Friday, August 5, 2011

Guggenheim CIO: Europe A "Train Wreck" On Brink Of "Major Financial Collapse"

Scott Minerd, CIO of Guggenheim Partners, tells CNBC Tuesday Europe Is A "Train Wreck" And On The Brink Of A Major Financial Collapse
In the midst of today's major market crash in the United States that shot gold to all time highs and the people of Greece flocking to the banks in massive numbers to pull their cash from the banks more and more investors, economists and analysts are joining the chorus singing about a pending worldwide global collapse.
Gerald Celente sounded the bell today saying that the U.S. dollar isn't worth the paper it is printed on and that the spending cuts part of the debt ceiling bill that was passed into law today will trigger a Great Depression.

Laurence Kotlikoff, an economics professor from Boston University said the U.S. will need to make $20 trillion in debt cuts to save America from a financial collapse.
On the other side of the Atlantic the situation is even worse.
Scott Minerd, CIO of the fixed-income firm Guggenheim Partners, and former managing director at Morgan Stanley and Credit Suisse weighed in on the problems facing Europe.
In the video of his interview with CNBC attached on the left side of this page, he says the Europe is such a train wreck that investors will have no choice but to flee the currency altogether at some point while pointing out that Europe is on the verge of a major financial collapse.
If you have any doubt that he is alone in his sentiment just look at the surging prices for credit default swaps, shown in the image attached to the left side of this page, which isa type of insurance against a default and often used as an indicator of creditworthiness and a barometer of economic fear.
You can read the written CNBC article on the interview with Scott Miner here.

Stock Market Bloodbath: Dow Plunges 513 Points on Fear

Gripped by fear of another recession, the stock market suffered its worst day Thursday since the financial crisis in the fall of 2008. The Dow Jones Industrial Average fell more than 500 points, its ninth-steepest decline.

The sell-off wiped out the Dow's gains for 2011. It put the Dow and broader stock indexes into what investors call a correction -- down 10 percent from their highs in the spring.

"We are continuing to be bombarded by worries about the global economy," said Bill Stone, the chief investment strategist for PNC Financial.

For the day, the Dow closed down 512.76 points, or 4.3 percent, to close at 11,383.68. It was the steepest point decline since Dec. 1, 2008.

The ‘Unthinkable’ Could Happen — Wall Street Journal
Over one million Americans have heard the evidence for 50% unemployment, 90% stock market crash, and 100% inflation. Be prepared. Watch the Aftershock Survival Summit Now, See the Evidence.
Thursday's decline was the ninth-worst by points for the Dow. In percentage terms, the decline of 4.3 percent does not rank among the worst. On Black Monday in 1987, for example, the Dow fell 22 percent.

The S&P 500 lost 60.27, or 4.8 percent, to 1,200.07. The S&P 500, the benchmark for most mutual funds, is now down 12 percent from its recent high of 1,363 reached on April 29. The Nasdaq composite shed 136.68, or 5.1 percent, to 2,556.39.

Across the financial markets, the day was reminiscent of the wild swings that defined the financial crisis in September and October three years ago. Gold prices briefly hit a record high. Oil fell even more than stocks -- 6 percent, or $5.30 a barrel. And frightened investors were so desperate to get into some government bonds that they were willing accept almost no return on their money.

It was the most alarming day yet in the almost uninterrupted selling that has swept Wall Street for two weeks. Since July 21, the Dow has lost more than 1,300 points, or 10.5 percent of its value. It has closed lower nine of the 10 trading days since then.

Two weeks ago, investors appeared worried about the deadlocked negotiations in Washington over raising the ceiling on government debt. As soon as the ceiling was raised, investors focused on the economy, and the selling accelerated.

On Thursday, growing fear about the weakening U.S. economy was joined by concern in Europe that the troubled economies of Italy and Spain might need help from the European Union.

The European Union has already given financial assistance to Greece and Ireland, two countries that have struggled to pay their debts. A financial rescue package for Italy or Spain might be more than the group of countries can handle.

Traders also unloaded stocks before Friday's release of the government's unemployment report for July, which is expected to show weak job growth and perhaps a rise in the unemployment rate, which is 9.2 percent.

Together, they produced "a perfect storm of selling," said Ryan Larson, head of U.S. equity trading for RBC Global Asset Management.

Until a week ago, Wall Street had mostly convinced itself that the U.S. economy would improve in the second half of the year. Gas prices were falling, and Japanese factories were resuming production after disruptions from the March earthquake.

Then one report after another began to show that the economy was much weaker than first thought.

Manufacturing is barely growing. The service sector, which covers about 90 percent of the American work force, is growing at the slowest rate in a year and a half. People spent less in June than in May, the first decline since September 2009.

And the overall economy is expanding at the slowest pace since the end of the Great Recession. It grew at an annual rate of just 0.8 percent for the first six months of this year, raising the risk of another recession.

In an indication of how frightened investors are, Bank of New York Mellon said it would start charging large investors to hold their cash because they are depositing so much. The bank's clients include pension funds and large investment houses that are selling stock and need to deposit the proceeds.

Mark Luschini, chief investment strategist for Janney Montgomery Scott, an investment firm in Philadelphia, said his clients saw the move from stocks into cash as "a parking lot to sort things out."

"With the scars of 2008 still fresh," he said, "some clients don't want to miss the chance to pre-empt further damage should it come."

Wells Fargo Advisers, a financial management company in St. Louis, said clients were more nervous.

"I wouldn't say they're totally panicking. But obviously nerves are rattled," said Scott Marcouiller, chief technical market strategist there. "And I think that is simply because of the speed of the decline."

Other market indicators reinforced the risk-averse mood. Gold, which is seen as a safe investment when the stock market is turbulent, set a record price, $1,684.90 an ounce, before falling to finish the day at $1,659.

Adjusted for inflation, gold is still far below the record reached in 1980.

