Saturday, July 31, 2010

Watching The Fed Control the Economy

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While we wait, watch and listen, the Fed decides when the banks will be given the word to start lending to get the domestic economy back to neutral. Action is needed quickly because the world economy is quickly deteriorating, and their recovery is simply not happening, as the administration admits to a fiscal deficit of $1.4 trillion. That would be down from a deficit of $1.9 trillion in 2009. Our long-term estimate has been $1.6 to $2 trillion. Over the past 18 months and after joint expenditures by government and the Fed of $2.3 trillion, all the administration has to show for their efforts are five quarters of stimulus growth of about 3-1/2%, which is now ending. In addition, economies worldwide are slowing as well. At the same time the credit crisis continues as the Fed’s money machine funds banks and other financial institutions worldwide in a sea of perpetually degraded dollars. The only real mission for the Fed is to keep the financial sector afloat until the elitists are ready to finally pull the plug and bring about worldwide deflationary depression, as a trigger mechanism to force people’s of the world to accept world government. Most of the major banks of the world are insolvent and keeping them functioning is the Fed’s primary mission.

Debt is devouring sovereign nations, especially in Europe, the UK, Japan and the US. Over the past 20 years ideas and policies have been discussed on how to handle such debt. Austerity programs and cutbacks have begun in a number of countries, each using their own formulas. In the US on the table are Social Security, Medicare and Medicaid, all of which run at a substantial deficit. In fact, they come close to consuming all government revenue. This is causing difficult problems because off budget items cannot be funded. They have to be funded via deficits, which are shrouded in secrecy. That is understandable as America’s wars have already cost taxpayers well over $1 trillion. These dollar denominated assets, when in fact secretly, are being funded by the privately owned Federal Reserve. The big secret of the past seven years is not a secret anymore. These are policies that are secret. If you ask the Fed specific questions all you get is that the answer is a state secret, it is classified. Of course, this is done to hide the Fed’s activities. The same is true of commissions appointed by the president under the cloak of executive orders. These are the bureaucrats that will formulate how spending will be cut and revenues will be enhanced. Their conclusions are then rubber stamped by a purchased Congress and Senate. This procedure bypasses all debate and allows progress in semi-secrecy.

The deficit is being funded and monetized by the Fed, but they won’t tell you that. Yes, foreigners buy debt, but so does the Fed.

Behind all this lurking in the shadows is the administratio n’s decision to allow low tax rates to elapse, which will increase taxes by some 15%. This change should be reverified after the next election. Recently Treasury Secretary Geithner said tax increases should be pursued.

Then we also expect that moves will begin to expose the administration’s program to tax or offer an exchange for retirement plans with government. Government would offer guaranteed annuity plans. This would be a method of securing assets immediately to offset deficits.

Whatever the administration wants to do they’ll have to do it before November’s election because of anti-incumbent sentiment. That has been complicated by a federal court decision to strip an Arizona law of its most important elements regarding illegal aliens. Democrats are going to bear a great deal of blame regarding this issue. Two surveys showed 90% and 94% of Americans agreed with the Arizona law regarding immigration. In addition, many solons are realizing that the accelerating deficit impedes government. Some Democrats and many republicans are sophisticated enough to see higher taxes could subdue the economy even further. If the Fed were to raise interest rates that would further put downward pressure on the economy. All these things leave few viable options. There is no question that the Fed is going to accommodate the economy, as we explained earlier, by cutting interest on banks deposits at the Fed and forcing banks’ to lend, which would invigorate the economy and raise employment. This is why the market rallied from 9800 to 10,500. Remember since Fed Chairman Ben Bernanke took office the government’s short term debt rose from $8.2 trillion to $13.3 trillion. We are sure you remember his 2002 speech as he described the Fed’s printing press abilities. All monetary expansion has been done is buy time â€" it has not in any way solved the underlying problems.

We wonder what the Fed will do with the trillions of dollars in toxic waste bonds held on its balance sheets? They’ll sell them and you will get billed for it. Don’t forget foreign exchange of foreign nations in dollars fell from 64.5% of assets to 59.5% of assets in just 1-1/2 years. Our friends are sellers, including China.

What Washington, the Fed and Wall Street have to understand is that you cannot borrow your way to wealth. There is an eventual law of diminishing returns. Present prosperity cannot be paid for by future production and services. The public senses this and their confidence continues to dissipate. Seventy percent believe there will be no recovery. They are angry and want to purge congress and the Senate of the criminals they previously elected. This is a reflection in part of unemployment of 22-3/8%, falling hours and wages and perpetual loss of purchasing power.

As we pointed out previously Europe and the UK and the US have chosen differe nt paths to solve their debt, finance and economic problems. Europe has raised taxes and implemented austerity. The US so far has done neither and continues to believe that quantitative easy (QE) is the best hope of success. Heretofore it has been unsuccessful, but they keep on doing it anyway for lack of an acceptable alternative. The US is in double dip recession already. The question is can the Fed act fast enough to stave off deflationary depression? This is what Europe has done and they are about to find out much to their chagrin that they have a deflationary depression on their hands, and they have lost control. That should eventually knock the euro for a loop. The solvent members of the euro zone are going to find they have thrown good money after bad. Europe heads for depression and the US will soon follow. It is the intention to create $5 trillion in QE over the next two years to carry the US economy through the next election. There is just three months to elections . The race is on to convince the US electorate that America is ok. We do not believe that will be successful.

The Fed continues to buy toxic debt instruments. They admit to having purchased $1.3 trillion worth, but we believe that the figure is more like $1.8 bullion worth. The difference is parked offshore. As Fed chairman Bernanke says unemployment is the most pressing challenge. The way to help that situation is to have banks lend to small- and middle-sized businesses that create 70% of the jobs.

As of now we have not emerged from our inflationary depression and we are not going too. We may have a period of grace due to QE but that will be transitory.

Housing is locked into a long-term depression. Can you imagine building 549,000 new homes with a 3-year overhang, when four months is normal? Eighty percent of the building industry is dead in spite of $8,000 credits and $1.25 trillion or $1.8 trillion in purchase s of MBS and CDO bonds. Foreclosures hitting the market are endless with no relief in sight. Millions of homes are underwater and will probably stay that way for years to come.

46.2% of the unemployed have been out for 27 weeks or more. They cannot buy houses â€" that is double the worst ever recorded. The average worker has been out of work for 35.2 weeks. Real unemployment is 22-3/8%. The average workweek is 34.1 hours. You certainly cannot have recovery with these kind of numbers.

We ask how do you have a recovery under such circumstances? By the end of the year, in the absence of a quick QE injection we should see GDP growth in the minus column or close to it. All QE sights, except for more bank lending will focus again on banking and Wall Street making sure they do not collapse.

Economists tell us the opposite, but they are only correct 1/3rd of the time. It is obvious the economy is still in deep trouble. Payr olls have fallen, state and federal revenues are way off, state unemployment disbursements are up, as are the use of food stamps, welfare and Medicaid. All these problems and we have seen $2.3 to $2.5 trillion in stimulus and zero interest rates to boot. As the planning at the Fed figures out how the 3rd stimulus will be applied the Fed still won’t talk about an exit strategy, because they have none. Bernanke, like his predecessor Greenspan, doesn’t have any workable solutions. That is because he won’t purge the system and its malinvestment. That is why his only answer can be QE and monetary inflation. After the 2012 election it will be very obvious that the banking system will be unable to properly function. This has been a lonely vigil, but others are now coming to the same conclusion as we have. Mark Farber, Jim Willie, DavidRosenberg, Jim Grant and Ambrose Evans-Pritchard have all joined us in a chorus of warnings.

