Daily Digest

Daily Digest 12/30 - Pension Bailout Plan, Home Prices Teeter, Gas Prices Up

Thursday, December 30, 2010, 11:00 AM
  • Council Unveils Latest Pension Bailout Plan (Pittsburgh)
  • Pensions Issue Overshadows USPS Outlook For 2011
  • Home Prices Teeter on a Double Dip
  • Retirement Plans Put State In Financial Bind (North Carolina)
  • Gas Prices Heading Up From 3 Dollars
  • Blackouts, Petrol Shortage And Cash Woes As New Year's Approaches (Argentina)
  • Gramley Says Plosser, Fisher May Dissent From Fed Ease Plan

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Council Unveils Latest Pension Bailout Plan (Pittsburgh)

Council President Darlene Harris and members Patrick Dowd, Bill Peduto, Natalia Rudiak and Doug Shields said they've received the state's go-ahead to shore up the pension fund not with cash but a different kind of asset -- 30 years of dedicated revenue from parking rate increases....The pension fund, now 29.3 percent funded, must be 50 percent funded by Dec. 31 to avoid a takeover by the state. For months, Mr. Ravenstahl and council have skirmished over how to raise the $220 million in cash that would boost the fund to 50 percent. With time running out, council members last week consulted the state about dedicating future revenue streams to the fund instead.

Pensions Issue Overshadows USPS Outlook For 2011

Ruth Goldway, the Commission’s chairman, said that the improving economy was now strengthening the mail market, but that the Postal Service faced “potential financial insolvency” in 2011 because of its rising debt and the legally-imposed cap on its borrowing. In particular, she highlighted the pension obligations issue as a key problem area, noting that her Commission had found that pay requirements for the USPS, compared to other federal organizations, may have been overstated by as much as $55 billion.

Home Prices Teeter on a Double Dip

A 20-city composite of home prices through October as measured by the S&P/Case-Shiller Indices is teetering on the brink of falling below recent lows in 2009 to create a price new low and achieve the “double dip” in prices long feared by the real estate industry.
Data released today by Standard & Poor’s for its S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, show a deceleration in the annual growth rates in 18 of the 20 MSAs and the 10- and 20-City Composites in October compared to what was reported for September 2010.  The 10-City Composite was up only 0.2 percent and the 20-City Composite fell 0.8 percent from their levels in October 2009. Home prices decreased in all 20 MSAs and both Composites in October from their September levels.
October was the fifth consecutive month where the annual growth rates moderated from their prior month’s pace, confirming a clear deceleration in home price returns.

Retirement Plans Put State In Financial Bind (North Carolina)

Democratic Gov. Bev Perdue and the new Republican-controlled General Assembly appear pained trying to close a projected $3 billion-plus state budget deficit in 2011.
How about finding another $32.8 billion?
That's how much an actuary has told Perdue's budget director that legislators will need to allocate - but have yet to do so - in order to provide all the medical benefits that have been promised so far to state workers when they retire.
When pledges to beneficiaries aren't backed up by adequate appropriations, the difference is called an unfunded liability.
"Our retiree health plan is totally unfunded," said Robert L. Clark, a professor in North Carolina State University's Department of Management, Innovation and Entrepreneurship.

Gas Prices Heading Up From 3 Dollars

For the first time since October 2008 the average gas price has crossed the three dollar per gallon mark.
According to AAA, gas prices have climbed four weeks in a row. The average gas price is now $3.03 per gallon in Massachusetts. That is about 44 cents more than you were paying at this time last year.
Area drivers told 22News that they are new having a harder time finding gas stations selling gas below the three dollar price mark. One Springfield driver said that he prefers to stick with his favorite station.
Don't expect prices to go down anytime soon, either. Predictions for 2011 run as high as four and five dollars per gallon.

Blackouts, Petrol Shortage And Cash Woes As New Year's Approaches (Argentina)

Rolling blackouts, a shortage of petrol and a union conflict at the Banco Nación are some of the problems that the City and the Greater Buenos Aires areas are expected to be facing in the next few days, which could potentially threaten New Year's celebrations.
As the high temperatures continue, at least 25,000 citizens in the City and the Greater Buenos Aires suburbs registered blackouts for a few days due to the high energy demands.
Rolling blackouts will continue to take place in the area for as long as the red alert remains in effect.
City government officials also confirmed that close to a 100 traffic lights remained unresponsive today due to the blackouts.

Gramley Says Plosser, Fisher May Dissent From Fed Ease Plan

Federal Reserve Bank of Philadelphia President Charles Plosser and Dallas Fed President Richard Fisher may dissent from Fed Chairman Ben S. Bernanke’s plan to purchase $600 billion in Treasuries, former Fed governor Lyle Gramley said. “I think Charles Plosser of Philadelphia and Richard Fisher of Dallas probably will dissent from time to time,” Gramley said today in an interview on Bloomberg Television’s “Fast Forward” with Peter Cook. “It probably isn’t going to affect the outcome of monetary policy decisions. Ben Bernanke still has control of the committee.”....As part of an annual rotation in voting on Fed policy, Plosser, Fisher and the heads of the Chicago and Minneapolis Fed banks will cast votes in 2011.

