Daily Digest

Daily Digest - April 2

Friday, April 2, 2010, 9:52 AM
  • Why Is The Fed Actively Managing A $25 Billion Maiden Lane MBS Portfolio When Its $2.4 Trillion SOMA Holdings Have A $1 Billion DV01?
  • China's credit curbs pose mounting risk to commodities
  • Inflation Accelerating in Southeast Asia
  • Western Civilization and the Economic Crisis, The Impoverishment of the Middle Class
  • Bill Dudley Speaks: Hints At The Endgame - Dollar Devaluation
  • The Federal Reserve’s Veil of Secrecy is Being Taken Down, But Slowly


Why Is The Fed Actively Managing A $25 Billion Maiden Lane MBS Portfolio When Its $2.4 Trillion SOMA Holdings Have A $1 Billion DV01? (Davos)

And simply for those who may be a little confused by the jargon: the Fed's lapdog BlackRock is hedging that which is irrelevant: the smallest portion of the Fed's rate exposure. But because Tim Geithner has a penchant of appearing on TV and saying how well Maiden Lane is performing, the Fed has decided to protect against a major hike in rates. Yet that which is truly relevant, the Fed's nearly $2.4 trillion in holdings of MBS, Agency and Treasuries is completely unhedged.

China's credit curbs pose mounting risk to commodities (SolidSwede)

"We believe overheating risks in China are escalating," said Michael Lewis, commodities chief at Deutsche Bank. "Heading into the second quarter, we believe China will become the main source of event risk for commodity markets, specifically industrial metals."

Inflation Accelerating in Southeast Asia (pinecarr)

Businessweek reports that HSBC Warns Vietnam's Inflation Is 'Worryingly High'

Western Civilization and the Economic Crisis, The Impoverishment of the Middle Class (pinecarr)

The middle classes of the western world, surviving only on debt, are about to be subject to a “class default.” The wealthy class will be the consumption class, as the middle class is absorbed into the lower class and labour work force.

Bill Dudley Speaks: Hints At The Endgame - Dollar Devaluation (pinecarr)

Most notably, Dudley hints at the inevitable endgame: "The fact that our foreign indebtedness is for the most part denominated in our own currency is a huge advantage in the event the dollar were to come under significant downward pressure."

The Federal Reserve’s Veil of Secrecy is Being Taken Down, But Slowly (pinecarr)

The Fed must be audited, and it role as the 'master regulator' and as the place where the Office of Consumer Financial Protection would be located is a farce, a cruel joke.

Please send article submissions to: [email protected]


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Re: Daily Digest - April 2

"BEIJING (MNI) - Surging debt levels in major economies such as the U.S. and U.K. raise the threat of sovereign credit rating downgrades, the People's Bank of China warned Friday.

The central bank's assessment was among the risks highlighted in its latest annual review of the global financial markets, which gave a broadly upbeat forecast for the year ahead.

But it warned of ongoing and fresh difficulties as the world continues to recover from the devastating recession of late 2008 and early 2009.

"Because of continually expanding public debt, the sovereign credit ratings of major economies, including the U.S. and U.K., face downgrade risks," it said. "

...............1A) China's Central Bank Sees Limited Rebound for Dollar (Update1)

"April 2 (Bloomberg) -- The People's Bank of China said the U.S. dollar will have only a limited rebound in 2010 because of the nation's high fiscal deficit and low interest rates." 

"LONDON (Reuters) - Shrinking foreign demand and a high risk premium on Greek government bonds are fuelling fears that markets may ultimately give the thumbs down to Greece's efforts to meet 54 billion euros of funding needs this year.

This is raising the prospect that Greece may have to test the generosity of European governments and the International Monetary Fund, which pledged last month to aid the country if it has problems tapping investors for funds.

"Without some miracle, the performance of recent Greek debt sales has been poor enough and the absolute yield has gone so high that the use of the bailout package could be more palatable than conducting another round of domestic austerity measures to overcome spiralling coupon payments," said David Schnautz, bond analyst at Commerzbank in Frankfurt." 

"April 2 (Bloomberg) -- Japanese National Strategy Minister Yoshito Sengoku said the country should have a greater sense of urgency about the nation's fiscal situation, comparing it to the plight of Greece.

"So far some have been crying wolf, but Greece's situation isn't entirely unrelated to Japan's," Sengoku said at a news conference in Tokyo today. "At the end of the day, Japan's situation right now is not that good. There hasn't been a sense of crisis about this, including from ourselves."