We have seen a continual fall in M3 at a 9.5% contraction rate. This reduction has been going on for over a year, as money stock declined by $300 billion. All we can say is this reduction allows the Fed lots of room to reincrease M3 again.

The Fed, Wall Street and the Treasury know current levels, which are receding, cannot be maintained without more massive infusion of money and credit. Problems are about to occur if quick action is not taken.

That is reflected in the statements of St. Louis Fed President James Bullard’s comments, or should we say trial balloons. The bottom line is monetize and inflate or die.

We cannot but help make comment on the SEC’s new position that “reform” legislation exempts the SEC from the Freedom of Information Act. This really is nothing new. The SEC has been blocking access to testimony for years. Government is supposed to be seeking transparency not acting like the CIA or FBI.

Stocks a re again in the process of topping out. That should further cut into the savings rate and into spending as well. Higher income families are feeling the pinch. That is complicated by the fact that almost half of all mortgages have negative equity. Homeowners are staggered by the loss in equity, which in many cases is their total life savings. As a result FICO scores are plummeting. That means more consumers are being shut out of the credit markets. Take our advice, be long gold and silver related assets.

The commercial paper market rose $1.5 billion to $1.101 trillion last week. The California fiscal emergency is much worse than Greece. There is a $19 billion shortfall, as the state House and Senate refuse to fix the problem. There is big trouble in La La land. The deficit is 22% of the $85 billion general fund budget.

State workers will take three days off without pay per month beginning in August. The budget is five weeks overdue.

Schwarzenegger says its fiscal meltdown as the state hovers a few notches above junk state, IOU’s are on the way. We saw this coming 14 years ago, and we left never to return. The governor says he will only sign a budget if it includes an overhaul of the state’s public pension system. The overall economy is on the verge of tanking. It is like the summer of 2008 again. They still have real estate and bank problems, now sovereign debt problems mixed in. After two years and the injection of almost $5 trillion the economy has little to show for it. The stock market holds up as transnational conglomerates scoop up profits made from free trade and globalization that are parked offshore escaping taxes. That is $1.5 trillion, or $525 billion in taxes that could go a long way to reducing the fiscal deficit. It is very unfair when we have two sets of rules. How can anyone have any faith in the system?

The four quarters of inventory accumulat ion is over and it shows how ineffectual the stimulus combination of the administration and the Fed of $2.3 to $2.5 trillion really has been. Can you imagine a revision in the second quarter from 3.7% to 2.4%. Lies, lies and more lies.

The Reuters/Ipsos Poll showed only 34% approval of Obama’s handling of the economy and jobs versus 46% who deemed it unsatisfactory.

Imports in the second quarter surged by 28.8%, which is no surprise, as the US manufactures very little anymore. Exports rose 10.3%. That provided the largest subtraction since the 3rd quarter of 1982. Business inventories increased $75.5 billion, up from $44.1 billion in the 1st quarter. That added 1.05% to GDP. Excluding inventories the economy expanded at a 1.3% rate, up from 1.1% in the 1st quarter. Now who do they sell too?

The economy shrank 2.6% last year, the steepest drop since 1946. This as unemployment surged to 22-3/8%. These figures are the worst since the Great Depression.

Employment costs rose 0.5% in the 2nd quarter. Wages and salaries rose 0.4% and benefits 0.6%. The July Chicago PMI was 62.3, up from June’s 59.1. The employment index rose to 56.6 from 54.2 in June. New orders rose to 64.6 from 59.1.

The University of Michigan Sentiment Index was 67.8, up from 66.5.

The current conditions index was the weakest since November 2009, as consumer sentiment fell to 67.8 from 76.0.

Favorable attitudes for durable goods fell to 58% from 67% in June. Consumer expectations fell to 62.3, the lowest since March 2009 versus 60.6 in early July and 69.8 in June. The consumer 12-month outlook fell to 66 from 79.

The IMF says the US financial system needs $76 billion in capital immediately.

The great recession has been far worse than depicted.

China, Japan and oil exporting co untries are dumping US treasuries. Everyone now knows the Fed is practicing financial fraud.

Fixed U.S. mortgage rates set record lows last week for the sixth straight week, home funding company Freddie Mac said on Thursday.

The average 30-year loan rate edged down to 4.54 percent in the week ended July 22 from 4.56 percent the prior week and 5.25 percent a year ago.

Fifteen-year mortgage rates averaged 4 percent, also a record, down from 4.03 percent a week ago and 4.69 percent a year ago.

Records from Freddie Mac, the second largest buyer of U.S. residential mortgages, date back to 1971 for 30-year mortgages and 1991 for 15-year loans.

Lenders charged an average 0.7 percentage point in added fees and points last week, the same as the previous week.

Thirty-year mortgage rates last averaged over 5 percent in April.

While refinancing has picked up steam, the pace remains well below highs of last year when rates were similarly low.

Many borrowers who had the financial incentive either have already refinanced or do not meet lender requirements.

Applications to refinance mortgages last week declined from a 14-month high, the Mortgage Bankers Association said on Wednesday. Home buying has been quelled by dour consumer confidence, fears of job loss and tight lending practices.

Ever wonder why according to the latest economic poll published by Reuters earlier the general public's satisfaction with Obama's handling of the economy is deteriorating faster than any other issue? (not to mention that 46% of Americans believe Obama is not focused enough on job creation, and that 72% of republicans say they are certain to vote at the November congressional elections versus 49% of democrats). A part of the answer comes courtesy of a new study produced by National League of Cities, the U.S. Conference of Mayors and the National Association of Counties titled simply enough: "Local Governments Cutting Jobs and Services: Job losses projected to approach 500,000", showed local governments moved to cut the equivalent of 8.6 percent of their workforces from 2009 to 2011. As a result of local government cutbacks, almost 500,000 people will lose their jobs, and the total will likely rise. The summary of the report attached below, is particularly grim: "Over the next two years, local tax bases will likely suffer from depressed property values, hard-hit household incomes and declining consumer spending. Further, reported state budget shortfalls for 2010 to 2012 exceeding $400 billion will pose a significant threat to funding for local government programs. In this current climate of fiscal distress, local governments are forced to eliminate both jobs and services." If Americans are dissatisfied with Obama's handling o f the economy now, just until 2012.

Orders and shipments for non-military capital goods excluding aircraft climbed in June, signaling investment by U.S. businesses picked up heading into the second half of the year. Such bookings increased 0.6 percent after jumping 4.6 percent in May, more than previously reported, figures from the Commerce Department showed today in Washington. Total orders for durable goods, those meant to last at least three years, unexpectedly dropped 1 percent, depressed by a decrease in demand for aircraft which is often volatile.

Eaton Corp. is among manufacturers benefiting from a pickup in demand as companies in the U.S. and abroad update equipment that is helping to support the recovery. The gains will partially compensate for a slowdown in consumer spending that is causing the world’s largest econom y to cool heading into the second half of the year.

