Daily Digest

Daily Digest 10/25 - The Subprime Debacle, French Strikes Continue, Diminishing Returns On Energy

Monday, October 25, 2010, 9:46 AM
  • Mauldin: The Subprime Debacle: Act 2, Part 2
  • Amid Strikes, French Leader Vows Order
  • The Real Danger From The Foreclosure Crisis
  • McDonald's Intends to Raise Prices
  • Unemployment Benefits: The 99ers
  • The Foreclosure Pipeline Slows
  • Engine Trouble
  • Ministers Plan Huge Sell-off of Britain's Forests

Follow our steps to prepare for a world after peak oil, such as how to store & filter water

Economy

Mauldin: The Subprime Debacle: Act 2, Part 2 (JRB)

Final rant. If you were part of a group that knowingly created or sold flawed and fraudulent mortgage-backed securities to pensions and insurance companies and took home tens of millions in bonuses, up and down the management chain, maybe you should consider moving yourself and your money to a country that does not honor US extradition, because my guess is that, as all this comes out, you may have to hire some very expensive lawyers and get measured for pinstripes.

Amid Strikes, French Leader Vows Order (jdargis)

The gas stations ran out of supplies because of transport problems; stocks remained adequate. Furious drivers waited in lines for expensive fuel and worried openly about their plans for the pending two-week school break. Numerous flights were canceled, railway travel was disrupted and garbage went uncollected in some major cities.

The Real Danger From The Foreclosure Crisis (Fred H.)

The foreclosure scandal will likely depress the real estate market, as clear title for millions of homeowners comes into question.

This is obviously a huge problem.

McDonald's Intends to Raise Prices (Chris M.)

U.S. restaurant chain McDonald's said it was preparing to raise prices to cover higher costs of commodities.

McDonald's has not raised prices since late 1990, Media Post News reported Friday.

The firm said it expected commodity costs to rise up to 3 percent in 2011. The price hikes are expected in Europe and the United States, but the firm did not release details.

Unemployment Benefits: The 99ers (Chris M.)

60 Minutes: Even after an extension of unemployment benefits to 99 weeks, many of those about to go off the program are in a quandary. Scott Pelley talks to some of them in Silicon Valley.

US Foreclosure Pipeline Slows (Chris M.)

The foreclosure process in the US is slowing, enabling delinquent borrowers to stay in their homes for months after they stop making mortgage payments, according to one of the largest lenders.

Freddie Mac, one of the two government-owned entities that finance about half all US mortgages, says that homes are taking as long as eight months to work their way through its foreclosure pipeline, two months longer than was typical before the housing crisis began.

The delay is the result of more borrowers staying in their homes for months after foreclosure proceedings have begun, requiring Freddie Mac to evict them before it can put those homes back on the market.

Energy

Engine Trouble (jdargis)

In a recent article for the Cato Institute, Matt Ridley, a former journalist at The Economist, argues for the importance of coal in allowing the industrial revolution to be sustained. “Fossil fuels were the only power source that did not show diminishing returns,” he writes. “In sharp contrast to wood, water and wind, the more you mined them the cheaper they became.” A further advantage was that coal supplies were so large. By 1830, Mr Ridley estimates, Britain was consuming coal with an annual energy output equivalent to 15m acres of forest, about three times the size of Wales.

Environment

Ministers plan huge sell-off of Britain's forests

Ministers are planning a massive sell-off of Britain's Government-owned forests as they seek to save billions of pounds to help cut the deficit, The Sunday Telegraph has learnt.

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."

7 Comments

saxplayer00o1's picture
saxplayer00o1
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Re: Daily Digest 10/25 - The Subprime Debacle, French ...

"U.S. Treasury Secretary Timothy Geithner on Saturday pressed emerging economies to allow “gradual appreciation” in their currencies following the Group of 20’s agreement to refrain from competitive devaluation."

..................1A) South Africa Stocks, Bonds, Rand Rally as Dollar Slumps on G-20, Fed Bets

“The assumption is that the U.S. is going to continue printing money, which is keeping the dollar weak, so people are still looking for yield elsewhere.”

.....................1B) Fed Asset Buying May Reach $2 Trillion, Goldman's Hatzius Says

"WASHINGTON (MarketWatch) — The hugely popular mortgage-interest tax deduction could be targeted by a bipartisan commission charged with finding ways to chop the deficit, according to a report published Monday.

