Daily Digest

Daily Digest 8/6 - Jobless Claims Jump, The Deflation Debate, Banking Crisis 2.0

Friday, August 6, 2010, 9:51 AM
  • Two Top Economists Differ Sharply on Risk of Deflation
  • Chinese Missile Could Shift Pacific Power Balance
  • Revised Growth Figures: A Deeper Hole
  • U.S. Jobless Claims Jump To Highest Level Since April
  • Through the Roof or Smashed into a Thousand Pieces?
  • Banking System On Verge Of New Crisis, Hedge Fund Noster Capital Warns
  • IMF: U.S. Real Estate Sectors Could Bring Banking Crisis 2.0
  • China's Riddle: Corn Deals
  • Wheat Goes Up, Prices to Follow

Crash Course DVDPass along a DVD to your friends and family—the deluxe DVD is available in discount packs of 4 and 10! (NTSC or PAL)


Two Top Economists Differ Sharply on Risk of Deflation (jdargis)

Mr. Berner and his deputy, David Greenlaw, still expect a pickup in the second half of the year, which would help gradually bring down unemployment. They play down the danger posed by deflation, the malady that deepened the Great Depression and contributed to Japan’s lost decade of the 1990s.

Chinese Missile Could Shift Pacific Power Balance (jrf29)

U.S. naval planners are scrambling to deal with what analysts say is a game-changing weapon being developed by China — an unprecedented carrier-killing missile called the Dong Feng 21D that could be launched from land with enough accuracy to penetrate the defenses of even the most advanced moving aircraft carrier at a distance of more than 900 miles.

Revised Growth Figures: A Deeper Hole (jdargis)

The updates show an economy that was weaker going into the recession than previously believed, and which declined much more steeply in the immediate wake of 2008’s financial crisis (see chart). These changes confirm the recession as the worst of the post-war years.

U.S. Jobless Claims Jump To Highest Level Since April (bandv)

Initial claims ended 2009 around 450,000 and have not improved since then even as the economy emerged in the middle of last year from a brutal recession.

"With limited hiring by the private sector, it is becoming increasingly difficult for the recovery to be sustained," Gledhill said.

Through the Roof or Smashed into a Thousand Pieces? (Ilene)

Since our last dip, we’ve come back for another try but the volume has been substantially lower than it was in April, leading us to believe it is only TradeBots, and not Oompa Loompas, who are buying this market. Can TradeBots alone give us enough “thrust” to break through this time? It shouldn’t be THAT hard, in April we had highs of Dow 11,258 (5.6% higher than 10,680), S&P 1,219 (7.5% higher), Nas 2,535 (9.2%), NYSE 7,743 (7.2%) and Russell 745 (11.1%) so it’s not like we’re asking for a low with our little breakouts, are we?

Crash Course DVDPass along a DVD to your friends and family—the deluxe DVD is available in discount packs of 4 and 10! (NTSC or PAL)

Banking System On Verge Of New Crisis, Hedge Fund Noster Capital Warns (bandv)

"Two months ago everybody was in a panic about the sovereign debt crisis, and now it's like everybody is going on holiday and everything is fine," he said.

IMF: U.S. Real Estate Sectors Could Bring Banking Crisis 2.0 (bandv)

IMF noted financial institutions will face rollover risks with large loan maturities in 2011–13, which could bring rapidly rising foreclosures and bank losses. The small and medium-sized banks, which are most heavily exposed to the commercial real estate sector, are causing the most concern.


China's Riddle: Corn Deals (Rector)

China has now imported about 1.2 million metric tons of corn this year from the U.S., the world's largest producer, compared to total imports from all countries of less than 100,000 tons in previous years.

Farmers, traders, and agricultural economists are divided over the implications of this surge. Some see it as the arrival of a long-anticipated age of big corn exports to China to feed its increasingly wealthy population. Others think it's probably a short-term blip caused by recent droughts.

