Carl Icahn Comedy On Drexel, Texaco/Getty, US Steel In 1980s (Videos)

Famed hedge fund manager / "shareholder activist", Carl Icahn, did stand up financial comedy at Caroline's Comedy Club in Manhattan in 2003. He talked about trading options back in the day, doing business with Drexel Burnham Lambert in the '80s, Leon Black (Apollo IPO coming?), trying to take over US Steel, David Roderick, the Texaco/Getty Oil lawsuit (funny stuff) and Joe Jamail. Read these interesting articles and watch the videos after the jump.

THE BIGGEST BOSSES 47. DAVID RODERICK USX A CEO AS TOUGH AS STEEL (Fortune Magazine, 1987)

"this was followed by a takeover proposal from raider Carl Icahn. By most accounts the company won the strike. Roderick, 63, punctured Icahn's balloon by piling up $3 billion in debt due if the company changed hands. He used the money to restructure the company yet again"....

Houston Lawyer Joe Jamail Sued the $10.5-Billion Pants Off Texaco and Stands to Pocket a Record Fee (People Magazine, 1986)

1) Carl Icahn wants to own US Steel
2) Carl Icahn settles the Texaco/Getty Oil lawsuit (hat tip Livermore Report)

US National Debt Above $14 Trillion, Debt Ceiling In Play Soon ($14.29T)

The U.S. National Debt is a serious issue right now. On 1/13/2011 the U.S. Treasury reported that Total Public Debt Outstanding hit 14,007,216,975,377.59 ($14 Trillion). $9.3 trillion was held by the public and $4.6 Trillion was intergovernmental (source: TreasuryDirect.gov). According to the real-time U.S. National Debt Clock at USDebtClock.org, the National debt is at $14,049,024,219,550. The main problem right now is there's a debt limit in place. Last year Congress raised the debt ceiling to $14.29 Trillion and it is expected to hit that level in May. So Congress will be making major moves in the next few months. I found an interesting fact sheet from the Heritage Foundation that explains what is going: The Debt Ceiling: Time, Options, and Action:
Congress Has Time: Gross federal debt has reached $14 trillion. Ongoing deficit spending (projected at $1.4 trillion for 2011) means the ceiling of $14.29 trillion will initially be reached around mid-March. Treasury’s traditional financial toolbox and revenue surges in April and June should delay the final moment of reckoning to mid-May and possibly as late as July.


Reads: David Rosenberg Likes Muni Bonds, Assange Gets Swiss Bank Info, Hu Visiting U.S.

Articles/Videos 1/17/2010

Apple Media Advisory (Steve Jobs Press Release) - BusinessWire

Barron's 2011 Roundtable - Barron's

David Rosenberg Says This Is A Fantastic Time To Buy Beaten Down Muni Bonds - Business Insider

Argentina farmers in grain export quota strike - BBC

Albert Edwards: "I Have Been Wrong – I’ve Been Too Bullish" (SocGen) - Zero Hedge

The Financial Crisis: Will It Lead to America's Decline? (Niall Ferguson, Mort Zuckerman at Aspen Institute) - Fora.tv (ht Zero Hedge)

Apple In Germany Falls 8% On Steve Jobs' Medical Leave (APC.F Chart)

Steve Jobs, Apple's CEO, is taking a medical leave and Time Cook (COO) is filling in. Here is the media release from Steve Jobs. Apple's stock on the Frankfurt Stock Exchange fell 7.96%. U.S. markets were closed for Martin Luther king Day.  Click the chart for a larger view (APC.F, Apple Inc. - Yahoo Finance).

"Apple Inc. Chief Executive Officer Steve Jobs took a leave of absence as his health deteriorates from battling a rare form of cancer and the effects of a liver transplant he had almost two years ago, according to a person with knowledge of the situation." (read more at Bloomberg.com)

Nasdaq 100 E-Mini March 2011 Future -1.13%, 2293.75
S&P 500 E-mini  March 2011 Future -0.35%, 1285.25


*UPDATE: ES (S&P) +0.29% and NQ +0.36% at 3:30am eastern. Carry on as usual? We'll see what happens tomorrow. AAPL is 19.74% of the Nasdaq 100 ETF, QQQQ.

Gary Shilling: Commodities Clearly In A Bubble

Gary Shilling thinks "commodities are clearly in a bubble" and "stocks aren't there yet, but we could be if things keep up at this rate". He also talked about Inventory/Sales and the savings rate, which he thinks could hit double digits. At what level is bubble territory on the S&P? SPX EPS 107x12 = 1,284, 107x15 = 1,605 or EPS 107 x 18 = 1,926? It is currently trading at 1,293. See the interview with Tom Keen after the jump.

Tunisia, Algeria Protests Due To Unemployment, Rising Food Prices and Politics (Videos)

If you've been following the news recently, Tunisia's ex-President, Zine Al-Abidine Ben Ali, fled the country as violent protests hit Tunis, the nation's capital. Rising food prices, high unemployment and political corruption are to blame, according to the articles below and Al Jazeera English / Euronews videos. Tunisia has a 14.7% unemployment rate and 23% for higher education graduates. Algeria also saw protests and a protestor mentioned rising sugar prices.

Global Agriculture: Adecoagro Files $400 Million IPO (AGRO)

This company will be interesting to watch, especially if the agricultural commodities (and renewable energy?) trend sees another leg higher. If interested, look at the Economist commodity-price index (one month and one year % change) from January 13, 2010. And as you know, rising food prices are causing people to riot in Tunisia and Algeria. Will monetary tightening in emerging markets cool down commodity inflation? Gary Shilling thinks commodities are in a bubble. If interested, the ticker symbol is AGRO according to the DealBook article.
"An agriculture company backed by the billionaire George Soros on Thursday filed to go public in an offering of more than $400 million.

The company, Adecoagro, based in Luxembourg, but with extensive farm holdings in South America, is selling 21.4 million common shares".....
(Read More)

From their website: "Adecoagro is currently one of the leading companies in the production of food and renewable energy in South America. Present in Argentina, Brazil and Uruguay, our main activities include the production of grains, rice, oilseed, dairy products, sugar, ethanol, coffee, cotton and cattle meat."

Photo from website.

New Jersey Gov. Chris Christie vs. Teachers (Town Hall Videos, CNBC)

Below are New Jersey Town Hall videos and a CNBC squawk box video featuring New Jersey Governor Chris Christie. It's getting serious. Christie was featured on 60 Minutes a few weeks ago, along with analyst Meredith Whitney, talking about New Jersey's financial situation and munis in general. These are old videos, but it shows the real life affects of spending cuts due declining state revenues, a stressed tax base, deficits, debts and a State aid squeeze.
"Governor Chris Christie responds to a teacher's question during a town hall meeting at Raritan Township. Discusses the teachers' union and the need for shared sacrifice. September 8, 2010.

MUB Breaks Dec 2010 Low, SEC Looking At Muni Bond Disclosures

On Friday, MUB, the National Municipal Bond ETF, took out the December 2010 low of $96.59 and closed at $96.26. Big red volume is making lower highs (not sure that means much or not), the RSI (relative strength index) is at 26.31 (it hit 10 in December) and the MACD is still in downtrend mode. See the chart after the jump. Last Wednesday Meredith Whitney gave an update on the muni market on CNBC.

