Posted by donnywise | Posted in Consumer and Banking Analysis | Posted on 04-09-2010
We are a lead exporter in the world. We do produce and export a product that the world needs. Food is growing and flowing from the United States to a world that has suffered this growing season. Wall Street and Corporate America take note. Outsourcing is a practice that is prudent in a global marketplace, but enjoying corporate headquarters in the United States and outsourcing all manufacturing to countries with less freedoms and protection of workers is producing profits today, but gutting the manufacturing base and America is destroying the country and discounting the work force of the country.
The hard decision is to mix outsourcing and domestic manufacturing and focus on being competitive in the marketplace. The cancer in our country is spreading and leaving a country in collapse. The character of American farmers is an example of our ethics and values to make the tough choices to adapt and succeed. Made in the USA stamped on grain and corn kernels is not feasible, but companies are making profits with no impact on manufacturing. The farmer is the shining light in the soaring exports of food to the world. Finally, Made in the USA is still missing on all my clothes, but I am glad that this export boom is to assisting a suffering world.
Corn, Soybeans Rise as Reduced World Crops Boost U.S. Exports
September 02, 2010, 4:24 PM EDT
By Jeff Wilson
Sept. 2 (Bloomberg) — Corn prices touched a 14-month high and soybeans rose after adverse weather damaged crops in Russia, Europe and Canada, boosting demand for U.S. supplies to make animal feed, food and fuel.
U.S. exporters have sold 10.616 million metric tons of corn for delivery after Sept. 1, up 36 percent from the same time a year earlier, the Department of Agriculture said today. Soybean sales reached 15.315 million tons as of Aug. 26, up 8.7 percent from a year earlier. Egypt bought 120,000 tons of corn and 100,000 tons of soybeans overnight, the USDA said today in a separate report.
“Export demand continues to be very good,” said Mark Schultz, the chief analyst for Northstar Commodity Investment Co. in Minneapolis. The “U.S. is going to continue to pick up extra demand” after world production was reduced in exporting nations, Schultz said.
Corn futures for December delivery rose 0.75 cent, or 0.2 percent, to close at $4.475 a bushel at 1:15 p.m. on the Chicago Board of Trade. Earlier, the price touched $4.48, the highest level since June 2009. The contract erased earlier losses of as much as 0.8 percent.
The commodity rose 8 percent in August as Russia halted grain exports to protect domestic supplies.
Soybean futures for November delivery rose 3.5 cents, or 0.3 percent, to $10.09 a bushel in Chicago, rebounding from an earlier decline. Last month, the most-active futures rose 0.5 percent and reached a seven-month high of $10.49 on Aug. 5.
Russia Extends Ban
Grain prices also rose after Russia said it would extend its ban on grain exports until the harvests in November 2011, increasing demand for alternative supplies. The announcement by Russian Prime Minister Vladimir Putin came as a surprise, because Russia originally had banned exports through the end of this year, said Tim Hannagan, a grain analyst for PFG Best Inc. in Chicago.
Russians have responded to slashed harvest forecasts by hoarding staples, which has contributed to price gouging, a government official said.
The ban by Russia, which tied last year with Canada as the world’s second-largest wheat exporter, began Aug. 15. Lower quality Russian wheat competes with corn and other grains in livestock feed.
“The U.S. is the grocery store to the world,” Hannagan said. “Export demand is unlikely to slow.”
Corn is the biggest U.S. crop, valued at $48.6 billion in 2009, government figures show, followed by soybeans at $31.8 billion.
–With assistance from Lyubov Pronina in Saratov and Ilya Arkhipov in Moscow. Editors: Millie Munshi, Steve Stroth
To contact the reporter on this story: Jeff Wilson in Chicago at email@example.com
To contact the editor responsible for this story: Steve Stroth at firstname.lastname@example.org.
Posted by donnywise | Posted in Consumer and Banking Analysis | Posted on 04-09-2010
5 Doomsday Scenarios for the U.S. Economy
by Derek Thompson and Daniel Indiviglio
Friday, September 3, 2010
It’s been a brutal summer for the economy. The housing sector, like a balloon batted in the air one last time by the government credit, resumed its inevitable fall. Economic growth slowed to a lead-footed 1.6 percent, and job growth is even more anemic. Meanwhile, consumers are cranky, the trade gap is gaping.
