Morning Economic News - December 31, 2008

Commentary and Overnight Trading

The biggest news of the day is likely to get lost in the news of "record drops" and "record lows" in home prices and consumer confidence. The oil producing states of the Gulf region finalized an agreement to have a common currency and a common central bank by 2010. This is pretty significant news for the dollar, which is the currency of oil sales worldwide, by creating an alternative currency in the oil rich region. The pressure will grow greater the closer the monetary union gets to implementation.

The dollar is doing ok in early overnight trading, up a bit against the Canadian dollar, down less than a tenth percent against the yen and down just over two-tenths percent against the euro and pound. And the news doesn't seem to be doing much for oil prices either, as they're down 2% in overnight trading so far. US stock market futures are mixed, with movement in the 0.75 to 2 point (not percent, but point) range on all indexes. Asian markets are up. [12:25 AM Eastern]

Tuesday's Economic News

Case-Shiller Home Price Index - October 2008

• Composite 20 Index: 158.16


• Monthly Change: Down 2.2%

Consumer Confidence Index - December 2008

• Consumer Confidence Index: 38


• Monthly Change: Down 6.7

Record drop in home prices and consumer confidence at record low

S & P reported another big drop in its Case Shiller Home Price Index,
which covers the top 20 metropolitan areas in the US and the Conference
Board reported that US consumer confidence fell to a record low.

What I'm Reading

Home Prices Decline at Record Pace

A measure of October home prices dropped by the sharpest
annual rate on record. Separately, consumer confidence hit a new low in
December.

Saudi Arabia, Kuwait, Bahrain, Qatar, U.A.E., Oman Approve Monetary Union Gulf Arab leaders approved a monetary
union agreement that aims to create a central bank and single
currency for the region that will help boost trade and strengthen
monetary policy.

Consumer Confidence in U.S. Drops to Record Low as Unemployment Increases Consumer confidence sank to the
lowest level in at least 41 years this month as Americans grew
more concerned about keeping their jobs and paying their
mortgages, raising the risk they’ll spend less next year.

U.K. House Prices Were Most Affordable in Five Years in 2008, HBOS Says U.K. houses are now the most
affordable in more than five years, helping those looking to buy
a home for the first time, HBOS Plc said.

Vietnam's 2008 Economic Growth Slows to 6.2% as Building, Tourism Stumble Vietnam’s economy expanded at the
slowest pace since 1999 as higher interest rates and lending
restrictions earlier this year damped construction and a global
recession hurt tourism.

Indian Economy Succumbs to Global Recession After Surviving Terror Attacks India’s economic growth, unscathed by
terrorist attacks in Mumbai last month, is slowing as the global
recession cuts demand for its exports and cools investment.

Australian Retailers May Have Record Post-Christmas Sales, Group Predicts Australian retailers may have record
post-Christmas sales as lower borrowing costs and government
stimulus packages spur consumer demand, according to the
industry’s peak representative body.

Home Prices in 20 U.S. Cities Dropped 18% From Year Ago, Case-Shiller Says Home prices in 20 major U.S. cities
declined at the fastest rate on record, depressed by mounting
foreclosures and slumping sales.

`Original Sin' Returns to Emerging Markets Requiring Sales of Dollar Bonds Developing nations plan to sell the
most dollar-denominated bonds since 2005, reversing a shift into
local debt, as commodities prices fall, foreign reserves diminish
and emerging-market currencies weaken.

Morning Economic News - December 30, 2008

Commentary and Overnight Trading

US stock market indexes are up just under 1% in overnight trading [4:30 AM Eastern] after the Treasury Department announced a $5 billion preferred stock investment in GMAC after the market close Monday. The Nikkei rose 1.28%, the S&P/ASX 200 rose 0.91% and the Hang Seng fell 0.65%, Oil futures are down 1.4% after the WTI spot price rose 24% Monday. The dollar has gained a half percent against the yen and the Canadian dollar and fallen against the euro and the pound.

Monday's Economic News

Money Supply - December 29, 2008

• M1 Seasonally Adjusted Prior Month: $ 1522.6 billion


• M1 Annual Change (Unadjusted): $157.6 billion


• M2 Annual Change (Unadjusted): $570.3 billion

What I'm Reading

GMAC Gets $5 Billion Investment From Treasury to Help Revive Auto Lending The U.S. Treasury committed $6
billion to support GMAC LLC, the financing arm of General Motors
Corp., widening the government's effort to keep the largest U.S.
automaker out of bankruptcy.

European Retail Sales Drop for Seventh Straight Month as Recession Deepens European retail sales fell for a
seventh month in a row in December as the deepening recession
curbed consumer confidence and spending, the Bloomberg
purchasing managers’ index showed.

Japan Economy May Shrink 12% This Quarter, Most Since 1974, Barclays Says Japan's economy will probably shrink
at an annual 12.1 percent pace this quarter, the sharpest drop
since 1974, as exports collapse, Barclays Capital said.

U.S. Consumer Confidence Probably Rose in December on Lower Gasoline Price U.S. consumer confidence probably
improved in December for a second month as falling gasoline
prices helped ease the strain on tattered household finances,
economists said before a report today.

South Korean Factory Output Falls By Record, Manufacturers Sentiment Drops South Korea’s factory production
fell by the most on record in November and confidence among
manufacturers tumbled, adding to signs the nation will join
Japan, Europe and the U.S. in recession.

South Korea Posts Current-Account Surplus, Easing Pressure on Currency South Korea posted a current-account
surplus for a second straight month in November, easing pressure
on the won, the region's worst-performing currency this year.

Thailand Posts Current-Account Deficit as Exports Decline Most Since 1992 Thailand posted a current-account
deficit in November for the fifth straight month as the global
economic slowdown cooled exports and a blockade of the country’s
main airports hurt tourism, the central bank said.

Loonie's Worst Year May Extend Into '09 as Canada Reels From Oil Collapse Canada’s currency may extend its
biggest annual decline on record, as tumbling crude prices hobble
foreign investment in the country’s oil patch, according to the
world’s biggest strategists and economists.

Toyota, Honda May Scrap `Just-in-Time' Inventory as `Supplier Shock' Looms Toyota Motor Corp. and Honda
Motor Co., Japan’s two largest carmakers, may modify
their so-called “just-in-time” manufacturing system to
avoid possible supplier bankruptcies disrupting production.

