Sunday, March 8, 2009

NKOREA WARNS INTERCEPTING 'SATELLITE' WILL PROMPT COUNTERSTRIKE

North Korea WARNS INTERCEPTING 'SATELLITE' WILL PROMPT COUNTERSTRIKE

Friday, March 6, 2009

Iraq War: By The Number s

20 killed as Mexico crime gangs defy security

Limbaugh: Kennedy Will Be Dead By The Time Health Care Bill Passes

Monday, March 2, 2009

Washington, Your Solution IS the Problem - Glenn Beck: It's Only the Beginning

Wall Street tumbles anew as financials slide

Dow breaks 7,000 for first time since '97 as AIG gets more gov't funding, posts $61.7B loss

Tim Paradis, AP Business Writer
Monday March 2, 2009, 4:40 pm EST

NEW YORK (AP) -- Investors' despair about financial companies and the recession has brought the Dow Jones industrial average to another unwanted milestone: its first drop below 7,000 in more than 11 years.

Symbol	Price	Change
AIG	0.42	0.00

The market's slide Monday, which took the Dow down 300 points, was nowhere near the largest it has seen since last fall, but the tumble below 7,000 was nonetheless painful. The credit crisis and recession have slashed more than half the average's value since it hit a record high over 14,000 in October 2007. And now many investors fear the market could take a long time to regain the lost 7,000.

"As bad as things are, they can still get worse, and get a lot worse," said Bill Strazzullo, chief market strategist for Bell Curve Trading. Strazzullo said he believes there's a significant chance the S&P 500 and the Dow will fall back to their 1995 levels of 500 and 5,000, respectively.

The "game-changer," he said, will be the housing market and whether it can stabilize.

A recovery will also require signs of health among financial companies, but so far in 2009, it is clear that banks and insurance companies' losses are multiplying despite hundreds of billions of dollars in government help. The market fell Monday after insurer American International Group Inc. posted a staggering $61.7 billion in quarterly losses and as the government agreed to inject more money into the company. AIG will get another $30 billion in loans, on top of the $150 billion the government has already invested.

And it's not just U.S. companies that have Wall Street frightened. HSBC PLC, Europe's largest bank by market value, said Monday it needs to raise $17.7 billion. The company reported a 70 percent drop in 2008 earnings and said it would cut 6,100 jobs.

While the root of financial firms' problems lie with the bad bets they made on mortgages and mortgage-backed securities, now the recession is exacerbating their problems as it also forces millions of job cuts.

"The economy definitely has deteriorated since November," said Sean Simko, head of fixed income management at SEI Investments. "It's just the fact that we haven't seen signs of improving or stabilizing, per se, which is adding to the morass of the market."

According to preliminary calculations, the Dow fell 299.64, or 4.24 percent, to 6,763.29. The Dow last closed below 7,000 on May 1, 1997 and hadn't finished at this level since April 25, 1997.

The Dow's descent has been swift. It took only 14 sessions for the average to go from above 8,000 to below 7,000. So far this year, the Dow is down 22.9 percent.

Broader stock indicators also slid. The Standard & Poor's 500 index fell 34.27, or 4.7 percent, to 700.82. The index briefly traded below the 700 mark in the final minutes of the session. S&P 500 index hadn't traded below 700 since Oct. 29, 1996. It hasn't closed below that level since the previous day, Oct. 28.

The Nasdaq composite index fell 54.99, or 4 percent, to 1,322.85.

The Russell 2000 index of smaller companies fell 21.22, or 5.5 percent, to 367.80.

About 16 stocks fell for every one that rose on the New York Stock Exchange, where volume came to a heavy 1.80 billion shares.

Sunday, March 1, 2009

Asian stock markets tumble on worsening US slump

Asian stocks tumble as worsening US slump erodes recovery hopes; Tokyo, HK off about 4 pct

HONG KONG (AP) -- Asian stocks tumbled Monday after the U.S. economy withered at its fastest pace in more than a quarter century, heightening doubts that the global economy can recover later this year. Japan's benchmark fell 4 percent.

Symbol	Price	Change
C	1.50	-0.96

As in the U.S. and Europe, investors across the region were shaken after figures Friday showed gross domestic product in the world's largest economy shrank at a 6.2 percent annual pace at the end of last year.

The decline, worse than most economists had expected, was the country's sharpest since 1982.

Adding to fears that the world economic crisis won't end anytime soon were more troubling signs that banks may need still more capital to cope with crippling losses.

On Friday, Citigroup Inc. agreed to turn over a huge stake to the U.S. government. And European banking giant HSBC PLC is expected to unveil plans to raise 12 billion pounds ($17 billion) in a new rights issue when it reports results later Monday.

Meanwhile, faltering insurer American International Group is expected to get another massive bailout.

"You're seeing the U.S. is sinking lower and lower, and we're still desperately searching for a bottom," said John Mar, co-head of sales trading at Daiwa Securities SMBC Co. in Hong Kong. "It's death by a thousand cuts, a slow death right now."

Every major market in Asia convulsed with selling.

In Japan, the Nikkei 225 stock average dropped 300.99, or 4 percent, to 7,267.43.

Hong Kong's Hang Seng lost 490.53 points, or 3.8 percent, to 12,321.04, and South Korea's Kospi plummeted 4.1 percent to 1,019.74. Markets in Australia, Taiwan and Singapore shed about 3 percent or more.

Equities markets in the U.S. and Europe suffered a similar rout on Friday.

In New York, the Dow fell 119.15, or 1.7 percent, to 7,062.93 -- its lowest close since May 1, 1997.

The S&P 500 index fell 17.74, or 2.4 percent, to 735.09, and the Nasdaq composite index fell 13.63, or 1 percent, to 1,377.84.

With U.S. futures down, Wall Street was poised for more losses. Dow futures were down 89 points, or 1.3 percent, at 6,963 and S&P500 futures lost 10.7, or 1.5 percent, to 723.50.

Asian financal stocks were among the hardest hit. Leading Japanese bank Mitsubishi UFJ Financial Group dived over 5 percent. In Hong Kong, shares of HSBC were suspended ahead of Monday's results and expected announcements.

Oil prices weakened in early trade, with benchmark crude for April delivery down $1.14 at $43.62. Last week in the U.S., the contract fell 46 cents to settle at $44.76 a barrel on the New York Mercantile Exchange.