The yield on the 10-year Treasury note fell to 2.42 percent, its lowest of the year, and the yield on the 2-year Treasury note hit its lowest ever, 0.265 percent. Bond yields fall when demand for bonds increases.

The yield on the one-month Treasury bill fell to almost nothing -- 0.008 percent. Investors were willing to accept paltry returns in exchange for holding investments they believed to be stable.

The sell-off was broad. All 10 industry groups in the Standard & Poor's 500 index fell. Energy companies lost almost 7 percent, materials companies were down 6.6 percent, and industrial companies lost more than 5 percent.

For a time, Kraft Foods was the only stock to rise among the 30 that make up the Dow industrials. Kraft announced Thursday that it would split in two, with one company focusing on snacks and the other groceries. But the selling eventually dragged Kraft under, too, and its stock finished down 52 cents, at $33.78.

Steep stock market losses like the ones of the past two weeks can be self-reinforcing. A drop in stocks erodes household wealth and raises doubts about the economic outlook.

The result can be what economists call a vicious cycle. Stock losses take a toll on consumer confidence and make people more reluctant to spend money. Consumer spending makes up 70 percent of economic output in the United States.

Kevin Cook, senior stock strategist for Zacks Investment Research in Chicago, said investors' worst fears probably won't come true.

"This is not 2008 again," he said. "We don't have a liquidity crisis, we don't have a credit crisis -- this is just profit taking."

Cook said he believes the S&P 500, which closed Thursday at 1,200.07, will trade between 1,150 and 1,250 between now and Oct. 1, at least until investors have enough information to determine whether the economy is in recession again.

Even taking into account the recent declines, stocks are still considered to be in an impressive bull market that began March 9, 2009, when the market reached its recession low.

The Dow closed that day at 6,547. Since then, it is up about 74 percent.

One year ago, the Dow closed at 10,680. About a month later, the stock market began a rally that took the Dow almost to 13,000. The catalyst was an announcement by Federal Reserve Chairman Ben Bernanke that the Fed was preparing to launch a program to buy $600 billion in government bonds to keep interest rates low and help stocks rally.

The sell-off now comes at a time when corporate profits are growing. For the S&P 500, a measure called the forward price-to-earnings ratio has fallen to about 12, well below its long-term average of 16. That means that investors who buy now are paying less for each dollar in profits.

Based on what an investor now pays for corporate profits, stocks are now trading at their lowest levels in 20 years, said Tim Courtney, chief investment officer of Burns Advisory Group in Oklahoma City.

But few companies were spared in the sell-off Thursday. Just three of the 500 stocks in the S&P 500 moved higher. General Motors fell 4 percent despite beating analyst estimates for its quarterly earnings.
© Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Read more: Stock Market Bloodbath: Dow Plunges 513 Points on Fear
Important: Can you afford to Retire? Shocking Poll Results

Mainstream Economist: Stocks Could Crash Soon — Recession Almost A Certainty

Wall Street Down Over 3% with the DOW down over 365 points

  • 15

Mainstream analysts are now warning a recession is almost a certainty and world stock markets could crash very soon.

I reported a few hours ago that Wall Street was down over 2% on the day and gold had surged past $1,680 per ounce.
Looking at the latest market data Wall Street is now down over 3% with the DOW down over 350 points on the day and gold retreating off its session highs.

Wall Street Down Over 3% with the DOW down over 365 points
Wall Street Down Over 3% with the DOW down over 365 points
Now analysts are saying double dip recession is almost a certainty. Mind you some say we are actually in a Great Depression, but here is a mainstream analysts warning stocks could crash soon.
Yahoo! Finance reports:
Follow The Daily Ticker on Facebook here!
In the past few months, investors have gone from being generally bullish about the economy and stock market to increasingly concerned that we may be headed for another recession. For now, however, the consensus is still that we’ll trudge along with slow growth but avoid an actual downturn.
One advisor who thinks that a recession is almost a certainty, however, is Lance Roberts, the Chief Economist at Streettalk Advisors, a $400 million advisory firm.
Roberts says he began warning clients about a recession more than 6 months ago, urging them to be more defensive. And now, after the string of lousy economic data in recent months, Roberts thinks another recession is almost a foregone conclusion.
So what should investors do, given that outlook?
Roberts observes that, in “normal” post-War recessions, the stock market tends to fall by about a third. He also argues, however, that this is NOT a normal post-War recession–it’s a debt-fueled balance-sheet recession, which we haven’t experienced since the Great Depression.
See Also: Here’s Why This Recession Is Different
Here’s what other have been saying lately:

Related Posts
Greece In Panic In Face Of Great Depression Style Run On Banks As People Race To Withdrawal Their Cash
The Guardian reports that while Western media has been silent on the issue Greece is in an absolute state of panic facing a Great Depression style run on the banks ...

Barroso calls for EU bailout fund increase 'to stop crisis spreading'

Bears Ripping Thru Wall Street - Dow Down 350 Points


"We Are Advising Our Clients To Put Everything They've Got Into Canned Food And Shotguns"


Will Easing By The Swiss Central Bank Drive Investors to Gold As The Only Safe Haven?

After rising some $50/ounce in about a week, gold is slightly down so far today.
As Tyler Durden explains, margin calls are forcing the start of a gold liquidation:
As expected, the massive global rout is shifting to the best performing asset: gold, which courtesy of pervasive repo desk margin calls (which are merely trying to preserve capital for their TBTF holding companies) is seeing liquidations to satisfy collateral margin requirements.
Reuters confirms:
Gold recoiled from a record high in heavy volume Thursday, as mounting recession fears fed a global stock market maelstrom that forced investors to liquidate bullion profits to cover losses elsewhere.
But this may be only a short-term correction.

As MarketWatch notes, gold futures are soaring:
Gold futures tacked on as much as $18 an ounce Thursday as concerns about the U.S. economy and Europe’s sovereign debt crisis and Japan’s intervention in the currency market to stem the rise in the yen sent investors into their defensive shells — and to gold as a safe haven.

