CEO's Get ahead

A new study on executive pay packages found soaring compensation for chief executives and urged Congress to rein in the trend.

The Institute for Policy Studies, a progressive think-tank, found that in 2004, chief executive officers made 431 times as much as the average worker. This is up from a 301-to-1 ratio in 2001.

Defense executives were particularly big winners, according to the study, which was released Tuesday. At 34 companies with substantial defense revenue, average CEO pay rose 200 percent from 2001 to 2004, compared with 7 percent for chief executives in general.

United Technologies Corp. chief George David led the pack with total compensation of about $88 million last year. (Dow Jones)

Semiconductor Index

The Technical case for the COMP bulls

How far is China's top 500 from world's top 500?

China's top 500 are greatly inferior to their world's counterparts in terms of scale, productivity, profit-making capacity, managing capacity and competitiveness, said CFE Chairman Chen Jinhua. "China's enterprises still have a long way to go in participating in global competition," he added.

According to CFE statistics, the gross business income, profits and assets of China's top 500 just account for 8.4 percent, 7.0 percent and 6.0 percent of the world's top 500 respectively.

The first eight companies of China's top 500 are corporations in the monopolized fields, for instance, petroleum, power and steel, but most of the world's top 500 companies belong to the competitive fields like the automotive industry, said Liu Jisheng, professor of Tsinghua University's economic management school.

Apart from that, the majority of the world's top 500 companies are privately run like Wal-Mart, but quite a proportion of China's leading enterprises are State-owned, said the professor.

US in "Economic Recovery" Right?

The poverty rate in 2004 remained significantly higher than in 2001, the year of the recession. The number of people in poverty increased from 32.9 million in 2001 and 35.9 million in 2003 to 37 million in 2004. The poverty rate rose from 11.7 percent in 2001 (and 12.5 percent in 2003) to 12.7 percent in 2004. The rise in poverty in 2004 is particularly disturbing because 2004 represented the third full year of the economic recovery.

Contrary to the impression left by a Census official today, this three-year poverty trend is not typical for recoveries.

-- In no other downturn over the past 45 years did poverty increase between the second and third full years of the recovery.

-- In all other downturns except that of the early 1990s, the poverty rate by the third year of the recovery was at or below the poverty rate in the recession year itself. In 2004, by contrast, the poverty rate was a full percentage point higher than in 2001, the recession year.

The number of Americans who are uninsured climbed again in 2004. The percentage of people who are uninsured remained unchanged, but at a level well above the percentage in 2000, prior to the recession. Some 45.8 million people were uninsured in 2004, an increase of 800,000 people over 2003. The percentage of the population without insurance remained unchanged at 15.7 percent. Since 2000, the number of uninsured has increased by 6 million, and the percentage of Americans without insurance has risen from 14.2 percent to 15.7 percent. The Census data show that the proportion of Americans lacking health insurance would have been even higher if it were not for the increase in the number of people covered by public health insurance, most notably Medicaid.

Homebuilder insiders on selling spree

"There has been record insider selling within the last 10 months across a broad range of homebuilding companies despite very few sell ratings by Wall Street analysts and the general perception by investors that the stocks are undervalued," Richard Bernstein, the firm's top strategist, wrote in a note to clients..

Rates spreads tightening... Bad for US Banks

What we do know is the difference between short and long rates - the "spread" in Wall Street parlance - is now less than one percentage point, down from around three points a year ago.

This is more than mathematical trivia. To bankers in particular, it can be the difference between profit and loss.

Bankers, after all, make money by borrowing "short" from their depositors, while lending "long" to businesses, home buyers and others.

A healthy spread between short and long interest rates traditionally means banks can earn a nice income - enough to give freebies to depositors, take big clients to Phillies games, and still give the shareholders a decent return.

But when interest-rate spreads narrow, bankers have to scramble. Many turn tight-fisted, making loans harder to get. Others can become desperate, betting on risky ventures that can come back to haunt them.

Either way, the result can mean trouble for the economy as a whole. If firms cannot get loans, they won't expand, and more will fail. If banks themselves fail, shareholders, depositors and even taxpayers can be hurt.

That's what happened in the late 1980s; the savings-and-loan debacle took years to resolve and cost many billions.

Hey buddy, got $145,000?

The government is deep in debt. How deep? Check this column's headline for an idea of how much money you would owe if every American were to pay an equal share of the debt (USA Today).

The government has borrowed hundreds of billions to maintain current programs. Long-term obligations such as Social Security, Medicare, and Medicaid bind the government into around a $43 trillion spending obligation, said the U.S. Comptroller General David Walker (Don't feel dumb, I've never heard of him either).

That $43 trillion in debt and obligations averages out to $145,000 for every American, and by the time you read this column, that number may have gone up. Federal spending has increased. Taxes have been cut. The booming economy of the late 1990s has slowed.

US drivers use credit cards to manage gasoline pain

Convenience stores, which sell about three-quarters of all gasoline sold in the nation, have seen the use of credit card purchases for motor fuel rise to 70 percent from about 54 percent last year, according to the industry group.

And drivers are seen reaching into their pockets for plastic more often as they try to stretch their budgets.

Bedlam Asset Management on CHINA

Occasionally, weak attempts have been made to reform the financial system (IN CHINA). In 2003 for example, and with considerable hullabaloo, the Bank of China fired 20 local bank managers (out of 3,000) for corruption. Care to bet that stopped the rot? More common are 'one-off' rescues, which repeat every few years. $45 billion was shelled out by the financial authorities in 2003 to prop up the Bank of China and the China Construction Bank, followed by $30 billion into ICBC. Even by western standards, these are simply huge numbers (Barings couldn't even lose a billion, despite trying very hard). All these reforms and bail-outs fail for one reason, the core problem of the Guangxi system.

