quote
Dr. Ed Yardeni of Yardeni Research believes that sectors and industries that outperformed and underperformed the market during the first year of the bull market will do so again for this year, writes Josh Lipton for Minyanville. Yardeni says that tech will come out ahead this year and “industry analysts are raising both their 2010 and 2011 estimates as the sector continues to deliver more positive earnings surprises than the other sectors.”

The tech sector’s top performers have some things in common, such as companies that have big global footprints and strong, clean balance sheets. Additionally, valuations look attractive, tech companies are continuing to put up record revenue numbers and capital expenditure may begin to increase.

http://www.etftrends.com/2010/03/why-tech-etfs-may-keep-leading-in-2010.html

Globalization and our 20-30 year decline in our standard of living, buying power and investor sentiment has changed everything about how we look at the market.

However, caution, so many people still think only in terms as if the U.S. is still the most powerful force in the market, that they can still move it short term. Also, we have the European theater to drag the global economy down with and that, when combined with the U.S. could be a major force and it isn’t looking too great.

Again, the global economy is very fragile but, it has become the market’s leading force. 76% of the S&P get at least some earning from overseas. Exports to the U.S. are now only about 16% of what China counts on for their export economy and that trend continues to marginalize the U.S. (if the global economy continues to grow).

If the global economy falters, then all the doom and gloomers on the market will be probably vindicated for their pessimism but, that hasn’t happened yet.

Have your stops in place but, I wouldn’t be shorting this market yet. As concerned as many are that China’s “bubbles” are ready to break, until they do, like the tech bubble, they can keep expanding longer than many believe possible.

There really is no place without risk and that includes the bond markets and cash. You have to be active in seeking global information everyday that will drive the markets and stocks. Domestic companies could be closing their doors at the same time global companies are hiring and expanding.

“Be ‘alert’ for the world needs more ‘lerts.’”

- JanPaul

March 11 (Bloomberg) — Olivier de Vergnies quit managing family fortunes at Dexia Private Bank (Switzerland) Ltd. in 2008 to run a New York start-up at 100 Wall St. that’s trying to tap riches in solar energy.

The chief executive officer of two-year-old Prime Sun Power Inc. is hiring hundreds of workers to build solar plants in Italy, where he can sell electricity for about six times the price paid to coal- and natural gas-fired generators.

Prime Sun and developers across the globe, like prospectors staking gold or oil claims in the American West a century ago, are rushing to Italy, Israel and China to lock in the world’s highest subsidized electricity rates before they’re cut back.

…

SunEdison LLC and Siemens AG both announced plans today to build in Italy.

…

China is also attracting investors, including First Solar Inc. and Suntech Power Holdings Co., which will earn 2.15 yuan (31 U.S. cents) for each kilowatt-hour, about four times the base price for fossil fuel-generated electricity.

…

First Solar, based in Arizona, plans to start building the world’s biggest solar farm in China’s Inner Mongolia region in June. The above-market rates are “critical” to the project, Chief Executive Officer Mike Ahearn said in September.

The solar industry is “built on subsidies,” said James Britland, an alternative energy analyst at Allianz RCM in London. “This is a non-competitive industry that has to be subsidized.”

…

The real opportunity for solar investors will come when the sunnier U.S. states offer bigger incentives, said Matthew Page, who manages about $50 million in alternative-energy shares at Guinness Atkinson Asset Management in London.

“We’re all waiting for the U.S. to take off,” he said.

http://www.bloomberg.com/apps/news?pid=20601109&sid=aVTGnASbLcHs&@#$%&!=12

Only they can’t print money. Meanwhile the sourcing people in this country keep saying they will not buy unless they get an absurd price point. Well, three months from now I fully expect there to be a major shake out in my industry as one of the top three companies goes out of business, and the third realizes they WILL NOT SURVIVE without price increases. My company? Stable prices, great service, R&D support - we WILL NOT deal with American companies that arrogantly think that price is all that matters - to the detriment of OUR company. Everything in the USA today is SHORT-TERM, QUICK PROFIT! Look where it got the USA - a DEBTOR nation with NO production to speak of!! Great moves Washington and Big Business!

- irishscot2

http://www.ncua.gov/DataServices/FindCU.aspx

http://www.creditunion.coop/cu_locator/quickfind.php

The banks hate credit unions.

- DRC

After twenty years of house payments my wife and I toasted our new freedom of no house payments. The next day we received property taxes “due and payable!” They amount to $5,400 a year for a small log home. Now I ask you, who owns that property? Anyone who can take it for non-payment, that’s who owns IT and anything else that is taxable. So our land lord is the County we are subject to the State and the weasels in Washington have no idea of the pressure of taxes at the local level. So maw and I took a ride to get away. We left in our car that costs $700 a year in fuel tax , registration fees… etc, no end to the taxes, YOU DON”T OWN ANYTHING BUT THE PEN YOU WRITE THE CHECK WITH>The government owns YOU! Please vote for this “Hell Plan” so we can be totally owned.

The reason most American’s don’t realize this is because the tax payments are incorporated into the mortgage through escrow (or part of the rent). If each homeowner had to pay the taxes in a lump sum each year, there would be riots.