“Gold is still proving its character as a store of value in the current market environment, marked by equity markets tumbling sharply, in part, and continued high risk aversion,” analysts at Commerzbank [Germany's second-largest bank] said in a note to clients Thursday. “And the yellow precious metal evidently still has strong support.”

“Central bank currency intervention or money printing and competitive currency devaluations have resumed with gusto, which is of course bullish for precious metals as they cannot be devalued or debased,” analysts at GoldCore wrote in a report Thursday.
The Swiss central bank on Wednesday surprisingly lowered the key interest rate and announced a massive expansion of liquidity on the domestic money market, analysts at Commerzbank said. “These steps by the two central banks are aimed at halting the appreciation of their currencies and not burdening their domestic economies even more.”
“Up to now, both the Swiss franc and the Japanese yen have been regarded as ‘safe havens’,” they said. “If they lose this status, only gold would remain and the interest in gold should increase further.”
For an in-depth background on gold, see this, this, this, this, this, this, this and this.
Note: I am not an investment adviser and this should not be considered investment advice. Personally, I am long gold.

South Park Bailout Episode - "And...It's Gone!"


Stocks: Worst day since 2008 financial crisis

NEW YORK (CNNMoney) -- Stocks plunged Thursday in their single worst day since the 2008 financial crisis.
The Dow tumbled 512 points -- its ninth deepest point drop ever -- as fear about the global economy spooked investors.
"The conventional wisdom on Wall Street was that the economy was growing -- that the worst was behind us," said Peter Schiff, president of Euro Pacific Capital. "Now what people are realizing is the stimulus didn't work, and we may be headed back to recession."
U.S. markets were already sharply lower on widespread worries, including the weak job market. But the selling gained momentum as Japanese and European policymakers stepped in with dramatic measures to shore up their financial markets.
There's "total fear" in the market, said Bob Doll, chief equity strategist at the world's largest money manager, BlackRock.
All three major indexes tumbled more than 4% Thursday and erased all their gains for the year. The indexes have also pushed into "correction" territory -- defined as a 10% drop from recent highs. The Dow, Nasdaq and S&P 500 have all fallen 10% in just the last 10 days.
"In the last two weeks, we've been through the ringer," said Rich Ilczyszyn, market strategist with futures broker Lind-Waldock. "When we start looking at the recovery, there's nothing to hang our hats on anymore."
The market's fear gauge -- the VIX (VIX) -- surged 35.8% to a reading of 31.8. A level above 30 signals a high degree of fear.
At the closing bell, the Dow Jones industrial average (INDU) was down 512 points, or 4.3%, with Alcoa (AA, Fortune 500), Caterpillar (CAT, Fortune 500) and Bank of America (BAC, Fortune 500) among the biggest drags on the blue chip index. Thursday's sell-off marked the steepest point loss since October 2008.
The S&P 500 (SPX) was down a staggering 60 points, or 4.8%.
The Nasdaq (COMP) lost 136 points, or 5.1%. Some of the better performing tech stocks, Apple (AAPL, Fortune 500), Google (GOOG, Fortune 500) and Netflix (NFLX) were all down between 2% and 3%.
Fears about a global slowdown are at the forefront of investors' minds amid recent weak economic data. Early Thursday, the latest reading on jobless claims showed a large number of Americans remain unemployed.

10 job killing companies

Adding further to investors' jitters, Wall Street is waiting for Friday's jobs report, which BlackRock's Doll said was adding to the selling pressure.
The report is now a bit of wild card after it has come in far below forecasts for the last two months.
Economists surveyed by CNNMoney are expecting the report to show that the U.S. economy created 75,000 jobs in July, marking a slight improvement over the paltry 18,000 jobs added in June.
The unemployment rate is expected to hold steady at 9.2%.
Economy: Economic woes weren't contained to the United States.
In moves that they hoped would tame financial markets, Japan's government stepped in to weaken the yen, and the European Central Bank decided to re-enter the European bond market for the first time since March.

Track currencies

Those decisions come just a day after Switzerland intervened to curb the Swiss franc's rise.
"It's true that we are in a period of a high level of uncertainty, not only in the euro area but at the global level," ECB President Jean-Claude Trichet said in a press conference Thursday.
The ECB wasted no time and immediately started buying European bonds while Trichet's press conference was still going on. But bond traders were quickly disappointed, after they discovered the central bank only bought Portuguese and Irish debt -- not the Spanish and Italian bonds at the center of the crisis.
The ECB also left interest rates unchanged at 1.5% and initiated a 6-month refinancing operation to add liquidity to European markets.
European stocks plunged. Britain's FTSE 100 (UKX) tumbled 3.4%, Germany's DAX (DAX) lost 3.9% and France's CAC 40 (CAC40) fell 3.4%.
Asian markets ended the session mixed. The Shanghai Composite and Japan's Nikkei edged up 0.2%, while the Hang Seng in Hong Kong fell 0.5%.
Meanwhile, it should come as no surprise that in the U.S., investors flocked to assets perceived as low-risk, including Treasuries and gold.
Treasury prices rose, pushing the yield on the 10-year note down to 2.43% from 2.6% late Wednesday, and gold futures for December delivery fell $7.30 to $1,659 an ounce. Earlier in the session, gold hit a record high of $1,684.70 an ounce.
In other commodities, oil prices slumped 5.3% to $86.63 a barrel.
Companies: Auto giant General Motors' (GM, Fortune 500) second-quarter earnings nearly doubled to $2.5 billion, as revenue rose 19% and topped expectations. Shares of GM slid 4.3%.
After the closing bell, insurance giant AIG (AIG, Fortune 500) reported second-quarter operating income of $1.28 billion, falling short of analysts' expectations.
Shares of LinkedIn (LNKD) surged 7.8% in afterhours trading, when the newly-public company reported its second-quarter profit doubled from a year ago and its sales beat forecasts.
In addition to quarterly financial reports, retailers were also announcing July sales results.
Costco Wholesale Corp. (COST, Fortune 500) said its same-store sales climbed 10% last month, while Limited (LTD, Fortune 500) said sales rose 6%.  To top of page

E-Trade Baby Loses Everything.

