NEW YORK (MarketWatch) -- A fivefold surge in the sale of junk bonds, a drop in borrowing spreads to two-plus-year lows, and heightened buzz about a coming wave of leveraged buyouts are the latest signs that credit markets are getting close to their pre-crisis levels -- and, to some observers, sowing the seeds for a dangerous new borrowing binge.
Companies sold $54.3 billion in U.S. high-yield debt during the first quarter of the year, according to Dealogic, up from $9.6 billion a year ago, as the sharp drop in interest rates made it cheaper to borrow. Including investment-grade debt, bond sales in March rose to their highest level since May.
Last week, the growing debt issuance turned swap spreads, a metric of how issuers adjust their interest-rate exposure, negative for the first time on record.
And borrowing costs measured by corporate-bond spreads have returned to December 2008 levels, though they are still far higher than they were before the housing bust.
Selling debt has become much cheaper for companies as the credit crisis fades into history and investors lay their hopes on the recovery of the economy.
Plus, there's little allure for investors to lend to some of the most stable borrowers, such as the U.S. government.
The Federal Reserve's 15-month policy of keeping rates near 0% alongside a pledge to keep them low for a "extended period" have pushed 10-year Treasury yields (U.S.:UST10Y) to 3.94%, after falling to record lows from around 5.25% when the Fed started cutting in 2006.
Yields on 1-month CDs have fallen to 0.47%, from 2.5% in 2007, according to Bankrate.com.
For some private-sector analysts, as well as Federal Reserve policy makers, this lengthy period of low benchmark rates and investor appetite for higher returns poses a risk of again pushing the economy to an unsustainable reliance on debt -- not far from the situation that led to the credit crisis just a few years ago.
"We look at this as a replay of what happened in 2007," said Walter Zimmermann, chief technical analyst for United-ICAP.
Midway through the last decade, investors increasingly piled into much riskier assets, including mortgage-backed securities. They were hunting for a slightly higher yield after the Fed's decision to keep interest rates at 1% for one year in 2003-04 helped flatten yields on government debt.
That demand for higher yields pushed borrowing costs for companies to extremely low levels by 2007, when problems with too much leverage started to materialize within the massive and various securitizations distributed around the world, eventually leading to the credit crisis.
"The need for yield was felt to counteract otherwise low interest rates," he said. "That turned out to be one of the most disastrous investments of our age."
Some officials, such as Kansas City Federal Reserve President Thomas Hoenig, have warned that the Fed risks "distortions in the economy" and creating an asset bubble by keeping rates very low for too long.
WASHINGTON, D.C. -- Gallup Daily tracking finds that 20.3% of the U.S. workforce was underemployed in March -- a slight uptick from the relatively flat January and February numbers.
These results are based on March interviews with more than 20,000 adults in the U.S. workforce, aged 18 and older. Gallup classifies respondents as underemployed if they are unemployed or working part-time but wanting full-time work. Gallup employment data are not seasonally adjusted.
I excited about this, because it means that I'm going to be able to buy grains at great prices! Soybeans is still the highest priced and most overbought, but corn and wheat are both selling at very cheap prices!
I suspect that this information will ultimately prove wrong, but this is the news today. Grains were down across the board today.
March 31 (Bloomberg) -- U.S. wheat stockpiles were 30 percent higher on March 1 than a year earlier as exports fell, the Department of Agriculture said today in a report.
Inventories jumped to 1.352 billion bushels, the USDA said. Exports have declined as competitors including Russia increased shipments. Spring-wheat acres will rise 4.8 percent from a year earlier to 13.9 million, the USDA said in a separate report. Durum acres will fall 13 percent to 2.22 million.
“Our exports have been so poor we’re going to see big stocks,” said Louise Gartner, owner of Spectrum Commodities in Beavercreek, Ohio. “There’s been little farmer movement. As far as planting, there’s just not much money in it.”
The total area planted with wheat, including winter varieties, will fall 9 percent to53.8 million acres, the USDA said.
Through March 18, U.S wheat exports totaled 17.295 million metric tons in the marketing year that began June 1, down 21 percent from the previous year, according to the USDA.
Wheat futures for May delivery rose 7.25 cents, or 1.6 percent, to $4.72 a bushel yesterday on the Chicago Board of Trade. The most-active contract has fallen 13 percent in the first quarter of the year.
The U.S. and Canada are the world’s two biggest wheat exporters, followed by Russia.
Rice stockpiles as of March 1 totaled 10.2 billion pounds, up 11 percent from a year earlier, the USDA said. The area seeded with the grain may rise 8.8 percent to 3.41 million acres, the government said. The U.S. is the world’s fourth-biggest exporter of the grain, behind Thailand, Vietnam and Pakistan, USDA data show.
Rice futures for May delivery rose 20 cents, or 1.6 percent, to $12.575 per 100 pounds yesterday in Chicago. Futures have declined 16 percent this year.
--With assistance from Alan Bjerga in Washington. Editors: Daniel Enoch, Steve Stroth.
LONDON (MarketWatch) -- Losses on U.S. stock futures accelerated Wednesday after ADP said private-sector employment dropped by 23,000, confounding economist expectations for a 40,000 rise. Shortly after the data, S&P 500 futures fell 3.6 points to 1,165.80 and Nasdaq 100 futures fell 5.5 points to 1,960.00.
from Feedstuffs.com
Monday the American Petroleum Institute and the National Petrochemical & Refiners Association filed a lawsuit with the U.S. Court of Appeals for the District of Columbia challenging the Environmental Protection Agency's Renewable Fuels Standard 2 (RFS2) rule. The RFS2 rule was finalized and published in the Federal Register March 26.
The groups are challenging the legality of EPA's actions because the agency made the rule effective on July 1, 2010, but combines the 2009 and 2010 biomass-based diesel volumes and makes the rule retroactive to January 1, 2010.
The organizations both state they don't question the role renewable fuels can play in the nation's transportation fuel mix. In fact, API's statement said the U.S. oil and natural gas industry is the biggest consumer of ethanol and other biofuels. Almost 80% of all gasoline now produced in the United States contains ethanol. API said it supports a "realistic and workable RFS."
“While the U.S. oil and natural gas industry recognizes and appreciates the role of ethanol and other biofuels in the fuel marketplace, we are deeply concerned that the Environmental Protection Agency’s final RFS2 rule could result in higher consumer costs. By setting retroactive requirements, refiners, and ultimately consumers, will be penalized for EPA's inability to get this rule out on time as directed by Congress," API said.
The Energy Independence and Security Act of 2007 required EPA to promulgate and finalize certain standards under the RFS2 program by specific dates in 2008 and 2009. The agency, however, failed to meet those statutory deadlines. Instead, in its recently published RFS2 final rule, "EPA retroactively and unlawfully imposed RFS2 compliance burdens on obligated parties, many of whom are NPRA members," the organization noted
“Simply put, the fact that EPA failed to meet its statutory obligations under current energy law does not give the Agency license to impose retroactively additional compliance burdens on obligated parties," said NPRA President Charles Drevna. "At the least, such action calls into serious question the fundamental fairness of EPA’s RFS2 rulemaking process."
from Doug Kass:
A few weeks prior to the markets hitting a generational low a year ago, I created a watch list that enabled me to better gauge the bottom.
