Happy Holidays!

(Updates resume Jan.2)

A couple of charts for Fed watchers

Bank Borrowings:


Bank Free Reserves:

Unpaid credit cards bedevil Americans "The desires of consumers to want, want, want, spend, spend, spend — it's the fabric of our nation," said Howard Dvorkin, ..

Quick Overview

• U.S. Personal incomes rose 0.4% in November.
  

• U.S. Consumer spending rose 1.1%.
  
  

• The University of Michigan's consumer sentiment index fell from 76.1 to 75.5
  
  

• Canada’s GDP rose 0.2% in October and up 2.8% YoY.
  

• U.K.'s retail sales rose 0.4% in Novembe
  

• Australia’s leading Indicator rose 0.9%
  
  

• The USDA said there were 12.081 million head of cattle on feed on December 1st, up 0.9% YoY. Placements in November rose 12.3% while marketing's fell 3.3%.
  

• The USDA also said that pork production rose 8% YoY.
  The USDA said there were 477 million pounds of frozen pork in storage, up 2% YoY. Frozen bellies totaled 34.5 million pounds, up 13% YoY.
  

• The USDA said there were 564 million pounds of frozen orange juice in storage, down 13% YoY.
  

• The Far Eastern Freight Conference said its member’s lines are preparing an unspecified eastbound tariff increase to take effect on April 1. The eastbound trade between Europe and Asia continues to experience substantial growth with a current level of 7% while trade with China is growing at 15%," the FEFC said.

Quick Overview

• U.S. GDP rose 4.9%
  

• U.S. leading indicators fell 0.4%
  

• U.S. jobless claims rose12, 000 to 346,000
  
  

• China increased its lending rate from 7.29% to 7.47%. For the year, this is increase #6
  

• U.K.'s GDP rose 0.7% QoQ and up 3.3% YoY
  

• Japan kept the interest rate unchanged at 0.50%
  

• The port of Long Beach is instituting a “green tax” of $35 to $79 per loaded container.
  The tax will take effect by June and is expected to raise $1.6 billion to replace or retrofit 16,800 trucks to reduce emissions. The Port of Los Angeles is expected to copy the scheme.
  

• Hong Kong’s container port volume rose 1.6% in the first 11 months, but fell 2.4% in November
  

Quick Overview

• Japan's reduced its GDP growth estimate for 2007-2008 from 2.1% to 1.3%.
  
  
• Business confidence in Germany fell from 104.2 to 103.0 in December -- a two year low.
  

• MoM home foreclosure filings fell in November, a real estate data company reported on Wednesday.
  

• Bush signed legislation that requires auto makers to raise fuel efficiency by 40% to an industry average 35 miles per gallon by 2020. It also ramps up production of ethanol use to 36 billion gallons a year by 2022.
  
  

• The U.S. department of energy said that:
  Supplies of crude oil fell 7.6 million barrels to 296.9 million barrels.
  Supplies of gasoline rose 3.0 million barrels
  Supplies of heating oil fell 2.1 million barrels.
  Refinery use fell from 88.8% to 87.8%
  Gasoline demand rose 0.3% YoY
  Distillate demand rose 4.3%.
  
  

• Canada confirmed the discovery of that country's eleventh case of BSE Tuesday. The latest case involves a 13 year-old beef cow in Alberta.
  

• South Korea said it would eliminate import taxes on corn, wheat and soybeans to curb food inflation.
  

• Shangyu port is planning new terminals with total annual capacity of 10 million tons. Capacity of the new port will be 40 times larger than the present Shangyu facility, which can accommodate 3,000-tonne vessels and handle 245,000 tons of cargo a year, Xinhua reported.

Quick Overview

• U.S. housing starts fell 3.7% MoM, in 2007 housing starts are down 24% YoY.
  

• YoY consumer prices in Canada rose 2.5%.
  