Obama, Bernanke May be out of Options to Boost Jobs, Economy Read more: Obama, Bernanke May be out of Options to Boost Jobs, Economy Important: Can you afford to Retire? Shocking Poll Results

The United States has a jobs problem and there's not a lot President Barack Obama or Federal Reserve Chairman Ben Bernanke can do about it. In the face of rising risks of a recession that could imperil his re-election chances next year, Democrat Obama wants Congress to extend a payroll tax cut and emergency unemployment benefits that are due to expire in December.
But the Republican-controlled House of Representatives is emboldened by budget concessions it made Obama swallow to lift the country's debt limit this week and he has little political leverage to win significant fresh spending to aid growth.

‘You Opened My Eyes to the Catastrophic Enormity of This Financial Debacle’
Debt ceiling ‘medicine will become the poison,’ according to famed economist. Brace for economic meltdown. Watch the Aftershock Survival Summit Now, See the Evidence.
"Obama does not have much presidential persuasion left. He is running out of capital," said James Thurber, of American University's Center for Congressional and Presidential Studies. Obama's political opponents have been openly scornful of the impact of two previous stimulus packages, which were accompanied by extraordinary measures by the Federal Reserve to kick-start the U.S. economy.
"It seems we've thrown everything at it. We've had QE1 and QE2, Stimulus 1 and Stimulus 2, and the unemployment rate is still 9.2 percent," said John Makin, an economist at the American Enterprise Institute in Washington. "Maybe there are just not many options here at this point," he said.
World stock markets shuddered after disappointing U.S. growth and manufacturing numbers and investors rushed to buy long-dated U.S. Treasury bonds in a move that suggests deep concerns about the economic outlook.
Data on Friday is expected to confirm the U.S. unemployment rate remained stuck at 9.2 percent in July.
Lawrence Summers, a top Obama adviser until last year, wrote in a Reuters column on Tuesday the odds of another U.S. recession were 1 in 3. Goldman Sachs has said a slight tick up in the unemployment rate could provide a strong recession signal.
Obama signed a hard-won compromise Tuesday to raise the $14.3 trillion U.S. debt limit in return for measures that will reduce deficits by at least $2.1 trillion over 10 years.
Joel Prakken of the forecasting firm Macroeconomic Advisers estimates an extension of the payroll tax cut could add about 0.25 percentage points to U.S. growth next year.
Republicans fought hard to cut spending but are open to tax cuts, and the White House expects bipartisan support when Obama advances the idea in the coming months.
But analysts are skeptical it will make much difference for an economy that is having trouble gaining traction.
"A major option is extending the payroll tax cut. We did that in December, and the economy grew at a 0.6 percent annual rate over the first half of the year," said Makin.
But the economic benefit of extending the payroll tax cut will be curbed by the government spending cuts agreed to Obama, and a weak economy will make hitting deficit-reduction targets that much more difficult.
JPMorgan's Michael Feroli estimates fiscal policy will subtract about 1-3/4 percentage points from growth next year as spending cuts kick in, if the earlier payroll tax cut and unemployment insurance extensions expire on schedule.
"Given that GDP growth has been 1.6 percent over the past four quarters when fiscal policy has been much less of a drag, this doesn't bode well for next year," he said.
JPMorgan has cut its first half 2012 growth forecast to 2 percent from 2.5 pct due to fiscal drag.
Bernanke also seems to have few options at his disposal.
The Fed is not expected to announce an extension of its so-called quantitative easing, or QE, measures to stimulate economic activity at a policy meeting on Tuesday, despite the sense of gloom descending on the economy.
If push comes to shove, the Fed would likely look to cement its promise of keeping in place a loose monetary policy for a long period. It might even consider shifting the composition of its Treasury note holdings toward longer maturities, an option Bernanke has raised as a way to give the economy some relief.
"Someone should do something. Given that the Congress has declared itself unwilling to provide support for the economy, the Fed will feel pressure to try to do what it can," said Barry Eichengreen, an economics professor at the University of California, Berkeley.
However, the Fed's options hardly add up to a game-changing play to dramatically improve the U.S. outlook.
"Everyone is really looking to the Fed to support the economy, and I think (Bernanke) would realize that you could only do so much with monetary policy," said Mike Knebel at Portland, Oregon-based Ferguson Wellman Capital Management.
The Fed's scope for more easing of monetary policy has been narrowed by a rise in core inflation, which bottomed at 0.9 percent in December but has since hit 1.3 percent.
As Obama signed the debt deal, which averted a devastating default and reduced the risk to the country's AAA credit rating, he promised more ideas to boost hiring soon.
The White House declined to say what he had in mind or when he would lay out suggestions. But Treasury Secretary Timothy Geithner said in an opinion piece in the Washington Post that Congress could make space to fund a payroll tax cut extension by "locking in" long-term budget savings.
With lawmakers out of town for a summer recess, no major initiative is likely before September, although Obama does plan a Midwestern bus tour from Aug. 15 to Aug. 17 to talk up jobs.
When it comes, the odds favor small steps that allow Obama to show he is taking action, without disturbing investors.
"There is a good case to be made for additional stimulus, but given our fiscal situation it has to be targeted to create more jobs," said Karen Dynan, a scholar at the Brookings Institution in Washington.
© 2011 Thomson/Reuters. All rights reserved.

