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Wednesday, January 26, 2011

A Decade Of Progress Wiped Out By Financial Policy

Stock Assault 2.0 - Artificial Intelligence Stock Market Software

There is nothing dumb about the financial media. They know exactly what they are doing. All they want to do is keep their jobs and in that process they sell out themselves, their families and friends, other people and their country. They know government statistics are bogus, but they won‘t report that, because if they did they will be discharged. There are two sets of alternative figures. One shows inflation at 6.75% and the other 8%. As we have reported before the PPI reflects 13-1/2% to 14%, so how can official inflation be 1.2%? If this is truly the case how can inflation be tame with food and energy prices going through the roof?

What we are seeing are the results of QE1 and QE2 in the form of growing inflation. This is our gift from chairman Ben Bernanke. The recovery he envisions can only be translated into some kind of temporary relief, which is the product of monetary distortion, not recovery. In addition observers see higher sales, but never factor in the growth of inflation. That is why the CPI figures are distorted as much as they are officially by government. This year will be a classic inflation year with prices rising in all sectors. We see current inflation at 6-3/4% and by the end of the year that should be 14%. If you refer back to CPI -U it is 6.2%, the CPI-W 7.8% and the 1980 SGS of 8.9% you can see 14% is a very tame number. If we have to guess in December the official CPI will beat 5-1/2%.

In November of 2004 we predicted housing starts would fall 75% during the coming housing correction, up from 70% during the 1989-92 correction. Thus far the correction is just under 80%. During this past final quarter of 2010 starts fell at a more accelerated pace, which does not auger well for the economy. This slowing will present a formidable headwind for recovery. In 2011 and 2012 we see house prices falling 20%. The promiscuous lending and syndication of mortgages that has so ruined lenders balance sheets will be with us for years to come unless, of course, they do the right thing and declare bankruptcy. Much the same has happened in parts of Europe and is presently occurring in Asia, particularly in China. Monetary and then price inflation has taken hold worldwide because almost all governments have been using the same Keynesian policies. No country will escape the deflationary depression, which is on the way. There will just be degrees of misery.

QE1 and QE2 can be credited for the most part with today’s and the coming inflation. What is deeply disturbing is that the Fed, Treasury and most economists know that throwing money and credit at the problem is not going to work. Is the Fed just hoping that it will work, just this one time, or are they being deliberately destructive? We believe it is deliberate. You make your own choice. The food riots we see worldwide will worsen and in some countries revolution will follow. You will see more of what you just saw in Tunisia, where the president’s wife flees the country due to the upheaval and doesn’t forget to take 1-1/2 tons of gold with her. Upward pressure on prices is caused in part by growing populations of what the Bilderbergers call useless eaters. It is surprising these elitists haven’t as yet begun WWIII. That would help solve that problem.

QE1 was to save the financial sectors in the US, UK and Europe. QE2 is to save the US government. Very little if any of these funds have benefited the public. The direct affect of these rescues is much higher inflation. Unemployment has only fallen from 22-5/8% to 22-1/4% over the past three months. December saw a great acceleration in inflation and that will carry forward for at least two years, as QE3 becomes reality. Real GDP growth is minus 1-1/2% and even with QE2 it will only be 2% to 2-1/4% at a cost of another $2.5 trillion. M3 is down 2-1/2% to 3%, but don’t be deceived there are other ways to increase money and credit. The path of QE2 and then QE3 will lead to hyperinflation. How soon we don’t know, but you can plan on it coming. That is why gold and silver related assets are so important; they are your only refuge.

In order to keep the system from collapsing we have zero interest rates and quantitative easing. This may prolong the agony for the elitists, but it also causes higher inflation. One of the subscribers says she went to a swap meet and there were no bargains. Purchasing power is falling every day.

As an overview of last weeks Hollywood theatrics at the White House between a Chinese dictator in serious trouble and an illegal alien who desperately wanted higher poll numbers. The real meetings were in secret and the rest was a stage play, which included smoke and mirrors. Our sources tell us all over China there are demonstrations and riots, over 35% inflation and a demand for higher wages. That country is in deep trouble as the housing bubble bursts and the stock market falls. Periodically bank reserve ratios are raised, but they have not delivered the desired results. We see the Chinese economy slowing over the next few years as the world economy slows. That could cause 40 million people to be unemployed. They have built whole cities that are empty. They were simply make-work projects. That means the US and other economies will be negatively affected as well. China has serious problems that in time will lead to the sale of US dollars on a major basis.

2011 is going to be a year to remember. It could be the beginning of a major collapse - that is without an untoward event taking place. Almost everything the US and Europe have attempted has not worked. Could it be another Lehman Bros. or Bear Stearns, or a major bank going under? We will see the fall in financial stocks that we have been awaiting for, so long.

