US$/S&P 500 Correlation, Dollar Cheaper to Borrow Than the Yen, AIG Momentum Discussed

As the graph above illustrates, a serious correlation between the US$ and the US equity markets has developed over the last 9+ years. This correlation is strong and for policy makers in Washington, rather disturbing. The relationship is as follows: If the US$ loses value the equity markets have rallied and if the US$ strengthens equity markets have sold off.

A hint as to the future direction of the US equity markets may reside in the chart above. If this strong correlation continues then any insight into the future strength or weakness of the Greenback could be helpful when managing a U.S. equity portfolio.

To that end, I offer the following story about the relationship between the US$ and the Japanese Yen. The Japanese economy has for years (decades in fact) been the poster child for failed socialist economic policies and as a result their interest rates have been the lowest of any major country in an effort to stimulate growth. Unfortunately, the socialist policies have overwhelmed the fiscal stimulus and a stagnation has resulted.

This stagnation has led to a very profitable trade for hedge funds over the years called the Yen carry trade. Simply put: with rates in Japan so low, an investor could borrow Yen, sell the Yen to buy the currency of another nation and use the currency to buy that nation's government debt. As long as interest rates in that other nation were higher than in Japan the investor could profit on the spread between the cost to borrow Yen (tiny) and interest paid on the other nation's debt (larger than tiny). Of course, a side effect of this trade would be the strengthening of the other nation's currency and a major bid for said nation's debt.

I believe the story below could be the proverbial "straw" that breaks the back of the US$. The US$ is fighting to maintain support above the crucial 80 level and avoid selling off to the lows of early 2008. The battle is in the process of being lost as the US$ sits at the 78 level as of this writing.

As the story below explains, the US$ is now cheaper to borrow than the Yen. The implications of this reversal could be enormous:

• A major leg of support for the US$ in the form of carry traders has vanished


• A major leg of support for the US treasury markets in the form of carry traders has vanished


• Could the carry trade begin to work in the reverse? Borrow and sell US$ to buy another nation's currency and debt? This action, of course, would add even more pressure to a falling US$
  

The US$ is already under attack on many different fronts from increased government spending to seemingly endless treasury debt offerings to the Feds decision to monetize said debt. Will the loss of the carry trade support - or worse, a new reverse carry trade - lead to the real collapse in the US$? Only time will tell, but all signs point to trouble for the Greenback. This trouble could result in further upside for the equity markets as inflation becomes a reality and investors flee cash for high growth assets and commodities.

Dollar is now cheaper to borrow than yen - WSJ
WSJ reports the dollar officially became cheaper to borrow than the conspicuously low-yielding yen for the first time in more than 16 years. That doesn't bode well for the U.S. currency, some analysts said.

The dollar has long benefited from positive yield premiums, especially against the Japanese currency, but the prospect of the Federal Reserve keeping U.S. overnight interest rates essentially at zero until at least late next year has wiped out the dollar's premium. That means less incentive for investors to park funds in dollar assets for the relative yield advantage, or "carry."

The fall in dollar interbank-borrowing rates -- on an absolute basis, but even more so in relative terms -- could even see the dollar becoming a funding currency, the unit investors borrow to buy higher-yielding assets... It isn't likely that investors would massively short the dollar as a funding currency, especially against the yen. Indeed, with the Bank of Japan expected to raise rates even more slowly than the Fed, dollar Libor rates could soon rise back above yen Libor, says Woon Khien Chia, a strategist with Royal Bank of Scotland. But the puny U.S. yields could add to longer-term dollar negatives, such as the huge and burgeoning U.S. budget and trade deficits, although not necessary in relation to the yen.

I've made a case for a continuation of the equity market rally in the discussion above. However, I feel it is only prudent to point out the obvious at this moment and temper enthusiasm a bit. A pullback can occur at any time and September - October are rarely kind months to the equity holder. The aggressive moves by the weakest financial stocks over the last few days may portend a turning point. This turning point may be group specific or it could effect the market in general. If the US$ continues to head south and inflation begins to develop in earnest then a natural shift away from financials and into commodities and high growth companies would be appropriate and normal.

