmark slipped less than a point yesterday.

The S&P 500 closed at 1,150.23 on Jan. 19, the highest level since October 2008, and then plunged 8.1 percent through Feb. 8 on concern over deficits in European nations including Greece and speculation that the Fed will need to rein in emergency stimulus measures as the economy improves. The index has since recovered that loss and extended its rebound since the March 9, 2009, lows to 72 percent.

Technical analysts observe price charts to forecast resistance levels, or ceilings restricting further price increases, and support levels, or floors limiting declines. The trading patterns and prices are used to predict changes in a security, commodity, currency or index.
*****

Oil dropped $1.67 to $80.53 and Gold closed at $1105 down $22. European stocks closed mostly lower, as concern about Greece's fiscal situation rose again. The euro weakened on the dollar, 1 Euro = 1.3529 U.S. dollars.
*****

The major measures opened higher but reversed in the first hour of trading and were lower for the rest of the session. Breadth was 2/1 negative and volume was light for a Quarterly Witching day.

*****

 

18 March 2010

Model Portfolio Value As of 18 March 2010

$ 640,247

Tomorrow, Friday, Katie and friends ride over the Emory Pass in New Mexico which is the highest spot on their ride. The temperatures in Sliver City from where they are leaving and Kingston, NM, their destination, are expected to be in the 60s and but temps in the mountains may be cooler depending on the clouds. We thought her ride on Wednesday was her last mountain ride but we were wrong. But tomorrow’s 48 mile ride is the end of the mountains and it’s all downhill to the Atlantic Ocean from there.

http://www.kingstonnewmexico.com/ Once, Kingston was the largest silver mining town in New Mexico in 1880’s. The population grew to 7000 men and some women, children and Chinese people. Jack Sheddon discovered a rich lode of silver ore in 1882. Kingston quickly became a boom town with a bank, 22 saloons, 14 groceries, 3 hotels, 3 newspapers, a brewery, gambling halls and much more. Here is some current information about Kingston - it's pretty accurate since I live here. Today Kingston is a tiny village of about 25 residents - one blink and you will miss the turn to the entrance of the village. The Spit & Whittle Club, the nation's oldest continuously-active social club, dates to 1888 is still having a meeting in the old schoolhouse every month. You can still see some of the historical buildings and a fire bell in town. Kingston is a ghost town on the foothill of beautiful Gila National Forest. We are happily living here and enjoying life in this environment with the spirits.


*****
Thoughts

The crocuses are up and the tulip and hollyhock greens are also showing. Spring is on the way but snow is predicted for Saturday.
*****




(YAHOO) The Consumer Price Index for February was flat; a 0.1% monthly increase had been expected. Core prices increased 0.1% month-over-month, as expected. The February figures followed January's 0.2% monthly increase for headline CPI and a 0.1% monthly decrease for core CPI. Meanwhile, initial jobless claims for the week ended Mar. 13 totaled 457,000, which is on par with the 455,000 initial claims that had been expected and down 5,000 from the prior week. Continuing claims totaled 4.58 million, which is greater than the 4.52 million continuing claims that had been expected. Continuing claims for the prior week were upwardly revised to 4.57 million.

Most Asian markets declined Thursday, with Japanese exporters dragged lower as the euro weakened against the yen following a report that Greece may seek financial help from the IMF. The Nikkei was off 1.0%.European markets were quiet and mixed at midday.
*****

We completed our selling today by eliminating Huntington Bank and Sprint for scratch profits. We also sold half the Ford in most accounts for a 30% profit and as a discipline sold half our Boston Scientific position for 10% or less loss. That leaves us with small holdings in Ford and BSX in most accounts and 95% cash. Our take is that the world is not ending but stocks seem ahead of themselves and the economic outlook. We made enough money for clients to live on this year and we would rather be on the sidelines watching for now.
*****

Diane Swonk, chief economist Mesirow Financial: CPI Subdued, Jobless Claims Still Somewhat Elevated

The Consumer Price Index came in unchanged for the month of February, with declines in energy prices offsetting a slight increase in food and some of the core indices. Vehicle prices increased, as they did in the Producer Index. Once again, the vehicle sector is hardly a hotbed of inflation.

In general, inflation not only remains contained, but continues to decelerate from its pace of a year ago. Moreover, that trend is expected to continue, given the large role that housing plays in inflation measures. This should reassure the inflation hawks that inflation is tame and not a near-term problem. However, it also underscores how weak the recovery truly is.

Indeed, jobless claims edged slightly lower to 455,000 in the most recent week. This is still elevated, especially given the fact that weather is no longer a major distortion to the data. Moreover, ongoing claims remain extremely high, underscoring the difficulty for the already-unemployed to find a job.

The Bottom Line: The economy lost momentum in the first quarter - a critical time for the recovery. The best bet is that we muddle our way into spring and even start to generate some jobs along the way. Economic conditions will feel a little bit better as we move from 2010, through 2011, and into 2012. There is no going back, however, and the road ahead is rocky and uncharted. We are cutting a new path which is fraught with both danger and opportunity. The key is to find the opportunities, and if the financial reform proposals are any indication, we will see whole new industries arise as financial firms stake out their territory and adapt. History doesn't tell us where the jobs will come from - just that they will come.
*****

Attention Hank and Uncle Alan:

(http://www.huffingtonpost.com/2010/03/18/pak-nam-gi-north-korea-fi_n_503588.html) North Korea executed a former senior official last week as punishment for the country's botched currency reform, a news report said Thursday. In November, North Korea redenominated its currency as part of efforts to lower inflation and reassert control over the country's nascent market economy. However, the measure reportedly worsened the country's food situation by forcing the closure of markets and sparked anger among many North Koreans left with piles of worthless bills. Pak Nam Gi, the ruling Workers' Party finance and planning department chief who spearheaded the currency reform, was executed by a firing squad in Pyongyang last week, South Korea's Yonhap news agency reported, citing unidentified sources. Pak was accused of ruining the nation's economy in a blunder that also damaged public opinion and had a negative impact on leader Kim Jong Il's plan to hand power over to his youngest son, Yonhap said.
*****

(http://www.calculatedriskblog.com/) Loan Performance: January Home Price Index Shows Narrowing Annual Decline

National home prices, including distressed sales, declined by 0.7 percent in January 2010 compared to January 2009, according to First American CoreLogic and its Loan Performance Home Price Index (HPI). This was a significant improvement over December’s year-over-year price decline of 3.4 percent. Excluding distressed sales, year-over-year prices declined in January by 0.4 percent; while in December the non-distressed HPI fell by 3.3 percent year-over-year. Compared to a year ago, the month-to-month rate of decline is lessening – in January 2009, the HPI showed the largest one month decline in its more than 30-year history. On a month-over-month basis, the national average home price index decline accelerated, falling by 1.9 percent in January 2010 compared to 0.8 percent in December 2009, indicating the housing market still remains weak.
*****

(Bloomberg) -- Ebullio Capital Management LLP’s commodity hedge fund slumped more than 86 percent last month because of losses in industrial metals.

Assets under management fell to $1.47 million, from $42.3 million in November, according to the company’s February report to investors. The Southend-on-Sea, England-based fund pledged to honor requests from investors to return money after “quite substantial” redemptions in February and March.

“Extraordinary circumstances” forced the fund “to liquidate and/or cancel parts of the physical book and liquidate some long-held speculative positions, mainly in LME non-ferrous metals,” Ebullio founder Lars Steffensen wrote in the report, referring to the London Metal Exchange.
*****

European stocks closed mostly lower, as concern about Greece's fiscal situation rose again. The euro weakened on the dollar, while oil fell 86 pennies to $82.15 and gold was flat at $1126.
*****

The major market measures closed mixed with the DJIA and NAZZ slightly higher and the S&P 500 slightly negative. The DJIA has been up 8 days in a row. Breadth was negative and volume was light.

*****

 

St Patrick’s Day 2010

 

Model Portfolio Value As of 17 March 2010

$ 640,688

Katie’s phone died and it has taken a few days to replace it. Thus there have been no posts on her blog.

Katie sent this e-mail to us last night:

Headwinds up to 20 mph on Monday and 30 mph yesterday.  Couldn't go faster than 7 mph on flat.  Made the 78 miles on Monday but only made 65 of 75 mile route. couldn’t get in before dinner because of time change. Most of group didn't finish either day. Big climb today. Consolation is short mileage.

Hopefully Thursday she will have time to learn how to use the new phone, a droid, for a post. But she keeps riding on and today she and her cohorts are spending the day climbing 4000 feet to cross the Continental Divide. This is the last major climb for the ride and tomorrow is a well deserved rest day for the group.

(Wikipedia) The Continental Divide of the Americas, or merely the Continental Divide or Great Divide, is the name given to the principal, and largely mountainous, hydrological divide of the Americas that separates the watersheds that drain into the Pacific Ocean from (1) those river systems that drain into the Atlantic Ocean (including those that drain via the Gulf of Mexico or the Caribbean Sea), and (2) along the northernmost reaches of the Divide, those river systems that drain into the Arctic Ocean. There are other continental divides on the North American continent; however the Great Divide is by far the most prominent of these because it tends to follow a line of high peaks along the main ranges of both the American and Canadian Rocky Mountains, at a generally much higher elevation than the other divides.

