The alternative engine

Asia and the world economy | The alternative engine | Economist.com: "AMERICAN consumers have been one of the main engines of global growth for the past decade. But now, as America's housing boom threatens to turn into a bust, many forecasters expect household spending to stall. A few even worry that America could come perilously close to a recession in 2007. Previous American downturns have usually dragged the rest of the world economy down, too. Yet this time its fate will depend largely upon whether China and the other Asian economies can decouple from the slowing American locomotive.
According to conventional wisdom, American consumers have single-handedly kept the world economy chugging along, whereas cautious Europeans and Asians have preferred to save. Yet the importance of America's role in global growth is often exaggerated. During the past five years America has accounted for only 13% of global real GDP growth, using purchasing-power parity (PPP) weights."

Risks of recession continuing to rise | Chicago Tribune

Risks of recession continuing to rise | Chicago Tribune: "Most major polls of economists have said the chances of a recession and its ill-begotten progeny, a bear market, are very low.

While stock market bulls may take comfort in that, they should remember this: Not one recession in the past 50 years was forecast in advance by a major poll of economic forecasters, said James Stack, a market historian and editor of InvesTech Research.

Recessions and bears can and often do arrive unexpectedly. Savvy investors simply cannot rely on assurances that the economy won't lapse into recession, generally defined as two consecutive quarters of negative economic growth.

Recent polls of economists put the odds of this at less than 25 percent.

'At this stage of an economic recovery, now going into the fifth year, it is time for investors to get more defensive and more conservative,' Stack said. 'They have to navigate their portfolio through treacherous waters for the next six to nine months.'

That's because bear markets typically presage recessions and can lop off 20 percent or more of an investor's portfolio."

Credit Extreme

Safe Haven | Credit Extreme Emotion: "Sentiment Update
For the last 11 days, MBH Commodities' Daily Sentiment Indicator (DSI) has recorded a 90% or higher bullish reading for the S&P500 index. This is the highest 10 day average ever recorded in the 19 year history of this indicator. Investors are now more optimistic towards this index than they were at tops in late 1987 or early 2000, which led to falls of 35% and 50%, respectively. The NASDAQ's sentiment is also at extreme levels. For the last 10 days, an average of 92% of investors surveyed believe the NASDAQ will go higher. What makes this even more amazing is that the S&P500 and NASDAQ indexes are not making new highs. With extreme optimism levels not seen in over 19 years in these equity markets, it would be wise to prepare for a historic sell off."

Credit Crunch

The Comming credit crunch

Despite the steadily expanding U.S. economy, a perfect storm of rising mortgage rates, disappearing health-insurance coverage, stagnant wages and relentless college-tuition increases is gathering on the financial horizon for many Americans, threatening a flood of debt and bankruptcies. The warning signs are hard to miss:

The amount of consumer credit outstanding, led by brisk growth in credit card use, more than doubled in the first six months of the year, according to the Federal Reserve. Over the past two years, consumers increased their non-mortgage debt by 12.5 percent, reaching an average of $11,669 early this year, says Experian Consumer Direct, a company that compiles credit reports and scores. Meanwhile, the average number of late payments rose 19 percent, indicating increasing difficulty managing the greater debt load.

Mortgage foreclosures are on the upswing from historic lows, says Bob Visini, a spokesperson for First American LoanPerformance, a mortgage data company in San Francisco. There also is a significant increase in late mortgage payments among sub-prime borrowers, generally those with credit scores below 680 on a scale of 300 to 850. Nationwide, just over 10 percent of sub-prime borrowers are at least 30 days late on their mortgage payments."

This week in Nuclear

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Please, Proceed to the Nearest Exit

PrudentBear.com - The One-Stop Shop for the Bear Case: "Today, as I write this article, a financial storm continues to build. Still, most people don’t want to be bothered with the details. With such pretty pie charts predicting fair winds, they feel secure aboard the “USS Stocks for the Long Term,” chanting the “Buy-n-Hold” mantra should they ever feel a tinge of concern. Yet, when this modern marvel collides with the iceberg of science and history, the pain will cause them to begin searching for what went wrong. Understandably, they want their lives to go as normal. Unfortunately, the thinly disguised marketing materials most investors (and advisors) look to for guidance carry a heavy consequence which will affect many for the rest of their lives."

