Boiler Room

Fitch Updates Ratings Model; Projects Steep Housing Price Declines (25% and more). San Diego and San Francisco to decline by more than 30%.

2008-07-28T15:52:00.001-07:00

http://www.housingwire.com/2008/07/24/fitch-updates-ratings-model-projects-steep-price-declines/

Fitch Ratings said Thursday that it had enhanced its U.S. residential mortgage loss model, called ResiLogic, a key component of the agency's overall approach to assessing U.S. RMBS new-issue ratings. While the new-issue market has been essentially dead for all of 2008, Fitch's revisions suggest that the agency is preparing for where the market might be headed next: seasoned mortgage issuance.

They also suggest a very bearish take on housing prices over the next five years: Fitch said in its report that it is expecting home prices to decline by an average of 25 percent in real terms at the national level over the next five years, starting from the second quarter of 2008.

And that's the base case scenario.

Seasoned securitizations?

In face of those sort of expectations for housing, more than a few market participants have suggested to HW as of late that in order for the battered securitization market to regain its footing, it may have to revert back to issuing deals only for mortgages that have already been "seasoned."

Seasoning refers to the usual pattern of increasing defaults during the first 24 months of a deal's life; so-called "seasoned deals" typically exhibit much more stable and predictable default patterns.

While the updates to ResiLogic cover other areas, it's Fitch's addition of the ability to analyze seasoned loans and to take into account loan payment history and house price changes since loan origination that are probably the most telling, at least in terms of where the securitization market is headed next.

"The ability to look at seasoned loans through ResiLogic is significant because the dearth of new mortgage origination has placed emphasis on the securitization of seasoned loans," said Huxley Somerville, group managing director and head of Fitch's U.S. RMBS group. "To rate transactions with seasoned loans, it is imperative to understand how they are performing in the current environment."

Fitch will also roll out new 25 MSA-level risk factors influencing frequency of foreclosure and loss severity estimates, the agency said; the 25 MSAs chosen are those that have exhibited strong non-conforming mortgage lending activity in the past.

"Some MSAs such as San Diego and San Francisco, CA are expected to experience home price declines by as much as 47 percent and 33 percent over the next five years, while home prices in MSAs such as San Antonio, TX are expected to appreciate by 7 percent," Somerville said.

"The home price forecasts are embedded in the state and MSA level risk indicators and will be updated quarterly."

For many investors, the updates come too late to salvage existing deals; but it's clear that the agency has become much more bearish on prospects in the primary housing market.

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10 Stocks To Watch, Only Freddie Mac & Fannie Mae looks Interesting

2008-07-10T10:11:00.003-07:00

If by 'interesting' this joker means FAIL

via News for Freddie Mac - Google Finance on 7/10/08

10 Stocks To Watch, Only Freddie Mac & Fannie Mae looks Interesting
istockAnalyst.com - 2 hours ago

You really gotta understand how slaughtered people are getting right now - illiquid positions , leverage and a lack of joke of an industry transparency have combined to create the perfect storm ...

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Freddie "absolutely" has enough capital: spokeswoman

2008-07-10T10:11:00.001-07:00

Poor spokeswoman! She is just reciting from the script.

via News for Freddie Mac - Google Finance on 7/10/08

Freddie "absolutely" has enough capital: spokeswoman
Reuters - 1 hour ago

NEW YORK ( Reuters ) - Freddie Mac , the second - largest source of US home funding , " absolutely " has enough capital , a spokeswoman told Reuters on Thursday.The company is also committed ...

Freddie Mac leads financial-services stocks lower - MarketWatch
UBS Cuts Freddie Mac Price Target to $10 as Credit Losses Grow - Bloomberg

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Lehman Shares Sink as Fannie, Freddie Plunge Further (Update1)

2008-07-10T10:10:00.001-07:00

This stinks..

via News for Freddie Mac - Google Finance on 7/10/08

Lehman Shares Sink as Fannie, Freddie Plunge Further (Update1)
Bloomberg - 33 minutes ago

July 10 ( Bloomberg ) - - Lehman Brothers Holdings Inc . , once the largest US underwriter of mortgage - backed bonds , fell to an eight - year low in New York trading as home - loan financing ...

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Real Estate Commonsense RIP 2002

2008-06-24T22:49:00.001-07:00

Moreover, the authors suggest that homeownership is not always an effective way to accumulate wealth, and they blame economists and policy professionals for not recognizing the housing bubble that they claim could be seen as far back as 2002.

"Unfortunately, we had this huge cohort of baby boomers and they really weren't paying attention," Baker said. "People who should have been saving for their own retirement weren't."

Drama unfolds..

whatever in thousand cuts..

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Death of American suburban dream. Bill Bonner a**hole is laughing his way to bank

2008-06-18T11:15:00.001-07:00

What goes around, comes around...

Every country in the world has had to put up with finger wagging and scolding from U.S. officials. The U.S. economy was the world's best for so many years – and American experts, government officials, professors and consultants never got tired of saying so.
But now...as the Rolling Stones put it... "Tables turn and now her turn to cry." Now, the tears are coming from the United States; the foreigners are doing the scolding.
Bloomberg reports that U.S. housing starts are at their lowest level in 17 years. Housing prices are going down too, while consumer prices go up – both apparently at a faster and faster rate.

Producer prices in the United States rose 1.4% last month, following an increase of 0.2% the month before...annualizing the two months gives us a rate just shy of 10%.
Meanwhile, prices paid by producers were 7.2% higher than a year ago.
Worldwide inflation is about 7%, says Bill Gross of PIMCO. And since price inflation has now been globalized, there is no escaping. Here in Britain, consumer price inflation, officially, is running at its highest rate in 10 years.

"There is really nothing we can do about it," said an analyst at this morning's investment meeting. "We're a small island. We have to import things from overseas. Prices are rising everywhere. How can they not rise here? We're just at the beginning of this trend. It's going to get worse."
It is going to get worse everywhere. Inflation is in the pipes. Soon, it will be backing up in the bathtub drain and spilling over from the sink. Over the last 15 years, the world has seen huge inputs of 'liquidity' – cash and credit from central banks and the financial industry. Everyone was perfectly happy when this juice was going into asset prices. But one by one the bubbles have popped...and now the liquidity goes where it is unwelcome – into commodities, food, and fuel.
Consumers and central banks are both trapped. Central banks want to lower rates and increase liquidity in order to stimulate a sagging economy. But their inflation no longer swells assets prices and nourishes economic growth; now it leaks into consumer prices.

And the poor American consumer...he spent his entire career preparing for an economy that no longer exists. He has a big house...a big car...and, often, a big mortgage. America's far-flung suburbs were invented when gasoline was only about 25 cents a gallon and real U.S. incomes were rising. We remember it well. We'd drive into a gas station and tell the pump monkey: "Let me have $2 worth." Heck, 2 bucks' worth was all you needed. You got eight gallons – enough to last you all week. Now, gasoline is $4 a gallon...and real incomes are scarcely higher than they were in the late '60s. And now the typical commuter lives too far out in the suburbs to walk to work. And even if he could, this item from the

Wall Street Journal offers little comfort:

"Pain at the Other Pump: Shoe Prices Rise." The story tells us that footwear is going up too – about 10% to 15% next year, which "would be the largest single-year increase in more than 50 years."
And the poor man didn't bother to save money, because he didn't need to. His house rose in price...and there was always someone ready to lend him money when he needed it. But now...the cost of credit is going up too.
What we are looking at is big. It's an historic turnaround. In financial terms, it is the end of the era of cheap credit. In cultural terms, it's the end of the prosperous, suburban U.S.A. as we have known it...the U.S.A. that we grew up in.

The last credit expansion began, by the way, with the Reagan Revolution, in the very early '80s, with bond yields over 15%. It ended either in 2003 or 2005 or a couple weeks ago. Yields on the 10-year Treasury note fell below 4% on several occasions. But now they are rising. Investors fear rising inflation. Even at current rates, they still buy treasuries at yields below the rate of consumer price inflation. But they'll regret it, in our opinion. The trend seems to be up. It is the beginning of what probably will be a long period of higher inflation rates...higher bond yields...and tighter credit generally.

So too have we entered into a period of higher energy costs. The price of oil hit a new intraday high yesterday at nearly $140. It will probably drop back below $100...but the days of $10...$20...or even $50 oil are probably gone forever.

And the suburbs? Are they dead too? We don't know...but

hope so; we never liked them.

All this is bad news for people who organized their lives on cheap oil and cheap credit – especially those for whom it is too late to make big changes.
USA Today reports, for example, that the rate of bankruptcy is skyrocketing among old people. From 1991 to 2007, the rate went up 150%. But for those 75 to 84, the rate has exploded 433%.

The poor codgers. It's bad enough being old. Imagine being broke too.
*** A few weeks ago, the Indians were giving America a piece of their mind. This week, it's the Chinese. The subprime crisis was caused by Washington's "warped conception" of market regulation, said a Chinese banking regulator... and the Chinese media has gone so far as to compare China's decisive action in Sichuan Province after the earthquake to the Bush administration's diddling after Hurricane Katrina.

"U.S. credibility and the credibility of U.S. financial markets is zero everywhere in the world," says Joseph E. Stiglitz, a professor of economics at Columbia University.
"Anybody looking at this from the outside says, 'There's been a lot of hot air coming out of the U.S., so why should we listen to these guys when they didn't know how to manage risk?'"

The Chinese yuan has gone up 11% against the dollar so far this year.
*** When it rains, it pours. The Midwest has seen the worst flooding in 15 years...pushing up grain prices even higher.
But it could be worse. You could be in Argentina, from which our colleague Paola Pecora reports on the latest conditions (farmers are blocking roads to protest tax increases):

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Housing sector sucks but that cannot stop creativity. Buy one and get one for free.

2008-06-02T16:04:00.001-07:00

In Escondido: Buy one (house), get one free.

In a sign of how difficult it is to sell new homes in Southern California right now, a San Diego developer is offering a "buy one, get one free" deal, pairing million-dollar homes with less expensive homes.

"We thought, 'Why does it just have to be on Pop Tarts and restaurants? Why not buy one home, get one free,'" Dawn Berry of Michael Crews Development told 10 News in San Diego.

More: "Michael Crews Development is offering new, 2000-square foot cityscape row-homes worth $400,000 in Escondido for free -- if you buy one Royal View Estate home in San Pasqual Valley starting at $1.6 million. 'You know it's a straight-up legit deal; no prices have been increased, there are no hidden costs. Michael is just giving away a free home for people that buy at Royal View,' said Berry."

"Adam Rossman of Michael Crews Development added, 'People have been coming in saying, 'How can you do this?' Well, it's our way of dealing with current market conditions to move some inventory.' "

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Bill Bonner on Supply and Demand

2008-05-29T12:18:00.001-07:00

As Simple as Supply and Demand?

*** The vigilantes are back...putting the screws to the consumers...the confusing Big Picture in the oil market...

*** Could the key to understanding the oil market be as simple as grasping the theory of supply and demand?

*** The latest news for U.S. housing is worse than ever...Byron King recreates the infamous meeting at Bretton Woods in 1944...and more!

Oh la la, dear reader...the vigilantes are back!

Those happy trends of the Great Moderation period – roughly, the 15 years before 2007 – have turned for the worse.

Globalization, for example, helped keep prices down in the United States. Americans could reach for all the imports they wanted without getting rapped on the knuckles by the usual consumer price inflation. That is, like a drunk who never gets a hangover, they could enjoy an inflationary boom without ever having to pay higher consumer prices.

Now, the screw has turned a full 180 degrees...now they can cut back...spend less...and still have to pay higher prices! The world was such a benign, forgiving place before 2007. Now it has turned wicked.

Let's begin our exploration of this nasty turn of events by looking at the oil market.

We are out of oil; at $130, we regard it as too speculative. But that doesn't mean that the oil bubble is going to burst anytime soon...or that the real price of oil won't be even higher 10 years from now than it is today.

The Big Picture in the oil market is one of the most confusing and complex we have ever seen. It is like a painting by Hieronymus Bosch, where there is so much going on you can't quite tell what it all means.

On the one hand, there is the background of supply and demand. Even here, the picture is not a clear one. Oil supplies seem to be running out. Of the world's 60 top oil producers, 54 report declining output. Indonesia announced yesterday that its production had slipped so much, it was no longer an exporter; the country had to withdraw from OPEC, since it has become an oil importer.

On the other hand, Brazil has recently reported huge new finds. New technologies offer ways to get more oil out of existing fields. And more and more alternatives to petroleum are being developed. Brazil is also the world's leading producer of biofuels, mostly from sugar cane, and is ramping up production as fast as it can. Solar power is hot.

As for oil itself, there is only so much available...and many experts believe the maximum annual extraction level – Peak Oil – is coming up soon. From that point onward, the world will just have to make do with tighter supplies and higher prices.

Looking at the demand side, we see the opposite picture – a curve rising from here to eternity. A few years ago, millions...maybe billions...of the world's people lived almost without fossil fuel of any sort. They tilled rice paddies, for example, with water buffalo, cooked their meals on a wood fire, and traveled on bicycles. Now they're moving to the city, living in apartments heated by oil, eating commercial food grown with plenty of petroleum-based inputs, working in heated, energy-absorbing factories, riding on automobiles and buses, and buying things that take energy to make and energy (usually oil) to deliver.

It used to be a sure thing that if the United States had a recession, oil consumption – and energy prices – would go down. But in the last year, oil consumption in the United States has gone down 1.3% – even as the price of it soared. How is that possible? It is partly explained by that giant sucking sound coming from the emerging markets, the BRICs (Brazil, Russia, India and China) and the Middle East. These countries are all using a lot more energy – partly because they are getting a lot richer, and partly because they tend to keep internal energy prices low (which helps explain why they are growing so fast). Both China and India have refused to allow their large oil companies to raise domestic prices in line with world market prices, encouraging greater consumption. In the BRIC nations, oil use went up 4% during the last 12 months.

But how come investors didn't see it coming? A man of 30 may be unprepared to die in a train wreck; but a man of 90 typically has a Last Will & Testament. These trends in demand and supply are well known...and they happen slowly. How could investors miss them? How come the price of oil stayed so low for so long? How come it more than doubled since the beginning of '07...and went up more in the last 6 months than the entire oil price prior to 2005?

*** Let's look again at this remarkable tableau of the oil market. In addition to the supply and demand pictures, there is a lot more going on. Over on the side are the central bankers – led by Ben Bernanke and the U.S. Fed. What are they doing? Let us look hard...oh yes, they seem to be printing money! Yes, the Fed – the guardian of America's financial integrity – is lending money at 2% below the official inflation rate (probably more like 6% below the real inflation rate). And it is permitting the supply of money to increase at an estimated 16% annual rate. Remember, when the supply of money increases faster than the supply of goods and services (GDP), prices rise. With GDP flat or barely rising at all, a 16% increase in money supply represents a huge inflationary push.

And look! Prices are rising, just as they should. Want proof? Just drive to a filling station...or go to the grocery store. As reported in this space, the ingredients for a typical Memorial Day cookout rose by double digits in the last 12 months.

And look at this. Over on the other side...what's this? A group of vigilantes!

Yes, dear reader, they're back...the vigilantes...ready to mount up and ride out whenever they think the Fed is being too inflationary. Back in the '70s and '80s the vigilantes won their spurs in the bond market. As soon as they saw the money supply figures creeping up on them, the vigilantes strapped on their guns and shot the bond market to pieces. Bond prices fell...forcing up yields....and thereby forcing the authorities to back off. It was bond market vigilantes who convinced the feds that the jig was up in the late '70s. They still had the power to inflate the money supply as they had during the '60s. But they couldn't get away with it anymore. When the vigilantes dumped bonds and drove up interest rates, the economy went into such a slump, it just wasn't worth it.

We'd been wondering what happened to the vigilantes. The feds have been increasing the money supply twice, three times...and now infinitely...faster than GDP growth. How come the vigilantes let them get away with it? How come the bond market didn't crash? Why did they still buy bonds...didn't they know they were going to lose money?

We still don't know the answer. Maybe the vigilantes have grown old and too tired to strap on their six-shooters... maybe they've gotten Alzheimers and no longer know how things work.

But lo and behold...here they are again – in the oil market! They've found a new way to bring some financial discipline and monetary rectitude to the feds.

The sharp upward move in oil began at just about the same time the Fed began printing more currency, bailing out investment firms, and cutting its key rate. The supply and demand situation hadn't changed; but the monetary situation had – and the vigilantes saw it. Rather than sell bonds...they bought oil!

Higher oil prices, of course, depress economic activity. They, along with falling house prices, are the two things pushing the United States into a slump. Usually, a slowdown would bring pain...but some relief too. Prices, notably the price of oil, would fall. But now globalization – which had been such a delight during all those years of the Great Moderation – kicks us in the derriere. Americans are forced to cut back on energy use. But the foreigners take up the slack...and then some. The oil price refuses to fall.

And the feds try to make up for it by cutting rates and increasing the money supply. They're desperate to try to get the party going again. But then along come the crude oil vigilantes. In just seconds, they've pulled the plug on the amplifier and turned off the beer machine. Oil goes higher, and the economy sinks further.

*** The latest news from the U.S. housing market is bad. New house sales are still near their lowest level in 17 years. And the New York Times reports that even the best markets – like Seattle – are beginning to sink. The Times mentions a guess that prices could fall another 10% before stabilizing.

*** Rising consumer prices, combined with stagnant incomes and falling house prices, has the U.S. public in a squeeze. The "middle class is struggling to stay in the same place," says a report on CNNMoney.

This has to result in lower consumer spending – and an economic slump in the United States. We got evidence of sharply lower spending in yesterday's driving figures.

Now, we're going to see it in other areas. Yesterday, for example, Dow Chemical announced price hikes of 20% – which will feed into a whole range of consumer goods, from diapers to detergent.

*** The BRIC nations held an historic meeting in Yekaterinburg, Russia, last week. They're growing very fast...with rising markets, rising incomes, rising currencies, and rising GDPs. Together, their percentage of total global growth grew 50% between 2000 and 2008.

