Moody's Warns of US, UK Credit Rating

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!

Seasonal Stock Trading Strategies

How you can profit from seasonal patterns in stocks

By Jonathan Burton, MarketWatch

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."

 

Consumer Mood Declines

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.

Natural Gas Prices Continue to Decline

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.

Gold Price Linkage to Rate Tightening, Other Macroeconomic Variables

Gold is down about $10 today.

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.

Maintaining a Positive Attitude in Trading

from Brian Tracy and Nightingale Conant:

THINK LIKE A WINNER

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 & PESSIMISTS In his book Learned Optimism, Dr. Seligman claims there are three fundamental differences between optimists and pessimists.

1. 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.
2. 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.
3. 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.

1. 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.
   
2. 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.
   
3. 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.
   
4. 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?
   
5. 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.
   
6. 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).

With Crude Oil at $82.50 Now, What Will Summer Bring?

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?

Natural Gas Seasonal Factors

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.

Obama to "Cull" Jobs in Recreational Fishing, Curtail Fishing?

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."

U.S. Risks Trade War With Brazil Over Cotton

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.

Dollar Unhinged - China Considering Severing Renminbi From Dollar

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.

Jobs, Jobs, Jobs

Only at CNBC is a jobs loss considered "positive".

from CNBC:
Friday's better-than-expected jobs report, while cheering stock investors, hasn't taken the threat of a double-dip recession off the table.
Even as the jobless rate held steady at 9.7 percent and the 36,000 workers laid off in February was much less than expected, economists and investment analysts said it's still too early to discount the economy's chances of revisiting recession.

"Eight months into the much-touted recovery, the economy should be adding jobs not just losing jobs at a slower pace," University of Maryland economist Peter Morici wrote in an analysis.

"No study of economic history could yield a conclusion other than that the US economy (walks) along the precipice of a double dip recession."

There were two ways to view the Friday jobs report, and Wall Street clearly chose the more optimistic.

Obama Has Underestimated His Deficits By $1.2 Trillion

March 5 (Bloomberg) -- President Barack Obama’s budget proposal would generate bigger deficits than advertised each year for the next decade, with the 10-year shortfall totaling $1.2 trillion more than the administration estimated, according to the Congressional Budget Office.
The nonpartisan CBO, in an annual analysis of the White House budget proposal, said today that under Obama’s plan deficits would never shrink below 4 percent of the economy between now and 2020. The cumulative deficits would total $9.76 trillion, and debt held by the public would amount to 90 percent of the nation’s gross domestic product by 2020, the CBO said.

Pending Home Sales Plunge Most Since April

WASHINGTON (MarketWatch) - A forward-looking gauge of home buying declined sharply in January, dropping to the lowest seasonally adjusted level since last April, an industry trade group reported Thursday. The pending home sales index fell a seasonally adjusted 7.6% in January after a revised 0.8% gain in December. The index remained 8.8% higher than in January 2009. The index tracks sales contracts signed on previously owned homes.

Stocks gave up all gains as a result, are now building a foundation to attempt another rise.

Another FInancial Crisis Coming

from ABC News:

Even as many Americans still struggle to recover from the country's worst economic downturn since the Great Depression, another crisis one that will be even worse than the current one is looming, according to a new report from a group of leading economists, financiers, and former federal regulators.
In the report, the panel, that includes Rob Johnson of the United Nations Commission of Experts on Finance and bailout watchdog Elizabeth Warren, warns that financial regulatory reform measures proposed by the Obama administration and Congress must be beefed up to prevent banks from continuing to engage in high risk investing that precipitated the near collapse of the U.S. economy in 2008.
The report warns that the country is now immersed in a "doomsday cycle" wherein banks use borrowed money to take massive risks in an attempt to pay big dividends to shareholders and big bonuses to management and when the risks go wrong, the banks receive taxpayer bailouts from the government.
"Risk-taking at banks," the report cautions, "will soon be larger than ever."
Without more stringent reforms, "another crisis a bigger crisis that weakens both our financial sector and our larger economy is more than predictable, it is inevitable," Johnson says in the report, commissioned by the nonpartisan Roosevelt Institute.
The institute's chief economist, Nobel Prize-winner Joseph Stiglitz, calls the report "an important point of departure for a debate on where we are on the road to regulatory reform."
The report blasts some of Washington's key players. Johnson writes, "Our government leaders have shown little capacity to fix the flaws in our market system." Two other panelists, Simon Johnson, a professor at MIT, and Peter Boone of the Centre for Economic Performance, voiced similar criticisms.
Federal Reserve Chairman Ben Bernanke and Treasury Secretary Tim Geithner "oversaw policy as the bubble was inflating," write Johnson and Boone, and "these same men are now designing our 'rescue.'"
The study says that "In 2008-09, we came remarkably close to another Great Depression. Next time we may not be so 'lucky.' The threat of the doomsday cycle remains strong and growing," they say. "What will happen when the next shock hits? We may be nearing the stage where the answer will be just as it was in the Great Depression a calamitous global collapse."

