Daily Digest

Daily Digest - April 20

Tuesday, April 20, 2010, 9:49 AM
  • Monday Market Mayhem - Is Goldman's Goose Cooked?
  • KDKA Radio - Is America An Empire Or A Republic?
  • Debunking the Post-CFTC Precious Metals Fear Mongering Campaign
  • Airline Losses From Ash Climb Over $1 Billion
  • IMF Executive Board Approves Major Expansion of Fund’s Borrowing Arrangements to Boost Resources for Crisis Resolution
  • What Links The Banking Crisis And The Volcano?
  • When The U.S. Energy Secretary Spoke Of "Peak Oil"

Economy

Monday Market Mayhem - Is Goldman's Goose Cooked? (Ilene)

Did anything happen this weekend? You sure wouldn’t know it from listening to the MSM, who have no other topic to discuss. I was contacted by over a dozen media people asking me to comment on GS’s guilt or innocence (and, big hint for those of you who like to be quoted - don’t say "how the hell should I know") but, by far, the best analysis I read this week was Sam Antar’s analysis...

KDKA Radio - Is America An Empire Or A Republic? (Davos)

Damon Vrabel, a writer at Canada Free Press and an economic philosopher, joins the show to talk about America. Is America a republic or empire? Listen here.

Debunking the Post-CFTC Precious Metals Fear Mongering Campaign (Erik T.)

A logical place to begin this story is with the work of Ted Butler, a precious metals analyst and newsletter author whose firm Butler Research specializes in analysis of the government-published Commitment of Traders reports.



These reports reveal the positions of large commercial traders who are required to disclose that information publicly on a weekly basis. Ted’s analysis of the COT reports is quite involved and unfortunately, the full details of his work are only available to his paid newsletter subscribers. For the purposes of this discussion, all you need to know is that from the official COT reports, Ted concluded that Bear Sterns was holding a very large concentrated short position in COMEX Silver futures, and that J.P. Morgan has since taken over this position.

Airline Losses From Ash Climb Over $1 Billion (Christian W.)

Airlines are losing as much as $300 million per day, with European companies like British Airways suffering the most. An umbrella group for the airline industry criticized European leaders' handling of the disruption, which has grounded thousands of flights to and from Europe for the past five days.

IMF Executive Board Approves Major Expansion of Fund’s Borrowing Arrangements to Boost Resources for Crisis Resolution (Christian W.)

The Executive Board of the International Monetary Fund (IMF) today approved a ten-fold expansion of the Fund’s New Arrangements to Borrow (NAB) and the transformation of the Fund’s premier standing credit arrangement into a more flexible and effective tool of crisis management. The NAB will be increased by SDR 333.5 billion (about US$500 billion) to SDR 367.5 billion (about US$550 billion), representing a major increase in the resources available for the Fund’s lending to its members.

What Links The Banking Crisis And The Volcano? (Christian W.)

But beyond a certain level, connectivity becomes a hazard. The longer and more complex the lines of communication and the more dependent we become on production and business elsewhere, the greater the potential for disruption. This is one of the lessons of the banking crisis. Impoverished mortgage defaulters in the United States – the butterfly's wing over the Atlantic – almost broke the global economy. If the Eyjafjallajökull volcano – by no means a monster – keeps retching it could, in these fragile times, produce the same effect.

Energy

When The U.S. Energy Secretary Spoke Of "Peak Oil" (Christian W.)

... He was referring to the arguments of ASPO that we have already reached peak oil.

The U.S. Secretary of Energy, Steven Chu, knows and understands the issues of global peak oil production. During a talk he gave in March 2005 as director of the Lawrence Berkeley National Laboratory, a U.S. Department of Energy National Laboratory, Steven Chu advanced the hypothesis of an imminent decline in world production of liquid fuels.