• YoY U.K.'s consumer prices rose 2.1%

The Last Empire: Can the world survive China’s rush to emulate the American way of life?”.
“Per-capita income in China is less than 1/10 of America’s and its per-capita greenhouse gas emission is less than 1/5 of ours. But if 1.3 billion Chinese were to consume at the level Americans do, we’d need several more Earths. China’s effect on world resources, quantified:
China is:
• The world’s largest consumer of coal, grain, fertilizer, cell phones, refrigerators, and televisions
• The leading importer of iron ore, steel, copper, tin, zinc, aluminum, and nickel
• The top producer of coal, steel, cement, and 10 kinds of metal
• The No. 1 importer of illegally logged wood
• The third-largest producer of cars after Japan and the United States; by 2015, it could be the world’s largest car producer. By 2020, there could be 130 million cars on its roads, compared to 33 million now.
More Facts:
• China produces half of the world’s cameras, 1/3 of its television sets, and 1/3 of all the planet’s garbage.
• There are towns in China that make 60% of the world’s button supply, 1/2 of all silk neckties, and 1/2 of all fireworks.
• China uses half of the world’s steel and concrete and will probably construct half of the world’s new buildings over the next decade.
• Some Chinese factories can fit as many as 200,000 workers.
• China used 2.5 billion tons of coal in 2006, more than the next three highest-consuming nations—Russia, India, and the United States—combined.
• It has more than 2,000 coal-fired power plants and puts a new one into operation every 4 to 7 days.
• Between 2003 and 2006, worldwide coal consumption increased as much as it did in the 23 years before that. China was responsible for 90% of the increase.
• China became the world’s top carbon dioxide emitter in 2006, overtaking the United States.
• Russia is China’s largest timber supplier; half of all logging there is illegal. In Indonesia, another timber supplier to China, up to 80% of all logging takes place illegally.
• 90% of all wood products made in China are consumed in the country, including 45 billion pairs of wooden chopsticks each year.
• The value of China’s timber-product exports exceeds $17 billion. About 40 percent go to the United States.
• More than 3/4 of China’s forests have disappeared; 1/4 of the country’s land mass is now desert.
• Until recently, China was losing a Rhode Island-sized parcel of land to desertification each year.
• 80% of the Himalayan glaciers that feed Chinese rivers could melt by 2035.
• In 2005, China’s sulfur-dioxide emissions were nearly twice those of the United States.
• Acid rain caused by air pollution now affects 1/3 of China’s land.
• Each year, at least 400,000 Chinese die prematurely of air-pollution-linked respiratory illnesses or diseases.
• A quarter of a million people die becau! se of mo tor-vehicle traffic each year—6 times as many as in the United States, even though Americans have 18 times as many cars.
• Of the world’s 20 most polluted cities, 16 are in China.
• Half of China’s population—600 to 700 million people—drinks water contaminated with human and animal waste. A billion tons of untreated sewage is dumped into the Yangtze each year.
• 4/5 of China’s rivers are too polluted to support fish.
• The Mi Yun reservoir, Beijing’s last remaining reliable source of drinking water, has dropped more than 50 feet since 1993.
• Overuse of groundwater has caused land subsidence that cost Shanghai alone $12.9 billion in economic losses.
• Dust storms used to occur once a year. Now, they happen at least 20 times a year.
• Chinese dust storms can cause haziness and boost particulate matter in the United States, all the way over to Maine.
• In 2001, a huge Chinese storm dumped 50,000 metric tons of dust on the United States. That’s 2.5 times as much as what U.S. sources produce in a typical day.
• Currently, up to 36 percent of man-made mercury emissions settling on America originated in Asia.
• Particulate matter from Asia accounts for nearly half of California’s annual pollution limit.
• Environmental damage reportedly costs China 10 percent of its GDP. Pollution-related death and disability heath care costs alone are estimated at up to 4 percent of GDP.
• In 2005, there were 50,000 pollution-related disputes and protests in China.
• China’s middle class is expected to jump from 100 million people today to 700 million people by 2020.

Fed Taking on Abusive Lending Practices
The Fed is considering:
-barring lenders from penalizing subprime borrowers - those with spotty credit or low incomes - who pay their loans off early.
-forcing lenders to make sure that borrowers, especially subprime borrowers, set aside money to pay for taxes and insurance.
-restricting loans that do not require proof of a borrower's income.
-examining lenders' failure, in some cases, to consider a borrower's ability to repay a home loan.
-improving financial disclosure so people better understand the terms and conditions of their mortgages and get this information when it is most useful.
-curtailing abuses in mortgage advertising.