The panelists call for major banks to maintain liquid capital of at least 15 to 25 percent of their assets, the enactment of stiffer consequences for executives of bailout recipients and for government officials to start breaking up firms that grow too big.
In the report, Elizabeth Warren, who was chair of the Congressional Oversight Panel, reiterates her calls for an independent agency to protect consumers from abusive Wall Street practices.
"While manufacturers have developed iPods and flat-screen televisions, the financial industry has perfected the art of offering mortgages, credit cards and check overdrafts laden with hidden terms that obscure price and risk," Warren writes. "Good products are mixed with dangerous products, and consumers are left on their own to try to sort out which is which. The consequences can be disastrous."
Frank Partnoy, a panelist from the University of San Diego, claims that "the balance sheets of most Wall Street banks are fiction." Another panelist, Raj Date of the Cambridge Winter Center for Financial Institutions Policy, argues that government-backed mortgage giants Fannie Mae and Freddie Mac have become "needlessly complex and irretrievably flawed" and should be eliminated. The report also calls for greater competition among credit rating agencies and increased regulation of the derivatives market, including requiring that credit-default swaps be traded on regulated exchanges.
With the Senate Banking Committee, led by Chris Dodd, D-Conn., poised to unveil its financial regulatory reform proposal sometime in the next week, the report calls on Congress to enact reforms strong enough to prevent another meltdown.
"Sen. Dick Durbin once said the banks 'owned' the Senate," says Johnson. "The next few weeks will determine whether or not that statement is true."
In response to the report, a spokesman for the Treasury Department told ABC News that the administration's regulatory reform proposals would be the most significant Wall Street overhaul in generations.
"We laid out our strong principles of reform last June and we have been fighting every day since to see them enacted in law," said Treasury spokesman Andrew Williams. "While we have a tough fight ahead, we are getting close to seeing Congress pass the most significant overhaul of the financial sector in our lifetimes."

China Holds Far More U.S. Gov Debt Than Official Figures Indicate

from Washington Times:

