Daily Digest

Daily Digest 11/5 - Bernanke and Banking, Markets Surge In Asia, Beyond Bretton Woods 2

Friday, November 5, 2010, 9:44 AM
  • Benny Drops the Big One!
  • Reps Take the House and QE Too! / Fed Statement
  • Fed to Spend $600 Billion to Speed Up Recovery
  • Doubts Grow Over Wisdom Of Ben Bernanke 'Super-Put'
  • Markets in Asia Surge Further After the Fed's Move
  • Beyond Bretton Woods 2
  • The Peak Oil Crisis: The Leading Edge
  • Spill Cleanup Proceeds Amid Mistrust

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Economy

Benny Drops the Big One! (Ilene)

The Bernanke plan to rebuild banking by destroying the American Worker is in full force this week with Jobless Claims up 457,000 this morning while Big Business squeezes another 1.9% more productivity out of terrified workers who even took a 0.1% pay cut (Unit Labor Costs) for their troubles. That has sent the futures to even higher highs as nothing is better for the markets than cheap labor.

Reps take the House and QE Too! / Fed Statement (Ilene)

We have the MBA Mortgage Report this morning along with ADP Employment (+43,000 jobs - all service), Inventories and ISM manufacturing but nothing really matters other than the Fed, which has to ignore all the improvements in the underlying data and risk hyperinflation by jamming another Trillion dollars into the dead pool of the US Money Supply. We like XLF, UYG (see Member chat for our plays on them) as well as FAS to play the QE2 game because, eventually, all this money will flow through them at some point.

Fed to Spend $600 Billion to Speed Up Recovery (jdargis)

The action was the second time in a year that the Fed had ventured into new territory as it struggles to push down long-term interest rates to encourage borrowing and economic growth. In a statement, the Fed said it was acting because the recovery was “disappointingly slow,” and it left the door open to even more purchases of government securities next year.

Doubts Grow Over Wisdom Of Ben Bernanke 'Super-Put' (joemanc)

The dollar plunged yet again. That may have been the Fed's the unstated purpose. If so, Washington has angered the world's rising powers and prompted a reaction with far-reaching strategic consequences.

Li Deshui from Beijing's Economic Commission said a string of Asian states share China's "deep bitterness" over dollar debasement, and are examining ways of teaming up to insulate themselves from the tsunami of US liquidity. Thailand said its central bank is already in talks with neighbours to devise a joint protection policy.

Markets in Asia Surge Further After the Fed's Move (jdargis)

“It looks as though the multi month consolidation phase is over,” Puru Saxena, chief executive at Puru Saxena Wealth Management in Hong Kong, commented in a note on Friday. “It is notable that a number of the developing stock markets are either at or close to a new record high. The fact that most stock market indices are rising in tandem is evidence that we are in a powerful primary uptrend.”

Beyond Bretton Woods 2 (jdargis)

When the leaders of the Group of Twenty (G20) countries meet in Seoul on November 11th and 12th, there will be plenty of backstage finger-pointing about the world’s currency tensions. American officials blame China’s refusal to allow the yuan to rise faster. The Chinese retort that the biggest source of distortion in the global economy is America’s ultra-loose monetary policy—reinforced by the Federal Reserve’s decision on November 3rd to restart “quantitative easing”, or printing money to buy government bonds. Other emerging economies cry that they are innocent victims, as their currencies are forced up by foreign capital flooding into their markets and away from low yields elsewhere.

Energy

The Peak Oil Crisis: The Leading Edge (debu)

Some hold that our sustainability problem started when we first started planting crops and domesticating animals 10,000 years ago. This thesis says if we had stuck with hunting and gathering as a race we would have been able to sustain our act indefinitely, but then we would never have had enough surplus energy to learn reading & writing, and to build cities, the Internet and space ships. Our immediate problem, however, started in earnest with the industrial revolution about 200 years ago when we first started digging up prodigious quantities of coal and feeding it into steam engines. It wasn't long before we struck oil and the rest is history.

Environment

Spill Cleanup Proceeds Amid Mistrust (jdargis)

“A lot of the oil, when it weathered, ended up with a consistency that wasn’t too far from this stuff,” Mr. Overton said, though Ms. Cruikshank and many other fishermen who saw the stuff remain unconvinced.

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."

