Doom or Boom ?

BOOMERS – WINTER IS COMING
by James Quinn
July 13, 2009

Thus might the next Fourth Turning end in apocalypse – or glory. The nation could be ruined, its democracy destroyed, and millions of people scattered or killed. Or America could enter a new golden age, triumphantly applying shared values to improve the human condition. The rhythms of history do not reveal the outcome of the coming Crisis; all they suggest is the timing and dimension. – Strauss & Howe – The Fourth Turning

Winter is coming. Are you prepared? Americans see time as their enemy. Most Americans have bought into a view of the past and future as linear. When you observe the world in linear way and things are going well, the population is happy and confident. If you view the world in a linear way and things are going badly, the population sees nothing but terrible times ahead. This linear outlook of history and the future is not rational or supported by facts. I’m convinced that world history is not on a linear path towards Armageddon and the Rapture. This belief is preached by many of the mainstream religions, but the truth is that we’ve seen this movie before and it doesn’t end in the 2nd Coming of Christ. The American belief in a destiny of never ending progress will undergo its 3rd major crisis period since its founding. The resolution of this crisis is 10 to 20 years in the future. The outcome will remain in doubt until the definitive resolution.

Our everyday lives clearly support a cyclical view of the world. There are 24 hours in day progressing from light to darkness and back again. There are 365 days in a year progressing from Spring to Summer to Fall to Winter, and then starting the cycle over again. A month is dictated by the four phases of the Moon. Our oceans rise and fall in a predictable pattern of high tides and low tides based on lunar phases. Even Christian religions that preach a linear view of the world, celebrate their beliefs in a predictable annual cycle encompassing the life of Christ from is birth, life, death and resurrection. The human life cycle extends 80 to 100 years going through the stages of childhood, young adulthood, midlife, and elderhood. This cycle has not changed over the whole history of earth. A long human life approximates a century of time. The rhythm of time has a regularity and cadence that is predictable on a generational level. The elites, most academics, religious zealots and social engineers scoff at the idea of predictable cycles of history. It throws a monkey wrench into their deceptive self aggrandizing agendas.

Generational Theory

We perceive our civic challenge as some vast, insoluble Rubik’s Cube. Behind each problem lies yet another, and another, ad infinitum. To fix crime we have to fix the family, but before we do that we have to fix welfare, and that means fixing our budget, and that means fixing our civic spirit, but we can’t do that without fixing moral standards, and that means fixing schools and churches, and that means fixing the inner cities, and that’s impossible unless we fix crime. There’s no fulcrum on which to rest a policy lever. People of all ages sense that something huge will have to sweep across America before the gloom can be lifted – but that’s an awareness we suppress. As a nation, we’re in deep denial.  – Strauss & Howe – The Fourth Turning

Anyone who is being honest recognizes the country is on a path towards a major calamity. We have been living beyond our means for decades and the fiscal mismanagement of the country will come to a dramatic climax in the next decade. What many deny is that this crisis was pre-ordained based upon a predictable timeline of generational forces repeating over and over again throughout history. The elites are continuously stunned that every 20 to 25 years a fresh mood engulfs the country and new generations act differently than the generations who proceeded them. The privileged are astounded because they don’t want to accept the fact that progress is not linear and that society will undergo highs and lows over the course of a century.

Strauss and Howe have been able to trace consistent 80 to 100 year generational patterns throughout modern history. The 20 to 25 year quartiles are a High (1st Turning), an Awakening (2nd Turning), an Unraveling (3rd Turning), and a Crisis (4th Turning).  They have also identified four archetypes that occupy their necessary position within the 80 to 100 year cycle. These archetypes are Prophets, Nomads, Heroes, and Artists. History forms the generations as the generations create history in a repetitive dance throughout the ages. The archetypes always follow the same path. As an example, the Prophet archetype is always born during a High, comes of age during an Awakening, enters midlife during an Unraveling, and spends their elderhood during a Crisis.

Below are charts detailing the archetypes and the 12 Turnings since the founding of the American Republic. There is a remarkable consistency of timing and scope regarding the previous Turnings in our history.

		FIRST TURNING (High)	SECOND TURNING (Awakening)	THIRD TURNING (Unraveling)	FOURTH TURNING (Crisis)
GENERATION ENTERING:
Elderhood		Nomad	Hero	Artist	Prophet
Midlife		Hero	Artist	Prophet	Nomad
Young Adulthood		Artist	Prophet	Nomad	Hero
Childhood		Prophet	Nomad	Hero	Artist
	CIVIL  WAR SAECULUM Era of Good Feelings Transcendental Awakening Mexican War & Sectionalism Civil War (1794-1822) (1822-1844) (1844-1860) (1860-1865)
	GREAT  POWER SAECULUM Reconstruction & Gilded Age Third Great Awakening World War I & Prohibition Great Depression& World War II (1865-1886) (1886-1908) (1908-1929) (1929-1946) MILLENNIAL SAECULUM American High Consciousness Revolution Culture Wars Millennial Crisis? (1946-1964) (1964-1984) (1984-2005?) (2005?-2026?)

The archetypes that comprise a human life cycle follow the same repetitive pattern throughout history and they show the same traits and attitudes as their preceding archetype. Strauss & Howe describe the archetypes as follows:

• A Prophet generation grows up as increasingly indulged post-Crisis children, comes of age as the narcissistic young crusaders of an Awakening, cultivates principle as moralistic mid-lifers, and emerges as wise elders guiding the next Crisis. (Boomers – indulged, narcissistic, moralistic, wise)
• A Nomad generation grows up as under-protected children during an Awakening, comes of age as alienated young adults of a post-Awakening world, mellows into pragmatic mid-life leaders during a Crisis, and ages into tough post-Crisis elders. (Generation X – abandoned, alienated, pragmatic, tough)
• A Hero generation grows up as increasingly protected post-Awakening children, comes of age as heroic young team workers of a Crisis, demonstrates hubris as energetic mid-lifers, and emerges as powerful elders attacked by the next Awakening. (Millennial – protected, heroic, hubristic, powerful)
• An Artist generation grows up as overprotected children during a Crisis, comes of age as the sensitive young adults of a post-Crisis world, breaks free as indecisive mid-life leaders during an Awakening, and ages into empathetic post-Awakening elders. (Homelanders – suffocated, sensitive, indecisive, empathetic)

The First Turning is referred to as a High. A High always follows a period of Crisis. The hallmark of a First Turning is a heightened sense of community and collective confidence, driven in part by the fact that the society has just come through a difficult and challenging period. Consequently, during First Turnings, societal institutions tend to be strong while individualism is weak. The post-World War II “High” of the mid-1940s through early ’60s is the most recent example of a First Turning. The victory over Nazism and Fascism marked the beginning of this High. The United States was on top of the world. We exited World War II as an ascending superpower. The Marshall Plan rebuilt Europe and Japan. The middle class grew and flourished as former GI’s built the suburbs and the interstate highway system. During this period Old Prophets disappear, Nomads enter elderhood, Heroes enter midlife, Artists enter young adulthood—and a new generation of Prophets is born. These new Prophets were the Baby Boom Generation.

The Second Turning, called an Awakening, starts out feeling like the high tide of a High, with signs of advancement and prosperity everywhere. Just as everything seems to be going along swimmingly, large swaths of society begin to chaff under the social conformity of the High, beginning to gravitate to more individualistic pursuits and demanding that their personal interests come first. The “Consciousness Revolution” of the mid-1960s through early 1980s was our most recent Awakening. The trigger for this Turning was the assassination of John F. Kennedy. No one expected the turmoil that would occur over the next 10 years. Urban riots, campus riots, Civil rights protests, Kent State, Woodstock, Watergate, the feminist movement, counterculture, drugs, violent crime and family strife marked the next two decades. The New Age movement and Me Generation dominated the culture until the Reagan era. During this phase Old Nomads disappear, Heroes enter elderhood, Artists enter midlife, Prophets enter young adulthood—and a new generation of child Nomads is born. These Nomads are known as Generation X.

