International Forecaster -- Bob Chapman February '06 US Markets

US MARKETS
Two week’s ago we saw a major home and condo inventory build and a drop of in sales in the San Francisco Bay Area. Prices rose slightly. This is the first crack to appear in the California housing market, which is very susceptible due to about 70% of loans being of the option, interest-only and adjustable rate mortgages variety.
The mortgage trade is concerned due to the expiration of some of these loans and that new higher rates are being set that translates into higher monthly house payments. In fact, over the next two years, some $600 billion in mortgages will be reset for borrowers with thin or no credit histories known as sub-prime borrowers. It won’t be unusual for monthly payments to rise by 50%, as the two-year teaser rates on hybrid ARMS expire and interest rates hit their fully indexed levels. These sub-prime loans were $540 billion in 2004, and $628 billion in 2005. ARM rates are up 1.5% from the lows and have at least 1/2% to go this year. That is a 2% increase in rates on what could have been a 4% loan. Interest-only loans have interest only in the early years and have no repayment or amortization of principal. There are no document loans, which require no verification of income. There are option ARMS, which gives the borrower the option of making smaller than normally required monthly payments, with the unpaid portion being added to principal. Then there are the piggyback mortgages, where the borrower has a first of 80%, plus a credit line to cover his down payment.
It’s all called leverage and it works both ways. When homes and condos appreciate it’s just great. When values fall, it’s a nightmare. Up until this past September homes appreciated for five years, but in some major hot markets prices started to fall, namely New England, NYC, Maryland and Las Vegas. If you had a sub-prime ARM there was no problem, but over the past two years interest rates have risen and now painful resets loom. Some hearty souls refinanced old debt at teaser rates, sucked additional equity out of their homes with cash-out refinancings or paid off higher rate credit card debt. No one worried because house prices would appreciate forever. One and a half years ago we helped a subscriber roll out of an ARM into a 30-year fixed rate loan and the lender thought we were insane. As it turns out he was wrong and we were right.
We see the end of the saga of refinancing for the sub-prime buyer who more often than not should have never been a buyer in the first place. Short-term interest rates have risen and pushed up rates on fully indexed ARMS. At the same time appreciation is falling. Mortgage-backed securities’ owners who provide 90% of the liquidity in the sub-prime market are stepping back from the market. There is a lot of foreign money in this investment area - investors chasing yields, which is always a path to losses. Rates on these loans are higher for a reason – they are dangerous.
We will definitely see a spiral in delinquencies, foreclosures and credit losses from many who simply cannot make the new higher payments. As we have explained before, forced home sales add to inventory and definitely reduce all home values, which in turn sponsors more delinquencies and forced sales. This correction has begun slowly, but it will pick up momentum over the next few years. The slowing US economy and higher unemployment will bring this about. There will be no muddle through on this one. What is one to do when the interest rate on their loan jumps from 7% to 12%? They jump ship of course or bail out. In addition, there is the amortization of principal, which has been neglected for two years or more. Talk about a double whammy. Twenty-five percent of these sub-prime borrowers will have little equity left, even though home prices have risen over the past two years. Those cash outs of $800 billion a year are history and wages haven’t kept up with inflation. That means consumer purchases will fall from 71% of GDP to the norm of 64.5%. That means a falling economy and higher unemployment as the Fed feeds us hyperinflation to keep the economy afloat. Those who still have untapped home equity left will be able to refinance at slightly higher rates and the correction in their finances will be postponed for two more years. The question for them is, will regulators set new standards for nontraditional mortgage products? That would entail qualifying borrowers on the full payments they will incur once teaser rates expire or full amortization on the loans begin. Application of this criteria could mean only qualifying for a $200,000 loans, not a $300,000 loan. This means many sub-prime borrowers would not be able to refinance unless their income increases or interest rates fall, which we do not see happening.
Unsold home and condo inventories have been building for six months across the nation. In many hot areas affordability has priced people out of the market. Only 14% qualify in California, and in hot areas it varies from 15% to 25%. Sales of existing homes have fallen since September. In the third quarter, 38% of the housing market was at extreme overvaluation of 30% or higher. That will worsen as the economy slows and unemployment rises. Nationally overvaluation has taken three years to complete and prices usually fall 15%, but this will not be a normal correction due to debt buildup. We see 30% to 40% nationally in hot markets and 40-60% in California and a few other areas.
The aftermath of a correction will be a major wealth decline, which couldn’t have happened at a worse time. That means a decline in spending and a loss of faith at least for the time being in real estate. Lenders will suffer losses and some will go under. Owners of mortgage-backed securities will take big losses.
In the last two years $1 trillion in sub-prime loans were made. Problems usually don’t start for a year after they’ve been written. In hot markets like California, trouble could be massive with just moderate price decreases. As you can see, changes are coming. Residual residential real estate should be sold and debt should be paid off or down. We are in for difficult times.
Our President told us in regard to Jack Abramoff, “You know, I frankly, don’t even remember having my picture taken with this guy. I don’t know him.” Abramoff told others, “He and our President have met almost a dozen times, shared jokes, spoke about details of Abramoff’s family. Our President has one of the best memories of any politician I have ever met. It was one of his trademarks, though, of course, he can’t recall that he has a great memory. The guy saw me in a dozen settings, and joked about a dozen things, including details of my kids.” Our President is a liar.
The Boston Police Department is sounding the alarm that a new type of high-powered handgun, the FN-Five-Seven, fires bullets with such velocity that they will punch through body armor. In one of the stupidest statements ever, Police Commissioner Kathleen M. O’Toole said, “These aren’t recreational weapons. This is an example of a gun designed to kill people.” We thought all guns were made to kill people, although we don’t know anyone who shoots people for recreation. Bullets for the gun come in two forms, one for the police and one for the public. The police have steel hardened tips, which allows them to penetrate body armor. Bullets available to the public are designed to fragment upon impact so they cannot penetrate police or military body armor. The gun’s magazine holds 20 bullets. We guess the moral of the story is if you have to use a pistol in defense you had best make head shots, so start practicing.
In 1982 and after, we wrote extensively regarding the death of “God’s Banker”, Roberto Calvi, who was found hanging from the Blackfriars Bridge in London, a supposed suicide. We wrote many articles thereafter about the Vatican Bank scandal at Banco Ambrosiano, Cardinal Paul Marcinkus, the missing millions and the connection to forces that worked for many years with the CIA, such as the Gladio P2 Masonic Lodge, the Freemasons and the Jesuits and their interconnection in many things in Europe. Gladio is the name of the NATO-controlled post-war “stay behind network of agent” provocateurs based in Europe. Calvi was murdered to silence him. It was suspected he might talk and that he had shortchanged the Mafia, which was also involved in the looting of Banco Ambrosiano.
