Wednesday, February 16, 2011

Replace the Federal Reserve Altogether A Good Idea

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Rather than have designation to what the Fed is doing we believe to a great extent the term quantitative easing will fade from the major media and Fed announcements, probably to be replaced by a term such as accommodation. As time passes more and more professionals and investors will realize that this massive creation of money and credit is destroying the capital structure and the dollar. Other countries are emulating the Fed in various ways and degrees and that is why the USDX, the dollar index versus six major currencies has not plunged as it should have. It is lower, but it is not a true reflection of what is really in progress. Gold has spent the last 2-1/2 years directly competing with the dollar for supremacy as the world’s reserve currency and hands down the dollar has lost in an accelerating flight to quality to gold and silver. Over the past ten years versus nine other major currencies the dollar’s loss in value over each of those years has averaged 15-1/4% an d versus silver 20-3/8%. If you widen the spectrum to 50 currencies, the currencies value versus gold and silver have had an even greater fall. The longer the Fed, and other central banks continue to work this charade, the worse the final outcome is going to be. Every step that has been taken since 2000 to extend the problems rather than solve the problems has been futile and makes the final deflationary depression more gruesome.

The Fed has done a dreadful job, as has other central bankers and the public has become aware of that over the past few years. In the US polls they show 70% of the public wants the Fed replaced. This is significant because understanding what the Fed does is not easy for most people. We have been trying to expose the Fed Ponzi scheme for more than 50 years with only limited success. Then about 15 years ago along came talk radio and the Internet and they both opened the information spigot, allowing the average person to understand what the Fed was all about.

During this learning process people are outraged at what the Fed have been doing for many years. The owners of the Fed are always in possession of inside information because they create such information, thus, in an ongoing basis they can never be losers. As a trader for 25 years we know you cannot have three months of trading without a daily loss and produce unbelievable profits without this information. These banks and brokerage houses simply cannot lose and you get to pay the bill one way or another. People now understand and that is one of the prime reasons Rep. Ron Paul just won 30% of a Republican-conservative straw pool. Romney in 2nd place pulled 24%, one of the main elements of Mr. Paul’s platform is to end the Fed, so that had to be a strong element in his victory.

The elitists own the media and the Fed, so it seldom gets any bad press. They also own 95% of Congress and the court system. Taking down the Fed will also destroy the power of these elitists to control America and end the move by these people to create a corporatist fascist government. The Fed is on the way out. It is now only a question of when. Elitists are already planning an alternative, but they won’t be successful. Throughout America the Fed, bankers and Wall Street are held in contempt and by changing the name of the game is not going to fool anyone.

The choices open to the Fed since June of 2003 have been limited. After that date there was no turning back. The die has been cast for a last all out policy of creating a world government. The Fed and others knew there would be no return. It was either victory or a disastrous defeat and exposure, which is something the cabal can ill afford. There is absolutely no way out of the trap they are in. They have extended the time line by expanding money and credit, swaps and quantitative easing. First, temporarily bailing out Wall Street and now they are doing the same for the US Treasury. They are being copied by the UK, Europe, China and many other countries worldwide, all of which are destined to meet the same ignoble end.

In essence the Fed has lost control because the only option it has is to create money and credit, which in the final analysis is self-defeating. The only way out is to classically purge the system, but if the Fed and the elitists do that, they are taking the problem to the very end, hoping for the best. This is not 1348 and the collapse of the Lombard System or the collapse of the Hanseatic League in the 1600s. Today there is the Internet and talk radio, which is projecting the truth worldwide. Why do you think we are seeing demonstrations, which we believe will spread worldwide including the US, UK, Europe and China and many other countries. The major changes have only just begun.

Interest rates worldwide are creeping up in the real market. In the US despite efforts to suppress real interest rates the Fed is slowly loosing control. On the short end rates have doubled and using the 10-year T-note the yield has risen over five months from 2.20% to a high of 3.75%. That doesn’t in any way denote control and shows us that over time higher rates will unfold. That means the real estate problem can only worsen with lower prices and sales indefinitely. Worse yet, the inventory held by banks will grow and grow either taking them down or resulting in home nationalization. In the meantime worldwide price inflation, a result of QE1, envelops the globe. Wait until the affects of QE2 hit a year from now. Our question is when will QE3 begin? We will guess at early next year.