Wheat Goes Up, Prices to Follow (Rector)

Wheat futures' eight-week rally regained steam on Wednesday by surging 6.7% to above $7.25 a bushel on the Chicago Board of Trade, their highest since September 2008.

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."


saxplayer00o1's picture
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Re: Daily Digest 8/6 - Jobless Claims Jump, The Deflation ...


"WASHINGTON -(Dow Jones)- The federal budget deficit reached $1.2 trillion through the first 10 months of fiscal 2010, a slight improvement from the same point last year, the Congressional Budget Office said Thursday evening.

The deficit in July was $169 billion, around $11 billion less than in July last year, the non-partisan congressional scorekeeper said in its monthly budget assessment.

The federal government's deficit for the fiscal year is on track to be between $1.2 trillion and $1.3 trillion, the CBO said recently in its most up-to-date yearly forecast. That would be slightly less than the $1.4 trillion recorded in fiscal 2009, the highest mark ever.

The current fiscal year ends on Sept. 30."

"Losses for the U.S. Postal Service widened to $3.5 billion in the third quarter as mail volume continued to plummet and operating expenses grew.

Despite more than $10 billion in cost cutting over three years, the Postal Service could face a cash-flow problem next year and may have trouble making a payment for future retiree benefits, the agency's chief financial officer said Thursday. Another expense was $17 billion in workers' compensation liability because of lower interest rates, Joseph R. Corbett told the board of governors.

Losses for the quarter that ended June 30 were $1.1 billion more than the Postal Service had hemorrhaged during the same period last year, Corbett said.

So far this fiscal year, the Postal Service has had a net loss of about $5.4 billion, an increase from $4.7 billion in the same period of 2009."

"Aug. 5 (Bloomberg) -- Chicago, the third most-populous U.S. city, had its creditworthiness on $6.8 billion of general- obligation debt cut one level by Fitch Ratings because declining tax revenue has weakened its finances.

The one-step downgrade to AA, third-highest, from AA+ was also influenced by the city’s accelerated use of reserves to balance its budget, Fitch said in a press release. Fitch maintained a negative outlook on the city’s debt, meaning the rating might be lowered further.

Chicago’s tax revenue has been challenged by an unemployment rate of 10.6 percent, higher than the national average of 9.5 percent in June. Foreclosure filings in the first half climbed 23 percent to 78,022, including the Naperville and Joliet areas, according to RealtyTrac Inc.

“The city continues to experience large budget gaps, multiple years of structural imbalance and a large and rapidly growing unfunded pension obligation,” Fitch said. “Fitch believes rising costs for public safety and the continued slow economic recovery will severely limit the city’s ability to achieve structural balance in 2011.” "

.......................3A) City faces higher borrowing costs as bond rating is downgraded

"None of the numbers Cincinnati City Council members heard or saw at a meeting Thursday about the staggering financial woes of the city's retirement system offered much encouragement about finding a less-than-painful solution.

Not the warning that, without substantive changes, the $2 billion system could see a projected $1 billion long-term shortfall balloon to $1.5 billion within five years.

Not the fact that, even if the plan achieves what many see as wildly optimistic investment returns, it still could lose up to $30 million a year. Not recommendations that, to avert those doomsday scenarios, City Hall might be asked to come up with an immediate cash infusion of as much as $439 million or nearly double its annual payments.

And, perhaps most importantly, not the roughly 125 city retirees and workers in the audience at the Duke Energy Convention Center whose lives could be significantly affected by any changes - and whose attitudes and fears were passionately expressed by a retired city garage worker toward the end of the three-hour hearing."

..........................4A) Retirement Fund Faces $1 Billion Shortfall (Cincinnati)

"Paula Tilsley, Pension Consultant: "Under current conditions, the plan is at risk of becoming insolvent in 18 years, meaning we will not have money to pay out our benefits."

18 years may seem like forever, but in pension world, it's spare change. Which could mean an older retirement age for current workers, higher pension contributions, and for retirees. ... lower monthly pensions, plus medical benefit cuts."