New information has arisen and not one bit of it has appeared in the US media. Calvi was not a suicide, he was murdered. He was left hanging from the bridge for more than an hour before he succumbed. Cardinal Marcinkus was indicted but the case was dropped. He was then sent to Phoenix under diplomatic immunity and has never been questioned since. Marcinkus took the fall. It will be interesting to see what the police are able to get from the Mafia. This was one of the great scandals of the last 25 years and everyone walked except Robert Calvi and Michael Sindona. They are resting in peace.
Now, three days later there is a new twist to the story. Paul Marcinkus, the papal bodyguard dubbed “the Gorilla” was found dead in his home in Sun City, Arizona. He was 84 and we are so far told that he had emphysema. We don’t believe in coincidences, especially with the Calvi case just having been reopened. Marcinkus ran the Institute for Religious Workers from 1971 to 1989, and he was among the most powerful members of the Vatican elite. As a result of the Banco Ambrosiano affair, the Vatican paid off $244 million to creditors as recognition of moral involvement in the bank’s collapse. The scandal was one of the darkest pages in Catholic history in terms of government and moral issues. Marcinkus was the most important American ever to work in the Curia. He took the fall for the Vatican and all the other players and then conveniently dies as the new investigation begins. Paul knew too much and had to be dispensed with.
The English Unity Act (HR997), introduced by Rep. Steve King (R-IO), making English the official language of the United States has the support of 145 House members from 36 states. The bill is important to Americans both culturally and financially. The legislation is before the Judiciary Committee and Education and Workforce Committee. It would require that all public documents be printed in English. Presently trillions of documents are printed in numerous languages, most predominately Spanish. A Zogby Poll showed 79% of Americans support English only. You should let Congress hear your feelings on this issue.
We first began noticing something wasn’t right in the early 1960s. We could see America was headed for inflation so we started to put away silver coins and we bought our first BU, US $20 Saint Gaudens gold coin for $47.00. We had only begun to realize something was terribly wrong in our society.
We found out first Communism was financed and aided by wealthy elitists in our society and in Europe. We than found that the same group of people financed fascism. We then found out that this duality had been going on for centuries and that elitist had financed both sides of almost every war since at least the 12th century. They promulgated almost every conflict by essentially controlling the European and later the world monetary system. Since the inception of America some true Americans have attempted to stop the influence and control of European central and private banks from controlling our country. These elitists, Illuminists, Freemasons, etc., believe we are all their slaves. They don’t believe we should be free. They believe in Europe that there should be a master slave relationship. This is why people fled Europe and came to America. Unfortunately, the evil people in our society over the past 150 years have joined hands with the evil that has controlled Europe for so many centuries. That control has been and is controlled by a fascist monetarist monetary system. They regulate the value of money via their central banks and through politics that they control as well.
Now both Europe and the US are bankrupt. Germans realize the euro has been a disaster for them and as long as it exists, Germany and Europe are headed for failure. Thus, the euro has to be rejected and the ECB, the European Central Bank, has to be dismantled. It is part of the free trade globalist system.

Pt II

The same system Eisenhower called the military industrial complex, is the same bankers that bankrolled Hitler, Mussolini and Stalin. We have wars to control populations. There is usually little intention of winning. Today we have a phony war on terrorism used to distract the public from economic and financial problems, and to implement the Patriot Acts. Thus, we initiate and spread war to achieve other goals. In the final analysis it’s world fascist government that is their goal. With this new world order will also come the new dark ages. This is what these people are up to and it is up to us to stop them.
The next major fight for Americans will be property taxes and that war is well underway. Property taxes are outrageous in most areas, the big question is, will they fall as fast as they rose and, of course, the answer is no.
The new Medicare drug benefit plan was not designed to help aging Americans – it was to buy votes and donations from Big Pharma. The program is already a disaster and the Democrats are ready to take advantage of its failings.
We see Democrat picking up a net gain of more than 15 seats in the House and more than six in the Senate giving them control of both houses. There are a number of issues that will make this happen. One of the reasons for this outcome is general disappointment by over 60’s with the neocon agenda and a return to the Democratic Party.
Another issue that will come into sharper focus in the second half of the year, if not sooner, is employment. Official figures, which are bogus, show job gains should be 254,000 a month, not gains of 165,000. Employment has been lagging GDP growth in a major way never seen before. It is the slowest of the last ten recoveries. Employment figures officially show employment strength at 20% of what it should be, which is disastrous. GDP growth has been five times as strong as employment growth in this expansion: in earlier expansions it was one-and-a-half times as strong. In addition, after tax income year-on-year was down 0.1%, and add in inflation and you have a 10% loss in buying power.
Eighty-six percent of Americans want a national minimum wage of at least $6.45 an hour. An increase if nothing else is a powerful moral and political tool with real impact especially among workers who see the promises of the corporate social contract vanishing. They are coming again to believe they are no more than slaves. Pensions are shrinking or dying, as is their health insurance. Retirees are forced to fend for themselves. The whole system has turned grossly immoral to average working people.
One of our favorite economists Gary Shilling has made the following predictions for 2006. The world is awash in financial liquidity mainly due to rising house values, the negative US corporate financing gap and the American balance of payments deficit. Inflation remains officially low despite higher energy prices. As a result investment returns are low. Speculation remains rampant despite the earlier bear market, so investors are assuming more risk to achieve expected returns. Consumers continue to spend freely. The housing bubble will burst in 2006. Houses are owned by 70% of Americans and the bubble’s demise will shake the economy more than the earlier bear market in stocks. The Fed will tighten until the housing bubble bursts. The inverted yield curve foretells recessions, much as the fact the Fed rate-raising campaigns usually end in recession. Increases in rates began in June 2004 and continue. Once housing is in a shambles the Fed will stop raising rates.
US stock prices will fall this year; perhaps below their October 2002 lows, in the midst of a major recession. A major decline in housing prices and activity will almost surely precipitate a full-blown recession. That in turn will send corporate profits down. Without robust corporate profits, stocks are vulnerable. (That also means pensions will slip further under water).
China will suffer a hard landing due to domestic cooling measures and the US recession. China is attempting to cool her white-hot economy, but is having difficulty. Her economy is still more and more market driven, but is still state controlled in many aspects. Therefore, her policymakers lack the sophisticated tools to affect an economic soft landing. That might be a cut from 10% growth to 4% and that would be severe for China.
Global markets will fall as well. The Japanese recovery will fail. The dollar will remain relatively strong as a global safe haven. America with all her speculative excesses to be corrected and will probably remain the best of a bad lot.