TSX plunges 436 points on U.S. recession fears

North American stock markets took a hammering Thursday as investors grew ever more pessimistic about the economy with evidence mounting that a serious slowdown may be under way.
The S&P/TSX composite index plunged 435.89 points to 12,380.13, its biggest one-day decline since late June, 2009, while the TSX Venture Exchange fell 112.34 points to 1,853.34.
The Canadian dollar also got caught up in the downdraft as tumbling prices for oil and metals helped push the currency down 1.8 cents to 102.09 cents US.
New York markets also fell hard, with the Dow Jones industrial average tumbling 512.76 points to 11,383.68. The Nasdaq composite index dropped 136.68 points to 2,556.39 while the S&P 500 index was down 60.27 points to 1,200.07.
Just a couple of weeks ago, investors were concerned the U.S. economy had hit a soft patch. Since then a raft of economic data have raised worries it will slip back into recession. Manufacturing, consumer spending and hiring by private companies are below levels that are consistent with a healthy economy.
“It has now become completely about the economy,” said Sid Mokhtari, market technician at CIBC World Markets.
“The evidence suggest there is now the risk of a serious economic slowdown.”
Investors will be looking towards economic data released Friday for more perspective on the direction of the U.S. economy.
Expectations are modest for tomorrow’s U.S. non-farm payrolls report for July, with economists expecting something in the neighbourhood of 75,000 jobs created. Pessimism deepened after jobless insurance claims last week were down by only 1,000.
“If numbers are in line or below what the consensus is, I think we will see the selling pressure continue,” added Mokhtari.
“If it’s better, above estimates, it’s reasonable to say that maybe we can set the tone a little bit better. But having said that, you need about a month or so to get another round of numbers coming at us before we can put a bottom to this thing.”
Canadian jobless figures for July will also be released on Friday and economists expect about 20,000 jobs were created.
Stock buying sentiment has also been hard hit recently by concerns that Italy or Spain may need financial help from the European Union. The benchmark stock indexes in Italy, Germany and England each fell by three per cent Thursday.
Markets have also been driven lower by the weeks of bitter partisan wrangling that preceded an agreement by American lawmakers to raise the U.S. debt limit and avoid a default. The flight to safety has resulted in large investors moving so much money into cash accounts at Bank of New York that on Thursday the bank said it would begin charging some clients a 0.13 per cent fee to hold their cash.
The sour sentiment has taken a substantial toll on the TSX, which has lost ground in six of the last eight sessions, taking the Toronto market down more than eight per cent below where it started 2011 trading.
Energy stocks were a big loser on the TSX as oil prices fell a fifth day on demand concerns, plunging well below US$90 a barrel. The September crude contract on the New York Mercantile Exchange lost $5.30 to US$86.63 a barrel, the lowest close since mid-February. The day also marked oil’s biggest one-day drop since early May.
The energy sector fell 4.1 per cent as Suncor Energy (TSX: SU) fell $1.53 to C$33.12 while Canadian Natural Resources (TSX: CNQ) was down 64 cents to $36.19.
Mining companies also sold off with the sector falling 7.63 per cent as September copper closed down nine cents to US$ a pound. Teck Resources (TSX: TCK.B) dropped $3.07 to C$42.90 while First Quantum (TSX: FM) declined $9.23 to C$116.19.
Gold prices backed off after investors, looking for a safe haven while fleeing risky assets such as shaky European government bonds, pushed bullion to a series of record highs recently. But on Thursday, the December contract in New York declined $7.30 to US$1,659 an ounce. Goldcorp Inc. (TSX: G) lost $2.04 to C$44.88 while Barrick Gold Corp. (TSX: ABX) faded $1.93 to $45.38.
All sectors were lower with the financials sector down 1.6 per cent amid solid earnings reports from two big insurance companies. Royal Bank (TSX: RY) fell 57 cents to $50.73 and Scotiabank (TSX: BNS) lost 98 cents to $52.30.
The Canadian dollar was also affected by the Bank of Japan’s move to control the rise of the yen by selling the currency and buying the greenback.
Japanese Finance Minister Yoshihiko Noda said financial authorities decided to intervene in the currency markets because the strong yen could hurt the country’s export-dependent economy.
There was plenty of earnings news for investors digest.
On Thursday, telecom giant BCE Inc. (TSX: BCE) said its profits declined 2.5 per cent in the second quarter to $590 million or 76 cents a share. The slippage was largely due to costs associated with its purchase of the rest of the assets of CTV that it didn’t already own. Its shares dropped 58 cents to $36.13.
Air Canada (TSX: AC.B) shares were off 10 cents to $2.01 as it narrowed its losses to $46 million in the second quarter.
WestJet (TSX: WJA) shares lost 38 cents to $13.85 even as the carrier reported that it saw its second-quarter profits soar almost 275 per cent to $25.6 million as higher fares and cost controls helped offset increased fuel prices.
And in the U.S., General Motors Co. said its second-quarter profit nearly doubled to US$2.5 billion but its shares lost $1.18 to C$25.99.
After the markets closed Wednesday, Sun Life Financial (TSX: SLF) reported a five-fold increase in its second quarter profits to $408 million and its shares got caught up in the market selloff and lost 41 cents to $25.55.
Great-West Lifeco Inc. (TSX: GWO) shares dropped 38 cents to $23 as it reported its net earnings jumped to $526 million, up from $455 million a year ago.
Elsewhere, Yellow Media Inc. (TSX: YLO), a publisher of telecom directories and other businesses, slashed its dividend to common shareholders to 15 cents from 65 cents annually in a move to cut debt and improve its balance sheet. Its shares plunged 84 cents or 43.3 per cent to $1.10.

