Saturday, February 28, 2009

Money Supply, M2, Year over Year Change

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Tuesday, February 24, 2009

Think WE Have it Bad---What about Japan?

On February 25, 1983 the S and P 500 closed at 149.74.

Do you think that could happen here?
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Japanese shares tumbled Tuesday after a plunge on Wall Street overnight, but the sell-off eased as the government signaled it may move to prop up stock prices.

The benchmark Nikkei 225 stock average lost 1.5%, or 107.6 points, to 7,268.56. That's just above the 26-year low of 7,162 set on Oct. 27.

Worries that Citigroup and other U.S. banks will keep suffering severe losses sent U.S. stocks tumbling overnight amid pessimism about a quick economic recovery. The Obama administration tried to pacify fears, saying it would launch a revamped bank rescue program this week. But the Dow Jones and Standard & Poor's 500 indexes plummeted to their lowest closes since 1997.

Anger really can kill you

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Anger and other strong emotions can trigger potentially deadly heart rhythms in certain vulnerable people, U.S. researchers said on Monday.

Previous studies have shown that earthquakes, war or even the loss of a World Cup Soccer match can increase rates of death from sudden cardiac arrest, in which the heart stops circulating blood.

"It's definitely been shown in all different ways that when you put a whole population under a stressor that sudden death will increase," said Dr. Rachel Lampert of Yale University in New Haven, Connecticut, whose study appears in the Journal of the American College of Cardiology.
"It says yes, anger really does impact the heart's electrical system in very specific ways that can lead to sudden death," she said.
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Monday, February 23, 2009

Down side range expansion continues--good trade opportunity

The downside range expansion continues and all systems indicate that market is going lower. You will notice the spike down to the 741 area in November. Will history repeat itself? i think to some extent it will. Traders should be on their toes for any spike below 741 overnight or early Tuesday morning.

I doubt we will see the monster rally we saw in November. But, looks good for a nice fat trade.

Complacent longs are still in the market and so far they have not capitulated. Sometime soon, very soon they are going to cry "Uncle".
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Chart for S&P 500
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Sunday, February 22, 2009

Stimulus Tax Break Savings

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How households may fare under the economic recovery plan.
IncomeAvg. tax savingsDrop in tax bite
Under $19K$476-95%
$2.8M plus$39,350-1.4%
Source:The Tax Policy C
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Friday, February 20, 2009

S and P 500

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Chart for S&P 500
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Charlie Rose: Nouriel Roubini, Mark Zandi, Nina Easton and Fred Mishkin

Charlie Rose interviews Professor Nouriel Roubini, Mark Zandi, Nina Easton, and Fred Mishkin. This is an excellent interview that contains a detailed analysis of the Help for Homeowners Plan. This is informative, educational and worthwhile listening.

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Wednesday, February 18, 2009

The Housing Bailout--How did they get there?

The long awaited housing bailout will be announced today. The biggest issues surround which homeowners win and which homeowners lose. The biggest losers will be homeowners who have been living in their homes for a long time and making their payments. They will get nothing and will help pay the loans of home owners in trouble. The big question is will the Obama plan include homeowners who put nothing down, have no job, and no assets and received a mortgage--NINJA loans. The next group in trouble are homeowners that simply cannot afford their home. Will the homeowners who never were going to be able to afford the home they purchased get bailed out? The current estimate is a whopping 3 million homeowners fall into these categories. Should they be bailed out? Or, should the lenders be forced to eat the loans. The most vulnerable group are homeowners that are making payments but now see their houses underwater. The first question I would ask is how did they get there? My mother has a neighbor with a house that is $150,000 underwater. However, prior to that purchase she sold a house and realized a gross gain of $550,000. Should she receive help? It is now estimated that about 10 million homeowners are making their payments but own homes that are worth less than the mortgage they are paying. It appears they get nothing in the housing bailout. Once they see deadbeats and fools getting bailed out will they decide to walk away from their mortgage? If they do, the housing bailout will ultimately fail. This will occur because the housing market will continue to worsen for years and be a continued drag on the economy? Or will it? Housing accounts for about 6 percent of Gross Domestic Product. Meanwhile, retail sales accounts for 66 percent. Are we focusing in the right place? Is the housing bailout about consumers or is it about banks. I think you already know the answer. Your thoughts, perspective and comments are welcome.