Global and chronic deflation may commence in 2006. With a global recession collapsing commodity prices and the robust deflationary forces already at work will send the CPI lower. Inflation usually recedes in recessions (that is if the Fed doesn’t continue to massively issue money and credit while raising rates), so it’s the action in the following recovery in 2007 that will tell the tale. (If rates are falling and money and credit increases so will inflation) If we get it the transition to good deflation may be rough since few are prepared for it and have oversized debts that need to be drastically reduced. A very severe collapse in housing (which we expect) could destroy enough net worth to spawn bad deflation.
Consumers need to save reversing a 25-year spending binge, but they won’t, they’ll play until they lose big. The fall in house prices will rob US consumers of buying power. Incomes won’t support robust spending since they’re likely to remain subdued.
Deflationary expectations may surge and widen in 2006 as consumers wait for lower prices. That leaves excess capacity and inventories that force price cuts. (We agree but dependent on what the Fed does. We believe the Fed will crank out money and credit until the bottom falls out). Gary, we thank you very much for your views.
Denver law enforcement officers were forced to admit that for years they had been keeping tabs on activists and grass root groups and illegally maintaining extensive files on them. One of the more outrageous aspects of the case was that the former head of the intelligence division had lied to the police chief and the mayor and told them they were complying with all state and federal guidelines when snooping on citizens. Files were kept on 200 groups and 3,200 individuals. Hopefully this will discourage similar activities in other police departments.
If Osama bin Laden said let’s have a truce his request would be rejected. The neocons have to have war. They are accountable to only their Illuminist masters, not Congress and not the American people. They have completed packing more fascists into the Supreme Court. They face an economic and financial mess of their own doing that they need a cover for – war. Vote fraud by Republicans and scandal after scandal fails to disturb Republicans. Worse yet, they are appeasing Israel by trying to find any excuse to attack Iraq. They are also determined to give amnesty to 20 million illegal aliens while millions stand in line for years properly having applied for legal immigration. We see the same Iraq propaganda now being used to foment war against Iran. This is the biggest media blitz since the Nazi war propaganda in the 1930s. How do Americans stand still for these blatant lies? Can they really be that dumb?
The matter of the seizure of property under eminent domain of Supreme Court Justice David Souter will be on the March ballot in Weare, N.H. The activists want the property so they can build the “Lost Liberty Inn.” It might be Mr. Souter will lose his 200-year-old farmhouse.
Free trade and globalization are driving college-educated young people out of Michigan, Pennsylvania and other rust-belt states. Children and grandchildren of autoworkers who are living through the collapse of the US auto industry throughout the Midwest are seeking service and financial jobs in other regions, particularly in the non-union South. From 1995-2000 Michigan lost almost 40% of its population of college-educated, single young people, from 42,600 to 26,600, the only state with a worse drain was Pennsylvania. This is a sure, dire indicator of the no future economic crisis centered around the decay of the formerly productive, industrialized regions of the US, the result of free trade and globalization. These are irreversible losses of the productive capabilities and skilled labor force of our Midwest. The auto industry since 1975 has lost 50% of its jobs in Michigan. The losses have been worse in Missouri, New York, Indiana and Ohio. This is all part of the deliberate de-industrialization of America. Our country is being hollowed out, particularly in these states. At the current rate of loss of 800,000 youths a year it won’t be long before the rust-belt region will be vast wastelands.
This came in from a subscriber: I just thought of a phrase that’s catchy and sums up the global mindset currently running the entire world’s individual sovereignty of nations and countries, “no borders/place your orders” – just thought I’d pass it along.
Venezuela’s President Hugo Chavez Frias said he is taking potential steps to cut off oil shipments to the US, in the event Washington “crosses the line.” The US Secretary of State late last week called for an international “united front” against Venezuela. The disruption of a withdrawal of 1.5 million barrels of oil a day would be devastating for the American economy. There is no question Venezuela is being threatened by the US and American and European elitists who have now decided to take down the Venezuelan government. Mr. Chavez has called upon Venezuelans to embrace “resistance to imperialism.”
The Medicare prescription benefit program that was supposed to put more prescription drugs in seniors’ pockets and more money in state coffers has been exposed as a scam. The promises were total lies just like WMD. The program has turned into a national nightmare that has left hundreds of thousands of low-income seniors without prescriptions and states actually owing the federal government hundreds of millions of dollars.
As a result, California, Texas, Kentucky, New Jersey and Missouri have filed suit to keep George and the neocons from billing them for drugs that would have cost them even less under the old system.
This shows you how really powerful the drug industry is. The FDA and Big Pharma attempts to discredit, or even outlaw anything that competes with the price-controlled US drug market, thereby forcing US states to over pay for drugs by as much as 10,000%. Even when states are getting reimbursed by the Feds for these drugs they’re still being purchased at rip off prices. The drug benefit program makes it legitimate for the federal government to negotiate volume discounts with drug companies, which is another rip off of the taxpayers.
Just to show you how bad this is, a drug is manufactured for $1.00; it is sold to the wholesaler for $20.00 who sells it to the retailer for $30.00 who sells it to the user for $50.00. Medicare processes the purchase adding $50.00 to the cost. We now have a $100.00 drug. The state then processes it for $25.00 and then for $25.00 more in paperwork. There is final approval of $150.00 for a $1.00 pill. This is socialist insanity. The only winners are the drug companies and the recipient if the drug works.
Americans and American seniors are simply too dumb to understand. These are handouts someone has to pay for. They are created to enrich Big Pharma and keep getting politicians reelected. The drug program is another big lie and will end up costing us another trillion dollars in waste, fraud and profiteering.
A ten-year old boy held prisoner at Guantanamo Bay has been found innocent after two years interrogation and torture. He and the other 600 in prison have been denied lawyers, charges and judicial review. The remainder could be held for years to come. What is wrong with Americans to allow their government to do such illegal things? What has happened to our country and our people?
Wholesale prices, the PPI, rose 0.3% in January led by higher costs for vehicles and machinery. December rose 0.6%. The question now is will the higher costs be passed on increasing inflation or will corporate America cut profits? We see higher inflation. This means our forecast of two more 1/4% interest rate increases are in the bag, the big question is will the Fed have to go 1/2% or more higher?
Debt-insurance contracts (derivatives) may be settled in cash, averting a rush for bonds when companies default, under a plan being proposed by the International Swaps and Derivatives Association.
The market for credit derivatives, dominated by credit-default swaps, expanded five-fold in two years to about $12.4 trillion. Banks sold so many of the contracts that when auto-parts marker Delphi defaulted in October, there weren’t enough bonds to settle with, causing prices for the notes to rally. Currently, GM is in the same position.
