Daily Digest

Daily Digest - Apr 14

Tuesday, April 14, 2009, 8:10 AM
  • Another House Price Round Trip to the 1990s
  • Uncle Jay Explains the News - Soclalism Video
  • Treasury Directs GM to Prepare for BK
  • Baltics: Fitch downgrade and more downgrades to come
  • Protest at the San Francisco Fed
  • California Budget and Economy Examined: 8th Largest Global Economy Still on the Brink.
  • Is TARP Investigator on Collision Course With Treasury on Bank Assets?
  • China Cuts Purchases of Treasuries and Foreign Bonds
  • They shoot real estate agents, don't they? (H/T Zombie210)
  • Michigan Facing "Economic Katrina" If GM Files for Bankruptcy, Rep. McCotter Says (H/T Christopher Peters)
  • Bear Attack (Video H/T CM)
  • Phone Taxes are Cell He$&

Economy

Another House Price Round Trip to the 1990s

Here is the price history for the featured 3 bedroom, 2 bath, 2 car garage home:

May 1992: $115,500

April 2003: $275,000

April 2006: $440,000

March 2009: $135,000 (REO)

Uncle Jay Explains the News - Soclalism Video

Treasury Directs GM to Prepare for BK

From the NY Times: ‘Surgical' Bankruptcy Possible for G.M.

The Treasury Department is directing General Motors to lay the groundwork for a bankruptcy filing by a June 1 deadline... The goal is to prepare for a fast "surgical" bankruptcy, the people who had been briefed on the plans said.

One plan under consideration would create a new company that would buy the "good" assets of G.M. almost immediately after the carmaker files for bankruptcy.

Treasury officials are examining one potential outcome in which the "good G.M." enters and exits bankruptcy protection in as little as two weeks.

Baltics: Fitch downgrade and more downgrades to come

The first time I wrote about the Baltics was back in August in a post entitled, "Are the Baltics the new Argentina?." Since then, things have gotten progressively worse and the Baltics are clearly in Depression with Latvia leading the way to the downside. The credit ratings agencies have caught on to this and Fitch is marking the countries down near and into junk territory with negative outlooks. Win Thin of Brown Brothers Harriman has a good read on what to make of this:

Fitch downgraded the Baltics and kept the outlooks at negative. Estonia was cut to BBB+ from A- Latvia was cut to BB+ from BBB-, and Lithuania was cut to BBB from BBB+. The only surprise to us was that the downgrades weren't deeper, as we see eventual junk status (below BBB-) for all three. As we noted in our most recent FX quarterly, the ratings agencies have been overly generous with Eastern Europe, particularly the Baltics. Our sovereign rating model puts Estonia at a BB/Ba2/BB rating, way below actual ratings of A/A1/BBB+. For Lithuania, we rate it BB+ vs. actual BBB/A2/BBB. For Latvia, we rate it B+ vs. actual BB+/Baa1/BB+. Others that are overrated in the region include Bulgaria (we rate it BB- vs. actual BBB/Baa3/BBB-), Hungary (we rate it BB vs. actual BBB-/Baa1/BBB, and Romania (we rate it BB vs. actual BB+/Baa3/BB+).

Protest at the San Francisco Fed

A couple of photos from the "A New Way Forward" protest at the San Francisco Fed yesterday. Photo credit: Darin Greyerbiehl, 4/11/2009. More photos here.

California Budget and Economy Examined: 8th Largest Global Economy Still on the Brink

Now let us break down the numbers. Personal income tax makes up 49 percent of all incoming revenue. Sales tax makes up 34 percent of all incoming revenue. These two line items make up over 80 percent of a state budget that is well over $100 billion. And these are two line items that are receding like the tide. First, personal income tax is falling because a state with 2 million unemployed is not paying as much taxes. In addition, those who are still working, many on commission-based industries like real estate and finance are not pulling in salaries from boom time days. What happens? Less taxes are paid. And with less earnings people are spending less. What does this translate to in the economy?

Is TARP Investigator on Collision Course With Treasury on Bank Assets?

