The new Pickens Plan is cash

The Wall Street Journal reports that investors are fleeing T. Boone Pickens' two hedge funds after huge losses over just the last few months.

It was not long ago (in early-July actually), that investors around the world were ogling the oil tycoon's energy stock holdings that had produced gains of 30 percent or more at mid-year.

That was when crude oil was closing in on $150 a barrel.

With the black goo now closing in on just $50 a barrel, there seems to be little interest in the energy patch here in October.

About half of the investors in T. Boone Pickens's energy-oriented equity hedge fund have asked to withdraw their money on the heels of losses of about 60% this year, according to people close to the matter. Mr. Pickens and his investment firm have lost $2 billion since peaking in late June, Mr. Pickens said Sunday on the CBS program "60 Minutes."

His fund, BP Capital, will have about between $400 million and $500 million after expected withdrawals. It started the year with about $2 billion. A few weeks ago, Mr. Pickens moved the fund almost entirely into cash to help ride out the volatility in the energy patch, according to people close to the matter.

Mr. Pickens is expected to personally hold about 20% of the fund after the withdrawals, or about $100 million, after he does some selling along with his investors. He has lost an estimated $400 million or so in his funds this year.

Energy stocks were on a tear today, the Energy Select Sector SPDR (NYSE:XLE) rising more than 15 percent...

Here's the 60-Minutes segment from two days ago (if you'd prefer a short and silent 5-second commercial instead of a longer, louder 30-second spot, go directly to the CBS website):

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Happy Diwali!

At the top of Yahoo! right now is a prominent link to this festive page about the Indian holiday Diwali, also known as the "Festival of Lights".
There's lots more about Diwali at Wikipedia and at Diwali, from which comes:

The first day of five day long Diwali celebrations is of great importance to the rich community of western India. Houses and business premises are renovated and decorated. Entrances are made colorful with lovely traditional motifs of Rangoli designs to welcome Lakshmi, the Goddess of wealth and prosperity. To indicate her long-awaited arrival, small footprints are drawn with rice flour and vermilion powder all over the houses. Lamps are kept burning all through the night. Believing this day to be auspicious, women purchase some gold or silver or at least one or two new utensils.

With only a few exceptions, gold buying in India is reportedly brisk at the moment.
Dubai too it seems, based on that last news item - here's a link. They're running out of gold bars - that seems to be a problem everywhere these days.

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Consumer confidence falls to record low

The Conference Board reported a record low in consumer confidence in the U.S. going all the way back to 1967 when record-keeping began.

Falling home equity, plunging stock markets, and a credit crisis, the likes of which few have seen in their lifetimes, will tend to have that effect.

The consumer confidence index plunged by more than one-third, from 59.8 in September to 38.0 in October, a truly stunning fall that, according to Bloomberg, was the third biggest monthly decline on record, trailing only two plunges in the early 1970s linked to oil shocks.

From the peak of over 110 in July of last year, consumer confidence has plunged by almost two-thirds as shown below along with retail sales courtesy of Econoday.
It was the employment component of the report that took the biggest hit.

What used to be about equally weighted views of jobs being "hard to get" or "plentiful" has taken on a decidedly negative outlook in recent months - these two views were about equally weighted in the low 20s not more than a year ago:

Jobs readings point to big trouble for next week's monthly payroll report. Those saying jobs are currently plentiful fell nearly 4 percentage points to only 8.9 percent. Those saying they are hard to get spiked 5 points to 37.2 percent. These are very large month-to-month movements for these readings which make up a big piece of the current conditions component, a component that tracks very closely with the unemployment rate and is pointing squarely at a sharp rise from the current 6.1 percent.

In bad news for retail sales, only 4.4 percent of the sample say they expect to buy a car in the next six months, unusually low and down a steep 5 tenths against September which was a month of disaster for auto sales. In a sign that consumers are distressed, 12-month inflation expectations inexplicably jumped 7 tenths in the month to 6.9 percent. Perhaps consumers are judging inflation not by gas or food prices, which are coming down, but perhaps by money supply growth?

The rise in inflation expectations is very interesting, particularly since gasoline prices have been dropping like a rock.

Inflation expectations and prices at the pump have been highly correlated for years and it's hard to believe that consumers now view all the government rescue attempts as having a monstrous inflationary impact next year.

While many of us do hold that view, does the typical consumer?

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Phoenix and Las Vegas home prices fall 31%

The August report(.pdf) for the S&P Case-Shiller Home Price Index shows the 10-City and 20-City Composite Home Price Indices at new record annual declines of 17.7 percent and 16.6 percent, respectively. Price indices for all 20 cities are shown below.
To aid in viewing this graphic, the order of the legend (upper left) reflects the top-to-bottom position of all 20 cities for the current month (far right). As such, the legend indicates which cities have managed to hold onto the largest real estate price gains since 2000.