Guardian Unlimited Business | | America is living beyond its means

Guardian Unlimited Business | | America is living beyond its means: "It's 2056. After a coup in Saudi Arabia, the new government announces it is cutting off supplies of its dwindling stock of oil to the United States. The White House responds by sending in the troops, but is forced to withdraw after Beijing says it will only continue shoring up the dollar if the military action is called off.
Marking the 100th anniversary of Suez, the Americans have no choice but to comply. Fanciful? Ludicrous? Certainly, that would have been the reaction of the traders on Wall Street who last week sent the Dow Jones industrial average to within a whisker of its all-time high. But even if the US can avoid a hard landing in the short term, as equity dealers believe it can, the medium and long-term risks to the economy remain."

Home-Equity Loss Rate Rises to Most Since 2001

Bloomberg.com: Bonds: "Sept. 27 (Bloomberg) -- The rate of losses on U.S. home- equity loans in June reached its worst level since 2001 because of more foreclosures, Moody's Investors Service said.
The loss rate climbed to 1.05 percent of total loans from 0.8 percent in June 2005, Moody's said in a statement yesterday. The amount of loans with payments more than 60 days late rose to 6.76 percent from 5.86 percent. There were $551.1 billion of securities backed by home-equity loans outstanding at the end of last year, according to the Bond Market Association.
Destruction from Hurricane Katrina in Louisiana, Mississippi and Alabama last year along with layoffs in the Detroit area by carmakers Ford Motor Co. and General Motors Corp. this year have left more people unable to pay bills, said Michael Youngblood, a Friedman Billings Ramsey & Co. analyst.
``We have seen much greater weakness in the rust belt cities than anticipated,'' Youngblood said in an interview today.
The share of mortgages entering foreclosure at the end of June was the highest since the fourth quarter of 2004, according to a Sept. 13 report by the Mortgage Bankers Association in Washington. And prices of existing homes fell last month for the first time in 11 years as sales dipped to the lowest level since early 2004, the National Association of Realtors said yesterday. "

PAKISTAN: MULLAH OMAR BEHIND PEACE DEAL BETWEEN GOVT. AND TALIBAN, REPORT

PAKISTAN: MULLAH OMAR BEHIND PEACE DEAL BETWEEN GOVT. AND TALIBAN, REPORT: "London, 25 Sept. (AKI/DAWN) - The fugitive Taliban commander Mullah Omar has emerged as the key player behind the controversial peace deal between the Pakistani government and the pro-Taliban rebels in the tribal region of Waziristan. The online edition of the British daily Telegraph reported that the Taliban’s one-eyed spiritual leader, who has a 10 million dollars price on his head for refusing to hand over Osama bin Laden after the September 11 attacks, signed a letter explicitly endorsing the recently announced truce."

U.S. real estate crash could cause global ripples

globeandmail.com : U.S. real estate crash could cause global ripples: "VANCOUVER -- The United States real estate market has entered a period of 'unprecedented volatility,' and banks, insurance providers, and government housing agencies should brace for global ripple effects, Yale economist and author Robert Shiller told a conference yesterday.
'There is a serious risk of worldwide recession coming up in the next couple of years because of the turning of the real estate market,' said Mr. Shiller, speaking at the annual congress of the International Union for Housing Finance (IUHF) in Vancouver."

Global Growth Downgrades Continue

BCA Research - Independent Investment Research Since 1949: "The ZEW survey of analyst expectations for the euro area and the global economy slipped again in September. The global indicator is now near past cyclical lows, with the U.S. component notably weak. The euro area measure also continues to fall, which is in marked contrast to other surveys that indicate momentum remains strong. While the global economy is clearly cooling, the ZEW measures overstate the pace of the deceleration. However, the weakness of the euro zone reading calls into question the ability of the region to de-couple from U.S. and global trend. Bottom line: the developing global growth slowdown will be broad-based, with all major regions moderating. "

SAC's Cohen sees risk of mass hedge fund exit: WSJ | Business News | Reuters.com

SAC's Cohen sees risk of mass hedge fund exit: WSJ | Business News | Reuters.com: "NEW YORK (Reuters) - Steven Cohen, the billionaire founder of SAC Capital Advisors, said in an interview with the Wall Street Journal that there may eventually be a sharp fall in the stock market, exacerbated by hedge funds crowding into similar shares.
In the interview, published on Sunday, the 50-year-old head of one of the world's most closely watched investment firms also said he was now making bigger bets and holding stocks for a longer time.
'It's hard to find ideas that aren't picked over, and harder to get real returns and differentiate yourself,' Cohen said in the interview. 'We're entering a new environment. The days of big returns are gone.'
The highly secretive investor, whose net worth Forbes magazine estimates to be around $2.5 billion, was also quoted as saying there were risks in burgeoning hedge funds investing in the same stocks.
'There will be a real decline that may devastate hedge funds that have crowded into the same stocks,' he said, adding that he was not worried about that happening this year.
'Hedge funds are bigger than they used to be. Their positions are bigger,' he said. 'I worry that if everyone were to sell, could we get out?'
© Reuters 2006. All Rights Reserved."

