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International Forecaster January 2010 (#3) - Gold, Silver, Economy + More

By: Bob Chapman, The International Forecaster



-- Posted Monday, 11 January 2010 | | Source: GoldSeek.com

The following are some snippets from the most recent issue of the International Forecaster.  For the full 26 page issue, please see subscription information below.

US MARKETS

 

          The number of Americans filing for personal bankruptcy rose by nearly a third in 2009, a surge largely driven by foreclosures and job losses.

 

          And more people are filing for Chapter 7 bankruptcy, which liquidates assets to pay off some debts and absolves the filers of others. That is significant because a 2005 overhaul of federal bankruptcy laws aimed to encourage Chapter 13 filings, which force consumers to sign onto debt-repayment plans in exchange for keeping certain assets.

 

          The changes were designed to make it more difficult for people to shed their debt, particularly in a Chapter 7 filling. A "means" test, for example, was introduced to separate those who could afford to repay their debt from those who couldn't. A Chapter 7 filing is off the table if the means test determines a person is able to pay back at least a portion of the debt after it is restructured.

 

          The worst U.S. recession in a generation is testing the effectiveness of these laws. The economic downturn also has prompted more middle-class Americans to file for bankruptcy protection.

 

          Overall, personal bankruptcy filings hit 1.41 million last year, up 32% from 2008, according to the National Bankruptcy Research Center, which compiles and analyzes bankruptcy data. It is the highest level of consumer-bankruptcy fillings since 2005. Consumers rushed to file in 2005 before the new bankruptcy laws took effect in October of that year.

 

          Chapter 7 filings were up more than 42% as of November 2009, compared with the same period a year earlier, according to the research center. November is the most recent month with analyzed data available. Chapter 13 filings rose by 12% and made up less than a third of 2009 filings as of November.

 

          "That suggests it was largely ineffective," Ronald Mann, a law professor at Columbia University, said of the 2005 overhaul. "I don't think anybody who's knowledgeable about the bankruptcy system thought the statute was well crafted."

 

          During this recession, the housing crisis and high unemployment rate have prompted more people to file for bankruptcy who may never have considered the option before, experts said. Filings from 2008 showed more people with high income and high education levels resorting to bankruptcy petitions, according to an annual survey of consumer-bankruptcy filers' demographics by the Institute for Financial Literacy, a nonprofit that provides bankruptcy-related counseling and education services. Those demographic trends appeared to continue last year.

 

          Mr. Mann said he believes bankruptcies reached their peak sometime last year, but bankruptcy attorneys from across the country said there was no sign that business was slowing. The 113,274 filings in December alone were a third higher than the same month a year earlier.

 

          "I can't see over the top of the files on my desk," said Cathleen Moran, a bankruptcy attorney at Moran Law Group in Mountain View, Calif., likening it to the rush of clients before the revised law went into effect. In a three-month period before those rules changed in 2005, her firm filed five times as many cases as usual.  Ms. Moran's clients in 2008 typically were people who earned between $40,000 and $80,000. That changed last year when a rash of people who earned $100,000 to $300,000 began filing as well, she said.

 

Non-manufacturing sector expanded in December, but barely, according to data released Wednesday by the Institute for Supply Management. Employment within the broad sector continued to contract.

 

The ISM's non-manufacturing purchasing managers' index rose to 50.1 last month, from 48.7 in November. The December index was slightly below the 50.5 expected by forecasters surveyed by Dow Jones Newswires. Readings above 50 indicate expanding activity.

 

The ISM said its December business activity/production index rose to 53.7 last month from 49.6. The new-orders index slipped to 52.1 from 55.1 in November. 

 

Nonfarm private employment declined by 84,000 jobs in the month of December, marking the eight straight month of a decreasing rate of job destruction.

 

According to the authors of the ADP National Employment Report, “employment losses are now rapidly diminishing and, if recent trends continue, private employment will begin rising within the next few months.”  Despite the improvement over the 145,000 jobs lost in November (revised up from -169,000), December's slowdown was still less than forecast. Analysts had expected a better improvement in the range of 63,000 jobs lost.

 

Well-known banking analyst Meredith Whitney on Tuesday cut her earnings estimates for Wall Street bank Goldman Sachs for the second time in less than a month.

 

          Shares of Goldman Sachs (NYSE: gs) fell immediately after the news, but then rebounded higher.

 

Whitney, head of the Meredith Whitney Advisory Group, lowered her fourth quarter estimate for Goldman Sachs to $5.50 from $6. She also cut her full-year estimate for Goldman for 2010 from $19.65 to $19.20; her 2011 earnings per share estimate from $20.60 to $20.25; and her 2012 estimate from $21.45 to $21.10.