Now, nearly 13 months later and with the S&P 500 almost 500 points higher, it is time to focus on a new checklist of some potential adverse developments that could contribute to a market top and a reversal of investors' good fortunes since March 2009.
Interest Rates: The yield on the 10-year U.S. note might climb to over 4% (now at 3.85%). A 4.00% to 4.25% yield would likely provide a tipping point for increased competition to equities and produce an interest (mortgage) rate headwind to the nascent housing recovery at a time when stock dividend yields have nearly halved and when a large phantom inventory of unsold homes is about to begin to enter the residential for-sale market.
Jobs / Economy: A more sluggish-than-expected expansion in new jobs and the weight of higher taxes in 2011 might translate to a downturn in consumer confidence, reduced business fixed investment and a more shallow domestic economic recovery in the second half of this year.
Retail: Cautious forward comp guidance in retail could reverse the February-March strength.
Europe: There could be growing signs of weakness in the European economies.
Credit: Over there, we might witness evidence of more sovereign (Spain?) crises, and, over here, we could see more U.S. municipal -- the universe is large! -- financial woes. Forced austerity measures would likely produce lower growth.
Credit (Part Deux): Credit spreads might widen.
Geopolitical: We could see a possible rise in geopolitical tensions or even another terrorist act on our shore.
Monetary Policy: We might have a less dovish Fed in words (jawboning) and in action (through an increase in the federal funds rate).
Tightening Abroad: It is likely that central banks around the world will begin to clench their monetary fist, especially in China.
Protectionism, Trade and Currency Wars: Things might get ugly, especially on the U.S. / China front.
Housing: A renewed leg down in home prices is possible as the spring selling season could fail to appear. (It hasn't gotten off to a great start.)
Sentiment: We could witness the birth of a 5x to 10x levered bullish ETF, a burst in bullish investor sentiment, an expansion in hedge fund net long positions, a further drawdown in mutual fund cash positions, a meaningful increase in retail mutual fund equity inflows and massive outflows out of Rydex bear funds.
Technical: Stocks could fail to respond to good news, suggesting that the sharp corporate profit recovery has been baked into prices. A breakdown in financials and/or transports could occur. Overseas markets might fail to make new highs, or we could see a further contraction in NYSE / Nasdaq exchange volume.
Deflation: Industrial commodity prices could weaken.
Speculation: We might see an increasingly speculative market for low-price issues.
Underwritings: The emergence of a record syndicate calendar is possible.
Wall Street: A substantial increase in Wall Street industry hirings could be announced.
Dr. Doom vs. the Sunshine Boys: Dr. Nouriel Roubini could see green shoots, causing bullish strategists and money managers to demonstrate even more swagger. Reminiscent of late 1998, a sell-side analyst (perhaps the new Henry Blodgett) might raise his 12-month Apple(AAPL) price target to $375 a share, leading another analyst to top that target and move to $400 a share a week later.
The Media:CNBC could throw another celebratory party. Time magazine might declare the death of the bear market on its cover or run a cover story offering a new bullish economic and/or stock market paradigm. Sir Larry Kudlow could have trouble finding a single bear to appear on CNBC's "The Kudlow Report." Record ratings might induce the management of CNBC to expand "Squawk Box" from three hours to four hours (6:00 a.m. to 10:00 a.m.) and add an additional anchor to join Joe, Becky and Carl.
Dougie: Maybe I turn bullish.
I could add a few, but don't have much time to do so. He didn't mention commercial real estate, public sector pension funds, falling demand for U.S. government debt, a second wave of mortgage/housing collapse, or bubble-like behavior. One bubble behavior is that when bad economic news is released, the stock market still moves higher!
from Washington Times:
President Obama's fiscal 2011 budget will generate nearly $10 trillion in cumulative budget deficits over the next 10 years, $1.2 trillion more than the administration projected, and raise the federal debt to 90 percent of the nation's economic output by 2020, the Congressional Budget Office reported Thursday.
In its 2011 budget, which the White House Office of Management and Budget (OMB) released Feb. 1, the administration projected a 10-year deficit total of $8.53 trillion. After looking it over, CBO said in its final analysis, released Thursday, that the president's budget would generate a combined $9.75 trillion in deficits over the next decade.
"An additional $1.2 trillion in debt dumped on [GDP] to our children makes a huge difference," said Brian Riedl, a budget analyst at the conservative Heritage Foundation. "That represents an additional debt of $10,000 per household above and beyond the federal debt they are already carrying."
The federal public debt, which was $6.3 trillion ($56,000 per household) when Mr. Obama entered office amid an economic crisis, totals $8.2 trillion ($72,000 per household) today, and it's headed toward $20.3 trillion (more than $170,000 per household) in 2020, according to CBO's deficit estimates.
That figure would equal 90 percent of the estimated gross domestic product in 2020, up from 40 percent at the end of fiscal 2008. By comparison, America's debt-to-GDP ratio peaked at 109 percent at the end of World War II, while the ratio for economically troubled Greece hit 115 percent last year.
"That level of debt is extremely problematic, particularly given the upward debt path beyond the 10-year budget window," said Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget.
For countries with debt-to-GDP ratios "above 90 percent, median growth rates fall by 1 percent, and average growth falls considerably more," according to a recent research paper by economists Kenneth S. Rogoff of Harvard and Carmen M. Reinhart of the University of Maryland.
CBO projected the 2011 deficit will be $1.34 trillion, not much different from the administration's estimate of $1.27 trillion. However, CBO's estimate of the 2020 deficit at $1.25 trillion significantly exceeds the administration's $1 trillion estimate.
from WSJ:
Personal income in 42 states fell in 2009, the Commerce Department said Thursday.
Nevada's 4.8% plunge was the steepest, as construction and tourism industries took a beating. Also hit hard: Wyoming, where incomes fell 3.9%.
Incomes stayed flat in two states and rose in six and the District of Columbia. West Virginia had the best showing with a 2.1% increase. In Maine, Kentucky and Hawaii, increased government benefits, such as unemployment insurance and Social Security, offset drops in earnings and property values.
Nationally, personal income from wages, dividends, rent, retirement plans and government benefits declined 1.7% last year, unadjusted for inflation. One bright spot: As the economy recovered, personal income was up in all 50 states in the fourth quarter compared with the third. Connecticut, again, had the highest per capita income of the 50 states at $54,397 in 2009. Mississippi ranked lowest at $30,103.
The Dow reversed from a 120-point gain, and the S&P 500 closed down. Bernanke set off the rally with a statement indicating the he would continue to artificially suppress interest rates.
