Outlook for week of April 20th

by Stephen Tetreault, T-Waves | April 20, 2009

Strap-yourselves in tight this week, as it is sure to be another wild rollercoaster of a ride! On Friday I wrote the following.....(14:13:49) MY Technicals are calling for a significant topping event to trigger with 6-10 trading hours, we should see a drop in the Dow of 650-750 points Nasdog drop of 125-175 points and the SPX a drop of 85-125 points so please trade carefully Selling SPX into OHR at 875-885, Dow has significant OHR at 8,198-8,225 thereafter 8,270-8,290, Nasdog has significant OHR at 1,689-1,700, and thereafter at 1,725-1,730 while the Russell-2000 has significant OHR at 487-493 thereafter 514-520 we are very-overbought on a multitude of time frames and we are near-completion or have completed Bearish-Rising-Wedge patterns in all the major indexes, and I believe that we are knocking on the door step of a 25-40 % correction at a minimum. SPX has significant Support at 787-790 thereafter at 762-765, Dow has significant Support at 7,560 thereafter 7,410 , Nasdog has significant Support at 1,525-1,550 thereafter at 1,470, and the Russell-2000 has significant Support at 444 thereafter at 402 The BULLS ARE IN CONTROL RIGHT NOW, and as I have said before this rally is theirs to press forward this week or lose and since we are embroiled in a 6-week parabolic uptrend....this rally is quite long in the proverbial tooth ; we have a mundane level of potential market moving economic data due to be released this week (please review calendar at the end of this report)! See report below...4-20-2009 I have put the Retailers into the SELL-BLOCK

As a technician the charts are flashing significant-divergences and SELL-signals on a near-term and intermediate basis...during the past few weeks as we have seen some significant periods of whipsawing volatility. Investors still appear to be buying dips but then they seem perplexed quickly thereafter as each passing day brings another conflicting view of the economy, and this seems to be adding to the apprehension and skittishness.. We have two opposing forces at work, those who desire to book profits and sit out this period of uncertainty, as the market swings pick up in intensity and those stricken with greed or the fear of missing out of this so called bull-rally. The excessive positioning and excessive leverage all leaning to the LONG-side has me very worried!!

I expect that we could see some distinct volatility this week (VIX is low though). We will soon see which market emotion “Greed” or “Fear” will win out. Please remember my friends….trying to pick market direction based on real-concrete facts and tangible data can be a fool’s endeavor; as the stock market is not a single entity it is not a rational human being but is driven by the individual decisions promoted by greed and fear of millions of investors and many huge mutual funds and thousands of hedge and trading funds. Without these funds cooperating together the market is going to move sluggishly if at all. As such the answer to the $64,000 question as to whether the rally is over, or this is just a minor pause depends on whether these funds believe or desire or NEED for underlying reasons to move higher. Now we are in a quandary as I believe that if we are to move higher we need at least a 50% correction as way to many are questioning the validity of this parabolic rally and without some decent retracements it will be tough to attract new money into the market as no one wants to be a bag-holder after a 25% rally; and smart money will not want to buy into a 25% rally unless they can get a decent retracement wherein they feel comfortable with putting up new monies.

Adding to my bearish posture is the premise that a huge segment of the SPX will report earnings this week, and the best of the best report early...their guidance has been anything but stellar....I believe that the upcoming earnings or lack thereof will soon start to weigh heavily on the markets after this stellar relief rally as investors and traders alike start to become skittish, like a long-tailed cat in a room full of rocking chairs, of their pent up profits from the past 6+/- weeks of intensive trading (especially after the dismal start to this New-Year). Earnings will likely be negatively impacted due weakening corporate profit environment along with a deteriorating economy, as such we could easily see a positional stance taken by many smart-money players of selling into any strength as we enter the confessional-period and earnings announcement season, and as such this scenario could be played out in a major significant manner. In my opinion U.S. firms will most likely post their smallest gains in profits Moving forward earnings will be negatively impacted by the ongoing economic slowdown as such corporate guidance for growth will surely be worse than previously hyped.….I believe many smart-money players already understand this hence their lack of stepping up in a bullish buying mode after such a great relief rally.

