PIMCO Australia Prefers Buying Steep Yield Curves and Hedging in Local Currencies to Pick Up 9%

“Pacific Investment Management Co.’s Australian unit is using the developed world’s highest interest rates to reap profits by buying bonds offshore and hedging them back into the local currency.

Pimco, which manages about A$32 billion ($34 billion) of assets in Australia, favors investing in countries with steeper yield curves or buying Australian corporate debt sold abroad at more attractive prices, said Robert Mead, Sydney-based head of portfolio management, in an interview. Buying debt abroad and hedging the purchases offers yields of about 9 percent, he said.

Australia’s central bank has raised interest rates by 175 basis points to 4.75 percent since October 2009 to contain inflation amid a record mining-investment boom. The Aussie dollar climbed 29 percent against the greenback in the past 12 months as the yield gap between Australian and U.S. 10-year government notes widened to 227 basis points. Hedging allows Pimco to avoid currency volatility and benefit from the higher interest rates in Australia. Newport Beach, California-based Pimco manages $1.3 trillion worldwide.”

Full article

“Emerging-market economies, growing almost three times faster than their developed counterparts, need to speed spending cuts and interest-rate increases as they fight inflation and overheating, the World Bank said.

The Washington-based institution lowered its growth forecast for the world economy this year to 3.2 percent from a January estimate of 3.3 percent, to reflect Japan’s earthquake and political unrest in the Middle East and North Africa. The World Bank left unchanged a prediction for a global rebound to 3.6 percent in 2012.

Developing countries “have put the crisis-fighting stage of the recovery behind them,” Andrew Burns, the World Bank’s manager of global macroeconomics, told reporters yesterday. “They now need to be reorienting themselves towards establishing the conditions that are going to allow them to have strong growth in years to come.”

While developed nations contend with high unemployment and Europe’s debt crisis, many emerging economies with strong expansions are yet to remove fiscal stimulus enacted to cushion the global recession, according to the World Bank. Real interest rates are low or negative in many countries even as policy makers from India to Peru raise borrowing costs, according to the bank.

China’s Inflation

Developing nations also need more flexible currencies, the World Bank’s Global Economic Prospects report said. In China, the government is “very unlikely” to meet its 4 percent inflation target for the year, with the rate set to stay at about 5 percent for “a few more months,” Ardo Hansson, the lender’s chief economist for China, said at a briefing in Beijing.”

Full article

“All indications are that there are no fraudulent activities, no overstatements. We believe in the company. We trust the company after they have come through with various disclosures,” Mr. Kelertas said.