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7 Comments

saxplayer00o1's picture
saxplayer00o1
Status: Diamond Member (Offline)
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Posts: 4066
Re: Daily Digest - April 20

"April 20 (Bloomberg) -- Greece's borrowing costs more than doubled at an auction of 1.95 billion euros ($2.6 billion) of three-month bills amid concern the nation will default unless it taps a bailout package brokered by the European Union.

Greece sold the 13-week securities today to yield 3.65 percent, compared with 1.67 percent at a sale of similar debt on Jan. 19, according to the Athens-based Public Debt Management Agency. "

.......................1A) Germany warns of 'Lehman' crisis if Greece defaults

"German finance minister Wolfgang Schauble has pleaded with his country's citizens to back a joint EU-IMF bail out for Greece worth up to €45bn (£40bn), warning that failure to act risks a financial meltdown.

"We cannot allow the bankruptcy of a euro member state like Greece to turn into a second Lehman Brothers," he told Der Spiegel.

"Greece's debts are all in euros, but it isn't clear who holds how much of those debts. The consequences of a national bankruptcy would be incalculable. Greece is just as systemically important as a major bank," he said."

 

"DUBAI (Zawya Dow Jones)--Pricing of a benchmark bond by Dubai Electricity & Water Authority is putting Dubai World's negotiations to reschedule almost $24 billion of debt under pressure, bankers familiar with the matter said.

The utility, or Dewa, earlier this month sold a $1 billion bond at mid-swaps +577.6 basis points; 105 basis points over Dubai sovereign debt. The company will pay a semiannual coupon at a rate of 8.5% to bond holders until the instrument reaches maturity in 2015.

Dewa's bond pricing has made Dubai World's offer of a 1% interest rate on some of its outstanding debts and the debts of its real estate unit Nakheel unacceptable to many of its 97 creditors.

"If Dewa is the pricing benchmark for a Dubai quasi-government security, then Nakheel and Dubai World have to pay much more considering the risk attached," said a Dubai-based banker familiar with the matter. "

"$17.6 billion is the total unfunded liability of the Los Angeles City Employees Retirement System and the Fire and Police Pension Plans based on the market value of the assets on June 30, 2009 and a realistic rate of return assumption.

As such, our pension funds are only 52% funded, representing a debt of around $11,000 per household. This is over four times the amount of the General Fund, two and a half times the total revenues of the City, over five times the annual payroll, and is over $400,000 per employee. On the other hand, the City states that the liability is “only” $4.6 billion. Why the $13 billion difference?

If the assets of the pension plans are “marked to market” as mandated for public owned companies, this results in a $6.9 billion difference from the “Actuarial Value” of the assets, a methodology devised by the funny money accountants setting the rules for government pensions.

The remaining $6.1 billion is the result of using a realistic rate of return on investments of the pension funds. The City uses the “8% Myth,” a rate of return based on aspiration. If the more realistic rate of return of 7% is used, the combined liability related to future benefits of $30.6 billion would increase by about 20% to $36.7 billion, an increase of $6.1 billion."

"SPRINGFIELD — Up to 15,000 citizen lobbyists are expected to descend on the Capitol on Wednesday to rally for a tax increase to help fix the state’s crippling budget.

If those estimates are correct, the rally will be the largest in Statehouse history.

“In fact, it may be twice as large as anything before it,” said Anders Lindall, spokesman for the American Federation of State, County and Municipal Employees union.

As it stands, the state is in a $13 billion hole, leaving the state months behind in paying its vendors. The budget crisis also has hit schools, mental service agencies and law enforcement, causing layoffs and service reductions across the state.The rally will target lawmakers, who Lindall said have done little to fix the state’s fiscal problems.“The coalition is going to be sending a very strong message that inaction is not acceptable,” Lindall said.But the rally probably won’t push politicians to support a tax increase in an election year, many lawmakers said."

................4A) Illinois Offers $700 Million After Moody's Rating Shift to Aa3

"Moody’s Investors Service kicked off a wide-scale “upward shift” in municipal credit ratings yesterday, assigning stronger grades to 34 states and Puerto Rico.

