fuTuRe sHOcK

Our new president is determined to hand out $860 Billion to One Trillion dollars in a Herculean effort to literally buy a new economic recovery. While some of his ideas are noble indeed the overall plan
will have little effect and Great Depression II shall take hold in 2009 with crashing stock markets in May and September-October 2009. We think the worst of the worst hits in later September 2009.

During the spring of next year we see:

(1) A second larger wave of residential housing mortgage failures; (2) The first big wave of auto loan failures and repossessions; (3) Over $40 billion in credit card defaults, smashing the bank lenders; (4) The first wave of commercial mortgage failures and foreclosures on shopping malls, office buildings and other commercials; (5) And finally, the grand smashing finale of CDS Credit Default Swaps originated with No margin money or down payments! We heard today the total is 500 trillion! I cannot even fathom that number. These five converging train wrecks could take the Dow from a dead cat bounce of 10400-10800 back to 7250, or even 6600, or 5600.

Shares traders and investors have one more solid quarter, in our view to regain some stock market losses on the forthcoming Obama Trillion Dollar handouts. We think the rising share markets will help most all sectors gain some recovery and provide the illusion the bottoms are in and new bases found. The stark reality hits home after shares peak in April or early May taking an unprecedented selling high dive scaring the wits out of Americans and the watching world.

Even with these events and rising unemployment and social problems, economic observers and analysts could continue to plead the worst is over, the bottoms are in and a fine, new, shiny world of trading and investing in our bright economy lies just ahead for the fall of 2009. Then, in later September and early October, the New York, London, Tokyo and Asian markets take a monster crash. How low is low and how bad can it get? We think the Dow could end-up on November 1st, 2009 anywhere from 5,600 to a low of 3,000 or even 1,500. One guideline will be a falling overshoot of PE’s on our largest, so-called international corporations posting lows of 4 to7. Today, many of them are near 18. What does this tell us about the severity of our projections?

Unemployment nationally in the USA is now touching 16%. The officially posted number is somewhere near half of that. By the fall of 2009, American REAL UNEMPLOYMENT WILL BE NEAR THE ALLTIME 1930′S DEPRESSION HIGH OF 25% UNEMPLOYED. SADLY, THAT IS NOT THE WORST AS IT GETS MORE DIRE. WE PREDICT REAL, USA UNEMPLOYMENT REACHES 30-40%. IN THE RUST BELT STATES OF MICHIGAN AND OHIO, WHILE 40% IS NOT UNREALISTIC. More…

The U.S. Treasury drafted broad guidelines for aid to the auto industry that would let officials provide funds to any company they deem important to making or financing cars. With today’s announcement, the Treasury is giving itself room to provide money from the Troubled Asset Relief Program beyond loans already committed to General Motors Corp., GMAC LLC and Chrysler LLC. That’s consistent with analysts’ speculation yesterday that suppliers, such as GM’s bankrupt former parts unit Delphi Corp., might be eligible for assistance. The guidelines may encourage more guessing on what companies and industries are next, said Vincent Reinhart, resident scholar at the American Enterprise Institute in Washington. More…

Greg Barr
BizJournals.com
Some of the biggest banks that received billions in government aid are probably worse off than originally thought, a study contends. Many of the financial services companies that have received the majority of taxpayer-funded capital through the U.S. Treasury are likely in worse shape than previously disclosed, according to a research report. Audit Integrity, a Los Angeles firm that rates companies based on corporate integrity risk, looked at the 25 financial services companies that have received more than 90 percent of funding doled out so far through the federal government’s Troubled Asset Relief Program, or TARP. More than 80 percent of those companies have a “very aggressive” or “aggressive” accounting and governance risk rating based on recent regulatory filings, and have a high likelihood to restate earnings or be affected by other adverse events such as regulatory actions or shareholder litigation.

That compares with a 35 percent “very aggressive” or “aggressive” rating among the 7,000 public companies measured overall by Audit Integrity. Fourteen of the 25 financial services companies studied were rated as “very aggressive.” Among those 14 companies, 10 received the largest amounts of TARP funding to date, including American International Group, Bank of America, Citigroup, Fifth Third Bancorp, Goldman Sachs Group, J.P. Morgan Chase, Merrill Lynch, Morgan Stanley, PNC Financial, and Wells Fargo. Among the TARP recipients receiving the largest amount of taxpayer funds, the study rates Wells Fargo, Merrill Lynch, and Regions Financial as having a “weak” financial condition.

