Daily Digest

Daily Digest 11/11 - Swedish Debt Tensions, Ambac Bankruptcy, Golden Age for Natural Gas

Thursday, November 11, 2010, 11:00 AM
  • Spinning Straw Trades Into Gold – Part 2
  • US Banks See Demand for Business Loans Drop
  • Sweden Debt Market Tensions Show ECB What Exit Brings
  • Executives Collect $2 Billion Running U.S. For-Profit Colleges
  • Bond Insurer Ambac Files For Bankruptcy
  • IEA World Energy Outlook 2010 Now Out; a Preliminary Look
  • IEA: China Will Create A 'Golden Age' For Natural Gas
  • Reverse Bubbleomics: What If OPEC Figures Out Crude Oil’s Fair Price is $150?

Our 'What Should I Do?' guide helps you cover your food, water, and warmth needs in any emergency.


Spinning Straw Trades Into Gold – Part 2 (ilene)

You can see that gold is mainly a negatively correlated trade against the dollar - it's there to protect your cash!  You stocks are not cash, your TBills are not cash, your other commodities are not cash so don't make the mistake of over-protecting yourself because gold will crash with the markets - that's something a lot of people did not realize in our last crash as people panicked into the dollar and sent commodities right off a cliff along with equities.  That's why we'll be looking at gold plays as well as hedges to protect gold plays in this article but the key is to control your allocations sensibly - there is no substitute for that.

US Banks See Demand for Business Loans Drop (johan)

The tepid demand for loans from small businesses reduces the chance of a strong rebound in growth in 2011 and suggests that even rock-bottom interest rates and easier borrowing conditions may not persuade them to invest. Last week the central bank launched a $600bn programme of asset purchases aimed at driving down long-term interest rates to encourage spending and investment and support the economic recovery. Every bank reporting a decline in small business loan demand said that its customers had cut back on their investment in plant or equipment.

Sweden Debt Market Tensions Show ECB What Exit Brings (johan)

In Sweden, the withdrawal of crisis funds made the biggest dent on covered bonds, which are backed by cash flows derived from mortgage debt. The asset class shares the top credit rating with Sweden’s government debt. The Riksbank’s liquidity program had encouraged a so-called carry trade, whereby banks had borrowed cheaply at the central bank’s rate and used the funds to purchase higher-yielding mortgage-backed assets. The Riksbank left its benchmark rate at a record-low 0.25 percent until July this year. The covered bonds were then used as collateral for new central bank loans.

Executives Collect $2 Billion Running U.S. For-Profit Colleges (denszcz)

Top executives at the 15 U.S. publicly traded for-profit colleges, led by Apollo Group Inc. and Education Management Corp., received $2 billion during the last seven years from the proceeds of selling company stock, Securities and Exchange Commission filings show. At the same time, the industry registered the worst loan-default and four-year-college dropout rates in U.S. higher education. Since 2003, nine for-profit college insiders sold more than $45 million of stock apiece. Peter Sperling, vice chairman of Apollo’s University of Phoenix, the largest for-profit college, collected $574.3 million. Education corporations, which receive as much as 90 percent of their revenue from federal financial-aid programs, are “private enterprise that’s almost entirely publicly funded,” Henry Levin, director of Columbia University’s National Center for the Study of Privatization in Education, said in a telephone interview.

Bond Insurer Ambac Files For Bankruptcy (claire)

Ambac faltered after it began chasing higher profits by expanding beyond municipal bond insurance and insuring riskier debt. That move backfired when the housing market crashed and credit markets tightened. Ambac said it was unable to raise needed capital and failed to reach an agreement with senior bondholders that would have allowed it to restructure through a prepackaged bankruptcy.

IEA World Energy Outlook 2010 Now Out; a Preliminary Look (tom)

The International Energy Agency issued its annual energy forecast today for 2010. It consists of a three volume report, plus an executive summary and a press release. In the next few weeks, we will be analyzing the report. At this point, we can only point to a few of the summary findings. One clear concern is that demand will be rising--especially from China and India. Another is that prices (in inflation-adjusted terms) will be rising. A third concern is that conventional oil production will no longer be able to rise.


IEA: China Will Create A 'Golden Age' For Natural Gas 

The outlook for natural gas consumption growth is stronger than for any other major fossil fuel, according to the IEA. This is partly the case because natural gas is the most resilient to potential climate change regulations.

Reverse Bubbleomics: What If OPEC Figures Out Crude Oil’s Fair Price is $150? (guardia)

The International Energy Agency (IEA) recently announced their 2009 projection of when oil production would peak was changed from 2030 to 2020, although in a bemusing twist they said it would never ever exceed the peak that was reached in 2006 of 70 million barrels per day. Err…just a small point there; perhaps someone can help me out here? Like I’m not very smart, but the way I read that it looked to me like they were saying that “Peak Oil” was in 2006? They also predicted $100 oil by 2015 and $200 by 2035 although they don’t say how they calculated that. But if you assume (a) that the share of GDP that will be spent on oil is constant (b) that right now the price of oil is just right (according to the theory of Parasite Economics it is) (c) broadly static production capacity over the next ten to twenty years, and (d) 5.5% global GDP growth (nominal), then you get to those numbers.

