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[MDT] Medtronic heart device wires may have caused 13 deaths: WSJ
US Stocks Lower; Dow Down 40
By Peter A. McKay
Last update: 11:58 a.m. EDT March 13, 2009
Comments: 14
Stocks were mostly weaker on Friday following a three-day surge, as major indexes swung between gains and losses.
At 11:55 a.m., the Dow Jones Industrial Average, which has leapt 623 points over the last three sessions, was down about 40 points. Its banking components rose, and General Motors jumped 17%. But American Express slid 8% on fears that credit-card firms may face higher borrowing costs, while Microsoft was down 3.5% amid a broader decline in large technology stocks.
The tech-focused Nasdaq Composite Index fell 0.8%. The S&P 500 was down 0.5%, weighed down by losses in its financial and energy sectors. Health-care and utilities stocks, traditional defensive sectors, were higher.
Assurances from top executives at major banks that the companies have been profitable so far this year have helped drive the market's gains this week. Also, talk is continuing to swirl about possible rule changes that most traders would welcome.
One scenario could involve relaxation of the government's mark-to-market accounting standards. Regulators may also reinstate the stock market's "uptick rule," restricting bearish short sales so they could only take place when a stock is rising. Many participants believe such a move would damp the momentum of market declines on down days, with selling less likely to cascade if people selling borrowed shares can't participate as freely.
"Academically, I can't argue with the case for relaxing the short rule in the first place [in 2007]," said floor broker and New York Stock Exchange member Ted Weisberg of Seaport Securities. "People argued there shouldn't be different restrictions for buyers and sellers. But in practice, it doesn't work. It erodes public confidence, and we need the public investor to participate in our market."
In economic news on Friday, the Reuters/University of Michigan monthly index of consumer confidence rose to a reading of 56.6 for March, up from 56.3 in February. Analysts surveyed by Dow Jones Newswires had expected the measure to fall to 55.0.
Elsewhere, the Labor Department reported that import prices slid 0.2% on a monthly basis in February, smaller than the 0.8% drop economists expected and the slimmest decline since the streak began last August, suggesting that while inflation is well contained there's little evidence yet of outright deflation.
The U.S. trade deficit narrowed by about 10% in January, brought by falling prices and shrinking demand to its lowest point since 2002. The trade deficit has shrank a record six consecutive months. Exports in January declined 5.7% as growth for many U.S. trading partners slowed, while imports fell 6.7% amid the erosion of consumer demand in the U.S.
Experts still expect considerable economic weakness. Economists surveyed this month by the Wall Street Journal expect gross domestic product to decline at an annual rate of 4.6% this quarter and 1.5% in the second quarter. Federal Reserve Chairman Ben Bernanke has said he doesn't expect the recession to end until later this year.
Europe stocks were higher, with banks and oil producers leading a broad-based advance. Most Asian markets also advanced. The Nikkei jumped 5.2%, its best single-day percentage gain since mid-December.
Treasury prices were mixed. The 10-year note fell 4/32 to yield 2.881%. The dollar was stronger against the yen and the euro.
Oil prices soared 11% Thursday as traders worried that the Organization of Petroleum Exporting Countries may tighten output at a meeting this weekend in Vienna. Futures continued to move higher on Friday, climbing 65 cents to $47.68 a barrel. The International Energy Agency on Friday revised down its forecast for 2009 global oil demand by around 300,000 barrels a day to 84.4 million barrels a day, roughly a 1.5% fall on an annual basis. End of Story
NOTE: futures continued to move higher on friday ,the international energy egency on friday revised.
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Comments: 14
Ha! Bulls are back. Too bad the global depression is still there and getting worse.
- Eichmare
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adcs 12 hours ago
+2 Votes (4 Up / 2 Dn)
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The trend line for the day is steeply downward, even at the beginning when the see-sawing was occuring. Doesn't look like an up day to be sure.