TALKX Floor Talk: AIG and momentum themes
...We're seeing another garbage rally unfold before us today in the most at-risk Financials, which began late yesterday afternoon with the massive short squeeze in AIG. This out-of-the-blue 5 point surge in AIG near 3pm ET yesterday wasn't the result of a specific news-related catalyst; instead, it started as a small rally in the afternoon, and as it started to gather steam and accelerate it forced shorts to panic and scramble to cover.

Since AIG is the most volatile name in the "at-risk Financials" group, this created one of those "momentum themes" where coming in this morning, traders saw AIG continuing to squeeze in pre-market trading, and so they started to bid up the other low-quality financial stocks (CIT, ABK, MBI, PMI, HIG, BPOP, etc) in the hopes of riding similar short squeezes (which indeed is what occurred today).

There are two things to keep in mind with these types of low-quality rallies/squeezes:

1) they tend to last for just a few days before the stocks in question roll back over again (look at AXL or CORS in early May, for example)

2) these squeezes in distressed names often punctuate the final stages of a near- or intermediate-term rally. Of course, we don't know yet whether what we're seeing today with the at-risk Financials is signalling the end of the recent bull market, but this type of action is certainly one of those red flags that investors should be mindful of.

Courtesy of Obama 'Change' is a Baffling Word, Bernanke Reappointment, "Cure Rate" on Mortgages Plunging, Central Bankers Call for Continued Stimulus

The American people are receiving a true education from our president regarding the various uses of the baffling word that is 'Change'.

First, during Obama's campaign for presidency, we were led to believe that change meant 'out with the old, in with the new'. Old representing all that was bad and new all that was good.

Then, after obtaining the presidency Obama has been kind enough to illustrate the use of the word change as in 'the more things change the more they stay the same.' This use of the word change can be evidenced by the Bernanke story below as well as countless examples of cronyism and kotowing to lobbyists by the Obama administration. Simply look up stories connecting Obama to ACORN if you desire evidence. Both of these egregious endeavors were objects of ridicule by Obama during his campaign and, might I remind you, reasons to vote for the caped crusader as he promised to eradicate the evils of Washington.

And that brings me to the next use of the word 'change'. If anyone actually believed that Obama was going to change Washington then I respectfully request you review the phrase, 'A leopard can't change its spots.''

Obama to reappoint Bernanke as Fed chief - WSJ
The Wall Street Journal reports President Obama will announce the nomination of Ben Bernanke to a second term as Federal Reserve chairman on Tuesday, opting for continuity in U.S. economic policy despite criticism in Congress of the low-key central banker's frantic efforts to rescue the financial system. Mr. Obama's decision had become a subject of growing speculation and uncertainty in financial markets and in Washington policy circles. The president called the Fed chairman to the Oval Office this past Wednesday to offer him another four-year term. Mr. Bernanke then flew off to Wyoming where he gave a defense of his controversial policies at the Fed's annual meetings in Jackson Hole.

In recent weeks I have read countless stories about the end of the recession and the beginning of monetary tightening. I have witnessed innumerable reports on TV regarding the inevitable strength coming in the US$ because of the wonderful turnaround unfolding across world economies. And yet, the US$ value sits barely above the year low. Why the disconnect you might ask? Well, read the next three stories. These stories represent the reality of the situation and illustrate the desire of central banks around the world to continue the course of currency devaluation to stimulate nascent/non-existent growth.

Fewer catching up on lapsed mortgages - WSJ
WSJ reports homeowners who fall behind on their mortgage payments have become much less likely to catch up again, a new study shows. The report from Fitch Ratings focuses on a plunge in the "cure rate" for mortgages that were packaged into securities. The study excludes loans guaranteed by government-backed agencies as well as those that weren't bundled into securities.

The cure rate is the portion of delinquent loans that return to current payment status each month. Fitch found that the cure rate for prime loans dropped to 6.6% as of July from an average of 45% for the years 2000 through 2006. For so-called Alt-A loans -- a category between prime and subprime that typically involves borrowers who don't fully document their income or assets -- the cure rate has fallen to 4.3% from 30.2%. In the subprime category, the rate has declined to 5.3% from 19.4%.

