October 28 2009

October 18, 2009

The culture of not only this country but of the world begs for commentary based on reason. The problems, the confusion, and to some degree the metaphorical darkness that enfolds this world is a result of man not adhering to the design he was created for, which is to search for and adhere to truth. All ills of this world can be attributed to either the non recognition of “truth” or the rebellion against “truth”.

So then, the age old question raises its head again, ‘what is truth?’ How do we come to truth? Can everyone have ‘the’ truth? Is truth objective? Can each person have his or her own individual truth? According to Webster ‘truth’ is defined as ‘fact or reality’; ‘that which is’.

We are creatures of an environment. With being creatures and being created there must be a plausible or reasonable assumption that we have a creator. There is nothing in man’s experience that dictates otherwise. From the fountain pen, to the automobile, to the most esoteric of thoughts—there is a creator of each of these entities. So also with reason we can deduce, being creatures of a material world, that we have a creator. Each of these elements, the pen, the auto, a thought not only has a creator but also a purpose; the pen to write, the automobile to carry and travel, and Einstein’s Theory of Relativity to explain the cosmos and how it works through physics. What they all have in common is a creator and a purpose. These are ‘truths’ based on reason. One could say about the pen that it is a crow bar. Yet the pen will not work as a crowbar in prying or lifting a heavy load from a floor. No matter how many times an individual repeats the mantra that the pen is a crow bar or how many times an individual is told it is a crow bar or how many times an individual attempts using that pen as a crowbar—the pen will not work as nor is a crow bar. Pens do not fulfill that purpose because they were not designed for that purpose, were not created for that purpose. Is it the complete truth? No. But neither is it the complete truth that all pens are fountain pens; all automobiles are Hondas and all esoteric thoughts come from Einstein. There is a fullness of ‘truth’ which we will get into much later in our discussion.

Let’s take the automobile. The creator is Honda, or more specifically, a number of engineers. They created this marvel of engineering to take an individual or group of individuals from point ‘a’ to point ‘b’. It has an ‘owner’s manual’—usually in the glove compartment. That owner’s manual directs whoever owns the car on how it runs, what makes it run and how to keep it running properly. One would think that the creator of this automobile would know this information and for a variety of reasons would want the owner to know as well. Now Sam, who owns the automobile, normally would want to read the ‘owner’s manual in order to maintain and keep his car operating. Sam wants to find out the ‘truth’ in regards to changing the oil or what kind of gas he should put in the gas tank so that his car will operate properly and keep operating properly. But for a moment, let’s assume that he doesn’t want to find out from the manual what the ‘truth’ is in regards to keeping his auto running well (rebellion against truth). Sam goes to his neighbor. Now his neighbor, Joe, is from New York City. He’s never owned a car; has had no interest in anything mechanical, and could care less how they work because he always takes public transportation. Sam asks Joe, what he thinks he should put in the crankcase. Joe responds with ‘molasses’ (ignorance of truth). The motivation is irrelevant. The knowledge and advice is false. Sam doesn’t know it but when he gets home and puts molasses in the crank case because of his friends advice, starts the engine, and takes it out on the road, it will not be very long before the automobile will break down, not run any longer and could be irreparably damaged. Joe didn’t do this out of spite necessarily but from lack of knowledge and care. Even more so, Sam took it upon himself to inquire or get advice from someone who, at the very least, is incompetent, making himself partially responsible for the eventual breakdown of his car.

We, this wonderfully, ‘well knit’ creation of humanity that populates this world, have the same things metaphorically happening to us today, as with that automobile. We also have been created with an ‘owner’s manual’. And it has been with us since the beginning of time. We can see society today and its disintegration. It’s happening before our very eyes because we as individuals as well as collectively are trying to follow a manual that wasn’t produced by the entity that created us. Instead, society looks towards the media, the entertainment industry, Oprah, the secular and agnostic fathers of pop culture for answers, life styles, for thought processes, for perfect marriages, how to consistently be happy--to all of these elements as being in or should be in our ‘owner’s manual’. And the results? Marriages have over a fifty percent divorce rate; abortion is now numbering in the forty plus million; there are two states in the union that sanction suicide; a drug war declared by the government back in the Nixon era that has spent untold billions of dollars and yet the problem not only has not receded but in actuality has accelerated; a separation and attempted elimination of classes; forced redistribution of wealth; and the list goes on. Notice that the previous sentence involves nothing but death and destruction. Why? We don’t have to look back through the history of this world and see what has happened to humanity—it’s happening right before our very eyes. And it’s happening because of our almost total disregard of ‘our owner’s manual’. From Rome to present day society—there is nothing new under the sun. One can track historically the rise and fall of world cultures and societies when they disregard this ‘owner’s manual’. It’s not pretty.

