US MARKETS

The 10-year T-note auction showed a bid to cover of 3 to 1, versus a 10 auction average of 2.67%.

We have been told over and over again a weak dollar would build exports and turn our balance of payments deficit down. Well, it hasn’t happened yet.

The budget deficit was $9.185 billion for December, a 15-straight monthly decline. That is up from $51.75 billion in December 2008. That makes the first fiscal quarter a $388.51 billion deficit. Revenues were $218.92 billion versus $237.79 in December 2009, the lowest since December 2004.

Prime jumbo borrowers overall, that are 60 plus days delinquent, rose to 9.2% for December, almost three times last year’s 3.2% in December 2008. If you combine 2006 and 2007 combined they moved from 4.3% to 12.7%. The five big losers are California, New York, Florida, Virginia and New Jersey, which make up 2/3’s of the problem loans. California up 10.8%, up from 3.5%, or a 44% share; New York 5.8%, up from 1.8%, or a 7% share; Florida 16%, up from 7.3%, or 6%; Virginia 5.4%, up from 2.3%, or 5%, and New Jersey 7.1%, up from 2.3%, or 4%. The most expensive homes are now in free fall.

Goldman Sachs has admitted that they have been front running and opportuning against their clients in the fundamental strategies group, which is not subject to the same regulatory rules that equity research departments are. That is why they are called “Hannibal Lecter” in the business.

They have been setting up clients to take losses so their trading would be profitable. That is like eating your own children. This is the bottom of the moral and ethical totem pole.

The notional value of derivatives held by US commercial banks rose $804 billion in the third quarter, or 0.49%, to $204.3 trillion. That consisted of 1,065 banks, a fall of 45 from the prior quarter. Five major banks held 97% of the amounts and 88% of the exposure. The CEO’s are sorry for their risky behavior, but they are still engaged in it in a bigger way than ever.

Incidentally, these are the same banks that have a record short position in the dollar.

New Gallup Poll figures show the President’s handling of the economy at 40% and approval of his handling of healthcare at 37%

          The Federal Reserve yesterday issued sweeping new rules designed to better protect Americans from sudden increases in interest rates on credit cards.

          The rules, effective Feb. 22, bar rate increases during the first year after an account is opened. After the first year, companies must provide a 45-day notice.

          Some lenders have pushed through rate increases ahead of the new rules. That irked lawmakers in Congress who had wanted to speed up implementation of the Fed’s rules.

          The new rules also ban - with a few exceptions - increasing the rate on existing card balances. But if, for instance, a customer is behind more than 60 days on a payment, the rate can be boosted.

          Credit card companies will need a customer’s consent before charging fees on transactions that exceed their credit limits and will forbid companies from issuing credit cards to people under age 21 unless they - or a parent or other cosigner - have the ability to make the required payments.

          Payments will be applied to highest interest-rate balances first, helping customers pay off their balances faster and more cheaply. And due dates will be the same every month.

          The Fed wrote the rules to carry out provisions of legislation signed into law last year. Other provisions of that law take effect later this year.

          School administrators across the state of Massachusetts are crafting bleak budgets for the next school year and warning of steep cutbacks, including teacher layoffs, to cope with a probable sharp drop in funding from Beacon Hill and dwindling federal stimulus money.

          Though schools grappled with thinned-down budgets last year, they got relief from a massive infusion of federal education dollars that is now all but spent, and officials are bracing for cuts that go deep into the classroom.

          Arlington is weighing the elimination of 21 elementary school teaching positions. Needham, for the first time in recent memory, is also proposing that teaching positions be cut, despite growing enrollment. Hingham, facing a $3 million deficit, has similarly placed 33 teaching positions on the block. Brockton is looking at a staggering shortfall that could approach $20 million.

          Investors are the most bearish on Treasuries in more than two years as the reliance on government debt to revive economic growth weighs on sovereign issues, a survey of Bloomberg users showed.

          Yields on the benchmark U.S. 10-year note will rise over the next six months, according to the Bloomberg Professional Global Confidence Index. The 5,437 respondents from New York to Tokyo to Paris were optimistic on the outlook for the global economy for a sixth consecutive month, pushing the index, which began in November 2007, to a record high.

          Treasury yields will rise for a second consecutive year as U.S. debt sales climb above $2 trillion and the Federal Reserve unwinds stimulus programs, according to the 18 primary dealers that trade with the central bank. The survey shows sentiment is also the most pessimistic on record for the U.K., Spain and Switzerland, where governments also enacted measures to support their economies.

          “The market will have to absorb a significantly greater amount of supply as the Fed steps away,” said Michael Pond, a survey participant and an interest-rate strategist in New York at Barclays Plc, one of the primary dealers required to bid on Treasury auctions. “We do expect yields to go higher. Bearishness across all sovereign issuers may be warranted.”

          The US Federal Reserve has reported a record profit of $52 billion in 2009 due to earnings gained from investments aimed at rescuing the US economy.

          The Fed says it paid $46.1 billion to the US Treasury last year from its investments in Treasury bonds and mortgage-related securities — including those of mortgage giants Fannie Mae and Freddie Mac.

          "The significant increase in earnings on securities was primarily due to increased securities holdings as a result of the Federal Reserve's response to the severe economic downturn," the Federal Reserve explained in a statement on Tuesday.

          The entity that functions as a central bank for the US says it returned any profit to the Treasury Department after paying operating costs.

          The Fed's profit last year was $14.4 billion more than it had earned in any year since 1914.

          The numbers are a sign that the Fed has been successful in dealing with the economic crisis triggered by a dramatic rise in mortgage delinquencies and foreclosures.

          But there is a risk of significant future losses if the Fed sells investments or loses money on its stakes in bailed-out firms.

...

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-- Posted Monday, 18 January 2010 | Digg This Article