We are headed toward 14% inflation this year, which is currently close to 7%. That means 2012 could send the economy into hyperinflation. As we said long ago the Fed will end up buying almost all of the Treasury and Agency bonds, which will create losses of well over $1 trillion, as rates rise. Monetization will be in full swing. The banking system is headed for renewed insolvency, as is the Fed. The effects of quantitative easing will unfortunately become manifest. Wall Street and Washington will continue to lie about it, but the Internet and talk radio will tell the public the truth. Again, your only hedge against the effects of these oncoming events to to own gold and silver related assets, such as shares and coins. All the clever deceptions are not going to work. The US, UK, European and other economies are going to come apart at the seams.

The economists behind the scenes and Front man Bernanke are not dumb or clueless; they know exactly what they are doing. Their tactics and policies are designed only to prolong the system to keep it from total collapse. On one end we see the administration desiring higher taxes for the middle class and the wealthy on the other we see endless extended unemployment benefits and food stamps. These experts have put America into a death spiral from which there is no return, and they know that. The only question is when will they finally pull the plug and what will be the final outcome?

This demoralizing economic and financial picture is accompanied by unbridled fraud, theft and criminality on Wall Street. Massive naked short selling that the SEC absolutely refuses to do anything about. Insider trading prosecutions, none of which touches the Illuminist inner sanctum. A CFTC that also refuses to stop and discipline the major firms, such as JPM, HSBC, GS and Citi for cornering the gold and silver markets. Flash trading, better known as front-running, proceeds apace with no interference from the SEC. We have a government that has killed free markets under the Executive Order called, “The President’s Working Group on Financial Markets.” Then we have black box manipulation used to take markets up and down as Wall Street pleases.

The foregoing is not a happy story, but it is the reality of our times. It will eventually bring down our present financial system. When the end comes it will be violent and very damaging. Your only respite will be gold and silver related assets, something Americans are yet to discover.

Adjustable rate mortgages are back!

After accounting for nearly 70% of all mortgages issued during the boom, ARMs vanished during the bust, totaling just 3% of the market in 2009. Now they make up 5% of all mortgages issued, and Freddie Mac predicts 10% by December.

Behind the comeback is a simple fact: ARMs are a great bargain right now. The most common ARM loan currently has a rate of 3.5% compared to 5% for a 30-year fixed-rate mortgage. "For anyone with a high likelihood of moving soon, the 5/1 is a great product," said Michael Fratantoni, vice president of research and economics for the Mortgage Bankers Association. "It's a well understood product too; there's not a lot of danger with it."

 So why isn't everyone grabbing an ARM?

Well, because fixed-rate mortgages are seen as safer because they carry the same rate over life of the loan. Borrowers always know what their payment will be.

But with ARMs, interest rates change over time. For example, the 5/1 ARM the most common loan has the 3.5% introductory rate for the first five years. After that, the rate adjusts annually.

That sounds kind of dangerous, but look deeper. On a $200,000 mortgage, the monthly ARM payment at 3.5% would be $898 compared with $1,074 for a 30-year, fixed-rate loan at 5%. That's a $10,560 difference after five years, when the ARM would adjust. At that point the ARM rate could jump to a worst-case scenario 8.5% and the monthly payment to $1,538.

It would still take more than 22 months of the higher ARM payments to offset the first  Five years of savings.

"Even under a worst case scenario, you're better off with an ARM if you're planning to live in the house for less than seven or eight years," said Steve Habetz, a loan officer with Darien Rowayton Bank in Connecticut.

And, the reset will, most likely, be lower than to 8.5%. The amount the rate can increase is typically calculated by adding a margin of 2.75 points to an index, usually the rate of a one-year T-bill, explained mortgage broker Alan Rosenbaum, founder of GuardHill Financial. And most loans have a maximum amount they can rise per year and a cap on how high the rate can go.

Still, many homebuyers want no part of ARMs.

"I had a client recently who told me that they were going to move in four or five years," said Habetz. "I suggested an ARM. They insisted on a fixed rate. It made no sense but that's what they wanted."

Many buyers remember the so-called toxic or exploding ARMs and how their defaults triggered the mortgage meltdown, helped sink the housing market and usher in the Great Recession.

These loans failed for a couple of reasons. Many were issued to people who lacked the income to pay once the initial years of low fixed rates ended and the interest rate reset higher. Too, the caliber of borrowers was very low.

