Thursday, November 4, 2010

Raw Sugar Advances to 29-Year High

Too much money chasing a return! Sugar is one of the most manipulated commodities on the globe and the stories that are in the press don't have anything to do with real demand! They are reported in order to draw new players into the market and then crush them when the market is collapsed by the market makers.

Thanks Tim for the article. Aivars Lode

Raw Sugar Advances to 29-Year High on Forecast Global Output to Decline
By Stephen Morris and Debarati Roy - Nov 4, 2010 2:39 PM ET

Raw-sugar prices jumped to a 29-year high on forecasts for lower global production after adverse weather damaged crops in Brazil, the world’s biggest producer.

Global output will be 167 million metric tons in the year that began this month, down from an estimate of 173 million tons, Paris-based Sucres et Denrees SA said yesterday. Production in Brazil’s Center South tumbled 30 percent in the first half of October from a year earlier, Unica, an industry association, said on Oct. 28.

“People are very concerned about the Brazilian crop, for this year and for next,” said Jonathan Kingsman, the managing director of Lausanne, Switzerland-based sugar broker Kingsman SA.

Raw sugar for March delivery rose 1.5 cents, or 5 percent, to settle at 31.66 cents a pound at 2:01 p.m. on ICE Futures U.S. in New York. Earlier, the price reached 31.81 cents, the highest level for a most-active contract since Jan. 9, 1981.

The commodity gained for the seventh straight session, the longest rally since July 2009.

Global consumption this year will be 166.2 million tons, Sucden said. In the past three month, Brazil and Russia were the producers hurt most by adverse weather, the company said.

“The main problem is the lack of selling,” Kingsman said. “When people need to buy, there is no supply.”

India, the second-biggest producer and largest consumer, may export less than forecast, and shipments should be spread out to prevent global prices from slumping, a milling group said yesterday.

“India could also be a factor in sugar’s rise,” Kingsman said. “If they are going to control or limit exports, that might be worrying some people.”

Sugar has more than doubled since touching a 13-month low on May 7.

In London, refined-sugar futures for March delivery climbed $27.70, or 3.7 percent, to $776.50 a ton on NYSE Liffe. Earlier, the price reached $777.40, the highest level since at least 1989. The commodity has gained 9.3 percent this year.

To contact the reporters on this story: Stephen Morris in London at; Debarati Roy in New York at

To contact the editor responsible for this story: Steve Stroth at

Gold Jumps to Record

We know what happens when records are set they fall.
Boy of boy 70% of Gold goes into jewelery annually how can it be a currency?

Wait for the pop. Thanks Tim for the article

Aivars Lode

Gold Jumps to Record as Weakening Dollar Boosts Demand for Precious Metal
By Pham-Duy Nguyen - Nov 4, 2010 4:29 PM ET

Gold surged to a record price in New York as plans by the Federal Reserve to buy more debt drove the dollar lower, boosting demand for precious metals as alternative investments.

After settling at $1,383.10 an ounce on the Comex, gold rallied to $1,393.40, the highest ever, in after-hours electronic trading. The dollar fell to the lowest level in almost 11 months against a basket of major currencies after the Fed yesterday said it will buy an additional $600 billion of Treasuries through June to spur growth. Gold futures are up 27 percent this year, heading for a 10th straight annual gain.

“The Fed gave the green light to just continue buying gold,” said Matt Zeman, a metals trader at LaSalle Futures Group in Chicago. “You can just short the dollar and go long on commodities with impunity. Until the Fed mops up this liquidity, the sky is the limit for gold.”

Gold futures for December delivery rose $45.50, or 3.4 percent, as of the 1:30 p.m. close on the Comex in New York, the biggest gain for a most-active contract since March 19, 2009. The metal traded at $1,391.90 as of 4:27 p.m. Gold for immediate delivery in London rose to an all-time high of $1,393.55.

