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Thursday 10 December 2009

Gold falls from record, dips below $1,050


By Miho Yoshikawa

TOKYO (Reuters) - Gold fell to below $1,050 per ounce on Friday as the dollar edged up, snapping a rally that took prices to all-time highs for three consecutive days.

Spot gold hit a record high of $1,061.20 on Thursday as the dollar's weakness increased bullion's traditional appeal as a hedge against the U.S. currency.

The dollar rose on Friday, with comments from Reserve Chairman Ben Bernanke that indicated monetary policy might have to be tightened as a recovery takes hold, helping to pull the greenback off 14-month lows against a basket of currencies.

Apart from its strong inverse correlation with the dollar, fears of inflation have also fuelled gold's rise to historic levels this week.

"I think gold's uptrend remains intact," said Shuji Sugata, a manager at Mitsubishi Corp Futures & Securities' research team.

Technical analysts at Barclays Capital have also said their outlook on gold was bullish, with a push towards $1,120 now a possibility.

"There are new participants that are being attracted to the market now as it rises," Sugata said.

He said these new inflows of money could be seen in areas including gold-backed exchange-traded funds and physical buying

By Miho Yoshikawa

TOKYO (Reuters) - Gold fell to below $1,050 per ounce on Friday as the dollar edged up, snapping a rally that took prices to all-time highs for three consecutive days.

Spot gold hit a record high of $1,061.20 on Thursday as the dollar's weakness increased bullion's traditional appeal as a hedge against the U.S. currency.

The dollar rose on Friday, with comments from Reserve Chairman Ben Bernanke that indicated monetary policy might have to be tightened as a recovery takes hold, helping to pull the greenback off 14-month lows against a basket of currencies.

Apart from its strong inverse correlation with the dollar, fears of inflation have also fuelled gold's rise to historic levels this week.

"I think gold's uptrend remains intact," said Shuji Sugata, a manager at Mitsubishi Corp Futures & Securities' research team.

Technical analysts at Barclays Capital have also said their outlook on gold was bullish, with a push towards $1,120 now a possibility.

"There are new participants that are being attracted to the market now as it rises," Sugata said.

He said these new inflows of money could be seen in areas including gold-backed exchange-traded funds and physical buying



Sunday 6 December 2009

Palace says it will no longer ‘tolerate’ intrusion by paparazzi




The Queen has issued a blunt warning that the Royal Family stands ready to take legal action against harassment and intrusion by paparazzi.

After years of what one aide yesterday called “a growing feeling of frustration” over repeated breaches of privacy, lawyers operating for the Queen have reminded newspapers of their obligations under the industry’s own code of practice.

Photographers will be closely monitored around the Sandringham estate in Norfolk, where the Queen and members of her family will gather for Christmas.

The use of telephoto lenses by paparazzi — who sometimes conceal themselves in the undergrowth or wear camouflage to snatch pictures from public roads near the estate — “will not be tolerated”, according to the aide.
Last Christmas there were a number of incidents, including publication of images allegedly showing the Earl of Wessex beating two gun dogs with a walking stick at Sandringham.

Prince William is also understood to have been dismayed that a shooting party with friends was spoilt by photographers “hiding in bushes”. Some members of the Royal Family blame the paparazzi for the death of his mother, Diana, Princess of Wales, in a car crash 12 years ago.

William has taken a keen interest in whether privacy laws have been broken by those following Kate Middleton, his girlfriend, over recent years. He came close to taking legal action when he and Ms Middleton were pursued by the paparazzi after leaving a nightclub.

Disclosure yesterday of the tougher approach towards intrusive photography renewed speculation that they might be planning to get engaged over Christmas. The bookmaker William Hill halved the price on such a prospect from 12-1 to 6-1. The palace, however, is playing down talk of an engagement and says it reflects long-standing concerns.

“We wrote to newspapers with a private letter two and a half months ago and you will have to ask The Sunday Telegraph [which run the story on its front page yesterday] why this is news right now,” said a senior official.

Paddy Harverson, the Prince of Wales’s communications secretary, was quoted by the newspaper saying: “Members of the Royal Family feel they have a right to privacy when they are going about everyday, private activities. They recognise there is a public interest in them and what they do, but they do not think this extends to photographing the private activities of them and their friends.”

The Republic Campaign, which calls for the monarchy to be replaced with an elected head of state, said the Royal Family must be open to scrutiny. “While everyone has a right to a level of privacy, the Queen cannot expect the media to dance to her tune,” said Graham Smith. “If people who claim a God-given right to head our nation are falling out of nightclubs, clearly there is a public interest.”



Obama’s Sunday on Capitol Hill


A Call for Making ‘History’ | 5:13 p.m. President Obama exhorted Senate Democrats on Sunday to put aside their fierce policy differences and to make history by passing landmark health care legislation, according to The Times article now posted on our Web site.

Original Post | 2:35 p.m. President Obama arrived on Capitol Hill shortly after 2 p.m. Sunday for his meeting with Senate Democrats.

Mr. Obama offered a “Hey, guys, good to see you” greeting to the Capitol press corps but otherwise did not say anything as he walked briskly into the Mansfield Room, where Democrats hold their weekly party luncheon.

The Sunday session is unusual. Democrats remain divided over some important issues in the health care bill, and Mr. Obama was expected to urge them to band together to finish the legislation.




Climate change protesters take to London streets


Thousands of people marched through central London on Saturday calling for a deal on climate change at next week's conference in Copenhagen.

Organizers of the Stop Climate Chaos Coalition had originally estimated that more than 10,000 people would participate in the event that began at Grosvenor Square and made its way to the Houses of Parliament on the River Thames.

But London's Metropolitan Police said there were about 20,000 people at the march.

"We wanted to make a positive statement," retired teacher Pip Cartwright, 72, from Witney, Oxfordshire said. "It's for the future. It's not my generation that's going to have the problem to solve."

The coalition — which includes groups such as Oxfam, Greenpeace, Friends of the Earth and the World Wildlife Federation — called the protest "The Wave," and organizers asked marchers to dress in blue.

The first stop for many in the march was the headquarters of BP, the large British-based oil company, because of its relationship with Alberta's tarsands project.


"We have to leave the tarsands oil in the ground," said one of the speakers.

The march was to climax with a mass "wave" around Parliament. Other "Wave" events were being held in Glasgow, Belfast, and Dublin. Similar demonstrations took place in Brussels and Berlin.

"The U.K. government must fight for a comprehensive, fair and binding deal at Copenhagen. That is our demand today and we expect it to be fulfilled," Oxfam GB chief executive Barbara Stocking said in a statement.

"They must return home with a strong, effective climate deal both for our own sakes in the U.K. and for the millions of poor people already suffering from the effects of climate change around the world," she said.
Data from 1,000 weather stations to be released

Also on Saturday, Britain's Met Office said it would publish some of the data it uses to analyze climate change, after thousands of pieces of correspondence between some of the world's leading climate scientists were stolen from the University of East Anglia and leaked to the internet.

Skeptics of man-made global warming have said the mails prove that scientists have been conspiring to hide evidence about climate change.

On Friday, the chairman of the Intergovernmental Panel on Climate Change, Rajendra Pachauri, said the issue raised by the emails was serious and would be looked at in detail.

Met Office spokesman Barry Gromett said data from 1,000 weather stations around the world, covering 150 years, will be released early next week. The office has written to 188 countries to ask for permission to release more data from a further 4,000 stations.

Ahead of the march through central London, Archbishop of Canterbury Rowan Williams offered prayers for negotiators in Copenhagen and urged people not to listen to those who say there's a choice between "looking after human beings and looking after the Earth."

"If we make ourselves a bit less comfortable, if we draw back from a little bit of our space and liberty so that others may have the space and comfort they need for life, thank God," Williams said.

A second group of climate campaigners was planning an action for later Saturday.

Richard Bernard, a spokesman for Camp for Climate Action, said protesters planned to pitch tents somewhere in central London to spotlight the talks in Copenhagen.

He said his group intended to march with the main protest, and then head off to their so-far secret site in London.