 


*****
Thoughts

(Yahoo/Finance) Stock futures in the U.S. are still slightly higher this morning. In Europe, Britain's FTSE is up 0.4% at the moment. Mining stocks are strong as BHP Billiton (BHP), Xstrata, and Rio Tinto sport gains. Shares of RTP were actually downgraded by analysts at Societe Generale. In economic news, employment data for the U.K. came in better than expected, which has bolstered the British pound. The pound was also helped by the details of minutes from the last Bank of England meeting, during which policymakers voted unanimously to keep monetary policy unchanged. Germany's DAX is currently up 0.8%. Siemens is a leader for the second straight session. Reports indicated that the engineering giant plans to revamp its information technology unit to prepare it for a possible sale or public offering. In France, the CAC is currently up 0.5%... ArcelorMittal is outperforming, but Sanofi-Aventis has slipped amid news that the World Health Organization is conducting a probe into a vaccine from Sanofi. In Asia, the MSCI Asia Pacific Index advanced 1.5% to an eight-week high, while Japan's Nikkei tacked on 1.2% to hit at an eight-week closing high. The Bank of Japan eased policy in move thought to be an attempt to prevent the yen from rising. The central bank doubled the amount available under its short-term lending program to 20 trillion yen from 10 trillion yen. In corporate news, Elpida Memory was a strong performer after the Nikkei business daily said Elpida is expected to return to a hefty profit for its current fiscal year. Tokyo Electron
*****

While we were away market meandered higher. Investors’ Intelligence has 46% bull and 21% bears in its latest weekly report.
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(MarketWatch) Wholesale prices fell a larger-than-expected 0.6% in February after seasonable adjustments, with energy prices falling 2.9%, the Labor Department reported. This is the largest decline since last July. The producer price index has risen 4.4% in the past year, the government said. The core PPI - which excludes food and energy prices - rose 0.1% in February, more than expected. Core prices are up 1.0% in the past year. Economists surveyed by MarketWatch expected a 0.3% fall in the headline PPI and a 0.1% decline in the core rate.

Members of the Organization of the Petroleum Exporting Countries have agreed to keep the cartel's production quota unchanged at 24.845 million barrels a day, as expected, according to media reports on Wednesday citing delegates. OPEC is holding a meeting in Vienna. An official announcement is expected later on Wednesday.
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Government interference:

(WSJ) Air-safety regulators are ordering U.S. airlines to install new software on Boeing 777s to keep the jetliners from possibly running off the end of runways, a mandate that could ultimately affect more than 800 planes world-wide.

In a safety directive released Tuesday, the Federal Aviation Administration ordered the fix to prevent problems when the autopilot system is inadvertently on while a Boeing 777 aircraft is rolling down the runway just before takeoff.<
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For a price:

(WSJ) A package of 165 condominiums in downtown Orlando, Fla. was sold for $25.9 million at an auction there Monday, the auctioneer, Fisher Auction Co., said.

The winning bid compared with a minimum of $20 million set before the auction of units at a building called the Vue at Lake Eola and shows that investors are pouncing on what they see as bargains even in glutted condo markets like Orlando.

The winner among the nine registered bidders was Condo Developer LLC. Michael Messersmith, a Chicago-based lawyer representing that firm, said it was owned by a family trust but he declined to identify the family. The owners of Condo Developer are interested in acquiring more condo developments in large metropolitan areas across the U.S., Mr. Messersmith said.

The winning bid works out to about $125 per square foot. That compares with an original price of $350 to $450 on the condos several years ago, said Jeff Morris, a managing director at Jones Lang LaSalle, a broker that wasn't involved in the sale.

The 35-story building contains 375 condos, of which 210 already had been sold. The package sold Monday was all the remaining condos plus a vacant retail space of about 8,000 square feet on the ground floor.

The developer of the building, Vue-Orlando LLC, spent about $100 million to construct the tower, opened in 2007, and owes about $53 million to lenders, according to Scott Shuker, a lawyer for the developer. The banks forced the developer into bankruptcy proceedings in November.
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Mortgage Applications Decrease in Latest MBA Weekly Survey: http://www.calculatedriskblog.com/

The Market Composite Index, a measure of mortgage loan application volume, decreased 1.9 percent on a seasonally adjusted basis from one week earlier. The Refinance Index decreased 1.7 percent from the previous week and the seasonally adjusted Purchase Index decreased 2.3 percent from one week earlier. The refinance share of mortgage activity increased to 67.3 percent of total applications from 67.2 percent the previous week. The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.91 percent from 5.01 percent, with points increasing to 1.30 from 0.82 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. This is the lowest 30-year fixed-rate observed in the survey since mid-December of 2009, yet the effective rate was unchanged from last week due to the significant increase in points.
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Boston Scientific dropped like a rock on Monday when they reported that they had to suspend sales of a heart device because they hadn’t made the proper FDA filing. We bought more shares on the drop because the shares are at a multi-year low and we don’t think (hope) that they can mess up any more than they already have. We also sold our Natural Gas ETF after receiving a K1 for 2009 from the company. We thought UNG was a normal ETF and hate dealing with K1s. Since the K1 reported $0 there is no effect on 2009 tax returns.

We placed the money in Boston Scientific.
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In the spirit of selling when we can, not when we have to we are moving to 85% cash. We sold GE, Nokia, Nvdia, Dell, and Alcoa for nice percentage gains. We sold Goodyear and Deutsch Telekom for scratch profits.

The Model Portfolio is double where it was last year at this time. The Model is up almost 9% for the year and at its all time high.

Large accounts are up 7% to 9% for the year and smaller accounts are plus 10% and more. The S&P 500 is within 3% of our target.
*****

European stocks rose, helped by S&P's remarks that it no longer considers a downgrade of Greece's credit rating to be imminent. Oil ended up 95 pennies at $82.55 and Gold lost $2 to $1120.
*****

The major market measures were up all day and managed to hold most of their gains to finish 1/2% higher. Breathe was 2/1 to the good as the financials were strong and volume was light. Thursday and Friday are Quintuple Witching days so expect more volatility.


*****

 

16 March 2010

Portfolio Update

Model Portfolio Value As of 16 March 2010

$ 636,430

15 March 2010

Ides of March Portfolio Update

Model Portfolio Value As of 15 March 2010

$ 632,994

12 March 2010




We will be traveling Monday and Tuesday and so the next post will be on Wednesday St Patrick’s Day.
*****


Katie’s phone died in the Arizona desert. Her stop on day 7 at Salome was interesting but there were no phones or computers or much else there and so she was unable to post. Today she and Kelle arrive in Phoenix. She will post as soon a she can. Saturday the women ride 53 miles to Apache Junction followed by a 56 mile ride on Sunday to Globe, Az. Monday they move on to Safford, AZ in an 83 mile ride followed the next day by 75 miles to end the day in a new state at Lordsburg, New Mexico. A St Patrick’s day ride of 47 miles through the tail end of the Rocky Mountains will end at Silver City, NM after which they will spend the evening celebrating and take the next day Thursday off. The weather promises to be and in the 70s in Arizona and the 60s in New Mexico with a 20% chance of on Sunday.


*****

Thoughts

Model Portfolio Value As of 12 March 2010

$ 634,796

Arrived

Neither snow nor rain etc will keep the American shopper from shopping. (MarketWatch) U.S. retail sales posted an unexpected gain in February despite falling car demand amid trouble at Toyota and fierce blizzards that crippled the East Coast for days. Retail sales rose 0.3% last month compared with January, the Commerce Department said. Excluding the car sector, all other retail sales rose 0.8%. With the Super Bowl early in the month, sales at electronic store soared.
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(Reuters) - Women's clothing retailer AnnTaylor Stores Corp reported a surprise quarterly profit on Friday, helped by tight inventory management and improved merchandise.

The retailer, which operates its namesake Ann Taylor chain and the more casual, less expensive LOFT stores, said net income was $41 million, or nil per share, compared to a loss of $375.6 million, or $6.66 per share, a year earlier. Excluding restructuring charges, the company earned 5 cents per share. Analysts, on average, were expecting a loss of 1 cent per share, according to Thomson Reuters I/B/E/S. Net sales fell about 3 percent to $469.1 million. Same-store sales fell 0.6 percent, as a 2.1 percent increase at LOFT stores helped mitigate a 7.3 percent decline at Ann Taylor. For the current first quarter, AnnTaylor expects total net sales of $445 million, above analysts' average estimate of $443.7 million.