Guangxi (or connections) is not just having a Scottish Cabinet ruling England and Wales, or Enarques, all of whom attended the same two schools, running the French civil service. It is more subtle. It includes blood relatives and in-laws; it can extend to cousins of cousins, clans of the same name (China has only 100 proper surnames), people from your village or province and hopefully, senior politicians for whom one of your set once did a favour. It has been around for hundreds of years. Neither the Manchu nor Mongol rulers understood it or could break it. Guangxi has its strengths; it provides a support net for the weak and dispossessed. Very large personal networks on a national level can make the creation of new businesses and raising capital a remarkably smooth operation. It also embeds corruption, deeply. Thus any attempt at reform becomes mired and compromised. Government regulators find themselves having to pull the plug on their own connections, including perhaps their bosses or even worse, senior army officers and politicians. This is why so many of Hong Kong's listed 'red-chip' companies, run by wholly unqualified children of senior officials, were able to get all the funding, licences and assets they wanted in record time. Another more recent example of a Guangxi in operation took place in July this year; an order from the Government that the state-owned commercial banks must lend $1.2 billion to around half of the country's 130 securities firms which in practice have gone bust. Each has a major political connection. It is into this hopeless financial morass that western bankers have now decided to invest.

Today, most leading western banks have agreed that they must be in China, seemingly irrespective of the price, because of its rapid growth. They cannot resist the lure of potentially 1.3 billion savers and borrowers. They have swallowed the myth that the balance sheets of China's financial institutions have been cleaned up. Western banks are now shelving out considerable sums for the tiniest toehold in the China market. Not surprisingly, one of the earliest players was Hong Kong's Hang Seng Bank. In 2003, together with the finance arm of the World Bank and the Government Investment Corporation of Singapore, it plonked down $324 million for a 24.9% stake in China's Industrial Bank. Its parent, the better known HSBC, subsequently shelled out $1.75 billion for a 19.9% stake in the Bank of Communications. Both these two banks have an economic imperative and a level of knowledge of how to work in difficult Asian countries, which means they might even make a small return on capital, one day. For almost all other major banks, there must be considerable doubt. Bank of America is paying $3 billion for a 9% stake in China Construction Bank; Dutch-based ING Groep bought a 19.9% stake in the Bank of Beijing for €166 million. Newbridge Capital of the US bought 18% in the Shenzhen Development Bank. There is now hardly a major foreign bank not sniffing around Chinese banks and assets in one form or another. Those who have either been snoogling or have stated they are looking at major bank or asset deals include the Commonwealth Bank of Australia, Britain's Standard Chartered Bank, JP Morgan, Credit Agricole, Morgan Stanley, Bank of Nova Scotia and many, many more. It is a global herd.

U.S. workers say they're falling behind

U.S. workers are dissatisfied with the economy and fear their standard of living is declining, according to a survey released on Tuesday by the AFL-CIO. The labor organization's survey of 805 workers found widespread dissatisfaction with their economic situation, even as other indexes show rising consumer confidence and a more plentiful job market. Rising health-care costs, gasoline prices and job outsourcing weighed on the minds of those surveyed by the AFL-CIO. Seventy percent of those surveyed said their salaries are not keeping pace with rising costs and 69 percent said most new jobs do not offer good pay or benefits.

Telmex to Take Control of Telecom Columbia

Slim said he hopes the merger will position Colombia Telecom, a fixed-line company, to penetrate Colombia's cellular market, currently dominated by three private firms.

There are some 15 million cell phone users in Colombia, a country of 44 million people. Telmex has experience in the mobile sector through its wireless company America Movil, Latin America's largest cellular firm.

"There's no doubt that Telecom needs a strategic partner to move forward, but the agreement with Telmex endangers the future of this company, which is owned by all Colombians," El Tiempo, Colombia's main newspaper, said an editorial Friday.

But the deal is also seen as an important boost for Colombia, whose 41-year-old guerrilla war has made many foreign investors wary. Slim said he feels Colombia's future is bright.

Carlos Slim of Mexico Says Peso Strong....

Billionaire Carlos Slim, the world's fourth-richest man, said the Mexican peso is ``a little strong'' and is hurting the nation's ability to compete.

Mexico's peso has gained 2.8 percent this year, the second- best performer against the U.S. dollar among the 16 most-traded currencies.

``It's a little strong,'' Slim, whose telephone, banking and industrial companies account for almost half of Mexico's benchmark stock index, said in an interview today in New York. ``When a currency strengthens too much, you lose competitiveness.''

The peso has climbed on increased demand for the nation's local currency-denominated securities. Mexico's overnight deposit rate is about 9.5 percent, compared with 3.5 percent in the U.S. Mohamed El-Erian at Newport Beach, California-based Pacific Investment Co. is among investors who expect the currency to weaken as the central bank lowers the benchmark lending rate to spur economic growth.

Housing Boom Stimulating Mortgage Application Fraud Boom

The national housing boom is producing a companion boom -- one that you don't read about as much: Dishonesty and outright fraud by home buyers and mortgage and realty industry professionals on loan applications has exploded in the past two yeas.

A newly-released national study by a research group says fraud-related cases on mortgage applications reported to the FBI more than doubled between 2003 and 2004.

What sort of games are people playing with mortgage applications? You name it -- everything from little white lies about income or assets all the way up to what the FBI calls "air loans" that are based on completely fabricated information.

The MARI report cites this real-life example to illustrate the problem: "An officer at a Florida mortgage company applied to a second lender for two stated income loans. The applications were submitted 90 days apart. In the first application, the borrower stated his monthly income as $24,000, and in the second he said it was $30,000." When the mortgage officer was challenged about the discrepancy, he replied, "I thought that on stated income loans you could claim an income as high as necessary" to qualify for the loan amount the applicant needed.