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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Re: Daily Digest 11/11 - Swedish Debt Tensions, Ambac ...

"SEOUL — Former Federal Reserve chairman Alan Greenspan says both the United States and China are pursuing a policy of weakening their currencies to the detriment of other economies.

Greenspan published his views in Thursday's Financial Times hours before the start of a G20 summit in Seoul designed to protect the global economy from lingering crisis amid a growing risk of protectionism.

"America is...pursuing a policy of currency weakening," Greenspan wrote.

"The suppression of the (Chinese yuan) and the recent weakening of the dollar are, of necessity, producing firming exchange rates in the rest of the world to, as they see it, the rest of the world's competitive disadvantage.""

.................1A) Geithner: Won't Ever Seek To Weaken Dollar For Competitive Advantage - CNBC

"SEOUL (Dow Jones)--The dollar's movement is due to safe-haven flows into the U.S., not the Federal Reserve's easing policy which the U.S. would never use for competitive advantage, Treasury Secretary Timothy Geithner said in a television interview Thursday.

The comments, made by Geithner to CNBC as leaders of the Group of 20 industrial and developing nations meet in Seoul to resolve the world's pressing economic issues, follow criticism that the U.S. was weakening its currency for economic advantage.

"The U.S. will never do that. We will never seek to weaken our currency as a tool to gain competitive advantage or to grow the economy," the Treasury secretary said. "It's not an effective strategy for any country." "


"LONDON (MarketWatch) -- Fears surrounding sovereign-debt problems on the periphery of the euro zone drove the cost of protecting the debt of Ireland, Portugal and Spain to record highs on Thursday, according to data provider Markit. The spread on five-year Portuguese credit-default swaps widened to 505 basis points from around 491 on Wednesday, topping the 500-level for the first time, Markit reported. That means it would now cost $505,000 a year to insure $10 million of Irish sovereign debt against default for five years. The five-year Irish CDS spread widened 27 basis points to 620, while Spain's spread widened to 294 basis points from 279. Greece's spread was 12 basis points wider at 890."

...................................2A) Irish Bank Default Swaps Rise to Distress as Loan Losses Lift Bailout

"(Reuters) - California faces a $25 billion deficit through the next fiscal year, its budget watchdog said on Wednesday, just weeks after leaders of the most populous U.S. state closed a $19 billion gap and days ahead of a planned sale of some $10 billion of state debt.

The state's Legislative Analyst's Office said in a report that incoming Governor Jerry Brown and lawmakers must tackle a projected deficit of $6 billion in the current fiscal year and a shortfall of $19 billion in its next fiscal year.

"Similar to our forecast of one year ago, we project annual budget problems of about $20 billion each year through 2015-16," the report added, noting that those estimates may be understated."

.........................3A) California budget shortfall twice as large as predicted

"After an uptick in revenue this fall offered a glimmer of hope that Maryland's recession-ravaged budget might be improving, new state data released Wednesday showed just the opposite: Rising Medicaid costs and a drop in federal stimulus funding have left the state with an even bigger gap to fill than lawmakers anticipated when the General Assembly adjourned in April.

Maryland's general-fund budget shortfall for the fiscal year beginning next summer has swelled by about $400 million from an estimated $1.2 billion in September to $1.6 billion. "

...............................4A) Md. faces $1.6 billion budget hole as pension costs grow

"The company that manages a former nuclear weapons complex in South Carolina announced Wednesday that it plans next year to lay off 1,400 contractors, 800 of whom were funded with federal stimulus money.

The total cuts represent more than 20 percent of the workers employed by Savannah River Nuclear Solutions at the Savannah River Site, the former weapons complex near Aiken. The 800 jobs also represent about a quarter of the site's 3,100 jobs that were either saved or created by federal stimulus cash."

"Columbia, SC (The Greenville News) --The department that runs the state's Medicaid program is facing a $228 million shortfall and says it will run out of funds to pay claims byMarch 4 un­less it is allowed to oper­ate at a deficit.

The $5.2 billion Medi­caid program now covers about 43 percent of all children in the state and about 53 percent of all births, according to the state Department of Health and Human Serv­ices. State funds make up $606 million of the budg­et.

With the recession dragging on and leading to the loss of jobs and health insurance, more than 100,000 people have been added to the pro­gram in the past three years, according to DHHS. At the same time, the budget has been cut $228 million.

"The biggest challenge is that we have more indi­viduals on the Medicaid rolls and fewer resources to pay for them," DHHS spokesman Jeff Stensland said."

"Municipal debt yields rose in most maturities yesterday, with rates on top-rated tax-exempt debt due in 20 years climbing to the highest level since July.