More from TheAtlantic.com:
• 5 Reasons Why the Economy Will Be Alright, Eventually
• Mapping Troubled Housing Markets
• Despite Unemployment Rising to 9.6%, a Glimmer of Hope?
Most signs point to a slow and steady recovery, but what if the pessimists are right, again? What if the United States isn’t in the slow-lane to recovery, but rather on the precipice of another decline — a double dip?
[Click here to check savings products and rates in your area.]
To see where this re-recession might begin, my colleague Dan Indiviglio and I imagined five financial earthquakes, each with a single epicenter: housing, consumers, toxic assets, Europe, and the debt. The following five scenarios are listed in order of likelihood.
1. Housing’s Mini-Bubble Pops
Perhaps nothing poses as a big of a concern to the U.S. economy as its housing market. It’s unclear how the government’s efforts to stabilize the market through a buyer credit, ultra-low mortgage rates, and mortgage modification programs will pan out. Did it just create another mini-bubble that’s beginning to pop now that the support has been withdrawn?
[See Why the Housing-Market Recession Isn't Over]
Here’s the scenario. Weak home sales and continuing foreclosures result in climbing real estate inventory. This has two effects. First, it makes new homes even less attractive which further reduces construction jobs. Second, it puts downward pressure on home prices, which makes it harder for struggling homeowners to sell their home to avoid foreclosure and also keeps strategic default rates high, exacerbating the problem. Lower home values encourage Americans to save more and spend less, since their wealth is effectively reduced. The Dow drops and credit markets tighten even further, suffocating private investment just as homeowners bunker down and slash spending. Growth turns negative.
2. You Break the Economy
You, the American consumer, are reloading savings after a debt-fueled decade. But as any general will tell you, when an entire squad reloads at once, it leaves everybody vulnerable. It’s the same with the economy.
Here’s the scenario. Consumer sentiment continues to fall slowly, and spending turns negative again. Small businesses hold off to replenish their inventories or add new workers. Wages and hours freeze, and unemployment takes a leap toward 10 percent in October. Congress is paralyzed, because it’s only weeks away from the mid-terms. The stock market sees business revenue trending flat, joblessness rising and Congress doing nothing, and it sparks a 300-point sell-off. Americans frightful for their savings cut back spending even more the next month, and overall growth turns negative.
[See 15 Freebies, From Tools to Treats to Entertainment]
3. Toxic Assets Return
If you closely followed the bank bailout, then you know it wasn’t originally billed as simply throwing money at the banks. Instead, the Treasury intended to purchase the toxic assets from banks, which were the source of investors’ uncertainty concerning bank stability. But the Treasury couldn’t figure out a way to do this quickly enough to make it effective. As a result, the banks were largely stuck with these bad assets. We just don’t know how bad, yet.
Here’s the scenario. The residential real estate market’s problems continue. Even once foreclosures begin to decline, we see waves of defaults, as modification program participants re-default at rates of 30% to 50%. Commercial mortgage-backed securities continue to deteriorate, as some businesses struggle with weak consumer demand. Home and commercial real estate values keep declining, and so do the value of the assets that back them. Banks with exposure to these toxic securities see another round of losses, and investors question their stability. The market plummets, credit freezes, and growth turns negative.
4. Europe Falls Apart
Europe seems to have avoided an all-out collapse of confidence in its ability to pay back its debt. But things can change, and fast fast. Indeed, the Greek debt crisis went from ignorable wire stories to front page news in a matter of days.
Here’s the scenario. Slow growth in weak Eurozone states like Greece, Spain, and Italy turns negative and spooks investors, who demand higher returns on government debt. Europe’s bond rates spike. Countries announce further austerity — tax increases and spending cuts — which strangles our biggest export market. The EU central bank responds by announcing a plan to write down troubled debt, which dings some Americans banks.