For the full year, AnnTaylor expects total sales in 2010 to rise, helped by a return to same-store sales growth at both of its chains. It expects total store square footage to decline 3 percent this year, as it plans to close about 72 stores and open 30.
*****

(Yahoo/Finance) 8 AM: U.S. stock futures continue to point to a higher start. Meanwhile, Europe's major bourses are firmly higher amid news that eurozone industrial production during January spiked 1.7% month-over-month. That exceeded the call from economists for a 0.6% increase. Britain's FTSE is currently up 0.4%. Royal Bank of Scotland (RBS), Lloyds Banking Group (LYG), and Barclays (BCS) are up solidly. In Germany, the DAX is currently up 0.9%. Deutsche Post is a primary leader. The stock stopped its two-day slide after UniCredit Research upgraded the name. Meanwhile, France's CAC is up 0.6% at the moment. Valeo is among the top performers. In Asia, the MSCI Asia Pacific Index tacked on 0.3%, while Japan's Nikkei closed 0.8% higher. Exporters gained ground amid speculation that the Bank of Japan may take additional steps to ease monetary policy after Japanese Prime Minister Hatoyama called for firm steps to stem the yen's strength. The comments precede central bank meeting next week. Hitachi (HIT) advanced after its incoming president said he has no plans to pursue additional capital raising and that the company must return to profit at any cost. Honda Motor (HMC) gained after the Nikkei business daily reported the automaker's CR-Z hybrid sports car is drawing unprecedented demand. In Hong Kong, the Hang Seng slipped 0.1%. However, Sun Hung Kai Properties gained after it forecast a stronger-than-expected first-half profit. In mainland China, the Shanghai Composite fell 1.2%. Banks weighed on the index.
*****

Retailers have had a nice run in the last few weeks and we want to lock in some profits and so we sold ANN and AEO for nice gains, Chico’s for a not so much gain as well as INTC and HAIN for solid gains. We also sold AT&T for flat to more than the dividend gain.  We sold VZ for twice two quarters and more of dividend gain. We want to raise cash in accounts and selling these two is the easy way to do it. We don’t understand why these two issues haven’t moved higher but we would rather keep our more volatile holdings right now while getting back to 40% invested and selling these two issues accomplishes that.
*****

European stocks closed lower as investors fretted about potential tightening of monetary policy in China, while lackluster U.S. economic data weighed on Wall Street. Gold ended down $6 at $1102 and Oil was $81.13 down 90 pennies.
*****


The stock market measures ended flat on Friday in light trading. The DJIA was up slightly and the NAZZ and S&P 500 were down slightly. Breadth was flat.


*****

 

11 March 2010

72/50 and the coast2caost crew ride a mere 67 miles on to Phoenix on Friday with clear warm weather ahead for at least the next few days.


*****
Thoughts

Model Portfolio Value As of 11 March 2010

$ 633,501

Spring is here as the redwing blackbird males arrived this morning warbling to stake out their territory for the females that will follow. The snow is melting and the fog hangs low over the remaining snow piles as ugly March gives promise of nicer times to come.
*****

Early market action suggests the pullback from the run up is upon us. As long as it doesn’t turn into a route (always the caveat) this correction will be healthy for a further advance to our target of 1250 on the S&P 500 by May.

The reason the talking heads and wire services are giving for the pullback is that traders are worried about Chinese inflation. Say What? How about the markets being up a gilllion days in a row on light volume with a rest needed as the more likely reason.
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(WSJ) --British oil giant BP PLC said Thursday it bought into a diverse and broad deepwater exploration portfolio that includes assets off the shores of Brazil, Azerbaijan and the U.S., in a $7 billion deal with U.S. independent oil and gas producer  Devon Energy Corp. The deal gives BP a greater footprint in two of its core areas--the Gulf of Mexico and the Caspian Sea--and its first entry into Brazil's prolific offshore basins.
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Oops!! He was just doing his civic duty and will probably refuse any cash reward.

HSBC account data theft affects 24,000 accounts. http://dealbreaker.com/

The bank was just kidding when it said previously that “less than 10 clients” were affected after a former HSBC computer specialist stole client data from the bank which he handed over to French tax authorities.
*****

Why is it that the supposed socialist Obama folk have the backs of the financial titans on Wall Street?

(WSJ) Geithner (Treasury Timmy) has warned the European Commission that its proposals for more restrictive regulation of alternative fund managers could affect cross-border investment, demonstrating how the controversial European Union directive could have transatlantic ramifications.

Europe wants to regulate hedge funds and other financial entities to prevent what occurred last year but Trusting Timmy is afraid the markets will collapse. Of course he and his Congressional allies also think that making hedge fund managers pay regular income tax and Medicare tax on their individual billions in earnings would hamper the system also. The remarkable reality is that the hedge funds get all this protection from a tax rates all the rest of us have to pay for a mere pittance –for them- of political contributions.
*****

Hooray? U.S. foreclosure filings rose 6% in February from a year earlier, the smallest increase in four years.
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(WSJ) The U.S. trade deficit narrowed to $37.29 billion in January, the Commerce Department said. A 1.7% decline in imports outpaced a 0.3% drop in exports as the volume of oil imports hit its lowest level in more than a decade. Separately, the number of idled U.S. workers applying for jobless benefits fell by 6,000 to 462,000 last week, the Labor Department reported, but total claims lasting more than one week rose and the four-week moving average of new claims also climbed.
*****

The bank stocks are not rolling over with the rest of the markets. That is mitigating this morning’s downdraft. It is probably the result of traders’ dawning understanding the Senate fiancé bill is to the likening of the banks. It should be since the banks wrote it.
*****

We bought another tranche of Huntington Bank, our only bank stock. It is speculative and remains a manageable position of portfolios.
*****

(WSJ) Verizon Wireless will have its first next-generation 4G handset in mid-2011, about six months earlier than the company had said before. The carrier could have a phone that runs on Long Term Evolution, a type of high-speed wireless technology, three to six months after it launches the service, Anthony Melone, chief technology officer at Verizon Wireless, said in an interview. The company expects to launch the service in some markets by the end of the year. The move is a key step in making faster, next-generation networks useable by consumers. Earlier uses will involve data cards for laptops. It will be some time before full coverage is available, however, and the first LTE phones will feature dual chipsets so they can work on Verizon's existing mobile-phone network.
*****

The gods are not happy with Chile: Three strong earthquakes rattled Chile's central-south on Thursday, minutes before Sebastian Pinera was sworn in as the country's new president.

The first aftershock, one of the strongest since a massive 8.8-magnitude quake devastated large swaths of Chile's Maule and Bio Bio regions, was magnitude-7.2, according to the U.S. Geological Service.
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We were interested in this article for what the panel expected 7th graders to know. We didn’t have equations and rational numbers (whatever they are-as opposed to irrational numbers?) until high school. We don’t think we could explain the concepts now.

(NYT) A panel of educators convened by the nation’s governors and state school superintendents proposed a uniform set of academic standards on Wednesday, laying out their vision for what all the nation’s public school children should learn in math and English, year by year, from kindergarten to high school graduation. The new proposals could transform American education, replacing the patchwork of standards ranging from mediocre to world-class that have been written by local educators in every state. Under the proposed standards for English, for example, fifth graders would be expected to explain the differences between drama and prose, and to identify elements of drama like characters, dialogue and stage directions. Seventh graders would study, among other math concepts, proportional relationships, operations with rational numbers and solutions for linear equations. The new standards are likely to touch off a vast effort to rewrite textbooks, train teachers and produce appropriate tests, if a critical mass of states adopts them in coming months, as seems likely. But there could be opposition in some states, like Massachusetts, which already has high standards that advocates may want to keep.
*****

Germany and France launched a proposal that calls for European trading in credit default swaps to be conducted on transparent exchanges and subjected to minimum holding periods.
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Again we note that the population of Greece is 12 million while the population of California is 36 million. The population of Illinois is 12 million and yet the fear mongers seldom mention that the financial crisis in California and/or Illinois is going to bring down the world financial system. We actually are more worried about California and Illinois and would like to see the $100 billion a year being spent in Afghanistan being spent in the states of the U.S. but then Congress and the White House find it more politically palatably to spend for a war that for a severe recession.
*****

News to some folks (men & women) we know:

Sex Life Ends at 70 as Health Declines, Study Says (Update1)

By Andrea Gerlin

March 10 (Bloomberg) -- The average person’s sex life ends by the age of 70, according to a report published today in the British Medical Journal. Men age 30 have an average of 35 years of sexually active life remaining, compared with 31 years for women, researchers at the University of Chicago’s department of obstetrics and gynecology estimated after reviewing a survey of 3,000 people. A separate survey of older people showed that by 55, men have an average sexual life expectancy of 15 years and women can expect 10 more years, the researchers found. People in very good or excellent health were almost twice as likely to be interested in sex as people in poorer health, according to the study. Men lost more years of sexual activity as a result of poor health than women, the researchers said. That may motivate men to pursue healthier lifestyles, they said. “Translation of expectations about the duration and quality of sexually active life may, at the individual level, influence important health behaviors to promote or prolong sexual functioning, such as adherence to medical treatment or maintenance of a healthy lifestyle,” the researchers wrote. In statistics, projections of how long people will live vary according to age. Life expectancy increases as people reach middle age because they have survived risks that earlier in life reduced their chances of making it to old age. The team led by Stacy Tessler Lindau, used data from a 1995-1996 survey of 3,000 men and women between ages 25 and 74 and a 2005-2006 survey of 3,000 men and women between 57 and 85. Men were more likely than women to be sexually active, report a having a good quality sex life and be interested in sex, according to the study. The gap was largest among 75- to 85-year-olds. About 40 percent of men in that group were sexually active, compared with 17 percent of women, the researchers found. The study was funded by the University of Chicago and the U.S. National Institutes of Health.
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European stocks closed lower as investors fretted about potential tightening of monetary policy in China, while lackluster U.S. economic data weighed on Wall Street. Gold ended at $1107 down $1 and Oil was $81.86 of 30 pennies. 1 Euro = 1.3674 U.S. dollars, 1 Japanese yen = 0.011048 U.S. dollars
*****

Bank stocks holding kept the major measures in check after an initial down opening and in the final hour the big boys and girls must have decided to go home long for the day. Thus the major stock measures were higher on the session and breadth improved from 3/2 negative early in today’s trading to 3/2 positive at the close. Volume was moderate.
*****

 

10 March 2010

This ☺ picture of Katie was taken before she began her 2000 foot climb on Day 2 of her ride. (She was also smiling afterwards.) Tomorrow’s (Thursday) ride is 57 miles to Wickenburg, Az. 63/38 at which time she will meet up with our daughter Christine (Kelle) for a one day ride for the both of them to Phoenix. Christine then leaves the ride to fly to Costa Rica for Spring Break with special friend Gerald. Rush is not going along. The bike riders and Katie especially will be happy for the sunshine and Phoenix promises 70 degree weather for them on Friday.