Please understand that my technicals and the way I am reading the chart patterns (see technical section below) that I believe in the near-term that we will need to see a significant retracement 25-38% maybe even a 50% pull-back of this parabolic up-move before we can attempt to move higher into the end-of-the-year and into the new-year; the 240/180/120/60 minute charts and now the daily's are very overbought and we have seen some very-strange negative divergences forming; and it appears that at least for the momment anyway the external contagions (economic, financial and corporate) are being ignored as the indexes crawl upward as this countertrend move stays alive. It appears at least at first blush that No amount of bad news is not a real concern for this market. It's getting that head down in the sand look to it. As if nothing can get in their way. What is perplexing to me is that I am seeing massive negative divergences forming and yet these indexes some how continue to crawl higher nearing break out levels and the contagions just doesn't seem to matter. Or does it:?.

The markets last week ignored negative remarks from the Wal-Mart CEO as Mike Duke said the retailer's customers (these are average Americans, those who bleed and sweat for this country) are under a great deal of stress and that signs of a consumer revival are way too optimistic. “We all want to be hopeful. We're all looking for a better day when we start to come out of this,” he said in an interview aired Wednesday on NBC's [Today TV program]. “I will tell you, though, in talking to our customers all across the country, I think there's still a lot of stress.” he said that the recession will not be V-shaped and the economy wouldn't bounce back quickly. Given fears about unemployment, “maybe there is some period of time from seeing the first data points to actually translating to the 140 million Wal-Mart customers around the country feeling it when they come in our stores.”

I wrote this about in my 02-02-2008 weekend-market recaps....seems like I was dead on target huh? And it bears repeating! The rhetoric of late reminds me of the 1859-famous novel by Charles Dickens called the Tale of Two Cities (only now we could interpose the Tale of Two-Classes, the haves and have nothings) The book opens with the famous line "It was the best of times, it was the worst of times..." the novel tells a story of the shameless corruption, abuse and inhumanity of the French nobles towards the peasantry. The masses, oppressed for eons, rise up at last and destroy their masters.

I have been asked by several subscribers over the past several weeks about my longer term out look for our economy and markets….well here it is…I believe we have already entered a recession…the fuzzy-math manipulators have just been fudging the numbers…I believe that this consumer lead recession will be a huge recession that could easily hinge on a depression; I believe that over the next several years the Dow will trade back down to the 7000-7500 level, the SPX will be cut almost in half, and the Nasdog will test the old relevant 2002 lows and unfortunately many stocks will fall by as much as 50-75% and this next bear-market will crush the masses. The lamebrains on the various bubblevision networks are now praising the Federal Reserve for taking aggressive actions to avoid recessions and the bursting of bubbles which they themselves created, and I find this an awful joke, as they insult at least my intelligence! The problem in a nut shell is that we should have experiences mini-recessions and boom-bust, and business-destruction-creation cycles during the past decade as is the normal evolution of a true and “FREE” capital-society, however through their manipulation, and the greed of the wall-street tycoons, bankers and various insiders, they have been just putting what I call Band-Aids on a patient that should have had its wounds cleaned, sutured and allowed to heal, now we have a patient on the verge of a massive heart attack that is about to hemorrhage and now they are bringing out the defibrillators and hordes of plasma in order to rescue a drying patient that they ignored when it only had a cold/flu, hence this attempt to stall what is a normal business and economic cycle could send us into a depression, one that they caused, and worse yet (knowingly….I believe), now please understand that along the way as we enter this perfect force 5-huricane we will see brief periods of sunshine, and when we enter the eye of the storms all will be well, or so it seems, however those who have lived through mega hurricanes as I have know that the back side of the storms is twice as violent before it subsides! Meaning that we will not fall off a proverbial cliff like Wiley Coyote

The indexes on options-X Friday crawled higher as better-than-expected pro forma earnings from Citigroup, General Electric and Google, helped stretch the recent relief rally to a sixth straight week, and the bulls are getting braver as so many now believe the bear market carnage is but a distant memory and that we have boarded the new-bull-market train into the land-of-milk and honey. However this rally appears to be very-overextended as the days where the bulls attempt to hang onto their gains the selling volume has been picking up as are the options betting on a sell-off as the put activity and call-selling has significantly picked up!

The Dow 5.90 points; while the SPX gained 4.3 points; and both ended at more than 2-month relative high, while the Nasdog gained 2 points , ending at a more than 5-month high…so lets all forget about the massive looming economic, social, credit/debt-crisis and fundamental contagions, as they no longer matter, in just 6-short weeks !