The Post-Imperial Presidency


Even as Obama increases troop levels, he is scaling back American foreign policy.
If you take just one sentence out, Barack Obama's speech on Afghanistan last week was all about focusing and limiting the scope of America's mission in that country. His goal, he said, was "narrowly defined." The objectives he detailed were exclusively military—to deny Al Qaeda a safe haven, reverse the Taliban's momentum, and strengthen the Kabul government's security forces. He said almost nothing about broader goals like spreading democracy, protecting human rights, or assisting in women's education. The nation that he was interested in building, he explained, was America.
And then there was that one line: "I have determined that it is in our vital national interest to send 30,000 U.S. troops to Afghanistan." Here lies the tension in Barack Obama's policy. He wants a clearer, more discriminating foreign policy, one that pares down the vast commitments and open-ended interventions of the Bush era, perhaps one that is more disciplined even than Bill Clinton's approach to the world. (On the campaign trail, Obama repeatedly invoked George H.W. Bush as the president whose foreign policy he admired most.) But America is in the midst of a war that is not going well, and scaling back now would look like cutting and running. Obama is searching for a post-imperial policy in the midst of an imperial crisis. The qualified surge—send in troops to regain the momentum but then draw down—is his answer to this dilemma. This is an understandable compromise, and it could well work, but it pushes off a final decision about Afghanistan until the troop surge can improve the situation on the ground. Eighteen months from now, Obama will have to answer the core question: is a stable and well-functioning Afghanistan worth a large and continuing American ground presence, or can American interests be secured at much lower cost?

This first year of his presidency has been a window into Barack Obama's world view. Most presidents, once they get hold of the bully pulpit, cannot resist the temptation to become Winston Churchill. They gravitate to grand rhetoric about freedom and tyranny, and embrace the moral drama of their role as leaders of the free world. Even the elder Bush, a pragmatist if there ever was one, lapsed into dreamy language about "a new world order" once he stood in front of the United Nations. Not Obama. He has been cool and calculating, whether dealing with Russia, Iran, Iraq, or Afghanistan. A great orator, he has, in this arena, kept his eloquence in check. Obama is a realist, by temperament, learning, and instinct. More than any president since Richard Nixon, he has focused on defining American interests carefully, providing the resources to achieve them, and keeping his eyes on the prize.

In 1943 the columnist Walter Lippmann defined foreign policy as "bringing into balance, with a comfortable surplus of power in reserve, the nation's commitments and the nation's power." Only then could the United States achieve strategic stability abroad and domestic support at home. Consciously or not, President Obama was channeling Lippmann when he said, "As president I refuse to set goals that go beyond our responsibility, our means, or our interests." In his speech he quoted only one person, a president of the opposite party, Dwight Eisenhower, who said of national-security challenges, "Each proposal must be weighed in the light of a broader consideration: the need to maintain balance in and among national programs." Obama added that "over the past several years, we have lost that balance." He is hoping to restore some equilibrium to American foreign policy.

"In the end," said the president last week, "our security and leadership does not come solely from the strength of our arms." He explained that America's economic and technological vigor underpinned its ability to play a world role. At a small lunch with a group of columnists (myself included) last week, he made clear that he did not want to run two wars. He seemed to be implying that these struggles—Iraq and Afghanistan—were not the crucial path to America's long-term security. He explained that challenges at home—economic growth, technological innovation, education reform—were at the heart of maintaining America's status as a superpower.

It is now clear that Obama is attempting something quite ambitious—to reorient American foreign policy to-ward something less extravagant and adversarial. That begins with narrowing the war on terror; scaling back the conflict with the Islamic world to those groups and countries that pose serious, direct threats to America; and reaching out to the rest. He has also tried to develop a better working relationship between America and other major powers like Russia and China, setting aside smaller issues in hopes of cooperating on bigger ones. This means departing from a bipartisan approach in which Washington's role was to direct the rest of the world, pushing regimes large and small to accept American ideas, and publicly chastising them when they refused. Obama is trying to break the dynamic that says that when an American president negotiates with the Chinese or Russians, he must return with rewards or concessions—or else he is guilty of appeasement.

And then there is that line. It might seem hard to reconcile a more targeted and focused foreign policy with the expansion of a war and the introduction of 30,000 troops. But it is not unprecedented. When Richard Nixon and Henry Kissinger entered the White House in 1969, they inherited a war in Vietnam that they might have believed in at some theoretical level, but that they recognized was bleeding the country. Over their years in office, they focused on shoring up America's power position through diplomacy with the Soviet Union, China, Egypt, and Israel. But they also recognized that they had to deal with the crisis in Vietnam and said explicitly that they were going to try to scale back America's involvement there. In this they succeeded. By April 1969, soon after Nixon took office, there were 543,000 American troops in Vietnam. At the end of his first term, there were fewer than 20,000 left. But in between, in order to keep the enemy on the defensive, to gain momentum, and to create space for American troops to leave, Nixon and Kissinger ordered a series of offensive military maneuvers that were designed to hit the North Vietnamese hard. Surge and then draw down, you might say.

Although the Viet Cong were beaten back temporarily, ultimately the North took over the South in 1975. But it is instructive to think about why. First, our local ally lacked legitimacy and competence. The government of South Vietnam was simply unable to gain the confidence of its people, and the Viet Cong and its Northern allies were able to persuade or intimidate tens of thousands of Vietnamese to shift to their side. Second, the enemy had safe havens outside South Vietnam—mainly in North Vietnam and Cambodia—which provided them escape routes and supply chains. More significant, the insurgents had the active support of the other superpower, the Soviet Union, as well as some aid from China. Finally, the United States cut off all assistance to South Vietnam, abandoning a country it had lost 59,000 troops defending.



Tuesday 10 November 2009

Gold rallies to fresh record, stocks up



NEW YORK (Reuters) - Gold climbed to a record on Thursday as the dollar struggled, while U.S. stocks settled higher after Alcoa (AA.N) began the third-quarter earnings season with an unexpected profit.

Major U.S. equity indexes rose nearly 1 percent, led by Alcoa, a day after the Dow component and the largest American aluminum producer posted its first profit after a string of quarterly losses. Alcoa cited improving metal prices and cost savings as the main reasons for its profitable quarter.

Alcoa is the first major company to release earnings in the U.S. third-quarter reporting season.

Its profit surprise also played a factor in world equity markets on Thursday, as investors have been scouring for signs of any fundamental improvement in organic growth. The MSCI world equity index .MIWO00000PUS rose 1.32 percent to 1,137.84, near the year's high of 1,150.42.

For their part, the Dow Jones industrial average .DJI was up 61.29 points, or 0.63 percent, at 9,786.87, while the Standard & Poor's 500 Index .SPX was up 7.90 points, or 0.75 percent, at 1,065.48. The Nasdaq Composite Index .IXIC was up 13.60 points, or 0.64 percent, at 2,123.93.

But gold stole the spotlight again.

The yellow metal topped $1,060 per ounce to mark a record high for the third session in a row, versus its late New York Wednesday quote of $1,043.70. It closed the day at $1,055.45.

The move in spot bullion has primarily been driven higher by the weakening dollar, which makes the dollar-denominated metal more attractive to investors.

In some currencies -- the high-flying Australian dollar, for example -- gold has actually fallen in price this year.

"Investors are turning toward gold as a hedge in dollar weakness," said Adrian Koh, an analyst at Phillip Futures in Singapore.

The dollar was down against a basket of major trading-partner currencies, with the U.S. dollar index down 0.69 percent at 75.966, a 14-month low and below a previous session close of 76.494.

The currency has been hit by a combination of expectations that U.S. interest rates will stay low for some time and a belief that the global economy is on the mend, easing the motivation behind last year's flight to dollar safety.

The euro was up 0.63 percent at $1.4778 from a previous session close of $1.4685, while against the Japanese yen, the dollar was down 0.15 percent at 88.45 from a previous session close of 88.580.

The Australian dollar jumped 1.7 percent to US$0.9063, still benefiting from this week's rate hike. It has now gained nearly 28 percent against the U.S. dollar this year.






Sunday 8 November 2009

United Commercial Bank is shut down, sold to East West BancorpThis creates by far the largest U.S. bank focused on the Chinese American market and the largest bank based in Southern California. United Commercial was the 120th bank to fail in the U.S. this year.This creates by far the largest U.S. bank focused on the Chinese American market and the largest bank based in Southern California. United Commercial was the 120th bank to fail in the U.S. this year.