*****
Thoughts

Model Portfolio Value As of 10 March 2010

$ 631,788

Bluebirds and migrating starlings arrived. (Wikipedia- After a number of misguided attempts to introduce starlings to North America, perhaps 60-100 starlings were released into Central Park, in New York City, in 1890 and 1891, by an acclimatization society headed by Eugene Schieffelin. Their goal was to introduce all birds mentioned in Shakespeare's works. The entire North American population, now numbering more than 200,000,000, descended from these birds.)
*****

(MarketWatch) European shares continued the week's muted moves, with gains for mining stocks and some financial firms helping push the region's main indexes slightly higher. Major Asian indexes ended mixed after trading in a tight range as investors looked toward crucial economic data due this week, while Chinese stocks snapped a three-day advance amid concerns about policy tightening.
*****

The dollar is lower against the euro at $1.36 and higher against the yen at 90 yen.
*****

Bulls are higher at Investors Intelligence at 44% up from 42% last week and Bears are lower at 23% from 24%.
*****

(Bloomberg) -- Hedge funds that trade currencies are taking hits from politicians casting them as speculators out to sink the euro and push Greece into insolvency. They are also losing money.

Macro funds, so named because they try to profit from macroeconomic trends, fell 1 percent in the first two months of the year, according to data compiled by Chicago-based Hedge Fund Research Inc. Brevan Howard Asset Management LLC, Europe’s largest hedge-fund firm, Moore Capital Management LLC and Tudor Investment Corp. were among those reporting fund losses.

The euro dropped 4.8 percent against the dollar in January and February, while the British pound tumbled 5.8 percent and the cost to insure Greek government debt rose by a third through the beginning of February. Still, macro managers said the lack of sustained moves in markets they favor, such as developing- country stocks and commodities, made it difficult to profit.
*****

Bond underwriters handling the administration-backed Build America bonds have collected fees topping $1 billion. The fees the banks are earning on these bonds are 50% greater than the fees they normally earn. Contrast the love the Congress has for the large investment banks with the protection it gives to consumers:

(NYT) A Consumer Bill Gives Exemption on Payday Loans: Senator Bob Corker, the Tennessee Republican who is playing a crucial role in bipartisan negotiations over financial regulation, pressed to remove a provision from draft legislation that would have empowered federal authorities to crack down on payday lenders, people involved in the talks said. The industry is politically influential in his home state and a significant contributor to his campaigns, records show.

The Senate Banking Committee’s chairman, Christopher J. Dodd, Democrat of Connecticut, proposed legislation in November that would give a new consumer protection agency the power to write and enforce rules governing payday lenders, debt collectors and other financial companies that are not part of banks.

Late last month, Mr. Corker pressed Mr. Dodd to scale back substantially the power that the consumer protection agency would have over such companies, according to three people involved in the talks.

Mr. Dodd went along, these people said, in an effort to reach a bipartisan deal with Mr. Corker after talks had broken down between Democrats and the committee’s top Republican, Senator Richard C. Shelby of Alabama. The individuals, both Democrats and Republicans, spoke on condition of anonymity because they were not authorized to discuss the negotiations.

Under the proposal agreed to by Mr. Dodd and Mr. Corker, the new consumer agency could write rules for nonbank financial companies like payday lenders. It could enforce such rules against nonbank mortgage companies, mainly loan originators or servicers, but it would have to petition a body of regulators for authority over payday lenders and other nonbank financial companies.

Consumer advocates said that writing rules without the inherent power to enforce them would leave the agency toothless.
*****

On our afternoon walk yesterday we thought of the cost of the War in Afghanistan. U.S. taxpayers are spending about $80 billion out of pocket per year and with future cost of veterans’ health care and other benefits the cost is at least $100 billion per year. The population of Afghanistan is 12 million give or take. If the average Afghan family average 3 people that means there are 4 million families. The U.S. could offer sanctuary to 2.5 million Afghan units (more than half the population) and pay $40,000 per year to each unit and still spend less that the war is costing per year. Those refugees could be allowed to buy the foreclosed houses taking care of another problem. And no more troops would die in a useless cause.
*****

(Barron’s) American Eagle shares have continued last night’s rise, currently up 95 cents, or 5.5%, at $18.10, following a better-than-expected Q1 forecast this morning.

AEO said Q4 revenue rose 7.3% to $972 million, beating the average $969 million estimate, and yielding profit per share of 33 cents, in line with estimates. Same-store sales rose 5%, almost double the rate analysts were expecting and gross profit as a percentage of sales increased, year over year, from 34% to 39%.

For this quarter, the company sees profit per share of 15 cents to 17 cents, better than the 15 cents analysts have been projecting.

Last night, the company said it would close its “Martin” group of 28 stores, after the division continued to lose money, boosting the stock in after-hours trading by more than 5%.
*****

We switched KBE with a $1 profit to Deutsch Telecom with half our money left to add to cash. Bank stocks are higher on takeover rumors. Our guess is that this pop in bank stocks will let the Treasury try to sell part of its Citi stake. Citi is trading close to $4 per share. The Treasury owns its billions of shares at $3.25. With a close over $4 a secondary at $3.75 is just around the corner.
*****

European stocks closed higher, with an upbeat session on Wall Street providing support after stronger-than-expected economic data from China and the U.S. Oil ended at $82.02 up 40 pennies and Gold was down $15 at $1107.
*****

The major measures closed slightly higher on Wednesday with the S&P 500 up and The DJIA lower. Boeing was up $2.50 in the DJIA while 20 of the thirty issues were lower. AIG was up $3.40 AIG as a hot issue is not positive. Breadth was plus and volume light.

*****

 

9 March 2010

Wednesday the 10th the bikesters will head for Salome, Az. ☺ The ride for Katie and her cohorts is 64 miles. Weather 56/40. Where is the warm weather?
Salome, AZ, La Paz County, AZ Zip code population (2000): 2,266   Estimated zip code population in 2008: 2,870 http://www.azoutback.com/salome.htm

RV Parks, Open Lands, and the Airpark Fly-In Communities are big draws to the area. Thousands of acres of natural desert and wilderness are protected from development - giving residents and visitors the opportunity to off-road, rockhound, hike, explore, and wander through the Outback. Thousands of winter visitors / snow birds each year enjoy the mild winters, and the remote location.

Charles H. Pratt, with the help of Dick Wick Hall and his brother Ernest, established Salome in the fall of 1904. Dick Wick Hall named the town after Mr. Pratt's wife "Salome". The Post Office of Salome was established April 14th, 1905, and later moved to the current townsite in 1906. It is very hard to travel through the town of Salome without seeing mention of Dick Wick Hall, his famous frog, and the stick figure of the dancing Mrs."Salome" Pratt. Dick Wick Hall, co-founder of Salome, became famous for his writings, his imagination and his pet frog ~ and according to Mr. Hall ~ Mrs. Salome Pratt took off her shoes and danced across the hot sand that burned her feet. Thus, the town became "Salome ~ where she danced ~ Arizona." You can usually see her pictured on several of the buildings in town, right along with paintings of ~ "That Salome Frog" and a few saguaro cacti. So if you travel through, don't be shy about asking questions or taking pictures - happens all the time. Visit the Dick Wick Hall page for additional history and information regarding this famous humorist - and don't miss the annual Dick Wick Hall Days Celebrations.


