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The Wall Street Greek blog is the sexy & syndicated financial securities markets publication of former Senior Equity Analyst Markos N. Kaminis. Our stock market blog reaches reputable publishers & private networks and is an unbiased, independent Wall Street research resource on the economy, stocks, gold & currency, energy & oil, real estate and more. Wall Street & Greece should be as honest, dependable and passionate as The Greek.

Wall Street, business & other videos updated regularly...

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Sunday, November 30, 2008

Weekly Videos: Indigestion!

movie theater video viewer
Visit the front pages of Wall Street Greek and Market Moving News to see our current coverage of economic reports and financial markets.

If you do not see the video player from your vantage point, please click on the theater image above to see the collage at our site. Thanksgiving was marred this year by terrorism and tough times. Still, we hope you remembered the most important things to be thankful for. The 40+ videos below include the usual business, political and world news. As always, we advise you to fast forward through any clips that do not interest you, so as to be sure to see those that do. If you missed our special Thanksgiving collage, please SEE IT HERE.

Opinions expressed in the videos may not agree with the view of Wall Street Greek. Article interests: AMEX: DIA, AMEX: SPY, Nasdaq: QQQQ, NYSE: NYX, AMEX: DOG, AMEX: SDS, AMEX: QLD, AMEX: XLF, AMEX: IWM, AMEX: TWM, AMEX: IWD, AMEX: SDK. Please see our disclosures at the Wall Street Greek website and author bio pages found there.



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Friday, November 28, 2008

Black Friday

black fridayBy Markos N. Kaminis - Economy and Markets

Visit the front pages of Wall Street Greek and Market Moving News to see our current coverage of economic reports and financial markets.

We expect that when the final tally is taken this year measuring Black Friday business, it will present illusion. We anticipate traffic will measure heavy, but for all the wrong reasons. So, be careful of the headlines that read, "Shopping Not So Dire. Stores Packed." Don't let such news intoxicate you into thinking the retail share selloff or commercial real estate bearishness has been overdone. It has not.


Black Friday traffic can be misleading. Local news channels and newspapers will likely report that shoppers were out in force this year, but be careful not to miss the point. Americans didn't hit the streets before the sunrise Friday morning in order to shop like there's no tomorrow. They were bargain hunting!

What is Black Friday

Black Friday is a cultural wonder. In America, it's the day most retailers turn the year's red ink into a profit. It marks the beginning of the holiday shopping season. One-day deals and early morning promotions have been long-employed to draw shoppers into stores. During this one day of chaotic consumption, Americans often begin buying for the holidays and sometimes fill their entire gift list. Competition for this critical foot traffic leads retailers to continually outdo one another with marketing innovation. This year, Wal-Mart (NYSE: WMT) made a last minute declaration to match any advertised deal. That's not a new gimmick, but an effective one nonetheless.

The goal of every retailer is to entice shoppers to their locale for store-wide deals and special item promotions, or carrots to spur overall sales. Once you're there for the special deal, odds are you'll buy a few more things as well. Retailers even offer loss leaders, or goods they take a loss on the sale of, in order to get you into their vinyl tile trap. It's a gamble that often pays off, but this year, retailers are noting a hit and run mentality. Shoppers are hitting the stores precisely for the deal, and getting out to the next deal somewhere else.

Get a Grip, It's Only a Sale

Shoppers were so frenzied to save a few dollars Friday morning that a couple horrible examples of human character were exposed. At a Wal-Mart in Long Island, NY, competitive and desperate shoppers trampled a clerk to death after they broke through the doors of the store (we assume after they were unlocked). So, a life was lost for the greed of a few dollars saved. There are also stories on the wire of heart attacks born by superficially excited shoppers. People even lined up through the night, camping out in the cold to buy something at discount. It's a sign of the times.

As a result, I expect data counters will note an increase in Black Friday numbers this year. More and more Americans are desperate for a deal. As the legions of jobless grow, and security and real estate wealth is lost, Americans are growing wary of spending hard earned and long saved dollars on gifts.

Even so, it's the holidays. American culture has taken a time of goodwill and transformed it into a time of goods. We've grown so accustomed to gift giving that even in times like these, we're prone to continue. So, that's why Black Friday is likely to prove especially busy this year. Come this time next year is another story though. Many Americans have only just lost their jobs after all.

The Damage is Mounting

Without a doubt though, shoppers are spending less, leaving an oversaturated retail environment quickly consolidating. Recent store closures and/or bankruptcies of operators like Radio Shack (NYSE: RSH), Macy's (NYSE: M), Circuit City (NYSE: CC), Talbots (NYSE: TLB), Linens 'n Things, Mervyn's and others seem sure to prove the beginning of an even greater re-evaluation of the retail marketplace. Weekly data from the International Council of Shopping Centers has only deteriorated further with each passing week. After sliding into negative year-over-year territory a couple weeks ago, sales only sank deeper last week.

ICSC Sales Trends
Week Ended Yr/Yr Growth Wk/Wk Growth
Nov 22 -0.8% -0.9%
Nov 15 -0.1% +0.3%
Nov 8 +0.4% -1.0%
Nov 1 +0.9% +0.6%
Oct 25 +1.3% +0.5%
Oct 18 +0.9% -1.6%
Oct 11 +1.0% +0.7%
Oct 4 +1.3% +0.1%
Sep 27 +1.1% -0.2%
Sep 20 +1.3% -1.0%
Sep 13 +1.3% -1.6%
Sep 6 +1.9% -0.1%
Aug 30 +2.2% +0.1%

Luxury retailers are even finding themselves caught off guard, according to the CEO of Overstock.com (Nasdaq: OSTK). This is leaving high-end brand goods overstocked. Tiffany (NYSE: TIF), Saks (NYSE: SKS), Neiman Marcus and other high-end retailers have had a very rough last couple months. While many of the wealthy may still have plenty of money, they're also shell-shocked by the demise of Wall Street, tumbling high-end real estate values and halved stock prices. Besides this, they seem to have no hiding place for capital, and thus have rushed into low yielding treasuries.

Many retail analysts expect intelligent shoppers to wait out the store operators, putting off purchases until late in the season as they count on retailers getting desperate. I also advise shoppers to wait for the best deals yet to come. Retail industry investors are likewise better off waiting a bit longer before picking through the sales bin.

Wal-Mart shares have benefited as the discount retailer that also offers grocery goods steals market share from several categories of competitors. But, when the all clear is given to buy retail stocks, you'll likely find higher returns elsewhere. Just as WMT has benefited lately, its shares have benefited from industry destined capital finding safe haven. However, when it's generally safe, or even tempting, to buy retail stocks again, money should flow out of Wal-Mart and into other names. For now though, we would stay put.


Black Friday is a long day, far from concluded even at this early evening hour of publishing. A black holiday season also seems far from finished. While the day may prove healthy, remember why it would. Also, compare high traffic counts to likely drab revenue and profit margins, as sales pervade the marketplace. In this supposed season of holiday cheer and jolly good times, the current sentiment leaves one to wonder, could this be the year without a Santa Claus? The casualties are mounting both literally on the bloodied store floor and within the industry's shares. Thus, you might think twice about buying a stock you could want to return after Christmas.

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Please see our disclosures at the Wall Street Greek website and author bio pages found there.

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Thursday, November 27, 2008

Think of Others on Thanksgiving Please

homeless man near you
The Wall Street Greek team wishes you and yours a happy Thanksgiving. In these very difficult times, it can seem like we have little to be thankful for, if anything at all.

Allow me to share a personal testimony and maybe help you through a rough patch. When I attended college, at Temple University in North Philadelphia, I use to drive through my mother's old neighborhood adjacent to the school. It warmed me to see the old J&L Luncheonette sign still hanging there decades later, and it prepared a kinship for me with the very poor people who live there now. It was something I did when I was down and depressed to remind myself that my own struggles weren't so bad. It was something I did to humble myself, so as to not feel sorry for my second hand jeans, which were full of holes, that I pretended to wear for the style. It allowed me to not think about the thousands of dollars in student loans I was building. It kept me from worrying about my father's business and my family's future, as he lay immobilized by back injury. It distracted me from my exhaustion after 16 hour study days filled with library time in between classes. It kept me from crying as I passed other students in the halls.

I grew up poor, but I didn't realize it. My father did a good job of filling the refrigerator and our stomachs, though we complained about empty or even absent Christmas trees. You can be happy without material wealth, if you remember what's really important in life. It's love, family and friendships; it's faith, compassion for others and continual effort.