This could be the derivative bomb we have been waiting for. The reason for our fears is that this is an unregulated market and no one knows how much debt is insured through credit default swaps because the contracts are privately arranged. The ISDA, which represents 700 banks and investors in 50 countries, has presented members with its proposals. Credit derivatives are the fastest growing part of the $270 trillion market for derivatives, which are financial obligations based on interest rates, the outcome of certain events, or the price of underlying assets, such as bonds. We call it the big casino.
The University of Michigan’s mid-month report on consumer sentiment said its preliminary estimate for February stood at 87.4 down from 91.2 in January. This was far below “expert” estimates of 91. The current conditions index fell to 107.7 in the middle of the month, from 110.3 in January. The expectations gauge fell modestly to 74.4 in mid-February from 78.9.
The US condo market used to be a flippers delight, but not anymore. No more 20% annual increases in value. In the previous hot markets throughout the country 20% to 50% of new condos are up for sale. The inventory is overwhelming and buyers are bargaining accordingly as speculators lose money. Nationally 9.5% of residential mortgages nationally in the 10-months through October were owned by speculators. In hot cities like San Diego it was 13.5% and in Miami 16%. Few believe those figures. Other experts see the figures between 25% and 35% because buyers disguise their intentions. Either way, weakness in the condo market is a consistent indicator that the great boom has really ended.
The rate of appreciation in some of the hottest markets for speculators has slowed. In San Diego, the median price of a home only appreciated 2.5% in January, down from 20% a year earlier. The slowdown is affecting all sellers; the speculators are affected more acutely. This is a replay of the early 1980s, but this time the correction will be more severe. In San Diego condo inventory is 6,200 up from 3,100 year-on-year.
In Miami condo inventory was 5,400 in January of 2004, today it’s 12,750. The volume of sales has declined 9.6% y-o-y. This is not going to be pretty to watch and it’s only just begun.
Last year while under investigation for fraud and accounting scandals, Fannie Mae and Freddie Mac spent $23 million on lobbying trying to make it all go away. These two private agencies, whose public mission is encouraging home ownership, were lobbying to short circuit legislation.
The Conference Board said its leading economic indicators rose 1.1% in January, a fourth straight monthly gain. The Coincident Index rose 0.2%, while the Lagging Index rose 0.7%.
On Tuesday, the Fed added $7.75 billion in repurchase agreements putting the repo pool in near record ground at $111.428 billion. This means the Fed needs more buying power to support the Dow. They’ll have $160 to $170 billion for support, plus whatever else the Working Group on Financial Markets has available, probably another $200 to $300 billion. At the same time the Fed is again suppressing interest rates and the prices of gold, silver and commodities.
The tidal wave of illegal aliens is hitting Kentucky’s coal mining industry. Companies don’t want to hire locals, not when they can get Hispanics to work cheaper. Sidney Coal wants to change Kentucky mining law, so it can hire non-English speaking Latino workers. For safety reasons miners must speak English. This is a classic example of what illegal aliens are doing to the American wage structure. Thirty-eight percent of Sidney’s residents have disability status due to mine injuries, and 33% already below the poverty line.
Between 1990 and 2003, hundreds of miners were laid off and replaced by young inexperienced miners. If Hispanics are allowed to work we fear the coal companies will revert to paying in script that can only be spent in the company store, which is essentially indentured servitude. Changes could be coming to the mines of Appalachia.
Moody’s has again cut GM’s rating deeper into junk territory, citing increased uncertainty about the automaker’s ability to achieve competitive wage, benefit and supplier cost structures outside bankruptcy.
Dr. John Pace, via an obscure Maltese newspaper, has dropped a bombshell proving that Abu Ghraib and Guantanamo are but the tip of the iceberg. The outgoing UN Human Rights Chief says thousands of detainees a month are being tortured to death in Iraq. The Baghdad morgue received 1,100 bodies in July alone, about 900 of whom bore evidence of torture or summary execution. In December, there were 780 bodies with 400 who had gunshot wounds or wounds caused by electric drills. How can Americans allow this barbarity to continue?
Our President’s new Health Savings Account is actually a tax shelter dressed up as a program to help the uninsured. It would also undermine the traditional health coverage presently offered by employers. It will cost the Treasury $156 billion in lost tax revenues over ten years, wiping out any savings from Medicare cuts.
An HSA would allow people to put pre-tax earnings into a tax-advantaged account to be tapped for medical expenses, but they must also buy a high-deductible health insurance policy to pay for big ticket medical needs. Quite frankly, we like the program, but with war spending that could go on for years, tax cuts that will go on for years, and the terrible shape US finances are in plus the new disastrous state the Medicare prescription plan is in we say let’s hold up for now until tax cuts of the prescription plans are cut or killed or the occupation ends. We simply cannot afford it with the debt we have. Besides, the working poor could be better served. There are over 40 million with no insurance. The Bush plan would raise the amount that could be contributed into an HSA to $10,000 a year, which only the upper middle class could afford.
Like 401ks, the proposed HSA’s could save money for employers while transferring the cost and risk of providing what was once an expected benefit onto the workers. The move from traditional pensions to 401k plans has already amounted to a major hidden pay cut for millions of American workers.
Under the HSA program George and the neocons would give small businesses new reasons not to offer employees coverage. At the same time these highly paid executives could afford the new HSA. The estimate is that 1.4 million people currently insured would lose their insurance. Everyday under this administration just gets worse.
Americans just don’t get it. General Motors has been deliberately scheduled for bankruptcy. It is going to happen. The elitists who run the neocons from behind the scenes long ago designated GM and many other major US firms they control to withdraw from markets so that our productive manufacturing base could be destroyed. The consequences are massive job losses, the loss of homes and the bankruptcy of individuals, cities, towns and states, and the relegation of America to a third world designation. This is not good news as we face a worldwide depression that should make our great depression of the 1930s look like a walk in the park. The loss of the machine-tool design capability alone is enough to destroy our status as a first world nation.
We are not socialists and we normally wouldn’t broach this solution, but GM and Ford have to be saved. That would invoke government subsidation for a finite period of time, but in order for it to work there would have to be tariffs on foreign manufactured vehicles. There is no other choice – our highly skilled labor that creates employment for thousands of others must be kept in tact. If government does not move on this issue it will finally once and for all wipeout our industrial base.
The State Street Investor Confidence Index for February has been released and investor confidence decreased to 73.4 from January’s 77. The confidence of North American institutional investors fell to 85.5 in February from 89.8. The European Index increased from 73.7 in January to 77.9, and the Asian Index declined from 82.9 to 81.9.