But we really do have an ‘owner’s manual’. And because we are creations our creator has imbedded this ‘owners manual’ in our ‘glove compartment’--our soul, our very being, cross societal, cross cultural.

It’s called the Natural Law.

Financial News October 15, 2009

Consumer Prices in U.S. Increased at Slower Pace in September2009-10-15 12:30:01.146 GMTBy Timothy R. Homan Oct. 15 (Bloomberg) -- The cost of living in the U.S. rose at a slower pace in September, showing inflation will not be a threat as the economy emerges from the worst recession since the Great Depression. The 0.2 percent gain in the consumer-price index followed a 0.4 percent increase in August, as forecast, figures from the Labor Department showed today in Washington. Excluding food and energy costs, the so-called core index also climbed 0.2 percent, more than anticipated and pushed up by health care and a rebound in auto prices. Rents dropped for the first time in 17 years. The worst economic slump since the 1930s has left unemployment at a 26-year high and record levels of homes sitting vacant, signaling companies and landlords will hold the line on prices in coming months. The lack of inflation may give the upper hand to the Federal Reserve policy makers who’ve said the central back can keep interest rates low for a long time. “Substantial excess capacity in the economy has dampened the pricing power of retailers,” Steven Wood, president of Insight Economics LLC in Danville, California, said before the report. “Accelerating inflation has retreated as a significant near-term concern but there are also fewer fears of deflation,”or a protracted decline in prices. Economists forecast consumer prices would rise 0.2 percent, according to the median of 79 projections in a Bloomberg News survey. Estimates ranged from a decline of 0.2 percent to a gain of 0.5 percent.To contact the reporter on this story:Timothy R. Homan in Washington at +1-202-624-1961 or thoman1@bloomberg.netTo contact the editor responsible for this story:Chris Anstey at +1-202-624-1972 or canstey@bloomberg.net New York Empire Factory Index Surges to Highest Since 20042009-10-15 12:30:01.0 GMTBy Bob Willis Oct. 15 (Bloomberg) -- Manufacturing in the New York region expanded in October for a third straight month, reinforcing signs that factories are helping pull the economy out of the worst recession in seven decades. The Federal Reserve Bank of New York’s general economic index soared to 34.6, the highest since mid-2004, from 18.9 in September, the bank said today, marking the first time the measure has shown expansion for at least three months since a period ending in January 2008. Readings above zero for the Empire State index signal manufacturing is growing. Government stimulus measures such as highway repairs and an auto trade-in program, record inventory cutbacks that set the stage for renewed production and a revival in overseas demand are helping factories expand again.Stabilization in manufacturing is one reason economists estimate that growth resumed last quarter. “The worst is over for the factory sector and the worst is over for the economy,” Michael Gregory, a senior economist at BMO Capital Markets in Toronto, said before the report. “Exports will increasingly be providing support to that sector. They’re at expansionary levels and that’s the key.” Economists forecast the Empire manufacturing gauge would drop to 17.3, according to the median of 50 estimates in a Bloomberg News survey. Projections ranged from 12 to 22.1. Manufacturers account for 6 percent of New York’s $1.1 trillion economy.To contact the reporter on this story:Bob Willis in Washington at +1-202-624-1837 or bwillis@bloomberg.netTo contact the editor responsible for this story:Christopher Wellisz at +1-202-624-1862, or cwellisz@bloomberg.net U.S. Initial Jobless Claims Fall to Lowest Level Since January2009-10-15 12:30:00.787 GMTBy Courtney Schlisserman and Timothy R. Homan Oct. 15 (Bloomberg) -- The number of Americans filing first-time claims for unemployment benefits dropped last week to the lowest level in nine months, indicating the improving economy is leading to a slowdown in firings. Applications fell by 10,000 to 514,000 in the week ended Oct. 10, lower than forecast, from a revised 524,000 the week before, Labor Department data showed today in Washington. The total number of people collecting unemployment insurance also decreased. Fewer dismissals don’t mean that companies will boost hiring, signaling the jobless rate is likely to keep climbing in the early stages of the economic rebound. Mounting joblessness is among reasons Federal Reserve policy makers, who project the recovery will be “restrained,” are likely to keep interest rates low for months to come. “What we expect for the most part is the downward trend to continue,” Maxwell Clarke, chief U.S. economist at IDEAglobal in New York, said before the report. “We will probably have more sustained growth in the labor market starting in early 2010. From there we will find a peak in the unemployment rate and ultimately create jobs.” Claims were forecast to fall to 520,000 from the 521,000 originally reported for the previous week, according to the median of 41 economists’ forecasts in a Bloomberg News survey.Estimates ranged from 490,000 to 550,000.To contact the reporters on this story:Courtney Schlisserman in Washington at +1-202-624-1943 or cschlisserma@bloomberg.netTimothy R. Homan in Washington at +1-202-624-1961 or thoman1@bloomberg.netTo contact the editor responsible for this story:Christopher Wellisz at +1-202-624-1862 or cwellisz@bloomberg.net Heard on the street... Corrective: Trade is pulling back better from the lower levels with the Philly Fed helping boost prices in a roundabout way. The market is also getting some corrective action as weak shorts get dragged out, with the curve out of joint. The once steeply steepening 2-10-yr yield spread has flipped back to flatter mode as the market reassesses its direction. The move to DJ 10K is being viewed as mostly spin, with the jump, even on a closing basis, being ephemeral, or as one long time player noted "a wanna-be. Feel good" moment.

