Sunday, October 31, 2010

$10,000 gold

In my Random House book, I have long preached a parabolic scenario for gold (click the link to your right. Here's another one making the case

It Would be Worse if it were Time Magazine

These magazine covers can have a knack for being contrarian indicators. At least Barron's is a business publication that supposedly knows something and not a regular generalized news magazine like Time, or Newsweek that are just catching up. Still, these covers which either vanquish the bull, or bear arguments are often dubiously timed.

Saturday, October 30, 2010

Shocker: Some Planning Death Before December 31st to Avoid Estate Taxes

Could this be true? CHEYENNE -- U.S. Rep. Cynthia Lummis says some of her Wyoming constituents are so worried about the reinstatement of federal estate taxes that they plan to discontinue dialysis and other life-extending medical treatments so they can die before Dec. 31.
Lummis, a Republican who holds her state's lone seat in the House, declined to name any of the people who have made the comments. Click here to read more..

Friday, October 29, 2010

A Bank Run

Now, bank runs can be done electronically, but none the less this a good lesson, or primer on what nutty things can happen at the Bank if something goes wrong. lol.


2 divided by 4 = .5. The 2% GDP figure that was served up on a platter today by the government is an ANNUALIZED rate. Put simply, on a three month, or quarterly basis, our majestic economy is growing at a rate of one half of one percent per quarter. Wowzers! I know that's a simplistic analysis, but it's a good tell on the state of what's going on and why people feel like their wading in a toilet with no tidy bowl man in sight. 

The Bomb Scares

Just in time for the elections. Let's be sure to make Obammy look like he grasps something for those poor Dumbocrats about lose at the hands at the Repulonuts. If you ask me, the suspicious package is actually sitting in the Oval Office masquerading as the leader of the free world.  Fighter jets escorting a flight back to JFK? What could fighter jets do if a package blew up? It's all meant to dazzle the dorks. I will reassess if something does blow, but all of this deserves a big Bronx cheer. Oh, one consolation: at least we weren't told to run out and buy plastic window covering and duct tape a la 2004 pre election day skulduggery.

My Market Prediction for Next Week

It's going to be a roller coaster ride and the bias could be to the downside. There are many events that could move the markets: the Tuesday election results, the possibility of Bank of Japan dollar buying to curb the yen's ascent, The Fed's meeting and what size QE2 will take, the Friday monthly jobs numbers. Of course, no one knows the market reaction to all of this.

Much attention is focused on Fed dollar printing (QE2). Can the Fed come out and say outright that it plans a $4 trillion or more QE? Nope. Such an announcement would spark all out trade/currrency wars with a disorderly dollar decline. The odds are the Fed will be fairly conservative sounding about QE. I expect the usual announcement about how the Fed is prepared to do what it takes to keep the economy going. We could very well be marching into a buy the rumor, sell the news type of event. Ultimately, I believe Ben Bumnanke will do QE to infinity, but it would be foolish to think they will announce it. As always watch their behavior and take what they say with a grain of salt. The motto on the Fed's door should read, "ASK ME NO QUESTIONS AND I WILL TELL YOU NO LIES".

The elections. All I can say is that a Republican takeover of the House is expected and had better happen. The markets are counting on total gridlock. C'mon, you surely don't believe that there will be massive changes under a Republican controlled house? LOL. While I am far right of center, I sure don't expect much to change. Our entire politician system is corrupt and at present incapable of doing the right thing. The draconian measures needed to cure our fiscal problems would be met by the veto pen of Obummer and lacking votes to override, and that's assuming there is even the political will of even a Republican led House to do anything beyond what would amount to token spending cuts, or baby steps. The conspiracy theorists think the market will  be allowed to tank on Wednesday so Obamamama can blame a Republican victory for sending fear through the markets. I don't see high odds of that, but who knows anymore.

Government jobs data. Do you follow those numbers and look at them as being facts?  The numbers are a jumbled mess with many assumptions ie. the birth/death rate. Look at today's GDP report. Disposable income was down ex the government. So how do you suppose consumption grew by more than 2% when income is stalled out like a flooded out car? Look for more wacky numbers come Friday.

Fasten your seat belts, it's gonna be a bumpy ride. If you like to trade in choppy markets, more power to you. I'm going to be an observer.

Does BofA have TRILLION dollar problem?

Could $1trillionish be the sum total of litigation it will face over mortgage buybacks and other dirty deeds? Just askin', as "they" say. Are we just a few steps away from another banking death spiral? Just wonderin'. I guess I have too much time on my hands. Stay tuned. 

Informer: BofA hawked risky deals to customers

From the New York Post

Informer: BofA hawked risky deals to customers


Last Updated: 4:39 AM, October 29, 2010

Posted: 11:59 PM, October 28, 2010

Bank of America aggressively pushed complex derivatives products on customers in the midst of the financial meltdown without warning them of the substantial risks associated with them -- and even told investors the products were "extremely conservative" -- a former employee claims in a letter delivered to Securities and Exchange Commission chief Mary Schapiro. Click here to read more. Bof A, what a bunch of bums.

Wednesday, October 27, 2010

JPM, HSBC Sued For Silver Market Manipulation, Reaping Billions In Illegal Profits

See this important summary at the Zero Hedge site:

Inflation Nation

The folks who are preaching that we have deflation must be living in a hole. Sure we've got housing deflation, t.v.price deflation, but have the deflationistas gone to the supermarket, or opened their utility bill? The wholesale prices of commodities that  are channeled into the products we buy, or the energy we burn have risen by a tremendous amount. This excellent chart shows it.
Unlike the policy wonks in Washington who either have not darkened the doors of a supermarket in ages, or filled a gas tank in years -- Yes, the cost of living is going up, up, up at an unnaturally quick pace.

What I find especially egregious, is that the Consumer Price Index (CPI) is also on this chart, showing a modest gain of 1.1% Whoa you've got to be kidding me. The government is massaging numbers to keep the CPI low so it doesn't have to give seniors and disabled people a raise from Social Security. Yes I realize the Social Security fund is broke,but the government is unable to fess up to any truthfulness about the reality of prices which as CBS anchor  Katie Couric would put it are hitting the "great unwashed masses".

This chart comes from Casey Research. Thanks CR, you've saved the time and trouble of gleaning this information  and then having to turn it into an Excel chart.

Signs of Inflation

Indications of faster inflation are starting to pop up in some interesting places.

Pocket change is one example. No, I'm not talking rare gold and silver coins, but the every day circulated coinage that we  take for granted and sometimes view as a weighty nuisance.