11 Comments

saxplayer00o1's picture
saxplayer00o1
Status: Diamond Member (Offline)
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Posts: 4060
Re: Daily Digest 11/5 - Bernanke and Banking, Markets Surge ...

"BEIJING—China has urged the U.S. Federal Reserve to explain its decision this week to inject an extra $600 billion into the U.S. economy through a new round of asset purchases, known as "quantitative easing."

"Many countries are worried about the impact of the policy on their economies," Vice Foreign Minister Cui Tiankai, China's top G-20 negotiator, told a news briefing in Beijing Friday. A summit of the Group of 20 industrial and developing nations is set for Seoul next week.

"It would be appropriate for someone to step forward and give us an explanation, otherwise international confidence in the recovery and growth of the global economy might be hurt," he said. The U.S. "owes us some explanation," he said, without specifying in which forum the explanation should be given.

Several other countries have also expressed concern that the Fed's decision could further strengthen their currencies and lead to asset-price inflation."

.....................1A) Fed's new stimulus plan worries global powers

"Nov. 4 (Bloomberg) -- International Monetary Fund Chief Economist Olivier Blanchard said the U.S. needs a “credible” a plan to cut its debt and dispel fears about the economy.

“It is very important that the U.S., over the next few months or a year, puts in place a very credible, medium-term plan so we can see what happens to the debt five years out, 10 years out,” Blanchard said in an interview with CNBC today. The plan “is essential. It’s not quite in place yet.”"

"The Federal Reserve may be forced to buy more assets if the $600 billion in bond purchases announced yesterday isn’t enough to boost growth and inflation, Pacific Investment Management Co.’s Richard Clarida said.

“A year from now, if unemployment is 9, 9.5 or 10 percent, we are going to see more,” Clarida, a global strategic adviser for Pimco, said during on Bloomberg Television’s "InBusiness" with Scarlet Fu. “It may take a different form; it may be concentrated in different assets, but the Fed can’t cut interest rates. They are at zero at the short-end. If they are going to ease policy, they have to do it through these quantitative measures.”"

"Fannie Mae and Freddie Mac, the mortgage firms operating under federal conservatorship, may cost taxpayers as much as $685 billion as the U.S. covers losses and overhauls the housing-finance system, Standard & Poor’s said.

Costs for resolving the two government-sponsored entities could reach $280 billion, including $148 billion already delivered under a U.S. Treasury Department promise of unlimited support, New York-based S&P said today in a research report. The government may spend another $405 billion to capitalize a replacement for the two companies, which own or insure more than half the U.S. mortgage market.

“It appears unlikely in our view that housing and mortgage markets will be able to operate normally without continuing and substantial government involvement,” S&P said, citing the GSEs’ growing portfolio of unsold homes, a sluggish economy, high unemployment, the prospect of rising foreclosures and billions in legacy losses. "

"(Reuters) - The top U.S. banks could face up to $31 billion in losses from buying back bad mortgages, Standard & Poor's said in a report on Thursday.

Large U.S. banks are facing pressure to buy back soured home loans that they packaged into mortgage bonds and sold to investors.

Bank of America Corp (BAC.N) and JPMorgan Chase & Co (JPM.N) have the most exposure to such potential repurchase obligations, followed by Wells Fargo & Co (WFC.N), Citigroup Inc (C.N), US Bancorp (USB.N) and PNC Financial Services Group (PNC.N), S&P analyst Vandana Sharma wrote on Thursday."

"Spain says it raised euro3.39 billion ($4.75 billion) in a 5-year bond auction but interest rates were up considerably since the last auction, indicating investors are still worried about the country's ability to handle its debt.

The central bank says the average interest rate for the auction Thursday was 3.57 percent, up from the 2.96 percent in the last 5-year bond auction Sept. 2."

"Nov. 4 (Bloomberg) -- Chicago, whose credit ranking has been cut by Fitch Ratings twice in less than three months, is delaying next week’s $804 million bond sale, said Pete Scales, a spokesman for Chief Financial Officer Gene Saffold.

The sale, which includes $591 million in tax-exempt refinancing bonds and almost $214 million in taxable Build Americas, will bring the total general obligations sold by the city this year to about $1.75 billion, according to data compiled by Bloomberg. The city sold $690 million in 2009.

“We have decided to postpone the GO bond sale to wait for a more opportune time to access the lowest possible rates,” Scales said in an e-mail. “A new sale date hasn’t yet been determined.”"

