US administration still trying to hide the recession

Alright, so today we had the great relief to see that the US GDP rose by 1.9%
Pfeeew!!! No recession, the economy is sound and growing!

But, the market was expecting a lot more than that (2.3% consensus) ; which also rises the question about how much the market can be that irrational.

Bur more importantly, the Chain Deflator used to deflate the GDP from inflation has dropped to 1.1% from 2.6% in the previous quarter.

With inflation rising at record rate and being very hide, it's amazing to see a deflator of 1.1% and see it drop.

Well done! That's creative accounting and artistic number reporting!

Global writedowns and credit losses

 Below is a breakdown of an estimated $341 billion of credit-related writedowns and losses recorded by major
institutions since the credit crunch hit in the third quarter of 2007.

                              FIRM                            AMOUNT (in Billion USD)
Citigroup (C.N: Quote, Profile, Research)                    46.40
UBS (UBSN.VX: Quote, Profile, Research)                      36.70
Merrill Lynch (MER.N: Quote, Profile, Research)              36.8
AIG (AIG.N: Quote, Profile, Research)                        20.23
HSBC (HSBA.L: Quote, Profile, Research)                      18.70
RBS (RBS.L: Quote, Profile, Research)                        16.50
IKB (IKBG.DE: Quote, Profile, Research)                      14.73
Bank of America (BAC.N: Quote, Profile, Research)            14.60
Morgan Stanley (MS.N: Quote, Profile, Research)              11.70
Ambac (ABK.N: Quote, Profile, Research)                       9.22
Credit Suisse (CSGN.VX: Quote, Profile, Research)             9.17
Wachovia (WB.N: Quote, Profile, Research)                     8.90
MBIA Inc (MBI.N: Quote, Profile, Research)                    8.41
Washington Mutual (WM.N: Quote, Profile, Research)            8.10
Deutsche Bank (DBKGn.DE: Quote, Profile, Research)            7.35
HBOS (HBOS.L: Quote, Profile, Research)                       6.90
Bayerische Landesbank   (BLGGgg.F: Quote, Profile, Research)  6.75
Societe Generale(SOGN.PA: Quote, Profile, Research)           6.40
Mizuho Financial Group  (8411.T: Quote, Profile, Research)    6.24
JPMorgan (JPM.N: Quote, Profile, Research)                    6.05
Barclays (BARC.L: Quote, Profile, Research)                   5.20
Dresdner Bank (ALVG.DE: Quote, Profile, Research)             3.45
Bear Stearns                                                  3.40
Fortis (FOR.BR: Quote, Profile, Research)                     3.10
WestLB (WDLGgb.F: Quote, Profile, Research)                   3.10
BNP Paribas (BNPP.PA: Quote, Profile, Research)               2.70
UniCredit (CRDI.MI: Quote, Profile, Research)                 2.70
Lloyds TSB (LLOY.L: Quote, Profile, Research)                 2.6
Nomura Holdings (8604.T: Quote, Profile, Research)            2.46
DZ Bank (DGBGg.F: Quote, Profile, Research)                   2.00
Natixis (CNAT.PA: Quote, Profile, Research)                   2.00
Swiss Re (RUKN.VX: Quote, Profile, Research)                  1.85
HSH Nordbank [HSH.UL]                                         1.70
LBBW                                                          1.70
Commerzbank (CBKG.DE: Quote, Profile, Research)               1.24
Mitsubishi UFJ (8306.T: Quote, Profile, Research)             1.19
Sumitomo (8316.T: Quote, Profile, Research)                   1.19

                  Grand Total   341.23
* Estimates based on writedowns, loss provisions and trading losses from subprime securities, mortgages, CDOs, derivatives,
and SIVs.

 Sources: Reuters, company filings

"Merrill was underwriting deals it knew or should have known were bad"

Mr Mortgage points to this article on Reuters:

 Tavakoli said in a report to clients that of the 30 collateralized debt obligations
(CDOs) Merrill sold in 2007, every one has either had its best-rated portion cut to junk,
is in technical default, is being liquidated, or is in danger of being liquidated.