The Third Turning, called an Unraveling, is the opposite of a High. Individualism rules, while establishments such as government, religion and military are increasingly weak and discredited. Neil Howe describes a typical Unraveling:

“This is a time when social authority feels inconsequential, the culture feels exhausted, and people feel bewildered by the number of options available to them. It is a time of celebrity circuses and a tremendous amount of freedom and creativity in our personal lives, but very little sense of public purpose.”

The most recent Third Turning began in 1984 with Ronald Reagan’s optimistic Morning in America message led to the fall of communism and the collapse of the Berlin Wall. The culture wars that have raged since the mid-1980’s have turned the initial optimism into an overwhelming sense of pessimism. There is no national consensus. The country’s leaders have ignored national problems such as unfunded Social Security and Medicare obligations, a coherent energy policy, and a deteriorating educational system. Popular culture centers around celebrity circuses like Michael Jackson’s death and Michelle Obama’s fashion choices. Americans reflect darkly on the future as growing financial and social inequality tears at the fabric of the country. The rich take advantage of the financial service economy and grow ever richer at the expense of the middle class. The poor pay no taxes and receive social transfer payments and take advantage of easy credit to live like the rich. The middle class is disillusioned and angry as manufacturing jobs leave the country. Previous periods of Unraveling in American history were also decades of cynicism and bad manners. The Roaring 20’s were the last Unraveling period that led to the stock market crash in 1929, the Great Depression and World War II. History teaches us that Third Turnings inevitably end in Fourth Turnings. During this phase, Old Heroes disappear, Artists enter elderhood, Prophets enter midlife, Nomads enter young adulthood—and a new generation of child Heroes is born. The latest Hero generation is the Millenials

Lastly, there is the Fourth Turning, called a Crisis. We are currently on the verge of a Fourth Turning. This is a time of great turmoil, when society’s basic institutions are torn down and rebuilt, and seemingly intractable problems are addressed. The apparently unsolvable financial dilemma of the country along with comprehension that Peak Oil has occurred will trigger the Crisis. The ultimate resolution could be rational and well thought out or it could end in a fiery fight to the death between countries or generations. During Fourth Turnings, America engages in a struggle for its very survival and redefines its identity as a nation. Large wars are often a part of this process. The American Revolution, Civil War, Great Depression, and World War II were all facets of past Fourth Turnings. During this period Old Artists disappear, Prophets enter elderhood, Nomads enter midlife, Heroes enter young adulthood—and a new generation of child Artists is born.

According to Strauss & Howe past Fourth Turnings in U.S. history we have overcome intractable problems and forged a new beginning:

“In the 1790’s, they triumphantly created the modern world’s first democratic republic. In the late 1860’s, wounded but reunited, they forged a genuine nation extending new guarantees of liberty and equality. In the late 1940’s, they constructed the most Promethean superpower ever seen.”

Sometime between today and 2025, this nation will undergo a test of its very survival. The ultimate outcome will be in doubt. Strauss and Howe paint a dire picture of the coming decades:

“The risk of catastrophe will be very high. The nation could erupt into insurrection or civil violence, crack up geographically, or succumb to authoritarian rule. If there is a war, it is likely to be one of maximum risk and effort – in other words, a total war. Every Fourth Turning has registered an upward ratchet in the technology of destruction, and in mankind’s willingness to use it.”

Boomers Unraveling

America feels like it is unraveling. Though we live in an era of relative peace and comfort, we have settled into a mood of pessimism about the long-term future, fearful that our superpower nation is somehow rotting from within. – Strauss & Howe – The Fourth Turning

Most of my adult life has been spent during the current Unraveling. In 1984 I was twenty-one years old and about to enter the workforce. The country was recovering from the worst recession in decades and the turmoil of the 1970’s was subsiding. Ronald Reagan (GI Generation) won re-election with a 49 state to 1 landslide victory over Walter Mondale using his Morning in America campaign slogan. Reagan’s tax cuts, interest rates starting a two decade decline and increased military spending combined to juice the economy. Reagan’s policies were the final dagger in the side of communism. The Soviet Union collapsed and the Berlin Wall fell. What many thought was the end of history, with democracy and capitalism victors, turned out to be a fleeting high. The initial signs of Unraveling were seen during Reagan administration. The Space Shuttle Challenger exploded, leading to questions of competence at NASA. The Iran-Contra scandal derailed the Reagan agenda as he showed signs of mental decline. The American military retreated from Lebanon after 220 Marines were killed in a terrorist attack. The stock market crashed, losing 508 points in one day, a 23% decline. The movie Wall Street with its amoral cynical view of the world captured the darkening mood of the country.

The first George Bush administration was marked by the Gulf War, which planted the poisonous seeds for our future War on Terror, and the recession which cost George Bush a 2nd term. The unraveling could clearly be seen in the 1992 Presidential election, as Ross Perot won the most votes as a 3rd Party candidate since 1912. During the Clinton administration the country continued to fragment, became more divisive, and cynical. Politics became gridlocked, which resulted in reduced government spending. A laissez-faire attitude was promoted by Alan Greenspan and Robert Rubin for the financial markets. This led to the Dot.com bubble and its eventual collapse. Trust in financial, government, and religious institutions continued to erode. The Oklahoma City bombing and the Columbine high school slaughter convinced many that something was very wrong with our culture. A distrustful alienation had solidified into an overwhelming gloom.

The Unraveling picked up speed during George W. Bush’s administration. The stock market continued to implode, the economy entered recession and half the country felt that George Bush was not a legitimate President. Then the country was shaken to its core by the 9/11 attack. For a brief time, the country rallied around the flag and fully supported the invasion of Afghanistan. This appeared to be the trigger for the next American Crisis. Instead, it resulted in an acceleration of the Unraveling. A true trigger for a Crisis period will rally the entire population (Fort Sumter, Pearl Harbor). The disastrous invasion of Iraq, horrific financial management of the economy by Alan Greenspan, individualistic greed and hubris of Wall Street, blatant corruption in Washington D.C., and complete lack of regulation by governmental agencies led to the collapse of the global economy in 2008. Decisive public action regarding $56 trillion of unfunded social liabilities, soaring public and private debt, and non-existent energy policy has been deferred for decades. Now there is no doubt that this paralysis and inaction will lead us into the next Crisis. The majority of Americans feel we are not on the right track, because we’re not. The coming catastrophe will truly test the mettle of our country.

Generation X – Assuming Command

We yearn for civic character but satisfy ourselves with symbolic gestures and celebrity circuses. We perceive no greatness in our leaders, a new meanness in ourselves. Small wonder that each new election brings a new jolt, its aftermath a new disappointment. Not long ago, America was more than the sum of its parts. Now, it is less. Around World War II, we were proud as a people but modest as individuals. Fewer than two people in ten said yes when asked, Are you a very important person? Today, more than six in ten say yes. Where we once thought ourselves collectively strong, we now regard ourselves as individually entitled. Yet even while we exalt our own personal growth, we realize that millions of self-actualized persons don’t add up to an actualized society. – Strauss & Howe – The Fourth Turning

Barack Obama became the 1st Generation Xer to be elected President of the United States. His background is a classic Nomad story. He has lived the life of a wanderer, living all over the globe, a child of divorce, fatherless, raised by grandparents, and a free agent in his career. Generation X grew up as abandoned children and alienated young adults. Generation X leaders will be pragmatic, savvy and practical. Obama has proven thus far to be pragmatic and able to get his agenda initiated. Previous Nomad leaders who proved to be highly competent doers during a time of Crisis include Dwight D. Eisenhower, George Patton, and Harry Truman. You may not agree with Obama’s plans or policies, but it is clear to anyone that he is an intelligent, pragmatic man that will institute dramatic change in the policies of the United States.