Full Article

Ticker Symbol Name Product Type List Date Expire Date
OEX S&P 100 Index (American style) Index, pm-settled, cash 20110602 20110610
XEO S&P 100 Index (European style) Index, pm-settled, cash 20110602 20110610
SPX* S&P 500 Index Index, pm-settled, cash* 20110602 20110610
DJX Dow Jones Industrial Average Index, am-settled, cash 20110602 20110610
NDX Nasdaq-100 Index Index, am-settled, cash 20110602 20110610
RUT Russell 2000 Index Index, am-settled, cash 20110602 20110610
EEM iShares MSCI Emerging Markets Index ETF 20110602 20110610
EWZ iShares Brazil Index ETF ETF 20110602 20110610
FAS Direxionshares Daily Financial Bull 3X Shares ETF 20110602 20110610
FAZ Direxionshares Daily Financial Bear 3X Shares ETF 20110602 20110610
GLD SPDR Gold Trust ETF 20110602 20110610
GDX Market Vectors Gold Miner ETF ETF 20110602 20110610
IWM iShares Russell 2000 Index Fund ETF 20110602 20110610
QQQ Power Shares QQQ Trust ETF 20110602 20110610
SPY S&P 500 Depository Receipts ETF 20110602 20110610
SLV iShares Silver Trust ETF 20110602 20110610
TBT Proshares Ultrashort Lehman 20+ Yr. Treasury ETF 20110602 20110610
USO United States Oil Fund ETF 20110602 20110610
UNG United States Natural Gas Fund ETF 20110602 20110610
VXX iPath S&P 500 VIX Short-Term FT ETF 20110602 20110610
XLE Energy Sector SPDR ETF 20110602 20110610
XLF Financial Select Sector SPDR ETF 20110602 20110610
AAPL Apple Corporation Equity 20110602 20110610
AIG American International Group Equity 20110602 20110610
AMZN Amazon.com Inc Equity 20110602 20110610
AXP American Express Company Equity 20110602 20110610
BAC Bank of America Corp Equity 20110602 20110610
BIDU Baidu Inc. Equity 20110602 20110610
BP British Petroleum Equity 20110602 20110610
C Citigroup Equity 20110602 20110610
CAT Caterpillar Inc. Equity 20110602 20110610
CSCO Cisco SystemsInc. Equity 20110602 20110610
EP El Paso Corp. Equity 20110602 20110610
F Ford Motor Company Equity 20110602 20110610
FCX Freeport McMoran Copper CL B Equity 20110602 20110610
FFIV FS Networks, Inc. Equity 20110602 20110610
GE General Electric Company Equity 20110602 20110610
GM General Motors Company Equity 20110602 20110610
GOOG Google Inc Equity 20110602 20110610
GS Goldman Sachs Group, Inc. Equity 20110602 20110610
INTC Intel Corporation Equity 20110602 20110610
JPM J. P. Morgan Chase & Company Equity 20110602 20110610
LVS Las Vegas Sands Corp. Equity 20110602 20110610
MCP Molycorp, Inc. Equity 20110602 20110610
MSFT Microsoft Corporation Equity 20110602 20110610
NFLX NetFlix Inc. Equity 20110602 20110610
NVDA Nvidia Corp. Equity 20110602 20110610
IBM International Business Machines Equity 20110602 20110610
PCLN Priceline.com Inc. (new) Equity 20110602 20110610
PCX Patriot Coal Corp. Equity 20110602 20110610
PFE Pfizer Inc. Equity 20110602 20110610
POT Potash Corp Saskatchewan Equity 20110602 20110610
QCOM Qualcomm Inc Equity 20110602 20110610
RIMM Research in Motion Limited Equity 20110602 20110610
SLW Silver Wheaton Corp. Equity 20110602 20110610
SU Suncor Energy Inc. Equity 20110602 20110610
T AT&T Inc. Equity 20110602 20110610
V Visa, Inc. Equity 20110602 20110610
VZ Verizon Comm Equity 20110602 20110610
WFC Wells Fargo & Co. Equity 20110602 20110610
X United States Steel Corp. Equity 20110602 20110610
XOM Exxon Mobil Corp Equity 20110602 20110610
YHOO Yahoo Inc Equity 20110602 20110610
* With the commencement of trading in PM-Settled Week-End SPX options beginning December 2, 2010, CBOE will discontinue
the listing of AM-settled SPX Weeklys options (with the last SPX Weeklys expiration on December 3, 2010)