Despite recent government reports that China's holdings of U.S. Treasury debt declined during the second half of last year, the Asian economic giant almost certainly owns far more Treasury securities than official statistics indicate.
After peaking at $801.5 billion, China's holdings of U.S. Treasury securities declined to $755.4 billion at the year's end, dropping the communist power into the position of second-largest holder of Treasury debt after Japan's $768.8 billion, official government data reveal.
But these numbers don't tell the whole story.
"The U.S. Treasury data almost certainly understate Chinese holdings of our government debt because [the U.S. figures] do not reveal the ultimate country of ownership when [debt] instruments are held through an intermediary in another jurisdiction," Simon Johnson, an economics professor at the Massachusetts Institute of Technology, told the U.S.-China Economic and Security Review Commission, a bipartisan forum established by Congress in 2000 to monitor the security implications of the U.S. economic relationship with China.
Mr. Johnson told the commission last week that "a great deal" of last year's $170 billion increase in Treasury holdings by the United Kingdom "may be due to China placing offshore dollars in London-based banks" and then using the funds to purchase Treasury debt.
Mr. Johnson, a former chief economist for the International Monetary Fund, estimated that China owns about $1 trillion in U.S. Treasury securities, or nearly half the $2.37 trillion stock of Treasury debt held by "foreign official" owners.
The amount of U.S. debt held by China is even higher than that, said Eswar Prasad, an economist at Cornell University.
Under the widely held assumption that 70 percent of China's $2.4 trillion in foreign exchange reserves is invested in dollar-denominated bonds, Mr. Prasad told the commission that China probably holds about $1.7 trillion in U.S. government debt.
That would include the more than $400 billion in debt issued by U.S. government agencies, such as Fannie Mae and Freddie Mac, whose obligations are liabilities of the U.S. government, Mr. Prasad said.
Derek Scissors, a China scholar at the Heritage Foundation, described as "unusable" the official U.S. government data on foreign holdings of Treasury debt.
China's mercantilist policies generate "by far the world's largest balance of payment surpluses" and contributed to China's $453 billion increase in foreign exchange reserves last year — surpluses that "are too large to put anywhere other than the United States. No other country has financial markets capable of absorbing them," Mr. Scissors said.
But the economists at last week's hearing disagreed about how much leverage China's creditor status commands over the U.S.
Maj. Gen. Luo Yuan told China's state-run Outlook Weekly magazine last month, shortly after the U.S. detailed new arms sales to Taiwan, that China's "retaliation should not be restricted to merely military matters" but also should be "covering politics, military affairs, diplomacy and economics."
"We could sanction them using economic means, such as dumping some U.S. government bonds," Gen. Luo said.
Michael Wessel, a member of the U.S.-China commission, began the hearing by noting that China, whose economy expanded by 10.7 percent during 2009, "emerged from the global recession stronger than ever, expecting its status as America's banker to convey new political power."
"The United States government, with its fiscal and monetary tools constrained by the recession, cannot easily extricate itself from its growing financial dependence on China," he said.
Leverage, however, works both ways, Mr. Wessel suggested, when he quoted oil magnate J. Paul Getty. "If you owe the bank $100, that's your problem," Getty famously said. "If you owe the bank $100 million, that's the bank's problem."
Mr. Johnson also downplayed China's leverage.
"There is a perception that China's large dollar holdings confer upon that country some economic or political power vis-a-vis the United States," said Mr. Johnson, citing the view that Chinese reserves prevent the United States from pressuring China to increase the value of its currency, the yuan, also known as the renminbi. "This view is incorrect and completely misunderstands the situation."
Daniel Drezner, a professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University, compared today's financial situation between China and the U.S. to the Cold War nuclear situation between the Soviet Union and the U.S.
He argued that the "balance of terror," which was connected with the nuclear policy of mutually assured destruction adopted by both adversaries, proved to be "a source of stability."
Mr. Drezner approvingly cited the analogy of Lawrence H. Summers, President Obama's chief economic adviser, who earlier coined the phrase "the balance of financial terror" to describe the U.S.-China financial relationship. Such a scary balance, Mr. Drezner told the commission, is "a source of stability and a source of anxiety."
Economists generally agree that the yuan is 25 percent to 40 percent undervalued, in large part because Chinese authorities instruct the central bank to purchase massive amounts of dollars in order to peg the yuan's value to the dollar at a level much lower than it otherwise would be, Mr. Johnson said.
A bipartisan coalition in Congress wants the Treasury Department to label China a currency manipulator in its next report, due April 15. Such a designation would require the Treasury Department to begin negotiations with China to let its currency rise in value and reduce the massive U.S. trade deficit with China, which has exceeded $200 billion for each of the past five years.
Under legislation proposed in Congress, currency manipulation would be designated as an unfair trade subsidy and would let U.S. companies seek import duties on Chinese goods.
"China is obviously a currency manipulator and should be so labeled by the U.S. Treasury," Mr. Johnson said.
Mr. Johnson called Chinese threats to dump dollar-denominated assets a "paper tiger" and "at worst a bluff and at best a way to help the U.S. with a depreciation of the dollar."
Mr. Scissors agreed. "Until the Chinese government is willing to break its dependence on the dollar — which there is not the slightest indication it is willing to do — [China] is compelled to buy American bonds and lacks the flexibility to wield any influence," he said.
Mr. Johnson said the current U.S. economic situation ensures that a substantial downward movement in the dollar "would have no noticeable effect on inflation and therefore would not force the Federal Reserve to increase interest rates."
Mr. Prasad, however, noted that the damage to the two countries' economies would not be equal.
"Any Chinese threat to move aggressively out of Treasuries is a reasonably credible threat as the short-term costs to the Chinese of such an action are not likely to be large," he said.
Moreover, even though China's share of the financing of the soaring U.S. budget deficit has declined over time, its actions still could affect U.S. interest rates, Mr. Prasad said.
"Its actions could serve as a trigger around which nervous market sentiments could coalesce," Mr. Prasad said. "Given that there are no clear prospects of reining in exploding deficits and debt in the U.S.," he added, "changes in availability of deficit financing at the margin can have potentially large consequences."
Mr. Scissors estimated that U.S. interest rates would rise at most three percentage points.
However, with U.S. national debt set to exceed $14 trillion before the end of the year, a three-percentage-point increase in interest rates would raise the annual cost of paying interest on that debt by more than $400 billion.
The commission was told that U.S. policymakers also need to consider the geopolitical and national security implications of operating a fiscal policy that depends on China and other foreign creditors, who collectively hold 50 percent of U.S. publicly held debt.
Clyde Prestowitz, president of the Economic Strategy Institute, recalled for the commission Britain's experience with the United States in 1956 after Britain joined France and Israel in seizing the Suez Canal after Egypt's nationalization of the waterway.
"President Eisenhower was furious over the seizure of Suez and informed the Brits that America would ruin the pound sterling if Britain did not withdraw," Mr. Prestowitz said. "And that was the end of the seizure.
"Now, America is not Britain and China is not America," Mr. Prestowitz said. "But if that is how your friends can treat you when you owe them, it is not difficult to imagine that less-friendly states could be quite difficult in certain circumstances."

