US stockmarket returns
Booms and busts Comparisons to the Depression are clear: only in 1931 and 1937 were there similarly abysmal losses

Quick Overview

• (Bloomberg) -- President-elect Barack Obama said he expects to inherit a $1 trillion budget deficit and that similar shortfalls are in store “for years to come”

• U.S. factory orders fell 4.6% in November, twice as much as forecast.

• U.S. pending U.S. home sales fell 4.0% in November, weaker than expected. The National Association of Realtors says this is the lowest level on record.

• The Institute of Supply Managements' index of services rose from 37.3 to 40.6

• An index of services in the U.K. rose from 40.1 to 40.2

• U.K. House prices fell by 15.9% last year.
  

• Inflation in the eurozone fell more than expected to 1.6% in December.

• (FT) The German government’s second fiscal stimulus could reach €50bn ($68bn, £47bn) over 2 years.

• Pakistani troops moving against Taliban guerrillas have intermittently blocked the one supply route through the Kyber Pass from Pakistan into Afghanistan.

• (WSJ) Russian gas supplies to a swathe of Europe were all but cut off as temperatures plummeted across the region, raising the stakes in a pricing dispute between Moscow and Ukraine.

• GM, Toyota and Ford all reported U.S. sales decline of more than 30% for December.

• Oil prices hit $50 a barrel amid escalating violence in the Middle East.

Quick Overview

• U.S. construction spending fell 0.6% MoM and 3.3% YoY.

• The N.Y. Fed said that it has begun buying fixed rate mortgage backed securities, as it previously announced it would do.

• (WSJ) Madoff's firm was examined at least eight times in 16 years by various agencies, which never came close to uncovering his alleged scheme.

• The Purchasing Managers' Index (PMI) of China's manufacturing sector climbed 2.4% MoM to 41.2% in December. A reading above 50% indicates expansion, while one below 50% indicates contraction.

• Construction activity index in the U.K. fell from 31.8 to 29.3 in December.

A special report on the sea
Troubled waters The evidence abounds. The fish that once seemed an inexhaustible source of food are now almost everywhere in decline: 90% of large predatory fish (the big ones such as tuna, swordfish and sharks) have gone, according to some scientists. In estuaries and coastal waters, 85% of the large whales have disappeared, and nearly 60% of the small ones. Many of the smaller fish are also in decline. Indeed, most familiar sea creatures, from albatrosses to walruses, from seals to oysters, have suffered huge losses.

Asia needs to fully wake up to the scale of the West's economic crisis
The defenders of this dead-end strategy are now coming up with astonishing proposals to put off the day of reckoning. Akio Mikuni, head of Japan's credit agency Mikuni, has called for a "Marshall Plan" to bail out America by cancelling $980bn of US Treasury bonds held by the Japanese state.

Quick Overview

• The Feds Yellen on Sunday urged "pulling out all the stops" by implementing a big fiscal stimulus program to turn around a possible long period of economic stagnation in the United States.
  

• The purchasing managers index published by China’s Federation of Logistics and Purchasing rose to 41.2 in December from the record low of 38.8 in November.
  

• The U.S. ISM index of manufacturing fell from 36.2 to 32.4 in December, the lowest level since 1980.
  
  

• Russia has shut off natural gas to Ukraine, saying that the country owes it $600 million for previous sales.
  

• Manufacturing activity in the Euro area fell from 35.6 to 33.9 in December,
  

• GDP in Singapore fell 2.6% YoY.
  

• Bloomberg reported that world’s largest iron ore consumer China may ask global iron ore majors to accept an 82% price cut for iron.
  

• According to SSY’s Australian Coal Port Congestion Index, average delays are now 9.93 days, the highest since June 2008. Congestion at Australia’s coal ports has contributed to the recent upward movement in freight rates.
  

• Japan’s factory output fell 8.1% in November -- the fastest pace in 55 years.

Happy Holidays!

(Updates resume Jan. 5)

Quick Overview

• Bush threw auto makers a $13.4 billion lifeline from the U.S. bank-bailout program.
  

• YoY Canada’s consumer prices rose 2.0% in November.
  

London Banker: “The market has failed, and officialdom is perpetuating that failure
The problem isn’t just money either, but how quickly the money is turned over.

Consumers Get Important New Credit Card Protections While praising the new protections, Consumers Union criticized the 18 month delay before consumers finally get relief.

Quick Overview

• U.S. jobless claims were down 21,000 to 554,000 last week
  

• The Philadelphia Federal Reserve's index of manufacturing improved from -39.3 to -32.9
  
  

• U.S. leading indicators fell 0.4% in November
  

• U.K. retail sales rose 0.3% MoM and 1.5% YoY
  

• (Bloomberg) -- The Bank of Japan cut its benchmark interest rate to 0.1 percent and introduced new ways of pumping money into the banking system to bolster the ailing economy.