The SPX which is the broader based index has gained 28.5% in the past six weeks, as investors (mostly institutional traders, on the large trading desks [banks, and brokerage firms taking on excessive leverage trading with taxpayer-money infusions in an attempt to bolster their bottom lines) others with vested interests….like hedge-funds, mutual funds [looking to mitigate fund redemptions etc.] others like myself recognized the impending bottom and looked to trade the extreme-oversold relief rally (I was only looking for 15-18% and as such I left the stampeding bullish herd way to early) many others have been led to believe that this is a sustainable recovery as such they have been placing their bets that the economy is stabilizing.

This 6-week is the market's best run since May 2007 and it has defied the laws of gravity, sensibility, logic and for the most part sound fundamentals and sound economic principles…I have been quite baffled of late and it dawned on me this weekend that 1-3 times a year the markets move in a choreographed manner, and the insider players are the chief puppeteers, and through their push/pull it happens and the markets just move in a very disconnected manner. Often the mystical-market does what it is so fond of doing it makes fools out of best intelligent-logical-rational value and fundamental driven traders/investors. Currently that is somewhat the case as no matter how bleak, dismal or crummy the economic data releases are, how deeply the fuzzy-math experts pump up the pro forma earnings statements; how disappointing the employment picture is or the housing market deteriorates this market keeps churning higher…it wants to chug higher just like “The Little Engine that Could” which is somewhat of a significant change in sentiment/psychology from the past 6-8 months.

A negative report that was not reported on fully by those on bubblevision this Wednesday….industrial production dropped as businesses struggle to work down their inventories of unsold goods due to demand slack, the output of our nation's factories, mines and utilities dropped 1.5% in March, retreating in spite of higher production of motor vehicles and a boost from utilities, this is not very bullish at all, and the data we generated by the fed-heads. Industrial production is down 13.3% since the recession began in December 2007, the largest percentage drop since the end of World War II.

In the past year, industrial production has plunged 12.8%; while output plunged at a 20% annualized rate during the first quarter, and it's now at the same level as December 1998, the Fed's data indicated. Factory production dropped 1.7% in March. Factory output has plunged 15.7% during the recession, also the largest decline since 1945-1946. Underscoring the trend in manufacturing, factory output has dropped 15% in the past 12 months and has fallen for five consecutive quarters.

These huge declines in industrial production in the past two quarters reflect very aggressive cuts in inventories by businesses. And eventually this will become an economic positive event….I still expect industrial production to contract 11-12% this year and it would be the biggest drop in the postwar period before it orchestrates a hard bottoming process in the second to third quarter of 2010.

In the March industrial production report, the Fed said capacity utilization dropped by a full percentage point, to 69.3%, the lowest level since the data series began in 1967. In manufacturing, capacity utilization fell to 65.8%, which means a third of the nation's manufacturing capacity is sitting idle; and this is surely cutting into profits and reducing firms pricing power. This clearly demonstrates signs of growing slack throughout the economy that are very deflationary.

HOUSING-Segment

How can this data be perceived as a trough or a bottom was in in the home-building sector as so many profess this past month? The construction industry continued to contract last month, eliminating 126,000 jobs across residential, commercial, and heavy construction sectors, according to figures released by the Bureau of Labor Statistics. The only industry to lose more jobs in March was manufacturing, which shed a whopping 161,000 positions overall in areas such as fabricated metal products, machinery, and transportation equipment.

These eliminated jobs that were in construction and manufacturing {are good paying benefited positions}…construction jobs have dropped more than 20%, or 1.3 million positions, since January 2007; what is even worse is that nearly half of that drop-off occurred in the past five months, according to the BLS release. March was a dismal showing for builders and their counterparts. In March, all five sub-sectors of the construction industry reported a quickening of job losses as compared to February, only the third time that has occurred over the past three years. Within residential building, for example, approximately 18,000 jobs vanished in March compared to the previous month, a 2.4% decline. Residential specialty trade contractors saw 40,700 positions evaporate, a reduction of 2.3% on a monthly basis.

But the true picture that is never shown on CNBC is even worse, given the composition of the home building workforce. Since the peak, jobs related to residential building construction have fallen 30% and residential contractor employment has declined 29%, which likely excludes illegal workers that were as much as 25-30% of the industry’s labor force especially in California, Florida and Texas.