It's RIP for the housing boom

Last Tuesday saw the release of July existing-home sales that were slightly below expectations. For the housing market, one piece of data in the National Association of Realtors report portends the end of ever-higher prices: The supply of homes on the market now stands at 2.75 million -- the highest since May 1988.

A Commerce Department report Wednesday adds weight to the evidence: New-home inventories have grown about 15% since July 2004, to 460,000, the highest level since the Commerce Department started tracking new homes in 1963.

Housing ATM: RIP
Given all the multiple-property buying that's occurred, the accounts in the media (I'll share two of them below) and what readers of this column have observed with their own eyes, this news is somewhat surprising. However, it was inevitable that inventory would start piling up at some point. The time, as it turns out, is now.

There was another sign of the times in "Bidders win unseen lands, discover they bought trouble," a story in the Aug. 17 edition of my Seattle Times. The story details how buyers are clamoring after what can only be described as dubious properties, held by an outfit called Auction Acres. That doesn't sound like someone you'd want to do business with, especially when you read the fine print, which the writer (with the assistance of a real-estate attorney) describes as follows:

"Unlike a traditional real-estate sale, where the buyer gets the title while paying off the loan, the Auction Acres contracts give buyers use of the land, but the seller keeps the title until the full sales price is paid off. ... So the contract allows the company to keep the land -- and all the previous payments -- if a buyer defaults, no matter how much they've paid. The auction company can also borrow against the land."
--------------------------------------------------- BILL F.......

Bank Indonesia raised its target for key one-month interest rates by 3/4ths of a percentage point to 9.5 percent


"The measures have been a long time coming," said James Malcolm, currency strategist at Deutsche Bank in Singapore. He added: "There is still a lot of potential incentive for domestic capital flight. This should not just be a one-off rate hike."

At one point on Tuesday the currency had fallen 9 percent. The rupiah recovered after the central bank intervened to buy it, and then held steady after the interest rate move.

The market mayhem is proving to be the sternest economic test yet for President Susilo Bambang Yudhoyono as he faces increasing calls to raise politically sensitive fuel prices.

Yudhoyono, in a hastily called speech, said the latest market turmoil was not the same as the 1997-98 Asian financial crisis. But he said "significant" measures were needed to support the currency, which he hoped to announce on Wednesday.

Record international crude prices of $70 a barrel have taken a heavy toll on Southeast Asia's largest economy. Indonesia needs to buy dollars to pay for oil imports and this has raised fears of a balance of payments crisis. Meanwhile, the government has been hesitant to cut a bloated fuel subsidy bill.

"The currency is moving at the speed of light," said Fauzi Ichsan, an economist at Standard Chartered in Jakarta.

"As the rupiah weakens further and as the bearish sentiment continues, the markets expect bigger positive news to reverse the sentiment."

The rupiah fell as low as 11,750 per U.S. dollar, its lowest in four years and down 9 percent from Monday's close of around 10,700. Later the currency recouped losses suffered earlier, recovering to 10,300 per dollar, from a four-year low of 11,750 hit earlier in the day.

Minutes after opening, the Jakarta Composite Index sank 4 percent after falling 5.2 percent on Monday -- its biggest percentage drop since May 2004. By 0600 GMT, it had recouped its losses and was up 0.9 percent at 1004 points.

Indonesia raised fuel prices by an average 29 percent in March, sparking protests by public transport drivers and students in a dozen cities across the impoverished country of 220 million people, although there was little violence.

A big rise in domestic fuel prices in early 1998 triggered widespread protests that were a factor behind Suharto's ouster.

The stock market has now lost some two thirds of its gains since Yudhoyono's government took office Oct. 20 on the back of promises to revive investment, stamp out graft and create jobs.

AUG 27th, The day Mars sneared at Earth and Dr. O was born

the "O"dometer just moved another year on me. In celebration and reflection, I wanted to post this link on Chairman Greenspans Tenure of 18 years....

The theme of this year's symposium is an examination of the 18-year tenure of legendary central banker US Federal Reserve Chairman Alan Greenspan, who plans to step down in January 2006.

The Greenspan Era: Lessons for the Future -- A Symposium Sponsored by the Federal Reserve Bank of Kansas City. (Jackson Hole, Wyoming, August 25-27, 2005).

``I'd hate to be the next guy in line'' for the chairmanship, said Henley Smith, chief investment officer at Gabelli Funds LLC in Rye, New York. ``You're going to get some uncertainty and volatility should increase as his day gets closer,'' he said of Greenspan's retirement.

Volatility rises when investors have differing opinions on fundamentals affecting interest rates. Implied volatility, as measured by the MOVE index, is the relative rate at which the market expects interest rates to move up and down. Options are the right to buy or sell assets at a set date and price.

Under Greenspan, the MOVE index has ranged from 57.89 in the weeks before the 1998 Russia debt default and failure of hedge fund Long-Term Capital Management, to a high of 186 in the weeks following those events. The index was mostly over 100, averaging 103.58 from 1988 to 2002.

Oil leaps above $70 as Katrina rips through US Gulf

U.S. crude oil futures jumped nearly $5 a barrel in opening trade to touch a peak of $70.80 a barrel, surpassing last week's $68 high to the highest frontmonth price since the New York Mercantile Exchange (NYMEX) began trading contracts in 1983.

It later traded up $3.94 a barrel, or 6 percent, to $70.07, more than recouping losses on Friday, when mixed forecasts showed Hurricane Katrina might miss oil and gas infrastructure.

More than 40 percent of all U.S. crude oil production in the Gulf of Mexico was reported closed down due to the hurricane, with the total expected to rise significantly as more operators report affected production to the U.S. government on Monday.