One of the odder stories of the day comes from Dow Jones, which reports that the Chinese Sovereign Wealth Fund (China Investment Corp, or CIC), has sold $138.5 million worth of Morgan Stanley shares in the past week, after dumping 4.53 million shares at $27.17 on Wednesday and 575,000 shares at $27.13 on Thursday. CIC began accumulating a massive Morgan Stanley stake in 2007, when it purchased its initial shares in the then troubled investment bank, and followed up with a June 2009 $1.2 billion investment, The reason for the sale, DJ speculates, is for the fund to avoid "additional disclosure requirements." Yet as a filing as recently as June 18 disclosed, the fund's Morgan Stanley stake was openly disclosed to be 11.64%. Surely the CIC administrator, the PM and everyone else in the front and back office were all too aware of this number. Which is odd since per both initial and follow up purchase agreements, CIC had stated it would not own more than 9.9% of MS' shares, and would remain a passive investor. That the firm would blatantly purchase 16% more than this threshold in the open market by mistake in the past year seems somewhat ludicrous. Worth recalling is that in June CIC disclosed a 10% MTM loss for the month of May or roughly about the time it announced its above normal MS exposure. Are the two related? Has the CIC been covertly liquidating assets? It is unclear, as the one and only 13F for CIC is still the original one filed from February. One would imagine there would be at least some SEC requirement that a filer that has issued at least one 13F would be so kind to follow it up with at least a second one... eventually. In the meantime there is no official statement on the transaction: "A spokeswoman for CIC said she was unaware of the reason for the sales. A Beijing-based Morgan Stanley spokeswoman declined comment.

  Moody's Investors Service on Tuesday lowered its outlooks to "negative" on certain ratings for Bank of America Corp., Citigroup Inc. and Wells Fargo & Co., citing a new law that is expected to reduce the likelihood of government bailouts of banks.

The outlooks on the banks debt and deposit ratings were previously "stable."

In a note to investors, analyst Sean Jones wrote that Wall Street Reform and Consumer Protection Act should result in lower levels of taxpayer support for banks that run into trouble. The new law attempts to strengthen the ability of regulators to supervise and liquidate banks if need be, he wrote.

Jones said that in the near term regulators would continue facing significant obstacles in trying to liquidate global companies without causing economic upheavals, so the current ratings are still appropriate.

However, he said that as the new l aw is implemented over the next year or two, Moody's "support assumptions" for major banks will likely revert to pre-crisis levels, or even lower.

"Since early 2009, Bank of America, Citigroup, and Wells Fargo's ratings have benefited from an unusual amount of support," Jones noted.

That support resulted in debt and deposit ratings that range from three to five notches higher than that appropriate for the banks' intrinsic financial strength, without the support.

The banks' long-term and short-term ratings, which have not benefited from the assumption of government support, were affirmed and not affected.

US industrial titan General Electric has agreed to pay over 23 million dollars to settle allegations that it bribed Iraqi officials, a US financial watchdog said on Tuesday.

GE had been accused by the Securities and Exchange Commission of being part of " a 3.6 million dollar kickback scheme with Iraqi government agencies to win contracts to supply medical equipment and water purification equipment."

Four subsidiaries of the Connecticut-based company were accused of bribing officials at the Iraqi ministries of health and oil, trading cash, computer equipment and medical supplies to win lucrative contracts.

The SEC said the four GE units -- two of which were not part of the firm when the alleged bribery took place -- earned around 18.4 million dollars as a direct result of the kickbacks.

About 18.9 million homes in the U.S. stood empty during the second quarter as surging foreclosures helped push ownership to the lowest level in a decade.

The number of vacant properties, including foreclosures, residences for sale and vacation homes, rose from 18.6 million in the year-earlier quarter, the U.S. Census Bureau said in a report to day. The ownership rate, meaning households that own their own residence, was 66.9 percent, the lowest since 1999.

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Friday, July 30, 2010

Indications: Stock futures fall further after U.S. GDP report

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By Polya Lesova and Kate Gibson, MarketWatch

NEW YORK (MarketWatch) -- U.S. stock futures pointed to opening losses for Wall Street on Friday after data showed the economy lost some momentum in the second quarter.

The Commerce Department reported U.S. real gross domestic product climbed 2.4% in the second quarter from an upwardly revised 3.7% in the first quarter.

Economists expected growth to slow a bit to a 2.5% rate in the second quarter, according to a MarketWatch survey. Read more about the GDP data.

Modestly lower ahead of the report, stock index futures slipped further in its wake.

S&P 500 futures were down 11.20 points to 1,085.70, and Nasdaq 100 futures declined 18.50 points to 1,838.75.

Futures on the Dow Jones Industrial Average dropped 92 points to 10,317.

Gold bugs get swatted

Is gold's rally over? MarketWatch's Money & Investing editor Jonathan Burton reports.

The Dow /quotes/comstock/10w!i:dji/delayed (DJIA 10,466, -1.22, -0.01%) fell 0.3% Thursday, declining for a second session.

Asian stocks ended mostly lower Friday, with Japan's Nikkei Stock Average dropping 1.6%.

The Stoxx Europe 600 index /quotes/comstock/22c!sxxp (ST:SXXP 255.35, -0.91, -0.36%) fell 0.4% in afternoon trade after a flood of earnings reports from major French firms.

In addition to the GDP data, a report on business activity in the Chicago area will be released at 9:45 a.m. Eastern, to be followed by data on July consumer sentiment at 10 a.m.

On the corporate front, pharmaceutical giant Merck & Co. /quotes/comstock/13*!mrk/quotes/nls/mrk (MRK 34.46, -0.60, -1.71%) said its second-quarter net profit fell 51% to $752.4 million, or 24 cents a share.

U.S.-listed shares of Alcatel-Lucent /quotes/comstock/13*!alu/quotes/nls/alu (ALU 2.98, +0.38, +14.62%) /quotes/comstock/24s!e:alu (FR:ALU 2.30, +0.23, +11.07%) rallied in premarket trade, as the telecom-equipment giant reported in-line underlying earnings for the second quarter and forecast a stronger second half. See more on Alcatel-Lucent.

Oil major Chevron Corp. /quotes/comstock/13*!cvx/quotes/nls/cvx (CVX 76.21, +0.19, +0.25%) and power firm Public Service Enterprise Group Inc. /quotes/comstock/13*!peg/quotes/nls/peg (PEG 32.90, -0.92, -2.72%) also reported quarterly results before the market open.

Walt Disney Co. /quotes/comstock/13*!dis/quotes/nls/dis (DIS 33.69, -0.02, -0.06%) announced it has agreed to sell its Miramax Films business to Filmyard Holdings for more than $660 million.

Raft of earnings from France

Oil giant Total SA /quotes/comstock/13*!tot/quotes/nls/tot (TOT 50.63, +0.41, +0.82%) /quotes/comstock/24s!e:fp (FR:FP 38.71, +0.36, +0.94%) said second-quarter net profit soared 43% to 3.1 billion euros ($4.05 billion) and expressed confidence about the second half of the year. Read more on Total's results.


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Its shares gained 1.2% in Paris, outperforming the CAC-40 index /quotes/comstock/30t!i:px1 (FR:PX1 3,643, -8.77, -0.24%) , which dropped 0.6% in intraday trading.