In currencies, the dollar was little changed at 97.52 yen, while the euro dropped to $1.2563 from $1.2668.

U.S. rattled as Mexico drug war bleeds over border

PHOENIX (Reuters) – Hit men dressed in fake police tactical gear burst into a home in Phoenix, rake it with gunfire and execute a man.

Armed kidnappers snatch victims from cars and even a local shopping mall across the Phoenix valley for ransom, turning the sun-baked city into the "kidnap capital" of the United States.

Violence of this kind is common in Mexico where drug cartel abductions and executions are a daily feature of a raging drug war that claimed 6,000 lives south of the border last year.

But U.S. authorities now fear that violent crime is beginning to bleed over the porous Mexico border and take hold here.

"The fight in Mexico is about domination of the smuggling corridors and those corridors don't stop at the border," Arizona Attorney General Terry Goddard said.

Execution style murders, violent home invasions, and a spiraling kidnap rate in Phoenix -- where police reported an average of one abduction a day last year linked to Mexican crime -- are not the only examples along the border.

In southern California, police have investigated cases of Americans abducted by armed groups tied to the Tijuana drug trade. One involved a businesswoman and her teenage daughter snatched in San Diego last year and held to ransom south of the border.

In south Texas, a live hand grenade traced back to a Mexican cartel stash was tossed onto the pool table of a bar frequented by off-duty police officers in January. The pin was left in it and the assailant fled.

COPING WITH SPILLOVER

Mexican traffickers have always been violent, but the death toll has soared since President Felipe Calderon took office in late 2006 and sent tens of thousands of troops to fight the country's powerful cocaine cartels.

Soldiers have fought pitched battles with drug gangs in several Mexican towns and overwhelmed police officers have fled municipal forces the length of the border. In many cases, police officers have been paid off by the drug gangs or even joined them.

In a sign of an increasingly desperate struggle to rein in the violence, Calderon this week ordered 5,000 more troops and federal police to Ciudad Juarez, just across the border from El Paso, Texas.

The cartels have killed 250 people in Ciudad Juarez in the past month, forced the police chief to resign, and shut down the airport with bomb threats.

The struggle by outgunned Mexican authorities to contain the violence was highlighted for Arizona state police last November, when Mexican police officers pinned down in a raging gun battle in Nogales, Sonora, reached out to them with an urgent request for more bullets.

While U.S. authorities stress they have not seen anything like the kind of street battles and horrific beheadings that are now common in Mexico, they are already taking action to curb was has become known as "overspill".

Texas Gov. Rick Perry says he wants 1,000 troops to guard the border. The state's Attorney General Greg Abbott is backing legislation to crack down on money laundering and human, drug and weapons trafficking through the state by the warring Gulf and Sinaloa cartels.

Lawmakers in Arizona heard testimony on border violence last week from police and prosecutors, who are seeking more robust measures to seize smugglers' assets, as well as cracking down harder on gunrunning to Mexico.

PLANNING FOR THE WORST

Washington has stepped up support for Calderon, pledging to give Mexico helicopters, surveillance aircraft, inspection equipment and police training under a $1.4 billion plan to beat the cartels in Mexico and Central America.

Homeland Security Secretary Janet Napolitano -- a former Arizona governor -- told a Congressional hearing last week she was focused on curbing the southbound traffic in guns that are being used to arm the violent cartels.

In a measure of that commitment, a Phoenix gun dealer goes on trial next week on charges he sold hundreds of weapons, including AK-47 assault rifles, to smugglers knowing they would send them to a powerful cartel in Sinaloa state on Mexico's Pacific coast.

As the spiraling drug violence shakes Mexican cities and towns along the U.S. border, U.S. Senate lawmakers announced last week they would hold two hearings to assess the ability of U.S. security forces to deal with the rise in crime on the U.S. side.

Senator Joseph Lieberman, chairman of the homeland security governmental affairs committee, said the panel would assess border security programs already in place and review whether federal, state and local authorities are ready to respond to any serious spillover of the Mexican drugs war.

For the sheriff of Hidalgo County, in south Texas, where the live grenade was thrown into a bar in Pharr, possibly by street gang members armed by a Mexican cartel, that renewed attention to the war on his doorstep can only be welcome.

"It's the first time we've had a hand grenade attack," Guadalupe Trevino told Reuters. "I believe there's more out there that we need to find."

SILVER : GOLD'S little BIG BROTHER

Ailing G.O.P. Risks Losing a Generation

By MARJORIE CONNELLY

Published: February 28, 2009

Republicans have their work cut out for them.

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Noam Fridman

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Graphic

The Party Identification Gap

Survey Reveals Broad Support for President (February 24, 2009)

Complete Poll Results (pdf)

Americans identifying themselves as Democrats outnumber those who say they are Republicans by 10 percentage points, the largest gap in party identification in 24 years.

The gap has widened significantly since President George W. Bush’s re-election in 2004, when it was a mere 3 percentage points. But by the time Mr. Bush left office in January, less than a quarter of Americans approved of his performance.

These days, 38 percent of Americans say they are Democrats, 28 percent call themselves Republicans, and another 29 percent identify as independents, according to an average of national polls conducted last year by The New York Times and CBS News.

Whether President Obama is able expand that gap to favor his party will probably depend mostly on Americans under the age of 30 who have yet to form strong partisan ties.

Ronald Reagan’s presidency underscores the power of a popular incumbent to win over young voters. When he was elected in 1980, only 20 percent of young Americans identified as Republicans. By 1989, the number had grown to 37 percent, a significant factor in the expansion of the Republican Party during those years.

The year-by-year trends are based on party identifications from all national surveys conducted by The New York Times and CBS News and averaged by year.

Next Article in Week in Review (4 of 7) » A version of this article appeared in print on March 1, 2009, on page WK3 of the New York edition.

State caught in avalanche of job losses

After steep January cuts, more than 1 in 10 Californians is out of work. It's even worse in L.A. County.

By David Pierson
February 28, 2009

Unemployment in California shot up to its highest level in nearly 26 years in January, leaving more than 1 in 10 workers without a job.

Figures released Friday show that 79,300 jobs were lost in the state last month, bringing the total number of unemployed to 1,863,000, or 10.1% of the workforce. That's the highest since the rate touched 10.4% in 1983.