According to data from the web site, the melt value of modern day (post WWII) nickels is now 6-cents.That's a 20% premium over face value. The government, however, prohibits the melting of U.S. coins to protect against profiteers who would end up causing shortages of coins. Looked at another way, our smart federal government is beginning to lose money on minting nickels. Nickels are composed of both copper and nickel, both of which have skyrocketed in price.

Dimes and quarters, for the time being, still have melt values well below face values.

The ever present Lincoln cent is becoming costlier by the day due to a rise in the price of zinc. Our 1-cent piece is composed mostly of zinc, with just a dollop of copper to give it the "penny" look of copper. According to, the Lincoln penny now has a melt value of 7-tenths of a cent. Should zinc continue to rise, the melt value would soon overtake face value, as it did 3 years ago. Prior to 1983, cents were made up of 95% copper and now sport a melt value of over 2-cents.

This brings new meaning to "don't take any wooden nickels".

Silver Subject to Price Manipulation, Chilton Says

“There have been fraudulent efforts to persuade and deviously control that price,” said Commissioner Bart Chilton at a hearing today in Washington, alleging there have been violations of the Commodity Exchange Act. “Any such violation of the law in this regard should be prosecuted,” he said.

JPMorgan Plans Physically-Backed Copper ETF

Monday, October 25, 2010

Topsy Turvey

Look out for more twists and turns this week.

A week from Wednesday the Fed will gather and then make the announcement of its monetary stance. The boys and one gal must tread cautiously. Its all about mind games and managing expectations. The Fed knows the markets are like Oliver Twist, just begging for a little more porridge. The glop in this case is Quantitative Easing or QE2, or money printing.The two ends of the scale: Under delivery vs expectations means a dollar rebound and a rout in stocks and precious metals. If the Fed says it will take up QE on a slow meeting to meeting basis that will be under delivery to the markets which will make a 2 year old's temper tantrum look like a whimper. The opposite side of the spectrum, the Fed tips its hand to massive QE. Stocks will rally, dollar tanks, metals skyrocket. The Fed will do its best to keep expectations somewhere in between. Any evidence that more, or less QE is coming will swing the markets to and fro in the days before the meeting.  Yep, gargle with Maalox each morning.  Ultimately, the Bernanke Fed has no choice but to do QE to infinity. It's just that they won't make that prospect too clear lest a pitch fork brigade descends on Washington.  
As for the elections. There is bound to be conflicting projections on who is going to win, or lose.  The stock market has priced in the Republicrats to win over the Demoncrats by taking at least the House and a number of State Houses. If the Reps fail to deliver, look for some tankage in the markets.

In sum, the market of stocks is coiled to move higher. Technically the set up looks good as the S&P 500's 50 day moving average has crossed above the 200 day (a golden cross). The Dow Transports have also been receiving some love and appear to be in a pattern of moving even higher, which Dow theorists see as a positive signal for the Dow Jones Industrial Average. Still, some angst in the week ahead can't be ruled out  with the coming cavalcade of news events. Banks also remain a wild card

Friday, October 22, 2010

Dollar Flashy Crashy

Looking into the cause of this....

A So, So Trading week

The portfolio balance ended up little changed this week. I will add to this post later in the weekend with the actual trades. It came down to a bad NFLX trade, but great performance in BIDU, MCD and a weak trade in STX. The BAC puts are still holding strong and I expect more out of those in the coming days.

Today is POMO Friday

This means stocks are supposed to rise as the Fed injects more Funny Money into the financial system. POMO is permanent open market operations where the Fed buys treasuries from the bankers and then the fresh cash is deployed into the stock market. This POMO script is on going and will continue. It will help to at least keep a floor under the stock market, if not lift it higher in the short term. If you are net short the market, you may as well be banging your head against a brick wall. Yes, shorts, your day will come, but it is hard to know exactly when that date is. Certainly if you're bullish and understand the old adages of the "Fed is your friend" or "Don't fight the Fed" you've had a gleeful experience since S&P 666, though it is prudent to hedge in some way via, for example, some cheap SPY puts. The upshot of all this? I am still sticking to a doomish outlook on the banking sector that will eventually hurt the rest of the market. There's no doubt that POMO has worked, but the day will come when it won't be enough.  The market is already overly dependent on POMO and will need and demand more and more of it to the point that it becomes too difficult for even the crazy Fed to accommodate. Either that, or 'events' outside the Fed's control will overwhelm the POMO game. Pick your eventual poison. Post election day will be very interesting. Good trading to everyone.

EDIT FRI NIGHT: At best POMO could be considered neutral following the noticeable market reversal on Thursday. The banking mortgage debacle weighed on the market and so to did G20.

All the President's Men!

Blogger Adam DeMouy with a little history lesson about the steps that can be taken to prevent a recession from happening and also the steps that were taken to cause the great depression! 
Read Here it's good stuff.

Rain fears send coffee prices to multi-year highs

Arabica coffee futures hit $2 a pound for the first time since 1997, while robusta prices touch a two-year top

Wednesday, October 20, 2010

H&R Block ($HRB) Sinking to oblivion

This was a $14 stock last week. It finished today at $10.95. Without help it could go to Zilch. Why? Remember its Option One subprime mortgage division? Yes, it unloaded that operation in 2008, but the tax preparation company still has potential  exposure of over $30 bln from the crappy loans it once made through Option One. Block has reserved less than $200 mln for potential losses in a mortgage put back scenario. So no wonder that Block's CDS spread has widened out to around 700. This is the bond market signalling for possible disaster in this company. Poor old Henry Bloch.

Bank of America

LOL. Originally seen on Zero Hedge

The NY Fed and other friends are apparently going after the Charlotte mafia for $47 bln in soured mortgage backed securities (MBS) that are secured by bad mortgages made by Countrywide - the infamous company that BAC bought in 2008. The big problem is that $BAC has reserves on the books for around 10% of its potential liability. Good luck with that BAC.

Monday, October 18, 2010

Playing $AAPL

I've been asked by a few subscribers how to play Apple and its 5pm ET earnings release today. Let's get this straight: no one knows for sure what shall happen; it's all a big guess - even for those highly paid Wall Street analysts and the hottest of stock and options traders. So take my opinion for what's it worth - about the same as everyone else's.

Long the stock and ridden the wave of the last few months? I'd just hold and ride it higher for even higher prices this spring. This is going to be volatile once earnings are out but no sense in knee jerk selling. How low could it go to make you lose money? Only you know your loss tolerance. Worried about some sort of big pit in the Apple results? Hedge by buying some near term puts.