Running Out of Other People's Money

from the Striker Report:

USA Today recently reported that the number of federal employees making salaries of $100,000 or more increased from 14% to nearly 20% of civil servants in the first year and a half of the recession. The average federal worker's pay is now $71,206, compared with $40,331 in the private sector, according to the article.

These numbers seem likely to arouse taxpayer ire, at least among workers in the private sector.

The Obama Administration has countered these charges by observing that federal civilian workers are on average better educated then their private sector counterparts. By some estimates twenty percent of federal workers have a master's, professional or doctorate degree, compared with only 13 percent in the private sector.

Nevertheless, job growth in government has far exceeded that of the private sphere even as federal and state deficits have soared. In fact, the U.S. private sector has shed over 200,000 jobs in the last decade, while government employment has expanded.

British Prime Minister Margaret Thatcher once famously observed that "the trouble with socialism is that sooner or later you run out of other people's money to spend".

While the American economic system is currently far from socialism, the trend toward increasing public domination of the economy will likely give pause to advocates of private enterprise.

Some economists have become concerned that Washington�s policies may be 'crowding out' private investment; after all, why should banks loan money to risky private businesses when they can park it at the Fed and receive a safe rate of interest?

Business Week's Adrian Slywotsky has written that of the 130 million or so jobs currently in the U.S., only 20% pay more than $60,000 a year, while the other 80% pay an average of $33,000.

Meanwhile, the number of Defense Department civilian employees earning $150,000 or more increased from 1,868 in December 2007 to 10,100 in June 2009, according to USA Today.

This brings us back to Mrs. Thatcher's question: where is the money going to come from to pay for the expanding Federal and state payrolls?

The problem is compounded by health care and pension issues.

California Governor Arnold Schwarzenegger recently told the Sacramento Press Club that over the last 10 years, state pension costs have gone up by 2,000 percent from $150 million per year to $3 billion a year, not including health care costs.

What's more, the number of public employees in California collecting $100,000-plus pensions has risen from about 2,500 in 2004 to 15,000 currently. State Treasurer Bill Lockyer told lawmakers they needed to reform the pension system or face bankruptcy.