The BRIC meeting seems intended to remind us that it is a big world...with a lot more going on it than we realize. Economies rise and fall. Nations and empires too. And here is colleague Byron King's explanation of how the U.S. dollar came to be the world's reserve currency. (It helps us look ahead...to when the U.S. dollar will no longer be the world's reserve currency.)

"I have long tried to imagine the discussion at Bretton Woods in July 1944. US, British & Canadian troops had just landed in France. Germany was bleeding white on the Russian Front. The Japanese Empire was dying in the Pacific. Everyone knew that there was hard fighting ahead. But everyone also knew that the Axis was going to be defeated, and the Allied nations would win the war.

"So 730 delegates from 44 Allied nations gathered in New Hampshire to chart the future course of the world monetary system.

"There are, of course, reports and summaries of what people said for the record. But what did the US delegates REALLY say at Bretton Woods? Let's just imagine...

"'OK, everyone. Nice to see you all. Hey, did you see the invasion force at Normandy last month? Can you do that? No? Oh. Well, we did that. And we can do it again.'

"'How about that industrial base back home, eh? Those Rosie the Riveter girls sure can knock out the old landing craft. How's your industrial base? Oh. Well, that's OK.

"'And it's a good thing we had all those bombers in the 8th Air Force in England, huh? Yep. Those bombers just turn the sky black, don't they? And how about that steel rain when the bombs come whistling down? You want area bombing? We have area bombing. On a good day, we can do precision bombing too. Can you do precision bombing? No? Oh.'

"'And we have 200 submarines in the Pacific. Do you have 200 submarines? No? Oh, gee.'

"'Overall, we have a 2,000 ship navy, with over 100 aircraft carriers. Do you have a 2,000-ship navy, with over 100 aircraft carriers? No? Oh. That's OK. Not everyone can have a 2,000-ship navy. Or 100 aircraft carriers.'

"'And have you heard about the B-29? It's an intercontinental bomber. Yep. Takes off from the U.S., and bombs another continent. We're going to build a lot of those B-29s. Do you have B-29s? No? Oh.'

"'And I can't get into details, but the U.S. has this really big program to develop the next generation of weapons. It's all classified, so I can't talk about it. But we have all the best physicists and chemists and mathematicians working on it. Really, there are so many brilliant minds working on it that you just can't find a decent physicist or chemist or mathematician any more. Do you have one of those programs? No? Oh.'

"'And how about all that gold in the U.S. government vaults? Back in 1933, President Roosevelt collected all the gold from every person in the United States. All of it. The whole national treasure. It's all under our control now. The Supreme Court said it was OK, so it's even legal. Now we have just thousands of tons of gold. Do you have thousands of tons of gold? No? Oh.'

"'OK everyone, let's get down to work. I propose that we make the U.S. dollar the world's reserve currency. Any questions? No? Oh.'"

Until tomorrow,

Bill Bonner
The Daily Reckoning

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Bill Bonner is waiting for Final Bubble. This guy knows his stuff!

2008-05-27T14:03:00.001-07:00

Awaiting the Final Bubble
London, England
Tuesday, May 27, 2008

---------------------

*** Why an 8th rate cut won't matter...remembering on the Great Moderation...

*** A recession by the numbers...two things you don't dare criticize...

*** Guilty by association and dropped under the campaign bus...a modern way to feel like a 16th-century heretic...and more!

Yesterday, markets were closed in both the United States and Britain. Still, here at The Daily Reckoning 's mobile command post, we continued our lonely vigil. What are we waiting for? What are we watching for?

Ah, dear reader...just a little dignity, a little grace, a little courage and beauty. That's all we ask. Can we find it on Wall Street? In Washington? In politics or economics? We hope so, because that's all we have to work with here at The Daily Reckoning .

Oil went up yesterday. Asian markets fell – with Japan taking its biggest hit in six weeks. And the dollar fell. Speculators are beginning to bet that the Fed will cut rates for an 8th time; that's the world on the street. As we predicted, the first 7 cuts have done wonders for the prices of oil, gold and commodities...but little for the real economy. Oil has gone up 60% in six months...putting big pressure on U.S. household budgets. Now, instead of taking the hint – that it's time to go in the other direction, by raising rates to head off rising prices – speculators think Ben Bernanke will continue battling deflation with further rate cuts. Maybe, maybe not...but our guess is that it doesn't matter. Even if the Fed raises rates, it is unlikely to raise them enough to block the consumer price inflation already in the pipeline.

In economic theory, the supply of money is the key to prices. Prices should remain more or less stable when the supply of money increases at the same rate as the supply of goods and services. But in the last 15 years, the U.S. money supply increased about twice as fast as GDP. The surprising thing was that prices didn't rise. That was the period known as the Great Moderation. As reported here yesterday, food prices only increased at a 2.5% annual rate...even though money supply, MZM, was going up at nearly 9%.

We have given our opinion as to why consumer prices did not go up. We guessed, too, that those trends that labored so hard to hold them down have now walked off the job. Prices now seem to be adjusting to a higher money supply, with food up 4% last year, officially. Unofficially and anecdotally, consumer prices are rising at about 10% per year.

But while consumer prices were stable during that 15-year period...asset prices frequently went into bubble territory. And now, we await the Final Bubble, dear reader...about which we will have more to say later in the week.

In the meantime, the winner of the Enron Prize, and former headman at the Fed, Alan Greenspan, is in the news this morning. The Financial Times reports that he believes "there still greater than 50% probability of recession."

Warren Buffett, on the other hand, says recession is already a fact of life. And he says it will be "deeper and longer that people expect."

The old timer's definition of a recession was 'when your neighbor loses his job.' When you lose your own job, it's a depression. How many people have lost their jobs in this downturn? Well, for the answer to that question we look to the same people who give us the official inflation numbers – the apparatchiks at the U.S. Labor Department. Therein, of course, hangs a tale...and we will let Dana Samuelson of Danagold tell it:

"The average person judges a recession mainly on employment. If jobs are available, then the economy is holding up. If jobs are scarce, the economy is poor. By that standard, the economy is really struggling, with payrolls down in each of the first four months of the year. But the headline figures, again, don't reflect the lived reality of Americans. At 5.0% in April, down from 5.1% in March, the current BLS unemployment rate is relatively low by historical standards. Yet the number of jobless Americans of prime working age, that is, men aged 24 to 54, is historically high at 13.1%. Most of these people don't qualify as unemployed but they are nonetheless out of work.

"Why don't these would-be workers show up in the headline statistics? Mainly because the government's definition of the unemployed includes only people who do not have a job, have actively looked for work in the four weeks preceding the survey, and are currently available for work. But it excludes the self-employed, 1099 workers who can't get enough contracts, those working part-time or on commission only, and the under-employed (like real estate agents waiting tables or mortgage brokers bagging groceries). It also doesn't count those who've given up looking for work altogether – a category known as 'discouraged workers,' defined as persons not currently looking for work specifically because they believe there aren't any jobs available for them. Some analysts say this particular group of jobless Americans – who believe their prospects for finding a job are getting ever dimmer, yet who don't figure in the computation of the unemployment rate – represent the nation's dire job situation. According to John Williams' Shadow Government Statistics, the primary source for unbiased economic data, if adjusted for 'discouraged workers,' the actual unemployment figure for April rose to 13.1%, up from 13.0% in March. Now that's recessionary!"

Real inflation at 10%? Real unemployment at 13%? Maybe. But we have not quite seen the fall off in consumer spending that these numbers suggest...

...stay tuned.

*** Since we have so little market news to report to you, we will take our quest for truth and beauty to other areas: global warming and the children of Israel for example. Both are touchy issues. In Europe, if you say you are skeptical of global warming, they look at you like a lion at a Christian. In America, you can say almost any nasty thing you want against Arabs...but if you are planning to run for public office, don't dare to criticize Israel.

We begin by telling a story that a Jewish colleague told us yesterday.

"You really have to be careful to maintain good relations with your neighbors. That's something my family discovered in WWII. My father was just a little boy in Paris when the war broke out...and then the French surrendered. You know, France was divided in two...there was the zone occupied by the Nazis and there was the unoccupied zone to the South. Since they were Jewish, they figured they'd sneak across the line and once they got to the unoccupied zone, they would just keep a low profile, not mention to anyone that they were Jews, and they would be safe. But my father was only a kid. And when they put him in the local school, in the little town they were staying in, the first thing he did was tell everyone that he was a Jew. So everyone knew why they were there. And then, when the Germans took over all of France anyone in the village could have denounced them and get them sent to a concentration camp. But no one did."

This recalled another story. A disagreeable French woman, then in her '70s, once told us that during the war she had been the directress of a boarding school for little children. It was a Catholic boarding school. But it was wartime and a few of the children were Jewish, sent there by their parents in the hopes that they would be safe.

"When the Germans came to Lyon, they came around to the school. They demanded that we send out the Jewish children. The truth is, I don't like Jews. But I disliked the Nazis even more. I had already changed the school's records so the Jewish names didn't show up anywhere. So, I told the lieutenant that we only had Catholic children. And I showed him the list. If he had wanted to pursue the matter, he probably would have found the Jewish kids and then sent them and me to the camps. But maybe he didn't really want to find them...you never knew; it was a strange time."

Well, times are always strange, we guess. And we find our little bits of courage and grace here and there...in odd places...and generally in the shadows. In the harsh light of the public eye, these civilized little acts of kindness and courage wilt like wildflowers...or get run over by a campaign bus.

When a presidential candidate discovers that a former friend or supporter has become a liability, for example, he is "thrown under the bus." Jeremiah Wright has the tire tracks to prove it – since he was thrown under the bus of the Obama campaign. The Obama group also sacrificed Robert Malley, an advisor on the Middle East, after it was revealed that he had met with Hamas officials. As every American knows, the Hamas fellows are bad hombres, and anyone who meets with them is no friend of Israel. Since being a friend of Israel, like wearing a flag on the lapel, is a requirement for America's top office, Obama had to push Malley off the team and then run him over with the bus.

Zbigniew Brzezinski, former national security advisor, said he thought the Jewish lobby has become too powerful and is showing a "McCarthyite tendency...by slandering, vilifying, demonizing. They very promptly wheel out anti-Semitism..."

So far, Mr. Brzezinski hasn't been dropped under the bus, but he should probably check his ticket.

Over on the McCain bus, another man of faith has been tossed beneath the treads. The Rev. John Hagee has views worthy of a man with great faith. According to Gideon Rachman's Blog in the FT , he believes the European Union is headed by the Antichrist. In his mind, the EU is a prelude to Apocalypse. And who are we to say he is wrong? There's no mention of it in the EU charter, but who knows what they're up to?

If Mr. Hagee had stopped there, he probably would have been all right, since most Americans agree that there is something ungodly about Europe. But then he goes further...and says that the Jews were murdered in WWII for a good reason – to drive them to Israel. It's all part of God's plan, he says; God made Hitler so the Jews would move to Israel, so the Apocalypse would come, followed by the second coming. How he knows God's plans in such detail, we can't imagine, but that's the beauty of faith; you can believe anything you want...until you put it to the test.

Rev. Hagee is a McCain supporter. But McCain is no longer a Hagee supporter; the reverend had to go "under the bus."

Under the bus, too, is where skepticism regarding global warming is going. George W. Bush fairly recently got on board, agreeing that the earth's climate is changing and the humans are to blame for it. And now all three candidates not only favor doing something about it – all endorse the idea of "cap and trade" as a palliative measure.

Here too, faith conquers wit. No one really knows what direction the earth's mean temperature is going...or why. There are only hypotheses.

"But if you really want to know what it's like to be a 16th-century heretic, try saying you're a bit skeptical about man-made global warming," writes Harry Mount in the Daily Telegraph .

In the middle ages, the Catholic Church made money by offering sinners a way to buy their way out of Hell – with an indulgence. In today's secular world, you will have to buy your way out of the sin of using too much fossil fuel, by buying "carbon rights."

Until tomorrow,

Bill Bonner
The Daily Reckoning

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The Daily Reckoning PRESENTS: The following story, first published in the Rude Awakening , tells a cyclical tale. I liked the story so much that I'm including it here in case you missed it. I'm not recommending the idea – not because I don't like it, but because I'm finding bigger upsides elsewhere for us right now. But it's one to keep an eye on...

ACID ROCKS
by Chris Mayer

Interesting how certain threads come together... I read recently that copper producers are complaining about the skyrocketing costs of sulfuric acid. A few days later, I read about Mosaic, a fertilizer company – about how the rising cost of sulfuric acid could impact its profit margins. Then last week, I came across a piece about how the cost of treating water is "going through the roof." The main culprit is, once again, the rising price of sulfuric acid.

As one water utility rep said: "As sulfuric acid prices increase, so do the products that contain this ingredient. The U.S. has also seen a shortage in supply of sulfuric acid. The U.S. has imported the majority of sulfuric acid from China in the past, but recently, China has slowed the trade of sulfuric acid to the U.S. because its own demand is greater than what China can produce for both the U.S. and itself." In short, demand is swamping supply. Sulfuric acid prices in March hit a record high of $329 per ton, according to Purchasingdata.com, after trading at $90 per ton as recently as October. Sulfuric acid shortages?

Hmmm... Well, time to take a look at this, think I.

"Sulfuric acid is one of those unheralded lubricants that keep the gears of the industrial economy spinning," says Chemical and Engineering News. "Although less in the limelight than petrochemicals such as ethylene or polyethylene, it is, in fact, the largest-volume chemical in the world."

We use sulfuric acid in mining to extract copper, nickel and uranium. We use it in steel production and in making fertilizers. We use it to refine oil and to treat wastewater. It goes into the plastics we make, and a bunch of other things. The biofuel boom has kicked off a big increase in the demand for sulfuric acid. In fact, some 60% of the sulfuric acid ends up in agriculture. The surge in ethanol production is a doublewhammy on sulfuric acid. First, all that corn needs fertilizers. And second, the ethanol facilities themselves also use sulfuric acid in their own processing. A typical ethanol facility requires 2,000 4,000 tons of sulfuric acid per year.

Then there is that great demand pull from China and India. Traditionally, these two countries produced what they needed. But now their own rapid industrialization has turned the tables. They've switched from being exporters to importers of sulfuric acid.

The boom in metals such as copper and nickel also drives the demand for sulfuric acid. Smelting operations typically throw off sulfuric acid as a byproduct. But even here, metals companies need more than they can produce.

Supply is also tight. As with many commodities, there was a long period when sulfuric acid prices went nowhere. This led to a decrease in production facilities. I found one example of a closure as late as November 2006, when GenTek shut down a sulfuric acid facility due to "adverse market conditions."

There also seems to be little new capacity on tap. Industrial Info Resources, in Sugar Land, Texas, tracks this sort of thing. According to IIR, of the $89 million invested in sulfuric projects in the U.S. in 2007, most of the funds went toward planned maintenance, rather than expanded capacity. It also turns out that not only is supply tight, but there are all kinds of transportation bottlenecks in delivery – such as a shortage of rail cars. Key Compton, president of a sulfuric acid producer in Texas, said toward the end of last year that customers soon "may be paying prices for sulfuric acid that they've never seen before."

So how can you play it? Well, there are a number of producers of sulfuric acid. Most are big chemical companies that you wouldn't own because you want exposure to sulfuric acid. Owning them is like buying Home Depot because you think it sells a great lawn mower. The only "pure play" on the idea I could find is a little company called Chemtrade Logistics in Canada, one of the world's largest suppliers of sulfuric acid. It trades in Toronto under the ticker symbol CHE. You can find a quote on Yahoo using CHE-UN.TO.

It's a Canadian income trust and pays a monthly distribution of about 10 cents. Based on a price of $11.44, that's a yield of 10.5%. The company appears to be in good financial condition and throws off a lot of cash flow, much of which investors pocket in the distribution. It's not a sexy business, but it looks like an interesting play on what seems to be at least a temporary scarcity of a key chemical. Chemtrade is not a one-trick pony. It also produces liquid sulfur dioxide and sodium hydrosulfite. The company also sells into a wide range of end markets, so you're not tied to the fortunes of any single sector. The company has an excellent presentation of its business, complete with slides, on its Web site.

Since I have not completed my research on either Chemtrade or the overall sulfuric acid industry, I do not recommend Chemtrade. But since this sector is red-hot at the moment and appealing on many levels, I decided to share the insights I've gleaned so far. I plan to do more research on the idea. I would advise all investors do the same.

Regards,

Chris Mayer
for The Daily Reckoning

P.S. The skyrocketing price of sulfuric acid shows how interrelated the world's commodity markets and economies have become. And these interrelationships can produce investment opportunities at light speed. Agriculture, energy, metals... they're all part of one big story – one big, rapidly evolving story. And even though this pick isn't quite ready to recommend, there are some investments I've been tracking that you might want to take a look at. Read more here...

Editor's Note: Chris is a veteran of the banking industry, specifically in the area of corporate lending. A financial writer since 1998, Mr. Mayer's essays have appeared in a wide variety of publications, from the Mises.org Daily Article series to here in The Daily Reckoning . He is the editor of Mayer's Special Situations and Capital & Crisis – formerly the Fleet Street Letter .

Chris also recently wrote a book: Invest Like a Dealmaker: Secrets from a Former Banking Insider . Get your copy now...

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Keeping up with Joneses gets little cheap now

2008-05-26T16:22:00.001-07:00

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I’m back from vacation, some links I’m reading

2008-05-24T22:48:00.001-07:00

Worse is yet to come

via I Will Teach You To Be Rich by Ramit Sethi on 3/25/08

I’m back from India!

I had a great time in Delhi and Mumbai, and I’ll probably post some of my photos/thoughts a little later. I was also lucky enough to meet up with a few readers (here’s Ranjan’s writeup on meeting me), so thank you to everyone who met up and said hello.

While I’m catching up on stuff, here are some links that caught my attention recently.