LIST OF AVAILABLE WEEKLYS OPTIONS (last updated May 25, 2011) – official
Ticker Symbol Name Product Type List Date Expire Date
OEX S&P 100 Index (American style) Index, pm-settled, cash 20110526 20110603
XEO S&P 100 Index (European style) Index, pm-settled, cash 20110526 20110603
SPX* S&P 500 Index Index, pm-settled, cash* 20110526 20110603
DJX Dow Jones Industrial Average Index, am-settled, cash 20110526 20110603
NDX Nasdaq-100 Index Index, am-settled, cash 20110526 20110603
RUT Russell 2000 Index Index, am-settled, cash 20110526 20110603
EEM iShares MSCI Emerging Markets Index ETF 20110526 20110603
EWZ iShares Brazil Index ETF ETF 20110526 20110603
FAS Direxionshares Daily Financial Bull 3X Shares ETF 20110526 20110603
FAZ Direxionshares Daily Financial Bear 3X Shares ETF 20110526 20110603
GLD SPDR Gold Trust ETF 20110526 20110603
GDX Market Vectors Gold Miner ETF ETF 20110526 20110603
IWM iShares Russell 2000 Index Fund ETF 20110526 20110603
QQQ Power Shares QQQ Trust ETF 20110526 20110603
SPY S&P 500 Depository Receipts ETF 20110526 20110603
SLV iShares Silver Trust ETF 20110526 20110603
TBT Proshares Ultrashort Lehman 20+ Yr. Treasury ETF 20110526 20110603
USO United States Oil Fund ETF 20110526 20110603
UNG United States Natural Gas Fund ETF 20110526 20110603
VXX iPath S&P 500 VIX Short-Term FT ETF 20110526 20110603
XLE Energy Sector SPDR ETF 20110526 20110603
XLF Financial Select Sector SPDR ETF 20110526 20110603
AAPL Apple Corporation Equity 20110526 20110603
AIG American International Group Equity 20110526 20110603
AMZN Amazon.com Inc Equity 20110526 20110603
AXP American Express Company Equity 20110526 20110603
BAC Bank of America Corp Equity 20110526 20110603
BIDU Baidu Inc. Equity 20110526 20110603
BP British Petroleum Equity 20110526 20110603
C Citigroup Equity 20110526 20110603
CAT Caterpillar Inc. Equity 20110526 20110603
CSCO Cisco SystemsInc. Equity 20110526 20110603
EP El Paso Corp. Equity 20110526 20110603
F Ford Motor Company Equity 20110526 20110603
FCX Freeport McMoran Copper CL B Equity 20110526 20110603
FFIV FS Networks, Inc. Equity 20110526 20110603
GE General Electric Company Equity 20110526 20110603
GM General Motors Company Equity 20110526 20110603
GOOG Google Inc Equity 20110526 20110603
GS Goldman Sachs Group, Inc. Equity 20110526 20110603
INTC Intel Corporation Equity 20110526 20110603
JPM J. P. Morgan Chase & Company Equity 20110526 20110603
LVS Las Vegas Sands Corp. Equity 20110526 20110603
MCP Molycorp, Inc. Equity 20110526 20110603
MEE Massey Energy Company Equity 20110526 20110603
MSFT Microsoft Corporation Equity 20110526 20110603
NFLX NetFlix Inc. Equity 20110526 20110603
NVDA Nvidia Corp. Equity 20110526 20110603
IBM International Business Machines Equity 20110526 20110603
PCLN Priceline.com Inc. (new) Equity 20110526 20110603
PCX Patriot Coal Corp. Equity 20110526 20110603
PFE Pfizer Inc. Equity 20110526 20110603
POT Potash Corp Saskatchewan Equity 20110526 20110603
QCOM Qualcomm Inc Equity 20110526 20110603
RIMM Research in Motion Limited Equity 20110526 20110603
SLW Silver Wheaton Corp. Equity 20110526 20110603
SU Suncor Energy Inc. Equity 20110526 20110603
T AT&T Inc. Equity 20110526 20110603
V Visa, Inc. Equity 20110526 20110603
VZ Verizon Comm Equity 20110526 20110603
WFC Wells Fargo & Co. Equity 20110526 20110603
X United States Steel Corp. Equity 20110526 20110603
XOM Exxon Mobil Corp Equity 20110526 20110603
YHOO Yahoo Inc Equity 20110526 20110603

Spreads have blown out, now more than $17 differential between expensive Brent and lowly WTI.

REALLY ?

“(NaturalNews) Wyldewood Cellars, a Kansas-based producer and distributor of elderberry juice, is the latest raid target of the US Food and Drug Administration (FDA), which recently sent US marshals to the company’s winery in Mulvane to confiscate the “unapproved drug.” According to the rogue agency, Wyldewood had violated provisions in the US Federal Food, Drug, and Cosmetic Act (FFDCA) that restrict health claims for food items, warranting the sudden invasion.