California unemployment rate reaches 10....

Conditions are even worse in Los Angeles County, which saw its unemployment rate jump to 10.5% in January from 9.2% the month before.

The deep job losses follow a sharp drop in the gross domestic product -- the value of all goods and services produced -- in the waning months of 2008. Nationwide, GDP shrank at an annual rate of 6.2% in the fourth quarter, the Commerce Department said Friday. That was far worse than the 3.8% drop the agency had estimated, and the biggest decrease since 1982.

Paul Policarpio knew it was only a matter of time before he would be laid off.

Where have all the jobs gone?

Announced layoffs in 2009

Recent cuts | Money & Co. | Full coverage

In his final months as a sales associate at a Nordstrom store in Canoga Park he spent most of his time straightening out the piles of unsold clothes. A couple of weeks ago, the ax fell.

Policarpio's experience has been repeated across L.A. County, where retail jobs have taken the hardest hit in an ever-growing wave of layoffs and downsizing.

The outlook for Southern California is considerably worse than the national forecast presented by President Obama's budget team this week because the economy here -- usually considered resilient because of its diversity -- relies on sectors battered by this particular recession, said economist Jack Kyser of the Los Angeles County Economic Development Corp.

L.A. County alone, his group projects, will lose 89,000 jobs in 2009, and Kyser suggested the unemployment rate could surpass 10.5% for the year. In the Inland Empire, the group predicts the unemployment rate will rise to 11.1%, while Orange County, which lost 41,400 jobs last year, is projected to see unemployment climb to 7.3%, the highest rate in 16 years. January figures for those counties will be released next month.

Los Angeles County lost a net 41,900 jobs last year and nearly all of them -- about 41,000 -- were in retail, manufacturing and construction, in that order. In January, retail shed 15,100 jobs, manufacturing lost 6,800, and construction, 4,800. The three sectors were caught in the collapse of the housing boom and recession.

To make matters worse, another key California industry -- the film business -- lost 22,300 jobs in January, leading L.A. County layoffs for the month.

Sally Wang found out she was losing her job the day she returned from a New Year's vacation.

The mother of one managed a high-end women's clothing showroom in the garment district in downtown Los Angeles selling wholesale to department stores such as Barneys and Neiman Marcus. She said 2008 started poorly and got progressively worse.

"First, very few people were coming in," Wang, 36, said. "Buyers stopped traveling so they asked us to send pictures. Then people wanted to return stuff because it wasn't selling. And then they started canceling orders."

Wang agreed to a $25,000 cut from her $80,000 salary before the winter holidays. But that wasn't enough to save her job. She was fired after four years with the company.

"It doesn't look like I'll be able to get a job in the same industry for the same salary," said Wang, who is concerned she'll have to scrap her plans to enroll her 5-year-old daughter in private school. "The only things available are very skilled jobs where you need lots of experience or $10-an-hour jobs."

Hollywood studios and television networks have been slashing payrolls as financing and revenue ebb. Although box-office sales are up 23% for the first few weeks of the year, other parts of the entertainment business, such as DVD sales, have been struggling.

Warner Bros. announced last month it would eliminate 800 jobs. Other entertainment heavyweights, including Viacom Inc., video game giant Electronic Arts Inc. and Hollywood's largest independent studio, Lionsgate, have also downsized.

Economic pressures have forced studios to scale back the number of films they are shooting, further eroding the number of available jobs.

With more competition in the job market, the chances of finding employment declines.

State caught in avalanche of job losses

February 28 2009

Anthony Azucar was laid off twice last year and has spent the last six months looking for work.

The former printing press technician has sent out dozens of resumes, applying for jobs far afield from his trade such as customer service call center representative and office assistant. Desperate to help support his wife and 10-year-old daughter, he's willing to accept a fraction of his former pay, but still hasn't received any offers.

California unemployment rate reaches 10....

"It's overwhelming," Azucar, 52, said. "I feel like there's too much competition. And you don't see any improvement in the near future. That's what it boils down to."

Economists say that, even if the economy begins to improve later this year, employment will lag behind.

"There will be more pain to come," said Jerry Nickelsburg, a senior economist for the UCLA Anderson Forecast. "Typically, when it comes to unemployment, it continues to decline even after we reach the bottom of the recession. And we're still not there."

Where have all the jobs gone?

Announced layoffs in 2009

Recent cuts | Money & Co. | Full coverage

Nickelsburg expects consumer spending to rebound slightly in the second half of the year, spurring some economic growth. But the unemployment rate may not begin to recede until months later.

"Businesses have to be convinced we're out of the recession before they start hiring," said Lisa Grobar, a Cal State Long Beach economist.

Grobar said unemployment rates tend to lag six to 12 months behind GDP growth, and companies climbing out of a recession usually hire temporary workers first. Only when they're confident they're entering a sustained growth period will they hire for the long term.

Though December 2007 was declared the national recession's starting point, unemployment in L.A. County started gaining momentum in the spring of 2008 in concert with the crumbling housing sector.

Building contracts dried up and project engineers like Casey Lorenzen were suddenly forced out of their jobs.

"We were the first to get hit," said Lorenzen, who learned he was being fired in April at a job site in Lancaster. "I wasn't exactly blindsided. I'd been reading every day about how the economy was souring. I could see everyone was struggling and beginning to downsize."

He lost his job two weeks before he was married. The celebration went as planned with 200 guests, but after the honeymoon, his bride had to take on two jobs while Lorenzen struggled to find work. He's since landed some handyman assignments -- building a fence, plumbing, remodeling an apartment.

Looking for employment with a construction company was a dead end. In 2008, the industry lost 8,600 jobs in L.A. County, the third-largest loss of any sector.

"It's been really tough getting by," said Lorenzen, 29, of Granada Hills. "My few friends in the industry tell me there just isn't any work."

The problem would spread. With the collapse of the housing market, consumer spending declined.

Retail sales plummeted and, in a mad dash by businesses to stay afloat, 19,300 jobs were eliminated in L.A. County, the most of any industry last year.

The worst of the losses may be past for retail, but that doesn't mean companies will be staffing up any time soon, said Richard Giss, a partner in accounting firm Deloitte & Touch's consumer business division in Los Angeles. Many jobs -- such as those lost in the liquidation of Mervyns and Circuit City -- are never coming back, he said.