It is very likely that Barack Obama will lead the country into the next Crisis. He will not lead us out of the Crisis, as it is unlikely to subside until 2025. As the Unraveling transitions into Crisis the apathy reflected in historic low voter turnout will reverse itself as Americans become mobilized by the Crisis. The economy always undergoes wrenching transformations during a Crisis. The U.S. economy will likely be racked by panic, depression, inflation and war. We have witnessed a preliminary financial panic, but the real panic will be much more traumatic. The separateness and blame witnessed during the Unraveling will transform into gathering and family togetherness. McMansions will become useful as three generations will more frequently live under one roof. Immigration will decline as the population will fear outsiders and place strict restrictions on foreigners entering the country. During the coming crisis, our culture will likely be cleansed, censored, and harnessed for the public good. The current ongoing financial debacle will ultimately contribute to the Crisis causing trigger of a worldwide oil shortage.

Peak Oil + Green Energy = Crisis

“But I guess it just reminds me that as a society, we don’t have the ability to actually come to grips with a crisis until it hits us in the face. I am discouraged enough now to think that we’re going to have to have a really nasty shock before we wake people up. The most optimistic estimate for the average depletion rate of the world’s currently producing oilfields is between 4% and 5% annually, or about four million barrels per day at our current rate of production. That means that each year we must find enough new oil to first replace those four million barrels of lost daily production before we even add enough to meet new demand. This is all the more worrisome because world oil discovery of new reserves has been slowing since the mid-20th century.” – Matt Simmons

(click to enlarge)

Matt Simmons has been a lone voice in the wilderness warning Americans about the impending crisis that will be caused by Peak Oil. His prediction of a worldwide peak in crude oil production at 73 million barrels per day in 2005 has proved correct. Worldwide total liquids production peaked at 86 million barrels in 2008. All of the easy oil and gas in the world has been found. Additional supplies will be found deep below the ocean, in challenging arctic regions, in tar sands, and shale. It will be dramatically more expensive to extract oil from these sources. Oil discoveries have been in a steady decline since the 1970’s.

The United States has been dependent on 600 million barrels of oil from Mexico every year. By 2012 Mexico will become a net importer of oil, so 600 million barrels of oil will need to be replaced. Iran’s oil production is in decline as capital investment has been ignored for years. Russia’s production has peaked. Saudi Arabia continues to lie about its ability to ramp up production. Their oil fields are 40 years old and in terminal decline. By 2012, the world will only be able to produce 80 million barrels per day. There is no doubt that demand in 2012 will be higher than today’s 85 million barrels per day as China, India and other developing countries continue to grow. Even a Wall Street economist could predict what will happen to prices.

Peak oil will have the most dramatic affect on America. We have 5% of the world’s population, but use 25% of the world’s energy. Practically 85% of the world barely uses energy. World population of 7 billion will likely grow to 10 billion by 2030. China and India both are selling more cars annually than the U.S. As people throughout the world enter the middle class, they want cars, TVs, and modern appliances. Energy demand cannot be turned back. Infrastructure constraints will exacerbate the coming energy crisis. The NIMBY crowd has managed to keep any refineries from being built in the U.S. since 1976. Our energy infrastructure is made of steel and is rusting away. It would take trillions to upgrade the energy system. These investments will not be made. The geologists and other experienced oil men are retiring, and no one is replacing them. Matt Simmons’ recommendation for the upcoming crisis is DOA:

“We should basically be going back to creating a village economy, so that we really reduce the energy intensity of how we live,” he says. “We need big time conservation, not feel-good conservation. Make things where they’re used. You’ll end long-distance commuting, and we have the tools to do that now with webcams. Grow food locally. Grow food in your backyard. If they’re not commuting, people will have time to do that.”

The Green Agenda that is sweeping the country and is fully supported by the Obama administration will be the final nail in the coffin. The blueprint of success for the Green Agenda is ethanol. Government subsidized a fuel that required more energy to produce than it provides.

The mal-investment in ethanol plants led to a boom and the usual bust when government interferes in the free markets. The use of corn for fuel caused prices to rise for other food crops and meat. With the crash in oil prices, ethanol plants have been going bankrupt at an accelerating rate. Renewable energy and green jobs are the catch phrases being used by Obama and the Democrats pushing the Al Gore led agenda.

“I believe it is appropriate to have an ‘over-representation’ of the facts on how dangerous it is, as a predicate for opening up the audience.” – Al Gore

I’d like to know the difference between over-representation and lying. The real inconvenient truth is that the United States depends on oil, natural gas, and coal to supply 87% of its energy, with nuclear power providing another 7%. The beloved solar, wind and geothermal sources supply 1.5% of our energy needs. Harry Reid and his green disciples believe coal and oil are ruining the world. They want to eliminate the fuels that power 87% of our economy. Maybe they should just keep implementing their economic policies and keep the country in a permanent recession, as carbon emissions have declined over the last three years. Their false science claims, scare tactics in grade schools, and use of green catch phrases will not generate the energy needed to run this country.

The green extremists want to eliminate coal as an energy source in the U.S. Even though nuclear energy emits no Carbon Dioxide, it is unacceptable to the green extremists. There is just one small problem. The chart below shows that coal and nuclear provide 72% of all the electric power in the United States. Renewable energy sounds good, but it cannot replace our existing sources. Inconvenient facts like no ability to distribute any energy created by wind and solar to the places that use the energy are completely ignored by green extremists. Our transportation system depends on oil to provide 96% of its energy. I don’t think anyone will be commuting to work in a solar car or wind powered car in the near future. A plug in car will require electric power that comes from coal and nuclear plants.

The Cap & Trade Energy bill will eventually be rammed through by the Democratic controlled Congress. It is being spun as a bill that will reduce greenhouse gases and create thousands of green jobs. What is a green job? Will we turn unemployed investment bankers and auto salesmen into solar panel and wind turbine manufacturers? The green agenda bill will penalize manufacturers, refineries, natural gas producers and electric utilities with increased taxes.

Sounds great. Let’s penalize the polluters. Every company that produces something will pass their costs along to their customers. This bill will increase the average family’s energy costs by $1,500 per year. It will convince many companies to move operations and jobs to China and India where these regulations don’t apply. Our agriculture industry will bear the brunt of this burden as they use tremendous amounts of energy in farming. Expect food costs to go up a lot. Since low income families spend a greater percentage of their income on energy, this bill will damage their finances the most. It will also trigger the coming Crisis.

20 Year Crisis – Financial Collapse, War, Rebirth

“Most of today’s adult Americans grew up in a society whose citizens dreamed of perpetually improving outcomes: better jobs, fatter wallets, stronger government, finer culture, nicer families, smarter kids, all the usual fruits of progress. Today, deep into a Third Turning, these goals often feel like they are slipping away. Many of us wish we could rewind time, but we know we can’t – and we fear for our children and grandchildren.” – Strauss & Howe – The Fourth Turning

The skies are darkening and a cold wind is beginning to blow. Autumn began with bright skies and warm breezes, but the atmosphere has gotten bitter as swirling winds rip the remaining leaves from the trees. Winter is approaching rapidly and it gives all indications that it will be a bitter, dangerous, harsh time for all Americans. We wish we didn’t have to face the coming trial, but there is no avoiding it. Generational moods are transitioning, and a Crisis will envelop the country for the next twenty years. Courage and fortitude on a level not seen since World War II will be required. The celebrity circuses like the Michael Jackson funeral, Britney Spears comeback tour, and Brangelina’s latest adoption will seem so trite during the coming Crisis. Wearing a blue rubber wristband and putting a yellow ribbon on your Mercedes SUV will not cut it. Previous 4th Turnings in U.S. history have involved total war. Deaths during the American Revolutionary War were approximately 50,000. Total deaths during the Civil War were 600,000. Total deaths during World War II were 73,000,000. How many people will die during the coming Crisis? No one knows the answer in advance. An integrated global economy, combined with nuclear weapons, advanced military killing machines, terrorists, and peak oil appears to be a recipe for death on a colossal scale.