This could get interesting. The Financial Times tells us that Neil Barofsky, the special investigator general for the TARP, is looking whether banks cooked their books by overvaluing assets to qualify for TARP funding, Remember, bank had to fall into this funny construct of being sick enough to need help, but not so sick as to be terminal.

And since we are widely reading reports of banks carrying lots of mortgage paper at higher than 80 cents on the dollar (we've even seen reports of over 90 cents on the dollar being common) it would appear that Barofsky's suspicions are well founded.

So play this out: we have the public private partnerships designed to hoover up assets at well above market levels. These programs are voluntary, so the banks most decidedly will not sell assets unless they get a price that is above the current carrying value on their books. And recent research suggests that, contrary to the Treasury's claims otherwise, the current market values are likely to reflect accurately what this dreck is worth. So taxpayers are being asked to overpay substantially for junk in an opaque and unnecessarily costly subsidy (the need to bring in the private asset managers as a fig leaf only adds costs, since they need to somehow see decent odds of a positive return). And doing it this way, by making an indirect subsidy to the banks, excludes the overpayment from what the government calculates as its subsidy to each bank. The more the taxpayers perceive they have given to a Citi or a BofA, the more they are entitled to demand control, or at least more restraints (particularly on risk taking. Why should these banks be gambling with taxpayer funds to enrich shareholders?). So muffing the equation helps the plutocracy.

China Cuts Purchases of Treasuries and Foreign Bonds

There have also been some signs that Americans may consume less and save more money in response to hard economic times. This would further decrease the American dependence on Chinese savings.

Yves here. That is more than a tad misleading. All signs are that consumer savings are debt reduction (the official reports of "savings" merely measures income versus consumption and does not differentiate whether the difference is debt paydown or an increase in liquid assets that could be used for investments such as Treasuries). The picture is further muddied by the clampdown on consumer credit. Money mavens for the masses such as Suze Orman, who formerly advised paying down on credit card debt as quickly as possible, now are telling consumers to build up an 8 month cash reserve and make only minimum card payments, since card companies are often cutting credit lines and not extending new credit. Thus families can no longer rely on credit cards as a source of emergency money and need to look to their own resources.

They shoot real estate agents, don't they? (H/T Zombie210)

April 11, 2009 | It's a terrible thing to come to terms with, but I am the reason the world is in an economic tailspin. Me, alone. All those foreclosures, short sales, bank failures, job losses, bailouts, plummeting stocks, the ripple effect into Europe, China, even Madoff: all my fault. Moi. That last house I sold at 253 Carrington Way? That was the tipping point, I'm convinced. I sold it for $657,500 in August 2005, and now Zillow is damning it at $537,000. I would weep to call the owners now and say, hey, want a market analysis? Sound like fun? I know, you'd rather shove shards of glass under your fingernails, I hear you.

In any case, I'm your neighborhood real estate agent, and I'm really, really sorry.

Michigan Facing "Economic Katrina" If GM Files for Bankruptcy, Rep. McCotter Says (Video - H/T Christopher Peters)

Bear Attack (Video H/T CM)

Phone Taxes are Cell He$&

Eleven federal, state and city levies add as much as 33 percent to the cost of New Yorkers' cellphones, a Post analysis found.

A typical cell plan costing $49.99 a month comes with a total tax bill of $10.59 -- a 21.18 percent tax rate that helps give New York the fourth-highest cellphone taxes of any state.

22 Comments

kolcan900's picture
kolcan900
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Re: Daily Digest - Apr 14

I just read today that Goldman Sachs is reporting huge profits for last quarter.  Any insight anyone?  How does this propaganda continue to go on?

vinnya's picture
vinnya
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Re: Daily Digest - Apr 14

Can anyone explain to me how all of a sudden theres no bad news and people seem to believe the worst is over and things are gonna get better?  I personally believe things are still going to get worse, much worse. 

Trojan24's picture
Trojan24
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Re: Daily Digest - Apr 14

 

It is called "The Orphan Month"

 

See:  http://www.ritholtz.com/blog/2009/04/how-to-puff-up-earnings-goldman-sachs-style/

castlewp's picture
castlewp
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Re: Daily Digest - Apr 14

IKolcan wrote

 "just read today that Goldman Sachs is reporting huge profits for last quarter.  Any insight anyone?  How does this propaganda continue to go on?"

