Friday, October 19, 2007

Stocks Get Pummeled

Dow down almost 367 points, its third worst day of the year, on fears about credit and housing sector, earnings, record-high oil prices, slide in dollar, what the Fed will do next.
Stocks tumbled Friday as record-high oil prices, more problems in the bank sector and slower corporate earnings growth revived worries about an economic slowdown.

The Dow Jones industrial average lost around 367 points, seeing its third-biggest point loss of the year, its worst since the steep selloff in early August in the midst of the credit and mortgage market mess.

The decline Friday left the blue-chip indicator at its lowest point since Sept. 17, the day before the Federal Reserve cut interest rates for the first time in 4 years, triggering a rally that was cut short this week.

The S&P 500 index lost 2.6 percent and the Nasdaq composite gave up 2.7 percent.

Disappointing earnings from Caterpillar, Honeywell and others exacerbated concerns about weak third-quarter profits. Meanwhile, Wachovia became the latest financial services firm to reveal how the credit and mortgage market crisis had hit its profits.

Oil prices ended lower Friday, but not before hitting an all-time high of $90.07 a barrel in electronic trading. The dollar fell to a new record low against the euro and also slipped versus the yen. Treasury prices surged, as investors sought safety in the comparably safe haven of bonds.
The house of cards that is the United States economy seem ready to come tumbling down. The question I think isn't if we will go into a recession but how severe a recession we can expect?

Thursday, October 18, 2007

Dollar Hits New Low as Unemployment Claims Spike Upward

The euro reaches $1.4305 after U.S. jobless claims spike.
The dollar fell to a new record low against the euro on Thursday, with the 13-nation European currency breaking through the $1.43 mark for the first time after Washington reported a spike in jobless claims.

The euro rose to $1.4305 in early afternoon trading in Europe shortly after the U.S. Labor Department reported that applications for jobless benefits hit 337,000 last week - up 28,000 from the week before and the biggest one-week surge since claims jumped 42,000 the week of Feb. 10.

It settled back slightly, to $1.4290, but was still up more than a penny from the $1.4186 it bought in late New York trading on Wednesday and was higher than the previous record of $1.4282 set Oct. 1.

The jobless increase was four times the gain of 6,000 that economists had been expecting and was taken as a possible sign that the labor market is starting to weaken under the impact of a housing downturn and turmoil in credit markets.

Earlier this week, both Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke warned that the housing crisis was likely to last longer than had been expected.
Of course the housing crisis will last longer. Who exactly will buy all these homes after foreclosure? Real wages are down for six years under this administration and the savings rate is negative for the first time since the great depression. With new underwriting standards on loans less people will qualify. This all adds up to a disaster in the making.

This is what happens when you kill the middle class.

Wednesday, October 17, 2007

Foreigners Dumped U.S. Assets in August

Foreign investors fled from U.S. assets in August as a meltdown in the U.S. subprime mortgage market triggered a global credit crunch, Treasury Department data showed on Tuesday.
Net sales of long-term securities such as bonds, notes and equities -- a more closely watched gauge of foreign demand -- hit $69.3 billion, also a record. The last time this measure turned negative was in August 1998, the month when Russia defaulted on its sovereign debt, sparking a global crisis.

Economists had expected net foreign purchases of long-term securities of $60 billion, according to a Reuters poll.

"Investors seem to be moving money outside of the U.S., which leads us to believe they are planning for a continual U.S. dollar decline," said Mark Meadows, currency strategist at Tempus Consulting in Washington.

"What they are saying," he added, "is they are not going to receive as much in return as it will cost them to hold dollars."

The net sales of $163 billion, which includes short-term securities such as Treasury bills, beat a prior record outflow of $42.3 billion in March 2001.

U.S. capital markets would have needed to attract nearly $58 billion of inflows in order to cover the August trade deficit.

"The diminished foreign appetite for long-term U.S. financial assets is alarming, and will weigh heavily on the dollar," said Tu Packard, chief economist at Moody's in West Chester, Penn.
What will happen if the United States can not attract foreign investors in order to cover the HUGE deficits run up by this administration? You can either print money to pay the bonds being redeemed which would lead to a further devaluing of the dollar or you would need to raise interest rates enough to make U.S. debt attractive again to foreigners. Either option will be bad for the U.S. economy.

This is what happens when you believe that deficits don't matter. Will Americans realize that this disastrous economic policy is actually the fault of this administration or will they blame it on the next administration. Only time will tell but I think people understand that the huge surpluses left by the Clinton administration were squandered by Bush as he presided over a huge redistribution of wealth from the middle and lower classes to the rich.

That is Republican economic policy in a nutshell. Give it all to the rich and the rest of us will be patient while we wait for "the trickle down effect". The Bush administration is a failure on absolutely every level.

Tuesday, October 16, 2007

Builders' Confidence At All-Time Low

Home builders see weakest buyer traffic in 23-year history of trade group survey, outlook for future remains at record low as well.
The nation's home builders' confidence in the battered market for new homes fell further in October, and a measure of their outlook remained at a record low level, according to the latest industry survey.