Some women don’t go see their doctor because they’ll be weighed in public. Clueless comments include “Why don’t they just say no?” and “Do something to change it.” As I’ve written, food and weight are similar to personal finance. This is a classic Failure of the Last Mile.
Great overview of why timeshares are a stupid scam.
The Entrepreneurship Myth. Author dispels myths about entrepreneurship. You make less $ than working in a company, it’s riskier, and your chances of success depend primarily on the market you enter. Fascinating stuff. DO YOUR RESEARCH BEFORE STARTING ANYTHING.
What to do if you’re laid off in the 2008 recession. Scoble’s brilliant post on what to do if you’re laid off. We should be doing this anyway.
Sad, eye-opening article on the plight of American homeowners who got in over their head. This chart shows that the worst is yet to come — a lot worse.

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End to credit crisis is just an American pipedream

2008-05-24T19:38:00.001-07:00

End to credit crisis is just an American pipedream

THOSE in the US who have begun predicting the end of the credit crisis ought to have tuned in to National Public Radio last week when they would have heard what the housing crisis means for ordinary Americans.

Stories of families moving back to Mom and Dad's after struggling to either buy a home or keep the one they already had rammed home the message that this is a problem likely to run and run.

At the beginning of the week, it was easy to write these people off as a tail-end minority emerging from the trough of the worst US housing slump in more than two decades. However, opinion has shifted significantly as signs of a continuing decline in house prices and a build up of inflationary pressures have caused Wall Street to worry about consumers' ability to spend the US out of economic slowdown.

"I don't think anybody is fooling themselves that it is going to be easy from here on out," says Paul Ashworth, senior US economist with Capital Economics in Toronto. "House prices are plummeting, confidence is plummeting, and inflation is very much on the rise."

Indeed, the cost of oil and food, not to mention other products, has made investors quite jittery. Although oil prices eased back from an all-time peak of more than $135 per barrel, no one expects any serious relief in the near future.

Even before oil touched these record-breaking levels, the cost of gas had been grabbing headlines for months in the auto-addicted United States. E-mails on how to get best value at the pump – "fill up your tank when the temperature is cooler" – have been zipping their way across the internet for months.

In response, the US House of Representatives overwhelmingly passed legislation last week that would allow member states of Opec to be sued in US courts for limiting oil supplies and colluding to fix prices.

The Gas Relief for Consumers Act is not expected to make it into law, as it must still be approved by the US Senate and President Bush, the latter of whom has already threatened a veto on the basis that such lawsuits would be counter-productive to overall trade. However, this political gesture in an election year should play well with voters who are increasingly short of cash despite the return of tax dollars by the federal government in the coming weeks.

"Obviously we have got the tax rebates coming, so that should be some help (towards boosting consumer spending], but of course a lot of that will be swallowed up by filling up at the pump," says Ashworth.

Meanwhile, US homeowners can only sit and watch as the value of their properties continues to drop. On Thursday, a key government index showed that home prices fell at a record pace in the first three months of 2008, resulting in a year-long decline in house prices.

The house price index produced by the Office of Federal Housing Enterprise Oversight (OFHEO) recorded a 1.7% drop between January and March, the largest quarterly decline since the index began in 1991.

The index is down 3.1% during the last four quarters, the largest decline over that period in the history of the index.

The unease caused by these continuing declines has cut into the profits of nearly every major quoted firm reliant upon the US housing market, as homeowners cut back on everything from major maintenance to the purchase of new fixtures and fittings. Most recently, DIY chains Lowe's and Home Depot fell victim to the spending crunch, while hundreds of thousands of smaller firms are feeling the pinch as well.

Adding to the gloom is the increasingly unlikely prospect that US interest rate authorities will further cut the cost of borrowing. Having slashed rates by 3.25 percentage points since mid-September, the US Federal Reserve has little room left to cut from the current 2% benchmark, particularly against a backdrop of surging prices for energy and commodities. Despite the simple arithmetic weighing against a further cut, some analysts still believe monetary authorities will be forced into further bold moves. The pressure was not eased when a top official from the International Monetary Fund warned on Tuesday that the global economy remained threatened by both financial instability and the spread of slowing US economic growth to the rest of the world.

"We still see serious risks to global financial stability," said John Lipsky, first deputy managing director of the IMF.

"Policy-makers need to avoid complacency and take steps to restore confidence."

Lipsky, whose remarks were made in Tokyo, added that "perhaps extraordinary" measures would be needed if the US economy did not recover from its current malaise later this year.

"Persistently weak US growth would significantly inhibit a return to trend growth in other advanced economies, and could undermine growth in emerging economies as well," he said. Just a day after his comments, the IMF confirmed it was cutting its global growth forecast for 2008 to 3.7%, down from 4.1% previously.

At the heart of Wall Street, the consumer crunch is also making waves. Infamous banking analyst Meredith Whitney – who shot to notoriety when she predicted troubles at Citigroup last autumn – has now weighed in with her opinion that the major US banks will need to take an extra $170bn of write-downs by the end of next year.

The notoriously bearish Whitney cited the collapse of the securitisation business and a "sharp" pullback in consumer spending as the main reasons for this prediction.

There are few among the ranks of analysts who count Whitney as a friend, but there are also few who now disagree that economic recovery will be a long slog, rather than a quick rebound.

"There is no magical cure here," said Capital Economics' Ashworth. "Consumers are just facing a lot of headwinds now."

------------------------------------

Bought but can't hold

Commentary: Put your house on the market now? Are you nuts?

By MarketWatch

Last update: 4:18 p.m. EDT May 23, 2008

CHICAGO (MarketWatch) -- Either American home sellers are an incredibly optimistic lot, or they think they are stock traders who need to dump their assets in a declining market. How else to explain the surge in homes going up for sale in April, in the teeth of the worst downturn in housing since the Great Depression?

Because home buyers are spooked by the current environment, in which home prices have been falling in many markets across the country, there has been a glut of unsold homes on the market for more than a year. Sellers have been cutting their prices to attract the limited buyers out there -- the median price of a home sold in the U.S. in April was off 8% from a year earlier -- but that has done little to cut into the inventory. See full story.

Against that backdrop, sellers still concluded April was the time to move. The inventory of unsold homes on the market jumped 10.5% in April to 4.55 million units. At the current sales pace, that represents an 11.2-month supply of houses -- nearly double what the real estate industry considers to be a health level.

Of course, April is the biggest time of the year for putting houses on the market. That's because of the school-year cycle; families with kids in school who need to move in the June-August summer recess have to get their homes on the market then in order to sell, buy and close on both transactions before the fall term begins.

But even by seasonal standards the number of houses put on the market last month was high. And here is why that is particularly ominous:

Many of those potential sales are likely forced. Strapped homeowners who are struggling to keep up with mortgage payments may feel compelled to sell and get what they can for their house before the financial burden overwhelms them.
Many of those houses are foreclosures. With foreclosure proceedings nearly double what they were a year ago, banks are being handed the keys to record number of properties. Their aim is to get rid of them, regardless of market conditions.
Many of these moves are not discretionary. Let's face it: The job market is not the most stable right now. Folks who face layoffs or are "asked" to transfer may have little choice but to put their home on the market.
Many of these properties are failed investments. The speculators who bought -- mostly condos -- in the boom times in anticipation of quick profit have been caught with their windows down. They may have been tempted to hold for a rebound, but like stock traders they will also cut and run with no bottom in sight.

Some of the folks who put their houses on the market in April may end up pulling them off the market in subsequent months, once they see how choppy the water really is. But for most, it's now sink or swim.

--------------------------------------------

Home prices post record decline

A government study finds home prices fell 1.7% in the first quarter of 2008. California, Nevada see sharpest drop.

Compared to the first quarter of 2007, home prices fell 3.1% in the first quarter of 2008.

Washington, D.C. -- The prices of homes sold in the first quarter of 2008 posted a record decline, according to a new report from the Office of Federal Housing Enterprise Oversight.

Home prices fell 3.1% from the first quarter of 2007, the largest decline in the purchase-only index, which excludes refinancings, since the agency began keeping records 17 years ago.

First-quarter prices dropped 1.7% from the fourth quarter, the largest quarterly dip ever.

"It's not going to be the largest decline on record for long," said Peter Schiff, president and chief global strategist at Euro Pacific Capital."Prices are going to keep falling until we get to the equilibrium, which is much, much lower. This is only the beginning."

The inflation-adjusted price of homes fell 7.7% on a year-over-year basis. At the same time, the prices of other goods and services rose 4.6%, according to OFHEO.

"The nominal price declines aren't as spectacular as they would be if we didn't have so much inflation," Schiff said. "Houses are becoming a less valuable asset relative to the cost of living."

OFHEO reported that prices fell in 43 states, with eight states seeing quarterly price declines of more than 3%. California and Nevada were the biggest losers, with home prices falling more than 8% in both states.

Prices on all transactions, including homes sales and refinancings, fell 0.2%year-over-year and remained flat compared to the fourth quarter, OFHEO reported.

California, Nevada, Florida, Arizona and Michigan exhibited the greatest price depreciation in all transactions in the first quarter. Wyoming, Utah, Montana, Texas and Alabama saw prices for all transactions increase the most.

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Bank failures to surge in coming years

2008-05-24T01:43:00.001-07:00

IndyMac, Corus, UCBH under pressure as credit crunch slows economy

By Alistair Barr, MarketWatch
Last update: 6:27 p.m. EDT May 23, 2008
SAN FRANCISCO (MarketWatch) -- By April, Gary Holloway was almost three years into retirement.
He'd built a new home by a lake in Texas, bought a boat and was working on his golf game. While taking on some part-time work, Holloway also traveled for months across the U.S. with his wife, from Seattle to Washington D.C., catching up with old friends and family.
That life of leisure abruptly changed about six weeks ago when Holloway got a phone call from his former employer, the Federal Deposit Insurance Corp., or FDIC, which regulates U.S. banks and insures deposits.

Holloway, a 30-year FDIC veteran, had worked extensively with failed lenders in Houston during the savings and loan crisis in the late 1980s and early 1990s, when thousands of thrifts collapsed.
Earlier this year, the FDIC began trying to lure roughly 25 retirees like Holloway back to prepare for an increase in bank failures. It's also hiring about 75 new staff.
Holloway quickly went back to work. ANB Financial N.A., a bank in Bentonville, Ark. with $2.1 billion in assets and $1.8 billion in customer deposits, was failing and an expert like Holloway was needed to value the assets and find a stronger institution to take them on.
"I was very excited about coming back," Holloway said in an interview. "I'm now 57. There's still a lot of life left and the juices are flowing again."
On May 9, life for ANB ended when the FDIC and the Office of the Comptroller of the Currency, another bank regulator, announced that the lender was closing. See full story.
Only three banks have failed so far in 2008. But that number is set to surge as the credit crunch slows economic growth and hammers some lenders that grew too fast during the recent real-estate boom, experts say.
The roots of today's banking crisis grew out of the boom and bust in the real estate market. Lenders originated more and more mortgages, while other banks, particularly smaller and medium-sized institutions, ploughed money into construction and development loans.
'You don't avoid the problem. It's too late to wait and hope that things get better.'
— Joseph Mason, Drexel University
While loan growth soared in 2004 and 2005, most regulators failed to scrutinize many banks or restrain this heady expansion of credit. Now that the loans have been made and delinquencies are climbing, some banks may already be doomed.
Marriages and managing
"At this point in the crisis, you can't stop bank failures," said Joseph Mason, associate professor of finance at Drexel University's LeBow College of Business, who has studied past financial crises.
"At this point you manage through failures and arrange marriages where another stronger bank takes on the assets and deposits," he said. "You move through the problem. You don't avoid the problem. It's too late to wait and hope that things get better."
Things may get worse before they get better.
At least 150 banks will fail in the U.S. during the next two to three years, according to a projection by Gerard Cassidy and his colleagues at RBC Capital Markets.
'There has been excessive loan growth and some banks won't be able to access capital markets to replace the money that will disappear as credit losses rise.'
— Gerard Cassidy, RBC Capital Markets
If the current economic slowdown deteriorates into a recession on the scale of those from the 1980s and early 1990's, the number of failures will be much higher this time around -- probably as high as 300 of them, by RBC's reckoning.
That's a massive surge compared to the recent boom years of the credit and real estate markets. From the second half of 2004 through end of 2006 there were 10 consecutive quarters without a bank failure in the U.S. -- a record length of time, Cassidy notes.
"This downturn will trigger a significant amount of bank failures relative to the past five years," he said. "There has been excessive loan growth and some banks won't be able to access capital markets to replace the money that will disappear as credit losses rise."
Texas Ratio
Cassidy and his colleagues have developed an early-warning system for spotting future trouble at banks called the Texas Ratio.
The ratio is calculated by dividing a bank's non-performing loans, including those 90 days delinquent, by the company's tangible equity capital plus money set aside for future loan losses. The number basically measures credit problems as a percentage of the capital a lender has available to deal with them.
Cassidy came up with the idea after covering Texas banks in the 1980s. Until the recession hit that decade, many banks in the state were considered some of the best in the country. But as problem assets climbed, that view was cruelly challenged, Cassidy recalls.
The analyst noticed that when problem assets grew to more than 100% of capital, most of the Texas banks in that precarious position ended up going under. A similar pattern occurred in the New England banking sector during the recession of the early 1990s, Cassidy said.
Along with his colleagues, Cassidy applied the same ratio to commercial banks at the end of this year's first quarter and found some disturbing trends.
UCBH Holdings Inc.

http://www.marketwatch.com/news/story/story.aspx?guid=%7B2FCA4A0C-227D-48FE-B42C-8DDF75D838DA%7D&print=true&dist=printTop

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Americans split on homeowner bailout - poll

2008-05-08T09:51:00.001-07:00

They are not bailing you out.

via Business and financial news - CNNMoney.com on 5/8/08

Americans remain split on whether homeowners about to default on their mortgages should receive special treatment to help them keep their houses, according to a new CNN/Opinion Research Poll.

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Countrywide Takes Away Home-Equity Credit Lines in Las Vegas

2008-05-06T20:43:00.001-07:00

http://www.bloomberg.com/apps/news?pid=20601109&sid=adSiHtVyQXmc&refer=home

U.S. lenders had $1.1 trillion in home equity loans outstanding as of last year, up 89 percent since 2003, based on the Federal Reserve's Flow of Funds data.

Amid flashing neon signs along the Vegas Strip, residents are losing access to credit that might have financed businesses or bought cars and other goods.

As many as 15,000 people in Las Vegas, or 5 percent of the total homeowner population, had credit lines suspended by Countrywide and other lenders, said Brad Henderson, president of Henderson, Nevada-based mortgage banker and broker Evofi One.

Jerry Tao, a part-time lawyer and spokesman for Evofi One's parent company, lost access to his $50,000 Countrywide line despite earning more than $500,000 last year and having a credit score he says was between 750 and 770.

Replacing Pathfinder

Though he never accessed the line, Tao, 40, said he'd hoped to redo his backyard and replace his 1995 Nissan Pathfinder.

Credit scores are a calculation of the likelihood a person will pay bills based on past history.

Countrywide, the biggest U.S. mortgage lender, stopped extending credit to 122,000 borrowers nationwide whose homes fell below appraised values, a practice permitted by bank regulations, the company said in a statement.

Pasadena, California-based IndyMac and Seattle-based Washington Mutual say they evaluate borrowers individually. Bank of America says it's reviewing all its home-equity credit lines and taking actions permitted by lending agreements.

The Las Vegas housing-market crash represents a turnaround since 2003, when the local economy and real estate were booming.

``If you had anything on the ball, you could make it happen in Vegas,'' said real estate agent Donna Marie Gold, 62, who built a $4.5 million fortune buying and selling properties over six years.

After failing to complete a single sale last year, Gold said she fell $22,000 short each month on payments needed to maintain 14 properties. Now two to four months behind on some mortgage payments, she's lost access to a $250,000 Wells Fargo & Co. equity credit line.

`New York Minute'

``The whole thing was upside down in a New York minute,'' Gold said. ``There needs to be some forgiveness in this climate with regards to credit and rebuilding one's credit.''

John Simon, 42, borrowed $35,000 on low-interest credit cards in 2007 to pay down his $63,000 credit line and save on the 11.75 percent interest he says Countrywide charged. He expected to be able to access the credit line later. When Countrywide froze the line, he wasn't able to get money needed to pay his bills.

``They took away the last amount of cash I had to make all the payments on my father's retirement home,'' Simon said. ``From a business standpoint, this was the stupidest thing I ever did. But it was so easy.''

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The Fed is Getting Desperate

2008-05-05T23:07:00.001-07:00

http://www.rgemonitor.com/blog/roubini/252573/

Financial markets – especially the equity markets – have somewhat recovered since the financial markets reached a point of near meltdown around the time of Bear Stearns collapse. But the strains in money markets and credit markets remain severe and show little sign of improvement.

In mid-March – at the peak of the crisis - the Fed did not just partially bail out the Bear Stearns shareholders who would have been totally wiped out in the case of a disorderly collapse of Bear Stearns; more importantly the Fed bailed out JP Morgan that had – like Bear – and still has a massive exposure to the CDS market; it bailed out the creditors of Bear Stearns who would have suffered massive losses if the Fed had not outright bought $29 billion of toxic securities held by Bear; and it bailed out Lehman, Merrill and a good chunk of the shadow financial system as the Bear Stearns bailout – together more importantly with the new TSLF and the PDCF – ensured – for the first time since the Great Depression - that systemically important broker dealers would have access to the lender of last resort support of the Fed.

While the extreme tail risk of a systemic financial meltdown – and we were in mid-March one epsilon away from such a generalized run on most of the shadow banking system – was avoided by the trifecta of the Bear Stearns bailout, the TSLF and the PDCF the stresses in the financial markets – liquidity and credit crunch - remain severe as even the FOMC had to admit in its latest statement.

