“The Conference Board‘s Consumer Confidence Index fell to 38 in December from a revised 44.7 in November. Economists surveyed by Thomson Reuters had expected the index to rise incrementally to 45.
The separate Present Situation index, which measures how respondents feel about business conditions and employment prospects, fell to 29.4 in December from 42.3 in November. It is now close to levels last seen after the 1990-1991 recession…”
Gold needs to fall below $830 or to beak $865 to get out of its trading range, which is fairly wide ($35).
It’s up today, trading around $875-880 on news of the the Israeli attack on Hamas Gaza ( I corrected this in response to a thoughtful criticism). The volume of trade is light (as it was on December 26, Friday) and more volatile than normal. We will see at the close of the half-day whether it’s likely to move to the $885-$900 zone.
Otherwise, it could have put in a top (short-term) after its recent run up.
If so, we could go through support and back under $820 and even $810.
That’s short term. Longer term, fundamentals are strong.
Meanwhile, confirming that investors are still most worried about the return OF their money, rather than ON it (to quote some wag), the Swiss franc shot up further, even though the Swiss economy seems to be contracting, according to recent financial news.
Hmmm. I was naive. Mark-to-market is being manipulated too:
“Emilio knows, because he learned from the master manipulators at Enron. For an example, he said, check out Section 113 of the bailout bill, titled “Minimization of long-term costs and maximization of benefits for taxpayers.” This is the section that Congress haggled into the bill to ensure a payoff, via warrants, for citizens if mortgages purchased from banks are later sold for a profit. Yet Emilio says bank lobbyists snookered the government by sneaking in an exception under subsection 3a, “Conditions on purchase authority for warrants and debt instruments.” The clause, titled “Exceptions — De Minimis,” states that any debt instruments worth less than $100 million won’t trigger the payback provision.Emilio says that banks will simply issue their debt in tranches of $99 million or less, and avoid allowing the government — and thus taxpayers — to get a piece of the banks’ profits. “It’s a joke,” he scoffed.
Other traders who scanned the bill came to the same conclusion, through their own prisms, agreeing that the bill would provide only an illusion of action while failing to address the key problems facing the financial system: Too many houses will remain on the market; they were bought with too much leverage that is vaporizing in spurts; and those losses have left banks with too little capital from which they can lend.
Even worse, the traders pointed out, the government can make money on the loans only if it pays so little for them that they can be sold at a much higher price. And yet if the government doesn’t pay enough, then the banks won’t receive enough to make a difference in their balance sheets. So here’s how the taxpayers will be cheated, they said: Banks will take advantage of the suspension of mark-to-market accounting by stating that loans originally held at “par,” or the equivalent of the purchase price, and now valued by the market at 20 cents on the dollar, will really be worth 85 cents if held until the loan matures. The banks will then sell the loans to the government at a fake discount of 75 cents on the dollar.”The lobbyists made sure this bill was rammed through so that these rip-offs couldn’t be fixed in committee,” said another trader. “Everyone on the Street knows it solves nothing.”
More by Jon Markman why the fear is real and warranted.
“New Delhi (PTI): Indian currency may lose further ground and dollar is likely to touch Rs 50 in the next two months in the wake of global financial crisis, say exporters and economists.”
More at The Hindu.
“Chanting slogans “Return my blood money” and “Stealing elderly money,” protesters rallied outside the territory’s legislature building in the downtown Central financial district to urge newly elected lawmakers to investigate the sales of Lehman-backed bonds in Hong Kong.
The investors, many of them near or at retirement age, also swarmed several major banks, including Bank of China and Standard Chartered, in small groups in hopes to recoup their money.
Organizers said about 1,000 people attended the rally. Police did not offer an estimate.
Protesters accused banks that sold them Lehman-backed bonds failed to explain to them the products were linked to the bankrupt U.S. company as they thought their investment carried low risk.
“I was only told it was an investment with principal protection,” said electrical repairman Chan Hong-ming who bought $30,000 worth of Lehman-backed bonds two years ago from Bank of China.
The 50-year-old said the bank salesman had deceived him by not telling him the bonds were secured by swap obligations guaranteed by Lehman.
“The bank just cheated me … Now I don’t even know how much my investment is worth.”
Housewife Annie Ng also said she was misled by banks when she bought the $15,000 bond.
“I’d never heard of Lehman Brothers before. I wouldn’t have bought it if I knew Lehman was involved,” said the 60-year-old mother who planned to passed on the money to her children.