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newmexicomom 12 hours ago
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why isn't MW carrying THIS story?
http://www.cnbc.com/id/29666975
(Berkshire Hathaway stripped of AAA rating if you don't want to copy and paste)
I know its cnbc but still!
druidmechanics 12 hours ago
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BH to AA+ and he's only the 2nd richest billionaire? My heart goes out to him.
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woodsmoke52 12 hours ago
+3 Votes (3 Up / 0 Dn)
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"Bulls Getting A Little Winded"
So the Bears take 2500 pts, and when the Bulls take back 500, they're all done in. Methinks this "bull" has been castrated by a government that's hell-bent on destroying both the currency and the economy.
Note to Thumbs-Down Fairy: The Obama administration has proposed a bill to end mining in the U.S. and destroy not only mining jobs, but our ability to develop our own resource base. It allows for warrantless searches of vehicles and buildings to see if you've stashed away a lump of coal or a few flakes of gold somewhere. It's called H.R.699.
Don't believe me?
http://www.icmj.com/article.php?id=56&keywords=Rahall_Proposes_Bill_to_End_All_Mining_in_the_U.S
druidmechanics 12 hours ago
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There goes all hope for my black lung drug startup.
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GreatObamaCrash 12 hours ago
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A.I.G., Where Taxpayers' Dollars Go to Die
By GRETCHEN MORGENSON
"DERIVATIVES are dangerous."
That simple sentence, written by Warren Buffett, begins an enlightening discussion in Berkshire Hathaway's most recent annual report. Mr. Buffett's views on derivatives, gleaned from his own unhappy encounters with them, should be required reading for all United States taxpayers.
Why? Because we own almost 80 percent of the American International Group, the giant insurer whose collapse was a direct result of derivatives it sold during the late, great credit boom.
A.I.G. nearly barreled off the cliff last September, when it couldn't meet its obligations to customers who had bought a version of derivatives called credit default swaps. Such swaps are like insurance policies; bondholders buy them to protect themselves from default on various forms of debt.
When A.I.G. couldn't meet the wave of obligations it owed on the swaps last fall as Wall Street went into a tailspin, the Federal Reserve stepped in with an $85 billion loan to keep the hobbled insurer from going bankrupt; over all, the government has pledged a total of $160 billion to A.I.G. to help it meet its obligations and restructure operations.
So is A.I.G. the taxpayer gift that keeps on taking? Sure looks that way. And while no one can say with certainty whether more money will be needed, the sheer volume of derivatives engineered by a small London unit of A.I.G. suggests that taxpayers haven't seen the bottom of this money pit.
Some $440 billion in credit default swaps sat on the company's books before it collapsed. Its biggest customers, European banks and United States investment banks, bought the swaps to insure against defaults on a variety of debt holdings, including pools of mortgages and corporate loans.
Because of the way A.I.G. wrote its swaps, and because the company had a double-A credit rating at the time, it did not have to put up collateral to assure its customers that it would be able to pay on the insurance if necessary. Collateral would be required only if A.I.G.'s credit rating were cut or if the debt underlying the swaps declined.
Both of these "unthinkable" events occurred in 2008. Suddenly, A.I.G. had to cough up collateral it didn't have.
SO, you see, the rescue of A.I.G. also involved a bailout of its many customers, none of whom the insurer or the government is willing to identify.
Nevertheless, Edward M. Liddy, the chief executive of A.I.G., explained to investors last week that "the vast majority" of taxpayer funds "have passed through A.I.G. to other financial institutions" as the company unwound deals with its customers.
On Wall Street, those customers are known as "counterparties," and Mr. Liddy wouldn't provide details on who the counterparties were or how much they received. But a person briefed on the deals said A.I.G.'s former customers include Goldman Sachs, Merrill Lynch and two large French banks, Société Générale and Calyon.
All the banks declined to comment.
How much money has gone to counterparties since the company's collapse? The person briefed on the deals put the figure at around $50 billion.
Unfortunately, that is likely to rise.
