World economy talk

[tidus1203]

I just wanted to differentiate LOW DEMAND vs INCREASING SUPPLY for falling oil prices. Demand and Supply is like a weighing scale and the former is making the price move and not the latter. Demand is much more elastic though that is why I am still bullish in oil. Oil does not grow at all and actually depletes over time... I think oil right now is what I would call a "ONCE IN A LIFETIME OPPORTUNITY". Grab it!

[uls]

yes i know low demand is keeping oil price low

there hasnt been new supply in years

oil price will definitely soar when demand picks up

i'm not disagreeing with your bullish stance on oil

with inflation on the horizon, commodities will be used to hedge against inflation, just like in 1H 2008

[uls]

Commodities bottomed in Feb 2009

[uls]

do you have the flu?

hehe

Investopedia term of the day: Affluenza
http://www.investopedia.com/terms/a/...p?partner=TOD5

What Does Affluenza Mean?

A social condition arising from the desire to be more wealthy, successful or to "keep up with the Joneses". Affluenza is symptomatic of a culture that holds up financial success as one of the highest achievements. People said to be affected by affluenza typically find that the very economic success they have been so vigorously chasing ends up leaving them feeling unfulfilled, and wishing for yet more wealth.

Investopedia explains Affluenza

Affluenza is arguably present in the United States, where the culture is one that prides itself on possessions and financial success. Mainstream media outlets, such as television broadcasts, tend to show how pervasive the idea has become.

While affluenza cannot be quantified easily, those wishing to avoid the condition should look to be the master of, not a slave to, the things they have or wish to obtain.

[uls]

in his latest video blog, Peter Schiff says the flight to safety of cash has reversed

people are no longer confident holding cash and are shifting to higher yielding, riskier assets

[ame="http://www.youtube.com/watch?v=L4r7546ep98"]YouTube - Peter Schiff The Schiff Report Video Blog May 4 2009[/ame]

[uls]

Good luck B of A

BofA Needs $35 Billion Jolt
http://online.wsj.com/article/SB1241...ws_us_business

Regulators have told Bank of America Corp. that the company needs to take steps to address a roughly $35 billion capital shortfall based on results of the government's stress tests, according to people familiar with the situation.

The exact amount of the needed infusion couldn't be determined late Tuesday, and Bank of America officials either declined to comment or couldn't be reached.

Regulators began notifying the 19 financial companies subjected to the government tests of the results Tuesday.

An official announcement is expected after the close of U.S. stock-market trading Thursday.

Bank of America to need $34 billion in capital: source
http://www.reuters.com/article/ousiv...5450C120090506

WASHINGTON (Reuters) - Bank of America has been deemed to need an additional $34 billion in capital, according to the results of a government stress test, a source familiar with the results said on Tuesday.

A Bank of America spokesman declined comment.

The amount is far higher than published reports had speculated the largest bank might need. It is certain to increase the pressure on Chief Executive Kenneth Lewis, whom shareholders ousted as chairman last week.

good luck Ken Lewis

--

in other news

GM to dilute shareholders to death

GM details plans to wipe out current shareholders
http://www.reuters.com/article/busin...e=businessNews

DETROIT (Reuters) - General Motors Corp on Tuesday detailed plans to all but wipe out the holdings of remaining shareholders by issuing up to 60 billion new shares in a bid to pay off debt to the U.S. government, bondholders and the United Auto Workers union.

The unusual plan, which was detailed in a filing with U.S. securities regulators, would only need the approval of the U.S. Treasury to proceed since the U.S. government would be the majority shareholder of a new GM, the company said.

The flood of new stock issuance that could be unleashed has been widely expected by analysts who have long warned that GM's shares could be worthless whether the company restructures out of court or in bankruptcy.

The debt-for-equity exchanges detailed in the filing with the Securities and Exchange Commission would leave GM's stock investors with just 1 percent of the equity in a restructured automaker, ending a long run when the Dow component was seen as a bellwether for the strength of the broader U.S. economy.

[uls]

the CNBC spin machine goes to work

CNBC says B of A doesnt have to raise $34B of new capital

the USG already injected B of A with $45B in the last bailouts (USG holds $45B preferred shares)

B of A will just have to convert $34B of the $45B preferreds into common stock

that's it

healthy bank

[Monseratto]

Creating its own sub-prime bubble...