IMF Backs Obama Stimulus Plan

The IMF's top economist endorsed Obama's approach to
economic stimulus and urged countries to consider offering a kind of
"recession insurance."

GOP Warns Against Overspending on Stimulus

Republican lawmakers are positioning themselves as foes of
excessive spending as they prepare for battle over Obama's stimulus
package.

Morning Economic News - December 29, 2008

Commentary and Overnight Trading

Even trouble in the Middle East hasn't managed to move oil back above the $40 mark yet [2:30 AM Eastern]. And though a $1.31 increase has it well within striking distance of that mark, the increase can be accounted for almost entirely by a drop in the dollar - down against the yen, euro, pound and Canadian dollar. US stock market index futures are down about a half-percent, while Asian markets are up slightly.

Financial Roadmap: The Week Ahead December 29, 2008 to January 2, 2009

This week will give investors another breather of sorts with overflow
from last week's holidays starting off the week when the Fed reports on
money supply Monday. This statistic had become so boring, and so little
consulted, a few years ago that the Fed moved to a leaner version. The
theory at the time was that what was important to watch for monetary
policy was the federal funds rate. Now the Fed has slashed that rate
about as low as possible and is directly inflating the money supply as
a major policy tool. The numbers are getting very interesting and they
are pointing in a very familiar direction – another bubble is in the
works.

Economic News

Durable Goods Orders - November 2008

• New Orders: $186.9 billion


• New Orders Change: Down 1%


• Nondefense Capital Goods Change: Down 0.8%

Jobless Claims - December 24, 2008

• Initial Claims: 586,000


• Change from Last Week: Up 30,000

Personal Income and Outlays - November 2008

• Personal Income: Down $20.7 billion


• Monthly Change: Down 0.2%


• Real Disposable Personal Income: Up 1%

Weekly Mortgage Applications Survey - December 24, 2008

• Market Composite Index: 1245.4


• Change: Up 48%


• Purchase Index: 316.5


• Change: Up 10.6%

Interest rates at 37-year low

Freddie Mac and the Mortgage Bankers Association are both reporting
30-year rates near 5% and 15-year Fixed Rate Mortgage (FRM) rates below
5% for a second week. Buyers have responded aggressively to the lower
rates, with mortgage applications for home purchases up more than 10%
last week.

What I'm Reading

Paulson's Progress With China Evaporates as Recession Reopens Trade Rifts The global recession is re-exposing
fissures in U.S.-China relations that Treasury Secretary Henry
Paulson spent more than two years smoothing over.

U.S. Retailers Face Store Closings, Bankruptcies as Holiday Sales Slump U.S. retailers face a wave of store
closings, bankruptcies and takeovers starting next month as
holiday sales are shaping up to be the worst in 40 years.

London House Prices Led Declines Across U.K. in 2008 and May Fall Further London house prices fell more than
in any other U.K. region this year and probably will decline
further in 2009 as the economy sinks deeper into a recession,
Hometrack Ltd. said.

South Korea Consumer Confidence Falls to 10-Year Low as Unemployment Rises South Korea’s consumer confidence
fell to the lowest level since the Asian financial crisis a
decade ago on concern faltering economic growth will lead to
further job cuts and falling incomes.

Japan Economy May Shrink 6.5% This Quarter, Bank of America's Fujii Says Japan’s economy may shrink at an
annual 6.5 percent pace this quarter, Bank of America Corp. said
after reports last week showed industrial production and exports
posted the biggest declines on record.

Israel May Cut Key Interest Rate Half-Point to Record 2% as Growth Weakens The Bank of Israel will probably
lower its benchmark lending rate tomorrow to a record as
Governor Stanley Fischer seeks to shore up flagging economic
growth, a survey showed.

U.S. Manufacturing Probably Shrank Most Since 1980 as Global Demand Slid Manufacturing in the U.S. probably
shrank at the fastest pace since 1980 as the deepening global
recession forced customers in North America, Europe and Asia to
cut back, economists said before reports this week.

Democrats May Add Municipal-Bond Tax Break to Sweeten Obama Stimulus Plan Congressional Democrats are seeking
to expand funding for airport runways, housing projects and
sewage-treatment plants though a new tax break for municipal
bondholders.

Biggest Bond Investors Look for European Rally in 2009 as ECB Follows Fed The world’s biggest bond investors
are betting European Central Bank President Jean-Claude Trichet
will be forced to follow Federal Reserve Chairman Ben S.
Bernanke and step up the pace of interest-rate cuts.

Iceland's Fall: The Isle That Rattled the World

Iceland is an extreme casualty of an era in which it was
easy to borrow money. The tiny isle became so leveraged that its
collapse has rattled the world.

Morning Economic News - December 24, 2008

Commentary and Overnight Trading

Tuesday the stock market shrugged off a megadose of bad news that would have easily made for a 500 point drop in the Dow in September or October with a relatively small 1% drop. Both major housing sales indicators fell significantly in November. Part of the reason may be just how far the market has already fallen and that's reflected in another number that came out Tuesday: The State Street Investor Confidence Index. The Index, which measures the ratio of institutional investments in equity versus (theoretically less risky) debt securities fell by 1/3, indicating a huge shift out of stocks over the last month.

Markets trading overnight seem little thrilled or scared by the days news either, with US stock market futures up two-tenths of a percent, oil down 0.15% and Asian stock markets mixed with the biggest move a 2.37% drop in the Nikkei. The dollar is down against the yen, euro, pound and Canadian dollar. [3:14 AM EAstern]

Tuesday's Economic News

State Street Investor Confidence Index - December 2008

• Global Index: 48.0


• Monthly Change: Down 6.5


• Year-to-year Change: Down 17.9


• North America Index: 30.1


• Monthly Change: Down 15.2

Existing Home Sales - November 2008

• Total Existing Home Sales Annual Rate: 4.49 million


• Monthly Change: Down 8.6%


• Year-to-year Change: Down 10.6%

New Home Sales - November 2008

• Annual Sales Rate (Seasonally Adjusted): 407,000


• Monthly Change: Down 2.9%


• Annual Change: Down 35.3%

German Leading Index Down 2.6%

• Leading Index: Up 0.1%


• Coincident Index: Up 0.3%

What I'm Reading

Recession Compounds Housing Woes

A deepening recession and tight credit conditions are
compounding problems in the housing market, suggesting that declines in
home prices may continue well into 2009.