The social and political climate has changed over the past few years. We see demonstrations and riots in Europe, Africa and Asia. The international system cannot respond as strongly as it did just a few years ago. The cry by Bilderberg-type governments is that the people must make the banks whole. The people didn’t gamble in international markets, the banks did, but the people are still forced to pay for their mistakes. As we found out with the court forced exposure by the Fed that the fed has poured trillions of dollars in financial entities in the US, and Europe to make it look like they were solvent, when in fact they were all insolvent and still are bankrupt. Citizens are finally realizing that the banks are the problem and that they are being forced to bail them out. The result has been a reduction in world commerce, that is about to worsen, systemic high unemployment that nothing is being done to address and as a result there are socio-economic problems in many cou ntries worldwide. In America they have 44 million people on food stamps and 15.7% of the population already living below the poverty level. What would that figure be like if there were no food stamps or extended unemployment benefits? Would it be 20% or 25%? We don’t know, but we do know that empty bellies bring on revolutions. Tens of millions of Americans, Europeans and British are living on the edge. The world financial situation is out of control and those in charge, who caused it, do not know how to fix it. All of the fundamental imbalances are still there and for the most part are not being addressed. Nations and peoples have been warned. The system is broken and cannot be fixed. Keep your eyes on Ireland late in February, it could provide the catalyst for a new round of defaults and the breakup of the euro zone. In many countries retirees have had their social benefits frozen or cut and inflation is eating them alive. Politicians and elitists just turn their backs o n the problem, as the rich spend with wild abandon. It reminds us of 1788 France just before the revolution. Deliberate blindness won’t solve the problem â€" it only makes it worse. The time is fast approaching when all these problems will bubble up and explode. It is only a matter of when. The elitists should remember that a collapse of the world banking system threatens their hold on financial and political power and that failure will include their unmasking, which will bring on the wrath of the mobs.

As they have many times before elitists have gone a step too far. They miscalculated in June of 2003, the point of no return. The Talk radio beamed all over the world and the internet would inform all who were willing to listen that trouble was on the way and who caused it and why. Recent moves behind the scenes, like those of the Rothschilds that they have some serious problems. They seem to think we do not know what they are up to, but we do know what they are doing and we will do everything possible to thwart their efforts. Perhaps that is why they are subscribers. Their efforts to keep people separated will fail. It will be difficult for everyone but in the end we will have learned a good lesson.

Increases in money and credit affect an economy like increases in oil prices. It will take a year to two years for the full impact to be realized. It is like all the price inflation that is in the pipeline. Yes, we have the deflationary undertow, but remember the Fed and other central banks have to create far more inflation than they need, because if they do not and deflation takes hold the whole game is over. The wealth affect created by stimulus one and now two and QE1 and QE2 are about to take their toll in the form of higher inflation. It is not just food and energy everything will be affected. One sure sign of this is that gold bullion sales machines are starting to appear all over the world. Then the question arises will the Fed go for QE3 with real inflation abounding? Of course they would. They have no other way out.

Here is a government that spends 60% more than they have coming in via revenues. This year we do not have inventory buildup to help GDP and there are sure to be at least $50 billion cut from public spending. The dollar has fallen from 86 on the USDX to 78 over the past year. Exports are more competitive, what is left of them, but imports are more expensive and that is inflationary. This year the growth in business spending will probably be half of what it was in 2010. All these tax increases we see and the higher cost of goods will cut into consumption this year and 10% drop in the value of homes could also cut consumption by 1% of GDP. The increased cost of energy and food just at current levels will cut $100 billion from consumer spending on other items. States cannot spend money they do not have. There will be many bankruptcies, cuts in personnel and cuts in civic spending. Ten million are working part-time that will increase as well overall unemployment. Real wages hav e fallen for three of the past four months and that will continue as long as we have 30 million illegal aliens in the country and free trade, globalization, offshoring and outsourcing. GDP growth will be 2% to 2-1/4%, not 3% to 3-1/4%. On the plus side JPM says business lending is picking up. It rose $800 million over the past five weeks. In the US top corporations are holding $1.9 trillion in cash, but if they are unwilling to spend some of it the economy cannot recover. Then there is the issue of the additional $1.9 billion sitting in offshore accounts that major corporations want to bring to the US, but not at 35% taxation, but again at 5-1/4%. That is so they can buy stock in their companies on the stock market, which would drive the market higher and allow their officers to cash in their options and make billions. The hook of course is that part of those funds would supposedly be used to create jobs, and to buy Treasury and Agency securities, so that the Fed would not h ave to purchase as much. At best another temporary fix and little is really being spent to help the economy and unemployment. We may have extended unemployment for the next 20 years at the rate we are going.

As the above transpires consumers continue to pay down debt. They are taking out loans against equity in their homes, while there is still some equity left. Those types of loans by banks are four times more than commercial loans. Even that type of loan is slowing down. Money velocity is still moribund with M3 at about a minus 1% to 1-1/2%. QE has not improved employment or the economy, nor the real estate market. It has saved the financial sector in the US and Europe, funded Treasury and Agency debt and caused further speculation.

As a reflection of this mismanagement, inflation increases, as does the price of commodities, gold and silver. This saps consumer confidence and reduces spending. As the year progresses, thanks to the Fed and its owners - the major money center, legacy banks, the casino known as the market will hold firm. The stock and bond markets are the only two sectors that have not as yet been ravaged. Once they fall the bottom falls out. That is why you have the manipulation you do. It happens in all corporatist fascist societies. Why do you think commodities and gold and silver are at or near up to 30 year highs.