So, if you lost your job this year and you feel bad, don't bury yourself in alcohol. If your marriage is on the rocks because of hard times, don't give up on it. If a loved one has passed on or someone is in ill health, don't let it kill your spirit. Make the most of the rediscovery of your heart. Instead of worrying about your own struggles, give comfort to those you love and even think of those less fortunate.

Why don't you do something. Why don't you give. Please see the videos here, each and every one of them. Show them to your children. Take something valuable with you from this Thanksgiving.


I use to spend more money riding the subway home than I would taking a cab, because of all the open hands I would pass on my way. Even so, I never felt like I was helping enough. I appeased myself, like many of us do, by thinking "some day when I reach my goals and get some money, I'll really help these people." Jobless and poor (yes poor) I passed a soup kitchen one day on my way home from church. A thought came to mind... why not now? Why couldn't I help people now, instead of when I get rich? What's stopping me or you?

So I went one day, and I volunteered. Let me tell you. It's a lot harder to actually do than it is to say you will do. Try it and see. I found myself, a grown man, nervous. I found myself, an old Wall Street big shot, now the servant of the meekest of men. I actually trembled from my nervousness, though nobody noticed. I even spilled some soup on a hungry man. Imagine your only pair of pants stained. He was upset, and I tried to console him by telling him, "now you have some for later." It was of course meant to take his mind from that concern and maybe bring a smile to his face, but it was also the sad truth, which is not so funny. Not the first time I put my foot in my mouth, nor will it be the last.

Many of us don't give because we create justifications in our minds why these folks don't deserve help. We say, "he's a drunk. he'll just buy a bottle of booze with my hard earned money." We say, "he's young. he can work. he can get a job." We say, "he's sick and dirty. I might catch some disease from him." We say, "I don't have enough for myself." Worst of all, we say "I gave that other guy last week a dollar, or I gave at the office." That does the man before you little good, and his needs are at issue. These justifications are judgments on our part, and as you know, we should not judge, lest we be judged.

A man once approached me outside 30th street station in Philadelphia as I caught a train back to New York. He said, "I came from Pittsburgh for a job interview and I don't have enough money to go home. Can I have $20 please." I'm not stupid. I know the odds of that story being truth are very low, but that's not my judgement to make. I gave him $20, but I warned him of the penalty he would bear if that story were a lie. Whether you believe in God or karma, you realize there are penalties for our actions.

I once saw a man in the middle of winter walking up Park Avenue, at around 26th street Manhattan. It was 20 degrees Fahrenheit. He was homeless, pulling something but wearing only a blanket around the bottom half of his body. As I hope you would also do, without thinking, I put down my coffee, took off my sweater from my own back (my favorite sweater), and standing there in a cafe half naked, put back on the second sweater I had worn over it and rushed outside and gave the man the shirt from my back. That man took it, lifted up the cover of his wheeled home and goods, and placed the sweater in it and continued to walk up the street half naked.

What lesson do you take from this? Do you think he fooled me. Am I a fool? He clearly was half naked in order to gain sympathy; it was after all freezing. It was a brilliant plan he was pulling off. Still, we cannot judge him. I was initially angered, but not for long. We can never know what he has in his pull cart, who it's for, or how he lives and what he needs. If it takes such dramatic ploy to gain him clothing to wear, then what does that say about the generosity of mankind, or lack of it. We have to give, because we cannot discern truth from lie, nor the purpose of lies which are often designed to confuse truth and incriminate the innocent.

I've come across plenty of reasons not to help people, including my own limited resources. I once gave a man 50 cents while I was a month behind in my rent. He then said, "I only need another 50 to get a beer." I even encountered a millionaire in a soup kitchen. Should I have decided that all "clients" are millionaires? The source driver of these anomalies is to fool givers of heart out of giving. Don't be fooled. Give, and ignore these tricks and traps of the devil to stop you from giving.

Does your neighborhood feed the homeless? If not, why not consider organizing a soup kitchen, and perhaps a network of kitchens to allow these people to find meals each day. I want you to know that the reward gained is a spiritual one, and an undeniable one at that. You will never feel more happy than you do when you are providing life essential necessities to others. Their sincere appreciation is a beautiful gift, one we should view undeserved (for us). It's our duty, not something for praise. I'm not seeking praise from you in writing these words. In fact, I'm embarrassed. But I have hope.

I hope my personal testimony leads to intraspection, but I'm no better than you. Just last week I reacted poorly to someone, and am responsible for my own faults. I'm simply seeking to make you think, perhaps inspire you to give. At least, to forget your own troubles in these hard times and remember that guy sleeping on the sidewalk on this frigid night. By the way, there's a picture of him atop this article in case you missed it. He was cold, starving, hurt, unloved and alone...for our sake. Now you have one more reason to ignore the suffering, since these words were written by a "Jesus freak." However, that image was not meant to depict Jesus here. It was meant to depict God.

Happy Thanksgiving to each of you, whether you have a computer to read it or not. Be warm, be dry, be well-fed and be loved.


Please see our disclosures at the Wall Street Greek website and author bio pages found there.

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Wednesday, November 26, 2008

Recovery and Reflation

reflate reflating real estate prices housing
By Michael Douville - Real Estate Market

Visit the front pages of Wall Street Greek and Market Moving News to see our current coverage of economic reports and financial markets.

First the bad news:

The U.S. is in a recession, and has been since December of 2007, in my view. Furthermore, I expect it will be the worst recession since the Great Depression, and last at least until 2010. It will, however, NOT be a depression. There will be a terrible loss of jobs, with unemployment reaching almost to 10%. I see many business failures as well, particularly in finance and retail. This should drive huge dislocations of families, as workers seek alternative careers in the South and West. Just as necessity is the mother of invention, those who have had the misfortune of losing their jobs will seek new opportunities. Throughout all of 2009, there will likely be upheaval as the economy adjusts to the new reality of restrictive credit and raised underwriting standards of the financial system.

The Federal Reserve and the Treasury Department were late in understanding that fighting inflation was an issue of the past, and that there was a new and different problem before them. The deflating of the real estate bubble, followed swiftly by the bursting of the commodity bubble and the ensuing unwinding of leveraged positions around the U.S. and the world was causing huge destruction of capital. This loss of capital nearly destabilized the financial system.

The freezing of the credit markets in September was the "shot across the bow" that awoke the authorities to the crisis that had developed. Trillions of dollars have been lost over the past year throughout the world. As the unwinding progressed, asset prices sunk lower and lower; further exacerbating the downward spiral. In true emergency crisis mode, the horns blared and the cavalry charged with both the U.S. Treasury and the Federal Reserve swiftly replacing lost liquidity and capital.

The financial markets are still weak and before lending is resumed, each financial institution's own survival and viability will need to be ensured. However, the major governments of the world have taken equity positions in the financial system and guaranteed their viability. I expect that within three months, reserves will have been restored and lending will start to flow. Before today's action, the U.S. had added $4.5 trillion into the system, flooding liquidity throughout the banking body. Other G7 nations have added an equivalent amount. Thus, the replacement of lost capital is reaching the system. I expect the infusion needs 6-9 months to filter to users of credit throughout the world, and so it will be a difficult 6-9 months.

Those who have a job and have exercised restraint in the use of credit may pass through this period without a worry; those who are in debt or live in the more affected regions of the country, or indeed the world, will not be so lucky. Many U.S. citizens have enjoyed the free and easy availability of credit, and have become addicted to borrowing; they will suffer badly, as they potentially lose their homes, their cars and their credit.

Production of everything related to the consumer will slow as credit lines shrink; so will the over-consumption that has been pervasively driving the world economy. Without home equity lines and extended credit card balances, there will be fewer buyers. Those with cash will have their choice of a myriad of bargains, from computers and high definition digital televisions to cruise vacations and hotel accommodations. Valuable assets will likely be liquidated and sold cheaply to those with cash and credit.

Now the good news:

Recovery in both the financial markets and the real estate markets should be evident by mid-2009. In my view, the stock market will have bottomed by the end of March, as the efforts of the FDIC, FHA, and the Treasury will start to stabilize foreclosures across the US. Further, the lack of new construction in the residential and apartment sectors should bring an end to the glut of vacant homes. The demographic population shift from the industrial North to the West and South will see temporary acceleration due to the loss of manufacturing jobs. The troubled MSA's of California's inland empire, Phoenix, Miami and Las Vegas will once again stabilize through the added population of these displaced workers. Rental vacancy factors will start to decline, and due to the lack of additional construction, rental rates will start to rise. By the end of 2009, I believe the population will have risen through normal growth, to begin the process once again. As liquidity permeates the economy, recovery will inexorably reach all sectors and prices will rise again in both the equity and property markets. There will be unintended results.