Same with income tax. It’s quietly removed from each paycheck so that no one really notices. In fact, we get excited when we get a ‘refund’ - money that was ours to begin with. Can you imagine what would happen in income taxes weren’t withheld, and Americans had to write a check for the full amount every April 15th? Again, there would be riots.

- bout-given-up

For many small business owners in the Great Recession, community banks have been a lifeline.

But that lifeline could be about to snap. The Congressional Oversight Panel, which monitors the financial bailout, just released a report on the state of commercial real estate lending—and the news is not good.

“There’s been an enormous bubble in commercial real estate, and it has to come down,” panel chair Elizabeth Warren told the Washington Post. “A mortgage crisis like the one that has devastated homeowners is enveloping the nation’s office and retail buildings,” the Post reports. The fallout will hit community banks hard.

In general, large, community banks haven’t been hurt by the residential real estate crisis. But community banks issued higher proportions of commercial mortgages than did the big banks. Some 3,000 community banks have disproportionate amounts of commercial loans relative to their assets, according to the oversight panel’s report. And, as Warren says, “Every dollar [community banks] lose in commercial real estate is a dollar they can’t use for small businesses.”

Areas most at risk? South Florida, metropolitan New York and Washington, DC, lead the nation in the per capita value of commercial real estate currently in foreclosure, default or delinquency, according to research group Real Capital Analytics.

http://smallbiztrends.com/2010/03/looming-commercial-real-estate-crisis-threatens-small-businesses.html

U.S.-owned assets abroad increased $294.1 billion in the third quarter,
following a decrease of $37.4 billion in the second.

U.S. claims on foreigners reported by U.S. banks and securities brokers
increased $240.1 billion in the third quarter, following an increase of $27.2
billion in the second. (Examples of these claims are U.S. residents’ deposits at
banks abroad and loans by U.S. banks and securities brokers to foreigners.)

Net U.S. purchases of foreign securities were $47.8 billion in the third
quarter, down from $92.6 billion in the second. Net U.S. purchases of foreign
stocks were $26.8 billion, down from $37.7 billion. Net U.S. purchases of foreign
bonds were $21.0 billion, down from $54.9 billion.

U.S. direct investment abroad increased $62.7 billion in the third quarter,
following an increase of $47.4 billion in the second. Shifts to increases from
decreases in net equity capital investment and in net intercompany debt investment
abroad were partly offset by a small reduction in reinvested earnings.

U.S. official reserve assets increased $49.0 billion in the third quarter,
following an increase of $3.6 billion in the second. The pickup resulted from
the allocation of $47.6 billion in special drawing rights (SDRs) to the United
States as part of two new allocations of SDRs by the International Monetary Fund
to its member countries.

http://www.bea.gov/newsreleases/international/transactions/transnewsrelease.htm

There is a lot more detailed in this report that should be of interest to all, including those who are following our financial condition and overall trends in our economy.

Note that pesky SDR statement. The U.S. is actually supporting the very instrument that many are wanting used to replace the dollar as the global reserve currency.

Remember how Geithner shortly after being appointed said he could support SDR’s only to say he was misunderstood when his statement caused the markets to move?

Look how the G-20 (not U.K. and U.S.) are supporting gold as a part of the basket the SDR’s would be valued against.

There are a lot of things going on that aren’t being covered by the media (so what’s new about that?) that we should be digging and finding out about if we want to protect our investments from people like Dodd and others in both parties that say one thing and do another.

On that deposits abroad, in a Financial Times interview of Jing Ulrich, she pointed out that there are $9 trillion in deposits in Chinese banks alone by corporations and retailers.

- JanPaul

• 1) Gov seeks 33% tax hike for education, billions in spending cuts (Illinois)

“SPRINGFIELD — Uncorking a risky election-year gambit, Gov. Quinn on Wednesday proposed a 33 percent increase in the state income tax to avoid “sacrificing the future of a generation of children.”

Quinn’s push to hike the tax on Illinois workers’ paychecks from 3 percent to 4 percent came with a promise to devote all of the $2.8 billion in new annual revenues to education, staving off the $1.3 billion in cuts the governor aimed at the state’s schoolchildren and university students if the tax hike doesn’t materialize.

“I believe this 1 percent for education makes sense, and I think the people of Illinois will understand,” the governor said during a 20-minute budget address to both chambers of the General Assembly.

The tax hike would deal with only a portion of the historic $13 billion budget deficit that has made Illinois one of the least-solvent states.”

• 2) Watchdog: GMAC bailout could cost taxpayers $6.3B

“WASHINGTON (AP) — The Treasury Department sank billions into auto finance giant GMAC Inc. without an exit strategy or proof the company was viable — a decision that could cost taxpayers $6.3 billion, a new watchdog report says.”

• 3) Dollar Dominance Gets a Warning

“The dollar’s dominant role as global reserve currency hasn’t been challenged by the global credit crunch, Standard & Poor’s said in a report published Thursday. But the ratings firm warned that the U.S. can’t take the dollar’s role for granted. Unless it addresses its fiscal deficit and debt, foreign investors could start to reduce dollar holdings, sending rates sharply higher and undermining the economy, which in turn could threaten the U.S.’s triple-A rating.