Anyone who doesn’t sense a turning in the mood of the country is just not paying attention. There is a foreboding feeling that something is dreadfully wrong with our country. For those addicted to cable television, we are about to leave the sheltered, superficial, coddled world of Housewives of Orange County and enter the frigid, dangerous world of The Deadliest Catch with 40 foot waves and the threat of a watery death at any moment. A dramatic event will soon shock the nation into action. The catalyst for the Crisis will likely be a sequence of events that will shift the mood of the country. The 1st event will be seen as the financial system meltdown in September 2008. The 2nd event will be viewed as the government’s reaction to the crisis. The remarkable sweeping steps taken by Ben Bernanke, Hank Paulson, Tim Geithner, and Barack Obama have further weakened the U.S. financial system and left it vulnerable to the next sudden shock.

The approaching Crisis will be sparked by known existing threats that have been ignored and discounted by our Baby Boom leaders. These known threats include titanic current deficits, colossal unfunded future liabilities, and unavoidable Peak Oil. As the economy continues to hemorrhage jobs, Congress will do what they do best and spend billions more on stimulus pork. As the National Debt approaches $15 trillion in 2012, a spectacular collapse of the U.S. dollar becomes more likely. By 2012 the world will realize that Peak Oil is a fact. As demand outstrips supply, prices will rise dramatically. This is when a catalytic event is likely to plunge us into a harsh Winter of darkness and death. As the U.S. economy begins to collapse under the weight of debt and oil shortages, a terrorist attack using nuclear or biological weapons on U.S. soil would plunge the country into chaos. Other possible triggers could be a natural disaster such as an earthquake that destroys significant portions of California or a hurricane that destroys oil rigs and  refineries in the Gulf of Mexico. Significant oil shortages will bring commerce to a halt. Food shortages would occur within a week of oil supply disruptions, as most of the food in our stores must be delivered by truck. As real unemployment reaches 25%, interest rates soar, and the dollar becomes worthless, civil unrest will breakout and the Department of Homeland Security will be called upon to fight and imprison its fellow citizens.

Past Crisis periods were marked by Prophets leading and Heroes sacrificing (Gandalf & Frodo) as the soldiers of the Crisis. In 2012 the country is likely to turn to a Baby Boom President with strong leadership skills such as Newt Gingrich or someone who will appear out of nowhere (Abraham Lincoln was an unknown two year Illinois Congressman). As the U.S. domestic crisis deepens, Russia and China will attempt to take advantage of U.S. weakness by expanding their influence and control in Eastern Europe and Asia. Countries with domestic problems always turn outwards for a real or created threat to rally the nation. With the oil crisis getting worse, the U.S. will go to war in order to secure the precious supplies needed to run our economy. With China also seeking oil supplies a military conflict with China and Russia is quite possible. If the conflict turns into a cyber war of destroying satellites and disrupting computer communications, world leaders could be fighting blindly. If one of these leaders panics and decides to launch some of their nuclear arsenal, the world could be changed beyond all recognition. This scenario seems impossible today. On October 24, 1929 when the Stock Market crashed, did anyone foresee a twelve year Depression with 25% unemployment, a World War that killed 73 million people, and the creation and use of an atomic bomb in the following sixteen years? The impossible becomes possible during a Crisis.

A Crisis can end positively or negatively. Our previous Crisis periods have resulted in new golden ages. If the leaders we choose are strong, wise, and judicious and the Millennial generation can rise to the occasion as their GI generation grandparents did during our last Crisis, we can rejuvenate our national destiny. Winter always turns into Spring. But, Strauss & Howe offer a chilling warning:

“History offers no guarantees. Obviously, things could go horribly wrong – the possibilities ranging from a nuclear exchange to incurable plagues, from terrorist anarchy to high-tech dictatorship. We should not assume that Providence will always exempt our nation from the irreversible tragedies that have overtaken so many others: not just temporary hardship, but debasement and total ruin. Losing in the next Fourth Turning could mean something incomparably worse. It could mean a lasting defeat from which our national innocence – perhaps even our nation – might never recover.”

© 2009 James Quinn
Editorial Archives

Comments »

U.S. Postal Service May Be Unable To Make Payroll & Retiree Health Plan Costs as Soon as October

On July 14, unions representing United States Postal Service (USPS) workers wrote the White House with “extreme urgency” asking for a meeting to address lack of funding for both employee payroll in October and health benefits for retired employees.

The letter, which the FederalTimes.com blog provided a scanned copy late last week, says:

“[USPS] top executives are now saying that the USPS will default on a $5.4 billion payment to prefund future retiree health benefits on September 30, 2009. And its government affairs representative are now telling Congressional staff that the Postal Service may not be able to make payroll in October and will be forced to issue IOUs instead.”

The letter was co-signed by the presidents of the American Postal Workers Union, National Rural Letter Carriers’ Association, National Association of Letter Carriers and National Postal Mailhandlers Union, and sent to White House Deputy Chief of Staff, Jim Messina.

U.S. & India Announce Power Deals

By MATTHEW ROSENBERG

NEW DELHI — The U.S. and India announced deals Monday that could bring American defense contractors and power companies billions of dollars in business, as Hillary Clinton wrapped up her first visit as secretary of state to the South Asian nation.

A long-running dispute over how to combat climate change threatened a day earlier to the sour the trip, which has been touted as an effort to strengthen ties between world’s two largest democracies after decades of estrangement during the Cold War, when New Delhi often leaned toward the Soviet Union.

Monday’s announcements ensured Mrs. Clinton’s three-day visit brought tangible gains for both sides, setting the stage for further expanding military cooperation and two-way trade, currently valued at about $45 billion and growing.

“I don’t think you can understate the significance of our relationship as two democracies,” Mrs. Clinton said at a joint news conference with her Indian counterpart, External Affairs Minister S.M. Krishna. “We understand the difficulties of decision-making in democracies, and we respect the vibrancy of each other’s democracy. That is a much stronger base for a relationship than any other in the world.”

Mrs. Clinton said she had been told by Prime Minister Manmohan Singh, whom she met earlier in the day, that India had set aside two sites where U.S. firms will have exclusive rights to build nuclear power plants.

The sites will “facilitate billions of dollars in U.S. reactor exports and create jobs in both countries as well as generate much-needed energy” in India, which faces chronic power shortages, Mrs. Clinton said.

She didn’t say where the sites would be. But the widely expected announcement is a major step toward implementing a landmark pact sealed last year between Washington and New Delhi that ended a 34-year ban on trading nuclear fuel and technology with India, which had developed atomic weapons outside the Nuclear Non-Proliferation Treaty.

Already, India has set aside sites exclusively for French and Russian companies. The U.S. sites announced Monday guarantee American access to a market for power plants valued at tens of billions of dollars.

However, a number of hurdles remain. The U.S. hasn’t granted American companies licenses needed to share sensitive technical data and specifications with Indian firms. And India must pass legislation and sign an international convention that limits nuclear-power companies from liability in the case of an atomic accident.

