Daily Digest

Daily Digest - Apr 29

Wednesday, April 29, 2009, 9:58 AM
  • Canadian Solar Soaking China’s Sun, and Money (CSIQ)
  • US Treasury 2nd Quarter Borrowing to hit $361 Billion…
  • A Fantastic Invention! (Video)
  • Robert Shiller at Seattle Pacific University (Audio on page)
  • FSN April 25, 2009 (Audio, I haven't listened to it yet Part III Looks really good)
  • Evidence to the Contrary
  • What Did This Cost? (Video)
  • Obama Orders Review of New York Flight as Cost Put at $328,835
  • Changing Sides
  • From The Coming Depression Blog (Video, Bank Destroys Homes)
  • Jim the Realtor: Still Flippin (Video) 

Economy

Canadian Solar Soaking China’s Sun, and Money (CSIQ) 

Solar maker Canadian Solar Inc. (NASDAQ:CSIQ) is incorporated in Canada, but all operations are based in China. The company has announced that three Chinese banks will kick in a total of $2.2 billion “in potential credit facilities that can be used to finance domestic and overseas solar projects where Canadian Solar is the provider of solar modules.” Canadian Solar may establish a holding company in China to “manage these and other transactions.”

The company also announced a $1.1 million matching fund from the government of Suzhou New District for building new PV solar installations in the district. The funds are available only to Canadian Solar.

It is interesting that the amount of backing that the Chinese government is willing to put into manufacturing is a few orders of magnitude greater than its willingness to invest in domestic projects. China appears to have decided to support domestic PV solar manufacturing in whatever way necessary to keep the industry afloat in the country.

The news has bumped the share price by 4.5% in pre-market trading, to $5.80. The company’s 52-week range is $3.00-$51.80.

US Treasury 2nd Quarter Borrowing to hit $361 Billion… 

Math, it’s not fun when it works against you, and the Fed, the central banks, and your government are all working against you. The second fiscal quarter is the one where the revenues are supposed to be the strongest and borrowing the least. However, not this year:

US Treasury April-June borrowing to hit $361 bln

WASHINGTON, April 27 (Reuters) - The U.S. Treasury Department said on Monday it expects to borrow $361 billion of marketable debt in the April-June quarter, up $196 billion from earlier estimates, as government spending soars in the deepest and longest recession in decades.

The amount is a record for the quarter, in which borrowing usually diminishes because most Americans' annual income taxes are filed by April 15. Borrowing needs include $200 billion to support Federal Reserve liquidity programs aimed at reviving lending after the housing market crash and surge in credit defaults.

The previous record borrowing for the April-June quarter is $60 billion in 2003. The Treasury cited weak revenues and greater spending to support economic recovery programs as among reasons for greater borrowing needs.

The Treasury said it expects to borrow $515 billion of marketable debt in the July-September quarter. In the January quarter it borrowed $481 billion, slightly less than earlier estimates.

The Treasury on Wednesday announces its quarterly debt refunding needs. (Reporting by Mark Felsenthal; Editing by Neil Stempleman)

The previous record for the quarter is $60 billion? That almost sounds quaint! Well, I think I know how to do simple math and that means that this year we are SMASHING THE ALL TIME DEBT RECORD BY A FACTOR OF 6! Six times more than ever before?!

You can't say you were never warned: U.S. Budget Disaster Strikes...

Hey, sorry to those who believe the crisis is over, but I think I see that train a coming… and we’re all stuck in Folsom Prison!

A Fantastic Invention! (Video)

Robert Shiller at Seattle Pacific University (Audio on page) 

Professor Shiller spoke at Seattle Pacific University today. After the Q&A, reader Erik asked Shiller:

Q: Why does the FHFA (OFHEO) index show house price gains for the last two months, whereas the Case-Shiller is showing prices are still falling?