“The will isn’t there yet, but we think it will come,” said John Chambers, the chairman of S&P’s sovereign-ratings committee, referring to the U.S. government’s commitment to rein in its deficit. Mr. Chambers said the 2010 budget, presented last month, was disappointing, but he expects a “more-robust fiscal consolidation plan” to emerge after this year’s midterm congressional elections.”

…………….3A) US Dollar Still Rules, but Debt Level a Risk: S&P ABC News

• 4) Sovereign debt crisis may deepen: Pimco

“Mohamed El-Erian, whose company runs the world’s biggest mutual fund, said deteriorating public finances around the world may affect the global economy more than is currently realised.

“The importance of the shock to public finances in advanced economies is not yet sufficiently appreciated and understood,” El-Erian, co-chief investment officer at Pacific Investment Management Co, wrote in an article on the Financial Times website.”

“Governments may have to raise taxes and slash spending to cope with swelling deficits after nations including the US borrowed unprecedented amounts to stave off the global financial crisis, said El-Erian, who shares his job title with Bill Gross.

A failure to carry out fiscal measures in time would raise the possibility of governments seeking to eliminate excessive debt through inflation or default, he said.”

• 5) China Regulator Warns Banks On Western Debt Probs, Exits

“BEIJING (MNI) - China’s banking regulator warned domestic lenders Thursday of increasingly complicated global economic and financial conditions, in part the result of problems western countries are having with their sovereign debt issues as well as the timing of exit strategies from stimulus policies.

China Banking Regulatory Commission director Liu Mingkang said in a release that banks need to tighten up their risk management as a result of the increasing difficulties facing the world.

“Sovereign debt problems with developed western countries, high unemployment rates, international trade protectionism and exits from economic stimulus are complicating world economic and financial conditions,” Liu told major banks in a meeting. ”

• 6) European Debt to Reach 1.4 Trillion Euros, S&P Says

“March 11 (Bloomberg) — European government borrowing will probably rise to a record 1.45 trillion ($2 trillion) euros this year to fund fiscal stimulus measures designed to revive growth, Standard & Poor’s said.

Borrowing will probably climb about 52 billion euros, or 4 percent, from 1.39 trillion euros in 2009, which was also a record, S&P said in a statement today. The cost of raising the cash will also rise as the phasing out of stimulus measures and central bank purchases reduce demand for bonds and push yields higher, according to the ratings company.”

• 7) Arizona exports drop 30 percent from 2008

“Arizona exports dropped by $5.8 billion in 2009 with the recession taking a toll on cooper, computer and semiconductor trade.

Arizona exports totaled just over $14 billion in 2009, according to U.S. Department of Commerce. That is down 30 percent from $19.8 billion in 2008. It’s also the lowest level since 2003.”

“California exports fell to $120 billion in 2009 from $145 billion in 2008 — a 17 percent drop, according to the commerce department.

U.S. total exports went from $1.3 trillion in 2008 to $1.1 trillion in 2009.

Foreign imports to the U.S. came in at $1.6 trillion in 2009 compared to $2.1 trillion in 2008.”

• 8) German 2009 Public Debt Climbs 7.1% TO EUR1.69T, 15-Year High

“BERLIN (Dow Jones)–Germany’s total public debt climbed 7.1% to EUR1.69 trillion in 2009, federal data showed Thursday, the highest yearly increase in 15 years.

The federal statistical office in Wiesbaden said EUR36 billion in stimulus funding deployed to combat the economic crisis led the federal government’s 6.9% debt increase over 2009, pushing its total to just over EUR1 trillion.

The debt of Germany’s 16 states last year climbed even more drastically last, by 8.5%, to EUR526 billion, the office said.

In the 20 years since German reunification, the total public debt increase for 2009 was surpassed only by a EUR171 billion yearly bump in 1995. ”

• 9) US monthly deficit at record 220.9 billion in February news

“The US government’s monthly budget deficit rose to a record $220.9 billion in February 2010, the treasury department said today.

This brings the total US government deficit for the first five months of the current fiscal (October-February 2009-10) to $651 billion, compared with a $589 billion deficit in the similar period of the previous fiscal.

The February budget deficit is up 14 per cent year-on-year and is the biggest monthly shortfall in US history.”

• 10) Russia set to overshoot on budget deficit -sources

“MOSCOW, March 10 (Reuters) - Russia is struggling to balance next year’s budget, and even with strict spending cuts looks unlikely to cut its deficit to the planned 4 percent of gross domestic product (GDP), sources told Reuters on Wednesday. Russia dipped into the red for the first time in a decade last year, as high spending to help the economy out of recession and sharp fall in budget revenues caused a 5.9 percent deficit.”

• 11) Detroit Sells $250 Million Without Recent Disclosure Filings

“March 11 (Bloomberg) — Detroit, the largest U.S. city whose debt is rated below investment grade, will ask investors today to buy $250 million of its debt without having filed annual financial reports on time for five years.

The city, which warned investors in its preliminary official statement of the possibility of filing for Chapter 9 bankruptcy protection, is providing a June 30, 2008, financial statement, its most recent, to investors. A fiscal 2009 report is expected to be complete by May 31, said city spokesman Dan Lijana, in an e-mail.

“This issue is not for the faint of heart,” said Richard Ciccarone, chief research officer of Oak Brook, Illinois-based McDonnell Investment Management, which oversees $6.8 billion of municipal debt. “It certainly raises eyebrows.””