We are still five months away from July 1st, the beginning of the new fiscal year for the states and already their plight is front-page news. The word is out that public servants now make twice as much as those in private industry. It once was just the opposite. Public employees are the haves and the taxpayers who foot the bill are the have-nots. What has happened over the past 40 years is that the groundwork has been laid for class warfare. Is it any wonder the states have staggering fiscal problems? Even Democrats, who have counted on public-employee unions for handouts and support, are striking a militant pose, as families pay ever-higher taxes to service people who make twice as much money as they do, often for half the work.

Last week saw the Dow up 0.7%, S&P down 0.8%, the Russell 2000 down 4.4% and the Nasdaq 100 off 2.4%. Banks fell 2.1%; broker/dealers 2.3%; cyclicals off 2.3%; transports off 3.6%; consumers off 0.1%; utilities off 1.4%; high tech off 2.5%; semis off 4.6%; Internets off 4% and biotechs off 2.1%. Gold bullion fell $19.00, the HUI gold index slid 2.2% and the USDX off 1.3% to 78.12.

Two year-T-bill yields rose 3 bps to 0.585%, the 10-year T-note rose 8 bps to 3.41% and the 10-year German bund rose 15 bps to 3.17%.

The 30-year fixed rate mortgage rose 3 bps to 4.74%, the 15’s fell 3 bps, the one-year ARMs rose 2 bps to 3.25% and the 30-year fixed rate jumbos fell 11 bps to 5.50%.

Fed credit declined $16.1 billion, but it is still up 8.3% year-on-year. Fed foreign holdings of Treasury and Agency debt fell $7.3 billion. Custody holdings for foreign central bank yoy rose $397 billion, or 13.5%.

M2 narrow money supply rose $6.9 billion to $8.815 trillion, yoy it rose 4%.

Total money market fund assets fell $35.1 billion to $2.761 trillion.

Safety deposit box holders and depositors are not given advanced notice when failed banks shut their doors.

If people have their emergency money in a safe deposit box or an account in a bank that closes, they will not be allowed into the bank to get it out. They can knock on the door and beg to get in but the sheriff’s department or whoever is handling the closure will simply say “no” because they are just following orders.

Deposit box and account holders are not warned of the hazards of banking when they sign up. It is not until they need to get their cash or valuables out in a hurry that they find themselves in trouble.

Rules governing access to safe deposit boxes and money held in accounts are written into the charter of each bank. The charter is the statement of policy under which the bank is allowed by the government to do business. These rules are subject to change at any time by faceless bureaucrats who are answerable to no one. They can be changed without notice, without the agreement of the people, and against their will. People can complain but no one will care because this is small potatoes compared to the complaints that will be voiced when the executive order that governs national emergencies is enforced.

That order allows the suspension of habeus corpus and all rights guaranteed under the Bill of Rights.

A look at the fine print of the contract signed when a safety deposit box is opened reveals that in essence the signer has given to the bank whatever property he has put into that deposit box. When times are good people will be allowed open access to their safe deposit box and the property that is in it. This also applies to their bank accounts.

But when times get really bad, many may find that the funds they have placed on deposit and the property they thought was secured in the safe deposit box now belong to the bank, not to them. Although this was probably not explained to them when they signed their signature card, this is what they were agreeing to.

During the Great Depression in the early 1930’s people thought that many banks were going to fail. They were afraid they would lose their money so they went in mass to take it out, in what is known as a run on the banks. The government closed the banks to protect them from angry depositors who wanted their money back. Throughout history, governments have acted to protect the interests of banks and the wealthy people who own them, not the interests of depositors or box holders.

In a time of emergency, people will have no recourse if access to their safe deposit box and bank accounts is denied. If they are keeping money in a bank that would be needed in an emergency or in a time when credit is no longer free flowing, they may not be able to get it out of the bank. The emergency may occur at night or on a weekend or holiday when the bank is closed.

The solution is to take emergency cash or valuables out of the safe deposit box or bank account and secure them somewhere else, like in a home safe. An even better idea may be to close the safe deposit box account completely, letting someone else entertain the illusion of safety.

Americans have learned a few things since the Great Depression. They now have the FDIC to liquidate any failed banks.

The FDIC promises to set up a series of dates and times when safe deposit box renters can access their boxes by appointment to remove their property and surrender their keys. The FDIC also promises to mail bank customers an announcement of the dates for such events and include a question and answer page that addresses safe deposit box access.

The people have the FDIC to give them back the money they had on deposit that they were unable to get out of any failed bank that carries FDIC insurance. Sheila Bair, head of the FDIC, promises that depositor’s money will be available in 24 hours or less. But people should remember that the FDIC is just another bureaucracy, and it`s probably best not to rely on a bureaucracy in an emergency.

 

January 2006:

U.S DEPARTMENT OF HOMELAND SECURITY HAS TOLD BANKS - IN WRITING - IT MAY INSPECT SAFE DEPOSIT BOXES WITHOUT WARRANT AND SIEZE ANY GOLD, SILVER GUNS OR OTHER VALUABLES IT FINDS INSIDE THOSE BOXES!

According to in-house memos now circulating, the DHS has issued orders to banks across America which announce to them that "under the Patriot Act" the DHS has the absolute right to seize, without any warrant whatsoever, any and all customer bank accounts, to make "periodic and unannounced" visits to any bank to open and inspect the contents of "selected safe deposit boxes."

