Daily Digest

Daily Digest - August 8

Saturday, August 8, 2009, 10:55 AM
  •  Misdisinformation
  • Hunger hits Detroit's middle class (H/T Yashash)
  • Peter Schiff on Health Care & Don't Put Words In My Mouth, (Video, H/T Spilldenmark)
  • Max Keiser - On Criminal Banking Syndicates, Moral Hazard, (Video on page)
  • Jeffrey Sachs, Columbia University, Crisis, Economic and Environmental and others (FORATV Video)
  • From Calculated Risk, Google Maps does foreclosures
  • TrimTabs Unemployment (Video on page)
  • Bankrupt: Federal Reserve Balance Sheet Update: Week Of August 5
  • Drowning
  • The Octavia Solution (H/T DavidC, Video on page, Humor)

Economy

Misdisinformation

The main reason why central banks are generally not allowed to buy government debt in the primary market is that the central bank is supposed to buy assets at market prices (to protect its ability to re-sell them when it chooses to tighten monetary policy without depleting its capital and therefore its independence from government). Although the Fed does buy treasuries at auction, it does so only to roll over its existing holdings. So when the Fed buys a large proportion of a new treasury issue from the primary dealers very soon after the auction, it raises the question of how meaningful the auction process actually was in determining a fair market price for the bonds. And, as Chris Martenson notes, the apparently successful sale of a larger volume of treasuries to the private sector gives the impression that demand remains robust despite the massive increase in supply.

Hunger hits Detroit's middle class (H/T Yashash)

Food has long been an issue in this city without a major supermarket.

Peter Schiff on Health Care & Don't Put Words In My Mouth! (Video, H/T)

Max Keiser - On Criminal Banking Syndicates, Moral Hazard, (Video on page)

Jeffrey Sachs, Columbia University, Crisis, Economic and Environmental and others (FORATV Video)

TrimTabs Unemployment (Video on page)

Bankrupt: Federal Reserve Balance Sheet Update: Week Of August 5

Foreign holdings of USTs and Agencies increased by $23.5 billion monthly to $2,810 billion from $2,787 billion in the prior month. This is now less than 20% of the comparable increase in Securities Held Outright by the Federal Reserve, implying foreign purchasers are starting to fall far behind in their purchases of US securities relative to the Fed's monetization rate.

Drowning

The Octavia Solution (H/T DavidC, Video on page, Humor)

14 Comments

LogansRun's picture
LogansRun
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Re: Daily Digest - August 8

I've never watched "the Ed Show".  Is this how this guy acts with all of his guests?  If so, what the heck is the purpose of going on if he's more interested in listening to his own voice than listening to his guests.....what a joke.

Davos's picture
Davos
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Re: Daily Digest - August 8

I've never watched it either, yet one more reason I'm thankful I don't have a cable, dish or satellite TV bill. Sad, because I think Ron Paul, Alan Grayson and Peter would be at least 3 lawmakers that understand the problem at large - money.

Take care

that1guy's picture
that1guy
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Posts: 333
Re: Daily Digest - August 8

Ya, I agree, I have only seen one other interview, I dont remember with who, but I do remember that he was a complete A@!.

I don't know why anyone would agree to go on the show.....at least Schiff did his best to stick up for him self. I probably would have went off on him on TV and all....lord knows he deserves it.

girlflower's picture
girlflower
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Posts: 15
Re: Daily Digest - August 8

Two more things I want to add to Singapore's healthcare, if you don't mind, so as to give a clearer picture:

(1) At the govt hospital level, there are three classes of wards.. and one can go to any based on their affordability:

(a) BASIC Subsidised (no air-con, no TV, 6 beds thus 6 patients in one room, cannot choose your MD to treat you)... cost very low... cost can be offset by the BASIC level healthcare plan you bought (may not completely offset cost - really depends on the plan you have bought...)

(b) MIDDLE (air-con, 4 beds in 1 room, has personal TV, can choose MD to treat you)... cost slightly higher... cost can be offset (maybe not totally though) by the healthcare plan you have bought...

(c) First-class (air-con, 1 bed in each room... no sharing of room)... cost expensive... foreigners go to this class... cost can be offset (maybe not totally though) by healthcare plan you have bought...

