Daily Digest

Daily Digest - April 17

Saturday, April 17, 2010, 9:26 AM
  • U.S. Accuses Goldman Sachs of Fraud in Mortgage Deal
  • High Frequency Friday – The WSJ Finally Catches On! 
  • The U.S. Economy: Riding the Debtors' Merry-Go-Round
  • Housing Plan Survives For St. Vincent’s Site
  • Goldman May Owe British Taxpayers $841m
  • Volcanic Ash Cloud Leaves Shops Facing Shortages Of Fruit, Vegetables And Medicine

Economy

U.S. Accuses Goldman Sachs of Fraud in Mortgage Deal (mhoop)

The move marks the first time that regulators have taken action against a Wall Street deal that helped investors capitalize on the collapse of the housing market. Goldman itself profited by betting against the very mortgage investments that it sold to its customers.

High Frequency Friday – The WSJ Finally Catches On! (Ilene)

I was amazed this morning to see both the usual contrarian indicator of a bullish cover on Newsweek (mission accomplished market pumpers) and a good piece of reporting in the Journal on a topic ZeroHedge and I have been pounding the table on for a year. Our readers will find nothing new in the article "This Market Has Its Freq On" but to see it finally summarized in the MSM (giving us no credit at all, of course) is at least a little bit satisfying.

The U.S. Economy: Riding the Debtors' Merry-Go-Round (mhoop)

The whole point is that playing this debt “shell game” solves nothing. The paper of all three of these nations is worthless, or is rapidly approaching that point, since none of the three is capable of repaying a penny of all this new debt. “Buying” worthless IOU's using worthless IOU's (the fiat currency of an insolvent economy) is a transparent sham which even the comatose, market sheep will ultimately notice, eventually.

Housing Plan Survives For St. Vincent’s Site (VeganD)

St. Vincent’s would have moved across Seventh Avenue, demolishing another building, the contemporary Edward and Theresa O’Toole Medical Services Building, and building a new $830 million hospital in its place.

Over the protests of preservationists and neighborhood celebrities like Susan Sarandon, the New York City Landmarks Preservation Commission approved the O’Toole demolition after St. Vincent’s argued that it deserved an exemption for financial hardship.

Goldman May Owe British Taxpayers $841m (james_knight_chaucer)

British taxpayers have a direct material interest in the outcome of the fraud case brought against Goldman Sachs by the US financial watchdog, the Securities and Exchange Commission.

Because the bulk of the loss on the transaction at the heart of the charge against Goldman ended up with Royal Bank of Scotland, the bank where British taxpayers have an 84% stake.

Volcanic Ash Cloud Leaves Shops Facing Shortages Of Fruit, Vegetables And Medicine (joemanc)

Clothing retailers also face a backlog as their stock sits in holding pens around the world waiting to be flown from manufacturing hubs to the UK.

The ban on air freight has meant that fruits such as figs, papaya and coconuts, fresh flowers and pharmaceutical products – all of which are delivered by air – are not reaching their destinations in the UK. Air freight accounts for 25pc of the UK's international goods movements by value.

Please send article submissions to: [email protected]

22 Comments

saxplayer00o1's picture
saxplayer00o1
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Re: Daily Digest - April 17

"BEIJING, April 17 (Reuters) - China should use more of its massive foreign exchange reserves to buy gold to support its aim of raising the international role of the yuan currency, a senior government researcher said on Saturday.

Li Lianzhong, who heads the economic department of the Communist Party's policy research office, said that Beijing should also encourage domestic enterprises to acquire foreign energy and natural resource assets by using part of the foreign exchange reserves.

"We can also consider buying some more gold because if we want to develop the RMB into an international currency, we must have some scale of gold reserves," Li told a forum in Beijing."

"Topeka — The lines deepened Friday between those wanting a tax increase and those wanting more cuts as a new revenue estimate revealed a $510 million state budget hole and a shaky economy.

Given the revenue freefall over the past year of recession, Gov. Mark Parkinson’s budget director Duane Goossen said the dropping revenue figures were expected. Previously the shortfall had been in the $450 million neighborhood."

"The state deficit is estimated at more than $500 million for this year, $700 million for 2010-11 and $3 billion for 2011-12, the secretary of the Office of Policy and Management told municipal leaders Friday.

Mayors and first selectmen from southeastern Connecticut said Robert Genuario’s talk was the most frank and open discussion they have ever had with a state official.

They also said they weren’t surprised by his dire predictions for state and local budgets in the next few years.