The severity and persistence of the liquidity crunch is evident from the fact that in the interbank markets spreads relative to Libor remain extremely high and still close to their peaks since this crisis started last summer in spite of 325bps Fed Fund ease by the Fed, in spite of the creation and vast expansion of the TAF auctions (now up to $150 billion over a month), in spite of the creation and extension of the TSLF, in spite of the creation of the PDCF. So now after the Fed has already allowed banks and non banks primary dealers to swap hundreds of billions of dollars of illiquid MBS (and now even any “good quality” ABS), after it has allowed the non bank primary dealers to have access to the Fed discount window on same terms as the banks, it has now decided to allow even non-US banks outside of the US to have access to the liquidity support of the Fed: indeed given the stubborn recalcitrance of term Libor spreads to fall in the US, UK , Europe and around the wor!
ld the
Fed now claims that this stress in money markets is due to the fact that non-US banks are short of dollar liquidity and are thus putting pressure even on the borrowing rates of US banks.

So while foreign banks and foreign primary dealers already present in the US can have access to the Fed liquidity and Treasuries-swap-for-illiquid-assets facilities foreign banks without US operations now also need to be provided with the lender of last resort support of the Fed. How to do that? The Fed just announced a significant increase of its swap facilities with European central banks: the latter will be able to swap their euros, swiss francs, etc. for US dollars and then relend these dollars to their own banks that are structurally short of dollar liquidity. So, via foreign central banks now the Fed will also try to provide its safety net to non-US banks.

So as the stress in interbank markets is showing no sign of relenting the Fed has increasingly resorted to new operations that incrementally increase the number of institutions that have access to its safety net and the nature of its safety net: direct Fed Funds easing of 325bps and parallel sharp reduction of the discount rate; creation and now massive extension of the TAF that provided term liquidity to US banks; creation of the term facility (TSLF) that allowed both banks and non-bank primary dealers to swap illiquid MBS and now ABS for safe and liquid Treasuries; creation of the primary dealers credit facility (PDCF) that vastly extended the lender of last resort support to systemically important non banks (primary dealers); creation and now further extension of swap facilities with foreign central banks that will allow even non-US banks operating abroad to have access to the Fed’s dollar liquidity.

The Fed is getting most creative and desperate as all these facilities have done very little to reduce the liquidity crunch in spite of the fact that now $500 billion out of the $700 billion of safe Treasuries held by the Fed are now committed to be swapped for illiquid assets on the balance sheets of US and non-US banks and non-banks. That is why the Fed recently leaked even more non-orthodox ideas that are being discussed on how to buy even more illiquid assets once it runs out of safe Treasuries to swap: borrowing from the Treasury bonds to be swapped for illiquid MBS/ABS, issuing Fed debt notes (like the sterilization bonds used by some central banks to perform sterilized intervention, paying interest on reserves to potentially massively increase the liquidity available to banks without blowing the monetary base, etc.).

But in spite of all of these interbank spreads – both the Libor-OIS spread and the TED spread – remain stubbornly high and only modestly lower than their recent extreme peaks. Why? Banks and non bank primary having access to the Fed liquidity are hoarding such liquidity and not relending it to the other members of the shadow banking system for two reasons. First, they need that liquidity for themselves as the roll-off of SIV and conduits and concerns about future liquidity needs have led to a massive need for liquidity insurance; second, given the counterparty risk – who is holding the toxic waste and how much of it – that an opaque and non-transparent financial system has created no one trust its counterparties and is willing to lend them money on a term basis. Given this fundamental lack of confidence and trust in counterparties the money markets remain totally clogged and the massive orthodox and non-orthodox actions of the Fed have very little effects. Yes, now in
addition to banks, a dozen non bank primary dealers have access to the Fed liquidity. But thousands of other members of the shadow banking system – SIVs, conduits, money market funds, hedge funds, private equity funds, smaller broker dealers and investment banks – don’t have access to such liquidity. And most of these members of the shadow banking system borrow short and in liquid ways, are highly leveraged and lend or invest in longer terms and more illiquid ways. So they are all subject to liquidity or rollover risk.

So the liquidity crunch remains severe in spite of all of the extreme policy actions by the Fed and other central banks. In forthcoming note we will show why the recent stock market rally is just a bear market sucker’s rally; and why the credit crunch is getting worse rather than getting better. The worst is still ahead of us both for the real economy that is spinning into a more severe recession and for financial markets where unrecognized losses are much larger ahead than the losses that have been already recognized.

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Will Fed Cut Rates Again?

2008-05-02T14:55:00.001-07:00

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April Payrolls Down Less Than Expected: Is the U.S. Labor Market Showing Mixed Recessionary Trends?

2008-05-02T14:52:00.001-07:00

Fact-check from http://www.rgemonitor.com/

Large birth/death adjustment (267k), seasonal factors may be inflating the no. of jobs added; unemployment rate down due to increase in household employment; BLS data subject to revisions

Website Snapshot

RGE Monitor

RGE Monitor -

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Let Rome in Tiber melt

2008-04-25T15:51:00.001-07:00

Rome did melt into the Tiber. The place was invaded by barbarians...the population sank from over a million to under 100,000. And when the city was “rediscovered” by tourists with a sense of history in the 17th century...there were goats grazing amid the ruins of the ancient city.

There are people who believe that power, progress, and wealth are always on a rising slope. Let them come to Rome!

Roman property was a sell for a period of probably a thousand years...from the peak of Roman power, around 100 AD, down to its nadir, sometime after the Renaissance.

We have come to Rome on your behalf, dear reader. We poke through its dusty ruins looking for the future. There are more ruins to come, we think...

(Oh, the labors we undertake for your sake, dear reader. Last night, trying to get in the spirit of the place, we drank nearly a whole bottle of wine from Abruzzo. Today, we will go with a Tuscan variety...)

But let us first look at the news:

“Does the US matter any more?” The question comes to us from the head of research at Societe Generale . Looking at the data from the International Energy Agency in Paris, reported in this space yesterday, he noticed that now China, Russia, India and the Mideast use more oil than the USA. What’s more, energy use in America is going down...while it is skyrocketing in those other countries. Thanks largely to growing demand in the emerging markets...and the falling value of the U.S. currency...the price of oil hit a new record yesterday – at $118.

The United States matters less and less to the oil market – but is still very important, of course.

We have guessed that the United States of America is a sell. Its money, its paper, its property, its labor, its stocks, its industries, its debt – sell them all.

We don’t mind saying so...still, we don’t like to hear the foreigners say it. A man may have noticed the swelling with his own eyes; still he doesn’t like to hear a stranger say his wife is getting fat. So when the Financial Times comes out with an article saying the same thing, it sticks in our craw.

At least the FT is nice enough to use a euphemism. Instead of seeing the United States on its knees, it sees the “end of unipolarity.” As we all know, when the Soviet Union threw in the towel in 1989, the US was the world’s undisputed hegemon. America was on top of the world – with no real competition. It was a “unipolar” world, as the FT would put it. The stock market boomed. The dollar rose. America’s chest swelled with homegrown pride and the entire world’s credit. And by the late ’90s, President Clinton summed it up: “things couldn’t get better,” he said.

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Bill Bonner from Italy. Air is going somewhere else

2008-04-25T10:07:00.001-07:00

From the Financial Times comes the view from the sunny side of the street:

“The optimistic view is based on two distinct elements. First, that the deleveraging process is reaching its natural end as valuations stabilise and institutions come clean about their losses and raise capital; second, that a series of previously unthinkable policy responses have been effective in restoring liquidity to the financial system.

“Both views have merit. Financial institutions, particularly in the US, have recognised the scale of the problem and are taking remedial steps. Just witness the recent round of capital raising by Citigroup, Merrill Lynch, JPMorgan and Wachovia . At the same time central banks in Europe and the US have opened up their financing windows, expanding the size of the financing, the range of institutions that can access it and the list of eligible collateral.”

The report goes on to suggest the alternative...that policy reactions (by the Fed and other central banks) may be “too little, too late.”

And here, we think the writer is wrong on both scores. That is, the real problem is not one that can be fixed by putting more money into the banking system. It’s more basic than that. When a bubble pops, it’s almost impossible to pump it up again. You pump and pump...but the air goes somewhere else. The consequence of the dot.com bubble, for example, was that expectations for the new age of computerized communications were over-bought. New money could be put into the system. But the new money didn’t go into dot.coms. It went into housing and finance. Now, those bubbles have popped too. The authorities are pumping new money into the banking system...but where is it going? We already have plenty of houses in America – more than enough. Don’t expect a boom in the housing industry anytime soon. And take all those leveraged, sophisticated CDOs, MBSs, SIVs, and the rest – please! Who’s going to put more money into those?

No, dear reader, that’s not the way it works. New money looks for a new home...a new bubble to inflate...not one with a hole in it.

Our guess...and again, we warn readers that we are just guessing...is that this inflation is going into gold, commodities, oil...and, yes, emerging markets. Our guess is that the setback for emerging markets is just a correction, not a fundamental shift of direction.

Our guess is that the setback for gold – down below $900 – is also just a correction, not the end of the bull market. Indian stocks...the Vietnamese economy...commodities...gold – all still have a lot of room on the upside.

Our resident commodities guru, Kevin Kerr, couldn’t agree more. “A nasty rumor has been going around that the commodity markets are old hat and will soon go the way of the dinosaur,” says Kevin.

“‘They’ have been saying that since I started on the floor almost 20 years ago. I’m here to tell you that not only are these markets stronger and more modern than ever, but there’s never been a better time than right now for investors like you to make lifestyle-changing profits, and probably more quickly than you ever thought possible. I know, because I’ve done it myself!”

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Japan's Notes Poised for Biggest Slump Since 1999 on Inflation

2008-04-24T22:08:00.001-07:00

Japan's five-year notes headed for the biggest slump in almost nine years after inflation rose at the fastest pace in a decade in March, adding to speculation the Bank of Japan will increase interest rates this year.

Government notes declined for a second day, pushing yields to the highest in six months, after the statistics bureau said core consumer prices climbed 1.2 percent from a year earlier after gaining 1 percent in February. The probability that the central bank will raise its target rate this year climbed to 79 percent from 39 percent yesterday, according to calculations by JPMorgan Chase & Co. using interest-rate swaps.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aYruOQCFHlQs&refer=home

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The Shape of the US Recession: V or U or W or L-Shaped?

2008-04-23T12:30:00.001-07:00

Roubini in Gulf Times

http://tinyurl.com/6qmodl

Now that it is clear that the US is in recession, the debate has moved on to whether it will be short and shallow or long and deep – a question that is as important for the rest of the world as it is for the US.

The answer depends on the shape of the US recession: if it is short and shallow, sufficient growth elsewhere will ensure only a slight global slowdown. But if the US recession is long and severe, the result could be outright recession in some countries (the United Kingdom, Spain, Ireland, Italy, and Japan), and even financial crises in vulnerable emerging-market economies.

In principle, the US recession could end up being shaped like a V, U, W, or L. Which of these four scenarios is most likely?

The current consensus is that the recession will be V-shaped – short and shallow – and thus similar to the US recessions in 1990-91 and 2001, which lasted eight months each.

Most analysts forecast that GDP will contract in the first half of 2008 and recover in the second half of the year.

I expect a longer and deeper U-shaped recession, lasting at least 12 months and possibly as long as 18 months –- one of the most severe US recessions in decades – because today’s macroeconomic and financial conditions are far worse.

First, the US is experiencing its worst housing recession since the Great Depression, and the slump is not over. Construction of new homes has fallen about 50%, while new home sales are down more than 60%, creating a supply glut that is driving prices down sharply – 10% so far and probably another 10% this year and in 2009.

Already, $2.2tn of wealth has been wiped out, and about 8mn households have negative equity: their homes’ are worth less than their mortgages. By 2010, the fall in home prices will be close to 30% with $6.6tn of home equity destroyed and 21mn households – 40% of the 51mn with a mortgage – facing negative equity.

If owners walk away from their homes, credit losses could be $1tn or more, wiping out most of the US financial system’s capital and leading to a systemic banking crisis.

Second, in 2001, weak capital spending in the corporate sector (accounting for 10% of GDP) underpinned the contraction. Today, it is private consumption in the household sector (70% of GDP) that is in trouble.

American consumers are shopped-out, saving-less, debt-burdened (136% of income, on average), and buffeted by many negative shocks.

Third, the US is experiencing its most severe financial crisis since the Great Depression. Losses are spreading from sub-prime to near-prime and prime mortgages, commercial mortgages, and unsecured consumer credit (credit cards, auto loans, student loans).

Total financial losses – including possibly $1tn in mortgages and related securitised products – could be as high as $1.7tn.

Given these staggering sums, the US could face a double-dip,

W-shaped recession. The main question is whether the tax rebate that US households will receive in mid-2008 will be consumed – thus leading to positive third-quarter growth – or saved.

Given how financially stretched US households are, a good part of this tax rebate may be used to pay down high credit card balances (or other unsecured consumer credit) or to postpone mortgage delinquency.

Fortunately, an L-shaped period of protracted economic stagnation – Japan’s experience in the 1990’s – is unlikely. Japan waited almost two years after its asset bubble collapsed to ease monetary policy and provide a fiscal stimulus, whereas in the US both steps came early.

Moreover, whereas Japan postponed corporate and bank restructuring for years, in the US private and especially public efforts to restructure assets and firms will start faster and be more aggressive.

Still, given a severe financial crisis, declining home prices, and a credit crunch, the US is facing its longest and deepest recession in decades, dashing any hope of a soft landing for the rest of the world. While a global recession will be averted, a severe growth slowdown will not.

Many European economies are already slowing, with some entering recession. China and Asia are particularly vulnerable, given their trade links to the US. And emerging markets will suffer once the US contraction and global slowdown undermines commodity prices

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How to make money in stock market

2008-04-21T16:04:00.001-07:00

If You Started With $200 in January 2006, You Could Have Been Sitting on $9.4 Million by July 13 2007, Thanks To...

Wall Street's
Most Profitable Stock Strings Revealed
AT LAST...

Inside:Exclusive details about four stocks set to rise as much as eight times over in the next year. If I don't deliver gains, I'll give you DOUBLE your money back. Just Some of 2007's Amazing Gains in this Explosive Market Sector...

Dear Profit-Seeking Reader,

In just the next five minutes, I want to show you how you could have turned $200 into $9.4 million in just over 18 months.

Sound impossible? It's not!

In the last year and a half, one of Wall Street's most profitable 'stock strings' could have turned $200 into $9.4 million. I'll show you how in a second.

I'll also show you what four stocks you need to own right now to start your own string of gains (potentially worth millions!) for the rest of 2008.

I'm so sure that these stocks could make you a tremendous amount of money...

I'm willing to refund you DOUBLE YOUR MONEY if my recommendations do not produce AT LEAST FOUR 100% gains in the next year Does that sound like a fair deal?

No one else can make a promise like that. No one. That's how sure I am that you can make money following my recommendations.

You see, these 'stock strings' are Wall Street's best-kept secret. Those who know how to play them become insanely rich — and FAST! But the vast majority of investors have NO IDEA what they are, or how to profit...

So before you read on, let me warn you...

Only a few people will have the insight, intelligence and know-how to make the huge gains I am going to show youin this report. That's because in order to beat the market and make spectacular gains, you have to choose the highest-yielding, fastest-growing and most-ignored stocks in the world.

I'm talking about the stocks that are left out of your nightly news reports...that are never featured in The Wall Street Journal or Investor's Business Daily...and that your broker would rather die than tell you about (since he wants them for his own portfolio!).

These stocks are where the huge profits can be made month in and month out. They are the same class of stocks that...

Gave readers gains of 146% in less than 2 months, 221% in 18 months, 68% in 21 days and 61% in 3 months

Helped the finest fund manager of all time quadruple his money in only 4 years (Today, he is a retired billionaire living out his days in the sunny Bahamas!)

Formed one of Wall Street's most profitable stock chains ever and could have turned $200 into a potential $9.4 million in just 18 months

USA Today, Yahoo Finance, TheStreet.com, Forbes.com and well-known money managers are touting them as the best investment opportunities on the market right now.

In fact...

Forbes reported in December 2006 that 'Small companies are expected to grow earnings considerably faster than large companies [...] and small 'penny' stocks are likely to remain popular as long as they are delivering superior earnings growth.'

And if you are willing to invest in them now, you could make a fortune just like the $9.4 million that could have been made in 2006 - 2007.

The key is to recognize these stocks before anyone else does — and to string the gains together over several months — even a year — at a time. This technique is certainly not for everyone. No one can predict the future, and every string of wins ends with a loser. So there is significant risk involved, but the potential for profits is limitless. Of course, we would never recommend rolling all money invested from one play to another. The best thing is to take out winnings as you go, and continue with only as much of the profits as you feel comfortable putting on the line. That way, you keep your core money safe and play with the rest.

In fact, if you'll give me just a few minutes, I'll show you how one of Wall Street's most profitable stock strings could have made $9.4 million...starting with just $200.

The magic is in knowing what type of stock yields the highest returns. And the great thing is you could have done it with only nine investments! Here's how...

Profit Chain Step 1:
Invest in an Undiscovered IT and Network Security Company that Racked up 457% Gains in Just 2 WEEKS

On Jan. 20, 2006, shares of China Technology Development Group (CTDC:NASDAQ) traded for just $2.18 per share. Most investors had never heard of this tiny company, but CTDC was poised for an amazing run.

CTDC is an IT and network security firm based in Hong Kong. The company has less than 70 full-time employees — but in late January 2006 — it was about to see a stock price increase for the record books. CTDC is a good company. It's small, it's growing, and it operates in the hottest technology region in the entire world.

In short, this unheard-of company was a solid business — the kind that can make educated individuals like you a lot of money (but you NEVER hear about on TV or in the newspapers). And that lack of coverage is exactly what led a select few investors to enormous profits, while most people had never even heard of CTDC!

Between Jan. 20 and Feb. 2, shares rose from $2.18 to $12.15. And it was the first step to turning $200 into $9.4 million. If you invested $200 on Jan. 20, you were sitting on $1,114 by Feb. 2. That's a 457% rise in TWO WEEKS.

As impressive as 457% in two weeks is, it is not going to turn $200 into $9.4 million, is it? Well, no. It was only Step One in the profit chain.