 The poor performance suggests that Merrill was underwriting deals it knew or should
have known were bad, Tavakoli said. That underwriting, combined with similar moves from
other banks -- has shaken investor faith in CDOs, Tavakoli wrote in the report. Her
company is Tavakoli Structured Finance Inc.

 Merrill Lynch spokesman Mark Herr declined comment.

They also list on the article the status about these CDOs:

 ABS CDOs underwritten by Merrill Lynch in 2007

 (All data is as of June 10)
Estd    Deal Name                    Manager              Appx. Size    Status
Closing                                                   (in millions)
1/11    Lexington Cap Fundg III      Harding Advisory     1,212.00      Toast**
1/24    Port Jackson CDO 2007-1      Basis Capital          350.00      Toast**
1/25    Highridge ABS CDO I          ZS Structured Credit 1,500.00      Acceleration**

                                  Capital Mgt
2/21    Maxim High Grade CDO I       Maxim Capital Mgt    2,000.00      EOD**
2/27    Broderick CDO 3              SCM Advisors         1,500.00      Acceleration**
2/27    Kleros Real Estate CDO IV    Strategos Capital    1,000.00      Undeclared EOD

                                  Mgt
3/1     Norma CDO I                  NIR Capital Mgt      1,500.00      Acceleration**
3/8     Maxim High Grade CDO II      Maxim Capital Mgmt   2,000.00      EOD**
3/8     Newbury Street CDO Ltd.      Mass. Fincl Svcs.    2,000.41      EOD

                                  Inv
3/9     South Coast Funding IX       TCW Asset Mgmt         540.00      Toast**
3/27    Euler ABS CDO I              Babcock and Brown      675.00      Toast**
3/27    GLACIER-V                    Terwin Money Mgmt      498.50      Toast**
3/29    Lexington Capital Funding V  Harding Advisory       615.00      Toast**
3/29    Libertas Preferred           Strategos Capital      500.00      Toast**

     Funding IV                   Mgt
3/29    Silver Marlin                Sailfish Structured  1,250.50      EOD

                                 Inv
4/3     Kleros Preferred Funding VII Strategos Capital    1,498.00      EOD**

                                  Mgt
4/5     NEO CDO 2007-1               Harding                300.00      Liquidation**
4/11    Forge ABS High Grade CDO I   Forge ABS LLC        1,503.50      EOD**
4/12    IMAC CDO 2007-2              Ivy Asset Mgmt         500.00      Liquidation**
4/18    Mars CDO I                   Chotin Group           618.50      Acceleration**
4/26    Brookville CDO I             Petra Capital          499.00      EOD**
4/26    Fourth Street Funding Ltd    N.I.R. Capital Mgmt    500.50      Acceleration**
4/26    Western Springs CDO          Deerfield Capital Mgt. 495.60      Acceleration**
5/3     Jupiter High Grade CDO VI    Harding Advisory     1,501.10      Toast**
5/10    Tazlina Funding - II         Winter Group         1,500.00      EOD**
5/25    West Trade Funding CDO III   N.I.R. Capital Mgmt  2,500.00      Toast**
6/1     Robeco HG CDO-I              Robeco Investment    1,100.55      Toast**

                                  Mgt
6/7     Durant CDO 2007-1            SCM Advisors           400.00      Liquidation**
7/26    Biltmore CDO 2007-1          ING Clarion Capital  1,000.00      EOD**
8/28    Bernoulli High Grade CDO-II  Babcock and Brown    1,500.00      Acceleration**

 **means the topmost "triple A" tranche of the CDO has been downgraded to junk.

US Senator objects to Olympic spying... but should he?

"US SENATOR Sam Brownback, a Republican from Kansas, has objected to recent Chinese government moves to spy on visitors during the Olympic games.

China has ordered hotels in Beijing and Shanghai to install Internet monitoring equipment and software, according to a news release issued by the senator's office. It claims several hotel chains have confirmed the Chinese government's order and provided documentation."

