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November 14, 2009

Just the Facts
by Doug Noland

For the week, the S&P500 gained 2.3% (up 21.1% y-t-d), and the Dow increased 2.5% (up 17.0% y-t-d). The Morgan Stanley Cyclicals surged 4.7% (up 65.1%), and Transports increased 2.8% (up 12.0%). The Morgan Stanley Consumer index gained 2.7% (up 21.3%), and the Utilities added 1.0% (down 1.4%). The Banks increased 0.7% (down 2.7%), and the Broker/Dealers rallied 2.6% (up 51.9%). The S&P 400 Mid-Caps rallied 2.5% (up 29.7%), and the small cap Russell 2000 increased 1.0% (up 17.4%). The Nasdaq100 jumped 3.3% (up 47.6%), and the Morgan Stanley High Tech index gained 3.7% (up 62.4%). The Semiconductors surged 5.2% (up 49.6%). The InteractiveWeek Internet index rose 3.1% (up 69.2%). The Biotechs were little changed (up 37.7%). With bullion jumping $24, the HUI gold index rose 4.1% (up 52.3%).

One-month Treasury bill rates ended the week at 5 bps, and three-month bills closed at 6 bps. Two-year government yields declined 4 bps to 0.81%. Five-year T-note yields fell 4 bps to 2.25%. Ten-year yields were 8 bps lower to 3.42%. Long bond yields declined 4 bps to 4.36%. Benchmark Fannie MBS yields sank 16 bps to 4.13%. The spread between 10-year Treasuries and benchmark MBS yields narrowed 8 to 71 bps. The implied yield on December 2010 eurodollar futures dropped 8 bps to 1.355%. The 10-year dollar swap spread declined 4.25 to 11.5 bps; and the 30-year swap spread declined 3.25 to negative 13.5 bps. Corporate bond spreads were mostly narrower. An index of investment grade bond spreads narrowed 2 bps to 148, and an index of junk spreads narrowed 4 bps to 565 bps.

Investment grade issuers included Cisco Systems $5.0bn, GE Capital $1.5bn, Lockheed Zimmer $1.0bn, Massachusetts Electric $800 million, Quest Diagnostic $750 million, Emerson Electric $600 million, Waste Management $600 million, PG&E $550 million, Raytheon $500 million, Praxair $400 million, NSTAR $350 million, Revlon $330 million, CNA Financial $350 million, HCC Insurance $300 million, Northern States Power $300 million, Cleco Power $295 million, Enogex $250 million, Public Service Oklahoma $250 million, and Amerenenergy $250 million.

Junk bond funds saw inflows of $ million this week. Junk issuers included Capital One $1.0bn, Toys R Us $725 million, Discover Bank $700 million, United Rental $500 million, Pioneer Natural Resources $450 million, Entergy Louisiana $400 million, Antero Resources $375 million, Belo Corp $275 million, Swift Energy $225 million, Viasystems $220 million, and Triumph Group $175 million.

I saw no convert issues this week.

International dollar-denominated debt issuers included Ontario $4.0bn, CBQ Finance $1.6bn, Eksportfinans $1.5bn, Inmarsat $650 million, Commercial Bank Qatar $600 million, Transalta $500 million, and Banco Santander $500 million.

U.K. 10-year gilt yields fell 9 bps to 3.79%, and German bund yields rose 2 bps to 3.38%. The German DAX equities index jumped 3.6% (up 18.2% y-t-d). Japanese 10-year "JGB" yields sank 11 bps to 1.34%. The Nikkei 225 slipped 0.2% (up 10.3%). Emerging markets were higher. Brazil's Bovespa equities index rose 1.3% (up 74.0%), and Mexico's Bolsa jumped 3.8% (up 38.5%). Russia's RTS equities index increased 0.8% (up 124.6%). India's Sensex equities index surged 4.3% (up 74.6%). China's Shanghai Exchange added 0.7%, boosting 2009 gains to 75.1%. Brazil's benchmark dollar bond yields dropped 18 bps to 5.07%, and Mexico's benchmark bond yields fell 18 bps to 5.20%.

Freddie Mac 30-year fixed mortgage rates dropped 7 bps to a 5-wk low 4.91% (down 123bps y-o-y). Fifteen-year fixed rates declined 4 bps to 4.36% (down 145bps y-o-y). One-year ARMs dipped one basis point to 4.46% (down 87bps y-o-y). Bankrate's survey of jumbo mortgage borrowing costs had 30-yr fixed jumbo rates down 19 bps to 5.91% (down 159bps y-o-y).