The 5/1 is an entirely different animal, experts says. Unlike the toxic ARMs, these products are issued to borrowers with high credit scores, making substantial down payments and with assets, debt and income carefully underwritten before approval. Rosenbaum said he's always featured the 5/1 ARM as the product of choice unless the clients tell him they're planning to live in the home for 15 or 20 years.

For people planning to stay for less time, "It's paying for insurance they don't need," he said.

The outflow from the municipal sector is finally subsiding after seeing $25 billion leave muni funds since November. We sounded the alarm three years ago and over that period tried to get everyone out. This is not the end of the outflow. We now have to see who is not going to survive.

Since last October the 10-year T-note has gone from 2.2% to 3.65%. This past week we saw the 30-year fixed rate mortgage rate at 5.05%. That is a 90 bps increase in three months and in the last week a 24 bps move.

Obviously, Kevin Warsh’s resignation as a Fed Governor was because he could see QE3 coming and didn’t want any part of it. He was a vocal critic of QE2.

Capital preservation should be first and foremost in the mind of a money manager or an advisor. You do not have to be bearish or bullish. You have to find the best place to put wealth to work and at the same time have the highest protection possible for those funds. This is why for 11 years we have stuck with gold and silver shares and coins as they delivered the returns of a lifetime. The bull market in this sector could last as long as another ten years. Bull markets have a way of not wanting to die.

One-third of Americans have FICO scores of below 660. That cuts out a large portion of Americans from buying a home. The FHA won’t give a loan to anyone below that level. The FICO score has risen risen from 630 a year ago to 700 today, so obviously Americans have been repairing their credit. The next step for the Treasury will be to raise down payments on home loans from 3% to 7% and to increase fees as well. This is a housing depression and the downside still has 2 to 3 years to go and then it may be years before prices again begin to rise. The long-term mean is 64% on Americans owning homes down from 69%. We could get as low as 60%. The downside could also be expedited by the phase-out of Fannie Mae, Freddie Mac, Ginnie Mae and FHA. We are going to have many more renters in the future. When these GSE’s end we could see a national renting agency for banks and the federal government, or we could see housing being nationalized as we predicted eight years ago. In additio n, there will be far less builders, because demographics will cut the need for new homes. High unemployment is going to be with us for some time as well. Those who have gained degrees are finding there is no work for them and they cannot repay large loans. That means they won’t be able to buy homes.

Last week the Dow rose 1.5%; S&P 1.4%; the Russell 2000 2.8% and the Nasdaq 100 1.8%. The banks rose 2.6%; broker/dealers 3.4%; cyclicals 2.8%; transports 3.6%; consumers 0.7%; utilities 0.4%; high tech was unchanged; semis were unchanged; Internets gained 1.4% and biotechs rose 0.1%. Gold bullion rose $8.00, as the HUI fell 0.8%. The USDX rose 0.5% to 78.44.

Two-year T-bills rose 8 bps to 0.83%, the 10-year notes were unchanged at 3.63% and the 10-year German bund rose 3 bps to 3.29%.

Fed credit rose $30.9 billion to a record $2.469 trillion, or 10.6% yoy. Fed foreign holdings of Treasury and Agency debt rose $7.3 billion to a record $3.363 trillion. Custody holdings for foreign central banks have grown $407 billion, or 13.8% yoy.

M2, narrow money supply rose $39.5 to a record $8.868 trillion you and 4.4% on the year. Total commercial paper rose $18.1 billion to $1.014 trillion; it is down $119 billion yoy, or 10.5%.

 Congressman Barney Frank, Ranking Member of the House Financial Services Committee, released the following statement regarding the Administration’s white paper on housing finance:

“The administration’s white paper is a thoughtful beginning that sets the stage for a constructive discussion of the future of housing finance.”

“I am especially pleased that the paper specifically supports funding for rental housing. It is important that any new legislation include a revenue stream to support rental housing, both to make reasonably-priced rental housing available and to allow the mortgage market to function on the basis of market-based decisions with less reliance on government support for unsustainable levels of homeownership.”

“The central question going forward is how to protect taxpayers without unduly increasing the cost of mortgages to American families.”

“This issue is addressed in part by a law we passed during the last Congress, the Wall Street Reform and Consumer Protection Act.  This law helps ensure that fewer bad mortgages are made, that there is more disclosure, and that mortgage securitizers must maintain a percentage of the securities and thus hold part of the risk.  The law is designed to increase confidence in the value of mortgage-backed securities, provide liquidity to the mortgage market, and help keep the price of mortgages at a reasonable level.”

