Daily Digest

Daily Digest - Apr 17

Friday, April 17, 2009, 10:52 AM
  • Treasury Department Issues Emergency Recall Of All US Dollars (Video, Humor, H/T JKibbe)
  • Behind the Curtain 4/9/09
  • CPI Down; Solely Due to Transportation
  • February Monthly TIC Flows Negative Again...
  • Bank Stress Tests, Explained (Video)
  • Is Recovery Just Around the Corner?
  • RPT-FEATURE-Politicians also to blame for crisis, say bankers
  • General Growth Files Biggest U.S. Property Bankruptcy
  • Stage 3 Tsunami Building up Again. SB 1137 Delay and Toxic Mortgages
  • A Good -- er, Bad -- Connection
  • Tarp-o-Meter, Keeping track of who's paying back
  • The End of Final-Salary Pensions?
  • Central Banker Fun & Games...
  • Swiss citizens think a large Swiss bank will fail

Economy

Treasury Department Issues Emergency Recall Of All US Dollars (Video, Humor, H/T JKibbe)

Behind the Curtain 4/9/09 (Scribd Document H/T CM)

CPI Down; Solely Due to Transportation

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent in March, before seasonal adjustment, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. The index has decreased 0.4 percent over the last year, the first 12 month decline since August 1955.

Looking at the chart below, we see the only area that saw price declines year over year was transportation, dropping 12.5% year over year.

February Monthly TIC Flows Negative Again...

The Treasury International Capital flows for February were NEGATIVE $97 billion. This follows a negative $146.8 billion flow in January. Since we run a negative trade deficit, we need this flow to at least equal our deficit in order to create sustainable debt financed trade.

While our trade deficit is falling due to a decrease in overseas trade, the TIC flow is falling much faster and that simply means that foreigners are not purchasing our debts. In the statement below note that net foreign PRIVATE capital flows were negative $106.3 billion, but that net foreign OFFICIAL flow was positive $9.3 billion. So, it is the private capital flow that is negative while foreign official flow is only slightly positive.

We have had negative months during the past year or so, but we have not been stringing negative months together - this two month string is large and it is significant. The overall TIC flow is definitely averaging down and the trend is very clear - we are not financing our trade. Ultimately this lowers demand for our debt and places pressure on Bernanke to perform more QE.

Below is the verbiage of the official release. Follow the link to see the table of flows:
Treasury International Capital (TIC) Data for February

Washington -The U.S. Department of the Treasury today released Treasury International Capital (TIC) data for February 2009. The next release, which will report on data for March 2009, is scheduled for May 15, 2009.

Net foreign purchases of long-term securities were $22.0 billion.

Bank Stress Tests, Explained (Video)

Is Recovery Just Around the Corner?

After the 1929 crash, the Hoover administration spied similarly hopeful signs in the U.S. economy. "Recovery is just around the corner", is first attributed to economist, Irving Fisher, but Team Hoover repeated this phrase and variations of it right up until he was crushed by the landslide election of FDR in 1932. It is true the U.S. economy in 2009 has yet to see the massive reversals suffered during the Great Depression, but the root causes of each period - easy monetary policy and an over-reliance on debt - are the same.

RPT-FEATURE-Politicians also to blame for crisis, say bankers

"For the politicians on both sides of the Atlantic to say it's 100 percent the fault of the bankers is a bit disingenuous," said Scott Moeller, director of mergers and acquisitions research at Cass Business School in London.

General Growth Files Biggest U.S. Property Bankruptcy

April 16 (Bloomberg) -- General Growth Properties Inc. filed the biggest real estate bankruptcy in U.S. history after amassing $27 billion in debt during an acquisition spree that turned it into the second-largest shopping mall owner.

The owner of Boston's Faneuil Hall and the South Street Seaport in New York City ended a seven-month effort today to refinance its debt. The company listed $29.5 billion in assets and debts of about $27.3 billion in the Chapter 11 filing. General Growth will continue operating its more than 200 properties.

