Daily Digest

Daily Digest 8/19 - China Favors Euro, Chinese Wages Wilt Western Profits, Will Renters Ever Buy?

Thursday, August 19, 2010, 9:46 AM
  • China Favors Euro Over Dollar as Bernanke Alters Path
  • Hedge Funder Kyle Bass: ‘I Don’t Know How You Can Be Long Stocks’
  • U.S. Matches Indian Call Centre Costs
  • Will Connecticut Last A Week?
  • Western Profits Wilt On China's Surging Wages
  • Tensions Rise in Greece as Austerity Measures Backfire
  • One-Fourth Of Renters Will Never Buy A Home: Survey
  • Transparency: Which Countries Invest the Most in Alternative Energy?

Crash Course DVDWatch the Crash Course DVD, a perceptive glimpse at our economic and energy future (NTSC or PAL)


China Favors Euro Over Dollar as Bernanke Alters Path (Sky Willow)

“Diversification should be a basic principle,” Yu said in an interview, adding a “top-level Chinese central banker” told him to convey to European policy makers China’s confidence in the region’s economy and currency. “We didn’t sell any European bonds or assets, instead we bought quite a lot.”

Hedge Funder Kyle Bass: ‘I Don’t Know How You Can Be Long Stocks’ (kelvinator)

If we get a global restructuring, if we get the European periphery starting restructuring and Japan restructures, global GDP will not be +4.00%. It might (-4.00,or 5.00%)….We still have deflation. M3 is contracting at an alarming rate today because the Fed can supply the market with as much credit as it can at zero rates. But what they’re realizing, what Bernanke is realizing today is he can’t change the borrowing proclivities of the people that just got wiped out in ‘08.

U.S. Matches Indian Call Centre Costs (SolidSwede)

Call centre workers are becoming as cheap to hire in the US as they are in India, according to the head of the country’s largest business process outsourcing company.


Will Connecticut Last A Week? (Ilene)

Before the end of the year, Connecticut expects to offer the $520 million of general obligations and as much as $600 million of special tax obligations, which would raise money for transportation. Both issues likely would be offered via negotiation.

    Crash Course DVDWatch the Crash Course DVD, a perceptive glimpse at our economic and energy future (NTSC or PAL)

Western Profits Wilt On China's Surging Wages (joemanc)

A report by Credit Suisse said the vast majority of US and European companies in China are expecting a "margin hit" over the next 12 months and fear they will not be able to pass on the costs to consumers, with the biggest worrries in electronics, clothing, and retail. The bank said Footlocker, Liz Claiborne, and Office Depot would tip into outright loss in a worst-case scenario, defined as a 20pc rise in costs without any pass-through to customers.

Tensions Rise in Greece as Austerity Measures Backfire (R.Fuhrmann)

The newspaper Ta Nea has recommended that the Greek government adopt the very same approach -- the country's leaders have to hope that Mary comes up with a miracle to save Greece from a serious crisis, the paper writes. Without divine intervention, the newspaper suggested, it will be a difficult autumn for the Mediterranean state.

One-Fourth Of Renters Will Never Buy A Home: Survey (Robert C.)

The survey, by real estate search site Trulia.com, found 27 percent of renters do not plan to ever buy a home. Although 72 percent still expect to buy eventually, that proportion is down from 77 percent six months ago. Of those who do hope to become homeowners, two-thirds say they will wait two years or more.


Transparency: Which Countries Invest the Most in Alternative Energy?

In a world of dwindling traditional energy resources, countries are starting to invest in more sustainable alternatives. Here are the countries...

[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 8/19

"Fitch Ratings said Wednesday the four largest U.S. banks could book losses of up to $42 billion if Fannie Mae and Freddie Mac force them to take back troubled mortgages they originated.

Fitch estimates that JPMorgan Chase & Co., Citigroup Inc., Bank of America Corp. and Wells Fargo & Co. could record $17 billion in losses if they repurchase a quarter of the mortgage giants' seriously delinquent loans. In the worst case, they could lose $42 billion if the government-sponsored entities force them to buy back half of their bad loans."

.........................1A) U.S. Banks May Face $180 Billion in Troubled-Mortgage Buybacks, Fitch Says

"Aug. 18 (Bloomberg) -- California may begin paying bills with IOUs in September for a second year in a row as a legislative logjam over erasing a $19 billion deficit prevents passage of a budget.

State Controller John Chiang said the IOUs may be issued in two to four weeks if the budget impasse persists. The warrants will pay for everything from contracted services to health-care clinics so California can preserve funds to make payments on priority items such as bonds.

“I will not let the state of California become insolvent,” Chiang said today in a speech at the Sacramento Press Club. He said he is closely monitoring the state’s cash flow, which may flip to negative by late October."