According to Barry Grissom, US Attorney for Kansas,the FDAsent a warning letter to Wyldewood in 2006 to remove or modify certainhealth claimsthat it said were in violation of federal law, but the company did not comply.FDAofficials claim that Wyldewood continued to make unapproved claims, and that seizing the product was the next step….”

Full article

“(NaturalNews) Genetically modified foods have become so ubiquitous in the US that even the grocery store ‘Whole Foods’ now admits it cannot keep biotech foods off its shelves. A representative for the corporation acknowledged in May of 2011 that the realities of the marketplace have forced a shift in the company’s previous no-GMO’s policy.

Joe Dickson, quality standards coordinator for Whole Foods Markets, notes that GMO’s dominate the market, especially for corn, soy and canola crops from whichingredientsin most processedfoodsare derived. “Until there’sfederal governmentmandated labeling ofGMOingredients, there’s no way to tell if packagedproductscontain GMO ingredients,” Dickson said. “Our approach is to work in the spirit of partnership with our suppliers … to encourage them to take active steps to avoid GMO ingredients.”

In spite of public skepticism about GMO foods, the FDA has backedMonsantoand other corporations, declaring that modified foods do not require special labeling lettingconsumersknow they are eating Frankenfoods. This is in contract to the European Union, where public concern over health issues resulted in a moratorium on GMO’s. Many European countries, including France, Germany, Greece, Austria and Luxembourg have bannedgenetically modified foods, while other countries in the EU permit their sale only when products include clear labels of GMO ingredients…”

Full article

“While the Obama administration has continued to focus its mortgage relief program, the Home Affordable Modification Program, on the problem of risky loans, the biggest cause of foreclosures these days is actually unemployment.

With the nation’s jobless rate continuing to hover above 9%, millions of homeowners are at risk of facing foreclosure. And although the housing program run by the Department of the Treasury is supposed to provide help to the unemployed, the assistance is often insufficient.

For instance, the program allows the jobless to postpone mortgage payments for three months. But the average length of unemployment is now nine months.

The Wall Street bailout allocated $46 billion to the Treasury Department to help homeowners avoid foreclosure, but so far it has only spent $1.85 billion. Last year the Department of Housing and Urban Development received $1 billion to give two-year loans to unemployed homeowners, but thus far applications have been accepted in only five states.

In general, Republican members of Congress have sided with the banks and mortgage holders, and opposed programs that fight foreclosure. Meanwhile, the Obama administration has appeared somewhat indifferent. According to the Times, Treasury SecretaryTimothy Geithner wrote a letter in December to Rep. Barney Frank (D-Massachusetts) expressing hesitation about extending payment periods for unemployed homeowners because regulators and “other industry stakeholders expressed strong reservations.”

Full article

“WASHINGTON (MarketWatch) – U.S. consumers increased their debt by a seasonally adjusted 3.1% annual rate in April, the seventh straight monthly gain, the Federal Reserve reported Tuesday. Total consumer debt increased $6.25 billion to $2.43 trillion in April. The gain was larger than Wall Street economists had expected. Consumer credit debt for March was revised down to a $4.82 billion increase compared with the initial estimate of a $6.0 billion rise. The increase in debt in April came despite a drop in credit card debt, which fell $943.52 million or at a 1.4% annual rate after a slim $36.70 million gain in March. Non-revolving credit, such as auto loans, personal loans and student loans, rose $7.20 billion, or at a 5.3% rate after a $4.78 billion rise in March.”

Full article

The heavily battered refinery sector is catching a reprieve today on the back of widening 321 crack spreads, now up more than 6.5% to $27.5.

Leaders include HOC +6.5%, WNR +6%, SUN +4.8% and CVI +5%

Incidentally, both the CBO and this group are probably way off. 1/3 is much to high, they aren’t counting on the fact that most employers enjoy offering health insurance and use it to compete for the most competent and desirable employees. However, the CBO was super rosy, so the budget will likely get busted wide open anyway.

Thirty percent of employers will definitely or probably stop offering health benefits to their employees once the main provisions of President Obama’s federal health care law go into effect in 2014, a new survey finds.

