Dow Shows Confidence in U.S. Economy

[John McKenna]

http://www.mercurynews.com/markets/c...nclick_check=1

Latest Dow record shows confidence in U.S. economy
Mercury News Wire Services
Article Launched: 05/10/2007 01:34:12 AM PDT

Stocks climbed Wednesday, sending the blue-chip Dow Jones industrial average to another record close.

The technology-heavy Nasdaq composite index rose 4.59, or 0.2 percent, to 2,576.34.

Silicon Valley's largest tech stocks by market value were mixed. Google, Intel, Apple, eBay, Gilead Sciences and Applied Materials gained. Cisco Systems, Hewlett-Packard, Oracle and Yahoo dropped.

The Dow rose 53.80, or 0.4 percent, to 13,362.87. The Standard & Poor's 500 index advanced 4.86, or 0.3 percent, to 1,512.58.

Federal Reserve policy-makers Wednesday kept short-term interest rates unchanged and noted that while economic growth is slowing, they still consider inflation a higher risk than the possibility of a slowdown in the economy.

"No one is really surprised," said Jay Suskind, director of trading at Ryan Beck. "The market whisper was that they would show more concern about inflation.

"The market rallied back up because the flip side is that this means the economy is doing well enough and earnings will stay strong," Suskind said.

Texas Instruments rallied $1.66, or 4.4 percent, to $36.83. The Dallas maker of mobile phone chips raised its target for gross margin, or the percentage of sales minus production costs, to 55 percent from 50 percent.

IBM, a Dow component, rose $1.09, or 1.1 percent, to $104.38. The technology giant's shares were upgraded to "buy" from "neutral" by Goldman Sachs.

Weighing on the Dow, Walt Disney dropped 43 cents, or 1.2 percent, to $36.12 after the Burbank entertainment giant didn't generate as much revenue as analysts had forecast, though its 27 percent profit rise came in ahead of forecast.

Bond prices dropped after the Fed decision. The yield on the 10-year Treasury note, which moves in the opposite direction, climbed to 4.67 percent from 4.64 percent late Tuesday.

The dollar was mixed against other major currencies, while gold prices fell.

Crude-oil prices dropped 71 cents to $61.55 a barrel on the New York Mercantile Exchange, after the U.S. government said the nation's gasoline stockpiles increased last week.

The Associated Press, MarketWatch and Bloomberg News contributed to this report.

[Joseph Burkeson, CMI]

What a difference a day makes...

Dow Tumbles On Retail Sales

The Dow industrials fall 147 points. Analysts had been saying the market was due for a pullback.

By Madlen Read
The Associated Press
The Denver Post
Article Last Updated:05/10/2007 11:55:22 PM MDT

New York - Wall Street retreated sharply Thursday, slicing nearly 150 points off the Dow Jones industrial average after weak sales at many of the nation's major retailers heightened concerns about consumer spending.

The day's economic news, which also included a disquieting trade-deficit figure, appeared to give investors the rationale they were looking for to cash in some of the market's recent gains. Analysts have been saying the surging stock market, which had pushed the Dow up more than 1,000 points since the beginning of March, was due for a pullback.

Companies including Wal- Mart Stores Inc., J.C. Penney Co. and Federated Department Stores Inc. said business fell in April, hurt by rising gasoline prices. Though many retail stocks had respectable gains Thursday, the reports raised worries that retail-sales data from the Commerce Department today will also disappoint and suggest that the economy is slower than previously thought.

Thursday's sluggish retail sales and widening trade gap raised concerns that, while a rate cut may be necessary to boost the flagging economy, the central bank will be loath to make one because of the threat of inflation.

"What the Federal Reserve said yesterday is that their principal focus is on inflation, and what retail sales said today is that their focus should be on the economy," said Hugh Johnson, chairman and chief investment officer of Johnson Illington Advisors.

The Dow fell 147.74, or 1.11 percent, to 13,215.13, giving back five sessions' worth of gains. It was the biggest point drop in the blue-chip index since a 242- point plunge March 13.

Broader stock indicators also declined. The Standard & Poor's 500 index lost 21.11, or 1.40 percent, to 1,491.47. The Nasdaq composite index dipped 42.60, or 1.65 percent, to 2,533.74.

[John McKenna]

Odds against US recession 2 to 1: Greenspan
Posted: 11 May 2007

http://www.channelnewsasia.com/stori...275535/1/.html

[Joseph Burkeson, CMI]

U.S. economy poised for nose dive
Major recession feared when 'liquidity bubble' bursts

Posted: April 21, 2007
1:00 a.m. Eastern


By Jerome R. Corsi
© 2007 WorldNetDaily.com


As the dollar sinks to near-record lows against the euro and the British pound, the stock market has returned to record highs, but investors are being advised to anticipate a worldwide downturn and the U.S. economy may have already entered a recession.

An explanation may be found in a private investment letter published by the Carlyle Group to its "professional investors."

WND has obtained a copy of a Jan. 31 letter by the Carlyle Group's founding partner and managing director, William E. Conway, Jr., to the firm's investment professionals worldwide.

In the letter, Conway attributes the continued rise of world stock markets to a glut of liquidity in the world financial system, which he describes as "the availability of enormous amounts of cheap debt."

Conway writes, "This cheap debt has been available for almost all maturities, most industries, infrastructure, real estate and at all levels of the capital structure."