"NEW YORK (Dow Jones)--Pittsburgh would have to pay $2.6 billion to $3.6 billion over the next 30 years to shore up its public pension fund if the city fails to meet a state funding minimum by the end of the year, city council members were told Thursday.

The city's retirement system currently has only 28% of the assets it needs to cover its obligations; if it cannot raise that to 50% by Dec. 31, Pennsylvania law will require the state to take over the retirement system and compel Pittsburgh to make the payments needed to assure pensions for 8,000 active and retired employees.

Reaching the 50% threshold will require about $220 million, equivalent to about half of the city's annual budget. Making the payment from the general fund would result in painful consequences for city residents, such as loss of services or higher taxes"

"The European Central Bank refused to disclose internal documents showing how Greece used derivatives to hide its government debt because of the “acute” risk of roiling markets, President Jean-Claude Trichet said.

The ECB turned down a request and an appeal by Bloomberg News to release two briefing documents officials drafted for the central bank’s six-member Executive Board in Frankfurt this year. The notes outline how Greece used the swaps to hide its borrowings, according to a March 3 note attached to the papers and obtained by Bloomberg News.

“The information contained in the two documents would undermine the public confidence as regards the effective conduct of economic policy,” Trichet wrote in an Oct. 21 letter in which he rejected the appeal. Disclosure “bears, in the current very vulnerable market environment, the substantial and acute risk of adding to volatility and instability.”"

"A huge number of American households are still relying on government assistance to buy food as the recession continues to batter families.

More Americans are using government assistance to buy food. Food stamp recipients ticked up in August, children consumed millions of free lunches and nearly five million low-income mothers tapped into a government nutrition program for women and young children.

Some 42,389,619 Americans received food stamps in August, a 17% rise from the same time a year ago, according to the U.S. Department of Agriculture, which tracks the data. That number is up 58.5% from August 2007, before the recession began."

"WASHINGTON (MarketWatch) — About 2 million long-term jobless workers could lose eligibility for unemployment-insurance payments by the end of the year due to the expiration of federal funding.

A special extended-benefits program that relies on federal funds will start shutting down later this month. There’s little time to work on legislation to extend the program during the lame-duck session in Congress, and passage of additional benefits would likely be even tougher once Republicans assume majority status in the House of Representatives starting in January.

A spokeswoman for Senate Majority Leader Harry Reid, of Nevada, said there’s a long list of “things to do and not a lot of time to do them” during the lame-duck session, scheduled to convene Nov. 15.

“While a short-term extension into 2011 is very possible, a long-term extension appears more difficult, and could happen only if an agreement on a tax-cut extension can also be reached,” Goldman Sachs analysts wrote in a research note. "

  • Other news, headlines and opinion:

Fed's Printing Press to Fund Deficit for 6 Months (CNBC)

Bernanke `Doesn't Understand' Economics, Investor Jim Rogers Tells Oxford

Nations May Get Three-Day Notice on Sovereign-Debt Rating Cuts, EU Says

Ireland sinks deeper into danger zone as bond yields near 8%

Ireland slashes budget by £5bn as fears of Greek-style bailout grow

Debt woes put Irish funds on watch list ("Chile’s government has put the entire Irish funds industry on a watch list because Ireland’s sovereign debt woes have triggered a regulation requiring total withdrawal from the country.")

Aldar of Abu Dhabi Needs $2.7 Billion to `Survive,' Bank of America Says

Municipal Issues May Surge on Fed Debt-Buying, Loop's Mier Says

Portugal rejects bailout rumours

Greeks Bombing EU Hands in Bailout Show No Shame Two Days Before Election

IMF's Blanchard Says Carry Trades More Attractive on Fed Move

Buffalo Schools: Fiscal Emergency Declaration is "Premature"

Hard times worsen NY's deficit, more seek Medicaid

Ron Paul vows renewed Fed audit push next year

Citing health overhaul, AARP hikes employee costs

`Hell Week' Ends With Central Banks Split on Recovery Policies

Latin America's Central Banks May Delay Rate Rises on Fed Move, HSBC Says

Rental Vacancies Shrink, Ownership Vacancies Rise

AIG loses more than $2 billion after asset sales

China and Germany belittle U.S. actions before G20 (Germany dubbed the Fed's money-printing policy "clueless")

 

.......................From the jobs report today:

Civilian Participation Rate (CIVPART)

participation

Latest Observations:

Date 2010-06 2010-07 2010-08 2010-09 2010-10
Value 64.7 64.6 64.7 64.7 64.5
Last Updated: 2010-11-05 8:01 AM CDT 
SagerXX's picture
SagerXX
Status: Diamond Member (Offline)
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Posts: 2219
Gold knocking on door to $1400, silver nearly at $27

(10:58 a.m. NY time)...