Now, the safe way to play it would be to pull out your initial investment at some time and roll on the rest. Only the very bold would bet the entire pot, so for the sake of demonstration, let's say you took your initial $200 out of that $1,114. That means you're forwarding $914 in pure profits to the next stock in the profit string. You're playing with house money!

Profit Chain Step 2:
1,500% Gains in Less Than 4 Months

The day after CTDC's amazing profit run, another small company called NaviSite Inc. (NAVI:NASDAQ) really started to take off.

NAVI specializes in hosting and application management for mid-to-large-sized companies. Its roster of software solutions reads like a hot list of all the most current pressing problems in the computing world.

On Feb. 3, 2006, NAVI traded for just $1.54 per share. By May 10, it had shot all the way up to $5.45. Had you been stringing together your profits from CTDC, your $914 would've been worth $3,234 in about three and a half months.

In about 100 days, you could have grown your money over 1,500% by investing in just TWO of the fastest growing stocks on Wall Street — the ones you NEVER hear about in the mainstream media.

But turning $200 into $3,234 is just the beginning. Check out what happened next — Step Three in your quest to turn $200 into $9.4 million...and Step Three in Wall Street's most profitable stock chain.

Profit Chain Step 3:
This Stock Shot $3,234 All The Way up to $7,688

Step Three in the profit chain was International Assets Holding Corp. (IAAC:NASDAQ). IAAC is a financial services company that focuses on international markets. It has great earnings and shows enormous potential for future growth. But here's the thing — on May 11, 2006, the day IAAC started its amazing run, no one knew what IAAC was, and very few investors were able to capitalize.

On May 11, IAAC traded at a relatively puny $11.90 per share. Less than four months later, the share price had more than doubled, to a healthy $28.29 per share. That was good enough to turn your $3,234 into a robust $7,688.

And the profits through the first three steps are just the beginning. Because this profit string was just getting started...

In Less Than 8 Months, You Could Have Turned $200 Into Over $7,600!

Starting with ONLY $200, if you had managed to get in on those three plays at the right time, you could have been sitting on $7,688 in pure profits in just eight months!

$400 to start would've had you sitting pretty at $15,376. $1,000 to begin with, all the way back at Step One — and you'd be counting the dough with $38,440 in profits.

But those are hypothetical starting amounts. What I'm demonstrating here is how as little as $200 could turn into $9.4 million.

Talk about a profit chain! And all you had to do was...

Recognize the ignored stocks set to soar and...
Take your gains from the previous month and reinvest them in the next highflying stock.

That's it! Well, actually there was another step. When you finally decided to end the string, you had to collect your big check and deposit it into your savings account. If you chose to end the string of gains after investing in only the three stocks I just showed you, you could have turned $200 into $7,688. Not too shabby. But in a second, I'll show how anyone with a steel stomach and amazing timing could have turned that $7,688 into over $9.4 million by mid-July 2007.

Sounds crazy, doesn't it? I know. But the only reason it sounds crazy is because you never hear about these stocks in the mainstream press. NEVER. So you are not used to these amazing gains. Think about it...

If you knew about these stocks, your broker would lose his business. You wouldn't want to buy shares of GE, IBM and eBay from him. You'd close your account and make your own fortune — without all the pesky fees.

No broker wants that. If everyone knew about these stocks, Wall Street could crumble. And I don't expect that to happen anytime soon. You see, most people don't have the guts to invest in these stocks. Since they don't know much about them, they ignore 'em. And it's too bad...

The best investors of all time have built their fortunes buying these very kinds of stocks. In fact, the most successful money manager of the 20th century got his start by investing in stocks just like CTDC, NAVI and IAAC. And he quadrupled his money in four years!

I'll tell you all about his story — and how you can make similar gains in this market. But first, let me ask you a question...

Are you beginning to see how $200 could transform into $9.4 million if you were brave and savvy enough to invest in the right stocks at the right time...and strung those gains out over several months?

Thousands of Undiscovered Companies Waiting for You Right Now

There are thousands of undiscovered companies that trade on the NYSE, Nasdaq and Amex every day. Many of them have growing sales and earnings, low debt, lots of cash and incredible products. And those are the companies that make investors rich every month.

They are companies like China Technology Development Group (CTDC), NaviSite Inc. (NAVI), and International Assets Holding Corp. (IAAC) — three stocks that could have turned $200 into over $7,600 in less than eight months!

And folks, these high-rising stocks aren't rare. They are very common, in fact. In 2007 alone, here are just a few of the companies that saw astounding gains:

Just a Few of 2007's Biggest Stock Gainers so Far!

And there are many, many stocks like these (including the nine stocks I'll show you in a minute) that could have turned your $7,688 into $9.4 million! But before I get to those, I want you to know...

You could have made a LOT more than $9.4 million last year.You see, there are FAR more high-rising stocks than the ones I am showing you in this report. But it would take hours for me to list all of them. And by now, I think you get the point. An investor with the knowledge, insight and fortitude to invest in the right stocks at the right time could make a fortune.

And that is exactly why I am willing to offer you the best deal I've ever offered.
If you give my research service a try today and my string of recommendations does not deliver at least four 100% gains in my track record in the next year, I'll pay you back DOUBLE what it costs to join. All you have to do is ask.

Simple as that. If my analysis does not deliver gains, I'll send you a check for exactly TWICE what you sent in.

Sounds like a fair bet, doesn't it? If you're willing, I can show you how the best investors of all time made a lot of money. And get you on the road to joining them...completely risk-free.

From $200 to $9.4 Million in Just Over 18 Months

For instance, using a hypothetical example, I just showed you how you could have turned $200 into $7,688 — in only three steps on the profit chain.

Let's take that example to its gutsy, but logical extreme. Pretend you could have kept the profit chain going all year long. I'll show you how you could have turned that $7,688 into $9.4 million by mid-July in 2007 with only SIX more stocks.

If you had managed to invest in one highflying stock after another — taken your gains and invested in the next highflier — just like I showed you with CTDC, NAVI and IAAC — in just about 18 months, you could have turned $200 into $7,688…then into $9.4 million. Check it out...

Starting in January 2006 and ending in mid-July 2007, it was possible to turn $200 into over $9.4 million by investing in the right stocks, cashing out and reinvesting your winnings in the next stock on the profit chain! Of course, you couldn't have done it investing in General Electric, IBM, Intel, Cisco or any other large stock your broker tried to push off on you.

You had to have the proper guidance and intelligence to put your money where no one else was...and you had to decide whether to do the safe thing and take some winnings out early — or take a chance by rolling your winnings into the next play.

Of course, I can't promise you will turn $200 into $9.4 million this year by following my recommendations. What I showed was an extreme example of how powerful penny stocks can be. It took tremendous timing and a lot of luck to turn $200 into $9.4 million.

But those who kept up the string could have walked away millionaires in a year. And if you stay with me, I'll show you what four stocks you need to own now to start your own stunning chain of winning stock picks.

Remember, you need only $200 to get started.

Penny Stocks Beat the Pants off of Large-Cap Stocks Year in and Year Out

The best-performing stocks on the market are companies with tons of cash...groundbreaking products...and growing businesses — the same stocks that have proven to be the BEST investments over the last century.

The one thing that makes these stocks different is...they're still small enough to make them affordable for small investors to make a grab for their share of the profits!

Since 1926, no other class of stock has made investors more money than these penny stocks. Let me repeat that...

Over the last 80 years, NO group of stocks has made investors more money than penny stocks. Not mid caps, not large caps, not gold stocks and not retail stocks.

In fact, a famous study done in 1996 by Ibbotson Associates — a major research firm based in Chicago — proved this once and for all.

After compiling cold, hard data on small- and large-cap stock returns from 1926-1996, Ibbotson Associates proved that small-cap penny stocks outperform large caps...

56% of the time in any given 1-year period
66.1% of the time if you hold for 10 years
94.2% of the time if you hold for 20 years
100% of the time if you are willing to hold for 33 years or more!

In other words, investors who buy shares of the smallest companies on the market beat those who buy stock in companies like Microsoft, GE, IBM, Intel and Cisco. That's exactly why everyone generates the same returns year in and year out. It's ridiculous!

But what investors don't realize is...

· There are 3 times more small-cap stocks than large caps on Wall Street right now. That means you have 3 times as many opportunities to make huge gains every month — like the 146%and 221% gains Penny Stock Fortunes readers could have made
The longer you are willing to hold solid small-cap stocks, the more money you can make.

Check it out...

$1,000 Turned Into $3.96 Million

Anyone who invested $1,000 in a basket of small-cap stocks in 1926 could have cashed out for $3.96 million by 2000. By comparison, a $1,000 investment in a basket of large-cap stocks in 1926 grew to only $1.76 million by 2000.

Translation...

Over time, people who buy and hold small-cap stocks give themselves the chance to walk away MUCH richer than those who follow the Wall Street herd and invest in the same old large-cap stocks. I'm talking $2.2 million richer!

In fact, the most famous money manager of all time (now a retired billionaire living out his days in the sunny Bahamas!) made his first fortune following the same advice I am sharing with you now.

Here's How He Turned $10,000 Into
$40,000 in 4 Years

John Templeton is the most successful money manager of the 20th century — and probably of all time. In 1954, he founded his flagship Templeton Growth Fund — one of the highest-yielding funds of the modern era. Every $100,000 invested into John's fund was worth $55 million by 1999. That's an annual rate of return of 12.2%. To put that in perspective for you...

If you put $100,000 in Microsoft in 1986 — arguably the best single investment opportunity of the last 100 years — you would be sitting on $22.9 million today. That's less than HALF what the Templeton fund yielded investors!

And in 1992, John sold his entire group of funds — worth $25 billion — to Franklin Resources Inc. for $440 million. Today, he is living a life of luxury in Nassau, in the Bahamas.

Think he was just a rich kid who got richer as he got older? Think again...John Templeton wasn't born rich. In fact, he was born on Nov. 29, 1912, in Winchester, Tenn. — a small town only miles from where the famous Scopes Monkey Trial took place.

After graduating first in his class at Yale (which he put himself through by working three jobs), Templeton took a job on Wall Street. He loved stocks, numbers and the promise of big returns. And he knew he could make a fortune investing in the most lucrative stocks of all time — small-cap 'penny' stocks. By 1939, just five years out of school, John saw his opening. Problem was, he had no money to act on his knowledge.

But that wasn't going to stop the young farmer from Tennessee. In a move slated for the Investment Hall of Fame, John went to his boss and begged for a $10,000 loan. Remember, this was 1939 — 10 years after the start of the Great Depression. The Dow Jones was down 73% from its high in 1929. And most people were petrified to invest in any stocks — let alone small caps. Plus, $10,000 was a lot of money — the equivalent of $135,899 today.

But John's boss knew there was something special about this kid. He studied the markets like a bloodhound looking for a faint scent in the woods. And when he found it, the gains were sure to follow. So he gave John the loan — all $10,000.

It proved to be the best move he ever made.

Templeton took the money and invested it equally in every single small-cap stock trading on a major exchange for $1 or less. There were 100 stocks, all told. He was betting these stocks would lead the way out of the Depression. And, boy, he was right.

Between 1939-1943, John's investment grew from $10,000 to $40,000 — despite four of the companies going bankrupt and losing everything! Today, Mr. Templeton is retired, living in the Bahamas. His net worth is an estimated $2 BILLION. He owes his fortune to that day he went in, hat in hand, to borrow the money from his boss...and took a calculated gamble on the fiery strength of small companies and their will to survive in tough markets.

Today, I'm offering you a similar shot...speculating on the very fiber of America's future leaders. With the right guidance, you could achieve similar results. In fact, I am so confident of these stocks' effectiveness, I'm willing to make you the best offer of my entire career.

If you give my research service a try today, I will give you an unbeatable offer...

If you aren't 100% satisfied with the results, all you have to do is say so. If my system does not yield the opportunity for four 100% winners in my track record in the next year, I'll send you DOUBLE WHAT YOU PAID. All you have to do is ask.

Simple as that.

No one else can afford to make that kind of an offer. But there's a simple reason for that. I know something no one else does...

These stocks were good enough to help John Templeton quadruple his money after the Great Depression. They have been proven to be the most lucrative stocks to own over long periods of time. And I have NO doubt they will help you make a pretty penny in this market!

Sign up today, and I'll give you ALL the details you need to start your own profit chain in 2008. I can't promise you'll have a chance to make $9.4 million like last year. That was one of the best runs of all time, and it took tremendous timing and a lot of luck. What I showed you was an extreme example of how powerful penny stocks can be. But the market is still ripe for huge gains. Even the mainstream press knows that!

What The Press is Saying About The Small-Cap Penny Stock Market

"Small companies offer individual investors like us many other advantages. Most institutional investors, who have billions of dollars to allocate, must avoid small caps — at least until they grow larger. That makes small caps underfollowed and increases the chances that they're misvalued.'

-The Motley Fool

"Running a portfolio that targets some of the market's smallest stocks allows [investors] to buy growth opportunities, often in overlooked areas, and ride them before the rest of the market piles on.'

-MarketWatch.com

"Managers who own shares [of their own company] stand to reap a bigger benefit from a firm's success, which results in a big increase in share price [for small caps].'

-Money.CNN.com

The ONLY Major Group of Stocks to
Beat Its 2000 Highs!

Not only are penny stocks making headlines. Since 1999, penny stocks have blown their large-cap peers out of the water.

The Russell 2000 (known as the "small-cap index" on Wall Street) pummeled the S&P 500 by 200% in 2000, 17% in 2001, 3% in 2002, 90% in 2003 and 77% in 2004. In fact...since the summer of 2004 alone, the Russell is up 37%.

The small-cap index was the ONLY major stock index to not only reach its 2000 highs (during the height of the last bull market), but also pass them.

Small-cap stocks are making smart investors with the insight and intelligence to go after them a lot of money. And they are doing so at a record-breaking pace. In fact, readers have seen gains of:

87.5% on shares of little-known Alloy Inc.- a "Generation Y" marketing company
56.6% on shares of DURECT Corp. - a small pharmaceutical company
19.82% on leather maker Wilsons
25.2% on Salton Inc - maker of the popular Foreman grill.

And they also could have walked away with additional gains of 20%, 22.4% and 10% on, DURECT, Salton and Wilsons — again.

But that's nothing. In a second, I'll show you a real-life string of gains that helped readers make 233%, 146.7%, 62.35%, 34.81%, 34.94%, 35.2%, 32.19% and more over a span of six months. In fact, from June - September 2003, EVERY single small-cap recommendation my publication closed out was a winner. Putting only $200 into each stock, you would have been sitting on a possible $3,051.06. And you have a chance to do the same thing NOW!

Before I show you this profit chain, let me introduce myself...please read on...

If I Put My Name on Something, It Must Be the BEST

My name is Greg Guenthner. I am the editor of Penny Stock Fortunes — the single greatest penny-stock newsletter on the market today. And I can say that knowing it's 100% true.

I have spent time in newsrooms up and down the East Coast, and I bring a reporter's eye and skepticism to every stock I research. I'm not looking for fly-by-night stocks that might give your portfolio a tiny boost. I travel whenever necessary, meet with CEOs, pore over financial filings and take part in conference calls so I can uncover only the best small-cap stocks that'll put money in your pocket for years to come.

I also evaluate stocks using my proprietary CXS Money Multiplier System. It's a complicated screen I perfected after reviewing the fundamentals and prospects of several of the most successful small-cap stocks in history. The CXS System is my most important tool in determining whether or not a stock is worth recommending. I rely on it in every single issue of Penny Stock Fortunes.

The great thing about the CXS System is that it isn't subject to fads in investing. Hot ideas of the month and wildcard stocks with no fundamental strengths are rejected by CXS just like all the other garbage stocks out there. You can always count on Penny Stock Fortunes to bring you only the very best picks from the world of penny stocks.

My peers are best-selling authors in the investment world, CEOs of major businesses and traders that have made millions on Wall Street. And I don't say that to brag. Rather, I want you to know...

If I put my name on any investment letter, it MUST be the best. And Penny Stock Fortunes is.

In years past, Penny Stock Fortunes readers have had the chance to rake in gains like these...

If you had put only $200 into each one, you would be sitting on $7,822.40 today.

Those are some pretty nice gains — and they are only a few of what readers have seen through the years. There have been more — lots more! And there WILL be more in the future. Because there are new blockbuster opportunities every day!

Every month, I highlight at least two penny stock opportunities for you. I tell you what the risks and rewards are. And I give you ALL the information you need to make an informed buy decision.

I even let you know when to take your gains and get out — with detailed and reasoned sell recommendations. It couldn't be any simpler...or more potentially profitable.

Check out what some of our Penny Stock Fortunes readers have said...

I've Made More Money With You Than the More Expensive Services
'I depend on the recommendations of Penny Stock Fortunes, plus some research for peace of mind. I am not a rocket scientist in the area of investing and cannot afford huge chunks of change for stock. I only wish I had signed up sooner for the service. I respect what you do. I've made more money with this service than any of the other more expensive services out there."

-Best Regards, Peggy B.

879% Return!
"A lot of talk about patience and holding onto a stock for the best returns. I bought (upon your recommendation) [company] stock at 66 cents per share and held it, and in the long run, I watched it go up (over $9) and down, and now it is at $6.50 per share, or an 879% return. Thanks again. Here's hoping that it goes higher still.

-Gary

300% and Still Holding!
'Well, I always want/like quick profits. But I decided to try the longer hold on penny stocks. I chose Navarre Corp. You recommended it as a buy at 5.35. I am still holding it at $16.39. A 300%-plus gain!! Just wanted to let you know how right you were and say, THANKS, THANKS, THANKS. "

-J. Nolan

You Allow My Money to Work for Me!
'Thank you for helping my dreams become a reality by allowing me to make my money work! Believe it or not, you are the only newsletter that I have found I can trust, because you consistently make me money. "

-A happy and loyal subscriber, R. Hunt

I Love Your Analysis!
'I am very new at trading stocks. In fact, my only experience prior to subscribing to Penny Stock Fortunes has been keeping an occasional eye on my 401(k)-type savings plan that my employer sponsors. I have been subscribing since August, and I love your analysis as well as your delivery. I have been able to profit 18.5% and 26.8% after commissions on Salton, Inc and Durect Corp. already!