"Last year we had 15 million barrels more gasoline (stocks) than now," said Jim Ritterbusch, president of Ritterbusch and Associates in Illinois. "Given the already low stock levels most of price impact will be at the front of the gasoline curve."

Gulf Coast refiners produce about 45 percent of U.S. gasoline, he said, and they might struggle to restore operations amid power cuts and flooding, even if they escape damage.


Why Housing Bubblenomics Continues...

Strong demand for mortgage-backed securities from investors world-wide is allowing American lenders to make more loans -- and riskier ones -- in a way that is helping prolong the boom in U.S. house prices.

The cash pouring in -- not only from U.S. investors but increasingly from Europe and Asia -- keeps stoking the housing market even as the Federal Reserve Board continues to raise interest rates, normally something that damps home prices. The market has shown a few signs of slowing recently, and talk of a bubble has grown louder, but prices continue to rise or remain at lofty levels as investors continue to gobble up mortgage-backed securities and banks keep lending.

U.S. lenders will make about $2.8 trillion in home-mortgage loans this year, according to the Mortgage Bankers Association. The MBA estimates that about 80% of these loans will end up in mortgage-backed securities. Mortgage-backed securities outstanding at the end of the first quarter totaled $4.61 trillion, up 61% since the end of 2000. In the same period, total Treasury securities outstanding grew 35% to $4.54 trillion.

In a world of low interest rates, the market for mortgage securities is simply too big and profitable for many investors to ignore. Investors can earn about 5.5% on mortgage securities whose payments are guaranteed by Fannie Mae or Freddie Mac, government-sponsored companies. Those who can stomach greater risk can buy subprime mortgage securities, which come with no guarantee but can yield as much as 15%, according to Bear Stearns. By contrast, 10-year U.S. Treasurys yield about 4.2%; the equivalent government securities in Germany yield about 3.2% and in Japan 1.5%.

IndyMac pooled Mr. Gaty's loan with about 3,000 other mortgages that carry a fixed rate for the first three, five or seven years. Mr. Gaty is paying both principal and interest on his loan, but most of the loans in the pool are interest-only mortgages, which allow borrowers to pay no principal in the early years. When the $650 million offering of triple-A rated bonds backed by these mortgages came to market in June, it drew more than a dozen investors from Europe, Asia and the U.S., according to Deutsche Bank, which handled the deal. Such bonds typically yield 0.75 to 1.15 percentage point more than Treasurys, Deutsche Bank says.

Until a few years ago, Chinese investors restricted U.S. investment mostly to Treasurys. Now, to boost their yields and because they consider the market safe, bankers from a number of institutions say they are devoting more of their portfolios to mortgage securities. Some bankers say their goal is to have 40% of their U.S. dollars in asset-backed securities.

Strong investor interest has also made loans available to borrowers with poor credit and many other people who might otherwise have trouble getting a mortgage. Subprime loans included in mortgage securities totaled $401.5 billion last year, nearly double the total for 2003, according to Standard & Poor's. Meanwhile, loans with less than full documentation of the borrower's income and assets accounted for 70% of mortgage securities rated by Standard & Poor's in this year's first half, double the level recorded in 2000.

Small Vs. Large Stocks/Domestic Vs. International

In "Firm-Level Evidence on International Stock Market Comovement" (June
2005) - soon to be a major motion picture - Brooks and Del Negro
"explore the link between international stock market comovement and the
degree to which firms operate globally." The dynamic duo discovered "a large
and highly significant link: On average, a firm raising its
international sales by 10 percent raises the exposure of its stock return to
global shocks by 2 percent and reduces its exposure to country-specific

Borgsen and Glaser ("Diversifikationseffekte durch Small und Mid Caps?"
Feb. 20, 2005): "Based on an empirical analysis of European large,
small and mid cap stock indices, we find that small caps have relatively
low correlations not only with large caps but also with each other. We
show that small cap stock returns cannot be spanned by large cap stock
returns. Furthermore, we find that diversification in Europe is likely to
be more effective with a combination of small and large caps than with
large caps alone."

The authors also conclude that "large cap returns are mainly driven by
global factors whereas returns on small cap stocks are primarily driven
by local and idiosyncratic factors," confirming the earlier work of
Hansen and Rowenhorst and Griffin and Karolyi.
shocks by 1.5 percent. This link has grown stronger since the mid-1980s."

It seems no matter what part of the globe, no matter what the question,
the empirical evidence always points in the same direction: small caps,
small caps, small caps, again and again and again. 

America's Economic Future full of Hubris?

"There are three kinds of lies: Lies, damned lies and statistics." - Mark Twain

There is really only one source of raw data and information about the U.S. economy and the GDP: the government. Every month, reports issue like a river of paper from the Congressional Budget Office, the Bureau of Economic Analysis and the Bureau of Labor Statistics, just to name a few...

But because these statistics are so overwhelming in scope, few bother to even review them, much less question them. A few folks out there wade through this massive pile and summarize the salient points of these reports, and then everyone else (through the miracle of the Internet) analyzes, hypothesizes and proselytizes based on these summaries.

Even seasoned analysts and hard-boiled financial journalists seem to blindly accept and report these figures, editorializing vehemently on what they mean (or what they think these figures mean) without questioning their fundamental validity in the least.


Instead of reporting profits, GDP, productivity and other rates of growth quarter by quarter and quarter over quarter like corporations do, the government "annualizes" these numbers. That means that instead of announcing growth (or lack of growth) as a ratio of one fiscal quarter relative to the previous quarter - or relative to the same quarter from the previous year - the Fed reports an extrapolation of every quarter's growth as though it were to inevitably continue at that same rate for a whole calendar year.