Zions Bancorp, which operates Houston-based Amegy Bank of Texas, was the only financial services company that received TARP funding to earn a “conservative” rating during the most recent quarter. “As a group these are very risky companies,” said Jack Zwingli, Audit Integrity chief executive. The use of federal money to bail them out should be pause for concern on several levels. “Unfortunately,” Zwinglin added, “the odds are that a number of these companies will fail at some level in the future, which raises the concern that the government is throwing good money after bad. At a minimum we should demand a thorough review of their accounting and corporate governance practices.”

The combination of the worst financial crisis since World War II and the collapse of the $330 billion auction-rate debt market will leave 41 states and the District of Columbia with shortfalls just as financing sources diminish. Merrill Lynch’s Municipal Master Index, which tracks 14,000 bonds, fell 4.6 percent this year, the first decline since a 6.34 percent drop in 1999. The biggest underwriters are merging or leaving the business. “It’s been an absolutely horrible year,” said Robert MacIntosh, a money manager at Eaton Vance Management in Boston, who oversees $17 billion in tax-exempt bonds. He said he’s never seen such turmoil in the $2.67 trillion municipal debt market during more than 25 years in the business. A freeze in global credit markets this year drove municipal borrowing costs to unprecedented levels. Yields on AAA general obligation bonds due in 30 years rose to a record 2.2 times Treasury yields from the historical average of about 0.96 times, according to Concord, Massachusetts-based Municipal Market Advisors. That represents an extra $2.93 million a year in interest on every $100 million of debt sold. More…

We are to the point where we are about 14 feet from going over the edge of Niagara Falls. We haven’t gone over the edge yet; we haven’t gone to a total collapse. We don’t have riots in the streets; we don’t have a revolution. That’s coming; that’s about two to three months off. Here’s what we’ve got: the Fed has committed to $8.5 trillion of taxpayers’ money to bail out the worst run companies and banks. It hasn’t worked. Now, they’re at a 0% to .25% on the Fed Funds rate for funds for banks, which means if you go down and you pay $100,000 for a T-bill for 90 days, your return is zero, which is to imply that there is zero risk to investing with the government. Anybody who actually believes that is going to be in for a real shock in the first quarter of next year.

GM has lost has lost $80 billion dollars in the last four years. They’re burning through $2 billion a month when everything is going well. Their sales are down 37% in November; the mathematical probability of GM surviving is zero. But we’re going to pour more taxpayer money down that hole. AIG’s also turned into the proverbial black hole. I would think that at $300 billion or $400 billion or $500 billion or $600 billion, somebody’s going to wake up and say, “You know, we’re losing a lot of money here.”What we have done is guaranteed hyperinflation in the United States. We have guaranteed the destruction of the United States. We will have riots starting in the first quarter of next year; we will default by the summer of 2009. More…

Israel rejected international pressure to suspend its air offensive against Palestinian militants whose rocket barrages are striking close to the Israeli heartland, sending warplanes Wednesday to demolish smuggling tunnels that are the lifeline of Gaza’s Islamic Hamas rulers. Israel has been massing troops and armor along the Gaza border in an indication the air campaign could morph into a ground operation. The government approved a plan to call up an additional 2,500 reserve soldiers late Tuesday, following a decision earlier this week to authorize a call-up of 6,700 soldiers. The call-ups have yet to be carried out. Calls for an immediate cease-fire have also come from the United States, the European Union, the United Nations and Russia. President Bush and Secretary of State Condoleezza Rice personally called leaders in the Middle East on Tuesday to press for a durable solution. More…

Maintaining a night vigil along the border with Israel, Hamas fighters sat within reach of a device connected to wires running underground. “What you see are little surprises, but what awaits (the Israelis) is beyond their imagination,” said Abu Sakher, a Hamas battalion commander making the rounds of frontier positions held by his men awaiting a possible invasion of the Gaza Strip. Abu Sakher did not elaborate, but the wires were attached to a battery-like device that might have been a detonator for a land mine to be used against Israeli armor or infantry. “Not only are our surprises hidden, but so are our men, and if the Zionists enter, they will be met where they never expected to be confronted,” he said. Hamas’s armed wing is believed to have 25,000 fighters, some of them members of an “engineers” unit of bomb- and rocket-making experts. More…

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ALONG THE ISRAEL-GAZA STRIP BORDER — In a muddy field overlooking the smoke-blackened Gaza Strip skyline on Tuesday, young soldiers from an Israeli tank unit linked arms with euphoric civilians and joined them in the hora, a circular dance, in anticipation of a possible ground invasion of the Palestinian territory. Far overhead, a pair of Israeli Apache helicopters fired on a target inside Gaza, unleashed diversionary flares and disappeared to the north. Elsewhere in the autonomous Palestinian region, Israeli jets, helicopters and ships pummeled the area with new strikes against dozens of targets.