The Great Depression was a simple recession amplified to an extraordinary degree by the central banks of the world mistakenly restricting money supply. The world suffocated from loss of capital and years of pain were added by not replacing the lost capital. In this recession, the financial institutions are being flooded with money. Trillions of dollars are being added to the money supply; never has there been this much liquidity added by so many global participants in such a short time. The increase in money supply is at historical proportions. The central banks of the world, in a coordinated response to the financial crisis, will attempt to restore asset prices, and as a result, restore solvency to businesses and institutions. I expect they will be extremely successful in restoring value; so successful that not only will they restore the old value, but they will reflate the world. The unintended result should be inflation.

Real estate, gold, and commodities such as oil and grains will again bubble as the money supply disseminates. By the end of 2012, I expect prices will have surpassed the highs of 2005, making all homeowners and lenders whole. By 2015, inflation should be a problem; interest rates will likely be high and money supply decreasing to slow the economy. In my view, this short time frame of seven years will allow fortunes to be made.

The emerging strategy I offer is as follows: buy affordable single family homes from the first time entry level and from the lower end of the move up category of second homes; these should all provide cash flow with growing rent revenues. The accumulation timeframe is from late 2008 through the end of 2009. Efforts of the FDIC and FHA should slow foreclosures coming to market, and so the availability of properties with depressed prices should dwindle. I expect rents will accelerate, due to a tightening of credit standards for new homeowners coupled with the lack of new construction. By late 2009, the aggressive pricing of asset managers should be waning, and stability and equalization occurring.

The years 2010 through 2013 could be excellent years to enjoy appreciation and growing cash flow; acquisitions would be on an opportunity basis. I believe homes purchased in 2008 will have doubled by the end of 2014. Inflation will likely be a problem by 2014, and all properties would then need to be sold prior to the Federal Reserve's inflation fighting efforts and the resulting problems. By the end of 2014, investors need to be back in CASH. Warren Buffet's famous adage "be greedy when everyone is fearful and be fearful when everyone is greedy" is extremely apt.

wall street stock market news economy
Please see our disclosures at the Wall Street Greek website and author bio pages found there. (Article interests: AMEX: DIA, AMEX: SPY, Nasdaq: QQQQ, NYSE: NYX, AMEX: DOG, AMEX: SDS, AMEX: QLD, AMEX: XLF, AMEX: IWM, AMEX: TWM, AMEX: IWD, AMEX: SDK, Nasdaq: DPRRX, NYSE: AIV, NYSE: TOL, NYSE: HOV, NYSE: BZH, NYSE: LEN, NYSE: PHM, NYSE: NVR, NYSE: GFA, NYSE: MDC, NYSE: CTX, NYSE: KBH, NYSE: RYL, NYSE: MTH, NYSE: XIN, NYSE: BHS, NYSE: SPF, NYSE: MHO, NYSE: OHB, NYSE: WC)

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Tuesday, November 25, 2008

China's Slowdown, a Breather for the World

china economic slowdown world catch breatherBy The Greek - Economy & Markets

Visit the front pages of Wall Street Greek and Market Moving News to see our current coverage of economic reports and financial markets.

Reports from the World Bank, the Organization for Economic Co-operation and Development (OECD) and the European Bank for Reconstruction and Development (EBRD) all effectively downgraded the world economic outlook today. Each of these individual reports offered cuts in regional economic forecasts, and raised related issues of concern. However, according to the World Bank and Wall Street Greek, China's economic breather offers the world a chance to catch its breath.

(Article interests: AMEX: DIA, AMEX: SPY, Nasdaq: QQQQ, NYSE: NYX, AMEX: DOG, AMEX: SDS, AMEX: QLD, AMEX: XLF, AMEX: IWM, AMEX: TWM, AMEX: IWD, AMEX: SDK, Nasdaq: ASIA, Nasdaq: PRASX, AMEX: PUA, AMEX: NWD, Nasdaq: MEAFX, Nasdaq: EBASX, Nasdaq: EVASX, Nasdaq: MACSX, Nasdaq: MATFX, AMEX: CZJ, Nasdaq: CHINA, PCX: FXI, PCX: CYB)

My How Things Have Changed

The World Bank issued its quarterly update on China today, indicating that the nation's domestic economy and its economic stimulus plan would be critical to the world outlook. Not long ago, China's outlook would have hinged on the needs of the developed world.

In today's harsh economic climate, China's GDP growth outlook has suffered a set back. One man's trash, however, is another man's treasure. The World Bank sees Chinese GDP slowing to a turtle's pace of just 7.5% in 2009! That rapidity of growth is impossible to imagine for the developed world, and would be more troublesome than wanted due to inflation concerns.

China's population size would seem to make that kind of growth impossible, judging by the law of large numbers. Recall, as numbers grow, the rate of growth becomes harder to maintain, and change more difficult to accomplish. Thus, the reality of Chinese development, with GDP seen growing 9.4% in 2008, illustrates the magnitude of the giant nation's still untapped potential. At the same time, it makes clear China's future global leadership role.

The economic importance of China's internal development is evidenced by its decreasing reliance upon exports. Recently the key outsource provider of the world's goods due to cost advantage, declining exports are now only a speed bump in GDP pace. The World Bank estimates export growth will slow to 3.5% in 2009, from 11% in 2008. Yet, GDP growth will stick stubbornly high, though admittedly benefiting from government help.

In summary, the World Bank's report paints a pretty picture for China. It indicates the global slowdown offers China a chance to take a breath and clean house a little. Previously, the pace of domestic and export demand had China producing at any and all cost, often making social sacrifice for profit. The nation's stimulus package now offers China a chance at introspection.

It provides direct investment, and according to the Bank, is responsible for more than half its '09 growth projection. The funding certainly seems like yuan well spent. Chinese infrastructure, service sector and social responsibility look to benefit. One such social gift is offered to the environment as well. Time avails now for China to more effectively incorporate alternative energy and environmental protections into its economic engine. This is a benefit that in one way or another reaches us all. You can measure it in lower fuel, energy and commodity prices, or in carbon pollution levels.

What might seem a selfish catalyst, has broader benefits. China is not the only nation gaining from its domestic focus. Commodity trading partners Australia and Mongolia will see offsets to China's softer export demand, as China retains need for iron ore, copper and other resources for infrastructure development. The world also gets a breather, during which it should continue to develop alternative energy resources before the global economic engine revs up again.

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Please see our disclosures at the Wall Street Greek website and author bio pages found there.

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Feds Free Up Lending

happy business man fed frees up credit
By Markos N. Kaminis - Economy & Markets

Visit the front pages of Wall Street Greek and Market Moving News to see our current coverage of economic reports and financial markets.

This morning's news was hot and heavy, but it highlighted two big new federal government actions. The government held a related press conference in the early AM hosted by Hank Paulson, discussing the Treasury's new consumer credit action and Federal Reserve's mortgage backed securities move. Finally, it appears the feds are following through on earlier plans, and we believe this will be effective in availing credit to new housing and consumer borrowers. That said, it does little in helping to place the citizenry into financial position to borrow, but President-Elect Obama might have something to say on that front in the afternoon. He's expected to discuss a fiscal stimulus plan, and may also present his Budget Director.


Federal Government Actions

The Federal Reserve and Treasury Department offered a one-two-punch this morning, taking actions that greatly resemble what the TARP plan was supposed to do. The Federal Reserve will employ $100 billion to purchase direct obligations of housing-related government sponsored enterprises (GSE), freeing up those organizations to offer new liquidity to inspire the housing market. The Fed will then allocate $500 billion to purchase mortgage backed securities (MBS), freeing up financial institutions to operate and to offer liquidity to new borrowers. The MBS purchased will be managed by outside managers, selected through competitive processes. The Fed indicated that it is reacting to widened spreads for MBS, which is indicative of risk perception and frozen credit markets.