Stage 3 Tsunami Building up Again. SB 1137 Delay and Toxic Mortgages

Bottom line, many folks thinking this is the bottom are getting lured into the shark tank once again. They fail to look at the data. Yet they will quickly find out how dangerous it is to play in the California casino.

A Good -- er, Bad -- Connection

Yet in a recent Associated Press report, "NYC Mayor: No Link Between Violent Crime, Economy," New York City Mayor Michael Bloomberg said he didn't "believe a bad economy leads to more violent crime." [italics mine]

Notice his use of the word "violent."

To me, that's a good example of the games that politicians play. Instead of speaking about bad behavior in general, which is what most people would probably assume the discussion is -- or should be -- about, he shifts the focus in a way that appears to undermine the original hypothesis.

In truth, as the following Wall Street Journal report, "The Snap Judgment on Crime and Unemployment," indicates, the two go hand-in-hand.

Tarp-o-Meter, Keeping track of who's paying back

Ever drive by your local church or United Way office and see one of those huge motivational thermometers, showing just how far the community has to go before it meets its big goal? At TBM, that's kind of how we feel about the Troubled Assets Relief Program, or TARP. With all those hundreds of billions of dollars doled out to the poor, deserving banking sector, we, along with patriotic leaders like Goldman Sachs, would like to see every penny restored to the taxpayer, and soon.

The End of Final-Salary Pensions?

The funding deficit of New Jersey's public pension system climbed to $34.4 billion as of June 30, from $28.4 billion in mid-2007.

The pensions were 72.6 percent funded as of June 30. That compares to a funded ratio in June 2007 of 76 percent, according to state Treasury Department officials.

New Jersey's largest pension fund, the Public Employees' Retirement System, had an
unfunded liability of $10.82 billion as of June 30, up from $9.07 billion as of mid-2007. That combines state and local systems. The state PERS had a funded ratio of 65.6 percent, compared with 68.8 percent in June 2007.

The state has less money than it owes for anticipated pension obligations because of
investment losses earlier this decade, a lowering of the retirement eligibility age and a failure by past governors to make annual contributions. The value of the pension system's assets dropped to $56.3 billion as of February, from more than $82 billion as of June 2007, after losses on investments.

Governor Jon Corzine, a first-term Democrat seeking re- election in November, has tried to slow the deficit's growth by making regular pension payments. His administration has contributed about $3 billion into the system since he took office, compared with $3.2 billion contributed in the previous 14 years, according to the treasurer's office.

Pension Reform

Central Banker Fun & Games...

In the never ending game called The Great American Rip-off, JPMorgan and CEO Jamie Dimon take the prize. Well, maybe a tie with Goldman Sucks, but it's close. The latest ploy, the "Stress-Test," is like a carrot hanging out in time at the end of a long stick. Oh boy, more details and a timeline. That must mean I should buy stocks and the debts of the banks, right?

Who, exactly, is fooled by this game? Not me. The banks themselves are as unhealthy as ever, if not more so. They are hiding trillions of dollars of debt that will never be serviced in addition to trillions more in all types of derivatives. The stress test and the conditions with it are meaningless if the testers agree to overlook the leverage created by the debt and derivatives. Thus, it is a show to attempt to convince unwitting people that everything is okay. Everyone involved simply pretends and looks the other way.

Why would they do that? Because this is where their money to get elected comes from, that's why.

Swiss citizens think a large Swiss bank will fail

Over 50% of respondents in Geneva surveyed by the HEG School of Management believe that the bankruptcy of a large institution is likely.

The Swiss political world is clearly convinced that it will never let one of the major banks in the country go bankrupt. Despite the rescue of UBS by the Swiss Confederation and the Swiss National Bank (SNB), 53% of the approximately 550 people surveyed by the Haute Ecole de Gestion (HEG) in Geneva in the first quarter 2009 estimate it "likely" that a major bank will declare bankruptcy. This proportion was only 37% last June.