In a flight to quality debt, the dollar appreciates. This hurts our exports even more. As the trade deficit gapes open and manufacturing’s good run dead ends, the stock market plummets, taking household wealth down with it. Families looking to restore balance sheets cut back on spending, and the American producer loses the American consumer and the European buyer. Growth turns negative.
5. Debt Finally Catches Up to Us
Interest rates on U.S. debt are low today for one big reason. Investors trust the United States, at least more than they trust other countries. If the people giving us money suddenly have as little faith in America as Americans, that could change, and quickly.
Here’s the scenario. The IMF recently said the United States has a 25 percent chance of seeing dramatically higher interest rates in the near future. But the bond market can strike without warning, as it did in Europe earlier this year. If uncertainty with our political process gets reflected in our interest rate, we’ll have a harder time affording debt, 55% of which has to be rolled over in the next three years. Pension and mutual funds with government debt would be written down, causing Americans to save even more of their paychecks. We’d be left with two bad choices: tax cuts to juice consumption or tax hikes to please our lenders. But at that point, it would be too late to avoid a double dip.
Posted by donnywise | Posted in Consumer and Banking Analysis | Posted on 02-07-2010
Customer Centric Banking is Today. The banks are not allowing 2.0 technology to empower consumers to be financial stewards of financial destiny.
The time is 5am on a Friday in DC, and a consumer is signing online to verify a bonus check for $10,000 is direct deposited into a personal checking account. The online access is not inclusive to one bank or one account, but many financial service providers are available to the consumer including banks, investment companies, lending companies, credit unions, and private investors for small business lending and private mortgage lending. The consumer has predetermined the allocation move over $7,500 to an investment bank to allocate into stocks and mutual funds, and $2,500 to invest in a peer-to-peer lending company accessible via the same online account to be a partial investor in a business loan request.
As the consumer signs online, the consumer is in control of all the services via one online platform system with a dashboard customized to the consumer’s financial services ownership and future financial. The opportunity for both consumer and primary bank is vast as the online platform has matched the deposit and the linked suitability form submitted during initial sign-up for the online service. This feature has allowed the bank to recognize a cross sell opportunity via the consumer’s desire to buying a home as a top priority over investment’s in stock and mutual funds in the consumer’s financial priorities list use of the $10,000 bonus money.
The consumer clicks the dashboard icon for the bank checking account and an avatar appears on the computer screen to inform the consumer of the $10,000 direct deposit into the primary checking account, and the avatar explains about the bank’s new mortgage savers account in the same sentence. The mortgage saver’s is an account with a higher rate of return with partial allocation in Treasuries and retain the FDIC guarantee. The rate is fixed until the 20% threshold for a mortgage down payment is met with easy approval for a mortgage and discount on rates and fees via the same bank. The consumer is intrigued and leaves $7500 in the checking instead of moving over to the investment bank connected the online banking account because the consumer is going to the branch of the bank to obtain more information.
As the consumer begins the day, the consumer has been able to engage account money management with one platform. The consumer has made a decision to experience another financial channel to meet financial needs. The new bank has utilized the sharing of an online platform online platform not as a threat to offer new innovative product solutions. That opportunity and technology is available today.
Read more: http://bizcovering.com/business/the-future-of-banking-is-not-beyond-tomorrow/#ixzz0sUwrVfPI
Posted by donnywise | Posted in Consumer and Banking Analysis | Posted on 02-07-2010
Posted by donnywise | Posted in Consumer and Banking Analysis | Posted on 29-05-2010
In a recent news report about past campaign coverage, the 1976 presidential campaign and debate was aired with Democratic Presidential Candidate Lloyd Bentsen discussing the challenges of the day including the threat of fiscal deficits to the economy. The short clip from 1976 was so relevant in words to the current economic situation of 2010. The visual aspect was a much different time where debate was civil and clothing was questionable. The two minute experience was enough to vaguely recall through life experience or history class the “boot on the throat” of economic growth in the United States economy. That brought to more recent historical event in our journey to the current scenario in the economy, job market, and excesses in debt that no segment of society can address the issues because of the enormity and the missing element of the common sense twist.