The Wall Street Journal reported that the mortgage-interest deduction, child tax credits and payment for health insurance with pretax dollars all could be put in jeopardy by the deficit commission, which is to issue recommendations on balancing the budget by 2015."

"Ingrid Robinson stopped paying her mortgage more than two years ago, and her bank has owned her San Anselmo house since July 2009. But with the backing of a Marin County judge who ruled that her lender followed improper foreclosure procedures, Robinson is not planning to leave."

 (Scroll down...the video is posted at Nathan's Economic Edge)

"State, county and city agencies, beset by plunging revenues, make their biggest payroll cuts in decades, and more layoffs are ahead, analysts forecast."

"Weighed down by a struggling economy, government agencies in California shed 37,300 workers last month — more jobs than were lost in the private sector — as cities and counties made their biggest payroll cutbacks since at least 1990."

"Clear Capital issued a market alert Friday after identifying what the company called a “dramatic change” in U.S. home prices.

The valuation firm’s index is showing a 5.9 percent two-month drop in home prices through September and October, representing a magnitude and speed of decline not seen since March 2009, the height of the housing downturn."

“Dr.Doom ” says U.S. states are in for it.

"Municipal debt is up to 20% of GDP, he told me exclusively. And unfunded liabilities of state and local pension funds? Those are as high as $3 trillion — another 20% of GDP. So, basically, get ready — especially in Q1 when states can no longer use federal money to plug their budget holes.

“The issue is whether the Federal government will bail out state and local governments with a federal guarantee of their debt,” Roubini told me, likening the scenario to the money received by Greece and to be generalized to other Eurozone members in trouble via the new European "stabilization fund."

Some might call it the trillion dollar question: what will the government do if the states fail? This week I address that in my special series "States of Pain."

The possibility of states failing, is no longer a scary hypothetical. Roubini said that many US states are semi-insolvent. According to a report by the Center on Budget and Policy Priorities, forty-eight states addressed shortfalls in their fiscal year 2010 budgets, totaling $191 billion or 29% of state budgets — the largest gaps on record."

  • Other news, headlines and opinion:

BOJ Should Consider Buying Foreign Assets To Ease Yen's Gain, Kaieda Says

Pound Set for Pain as Cuts Push King to Print Money and Pound Set for Pain as Cameron Cuts Send King to Printing Press

French Strike Costing Up to EU400 Million a Day, Lagarde Says and Militant trade unionists reclaim France's biggest oil refinery

National debt in 2009 more than 50pc of GDP, says government audit (Malaysia)

San Jose's redevelopment agency's woes worsen

Effective default by Greece is inevitable, says Nouriel Roubini

Study: Marin pensions $2 billion in debt

Mass defaults call into question notion that we're getting thriftier

To get out of the woods, Britain may sell forests

Puerto Rico slaps new tax on offshore business

Vacancies at some area malls double since 2006 (Dayton)

Candidates lay out plans for solving $1B budget gap (Maine)

Companies that received bailout money giving generously to candidates

Recession's reverberations keep pummeling the young

Niners' free rides coming to an end (SF)

State money won't dash Pasadena plans to close schools (California)

Harrisburg seeks $700000 loans to make payroll

Legislature likely to cut deep to meet possible $25 billion budget gap (Texas...thousands of layoffs?)

Rare-Earth Demand Will Grow 9% a Year on Magnets, Batteries, Producer Says

Bubble fear as rare earth prices soar

Treasury Gets 36% Return Buying Toxic Mortgages

Fannie and Freddie Trump Homebuyer Tax Credit

Nation's Biggest Banks Each Hold over $20B in Foreclosures: Report

USDA says food inflation 'to accelerate" into 2011

Strike paralyses Greek rail network

Dollar at Risk of Becoming 'Toxic Waste': Charts (CNBC)

Italian Government's Deficit Cuts Are `Not Ambitious Enough,' Nomura Says

City Watchdog Unveils Sweeping Budget Plan (Chicago..."more than $1 billion budget hole when unfunded city pension liabilities are thrown into the mix")

1000 former army personnel protest in Romania against austerity measures

For many over 55, debt defers dreams

dbworld's picture
dbworld
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Re: Daily Digest 10/25 - The Subprime Debacle, French ...

U.S. restaurant chain McDonald's said it was preparing to raise prices to cover higher costs of commodities. .... expected commodity costs to rise up to 3 percent in 2011. The price hikes are expected in Europe and the United States ...