Car maker Renault SA /quotes/comstock/24s!e:rno (FR:RNO 34.24, +0.59, +1.75%) swung to a first-half net profit, but warned about the uncertain economic outlook. See more on Renault's results.

French power firm Electricite de France SA /quotes/comstock/24s!e:edf (FR:EDF 32.62, +0.15, +0.46%) announced it has received a €6.9 billion offer from a Hong Kong-based consortium for its U.K. electricity distribution networks.

In London, shares of British Airways PLC /quotes/comstock/23s!a:bay (UK:BAY 219.60, +3.60, +1.67%) gained 1.3% after the airline said its fiscal first-quarter net loss widened to 122 million pounds ($190.5 million), but it was still ahead of consensus forecasts. The firm still expects to break even for the year on a pretax basis.

In the currency markets, the dollar index /quotes/comstock/11j!i:dxy0 (DXY 81.59, -0.10, -0.12%) gained 0.2% to 81.806, while the euro /quotes/comstock/21o!x:seurusd (EURUSD 1.3045, -0.0033, -0.2523%) fell 0.5% to $1.3013.

Crude-oil futures dropped $1.30 to $77.07 a barrel in electronic trading on the New York Mercantile Exchange. Gold futures gained $2.10 to $1,173.40 an ounce.

Polya Lesova is a reporter for MarketWatch, based in Frankfurt. Kate Gibson is a reporter for MarketWatch, based in New York.

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NYSE Arca Morning Update - 08:30:00 ET

NYSE Arca Morning Update for Friday, Jul 30, 2010 :


Stock Thursday's Close Current Price Pct Change Current NYSE ARCA Vol
PWER $9.97 $11.57 16.0% 71,995


Stock $ Volume Price PctChg | Stock Share Vol Price PctChg
SPY $31,601,043 $109.67 ( 0.6%) | C 1,773,759 $4.07 ( 0.9%)
BP $7,519,653 $38.09 ( 0.9%) | ALU 1,026,461 $2.87 9.2%
C $7,247,449 $4.07 ( 0.9%) | YRCW 304,885 $0.37 ( 2.9%)
GLD $6,484,302 $114.73 0.4% | SPY 287,987 $109.67 ( 0.6%)
AAPL $4,304,367 $256.72 ( 0.5%) | BP 197,984 $38.09 ( 0.9%)
CRL $3,588,322 $33.95 6.1% | WFR 122,156 $10.13 (10.2%)
BHP $3,519,645 $72.07 ( 0.5%) | CRL 105,580 $33.95 6.1%
BIDU $3,132,875 $80.03 1.1% | FAZ 101,835 $14.12 2.2%
ALU $2,973,885 $2.87 9.2% | STD 89,525 $12.86 ( 2.3%)
QQQQ $2,949,540 $45.48 ( 0.5%) | PWER 71,995 $11.57 16.0%

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:

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.

Copyright [2010] by NYSE Euronext. All rights reserved. Reproduction and redistribution prohibited without prior express consent.

Thursday, July 29, 2010

The Handshake: What is the perfect handshake?

Many of us know what it is like to receive a handshake that just doesn’t do it justice. From extra hard handshakes to soft and limp handshakes there are ranges that are on offer but just which one is the one for you? Well to be honest there is only one perfect handshake and to understand which one it is we need to look at the reason why we use handshakes.

Handshaking is a form of greeting. It’s the very first thing we do to greet and build rapport with people. In fact it shows our strength to an issue, our behaviour type and motive for the meeting. So if our handshake is to build a relationship what should we do? Well in communication the correct way is the way the other person understands. This means to build rapport you need to show and share similarities with the person you are trying to build rapport with. By showing that you are similar you build a character that the other person can relate to. In other words, by mirroring the client or other person you will build a relationship with similarities.

You’re probably wondering what this has to do with a handshake. Well if you shook someone’s hand and you were extremely stronger than the other person do you think this will build or detract from the relationship? Likewise if you go in with a soft handshake and the person you approach has a strong handshake, will this help? No. Ultimately you need to match the other person’s behaviour to build a relationship as by doing something that detracts from the meeting will not help.

To show you on a different level why it is important to mirror the behaviour of your guest, some cultures do not shake hands at all. To shake hands with someone that doesn’t shake hands it can have detrimental effects on the meeting. People from different parts of the world will do things differently and if you can help them feel comfortable by greeting them they way they wish to be greeted you are a step ahead. Even in some places city people will greet differently to country people. Some may come up close to you and shake your hand others may just wave and stand away from you comfortable. You need to realise greeting people in their language or the way they greet is a way of respect and will help you in building rapport. Body Language Expert Sales Training

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Indications: Stock futures gain strength as jobless claims fall

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By Polya Lesova and Kate Gibson, MarketWatch

NEW YORK (MarketWatch) -- U.S. stock futures pointed to opening gains Thursday on Wall Street, as oil major Exxon Mobil Corp. posted a surge in quarterly profit and the government reported a decline in weekly jobless claims.

Up 30-plus points before the jobless-claims data, Dow Jones Industrial Average futures were lately up 63 points to 10,511.

S&P 500 futures advanced 8.30 points to 1,110.40, while Nasdaq 100 futures gained 11.75 points to 1,881.50.


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The Labor Department reported that those applying for first-time jobless benefits fell 11,000 to 457,000 last week, with the level below the 460,000 expected by analysts. Read more about jobless claims.

The Dow /quotes/comstock/10w!i:dji/delayed (DJIA 10,436, -61.60, -0.59%) fell 0.4% Wednesday, snapping a four-day winning streak, as disappointing data rekindled concerns over U.S. economic growth.

Before the bell Thursday, Exxon Mobil /quotes/comstock/13*!xom/quotes/nls/xom (XOM 60.49, -0.42, -0.69%) said second-quarter net profit climbed 91% to $7.56 billion, or $1.60 a share, from $3.95 billion, or 81 cents a share, in the year-ago period. Analysts expected earnings of $1.46 per share. Read more about Exxon Mobil's results.

Shares of Colgate-Palmolive Co. /quotes/comstock/13*!cl/quotes/nls/cl (CL 77.93, -5.93, -7.07%) dropped 4.6% in premarket trade after the firm lowered its full-year earnings forecast because of a currency devaluation in Venezuela.

Motorola Inc. /quotes/comstock/13*!mot/quotes/nls/mot (MOT 7.83, +0.15, +1.95%) , a provider of mobile phones and telecom technology, posted sharply higher second-quarter net income.

In the quarter ended June 30, Motorola said it earned $162 million, or 7 cents a share, compared with $26 million, or 1 cent a share, in the year-earlier period. Revenue dipped 1.5% to $5.41 billion. Read more about Motorola's results.

In the currency markets, the dollar came under selling pressure amid comments from a ratings agency. If U.S. government projections for debt levels materialize, the nation's triple-A credit rating will have to be examined, Moody's Investors Service's lead sovereign analyst for the country told Dow Jones Newswires on Thursday.

The dollar index /quotes/comstock/11j!i:dxy0 (DXY 81.62, -0.56, -0.68%) , which tracks the performance of the greenback against a basket of other major currencies, fell 0.7% to 81.648.

The euro /quotes/comstock/21o!x:seurusd (EURUSD 1.3077, +0.0091, +0.7008%) gained 0.6% to $1.3072, as data showed that economic sentiment in the 16-nation euro zone rose in July, while the number of unemployed in Germany declined.