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Economic Scene

Bailout Likely to Focus on Most Afflicted Homeowners

By DAVID LEONHARDT The long-awaited housing bailout will finally be announced on Wednesday. In a speech in Phoenix, a signature real estate boomtown gone bust, President Obama will explain his plan to reduce foreclosures. And the key to understanding that plan will be remembering that there are two different groups of homeowners who are at risk of foreclosure. The first group is made up of people who cannot afford their mortgages and have fallen behind on their monthly payments. Many took out loans they were never going to be able to afford, while others have since lost their jobs. About three million households — and rising — fall into this category. Without help, they will lose their homes. The second group is far larger. It is made up of the more than 10 million households that can afford their monthly payments but whose houses are worth less than what is owed on their mortgages. In real estate parlance, they are underwater. If they want to stay in their homes, they will have no trouble doing so. But some may choose to walk away voluntarily, rather than continue to make payments on an investment that may never pay off. Scratch beneath the details of any housing bailout proposal, and the fundamental issue is whether it tries to help the second group or just the first. Mr. Obama has evidently decided to focus on the first group, based on the previews of his speech that aides have offered. In coming weeks, his administration will begin spending $50 billion to entice banks to reduce the monthly payments of people who otherwise couldn't afford to stay in their houses. In effect, the government will split the losses on these mortgages with banks. The $50 billion will come from the money Congress has already allocated for the bailout of the financial system. It is likely to be aimed at people who need a significant, but not an enormous, amount of help to meet their mortgage payments. There are some big advantages to this approach. Bailing out all underwater homeowners would be tremendously expensive. All told, about $500 billion in mortgage debt is already underwater, and it's impossible to know in advance who is likely to walk away. So the government would have to spend hundreds of billions of dollars to help millions of people who don't need help staying in their homes. But the Obama approach also brings risks. The administration is betting that few of those 10 million underwater homeowners will walk away. (A year from now, the number will about 15 million, Moody's projects.) If they begin to abandon their homes in large numbers, however, they will aggravate the housing bust and the financial crisis — and probably force the administration to come up with a new, much larger housing bailout down the road. In that case, the speech that Mr. Obama is making in Phoenix could come to look like a rose-colored bit of incrementalism, which happens to be the very criticism that Obama advisers have leveled against the Bush administration's response to the housing bust. Underwater homeowners clearly face a difficult choice. By walking away from a house and then renting a similar one in the same town, many could save themselves a lot of money. And those who need to move — to take a new job, for example, or to marry — may have little choice but to default. They may not get enough from a sale to pay off the mortgage. On the other hand, defaulting will wreck a homeowner's credit rating. For families that don't need to move, doing so will also bring other headaches and costs. They will be leaving behind their homes. Many other people may continue to make their payments simply because they think it's the right thing to do. The current housing bust doesn't have a good recent historical analogy. It's too big. But there have been some serious regional housing slumps that may offer a window into how underwater homeowners will behave this time. Three economists at the Federal Reserve Bank of Boston recently did an analysis along these lines, looking at the Boston area in the early 1990s. From early 1989 until late 1991, prices in Boston fell 15 percent. They did not return to their 1989 peak until 1997. Yet only 6.4 percent of homeowners who had been underwater at the end of 1991 were eventually foreclosed on. And the majority of these foreclosed homeowners weren't merely underwater; they were also unable to make their monthly payments, because of the severe recession hitting New England at the time, as Chris Foote, an economist at the Boston Fed, told me. They are the kind of people the Obama plan is meant to help. In all, maybe only 1 or 2 percent of underwater homeowners walked away even though they could make their payments. Mr. Foote and his colleagues predict that the nationwide foreclosure rate over the next few years will be higher than it was in Boston, but not radically so. For most people, the Fed economists write, being underwater "is a necessary but not a sufficient condition for foreclosure." Now, not all economists buy this argument. They say that the psychology of the current bust is different from what it was in Boston in the early 1990s. In a handful of metropolitan areas, including Phoenix, prices have fallen almost 50 percent from their 2006 peak. Homeowners in such places may wonder if their houses will ever be worth more than their mortgages. So fairly small changes in their lives — like a reduction in work hours or the breakdown of a car — may lead them to walk away from their homes. "I would not minimize that risk at all," said Frederic Mishkin, a member of the Fed's board of governors until last year. If even 10 percent of the underwater homeowners walked away, Mr. Mishkin notes, foreclosures would soar, exacerbating the economy's many problems. Other economists who share his view are calling for across-the-board programs that would reduce interest rates or otherwise juice the housing market. They are worried that without bolder government actions, the housing market will continue to spiral downward. In the end, the choice between the two approaches becomes a matter of cost-benefit analysis. The more aggressive approach would almost certainly do more to reduce foreclosures. But it would also be enormously more expensive. If the economists from the Boston Fed are right — or even close to right — then the aggressive approach may cost something like $500 billion to prevent 500,000 foreclosures. That's $1 million per prevented foreclosure. Is that really worth it? Or could the money be better spent in other ways? (There is also the small matter of whether Congress would be willing to spend another $500 billion anytime soon.) Mr. Obama is apparently going to try to get more bang for the buck by focusing on those homeowners who would certainly lose their homes without government help. The plan will also help some underwater homeowners refinance their mortgages, but that won't be the emphasis. The administration's next task is to execute its plan better than the Bush administration executed its various housing plans. That will mean offering subsidies that are big enough to persuade banks, finally, to rewrite mortgage terms. It also might help to suggest that the federal government would look unfavorably on any bank that did not make good use of those subsidies. After all, the government is now a shareholder in many banks. E-mail: More from All American Investor