Japan Manufacturers' Confidence Slumps as Recession Deepens, Survey Shows Confidence among Japanese
manufacturers fell the most on record as exports collapsed,
signaling the recession will extend into 2009.

Thailand to Lift Spending as Government Predicts First Recession in Decade Thailand’s new government plans to
increase spending and tax breaks to stimulate domestic demand as
it forecast the economy will slip into its first recession in
almost a decade.

Philippine Imports Fall for First Time in 17 Months on Electronics Orders Philippine imports fell for the
first time in 17 months as demand waned for raw materials used
by electronics exporters amid a global recession.

U.S. Housing Prices Collapse at Near-Depression Pace After Purchases Slide Sales of single-family houses in the
U.S. dropped in November by the most in two decades and resale
prices collapsed at a pace reminiscent of the Great Depression,
dashing speculation the market was close to a bottom.

U.S. Economy Contracted 0.5% in Third Quarter as Recession Began to Deepen The U.S. economy shrank in the third
quarter at a 0.5 percent annual pace as the now year-old
recession intensified.

U.K. Economy Shrank Most Since 1990 in Third Quarter, Exceeding Estimates The U.K. economy shrank the most
since 1990 in the third quarter and mortgage lending dropped to
the lowest in 14 years as tightening credit exacerbated the
slide into recession.

China Stocks Lure BlackRock With `Mother' of Stimulus Plans as Mobius Buys The biggest investors in emerging
markets say China is the best choice for 2009, betting plans to
stimulate growth will lead a stock market recovery in the fastest
growing major economy.

Australian Funding Costs Decline for a Fourth Day on Central Bank Actions Australian funding costs fell for a
fourth day on speculation central banks worldwide will add to
cuts in borrowing costs that led to near-zero interest rates in
the U.S. and Japan.

Philippine Peso, Stocks Drop in Year on Signs Global Slump Hurting Exports The Philippine peso headed for its
worst year since 2000 and stocks had their biggest annual loss
in at least two decades on signs the global slowdown is hurting
sales of the nation’s exports.

US, UK housing slump deepens; Japan boosts spending

Morning Economic News - December 23, 2008

Commentary and Overnight Trading

The Hang Seng Index is down more than 3% and the S&P/ASX 200 is down 0.73%, US stock market futures are mixed with DJIA futures down slightly, S&P500 up slightly and NASDAQ down slightly. NYMEX Crude Oil futures are down more than 1% on reports that Chinese oil production will rise 1.2%. This news after the US Energy Information Administration last week reported that three new US platforms coming online next year will produce nearly as much oil as the state of California. The dollar is up less than a tenth of a percent against the yen and the Canadian dollar and down against the euro and the pound. [3:29 AM Eastern]

Monday's Economic Numbers

Australian Leading Index fell for second month

• Leading Index: Down 0.5%


• Coincident Index: Up 0.2%

Mexican Leading Index dropped more than 5% in October

• Leading Index: Down 5.7%


• Coincident: Down 0.2%

What I'm Reading

Foreclosure Mitigation Makes Little Headway

Intensified efforts by mortgage servicers to help borrowers
stay in their homes failed to stem the growing number of foreclosures
in the third quarter.

Saudi Arabia to Boost Spending

Saudi Arabia plans to ramp up government spending next year
and incur its first budget deficit in six years to keep its economy
growing.

France's Consumer Spending Unexpectedly Rebounds as Energy Prices Decline French consumer spending unexpectedly
rebounded in November as stimulus measures and declining energy
prices cushioned the impact of the deteriorating economic
environment.

China Steps to Increase Consumer Spending May Follow Latest Rate Reduction China may follow its latest interest-
rate cut with steps to spur consumer spending as deepening
recessions in the U.S. and Europe pummel exports, one of the main
engines of the world's fourth-largest economy.

New Zealand Economy Shrinks 0.4% as Recession Deepens on Spending, Exports New Zealand’s economy contracted for
the third straight quarter, extending the nation’s first
recession in 10 years and adding to the prospect the central
bank will cut interest rates to a record low next month.

Frozen Ports From Long Beach to Singapore Presage Bleak Trade Into 2010 Chris Lytle, chief operating officer
of the port of Long Beach, California, took in a panorama of the
slumping world economy from his rooftop observation deck one day
this month.

Chile's Copper Windfall Props Up Spending While Ecuador Defaults on Bonds Chilean homemaker Majorie Rojo shrugs
when asked about the crash in the price of copper, the engine of
her nation’s economy.

Won, Rupee, Asia's Biggest Losers, Will Shine in 2009, Moody's Unit Says South Korea’s won and India’s rupee,
Asia’s biggest losers this year, will be the region’s biggest
gainers from improved appetite for emerging-market assets and a
recovery in the global economy, said Moody’s Economy.com.

Thailand's New Government May Increase Stimulus Spending by 80%, Korn Says Thailand's new government may
increase spending by 80 percent to spur an economy hurt by the
global recession and domestic political strife, Finance Minister
Korn Chatikavanij said.

World economies slide into recession

Dec 23 (Reuters) - New Zealand's economy contracted by its
biggest amount in eight years, third quarter data showed on
Tuesday, reinforcing expectations that its recession will not
lift until well into 2009

Asian shares ignore China cut

Dec 23 - Asia stock markets retreated for a
third straight day on Tuesday as more investors locked in profits on
the year-end rally and prepared to close their books ignoring a rate
cut by china. 

Morning Economic News - December 22, 2008

Commentary and Overnight Trading

US stock market futures are up about 3/4 percent in early overnight trading [1 AM Eastern], the Nikkei is up 1.57%, the Hang Seng is down 1.67% and the S&P/ASX 200 down 1.61%. The NYMEX crude oil future is up 1.75%, with the February future trading almost $10 above Friday's spot price close (but still below $45/barrel). The dollar is up against the yen, pound and Canadian dollar. It's down against the euro, in spite of Barclays and UBS predicting a 10% drop in the euro in the next three months.

Financial Roadmap: The Week Ahead December 22 to 26, 2008

Investors will find lots of information packed into the holiday
shortened week and it's even more packed with no major indicators due
out until Tuesday. The first numbers due out are the Commerce
Department's final 3rd quarter GDP and corporate crofits figures with a
0.5% drop in GDP expected. Aside from corporate profits, Tuesday will
have one other big corporate oriented figure – the State Street
Investor Confidence Index. This index, which measures the actual risk
taking behavior of institutional portfolios, could help indicate if the
market has actually bottomed or if we are in a sustained bear market
rally – if the big boys are starting to move out of debt securities
back into equities, it's a good sign.