Clearly either the citizens have it wrong or Switzerland is in big trouble. Along those lines, I have another poll for you (click through to the site to vote): Will Citigroup eventually escape this crisis without a drastic reduction in size?

14 Comments

gregroberts's picture
gregroberts
Status: Diamond Member (Offline)
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Posts: 1024
Re: Daily Digest - Apr 17

Cheerful Article

http://www.counterthink.com/025688.html

maveri's picture
maveri
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Posts: 159
Re: Daily Digest - Apr 17

oh boy - I've got my gullable hat firmly on.

That video of the money recall got me going initially - then I stopped and thought about it for a second.

It's not April 1st again is it? because I sure got taken for a while there.

:-)

cannotaffordit's picture
cannotaffordit
Status: Gold Member (Offline)
Joined: Jun 12 2008
Posts: 273
Re: Daily Digest - Apr 17

Apparently the commercial real estate fall is underway.  Second largest mall owner in the nation now in bankruptcy:       

http://www.bellinghamherald.com/255/story/874203.html 

joemanc's picture
joemanc
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Posts: 834
Re: Daily Digest - Apr 17

Finally, some good news, Obama pushes for high-speed rail:

Quote:
The United States will seek to develop high-speed rail nationally, President Barack Obama
said on Thursday in emphasizing a broader commitment to U.S.
infrastructure investment and a transportation alternative ignored or
dismissed by previous administrations but long embraced by Asia and
Europe.

http://www.reuters.com/article/domesticNews/idUSTRE53F4DJ20090416

As someone who takes the train everyday, I'm very appreciative of efforts to build more rails and not more roads.

Davos's picture
Davos
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Posts: 3620
Re: Daily Digest - Apr 17

Hello JoeManC:

That is awesome news. The more roads they work on the more oil demand will go up, which will only simmer the economy. Now if they'd just take the rest and put it in alternate energy (solar, wind, geothermal etc.) we'd be somewhat better off.

The one thing I really like about rail is that it will help people stay off the roads.

Take care

gregoro's picture
gregoro
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Posts: 15
Re: Daily Digest - Apr 17

Do you think they got together and decided, "OK guys, we can only have 2 banks fail each week"?? And both costing 42 million?? They need a new script. Or maybe just new $cript.

#24 American Sterling Bank

#25 Great Basin

http://www.fdic.gov/bank/individual/failed/banklist.html

FireJack's picture
FireJack
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Posts: 156
Re: Daily Digest - Apr 17

Here is a good article from Nathan's Economic Edge: Getting to the Heart of the matter

"Nevertheless, on May 4, our leaders will — with great fanfare, I am
sure — release the results of this jury-rigged stress test. And you can
be assured that it will likely say that, given these mindlessly
optimistic criteria, many of our 19 largest banks are “safe.”

These phony stress tests might be laughable if only the truth behind them wasn’t so terrifying:

Our
own government is clearly cooking the books— using these false criteria
to deceive you; hoping you’ll trust banks that are clearly hanging by a
thread.

Worse — they’re so busy concocting
this smoke-and-mirrors stress test that nobody’s asking what will
happen... how will we cope... how will families survive when...

>> The still-accelerating surge in home mortgage defaults hammers banks in the weeks ahead...

>>
The new explosion in the number of defaults on jumbo loans made to
prime borrowers hits the headlines as lay-offs continue to intensify,
and when...

>> Large chunks of the entire commercial real
estate sector go the way of GGP — the nation’s second largest shopping
mall operator that declared bankruptcy yesterday.

Nobody in Washington seems to have the time to ask what will happen if and when...

Our cities are unable to provide police, fire and other essential emergency services when the credit markets shut down...

Our hospitals are forced to close their doors due to disruptions in insurance payments...

Our supermarket shelves are emptied because trucking companies can’t get short-term loans to stay in business...

Our utilities
— the companies that deliver crucial electricity, gas and water to our
homes — are crippled as the crisis kills the revenues they count on
from corporations, and when ...