"The name of the game for retail is survival, not growth," Giss said. "It means conserving resources."

If those selling goods are having a hard time staying employed, so are the people who make the goods. Manufacturing took the second-largest hit of any sector in 2008, shedding 13,100 jobs.

The losses were felt across the board, by metal workers, furniture makers and aerospace manufacturers alike. Boeing Co. in Long Beach eliminated at least 68 positions last year, with more expected in 2009. The airplane manufacturer said it would cut 10,000 jobs, or 6% of its total workforce.

The losses continued in the new year when Superior Industries International, which makes aluminum wheels for the auto industry, announced Jan. 13 it would close its Van Nuys plant. The move eliminates 290 jobs and is expected to save the company $16.5 million a year in labor costs.

While dwindling consumer demand contributed to many of the layoffs, additional manufacturing jobs were lost to outsourcing and to new technology that reduces the need for workers. There are 29% fewer workers in manufacturing in L.A. County today than there were in 2000.

The opposite is happening in healthcare, which added 8,400 workers last year as providers expanded to accommodate the graying baby boomer generation, experts say.

That's not lost on Resty Tiangco, 35, who was laid off from a car dealership in Santa Monica on Feb. 17. After 15 years in the industry as an auto technician, the father of three is thinking about going to nursing school.

"After looking online and seeing there's no work out there, I realized I should probably change fields and go to school," he said. "But maybe I need to take any job I can find. I have kids to worry about."

david.pierson@latimes.com

Times staff writers Marc Lifsher, Jim Puzzanghera and Richard Verrier contributed to this report.

A bleak outlook
All areas of state economy are affected. BUSINESS, C1

Saturday, February 28, 2009

Calif. declares drought emergency, mulls rationing

By Peter Henderson

SAN FRANCISCO, Feb 27 (Reuters) - California Governor Arnold Schwarzenegger on Friday declared a state emergency due to drought and said he would consider mandatory water rationing in the face of nearly $3 billion in economic losses from below-normal rainfall this year.

As many as 95,000 agricultural jobs will be lost, communities will be devastated and some growers in the most economically productive farm state simply are not able to plant, state officials said, calling the current drought the most expensive ever.

Schwarzenegger, eager to build controversial dams as well as more widely backed water recycling programs, called on cities to cut back water use or face the first ever mandatory state restrictions as soon as the end of the month.

"California faces its third consecutive year of drought and we must prepare for the worst -- a fourth, fifth or even sixth year of drought," Schwarzenegger said in a statement, adding that recent storms were not enough to save the state.

He called on urban water users to cut consumption by 20 percent and state agencies to implement a water reduction plan. Meanwhile, the state of emergency will let planners fast-track some infrastructure building.

Legislators have also revived a $10 billion bond package to build new dams, fund conservation programs and build plants to recycle waste water and recharge aquifers.

"There is a bit of a perfect storm, pardon the pun, developing here," Republican state Senator Dave Cogdill told Reuters after introducing one of the new bond packages. "I hope the attitude toward surface storage, the larger projects, has changed."

The state water department will report on conservation progress by the end of March, and if the situation has not sufficiently improved, water rationing and mandatory cuts in water use could be instituted, the governor said.

California produces more than half the nation's fruits, vegetables and nuts, and farmers in recent weeks have been staggered by reports that the main federal source of irrigation water will go dry this year and the top state water project will not fulfill more than 15 percent of requested water.

The Central Valley, a fertile but arid region stretching some 500 miles (805 km) from Bakersfield to Redding, is the agricultural heartland of California, which ranks as the nation's No. 1 farm state in terms of the value of crops produced -- more than $36 billion a year.

Concern about California's tight water supply is on the upswing at the same time as officials in the state capital of Sacramento rally behind the idea of creating jobs with public works spending. Unemployment in the most populous state rose to double digits -- 10.1 percent -- in January.

Water planners and environmentalists are also broadly in agreement that climate change is creating a more erratic climate that could lengthen dry spells.

"We're going to have droughts. That's a fact of life. They may be worse in the future," state water chief Lester Snow told reporters on a conference call. (Additional reporting by Jim Christie; Editing by Christian Wiessner)

Buffett Says Economy Will Be ‘In Shambles’ for 2009

By Rick Levinson

Feb. 28 (Bloomberg) -- Billionaire Warren Buffett said the economy will be “in shambles” for the rest of this year as financial firms take losses tied to reckless loans made during the housing boom.

The Standard & Poor’s 500 Index will probably gain in three quarters of the next 44 years, just as it did in the period since Buffett took over Berkshire Hathaway Inc. in 1965, he said today in his annual letter to the company’s shareholders.

While Buffett and business partner Charlie Munger can’t predict how stocks will perform in 2009, they’re certain “that the economy will be in shambles throughout 2009 -- and, for that matter, probably well beyond,” he wrote.

Gross domestic product shrank at a 6.2 percent annual pace from October through December, the most since 1982, the Commerce Department said yesterday in Washington. Buffett said the consequences of the U.S. housing bubble are now “reverberating through every corner of our economy.”

Home purchases should involve an “honest-to-God down payment of at least 10 percent,” Buffett said. “Putting people into homes, though a desirable goal, shouldn’t be our country’s primary objective.”

Buffett endorsed efforts by the U.S. government to prevent the failure of financial firms including Bear Stearns Cos., which was sold to JPMorgan Chase & Co.

‘Immediate Action’

“Whatever the downsides may be, strong and immediate action by government was essential last year if the financial system was to avoid a total breakdown,” Buffett said. “Had that occurred, the consequences for every area of our economy would have been cataclysmic. Like it or not, the inhabitants of Wall Street, Main Street and the various Side Streets of America were all in the same boat.”

Buffett’s letter accompanied the release of Berkshire’s fourth-quarter results, in which net income fell 96 percent to $117 million on losses from derivative bets tied to stock markets. Berkshire shares have fallen 44 percent in the past year as the value of the firm’s top stock holdings dropped and losses increased on the derivatives.

By the fourth quarter of last year, “the credit crisis, coupled with tumbling home and stock prices, had produced a paralyzing fear that engulfed the country,” Buffett said. “A freefall in business activity ensued, accelerating at a pace that I have never before witnessed. The U.S. - and much of the world - became trapped in a vicious negative-feedback cycle. Fear led to business contraction, and that in turn led to even greater fear.”