Federal Reserve Credit declined $33.2bn last week to $2.116 TN. Fed Credit has declined $131bn y-t-d and $82.5bn over the past 52 weeks. Elsewhere, Fed Foreign Holdings of Treasury, Agency Debt this past week (ended 11/11) increased $6.9bn to a record $2.917 TN. "Custody holdings" have expanded at an 18.4% rate y-t-d, and were up $409bn over the past year, or 16.3%.

M2 (narrow) "money" supply declined $6.5bn to $8.387 TN (week of 11/2). Narrow "money" has expanded at a 2.8% rate y-t-d and 5.7% over the past year. For the week, Currency slipped $0.5bn, while Demand & Checkable Deposits surged $28.4bn. Savings Deposits dropped $22.1bn, and Small Denominated Deposits declined $8.0bn. Retail Money Funds fell $4.3bn.

Total Money Market Fund assets (from Invest Co Inst) slipped $3.8bn to $3.335 TN. Money fund assets have declined $495bn y-t-d, or 14.9% annualized. Money funds declined $302bn, or 8.3%, over the past year.

Total Commercial Paper outstanding slumped $76.7bn (13-wk gain of $164bn) to $1.239 TN. CP has declined $443bn y-t-d (30.4% annualized) and $364bn over the past year (22.7%). Asset-backed CP declined $4.7bn last week to $510bn, with a 52-wk drop of $231bn (31.2%).

International reserve assets (excluding gold) - as accumulated by Bloomberg's Alex Tanzi - were up $749bn y-o-y to a record $7.517 TN. Reserves have increased $752bn year-to-date.

Global Credit Market Watch:

November 13 - Bloomberg (William Selway): "U.S. state and local governments sold $9.5 billion of bonds this week, led by California, as demand from investors allowed Connecticut to almost double the size of its offering of tax-exempt securities."

November 10 - Bloomberg (Laura Cochrane and Esteban Duarte): "Islamic bond issues surged this year as offerings from governments and state-related companies fostered a more efficient market, according to Moody's... Global sales of so-called sukuk that comply with Islamic religious laws increased 40% in the 10 months to October... Moody's... Faisal Hijazi... wrote..."

November 9 - Bloomberg (John Fraher and Shobhana Chandra): "The International Monetary Fund signalled record low U.S. interest rates are funding global 'carry trades' and the dollar is still overvalued as concerns mount that new financial imbalances are forming. 'There are indications that the U.S. dollar is now serving as the funding currency for carry trades,' the IMF said... 'These trades may be contributing to upward pressure on the euro and some emerging-economy currencies.'"

November 11 - Bloomberg (Scott Lanman and Craig Torres): "The Federal Reserve faces the biggest blows to its authority and independence in five decades under legislation championed by its lead overseer in the U.S. Senate. The financial-regulation overhaul proposed yesterday by Senator Christopher Dodd would strip the Fed of its role as a bank supervisor and give Congress a greater voice in naming the officials who set interest rates. The measure opens the door to interference from politicians who might disagree with any move by the Fed to raise rates from record lows, former central bank officials said."

November 12 - Bloomberg (Alison Vekshin and Robert Schmidt): "Seven Wall Street lobbyists trooped to Capitol Hill on Nov. 9, hoping to convince Representative Paul Kanjorski's staff that his plan to dismantle large financial firms was a bad idea. They walked out with a sobering conclusion, according to the accounts of two attendees who requested anonymity because the meeting was private. Not only was Kanjorski serious, he planned to offer the legislation as early as next week -- and it just might pass."

Global Government Finance Bubble Watch:

November 12 - Bloomberg (Mike Gavin): "Germany's budget deficit will reach 5.1% of gross domestic product in 2010, from 3% this year, according to a forecast by the government's council of economic advisors..."

November 12 - Bloomberg (Dara Doyle and Ian Guider): "The biggest financial gamble in modern Irish history is about to exit the realms of theory and enter the real world. Lawmakers will today pass a bill creating a so-called bad bank that will pay the country's biggest banks 54 billion euros ($81 billion), or about a third of gross domestic product, for property loans to free up lending... Real-estate prices have on average dropped 50% since peaking in 2007..."