This creates by far the largest U.S. bank focused on the Chinese American market and the largest bank based in Southern California. United Commercial was the 120th bank to fail in the U.S. this year.

Toppled by loan losses and misstated financial reports, San Francisco's United Commercial Bank was shut down by regulators Friday night and immediately sold to Pasadena's East West Bancorp, creating by far the largest U.S. bank focused on the Chinese American market.

The combination also will be the largest bank based in Southern California, surpassing City National Bancorp.

East West agreed to assume all of United Commercial's deposits, so no depositors will lose money, the Federal Deposit Insurance Corp. said. The bank's 63 U.S. branches, including 17 in Southern California, will reopen Saturday as branches of East West Bank.

United Commercial, a unit of UCBH Holdings Inc., was the fourth-largest bank to fail this year. That position was formerly occupied by California National Bank of Los Angeles, which failed last week and was acquired by U.S. Bancorp of Minneapolis.

Regulators also seized on Friday one bank each in Georgia, Michigan, Minnesota and Missouri, bringing to 120 the number of failures this year.

United Commercial's collapse may cause a greater-than-usual stir because a year ago the federal government invested $299 million in bailout funds in the bank in exchange for preferred stock, which was made worthless by the failure.

In addition, the FDIC said the collapse would cost the federal deposit insurance fund an estimated $1.4 billion.

East West raised $500 million in new capital to support the takeover, most of it from mutual funds and other existing shareholders, said Dominic Ng, chairman of the Pasadena-based lender.

The privately placed stock sales will enable East West to proceed slowly as it integrates the two banks, then have plenty of capital later next year to consider additional expansion by adding branches or making more acquisitions.

The takeover will greatly expand the reach of East West, which has concentrated on Southern California and the San Francisco Bay Area. In addition to 69 California offices, East West has full-service branches in Houston and Hong Kong.

United Commercial not only has dozens of branches in California but also has locations in key Chinese American areas, including New York, Boston, Seattle, Atlanta and Houston.

What's more, because of its 2007 acquisition of a Shanghai bank, United Commercial also has a banking license in China -- a "rare and hard-to-come-by" asset that makes it easier to operate and expand in that country, , said RBC Capital Markets analyst Joe Morford. It has full-service offices in Shanghai, Hong Kong and Shantou, China.

United Commercial, East West and Cathay General Bancorp of Los Angeles have vied for years to become the largest of the banks focused on the Chinese American market.

East West, which had $12.5 billion in assets at last report, agreed to acquire $10.2 billion of United Commercial's $11.2 billion in assets. That would put the combined bank, at almost $23 billion in assets, ahead of L.A.-based City National as the largest bank based in Southern California. At last report, City National had $18.4 billion in assets.

The FDIC agreed to absorb most of the expected losses on about $7.7 billion of the United Commercial assets acquired by East West.

Like its Chinese American rivals, United Commercial was burned by commercial lending losses, especially loans to developers and home builders during the housing boom. But it also was tainted by a financial scandal that resulted in a shake-up of its top management.

UCBH announced in September that its financial reports could not be trusted because of the "deliberate and improper actions and omissions of certain bank officers," who had understated losses in "an apparent desire to downplay deteriorating financial conditions."

The company's longtime chief executive, Thomas S. Wu, resigned in September, along with its chief operating officer.

Ng said he believed his new customers would happily accept a takeover by another California-based Chinese American bank rather than an institution "from somewhere else -- New York, or a foreign bank."

Ng said he anticipated only a few branch closures. Some back-office employees will be let go, he said.
 

US jobless rate rises to over 10%



The unemployment rate in the US rose to 10.2% in October, which was its highest rate since April 1983, according to figures from the US Labor Department.
It rose from September's figure of 9.8%. The economy lost 190,000 jobs in the month.
Since the recession began in December 2007, the number of unemployed has risen by 8.2 million, while the jobless rate has risen from 4.9%.
President Barack Obama described the rise in unemployment as "sobering".
"I will not rest until all Americans who want work can find work," he added.
He also said he would be signing legislation to extend unemployment benefit, cut taxes for businesses and extend tax credits for home buyers.



Analysts were also downbeat after the worse-than-expected figures.
"It's pretty disappointing overall," said Richard Franulovich at Westpac.
"Job losses are not moderating as quickly as I had hoped despite those earlier indicators on jobs."
Dollar falls
The figures were particularly poor given Thursday's news of a fall in initial weekly jobless claims and the data earlier in the week that showed the US economy had grown by 3.5% between July and September.
The number of unemployed people rose by 558,000 to 15.7 million.
But there was some better news with the revision of September's figure from a loss of 263,000 jobs to a loss of 219,000 jobs.
The dollar fell against both the euro and the yen following the release of the figures.
Long-term unemployed
The sectors contributing the largest numbers of job losses in October were construction, manufacturing and retail.
It was the 22nd month in a row that the US economy had shed jobs, which is the longest run since records began 70 years ago.
There is concern that rising unemployment could scupper the recovery by restricting consumer spending, which accounts for 70% of the economy.
The number of people who had been out of work for at least six months rose to a record 5.6 million, accounting for 35.6% of the jobless total.

Berlin all fired up for wall-to-wall partying


THE elderly lady with her shopping bag stood and stared at the armed policeman politely but firmly preventing her from crossing the 8ft-high barrier built across the street. “It’s like having the Wall back,” she said tetchily. But with a smile.
The policeman smiled back. Stretching away on either side, a chain of 1,000 wall-like slabs daubed with graffiti form a new 1.2-mile barrier from the Brandenburg Gate to Potsdamer Platz — now once again one of Europe’s busiest intersections.