This is just the first salvo in what is likely to be a four-week blizzard of ratings “recalibrations” among most of the 18,000 states and localities whose debt Moody’s rates.

Last month, the New York-based rating agency unveiled a plan to hoist the ratings on most of the universe of state and local government debt.

Moody’s has long held municipalities to a higher rating standard than sovereign governments, corporations, or structured products.

The municipal scale represented a ranking of municipal credit quality based on “distance to distress” rather than default probability.

This generally meant municipalities have been stuck with lower ratings than other types of issuers despite what in many cases were stronger histories of repayment.

Last month, the agency said it was going to recalibrate its municipal ratings scale to align it with the scales assessing the creditworthiness of other types of issuers."

"California and Puerto Rico were the biggest gainers under the Moody’s recalibration.

Each was bumped three notches — the maximum ratings ascension under the recalibration.

California is now rated A1. Puerto Rico is rated A3."

........................5A) Moody's moves US states to new 'global' rating scale

"CalPERS is discovering that some of the leverage in its now $13.7 billion real estate portfolio falls outside its investment policy limits.

Drawing back the curtain a little more on what went wrong in what had been a $20 billion portfolio, executives at the $209.3 billion California Public Employees' Retirement System, Sacramento, have revealed that it was not only massive amounts of leverage, but also the kind of debt and the type of investments the system took on, that ended up cutting the value of its real estate portfolio by almost half. "

"Despite a few signs of an uptick in the economy, Alameda County officials unveiled another large funding gap for the upcoming fiscal year.

County officials said they face a potential funding gap of nearly $182 million for fiscal year 2010-11. At a county budget workshop meeting Monday, however, supervisors and other officials agreed to apply $30 million set aside as a contingency contribution for the retirement fund toward the gap — bringing the shortfall down to $152 million."

"ALBANY -- Live in Westchester County and you pay the highest property taxes in the nation: the median is $8,404 a year.

Live in upstate New York, and you also have an unenviable distinction: Sixteen upstate counties -- including Cortland, Seneca and Allegany -- pay the highest property taxes compared to home values in the country, according to the U.S. Census. Orleans County, near Rochester, is No. 1.

And closer to home, we don't fare much better: Steuben is the 18th highest county, comparing taxes to home values; Chemung is 21st; Broome is 28th and Tioga is 30th."

..................8A) (Same story as above) Property tax bills rise even as home values fall

..................8B) New York State Senate Considering New Mortgage, Auto Taxes

"April 19 (Bloomberg) -- Ecuadorean President Rafael Correa is seeking to accelerate renegotiations of oil-service contracts by threatening to seize assets if talks fail as Barclays Plc said declining oil production and exports are weakening the Latin American country’s finances.

Ecuador’s economic fundamentals are “deteriorating,” after a decline in oil production and exports, Barclays said today in a report to clients. Repsol YPF SA, the country’s biggest private oil producer, posted a 17 percent drop in output to 16.3 million barrels last year from 2008, according to data from Ecuador’s Non-Renewable Natural Resources Ministry."

"“To maintain our quality of life here — as it is, for better or for worse — means at a minimum maintaining our current road networks,” said William Shallcross, a Winter Park developer.

Here’s the problem: Collection of several taxes earmarked for road work is off by more than $75 million this budget year. The worst hit are fees from drivers licenses, vehicle registrations and titles. All together, the state is projecting a drop of almost $488 million to its five-year work plan."

"A healthier world economy and better financial conditions have reduced banks’ need to write down assets but sovereign debt problems may be spreading, according to the International Monetary Fund.

In its twice-yearly global financial stability report, the fund reduced its estimate of the writedowns required of banks around the world to $2,300bn from an earlier estimate of $2,800bn made six months ago. A recovery in the financial markets had increased the value of their assets and made it easier to raise capital, the fund said.

But the fund said that the credit recovery would be “slow, shallow and uneven”, and that sovereign debt problems in countries such as Greece had the potential to undermine the recovery.