Option holder? Take some profits off the table if your position has rewarded you with big gains in recent days. Remember, once the 4 pm bell sounds, you are trapped until 9:30 the next morning. Don't be piggish. Also consider rolling into longer term calls (eg spring strikes) if say a November expiring position is up better than 100% for you.. I know some options traders who do not hold through any earnings. They wait for the numbers to see whether their justification for being long or short is validated by the numbers and then go back in.

New option holder as of today or Friday. heh. good luck. You might as well be shooting dice.No advice, but be prepared to lose it all if you're wrong about direction, or the stock stands still. There is such a thing as evaporating volatility after an event which can put you behind the eight-ball. I will note that the options players are going nuts over the calls today with volume in most strikes exceeding open interest. Better hope it's not a contrary indicator. The buys in Apple November options go all the way to the 470 strike.

By the way, going into GooG earnings many were unsure. In Apple's case, many see an upside explosion coming. Sentiment in the two company's vastly different ahead of earnings.

All of this is not official FA type of advice, just some rambling thoughts.

Sunday, October 17, 2010

Why Is The Wall Street Journal Asleep At the Switch?


So we’ve got a nationwide scandal in the still-crippled industry that caused the crisis in the first place—a scandal with potentially systemic (meaning crisis-causing) implications. And how has our leading financial newspaper covered it?

Well it hasn’t, really. Not much, anyway.

The Wall Street Journal hasn’t had a single page one piece on the scandal, which is now a couple of weeks old. And the paper has had just one section-front story on it: Wednesday’s good piece in Money & Investing on how mortgage-securities investors are threatened by it.

Not that there’s been much inside coverage, either.

There’s an A3 news story today. There was an inside story yesterday from the Bay Area that touches around the edges of the scandal but, bizarrely, doesn’t even mention it. On Monday there was a decent feature, also on A3. There was a 700-word C5 story a couple of weeks ago, and other than three or four FT-length news stories, that’s it.

Compare that to The New York Times and Washington Post which (especially the Post) have a fraction of the business staff that the Journal has.

The Times has put the story on a section front eight times, including twice on the front page this week.

The Post has done even better. I count four page one stories on the scandal, including an agenda-setting one on September 23, and several other major pieces.

The Journal is getting its clock cleaned on this story. (For that matter, so has the Financial Times, although it has put the story on page one once, and has the excuse of being based in the UK). And not just by biggies like the Times and the Post. Go click the real estate keyword over at Yves Smith’s Naked Capitalism and look how outclassed it has been by a single blogger.

Admittedly, Smith has done yeoman’s work on this story, but she’s one person. It’s time for the Journal to flex its muscles on this one.

Saturday, October 16, 2010

Mortgage modifications - Beware

Banks are up to their usual tricks. They have now turned their sinking mega-ship to suddenly offer mortgage modifications to people they once treated like dirt. There is plenty of anecdotal evidence of a sudden surge in mortgage modification activity. This includes my neighbor who shared more information with me this week about her situation.

Think about it. What better way to circumvent the foreclosure-gate process than to get foreclosure people into a new loan with proper paperwork which would enable a flawless future foreclosure? (Most mods still end up in default). Home debtors under a new modification would effectively reaffirm their debt, the old flawed mortgage would go away and the bank would get a sure way to foreclose problem free. By giving new mods, the bank also releases itself from the potential of having to buy back the old, bad debt. Until now banks have steadfastly refused to do many mods.

Remember, if it sounds too good to be true, it is just that. Beware of bankers bearing what seem to be gifts. If you have received a modification approval in the last few weeks after months of waiting, or even a sudden invitation to apply, get with an attorney -- even if you have to scrape the money together. Know your legal options. This goes especially for foreclosure candidates, but also for people who are paying on time who may suddenly find themselves enticed their bank to do a  refi. Demand the note!. More indication of what a mess things really are.

Friday, October 15, 2010

A bankruptcy attorney speaks

No one deserves a free house, but banks must do their deeds within confines of the law.

Thursday, October 14, 2010

Google $Goog

The market has gone gaga for Google once again. The stock roared ahead by over $50 from the day's lows on a surprisingly strong earnings report. Sorry, I didn't play it, or blog it though I did consider it. Who really knew what was going to happen? I guess I am too risk averse to deploy hard won gains into something whose outcome was well shrouded. I avoid investing in big IFs. Yes, some good bullish strategies were outlined on the web, but all were predicated on the gamble of upside surprise - a huge IF prior to the release of the actual numbers.Winners today had lady luck (which is nice) on their side but didn't possess any special foreknowledge or skill. Today's Goggle guessing is leading to riches (super peachy), but one bad guess and it can be curtains. If you missed the Google train today because you follow a certain discipline, there will be other opportunities soon enough - don't get hung up on "shoulda, woulda, coulda".

One little consolation: Goggle will bring in a rising tide tomorrow that will float many other boats, unless Bernanke says something bad.

The coming Ben Speech

8:15 tomorrow Fed head Ben Bernanke will deliver another one of his speeches. Our expert helicopter pilot won't be directly saying another big cash drop (QE) is coming, but is expected by economists far and wide to signal the Fed will do what it takes to keep the economy going -- meaning more Ben bucks. As I've blogged before, the strategy at the Fed is clearly geared toward dollar depreciation in order to make U.S. goods cheaper overseas. Let's face it, Ben also has a preoccupation with the Great Depression's deflation. He's haunted by it and thinks we must avoid such a specter at all costs. Anyone who feels that Bernanke is principled like former Fed chief Volker and would stop the printing presses and lift rates, is simply cuckoo for Cocoa Puffs. While Big Ben would love to crater gold by directly saying he's applying the brakes to QE, he also knows that such action would send the stock market down 500 to 1000 points in no time flat and cause banks to implode left and right. Imho, the Bernanke Fed thinks it holds all of the cards and can control every thing and that a little inflation is good for the soul.. Ha! I expect the Fed will remain overly accommodative and end up having to vainly battle eventual hyperinflation.

Dollar getting creamed

No wonder the dollar index has slid below .77 in a disorderly market tonight. Central Bankers better get a grip on this - IF they can. What? more in effective intervention? Sadly, most will feel a boot on their neck when the system goes into total haywire mode. More dollar printing is a dollar killer. Raising rates is an instant bank killer. What will the Fed do? Amazing things are unfolding.

Wednesday, October 13, 2010

Gold going higher again... silver too.