The index measures confidence on a quantitative basis, analyzing actual buying and selling patterns of institutional investors. The index is based on financial theory that assigns precise meaning to changes in investor risk sentiment, or the willingness of investors to hold proportionally more or less of their portfolio in equities. The more they are in equities the greater the risk appetite or confidence.
This month it’s negative for the second month of record lows for global confidence. The strong inversion of the yield curve says the Fed will raise rates at least twice more soon. That will end up reducing growth as they move to reduce inflationary pressures that they are lying about.
Over the past 2 1/2 years this index has become a key economic indictor for asset owners, investment managers and central banks. It is the only measure of its kind that offers a unique look into the investment behavior and decisions of thousands of professional investors and their investment decisions. We say one more down month and we have a trend downward.
The January CPI rose 0.7% led by housing, food and energy costs. In the past 12 months the CPI is up 4%.
We find it of interest, but not surprising, that Treasury Secretary John Snow, whose agency heads the federal panel that signed off on the $6.8 billion sale of an English company to government-owned Dubai Ports World. Snow was chairman of the CSX rail firm that sold its own international port operations to DP World for $1.15 billion, as Snow left for his current job. As we reported earlier David Sanborn who runs DP World’s European and Latin American operations was tapped by Bush last month to head the US Maritime Association.
A coalition of farmers, consumers and environmental activists sued the US government over its approval of a biotech alfalfa that critics say will spell havoc for farmers and the environment. They contend the US Department of Agriculture improperly allowed Monsanto to sell herbicide-resistant alfalfa seed while failing to analyze the public health, environmental and economic consequences of that action. The GM alfalfa will overwhelm the native growth and force farmers to pay for Monsanto’s patented gene technology whether they want it or not. It will also hurt or destroy production of organic dairy and beef products. That would destroy exports of $500 million a year. Alfalfa is number four in production in the US after corn, soybeans and wheat. If allowed to go forward Monsanto will own the entire alfalfa industry.
Our President says that journalists can be prosecuted under current espionage laws for receiving and publishing classified information.
On Wednesday, the Fed added $10.248 billion in repurchase agreements including a $1.248 billion permanent open market operation. This caused the repo pool to go to $108.675 billion. The main operation is to keep the Dow from collapsing.
The BIS, Bank for International Settlements, is the elitists’ bankers bank. It has had its share of scandals. During the 1930s and 40s the Nazis had a representative who attended meetings and was part of the structure. Several years ago they called in their stock to privatize ownership and attempted to screw their shareholders. This week they released a policy paper that calls for an end of national currencies. Their head of monetary policy William White wants to replace these currencies with a small number of more formally-based currency blocks. He claims that because of the record rate at which Asian central banks have been buying US dollars, in order to keep their currencies artificially low, we do not really have a freely floating rate system. This is the elitist working toward a handful of currencies and eventually to one - one-world currency. The guiding lights of the BIS are all Bilderbergers. In his time John Maynard Keynes wanted the BIS shut down because he said it was used to launder money for the Nazis. The BIS has said their eventual goal is a cashless society credit system based on a worldwide citizen ID. Those designated as subversives or security threats will have their credit entitlement reduced or eliminated and be restricted as what they can buy or sell. There would be a world tax on all purchases. This small group of currencies or a world currency would end all national sovereignty. All financial transactions would be controlled by the BIS. This is what your masters have in store for you unless you stop them.
No one wants to talk about it but higher inflation is going to bring demands for higher wages, which will add even more inflation. That means ever-higher interest rates. Raising interest rates slowly while increasing money and credit hasn’t worked. Official inflation y-o-y is 4% and our estimate is over 10%.
Yes, governments can and do go bankrupt and our government is no exception. Due to its actions in many fields it is fair to call our government illegitimate. An Orwellian government that among other things manipulates markets and just about everything else.
This past Wednesday we received a terrible CPI number for January, up 0.7% and 4.0% y-o-y. Just prior to the announcement gold is hit, interest rates fall and the stock market stages a large rally. These are all the antithesis of what should have happened, which should have been just the opposite. Over the past ten years markets have constantly traded like this. Granted the rallies don’t last long enough to neutralize bad news, but the fact is they constantly reoccur. This is our government at work, because they know what’s better for you than you do.
At the recent FOMC meeting, the Fed tells us they are intervening in the foreign currency markets, something that has gone unreported except for one inference by Bloomberg, a responsibility that is under the purview of the Secretary of the Treasury and its subsidiary the Exchange Stabilization Fund.
The FOMC vote to intervene in the Forex market was completed with one dissenter Jeffery Lacker who said, “Such intervention would be ineffective if it did not also signal a shift in a domestic monetary policy. And, if it did signal such a shift, it could potentially compromise the Fed’s monetary policy independence.”
The Treasury has a long history of lying about intervention. This was borne out by testimony by Lawrence Lindsay on January 31, 1995, at an FOMC Committee Meeting and referenced not only currency, but also credit and gold swaps by the ESF. The legalistics satisfied manipulation began in earnest in 1996. They called it monitoring – which in their parlance, means rigging. Lindsay later said he didn’t say that, but he’s lying because it is a matter of public record.
After Mr. Greenspan said at the January meeting, more rate increases may be needed because inflation has been somewhat higher than acceptable.” Then separate from the interest rate discussion Jeffery Lacker made his comments regarding Forex intervention and the word measured was dropped from interest rate declarations because it was considered a Greenspanism, and with Bernanke taking over we could see 1/2% increases. Bernanke sees core inflation at 2.2%, which is higher than his norm of 1-2%, so there is a 96% chance of a 1/4% increase in Fed rates in March. Of course, in deciding on interest rates no one refers to M3 and other credit expanding at a 12% annualized rate. We had forecast 5%. Now Bear Stearns has predicted 5 1/4% and we concur it is a good possibility.

Pt III

Now, back to the FOMC, which has authorized the Fed to rig currency markets under the 1934 Act. They can conspire with governmental financial institutions and others in Canadian dollars, Danish kroner, euros, pound sterling, Japanese yen, Mexican pesos, Norwegian kroner, Swedish kroner and Swiss francs. They can maintain an overall open position in all foreign currencies not exceeding $25 billion, so obviously this is an adjunct to the ESF currency manipulation procedures. All actions can last either 12 or 18 months and are to be reported to the Foreign Currency Subcommittee. Quite frankly, $25 billion is really inadequate in a real emergency as opposed to currency manipulation. They’d need at least $100 billion to neutralize real trouble, thus, we can call this a pure short-term ability to manipulate. The foreign exchange markets trade $1.7 to $2.4 trillion a day, of which at least 40% has to be in US dollars. There you have it – another item not reported by our media.