The National Association of Home Builders/Wells Fargo Housing Market Index showed the overall confidence measure sank to 18, the worst reading on record for the 23-year old monthly survey.

The trade group's statement said the problems included decreased availability of subprime mortgages, a glut of new homes available for sale and reports about declining home values.

The builders' expectations for the market six months from now came in with a reading of 26, matching the lowest reading on record that was set in September. And their view of current buyers' traffic fell to a record low reading of 15.

"Builders in the field are reporting that, while their special sales incentives are attracting interest among consumers, many potential buyers are either holding out for even better deals or hesitating due to concerns about negative and confusing media reports on home values," said NAHB President Brian Catalde.

The overall confidence reading reflects the eighth straight month in which that measure has declined. It has fallen sharply, and is down from a very strong reading of 74 only two years ago. A reading of 50 in any of the three measures indicates the number of positive responses from builders is equal to the number of negative responses.
The housing woes continue unabated with the worst still to come. The housing market correction will be very painful for millions but hopefully after the dust settles we will have a market that is both affordable and vibrant. This could not come at a worse time for the Republican party. What accomplishments can they point to over the past eight years? The rich got richer and the poor got poorer, not exactly a 30 second political commercial to sway the masses.

Monday, October 15, 2007

The Real Rudy

The man who is trying to be the President of 9/11 has some explaining to do!! I am still baffled as to why this clown is even running for President let alone is a top contender for the Republican Party. He has become rich and powerful as a result of 9/11. The term blood money never had such a clear description.

Oil Tops $86.00 Per Barrel

Crude prices reach record high on worries about declining oil inventories, OPEC says production by non-member countries may fall; Turkey-Iraq tension.
Oil prices surged higher than $86 a barrel Monday for the first time after OPEC said crude production by non-member countries is likely falling even as global demand for oil is rising.

The price for light sweet crude settled at a record $86.13 a barrel, up $2.44 from Friday's $83.69.

Prices were also supported by concerns Turkish forces will pursue Kurdish rebels into Iraq, disrupting oil supplies, and by technical buying by investment funds.

Monday's intra-day high was $86.20 a barrel, breaking Friday's peak of $84.05.

Despite the Organization of Petroleum Exporting Countries' decision last month to boost its production by 500,000 barrels per day beginning next month, the rest of the world will likely produce 110,000 fewer barrels of oil per day than expected in the fourth quarter, OPEC said in a report.

At the same time, fourth quarter demand for crude oil will grow by 100,000 barrels a day over last year, OPEC said.

The estimates add to sentiment that crude supplies are tight. Last week, the Energy Department reported that domestic crude inventories fell during the week ended Oct. 5 when they had been expected to rise. And the International Energy Agency concluded that oil inventories held by the world's largest industrialized countries have fallen below a five-year average.
The rise in oil prices will most surely make it even more likely that the U.S economy will tip into a recession. The housing collapse is being felt in many other industries and the rise in gas prices will also spill over into other industries. This double whammy will have a very damaging effect on the economy. It is time to spend money on alternate sources of energy not on invading countries that have the oil.

Sunday, October 14, 2007

Banks Said To Be Prepping Up To $100B Fund

Reports: Citigroup, others working with Treasury Department on plan to protect against further securities collapses.
A consortium of the world's biggest banks, led by Citigroup, is working to create a fund to back up to $100 billion in shaky mortgage and other securities, according to published reports Sunday.

The fund, according to reports in the New York Times and Wall Street Journal, would be used to buy securities at risk in the current credit crunch in an effort to avoid a broader economic problem. An agreement on the fund's framework could be announced as early as Monday, the Times reported, adding the talks were ongoing and could still result in no accord.

A major focus of the fund, according to the reports, is structured investment vehicles, or SIVs. The Times said the SIVs - which issue short-term notes to invest in longer-term securities with higher yields - have been tainted by the loss of confidence in subprime mortgages.

The Journal, citing Moody's, said there are about $400 billion in SIVs.

Besides Citigroup, the Times said Bank of America and JP Morgan Chase were involved in the discussions. The Journal said Britain's markets regulator has suggested that U.K. banks participate in the plan.

The Journal said Citigroup has about $100 billion invested in SIVs, while Britain's HSBC Holdings PLC has about $35 billion.

Both the Times and Journal see the fund as an echo of the 1998 plan to bailout the hedge fund Long-Term Capital Management after it made a series of bad bets. The bailout was made to thwart an international financial crisis.
This is a sound idea to ward off any major economic collapse. It does make me realize that these large banks must understand that the threat of collapse is real or they would not be putting in 100 Billion dollars of their own funds to head off such a collapse.

The Bush administration has been one that believes that industry can police itself. With the subprime mess and the continued recalls of food and toys I hope we all realize that this belief is false.