The Treasury will allocate $20 billion from the TARP program to put toward a lending facility backing the consumer asset backed securities market. ABS issuance came to a halt in October, and this capital is meant to encourage auto, small business, student and credit card lending. The capital is available for new such lending, and therefore may encourage its usage over hoarding or misuse. The Treasury's $20 billion is to be used as credit protection, to leverage a new $200 billion facility from the New York Fed. The NY Fed will lend this capital to encourage new ABS creation, and therefore, open up related capital to new borrowers.

Paulson seems concerned about potentially needing more funds from Congress, and how he might look in doing so. This appears evidenced by his keeping open the possibility of using these funds for just about any other asset class.

We speculate the Citigroup (NYSE: C) unraveling slapped the Fed and Treasury in the face, reminding them of the directive of the TARP program. Perhaps lulled to sleep, the near failure of Citi, and likely due diligence discovery in talking with the company worked to refocus Ben and Hank. The two have come under fire recently, and perhaps have been dodging more bullets than they've been firing of late. Whatever the catalyst, The Greek believes this will be effective in providing capital to new borrowers who demand it. However, it does little to help people demand it in the first place. Fiscal stimulus and keeping people employed will go toward that end.

Look for a news conference from Barack Obama this afternoon to perhaps offer some hope on that front. We view these actions as positive events for stocks, as they offer both catalyst and hope for economic recovery.

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Please see our disclosures at the Wall Street Greek website and author bio pages found there.

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Monday, November 24, 2008

Turkey Turkey Everywhere, and Not a Bite to Eat

turkey turkeys everywhereBy "The Greek" - Economy & Markets

Visit the front pages of Wall Street Greek and Market Moving News to see our current coverage of economic reports and financial markets.

Thanksgiving is on the horizon, and that bird we all savor is everywhere to be found. The cluck is flying private jets to Capitol Hill, where at the same time he's begging for $25 billion. He's closing down his hedge fund in the Citi, while pecking off rumors to stave off his stock's slide deep into single digits. The Yahoo is being forced out of the roost after turning down a deal worth three times the current value of his shares. The bald eagle is packing his things into a box after falling from the nest. He's being roasted in Congress after flying the coop to start a jail term. The lame duck is migrating south to Texas, just as hunting season was set to open on him. Still, perhaps the worst turkey of the flock of gobblers is actually the bird buying stocks in the middle of a flu outbreak. So, in this group of turkeys, who is the biggest cluck then?

Well, there certainly are enough turkeys to feed the vengeance of the newly poor. Congress has wised up though, after being taken for a wild goose chase that cost American tax payers $700 billion. As a result, the CEOs of the big three automakers were sent home to piece together that silly old thing we use to need to raise money, a business plan. Nancy Pelosi and Chris Dodd told the stooges "no plan, no help from the man!" Without the votes to pass an auto bailout, and with Congress' experience from the Economic Stabilization debacle, the group is now mindful of the damage it can do to the psyche of the citizenry by failing to pass a perceived critical bill when it comes up for vote.

Last Week

Last week cost corporate America a few heads, which makes sense since headless chickens are no rarity to bear markets or otherwise difficult times. Yahoo's (Nasdaq: YHOO) CEO and co-founder, Jerry Yang, was forced to leave by the company's board and at the insistence of shareholders of a $10 stock that could have had $33 from Microsoft (Nasdaq: MSFT) some time back. Even so, couldn't the same be said for stocks across the spectrum? I still think Yang is getting a bad wrap, because with a little work here and there Yahoo seems to me a fixer-upper worth investment.

Up in George Town, where I had the pleasure to visit briefly last week, Hank Paulson found out who his inevitable replacement would be. One has to wonder if that quiet Ben Bernanke put in a word or two for his New York Fed chum Timothy Geithner. One also has to wonder how long until the villagers across this nation, including Detroit, come with torches in hand for the purpose of lighting up DC and old New York. Never has such intense global distaste been focused on such a tight pressure point. Better get that "change" fellow in here quick before structural support gives way!

The Week Ahead

The week ahead is a shortened one due to the holiday. The endless stream of bad news and resulting carnage has become repetitive, and dare I say boring, at this point. I guess we really do grow numb to war. However, there are a couple reports that stand out this week.


One less thing to worry about, Japanese markets will be closed on Monday. However, the SEC is scheduled to meet with international regulators to discuss policy on short selling, unregulated products, credit rating agencies and accounting rules. You know, the usual suspects. Accounting rules are in focus this week as Citigroup (NYSE: C) looks to face related fair-value accounting pressure as its stock drops.

Existing Home Sales picked up in September, but with the reverse wealth effect in play like never before, look for October sales to backtrack toward the year's lows on Monday. The economists' consensus is looking for the annual pace of sales to have run at 5.0 million in October, versus 5.18 million in September. Finally, the Chicago Fed is scheduled to release its National Activity Index for October.

The earnings slate highlights news from Analog Devices (NYSE: ADI), Campbell Soup (NYSE: CPB), Star Bulk Carriers (Nasdaq: SBLK), CBRL Group (Nasdaq: CBRL), Citi Trends (Nasdaq: CTRN), Donaldson (NYSE: DCI), Dycom (NYSE: DY), Gilat Satellite (Nasdaq: GILT), Hewlett-Packard (NYSE: HPQ) and Skillsoft (Nasdaq: SKIL).


Tuesday's brings the second reporting of third quarter GDP. Since it will be the first revision of the economic metric, it has a greater chance of being significant. The Advanced GDP Report (the first) showed the economy contracted just 0.3% in Q3. We think you can expect that contraction to deteriorate with this revision. Economists are expecting the report to show a decline of 0.5%. Corporate Profits, the GDP sidekick report, is likely to offer similar deterioration.

The ICSC posted the first weekly same-store sales data decline in memory last week, and this week's reporting seems likely to worsen. See the link for more details on retail sales.

The Conference Board's Confidence metric is one of those boring old bad news bearers we mentioned earlier. Bloomberg's consensus sees the November figure matching the dramatic low set in October, at 38.0. Considering the degree of decline that occurred in October, this metric might actually edge slightly higher to compensate for last months overreaction (alleged here anyway).

Accounting regulators will meet to discuss topics related to the financial crisis, like fair-value accounting. How ironic could the term fair-value accounting be as it helps sink the nations largest financial institutions. We're sure they consider it unfair... The Organization for Economic Co-operation and Development (OECD) will offer its economic outlook on Tuesday. Mentioned here last, but likely the first news of the day, the S&P Case Shiller Home Price Index is due, and it's expected to show further pricing deterioration as the negative feedback loop sets real estate back.

The day's EPS news highlights American Eagle Outfitters (NYSE: AEO), D.R. Horton (NYSE: DHI), Hillenbrand (NYSE: HI), Allied Healthcare (Nasdaq: AHCI), Bank of Montreal (NYSE: BMO), Borders (NYSE: BGP), Brown Shoe (NYSE: BWS), Charming Shoppes (Nasdaq: CHRS), Chico's (NYSE: CHS), Coldwater Creek (Nasdaq: CWTR), Daktronics (Nasdaq: DAKT), Dollar Tree Stores (Nasdaq: DLTR), DSW, Inc. (NYSE: DSW), Eaton Vance (NYSE: EV), Genesco (NYSE: GCO), Hillenbrand (NYSE: HI), Hormel Foods (NYSE: HRL), J. Crew (NYSE: JCG), Warner Music (NYSE: WMG) and Zale (NYSE: ZLC).


Most of the week's economic color is expected to arrive on Wednesday, as the day is jam-packed with reports. Some important news is due out of Europe first thing. The European Commission plans to offer an EU tailored stimulus plan. The stability added to the world's second most important region might in turn offer stability for global markets. At the same time, the ECB President is set to address the press. We'll be watching.

Personal Income and Outlays are due for October, and spending looks to be nonexistent. Economists expect spending to be recorded down 0.9% for October, with income up 0.1%. Durable Goods Orders should be likewise missing, seen down 2.6% in October.

Weekly Jobless Claims have quickly overtaken our fear threshold of 500K, hitting 542K last week, the second sequential drastic jobs loss. Economists expect this week's reading to show 537,000 new jobless claimants.

Recent NAHB data points toward a horrible New Home Sales number as well. The economists consensus is in fact anticipating the annual pace of sales to have run at 450K in October, down from 464K in September. The University of Michigan's final reading of Consumer Sentiment for November is expected to sit at 57.9, versus 57.6 at last check.

Both of the regular EIA energy reports will reach the wire on Wednesday this week, due to the holiday, but news that OPEC is preparing an adequate production cut to match demand loss estimates has oil looking stable to start the week.