What I'm Reading

Euro Will Fall 10% Versus Dollar in 3 Months, UBS, Barclays Say

Trade-Finance Pinch Hurts the Healthy

The global financial crisis is drying up financing that
firms depend on for trade, making the recession deeper than it
otherwise would be.

Paulson Wants Rest of TARP Funds

The U.S. rescue of the auto industry drained what remained
in the first half of Treasury's $700 billion bailout fund, prompting
Paulson to call on Congress to release the rest of the money.

Aid to Homeowners May Double Next Year Under Bush-Backed Mortgage Program The mortgage-industry effort to stem
foreclosures aims to double the number of borrowers getting help
next year, as Democrats call for using taxpayer money to address
the crisis.

Japanese Exports Plunge Record 27% as Economy Sinks Further Into Recession Japan’s exports plunged the most on
record in November as global demand for cars and electronics
collapsed, signaling more factory shutdowns and job cuts are
likely as the recession deepens.

New Zealand's Recession Probably Deepened, Signaling More Rate Cuts Needed New Zealand’s recession probably
extended into a third quarter as consumers and businesses reined
in spending and exports of milk, timber and wool eased.

Japan Lowers Its Economic Assessment for Third Month as Recession Deepens The Japanese government lowered its
assessment of the economy for a third month, describing
conditions as the most severe since 2002.

Recession-Strapped U.S. Christmas Shoppers Search for Bargains, Discounts Cash-strapped shoppers are searching
for bargains in the final days before Christmas and some are
limiting their gift-giving to children in what could be a make-
or-break weekend for U.S. retailers.

Treasury Bond Bubble Sucks up Investors Who Can't Say No to Lowest Yields The world’s biggest bond investors
can’t stop buying Treasuries even though they’re comparing
government debt to Internet stocks just before the technology
bubble burst.

Oligarchs Seek $78 Billion Loans as Credit-Market Squeeze Empowers Putin Russian oligarchs are lining up for
$78 billion of Kremlin loans to survive the credit squeeze,
handing Prime Minister Vladimir Putin the opportunity to increase
government control of the nation’s biggest companies.

Japan exports collapse as yen, world recession bite

China FX reserves fall in Oct, first time since '03

Japan recession deepens, Ireland bails out banks

Morning Economic News - December 19, 2008

Commentary and Overnight Trading

The Bank of Japan returned to a near Zero Interest Rate Policy (ZIRP) that it had only abandoned in the last couple of years, after the Fed's ZIRP announcement Tuesday, and announced that it will buy corporate debt to inject money into businesses. The European Central Bank announced it was cutting interest it pays on deposits in the hope of spurring banks to loan to each other rather than deposit excess reserves. Central banks and governments worldwide are matching the US Federal Reserve move for move in easing monetary policy, which should help support the dollar. On the other hand, with increasing good signs in credit markets and liquidations wringing some of the riskiest excesses from financial markets, investors are not flocking to the dollar as a stable haven. The flight to quality is reversing - bad news for US citizens traveling overseas, but good news for US exporters.

Asian stocks are down in early overnight trading (1:30 AM Eastern) driven partly by drops in commodity stocks. The S&P/ASX 200 is up 0.96%, while the Hang Seng and Nikkei are each down less than 1%. US stock market futures are down less than 1% as well. Crude oil has recovered 0.6% after dropping nearly 10% Thursday. The dollar is down against many currencies, including the yen, euro and pound, but is up against the Canadian dollar and several Asian currencies. ;

Thursday's Economic News

Mortgage rates below 5%

The Mortgage Bankers Association and Freddie Mac both reported good
news for those needing to refinance mortgages and those with resetting
ARMs with the MBAA reporting an average 15-year Fixed Rate Mortgage
(FRM) rate below 5% and Freddie Mac reporting a 1-year ARM rate below
5% and 15-year FRM rates below 5%. Even 30-year FRM rates are flirting
with 5% according to both reports.

Jobless Claims - December 18, 2008

• Initial Claims: 554,000


• Change from Last Week: Down 21,000


• 4-Week Moving Average: 543,750

Money Supply - December 18, 2008

• M1 Seasonally Adjusted Prior Month: $1525.0 billion


• M1 Annual Change (Unadjusted): Up $160 billion

Leading Index (US) - November 2008

• Leading Index: Down 0.4%


• Coincident Index: Down 0.3%


• Lagging Index: Up 0.1%

What I'm Reading

Bank of Japan Cuts Interest Rate

The Bank of Japan became the latest central bank to cut rates to rock-bottom levels, reducing the benchmark rate to 0.1%.

ECB Moves to Foster Interbank Lending

The ECB widened its interest-rate corridor and cut the return it gives
banks for holding cash with it as it seeks to prod interbank money
markets back to normality.

RBS slashes China '09 GDP growth forecast to 5 pct 

BEIJING, Dec 19 (Reuters) - Royal Bank of Scotland on Friday
slashed its forecast for China's 2009 gross domestic product
growth to 5 percent, from 8 percent, warning about the potential
for increasing social tensions as the economy falters.

Mexico to cut import tariffs to support industry

Bank of Japan Cuts Benchmark Rate to 0.1%, to Start Buying Corporate Debt The Bank of Japan cut its benchmark
interest rate to 0.1 percent and said it would buy corporate
debt as a deepening recession chokes off funding for businesses.

ECB's Trichet Says Deposit-Rate Cut May Help Revive Money-Market Lending European Central Bank President
Jean-Claude Trichet said financial companies may begin lending
more to each other after policy makers made it less attractive
to turn to them for support.

Japan Says Economy Won't Grow in Fiscal 2009 as Global Recession Deepens Japan’s government slashed its
economic growth forecast for next fiscal year as the global
slowdown prompts companies to cut business investment.

U.S. Leading Economic Indicators Index Falls 0.4% as Outlook Deteriorates A gauge of the economy’s future
performance posted its biggest annual drop since 1991 in November
as the declines in housing and job markets accelerated, showing
little sign the U.S. contraction will ease in early 2009.