Situation Called Dire in West Iraq - washingtonpost.com

Situation Called Dire in West Iraq - washingtonpost.com: "The chief of intelligence for the Marine Corps in Iraq recently filed an unusual secret report concluding that the prospects for securing that country's western Anbar province are dim and that there is almost nothing the U.S. military can do to improve the political and social situation there, said several military officers and intelligence officials familiar with its contents.
The officials described Col. Pete Devlin's classified assessment of the dire state of Anbar as the first time that a senior U.S. military officer has filed so negative a report from Iraq."

Pollution costs China 511.8 billion yuan in 2004

Pollution costs China 511.8 billion yuan in 2004: "BEIJING -- Environmental pollution caused China to suffer 511.8 billion yuan (about US$64 billion) in economic losses in 2004, which amounted to 3.05 percent of GDP that year, according to a government research report released on Thursday.
It is China's first research report on China's 'green national economy', also called 'green GDP', which is calculated by subtracting the cost of natural resources used and the cost of environmental degradation from the GDP.
'This marks only the beginning of our efforts in Green GDP calculation. Our formula is still not complete and we have to keep working hard to improve it,' said Pan Yue, deputy director of the State Environmental Protection Administration (SEPA), at a press conference in Beijing.
The report was jointly released by the SEPA and the National Bureau of Statistics.
The 'Green GDP' calculation system is based on the cost of using five kinds of natural resources - land, minerals, forest, water and fisheries - and the cost of two kinds of environmental degradation - environmental pollution and ecological damage. "

"Smoking gun" evidence uncovered in Ohio of massive vote fraud

Wayne Madsen Report - Home: "After the November 2004 presidential election, this editor reported on massive vote fraud, particularly in Ohio. The relevant articles are found here, here, here, and here. Sources within the U.S. Intelligence Community provided information on the financing -- via foreign funding sources, covert intelligence networks, and illegal pseudo-banking routes -- of programmers, election officials, and others to ensure that Bush and Cheney captured Ohio's critical 20 electoral votes.
Pursuant to a federal law that permits the destruction of ballots, including absentee ballots, 22 months after a federal election, ballots from the 2004 Ohio election were scheduled to be destroyed on Sept. 2, but the intervention of Columbus-based attorney Cliff Arnebeck and the New York-based Center for Constitutional Rights with the U.S. Court in Columbus resulted in a protective order being issued for ballots and voting records in all 88 Ohio counties. This decision upset the corrupt Ohio Republican Party and its gubernatorial standard bearer Kenneth Blackwell, the Secretary of State who helped engineer the 2004 electoral vote fraud coup in his state, who wanted to begin the document shredding process in Sept. 2. "

"Smoking gun" evidence uncovered in Ohio of massive vote fraud

Wayne Madsen Report - Home: "After the November 2004 presidential election, this editor reported on massive vote fraud, particularly in Ohio. The relevant articles are found here, here, here, and here. Sources within the U.S. Intelligence Community provided information on the financing -- via foreign funding sources, covert intelligence networks, and illegal pseudo-banking routes -- of programmers, election officials, and others to ensure that Bush and Cheney captured Ohio's critical 20 electoral votes.
Pursuant to a federal law that permits the destruction of ballots, including absentee ballots, 22 months after a federal election, ballots from the 2004 Ohio election were scheduled to be destroyed on Sept. 2, but the intervention of Columbus-based attorney Cliff Arnebeck and the New York-based Center for Constitutional Rights with the U.S. Court in Columbus resulted in a protective order being issued for ballots and voting records in all 88 Ohio counties. This decision upset the corrupt Ohio Republican Party and its gubernatorial standard bearer Kenneth Blackwell, the Secretary of State who helped engineer the 2004 electoral vote fraud coup in his state, who wanted to begin the document shredding process in Sept. 2. "