Metals investors can thank Uncle Ben Bernanke's magic money printing press for another leg up in gold to the $1375 notch today. Silver is knocking on the $24/oz door (won't be long 'till we see $30, at this rate).

Ah, what it must be like to be a counterfeiter with total impunity. That's what Federal Reserve is. Imagine being able to shove some worthless paper instrument into your own mass magic duplicator and out pops crisp $100 dollar bills. Ben's printer will eat anything, especially valueless bank assets, and out pops the monopoly money with pretty pictures of Franklin, Grant, Jackson, etc.

But let's throw in a plot complication. Now, the state attorneys general of all 50 states have snapped on their rubber gloves and are probing the mortgage/foreclosure mess. This virtually assures, as I've been blabbing about, that the foreclosure landscape will undergo a sort of nationwide nuclear winter. Obama and Geithner have both said 'no freeze' needed, but Mr. Freeze is going to have his way through our states. Worse, the questions surrounding proper transfer or mortgages into trusts assure coming mayhem in various mortgage related derivatives markets. It's a mess which the gold and silver market investors sense.

As telegraphed by the latest Fed minutes, add the prospect of more QE (money printing) in a vain attempt by the Fed to keep interest rates at near microscopic levels AND it's no wonder that gold and silver have blasted higher. Do we even want to think of what happens to the dollar's existence if trillions more in Ben bucks are used to save the banksters???? No wonder gold and silver are in TILT mode. What a mess.

To ramble further. These are extremely powerful forces at work. On one side of the ring you've got the Fed/banking cabal and on the other side you've got the metals screaming further dollar devaluation and rising inflation pace. Who will win? I think that metals and commodities will rule the day, but expect both sides to duke it out violently. I don't expect the banks will take all of this lying down. It will be intriguing to see what type band aid the D.c. to NY bunch will attempt to pull out of the box and what type of lies and deceptions will be used. This is only round one.

Two risky trades

At a few minutes before closing bell I bought November 60 CSX calls and Oct 20 Intel calls.

It looks like the CSX play will perform well. The tell was recent strong rail traffic reports. Another feature was the extremely heavy volume in both October and November calls that overwhelmed open interest in certain strikes. This a feature that I seek out in my options scans: volume that swamps open interest. I would be looking at other rails, including Norfolk Southern.

While volume was very heavy in Intel calls, it wasn't of the sort that exceeded open interest. So it was really a "gut" feeling kind of trade based on knowing some of the fundamentals. Call it a gamble. We know all about the "expectations" game on Wall Street. Intel had previously guided lower for the quarter and set up a not so unusual scenario of beating lowered expectations. C'mon, isn't it ridiculous that the bears in the stock reasoned that Intel would destroy the market by missing lowered estimates? Intel's stock is in a multi year dead money downtrend for certain, but its managers are not complete idiots that they would allow it to post a miss. Wall Street is onto the non growth stock ways of Intel and reaction to the numbers was muted. We'll see how the options perform tomorrow. They were cheap, implied volatility was fairly low and they are priced purely on intrinsic value.

It's now 3 majors down - with Alcoa, CSX and Intel beating the street. Let's see what JP Morgan pulls out of the bag tomorrow (no position). A good or decent report from JPM might stoke some bullish action out of the market.

I'm sorry that I don't tweet or blog about last minute trades until after they're done. There is just not enough time. Risk in these trades is also high enough that I do not want to accidentally lead anyone to lose money if I am wrong.

"A curious creature"

Monday, October 11, 2010

$IBM finishes at an all time high

Here's a message I tweeted on Twitter back in September about Big Blue:

'Jim Kingsland

I remain bullish on $IBM. A friend who works there is as grim as ever about staff and other cuts. $140 is an easy call by Christmas.

By Christmas? It's taken far less time for it to rise about $10 since I mentioned it. IBM finished at 139.66 today.

Now the stock is extremely overbought. Consolidation time at the very least. Watch out for a pullback if the overall market heads south.

It's not just Food that's going to jump

what about shipping and the DOT regs? Here's a quick message from a friend for you to consider:
"Add another factor in: my husband and I recently talked to the driver of the truck which transported our stuff to the West Coast (owns his own truck, has done this for decades, knows the industry well.) He said with regulations implement...ed by DOT at the start of this year, transport costs for goods are going to skyrocket in the coming months. The changes are designed to protect drivers from fatigue, but they include limits on how many hours drivers can work/drive per day. That will lead to longer delivery times & added expenses which get passed on to consumers."

Demand to see your mortgage note

The Titles, $POT $AAPL $CORN

As mentioned, I still see the title insurance companies as good short plays.
Things will eventually resume in the mortgage world but it may take a
while, invalidating their business models. What will they do in the
meantime? Make oven mitts?? Tickers include: $LPS $ASPS $FNF $FAF $ORI .
AS usual this is not official financial advice. Do your own due diligence.

$BAC and $WFC look like the ugliest banks in a foreclosure freeze. I blog
more about the banking mess here:

Potash shares are coming back to life as it is now threatening a breakup
and huge dividend payment. The train is about to leave the station again.
TelegraphNews Potash plans break-up to foil Billiton bid $POT

$AAPL whisper rev number for 3rd qtr is $20 bln. As long as market holds up
on QE spec, Apple looks like a fairly good short term bullish scalp up thru
earnings. Yes, it is priced to perfection and yes they can be very
conservative in the guidance.


Sunday, October 10, 2010

The tin ear of the Obama administration

A blanket freeze on foreclosures IS coming but at the hands of state attorneys general and market forces. Axelrod and his boss are irrelevant as they had put their full faith and trust in banks to do the right thing. For over a year through meaningless federal programs like the now infamously ineffective HAMP, the problems of the mortgage industry have been allowed to fester. We now know that banks had little reason to help distressed homeowners and in fact ran amok of standard due process, foreclosure proceedings. The foreclosure mess is exposing the failure of banks to have done correct paperwork and documentation on the securitization side of the equation. So now we're faced with a cloud of doubt over the validity of what were heretofore believed to be clear titles. This is an across the board mortgage (not just foreclosure) fiasco.

WASHINGTON — A top White House adviser questioned the need Sunday for a blanket stoppage of all home foreclosures, even as pressure grows on the Obama administration to do something about mounting evidence that banks have used inaccurate documents to evict homeowners.

"It is a serious problem," said David Axelrod, who contended that the flawed paperwork is hurting the nation's housing market as well as lending institutions. But he added, "I'm not sure about a national moratorium because there are in fact valid foreclosures that probably should go forward" because their documents are accurate.