Our soaring deficits drive interest rates sky-high and gut the dollar, driving our cost of living through the roof."

Its starting to look like things might happen really fast and it could start anytime now. They can hide the numbers but the can't hide the effects.

cwixom's picture
cwixom
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Posts: 44
Re: Daily Digest - Apr 17

High speed rail is great stuff.  I've taken it in Europe and it seems to work pretty well in Japan too.  There are a few corridors in the US where it seems to work as well.

I love to walk every day and my path takes me past a rail road where AmTrak goes by a few times a day.  Even at the 60 or 70 mph it travels I can see the half dozen people who are riding it.  No one wants to address how, other than taxing other modes of transportation to death and pushing people to the government run very inefficient rails, that they are going to get ridership.  There is a reason people aren't on those trains.

Unless we first get the alternative electrical power system up and going, almost every electric powered train is really a coal powered train.  Same goes for the so called zero emissions car.  Follow the energy to the source before you call something clean.

Let's replace our coal powered plants with wind power here in the
US.  What does that take?  To properly space them you'll need about 1367 square miles of space.  Based on the average wind turbine output you will need to install just
over 24,000 of these nearly 300 foot diameter turbines.  Let's say you
can produce and put up 20 of them a day.  Working 5 days a week with
vacation and holiday coverage by other workers you will need 4.6 years to get them all in place.  One other small
requirement: the wind will need to blow constantly at about 10 to
15mph, 24/7/365 to make this small installation capable of replacing
the coal plants. The only place you'll get that much wind is in the Washington DC area when congress is in session. 
In reality you will probably need two to three times this many turbines
and space.  I'm not suggesting we shouldn't be going after this, we
just need to understand the scope of the project and the realities.

Let's
replace our coal powered plants with solar here in the US.  We will
need about 417 million 200 watt panels to replace the 2,016,456
megawatt hours produced by coal.  Each panel is 12.64 sq ft and you should
allow an additional 20% of that space for access or about 15.2 sq ft
per panel.  You'll need 227 sq miles of space if you can get
24/7/365 sunshine but that's unlikely (especially at night) so let's use an optimistic 30%
full power factor for each panel.  Now we need 1.4 billion panels and 757 square miles of nothing but solar panels.   Let's be ambitious and produce and install 100,000
panels a day (that is roughly 64 full tractor trailers showing up on
site per day.  At that rate of production and
installation we will only require a bit over 53 years to install our
system.  Maybe we should aim for installing 500,000 panels a day so
we can get it done in just over a decade. Current cost of a 200 watt panel is about $1,000 so we are looking at well over a trillion dollars just for panels.

These are massive projects and the devil is always in the logistics.

We
really haven't addressed the power storage issues required here because
neither wind or solar is on demand power and so it must be stored. 
That just adds to the scope of the project.  We don't want to talk about all those nasty batteries
anyway.  We also won't address the impact to our climate system of
taking that much power out of our heat transfer and balancing systems,
AKA the weather.  At least for now, our power extraction from that
system will probably only have a small effect on the environment and
climate but nothing is impact free.

(numbers updated 4/19 due to my misread of the coal power production number on the first round)

terryppp's picture
terryppp
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Posts: 2
Re: Daily Digest - Apr 17

Been reading this excellent blog for a while.

Being a Brit In SE Asia I am seeing the power of domestic China ..but what I just don’t get is why the US markets are going thro the roof again; massive amounts of cash are flowing back into markets and even debt being bought again?
IPO coming back into demand, Car sales & property in Europe/China are growing etc etc, even the £GBP is gaining ground again even tho experts said Quantative easing would destroy the £.

Are the doom sayers really wrong about this, as it is looking more like a boom with some re-balancing later equalling certain profits?

Are we really just being suckered into investing to be ripped off ?

Massive followers of Gold/Silver but the thousand $ still to be really broken thro…but many saying buy gold, if so many buying gold then why no real movement

It truly is becoming confusing with so many contradictory statements.