Sengoku has been tasked with developing a plan for repairing the finances of a country that is burdened with the world's largest public debt. "

"MONTREAL - It was a sign of the coming fiscal storm: thousands of people poured into the streets of Montreal to protest Quebec's bad-news provincial budget and prompted a police intervention.

As governments everywhere try to tackle deficits after an era of heavy stimulus spending, Thursday's demonstration could be a warning of what's ahead in the post-recession era.

Police in riot gear fended off a crowd outside the Quebec finance minister's office.

Old Montreal's business district was awash in chanting, placard-waving demonstrators against a budget that will pile new costs on Quebecers, including a sales-tax hike and a historic health fee. "

"ALBANY — Gov. David Paterson called on state workers Thursday to forgo their 4 percent raises scheduled for this month because the state is running out of money to pay its bills.

"The whole issue is we're not asking because we're trying to gouge anyone, we're asking because the state is now $9.2 billion in deficit," Paterson said on his weekly radio appearance on WOR-AM. "When is somebody going to get it? We have run out of money."

He added, "So now I think it is appropriate to ask the workers to forgo their increases."

In a statement later in the day, Paterson said it is unfair for unions to get the raises when more than 300,000 New Yorkers have lost their jobs, the state has a nearly 9 percent unemployment rate and the private sector has accepted wage freezes, salary cuts and furloughs."

"Pennsylvania’s budget situation worsened in March, with revenue collections for what is typically one of the state’s most flush months coming in millions of dollars below expectations.

The state collected $3.9 billion in General Fund revenue in March, about $243 million less than anticipated, despite better-than-expected collections of personal income taxes. The personal income tax brought in $811.9 million last month, but is about 2 percent behind for the year.

State sales tax receipts totaled $569 million for March, about $51 million below estimates. Budget Secretary Mary Soderberg said March’s collections were unusually low because February snowstorms hurt retail sales.

Sales tax revenue to date is 5.1 percent, or about $316 million, less than anticipated. "

"More Americans filed for bankruptcy protection in March than during any month since the federal personal bankruptcy law was tightened in October 2005, a new report says, a result of high unemployment and the housing crash.

Federal courts reported over 158,000 bankruptcy filings in March, or 6,900 a day, a rise of 35 percent from February, according to a report to be released on Friday by Automated Access to Court Electronic Records, a data collection company known as Aacer. Filings were up 19 percent over March 2009. The previous record over the last five years was 133,000 in October.

“Even with the restrictive new law, we’re back up over where we were before the law changed,” Mike Bickford, president of Aacer, said in a phone interview Thursday from his headquarters in Oklahoma City. He faulted the stagnant economy, saying a surge in bankruptcies generally follows economic contraction by 6 to 18 months, and he pointed to March as a historically busy month for bankruptcy filings. "

........................7A) Personal Bankruptcies Rise 35%

"BUFFALO, NY - Another piece of the historic Statler Towers in downtown Buffalo has fallen to the street.

The latest incident occured around 11 a.m. on Thursday. City Fire crews responded to make sure no one was hurt. They blocked off the sidewalk on West Genesee in order to check the rest of the building."

"The Statler Towers was shut down in January and then boarded up. The previous owner filed for bankruptcy and the group that tired to buy it out of bankruptcy court could not come up with the necessary payments.

Last November, another piece of the towers fell to the ground. Firefighters were forced to block off a section of the nearby road as a response.

Crews on the scene tell 2 On Your Side, they removed larger pieces of the tower because they were concerned about them falling to ground and hurting people walking near the building. "

"ALBANY Downtown Albany continues to lose companies and jobs to the suburbs, leading to slack demand for new construction and higher office vacancy rates.

In fact, the city's downtown has the Capital Region's highest percentage of empty offices and that vacancy rate is rising dramatically, according to a report being released today by CB Richard EllisAlbany.

Early in 2007, 10 percent of downtown Albany offices were vacant. By the end of 2009, the vacancy rate had risen to 15.2 percent." 

"Two major credit-rating services are set to tweak their systems for rating U.S. municipal bonds this month, and the results could prove confusing for some mutual-fund investors.