“We’ve known this was coming for months,” Montville Mayor Joseph Jaskiewicz said.

“We’re facing a cliff in 2010, and the (Legislature) is passing,” Preston First Selectman Robert Congdon, a former state legislator, said."

"A revamped state health care program for about 37,000 of the poorest and sickest Minnesotans will start June 1. But with funding cut to one-fourth of the projected costs, it appears that only five of 17 qualifying hospitals have agreed to provide the care -- none outside the Twin Cities area."

""We can't do it,'' said Jerome Crest, CEO of Immanuel St. Joseph's Hospital in Mankato. The hitch is that hospitals are being told to provide medical care and some social services to an unknown number of high-cost patients at about one-third the payment they received last year."

"Welcome to the recovery -- one like no other. To underline that point this week, Mark Zandi, chief economist at Moody's Analytics, opined that the six million Americans currently behind on their mortgage payments are likely spending that money on other things. As a result, U.S. retail sales were surprisingly strong in March, with those numbers helping the stock market to go to new 19-month highs.

Go figure."

"If Arizona voters fail to approve the proposed 1-cent-per-dollar sales-tax hike on May 18, the state's courts, prisons and police stand to lose more than $90 million in critical funding.

Under a contingency budget lawmakers developed to manage the deficit if Proposition 100 fails, the criminal-justice system would suffer some of the largest cuts among state agencies.

That plan requires the Department of Corrections to transfer about 13,000 prisoners to counties, shifts nearly $8 million in Superior Court judges' salaries to counties, reduces the Department of Public Safety budget by $10.9 million and cuts more than $5.8 million from the Department of Juvenile Corrections.

The funding shifts mean that even if Arizona voters reject Prop. 100, they would likely still end up paying more taxes one way or another because counties would have to pick up costs shed by the state. "

"Connecticut's state government pension fund is acknowledged to be at least $16 billion short of what is necessary to fulfill its obligations to state employees. That underfunding is nearly equal to a year of all state government spending. According to the Yankee Institute for Public Policy, the official calculations are too optimistic and the underfunding is much greater, between $50 billion and $80 billion.

So what are Governor Rell and the General Assembly doing about the problem? Making it worse. They're patching the deficit in the expiring state budget by diverting to the general fund $100 million in pension fund contributions -- without simultaneously reducing pension benefits and state government's liabilities."

"CLIFTON, N.J. (WPIX) - New Jersey faces the prospect of losing tens of thousands of well-qualified teachers before the next school year begins, thanks to a new proposal from Gov. Chris Christie.

He is faced with a state budget that could have a deficit as high as $11 billion. In an effort to help fill that gap, according to NJEA, the teachers' union in New Jersey, the Republican governor proposes changing the terms under which people receive state-provided medical insurance and pensions. Teachers are the largest segment of state benefits recipients, and Christie's proposal could force some 30,000 of them to retire by August 1st, according to the union.

The reason why, NJEA says, is that teachers' current benefits would shrink significantly if they don't retire soon: A teacher who would retire before August 1 of this year would keep free medical benefits for life. Under the governor's proposal, teachers would have to pay an as-yet undetermined portion of their medical costs if they stayed employed after the August 1 deadline. Also, right now teachers' pension payments are based on the salary they earned over their last three years of employment. Under the proposal, it would be based on their last five years' salary if they stayed employed after August 1, which could include years when teachers didn't earn at their peak, so their pension payments could end up thousands of dollars lower every year."

  • Other news and headlines:

Indian Bonds Drop a Second Week on Supply, Inflation Concerns

India cuts US debt holdings by over $1 bn in Feb

Chinese investment in Australian farms rises 10-fold

Douglas tells Congress states may not bounce back from recession until 2014

Wave of commercial foreclosure postings hits Central Texas

Syracuse University students protest JPMorgan Chase CEO as graduation speaker (Video)

Hawaii gas prices about to get pushed up by added taxes

U.S. government mulls luring foreign property owners

 

..........Enjoy the weekend. Back on Monday.

.........Portals: I tried to get started early, but had a little problem with the commute.

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portals
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Re: Daily Digest - April 17

Hi Sax,

 

You started to worry me.  I look forward to your listings everyday, and at 10:00AM it still wasn't up.  :)

 

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Re: Daily Digest - April 17

Eight Banks Fail; Canada's Second Largest Lender Buys Three Of Them

It's bank failure Friday and today was no disappointment. Today regulators stepped up to the plate with Eight Bank Seizures as the number of failures in 2010 hits 50.