Billions of dollars in souring debt forced Lehman Brothers Holdings Inc., once the fourth-largest investment bank in the U.S., to file for bankruptcy last month amid the world’s worst financial crisis in decades….”
Now here”s the spirit of self reliance:
“Which brings me back to the collapsing markets, the product of fart-in-the-wind economics.
I can foresee on 5th Avenue in Park Slope a beautiful resurgence of shuttered shops, rotted storefronts, the end of money’s welcome in its hypocrite hug, the end of surfeit, a return to normalcy. No more strawberries in January at the store on the corner – the strawberries were never meant to be eaten in winter anyway. Perhaps we might even see a return to the city of people who manufacture something other than air. I will be driven out first – because this screed is all air! So be it!”
Christopher Ketcham at Counterpunch.
Comment:
Only problem I have with this essay is the confusion between casino capitalism and the free market..and the reflexive assumptions about what growth is (assumptions our corporatist masters also hold, oddly enough)
“You do realize that Ron Paul is not pro choice. He is not the freedom loving candidate you portray him as. He doesn’t give a shit about individual freedom because if he did he would not have voted against pro choice. It is there in his voting record if you ever bothered to look.”
Comment:
I’ve actually read Ron Paul’s voting record quite thoroughly. It’s exactly what I’d expect from a principled libertarian from his background.
Libertarians believe in state’s rights and decentralization. So I expect Paul, while pro-life, would be quite comfortable with states choosing for themselves what they wanted on that. If you were pro-choice, you’d just move to a state which supported your position.
Pro-lifers believe that life and liberty are non-negotiable, something all libertarians believe. It’s just that libertarian pro-choicers (like me) think where you draw the line that begins life is indistinct, but we respect pro-life as a serious ethical position.
Pro-life isn’t anti-feminist or anti-female, as you suggest. It’s simply a different way of looking at the issue of reproductive rights. In any case, reproductive rights are not the only thing, are they? A uterus does not make a very compelling political philosophy on its own…
“As with the Tsunami which devastated Asia in wave after terrifying wave in December 2004, the financial Tsunami we are witnessing is a low-amplitude, long-wave phenomenon of trillions of dollars of financial securities being unwound, defaulted on, dumped on the market. But the scale of the latest wave to hit, the collapse of confidence in the two Government-Sponsored Entities, Freddie Mac and Fannie Mae, is a harbinger of worse to come in what will be the most devastating financial and economic catastrophe in United States history. The impact will be felt globally.”
From a correspondent (can’t vouch for its authenticity, but found the commentary interesting):
“We’re not going to be done with the subprime mortgage when the CDOs fall. Therefore we will have an insolvency problem with the banks that are mentioned above.
This is the kiss of death of a privately held Federal Reserve. For the Federal Reserve to function, its stakeholder banks (like JP Morgan Chase) must remain viable and liquid. When one of them, or any major bank in the U.S. (like Bank of America, Citibank, Wells Fargo, Bank of New York, Washington Mutual, etc.) is impaired or ceases to exist, the architecture of the Fed’s capacity to respond to systemic challenges is unsustainable.
If the banks have no money, they can’t pump liquidity into the market. Taking half of a trillion dollars out of market in a single distressed write down becomes problematic. The US banking system does not have the liquidity to take the hit.
The actual solvency of the Federal Deposit Insurance Corporation is relatively indecipherable due to the fact that their treasury management processes (and the risks of their own investment strategies) are not uniformly disclosed with sufficient transparency. The FDIC was set up for isolated problems with a few bad banks but is NOT prepared to “insure” the system in an industry-wide crisis. The actual liquidity reserve of the “insurance” that Americans view as their safety net is 1/100th the actual exposure of outstanding deposits. The actual coverage ratio for the Bank Insurance Fund (BIF) fell below 1.25% in 2002, the same year that less stable credit practices were adopted by America’s leading banks.
The funny part is that the Federal Government will be on holiday when all of this happens. There will be no one to put freeze actions and moratoria on actions. The only way you stop the cataclysm is to put together civil actions on deposit withdrawals.