"MORRISON, Illinois - Call it a sign of the times in Illinois. The cost of farming is going up. That's after the state hiked fees to help fight its deficit.

While local farmers staff the grill at the Whiteside County Fair on Wednesday, the cost of their occupation is getting more expensive. With each sizzling flip of a burger, the higher Illinois fees are adding up.

"It will impact all of our bottom lines and everything we do," said Loren Tenboer, a Whiteside County farmer.

Farms will be harvesting part of the state's financial burden these days. There are about a dozen new fees. That includes everything from inspections to safety checks. The fees are expected to raise about $2 million.

"You're going to have to pay it or move to something else," added Carroll County farmer Randy Durward."

"Illinois State Board of Investment, Chicago, could sell close to $1 billion in investments over 12 months to raise cash to pay benefits for participants in three state retirement systems, a liquidity strain that could force the board to restructure its asset allocation and possibly make manager changes, said William R. Atwood, executive director.

The board, which oversees $9.9 billion in assets, has been selling some $70 million in investments a month since July 1, because of a lack of state pension contributions, he said.

The systems that would be affected are the $9.6 billion Illinois State Employees' Retirement System, $500 million Illinois Judges' Retirement System and $100 million Illinois General Assembly Retirement System, all in Springfield,

Timothy B. Blair, executive secretary of the three plans, whose assets the ISBI oversees, said, “We worked out a plan to liquidate $70 million a month,” he said. “It's hard on their (ISBI's) end to draw down $840 million in investments over the next year.”"

"Aug. 19 (Bloomberg) -- Applications for unemployment benefits in the U.S. unexpectedly increased last week to the highest level since November, showing companies are stepping up the pace of firings as the economy slows.

Initial jobless claims rose by 12,000 to 500,000 in the week ended Aug. 14, Labor Department figures showed today in Washington. Claims exceeded all estimates of economists surveyed by Bloomberg News and compared with the median forecast of 478,000. The number of people receiving unemployment insurance fell, while those getting extended benefits increased. "

"A survey released yesterday also showed companies expect their costs of health-care benefits to rise 8.9 percent next year, a product of the overhaul signed into law by President Barack Obama."

"WASHINGTON (MarketWatch) -The index of manufacturing activity in the Philadelphia region dropped sharply in August, the Federal Reserve Bank of Philadelphia reported Thursday. The Philly Fed diffusion index fell to negative 7.7 in August from 5.1 in July. This is the first negative reading in a year. The decline was unexpected. Economists polled by MarketWatch were expecting the index to rise to 7.0. Indexes for new orders and shipments were also negative in August. There was also a sharp drop in the average workweek"

"Michael Smith and Julius Giles couldn't be less alike. Smith is 63 with three children in college and a veteran of 25 years in the local television business; Giles is a 23-year-old Sacramento City College student and a single father of a 2-year-old daughter.

But on Tuesday afternoon, the two shared a table at a Sacramento McDonald's: unemployed, applications in hand, waiting for their names to be called.

"Forty years between us, and we're at the same table," Smith of Sacramento said.

A lot of people might as well have been at the same table.

Smith and Giles were among thousands who showed up at McDonald's outlets throughout Northern California and western Nevada – trying to land one of 1,000 jobs the company was filling during a hiring day event. More than 100 applicants came to the K Street site alone.

It was a graphic example of the economic pain that has been visited upon the region the last two years."


  • Other news and headlines:

Hedge funds tap ETF for gold bets as stock correlation rises

Greek Bonds Show Nation Won't Control Increasing Debt, High Frequency Says

Study warns Conn.'s economic recovery could fizzle

Schwarzenegger Orders Furloughs to Start After Top California Court Rules

N.J. unemployment jumps from Christie budget cuts

Florida Toll Bridge Agency in Dire Straits

Gulf real estate sales suffer from BP oil spill aftermath

Medicaid shortfall: $64 million gap in Alabama budget threatens services

UK borrowing falls as country slide deeper into debt

Tucson Police face hundreds of layoffs if voters don't pass tax

New Jersey Settles SEC Fraud Claims Over $26 Billion in Bonds

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Re: Daily Digest 8/19 - China Favors Euro, Chinese Wages ...

Death of the 'McMansion': Era of Huge Homes Is Over

They’ve been called McMansions, Starter Castles, Garage Mahals and Faux Chateaus but here’s the latest thing you can call them — History.

In the past few years, there have been an increasing number of references made to the “McMansion glut” and the “McMansion backlash,” as more towns pass ordinances against garishly large homes, which are generally over 3,000 square feet and built very close together.