A (Erik's notes): He thought about it for a bit, and said "I haven't studied it yet", I think it is because the "OFHEO index doesn't capture foreclosures as much our index." They tend to use conventional mortgages more and conventional mortgages seem to hold out longer and as a result "there may be an upward bias to their numbers." He then paused and said, "the OFHEO numbers are a bit fishy (he looked perplexed) to me because they seem to have broken the smooth trend (he gestured with his hand the trend and finished with an upward movement) and I can't quite figure out where they came from, but I suspect it is from them capturing too few foreclosures or us capturing too many (laughs) even OFHEO has said they don't know why or can't explain their own numbers from the last two months."

I'll revisit this question soon, but I prefer the Case-Shiller index.

Tim at the Seattle Bubble Blog has more:

One amusing part of the afternoon session was a story Dr. Shiller related about a localized Los Angeles housing bubble in 1885. In describing the mentality in 1885 Los Angeles, he said that people thought “Los Angeles is special!” He also quoted from an article in the LA Times which was published during the aftermath of the collapse in 1886: "We Californians have learned something. And that is that home prices can’t just go up forever—they have to be supported by something. Never again will Californians make this mistake."

For anyone interested in hearing the entire afternoon lecture, you can listen to it right here.

Report: BofA, Citi Told May Need to Raise Capital 

From the WSJ: Fed Pushes Citi, BofA to Increase Capital

Regulators have told Bank of America Corp. and Citigroup Inc. that the banks may need to raise more capital ...

Executives at both banks are objecting to the preliminary findings ...

Industry analysts and investors predict that some regional banks, especially those with big portfolios of commercial real-estate loans, likely fared poorly on the stress tests. Analysts consider Regions Financial Corp., Fifth Third Bancorp and Wells Fargo & Co. to be among the leading contenders for more capital....
The article also notes that the results of the stress test could be released the week of May 4th - and not on May 4th as originally announced.

No one will believe the test results if Citi isn't required to raise more capital.

FSN April 25, 2009 (Audio, I haven't listened to it yet Part III Looks really good)

Evidence to the Contrary 

Despite all the evidence to the contrary, mainstream types keep insisting on two things: that what we are going through right now is a recession -- albeit a severe one -- and the worst is (or will soon be) over.

Hogwash.

What Did This Cost? (Video)

Obama Orders Review of New York Flight as Cost Put at $328,835 

April 28 (Bloomberg) -- President Barack Obama ordered a review of a publicity-photo shoot with one of the planes that serves as Air Force One that cost taxpayers $328,835 and caused a furor in New York City.

Changing Sides

There was a time when I disagreed with the inflationistas and the gold bugs. In my view, they did not anticipate the deflationary flash flood that would rip through the global economy once history's biggest credit bubble began to burst, and they failed to understand that this was just the set-up needed to transform the last of the allegedly prudent policymakers into full-on Mugabes-in-the-making.

Now, though, as some deflationistas grow ever more confident that we are set for a replay of what took place 80 years ago, I am in the process of switching sides. As I see it, the combination of intellectual hubris and a relentless determination by central bankers and politicians to beat the GD 2.0 rap, as well as an increasingly contagious urge to embrace all manner of fiscal insanity, suggest we are nearing the point where people will begin to lose faith in those who control the pursestrings -- and the printing presses.

From The Coming Depression Blog (Video, Bank Destroys Homes)

Jim the Realtor: Still Flippin (Video)

16 Comments

DrKrbyLuv's picture
DrKrbyLuv
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Re: Daily Digest - Apr 29

US Treasury 2nd Quarter Borrowing to hit $361 Billion…

It should come as no surprise that talk of a 50 year bond has resurfaced in the market (MarketWatch).

The above graph does NOT include the Social Security taxes - which represent about 40% of the budget deficit.  This makes the debt all the more untenable as the SS "income" will soon vanish; becoming added debt instead of funding.  They are looting SS!

Here is the bottom line, and it really makes me mad - we are auctioning T-bills to capitalize the private Federal Reserve with cash to capitalize private banks!  All the while, "We the People" are falling into perpetual debt and eventual bankruptcy to these same villains.