As I discussed previously, the Chinese currency wild-card may become relevant far sooner than expected. An effort by China to convert its $1.4 trillion U.S. Treasury holdings into euros is not viable for many reasons – not the least of which is the European Central Bank’s inability to absorb such an event. As China continues its rush away from supporting U.S. Treasuries and as Middle Eastern investors are buying them up in more diversified holdings, a new “currency exchange” is unfolding. Realizing that they cannot liquidate their holdings, it appears that the Chinese are currently using their U.S. Treasury holdings as collateral for euro denominated purchases and long term infrastructure transactions. In other words, they may be “liquidating” their holdings as collateral and, in so doing, effectively migrating to non-dollar value without ever having to officially dump their current Treasury holdings.
Therefore, collateralize the credit in dollars – especially if you’re long in dollars. The lender/financier won’t call the note because you have it structured in such a way to both allow it to perform and hold illiquid collateral that no one wants. This essentially inflates euros. Although you can’t sell dollars, the whole purpose of collateral is that it is a second source of payment – collateral is there to down rate the risk of the loan. Secondary becomes irrelevant.
When February comes, the Chinese are going to do something as they will have to decide what the exposure is going to be with the treasury. As I see it they have to just dump the treasury. They only keep it because they can use it – they have 43% direct/indirect of US treasuries so they’ll dump them on the market.
The US Congressional pressures to decouple the RMB will work, but not in the way we want. Our plan includes helping them hold on to the treasuries, it does not involve them not holding the dollar anymore. The US wanted the tether to be part of the float. This will cause disenfranchisement of the US electorate (during primary season). February is also when public (media) will realize we won’t pull out of this.
Side note: Mayor Bloomberg could enter the race at this point, being the savior candidate (at least economically), but has $1B dollars in non-liquid money so he may not be able to enter.
OPEC price with the whole fluctuation of oil futures presages the event. They are going to run the price of oil as high as they can get it on the dollar, while buying US treasuries from China with the money. When the dollar does collapse, they’ll flip denominations. The wild card is long about March when the OPEC cuts spot oil off the dollar to the euro. One can look at the current oil price at close to $100/barrel and fail to see that, as this premium price is currently turning around and investing in a weakening dollar, the effective price (less the dollar investment hedge) is probably closer to $50/barrel than the spot price reflects.
Currency problems will change the game – they are financially structuring themselves to take the hit.
When we can’t afford to buy oil commodities on a spot market – it compounds the problem however the consumer that Saudi Arabia ships to is liquid (China). In the US it is a big problem. There is still a market for oil; it just changes. When you come out of Straits of Hormuz, turn left.”
“From inside the White House, Leverett was hearing a scary scenario: The Russians were scheduled to ship fuel rods to the Iranian nuclear reactor in Bushehr, which meant the reactor would become operational by this November, at which point it would be impossible to bomb — the fallout alone would turn the city into an urban Chernobyl. The White House was seriously considering a preemptive attack when the Russians cooled things down by saying Iran hadn’t paid its bills, so they would hold back the Bushehr fuel rods for a while.
That put things into a summer lull. But by August, tensions were rising again. U.S. troops in Baghdad arrested an official delegation of Iranian energy experts, leading them out of a hotel in blindfolds and handcuffs. Then Iran said that it had paid its bills and that the Russians were ready to deliver the Bushehr shipment. In Time magazine, former CIA officer and author Robert Baer quoted a highly placed White House official:
“IEDs are a casus belli for this administration. There will be an attack on Iran.”
Mann steps back out on the deck and starts collecting the scattered toys to prepare the house for a dinner party, the typical modern American mother multitasking her way through a busy day. “The reason I have to be so careful now is that I’m legally on notice and they will prosecute things that I say or do,” she says, picking up a plastic truck.
“Because of that one article?”
“Yeah.”
Outside, it’s getting warmer. There’s a heavy haze and floating bugs and for a moment it feels a bit ominous, a gathering silence, one of those moments when giant pods start to sprout in local basements.
“We’re tired,” Mann says. “Nobody listens.”
It seems inconceivable to her that once again a war could be coming, and once again no one is listening. Another pair of lawn mowers joins the chorus and the spell breaks. A cab pulls in the driveway. The caterer comes to prepare for the dinner guests.”
Comment:
Of course, we’ve always known that some hawks have wanted to take control of the Middle East and make a broad sided attack on the Muslim world as such.
It’s been in the works since the 1970s when British intelligence wanted the US and UK to go in and grab the Saudi oil fields. And since the 1950s, when, post WW II, realists like George Kennan famously recognized the need for western governments to stop wearing the mask of nice guy and secure their hold over world resources before the rest of the world demanded more for itself.
But it’s nice to have this insider view of the story…..