The Labor Department says real average weekly earnings fell 0.2% in January, the first decline since September, after a 0.5% gain in December. Year-on-year average weekly earnings are up 3.6%, but “official” inflation is 4% leaving a 0.4% loss. Real inflation is 10% and by our calculations that leaves a loss in buying power of 6.4%.
AP tells us George and the neocons secretly required Dubai Ports in the UAE to cooperate with future US investigations before its takeover of operations at six American ports. They have to spy for the US. Dubai Ports in return doesn’t have to reveal records on demand about “foreign operational direction” of its business at US ports, nor keep copies of business records on US soil where they would be subject to court orders. (This is to expedite payoffs to neocons and their friends). They don’t have to designate an American citizen to accommodate US government requests. The conditions of the deal have now been classified secret. Worse yet, our President would have us believe he knew nothing about the deal – yes, and we have a bridge for sale. Our criminal enterprise known as the US government moves forward.
Part of the approval of this buyout is an extension of the concept of interdependence and the privatization of roads, ports, utilities and highways to international corporations so that in the corporatist fascist mold corporations can grow bigger and more monopolistic. Forty-four of the world’s 100 largest economies are corporations. These transnational conglomerates do buyouts and mergers by paying off politicians and governments. Sometimes our government arranges and expedites for non-financial reasons. Like the 1997 takeover of the Port of Long Beach by the Chinese Communist government and the open borders policy, which allows unbridled illegal immigration. Those are the same Chinese whose generals want to nuke our country. This is part of the dismantling of America just like free trade and globalization. Our country is being looted and sold, often to the lowest bidder or a sole bidder.
David Irving has appealed his conviction in Austria. Now the state prosecutor has filed an appeal as well to increase the jail sentence because he says Mr. Irving is pretending to moderate his views to try to escape jail time. This is thought control. The prosecutor believes he can read David Irving’s mind. This is ridiculous, but that is what you can expect from radical zealots on both sides.
Lobbyists are used to pay off corrupt politicians who are part of the giveaway system. The UAE is still part of Britain’s colonial empire. This is what corporatist fascism is all about.
Nearly half of South Korea’s youths who will be old enough to vote in the country’s next elections say Seoul should side with North Korea if the US attacks the Communist dictatorship. 40.7% say the Seoul government should remain neutral. Only 11.6% said the South should back its longtime ally. The poll was among youths 17 to 23 years old. Over 60 years of occupation has breed mis-content.
As our trade deficit expands your living standards fall. That deficit was $726 billion in 2005, up 18% from 2004. The 2005 trade deficit with China was $20.2 billion and was responsible for the entire increase in the US non-oil trade deficit. If you add in the losses caused by our occupations in the Middle East, we are faced with horrendous unpayable debt that will send us spiraling into bankruptcy. This is the result of free trade and globalization and WTO and NAFTA.
We are facing vanishing jobs as our economy heads down the sewer. China isn’t happy destroying our manufacturing economy - they are demanding restrictions on high-tech exports to China be lifted, so they can capture that market as well and at the same time steal our potential secrets. They are not happy that we had a $44 billion trade deficit in advanced technology products. That is up 20% since 2004. Free trade, especially with China, is a fraud, which is stripping our economy of domestic capacity and technology. If we don’t invoke tariffs against China and other currency manipulators soon there will be nothing to save. Let’s stop the bleeding. If we don’t we’ll die. Corporatist fascist, one-world free trade is a fifth column in our country and those who advocate it should be thrown out of office and out of our country. It is a matter of national survival and if we do not act now we are doomed.
On Thursday, the Fed added $21 billion in repurchase agreements sending the repo pool to $109.676 billion. Bonds then fell as did the Dow. The Fed and the Plunge Protection Team has their hands full.
We find it of great interest that Korea recently opened the new Pusan Newport Co. (PNC) terminal and that the port operator and developer is the DP (Dubai Port) World and Samsung Corp. DP World has been contracted as the PNC’s operations and maintenance provider.
Education has been turned upside down in Florida. The FCAT has to be passed in certain grades to get promoted through school and for graduation. A case was brought to our attention recently where the valedictorian of the senior class received a certificate not a diploma and did not address the senior class. She did not pass the FCAT. We heard hundreds of such stories. Thousands of children are not graduating and taking the GED test who otherwise have excellent grades. Florida has gone overboard and the Jeb Bush administration is destroying the educational system. Thousands of children are living in terror and fear that they won’t pass. This is not what education is all about.
A big WorldCom shareholder who lost a $900 million securities arbitration against Citigroup, is asking a federal court to overturn the decision because an arbitrator overseeing the matter failed to disclose significant relationships and past incidents that should have disqualified him. Donald Sturm lost almost $1 billion by following the advice of Jack Grubman the star telecommunications analyst at the Salomon Smith Barney unit of Citigroup. We find it strange Citigroup would pay $3 billion to settle various lawsuits arising out of its role as investment banker to WorldCom and its relationship with Bernard Ebbers. The reason they paid off is that if they didn’t they would of gone to prison for fraud along with J. P. Morgan Chase and BofA. This is a good example of how large Wall Street firms get away with anything they want too. The small brokers, brokerage firms and newsletter writers get the shaft. Let’s hope Mr. Sturm wins. America needs another wakeup call as to how the SEC and NASD operate. It’s all in the big firms favor, but not in the small firm or investors favor.
A four-year pharmacy college student can expect a $150,000 bill when he finishes college as a result of his education. The interest rate on that loan is 6.8% and is rising. The average debt for undergrads is $40,000. This is up 50% in ten years. It used to be we’d work part-time and summer jobs. Few of those options are open to today’s students due to the tidal wave of illegal aliens that American business is so eager to exploit. If you are poor you are really screwed. Soon only the wealthy will attend college because it will take a lifetime to repay your non-dischargeable loans. Beside, our President and congress might have all your jobs offshored and outsourced by then.
In 2004 average family incomes, after adjusting for inflation, fell to $70,700, a drop of 2.3% when compared when an 11.3% drop between 1989 and 1992 during a recession. From 1998-2001 incomes rose 17.3% and 12.3% from 1995-1998. In 2000 and 2001 investors lost $7 trillion in the market decline. Between 2001 and 2004 net worth increased by 6.3%. From 1995 to 1998 it increased 25.6%. The 2001-04 performance was the worst since net worth actually declined 9.9%. Presently GDP is rising but income and net worth isn’t. Only debt is rising. What happens when real estate falls? The present administration and Congress are the worst in history.
