North Dakota’s economy is mainly dependent on agriculture, 25% of its economic base to be more precise. Natural resources are the most valuable asset this state possesses. Consider the following key facts about North Dakota:

1. It ranks number one nationally for its potential to produce wind power.
2. The state also produces biofuels like ethanol and biodiesel.
3. There are more than 160 certified organic farms in the state.
4. North Dakota lowered its corporate income tax beginning January 1, 2007. North Dakota corporate taxable income percentages vary from 2.6 to 6.5%.
5. The state individual income tax varies from 2.1% to 5.5%.
6. North Dakota allows a corporate tax exemption of up to five years for new or expanding technology based businesses.
7. North Dakota is one of the safest states in the country.
8. North Dakota produces about 2.7% of the total U.S. oil production.
9. The state population is only 635,867.
10. North Dakota produced approximately 45 million barrels of oil in 2007.

The following companies are connected to North Dakota:

Wow!  As I write this, the S&P futures are up 33 points with the Dow Jones futures being up nearly 300, and Nasdaq 100 up 38.  The market is all cheered up over the news that Freddie Mac (FRE) & Fannie Mae (FNM) are going to be taken under conservatorship by the Federal Government.  It appears that this news was leaked in the final hour of trading on Friday as the market, and especially the financials started rallying pretty strongly into the close.  Daniel Mudd and Richard Syron, the two CEOs, will be replaced and I am sure that many more senior executives will follow the same fate in the weeks to come.  With this move, mortgage spreads should tighten and the US dollar should start to tank which is bullish for gold.

Conservatorship is basically similar to Chapter 11 bankruptcy and will render the shares nearly worthless.  The two GSE's had their credit ratings dropped to junk status on their preferred stock and we should see both companies trading on the pink sheets shortly.

After consolidating and making a continuation pattern between 76 and 77, the US Dollar Index [DX] broke out above 77 ½, traded as high as 79.077 on Thursday and then closed Friday at 78.932.

For a currency with many trillions outstanding, we think a 10.87% move in seven weeks is “too high too fast” and we should now expect a correction back to 76 or perhaps even 75. The apparent overhead resistance is at the 80 level where it made a pivot at 80.39 before turning higher on December 27, 2004, and then again when it traded between 80 and 81 for six weeks during the summer of last year. While exchange rates move primarily in response to news that alters expectations about the future economic environment and the relationships between economies, this rapid move has the look of short covering.

Last Friday, September 5th, the dollar was up almost half a percent against the Euro and most other currencies despite a spectacularly horrible jobs report, but it seems to be overshadowed by Freddie (FRE) and Fannie (FNM) in traders’ mind. In one of my previous posts I had talked about the dominance of the currency markets over the equity and commodity markets in predicting the future market trends and overall state of the economy. I had reasoned that this relative power is due to the fact that currency markets are larger than the other two by a huge margin and therefore are not easily manipulated.

Another interesting event that took place last Friday was that the banks bottomed around 11 am and rose through the remainder of the trading day, taking the whole market up with them. Now I am not one of those whiners who constantly complains about insider trading and how the Wall Street manipulates and robs the ordinary investor. However, given the sequence of events last Friday, it is not hard to imagine that a whole lot of people knew about the GSE rescue package before we, the ordinary folks, got the news after the closing bell.

Try as hard as it might, Bush 43 could not postpone the consequences of its actions until it January 20, 2009. Bush 41 largely escaped these problems, but his son’s administration was not so lucky.

Yes, things started unraveling early in 2007 with the subprime market leading the way. However, the economy did not ‘tank’ and many, including McCain’s friend, advisor, and one time choice for Secretary of the Treasury in a McCain administration, kept telling us that ‘things weren’t so bad’ and that some people just suffered from mental depression and were just whiners.

[The following is excerpted from Bill Cara's Week-in-Review from September 7, 2008]

Technical analysts looking at the major equity market indexes of various countries this weekend must be stunned to see a consistent pattern where prices are on the verge of simultaneous collapse.

The employment situation release seems like old news, and Jim has already teased out some of the most important aspects in his post. However, I thought a little more context would be useful, given that some observers still think a recession can be avoided. From the White House economy fact sheet (accessed 9/7/08):

On September 5, 2008, the Bureau of Labor Statistics released new jobs figures for August. Nonfarm payroll employment decreased by 84,000 jobs in August, and the unemployment rate rose to 6.1 percent. While these numbers are disappointing, what is most important is the overall direction the economy is headed. Last week, the economy posted a strong gain of 3.3 percent at an annual rate in the second quarter, led by growth in consumer spending, exports, and a well-timed and appropriately sized stimulus package. This level of growth demonstrates the resilience of the economy in the face of high energy prices, a weak housing market, and difficulties in the financial markets. Orders for durable goods have been rising in recent months. In addition, productivity growth over the past four quarters has been strong at 3.4 percent -- above the averages for each of the past three decades over the course of the Administration.