"The cure rates have really collapsed," said Roelof Slump, a managing director at Fitch. Because borrowers are less willing or able to catch up on payments, foreclosures are likely to remain a big problem. Barclays Capital projects the number of foreclosed homes for sale will peak at 1.15 million in mid-2010, up from an estimated 688,000 as of July 1.

Central bankers stress not rushing for exits - Reuters.com
Reuters.com reports if there was one message from central bankers gathered at this mountain retreat this weekend it was this: Don't expect us to raise interest rates any time soon. A series of speakers at the Kansas City Federal Reserve Bank's annual conference, which drew the monetary policy elite from around the world, heralded the global economy's apparent push out of its deep recession. But they noted that economies were recovering only with extraordinary stimulus from governments and central banks, and said it was too soon to talk of a self-sustaining recovery.

"I am a little a bit uneasy when I see that, because we have some green shoots here and there, we are already saying, 'Well, after all, we are close to back to normal,'" European Central Bank President Jean-Claude Trichet said on Friday. "We have an enormous amount of work to do." As ECB Governing Council member Ewald Nowotny told Reuters, there seems to be a consensus among central banks to make sure they do not withdraw their stimulus too soon. "What we see now is that to a large part this is still a recovery sponsored by public measures," he said. In the words of Harvard University professor Kenneth Rogoff: "They don't want to go back into what we just got out of."

China to keep policy loose as economy faces new woes - Reuters.com
Reuters.com reports China will maintain its stimulative policy stance because the economy, far from being on solid footing, is facing fresh difficulties, Premier Wen Jiabao said. In a downbeat statement on the government's website following a trip to the eastern province of Zhejiang, known as a hotbed of private enterprise, Wen said Beijing would ensure a sustainable flow of credit and a "reasonably sufficient" provision of liquidity to support growth.

"We must clearly see that the foundations of the recovery are not stable, not solidified and not balanced. We cannot be blindly optimistic," Wen was cited as saying. "Therefore, we must maintain continuity and consistency in macroeconomic policies, and maintaining stable and quite fast economic growth remains our top priority. This means we cannot afford the slightest relaxation or wavering." China still faced great pressure from the slowdown in demand for exports, Wen said, adding that it was difficult to boost domestic demand in the short term to fill in the gap -- despite the boost from the government's 4 trillion yuan ($585 billion) stimulus package.

This is a public service message to the Obama administration:

Please review the following story closely. You will see a pristine example of how the real world reacts to tax increases. The evidence clearly illustrates that jobs are lost in the country where taxes are increased. Please have the good sense to avoid the evil temptations of tax hikes in the midst of a jobless economic recovery effort. This has been a word from your sponsors, you know, the voters.

New UK tax sends hedge funds fleeing - WSJ
WSJ reports a stream of hedge-fund managers and other financial-services professionals are quitting the U.K., following plans to raise top personal tax rates to 51%. Lawyers estimate hedge funds managing close to $15 billion have moved to Switzerland in the past year, with more possibly to come. David Butler, founder of professional-services co Kinetic Partners, said his company had advised 23 hedge funds on leaving the U.K. in the 15 months to April. An additional 15 are close to quitting the U.K., he said.

"In the past, managers would say they'd move some operations or dip their toe in the water," Mr. Butler said. "Now that's changed." Hedge fund Amplitude Capital took its $735 million in assets under management to Switzerland at the start of this year. In May, Odey Asset Management threatened to move. All the hedge funds that have left the U.K. for Switzerland are concerned about tighter European Union regulations, as well as a new top rate of income tax announced by the U.K. government. Starting next April, individuals in the U.K. who earn more than 150,000 pounds, or about $247,000, a year will pay tax at 51%, including national insurance. They will also be taxed heavily on pension payments.

Initial Claims Disappoint Again, Failded Banks Weighing On FDIC, Calpers Takes Another Hit, Tishman Faces Office Downturn

The stories below offer further concrete evidence that major issues persist in the US economy. When making investment decisions, we prefer to place more weight behind this type of data than "leading" economic indicators the government likes to laud and CNBC types love to regurgitate.