Axelrod said the administration is pressing lenders to accelerate their reviews of foreclosures to determine which ones have flawed documentation.

"Our hope is this moves rapidly and that this gets unwound very, very quickly," he said.

With the reeling economy already the top issue on voters' minds, the doubts raised over foreclosures and evictions are becoming a political issue with the approach of Nov. 2 elections.

Underscoring those pressures, two leading lawmakers took opposing stances on the wisdom of a moratorium.

Rep. Debbie Wasserman Schultz, D-Fla., a top House Democrat, said she backed a foreclosure moratorium and government talks with the banking industry to concoct ways to let lenders reshape troubled mortgages. She said the foreclosure problem has been "extremely vexing" in her state.

The No. 2 House Republican, Rep. Eric Cantor of Virginia, said a national moratorium would remove the protections that lenders need.

"You're going to shut down the housing industry" with a national stoppage, Cantor said. "People have to take responsibility for themselves."

In recent days, Senate Majority Leader Harry Reid, D-Nev., in a tough re-election race, urged five large mortgage lenders to suspend foreclosures in his state until they establish ways to make sure homeowners don't lose their homes improperly. Attorney General Eric Holder said that the government is looking into the matter, and Democratic lawmakers urged bank regulators and the Justice Department to probe whether mortgage companies violated laws in handling foreclosures.

The attorneys general of up to 40 states plan to shortly announce a joint investigation into banks' use of flawed foreclosure paperwork, a person familiar with the investigation told The Associated Press late Saturday.

On Friday, Bank of America became the first bank to halt foreclosures in all 50 states. Three other institutions — JPMorgan Chase & Co., Ally Bank's GMAC Mortgage unit and PNC Financial — have stopped foreclosures in the 23 states where foreclosures must be approved by a judge.

President Barack Obama vetoed a bill last week that would have made it easier for banks to approve foreclosure documents, which the White House said could hurt consumers.

Axelrod spoke on CBS' "Face the Nation" while Wasserman Schultz and Cantor appeared on "Fox News Sunday."

Friday, October 8, 2010

Why Dow 11k matters

Tonight on every t.v. newscast across the country, Dow 11,000 will get a mention. The tens of millions of average people who are not traders or market wonks care little about what other indicators like the S&P and Nasdaq are doing from day to day. Each night they hear about the Dow on the so called local t.v. "market report' and its good enough for them. 11k for the average person is a milestone number and most will simply conclude, perhaps with a little cheer, that at least their hard hit 401k's are not falling further.

My cynical side would add that a Dow 11k headline is a good way to smokescreen the lousy employment report and the snowballing banking foreclosure problem. Yes, the Dow matters and it matters quite a bit.

Simple explanation of today's market action

lousy jobs report - sparks further economy worries - enough to convince investors FED will resort to another round of Quantitative Easing - so stocks rise - bond mkt fairly flat - gold gains as more expected QE means more mass printing of paper dollars. It's that simple.

One day it will all end badly for stocks and bonds. For now, however, I remain somewhat bullish on stocks as long as QE pumping is in the cards and the banks don't quickly implode over the foreclosure mess. One of the hard lessons in all of this: it's pretty easy to inflate the stock market, but not so easy to rejuvenate the economy. QE just doesn't seem to have a trickle down effect on the masses. QE feeds the banksters who get freed from government paper and other worthless assets. The banks then throw some money at the stock market and up it goes. That's essence of what's going on (in very simple terms).

Banks Already up to their usual tricks

The banking industry is already trying to use tactics to scare Congress into believing that a nationwide foreclosure timeout would be bad. Let's just forget about due process and let the banks do as they please even if it means technically breaking the law? That's a bad idea as well. Yes, I realize that deserved foreclosure occurs when the home-debtor decides to no longer make timely monthly payments. I still, however, have problems with banks that fail to provide accurate proof of ownership and complete paperwork to the courts. Here's the industry's dribble.

Letter From Banks to Congress on Risks of Foreclosures

'This is the biggest fraud in the history of the capital markets'

Even the Washington Post knows there is big trouble ahead for the Banksters. Ezra Klein interviews Janet Tavakoli

Janet Tavakoli is the founder and president of Tavakoli Structured Finance Inc. She sounded some of the earliest warnings on the structured finance market, leading the University of Chicago to profile her as a "Structured Success," and Business Week to call her "The Cassandra of Credit Derivatives." We spoke this afternoon about the turmoil in the housing market, and an edited transcript of our conversation follows.

Ezra Klein: What’s happening here? Why are we suddenly faced with a crisis that wasn’t apparent two weeks ago?

Janet Tavakoli: This is the biggest fraud in the history of the capital markets. And it’s not something that happened last week. It happened when these loans were originated, in some cases years ago. Loans have representations and warranties that have to be met. In the past, you had a certain period of time, 60 to 90 days, where you sort through these loans and, if they’re bad, you kick them back. If the documentation wasn’t correct, you’d kick it back. If you found the incomes of the buyers had been overstated, or the houses had been appraised at twice their worth, you’d kick it back. But that didn’t happen here. And it turned out there were loan files that were missing required documentation. Part of putting the deal together is that the securitization professional, and in this case that’s banks like Goldman Sachs and JP Morgan, has to watch for this stuff. It’s called perfecting the security, and it’s not optional.

EK: And how much danger are the banks themselves in?

JT: When we had the financial crisis, the first thing the banks did was run to Congress and ask for accounting relief. They asked to be able to avoid pricing this stuff at the price where people would buy them. So no one can tell you the size of the hole in these balance sheets. We’ve thrown a lot of money at it. TARP was just the tip of the iceberg. We’ve given them guarantees on debts, low-cost funding from the Fed. But a lot of these mortgages just cannot be saved. Had we acknowledged this problem in 2005, we could’ve cleaned it up for a few hundred billion dollars. But we didn’t. Banks were lying and committing fraud, and our regulators were covering them and so a bad problem has become a hellacious one.

EK: My understanding is that this now pits the banks against the investors they sold these products too. The investors are going to court to argue that the products were flawed and the banks need to take them back.

JT: Many investors now are waking up to the fact that they were defrauded. Even sophisticated investors. If you did your due diligence but material information was withheld, you can recover. It’ll be a case-by-by-case basis.

EK: Given that our financial system is still fragile, isn’t that a disaster for the economy? Will credit freeze again?

JT: I disagree. In order to make the financial system healthy, we need to recognize the extent of our losses and begin facing the fraud. Then the market will be trustworthy again and people will start to participate.

EK: It sounds almost like you’re saying we still need to go through the end of our financial crisis.