The Federal Open Market Committee said yesterday that it was compelled to act because “progress” toward objectives of full employment and stable prices “has been disappointingly slow.” The U.S. and other governments have kept interest rates low and spent trillions of dollars to revive the global economy.

‘Inflationary Threat’

“The Fed aims to weaken the dollar and create inflation,” said Peter Schiff, the president of Euro Pacific Capital in Westport, Connecticut. “Gold and non-dollar investments should benefit from their efforts.”

The dollar also fell to a nine-month low against the euro as the European Central Bank kept its benchmark rate at 1 percent, signaling it will likely stick with its stimulus-exit strategy. The federal-funds rate has been zero to 0.25 percent since December 2008.

“Investors are starting to think about the long-term inflationary threat,” said Adam Klopfenstein, a senior market strategist at Lind-Waldock in Chicago. “The $600 billion in bond purchases looks very friendly for buying anything tangible like gold. Commodities are going to look undervalued.”

The Thomson Reuters/Jefferies CRB Index of 19 raw materials rose to a two-year high.

“Commodity prices are far more likely to rise than to fall,” said Dennis Gartman, an economist and the editor of the Suffolk, Virginia-based Gartman Letter. The Fed has signaled that “it will do what it must to assure that deflationary pressures are dealt a death blow, that inflation is the better choice.”

Inflation expectations, based on the 10-year U.S. Treasury breakeven rate, have fallen to 2.17 percent from 2.4 percent at the beginning of the year. Gold is traditionally a hedge against accelerating consumer prices.

To contact the reporter on this story: Pham-Duy Nguyen in Seattle at

To contact the editor responsible for this story: Steve Stroth at

Real estate ‘shake-out’ coming

Some of you may recall that I have been commenting on this for some time. The commercial space has not had its fallout yet. Here in Naples, I was bemused a couple of years ago, when Realtor's talked about getting out of housing and into commercial as it was booming. I thought at the time why would they still be building commercial when the people are not coming and buying the residential? Self interest; don't stop building until you are forced too or you run out of money. It will be interesting to watch this unfold

Aivars Lode

Schwarzman: Real estate ‘shake-out’ coming
The Blackstone Group will not have a problem attracting LP capital for its next real estate funds, unlike other firms, according to the firm’s chief Steve Schwarzman.
Christopher Witkowsky

The real estate private equity market is headed for a “shakeout” with many firms unable to raise any capital for new funds, Steve Schwarzman, chief executive officer of The Blackstone Group, said during an earnings call Thursday.

“There will be a huge shake-out in [real estate],” Schwarzman said, answering a question about whether limited partners are still allocating capital to real estate funds. “People have been devastated in that area, but it remains a big asset class."

“We have what we think is the best record in the developed world … so we’re anticipating a very good response to our next fundraising, but that will be at the expense of some people who won’t even get to market again,” Schwarzman said.

Institutions like pensions are looking for the cash flow from real estate investments “to meet their actuarial assumptions”, Schwarzman said.

Blackstone has seen improving revenues in the hospitality side of real estate, according to Joan Solotar, senior managing director at the firm.

In real estate, the fund’s net return in its carry funds was 16.9 percent for the third quarter, compared with a negative 2 percent in the same period last year. Net returns for the real estate debt hedge funds declined slightly to 3.3 percent in Q3, compared to 7.8 percent in the same period in 2009.

Overall revenues in real estate in the third quarter increased in the third quarter to $258 million, compared to $100 million in Q3 2009. Over nine months, revenues increased to $618 million, compared to negative $131 million in the same period last year.

The revenue increases were due to improvements in performance fees and allocations and losses in investment income, which improved this year through better operating performance, projected cash flows and exit multiples across the real estate segments’ investments, the firm said.

The firm invested $689 million in the third quarter, up from $35 million in the third quarter of 2009. The firm has about $1.6 billion in investments that haven’t closed yet, he said.