"WASHINGTON — Medicare will remain financially solvent for 12 additional years, until 2029, because of the cost-cutting measures in President Obama’s recently enacted health care legislation, the program’s trustees projected on Thursday. "

"The new law squeezes nearly a half-trillion dollars from Medicare spending in the next 10 years. The savings are based on an assumption that hospitals, nursing homes and other health care providers will become more efficient, increasing their productivity to match productivity gains in the overall economy.

If that does not happen, the trustees said, Medicare will pay many hospitals and doctors less than the cost of the goods and services they purchase, and providers may “eventually become unwilling or unable to treat Medicare beneficiaries.”

The report also assumes that Medicare will cut payment rates for doctors’ services by 23 percent on Dec. 1 and by a further 6.5 percent on Jan. 1, as required under existing law.

This assumption is unrealistic, the report said, because “Congress is virtually certain to override” the scheduled cuts, as it has done in recent years.

The report makes clear that Medicare still faces major financial problems. If, as expected, Congress overrides the cuts in doctors’ fees, the cost of Part B of Medicare, which covers physician services, will grow about 8 percent a year in the coming decade, and Part D, which covers prescription drugs, will grow 9.4 percent a year — much faster than the economy, the trustees said."

"KANSAS CITY, MO (kcur) - Missouri can expect a $1 billion income deficit in the 2012 fiscal year according to an assessment of the nonprofit Missouri Budget Project.

A billion dollars were cut from the state budget for the financial year that started July first. But the public policy analysis group believes the cuts have gone as far as possible. July tax collections were down 4.2 percent from a year ago. The Budget Project's Director Amy Blouinhe estimates the crisis has been escalating over the last decade. She said the answers lie in collecting revenue, such as multi-state corporations that headquarter in Missouri and pay no income tax.

"Base companies, [and] mom and pop operations that started here are contributing to the infrastructure that they benefit from," Blouin said. "And multi-state operations should be required to do the same thing."

Another innovation working for other states, said Blouin, is using sales tax to collect on internet purchases. A new study from University of Tennessee stated Missouri loses $187 million this year in state and local tax revenue from letting internet buying be tax exempt."

"WASHINGTON (TheStreet) -- Employers shed a disappointing number of workers in July thanks to the continued and expected disappearance of census workers from government payrolls. Even so, private sector employers added a modest number of workers during that period, though less than Wall Street had expected.

Nonfarm payrolls fell by 131,000 last month, according to a Labor Department report released Friday morning, marking a second straight month of losses. During that time, the government continued laying off workers tied to the decennial census, as that work ebbed. The government lost 143,000 census positions in July. Investors had expected nonfarm payrolls to lose a total of 87,000 positions last month, according to consensus projections provided by Briefing.com.

In June, the economy broadly lost 221,000 jobs, which was revised to reflect an even steeper drop than the originally reported loss of 125,000."

...................7A) Companies hire at slow pace for 3rd straight month

"The "underemployment" rate was the same as in June, at 16.5 percent. That includes those working part time who would prefer full-time work and unemployed workers who've given up on their job hunts.

All told, there were 14.6 million people looking for work in July. That's roughly double the figure in December 2007, when the recession began.

Even if hiring picks up, it will take years to regain all the jobs lost during the recession. The economy lost 8.4 million jobs in 2008 and 2009. This year, private employers have added only 559,000 jobs."

....................7B) Unemployment comment by Nathan's Economic Edge

"Here is how they are keeping the headline percentage down:

The civilian labor force participation rate (64.6 percent) and the employment-population ratio (58.4 percent) were essentially unchanged in July; however, these measures have declined by 0.6 percentage point and 0.4 point, respectively, since April.

So, while the population is growing, now 311 million in the U.S., both the participation rate and population ratio are declining! How much is that? Well, .6% is equal to 1.866 million people!!! That’s just since April!

And that makes any job creation whatsoever a flat out lie."