Paulson May Ask Congress to Release Next $350 Billion in Bank-Rescue Funds Treasury Secretary Henry Paulson may
ask Congress for the second half of the $700 billion bank rescue
program, concerned that the deepening recession may spark
further financial turmoil.

Harvard Economist Feldstein Says Recovery Won't Start for Another Year The U.S. economy likely won’t start
recovering from a recession for at least another year, making
this the longest downturn since the 1930s, said Harvard
University economist Martin Feldstein, a member of the
committee that charts American business cycles.

Greenspan Says Financial Markets Are Likely to Rebound in 6 to 12 Months Financial markets, which have been
depressed by “fear” not seen since at least the 1930s, are
likely to rebound in the next six to 12 months, former Federal
Reserve Chairman Alan Greenspan said in a commentary published
by The Economist online.

Philippines Posts Third Straight Monthly Budget Deficit on State Spending The Philippine government posted its
third straight monthly budget deficit in November as it boosted
spending to counter the global recession.

World Economy to Contract for First Time in Almost 50 Years, Bankers Say The world economy will contract next
year for the first time in almost 50 years, as industrial
nations are wracked by recession, and growth in emerging markets
is cut almost in half, a banking industry group said.

Morning Economic News - December 18, 2008

Commentary and Overnight Trading

The big question Thursday morning is how US markets will react to the bombshell Chrysler dropped after the market close Wednesday: all plants closed for at least a month starting Friday. Bear in mind that, while this is awful news for temp workers and suppliers, it won't lower costs enough to keep the company afloat long term because Chrysler's union workers will get on average 95% of their pay under the job bank agreement.

In early overnight trading (1:30 AM Eastern) US stock market futures are mixed - the Dow Jones Industrial Average up 13 points, the NASDAQ down 12.5 points and the S&P 500 up 0.7 - as are Asian indexes. Oil is down more than 1% on top of Wednesday's 8% drop to put the NYMEX crude future below $40. The dollar is up strongly against the yen, up slightly against the pound and the Canadian dollar and down slightly against the euro.

Update and correction: US stock market futures are up - DJIA by 65 points, S&P 500 by 6.4 points. NASDAQ futures are up 5, but I'm having to get the numbers from an alternate source as my usual source isn't reporting NASDAQ - the previous "down 12.5" was actually the 12/17 close. The dollar is now up substantially against the pound and down substantially against the euro. Oil is up, with the NYMEX contract back above $40.

Wednesday's Economic News

Consumer Price Index (CPI) - November 2008

• CPI-U: 212.425


• Monthly Change: Down 1.9%


• Year-to-year Change: Up 1.1%

Federal Funds Rate (FOMC) - December 16, 2008

• Overall, the outlook for economic activity has weakened further


• …inflationary pressures have diminished appreciably…the Committee expects inflation to moderate further in coming quarters.


• …weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time. 

Current Account - 3rd Quarter 2008

• Current Account Deficit: $174.1 billion


• Quarterly Change: Down $6.8 billion


• Goods Deficit: $214.7 billion


• Quarterly Change: Down $1.6 billion

Weekly Mortgage Applications Survey - December 17, 2008

• Market Composite Index: 841.4


• Change: Up 2.9%


• Purchase Index: 286.1


• Change: Down 4.5%

What if we added a whole oil producing state next year?

The Energy Information Administration is predicting big increases in US oil production in 2009. In fact, according to This Week in Petroleum
one new platform in the Gulf of Mexico, the Thunder Horse platform,
«would rank as the fourth largest producing State» in the country.
Thunder Horse will produce more oil than Louisiana or Oklahoma. Three
new platforms combined will produce more oil than all the states
combined except Alaska, Texas and California.

Creative Financing: Help During the Housing Downturn

With home prices falling in many parts of the country, sales slower
than normal in other parts and mortgage standards higher than any time
since the late ’80s, buyers and sellers can both benefit from creative
financing - owner finance, lease options, lesser known grant and loan
programs, and more.

What I'm Reading

Global Crisis Resists Central-Bank Moves

Central banks around the world cut rates a day after the
Fed's move, and Japan, the U.K. and euro-zone economies may follow suit.

OPEC Plans Record Output Cut

OPEC will cut crude production by a record 2.2 million
barrels a day, but the cartel's announcement failed to stop oil prices
from dropping to their lowest level in four years.

Global Confidence Wanes as World Sinks Into Recession, China Growth Slows Confidence in the world economy fell
in December as a recession spread beyond the U.S. and growth
weakened in China and Latin America, a survey of Bloomberg users
on six continents showed.

European November Inflation Rate Falls Most in Almost Two Decades to 2.1% Europe’s inflation rate fell the
most in almost two decades last month as oil prices plunged,
giving the European Central Bank more leeway to cut interest
rates.

Current-Account Deficit in U.S. Narrowed in Third Quarter on Export Gains The U.S. current-account deficit
narrowed more than forecast in the third quarter to $174.1
billion, reflecting gains in exports and decreases in foreign
earnings on American assets.

U.K. Unemployment Rose at Fastest Pace Since '91 as BOE Weighed Deeper Cut U.K. unemployment rose at the
fastest pace since 1991 in November and the Bank of England
considered cutting interest rates to the lowest ever this month
as the recession tightened its grip.

Fed Efforts to Unlock Housing Market Fail to Spur Buying: Chart of the Day The Federal Reserve’s efforts to make
homes more affordable have yet to bolster buying and instead are
fueling a surge in refinancing, according to data compiled by the
Mortgage Bankers Association.

Nomura Cuts Vietnam Growth Forecast to 5% on Delays in Investment Projects Nomura Holdings Inc. cut forecasts
for Vietnam’s economic growth because of delays in foreign-
invested projects amid a faltering global economy.

Bernanke Charts New Fed Course With Zero Rate, Pledge to Purchase Assets The Federal Reserve opened a new era
in U.S. monetary history, cutting interest rates to as low as
zero and pledging to buy unlimited quantities of securities,
after conventional policies failed to arrest what may be the
worst recession since World War II.

Zoellick Says the Right Government Policies Are Crucial to Global Recovery The right government policies will
be key to reviving economic growth forecast to cool globally in
the first half of 2009, World Bank President Robert Zoellick
said today.

Zhou Stokes Speculation China Will Cut Rates Again Soon as Inflation Eases Chinese central bank Governor Zhou
Xiaochuan stoked speculation that an interest-rate cut is
imminent, reiterating that falling inflation has added pressure
for a reduction.