A further concern is the composition of the public expenditures; California taxpayers are on pace to spend more on incarceration then on public universities by 2012.

California is hardly alone in its budget woes. A study by the Pew Charitable Trusts found that U.S. states in general have promised at least $2.73 trillion in pension, health care and other retirement benefits for public employees over the next three decades. While the study showed that the states have saved enough to cover 85% of this amount, they have only enough to cover 3% of the health care and non-pension benefits, and are still short $731 billion.

One possible clue to the origins of these shortfalls may be found in the changing nature of unionization. According to the Fresno Bee, the number of union members in the public sector exceeded their private-sector counterparts for the first time last year, while unions nationwide lost 10 percent of their private-sector members, the largest drop in more than 25 years.

Given the disparities in hiring, benefits and pay, it's becoming increasingly hard to see why workers would choose the private sector over the public, a trend that does not bode well for private industry in the United States.

Larry Summers: February Job Losses Are Going to Be Really Bad!

WASHINGTON, March 1 (Reuters) - White House economic adviser Larry Summers said on Monday winter blizzards were likely to distort U.S. February jobless figures, which are due to be released on Friday.
"The blizzards that affected much of the country during the last month are likely to distort the statistics. So it's going to be very important ... to look past whatever the next figures are to gauge the underlying trends," Summers said in an interview with CNBC, according to a transcript.
Construction activity was hit particularly hard by the storms, but many restaurants and stores also had to close, putting the brakes on hiring plans and temporarily throwing some employees out of work.

Comments from the same story:
Mr. Summers I have only one thing to say….WHAT A LOAD OF CRAP!

Another false claim…I bet there were no government jobs lost. Does the adminstration really think we are stupid?

Also….people please take a nice long look at what is happening in Greece, Spain, Portugal, and possibly Italy. This is the future of the USA unless this spending madness is stopped.

Temporary job loss of a few days allows unemployment claims? When did this start?
Must have to have some reason for expected bad news?

LOL, surprised they didn’t also use the blame Bush card. Watch, this Summer will be too hot for employment…

More People Taking... Than Making... Money

The so-called "Great Recession" has left Americans depending on the government dole like never before.
Without record levels of welfare, unemployment and other government benefits as well as tax cuts last year, the income of U.S. households would have plunged by an astonishing $723 billion — more than four times the record $167 billion drop reported last month by the Commerce Department.
Moreover, for the first time since the Great Depression, Americans took more aid from the government than they paid in taxes.

California Is the Debt Threat

Mr Dimon told investors at the Wall Street bank's annual meeting that "there could be contagion" if a state the size of California, the biggest of the United States, had problems making debt repayments. "Greece itself would not be an issue for this company, nor would any other country," said Mr Dimon. "We don't really foresee the European Union coming apart." The senior banker said that JP Morgan Chase and other US rivals are largely immune from the European debt crisis, as the risks have largely been hedged.

California however poses more of a risk, given the state's $20bn (£13.1bn) budget deficit, which Governor Arnold Schwarzenegger is desperately trying to reduce.


Nothing to worry about. The stock market is higher, back to ignore-the-risk mode.

Chris Wood at CLSA Sees U.S. Monetary Collapse As the End Game

My view is that there is an inevitable endgame as a result of all this massive spending of taxpayer money in the West and Japan to bail out bankrupt banking systems, so in my view unfortunately the end game will be systemic government debt crisis in the western world. It will probably happen in Europe and will climax in the US, and I am expecting on a five year view the collapse of the US Dollar paper standard...The key reason why that is the endgame is that this credit crisis we saw in the west in 2008 and 2009 has simply been deferred, because 95% of the so-called government policy solutions to deal with this crisis have simply been to extend government guarantees. So the problem has been transferred from the private sector to the public sector. It is just a matter of time before investors revolt against these sovereign guarantees...The crisis is going to happen first in Europe, the US will be the endgame. -- Chris Wood from CLSA, Asia's Independent Voice