U.S. regulators on Friday seized eight banks with assets totaling more than $6 billion, raising the tally this year to 51 failed banks and adding to the carnage of small institutions that is expected to peak this year.

The eight banks were the most authorities closed since nine were seized last October.

The failed banks were spread across the United States, from Washington state and California to Massachusetts and Florida. Banks have been failing at a consistent pace as the industry still works through large portfolios of troubled mortgages and commercial real estate loans.

The Federal Deposit Insurance Corp said the eight banks that failed were:

  • City Bank of Lynnwood, Washington, with assets of about $1.13 billion
  • Tamalpais Bank of San Rafael, California, with assets of $628.9 million
  • First Federal Bank of North Florida of Palatka, Florida, with assets of $393.9 million
  • AmericanFirst Bank, of Clermont, Florida, with assets of $90.5 million
  • Riverside National Bank of Florida, with assets of $3.42 billion
  • Butler Bank of Lowell, Massachusetts, with assets of $268 million
  • Lakeside Community Bank of Sterling Heights, Michigan, with assets of $53 million
  • Innovative Bank of Oakland, California, with assets of $284 million.

The recovery of the bank industry is lagging behind the recovery of the overall economy, which is regaining footing after the worst financial crisis since the 1930s.

FDIC Chairman Sheila Bair recently said bank failures will likely peak in the third quarter of this year.

Toronto-Dominion Buys Three Failed Banks

Inquiring minds are reading Toronto-Dominion Buys Three Failed Banks as 2010 Toll Hits 50

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China Bubble

Good presentation on the biggest bubble of them all:

http://www.scribd.com/full/30052154?access_key=key-2laboxvh5h0te2zpiq9i

 

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Good example of the fragility of complex systems...

...and specifically our complex society/civilization:

http://www.guardian.co.uk/business/2010/apr/16/flight-ban-shortages-uk-s...

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Re: Daily Digest - April 17

Leave it to Iceland...first their banks screw up the Europeans, now it's their volcanoes. Tongue out

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Re: Daily Digest - April 17
joemanc wrote:

Leave it to Iceland...first their banks screw up the Europeans, now it's their volcanoes. Tongue out

GS probably owns the volcano and likely will insist it is doing God's work.

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Re: Daily Digest - April 17
Davos wrote:
joemanc wrote:

Leave it to Iceland...first their banks screw up the Europeans, now it's their volcanoes. Tongue out

GS probably owns the volcano and likely will insist it is doing God's work.

Just look to see who shorted Kenyan Roses, exotic produce, and air freight carriers right before the volcano erupted. Then you will know who caused the eruption. Yell

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Re: Daily Digest - April 17

Good piece by Nate.

http://economicedge.blogspot.com/2010/04/breaking-sec-sues-goldman-sachs-for.html

Given his comments below;

"Think about the timing of this. It comes just as I have been talking about a “triggering event” that will take the blame for turning the markets. This suit was reported AFTER the open on OPTIONS EXPIRATION day. Why now? My suspicious mind says that it was timed to allow the options sellers and contract speculators to walk away and to instill maximum damage on the retail buyers of the ALL TIME RECORD number of option call buyers who were in the market just yesterday."

It would be a good exercise for the SEC(if it is NOT a poodle of GS) to analyse the trading activity if GS over the last day or two, it might turn out to be quite interesting.

DavidC

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Re: Daily Digest - April 17

"I'll keep things simple in deference to Mr. Cramer"

Priceless!

 

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Re: Daily Digest - April 17

crap....the more I read this site the more I am about to be a paid member..

the world is about to change..

 

 

thanks for all the input

 

 

 

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Re: Daily Digest - April 17
Farmer Brown wrote:

"I'll keep things simple in deference to Mr. Cramer"

Priceless!

LOL, don't say anything bad about Mr. Cramer!

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Re: Daily Digest - April 17

U.S. Cities In Free Fallhttp://realestate.yahoo.com/promo/us-cities-in-free-fall

Economic indicators in these metros have gone from bad to worse, with no sign of recovery.

Miami boasts a popular South Beach club scene, Art Deco Architecture, and perhaps the best Cuban food in the country. But residents don't have much else to celebrate.

More than three years after the economy started its downward slide, the Miami metro area, like a handful of Sun Belt cities, still hasn't begun to recover. Median home prices in Miami have fallen 38% since its market peaked in the second quarter of 2007; the city's 11% unemployment rate is above the national average and has grown more than most of the 40 cities we surveyed.