A key measure of jobs, the Conference Board Help-Wanted Advertising Index, was 37 in January, down from 42 a year ago.
Freddie Mac says the 30-year fixed rate mortgage was 6.26% last week, down from 6.28% a week earlier. We find that of great interest seeing the 2-year Treasury note rose 20 BP during the week. The 15’s fell from 5.91% to 5.89% and the 1-year ARM averaged 5.32%, down from 5.36%, which is absolutely impossible. It doesn’t matter what the Treasury rates are they set rates where they want to see them.
In 1998 we wrote of the scam that was going on at Fannie Mae and Freddie Mac, but no one wanted to listen. An extensive investigation of Fannie Mae points to its former finance chief and controller as mainly responsible for their accounting failures as FNM struggles to emerge from an $11 billion scandal in which no one went to jail or was even fined.
Former Senator Warren Rudman found CEO Franklin Raines contributed to a culture of arrogance at the government-sponsored agency that is also a private company. Now that the crooks have been rediscovered nothing will happen.
Never has there been a more scurrilous, evil man in the White House than George Bush. He is using the neocon failure in Louisiana and Mississippi to say what went wrong is that we did not bring in US troops. It’s illegal and he knows it. In fact, he illegally used mercenaries. Now he tells us he wants a bigger presence of US military personnel at disasters in violation of Posse Comitatus. It is hard to use the legal National Guard when almost all of them are in Iraq.
Weekly first-time claims for state unemployment benefits dropped by 20,000 to 278,000 last week. The four-year week average fell 1,500 to 281,700.
According to Doug Thompson, a written report from a Secret Service agent guarding Dick Cheney said the Vice President was “clearly inebriated” at the time of the recent shooting. As we said last week why else was there a delay in reporting the almost fatal accident? When asked if a blood alcohol test had been performed on Whittington, the doctors who treated him refused to answer. One doctor said privately that he was ordered by the Secret Service to never discuss the case with the press. Cheney was on blood thinners; so one beer would have made him legally intoxicated. Our neocon VP should have been charged with a felony.
We must be missing something because we cannot understand why the Israel Army would be ordered to use a bulldozer to destroy a US playground and swimming pool in a West Bank village. The Israelis said it was built without permission. Another $120,000 of our tax dollars down a rat hole. The Israelis waited until the project was completed and then destroyed it. That is disgraceful.
Lawrence Summers who along with Robert Rubin manipulated the gold price for several years has resigned from Harvard after five years at the helm. He’ll miss his $563,000 annual salary and benefits. He was ousted for being bullying and arrogant.
The NY Times reports that the rate of black home ownership fell in 2005 to 48.8% from 49.7%. This was caused mainly by foreclosures and that will accelerate as interest rates rise on sub-prime loans. In the Cleveland area foreclosures were 52% black, 7% Hispanic and the remainder white. The MBA plays down foreclosures. The foreclosure rate for sub-prime borrowers is 3.3%.
The MBA Adjusted Purchase Mortgage Index, a gauge of home sales, rose 4.3%, the lowest level in two years. They said the 30-year fixed mortgage was 6.22%, down from 6.25%. The index for refi’s decreased 4.0%.
Propelled by an aging population, healthcare spending may double to $4 trillion by 2015. It will consume 20% of income, up from 16% last year. More than three million people signed up for the health savings account.
It is payback time. Outsourcing has hit investment banking. After years of outsourcing technology support and other back-office operations to India, China and the Philippines, financial institutions are increasingly looking to move large portions of their investment banking operations abroad. It is all about cheap labor.
J. P. Morgan Chase will have 9,000 employees in India by the end of 2007. The moves are no longer to New Jersey they are to India. One third of the investment banking unit is being outsourced. The entire financial services industry will move 20% of its total cost base offshore by 2010. Forrester Research says that within 10 years, at least 3.3 million will move offshore. Those of you who don’t think we need protective tariffs need their heads examined.
The former BATF now known as the ATF, acting without warrants or legislative authority to do so, seized firearms from at least 50 gun show patrons in Virginia according to congressional testimony and an agency document just made public. Witnesses also testified the African-American and female gun buyers in Richmond, Virginia and Pittsburgh, Pennsylvania were profiled based on their race or sex and some in Pittsburgh were threatened with arrest for alleged actions that are not violations of the law. People were being stopped without probable cause and stripped of their weapons – most of which the Gestapo had to return.
Some 400 state, city and country police joined a Richmond operation and conducted so-called residency checks and uniformed officers went to the homes of prospective gun buyers while they waited for their NICS background checks to be completed and questioned family members and neighbors about gun buyer’s firearm purchasing habits. Nobody told the ATF and other law enforcement that it is a federal crime to deny women or minorities their civil rights. The ATF then refused to comply with the Freedom of Information Act requests from the gun show promoters. There are two sets of laws, one for them and one for us. The ATF and police were trying to intimidate and terrorize law-abiding gun purchasers so people wouldn’t attend gun shows. This is all an outgrowth of our fascist police state.
Republicans and Democrats called American Internet companies who are helping the Chinese government suppress free speech in China sickening collaboration and a disgrace. These same solons see nothing wrong with free trade with China or Chinese goods made with prison or slave labor. We cannot determine which is worse, corporate America or our politicians. It’s simply hypocritical. China has no human rights. It kills its own citizens so it can harvest their body parts and sell them on the world market. When are Americans going to wake up?
On Thursday, the 5-year Treasury note auction had a cover of 2.18 to 1 versus an average of the last 10 auctions of 2.47 to 1.
Indirect participation (central banks) was only 21.3% versus an average 35.8%.
Central bank holdings of US Treasury debt soared $15.648 billion for the week ended 2/22. The Fed custodial account now holds $1.572 trillion for foreign central banks. The NY Fed reports that the Fed bought $13.325 billion of US Treasury and Agency debt for the week ended 2/22. Combined they bought $29 billion in US paper in a week, which is out of sight – unheard of. As we predicted the monetary system is out of control.
This should knock Sir Alan Greenspan’s productivity gains into a cocked hat. Expectations that technology would save time and money largely haven’t been borne out in the workplace, says Ronald Downey, Professor of Psychology who specializes in industrial organization at Kansas State University.
US Senator Bob Bennett (R-UT) is clueless. He admitted on CNBC that Sir Alan told him he called the BLS and told them to rework their figures on productivity gains. Then lo and behold, when the numbers came back the US productivity miracle appeared. Bennett dumbly spilled the beans. We have been screaming about these bogus figures for 15 years. Now someone is starting to listen.
