In The Newz

Congress Presses For Details From Bank of America On Talks (NYT)
Bank of America has tried to keep legal conversations regarding what happened last year when it acquire a toxic dump hush hush through the excuse of attorney-client privilege. Representative Edolphus Towns told them Friday to fuck that noise: “In a sternly worded letter, Mr. Towns said the bank must divulge when it became aware of the enormous losses at Merrill last year, when it received a commitment from the federal government for a second round of bailout money and what legal advice its management received about whether it had to disclose those developments to the bank’s shareholders. 111

Mr. Towns gave the bank until noon on Monday to provide answers and relevant legal documents. He said it seemed that the bank was “hiding information.” The bank replied to Mr. Towns’s committee late on Saturday, asking him to delay that request until after Tuesday, when Mr. Towns meets with Anne Finucane, the bank’s chief strategy and marketing officer, who oversees public policy at the bank. But a spokesman for Mr. Towns said on Sunday that he was sticking to the deadline.”

Firms Back Plans To Change Pay Policies (WSJ)
A bunch of companies are going to voluntarily promise to be good re: compensation and hope the government will ixnay egulationray.

Recession Drives Women Back To Workforce (NYT)
Citi? Anna Bresnahan of Spokane, Wash., says she would not have returned to work if she and her husband had not started worrying that the bank where he worked might fail. “I decided I could start looking. He said, ‘That would be nice.’ ”

Royal Bank of Scotland eyes share issue to limit London’s stake (FT)
RBS would really appreciate it if someone would stop the Queen from moving anymore of her stuff in, or if she could at least clean up the shit the Corgis leave in the lobby: the bank is considering a £3bn-£4bn share issue to reduce the stake it will hand to the government for joining its toxic assets insurance scheme. Plans are “tentative” and Stephen Hester, RBS chief executive, is still “putting out feelers” about a “modest-sized” issue, a person familiar with the situation said.

IRS Extends Amnesty Deadline (WSJ)
You now have until October 15 to come forward and tell the IRS you’re a tax cheat. After that there’s going to be serious hell to pay.

Limit EU Bank Bonuses Even if US Doesn’t (Reuters)
“It would be interesting, important, useful to have if possible the same rules in the world (…) to have the Americans at our side,” European Commission president Jose-Manuel Barroso said on Sunday. “But in this case of the bonuses, I am absolutely clear — it is such a scandal what is happening, it is really an ethical problem and I believe that, if necessary, we have to do it on our own,” he said.

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Morning Markets

Morning Markets

Crude oil was lower due to profit taking overnight and trading below the 20 day moving average crossing at 70.80. Stochastics and the RSI are neutral to bullish signaling that sideways to higher prices are possible near term. Closes above the reaction high crossing at 72.90 are needed to renew this month’s rally.

Closes below the reaction low crossing at 67.05 would confirm a downside breakout of the trading range of the past seven weeks has been posted while opening the door for additional weakness during September.

Monday’s pivot point, our line in the sand is 71.99

First resistance is last Thursday’s high crossing at 73.16
Second resistance is August’s high crossing at 75.00

First support is last Monday’s low crossing at 68.02
Second support is the reaction low crossing at 67.05investment

The S&P 500 was lower due to profit taking overnight as it consolidates some of the rally off this month’s low. Stochastics and the RSI are overbought and are turning neutral to bearish hinting that a short term top might be in or is near.

Closes below the 20 day moving average crossing at 1028.49 are needed to confirm that a short term top has been posted. If December extends this month’s rally, the 50% retracement level of the 2008-2009 decline crossing at 1112.80 is the next upside target.

Monday’s pivot point for the SP 500 is 1,063

First resistance is last Thursday’s high crossing at 1070.50
Second resistance is the 50% retracement level at 1112.80

First support is the 10 day moving average crossing at 1045.47
Second support is the 20 day moving average crossing at 1028.49

The S&P 500 Index was down 6.50 points at 1054.50 as of 6:00 AM CST. Overnight action sets the stage for a lower opening by the December S&P 500 index when the day session begins later this morning.

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The U.S. Dollar was higher due to short covering overnight and trading above the 10 day moving average crossing at 76.94 signaling that a short term low might be in or is near. Stochastics and the RSI are oversold and are turning bullish hinting that a short term low might be in or is near.

Closes above the 20 day moving average crossing at 77.79 are needed to confirm that a short term low has been posted. If December extends this month’s decline, monthly support crossing at 75.73 is the next downside target.