If You Can't Trust a Poll

White Collar Crime Prof Blog: March 7, 2005 - March 13, 2005: "Everyone reads reports about surveys and political polls as if they were gospel, but what if the pollster is taking liberties with the data? An indictment returned in the District of Connecticut presents that very scenario involving DataUSA Inc . (now called ViewPointUSA Inc.), which has been charged along with its owner (Tracy Costin) and a manger (Darryl Hylton) with conspiracy and wire fraud for providing political and business clients with falsified data. The indictment alleges that employees were told to speak with cats and dogs for information. The company's website (www.datausainc.com) has the following statement: 'DataUSA upheld the highest standards in data collection as demonstrated in the excellence of our data. DataUSA's predictions of voting behavior and consumer behavior routinely reflected to be within 1% to 2% of actual behavior. We are proud of the quality data collected and want to thank you for teaming with DataUSA and for your support over the years.'
A press release by the U.S. Attorney described the allegations:
According to the Indictment, DATAUSA INC. (“DataUSA”) conducts surveys and political polls for numerous clients throughout the United States. The surveys or polls are conducted through the use of computers and telephones. COSTIN, the owner and director of operations for DataUSA, was charged with conspiracy to engage and engaging in a wire fraud scheme to defraud clients of DataUSA by falsifying and fabricating survey results. According to the Indictment, both COSTIN and HYLTON, a DataUSA manager, and others not named in the indictment, engaged in a scheme to defraud by unilaterally instructing DataUSA employees to alter survey data and to fabricate surveys and otherwise falsify their contents"

Victims of Foreclosure, Predatory Mortgages on the Rise California Foreclosure Attorney Cites Reasons and Troubling Statistics

Victims of Foreclosure, Predatory Mortgages on the Rise California Foreclosure Attorney Cites Reasons and Troubling Statistics: "San Diego, CA (PRWEB) September 7, 2006 -- According to San Diego County records, mortgage defaults have skyrocketed an astounding 219% since the same time last year. In July 2005 there were 345 defaults. In July 2006 there were 756 defaults, a first step toward a lender’s foreclosure on a property. In July 2005 there were 91 trustee sales of homes.

In the same month this year there were 299 trustee sales, more than three times the year before. California foreclosure attorney John F. Brady, who specializes in rescuing homeowners from mortgages in default, credits the rise in defaults and trustee sales to the influx of inexperienced real estate agents, aggressive new mortgage brokers, naïve first time buyers, little or no money down below-market adjustable interest rate loans and predatory mortgage lending practices.

According to HUD and the Center for Responsible Lending, a national watchdog organization, predatory mortgage lending involves a wide array of abusive practices including excessive fees, abusive prepayment penalties, kickbacks to brokers, loan flipping, unnecessary products, mandatory arbitration, and steering & targeting. “You would think mostly low income folks would be the victim’s of predatory mortgages, says Brady,“however recent studies show that three out of four loans were made to borrowers with middle and upper incomes.” "

CPAs Pessimistic about Economy

CPAs Pessimistic about Economy - - CFO.com: "More than half of certified public accountants polled by the American Institute of Certified Public Accountants, many of them CFOs or controllers, are pessimistic about the state of the U.S. economy. The opinions of 54 percent of accountants polled ranged from neutral to very pessimistic. That's up from 41 percent expressing similar sentiments in December 2005, the last time the AICPA conducted this kind of survey.
'The lack of enthusiasm for the state of the economy among these CPA executives seems to mirror that of consumers in general,' said John Morrow, AICPA Vice President for members in business and industry, in a statement."

US: Bullish or Bearish?

Morgan Stanley: "On balance, I remain constructive on the structural prognosis while I have turned more pessimistic on the cyclical outlook.
Four months ago, I dared to pen my first constructive piece on the global macro outlook in years (see my 1 May dispatch, “World on the Mend”). Yet recently, I have warned of the mounting downside risks to world economic growth in 2007 (see my 14 August dispatch, “Not Much Fizz Left in the Global Economy”). How do I reconcile these seemingly contradictory points of view?
My optimistic assessment was primarily a call on the global policy architecture -- the structural framework that governs the cross-border interplay between national economies and world financial markets. I was encouraged because the so-called stewards of globalization finally seemed to be taking the threat of mounting global imbalances seriously. The 22 April meetings of the G-7 and the IMF were watershed events -- singling out global imbalances as an increasingly worrisome threat to sustainable growth in the world economy. The IMF introduced a new paradigm of surveillance and consultation that moved from a single-country to a multilateral framework. I drew added encouragement from pro-consumption rumblings in China that pointed to a rebalancing of that economy away from excess dependence on exports and fixed investment. For years, I worried that the authorities were asleep at the switch as an increasingly unbalanced world veered toward a highly disruptive strain of global rebalancing. With global policy makers finally waking up to the threat, I argued that it made sense to reduce the odds of a crisis endgame"