Mortgage News

U.S. MBA Mortgage Applications Index Fell 1.8 Percent Last Week2009-10-14 11:00:03.0 GMTBy Courtney Schlisserman Oct. 14 (Bloomberg) -- Mortgage applications in the U.S. fell last week from the highest level in four months as borrowing costs increased. The Mortgage Bankers Association’s index of applications to purchase a home or refinance a loan declined by 1.8 percent to 742.9 in the week ended Oct. 9 from 756.3 a week earlier.The group’s gauge of purchases dropped 5 percent and its measure of refinancing decreased 0.1 percent. The index has jumped 52 percent over the last year as government efforts to bring down interest rates and on unclog credit have contributed to gains in sales. Economists are counting on stabilization in housing to help the economy recover from the worst recession since the 1930s. “We’ve seen bottom overall in terms of residential construction and home sales,” Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida, said before the report. “It’s going to be a long road back though.” The mortgage bankers’ purchase index decreased to 290.9 from 306.1 last week, the highest level since January, today’s report showed. The refinancing gauge fell to 3,374.6 from 3,377.1, the highest level since May. The share of applicants seeking to refinance loans rose to 67.4 percent of all applications from 66.3 percent.To contact the reporter on this story:Courtney Schlisserman in Washington at +1-202-624-1943 or cschlisserma@bloomberg.netTo contact the editor responsible for this story:

Current fiscal news Reply

By Matthew Brown and Wes Goodman Oct. 13 (Bloomberg) -- Treasuries rose for the first time in three days as investors bet the Federal Reserve will keep interest rates at an all-time low until late next year and the central bank prepared to buy securities. Ten-year notes led the gains after holidays in the U.S. and Japan. Fed Bank of St. Louis President James Bullard said yesterday that a falling unemployment rate is a precondition for an increase in the target interest rate from near zero. Treasuries fell last week after Fed Chairman Ben S. Bernanke said policy makers will tighten monetary policy once the economic outlook improves. “People are rethinking the negative spin on Bernanke’s comments of last week as there’s been no comments from the Fed saying they are thinking of raising rates sooner rather than later,” said Charles Diebel, head of European rate strategy at Nomura International Plc in London. “Treasury futures rose yesterday, so there is catch-up in the cash market today.” The yield on the benchmark 10-year note fell 3 basis points to 3.35 percent as of 7:12 a.m. in New York, according to BGCantor Market Data. The 3.625 percent security due August 2019 increased 9/32, or $2.81 per $1,000 face amount, to 102 10/32. Trading of Treasuries was closed yesterday in the U.S., Japan and London, because of a public holiday in North America. U.S. 10-year note futures expiring in December rose 0.2 percent yesterday, and were little changed at 118 19/32 today. The Fed will hold off raising interest rates until the third quarter of 2010 as the recovery is likely to be too weak to lift employment and incomes, according to a September survey of 57 economists by Bloomberg News. Futures on the Chicago Board of Trade show a 61 percent likelihood that the central bank will increase the target rate from the current range of zero to 0.25 percent by April.

Goldman Downgrade
Goldman Sachs Group Inc., the biggest U.S. securities firm before converting to a bank last year, was cut to “neutral” by Meredith Whitney today, after the stock rose 34 percent since she upgraded the company to a “buy” recommendation on July 13. New York-based Whitney, who correctly predicted in 2007 that Citigroup Inc. would cut its dividend, said on Sept. 10 that Goldman Sachs “still has a lot of gas in its tank.” The Fed is scheduled to purchase notes due from May 2016 to August 2019 today. The Fed has purchased $294.064 billion of U.S. debt since March under a $300 billion program scheduled to end this month. “You want to see the economy start to recover in all its dimensions, output and trade” before raising rates, Bullard said in a Bloomberg Radio interview in St. Louis. “We do have some of those turning around now.”