The United States is the ONLY country that reports its growth in this deceptive manner.


A recent Federal Reserve press release began by trumpeting our economy's "robust underlying growth in productivity." But there are many ways in which numbers can paint a picture of healthy growth - or obscure evidence of a lack of growth. And the popular misunderstanding of the nebulous concept of "productivity" is vital to the Fed's ability to misrepresent our economy to us.

Here's one example: By using a trick of accounting called hedonic pricing, the U.S. government has for years been able to report stellar growth in the hard-to-quantify "productivity" realm. It's a complex concept, but it goes a little like this: The value of any given thing is more a measure of its theoretical capabilities than its actual cost.

Computers are a great example of this. Say a company bought a computer in 1995 for $1,000. Then in 1998, it replaced it with a new computer with twice the memory for only $800. Based on the hedonic method, that computer with twice the capabilities as the one the company paid $1,000 for is twice as valuable - so they calculate its value to the nation's bottom line at $2,000, instead of the $800 actually paid for it.

Neat trick, huh? With one button push on a calculator, the Fed has added $1,200 to the GDP - even though no one paid it and no one received it.

All told, the United States has invested in the mechanisms of real productivity growth at a dismal rate of just over 0.3% per year over the last eight years. Yet according to the latest Fed estimates (April 28), the U.S. GDP is rising nearly 3.8% per year!

In other words, the true numbers say productivity shouldn't be rising, but the government says it is. Something's rotten in Greenspanland...


Profit is a simple thing to understand - it's the revenue that's left over for companies after all business-related expenses are paid. Theoretically, anyway. But the calculating of these profits by our federal government is by no means as simple a task as it would seem. The reason is that one of the most important sources of profit in the U.S. economy is net capital investment: investments made by businesses out of their own profits, without incurring any meaningful expenses.

This is measured as pure profit and trumpeted by the Fed as growth - without regard to the eventual depreciation on those investments, which begins to accrue much later. In other words, the Fed knows that the "profit" of net capital investment by businesses does not come without eventual expense (depreciation), yet it record its as pure profit to help keep GDP estimates as high as possible.


The Fed (along with most of the bit-in-mouth mainstream media) has been trumpeting the relatively low unemployment numbers for some time now. However, the picture isn't as rosy as the numbers make it seem. Here's what I mean: Not too long ago, there were only two classifications of workers - employed and unemployed. A simple ratio of these two numbers yielded the "unemployment rate." But that's not the case today...

Nowadays, there's a third classification called "discouraged worker" (it should be called "disinterested worker"). What this refers to is any unemployed worker who isn't seeking a job. And with today's aggressive welfare and entitlement programs footing the bills and creating millions of career recipients, that's a huge and ever-increasing number of people. That's right: Even though they aren't working, millions of "discouraged workers" aren't counted as unemployed.

Beyond this, the Fed also uses a statistical model based on jobs it assumes aren't being counted. The theory is that hundreds of new businesses are started each day - businesses whose employees are too new to have been added to the official employment figures. To "fix" this, the Fed calculates a number of theoretical jobs it figures MUST have been created. What drives this figure? In large part, it's the estimated GDP, which, as I've just explained, is hugely skewed toward nonexistent growth.

Consider: Of 274,000 jobs the government claimed were created in April 2005, a full 257,000 came from this formula for estimating theoretical jobs. In other words,94% of reported new jobs may not even exist.

As of last year, Americans were holding onto $37 trillion in debt - more than $123,000 for every man, woman and child in the United States. This amount of debt is more than three times the total number of dollars in existence anywhere - in home and business equity, checking and savings accounts, stock markets and even those held by foreign investors (66% of all dollars are held by foreign investors, by the way). If all of this debt comes due, there literally isn't enough money on Earth to pay it.

According to statistics from mortgage behemoth Freddie Mac, the total
volume of home equity cash-outs, including second mortgages
and home equity lines of credit, has gone from
approximately $22 billion in 1995 to an estimated $200
billion this year... a better than 800% increase. Behind
the scenes, the amount of credit derivatives traded amongst
banks and hedge fund players has gone well into the
trillions, with no one certain how these exotic new
products will perform under stress.

So what happened to those tier 2 Public Secondary Marketers..

Well, i haven't done a loan in over a year, but i remember using Impac and Novastar to fund a few deals. The former is a mid to hi fico and the latter is a mid fico... I was shocked to see the YIELDS and the prices. These are going xdiv in the fall.....And they say there aren't high yielding instruments....

3 year Novastar Chart

3 year Impac Holdings Chart

3 year Countrywide Credit Chart

New Search Technology for Web may be Huge for investors

This new technology - this new search engine - is completely different. It's what some experts describe as 'always-on search.'

Meaning: you don't have to tell your computer to look for information. It's always looking for information.

How does it know what to look for?

By first looking at what's in your computer - and what you're currently working on.

Say you've got a word document open and you're writing an article on the various assassination theories of JFK. Your computer will go out onto the Web, find relevant information and bring it back - without you asking for it.

And using this technology, your computer continues to search - by association.

As you accept certain documents and reject others, your computer learns which are more relevant and which aren't... and goes back out to find more information that is closer to what you're actually looking for.

This is a different kind of search. Called a Bayesian search.

It's based on a theory proposed some 300 years ago by a Presbyterian minister named Thomas Bayes.

The details of the theory are not important. What is important is this:

I believe it will become the new language of search engines.

Iraq now, China later??

OK I really want some reader comments on this link i have added, with some extracts below..Is this for real?

The Chinese nation that we are so proud of. Hitler’s Germany had once bragged that the German race was the most superior race on Earth, but the fact is, our nation is far superior to the Germans.