*****
Thoughts

Model Portfolio Value As of 9 March 2010

$ 628,453

Turnaround Tuesday is upon us and given that the markets have been meandering higher the last 6 days a rest and recharge is probably in order. (MarketWatch) Most Asian markets ended higher Tuesday, as Shanghai and Hong Kong shares rose after an upbeat forecast from China Life Insurance Co., while China Southern Airlines Co. jumped on plans to raise funds through a private placement. European shares marked the one-year anniversary of multi-year lows with mild losses on Tuesday, as worries about Greece and earnings-related weakness from EADS and Deutsche Post weighed. Oil has backed down to $80.45 overnight and Gold is down $7 as the trading day in the land of milk and honey begins.
*****

All the better to make more folks resistant to antibiotics:

(MarketWatch) Health care giants Merck & Co. and Sanofi-Aventis said Tuesday that they will combine their animal-health divisions in a 50-50 joint venture that will create the world's biggest seller of veterinary drugs. France's Sanofi-Aventis said it's exercised an option to combine its Merial division with Merck's Intervet/Schering-Plough arm.
*****

Merkel wants to do what Obama and Treasury Timmy are too timid to attempt:

(WSJ) German Chancellor Angela Merkel called for fast action against credit-default swaps Tuesday, as European Central Bank Governor Christian Noyer said (CDS) should be traded through clearing houses under the control of a supervisor. "Clearing houses should be set up in each of the largest currency zones where CDS are traded...under the control of each zone's supervisors," Mr. Noyer said at a press conference in Paris. The clearing should "take place at conditions that would make the recourse to the central bank possible in case of need," Mr. Noyer said.

The EU also wants to ban short selling which is a mistake since without shorting there is no discipline on bullish investors. Shorting only on upticks worked for 70 years.
*****

(WSJ) The European Union's executive arm said on Monday it is preparing proposals that could lead to the creation of a bailout fund for financially troubled euro-zone countries.

The comments—coming a day after German Finance Minister Wolfgang Schäuble said in a newspaper interview he backed a plan for a European institution with "comparable powers of intervention to the International Monetary Fund"—signal that Greece's financial problems are speeding efforts to address important failings in the euro zone.

While members share a currency and a central bank, they have no institution that can rescue countries in trouble or enforce rules to limit budget...
*****

From the BLS: Job Openings and Labor Turnover Summary

There were 2.7 million job openings on the last business day of January 2010, the U.S. Bureau of Labor Statistics reported today. The job openings rate rose over the month to 2.1 percent, the highest the rate has been since February 2009. The hires rate (3.1 percent) and the separations rate (3.2 percent) were unchanged in January.
*****

The internet is greeeeeeeeat:

(WSJ) The Securities Investor Protection Corporation on Tuesday issued a warning about a group masquerading as another investor protection group in an apparent attempt to lure in victims of Bernard L. Madoff. In a press release, SIPC highlighted the site of the “International Securities Investor Protection Corporation,” which mimics the design of its own site. The so-called “I-SIPC” group calls on Madoff victims to submit their claims, with assertions like the purported discovery of $1.3 billion of Madoff assets found in Malaysia.

Its claim form asks investors for their Madoff case claim number, as well as copies of their most recent brokerage account statement.
*****

How to make lawyers rich:

(WSJ) Goldman Sachs Group was sued on Monday by a large union pension fund that accused the Wall Street investment bank of overpaying its executives, Reuters reported.

The International Brotherhood of Electric Workers fund filed the lawsuit in Delaware Chancery Court, seeking to recover money for the company on behalf of other shareholders.

It seeks to stop Goldman from allocating roughly 47 percent of 2009 net revenue as compensation, saying such allocations “vastly overcompensate management and constitute corporate waste.”

The lawsuit also wants Chief Executive Lloyd Blankfein and others in management, rather than shareholders, to be responsible for charitable contributions that Goldman is making, Reuters said.
*****

Just how bad was last year for dairy farmers? Average price received for milk was in the $11 to $12 per hundred pound range. The cost to produce one hundred pounds of milk is generally in the $15 -$16 range. To put that into perspective, if you take the price farmers received for their milk during the great depression and adjusted that for inflation, it would come to $40 - $60 per hundred. Imagine yearning for the good old days of the great depression.
*****

Cisco (today announced a major advancement in Internet networking -- the Cisco® CRS-3 Carrier Routing System (CRS) -- designed to serve as the foundation of the next-generation Internet and set the pace for the astonishing growth of video transmission, mobile devices and new online services through this decade and beyond. With more than 12 times the traffic capacity of the nearest competing system, the Cisco CRS-3 is designed to transform the broadband communication and entertainment industry by accelerating the delivery of compelling new experiences for consumers, new revenue opportunities for service providers, and new ways to collaborate in the workplace.
http://finance.yahoo.com/news/Cisco-Introduces-Foundation
*****

(MarketWatch) Sprint Nextel jumped more than 5% Tuesday after a top executive said the company plans to cut debt faster and hinted that quarterly revenue could grow in 2010 for the first time in four years. Chief Financial Officer Bob Brust made his remarks Monday afternoon at an investors’ conference.
*****

Matt Taibbi: Shorting America Rocks!

Lower credit risk means a lower price for protection. Zero implies zero risk. The higher the basis points, the higher the implied risk. When U.S. credit default swaps were first introduced,     the price of protection was around two basis points. According to Bloomberg, the price for five-year protection was around 38 basis points (per annum) on Friday. But the price in the over-the-counter market — where this stuff actually trades — was almost double or around 75 basis points.

Since most traders in U.S. credit default swaps don’t think the U.S. will default any time soon, why are they trading U.S. credit default swaps? They are speculating on price movements the way a day trader buys and sells stocks to speculate on stock price movements.

via Janet Tavakoli: Washington Must Ban U.S. Credit Derivatives as Traders Demand Gold.

I’d like someone to explain to me how trading a credit default swap on a U.S. Treasury note isn’t gambling. This is purely betting on crowd behavior — after all, nobody really thinks the U.S. will default.

It is weird enough living in a country where a man can legally own an arsenal of machine guns, but his neighbor growing a pot plant will send a team of DEA agents kicking his door in with a no-knock warrant. But this goes even beyond that. If I go online today to HaveNoLifeAndBetOnSports.com and bet fifty dollars on the Bucks against the Celtics tonight, I’m a criminal. But some gazillionaire firm in New York can legally bet against the United States of America in unlimited amounts in a trade that has nothing to do with anything, but a guess about how many other people will make the same bet.
*****

So the Israelis are insulted that after 14 months in office, Barack Obama has yet to come and visit them. Yet Bush went almost his entire term before he visited Israel, and did we ever hear them bitching about being insulted between January 2001 and January 2008? Nope. http://www.theleftcoaster.com/
*****

(AP) -- Nvidia Corp. shares rose Tuesday after a Raymond James analyst said chip supplies are tight and Wall Street is underestimating the maker of graphics chips.

Nvidia "remains a controversial name in the near term," Hans Mosesmann wrote in a note to investors. He said the stock "presents an opportunity as the Street appears to significantly underestimate the momentum in new products for 2010" as well as "upward movement in gross margins."
*****

(Bloomberg) -- In California’s Napa Valley, producer of the most expensive U.S. wines, 2010 may be a vintage year for foreclosures as the industry is squeezed by falling land values and a consumer shift to cheaper brands. As many as 10 wineries and vineyards in Napa will change hands in distressed sales or foreclosures this year and next, up from none in 2008, according to Silicon Valley Bank. In a bank survey of vintners, 7 percent called their finances “very weak” or “on life support.” “We have 250 vintner clients saying this downturn is the worst in 20 years,” Bill Stevens, manager of the bank’s wine division in St. Helena, California, said in an interview. “Anybody who was late to the party won’t have staying power.”
*****

Gold finished at $1122 down $2. Oil was $81.50. European stocks recovered earlier losses to finish mostly flat, as positive U.S. stocks offered support despite continuing concerns about the euro zone's sovereign debt crisis
*****

Wonder if Mustard was a Colonel? ☺

Robert Mustard, Jr., the man accused of shooting two men at a Dallas office building on Monday morning, was apparently trying to get his revenge on a financial advisory firm that he believed had lost all his money. According to the Fort Worth News, when Mustard approached his financial adviser, Richard Smith, 66, and his son, Chris, 39, in their office yesterday, he accused them of taking "all my money," before opening fire with a 45-caliber weapon. Mustard shot the elder Smith in the legs and his son -- who fled down an escalator into the lobby -- in the neck. With blood "gushing from both sides of his neck," witnesses told the AP that the younger Smith begged bank employees and customers for help: "He was screaming and crying," said Abraham Achar, who was visiting his friend at the United Texas Bank on the first floor. "He said, 'He shot my dad.'" When police arrived, Mustard was still on the premises, authorities said. Police shot at -- but missed -- the gunman, a disbarred lawyer, who then barricaded himself in an office and shot himself in the head.
*****

The major measures were higher most of the day but the big boys and girls began their games in the final hour and the DJIA lost its gain of more than 60 points to move into negative territory. But once the sell programs ceased the major measures moved up to close mildly positive on the day. Breadth was flat in light trading.

*****

 

8 March 2010

Katie dips her back bike wheel into the Pacific Ocean on March 5. Tuesday is a rest day which is needed after climbing 4500 feet on Friday and Saturday to breast the Sierra Nevada Mountains in the rain and riding 90 miles today to Blythe. Riding 233 in the first four days is not a blithe activity ☺.