First resistance is the overnight high crossing at 77.17
Second resistance is the 20 day moving average crossing at 77.79

First support is last Thursday’s low crossing at 76.23
Second support is monthly support crossing at 75.73

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Cash For Clunkers Hangover Is Here: Edmunds Predicts September SAAR Of 8.8 Million, 28 Year Low

Zero Hedge

Newton’s third law of motion: F1 = -F2

Obama’s first and only law of economics: Stimulus Today = 2x Hangover Tomorrow

In 10 days auto companies will announce their September auto sales. If auto specialist is right, expect to see an unprecedented decline in the September SAAR number: from 13.7 million in August to a 28 year low of 8.8 million!

September’s light-vehicle sales rate will fall to 8.8 million units, consumer auto site said. That would be the lowest rate in nearly 28 years, tying the worst demand on record.
After the cash-for-clunkers program boosted August sales to their first year-over-year increase since October 2007, demand has plunged. In at least the last 33 years, the U.S. seasonally adjusted annual rate has only dropped as low as 8.8 million units once — in December 1981 — with records stretching back to January 1976.
Demand increased to 8.9 million in the first five days of September, with 3.6 percent of sales from cash for clunkers. The rate slipped to 8.7 million from Sept. 6 to Sept. 12, said, with 3.3 percent of deals leftover from cash for clunkers.
The slide in demand also has lowered the average dealer profit per vehicle, the consumer auto site said. The average was $981 the week leading up to the July 24 launch of cash for clunkers, and that steadily increased to $1,494 the last week of the program. As of last week, average dealer profit had slipped to $1,303 per vehicle.
“Many people regard February as the darkest month of the recession, but even then the SAAR was higher, at 9.1 million units,” senior statistician Zhenwei Zhou said in a statement.

And the simple observation that anyone in Obama’s crack team who had ever read Econ 101 would have figured out:

Now that consumers can’t receive $3,500 to $4,500 for trading in gas guzzlers for new vehicles with better fuel efficiency, they aren’t rushing to purchase vehicles.

The silver lining: thousands of Americans took out new lines of credit and other loans that will add to the increasing monthly bill, while their wages (if they are lucky to be employed) decline in real (and nominal) terms, or have less and less emergency unemployment benefits left. Thus money which could have been spent more efficiently to pay down consumer debt, ended up propping bank balance sheets, with the blessing of the President, whose primary agenda purposes are to i) recreate the credit/housing bubble and ii) to transfer any and all residual middle class wealth into the coffers of Wall Street, not necessarily in that order.

h/t John

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You’re All Wrong, There’s No V-Shaped Recovery Coming

Courtesy of Joe Weisenthal at Clusterstock

Well, well. It’s suddenly become very hip to believe in a V-shaped recovery, and to slam the pessimists for not knowing their history. As Jim Grant argued yesterday in the Wall Street Journal, the severity of the slump predicts the severity of the recovery — it’s just like physics!

But economics isn’t physics. And don’t worry about not knowing your history, because economics isn’t history either.f

Here’s why we’re not in for a v-shaped recovery.

First, the pax economica that preceded the current slump was artificial. Large swaths of the economy had stopped doing anything productive, while the rest of the economy was buoyed by rising home values that allowed for spending on a level that was disconnected from what people were actually bringing in via income. Of course, you know this part of the story, but the key is that this is meaningfully different than the situation heading into previous economic slumps.

The other reason why we’re not in for a “V” is that the economy, even without the credit-collapse, is still in the midst of violent changes in the economy. New technology and new business models are uprooting old businesses (whether it’s media, manufacturing, or commercial real estate), throwing labor and capital into disarray. Ultimately the transition will be good, but in the meantime, displaced workers will face an unusual amount of lag in finding new work, if only because the industries that were they yesterday have gone and disappeared, requiring extensive levels of retraining.

There are other aspects too, such as the size of government and demographics that look increasingly unfavorable.

Curiously, Jim Grant’s admonition to remember history only mentions past slumps in the US. We don’t see the word “Japan” mentioned once in the whole article? But unless the laws of economics are different there than they are here, then we can certainly point to examples of bad busts that weren’t followed by a quick snap back.

See Also:

Jim Grant: It Will Be A V-Shaped Recovery

It’s A V-Shaped Rally And It’s Only Half Done! Says Ken Fisher

No V-Shaped Recovery, Says Dr. Doom

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October Gold closed lower due to profit taking on Friday

October Gold closed lower due to profit taking on Friday as it consolidates some of this week’s rally but remains above last February’s high crossing at 1008.70. The low-range close sets the stage for a steady to lower opening on Monday. Stochastics and the RSI are overbought, diverging but are neutral to bullish signaling that sideways to higher prices are possible near-term. This week’s breakout above February’s high has opened the door into uncharted territory and the possibility of significantly higher prices later this fall. Closes below the 20-day moving average crossing at 980.30 would confirm that a double top with February’s high has been posted. First resistance is Thursday’s high crossing at 1024.70. First support is the 10-day moving average crossing at 1003.70. Second support is the 20-day moving average crossing at 980.30.


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