Late Change in Course Hobbled Rollout of Geithner's Bank Plan

Here is a novel idea. How about they start classifying banks. Identify the banks that need to be privatized, banks that need some help and can survive, and the banks that need nothing and are good to go.

Of course, politicians have already proved by forcing banks to take TARP money that they are unwilling to call a spade a spade.

I guess we wait until the next bank explodes and then try to throw some money at the problem and a box of bandages.

Just days before Treasury Secretary Timothy F. Geithner was scheduled to lay out his much-anticipated plan to deal with the toxic assets imperiling the financial system, he and his team made a sudden about-face.

According to several sources involved in the deliberations, Geithner had come to the conclusion that the strategies he and his team had spent weeks working on were too expensive, too complex and too risky for taxpayers.

They needed an alternative and found it in a previously considered initiative to pair private investments and public loans to try to buy the risky assets and take them off the books of banks. There was one problem: They didn't have enough time to work out many details or consult with others before the plan was supposed to be unveiled.

Obama's foreclosure fix on the way

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The multipart plan will for the first time commit government money to spur loan modifications. One likely component will be interest-rate subsidies for at-risk borrowers, with the government matching the servicer's rate reduction. Borrowers would have to take an affordability test to see whether they could handle the monthly payment on the reworked loan.

The administration is also expected to ramp up loan modifications of borrowers in default. These modifications would lower monthly payments to more affordable terms - often 31% to 38% of gross monthly income - through reducing interest rates or lengthening the loan's term.

On deck is controversial legislation to allow bankruptcy judges to modify loans on primary residences. The financial industry is staunchly opposed to this measure, but administration officials told them last week to expect it to happen this year.

Families in foreclosure

Sunday, February 15, 2009

Winners and losers in the final stimulus bill

Follow the link for a more complete breakdown.
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  • Foreclosures: $2 billion is set for a neighborhood stabilization program that helps areas plagued with foreclosures by buying back properties and preventing blight.
  • Social Security: $500 million goes to replace its 30-year-old computer system.
  • Car buyers: Anyone who buys a new car in 2009 gets to deduct the sales tax. To qualify, buyer must make less than $125,000 individually or $250,000 jointly. Cost is $1.7 billion.
  • Homebuyers: First-time homebuyers who purchase this calendar year get an $8,000 tax credit which does not have to be repaid like a similar measure last year. This phases out for people making more than $75,000 individually or $150,000 jointly. "First-time homebuyer" is defined as someone who has not owned a home for the past three years. Cost: $6.63 billion.
  • Tax credits: Anyone making $75,000 individually or $150,000 as a family will get refundable tax credit up to $400 per person or $800 per family.