Hour after hour, Israeli jets, helicopters and ships pummeled the region with new strikes against dozens of targets as diplomats took the first tentative steps to head off a ground offensive. Four days into the Israeli military campaign, the death toll among Palestinians topped 370, including at least 90 civilians, according to U.N. personnel and Palestinian human rights workers. “If you enter Gaza, the children will collect your flesh and the remains of your tanks, which will be spread out through the streets,” said a leading Hamas spokesman, who goes by the nom-de-guerre Abu Obeida, in a videotaped statement delivered to reporters in the Gaza Strip. More…

A record $14 trillion (£9.7tn) has been wiped off world share values this year as stockmarkets around the world suffered their worst 12 months on record. Turmoil in the financial system and the worst global recession since the 1970s have sent shares reeling. Global stocks, as measured by the MSCI index, have fallen by a record 43.7% in 2008, destroying $14tn of shareholder value. The worst-performing stockmarket this year was Russia’s, where the key RTS index plunged by 72%. Second worst hit was China’s benchmark Shanghai composite index which plummeted 65% - its largest-ever annual drop - after soaring more than 300% over 2006 and 2007. More…

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The private sector will be asked to manage and run a communications database that will keep track of everyone’s calls, emails, texts and internet use under a key option contained in a consultation paper to be published next month by Jacqui Smith, the home secretary. A cabinet decision to put the management of the multibillion pound database of all UK communications traffic into private hands would be accompanied by tougher legal safeguards to guarantee against leaks and accidental data losses.

But in his strongest criticism yet of the superdatabase, Sir Ken Macdonald, the former director of public prosecutions, who has firsthand experience of working with intelligence and law enforcement agencies, told the Guardian such assurances would prove worthless in the long run and warned it would prove a “hellhouse” of personal private information. “Authorisations for access might be written into statute. The most senior ministers and officials might be designated as scrutineers. But none of this means anything,” said Macdonald. “All history tells us that reassurances like these are worthless in the long run. In the first security crisis the locks would loosen.” More…

Ireland’s unemployment rate surged to a decade high of 7.8 per cent in November, surprising economists and deepening the Government’s struggle to contain its budget deficit. The Central Statistics Office reported an unexpectedly sharp jump from October’s rate of 7.4 per cent hours after the Government conceded that its budget planning for 2009 was in disarray because of grossly overestimated tax forecasts.

Unemployment has not been this bad in Ireland since April 1998. And the swelling numbers of people signing on for jobless benefits is even worse, reaching a 12-year high above 268,000. The different milestones reflect the fact that Ireland’s population and job market have grown strongly during the so-called “Celtic Tiger” economic boom.

Finance Minister Brian Lenihan told the nation that, after more than a decade of unprecedented wealth gains, citizens must accept a declining standard of living. Lenihan said he had already raised taxes as high as he could in an emergency October budget, so a new wave of spending cuts in government services must follow. He also warned that civil servants might not get pay raises agreed for 2009. More…

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It’s a good thing Nancy Silverton still has her day job. The La Brea Bakery founder and queen of L.A.’s restaurant scene is among the legions of investors who’ve lost their fortunes in the alleged $50-billion fraud attributed to New York financier Bernard L. Madoff. Silverton said she learned the bad news from her father when she called him at his office as she was driving up to Napa Valley about two weeks ago. “He said, ‘I want to tell you something. Everything’s gone. We lost everything.’ ” She was devastated. Silverton said she lost her entire nest egg, including her retirement fund and money she had set aside for her children and their educations. “I need to reinvent my life,” said Silverton, who co-founded the landmark Campanile restaurant and La Brea Bakery with her ex-husband, Mark Peel, and another partner. “To think you have a chunk of money is very comforting. Now, I’m just like 99% of the world. If I had to retire tomorrow, I could not.” More…

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Over 400 Lativans have signed a letter addressed to Russian billionaire Roman Abramovich asking him to buy their country, Latvia’s novonews.lv website said on Monday. The letter, posted by an unknown person on the petitonline.com website, reads, “Dear Roman Abramovich. As you may already know our homeland Latvia went bankrupt and is currently holding talks with the International Monetary Fund on the sale of our country for 7.5 billion euros ($10.7 billion).”

