Daily Digest

Daily Digest 12/19 - Citi: New Credit Cards, Ingredient Costs Push Up Food Prices, China and Pakistan

Sunday, December 19, 2010, 11:00 AM
  • Citi Deals a New Deck of Credit Cards
  • Mauldin: Kicking the Can Down the Road
  • PIMCO Investment Outlook - Allentown
  • Ingredient Costs Expected To Push Food Prices Up
  • IMF Chief Worried About Europe Domino Effect
  • German Obstructionism Heightens Euro Fears
  • China, Pakistan To Formalize Another US $10 Bil In Deals

Our 'What Should I Do?' guide offers a detailed management plan for your personal finances.



Citi Deals a New Deck of Credit Cards

The bosses are desperate for new revenue after a couple of years of writing off bad loans. President Obama signed legislation making it harder to raise interest rates and impose fees. Meanwhile, many customers are paying down high-interest debt and have sworn off the companies’ products in favor of debit cards. Oh, and they mostly hate that card companies cut many of their credit limits in a time of need and then reduced perks on some cards as if to rub salt in their wounds.

Mauldin: Kicking the Can Down the Road (jrb)

While the US Congress is certainly an adept player at that game, I think the world champions at the present time have to be the political and economic leaders of Europe.  Today we look at the extent of the problem and how it could affect every corner of the world, if not played to perfection. Everything must go mostly right or the recent credit crisis will look like a walk in the Jardin des Tuileries in Paris in April compared to what could ensue.

PIMCO Investment Outlook - Allentown (solidswede)

We’re all Allentowners now. Granted, 90% of the workforce is still reporting for work on time, but our standard of living, our confidence in the future – we’re standing in line in Allentown. Lost in the policy debate surrounding the elections and the subsequent demonization of the Federal Reserve’s Quantitative Easing (“QE2”) policies has been any recognition of why we no longer live on Ronald Reagan’s shining hill or how we might possibly reclaim higher ground.

Ingredient Costs Expected To Push Food Prices Up

General Mills hasn’t raised food prices in 3 1/2 years.  The maker of Bisquick, Betty Crocker, Pillsbury and Gold Medal flour has stated it will raise prices on 25% of it’s cereal line on Monday. Last month, McDonald’s said it is planning on raising prices in order to offest rising costs. Kellogg is expected to raise cereal prices along with Unilever and Nestle who have signaled increases are likely in the near future.

IMF Chief Worried About Europe Domino Effect

Dominique Strauss-Kahn appeared to endorse the idea of common euro bonds, saying they could be a useful tool, but added the political will to give power to the center of Europe was the main hurdle to their creation. "I am worried, and that's why I am urging the Europeans ... to provide a comprehensive solution because this piecemeal approach ... obviously doesn't work," Strauss-Kahn told Reuters. "The markets are just waiting for what's next."

German Obstructionism Heightens Euro Fears

Speaking in front of the German parliament in Berlin, Merkel sang the praises of the "extraordinary ideas of peace and freedom which provide the foundation of European unity." It is a legacy, she went on, "to which I feel personally beholden." Fine words, to be sure. But there are some in Germany who have found cause to doubt the sincerity of Merkel's commitment to the European Union. The German chancellor, after all, has become a stick in the deep mud of the ongoing euro crisis, one which has seen country after country fall victim to skyrocketing interest rates on government bonds, making borrowing on the international financial markets virtually impossible.

China, Pakistan To Formalize Another US $10 Bil In Deals

Boosting trade and investment have been the main focus of the first visit in five years by a Chinese premier to the nuclear-armed Muslim nation on the front line of the U.S.-led war on al-Qaida. Pakistan regards China as its closest ally and the deals are seen locally as incredibly important to a moribund economy, which was dealt a massive blow by catastrophic flooding this year and suffers from sluggish foreign investment.

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."


bandvbandv's picture
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Re: Daily Digest 12/19 - Citi: New Credit Cards, Ingredient ...

Us VS. the bankers.  This is becoming more and more believable.