Quick Overview

• Support is growing on several fronts in Washington for mortgage-industry reforms and homeowner-assistance programs.
  

• Foreigners purchased $118.0 billion of U.S. securities in October while U.S. purchases of foreign securities amounted to $4.1 billion.
  

• The National Association of Home Builders sentiment index stayed at 19, the lowest since the index began in 1985.
  
  
  

• Manufacturing and services index in the Euro area fell from 54.1 to 53.3 in December
  
  

• Japan's tertiary index rose 1.1% in October
  
  

• China's third largest container port, Qingdao, handled more than nine million TEU during 2007, up 23 % YoY.
  

• The USDA said that last week's export inspections of:
  Corn totaled 46.6 million bushels, up 13% YoY.
  Soybeans totaled 35.6 million bushels, up 42% YoY.
  Wheat totaled 19.4 million bushels, up 63% YoY.
  
  

• The U.S. Senate's latest energy bill wants 36 billion gallons of renewable fuels to be used in U.S. vehicles by 2,022. Some 15 billion gallons of this are to come from corn. The rest is to come from other sources such as cellulose and sugar.
  

China, India to drive growth as credit crisis gains momentum
“For the first time, China and India are making the largest country-level contributions to world growth,” he said.
Emerging Asia is forecast to expand 9.2% this year and 8.3% in 2008; Africa is to grow 5.7% and 6.5%, and West Asia, supported by high oil prices and robust domestic demand, is projected to expand 5.9% in both 2007 and 2008.

World food price rises set to hit consumers
In Chicago wheat and rice prices for delivery in March 2008 have jumped to an all-time record, soyabean prices are at a 34-year high and corn prices at an 11-year peak.

Quick Overview

• U.S. consumer prices rose 0.8% in November and 4.3% YoY.
  

• U.S. industrial production rose 0.3% in November.
  

• U.S. Capacity utilization rose from 81.4% to 81.5%.
  

• YoY Consumer prices in the Euro area rose 3.1%
  

• Japan's Tankan survey, fell from +23 to +19 the lowest in two years.
  

• Industrial capacity in Canada fell from 83.5% to 82.7%.
  

• The U.S. Senate approved legislation that would more than quadruple the use of biofuels made from crops during the next 15 years.
  

• Orange juice rose on speculation frost may damage the crop in Florida.

China Orders Agencies to Boost Grain, Vegetable Oil Stockpiles
Authorities in 36 major urban regions must have emergency reserves equal to at least 10 days of consumption, the state- owned China National Grain and Oils Information Center said in an e-mailed report yesterday, citing a decree.

Waterboarding vs. Hammers vs. Genitals
..given our extraordinarily enormous and expensive military-industrial and intelligence establishment, the ultimate safety of our citizens and cities appears to come down to... what? Torture? Sorry, no. If the shopping list for preventing a terrorist attack is a wooden plank, a hanky and a jug of water, I want my goddamn money back.

Quick Overview

• U.S. Retail sales rose 1.2% in November, much stronger than expected. Excluding autos, sales were up 1.8% in November.
  

• Prices paid to U.S. producers rose 3.2% in November and up 7.2% YoY— the fastest pace in 34 years. Excluding food and energy, prices rose 0.4% in November.
  

• Canada’s manufacturing sales rose 0.1% in October
  

• New Zealand October retail sales fell 0.7%.
  

• Australia’s unemployment rate rose to 4.5% vs. 4.3% expected
  

• China’s November industrial production rose 17.3% vs. 18.0% expected
  
  

• Since cumulative wheat sales have reached an amazing 89.6% of the USDA forecast as compared to 66.7% on average, there is now talk, that stocks will at some point be wiped out and the US may be forced to curtail or embargo further sales.
  
  
  

• Japan will invest US$239.05 million in the Mombasa Port Development Project, thus doubling Kenya's capacity by 2018.
  
  
  

Soybeans to Lead Gains in Agriculture Next Year, Goldman Says
The New York-based bank raised its 12-month forecast for the crop by 61 percent to $14.50 a bushel from $9 a bushel. Wheat in Chicago may trade at $7.50 a bushel in a year compared with a previous forecast of $6, Goldman said. The bank raised its estimate for corn by 20 percent to $5.30 a bushel from $4.40.

