Daily Digest

Daily Digest - April 26

Monday, April 26, 2010, 10:46 AM
  • Record 21% Of Americans Think They'll Get Canned In The Next Year
  • Goldman's Essay On Why The U.S. Debt Load Is "Not Too Concerning"
  • Why Investors Never Learn
  • Peak oil: Why industry and government should sit up and listen
  • BP Oil Well Leak May Take Months to Close After Rig Sinks
  • Diamonds Aren't Forever? De Beers To Cut Supply

Economy

Record 21% Of Americans Think They'll Get Canned In The Next Year (Ben Johnson)

Gallup's poll of employed Americans found that 21% think it is likely they will be laid off in the next year. Only 38% are confident they won't be laid off. Both indicators are at record levels and getting worse. Rising fear shows the average American does not believe in the recovery.

Goldman's Essay On Why The U.S. Debt Load Is "Not Too Concerning" (jdargis)

In a note distributed to clients, entitled "What's the Right Measure of US Government Debt?" Andrew Tilton and Alec Phillips try to present the case that contrary to what you may have heard, the $12.8 trillion of US debt is not really worth losing sleep over. In fact the next time Goldman needs a bailout and the resultant $2-20 trillion of new debt are added to the make the 2s30s at about 100%, that should not be a source of concern either.

Why Investors Never Learn (jdargis)

The post-bubble backlash gave rise to useful new regulations, but it had no discernible impact on Wall Street’s actual business. The very year that the analyst scandal broke, investors gave major offenders like Citigroup and Merrill Lynch more money to manage. Within a few years, financial-industry profits were at an all-time high. Will investors forgive as easily this time?

Energy

Peak oil: Why industry and government should sit up and listen (Chris M)

But the taskforce companies find themselves on the minority side of a somewhat polarised debate. Those on the other side - led by BP, Exxon and others - offer a much more comforting narrative: forty years of supply at least, and no chance of global oil supply dropping before demand does. Theirs is the view that is favored in most governments, and in boardrooms, often implicitly. I know of no company that views premature peak oil as a serious risk issue.

All this may soon change. The UK government had historically echoed the BP line, until our report was published. Senior government officials had told taskforce members that they saw no risk of premature peak oil, and declined the invitation of the companies to convene a government-plus-industry taskforce. The 2009 Wicks Review of UK energy security allocated a dismissive one page-and-a-bit to peak oil in a 119 page document.

But at the press conference in the Royal Society where the taskforce released the report, it became clear that the UK government response had changed. They were no longer certain who was right. The head of international energy security at DECC, Chris Barton, said: "we need to work together (with industry) to do more - e.g. to consider recommendations in the report that we're not currently acting on." DECC will set up a forum for doing this.

BP Oil Well Leak May Take Months to Close After Rig Sinks (Chris M)

BP Plc said it may take months to drill a well to stop an oil spill under the Gulf of Mexico that threatens to become an environmental disaster.

BP and Swiss drilling contractor Transocean Ltd. began using remote-controlled vehicles yesterday to try to halt the 1,000 barrel-a-day leak. If that doesn’t work, BP may need to pump heavy fluid into a relief well to stop the flow of crude from the seabed.

“The relief well as described could take several months,” Doug Suttles, BP’s chief operating officer of exploration and production, said in a teleconference yesterday

Environment

Diamonds Aren't Forever? De Beers To Cut Supply (Jeff B.)

De Beers' move, which will see production plateau at about 40m carats a year from 2011 compared with 2008 production of 48m carats, anticipates new Asian demand accelerating the depletion of the world's existing diamond mines, said Gareth Penny, managing director.

Please send article submissions to: [email protected]

11 Comments

saxplayer00o1's picture
saxplayer00o1
Status: Diamond Member (Offline)
Joined: Jul 30 2009
Posts: 4145
Re: Daily Digest - April 26

 

"LONDON—Hopes that Greece's formal request for international financial aid might help stabilize the financial markets are proving short-lived Monday, with the cost of insuring Greek debt against default soared to a new record.

The euro also took a dive, after briefly rebounding from a 12-month low of $1.32 against the dollar Friday after Greece officially requested the financial aid promised last month by euro-zone finance ministers and the International Monetary Fund.

