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Stocks Risking Taking, Bonds Take a Beating and Gold Volatility

Stock-Markets / Financial Markets 2010 Dec 11, 2010 - 10:40 AM GMT

By: Anthony_Cherniawski


Best Financial Markets Analysis ArticleA&P May File for Bankruptcy as Soon as Weekend After 151 Years in Business
(Bloomberg) Great Atlantic & Pacific Tea Co., the once-dominant grocery-store chain founded in 1859, may file for bankruptcy in the coming days to restructure debt, two people with knowledge of the matter said. A filing to reorganize under court protection may come as soon as this weekend, said the people, who declined to be identified because the matter is private. A&P hired law firm Kirkland & Ellis LLP to represent it in negotiations with creditors and in any Chapter 11 proceeding, the people said.

U.S. Michigan Consumer Sentiment Index Rose in December

(Bloomberg) Confidence among U.S. consumers increased more than forecast in December to the highest level in six months at the same time Americans began stepping up holiday spending. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment rose to 74.2 from 71.6 at the end of November. Economists projected a December reading of 72.5, according to the median estimate in a Bloomberg News survey.

M2 Rises To Fresh All Time Record, 19 Of 21 Consecutive Weekly Increases

(ZeroHedge) One of the funniest lines in Bernanke's speech last 60 Minutes speech is when he said that the currency in circulation has not increased despite his monetary easing - ergo there is no inflation. Of course, as even doorknobs know by now currency is merely one component of physical and binary money out there.

Bullish Sentiment Leads to more Risk-Taking.

-- The Investment Company Institute reported the 31st sequential weekly outflow from domestic equity mutual funds. Despite $93 billion of outflows, the stock market is at 2010 highs, courtesy of the Federal Reserve’s “Quantitative Easing.” The difference between price and value has never been so wide. Yet the bull/bear ratio in the Rydex NASDAQ 100 funds is 34 to 1, reminiscent of the Dot-Com Bubble. What’s scarier today is that traders are using leveraged funds that were not available in 2000.

The Long Bond Has Taken a Beating.

--Treasury 10-year notes fell, pushing the yield toward its biggest weekly increase this year, as better-than-estimated reports on consumer confidence and the American trade deficit boosted optimism about the economy. U.S. government bonds have tumbled this week amid speculation President Barack Obama’s agreement with Republicans to extend tax cuts will spur growth in the world’s largest economy and drive down unemployment from the highest levels since the early 1980s.

Gold Uptrend Experiencing Volatility.

--Gold futures fell, heading for a weekly loss, as concern that China may tighten monetary policy eroded demand for precious metals. Silver, palladium and platinum also dropped.

China, the world’s second-biggest gold buyer, ordered lenders to park more money with the central bank for the third time in five weeks. Before today, gold climbed 27 percent this year, reaching a record $1,432.50 an ounce on Dec. 7.

Japan’s Stocks Leery of Growing Debt Crisis.

-- Japanese stocks declined for the first time in three days after a downgrade to Ireland’s credit rating fueled concern Europe’s debt crisis will spread and as the euro weakened. The Nikkei 225 Stock Average fell 0.7 percent to 10,211.95 as of the close in Tokyo. The Topix lost 0.4 percent to 888.22, with about 8.5 shares dropping for every 6.5 shares that gained. The Nikkei 225 gained 0.3 percent this week, rising for a six consecutive week.

China inflation still climbing.

-- Emerging-market stocks fell while the Shanghai Index gained 1.1%, after Ireland’s credit rating was cut and as a surge in Chinese exports overshadowed concern the government will raise interest rates to slow inflation. The data may show (Chinese) consumer prices climbed 4.7 percent in November, the highest in three years, according to the median estimate of 29 economists surveyed by Bloomberg.

The dollar pulled back this week.

-- The dollar fell against the euro, paring a weekly gain, on speculation Federal Reserve policy makers on Dec. 14 will discuss a plan to extend Treasury purchases to support growth.

The dollar dropped as benchmark Treasury yields declined for a second day, damping the allure of U.S. assets. Fed officials announced last month a $600 billion second round of debt buying through June.

Plunging Property Values Swamp Tax Tribunals.

-- The backlog of cases from Michigan taxpayers seeking to lower property-tax bills of more than $100,000 shot up to 14,236 this year from an annual average of about 6,000 during the past decade. The backlog of smaller claims was at 28,558 at the end of September, eight times higher than a decade ago, according to records at the tribunal, a Lansing-based administrative court.

Gasoline Prices Up Another Dime Last Week.

