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Margin Debt Soars to Highest Levels Since September 2008 – Margin debt is one measure of the amount of optimism or pessimism in the stock market. Rising margin debt generally correlates to a rising stock market. Margin use has soared to the highest level since September 2008.  Margin Debt vs. S&P 500 – click on chart for sharper image Margin Debt Data is from NYSE Factbook Securities Credit. ZeroHedge discussed margin debt in NYSE October Margin Debt Jumps To Highest Since Lehman Failure As Investor Net Worth Is At Lowest Since April Highs. Moreover, mutual fund cash levels have been near record lows since September, and topping it off, a respected friend tells me NYSE cash levels are negative $35 billion. Collectively, this sounds like "all in" to me, and then some.
 

Copper Approaches Record as Swiss Franc Weakens on Global Recovery Signs
- Copper rose to almost a record high amid speculation the global recovery will continue into 2011. The Swiss franc declined and U.K. shares advanced for a fifth day before the holiday weekend.  Copper gained 0.7 percent, extending this year’s rally to 27 percent. The franc depreciated 0.4 percent against the euro. U.S. markets were closed for the Christmas holiday.  Confidence among American consumers probably improved this month, economists said before the Conference Board’s report due to be released on Dec. 28. U.S. stocks completed a fourth straight weekly gain yesterday after data showed the nation’s economy grew more in the third quarter than initially reported and Americans increased spending in November for a fifth month.  “The continuing advance of base metals continues to prove the strength of economic growth and the tortuous business of turning on additional supplies of metals,”

 
China’s Surprise Rate Hike May Roil Commodity Markets  – The surprise timing of the People’s Bank of China (PBOC) increase in benchmark lending and deposit interest rates is likely to weigh on commodity markets when trading starts on Monday. On Christmas Day, the PBOC raised rates by 25 basis points, the second rate rise in just over two months, part of a series of measures designed to combat inflation which hit a 28-month high of 5.1 percent in November. The opportunity to cash in on prices at or near their highest in years before the year end could mean the correction this time may be greater than the losses following the last interest rate hike in October. While the market expected China to raise rates, some investors had thought it was too late to move in 2010. "This certainly doesn’t spell the end of the commodities boom or the strong China story. It’s a smart move that may have caught the market off guard,"
 
Changes in the yield curve – The bond market sees an improving economy. The yield curve has shifted up and steepened over the last 4 months, which I read as a perception that things are not quite as dreary as they appeared a short while ago. On the other hand, that still leaves the overall level of interest rates a little below where they stood a year ago. Essentially what happened this fall was a reversal of much of the pessimistic sentiment that had been developing in the first 8 months of 2010. Much of the flattening and lowering of the yield curve in the first 8 months of 2010 was due to a decrease in inflationary expectations. These too have come back up, as the graph below of the spread between nominal yields and those on Treasury inflation protected securities reveals. One goal of the Fed’s second round of quantitative easing begun at the start of November was to flatten the yield curve. That obviously didn’t happen, and I discussed some of the reasons why a few weeks ago. A second goal was to increase inflationary expectations, which was achieved.

 

 
US excess liquidity pushes oil to record high – RIYADH: As the year comes to a close, another round of crude price spiral seems just round the corner. Markets are already at their highest level in 25 months, despite the fact that the world is barely out of the Great Recession.  The jobless rate today is hovering at around 10 per cent twice the levels in 2007-08; the housing sector in the US continues to languish in the intensive care with existing home sales down 27.9 per cent year-on-year in November and a lacklustre global macroeconomic performance. And this leads us to the question-given ample supplies, considerable spare capacity how could crude be at this level,? Indeed, severe winter and snowstorms have hit parts of Europe buoying the expectations, at least temporarily, that fuel demand will increase. Chinese consumption continues to grow at least in the short term. Yet the biggest mover for energy markets appeared to be financial investors,” “The additional liquidity pumped into the markets by the Fed’s Treasury purchases should also reach commodity markets and is thus leading to increasing oil prices,” analysts at the Frankfurt-based Commerzbank AG said. “What is more, the higher price level reflects the weaker dollar, which is a direct consequence of the ultra-expansive US monetary policy.”
 
 Pensions eat up growing portion of city of Decatur’s property tax revenue – As the Decatur City Council prepares to convene Monday to discuss setting its portion of the local property tax levy, the largest burden on those revenues – funding the pensions of police, firefighters and city employees – remains a persistent and growing challenge. In 2001, about 30 percent of the city’s property tax levy went into paying down the pensions of its retired police and firefighters. In 2011, 70 percent of it will go toward pensions, even as recent years have seen cuts to other services that draw their funds from the same source, including the Decatur Public Library. The state legislature sets all of the rules for pension contributions, and over the years it has mandated that municipalities make ever increasing payments. The result, McCrady said, has been a higher and higher cost for the city.
 
New York’s Exploding Pension Costs – Public pension costs in New York are mushrooming—just when taxpayers can least afford it. Over the next five years, tax-funded annual contributions to the New York State Teachers’ Retirement System (NYSTRS) will more than quadruple, while contributions to the New York State and Local Retirement System (NYSLRS) will more than double, according to estimates presented in this report. New York City’s budgeted pension costs, which already have increased tenfold in the past decade, will rise by at least 20 percent more in the next three years, according to the city’s financial plan projections. NYSTRS and NYSLRS are “fully funded” by government actuarial standards, but we estimate they have combined funding shortfalls of $120 billion when their liabilities are measured using private-sector accounting rules. Based on a similar alternative standard, New York City’s pension funds had unfunded liabilities of $76 billion as of mid-2008—before their net asset values plunged in the wake of the financial crisis.

 Houston mayor wants benefits cut, takes fight to Legislature – Instability in its three pension systems is the greatest threat to Houston‘s financial solvency, city officials and financial analysts say.  Within three years, according to an actuarial study commissioned by the city, the pension for firefighters will require the city to contribute 45 percent of its payroll costs for that retirement plan, a burden Mayor Annise Parker says is unsustainable.  The other two plans are in even worse shape. The police and municipal employee pensions are underfunded by $2.1 billion, roughly the equivalent of what the city spends annually for public safety and general operations. "The bottom line is the whole system is completely unsustainable with current benefit levels and the city’s financial position,"

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