WEAK DEMAND: Interest rates climbed in the bond market Thursday after a government debt auction drew tepid demand. Auctions Tuesday and Wednesday also saw lower demand.
NOT THAT INTERESTED: The auction of $32 billion in seven-year notes saw demand fall from the past two months. That means the government could have to start offering higher interest rates to attract buyers.
BERNANKE SAYS: Testimony from Federal Reserve Chairman Ben Bernanke affirmed the government's pledge to keep interest rates near zero for an extended period.
That was one ugly auction. More worries of sovereign debt default in Europe. Both Greece and Portugal are in trouble now! The bond vigilantes are back in force today!
WASHINGTON (AP) -- Sales of existing homes fell for a third straight month in February, pushing sales down to the lowest level since last July. There is concern the fragile housing rebound is faltering, making it harder for the overall economy to recover.
The National Association of Realtors said Tuesday that sales of previously occupied homes dropped 0.6 percent in February to a seasonally adjusted annual rate of 5.02 million.
The weakness in sales depressed prices with the median home price dropping almost 2 percent from a year ago to $165,100.
March 19 (Bloomberg) -- The Federal Reserve Board must disclose documents identifying financial firms that might have collapsed without the largest U.S. government bailout ever, a federal appeals court said.
The U.S. Court of Appeals in Manhattan ruled today that the Fed must release records of the unprecedented $2 trillion U.S. loan program launched primarily after the 2008 collapse of Lehman Brothers Holdings Inc. The ruling upholds a decision of a lower-court judge, who in August ordered that the information be released.
The Fed had argued that it could withhold the information under an exemption that allows federal agencies to refuse disclosure of “trade secrets and commercial or financial information obtained from a person and privileged or confidential.”
The U.S. Freedom of Information Act, or FOIA, “sets forth no basis for the exemption the Board asks us to read into it,” U.S. Circuit Chief Judge Dennis Jacobs wrote in the opinion. “If the Board believes such an exemption would better serve the national interest, it should ask Congress to amend the statute.”
Dow Jones Newswires | Caterpillar Inc. said the health-care overhaul legislation being considered by the U.S. House of Representatives would increase the company's health-care costs by more than $100 million in the first year alone.
In a letter Thursday to House Speaker Nancy Pelosi (D-Calif.) and House Republican Leader John Boehner of Ohio, Caterpillar urged lawmakers to vote against the plan "because of the substantial cost burdens it would place on our shareholders, employees and retirees." Caterpillar, the world's largest construction machinery manufacturer by sales, said it's particularly opposed to provisions in the bill that would expand Medicare taxes and mandate insurance coverage. The legislation would require nearly all companies to provide health insurance for their employees or face large fines.
The Peoria-based company said these provisions would increase its insurance costs by at least 20 percent, or more than $100 million, just in the first year of the health-care overhaul program.
"We can ill-afford cost increases that place us at a disadvantage versus our global competitors," said the letter signed by Gregory Folley, vice president and chief human resources officer of Caterpillar. "We are disappointed that efforts at reform have not addressed the cost concerns we've raised throughout the year."
Business executives have long complained that the options offered for covering 32 million uninsured Americans would result in higher insurance costs for those employers that already provide coverage. Opponents have stepped up their attacks in recent days as the House moves closer toward a vote on the Senate version of the health-care legislation.
A letter Thursday to President Barack Obama and members of Congress signed by more than 130 economists predicted the legislation would discourage companies from hiring more workers and would cause reduced hours and wages for those already employed.
Caterpillar noted that the company supports efforts to increase the quality and the value of health care for patients as well as lower costs for employer-sponsored insurance coverage.
"Unfortunately, neither the current legislation in the House and Senate, nor the president's proposal, meets these goals," the letter said.
from Bloomberg:
March 17 (Bloomberg) -- China is in the midst of “the greatest bubble in history,” said James Rickards, former general counsel of hedge fund Long-Term Capital Management LP.
The Chinese central bank’s balance sheet resembles that of a hedge fund buying dollars and short-selling the yuan, said Rickards, now the senior managing director for market intelligence at McLean, Virginia-based consulting firm Omnis Inc.
“As I see it, it is the greatest bubble in history with the most massive misallocation of wealth,” Rickards said at the Asset Allocation Summit Asia 2010 organized by Terrapinn Pte in Hong Kong yesterday. China “is a bubble waiting to burst.”
Rickards joins hedge fund manager Jim Chanos, Gloom, Boom & Doom publisher Marc Faber and Harvard University professor Kenneth Rogoff in warning of a potential crash in China’s economy. The government has raised banks’ reserve requirements twice this year after economic growth accelerated and property prices rallied.
China has pegged the yuan to the dollar since July 2008 to help exporters weather the global recession. The central bank buys dollars and sells its own currency to prevent the yuan strengthening, driving foreign-exchange reserves to a world- record $2.4 trillion as of December. The Shanghai Composite Index of stocks jumped 80 percent last year and property prices rose at the fastest pace in almost two years in February, helped by a record 9.59 trillion yuan ($1.4 trillion) of new loans in 2009.
‘Massive Stimulus’
The World Bank indicated today that China should raise interest rates to help contain the risk of a property bubble and allow a stronger yuan to help damp inflation expectations. The nation’s “massive monetary stimulus” risks triggering large asset-price increases, a housing bubble, and bad debts from the financing of local-government projects, Washington-based World Bank said in a quarterly report on China released in Beijing.
“People making comments about bubbles possibly don’t have all the facts,” HSBC Holdings Plc Chief Executive Officer Michael Geoghegan said in Shanghai today. Regulators are in control of the banking industry, and have the ability to curb lending as needed, he said.
Rickards said leveraged speculation in the stock market, wasteful allocation of resources by state-owned enterprises, off-balance-sheet debt through regional governments and the country’s human rights record are concerns.
“Take Russia and China together, neither of them is really deserving any investment” except for short-term speculation, Rickards said. India and Brazil are two of the “real economies” among the developing countries, he said.
Hard Landing
China is poised to overtake Japan as the world’s second- largest economy this year, according to the International Monetary Fund, and Nomura Holdings Inc. forecasts it will contribute more than a third of global growth. The nation has surpassed the U.S. as the world’s largest auto market and Germany as the No. 1 exporter.
Harvard’s Rogoff said Feb. 23 that a debt-fueled bubble in China may trigger a regional recession within a decade, while Chanos, founder of New York-based Kynikos Associates Ltd., predicted a slump after excessive property investments.
Investors Bob Doll and Antoine van Agtmael say China’s stock market isn’t a bubble.
Equities will gain by the end of the year as the government takes measures to prevent the economy from overheating, Doll, BlackRock Inc.’s chief investment officer for global equities, said on March 5. China is unlikely to face “chaos” or experience a hard landing, Van Agtmael, who helps manage $13 billion as chairman and chief investment officer of Emerging Markets Management LLC, said in a Bloomberg Television interview yesterday.