“Even with this law in place, it is not clear whether private markets by themselves will provide enough capital to make reasonably-priced mortgages available to families that can afford them.  There is consensus that the past system has failed and that in the future there should be no public/private hybrid entity. The administration presents three possible options with various degrees of government involvement; these ideas provide a solid foundation for serious discussion.  I welcome the opportunity to hear the opinions of market participants, consumers, and my colleagues, so that we may thoroughly discuss the issue as a whole and craft responsible legislation.”

“I hope this constructive step forward by the administration will inspire the Republican majority in the House to join us and the administration in moving concretely toward a solution to the serious problem of housing finance.  When they were in the minority, Republicans introduced and advocated strongly for a bill which they told us would address this issue.  They have since backed away from their own legislation and now that they are in the majority have offered no specific plans for moving forward.  I hope this will change soon and I look forward to working constructively on a bipartisan basis.” [This is a move toward the nationalization of housing that we wrote about 8 years ago in regard to the GSEs, Fannie Mae, Freddie Mac, Ginnie Mae and FHA and we were dead right. This is part of the process of making America into a corporatist fascist state. As people die off very often housing are sold, which means the government will buy them and in a couple of generation s they will own all the housing except perhaps 2 or 3 percent In order to get those house they will outrageously increase taxes. In the end no one will own a home, everyone will rent from the government. If you disagree with the Nazi’s running the government you won’t be allowed to rent, etc. this is where this whole thing is heading and another reason why so many people are leaving the country and giving up their citizenship. Bob]

 The House agreed yesterday to a 10-month extension of three key law enforcement powers in the fight against terrorism that some privacy advocates from both the right and left regard as infringements on civil liberties.

The House measure, passed 275 to 144, would extend authority for the USA Patriot Act-related provisions until Dec. 8. Common ground must be found with the Senate before the provisions expire on Feb. 28.

At issue are two provisions of the post-Sept. 11 law that give counterterrorism offices roving wiretap authority to monitor multiple electronic devices and court-approved access to business records relating to a terrorist investigation. The third “lone wolf’’ provision of a 2004 law permits secret intelligence surveillance of non-US individuals not known to be linked to a specific terrorist organization.

Last week the House, in an embarrassment for the new GOP leadership, failed to pass the same bill under an expedited procedure requiring a two-thirds majority. Twenty-six Republicans joined 122 Democrats in voting against it. Yesterday’s vote drew 27 Republican no votes.

The main objections are to what critics see as unconstitutional search and seize authority and big government intrusions into private lives.

“I believe the American people have a legitimate fear of out-of-control government,’’ said conservative Republican Dana Rohrabacher, one of the no votes.

Manufacturing in the New York region sped up in February, a sign factories continue to drive the economic expansion.

The Federal Reserve Bank of New York’s general economic index rose to 15.4 from 11.9 in January. Economists projected an increase to 15, based on the median forecast in a Bloomberg News survey. Readings greater than zero signal expansion in the so- called Empire State Index, which covers New York, northern New Jersey, and southern Connecticut.

Manufacturers will probably keep benefitting from gains in business investment in new equipment and rising exports that reflect improving global growth and a weaker dollar. Increased consumer spending may give factories another boost that will bolster production and hiring.

“Manufacturers are keeping their foot on the accelerator,” Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, said before the report. “All the forward-looking indicators point to relatively sturdy gains in factory output in the first half of this year.”

Estimates of 56 economists in the Bloomberg survey ranged from 11 to 21.

Nine components of the index rose this month. The Empire State gauge of new factory orders decreased to 11.8 from 12.4 last month, a measure of shipments decreased to 11.3 from 25.4 and employment fell to 3.6 from 8.4.

Today’s report showed an index of prices paid rose to 45.8 from 35.8 in January, while prices received increased to 16.9 from 15.8.

The cost of goods imported into the U.S. rose more than forecast in January, boosted by higher prices for commodities such as fuels and food.

The 1.5 percent increase in the import-price index followed a revised 1.2 percent gain in December, Labor Department figures showed today in Washington. Economists projected a 0.8 percent increase for January, according to the median estimate in a Bloomberg News survey. Excluding food and fuel, import prices climbed 0.6 percent.

A weaker dollar along with rising demand from emerging markets such as Brazil and China have pushed up prices of oil and food. With joblessness at 9 percent, U.S. companies have limited ability to pass along higher costs to consumers, one reason why the Federal Reserve says it plans to stick to its program of buying assets through mid-year.