Further, the DHS "shall, at the discretion of the agent supervising the search, remove, photograph or seize as evidence" any of the following items"bar gold, gold coins, firearms of any kind unless manufactured prior to 1878, documents such as passports or foreign bank account records, pornography or any material that, in the opinion of the agent, shall be deemed of to be of a contraband nature."

DHS memos also state that banks are informed that any bank employee, on any level, that releases "improper" "classified DHS Security information" to any member of the public, to include the customers whose boxes have been clandestinely opened and inspected and "any other party, to include members of the media" and further "that the posting of any such information on the internet will be grounds for the immediate termination of the said employee or employees and their prosecution under the Patriot Act."In Vermont, state senator Virginia Lyons on Friday presented an anti-corporate personhood resolution for passage in the Vermont legislature. The resolution, the first of its kind, proposes "an amendment to the United States Constitution ... which provides that corporations are not persons under the laws of the United States. "The profits and institutional survival of large corporations are often in direct conflict with the essential needs and rights of human beings."

Corporations "have used their so-called rights to successfully seek the judicial reversal of democratically enacted laws.”

Thus the unfolding of the obvious: “democratically elected governments” are rendered “ineffective in protecting their citizens against corporate harm to the environment, health, workers, independent business, and local and regional economies."

`The resolution goes on to note that "large corporations own most of America's mass media and employ those media to loudly express the corporate political agenda and to convince Americans that the primary role of human beings is that of consumer rather than sovereign citizens with democratic rights and responsibilities."

Denouncing this situation as an "intolerable societal reality," the document concludes that the "only way" toward a solution is the amendment of the Constitution "to define persons as human beings.”

Resolution Calling to Amend the Constitution Banning Corporate Personhood Introduced in Vermont | News & Politics | AlterNet

http://www.alternet.org/news/149620/resolution_calling_to_amend_the_constitution_banning_corporate_personhood_introduced_in_vermont?page=entire

 The Great Recession wiped out what amounts to every U.S. job created in the 21st century. But even if the recession had never happened, if the economy had simply treaded water, the United States would have entered 2010 with 15 million fewer jobs than economists say it should have.A recent paper by researchers at the Asian Development Bank Institute concluded that the iPhone, one of the United States’ top innovations of the past decade, actually contributes nearly $2 billion to our trade deficit because it is almost entirely produced and assembled in Asia. The paper also raises a conundrum for lawmakers and business leaders alike: If Apple moved its assembly line to the United States and created domestic jobs but didn’t raise the cost of the iPhone, the company would still turn a 50 percent profit on every one it sold.

California jobless rate ticks up to 12.5% California adds just 4,900 jobs in December, with the government and construction sectors shedding thousands of positions. L.A. County's unemployment rate hits 13%. The Employment Development Department said Friday, after adding 30,500 the month before.

The Phantom 15 Million

Taming unemployment starts with solving the mystery of the jobs that were supposed to have been created in the past 10 years but weren’t. Somehow, rapid advancements in technology and the opening of new international markets paid dividends for American companies but not for American workers.

In other words, American companies had adopted a more cold-blooded attitude toward recessions, one that fit the new model of globalization and automation. Technology made it easier to lay off your 100 least-effective workers and ship their jobs to India, or to replace them with a software program that made your remaining workforce dramatically more productive.

Mounting evidence suggests that educational stagnation has already socked American workers, particularly men. Businesses aren’t investing in American workers, either. The major productivity gains of the fledgling recovery came largely from companies producing more with fewer employees.

The simple truth is that American firms are either returning the spoils of globalization and technology to their shareholders, spending them on new projects abroad, or both. “U.S. companies are investing in plants and equipment, just not in our borders. What if the Peterson Institute’s Kirkegaard is correct when he says, “There is a significant risk that we wander aimlessly into a situation where U.S. labor markets end up becoming much more European than they were before,” less dynamic, less innovative, with persistently higher unemployment. “That’s not a description that I use lightly,” he says, “because that’s a very, very bad outcome.”

Payrolls decreased in 35 U.S. states in December, while the unemployment rate rose in 20, showing the labor market recovery is slow to gather momentum.

New York led the nation with 22,800 job cuts last month, followed by Minnesota with 22,400 firings, and Florida with 17,900, figures from the Labor Department showed today in Washington.

The report is consistent with figures on Jan. 7 that showed a fewer-than-forecast 103,000 jobs were created nationwide last month even as unemployment fell. Federal Reserve policy makers meeting today and tomorrow are likely to reiterate a pledge to buy $600 billion in government securities through June to help lower unemployment and spur growth.

“In spite of the fact that the economy is improving, there is not enough momentum to make a significant dent in the unemployment rate,” Brian Bethune, chief financial economist at IHS Global Insight in Lexington, Massachusetts, said before the report. “We really need two or three months of big numbers.”

Joblessness increased most in West Virginia, where it rose by 0.3 percentage point, followed by Colorado, Georgia and Nevada, which showed increases of 0.2 percentage point each. Nevada also faced the highest jobless rate in the country at 14.5 percent.

After Nevada, the jobless rate was highest in California at 12.5 percent and Florida at 12 percent, today’s report showed.

