Thursday, January 5, 2012

$15.2tn US debt passes 100% of GDP, Greece threatens default

Posted on 04 January 2012 with no comments from readers

Markets started the first day of the New Year with a rally with commodities sharply up too. The ArabianMoney pick of the year silver (click here) was up the most at seven per cent on the day.

But the bad news that got little coverage on a good day for official economic statistics was still there like the unwelcome guest at a party.

100% US debt ratio

The US debt to GDP ratio officially past 100 per cent of GDP for the first time at $15.22 trillion. As Zerohedge reported the world?s largest national economy is only $14 billion away from its own debt ceiling, and that is not a large sum when the total debt is double-figure trillions.

At the same time Greece got tough with negotiators over terms of a $170 billion international bailout deal signalling that it wants a 75 per cent haircut for privately held bonds that mature in March, and will default if that cannot be achieved.

Then perhaps the heightened state of tension in the Hormuz Straits is being overlooked. There are fears of a 1970s-style jump in the price of oil if Iran goes ahead with threats to close the straits should European leaders impose an embargo on Iranian oil exports and freeze Iranian central bank assets by the end of this month.

Oil price rises tend to preceed global economic downturns as we saw with $147 oil in July 2008 just before the global economic crisis of that autumn.

In 1973 the price of oil shot up 400 per cent plunging Western economies into a severe recession and 1974 saw one of the worst downturns ever in major stock markets.

New Year fear

You could almost wonder where the financial markets found their New Year cheer yesterday. It can?t last. The accumulation of negative factors by the end of last year was overwhelming and global trade is already in a slowdown.

There is a horrible logic carrying this forward into 2012 with debts only growing bigger and bigger, Greece close to breaking point and plenty of geo-political problems to unsettle the Middle East and the all important oil price.

Perhaps there is always a tendency to see the bright side of life after a holiday break but only a fool would invest money when feeling over-optimistic.

Source: http://www.arabianmoney.net/gold-silver/2012/01/04/15-2tn-us-debt-passes-100-of-gdp-greece-threatens-default/

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Video: Gingrich vows to rebut Romney

Tanier: Plays NFL wild-card teams can't do without

Tanier: Playoff time means diagram time, strategy fans! Let?s start with two rookie quarterbacks why rely on play-action to make up for their lack of experience. We?ll then move on to some vintage Drew Brees deep passing, and the type of defense the Lions will use to stop him. (Or at least try.)

Source: http://www.msnbc.msn.com/id/3036697/vp/45876396#45876396

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A Review Of Swings In Energy Commodities ETFs In 2011

By Abraham Bailin

Following the financial crisis of late 2008, commodities were driven ever higher by bouts of substantial monetary debasement, a consistently uncertain global macroeconomic outlook, and the market's search for diversification. Through 2011, however, the asset class hasn't been nearly so flush. Since late April, GreenHaven Continuous Commodity Index (GCC), an equal-weight broad-basket commodity futures offering, lost just less than 18%. This places annual performance for 2011 at negative 9.2%, which approximates the return of its competing broad-basket commodity offerings. Here we highlight the most noteworthy moves within the commodity asset class during 2011.

Top-Performing Energy Commodities Keep Broad-Basket Offerings Afloat
Whereas GCC maintains an equal-weight to each of its 17 constituent commodities, the most popular products in the space lean far more heavily toward energy exposure. Contrast GCC's 18% energy allocation with that of the largest broad-basket commodity ETF, PowerShares DB Commodity (DBC), which allocates 55% of its portfolio to energy. IShares S&P GSCI Commodity-Indexed Trust (GSG) holds an even-larger 71% energy exposure. As it turns out, an energy-heavy weighting paid off in 2011. DBC and GSG fell just 2.6% and 3.3% for the year, respectively.

The best individual performer in the commodity asset class during 2011 was United States Brent Oil (BNO), which tracks a basket of front-month Brent futures, with a 19.5% return in 2011. BNO was closely tailed by its sister offering, United States Gasoline (UGA), which rose 14.8% over the same period.