As Monday trading got off in earnest, though, concerns over the lack of detail on how this aid will be implemented shoved the euro below $1.33 against the dollar."

.................1A) Greece under pressure as Germany drags feet

"German Finance Minister Wolfgang Schaueble over the weekend said Germany would make no final decision on the country's 8.4 billion euro ($11.2 billion) share of the loan package until Greece provides a more detailed program of additional austerity measures, the Financial Times reported.

German Foreign Minister Guido Westerwelle on Monday said Berlin opposes providing financial aid to Greece without Athens presenting a credible debt-reduction program, Agence-France Presse reported. Westerwelle heads the Free Democratic Party, the coalition partner of German Chancellor Angela Merkel's Christian Democratic Union. "

...................1B) Greek Contagion Concern Spurs Sovereign Default Risk to Record

"April 26 (Bloomberg) -- Greece led an increase in European sovereign credit risk on concern the bill for bailing out the region’s most-indebted nations will surge as they struggle to finance swollen budget deficits.

Credit-default swaps on Greece soared as much as 98.5 basis points to a record 713 and Portugal jumped 39 basis points to an all-time high of 318, spurring the Markit iTraxx SovX Western Europe Index of swaps on 15 governments to 117 basis points, according to CMA DataVision. Contracts on Spain climbed 10.5 basis points to 184 and Ireland increased 16.5 to 200.

Portugal, Ireland and Spain are “conspicuously vulnerable” and may need funding, according to former International Monetary Fund chief economist and Harvard Professor Kenneth Rogoff. Greece has asked the IMF and European governments for a $60 billion emergency aid package to help fend off default when debt payments come due next month.

“On the face of it, a restructuring, a rescheduling or an external prop for the debt looks unavoidable” for Greece, Mark Schofield, head of interest-rate strategy at Citigroup Inc. in London, wrote in an investor note. That “could trigger rapid contagion that would cause a much graver problem should Spain, Portugal and Ireland be impacted,” he wrote."

"The government may borrow 120 billion rupees ($2.7 billion) of bonds this week, according to the central bank’s indicative auction calendar. The details of the securities to be sold will be announced today."

"The yield on the 6.35 percent note due January 2020 rose one basis points to 8.07 percent as of 9:40 a.m. in Mumbai, according to the central bank’s trading system. "

"New York state is on track to run out of money in June and will almost certainly end the months of May, June, July and August with a negative balance, according to Comptroller Thomas DiNapoli and state budget officials.

That’s unprecedented in New York history, DiNapoli said.

“The state’s finances are very shaky,” DiNapoli said. “Big bills are piling up, and there may not be enough cash to cover them.”

The state ended the 2009-10 fiscal year (which closed March 31) with a general fund balance of $2.3 billion. But that’s only because Gov. David Paterson delayed $2.9 billion in payments to schools and other groups. Those payments will soon come due.The state is on the hook to pay schools $4 billion June 1, including $2.1 billion that was deferred in March.“Based on current trends, we anticipate being $1 billion short on that school payment,” state budget Spokesman Matt Anderson said.What will the state do? Anderson said there are a number of options, but one clear frontrunner.“The best way to address this is to enact a timely and responsible budget as soon as possible,” he said.If no budget is in place, the state could be forced to do short-term borrowing or further delay payments to schools."

.....................3A) State Weighs Emergency Borrowing (New York)

"Scrambling to avoid running out of cash, state leaders are discussing whether to declare a fiscal emergency so they can lift a longstanding ban on short-term borrowing.

The state probably would need to sell more than $1 billion in notes that would be paid off with revenue expected to be collected later in the year, said people familiar with the discussions.

We are going to have to borrow, and we're going to have to borrow in the next couple of weeks in my opinion," Assemblyman Herman D. Farrel Jr., the Manhattan Democrat who is chairman of the Assembly Ways and Means Committee, said last week at a policy forum sponsored by the Nelson A. Rockefeller Institute of Government in Albany.

Morgan Hook, a spokesman for Gov. David Paterson, said emergency short-term borrowing is being discussed, but no final decisions have been made.

Such a move would mark the return of a maneuver known as "spring borrowing" that hasn't been used since the administration of Gov. Mario M. Cuomo, who ended the practice in 1993.

