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Monthly Archives: May 2011

HSBC: ‘Vicious’ day of reckoning looms for Aussie dollar

THE Australian dollar has overtaken the Canadian dollar as the major currency most closely linked to broadly buoyant investor sentiment, leaving it overvalued and susceptible to a “vicious” decline, HSBC has warned.

In a research note, the British bank said the currency had been supported by a generally upbeat view among investors on the prospects for global economic recovery, drawing on the country’s large commodities exports.

Last week’s abrupt sell-off in commodity markets had a limited impact on the currency, but the high correlation between risk sentiment and the Australian dollar gave cause for concern, according to HSBC.

“We believe the valuation of the Australian dollar is extreme and any move to a risk-off scenario could see a vicious unwind in the (currency),” the bank said in a note to clients.


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Bank of Canada hints at stronger Canadian dollar

Bank of Canada hints at stronger Canadian dollar

Earlier this week, Bank of Canada governor Mark Carney gave a remarkable speech entitled “Canada in a Multi-Polar World”.

In a relatively short address, Mr. Carney covered a myriad of topics, centered on the theme of Canada’s place in a changing world. The global economy is in the midst of a powerful transformation, with the pace of change accelerated by the recent financial crisis.


One of the key challenges for Canada lies in the outlook for the value of the Canadian dollar. I believe the new paradigm outlined by Mark Carney implies that the Canadian dollar will not only remain above par, but will strengthen further. Mr. Carney outlines four factors that will support Canadian dollar strength.

Firstly, we are in the midst of a commodity price super cycle — there will be fluctuations in prices but the cycle could proceed for some time reflecting fundamental Asian demand. Capital flows are also critical. Foreign central banks have already begun the process of diversifying their massive reserves away from the U.S. dollar and in to free floating currencies like the Canadian dollar.



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Munich Re Says Prostitutes Attended Reward Party

A Munich Re unit hosted about 20 prostitutes at a party thrown in Budapest to reward the insurer’s high-performing agents, a spokesman said.

The incident in the summer of 2007 was a “clear violation” of company policy, said Alexander Becker, a spokesman for the Ergo Versicherungsgruppe subsidiary, in a telephone interview today. Senior management involved in organizing the event are no longer employed at Ergo, he said.

Ergo hosted the party for about 100 guests at the historic Gellert spa, Handelsblatt reported in a preview of an article to be published tomorrow. Women wore color-coded armbands, the newspaper said, citing unidentified guests, with red for hostesses, yellow for those available for sexual favors and white for women reserved for executives and top agents. After each trip to beds set up near the thermal baths, a woman would receive a stamp on her forearm, the paper reported.

Full story at Bloomberg

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New Legislation To Prevent Tapping Into Your 401k

“Workers will be limited in tapping their 401(k) retirement plans for loans under legislation two senators plan to introduce today that’s designed to counter the erosion of retirement assets.

“During these difficult economic times, we are increasingly seeing 401(k) funds being treated as rainy day funds,” SenatorHerb Kohl, a Wisconsin Democrat, said in a statement obtained by Bloomberg News. “A 401(k) savings account should not be used as a piggy bank for revolving loans.”

Kohl, 76, who’s chairman of the Senate Special Committee on Aging, plans to introduce the “SEAL 401(k) Savings Act” with Senator Mike Enzi, 67, a Wyoming Republican. The bill would reduce the number of loans workers may take from a 401(k) and give participants more time to repay after losing a job. It will allow savers to contribute to their plan after taking a hardship withdrawal and ban debit cards linked to the accounts, according to Joe Bonfiglio, a spokesman for Kohl’s aging committee.”

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Cougars Inc.: The Lady Predator Lifestyle

Cougars Inc.: The Lady Predator Lifestyle

The phenomenon of older women dating younger men has expanded beyond the Web to a transcontinental economy around conventions, travel agencies, love coaches, marketing firms, and other profit-seekers

arryn Russo goes by “Jerzee” and refuses to divulge her age. She also has a very dark, unhealthy-looking tan. On Apr. 29, Jerzee—who appears to be in her mid-40s and, not surprisingly, hails from New Jersey—was at the Manhattan nightclub Greenhouse in an extremely short tie-dyed skirt adorned with peace symbols. When younger men stopped to talk, Jerzee started to dance. “She’s a cougar,” crooned the rapper on stage, “I think I love her, I put no one above her.”