In addition, the impotence of TARP was discussed in a previous article, and the precedent of TARP was not consider during the drafting of reform legislation. TARP was established for high impact in the real economy through an establishment of broad objectives. The legislation was not tailored to insure objectives were met. The benefactors of TARP were banks, and the benefactors were the recipients of liquidity without any expectations or conditions set by Congress. The easing of credit, stabilization of the housing market, stabilization of job market, and widespread impact in urban and rural areas were broad objectives that did not come to fruition in TARP.
In review, the establish of broad objectives by Congress as a centerpiece to any final legislation could have brought the desired impact via implementation of TARP. As an example, the mock example is stated below in a realized set of Financial Reform objectives in a Consumer Bill of Rights.
The following example details a Consumer Bill of Rights in Financial Reform:
Consumer Rights under Traditional Banking Financial Reform
Banking Services and Opportunities from Wall Street to Main Street:
Seven Components in a Bill of Rights:
Primary Goal: Banking Services and Opportunities from Wall Street to Main Street:
* Financial Literacy-Education-Schools, Banks, and Community Associations
* Savings First Products-Expansion of IRA programs-College,Mortgage,Long-Term Care
* Traditional Banking Facility separate from other business segments
* New Partnership- Banking 2.0 Technology-Fundamentals- 100% Servicing
* Credit Bureau Scoring – Fair and Inclusive to Banking Only
* One agency for traditional banking regulations and consumer advocacy
In conclusion, the Consumer Bill of Rights as the roadmap to Financial Reform would produce legislation that is tailored for high impact. In America, goal setting is must in life, and the restoration of a normal relationship of banker and consumer is a must for a vibrant economy. America is unable to spend enough money to fix a fundamental flaw in decoupling of trust between banks and consumers.
The current reform keeps the banks and consumer decoupled, and the last decoupling has one precedent in history to give insight to a possible outcome and this historical event was deemed the Great Depression.
Posted by donnywise | Posted in Consumer and Banking Analysis | Posted on 24-05-2010
Posted by donnywise | Posted in Consumer and Banking Analysis | Posted on 23-05-2010
Posted by donnywise | Posted in Consumer and Banking Analysis | Posted on 23-05-2010
Posted by donnywise | Posted in Consumer and Banking Analysis | Posted on 10-05-2010
Published on zero hedge (http://www.zerohedge.com)
Home > Summary Of The Biggest Bail Out Ever: Even Keynes Is Spinning In His Grave
Summary Of The Biggest Bail Out Ever: Even Keynes Is Spinning In His Grave
By Tyler Durden
Created 05/10/2010 – 03:32
Europe has now followed the Fed in its all in move to prevent the disintegration of the euro and of Europe. As we expected, the EU was leaking various rumors to gauge market interest, and as speculated earlier, the final cost ended up being just short of one trillion. Here are the key summaries:
•EU Crafts $962 billion show of force to halt crisis 
•Full blown monetization: ECB will buy public and private bonds 
•Fed reactivates swap lines with Bank of Canada, BOE, ECB, BOJ, and the SNB 
In other words, total and unprecedented monetary lunacy, as every cental bank, under the orchestration of the Federal Reserve, will throw money at the problem until it goes away, which it won’t. As we have long expected, Bernanke is now willing to sacrifice the dollar at any cost to prevent the euro unwind. This is nothing than a very short-term fix, whose half life will be shorter still than all previous ones.
The race to the currency devaluation bottom is now in its final lap. And gold is the only alternative to the now imminent collapse of the fiat system: the world had a chance to take writedowns on losses, punish those who took risk and failed, and refused to do so. There is now no risk left, but it only means that eventually all the risk will come back and lead all capital markets to zero. The result will be the end of Keynesian economics as we know it. Do not trade in this broken market, do not hold your money in a bank as they are all now one hour away from a terminal bank run – buy and hold real, FASB mark-to-myth independent assets.
Here is Goldman’s take on the reaction:
In reaction to escalating pressures on Euro area government bond markets this past week, and their broader repercussions on financial stability, European policymakers have announced tonight an impressive set of new policy initiatives, as Erik Nielsen flagged earlier this evening as they began to emerge.
