Daily Digest

Daily Digest 11/25 - The 57,000 Page Tax Return, Welcome To Austerityville, TX City Faces Bone Dry Reality

Friday, November 25, 2011, 10:45 AM
  • Pictures From A Latvian Bank Run As MF Global Commingling Comes To Town
  • Eurozone Economies: Latitude
  • The 57,000 Page Tax Return
  • Welcome To Austerityville
  • Compressed Natural Gas - A Realistic Alternative to Gasoline?
  • Can Anything be Done to Avoid the Coming Clean Energy Crisis in the U.S.?
  • Trends in Chinese Petroleum Production, Consumption and Imports
  • Texas City Faces Bone Dry Reality

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Pictures From A Latvian Bank Run As MF Global Commingling Comes To Town (June C.)

If anyone is wondering why the collapse of MF Global after the discovery of its commingling and theft of client funds was the single worst thing that could happen to market confidence, then look no further than the small Baltic country of Latvia where precisely what Jon Corzine's firm did to its clients, has happened at the bank level. Businessweek reports: "Lithuanian prosecutors issued an arrest warrant for Vladimir Antonov and Raimondas Baranauskas who are former shareholders of Bankas Snoras AB. Both men are suspected of embezzlement and document forgery, the Prosecutor General said in a statement on its website today. Baranauskas is also suspected of accounting fraud and abuse of authority, it said." Kinda like Jon Corzine, if not by the actual authorities, then by everybody else. And just like in the US where the lack of confidence in the system following the MF filing, so in Latvia the people have decided to hit the ATMs first and ask questions later.

Eurozone Economies: Latitude (jdargis)

SINCE bond investors began to discriminate between the euro-zone economies, pushing yields on Spanish, Irish, Greek, Italian and Portuguese government debt soaring, much of the talk in northern Europe has been of profligate governments in the south. As these indicators show, the euro zone's problems go rather deeper than that. A large chunk of the single-currency area has a chronic competitiveness problem, with a horrible mixture of high unemployment, low productivity and low investment.

The 57,000 Page Tax Return (jdargis)

Consider the resources that GE spends to lowers its tax bill, not just the many millions spent on clever accounting and accountants and the many millions spent on lobbying but also the many inefficient ways that GE structures its businesses just to avoid paying taxes and the many millions it invests in socially wasteful projects just in order to produce privately valuable tax credits. Now add to that the allocational inefficiencies of taxing some firms at different rates than others and you have a corporate tax system which wastes a lot of resources and raises relatively little revenue. Indeed, a corporate tax system with a tax rate of zero could well be preferable as it would waste fewer resources and raise not much less revenue.

Welcome To Austerityville (jdargis)

The unemployment rate in Pontiac is pegged at 25 percent. In 2009, as GM restructured under a government bailout, it shuttered its plant in Pontiac and ceased production on the line of cars named after the city, calling it a “damaged brand.” So what happens to the people that the city lays off?


Compressed Natural Gas - A Realistic Alternative to Gasoline? (James S.)

In terms of what renewable energy technologies make the most sense, it must be understood that in the U.S., electric power generation, transportation and industry are the big three contributors of greenhouse-gas emissions with each generating 2.4, 2.0 and 1.4 billion metric tons in 2007, respectively. Of the total energy consumed in the U.S., 40% comes from petroleum products, 23% from coal and 22% from natural gas. Nuclear power (8%), biomass (3%), hydro-electric (3%) and geothermal, solar/PV and wind (1%) plays a minor but conceivable growing role. The Energy Information Administration sites use of natural gas in the U.S. economy includes industrial (35%), electric generation (29%), residential (20%), commercial (13%) and transportation (3%). Additionally, a comprehensive study released on July 4, 2008 by the American Clean Skies Foundation (ACSF) and Navigant Consulting, Inc. (NYSE:NCI) indicates the United States has 2,247 trillion cubic feet (Tcf) of natural gas reserves, which is enough to last more than 100 years.

Can Anything be Done to Avoid the Coming Clean Energy Crisis in the U.S.? (James S.)

The institutional, technological, and financial barriers facing advanced energy entrepreneurs are numerous. An early-stage finance gap known as the "Technological Valley of Death" immediately faces promising energy ventures emerging from breakthrough research and seeking risk-tolerant investors to prove their concept can succeed beyond the lab. This challenge has only grown in recent years, as venture capital investments begin to shift towards later-stage, lower-risk ventures. As this gap in private finance grows, the targeted public investments of the Advanced Research Projects Agency-Energy (ARPA-E) and the Small Business Innovation Research (SBIR) program become increasingly important. Expanded federal support for state and regional clean energy cluster development could further address this Technological Valley of Death.

Trends in Chinese Petroleum Production, Consumption and Imports (Crash_Watcher)

In this post, I summarize my export land model analysis of China using the published petroleum production and consumption data from the BP Statistical Review for 2011.