Joblessness in Michigan

Michigan, which is part of the so-called manufacturing Rust Belt, saw unemployment plunge by 0.7 percentage point, the biggest one-month decrease since records began in 1976 as about 37,000 people left the labor force. The jobless rate fell to 11.7 percent, the lowest level since January 2009.

The state, home to the nation’s biggest automakers, is seeing signs the industry is turning around. General Motors Co., the largest U.S. automaker, will add a third shift and about 750 jobs to its assembly plant in Flint, Michigan, to meet rising demand for pickups, Detroit-based GM said yesterday in a statement.

“Adding a third shift is a response to customer demand for heavy-duty pickups, which most people use to tow, haul and plow,” Mark Reuss, president of GM North America, said in the statement. “Equally importantly, it brings jobs and a needed economic boost to the Flint area.”

Unemployment in North Dakota, the lowest in the U.S., was 3.8 percent.

Payrolls Nationally

The Labor Department’s national report for December showed private payrolls, which exclude government agencies, rose by 113,000 last month after a 79,000 November gain. For all of 2010, about 1.1 million jobs were created, the most since 2006. The economy lost 8.4 million jobs during the recession that began in December 2007 and ended in June 2009. At the pace of improvement projected by Fed officials, “it could take four to five more years for the job market to normalize fully,” Feb Chairman Ben S. Bernanke said Jan. 7 in testimony to the Senate Budget Committee after the jobs report.

The workforce, those with jobs or looking for work, shrank by 260,000 workers last month, sending the share of the population in the labor force down to a 26-year low of 64.3 percent, the Labor Department’s national report showed Jan. 7.

Unemployment stuck above 9 percent is one reason why President Barack Obama last month signed an $858 billion bill extending all Bush-era tax cuts for two years. The bill also continues expanded unemployment insurance benefits through 2011 and cuts payrolls taxes by 2 percentage points.

State and local employment data are derived independently from the national statistics, which are typically released on the first Friday of every month. The state figures are subject to larger sampling errors because they come from smaller surveys, making the national figures more reliable, according to the government’s Bureau of Labor Statistics.

 Many workers at the Metropolitan Water Reclamation District are collecting hundreds of thousands of dollars in severance pay despite leaving their jobs voluntarily.

The board is now trying change the decades old practice of awarding almost every employee severance pay. However, the department's 2,000 workers won't give up the perk without a fight.

Some workers are suing the Metropolitan Water Reclamation District, complaining that it's not fair that a very expensive and uncommon perk has been yanked out from under them. So two months ago, the board voted to eliminate severance pay beginning Jan. 1. That led to a very expensive stampede out the door, as 74 veteran employees quit or retired in the last few weeks of the year, before the perk vanished.

 

Alan Abelson cites a Merrill Lynch report that warns that wage inflation in China, which Trichet and Bernanke must ignore to continue to keep their big banks and governments afloat, means China will no longer export deflation and might start exporting inflation.

In the latest Canton Fair in October-November 2010, the analysts report, export prices were hiked 3%- 5% (in dollar terms) from those exacted from foreign buyers at the same fair held in the spring, while labor-intensive goods apparel, shoes, luggage were boosted an immodest 10%-20% migrant workers who got an 18.7% raise in wages in the first three quarters of last year, and the shrinkage of the supply of rural surplus workers younger than 40, which had provided a steady flow of cheap labor. Rising paychecks also have lifted food prices, which account for about 75% of the rise in the country's [CPI]. This switch on the part of the Chinese from a disinflationary or even deflationary role to an inflation generator in the world economy at the very least is going to stoke inflation and exert upward pressure on interest rates pretty much everywhere, including our fair land.

 

Concerns that the Federal Reserve could suffer losses on its massive bond holdings may have driven the central bank to adopt a little-noticed accounting change with huge implications: it makes insolvency much less likely.

 

The significant shift was tucked quietly into the Fed's weekly report on its balance sheet and phrased in such technical terms that it was not even reported by financial media when originally announced on Jan. 6.

But the new rules have slowly begun to catch the attention of market analysts. Many are at once surprised that the Fed can set its own guidelines, and also relieved that the remote but dangerous possibility that the world's most powerful central bank might need to ask the U.S. Treasury or its member banks for money is now more likely to be averted. "Could the Fed go broke? The answer to this question was 'Yes,' but is now 'No,'" said Raymond Stone, managing director at Stone & McCarthy in Princeton, New Jersey. "An accounting methodology change at the central bank will allow the Fed to incur losses, even substantial losses, without eroding its capital."

The change essentially allows the Fed to denote losses by the various regional reserve banks that make up the Fed system as a liability to the Treasury rather than a hit to its capital. It would then simply direct future profits from Fed operations toward that liability.

This enhances transparency by providing clearer, more frequent, snapshots of the central bank's finances, analysts say. The bonus: the number can now turn negative without affecting the central bank's underlying financial condition.

"Any future losses the Fed may incur will now show up as a negative liability as opposed to a reduction in Fed capital, thereby making a negative capital situation technically impossible," said Brian Smedley, a rates strategist at Bank of America-Merrill Lynch and a former New York Fed staffer.

"The timing of the change is not coincidental, as politicians and market participants alike have expressed concerns since the announcement (of a second round of asset buys) about the possibility of Fed 'insolvency' in a scenario where interest rates rise significantly," Smedley and his colleague Priya Misra wrote in a research note.