High Rollers at the Fed

I have asked for some time now, where are the assets on the US balance sheet that the govt took over? Well it appears that some of them are on the treasuries balance sheet and apparently making good earnings.

Aivars Lode

High Rollers at the Fed
The central bank becomes a Treasury profit center—for now

The Federal Reserve's Open Market Committee seems poised today to make a historic decision to expand its balance sheet by as much as $1 trillion or more to boost inflation and reduce unemployment. We've said before that we think this is a monetary mistake, but the public and Congress should also be aware that it increasingly carries fiscal risks.

In conducting monetary policy, the Fed has historically stuck to the purchase of short-term Treasury securities and other highly safe assets. That changed amid the financial panic, as the Fed grew its balance sheet to $2.1 trillion in 2009 from $900 million in 2007. That expansion was controversial but it was defensible on grounds that the central bank was fulfilling its duty as lender of last resort during a liquidity squeeze. Roughly $1 trillion of the new assets were in short-term credit facilities, including foreign central bank swaps.

In 2008, the Fed began its dive into riskier assets by adding securities from Bear Stearns and AIG totaling about $70 billion, Fannie Mae and Freddie Mac debt of $45 billion and over $200 billion in Fan and Fred-guaranteed mortgage-backed securities. But those purchases remained a small part of the Fed's portfolio and were widely viewed as emergency measures amid a crisis. As it turned out, the Fed was only warming up.

Today the Fed's balance sheet of more than $2.3 trillion has no term auction facilities, commercial paper funding facilities or liquidity swaps. In their place mortgage-backed securities have ballooned to $1.1 trillion, U.S. Treasurys to $821 billion and Fannie Mae and Freddie Mac debt to $154 billion.

In the short-term, these investments have proven to be a revenue windfall for the U.S. government. In the first six months of 2010, the Fed says this portfolio produced net earnings of some $36.9 billion. Most of those earnings came from Treasurys, Fannie-Freddie debt and mortgage-backed securities (MBS). This compares to $16 billion in the first six months of 2009.

The Congressional Budget Office reports that in fiscal 2010, which ended September 30, the Fed earned $76 billion, a 121% increase from a year earlier. To put that in perspective, $76 billion is more than a third of the $192 billion that the corporate income tax raised in fiscal 2010. The Fed has become one of the Treasury's biggest cash cows, helping to mask the real size of the budget deficit.

As you may have read, however, there is no free lunch, and this revenue stream is the result of taking new risks. Before 2008, short-term government debt was the Fed's traditional instrument of monetary policy. Today the Fed's mortgage-backed portfolio has a maturity of more than 10 years, and nearly half of its portfolio of Treasurys is now greater than five years.

This means greater interest rate risk, as outlined in a new paper in the American Institute of Economic Research, "The World's Most Profitable Corporation," by former Atlanta Fed President William Ford and Walker Todd, a former New York Fed lawyer specializing in monetary affairs. The authors estimate that if interest rates on 30-year fixed-rate MBS were to rise to 5% from 4%, "the Fed's current portfolio of such bonds ($1.079 trillion) would decline in value by about $162 billion—nearly three times the $57 billion of capital on the Fed Banks' consolidated balance sheet in mid-October 2010."

The Fed's new risk profile also shows up in its capital to asset ratio. Messrs. Ford and Todd point out that the Fed's short-term portfolio has allowed it to carry only a 4% ratio of capital to assets compared to an 8% ratio at commercial banks. But since 2008, while the portfolio has become more risky, the capital ratio has dropped. The authors says that today the New York Fed's capital ratio is a measly 1.45%, which means a leverage ratio of 69 to 1 and the entire Fed system has a ratio of 2.46% or 47 to 1.