    GM to say, 'more aid or bankruptcy'

    Sooner or later it will become obvious to the politicians in Washington that this situation requires more than a bandage--more like a heart transplant.

    As a taxpayer, I would prefer to see a "cram down" of the existing stock and bond holders. Then a complete restructuring of the company by a board of directors put in place by we the people.

    I cannot understand why taxpayer money would be invested any differently than real money. I guess I just explained why--the people in congress have been throwing money around for so long they forget where it came from and are no longer treating our tax monies as they would treat their own monies. Sad.
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    General Motors Corp. will offer the government the choice of giving it billions more in bailout money or seeing it file for bankruptcy when it presents a restructuring plan next week, according to a report published Saturday.

    The government has already committed $13.4 billion to GM as part of a federally-funded bailout. The automaker is expected to include its call for more funds in a restructuring plan it's required to submit to the Treasury Department by Tuesday, though the company isn't expected to include a dollar amount, according to the Wall Street Journal report.

    Chrysler is also expected to submit a restructuring plan on Tuesday.

    Friday, February 13, 2009

    New Penny: Lincoln Love Helps Keep Waste Alive

    How many pennies do you have in your pocket right now? Do you love or hate pennies?

    Penny for your thoughts? Or, more like fifty bucks?

    Ever wonder why we are in such deep doo doo? Maybe decisions by our government like this will clue you in.
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    As a one of four new pennies enters circulation today, it reintroduces the question of why we even need pennies in the first place.

    In a 2006 editorial in the Journal, Harvard economist Greg Mankiw made a simple case for getting rid of the penny. “The purpose of the monetary system is to facilitate exchange, but I have to acknowledge that the penny no longer serves that purpose. When people start leaving a monetary unit at the cash register for the next customer, the unit is too small to be useful. I know that some people will be upset when their favorite aphorisms become anachronistic, but a nickel saved is also a nickel earned,” he wrote.

    “Producing a penny now costs about 1.7 cents.
    A 2006 poll by coin-counter CoinStar, not a completely unbiased source, found that two-thirds of people think the penny should be kept as an “important symbol of American culture, history and the economy.”
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    Household Wealth Plunged In ‘08, Reversing Rise

    Borrowing for second homes accounts for part of the large increase in debt over the last five years. This is something that is not being discussed or factored into the current housing situation. An enormous amount of second homes are going into foreclosure and even more are on the market for sale. This overhang in the housing market is likely to continue for a long time. Is anyone in the government discussing supply and demand as they look for a quick fix for the housing crisis?

    The drop in the stock market is hurting the newly retired and really weighing on Baby Boomers.
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    U.S. household wealth appeared to have plummeted in 2008 in the face of falling values for stocks and homes, a Federal Reserve report showed, more than reversing gains achieved over the previous three years.

    According to the Fed’s survey of consumer finances, released Thursday, average net worth is estimated to have fallen 22.7% from 2007 until October 2008. The median, or midpoint, fell a more modest 17.8%, suggesting declines were centered among wealthier families.

    The share of households with loan payments exceeding 40% of their income rose 2.5 percentage points between the 2004 and 2007 surveys, to 14.7%.

    Borrowing for second homes was a big factor pushing up debt between 2004 and 2007, the Fed said. –Brian Blackstone

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    Saturday, February 7, 2009

    Wells Fargo May Cut Loans for Some Wachovia Customers

    Ok. Let me get this straight.