“I would like you to consider the possibility of purchasing Latvia: the population are hard working and pleasant, environmentally clean area and plenty of space to dock your yacht,” the letter said. Latvia has experienced the worst economic decline in the European Union, with the country’s GDP declining for a third quarter this year by 4.6% against the same period last year. More…

Struggling airlines hit more trouble in November, with passenger numbers down and freight plunging by a “shocking” 13.5 percent, the worst drop since the September 11 terror attacks, IATA said Tuesday. Profits at Asia-Pacific carriers, which saw the sharpest downturn in demand as the global economic crisis deepened, are expected to be “disproportionately” affected by the plunge in cargo traffic, the aviation industry group added. “The 13.5 percent drop in international cargo is shocking … By comparison, this is the largest drop since 2001, in the aftermath of September 11,” IATA chief Giovanni Bisignani said. “As air cargo (accounts for) 35 percent of the value of goods traded internationally, it clearly shows the rapid fall in global trade and the broadening impact of the economic slowdown,” said Bisignani. Freight traffic shrank 16.9 percent for the Asia-Pacific airlines which account for almost half of all air cargo carried. “As freight accounts for a larger percentage of revenues for the Asia-Pacific carriers, fourth quarter profits for the region’s carriers will be disproportionately impacted by the downturn in the global air freight market,” IATA said. Latin American, North American and European carriers also posted double-digit falls in freight traffic. More…

The Dignity, a Free Gaza boat on a mission of mercy to besieged Gaza, is being attacked by the Israeli Navy in international waters. The Dignity has been surrounded by at least half-a-dozen Israeli warships. They are firing live ammunition around the Dignity, and one of the warships has rammed the civilian craft causing an unknown amount of damage. Contrary to international maritime law, the Israelis are actively preventing the Dignity from approaching Gaza or finding safe haven in either Egypt or Lebanon. Instead, the Israeli navy is demanding that the Dignity return to Cyprus - despite the fact that the ship does not carry enough fuel to do so. Fortunately, no one aboard the ship has yet been seriously injured. There are 15 civilian passengers representing 11 different countries (see below for a complete list). At approximately 5am (UST), well out in international waters, Israeli warships began surrounding the Dignity, threatening the ship. At 6:45am (UST) we were able to establish brief contact with the crew and were told that the ship had been rammed by the Israeli Navy in international waters, and that the Israelis were preventing the ship from finding safe harbor. We heard heavy gunfire in the background before all contact was lost with the Dignity. More…

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The Israel Air Force used a new bunker-buster missile that it received recently from the United States in strikes against Hamas targets in the Gaza Strip on Saturday, The Jerusalem Post learned on Sunday. The missile, called GBU-39, was developed in recent years by the US as a small-diameter bomb for low-cost, high-precision and low collateral damage strikes. Israel received approval from Congress to purchase 1,000 units in September and defense officials said on Sunday that the first shipment had arrived earlier this month and was used successfully in penetrating underground Kassam launchers in the Gaza Strip during the heavy aerial bombardment of Hamas infrastructure on Saturday. It was also used in Sunday’s bombing of tunnels in Rafah.

Also Sunday, Military Intelligence’s Psychological Warfare Department broke into radio broadcasts in Gaza and warned Palestinian civilians not to cooperate with Hamas terrorist activity. Palestinians reported that they received phone calls to their cellular phones and landlines from the IDF. The phone call, the Palestinians said, conveyed a recorded message ordering the immediate evacuation of homes that were next to Hamas infrastructure or being used by the terrorist organization. More…

DEBKAfile reports this call-up order raises the number of reservists Israel has mobilized for the Gaza operation to 9,200. Beersheba, capital of the Negev and 40 km from Gaza, was attacked for the first time by two improved Grad rockets Tuesday night, Day 4 of the Israeli operation. One hit an empty nursery school. There were 34 shock victims hospitalized. Beersheba is the largest town (250,000 population) and the most distant from Gaza ever to come under rocket attack. Israeli artillery opened cross-border fire on potential rocket sites inside Gaza. Hamas kept up its missile and rocket attacks against an expanding circle of Israel towns, 35 by nightfall. Israeli tank, infantry, armored and artillery units are massed outside the northern, central and southern Gaza Strip awaiting orders to go in. Tuesday, Dec. 30 – Day 4 of Israel’s Gaza offensive, Beersheba, capital of the Negev, was attacked for the first time by two missiles Tuesday night, one hit an empty nursery school. Israeli artillery opened cross-border fire on potential rocket sites inside Gaza.

Seven thousand university students from Iran’s central city of Isfahan registered on Monday to fight Israel, the semi-official Fars news agency reported. “On the first day of registration to fight Zionist regime and to help Palestinians, 7,000 students from the universities of Isfahan have claimed readiness,” Mohammad Zarifi, member of Iran’s Students Islamic Association, was quoted as saying by Fars. Also in the day, another Iranian students group, Basij Students(Volunteers) of Tehran Universities, announced it is registering volunteers to fight Israel.