U.S. Senator Says Debt-Driven Debacle Coming

from FT:
The US is heading for a debt-driven “financial meltdown” within five to seven years, according to Judd Gregg, the outgoing Republican senator for New Hampshire.
In a robust and at times testy video interview for the Financial Times’s View from DC series, Mr Gregg also complimented China for showing rising alarm about the US’s mounting levels of public debt.
“We have had China say that they are looking for other places to put their reserves and that is probably a smart decision on their part,” said Mr Gregg, who will not seek re-election in November. “So the warning signs are pretty clear and the path is unsustainable and, at this point, unless we take different actions, unavoidable.”
But the senator...said he doubted that the two parties would get together to tackle it.

"Profitability is found in the friction between perception and reality" - Todd Harrison

Harrison continues:
"the question is therefore begged, has the former finally caught up to the latter? While I foresee the inevitable consequences of our cumulative imbalances, I’m humble enough—and seasoned enough—to respect the motivation of cornered and scared animal spirits."

Shorts Increase in February

Short-selling rose at the New York Stock Exchange and the Nasdaq Stock Market during the first half of February.

But the SEC also voted today to impose new short-selling rules.

Treasury Bubble Theory Gets Boost From China

Treasuries are mostly unchanged today.

from Ambrose Prtichard-Evans at Daily Telegraph:

Evidence is mounting that Chinese sales of US Treasury bonds over recent months are intended as a warning shot to Washington over escalating political disputes rather than being part of a routine portfolio shift as thought at first.

A front-page story in the state’s China Information News said the record $34bn sale of US bonds in December was a "commendable" move. The article was republished by the National Bureau of Statistics, giving it a stronger imprimatur.

It follows a piece last week in China Daily, the Politburo’s voice, citing an official from the Chinese Academy of Sciences praising the move to "slash" holdings of US debt. This was published on the same day that US President Barack Obama received the Dalai Lama at the White House, defying protests from Beijing.

January U.S. New Home Sales Drop to Record Low

But the news is being drowned out by Bernanke's congressional testimony today. He's promising to keep rates artificially low and blow more bubbles. Stocks are nearly 100 points higher.

WASHINGTON (MarketWatch) -- Sales of new U.S. homes plunged 11.2% in January to a seasonally adjusted annual rate of 309,000, the lowest rate on record dating back to 1963, the Commerce Department estimated Wednesday.

The third-straight drop in sales on a month-to-month basis was unexpected. Economists surveyed by MarketWatch forecast sales to rise slightly, to a pace of 355,000, with buyers taking advantage of a new federal tax credit.
"The housing market remains very, very distressed," wrote Dan Greenhaus, chief economist for Miller Tabak & Co.
"There may have been some weather-related issues playing havoc with the sales data but clearly, these results are extremely unnerving," wrote Jennifer Lee, an economist for BMO Capital Markets. "There is nothing positive to glean from this report."
Sales of new homes are down 6.1% compared with January 2009's 329,000 units, which was the previous record low.

Heights of Cotton Prices Know No Bounds

Feb. 22 (Bloomberg) -- Cotton rose to the highest price in almost 20 months on speculation that export demand will remain strong while global supplies will be limited. Orange juice fell.
U.S. exports of the fiber this year have surged 93 percent compared with the first six weeks in 2009, U.S. Department of Agriculture figures show. World cotton consumption is expected to climb 4.9 percent to 115.5 million bales in the year through July, the USDA said on Feb. 9. Stockpiles will reach 3.3 million bales, the lowest amount since 2004, the USDA said.
“The market is kind of caught in a tight situation,” said Jack Scoville, a vice president at Price Group Inc., a broker in Chicago. “Demand has really been good.”

Beans (Grains) Reverse, Give Up Gains

Wow! Who ever would have thought we'd close lower despite strong demand! The consumer confidence figures have hit the broader market with a bit of a gut punch today. I'm surprised stocks aren't even lower!

Natural Gas Back in Downtrend

from FT:
US natural gas prices dropped sharply on Monday as weather forecasts predicted temperatures in the US north-east would moderate after recent severe winter weather.
Natural gas prices have dropped 12.7 per cent this year and some traders believe that winter will end with gas stocks, currently about 2,025bn cubic feet, at record levels. 