    Wells Fargo & Co., the second-biggest U.S. home lender is offering to cut mortgage balances for some of Wachovia Corporation customers by 20 percent.
    So if I have a $500,000 mortgage I can get my mortgage balance reduced to $300,000. I'm in. Well, probably not.
    While the terms are still a bit sketchy this is coming in response to the pressure to modify loans due to rising default levels. You have to be in default to get the 20 percent free lunch.
    Wells Fargo’s pilot program aimed at Wachovia borrowers is part of a plan announced on Jan. 26 to help avoid “preventable foreclosures.” As many as 478,000 Wachovia customers have access to the wider program and those who are in or at risk of foreclosure have until Feb. 28 to contact the bank. Customers may also win reduced interest rates and extensions of up to 40 years.
    Well what about people that have been making their payments for say the last ten years? No free lunch?
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    Friday, February 6, 2009

    The death of equity

    As soon as I read this headline I started feeling frisky. This is the kind of thing that tells you---chicken on the hill.

    My personal belief is that market is going to take one last fierce tumble. The capitulation phase of this long term bear market that started back in 2000.

    I am ready to buy tech stocks with both hands and both feet if this occurs. I will be buying the names that were all in vogue during the 90s. The big names plus some of the new kids on the block like RIMM and JNPR.

    Bear markets usually end ugly. But when you hear all your friends saying they are selling all their stocks and will never buy a stock again---knock knock knock--opportunity.

    Start maxing out the 401k and getting ready.

    Imagine buying something like INTC at the equivalent price of 87 cents the day after the crash in 1987. That is the ticket.
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    “Global equities have returned -29% this decade, compared to 80% from government bonds. We’ve seen two 50% equity bear markets in just five years. This combination of miserable returns and extreme volatility has led some to pronounce that, after 50 years, the cult of the equity is dead.”

    Now, here’s where things get scary .Buckland observes that prior to 1960 US equities yielded twice as much as government bonds. At current treasury prices, that would imply an equity market yielding 6 per cent  and…

    the S&P would need to fall by another 40% to deliver that yield on the current dividend base. In other words, the S&P would have to trade at around 500 points.

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    Nations Rush to Establish New Barriers to Trade

    This goes along with my growing concerns about deflation.

    When you look around the globe you can see that the entire world economy is in trouble and world leaders really don't know what to do about it.

    After 50 years of inflation everyone has a mindset about inflation. But, who really has an understanding of deflation and what to do about it?

    If you are old enough you might remember WHIP--whip inflation now. That brainy, government, idea didn't work as intended. Instead price controls gave us one percent inflation a month.

    It took almost a decade and Paul Volker to figure it out.

    Well now we are heading for a global trade war. Meaning barriers and trade tariffs that could very well choke off global trading.

    Just the mention of "Buy America" has the world in a tizzy.

    I have no doubt that many American consumers are thinking "buy America" right now. And, I have no doubt that companies will be getting behind this theme in their advertising soon.

    Given the dire straights in the auto industry, I have to admit. If I bought a new car it would have to be an American made car. I would just hold my nose and do it. The idea of millions of unemployed in Michigan does not sit well with me.

    Seems like the American thing to do. Doesn't it?
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    Countries grappling with global recession have enacted a wave of barriers to world commerce since early last month, scrambling to safeguard their key industries -- often by damaging those of their neighbors.
    The European Union has warned the U.S. that proposed "Buy American" provisions in planned stimulus spending could break trade rules. Meanwhile, EU nations have reversed direction and tightened their own trade rules, for instance by resuming subsidies to dairy farmers' exports and effectively barring Chinese screws and bolts from their market, while accusing China of dumping them below cost.
    [Global Retreat]
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    Resveratrol Clinical Trials

    People selling Resveratrol via multi level marketing, jumped all over 60 minutes for now including them in their story.

    Somebody missed the point. You decide.
    Yesterday, I posted an article about Resveratrol, Fountain Of Youth In A Wine Rx? The catalyst for the article was a segment I saw on 60 minutes.
    The form of the drug, Resveratrol, that I was referring to is being developed by Sirtris Pharmaceutical, a Cambridge, Mass research company.
    SRT501, a formulation of resveratrol with roughly five times higher bioavailability than the chemical alone
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    Bailout Talks Turn to More Equity Stakes

    The fact that this keeps changing is making me a bit uneasy. You?