• 12) Report: Feds could take over S.C. jobless fund

“South Carolina must quickly take steps to stop the billion-dollar bleeding within its bankrupt Unemployment Insurance fund, lawmakers were told Wednesday, or the consequences could be great.

For one thing, the state risks losing control of the unemployment insurance system to the federal government, due to its unpaid debt to Washington, which now stands at more than $773 million, and counting.

The Lucas Group, a Boston-based consultant, warned members of the Senate Labor, Commerce, and Industry Committee that a federal takeover, made possible when the state’s unemployment insurance system is indebted to the federal government for two consecutive years, would likely mean an across the board hike in employment taxes on S.C. employers.

Each week, the state’s debt to the federal government grows by $16 million due to the state’s inability to afford unemployment benefits.”

• 13) Unemployment benefit cuts, higher taxes for Wis. business projected to deal with shortfall

“In 2007, before the recession started, less than $1 billion was paid to the unemployed in Wisconsin who were eligible for up to 26 weeks of benefits.

In 2009, benefits could be tapped for up to 93 weeks and the state paid out $3.1 billion, more than triple what it did two years prior.

Wisconsin’s debt to the federal government is expected to double from the roughly $1.2 billion that is owed now to nearly $2.4 billion by 2014, said Hal Bergan, administrator of Wisconsin’s unemployment insurance program.

Paying that off will require both a reduction in benefits and higher business taxes, Gassman said.”

• 14) States, Cities Likely to Slash Jobs As Stimulus Dwindles (CNBC)

“”This is a completely unprecedented crisis,” says Ethan Pollack of the Economic Policy Institute. “The budget cuts are going to get more and more severe.”

The main trigger will be the winding down of the massive America Recovery and Reinvestment Act, better know as the federal stimulus plan. Tepid to modest economic growth will also hurt.

“A lot of states didn’t go through with the layoffs that were expected because of the stimulus,” says Christian Weller, who specializes in economics and public policy for the University of Massachusetts and the Center for American Progress.

The federal government is spending more, not less, so its workers won’t be affected by the end of the stimulus program. Still, federal employees represent a relatively small percertage of all government workers, with state and local workers making up the biggest portion.”

• 15) Shun Spain on ‘Death by 1000 Cuts,’ Merrill Says

“March 11 (Bloomberg) — Investors should avoid Spain’s bonds as the euro region’s highest levels of joblessness stifle the country’s ability to cut its budget deficit, according to Invesco Ltd. and Bank of America Corp.’s Merrill Lynch unit.

Spanish debt isn’t yielding enough to compensate investors for buying the bonds of a country with the euro region’s third- largest budget deficit, according to Axel Blase, a fund manager in Frankfurt at Invesco. Investors receive a 68 basis-point yield premium for holding Spanish 10-year bonds rather than German bunds, compared with 309 basis points for Greek debt.”

• 16) Virginia State Police Help With Budget Crunch (From March 9)

“A federally funded ticketing blitz in the state of Virginia landed a total of 6996 traffic tickets this weekend. The blitz, dubbed “Operation Air, Land & Speed” coincided with frantic efforts by state officials to close a$2.2 billion budget deficit. Supervisors ordered state troopers to saturate Interstates 81 and 95 to issue as many tickets as humanly possible over the space of two days.”

• 17) Christie May Propose Cutting N.J. Budget to $25 Bln (A mack truck through the eye of a needle)

““The things I’m going to propose next week are going to anger people,” Christie said yesterday at a town hall meeting in Haddon Heights. “But I will tell you that it’s going to be fair. We will cut everyone. I’m just trying to fix the problems we have. I would love to play Santa Claus, but I can’t.””

“Christie’s plan for next fiscal year may eliminate or scale back the state’s $1.1 billion property-tax rebate program, which gave more than 1 million New Jersey homeowners checks averaging $1,000 last year. The state’s highest-in-the-nation real estate levies averaged $7,281 last year, up from $7,045 in 2008, according to data released Feb. 26.

The new governor has also warned New Jersey’s almost 600 school districts to plan for a 15 percent cut in state aid and told municipalities they also face a reduction in funding. The governor also will seek a reduction of charity care reimbursements to hospitals, one of the people familiar said. New Jersey’s constitution requires a budget that balances spending with projected revenue.

“New Jersey has never seen a challenge like it’s seeing this year. It’s stunning,” said Senator Kevin O’Toole, a Republican from Wayne on the budget committee. “Forget the one about a camel through the eye of a needle. We’re dealing with a Mack truck.””

• 18) Big ax looming at the FDNY: Threat of 1,000 layoffs, closing of 62 fire companies (NY)

“The FDNY is bracing for doomsday.

The department will be forced to close a staggering 62 fire companies and lay off more than 1,000 firefighters if the bad-news state budget becomes reality, Commissioner Salvatore Cassano told the City Council Wednesday.

“We would be very, very taxed,” warned a grim-faced Cassano. “Our operations would be impacted and every neighborhood in this city would feel the effect.”

Even if lawmakers in Albany - already facing an April 1 deadline and a $9 billion budget gap - find a way to pump in more cash, the city’s fiscal woes may still force the FDNY to shutter 20 companies, Cassano warned.