Some of the nation's largest mortgage firms are stepping up foreclosures on delinquent homeowners; and this will likely lead to more Americans losing their homes just as the Obama administration's housing-rescue plan another taxpayer-bailout, where 90% or more of responsible Americans bailout the 5-10% of irrational and irresponsible Americans. J.P. Morgan Chase, Wells Fargo, Fannie Mae and Freddie Mac all stated that they have increased foreclosure activity in recent weeks. Those companies say they have lifted internal moratoriums which temporarily halted foreclosures (hum, why would this be occurring if we are near a bottom?). Many had stopped foreclosing on borrowers as they waited for details of the Obama administration's housing-rescue plan, which provides incentives for mortgage companies and investors to reduce borrowers' payments to affordable levels (something that I doubt will happen in enough volume to make a difference). Others had temporarily halted foreclosures while they put their own programs in place or in response to changes in various state laws.

They have now begun to determine which troubled borrowers are candidates for help, and to move the rest through the foreclosure process. The resulting increase in the supply of foreclosed homes will likely depress home prices and put additional pressure on bank earnings as troubled loans are written off their balance sheets (unless we can find a new way to hide these contagions). Foreclosure sales had dropped in the second half of 2008 as mortgage companies delayed taking action against delinquent borrowers. Foreclosure-related filings increased by nearly 6% in February from the month earlier, and were up almost 30% from February 2008, according to data released from RealtyTrac; and stealthily and quietly we have seen that the current backlog of seriously delinquent loans has been growing.

In California, notices of trustee sales, which are preludes to foreclosure sales, climbed by more than 80% to 33,178 in March, from February, according to data from ForeclosureRadar.com. The increase reflects both the expiration of foreclosure moratoriums and a California law enacted late last year that temporarily delayed default and foreclosure notices.

Now (I know many of you think that I’m sort of a chicken-little forecaster at times) but I still believe through my extensive research and calculations that home prices may still plunge 20% to 25% from their January levels; as such I fail to see how the economy can be in a recovery mode). I believe that between (1.97-2.6 million) homes could be foreclosed on because borrowers can't meet their loan payments, up from about (1.7 million in 2008).

I have read that J.P. Morgan Chase has increased foreclosure actions since the expiration of a moratorium on new foreclosures that had began on 10/31/08, and a later moratorium put in place at President Obama's request. The 10/31/08 moratorium delayed foreclosures on more than $22-23 billion of JPM-owned mortgages involving more than 80-84,000 homeowners. “We had stopped putting additional loans into the foreclosure process so we could be sure that delinquent borrowers would have every opportunity to take advantage of new initiatives that we were putting in place,” a Chase spokesman had previously stated.

Both Fannie and Freddie have stepped up sales of foreclosed properties since their moratoriums ended on 3/31. Freddie says it has started to complete some foreclosure sales, such as those involving investment properties or second homes, though it continues to delay foreclosures on loans that may be eligible for modification under the Obama taxpayer-bailout plan. A potential positive Fannie has told servicers that “a foreclosure sale may not occur on a Fannie Mae loan until the loan servicer verifies that the borrower is ineligible for any loan modification under the Obama administration's plan, and all other foreclosure prevention alternatives have been exhausted” according to a statement from Fannie.

Still, some borrowers who are currently talking to their mortgage companies are also likely to wind up in foreclosure once their files are reviewed. “We are getting so many of these cases where people don't fit the new [Obama] program,” says Michael Thompson, director of Iowa Mediation Service. Many borrowers are unemployed or underemployed or have credit problems that go well beyond their mortgage troubles, and these contagions are growing at the worst possible time!

Many home owners and servicers have been “playing for just a reprieve” additional time while the moratoriums have been in place. But these delays have only increased the amount of interest, penalties and fees they owe, making their loans nonviable in the long run. Many toxic and troubled loans will ultimately wind up in foreclosure because the borrower just doesn't have sufficient income to make even a reduced mortgage payment.

Please remember that many troubled loans are held by hedge funds, pension funds and other investors, the expiration of foreclosure moratoriums could also put a dent in their profits (though the moratorium helped to lift the 1st quarter profits due to delay of write-offs at the banks. These moratoriums have just delayed the overall realization and acknowledgement of these massive contagions.