“Commodity prices are rising, so import prices are rising,” said Ward McCarthy, chief financial economist at Jefferies & Co. Inc. in New York. “It will take a long time” for import price gains to translate into sustained consumer- price inflation.

A separate report today showed sales at U.S. retailers rose less than forecast in January, depressed by a drop in demand at building material stores and restaurants that may reflect the influence of harsh winter weather.

Purchases increased 0.3 percent, the smallest gain since a drop in June and followed a 0.5 percent December gain that was less than previously estimated, Commerce Department figures showed. The median forecast of economists surveyed by Bloomberg News called for a 0.5 percent rise.

Futures on the Standard & Poor’s 500 Index expiring in March lost 0.2 percent to 1,324.80 at 9:01 a.m. in New York.

Projections for gains in January import prices in the Bloomberg News survey of 53 economists ranged from 0.2 percent to 1.5 percent.

From a year earlier, import prices increased 5.3 percent in January, compared with a 5.1 percent gain in December. Import prices were forecast to rise 4.4 percent in January from a year earlier, according to the survey median.

The cost of imported petroleum rose 3.4 percent in January from the prior month and gained 18.5 percent over the past four months.

Excluding all fuels, import prices were up 0.8 percent from a year earlier.

Prices of imported food increased rose 2.6 percent last month, and were up 14.8 percent from a year earlier.

Costs of imported automobiles, parts and engines rose 0.5 percent from the prior month, the largest monthly gain since December 2007. Prices of consumer goods excluding vehicles climbed 0.3 percent after no change.

Imported capital goods prices were up 0.2 percent.

The import-price index is the first of three monthly price gauges from the Labor Department. Producer prices are due tomorrow and the consumer-price index on Feb. 17. An unemployment rate that’s held above 9 percent since May 2009 is also restraining labor costs. Persistent joblessness and a declining inflation rate prompted Fed policy makers on Nov. 3 to announce a plan to purchase of $600 billion in Treasury securities by the end of June to bring down long-term borrowing costs.

Since reaching a one-year high on June 7, the dollar has fallen about 8.1 percent against a trade-weighted basket of major currencies, making imported goods more expensive Chipotle Mexican Grill Inc., which owns and operates quick- serve Mexican restaurants across the U.S., is seeing its costs for imported tomatoes, green peppers and tomatillos rise, along with beef and cheese. Still, the company has been reluctant to raise prices.

“Commodity inflation has continued to push our food costs higher in 2011 already, and we expect continued inflationary pressure on many of our ingredients,” said John R. Hartung, chief financial officer at Denver-based Chipotle in a Feb. 10 earnings teleconference. “We plan to hold off on any menu- pricing decisions until later in the year, which will allow us to see how inflation plays out on a sustained basis and allow us to see how consumers react to price increases from other restaurants and grocers.”

Sales at U.S. retailers rose less than forecast in January, depressed by a drop in demand at building material stores and restaurants that may reflect the influence of harsh winter weather.

Purchases increased 0.3 percent, the smallest gain since a drop in June and followed a 0.5 percent December gain that was less than previously estimated, Commerce Department figures showed today in Washington. The median forecast of economists surveyed by Bloomberg News called for a 0.5 percent rise.

Sales at retailers like Gap Inc., Limited Brands Inc. and Macy’s Inc. topped analysts’ estimates last month as merchants used promotions to lure post-holiday shoppers before storms blanketed much of the U.S. mid month. Federal Reserve policy makers are among those saying bigger gains in employment are needed to ensure American consumers sustain spending.

 U.S. business inventories rose slightly more than expected in December as the pace of sales slowed moderately from the prior month, a government report showed Tuesday. The Commerce Department said inventories increased 0.8 percent to $1.44 trillion, the highest since January 2009, after increasing by an upwardly revised 0.4 percent in November.

Economists polled by Reuters had forecast inventories rising 0.7 percent after a previously reported 0.2 percent increase in November.

Inventories are a key component of gross domestic product changes. The pace of inventory accumulation slowed sharply in the fourth quarter to subtract from GDP growth for the first time since the economic recovery started in the second half of 2009. Business sales increased 1.1 percent to $1.15 trillion in December, the highest since September 2008, after rising 1.4 percent the prior month.

The sales pace left the inventory-to-sales-ratio, which measures how long it would take to clear shelves at the current sales pace, unchanged at 1.25 months.