According to Charlie Gasparino on Fox Business, the SEC is looking at muni bond disclosures.

"The Securities and Exchange Commission is ramping up its efforts to monitor disclosure problems in the municipal bond market, worried that cities issuing municipal debt are failing to properly disclose budget problems and other issues, thus affecting the price of bonds purchased by small investors, Fox Business has learned." [read more]

BSE Sensex and CSI 300 Down 1.6%, PBoC Raises Bank Reserve Ratio

Jim Rogers and Marc Faber win again. They were short emerging markets.

China Raises Bank Reserve Ratios to Fight Inflation (Bloomberg)
China raises bank reserves again (Reuters)
INSTANT VIEW - China raises bank reserve requirements (Reuters India)
BSE Sensex below 19,000 level, at 4-month closing low (Reuters India)
Sell-off Continues; India's Sensex Down 1.7% (RTT News)

BSE Sensex (Bombay Stock Exchange, India)
http://www.bloomberg.com/apps/quote?ticker=SENSEX:IND



CSI 300 Index (Shanghai, Shenzhen A-Shares)
http://www.bloomberg.com/apps/quote?ticker=SHSZ300:IND

Meredith Whitney On Municipal Bankruptcies (Ch. 9), State Arbitrage (CNBC Video)

Meredith Whitney was back on CNBC talking about municipalities. She doesn't see states defaulting on their debt, or Federal bailouts, but she still sees local municipalities declaring bankruptcy (not all of them). "It's not a severity issue, it's a frequency issue" she said. State governments are confirming her thesis. See the articles below.

She also mentioned state flight risk (state arbitrage), where companies or people leave for more favorable business conditions. Imagine if people left a city in mass exodus. What would happen to the tax base? Would defectors be treated like short sellers? Detroit is going through a similar event, but it was years in the making. They are shrinking the city, shutting down services and offering incentives for people to move. FYI: Illinois increased business taxes by 46 percent and the individual income tax by 66% (Fox Video). Watch the CNBC interview after the jump.

Jamie Dimon Interviewed On CNBC About JPM's Dividend (1/13/2010)

More on the new golden age of banking. Jamie Dimon, CEO of JP Morgan (JPM), is hopeful that JP Morgan will be able to "reinstate a dividend" in the second quarter.

Dick Bove: We're In A Golden Age Of Banking, C, BAC, STT, NTRS, BK Trading Below Cash Per Share

Dick Bove of Rochdale Securities thinks we're in new "golden age" of banking. He mentioned that bank shares are trading below cash.

"There's so much cash in some of the banks in the United States that they're actually selling at below their cash value per share. For example, Citigroup, Bank of America, Bank of New York, State Street, Northern Trust. They all sell at below their cash per share. What that means is, these companies now have a tremendous amount of liquidity which ultimately can be put to use to generate further earnings growth. And I think for the next 2-3 years what you will see, is that banks will actually increase their earnings at about a 20% rate per year, which will be far faster than what you're going to see from the industrial averages."

"Banks have more capital as a percentage of assets since anytime since 1934"

More bullet points:
  • 28% of bank assets are in cash
  • Non-performing loans are down
  • Net charge-offs are down
  • Delinquencies are down
  • Reaching point of being over reserved

Watch the CNBC interview after the jump, and the bankers vs. consultants rap battle in honor of the new golden age of finance.

Who, How and Why: $140 Oil and $5 Gas

Guest post by OilPrice.com

Who, How and Why: $140 Oil and $5 Gas

According to a loosely-organized apocalyptic Christian movement, May 21, 2011 will be the "end of days." On or about that same date, the price of oil in the United States will begin to climb to $4 a gallon, according to two savants of the oil industry.

The former is highly unlikely but the latter is very probable.

The escalation in the price of oil is predicted by the legendary oil man T. Boone Pickens, known for his financial acuity as well as his oil expertise, and John Hofmeister, who retired as president of Shell Oil Company, to sound the alarm about the rate of U.S. consumption of oil.

In an interview with a trade publication, Hofmeister predicted that oil would rise to $4 a gallon this year and to $5 a gallon in the election year 2012. Separately, Pickens-who has been leaning on Congress to enact an energy policy that would switch large trucks and other commercial vehicles from imported oil to domestic natural gas-predicts that oil currently selling for just over $90 a barrel will go to $120 a barrel, with a concomitant price per gallon of $4 or more.

SEC Conducts Inquiry Into St. Joe's Land Impairment Practices (JOE)

The SEC is checking out St. Joe's impairment practices. David Einhorn of Greenlight Capital, who is currently short St. Joe shares, believes $JOE needs to recognize significant impairment charges on their land. He thinks the stocks is worth $7-10 per share and it's trading at $24.60. Read: Einhorn's Presentation On Why He's Short St. Joe Vs. Bruce Berkowitz Who Owns 30%. This is getting interesting. Hat tip Going Concern.
"The Securities and Exchange Commission (the "SEC") has notified The St. Joe Company ("St. Joe") that it is conducting an informal inquiry into St. Joe’s policies and practices concerning impairment of investment in real estate assets. St. Joe intends to cooperate fully with the SEC in connection with the informal inquiry. The notification from the SEC does not indicate any allegations of wrongdoing, and an inquiry is not an indication of any violations of federal securities laws." (SEC.gov Form 8K)

St. Joe Reports Informal SEC Inquiry of Accounting for Land Impairments (Bloomberg 1/10/2011)
The St. Joe Company Dropping On SEC Concerns (JOE) (Benzinga)

Financial Links - Jeff Gundlach, David Einhorn, Illinois, EUR/USD, Spain, China (1/12/2010)

Jeff Gundlach’s Doubleline Presentation: Must Read "Bonds, 2011 Bonds", 1/1/2011 (Stone Street Advisors)

An Exclusive Interview With Green Light Capital's David Einhorn (Motley Fool)

David Einhorn - Federal Reserve’s Policies are Quite Dangerous (KingWorldNews)

China’s Chongqing Plans Tax for Used Homes, CCTV Says (Bloomberg) h/t Nuibi

Illinois Lawmakers pass income tax hike; Rep. collapses on Senate floor (Chicago Sun Times)

"Illinois lawmakers OK 66% income-tax increase in budget crisis. The rate increase from 3% to 5% will generate about $6.8 billion a year. A taxpayer who used to owe $1,000 would owe $1,666 instead." (AP / LA Times)

JP Morgan chief investment officer says EUR to drop to USD 1.20 by end-Aug - (hat tip Ran Squawk/Zero Hedge)

Euro May Fail if Spanish Economy Collapses, Nobel Winner Pissarides Says (Bloomberg)

Japan May Buy More Euro Bonds to Help Region, Officials Say (Bloomberg)

Spanish Bank Debt Costs Spur Doubt on Ability to Sustain Profit (BusinessWeek)

German Economy Grew at Fastest Pace in Two Decades in 2010 (Bloomberg)

Portugal Borrowing Costs Fall at Auction as Bailout Speculation Diminishes (Bloomberg)

St. Joe’s ($JOE) Accounting for Real Estate Impairment to Get the ‘Informal’ SEC Inquiry Treatment (Going Concern)

JGB CDSs are rising. See quotes and charts: JGB CDS USD SR 5Y and JGB CDS USD SR 10Y (h/t dutch book). *JGB CDS = Japanese Government Bond Credit Default Swaps

Federal Reserve Banks Earn $80.9 Billion In 2010, Up From $53B In 2009, Distributes $78.4 Billion To Treasury

The Federal Reserve Banks made $80.9 billion in 2010, up from $53.4 billion in 2009 (audited). "After providing for the costs of operations, payment of dividends, and the amount necessary to equate surplus with capital paid-in", they distribute profits to the U.S. Treasury (see chart below). Are Fed Bank shares on Second Market?