European shares up after earnings reports

European shares rose, as investors digested a deluge of mostly positive earnings reports. The Europe Stoxx 600 index /quotes/comstock/22c!sxxp (ST:SXXP 256.26, -0.95, -0.37%) gained 0.5% in afternoon trading.

"Company earnings are coming in thick and fast, and the general theme so far has been one of outperformance as opposed to disappointment, and this has invigorated appetite for risk," said Joshua Raymond, market strategist at City Index.

In the energy sector, Royal Dutch Shell /quotes/comstock/23s!e:rdsa (UK:RDSA 1,784, -3.50, -0.20%) reported a 15% rise in second-quarter net profit as higher production and lower costs were partly offset by a bigger tax bill. Revenue surged 42% to $90.57 billion. See more on Shell.

Oil giant BP PLC /quotes/comstock/13*!bp/quotes/nls/bp (BP 38.40, +0.69, +1.83%) /quotes/comstock/23s!a:bp. (UK:BP. 413.45, +10.95, +2.72%) is in negotiations with its Russian venture TNK-BP over the sale of about $1 billion of oil assets in Venezuela, the Times newspaper reported Thursday. BP this week tripled its target for asset disposals to $30 billion in an effort to secure enough cash to cover the costs of the Gulf of Mexico oil spill.

In Spain, Banco Santander /quotes/comstock/13*!std/quotes/nls/std (STD 13.08, -0.19, -1.43%) /quotes/comstock/06x!csan (ES:SAN 10.26, -0.17, -1.63%) said its second-quarter net profit fell 8%, while profit at Telefonica /quotes/comstock/13*!tef/quotes/nls/tef (TEF 68.48, +2.50, +3.79%) /quotes/comstock/06x!ctef (ES:TEF 17.55, +0.55, +3.20%) rose 16%, driven by revenue growth in Latin America.

Germany's blue-chip DAX index /quotes/comstock/30p!dax (DX:DAX 6,135, -44.24, -0.72%) advanced 0.7%. The most actively traded stock in the index was Siemens AG /quotes/comstock/13*!si/quotes/nls/si (SI 97.04, -2.43, -2.44%) /quotes/comstock/11e!fsie (DE:SIE 74.25, -2.35, -3.07%) , which reported a 12% increase in fiscal third-quarter net profit, as orders soared 22% to 20.87 billion euros ($27.08 billion).

Shares of Volkswagen AG /quotes/comstock/11e!fvow3 (DE:VOW3 80.45, +1.96, +2.50%) rose 2% after the car maker said its first-half net profit surged to €1.82 billion from €494 million in the same period a year ago. Revenue rose 21% to €61.8 billion.

In the pharmaceutical sector, shares of AstraZeneca PLC /quotes/comstock/13*!azn/quotes/nls/azn (AZN 50.55, -0.96, -1.86%) /quotes/comstock/23s!a:azn (UK:AZN 3,289, +86.50, +2.70%) rallied 4% after it reported profit growth and raised its guidance. France's Sanofi-Aventis /quotes/comstock/13*!sny/quotes/nls/sny (SNY 29.26, -0.21, -0.71%) /quotes/comstock/24s!e:san (FR:SAN 44.82, -0.61, -1.34%) announced a 61% increase in second-quarter net profit.

Meanwhile, crude-oil futures gained 21 cents to $77.20 a barrel in electronic trading on the New York Mercantile Exchange.

Later in the day, the Treasury will sell $29 billion in 7-year notes.

Polya Lesova is a reporter for MarketWatch, based in Frankfurt. Kate Gibson is a reporter for MarketWatch, based in New York.

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NYSE Arca Morning Update - 08:30:00 ET

NYSE Arca Morning Update for Thursday, Jul 29, 2010 :


Stock Wednesday's Close Current Price Pct Change Current NYSE ARCA Vol
VPRT $50.26 $37.00 (26.4%) 54,312
VCBI $5.15 $6.09 18.3% 13,000
DSTI $2.57 $2.14 (16.6%) 27,167
CVD $49.60 $42.00 (15.3%) 3,500


Stock $ Volume Price PctChg | Stock Share Vol Price PctChg
SPY $73,905,259 $111.16 0.3% | C 1,934,262 $4.11 0.9%
GLD $15,529,804 $113.52 ( 0.2%) | YRCW 1,381,188 $0.40 12.5%
XOM $12,486,878 $61.38 0.8% | SPY 664,114 $111.16 0.3%
AAPL $8,227,431 $260.59 ( 0.1%) | MOT 458,294 $7.66 ( 0.3%)
C $7,951,193 $4.11 0.9% | NVDA 330,485 $9.45 ( 6.6%)
IWM $6,258,568 $65.47 0.5% | SYMC 258,652 $13.37 ( 8.8%)
BHP $4,790,828 $73.17 1.5% | XOM 203,580 $61.38 0.8%
AKAM $4,731,690 $40.89 ( 7.1%) | NOK 158,284 $9.38 1.2%
CL $3,926,109 $79.94 ( 4.6%) | S 145,876 $4.84 0.4%
SDS $3,644,958 $32.06 ( 0.7%) | GLD 136,480 $113.52 ( 0.2%)

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:

This material is for informational purposes only.
NYSE Euronext and its affiliates ("NYSE Arca") are not soliciting any action based upon it.
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Copyright [2010] by NYSE Euronext. All rights reserved. Reproduction and redistribution prohibited without prior express consent.

Wednesday, July 28, 2010

Accounting for the Counterparties in the Goldman Sachs Debacle

Stock Assault 2.0 - Artificial Intelligence Stock Market Software

As we long ago predicted, 2005 was the beginning of the collapse of the housing bubble. The result was financial chaos and a credit crisis that enveloped the US, Europe and eventually the world. Some would like us to believe that materialism and selfishness were the reasons for bubbles, but the causes go far deeper than that. US, UK and European central banks, due to their greed for power, and a desire for world government, allowed debt to get totally out of control.

America’s monetary problems began on August 15, 1971, when the country left the gold standard, although GATT, which became WTO in 1986, began the cycle of destruction in the early 1960s. The presidency of Ronald Reagan opened and initiated the floodgates of debt after cutting taxes far too much and then destroying upper income taxpayers with the 1986 Tax Reform Act, which thrust 8 million millionaires into bankruptcy. Reagan’s failure to cut spending set a p recedent, which lives with us to this day. During his time in office debt doubled. The result was the economy came unglued in 1989 and didn’t recover until the beginning of 1994. His successors had the opportunity to purge the system of debt and malinvestment, but they and the Fed passed up that opportunity to again cover up the mess they created. A boom in the stock market followed in the late 1990s and economic failure by 2007.

After the collapse of 1987, it was decided that the economy and financial structure needed support and insurance and derivatives came on to the scene to replace productivity in the economy. Free trade, globalization, offshoring and outsourcing began its bite into the economy. After the collapse of 1987 in August 1988 the President’s Working Group on Financial markets appeared having been created by Mr. Reagan’s executive order to assist collapsing markets as Alan Greenspan flooded the economy with money and credit in an att empt to halt the severe correction in real estate and the market. That eventually worked after five years more of debt creation. A great opportunity to purge the system had been deliberately lost. This last opportunity began the failure of the middle class as wages versus inflation stagnated, buying power was decimated and debt accumulation by individuals began in an ever-widening cycle. During the 1980s deregulation was the watchword and we were treated to the criminal collapse of the savings and loan industry. We predicted a $500 billion collapse although to this day the government only admits to $300 billion. Every crook in the nation was involved, led by the Bush and Clinton crime families. As usual few heeded our warnings.