"CONCORD -- Unsustainable. Overwhelming. Drastic.

Just some of the words pension experts used Thursday to describe public employee pensions in Contra Costa County and the state.

Four panelists painted a dire picture for governments during the pension reform debate presented by the Contra Costa Council and attended by more than 100 people, including many public officials.

"Pension problems are drastic and, in some sense, overwhelming," said David Twa, a panelist and Contra Costa chief administrator.

The county will need to find $59 million a year by 2015 just to pay for pensions, he said."

"Millions of homeowners are trapped in a bizarre real estate limbo, living in houses but no longer paying for them, waiting and wondering if someone will help them - or throw them out.

Some are victims of their own economic circumstances, unable to afford their mortgage and expecting to lose their homes if they can't get a break from their bank. Others are opportunists, choosing not to spend on a house worth less than they owe. Instead, they can live rent-free until their lender makes a move.

The limbo phenomenon is a radical departure from previous real estate crashes, when there were far fewer troubled loans and banks moved speedily on those who fell behind on payments. Now many lenders simply can't keep up, and others appear reluctant to flood a weakened market with foreclosed homes.

It all adds up to lingering instability for the housing market, as lenders slowly work through the backlog while homeowners endure uncertainty that could last months or even years.

"It's bad all the way around, for the neighbor, the community, the city, state, nation," said Chris George, founder and CEO of CMG Mortgage, based in San Ramon, Calif. "It's a continued indication that there are a lot of people in trouble, particularly with their job situations."

Some homeowners say ignoring the mortgage is the only option they have."

"Nationwide, "roughly 3.5 million loans are in this limbo land, and are not proceeding through very quickly. It could take years," said Sam Khater, an economist with CoreLogic, which tracks mortgage performance. "I have a feeling it's going to follow the path of unemployment and have a long tail.""

  • Other news and headlines:

Fannie Mae asks for $1.5B in aid after 2Q loss

Is the party about to end in Brazil? (CNN Money)

Russian grain ban sees prices surge a further 6%

Role Of IMF In Reshaping Financial Sector Landscape

Recession Costs Small Businesses $2 Trillion: Outlook Remains Gloomy For Many

Korea may be more indebted than said

Medicare fund will last extra 12 years - maybe

John Williams: Times That Try Our Souls

Moody's Downgrades Another $4.3 Billion Of RMBS

Treasury Plans to Sell $60 Billion of Bills

Unemployment borrowing adds to state debt load (Illinois)

U.K. Bankruptcies to Rise as Government Reduces Spending, Accountants Say

Grand jury: Jackson Health System a 'colossal mess'

bklement's picture
Status: Silver Member (Offline)
Joined: Jan 26 2009
Posts: 108
Re: Daily Digest 8/6 - Jobless Claims Jump, The Deflation ...

The Return of the $1000 Down Mortgage


It sounds too good to be true. But it is true. This offer does not come from a subprime lender, looking to reel in thousands of unqualified and ill-advised homebuyers, only to slap them with add-ons, fees and variable rates. It is not a teaser or a trick. The advertisement references a program initiated by the National Council of State Housing Agencies and Fannie Mae, the taxpayer-backed, government-sponsored enterprise that buys up mortgages from lending banks.

NZSailor's picture
Status: Bronze Member (Offline)
Joined: Oct 4 2008
Posts: 62
Re: Daily Digest 8/6 - Jobless Claims Jump, The Deflation ...

The John Williams piece is pretty sober... and with a short timeline....

Great stuff as usual Saxplayer, thanks again!


printfaster's picture
Status: Bronze Member (Offline)
Joined: Sep 30 2009
Posts: 52
Contra Costa pension reform debate paints troubling picture (Ca.

Stupid politicians:

The county will need to find $59 million a year by 2015 just to pay for pensions, he said."

No you idiot, you don't need to find $59 million.  You need to cancel $59 million in pensions.

Just where does he think he will "find" the money?  By going house to house and lifting sofa cushions?

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