Click here to see the full list of Ten U.S. Cities In Free Fall

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Re: Daily Digest - April 17

joemanc said,

Leave it to Iceland...first their banks screw up the Europeans, now it's their volcanoes

 

Actually, it's the opposite.   First the Europeans Banks screw Iceland and now Eyjafjallajokull screws the Europeans!

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Stoneleigh To Tour

Stoneleigh, from The Automatic Earth blog, to start giving talks in various places throughout US and Europe:

My next talk will be in the Anderson Theatre at Hartwick College in Oneonta, NY, at 7pm on the evening of April 20. The following evening I will be speaking in Rhinebeck, NY (for details please e-mail [email protected]). New York City is scheduled for April 22/23, details will follow. On Sunday April 25, I will be presenting in Brockville, Ontario, at 2pm in the Brockville Public Library. 

Next month, on May 18, I will be doing a talk at the library in Tamworth, NH, more dates in that area should be known soon. I am working also on a plan for a short trip to Texas, involving either Austin, San Antonio or both. Specific details will follow nearer the time.

In June and July I will be heading to Europe for several weeks. I'll start in the UK, where 2-3 talks are tentatively booked, then travel to the Netherlands (we need contacts there still), Belgium, France and Italy. Arrangements are still fluid at this point, so if you would like me to speak somewhere, please let me know so that I can plan a sensible itinerary. The address to use for arrangements is StoneleighTravels(at)gmail(dot)com. 

I recall requests for Finland, Berlin, the Czech republic and Switzerland, but I would need an email contact address and some sense of what arrangements would need to be made. Some destinations would involve a flight, due to time constraints, and would therefore be more problematic. But do send in your requests and arrangements, I'm open to anything that fits my schedule.

I'm going to see if I can set up something for her at the University of Houston. Maybe I can videotape the talk and post it to youtube as well.

For more info see: April 17 2010: Message from Stoneleigh (and lots of Goldman)

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Re: Stoneleigh To Tour
JAG wrote:

Stoneleigh, from The Automatic Earth blog, to start giving talks in various places throughout US and Europe:

My next talk will be in the Anderson Theatre at Hartwick College in Oneonta, NY, at 7pm on the evening of April 20. The following evening I will be speaking in Rhinebeck, NY (for details please e-mail [email protected]). New York City is scheduled for April 22/23, details will follow. On Sunday April 25, I will be presenting in Brockville, Ontario, at 2pm in the Brockville Public Library. 

Next month, on May 18, I will be doing a talk at the library in Tamworth, NH, more dates in that area should be known soon. I am working also on a plan for a short trip to Texas, involving either Austin, San Antonio or both. Specific details will follow nearer the time.

In June and July I will be heading to Europe for several weeks. I'll start in the UK, where 2-3 talks are tentatively booked, then travel to the Netherlands (we need contacts there still), Belgium, France and Italy. Arrangements are still fluid at this point, so if you would like me to speak somewhere, please let me know so that I can plan a sensible itinerary. The address to use for arrangements is StoneleighTravels(at)gmail(dot)com. 

I recall requests for Finland, Berlin, the Czech republic and Switzerland, but I would need an email contact address and some sense of what arrangements would need to be made. Some destinations would involve a flight, due to time constraints, and would therefore be more problematic. But do send in your requests and arrangements, I'm open to anything that fits my schedule.

I'm going to see if I can set up something for her at the University of Houston. Maybe I can videotape the talk and post it to youtube as well.

For more info see: April 17 2010: Message from Stoneleigh (and lots of Goldman)

JAG: What do you think of John Williams? Roel says this about him:

Williams is just dead wrong. He's a number cruncher who shouldn't interpret his own data.

I have absolutely lost any and all respect for them. Roel also went off the deep end when I was doing the DG and posted a few too many paragraphs of his on the DG, one of his past articles was quite good and too much  accidentally got posted. We drove a lot of data to his old blog and his thank you was a huge %you.

I'm being nice here and refraining from using the M word.

Personally, anyone who uncovers the fact that the US has a 9 trillion dollar GAAP deficit that it is Enron wrapping and packaging as a 1.8 trillion dollar deficit is NOT a number cruncher who shouldn't interpret his own data. In my book he is a darn smart guy.

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Re: Stoneleigh To Tour

Davos,

I have to plead ignorance on who Roel is, though I'm thinking Roel might be just a commenter on the TAE blog. If that is the case, I don't see how it detracts from Stoneleigh's message. (its like someone dismissing CM's message because what a peon like me said in the forums) To be clear, I only read what Stoneleigh writes on that blog, as I really don't like Ilargi's writing style, and I rarely ever read the comments.