China’s enormous economic expansion over the past 15 to 20 years has been fueled by a large increase in petroleum consumption, making China increasingly dependent upon the global export pool. This trend is likely to increase in the future as China becomes more and more dependent on petroleum imports until the global export pool declines.


Texas City Faces Bone Dry Reality (Jeff B.)

Total rainfall in Groesbeck this year is off by more than one-third, and there were 90 days of temperatures above 100 degrees this past summer. The combination dried up the city's water supplies.

The Navasota River is now flowing at 75 percent below normal. At Fort Parker Lake, 730 million gallons of water have now evaporated.

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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Italy Borrowing Costs Almost Double as Euro Tumbles

(Reposting from earlier)


"Italy's Treasury was forced to pay the highest yields on record for the country, since the launch of the euro, to lure investors to its latest sale of short-term debt Friday, but it managed to garner enough demand to sell the amount targeted despite investors' growing distrust of euro-zone sovereign debt.
Friday's sale was seen as warm-up before next week's tougher government bond auctions.
Italy sold EUR8 billion of six-month Treasury bills at an average yield of 6.504%, up from 3.535% at the previous auction Oct. 26. This auction was supported by EUR8.8 billion redeeming Treasury bills. The offer received EUR11.735 billion in bids.
Italy also sold the EUR2 billion it had planned to shift in September 2013-dated CTZ, or zero-coupon bonds, paying a yield of 7.814% to investors, up from 4.628% previously. The offer attracted EUR3.189 billion in bids. "

....................1A) Italy Borrowing Costs Almost Double as Euro Tumbles

"Yields on Hungarian sovereign bonds soared and the forint dropped on Friday after Moody's downgraded Hungary's credit rating to non-investive status.
Traders said that investors were shunning Hungarian bonds and that domestic players were also absent from the market.
Yields on three-year, five-year and 10-year treasury bonds went up 0.6-0.8 percentage points to about 9.1-9.5 percent, Daniel Bebesy, portfolio manager at Budapest Fund Management, told the economy site portfolio.hu in late morning trading.
Earlier, yields on the same bonds stood between 8.51 and 8.98 percent, according to analysts at Intesa Sanpaolo's Hungarian unit.
Hungary's CDS spreads -- the cost of insurance against a default -- also rose 620 points from 510 in the beginning of November, coming close to all-time high of 640 points reached in October 2008, when Hungary first turned to international lenders for assistance to avert a default."

"Portugal's efforts to climb out of its economic crisis suffered a double setback Thursday as its credit rating was downgraded to junk status and a major strike gave voice to broad public outrage over austerity measures that have squeezed living standards."

"Standard and Poor's said Japanese Prime Minister Yoshihiko Noda's administration hasn't made progress in tackling the public debt burden, an indication it may be preparing to lower the nation's sovereign grade.

"Japan's finances are getting worse and worse every day, every second," Takahira Ogawa, director of sovereign ratings at S&P in Singapore, said in an interview. Asked if that means he's closer to cutting Japan, he said it "may be right in saying that we're closer to a downgrade. But the deterioration has been gradual so far, and it's not like we're going to move today"."

"U.S. economic conditions are “terrifying” Mohamed El-Erian said yesterday. El-Erian, as you may know, is Bill Gross’ right-hand man at Pimco, the world’s largest bond fund. He gives the U.S. a 50/50 chance at a renewed recession.

“What’s most terrifying?” El-Erian asked rhetorically in a Bloomberg TV interview. “We are having this discussion about the risk of recession at a time when unemployment is already too high, at a time when a quarter of homeowners are underwater on their mortgages, at a time then the fiscal deficit is at 9% and at a time when interest rates are at zero.

“The big concern is the U.S. getting tipped over by Europe. Things in Europe are getting worse, not better.”"

Other headlines:

  1. German, French debt insurance costs hit record
  2. Japan Sharpens Warning on Euro Crisis Impact
  3. Europe debt crisis poses grave risk to Japan, says Furukawa
  4. IFR-European banks' asset sales face failure
  5. Moody's warns US not to back off deficit cuts
  6. German Parliament backs $35 billion in new borrowing in 2012
  7. France Telecom Debt Risk at Record in Crisis: Corporate Finance
  8. Detroit’s council and mayor war over city's financial death spiral ("City will run out of money by April: Report")
  9. Jefferson County using capital funds to pay daily expenses
  10. Ruling on bankruptcy clears the way for state takeover of Harrisburg
  11. Italian, Spanish Yield Curves Start Looking Greek: Euro Credit
  12. S&P cuts Egypt sovereign rating
  13. Japan's Benchmark Yields Rise Above 1% Amid Fiscal Concern
  14. Monti Says Merkel, Sarkozy Agree Italy Default Would Lead to End of Euro
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S&P downgrades Belgium's credit rating


"Standard & Poor's said Friday it downgraded the long-term sovereign credit rating of Belgium to AA from AA+ because of renewed funding and market risk pressure. The outlook is negative. "We think the Belgian government's capacity to prevent an increase in general government debt, which we consider to be already at high levels, is being constrained by rapid private sector deleveraging both in Belgium and among many of Belgium's key trading partners," S&P said in a note."