He says there is so much liquidity in world financial systems that "lenders (even 'our' lenders) are making very risky credit decisions."

WND previously reported concern that the decision of the Federal Reserve to quit publishing a traditional index, "M3," a broad measure of the money supply, signaled a decision to pump the economy with excess liquidity.

Since the Fed quit publishing M3 data, economists who have attempted to re-create the index from other available data have estimated M3 data would today be reporting upwards of a 10-percent increase in the money supply, a high level by historical standards.

"Liquidity" is defined by economists as money available in all forms to be given out as debt, ranging from credit card debt to mortgage debt to large quantities of institutional debt typically used in complex financial transactions such as highly leveraged corporate acquisitions.

Excess liquidity, as reflected in the rise of highly leveraged hedge fund accounts, has been widely seen as a major factor in the rise of the stock market in the recovery since 9/11.

Conway cautions that "this liquidity environment cannot go on forever." He warns that "the longer it lasts, the worse it will be when it ends."

Looking on the bright side of what could be a major recession when the liquidity bubble bursts, Conway advises, "And of course when [the liquidity bubble] ends the buying opportunity will be once in a lifetime."

He adds, "But I do not know when it will end."

Bob Chapman, who publishes a bi-weekly Internet newsletter, The International Forecaster, has issued his reconstructed M3 estimate to100,000 subscribers.

"The world is awash in money and credit," Chapman said. "My numbers show M3 increasing at about a 10-percent rate right now."

Chapman has spent 45 years in the finance and investment business, including 28 years as a stockbroker specializing in gold and silver shares. He publishes his newsletter from an undisclosed address outside the U.S.

In his April 14 newsletter, Chapman wrote, "The effort to save the American economy, which began in 2001, has finally come full circle and the Ponzi scheme is coming unraveled. The overextension of credit, outrageously low interest rates and loans to the totally unqualified have finally come home to roost."

For months, Chapman has been warning that the U.S. economy entered a downturn in February 2006. Chapman expects it will develop into a prolonged recession caused largely by the bursting of the housing bubble and the weakness in the dollar attributable to the United States' large federal budget deficit and international trade imbalance.

At the same time, Chapman has been predicting for months that the dollar will challenge the technical support point of $USD 80 on the world currency markets.

On Thursday, the dollar index closed at $USD 81.64 in a steady decline that began at the end of February.

The euro late last week was trading as high as $1.3576, near its December 2004 record of $1.3539. At the same time, the pound rose to $1.9938, its highest point since September 1992. The pound last reached the $2 mark 14 years ago, when the UK was ousted from the European Exchange Rate Mechanism.

Chapman has argued the U.S. Treasury and Federal Reserve have been trying to manage a gradual devaluation of the U.S. dollar.

Chapman expects the dollar could lose as much as an additional 20 percent of its value this year alone. In the last five years, the dollar has lost 35 percent of its value against the euro.

Still, until debt defaults force a crisis in the world debt markets, Chapman agrees with the Carlyle Group that excess liquidity will continue to buoy the world stock markets, including the New York Stock Exchange, to new highs.

Chapman also agrees with Conway that when the liquidity bubble bursts, the decline in world stock markets could be sharp and severe, possibly even reaching crash magnitudes on the downside.

"Tens of billions of dollars have already been lost in the U.S. sub-prime lending market and the contagion is spreading as the media tries to cover-up what is really going on," Chapmen wrote in his March 28 newsletter. "We are watching the disintegration to an extent of the entire mortgage market, which encompasses 25 percent of all outstanding credit."

Chapman continued: "We predicted this three years ago and those who believe they are savvy discovered the problem a couple of months ago. This is a general meltdown and do not think it isn't, and it has several years to go until the real estate sector is purged."

The Carlyle Group, a large Washington, D.C., private equity firm headquartered founded in 1987, has close ties to the administration of President George H.W. Bush.

WND also reported the Carlyle Group has established a new team to invest in Mexico. The team includes Mark McLarty, president of Kissinger McLarty Associates and former chief of staff and special envoy to the Americas for President Bill Clinton.

[John McKenna]

Worldnetdaily.com is a wonderful source that I read all the time,
but they also like to sell gold coins (doomsday reports go with this type
of vendor) and they lean toward some conspiracy and UFO stories
a little to heavy "sometimes"... IMHO.

Please read with caution, when considering their stories about the end of
the world as we know it.

[Michael Larson]

John,

I think Joe is "Gold Bug". They hope doom and gloom scenarios will actually happen so their gold will out preform other investment vehicles.
Gold may be a good investment at times but with an ongoing great economy this doesn't appear to be a good strategy at this time. Of course things can change overnight but when you decide to bet against the American economy you are most likely making a huge mistake. JMHO your milage may vary.

[Joseph Burkeson, CMI]

Originally Posted by mlarson

I think Joe is "Gold Bug".

You know very little about me and that is a good thing, so why speculate? I have almost no gold investments less then 2%, why would anyone want to own something that only provides capital appreciation, true wealth is not created that way.

Believing you will get rich by owning gold is as foolish as believing that you can create wealth buying newly built houses from builders and selling them to other investors.

[Michael Larson]

Sorry Joe,

I made an assumption based on all the negative posts about the economy you are wont to post and where they tend to come from.