"Release Date: January 10, 2011

For immediate release

The Federal Reserve Board on Monday announced preliminary unaudited results indicating that the Reserve Banks provided for payments of approximately $78.4 billion of their estimated 2010 net income of $80.9 billion to the U.S. Treasury. This represents a $31.0 billion increase in payments to the U.S. Treasury over 2009 ($47.4 billion of $53.4 billion of net income). The increase was due primarily to increased interest income earned on securities holdings during 2010.

EU Prepares to Approve €1 Trillion Master Energy Plan - Guest Post

Guest post by GIR Analysts for OilPrice.com

EU Prepares to Approve €1 Trillion Master Energy Plan

INCIDENT: Towards the end of last year, the European Commission presented its new energy strategy for the next decade, calling for investment of €1 trillion in the EU's energy network, among a series of other measures. Leading Eurocrats hope that an EU energy summit scheduled for next month in Budapest will endorse the proposals and give them some political traction.

SIGNIFICANCE: The new energy strategy is a set of normative proposals that depend upon the member-states, the private sector, and other EU organs such as the European Parliament (EP) for clarification and implementation.

David Rosenberg Prefers US Dollar Over Euro, Bonds Not In Bubble (EUR/USD, UUP)

David Rosenberg, Chief Economist and Strategist at Gluskin Sheff, was interviewed at The Globe And Mail this morning. He sees more "financial spasms out of Europe" on debt concerns and the Ireland elections, a flight to safety bid back into the US Dollar (lower EUR/USD) and fixed income as an attractive investment. He said "bonds are not in a bubble". Link to the video (hat tip Zero Hedge)

http://www.theglobeandmail.com/globe-investor/markets/markets-blog/market-view-video/david-rosenberg-on-market-prospects/article1863551/

*Rosenberg is also bullish on Japan when using price valuation and interest rate comparables to the U.S. and Europe. Read more at Business Insider.

Dhaka Stock Exchange Index In Bangladesh Falls 20% In One Month, DGEN Chart And Protest Video

The DSE General Index (DGEN) lost 20% (8,918 to 7,135) from 12/5/2010 to 1/9/2011 and according to AP it is sparking protests.
"The government regulator, the Securities and Exchange Commission, held an emergency meeting Monday with merchant bankers and institutional stockbrokers to decide what actions to take to save the market from further falls." (Source: AP via myway.com)

Here is the 6-month chart of DHAKA:IND courtesy of Bloomberg.com. More at Reuters: Bangladesh police, investors clash as stocks go into free fall. See people riot in the streets outside the Dhaka Stock Exchange courtesy of Russia Today.

Portugal CDS, 10 Year Government Bond Yield and Bank Watch (Charts)

Credit protection on Eurozone sovereign debt is rising and banks are under pressure. Portugal is hitting the wires hard this morning (see below). I provided snapshots of Portugal's 5Y CDS and 10-year Government bond yield with direct links to Bloomberg. Bailout coming? It looks like Portugal's 10-year yield is lower at 7.05% from 7.17% earlier. *Here's your answer: Portuguese bond spread tightens, ECB seen buying (h/t Toni).

Jim Rogers Is Long The US Dollar, Short Emerging Markets ETF (Short Term)

In an interview with The Economic Times on 1/3/2011, Jim Rogers said he was long the US Dollar and short an Emerging Market ETF. He also mentioned sugar, rice, silver, oil, China, the Renminbi and more. Watch the full interview with text at their website: Jim Rogers outlines hot commodities for 2011 trade.

*Related: Marc Faber told CNBC TV18 India on 12/10/2010 that emerging Markets could fall by 20-30% (video)

$BGP February Call Option Activity, Watching Borders Group News

Expect big news soon from Borders Group (BGP). Bill Ackman of Pershing Square Capital Management owns 37%, their General Counsel and Chief Information Officer resigned, they halted payments to certain vendors to refinance debt and something needs to be done about declining revenues and shareholders equity (see chart comparison since 2001 below). Articles:

*More red flags up at Borders Analysts: Chapter 11 an option; company needs a strategy, too (Crains Detroit)

*Borders Group bankruptcy filing may be inevitable, University of Michigan expert says (AnnArbor.com)

BGP closed at 0.92 on Friday and $1 call options were active from February to August. February activity was over open interest. I'm not sure what this activity means. Are investors positioning for a pop on news? Is someone hedging their short positions? Either way, hopefully something interesting happens with this company, including more land for Laptopistan. Massive retail commercial real estate space is involved here as well. See my previous post for more news and information. BGP option chain snapshots and fundamental data after the jump.

Financial News and Research Links (1/9/2010)

Eclectica's Hendry Turns Greece Profit Into China Failure Bet (Bloomberg)

Freight Rates Tumbling as 35 Miles of Ships Passes Ore Demand (Bloomberg)

THE BEST RISING INTEREST RATE TRADE - Credit Suisse (Pragmatic Capitalism)

Goldman Sach's Abby Joseph Cohen January 2011 Research (Zero Hedge)

Goldman traders to leave to start hedge fund- FT (Reuters)

*$432 BILLION PENSION FUND COALITION DEMANDS BANK DIRECTORS IMMEDIATELY EXAMINE FORECLOSURE PRACTICES - (New York City Comptroller/John C. Liu) h/t Ritholtz

Christie Targets Medicaid to Close $10.5 Billion New Jersey Budget Deficit (Bloomberg)

Illinois may dig deeper credit rating hole (Pensions & Investments)

In Illinois, a Giant Deficit Leads to Talk of a Giant Tax Increase (New York Times)

For more headlines see my Twitter handle in the Wibiya toolbar below.

Higher Bond Yields, Dollar Could Trigger Gold Sell Off (Keith McCullough On CNBC)

Keith McCullough (Hedgeye Risk Management) told CNBC last week (1/7/2010) that higher bond yields and US Dollar could trigger a sell off in Gold. Watch the video below for more. LaSalle Futures Group and Doug Kass agree. Here's a 3 year chart of $GLD courtesy of stockcharts.com.