Whatever bear raid that was this morning didn't last long...

Hotrod's picture
Hotrod
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Re: Daily Digest 11/5 - Bernanke and Banking, Markets Surge ...

A well thought out piece on the shortcomings of QE2

http://blog.atimes.net/?p=1607

rjs's picture
rjs
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Posts: 445
Re: Daily Digest 11/5 - Bernanke and Banking, Markets Surge ...

from the religion section of the Tuscon Citizen: Tongue out

Evidence That Oil Fields Renew Themselves - Off the Louisiana coastline is an underwater mountain known as Eugene Island.  This island spews natural gas spontaneously.  In the late 60’s crude oil was discovered and by 1970, a platform in the area pumped about 15,000 barrels a day of high-quality crude oil.  The field was estimated to have reserves of 60 million barrels. Then in the late 80’s the production of the well was reduced to less than 4000 barrels a day.  The well was considered depleted.  Then in 1990 the well started producing 15,000 barrels a day and reserves were estimated to be around 400 million barrels. A study of the geological age of the new oil was substantially different than the age of the oil pumped in the 70’s and 80s. The seismic data found that the oil was coming from a previously unknown deeper source. This phenomenon is not unique to Eugene Island.  It is happening in other Gulf of Mexico wells and in oil fields in Alaska. Replenishment of oil fields was also recorded in Uzbekistan.  In the Middle East where oil has been pumped for 20 years it has been discovered that known oil reserves have doubled to over 680 billion barrels.

Stan Robertson's picture
Stan Robertson
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Re: Daily Digest 11/5 - Bernanke and Banking, Markets Surge ...
rjs wrote:

from the religion section of the Tuscon Citizen: Tongue out

Evidence That Oil Fields Renew Themselves - Off the Louisiana coastline is an underwater mountain known as Eugene Island.  This island spews natural gas spontaneously.  In the late 60’s crude oil was discovered and by 1970, a platform in the area pumped about 15,000 barrels a day of high-quality crude oil.  The field was estimated to have reserves of 60 million barrels. Then in the late 80’s the production of the well was reduced to less than 4000 barrels a day.  The well was considered depleted.  Then in 1990 the well started producing 15,000 barrels a day and reserves were estimated to be around 400 million barrels. A study of the geological age of the new oil was substantially different than the age of the oil pumped in the 70’s and 80s. The seismic data found that the oil was coming from a previously unknown deeper source. This phenomenon is not unique to Eugene Island.  It is happening in other Gulf of Mexico wells and in oil fields in Alaska. Replenishment of oil fields was also recorded in Uzbekistan.  In the Middle East where oil has been pumped for 20 years it has been discovered that known oil reserves have doubled to over 680 billion barrels.

The Gulf coast is dotted with salt domes where rising salt diapirs have pushed up sedimentary formations, producing structural traps for oil and gas accumulations. It is entirely possible that a depleted reservoir might be recharged from zones lower on the diapir.  Many of these reservoirs also have water below the trapped oil. High production rates can cause water to cone into the producing wells. Reducing or stopping the production can allow the cone to drop and oil to refill the zone near the well bore thereby allowing production to resume without a high water cut. There are many conventional explanations for what has been observed without hypothesizing reservoir recharging with abiotic oil. I am unaware of any actual commercial production of abiotic oil anywhere on earth. The oils found in tests of Prof. Gold's abiotic hypothesis have always been only trace amounts bearing the same mass spectrographic signatures as the fuels and lubricants in use on the drilling rigs.

People who believe the earth to have been created within the past few thousand years are often inclined to believe that oil and gas could be quickly formed and therefore oil reservoirs might be quickly replenished after they have been depleted. Unfortunately, this does not accord with what we know of geology and the experiences of the oil companies over the last century.  Lastly, oil reserves are classified as possible, probable or proved depending on the degree of certitude of their existence. Increase of proved reserves merely reflects a growth of confidence without necessarily implying any increase at all in the actual amount of oil that might ultimately exist in a field. There are also reasons for believing that some OPEC nations have increased their estimates of proved reserves in order to justify higher production quotas.