Friday, February 27, 2009

WORST MONTH SINCE 1933

WORST MONTH SINCE 1933

A late burst of selling sealed a dismal finish for the stock market, which hit a fresh 12-year low on Friday as Citigroup sold a bigger chunk of itself to the government and General Electric slashed its dividend, spooking investors who were already jittery.

The Dow Jones Industrial Average dropped 119.15 points, or 1.7%, to end at 7062.93. The blue-chip benchmark ended down 937.93 points, or 11.72% on the month -- the worst percentage drop since 1933, when it fell 15.62%. The Dow industrials have fallen six months in a row and are now more than 50% off their record highs hit in October of 2007.

Market Data Center >

The S&P 500 fell 17.74 points, or 2.4%, to 735.09. Its financial sector dropped 6.5% and its health-care sector sank 4% on fears that President Barack Obama's reform plans will carve into the profits of drug makers and insurers. The S&P is off 53% from its October 2007 peak and has now seen its worst six-month drop in percentage terms -- 42.7% -- since 1932, when it dropped 45.44% in the six months ending in June.

Major market yardsticks broke through one long-term low after another this week, but the slide never quite gained intraday momentum akin to that seen during the market's late-2008 plunge. Many market veterans now expect the market to continue such a slog in the days ahead, with both new lows and short-term rallies likely.

"This decline does put some emphasis to the downside going into next week, but I'm still in a wait-and-see mode," said John Bollinger, president of Bollinger Capital Management in Manhattan Beach, Calif.

General Electric shares fell 6.5% after the conglomerate said it planned to cut its quarterly dividend to 10 cents a share from 31 cents in a move that it hopes will save $9 billion and preserve its AAA credit ratings. GE, which has shed 75% of its market value over the past year, had said that it would preserve the dividend, but analysts and investors were skeptical.

Thirty-six companies in the S&P 500 have cut their dividends since the mid-September meltdown of Lehman Brothers Holdings marking the start of a full-blown financial crisis that has since tightened its grip on the global economy. That pace of reductions appears unprecedented over any three- or four-month period, with more cuts likely on the way, said Ashwani Kaul, research director at Thomson Reuters.

"If anything, I would expect the pace to pick up over the next few months," he said. "Let's face it, these companies are doing whatever they need to preserve their capital."

Concern about the financial sector has shaped trading around the world for months, and the banking sector remained a dominant theme on Friday.

Associated Press

Specialist Glenn Caroll, left, works his post on the trading floor of the New York Stock Exchange Friday, Feb. 27, 2009 (AP Photo/David Karp)

Over the last few weeks, concern that banks would need even more capital has damped share prices across the sector and the few traders willing to even play in bank stocks are mostly holding short positions. According to Data Explorers, a short-selling data research firm based in New York and London, 2.6% of Citigroup is now out on loan, up nearly 38% from just less than two weeks ago.

"I don't plan on buying any banks anytime soon. That industry is going to zero, some winners, some losers," said Keith Walter, a portfolio manager with Artio Global Investors.

Citigroup unveiled a stock swap that would leave the government owning more than a third of the bank. The move is an acknowledgement that the billions that the U.S. has already deployed to aid Citi haven't been enough to stop its slide. Citi also said that it will record $10 billion in write-downs in its fourth quarter, boosting the year's net loss to $27.7 billion. Moody's and S&P cut their ratings on the bank's preferred stock.

The arrangement inflamed some investors' fears of bank nationalization.

"What I have more of a problem with than nationalization itself is the fact that [the government] debated nationalization for a couple of weeks," said strategist Jim Paulsen, of Wells Capital Management in Minneapolis. "That debate in itself was harmful because it created a run on the bank stocks."

The bank's stock plunged by 39% and caused a selloff in the shares of many of its peers. Bank of America, which has seen its shares battered in recent weeks in a similar manner as Citi, dropped 26%. The KBW Banks Index fell 8.7%.

The Nasdaq Composite Index fared better on the day than the other major indexes, falling 13.63 points, or 1%, to 1377.84. Intel, Research In Motion and Google managed to stake out gains. Dell jumped by 3.9% after the computer maker reported a steep loss but investors welcomed its efforts to trim its costs.

Gross domestic product decreased at a seasonally adjusted 6.2% annual rate October through December, the Commerce Department said Friday in a new, revised estimate of fourth-quarter GDP. The 6.2% decline meant the worst quarterly showing for GDP since a 6.4% decrease in first-quarter 1982 GDP.

In its original estimate, issued a month ago, the government had reported fourth-quarter 2008 GDP fell 3.8%. The sharply lower revision to a decline of 6.2% reflected adjustments downward of inventory investment, exports and consumer spending.

Treasury prices were mixed, with longer maturities sliding. The dollar gained against the euro but slid against the yen. Stocks in Europe slid on the Citi deal and U.S. economic news, with the FTSE 100 ending down 2.2%.

—Kejal Vyas contributed to this article

Thursday, February 26, 2009

Big Names: Rogers "Prepared For The Worst"; Rogers On His Mettle; Cultivating Growth

Jim Rogers - "I expect to see civil unrest in the U.S." 02/25/09

Obama budget plan forecasts soaring deficits

By Caren Bohan and Jeff Mason

WASHINGTON (Reuters) - President Barack Obama forecast the biggest U.S. deficit since World War Two in a budget on Thursday that urges a costly overhaul of the healthcare system and would spend billions to arrest the economy's freefall.

An eye-popping $1.75 trillion deficit for the 2009 fiscal year underlined the heavy blow the deep recession has dealt to the country's finances as Obama unveiled his first budget. That is the highest ever in dollar terms, and amounts to a 12.3 percent share of the economy -- the largest since 1945. In 2010, the deficit would dip to a still-huge $1.17 trillion, Obama predicted.

With that backdrop, his budget represents a gamble that Americans are ready for the sort of change they embraced by electing him in November -- a shift of wealth through higher taxes on the rich to pay for more government attention to healthcare, education, climate change and social programs.

The coming fight with Congress -- where the Republican opposition quickly opened fire on the plan -- will show whether Americans weary of paying for a raft of expensive bailouts for banks and the car industry can get on board with more hefty doses of big government.