GLD (SPDR Gold ETF) - 200DMA 123.67 

Bernanke's Testimony On Economy, Monetary And Fiscal Policy (Senate Hearing)

Bernanke's testimony before the Senate Budget Committee on the Fed's economic outlook, quantitative easing, monetary and fiscal policy. The hearing is live at CSPAN 2. Also read the December FOMC Minutes.

Chairman Ben S. Bernanke
The Economic Outlook and Monetary and Fiscal Policy
Before the Committee on the Budget, U.S. Senate, Washington, D.C.
January 7, 2011

Chairman Conrad, Senator Sessions, and other members of the Committee, thank you for this opportunity to offer my views on current economic conditions, recent monetary policy actions, and issues related to the federal budget.

The Economic Outlook
The economic recovery that began a year and a half ago is continuing, although, to date, at a pace that has been insufficient to reduce the rate of unemployment significantly.1 The initial stages of the recovery, in the second half of 2009 and in early 2010, were largely attributable to the stabilization of the financial system, expansionary monetary and fiscal policies, and a powerful inventory cycle. Growth slowed somewhat this past spring as the impetus from fiscal policy and inventory building waned and as European sovereign debt problems led to increased volatility in financial markets.

VIX 1X2 Call Spreads Trading (VIX Chart, Futures Curve and Put/Call Ratio)

Below is information from the CBOE VIX options pit on 1/4/2010 and 1/5/2010 courtesy of Jamie Tyrrell of optionMONSTER TV. VIX 1X2 call spreads were in play, moving from January to March and February to March. They were protecting March upside in volatility. Here's the VIX futures curve using data from InsideStocks.com on 1/6/2010. See the videos and more after the break.


Howard Davidowitz's Retail Outlook, Real Estate Revolution, XRT Put Spread and Chart Levels To Watch

Like I said on 12/15/2010, keep an eye on $XRT, the retail stock ETF. It broke below a rising wedge and could test the ultimate $45.74 support level (2007/2010 highs). A January put spread that expires on January 22 is trying to capitalize on this (or hedge).

From the Xpound Blog:

"Put volume is picking up in the SPDR Retail Trust (XRT), as shares sink on disappointing December same store sales numbers. XRT is now off 63 cents to $47.12 and options volume includes 29,000 puts and 3,200 calls through midday. The top trade was part of a spread, in which an investor apparently paid 40 cents per contract for 5,400 January 46 puts and collected 10,800 January 45 puts at 20 cents. This 2X1 put ratio spread, at even money, is a bearish play. It makes its best profits if shares fall to $45 by the January expiration, in 15 days."

December retail sales disappointed according to Retail Metrics Inc. From BusinessWeek:

"Sales at stores open more than a year rose 3.2 percent in December, according to Retail Metrics Inc. That compared with the 3.5 percent average of estimates compiled by the firm and a 5.5 percent increase in November. Retail stocks fell, led by Gap Inc. and Target Corp. as both missed estimates and dropped more than six percent."

Here is the grand finale. Howard Davidowitz, who's been consulting on the retail industry since 1981, thinks the overall consumer is still in "terrible shape" with "17.5% UNDERemployment, 46 million people on food stamps and housing continuing to go down (another 10% would bring a double dip recession). He said the rise in capital markets drove holiday spending mainly in the luxury space (Coach, Tiffany, Saks, jewelry). Sears, Wal-Mart, Toys R' Us, Best Buy, AJ Wright, A&P, Loehmann's, Charming Shoppes are a different story. He also talked about Edward Lampert's strategy on Sears and thinks Wal-Mart is "scared stiff" of Amazon.

Davidowitz ultimately believes that the explosion in online sales (Amazon) will put major pressure on retail commercial real estate going forward (*this is interesting though: Malls Bet on MindSmack's FastMall App to Draw Shoppers Back*).I embedded the video below and provided quotes. Here's what he said:

"We're only at the beginning of this online sales and that has to lead you to question the whole retail real estate strategy. We've got 21 square feet of  selling space for every man, woman and child in this country. We already have double of what we need. With the explosion of online sales, what happens to all these retail malls and tons of shopping centers that are marginal. I think there are huge questions going forward about size of stores, locations of stores, distribution facilities. Huge changes are going to be taking place in the next 5-years as people continue to shop online."


Baltic Dry Index Makes New Low, Huge BDI/Copper Divergence (Chart)

The Baltic Dry Index ($BDI), or dry bulk freight rate index, just broke through the 2010 low of 1700. It closed at 1,621 today (1/5/2011). When the financial system froze up in late 2008, the BDI hit a low of 663 before the reflationary jolt by the Fed. It was pretty much a done deal for reflationary assets to rally hard, and look where we're at today with the addition of QE2. What's interesting now is dry bulk commodities and the Baltic Dry Index have been diverging for 7 months now. For example, the BDI peaked in May 2010 while Copper kept making new highs. Look at the huge gap on the second chart. You'd think commodities would follow freight rates. So how does this gap close? Are dry bulk commodities overpriced? China demand waning due to rate hikes to curb inflation? Or is this simply a supply/demand imbalance on the shipping front? Related articles: Queensland Flooding to Cut Freight Rates as Coal Transporters Lie Idle (coal ships lie idle) and China Stocks' Best Forecaster Predicts Slump in 2011, Defying CICC, Mobius. Check out the $BDI 3-year chart and $BDI/$COPPER chart after the jump.

'Off With Our Heads', PIMCO's Bill Gross January 2011 Investment Outlook

Important highlights from Bill Gross's January Investment Outlook "Off With Our Heads" (pimco.com).

"The problem is that politicians and citizens alike have no clear vision of the costs of a seemingly perpetual trillion dollar annual deficit. As long as the stock market pulsates upward and job growth continues, there is an abiding conviction that all is well and that “old normal” norms have returned. Not likely. There will be pain aplenty and it’s imperative that we recognize now what the ultimate cost of blueberries will mean for American citizens of tomorrow. Four major factors come to mind:"
"American wages will lag behind CPI and commodity price gains." [...]

"Dollar depreciation will sap the purchasing power of U.S. consumers, as well as the global valuation of dollar denominated assets."

"One of the consequences of perpetual trillion dollar deficits is the need to finance them, and at attractively low interest rates for as long as possible." 

"Trillion dollar annual deficits add up, and eventually produce a stock of debt that can become unmanageable:"

"Investment Implications

Birinyi's 2,854 SP Target Vs. Rosenberg's Bear Market Rally Call (Links)

Birinyi's Projected 322% S&P 500 Advance Beats '90s Tech Rally (Bloomberg)
S&P on Steroids: Index To Hit 2,854 on Sept. 4, 2013, Birinyi Predicts (NetNet)

vs.

David Rosenberg Goes On Offensive, Mocks Birinyi, Tells Koolaid Guzzlers To "Put It In Their Pipe And Smoke It" (Zero Hedge)

Mark Cuban Interviewed By Howard Lindzon (StockTwits TV)

Watch Howard Lindzon interview Mark Cuban on StockTwits TV. Financial hackers are running the market.