Larry

kingkang's picture
kingkang
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CSIQ

I'm surprised you guys gave an article that feels like a stock tip.  That is helpful though, even if that's not what it meant to do.

Davos's picture
Davos
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Re: Daily Digest - Apr 29

 Hello KingKang: Which article? Take care, 

kingkang's picture
kingkang
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Re: Daily Digest - Apr 29

Hi Davos,

Oh the first one.  Canadian Solar (CSIQ). 

 

Don't stop the stock tips though b/c you guys have great insight on fundamnetal issues which I usually tend to agree with!

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Re: Daily Digest - Apr 29

where is the fantastic invention video?

DavidC's picture
DavidC
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Re: Daily Digest - Apr 29

Well,

Once again I wonder if we're now fully into 'The New Paradigm'. GDP figure the worst in 50 years(!) and the Dow is up, S & P up and FTSE...up.

I've just seen a piece on Bloomberg TV that made me splutter. Frank Sorrentino (CEO, North Jersey Community Bank), following the announcement by the Fed, says "Real estate prices have become affordable" and this could be the opportunity of a lifetime to get a mortgage at around 4%. Well, I can't see interest rates ever going up again, can you?

David

Apologies - GDP in the first quarter contracted at a 6.1% annualized rate, worse than the expected contraction of 4.9%, slightly better than the negative 6.3% rate seen in the fourth quarter ( GDP has contracted for three quarters in a row for the first time since 1975).

It was inventories that fell ($103.7 billion annual rate last quarter), the biggest drop since records began in 1947, which took 2.8 percentage points off the GDP number. Businesses cut back on total spending by a record 38% annual rate.

mintork's picture
mintork
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Re: Daily Digest - Apr 29

 Hi Davos,

I can't find the "fantastic invention"... error?

Keep up the great work! Could not make it though the day without my Daily Digest!!

Davos's picture
Davos
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Re: Daily Digest - Apr 29

 Hello Tom815 & Mintork:

My appologies for not bringing the fantastic video link below.

The way I build the blog each day is to open about 12 windows per blog I visit (I visit no less than 25 blogs per day), I read everything and leave the gems open. Then I copy the text into this blog, then add the url to the text making it a link, then I copy it from above and paste it below and then add the key part of the article. Then I remove the url from link from the text up at the very top.

I go fast (takes just minutes to do once I'm done with my reading) and am prone to human error. Thanks for the heads up so I could fix it. I think it will be a democratizing invention - I love anything to do with reading, information and books, to me knowledge is more valuable than gold (but I don't like school).

Hello KingKang:

Sorry if that came across with the look or feel of a stock tip.

I really posted it becuase I think solar is the answer to residential and commercial power. It is not however the company I would personally invest in.

What surprised me, and in a good way, is that China is taking an interest in solar. Less coal up the stack I hope. I also posted it becuase I thought it was sad but different that the company was based in the North Americas but really doing everything in China.

Also, I like to mention that when it comes to the Daily Digest I don't know how much of it Chris has a chance to proof or review. So any misstakes or any comments (mine especially) that are in poor taste I hope everyone knows are mine and mine alone. I've been "just a little too harsh" on some elected or appointed officials(and Cramer) becuase I feel our solutions are making our problems worse. I'm going to do my best to be a little more refined.

Take care

 

 

 

 

Ready's picture
Ready
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Re: Daily Digest - Apr 29

Davos,

My company sells a larger version of that printer / perfect binder.

If you have a business model in mind, let me know!