 

Concerns that the Federal Reserve could suffer losses on its massive bond holdings may have driven the central bank to adopt a little-noticed accounting change with huge implications: it makes insolvency much less likely.

The change essentially allows the Fed to denote losses by the various regional reserve banks that make up the Fed system as a liability to the Treasury rather than a hit to its capital. It would then simply direct future profits from Fed operations toward that liability.

Now, there is no pretense that US taxpayers are on the hook for all Ben’s QE and other schemes, scams and follies. We think Congress will have much more to say about this in coming weeks.

 

The Federal Reserve on Wednesday reluctantly opened the books on its monumental campaign to save the financial system in the midst of the recent crisis, revealing how it distributed some $3.3 trillion in relief.

The data revealed that the Fed's aid was scattered much more widely than previously understood. Two European megabanks Deutsche Bank and Credit Suisse were the largest beneficiaries of the Fed's purchase of mortgage-backed securities (also known as "toxic derivatives" - ed.)

The Fed's dollars also flowed to major American companies that are not financial players, including McDonald's and Harley-Davidson, through unsecured short-term loans. The measure, initiated in Jan. 2009 to stimulate the flow of credit and keep household borrowing costs low, led the nation's central bank to purchase more than $1.1 trillion in mortgages packaged into the form of securities. The mortgage bonds are backed by Fannie Mae and Freddie Mac, the twin mortgage giants now owned by taxpayers.

Deutsche Bank, a German lender, has sold the Fed more than $290 billion worth of mortgage securities, Fed data through July shows. Credit Suisse, a Swiss bank, sold the Fed more than $287 billion in mortgage bonds.

The data had previously been secret. It was released Wednesday per the recently-enacted law overhauling the federal financial regulation. The Fed, ferociously backed by the Obama administration, fought lawmakers' desire for full disclosure throughout the financial reform debate.

 

Bernanke is rooting for higher stock prices. Ben Bernanke is recommending that investors load up on stocks, particularly small caps. Really. I’m serious. He did it on Thursday on CNBC in a brief interview with Steve Liesman. Steve asked the Fed Chairman whether QE-2.0 isn’t working as planned given the backup in bond yields and the surge in commodity prices. Mr. Bernanke responded: “Policies have contributed to a stronger stock market just as they did in March ‘09, when we did the last iteration of this. The S&P 500 is up about 20%-plus and the Russell 2000, which is about small cap stocks, is up 30%-plus. So I think a stronger economy actually helps small business even more than it helps larger businesses.”

Given everything that has happened over the past two decades, it is totally bizarre to see the Fed Chairman extolling rational exuberance in the stock market given how quickly it can turn into irrational exuberance with such a powerful endorsement!

 

The US Securities and Exchange Commission has delivered subpoenas to the state treasurer’s office in a wide-ranging request for documents concerning dealings between investment banking giant Goldman Sachs and former treasurer Timothy P. Cahill, onetime top staff members, and former campaign aides, according to an official briefed on the document request.

The agency’s subpoenas, which seek e-mails, phone records, schedules, files, and memorandums, come just over a month after Goldman Sachs removed itself from two state bond deals in Massachusetts following the disclosure that a vice president at the firm, Neil Morrison, was active in Cahill’s 2010 gubernatorial campaign, which could violate federal securities regulations. Morrison had previously served as a top deputy to Cahill in the treasurer’s office.

 

John Crudele of the NY Post: Crack down on these tax scams, save $400M

Right now there is someone looking for an apartment in the Bronx from which he can file fake tax returns seeking large refunds he doesn't deserve. The place needs, above all else, Wi-Fi Internet access.

The renter will want to tap into a neighbor's Internet connection, so he'll probably have a laptop along when the realtor shows him places. This way the renter will be able to file dozens, if not hundreds, of tax returns from his apartment without leaving electronic footprints. The refunds will be sent to a variety of Post Office boxes, which will be disguised by using the word "suite" or "Apt" on the tax filing rather than the more suspicious "P.O. Box" tag.

This source adds that there is a refund mill filing for multiple New York state refunds out of a central New Jersey location with the help of a corrupt Brooklyn accountant. There have been few prosecutions, sources say. One of the main problems is that the IRS is besieged with tax fraud on the national level and the state mainly leaves policing of fraudulent tax returns up to local authorities. [Investigators believe the NY ring is mostly Middle Eastern nationals.]

 

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Indications: U.S. stock futures rise as markets await Fed

Stock Assault 2.0 - Artificial Intelligence Stock Market Software

By Simon Kennedy, MarketWatch

LONDON (MarketWatch) â€" U.S. stock futures pushed higher Wednesday, following President Barack Obama’s call for corporate tax cuts and a freeze on some spending. Investors also awaited a slew of corporate earnings and the Federal Reserve’s latest pronouncements on monetary policy.

Futures on the Dow Jones Industrial Average /quotes/comstock/21b!f:dj\h11 (DJH11 11,933, +11.00, +0.09%)  rose 38 points to 11,960, and S&P 500 futures /quotes/comstock/21m!f:sp\h11 (SPH11 1,291, +3.50, +0.27%)  gained 5.4 points to 1,293. Nasdaq 100 futures /quotes/comstock/21m!f:nd\h11 (NDH11 2,307, +5.75, +0.25%)  added 9 points to 2,310.25.