Over the past 30 years, as a result of lower purchasing power and debt, savings fell from 12% to minus 2%, finally recovering over the past two years to 3%. From 1990 on debt became a way of life, because purchasing power was falli ng every year. The banks were very happy to lend at 8% to 10%, as they created credit out of thin air. As we all now know lenders lent to anyone starting in 2002 and they knew better. These are professionals who are responsible for 80% of individual debt problems. Not only did they lend when they should not have been lending, but they encouraged debt along with the government, particularly for those unable to pay. Then came zero interest rates and market intervention by the Fed, which has kept all interest rates low. Even 10-year US T-rates are yielding 2.93%. Essentially all the rules have been thrown out the window. This is really a continuum of what we have seen since 2002.

We had the chance to fix the system in 1990 and again in 2000, but the Fed refused to do so. The Fed created one last fling. It was undecided whether to go ahead with the real estate and credit bubble. In June of 2003 they made the decision to go ahead knowing they couldn’t turn b ack after that time. The party is over and the unraveling has been going on for three years. The credit crisis is about to enter a second phase worse than the first phase. After two stimulus packages and $3 trillion, the economy has continued slightly higher to sideways at a terrific price. Now in addition we have a massive sovereign credit crisis that has only begun. The gravity of the fiscal and monetary madness has yet to be assisted. Over the next several months all the furies will break loose as pessimism deepens. Government deficits will worsen as will residential and commercial real estate and the stock market will finally again move lower, as the presidents, “Working Group on Financial Markets” finds there is a limit to what they can accomplish through manipulation. The powers behind government are going to find out they cannot do anything they want. Due to the internet and talk radio the public is being quickly educated and it won’t be long before most everyon e understands what the Illuminists are up to and what their intentions are and that is for world government and the enslavement of humanity.

Why is it we hear that the US economy is emerging from its credit crisis and the worst economic crisis since the depression, even from conservative writers? As far as we can see the monetary and fiscal situation along with unemployment haven’t improved. Congratulating the administration and the Federal Reserve is ridiculous in as much as they were both responsible for the horrible situation we are in today. Over the past four years the euro zone governments’ debt has grown more than 20% and the US and Japan by 45%.

In Europe the head of the ECB, the European Central Bank, says austerity now. No more government stimulus, because of the great risk. In Washington we find just the opposite opinion. Wall Street, banking and government want more stimulus, Fed intervention and manipulation. Europe is pleased with recent stress tests, which were self-conducted, and which did not include the banks’ capital exposure to sovereign debt risk, which renders their test invalid. We might also ask about their two sets of books. What a farce.

Investors looking for safety and shelter have been piling into US Treasuries as the dollar falls again instead of buying into gold. Gold has no yield, but essentially speaking after inflation is factored in, neither does Treasuries. Wall Street, banking and Washington see no problem with debt. It is only 66% of GDP and next year should be 82%. They believe that is better than most countries and it is of no concern at present.

Money and credit creation has been expanding for 15 years and the Treasury and the fed and other central banks have been fighting the results for seven years. This has enabled the consumer and the financial sector, never mind government, to spend far beyond their ability to pay back, as a method of temporarily saving the financial system. That battle still rages and it is a battle that is un-winnable for the elitists.

We wonder how long other nations, which hold 59-1/2% of their foreign reserves in US dollars, are going to tolerate massive monetization and fiscal ineptitude? Seven years ago we wrote that Fannie Mae and Freddie Mac were broke and everyone within the beltway knew it. We said it was America’s way of nationalizing housing, so 60% as a goal. This way renters could be herded hither and yon wherever government wanted to put them. Since then both became wards of the US taxpayer.

The big banks have borrowed substantial amounts of money from the Fed to hold as reserves at zero interest rates and rent it back to the Fed at higher rates. We wonder how much of those funds have been used to monetize treasuries and whether the banks will ultimately lend those funds, which will eventually monetize them? O n the other front the government tells us they’ll have fiscal deficits of $1.5 trillion annually. That certainly isn’t the way to put the government’s house in order and adds to monetization. We find it of interest that such issues are not discussed on CNBC and Fox or other elitist venues. At the same time the financial system is being torn apart internally and little is done about it. Outright fraud by Warren Buffett’s Berkshire Hathaway - they steal $300 million and pay a $100 million fine. Goldman Sachs defrauds for $5 billion and gets a $550 million fine, which is two weeks income. Is it no wonder these Wall Street criminals do what they do. Look at the rating agencies, all partners in crime and no charges. And, of course, none of the Illuminists go to jail.

We find it of interest that the administration and its Treasury Department, an extension of Goldman Sachs, wants the tax cuts imposed by the previous administrations to lapse. That would i ncrease taxes 15% and smother the economy. Such a position makes us wonder whether the Fed will loosen up on quantitative easing.

Then there is the matter of Treasury securities sales, which are running about $145 billion a month. The question is where is all the money going? This is about 50% more money then the government needs. As we have pointed out many times before the Fed, we believe has been printing money and using various fronts to run the money through, and has been indirectly and directly funding Treasury and agency sales. We reported on this as long as seven years ago. First it was emergency loans to European and US banks, then swaps and now we have nations like England buying boatloads of Treasuries and they cannot even pay their bills. We supposedly have American households buying massive amounts, which is ludicrous. There is massive monetization going on and the Fed is hiding it. Mind you, this has been going on for a long time, but especi ally so over the past three years. It is out of control and we should have written more on it previously. Between foreign buyers, the household sector and the Fed about $1.5 trillion of Treasuries were purchased last year, which is simply impossible and it is part of which the Chinese are complaining about. This is how surreptitiously the Fed has supplied the Treasury with funding and offset deflation at least temporarily.

It now looks like the next step is to re-liquefy; the domestic economy via bank lending. This past week the Fed said it intends to stop paying interest on bank deposits with the Fed. This ability of the Fed to pay member banks interest is relatively new. Excess reserves of banks heretofore were lent out into the market. The funds were kept at the Fed in reserve, bearing interest, and remained sterilized. They served the purpose of giving banks interest. The banks borrowed from the Feds at zero interest and then lent it back to the Fed t o hold at 2-1/2% interest. That was a blatant action to keep the banks in income and an unbelievable scam that the taxpayer got to pay for. The end of the interest payments will force banks to either return the funds or lend them and, of course, they’ll be lent out probably in a large way to small- and medium-sized companies that will find various uses for those funds and their use will create jobs. Lending to these companies has fallen 25% over the past 15 months. These companies also produce 70% of the jobs in the economy. Thus, you can expect a business resurgence and falling unemployment. That activity should also keep the Dow above 8,500 and perhaps take it back to 11,200. The banks, the lenders, may also use part of those funds to buy Treasuries, which will take pressure off of the Fed’s subliminal Ponzi scheme. This is in part where the $5 trillion will come from to fund the economy over the next 28 months, which will take us through two elections. This will be wa ve 2 of quantitative easing, which few will pick up on until next year. We domestically will go from sterilization to monetization.

