Daily Digest

Daily Digest 10/13 - The Way Forward, "Utterly Hopeless" Dollar Situation, DoD's 2010 Energy Usage

Thursday, October 13, 2011, 9:45 AM
  • The Way Forward
  • A Few Observations About Occupy Wall Street
  • Five Banks Account For 96% Of The $250 Trillion In Outstanding US Derivative Exposure; Is Morgan Stanley Sitting On An FX Derivative Time Bomb?
  • Foreign Central Banks Selling US Treasuries at Unprecendented Levels
  • Doug Noland: “The Situation Is Utterly Hopeless”
  • A Look at the DOD’s Energy Usage in 2010
  • Can the Keystone XL Pipeline Really Break America's Dependence on Middle East Oil?
  • Vietnam Hosts Renewable Energy Fair

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The Way Forward (CrismoZ)

It is not only the U.S. economy that is in peril right now. At this writing, Europe is struggling to prevent the sovereign debt problems of its peripheral Euro-zone economies from spiraling into a full-fledged banking crisis – an ominous development that would present an already weakening economy with yet another demand shock. Meanwhile, China and other large emerging economies--those best positioned to take up worsening slack in the global economy--are beginning to experience slowdowns of their own as earlier measures to contain domestic inflation and credit-creation kick in, and as weak growth in Europe and the United States dampen demand for their exports.

A Few Observations About Occupy Wall Street (Coley H.)

One side says government is the problem. The other side says corporate America is the problem. So, who’s right?

Both of them ... or more precisely, neither of them.

Five Banks Account For 96% Of The $250 Trillion In Outstanding US Derivative Exposure; Is Morgan Stanley Sitting On An FX Derivative Time Bomb? (Phil H.)

The top 4 banks: JPM with $78.1 trillion in exposure, Citi with $56 trillion, Bank of America with $53 trillion and Goldman with $48 trillion, account for 94.4% of total exposure. As historically has been the case, the bulk of consolidated exposure is in Interest Rate swaps ($204.6 trillion), followed by FX ($26.5TR), CDS ($15.2 trillion), and Equity and Commodity with $1.6 and $1.4 trillion, respectively. And that's your definition of Too Big To Fail right there: the biggest banks are not only getting bigger, but their risk exposure is now at a new all time high and up $5.3 trillion from Q1 as they have to risk ever more in the derivatives market to generate that incremental penny of return.

Foreign Central Banks Selling US Treasuries at Unprecendented Levels (Joanne)

About 6 weeks ago, something changed. FCBs [foreign central banks] not only slowed their buying of Treasuries, they stopped altogether, reversed course and actually began selling them. Three weeks ago their selling reached a level that I characterized in my weekly Treasury update for subscribers as "dumping." It was simply unprecedented. I opined that this could be the beginning of the end of the Treasury bull market, in spite of any effect that the Fed's new Operation Twist might have.

These are troubling developments, not just for their implications for the bond market, but for what they imply about the health of the backbone of the US financial system--the Fed's Primary Dealer (PD) network.

Doug Noland: “The Situation Is Utterly Hopeless” (Denny J.)

The markets are somewhat relieved to see policymakers now completely engaged. Yet I don’t foresee an increasingly enlightened marketplace really buying into any notion that policymakers are getting their arms, minds or pocketbooks around the problem. Seeming at times in lonely isolation (and I’m not referring to either their AAA debt rating or manufacturing-based economy), the Germans appreciate the unfolding “financial black hole” and monetary “slippery slope” nature of how things are progressing. Meanwhile, on a more daily and hourly basis, the market focus seems to be whether policy pronouncements are sufficient to engender another “rip your face off” short squeeze.


A Look at the DOD’s Energy Usage in 2010 (James S.)

Note that 872 trillion Btu corresponds to site delivered energy. In energy balance terminology it refers to final energy consumption. So, if you want to compare this amount with a country’s energy consumption you better use the estimated source energy, which by the way more or less corresponds to primary energy supply, and which by way is not given in the DoD’s annual energy management report.

Can the Keystone XL Pipeline Really Break America's Dependence on Middle East Oil? (James S.)