The registration came a day after Iran’s Supreme leader Ayatollah Ali Khamenei issued a religious decree saying whoever dies in fight with Israel and in defense of Gaza would be a martyr. “In response to the supreme leader’s decree of Jihad (holy war),Basij students from all the universities of Iran have registered and the registration will be kept tomorrow,” said Alireza Zahedi, a member of Basij Students of Tehran Universities, without disclosing how many students have already registered. “In the near future, the registered students will hold a meeting to claim their readiness to the supreme leader to go to fight in the occupied (Palestinian) territories,” he added. More…

The armed wing of Hamas has vowed to send rockets deeper into Israel than ever before if the latter continued its deadly bombardment of the Gaza Strip. “We tell the leaders of the enemy - if you continue with your assault, we will hit with our rockets further than the cities we have hit so far,” a masked spokesman for Ezzedine al-Qassam Brigades said in televised comments on Tuesday. “If you think that Hamas and al-Qassam will be crushed, we will rise up from the rubble,” the spokesman said. The Hamas announcement followed Israeli warning that the onslaught in the Gaza Strip could last for “weeks”. Israel said there would be no let up until the threat of Palestinian rockets attacks from the Gaza Strip had been removed. “There is no room for a ceasefire,” Meir Sheetrit, Israel’s interior minister, said. “The government is determined to remove the threat of [rocket] fire on the south. “Therefore the Israeli army must not stop the operation before breaking the will of Palestinians, of Hamas, to continue to fire at Israel.” More…

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Rep. Dennis Kucinich (D-OH) called for an independent investigation to be led by the United Nations into the recent eruption of violence between Israel and Hamas along the Gaza strip that has killed scores of innocent civilians. Kucinich said he wrote to UN General Secretary Ban ki-Moon urging an “independent inquiry of Israel’s war against Gaza.” The Democratic lawmaker said Israel’s attacks are an example of “collective punishment,” which violates the Geneva Conventions. “The perpetrators of attacks against Israel must also be brought to justice, but Israel cannot create a war against an entire people in order to attempt to bring to justice the few who are responsible. The Israeli leaders know better,” Kucinich said in a news release Monday. “The world community, which has been very supportive of Israel’s right to security and its right to survive, also has a right to expect Israel to conduct itself in adherence to the very laws which support the survival of Israel and every other nation.” More…

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Four leading Israeli rabbis have sanctioned the murder of civilian population in the Gaza Strip amid the Israeli onslaught on the region. “When a population living near a Jewish town sends bombs at the Jewish town with the purpose of killing and destroying Jewish lives there, it is permitted, according to Jewish Law, to fire shells and bombs at the firing sites, even if they are populated by civilians,” read a ruling issued by Rabbi Yaakov Yosef, Rabbi Dov Lior, Rabbi Shalom Dov Wolpe and Rabbi Meir Mazuz.

The four added that a warning should be issued prior to any attacks; however, they reiterated that the army’s response to rocket or mortar fires may be immediate “even if there is no time for a warning.” The rabbis argued that the army should announce that it would bomb any civilian community from which a rocket is fired to force the local residents into confronting those who fire rockets or mortars at Israeli targets. More…

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An 85-year-old former Army mechanical engineer pleaded guilty Tuesday to conspiracy, admitting that he passed classified documents to the Israelis in the 1970s and ’80s. Ben-ami Kadish entered the plea in federal court in Manhattan and is to be sentenced in February. A prosecutor said the government will not oppose a sentence that calls for no prison time. Kadish pleaded guilty to only one of the four conspiracy charges he originally faced. Kadish was accused of taking home classified documents from 1979 to 1985 when he worked at an Army base in New Jersey. The government said he let an unidentified Israeli agent photograph the documents in his basement. Those documents included information about nuclear weapons.
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Not only are children in the Gaza Strip losing their parents, missing food, medicines and school, they are being killed. Israeli forces took the lives of at least 30 children in Gaza since air attacks began on Saturday. A statement issued by the Global Movement for the Defense of Children says its initial reports indicate that another 150 children are injured. The first children hit en masse were during struck during the beginning of the attacks when they were leaving school. Dozens of school children were raced to area hospitals in Gaza City on Saturday. Among the children killed are the sisters in Jabaliya yesterday and the eight year old boy today in Khan Younis. The British university movement to boycott Israel wrote in their petition, “‘Children,’ says an Israeli spokeswoman, ‘are legitimate targets because if they inhabit a house allegedly being used to manufacture home-made rockets to fire into Israel, they are ‘terrorists’ themselves.’” The international children’s agency Global Defense for Children called today on the United Nations Security Council to convene an emergency session. The UNSC has yet to take effective action to force Israel to stop its aggression or apply previous UN resolutions, which include an end to occupation. More…