“With markets less willing to support leverage – be it on bank or sovereign balance sheets – and with liquidity being withdrawn as part of policy exits, new financial stability risks have surfaced,” the report said. The rise in sovereign credit risk premiums in the early stage in the crisis had now been compounded by growing concern about the creditworthiness of countries with heavy government debt burdens.

“Advanced countries have the debt levels that they had after World War Two but without a world war,” said José Viñals, head of the IMF’s monetary and capital markets department. "

"As for foreclosure outcomes, third party purchases at foreclosure sales hit a new record in March, crossing 4,000 properties for the first time with combined purchases totaling more than $840 million. Third party sales jumped 11.04 percent from February and surged 266 percent from a year ago.

In addition, a total of 15,204 California foreclosures went back to bank in March, up 28.14 percent from the month before and 66.33 percent higher than March 2009. And 16,513 foreclosure cancellations were recorded, a 20.21 percent jump from February and a 159.97 percent increase from the same month last year."

 

  • Other news and headlines:

Massive Teacher Layoffs Likely With Budget Cuts (Oklahoma...up to 5,000 layoffs)

AEP to cut more than 2000 jobs

IMF Said to Propose G-20 Bank Tax to Pay for Bailouts

Drug Prices Rose 9.1% Last Year, Ahead of Federal Health Overhaul

Colorado faces budget cliff in 2011

Volcano market impact moves far beyond airlines

Adelanto School District to borrow $3 million to make payroll (California)

Thailand May Put Off Rate Increase as Unrest Worsens

DavidC's picture
DavidC
Status: Silver Member (Offline)
Joined: Sep 29 2008
Posts: 243
Re: Daily Digest - April 20

Sax,

It's not the 1st of April is it...?!

"California is now rated A1. Puerto Rico is rated A3."

I don't live in the USA so I'd be very interested in hearing opinions from anyone about how things really are there. From what I've been reading of the various states' troubles in the USA things are very bad.

DavidC

 

jpitre's picture
jpitre
Status: Gold Member (Offline)
Joined: Mar 3 2009
Posts: 366
Re: Daily Digest - April 20

Davos

 

Thanks for the Strabes/Damon post -- seems to me that his comments are well thought out  and form an excellent continuation of the Crash Course. I've watched his videos read most of his articles and find them well stated and accurate  -- see http://www.canadafreepress.com

And videos (in order) of Damon's course about our monetary system on YouTube at:

http://www.youtube.com/user/councilonsper#p/a/3FB144AC4AAA1EC4/0/l37RhdF...

http://www.youtube.com/user/councilonsper#p/a/3FB144AC4AAA1EC4/1/BGTBkNJ...

http://www.youtube.com/user/councilonsper#p/a/3FB144AC4AAA1EC4/2/a2VDC8U...

 

Great stuff to get to know

Jim

Russ_H's picture
Russ_H
Status: Member (Offline)
Joined: Sep 28 2008
Posts: 18
On a lighter note.....

 

The truth about Goldmine Sacks, maybe :-)

http://www.thedailymash.co.uk/news/business/goldman-sachs-'did-not-have-magic-beans'-201004192654/

 

 

idoctor's picture
idoctor
Status: Diamond Member (Offline)
Joined: Oct 4 2008
Posts: 1731
Re: Daily Digest - April 20

idoctor's picture
idoctor
Status: Diamond Member (Offline)
Joined: Oct 4 2008
Posts: 1731
tomadkins's picture
tomadkins
Status: Bronze Member (Offline)
Joined: Sep 9 2009
Posts: 32
Re: Daily Digest - April 20

Kudos to Erik Townsend, a member of this site, for his cogent synopsis of the entire GATA/CFTC/etc event.

My take:  you must have possession of your PM's...somewhere...and preferably outside of a bank.

I can only hope that the concept of JPM's short position "gets legs"...and soon.

Regards,

Tom

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