Rog

hucklejohn's picture
hucklejohn
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Re: Daily Digest - Apr 29

Again, thanks Davos for all that you do everyday.    Would you care to share with us a list of all the blogs or sites you visit?  I am also a voracious reader of blogs.  Besides if you show me yours I'll show you mine!

r101958's picture
r101958
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Re: Daily Digest - Apr 29

Two bits of news to pass along. One- the 10 year treasury closed at 3.12% today aaaannnd....just a moment ago....it was announced that Ken Lewis is no longer the CEO of BAC. Link for the Treasury is here:

http://www.ustreas.gov/offices/domestic-finance/debt-management/interest-rate/yield.shtml

Davos's picture
Davos
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Re: Daily Digest - Apr 29

 Hello HuckleJohn:

I'm about as open source as they come when it comes to information, please email me your email address [email protected] and I will email you a share via my Google Chrome blog reader....

Hello Rog: 

Don't have a commercial application for it, thought it was a neat thing, better than the printing press and love how it uses the internet. 

 

Take care

hucklejohn's picture
hucklejohn
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Re: Daily Digest - Apr 29

Thanks for the heads up on the 10 year Treasury note going up.  The dollar was down today too. I keep on the look out for several days at least where the yield on the 10 year Treasury note is trending up while the dollar is trending down.  This would be a bad sign for the dollar although I don't know how much more the Treasury (or the Fed) can manipulate the dollar.

Damnthematrix's picture
Damnthematrix
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Re: Daily Digest - Apr 29

http://news.bbc.co.uk/2/hi/business/8024839.stm

Slump in exports hits US economy

US GDP graph


The US economy continued to contract in the first quarter of 2009, led by the biggest fall in exports for 40 years.

US GDP contracted at an annualised rate of 6.1% during the quarter, little improvement on the 6.3% fall in the last three months of 2008.

Exports fell by 30%, the Commerce Department said, as the global recession hit worldwide spending.

Separately, the Federal Reserve held interest rates at near zero and said the recession in the US may be easing.

The central bank kept its key rate at its current range of between zero and 0.25%, saying that while the economy is still contracting, the pace of contraction appears to be "somewhat slower". <MORE>

Damnthematrix's picture
Damnthematrix
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Re: Daily Digest - Apr 29

http://www.nytimes.com/2009/04/29/business/economy/29econ.html?_r=1&em

Phoenix Leads the Way Down in Home Prices

Published: April 28, 2009

Phoenix has achieved the unwelcome distinction of becoming the first major American city where home prices have fallen in half since the market peaked in the middle of the decade, according to data released Tuesday.

Though historical statistics are scant, experts said the precipitous decline probably had few if any equals in modern times.

“Even during the Depression, I’m not sure prices fell this quickly,” said Karl Guntermann, a professor of real estate at Arizona State University.

Greg Swann, a Phoenix real estate agent, took a moment to marvel at the news. “What happened here will some day be a new chapter in ‘Extraordinary Popular Delusions and the Madness of Crowds,’ ” the classic survey of investing mania, he said. “We were living during the boom like there was no tomorrow. And guess what? Now it’s tomorrow.”

Home prices in the Sun Belt city, the 12th-largest metropolitan area in the United States, dropped 4.5 percent in February, according to the Standard & Poor’s Case-Shiller Home Price Index. Prices in Phoenix are now down 50.8 percent since the market peaked in June 2006.

For the country as a whole, the Case-Shiller numbers offered the thinnest of silver linings: things are still getting worse, but more slowly.

 

fujisan's picture
fujisan
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Re: Daily Digest - Apr 29

U.S. economy tumbles steeply in first quarter | Reuters

Quote:

WASHINGTON (Reuters) - The U.S. economy shrank by a surprisingly steep 6.1 percent in the first quarter, hit by a record plunge in business inventories and sinking exports, but investors read signs of recovery in the report.

...

The Commerce Department said on Wednesday inventories were drawn down by a record $103.7 billion -- potentially good news for the economy because it suggests businesses have cut their stockpiles of merchandise to levels that will let them start placing new orders, stimulating production.

"The larger-than-expected decline in first-quarter GDP is good news for the upcoming quarters. We expect that the recession will be over in the second half of the year," said Harm Bandholz, an economist at Unicredit Markets and Investment Banking in New York.

"good news" ?! Maybe they should stop sniffing that white powder.

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