Jerzee was one of more than 30 contestants vying for the title of Miss Cougar America, the marquee event of the third annual National Cougar Convention. And she appeared to be the odds-on favorite until the pageant’s emcee, Rich Gosse—donning a black shirt, a yellow and orange paisley tie, and a thick, unmanicured mustache—announced the shocking news: The crown had gone to Aalsa Lee of Palm Springs, Calif. “We was robbed!” yelled a crestfallen Jerzee supporter who paid the $20 admission fee. Lee, who does not make a secret of her age, is 73.

In the decade since Valerie Gibson published Cougar: A Guide for Older Women Dating Younger Men, the very notion of older women dating younger men has gained acceptance in popular culture, in part, due to the emergence of high-profile women—such as Demi Moore, Katie Couric, and the fictional character Samantha Jones on Sex and the City—who have no qualms about dating younger partners. “There is a new archetype that’s emerging,” says Amy Luna Manderino, the reigning Miss Cougar International. “There have always been free-thinking, vital women over the age of 40. The difference today is our numbers have reached a critical mass.” Christine Lehtonen, a principal at Asterix Group, a marketing and advertising agency in San Francisco, says there are more women in the U.S. aged 51 than any other single age. “Can you imagine what could happen,” she says, “if all these women were marketed to?”

Read the full article at Business Week

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Fed Officials See Interest Rate Hikes as More Favorable Over Asset Sales

“Most Federal Reserve officials prefer to raise benchmark interest rates before selling assets when the time comes to tighten policy, minutes of their April meeting showed on Wednesday.

During an extensive discussion of how the central bank might pull back its massive support for the world’s largest economy, officials agreed they would eventual shrink the Fed’s much expanded portfolio over the medium term, and that getting rid of mortgage-related debt would be a priority.

“A majority of participants preferred that sales of agency securities come after the first increase in the (Fed’s) target for short-term interest rates,” the Fed said.

“And many of those participants also expressed a preference that the sales proceed relatively gradually, returning (Fed holdings) to all Treasury securities over perhaps five years,” the minutes said.

Discussion of the removal of monetary stimulus should not be seen as an indication the Fed is ready to start down that road any time soon, policy makers said.”

Full article

Full Minutes Report

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Markets Rebound on Commodity Led Rally

Let’s see what happens after the Fed minutes later today….

“(Reuters) – Stocks advanced on Wednesday, lifted by energy and materials shares as commodity prices rebounded before the Federal Reserve’s release of its assessment of the economy later in the session.

The Federal Open Market Committee, which sets interest-rate policy, will release minutes of its April 26-27 meeting at 2 p.m. (1800 GMT). Investors will look for hints about the Fed’s “QE2” stimulus program, which is widely expected to end in June, and will scrutinize the minutes for any disagreements among officials.

U.S. crude oil futures rose more than 3 percent to climb back above $100 a barrel after a weekly government report showed inventories of crude unexpectedly fell in the United States last week as refinery utilization rose.

Chevron Corp (CVX.N) gained 2.2 percent to $102.60, providing the top lift to the Dow, while Exxon Mobil Corp (XOM.N) advanced 1.6 percent to $81.71. The PHLX oil service sector index .OSX climbed 2.6 percent. The S&P energy index .GSPE added 2.1 percent and was the top-performing S&P sector.

The Reuters/Jefferies CRB index .CRB, a broad measure of commodity performance, rose 2.2 percent. Before Wednesday’s advance, the CRB index was down more than 9 percent for the month.

The S&P materials index .GSPM gained 1.5 percent, boosted by mining company Freeport-McMoRan Copper & Gold (FCX.N), up 3.5 percent at $48.48.”

Full article

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Freak Lightning Storms Knock Out Power To Refineries in TX

“(Reuters) – Powerful storms knocked out electrical power to Valero Energy Corp.’s (VLO.N) fire-damaged McKee refinery in Sunray, Texas, on Saturday, according to a notice filed with state pollution regulators.

Valero began restarting units at the refinery as soon as power was restored, according to the filing on Sunday with the Texas Commission on Environmental Quality.

The 170,000 barrel per day (bpd) capacity refinery was operating at 85,000 bpd since Wednesday when it completed a five-day restart after being shut by a Feb. 16 fire.

A Valero spokesman said he did not have information immediately available about the storm’s affect on refinery operations.

The February shutdown of the McKee refinery affected oil and refined products markets across the United States.

Wholesale gasoline prices in Los Angeles jumped immediately after the Feb. 16 shutdown as the refinery supplies Arizona gasoline markets along with other west Texas and Los Angeles refineries.”

Full article

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Moody’s: Volatile Silver Prices Pressure End Users

New York, May 17, 2011 — Recent elevated silver prices have pressured companies that make or purchase products with silver but will not boost mining companies’ credit ratings, according to a new report by Moody’s Investor Service.