“We’re going to try not to close a single company or a single firehouse,” Cassano told the Fire and Criminal Justice Services Committee, “but if we have to, we will.”"

• 19) Modesto City Schools asking for 16% pay cut (CA)

“370 teachers and 67 managers to get layoff warnings

Salary reductions of about 16 percent were proposed Wednesday by Modesto City Schools trustees as they began what undoubtedly will be tough negotiations with the district’s employee unions.

The initial bargaining proposals were greeted with dismay by employees, especially because the schools started handing out 370 layoff notices to teachers Wednesday.

Trustees also voted to issue layoff warnings to 67 managers, and they’re expected to hand out notices to perhaps hundreds of nonteaching staff members this spring.

The drastic measures are triggered by declining student enrollment and shrinking funding, forcing the district to slash $25 million from next year’s budget.

“This district has been falling apart day by day, week by week, year by year. God help us all,” said Aaron Castro, president of the union that represents the district’s non-teaching staff. ”

• 20) Silverstein May Default on Debt for 575 Lexington

“March 10 (Bloomberg) — New York developer Larry Silverstein, who teamed with the California State Teachers Retirement System to buy a 35-story skyscraper in 2006, now faces “imminent default” on debt tied to the property, Fitch Ratings said today.”

• 21) Columbus Center’s plug pulled (Calpers was lead equity partner)

“While WinnCompanies, and its former chief executive, Arthur Winn, have long been the local public face of the project, Calpers is the lead equity partner and has been making decisions on the project over the past several years. The development team previously estimated it had spent more than $120 million on the proposed project.”

DC headed for another financial meltdown (Opinion…only 18 days of working capital?)

DiNAPOLI: NYC Faces Budget Risks of $2 Billion

Colo. public schools need $18 billion in construction and maintenance, report finds

Violence erupts at Greek demonstrations

JPMorgan, Top US Banks May Charge Off $196 Billion: Moody’s

Ky. House passes budget after lengthy floor debate ($2.2 billion in borrowing)

Rising debt a ‘time bomb’ (Canada)

Moody’s Says Many US Banks Will Remain Unprofitable in 2010

California revenue jumps, tax refunds should be paid on time but Despite more good news for California’s finances, state may delay $600 million in payments

NewsLt. Gov. Richard Ravitch: New York budget mess too big to fix in one year

US bankruptcy court filings rise 31.9% in 2009

DB pension scheme deficits ‘may be affected by further QE’ (UK)

Kansas City closes 26 schools to meet $50 million budget shortfall

Metrolink Service To Be Cut (CA)

Poway schools to cut more than 200 teachers

Mt. Diablo school board cuts $48.8 million, OKs 200 layoffs, sets $348 million bond vote in June

CU looking at hiking tuition by 9 percent (Colorado)

NJ Gov. Chris Christie plans privatization of as many as 2000 state jobs

Nonresidential Building Construction Drops 22% Since October 2008

San Jose PL Could Lose 35% of Budget, Lay Off More than 100 Staff (public library)

US foreclosures rise 6 percent in February, smallest yearly increase in 4 years

Seabaugh proposes cutting 19 superior court judges (GA)

- Saxplayer00o1

–

Bernanke’s Dilemma: Hyperinflation and the U.S. Dollar
Ben Bernanke, Chairman of the US Federal Reserve, faces a Sisyphean task because US banks are experiencing debt deflation and, because lending is now at much lower levels, monetary deflation is encumbering the domestic US economy as existing debts continue to be serviced. Government deficit spending can only offset lower consumer spending to a degree, and the mushrooming debt of the US government raises the question of whether the US can repay or roll over its debt obligations, given that tax receipts are likely to fall.

Despite deflationary pressure, the value of the US dollar is in a downtrend trend pointing to higher prices for imported goods and energy. Devaluing the US dollar will reduce the value of debts in real terms, thus it can make debt levels sustainable, but higher prices will exacerbate debt defaults, worsening the condition of US banks. Mr. Bernanke’s dilemma is how to salvage the balance sheets of US banks without sparking high inflation or unleashing hyperinflation.

http://seekingalpha.com/article/192916-bernanke-s-dilemma-hyperinflation-and-the-u-s-dollar?source=feed#comments_header

I have read that the duration gap of most of the bank’s holdings are strongly positive meaning that if interest rates ever go up they stand to lose a lot of money as their assetts lose a tremendous amount of value because of the assett liability mismatch caused by their huge overleveraged derivatives holdings. If the destruction of credit money continues putting downward pressure on the M3 money supply interest rates will have to go up. Below I have copied and pasted information from Wikipedia regarding what the duration gap is and what it means.

The duration gap is a financial and accounting term and is typically used by banks, pension funds, or other financial institutions to measure their risk due to changes in the interest rate. This is one of the mismatches that can occur and are known as asset liability mismatches.Another way to define Duration Gap is : it is the difference in the sensitivity of interest-yielding assets and the sensitivity of liabilities (of the organization ) to a change in market interest rates (yields).The duration gap measures how well matched are the timings of cash inflows (from assets) and cash outflows (from liabilities).When the duration of assets is larger than the duration of liabilities, the duration gap is positive. In this situation, if interest rates rise, more assets than liabilities will lose value, thus reducing the value of the firm’s equity. If interest rates fall, more assets than liabilities will gain value, thus increasing the value of the firm’s equity.Conversely, when the duration of assets is less than the duration of liabilities, the duration gap is negative. If interest rates rise, more liabilities than assets will lose value, thus increasing the value of the firm’s equity. If interest rates fall, more liabilities than assets will gain value, thus reducing the value of the firm’s equity.By duration matching, that is creating a zero duration gap, the firm becomes immunized against interest rate risk. Duration has a double-facet view. It can be beneficial or harmful depending on where interest rates are headed.