From Santa to Scrooge The Fed’s quarter-point cut is followed by plans to ease money market tensions

Quick Overview

• The Fed announced coordinated measures with the Bank of Canada, European Central Bank, and Swiss National Bank to add liquidity to the markets.
  

• Australia December Consumer Confidence rose 1.8% vs. a drop of 4.2% in November.

• Japan’s wholesale prices rose 2.3% in November
  

• Japan October Current Account was +¥2565B (+¥2277B expected)
  

• YoY Indian industrial production rose 11.8% in October
  

• China November Retail Sales rose 18.8% YoY (18.0% expected)
  

• U.K.'s October unemployment rate improved to 5.3%, from 5.4% last month.
  
  

• The U.S. Department of Energy said that:
  Supplies of crude oil fell 700,000 barrels to 304.5 million barrels.
  Supplies of gasoline rose 1.6 million barrels
  Supplies of heating oil supplies fell 1.0 million barrels.
  Refinery use fell from 89.4% to 88.8% of capacity.
  Gasoline demand rose 0.4% YoY
  Distillate demand rose 4.3% YoY.
  
  
  

Quick Overview

• The Fed cut the fed funds rate from 4.50% to 4.25%, as expected.

• They also cut the discount rate by a quarter %.
  

• U.S. wholesale sales rose 0.7% in October.
  

• Australia November business confidence fell to 6 from 9.
  

• China November CPI rose 6.9% (6.5% expected).
  

• New Zealand November House Sales fell 21.6% YoY.
  

• China’s November Trade Surplus at 26.28B (26.55B expected).
  

• Japan November Consumer Confidence fell to 40.00 (43.0 expected).
  

• German investor confidence fell from -32.5 to -37.2 -- a 15 year low.
  

• The USDA's 2007-2008 U.S. ending stocks estimate for:
  Corn was reduced from 1.897 to 1.797 billion bushels.
  Soybeans were reduced from 210 to 185 million bushels.
  Wheat was reduced from 312 to 280 million bushels.
  Sugar was increased from 1.880 to 2.050 million tons.
  Cotton was increased from 7.60 to 7.70 million bales.
  

• The USDA's 2007-2008 world ending stocks estimate for:
  Corn was reduced from 110.4 to 109.1 million tons.
  Soybeans were reduced from 49.4 to 47.3 million tons.
  Wheat was increased from 109.8 to 110.1 million tons.
  Cotton was increased from 54.8 to 55.3 million bales.
  
  

• The USDA's estimates the Florida orange crop at 168 million boxes with a yield of 1.60 gallons per box.
  
  
  

Stonehenge: The Incredibly Simple Secret of How It Was Built
Wallington has discovered what he believes is the incredibly simple secret of how the ancients managed to build Stonehenge. He demonstrates in this video

Quick Overview

• The National Association of Realtors said the pending U.S. home sales index was up 0.6% in October but down 18.4% YoY.
  
  

• Japan’s machinery orders rose 12.7% in October, stronger than expected.
  

• YoY U.K.'s manufacturing prices rose 4.5% in November.
  

• Australia Home Loans for October fell 0.7%
  

• China's November PPI rose 4.6% YoY vs. 3.5% expected.
  

• China raised bank reserve requirement ratio by 1 %, the largest such move since 2003
  

• UBS announced it will write down $10 billion in US subprime investments.
  

• A trade group for real-estate agents said the battered housing market is on the verge of stabilizing and raised its outlook for 2007 and 2008 home sales.
  

• The current US ethanol capacity is 7.3 billion gallons a year. If the projected new capacity comes on line during 2008, capacity will rise to 13.5 billion gallons a year.
  

• The USDA increased its estimate of the 2007-2008 world coffee crop from 118.9 to 122.9

• Rongcheng’s cargo volume for foreign trade grew 78% YoY
  

Updates are delayed due to data problems.

Quick Overview

• U.S. Nov. unemployment rate out at 4.7%.
  

• US Nov. ICSC Chain Store Sales grew 3.5% YoY vs. 2.4% expected and 1.6% in Oct.
  

• Japan final Q3 GDP growth number adjusted down to 1.5% annualized vs. 2.6% expected
  

• Australia Nov. construction index fell to 53.2 from 57.4 MoM.
  