Lending Slowdown
The Shanghai Composite Index is valued at 32 times reported earnings, compared with 52 times at its peak in October 2007. The U.S. benchmark Standard & Poor’s 500 Index trades at 19 times earnings.
China’s economic growth quickened to 10.7 percent last quarter, helped by a 4 trillion yuan, two-year stimulus plan for railways, airports and homes. Property prices in 70 cities rose 10.7 percent from a year earlier in February.
Bank loans slowed to 700 billion yuan last month after surging more in January than the previous three months combined, central bank data showed. Growth of the broadest measure of money supply, or M2, slowed for a third month to 25.5 percent.
‘Very Sound’
The banking industry has “very low impairment charges compared to what you’d expect this time in the cycle,” HSBC’s Geoghegan said. “I wouldn’t be surprised if there’s a gradual increase in impairments, but long term I’m confident that the structure of the banking industry is very, very sound.”
Rickards disputed an argument that China could hold U.S. policies hostage through its Treasuries holdings. The nation remained the largest overseas owner of U.S. debt after trimming its holdings by $5.8 billion in January to $889 billion.
China would suffer massive losses if the debt was dumped, reducing the funds available in the U.S. securities market and forcing the prices lower, he said. The U.S. president also has the authority, rarely used, to freeze such positions, he said.
Rickards worked for LTCM between 1994 and 1999 and helped to negotiate its rescue by 14 Wall Street firms after the fund lost $4 billion in a few weeks in 1998. The Federal Reserve brokered the bailout on concern that LTCM’s collapse would cause a meltdown in financial markets.
WASHINGTON—China continued selling U.S. Treasurys in January, although it remained the top foreign holder following upward revisions to past data, the Treasury Department said.
Overall, foreigners were modest net buyers of long-term U.S. financial assets in January, according to the monthly Treasury International Capital report, known as TIC.
China remained a net seller of Treasurys, with its holdings falling $5.8 billion to $889.0 billion in January, following net sales of over $34 billion in December.
The Chinese are wise! This is the mother of all bubbles!
March 15 (Bloomberg) -- The U.S. and the U.K. have moved “substantially” closer to losing their AAA credit ratings as the cost of servicing their debt rose, according to Moody’s Investors Service.
The governments of the two economies must balance bringing down their debt burdens without damaging growth by removing fiscal stimulus too quickly, Pierre Cailleteau, managing director of sovereign risk at Moody’s in London, said in a telephone interview.
Under the ratings company’s so-called baseline scenario, the U.S. will spend more on debt service as a percentage of revenue this year than any other top-rated country except the U.K., and will be the biggest spender from 2011 to 2013, Moody’s said today in a report.
“We expect the situation to further deteriorate in terms of the key ratings metrics before they start stabilizing,” Cailleteau said. “This story is not going to stop at the end of the year. There is inertia in the deterioration of credit metrics.”
The pound fell against the dollar and the euro for the first time in three days, depreciating 0.8 percent to $1.5090, while the dollar index snapped a four-day drop, adding 0.3 percent to 90.075.
The U.S. government will spend about 7 percent of its revenue servicing debt in 2010 and almost 11 percent in 2013, according to the baseline scenario of moderate economic recovery, fiscal adjustments in line with government plans and a gradual increase in interest rates, Moody’s said.
Under its adverse scenario, which assumes 0.5 percent lower growth each year, less fiscal adjustment and a stronger interest-rate shock, the U.S. will be paying about 15 percent of revenue in interest payments, more than the 14 percent limit that would lead to a downgrade to AA, Moody’s said.
U.K. Debt Service
The U.K. is likely to spend 7 percent of revenue servicing debt this year and 9 percent in 2013, rising to almost 12 percent under the adverse scenario, Moody’s said.
Financing costs above 10 percent put countries outside of the AAA category into a so-called debt reversibility band, the size of which depends on the ability and willingness of nations to reduce their debt burden by raising taxes or reducing spending. The U.S. has a 4 percentage-point band, while the U.K. has a 3 percentage-point band.
“Those economies have been caught in a crisis while they are highly leveraged,” Cailleteau said, referring to the level of private and public debt as a percentage of gross domestic product. “They have to make the required adjustment to stabilize markets without choking off growth.”
The U.S. would be the “most affected” under the adverse scenario, as the only country that would face a downgrade, Cailleteau said. The company’s baseline scenario assumes that all current AAA sovereigns will keep their ratings over the next three years, he said.
‘Warning Shot’
“On balance, we believe that the ratings of all large Aaa governments remain well positioned, although their ‘distance-to- downgrade’ has in all cases substantially diminished,” Moody’s said in the report.
None of the current Aaa rated countries are likely to lose their ratings, said Peter Chatwell, a fixed-income strategist at Credit Agricole CIB in London.
“This report is a warning shot to governments, setting out the line that they can’t cross with their budgets,” he said.
While the U.S. is likely to benefit from economic growth more than other AAA nations, weak public consumption is likely to weigh on GDP this year, the ratings company said.
“The pattern of growth and the high rate of unemployment raise the question of how strong the recovery will be going forward,” Moody’s said. “The ability of the U.S. economy to grow more rapidly and, therefore, for government revenues to contribute to fiscal consolidation, will have to depend on a revival in the growth of consumption.”
I was also stunned to learn that Moody's warned that coming "fiscal adjustments" will be required that will likely cause social unrest. Wow!
SAN FRANCISCO (MarketWatch) -- Mark Twain famously observed that October is one of the most dangerous months to speculate in stocks. The others, he added, "are July, January, September, April, November, May, March, June, December, August, and February."
Maybe the humorist was using a different calendar. There's ample evidence that the stock market's performance is tied to the time of year and even the days of a month. Seasonal patterns persist not just in the U.S., but in other countries as well.
It's been a year since the stock market started to rebound and 10 years since the Internet bubble burst. Each milestone has its lessons for investors, according to Money & Investing editor Jonathan Burton.
For instance, the quarter is coming to a close and the market's worst six-month stretch is on the horizon. Those calendar effects have influenced stocks before, and you can expect they will again. Stocks, as they always do, follow money flows and fluctuate in ways that echo the past.
What's behind this seasonality? Human nature, said Jeffrey Hirsch, editor-in-chief of the Stock Trader's Almanac, a weathervane for the market's calendar-based moves.
"There is a habitual nature to society and human activity," Hirsch said. "People's behavior and what they do with their money and time bears upon economics and the stock market."
If you recognize these patterns, you can increase the odds of matching or even outperforming the market with considerably less risk. Plus, transaction costs are no longer an issue nowadays using a discount broker and exchange-traded funds such as SPDR S&P 500 (NYSE:SPY) , iShares Russell 2000 Index (NYSE:IWM) , or any comparable fund tracking a broad-based benchmark.
One of the most visible calendar patterns is the so-called Halloween effect, also known as the "Sell in May" indicator, which holds that stocks typically are weaker during summer than winter. Another pattern appears in the final trading days of the month and the first trading days of the new month. A subset of that is the "first day of the month trade" -- buying and selling a market index on the first trading day of the month and not going back in until the first day of the next month.