Francisco Blanch, head of global commodities research at Bank of America Merrill Lynch, said demand for gas from US industry had remained very depressed.

Soybeans Rise on Strong Demand

from Arlan:
Consumer confidence # knocked trader confidence early, but beans providing stability based on demand; corn dn 2, beans up 3, wht dn 5

This is surprising given that stocks have taken a strong dip today.

Consumer Confidence Slides, Hits Stocks

NEW YORK (MarketWatch) -- U.S. stocks tumbled Tuesday after a measure of consumer confidence fell by much more than expected in February, raising concerns about the outlook for consumer spending.
The declines piled on quickly after the Conference Board, a private research group, said its index of consumer confidence plunged more than 10 points this month to 46.0. Economists surveyed by MarketWatch had been looking for a slight drop, to 55.5 points from January's previously reported level of 55.9.

The present situation index, a gauge of consumers' assessment of current economic conditions fell to 19.4, its lowest point in 27 years. See full story on confidence.
Investors said the plunge was unexpected and did not portend well for retailers and other businesses that rely on consumer spending.
"There's disappointment that we just haven't been able to create jobs yet and that that may now be starting to undermine consumer buying attitudes," said Jeffrey Kleintop, chief market strategist at LPL Financial.
Especially with government programs run by the U.S. Federal Reserve and the Treasury slated to expire this spring, consumers may not be able to support the recovery unless the labor market improves, he said.
Many retailers who opened the session trading up after posting strong earnings, quickly slid into the red following the consumer confidence data.

in other news:
WASHINGTON (MarketWatch) -- Home prices in 20 major U.S. cities fell a not-seasonally adjusted 0.2% in December compared with November, according to the Case-Shiller home-price index released Tuesday by Standard & Poor's.
"The pace of deterioration has stabilized for now," said David Blitzer, chairman of the S&P index committee. "However, the rate of improvement seen during the summer of 2009 has not been sustained." 

The Psychology of Winners

from Dr. Brett:

Last year I gave a talk at a conference of traders and concluded the session by giving out my email address and phone number and inviting the attendees to contact me for any help they might need. I made it clear that I would not be soliciting them as commercial clients for coaching and that I would not charge them for time spent with them.

One of the participants approached me at the end of the session and expressed surprise that I would make myself so widely available at no charge. He noted that there were over 100 traders in the session and that I could easily be swamped with calls.

I smiled and simply said, "We'll see."

Within a two week period, I counted all the contacts that resulted and tracked who initiated them. It was a very easy task, because there was only one contact. It was from a very successful independent trader. No one else followed up.
And that's the way it usually is: Of the people with professed trading passions, only a fraction will sustain keeping any kind of journal or performance record; of those, only a fraction will use the journal and performance data to set and pursue concrete goals; of those, only a fraction will reach out for assistance in achieving those goals.

On the whole, people fail to reach high levels of success because they are not doing the things that successful people do: they are not on a path that can possibly lead to success. Traders can repeat positive affirmations and invoke positive images, but nothing replaces the hard work associated with preparation, practice, and focused work on oneself and one's craft.

The motivation to trade? Everyone has that. The motivation to be more than who you are: that's what makes winners. 
And by the way, that one guy who did follow up and call me? He made well over $1,000,000 last year.

And he still calls.

More:

Turning Goals Into Habit Patterns

What Turns Goals Into Performance

Euro Slump to Worsen

Feb. 22 (Bloomberg) -- Derivative traders are signaling that the euro’s slump to a nine-month low will continue even if European Union leaders bail out Greece.

Reuters: State Budgets to Worsen

WASHINGTON (Reuters) - The already gloomy conditions of states' economies are set to worsen, according to preliminary survey findings from the National Governors Association released on Saturday.
"The situation is fairly poor for a lot of states around the country. In fact, most states," Vermont Governor Jim Douglas, who is chairman of the association, said at a press conference at its annual meeting.
"What we're finding out from a fiscal standpoint is that the worst is yet to come," Douglas said.