Japan acts to tame yen, follows Swiss move

(Reuters) - Japan sold one trillion yen ($12.5 billion) and loosened its monetary reins on Thursday, joining Switzerland in efforts to tame currencies buoyed by safe-haven demand from investors fretting about the deteriorating health of the global economy.
Japan's intervention, which it continued in London trading hours, pushed the yen to a three-week low of 80.20 per dollar from around 77.10, a more extensive yen move compared with intervention in March this year and September 2010.
Tokyo's action followed days of official warnings that the yen had risen so much that it threatened to derail Japan's recovery from the destruction wrought by the March 11 magnitude 9.0 earthquake, a deadly tsunami and an ensuing nuclear crisis.
Finance Minister Yoshihiko Noda said Japan had consulted its international partners, but intervened on its own to stem what it considered speculative and disorderly currency moves.
Hours later, the Bank of Japan joined the fray, boosting funds for buying financial assets to 15 trillion yen from 10 trillion yen, under a scheme established in October 2010 to shore up market confidence and support the economy.
"The central bank seems to be working in sync with the finance ministry, and that is different from past times when they eased policy," said Koichi Ono, senior strategist at Daiwa Securities Capital Markets. "It's a message that they are willing to act to stop the yen from appreciating further."
Analysts doubted though that even a combination of yen selling and monetary easing could stem a global shift away from the dollar and other riskier assets if Tokyo were to continue acting on its own.
"The yen's advance reflects the difficult economic and fiscal situation of both the U.S. and the euro zone, so even if Japan intervenes in the market, it won't be able to combat the yen's rise in the long run on its own," said Takashi Kamiya, chief economist at T&D Asset Management Co.
Indeed, Japan's Economy Minister Kaoru Yosano pressed on Thursday for Group of Seven and Group of 20 officials to discuss currencies as a global issue.
The coordinated action with the central bank was important for Prime Minister Naoto Kan and his government, beset by poor ratings and struggling with the aftermath of Japan's worst disaster in generations and the world's gravest nuclear crisis since Chernobyl 25 years ago.
"Japan is just in the process of recovering from a natural disaster, so these currency moves are certain to have a negative impact on the economy and financial markets," Noda told reporters in justifying the intervention.
Traders said Japan had sold more than one trillion yen in intervention so far on Thursday, a day after the Swiss central bank surprised markets by cutting interest rates to try to weaken the Swiss franc.
Investors have seen the Swiss franc and the yen as a safer refuge among G10 currencies from a deepening euro debt crisis and speculation that the U.S. economy could be slipping into recession and could lose its coveted AAA credit rating.
Analysts said the Swiss rate cut may have influenced the timing of Japan's move, which surprised some traders because the yen had backed off levels close to a record high of 76.25 per dollar, which was hit shortly after the March quake.
"Yesterday's monetary easing by Switzerland provided the push because if Japan didn't respond this would push the yen still higher," said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Morgan Stanley Securities.
The moves by Switzerland and Japan could now put pressure on the European Central Bank, which reviews policy on Thursday, to resume bond buying or other measures, since the euro zone crisis is a major factor behind the rise in the franc and yen.
"Other bold policy maneuvers could be in the pipeline," said Gareth Berry, foreign exchange strategist at UBS in Singapore.
The Bank of Japan cut short its scheduled two-day meeting that started on Thursday to announce the easing of policy. It left its benchmark rate steady at 0-0.1 percent.
With rates pegged near zero, the central bank has been using the size of the asset buying pool as the main gauge of its policy stance.
The release of extra funds in addition to cash spent on foreign currencies is seen as a way of making the intervention more effective by boosting yen supply.
Asked whether the central bank would do more, Governor Masaaki Shirakawa said:
"We think we took enough steps after carefully examining economic and price developments as well as the risks to the outlook. Having said that, the economy is a living thing. We central bankers tend to say: 'Never say never.'"
Until recently the central bank has sounded confident that it had done enough to support the economy and that Japan would exit recession later this year with the help of reconstruction spending following the March disaster and a recovery in exports.
But the yen's nearly 5 percent climb over the past month cast doubt on such a scenario and both the government and the central bank have been under growing pressure from Japanese exporters, including Toyota Motor Co, to tame the currency.
The yen selling gave a lift to export shares in Tokyo trading and lifted the Nikkei average off five-week lows.
Noda would not give away any details of Thursday's action, but traders said authorities continued sporadic intervention, including in London. Some said it could eventually add up to a similar amount as 2.1 trillion Tokyo sold in its last solo intervention in September 2010.
($1=79.90 yen)
(Additional reporting by Rie Ishiguro and Kaori Kaneko; Writing by Tomasz Janowski; Editing by Neil Fullick)

Wall Street Plunges Over 2% As Gold Surges Past $1,680 Per Ounce

Gold Surges Past $1,680 Per Ounce
Gold Surges Past $1,680 Per Ounce
And Wall Street has plunged over 2%.
Wall Street Plunges Over 2 Percent
Wall Street Plunges Over 2 Percent
Stocks fell sharply Thursday as investors grew more concerned about economic weakness in the U.S. and Europe.
The Standard & Poor’s 500 index sank 2.6 percent, bringing it 10 percent below its recent high of 1,363 reached on April 29. A decline of 10 percent is considered to be a market correction. The Dow Jones industrial average is now down more than 1,000 points from July 21.
The U.S. government said before the market opened that the number of people who applied for unemployment benefits for the first time edged only slightly lower last week to 400,000. That’s still above the 375,000 level that economist say indicates a healthy job market. It was the latest indication of weakness in the U.S. economy.
European stocks fell broadly because of concerns that Italy or Spain may need help from the European Union. The benchmark stock indexes in Italy, Germany and England each fell 3 percent.
“We are continuing to be bombarded by worries about the global economy,” said Bill Stone, chief investment strategist at PNC Financial. Some traders are selling ahead of Friday’s employment report, which is expected to show that unemployment remained at 9.2 percent last month. A rise in the unemployment number would likely push stocks lower again.
Thursday started as another big sell-off on Wall Street. The Dow Jones industrial average fell 244 points, or 2 percent, to 11,652 in late morning trading. The S&P 500 lost 29, or 2.6 percent, to 1,231. The Nasdaq composite shed 71, or 2.6 percent, to 2,621.
Investors poured money into investments that are seen as relatively safe places to park cash when markets are turbulent. Gold rose 1 percent to $1,680 an ounce. The yield on the 10-year Treasury note fell to 2.52 percent, its lowest level of the year. Bond yields fall when demand for them increases.
Source: Yahoo Finance

Market meltdown ahead?

Wall Street gives the new debt deal a big thumbs down as stocks and commodities plunge, taking out significant technical support.