As far as JW goes, I think his message is just as valid as anyone else's in the blogosphere. I just make a concerted effort to not "believe" anyone's message or predictions 100%. The world is far too complex for any one person to completely grasp it, IMO. That is why I relish variations of perspective. How many of us predicted in 2008 that the Dow would be +11,000 in 2010? 

 

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Re: Stoneleigh To Tour
JAG wrote:

Davos,

I have to plead ignorance on who Roel is, though I'm thinking Roel might be just a commenter on the TAE blog. If that is the case, I don't see how it detracts from Stoneleigh's message. (its like someone dismissing CM's message because what a peon like me said in the forums) To be clear, I only read what Stoneleigh writes on that blog, as I really don't like Ilargi's writing style, and I rarely ever read the comments.

As far as JW goes, I think his message is just as valid as anyone else's in the blogosphere. I just make a concerted effort to not "believe" anyone's message or predictions 100%. The world is far too complex for any one person to completely grasp it, IMO. That is why I relish variations of perspective. How many of us predicted in 2008 that the Dow would be +11,000 in 2010? 

 

He is a contributer/article writer and he might be part of their blog.

I agree that there are way too many dynamics to be even anywhere near 100% with predictions. I listen to the deflationary voices also and with the market who knows. My personal take is I'll leave money on the table rather than put it in harms way.

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Re: Daily Digest - April 17

Jag, Davos,

Roel also went off the deep end when I was doing the DG and posted a few too many paragraphs of his on the DG, one of his past articles was quite good and too much  accidentally got posted. We drove a lot of data to his old blog and his thank you was a huge %you.

I'm being nice here and refraining from using the M word.

Yeah, you;re very nice. I'm reminded of the game where you put 10 or 20 people in a circle, have no 1 whisper a story in no 2's ear, who whispers it to no 3, and so forth, to find that no 20 has an entirely different story than no 1 had.

What I protested on Oct 31, in relation to  An interview with Stoneleigh - The case for deflation, if I recall correctly, was the fact that I found content copied from my site behind a paywall on yours. I don't care how much you copy, but to then put it behind a paywall is simply highly unethical. As is the fact, by the way, that there was never a reaction to my complaint. 

As for John WIlliams, his argument for hyperinflation is so weak and full of holes that the conclusion about what he's good at and what not would be obvious. But by all means suit yourself.

As for my old blog and a lot of data you're supposed to have driven to it, I have no idea which blog or which data you're talking about. You're not being nice (where?), you're more being kind of delusional.

 

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Re: Daily Digest - April 17
Ilargi wrote:

Jag, Davos,

Roel also went off the deep end when I was doing the DG and posted a few too many paragraphs of his on the DG, one of his past articles was quite good and too much  accidentally got posted. We drove a lot of data to his old blog and his thank you was a huge %you.

I'm being nice here and refraining from using the M word.

Yeah, you;re very nice. I'm reminded of the game where you put 10 or 20 people in a circle, have no 1 whisper a story in no 2's ear, who whispers it to no 3, and so forth, to find that no 20 has an entirely different story than no 1 had.

What I protested on Oct 31, in relation to  An interview with Stoneleigh - The case for deflation, if I recall correctly, was the fact that I found content copied from my site behind a paywall on yours. I don't care how much you copy, but to then put it behind a paywall is simply highly unethical. As is the fact, by the way, that there was never a reaction to my complaint. 

As for John WIlliams, his argument for hyperinflation is so weak and full of holes that the conclusion about what he's good at and what not would be obvious. But by all means suit yourself.

As for my old blog and a lot of data you're supposed to have driven to it, I have no idea which blog or which data you're talking about. You're not being nice (where?), you're more being kind of delusional.

 

Delusional?

The article that I neglected to trim - and probably because if I recall I was on vacation and it was all good, finding the best was tough - was NOT put behind a "paywall". I've never contributed content to any of the for pay only work CM has done on this site. Delusional? No.

Additionally I recall an email from CM personally apologizing for my %up. Never getting a reaction to your complaint. Delusional? No.

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Re: Daily Digest - April 17

Genoa 1922 the CB's doubled the money supply by counting every dollar claim against gold as part of the money supply. For 10 years people did stupid things with cheap money and then they paid the piper.

Greenspan & Bernanke have re-created said stupidity and we will have a dollar crisis as a result.

Thats my take. Differ all you want. I don't profess to always be right - or wrong. 

Time will grade it.

Papua New Guinea is another example of reality.

 

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