Not surprisingly, a number of cities have consistently moved down in the legend, notably, Phoenix and Las Vegas, both of which were near the top of the list late last year and earlier this year.

The reason for their steady move down is clear to see when looking at the table below - both now sport year-over-year declines of more than 30 percent.
Miami is not far behind, nor are San Francisco, Los Angeles, or San Diego. Regrettably, the curve for San Francisco in the first graphic above is somewhat obstructed - its recent decline has been remarkable, mirroring Las Vegas in declining sharply in 2008.

David M. Blitzer, Chairman of the Index Committee at Standard & Poor's, noted:

The downturn in residential real estate prices continued, with very few bright spots in the data. The 10-City Composite and the 20-City Composite reported record 12-month declines. Furthermore, for the fifth (5th) straight month, every region reported negative annual returns. This started when Charlotte, NC, was the last region to turn negative back in April 2008.

Both the 10-City and 20-City Composites have been in year-over-year decline for 20 consecutive months. Of the 20 regions, 13 of them had their annual returns worsen from last month’s report. As seen throughout 2008, the Sun Belt markets are being hit the most. Phoenix and Las Vegas are both reporting annual declines in excess of 30%, and Miami, San Francisco, Los Angeles and San Diego are all in excess of 25%.

There was some good news in the report as both Boston and Cleveland posted increases in home prices from July to August. The Boston area has been a real outlier so far in 2008 showing a modest 1.5 percent gain since February.

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Tuesday morning links

TOP STORIES
Cost of crash: $2,800,000,000,000 - Guardian
August Home Prices in 20 U.S. Cities Fall 16.6% From Year Ago - Bloomberg
IMF may need to "print money" as crisis spreads - Telegraph
Downturn Clobbers Public Pension Funds - Washington Post
GM, Chrysler request $10 billion in aid: sources - Reuters
Failing its retest: The Dow's Oct. 10 lows have been decisively broken - MarketWatch
Foreclosures Open Door To Disorder - Washington Post

MARKETS/INVESTING
OPEC officials say ready to act again to boost oil - Reuters
World Is `Drowning in Oil' (Again) After Drought - Bloomberg
What now? Ignore big investors - MSN Money
Gold up 3 pct on softer dollar, firmer equities - Reuters
Low oil prices take wind out of renewable fuels - SF Gate

ECONOMY
Majority of economists in USA TODAY survey back 2nd stimulus - USA Today
Whirlpool to cut 5,000 jobs, cuts 2008 earnings view - MarketWatch
Fidelity reportedly may lay off up to 4,000 - Boston.com
Gas prices drop 26 cents in a week; some areas below $2 a gallon - USA Today

HOUSING
Good credit? Home loans no longer a sure thing - USA Today
Dropping house prices spur purchases, but is it a real turnaround? - MetroWest Daily
The innocent borrower - Housing Wire
US Home Builders Push Bold New Fix For Housing Market - CNN/Money
Subprime Mortgage Delinquencies Building, Again - Housing Wire

FED/TREASURY/BANKING
Libor Falls as Central-Bank Cash Injections Ease Credit Freeze - Bloomberg
Fed Begins Buying Short-Term Debt - Washington Post
Fed weighs another rate reduction to limit fallout - AP
Rescue plan faces delays in hiring asset managers: report - Reuters
Greenspan Says, "Who Could Have Known?" - truthout.org

INTERNATIONAL
In Japan, a Robust Yen Undermines the Markets - NY Times
Pensions plummet in value - Times Online
Iceland hikes lending rate to 18% - MarketWatch
Thais to barter rice for oil with Iran - Financial Times
The Housing Crisis Spreads to China - AP
Central Banks Slashing Rates As Investors Flee - Washington Post

INTERESTING
Canadian dollar's loss could be Hollywood's gain - LA Times
Can't save? How to force yourself - MSN Money

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Greenspan gallows humor

From Pat Oliphant at the New York Times comes this bit of Greenspan gallows humor (a big tip of the hat to MP). Apparently it takes a few days for this all to sink in...

Though there are no guidelines yet established for cartoons, it is believed that this will count as a "Greenspan Mess" sighting.

From Wikipedia:

Gallows humor is a type of humor that arises from stressful, traumatic or life-threatening situations such as wartime events, hostilities, mass murder; often in circumstances where death is perceived as impending and unavoidable. It is similar to black comedy but differs in that it is made by the person affected.

Close enough...

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Ron Paul on Alan Greenspan's testimony

This appears to be in high demand at the moment, for obvious reasons.

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