It was an ugly, ugly session Tuesday. It seemed strange, considering Congress got its act together to pass a debt deal with not a day to spare. The deadline was Tuesday, when the bill was passed into law. How's that for cutting it close?
Stocks plunged anyway, with the S&P 500 dropping more than 2.6 per cent in its worst one-day loss in nearly a year. And it caps an eight-day 6.7 per cent losing streak for the Dow Jones Industrial Average, the worst run since May 2010, a month that featured the "flash crash" and the panicked start to the eurozone debt crisis.
Investors are reacting to a number of big negatives: the fact that the debt bill probably won't save America's AAA credit rating, the fact the economy is on the edge of falling into outright contraction, and the fact that the eurozone crisis is spreading like a disease into Italy and Spain.
As a result, significant technical support was taken out, clearing the way for a very nasty and dramatic market meltdown over the next few days. Here's why.
I'll have more to say about the economy and the debt deal in my next column. For now, let's set those issues aside and focus on the market action. And, boy, is there plenty to talk about.
S&P 500, 8 months, daily
The most important chart is the one above, which shows that the S&P 500 has violated the neckline of an epic six-month-long head-and-shoulders reversal pattern. This pattern is one of the most well recognized by Wall Street chartists, who were no doubt closely watching the 1,260 level today. Violation in the final minutes of trading triggered a wave of selling pressure as stop losses were hit.

Here's the bad news: The pattern traces to a price target of 1,150, which would be worth a further 8.7 per cent drop from current levels.
iPath Copper, 8 months, daily
Other markets tell a similarly dour story. Copper, which is said to have a Ph.D. in economics for its ability to anticipate shifts in the business cycle, has just fallen out of its consolidation range.
Inflation Expectations, 21 months, daily
Bond traders are also gearing up for a period of economic disappointment and price deflation, signalling that they expect a period of weak growth. You can see this in the ratio of inflation-protected Treasury securities versus traditional Treasury securities. The chart above illustrates this with the iShares TIPS (TIP.N) and the iShares 20+ Year Treasury Bond (TLT.N). Translation: Inflation expectations have dropped on growth concerns to levels last seen in December.
Junk Bond SPDR, 9 months, daily
Bond traders are abandoning risk as high-yield bonds come under selling pressure. Drops in these so-called junk bonds closely follow the vagaries of the stock market, with the deepest market sell-offs accompanied by sizable drops in junk bonds.
What are investors to do?
If you're a risk-averse long-term buy-and-hold type, the best advice is to move to cash and wait for fairer weather. There is too much political and economic uncertainty. There is too much market volatility. And while we may get a rebound rally, the technical setups suggest the bottom could very well drop out of this market. It wouldn't take much. Maybe a U.S. credit downgrade from AAA to AA will be the catalyst.
For more nimble traders, there are plenty of opportunities on the short side, although many sectors have already made their move. Health care, for instance, was leading the decline but looks overextended to the downside now. Materials and consumer discretionary stocks, which are just beginning to show relative weakness, could be the next market laggards.
CarMax, 1 year, daily
Thanks to targeted short positions in consumer, health care and materials stocks, my newsletter subscribers have limited their month-to-date decline to just 0.6 per cent versus a three per cent loss for the S&P 500. Highlights include a 7.5 per cent gain in high-end retailer Saks (SKS.N) and a near four per cent gain in CarMax (KMX.N) over the past few days.
Both SKS and KMX will be added to my Edge Letter sample portfolio, which tracks a selection of picks for my MSN Money readers in real time here.
Admittedly, my performance could have been better if not for my short precious-metals positions. While my shorts in metal miners have done well, my gold-futures short underperformed as gold zoomed to a new high despite a rebound in the U.S. dollar. Word overnight that the Bank of Korea increased its gold reserves — which still remain a very small percentage of the central bank's overall assets — sent gold prices surging.
While I still believe precious metals are vulnerable to a pullback on a stronger U.S. dollar, I must respect the market's will in this case. Precious metals are highly speculative, and when a headline like the one out of Korea drops, it pushes all the right buttons for the gold bugs: currency debasement, abandonment of the U.S. dollar reserve standard, etc.
Disclosure: Anthony has recommended KMX and SKS short to his newsletter subscribers.
Check out Anthony's new investment advisory service The Edge. A two-week free trial has been extended to MSN Money readers. Click here to sign up.
The author can be contacted at and followed on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.

Rep Cantor: Government Promises Aren't Going To Be Kept For Many

--Cantor: Government promises 'aren't going to be kept for many'
--Cantor: Younger Americans will have to adjust
--Cantor: Americans will see current cutbacks as paring back government waste
By Siobhan Hughes
WASHINGTON -(Dow Jones)- U.S. House Majority Leader Eric Cantor (R., Va.) on Wednesday suggested that Republicans will continue a push to overhaul programs such as Medicare, saying in an interview that "promises have been made that frankly are not going to be kept for many" and that younger Americans will have to adjust.
"What we have to be, I think, focused on is truth in budgeting here," Cantor told The Wall Street Journal'sOpinion Journal. He said "the better way" for Americans is to "get the fiscal house in order" and "come to grips with the fact that promises have been made that frankly are not going to be kept for many."
His comments suggest that Republicans are committed to overhauling entitlement programs such as Medicare even after President Barack Obama signed into law a debt package under which Medicare recipients weren't hit with direct cuts. Congress left Medicare recipients untouched directly in order to win enough Democratic votes for the debt package to become law.
But Republicans could make a new push to cut back on Medicare as the debt- reduction deal is implemented. The law initially provides for $917 billion in spending cuts over a decade, but a bipartisan committee of lawmakers must come up with a proposal by Nov. 23 to find an additional $1.5 trillion in deficit reduction. The panel's members--half of whom will be Republican lawmakers--could try again to change Medicare.
"When we came out with our budget, we said, look, let's at least put people on notice, but preserve those who are 55 and older," Cantor said, referring to a Republican-written budget plan that would turn Medicare, now a fee-for-service program, into a program that subsidizes private health insurance. "The rest of us have got ample time to try and plan our lives so that we can adjust to reality here when you look at the numbers. Again the math doesn't lie."
Medicare's trustees said earlier this year that the part of the program that covers hospital stays would be exhausted in 2024, five years earlier than previously thought. When that occurs, the program wouldn't have enough money flowing in to pay all of the expected benefits.
Asked whether voters would push back against any of the federal spending cuts that Republicans have won so far, Cantor was silent before responding to a different question about whether voters would see spending cuts as the government doing something.
"Initially, yes," Cantor said. "Most people that I talk to in my district in Virginia or throughout the country realize that Washington is spending money that it doesn't have. They'll tell me: Why are you wasting my taxpayer dollars the way that you are in Washington?"
Democrats see it differently. After a Democrat won a seat earlier this year in a western New York district long held by Republicans, Democrats attributed the victory to the unpopularity of the Republican Medicare overhaul plan. Rep. Kathy Hochul (D., N.Y.) had made her opposition to the Medicare overhaul her campaign's centerpiece. After her victory, Democratic leaders vowed to use the issue in the next elections.
-Siobhan Hughes, Dow Jones Newswires; (202) 862-6654;