Here is an interesting article

http://www.goldmansachs666.com/2009/04/is-goldman-sachs-manipulating-stock.html

I understand this is the website Goldman Sachs has hired a law firm to have shut down.

__________________

I am more concerned about the return of my money than the return on my money. --Mark Twain

 

Dogs_In_A_Pile's picture
Dogs_In_A_Pile
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Re: Daily Digest - Apr 14

Okay - I got about halfway through the President's speech (still going as I type) on the state of the economy before I vomited my socks up all over my keyboard.

I don't know if he truly believes that We The People are as stupid as he must think we are to buy what he's selling or if he just doesn't understand what is going on and is counting on the electorate to be that stupid.

But since he started talking the Dow has dropped 30 points and I am in DIA Puts that were already profitable.

As far as GS - naaaaah, there isn't any manipulation going on.  C'mon, they're only up 72 points since 11/21.  They must have had a good model going into the meltdown in order to survive.  Well that and eleventy kajillion (I made that up) dollars printed and served up on a silver platter.

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Re: Daily Digest - Apr 14

WASHINGTON – Federal Reserve Chairman Ben Bernanke said Tuesday there's been "tentative signs" that the recession may be easing. But he also warned that any hope for a lasting recovery hinges on the government's success in stabilizing shaky financial markets and getting credit to flow more freely again.

http://news.yahoo.com/s/ap/20090414/ap_on_bi_ge/bernanke

Bwahahahaha

Dogs_In_A_Pile's picture
Dogs_In_A_Pile
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Re: Daily Digest - Apr 14

Greg -

And now that we have the banks' balance sheets all patched up we shift our attention to the sucking chest wounds on the Fed's balance sheet right?

What's sobering about the Bernanke article you provided is that he probably believes what he is saying.

BTW - found a new BBQ place this weekend - vinegar based sauce - at the local Farmer's Market. Will probably be a while before Bubba's BBQ goes under if I have anything to say about it...........

suesullivan's picture
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Re: Daily Digest - Apr 14

I found Eric Sprott's comment about unemployment figures on "Bear Attack" very interesting, after hearing Jim Puplava reiterate the prevailing understanding that unemployment numbers as a trailing economic indicator. Sprott says he's beginning to consider unemployment to be a leading indicator, in that folks who lose jobs have mortgages and credit card debt that they will fall behind on if they can't get another job. Continued rising unemployment then, portends continued economic contraction, and that makes a ton of sense.

And I got a chuckle out of Nouriel Roubini's comment about the six bear market rallies in the last two years: "The market has predicted six out of the last zero economic recoveries."

Ready's picture
Ready
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Re: Daily Digest - Apr 14
suesullivan wrote:

And I got a chuckle out of Nouriel Roubini's comment about the six bear market rallies in the last two years: "The market has predicted six out of the last zero economic recoveries."

That was great!

alcatwize's picture
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Feel helpless? How about a call to action?

How about a grass roots movement for everyone to pull their deposits from the banks that took TARP money?  I can think of no better way to send a message and show that the people are not powerless and will not stand for what is going on.

 

 

CB's picture
CB
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Re: Daily Digest - Apr 14

A snippet of a Simon Johnson interview here:

http://www.bbc.co.uk/worldservice/business/2009/04/090409_johnson.shtml

listen and weep as he lays out the ugly truth of the situation - there will be no top-down change as the banking cabal won't allow it/can't allow it - they are unwilling to commit suicide on behalf of the public (what a surprise). The chaiman of Goldman Sachs was interviewed on NPR the other day - these people have no shame and will never admit their role in creating the problem. They are, in fact, still working furiously to profit from the national misery.

Without widespread popular uprising there will be no change of direction. While there is widespread public disatisfaction with the state of affairs it is completely unfocused and easily sidetracked. I don't expect any effective opposition to arise - people like Ron Paul are not effective in focusing the public's attention.

plantguy90's picture
plantguy90
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Re: Daily Digest - Apr 14

Uh oh, Ben's talking up the dollar, yikes!!!!