We all know that on account of our national superiority, during the thriving and prosperous Tang Dynasty our civilization was at the peak of the world. We were the center of the world civilization, and no other civilization in the world was comparable to ours. Later on, because of our complacency, narrow-mindedness, and the self-enclosure of our own country, we were surpassed by Western civilization, and the center of the world shifted to the West.

Actually, Comrade Liu Huaqing made similar points in early 1980s. Based on an historical analysis, he pointed out that the center of world civilization is shifting. It shifted from the East to Western Europe and later to the United States; now it is shifting back to the East. Therefore, if we refer to the 19th Century as the British Century, and the 20th century as the American Century, then the 21st Century will be the Chinese Century.

As we all know, Nazi Germany also placed much emphasis on the education of the people, especially the younger generation. The Nazi party and government organized and established various propaganda and educational institutions such as the “Guiding Bureau of National Propaganda,” “Department of National Education and Propaganda,” “Supervising Bureau of Worldview Study and Education,” and “Information Office,” all aimed at instilling into the people’s minds, from elementary schools to colleges, the idea that German people are superior, and convincing people that the historical mission of the Arian people is to become the “lords of earth” that “rule over the world.” Back then the German people were much more united than we are today

Specifically, the following are the fundamental causes for the defeat of Germany and Japan: First, they had too many enemies all at once, as they did not adhere to the principle of eliminating enemies one at a time; second, they were too impetuous, lacking the patience and perseverance required for great accomplishments; third, when the time came for them to be ruthless, they turned out to be too soft, therefore leaving troubles that resurfaced later on.

Ostensibly, in comparison, today’s China is alarmingly similar to Germany back then. Both of them regard themselves as the most superior races; both of them have a history of being exploited by foreign powers and are therefore vindictive; both of them have the tradition of worshipping their own authorities; both of them feel that they have seriously insufficient living space; both of them raise high the two banners of nationalism and socialism and label themselves as “national socialism”; both of them worship “one state, one party, one leader, and one doctrine.”

Our Chinese people are wiser than the Germans because, fundamentally, our race is superior to theirs. As a result, we have a longer history, more people, and larger land area. On this basis, our ancestors left us with the two most essential heritages, which are atheism and great unity. It was Confucius, the founder of our Chinese culture, who gave us these heritages.

Take response to war as an example. The reason that the United States remains today is that it has never seen war on its mainland. Once its enemies aim at the mainland, the enemies would have already reached Washington before its congress finishes debating and authorizes the president to declare war. But for us, we don’t waste time on these trivial things. Comrade Deng Xiaoping once said, “The Party’s leadership is prompt in making decisions. Once a decision is made, it is immediately implemented. There’s no wasting time on trivial things like in capitalist countries. This is our advantage.”

Our Chinese society has always worshipped sages, and that is because we don’t worship any god. Once you worship a god, you can’t worship a person at the same time, unless you recognize the person as the god’s representative like they do in Middle Eastern countries. On the other hand, once you recognize a person as a sage, of course you will want him to be your leader, instead of monitoring and choosing him. This is the foundation of our democratic centralism.

Maybe you have now come to understand why we recently decided to further promulgate atheism. If we let theology from the West into China and empty us from the inside, if we let all Chinese people listen to God and follow God, who will obediently listen to us and follow us? If the common people don’t believe Comrade Hu Jintao is a qualified leader, question his authority, and want to monitor him, if the religious followers in our society question why we are leading God in churches, can our Party continue to rule China?

There’s no need to worry about this issue. Comrade Mao Zedong said that if we could lead our allies to victory and make them benefit, they would support us. Therefore, as long as we can lead the Chinese people outside of China, resolving the lack of living space in China, the Chinese people will support us. At that time, we don’t have to worry about the labels of “totalitarianism” or “dictatorship.” Whether we can forever represent the Chinese people depends on whether we can succeed in leading the Chinese people out of China.

We have made a tremendous effort to construct “The Great Wall Project” to build up, along our coastal and land frontiers as well as around large and medium-sized cities, a solid underground “Great Wall” that can withstand a nuclear war. We are also storing all necessary war materials. Therefore, we will not hesitate to fight a Third World War, so as to lead the people to go out and to ensure the Party’s leadership position. In any event, we, the CCP, will never step down from the stage of history! We’d rather have the whole world, or even the entire globe, share life and death with us than step down from the stage of history!!! Isn’t there a ‘nuclear bondage’ theory? It means that since nuclear weapons have bound the security of the entire world, all will die together if death is inevitable. In my view, there is another kind of bondage, and that is, the fate our Party is tied up with that of the whole world. If we, the CCP, are finished, China will be finished, and the world will be finished.

Would the United States allow us to go out to gain new living space? First, if the United States is firm in blocking us, it is hard for us to do anything significant to Taiwan and some other countries! Second, even if we could snatch some land from Taiwan, Vietnam, India, or even Japan, how much more living space can we get? Very trivial! Only countries like the United States, Canada and Australia have the vast land to serve our need for mass colonization.

Therefore, solving the “issue of America” is the key to solving all other issues. First, this makes it possible for us to have many people migrate there and even establish another China under the same leadership of the CCP. America was originally discovered by the ancestors of the yellow race, but Columbus gave credit to the white race. We the descendents of the Chinese nation are entitled to the possession of the land! It is said that the residents of the yellow race have a very low social status in United States. We need to liberate them. Second, after solving the “issue of America,” the western countries in Europe would bow to us, not to mention to Taiwan, Japan and other small countries. Therefore, solving the “issue of America” is the mission assigned to CCP members by history.