"Spain's People's Party (PP), due to form a new government by mid-December, is considering applying for international aid as one option for shoring up its finances, sources close to the party say.

The PP inherits an economy on the verge of recession, a tough 2012 public deficit target, financing costs driven to near unsustainable levels by nervous debt markets and a battered bank sector with billions of euros of troubled assets on its books."


European single currency has a '50-50 chance' of collapsing by Christmas as Italy's borrowing rates soar to record high

Dow, S&P Log Worst Thanksgiving Week Since 1932

Damnthematrix's picture
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only in America..... from Aussie news.

Gunfights mar US holiday sales
By Washington correspondent Craig McMurtrie


The biggest shopping day of the year in the United States has been marred by more reports of violence than usual, including gunfights in stores and car parks.

Massive crowds were waiting for the biggest discount chains to open after Thanksgiving in a national shopping frenzy known as Black Friday.

At midnight you might think Americans would have been too full of Turkey to shop, but you would be wrong.

In a sign of desperate economic times, some of America’s biggest retailers opened up with holiday season deals even earlier this year.

"I'm a lean, mean, black Friday machine!" said one punter.

Black Friday bargain hunting in America is not for the faint-hearted.

For many it is almost a military operation - carefully select your target (often a flat screen television), pick your entry point, and stake a claim with your tent, sleeping bag and camp stove.

"If I get it here for $199 it's worth waiting 20 hours, it doesn't bother me," one person said.

"Because I'm off from work - why not sit here and wait for the best deal?"

Getting in the door requires plenty of elbow work to claim your trophy.

The electronics aisle is the most dangerous place to stand in the store - in a Walmart in Los Angeles, a woman used pepper spray on competing shoppers to claim a game console.

In Alabama, police used a stun gun to subdue a 22-year-old man, and there were several shootings reported around the country, including Fayetteville, North Carolina, where there was a gunfight in the aisles.

Consumption has long underpinned the US economy, but with high unemployment, retailers are expecting about half the growth in sales of last year.

"They believe there's a limited amount of money in everyone's wallet and if they can tap that money sooner, then they're going to win sooner; they're going to win over somebody else who's not tapping it soon enough," said retail guru Dan de Grandpre.

Online sales are increasingly competing with the floor room stampede, and this holiday season Americans are expected to spend in excess of $US50 billion over the web.

But brand expert Martin Lindstrom says black Friday is really all about the competition.

"Because we all are fundamentally greedy, we would like to get a deal ahead of everyone else, and suddenly this had become a game more about getting the deal than getting the product that is suited for you at the moment," he said.

"And what's a bit of pepper spray in the face of a bargain?"

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Vote on Nov. 28th: A bill that would define the USA as a battlef

Vote on Nov. 28th: A bill that would define the USA as a battlefield and Citizens as the enemy and would authorize indefinite detention of anyone anywhere WITHOUT trial



Damnthematrix's picture
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Here You Go: It's Over
Posted 2011-11-21 11:14
by Karl Denninger

Ignore this thread

Here You Go: It's Over


We're done folks.

CNBC is reporting that there are now clients running out of the markets entirely because they do not believe their customer funds are safe.

That's the end of it.  The belief that there are more MF Globals has now taken hold.  The thieves have pushed it too far and now we've got the start of a global liquidity run, and with good reason.

The authorities both in the regulatory side and on the prosecutorial side have refused to put a stop to the thievery and now the risk factors have turned into realized risk.

The market is done folks.  You can be right but if you make your bet in the markets, are right, and then get screwed anyway when someone steals the money and nobody goes to jail there comes a time when people begin to understand that it can happen to them and will unless they depart the market.

We're there folks.

Oh sure, there will be rallies and there will be selloffs.  But there is no longer a market, there is no longer a thing to trade, and there is no longer a reason to believe that superior analysis will lead to profit or even safety.

This isn't just about speculators - it is also about farmers, shippers, airlines, manufacturing concerns, everyone in business who has a need to hedge.

More than four years ago I said that the government had to step in and demand that both off-balance sheet games be ended permanently and in all forms and that all derivatives had to be put on an exchange, without exception, and that every dollar of underwater position had to be backed by an actual dollar of capital in real money, held and known to be safe.

The regulators refused and now it appears that what was put up on a regulated exchange was effectively stolen.

Well folks, then none of your investment accounts -- not your IRA, 401k, not even your bank account -- is safe.

Diversification is a strategy but the risk remains.  It is up to you to decide how much you're willing to risk losing to a crook.  If the answer is "none" or you cannot reduce the at-risk portion of your assets to what you're willing to lose to fraud then you can no longer participate in the market at all, in any form, nor even do business with a bank.

That sucks, but it is what it is and if this meme spreads -- and it will until it's stopped -- we run the risk of a "sudden stop" economic event.

I hope you're ready for it -- I am to the best of my ability, and you ought to be.

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