According to its most recent financial statements, A.I.G. had $302 billion in credit insurance commitments at the end of 2008. Of course, the company is not going to have to make good on all that insurance: the underlying securities are not all going to zero.
But as the economy deteriorates, A.I.G.'s insurance bets certainly become more perilous. And because most of A.I.G.'s swaps are known as the "pay as you go type," collateral must be supplied when the underlying debt declines in value. Swap arrangements made by other insurers require payments only if a default occurs.
So the meter is constantly running at A.I.G. Just as quickly as taxpayer funds flow into the firm, chunks of it go right out the door to settle derivatives claims.
A.I.G.'s insurance commitment stood at "only" $302 billion in part because the government has already voided $62 billion of the protection A.I.G. had written on pools of especially toxic securities. The underlying collateral on those contracts, valued at about $32 billion or so, now sits in a facility that the Federal Reserve Bank of New York oversees and which we, the taxpayers, own.
In order to rip up those contracts, the taxpayers had to make A.I.G.'s counterparties whole by buying the debt that A.I.G. had insured and paying out — in cash — the remaining amount owed to the counterparties.
Of the $302 billion in insurance outstanding at A.I.G., about $235 billion was sold to foreign banks and covers prime home mortgages and corporate loans. The banks that bought this insurance did so to reduce the money they must set aside for regulatory capital requirements.
A.I.G. also wrote $50 billion of insurance on pools of corporate loans. These contracts are performing O.K. for now, the company has said.
But there's yet another complication that will probably force A.I.G. to cough up cash more quickly than it otherwise might have had to. That's because it didn't simply write insurance protection on debt; it also entered into yet another derivative contract — known as an interest rate swap — with counterparties buying the protection.
The reason A.I.G. entered into the second contract was that banks feared they were also exposed to interest rate risks on the loans bundled into debt pools. Presto! A.I.G. was happy to remove that risk by writing another complicated swap.
Now, however, A.I.G. not only has to meet collateral calls as the value of the debt it insured withers, but also has to post collateral related to the interest rate swaps.
Another troubling aspect of these deals is how long it takes to untangle them when they go awry. Back to Mr. Buffett's recent shareholder letter: when Berkshire acquired the insurance company General Re in 1998, he wrote, General Re had 23,218 derivatives contracts that it had struck with 884 counterparties.
Mr. Buffett wanted out from under the contracts and he began unwinding them. "Though we were under no pressure and were operating in benign markets as we exited," he said, "it took us five years and more than $400 million in losses to largely complete the task."
When you look back with the benefit of hindsight, it is truly amazing how outsized A.I.G.'s insurance commitment was, at $440 billion. After all, in 2005, when A.I.G. put many of these swaps on its books, the market value of the entire company was around $200 billion.
That means the geniuses at A.I.G. who wrote the insurance were willing to bet more than double their company's value that defaults would not become problematic.
That's some throw of the dice. Too bad it came up snake eyes for taxpayers.
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Classixm 12 hours ago
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Not surprising a little down today with the major advances financials have had all week, finally. If it does stay relatively mild on the decline side, i would consider that further support into next week.
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Momintn 11 hours ago
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Lunch is almost over with, so the bulls will be back.
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Momintn 11 hours ago
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The markets are suppose to go up until mid May with the S&P at 850 20% from here.
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Wile-E-Coyote 11 hours ago
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I believe we are going to move back to our normal decline shortly, after the kid with the etch a sketch finishes trying to draw an "M" with the DJIA. He sometimes gets close.
We're still on a 19.77 point decline per trading day trendline, including yesterday's close.
;)
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Eichmare 11 hours ago
+6 Votes (6 Up / 0 Dn)
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Ha! Bulls are back. Too bad the global depression is still there and getting worse.
Larucci 11 hours ago
+2 Votes (2 Up / 0 Dn)
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I agree 100%
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ken225 11 hours ago
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538 stocks have hit new short-term highs and 19 have hit new short-term lows so far today according to pages.sbcglobal.net/acom
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A4Driver 11 hours ago
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What a head fake...rally time!
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