Global demand for U.S. stocks, bonds and other financial assets fell in December from a month earlier, the Treasury Department reported.

Net buying of long-term equities, notes and bonds totaled $65.9 billion during the month compared with net buying of $85.1 billion in November, according to data released today in Washington. Including short-term securities such as bills and stock swaps, foreigners purchased a net $48.2 billion compared with net buying of $35.6 billion the previous month.

The economy has been slow to recover from the longest recession since the 1930s, stymied by continued weakness in the housing market as well as unemployment at 9 percent in January and a budget deficit projected by the Obama administration to be $1.6 trillion this fiscal year.

“Treasury yields in the US went up tremendously in December spurring big losses for foreign bondholders,” said Chris Rupkey, chief financial economist at Bank of Tokyo-UFJ in New York before today’s report. “The rise in yields curbed global investor enthusiasm.” The Treasury’s reporting on long-term securities captures international purchases of government notes and bonds, stocks, corporate debt and securities issued by U.S. agencies such as Fannie Mae and Freddie Mac, which buy home mortgages. Before today’s report was issued by the Treasury, economists in a Bloomberg News survey projected a median of $40 billion of net purchases of long-term U.S. financial assets in December. Five economists participated in the survey, and their estimates ranged from $10 billion to $66 billion.

Billionaire investor and philanthropist George Soros warned tonight in New York that the combination of Fox News, Glenn Beck, The Tea Party, and the ability of Americans to fantasize unrealistically about their political system might lead “this open society to be on the verge of some dictatorial democracy.”

Soros mentioned George Orwell’s novel, “1984″ as a possible precedent for the kind of fantasies being promulgated in our culture today. Orwell’s “1984″ satirized the Communist system of absolute control over society and politics that prevailed in the Soviet Union until 1990.

Soros was speaking extemporaneously in conversation with CNN newsman Fareed Zakaria at a International Crisis Center dinner that honored him at the Pierre Hotel.

Former President Bill Clinton, Lord Christopher Patten, Chancellor of Oxford University, hedge fund multibillionaire Paul Tudor Jones, all spoke eloquently about Soros contribution to global order.

Many financiers, mutual fund managers, and former diplomats like Thomas Pickering and John Whitehead were in the audience.

C-Bass, the once high-flying marketer of securities backed by subprime mortgages, has filed a Chapter 11 liquidation plan that calls for unsecured creditors to get nothing if they veto it.  Formally known as Credit-Based Asset Servicing and Securitization LLC, C-Bass on Wednesday filed a proposal with details about how it will liquidate itself, four months after it filed its long-awaited bankruptcy.

“Investors are betting with Ben S. Bernanke that surging food and energy prices won’t accelerate U.S. inflation, allowing him to maintain easy money… While pressure from commodity costs may cause a spike this year to what Pacific Investment Management Co.’s Anthony Crescenzi considers a warning threshold of 2.75 points, the spread won’t persist there or higher without strong job growth, Crescenzi said.  That means the Federal Reserve chairman probably won’t raise benchmark interest rates from near zero in 2011 because of higher consumer prices, Crescenzi predicted. ‘Headline inflation is beginning to have a greater influence on monetary policy, but not yet at the Fed,’ said Crescenzi, who helps manage $1.2 trillion at Pimco. The central bank ‘remains anchored or hinged to the core rate,’ which excludes food and energy costs.”

Florida Governor Rick Scott proposed a 2012 budget that would lower spending by $4.6 billion, or about 7%, the most since at least 2002, as it eliminates almost 8,700 jobs.  The budget would require public employees to contribute 5% of their wages to pensions, pare Medicaid spending by almost $4 billion over two years and renegotiate contracts and leases to save more than $660 million over two years.  The first-term Republican elected in November faced a projected deficit of $3.6 billion and campaigned on a promise to fill the gap with spending reductions while still cutting taxes.”

“Investors withdrew about $1.2 billion from U.S. municipal-bond mutual funds this week, the 13th-straight period of withdrawals, Lipper US Fund Flows said.  Outflows have totaled $24.8 billion since mid-November…”

The Federal Reserve’s Treasury purchases already have succeeded in driving investors to junk bonds and stocks. Now, policy makers are focusing on benchmark government securities, helping contain rising yields that set rates on everything from corporate debt to mortgages.  More than 40% of the government bonds the Fed bought in January for its so-called quantitative easing were auctioned in the previous 90 days, up from 20% in December and 15% in November, according to Bank of America Merrill Lynch.  The central bank is concentrating on newer securities as its $600 billion program depletes primary dealers’ holdings of Treasuries to the lowest since November 2009.