Tomorrow night, at the climax of the biggest official party seen in Europe, with Angela Merkel, the German chancellor, hosting Gordon Brown, Hillary Clinton, the US secretary of state, Nicolas Sarkozy, the French president, and Dmitry Medvedev, the Russian president — to name but a few — the slabs will crash into one another like dominos, representing the chain of events that 20 years ago brought the cold war to an end.
The first “domino” will be pushed over, fittingly enough, by Lech Walesa and Miklos Nemeth, the veteran Polish and Hungarian anti-communist campaigners. They will be joined by two other main actors in the drama of 1989: the former Soviet president Mikhail Gorbachev and Hans-Dietrich Genscher, the then West German foreign minister.
The officially organised street party is costing £4.6m and kicks off with a Daniel Barenboim-led concert at the Brandenburg Gate, followed by Bon Jovi performing their single We Weren’t Born to Follow and an extravagant firework display as the thousand dominos fall.
All of Germany is celebrating what the newspaper Die Welt yesterday called “the unexpected joy” that hit the country on a cold night in November 1989 when popular unrest, democracy protests, and a series of misjudged measures and misunderstandings caused the Berlin Wall to fall.
In today’s difficult climate, nobody is claiming reunification came without economic pain, but with Germany having already climbed out of recession, one newspaper editorial could claim yesterday that “if we are not the happiest nation on earth, at least we are a happy nation”.
On that wintry, chaotic, euphoric November night 20 years ago, I met up on West Berlin’s showy Kurfürstendamm with Kerstin and Andreas, two friends from East Berlin who had escaped only weeks before on one of the sealed trains that brought asylum seekers from West Germany’s embassy in Warsaw through to the West.
On a night of tears, joy, fireworks, inebriation and incredulity — a far more spontaneous celebration than anything taking place tomorrow — Kerstin was reunited with the family she had left in the East and expected never to see again.
Karin, another East German friend, reluctantly trained as an engineer by the communist regime, was expelled from East Germany shortly before the Wall fell — her brother had spent months in prison as a failed escaper — and now runs a thriving business. She has moved to a leafy suburb so far west in West Berlin that, back then, it was in East Germany.
We walked along the banks of the Spree, past the Berliner Ensemble, Bertolt Brecht’s theatre, and Ganymed, old East Berlin’s stuffy, showcase restaurant. Twenty years ago the path ended a few yards along in darkness, concrete and barbed wire across the river.
Today the same riverbank leads to the restored Reichstag, again the seat of parliament, and is lined with restaurants. Instead of patrol boats with machineguns and searchlights, the Spree is home to river cruisers with beer and champagne bars. Potsdamer Platz, near the site of Hitler’s buried bunker, has been transformed from a no man’s land of wall and watchtowers into a bustling, 21st-century streetscape.
Berlin today has seized with both hands its role at the heart of an expanded Europe, symbolised by the vast new Central station, with high-speed trains on three levels hurtling east and west. Workers from western Poland returning from Britain fly to Berlin and catch the Intercity-Express to Poznan.
As the Cafe Varna, not far from the Brandenburg Gate testifies, there are now — thanks to European Union expansion — more Bulgarians, Czechs, Slovaks and Hungarians working in Berlin than there were when they were “fraternal allies” in the Warsaw Pact. More Russians too, if one does not count the 380,000 departed troops.
As part of the celebrations, an exhibition in the city centre is showcasing the Art of Socialist Realism, a collection of Stalinist-style paintings of happy children scattering grain to chickens, or Lenin addressing adoring workers. Nostalgia is a funny thing.
On Ebertstrasse, named after the first president of the pre-war Weimar Republic — save for a brief spell as HermannGöring-Strasse — Japanese tourists queue to be photographed astride the brick line in the pavement that shows where the Wall once ran.
Ironically, it is once glitzy western Berlin that now looks the shabbier part of the city, with the Ku’damm (as the Kurfürstendamm is known) in search of regeneration money.
A few statistics alone illustrate some of the superficial social changes in the old East. The number of cars has almost doubled from 3.9m to 7.5m, while — partly thanks to mobile phones — the number of telephones has soared from 49 per 100 households to 243.
The child mortality rate has fallen by two-thirds, life expectancy has risen from 69.8 years for men and 76.8 for women to 76.1 and 82.2 respectively, and although the number of hospitals has fallen from 392 to 254, they are far better equipped.
But the west’s longer established infrastructure still beckons: the population of the old East Germany has dropped from just under 17m to just over 14m, while that of the former West Germany has risen from 61.7m to 67.5m.
For those of us who lived in the East in the years before the Wall came down and were there to see it crumble, the emotion of the anniversary is still best summed up in the words spoken at the reunification ceremony in 1990 by Lothar de Maizière, East Germany’s last prime minister: “It is an hour of great joy, It is the end of some illusions. It is a farewell without tears.”
Inevitably, there is a new joke doing the rounds: East Berlin and West Berlin used to be fractious siamese twins, one dowdy, prudish and hypocritical, the other stylish, spendthrift and sluttish. Through the miracle of modern science they have been united, and what do you get? Angela Merkel.
Peter Millar’s book 1989 The Berlin Wall (My Part in Its Downfall) is published by Arcadia Books, £11.99.
History’s back from the dead, Bryan Appleyard, News Review, page 6

Texan police officer Kim Munley who shot Fort Hood gunman hailed as a heroine


A police officer who intervened to stop a shooting spree at America's biggest military base was hailed today a heroine as she received treatment for the wounds received in a shoot-out with the gunman.
Major Nidal Hasan, an army psychiatrist due to be posted to Afghanistan, shot dead 13 people and wounded 30 others after opening fire with two handguns at Fort Hood yesterday afternoon.
But the death toll from the rampage could have been far worse had it not been for the actions of Sergeant Kimberly Munley, a civilian police officer stationed at the base who was the first on the scene as Major Hasan picked off his victims.
Sergeant Munley managed to hit Major Hasan four times but was herself hit by a bullet that passed through both her legs, according to witnesses.



Colonel John Rossi, briefing reporters at Fort Hood this morning, said that Major Hasan's victims, who were killed in a part of the base used to process soldiers for deployment to Iraq and Afghanistan, had all been unarmed. Sergeant Munley had been the first armed person on the scene and had immediately taken him on.
"Her efforts were superb," he said.
The base commander, Lieutenant-General Bob Cone, also paid tribute: “She happened to encounter the gunman. In an exchange of gunfire, she was wounded but managed to wound him four times,” he said.
“It was an amazing and aggressive performance by this police officer.”
Colonel Steven Braverman, commander of the base hospital and Major Hasan's supervisor, said that Sergeant Munley was in a stable condition in a nearby community hospital.
She is likely to return home to a hero's welcome, although her Twitter page – which features a picture of her with the country music star Dierks Bentley at the Fort Hood "Freedom Fest" on July 4 – suggests she is not the type to have her head turned.
Her Twitter biography reads: "I live a good life ... a hard one, but I go to sleep peacefully @ night knowing that I may have made a difference in someone's life."


It emerged today that Major Hasan, a Muslim who had argued with his comrades against the wars in Iraq and Afghanistan and had been trying to get out of the Army, shouted "Allahu akbar" – Arabic for "God is great" – as he launched the attack.

Fort Hood shooting: President Barack Obama will travel to Texas for Fort Hood memorial service


The mass shooting by Army psychiatrist Major Nidal Malik Hasan on Thursday, left 13 dead and 38 wounded at America's largest military base.
A memorial service has been scheduled for Tuesday. The White House said Mr Obama and Michelle Obama, the First Lady, would be there. Mr Obama is due to leave the following day for a 10-day tour of Asia.


Earlier, he said the response to the tragedy had displayed "the best of America." He said: "Thursday's shooting was one of the most devastating ever committed on an American military base and yet, even as we saw the worst of human nature on full display, we also saw the best of America."

Mr Obama said he had met with FBI director Robert Mueller and Defense Secretary Robert Gates to be briefed on the investigation into the crime.
Hasan, 39, a specialist in combat stress, went on the rampage as he was about to be deployed to Afghanistan against his wishes.
Mr Obama said it might prove impossible to understand what the motive was.
He said: "We cannot fully know what leads a man to do such a thing. What we do know is that our thoughts are with every single one of the men and women who were injured at Fort Hood.
"Our thoughts are with all the families who've lost a loved one in this national tragedy.
"And our thoughts are with all the Americans who wear, or who have worn, the proud uniform of the United States of America.
"They are Americans of every race, faith and station. They are Christians and Muslims, Jews and Hindus and nonbelievers. They reflect the diversity that makes this America. But what they share is a patriotism like no other." Mr Obama praised the reaction of soldiers and civilians to the initial shootings at Fort Hood.
He said: "We saw soldiers and civilians alike rushing to aid fallen comrades, tearing off bullet-riddled clothes to treat the injured, using blouses as tourniquets, taking down the shooter even as they bore wounds themselves.
"We saw soldiers bringing to bear on our own soil the skills they had been trained to use abroad."

Sunday 1 November 2009

UPDATE: US Stocks Close Sharply Lower; DJIA Ends Month Flat

By Donna Kardos Yesalavich
Of DOW JONES NEWSWIRES


NEW YORK (Dow Jones)--U.S. stocks tumbled Friday, with Bank of America, JPMorgan Chase and Alcoa leading the Dow Jones Industrial Average's components lower as investors again grew concerned about the economy after the short-lived excitement over Thursday's good report on gross domestic product.

The Dow Friday posted its biggest one-day point drop since April 20, and ended October just 0.45 point above where it began. Other major measures, including the Standard & Poor's 500 and the Nasdaq Composite, ended the month in the red, marking their first monthly declines since February.

The Dow closed down 249.85 points, or 2.51%, at 9712.73, marking its 10th triple-digit movement this month. Five of them were down and five up, reflecting how volatile the market has gotten as investors try to get a handle on whether the 48% surge in the Dow since March can be justified by economic fundamentals. For the week, the Dow fell 259.45 points, or 2.6%, marking its second consecutive week in the red.



Among the Dow's big movers Friday, Bank of America tumbled 1.15, or 7.3%, to 14.58, while JPMorgan slid 2.58, or 5.8%, to 41.77, and Alcoa dropped 58 cents, or 4.5%, to 12.42.

Across other measures, the Nasdaq Composite fell 52.44, or 2.50%, to 2045.11. It was down 5.08% for the week, and 3.65% for the month.

The Standard & Poor's 500 dropped 29.93, or 2.81%, to 1036.18. For the week, it dropped 4.02%; it was down 1.98% for the month.

Friday's declines come as the latest measure of consumer spending came in weak, reflecting the biggest drop since December 2008, although it was in line with economists' expectations.