*****
Thoughts

Model Portfolio Value As of 8 March 2010

$ 625,026

Greece is saved (maybe) and markets around the world are higher until the big boys and girls decide to attack another weak European country by blowing out the CDS (Credit Default Swaps) on the underlying sovereign debt of the target country.
*****

(yahoo.com)  this morning's mood remains subdued as participants sit on strong gains of more than 3% from last week -- the S&P 500 advanced in all five sessions, including an incremental gain midweek. Though there haven't been any economic items to act as catalysts ahead of the opening bell, there have been a few noteworthy items, including news that AIG (AIG) has divested another chunk of its business in further merger and acquisition activity. This time the insurance giant has offloaded its American Life Insurance Company to MetLife (MET) in a $15.5 billion deal. Shares of AIG are up 4.2% to $29.27 each in premarket trade and MET shares are up 4.3% to $40.55 per share in premarket trade. In other corporate news, Hewlett-Packard (HPQ) revised lower its previously announced first quarter earnings to $1.07 per share. Its stock price is down 0.7% to $51.66 per share in premarket action. Meanwhile, the dollar remains a focal point of market participants; the greenback is currently down 0.3% against competing currencies.
*****

(Bloomberg) -- Emerging-market stocks rose to a six-week high, currencies of commodity-producing nations strengthened and oil and metals advanced as Greece and Dubai moved closer to resolving their debt woes. The MSCI Emerging Markets Index climbed 1.3 percent at 12:47 p.m. in London, while Greece’s ASE Index gained 1.4 percent. The gap between Greek and German two-year notes narrowed 19 basis points to 359. Futures on the Standard & Poor’s 500 Index fluctuated between gains and losses. The Australian and New Zealand dollars strengthened against the U.S. currency and the yen, and oil increased as much as 1.1 percent in New York. French President Nicolas Sarkozy said the euro region is ready to rescue Greece should the government struggle to fund Europe’s biggest budget deficit, while former Federal Reserve Chairman Paul Volcker said the challenges posed by Greece’s debt aren’t “insuperable.” Dubai World, the state-owned holding company that’s trying to renegotiate about $26 billion of debt, will present a plan to creditors this month, said three bankers familiar with the negotiations.
*****

(http://www.calculatedriskblog.com/ )

From James Sterngold at Bloomberg: ‘On the Edge’ Banks Facing Writedowns After FDIC Loan Auctions (ht jb)

A Federal Deposit Insurance Corp. plan to auction more than $1 billion in assets seized from failed banks next month ... may trigger write downs that weaken lenders nationwide.

...

The auctions may have wider repercussions. Of the $50.4 billion in loans seized from failed banks currently held by the FDIC, 63 percent involve participations by other lenders, according to data provided by agency spokesman Greg Hernandez.

“These banks can’t believe that the regulator they pay to protect them is going to sell these loans to someone who can flip them and cause them serious losses,” said Robert Reynolds, a lawyer at Reynolds Reynolds & Duncan LLC in Tuscaloosa, Alabama, ... “Our banks just cannot believe they’re being treated in a way that ultimately hurts the FDIC’s insurance fund, because some of them are right on the edge.”

...

“We have a number of banks teetering on the edge, and we don’t need this problem,” [John J. Collins, president of Community Bankers of Washington in Lakewood, Washington] said in an interview.

"This problem" is many small and regional banks are carrying loans above market value. The FDIC auction will establish market value, and that will probably lead to significant losses for many banks - and more bank failures.
*****

Today’s market. Last year’s market.
*****

Despite the lack of economic and corporate data, European stocks closed mostly flat as concerns about Greece receded. The dollar weakened. Earlier, Asian markets closed mostly up 1% and more. Oil ended up $23 pennies at $81.70 and Gold lost $12 to $1122.
*****


The major stock measures were mixed all day and closed that way in light trading. Breadth was slightly positive.


*****

 

5 March 2010

KatieCoast2Coast March 6 and Katie is off to Jacumba, California 45 miles 50/38 (warmer in the land of milk and honey).

March 7 and she rides to Brawley, California 67 miles 65/49.

March 8 and it gets real, 89 miles to Blythe, California. 67/49.

But they get the next day off.

Blythe is in the desert on the California, Arizona border. Centuries ago, prehistoric cultures living along the Colorado River created gigantic figures on the surface known to archaeologist as "Intaglios." Also known as the Blythe Geoglyphs, archaeological dating suggests that these particular features are about 1100 years old. Since then, the Colorado River-dwelling Mojave peoples occupied the area.

The city of Blythe was named for English developer/financier Thomas Blythe, who first came here in 1877 and established primary water rights on the Colorado River. It was incorporated on July 21, 1916. Blythe came to California hoping to turn the Colorado River Valley into another Nile River Valley. For the most part, he succeeded. Modern irrigation methods have allowed the desert to become a rich farming and recreational area. Some mining still occurs in the Palo Verde Valley.

Six miles north of Blythe is the site of the original Blythe Intake, where the first legal claim for Colorado River Water was made. Water was transported from here to the nearby, desert Palo Verde Valley which is now lush farmland.


*****
Thoughts

Model Portfolio Value As of 5 March 2010

$ 623,413

One year ago tomorrow the Markets made their decade low in a huge sell off that cleared the air. In hindsight the bottom seems obvious. At the time it was scary, scary, and scary. Since then the major market measures have doubled and the fear of those days has again been replaced by greed. We try not to forget as we go about our daily trading. We must admit that we felt a lot better this morning when we awoke than we did a year ago.
*****

Our market outlook remains positive with an expectation of another 10% rise in the S&P 500 to 1250 before a major pull back. Markets like gridlock in Washington. The Employment report was a loss of 36,000 jobs for the month of February which was below expectations. And the news was greeted positively by the markets both here and overseas. January job losses were revised to down 26,000 from the first reported down 20,000 numbers. The unemployment rate is 9.7%.
*****

Stocks in Japan climbed on reports the Bank of Japan could take further easing measures. Europe stocks rose in midday trade, putting the market on track for six straight days of gains.
*****

European shares jumped Friday to stretch a winning run to six sessions after a report painted a much better-than-expected picture of the U.S. jobs market. Gold $1132 and Oil ended at $81.75. The euro was $1.36.
*****

The major measures were higher all day and closed on their highs up 1% with the S&P 500 ending above the important 1130 level at 1138.  Breadth was 5/1 positive and volume was moderate. The wall of worry is losing height. Six days up suggest that either Mean Monday or Turnaround Tuesday is probable to skim the froth.

*****

 

4 March 2010

Katie’s Bike tour begins Friday AM and goes 32 miles from the Pacific Ocean in San Diego to Alpine California which is still in San Diego County. Weather forecast is 59/45.

Alpine California: http://maps.google.com/maps/place


*****
Thoughts

Model Portfolio Value As of 4 March 2010

$ 617,582

Asia was lower overnight and Europe is mixed a midday. U.S. futures are flat as the trading day begins. Gold is down $3 and Oil is touching $81.
*****

The euro is $1.36. According to the WSJ http://seekingalpha.com/article/191964-hedge-fund-euro-probe-should-look-for-media-manipulation the Justice Department is investigating collusion among hedge to drive down the value of the euro versus the dollar. Ten years ago the value relation was the inverse of today and folks were saying the euro would never rise in value. As long as there are traders there will be fluctuations. Hedge funds can control a lot of things, but currency values are not one of them.
*****

(MarketWatch) European shares pulled off early lows to trade broadly flat, with the European Central Bank and the Bank of England both keeping rates on hold. Asian markets closed mostly lower, with Japan's Nikkei 225 closing down over 1%, with export-related stocks among the fallers.

U.S. stock market futures held broadly flat Thursday as data showed a fall in initial jobless claims and as productivity figures were revised higher, with Coca-Cola, Boeing and Walt Disney in focus after receiving broker upgrades.

U.S. nonfarm businesses were more productive in the second half of the year than previously reported, slashing hours by 1.3% even as they boosted their output by 2.5%, the Labor Department reported. In the fourth quarter, productivity increased at a 6.9% annual rate, revised up from 6.2%. In the third quarter, productivity was revised higher to a 7.8% annual rate from 7.2%. For all of 2009, productivity increased 3.8%, the most in seven years.
*****

American Eagle Outfitters said Thursday that a key sales figure rose past analyst expectations last month and reiterated its fourth-quarter outlook. The company said sales at stores open at least a year rose 6 percent in the four-week period ending Feb. 27. Analysts surveyed by Thomson Reuters forecast an increase of 2 percent. Sales at stores open at least a year are considered a key measure of retailer performance since they measure growth at existing stores rather than newly opened ones. Total sales for the period rose 6 percent to $188 million, from $177 million in the same period last year. American Eagle maintained its fourth-quarter adjusted profit outlook, which it previously raised based on its sales performance in January. The retailer expects earnings in a range of 32 cents to 33 cents per share, excluding possible investment security or store impairment charges. Analysts predict fourth-quarter earnings of 33 cents per share. Analyst estimates typically exclude one-time items. The company is due to announce fourth quarter results next Wednesday.

The share price sold off $1 on the news- our guess is either an analyst downgraded the stock or that traders were disappointed in that the fourth quarter estimate wasn’t’ raise again as it was several weeks ago. We bought shares for accounts on the drop.
*****

Women's apparel retailer Coldwater Creek posted a smaller quarterly loss that missed estimates by a penny, but said it expects to improve merchandise margins this year as the company looks to revamp its offerings and adjust price points.