Other market biases surface as well: Stocks tend to be stronger during the middle of the month, particularly over the five trading days before St. Patrick's Day, March 17. As part of that, Hirsch said, the ninth trading day of March has been positive for the Nasdaq index more than 70% of the time since 1986, including most recently its rise on Thursday. Stocks also tend to rise in the two or three trading days before a market holiday, such as July Fourth or Christmas.
To be sure, many skeptics dismiss calendar effects as random events, giving them about as much predictive credit as astrology. Naysayers have even more reason to disbelieve after the past couple of years. Going long U.S. stocks in November 2008 and holding through April 2009 would have cost you big money. You'd have compounded the injury by selling then and sitting out until November as stocks recovered.
Accordingly, use these indicators as a market guide, not a GPS. "These things don't happen every time; it's a general tendency," said Ed Clissold, senior global analyst at market strategists Ned Davis Research. "You're talking about odds that are modestly better than 50-50. You have to look at them in the context of what else is going on in the market."
Moreover, individual investors tend to lack the discipline such trading strategies demand. If you do attempt seasonally driven trades, venture just a small portion of your money. And be wary of "experts" peddling timing systems that purport to outperform the market year-in and year-out.
"It's like being a card counter; you have to play many rounds to get the numbers in your favor," said Mark Hulbert, editor of the Hulbert Financial Digest, which tracks the performance of investment advisory newsletters and is a service of MarketWatch, the publisher of this report. "There's never a guarantee that these systems will work every year. The merit is to come close to the market's return while incurring below-average risk."
1. Halloween effect
"Sell in May and go away" is a time-worn market adage, referring to the period from May through October that has been the weakest for U.S. stocks going back at least 60 years. May, June and August typically have been lackluster, with September especially treacherous, according to the Stock Trader's Almanac.
Meanwhile, the six months from November through April, with the exception of February, have marked the strongest period for the benchmark Standard & Poor's 500 Index (INDEX:SPX) .
S&P 500 monthly average performance*
(Jan. 1970 - Feb. 2010)
January
1.0%
February
-0.08
March
0.99
April
1.3
May
0.76
June
0.29
July
0.28
August
0.35
September
-0.89
October
0.44
November
1.3
December
1.69
*Not including dividends
Data: Standard & Poor's Inc.
In fact, for the past 20 years or so, dreaded October also has been a generally winning month for the markets, suggesting that traders may be trying to front-run the traditional year-end buildup.
"There's a sprint to the finish," said Richard Ross, global technical strategist at Auerbach Grayson, a New York-based brokerage. Traders start to focus on bonuses, holidays, vacations, he said, adding that "There are a lot of tailwinds behind the market."
The pattern continues into January and through the spring, with the first month's performance tending to be a barometer for the rest of the year.
"The cycles of greed and fear happen to coincide with the seasons," Ross said. "This has been ingrained in the markets from the very beginning."
The Halloween effect's notoriety should have eliminated it as an opportunity long ago, or in the words of Yogi Berra: "Nobody goes there anymore; it's too crowded."
But it has persisted in the U.S., and many countries. "Even though it does not work every year, I think it is hard to find periods of, say, a decade when it would not have worked," said Ben Jacobsen, a finance professor at Massey University in New Zealand who has published seminal research on the Halloween indicator.
"Generally," he said, the November through April trading pattern "works often enough to make the believers happy and a bit richer on average and the skeptics happy as well but a bit poorer on average."
2. Turn of the month indicator
In this strategy, you buy on the last trading day of the month and sell after the first three or four days of the next month.
Why has this approach succeeded? Again, you're following the money. Money managers are "window-dressing" portfolios at the end of the month to improve returns, while pension funds and automatic retirement plans are also contributing to buying demand.
"Selling into the early month's strength is a good strategy," Ross said. "If you get a pickup in the first couple of days, money is definitely coming off the sidelines out of retirement programs, and money managers have a clean slate and you get a nice lift up."
The best illustration of this indicator's power comes from "The Seasonality Timing System," backed by research from veteran market strategist Norm Fosback, editor of Fosback's Fund Forecaster newsletter.
The system calls for being 100% invested on the last trading day of the month and selling after four trading sessions of the next month, and also being fully invested for the two trading days preceding a market holiday.
"The Seasonality Timing System has been superb on a risk-adjusted basis," Hulbert wrote in a recent MarketWatch article. In an interview, he added: "It's the best market timing system of any." See Mark Hulbert's column on this timing system.
According to Hulbert's research, a portfolio that switched between the Wilshire 5000 Index and 90-day T-Bills on the seasonality system's signals gained 4.1% annualized on average from the end of December 1999 through the end of February 2010, versus a 0.3% decline for a buy-and-hold investor. Importantly, you took only one-third of the market's risk.
That makes sense in a declining market, when missing the worst days would have been to your benefit. What about a bull run? From Dec. 31, 1989 through Dec. 31, 1999, the seasonality system gained 13.4% on average each year, compared to 17.6% for buying and holding.
While that's a smaller total return, the strategy carried only about 40% of the market's risk. On a risk-adjusted basis, that puts the timing system ahead of buying and holding, Hulbert said.
Fosback created the system in the mid-1970s, based on data going back to 1926.
"It's been 35 years in real time," Fosback said. "Over this 35-year period it has continued to demonstrate above-average returns. You wouldn't have beaten the market, but you would have earned a return pretty close to the market's average."
And you'd have captured this performance without suffering through the market's unpredictable swings. "You're exposed to the risk of market fluctuations just 30% of the time; 70% of the time you're absolutely risk-free," Fosback said.
If the turn of the month effect is due to month-end paycheck, pension contributions and other sources, what accounts for the bullish sessions leading into market holidays?
Fosback attributes this to the unwillingness of short-sellers to leave positions exposed to market-changing events over holidays. "My hypothesis is there was short covering the day before the holiday in particular, and traders put back their positions after," he said.
Fosback added that the seasonality system seems more valuable nowadays for smaller stocks, and suggested that investors starting out might consider a small-cap ETF that tracks the Russell 2000 Index (INDEX:RUT) , for instance.
3. First day of the month trade
A subset of the turn of the month effect is the "first day of the month" trade, where you're in the market for one full day each month and in cash for the remainder of the month.
This strategy, not surprisingly, dominates in bearish periods For example, from the end of 1999 through March 1, an investor who followed the trade using the S&P 500 as a proxy would be up 28% on a cumulative basis, and a $10,000 investment would be worth about $12,800, according to S&P. A buy-and-hold investor, on the other hand, would have lost 25% cumulatively and $10,000 would be worth only about $7,600.
"In a bear market, it does better," said Howard Silverblatt, senior index analyst at Standard & Poor's.
Not so in bull markets. From the first trading day of 1990 until Dec. 1, 1999, the first day trade in the S&P 500 would have netted you about 3.5% annualized, excluding dividends, and a $10,000 investment would have been worth $10,406.