Can't remember when I read it, but I once read an article that stated that the US would import inflation from China.  Is McDonald's price hikes in US and Europe an example of this? (and not a result of QE2 speculation)

saxplayer00o1's picture
saxplayer00o1
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Re: Daily Digest 10/25 - The Subprime Debacle, French ...

"Oct 25 (Reuters) - Defaults by U.S. commercial mortgage debt that is bundled in securitizations are likely to climb at least until 2011, while losses from the deals are approaching an all-time high, Standard & Poor's said on Monday.

Issuers defaulted on 1200 loans in the first half of this year and if the current pace continues defaults could eclipse 2009's total of 2,138 defaults, S&P said.

S&P conducted a study of more than 69,000 commercial mortgage loans that were originated for securitizations between 1993 and 2008 and found that more than half of the defaults occurred in the 18 months between January 2009 and June 2010.

Meanwhile losses from the defaulted deals have been steadily rising since 2008 and are approaching a record high, S&P said."

"NEW YORK (MarketWatch) -- The Treasury Department sold $10 billion in 5-year Treasury Inflation Protected Securities on Monday at a yield of negative 0.55%, the first time the yield on the maturity has come in below zero. The negative real yield for the coupon indicates investors expect enough inflation to make the protection worthwhile."

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rjs
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Posts: 445
Re: Daily Digest 10/25 - The Subprime Debacle, French ...
dbworld wrote:

U.S. restaurant chain McDonald's said it was preparing to raise prices to cover higher costs of commodities. .... expected commodity costs to rise up to 3 percent in 2011. The price hikes are expected in Europe and the United States ...

Can't remember when I read it, but I once read an article that stated that the US would import inflation from China.  Is McDonald's price hikes in US and Europe an example of this? (and not a result of QE2 speculation)

prices of wheat started rising when the heatwave & fires in russia burned a quarter their crop and flooding of most of the producing areas of pakistan wiped out much of theirs...other grains followed suit, as did corn and soybeans...and you can bet the commitment for 15% ethanol didnt help corn prices, either...

plato1965's picture
plato1965
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Posts: 615
Re: Daily Digest 10/25 - The Subprime Debacle, French ...

 

 As someone totally comitted to 4.5% ethanol .... I hope barley stays reasonable... *grin*

  In nomine Hordeum vulgare et Humulus lupulus, et Saccharomyces Cerivisae... amen... *cheers* !

rjs's picture
rjs
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Posts: 445
Re: Daily Digest 10/25 - The Subprime Debacle, French ...
US firm to ship Alaskan water to Middle East via Mumbai  - In a commercial scheme that attempts to rectify some of the inequalities inflicted by the beginnings of climate change, water from a lake in Alaska will be sent to a new, yet-to-be-built water hub in Mumbai and then exported to arid cities in the Middle East. A San Antonio, Texas, based company has announced plans to export 12 billion gallons of water per year from the Blue Lake Reservoir in Sitka, Alaska, to a new, yet-to-be-built water hub on the west coast of India. There's trillions of litres of water in a three mile-long reservoir near a town called Sitka in the archipelago off the western coast of Canada.It's named Blue Lake, and fewer than 9,000 people live nearby, meaning that there's very little local pressure on the water supply. The water in the lake is pure enough to drink without any treatment, and a local bottling business has for some time siphoned small quantities out for thirsty people around North America.
Doug's picture
Doug
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Posts: 3125
Re: Daily Digest 10/25 - The Subprime Debacle, French ...
rjs wrote:
US firm to ship Alaskan water to Middle East via Mumbai  - In a commercial scheme that attempts to rectify some of the inequalities inflicted by the beginnings of climate change, water from a lake in Alaska will be sent to a new, yet-to-be-built water hub in Mumbai and then exported to arid cities in the Middle East. A San Antonio, Texas, based company has announced plans to export 12 billion gallons of water per year from the Blue Lake Reservoir in Sitka, Alaska, to a new, yet-to-be-built water hub on the west coast of India. There's trillions of litres of water in a three mile-long reservoir near a town called Sitka in the archipelago off the western coast of Canada.It's named Blue Lake, and fewer than 9,000 people live nearby, meaning that there's very little local pressure on the water supply. The water in the lake is pure enough to drink without any treatment, and a local bottling business has for some time siphoned small quantities out for thirsty people around North America.

Sounds like a recipe for introducing invasive species to India.

Doug

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