Any help to get my head around this would be wonderful

fujisan's picture
fujisan
Status: Gold Member (Offline)
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Posts: 296
Re: Daily Digest - Apr 17

FT.com / Companies / Financials - CDS blamed for role in bankruptcy filings

Quote:

 CDS blamed for role in bankruptcy filings

By Henny Sender in New York

Published: April 17 2009 00:57 | Last updated: April 17 2009 00:57

Credit default swaps, the derivatives instruments that have figured prominently in the global financial crisis, are now being blamed for playing a role in two bankruptcy filings this week.

Bankers and lawyers involved in restructuring efforts say they are concerned some lenders to troubled companies, such as newsprint producer AbitibiBowater and mall owner General Growth Properties, stand to benefit from a default because they also hold default swaps, which entitle them to payments in such events.

“We have seen CDS becoming a significant factor” when negotiations on out-of-court restructurings fail, said Alan Kornberg, the partner in charge of the bankruptcy practice at Paul, Weiss, Rifkind, Wharton & Rice, speaking generally. “We used to talk about the practice theoretically but now we see cases where it is hard to get lenders to agree to tender or to compromise and then you find out that these holdouts had significant CDS protection.” 

BTW it has been estimated they're about $1 trillion CDS on GM...

cwixom's picture
cwixom
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Posts: 44
Re: Daily Digest - Apr 17

Terryppp,

No crash goes straight down.  Economies affect the stock markets but they are not the same and often move counter to the others direction.  There is a concerted effort to suppress bad news and spin anything to the positive right now and to rebuild the house of cards.  It will work for a while just like adding a couple of supports will keep a house infested with termites from falling down... for a while.  However, we have done little or nothing to exterminate the termites.  In fact we seem to be adding carpenter ants to the mix.  This is a bear market rally and unless you are good a spotting reversals and timing the market it can be a dangerous place to play.  You can play it for what it is but remember what it is.  I once heard that it always takes longer than expected for a system to really come apart, but once it does start to come apart in ernest, it happens much quicker than anyone expected. 

terryppp's picture
terryppp
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Posts: 2
Re: Daily Digest - Apr 17

Many thanks for the reply, I think I’m like many people at the moment & just totally overwhelmed by all the spin; it’s getting difficult to know which way is up at the moment LOL , soon the so called positive experts will be telling us that a decline is actually an upward trend

But why is gold not flying thro the $1,000 with so little in World stock available? And with all those people supposedly buying all they can.

An acquaintance of mine has a very large scrap & bullion gold buying business in the UK, apparently he can’t keep up with people selling scrap & old gold jewellery items …he too says $2000 is not far away? .
I guess when it makes a move it could fly

plantguy90's picture
plantguy90
Status: Gold Member (Offline)
Joined: Jan 27 2009
Posts: 271
Re: Daily Digest - Apr 17

Do we really need to watch that first posting about Treasury recall of the Dollar?  Humor/Satire should be labelled as such,  I really wish that stuff gets posted at the bottom of the section separately.

The Daily Digest  is a location where I try to grab relevant articles, I dont have time for that junk, I'm sure there's a lot of it floating around the web.  Just my 2cents.

Davos's picture
Davos
Status: Diamond Member (Offline)
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Posts: 3620
Re: Daily Digest - Apr 17

Hello PlantGuy:

That is a valid merit. Usually I do write humor - my apologies for not doing so, I totally agree about time.

As for the placement, I am going to leave it at the top and when I went back to add humor to the title I now recall why it is at the top and why I didn't write humor: It is why we are in the mess we are and not getting out. Geithner, Summers, et al are morons who have miss diagnosed the problem, this spoof emphasizes that. IMHO we are taking all our money, and our kids money and the value of everything we have (assetts) and putting them in a bag and mailing them off to the govt..

TerryPPP: I agree with Cwixom and the markets not going straight down. I also like how Soros puts it, "The markets are always wrong."

Take care

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