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Re: Daily Digest 12/19 - Citi: New Credit Cards, Ingredient ...

Will shale gas turn out to be an energy sink? - If you externalize the costs of a business activity, it means other people pay the costs--environmental, social and otherwise--and you get the profits. It goes on all the time in extractive industries such as oil and natural gas and mining. And, it is also a natural strategy for manufacturers who dump their pollution into the air and the water. It's even practiced in finance where the executives of Wall Street banks have managed to collect the bonuses made off a phony boom in the last decade and saddle taxpayers with the losses of the inevitable bust caused by bad and often fraudulent loans, misleading derivative contracts, and leveraged speculation in stocks and commodities. If the loopholes are there, you can be assured that people in business will take advantages of them. That's exactly what is happening in the business of shale gas drilling.

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Re: Daily Digest 12/19 - Citi: New Credit Cards, Ingredient ...

Hi everyone,

I'm new to the writing part of the list, have been reading a while to get the style & rules. Here's my first two cents


Worth a watch/listen: Harvey Organ on Hyperinflation, Backwardation, Silver & Gold.


Btw: For all of you who watched Jim Rickard's views of the "end game", you know that Germany has it's Gold still in Fort Knox .. that is officially aka on paper  ;-)   What are they gonna say to get it "back"?



Happy 4th Advent,


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Re: Daily Digest 12/19 - Citi: New Credit Cards, Ingredient ...

Howdy Germanni

I love the Jim Rickards too!

Welcome to CM

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Re: Daily Digest 12/19 - Citi: New Credit Cards, Ingredient ...


Nigeria drops charges against Halliburton, Cheney

By Joe Brock

ABUJA | Fri Dec 17, 2010 2:03pm EST

ABUJA (Reuters) - Nigeria's anti-corruption agency said on Friday it had dropped bribery charges against former U.S. Vice President Dick Cheney and oil services company Halliburton after the company agreed to pay a fine.

"It was formally dropped today," Economic and Financial Crimes Commission (EFCC) spokesman Femi Babafemi said. He said the Nigerian government had agreed to an offer made by Halliburton to pay fines totaling up to $250 million.

Halliburton, which has said the Nigerian charges have no legal basis, confirmed that they were dropped but declined additional comment.

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Re: Daily Digest 12/19 - Citi: New Credit Cards, Ingredient ...

For 12/20 News:

State Budgets: Day of Reckoning (60 Minutes News Video.....A must watch)

"Although the battle over extending unemployment benefits has been solved in Washington, Ohio still has no way to repay the $2.3 billion borrowed from a federal loan fund to continue the jobless benefits through the recession.

Without a reprieve from Congress, that bill comes due next year, at the same time state leaders will be grappling to close a projected $8 billion shortfall in the two-year state budget that begins in July. "

"Rising unemployment and lingering recession in many parts of the country have drained state unemployment funds across the nation. Thirty states, including Ohio, and the Virgin Islands currently are borrowing from the federal fund, owing a combined $41.7 billion as of Dec. 13, according to the U.S. Department of Labor. Four other states have paid back their loans.

California has needed the most help, more than $9 billion, while Midwestern states, including Ohio, make up four of the top eight borrowers.

“There is a lot of hope that the feds are going to look at this and say, ‘Hey, we have to look at this differently.’ There is an underlying hope that no one wants to speak publicly about and that’s that the feds will step in,” Doehrel said.

Such a provision, however, has not been included in the tax package Congress approved last week, which also renewed funding for extended unemployment benefits."

"Dec. 20 (Bloomberg) -- New Jersey Governor Chris Christie said U.S. states face a “day of reckoning” as they contend with looming budget deficits in the wake of the longest recession since the 1930s.

Christie, who cut $1.3 billion in aid to schools and municipalities this year to close a $10.7 billion deficit, said states’ pension and debt costs have grown to be “unsustainable.” Benefits, education and health care will be reduced in many states, he said in an interview aired last night on CBS Corp.’s “60 Minutes.”

“The day of reckoning has arrived,” said Christie, 48, a first-term Republican. Areas such as education and pensions “were third rails of politics. We are now left with no alternatives.”