ADP: December Private Sector Employment Up 297,000 (100K Expected)

Private sector employment increased by 297,000 in December (2010) according to ADP. An increase of 100,000 was expected at Reuters. Here's a quote and chart from the December press release:
"Private-sector employment increased by 297,000 from November to December on a seasonally adjusted basis, according to the latest ADP National Employment Report® released today. The estimated change of employment from October to November was revised down but only slightly, from the previously reported increase of 93,000 to an increase of 92,000.


This month’s ADP National Employment Report suggests nonfarm private employment grew very strongly in December, at a pace well above what is usually associated with a declining unemployment rate. After a mid-year pause, employment seems to have accelerated as indicated by September’s employment gain of 29,000, October’s gain of 79,000, November’s gain of 92,000 and December’s gain of 297,000. Strength was also evident within all major industries and every size business tracked in the ADP Report. [read full release]"
 Is this already priced in?

SP Future Large Specs Vs. ES Future Large Specs (COT Charts 12/28/2010)

Here are COT charts as of 12/28/2010 for the E-Mini S&P Future (ES) and S&P 500 Index Future (SP) (courtesy of cotpricecharts.com). I'm not sure if this means much, but look how large speculators net long SP and net short ES closed out open interest recently. Charts after the jump.

  • ES COT on 12/7/2010: 37% of large speculators were bullish with 2,979,326 contracts open. ES COT on 12/28/2010: 47% of large speculators were bullish with 2,479,708 contracts open.
  • SP COT on 12/7/2010: 74% of large speculators were bullish with 384,778 contracts open. SP COT on 12/28/2010: 52% of large speculators were bullish with 273,812 contracts open.

December FOMC Minutes Text, QE2 Through Second Quarter 2011 (12/14/2010)

Text from the 12/14/2010 FOMC Minutes release on the financial situation, economy, federal funds rate and QE2 ($600 billion Treasury purchase program). I quoted the beginning and end (Developments in Financial Markets and the Federal Reserve's Balance Sheet and Committee Policy Action). I embedded the full PDF below or read the text at federalreserve.gov.

Minutes of the Federal Open Market Committee (December 14, 2010)

"Developments in Financial Markets and the Federal Reserve's Balance Sheet
The manager of the System Open Market Account (SOMA) reported on developments in domestic and foreign financial markets since the Federal Open Market Committee (FOMC) met on November 2-3, 2010. He also reported on System open market operations, including the continuing reinvestment into longer-term Treasury securities of principal payments received on the SOMA's holdings of agency debt and agency-guaranteed mortgage-backed securities (MBS) as well as the ongoing purchases of additional Treasury securities authorized at the November 2-3 FOMC meeting. Since the last meeting, the Open Market Desk at the Federal Reserve Bank of New York purchased a total of about $105 billion of Treasury securities, reflecting about $30 billion of purchases with the proceeds of principal payments and about $75 billion as part of the authorized expansion of the Federal Reserve's securities holdings. Purchases were concentrated in nominal Treasury securities with maturities of 2 to 10 years, though some longer-term securities were purchased along with some Treasury inflation-protected securities (TIPS). The Manager also discussed the Desk's intention to place additional limits on its purchases of individual securities, as the Federal Reserve's holdings of such securities increased beyond 35 percent of the total outstanding; these limits were intended to help ensure that Federal Reserve purchases do not impair the liquidity in Treasury markets. In addition, the Manager updated the Committee on the SOMA's holdings of foreign-currency instruments. There were no open market operations in foreign currencies for the System's account over the intermeeting period. By unanimous vote, the Committee ratified the Desk's transactions over the intermeeting period."

Google's Marissa Mayer On Location, Social, Groupon (Interview Videos)

Marissa Mayer, VP of Consumer Products at Google, was interviewed by Media Beat (MediaBistro.com). She talked about contextual discovery, Google Places (location), the Groupon bid, their own technology, startups inside of Google and their social push. With Facebook stealing the spotlight (worth $50 Billion now) and Groupon recently declining Google's $6 billion bid (worth 7.8 billion now?), you haven't seen the end of Google. They just haven't "gotten social media right yet". Marissa Mayer regarding Google Buzz.

"One of the things that we’ve learned is that Google hasn’t gotten social right yet. That said, social is really important; it’s something that we’re working very hard on."

"I think that we will get it right. I think that if you look at some of the main platforms of the Web, it’s search, video, mobile and social. We’ve done really well in three out of those four, and we’re working very hard on the fourth." (via mediabistro)

I bet Google makes social and location-based marketing/coupons more interesting and smarter on mobile devices going forward. The Microsoft/Facebook collabo and Groupon could be a decent fight. What side does Twitter take? Below I was able to embed video #2 on social. Here's a link to video #1 on the failed Groupon bid.

2010 Year End Macro Note To Read

GregorWeekly Year End Macro Note: 2010 Wrap Up and Closing Letter

Borders' General Counsel, CIO Resigned, Delayed Vendor Payments, Will It Merge With Barnes And Noble? (BGP, BKS)

What is going to happen with Borders? From Barron's Tech Trader Daily this morning.

"Late yesterday, beleaguered bookseller Borders Group (BGP) announced two executives resigned, Thomas D. Carney, the firm’s general counsel, and Scott Laverty, its chief information officer." (1/4/2010, Barron's)

And this comes after Borders delayed payments to vendors.

"The book chain Borders entered 2011 on an unsteady note, telling major publishers last week that it would delay payments owed to them, and stoking fears that it would not be able to recover from declining sales." (1-3-2010, NYT)

"PW has learned that at least one of the “big six” New York houses has suspended shipping books to Borders, a troubling sign for the company as it attempts to find lenders to refinance its debt and provide enough liquidity to get the national book retail chain through to early 2012." (12-31-2010, Publishers Weekly)

Bill Ackman's Pershing Square Capital Management owns 37% of Borders and on 12/6/2010 he offered to help finance a bid for Barnes and Noble.

"Hedge fund manager William Ackman is raising his wager on bookseller Borders Group Inc (BGP.N), offering to help it buy larger rival Barnes & Noble Inc (BKS.N) for $963.7 million." (12/6/2010, Reuters)

$BGP is trading at 96 cents, right around the 1-year low (chart 2). It hit an intra-day low of .87 before closing at .96 (chart 1). Get ready for something interesting to happen!

Charts courtesy of Yahoo Finance (click for larger view)

Niall Ferguson: Empires on the Edge of Chaos (ABC/ForaTV)

Harvard Professor and Historian, Niall Ferguson, gave an hour long speech titled "Empires on the Edge of Chaos" in Australia on 7/28/2010 (h/t Zero Hedge). Niall also did the must see documentary "The Ascent of Money" on PBS. Here's the summary of his speech and watch the full program at Fora.tv.
"Throughout history the rise and fall of empires isn't slow or cyclical, as we like to think, but arrhythmic...it mostly happens very, very suddenly. America is a superpower on the edge of chaos, according to economic historian and author Niall Ferguson. U.S. debt levels, he says, and its unwillingness to address the problem, has put it in the same category as other great empires which have collapsed throughout the ages.