"But then, the US National Security Agency has been illegally monitoring all US Internet traffic and phone conversations since shortly after President Bush took office in 2001 – not beginning after the events of September 2001 as is widely thought – with the willing collusion of most of the major US telecom companies.

Moreover, at the behest of the current US administration and Republican legislators, the US Congress recently passed an amendment to the Foreign Intelligence Surveillance Act that granted the US telecom giants retroactive immunity from civil liability for their illegal wiretapping, which also, coincidentally enough, shields current US administration officials from the possibility that there might be any investigation or potentially, criminal charges."

Indices PER update

So with the mega sucker rally following the no-news period (well maybe some news: US Gov and Fed injecting many more dozens billion USD in the market...) the PERs of indices have been taking off:

• DJ INDU: PER close to 80
• S&P 500: PER close to 26
• Russell 2000: PER close to 2600 (Does "2000" in "Russell 2000" actually refer to the PER of the index??).

These PER confirm that there's actually no downturn and everything is going well in a perfect world.
I am glad that Mr Market is here to clarify this situation for me, I was about to have a few doubt about "the strength of our economy" which "is growing steadily". Thank god we killed all the dangerous short sellers and commodity speculators. Oh, by the way, Oil is up 4% to 125 USD per barrel.

In 2003, Treasury Secretary John Snow told Congress...

This is from Bloomberg:

July 25 (Bloomberg) -- In October 2003, Treasury Secretary John Snow told Congress ``we need to be on guard'' against the ``perception'' that the U.S. government stood behind the stocks and bonds of Fannie Mae and Freddie Mac.

This week his successor, Henry Paulson, has seen a plan to make such a guarantee explicit to the brink of passage, getting a presidential veto threat withdrawn and reversing years of Republican-led efforts to unhook the companies' fortunes from the government's finances.

It's actually passed now, but it's interesting to see how things can change in a matter of a few years...

US law makers pressure the Accounting Standards to help bank hide their losses

Mr Mortgage points us to this article from Reuters:

NEW YORK, July 28 (Reuters) - The Financial Accounting Standards Board, under pressure from lawmakers, will reconsider its timeline for a controversial rule change that may force banks to bring trillions of dollars in off-balance sheet assets onto their books at its Wednesday meeting.
FASB, which sets U.S. accounting rules, will reconsider the rule's effective date and transition provisions, according to a schedule posted on its website.
[...]

Merrill Falling Down?

Some announcements are always surprising.

"Merrill said yesterday in a statement. The New York-based company is paying Temasek $2.5 billion to offset losses on its earlier investment".

The investment included something a bit special: Merrill had to pay for the difference between the price paid by Temasek (USD48) in case any new stock was issued during 12 months after their original investment.

Not exactly the kind of clause that you are used to see for healthy companies. Or even not exactly the kind of clause you are used to see at all for any investment.

So now, Merrill has to pay for the price difference (probably about USD24 per share). Being generous, Temasek is going to reinvest the "fees" Merrill are going to pay.

Some other comments from the Bloomberg article are also interesting :

``Why these assets are written down when you're selling them and weren't written down in your earnings is a question,'' said Ralph Cole, a senior vice president in research at Ferguson Wellman Capital Management Inc. in Portland, Oregon, which oversees $2.7 billion and doesn't own Merrill shares. ``This kind of announcement is surprising and a little disheartening.''

This kind of comments could probably be shared with many other companies.

What is especially disheartening is that auditors aren't supposed to let this kind of things happen, as this is against IFRS accounting rules...

So, what can we trust, if financial statements aren't "fully realiable"...

Fannie and Freddie in a interview a year ago

Bruno points me to this article from the Washington Post from the 8th of August when the subprime crisis got started...

Falls Church, Va.: Do we even know that Fannie and Freddie are operating normally? When was the last time they published clean reports?

Even setting aside their internal-control problems, if we allow Freddie and Fannie to take on a more risky portfolio, aren't we just transferring risks from private investors onto the taxpayers? Why is that a beneficial result?