With powerful high-tech zoom lenses monitoring more than 200 key locations, and more on the way, police officers in Washington, D.C., will soon be able to peer into virtually every corner of the nation’s capital. “We become like China. We become like the former Soviet Union, monitoring the movement of citizens,” said Johnny Barnes, executive director of the National Capital Area American Civil Liberties Union. “In this country, we have Times Square, we don’t have Tiananmen Square.” More importantly, Barnes said the cameras give citizens “a false sense of security” by being able to see activity but not being at the scene to prevent a crime from happening. “Cameras don’t catch crooks, cops do. A camera would not prevent a robbery. It might help law enforcement find the person who committed the robbery, but it wouldn’t prevent it.” Barnes used New York’s Times Square as an example, where the multimillion-dollar camera system has resulted in 10 arrests for petty crimes over a 22-month period. More…

Scientists were closely monitoring more than 250 small earthquakes that rattled Yellowstone National Park over the weekend and into Monday. Swarms of small earthquakes happen frequently in Yellowstone. But Robert Smith, a professor of geophysics at the University of Utah, said it’s very unusual for so many earthquakes to happen over several days. “This is an active volcanic and tectonic area and these are the kinds of things we have to pay attention to,” Smith said. “We might be seeing something precursory. “Could it develop into a bigger fault or something related to hydrothermal activity? We don’t know. That’s what we’re there to do, to monitor it for public safety.” More…

Kevin Bacon and Kyra Sedgwick are the latest known victims of Bernie Madoff’s $50 billion Ponzi scheme. “I can confirm that they had investments with Mr. Madoff – no further specifics or comment beyond that,” Bacon’s rep, Allen Eichorn, told New York Magazine Tuesday. As for reports that the couple lost everything except for their checking accounts and the land they own, Eichorn said, “Please, let’s not speculate or rely on hearsay.” Other Hollywood elite have also been victimized by the fraudulent money manager: Steven Spielberg’s Wunderkinder Foundation was hit, and DreamWorks’ Jeffrey Katzenberg has lost “millions,” reports the Wall Street Journal.
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Home prices in 20 major U.S. cities declined at the fastest rate on record, depressed by mounting foreclosures and slumping sales. The financial market meltdown that’s reverberated around the globe has prompted banks to curb lending, signaling the housing slump will persist for a fourth year in 2009. Falling property values have eroded household wealth, causing consumers to pare spending and deepening what is projected to be the longest recession in the postwar period. Other housing reports this month have shown property values are deteriorating even faster as foreclosures climb. Home resales, which account for about 90 percent of the market, dropped in November and median-home prices fell 13 percent from a year earlier, the most since records began in 1968, the National Association of Realtors said last week. Foreclosures and so- called short sales, or purchases at less than the value of the outstanding mortgage, accounted for 45 percent of last month’s home purchases, the agents’ group also said. More…

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A polite and cheerful man with a buzz cut, Mr. Panarin insists he does not dislike Americans. But he warns that the outlook for them is dire. “There’s a 55-45% chance right now that disintegration will occur,” he says. “One could rejoice in that process,” he adds, poker-faced. “But if we’re talking reasonably, it’s not the best scenario — for Russia.” Though Russia would become more powerful on the global stage, he says, its economy would suffer because it currently depends heavily on the dollar and on trade with the U.S. Mr. Panarin posits, in brief, that mass immigration, economic decline, and moral degradation will trigger a civil war next fall and the collapse of the dollar. Around the end of June 2010, or early July, he says, the U.S. will break into six pieces — with Alaska reverting to Russian control.

He based the forecast on classified data supplied to him by FAPSI analysts, he says. He predicts that economic, financial and demographic trends will provoke a political and social crisis in the U.S. When the going gets tough, he says, wealthier states will withhold funds from the federal government and effectively secede from the union. Social unrest up to and including a civil war will follow. The U.S. will then split along ethnic lines, and foreign powers will move in.

California will form the nucleus of what he calls “The Californian Republic,” and will be part of China or under Chinese influence. Texas will be the heart of “The Texas Republic,” a cluster of states that will go to Mexico or fall under Mexican influence. Washington, D.C., and New York will be part of an “Atlantic America” that may join the European Union. Canada will grab a group of Northern states Prof. Panarin calls “The Central North American Republic.” Hawaii, he suggests, will be a protectorate of Japan or China, and Alaska will be subsumed into Russia.