--The Energy Information Agency weekly report states, “The U.S. average retail price for a gallon of gasoline shot up 10 cents from last week to $2.96 per gallon, the highest average since October 2008 and $0.32 per gallon above last year at this time. This was the largest one week increase since May 2009. The biggest increases were seen in the Midwest and on the Gulf Coast; in both regions the price surged to over 13 cents higher than the previous week.”

Florida got a Cold Blast.

-- The U.S. Energy Information Administration reports, “Although cold temperatures were present throughout much of the United States, the Northeast and Florida saw the most substantial price increases. The price of natural gas at the Florida Gas Transmission Citygate trading point more than doubled, increasing from $4.84 per MMBtu on December 1 to $10.56 per MMBtu on December 8. Citing the cold temperatures, Florida Gas Transmission issued pipeline restrictions this week.”

Federal Reserve Loses $2.4 Billion In Taxpayer Money In Most Recent QE2 POMO Interval

(ZeroHedge) With the Federal Reserve now actively participating in capital markets, it should be noted that just like every other asset manager, the Fed has to be held accountable for its trading efficacy. After all, the Treasury takes every opportunity to remind the US public how courtesy of record amounts of new government debt, it has managed to make "profits" on its assorted investments, which are merely transfers of risk from one entity to another, and the "another" being the US taxpayer, although not directly, but indirectly via the now ludicrous amount of US debt which will never be repaid. Which is why the US taxpayer may want to know that in just the most recent POMO schedule - that from early November to December - the Federal Reserve has lost $2.4 billion in taxpayer capital by its mistimed market operations, primarily due to the recent rise in interest rates.

November Budget Deficit $150.4 Billion, Worse Than $138 Billion Consensus, Biggest November Deficit On Record

(ZeroHedge) The Treasury has released the November deficit, which at $150.4 billion was about $12 billion worse than expected. Total receipts were $148 billion, of which individual income taxes were $64.3 billion, while the government actually refunded $3.1 billion for corporate taxes in the month. While cumulative receipts since the start of the new fiscal year are better than in the prior year period ($135.7 billion compared to $109.1 billion), it is the expense side that is far more important: in November the government spent $299.4 billion, the bulk of which going to the Department of Health and Human Services ($72 billion), social security ($64 billion), and Defense ($57 billion).

Second QE2 POMO Schedule Released: Fed Will Buy Back $105 Billion In Bonds Through January 11

(ZeroHedge) The New York Fed has announced its 2nd POMO schedule. In the next month, Brian Sach will buy another $105 billion in bonds, which is lower than we expected, and may indicate that Sack is not expecting the MBS prepaying to accelerate. There will be 18 POMOs in the next month. And December 21 will be another day that will have two POMOs held: one at 11am and one at 2pm. With negligible trading volume, we expect the ramp in the market then to be ridiculous.

A Real Jaw Dropper at the Federal Reserve

(Huffington Post) At a Senate Budget Committee hearing in 2009, I asked Fed Chairman Ben Bernanke to tell the American people the names of the financial institutions that received an unprecedented backdoor bailout from the Federal Reserve, how much they received, and the exact terms of this assistance. He refused. A year and a half later, as a result of an amendment that I was able to include in the Wall Street reform bill, we have begun to lift the veil of secrecy at the Fed, and the American people now have this information.

It is unfortunate that it took this long, and it is a shame that the biggest banks in America and Mr. Bernanke fought to keep this secret from the American public every step of the way. But, the details on this bailout are now on the Federal Reserve's website, and this is a major victory for the American taxpayer and for transparency in government.

More Than Half of Americans Want Fed Reined In or Abolished

(Mish) A majority of Americans are dissatisfied with the nation’s independent central bank, saying the U.S. Federal Reserve should either be brought under tighter political control or abolished outright, a poll shows

The survey, conducted Dec. 4-7, also shows deep skepticism, especially among Republicans, over the Fed’s Nov. 3 announcement that it would buy bonds in an attempt to bring down unemployment and prevent deflation. More than half say the purchases won’t help the economy.

The policy, known as quantitative easing, was the target of criticism in Washington and overseas. That prompted Fed Chairman Ben S. Bernanke to appear in an interview on CBS television’s “60 Minutes” program on Dec. 5 to defend his actions.
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Disclaimer: The content in this article is written for educational and informational purposes only.  There is no offer or recommendation to buy or sell any security and no information contained here should be interpreted or construed as investment advice. Do you own due diligence as the information in this article is the opinion of Anthony M. Cherniawski and subject to change without notice.

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