The recession caused the biggest nationwide decline in state tax receipts on record, according to the nonpartisan Center on Budget and Policy Priorities in Washington. States have filled more than $425 billion in funding gaps since fiscal 2009; the combined imbalance is likely to reach $140 billion in the next budget year, the center said."

"As Washington spends and borrows, the Treasury will have to offer higher rates on new 20 and 30 year bonds, making comparable securities issued in 2010 and earlier worth less in the resale market.

That interest rate risk makes U.S. Treasury securities lousy investments.

For rating agencies, Washington’s monopoly on printing dollars makes difficult assigning a conventional rating between AAA and D on its bonds. Those can’t default but investors’ capital is still at grave risk.

Perhaps a special grade: “F” –flee now before you get stuck—is appropriate for the junk sold by the U.S. Treasury."

"PHOENIX - As bad as the state’s financial problems have been the past two years, the crisis is likely to come to a head in 2011.

When state legislators are sworn in on Jan. 10, they will immediately start working on solutions to wipe more than $2.2 billion in red ink off the books. And, unlike in past years, the federal government won’t be opening up its checkbook to give the state money in order to stave off deep budget cuts.

The first order of business will be an estimated $840 million deficit in the current fiscal year.

Legislative leaders are already crafting a plan to fill that hole and lawmakers will likely vote on it by the end of January. Attention will then shift to a $1.4 billion shortfall in the upcoming budget year, which begins in July.

And, despite what voters were told earlier this year when they headed to the polls in overwhelming support of a temporary sales tax increase, there are almost certain to be massive cuts to education."

"School districts already have crammed more students into classrooms, shortened the school calendar and stopped buying new textbooks.

As bleak as things are for California schools, however, next year stands to be worse.

K-12 schools and community colleges could receive at least $2.2 billion less because of lower state tax rates in 2011, state budget analysts say. To make matters worse, many districts will have less federal aid to rely upon.

The reduction seems to be a foregone conclusion at the Capitol because the state's projected 18-month budget shortfall – as great as $29 billion – would otherwise be higher.

So districts are bracing for another round of teacher furloughs, school closures and the elimination of programs outside the core teaching mission.

"To paint the mental picture, it's as if two people are looking over a forest of stumps, and one person says, 'Let's go get that low-hanging fruit,' " said Elk Grove Unified School District Superintendent Steven Ladd. "Well, there's not even a tree out there.""

"Parents in Colorado may want to start putting more money into their kids' college fund. Almost all of the universities and colleges in our state are considering double digit tuition increases next year to overcome cuts in state funding."

"Senate Majority Leader John Morse, (D) Colorado Springs says he and his fellow lawmakers must balance the budget, and with a billion dollar deficit, higher education is low hanging fruit."

"Instability in its three pension systems is the greatest threat to Houston's financial solvency, city officials and financial analysts say.

Within three years, according to an actuarial study commissioned by the city, the pension for firefighters will require the city to contribute 45 percent of its payroll costs for that retirement plan, a burden Mayor Annise Parker says is unsustainable.

The other two plans are in even worse shape. The police and municipal employee pensions are underfunded by $2.1 billion, roughly the equivalent of what the city spends annually for public safety and general operations.

"The bottom line is the whole system is completely unsustainable with current benefit levels and the city's financial position," said John Diamond, a Rice University public finance fellow and governmental tax consultant. "

"El Dorado County's auditor-controller has issued a warning to the Board of Supervisors about unfunded pension liability.

According to Joe Harn's letter to the supervisors last week, the liability has more than doubled from June 2008 to June 2009, the most recent reported.

The current liability is $264 million, he said.

"It's just an ugly number," Harn said."

"The Federal Reserve said it will limit purchases to 70 percent of any single Treasury security as part of its plan to expand its balance sheet that’s known as quantitative easing.

The central bank had temporarily relaxed its 35 percent limit in November when announcing additional purchases of $600 billion of Treasuries through June. The New York Fed in a statement today gave allowable purchase percentages for three brackets in its system open market account, or SOMA, consisting of securities it holds, from more than 30 percent to 70 percent."