Mrs. Clinton and Mr. Krishna also announced an “end-use monitoring” agreement that provides for the export of U.S. weapons and defense technology to India by allowing American authorities to make sure it is used as intended and not sold to other countries.

The agreement opens the way for Boeing Co. and Lockheed Martin Corp. to bid on an Indian contract to supply 126 fighter jets, a sale valued at more than $10 billion. It could also bring in billions of dollars more for those companies or other American defense contractors as India modernizes its aging, largely Soviet-made military arsenal.

India and the U.S. also finalized an agreement that would allow American parts to be launched on civilian or noncommercial Indian spacecraft.

A Look @ Commercial Paper

It’s interesing to note that the market is rallying today on the news that CIT will be rescued.  Of course, last week’s news of CIT’s demise did nothing to dent the market.  Meanwhile, the commercial paper market continues to display the weakness that is apparent in CIT’s underlying businesses.  As we’ve mentioned before, the commercial paper market is a clear sign that the lending markets are far from healthy.

David Rosenberg has a nice note on the recent declines in the ABCP markets:

We continue to hear from strategists and economists that the credit clouds have parted, and yet the U.S. commercial paper market continues to contract (by $40 billion in the July 15th week) to a level not seen since 1998. And, the declines are right across the board — financial issuers, non-financial, asset backed — in fact, the asset backed market is all the way down to $440 billion of outstandings from $1.2 trillion at the credit bubble peak in the summer of 2007. Commercial bank balance sheets also continue to shrink — by $12 billion in the latest week, with outstanding consumer credit falling the fastest.

This is another clear sign of the state of the current rally in equities.  While the underlying fundamentals remain little changed and even deteriorate in some lending markets we continue to see rampant bullishness in equity market participants that anticipate higher stock prices later in the earnings season.   After an 8% move in stocks in less than a week (on weak underlying earnings) we are beginning to see the risk/reward take a turn for the worse.

Leading Indicators Signal the Worst May Be Over

By Bob Willis

July 20 (Bloomberg) — The index of U.S. leading indicators rose in June for a third consecutive month, reinforcing signs the economy may be emerging from the worst recession in five decades.

The Conference Board’s gauge of the economic outlook for the next three to six months increased 0.7 percent, more than forecast, after a revised 1.3 percent gain in May, the New York- based research group said today. It is the first time the index has climbed for three months in a row since 2004.

Smaller job losses, rising stock prices and stabilization in homebuilding and manufacturing are evidence that government efforts to stem the financial crisis and lower borrowing costs may pay off. A jobless rate that is forecast to reach 10 percent and falling home values are a reminder that any expansion will be muted as consumers rein in spending and boost savings.

“The outlook over the next few quarters is improving,” Jeffrey Roach, chief economist at Horizon Investments in Charlotte, North Carolina, said before the report. “We see the recession likely ending by the end of year but that is not without some months of turbulence.”

Stocks, one component of the leading index, extended gains following the report. The Standard & Poor’s 500 Index rose 0.8 percent to 948.25 at 10:05 a.m. in New York. The S&P 500 index average rose 2.6 percent in June and has soared about 40 percent since March 9 — when it reached its lowest level in more than 12 years. Last month’s gain contributed 0.1 percentage point to the leading index.

Exceeded Forecast

The New York-based Conference Board’s index was forecast to rise 0.5 percent, according to the median of 59 economists in a Bloomberg News survey. Survey estimates ranged from a decline of 0.3 percent to a gain of 1 percent.

Seven of the 10 indicators in today’s report added to the index while three indicators subtracted from it. A growing divergence between long- and short-term interest rates, rising stock prices, a longer factory workweek, increases in building permits and falling jobless claims contributed to the gain. Falling money supply, orders for capital goods and consumer expectations pulled down the index.

The biggest boost was provided by a widening spread between the 10-year Treasury note, where yields rose based on mounting speculation of an economic recovery, and the overnight fed funds rate.

Bernanke Testimony…..

CIT May Announce $3bln in Financing From Bondholders

By Pierre Paulden and Linda Shen

July 20 (Bloomberg) — CIT Group Inc., the 101-year-old commercial finance company seeking to ward off bankruptcy, may announce an agreement for $3 billion in financing from bondholders as soon as today, a person briefed on the board’s deliberations said.

The funds would give the New York-based company a chance to restructure its debt outside of bankruptcy, said the person, who declined to be identified because the talks are confidential. The lender’s board accepted the deal late yesterday, the New York Times reported.

CIT needs time to strike deals with bondholders to reduce debt after the U.S. declined to give the firm a second bailout. CIT, which reported $3 billion of losses in the last eight quarters, received a $2.33 billion rescue in December after converting to a bank holding company to be eligible to sell bonds backed by the Federal Deposit Insurance Corp.

“We still think it is a losing effort in the intermediate term although some bondholders may end up better than others with this structure,” said David Hendler, an analyst at CreditSights Inc. in New York. “The wholesale model is dead and creating a branch deposit system from scratch is too expensive for CIT and takes too long to build to help any time soon.”

Barclays Capital is arranging the funding, said another person familiar with the negotiations. The financing will carry an initial rate of about 10.5 percent, the New York Times said. Creditors including Boston-based hedge fund Baupost Group LLC, CapRe, Centerbridge Partners LP, Oaktree Capital Management LLC, Pacific Investment Management Co. and Silverpoint Partners agreed to provide the money, the Financial Times reported….

World Indices Rise On Commodities & Economic Rebound

By Justin Carrigan

July 20 (Bloomberg) — Stocks, oil and emerging-market currencies rose, sending the yen and the dollar lower, as improved corporate earnings signaled the global economy may be bottoming.

Europe’s Dow Jones Stoxx 600 Index climbed 1.5 percent as of 7:49 a.m. in New York, gaining for a sixth straight day, the longest winning streak since March, while Standard & Poor’s 500 Index futures advanced 0.7 percent. Crude oil added 1.8 percent for a fourth day of gains. The ruble strengthened 3.1 percent against the dollar.

About 76 percent of companies in the S&P 500 Index that have reported earnings since July 8 beat analysts’ estimates. Tata Consultancy Services Ltd., India’s largest software exporter, climbed 16 percent after its earnings topped estimates. Stocks also gained on optimism lender CIT Group Inc. will get emergency loans from creditors to avert bankruptcy.

“Corporate profits are beating expectations by their widest margins in a year, pushing most equity markets within a whisker of new year-to-date highs and the dollar toward its 2009 lows,” John Normand, head of global currency strategy at JPMorgan Chase & Co. in London, wrote in a research note.

The yen fell 1.9 percent against the New Zealand dollar and 1.7 percent against the Australian dollar. It dropped 1.6 percent compared with the pound. The U.S. dollar declined against every major currency except the yen, and Normand said he expects the U.S. currency to extend its drop this month.

The Dollar Index, which the ICE uses to track the currency against those of six major U.S. trading partners, dropped as much as 0.6 percent to 78.840, the lowest level since June 3.

Emerging Markets

All 22 emerging-market currencies tracked by Bloomberg except Israel’s shekel advanced against the dollar. India’s rupee led gains in Asia, rising 1.1 percent, while South Africa’s rand appreciated 1.3 percent on the rally in commodities and after Absa Group Ltd. Chairwoman Gill Marcus was named as successor to central bank Governor Tito Mboweni.

Emerging-market stocks climbed for a fifth day, the longest stretch of gains in 10 weeks. The MSCI Emerging Markets Index increased 2.6 percent to the highest intraday level since June 3. Tata posted the steepest advance in the 22-country gauge after saying first-quarter profit rose 23 percent on lower costs and a weaker dollar that boosted the value of overseas earnings.

Oil for August delivery rose $1.07 to $64.63 a barrel on the New York Mercantile Exchange. Refiners in China, the world’s second-largest oil user, raised their operating rates to a 16- month high, according to CBI China, a Shanghai-based commodities researcher.