Steven Pearlstein: Look, this line that anytime Fan and Fred buy a paperclip, it is transferring cost or risk to taxpayers is just malarky. These two entities have never, ever cost the taxpayer a dime. In fact, they make money for the taxpayer because they make lots of money and pay taxes on it. Yes, they have an implicit government
guarnatee, and yes, that is worth something to their shareholders and their customers. But if they didn't have that, the taxpayer wouldn't save any money. It is a non-cash benefit, if you will.

Their internal control problems are fixed. They still have to go back and restatate some of their books, but that is an accounting issue, not a cash flow issue. They are sound. They are well run. They know what they are doing. And they could be of remendous help right now if they were allowed to be aggressive and creative in providing liquidity to a whole bunch of mortgage markets that have now frozen. They could also provide money and standards and mechanisms that would faciliate
the workout process between subprime borrowers who are in default and the entitites that hold their mortgages. Rather than Fan and Fred having to push the government for permission to do these things, regulators should be beating down their doors to get them to do more faster. The analogy I used this morning to katrina is very apt.

Russell 2000 P/E of 2470 is correct

Alright, I just got from a long week-end and upon arriving home, what do I do? I just launch my home-made spreadsheets to get the PER of the US indices, since the quarterly are almost finished now.

This is a little bit scary, because the indices PERs are still very high:

• Dow Jones 30: 77 (no kidding, thanks to GM and its huge losses)
• S&P 500 : 23 (still very very high, compared to historical averages)
• Nasdaq Composite: 27 (according to WSJ).

Regarding the Dow, even if there's a huge miracle, and that GM makes even (EPS of 0$) we still get an PER of 17 for the DJ INDU, which is not small, given that the financial stocks may sink in the DJ as well as many other components that are at historical high values. Notably:

1. JNJ -1%
   
2. IBM -3%
   
3. WMT -6%
   
4. MCD -9%

And they all have PERs of more than 15...

UPDATE: I just found this on the WSJ. No wonder my shorts on the Russell 2000 are not bringing any money!! The companies are collapsing, but the index is still holding!

NOTICE TO READERS: The Russell 2000 P/E of 2470 is correct. The EPS are very small because of write offs and such in the current quarter.

End of capitalism in the US is coming

The US government and fed have already socialized the losses of the real estate and the banks, they are now pursuing another goal: interfering with the futures market in the hope of getting oil prices back to $80 per barrel.

They are trying to get rid of the free market where the market doesn't serve them.
Getting rid the free market means also getting rid of capitalism and heading to socialism.

Bloomberg:

July 23 (Bloomberg) -- Congress may outlaw elements of oil futures trading that lawmakers found distorted demand and contributed to the 69 percent surge in prices in the past year.

Rally Confirmed!

Wachovia: mega loss of almost 9 billions USD, +28% today, +1% on top of that after market
UAL (united airlines): mega loss of 3 billion, +68%
US Airways: +59%
Washing Mutual: mega loss of 3 billion USD, plus many bad news, +6% today, +2% on top of that after market.

Conclusion: idiots are in command

The 5 largest quarterly losses at US banks

Wachovia opened at -10% is now currently trading at +24%
Go figure out...

The 5 largest quarterly losses at US banks
Tuesday July 22, 2:57 pm ET
By The Associated Press
A look at the 5 largest quarterly losses suffered by US retail banks

The five largest quarterly losses for U.S. retail banks, who suffered the losses, how big they were and when they occurred, according to Standard & Poor's Compustat:

-- Citigroup Inc., $9.83 billion, $1.99 per share, fourth quarter 2007
-- Wachovia Corp., $8.86 billion, $4.20 per share, second quarter 2008
-- Citigroup, $5.11 billion, $1.02 per share, first quarter 2008
-- Wachovia, $2.2 billion, $2.27 per share, second quarter 2000
-- Washington Mutual Inc., $1.87 billion, $2.19 per share, fourth quarter 2007

The lemmings are following the Fed

The Fed is talking the USD up, and it works (for how long? probably not longer than tomorrow, or the day after tomorrow, or the end of the week, given all the macro figures that are going to be released this week) the lemmings are following - but just don't forget the most of the time, the lemmings don't see the abyss...)