.......................9A) Treasuries Rise for Third Day as Fed Debt Purchases May Break Daily High

"Treasuries rose for a third day in the longest winning streak this month as the Federal Reserve prepared to purchase as much as $17 billion in two operations, the biggest amount in a single day."

"Municipal bond-rating cuts by Moody’s this year also include Los Angeles, San Francisco, Philadelphia and Chicago, after the slumping housing market ate into real-estate values and assessments of property declined.

Across the U.S., local governments collected 1.8 percent less in taxes this year than in 2009, the Washington-based National League of Cities said in an October report. Revenue may continue declining into 2012 as governments lag at least 18 months behind the private sector in feeling the effects of any economic turnaround, the group said."

"LONDON (AP) -- Ratings agency Moody's on Monday downgraded four Irish banks and an insurer, dropping two of them to junk status -- a reminder of the financial mess the country faces at it looks to draw on an international rescue loan.

Moody's Investors Service said it had lowered ratings on bank deposits and senior debt for Allied Irish Banks, Bank of Ireland, EBS Building Society, Irish Life & Permanent and Irish Nationwide Building Society. It also downgraded their bank financial strength ratings and most of the groups' junior securities.

The move came after Moody's on Friday downgraded Ireland's sovereign credit rating by five notches to Baa1 -- just three steps above junk-bond status."


  • Other news, headlines and opinion:

French AAA Grade at Risk as Downgrades Sweep Europe

Fears over French Downgrade Restrain Euro

Germany's robust economy not enough to stop record debt

German Public Debt Rises To EUR 1.8tln

EU Plans $17 Billion of Bond Sales for Ireland Bailout, FT Says

China plans 900 billion yuan deficit in 2011 to fuel economy

Stocks Rising 17% Since Bernanke Disclosed QE2 Disarms Fed's Worst Critics

Alberta deficit at $5 billion

Underfunded pensions dwarf deficit (Connecticut)

California's teaching force shrinks, as K-12 population set to grow

Weak Get Weaker as Muni Bonds Are Sold Off

City waits, frets over $41 million in state aid (Columbus)

City budget cuts hit crunch time (Cincinnati....$60 million deficit)

Incoming Nevada Governor Weighs Deeper Cuts

3 states in regional compact raid pollution funds

20 Companies That Cratered in 2010

Iranian riot police out in force as food and fuel subsidies end


European financials see dollar funding gap widen

School board borrows to pay off pension liability (Wisconsin)

Unintended Consequences (Inflation US Video)



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Re: Daily Digest 12/19 - Citi: New Credit Cards, Ingredient ...
saxplayer00o1 wrote:

For 12/20 News:

State Budgets: Day of Reckoning (60 Minutes News Video.....A must watch)

Second that.  I had a few thoughts when I watched this segment:

1.  "Gee, it's good that this is getting out there."

2.  "Well, they're talking about this issue (insolvent/bankrupt states & municipalites) but they're still not talking about the root cause[s]."

3.  "The only solution I hear is cut, cut, cut the budget."

4.  I also had some naughty, uncharitable thoughts along the lines of "Whoa, how ironic it is that Gov Christie is talking about slimming down the budget."  But on the whole he seems like a well-spoken dude who's actually saying the hitherto unsayable...

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Re: Daily Digest 12/19 - Citi: New Credit Cards, Ingredient ...


kjberg2000's picture
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Re: Daily Digest 12/19 - Citi: New Credit Cards, Ingredient ...

Thanks for the post. I used to think Alex Jones was wacko. No more. Check out John Perkins Confessions of an Ecomomic Hit Man. What he saw in the third world is now visible in Europe, and soon in the USA. As saxplayer00o1 indicated in his link State Budgets: Day of Reckoning (above), it could start with the bankruptcies of states and municipalities which would mean the layoff of more teachers, police officers, and fire fighters followed by the sale of assets to private corporations (Arizona). Scary stuff.


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