Brent and WTI Break Stride
West Texas Intermediate is a U.S.-based crude oil whose pricing is heavily tied to the supply and demand construct around the major Cushing, Oklahoma oil hub. Brent is a European crude that comes from the North Sea and is distributed across the globe. In 2011, WTI inventories at Cushing climbed to record levels, while at the same time, WTI consumption had been steadily decreasing for half of a decade. The two forces worked in tandem to place downward price pressure on the WTI.

Overseas, Brent prices have been bolstered by decreased North Sea crude production and the Arab Spring which took a swath of crude production offline, namely from Libya. While the crude markets are truly global, given the geographic proximity of Europe to Libya, it's only intuitive that the loss of Libyan production would place larger strain on Brent supplies than WTI.

Prior to 2011, the price of WTI crude oil had routinely ranged between $1 and $2 higher than its European counterpart, Brent crude. The reason that WTI had historically garnered a premium is that it is lighter and sweeter than Brent. Because of this, it can produce a higher percentage of refined products and is easier to refine. Earlier this year, however, the spread reversed. At the time of this writing, front month Brent is trading at an $8 premium to WTI.

Not only were spot prices impacted, but so, too, were the futures forward curves of the two crude oil markets. Academic literature published by Yale University's Professor K. Geert Rowenhorst indicates that the yield produced by rolling from a near to expiration contract into the next one out has a very strong inverse relationship to inventory levels. Given the surging inventories at Cushing, United States Oil (USO), which tracks front month WTI futures, has been subject to a negative roll yield for quite some time, a situation we refer to as contango. On the other hand, the futures forward curve of Brent crude has gone into backwardation. That is to say that the prices of contracts progressively further from expiration become less expensive. For BNO, rolling into new contracts allowed the fund to effectively sell high and buy low, producing a positive roll yield. It comes as no surprise, then, that while BNO rose 19.5% in 2011, USO was down 2.3%.

Natural Gas Offerings: Laggards of the Lot
While swelling inventories at Cushing worked to depress WTI prices relative to Brent, the supply situation for natural gas is far more bearish. Both proven reserves and storage of natural gas sit at or near all-time highs; circumstances that have made for severely depressed prices. As was the case for WTI, this naturally leads to a persistent state of contango.

At the time of this writing, the annualized cost of rolling a natural gas futures position forward was nearly 30%. That means that an investor holding a year-out futures contract would need to see spot natural gas increase by 30% just to break even. It should come as no shock then, that in 2011, United States Natural Gas (UNG) and iPath DJ-UBS Natural Gas ETN (GAZ), both of which track front month natural gas futures, were down 46.1% and 53.2%, respectively.

A Cautionary Note
Let us be very clear. Exchange-traded products that track commodities using only front-month futures are best left to those inclined to speculate over the very short term. Holding these products over longer periods, perhaps with the intent of bolstering exposure to a particular commodity, leaves the investor vulnerable to taking losses even when the spot commodity appreciates. Again, this comes on the basis of negative roll yield.

The problems that arise under the guise of contango can be mitigated to a large degree by the use of a dynamic contract selection methodology. PowerShares DB Oil (DBO), for instance, uses the DB 'Optimum Yield' strategy to select non-front-month WTI crude contracts. In doing so, they avoid the largest contango related drawdown. This nearly always occurs at the very front of the futures curve, while remaining close enough to expiration to realize a high degree of sensitivity to spot price fluctuations. That said, we would always recommend that long-term passive investors use broad-basket exposure to fulfill a commodity allocation within their portfolio.

Disclosure: Morningstar licenses its indexes to certain ETF and ETN providers, including BlackRock, Invesco, Merrill Lynch, Northern Trust, and Scottrade for use in exchange-traded funds and notes. These ETFs and ETNs are not sponsored, issued, or sold by Morningstar. Morningstar does not make any representation regarding the advisability of investing in ETFs or ETNs that are based on Morningstar indexes.