Jobless Rate
The jobless rate rose to a 26-year high last month of 9.8 percent, the Labor Department said on Oct. 2. Retail sales in the U.S. probably fell in September as auto showrooms sat empty after the “cash for clunkers” program expired, economists said ahead of the Commerce Department report tomorrow. Purchases dropped 2.1 percent after rising 2.7 percent in August, according to the median forecast of 72 economists surveyed by Bloomberg News. Other reports this week may show inflation and factory production cooled last month, according to Bloomberg surveys. The financial crisis started with the collapse of the U.S. property market in 2007 and has triggered $1.62 trillion of writedowns and credit losses at banks and other institutions, according to data compiled by Bloomberg.

Inflation Surge
Now investors are preparing for another potential crisis: a surge in the cost of living spurred by the $11.6 trillion the Federal Reserve and the government has lent, spent or guaranteed to shore up the economy and the financial system. BlackRock Inc., Pacific Investment Management Co. and Vanguard Group Inc., which together manage $3.45 trillion, say investors are pouring money into inflation-linked debt even as consumer prices post the longest series of contractions since Dwight D. Eisenhower was president in 1955. “Investors are really taking the long view and trying to hedge inflation risk,” said Mihir Worah, who oversees the $15.4 billion Real Return Fund for Newport Beach, California-based Pimco, the world’s biggest bond manager. “That’s the biggest reason why we’re seeing the flows.” Treasury Inflation Protected Securities, or TIPS, have gained 7.9 percent this year, according to Merrill Lynch & Co. indexes, while Treasuries overall lost 2.8 percent. That’s the biggest outperformance since the U.S. first issued TIPS in 1997.

Cheap TIPS
Bernanke said at a Board of Governors conference Oct. 8 in Washington that while “accommodative policies” will be in place for an extended period, the central bank will be prepared to tighten monetary policy “to prevent the emergence of an inflation problem down the road.” TIPS remain cheap by historical measures. The difference in yield between 10-year TIPS and 10-year notes is 1.85 percentage points, compared with an average of 2.18 over the past five years. A survey of investors by Ried, Thunberg & Co. shows fund managers turned more bearish on Treasuries. The company’s index measuring the outlook through the end of 2009 fell to 45 for the seven days ended Oct. 9 from 46 the week before. A figure below 50 shows investors expect prices to fall. The company, based in Jersey City, New Jersey, interviewed 21 fund managers controlling $1.54 trillion. *T Related News and Information: Bond yield forecasts: {BYFC } World bond markets: {WB } Credit market watch: {CMW } Sovereign debt monitor: {SOVR } Credit crunch page: {WWCC } Short-term liquidity {SLIQ } Bonds for sale: {PREL } *T --With assistance from Steve Matthews in Oklahoma City and Kathleen Hays and Daniel Kruger in New York. Editors: David Clarke, Peter Branton.

Today's financial news and commentary

In the markets, yesterday was a relatively quiet day. Rates are still low, and the stock market improved somewhat, which tends to make the US populace feel a little better about things. In fact, in spite of the profit margins, interest rates for 30-year fixed-rate mortgages are near last May’s levels. And 15-yr rates, where interestingly enough the principal portion of the early payments is about half of the total P&I, are the lowest in decades. So these rates, combined with the potential end of the $8,000 tax credit and some great pricing, are certainly helping to stabilize home sales. New home sales are the highest they’ve been in a year, and inventories are the lowest they’ve been in decades. One cloud on the horizon, as it always is, is this week's Treasury auction. Or, put another way, with the supply this week don’t look for a big drop in rates unless the stock markets continue their downward path, which may be unlikely. Yesterday we had $7 billion of 10-yr TIPS, today we have $39 billion of 3-yr notes, tomorrow $20 billion of 10-yr, and on Thursday $12 billion of 30-yr. bonds. Without much other news, we find the 10-yr currently yielding 3.24% and mortgage security prices about unchanged.

Well, in a nutshell there you have it. So what's the guess? My guess is buy real estate. Or maybe gold. Or maybe currencies of emerging countries such as China or India. Whatever you do, the dollar is fading. The government needs to shore it up by quit printing and spending money that we don't have. But that's just my opinion. Washington will probably extend, to some degree, the $8,000 tax credit for first time home buyers. Also, there maybe a new "cash for clunkers" in the works as well. But be careful. That money is taxable.