Obama, a Democrat, promised to get the red ink under control even as he planned new spending priorities that veered sharply away from the policies of his Republican predecessor President George W. Bush.

"I don't think that we can continue on our current course. I work for the American people, and I'm determined to bring the change that the people voted for last November," said Obama, who took office on January 20.

Republicans condemned the plan as showing a dedication to "tax-and-spend" policies, presaging major political fights getting the budget passed.

"I think we just ought to admit we're broke. We can't continue to pile debt on the backs of our kids and grandkids," said John Boehner, leader of the Republicans in the House of Representatives.

The cost of extra borrowing to pay for the record budget deficit pushed U.S. stocks and government debt prices down on Thursday. The budget's healthcare plans delivered a hit to shares in health insurers and drugmakers.

WORRIES OVER SPENDING

House Speaker Nancy Pelosi, a California Democrat, praised Obama's spending priorities and chided Republicans for what she saw as their new found interest in limited government.

"Perhaps ... they (the Republicans) have amnesia," Pelosi said, noting that with Bush at the helm they turned budget surpluses into deficits, in part through significantly higher government spending.

But some analysts questioned whether Obama's goals were realistic at a time when the economy is still in crisis and the surging deficits threaten to burden a future recovery.

"There are some good things in this budget but a lot still seems very wasteful. The market is crumbling around us and economies are in the tank," said Dan Cook, senior market analyst with IG Markets in Chicago.

Obama sought to push ahead with a campaign promise of expanding healthcare to the 46 million people who are uninsured in the United States. His budget includes a 10-year, $634 billion reserve fund to help pay for the president's proposed healthcare reforms -- much of it paid for by raising taxes on those earning more than $250,000 a year.

The budget also raises the possibility of more than doubling the government's aid to the battered financial sector.

The administration put in a "placeholder" to buy as much as $750 billion of assets from financial firms, which have been nearly crippled by an overhang of bad mortgage debt. Assuming one-third is lost, the ultimate cost to taxpayers would be $250 billion, the budget said.

Obama has not decided whether to seek that money, but if he does, it would come on top of an existing $700 billion financial bailout program, which has been unpopular with many Americans who see it as rewarding Wall Street bankers who made risky bets on mortgages securities.

The proposed $3.55 trillion spending blueprint for the 2010 fiscal year that begins October 1 provides the broad outlines of a more detailed one to be released in April.

While Obama has broad support since Congress is controlled by Democrats, he could face a fight -- including among fiscal conservatives in his own party -- about spending goals.

The deficit figure reinforced concerns the government will need to sell record amounts of debt to pay for programs aimed at pulling the economy out of a deep recession.

Obama set a goal of slashing the deficit to $533 billion, or 3 percent of GDP by 2013. A rollback of the Bush tax cuts for wealthy Americans and a planned drawdown of U.S. troops from Iraq are expected to help rein in the shortfall.

WAR SPENDING

Obama is seeking an additional $75.5 billion for wars in Iraq and Afghanistan for the rest of the current fiscal year. He is requesting $130 billion for military operations in the two wars for 2010, which would be down from the roughly $140 billion he expects will be needed this year.

Washington spent about $190 billion on the wars in 2008. Obama looks likely to order U.S. combat troops to withdraw from Iraq over about 18 months, according to U.S. officials. At the same time, he is ramping up the military effort in Afghanistan.

Obama's budget proposal lays out spending cuts in farm subsidies and other areas to meet the deficit-reduction goal. [ID:nN262396]. But such programs are popular with lawmakers -- both Republicans and Democrats --from states with big agricultural sectors who may be loath to allow cuts.

The budget includes billions in revenues, starting in 2012, from a greenhouse gas emissions trading system. That is central to Obama's proposals to fight global warming, which are a major departure from the policies of Bush, who was widely criticized by environmentalists for resisting action.

The $85-billion U.S. college student loan business reeled from a budget proposal to axe the giant federally guaranteed student loan program. In a major shift that severely undercut shares in top student lender Sallie Mae, the budget called for moving most student lending into the direct-loan program run by the U.S. Education Department.

The $1.75 trillion budget deficit forecast for this year reflects shortfalls accumulated under Bush as well as new spending proposals under the $787 billion economic stimulus package Obama signed earlier this month.

While Obama is still basking in high approval ratings from the U.S. public, his stimulus package and other efforts to revitalize the economy have done little to win over Wall Street. U.S. stocks prices hit 12-year lows this week.

(Additional reporting by Thomas Ferraro, Jeremy Pelofsky and Emily Kaiser in Washington and Leah Schnurr in New York, editing by Frances Kerry)

Monday, February 23, 2009

Hugh Hendry - Top 1% Fund Manager Lays it Out - Mega Deflation First - HyperInflation Later

Sunday, February 22, 2009

Glenn Beck predicts doomsday, revolution

FEDS EYE LARGE STAKE IN CITI

By DAVID ENRICH and MONICA LANGLEY

Citigroup Inc. is in talks with federal officials that could result in the U.S. government substantially expanding its ownership of the struggling bank, according to people familiar with the situation.

While the discussions could fall apart, the government could wind up holding as much as 40% of Citigroup's common stock. Bank executives hope the stake will be closer to 25%, these people said.

Any such move would give federal officials far greater influence over one of the world's largest financial institutions. Citigroup has proposed the plan to its regulators. The Obama administration hasn't indicated if it supports the plan, according to people with knowledge of the talks.

When federal officials began pumping capital into U.S. banks last October, few experts would have predicted that the government would soon be wrestling with the possibility of taking voting control of large financial institutions.

The talks reflect a growing fear that Citigroup and other big U.S. banks could be overwhelmed by losses amid the recession and housing crisis. Last week, Citigroup's share price fell below $2 to an 18-year low. Bank executives increasingly believe that the government needs to take a larger ownership stake in the institution to stop the slide.

Under the scenario being considered, a substantial chunk of the $45 billion in preferred shares held by the government would convert into common stock, people familiar with the matter said. The government obtained those shares, equivalent to a 7.8% stake, in return for pumping capital into Citigroup.

The move wouldn't cost taxpayers additional money, but other Citigroup shareholders would see their shares diluted. A larger ownership stake by the federal government could fuel speculation that other troubled banks will line up for similar agreements.