Fannie and Freddie running the printing press

In his WrapUp, Tony Allison brings two very important pieces of news to my knowledge:
#1

One of the ongoing risks is a lack of transparency and understanding of the derivative crisis. One expert that has spoken out extensively is Satyajit Das. He is beginning to sound like a modern-day Paul Revere. The following quote appeared in a column by John Markman last September on TheStreet.com.

“One of the world’s leading experts on credit derivatives (financial instruments that transfer credit risk from one party to another), Das is the author of a 4,200 page reference work on the subject, among a half-dozen other tomes. As a developer and marketer of the exotic instruments himself over the past 30 years, he seemed like the ideal industry insider to help us get to the bottom of the recent debt crunch—and I expected him to defend and explain the practice.

I started by asking the Calcutta-born Australian whether the credit crisis was in what Americans would call the “third inning”. This was pretty amusing, it seemed, judging from the laughter. So I tried again. “Second inning?” More laughter. “First?” Still too optimistic.

Das, who knows as much about global money flows as anyone in the world, stopped chuckling long enough to suggest that we’re actually still in the middle of the national anthem before a game destined to go into extra innings. And it won’t end well for the global economy.”

One would hope this derivative mess is now in the middle innings, but that may prove a tad optimistic. The problem is that bankers, economists and particularly politicians do not understand how derivatives work, and what real dangers they might present. When a true derivatives expert says we should be very afraid, perhaps it would be wise to pay attention.

Das made a return visit in Markman’s May 7th column. He doesn’t see the light at tunnel’s end just yet. “Given that the bank presidents have been consistently wrong about everything they’ve said about their losses until now, why on earth would anyone believe them now?” Das asked. He also mentioned the $1 trillion to $3 trillion that is in the process of moving onto the bank’s balance sheets from related entities where they were hidden. As to where we are in the credit crisis, Das dryly paraphrased Winston Churchill.

“This is not the end, or even the beginning of the end, though it may be the end of the beginning.”

While amusingly ironic, it does not give great comfort to a reeling global financial system. This may be one more reason to say cautious and buckled up.

#2

The Economist last week published “End of Illusions”, an article about “America’s deeply flawed system of housing finance.” The paragraphs below are excerpts from a more extensive article.

“After a headlong plunge in the two firms’ share prices, Hank Paulson, the treasury secretary, felt obliged to make an emergency announcement on July 13th. He will seek Congress’s approval for extending the Treasury’s credit lines to the pair and even buying their shares if necessary. Separately, the Federal Reserve said Fannie and Freddie could get financing at its discount window, a privilege previously available only to banks.

The absurdity of this situation was highlighted by the way the discount window works. The Fed does not just accept any old assets as collateral; it wants assets that are “safe”. As well as Treasury bonds, it is willing to accept paper issued by “government-sponsored enterprises” (GSEs). But the two most prominent GSEs are Fannie Mae and Freddie Mac. In theory, therefore, the two companies could issue their own debt and exchange it for loans from the government—the equivalent of having access to the printing press.”

“With the credit crunch, Fannie and Freddie have become more important than ever, financing some 80% of mortgages in January. So they will need to keep lending. Nor is there scope to offload their portfolios of mortgage-backed securities, given that there are scarcely any buyers of such debt. And if the Fed has to worry about safeguarding Fannie and Freddie, can it afford to raise interest rates to combat inflation? American monetary policy may be constrained.”

More reasons for equity markets to rally - 2

Bank of America: loss of almost $6 billion and many bad news.
Bank of America: many more billions at risk.
Bank of America: won't guarantee the debt of Countrywide.
American Express: Shares of credit-card giant American Express shed as much as 12% on Tuesday after the company warned that a deteriorating economy is choking off earnings growth.
Wachovia: an almost $9 billion loss.
United Airlines: reports 2Q loss of $2.73 billion
Merck stocks get hammered.
Texas Instruments: Shares slid more than 15% Tuesday

The company said demand "slowed unexpectedly" in June [...] a trend exacerbated by a weaker U.S. economy. [...] we are cautious given the demand environment we just experienced," TI Chief Executive Rich Templeton said in a statement. "If demand strengthens as quickly as it slowed, we are well-positioned to meet it."