Despite silver spot prices more than doubling since September 2010 and reaching a historical high of $48.70 per ounce on April 28, 2011, then plummeting to $34 per ounce earlier this month, mining companies are unlikely to see upwards rating pressure, says the report. That’s because silver makes up a relatively small component of their overall metals exposure.

Silver’s price swings stem largely from investment activity and macroeconomic factors and will persist, according to the report. Compared to the larger gold market, silver’s smaller trading volume means market activity can have a greater magnitude of impact, resulting in steeper price volatility on a day-to-day basis, according to the report.

“We believe the run-up in silver prices through late April 2011 was not a result of fundamental supply and demand factors but rather fund and other investment activity, safe-haven sentiments, and other more macroeconomic drivers,” says Carol Cowan, a Moody’s Senior Credit Officer. “Global markets remain concerned over sovereign-debt levels, political unrest, inflation, economic growth levels, and the strength of the U.S. dollar.”

However, the price increases are unlikely to greatly impact the top producing companies as other minerals and metals are larger drivers of earnings performance and cash-flow generation. Producers will enjoy a nice margin impact from the silver price increase but Moody’s does not consider silver prices about $40 per ounce as sustainable.

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May 18 afternoon S&P ratings actions

Ratings Affirmed In U.K. CMBS Transaction Meadowhall Finance Following Review 18-May-2011
12:19 EST

Liberty Mutual Group Inc.’s Proposed Senior Unsecured Debt Issue Rated ‘BBB-‘; Other Ratings Affirmed 18-May-2011
12:09 EST

AmeriCredit MTN Receivables Trust V Class A Certificate Rating Raised To ‘AA (sf)’ After Review 18-May-2011
11:38 EST

TAM Capital 3 Inc. $300 Million Senior Unsecured Notes Rated ‘B’; Placed On CreditWatch Positive 18-May-2011
11:35 EST

Preliminary Ratings Assigned In Driver Espana One Spanish ABS Transaction 18-May-2011
11:15 EST

Hampden CBO Ltd. Class A-1 Note Rating Withdrawn 18-May-2011
10:25 EST

Hyundai Auto Receivables Trust 2011-B $1.0 Billion Notes Assigned Ratings 18-May-2011
10:20 EST

Cintas Corp. Corporate Credit Rating Lowered To ‘BBB+’; Proposed Note Offering Rated ‘BBB+’; Outlook Stable 18-May-2011
09:50 EST

Clark County Public Utility District No. 1, WA, 2011 Revenue And Refunding Bonds Rated ‘A’; Other Ratings Affirmed 18-May-2011
09:34 EST

Saudi Arabia-Based Mediterranean & Gulf Cooperative Insurance and Reinsurance Co. Assigned ‘A-‘ Ratings; Outlook Stable 18-May-2011
09:11 EST

Rating Lowered And Withdrawn On Italian RMBS Transaction Adriano Finance’s Series 2 Class A Notes 18-May-2011
07:35 EST

Preliminary Rating Assigned To Spanish ABS Transaction Bancaja Leasing 1’s Class A Notes 18-May-2011
06:58 EST

Germany-Based Henkel Upgraded To ‘A/A-1’ On Solid Operating Performance And Improved Credit Metrics; Outlook Stable 18-May-2011
06:27 EST

S&P Corrects Short-Term Local Currency Rating On Irish Life & Permanent’s Guaranteed MTNs By Removing CreditWatch Status 18-May-2011
05:47 EST

Rating Assigned In FCT TitriSocram Compartment TitriSocram 2011-1 Auto ABS Transaction 18-May-2011
05:43 EST

Spain’s Basque Country Affirmed At ‘AA+’ On Anticipated Commitment To Comply With Budget Targets; Outlook Negative 18-May-2011
04:36 EST

Fortescue Metals Group Ltd. Rating Raised To ‘B+’ With Stable Outlook; Proposed Bank Facilities Rated ‘B+’ 18-May-2011
04:36 EST

German State of Saxony Assigned ‘AAA/A-1+’ Ratings On Excellent Budgetary Performance; Outlook Stable 18-May-2011
04:09 EST

Development Bank of Japan’s Series 14 Bonds Rated ‘A+’ 18-May-2011
02:31 EST

City of Yokohama’s Domestic Bonds Assigned ‘AA-‘ Rating 18-May-2011
02:10 EST

Softbank Corp. Placed on CreditWatch Positive On Expected Refinancing Of Business Securitization And Improved Finances 18-May-2011
01:18 EST

Preliminary Ratings Assigned To National RMBS Trust 2011-1 Prime Notes 18-May-2011
00:09 EST

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Earnings downturn could hit stocks

An excerpt from the article below:

Prices seem normal next to earnings, but history says earnings might plunge.