Barrick Gold in a recent press release said nothing about their hedge book. The concept is if you do not talk about it, it will go away. Their book has an unrealized loss of more than $5.5 billion. Other hedgers show those losses but not ABX.
On Friday, the Fed added $7.949 billion in repurchase agreements causing the repo pool to slip a shade to $108.625 billion. As time goes on the Dow and other markets cannot be manipulated without creating more buying power. When you see the Dow for almost three years trade between 9,500 and 11,000 you know there has to be intervention.
There is nothing normal about our lives today. Abnormality began in 1912 and hasn’t let up since. One major war after another and thousands of small conflicts. A world almost perpetually at war or open-ended indefinite revolution. The pursuit of classic liberalism of the 19th century is gone and along with it the strong backing of freedom and private property. The most to suffer, particularly over the past 15 years, is privacy followed by our loss of real money, gold. Next week we’ll address this further.
America’s largest companies expect the federal government to pay them about $4 billion over the next four years to help keep their retiree health plans alive at a time when such benefits are increasingly on the chopping block. This could only happen in corporatist fascist America. The money is due to start flowing to employers this month as part of Medicare’s new prescription drug benefit. When our President and Congress authorized the Medicare drug benefit plan, it also agreed to start subsidizing the drug component of employers’ retiree health plans, to keep them from shifting their retirees to the government program. Ostensibly the government saves money by not having retirees fall on to Medicare rolls. 331 of the 500 largest companies offer retiree health plans. Of that $4 billion $1.1 billion goes to GM.
Delta will be a recipient even though they may soon default on their pensions. That means the PBGC, or better US taxpayers would pick up the $8.4 billion bill. In the recent budget proposal our President has asked Congress to raise $16.7 billion from underfunded pension plans. That would put the premium at 1.8% of the under funding. This would push some plans over the edge.
On March 1, 2006, there will be massive evictions of 20,000 Katrina and Rita evacuees from 8,000 hotel rooms. 4,400 hotel rooms were emptied on 2/12/06, at a time when 98,000 requests for mobile homes were made. 41,000 are already in mobile homes. FEMA is mandated to provide housing for disaster victims for 18 months. The cutoff is illegal and immoral. Either transitional housing or rental assistance must be provided locally to the survivor’s workplace. This is a major problem for a government that spends most of its funds invading and occupying foreign countries and chasing phantom terrorists.
They don’t come any more mercenary than the Doles. Former Senator Robert Dole is a lobbyist for Dubai Ports. Chairman of the North Carolina Democratic Party, Jerry Meak, has called for Senator Elizabeth Dole (R-NC) to remove herself from any congressional oversight of the Dubai Port deal. The fact that Dubai is paying her husband to help pass the deal presents both a financial and ethical conflict of interest for Senator Dole. This is why any senator or representative family members should be banned as lobbyists. In fact, they should ban lobbyists - period.
UPI tells us George and the neocons have been allowing a debate over six ports when in fact British-owned Peninsular and Oriental Steam Navigation are actually talking about 21 ports, which is a monopoly. This deal stinks to high heaven.
Bourse director Sven Areld Andersen is fed up with Norwegian oil having to be traded in London and wants to have a commodities and energy bourse in Norway. Andersen is of the opinion that Norwegian oil must be traded in euros, which can be advantageous for international customers. Russia, which is a large oil exporter, as well as the countries of the Middle East have large parts of their economies in euros. They would be able to view such a bourse as a contribution to balancing their economies in a better manner than at present, where their products are traded solely in dollars. The world is slowly closing in on the US dollar. Today a Swiss banker subscriber said the pros in Switzerland expect a 50% devaluation of the dollar.
Venezuela plans to prohibit Continental and Delta Airlines from flying into Venezuela and restricting American Airline flights by one third. The FAA established a similar ban on some Venezuelan carriers serving routes in the US ten years ago due to safety violations and has failed to recognize improvements since then. Venezuela is a very important market for American carriers because they have a virtual monopoly on US-Venezuela flights. US aviation authorities have failed to give Venezuelan airlines the rights they deserve under bilateral agreements.
A decline in commercial aircraft orders last month caused the biggest drop in US durable goods since July 2000. Orders in January fell 10.2% after a 2.5% rise in December.
Two-year US Treasury yields increased 4 BP to 4.72% this week. The 5’s jumped eight points to 4.63% and the 10’s three BP to 4.57%. This is a very strong inverted yield curve and with interest rates being increased in March by the Fed the inversion will either get wider or the yield on the 10’s will rise substantially.
Pressure by US companies via sale of $98.5 billion in investment grade bonds is the highest in five years. Besides acquisitions these cash piles have been used to buy company stock and to raise dividends.
The MBA Purchase Applications Index rose 4.3% last week. Purchase apps were down 2.6% y-o-y with dollar volume 2.4% lower. Refi apps declined 4%. The average new purchase mortgage declined to $222,900, while the average ARM decreased to $337,700.
M3 expanded $1.5 billion to a record $10.281 trillion. Year-to-date, M3 has expanded at a 5.2% annualized rate. Year-on-year it is up 8.4%, with M3 less money funds up 8.6%.
Bank credit jumped $38.8 billion last week to a record $7.631 trillion, with y-t-d gains of $24.5 billion or 12.3%. Year-on-year bank credit is up $701.3 billion, or 10.1%. For the week securities credit jumped a very large $21.6 billion. Loans and leases were up 12.3% y-o-y. Commercial and industrial loans were up 14.8% y-o-y, and $3.1 billion for the week. Real estate loans rose $1.2 billion. They have expanded at a 10.6% rate y-t-d and 14.5% y-o-y. Consumer loans rose $1.0 billon and securities loans $11.3 billion.
Asset backed securities (ABS) issuance was up $15 billion on the week. Home equity ABS issuance totaled $11 billion. Year-to-date ABS issuance of $112 billion is running 17% ahead of 2005’s record pace and y-t-d home equity ABS issuance of $78 billion is 33% ahead of last year’s record boom.
Total commercial paper rose $6.7 billion to $1.681 trillion. Total CP is up $32.0 billion y-t-d, or 12.6% annualized, while having expanded $241 billion over the past 52 weeks, or 16.7%. Financial sector CP borrowings jumped $8.4 billion, or 19.9%. Non-financial CP fell $1.7 billion to $1.36 billion, with a 52-week decline of 4.6%.
Fed foreign holdings of Treasury, Agency debt surged $15.7 billion to a record $1.572 trillion for the week ended 2/22/06. Custody holdings are up $53.3 billion y-y-d, or 22.8% annualized and $208 billion (15.2%) over the past 52 weeks.