• Canada’s unemployment rate rose from 5.8% to 5.9%
  

• The International Sugar Organization said that India's sugar production will fall 20% in 2008-2009.
  

• (Bloomberg) -- …Less than 0.5 inch (1.3 centimeters) of rain will fall the next five days in Argentina before temperatures rise to as much as 10 degrees Fahrenheit above normal, increasing crop stress, said Drew Lerner, president of World Weather Inc. in Overland Park, Kansas. Dry weather will prevail into January when crops are reproducing and may spread into southern Brazil, he said.
  

• The CIA disclosed that it had made and destroyed videotapes of terrorism interrogations.
  
  

• The port of Guangzhou's cumulative throughput rose 41 % YoY to 8.4 million TEU.

Our star in pictures
The Japanese Hinode satellite has discovered a type of magnetic wave that ripples through the plasma of the sun’s atmosphere or “corona”. The waves may heat the corona to extreme temperatures by releasing energy as they travel outward from the sun along magnetic field lines. This could help explain the “corona problem” - the fact that the sun’s surface is only about 6,000 kelvin while the corona is at least 1 million kelvin

Quick Overview

• (Reuters) - Housing markets from Punta Gorda, Florida, to Stockton, California, will crash and suffer price drops of more than 30 percent before the housing crisis is over, a report from Moody's Economy.com said.
  
  
  

• U.S. Jobless claims fell 15,000 last week to 338,000.
  

• U.S. Treasury Secretary Paulson announced a plan to help roughly 1.2 million distressed homeowners avoid foreclosure.
  

• The Bank of England cut interest rates from 5.75% to 5.50%
  

• YoY GDP in Australia rose 4.3%.
  

• The European Central Bank kept its interest rate unchanged at 4.0%.
  

• Toll Brothers Inc reported a smaller-than-expected quarterly loss.
  

• Statistics Canada estimates Canada's 2007 wheat production at 20.05 million tons, down 21% YoY and down 587,000 tons from their September guess.
  

• Statistics Canada estimates 2007 corn production at 11.65 million tons, up 30% YoY.
  

• The U.S. Department of Energy said underground supplies of natural gas were down 88 billion cubic feet last week to 3.44 trillion cubic feet.
  

• YoY Oct. traffic at major US container ports fell 3.5%.
  

• The Reserve Bank of New Zealand left rates unchanged at 8.25%
  

• Japan Nov. preliminary Machine Tool Orders rose 13.0% YoY
  

• Switzerland Nov. Unemployment rate rose to 2.7%.
  
  
  

Cheap no more
Rising incomes in Asia and ethanol subsidies in America have put an end to a long era of falling food prices

China May Exhaust Existing Gold Mines in Six Years
Dec. 6 (Bloomberg) -- China, poised to overtake the U.S. as the second-biggest gold producer this year, must acquire more bullion assets overseas because existing mines will run out of ore in six years, Zijin Mining Group Co. said.

Shipping chief warns of ‘insane’ charter rates
One of the biggest operators in the booming dry bulk shipping market has warned that conditions where charter rates for ships have nearly tripled in a year, were “insane” and “unsustainable”.

Quick Overview

• The Institute of Supply Managements' index of services fell from 55.8 to 54.1 -- still recording growth.

• U.S. Productivity rose 6.3% -- the most since 2003
  

• US consumer confidence declined to 24 from 21 last week.
  

• U.S. factory orders rose 0.5% in October.
  

• U.S. non-farm productivity rose 2.7% -- better than estimated.
  

• U.S. Unit labor costs rose 3.0%.
  

• Australia left rates unchanged at 6.75% as expected
  

• Australia’s Nov. Services Index rose to 56.4 from 53.2.
  

• UK‘s Consumer confidence dropped to 86 vs. 94 expected
  

• QoQ Australia GDP rose 1.0%, YoY GDP rose 4.3% vs. 4.8% expected.
  

• The U.S. Department of Energy said that:
  Supplies of crude oil fell 8.0 million barrels to 305.2 million barrels
  Supplies of gasoline rose 4.0 million barrels.
  Supplies of heating oil supplies fell 1.1 million barrels.
  Refinery use unchanged at 89.4% of capacity.
  Gasoline demand rose 0.2%
  Distillate demand rose 5.9%.
  