JT: Yes, but I wouldn’t say crisis. This can be done with a resolution trust corporation, the way we cleaned up the S&Ls. The system got back on its feet faster because we grappled with the problems. The shareholders would be wiped out and the debt holders would have to take a discount on their debt and they’d get a debt-for-equity swap. Instead we poured TARP money into a pit and meanwhile the banks are paying huge bonuses to some people who should be made accountable for fraud. The financial crisis was a product of our irrational reaction, which protected crony capitalism rather than capitalism. In capitalism, the shareholders who took the risk would be wiped out and the debt holders would take a discount but banking would go on.

Bank of America halts its foreclosures

BAC and other big banking stocks are lower on a day when the Dow tops 11k (again).

(AP) — A mushrooming crisis over potential flaws in foreclosure documents is threatening to throw the real estate industry into chaos, as Bank of America on Friday became the first bank to stop taking back tens of thousands of foreclosed homes in all 50 states.
The move, along with another decision on foreclosures by PNC Financial Services Inc., adds to growing concerns that mortgage lenders have been evicting homeowners using flawed court papers.
Charlotte, N.C.-based Bank of America Corp., the nation's largest bank, said Friday it would no longer complete foreclosures in all 50 states as it reviews documents used to process foreclosures. That applies to homes that the bank takes back itself and those that it transfers to investors such as mortgage giants Fannie Mae and Freddie Mac.
A week earlier, the company had said it would only do so in the 23 states where foreclosures must be approved by a judge.
The bank did so in reaction to mounting pressure from public officials inquiring about the accuracy of foreclosure documents. A company spokesman, Dan Frahm, said the bank still believes its documents are correct but wants to satisfy officials' concerns.
"Our ongoing assessment shows the basis for our past foreclosure decisions is accurate," he said.
Banking and housing analysts, meanwhile, fear the foreclosure document problems could prolong the housing bust, and hundreds of thousands of inevitable foreclosures will be pushed off into some legal limbo for years.
"If you are looking at the key in this country to economic stability, it's the housing industry," said banking analyst Nancy Bush of NAB Research. "This is a huge mess that helps nothing."
State and federal officials have been ramping up pressure on the mortgage industry over worries about potential legal violations amid growing evidence that mortgage company employees or their lawyers signed documents in foreclosure cases without verifying the information in them. Also Friday, Sen. Christopher Dodd, D-Conn, the chairman of the Senate Banking Committee, said he would hold a hearing on the issue next month.
"American families should not have to worry about losing their homes to sloppy bureaucratic mismanagement or fraud," Dodd said. "Regulators at the federal, state, and local levels have a responsibility to uphold the law and protect consumers from unfair foreclosure, and lenders have a duty to not cut corners around the law."
A document obtained last week by the Associated Press showed a Bank of America official acknowledging in a legal proceeding that she signed thousands of foreclosure documents a month and typically didn't read them. The official, Renee Hertzler, said in a February deposition that she signed 7,000 to 8,000 foreclosure documents a month.
Earlier in the week, Senate Majority Leader Harry Reid, D-Nev., urged five large mortgage lenders to suspend foreclosures in Nevada until they have set up systems to make sure homeowners aren't "improperly directed into foreclosure proceedings." Nevada is not among the states where banks had suspended foreclosures.
Also Friday, PNC Financial Services Group Inc. said it is halting most foreclosures and evictions in 23 states for a month so it can review whether documents it submitted to courts complied with state laws. An official at the Pittsburgh-based bank confirmed the decision on Friday, which was reported earlier by the New York Times. The official requested anonymity because the decision hasn't been publicly announced.
PNC becomes the fourth major U.S. lender to halt some foreclosures amid evidence that mortgage company employees or their lawyers signed documents in foreclosure cases without verifying the information in them.
In addition to PNC and Bank of America, Ally Financial's GMAC Mortgage unit and JPMorgan Chase & Co. have announced similar moves in the past two weeks.
In some states, lenders can foreclose quickly on delinquent mortgage borrowers. By contrast, the 23 states use a lengthy court process. They require documents to verify information on the mortgage, including who owns it.

Thursday, October 7, 2010

Obama's first veto

It's a pocket veto of a passed without debate foreclosure bill. It would have made it easier for banks to foreclose. The Wall St Journal has further details:

Foreclosures on hold

Here's an exclusive pdf of the type of letters that are going out to foreclosure candidates. (this is from a neighbor) who has been open about her experience. Click the image enlarge.

Wednesday, October 6, 2010

Herman Cain on Kudlow

A Note from my friend Sam Stovall

at S&P where he is chief Investment Strategist

"Investor’s vision appears to be changing from 3-D (double-dip with deflation) to 20/20, and is being replaced by the expectation that the U.S. economy will experience a half-speed recovery. Our 12-month target for the S&P 500 is 1270, implying a 9% gain from the current level and an 1180 year-end value. Market optimism appears to be supported by the unwinding of fears that drove share prices lower by 16% through early July, a possible second-round of quantitative easing, and a potential change in Congressional leadership. Earnings growth projections also remain strong for 2010 and 2011. Finally, commodities and foreign investments will likely benefit from the expected further weakening of the U.S. dollar."

Factbox: Gold milestones on the road to record high

LONDON (Reuters) - Gold rose to a second successive record high on Wednesday, boosted by investors seeking to profit from weakness in the dollar and the U.S. economy.

Following are key dates in gold's trading history since the early 1970s:

* August 1971 - U.S. President Richard Nixon takes the dollar off the gold standard, which had been in place with minor modifications since the Bretton Woods Agreement of 1944 fixed the conversion rate for one Troy ounce of gold at $35.

* August 1972 - The United States devalues the dollar to $38 per ounce of gold.

* March 1973 - Most major countries adopt floating exchange rate system.

* May 1973 - U.S. devalues dollar to $42.22 per ounce.

* January 1980 - Gold hits record high at $850 per ounce. High inflation because of strong oil prices, Soviet intervention in Afghanistan and the impact of the Iranian revolution prompt investors to move into the metal.

* August 1999 - Gold falls to a low at $251.70 on worries about central banks reducing reserves of gold bullion and mining companies selling gold in forward markets to protect against falling prices.

* October 1999 - Gold reaches a two-year high at $338 after agreement to limit gold sales by 15 European central banks. Market sentiment toward gold begins to turn more positive.

* February 2003 - Gold reaches a 4- year high on safe-haven buying in the run-up to the invasion of Iraq.

* December 2003-January 2004 - Gold breaks above $400, reaching levels last traded in 1988. Investors increasingly buy gold as risk insurance for portfolios.