Due to these massive influxes of funds the dollar should head down again, which it is in the process of doing presently. The Fed will not admit this monetization fraud, nor will fiscal deficits be reduced. Both are like a train under full power headed toward the bunter, which will end in a spectacular crash. Even with all this liquidity the economy will only show at best 3% to 3-1/2% GDP growth as it did over the last 1-1/2 years. A futile attempt to keep the system functional until the elitists decide to pull the plug and accompany the event with another war. These actions are not an attempt to save an unsaveable economy. They are part of the far bigger picture of the deliberate attempt to destroy the US and European economies and as a result force people to accept world government.

These events are layin g the groundwork for higher gold and silver prices, which will reflect the loss in buying power in all currencies, as they have over the past five years. Gold prices could range from $3,000 to $7,600 based on today’s rate of inflation. Silver will follow in lock step and could have an even more powerful move.

The move to monetize is on and the signal for the beginning was the signing into the law of the financial reform package that made the Fed a financial and monetary dictatorship. This is what Andrew Jackson and others warned us would happen if we are not vigilant.

2011 will be a banner year for bank failures as toxic securities and real estate are written off and we move toward nationalization of banking and many other major industries. This is the corporatist fascist model of maintaining power. More and more industries and services will leave the US and Europe bringing both further to their knees.

During this period an attempt will be made to dethrone the dollar and introduce a gold-less SDR, Special Drawing Right, which has been kicking around the IMF since 1965. This is where the dollar is headed, or at least this is where the elitists will try to take us.

This past week the Dow gained 3.2%; S&P 3.5%; the Russell 2000 6.6% and the Nasdaq 100 4%. Banks rose 1.8%; broker/dealers 3.1%; cyclicals surged 7.1%; transports 6.1%; consumers 2.9%; utilities 2.3%; high tech 3.4%; semis 4.4%; Internets 5.1% and biotechs 3.6%. Gold bullion fell $5.50, the HUI rallied 1.8% and the USDX was unchanged at 82.49.

The 2-year government yields fell 1 bps to 0.56%; the 10’s rose 8 bps to 3.00% and the 10-year German bunds rose 10 bps to 2.71%.

Fed credit remained unchanged. Foreign holdings of Treasury and Agency debt surge $18.1 billion to a new record $3.132 trillion. Custody holdings for foreign central banks have increased $17 6 billion YTD or 10.7%. Custody holdings have risen $176 billion YTD and YOY by $345 billion, or 12.4%.

M2, narrow, money supply expanded $14 billion to $8.603 trillion. It is up $90.4 billion YTD and 2% YOY.

The total money market fund assets fell $17.8 billion to $2.798 trillion. YTD assets have fallen $496 billion and YOY 23.5%.

The Chicago Fed says economic activity weakened in June. The national Activity Index fell 0.63 in June, down from plus 31 in May.

The FDIC’s Friday Night Financial Follies continued its dismal record as: Seven banks were seized in seven U.S. states, marking the second year in a row in which at least 100 lenders have collapsed.

Banks with total deposits of about $2 billion were shut down yesterday, according to statements on the Federal Deposi t Insurance Corp. website. The failures cost the FDIC’s deposit- insurance fund $431 million. The U.S. bank-failure count this year rose to 103.

Iberiabank Corp., based in Lafayette, Louisiana, acquired Lantana, Florida-based Sterling Bank in its fifth FDIC-assisted transaction. Iberiabank picks up six branches and about $372 million in deposits.

“This acquisition is an excellent fit for our company, providing a nice complement to our current franchise in Broward and Palm Beach counties,” Iberiabank Chief Executive Officer Daryl G. Byrd said in a statement. “We anticipate a smooth transition.”

Regulators may close the most banks this year since 1992 as souring residential and commercial mortgages impair capital levels. The FDIC included 775 banks with $431 billion in assets on the confidential list of problem lenders as of March 31, an increase from 702 banks with $402.8 billion at the end of the fourth quarter. FDIC Chairman Sheila Bair has said 2010 failures will surpass last year’s total of 140.

Banks were also closed in Georgia, South Carolina, Kansas, Minnesota, Nevada and Oregon, the FDIC said.

Renasant Bank, of Tupelo, Mississippi, paid a 1 percent premium to take on the de posits at Crescent Bank & Trust Co. in Jasper, Georgia, the FDIC said. Renasant picked up “essentially” all of the more than $1 billion in assets at Crescent, the agency said.

South Valley Bank & Trust of Klamath Falls, Oregon, paid the FDIC a 1.05 percent premium to acquire the deposits of Cave Junction, Oregon’s Home Valley Bank, which stood at about $230 million at the end of March, the FDIC said.

Roundbank of Waseca, Minnesota, acquired New Prague, Minnesota-based Community Security Bank. First Citizens Bank & Trust Co. of Columbia, South Carolina, acquired Williamsburg First National Bank of Kingstree, South Carolina.

Las Vegas-based SouthwestUSA Bank and Thunder Bank of Sylvan Grove, Kansas, were also closed.

Goldman Sachs Group Inc. said it made payments to banks including Germany’s DZ Bank AG and Banco Santander SA of Spain for mortgage-related losses as it received U.S. taxpayer funds through the American International Group Inc. bailout in 2008.

The list of 32 counterparties to Goldman Sachs on collateralized debt obligations was released today by U.S. Senator Charles Grassley. The largest payments were to European lenders that also included the London branch of Rabobank N ederland NV, Zuercher Kantonalbank and Dexia Bank SA.

“The majority of these beneficiaries appear to be foreign entities,” Grassley wrote in a set of questions directed at Elizabeth Warren, chairman of the Congressional Oversight Panel, and published on his website. “Can you please explain how ensuring that these institutions were paid in full, rather than required to suffer the consequences of the risks that they took, benefited the U.S. taxpayer?”

Goldman Sachs turned over the list to the Congre ssional Oversight Panel and Financial Crisis Inquiry Commission, which are reviewing the use of taxpayer funds in financial bailouts. Grassley, the ranking Republican on the Senate Finance Committee, had suggested Goldman Sachs could be subpoenaed if the New York-based bank didn’t provide the information.

Goldman Sachs executives including Chief Operating Officer Gary Cohn and Chief Financial Officer David Viniar had defended the firm’s collection of $8.1 billion after AIG’s bailout, tied to swaps contracts. The money helped Goldman Sachs pay out offsetting contracts with other parties, they said, without naming the companies until now. In addition, Goldman Sachs received $4.8 billion after the bailout for securities lending contracts.

“We had transactions on the other side,” Cohn, 49, told members of the Financial Crisis Inquiry Commission at a hearing earlier this month. “In AIG, we sat in the middle of buyers and sellers.”

The documents released by Grassley’s office show that Goldman Sachs’s counterparties received a total of about $14 billion in payments for the bonds that ended up going into the Maiden Lane III special purpose vehicle established by the Federal Reserve for AIG’s bailout.

Other names on the list include the Hospitals of Ontario Pension Plan and a GSAM Credit CDO Ltd., a collateralized debt obligation managed by Goldman Sachs Asset Management. Collateralized debt obligati ons, or CDOs, are securities backed by pools of financial instruments such as mortgage bonds or loans. [Now after 2 years we should all feel warm and fuzzy about who our money went too and the secret bailout, which the Fed refused to disclose.]