Ferguson argues the world is changing. There's the rise of authoritarian China as a super-power; a Keynesian president leading a weakened United States; the re-emergence of democratic India as a great power; the continued decline of Japan; and the probability of continued global economic instability ahead.

Is the rise and fall of empires cyclical or arrhythmic? How does economic profligacy -- whether the result of arrogance or naivety -- contribute to the downfall of civilizations? Not to be missed, the address will offer a timely review of primacy, leadership, and the complex factors behind the rise and fall of great powers and civilizations."

Recent Posts with Niall Ferguson:

*Niall Ferguson On The Pitfalls of Keynesian Economics [Daily Beast Innovators Conference, 10/24/2010] (Zero Hedge)

*Niall Ferguson: Treasury Bond Vigilantes Coming, Default Or Inflation Choice For US at [Aspen Ideas Festival 7/7/2010] (Distressed Volatility)

Explore Hidden New York City Infrastructure (Undercity Video)

This is an amazing video and it's related to the "municipal" channel of the blog. So what do taxes and revenue bonds finance? Check out New York City's hidden infrastructure through the eyes of Urban Historian/Photographer Steve Duncan and Director/Cinematographer Andrew Wonder. They look at hidden NYC subway areas, sewer tunnels, tops of bridges, the hidden Amtrak tunnel etc. The website to visit is undercity.org. I embedded the "Undercity" video after the jump.

Robert Shiller Sees S&P 500 At 1,430 In Year 2020! (CAPE Ratio)

Yale Economics Professor, Robert Shiller, who recently gave his view on November's S&P/Case-Shiller Home Price Index, was on CNBC last week explaining how a CAPE (Cyclically-Adjusted Price/Earnings) ratio of 15, projected real S&P earnings of 78.2 and 2% inflation, was forecasting 1,430 on the S&P 500 in year 2020! That is 13.7% upside from Friday's close. Shiller quote via CNBC.com:

"We're talking ten years out. So I'm going to go back to 100 years. The growth of real inflation directed earnings is surprisingly low. From 1890 to 1990 it was only 1.5 percent a year," he said.

"I take earnings and I extrapolate them out at 1.5 percent from where they—S&P earnings—are now and then I apply a price earnings ratio of 15, which is the historical average for 1890 to 1990," Shiller said.

The 1,430 level actually makes sense if you look at the 50 year chart extended out to 2020 (click for larger view).

I'll do a new post with a chart analyzing Shiller's data at econ.yale.edu (S&P, EPS, CPI, Bond Yields and CAPE). I asked David Einhorn in a post on 12/12/2010 if he thought the CAPE would test the lows around 6, which is where the market bottomed in 1932 and 1982. I believe we're around 22 now, up from 13 when the market bottomed in March of 2009 (still double the low). Watch the CNBC video after the jump.

George Soros 2009 Interview On Bubbles, China, Currencies, Fed (WSJ)

I came across this George Soros interview from June 2009 and thought I'd post it (hat tip Howard Lindzon). When he sees a bubble (gold?) he buys it, but admitted to shorting Amazon early during the tech bubble. Timing still needs to be right in a bubble. The gold balloon will be interesting to watch from here. Soros also talked about the Federal Reserve, currencies, US Dollar, commodities, China, Graham and Dodd valuation models vs. market perceptions of price (traders guessing), risk management and probably more. This video will be something to look back on. I also embedded a bunch of videos with Soros talking about the theory of reflexivity. Click the labels or search on the blog.

Goldman Sachs Invests $450 Million In Facebook, $50 Billion Valuation (FBOOK, GOOG, TWIT, GS, GRPN)

According to DealBook, Goldman Sachs invested $450 million and Digital Sky Technologies invested $50 million in Facebook. This is going to be a crazy IPO. How high can they get $FBOOK's valuation? Read the article at Dealbook (NYT).

"Facebook, the popular social networking site, has raised $500 million from Goldman Sachs and a Russian investor in a deal that values the company at $50 billion, according to people involved in the transaction. The deal makes Facebook now worth more than companies like eBay, Yahoo and Time Warner." (continue reading)

DealBook also covered Groupon's ($GRPN) recent capital raise.

"The 30-year-old founder and chief executive of Groupon, Andrew Mason, could raise as much as $950 million from investors in the next few weeks, laying the groundwork for a multibillion-dollar initial public offering in 2011." (continue reading) 

Social media is bubbling up! Amazing times for this space. Will Google buy Twitter ($TWIT)? Here's what Howard Lindzon, CEO and Co-Founder of StockTwits, had to say.

"I think that Google has to buy Twitter and that will start to be a meme soon. It’s a chess game and nuclear war now in the social space." (continue reading)

Gerald Celente's Top Trends for 2011 (Trend Research Institute)

Gerald Celente, who runs the Trends Research Institute (since 1980), released a preview of his "Top 11 Trends of 2011" report (pdf) and hit the media scene. He sees Gold at $2,000/oz, people switching to "quality" foods, social unrest (unemployment, housing) and a huge alternative energy breakthrough. His list, Fox Video interview and links are after the jump.

Long-Term Bonds: The Best Possible Investment? Think Again (Elliott Wave International)

Note: This is an interesting post on bonds by Elliott Wave International. It includes charts of 'Moody's Corporate Bond Yields (Aaa, Aa, A, Baa)' from 1929-1932 and the Dow Jones 40-Bond Average from 1915-1933.

Long-Term Bonds: The Best Possible Investment? Think Again
A free Club EWI report reveals why bonds do not provide shelter from the storm
December 23, 2010

By Elliott Wave International

TREASURIES -- the very name conveys a thing that is secure, protected, and will appreciate over time. Otherwise, it'd be called something like "TRASHeries" or "Mattress Stuffers." Then, there's the official seal of the US Department of Treasury: its image of a scale and a key symbolize "balance" and "trust."

And, finally, there's the mainstream economic experts who have it on good authority that long-term bonds increase in value during financial instability and uncertainty.

On this, the following news items from November-December 2010 reflect the enduring faith in fixed-income assets as the ultimate safe-havens:

Market and Economic Forecasts For 2011 (Oil, Housing, Stocks, Rates)

More 2011 forecasts for your enjoyment. Continued from my previous post on 12/19 (2011 S&P Forecasts 1250 to 1450, 10y Yield, EPS and GDP) and 12/31 (Biggs, Gerson, Levkovich, SocGen).