[Panarin]…began his career in the KGB in 1976. In post-Soviet Russia, he got a doctorate in political science, studied U.S. economics, and worked for FAPSI, then the Russian equivalent of the U.S. National Security Agency. He says he did strategy forecasts for then-President Boris Yeltsin, adding that the details are “classified.” In September 1998, he attended a conference in Linz, Austria, devoted to information warfare, the use of data to get an edge over a rival. It was there, in front of 400 fellow delegates, that he first presented his theory about the collapse of the U.S. in 2010. More…

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The Times of India
Communist China on Thursday celebrated Christmas by announcing a high-end capitalistic dream: making the Yuan an international currency. The government has also set out to implement some aspects of this dream in a limited fashion. It has allowed businesses in certain regions of China to make payment settlements in Yuan instead of using a reference currency like the US dollar with South East Asian countries like Singapore. Businesses located in the Yunnan province and in the Guangxi Zhuang autonomous region will be allowed to use the Yuan to settle trade payments with “neighbouring trade partners” like member-nations of Association of Southeast Asian Nations, the government said. But there was no mention of India among the neighbours that would be engaged for this purpose.

The Chinese currency will also be used as the medium for settlement between businesses in the Pearl and Yangtze River delta regions and the special administrative regions of Hong Kong and Macao, the State Council, which is the national cabinet, said. With China holding $1.9 trillion in foreign exchange, it has been able to make the Yuan fairly acceptable in certain quarters. But Beijing has been facing stinging criticism from western nations for controlling the value of the Yuan instead allowing it to behave in tune with market forces. The move would help Chinese exporters to overcome some of the risks associated with foreign exchange when they are able to make settlements in the local currency, experts said. The government may have been prompted by speculation that the US dollar might lose a lot of its value because of the ailing American economy.

The move might even draft the otherwise important role played by the Hong Kong dollar in international monetary system. Experts had earlier suggested that the Hong Kong dollar will come under serious pressure owing to the weakening of its economy in the wake of the global crisis and a rising Yuan. Zhou Xiaochuan, governor of the People’s Bank of China, had recently suggested that future settlements using the US dollar would prove to be problematic if the dollar’s value fluctuates drastically. Starting off the currency project with Hong Kong, Macao and ASEAN would help the authorities test the waters before launching the Yuan in the deep waters of international trade. Trade in these areas at $402 billion now constitute 20% of China’s total foreign trade.

The Chinese government might ultimately be able to persuade a few other nations like South Korea, with which it recently signed a currency swap agreement, to accept the Yuan as a reference currency in international settlements. It has also signed a currency swap deal with Hong Kong last month.

There’s no hotline between China and Washington. What does that tell you.

A new military hotline between Beijing and Moscow has been used for the first time, according to reports in the Chinese state media. A senior Chinese officer discussed a range of topics with his Russian counterpart, Xinhua news agency said. The phone link is designed for “timely communication on significant issues”. Efforts to set up a similar hotline, mainly for use during crises, between Beijing and Washington appear to have stalled, correspondents say. In a world where emails and mobile devices mean you can always be in touch with the office, it seems strange that two of the world’s most important military powers have only now started using a direct telephone link designed to make it easier for their senior officers to contact each other.

No doubt security concerns and diplomatic issues had to be resolved first. But in huge bureaucracies it is not always easy to get to the man in charge in a hurry. The hotline will now make that easier. Put simply, the Chinese can now pick up the phone when there is a crisis and ask the Russians what is going on and what they are doing about it. This first historic call was not so urgent, apparently. The two soldiers exchanged views on the international and regional situation, bilateral relations and other issues of common concern. There is still no hotline between China’s armed forces and the Pentagon in Washington. The two countries’ presidents first agreed to set one up nearly three years ago. A further deal was signed between the two defence departments in February but since then progress on establishing it appears to have stalled.
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U.S. retailers face a wave of store closings, bankruptcies and takeovers starting next month as holiday sales are shaping up to be the worst in 40 years. Retailers will close 12,000 stores in 2009, according to Howard Davidowitz, chairman of retail consulting and investment- banking firm Davidowitz & Associates Inc. in New York. AnnTaylor Stores Corp., Talbots Inc. and Sears Holdings Corp. are among chains shuttering underperforming locations. More than a dozen retailers, including Circuit City Stores Inc., Linens ‘n Things Inc., Sharper Image Corp. and Steve & Barry’s LLC, have sought bankruptcy protection this year as the credit squeeze and recession drained sales. Investors will start seeing a wide variety of chains seeking bankruptcy protection in February when they file financial reports, said Burt Flickinger.