* November 2005 - Spot gold breaches $500 for the first time since December 1987, when spot hit $502.97.

* April 11, 2006 - Gold prices surpass $600, the highest point since December 1980, with funds and investors pouring money into commodities on a weak dollar, firm oil prices and geopolitical worries.

* May 12, 2006 - Gold prices peak at $730 an ounce with funds and investors pouring money into commodities on a weak dollar, firm oil prices and political tensions over Iran's nuclear ambitions.

* June 14, 2006 - Gold falls 26 percent to $543 from its 26-year peak after investors and speculators sell out of commodity positions.

* November 7, 2007 - Spot gold hits a 28-year high of $845.40 an ounce.
* January 2, 2008 - Spot gold breaks above $850.

* March 13, 2008 - Benchmark gold contract trades over $1,000 for the first time in U.S. futures market.

* March 17, 2008 - Spot gold hits an all-time high of $1,030.80 an ounce. U.S. gold futures touch record peak of $1,033.90.

* September 17, 2008 - Spot gold rises by nearly $90 an ounce, a record one-day gain, as investors seek safety amid turmoil on the equity markets.

* Jan-March 2009 - Gold-backed exchange-traded funds report record inflows in the first quarter as financial sector insecurity spurs safe-haven buying. Holdings of the largest, the SPDR Gold Trust, rise 45 percent to 1,127.44 tonnes.

* February 20, 2009 - Gold rises back above $1,000 an ounce to a peak of $1,005.40 as investors buy bullion as a safe store of value as major economies face recession and equity markets tumble.

* April 24, 2009 - China announces it has raised its gold reserves by three-quarters since 2003 and now holds 1,054 tonnes of the precious metal, boosting expectations it may add further to its reserves.

* August 7, 2009 - European central banks opt to renew their earlier agreement to limit gold sales over a five-year period, setting the sales cap at 400 tonnes a year.

* September 8, 2009 - Gold breaks back through $1,000 an ounce for the first time since February 2009 on dollar weakness and concerns over the sustainability of the economic recovery.

* December 1, 2009 - Gold climbs above $1,200 an ounce for the first time as the dollar drops.

* December 3, 2009 - Gold hits record high at $1,226.10 an ounce, with dollar weakness and expectations for central banks to diversify reserves into gold driving prices higher.

* May 11, 2010 - Gold reaches fresh record high above $1,230 an ounce as fears over the contagion of debt issues in the euro zone fuel safe-haven buying.

* June 21, 2010 - Gold jumps to a new high at $1,264.90 an ounce as underlying fears over financial market stability and sovereign risk combine with dollar weakness to push the metal through resistance at its previous high.

* Sept 14, 2010 - Gold climbs back to record highs, this time at $1,274.75, as global markets reflect renewed uncertainty on the economic outlook.

* Sept 16-22, 2010 - Gold hits record highs for five successive sessions, peaking at $1,296.10, as investors flock to bullion after the Fed signals it may consider further quantitative easing, weakening the dollar and raising fears over future inflation.

* Sept 27 - Spot gold prices touch the $1,300 an ounce mark for the first time.
* Oct 5 - Gold extends its record highs to above $1,330 an ounce, lifted by renewed weakness in the dollar, and as the Bank of Japan announces moves to combat yen strength.

* Oct 6 - Gold rallies to a record high just shy of $1,350 an ounce as the dollar comes under pressure from building expectations for the U.S. Federal Reserve to take extra measures to keep interest rates low and prop up the economy.

(Compiled by Atul Prakash and Jan Harvey; editing by James Jukwey)

Central Banks gone wild

Is this Journal video too optimistic? It may be just me, but I see a grim outcome. Oddly, this unlimited source of cheap Central Bank money may keep stocks above water and push the precious metals ever higher.

Tuesday, October 5, 2010

Even Moron Stanley jumps on the gold bandwagon

... pardon, That's MorGAN Stanley. Actually, this almost makes me feel a bit uncomfortable. The phony paper instrument hucksters suddenly liking gold?

Morgan Stanley Metals

Another Train Wreck in the Making

It's called fiat currencies. Some good reading here. Gomez Addams would be proud.


Be sure to check your inbox for a special Advisory Alert, sent out this evening.

Disorder in the markets....

The mortgage mess reminds me of the genius of the Stooges. Yes, there are plenty of stooges today, better known as the bankers and their cohorts. I am concerned we might end up seeing some DISORDER in the financial markets, not to mention housing markets over this mortgage debacle. The outcome won't be a happy one like this 3 Stooges short. Oh, LPS is really standing out as the ugliest girl at the dance.

"A tarantula!" lol. "Gentlemen, you must control your killing instincts...."

"Nixon can wipe his

a$$ with this social security check". I recall overhearing the remark back in the 70's from my grandma who was talking with adults in another room. I wasn't supposed to hear it, but I did. Why do I bring this memory up now? Because of the latest round of stupid Keynesian tricks. Tonight the Bank of Japan has lowered rates to 0 to .1%. This is just getting silly. Governments are tinkering with rates at these tiny levels while the masses continue to endure lean times. Back in the day my grandmother's social security check was about 100 bucks a month. She had every right to view it with disdain after a life of hard working, including raising two boys during the depression. Fast forward to today and seniors in 2011 are getting nothing extra in their checks while our government plays around with near zero rates (screwing savers). It makes no sense. Entitlements for the banksters will trump the average elderly person everyday.

Housing nightmare

What started out as a trickle of news from GMAC of a housing foreclosure suspension a few weeks ago, has become a tidal wave of incredibly bad news for the housing market. As it becomes apparent that servicers (GMAC, Chase, Bank of America, etc.) don't have clear titles to the homes they're foreclosing on, title insurers are refusing to insure and the whole mortgage system in seizing up as a result. This effectively means that with jumbled titles, mortgage debt securities marked on a bank's books at cost or higher, are worth zero. CNBC even spread a nasty rumor this evening that the federal government may try to mandate a 90 day suspension on foreclosures. 90 days won't be enough time to correct this problem which may take years to unravel.

Imho, this has obvious negative implications for banks. $JPM, $BAC, immediately come to mind. Title insurance companies don't look too good in this scenario. Use your imagination.

Monday, October 4, 2010

Super-rich investors buy gold by ton

(Reuters) - The world's wealthiest people have responded to economic worries by buying bars of gold, sometimes by the ton, and moving assets out of the financial system, bankers catering to the very rich said on Monday.