More leverage together with extended maturities means that if there is a sharp rise in the yield of long-term bonds, perhaps due to rising inflation expectations, the Fed's balance sheet could look very ugly, very fast. Fed officials will rightly argue that they are able to hold these long-term assets to maturity without having to realize losses. But what if the Fed has to sell assets to drain liquidity from the economy faster than it might prefer, and thus take losses on its portfolio? The revenue gain for the government would become losses. Imagine how delighted that would make Congress, not to mention complicating the political task of Fed tightening.

Everybody loves the Fed when it is easing money, as all but a few of us did during the credit boom and housing bubble of the mid-2000s. The trouble comes when the bill comes due. One task of the next Congress should be to better inform the public about the risks the U.S. central bank is taking, ostensibly on our behalf.

Monday, November 1, 2010

What does Florida's favorable business tax rank tell us?

With crumbling infrastructure higher tax's, super cold winters how long before you see the move to Florida and brand new cheap infrastructure, housing, sunshine and did I mention lower tax's. I have been on this band wagon for a while now, as more articles like this get printed people will start to work it out.

Aivars Lode

What does Florida's favorable business tax rank tell us?

By Robert Trigaux, Times Business Columnist
In Print: Saturday, October 30, 2010

For a state where business taxes are condemned as too high and detrimental to economic growth, consider this:

Florida's got a better business tax climate than all but four other states. And not one of those four is east of the Mississippi or comes close to being a big population state.

Florida ranks fifth overall in the annual "state business tax climate index" — an annual analysis of the relative competitiveness of states based on their business tax structures. In fact, Florida has remained consistent at No. 5 on this index since at least 2006. Many other states vacillate in rank from year to year.

The index is assembled by the Tax Foundation, a 73-year-old nonpartisan, educational organization in Washington, D.C. The foundation found that states that kept their taxes low, their systems simple and — this one likely comes as a surprise to many people — minimized tax incentives to lure businesses tend to benefit the most.

"The top eight tax systems all raise sufficient revenue without imposing one or two of the three major state taxes" that include sales taxes, personal income taxes and corporate income taxes, said foundation president Scott Hodge.

The tax group argues that states with the best tax systems will be most competitive in attracting new businesses and best at boosting economic and employment growth.

In a period of U.S. history when so many folks — especially politicians trying to get elected this coming Tuesday — insist that there's no good tax but a lower one, Florida achieved its overall No. 5 status based on a weighted composite of these five taxes:

1. The state ranked 15th in corporate taxes.

2. The state shared the No. 1 spot in the category of individual income taxes. The state has none.

3. The state ranked 30th in sales taxes. Florida relies heavily on sales taxes because so many tourists visit the state and their purchases help support the tax base without additionally burdening state residents. Florida also can rely on sales taxes because neighboring states such as Georgia or Alabama are far from Florida's population centers and none offers big breaks on sales taxes. So there's no incentive to cross the state line in search of lower sales taxes.

4. The state ranked third in unemployment insurance taxes. These taxes are paid by employers into a program to finance benefits for workers recently unemployed. The good news is this state tax is low. The bad news — given Florida's 11.9 percent unemployment — is the state unemployment insurance program was overwhelmed last year. Rather than significantly raise the rate, the state has borrowed funds from the federal government to meet state unemployment obligations.

5. Finally, the state ranked 28th on property taxes levied on the wealth of individuals and businesses. These include taxes on real and personal property, net worth, and the transfer of assets. This is a touchy topic in Florida where property values have plummeted in recent years, but property taxes have not fallen nearly as much.

Bottom line? If Florida boasts the fifth best climate for business taxes in the country, why are cutting state business taxes or providing tax-free incentives to small businesses in such political vogue?

That's what happens when a big recession meets a too-close-to-call election.

Contact Robert Trigaux at

Business taxes:
How competitive is Florida?

State ranks in latest Tax Foundation analysis.

The best

1. South Dakota

2. Alaska

3. Wyoming

4. Nevada

5. Florida

The worst

46. Ohio

47. Connecticut

48. New Jersey

49. California

50. New York

Source: Tax Foundation 2011 State Business
Tax Climate Index