Because of the holiday, U.S. fixed income markets will close at 2 p.m. On the equity end, look for earnings news from Deere & Co. (NYSE: DE), Hellenic Telecommunications (NYSE: OTE), National Bank of Greece (NYSE: NBG), Tiffany & Co. (NYSE: TIF), Fred's (Nasdaq: FRED) and Wegener (Nasdaq: WGNR).


Thursday, open your belts, take a deep breath, have a glass of wine and forget the past year. Remember what you have, not what you've lost. Give thanks for the important things.

Still, while U.S. markets are closed, we must stay aware of global happenings. The Bank of Japan is scheduled to release the minutes of its October 31st meeting. It was that Halloween meeting through which the BOJ eerily cut rates for the first time in seven years. We may also give thanks to the Swiss National Bank on Thursday, as its president discusses his recent surprise rate cut.


On Friday, look for more regional manufacturing contraction from Chicago to match last week's Philadelphia report. Economists are looking for a measure of 36.5 for November, down from 37.8 in October. Remember, a reading below 50.0 signals economic contraction...so below 40 signifies what then, economic catastrophe? The Farm Prices Report is due on Friday also, at 3:00 p.m.

It's Black Friday, and you can expect the market to be fooled. Retail activity should be hot this Friday, as bargain seekers are indigenous to hard times. Unfortunately, investors and media will likely mistaken this heavy foot traffic for a good sign, and temporarily aid retail industry shares.

For some silly reason, the stock market is open for a few hours on Friday, closing at 1 p.m. The bond market shuts at 2 p.m. One fine day, exchange operators will realize nobody ever shows up, and all that is accomplished by opening is indigestion for the few poor lugs that do. Look for EPS reports from Ship Finance Int’l (NYSE: SFL), Texas Industries (NYSE: TXI), Frontline (NYSE: FRO) and Tanzanian Royalty Exploration (AMEX: TRE).

Article interests: AMEX: DIA, AMEX: SPY, Nasdaq: QQQQ, NYSE: NYX, AMEX: DOG, AMEX: SDS, AMEX: QLD, AMEX: XLF, AMEX: IWM, AMEX: TWM, AMEX: IWD and AMEX: SDK. Please see our disclosures at the Wall Street Greek website and author bio pages found there.

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Saturday, November 22, 2008

Weekly Flicks: Auto Industry Agony

Visit the front pages of Wall Street Greek and Market Moving News to see our current coverage of economic reports and financial markets.

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Enjoy this week's videos below! You'll find plenty of Congressional testimony and other coverage of the auto industry's plea for capital, and more exciting grilling of the Treasury Boss and Fed Chief. As always, simply fast forward through the 50+ videos to watch those of interest to you.

The opinions expressed within the videos may not agree with the view of Wall Street Greek. Please see our disclosures at the Wall Street Greek website. Article interests: AMEX: DIA, AMEX: SPY, Nasdaq: QQQQ, NYSE: NYX, AMEX: DOG, AMEX: SDS, AMEX: QLD, AMEX: XLF, AMEX: IWM, AMEX: TWM, AMEX: IWD and AMEX: SDK.

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Thursday, November 20, 2008

Iran and the Rumor of War

iran a rumor of warBy Daniel Salem Padovano - Global Affairs

Visit the front pages of Wall Street Greek and Market Moving News to see our current coverage of economic reports and financial markets.

In a not too distant future, incidents happen and unfold...

Iran warns that enough is enough and that it will not be threatened or ignored any further. Iran's leadership feels the time has come and launches "Operation Cyrus the Great". As a prelude, Iran has Hezbollah attack Israel. Ships are seized by pirates (possibly in the pay of Iran) in the Gulf of Aden and off the Somali coast. Israel and the west are distracted.

At night, three submarines sail through the Persian Gulf and into the Gulf of Oman. Back in the Gulf, Iran begins mine laying operations. American and Saudi AWACS aircraft pick up several blips moving south from Iran; they are passed over as ground clutter, as the "blips" are very close to ground level. Minutes later, radar picks up several jet fighters closing in from below. Iranian fighters destroy one AWACS; the second manages to transmit the attack before it too is destroyed.

As operations commence, Iranian aircraft make several coordinated raids against American bases in Iraq, Saudi Arabia and Bahrain. CentCom in Bahrain is destroyed, as is the command center in Baghdad. Oil facilities at Jubail and Dammam are attacked as well. The ensuing confusion delays a proper assessment and reaction.

The Gulf is mined and shipping halts. Ships close to the Iranian coast are seized offering Iran new hostages, signaling that even "neutral" flag vessels may be considered as hostile.

Amphibious landing craft arrive at the tip of the Musandam Peninsula. On board are Iranian military who soon gain control of the communications facilities guiding ships through the Strait of Hormuz.

Iran's Shahab 3 missiles, with ranges of 1,500 kilometers are erected and put on alert. Iran announces that action was taken to "…preserve Iran's national sovereignty and to bring order to the Gulf region. Military response will be met with the full force of Iranian power."

When American and other national forces are able to assess what has happened, war has already unfolded. In the White House, the President awakens to a new reality.

The above scenario is only one of many possible futures, but what if…?

Much attention has been given to the prospects of a preemptive military action or possible war against Iran. The potential cause of this conflict is Iran's continuing pursuit of producing its own nuclear energy resources, and quite possibly producing weapons grade nuclear material that can be used to produce nuclear weapons. Adding to this tension is Iran's ongoing development of ballistic missile technology.

While the current financial crisis and recent U.S. Presidential elections have diverted the world's attention from the Iranian crisis, it is one that will most likely return to the world's headlines by mid-winter, and could easily present President-Elect Obama with his first international and military crisis.

Given the tension between Iran and the West (most notably the United States) which continues to raise tensions in the Persian Gulf region, how likely is a war between Iran and the United States? If there is a war, what might it look like; how would it be fought; and what might be the possible outcomes? These are the topics discussed below.

The Persian Gulf, a Perspective

What makes the Persian Gulf so important?

To keep the Persian Gulf, or "the Gulf" in perspective (as far as energy and geopolitics are concerned), one need only to look at a map of southwestern Asia. The Gulf is at the bottom of what is referred to as the "Strategic Energy Ellipse". This ellipse encompasses 15 countries across the region from Samarra, Russia at the northern locus, the Iranian-Pakistani border on the east, the coasts of Oman and Yemen on the south and to the west, the Iraqi-Syrian border.

The Strategic Energy Ellipse rests atop 70% of the world's proven oil reserves and 40% of its natural gas deposits; the lion's share rests in the Persian Gulf. It is also a region that has had its share of armed conflict (both interstate and intrastate) since 1980.

The Gulf, covering an estimated 251,000 square kilometers, contains an estimated 715 billion barrels of oil and 2.5 trillion cubic feet (69.7 trillion cubic meters) of natural gas reserves. It stretches 989 kilometers from the Shatt al-Arab to the Strait of Hormuz, and varies in width between 370 kilometers to 34 kilometers at the Strait. On a daily basis, about 15 million barrels of oil transit the Gulf (nearly 40% of the world's total hydrocarbon fuel resources).

The Gulf is not very deep, with an average depth of 50 meters and maximum depth of 90 meters (mostly on the northern side extending south from Bandar al-Bushehr to the Strait itself). The Gulf's basin slopes gently in the northern half, but becomes sharp in the center and western portions. Even from space this is evident as the waters are lighter in the western and southern regions.

The Strait of Hormuz

The Strait of Hormuz at the eastern end of the Gulf has a unique geography. A finger shaped piece of land, the Musandam Peninsula jutting north from the United Arab Emirate of Ras-al-Khamia and Oman almost separates the Persian Gulf from the Gulf of Oman. Across the Gulf is the Iranian coast, which includes Iran's largest port and naval headquarters, Bandar Abbas,

Both shore areas are extremely shallow with reefs and strong eddies. Smaller vessels have little problem, but the supertankers cannot navigate where they choose. Most of today's supertankers exceed 300 meters in length, exceeding the lengths of most cruise ships and in some instances, aircraft carriers. Ships of this size often require almost a kilometer to make a turn.

To facilitate transit, a traffic separation scheme is used. A ship "highway" 10 kilometers wide allows ample room for ships to transit the Strait. This highway includes three shipping lanes, each of which is 3 kilometers wide: one for outgoing traffic, one central meridian and one for incoming traffic.