-B. Frazier

What a Great Trip That Was!
'Just to let you know, I bought Coeur d'Alene Mines Co. at $1.33 and recently sold it at $5.29. What a great trip that was. Thanks for your expertise.

-M.L. Thornburg

Reaped Many Rewards
'I've been impressed by the results of the system and reaped many rewards. Your system has helped steer me in the right direction and prepare the foundation for a profitable future."

- T.K., Satisfied PSF Subscriber

Those are some pretty powerful testimonials. And it goes to show how you can make a lot of money if you are willing to invest in the right penny stocks.

In a moment, I'll give you all the details you need to know to invest in the four hottest stocks on the market right now — the four stocks that could start your own profitable stock string and turn $200 into $9.4 million in 2008.

And if you take advantage of my 200% money-back guarantee today and sign up for Penny Stock Fortunes, you could begin booking the gains in just a few hours — literally.

How so? Let's take a look...

I want to prove to you that my research service is the best in the world, so I'm going to give you four penny stock picks that could easily double your money...or more.

When you sign up for your risk-free trial to Penny Stock Fortunes, you'll get all the details on these four barnburner stocks in my groundbreaking report Four Penny Stocks You Need to Own. Here's a sampling of what you will find...

Barnburner Stock No. 1:Millions of shares of this small company were just snapped up by legendary investor George Soros. This company that has him so excited is a leader in a specific kind of telecommunications technology poised to return decades of great profits.

The company is solidly run, has great financials and will be a welcome addition to your portfolio. Its forecast for the future is one of the brightest you'll find in the entire technology sector.

Barnburner Stock No. 2:Ever think about how much that next trip you take will really cost you? Airline travel is a mess right now, and thousands of consumers are turning to a traditional method of travel that's been around for decades.

The most intriguing company in this space is one you've almost certainly heard of before, and its profitability numbers, after enduring some hard years, are finally starting to rebound in a big way. The profit potential is enormous.

Barnburner Stock No. 3:Through future mergers and mine startups, this junior mining company expects to produce 29 million ounces of silver in 2009. That's more than anyone else in the world. On top of just plain out-producing everyone else, this company will also have the lowest cash cost per ounce of silver in the industry at $1.73 per ounce.

So, it's not hard to see that the largest silver producer with the lowest production costs in the world will not stay a junior for too much longer. By 2009, this company should join the ranks of Silver Wheaton Corp. and Pan American Silver Corp. as one of the top silver miners on the planet. The profit potential for early-in investors is amazing!

Barnburner Stock No. 4: : Oil exploration and production is hands-down one of the most lucrative businesses to be in. Wouldn't we all have liked to be holding shares of Exxon from decades ago? Well, there's a small oil company out there right now with extensive operations in the states and a strong global presence in places like Asia. If things go as well in the future as they have been lately for this company, we're looking at one of tomorrow's Oil Majors at penny stock prices today!

Any one of these four stocks could return four times your money or more. And if just two or three rise, one after another — forming a profitable stock chain — you could walk away VERY rich! Just how rich?

Well, that's impossible to forecast. But if it's as good as the profit string Penny Stock Fortunes had in back in 2003, you are in for a treat. I'm reaching all the way back to 2003 to show you these gains, because I want to prove to you just how successful this service has been...for YEARS! Check it out...

Nine Winning Stocks in a Row!

From June 2003 until Oct. 22, 2003, Penny Stock Fortunes closed out positions in nine stocks. They were all winners. Take a look at what can happen when you hit several winners in a row...

Think about these results for a second...In only six months, nine Penny Stock Fortunes picks in a row were winners. Not a loser in the group! This is a real-life chain of gains that you could easily see when you subscribe. And who knows? If you hit everything just right, you could even turn $200 into $9.4 million!

So how can you get started in this moneymaking venture? How can you get the names and ticker symbols of my four favorite small-cap stocks for 2008?

All you have to do to get in is join me at Penny Stock Fortunes. Take me up on my offer to try out my system risk-free. If my recommendations do not deliver at least four 100% gains in the next year, just let me know and I will gladly refund double you what you paid for the service.

A Chance to Make Tons of Money, or I Pay You

Penny Stock Fortunes is worth thousands of dollars a year. If, for example, just one of my Four Penny Stocks You Need to Own stocks rises 100%, you could make thousands of dollars right there, depending on your initial stake.

Between these and other upcoming opportunities alone, you could see $200 stakes shoot up to princely sums in no time!

With the profit potential this high, it wouldn't be unreasonable to ask for $2,000 to join Penny Stock Fortunes. After all, you could make that up on one or two investments — easily. But that's not all...

Sign up now, and you'll get the names of my four favorite barnburner stocks — all of which could at least double your money in a heartbeat. The groundbreaking report is called Four Penny Stocks You Need to Own.. Inside this one report, you'll get the hard data on four excellent companies and what simple steps you need to take to start seeing amazing profits!

Plus, if you act right now, I'll also throw in two more reports...FOR FREE!

My Best Online Discount Brokers Guide will tell you what you need to watch out for when searching for a broker, and how to find a good one. Having the wrong broker can suck profits from even the tidiest of portfolios — but having the right broker will put you on easy street even quicker!

Winning With Penny Stockswill give you an insider's look into the world of small-capitalization penny stocks — how they work, how they grow and what you need to do to see the best profits. Investing successfully over the long term with penny stocks is both an art and a science. This report will get you started off on the right foot.

So that's four stocks to get you started on your way to earning $9.4 million in 2008 and beyond, plus TWO other exclusive reports.

All of a sudden, $2,000 doesn't seem like so much to ask!

But don't worry, there's no way in the world I'm going to ask $2,000 for a subscription.

In fact, I'm not even going to ask $100! I'm going to offer you my best deal ever. And I mean that. Just keep one thing in mind...

I can't guarantee you will turn $200 into $9.4 million this year by following my recommendations. What I showed you was an extreme example of how powerful penny stocks can be. It took tremendous timing and a lot of luck to turn $200 into $9.4 million. But what I can promise you is this...

My Ironclad Promise to You

Every month, you will receive a full, in-depth report on the two very best penny-stocks on the market. You'll read my in-depth analysis and be able to dissect my CXS Money Multiplier evaluation of every pick.

I'll tell you when I think you should buy. I'll tell you what the risks and rewards are. And I'll tell you when to sell. You just sit back, read the e-mails, decide that you are ready and call your broker. I will do all the work for you. And know this...

Some of these stocks could double your money. Others could rise 10-fold. And still others could fall. That's OK.

These are exactly the kinds of stocks that helped John Templeton quadruple his money in 1939 — despite four companies going completely bankrupt. They are the same kinds of stocks that could have turned $200 into $9.4 million from Jan. 2006 to July 2007. And they are the same kind of stocks that I recommend to my readers — with tremendous success. For instance...

Penny Stock Fortunes recommended shares of Select Comfort. At the time, this beaten-up bed manufacturer was trading for $5.61 a pop. Less than five months later, every investor on Wall Street was buying the stock, and it shot up to $9.76 per share

· Chinese diesel engine maker, China Yuchai, was also screaming, "BUY." It was trading for less than 10 times earnings. Its sales and net income were soaring. And demand for its diesel engines was sky high. When Penny Stock Fortunes recommended CYD to readers, it was trading for $7.50. Less than two months later, it hit $18.50. That's a 146% gain in 60 days!

· Shares of gold and silver miner Coeur d'Alene Mines were once dirt cheap. And with precious metals on the rise, this was a no-brainer. Readers were able to buy shares of CDE for $1.71. Later, they were triggered to sell at $5.49 — a mere 221% gain!

A bed maker, a Chinese diesel engine manufacturer and a gold miner...It doesn't matter what kind of company it is — as long as it is a solid business in a growing industry.

Those are the kinds of penny stocks you will find in the pages of Penny Stock Fortunes every month. And if you sign up today, you'll take advantage of my best offer ever...

Sign up for Penny Stock Fortunes for Only $39!

Try Penny Stock Fortunes for one year for the ridiculously low price of only $39. That works out to less than 11 cents per day — the best offer I've ever made! When you sign up, you'll get my three FREE reports with all the details on the four stocks you need to own to start growing your own profitable stock string.

Plus, you'll be signed up for the Agora Financial Executive Series...two daily e-letters that give you an insider's view of our editorial room here at Agora Financial.

You'll receive the groundbreaking Rude Awakening, which uncovers the latest big-picture trends in politics as well as in the markets, and the 5 Min. Forecast — a daily snapshot of what our editors are saying right now. These respected letters are also yours, FREE!

These two daily letters are reserved only for elite, paying members of Agora Financial. And they're yours for FREE with your Penny Stock Fortunes subscription.

But that's not all...

If you find that my system lets you down, I make you this ironclad promise... If following my system of recommendations does not yield four 100% gains, I will refund you 200% of the subscription price. All you have to do is ask. In other words...

Basically, I am assuming ALL the risk. I am betting the house, and then some, that my research service is the best in the world. But you know what? I know Penny Stock Fortunes is the best.

I have nearly 80 years of data proving that small-cap stocks are the best investments of all time. I have studied the great investors — guys like Warren Buffett, T. Rowe Price and John Templeton. I know how they made their fortunes. And I can help you make yours.

Remember, Templeton invested in small-cap stocks in 1939 and quadrupled his money in four years. And that was right after the Great Depression! After that, he went on to become the most successful money manager of the 20th century. And today he is living out his days in the sunny Bahamas — worth a cool $2 BILLION!

You can do the same.

Heck, even the mainstream press knows these stocks are the best. Remember...

Forbes reported that 'Small companies are expected to grow earnings considerably faster than large companies, and small stocks are likely to remain popular as long as they are delivering superior earnings growth.'

The problem is most of those other so-called experts don't have the guts to recommend penny stocks! But I do. And if you join me today, I will — starting with the four best stocks to own right now. But before you sign up, look at what my own readers are saying about Penny Stock Fortunes...

I Made over $10,000!
"Did great on Coeur d'Alene Mines Co. made over $10,000. Keep up the good work.'

-G. Dahl

You More than Quadrupled My Money!
'I'm having a ball...Last year, I started with $300 invested...currently, my portfolio is around $1,600...Being an accountant, I understand financials, however, I don't have time to research every stock I come across. You have done that for me.'

-A.L.

So there you have it. Readers love Penny Stock Fortunes. They have made good money following its recommendations. And I know you will too. All you need to do is sign up. When you do, you will get...

12 monthly issues of Penny Stock Fortunes sent to your home and e-mail box, complete with in-depth analysis and CXS Money Multiplier breakdowns

Weekly e-mail alerts telling you exactly when you should buy and sell every stock we recommend

A copy of Four Penny Stocks You Need to Own, detailing my four favorite barnburner penny stocks of 2008 — set to rise to amazing new heights

My Best Online Discount Brokers Guide to help you find the best broker and the level of service you deserve

The groundbreaking Winning With Penny Stocks report that routinely gets rave reviews from members

Access to our Penny Stock Fortunes Web site — including all past issues, reports and portfolio holdings

FREE subscriptions to the Agora Financial Executive Series — the 5 Min. Forecast and the Rude Awakening — five days a week of the best investment analysis and news on the Internet!

But I'll tell you what...since I'm already making the best offer I've ever come up with, I'm going to throw in one more bonus FREE gift.

Another Gift to You for Trying Penny Stock Fortunes

Because I want you to make as much money as possible in the small-cap market, I will automatically sign you up for the daily e-letter — The Penny Sleuth. With a daily circulation of over 100,000, it's one of the most fearsome and powerful small-cap penny stocks newsletters in existence!

Irreverent, Skeptical, Penetrating, In-Your-Face Coverage of the Small-Cap Universe

At The Penny Sleuth, , we're tired of the same old story on Wall Street — especially when it comes to the small-cap market. Everyone's a "yes man" these days. Your broker loves any stock that will make him a commission. "Yes, it's a buy." The mainstream analysts do nothing but tout bad stock after bad stock. "Yes, they will rise!" Even your neighbors tell you only about their winners.

The best deals aren't found on the surface of Wall Street. They are hidden in the shadows, in the corners and under the rug. Most brokers don't know a thing about them. The Wall Street Journal doesn't cover them at all. And your neighbor doesn't even know they exist.

So who knows what secrets lurk in the shadows of the small-cap universe?

THE PENNY SLEUTH — YOUR SOURCE FOR THE LATEST MARKET NEWS

Sleuthing is about peering into the dark corners of the small-cap market. It's about asking questions no one else is asking and looking off the beaten path for answers.

It's about looking at the market with a fresh perspective and at small-cap investing with a fresh approach. Sleuthing is about seeking real insights...and real gains.

Every issue of The Penny Sleuth unearths corners of the small-cap market you didn't even know existed. It's a personal window into Wall Street's most profitable hidden treasures of all time.

By signing up today for Penny Stock Fortunes, you'll automatically receive Penny Sleuth five days a week, absolutely FREE. What do you have to lose? If you don't love it, you can just cancel — and go back to listening to the same yes men you have been listening to for years. The choice is yours. But you must act now. This offer won't last forever. And remember...

If you aren't satisfied with Penny Stock Fortunes or my service to you, or I do not deliver 100% gains in my track record on at least four of my recommendations,just let me know and I'll pay you back 200%! That's how sure I am of this product and these small-cap stocks.

No matter what happens, all the free gifts you receive when you join are yours to keep — forever. But with this much profit potential just around the corner, I highly doubt you'll ever cancel Penny Stock Fortunes.

I look forward to welcoming you on board. And I can't wait until you see just how powerful these penny stock profit chains can be. I do hope you will find out!

Best regards,

Greg Guenthner
Penny Stock Fortunes
March, 2008

P.S. If you sign up today, I'll rush you a copy of your FREE report with the names of the four best penny stocks of 2008, Four Penny Stocks You Need to Own, to get you started on a profitable stock string — just like the one that could have turned $200 into $9.4 million in 2006 - 2007. AND — you'll also have immediate access to all your other FREE gifts as well!

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At last good news:Google Rocks, Sharply Beats the Street

2008-04-17T13:49:00.001-07:00

Google (GOOG) this afternoon reported first quarter results that dramatically beat Street expectations, sending the shares soaring in after hours trading.

Google reported revenue of $5.19 billion, or $3.7 billion excluding traffic acquisition costs. Non-GAAP EPS was $4.84 a share. The Street had expected $3.61 billion and $4.52.

Google-owned sites revenue totaled $3.4 billion, up 49% versus last year and 9% sequentially.

Google network revenues were $1.69 billion, up 25% versus last year and 3% sequentially.

International revenues were 51% of total revs, up from 48% in Q4 and 47% a year ago.

Headcount at March 31 was 19,156, up from 16,805 at December 31, an increase of nearly 14%. Of the 2,351 people added, about 1,500 were from DoubleClick.

In after hours trading, GOOG is up $42.64, or 9.5%, to $492.18.

http://seekingalpha.com/article/72774-google-rocks-sharply-beats-the-street

Blogged with MessageDance using Facebook

Hormones 'may fuel market crises'

2008-04-14T22:38:00.001-07:00

Hormone surges among City traders could be partly responsible for driving "boom and bust" economics, say researchers.

A Cambridge University team found testosterone levels were directly linked to the profit they made.

The Proceedings of the National Academy of Sciences study also found levels of the stress hormone cortisol could affect the risks they took.

A psychologist who works with investment bankers said it may help explain seemingly irrational behaviour.

The Cambridge study measured testosterone levels in a small group of male City of London traders at both 11am and 4pm, and matched these to the levels of profit or loss recorded for that day.

They found that daily testosterone levels were significantly higher on days when traders made more than their average profit.

They ascribe this to the "winner effect", seen in sportsmen, in which success increases testosterone levels, which in turn increase feelings of confidence and ability to take risks, which then increase the chances of further profits.

However, if repeated too much, they say, the rising testosterone levels could eventually compromise their ability to make rational decisions, as the traders take bigger and bigger risks during so-called "bubbles", where the market rises sharply.

Prof Joe Herbert, one of the study's authors, said: "Our work suggests that these decisions may be biased by emotional and hormonal factors that have not so far been considered in any detail.

"Hormones may be important for determining how well an individual trader performs in the stressful and competitive world of the market."

'Learned helplessness

The researchers also looked at cortisol, which is produced in response to stress, and in the case of traders, extreme volatility in the markets.

Dr John Coates, another of the study's authors, said that while ever-increasing testosterone levels might turn risk-taking into an "addiction", the reverse was true with the stress hormone cortisol, which, in excess, causes people to actively avoid risk, potentially worsening the effects of any downturn.

"In the present credit crisis, traders may feel the noxious effects of chronic cortisol exposure, and end up in a psychological state known as 'learned helplessness'.

"If this happens central banks may lower interest rates only to find that traders still refuse to buy risky assets.

"At times like these, economics has to consider the physiology of investors, not just their rationality."

'In the Zone'

Jeremy Holt, an occupational psychologist who works with investment banks to coach their traders on the psychology of risk-taking, agreed that both scenarios fitted well with his experiences.

"Traders will often talk to me about being 'in the zone' - similar to a sportsman, meaning a feeling of 'unconscious competence', decisiveness and confidence.

"But it's amazing the number of times that traders put in a really good run but then hand a lot of their profits back because they have become over-confident, and didn't just stop when they needed to.

"They often come up with some strange, irrational reasons for doing this."