“You’ll see department stores, specialty stores, discount stores, grocery stores, drugstores, major chains either multi- regionally or nationally go out,” Flickinger, managing director of Strategic Resource Group, a retail-industry consulting firm in New York, said today in a Bloomberg Radio interview. “There are a number that are real causes for concern.” More…

More than half a million jobs will be axed in the coming 12 months, making 2009 the worst year for job losses for two decades, according to forecasts to be published today. Just a week after one cabinet minister warned The Independent of an impending unemployment “bloodbath”, the Chartered Institute of Personnel and Development (CIPD) is predicting that as many as 600,000 staff face redundancy in 2009 alone, taking the unemployment total to 2.8 million. Next year’s forecast – combined with the number of positions already lost and those expected to go in 2010 – adds up to a grim total, according to John Philpott, the CIPD’s chief economist.

“The period from mid-2008 until the end of 2009 will witness the loss of around three quarters of a million jobs,” he said. “Assuming the economy bottoms out in the second half of 2009, job losses are likely to continue into 2010, in all probability taking the final toll of lost jobs to around 1 million.” The cull will start immediately, with staff cuts expected to jump sharply in the next few months as employers take stock of the economic outlook and go ahead with plans for lay-offs that were put off until after Christmas. “The period between New Year and Easter is likely to be the worst for redundancies since 1991,” Mr Philpott said. More…

Local charities in the San Francisco Bay Area are seeing a sharp increase in those without shelter or food, as well as a change in the composition of the needy, according to several recent reports. In addition to the groups often in need of food and shelter—people with mental health difficulties, down-and-out-veterans and the elderly—organizations such as the Salvation Army are increasingly seeing families with children sleeping on the streets and showing up at places like Glide Memorial Church that serve free meals. Those making use of emergency food and shelter are often employed people who once had homes of their own but lost them in the wave of foreclosures over the past several years. Others have recently been laid off, including high tech workers and those in the legal profession. Both these sectors have seen mass layoffs in the Bay Area in the last few months.

The rash of newly homeless is not limited to homeowners. Far less frequently reported but no less dire is the situation of rental tenants who live in buildings that are foreclosed. On December 18, the San Francisco Chronicle noted that renters are frequently given as little as 30 days’ notice to vacate their property after receiving notice of eviction. With no hope of seeing a refund of their security deposits or their last month’s rent, tenants are thrust out into a market of uncontrolled high rents that many cannot afford. Such evictions are in fact illegal, but this is not commonly known. More…

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Credit Suisse clients may have lost up to 1 billion Swiss francs ($925.9 million) on investments connected to accused swindler Bernard Madoff, newspaper Sonntag reported on Sunday. Without giving details of its sources, Sonntag reported that internal forecasts at Credit Suisse showed that customers of Switzerland’s second-largest bank could have lost 0.9-1.0 billion francs in the Madoff case. Credit Suisse spokesman Jan Vonder Muehll said: “Credit Suisse did not actively recommend or sell products invested with Bernard Madoff. “Furthermore, none of the funds of hedge funds offered by Credit Suisse contained holdings in Madoff funds.” Authorities say Wall Street fund manager Madoff has confessed to running a $50 billion fraud that ensnared investors and charities around the world. Funds managed by Swiss banks have been prominent victims of Madoff, who is accused of running a global Ponzi scheme in which earlier investors are paid off with investments from newer clients.
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Heightened tensions between China and the U.S. may worsen a contraction in world trade that already threatens to deepen and prolong the economic downturn. The friction comes as President- elect Barack Obama readies a two-year stimulus package worth as much as $850 billion that will require the U.S. to borrow more than ever from China, the largest buyer of Treasury securities. “The American economic slump is running into the Chinese economic slump,” says Derek Scissors, a research fellow at the Washington-based Heritage Foundation. “It’s creating the conditions for a face-off between Beijing and the U.S. Congress, possibly leading to destabilization of the world’s most important bilateral economic relationship.”

In the U.S., business and labor groups, along with lawmakers, are pushing the new Obama administration to take a harder line with China than President George W. Bush did. Senate Finance Committee Chairman Max Baucus, a Democrat from Montana, plans legislation that would raise tariffs on dumped imports from China and other nations. And newly elected Democratic congressmen such as Larry Kissell of North Carolina and Dan Maffei of New York have pledged actions to stop jobs from being shipped to China. Officials in Beijing will push back, says James McGregor, chairman of Beijing-based research firm JL McGregor & Co. and author of the book “One Billion Customers,” about doing business in China. Chinese leaders “will do whatever they need to protect their interests and to say to the U.S., ‘Do not mess with us on this one,’” he says. More…