Though derided as a gimmick a generation ago, Albany is gravitating toward the idea as doubts grow over the state's ability to stay afloat in June when billions of dollars in payments for schools, health care and local governments are due. "

"Ohio officials are pushing hard for federal aid that could pump $750 million more into the state's Medicaid program next year, money that would help maintain health-care services to the poor and disabled.

The call for more relief comes as Medicaid caseloads continue to climb and state officials face gaping budget shortfalls.

The rolls jumped 18,123 in March alone, meaning that nearly 2.1million Ohioans relied on Medicaid. With that trend expected to continue, combined with the prospect of no federal stimulus money, officials are projecting a shortfall of up to $8 billion in the next two-year state budget.

The Medicaid windfall would come if Congress approves legislation requiring the federal government to continue paying a larger share of the costs of the state-federal health-care program.

The higher federal reimbursement rate was included in the 2009 economic-stimulus package. It expires Dec. 31, but Congress is considering a $23 billion measure to keep the extra dollars flowing for six more months, through June30, 2011."

"The five state retirement systems are, on average, only 38.4 percent funded currently.

Recently, the state has been meeting its minimum payments for the 50-year fix only by borrowing - $3.5 billion last year alone.

How did it get this bad?

The answer stretches back decades, covering numerous political administrations and legislative careers at the Capitol, all of whom had a role in spending state pension money on things other than state pensions. "

"Bill Gross is used to buying bonds in multibillion-dollar batches. But when it comes to U.S. Treasury bills, he's getting nervous. Gross, a founder of the investment giant Pimco, is so concerned about America's national debt that he has started unloading some of his holdings of U.S. government bonds in favor of bonds from such countries as Germany, Canada and France. "

""In order to pay the interest and the bill when it comes due, we'll simply have to issue more IOUs. That, to me, is Ponzi-like," Gross said. "It's a game that can never be finished." "

  • Other headlines and news stories:

Goldman Sachs email said index 'like Frankenstein'

Emerald Shores owners lose big; ambitious redevelopment plan ends in land auction

Big deficit on horizon for Orlando

1 in 3 San Francisco employees earned $100000

Thai 2010 GDP may be cut 0.6 point by protest-govt

Bond Traders Declare Inflation Dead After Yields Fall

Nurse's base pay was $55,000, retired, she gets $191,400 (Cincinnati)

Saturday Night Live does a skit on public employee benefits

Pensions for 131 school retirees top $150,000 each annually (Illinois)

Thanks, Blago, Stern, Daley, Jarrett and company: Illinois public sector pensions will run dry in just 8 years... or less (Blog)

Mike Pilat's picture
Mike Pilat
Status: Platinum Member (Offline)
Joined: Sep 8 2008
Posts: 929
Re: Daily Digest - April 26

Recently, a study was published on Peak Oil that draws a direct connection between our debt based monetary systems, economic (energy) contraction, and the various implications. This is a direct reflection of the connections that Chris so clearly points out in the CC. While numerous books make the connection, I've seen few studies or white papers that make it this clearly. Definitely worth checking out. The document is appropriately named "Tipping Point."

http://www.feasta.org/documents/risk_resilience/Tipping_Point.pdf

 

Hotrod's picture
Hotrod
Status: Silver Member (Offline)
Joined: Apr 20 2009
Posts: 183
britinbe's picture
britinbe
Status: Gold Member (Offline)
Joined: Dec 28 2008
Posts: 381
Re: Daily Digest - April 26
Mike Pilat wrote:

Recently, a study was published on Peak Oil that draws a direct connection between our debt based monetary systems, economic (energy) contraction, and the various implications. This is a direct reflection of the connections that Chris so clearly points out in the CC. While numerous books make the connection, I've seen few studies or white papers that make it this clearly. Definitely worth checking out. The document is appropriately named "Tipping Point."

http://www.feasta.org/documents/risk_resilience/Tipping_Point.pdf

 

Mike,

Nice find, I'm about halfway through but I have already forwarded it on to a few folks.

mesaboogieman's picture
mesaboogieman
Status: Bronze Member (Offline)
Joined: Jan 16 2009
Posts: 42
Re: Daily Digest - April 26
Mike Pilat wrote:

Recently, a study was published on Peak Oil that draws a direct connection between our debt based monetary systems, economic (energy) contraction, and the various implications. This is a direct reflection of the connections that Chris so clearly points out in the CC. While numerous books make the connection, I've seen few studies or white papers that make it this clearly. Definitely worth checking out. The document is appropriately named "Tipping Point."

http://www.feasta.org/documents/risk_resilience/Tipping_Point.pdf

 

It's good, but he'd have saved himself lot of time if he'd discovered the crash course first.    Smile

 

idoctor's picture
idoctor
Status: Diamond Member (Offline)
Joined: Oct 4 2008
Posts: 1731
Re: Daily Digest - April 26

Mike nice post....thanks

mesaboogieman's picture
mesaboogieman
Status: Bronze Member (Offline)
Joined: Jan 16 2009
Posts: 42
Re: Daily Digest - April 26
idoctor wrote:

Mike nice post....thanks

 

Shouldn't that title read Peter Schiff pwns Galbraith ???

gabbas786's picture
gabbas786
Status: Member (Offline)
Joined: Aug 19 2008
Posts: 1
Re: Daily Digest - April 26

I have a question, that is bothering me for sometime.  When Federal Reserve prints money off of thin air, who has ownership of that money?  I would assume that US Federal Government should own that money since Federal Reserve is working on behalf of US Federal Government.  I would appreciate an answer from somebody who is knowledgeble in this field.  Thanking you guys in advance.

guardia's picture
guardia
Status: Platinum Member (Offline)
Joined: Jul 26 2009
Posts: 592
Re: Daily Digest - April 26
mesaboogieman wrote:

Shouldn't that title read Peter Schiff pwns Galbraith ???

I wonder how long before the big guys can't find anyone to bribe like this... Can this really go on forever?

Samuel

DmaxSilver's picture
DmaxSilver
Status: Member (Offline)
Joined: Apr 20 2009
Posts: 24
Re: Daily Digest - April 26
gabbas786 wrote:

I have a question, that is bothering me for sometime.  When Federal Reserve prints money off of thin air, who has ownership of that money?  I would assume that US Federal Government should own that money since Federal Reserve is working on behalf of US Federal Government.  I would appreciate an answer from somebody who is knowledgeble in this field.  Thanking you guys in advance.

Thats a big question that has HUGE answers. These two should answer most questions regarding money: 

I would recommend watching Accent of Money 1st, CC and then Council. 

http://www.youtube.com/user/councilonsper

http://www.pbs.org/wnet/ascentofmoney/featured/the-ascent-of-money-episode-1-from-bullion-to-bubbles/44/

JAG's picture
JAG
Status: Diamond Member (Offline)
Joined: Oct 26 2008
Posts: 2492
Farmer Brown on MIsh's Blog

Pretty soon the Martenson disciples are going to "own" this blogosphere. Strabes is all over the place, Erik and Davos own FSN, and now Farmer Brown is conversing with Mish:

http://globaleconomicanalysis.blogspot.com/2010/04/save-are-teachers-act...

Inquiring minds might be interested in an email from Patrick Brown, a director of operations of a private school in Costa Rica.

Dear Mish,

I've been following your blog for almost a year. I often post your articles on my facebook page or email them to friends and family.

I currently have one particular friend who writes, "Obviously, this will sound a little defensive; but didn't "Mish" miss adding any sort of proof to his Massachusetts teacher claim? I mean, anybody can start a blog and rattle off garbage."

He said this in response to your article titled, "Save Are Teachers", where you wrote, "In Massachusetts, teachers were telling kids that they would lose their homes if they did not get more money." If you can find the time to send me the reference for this claim, I would really appreciate it.

I happen to be in education. I'm the director of operations of a private independent K-12 American school in Costa Rica. Our school probably has much more in common with private US schools than you might think. My friend lives in la-la land and probably cannot take the fact that public schools in the U/S. and around the world have been run over by union thugs whose most minimal interest is the students.

Thanks much and please keep up the fantastic work. I cannot believe you do not charge for this!

Patrick Brown
Director Operations
Country Day School
An American School Serving the International Community

 

 

Kudos Hyper-Cow!

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Login or Register to post comments