One time, some Americans came to visit and tried to convince us that the relationship between China and United States is one of interdependence. Comrade Xiaoping replied in a polite manner: “Go tell your government, China and the United States do not have such a relationship that is interdependent and mutually reliant.” Actually, Comrade Xiaoping was being too polite, he could have been more frank, “The relationship between China and United States is one of a life-and-death struggle.” Of course, right now it is not the time to openly break up with them yet. Our reform and opening to the outside world still rely on their capital and technology, we still need America. Therefore, we must do everything we can to promote our relationship with America, learn from America in all aspects and use America as an example to reconstruct our country.

Of course we have not been idle; in the past years we have seized the opportunity to master weapons of this kind. We are capable of achieving our purpose of “cleaning up” America all of a sudden. When Comrade Xiaoping was still with us, the Party Central Committee had the perspicacity to make the right decision not to develop aircraft carrier groups and focus instead on developing lethal weapons that can eliminate mass populations of the enemy country.

We must prepare ourselves for two scenarios. If our biological weapons succeed in the surprise attack [on the United States, the Chinese people will be able to keep their losses at a minimum in the fight against the United States. If, however, the attack fails and triggers a nuclear retaliation from the United States, China would perhaps suffer a catastrophe in which more than half of its population would perish. That is why we need to be ready with air defense systems for our big and medium-sized cities. Whatever the case may be, we can only move forward fearlessly for the sake of our Party and state and our nation’s future, regardless of the hardships we have to face and the sacrifices we have to make. The population, even if more than half dies, can be reproduced. But if the Party falls, everything is gone, and forever gone!

Their genetic weapons are designed to target Arabs and protect the Israelis. But even they have not reached the stage of actual deployment. We have cooperated with Israel on some research. Perhaps we can introduce some of the technologies used to protect Israelis and remold these technologies to protect the yellow people. But their technologies are not mature yet, and it is difficult for us to surpass them in a few years. If it has to be five or ten years before some breakthroughs can be achieved in genetic weapons, we cannot afford to wait any longer.

ETF's Better then Funds?

In planning for your retirement, you can invest in exactly the same thing in either of two ways. One will put tens of thousands of dollars more into your pocket.

This isn't a trick. Exchange-traded funds, or ETFs, are cheaper to operate than mutual funds, meaning fewer of your profits are gobbled up by middlemen.

ETFs are index funds stripped of the back-office expenses of mutual funds and traded like stocks throughout the day. You can plunge into financial markets at the opening bell and exit at the close, which you can’t do (legally) with funds, or you can buy them and hold them to accumulate their higher returns (because of their lower cost) for a lifetime.

More properly, you have to worry only about the market, but ETFs have other attributes that can help you play it like a pro. You can buy them on margin, borrowing cash from your broker to leverage up exposure to markets you like. And you can sell them short, a negative bet in which you borrow shares and sell them, expecting to buy them back later at a lower price.

Not for everyone
Because they trade like stocks, meaning you pay brokerage commissions to buy them, ETFs are economical in bulk, as in established accounts and IRA rollovers. They’re not useful when you’re buying in small quantities, such as monthly contributions to a 401(k). Low-cost mutual funds are clear winners for that strategy, as they are for active portfolio management. But for indexing, ETFs are nearly impossible to beat.

Most popular ETFs
SecurityAssets in $ billions
S&P Spiders (SPY, news, msgs)46.19
Nasdaq-100 Tracking Stock (QQQ, news, msgs) 23.03
iShares Trust S&P Index (IVV, news, msgs)8.49
Diamonds (DIA, news, msgs)7.55
S&P Midcap 400 Spider (MDY, news, msgs) 6.88
Note: As of 6/30/04
Source: ETFConnect.com

Morgan Stanley expands to Russia markets

The Wall Street bank has hired 35 new employees in Moscow and has received a license from the Russian central bank, the head of Morgan Stanley in Russia, Rair Simonyan, told Reuters on Friday.

No RISK Commodity Investments??

CIBC World Markets is pleased to announce the launch of the CIBC Commodity-linked Rainbow Deposit Notes, Series 1. CIBC Commodity-linked Rainbow Deposit Notes are principal protected notes linked to the performance of commodities.

This innovative six-year investment combines the potential returns of four of the most liquid commodities in the world - crude oil, copper, aluminum and natural gas - with the peace of mind offered by principal protection at maturity.

Traditionally, the commodity market has been difficult for the average retail investor to access and commodity prices tend to appreciate cyclically making it difficult to predict which commodity will perform well at any given time.

CIBC Commodity-linked Rainbow Deposit Notes provide a unique "rainbow allocation" feature. Variable interest payable at maturity is determined by "looking back" at the end of the six-year term at the change in commodity prices (positive or negative) and applying a greater weighting to the best performing commodities and a lesser weighting to the poorer performers.

What Asset Backed really means??


Preliminary Ratings As Of Aug. 17, 2005
Class Preliminary rating* Preliminary amount (mil. $) Recommended credit support (%)
A AAA 584.5 16.5
B A 52.5 9.0
Collateral interest N.R. 63.0 N/A
*The rating of each class of securities is preliminary and subject to change at any time. N.R.—Not rated. N/A—Not applicable.

Credit Support

Credit support for the class A certificates is provided by the subordination of the class B certificates and the unrated collateral invested amount. Credit support for the class B certificates is provided by the collateral invested amount.


The preliminary ratings assigned to American Express Credit Account Master Trust's certificates series 2005-7 reflect credit enhancement of 16.5% for the class A certificates and 9.0% for the class B certificates, strong and stable historical portfolio performance, and structural considerations.