Buy and hold, meanwhile, would have delivered a yearly gain of 15.3% and that $10,000 would have grown to more than $41,000.
So be careful when utilizing this or any other trade and pay attention to broader market trends and technical analysis. "There's no indicator or strategy in isolation that generates a buy or sell signal," said Auerbach Grayson's Ross. "You need a cluster of evidence supporting or disproving your case."
Still, the odds are in the first-day trade's favor. From 1926, about 57% of these trades were up, versus 52% of all the days, S&P reports. Said Silverblatt: "More cash coming in pushes the market up, even in a declining market."
NEW YORK--U.S. consumer sentiment took a surprise negative turn in early April due to a persistently grim outlook on income and jobs, a private survey released Friday showed.
A slip in economic expectations to its lowest in a year likely stemmed from consumers hearing negative information on government programs and a perception that the recovery is too slow, according to Thomson Reuters/University of Michigan's Surveys of Consumers.
"While consumers think the overall economy will continue to improve, they still hold quite negative views on their own income and job prospects," Richard Curtin, director of the surveys, said in a statement.
Consumer sentiment is seen as a proxy for consumer spending, which fuels about 70% of the U.S. economy.
I'm somewhat surprised at this. If industrial use was picking up, we should see a manifestation of that in weekly storage declines and a pickup in usage. That said, the volume has already turned higher! Prices are now lower than last year's low.
this from Andrew Willis at Canada's The Globe and Mail:
Be wary of gold and gold mining stocks once interest rates start to rise.
With the Bank of Canada and U.S. Federal Reserve expected to beginning tightening this summer, analysts at RBC Dominion Securities are out this week with a report that looks at how bullion and gold stocks perform during economic cycles. The investment dealer crunched the last nine periods of rising rates and concluded “on average, gold equities outperform prior to the hike and lag thereafter.”
It’s difficult, or dangerous, to focus on any one outside factor when trying to forecast bullion prices, and RBC Dominion pointed to a number of forces that will move gold, apart from monetary policy, such as central bank gold selling, heightened geopolitical risk concerns and U.S. dollar weakness.
When I was 21 years old, a friend of mine and I decided to go off to see the world. Many of our friends were going to Europe and hitchhiking around with rucksacks. We decided to be different and go to Africa instead. It never occurred to us to ask why no one else was going to Africa. We found out later, much to our great regret.
To get to our destination in Africa, we had to cross the Sahara. We started out from London, riding bicycles across France and Spain. The labor was excruciating, the progress slow, and the pleasure was nonexistent.
In Gibraltar, we sold our bicycles and invested our last few dollars in an old Land Rover. We crossed from Gibraltar to Tangier into Algeria. We were on our way in Africa. Still, there was one obstacle between us and the greenery we were anxious to see. It was that darn old desert. We had no idea how serious and how difficult this adventure was to be.
As we moved south across the desert, we encountered endless problems, any one of which could have ended our trip and, probably, our lives. Yet, it was during this desert crossing that I learned one of the most important lessons in my life about attitude.
The French, who had controlled Algeria for many years, had marked a path across the desert with black 55- gallon oil drums. The drums were spaced exactly five kilometers apart. As we drove and came to an oil drum, the next drum, which was five kilometers ahead, would pop up on the horizon, and the last oil drum, which was five kilometers behind, would fall off the horizon. Wherever we were, we could always see two oil drums at a time — the one we had just left and the one we were headed toward. To cross one of the greatest deserts in the world, all we had to do was take it "one oil barrel at a time." We did not have to cross the entire desert at once. For me, crossing the Sahara was a metaphor for life. In order to maintain a positive attitude under all circumstances, all you have to do is take it one step, one oil barrel, at a time. As Thomas Carlyle said, "Our great business is not to see what lies dimly at a distance, but to do what lies clearly at hand."
In any endeavor we can choose to be positive and constructive, sit down and think through the situation, and then begin to deal with it one oil barrel — one small achievement — at a time. Of course, this isn't always as easy as it sounds. We all must overcome the four obstacles that tend to get in the way of our maintaining a positive attitude. OVERCOMING THE FOUR OBSTACLES TO A POSITIVE ATTITUDE
These obstacles are fear, worry, anger, and doubt. When things are not working out the way we had expected, our immediate response is to become fearful and uneasy. We are afraid that we will lose our money, waste our effort, or forfeit our emotional or physical investment in what we have done. If we are not careful, we start thinking of our potential losses rather than focusing on our potential gains.
Fear triggers worry, and we begin to use our power of imagination to create all sorts of negative images that cause us unhappiness and insomnia, and make us unable to perform efficiently. Fear and worry create anger, or what has been called the "victim complex." Instead of moving constantly forward in the direction of our dreams, we begin to react and respond, and to blame other people and other situations for our problems and challenges at hand.
Surrounding these negative emotions is the mental quality of doubt. Doubt is a fertile breeding ground for the other three negative emotions. Therefore, to eliminate these obstacles to positive thinking, you need to systematically eradicate the weakening emotion of doubt.
How do you do this? It's simple. The only real antidote to fear, worry, anger, and doubt is positive action toward the achievement of some worthwhile ideal.
Psychologists tell us that the key to dealing effectively with life is what they call "cognitive control." This is the assumption that you can think about, and concentrate on, only one thing at a time, either positive or negative. Successful people consciously choose to think about what they want, rather than what they don't want. As a result, they are continuously taking action toward their goals, rather than spending their time thinking and worrying about the current difficulties or the inevitable challenges that are sure to face them. WHAT IS HOLDING YOU BACK?
People who never achieve success do so because they fall in love with their excuses. It isn't the actual truth about yourself and your abilities that hurts you; it is the things you consider to be true but have no basis in truth that hold you back.
We naturally fall in love with our reasons for not moving ahead. Even if someone challenges those reasons, or tells us that we have the capacity to accomplish so much more, we will often argue with them.
We attempt to prove to ourselves and others that our limitations are real, and the less justification these ideals or beliefs have, the more adamant we become in attempting to prove them to others. Richard Bach wrote this beautiful line: "Argue for your limitations, and sure enough, they're yours."
So how do you change your beliefs? The starting point is to get up the courage to question these self-limiting beliefs seriously. Question your basic premises. Check your assumptions. Ask yourself, What assumptions am I making about myself or my situation that might not be true? Think about them. Remember, most of our self-limiting beliefs have no basis whatsoever in fact. They are based on information and ideas that we have accepted as true, sometimes in early childhood, and to the degree we accept them as true, they become true for us.