Currency Watch:

November 13 - Bloomberg (Oliver Biggadike and Matthew Brown): "Brazil, South Korea, Russia and other developing nations are fighting a losing battle to mute gains in their currencies as a falling dollar and economic recovery create more demand for their assets than central banks can handle. South Korea Deputy Finance Minister Shin Je Yoon said... the country will leave the level of its currency to market forces after adding about $63 billion to its foreign exchange reserves this year... Chile Finance Minister Andres Velasco said... that lawmakers approved an increase in local debt sales to finance spending, a move that will allow the government to keep more of its dollar-based savings overseas and slow the peso's rally. Governments are amassing record foreign-exchange reserves as they direct central banks to buy dollars in an attempt to stem the greenback's slide..."

November 10 - Bloomberg: "China, rejecting calls from Europe and Japan, will keep the yuan from gaining against the dollar until exports revive, state researchers said. Policy makers are unlikely to allow the currency to resume its appreciation this year after keeping it almost unchanged since July 2008... Zhu Baoliang, the chief economist at the State Information Center, said... China will stick with its 'tough stance' on the currency, Zhang Ming, a researcher at the Chinese Academy of Social Sciences, said..."

November 11 - Bloomberg (Rebecca Christie): "U.S. Treasury Secretary Timothy Geithner said a strong dollar is in the nation's interest and the government recognizes the importance it plays in the global financial system. 'I believe deeply that it's very important to the United States, to the economic health of the United States, that we maintain a strong dollar,' Geithner told reporters..."

The dollar index declined 0.7% to 75.25. For the week on the upside, the Mexican peso increased 2.8%, the New Zealand dollar 2.5%, the Canadian dollar 2.3%, the Swedish krona 2.2%, the South African rand 1.6%, the Australian dollar 1.5%, the Norwegian krone 1.4%, and the Taiwanese dollar 0.9%. On the downside, the Brazilian real declined 0.1%.

Commodities Watch:

November 9 - Bloomberg (Daniel Williams and Mahmoud Kassem): "China promised $10 billion in cheap loans to Africa, pledged to cut customs duties and distributed a newspaper with photos of Chinese leaders among beaming Africans, part of an effort to fight claims it is exploiting the continent's resources. At the close today of the two-day Forum on China-Africa Cooperation conference in Sharm el-Sheikh, Egypt, China pledged to 'work within its means to increase aid to Africa, reduce or cancel debts on African countries, in addition to increasing investments in Africa and open more markets,' Egypt's state-run Middle East News Agency reported."

November 9 - Bloomberg (Alan Bjerga and Jeff Wilson): "China's corn harvest, the world's second-largest, plunged by a more-than-estimated 13% to a four-year low because of droughts in the main growing regions, a survey of farmers showed."

The CRB index was little changed this week (up 17.2% y-t-d). The Goldman Sachs Commodities Index (GSCI) increased 1.0% (up 43.8%). Gold jumped 2.2% to close at a record $1,119 (up 26.8%). Silver added 0.4% to $17.45 (up 54.4%). December Crude declined 97 cents to $76.46 (up 71%). December Gasoline declined 0.4% (up 81%), and December Natural Gas dropped 4.2% (down 22%). December Copper added 1.3% (up 112%). December Wheat jumped 8.4% (down 12%), and December Corn rose 6.4% (down 4% y-t-d).

China Bubble Watch:

November 13 - Bloomberg: "China's President Hu Jintao told Asia-Pacific business leaders the world's most populous nation will take 'vigorous' steps to boost household spending and reduce a reliance on investment and exports for economic growth. 'Our focus in countering the crisis is to expand domestic demand, especially consumer demand... We want to 'increase people's ability to spend,' he said."

November 13 - Bloomberg (Shamim Adam): "China is facing the biggest challenge to its currency policy since the start of the global recession as economists warn the peg to the dollar risks causing an asset bubble... China's sales of yuan to keep it fixed to the dollar contributed to a 29% jump in money supply, and the peg helped spur more than $150 billion in speculative funds from overseas in the past six months, China International Capital Corp. says. Record apartment prices and a 74% climb in the benchmark stock index this year are prompting warnings that the policy is inflating asset prices excessively. 'If China keeps the peg, it will be powerless to prevent asset bubbles,' says Hu... Greater China chairman at Goldman Sachs..."

November 9 - Bloomberg: "China's passenger-car sales rose 76% last month... October sales of cars, sport-utility vehicles and multipurpose vehicles climbed to 946,400 units... Sales in the first 10 months rose 45.2% from a year earlier to 8.19 million."

November 11 - Dow Jones: "China's overall automobile sales could reach 13 million units this year, Dong Yang, executive vice president and secretary general of the China Association of Automobile Manufacturers, said... China's automobile sales totaled 9.38 million units last year..."