Chrysler shuts plants

Dec 18 - Facing a credit crisis and dwindling
sales, Chrysler announced it would shut down all manufacturing
operations from Dec. 19 for at least a month

Morning Economic News - December 17, 2008

Commentary and Overnight Trading

With Tuesday's big news, there's a bit more to today's commentary. The big question for today will be when and if the markets start to look seriously at the real question marks raised by yesterday's Fed rate reduction. Here are some specific points to consider:

• The rate was essentially cut to zero and that move was unanimous. The inflation hawks saw something serious enough that they agreed to a zero rate.


• The move was essentially a ratification of what the market was already doing. While a floating fed funds rate might be a good thing for long run policy, the fact that the Fed was bullied into it by circumstances represents a dangerous lack of control.


• A range instead of a rate target. I'm reading this as "Our target is really zero. We don't want to say zero yet, because we want somewhere else to go." Both halves of that are bad signs.


• An alternate reading of the range thing is "We'd just like to be able to get enough control to hold it in a quarter point range." Bad as my interpretation is, that's even worse.

Yesterday's Economic News

Morning Economic News - December 16, 2008

Commentary and Overnight Trading

Things are shaping up for a second day of relatively small drops in stock prices on Wall Street with US stock market futures down about 1/4%. The Nikkei is down more than 1%, the S&P/ASX200 is down nearly 1% and the Hang Seng is up 0.13%. The dollar is regaining some of Monday's losses against the euro and the pound, is down slightly against the Canadian dollar and down more than half a percent against the yen. Oil has regained three-quarter percent after falling Monday. [2:45 AM Eastern];

Monday's Economic News

Industrial Production - November 2008

• Industrial Production Index: 106.8


• (Base year 2002, Seasonally Adjusted)


• Monthly Change: down 0.6%


• Manufacturing Change: down 1.4%

Empire State Manufacturing Survey - November 2008

• Business Conditions Index: -25.8


• Monthly Change: down slightly


• New Orders Index: -20.8

Housing Market Index - December 2008

• Current Month Index: 9


• Monthly Change: 0


• Current 1-Family Sales Index: 8


• Monthly Change: down 1

What I'm Reading

Ecuador to Default on More Bonds

Ecuador says it is defaulting on a second bond payment, interest on $650 million in Global 15 bonds due through 2015.

U.S. Factories Slash Output Amid Slump

U.S. factories slashed output amid a deepening recession. Industrial output is on track for its worst quarter since 1980.

Russian Industrial Production Shrinks Most Since Economic Collapse of 1998 Russian industrial production shrank
the most since the economic collapse of 1998 in November as the
global slowdown reduced demand for steel, pipes and fertilizers
and pushed the nation to the brink of recession.

Bernanke Prepares to Deploy Balance Sheet as Interest Rate Approaches Zero The Federal Reserve may today reduce
its main interest rate to the lowest level on record and prepare
for one of the boldest experiments in its 94-year history: using
its balance sheet as the key tool for monetary policy.

U.S. Consumer Prices Probably Fell Most on Record as Energy Costs Retreat The cost of living in the U.S.
probably fell in November by the most on record, as the value
of oil plunged and retailers slashed prices to boost sales
before the holidays, economists said ahead of a government
report today.

European Car Sales Slumped 26% in November as Recession Concern Deepened European car sales plunged 26 percent
in November, the biggest monthly drop since 1999, as the economic
recession and tighter credit held back demand for new vehicles.

U.S. May Give Car Czar or Treasury Power to Force Bankruptcy, Levin Says The U.S. Treasury may adopt a plan
that would let a car czar or the Treasury Secretary force General
Motors Corp. and Chrysler LLC into bankruptcy if the automakers
don’t show they can survive without government aid, a U.S.
senator said.

Aso Puts Pressure on Bank of Japan to Do More for Economy as Slump Deepens Japan’s government increased
pressure on the central bank to implement measures to spur
economic growth after plunging business confidence indicated the
recession will deepen.

China's Zhou Says Rates May Fall This Month as Economy, Inflation Weaken China’s central bank Governor Zhou
Xiaochuan said interest rates may fall again this month after
exports declined, inflation slowed and a report today showed
property investment cooled.

Shirakawa Says Buying Corporate Debt Remains an Option for Bank of Japan Bank of Japan Governor Masaaki
Shirakawa said he hasn’t dismissed the possibility that the
central bank may start buying short-term corporate debt, while
adding that such a move may put a strain on its balance sheet.

ECB's Draghi Calls for More Measures at `Critical Stage' of Global Crisis Financial Stability Forum Chairman
Mario Draghi said another round of fiscal, monetary and
regulatory measures is needed at this “critical stage” of the
global financial crisis.

Singapore's Economic Growth May Miss Government Forecast Amid Global Slump Singapore’s economic growth this
year may miss the government’s forecast as the global economy
worsens amid a credit crisis, Trade Minister Lim Hng Kiang said.

Sri Lanka Economic Growth Slows to 6.3% as Global Recession Hurts Exports Sri Lanka’s economic growth slowed
last quarter as a global recession reduced demand for the
nation’s tea, rubber and textile exports.

China capital spending weakens, tough months ahead

* Economists divided on outlook, but expect further
measures 

Japan household assets dive on stock slide -BOJ

TOKYO, Dec 16 (Reuters) - The value of financial assets held
by Japanese households fell in July-September in its steepest
drop ever, as a sharp slide in Tokyo share prices took a toll. 

Morning Economic News - December 15, 2008

Commentary and Overnight Trading

Markets seem to be liking the news over the weekend, at least somewhat, as the Nikkei average is up 5.21%, the Hang Seng is up 3.07% and the S&P/ASX200 is up 2.31%. US stock market futures are up about three-quarter percent. Oil prices are up and the dollar is down against the Canadian dollar, euro, pound and yen. [1:40 AM Easterm]

Weekly Financial Roadmap

Financial Roadmap: The Week Ahead December 15 to 19, 2008

While there are plenty of economic numbers due out this week, weak
reports are almost such a foregone conclusion for several – especially
those related to new home construction and industrial production – that
watching them is a more a matter of staying in practice than looking
for any real insight. Two numbers due out early in the week will be
worth watching because they will give some indication of just how much
leeway the government has with all the fiscal stimulus and bailout
spending before it begins to impact the value of the dollar – Treasury
International Capital and CPI.