 

Whitney had previously cut her estimates for Goldman on Dec. 17. Whitney lowered her estimates for bank Morgan Stanley (NYSE: ms) this past December, reducing her 2010 expectations to $2.60 a share from $2.63 a share. For 2011, her firm lowered its profit estimates to $2.75 a share from $3.28 a share on the bank. It also set an earnings estimate of $2.90 a share for Morgan Stanley for 2012.

 

Construction spending on hotels, office buildings and retail centers may fall 13 percent this year, the second straight annual decline amid a drop in property prices, the American Institute of Architects said.

 

The Washington-based group’s forecast is more severe than an estimate it made in July, when it predicted a 12 percent decrease. Spending will turn “marginally” higher in 2011, the group said today.   “The magnitude of the downturn has set in,” Kermit Baker, the group’s chief economist, said in an interview. This year’s expected drop compares with a decline of about 20 percent in 2009. “Another bad year is the bottom line, but there are some prospects of recovery as we get into 2011.”

 

U.S. commercial real estate values sank to the lowest level in seven years in October as job losses cut demand for apartments, offices and retail space, Moody’s Investors Service Inc. said last month. Office vacancies may approach 20 percent in 2010, according to Jones Lang LaSalle Inc. and Grubb & Ellis Co. Unemployment was 10 percent in November after a 26-year high of 10.2 percent the prior month, the Labor Department said.

 

Commercial construction spending will probably have a “marginal increase” of 1.8 percent next year, according to the architects group.

 

That forecast “still implies a weak first half of 2011 and a stronger second half,” Baker said.

 

          Industrial construction spending is likely to slump the most this year, 24 percent, and an additional 7.8 percent in 2011, the institute said.

 

The group expects hotel building to also fall about 24 percent this year, before rising 5.4 percent in 2011.

 

          Spending on office buildings may drop 19 percent this year and then increase 12 percent in 2011, while retail construction is likely to decline 17 percent this year before climbing 3.2 percent next year, the group said.

 

          The Federal Reserve Bank of New York, then led by Timothy Geithner, told American International Group Inc. to withhold details from the public about the bailed-out insurer’s payments to banks during the depths of the financial crisis, e-mails between the company and its regulator show.

 

          AIG said in a draft of a regulatory filing that the insurer paid banks, which included Goldman Sachs Group Inc. and Societe Generale SA, 100 cents on the dollar for credit-default swaps they bought from the firm. The New York Fed crossed out the reference, according to the e-mails, and AIG excluded the language when the filing was made public on Dec. 24, 2008. The e-mails were obtained by Representative Darrell Issa, ranking member of the House Oversight and Government Reform Committee.

 

          The New York Fed took over negotiations between AIG and the banks in November 2008 as losses on the swaps, which were contracts tied to subprime home loans, threatened to swamp the insurer weeks after its taxpayer-funded rescue. The regulator decided that Goldman Sachs and more than a dozen banks would be fully repaid for $62.1 billion of the swaps, prompting lawmakers to call the AIG rescue a “backdoor bailout” of financial firms.

 

          “It appears that the New York Fed deliberately pressured AIG to restrict and delay the disclosure of important information,” said Issa, a California Republican. Taxpayers “deserve full and complete disclosure under our nation’s securities laws, not the withholding of politically inconvenient information.” President Barack Obama selected Geithner as Treasury secretary, a post he took last year.

 

          Central bankers will hold talks with banking executives in Switzerland this weekend amid concern financial companies are rebuffing a push to increase regulation and temper risk-taking as the recent crisis ebbs.

 

          The gathering to discuss regulation will take place at the Bank for International Settlements in Basel, according to two Group of Seven central bank officials. The BIS invited commercial bankers citing concerns that they are returning to the excessive-risk patterns that helped spark the global crisis in 2007, the Financial Times reported today.

 

          The meeting comes a month after the BIS urged central banks to take greater account of financial stability and published proposals aimed at forcing banks to hold more and better-quality capital and discourage leverage. The MSCI World Index of stocks has surged 73 percent since its low of last March.

 

          “The central bankers are clearly aiming to head off the excesses that will certainly come out of the very easy monetary policy” put in place during the crisis, said Bill Belchere, global chief economist at Mirae Asset Securities in Hong Kong. “They have no choice but to be prudent and vigilant to grapple with the potential problems and stop bubbles before they emerge.”

 

          The BIS meetings occasionally feature sessions with private banks and this month’s gathering will be such an example, the two officials said on condition of anonymity because the agenda isn’t public. Bank executives usually attend the January meet.

...

THE INTERNATIONAL FORECASTER

SATURDAY, JANUARY 9, 2010

010910(3)_IF

P. O. Box 510518, Punta Gorda, FL 33951-0518

An international financial, economic, political and social commentary.

 

Published and Edited by: Bob Chapman

NOTE: NEW E-MAIL ADDRESSES

For correspondence to Bob: bob@intforecaster.com

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-- Posted Monday, 11 January 2010 | Digg This Article | Source: GoldSeek.com



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