Worst day since financial crisis

Worst day since financial crisis
5:18PM: The Dow tumbles more than 500 points. All three indexes are down 10% from mid-July. More

'State actor' behind slew of cyber attacks

Security experts have discovered an unprecedented series of cyber attacks on the networks of 72 organizations globally, including the United Nations, governments and corporations, over a five-year period.
Security company McAfee, which uncovered the intrusions, said it believed there was one "state actor" behind the attacks but declined to name it, though several other security experts said the evidence points to China.
The long list of victims in the extended campaign include the governments of the United States, Taiwan, India, South Korea, Vietnam and Canada; the Association of Southeast Asian Nations (ASEAN); the International Olympic Committee (IOC); the World Anti-Doping Agency; and an array of companies, from defense contractors to high-tech enterprises.
In the case of the United Nations, the hackers broke into the computer system of its secretariat in Geneva in 2008, hid there for nearly two years, and quietly combed through reams of secret data, according to McAfee.
"Even we were surprised by the enormous diversity of the victim organizations and were taken aback by the audacity of the perpetrators," McAfee's vice president of threat research, Dmitri Alperovitch, wrote in a 14-page report released on Wednesday.
"What is happening to all this data ... is still largely an open question. However, if even a fraction of it is used to build better competing products or beat a competitor at a key negotiation (due to having stolen the other team's playbook), the loss represents a massive economic threat."
McAfee learned of the extent of the hacking campaign in March this year, when its researchers discovered logs of the attacks while reviewing the contents of a "command and control" server that they had discovered in 2009 as part of an investigation into security breaches at defense companies.
It dubbed the attacks "Operation Shady RAT" and said the earliest breaches date back to mid-2006, though there might have been other intrusions. (RAT stands for "remote access tool," a type of software that hackers and security experts use to access computer networks from afar).
Some of the attacks lasted just a month, but the longest - on the Olympic Committee of an unidentified Asian nation - went on and off for 28 months, according to McAfee.
"Companies and government agencies are getting raped and pillaged every day. They are losing economic advantage and national secrets to unscrupulous competitors," Alperovitch said.
"This is the biggest transfer of wealth in terms of intellectual property in history," he said. "The scale at which this is occurring is really, really frightening."
China Connection?
Alperovitch said that McAfee had notified all 72 victims of the attacks, which are under investigation by law enforcement agencies around the world. He declined to give more details.
Jim Lewis, a cyber expert with the Center for Strategic and International Studies, said it was very likely China was behind the campaign because some of the targets had information that would be of particular interest to Beijing.
The systems of the IOC and several national Olympic Committees were breached before the 2008 Beijing Games. And China views Taiwan as a renegade province, and political issues between them remain contentious even as economic ties have strengthened in recent years.
"Everything points to China. It could be the Russians, but there is more that points to China than Russia," Lewis said.
McAfee, acquired by Intel Corp this year, would not comment on whether China was responsible.
There was no comment from China on the report.
The UN said it was aware of the report, and had started an investigation to ascertain if there was an intrusion.
A US Defense Department spokeswoman, Air Force Lieutenant Colonel April Cunningham, said "it is unknown who is perpetrating these intrusions."
"With regard to China, we reported to Congress in 2010 that China is actively pursuing cyber capabilities with a focus on the exfiltration of information, some of which could be of strategic or military utility," Cunningham said.
White House spokesman Jay Carney declined to comment on the report's findings but said US President Barack Obama viewed cybersecurity as a top priority and was working to tighten the defenses of both the government and private sector.
US Homeland Security Secretary Janet Napolitano said, "We obviously will evaluate it, look at it and pursue what needs to be pursued in terms of its content."
Britain's electronic spy agency said the McAfee report highlighted the need for international cooperation as cyber security challenges were transnational.
"Attribution for attacks in cyberspace is always difficult. But whoever is responsible, this report is another reminder of the need for effective cyber-security," said a spokeswoman for the Government Communications Headquarters, one of the three main arms of British intelligence.
'Stone age'
Vijay Mukhi, a cyber-expert based in India, said some South Asian governments were highly vulnerable to hacking from China.
"I'm not surprised because that's what China does, they are gradually dominating the cyberworld," he said. "I would call it child's play (for a hacker to get access to Indian government data) ... I would say we're in the stone age."
In Taiwan, an official of the Criminal Investigation Bureau, which has a cyber crime unit, said he had no knowledge of the McAfee report but added there had been no cases in recent years of hacking of government websites.
An official from the Japanese trade ministry's information security policy team said it was difficult to determine whether a specific government lay behind a cyber attack "although we see which countries the attacks originate from."
McAfee released the report to coincide with the start of the Black Hat conference in Las Vegas, an annual meeting of security professionals who promote security and fight cyber crime.