Six-Day Gain….

Rates Expected To Be Held Down Fo A While

By Rich Miller

July 20 (Bloomberg) — To keep interest rates at a record low, Ben S. Bernanke may have to show Congress and investors he can be as creative about soaking up cash from the financial system as he was when pouring it in.

The Federal Reserve chairman will probably outline his strategy for exiting the biggest monetary expansion in history when he delivers his semiannual economic report to Congress tomorrow. Among the options: establishing term deposits at the Fed designed to induce banks to keep money there rather than lending it out, said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey.

Laying out a plan now may give Bernanke leeway to hold down borrowing costs for as long as it takes to reduce unemployment from a quarter-century high. To do that, he first has to convince lawmakers and investors he’s ready and able to contain inflation as the economy recovers.

“Bernanke needs to explain that the Fed has the tools to do the job and that it intends to use them forcefully when it has to,” said Lyle Gramley, senior economic adviser with New York-based Soleil Securities Corp. and a former central bank governor. “That would help hold down inflation expectations and give the Fed the opportunity to stay easier for longer.”

House Financial Services Committee Chairman Barney Frank said he expects Bernanke to spell out how the Fed will end its unprecedented expansion of credit when he testifies before the Massachusetts Democrat’s panel tomorrow.

‘Prepared to Unwind’

“I’ve urged him to be ready to tell people how he’s prepared to unwind some of those facilities when it’s prudent to do so,” Frank said.

Bernanke is “very conscious” of worries that the Fed may end up rekindling inflation, the lawmaker said…..

WSJ Reports Mortgage Failure @ 20 yr. High (DUH !)

(Reuters) – Commercial mortgages at U.S. banks have been failing at the fastest rate in nearly 20 years, the Wall Street Journal said, citing its own analysis.

Losses on loans used to finance commercial spaces would possibly reach about $30 billion by the end of 2009 at the current rate, the article said.

The estimated $30 billion is based on financial reports filed by more than 8,000 banks for the first quarter, the paper said.

The commercial real-estate market, valued at about $6.7 trillion, represents 13 percent of the U.S.’s gross domestic product, according to the paper.

Expectations Rise For European Banks

By Steve Slater

LONDON (Reuters) – Stellar earnings from U.S. banks have raised expectations that European rivals will follow suit in the next month, although rising bad debts have the potential to douse that optimism.

Results from Credit Suisse (CSGN.VX) on Thursday and from Santander (SAN.MC), Deutsche Bank (DBKGn.DE), HSBC (HSBA.L) and Barclays (BARC.L) in the following two weeks should show boom times have returned to investment banking and retail margins are attractive.

But bad debts are rising sharply as recession bites and banks most exposed to corporate loans and riskier home loans may provide a stark reminder that recovery will be a long, hard slog, analysts said.

“The big swing factor for banks this year will be the rising loan impairments, and that’s coming through in all the major countries,” said Simon Willis, bank analyst at ESN/NCB Stockbrokers in London.

Sweden’s SEB (SEBa.ST) on Monday posted weak Q2 results as it joined other Nordic banks giving a gloomy message on prospects for the Baltic region, signaling the global recovery is fragile and trouble spots remain.

Earnings from top U.S. banks, led by Goldman Sachs (GS.N) beat expectations and confirmed that a bumper first three months for investment banking continued in the second quarter, marking a sharp revival from last year’s turmoil.

Near-record fixed income revenues and strong equity and commodities business are fuelling profits, and there is a clear positive read-across to Credit Suisse, Barclays and Deutsche Bank, analysts said.

Credit Suisse is positioned to be a long-term winner from the retreat by rivals and Thursday’s results should show the benefit from market gains in investment banking…..

Are Cost Cutting Efforts Going To Mar Recovery ?

By Nick Carey – Analysis

CHICAGO (Reuters) – Much of Corporate America has slashed costs to stay in the black during the recession, but welding the knife too heavily could also remove the ability to grow in a recovery.

“If you cut into flesh long enough, eventually you find bone,” said David Rosenberg, chief economist at Gluskin Sheff in Toronto. “Cost cutting is not a bottomless pit.”

Firing people, introducing hiring freezes, halting investments, trimming budgets or even skimping on office supplies are time-tested ways to prove the old adage that a penny saved is a penny earned.

A slew of companies reported better-than-expected first-quarter results because aggressive budget slashing more than made up for falling sales. According to Rosenberg, 40 percent of companies missed their top line expectations in the first quarter.

And as the bulk of results for the most recent quarter hits in the next two weeks, many U.S. companies are expected to do the same again. Some already have.

Perhaps the biggest example so far has been General Electric Co, which managed on Friday to report earnings that whizzed past expectations despite a drop in revenue that was more dramatic than Wall Street had predicted. The major reasons: cost cutting and a dip in its tax rate.

Mind you, investors can be smart to the numbers game. They question the quality and sustainability of such results — and despite the earnings beat GE’s shares dropped more than 5 percent on Friday.

Another example was Yum Brands Inc, parent of the Taco Bell, Pizza Hut and KFC chains, which last Tuesday also surpassed earnings forecasts but was light on the revenue side. A cut in its full-year sales forecast triggered a decline of about 8 percent in its share price over the rest of the week.

Mattel Inc posted a bigger-than-expected 82 percent jump in quarterly profit as cost cuts offset a sales decline that was also much steeper than forecast. But the market was heartened by the toymaker’s ability to control costs, and its shares rose 7 percent.

“So far, earnings season is good, but if you were to call it revenue season, it’d be more of a mixed bag,” said Peter Boockvar, an equity strategist at Miller Tabak & Co in New York. “What this shows is that companies are able to deal with cost structure, but that the revenue is light shows that we’re still in a difficult economic environment.”

Although cutting costs can help a company hunker down for the downturn, academics and economists warn in the long term cutting too deeply can hamper its ability to compete and grow.

“If you cut too much then you will be very poorly positioned when the recovery comes,” said Russell Walker, a risk management professor at the Kellogg School of Management.

Others, however, warn additional cuts are needed to match the fact Americans are saving more and have less access to credit.

EMPTY PIPELINE….

China Says Bad Loans Are Down So Far This Year

By Michael Kitchen, MarketWatch

LOS ANGELES (MarketWatch) — China’s total non-performing-loan portfolio shrank during the first six months of this year, the nation’s banking regulatory body said Monday, even as doubts remained about the true state of affairs.

The total number of bad loans stood at 518.1 billion yuan ($75.83 billion) as of June, down by 42.2 billion yuan, the China Banking Regulatory Commission said.

It also said that the ratio to Chinese banks’ total lending portfolio fell by 0.65 percentage point during the period to 1.77%.

Non-performing-loan stock was down in “large commercial banks” and “city commercial banks,” but rose in “joint-stock commercial banks,” “rural commercial banks” and “foreign banks.”

Concerns linger

The data came even as the commission’s chief, Liu Mingkang, warned over the weekend of the need to avoid loan risks and ensure capital adequacy is maintained.

“In the first half of the year, our country’s banking loans expanded rapidly and helped play an important role in stabilizing the economy, but the loans growth has led to accumulated risks also increasing,” he said. See full story on Liu’s remarks.

Analysts also question how rigorously some Chinese banks assess the quality of their loans.

In a report earlier this year, Fitch Ratings said a lax attitude toward marking down NPLs is creating a risk of deterioration in banks’ portfolios.

“The recognition of credit losses can take far longer in China than elsewhere due to pervasive rolling over and maturity extension of loans when they fall due,” Fitch said in a note referencing the report.

“This not only leads to under-capturing of NPLs and delayed credit costs, but also, by extension, inflated capital,” it said.