Dow Jones 30 - S&P 500 - USD: rise on these news.

[Update] The Fed is talking the $ up by announcing they will raise rates (when???). They have been talking the $ up for a while, but talk is cheap.

Mish exposes BLS BS

From this post, Mish exposes what is really happening in the US compared to the official figures from the BLS.

Commercial filings for the first half of 2008 are up 45 percent from last year, as the national climate for commerce continues to deteriorate amid rising energy and food costs, mounting job losses, tighter credit and a reticence among consumers to part with discretionary income.

From April through June, 15,471 U.S. businesses called it quits, according to data from Automated Access to Court Electronic Records, an Oklahoma City bankruptcy management and data company.

It was the 10th straight quarter that business bankruptcy filings have increased. Nearly 29,000 companies filed in the first half of 2008. Another 60,000 to 90,000 others probably have closed, because roughly two to three businesses fold for every one that files for bankruptcy, said Jack Williams, resident scholar at the American Bankruptcy Institute.

[...]

The BLS reported net expansion of new businesses in all but 3 of the past 15 months. January and July are months in which they partially correct for the ridiculous assumptions made in the other months.

Zimbabwe to introduce 100 bln dollar bank note

This sounds like what Helicopter Ben would love to achieve (from MSN Money)

HARARE (Reuters) - Zimbabwe's central bank will introduce new higher-value 100 billion Zimbabwe dollar notes on Monday as part of a desperate fight against spiralling hyperinflation, the bank said.

[...]

Central bank Governor Gideon Gono announced on Wednesday that inflation had surpassed 2.2 million percent, though some economists put it much higher.

In a notice in the official Herald newspaper on Saturday, Gono said the Reserve Bank of Zimbabwe would introduce 100 billion dollar special agro-cheques (notes), to help consumers who currently need to carry large wads of cash even for simple transactions.

Too many things happening this week

I will need to sum up all this:
- SEC manipulating the markets
- Freedie Mac Willing to raise 10 b$ as share sales while it's market value is 5 b$ (after a short squeeze due to the SEC actions resulting in a 40-50% rise of the stock price in 2 days)
- Kucinich on his way for impeaching Bush
- Citi and Merrill making new and colossal write-downs
- Bunning vs. Paulson (See Mish and also a video on YouTube - found on Tanta's posts)
- Housing starts incorrectly interpreted as boosted by the market while the figures are just lifted by building code change (see also NYTimes: Homes Data Gets a Lift, by a Fluke)

US Banks non-borrowed reserves sinks further

I haven't seen anyone mention this, but the Fed published on the 11th of July the "BOGNONBR, Non-Borrowed Reserves of Depository Institutions" and they look even uglier than the previous month. See chart below.



Latest Observations:

Date	2008-02-01	2008-03-01	2008-04-01	2008-05-01	2008-06-01
Value	-17.375	-50.261	-91.876	-111.623	-127.872

Christopher J. Dodd

Karl Denninger spots out an interesting information from OpenSecrets.org on his Market Ticker about Christopher J Dodd. Let me remind you that this Dodd guy is the same Congressman that has been pushing and pushing to give more power to the Fed, and who also refuses to spend any time looking for any other alternative solution, as per his conversation with Ron Paul.