Some of the limitations of duration gap management include the following:

- the difficulty in finding assets and liabilities of the same duration
- some assets and liabilities may have patterns of cash flows that are not well defined
- customer prepayments may distort the expected cash flows in duration
- customer defaults may distort the expected cash flows in duration
- convexity can cause problems.

When the duration gap is zero, the firm is immunized only if the size of the liabilities equals the size of the assets. In this example with a two-year loan of one million and a one-year asset of two millions, the firm is still exposed to refinancing risk after one year when the remaining year of the two-year loan has to be financed.

To be able to compare firms and banks of different size the equation has to be normalized by dividing everything by total assets giving the formula for the duration gap.

- dbdmmb

Far and away the largest increase was between the third quarter of 2008 and the third quarter of 2009. The pigs haven’t learned a thing. Back to business as usual? Nope! They’re getting more aggressive.

The largest holder is JP Morgan with $79.397 TRILLION in derivatives. They have $2.041 Trillion in assets giving them an asset to derivatives ratio of 2.6%. The holding company with the lowest ratio of assets to derivative is Goldman Sachs at just 1.8% ($882 BILLION in assets against $49.803 TRILLION in derivatives).

The above data relates to the “holding companies”. But when looking at the “commercial banking operations”, it’s even worse. JP Morgan has an asset to derivates ratio of 2.1% in their commercial banking operation, which accounts for the bulk of their holding company’s operations ($1.67 TRILLION in assets against $79.0 TRILLION in derivatives).

The scary thing……..the commercial bank with the lowest assets to derivatives ratio……GOLDMAN SACHS. Goldman’s commercial bank has $114 BILLION in assets and $41.971 TRILLION in derivatives………..an asset to derivatives ratio of just 0.3%. That is not a misprint. ASSETS TO DERIVATIVES RATIO of 0.3%. It wouldn’t take a huge adverse move to wipe out depositors.

THE INSANITY…THE GREED….CONTINUES.

- Vics

The 2010 stress test targets set by the regulator are even more stringent than last year and draw up a nightmare scenario which may require banks to have a higher capital ratio than the current 4%.

The City watchdog says these new scenarios represents “severe but plausible macroeconomic stress” but they have come in for heavy criticism from institutions already short of capital.

Banks must assume that in 2010 to 2014 economic growth will tumble 8.1% from peak to trough, up from the 6.9% target set last year - which was close to the 6.2% that materialised.

They must also envisage that the unemployment rate will rise to 13.3% from 7.8% at present.

But their models for house prices must only take into account a 36% fall from their peaks in August 2008, an improvement on the 50% set by the FSA last year.

Lord Turner of Ecchinswell, the chairman of the FSA said he expects the UK to see a gradual V-shaped recovery but the tests are a crucial part of making sure banks are strong enough to survive a further downturn in the economy.

However, he does not expect the tougher targets to lead to a fresh round of capital raisings.

“We are not anticipating that [meeting the new requirements] requires a whole lot of extra capital,’ he says. ‘A lot of the banks will have a stronger starting point than they did when running the 2009 stress tests.”

Lord Turner has warned that the economy remains at risk from high levels of debt within the system although there are unlikely to be any ‘nasty surprises’ which have not already been factored in.

The UK’s four largest banks have lost £168 billion since the start of the crisis and have raised £134 billion - of which £66 billion comes from the government.

In their recent full-year results many reported a rise in bad debts during the year although these started to drop back in the second half.

However, Turner added that with the recovery so far fuelled by the stimulus measures rather than fundamentals.

With unemployment high and personal wealth diminished, how was it that strapped consumers were paying down their credit card debt last year? It turns out they probably weren’t.

The bulk of 2009’s drop in credit card debt instead came because banks were forced to write off loans consumers failed to pay, according to an analysis of Federal Reserve data.

Loans are typically charged off by banks once they’re 180 days past due, under the assumption that the debt won’t be repaid

In 2009, banks wrote off a record $83.27 billion in credit card debt. A study by consumer credit research site CardHub.com found that accounts for the bulk of the of $93.2 billion drop in consumer card balances reported by the Fed for last year.

“If you just look at the numbers, you think, ‘Oh my goodness, there was a big decrease in credit card debt,’” said Odysseas Papadimitriou, CEO and founder of CardHub.com.

But Papadimitriou said it didn’t add up that consumers could make such a big dent in debt while under the financial pressure Americans faced last year.

The Federal Reserve’s reports on outstanding consumer loans don’t tease out the amount charged off by banks. By that measure, credit card borrowing fell for 16 straight months through January, suggesting consumers have been chipping away at balances and spending less.

When you consider how much banks are being forced to forsake in bad loans, however, consumers’ ability to pay off balances doesn’t appear as rosy.