You can always tell what your true values and beliefs are by looking at your actions. It isn't what you say or wish or hope or intend that demonstrates what you really believe. It is only what you do. It is only the behaviors that you engage in. It is only the actions you choose to undertake. And out of your actions come all the elements of your life. You are where you are and what you are because of what you have done in the past. But the wonderful news is, the past doesn't have to hold you back. That's because we are in a perpetual state of becoming. A STATE OF BECOMING
The clearer you are about your ideal result or future vision, the easier it is for you to alter your actions and behaviors in the short term to assure that you get where you want to be in the long term. You have no limitations on your potential except for those you believe you have. As Walter D. Wintle wrote: The Man Who Thinks He Can
If you think you're beaten, you are;
If you think you dare not, you don't.
If you would like to win, but think you can't,
It's almost a cinch you won't.
Life's battles don't always go
To the stronger or faster man;
But sooner or later the man who wins
Is the man who thinks he can. THINK LIKE A WINNER
Thinking like a winner is the first step to living like a winner. You will become that which you think about most of the time. You are the architect of your personality and character. Your goal, your desire, is to be as successful, happy, and prosperous as you possibly can be in every aspect of your life. Therefore, the systematic development of a positive attitude is something that you need to work on every hour of every day. Continue to work on yourself and your thinking until you reach the point where you absolutely, positively believe yourself capable of winning in anything you sincerely want to accomplish.
People succeed not because they have remarkable characteristics or qualities. The most successful people are quite ordinary, just like you and me. Most of us start off poor and confused. We spend many years getting some sort of direction in our lives. But the turning point comes when we begin to believe that we have within us that divine spark that can lead us onward and upward to the accomplishment of anything that we really want in life. So, become the man or woman who thinks, I can. And when you reach the point where you feel unshakable confidence in yourself and your abilities, nothing will be able to stop you, not even the Sahara. Just stay your course and take each challenge ... one oil barrel at a time. THE 3 DIFFERENCES BETWEEN OPTIMISTS & PESSIMISTSIn his book Learned Optimism, Dr. Seligman claims there are three fundamental differences between optimists and pessimists.
The optimist sees a setback as temporary, while the pessimist sees it as permanent. The optimist sees an unfortunate event — something limited in time and that has no real impact on the future. The pessimist sees a negative event as permanent, as part of life, as destiny, as an indication of more to come.
The optimist sees difficulties as specific, while the pessimist sees them as pervasive. When things go wrong for the optimist, he or she looks at the event as an isolated incident largely disconnected from other things that are going on in his or her life. An optimist perceives an unfortunate business incident as just that — a business incident. The pessimist would question the validity of the entire business or business direction. The pessimist would tend to feel helpless, unable to make a difference to correct the issue.
The optimist sees events as external, while the pessimist tends to interpret events as personal. When things go wrong, the optimist will tend to see the setback as resulting from external forces over which one has little control but which one can overcome. The pessimist takes negative events personally and as an indication of a larger pervasive personal shortcoming.
Picture your Future Success — and Get It!
Take every opportunity to surround yourself with images of what success means to you: Get brochures on new cars you desire; get magazines containing pictures of beautiful homes, beautiful clothes, well-toned bodies, and other things you will obtain as a result of achieving the success that you are aiming for. Each time you see or visualize those images, you trigger the thoughts, feelings, and actions that make them materialize in your life. But, don't wish for them ... that is day dreaming. Think about them as absolute certainties in your future and focus on who you must be today to achieve these icons of your future success. 6 STEPS TO ASSURE A POSITIVE ATTITUDE There are six things you can do to assure that your attitude is the very best it can be under all circumstances.
Whatever challenges you face, focus on the future rather than the past. Instead of worrying about who did what or who is to blame, focus on where you want to be and what you want to do. Get a clear mental image of your ideal successful future, and then take whatever action you can to begin moving in that direction. As the New Testament says, "Let the dead bury the dead." Let the past take care of itself, and get your mind, your thoughts, your mental images on the future.
Whenever you're faced with a difficulty, focus on the solution rather than on the problem. Think and talk about the ideal solution to the obstacle or setback, rather than wasting time rehashing and reflecting on the problem. Solutions are inherently positive, whereas problems are inherently negative. The instant that you begin thinking in terms of solutions, you become more positive and constructive.
Assume that something good is hidden within each difficulty or challenge. Dr. Norman Vincent Peale used to say, "Whenever God wants to give us a gift, he wraps it up in a problem." Lloyd Conant said it this way: "You don't earn the right to solve big problems until you have solved the small ones." In other words, the bigger the gift, the greater the success you have coming, the bigger the problem you will receive and must surmount.
Assume that whatever situation you are facing at the moment is exactly the right situation you need to ultimately be successful. The situation has been sent to you to help you learn something, to help you become better, to help you expand and grow. What good is it to think anything else?
In every challenge, look for a valuable lesson. Assume that every setback contains a lesson that is essential for you to learn. Only when you learn this lesson will you be smart enough and wise enough to go on and achieve the big goals that you have set for yourself. Again, since you can think about only one thing at a time, if you are busy looking for the lesson, you cannot simultaneously think about the difficulty or the obstacle. You will always find the lesson if you look for it.
Whenever you have a goal that is unachieved, a difficulty that is unresolved, or a problem that is blocking you from getting where you want to go, sit down with a pen and paper and make a list of every single thing that you could possibly do to resolve the situation. Write down every idea, ridiculous or not. The more you think on paper, the more you will take control over your conscious mind and focus it where you want — on the solution. (Don't miss The Greatest Problem Solving Tool by Earl Nightingale in the next issue of AdvantEdge).
I'm worried that the US economy could take another oil-related hit this summer. With prices reaching about $82.50 yesterday, and the summer driving season ahead of us, what will happen when peak gasoline consumption hits this summer? Typically, oil/gas prices rise beginning in late March, in anticipation of the higher demand during summer months. If this happens, then we could see crude oil prices of $100+ per barrel this summer, and this type of price rise in 2008 was a significant contributing factor to the collapse of the US economy in late summer 2008.
This is also particularly striking this year because the Dollar has been rising due to concerns about burdensome debt in the Eurozone, especially in Greece. If the price of crude is strong, even in the face of a strong Dollar and winter usage, what will happen in summer, and what will be the economic effects?
This year, natural gas prices peaked on 12/29/09, but only drifted marginally lower. Prices started to fall significantly on 2/18/10, and have been dropping ever since. In looking at past years, there is also typically a rise in prices in early September, with another dip around Thanksgiving, with prices rising again in late December. This could all be, and may even likely be, a response to weather forecasts showing colder or warmer winters.
The Obama administration will accept no more public input for a federal strategy that could prohibit U.S. citizens from fishing the nation's oceans, coastal areas, Great Lakes, and even inland waters.
This announcement comes at the time when the situation supposedly still is "fluid" and the Interagency Ocean Policy Task Force still hasn't issued its final report on zoning uses of these waters. That's a disappointment, but not really a surprise for fishing industry insiders who have negotiated for months with officials at the Council on Environmental Quality and bureaucrats on the task force. These angling advocates have come to suspect that public input into the process was a charade from the beginning.