We didn’t like the report (profits are promised but not until next fall) and sold for a 20% profit. We are more comfortable with our positions in the ANN, AEO and CHS.
*****

(AP)Natural gas stockpiles fell less than expected last week, the government said Thursday. The Energy Department's Energy Information Administration said in its weekly report that natural gas inventories held in underground storage in the lower 48 states dropped by 116 billion cubic feet to about 1.74 trillion cubic feet for the week ended Feb. 26. Analysts expected stocks to fall between 128 billion and 132 billion cubic feet, according to a survey by Platts, the energy information arm of McGraw-Hill Cos. The inventory level was 1.2 percent above the five-year average of about 1.7 trillion cubic feet, and 3.9 percent below last year's storage level of about 1.81 trillion cubic feet, according to the government data. Natural gas prices dropped 10.2 cents, or 2 percent, to $4.655 per 1,000 cubic feet on the New York Mercantile Exchange.

The Natural Gas ETF is on its all time low and is priced at only a 1% premium to NAV. As the price of oil continues to rise we would guess that Natural gas should eventually stabilize. Of course we have been wrong before but the disconnect doesn’t make sense to us. Whatever, we are buying the UNG ETF in larger/ aggressive accounts for a trade.
*****

NAR: Pending Home Sales Down; Severe Weather Impacting Market

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in January, fell 7.6 percent to 90.4 from an upwardly revised 97.8 in December ...
“We will see weak near-term sales followed by a likely surge of existing-home sales in April, May and June,” [Lawrence Yun, NAR chief economist] said. “The real question is what happens in the second half of the year."
*****

Unemployment insurance claims:

In the week ending Feb. 27, the advance figure for seasonally adjusted initial claims was 469,000, a decrease of 29,000 from the previous week's revised figure of 498,000. The 4-week moving average was 470,750, a decrease of 3,500 from the previous week's revised average of 474,250. The advance number for seasonally adjusted insured unemployment during the week ending Feb. 20 was 4,500,000, a decrease of 134,000 from the preceding week's revised level of 4,634,000.
*****

European shares closed lower after amid mixed U.S. economic data and a further easing of the Greece fiscal crisis. The euro slipped to $1.35 against the dollar and oil closed at $80.02 and gold fell $4.
*****

The U.S. sold its warrants to purchase shares of Bank of America stock for $1.5 billion, the most Treasury has earned from selling warrants in a single institution.
*****


The major measures closed mildly higher ahead of the Employment Report at 7:30AM tomorrow. Breadth was positive and volume light.


*****

Nice story from chicagotribune.com. Not all news is bad.

Amazing Grace: Lake Forest secret millionaire donates fortune to college

Woman who lived frugally donates $7 million to alma mater

By John Keilman, Tribune reporter

Like many people who lived through the Great Depression, Grace Groner was exceptionally restrained with her money.

She got her clothes from rummage sales. She walked everywhere rather than buy a car. And her one-bedroom house in Lake Forest held little more than a few plain pieces of furniture, some mismatched dishes and a hulking TV set that appeared left over from the Johnson administration.

Her one splurge was a small scholarship program she had created for Lake Forest College, her alma mater. She planned to contribute more upon her death, and when she passed away in January, at the age of 100, her attorney informed the college president what that gift added up to.

"Oh, my God," the president said.

Groner's estate, which stemmed from a $180 stock purchase she made in 1935, was worth $7 million.

The money is going into a foundation that will enable many of Lake Forest's 1,300 students to pursue internships and study-abroad programs they otherwise might have had to forgo. It will be an appropriate memorial to a woman whose life was a testament to the higher possibilities of wealth.

"She did not have the (material) needs that other people have," said William Marlatt, her attorney and longtime friend. "She could have lived in any house in Lake Forest but she chose not to. … She enjoyed other people, and every friend she had was a friend for who she was. They weren't friends for what she had."

Groner was born in a small Lake County farming community, but by the time she was 12 both of her parents had died. She was taken in by George Anderson, a member of one of Lake Forest's leading families and an apparent friend to Groner's parents.

The Andersons raised her and her twin sister, Gladys, and paid for them to attend Lake Forest College. After Groner graduated in 1931, she took a job at nearby Abbott Laboratories, where she would work as a secretary for 43 years.

It was early in her time there that she made a decision that would secure her financial future.

In 1935, she bought three $60 shares of specially issued Abbott stock and never sold them. The shares split many times over the next seven decades, Marlatt said, and Groner reinvested the dividends. Long before she died, her initial outlay had become a fortune.

Marlatt was one of the few who knew about it. Lake Forest is one of America's richest towns, filled with grand estates and teeming with luxury cars, yet Groner felt no urge to keep up with the neighbors.

She lived in an apartment for many years before a friend willed her a tiny house in a part of town once reserved for the servants. Its single bedroom could barely accommodate a twin bed and dresser; its living room was undoubtedly smaller than many Lake Forest closets.

Though Groner was frugal, she was no miser. She traveled widely upon her retirement from Abbott, volunteered for decades at the First Presbyterian Church and occasionally funneled anonymous gifts through Marlatt to needy local residents.

"She was very sensitive to people not having a whole lot," said Pastor Kent Kinney of First Presbyterian. "Grace would see those people, would know them, and she would make gifts."

Groner never wed or had children — the sister of one prospective groom blocked the marriage, Marlatt said — but with her gregarious personality she had plenty of friends. She remained connected to Lake Forest College, too, attending football games and cultural events on campus and donating $180,000 for a scholarship program.

That allowed a few students a year to study internationally, including Erin McGinley, 34, a junior from Lake Zurich. She traveled to Falmouth, Jamaica, to help document and preserve historic buildings in the former slave port. The experience was so satisfying that she is trying to get Lake Forest to create a similar architectural preservation program.

"It affected my (career ambitions) in a way I didn't expect," she said.

But Groner was interested in doing more, so two years ago she set up a foundation to receive her estate. Stephen Schutt, Lake Forest's president, knew of the plan for the past year, but had no idea how large the gift would be until after Groner passed away Jan. 19.

The foundation's millions should generate more than $300,000 a year for the college, enabling dozens more students to travel and pursue internships. Many probably wouldn't be able to pursue those opportunities without a scholarship: 75 percent of the student body receives financial aid, Schutt said.

But the study and internship program is not the end of Groner's legacy. She left that small house to the college, too. It will be turned into living quarters for women who receive foundation scholarships, and perhaps something more: an enduring symbol that money can buy far more than mansions.

It will be called, with fitting simplicity, "Grace's Cottage."
*****

 

3 March 2010

Thoughts

Model Portfolio Value As of 3 March 2010

$ 615,897

Oil is $80 and Gold $1141 as the trading day begins. Asian and European markets were higher overnight.
*****

ADP reported this morning that private-sector payrolls drop 20,000 in February, the fewest in two years. This report precedes Friday’s Monthly Employment Report which is the next number on which the big boys and girls are focused.
*****

(WSJ) Ford Motor Co. surpassed General Motors Co. in sales last month for the first time in at least 50 years, presenting a new headache for the government-owned car maker as it struggles to return to profitability. ...Ford said it sold 142,006 cars and light trucks in the U.S. in February, 43% more than a year ago—and 471 more than GM. While Ford's results were boosted by sales to rental-car companies and other fleets, it was the first time since at least 1960 that Ford outsold its larger rival except for two months in 1998 when GM was hurt by strikes, according to Edmunds.com, an automotive data provider. GM's February sales rose 11.5%, to 141,535 vehicles.
*****

To complete our wireless exposure we added shares of Sprint to most accounts. It is the cheapest and also the worst of the four major wireless providers in the U.S. Our guess is that consolidation will lead Deutsch Telecom (T Mobile) to acquire Sprint. DT could pay twice the current price and still be buying Sprint at half the value the markets currently give to AT&T and Verizon’s wireless operations.
*****

Diane Swonk, Chief Economist Mesirow Financial

            Wednesday, March 3, 2010

Precursor to Friday Employment Report Not Encouraging

Today's ADP report, which is a precursor to the employment report for February, showed a decline of 20,000 in February - the smallest decline since early 2008, but still negative instead of positive. Moreover, the ADP report is less sensitive to weather-related losses than the report that will be released on Friday by the government, and hence, is understating (by as much as 100,000-200,000) the losses we will see in the official data for February.

Separately, the government started hiring for the 2010 census during the month, which means that private sector job losses were even greater. The blow to construction was particularly large, especially once you add weather-related disruptions back into the equation.

On the bright side, manufacturing employment looks like it may have posted its second monthly gain. Production has picked up as inventories have fallen even below lackluster demand in recent months, and now must be replenished.