The only time consumers truly paid down their debt was in the first quarter of last year, the CardHub.com study finds. During those three months, card balances fell by $46.9 billion, excluding the $17.59 billion banks wrote off.

After that, card balances either remained steady or rose.

The charge-off rate on credit card loans spiked dramatically in the downturn, hitting a record 10.1 percent in the third quarter of 2009.

The rate eased to 9.4 percent for the year’s final three months. By comparison, the rate was 4 percent in the fourth quarter of 2006, a year before the downturn began.

The situation may only get worse for banks. Moody’s Investor Service expects the charge-off rate to top out at 12 percent later this year. Charge-off rates vary depending on the bank, however.

At Bank of America, the annual net charge-off rate for U.S. cards declined to 13.2 percent in January from 13.5 percent in December, while Capital One said its rate rose to 10.41 percent in January from 10.14 percent in December.

Gail Cunningham, of the National Foundation for Credit Counseling, said she’s not surprised if consumers are still leaning on credit cards, especially given the high unemployment rate.

Still, she said she’s noticing significant belt tightening.

“People have made a conscious decision to rein in their spending,” Cunningham said.

- NK

(Maybe Government Have No Idea How Want to Restructure Fannie and Freddie)

The federal government has spent the past half year seeking to roll back its emergency efforts at propping up the financial markets — with the notable exception of its involvement in mortgage giants Fannie Mae and Freddie Mac.

As the government has pledged more and more money to cover the companies’ losses, it has assured the public that planning was underway for overhauling the firms so the bailouts would end. As recently as December, the Obama administration said it expected to release a preliminary report on how to remake Fannie Mae and Freddie Mac around Feb. 1.

But no plan was produced, and in response to questions from lawmakers, Treasury Secretary Timothy F. Geithner clarified last month that it would be another year before the government proposes how to restructure the firms.

Sixteen months after they were seized to prevent their collapse, the companies remain wards of the state, running a tab that has now exceeded $125 billion in what has become the single costliest component of the federal bailout for the financial system.

Some members of Congress have complained that the huge public commitment is unsustainable. But the administration has been reluctant to start reforming Fannie Mae and Freddie Mac, officials and analysts say, because the firms in their current form play an essential role in supporting the housing market at a time when it is still under severe stress. As other financial firms have exited the market and credit has seized up, Fannie and Freddie have been behind the vast majority of mortgages made since the start of the financial crisis. The companies now own or back more than half of all U.S. home loans.

- NK

March 11 (Bloomberg) — Australian employers added the fewest jobs in six months in February, suggesting the central bank has room to slow the pace of future interest-rate increases.

The number of people employed rose 400 from January after jumping a revised 56,500 in the previous month. That was less than the median estimate of a 15,000 gain in a Bloomberg News survey of 25 economists. The jobless rate increased to 5.3 percent from a revised 5.2 percent.

http://www.bloomberg.com/apps/news?pid=20601080&sid=aVigjLBs15uM

TOKYO (Nikkei/Dow Jones)–The Japanese government’s top spokesman said Thursday that a downward revision in the country’s fourth-quarter growth rate shows that domestic economic conditions remain severe.

“Even though the growth rate is still positive, (the downward revision) shows that we still need to watch economic conditions closely,” Chief Cabinet Secretary Hirofumi Hirano told a regular press conference.

Earlier in the day, the Cabinet Office said Japan’s gross domestic product expanded at a price-adjusted annual pace of 3.8% during the October-December period, compared with an initial reading in February of a 4.6% increase.

http://www.foxbusiness.com/story/markets/japan-hirano-revised-gdp-shows-economic-conditions-severe/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+foxbusiness%2Flatest+%28Text+-+Latest+News%29&utm_content=Yahoo+Search+Results

HONG KONG (MarketWatch) — China’s consumer price index accelerated to a pace of 2.7% in February from the year-earlier month, driven by a surge in food prices, according to official data released Thursday.

The increase, as reported by the National Bureau of Statistics, was higher than the 2.4% rise estimated by analysts in a Dow Jones Newswires survey, and was above the 1.5% increase in January’s CPI.

Food prices jumped 6.2% during the month, driving the price index higher.

http://www.marketwatch.com/story/chinas-consumer-prices-rise-more-than-expected-2010-03-10-222900

Read more here.

China’s consumer prices rise more than expected

HONG KONG (MarketWatch) — China’s consumer price index accelerated to a pace of 2.7% in February from the year-earlier month, driven by a surge in food prices, according to official data released Thursday. The increase was higher than the 2.4% rise estimated by analysts in a Dow Jones Newswires survey, and was above the 1.5% increase in January’s CPI. Food prices jumped 6.2% during the month, driving the price index higher. February’s producer price index accelerated 5.4% from the year-earlier period, also beating forecasts of a 5% increase.

Wall St. bonuses climbed 17% to $20.3 billion in 2009

SAN FRANCISCO (MarketWatch) — Wall Street bonuses climbed 17% to $20.3 billion last year as stock and corporate bond markets rebounded strongly amid unprecedented government support, according to an estimate released Tuesday by New York State Comptroller Thomas DiNapoli.

Total compensation at the largest securities firms grew even faster and industry profits could exceed an unprecedented $55 billion in 2009, nearly three times greater than the previous all-time record, DiNapoli added in a statement.