“Governor Andrew Cuomo’s plan to cut New York’s budget for the first time at least 17 years is meeting resistance from fellow Democrats who want to spend more and pay for it by keeping higher income-tax rates set to expire at year-end.  Cuomo… seeks record spending reductions in the two largest parts of the $132.9 billion budget, Medicaid and funds for local schools.”

“New York Mayor Michael Bloomberg told Albany lawmakers his city would lose about $2.1 billion and have to waste money on state-required spending formulas if legislators failed to change Governor Andrew Cuomo’s proposed budget.  The mayor’s analysis calculated a $1.4 billion cut to education aid. State Budget Director Robert Megna said the mayor’s view was ‘not realistic.’  Bloomberg also said that Cuomo’s plan singles out the city for a second straight year in denying it revenue-sharing funds. Paterson took the money from the city for this budget year and then allocated about $300 million in his proposal for the state’s next fiscal year  ‘It was a disgraceful gimmick last year when we were cut 100%, and our citizens are not going to let it become the ‘new normal’ in the state’s relationship with New York City”.

A former Fox News employee who recently agreed to talk with Media Matters confirmed what critics have been saying for years about Murdoch’s cable channel. Namely, that Fox News is run as a purely partisan operation, virtually every news story is actively spun by the staff, its primary goal is to prop up Republicans and knock down Democrats, and that staffers at Fox News routinely operate without the slightest regard for fairness or fact checking

“It is their M.O. to undermine the administration and to undermine Democrats,” says the source. “They’re a propaganda outfit but they call themselves news.”“I don’t think people would believe it’s as concocted as it is; that stuff is just made up.”

 Sales at U.S. retailers rose less than forecast in January, depressed by a drop in demand at building material stores and restaurants that may reflect the influence of harsh winter weather.

Purchases increased 0.3 percent, the smallest gain since a drop in June and followed a 0.5 percent December gain that was less than previously estimated, Commerce Department figures showed today in Washington. The median forecast of economists surveyed by Bloomberg News called for a 0.5 percent rise.

Confidence among U.S. homebuilders stagnated in February, reflecting a still-depressed housing market.

The National Association of Home Builders/Wells Fargo sentiment index registered a reading of 16 for the fourth consecutive month, in line with the median forecast of economists surveyed by Bloomberg News, data from the Washington- based group showed today. Readings below 50 mean more respondents said conditions were poor.

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Indications: Futures rise after Genzyme deal, Dell results

Stock Assault 2.0 - Artificial Intelligence Stock Market Software

By Simon Kennedy, MarketWatch

NEW YORK (MarketWatch) â€" U.S. stock futures rose on Wednesday after drug maker Genzyme Corp. agreed to a sweetened $20.1 billion offer and personal computer maker Dell Inc. beat earnings’ expectations.

Stock-index futures only lightly eased back on mild gains after data showing U.S. housing starts climbed more than expected in January. A separate report had producer prices climbing 0.8% last month.

The Genzyme /quotes/comstock/15*!genz/quotes/nls/genz (GENZ 75.32, +1.02, +1.37%)  deal will see French pharmaceutical group Sanofi-Aventis SA /quotes/comstock/24s!e:san (FR:SAN 51.55, +1.75, +3.51%)   /quotes/comstock/13*!sny/quotes/nls/sny (SNY 34.83, +0.34, +0.99%)  pay $20.1 billion in cash along with a series of milestone payments based on the performance of certain drugs. Read more on Sanofi's acquisition of Genzyme.

Dell profit shows diversification

Strong fourth-quarter results benefited from lower costs and wider profit margins on server sales, not to mention a greater push into new business lines.

Futures on the Dow Jones Industrial Average /quotes/comstock/21b!f:dj\h11 (DJH11 12,262, +60.00, +0.49%)  rose 31 points to 12,233 and S&P 500 futures /quotes/comstock/21m!f:sp\h11 (SPH11 1,334, +7.50, +0.57%)  gained 3.9 points to 1,330.2.

Nasdaq 100 futures /quotes/comstock/21m!f:nd\h11 (NDH11 2,393, +11.00, +0.46%)  were up 6.25 points at 2,387.75.