The Bottom Line: Firing continued to outpace hiring in February, but the pace of layoffs is clearly abating, and we are close to a tipping point. Increased hiring associated with the census, and the catch-up from weather delays in February, virtually ensure a RISE in employment in March. An economy that must rely upon census hiring and better weather to produce employment gains, however, is not exactly something to pop champagne corks over. Indeed, preliminary data suggest that the economy is losing instead of gaining momentum in the first quarter - an uncomfortable but predictable reality, given the ravages of the financial crisis.
*****

We repurchased shares of the Money Center Bank ETF (KBE) in many accounts.
*****

Flagstaff Arizona is on the main Santa Fe RR route from the west coast to the east. There are five RR crossings in town and the city has finally won a long fight to have the train whistles silenced as the trains pass those five crossings. The article in the Flagstaff paper is here:

http://www.azdailysun.com/news/local/article_e67b70f1-bb2b-5384-9f7c-49df8e19cd30.html

An economically interesting sentence in that article is: A Burlington Northern Santa Fe Railway official said during the ceremony that currently 60 trains pass through town, down from a peak of 125 trains per day a few years ago before the recession.
*****

(http://www.calculatedriskblog.com/ )

From the Institute for Supply Management: February 2010 Non-Manufacturing ISM Report On Business®

"The NMI (Non-Manufacturing Index) registered 53 percent in February, 2.5 percentage points higher than the seasonally adjusted 50.5 percent registered in January, indicating growth in the non-manufacturing sector. The Non-Manufacturing Business Activity Index increased 2.6 percentage points to 54.8 percent, reflecting growth for the third consecutive month. The New Orders Index increased 0.3 percentage point to 55 percent, and the Employment Index increased 4 percentage points to 48.6 percent. The Prices Index decreased 0.8 percentage points to 60.4 percent in February, indicating an increase in prices paid from January. According to the NMI, nine non-manufacturing industries reported growth in February. Respondents' comments vary by industry and company about business conditions."
...
Employment activity in the non-manufacturing sector contracted in February for the 26th consecutive month. ISM's Non-Manufacturing Employment Index for February registered 48.6 percent. This reflects an increase of 4 percentage points when compared to the seasonally adjusted 44.6 percent registered in January.

ADP reports:

Nonfarm private employment decreased 20,000 from January to February 2010 on a seasonally adjusted basis, according to the ADP National Employment Report®. The estimated change of employment from December 2009 to January 2010 was revised down, from a decline of 22,000 to a decline of 60,000. The February employment decline was the smallest since employment began falling in February of 2008.

Two large blizzards smothered parts of the east coast during the reference period for the BLS establishment survey. The adverse weather had only a very small effect on today’s ADP Report due to the methodology used to construct it. However, the adverse weather is widely expected to depress the BLS estimate of the monthly change in employment for February, but boost it for March. Therefore, it would not be unreasonable to expect the BLS estimate for February (due out this Friday) to be less than today’s ADP Report even though the BLS estimate will include the hiring of temporary Census workers not captured in the ADP Report.

Note: ADP is private nonfarm employment only (no government jobs).
*****


Rep. Patrick McHenry (R-NC) introduced a bill yesterday that would bump Ulysses S. Grant -- our 18th president and Civil War hero -- from the $50 bill in favor of Ronald Reagan -- our 40th president and Republican hero.

*****

Oil gained $1.12 to close at $80.80 and Gold finished at $1140 up $3. European stocks rose, boosted by a fresh set of austerity measures from Greece and better-than-expected U.S. private sector employment data. The euro gained against the pound.
*****


The major measures were mixed small the close. The DJIA was down 10 points and the S&P 500 was up 1 point. Breadth was positive and volume was moderate.


*****

 

2 March 2010

Portfolio Update

Model Portfolio Value As of 2 March 2010

$ 614,761

1 March 2010



Rabbit, Rabbit



We will be traveling tomorrow and so the next post will be on Wednesday March 3.
*****

Thoughts

Model Portfolio Value As of 1 March 2010

$ 613,953

 

Happy Casimir Pulaski Day.

Casimir Pulaski Day is a holiday observed in Illinois on the first Monday of every March in memory of Casimir Pulaski (March 4, 1745[1] – October 11, 1779), a Revolutionary War cavalry officer born in Poland as Kazimierz Pułaski. He is known for his contributions to the U.S. military in the American Revolution by training its soldiers and cavalry.

For more http://www.polishamericancenter.org/Pulaski.htm
*****

Asian and European markets were higher overnight. Oil has an $80 handle and Gold is at $1115. Copper is strong on the Chile earthquake.
*****

(Marketwatch) European shares advanced overall on the first day of March, although Prudential shares and sterling slumped after the London-based insurance giant announced a large-scale rights issue to partially fund the purchase of American International Group's Asian operations.

Asian markets rose Monday as resource stocks advanced after a massive earthquake in Chile raised expectations of higher prices for copper.

U.S. stock futures rose Monday as a slate of merger activity, including the sale of American International Group's Asia operations, greeted the new month and consumer spending rose in January.

Merrill Lynch unit upgraded oil giant BP to buy from neutral on Monday. "The recent sell-off in the market opens a compelling valuation opportunity," the broker said.

Britain's Prudential plc said it's going to buy AIA, the Asia operation of American International Group, for $35.5 billion in cash and stock. Prudential will sell $20 billion in discounted shares to existing holders to fund the deal which will give it leading positions in seven countries with highly complementary products and distribution channels across the region. Prudential intends to seek a dual primary-listing on the Hong Kong Stock Exchange.

Real consumer spending increased a seasonally adjusted 0.3% in January to the highest level since May 2008 in a further sign of a modest economic recovery, the Commerce Department estimated Monday. Adjusted for inflation, real spending on goods increased 0.8%, while spending on services remained anemic, rising 0.1%.

Worldwide semiconductor sales in January rose 47.2% to $22.5 billion from $15.3 billion a year earlier, according to data from the Semiconductor Industry Association Monday. Sales were up 0.3% from $22.4 billion December, the association added. "January and February of 2009 were the low point of the industry downturn as the semiconductor industry and electronics manufacturers quickly responded to the global economic recession," said SIA President George Scalise. "We are currently seeing strength across a range of demand drivers for semiconductors, including personal computers, cell phones, automobiles, and industrial applications," he added.
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From the BEA: Personal Income and Outlays, January 2010 (http://www.calculatedriskblog.com/)

Personal income increased $11.4 billion, or 0.1 percent, and disposable personal income (DPI) decreased $47.6 billion, or 0.4 percent, in January, according to the Bureau of Economic Analysis. ... Personal consumption expenditures (PCE) increased $52.4 billion, or 0.5 percent.
...

Real PCE -- PCE adjusted to remove price changes -- increased 0.3 percent in January, compared with an increase of 0.1 percent in December.
...

Personal saving -- DPI less personal outlays -- was $367.2 billion in January, compared with $467.9 billion in December. Personal saving as a percentage of disposable personal income was 3.3 percent in January, compared with 4.2 percent in December.
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Krugman on the need for financial regulation:

Many opponents of the House version of banking reform present their position as one of principle. House Republicans, offering their alternative proposal, claimed that they would end banking excesses by introducing “market discipline” — basically, by promising not to rescue banks in the future.

But that’s a fantasy. For one thing, governments always, when push comes to shove, end up rescuing key financial institutions in a crisis. And more broadly, relying on the magic of the market to keep banks safe has always been a path to disaster. Even Adam Smith knew that: he may have been the father of free-market economics, but he argued that bank regulation was as necessary as fire codes on urban buildings, and called for a ban on high-risk, high-interest lending, the 18th-century version of subprime. And the lesson has been confirmed again and again, from the Panic of 1873 to Iceland today. ....

That said, some Republicans might, just possibly, be persuaded to sign on to a much-weakened version of reform — in particular, one that eliminates a key plank of the Obama administration’s proposals, the creation of a strong, independent agency protecting consumers. Should Democrats accept such a watered-down reform?

I say no.

There are times when even a highly imperfect reform is much better than nothing; this is very much the case for health care. But financial reform is different. An imperfect health care bill can be revised in the light of experience, and if Democrats pass the current plan there will be steady pressure to make it better. A weak financial reform, by contrast, wouldn’t be tested until the next big crisis. All it would do is create a false sense of security and a fig leaf for politicians opposed to any serious action — then fail in the clinch....
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PMI at 56.5% in February. Down from 58.4% in January, and up from 54.9% in December.
(http://www.calculatedriskblog.com/)

From the Institute for Supply Management: February 2010 Manufacturing ISM Report On Business®

Economic activity in the manufacturing sector expanded in February for the seventh consecutive month, and the overall economy grew for the 10th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business®.

The report was issued today by Norbert J. Ore, CPSM, C.P.M., chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. "The manufacturing sector grew for the seventh consecutive month during February. While new orders and production were not as strong as they were in January, they still show significant month-over-month growth. Additionally, the Employment Index is very encouraging, as it is up 2.8 percentage points for the month to 56.1 percent. This is the third consecutive month of growth in the Employment Index. With these levels of activity, manufacturers are seemingly willing to hire where they have orders to support higher employment."
...

ISM's Employment Index registered 56.1 percent in February, which is 2.8 percentage points higher than the seasonally adjusted 53.3 percent reported in January. This is the third month of growth in manufacturing employment, and the highest reading since January 2005 (58.7 percent). An Employment Index above 49.8 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

Emphasis added

As noted, any reading above 50 shows expansion.
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European stocks rose, supported by a surge in mergers and acquisitions news but sterling sank to a ten-month low against the dollar. Oil ended at $78.79 down 8 pennies and Gold was $1117 down $2.
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The major measures closed higher with the S&P 500 up 11 at 1115. Breadth was 3/1 to the good on the NYSE, a bit less on the NAZZ, and volume was light.



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