What sets a McMansion apart from a regular mansion, according to Wikipedia, are a few characteristics: They’re tacky, they lack a definitive style and they have a “displeasingly jumbled appearance.”

Well, count 2010 as the year the last nail was hammered into the McCoffin: In its latest report on home-buying trends, real-estate site Trulia declares: “The McMansion Era Is Over.”

Just 9 percent of the people surveyed by Trulia said their ideal home size was over 3,200 square feet. Meanwhile, more than one-third said their ideal size was under 2,000 feet.

“That’s something that would’ve been unbelievable just a few years back,” said Pete Flint, CEO and co-founder of Trulia. “Americans are moving away from McMansions.”

The comments echoed those made in June by Kermit Baker, the chief economist at the American Institute of Architects.

“We continue to move away from the McMansion chapter of residential design, with more demand for practicality throughout the home,” Baker said. “There has been a drop off in the popularity of upscale property enhancements such as formal landscaping, decorative water features, tennis courts, and gazebos.”

“McMansions just look and feel out of place today, given the more cautious environment everyone’s living in,” said Paul Bishop, vice president of research for the National Association of Realtors.

And homebuilders are heeding the call: In a survey of builders last year, nine out of 10 said they planned to build smaller or lower-priced homes.

Even in Texas, the land of go big or go home, they’re downsizing.

Diane Cheatham, owner of Urban Edge Developers in Dallas, said today, the average size of home they’re building is 2,200 square feet, down from 2,500 in 2005 — which was considered small for Dallas back then.

She said the trend there is more toward building green homes instead of big homes. Right now, they’re building a 1,200-square-foot uber-green home for a couple that’s downsizing from 3,000-square feet, Cheatham explained.

1,200? Some of the hair in Texas is bigger than that!

“We’ve never built one that small,” Cheatham confessed, but added: “I think that’s just a good example of the trend right now.”

For a little historical context, 1,200 square feet was the average home size in America in the 1960s. That grew to 1,710 square feet in the 1980s and 2,330 square feet in the 2000s.

What’s more, many in the real-estate business say they think this trend of downsizing, or “right-sizing,” as Flint likes to call it, is here to stay.

“This is absolutely a long-term effect,” he said. “Think of families with small children who’ve been foreclosed upon … When these teenagers are in a position to buy a home, they won’t want to go through these experiences they saw their parents go through.”

Of course, the question becomes, what do we do with all these McMansions that have already been built?

It's tempting to make jokes about what you might do with a former McMansion but with crime on the rise in neighborhoods littered with abandoned McMansions, Christopher Leinberger, in an article for the Atlantic, asked a sobering question: Is this the next slum?

Luckily, people are starting to get creative: A film collective in Seattle has taken over a 10,000-square foot McMansion there, using it for both living and work space. They turned a wine closet into an editing room and tossed a green screen in the garage. And in a suburb of San Diego, one couple turned a former McMansion into a home for autistic adults.

The demise of the McMansion has stirred a growing chorus of murmurs in the real-estate community about the possibility that it may force a dramatic redesign of the suburban McMansion tracts into mini-towns of their own, turning these icons of excess into more practical spaces like offices, banks, grocery stores and movie theaters.

Though, given some of the poor quality of materials and craftsmanship, it begs the question, would it be better to just tear them all down and start from scratch?

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Re: Daily Digest 8/19 - China Favors Euro, Chinese Wages ...

Homeowners' Rebellion: Recent Rulings Could Shield 62 Million Homes From Foreclosure

Over 62 million mortgages are now held in the name of MERS, an electronic recording system devised by and for the convenience of the mortgage industry. A California bankruptcy court, following landmark cases in other jurisdictions, recently held that this electronic shortcut breaks the chain of title, voiding foreclosure. The logical result could be 62 million homes that are foreclosure proof.

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Death of the McMansion
idoctor wrote:

Death of the 'McMansion': Era of Huge Homes Is Over

They’ve been called McMansions, Starter Castles, Garage Mahals and Faux Chateaus but here’s the latest thing you can call them — History.


Though, given some of the poor quality of materials and craftsmanship, it begs the question, would it be better to just tear them all down and start from scratch?

Who was it that said that bubbles cause flawed resource allocation, and the inevitable collapse is just recognition of that poor resource allocation? Such a awaste of space and materials and so expensive to maintain and heat or cool.


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The Erosion of America's Middle Class

From Der Spiegel:


On the Way Down

The Erosion of America's Middle Class

While America's super-rich congratulate themselves on donating billions to charity, the rest of the country is worse off than ever. Long-term unemployment is rising and millions of Americans are struggling to survive. The gap between rich and poor is wider than ever and the middle class is disappearing.

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