Sentiment Surveys
As I mentioned, the Investor’s Intelligence sentiment survey continues mired in neutral with 37.8% bulls and 40% bears. Things haven’t moved for 3 weeks.

Note: percentages above taken on stock portion of portfolio only

The $5.4 billion purchase of Stuyvesant Town/Peter Cooper Village by Tishman Speyer and BlackRock (BLK) was predicated upon the notion that rental income from the predominately rent-controlled housing would rise as the apartments were quickly converted to market rate apartments. But rental income is declining - covering just 35% of estimated annual interest costs of $300M on the $4.4B loan developers took. The partners cite a high rate of new leases written, low vacancy rates, a long-term outlook and a $1B equity stake that should comfort investors. Yet Tishman and BlackRock could lose their entire $1B equity stake - and more on the loans - if the market keeps faltering. Debt investors will suffer too.

On a peak-to-trough basis, the S&P 500 declined 22.4%. Broad-based foreign stock indexes, which outperformed during the preceding bull market, have declined over 30%. Formerly high flying markets such as China and India have suffered huge drops in excess of 50%. These declines have taken their usual toll on investor fortitude and behavior.

Now that Treasury has taken the GSE’s into conservatorship it is likely that the housing market can begin the process of stabilization and recovery. The Treasury’s take-over of the GSE’s essentially means that the government will be providing liquidity into the mortgage market by way of re-starting the all-but-defunct secondary market for mortgages with planned purchases mortgage-backed debt. This will have an important implication for the dollar, which is discussed later.

One of the main features which enabled the housing market’s expansion was the change from the originate and hold model of mortgage lending to the originate and distribute (sell) model. The market for mortgage securitization basically dried up after August 2007 but now, the government will be there to make the purchases that no other entity can (or is willing) to make. Essentially, the government is taking the other side of the mortgage securitization trade as the buyer of mortgages that financial firms will again originate and distribute (sell). Now that liquidity is expanding, which means the supply of money within the mortgage system will increase, it is likely to see mortgage rates decline. Once mortgage rates decline, that obviously will make housing more affordable even if housing prices themselves hold steady because the monthly cost of carrying a mortgage will decrease.

If you are a holder of Powershares dollar bearish fund (UDN), gold (GLD) or silver (SLV), you’ve been taking a beating since late July/early August, as the dollar has powered forward, against all odds, in a bewildering climb against virtually all other currencies. In the past few weeks, after having been on a downward trajectory for years, the dollar suddenly appreciated against the euro, pound sterling, yen, ruble, rupee and almost every other world currency. On September 4, 2008, the U.S. dollar index rose an incredible 48 cents, while the DOW fell by 344 points!

How can the dollar be rising, in the face of overwhelmingly negative fundamentals? Big bank “analysts” are telling us the dollar is going up because Europe is following the U.S.A. into recession. But, this proposition is ridiculous. No other nation has been as adversely affected by the credit crisis than America, where the mess began. Ok, maybe the U.K. also. It shares our language, and most of the big Wall Street players are deeply enmeshed with players on High Street. The Bank of England does somersaults for High Street just as the Federal Reserve does for Wall Street. Both nations have essentially followed an identical path to economic implosion. This is not true of continental Europe, however.

In conjunction with the statement of Secretary Paulson, the Treasury has provided several fact sheets which flesh out the plan. I just read through the agreement which summarizes the Preferred Stock Purchase Agreement.

The Treasury will purchase Senior Preferred Shares of each entity and will begin with an initial purchase of $1billion. The preferred shares will carry a 10 percent coupon and pay a quarterly dividend. The Treasury will also receive warrants which represent going forward ownership of 79.9 percent of the companies. These contracts are for an indefinite duration and Treasury has pledged $100 billion for the effort. The fact sheet notes that that amount does not represent a judgment on the financial conditions of the companies but is meant to instill confidence.

Here is all we know so far:
 

WASHINGTON (Reuters) - The U.S. government announced on Sunday that it was taking control of troubled mortgage finance giants Fannie Mae (FNM) and Freddie Mac (FRE), effectively wiping out shareholders' interest in the publicly traded companies.

The Labor Department reported on Friday that 84,000 jobs were lost in August 2008 indicating a 6.1% unemployment rate. This current unemployment rate is the highest since September 2003.

The purpose of this article is to understand the relationship between unemployment rates and recession periods and finally their link to stock market prices.