(2) Other than the healthcare plans one can buy using his/her CPF, one can also use part of his/her CPF to offset treatment costs that are approved by government. For eg, this year, the birthrate in Singapore is low and to encourage higher birthrate, the govt has approved the using of one's CPF for IVF (with certain $ limit though... and the govt further subsidized IVF treatments too, for approved cases, eg if you are under 40 years old)

I guess what I like is the all-facet healthcare plan involved: the government ensures the poorer individuals has the option of going to the subsdized ward with lesser amenities of course, yet there are also many different choices/options available for the individuals (can choose different healthcare plans... can choose the class of ward you want if you can afford & are willing to pay for it)

So, this is all I am going to say... I think this system has worked very well for Singaporeans... and I like it...

Davos's picture
Davos
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Re: Daily Digest - August 8

Hello GirlFlower:

Wow, sounds like a super plan!

I'd feel a lot better if the U.S. had modeled something like this and if there was protection against looting and placing IOU bonds in the three ring binder called a trust fund. Take care

PS Thanks for the good read! 

gregoro's picture
gregoro
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Posts: 15
Re: Daily Digest - August 8

I came across this article from July 21st (Not sure if it was posted here..was on vacation)

http://www.marketwatch.com/story/lawmakers-take-issue-with-tarp-transparency-costs?pagenumber=1

A few excerpts (Bold highlight mine):

At issue is a report put out by Neil Barofsky, the inspector general for one of the Treasury's rescue programs, the so-called Troubled Asset Relief Program, or TARP.

The report calculates that taxpayer support to the financial system is currently at $3 trillion -- while potential support could be as high as $23.7 trillion.

Responding to Barofsky's testimony, the Treasury argued that his estimates are inflated in a number of ways.

The inspector general's report estimates that a Treasury program to guarantee money market mutual funds gives taxpayers a $3.4 trillion exposure. However, the program is scheduled to expire in a few months, a prospect that could significantly reduce taxpayer exposure.

Is anyone familiar with this?  Are all money market mutual funds currently protected and when will they not be?  Thanks  Greg

Doug's picture
Doug
Status: Diamond Member (Online)
Joined: Oct 1 2008
Posts: 2764
Re: Daily Digest - August Re: Schiff interview

I just want to note that the guy who interviewed Schiff is not "Ed".  I don't know his name, but I believe I've seen him on other financial shows.

Doug

JAG's picture
JAG
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Posts: 2490
Get Long And Get Loud!

It sure does seem like all the idiots are bullish. John Herrmann in the Trim Tabs video is the poster child of the idiot bulls. Even if I truly felt bullish on the markets, I would have sell everything just because I couldn't live with myself if I was on the same side of the trade as that guy.

"GET LONG AND GET LOUD!"....Idiots

Davos's picture
Davos
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Re: Daily Digest - August 8

I'm certainly not here to give investment advice, but those were about my thoughts.

Like investing in Enron. Seeing what is actually behind the numbers and putting bull in the same sentence doesn't exactly bring to mind the 4 legged animal. It's a 'bull' market alright. I think a lot of people might wake up to a smelly reality.

pinecarr's picture
pinecarr
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Posts: 1607
Re: Daily Digest - August 8

Hi Davos!

  Thanks for the "Misdisinformation" link!  I'd seen a couple of those other stories trashing Chris's rep and recent article about the Fed purchasing 7-year Treasury Notes, apparently without having a whole lot of insight into who they were trashing, but not letting that stop them from doing so anyway.  So I was glad to see the article you linked in here, that does pull back the reigns on that a little bit.

  pinecarr

Eye's picture
Eye
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Posts: 88
Re: Daily Digest - August 8

LOL-

Thanks Davos, a much neede comedic moment at a time of disappointment and despair.

Eye

cmartenson's picture
cmartenson
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Re: The Treasury Dust-Up

Pinecarr - there were more than a few bloggers out there that conflated my own words with what Tyler Durdan said, then cast aspersions on the whole lot.  I fully stand behind what I wrote and the interpretations I drew.

In one case I posted a comment on one of those sites and much to that blogger's credit, he chose to feature my response which I think displays uncommonly good style.

Late Thursday evening I pennned a piece which responded to a post at the blog Zero Hedge which had originally been written and posted at the blog of blogger Chris Martenson.The piece by Mr Martenson discussed the most recent 7 year note auction and the subsequent Open Market Desk purchase of nearly $ 5 billion of those bonds while the ink han not yest dried on that bond.

Mr Martenson posted a response to my post in the comments section of that post. It is well written and I think that more eyes will have a chance to read his thoughts here rather than in the comments section.

Here is his response in its entirety:

Hello, Chris Martenson here.