Senate moves toward easing mortgage terms

WASHINGTON – Trying to curb home foreclosures, the Senate voted on Wednesday to make it easier for homeowners with risky credit to switch to a lower-cost mortgage backed by the government. The bill, passed 91-5, also would give banks a break by encouraging reduced fees they must pay for the government to insure deposits.

While both steps put taxpayer money on the line, lawmakers say the legislation is needed to prevent the economy from getting worse.

"Given the size and scope of the struggles too many Nevadans and Americans endure, it will take more time before housing normalizes again," said Senate Majority Leader Harry Reid, D-Nev. "But with this bill, we are working to hasten that day so that no family will ever accept losing its home as the way it is."

The Senate housing bill would expand an existing $300 billion program called "Hope for Homeowners," which encourages lenders to write down an individual's mortgage if the homeowner agrees to pay an insurance premium. The program, which is set to expire in 2011, is intended to swap out a homeowner's high-interest rate for a 30-year fixed loan backed by the Federal Housing Administration.

So far, the program has been a dud.

When it was established last year, Congress envisioned helping some 400,000 troubled homeowners. But because eligibility requirements were so strict, one borrower has completed the refinancing process and only 51 more are in the works, according to statistics released last week.

The Senate bill would expand eligibility. For example, the program currently bans participants who intentionally defaulted on the mortgage or other substantial debt. The Senate bill would narrow that prohibition to defaults within the last five years.

[uls]

WTI crude now $56



S&P 500



Oil and equities moving together

[uls]

19 biggest US banks stress test results official announcement tonight

No need to raise capital:
J.P. Morgan, Goldman Sachs, MetLife, American Express, Bank of New York Mellon, Capital One

need to raise capital:
Bank of America, Wells Fargo, GMAC, Citigroup, Morgan Stanley, State Street, Regions Financial, Fifth Third Bankcorp, Keycorp

PNC Financial Services ???, U.S. Bancorp ???, SunTrust ???, BB&T ???

[uls]

momentum

Oil rises to six-month high near $57 in Asia
http://finance.yahoo.com/news/Oil-ri...-15160848.html

SINGAPORE (AP) -- Oil prices rose toward $57 a barrel Thursday in Asia, extending gains to near six-month highs on investor expectations global economic growth may begin to rebound by the end of the year.

Benchmark crude for June delivery was up 27 cents to $56.61 a barrel by midday in Singapore, in electronic trading on the New York Mercantile Exchange. The contract Wednesday rose 4.6 percent, or $2.50, to settle at $56.34, the highest level since mid-November.

Oil has broken above a trading range of about $45 to $55 a barrel that it's been in since dropping from a record $147 in July, boosted by investor perceptions that the worst of a severe U.S. recession may be over.

[tidus1203]

GO GO OIL!!! GO COMMODITIES!!! Big money, Big money! Opppss wala pala tayo sa Wheel of Fortune!

[tidus1203]

http://finance.yahoo.com/news/GM-pos...&asset=&ccode=

So what else is new? Once a zombie is always a zombie until finally its exorcised!

[uls]

GM (Government Motors) loses $6B and burns $10.2B cash in Q1

walking dead ZOMBIE!

--

asset allocation going away from cash

reversal of flight to cash trend

now cash has to go somewhere

guess where it's going

WTI crude $58

Gold $918

CRB index

[tidus1203]

And that's the scary part that is just 3 months of operations and it costs that much just to keep it alive. Kung RPG (role-playing game) lang ito and the necromancer (a magician who specializes in summoning the undead; the US Gov't) should be running out of mana (magic powers) by now to keep the zombies alive. But this is not an RPG, this is the real world were the necromancer este US Gov't can print money at will and charge inflation tax to the citizenry hehehehe

[uls]

GM has until the end of May to get bondholders to agree to the debt-for-equity swap

if not, GM files Chapter 11 on June 1

[uls]

official bank stress test results:

those that need capital --

B of A $33.9bn
Citigroup $5.5bn
Fifth Third Bancorp $1.1bn
GMAC $11.5bn
Keycorp $1.8bn
Morgan Stanley $1.8bn
PNC $0.6bn
Regions Financial $2.5bn
SunTrust $2.2bn
Wells Fargo $13.7bn

[uls]

Low demand for 10 yr and 30 yr treasuries

reversal of flight to safety trend

http://online.wsj.com/article/BT-CO-...07-718865.html

NEW YORK (Dow Jones)--Treasurys added to their losses Thursday afternoon, driven by a poor $14-billion 30-year bond auction, the last leg of the government's $71 billion May refunding this week.