Goldman Sachs Group Inc. documents show that it depended on banks including Citigroup Inc. and Lehman Brothers Holdings Inc. for protection against a failure of American International Group Inc.

Citigroup, which received the biggest government bailout of any U.S. bank, was Goldman Sachs’s largest provider of credit- default swaps on AIG as of Sept. 15, 2008, according to documents released by Senator Charles Grassley. Lehman Brothers, which declared bankruptcy that same day, is listed as fifth- biggest. Credit-default swaps act like insurance contracts, paying the owner in the event of a default.

Goldman Sachs, the most profitable securities firm in Wall Street history, has argued that it didn’t depend on the U.S. government’s $182.3 billion rescue of AIG because the investment bank had collateral and credit-default swaps to protect itself. Joshua Rosner, an analyst at research firm Graham Fisher & Co. in New York, said the list of counterparties i ndicates that Goldman Sachs may have had difficulty collecting on those swaps.

“Clearly Goldman’s calculation was more tied to their expectation of the political dynamics of forcing moral hazard than the fundamental realities of the financial strength of counterparties,” Rosner said. Moral hazard is created when government bailouts are perceived to reward risky activity.

Goldman Sachs’s relationship with AIG has been under scrutiny since AIG revealed in March 2009 that the bank had received $8.1 billion after the insurer’s 2008 bailout. The funds made good on credit-default swaps that AIG had provided to Goldman Sachs on mortgage-linked investments called collateralized debt obligations.


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Indications: Stock futures down after durable goods

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By Polya Lesova and Kate Gibson, MarketWatch

NEW YORK (MarketWatch) -- U.S. stock futures tossed aside tentative gains Wednesday after the government reported an unexpected drop in orders for U.S.-made durable goods in June, offsetting quarterly results.

Stock index futures fell modestly after the Commerce Department said orders fell 1% last month, far short of the 1% gain anticipated by analysts.

"If you look at reaction in the futures market, it's not much of one considering the soft patch in the economic data stream was very prevalent for data coming out for the month of May, and here in June we're having a continuation," said Art Hogan, chief market strategist at Jefferies & Co.

"But, we're bumping up against much better corporate news; earnings have been spectacular," Hogan added.

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Up 1 point ahead of the Commerce Department report, futures for the Dow Jones Industrial Average were lately off 35 points at 10,459. S&P 500 futures were down 3.4 points at 1,107.50. Nasdaq 100 futures fell 5.75 points to 1,880.75.

The Dow /quotes/comstock/10w!i:dji/delayed (DJIA 10,528, -9.61, -0.09%) closed up 0.1% on Tuesday, while the S&P 500 index /quotes/comstock/21z!i1:in\x (SPX 1,112, -1.41, -0.13%) and the Nasdaq Composite /quotes/comstock/10y!i:comp (COMP 2,289, +0.33, +0.01%) finished with small losses.

Another raft of earnings reports began pouring in on Wednesday. Boeing /quotes/comstock/13*!ba/quotes/nls/ba (BA 67.64, -0.98, -1.43%) affirmed its 2010 outlook as its quarterly net income and revenue fell on lower commercial deliveries.

Oil major ConocoPhillips /quotes/comstock/13*!cop/quotes/nls/cop (COP 54.63, +0.19, +0.35%) said its second-quarter net income climbed sharply on the sale of units. It plans to raise an additional $3.4 billion by the end of the year as part of a plan to divest its 20% stake in Russian oil giant Lukoil.

Newmont Mining Corp. /quotes/comstock/13*!nem/quotes/nls/nem (NEM 55.33, -0.45, -0.81%) said second-quarter net income rose to $382 million, or 77 cents a share against expectations for 84 cents.

Shares of Sprint Nextel Corp. /quotes/comstock/13*!s/quotes/nls/s (S 4.88, +0.05, +1.04%) rose 10% in pre-open trade. The firm reported a second-quarter diluted loss per share of 25 cents, which includes a non-cash $302 million increase in valuation allowance on deferred tax assets. The pro forma diluted loss per share was 15 cents, while analysts expected a loss of 19 cents a share.

Comcast Corp. /quotes/comstock/15*!cmcsa/quotes/nls/cmcsa (CMCSA 19.46, +0.13, +0.67%) said second-quarter net income fell 8.6% and revenue rose 5.7%.

In the afternoon, the Fed will release its Beige Book on regional economic conditions.

European shares gain

The Stoxx Europe 600 index /quotes/comstock/22c!sxxp (ST:SXXP 257.52, -0.59, -0.23%) fell 0.2%, breaking a multi-session winning streak. See more on Europe Markets.

Shares of Infineon Technologies AG /quotes/comstock/11i!ifnny (IFNNY 6.69, +0.10, +1.52%) /quotes/comstock/11e!fifx (DE:IFX 5.16, +0.09, +1.70%) advanced 1.5% after the German chip maker raised its full-year revenue and investment outlook. It also reported a return to fiscal third-quarter net profit and a 59% surge in revenue.

In France, shares of car maker PSA Peugeot Citroen /quotes/comstock/24s!e:ug (FR:UG 23.76, -1.12, -4.48%) fell 5.5%. The firm returned to profitability in the first half, but said it expected more difficult market conditions for the remainder of the year in Europe. Read more on Peugeot.

ArcelorMittal /quotes/comstock/13*!mt/quotes/nls/mt (MT 31.66, -0.36, -1.13%) , the world's biggest steel maker, reported a second-quarter net profit of $1.7 billion, compared to a loss of $792 million in the same period a year earlier. However, the firm warned that earnings in the coming months will be hit by a slowdown in demand from China. Its shares fell 1.3% in Amsterdam.

On the deals front, Spain's Telefonica /quotes/comstock/13*!tef/quotes/nls/tef (TEF 66.39, +0.34, +0.51%) /quotes/comstock/06x!ctef (ES:TEF 17.02, +0.13, +0.77%) said it will pay €7.5 billion ($10 billion) for Portugal Telecom's /quotes/comstock/13*!pt/quotes/nls/pt (PT 11.17, +0.43, +4.00%) stake in Brazilian mobile operator Vivo Participacoes /quotes/comstock/13*!viv/quotes/nls/viv (VIV 27.20, +1.10, +4.21%) .

Separately, Portugal Telecom said it would take a 23% stake in Brazil's Tele Norte Leste Participacoes, known as Oi Telemar. In a move seen as satisfying shareholders and Portugal's government, Portugal Telecom said it would invest 8.4 billion Brazilian reais ($4.75 billion), and have a "relevant role" in the management of Telemar Participacoes and its subsidiaries. Read more on the deal.

The currency markets traded in recent ranges. The euro /quotes/comstock/21o!x:seurusd (CUR_EURUSD 1.3012, +0.0011, +0.0846%) was little changed at $1.2975, while the dollar index /quotes/comstock/11j!i:dxy0 (DXY 82.01, -0.18, -0.21%) edged lower to 82.164.

September oil futures fell 92 cents to $76.58 a barrel in electronic trade on the New York Mercantile Exchange ahead of the release of government data on petroleum inventories.

In Washington, the U.S. Treasury will sell $37 billion in 5-year notes later Wednesday.

Polya Lesova is a reporter for MarketWatch, based in Frankfurt. Kate Gibson is a reporter for MarketWatch, based in New York.

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