Asset bubbles typically form because of widespread denial, not a lack of obvious signs. In 2000, just before the dotcom stock crash, the S&P 500 index of large American companies traded near 30 times trailing earnings, about double its historic average, but the Internet, some said then, had made price-to-earnings ratios obsolete. In early 2007, before a 30% drop in U.S. house prices, the ratio of prices to rents was twice normal levels, but generous financing and subsidies had supposedly redefined affordability.

A new stock bubble might now be in the making, but this time the signs are less obvious. U.S. stocks, despite having racked up a decade worth of typical gains in the 26 months after their recessionary low, do not look expensive. The S&P 500 trades at 15.3 times trailing earnings, only a smidgen above its historic average of 14.5.

Those numbers might be luring investors toward a cliff, however. History suggests today’s corporate earnings are unsustainably high relative to the size of the economy. The real price-to-earnings ratio, based on a more normal level of earnings, is well over 20.

To see why, consider a broad measure of America’s prosperity called national income. It consists of corporate profits, worker wages, sole proprietor income and more. Corporations and workers compete against each other for income but also rely on each other for success. When profits and wages grow in tandem, the result is healthy economic expansion. When one grabs too large a slice of the nation’s income pie, it usually signals a downturn waiting to happen.

For example, corporations since 1929 have collected an average of 6.4 cents per dollar of national income as after-tax profits. In 1966 corporate profits swelled to 8.3 cents per dollar of national income; they then fell 19% by the end of the decade. In 1997 they were 8.6 cents per dollar of national income; by the end of that decade they were down 13%.

Workers, after all, are customers. If they’re not participating in the boom, then the boom might be a bubble.

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Oil supplies are steady; gasoline stocks increased last week

NEW YORK (AP) — The nation’s oil supplies were flat last week, though gasoline supplies increased slightly, the government said Wednesday.

Crude inventories remained at 370.3 million barrels, which is 2.1 percent above year-ago levels, the Energy Department’s Energy Information Administration said in its weekly report.

Analysts expected an increase of 500,000 barrels for the week ended May 13, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

Gasoline inventories rose by 100,000 barrels, or 0.1 percent, to 205.9 million barrels. That was below analysts’ expectations and 7.2 percent below year-ago levels.

Demand for gasoline over the four weeks ended May 13 was 2.3 percent lower than a year earlier, averaging nearly 9 million barrels a day.

At the same time, U.S. refineries ran at 83.2 percent of total capacity on average, a rise of 1.5 percentage point from the prior week. Analysts expected capacity to rise to 81.98 percent.

Inventories of distillate fuel, which include diesel and heating oil, fell by 1.2 million barrels to 143.1 million barrels. Analysts expected distillate stocks to increase by 600,000 barrels.

Benchmark crude rose $2.74 to $99.65 per barrel in morning trading on the New York Mercantile Exchange.

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Meredith Whitney: State finances threaten recovery

NEW YORK (Reuters) – The dire condition of state and local finances threatens the country’s economic recovery and must be addressed immediately, prominent analyst Meredith Whitney wrote in an op-ed column in The Wall Street Journal on Wednesday.

In a separate interview on Bloomberg radio on Wednesday, she stuck by her prediction that more municipal bond defaults lie ahead, but added a qualification. “I never gave precise estimates or a specific period of time,” she told Bloomberg.

Whitney made her reputation by correctly predicting in 2007 that Citigroup would need a massive capital infusion. Last year, she rocked the $2.9 trillion municipal bond market by her forecast of massive numbers of bond defaults this year.

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U.S. Senate Blocks Bill Targeting Oil Subsidies

“WASHINGTON (AFP) – The US Senate defeated a bill taking aim at some $2 billion in annual subsidies to some of the world’s largest and most profitable oil companies amid deep voter anger at high gasoline prices.

Lawmakers voted 52-48 to end debate on the measure, falling short of the 60 required and effectively killing a proposal that the White House’s Democratic allies had portrayed as a belt-tightening step in cash-strapped Washington.

Democrats planned to revive the proposal — which would have affected oil giants BP America, Chevron, ConocoPhillips, ExxonMobil and Shell — as part of broader spending-cut talks ahead of a vote on raising the US debt ceiling.