Selling intensified after the auction at 1 p.m. EDT, pushing the 10-year and 30-year Treasury yields to fresh session highs and the highest levels since November. The 30-year bond's yield jumped more than 20 basis points while the yield on the seven-year note and the 10-year note rose more than 14 basis points.

At the peak of the selling, the 10-year note's yield touched 3.34% while the 30-year bond's yield hit 4.309%. The 10-year yield breached 3% on April 24, breaking out of the trading range of 2.5%-3% since mid-March, and since then, the yield has been pushed higher despite $92.2 billion Treasury purchases from the Federal Reserve since late March.

[uls]

more signs of reversal of flight to safety

money flowing back to emerging markets

remember during the worst of this crisis, money fled from emerging markets into the safety of USD cash and US treasuries

Emerging-Market Bonds Rise to Seven-Month High on China Economy
http://www.bloomberg.com/apps/news?p...e9E&refer=news

May 6 (Bloomberg) -- Emerging-market bonds climbed, pushing borrowing costs to the lowest in seven months, and stocks rose for a sixth day as commodity prices rallied and China said its economy performed “better than expected” last quarter.

The extra yield investors demand to own developing-nation debt instead of U.S. Treasuries narrowed 16 basis points to 4.85 percentage points, the lowest since Oct. 3, at 2:49 p.m. in New York, according to JPMorgan Chase & Co.’s EMBI+ Index. A basis point equals 0.01 percentage point. The MSCI Emerging Markets Index rose 1.7 percent to 716.14, a seven-month high.

Emerging-Market Stocks Rally Coming With Higher Valuations
http://online.wsj.com/article/BT-CO-...06-715544.html

NEW YORK (Dow Jones)--The feel-good factor in the recent rally in emerging-market equities is coming with a price: higher stock valuations.

Major emerging-market stock indexes have reached levels last seen in early October. MSCI's Emerging Markets Index is up more than 41% in the past three months.

LONDON, May 7 (Reuters) - Eastern European stocks rose 3 percent to near-7-month highs on Thursday after the International Monetary Fund said it overstated the region's financing needs, leading broad gains in emerging markets.

Cash is now being put back to work

chasing yield

months ago, fear > greed

now greed > fear

[uls]

more signs of reversal of flight to safety

money flowing back to emerging markets

remember during the worst of this crisis, money fled from emerging markets into the safety of USD cash and US treasuries

Emerging-Market Bonds Rise to Seven-Month High on China Economy http://www.bloomberg.com/apps/news?p...e9E&refer=news

May 6 (Bloomberg) -- Emerging-market bonds climbed, pushing borrowing costs to the lowest in seven months, and stocks rose for a sixth day as commodity prices rallied and China said its economy performed “better than expected” last quarter.

The extra yield investors demand to own developing-nation debt instead of U.S. Treasuries narrowed 16 basis points to 4.85 percentage points, the lowest since Oct. 3, at 2:49 p.m. in New York, according to JPMorgan Chase & Co.’s EMBI+ Index. A basis point equals 0.01 percentage point. The MSCI Emerging Markets Index rose 1.7 percent to 716.14, a seven-month high.

Emerging-Market Stocks Rally Coming With Higher Valuations
http://online.wsj.com/article/BT-CO-...06-715544.html

NEW YORK (Dow Jones)--The feel-good factor in the recent rally in emerging-market equities is coming with a price: higher stock valuations.

Major emerging-market stock indexes have reached levels last seen in early October. MSCI's Emerging Markets Index is up more than 41% in the past three months.

LONDON, May 7 (Reuters) - Eastern European stocks rose 3 percent to near-7-month highs on Thursday after the International Monetary Fund said it overstated the region's financing needs, leading broad gains in emerging markets.

Cash is now being put back to work

chasing yield

months ago, fear > greed

now greed > fear