November 11 - Bloomberg: "China's lending growth slowed in October as officials considered more steps to tighten credit standards and avert asset-price bubbles. Banks extended 253 billion yuan ($37bn) of new local- currency loans, compared with 516.7 billion yuan in September... M2... grew a record 29.4% from a year earlier, the central bank said."

November 11 - Bloomberg: "China's industrial production and trade surplus climbed in October, indicating a strengthening recovery in the world's third-largest economy that's likely to amplify calls to let the yuan appreciate... Production rose 16.1% from a year before, the most since March 2008... Retail sales gained an annual 16.2% in October... The trade surplus almost doubled from September, to $24 billion..."

November 9 - Bloomberg: "China's central bank and banking regulator may 'soon' issue measures to limit the use of debt in real-estate purchases after asset prices climbed, a Shanghai official said. Regulators may reduce 'leverage ratios,' Fang Xinghai, the director-general of Shanghai's financial services office, said... 'I would think that soon you will see these measures coming out of the central bank and banking regulatory commission.'"

November 9 - Bloomberg: "China, the world's second-largest energy user, will raise gasoline, diesel and jet fuel prices by as much as 8% tomorrow, the first increase in more than two months..."

Japan Watch:

November 10 - Bloomberg (Aki Ito): "Japan's current-account surplus unexpectedly widened in September as worldwide government stimulus spending helped to ease declines in exports. The surplus rose 0.2% to 1.57 trillion yen ($17.5bn) from a year earlier..."

November 11 - Bloomberg (Naoko Fujimura and Junko Hayashi): "Shiseido Co., Japan's biggest cosmetics maker, aims to accelerate China sales... Sales may grow about 20% in the 12 months ending March 2011, from about 15 percent expected this fiscal year, Chief Financial Officer Yasuhiko Harada said..."

November 9 - Bloomberg (Wes Goodman and Cordell Eddings): "Japanese investors who lived through a decade of deflation and recessions say U.S. Treasuries are a bargain even with yields at about the lowest levels since at least the 1960s. Japan bought a net $105 billion of U.S. government debt through August, exceeding China as the biggest foreign buyer and boosting its holdings to $731 billion..."

India Watch:

November 12 - Bloomberg (Kartik Goyal): "India's industrial production grew more than economists forecast in September, adding to positive economic signs as policy makers consider when to rein in stimulus measures. Output at factories, utilities and mines rose 9.1% from a year earlier..."

Asia Bubble Watch:

November 13 - Bloomberg (Christopher Anstey and Michael Dwyer): "The Federal Reserve's policy of keeping interest rates near zero is fueling a wave of speculative capital that may cause the next global crisis, Hong Kong's leader said. 'I'm scared and leaders should look out,' said Donald Tsang, chief executive of the city, said... 'America is doing exactly what Japan did last time,' he said, adding that Japan's zero interest rate policy contributed to the 1997 Asian financial crisis and U.S. mortgage meltdown... 'We have a U.S. dollar carry trade at the moment,' Tsang, 65, said... 'Where is the money going -- it's where the problem's going to be: Asia,' Tsang said. 'You can see asset prices going up, not only in Korea, in Taiwan, in Singapore and in Hong Kong, going up to levels that are incompatible or inconsistent with the economic fundamentals."

November 12 - Bloomberg (Seyoon Kim): "South Korea's central bank kept its benchmark interest rate at a record low for a ninth month, seeking to strengthen the economy's recovery before increasing borrowing costs. Governor Lee Seong Tae left the seven-day repurchase rate at 2%..."

Latin America Bubble Watch:

November 12 - Bloomberg (Helder Marinho): "Banco do Brasil SA, Latin America's biggest lender by assets, said third-quarter profit rose 6% as the bank increased lending more than its competitors... The lender's loan portfolio grew 41% to 285.5 billion reais. Total assets increased 50% to 685.7 billion reais."

November 9 - Bloomberg (Camila Fontana): "Brazil's current account deficit may almost double in 2010 and reach the widest since 1998 as a local currency rally boosts imports amid a consumer-led economic recovery, a central bank survey shows. The gap will widen to $33.25 billion next year from an estimated $16.9 billion in 2009, according to the median forecasts from about 100 economists..."

November 12 - Bloomberg (Adriana Brasileiro): "Brazil's integrated electricity grid leaves it vulnerable to the types of massive outages that occurred this week when 40% of the country was plunged into darkness, according to a government energy research agency. 'Brazil has the largest integrated power grid in the world; it's fantastic because it facilitates electricity transmission between regions, but the domino effect that happens when we have a problem is a major inconvenience,' said Mauricio Tolmasquim, president of Brazil's Energy Research Agency."