The research published in the McKinsey Quarterly found that the number rises to 50 percent among employers who are highly aware of the health care law.

McKinsey and Company, which identifies itself as a management consultant that aims to help businesses run more productively and competitively, conducted the survey of more than 1,300 employers earlier this year. It said the survey spanned industries, geographies and employer sizes.

But the White House pushed back against the report.

“This report is at odds with the experts from the Congressional Budget Office, the Rand Corporation, the Urban Institute and history,” a senior administration official told Fox News. “History has shown that reform motivates more businesses to offer insurance.”

“Health reform in Massachusetts uses a similar structure, with an exchange, a personal responsibility requirement and an employer responsibility requirement,” the official said. “And the number of individuals with employer-sponsored insurance in Massachusetts has increased.”

According to the survey, at least 30 percent of employers would reap financial gain from dropping coverage even if they compensated employees for the change through other benefit offerings or higher salaries.

The research notes among the new provisions that could spur employers to drop coverage is a requirement of all employers with more than 50 employees to offer health benefits to every full-timer or pay a penalty of $2,000 per worker. Those benefits must also be equal between highly compensated executives and hourly employees – requirements that will increase medical costs for many companies.

The findings are distinct from a Congressional Budget Office estimate that only about 7 percent of employees who currently get health coverage through their jobs would have to switch to subsidized-exchange polices in 2014.

The group said its variance is so wide because shifting away from employer-sponsored insurance “will be economically rational” given the “law’s incentives.” The law requires employers to make insurance available to low-income or part-time employees that may not otherwise be covered.

The research found that contrary to what many employers feared, most employees — more than 85 percent — would stay at jobs that no longer offered health benefits. But 60 percent of employees would expect higher compensation.

Exterran Holdings Inc. Outlook Revised To Negative From Stable On Declining Operating Performance; Ratings Affirmed 07-Jun-2011
14:36 EST

Mitsubishi Estate’s Domestic Straight Bonds Rated ‘A+’ 07-Jun-2011
01:04 EST

“Don’t look to state and local governments to prop up the job market.

To the contrary, this cash-strapped sector is set to go on a record-breaking layoff binge when the new fiscal year starts on July 1.

State and local governments are forecast to shed up to 110,000 jobs in the third quarter, the first time the blood-letting has risen into the triple digits, according to IHS Global Insight.

“We’re on a downward path,” said Greg Daco, principal U.S. economist at IHS. “It’s not looking good.”

State and local government employment has been a drag on the economy all year, averaging a loss of 23,000 jobs a month over the past three months. Meanwhile, the private sector has created an average of 180,000 a month during the same period.

In May, public employment shrunk by 29,000 jobs, mostly at the state and local level, while businesses created 83,000 jobs, the Labor Department reported Friday. All told, the sector has lost 510,000 positions since its peak in August 2008.

States still cutting

Though tax revenue is starting to rise, states are still wrestling with multi-billion-dollar budget gaps. Federal stimulus funds helped minimize job cuts until now, but that money essentially runs out on June 30.”

Full article

“Societe Generale has joined the chorus of forecasters calling for a slow-down and not a collapse in the US economy.  A nice brief summary from their latest strategy notes:

“FED FOCUS: We see QE3 as highly unlikely

Soft patch of data has brought back speculation about QE3. Highly unlikely: in contrast to last year’s slowdown, current softness has not pushed down long-term inflation expectations.

ECONOMICS: SG Business Cycle Index remains strong

Main drivers lately: swaps spreads, equity returns, commodity prices. But other variables (consumer confidence, commercial & industrial loans) picking up the baton.  Those positive signals should materialize in robust GDP growth in H2.”

Full article and charts

“Natural gas futures fluctuated between small gains and losses on Tuesday, but remained close to a ten-month high as warmer-than-normal temperatures across much of the U.S. next week boosted demand expectations for the fuel.

On the New York Mercantile Exchange, natural gas futures for July delivery traded at USD4.829 per million British thermal units during European morning trade, easing up 0.12%.

The July contract traded between a range of USD4.811, the daily low and USD4.845, the daily high.