*Marc Faber’s January 2011 Outlook, Correction Imminent - Wall Street Pit

*Goldman's Key Charts To Kick Off 2011 - Zero Hedge

*2011 and an arbitrary point of reflection - Stone Street Advisors (Dutch_Book)

*2010 Intermarket Relationship Charts with the SP500 - Afraid to Trade (Corey Rosenbloom)

*A Fed-Induced Speculative Blowoff - John Hussman (HussmanFunds)

*Top 11 Trends of 2011 by Gerald Celente - Trends Journal

Albert Edwards, SocGen bear, takes a bite out of China - Guardian.co.uk

*Keep Ahead of the Herd in 2011 - Elliott Wave International

*Oil Predictions for 2011 - Chris Jarvis ($120 doable) vs John Kilduff (bearish) - CNBC Video

*Happy New Year from The North Sea. Or, Secrecy By Complexity (Oil) - Gregor.us

*UBS: Short-Term Picture Intact but Clouds Gathering (Hindenburg Omen) - Hedge Analyst (12/21)

*Gary Shilling: And Now House Prices Will Now Drop Another 20% - Business Insider

*Peter Schiff: Home Prices Are Still Too High (looks at historical trend line) - WSJ

*The Long View by Decision Point (technical analysis) - PragCap

*A New Year brings new economic headwinds by Hedgeye - Fortune Magazine

More 2011 trends to watch by Doug Kass (Seabreeze Partners) and Josh Brown (Fusion Analytics) and see reader submitted charts on 2010 energy data at TheOilDrum. If there are more forecasts please put a title and link to the report or blog post in the comment section. Good luck!

Peter Schiff: Federal Reserve Could Bail Out Municipal Bond Market (MUB)

Peter Schiff (Euro Pacific Capital) thinks the Federal Reserve will bail out the municipal bond market. He argued with Don Luskin on the Kudlow Report on 12/23/2010 (video after the jump). Before the debate they showed a clip with Warren Buffett giving his view on munis in June 2009: "How would I rate the States and major municipalities. I mean if the Government will step in to help them they're triple A. If the Federal Government won't step in to help them, who knows what they are. I don't know how I would rate those myself now, in other words because it's a bet on how the Government will act over time". I embedded the full CSPAN video here.

Schiff thinks Meredith Whitney is sugar coating the upcoming muni-geddon. I could see the Fed backstopping muni obligations. If so, gold will probably like that no? And $TYX. PIMCO's Bill Gross actually sees a few muni-bond bargains based on yield spreads. So, what are the chances that $MUB tests the 2008 low?

Andy Xie: China Inflation vs. U.S. National Debt, Who Crashes First

Andy Xie, former Chief Asia-Pacific Economist at Morgan Stanley who's now independent, was on Bloomberg TV talking about inflation in China, tightening measures, potential property market effects, hard landing versus soft landing, U.S. monetary policy, U.S. National Debt and the coming Treasury crash. After watching the video read his recent write up at caing.com titled "Good Tidings in 2011":

"The last crisis started in the U.S. If China hadn't reformed a decade ago, it could have started in China. An economic crisis in China would have prolonged the U.S.'s economic cycle by bringing down oil and other commodity prices, which would have improved the U.S.'s cash flow.

The most likely candidates to trigger the next global crisis are the U.S.'s sovereign debt or China's inflation. When one goes down first, the other can prolong its economic cycle. China may have won the last race. To win the next one, China must tackle its inflation problem, which is ultimately a political and structural issue, in 2011. If China does, the U.S. will again be the cause for the next global crisis. China will suffer from declining exports but benefit from lower oil prices."
(read full article at Caing.com, Caixin Online)

2011 will be an interesting year of economic engineering. Happy MMXI everyone.

Queensland Flood Information, Police Briefing, News Videos (12/30/2010)

There is a massive flood in Queensland, Australia. I embedded the Queensland Police flood briefing and news videos after the jump. This is a disaster. Some towns could be 80% underwater.

200,000 Australians evacuated in Queensland floods (worst flood in 50 years) - Guardian

Queensland Flood Warning Centre - Bom.gov.au

Counting the cost: the bill could run into billions, warns Bligh - The Australian

Australian PM visits flood-devastated Queensland - CNN

Military called in as flood crisis deepens - The Australian

New payments announced for flood victims as crisis continues in Rockhampton, Emerald - The Australian

Australia Floods to Worsen in East As Cyclone Looms in West - WSJ

Reads: Marc Faber, Davidowitz, Borders, Clearwire, Barton Biggs, Tobias Levkovich, Gerald Celente

End of year articles and videos (12/29/2010-12/30/2010)

Long-term U.S. Treasuries are a suicidal investment (Marc Faber) - Bloomberg

Borders delays payments to certain vendors as part of potential refinancing - Reuters, AP

Howard Davidowitz: U.S. consumers are in terrible Shape, talks about U.S. retailers - Bloomberg video [h/t Zero Hedge]

2011 Predictions (Barton Biggs, Jeffrey Gerson) - PragCap.com

U.S. Stock Funds See First Weekly Inflow Since April - Bloomberg

Bolivians Protest Against 73% Rise In Gas Prices (Gasolinazo) - Video

Gasoline prices in Bolivia increased by 73% and Diesel rose 83%. People are not happy. Watch the AP video after the jump.
"Fuel prices had been frozen for six years, but the government said it could no longer afford to subsidize them, especially since much is smuggled across the border to neighboring countries." Read: Protests intensify in Bolivia over gasoline prices (AP)

XLF, IWM, XME Put Option Activity On 12/29/2010 (Charts)

Interesting put activity yesterday. Charts courtesy of freestockcharts.com.

$XLF (financials) Put Spread (debit)
30,000 March 2011 XLF $15 Puts bought for $0.39
30,000 March 2011 XLF $13 Puts sold for $0.09 (read more at theoptionsinsider.com)

XLF (SPDRs Select Sector Financial ETF)

$IWM (small caps) Put Spread (debit)
19,000 March 2011 IWM $77 Puts bought for $2.93
19,000 March 2011 IWM $70 Puts sold for $1.23 (read more at optionmonster.com)

IWM (iShares Russell 2000 Index Fund ETF)

$XME (metals/mining) Puts Bought (Hecla Mining is the top holding at 5.6%)
19,000 February 2011 XME $63 Puts bought for $1.38 with 14 open (h/t crimsonmind)

XME (S&P Metals & Mining ETF)

Josh Brown: Three Investment Fads To Watch In 2011 (Fast Money)

Josh Brown of Fusion Analytics and TheReformedBroker.com gave three trends to watch in 2011. Watch the CNBC video after the jump.

1) Social IPO Explosion (watch -> Twitter, Zynga, Skype, Groupon)
2) Municipal Bonds (Muni-Geddon)
3) Commodity Pickers Market (likes agriculture, not commodities building out Chinese infrastructure)

Doug Kass 2011 Forecast, Sees Secular and Cyclical Headwinds (Video)

Doug Kass (@dougkass) of Seabreeze Partners thinks the economic recovery and market rally will be short lived. A big portion of it is "recession fatigue", he said. He's also going against consensus estimates. Here are the headwinds he sees affecting the economy. Video after the jump.

Secular headwinds: Fiscal imbalances, inevitability of higher marginal tax rates, excess housing inventory, gridlock/reluctance to address the deficit, structural increase in unemployment.

Cyclical headwinds: Rising interest rates, inflation, rising commodities like oil (and agricultural commodities), corporate profit margins are at a 57 year high and are vulnerable to mean regression, sees less top line growth, and I think he said "some reversal in wage deflation".

Home Prices Make New Lows In Six U.S. Cities, Shiller On The Trend (Video)

Robert Shiller, Yale Economics Professor and co-creator of the S&P/Case-Shiller Home Price Index, was on WSJ Hub Extra talking about the recent trend in home prices. The recent price decline was not expected according to a Bloomberg survey. Shiller was wondering if the 3-month downtrend would continue, and if so, the market follow suit. However, Congress could step in again with an additional tax credit or stimulus measure. The odds of that happening compared to 2009 are lower.