He added: "On the other hand, in very stressful situations, some traders will just freeze, and not do anything

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No easy egg for you. Inflation hits your omlette

2008-03-28T13:59:00.001-07:00

http://www.marketwatch.com/news/story/lofty-egg-prices-showing-no/story.aspx?guid=%7B479DD084%2D1ED3%2D4437%2DB187%2D61752B8EB49C%7D

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RSS whores, read all you can. Best financial blogs are here

2008-03-28T12:04:00.001-07:00

Footnoted.org (http://www.footnoted.org/)
Frank Barnako’s Media Blog (http://blogs.marketwatch.com/barnako)
GannonOnInvesting (http://www.gannononinvesting.com/)
The microcap speculator (http://www.microcapspeculator.blogspot.com/)
Stock Market Beat (http://www.stockmarketbeat.com/)
Berkshire Ruminations (http://berkshireruminations.blogspot.com/)
The Kirk Report (http://www.thekirkreport.com/)
TraderFeed (http://www.traderfeed.blogspot.com/)
SeekingAlpha (http://www.seekingalpha.com/)
Ticker Sense (http://www.tickersense.typepad.com/)
ModernGraham.com (http://www.moderngraham.com/)
TheStockMasters (http://www.thestockmasters.com/)
BloggingStocks (http://www.bloggingstocks.com/)
Hilary On Stocks (www.journals.aol.com/hilaryonstocks/hilaryonstocks)
Value Discipline (http://www.valuediscipline.blogspot.com/)
Random Roger’s Big Picture (http://www.randomroger.blogspot.com/)
Equity Investment Ideas (http://www.equityinvestmentideas.blogspot.com/)
Absolutely No DooDahs (http://www.billakanodoodahs.com/)
Street Insider.com 13D Tracker (http://www.13dtracker.blogspot.com/)

Thanks to http://247wallst.blogspot.com/2006/09/twenty-best-financial-blogs.html

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USD/Yen chart

2008-03-28T10:01:00.001-07:00

">http://www.insidefutures.com/cache/5aedb07afe87762230b41eb21a3e23d3.png">

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Dilemmmmmaaaaa of US economy - where is peace between spending and income

2008-03-28T09:57:00.001-07:00

Consumer demand is being crippled and remained weak for the third month in a row after U.S. consumer spending was flat in February after adjusted for inflation. Real consumer spending however rose 0.1% but still not enough to help the suffering U.S. economy. Since consumer spending is about 70% of the U.S. gross domestic product, its a driver and measure of the economy's well being.

Inflation, falling housing sector and a diminishing labor force are catching up to the economy adding more weight and pressure to growth as it causes a significant slowdown to the extent of a recession. Surprisingly, inflation has moderated in February as core PCE, the Feds favorite inflation measure, rose 0.1% from a previous rise of 0.3% reading in January. The annual core prices inclined 2% taking levels back within the Feds comfort zone.

As for income, nominal incomes rose unexpected to 0.5% in February compared to the projected rise of 0.3% on the backs of government transfer payments. After-tax, inflation-adjusted income inclined 0.3% as well marking the largest real disposable income increase since last August.

Ironically, spending on durable goods in fact rose for the first time since September by 0.2% when the durable goods orders fell by 1.7%!! Something doesn't quite add up! Real spending on non durables though dropped 0.1% being the third consecutive decline.

In a different report, the University of Michigan released its confidence final reading for the month of March revising it down to 69.5 from the preliminary reading of 70.5 indicating that confidence is diminishing as consumers start to lose faith in their economy.

The status of the U.S. is still blurry as spending is most probably to come in flat for the third quarter while inflation during the previous month has eased to remain within the Fed's comfort zone. This still doesn't change the fact that Americans should admit it and face reality! It's time to wake up and smell the recession ladies and gentlemen

http://www.ibtimes.com/articles/20080328/income-vs-spending.htm

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Obama plans 'major' speech on economy

2008-03-26T10:42:00.001-07:00

Details weren't available Wednesday morning, but the Democratic presidential contender is scheduled to speak at 9:15 a.m. Eastern Thursday at Cooper Union for the Advancement of Science and Art in New York City.

Obama's speech on the economy will follow remarks made Tuesday by Republican nominee-in-waiting John McCain about the housing market, and housing market plans laid out by New York Sen. Hillary Clinton on Monday.

McCain said top U.S. mortgage lenders should provide "maximum support" to help cash-strapped but creditworthy customers keep their homes and called for greater transparency in the lending process.

Clinton is seeking a $30 billion emergency housing fund that would go to states and localities to help head off foreclosures, as well as backing other steps like a bill that would expand the government's capacity to guarantee mortgages that are reworked on affordable terms.

"The Clinton approach demonstrates, in our view, a clear preference to use government intervention in the mortgage markets," wrote analyst Brian Gardner of Keefe, Bruyette & Woods in a note on Wednesday.

http://www.marketwatch.com/news/story/obama-plans-major-speech-economy/story.aspx?guid=%7B6819193F%2D1033%2D4A6F%2D8C8F%2DECAE4FC61A6D%7D

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1970 Bear Stearns-Rare Cancelled Stock Certificate

2008-03-25T11:13:00.001-07:00

Extremely rare, purple Westrn Union 100 Share Stock Certificate issued to Bear Stearns & Co. in 1970. Certificate also has Bear Stearns endorsement stamp on the back. Very low serial #69. Very few of these purple Westrn Union certificates exist, and not many are issued to Bear Sterns. Bear Stearns stocks are very hot now that they have went broke. Very rare collectible, would look great framed.

Has no fold lines, Has minor cancellations.

Pristine condition.

Printer: American Bank Note Company

The certificates shown in the scans are the exact certificates you will receive.

All stocks are 100% authentic. We do not sell reproductions or copies. All stocks are complete and if they appear cut off, that is due to scanner limitations.

Full ebay listing

http://cgi.ebay.com/1970-Bear-Stearns-Rare-Cancelled-Stock-Certificate_W0QQitemZ310034953731QQihZ021QQcategoryZ255QQssPageNameZWDVWQQrdZ1QQcmdZViewItem

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Roubini asks important question: Is Bear Stearns the 'Sacrificial Lamb' or is the Fed?

2008-03-24T16:08:00.001-07:00

http://www.rgemonitor.com/

Bloomberg: JPMorgan boosts its all-stock bid for BS to $10 a share from $2.52, and strikes a deal with Bear Stearns's board to purchase about 40% of the company in a transaction that doesn't require shareholder approval.
Whalen (IRA): JPMorgan crowd won't be laughing much longer: analysis of risk exposures suggests that JPM needs almost five times current capital levels to fully support its economic risks (Citi almost 3x)
Farrell: Fed set an example with Bear before opening the liquidity tap for all other primary dealers--> Bear is the 'sacrificial lamb'
Siegel (Wharton): "I think that when we look back, we will say [Bernanke] did everything he reasonably could. We're going to have maybe a mild recession, but we're going to avoid anything worse. Bernanke may very well easily turn out to be a hero here, when everything is said and done and the recovery comes."
Roubini: First fully wipe out shareholders, then fire all the senior management and have the government take over such a bankrupt institution for orderly liquidation before a penny of public money is wasted in bailing it out.
Bear could not hang on until March 27 for Fed's TSLF operation announced on March 11 (i.e. swap sound Treasuries against tainted AAA mortgage paper)
Gongloff (WSJ): Shotgun JPMorgan and Bear Stearns wedding reminiscent of the "convoy system" employed for decades by Japanese banks, in which strong institutions propped up and absorbed weak ones, at the government's urging.
Economist: JPMorgan reportedly agreed to buy Bear Stearns for $2/share (about $236m). Agreement was backed by the Fed and Treasury in an attempt to stave off a run on other banks. Fed is to fund up to $30bn of Bear's less liquid assets to prevent JPMorgan's strong balance sheet from being hurt by the deal and avoid firesales
Fitch (via RGE): At the beginning of the turmoil Bear Stearns had the highest toxic waste ("residual balance") exposure as percent of adjusted equity on balance sheet: BSC = 54.5%; LEH = 53.3%; GS = 21%; MER = 17.8%; MS = 8.3%.
Cumberland: Bear (= second largest mortgage underwriter) has a business model that is becoming obsolete. It is heavily reliant on U.S. fixed income underwriting and trading. There is virtually no footprint outside of the U.S., and they are rapidly losing their competitive position as other brokerage firms pounce on Bear's weaknesses

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Home sellers get religion. Finally.

2008-03-24T15:17:00.001-07:00

On MarketWatch first take:

March traditionally kicks off the spring selling season, and a flood of inventory onto the market now could easily reverse February's gains.
Prices are falling, making homes more affordable, but in many markets they are still wildly out of relation to buyers' ability to pay.
Rates are affordable in the mortgage market, but only the most-creditworthy borrowers are getting the chance to obtain those rates; many marginal borrowers are still frozen out.
The number of delinquencies and foreclosures is continuing to grow and will likely do so for several quarters yet, threatening to pour more inventory on the market and take more buyers out of it.

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Ken Rosen still sour on housing

2008-03-24T12:41:00.001-07:00

Don't expect the rise in existing-home sales to signal a turnaround, warns Ken Rosen of UC Berkeley. He says there's more problems ahead for the housing market.

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Ken Rosen still sour on housing

2008-03-24T12:38:00.001-07:00

Don't expect the rise in existing-home sales to signal a turnaround, warns Ken Rosen of UC Berkeley. He says there's more problems ahead for the housing market.

Check this video - http://www.marketwatch.com

http://services.brightcove.com/services/viewer/federated_f8/452319854" bgcolor="#FFFFFF" flashVars="videoId=1468256941&playerId=452319854&viewerSecureGatewayURL=https://services.brightcove.com/services/amfgateway&servicesURL=http://services.brightcove.com/services&cdnURL=http://admin.brightcove.com&domain=embed&autoStart=false&" base="http://admin.brightcove.com" name="flashObj" width="486" height="412" seamlesstabbing="false" type="application/x-shockwave-flash" swLiveConnect="true" pluginspage="">http://www.macromedia.com/shockwave/download/index.cgi?P1_Prod_Version=ShockwaveFlash">

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Naked Capitalism says: Did the Fed Prevent a Financial Chernobyl?

2008-03-23T23:56:00.001-07:00

Did the Fed Prevent a Financial Chernobyl?
http://www.nakedcapitalism.com/2008/03/did-fed-prevent-financial-chernobyl.html

Listen to this article There are two useful but frustrating articles addressing different aspects of the extraordinary measures implemented by the Federal Reserve in the last ten days, in particular the bailout of Bear Stearns.

A New York Times article, "What Created This Monster," is very much worth reading despite its shortcomings. It attempts to say how we got to where we are today, but lacking a clear problem definition (are the markets in trouble due to excessive leverage? Overly complex instruments? Lack of transparency? Poorly thought and inadequate regulations? Those negative real interest rates under Greenspan?) it comes off being unfocused. However, it interviews a lot of Big Names and have some fascinating moments. My fave is this one:

Two months before he resigned as chief executive of Citigroup last year amid nearly $20 billion in write-downs, Charles O. Prince III sat down in Washington with Representative Barney Frank, the chairman of the House Financial Services Committee. Among the topics they discussed were investment vehicles that allowed Citigroup and other banks to keep billions of dollars in potential liabilities off of their balance sheets — and away from the scrutiny of investors and analysts.

“Why aren’t they on your balance sheet?” asked Mr. Frank, Democrat of Massachusetts. The congressman recalled that Mr. Prince said doing so would have put Citigroup at a disadvantage with Wall Street investment banks that were more loosely regulated and were allowed to take far greater risks. (A spokeswoman for Mr. Prince confirmed the conversation.)

It was at that moment, Mr. Frank says, that he first realized just how much freedom Wall Street firms had, and how lightly regulated they were in comparison with commercial banks, which have to answer to an alphabet soup of government agencies like the Federal Reserve and the comptroller of the currency.

Eeek. Barney Frank is really smart and diligent as Congressmen go, and he didn't know this? Ooh, we are in for a rough ride.

We also have a sleep deprived, immediately-post-Bear-deal statement from Jamie Dimon:

We have a terribly global world and, over all, financial regulation has not kept up with that,

But the story is also annoying on some levels. It mentions derivatives frequently, yet fails to define terns or explain which sorts are troubling and why. No one is worried about exchange traded equity and index options, for instance; it's the OTC variety which is the focus of worry, particularly credit default swaps, which is arguably a big unregulated insurance market. There is also some good detail on how Greenspan discouraged the regulation of derivatives, and some long overdue reservations about innovation for innovation's sake.

The other sighting of the evening is Ambrose Evans-Pritchard's "Fed's rescue halted a derivatives Chernobyl." The piece is a little more breathless than I like, but argues that the reason that the Fed intervened with Bear was to prevent a crisis in the CDS market. Unlike the New York Times piece, the Evans-Pritchard has a few useful factoid that I have not seen elsewhere.

The flaws in both pieces ultimately are not those of the authors, but reflect the inherent difficulty in researching complex, largely or completely unregulated over the counter markets. Data is scarce, so a reporter is heavily dependent on triangulating among source.

And the scary bit is that the regulators are not much better able to get information than the press.

From the Telegraph:

We may never know for sure whether the Federal Reserve's rescue of Bear Stearns averted a seizure of the $516 trillion derivatives system, the ultimate Chernobyl for global finance.

"If the Fed had not stepped in, we would have had pandemonium," said James Melcher, president of the New York hedge fund Balestra Capital.

"There was the risk of a total meltdown at the beginning of last week. I don't think most people have any idea how bad this chain could have been, and I am still not sure the Fed can maintain the solvency of the US banking system."

All through early March the frontline players had watched in horror as Bear Stearns came under assault and then shrivelled into nothing as its $17bn reserve cushion vanished.

Melcher was already prepared - true to form for a man who made a fabulous return last year betting on the collapse of US mortgage securities. He is now turning his sights on Eastern Europe, the next shoe to drop.

"We've been worried for a long time there would be nobody to pay on the other side of our contracts, so we took profits early and got out of everything. The Greenspan policies that led to this have been the most irresponsible episode the world has ever seen," he said.

Fed chairman Ben Bernanke has moved with breathtaking speed to contain the crisis. Last Sunday night, he resorted to the "nuclear option", invoking a Depression-era clause - Article 13 (3) of the Federal Reserve Act - to be used in "unusual and exigent circumstances".

The emergency vote by five governors allows the Fed to shoulder $30bn of direct credit risk from the Bear Stearns carcass. By taking this course, the Fed has crossed the Rubicon of central banking.

To understand why it has torn up the rule book, take a look at the latest Security and Exchange Commission filing by Bear Stearns. It contains a short table listing the broker's holding of derivatives contracts as of November 30 2007.

Bear Stearns had total positions of $13.4 trillion. This is greater than the US national income, or equal to a quarter of world GDP - at least in "notional" terms. The contracts were described as "swaps", "swaptions", "caps", "collars" and "floors". This heady edifice of new-fangled instruments was built on an asset base of $80bn at best.

On the other side of these contracts are banks, brokers, and hedge funds, linked in destiny by a nexus of interlocking claims. This is counterparty spaghetti. To make matters worse, Lehman Brothers, UBS, and Citigroup were all wobbling on the back foot as the hurricane hit.

"Twenty years ago the Fed would have let Bear Stearns go bust," said Willem Sels, a credit specialist at Dresdner Kleinwort. "Now it is too interlinked to fail."

The International Swaps and Derivatives Association says the vast headline figures in the contracts are meaningless. Positions are off-setting. The actual risk is magnitudes lower.

The Bank for International Settlements uses a concept of "gross market value" to weight the real exposure. This is roughly 2 per cent of the notional level. For Bear Stearns this would be $270bn, or so.

"There is no real way to gauge the market risk," said an official

"We don't know how much is backed by collateral. We don't know what would happen in a crisis, and if we don't know, nobody does," he said.

Under the rescue deal, JP Morgan Chase will take over Bear Stearns' $13.4 trillion contracts - lock, stock, and barrel.

But JP Morgan is already up to its neck in this soup, with $77 trillion of contracts. It will now have $90 trillion on its books, a sixth of the global market.

Risk is being concentrated further. There are echoes of the old reinsurance chains at Lloyd's, but on a vaster scale.

The most neuralgic niche is the $45 trillion market for credit default swaps (CDS). These CDS swaps are a way of betting on the credit quality of companies without having to buy the underlying bonds, which are less liquid. They have long been the bête noire of New York Fed chief Timothy Geithner, alarmed that 10 banks make up 89 per cent of the contracts.

"The same names show up in multiple types of positions. These create the potential for squeezes in cash markets, magnifying the risk of adverse dynamics," he said.

"They could increase systemic risk, by amplifying rather than dampening the movement in asset prices," he said.

This is what happened as the banking crisis gathered pace. The CDS spreads measuring default risk on Bear Stearns debt rocketed from 246 to 792 in a single day on March 13 amid - untrue - rumours that the broker was preparing to invoke bankruptcy protection.

Was it the spike in spreads that set off the panic run on Bear Stearns by New York insiders? Or are the CDS spreads merely serving as a barometer?

In the old days it was hard for speculators to take "short" bets on bonds. Credit derivatives open up a whole new game.

"It is now much easier to short credit, " said James Batterman, a derivatives expert at Fitch Ratings in New York. "CDS swaps can be used for speculation, and that can cause skittish markets to overshoot," he said.

For now the meltdown panic has subsided. Yet the hottest document flying around the City last week was a paper by Barclays Capital probing what might happen in a counterparty default.

It is not for bedtime reading. Direct losses from a CDS breakdown alone could be $80bn, but the potential risks are much greater.

In theory, the contracts are matching. One sides loses, the other gains, operating through a neutral counterparty (ie Bear Stearns). But if the system seizes up, the mechanism is not neutral at all. It becomes viciously one-sided.

"Upon the default of the counterparty, [traded] derivatives would be immediately repriced, with spreads widening dramatically," said the Barclays report.

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246 to 792 in a single day

2008-03-23T23:53:00.001-07:00

This is what happened as the banking crisis gathered pace. The CDS spreads measuring default risk on Bear Stearns debt rocketed from 246 to 792 in a single day on March 13 amid - untrue - rumours that the broker was preparing to invoke bankruptcy protection

http://www.nakedcapitalism.com/2008/03/did-fed-prevent-financial-chernobyl.html

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JPMorgan in Negotiations to Raise Bear Stearns Bid

2008-03-23T22:05:00.001-07:00

JPMorgan Chase was in talks on Sunday night for a deal that would quintuple its offer for Bear Stearns, the beleaguered investment bank, in an effort to pacify angry Bear shareholders, according to people involved in the negotiations.