Corn Jumps to Highest in Five Months on Demand for U.S. Exports
Current moderate La Nina weather conditions in the equatorial Pacific Ocean may lead to dry weather during South America's critical corn-pollination period in January, Widenor said. In three of the four moderate La Nina periods since 1950, Argentina's growing regions received as little as 25 percent of normal rainfall in January, he said.

Subprime Rate Five-Year Fix Eyed by U.S. Regulators, Lenders
About 100,000 subprime loans will jump from their discounted initial rates every month for the next two years, UBS AG estimates. American home foreclosures almost doubled in October from a year earlier as subprime borrowers failed to make higher payments on adjustable-rate mortgages,...
...These mortgages usually begin with a rate of between 7 percent to 9 percent and then reset to between 11 percent and 13 percent. ``What we are talking about is having these loans modified, so they continue for a longer period of time at the starter rate,'' ..

Quick Overview

• UK Nov. BRC retail sales monitor says retail sales rose 3.1% YoY, as discounting increased revenues.
  

• Australia Oct. retail sales rose 0.2% vs. 0.6% expected.
  

• The Bank of Canada reduced its benchmark rate from 4.50% to 4.25%
  
  

THE NIE REPORT: SOLVING A GEOPOLITICAL PROBLEM WITH IRAN
With this announcement, the dynamics of the Middle Eastern region, Iraq and U.S.-Iranian relations shift dramatically. For one thing, the probability of a unilateral strike against Iranian nuclear targets is gone. Since there is no Iranian nuclear weapons program, there is no rationale for a strike. Moreover, if Iran is not engaged in weapons production, then a broader air campaign designed to destabilize the Iranian regime has no foundation either.

Quick Overview

• U.S. Treasury’s Henry Paulson is confident an agreement will soon be reached that will help thousands of homeowners avoid mortgage defaults by temporarily holding their interest rates steady.
  

• Japan Q3 Capital Spending rose 3.4% YoY
  

• Australia's Oct. Trade Balance out at -2983M vs. -1800M expected.
  

• EU 13 unemployment fell to 7.2 % in October.
  

• The Institute for Supply Management’s manufacturing index fell to 50.8 in November -- the fifth straight monthly decline.
  

• The U.S. average price of diesel pushed past a record level for the third time in four weeks, rising 3.4 cents a gallon to $3.444.
  

• Gold demand in China, including the mainland, Hong Kong and Taiwan, rose 24 percent in the third quarter to 88.1 tons, the World Gold Council said.
  

• The U.S. national debt is expanding by about $1.4 billion a day -- or nearly $1 million a minute.
  
  

• Thailand’s economy grew 4.9% YoY.
  

• Manufacturing in the U.K. rose from 52.8 to 54.4 in November.
  

Sex, chocolate, meat top brain boosters
Plenty of sex, dark chocolate and cold meats are the latest keys to boosting your brain power, according to a new book published in Britain.

Bush Administration Offers Paul Wolfowitz Top State Department Job
Don't ever say the Bush administration doesn't take care of its own. Nearly three years after Paul Wolfowitz resigned as deputy Defense secretary and six months after his stormy departure as president of the World Bank—amid allegations that he improperly awarded a raise to his girlfriend—he's in line to return to public service. Secretary of State Condoleezza Rice has offered Wolfowitz, a prime architect of the Iraq War, a position as chairman of the International Security Advisory Board..

Banks may freeze subprime loan rates to avoid home foreclosures
The banks' plan recognizes that, absent a proactive move, many subprime ARMs could reset next year to 12 percent or more from current rates of 7 percent to 9 percent.
"I think there is a basic assumption here that there is money that is going to be lost one way or the other," said Wayne Abernathy, the executive director of financial institution policy at the American Bankers Association.

Guantanamo prisoners to ask Supreme Court for basic rights
Multiple Guantanamo Bay cases are being combined for an hour-long oral argument Wednesday morning. The justices must first decide whether some 340 foreign-born prisoners are protected by constitutional habeas corpus guarantees.
Habeas corpus, which in Latin means "produce the body," is a 13th century tenant of law enshrined in the U.S. Constitution. It enables prisoners to demand in federal court the legal justification and factual basis for their detention.