The rally in the US$ last week stalled this week right at the resistance of a long-term downtrend. We expected as much and wrote about the move last week. Treasury bonds however continue to rally. The direction of this market is perhaps harder to predict on a short-term basis due to the open efforts of the Fed to buy treasuries and support the market.

ECONX Initial Claims Disappoint
The initial claims report did nothing to support the economic recovery scenario. Initial claims for the week ended Aug. 15 increased to 576,000 from a revised 561,000 in the prior week. The number lifted the 4-week moving average to 570,000 from 565,750. Initial claims are up 31.5% from the prior year. Continuing claims rose 2,000 to 6.241 million. The 4-week moving average fell by 2,000 to 6.266 million. No major layoffs were announced yet 10 states reported increases in unemployment of more than 1,000. When you factor in that continuing claims were expected to slowly run down as unemployment benefits lapsed and not due to new hires, this report shows the labor market is more troubled than previously thought.

Failed banks weighing on FDIC - WSJ
WSJ reports banks in the U.S. that failed in the past two years were in far worse shape than those that collapsed during the industry's last crisis, a looming problem for the government agency charged with insuring deposits.

At three of the five banks that failed Friday, increasing the total to 77 so far this year, the financial hit to the agency's deposit-insurance fund is expected by the FDIC to be about 50% of their assets. The biggest hit on a percentage basis is coming from Community Bank of Nevada, a Las Vegas bank with $1.52 billion in assets and an estimated cost of $781.5 million. The failure of Colonial Bank, a unit of Colonial BancGroup that was sold to BB&T Corp., will cost $2.8 billion, or 11% of the Montgomery, Ala., bank's assets. For the 102 banks that have collapsed in the past two years, the FDIC's estimated cost averaged 25% of assets. That is up from the 19% rate between 1989 and 1995, when 747 financial institutions were closed by regulators, according to the FDIC.

The agency's insurance fund already has dipped to $13 billion, with more than 300 battered banks and thrifts still on an undisclosed FDIC list of problem institutions. One problem is that so many banks took risks when the economy was booming, and are seeing their capital dissipate with alarming speed.

Calpers takes another property hit - WSJ
WSJ reports the California Public Employees' Retirement System has given up control of its stake in a trophy office tower in Portland, Ore., a sign that even the largest institutional investors are cutting their losses rather than throwing good money after some badly battered real-estate assets. The decision by Calpers, the country's largest public pension fund by assets, to walk from its investment in the Koin Center, one of Oregon's tallest buildings at about 509 feet, nicknamed the "mechanical pencil" for its signature shape, also shows that leasing problems are cropping up in even the country's healthier markets. While it is on the rise, downtown Portland's Class A office vacancy rate was 6.1% as of June 30, below the average of 12.9% for major U.S. downtown markets, according to Colliers International. Despite Portland's relative health, in July a partnership that includes Calpers and CommonWealth Partners, defaulted on the Koin Center's $70 million mortgage provided by New York Life Insurance Co., according to court papers. A state circuit court judge approved New York Life's request that a receiver be appointed to control and possibly sell the property.

Tishman faces office downturn - WSJ
WSJ reports a partnership led by Tishman Speyer Properties is in default on debt tied to one of the largest office portfolios in the Washington area, the latest in a line of humbling turns for the prominent property developer. Tishman Speyer paid $2.8 billion in late 2006 for what was known as the CarrAmerica portfolio, a collection of 28 buildings leased to law cos, lobbyists and other upscale tenants in and around Washington. But in taking advantage of the easy credit terms of the time, Tishman ended up overpaying. With office vacancies rising and rents falling, the partnership has violated lender's covenants. Tishman also must find a way to refinance the debt when it comes due in 2011, something that analysts say could be a struggle.

Consumer Sentiment Dismal, US$ and US Treasuries Reaction A Head Fake

Today's consumer sentiment numbers offer immediate confirmation that the issues I raised in yesterday's post are clear and present dangers to the continued recovery of the debt and equity markets.

As of this post, equity markets are down about 1.5% across the board, which is not surprising.
However, the rally in the US$ and the US treasury market are in my estimation a head fake. The US$ has rallied a bit in the last week or so due to belief that a recovery will allow the Fed to shrink it's balance sheet. US treasuries have rallied because participants believe the economic recovery will pave the way for less stimulus and debt issuance.