The Gulf's littoral states include: Iraq (Basra), Iran, Oman, The United Arab Emirates, Saudi Arabia and Kuwait.

Oil fields pretty much line the northern shorelines, and eastern Saudi Arabia. The region's largest refineries are located in Iran: Kharg Island and Abadan; and in Saudi Arabia, Al-Dammam. Al-Dammam is connected to the Red Sea refineries of Yanbou by trans-Arabian pipelines. Large gas deposits are also located in these areas, largely throughout eastern Saudi Arabia, and including Bahrain and Qatar.

Iran's Geography

iran geography mapIran is both a vast country (1.6 million square kilometers) and a natural fortress connecting the Middle East to both Central Asia and India. The Zagros and Elbruz Mountain ranges define Iran's western and northern frontiers. At its southern terminus, the Zagros gives way to the flatlands and marshlands of southern Iraq (Basra province) and southwestern Iran (Khuzhestan Province).

The southern frontier is defined by the Persian Gulf, the Gulf of Oman and part of the Arabian Sea. Iran's eastern frontier is desert; the northern half is the Dasht-e-Kavir and the southern half being the Lut-e-Kavir. Both deserts are among the harshest deserts on the planet.

Iran's population of approximately 70 million people is young; some 50% of whom are 25 years old and younger and have only known "revolutionary" Iran. Most of this generation is highly educated and skilled. A majority of Iran's population and industry is located in the mountainous arch formed by the Zagros and Elbruz mountains. The interior deserts and eastern mountains remain sparsely populated and little developed.

Iran and a Sense of Purpose

Iran, formerly known as Persia, has a long and documented history going back almost 5,000 years. Home of various empires, among them: the Achaemenid, Seleucid, Parthian, Sassanian, Safavid and Qajarite. Iran, especially under the current regime, is very much aware of its earlier history as a world power, most notably during the Achaemenid (c.550-460 B.C.) and Parthian (c.250 B.C. – 224 A.D.) dynasties.

Even under the best of circumstances, invaders have had a tough time cracking Iran. The Mongols were the last successful invaders, having gained entry through Turkmenistan and northern Afghanistan. Overall, Iran has a history of absorbing invaders, not succumbing to them.

With the victory of the Islamic Revolution in 1979, Iran's national character was reborn in essence. The previous three and a half centuries of static existence under the later Safavids and Qajars, and the western dominated Pahlavi dynasty, were erased. The ascendancy of the Ayatollah Khomeini's revolution was seen as a restoration of Iran's sovereignty and character. That is, a Shiíte Islamic one, but one that is also very Persian in ancestry and character.

Post Revolutionary Iranian leadership sees Iran returning to its historical roots as a power not only in the Gulf region, but in world affairs. This is not a new development, but one that is based on historical records, population size and age, religion and oil wealth; and it is a logical path for Iran to ascend to a role of world power status again.

President Mahmoud Saborjihan Ahmadinejad

Some pundits have called Iran's president "crazy", or worse. These descriptions are largely due to his repeated calls for the destruction of Israel and anti-homosexual statements. Born on October 28, 1956 south of Tehran, Ahmadinejad is a conservative Shi'a follower, Iranian nationalist and holds a Ph.D. in engineering. He served with the Basiji of the Pasdaran (Islamic Revolutionary Guard Corps) during the Iran-Iraq war. His post war political posts include being an adviser to the governor-general of Kurdistan and serving as governor of both West Azerbaijan and Ardabil provinces. In 2003, he became Mayor of Tehran, and President in 2006.

Ahmadinejad entered the Iran University of Science and Technology in 1976. In the years that followed, he was involved with the Office of Unity and Strength. This group opposed and dissuaded people from supporting the Marxist Mohajedin e-Khalq. It was at this time that he has been accused of planning the 1979 seizure of the American embassy. (Iran's government has repeatedly denied these accusations).

His service with the Basiji during and after the Iran-Iraq War includes allegations that he was involved with operations against Iranian dissidents outside of Iran. He may be a follower of the "Twelver" branch of Shi'a Islam which awaits the return of the Twelfth Imam who was hidden in 874 A.D. According to Twelver belief, the 12th Imam is the Mahdi, a savior who upon his return will usher in an age of peace and justice.

If this is true, then it may be that Iran's President may see Iran as the door opening this Mahdist age... a door that can be opened if Iran is not only seen as a door, but becomes the door. As a nationalist, President Ahmadinejad maintains that Iran reserves the right to develop its own energy sources, nuclear power being the chief one cited. Should Iran elect to pursue development of nuclear weapons fuel from used civilian reactors, it could indeed become a regional power, and a world power should its missile development mature.

Prospects for Conflict in the Gulf

"If there is ever another war in Europe, it will come out of some damned silly thing in the Balkans."

German Prime Minister Otto von Bismarck

It is quite possible that a similar sentiment could ring true for the next Persian Gulf conflict; a big war that will most likely arise from a series of events that quickly spin out of control.

Given the tensions between the west (primarily the U.S.) and Iran, it is not beyond imagining that a small incident could escalate into a bigger incident or war. Some of these possibilities could include:

  1. A maritime incident involving either civilian or military vessels.
  2. A missile test gone wrong with one landing in someone else's backyard.
  3. A situation involving Iran and Israel. This might also include Iran sponsored Hezbollah attacking Israel provoking an Israeli response.
  4. A situation involving Iran and Iraq, whereby the U.S. is drawn in.
  5. Outright action by Iran against neighboring Gulf state' oil production.
  6. Provocative moves that lead Israel, the West or the U.S. to believe Iran has a working nuclear weapon capability or delivery system.

Iranian Military Capability and Strategy

Iran's main concerns in any conflict, principally with the United States are: 1) tighten or close down oil transport out of the Gulf, 2) spread unease among the adversary(ies), most likely through terror attacks outside of the Gulf region, and 3) resort to use of unconventional weapons if needed. Iran is a known producer and holder of chemical (gas) weapons. Less quantifiable is Iran's capability with biological weapons, and potential nuclear weapons (not necessarily explosive bombs).

During the past ten years, Iran has been rebuilding its military and military capabilities. Less than expected revenue gains have forced Iran to "get the most for less cost". While this has pared down iran's military capability and strength, it has not halted Iran's modernization programs.

Iran's Army

One thing must be remembered: Iran's military is not afraid of going into battle alone, or from a perceived status as an underdog. Iran fought a long eight year war with Iraq, largely alone and unaided. Iran's military character is built on large sacrifice and sense of destiny. Even from a weaker position, Iran's strategy would be to make any conflict too costly for the adversary to pursue.

What is doubted is the effectiveness of Iran's ground forces. Although the Iranian army held its own during the Iraq-Iran War of 1980-1988, strategy and execution was more reminiscent of World War I than other wars of the later 20th century. This was primarily because both wars largely consisted of trench warfare and front lines that remained static after the initial conflicts. In essence, Iran's ground forces are more a defensive institution than an offensive one.

Largely a land based power, Iran's army has responsibility for protecting the borders and maintaining domestic control. It is, however, among the largest in terms of numbers and the largest ground force in the region. Current army complement is estimated at 500,000 troops, including the Pasdaran (Islamic Republican Guard Corps). The army has approximately 1,600 tanks (about 500 of which were purchased since 2000), 650 armored personnel carriers, 2,000 pieces of artillery and an additional 350 pieces of self propelled artillery (including 25 to 20 SCUD missile launchers).

Iran is also producing some of its own armaments, including armored personnel carriers, assault rifles, ships and missiles.

Iran's Air Force

Similarly, Iran's air force is basically defensive in nature. The Iranian Air Force has about 275 operational attack aircraft. These include a hodgepodge of planes: F-5E's, F-4 Phantoms, and F-14's, Mig-29's, Sukhoi-25, Mirage F-1's and a domestically produced version of the F5E/F Tiger called Azarakhsh. Iran also has several maritime reconnaissance, early warning and air borne refueling aircraft.

While not supporting long range bomber aircraft, the air force is capable of inflicting damage in the initial stages of conflict. Chief targets would be American military bases in Iraq and Afghanistan as well as tankers in the Gulf and oil facilities in the Gulf region. A surprise raid on Baghdad and Saudi Arabia would be more than sufficient to damage American retaliation while wreaking havoc on oil production and pricing, and this could be done in a coordinated attack.