Unbalanced Global Economy Watch:

November 13 - Bloomberg (Simone Meier): "The euro-area economy emerged from its worst recession since World War II in the third quarter as exports from Germany and France helped compensate for households' reluctance to increase spending. Gross domestic product in the economy of the 16 nations using the euro rose 0.4% from the second quarter, when it fell 0.2%..."

November 13 - Bloomberg (Jana Randow): "Germany's economic recovery accelerated in the third quarter as government stimulus programs fueled company spending and a rebound in global trade boosted exports. Gross domestic product increased a seasonally adjusted 0.7% from the second quarter..."

November 10 - Bloomberg (Vibeke Laroi and Marianne Stigset): "Norway's sovereign wealth fund, the world's second largest, gained a record 13.5% in the third quarter as stocks rallied on signs the global recession ended."

November 12 - Dow Jones: "Australia reported... an unexpected surge in jobs last month in the latest sign the country's economy was accelerating quicker than expected... The unemployment rate, meanwhile, rose slightly to 5.8% from 5.7%..."

U.S. Bubble Economy Watch:

November 12 - Bloomberg (Vincent Del Giudice): "The U.S. budget deficit widened in October from a year earlier, reaching a record for that month... The excess of spending over revenue widened to $176.4 billion last month, compared with a deficit of $155.5 billion in the same month a year earlier... Spending for October declined 2.7% from the same month a year earlier to $331.7 billion, and revenue and other income fell 17.9% to $135.3 billion... Individual income tax collections fell 29% to $61.2 billion in October from a year earlier, and corporate tax receipts last month were a negative $4.5 billion on the government's books... Over the past week, the Treasury auctioned a record $81 billion in its quarterly sales of long-term debt. The Treasury's debt-management director... told a meeting of bond market participants last week to anticipate another year of government debt sales of $1.5 trillion to $2 trillion..."

November 13 - Bloomberg (Bob Willis): "The trade deficit in the U.S. widened in September by the most in a decade, reflecting rising demand for imported oil and automobiles... The gap grew a larger-than-anticipated 18% to $36.5 billion, the highest level since January... Imports climbed 5.8%, the most since March 1993, to $168.4 billion. The figures reflected a $4.1 billion increase in imported oil as the cost of a barrel of crude climbed to the highest level since October 2008 and volumes also rose... Exports rose 2.9% to $132 billion, the most this year, propelled by sales of civilian aircraft, industrial machines and petroleum products."

November 9 - Bloomberg (Sonja Franklin): "Former Federal Reserve Chairman Alan Greenspan said a rebound in stocks is 're-liquifying' the U.S. economy and housing prices are showing early indications of ending their decline. 'We have been very fortunate that the stock markets moved back' and are 're-liquifying the whole process,' Greenspan said..."

November 12 - Bloomberg (Bob Willis): "Mortgage applications to purchase homes in the U.S. plunged last week to the lowest level in almost nine years... The Mortgage Bankers Association's index of applications to buy a house dropped 12% in the week ended Nov. 6..."

November 9 - Bloomberg (Daniel Taub): "The number of U.S. homeowners who owe more than their properties are worth fell in the third quarter as values stabilized and some homes were lost to foreclosure, Zillow.com said. About 21% of owners of mortgaged homes were underwater, down from 23% in the second quarter..."

November 12 - Investment News (Jessica Toonkel Marquez): "In an attempt to keep a low profile, The Goldman Sachs Group Inc. has told its employees that it won't be hosting a corporate Christmas party this year. The investment bank is also prohibiting employees from funding their own parties, an insider at the firm told InvestmentNews."

Real Estate Watch:

November 12 - Bloomberg (Dan Levy): "U.S. foreclosure filings surpassed 300,000 for an eighth straight month as unemployment made it tougher for homeowners to pay their bills, RealtyTrac Inc. said. A total of 332,292 properties received a default or auction notice or were seized by banks in October, up 19% from a year earlier... RealtyTrac said..."

Central Banker Watch:

November 13 - Bloomberg (Steve Matthews and Mark Deen): "Chicago Federal Reserve Bank President Charles Evans commented... 'In our most recent policy statement we said that we expected rates to be low for an extended period of time. We included different markers that we will be monitoring, in terms of very low resource utilization, very low inflation. We'll be looking at all of those... Unless there are unusual developments, I think the policy is going to be highly accommodative, as it is now, for quite some period of time.'"