Bank of America Corp. said Sunday that it isn't discussing a larger ownership stake for the government. "There are no talks right now over that issue," said Bank of America spokesman Robert Stickler. "We see no reason to do that. We believe the goal of public policy should be to attract private capital into the bank, not to discourage it."

Shareholders' Fears

Citigroup's low share price already reflects, at least in part, a fear among shareholders that their stakes might be further diluted. A government move to take a big stake in the bank could backfire, potentially spurring investors to flee other banks, even healthier ones.

There's no universal agreement on what constitutes nationalization of a bank. In the U.K., the government already owns 43% of Lloyds Banking Group PLC, and last week it moved to increase its ownership of Royal Bank of Scotland Group PLC to 70% from 58%. Those two banks have been classified as "public-sector entities," and as much as £1.5 trillion ($2.136 trillion) of their liabilities have been moved over to the country's balance sheet.

The White House has knocked down recent speculation that the government is preparing to nationalize several large U.S. banks.

The U.S.'s intentions with Citigroup remain unclear. For instance, it's not yet known whether the government would seek a stronger hand in the New York company's management or day-to-day operations.

As part of the plan, Citigroup officials hope to persuade private investors that have bought preferred shares -- such as the Government of Singapore Investment Corp., Abu Dhabi Investment Authority and Kuwait Investment Authority -- to follow the government's lead in converting some of those stakes into common stock, according to people familiar with the matter. That would further bolster an obscure but increasingly pivotal measure of banks' capital known as "tangible common equity," or TCE.

The TCE measurement, one of several gauges of a bank's financial strength, gives weight to common shares -- thus the interest in converting preferred shares to common stock.

Details of the rescue remain in flux. Key questions, such as the price at which the government will convert its preferred stock into common shares, haven't been resolved.

And it's possible that other options will emerge to stabilize the company. For example, the Obama administration could decide to sit tight until the results of several new "stress tests" on major banks -- broad examinations of their financial health now being mandated -- are known in a couple months, one official said.

If the deal gets nailed down, it will be Washington's third effort to aid Citigroup since last fall. In October, the Treasury Department put a total of $125 billion into eight giant financial institutions, including $25 billion to Citigroup, in exchange for preferred shares and warrants to buy stock.

Then, shortly before Thanksgiving, the government agreed to infuse another $20 billion into Citigroup as its stock tumbled. It also agreed to protect the banking company against most losses on a $301 billion pool of assets.

Among the question marks looming over the current discussions is the future of Citigroup Chief Executive Vikram Pandit and the company's board of directors.

Pandit's Future

In November, as part of the sweeping rescue, federal officials privately discussed the possibility of replacing Mr. Pandit, who became CEO in December 2007. But the government decided not to remove him, in large part due to a dearth of qualified replacements. Still, top government officials warned Mr. Pandit that a third trip to the taxpayer trough would probably cost him his job.

However, since the latest talks don't involve the possibility of Citigroup receiving additional government capital, it isn't clear whether Mr. Pandit's job is on the line. A Citigroup spokeswoman declined to comment.

Federal officials have been pushing Citigroup executives and the board's lead independent director, Richard Parsons, to shake up the company's 15-member board. Already, three directors, including former Treasury Secretary Robert Rubin, have announced plans to step down this spring.

There are at least two catalysts for the recent talks with the government.

First, Citigroup's shares have fallen to historic lows. That doesn't pose a direct threat to the company's stability. But if it spooks customers into pulling their business, that could push the bank toward a dangerous downward spiral.

Second, bank regulators this week will start performing their battery of stress tests at the nation's largest banks as part of the Obama administration's industry-bailout plan. As part of those tests, the Fed is expected to dwell on the TCE measurement as a gauge of bank health, according to people familiar with the matter.

The crisis is triggering a deep re-examination of the way bank health is measured in the U.S. financial system. This complex exercise boils down to calculating various ratios of capital to a bank's total assets.

Until recently, TCE -- essentially a gauge of what common shareholders would get if an institution were dissolved -- has been one of the less prominent ways to measure a bank's vigor. TCE is also among the most conservative measures of financial health.

Bankers and regulators generally prefer to use what is known as "Tier 1" ratio of a bank's capital adequacy. It takes into account equity other than common stock.

By Tier 1 measurements, most big banks, including Citigroup, appear healthy. Citigroup's Tier 1 ratios 11.8%, well above the level needed to be classified as well-capitalized.

By contrast, most banks' TCE ratios indicate severe weakness. Citigroup's TCE ratio stood at about 1.5% of assets at Dec. 31, well below the 3% level that investors regard as safe.

The regulators' new focus on TCE represents an important shift. The government's recent injections into hundreds of institutions were predicated on the idea that Tier 1 was key. Because the investments weren't in the form of common stock, they didn't affect the companies' TCE ratios.

—Dan Fitzpatrick, Deborah Solomon and Damian Paletta contributed to this article.

Write to David Enrich at david.enrich@wsj.com and Monica Langley at monica.langley@wsj.com

California Shutting Down "Living Free in an Unfree World"

Saturday, February 21, 2009

Glenn Beck Economic Collapse Series - CIA says 55% Chance War in Middle East

Glenn Beck Economic Collapse Series - Hyperinflation Scenario 1/3

Soros sees no bottom for world financial "collapse"

NEW YORK (Reuters) - Renowned investor George Soros said on Friday the world financial system has effectively disintegrated, adding that there is yet no prospect of a near-term resolution to the crisis.

Soros said the turbulence is actually more severe than during the Great Depression, comparing the current situation to the demise of the Soviet Union.

He said the bankruptcy of Lehman Brothers in September marked a turning point in the functioning of the market system.

"We witnessed the collapse of the financial system," Soros said at a Columbia University dinner. "It was placed on life support, and it's still on life support. There's no sign that we are anywhere near a bottom."

His comments echoed those made earlier at the same conference by Paul Volcker, a former Federal Reserve chairman who is now a top adviser to President Barack Obama.

Volcker said industrial production around the world was declining even more rapidly than in the United States, which is itself under severe strain.

"I don't remember any time, maybe even in the Great Depression, when things went down quite so fast, quite so uniformly around the world," Volcker said.