Friday's Economic News

Retail Sales - November 2008

• Total Retail and Food Service Sales Annual Change: Down 7.4%


• Retail Sales Monthly: Down 2%

Producer Price Index - November 2008

• Finished Goods Index: Down 2.2%


• Finished Goods Core: Up 0.1%


• Intermediate Goods Index: Down 4.3%


• Crude Goods Index: Down 12.5%

What I'm Reading

OPEC in Race Against Falling Prices

OPEC ministers meeting in Algeria this week could cut as much as two million barrels a day from oil production

Target Rate Could Be Sliced to Near Zero

The Federal Reserve is expected to cut the fed-funds target
rate to levels not seen in decades, but that is unlikely to impress
Treasury-market investors.

Annus Horribilis Climaxes in Anxiety as New Year's Economy Sees No Bottom This was the year the global economy
fell apart. Next year may not be that much better, as policy
makers try to put the pieces back together.

Japanese Business Confidence Plunges Most in 34 Years as Recession Deepens Sentiment among Japan’s largest
manufacturers fell the most in 34 years, signaling companies are
likely to cancel spending plans and cut more jobs, pushing the
economy further into recession.

Bank of Japan May Need to Cut Rate Again, Former Deputy Governor Muto Says The Bank of Japan may cut the
benchmark interest rate further to show its commitment to
countering a deepening recession and market turmoil, said Toshiro
Muto, a former central bank deputy governor.

China's Industrial Output Grows at Weakest Pace Since 1999 on Export Slump China’s industrial production grew at
the weakest pace in almost a decade as export growth collapsed,
increasing pressure on the government to do more to revive the
slumping economy.

Dollar Staggers as U.S. Unleashes Flood, Deficits Increase, Fed Cuts Rates The biggest foreign-exchange
strategists and investors say the best may be over for the dollar
after a four-month, 24 percent rally.

Singapore's Retail Sales Unexpectedly Decline as Recession Hurts Spending Singapore’s retail sales
unexpectedly fell in October as a deteriorating economy prompted
consumers to pare spending on vehicles, furniture and clothing.

Putin's Devaluation Delay Risks Russia's Industry as Exports Steal Share Russian Prime Minister Vladimir
Putin’s pledge to avoid a “sharp” devaluation of the ruble and
let the currency fall gradually has dissuaded citizens from
storming banks to withdraw their savings as they did during the
crisis of 1998.

U.K. House Prices Will Drop 10% in 2009 as Recession Bites, Rightmove Says U.K. house prices extended declines
in December and will drop a further 10 percent next year as the
recession batters the British economy, Rightmove Plc said.

Treasury Benefits From `Massive Paranoia' as Bailout Borrowing Cost Falls Bill Clinton was forced to abandon
spending initiatives to boost the economy at the start of his
presidency when advisors warned him that the borrowing needed to
fund the programs would push interest rates higher. President-
elect Barack Obama may not have the same problem.

Japan's Business Confidence Falls Most in 34 Years: Table of the Day Following is the summary table
for the Tankan survey from the Bank of Japan in Tokyo.

Indonesian president announces cuts in fuel prices

Morning Economic News - December 12, 2008

Commentary and Overnight Trading

Thursday's economic reports were all about tough to decipher mixed news, which may explain how the US stock market held on for a good part of the day only to end down significantly in late afternoon. Earlier in the week, there was plenty of mixed news in real estate. That was followed up with a mixed set of reports on international trade. The trade deficit was up, which would normally be an indicator that US consumer demand was returning, but this time around it meant that both exports and imports had dropped. Since I focus mainly on total trade volume, this is a bad sign, but it can't be taken in a vacuum either. The Import Export Price Indexes also released Thursday showed a substanital drop in prices for both imports and exports in the 3-6% range. If you look at the trade figures in constant prices, trade volume actually expanded, unfortunately the deflation is itself a bad sign. Thursday was no day for one-handed economists.

Markets abhor an information vacuum and things are looking down for the open Friday, with US stock market futures down 3.5% in overnight trading and both the Nikkei and Hang Seng indexes down more than 5.5%. Oil is also down 4.5% after what may have been a too strong rise on news of OPEC cuts. The US dollar is up strongly against the euro, pound and Canadian dollar, down even more strongly against the yen.

Yesterday's Economic Reports

CASH Index - December 2008

• CASH Index Reading: 15.3


• Monthly Change: Down 19.4


• Expectations Index: -21.2


• Expectations Index Change: Down 44.5

Import Export Price Indexes - November 2008

• Import Prices: Down 6.7%


• Non-petroleum Import Prices: Down 1.8%


• Export Prices: Down 3.2%

International Trade (US) - October 2008

• Exports Monthly Change: Down $3.4 billion


• Exports Monthly Change: Down $2.7 billion


• Monthly Change: Up $0.6 billion

Jobless Claims - December 11, 2008

• Initial Claims: 573,000


• Change from Last Week: Up 58,000


• 4-Week Moving Average: 540,500

Money Supply - December 11, 2008

• M1 Seasonally Adjusted Prior Month: $1522.5 billion


• M1 Annual Change (Unadjusted): Up $157.5 billion


• M2 Seasonally Adjusted Prior Month: $7934.0 billion


• M2 Annual Change (Unadjusted): Up $569.8 billion

Mortgage rates drop, housing news mixed this week

This week brought more muddled news for the housing market. Both
Freddie Mac and the Mortgage Bankers Association reported drops in
Fixed Rate Mortgage (FRM) rates and increases in Adjustable Rate
Mortgage (ARM) rates this week. Last Friday, the Mortgage Bankers
Assocation reported mortgage delinquency rates at an all time high, two
days after reporting an all time increase in mortgage applications;
this week, the MBA reported a small drop in mortgage applications.

Spanish economy takes a nosedive

Spain’s economy dropped hard in October after holding on admirably in August and September. The Leading Index, which had risen 0.4% combined in the previous two months,
fell 1.2% in October and the Coincident Index fell 0.3%. The drop was
broadly based with only 1 leading indicator and 1 coincident indicator
improving.

What I'm Reading

Debt Shows First Drop as Slump Squeezes Consumers

The U.S. economy is deteriorating more rapidly than
expected, indicating the recession will be deeper and longer than
feared. Economists in a WSJ survey expect the decline in GDP to
continue into next year.