With mortgage rates near all-time lows and home buyer tax credit in place, U.S. home builders were much more optimistic and giddy about the housing market in April than they were in March, but they are still a long way from feeling good about their business. Is this reality, of just hope…..are they talking their book? Confidence amongst home builders increased in April, according to a report issued by Wells Fargo and the National Association of Home Builders (NAHB) today. The housing market index came in at a level of 14 for April, against expectations for a reading of 10 and following last months reading of 9 for March. The reading is the highest since 10/2008, but still remains far below the critical 50 level that would indicate a return to positive sentiment. The index, which has a 22-year history, consists of three components.

The sales expectations for the next six months component rose a whopping 10 points to 25 in April.
Meanwhile the component for present sales for single-family homes rose to 13 from 8. Finally, the component monitoring traffic of prospective buyers rose 5 points to 14.

Over the past three years, the index has fallen from 71 to a record-low reading of 8 in January 2009. A rating above 50 indicates optimism by home builders; a reading below 50 indicates pessimism. The all-time low prior to this recent credit-crisis-debacle was 19.

The volume of mortgage applications filed last week dropped a seasonally adjusted 11% compared with the week before, even as mortgage rates dropped whish was a strange divergence from what was reported on bubblevision. The results of the MBA's weekly survey were not adjusted for the Easter/Passover weekend, which may have contributed to why application volume declined. On the bright side Mortgage-application volume was still up 45.6% last week when compared with the same week in 2008. The volume of refinance applications dropped an unadjusted 10.9% for the week ended April 10, compared with the week before. Applications filed for mortgages to purchase a home were down a seasonally adjusted 11.3%. While the four-week moving average for all mortgages were up 5.3%. Refinance applications made up 77.8% of all mortgage activity, was down slightly from 77.9% the week before. The 30-year fixed-rate mortgage averaged 4.70% last week, down from 4.73% the previous week. The 15-year fixed-rate mortgage averaged 4.46%, down from 4.49%. And 1-year ARMs averaged 6.21%, down from 6.23%.

The bond market is starting to reconcile itself for a bankruptcy filing by GM but fears still lurk, building up around the edges….the primary reason is the same that prompted our lamebrain governmental idiots to provide the auto firms a taxpayer bailout in the first place: [systemic risk, and economic intertwined vulnerability]. As the collapse of Lehman proved, it isn't the firm itself but its wide-flung associations, and connections are the real contagions risk in the case of bankruptcy filing.

WE saw after the close on Friday that General Motors may structure a new debt plan that would convert $48 billion owed to bondholders and its union to equity at the direction of the Obama administration, Reuters reported late Friday, citing people briefed on the plan. GM intends to propose the plan to bondholders and the United Auto Workers union within the next two weeks, according to Reuters. Tentative plans to convert some amount of GM's debt for equity have been at the core of the company's restructuring effort for months and are seen as a way to spread the financial risks more evenly between bondholders and employees.

A bankruptcy filing by GM, which had $91 billion in assets at the end of last year most of which are over inflated [I believe their asset position is closer to 63-66-billion], would be the 3rd largest in U.S. history, after those of Lehman and WorldCom. and the largest ever for an industrial manufacturer. Worse yet as we saw in the past with the airlines, once one of the major players in the sector declares bankruptcy, the cancer spreads to the other major players as if they do not follow suit their competitive-position would be severely diminished due to the new cost structures enjoyed by the first firm to take the bankruptcy-path (elimination of legacy costs as these would now be stuck on the backs of taxpayers, breaking of and renegotiation of union contracts, and elimination of debt are a few examples)…as such Chrysler and Ford would likely follow the same bankruptcy path as GM and the contagions would be broad and sweeping

I know there's something out there lurking like a coiled cobra ready to strike and we just don't see yet. From a credit-market perspective, the most likely risks aren't in GM's debt itself as GM's $28-29 billion in unsecured bonds are already trading at $0.08-0.11 on the dollar, so bondholders already know they are going to get screwed and fleeced. The gross notional outstanding credit default swaps on the GM bonds have been shrinking for some time. At the end of last week, the net notional amount stood at just $2.71 billion, according to the Depository Trust & Clearing Corporation. However, according to a recent report from Moody's Investors Service, GM's swaps are widely distributed as part of structured swap products, so the pain could be wider than the raw numbers have led many to assume.