Clearly, this sentiment data along with the dismal July retail sales data and awful initial jobless claims data paint an altogether more ominous picture. This picture does not bode well for the US$ or the Treasury market.

ECONX Some Sobering Sentiment Data
The preliminary report on consumer sentiment for August from the University of Michigan caught the market by surprise and not in a good way. The index dipped to 63.2 from 66.0 in July. The consensus estimate was 69.0. The current conditions index dropped to 64.9 from 70.5.

The August reading here is unsettling considering it is below the level seen in February when the stock market was much lower and the unemployment rate wasn't as high. The economic outlook index fell to 62.1 from 63.2. That is the lowest reading since March when this category measured 53.5...

Ultimately, it is income that drives spending, but the weak confidence measure is a sobering reminder of the psychological (and real) effects of a weak labor market that has been accented by a growing mass of workers (1 out of every 3 unemployed) that has been unemployed for 27 weeks or longer. The economic data overall might suggest in the months ahead that the recession is over, but this confidence report goes to show it will feel like a recession for a lot of people a lot longer than some production data says it should.

Q2 EPS, LIBOR-OIS Spreads Narrow, July Retail Sales, Initail Jobless Claims

Second quarter earnings can be best characterized as light on revenue but strong on cost cutting, leading to better than expected EPS. The more positive bottom line results have helped fuel the equity market rally over the last couple of months.

Meanwhile, Aug. 13 (Bloomberg) -- The Libor-OIS spread narrowed to a level former Federal Reserve Chairman Alan Greenspan said he regarded as “normal,” adding to evidence the freeze in credit markets is thawing. Clearly credit market stabilization has been a major driver of the equity market rally.

While the rally has been a nice reprieve from the bear market the question remains what will compel the markets higher in Q3 and Q4. With credit back to normal that driver is off the table and cost cutting/belt tightening can only work to improve EPS for a short period of time. Revenue must accelerate in the 2nd half of the year for this bear market rally to turn into a bonafide bull market.

With that thought in mind I am publishing the next two stories. If the consumer can't find a job then spending will not return and revenue will continue to be disappointing. I fear this will result in a resumption of the down trend in the back half of the year.

Of course, these are long term questions and as my Mom always says "you must live the questions; the answers reveal themselves." "Living the questions" in this case means trading the trend while keeping your eyes open and your mind alert.

ECONX July Retail Sales Disappoint
The July Retail Sales report is a disappointment and yet another reminder, in the midst of a rising stock market, that the consumer isn't all he/she used to be due to weak wage growth, depressed asset prices, and concerns about job security...

For the month retail sales were down -0.1%. Excluding autos, they were down -0.6%. Both figures were well off the consensus forecasts that called for increases of 0.8% and 0.1%, respectively. The government doesn't provide any context behind the numbers, but with broad declines in most sales categories, it is clear that consumers weren't doing a lot of discretionary spending.

There will be a tendency to dismiss the weakness as being the result of consumers delaying purchases to take advantage of tax-free holidays that got pushed into August this year. There will likely be some makeup in August, but there is still no other way to read the July data than to consider it a disappointment. To the latter point, retail sales, excluding autos, gasoline station, and building materials, which is a measurement that flows into GDP estimates, was down for the fifth straight month.

ECONX Initial Claims Still Way Too High

Initial jobless claims for the week ended August 8 increased to 558,000 from a revised 554,000 in the prior week. The current number lifted the 4-week moving average to 565,000 from 556,500. Continuing claims, in contrast, fell 141,000 to 6.202 million. That dropped the 4-week moving average for the series to 6.259 million from 6.287 million. There is cold comfort in the drop in continuing claims since it most likely reflects people losing benefits. To be sure, there isn't much hiring happening... Separately, while the trend in initial claims has been better of late, a reading north of 500,000 at this point is still downright bad and still well above prior recession levels when the 4-week average for claims was closer to the 400,000-450,000 range. The labor market is weak and these figures aren't a great portent for consumer spending activity.