The centerpiece is a EUR 500bn conditional mutual financial support scheme for EU sovereign states, boosted by further assistance from the IMF. To put this number into perspective, consider that it is slightly higher than Italy’s 2007-09 average gross issuance of public debt and that it could cover Spain’s and Portugal’s combined gross borrowing requirements for two-three years. These conditional contingent liabilities tying EMU sovereigns will not appear under the Maastricht deficit and debt measures. They require no additional funding-raising, for now.
The fiscal agreement will be subject to closer scrutiny in the days ahead, when more details will be made available. In particular, the EUR 440bn of bilateral loans will be no doubt at the centre of more political discussions. But, together with the promise by euro area governments to ‘take all measures to meet their fiscal targets’, such display of fiscal ‘solidarity’ and the institution of a fast-track EMU/IMF funding backstop have been instrumental in convincing the ECB to step in, invoking a financial stability role. In the coming days, the ECB – presumably through the national central banks – will conduct ‘interventions’ in those ‘public and private’ markets of the euro area it deems ‘dysfunctional’ and therefore impairing the transmission of monetary policy.
We provide more details of the measures below, touching also on some of the issues still pending. Our overall take is positive. The Eurozone fiscal crisis spread beyond Greece to countries with much better fiscal profiles due to a lack of confidence, in turn amplifying debt roll-over risks and hurting domestic banks. Short of fiscal federalism, the mutual support plan launched tonight goes to the heart of the matter, and fortifies Eurozone institutions, endowing them more flexibility tools to deal with future crises.
But the true ‘circuit-breaker’ when the European markets open tomorrow will no doubt be the ECB’s unprecedented involvement in the secondary markets. Banking on the ‘best practices’ accumulated over the crisis, the ECB is not saying which securities it will buy, and in what size. This makes the ‘announcement effect’ even more powerful. The interventions will be over time sterilized (i.e., the cash injected will be mopped up), limiting the interference with monetary.
In terms of markets, there are clearly a few areas that are more directly linked to tonight’s announcements and others that have been caught in the general cross-fire. We would make the following broad observations.
1. EMU peripheral sovereign spreads should tighten back, particularly at the front-end of yield curves. The move should be reinforced by the further tightening of fiscal policy in Spain and Portugal to be announced later this week, and the ongoing conservative fiscal stance in Italy. At the 2-yr maturity, Portugal closed on Friday at 550bp over Germany, Spain at 237bp and Italy at 181bp. Our relative preference goes at this juncture for Portugal, because of the higher risk premium. We think spreads should come back to the 250bp area, and quite possibly further. In Italy and Spain, spreads should halve (although we continue to think that Spain will trade weaker than Italy reflecting the two countries’ relative funding requirements). Meanwhile, German 2-yr benchmark bonds closed at 76bp through swaps. This spread is at least 20bp too high (it averaged 50bp up to March), considering that Germany’s contingent liabilities as a result of these actions have increased.
2. The impact all this should have on the level of rates is unclear. The ECB is in the near term injecting more liquidity, and this should keep rates low over the coming months. Sterilizations will presumably entail a steeper money market than currently is the case. Against the backdrop of falling risk premium and better growth numbers, as we expressed already in our Bond Snapshot last Friday, our inclination would be to fade the bond rally now. Among our recommended exposures is a trade to be long 10-yr UST vs. Bunds, for a target in the 40-50bp area.
3. On currencies, the impact on the trade-weighed EUR of a more restrictive fiscal policy and easy monetary stance is unclear. As the risk premium erodes, the currency may extend gains against the Dollar, returning towards our 1.35 3- and 6-mth forecasts (from Friday’s 1.27 close). Our main focus in coming days will be on several fundamentally sound opportunities that have been rocked by the generalized de-risking. Among these, at this stage we highlight PLN, TRY against the EUR, and MXN against the USD, which we added on Friday already as a tactical recommendation. Asian FX weakened last week on the increasing risk aversion, and should stage a come back. Earlier tonight, we recommended going long a basket of MYR, PHP and IDR against the JPY.
