...And The Beat Goes On

No Quick End to the Pain
The [US] debt-to-GDP ratio went sideways for 50 years and the economy was growing handsomely. Then the debt level tripled in 25 years [since 1982] and the growth rate slowed. So this beautiful faith we have that increasing debt will cure all problems is a complete hoax. Growth is about the level of capital spending and saving, education, technology, R&D and all those good things. It’s not about what I owe you and you owe me.
- Jeremy Grantham
http://www.investmentpostcards.com/2008/06/20/jeremy-grantham-no-quick-end-to-the-pain/


The Fed Unreserved
What few economic leaders have acknowledged is that the Federal Reserve itself is responsible for the real estate and credit bubbles, which are the source of our current troubles. By keeping interest rates too low for too long, the Fed ignited a speculative fever and engendered a disregard for risk management that pushed asset prices above rational levels. Should we blame the private sector for taking advantage of all the cheap credit, or the Federal Reserve for supplying it? If a kindergarten teacher passes out handfuls of Pixie Sticks, and then leaves her classroom unattended for several hours, should we blame the five year olds for the hysteria that ensues?
- Peter Schiff, Euro Pacific Capital, Inc.
http://news.goldseek.com/EuroCapital/1213980391.php


Large U.S. banks' stocks in capitulation mode
(Reuters) - U.S. large-cap regional banks' stocks now appear to be in "capitulation mode" and will likely trade below fair value in the near term as more dividend cuts and capital raises, high credit risk and an uncertain earnings outlook all weigh on their share prices, an analyst at Merrill Lynch said.

Analyst Edward Najarian said he does not expect credit metrics to recover until 2010 and forecast more dividend cuts and capital raises at banks...

Najarian also slashed his earnings estimates by an average of 22 percent for 2008 and 19 percent for 2009. He said the cuts were largely due to higher loan losses, as well as an increase in loan loss reserve building.

"Our higher credit loss outlook is driven by higher loss assumption in nearly all consumer and commercial loan categories ... we have especially increased our loss assumptions for residential construction loans and home equity," Najarian wrote in a note to clients.
http://biz.yahoo.com/rb/080620/banks_research_merrill.html


IMF says US economy is set to ‘stagnate’
The US economy is likely to “stagnate” in the second half of this year, the International Monetary Fund warned on Friday, as stock markets in the US and Europe fell to their lowest levels since March and US bank shares hit a five-year low.

The IMF said continued economic weakness would result in inflation risk going down, not up, in the coming months, and urged the Federal Reserve to keep interest rates on hold for the time being – challenging market expectations that rate increases will soon be required. The IMF also suggested that the dollar had declined to a level at which it was closer to, if not at, its medium-term equilibrium value, on a broad trade-weighted basis.

John Lipsky, second-ranking IMF official, said: “We anticipate the economy will slow to virtual stagnation in the second half of the year.” The IMF is now forecasting no growth at all in the US this year, measured from the final quarter of 2007 to the final quarter of 2008.
http://www.ft.com/cms/s/0/9b5351ec-3f05-11dd-8fd9-0000779fd2ac.html


Used Truck Trade-In Values Plunge, Deepening Auto-Sales Decline
June 21 (Bloomberg) -- Plunging prices for used pickups and sport-utility vehicles are deepening U.S. automakers' sales slide, with Ford Motor Co. the latest company to feel the pinch.

Gasoline near $4 a gallon helped send prices for used large pickups and SUVs tumbling at least 21 percent in May, Atlanta- based Manheim Consulting estimates. That cuts trade-in values, pushing light-truck sales down 16 percent in 2008, compared with less than 1 percent for cars.

Used SUVs may fetch an average of $6,100 less than they did three years ago, according to Bandon, Oregon-based industry- analysis firm CNW Research. That means a possible writedown of almost $5 billion for vehicle lessors, CNW wrote on June 16.

Writedowns at the finance units of GM and Ford may be $1.5 billion and $1.1 billion, respectively, as used-truck values drop, New York-based Lehman Brothers analyst Brian Johnson said in a note yesterday.

Al Castignetti, vice president and general manager of Nissan Motor Co.'s North American sales unit, said the lenders are being squeezed by the so-called residual value they projected for the vehicles at the end of their lease terms.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aId91cQ5iwYU&refer=home


The economy starts its final descent into Davy Jones' Locker
The dollar has once again collapsed. Get ready for the next dollar debacle and the coming rally in gold and silver which have just broken out. The elitists have lost all credibility. The would-be lords of the universe have told so many pathological lies that no one "in the know" believes anything emanating from the forked tongues of Buck-Busting, Bear-Bashing, Big-Ben Bernanke and Hanky Panky Paulson. If our Fed Head and Treasury Secretary had been characters in the Walt Disney movie entitled "Pinocchio," their noses would have quickly grown to lengths that could have been wrapped around the earth's equator several times. God would have had to reverse the earth's rotation to extricate them.

Wall Street tells us the odds favor two quarter percent rate hikes to the Fed funds rate by the end of the year. We ask whether that would be before or after the economy collapses? If before, the Fed's rate hikes will destroy what is left of our economy, and the dollar will collapse, thereby erasing any benefits from the rate hikes. If after, you will see rate cuts instead of rate hikes as the Fed attempts to save the fraudsters on Wall Street who are not even remotely close to recovering from the credit-crunch despite what the elitists might tell you to the contrary. We ask who the morons are that make up these odds, and what planet they come from. They give aliens a bad name. These index predictions are just another form of jaw-boning and disinformation.
-Bob Chapman, The International Forecaster
http://news.goldseek.com/InternationalForecaster/1214164153.php