Fiscal Watch:

November 12 - New York Times (David Steitfeld): "The Federal Housing Administration said... that its cash reserves had dwindled dramatically in the last year after a record drop in home prices... The F.H.A., which insures loans made by private lenders, guaranteed more than $360 billion in mortgages in the last year, four times the amount in 2007... 'As a credit expert, I have seen this movie before, and the ending is always the same,' said Edward Pinto, a former executive with the government mortgage giant Fannie Mae. The results of the F.H.A.'s annual audit showed the agency's capital reserves to be 0.53%, far under the 2% minimum mandated by Congress. A year ago, the capital reserves were 3%... Nearly one in five loans made in 2007 are seriously delinquent, the agency said."

GSE Watch:

November 7 - Wall Street Journal (Nick Timiraos): "Freddie Mac said it didn't need any additional federal aid for the second straight quarter as it reported a loss of $6.3 billion for the third quarter... But the company said it expected to ask for more handouts from the U.S. Treasury in the future... Together with Fannie Mae, which said... it would need a $15 billion capital injection, the tab for the U.S. government's bailout of both mortgage-finance giants has climbed over the past year to $112 billion, making it one of the costliest government interventions ever to stabilize housing and financial markets."

Muni Watch:

November 11 - Financial Times (Nicole Bullock): "Some of the same financial troubles that have pushed California toward economic disaster are wreaking havoc in nine other states and posing a threat to the nascent recovery, according to research... 'California's fiscal problems are in a league of their own,' says Susan Urahn, managing director of the Pew Center on the States... 'but the Golden State is hardly alone.' Arizona, Florida, Illinois, Michigan, Nevada, New Jersey, Oregon, Rhode Island and Wisconsin join California as the most troubled US states... For residents, fiscal problems have meant higher taxes, layoffs of state workers, longer waits for public services, more crowded classrooms and less support for the poor."

November 12 - Bloomberg (Darrell Preston): "U.S. states, which are closing $250 billion of budget deficits, will be forced to grapple with diminished revenue until at least 2012, a survey of fiscal officials found. The only thing that kept states from 'draconian' spending cuts has been $135 billion of funding under President Barack Obama's economic stimulus package, according to a report from the National Governors Associations and the National Association of State Budget Officers. Revenue fell 7.5% in fiscal 2009, forcing states to close budget gaps of $72.7 billion. 'These are the worst numbers we've ever seen,' said Scott Pattison, executive director of the budget directors group... 'States have been forced to lay off and furlough employees, raise taxes, drain rainy day funds and sharply cut state spending.'"

New York Watch:

November 12 - Bloomberg (Ken Prewitt and Michael Quint): "New York legislators must act quickly to narrow a $10 billion, two-year budget deficit and solve a December cash squeeze, Governor David Paterson told Bloomberg radio. 'Our actions have to be taken now, they must be stern, they must be swift,' he said..."

November 11 - Bloomberg (Dan Levy): "Manhattan apartment rents fell as much as 9% in October from a year earlier... according to Citi- Habitats Inc. Average rents dropped for all apartment sizes and the vacancy rate rose 0.15 percentage point to 1.86%, the highest since November 2008..."

California Watch:

November 10 - Bloomberg (Michael Weiss): "California's tax receipts rose $285 million, or 7.1%, from the prior year, Controller John Chiang said... 'October's receipts are a welcome break from a largely negative trend line for the last two years,' Chiang said, noting the state's overall cash position was $1.2 billion ahead of state projections."

Speculation Watch:

November 10 - Bloomberg (Bei Hu): "Hedge fund assets may top the previous $2 trillion high by the end of next year as double-digit average returns lure investors, said Barry Bausano, Deutsche Bank AG's global co-head of prime finance."

Crude Liquidity Watch:

November 13 - Bloomberg: "Saudi Arabia... has started to expand and upgrade its oil and gas production and refining business at a cost of $100 billion to tap rising demand in Asia, Oil Minister Ali al-Naimi said. 'China's and Asia's demand are projected to be met mainly from supplies from Saudi Arabia and other Gulf states,' al- Naimi said..."

November 9 - Bloomberg (Zainab Fattah): "Saudi Arabia will face a 'substantial' housing shortage by 2015 as a growing population and rising employment fuel demand, Deutsche Bank AG said. The kingdom will require an estimated 1.2 million additional homes by 2015, compared with a projected supply of just 900,000..."

Doug Noland
The Credit Bubble Bulletin
PrudentBear.com

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