The bottom line here is that you can't believe everything that you read.

Stan

horstfam's picture
horstfam
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Posts: 71
3 Strange Things About The GM IPO

1. The U.S. government is going to sell at a loss.

GM expects to sell its stock at around $27 a share, roughly half what the government needs to make a profit. That's partly to get out of the business as fast as possible; the government doesn't want to be in the car business.

Article here: http://www.npr.org/blogs/money/2010/11/04/131074939/3-strange-things-about-the-gm-ipo?ft=1&f=1001

The truth is stranger than fiction. When will this ride end so we can get off?

yoshhash's picture
yoshhash
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Re: Daily Digest 11/5 - Bernanke and Banking, Markets Surge ...
rjs wrote:

from the religion section of the Tuscon Citizen: Tongue out

Evidence That Oil Fields Renew Themselves 

Oh man, that is funny!  Quite appropriate that it was run in the religious section- time to start praying that it's true!

cmartenson's picture
cmartenson
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Posts: 5568
Re: Daily Digest 11/5 - Bernanke and Banking, Markets Surge ...
yoshhash wrote:
rjs wrote:

from the religion section of the Tuscon Citizen: Tongue out

Evidence That Oil Fields Renew Themselves 

Oh man, that is funny!  Quite appropriate that it was run in the religious section- time to start praying that it's true!

Truly awesome!  I needed a Friday pick-me-up!  Pure comedy gold.

I loved the opening lines:

Off the Louisiana coastline is an underwater mountain known as Eugene Island. This island spews natural gas spontaneously.

Yes, and I have found that meat spontaneously generates flies and I have a paper submitted to the Proceedings of the National Academy of Sciences to that effect.  I hope they accept it very soon.  

Smile

jrf29's picture
jrf29
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Posts: 453
Re: Daily Digest 11/5 - Bernanke and Banking, Markets Surge ...
Quote:

In our culture it is widely believed and well-established that at some point in the near future we will run out of oil. The world as we know it will end and unless we find another source of cheap energy we will turn the clock back to the dark ages.

If Dr. Gold and Dr. Kenney are correct, that “the end of the world as we know it” scenario is wrong then there is an inexhaustible supply of deep reserves of inorganic crude oil which is commercially feasible to extract that would provide the world with generations of low-cost fuel.

This could almost be a study in how denial works as a coping mechanism.

We see a strikingly clear statement of the problem, showing that the author understands its seriousness as well as the potentially dire consequences.

But rather than spurring them to action, this clarity of understanding only motivates the individual to grasp at more and more fanciful reasons to avoid taking any action at all.

Denial is not just a river in Egypt.

People only accept change when they are faced with necessity, and only recognize necessity when a crisis is upon them..

- Jean Monnet, father of the European Union

TechGuy's picture
TechGuy
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Posts: 364
Re: Watch as Commodity inflation erodes employment

The Bernanke Put is like an inverse steroid, causing loss of muscle mass and obesity

As the dollar's value declines and commodity prices rise, it will cause unemployment to rise. Consider that people living on fixed income and stagnate wages will not be able to afford to buy as much goods and services. People still need to eat, buy energy to get to work or heat their home, The average Joe will cut back on spending as they thier cost of living increases. There will be less money to spend on non-essential items. Consumers will not buy new cars, applicances. They cut back on meals, shopping, and travel. The more they cut back the more the Fed will monertize the debt creating a death spiral. The Fed doesn't understand that its actions, which are causing food, energy, and commodity inflation will cause further unemployment. When they see unemployment getting worse they think that they aren't doing enough moniterization since its not fixing the problem. Much like a driver that puts the accelerator to the floor trying to get unstuck from mud. Instead of moving forward the car just digs a deep hole.

The Fed tried similar actions in the 1970s by printing money and it caused stagflation. It wasn't until the Fed raised interests and killed inflation that the economy recovered. Japan has tried QE for twenty years and it solved nothing. Yet the Fed keeps on trying the same old trick over and over. Bernanke is as dumb as a box of rocks!

Insanity: doing the same thing over and over again and expecting different results.
Albert Einstein, (attributed)
US (German-born) physicist (1879 - 1955)
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idoctor
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Re: Daily Digest 11/5 - Bernanke and Banking, Markets Surge ...

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