Just wanted to say that while I applaud the interest in this subject, and I am in awe of the knowledge on display here, I believe that some of my words and intent have been taken out of context or misinterpreted.

1) My only point in raising the specific 7-year CUSIP purchase by the Fed last week was in the context of the troubled 5-year auction being followed by a miraculous 7-year auction that now appears less-than-miraculous due to that fact that the fed took 47% of the Primary Dealer take off their hands a few days later. Yes, that’s a dot-connection that seems entirely relevant to me not because it reveals a greater degree of manipulation (the $1.25 trillion MBS target seems a tad larger to me…) but because it possibly reveals that there’s rebellion brewing in the Treasury auction world. While this may be over-reaching, it could also be legitimate spoor to be read as we try and illuminate some of the path before us. I was not, repeat not, making any overt claims about the extent of monetization in my post, just that one odd coincidence concerning the 7-year auction. I do collect and have all the base data for all the auctions and I track them closely and the Fed is very much on track with what it said it was going to do so there’s not much of genuine interest there for me yet. But stepping in to assure a “good appearance” at a critical auction. I consider that quite interesting and newsworthy.

2) My comment about “A more honest and open approach…” for the Fed to pursue, as my long-time readers will attest, was not a comment about what is legally permissible by the 1913 FR Act (yes, I’ve read the whole thing) or normal operating procedure (yes, I know how the Fed & Treasury operate) but rather just another statement about another way that complexity obscures our official monetary and fiscal actions. I regularly opine that we would be better off by being more straightforward in our official reporting and actions. I honestly didn’t know that this piece, out of the thousands that I have written, would catch a bit of internet-lightening and so I wrote a quick piece with my usual audience in mind. In retrospect I wish I would have framed that sentence a bit more because it is now being bandied about as proof that I don’t know how the Fed actually operates and, therefore, the rest of the piece (and maybe more!) is bunk as well. Ah well, such is life on the intertubes.

So that’s it, I think it smells that the 7-year auction seemingly went so well the day after the 5-year fiasco and then days later we find out that the Fed bought nearly half of the total load carried by the Primary dealers.

Perhaps it’s just a quirk in the largest bond auction week in history, or perhaps it portends a dangerous shift in Treasury appetite and is a sign that the greatest bubble of them all (Treasuries) has a small tear developing at the edge. I will continue to track the edges of this fascinating story because I personally don’t want to be in the position of someday reading about it above the fold in the NYT with everybody else.

Here's a hat tip to

AcrossTheCurve

!

 
Davos's picture
Davos
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Posts: 3620
Re: Daily Digest - August 8

because I personally don’t want to be in the position of someday reading about it above the fold in the NYT with everybody else.

Hello PineCarr:

I saw that. At first glance I thought Dennis Kneale had hacked a few sites to bash bloggers on the blogs themselves.

I was, and still am: Most surprised.

Without bloggers we'd all be reading about this and everything else in the fold of the NYTs - and AFTER the fact! So bloggers slamming bloggers is, to me, akin to a 2 trillion dollar deficit - I just don't get it!

pinecarr's picture
pinecarr
Status: Diamond Member (Offline)
Joined: Apr 13 2008
Posts: 1607
Re: Daily Digest - August 8

Hi Chris, hi Davos-

  Thanks for your responses.  Yes, I guess I was a little taken aback by the attacks.  I did see, later, that you'd posted a response at those sites, Chris, and was glad to see that.  And I also thought it was classy that the one blogger respectfully acknowledged and included your response. 

  I guess I had taken for granted how those of us here know about your scientific background, and how insistent you are that analyses have a sound factual basis.  We also know that when you express beliefs and opinions, you take great care to make sure they are clearly labeled as such. So I have to admit it was somewhat startling to me to see other bloggers shoot  from the hip and treat you disrespectfully on those points, without taking the time to get to know more about the credibility of the source (you) that they were dissing first.  It was obvious they did not have the same background knowledge about you that we here have! 

  That leads me to think:  maybe these are the kind of natural "growing pains" that we can expect with you getting introduced to a much larger audience.  The other difference is that this new audience is getting introduced to you in a different way than those of us here, who were attracted to your message and the insights, and came looking for it on our own.  That said, I do think that your logical, level-headed, and civil responses to these people, on the blogs where they were discounting you, went a long way towards countering their initial reactions, and of "introducing them" to the Chris we all know and respect so much! 

-pinecarr

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