Still, investors are growing hungry for economic data to start showing improvement and strength, rather than simply being above or in line with expectations. In addition, they are starting to wonder how much of the economic growth that was reported Thursday would have been there if it weren't for all the government support through such programs as the "cash for clunkers" funding for automobile purchases.

Nonetheless, some market participants said Friday's decline was typical of a market in recovery, and therefore no major cause for concern.

"It's not unprecedented after having such a strong rally," said Mary Ann Bartels, head of U.S. technical and market analysis at Bank of America Merrill Lynch. "Markets need to consolidate in order to achieve new recovery highs, and a correction will broaden out the base-building process we've been in since last year," giving stocks more support for a move higher, she said.

Life insurers fell in an exaggeration of the declines across the market, as the sector is exposed to equities through its variable-annuity guarantees and other equity-linked retirement-income products. MetLife was among the decliners, slumping 2.81, or 7.6%, to 34.03, after it swung to a third-quarter loss on $1.4 billion in investment losses. The life insurer's stock had climbed 7.8% Wednesday ahead of the report.

McAfee declined 1.87, or 4.3%, to 41.88, after the security-software company said its third-quarter profit fell 25% as higher costs led to lower margins.

Stereo maker Harman International Industries was a bright spot, surging 4.61, or 14%, to 37.61, after the company reported fiscal first-quarter sales above Street expectations. The company said its markets are stabilizing and it is gaining market share.

Estee Lauder also rose, climbing 1.36, or 3.3%, to 42.50, after its fiscal first-quarter profit more than doubled as the beauty-products company posted higher earnings across all of its businesses. Goldman Sachs raised its investment rating on the stock to neutral from conviction sell.

ITT fell 3.66, or 6.7%, to 50.70, after the defense and industrial conglomerate reported a 73% drop in third-quarter profit, stemming from a $131 million charge for asbestos-liability claims.

Cummins was down 2.86, or 6.2%, to 43.06, after the engine maker reported its third-quarter earnings fell 59% from last year's record results as it struggles in the face of weak North American and European trucking and construction markets.

Beckman Coulter fell 2.73, or 4.1%, to 64.33. The maker of biomedical instrument systems and test equipment posted a 94% plunge in third-quarter earnings as restructuring and acquisition costs masked higher sales and margins.

Universal Health Services' latest quarterly earnings beat analysts' expectations, but its shares fell 5.07, or 8.4%, to 55.65, as investors focused on the hospital operator's growing bad debt, which climbed more than analysts had been expecting. The news weighed on Tenet Healthcare, which fell 37 cents, or 6.7%, to 5.12.

Banks broken up: Q&A

Three new banks are to appear on Britain's high streets as part of a major break-up of the sector to be announced by the Government this week, The Sunday Telegraph has learned.
Why is the government doing it?

Gordon Brown and Alistair Darling have little choice. Under European law, Royal Bank of Scotland (RBS), Lloyds Banking Group and Northern Rock have to pay a price for the billions of pounds of state aid they have received. However, there are likely to be smiles rather than frowns in Downing Street because gradually returning these troubled institutions to full private ownership is firmly on the to do list. The government’s stakes in RBS and Lloyds are also threatening to become an even bigger political headache should these banks shower their best performing staff with bonuses in the New Year. Expect to see the emergence of Williams and Glyn, the revival of TSB and the resuscitation of Northern Rock hailed by the Prime Minister as a return to an era of more sensible and conservative banking.
Who will own these new banks?



We know who the Government do not want to own the new High Street banks but less about who could be favoured. Hoping to introduce more competition and stability into the market, ministers will not encourage bidders with big UK presences such as Barclays, HSBC and Spain’s Santander, which subsumed Abbey National, Alliance & Leicester, and Bradford & Bingley during the financial crisis. Likely candidates are therefore new or fledgling entrants into the banking market or foreign groups with substantial operations in other countries. It is thought that supermarkets or other retailers with interests in building current account facilities such as Tesco, Sainsbury’s, Boots, WHSmith or Sir Richard Branson’s Virgin Money, could make bids. Building societies, co-operatives or other financial services institutions could also be in the running.

Is it good news for the taxpayer?

At the Labour party conference, Mr Brown pledged to make last October’s dramatic bank bail-out pay for the average UK taxpayer. The government remains tight-lipped about the sort of prices these new banks may be sold for, but it is highly unlikely to be enough to cover the cost of the intensive care the banks have been in. RBS and Lloyds received a capital injection of £37 billion, and that is before counting any losses that might eventually land on the taxpayers’ doormat from the government insuring billions of pounds of the most toxic assets of RBS. The government will hope that the sale of these banks will go at least some way to recouping some of the billions spent at a time when the public finances are in such a parlous state. But with the sales not happening before the next general election, the taxpayer will have to wait.

What will the new High Street look like?

Since the onset of the crisis, the big banks have been furiously consolidating branches and closing stores with the loss of thousands of jobs. The rise of internet and telephone banking as consumers seek convenience, and banks try to cut costs, has also led to the slow demise of the High Street bank manager that knows the name of every customer. But the revival of two historic brands associated with personal banking, Williams and Glyn’s and TSB could herald a return to the importance of a High Street presence. If the Government manages to generate more competition in retail banking, branches may once again vie for prize spots in town centres.

Is it good news for consumers and businesses?

In economic textbooks, more competition is usually deemed to be good news for the customer. It is likely that the new entrants will seek to improve on existing retail services as they try to win customers. However, smaller banks focused on the nuts and bolts of consumer and business banking are also likely to be less profitable institutions and that may come at the public’s cost. There may be more choice, but it is not clear if banking services will be any cheaper. The Government’s plan to force Lloyds and RBS to hand out more mortgages and loans to businesses has so far delivered mixed results. The banks argue that there is little appetite for loans from either consumers, who are cutting their spending, or businesses fearful of investing in this economic climate. When these new banks are sold by the government, compelling them to lend gets even harder. Ultimately, the pace of lending to the wider economy is likely to depend more on a broader recovery in Britain.

Will it improve the stability of the financial system?

The speed with which the financial system unravelled still remains shocking a year on. So these new entrants in the British banking universe are likely to be focused on the basics: providing current and savings accounts as well as lending to home owners and businesses. What’s more they will only be lending what they get in from depositors – a model far removed from the old Northern Rock and HBOS when they relied on their own borrowing to plug the gap between what they handed out in loans and what they had in the bank. That certainly ticks a box for financial stability. However, this week’s announcement from the Government will not really address the 'too big to fail’ question that is at the heart of the future shape of banking. Big banks, such as Barclays and HSBC, still provide the very basics like current accounts and savings accounts but at the same time own investment arms engaged in far riskier and typically more profitable activities. What’s more, there’s nothing to stop a big foreign institution like Bank of America buying one of these new banks

Pilots 'face same distractions as drivers'



"I have my own ideas about this, but I'm going to work with the folks at the FAA and our department to deal with this issue," LaHood said. "We're going to take a very close look at that entire issue."

The Obama administration and lawmakers have already expressed interest in targeting distracted driving, including the use of mobile devices while behind the wheel. LaHood held a summit meeting in September that brought together researchers, regulators and other experts on distracted driving.

WASHINGTON - The two airline pilots who overshot their destination by 150 miles have prompted the Obama administration to broaden its look at distracted driving to include distracted flying, Transportation Secretary Ray LaHood said today.



The use of mobile devices and laptops while driving any type of vehicle is unsafe, LaHood told a hearing of the Senate Commerce, Science and Transportation Committee.

"We're not going to equivocate on this. Any kind of distraction, whether it's trains, planes or automobiles is a distraction and we should figure out ways to get these cell phones, the texting, ... and the use of laptops out of the hands of people who are supposed to be delivering the public to somewhere safely," LaHood said.

The pilots of Northwest Airlines Flight 188 told safety investigators they lost track of time and place while using their laptops to work out crew schedules. They said they were out of communications with air traffic controllers and their company's dispatchers for 91 minutes while cruising in their Airbus 320 at 37,000 feet, unaware that they had flown past their destination of Minneapolis in the upper Mideast until a flight attendant called them on an intercom.
The incident "raises serious safety concerns," said Sen. Jay Rockefeller, D-W.Va., chairman of the committee.

Sen. Frank Lautenberg, a Democrat, noted that the Federal Aviation Administration does not prohibit the use of laptop computers above 10,000 feet and asked whether the Transportation Department might regulate the use of laptops by pilots.
A group of senators proposed legislation that would offer incentive grants to states that approve laws to combat distracted driving.

"Texting takes your eyes off the road - long enough at high speeds to travel the length of a football field," Rockefeller said.

The FAA said that it had revoked the licenses of the Northwest pilots - Timothy Cheney, the captain, and Richard Cole, the first officer. Phone messages left at the homes of the pilots were not returned.

The pilots have 10 days to appeal the revocation to the three-member National Transportation Safety Board, the same agency that investigates air crashes and makes safety recommendations. If an appeal fails, they can apply for a new license after one year.

Friday 30 October 2009

Flat incomes, weak consumer spending raise concern


By MARTIN CRUTSINGER (AP) – 4 hours ago

WASHINGTON — Flat incomes suggest more weakness ahead in consumer spending, reinforcing concerns about a ho-hum holiday shopping season and a sluggish economic recovery.

"This recovery is going to be very weak. Consumers are in no position or mood to spend. Their wages are down and they can't get credit," said Sung Won Sohn, an economics professor at California State University's Smith School of Business.

Concerns about the economy sparked by disappointing government data on spending and incomes sent stocks down Friday, erasing the previous day's big gains. The Dow Jones industrial average lost about 250 points, and broader indexes also fell.

The Commerce Department reported that personal incomes were stagnant in September while the all-important wage and salary category dropped 0.2 percent, as unemployment rose.

Consumer spending — which accounts for 70 percent of total economic activity — dropped 0.5 percent, the first decline in five months and the biggest since December.



The spending retreat reflected a sharp falloff in auto sales following a spike in August from the government's Cash for Clunkers program.

The overall economy, as measured by the gross domestic product, actually grew at a 3.5 percent rate from July through September, signaling an end to the longest recession since the 1930s.

But analysts said the income and spending report underscored fears about a weak recovery. The most pessimistic worry the nation could be headed for a double-dip recession as consumers, concerned about further job losses and their tattered investment holdings, refrain from spending.

Some analysts believe that GDP growth, which received a big boost from the government's stimulus programs in the third quarter, will slow to 2 percent or less in the current quarter.

David Wyss, chief economist at Standard & Poor's in New York, said a recent spike in energy prices and other problems will depress sales in coming weeks, giving the nation's retailers another lackluster shopping season.

Gasoline prices have risen for 17 straight days to a new high for this year of $2.695 per gallon, according to auto club AAA. The increase will add about $50 a month to the typical customer's gas bill, meaning less to spend at stores during the holidays.

Sliding incomes and rising energy costs further darken the outlook for consumer spending during the holidays. People who do spend will stick to discounters like Wal-Mart Stores Inc. and Target Corp., and continue shying away from big-name department stores like Macy's, said John Lonski, chief economist of Moody's Capital Markets Group. Price will be key again this year.

"It most definitely limits the upside for consumer spending and scares the wits out of retailers," Lonski said, adding that consumers are "going to spend as though the economy is still in a recession."

"If you don't make it, you can't spend it, especially with the access to credit much reduced," he said.

A second report Friday showed that wages and benefits including health care rose just 1.5 percent for the 12 months ending in September. That's the smallest increase for the Labor Department's Employment Cost Index on records that date to 1982.

The Obama administration also released a new report that said about 650,000 jobs had been saved or created under the government's $787 billion economic stimulus program. Congress is currently debating expanding certain elements of that program including unemployment benefits and the first-time homebuyers tax credit. Many private economists said the new income and spending report showed the need to do that.

Unemployment, currently at a 26-year high of 9.8 percent, will edge up to 9.9 percent when the government releases the October jobless report next week and will peak at 10.5 percent in the middle of next year, Wyss said.

Last month's spending drop resulted in a boost in the savings rate to 3.3 percent of after-tax incomes, from 2.8 percent in August. Many analysts believe households will keep striving to increase savings and replenish nest eggs that were crushed by last year's stock market crash. That also would hold back spending in the months ahead, weakening the recovery.

But inflation remains in check. An inflation gauge tied to consumer spending edged up just 0.1 percent in September, after a 0.3 percent August rise. Excluding food and energy, the gauge rose 1.3 percent over the past year, well within the Federal Reserve's comfort zone.

Fed officials meet next week and economists believe they will again keep a key interest rate at a record low.

AP Economics Writer Christopher S. Rugaber in Washington, AP Retail Writer Emily Fredrix in Milwaukee and AP Energy Writer Mark Williams contributed to this report.

UPDATE: US Stocks Close Sharply Lower; DJIA Ends Month Flat

By Donna Kardos Yesalavich
Of DOW JONES NEWSWIRES


NEW YORK (Dow Jones)--U.S. stocks tumbled Friday, with Bank of America, JPMorgan Chase and Alcoa leading the Dow Jones Industrial Average's components lower as investors again grew concerned about the economy after the short-lived excitement over Thursday's good report on gross domestic product.

The Dow Friday posted its biggest one-day point drop since April 20, and ended October just 0.45 point above where it began. Other major measures, including the Standard & Poor's 500 and the Nasdaq Composite, ended the month in the red, marking their first monthly declines since February.



The Dow closed down 249.85 points, or 2.51%, at 9712.73, marking its 10th triple-digit movement this month. Five of them were down and five up, reflecting how volatile the market has gotten as investors try to get a handle on whether the 48% surge in the Dow since March can be justified by economic fundamentals. For the week, the Dow fell 259.45 points, or 2.6%, marking its second consecutive week in the red.

Among the Dow's big movers Friday, Bank of America tumbled 1.15, or 7.3%, to 14.58, while JPMorgan slid 2.58, or 5.8%, to 41.77, and Alcoa dropped 58 cents, or 4.5%, to 12.42.

Across other measures, the Nasdaq Composite fell 52.44, or 2.50%, to 2045.11. It was down 5.08% for the week, and 3.65% for the month.

The Standard & Poor's 500 dropped 29.93, or 2.81%, to 1036.18. For the week, it dropped 4.02%; it was down 1.98% for the month.

Friday's declines come as the latest measure of consumer spending came in weak, reflecting the biggest drop since December 2008, although it was in line with economists' expectations.

Still, investors are growing hungry for economic data to start showing improvement and strength, rather than simply being above or in line with expectations. In addition, they are starting to wonder how much of the economic growth that was reported Thursday would have been there if it weren't for all the government support through such programs as the "cash for clunkers" funding for automobile purchases.

Nonetheless, some market participants said Friday's decline was typical of a market in recovery, and therefore no major cause for concern.

"It's not unprecedented after having such a strong rally," said Mary Ann Bartels, head of U.S. technical and market analysis at Bank of America Merrill Lynch. "Markets need to consolidate in order to achieve new recovery highs, and a correction will broaden out the base-building process we've been in since last year," giving stocks more support for a move higher, she said.

Life insurers fell in an exaggeration of the declines across the market, as the sector is exposed to equities through its variable-annuity guarantees and other equity-linked retirement-income products. MetLife was among the decliners, slumping 2.81, or 7.6%, to 34.03, after it swung to a third-quarter loss on $1.4 billion in investment losses. The life insurer's stock had climbed 7.8% Wednesday ahead of the report.

McAfee declined 1.87, or 4.3%, to 41.88, after the security-software company said its third-quarter profit fell 25% as higher costs led to lower margins.

Stereo maker Harman International Industries was a bright spot, surging 4.61, or 14%, to 37.61, after the company reported fiscal first-quarter sales above Street expectations. The company said its markets are stabilizing and it is gaining market share.

Estee Lauder also rose, climbing 1.36, or 3.3%, to 42.50, after its fiscal first-quarter profit more than doubled as the beauty-products company posted higher earnings across all of its businesses. Goldman Sachs raised its investment rating on the stock to neutral from conviction sell.

ITT fell 3.66, or 6.7%, to 50.70, after the defense and industrial conglomerate reported a 73% drop in third-quarter profit, stemming from a $131 million charge for asbestos-liability claims.

Cummins was down 2.86, or 6.2%, to 43.06, after the engine maker reported its third-quarter earnings fell 59% from last year's record results as it struggles in the face of weak North American and European trucking and construction markets.

Beckman Coulter fell 2.73, or 4.1%, to 64.33. The maker of biomedical instrument systems and test equipment posted a 94% plunge in third-quarter earnings as restructuring and acquisition costs masked higher sales and margins.

Universal Health Services' latest quarterly earnings beat analysts' expectations, but its shares fell 5.07, or 8.4%, to 55.65, as investors focused on the hospital operator's growing bad debt, which climbed more than analysts had been expecting. The news weighed on Tenet Healthcare, which fell 37 cents, or 6.7%, to 5.12.

Stock futures point to modestly lower opening



By STEPHEN BERNARD
AP Business Writer

NEW YORK -- Stocks are headed for a moderate decline Friday, erasing some of the big gains racked up a day earlier after the government said the economy grew more than expected in the third quarter.

Overseas markets were mixed.

Investors welcomed a report showing the economy grew at 3.5 percent in the third quarter, but much of that growth was fueled by government stimulus programs. With those programs winding down, the economy might not be able to sustain such rapid improvement after the economy shrank for four straight quarters.

A Labor Department report due out Friday at 8:30 a.m. EDT on personal spending and income from September will provide further details into the health of the consumer. The strength of consumers is considered vital to a recovery because their spending accounts for more than two-thirds of all U.S. economic activity.



Without government incentives and stimulus programs, it is widely expected consumer spending will have to rise significantly to extend the economic recovery.

Economists polled by Thomson Reuters expect consumer spending dropped 0.5 percent last month, following a 1.3 percent jump in August. August's growth was fueled by the government's Cash for Clunkers auto program.

Spending likely dropped as income was flat in September after rising 0.2 percent in August.

Ahead of the opening bell, Dow Jones industrial average futures fell 45, or 0.5 percent, to 9,858. Standard & Poor's 500 index futures fell 5.30, or 0.5 percent, to 1,056.30, while Nasdaq 100 index futures declined 2.00, or 0.1 percent, to 1,705.50.

Stocks surged Thursday on the gross domestic product report, posting their best day in three months. The Dow rallied nearly 200 points, or 2.1 percent, after recording triple-digit losses in three of the four previous sessions.

The S&P rallied 2.3 percent on Thursday, while the Nasdaq jumped 1.8 percent.

Meanwhile, bond prices mostly rose Friday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.47 percent from 3.50 percent late Thursday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.06 percent from 0.05 percent.

The dollar mostly rose against other major currencies, while gold prices fell.

Overseas, Japan's Nikkei stock average rose 1.5 percent. In afternoon trading, Britain's FTSE 100 gained 0.3 percent, Germany's DAX index fell 0.4 percent, and France's CAC-40 declined 0.2 percent.
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Hillary Clinton wraps up tough mission in Pakistan


Hillary Clinton, the US secretary of state, talks to tribesmen from Pakistan's north-western areas in Islamabad. Photograph: EPA/AP of Pakistan

The US secretary of state, Hillary Clinton, wrapped up one of the toughest missions of her diplomatic career tonight after three days of bruising encounters with Pakistanis enraged by US drone attacks in the tribal areas.

The visit was never going to be easy for Clinton, who flew into Islamabad with the goal of blunting anti-Americanism in a country that seethes with hostility towards Washington.



In meetings with journalists, students and other leaders she came armed with a determined smile and a willingness to engage that disarmed even strident opponents. On the drones, she had no answer.

Time and again Pakistanis pressed her about the covert missile strikes by Predator or Reaper aircraft that have killed up to 1,000 people since 2006, according to one estimate.

"I can't answer that question," she told students in Lahore, according to one guest present. "It's a military to military matter."

The CIA-operated drone strikes have been embraced by the Obama administration, which considers them a key tool in disabling al-Qaida's ability to plot attacks from its tribal haven.

The US has carried out over 80 strikes since 2006, half of them since the start of this year. One such strike last August killed the Taliban leader Baitullah Mehsud.

Civilian casualties and the perceived infringement of sovereignty enrage most Pakistanis. The attacks enjoy only 9% support, according to a Gallup poll taken last August.

The level of civilian casualties is hotly disputed. But one recent study by the New America Foundation estimated that US drones have killed between 750 around 1,000 people in Pakistan since 2006, about one third of them civilians.

The deep public hostility to drones feeds latent anti-Americanism and leaves the Pakistani government in a difficult position. Although ministers publicly criticise the strikes, their officials privately assist the American spies and military officials who orchestrate them.

Analysts said Clinton's folksy but steel-edged charm worked well in public meetings - particularly in comparison with the more blunt style of Washington's envoy to the region, Richard Holbrooke. "In a bad situation she put up a sterling performance," said one.

One tribal leader who met her said afterwards he was impressed. But in a television interview later, one woman in the audience said the drones amounted to "executions without trial". Another asked Clinton if she considered drone strikes to be an act of terrorism similar to the bombing that killed more than 100 people in Peshawar on Wednesday. "No I do not," Clinton replied.

STIMULUS WATCH: Stimulus Jobs Overstated in Report



The White House is promising that new figures being released Friday will be a more accurate showing of progress in President Barack Obama's economic recovery plan. It aggressively defended an earlier, faulty count that overstated by thousands the jobs created or saved so far.
Ed DeSeve, serving as Obama's stimulus overseer, said the administration has been working for weeks to correct mistakes in early counts that identified more than 30,000 jobs paid for with stimulus money. He said a new stimulus report Friday should correct many mistakes an Associated Press review found that showed the earlier report overstated thousands of stimulus jobs.
"I think you'll see a pretty good degree of accuracy," DeSeve said in an interview.
White House spokesman Robert Gibbs downplayed errors in job counts identified by the AP's review, telling reporters, "We're talking about 4,000, or a 5,000 error."


The AP reviewed a sample of federal contracts, not all 9,000 reported to date, and discovered errors in one in six jobs credited to the $787 billion stimulus program — or 5,000 of the 30,000 jobs claimed so far.
Even in its limited review, the AP found job counts that were more than 10 times as high as the actual number of paid positions; jobs credited to the stimulus program that were counted two and sometimes more than four times; and other jobs that were credited to stimulus spending when none was produced.

For example:
— Some recipients of stimulus money used the cash to give existing employees pay raises, but each reported saving dozens of jobs with the money, including one Florida day care that claimed 129 jobs saved.
— A Texas contractor whose business kept 22 employees to handle stimulus contracts saw its job count inflated to 88 because the same workers were counted four times.
— The water department in Palm Beach County, Fla., hired 57 meter readers, customer service representatives and other positions to handle two water projects. But their total job count was incorrectly doubled to 114.

Celebrating Stock Market Bears Take a Major Hit

Yesterday we get some strong volume and blow through the 50-day exponential moving average on the Nasdaq. We fall only a bit below on the S&P 500 (4 points) and hold above it on the Dow. We didn't have all 3 major indexes trading below the 50-day exponential moving averages and that's what you want to see if you believe the market is ready for deeper selling than has already occurred. In addition, you don't want to clear by as little as we did on the S&P 500 as that's not a true breakdown. 4/10th's of 1% is not sufficient to say it's all clear for the bears.



So we had a nasty day and the bears were celebrating, but we also had something else take place and that's the reality that we got massively oversold on the 60-minute time frame charts. Stochastics below 5, and RSI's below 30, as low as 22, in fact, on the S&P 500. These types of oversold are conditions you NEVER add new shorts in to. Some type of bounce has to take place to unwind the oscillators and we sure did get that today. The thinking was you could add shorts on any move higher.

However, after studying the charts, WLSH, INDU, COMPQ, PowerShares QQQ (QQQQ), OSX, PowerShares DB US Dollar Index Bullish (UUP). It's clear to see that any move back down will create massive positive divergences. It'll also take place at very deeply compressed MACD cycle levels. That's not the best formula for shorting. It's in all likelihood the place to take some longs, even if just for a trade or two.

This is a very complicated market that's giving absolutely no one any satisfaction and that's the reason for so little on our end in terms of plays. When markets can't find a true trend near term, it's best to keep things extremely light. Always a time for aggressive playing in time. Patience is the hardest part of this game and unless you have lots of it, you can't do very well, especially in markets such as the one we're in now.