HFT "flash" Trade Fallout, Goldman Sachs Connection, Nasdaq Admission, Earnings of Interest: LINC, LOPE

We have been following this "flash" trading story closely and need to remain vigilant. The fallout from a clampdown on High Frequency Trade (HFT) could be far reaching and is difficult to predict. However, I'll take a stab at a couple of results that seem like obvious issues:

1) If HFTs are banned we should witness a disturbing collapse in trading volume. Over 70% of the NYSE volume today is program generated, a significant portion of which are HFTs. This may be good for the markets longer term as true levels of volume based on real buyers and sellers will return but disruptive shorter term.

2) Goldman Sachs (GS) earning could be seriously impaired. For years GS employees have been considered the "best" traders on the street. Was the company able to attract the brightest minds? Is GS in bed with Government? Probably yes to both questions but now we are able to see a little further behind the curtain and OZ is clearly aided by a bunch of computers getting fed information ahead of the street and profiting from the illegal early data. This is commonly known as front running and has been illegal for years. If this profit center is closed off GS will need to scramble to make up for the loss and EPS could suffer.

SEC Chairman Schapiro asked staff for method to quickly ban inequity from flash orders; says commission would need to approve proposal banning flashes, according to statement - Reuters

HFT "Flash" Orders: Nasdaq Admission?

...The New York Democrat, who has urged the U.S. Securities and Exchange Commission to clamp down on the practice, said parent company Nasdaq OMX is willing to submit to a potential ban by the agency after it "reluctantly" started offering flashes early last month.
Did I just read that correctly? Did Nasdaq OMX tell Chuck Schumer that it intentionally (even if reluctantly) began offering order types that do not contribute to public price formation and market transparency?

That is, did they (perhaps unwittingly) just admit to the true purpose of these order types and their willing participation in same rather than doing what any good steward of a public trust should have done - that is, standing up immediately as soon as this chicanery began and raising hell...?

Earnings of Interest

(Please click on the link above to review previous EPS posts)

Periodically I will post the EPS news of companies we find interesting. This is not a recommendation to purchase or sell the shares. I will not engage in the hackneyed approach of other writers and give advice about when to buy or sell. The purpose of these posts is to give you, the reader, an idea of what companies our research department deems worthy of review.

Of course, if you are an investor in any of the

Fortune's Favor Family of Funds or a client of RCM our door is always open. Feel free to call or email questions at any time.

LINC: Lincoln Educational Services beats by $0.08, beats on revs; guides Q3 and FY09 above consensus (21.04 ) : Reports Q2 (Jun) earnings of $0.27 per share, $0.08 better than the First Call consensus of $0.19; revenues rose 50.6% year/year to $128.1 mln vs the $120.9 mln consensus.

On its earnings call, says it hopes its Q3 and FY09 guidance may be a bit conservative... Co says it is increasingly focused on career development given the tough economy. Longer term, the co seeks to expand its degree programs and offer students the ability to go from diploma to degree, all in the LINC education system.... Looking ahead to Q3 and 2009, co says the outlook is very promising... Co says demand is strong across the country, and it saw good improvement in April starts. Co saw growth across all of its verticals. Co is seeing an uptick in its automotive programs. Co is moving ahead with rebranding recent acquisitions. New student starts improved impressively in the qtr... Co is seeing some timeframes lengthen for students to find jobs due to the tough economy... Co is extremely pleased with its execution. In Q2, the co completed the acquisition of Clemens College which, together with Briarwood College, are LINC's first two regionally accredited colleges. Co says these colleges will serve as the cornerstone of its next growth initiative.

LOPE: Grand Canyon Education beats by $0.03, beats on revs; guides Q3 EPS below consensus, revs above consensus; guides FY09 above consensus : Reports Q2 (Jun) earnings of $0.13 per share, $0.03 better than the First Call consensus of $0.10; revenues rose 71.7% year/year to $59.4 mln vs the $58 mln consensus. Co issues mixed guidance for Q3, sees EPS of $0.13 vs. $0.14 consensus; sees Q3 revs of $63.5 mln vs. $62.21 mln consensus. Co issues upside guidance for FY09, sees EPS of $0.66-0.67 vs. $0.63 consensus; sees FY09 revs of $260.5-262 mln vs. $256.40 mln consensus.