"When the World Wildlife Fund (WWF) and International Fund for Animal Welfare (IFAW) completed their successful campaign to convince the Ontario government to end one of the best scientifically managed big game hunts in North America (spring bear), the results of their agenda had severe economic impacts on small family businesses and the tourism economy of communities across northern and central Ontario," said Phil Morlock, director of environmental affairs for Shimano. "Now we see NOAA (National Oceanic and Atmospheric Administration) and the administration planning the future of recreational fishing access in America based on a similar agenda of these same groups and other Big Green anti-use organizations, through an Executive Order by the President. The current U.S. direction with fishing is a direct parallel to what happened in Canada with hunting: The negative economic impacts on hard working American families and small businesses are being ignored. "In spite of what we hear daily in the press about the President's concern for jobs and the economy and contrary to what he stated in the June order creating this process, we have seen no evidence from NOAA or the task force that recreational fishing and related jobs are receiving any priority." Consequently, unless anglers speak up and convince their Congressional representatives to stop this bureaucratic freight train, it appears that the task force will issue a final report for "marine spatial planning" by late March, with President Barack Obama then issuing an Executive Order to implement its recommendations — whatever they may be. Led by NOAA's Jane Lubchenco, the task force has shown no overt dislike of recreational angling, but its indifference to the economic, social and biological value of the sport has been deafening. Additionally, Lubchenco and others in the administration have close ties to environmental groups who would like nothing better than to ban recreational angling. And evidence suggests that these organizations have been the engine behind the task force since before Obama issued a memo creating it last June.
One sign at the rally of recreational and commercial fishermen summed up the feelings.
As ESPN previously reported, WWF, Greenpeace, Defenders of Wildlife, Pew Environment Group and others produced a document entitled "Transition Green" shortly after Obama was elected in 2008. What has happened since suggests that the task force has been in lockstep with that position paper. Then in late summer, just after he created the task force, these groups produced "Recommendations for the Adoption and Implementation of an Oceans, Coasts, and Great Lakes National Policy." This document makes repeated references to "overfishing," but doesn't once reference recreational angling, its importance, and its benefits, both to participants and the resource. Additionally, some of these same organizations have revealed their anti-fishing bias by playing fast and loose with "facts," in attempts to ban tackle containing lead in the United States and Canada. That same tunnel vision, in which recreational angling and commercial fishing are indiscriminately lumped together as harmful to the resource, has persisted with the task force, despite protests by the angling industry. As more evidence of collusion, the green groups began clamoring for an Executive Order to implement the task force's recommendations even before the public comment period ended in February. Fishing advocates had no idea that this was coming. Perhaps not so coincidentally, the New York Times reported on Feb. 12 that "President Obama and his team are preparing an array of actions using his executive power to advance energy, environmental, fiscal and other domestic policy priorities." Morlock fears that "what we're seeing coming at us is an attempted dismantling of the science-based fish and wildlife model that has served us so well. There's no basis in science for the agendas of these groups who are trying to push the public out of being able to fish and recreate. "Conflicts (user) are overstated and problems are manufactured. It's all just an excuse to put us off the water." In the wake of the task force's framework document, the Congressional Sportsmen's Foundation (CSF) and its partners in the U.S. Recreational Fishing & Boating Coalition against voiced their concerns to the administration. "Some of the potential policy implications of this interim framework have the potential to be a real threat to recreational anglers who not only contribute billions of dollars to the economy and millions of dollars in tax revenues to support fisheries conservation, but who are also the backbone of the American fish and wildlife conservation ethic," said CSF President Jeff Crane. Morlock, a member of the CSF board, added, "There are over one million jobs in America supported coast to coast by recreational fishing. The task force has not included any accountability requirements in their reports for evaluating or mitigating how the new policies they are drafting will impact the fishing industry or related economies. "Given that the scope of this process appears to include a new set of policies for all coastal and inland waters of the United States, the omission of economic considerations is inexcusable." This is not the only access issue threatening the public's right to fish, but it definitely is the most serious, according to Chris Horton, national conservation director for BASS. "With what's being created, the same principles could apply inland as apply to the oceans," he said. "Under the guise of 'marine spatial planning' entire watersheds could be shut down, even 2,000 miles up a river drainage from the ocean. "Every angler needs to be aware because if it's not happening in your backyard today or tomorrow, it will be eventually. "We have one of the largest voting blocks in the country and we need to use it. We must not sit idly by."
Brazil moved on Monday to raise tariffs on a wide range of American goods, potentially igniting a trade war with the US over cotton subsidies after eight years of litigation at the World Trade Organisation.
The decision takes effect next month, starting a 30-day period during which US and Brazilian officials will attempt to negotiate a solution to the dispute..
Under the Brazilian plan, duties would rise most steeply on cotton products. Many that are currently taxed at between 6 per cent and 35 per cent would be taxed at 100 per cent. The tariffs on beauty products would double, from 18 per cent to 36 per cent. Duties on household goods such as cookers, refrigerators, TVs and video cameras would also double, from 20 per cent to 40 per cent. Duties on cars would rise from 35 per cent to 50 per cent.
Brazil is allowed to impose the tariff increases – worth $560m – after winning a case at the WTO last year. Brazil challenged the legality of direct subsidies to US cotton farmers to protect them against fluctuations in global prices and a loan guarantee programme for international buyers of US cotton.
Brazil could also impose further penalties – known as “cross-retaliation” – on US intellectual property rights, potentially breaking patents in the pharmaceuticals, technology and media industries.
China’s central bank chief laid the groundwork for an appreciation of the renminbi at the weekend when he described the current dollar peg as temporary, striking a more emollient tone after months of tough opposition in Beijing to a shift in exchange rate policy.
Zhou Xiaochuan, governor of the People’s Bank of China, gave the strongest hint yet from a senior official that China would abandon the unofficial dollar peg, in place since mid-2008. He said it was a “special” policy to weather the financial crisis.
“This is a part of our package of policies for dealing with the global financial crisis. Sooner or later, we will exit the policies.”
Mr Zhou’s comments contrasted with recent Chinese comments on its currency policy in the face of international criticism that the renminbi was undervalued. In December, premier Wen Jiabao said: “We will not yield to any pressure of any form forcing us to appreciate.” Chinese officials have repeatedly emphasised the need for a stable exchange rate.
However, while the recent increase in consumer prices in China has strengthened the hand of those officials who think the currency should now rise, it is not clear that this argument has yet won over the country’s senior leaders.
Indeed, Mr Zhou gave no hint about the possible timing of a shift in policy.
I am a student of economics, financial analyst, and futures trader, specializing in agricultural commodities, and especially grains, but I also trade gold and other metals, soft commodities, treasuries, and stock index futures.
I began trading spot Forex currency crosses in May 2003, and in August 2006, I met a futures trader who has been making a living in futures for more than 20 years, and he became my futures mentor. I've never looked back, and I am now head trader for Global Capital Reserves, my own firm.
I also have both Bachelors and Master of Science degrees in business.
I really enjoy trading futures, and hope to share my successes, a few failures, and methodologies.