Source: http://seekingalpha.com/article/317437-a-review-of-swings-in-energy-commodities-etfs-in-2011?source=feed

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Wednesday, January 4, 2012

TwiSource: ?Breaking Dawn ? Part 1? DVD/Blu-ray now available for pre-order, ?Wedding Dress Edition? revealed http://t.co/QU4I3Ikz

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Source: http://twitter.com/TwiSource/statuses/154260801593683968

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Tuesday, January 3, 2012

Mohamed A. El-Erian: A Make or Break Year?

Lots of things are coming together to give 2012 the feel of a make or break year -- a year that could well determine whether the world transitions to a better and more stable place or, instead, battles an even larger number of economic, political and social fires. The drivers in four key geographical areas will be heavily influenced by the interaction of political leadership, the strength and agility of institutions, and the newly empowered segments of society.

First, there is the US where, to state the obvious, the results of the November elections will meaningfully impact the path taken by the largest economy in the world, and its only superpower.

This is an election about the economy 00 past, present and future. In the next few months, we will all be bombarded by various explanations of why America lacks its traditional growth dynamism, why so many people remain un- and underemployed, and why poverty is rising to such unacceptable levels.

Influenced by movements on both the left and right that are able to effectively self organize and project near and far, our votes will send important signals on what is needed to overcome our economic malaise. I suspect that, collectively, we will opt for compromise rather than corner solutions.

We will challenge Washington to strike the right balance between tax and spending reforms, immediate stimulus and medium-term debt and deficit solutions, incentives for businesses and safety nets for the vulnerable segments of our population, etc. In the process, we will urge our politicians to shed legacy shackles in order to come together for the good of the nation.

None of this will materialize without effective leadership. Our leaders need to quickly unite on a common vision, distill common purpose, catalyze multi-year nationwide efforts, and embrace midcourse corrections as needed (and there will be quite a few given how many unthinkables are now realities in America and in societies that we interact with closely).

Europe, the second key area, no longer has room for compromise. Its "moment of truth" is in 2012 when critical decisions -- taken either actively or passively -- will determine whether the Eurozone breaks up or, to use the words of French President Sarkozy, is "re-founded" with a firmer foundation. Again, the interaction between popular movements, institutions, and leadership will be key.

Many more people in many more European countries will be taking to the street. They will be united by a simple demand -- to end the economic and financial turmoil that is killing jobs.

Europe cannot afford more political bickering, misdiagnosis, and incomplete solutions. Its leaders and institutions need to urgently pivot, abandoning active inertia that has been anchored for too long by the delusion of returning to a status quo ante that, in reality, is no longer feasible.

There is no going back to the old Eurozone of 17 countries. It is either fragmentation or a smaller and less imperfect union of countries with similar conditions.

This brings us to the third area where, also, there is no going back to the old -- the growing number of countries where dissatisfied citizens only have the streets, as opposed to also fair and free elections, to change their governments.

Such popular movements are no longer limited to the Arab world. They will pop up in many other countries.

The required pivots here are much harder and more complex. Most uprisings are led by leaderless grass root movements, enabled by social media and fueled by multiyear grievances. Rulers still hanging on to power often opt for fear tactics to divide citizens, thus repressing the forces of orderly change and experimentation that are an inevitable part of the political maturation process. And existing institutions are not much help, having been corrupted over many years to serve now-discredited elites rather than the newly empowered masses.

So, where does all this leave us?

America should be able to come together, recognize its structural challenges, and unite on multi-year efforts needed to promote economic growth, create jobs, and restore the sense that the system is fair. Europe should be able to redefine its regional underpinnings and, after the inevitable initial disruptions, regain the financial stability that underpins economic and social well-being. Newly transitioning countries should be able to pivot, albeit noisily and imperfectly, from dismantling the past to building a better future.