It appears that the guy has the following top donators according to the official disclosure figures:

Contributor	Total
Citigroup Inc	$310,294
SAC Capital Partners	$286,600
United Technologies	$263,400
American International Group	$224,678
St Paul Travelers Companies	$205,400
Bear Stearns	$205,100
Goldman Sachs	$175,600
Royal Bank of Scotland	$174,050
Morgan Stanley	$155,000
Credit Suisse Group	$154,550
Merrill Lynch	$139,550
JPMorgan Chase & Co	$130,850
Lehman Brothers	$124,200
KPMG LLP	$113,100
National Westminster Bank	$111,900
General Electric	$108,250
Deloitte Touche Tohmatsu	$108,000
Hartford Financial Services	$101,500
The Hartford	$94,350
Bank of America	$91,300

New tentative of Impeachment for Bush

I already mentioned this on the 6th of June 2008, but Congressman Dennis Kucinich is still trying to Impeach Bush again, and again, we don't hear a lot about this on the media, weirdly enough...

More info here from AP at Google or more generally, Google News.

An interesting interview of Dennis Kucinich from Don Harrold is available on YouTube.

Did Jefferson predict the subprime crisis?

I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.

Thomas Jefferson, Letter to the Secretary of the Treasury Albert Gallatin (1802)
3rd president of US (1743 - 1826)

Greenspan and Bernanke during Housing Bubble

I found these quotes from Greenspan and Bernanke in Chris Puplava's article in Financial Sense:

Bernanke: There's No Housing Bubble to Go Bust

Ben S. Bernanke does not think the national housing boom is a bubble that is about to burst, he indicated to Congress last week, just a few days before President Bush nominated him to become the next chairman of the Federal Reserve.

U.S. house prices have risen by nearly 25 percent over the past two years, noted Bernanke, currently chairman of the president's Council of Economic Advisers, in testimony to Congress's Joint Economic Committee. But these increases, he said, "largely reflect strong economic fundamentals," such as strong growth in jobs, incomes and the number of new households.

Nell Henderson
Washington Post, October 27, 2005

Greenspan sounds optimistic note on housing

Former Federal Reserve Chairman Alan Greenspan said that last week's rise in weekly mortgage applications could signal that the ``worst may well be over'' for the U.S. housing industry, according to a report of a speech Greenspan gave in Canada on Friday.

John Shinal
MarketWatch, October 7, 2006

I really love these very knowledgeable market experts who are spreading havoc and misery on the whole world.

"I will not allow house prices to get out of control" Gordon Brown

Even though I can remember how I got there, I found this on the Renegade Economist. This quote is so famous and so hilarious that I couldn't keep myself from posting it as a praise for our beloved leaders and politicians.

When Tony Blair’s Labour Party secured power with a landslide victory in 1997, Brown was appointed Chancellor of the Exchequer. In his first budget speech to the House of Commons on July 2, 1997, he made a promise to the people of Britain:

“I am determined that as a country we never return to the instability, speculation, and negative equity that characterised the housing market in the 1980s and 1990s. Volatility is damaging both to the housing market and to the economy as a whole. So stability will be central to our policy to help home owners. And we must be prepared to take the action necessary to secure it. I will not allow house prices to get out of control and put at risk the sustainability of the recovery”.

More reasons for equity markets to rally

Today, in the news - as usual, bad news causes rallies, everybody should know that:

• Unemployment in the US rises more than expected. Official unemployment rate hits 5.5% while the unofficial ones from ShadowStats should reach around 13-14%
• ISM Services contracted, and were way lower than the market expections
• Gazprom announced that they will increase their prices by 22% (Bloomberg link)
• They also forecast oil at $250/b soon

Let the rally begin!!!

• Oh, did I forget to mention that oil hit $147 in London and $146 in the US? It's stabilised at $144 which is another good reason to rally!!
  

"Suckers" Rally - the sequel

So, yesterday, the market rallied because the auto-sales were worst than possibly imaginable:
Chrysler -36%
Ford -28%
Toyota -21%
GM -18%
Honda +1.1% (is this figure true???)

These figure are scary, but they are a good reason to buy the bad news right?

And today, the market is ready to rally, even if the employment figures came way below what the market was expecting:
ADP Employment report as per Yahoo Finance:
June: -79k where the market was expecting -20k
May has be revised to +25k where previously reported as +40k

And then we hear that markets are supposed to be efficient :-)