U.S. stocks have been on a tear lately but closed with modest losses on Tuesday. Economic reports showed retail sales climbing less than expected and the cost of imported goods rising. The Dow Jones Industrial Average /quotes/comstock/10w!i:dji/delayed (DJIA 12,285, +58.16, +0.48%)  closed down 41.55 points, or around 0.3%.

The minutes from the latest meeting of the Federal Reserve’s Federal Open Market Committee will also be released, at 2 p.m. Eastern.

“The perception of a U.S. recovery is becoming more entrenched,” said Andrew Dalton, chief investment officer at Dalton Strategic Partnership.

“North American fourth-quarter earnings results, together with the associated corporate outlook for this year, have continued to impress,” Dalton said in a note to clients.

With three quarters of the S&P 500 by market capitalization having reported earnings, core profits have been 6.2% higher than analysts were forecasting at the start of earnings season, Dalton said.

Continuing that trend of stronger-than-expected earnings, shares of Dell /quotes/comstock/15*!dell/quotes/nls/dell (DELL 15.76, +1.85, +13.30%)  jumped 6.6% in premarket trading.

Late Tuesday, the computer maker said net profit nearly tripled, driven by strong fourth-quarter corporate sales. Adjusted earnings of 53 cents a share were well ahead of the 36-cent consensus forecast. Read more on Dell's profit surge.

Also higher ahead of the opening bell, shares of discount retailer Family Dollar Stores Inc. /quotes/comstock/13*!fdo/quotes/nls/fdo (FDO 53.58, +9.62, +21.88%)  surged 25% to $55.05 after the company said it’s received an unsolicited takeover bid from Trian Group worth between $55 and $60 a share in cash.

Shares of book and music retailer Borders Group Inc.  fell 23% in pre-open trade after it filed for reorganization| under Chapter 11 bankruptcy code. The retailer said it will shutter close 30% of its stores.

Major companies reporting results on Wednesday include Comcast Corp. /quotes/comstock/15*!cmcsa/quotes/nls/cmcsa (CMCSA 25.30, +1.14, +4.71%) /quotes/comstock/15*!cmcsk/quotes/nls/cmcsk (CMCSK 23.90, +1.29, +5.71%) , Deere & Co. /quotes/comstock/13*!de/quotes/nls/de (DE 95.82, +2.20, +2.35%)  and CBS Corp. /quotes/comstock/13*!cbs/quotes/nls/cbs (CBS 21.83, +0.18, +0.81%) /quotes/comstock/13*!cbs.a/quotes/nls/cbs.a (CBS.A 22.05, +0.23, +1.05%) , among others.

European stock markets were also higher. The French CAC 40 index /quotes/comstock/30t!i:px1 (FR:PX1 4,151, +40.92, +1.00%)  was up 0.8%, helped by strong gains for Societe Generale /quotes/comstock/24s!e:gle (FR:GLE 51.24, +2.38, +4.87%)  after the lender beat earnings expectations.

Asian markets ended mostly higher, with Japan’s Nikkei 225 Average /quotes/comstock/64e!i:ni225 (JP:NI225 10,808, +61.62, +0.57%)  closing up 0.6%.

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, Feb 16, 2011 :


Stock Tuesday's Close Current Price Pct Change Current NYSE ARCA Vol
FDO $43.98 $56.50 28.5% 360,435
AIG-A $6.58 $4.85 (26.3%) 12,500
DSCO $2.95 $2.34 (20.7%) 17,367


Stock $ Volume Price PctChg | Stock Share Vol Price PctChg
GENZ $91,410,069 $75.56 1.7% | GENZ 1,210,024 $75.56 1.7%
SPY $55,752,611 $133.56 0.4% | C 849,851 $4.94 0.5%
FDO $20,359,680 $56.50 28.5% | DELL 686,504 $14.87 6.9%
ARG $16,526,277 $62.15 ( 2.5%) | NOK 548,320 $9.17 1.2%
AAPL $13,276,676 $361.32 0.4% | SPY 417,589 $133.56 0.4%
BHP $11,113,767 $92.50 ( 2.2%) | FDO 360,435 $56.50 28.5%
DE $11,057,701 $97.45 4.1% | ARG 267,079 $62.15 ( 2.5%)
DELL $10,209,076 $14.87 6.9% | SDS 190,678 $20.99 ( 0.8%)
BBL $6,011,838 $78.76 ( 2.5%) | CMCSA 177,545 $25.00 3.5%
POT $5,263,450 $186.44 1.4% | BGP 175,651 $0.15 (33.1%)

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

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