Light at the end of the tunnel: Shiller's professional forecasters (on average) at his firm Macro Markets see home prices up 7% by 2014, but could get pessimistic after this read. Just a blip? For a housing battle read Housing: Bill Ackman vs Gary Shilling at Felix Salmon's blog. Also read Roubini: 'Housing Prices Can Only Move Down' at CNBC NetNet. See the WSJ video after the jump.

"U.S. Home Prices Weaken Further as Six Cities Make New Lows According to the S&P/Case-Shiller Home Price Indices

New York, December 28, 2010 – Data through October 2010, released today by Standard & Poor’s for its S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, show a deceleration in the annual growth rates in 18 of the 20 MSAs and the 10- and 20-City Composites in October compared to what was reported for September 2010. The 10-City Composite was up only 0.2% and the 20-City Composite fell 0.8% from their levels in October 2009. Home prices decreased in all 20 MSAs and both Composites in October from their September levels. In October, only the 10-City Composite and four MSAs – Los Angeles, San Diego, San Francisco and Washington DC – showed year-over-year gains. While the composite housing prices are still above their spring 2009 lows, six markets – Atlanta, Charlotte, Miami, Portland (OR), Seattle and Tampa – hit their lowest levels since home prices started to fall in 2006 and 2007, meaning that average home prices in those markets have fallen beyond the recent lows seen in most other markets in the spring of 2009." [Read the full release breaking out the data at standardandpoors.com]

When Does Distressed Detroit Turn Around? (Videos and Info)

12/28/2010: Detroit area deleveraging and pension losses continue. Where is the bottom on Detroit's chart? Also check out the videos I embedded below.

*Detroit on time with annual audit (NPR Michigan Public Radio)

*Detroit Files CAFR On Time (Bond Buyers)

Michigan Town (Hamtramck) Is Left Pleading for Bankruptcy (New York Times)

Hamtramck manager: We'll pursue bankruptcy until 'door is shut, locked, barricaded, bolted' (mLive)

Detroit pension fund spends $30 million to fix $1-million building (Detroit Free Press)

Risky bets cost Detroit pension funds $480 million (Detroit Free Press)

A&P wants to terminate 21 retail leases in metro Detroit, bankruptcy filing shows (Craines Detroit)

Detroit Water and Sewer Revenue Bonds Are Downgraded by Moody’s (BusinessWeek)

Detroit Mayor Plans to Halt Garbage Pickup, Police Patrols in 20% of City; Expect Bankruptcy, Massive Municipal Bond Turmoil in 2011 - (Global Economic Analysis by Mish)

Michigan budget may fall short by $1.85B in 2011-12 (Detroit News)

Recent Detroit Housing Info

October S&P Case Shiller Home Price Index: 68.86, -2.5% over September 2010 and -5% over last year. "An October index level of 68.86 in Detroit indicates that average home prices are more than 30% below their January 2000 values." (December 28 press release Standardandpoors.com)

Detroit home sales decline leads slumping Metro area (Detroit News)

I came across the FNC Inc. Residential Price Index. It says October Detroit home prices hit 78.2, +1.9% over September 2010 and unchanged over last year. Never heard of it.

India (Tata Technologies) looking to hire 400 employees in Detroit. CNN Video after the jump from 12/10/2010 and more.

Bill Gross (PIMCO) Avoiding Illinois, Some Muni Bond Yields Attractive On Risk/Reward Basis (CNBC)

Bill Gross, who runs the world's largest mutual fund in the world PIMCO Total Return, which could now include up to 10% in preferred stock and convertible bonds, thinks some municipal bond yields are decent on a risk/reward basis. For example, 6.65% on New York City Build America Bonds and 7%+ in California. Again, just like commercial real estate (cap rates), how do you price in interest rate risk for Treasury yields going forward? Will the 10-year Treasury yield stay between 2-4% during the next 5-10 years? If tax rates rise significantly to fund our Nation's expenditures, is that the true alpha? Based on tax base/revenue risk though, it's a Muni pickers market imho. Have we seen the worst yet of the muni carnage? See the CNBC video after the jump.

The ‘Subsidy’: How a Handful of Merrill Lynch Bankers Helped Blow Up Their Own Firm (ProPublica.org)

This is an interesting read at ProPublica.org. It's an ongoing investigation. Listen to the NPR podcast Wall Street Trickery Inflated The Bubble and read Banks’ Self-Dealing Super-Charged Financial Crisis at ProPublica. Also see the Inside Job. Great movie...

"The ‘Subsidy’: How a Handful of Merrill Lynch Bankers Helped Blow Up Their Own Firm 
By Jake Bernstein and Jesse Eisinger ProPublica, Dec. 22, 2010, 3:37 p.m.

Two years before the financial crisis hit, Merrill Lynch confronted a serious problem. No one, not even the bank's own traders, wanted to buy the supposedly safe portions of the mortgage-backed securities Merrill was creating.

Bank executives came up with a fix that had short-term benefits and long-term consequences. They formed a new group within Merrill, which took on the bank's money-losing securities. But how to get the group to accept deals that were otherwise unprofitable? They paid them. The division creating the securities passed portions of their bonuses to the new group, according to two former Merrill executives with detailed knowledge of the arrangement." [continue reading at propublica.org]

Gartman's Top 3 Trades for 2011: Agriculture, Strongs, Regional Banks That Benefit (BRICmerica)

Dennis Gartman, who writes the Gartman Letter, was on CNBC giving his top 3 trades for 2011.

1) Agriculture (softs)
2) Strongs (coal, steel, ball bearings, railroads)
3) Small Regional Banks in the Midwest that benefit from U.S. farming and the positive yield curve (BRICmerica!)


He's still bearish on the Euro. Watch the video clip after the jump.

Biderman of TrimTabs Still Doesn't Know Who's Buying Stocks! (CNBC Video)

Charles Biderman, Founder and CEO of TrimTabs Investment Research, who specializes in data-mining, volume, liquidity and fund flows in the stock market, still doesn't know who's buying stocks! He mentioned this a year ago (1/8/2010) on BNN. Here is data from TrimTabs on Mutual Fund and ETF flows (via CNBC).

FundsDecember (MTD)2010 (YTD)
Bonds-15.5B+273B
U.S. Equities+16.7B-41.3B
International Equities+8.5B+84.3B


This is what he said (watch the video after the jump):
"It's very strange for someone like me who watches money because individuals have been selling, companies are net selling, [...] insider selling and new offerings are swamping any buyback or any cash M&A activity since QE2 was announced. Pension funds, hedge funds don't really have that much new cash to invest. So [...] who's buying the stock that people are selling. It's QE2. Since QE2 the market's gone up. So what nobody's asking or what I'm asking is what happens when QE2 stops? If the only buyer is the Fed and the Fed stops buying, I don't know what's going to happen."

On where money is leaving: