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The Fed Fails to Create the Stability it Dreams Of

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Bob Chapman
International Forecaster
March 14, 2011

Wall Street at least temporarily relieved of the burden of having to buy Treasuries & Agency bonds, is looking at the jump in oil prices as nothing more than an irritant to their plans for a higher market. Bill Dudley of the NY Fed, a most powerful member, continues to make a vigorous defense of Federal Reserve policies. He, and a few other Fed participants, and Chairman Bernanke believe liquidity is the key for solving problems. That is not only in the realm of debt purchases, but in the relief it brings to Wall Street and banking. It relieves them of the responsibility of having to make those purchases to assist the Fed. Those funds can then be directed toward other investments, such as la liquidity-driven stock market rally. The correlation between the movements in the Fed balance sheet and market can be traced to 85% of market movement for the past 2-1/2 years. An interesting result of Fed manipulative policy is low level of short interest during this period. Most of the professional market players knew the market was headed higher, because they knew such overwhelming liquidity injections would have to take it higher. They also knew that the Fed had to keep the wealth affect going, because the market was the only generator of wealth left, as the bond market bubble would be broken eventually. The Fed has engineered a market recovery and Wall Street knew what they were up too. QE1 saved the financial community and QE2 saved the government debt structure at least temporarily. The wealth effect has been saved temporarily as well. The public has been left with a pile of crumbs as they struggle for survival. Unemployment has improved ever so slightly and now we have a new problem to increase the suffering and that is much higher oil prices.

The largess sponsored by the privately owned Federal Reserve has still not been enough to spur adequate growth and the effects of Fed monetary creation and deficit spending have not been enough to produce higher economic growth and now the economy has to deal with rampant inflation, the result of QE1 and QE2, plus stimulus, of what will turn out to be a subsidy of some $5 trillion, plus rocketing oil prices. It then is not surprising that we are seeing downward revisions of analysts in 3rd and 4th quarter growth estimates. We still are seeing declines in home prices and sales, as well as in orders and shipments. All this cannot help but negatively affect consumer spending. At the same time the states and municipalities are severely cutting back.

The inventory overhang, higher interest rates and lack of funds for down payments have again trapped the housing market. As we predicted long ago, before anyone else, that the downside in housing has at least two years to go, and perhaps four years, before a bottom is found. Then how long will it bump along the bottom? Perhaps eight years or 20 years, or more. Even new homes are facing lower appraisals.

Japan: the earthquake, the nuclear power plant accident, the economy.

The earthquake in Japan will generally be negative for stock markets worldwide.

Japan’s economy contracted more than the government initially estimated in the fourth quarter because of a downward revision to capital investment and consumer spending.

Gross domestic product shrank at an annualized 1.3 percent rate in the three months ended Dec. 31, more than the 1.1 percent contraction reported last month, the Cabinet Office said today in Tokyo. The median forecast of 26 economists surveyed by Bloomberg News was for a 1.2 percent contraction.

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http://edition.cnn.com/2011/WORLD/asiapcf/03/12/japan.nuclear.quesions/

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The Fed Fails to Create the Stability it Dreams Of  161008pptv3

There is lack of job creation and debt control. The Republicans want to cut $61 billion from the budget deficit, which is a pittance and an insult with a deficit of $1.6 trillion. They cannot be serious, but they are. This shows you how out of touch with reality most politicians are and that they only answer to those who are paying them off, not their constituents.

There has been no impetus on job creation at a time when real unemployment is 22.4%. It is like the American worker didn’t exist. The situation at the state and municipal levels isn’t helping at all either, as cutbacks and layoffs prevail. This while food and gas prices head toward the stratosphere. As we predicted earlier, 2011 is not going to be a good year for growth at 2% to 2-1/4% at best. The stock market is not expecting this, and when it becomes evident the market will fall.

It is interesting to note that personal income rose 1% month-on-month, but as tax relief is subtracted, you remember that pork package from December don’t you, and growth would have been 0.1%. Hardly a number to write home about. As a result January spending fell 0.1% and that should continue negative. Don’t forget all that credit card debt from November and December has to be paid off. As we predicted the fist quarter should show negative spending and consumption.

The personal question we are asked is when will the Fed find out it cannot continue to create money and credit? Whether most of you realize it or not present monetary policy has been in action for 11 years, so this is nothing new. That is how long inflation has been created over those years. It shows you that central banks have major leeway and a long time line to do their dastardly deeds. The problem for these bankers is that in the end they lose every time. Historically they have extracted themselves by buying everyone in sight. When the Lombard League collapsed in 1348 they were exiled and in 1789 in France their heads were removed.

What is interesting is that in each case and there were many, the bankers knew exactly what the outcome would be, but they proceeded in spite of that. Today, the Fed is trying to stabilize inflation at about 2%. Official figures are 1.5% when in reality the figures are between 7% and 9%. There is supposed to be a sustainable recovery in jobs. That has not happened as yet with only an official reduction of 1% in the U6. Needless to say, we question those statistics in as much as government has great difficulty telling the truth. 65% to 70% of jobs are created by small and medium sized businesses and loans to these businesses have been reduced by almost 30%, hindering the ability for these companies to expand and create employment. The situation hasn’t changed. For the most part only AAA companies have easy access to credit and percentage-wise they have cut employment most. Consumer growth has been limited by bankruptcies and unavailability of credit. 17 million jobs were created out of 26 million as a result of securitization of credit, a market that no longer exists. As a result over the past two years the economy has lost 2 million jobs. Those losses are complicated by the losses attributable to free trade, globalization, offshoring and outsourcing. Due to this trade policy the economy cannot increase output to any great degree, nor can it produce jobs. The birth/death ratio doesn’t fool any inquiring mind. It is simply bogus and the millions of jobs created under its statisticians are lies and worthless. As long as we have such a trade policy we will have to have quantitative easing indefinitely.

QE2, which we predicted in May of 2010, began in June not later unbeknownst to most professionals. The full amount of funds to be used was $900 billion not $600 billion and it remains to be seen just how much money has again been created out of thin air. The purchase of CDS and MGS, known as toxic waste was supposed to have ended, but we know some was purchased from China. We wonder just how much was purchased and where it is being hidden? The QE2 and stimulus funds will have all been spent by June, which means the second half of the year will see an economic slide, which few are expecting. That could be in part why we are finally seeing a market correction. As far as we know the Fed is holding about $1.3 trillion in Treasuries followed closely by China, which has about $1.17 trillion. Americans hold $3.3 trillion and foreigners $4.45 trillion. The inflation created by monetization of US government debt is now showing in price inflation, particularly in food. That has been aided by a flight to quality to gold and silver, but also to all commodities. That flight will continue. The market may be telling us as well that quantitative easing is going to end. If that happens the world economy will collapse. Those who want an end to QE cannot understand what they are asking for. Deflation will immediately take over sucking the entire world economy down with it. The withdrawal of liquidity will be devastating, but for sometime price inflation already in the system would prevail, but would be on a downward slope. The Fed is the director and what happens depends on what they do. The inflation caused by QE 1 and 2 and stimulus 1 and 2 cannot be contained by the Fed. It is already in the system and it will have to play itself out unless the Fed begins QE3 this fall accompanied by stimulus from Congress. Sound economic growth hasn’t existed for 11 years and it is worse now than ever. The Fed cannot hold up the economy indefinitely no matter how much liquidity they inject into the system. It is all only a holding action. We probably will get QE3 and there may be more, but in the end it is all for naught. This system has to self-destruct.

What the Fed has given Wall Street and banking, which owns the Fed, is an economy on steroids, which is not a cure but a continuing palliative. Debt and unfunded liabilities spread worldwide will end up dishonored. The Fed’s idea is to inflate the problems away, but that can only work in general terms. How do you really inflate debt away without default? Perhaps the market is beginning to realize no matter how much money and credit is injected into the system that is not going to ultimately work. The elitists are at a dead end and they are well aware of it because they deliberately created this monstrosity. Everything is in place for economic, financial, social and political failure not only in the US, but in many other countries as well. The result will negatively impact the world for sometime to come. Materialism is coming to an end. You have been warned.

In the US living standards for some 16% of the population is already at poverty levels equal to the 1930s. Can you imagine where it would be without food stamps and extended unemployment, etc. this is caused by the wages of debt, accompanied by the disparity and inequality between the rich and the poor. That 16% is a total of some 45 million Americans.

Household wealth rose by $2.1 trillion in the fourth quarter and their debt contracted at the slowest pace since 2008 as consumers stepped up spending and boosted the fragile economic recovery.

Gains made in investments such as mutual funds boosted overall household wealth to $56.8 trillion even as the value of real estate fell, data released by the Federal Reserve showed on Thursday.

Businesses were holding $1.9 trillion in liquid assets in the last quarter of 2010, fueling hopes that companies would use their stockpiles of cash to step up investments.

The government’s debt expanded 14.6 percent on an annual rate in the fourth quarter, down from 16 percent in the previous quarter.

Meanwhile, state and local government debt expanded 7.9 percent on an annual basis after expanding 5.4 percent in the previous quarter.

U.S. drivers will pay another 10 cents a gallon for gasoline before the latest jump in wholesale costs is fully passed on at the pump, and yearly motor fuel costs will rise 28 percent from last year, the Energy Department said on Wednesday.

The average U.S. household will spend about $700 more for gasoline in 2011 than it spent last year, bringing total motor fuel expenses up 28 percent to $3,235, based on an annual pump price of $3.61 a gallon, the department’s Energy Information Administration said.

Retail gasoline prices soared by 38 cents over the last three weeks to $3.52 per gallon, according to the EIA, because of high crude oil costs due to unrest in the Middle East.

“Because the pass-through of changes in wholesale gasoline prices to the retail level is lagged, pump prices would be expected to rise a further 10 cents per gallon to fully reflect the current wholesale price level even without considering any future wholesale price movements,” the EIA said in its weekly review of the oil market.

Higher gasoline prices will give consumers less money to spend on other goods and services, which many economists fear could slow the U.S. economy.

The EIA said it expects drivers will pay an average $3.71 a gallon during the summer peak driving season from June through August, about 98 cents more than last year.

There is a 25 percent chance the pump price will exceed $4 a gallon from June through August, the agency said, compared with a 10 percent probability gasoline could fall below $3 during the same period.

The Texas Nationalist Movement marked Texas Independence Day with a rally on Saturday at the Capitol urging Texans to save the state by seceding from the United States. A small but enthusiastic group of Texans gathered on the steps of the Capitol, as an assortment of massive Texas flags blew above them in the chilly afternoon breeze.

Outrage was spread evenly toward Democrats and Republicans as leaders of the movement expressed their disgust for the growing national debt and the federal government’s treatment of Texas.

“Texas can take better care of itself than Washington,” said Lauren Savage, vice president of the movement. “We are here to raise interest in the Legislature of the possibility of secession to cure the ills of America.”

Members are demanding that state lawmakers introduce a bill that would allow Texans to vote on whether to declare independence.

Fed up with federal mandates, the burden of unsustainable taxes and disregarded votes, members say secession has been a long time coming.

“This is a cake that’s been baking for 85 years,” said Cary Wise, membership director of the Texas Nationalist Movement. “All this administration has done is light the candles.” Demonstrators said they have had enough of state leaders who are conservative in rhetoric but big government proponents in reality, calling out GOP Gov. Rick Perry as one of the biggest frauds.

“I would love to debate Rick Perry live because we could once and for all show that the guy is a big government fraud who claims to be conservative,” said Eric Kirkland, member of the Constitution Party of Texas.

Among shouts of agreement from the crowd, Kirkland added that he would love for Perry to walk out of the Capitol at that moment to engage in a debate.

Demonstrators said taxes are weighing down Texans and are ultimately unsustainable. Gerry Donaldson, host of Our Constitution: Foundation and Principles Radio Show, used bricks to demonstrate the burden dozens of taxes place on Texans throughout their lives. “Washington is encroaching on us in greater levels day by day,” Donaldson said, as he piled bricks one by one into a bucket held by a fellow member. “So, what do we do?” Secessionists stressed accountability for a government they say has become corrupted by power and distorted from the framers’ original intent.

Donaldson said he is getting a committee together that will review every bill proposed by state lawmakers and determine if it is constitutional by the people.

Drawing largely from the Texas Bill of Rights, demonstrators said Texans have the responsibility to take power from the hands of a federal government that has gotten out of control.

“The only way is to secede and wipe the slate clean,” Donaldson said. “We secede, and then we reform this government based on an absolute return back to basic principles.”

Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., eliminated government-related debt from his flagship fund, according to the Zero Hedge website.

Michael Reid, a Pimco spokesman in New York, declined to comment about the accuracy of the report. Zero Hedge didn’t say how it got the figures for holdings as of February.

Pimco’s $237 billion Total Return Fund last held zero government-related debt in January 2009. Gross had cut the holdings to 12 percent of assets in January, according to the Newport Beach, California-based company’s website.

Gross said yields on Treasuries may be too low to sustain demand for U.S. government debt as the Federal Reserve approaches the end of its second round of quantitative easing, he wrote in a monthly investment outlook posted on the company’s website on March 2.

Inventories at U.S. wholesalers rose more than forecast in January as distributors tried to keep pace with sales that rose by the most since November 2009.

The 1.1 percent increase in stockpiles followed a revised 1.3 percent gain in December that was bigger than initially estimated, the Commerce Department said today in Washington. The median projection in a Bloomberg News survey was for a 0.9 percent rise. Sales jumped 3.4 percent in January, led by cars, computers and commodities.

The amount of goods in inventory compared with purchases matched a record low in January, pointing to further gains in manufacturing, the mainstay of the expansion. Stockpiles may add to growth this quarter as businesses try to keep more on shelves.

“It’s a sign of strength in the economy,” said Eric Green, chief market economist at TD Securities Inc. in New York, who projected a 1 percent gain in January. “You saw a big correction in the pace of inventory growth last quarter, and now it’s going to be very supportive of growth.”

Applications for home mortgages jumped to the highest level in three months last week, buoyed by improvements in the job market, an industry group said on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, rose 15.5 percent in the week ended March 4.

It was the highest level since the week ended December 10 and was the biggest increase since June 11.

The MBA’s seasonally adjusted index of refinancing applications climbed 17.2 percent, while the gauge of loan requests for home purchases gained 12.5 percent.

“An improving job market is beginning to pave the way for an improving housing market,” Michael Fratantoni, MBA’s vice president of research and economics, said in a statement.

“Additionally, mortgage interest rates remained below 5 percent for a second week, maintaining affordability for buyers and leading to an increase in refinance applications.” Fixed 30-year mortgage rates averaged 4.93 percent in the week, up from 4.84 percent the week before.

Public spending cuts forced by Congress would be a serious brake on U.S. economic growth, hitting jobs and demand, billionaire investor George Soros said on Wednesday.

Speaking at a think-tank breakfast in Paris, Soros said the budget standoff between President Barack Obama’s Democratic administration and the Republican-controlled House of Representatives would force severe cuts in public services.

“While currently the U.S. economy is improving, that is going to be a serious brake on that in terms of employment and effective demand,” he said.

“So I am a little bit less optimistic for the U.S. economy than most people are currently.”

Republicans have so far refused to consider tax increases as part of any deficit-cutting effort. Lawmakers crafted another stopgap spending bill in the U.S. House of Representatives on Tuesday to keep the government running while the Senate set votes for Wednesday on two longer-term measures that appeared doomed to failure.

Soros, who created the giant Quantum hedge fund but describes himself as retired, said the Republican strategy “has a good chance of succeeding because the policy is very popular. But it is not really feasible to reduce spending to the extent necessary to balance the budget.”

The U.S. trade deficit widened more than forecast in January to the highest level in seven months as a surge in imports led by costlier crude oil overshadowed record exports.

The gap in goods and services increased 15 percent to $46.3 billion, from $40.3 billion in December, Commerce Department figures showed today in Washington. Imports jumped 5.2 percent, the most since March 1993, while exports grew 2.7 percent. The deficit was wider than the most pessimistic forecast in a Bloomberg News survey.

Imports were the highest since August 2008, reflecting a jump in oil prices and purchases of business equipment and consumer goods that may be sustained as the world’s largest economy expands. Exports of American-made goods are getting a boost from the weaker dollar and growth in Asia and Latin America, benefiting companies like Deere & Co.

“There’s no doubt the trade deficit will continue to widen through the quarter,” said Chris Low, chief economist at FTN Financial in New York. “The big increase in oil prices could cause some temporary pain. Companies are betting that demand will continue to be strong this year,” which will fuel gains in non- oil imports, he said.

Unemployment declined in 24 U.S. states in January and payrolls increased in 35, showing a strengthening labor market at the start of the year.

Joblessness decreased the most in Nevada, followed by Indiana, Michigan and South Carolina, figures from the Labor Department showed today in Washington. The states with the biggest gains in payrolls were Texas and Michigan.

The report is consistent with Feb. 4 figures showing U.S. unemployment in January fell to 9 percent as employers added 63,000 workers. The improvement continued into February when the jobless rate dropped to 8.9 percent and payrolls increased by 192,000, underscoring Federal Reserve Chairman Ben S. Bernanke’s testimony to Congress that there are “grounds for optimism” in the labor market.

Broad-based job gains have “staying power, power for lifting confidence and sustaining a view that will flow through to consumer spending,” said Jonathan Basile, an economist at Credit Suisse in New York.

Nevada’s jobless rate fell to 14.2 percent from 14.9 percent the previous month, today’s figures showed. Unemployment in Indiana dropped to 9.1 percent in January from 9.5 percent. Joblessness fell to 10.7 percent in Michigan and 10.5 percent in South Carolina.

Even with the decline, the jobless rate in Nevada was the highest in the country, followed by California at 12.4 percent and Florida at 11.9 percent, today’s report showed. Unemployment in Colorado rose to 9.1 percent, the highest for that state since record-keeping began in 1976.

Texas Job Leader; Texas led states with the biggest payroll gains as employers added 44,100 workers. Michigan was second with an increase of 39,700. Payrolls in Ohio rose 31,900 and employment increased 24,500 in Illinois.

The national employment report showed payrolls rose by 63,000 in January, less than half the 152,000 gain a month earlier. Weather may have played a role in depressing job creation during the month.

Winter storms spread from the Midwest and the South to New England, covering 71 percent of the country with snow on Jan. 12, according to the National Climatic Data Center. Last month, the average temperature was 30 degrees Fahrenheit (minus 1.1 degrees Celsius), the coolest January since 1994 when the temperature averaged 28 degrees Fahrenheit. “We do see some grounds for optimism about the job market over the next few quarters, including notable declines in the unemployment rate in December and January, a drop in new claims for unemployment insurance, and an improvement in firms’ hiring plans,” Bernanke told Congress March 1.

AOL Inc., the Internet company spun off from Time Warner Inc. in 2009, said it may eliminate up to 900 jobs as the company integrates its Huffington Post acquisition and restructures to try to return to revenue growth.

The company may cut as many as 700 jobs in India and 200 in the U.S., Chief Executive Officer Tim Armstrong wrote in a note to employees today obtained by Bloomberg News. In India, 300 of the affected employees will move to outsourcing partners and continue to do work for AOL, he said.

“Today, we are announcing an organizational structure that will significantly improve AOL’s ability to focus on growth,” Armstrong wrote in the memo. “Our strategy remains clear: create high quality content experiences for consumers, at scale.”

The company had 5,860 employees at the end of last year, according to securities filings. If the company sheds 900 jobs, that would be 15 percent of that figure.

AOL, whose sales have declined for four straight quarters, agreed to buy the Huffington Post for $315 million last month, aiming to increase online content to help boost advertising revenue. In India, the company is outsourcing back-office work to cut costs and focus on increasing consumer product sales.

First-time claims for jobless benefits rose last week from an almost three-year low,highlighting the uneven nature of the improvement in the U.S. labor market.

Applications for first-time unemployment benefits increased by 26,000 to 397,000 in the week ended March 5, Labor Department figures showed today. Economists forecast claims would climb to 376,000, according to the median estimate in a Bloomberg News survey. The total number of people receiving benefits in the prior week fell to the lowest since October 2008.

The rebound in the world’s largest economy has curbed firings, paving the way for employers such as Boeing Co. and Home Depot Inc. to add jobs and spur household spending. A Labor Department official said claims generally rise the week after a federal holiday and some New England states reported more claims due to school holidays. Presidents’ Day was Feb. 21.

“We’re just giving back the distortions from the holiday in the prior week,” said Mike Englund, chief economist at Action Economics LLC in Boulder, Colorado. “It does appear that tightening in the labor market has gained a little steam.”

Commerce Department figures showed today in Washington that the U.S. trade deficit widened more than forecast in January to the highest level in seven months as a surge in imports led by costlier crude oil overshadowed record exports.

The gap in goods and services increased 15 percent to $46.3 billion, from $40.3 billion in December. Imports jumped 5.2 percent, the most since March 1993, while exports grew 2.7 percent. The deficit was wider than the most pessimistic forecast in a Bloomberg News survey.

Those Banksters are at it again sticking it to the account holders. Through the Financial Reform Bill that made the Federal Reserve Bank the economic dictator over the US economy. In that bill cut the interchange fees that will hurt the banks and not the retailers. Right now the interchange fees the retailers pay the banks are at 44 cents would be capped at 12 cents. This they say would hurt the big banks, Tjis is what the Federal Reserve bank is recommending.

So what is the banks way of compensating for this loss? Their solution is limiting ATM purchases to as much as $100 and as little as $50. They are looking into monthly bank fees on debit and checking accounts. All this is proposed by the big banks. All these banks have been involved in fraudulent foreclosures and committing fraud on overdrafts manipulation people accounts to get a check to bounce that should have not bounced. Not they want to limit access to people’s own money limiting debit purchases. Why limit purchases. Should the banks encourage more debit purchases to compensate the losses instead of limiting the amount on transactions?

At this point we should never trust the big banks anymore. These are the same people who created the economic problems that plague this nation. I do not trust them anymore with my hard earned money. Look at this with great suspicion. They are a bunch of crook.

Bank of America Corp. is segregating almost half its 13.9 million mortgages into a “bad” bank comprised of its riskiest and worst-performing “legacy” loans, Bloomberg News reported, citing Terry Laughlin, who is running the new unit.

“We are creating a classic good bank, bad bank structure,” Laughlin told investors at a meeting in New York Tuesday, according to Bloomberg. He was promoted last month to manage the costs of resolving disputes stemming from the company’s 2008 purchase of Countrywide Financial Corp. “We’re going to get after this, we’re going to do it the right way and we’re going to put it to bed in the next 36 months,” he said.

Only 1 American in 7 has faith a lasting economic recovery has taken hold and a plurality say they are personally worse off than they were two years ago.

Almost half of the respondents in a Bloomberg National Poll conducted March 4-7 believe the U.S. is in a “fragile” rebound and could fall back into recession. More than a third of the country believes the U.S. never emerged from recession.

Sixty-three percent of Americans say the nation is on the wrong track, compared with 66 percent who said so in December, which was the lowest in the national mood in the one and a half years the Bloomberg poll has been conducted.

The gloomy outlook contradicts economic data showing an economy on the mend, including six quarters of economic growth, a 95 percent rise in the Standard & Poor’s 500 index over the past two years and job growth last month of 192,000. The National Bureau of Economic Research officially dated the end of the recession to June 2009. Almost half of poll respondents say they are personally worse off than they were two years ago, when the country was losing 796,000 jobs a month and the economy was shrinking at a 4.9 percent annual rate. The stock market hit its post-financial crisis low two years ago yesterday.

“There seems to be something of a disconnect between what people are feeling and what people are doing,” says J. Ann Selzer, whose Des Moines, Iowa-based firm, Selzer & Co., conducted the poll. “While admitting a recovery has at least started, the public still feels crummy. They may not feel it has started for them.”

Americans, on average, expect gas prices to surge to $4.36 per gallon where they live this year. More than one in four predicts gas prices in their area will rise to $5 or more per gallon this year. Good thing inflation expectations remain well anchored.

The proportion of Americans who believe the country is on the right track dropped 7 points in the past month to 31 percent, and 64 percent think the country is on the wrong track.

It was the highest number of people in an Ipsos poll who believe the country is going in the wrong direction since Obama took office in January 2009.

Ipsos pollster Cliff Young said the rating was a direct result of gasoline prices that have risen sharply in recent weeks as a result of tumult in North Africa and the Middle East.

AIG has only $1.558 billion USD in cash per its latest 10-k.

http://www.aigcorporate.com/investors/2011_February/December_31,_2010_10-K_Final.pdf
The proposed $15.7 billion all cash offer by AIG to buy the FED’s Maiden Lane II portfolio is one big circle jerk which would require AIG to pledge the portfolio and the FED to provide the cash.  What a farce.

The Ceridian-UCLA Pulse of Commerce Index (PCI), issued today by the UCLA Anderson School of Management and Ceridian Corporation fell 1.5% on a seasonally and workday adjusted basis in February, after falling 0.3% in January. The PCI in the first two months of 2011 has now given up all of December’s exceptional 1.8% gain. Over time, the PCI has shown a strong correlation with Industrial Production and with the goods components of GDP. The PCI results over the past two months suggest a small decline in industrial production in February when that data is released by the Federal Reserve on March 17.

Some big companies are changing how they account for their pension plans in a way that could make their earnings look better in coming years.

The companies say the changes will make their earnings reporting more transparent, but they also sweep away tens of billions in past pension losses the companies have yet to smooth into and hurt their results. By charging them against their earnings from

2008, when the losses were incurred, they are taking lumps for years that many investors may no longer care about. [One must craft earnings when top - line growth is stagnant.]

This article was posted: Monday, March 14, 2011 at 5:27 am





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