AP

When I saw that, I thought, well here is the mortgage insurance industry, faced with an historic number of claims, trying to save itself at the cost of the big banks.

I mean, if you buy insurance for a product, and something bad happens to that product, then you should make a claim and get paid back by the insurer.

That’s the definition of insurance.

But just like everything else in today’s housing/mortgage market, nothing is as it should be.

Mortgage insurers are rescinding (denying) claims, claiming themselves that the loans were fraudulent and misrepresented to them.

http://www.cnbc.com/id/35800892

The Chinese Government says the view that climate change is not man-made is a marginal and “extreme” outlook.

According to Xie Zhenhua, a deputy director at China’s powerful National Development and Reform Commission, climate change is a fact based on long-term observation in many countries.

At the annual session of China’s National People’s Congress, he said that those who advocate that climate change is not man-made are holding an extreme and marginal view.

He said that the majority of the world’s scientists believed that climate change has been caused by burning fossil fuels.

He and other officials said that more work needed to be done to ensure that scientific data on climate change was watertight, but the world had no choice but to reduce its reliance on fossil fuels.

Mr Xie said climate change is not only something that ordinary Chinese people can feel and experience every day, but that it may soon have a huge impact on China’s food security and even its economic stability.

Here is look at the information from the government site -

http://fms.treas.gov/mts/mts0210.pdf

YTD …. Receipts …. Outlays …. Def+/Sur-
FY 1981 …. 216,278 …. 271,883 …. 55,605
FY 1982 …. 245,502 …. 299,159 …. 53,656
FY 1983 …. 233,365 …. 336,549 …. 103,183
FY 1984 …. 259,826 …. 349,044 …. 89,217
FY 1985 …. 290,652 …. 391,168 …. 100,518
FY 1986 …. 307,316 …. 413,516 …. 106,201
FY 1987 …. 327,248 …. 422,530 …. 95,282
FY 1988 …. 346,698 …. 437,063 …. 90,364
FY 1989 …. 372,770 …. 466,781 …. 94,009
FY 1990 …. 393,381 …. 490,892 …. 97,513
FY 1991 …. 417,763 …. 528,777 …. 111,015
FY 1992 …. 421,574 …. 570,234 …. 148,660
FY 1993 …. 443,839 …. 582,984 …. 139,146
FY 1994 …. 483,314 …. 601,141 …. 117,826
FY 1995 …. 522,154 …. 618,481 …. 96,327
FY 1996 …. 556,453 …. 637,272 …. 80,817
FY 1997 …. 587,005 …. 676,845 …. 89,839
FY 1998 …. 646,939 …. 702,607 …. 55,669
FY 1999 …. 683,734 …. 711,254 …. 27,520
FY 2000 …. 741,759 …. 742,561 …. 803
FY 2001 …. 790,962 …. 765,095 …. -25,866
FY 2002 …. 767,724 …. 837,139 …. 69,415 9/11 and recession
FY 2003 …. 705,163 …. 899,100 …. 193,937 Iraq/Afgan and recession
FY 2004 …. 710,341 …. 937,111 …. 226,771
FY 2005 …. 790,284 …. 1,014,170 …. 223,886
FY 2006 …. 873,074 …. 1,090,594 …. 217,521
FY 2007 …. 954,449 …. 1,116,605 …. 162,159
FY 2008 …. 967,152 …. 1,230,412 …. 263,258 Democrats control CONgress
FY 2009 …. 860,786 …. 1,450,589 …. 589,803 Democrats control everything, TARP
FY 2010 …. 800,538 …. 1,452,139 …. 651,601 Democrats control everything

Change % From ‘09 -7.00% …. 0.11% …. 10.48%
Change % From ‘08 -17.23% …. 18.02% …. 147.51%

February data
Year …. Receipts …. Outlays …. Deficit …. Deficit % of Receipts
Feb 01 …. 110,481 …. 158,649 …. 48,168 …. 43.6%
Feb 02 …. 97,962 …. 174,018 …. 76,056 …. 77.6%
Feb 03 …. 89,496 …. 185,826 …. 96,330 …. 107.6%
Feb 04 …. 85,314 …. 182,022 …. 96,709 …. 113.4%
Feb 05 …. 100,871 …. 214,814 …. 113,942 …. 113.0%
Feb 06 …. 112,853 …. 232,052 …. 119,199 …. 105.6%
Feb 07 …. 120,312 …. 240,305 …. 119,993 …. 99.7%
Feb 08 …. 105,723 …. 281,287 …. 175,563 …. 166.1%
Feb 09 …. 87,312 …. 281,171 …. 193,859 …. 222.0%
Feb 10 …. 107,521 …. 328,429 …. 220,908 …. 205.5%

All you need to know is according to Treasury Statement of Receipts and Outlays

Receipts for Jan 2010 = 205,240 Million
Outlays for Jan 2010 = 247,874 Million
Receipts for Feb 2010 = 107,521 Million
Outlays for Fed 2010 = 328,429 Million

We are sinking further and further into DEBT

By the way, do not be lulled by the fact that this month is actually higher than last year at this time - look at the YTD. Probably just a payment shift structure. And our spending is greater by a SIGNIFICANT amount!

- irishscot2