    I still can't get comfortable with the idea that we the taxpayers are going to be buying toxic assets. Would you drink poison for breakfast?
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    The Obama administration's financial-rescue plan is shaping up to include capital injections with tougher terms than the first round and an expansion of an existing Federal Reserve lending facility that could potentially buy up toxic assets clogging the system, according to people familiar with the plans.

    The discussions are still fluid and much could change. But efforts to create a so-called bad bank to purchase distressed assets and to insure other assets against future losses appear less central to the administration's thinking. Still, some within the administration continue to push those efforts and they could wind up as part of the plan that will be detailed Monday by Treasury Secretary Timothy Geithner.

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    Foreclosures Rising: One Every 13 Seconds

    This is a bit on the disturbing side.

    I just finished reading the article and we already had another 10 foreclosures.

    Foreclosures are up by more than 5,000 since the original article was written.
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    For anyone who needs a constant reminder of misery, the Center for Responsible Lending (CRL) has added a new feature to its Web site.


    CRL, a nonprofit research and lobbying group, which favors aggressive policies to help distressed borrowers, now features on its home page a continually updated tally of the estimated number of home foreclosures started since Jan. 1. The total stood at more than 237,000 early Thursday afternoon and is rising at a rate of one every 13 seconds.

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    Solarz and Ferrisi set NYc subway record

    Dig math and records? This one is for you.

    I think I would rather try and eat a record amount of pizza.
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    Namely, “I had access to certain programs I could use, and I had access to people with backgrounds in graph theory.” But he didn’t have access to computing power that could handle a number as big as 468!, or 468 multiplied by 467 multiplied by 466 and so on to 2 and 1.
    That’s the number of possible routes, if you allow any possible route, even one where the second station is nowhere near the first. It’s also a number so big that I had trouble finding software to compute it; best I can tell, it’s about 144 followed by 1,046 zeroes, or a whole lot bigger than a googol (Google’s namesake, one followed by 100 zeroes)
    Chris Solarz and Matt Ferrisi, colleagues at an investment-management company they’d prefer not be named, received widespread publicity when they announced they were targeting the Guinness world record of 24 hours, 54 minutes and three seconds
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    Octuplets' mom to give first interview

    Nadya Suleman has 14 kids all together. This interview should be of great interest to many.

    I'm sure the negativo's will be out in force on this one.
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    Nadya Suleman, the California mother of the newborn octuplets, left a Los Angeles-area hospital early today.

    The New York Daily News writes, The 33-year-old snuck out of the hospital under cover of darkness Thursday and a spokeswoman pleaded for her privacy.

    But Suleman is wasting no time going public. She's doing her first media interview today with NBC News correspondent Ann Curry. Excerpts will be shown tonight. Air-date to follow.

    Meanwhile, The Associated Press reports that Suleman received more than $165,000 in state disability payments for an on-the-job back injury.

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    Is Etanercept the Cure for Alzheimer's

    I'm sure anyone suffering from Alzheimer's that has the financial where with all will be tempted to try this treatment.

    I find myself thinking, why not?

    Alzheimer's is the sixth leading cause of death recently surpassing diabetes. If a cure is not found, ten million baby boomer's can expect to suffer from Alzheimer's disease. Alzheimer's treatment is likely to be an enormous market so you can expect all kinds of alternative treatments to be popping out of the woodwork. Here comes Dr. Edward Tobinick and his claim that he has the cure--etanercept.

    Dr. Tobinick claims he injects a shot of etanercept--a drug approved for arthritis-- into the neck of his patients. Unfortunately, in the video provided below, he closed the door when it was time to demonstrate the procedure.

    He says,

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    Find the Wind

    Ever think about starting your own wind farm? Well, first you have to find the wind. Here you go.

    Maybe you just want to know how windy it is? Or maybe you just have an interest in wind.
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    Find solar fast

    We got Solar down here is south Florida.
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