The Worlds Next Top Brands

Comments »

Wenzel

Scrolling Headlines From Yahoo in Play:

HAL:

HOUSTON (AP) — Halliburton Co. said Monday its second-quarter profit tumbled 48 percent as sluggish exploration and production activity, particularly in North America, crimped results. Its earnings beat Wall Street forecasts, though the company offered little hope for an uptick in drilling before year’s end.

The oilfield services company, which has corporate headquarters in Houston and Dubai, said net income for the April-June period fell to $262 million, or 29 cents per share. That compared with $504 million, or 55 cents a share, a year ago. Revenue slipped 22 percent to $3.5 billion.

One-time items aside, Halliburton said earnings amounted to $274 million, or 30 cents a share. Analysts polled by Thomson Reuters were expecting earnings of 27 cents a share and revenue of $3.43 billion. Those forecasts typically exclude one-time items.

Halliburton kicked off the earnings period for the oil and gas sector. Most forecasts predict significantly lower year-over-year results for producers and service companies.

In a statement, Halliburton chairman and CEO Dave Lesar cited natural gas in particular as a drag on earnings and the industry in general. Prices have fallen from double-digit levels a year ago to around $4 per 1,000 cubic feet of late.

“Due to continued weakness in natural gas demand … we believe it is unlikely that there will be a meaningful recovery in natural gas prices and, consequently, drilling activity for the remainder of the year,” Lesar said.

Oil and natural-gas producers began scaling back exploration and drilling operations last year as crude and gas prices tumbled. A year ago this month oil reached an all-time high near $150 a barrel.

The pullback has meant less work for Halliburton and other service companies, which help producers with drilling, reservoir management and other oilfield jobs.

The number of rigs at work in the U.S. oil patch — a good barometer of activity — is off roughly 55 percent from last summer. The American Petroleum Institute noted last week that U.S. drilling in the second quarter was the lowest in about five years.

Lesar said revenue for most of Halliburton’s product lines fell in the quarter as the company had to lower prices. He said the downturn hasn’t been as bad overseas in part from strengthening commodity prices and “stabilizing financial markets which are improving our customers’ overall project economics.”

Halliburton’s most-recent results followed a bleak first quarter, when its net income fell 35 percent and the company cut more than 2,000 jobs in North America. The company said its most-recent results included one-time employee-separation costs of $12 million, or 1 cent a share.

WFT:

NEW YORK (AP) — Weatherford International Ltd., an oil and gas services provider, on Monday said its second-quarter profit dropped 89 percent amid weakened commodity prices that drove down the global rig count and demand for services, especially in North America.

Quarterly earnings fell to $42 million, or 6 cents per share, down from $371 million, or 53 cents per share, during the same period last year.

The company said its second-quarter profit from continuing operations came to $69 million, or 10 cents per share, excluding an after tax loss of 4 cents per share for costs related to the company’s withdrawal from sanctioned countries and severance costs.

Analysts polled by Thomson Reuters estimated a profit of 16 cents per share, on average. Analysts typically exclude one-time items.

Revenue fell 10.5 percent to $1.99 billion, compared with $2.23 billion in the prior-year period. Analysts forecast an average revenue of $2.03 billion.

Weatherford noted that the global rig count declined 35 percent. North America was a particular drag on revenue, declining 44 percent against a 50 percent decline in rig count. International revenues rose 17 percent, despite a 9 percent decrease in international rig count, the company said.

Prices of crude oil and gas have climbed in recent months, but are still far short of their peak prices a year ago. Crude oil closed Friday at $64.58 per barrel, compared with $147.27 last year. Natural gas closed at $3.816 per thousand cubic feet, far below its price of $13.577 per thousand cubic feet last July. Weakened prices and low demand for energy products have forced oil and gas companies to scale back exploration, which has hurt business for oil and gas services companies.

Shares of Weatherford closed at $19.93 on Friday.

MTB:

NEW YORK (MarketWatch) — M&T Bank Corp. /quotes/comstock/13*!mtb/quotes/nls/mtb (MTB 55.00, +0.56, +1.03%) announced Monday that it earned $51.2 million, or 36 cents a share, in the second-quarter ending June 30, compared with net income of $160.3 million, or $1.45 a share, in the year-ago period. Analysts polled by FactSet Research, on average, expected the Buffalo, N.Y.-based bank to earn 61 cents a share in the second-quarter. Certain expenses associated with the completed acquisition of Provident Bankshares Corp. during the quarter cost M&T $40 million, or 35 cents a share, the company said. Also, M&T incurred a $32.5 million special assessment from the Federal Deposit Insurance Corp., lowering after-tax earnings per share by 17 cents.

CNI

CN reports Q2-2009 net income of C$387 million, or C$0.82 per diluted share, compared with year-earlier net income of C$459 million, or C$0.95 per diluted share

Second-quarter 2009 highlights

    - Net income declined to C$387 million, or C$0.82 per diluted share, from
      year-earlier net income of C$459 million, or C$0.95 per diluted share,
      as a result of depressed North American and global economies driving
      lower volumes.
    - Revenues declined 15 per cent to C$1,781 million, carloads declined
      22 per cent to 928,000, and revenue ton-miles declined 14 per cent,
      with weakness in almost all market segments.
    - Operating expenses declined 14 per cent to C$1,198 million, reflecting
      a significant reduction in year-over-year fuel prices and extensive
      cost-containment measures in response to lower traffic.
    - Operating income declined 18 per cent to C$583 million, while the
      operating ratio increased by one percentage point to 67.3 per cent.
    - Six-month 2009 free cash flow increased to C$463 million from
      C$225 million generated during the first-half of 2008.(1)

    CN's second-quarter 2009 net income included:

    - A deferred income tax recovery of C$28 million ($0.06 per diluted
      share), of which C$12 million (C$0.03 per diluted share) resulted from
      the enactment of a lower provincial corporate income tax rate and
      C$16 million (C$0.03 per diluted share) resulted from the
      re-capitalization of a foreign investment.
    - Costs of C$2 million after-tax (nil per diluted share) related to the
      acquisition of the principal rail lines of the Elgin, Joliet and
      Eastern Railway Company (EJ&E).

Comments »

Remembering a journalist with integrity and the ability to get @ the truth !

Comments »

This was one of my best trading weeks so far this year; a la PPT. I’ve got a boat, booze, & fish 2 catch !

I’ll be 50 miles offshore til tuesday.

Adding to this weeks grinning market we all need a brake from thinking !

A Special Don’t Forget To Laugh

If you do not laugh you will live 6-8 years less than those who do

Rocky

Kevin Spacey Impersonations

A Santana Spoof

Funny Commercials

Katt Williams on MJ

Another From Katt

Tracey Morgan

Drew Carey

Dan Mintz

Maria Bamford

Jen Kirkman

Karen Mills

Kate Rigg

Chris Rocks

Eddie Murphy

Double Dip On Eddie

Comments »

CIT Holding Talks With Other Lenders

By Pierre Paulden, Linda Shen and Caroline Salas

July 16 (Bloomberg) — CIT Group Inc., the century-old lender facing a looming bankruptcy after failing to receive U.S. guarantees for its bonds, said it’s in talks with potential lenders to secure financing.

CIT is “continuing to evaluate alternatives,” the New York-based company said today in a statement. Earlier, bondholders held calls to discuss whether to swap some of their claims for equity to reduce indebtedness, according to a person familiar with the situation.

CIT is running short of cash and may need as much as $6 billion to avoid filing for bankruptcy protection, after the U.S. wouldn’t give the firm a second bailout, CreditSights Inc. analysts said. CIT, which has reported $3 billion of losses in the last eight quarters, received $2.33 billion in funds from the U.S. Treasury in December and hasn’t been given access to the Federal Deposit Insurance Corp.’s debt-guarantee program.