Jarhett's picture
Jarhett
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Re: Feel helpless? How about a call to action?
alcatwize wrote:

How about a grass roots movement for everyone to pull their deposits from the banks that took TARP money?  I can think of no better way to send a message and show that the people are not powerless and will not stand for what is going on.

 

 

 

This is a good idea!!!  I am taking all my money out of B of A (TARP recipient) , and I am going to cut up my B of A credit card.  If enough of us do this, it should have an impact.  Their is no reason to support these institutions anymore, they disgust me.  

goldcountry's picture
goldcountry
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Re: Daily Digest - Apr 14

http://zerohedge.blogspot.com/

 

BlackRock Confirms Goldman Q1 Profit Was Non-Recurring And A Result Of AIG Unwinds

This is kinda a huge deal... Peter Fisher, managing director of BlackRock (yes, that BlackRock), states in a Bloomberg interview that Goldman's first quarter trading profit is non-recurring in nature, and believes it was mostly due to AIG unwinds... It is a little shocking that BlackRock would have anything bad to say about the phenomenal resurrection of financial companies, and puts the huge "profit" in it's true light. After all PIMROCK are the direct beneficiaries of the perpetuating delusion that all is well with the banking system, so it is odd that a BlackRock professional would dare to go against the grain on this one.

Fully worth a listen (and yes, you need audio for this)

Full link below

foote2777's picture
foote2777
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Re: Daily Digest - Apr 14

 

I see the only way to truly bring this all down is to withdraw our money from the banks and from the stock market. If people en masse began removing their investments from these banks they could no longer pretend they were solvent, their stock prices would fall, and with it, the sham.

 Am I wrong?

Dogs_In_A_Pile's picture
Dogs_In_A_Pile
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Re: Daily Digest - Apr 14
foote2777 wrote:

 

I see the only way to truly bring this all down is to withdraw our money from the banks and from the stock market. If people en masse began removing their investments from these banks they could no longer pretend they were solvent, their stock prices would fall, and with it, the sham.

 Am I wrong?

Have you considered the impact on the many innocent and decent people in the banking industry and on Wall Street that would suffer from a market and banking system implosion?

If you have, you know the answer.

If you haven't, you still know the answer.

foote2777's picture
foote2777
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Re: Daily Digest - Apr 14

 

is that different from the "many innocent and decent people" outside of the banking industry and on Wall Street that have already been effected and will continue to be effected for a long time to come.

 

Dogs_In_A_Pile's picture
Dogs_In_A_Pile
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Re: Daily Digest - Apr 14
foote2777 wrote:

is that different from the "many innocent and decent people" outside of the banking industry and on Wall Street that have already been effected and will continue to be effected for a long time to come.

Yes it is different.  It's a different question than the one I asked.

joemanc's picture
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Re: Daily Digest - Apr 14

Bat Morality deemed Catastrophic in Massachussetts

Quote:

As an example, Madden mentioned that one of the
biggest hibernacula (in Chester), which normally has 8,000 to 10,000
bats at this time of year, had only 150 remaining. Some of the infected
bats have the characteristic white fungus on their muzzles.

Quote:

At this time, the affects on the insect population
are unknown. Bats eat thousands of pounds of agricultural pests and
nuisance species like mosquitoes every summer, so there's no telling
how the changes to the bat population could ripple through the
ecosystem, not to mention the human food chain.

http://www.berkshireeagle.com/ci_12126510

That last paragraph is scary. This is also happening here in CT.

capesurvivor's picture
capesurvivor
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Re: Daily Digest - Apr 14

I was stunned to hear of problems with bat "morality".

Gave me a great laugh!

I know you meant mortality, LOL!

I am concerned; I live in MA.

 

SG

ditchner's picture
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Re: Daily Digest - Apr 14

Don't forget that Goldman Sachs took most of the AIG bailout.  That had to help the bottom line.

joemanc's picture
joemanc
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Re: Daily Digest - Apr 14

Bat Morality - wow, now THAT'S a TYPO!!! lol

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