The so-called recalibrations, planned by Moody's Investors Service and Fitch Ratings, will also broaden the investment base for some institutional investors and make it easier for investors to compare Build America Bonds to corporate bonds. "

"Both companies stress the recalibrations aren't to be construed as ratings changes, but experts predict they will make many issues look more attractive. "Essentially, we'll see a large uptick in ratings across several of the traditional muni sectors," said Ben Barber, head of municipal bond investments at Goldman Sachs Asset Management. "

"The report also showed an increased in long-term unemployed Americans. The number of people unemployed for 27 weeks or more rose as a percentage of all jobless, to a record 44.1 percent. " 

"Rainy day funds that protect communities during economic downturns are running dangerously low in dozens of metro Detroit cities and counties as the worst fiscal storm in 70 years bears down.

After five years of dipping into emergency savings, many communities confront a grim reality: Without sufficient savings, they must raise taxes or cut deeper into services to offset drops in property taxes and state funding.

Of the 25 communities analyzed by the Free Press, 21 have drawn down their savings to below levels considered safe by the Government Finance Officers Association, a national group that advises public officials on financial management.

The impact could be severe as many communities stand to lose up to 20% of their budgets to declining property values.

"It's going to be a tsunami and some cities might not survive," Harrison Township Supervisor Anthony Forlini said. "It's going to get tougher over the next two years.""

"A bruising political fight among Los Angeles' top elected leaders over a proposed hike in electricity rates threatened Thursday to deepen the city's financial crisis while suggesting that Mayor Antonio Villaraigosa had sharply misread the public mood at a time of recession.

Residents, business owners and City Council members were quick to criticize the mayor on the heels of a dramatic late-night showdown Wednesday, pitting the Department of Water and Power board -- all Villaraigosa appointees -- against a council battered by ratepayers upset over increases sought by the mayor to bolster his green energy agenda.

Unless some electric rate hike is approved, the city's budget shortfall would balloon to $290 million, forcing elected officials to drain reserves, City Controller Wendy Greuel said.

That would leave the city with little cash by June 30, the end of the fiscal year, she said.

"There's no cushion," Greuel said. "So when the reserve fund gets below zero, there's no money left. Cooler heads should prevail about the fiscal situation in the city. This is too serious of an issue to not try to resolve this.""

"Workers at Japan's great corporations used to count on two things: a job for life and a decent pension. Lifetime employment in Japan is long gone, picked apart by relentless restructurings. And pensions? A recent series of assaults on big corporate plans raises the possibility that this other pillar of the corporate social contract may be crumbling, too.

The latest implosion of a major pension plan took place at Japan Airlines, which slid into bankruptcy three months ago. On Mar. 18, JAL got permission from the Labor Ministry to slash pension benefits by up to 50% for its 24,000 current and former employees.

Then on Mar. 23, Mitsubishi Heavy Industries said it wanted its workers and retirees to accept cuts that would ease the pressure on its plan, which is underfunded by 259 billion yen ($2.8 billion)"

"The latest deficit projection is down significantly from the $518.4 million shortfall Wyman projected one month ago for this fiscal year's $18.64 billion overall budget.

Gov. M. Jodi Rell's budget agency, the Office of Policy and Management, reduced its deficit forecast 11 days ago by $157 million down to $356 million. Among the reasons the administration cited were a $100 million reduction in this year's contribution to the state employee pension fund, an unexpected $45 million boost in federal aid tied to prescription drug benefits for low-income seniors, and about $12 million in new and other savings ordered by the governor."

  • 16) Huge jump in national debt numbers (Use the Treasury Direct link for the following numbers)
03/25/2010 8,200,481,797,735.73 4,487,088,355,288.20 12,687,570,153,023.93
03/26/2010 8,199,959,850,024.50 4,485,933,873,781.20 12,685,893,723,805.70
03/29/2010 8,199,927,347,284.93 4,486,322,450,430.08 12,686,249,797,715.01
03/30/2010 8,200,073,493,391.96 4,484,497,403,388.84 12,684,570,896,780.80
03/31/2010 8,290,037,831,046.49 4,483,085,265,092.94 12,773,123,096,139.43


(Link to Treasury Direct)

(Link to National Debt Clock)

(Link to U.S. National Debt Clock : Real Time)

"The commercial real estate outlook for the remainder of 2010 is grim. According to Deloitte’s recent online survey of real estate executives, 76 percent of respondents expect commercial property values to continue to fall this year, and 73 percent predict asking rents will follow the same trend. "


  • Other stories and headlines:

W.Va. tax revenues plunge $58M below March mark

ANALYSIS - Rising yields could turn toxic for US dollar

Massive Caltrain Deficit May Mean Extensive Service Cuts

Michigan motorists hit with $18 insurance hike 

Pension shortfalls nearly triple (UK) 

Commercial bankruptcies rose 52 percent in 2009 

Trepp: March CRE Loan Delinquencies in CMBS Rise To 7.61% 

CRE Crush Set To Increase Bank Failures By 30% This Year

Senate OKs hospital tax to fund Medicaid (Georgia)

 IMF, Ratings Agencies Praise Irish "Bad Bank" Launch

Key 30-Year Mortgage Rate Back Over 5%, Freddie Mac Says

Freddie Mac Announces REO Auction Blitz Ahead of Tax Credit Deadline


.....................Note: I have posted some of the latest (updated today) unemployment graphs and numbers from the St. Louis Fed here

printfaster's picture
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Re: Daily Digest - April 2

On Maiden Lane.

No one gets it.  The Fed does not need to hedge.  That is for those who cannot print money.  The Fed hedges with the printing press.  A trillion here, a trillion there is just bits on a computer screen.

Hedging is for peasants.


idoctor's picture
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Re: Daily Digest - April 2

Interesting watch with Mohommad El-Erian on this link. CNBC just seem to want to walk thru what he has to say.... to me anyway.

US Payrolls Rose 162,000 In March, Less Than Expectedhttp://www.cnbc.com/id/36146865

SingleSpeak's picture
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Re: Daily Digest - April 2

It was quite depressing to read through all of the "bummer" articles today. Therefore being Good Friday I'm offering up one positive story. Read it if you need your personal chart to find some support. Wink


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Re: Daily Digest - April 2

Having worked within a block or two of the Statler Towers for the past couple decades, it is very sad to see that grand remnant of Buffalo's glory days crumble like it is.  Particularly since Buffalo has been trying to increase tourist traffic based on its architectural history.  Its main claim to fame these days (aside from its deterioration) is a peregrine falcon nest that keeps producing new hatchlings every year.

Single Speak

I saw Mayor Booker on Rachel Maddow yesterday.  He's a very impressive character.

idoctor's picture
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Re: Daily Digest - April 2

Here is video of Democrat Rep. Hank Johnson saying he is afraid the addition of 8,000 U.S. Marines and their families to the island of Guam could cause Guam to "tip over and capsize."

WOW....any words to expain this LOL????

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Re: Daily Digest - April 2

"Economic growth may be too strong to be for real"



Then it's not really strong, and hence, not not real?!?!? Surprised


idoctor's picture
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Re: Daily Digest - April 2

He talks a little about GATA starts17.80

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Re: Daily Digest - April 2


 A great interview on Bloomberg....h/t to ZH - http://www.zerohedge.com/article/jim-grant-presents-prospectus-united-states-discusses-death-penalty-us-coinage-debasers

 Interest rates, currency debasement, decapitation... and err.... houseplants..  :o)



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Re: Daily Digest - April 2


GrouchoMarxist's picture
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Re: #8 idoctor - Guam might tip over and capsize.

Guam might tip over and capsize.

I'm not normally lost for words, but ...

It's far better to keep your mouth shut and let everyone think you are an idiot, than to open it and prove them right.

God help America 'cos no one else will if you allow inarticulate idiots with an intelligence as low as this to represent you in government. You would be far better off with Bart Simpson.

One has to assume that the people who elected this moron to represent them are just as stupid, inarticulate and uneducated as he is. Or maybe they just don't care, which amounts to the same thing.

America is a big country with vast open spaces - can it really be true that the biggest empty space in America is between their ears? Or is that 'empty space' really just solid bone?

It's no surprise at all that Wall St., the corporations & the MIC can control government policy so effortlessly if that's the level of intelligence they have to contend with.

I can't understand how people of such low intellectual ability as Hank Johnson can be a member of the same political engine as people with the intellectual caliber, independence of mind and clarity of thought as someone like Ron Paul.

Gerald Celente recently summed up the cause of current crisis as " Princeton, Harvard, Yale - Bullets, Bombs & Banks". That's only half the equation, I would add...

Stupidity, ignorance, lack of education - greed, fear and aggression.



idoctor's picture
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Re: Daily Digest - April 2

The other link I posted is not working so here is the repost.........

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