• German business confidence (IFO) fell to its lowest level ever in December amid concerns of a prolonged recession.
  

• Canada’s retail sales fell 0.9% in October.
  Canada’s leading indicators fell 0.7% in November.
  

• (Bloomberg) -- General Electric Co.’s debt ratings outlook and those of its GE Capital finance arm were changed to negative from stable by Standard & Poor’s, reflecting concern earnings could deteriorate further than previously thought.
  

• Bush is looking at "orderly" bankruptcy as a way to deal with the U.S. auto industry.

South African central bank gold sales dry up .. Demby also pointed out that demand for gold coins and bullion now exceeded supply by a huge margin as investors were seeking a safe haven from the prospective fallout in the wake of mammoth money supply creation by the United States government.

Quick Overview

• U.K. unemployment rate was 6.0, up from 5.8% MoM.
  

• Construction output in the Euro area rose 0.1% in October, but down 4.0 YoY
• YoY Consumer prices in the Euro area rose 2.1%
  

• Canada wholesale sales fell 1.8% in October
  

• Norway cut its interest rate from 4.75% to 3.00%
  

• OPEC will be cutting oil production by 2.2 million barrels a day as of January 1.
  

• The U.S. Department of Energy said:
  Supplies of crude oil rose 500,000 barrels to 321.3 million barrels.
  Supplies of gasoline rose 1.3 million barrels
  Supplies of heating oil supplies rose 600,000 barrels.
  Refinery use dropped from 87.4% to 84.1% of capacity
  Gasoline demand fell 2.7%
  Distillate demand fell 4.5%.
  

• Russia's central bank allowed the ruble to slide for the second time this week, speeding up the gradual depreciation policy
  
  

• French antitrust authorities ruled that Apple must allow other operators other than France Telecom to sell its iPhone, saying the exclusive deal was unfair for competition.
  

• Morgan Stanley reported a wider-than-expected $2.2 billion quarterly loss.
  

Quick Overview

• The Fed cut the fed funds rate from 1.00% to .125%, and signaled they will keep rates "exceptionally low" for some time amid rapidly waning price pressures.
  


• U.S. housing starts were at a record (since 1959) low annual rate of 625,000 in November, down 18.9% MoM.
  Building permits fell 15.6% MoM.
  


• The U.S. consumer price index fell 1.7% in November rose 1.1% YoY
  


• YoY U.K. consumer prices rose 4.1% in November
  


• Manufacturing and services index in the Euro area fell from 38.9 to 38.3
  


• China’s November steel output fell by 12.4% YoY

Bush Shoe Tosser Signed By The Seattle Mariners SEATTLE, Washington - The Seattle Mariners who in 2008, had the worst record in the American League (61-101) have just signed Muntazer al-Zaidi to a three year, $3 million pitching contract.

Our Updated Take on Gold Prices
The last era of any significant period of deflation was in the 1930s. Although gold was fixed for a long time at $20.67 per ounce, in 1934 a massive devaluation of the U.S. dollar saw its fixed price jump to $35 per ounce. During this period of entrenched deflation, and in spite of the fixed price of the metal, gold proxies saw a dramatic rise in price. The NYSE-listed shares of Homestake Mining Company rose from about $4 to $500 from 1929 to 1935; the company operated for some 120 years until its flagship Homestake mine in Lead, S.D., ran out of economic reserves a few years ago and the company ceased to exist.

Quick Overview

• U.S. industrial production fell 0.6% in November and 5.5% YoY
  

• Japan's Tankan fell from -3 to -24
  

• China's industrial output rose 5.4% YoY
  China’s November iron ore imports rose 6% MoM
  

• The Supreme Court ruled that cigarette companies can be sued by smokers who claim they were deceived by advertisements promoting “light” cigarettes.
  

Madoff and the Global Economy
The big unanswered question, for years, was why this money flow persisted. Why the heck were foreign investors willing to lend the U.S. such large amounts of money on such good terms? Economists and journalists spun out hypothesis after hypothesis (we'll see more below), but there was no agreement on why.

At Last, A Date
Around 2020. That casts the issue in quite a different light. Mr Birol’s date, if correct, gives us about 11 years to prepare. If the Hirsch report is right, we have already missed the boat. Birol says we need a “global energy revolution” to avoid an oil crunch, including (disastrously for the environment) a massive global drive to exploit unconventional oils, such as the Canadian tar sands. But nothing on this scale has yet happened, and Hirsch suggests that even if it began today, the necessary investments and infrastructure changes could not be made in time. Fatih Birol told me “I think time is not on our side here.”

Shipping charter rates soar One of the world’s key shipping markets has begun to recover from a slump, with a revival in Chinese demand for iron ore and coal pushing some average charter prices up almost threefold in the past week.