Regrettably, in today's world, what SHOULD happen does not easily translate into what is LIKELY to happen. Reality is far trickier, messier and, well, more uncertain.

Uncertainty is the defining characteristic of the fourth and final area where it is even harder to reconcile the should and likely. I am referring here to countries that are under enormous pressure and, to use Thomas Friedman's insightful analogy, can explode rather than implode when critically destabilized.

Countries like Iran, North Korea, and Syria face a mix of destabilizing influences that could well come to a boil in 2012. Containment forces will compete with those fueling accelerated change. And here, neither institutions nor leaders and popular movements can be credible and effective stabilizers.

By all counts, 2012 is shaping up to be a memorable year. In some areas, the potential clearly exists for societies to seize opportunities for change and transition to a better place. In others, stability can only follow a period of even greater uncertainty and risks.

This balance is not pre-determined. Much will depend on decisions to be made, and actions to be taken. Let us all hope that they end up tipping the balance favorably. There is a lot at stake.

?

Source: http://www.huffingtonpost.com/mohamed-a-elerian/a-make-or-break-year_b_1177820.html

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Video: Santorum would support exceptions to abortion ban

October 30: Plouffe, roundtable

Nearly a year away from the 2012 election, we?ll talk to the president?s 2008 campaign manager, now White House Senior Adviser, David Plouffe. Then author of the definitive new biography on the late Apple CEO, Steve Jobs, Walter Isaacson; Author of the new book ?The Time of Our Lives,? NBC News Special Correspondent, Tom Brokaw; Former Governor of Michigan, Jennifer Granholm; and Republican strategist, Mike Murphy.

Source: http://www.msnbc.msn.com/id/3032608/vp/45839865#45839865

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Monday, January 2, 2012

Will Hollywood still shower the love on Obama?

(AP) ? Hollywood, as everyone knows, loves the Next Big Thing. And four years ago, Barack Obama was certainly that: a political supernova, the equivalent of a breakout movie star.

"He is 'The One,'" declared Oprah Winfrey, his biggest and most influential celebrity champion. "The best candidate I've ever seen," pronounced George Clooney. Halle Berry said she'd "collect paper cups off the ground to make his pathway clear." Black Eyed Peas frontman will.i.am chimed in with the famous "Yes We Can" video. And so on.

But you can't be the Next Big Thing twice. And so, with the 2012 vote less than a year away, there's clearly a different mood in heavily Democratic Hollywood: less gushing, not to mention snippets of criticism, most prominently from actor Matt Damon, who campaigned for Obama last time but now makes no secret of his disillusionment.

"I think he misinterpreted his mandate," Damon said earlier this year, and then recently told Elle magazine the country would have been better off with a one-term president with guts (he used a much saltier word).

But while the adulation of the 2008 election may be significantly muted among Hollywood liberals, as with liberals elsewhere, Obama supporters say that's only natural, given the circumstances. Fundraisers there say that events have been selling out and there's plenty of enthusiasm.

Most importantly, they add, the nation's attention has been on the battling Republicans. Soon, the choice will get starker and the Democratic base will be energized, they argue.

"The moment the Republicans have their nominee is when you're going to see anyone still on the fence jump in," says Chad Griffin, a Los Angeles-based communications strategist and Democratic fundraiser. "Once you have a head-to-head matchup, the contrast will be grand."

Numbers compiled by the nonpartisan Center for Responsive Politics show that while overall political contributions were up in Hollywood for the first three quarters of this year compared with the same period four years ago, contributions to Democrats were slightly down.

According to the group, the movie, television and recording industries ? a large chunk of which is Hollywood ? gave $17,639,267 in the first three quarters to federal candidates and parties, with 71 percent going to the Democrats and 29 percent to Republicans, as opposed to $15,642,561 four years ago, when 77 percent went to the Democrats and 23 percent to Republicans.

But numbers for the Democrats were down by more than $2.5 million from four years ago ? $9,249,303 this year compared with $11,966,077 four years ago.