On Tuesday, U.S. markets overcame early disappointment over earnings to finish the session little changed. The Dow Jones Industrial Average /quotes/comstock/10w!i:dji/delayed (DJIA 11,977, -3.33, -0.03%)   ended with a decline of 3.33 points, or less than 0.1%.

State of the Union address

President Obama addresses the nation on the economy, innovation and health care during his State of the Union speech.

President Obama used his State of the Union speech late Tuesday to call for a lower corporate tax rate and a five-year freeze on domestic discretionary spending â€" a move that he said will require “painful cuts” in defense and even in Medicare and Medicaid. Read more on Obama’s State of the Union speech.

The market will get Wednesday’s main economic data after the market opens. Figures on December new-home sales are due at 10 a.m. Eastern time, followed by the latest statement from the Federal Open Market Committee at 2:15 p.m. Eastern.

Markets are likely to focus on the Fed’s inflation and growth outlook, as investors watch for any indication of when interest rates will begin to rise. Read more on expectations for the Fed.

Manoj Ladwa, senior trader at ETX Capital, said the move in stock futures was due to several factors, including Obama’s comments, hopes for strong home-sales data and the broadly positive trend in fourth-quarter earnings announcements.

“We’ve seen more beats than misses, and there hasn’t been anything to really shock markets,” Ladwa said.

The dollar edged slightly lower before the Fed statement. The euro rose 0.1% to $1.3702, while the dollar slipped 0.1% against the yen to ¥82.171.

Among companies in focus Wednesday, shares of Yahoo Inc. /quotes/comstock/15*!yhoo/quotes/nls/yhoo (YHOO 16.02, -0.07, -0.44%)  fell 2.6% in premarket trading after the Internet search company late Tuesday gave a current-quarter revenue forecast that fell short of Wall Street’s expectations. Read more about Yahoo’s results, forecast.

Toyota Motor Corp.’s /quotes/comstock/13*!tm/quotes/nls/tm (TM 83.86, +0.36, +0.43%)  shares lost 1.9% in Tokyo after the auto maker said it was recalling more than 1.7 million vehicles worldwide to fix problems, including fuel-system defects. Read more on Toyota’s woes.

Among Wednesday’s slew of earnings announcements, United Technologies Corp. /quotes/comstock/13*!utx/quotes/nls/utx (UTX 81.73, +0.21, +0.26%)  reported a 12% rise in profit to $1.2 billion as sales grew 6.3%.

Aerospace giant Boeing Co. /quotes/comstock/13*!ba/quotes/nls/ba (BA 72.24, -0.49, -0.67%) posted an 8% decline in fourth-quarter net income and offered a 2011 profit forecast of $3.80 to $4 a share. Analysts polled by FactSet Research were, on average, looking for 2011 earnings of $4.59 a share. Shares of Boeing slipped 3.1% in premarket trade.

ConocoPhillips /quotes/comstock/13*!cop/quotes/nls/cop (COP 67.48, -0.62, -0.91%)  is also on tap to report results.

In international markets, European shares posted strong gains, with the U.K.’s FTSE 100 index /quotes/comstock/23i!i:ukx (UK:UKX 5,991, +72.93, +1.23%)   up 1.3% in midday trading.

Most Asian markets closed higher, though Japan’s Nikkei 225 Average /quotes/comstock/64e!i:ni225 (JP:NI225 10,402, -62.52, -0.60%)  dropped 0.6%, in part due to the decline in Toyota.

Simon Kennedy is the City correspondent for MarketWatch in London.

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NYSE Arca Morning Update - 08:30:00 ET

NYSE Arca Morning Update for Wednesday, Jan 26, 2011 :

STOCKS TRADING ON NYSE Arca AT A PRICE 15% OR MORE AWAY FROM
THE PREVIOUS TRADE DAY'S CONSOLIDATED CLOSE PRICE (AS OF 08:30:00 ET)

Stock Tuesday's Close Current Price Pct Change Current NYSE ARCA Vol
KEYN $14.98 $18.50 23.5% 625


10 MOST ACTIVE STOCKS ON NYSE ARCA AS OF 08:30:00 ET

BASED ON DOLLARS TRADED: | BASED ON SHARES TRADED:
Stock $ Volume Price PctChg | Stock Share Vol Price PctChg
SPY $69,195,089 $129.68 0.4% | C 2,598,270 $4.84 0.2%
AAPL $19,210,842 $343.23 0.5% | APCVZ 1,388,721 $0.05 20.1%
GLD $18,313,619 $130.17 0.1% | SPY 533,602 $129.68 0.4%
C $12,565,777 $4.84 0.2% | RFMD 402,560 $7.02 ( 8.3%)
EWZ $10,111,890 $75.83 0.7% | YHOO 333,405 $15.86 ( 1.0%)
IWM $9,968,854 $78.25 0.5% | BAC 302,824 $13.69 0.5%
BHP $8,559,805 $89.75 1.5% | SDS 147,330 $22.36 ( 0.7%)
BA $7,455,470 $69.71 ( 3.5%) | GLD 140,828 $130.17 0.1%
RIO $7,217,213 $70.33 2.6% | EWZ 133,240 $75.83 0.7%
BP $6,017,386 $47.02 ( 0.4%) | BP 128,119 $47.02 ( 0.4%)


Price changes may be affected by symbol splits and dividends.