The sweetened offer is intended to win over stockholders who vowed to fight the original fire-sale deal, struck only a week ago at the behest of the Federal Reserve and Treasury Department.

Under the terms being discussed, JPMorgan would pay $10 a share in stock for Bear, up from its initial offer of $2 a share — a figure that represented a mere one-fifteenth of Bear’s going market price.

The Fed, which must approve any new deal, was balking at the new offer price on Sunday night after several days of frantic, secret negotiations, these people said. As a result, it was still possible the renegotiated deal might be postponed or collapse entirely, said these people, who were granted anonymity because of their confidentiality agreements.

If the Fed were to reject the new proposal, it could set off a furor among shareholders of both firms that the government was preventing them from making a fair deal.

In an unusual move, Bear’s board was seeking to authorize the sale of 39.5 percent of the firm to JPMorgan in an effort to move closer to majority shareholder approval. Under state law in Delaware, where the companies are incorporated, a company can sell up to 40 percent without shareholder approval.

http://www.nytimes.com/2008/03/24/business/24deal.html

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Dude issues correction

2008-03-21T15:55:00.001-07:00

http://youtube.com/watch?v=AyGc_rlF8aA

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World's fair

2008-03-21T15:16:00.001-07:00

http://www.youtube.com/watch?v=AT28AtRQVco&NR=1

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$500 for stimulating economy

2008-03-21T15:14:00.001-07:00

http://youtube.com/watch?v=MZotAcjB4bQ

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$500 for stimulating economy

2008-03-21T15:08:00.001-07:00

">http://www.youtube.com/v/MZotAcjB4bQ&hl=en">http://www.youtube.com/v/MZotAcjB4bQ&hl=en" type="application/x-shockwave-flash" wmode="transparent" width="425" height="355">

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play holiday portfolio on thestreet.com

2008-03-21T14:07:00.001-07:00

The concept behind the holiday portfolio is simple: I select a group of five stocks that I believe deserve watching over the next 12 months, and I follow them -- regardless of their performance -- throughout the year. I'll revisit the portfolio on each market holiday and, at times, make comments about the stocks in RealMoney's Columnist Conversation. The only way a stock is removed from the portfolio is if it merges with another company or ceases to trade on a major exchange.

http://www.thestreet.com/story/10408853/1/holiday-portfolio-some-broken-eggs.html

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On Barrons CHANGE BREWS AT STARBUCKS

2008-03-20T12:10:00.001-07:00

Starbucks (SBUX) may be in Clover, but the changes it introduced at Wednesday’s company conference aren’t going to push shareholders into the clover anytime soon. The coffee retailer unveiled a few new wrinkles in its business strategy and retailer interior design, including the deployment of a new line of single-cup coffee makers, and the purchase of an espresso-machine manufacturer that makes the so-called Clover line of appliances. McAdams Wright Ragen, the Seattle investment boutique that covers companies in Seattle, where Starbucks is based, said the changes, which also include plans to launch the equivalent of an on-line suggestion box, ”on paper, appear to be a little less t! han dramatic,” and likely won’t ”move the needle” on valuation anytime soon. But the firm said it liked the thrust of the moves, and believe they could pay off down the road for shareholders. Likewise, Cowen said the ”hockey-stick ramp” in the stock price is still several years away, and the moves heighten the risk of some modest disruption to EPS visibility in the short term, but nevertheless acclaimed what it described as bold action.

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Joined "Gordon Gekko Greed is Good Group (GGGGG)"

2008-03-20T12:00:00.001-07:00

Wake up pal! Either you are in or you are out!

I am talking liquid.

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Asia Hit Hard by Bear Sterns News

2008-03-19T18:59:00.001-07:00

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FED's moral hazard dilemma and continuation of MAINSTREET ignorance

2008-03-19T18:55:00.001-07:00

Moral hazard is the prospect that a party insulated from risk may behave differently from the way it would behave if it were fully exposed to the risk. Moral hazard arises because an individual or institution does not bear the full consequences of its actions, and therefore has a tendency to act less carefully than it otherwise would, leaving another party to bear some responsibility for the consequences of those actions. For example, an individual with insurance against automobile theft may be less vigilant about locking his car, because the negative consequences of automobile theft are (partially) borne by the insurance company.

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Gold Rush - Get Some NOW

2008-03-19T18:26:00.001-07:00

Yellow fever strikes

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Rate cut discussions are pressure games

2008-03-19T10:53:00.001-07:00

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Barron's says Home Depot Could Get Hammered

2008-03-19T10:49:00.001-07:00

Nice work ANALyst, making a call when soccer moms are busy predicting next economic moves -

WE ARE LOWERING OUR rating on shares of Home Depot, which is based on a six-month outlook, from Market Perform to Underperform, and we believe investors should sell the stock.

We are also lowering estimates as we believe recent macro data suggest that the home-improvement cycle is a long way from the bottom. The company's monthly same-store-sales results decelerated as the most recent quarter progressed and were down 10.8%

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Where to Invest When the Market's a Mess

2008-03-19T10:47:00.001-07:00

Gold diggers are in full swing. Spotting silver lining and picking few stocks:

Algonquin Power Income Fund
Climate Exchange PLC
Chicago Mercantile Exchange

Full analysis

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Why GOOG is a screaming buy

2008-03-19T10:43:00.001-07:00

http://link.brightcove.com/services/link/bcpid1078966384/bclid1137812485/bctid1463310866

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game theory

2008-03-18T23:35:00.001-07:00

Eppes brothers should run our economy.

NUMB3RS (pronounced Numbers) is an American television show produced by brothers Ridley and Tony Scott. It follows FBI Special Agent Don Eppes (Rob Morrow) and his mathematical genius brother, Charlie Eppes (David Krumholtz), who helps Don solve crimes for the FBI. It was created by Nicolas Falacci and Cheryl Heuton, produced by CBS Paramount Network Television, and airs on the CBS network in the U.S. It is also shown on Five US and ITV3 in the U.K, although it was also shown during a late-night slot on the main ITV Network for a brief period of time.

The show focuses equally on the relationships between Don Eppes, his brother Charlie Eppes and their father, Alan Eppes (Judd Hirsch), and on the brothers' efforts to fight crime, normally in Los Angeles. A typical episode begins with a crime, which is subsequently investigated by a team of FBI agents led by Don and mathematically described by Charlie, with the help of Larry Fleinhardt (Peter MacNicol) and/or Amita Ramanujan (Navi Rawat). The insights provided by Charlie's mathematics are always in some way crucial to solving the crime.

The series was the most popular show airing on Friday evenings throughout its first three seasons;[1] the fourth season began on September 28, 2007.

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Oil Prices

2008-03-18T23:24:00.001-07:00

We should get Federal Reserve to work with Saudis to start printing "oil"

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Which of Wall Street's 25 primate species is the greediest?

2008-03-18T13:13:00.001-07:00

[md-attach-image: 1] Beware the beast Man, for he is the Devil's pawn:" Cornelius the anthropologist is reading aloud from the ancient Sacred Scrolls of the Apes: "Alone among God's primates, he kills for sport or lust or greed." Sound familiar? The scene is on the mythical "Planet of the Apes," probably in the great Wall Street Jungle.

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I am not Spitzer, my dick is legal.

2008-03-18T10:47:00.001-07:00

One day after taking office, Gov. David A. Paterson held a noontime news conference to discuss news reports that he and his wife, Michelle Paige Paterson, had extramarital affairs during a strain in their marriage, which began in 1992. He acknowledged having affairs with "a number of women," including one state employee, "several years ago," but that the relationships were over and that he and his wife had repaired their marriage.

With his wife standing by his side, the new governor expressed regret for past mistakes but said he was coming forward to clear the air and avoid any "innuendo" or speculation that might arise. "I didn't break the law," he said, toward the end of his news conference, at the State Capitol in Albany. "I didn't violate an oath. I didn't use knowingly campaign funds. I didn't use state funds at all. I know that. I don't think institutionally there were any violations here. However, the public wants to know who its elected officials are, and sometimes, even though you are human and you are someone that just has feelings and has faults, there comes a time, perhaps, when you have to tell the public."

With cops like these, Wall Street is destined to go to dogs.

http://cityroom.blogs.nytimes.com/2008/03/18/paterson-to-hold-news-conference/index.html?hp

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They just don't get JP Morgan

2008-03-18T10:24:00.001-07:00

Tragedy and comedy go hand in hand - funny video on TheStreet.com

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US economy in worst condition since World War 2

2008-03-17T23:46:00.001-07:00

Greenspan spoke. Book royalties were not enough, this Einstein finally found his mouth.

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Which society doesn't run on greed?

2008-03-17T22:54:00.001-07:00

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Milton Friedman era is over?

2008-03-17T22:44:00.001-07:00

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This guy IS the problem

2008-03-17T18:05:00.001-07:00

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Dude we are so fucked

2008-03-17T11:04:00.001-07:00

LEH is next

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Roubini said everything. He did not use D-word

2008-03-17T00:56:00.001-07:00

D means dirty and d means depression.

The fact that the US is now in a recession is, at this point, without much doubt even if the consensus forecast � always behind the curve � now gives only even odds (49% according to the WSJ panel of forecasters, 50% according to the Bloomberg panel) to a recession outcome. The issue right now is not anymore whether the US will experience a soft landing or a hard landing but rather how hard the hard landing will be. The latest data point to a severe recession ahead lasting at least four quarters rather than mild recession that most forecasters are now predicting: a fall in employment in January; very high and elevated levels of initial and continued unemployment claims; a non-manufacturing ISM that literally plunged; falling � in real term � retail sales in the holiday season; mediocre results and falling sales for most retailers in January; plunging auto sales; very weak and further falling consumer confidence; a credit crunch that is becoming more severe in credit market as measured by a variety of credit spreads; the beginning of a severe recession in commercial real estate; a worsening housing recession; sharply falling home prices; evidence of a serious credit crunch in the banking system based on the Fed survey of loan officers; a correction in all major stock markets and the beginning of a bear market in the NASDAQ; serious evidence of a global economic slowdown, especially in Europe, with outright recession ahead in some European countries. All these indicators points towards a severe recession.

Believing � as the consensus now does � that this will be a mild two-quarter recession and that growth will recover in H2 of 2008 is wishful thinking. The last two recessions � in 1990-91 and 2001 � lasted almost three quarters (precisely 8 months) while the current recession looks fundamentally more severe than the latter two for three reasons: we are experiencing the worst housing recession ever in US history, a shopped-out, saving-less and debt-burdened consumer is now in financial trouble and retrenching; and we have a severe systemic financial crisis. Thus this recession will be longer, deeper and uglier than the previous two.

Since in the previous article I described a 12 steps scenarios towards a financial meltdown and a deep recession the crucial policy question is whether the Fed and other policy officials can prevent such a scenario of a systemic financial crisis.

I will present in this article the eight reasons why I am skeptical that such a systemic risk scenario can be avoided�

For quick history lesson - http://youtube.com/watch?v=HoptH8TqasE

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Carlyle Capital to file to liquidate the company

2008-03-17T00:39:00.001-07:00

Carlyle Capital to file to liquidate the company

Channel Islands affiliate of the Washington private-equity firm Carlyle Group, said it would apply under Guernsey's companies law to liquidate the firm. Holders of the Class A shares have approved the move, Carlyle Capital said. The company "received default notices from its remaining two lenders and it believes that its lenders have now taken possession of substantially all of its U.S.-government-agency AAA-rated residential-mortgage-backed securities," Carlyle Capital said in a statement late on Sunday. "As a result, the company believes its liabilities exceed its assets." Carlyle said the board recommended winding up the company's affairs after analyzing its prospects and "careful consideration of other options for continuing the business. The company will work with the court-appointed liquidator to ensure an orderly realization of assets and their subsequent distribution." Carlyle Capital was formed in August 2006 and went public in July 2007

Uncle Ben we are so screwed.

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CNBC on Bear Stearns

2008-03-17T00:30:00.001-07:00

$2 bucks!

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igotCRAMERED.com in Bear Stearns (NYSE:BSC), Jim Cramer

2008-03-17T00:22:00.001-07:00

Booya MF#$rs

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100% Chance of Recession & Stock Market to Plunge 50-60%

2008-03-17T00:19:00.001-07:00

David Tice saved money for his clients. Remember this name - DAVID TICE

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"Family Guy": Stewie Griffin Meets Wall Street

2008-03-17T00:15:00.001-07:00

Tragedy + Comedy = Wall Street 2008

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Boiler Room First Sale

2008-03-17T00:09:00.001-07:00

JT Marlin. Did you say JT Marlin!!!

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Boiler room - ABC

2008-03-17T00:08:00.001-07:00

JP Morgan HR Manager?

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Sheep get slaughtered

2008-03-17T00:04:00.001-07:00

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Lock-and-load 2008 version

2008-03-16T23:58:00.001-07:00

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Caution: Crumbling Wall Street earnings ahead

2008-03-16T23:40:00.001-07:00

CNN so late to party:

Bear Stearns is in the center of the bulls eye. On Friday, the brokerage firm said a serious liquidity crisis had prompted it to secure an emergency loan from rival JPMorgan Chase. Bear's stock plummeted 47% and the firm ended the week imperiled.

As a Bear Stearns liquidity crisis rattles markets, more woes are expected in the coming week when Goldman Sachs, Lehman Brothers and Morgan Stanley announce earnings.

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New York Times: JP Morgan Pays $2 a Share for Bear Stearns

2008-03-16T23:34:00.001-07:00

On New York Times:

The agreement ended a day in which bankers and policy makers were racing to complete the takeover agreement before financial markets in Asia opened on Monday, fearing that the financial panic could spread if the 85-year-old investment bank failed to find a buyer.

As the trading day began in Tokyo, however, markets tumbled more than 4 percent. In the United States, investors faced another week of gut-wrenching volatility in American markets.

Despite the sale of Bear, investors fear that others in the industry, like Lehman Brothers, already reeling from losses on mortgage-related investments, could face further blows.

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Chronicler of greed, money and trails nobody talks about

2008-03-16T23:11:00.000-07:00

Gordon Gecko you never went away.

Boiler Room

Fitch Updates Ratings Model; Projects Steep Housing Price Declines (25% and more). San Diego and San Francisco to decline by more than 30%.

10 Stocks To Watch, Only Freddie Mac & Fannie Mae looks Interesting

Freddie "absolutely" has enough capital: spokeswoman

Lehman Shares Sink as Fannie, Freddie Plunge Further (Update1)

Real Estate Commonsense RIP 2002

Death of American suburban dream. Bill Bonner a**hole is laughing his way to bank

Housing sector sucks but that cannot stop creativity. Buy one and get one for free.

In Escondido: Buy one (house), get one free.

Bill Bonner on Supply and Demand

Bill Bonner is waiting for Final Bubble. This guy knows his stuff!

Keeping up with Joneses gets little cheap now

I’m back from vacation, some links I’m reading

End to credit crisis is just an American pipedream

End to credit crisis is just an American pipedream

Bought but can't hold

Commentary: Put your house on the market now? Are you nuts?

Home prices post record decline

A government study finds home prices fell 1.7% in the first quarter of 2008. California, Nevada see sharpest drop.

Bank failures to surge in coming years

Americans split on homeowner bailout - poll

Countrywide Takes Away Home-Equity Credit Lines in Las Vegas

The Fed is Getting Desperate

Will Fed Cut Rates Again?

April Payrolls Down Less Than Expected: Is the U.S. Labor Market Showing Mixed Recessionary Trends?

Let Rome in Tiber melt

Bill Bonner from Italy. Air is going somewhere else

Japan's Notes Poised for Biggest Slump Since 1999 on Inflation

The Shape of the US Recession: V or U or W or L-Shaped?

How to make money in stock market

At last good news:Google Rocks, Sharply Beats the Street

Hormones 'may fuel market crises'

No easy egg for you. Inflation hits your omlette

RSS whores, read all you can. Best financial blogs are here

USD/Yen chart

Dilemmmmmaaaaa of US economy - where is peace between spending and income

Obama plans 'major' speech on economy

1970 Bear Stearns-Rare Cancelled Stock Certificate

Roubini asks important question: Is Bear Stearns the 'Sacrificial Lamb' or is the Fed?

Home sellers get religion. Finally.

Ken Rosen still sour on housing

Ken Rosen still sour on housing

Naked Capitalism says: Did the Fed Prevent a Financial Chernobyl?

246 to 792 in a single day

JPMorgan in Negotiations to Raise Bear Stearns Bid

Dude issues correction

World's fair

$500 for stimulating economy

$500 for stimulating economy

play holiday portfolio on thestreet.com

On Barrons ~~~~ CHANGE BREWS AT STARBUCKS ~~~~

Joined "Gordon Gekko Greed is Good Group (GGGGG)"

Asia Hit Hard by Bear Sterns News

FED's moral hazard dilemma and continuation of MAINSTREET ignorance

Gold Rush - Get Some NOW

Rate cut discussions are pressure games

Barron's says Home Depot Could Get Hammered

Where to Invest When the Market's a Mess

Why GOOG is a screaming buy

game theory

Oil Prices

Which of Wall Street's 25 primate species is the greediest?

I am not Spitzer, my dick is legal.

They just don't get JP Morgan

US economy in worst condition since World War 2

Which society doesn't run on greed?

Milton Friedman era is over?

This guy IS the problem

Dude we are so fucked

Roubini said everything. He did not use D-word

Carlyle Capital to file to liquidate the company

CNBC on Bear Stearns

igotCRAMERED.com in Bear Stearns (NYSE:BSC), Jim Cramer

100% Chance of Recession & Stock Market to Plunge 50-60%

"Family Guy": Stewie Griffin Meets Wall Street

Boiler Room First Sale

Boiler room - ABC

Sheep get slaughtered

Lock-and-load 2008 version

Caution: Crumbling Wall Street earnings ahead

On Barrons CHANGE BREWS AT STARBUCKS