Fears of a double-dip downturn had boosted the appetite for physical bullion as well as mining company shares and exchange-traded funds, UBS executive Josef Stadler told the Reuters Global Private Banking Summit.

"They don't only buy ETFs or futures, they buy physical gold," said Stadler, who runs the Swiss bank's services for clients with assets of at least $50 million to invest.

UBS is recommending top-tier clients hold 7-10 percent of their assets in precious metals like gold, which is on course for its tenth consecutive yearly gain and traded at around $1,317 an ounce on Monday, near the record level reached last week.

In a sign of the uncertain times, some clients go further.

"We had a clear example of a couple buying over a ton of gold ... and carrying it to another place," Stadler said. At today's prices, that shipment would be worth about $42 million.

Julius Baer's chief investment officer for Asia is also recommending that wealthy investors park some of their assets in gold as a defensive stance following a string of lackluster U.S. data and amid concerns about currency weakness.

"I see gold as an insurance," Van Anantha-Nageswaran said. "I recommend 10 percent as minimum in portfolios and anything more than that to be used for trading purposes, to respond to short-term over-bought or over-sold signals."


Billionaire financier George Soros, echoing comments from investment guru Warren Buffett, last month described gold as the "ultimate bubble" because it is costly to dig up and has no real value except its market price.

But a rising price for the precious metal has in itself generated more and more demand from investors looking for a way to hedge themselves against a fresh recession. Gold bears no yield and is uncompetitive in an environment of rising interest rates.

The uneasy outlook for inflation, hard currencies and global growth has triggered a five-fold increase in a physical gold fund launched by Pictet one year ago, the Swiss private bank said.

UBS's Stadler said the precious metal had become a staple of investors' portfolios, despite questions about whether it makes for a smart long-term investment.

"If you talk to ultra-high net worth individuals that level of uncertainty has never been higher in the last two, three, four years," he said. "If they ask me 'is inflation going up or are we entering a deflationary cycle?', I don't know. But obviously nobody knows."

Samir Raslan, Citigroup's regional head for central, eastern and northern Europe, Africa and Turkey, said clients were not going overboard on gold.

Sunday, October 3, 2010

Monday's the big 10-4, good buddy

Mr. Softy gets a downgrade

Got this email tonight via $GS on $MSFT:

"We are downgrading Microsoft to Neutral and
lowering our EPS estimates by 4%, 3% and 4% in
FY2011, FY2012 and FY2013, and therefore our price
target to $28 from $32, which suggests more upside
in other Buy-rated names in our coverage. We
believe the intrinsic value of shares cannot be
unlocked if the status quo remains, and we have
increased caution near term on a more elongated PC
refresh cycle, combined with the newer threat of
notebook cannibalization from tablets, where
Windows does not yet have a presence. Since added
to the Americas Buy list on 8/12/08, MSFT shares
have returned -13%, compared to -11% for the S&P

Saturday, October 2, 2010

Obviously war is serious

business, but here's a video that shows what the so called "illuminati" has been up to for centuries -- getting rich off of both sides.

Friday, October 1, 2010

Remember, there are two gold markets

the physical gold market and the spot market.

Spot is rising again to the $1317 level as the NY Fed head talks about the need for more QE.

Physical spread to spot has narrowed quite a bit from the heady days of late 2008 when certain gold coins commanded near double the spot price. Now the spreads are down to $25 to $50 per ounce. What's going on? 1. the potential for over regulation via the Congressman Weiner gold disclosure bill and 2. the 1099 rules. If Weiner gets passage and 1099 is not overturned in its present form, the market now is signalling a confiscation end run -- almost the perfect storm. Gold suppression schemes at their finest. Confiscation without having to do a 1930's style confiscation.

But throw a monkey wrench into the picture. International holders. Will China or India, for example, allow for a wholesale depreciation of their gold at the hands of US regs? I don't think so. So in the end the US PTB who want to keep gold from rising further because it exposes the true nature of the dollar's standing may end up being frustrated.

Gold is an internationally recognized store of value that you may not as an American be able to buy in the future. Yes, the combination of the so called consumer protection legislation of NYC mayoral wannabe Anthony Weiner and burdensome 1099 rules will be a one two punch to most industry gold and bullion dealers. More in coming posts. I remain bullish on gold with a good supply of Maalox on hand.

Good job BofA

First Day of the month

can be quite positive for Wall Street. Let's see if it happens again.

China PMI a worldwide sentiment booster

.... if the numbers are really accurate.

(Reuters) - Chinese manufacturing picked up steam in September after a mid-year lull, easing concerns of a renewed downturn in global growth, although other leading Asian economies showed some signs of softer business activity.

Manufacturing activity slowed in India in September and contracted in South Korea and Australia, surveys showed. Data on Thursday showed Japanese manufacturing contracted for the first time in 15 months and reports later on Friday are expected to show slowdowns in the United States and Europe.

Still, China dominated.

"The PMIs are a very good gauge of the outlook for industrial production in China, and they tell a beautiful story," said Rob Henderson, head market economist at National Australia Bank in Sydney.

"Fears of a substantial downturn have proved unfounded and this should put to rest a lot of the worries about the global outlook."

Indeed, the Asian purchasing managers indexes (PMI) followed signs that activity in the United States had picked up a little in the third quarter, easing worries about a fresh slump in the world's top economy.

New U.S. jobless claims fell last week and manufacturing in the Midwest region grew faster than expected in September.

China's official PMI rose to 53.8 in September from 51.7 in August, well above a median forecast of 52. The data pushed LME copper to a two-year high, lifted the Australian dollar and gave Asian stocks .MIAPJ0000PUS a boost.

India's manufacturing sector expanded for the 18th straight month, but the pace slowed to a 10-month low.

Indian manufacturing had stayed strong earlier this year as Chinese activity had slowed.

"The manufacturing sector shows signs of cooling after a red-hot pace earlier in the year," said Frederic Neumann, co-head of Asian Economics Research at HSBC.

"Capacity constraints may be partly responsible for this, in addition to the fading fiscal stimulus."

In Australia, among the few developed economies to avoid a recession after the global financial crisis, a strong local currency and soft domestic demand led to the first contraction in manufacturing activity in 2010, a survey showed.

PMIs use indicators such as new orders, employment, exports and order backlogs, to gauge the strength of manufacturing, and are considered a leading indicator of broader economic activity.

A reading above 50 indicates expansion, and below that a contraction. Further, a reading above 50 that is higher than the previous month indicates a quickening pace of activity, while a 50-plus reading lower than the previous month shows a slowdown.