breaking news:avid Walker Resigns as U.S. Comptroller General

“As comptroller general of the United States,” says David Walker, the federal government’s top accountant, ”there are real limitations on what I can do and say in connection with key public policy issues, especially issues that directly relate to GAO’s client — the Congress.”

You may recall, we’ve been traveling with David for more than a year documenting his efforts to educate the public on the fiscal issues challenging the country. Our film, I.O.U.S.A., featuring Mr. Walker among other luminaries, premiered at the Sundance Film Festival on January 19, 2008.

Despite the “very difficult” nature of Walker’s decision, he has chosen to leave his post at the GAO to become the president and CEO of the newly founded Peter G. Peterson Foundation. He made the announcement to Congress today.

“While I love both my job as comptroller general and the GAO,” said Walker, “I love my country more. And I believe that leading this foundation represents a unique opportunity and will be good for my country. My new position will provide me with the ability and resources to more aggressively address a range of current and emerging challenges facing our country, including advocating specific policy solutions and courses of action.”

As the head of the Peterson Foundation, Walker will oversee the billion-dollar endowment of Pete Peterson – former Commerce Secretary, the founder of the Blackstone group, The Concord Coalition, and legendary advocate for government fiscal responsibility. Chief among Walker’s duties at the Peterson Foundation will be the funding and advocating of projects that will enhance public awareness of fiscal imbalance, government deficits, and nuclear proliferation.

“We are at a make-or-break point in American history,” Mr. Peterson said of his new foundation. “The entitlement monster is unfunded. We are dangerously dependent on foreign capital, our health care costs per capita are twice the level of the developed world. The goal is to integrate public policy and charitable giving and to answer this question: How do you educate a public that has become largely inert?”

It’s now up to David Walker to answer that question. Walker’s resignation, coupled with the launch of Peterson’s fund, has broad implications for the future of fiscal responsibility in the United States, and more specifically, the development of our documentary, I.O.U.S.A.

Swiss banking monolith UBS announced its first-ever yearly net loss

It’ll close the books on 2007 down $4 billion.

Including today’s announcement of over $13 billion fourth-quarter mortgage-related write-downs, UBS racked up over $18 billion in such losses in 2007. Only Citigroup, with $21 billion, and Merrill Lynch, at $19 billion, can claim larger annual losses.

Spokespeople for UBS guessed 2008 would be “another difficult year.” We think they could be right…


But not if Hank Paulson and George W. Bush have anything to say about it: “After years of unsustainable home price appreciation, our economy is undergoing a significant and necessary housing correction,” Hank Paulson told Congress.

“The housing correction, high energy prices, and capital market turmoil are weighing on current economic growth,” he said. “I believe that our economy will continue to grow, although its pace in coming quarters will be slower than what we have seen in recent years.

“While we are in a difficult transition period as markets reassess and reprice risk, I have confidence in our markets. They have recovered from stressful periods in the past, and they will do so again.”

Focus more on Energy , signal from dow's component shift

We open today with a teeny sign of the times: Directors of the Dow Jones industrial average announced this morning they will change the Dow’s composition for the first time since 2004. Withering corporate giants Altria and Honeywell will be replaced with the swelling Bank of America and Chevron.

“We saw that the financials industry was underrepresented,” said Marcus Brauchli, one of the Dow’s caretakers, “notwithstanding the current turbulence -- and that the oil and gas industry's growing importance to the world economy called for another representative to join Exxon Mobil Corp.”

Altria will be removed because recent and expected spinoffs make it mostly a domestic tobacco manufacturer. Honeywell, despite outperforming the Dow by over 100% over the last five years, will get delisted from the Dow because it is and threatens to remain the smallest component by revenue/earnings of all the companies in the Dow 30.

Insider Buying buckles up!

insider buying among Wall Streeters has reached a 13-year high. In fact, January marked the first time since 1995 when CEOs and other senior corporate officials bought more of their own company’s shares than they sold. “Insider” purchases totaled $683 million last month in spite of the S&P’s 6% decline.

The last time insiders were net buyers, in January of 1995, the S&P rallied 34% in less than a year. What’s more, of the last seven times insiders bought more than they sold -- all occurring between 1988-1995 -- the S&P rallied an average of 21% in the following 12 months.

Among all the market’s sectors, net buying was most significantly found in communications, industrial, energy, materials and consumer cyclical groups.

opportunity associated with market dip

LIBOR -- the interest rate banks charge each other for overnight loans -- has gone down and even briefly dipped under the fed funds target rate. “That means,” explains Dan Denning from the other side of the planet, “the Western world's major banks are not scrambling for cash as desperately as they were a few weeks ago.
The falling LIBOR rates also suggest that the big banks are not as suspicious of one another as they were a few weeks ago. If that is the case, several financial stocks such as GS with low PE should deserve our attention.

If you still believe in US, Dollar, see what ISM tell you?

The U.S. service sector, savior of American consumerism, and roughly 90% of the American GDP, plunged into contraction during January for the first time in five years. The Institute for Supply Management reported early this morning its nonmanufacturing index dropped from 54 in December to 41 in January.
That’s a monumental change. A score of 49 or lower represents “contraction” within the sector. January’s score of 41 is the first below 50 since March 2003. And the lowest reading since 2001.

The number is so bad, in fact, the ISM released its data at 9 a.m. EST this morning, an hour and change ahead of schedule, in an effort to quell any leaks that might spook the stock market. In spite of an early release, the Dow opened down over 200 points.

Is the president responsible for the economics?

After chastising Congress for earmarks and pork barrel spending in his State of the Union address last week, the president unveiled the first ever $3 trillion budget proposal today. $3.1 trillion to be exact, but who’s counting the extra billions these days?

The man who once promised a more humble foreign policy and championed “compassionate conservatism” is now responsible for the first $2 trillion (2002) and $3 trillion (2009) government budgets… which is nothing short of incredible. It took his predecessors 200 years to reach the first $1 trillion in 1987.

What’s more, after repeating his promise to balance the budget by 2012, Bush announced the second and third largest deficits in the nation’s history. The $410 billion deficit projected for this year and the $407 billion projected for 2009 will be surpassed only by his $413 billion deficit four years ago. By what fuzzy math this is heading toward “balanced,” we cannot even hazard a guess.

“These are not insignificant changes,” Paul O’Neill comments in I.O.U.S.A. of Bush’s uncanny ability to add to the national debt. “These are monumental changes.”

“When you’re no longer able to service your debt,” O’Neill warns, “you’re finished.”