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saxplayer00o1's picture
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Re: Daily Digest 12/30 - Pension Bailout Plan, Home Prices ...

"ROME — Italy raised more than eight billion euros (10.6 billion dollars) on Thursday in its final bond auction of 2010, but was forced to pay investors sharply higher interest rates amid eurozone debt crisis fears.

Rome placed several maturities of bonds, with the yield on those due in 2021 jumping to 4.8 percent versus 4.43 percent in the previous auction.

The yield, or the rate of return it must pay investors, on Italy's 10-year bonds rose to 4.833 percent on the secondary market on Wednesday evening."

...............1A) Italy falls short on bond sale, yields rise-UPDATE 1

"MILAN, Dec 30 (Reuters) - Italy failed to sell part of its planned offer of bonds on Thursday, paying sharply higher yields to place 8.1 billion euros ($10.71 billion) of medium- and long-term debt with investors.

The sale adds to the 12 billion euros of short-term debt Italy sold on Wednesday, comforting the market on the Treasury's ability to fund a huge state debt burden and avoid the problems seen by other highly-indebted euro zone economies.

But the Treasury sold only 1.3 billion euros of 7-year paper and 836 million of 5-year paper compared to planned sales of up to 1.5 billion and 1.0 billion respectively.

"The periphery euro zone countries are under pressure to raise a lot of cash ... as the sovereign confidence crisis is not over, so all these auctions are going to be work," said Luca Jellinek, head of European rate strategy at Credit Agricole."

(Vermont Public Radio...audio)

""Host) Controlling rising Medicaid costs may be one of the toughest hurdles for Vermont officials struggling with the state's budget.

As VPR's Nina Keck reports, lawmakers and hospital administrators say Vermont has to find new ways to fund Medicaid if services are to continue.

(Keck) Five years ago, providing health care to low-income Vermonters cost about $900 million. This year it will cost almost $1.4 billion. And with the current economic situation driving up demand, it'll cost even more next year."


  •  Other headlines:

New York May Seize Nassau County Finances as Deficit Reaches $343 Million

Portugal needs to raise up to 20b euros

Survey: Most Baby Boomers Not Counting On Medicare

Euro debt crisis likely to spill into 2011, say Danish experts

Annapolis' credit rating may be downgraded

Merced faces dire cuts to police, fire crews

Half Moon Bay Faces Financial Brink

Counties' Budgets for 2011 Reveal Painful Times in New York

Legislative fight expected on class-size limit (Texas)

Damnthematrix's picture
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Gasoline Price Elasticity

Re the price of gas going up, our resident genius at Running on Empty Oz did his own study of price elasticity and made some interesting discoveries..

Australian Gasoline Price Elasticity

by Dave Kimble at www.peakoil.org.au

I was pondering what the impact of gasoline price rises might be on the demand in Australia. So I extracted data from ABARE's Mineral Statistics for Automotive Gasoline Sales (all types), and the national average price of ULP in AU$ per Litre from AIP (Terminal Gate Price), and charted the data.

It is clear there is an annual cycle in the sales figures - highest in Q4, lowest in Q2, and there seems to be a downward trend as well. So I used Excel's Solver function to disentangle the two features.

In the chart the blue line is actual Sales (in megalitres per quarter), and the green line is the best fit for a linearly decreasing trend and with the same seasonal fluctuations each year. You can see they are a pretty good match, which implies there is no other factor involved:

The overall trend in Sales is a 1% reduction per year, which is perhaps due to more people driving diesel-powered 4WDs more of the time.

So where is the impact of price on demand ?
There isn't one, despite the price increasing 72% and then falling back.

This means that gasoline consumption is very inelastic.

idoctor's picture
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pinecarr's picture
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Re: Daily Digest 12/30 - Pension Bailout Plan, Home Prices ...

Saxplayer, I can't tell you how much all the stories you've posted, giving detailed insight into the financial status of individual locales (states, cities, countries), have helped me see the reality of the ongoing economic crisis, and appreciate the true gravity of our circumstances.  They are very effective in neutralizing the BS spin fed us by the MSM!

bandvbandv's picture
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Re: Daily Digest 12/30 - Pension Bailout Plan, Home Prices ...

new national inflation video


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Ken C
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Posts: 753
Re: Gasoline Price Elasticity
Damnthematrix wrote:

So where is the impact of price on demand ?
There isn't one, despite the price increasing 72% and then falling back.

This means that gasoline consumption is very inelastic.


Thanks for the article. However, I suspect that we may see a great deal of impact on gasoline consumption when prices rise by a much more significant amount. Perhaps it is 200% or 500% rise when the average motorist cannot find a way to buy it anymore.

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