Obama's fundraisers note that four years ago, Obama was locked in a tense primary battle with Hillary Rodham Clinton ? and primaries drive early fundraising.

"A re-election is always different," says Andy Spahn, a longtime political adviser to one of the top Democratic fundraisers in the nation, DreamWorks co-founder Jeffrey Katzenberg, along with his partners Steven Spielberg and David Geffen.

He calls the current mood among Hollywood Democrats a "matured enthusiasm," but says support is strong.

Though Damon's remarks about the president have been the most pointed, other celebrities have expressed disappointment, or at least mild disillusionment.

"I love the president like most of us," Sean "Diddy" Combs told Source magazine this year. "I just want the president to do better."

And will.i.am, creator of that viral video that ended with the word "HOPE," told The New York Times earlier this year: "I don't want to hope anymore." Asked if he was disappointed in Obama, he said: "I don't feel disappointed. I feel like, Argggh! Speak louder! I feel like, Do something!"

What about core Obama celebrity supporters Clooney and Winfrey? Far from being disillusioned with Obama, Clooney said recently: "I'm disillusioned by the people who are disillusioned by Obama."

"Democrats eat their own," the actor said. "I'm a firm believer in sticking by and sticking up for the people whom you've elected." He went on to list the accomplishments of the Obama administration, wondering why Democrats weren't selling them better.

And Winfrey, credited with helping Obama win over many women in 2008, told Politico in August: "I'm in his corner for whatever he needs me to do."

There already have been plenty of celebrities hosting or showing up at Obama fundraising events. Actress Eva Longoria hosted one at the home of Melanie Griffith and Antonio Banderas. Lady Gaga attended a September fundraiser at the home of Facebook's chief operating officer, Sheryl Sandberg. Alicia Keys performed at a New York fundraiser.

And in the summer, film executive Harvey Weinstein held a Manhattan event sprinkled with celebs including Keys, Jimmy Fallon, and Gwyneth Paltrow and husband Chris Martin. A 50th birthday-themed fundraiser in Chicago featured performances by Jennifer Hudson, Herbie Hancock and the band OK Go.

Of course, celebrity support isn't always a win-win for a candidate. Just as Obama's opponents in 2008 tried to use his taste for arugula to paint him as elitist, they tried to use his celebrity connections to imply he was lightweight, all pizazz and no substance ? most pointedly in an ad tenuously linking him to Paris Hilton and Britney Spears.

The tactic seemed to scare Obama's campaign enough to downplay the role of celebrities at the Democratic convention that summer. Will the campaign similarly seek to downplay the celebrity role this time?

"Celebrities are helpful in terms of exciting a base," says Griffin, the fundraiser. "I don't think the president will have any shortage of surrogates."

One thing is clear: They won't include Damon, and the president wasn't shy about making a few jokes at the actor's expense back in May, at the White House Correspondents' Association dinner.

"Matt Damon said he was disappointed in my performance," the president noted. Then he referred to one of Damon's recent films. "Well, Matt, I just saw 'The Adjustment Bureau,' so right back atcha, buddy."

Damon, whose representatives did not respond to a request for comment, has given no sign that he plans to do anything as dramatic as switch sides in November. The real danger, say some Obama supporters, is that comments like his would lead voters ? especially key younger ones ? to stay home.

That's a threat the president faces in places well beyond Hollywood.

Ken Sunshine, a prominent public relations consultant who has represented top entertainers and politicians, thinks that ultimately "the activist community in entertainment and everywhere else will come home and support the president's re-election with the same degree of enthusiasm as before ? if for no other reason than ... consider the alternative!"

"But once we help him get re-elected," Sunshine adds, "then we really hold his feet to the fire in the second term."

Associated Press

Source: http://hosted2.ap.org/APDEFAULT/89ae8247abe8493fae24405546e9a1aa/Article_2011-12-31-Obama-Hollywood/id-d6856cf6743b4ebd84db60301c103028

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