Underestimating Iran's air force would be a tragic, if not strategic mistake. The Iranian air force may not be equal to today's aircraft in performance, but these aircraft are more than capable to affect battle and support theatre operations. Although derided by the west, Iran's air force has proven to be extremely resourceful in keeping itself flying. Potential strategy would be to keep the air war localized within the Gulf where Iran's planes would be most effective.

Iran has 35 air bases, with several adjoining civilian airfields.

Iran's Navy and Missile Defenses

The Iranian Navy and missile defenses pose the biggest threat to Iran's neighbors and any outside adversary. Iranian strategy and concerns are with protecting the heartland. However, if Iranian power projection and influence are taken into account, then dominating the Gulf and the oil and gas fields become the primary objective. In order to achieve this, Iran will rely on its navy and missiles to make any resistance, response or attack too costly.

Iran's navy consists of 8 attack submarines 46 corvettes and frigates, 5 mine warfare ships, 20 amphibious ships and 181 shore and coastal craft. Of these, the shore and coastal craft are among the largest challenges for any attacking force. These small vessels are capable of harassing commercial and military vessels alike and escaping to smaller ports and shelter along Iran's rocky and shoal protected coast line.

These vessels can interdict ships (recall the capture of British sailors a few years ago), engage in commando like actions, and perform mine laying operations. Smaller craft may be mistaken for civilian craft leading to a tragic result. It is also not beyond the realm of the possible that civilian craft would not be "borrowed" for use in Iranian operations. A few ships laying mines would easily result in the Gulf being closed to shipping.

Iran's submarine fleet, although small in numbers, could by sinking a few ships, close down the Gulf as well as threaten non-Gulf state warships in the Gulf. Six of Iran's submarines are of the Russian Kilo class. These submarines are capable of speeds up to 25 knots, operating 12,100 kilometers from home and diving to depths of 300 meters. They are very quiet and due to this, very difficult to detect. One or two slipping out into the Gulf of Oman or the Indian Ocean would be more than enough to occupy the American, British and French fleets.

The loss, or potential loss of an American air carrier would be a gold star in warfare, especially in terms of morale

Missile and Rockets

Iran's missile defenses are formidable. Iran has invested heavily in shore to ship and ground to air missiles. These missiles are capable of hitting vessels from land, and those fired from mobile launchers will be difficult, if not impossible to destroy. The C-802 and Noor missiles are capable of maximum speeds of Mach 0.9 (600 mph) and 0.8 (560 mph), respectively. The C-802 has a range of 120 kilometers, while the Noor has a range of 200 kilometers. The sleek design and low angle of flight make these missiles almost undetectable to radar.

Iran also uses the S-300 ground to air missile. This weapon, if upgraded could be used to intercept ballistic missiles. Iran employs a ship based version, the S-300 F. These are short range missiles, with a maximum range of 200 kilometers. They are extremely fast, attaining speeds of Mach 7, or nearly 2 kilometers a second (conventional commercial airliners fly at about Mach 0.8). At present, there is no defense against the S-300.

The Big Bang

iranian nuclear missilesOver the last few years, Iran has (with North Korean assistance) developed a ballistic missile called the Shahab. The Shahab exists in three classes. The Shahab 1 and 2 missiles are short to medium range vehicles, meaning their range is less than 500 kilometers from launch point.

Iran has advanced the Shahab into the Shahab 3. If Iranian claims are true, this missile has an effective range of 1,300 to 1,500 kilometers. Istanbul, the Suez Canal, Moscow, Southern Kazakhstan and New Delhi are at the furthest range of the Shahab 3. Assuming that this is true, Iran could threaten the entire Middle East and the world's major transportation routes. To date, Iran has not tested the full range of this missile.

In the summer of 2008, Iran aired images of test launches for the Shahab 3. The "success" of these launches was discredited in the west, when it was ascertained that one of the motor launches was digitally added to the photos. In February 2008, Iran also claimed to test launch a vehicle capable of sending a satellite into orbit. Again, the depth and success of this "launch" were not able to be credibly verified.

These advances are possible, and if Iranian accounts are correct, they have been able to build a two stage rocket, and use a solid fuel propellant. A two stage construct allows for greater stability at liftoff and increases the prospect for longer and steadier flight path. A rocket using solid fuel is able to hoist a heavier payload (i.e. satellite or warhead). Under the right circumstances, distances of 5,000 kilometers or reaching orbit are not beyond the realm of the possible.

Rumors abound that Iran is planning on more advanced models which would constitute a true ballistic missile range. The Shahab 4, 5 and 6 missiles would have estimated ranges of 3,000, 5,000 and 10,000 kilometers. The Shahab 4 would place most of Eastern Europe and India in danger. The Shahab 5's range would reach London.

Iran's presumed test launch sites are located in the Dasht-e-Kavir, one of the more remote deserts on Earth.

This, then is the growing concern among world nations. The threat and danger becomes more paramount should Iran ever gain the capability and ability to attach a functioning nuclear weapon to the Shahab's nosecone.

Iran's Nuclear Aspirations

Iran's nuclear aspirations and technological proficiency are well documented. Iran was building a nuclear reactor at Bushehr in the late 1970's; construction ended as the 1979 Islamic Revolution began. Iran, at least since the late 1980's, has made obtaining and producing nuclear energy a national goal. While Iran has repeatedly stated that it does not desire to build a nuclear weapon, the post Islamic Revolution and Iraq-Iran War isolation have left Iran with deep memories and distaste for being at the mercy of outsiders.

Iran's 25 known nuclear research facilities are scattered across the nation. Any attack would have to take into consideration the fact that a number of facilities are in or near populated cities. Among these are Bushehr (the site of Iran's nearly completed nuclear reactor and port), Esfahan (multiple research facilities), Qataran which is 150 km south of Tehran (a suspected site of heavy water processing), Gchine (near Bandar-Abbas) where uranium yellow cake is produced, and Natanz, the location of Iran's estimated 50,000 nuclear centrifuges.

Iranian nuclear related facilities are scattered. Several (i.e. Chalus) are located within mountains and virtually impregnable to conventional weapons, including so called "bunker busters".

Any attack would need to be multi layered and coordinated with other attacks. Most of the country's facilities are located near air bases and are presumably well defended with ground to air defenses.

U.S. Ground and Air Forces

The American military presence in the Gulf region is astounding. 140,000 troops in Iraq and about 50,000 more stationed throughout the southern half of the "Strategic Energy Ellipse". This includes several hundred advanced fighter attack and bomber aircraft scattered across the region and two regional command centers. Not included are military units (U.S. Army and U.S. Air Force based in Afghanistan and Central Asia).

Air resources include approximately 200 aircraft under the command of both the U.S Air Force and U.S. Army, exclusive to the U.S. Navy and forces based at Diego Garcia.

U.S. Naval Presence

The U.S. Navy has a minimum of one Aircraft Carrier Battle Group (CSG), and one Amphibious Readiness Group (ARG) in the Middle East / Eastern Mediterranean Sea. In addition to the aircraft carrier or amphibious warship, about twenty other ships provide escort and support. An aircraft carrier group is accompanied by three or four attack submarines, four or five destroyers and frigates, two guided missile cruisers and two supply and support vessels.

Aircraft carriers are large, very large. Most are about 350 meters long and have a crew of about 5,000 including 1,500 Marines. One air wing comprising nine squadrons are based on these ships. That is about 90 aircraft, of which about 70 are combat aircraft.

Amphibious Readiness Groups (ARG) are comprised of one Assault (helicopter/jump jet) carrier, slightly smaller than an aircraft carrier (about 250 meters long) with a crew of about 2,700 including 1,800 Marines. Besides the amphibious carrier, four destroyers and frigates provide escort and protection along with an attack submarine. Support ships include one dock landing and one transport docking ship.

During times of increased tensions, two air carrier groups are deployed in or near the Gulf of Oman.

Gulf Warfare

The Gulf is not a prime place for surface naval warfare. Surrounded by land on three sides, and given its narrow width, Iran would have little problem attacking any quarantine or invading naval force. The Gulf's waters are suitable for submarine warfare, more so within the darker waters of the eastern half, since this would make visually spotting a submarine nearly impossible.

Even though commercial and private ships have safe transit, they are also at great risk from shore batteries, missiles and air attack. Sinking several ships would very quickly close the Straits and probably be as effective as using mines. The geography of the Persian Gulf – surrounded on three sides by land, narrow width and narrow choke point is not conducive for large surface naval operations, however, it is a prime place for submarine and small craft warfare.