Obama's First Budget Seeks To Trim Deficit

Obama's First Budget Seeks To Trim Deficit
Plan Would Cut War Spending, Increase Taxes on the Wealthy

By Lori Montgomery and Ceci Connolly
Washington Post Staff Writers
Sunday, February 22, 2009; A01

President Obama is putting the finishing touches on an ambitious first budget that seeks to cut the federal deficit in half over the next four years, primarily by raising taxes on businesses and the wealthy and by slashing spending on the wars in Iraq and Afghanistan, administration officials said.

In addition to tackling a deficit swollen by the $787 billion stimulus package and other efforts to ease the nation's economic crisis, the budget blueprint will press aggressively for progress on the domestic agenda Obama outlined during the presidential campaign. This would include key changes to environmental policies and a major expansion of health coverage that he hopes to enact later this year.

A summary of Obama's budget request for the fiscal year that begins in October will be delivered to Congress on Thursday, with the complete, multi-hundred-page document to follow in April. But Obama plans to unveil his goals for scaling back record deficits and rebuilding the nation's costly and inefficient health care system tomorrow, when he addresses lawmakers and budget experts at a White House summit on restoring "fiscal responsibility" to Washington.

Yesterday in his weekly radio and Internet address, Obama said he is determined to "get exploding deficits under control" and said his budget request is "sober in its assessments, honest in its accounting, and lays out in detail my strategy for investing in what we need, cutting what we don't, and restoring fiscal discipline."

Reducing the deficit, he said, is critical: "We can't generate sustained growth without getting our deficits under control."

Obama faces the long-term challenge of retirement and health programs that threaten to bankrupt the government years down the road, as well as the more immediate problem of deficits bloated by spending on the economy and financial system bailouts. His budget proposal takes aim at the short-term problem, administration officials said, but also would begin to address the nation's chronic budget imbalance by squeezing savings from federal health programs for the elderly and the poor.

Even before Congress approved the stimulus package this month, congressional budget analysts forecast that this year's deficit would approach $1.2 trillion -- 8.3 percent of the overall economy, the highest since World War II. With the stimulus and other expenses, some analysts say, the annual gap between federal spending and income could reach $2 trillion when the fiscal year ends in September.

Obama proposes to dramatically reduce those numbers, said White House budget director Peter Orszag: "We will cut the deficit in half by the end of the president's first term." The plan would keep the deficit hovering near $1 trillion in 2010 and 2011, but shows it dropping to $533 billion by 2013, he said -- still high but a more manageable 3 percent of the economy.

To get there, Obama proposes to cut spending and raise taxes. The savings would come primarily from "winding down the war" in Iraq, a senior administration official said. The budget assumes continued spending on "overseas military contingency operations" throughout Obama's presidency, the official said, but that number is lower than the nearly $190 billion budgeted for Iraq and Afghanistan last year.

Obama also seeks to increase tax collections, mainly by making good on his promise to eliminate some of the temporary tax cuts enacted in 2001 and 2003. While the budget would keep the breaks that benefit middle-income families, it would eliminate them for wealthy taxpayers, defined as families earning more than $250,000 a year. Those tax breaks would be permitted to expire on schedule in 2011. That means the top tax rate would rise from 35 percent to 39.6 percent, the tax on capital gains would jump to 20 percent from 15 percent for wealthy filers and the tax on estates worth more than $3.5 million would be maintained at the current rate of 45 percent.

Obama also proposes "a fairly aggressive effort on tax enforcement" that would target corporate loopholes, the official said. And Obama's budget seeks to tax the earnings of hedge fund managers as normal income rather than at the lower 15 percent capital gains rate.

Overall, tax collections under the plan would rise from about 16 percent of the economy this year to 19 percent in 2013, while federal spending would drop from about 26 percent of the economy, another post-World War II high, to 22 percent.

Republicans, who are already painting Obama as a profligate spender, are laying plans to attack him on taxes as well. Even some nonpartisan observers question the wisdom of announcing a plan to raise taxes in the midst of a recession. But senior White House adviser David Axelrod said in an interview that the proposals reflect the ideas that won the election.

"This is consistent with what the president talked about throughout the campaign," and "restores some balance to the tax code in a way that protects the middle class," Axelrod said. "Most Americans will come out very well here."

The budget also puts in place the building blocks of what administration officials say will be a broad restructuring of the U.S. health system, an effort aimed at covering some of the estimated 46 million Americans who lack insurance while controlling costs and improving quality.

"The budget will kick off or facilitate a focus on getting health care done this year," the senior official said, adding that the White House is planning a health care summit. The event has been delayed by former senator Thomas A. Daschle's decision to withdraw from consideration as health secretary because of tax problems, a move that left Obama without a key member of his health team.

Administration officials and outside experts say the most likely path to revamping the health system is to begin with Medicare, the federal program for retirees and people with disabilities, and Medicaid, which serves the poor. Together, the two programs cover about 100 million people at a cost of $561 billion in 2007. Making policy changes in those programs -- such as rewarding physicians who computerize their medical records or paying doctors for results rather than procedures -- could improve care while generating long-term savings, experts say.

Obama's budget request would create "running room for health reform," the official said, by reducing spending on some health programs so the administration would have money to devote to initiatives to expand coverage. The biggest target is bonus payments to insurance companies that run managed-care programs under Medicare, known as Medicare Advantage.

The Bush-era program has attracted nearly a quarter of Medicare beneficiaries to private health insurance plans that cover a package of services such as doctor visits, prescription drugs and eyeglasses. But the government pays the plans 13 to 17 percent more than it pays for traditional fee-for-service coverage, according to the Medicare Payment Advisory Commission, which advises Congress on Medicare financing issues.

Officials also are debating whether to permit people as young as 55 to purchase coverage through Medicare. That age group is particularly vulnerable in today's weakened economy, as many have lost jobs or seen insurance premiums rise rapidly. The cost would depend on whether recipients received a discount or were required to pay the full price.

In addition to the substantive proposals, Obama's team boasts of improving the budget process itself. For years, budget analysts complained that former president George W. Bush tried to make his deficits look smaller by excluding cost estimates for the war in Iraq and domestic disasters, minimizing the cost of payments to Medicare doctors and assuming that millions more families would pay the costly alternative minimum tax. Obama has banned those techniques, the senior official said