Geithner's Rant, Obama Administration's Desperation?, Ramifications of the Clunker Plan

This story is quite disturbing. The Obama administration is sliding down a slippery, or should I say, slimy slope. In Q4 of last year fear mongering was the tactic of choice to push policy (e.g. auguring global financial ruin if senators didn't quickly pass questionable legislation.) In Q1 & Q2 of this year financial market manipulation was the potion incorporated to conjure up support for far-reaching and possibly destructive government controls. Apparently Q3 ushers in a new age of coercion. When I read the story below I wonder: Is this a show of unbridled audacity (to use an Obama term) or is this the beginnings of something altogether more desperate? As ratings slip and agendas meet resistance is this how our "esteemed" president and his "brilliant" entourage conduct themselves?

Please take a good look at the June 30 post. You may feel a more acute impact of the cartoon's message after reading about the behavior described in the story below. Shouting, expletives and coercion are a common trait for the gaggle depicted.

Geithner vents as overhaul stumbles - WSJ
WSJ reports Treasury Secretary Timothy Geithner blasted top U.S. financial regulators in an expletive-laced critique last Friday as frustration grows over the Obama administration's faltering plan to overhaul U.S. financial regulation, according to people familiar with the meeting.

The proposed regulatory revamp is one of President Barack Obama's top domestic priorities. But since it was unveiled in June, the plan has been criticized by the financial-services industry, as well as by financial regulators wary of encroachment on their turf. Mr. Geithner told the regulators Friday that "enough is enough," said one person familiar with the meeting. Mr. Geithner said regulators had been given a chance to air their concerns, but that it was time to stop, this person said.

Among those gathered in the Treasury conference room were Federal Reserve Chairman Ben Bernanke, SEC Chairman Mary Schapiro and FDIC Chairman Sheila Bair. Friday's roughly hourlong meeting was described as unusual, not only because of Mr. Geithner's repeated use of obscenities, but because of the aggressive posture he took with officials from federal agencies generally considered independent of the White House. Mr. Geithner reminded attendees that the administration and Congress set policy, not the regulatory agencies. Mr. Geithner, without singling out officials, raised concerns about regulators who questioned the wisdom of giving the Federal Reserve more power to oversee the financial system.

Clunker plan gives car sales a lift - WSJ
The Wall Street Journal reports U.S. auto sales in July climbed to their highest pace in 11 months, as customers rushed to showrooms amid uncertainty about the future of the federal government's "Cash for Clunkers" incentive program.

Now, car makers, the Obama administration and the Senate face tough decisions about how to respond to the clunker program's apparent success. The administration on Monday stepped up a campaign to persuade senators to approve $2 bln more in funding before Congress goes on vacation at the end of the week. The House on Friday approved a $2 bln funding extension. Administration officials have warned the program could be forced to end. But some key senators in both parties are balking. White House spokesman Robert Gibbs said Monday that President Barack Obama would use a Tuesday lunch meeting with Senate Democrats to push for an extension of the program. The administration gained ground Monday when Senators Susan Collins (R., Maine) and Dianne Feinstein (D., Calif.,) dropped their opposition to additional funding, saying data released by the administration persuaded them that most vehicles scrapped so far have been sport-utility vehicles and trucks, and that 60% of the people using the program had purchased cars.

What they don't tell you:

These cars need to have a lot of mileage on them to be considered "clunkers"

People driving old "clunkers" typically come from an income bracket that can't afford a new car

This plan is encouraging these people to spend money they could be using to pay down debt or worse, inducing an increased debt burden

The incentive program requires car dealers destroy each clunker's engine and drivetrain. This will drive up the cost of used car parts that lower-income car owners who don't enter the program depend on.

Pulling demand forward, while possibly good for opinion polls, will make the future rather daunting for the auto companies.

History, unfortunately, must repeat itself. This demand pull through is identical to the shenanigans Barney Frank and his cohorts concocted in the real estate market and we all know how that ended. Barney's bunch forced banks to lend to individuals who could not afford the home they were buying. Predictably, demand dried up and foreclosures exploded when the well ran dry.