Collateral Interest And Secured Notes

The collateral interest serves as credit protection for the class A and B certificates. Cash flows allocated to the collateral interest, together with any remaining excess finance charge collections available from the master trust, will be transferred to American Express Credit Account Secured Note Trust Series 2005-7 (the owner trust). Notes issued out of the owner trust will be privately placed and rated 'BBB' by Standard & Poor's in a separate transaction. The 'BBB' notes are backed by the cash flow allocated to the excess collateral tranche and a dedicated spread account, which is funded by excess cash flow if certain performance thresholds are breached. The spread account is available to cover the notes' monthly interest to the extent the monthly cash flows are insufficient. On the notes' legal maturity date, amounts in the spread account may be used to pay down the remaining outstanding balance of the notes and to reimburse noteholders for any losses incurred. The expected maturity date of the notes is Aug. 15, 2012, and the legal maturity date is March 16, 2015.

Description Of Collateral

The primary assets of the trust are receivables in designated American Express credit cards (whether branded Optima Card or otherwise), Optima Line of Credit, Sign and Travel, and special-purchase revolving credit accounts. The aggregate amount of credit card receivables in the American Express Credit Account Master Trust, as of June 30, 2005, totaled approximately $27.760 billion, and comprised $27.013 billion in principal receivables and $747.400 million in finance charge receivables. The table summarizes the historical portfolio performance of the total lending portfolio and includes the receivables in the master trust.

--Year-Ended Dec. 31--

2005* 2004 2003 2002
Avg. receivables outstanding (mil. $) 32,944.28 31,056.25 28,201.41 25,233.90
Yield from finance charges and fees (%) 17.43 17.02 16.48 17.54
Avg. monthly payment rate (%) 26.89 25.00 22.45 20.49
Delinquencies of 30 days or more (%) 2.32 2.45 2.83 3.12
Net charge-offs (%) 3.69 4.08 4.87 5.43
*Five months ended May 31.

Women face hurdles in venture-capital world

As women have made gains in the executive suite, those who dreamed of making venture investing their career have found more headwinds. A study conducted last year found that in 1995 there were 346 ``professional women'' -- partners, principals and associates -- comprising about 10 percent of the venture capital industry. By 2000, while that number had risen in absolute terms -- to 510 -- it fell as a percentage, to 9 percent.

The study also found that 64 percent of female venture capitalists in 1995 were no longer in the industry by 2000, almost double the turnover rate for men. The study was conducted by The Diana Project, which is associated with the Kauffman Foundation, a group that fosters entrepreneurship. More recent figures aren't available, although given the post-Internet bubble shakeout in the industry, it is likely that the situation hasn't improved.

Warren Buffet Selling Oil Stakes

Billionaire investor Warren Buffett believes crude oil prices have peaked and is considering selling his two billion shares in PetroChina, China's biggest oil company, a report said on Friday.

"There is talk that he is considering selling his stake because of his view that crude oil prices may have already peaked, and that PetroChina's shares might continue to come under pressure in the coming days and weeks," a market source told XFN-Asia.

Why the U.S. Hates Venezuela's Chavez

Venezuela, the world's fifth largest oil exporting country, holds the largest conventional oil reserves outside the Middle East.

Venezuelan President Hugo Chavez said the state oil company plans to build three new oil refineries in coming years, and that his government would be willing to discuss establishing a new OPEC price band for world oil prices.

Two new refineries will have a capacity to run 50,000 barrels a day each, and a third would process as much as 400,000 barrels a day, Chavez said late Thursday during a televised speech.

If someone doesn't like Venezuela's laws, they "can go and look for oil elsewhere," Chavez said.

Venezuela has been handing tax claims to transnational oil companies operating in the country. The government says they are underpaying taxes.

Chavez's government has been seeking to exert greater control over the industry, saying that in the past poor Venezuelans didn't see enough benefit from oil revenues.

The government has increased tax rates and is now signing joint-venture agreements to take majority stakes in oil fields that foreign firms until now have operated independently.

The internet IS the FUTURE....

Entertainment Dollars Staying Closer to Home

Millions of Americans are choosing to stay at home for entertainment -- DVDs, video games, music downloads -- rather than go out to movie theaters and concert venues. "We can create entertainment ourselves," says one market researcher. "That's not a fad -- that's a fundamental shift."

Venture Capitalists Tune In to Podcasts

Silicon Valley venture capital funds are investing in two start-ups -- Podshow and Odeo -- that aim to popularize and commercialize podcasting. The investments represent a vote of confidence in podcasting, which some observers believe could transform commercial radio.

Donald Trump Launches Blog as Latest Media Venture

Donald Trump, the real-estate mogul and reality TV star, is launching a blog in connection with Trump University, the online education Web site begun in May. "If Donald Trump is blogging, then blogging is about as mainstream as it gets," says Jupitermedia research director Michael Gartenberg.

Video Gamers' TV Viewing Down, Says Report
World Screen News
Almost 25% of video gamers cut their TV watching time last year, and expect to cut it even further this year, according to Ziff Davis Media's annual digital gaming survey. "We're seeing a broadening of the gamer base as gaming goes more mainstream," says a Ziff Davis exec.

Web Sites Have Sex Appeal
TechWeb News
Men and women are very different in what catches their eye on the Internet, according to a study at the University of Glamorgan. Males favor the use of straight lines, as opposed to rounded forms, and few colors in the typeface and background. Women are nearly the opposite.

Internet Causes 'Fundamental Advertising Shift'
Financial Times
The Internet is pushing fundamental changes as advertising money shifts online and as consumer attention drifts from traditional media, says a new survey by private equity firm Veronis Suhler Stevenson. Traditional media companies are already stepping up their Internet acquisitions.

U.S. Brands Have an Image Problem
Disney and CNN are among the brands with the biggest declines in favorability among consumers worldwide, according to a study from market research firm Gfk NOP. However, Google, MSN and Yahoo are showing improvement in their likeability scores.