“They are going try to raise capital with any unencumbered assets maybe they will get a couple of billion dollars, but that’s not going to solve the problem,” Sean Egan, president of Egan-Jones Ratings Co., said in a Bloomberg Television interview. “What they really need to focus on is the fact their operating income is a lot less than their cost of funds so there’s going to have to be a restructuring.”

Pimco Call

Pacific Investment Management Co., CIT’s largest bondholder based on regulatory filings, was to host a call, and debt owners are considering hiring financial and legal advisers, said the person, who declined to be identified because the discussions are private. The company hasn’t proposed an exchange offer.

“CIT indicated that it needs at least $2 billion of rescue financing in the next 24 hours or it would likely file,” CreditSights analysts Adam Steer, David Hendler and Pri De Silva wrote in a report. “We believe the figure is in the range of $4 to $6 billion plus, making outside capital sources shy away.”

Steven Vames, a spokesman for Newport Beach, California- based Pimco, declined to comment.

CIT said in the statement it’s continuing to serve customers. CIT spokesman Curt Ritter didn’t respond to a message.

Debt Exchange

If bondholders are able to swap as much as $6 billion, that may reopen talks with the U.S. government for a bailout package, Jeffrey Werbalowsky, chief executive officer of Houlihan Lokey Howard & Zukin, said on another call offering his firm’s services to creditors, according to the person. Werbalowsky said there may not be time to complete a debt exchange before CIT goes bankrupt, the person said. Werbalowsky didn’t immediately return a call seeking comment.

CIT’s debt tumbled and the shares plunged today. CIT shares fell $1.23, or 75 percent, to 41 cents as of 4:15 p.m. in New York Stock Exchange composite trading. New York-based CIT’s $1 billion in floating-rate bonds that mature next month fell 22.5 cents to 61.5 cents on the dollar, according to data from Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

Fitch Ratings slashed CIT’s credit rating seven grades to C today, saying in a report that “default of some kind appears imminent or inevitable.”

A failure of CIT, which has almost $76 billion in assets, would be the biggest bank collapse by that measure since regulators seized Washington Mutual Inc. in September and would trigger more credit swaps than any default since Lehman Brothers Holdings Inc. that same month.

“In the short term it may have some devastating impact,” Al Ferrara, head of the retail practice at accounting and consulting firm BDO Seidman LLP, said today in a telephone interview. “You may suck out some liquidity from retailers and vendors when they need their liquidity the most,” before the back-to-school season.

Talks Break Off

Talks with regulators broke off yesterday and “there is no appreciable likelihood of additional government support being provided over the near term,” the firm said in a statement. CIT, once the biggest independent commercial lender, may seek court protection if no U.S. aid emerges, Standard & Poor’s said this week. The company said it is “evaluating alternatives.”

President Barack Obama, “when he came into office, was clear that he would have a very high standard for what companies receive assistance from the federal government and the American taxpayer,” said Bill Burton, deputy White House press secretary, aboard Air Force One today traveling to New York. “A lot of that had to do with whether or not they could show themselves to be sustainable in the long term.”

Burton said Obama didn’t make the call on denying CIT federal help.

Mining Giants Must Curtail Hopes

By ROBERT GUY MATTHEWS

SIMANDOU, Guinea — In a sunbaked field carved into a patch of lush forest here stand a half-dozen hulking mining machines that were shut down earlier this year. Nearby, military barrack-style housing for 200 workers sits abandoned.

“We were building a country-changing project,” says David Smith, head of Guinea operations for mining giant Rio Tinto PLC.

The United States wants China to move more quickly to a freely floating exchange rate, U.S. Commerce Secretary Gary Locke said on Friday.

Eugene Hoshiko / AP

“Clearly, progress has been made. We simply want the currency to float freely,” Locke told the U.S. Chamber of Commerce in Shanghai.

Locke, who was in China this week for talks on clean energy cooperation and trade with senior Chinese officials, declined to say what an appropriate U.S.-China exchange rate would be.

“Clearly every country is suffering from economic woes. There’s been a lot of government intervention in each of their individual economies and monetary policies. But ultimately we need to see a freer floating exchange rate,” Locke said.

His comments follow a decision by President Barack Obama’s administration not to label China as a currency manipulator, despite concerns Obama raised about Beijing’s exchange rate policies during last year’s presidential election campaign.

Many U.S. lawmakers and manufacturers complain that China artificially depresses the price of its currency against the dollar to give Chinese companies an unfair trade advantage.

The yuan rose more than 20 percent against the dollar in the three years after China scrapped the currency’s fixed peg in July 2005.

In the past 12 months, however, Beijing has effectively repegged the yuan, keeping the currency in very narrow ranges and preventing any further appreciation that would hurt Chinese exporters who have been hit hard by a slump in global demand.

Roubinis Rally Today Was A Mistake; He Later Said That His Words Were Taken Out of Context

Nouriel Roubini, the economist whose dire forecasts earned him the nickname “Doctor Doom,” said after markets closed Thursday that earlier reports claiming he sees an end to the recession this year were “taken out of context.”

cnbc.com

“It has been widely reported today that I have stated that the recession will be over ‘this year’ and that I have ‘improved’ my economic outlook,” Roubini said in a prepared statement. “Despite those reports … my views expressed today are no different than the views I have expressed previously. If anything my views were taken out of context.”

Several business news outlets, picking up on a report initially from Reuters, earlier Thursday cited Roubini as saying that the worst of the economic financial crisis may be over.

The New York University professor was quoted by Reuters as saying that the economy would emerge from the recession toward the end of 2009.

Reports of his comments helped trigger a late rally in the stock market.

Roubini added late Thursday that he sees no economic growth before the end of 2009.

“I have said on numerous occasions that the recession would last roughly 24 months. Therefore, we are 19 months into that recession. If as I predicted the recession is over by year end, it will have lasted 24 months with a recovery only beginning in 2010. Simply put I am not forecasting economic growth before year’s end.”

Roubini predicts a shallow recovery with average growth will average about 1 percent over the next few years. He also sees the possibility, he reiterated, of a “double-dip” recession toward the end of next year.

“On one side, early exit from monetary and fiscal easing would tip the economy into a new recession as the recovery is anemic and deflationary pressures are dominant,” Roubini said. “On the other side, maintaining large budget deficits and continued monetization of such deficits would eventually increase long term interest rates … and thus would lead to a crowding out of private demand.

“While the recession will be over by the end of the year the recovery will be weak given the debt overhang in the household sector, the financial system and the corporate sector; and now there is also a massive re-leveraging of the public sector with unsustainable fiscal deficits and public debt accumulation.”

Joe Biden ” We have to spend $ in order not to go bankrupt. “

(CNSNews.com) – Vice President Joe Biden told people attending an AARP town hall meeting that unless the Democrat-supported health care plan becomes law the nation will go bankrupt and that the only way to avoid that fate is for the government to spend more money.

“And folks look, AARP knows and the people with me here today know, the president knows, and I know, that the status quo is simply not acceptable,” Biden said at the event on Thursday in Alexandria, Va. “It’s totally unacceptable. And it’s completely unsustainable. Even if we wanted to keep it the way we have it now. It can’t do it financially.”

“We’re going to go bankrupt as a nation,” Biden said.

“Now, people when I say that look at me and say, ‘What are you talking about, Joe? You’re telling me we have to go spend money to keep from going bankrupt?’” Biden said. “The answer is yes, that’s what I’m telling you.” (Listen to Audio)

The event, sponsored by the AARP – which supports the Obama administration’s plan – was attended by mostly AARP members who were bussed in for the meeting……

Comments »