Twenty-year AAA general obligations jumped about 0.13 percentage point today to 3.69 percent, according to the Bloomberg Valuation index for that maturity. States and municipalities had planned to sell $11.2 billion in municipal debt this week, the most since Oct. 29, according to data compiled by Bloomberg. That means many issuers must offer greater yield to persuade investors to buy their debt. "

"(Reuters) - Ireland warned on Thursday that a surge in its borrowing costs to record highs had become "very serious" and the EU said it was ready to act should the humbled former "Celtic Tiger" require a rescue from its euro partners.

European officials said they were monitoring developments in Ireland closely, but denied for a second day running that Dublin was seeking financial aid, in an ominous echo of the rhetoric that preceded an EU/IMF bailout of Greece six months ago.

"The bond spreads are very serious and there is international concern throughout the euro zone about that," Irish Finance Minister Brian Lenihan said in Dublin."


  • Other news, headlines and opinion: 

Fed set to buy $105b in bonds

Government Begins Fiscal Year With 3rd Highest Deficit

Tighter U.S. corn supplies may mean higher food prices

Fed's QE2 programme could grow to US$1.5 trillion, say analysts

Irish Loan Losses at Least $117 Billion, Honohan Says

EU's Barroso says G20 should question Obama over Fed policy

Greek unemployment rate up to 12.2 per cent in August

New wave of Irish home loan defaults feared

ICE says will takes gold as collateral

Moody's Downgrades Much Of $1.2 Billion In Bear Stearns RMBS

First Gulf Bank delays $500 million bond issue

Copper Surges to a Record on Rising Inflation, Supply Shortfall

Delinquencies in CMBS rose to 8.39% in October

Hungary Plans to Impose New Industry Levy After Crisis Tax Expires in 2012

Half Moon Bay forced to farm out police services

Weak Revenue Hits Greece

Michigan retirement deal draws 4755 state workers

Renminbi will be world’s reserve currency (Financial Times)

Nevada Public Employee Retirement Contributions To Increase, Unfunded Liability Climbs To $10 Billion

Repossessions fall 9% thanks to foreclosure freeze

Commodities News (Bloomberg)..........Commodity Exchanges Raise Margin Requirements in Response to Price Surge

More Homeowners Underwater as Depression-Era Depreciation Nears

Grantham Says Fed Asset Purchases May Make Stocks `Dangerously Overpriced'

Insider trading

CalPERS local rate: up 55% over next three years

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Re: Daily Digest 11/11 - Swedish Debt Tensions, Ambac ...

Geinter story here too:


“We will never seek to weaken our currency as a tool to gain competitive advantage or to grow the economy.”

So what tool is QE2 then - to increase liquidity?  Fund growing deficits? Inflate assets and increase confidence to spend? 

This sounds like just a war of semantics.  Actions speak more than intentions. 

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Re: Daily Digest 11/11 - Swedish Debt Tensions, Ambac ...

No money for energy alternatives.

NoMoney, No Nukes

NEW YORK (CNNMoney.com) -- Nuclear power may be one issue both President Obama and the new Republican Congress can agree on, but unless someone is willing to pony up more money, a big new build-out of nuclear power plants remains unlikely.

"Money is just hard to come by for anything right now," said Joseph Stanislaw, an independent energy adviser at Deloitte & Touche.



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Re: Daily Digest 11/11 - Swedish Debt Tensions, Ambac ...


GE to Purchase 25,000 Electric Vehicles From GM, Rivals by 2015

By Rachel Layne - Nov 12, 2010 7:22 AM GMT+1000

General Electric Co. will buy 25,000 electric vehicles, almost half of them from General Motors Co., by 2015 in the biggest such order ever.

The purchase will account for at least half of GE’s own 30,000-car fleet and will include vehicles customers can lease from its GE Capital unit, the company said in a statement today. GM’s portion of the order is for 12,000 vehicles including the 2011 Chevrolet Volt. Financial terms weren’t disclosed.

Chief Executive Officer Jeffrey Immelt is positioning Fairfield, Connecticut-based GE to benefit from more energy- efficient technologies by producing batteries, car-charging stations and smart-grid systems. GE said it’s in a “strong position” to help 65,000 leasing customers convert to electric vehicles and sees the electric-car market adding as much as $500 million in sales in the next three years.

“Wide-scale adoption of electric vehicles will also drive clean-energy innovation, strengthen energy security and deliver economic value,” Immelt said in the statement. GE’s power-plant equipment generates one-third of the world’s electricity, and the need for vehicle-charging stations may spur demand for more power from its utility customers.

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Re: Daily Digest 11/11 - Swedish Debt Tensions, Ambac ...

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Re: Daily Digest 11/11 - Irish debt crisis 'serious stuff' for E

Irish debt crisis 'serious stuff' for Europe

By business editor Peter Ryan


Earlier this year Greece was at the epicentre of the sovereign debt crisis in Europe, now it is Ireland which is on the brink of calling for a financial rescue from the European Union.

The cost of insuring Irish debt has soared amid growing concerns that the Irish government will not be able to afford to bail out the nation's struggling banks.

The scenario raises the possibility that, without EU assistance, Ireland might default on its massive government debt.

Ireland was once known as the Celtic tiger, and its booming economy created a bubble in real estate prices.

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