Consolidated close price is the last print (excluding prints with trade
conditions) prior to 4PM ET.

This information is also updated on our web page every morning at 8:35ET:
http://www.tradearca.com/data/volume/daily_update.asp

This material is for informational purposes only.
NYSE Euronext and its affiliates ("NYSE Arca") are not soliciting any action based upon it.
This material is not to be construed as an offer to buy or sell any security in any jurisdiction where such an offer or solicitation would be illegal.
Any opinions expressed in this material are NYSE Arca opinions only.
NYSE Arca undertakes no obligation to update any of the information contained in this material in light of new information or future events.
THIS MATERIAL IS PROVIDED BY NYSE ARCA "AS IS" AND WITHOUT WARRANTIES EXPRESS OR IMPLIED.
NYSE ARCA DISCLAIMS ALL WARRANTIES INCLUDING THE IMPLIED WARRANTIES OF MERCHANTIBILITY, TITLE, AND FITNESS FOR A PARTICULAR PURPOSE AS TO THIS MATERIAL.
IN NO EVENT SHALL NYSE ARCA BE LIABLE FOR DIRECT, INDIRECT, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES OF ANY KIND WHATSOEVER (INCLUDING BUT NOT LIMITED TO, LOST PROFITS, TRADING LOSSES AND DAMAGES THAT MAY RESULT FROM THE USE
OF THIS MATERIAL, ANY DELAY OR INTERRUPTION OF SERVICE OR OMISSIONS OR INACCURACIES IN THE MATERIAL) WITH RESPECT TO THIS MATERIAL.

Copyright [2011] by NYSE Euronext. All rights reserved. Reproduction and redistribution prohibited without prior express consent.

Indications: Stock futures rise as markets await Fed, Boeing

Stock Assault 2.0 - Artificial Intelligence Stock Market Software

By Simon Kennedy, MarketWatch

LONDON (MarketWatch) â€" President Barack Obama’s call for corporate tax cuts and a freeze on some spending helped push U.S. stock futures higher Wednesday, as investors also awaited a slew of corporate earnings and the Federal Reserve’s latest pronouncements on monetary policy.

Futures on the Dow Jones Industrial Average /quotes/comstock/21b!f:dj\h11 (DJH11 11,956, +34.00, +0.29%)  rose 34 points to 11,956 and S&P 500 futures /quotes/comstock/21m!f:sp\h11 (SPH11 1,293, +5.70, +0.44%)  gained 5.60 points to 1,293.20.

Nasdaq 100 futures /quotes/comstock/21m!f:nd\h11 (NDH11 2,310, +8.25, +0.36%)  were up 7.75 points at 2,309.00.

U.S. markets overcame early disappointment over earnings on Tuesday to finish the session little changed. The Dow Jones Industrial Average closed down 3.33 points, or less than 0.1%.

State of the Union address

President Obama addresses the nation on the economy, innovation and health care during his State of the Union speech.

President Obama used his State of the Union speech late Tuesday to call for a lower corporate tax rate and a five-year freeze on domestic discretionary spending â€" a move that he said will require “painful cuts” in defense, and even in Medicare and Medicaid. Read more on Obama’s State of the Union speech.

Wednesday’s main economic data will come after the market opens. Figures on December new-home sales are due at 10 a.m. Eastern time, followed by the latest statement from the Federal Reserve at 2:15 p.m. Eastern.

Markets are likely to focus on the Fed’s inflation and growth outlook as investors look for any indication of when interest rates will begin to rise. Read more on expectations for the Fed.

The dollar edged slightly lower ahead of the Fed statement. The euro rose 0.1% to $1.3702, while the dollar slipped 0.1% against the yen to ¥82.184.

Among companies in focus Wednesday, shares in Yahoo Inc. /quotes/comstock/15*!yhoo/quotes/nls/yhoo (YHOO 16.02, -0.07, -0.44%)  may come under pressure after the Internet search company late Tuesday forecast revenue for the current quarter that was below Wall Street expectations.

Toyota Motor Corp. /quotes/comstock/13*!tm/quotes/nls/tm (TM 83.86, +0.36, +0.43%)  fell 1.9% in Tokyo after the auto maker said it was recalling more than 1.7 million vehicles worldwide to fix problems including fuel-system defects. Read more on Toyota’s woes.

Firms due to announce their results Wednesday include Boeing Co. /quotes/comstock/13*!ba/quotes/nls/ba (BA 72.24, -0.49, -0.67%) , which is seen reporting fourth-quarter earnings of $1.12 a share.

ConocoPhillips /quotes/comstock/13*!cop/quotes/nls/cop (COP 67.48, -0.62, -0.91%)  is forecast to report a profit of $1.28 a share for the latest quarter.

In international markets, European shares posted strong gains, with the U.K.’s FTSE 100 index up 1.2% in mid-morning trading.

Most Asian markets closed higher, though Japan’s Nikkei 225 Average dropped 0.6%, in part due to the losses for Toyota.

Simon Kennedy is the City correspondent for MarketWatch in London.

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