Natural gas prices rose to the highest level since July 2010 on Monday after the Commodity Weather Group said that it expected above-average temperatures across the eastern U.S. states next week.

The weather group added that temperature through June 10 could be the warmest of the season so far for East Coast cities.

Houston, St. Louis, Chicago and New York City were expected to see daily highs above 90 degrees Fahrenheit this week, industry weather group MDA Federal said late Monday.

Hotter-than-normal weather increases the need for gas-fired electricity to power air conditioning, boosting demand for natural gas.”

Full article

“While the rest of the world is transfixed by the latest pocket change bailout of the Eurozone, China has stealthily conducted an economic rescue bigger than than one and a half TARPs. Dylan Grice’s latest note focuses on the key news out of China from last week which oddly received very little media attention, namely the onboarding by the Local Government Financing Vehicles (LGFV) of $463 billion in bad loans made to various infrastructure and development projects as part of the Chinese stimulus package. This is nothing short of a bailout the likes of TARP when Paulson transferred billions of toxic debt to the government’s balance sheet. The reason why this is actually a much bigger deal than perceived is that as Grice notes, a “bail-out of $463bn is half the size of the TARP, introduced by Paulson at the nadir of the 2008 crisis, for an economy which is only one-third the size of the US. So adjusted for GDP, China has just announced an emergency bail out of one and a half TARPs!! If we calibrate the magnitude of the economic crisis with the size of the bail-out, one and a half TARPs implies a financial crisis one and half times the order of magnitude of 2008……”

Full article

“Legendary investor Jim Rogers sees a dismal future for agriculture worldwide. “Farming has been a disaster, and unless something happens very quickly, we’re going to have no food at any price in a few years,” says Rogers.

“The average age of a farmer in the U.S. is 58 years old,” Rogers says.

“The largest group of suicides in the U.K. is farmers because farming is such a horrible business. Hundreds of thousands of Indian farmers commit suicide every year.”

The UK Independent reports that Oxfam, a leading agency, has warned that millions more people across the world will be locked into a cycle of hunger and food crisis unless governments tackle a “broken” production system which is being exploited by speculators and will cause a doubling in basic foodstuff prices in the next 20 years. ”

Full article

Nothing new here with…seriously don’t all government agencies lie or doctor statistics ?

“Chrysler has repaid every dime and more of what it owes American taxpayers for their support during my presidency.”

— President Obama, June 4, 2011

This post has been updated.

With some of the economic indicators looking a bit dicey, President Obama traveled to Ohio last week to tout what the administration considers a good-news story: the rescue of the domestic automobile industry. In fact, he also made it the subject of his weekly radio address.

We take no view on whether the administration’s efforts on behalf of the automobile industry were a good or bad thing; that’s a matter for the editorial pages and eventually the historians. But we are interested in the facts the president cited to make his case.

What we found is one of the most misleading collections of assertions we have seen in a short presidential speech. Virtually every claim by the president regarding the auto industry needs an asterisk, just like the fine print in that too-good-to-be-true car loan.

Let’s look at the claims in the order in which the president said them.

“Chrysler has repaid every dime and more of what it owes American taxpayers for their support during my presidency — and it repaid that money six years ahead of schedule.  And this week, we reached a deal to sell our remaining stake. That means soon, Chrysler will be 100 percent in private hands.”

Wow, “every dime and more” sounds like such a bargain. Not only did Chrysler pay back the loan, with interest — but the company paid back even more than they owed. Isn’t America great or what?

Not so fast. The president snuck in the weasel words “during my presidency” in his statement. What does that mean?”

Full article

In order to push consumers towards fuel efficient vehicles….who got us hooked on SUVs?

Who killed the electric car ?

Who played a role in reducing the refineries in this country ?

Full article

One of our favorite economic reports — the Rail Time Indicators publication from the AAR — is out for May!

“Generally, it’s not good, and confirms a lot of what the other data has been showing.

Here are some charts that stood out.

Year over year total carloads growth is basically flat…”

Full article & charts