In a reorganization under bankruptcy such as that being bantered about (split into a good/bad firm), many of GM's unprofitable product lines will be cut back or eliminated entirely…as such the parts for those lines which are made by various auto-parts producers, which have on their own billions of dollars in debt outstanding will be negatively impacted…it’s the economic domino theory. The auto sector has some $150-170 billion in bonds outstanding, according to data collected by Moody's. The physical restructuring of GM could lead to rolling defaults and bankruptcy reorganizations throughout the auto sector. As such the GM bankruptcy could force many a supplier our of business (more bankruptcies and more unemployment)

What is unknown at this time is how the combination of events from a huge, complex bankruptcy such as a GM bankruptcy will work themselves out. In the past few weeks, credit markets have started to exhibit cautious optimism; I am not in this camp as I believe much of the damage from such a bankruptcy to the “real” economy from this downturn has yet to be felt.

WHO will win this battle?

Many large technology firms, hopes for significant tax relief will soon give way to fears of a potentially costly backlash due to their lack of patriotism. At a time when the United States is struggling to revive the flow of capital, corporations have stealthily maintained large portions of their cash offshore to avoid paying corporate-taxes. But companies' prized ability to defer paying taxes on that offshore money is now in peril as they lost the first battle in their efforts to win a tax amnesty (such as Bush gave…never gave the average American such a break) fell short.

Technology firms in particular have moved large cash hoards off shore, as we saw from their fourth-quarter earnings reports, several of the richest companies in the SPX were technology firms; CSCO, and MSFT as each ended the year with more than $20 billion in their coffers. The massive Bush tax amnesty in 2004 which allowed these greed lecherous firms to bring earnings home at a 5.25% tax rate rather than the standard rate of 35% did little for the greater good; as they just kept on putting the screws to our tax collecting efforts and as such they enjoyed benefits that domestic based business do not!

Its worth noting that these technology firms tend to keep a huge disproportionate amount of their cash overseas; as ORCL, for example, held about 89% of its $11.3 billion in cash and equivalents overseas as of the end of February, according to their 10-K, though ORCL regularly pulls in just 40% plus/minus of their revenue from overseas markets. eBay (EBAY) keeps about 88% of its cash overseas, while networking giant Cisco, keeps 89% abroad. Many other technology companies don't disclose how much cash they hold overseas at any given time, though amounts are generally assumed to be significant. Microsoft, which reported having $20.7 billion in cash and equivalents as of the end of last year, doesn’t even disclose how much is held overseas, however they did say that the majority is offshore. IBM finished 2008 with about $12.7 billion in cash, and said recently that since 2002 it's generated about $65 billion in free cash flow and they keep 90% or more overseas…great patriots that they are.

Now generally firms can't generally use this cash held overseas for domestic transactions such as buying another U.S. firm, without it being taxed however, they can always borrow against cash held overseas to finance acquisitions and the European banks love them for the business. I hope they tax them at 2-times the rate for their dishonesty!

J.P. Morgan first-quarter earnings were aided by an old fuzzy-math manipulation: hundreds of millions of dollars in gains the bank booked was because of declines in the value of its own debt…based on their own assumptions and not real market values. JPM said its investment-bank unit's revenue benefited from $638 million in gains stemming from “the widening of the firm's credit spread on certain structured liabilities.” This fictitious amount is about 21% of JPM’s pretax income for the quarter.

Under this accounting manipulation….this means is that the market value of some of JPM’s debt dropped during the quarter, which means that the liabilities on its balance sheet reflecting that debt declined too. And lower liabilities mean a boost to earnings.

Now this is a legal-loop-hole (huge) in the FASB rules and is perfectly legitimate under accounting rules; and the bankers, lenders and brokerage firms have been playing this game and booking gains since 2007, when the new rule took effect (Bush pushed it through) allowing banks to value some of their liabilities at market prices, so as the markets drop they add the difference in as a gain….do you not all wish you could do this.

This is a huge double-edge-sword of Damocles consider; as if the value of their debt goes up, so do their liabilities, and then they have to book them as losses. That happened to JPM in the fourth quarter of 2008, when they had to record $721 million in losses because of increases in their debt values.

HSBC Holdings PLC (HBC), for instance, said in March that it booked a $529 million gain in 2008 for the same reason.

A very-dismal report…..as we saw data on Thursday that the number of American households threatened with losing their homes grew 24% in the first three months of this year and is poised to rise further (this is just the tip of the iceberg) as major lecherous lenders restart foreclosures after a temporary break (in order to pad their 1st quarter earnings and mitigate write-downs).