So what type of market are we in exactly!

It's a mature move up for sure. The very best of things have been seen for now. There's the lure or desire for more and it's very easy to get too caught in that. Conversely, there's the lure of thinking that because the move is mature, we should just start breaking down. Nice thought. No reality! Markets don't break that easily folks. Not after such a long protracted move higher over eight months. Folks are trained to buy weakness. The desire to get the next leg up. Distribution out, a bull in, to a bear, if that's indeed where we're headed, can take many months.

Yes, I said months.

That's not unusual. If you all would think back to 2000, the market started to mature in late 1999, but didn't top on the Nasdaq until March 9th, 2000. It was roughly four months of distribution before the house of cards came down. And we may not be headed back in to a bear. That's very unclear. Just stating that if we are, you can not expect a crash right back down. If you have been, you've been extremely disappointed with the results and will likely continue to be so for some time. We are in a mature market that's either handling out waiting for the next move higher in time, or is maturing and distributing. That will become very clear in time. For now things are very unstable and volatile. A market where less is more.

The dollar has broken out of its wedge in a bullish fashion and is now in the process of back testing. If it's truly bottomed and if the market is truly topping, it should not fall back in to its wedge. If it does, it tells us that the move out was nothing more than a head fake and makes future moves difficult to trust. However, once a move like that fails, normally the next move will take a long time to happen, which, of course, would make our market that much more difficult. So far it’s held, thus we should see at least another move lower soon, but as I mentioned above, that move will open the door to strong positive divergences on the 60-minute time frame chart. Let's just say things aren't easy here. The dollar needs to be watched very closely here.

1047 remains the 50-day exponential moving average on the S&P 500. The small breach yesterday was a false breakdown. Until the bears can close this below this level by at least 1%, you can't trust the move with any real confidence. The Dow has yet to close below its exponential moving average at 9677. These levels can change slightly each day. 2083 is the number on the Nasdaq. The bears need all three of these major averages to close approximately 1% below those levels to feel they have proper confirmation. We know 1101 is the recent S&P 500 high and that will be incredibly tough here. We simply are trading between roughly those 50-day exponential moving averages and the recent highs on all the indexes with lots of head fake type moves to draw in your emotions. This tells us to keep things very light for now until we get some convincing evidence of what's to come.

Oh, and one last thing. Things change over time. Life is all about change. The landscape may have changed today, with that better than expected. Gross Domestic Product (GDP) number at 3.5% growth. It may not be real, or may not last, but that's not how we play. This is probably the reason for the large move up today and why any move lower will now set positive divergences.

Stock Markets and Other Risky Assets Tumble on Recovery Fears



I concluded a post on stock markets over the weekend saying: “After equities’ seven-month climb, stock markets certainly look vulnerable for a decline. Two downside reversal days - on Wednesday and Friday - would seem to indicate that stocks could commence a pullback to work off the overbought condition, allowing fundamentals to reassert themselves.”

Global stock markets, as well as other risky assets, closed sharply lower over the past few days as concerns mounted over the sustainability of the global economic recovery and the outlook for central bank policy.
Source: StockCharts.com



A summary of the movements of major global stock markets since the March 19 peak, as well as various other measurement periods, is given in the table below.


The MSCI World Index and the MSCI Emerging Markets Index have declined by 5.3% and 6.2% respectively since the highs of October 19, with markets like Ireland (‑13.2%), Brazil (-10.5%), Austria (-10.8%) and Belgium (-9.0%) falling by significantly more. Also, higher risk indices such as small caps have borne the brunt of the selling, with the Russell 2000 Index down by 9.0%. This is a pattern that one would expect as investors shift the emphasis to higher quality.




The major moving-average levels for the benchmark US indices, the BRIC countries and South Africa (where I am based) are given in the table below. A number of indices, including the S&P 500 Index, have fallen below their 50-day moving averages over the past few days, but all the indices are still holding above their respective 200-day moving averages. The 50-day lines are also above the 200-day lines in all instances.

The October lows are also given in the table as a break below these levels would indicate a reversal of the uptrend since March, i.e. reversing the progression of higher reaction lows.




Over the past few days a number of commentators have made pronouncements about the extent of a possible decline. For example, Jeremy Grantham (GMO) expects the S&P 500 to drop by 15% to 25%, David Rosenberg (Gluskin Sheff & Associates) sees markets falling by 20% and Doug Kass is looking at -5% to -12%.

This brings me to the topic of valuations. Based on operating earnings (i.e. stripping out everything that is bad), the historical price/earnings (PE) multiple of the S&P 500 is 27.0; using “as reported” (GAAP) earnings the figure shoots up to a giddy 95.7! Getting past the loss-making fourth quarter of 2008 and calculating prospective multiples through December 31, 2009 reduce the valuations to 19.0 and 24.4 respectively. Looking further out to the end of 2010, the prospective PEs are 14.1 and 22.9 respectively - still hardly the type of valuations that will inspire one to be a buyer across the board. (The earnings estimates are courtesy of Standard & Poor’s.)

Another way of looking at valuation levels, and cutting through the uncertainty of having to forecast earnings, is by means of Robert Shiller’s cyclically adjusted price-earnings ratio (CAPE), effectively muting the impact of the business cycle by averaging ten years of earnings. Using rolling ten-year reported earnings, my research (based on Shiller’s methodology, but including some refinements) shows that the “normalized” price-earnings ratio of the S&P 500 Index is currently 18.7. This compares with a long-term average of just more than 16.3 and implies an overvaluation of 15%. Considering a geometric rather than an arithmetic average of earnings, the overvaluation increases to 25%. The graphs below show data since 1950, but the actual calculations date back to 1871


Meanwhile, David Rosenberg highlights that this is not the onset of a sustainable secular bull market as we had coming off the fundamental lows of prior bear phases, such as August 1982, when:

• Dividend yields were 6%, not sub-2%.

• Price-to-earnings multiples were 8x, not 27x.

• The market traded at book value, not more than twice book.

• Inflation and bond yields were in double digits and headed down in the future, not near-zero and only headed higher.

• The stock market competed with 18% cash rates, not zero, and as such had a much higher hurdle to clear.

• Sentiment was universally bearish; hardly the case today.

• Global trade flows were in the process of accelerating as barriers were taken down; today, we are seeing trade flows recede as frictions, disputes and tariffs become the order of the day.

• A Reagan-led movement was afoot to reduce the role of government with attendant productivity gains in the future, as opposed to the infiltration by the public sector into the capital markets, union sector, economy and of course, the realm of CEO compensation.

Back to charting, Adam Hewison (INO.com) also sounded a cautious note on the outlook for the S&P 500 as explained in one of his popular technical analysis presentations. Click here to access the presentation.

I conclude with a comment from David Fuller (Fullermoney) who said: “At this stage of the bull cycle, I think a correction of approximately 10-15% for developed country stock markets and somewhat more for emerging markets would be good news for investors with cash to invest. Such a mean reversion towards rising 200-day moving averages would blow the recent froth off valuations and stem talk of an early change in monetary policy.”

I will bide my time while the fundamentals play catch-up. Meanwhile, caution remains the operative word.

By Dr Prieur du Plessis

Dr Prieur du Plessis is an investment professional with 25 years' experience in investment research and portfolio management.

More than 1200 of his articles on investment-related topics have been published in various regular newspaper, journal and Internet columns (including his blog, Investment Postcards from Cape Town : www.investmentpostcards.com ). He has also published a book, Financial Basics: Investment.

Prieur is chairman and principal shareholder of South African-based Plexus Asset Management , which he founded in 1995. The group conducts investment management, investment consulting, private equity and real estate activities in South Africa and other African countries.

Plexus is the South African partner of John Mauldin , Dallas-based author of the popular Thoughts from the Frontline newsletter, and also has an exclusive licensing agreement with California-based Research Affiliates for managing and distributing its enhanced Fundamental Index™ methodology in the Pan-African area.

Prieur is 53 years old and live with his wife, television producer and presenter Isabel Verwey, and two children in Cape Town , South Africa . His leisure activities include long-distance running, traveling, reading and motor-cycling.

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