“I am confident that before we finish our budget negotiations here, in anticipation of raising the debt ceiling, that that will be part of it,” said Democratic Senate Majority Leader Harry Reid.

“There is no justification for giving these companies that are making so much money, and their own executives said these subsidies are unnecessary, there’s no justification for continuing that,” Reid told reporters.

The White House meanwhile insisted that it would continue to push for the measure, saying it was “disappointing that at a time when oil companies are posting near record profits, Republican leadership in the Senate led an effort to protect billions of dollars in tax breaks for the oil and gas industry.”…”

Full article

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Warrant-Less Searching of Homes On the Rise

“ALBUQUERQUE, N.M. — A special type of government search warrant that allows authorities to search homes without informing the owner for months is becoming more common, Target 7 has learned.

Imagine someone walking through your neighborhood, coming into your home and rifling through your intimate belongings.

“(They) search through your home, your dresser drawers, your computer files,” Peter Simonson, with ACLU New Mexico, said.

These search warrants don’t involve knocking on doors or any type of warning at all. Delayed-notice search warrants, or “sneak-and-peek” warrants, allow federal agents to enter your home without telling you they’ve been there until months later….”

Read more: http://www.koat.com/news/27922147/detail.html#ixzz1MiTzxinE

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Krugman: “It’s a Household Debt Problem; Not a Banking Problem”

“I found this commentary by Paul Krugman to be somewhat humorous.  2 years after the fact, prominent economists are finally pointing out that we have a household debt problem and not a banking problem:

“You can clearly see the oh-God-we’re-gonna-die period following Lehman’s fall; you can also see that it’s over, and stress is more or less back to normal.

So what’s holding back the recovery? Housing and household debt.

And so the priority in financial policies should be helping to clear up the housing mess and helping arrange debt relief. This is not the time to worry a lot about the banks — and especially not to worry about what bankers say.”

I am not sure why it has taken so many so long to diagnose this problem.  The Fed, for instance, thought we had a credit crisis.  The media was convinced that it was the banks that were the problem.  But the real root cause of the issue was households.  The reason I bring this up is because of my personal frustration with regards to the current economic plight.  I have written letters to the Fed and prominent politicians outlining all of this in very easy to understand language.  In 2008 I said:

“We have a major capital problem at the U.S. banking level.  What Ben Bernanke and Hank Paulson are essentially proposing is an asset swap.  The Fed will take on the toxic assets of the banks and they will receive reserves in exchange.  This is important because it will alleviate the strains in the credit markets.  That’s a good first step, however, it is not a solution to the problem at the household level and THAT is where the real economic weakness is.  By introducing this asset swap idea Ben Bernanke is simply altering bank balance sheets.  He is not fixing the economy…..”

Full article

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Mark LaPolla From Knight Capital: China Looks Like America Before The Great Depression

“I wanted to pass along some excellent thoughts from Mark Lapolla of Knight Capital.  He was in the latestwelling@weeden and had some excellent thoughts on the overall economic environment.  He touches on a variety of topics including some MMT, but the most interesting portion was his belief that China now resembles pre-depression USA or 1990′s Japan.  Lapolla is astounded at how the world has come to rely so heavily on a “repressive, communist regime employing command and control economic management while violating trade protections and human rights everywhere”.  Attached are the 8 reasons why Lapolla sees similarities between China and USA prior to the GreatDepression:

1) Massive disparity of wealth, income and education

2)  Rapid industrialization and displacement of labor

3)  Opaque and misleading economic and financial data

4)  Massive build-up of leverage across the “rising class”

5)  Bubbles in both residential real estate and fixed asset/infrastructure development

6) Accelerating and uncontrolled growth in disintermediated credit

7)  Expected transference of economic growth to domestic demand.

8) An accelerating price/wage spiral

I highly recommend reading the piece in its entirety.”

Full article

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Warren Buffetr on Talk About U.S. Debt Problems: “Silly Talk”

“Some pundits are unhappy with the Oracle of Omaha’s proclamation that a debt crisis is not an issue for the USA. They reference the following comments from a few weeks ago and cite the comments as “silly talk”:

“The United States is not going to have a debt crisis as long as we keep issuing our debts in our own currency. The only thing we have to worry about is the printing press and inflation.”

And when someone starts claiming that Buffett is talking “silly” you should probably start wondering who is actually being silly because, as Buffett likes to say, “If you’ve been playing poker for half an hour and you still don’t know who the patsy is, you’re the patsy.”   I can assure you of two things – this MarketWatch article will take you less than half an hour to read and Warren Buffett is not the patsy in it….”

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