The deteriorating economy….job losses mounting, housing prices crumbling (and the fact that many of these loans should never been written) is causing the housing crisis to spread like a cancer. Nationwide, nearly 804,000 homes received at least one foreclosure-related notice from January through March, up from about 650,000 in the same time period a year earlier, according to RealtyTrac Inc..

In March, more than 340,000 properties were affected nationwide, up 17% from February and 46% from a year earlier. Ohio had 12,600 homes receiving foreclosure notices during the month, 12 percent more than during March 2008.

Foreclosures "came back with a vengeance" last month and are likely to keep rising, said Rick Sharga, RealtyTrac's senior vice president for marketing. Nearly 191,000 properties completed the foreclosure process and were repossessed by banks in the quarter. While the number was down 13% from the fourth quarter of last year, it is expected to rise through the summer.

In the coming months, there are still likely to be increased foreclosures, especially from vacant houses, second homes and those owned by speculators. None of those properties will qualify for a loan modification. However, he remained optimistic that overall foreclosures could start to decrease this summer.

China, the U.S. government’s biggest creditor (they practically own us) increased their purchases of US securities in February just weeks before their officials questioned whether such investments were safe (strange divergence huh). While China’s purchases slowed and most were in short-term T-bills, the country remained the largest foreign holder of US Treasuries and their holdings rose 0.6% to $744.2 billion, according to a TIC report. Still, the governor of the People’s Bank of China, Zhou Xiaochuan last month urged the establishment of a “super- sovereign reserve currency” after Chinese Premier Wen Jiabao said he’s “worried” a weaker U.S. dollar may hurt China’s investments. Our governmental officials are selling us down the Yangtze River, as they need China to sustain their purchases of T-Bills to fund billions/trillions worth of programs aimed at (enslaving the American people) they call it reviving the economy. It’s a devilish pact as if they are going to boost their economy at the expense of ours by selling cheap consumer goods to the U.S. they are being forced to accept U.S. T-bills as part of their bargain with the devil! China and the U.S. currently have to cozy of a symbiotic relationship, for my liking; as they are close to calling the shots!

On a side note we saw a bearish development as foreign direct investment into China fell for a sixth month from a year earlier…so why all they hype about money flowers into their markets? Investment dropped 9.5% to $8.4 billion in March, the Chinese commerce said on Wednesday. Marking the first time since 2000 that they saw investments from abroad has fallen for 6- straight months.

Worldwide foreign direct investment fell 21% last year to $1.4 trillion because of the global recession and falling profits, according to estimates from the United Nations Conference on Trade and Development, and it’s likely to decline further this year, they stated.

Our idiot Treasury Secretary Geithner as every chicken-livered Treasury secretary before him refrained from labeling China as a currency manipulator (is so blatant that they are its not even funny), as he backtracked from an assertion he made during his confirmation hearings in January (and I wonder what he was paid to do so).

In its first semiannual report on foreign-exchange policies since he became secretary, the Treasury said that while the yuan remains significantly “undervalued” no country “meets the standards” for illegal currency manipulation during the period of his report, from July 2008 through December 2008. [His knucklehead conclusion clashes with his January 22 statement to a Senate panel that “President Obama backed by the conclusions of a broad range of economists believes that China is manipulating its currency.”]

Treasury International Capital (TIC) Data for February…..Net foreign purchases of long-term securities were $22.0 billion. Net foreign purchases of long-term U.S. securities were $20.8 billion. Of this, net purchases by private foreign investors were $25.9 billion, and net purchases by foreign official institutions were a negative $5.1 billion. U.S. residents sold a net $1.2 billion of long-term foreign securities. Net foreign acquisition of long-term securities, taking into account adjustments, is estimated to have been $5.0 billion. Foreign holdings of dollar-denominated short-term U.S. securities, including Treasury bills, and other custody liabilities increased $43.1 billion. Foreign holdings of Treasury bills increased $68.3 billion. Banks' own net dollar-denominated liabilities to foreign residents decreased $145.1 billion. Monthly net TIC flows were negative $97.0 billion. Of this, net foreign private flows were negative $106.3 billion, and net foreign official flows were positive $9.3 billion. Full TIC report

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Stephen Tetreault | Southern Maine, USA | Email | Website