Fed's Assets Top $2 Trillion

U.S. financial institutions continued to make extensive use
of the Fed's growing list of credit facilities, pushing the Fed's
balance sheet well past $2 trillion.

Household Net Worth in U.S. Drops Most on Record as Stocks, Homes Tumble U.S. household wealth fell in the
third quarter by the most on record as property values and stock
prices tumbled, highlighting the tattered state of consumer
finances even before the most recent slump in lending.

India's Industrial Production Dropped in October for First Time Since 1993 India’s industrial production
unexpectedly fell for the first time in 15 years, placing
pressure on policy makers to add to interest rate and tax cuts
to shield the weakening economy from a global recession.

U.S. Initial Unemployment Claims Soar to 26-Year High as Recession Deepens The number of Americans filing first-
time claims for unemployment benefits surged more than forecast
last week to a 26-year high, a sign companies are stepping up
firings as the recession deepens.

South Korea's Economy to Grow at Slowest in 11 Years, Central Bank Says South Korea’s economy will expand at
the slowest pace in 11 years in 2009 as the deepening global
recession cools demand at home and abroad, the central bank said.

South Korea, China, Japan Agree on $48 Billion in Currency Swaps Accords South Korea agreed on bilateral
currency swap accords with Japan and China in an effort to ensure
financial stability in Asia.

Japanese Consumer Sentiment Falls to Record Low as Companies Fire Workers Japan’s consumers became the most
pessimistic in at least 26 years, indicating their weaker
spending may deepen the recession.

China Retail-Sales Growth Slows to Weakest in 9 Months as Confidence Dips China’s retail sales grew at the
slowest pace in nine months as the economy and inflation cooled
and the global financial crisis damped consumer confidence.

ECB's Weber Cautions Against Reducing Key Interest Rate Below 2 Percent European Central Bank council member
Axel Weber cautioned against reducing interest rates below 2
percent, becoming the latest ECB policy maker to signal the bank
may be nearing the end of its rate-cutting cycle.

Swiss Central Bank Cuts Benchmark Interest Rate to 0.5%: Table of the Day The following table details the
changes in the Swiss National Bank’s 3-month LIBOR target
rate:

Japan consumer sentiment at record low in Nov

Jobless claims hit 26-year high, exports tumble

Morning Economic News - December 10, 2008

The South Korean central bank dropped rates 1% Wednesday as the Leading Index for Korea slid 2.7% in a single month. This move adds further momentum to the movement of central banks to follow the Federal Reserve's lead in dropping rates to combat a recession that has gone global. Markets seem to be responding positively with oil prices rebounding despite a strong US inventory increase and continued demand weakness, stock prices increasing in the US and holding fairly steady in Asia overnight and US stock market futures down less than a quarter-percent early Thursday. The dollar is down against the yen, Canadian dollar, euro and pound, indicating some at least temporary respite from the "flight to quality" run to the dollar. On the other hand, there is one big negative sign for the economy that continues - US short term T-bill rates are at essentially zero (or even below zero adjusted for inflation), signaling that investors are nervous enough that they would rather hold "safe" Treasuries at no interest than risk the same money on stocks or even corporate debt.

Yesterday's Economic Reports

Federal Budget (US) - November 2008

• Year-to-date: $401,574,000,000 deficit


• Prior Year-to-date: $155,076,000,000 deficit

Weekly Mortgage Applications Survey - December 10, 2008

• Market Composite Index: 796.8


• Change: Down 7.1%


• Purchase Index: 298.1


• Change: Down 17.4%

Wholesale Trade - October 2008

• Wholesale Sales: $377.4 billion


• Monthly Change: Down 4.1%


• Year-to-year Change: Up 2.7%

Oil rebounds despite inventory build signaling possible market bottoms

...oil markets shrugged off the news and rose Wednesday and in early
overnight trading Thursday. Though this is the same pattern we were
seeing this time last year at the height of the oil bubble, in this
case the news is a bit more positive than just a return of the oil
bubble (which is not likely). For weeks nothing has put a floor under
oil because the thing driving oil prices downward has been anxiety
about the global economy; this oil rebound seems to be part of a
broader floor that includes stock prices, other commodity prices and
foreign currencies (against the dollar), at least for now.

Korean Leading Index plummets, central bank cuts rates 1%

South Korea’s economic indicators took a big tumble in October, the
Leading Index dropping 2.9% and the Coincident Index falling 0.7%, and
the South Korean central bank responded to the bad economic news with a
1% drop in key interest rate targets. With a 0.7% decline in September and a 2.3% drop in August, this puts the Leading Index down a cumulative 5.9% in just three months.

What I'm Reading

Gas Consumption Kept in Check

U.S. gas consumption ticked up last week as prices fell,
but experts don't predict a sizable rebound in demand until the economy
improves.

Slowdown In China Gets Worse

Sudden declines in China's imports and exports show the
country's economic slowdown is entering a new and more serious phase,
exacerbating the global slump while jolting Chinese companies and
workers.

Bank of Korea Reduces Interest Rate 1 Percentage Point to a Record Low 3% The Bank of Korea cut its benchmark
interest rate to a record low of 3 percent in an effort to
prevent the global economic crisis from pushing the nation into
its first recession since 1998.

China's Inflation Cools to Weakest in 22 Months as Economic Growth Slows China’s inflation cooled to the
weakest pace in almost two years, giving the central bank room
for more interest-rate cuts.

Australia's Jobless Rate Rises to a One-Year High as Economic Growth Slows Australia’s jobless rate climbed to
the highest in a year as employers cut part-time workers in
November, adding to signs the economy may follow the U.S., Japan
and Europe into a recession.

Taiwan Central Bank May Cut Interest Rates as Global Recession Hurts Trade South Korea and Taiwan will probably
cut interest rates today to shore up economies buffeted by
declining demand for exports amid recessions in the U.S., Japan
and Europe and weakening growth in China.

Worst Spending Slump Since 1942 Paces `Scary' U.S. Recession, Survey Says The biggest slump in U.S. consumer
spending since 1942 will extend the recession and push the
jobless rate to the highest level in a quarter century, according
to economists surveyed by Bloomberg News.

US Nov retail sales post big drop -SpendingPulse

NEW YORK, Dec 11 (Reuters) - U.S. retail sales excluding
autos posted their biggest monthly drop in five years November,
as consumers, spooked by a deepening recession, pared spending
for a third straight month, a private report released on
Thursday showed.