The Keystone XL pipeline is a proposed $7 billion project that would link oil sands operations in Alberta, Canada to American refineries in Texas. The 1,700-mile-long pipe would create 120,000 jobs (20,000 direct and 100,000 indirect) and transport 700,000 barrels of oil per day. The project is being spearheaded by Canadian oil company TransCanada.

Vietnam Hosts Renewable Energy Fair (James S.)

Speaking at a renewable energy fair in the Vietnamese capital Hanoi, Vietnam’s National Agency for Science and Technology Information Deputy head Le Thi Khanh Van told journalists that modern technology, government incentives and reasonable production costs will help facilitate the development of renewable energy in Vietnam.

Article suggestions for the Daily Digest can be sent to [email protected]. All suggestions are filtered by the Daily Digest team and preference is given to those that are in alignment with the message of the Crash Course and the "3 Es."


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cereal recipe

Not long ago, Chris posted about getting physically in shape.  Since that time I have been meaning to post about our home made cereal recipe.  Well, I'm finally getting around to it, but the original post has not had any recent activity, so I figured I'd just put it here where folks might see it.

This is great stuff we make once a week and keep in the frig.  Pull it out, put a bit in a bowl ... one minute in the microwave and it's ready ... hot cereal.  We like to eat it with raw milk, honey and cinnamon.

Hot Whole Grain Cereal
Recipe for two people for 9 days +/-.
    3/4 cup oats, rolled (gluten-free, or not)
    3/4 cup millet                                    For these 4 grains, others with gluten could be used, such as rye groats, wheatberries, etc.
    3/4 cup quinoa
    3/4 cup amaranthe grain
    3/4 cup buckwheat groats
    1 TBS coconut oil
    6 TBS coconut flakes (unsweetened)   
    6 TBS raisins
    2 TBS turbinado sugar
Cook with lots of water (4 cups or more) for 50 minutes, adding water to get desired consistency.  Refrigerate.
Each day we heat desired amount in the microwave oven, serve with cinnamon and honey and milk.
Hoping someone out there will enjoy this.  ... dons


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The peak oil crisis: contagion

The peak oil crisis: contagion

Original article: http://www.fcnp.com/commentary/national/10285-the-peak-oil-crisis-contagion.html
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 We've got the milch coes-n-goats,grains-n-raisins, seems the coconut is outa season 'round here. Actually, your recipe is healthy and tastie. All must learn to live simply so others may simply live.  Your posts seem warm and are appreciated..          Robie 

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Radiation from Fukushima biting all of Japan

A lot of stones are starting to get turned... Frankly, this is getting scary. Here are this week's headlines from this site http://ex-skf.blogspot.com/


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ECB Tells Belgium Not To Backstop Dexia



ECB Tells Belgium Not To Backstop Dexia Interbank Deposits Says Bailout Plan May Be Against The Euro Charter

If anyone is surprised that things in Europe will get massively surreal before this is all over, we suggest finding another thread.

In the meantime, for the latest example of the utter chaos and "make it up as we go along" we go to the ECB which has just, in very polite terms, warned Belgium that its bailout-cum-nationalization plan may not be quite feasible.
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S&P Downgrades BNP Paribas

14 Oct 2011

PARIS:  France's largest bank by market value, BNP Paribas SA, received a credit-rating downgrade Friday, the latest sign that the Greek sovereign-debt crisis is gradually contaminating the heart of Europe's financial industry.

Standard & Poor's Rating Services cut the bank's long-term debt rating by one notch to double-A-minus from double-A, citing the lender's exposure to Greece and other highly indebted Southern European countries and more difficult funding market conditions.

BNP Paribas's capacity to raise funds has become "more vulnerable to adverse condition than had previously anticipated," S&P said. The rating agency also cautioned that it expects lower earnings for BNP Paribas and other French banks because of the difficult environment.

"BNP Paribas remains one of the best-rated banks in the world," a spokeswoman for the bank said late Friday.

S&P also lowered the stand-alone credit profiles of four other French banks: Credit Agricole SA and Societe Generale SA as well as unlisted Groupe BPCE and Banque Federative du Credit Mutuel. For these four banks, however, S&P kept its closely watched long-term debt ratings unchanged at A-plus.

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