Theatre operations from an Iranian perspective would most likely involve ceasing all transportation within the Gulf. As stated earlier, sinking a few ships in the Gulf, mining the Gulf and/or Strait of Hormuz would achieve this goal very quickly. Using Iran's coastal craft, private craft and 3 minelayers, this could be done with some degree of stealth (and luck) prior to the commencement of major operations. Seizure and control the Musandam Peninsula would be paramount to controlling the approach and access to the Strait of Hormuz and Persian Gulf.

Conventional warfare in the Gulf would be largely a war of missiles and air operations with Iranian missiles aimed at commercial and non-Iranian military vessels; this also includes neighboring countries' oil production and transportation facilities. Of primary importance are the Saudi cities of Jubail and Dammam, Bahrain (where the U.S. Central Command [CENTCOM] is headquartered), and Abu Dhabi.

American countermeasures would be centered on neutralizing Iran's submarine threat. Submarines are an aircraft carrier's natural enemy and mortal threat. Eight submarines may not sound like a lot, but if even one managed to get out of the Gulf, America's air carrier groups would be in mortal danger.

Electronic jamming would be a feature as well. Scrambling Iranian communications would aid an effort at systematically taking out Iranian air defenses. Primarily, Iran's anti-air missiles would need to be located and destroyed, especially those based on mobile launchers. Aircraft and cruise missiles would be able to achieve this goal.

Non-conventional warfare might be utilized as well; spy and communication satellites would be a key part of offensive-defensive operations and strategy. A fourth Gulf war might even see new weapons systems, perhaps an Electro-Magnetic Pulse weapon. An EMP weapon generates a powerful magnetic field which literally fries electronic circuitry, rendering electronic instruments useless. This would effectively blind and immobilize communications and weapons systems. The one drawback is that the only way to create these waves is by detonating a small nuclear warhead about 80 kilometers over the target area.

Potential Outcomes

Oil prices would most likely skyrocket, more so if Jubail and Dammam were out of commission. Besides the increase in oil prices, temporary leadership in oil production would shift to Russia and Nigeria and away from the Middle East.

Iran would face severe disruption and risk loss of internal infrastructure collapse. Airports, roadways and a number of industrial and weapons production facilities would be destroyed. Most likely telecommunications and electrical capacity would be limited, or non-functioning. Iranian military capacity would also be seriously impacted if not nearly wiped out.

The Gulf states' influence in world affairs would be reduced as they would be spending a lot of their financial reserves in rebuilding their own facilities and economies.

American power and influence would be compromised to a point. Assuming major military assets (like an aircraft carrier) were not lost, the drain on resources would be acute, at least in the short term. American concerns would now center not just on rebuilding the Gulf region, but also on future challengers.

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Please see our disclosures at the Wall Street Greek website and author bio pages found there. Article interests: AMEX: DIA, AMEX: SPY, Nasdaq: QQQQ, NYSE: NYX, AMEX: DOG, AMEX: SDS, AMEX: QLD, AMEX: XLF, AMEX: IWM, AMEX: TWM, AMEX: IWD and AMEX: SDK.

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Global Affairs & Geopolitics, By Daniel Salem Padovano

Senior Analyst

Global Affairs & Geopolitics

Daniel Salem Padovano is a third generation native New Yorker serving the higher education community. His educational background includes a Master's degree in History from Hunter College-CUNY and post graduate studies in International Affairs at New York University. His areas of specialty include the modern Middle East and North America.

Daniel currently serves as Senior Financial Aid Officer for the Federal Perkins Student Loan program at the City University of New York (CUNY). Mr. Padovano is an Adjunct Professor who also teaches courses in world history and American Government at Metropolitan College of New York. Previous teaching assignments have included Pace University ( White Plains ) and Iona College. Prior to his service for CUNY, Mr. Padovano was the Bursar of Concordia College in Bronxville, New York. Before his current career in higher education, Mr. Padovano held positions in international and commercial banking. Mr. Padovano is also a licensed New York City Sightseeing guide.

"The Greek" is proud to include Daniel among our strong research staff. I know Mr. Padovano well and like him much. This image of him we've chosen is representative of the strength of his knowledge base, but perhaps missed by the image is what I value most in Daniel, his kind heart.

Daniel's Email: dpadovano@wallstreetgreek. com
The Greek's Email: greek@wallstreetgreek. com

Mr. Padovano's Article Portfolio:

Full Disclosure: Mr. Padovano has agreed to Wall Street Greek policy to not author articles about securities he personally owns or holds beneficial interest in. In the event of a special case, Daniel will make full disclosure of ownership or beneficial interest. The work of contributors to Wall Street Greek is their own, and may not necessarily agree with the opinion of the site or its founder, and does not constitute financial advice. Please see our full disclosure at the site (Wall Street Greek).

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Wednesday, November 19, 2008

ICSC Data, Jobless Claims Turn Sour Simultaneously

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Visit the front pages of Wall Street Greek and Market Moving News to see our current coverage of economic reports and financial markets.

If you've been reading "The Greek," you know we've been tracking two regularly reported economic indicators for signs of expected breakdown. Unfortunately, both these data points broke simultaneously over the past week, portending a massacre of a holiday shopping season... if that wasn't already plainly clear.


We've been tracking weekly jobless claims closely for months now, and pointing toward a point we call "the fear threshold." Well, we surpassed that point of 500,000 newly jobless last week, when 516K poor souls filed for benefits. The realities and consequences of rising unemployment are of course already evident throughout the economy. Retail spending is collapsing and manufacturing and service sectors are indicating impending recession (to be later revealed current). Recall, the formal definition of recession lays out two sequential quarters of GDP contraction. The fourth quarter would provide the second, according to the National Association of Business Economists. The NABE sees a 2.6% contraction in Q4.

More Fuel for Futility

Unemployment was most recently measured up sharply, to 6.5%, and each day brings a new corporate layoff announcement. That's not to mention what appears to be the impending bankruptcy of Chrysler and significant downsizing of General Motors (NYSE: GM) and Ford (NYSE: F). In that regard, Ford smartly unloaded its stake in Mazda this week, while it still had some value. In doing so, the legendary automaker further solidified its potential to stay solvent. That's important! In case you hadn't noticed, Congress looks steadfast in its stubborn opposition to provide aid to the auto sector. Even if a bill passed, President Bush isn't expected to sign it unless he gets his Colombia free-trade pact in return.

The downsizing of the American auto industry is probably not something the NABE expected when it forecast unemployment would top out at 7.5%. Losing a major player would have repercussions across the industry, leading to layoffs at parts suppliers and dealer closures. However, companies reorganize under bankruptcy protection (just look to the airlines), so it's unclear how deep the pain will truly run. Even so, it's likely the industry will emerge leaner and short many thousands of previously employed. Therefore, 10% unemployment remains probable in our view. Imagine that, one out of every ten of your friends will need some help soon.

The Second Sign - Weekly Same-Store Sales

We've also been tracking the International Council of Shopping Centers data, and looking toward the point where year-over-year weekly same-store sales would turn negative. That scenario is not as possible a result as you might think, considering the steady growth of population and thus the economy. Well, it happened...

ICSC Sales Trends
Week Ended Yr/Yr Growth Wk/Wk Growth
Nov 15 -0.1% +0.3%
Nov 8 +0.4% -1.0%
Nov 1 +0.9% +0.6%
Oct 25 +1.3% +0.5%
Oct 18 +0.9% -1.6%
Oct 11 +1.0% +0.7%
Oct 4 +1.3% +0.1%
Sep 27 +1.1% -0.2%
Sep 20 +1.3% -1.0%
Sep 13 +1.3% -1.6%
Sep 6 +1.9% -0.1%
Aug 30 +2.2% +0.1%

Since the end of "back to school" season, we've been expecting and tracking the steady decline of same-store sales. We even nicknamed this period the dead-zone between back-to-school and Black Friday.

This year's Black Friday is shaping up to be the most frenzied in history, as cash strapped Americans seek to do whatever smart spending they can within a few early morning hours, all at once! Even so, this year, the best deals may be had by the procrastinators. We fully expect there to be a huge leftover stock of inventory steeply marked down on December 24th and over the weeks that follow.

With sales turning negative and unemployment spreading swiftly, shake out is already underway in retail. We've got an interesting article coming up in early December to follow up on that thought. Stay tuned for an in-depth analysis of Iran, due here tomorrow morning.

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Please see our disclosures at the Wall Street Greek website and author bio pages found there.

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