4. The story in equity space is similar: Given the higher co-variance between financial and sovereign risk, the main underperformer of late has been the European banking sector. In the near term, it will probably lead the market bounce. But tighter fiscal policy in the European periphery will in our view continue to weigh on the local financial institutions. Our interest goes more towards opportunities where we judge the macro underpinnings to be stronger. We have been recently stopped out of long positions in US consumer stocks, but that remains an area of interest, for example. And we have highlighted the merit of ‘core Europe’ (through the German DAX index), which we are likely to elaborate on in the coming days. Unlike during the credit crisis of 2008, these policy announcements take place against a much more favorable macro backdrop.
Turning to the measures, these involve:
On the fiscal side, the establishment of a ‘European stabilization mechanism’, under the legal umbrella of article 122.2 of the Maastricht Treaty. This envisages financial assistance from the Union to member states ‘seriously threatened with severe difficulties caused by exceptional occurrences beyond their control’. The overall ‘stabilization mechanism’, which overall will not require approval by the national parliaments, will revolve around three funding avenues, all operating on a conditional basis (meaning that the sovereign will have to agree to a fiscal adjustment plan to access the funds, ‘on terms and conditions similar to the IMF’s’).
To begin with, the EU Commission will set up and run a permanent ‘rapid-fire’ facility funded by the issuance of Eurobonds guaranteed by the single member states. The framework piggy-backs on the one used for the balance of payment support to non-EU countries, which is also run by the Commission. The new facility should be endowed with around EUR 60bn, and provide for the quick response that was lacking in the case of Greece. It is unclear whether the facility will be pre-funded. The balance-of-payment program is not, and the Commission taps markets upon need. Whether the guarantees will be ‘joint and several’, like is the case of existing EU Commission bonds, is also unclear. If so, the issuance may compete with existing EIB and KFW programs, which is less senior. We plan to flesh out some of these issues when more technical details are available.
Moreover, EMU member states have pledged up to an additional EUR 440bn in bilateral loans to support each other. As in the case of Greece, we think that they will be allocated along the same proportions as those holding for the ECB’s capital shares. The loans will be collected in an SPV ‘expiring after three years’. It is unclear whether non-EMU countries have signed up (the UK has not). The disbursement of the loans will require parliamentary approval.
Finally, according to European sources, the IMF will contribute to the deal with an amount up to EUR 250bn, presumably providing assistance in the formulation of the fiscal restructuring plan, as has been the case for Greece. We would notice that the higher the amount pledged by the IMF, presumably the greater the influence of its main shareholders over the disbursement.
On the monetary side, the ECB has announced it will conduct interventions in the euro area public and private debt securities markets ‘to ensure depth and liquidity in those market segments which are dysfunctional’. The ECB plans to sterilize these purchases. Further, to support banks, the ECB will conduct 3-mth fixed rate tenders around the end of this month, when the first 1-yr LTRO expires, and a 6-mth operation this Wednesday. And finally, the ECB will reactivate together with other major central banks temporary but unlimited Dollar swap lines with the Federal Reserve.
Last, but not least:
•The first tranche of the joint EMU/IMF 110bn package for Greece will be disbursed in the coming days. Earlier today, the IMF Board has approved the EUR 30bn Stand-by arrangement with Greece. Both these news were widely expected.
•On May 12, the European Commission will present proposals on how to improve the governance of the Euro area, including ‘strengthening’ the Stability and Growth Pact (involving a discussion on the introduction of more effective sanctions). This is the natural and necessary complement to a system of fiscal relationships involving greater risk-sharing, and will be the focus of many discussions in the weeks and months to come.
Francesco U. Garzarelli
Bank of EnglandBank RunBen BernankeBOECapital MarketsCentral BanksCredit CrisisEuropean Central BankEurozoneFederal ReserveFinancial Accounting Standards BoardGermanyGreeceInternational Monetary FundItalyKeynesian economicsMonetary PolicyNielsenPortugalRisk PremiumSovereign RiskSovereignsUnited Kingdom
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