Daily Digest

Daily Digest - August 22

Saturday, August 22, 2009, 10:37 AM
  • Ouch. Colonial Left a Mark! (on Loans)
  • Commercial Real Estate: There Goes the (Entire) Bubble (Chart on page)
  • Peter Schiff on AIG (H/T iDoctor)
  • 1 in 10 1 in 8 US Mortgages Falling Behind (CHART)
  • Seriously Delinquent and in Foreclosure by Type of Loan From Calculated Risk Blog (Chart)
  • Andy Xie: New Bubble Threatens a V-Shaped Rebound
  • King Report: Phony Philly Forecast
  • Guaranty Bank: OTS Closes the Barn Door
  • Film Feedback
  • Oh Oh.... Trouble Dead Ahead

Economy

Ouch. Colonial Left a Mark! (on Loans)

Yes, Colonial had some really bad loans. Peter Eavis quoted Daryl Bible, BB&T's chief financial officer: "When we looked at Colonial's portfolio versus ours, we saw a lot of borrowers we turned away."

Still it appears the BB&T / Colonial marks are the lowest yet.

Commercial Real Estate: There Goes the (Entire) Bubble (Chart on page)

Peter Schiff on AIG (H/T iDoctor)

1 in 10 1 in 8 US Mortgages Falling Behind

This is an astonishing number:

“A survey found that one in eight U.S. households with mortgages was in foreclosure or behind on its mortgage payments during the second quarter, putting added pressure on programs aimed at preventing foreclosures.”

As previously discussed, subprime is no longer the main offender — Prime mortgages are becoming delinquent at an accelerating pace:

1 in 10 1 in 8 US Mortgages Falling Behind (CHART)

Seriously Delinquent and in Foreclosure by type of loan from Calculated Risk Blog (Chart)

Andy Xie: New Bubble Threatens a V-Shaped Rebound

The process is called Schumpeterian creative destruction. Keynesian thinking ignores structural imbalance and focuses only on aggregate demand. In normal situations, Keynesian thinking is fine. However, when a recession is caused by the bursting of a big bubble, Keynesian thinking no longer works.

King Report: Phony Philly Forecast

Is Bernanke purposely aiding & abetting the usual market manipulation that occurs during expiration

week? In July, Ben poured $80.2B into the system, mostly by monetizing MBS, during expiration week, igniting a huge rally. The Fed balance sheet contracted for most of June and July before Ben’s gambit.

For the week ended Wednesday, Ben increased the Fed balance sheet $46.157B. Ben monetized

$66.646B MBS this time.

Guaranty Bank: OTS Closes the Barn Door

It has been widely reported that the assets of Guaranty Bank (Texas) will be seized Friday by the FDIC and sold to Banco Bilbao Vizcaya Argentaria SA of Spain.

Meanwhile the OTS issued a Prompt Corrective Action (PCA) to Guaranty yesterday. Maybe they didn't get the memo ...

Film Feedback

Mike: I have now had the pleasure of watching “Broke” three times. I seem to gain more understanding of its message each time. I believe the video could have been shot at anytime in human history, had the technology been available. This is because the film is about human behavior and the lies humans tell themselves (and others) to justify their responses to stress. What you have generously allowed your “actors” to reveal to viewers are the attempts by them to handle a more and more complicated life. When applied to the markets, through the film, one can begin to understand how participant behavior shapes price discovery and movement. In fact I have been able to broadly apply what I have learned from “Broke” to my own trading (and my own behavior). Indeed the film has served as reinforcement to some theories I have long held - which are not very popular with my friends. It’s all there to be seen in “Broke” - greed, hypocrisy, blame, insight, sloth, vengeance, fear, ignorance, enlightenment (stop me now), but by far my favorite is the interplay between the Shepard (big brother, government, religion?) and his sheep (investors, traders, everyone?). The unpredictable herd changes play like the trend reversals in trading and serve to inform and profit those who can be taught how to approach making money. What a gift is “Broke.” Thanks, Jack

Oh Oh.... Trouble Dead Ahead

You can read the original article at the above link, or I'll just point out the important parts: foreigners are rejecting virtually all forms of US debt, most specifically corporate and agency (mortgages.)

The only place foreigners are "still buying" is in the Treasury market, and one wonders: for how much longer, and how much of that is really foreign buying?

Not that it matters. This debt is being rejected because foreigners have no faith in the future of its value. It is not just the risk of default any more - it is also the risk of currency translation going "the wrong way" to an extreme degree, potentially destroying the buyer's purchasing power even if a formal default does not occur.

13 Comments

gregroberts's picture
gregroberts
Status: Diamond Member (Offline)
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Posts: 1024
Re: Daily Digest - August 22

http://www.infowars.com/common-sense-2009/

Perhaps it’s time to consider that option once again.

I’m calling for a national strike, one designed to close the country down for a day. The intent? Real campaign-finance reform and strong restrictions on lobbying. Because nothing will change until we take corporate money out of politics. Nothing will improve until our politicians are once again answerable to their constituents, not the rich and powerful.

Let’s set a date. No one goes to work. No one buys anything. And if that isn’t effective — if the politicians ignore us — we do it again. And again. And again.

The real war is not between the left and the right. It is between the average American and the ruling class. If we come together on this single issue, everything else will resolve itself. It’s time we took back our government from those who would make us their slaves.

cannotaffordit's picture
cannotaffordit
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Joined: Jun 12 2008
Posts: 273
Re: Daily Digest - August 22

gregroberts wrote:  "The real war is not between the left and the right. It is between the average American and the ruling class. If we come together on this single issue, everything else will resolve itself. It’s time we took back our government from those who would make us their slaves."

Hooray for you Greg.   I, for one, think you got it exactly right.  

"Nothing WILL change until we get big money out of politics.  Only thing is, big money OWNS politics in this country.  How in heck can we ever fight against those who have more money that god, and if we kick one politician out, big money will just recruit the new one, with their big money?

hucklejohn's picture
hucklejohn
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Posts: 281
The Big Picture

Here is one of the best explanations I have seen regarding the big picture, inflation, deflation, currency, deficits, debt, credit, etc:

http://economicedge.blogspot.com/2009/08/debt-interest-rates-and-monetary-trends.html

joemanc's picture
joemanc
Status: Martenson Brigade Member (Offline)
Joined: Aug 16 2008
Posts: 834
Good Deflation - Solar panel prices sliding
Quote:

After peaking at $4.20 a watt in 2008, prices for solar panels have dived as much as 50 percent to about $2.40 a watt for European and U.S. companies that make silicon-based panels and $2.00 a watt for Chinese suppliers, Chase said. Prices on lower-cost thin film panels are between $1.00 and $2.00 a watt.

The bottom-out price "could be as low as $1.50 for crystalline silicon, which would be a shockingly low price," Chase said.

http://www.reuters.com/article/GCA-GreenBusiness/idUSTRE57K46Y20090821

Farmer Brown's picture
Farmer Brown
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Posts: 1503
Re: The Big Picture

hucklejohn,

Thanks for the link.  Excellent (though depressing) analysis.

jlshen2000's picture
jlshen2000
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Re: Daily Digest - August 22

Thanks to HuckleJohn for the link

http://economicedge.blogspot.com/2009/08/debt-interest-rates-and-monetary-trends.html

It is indeed an interesting article.

My understanding is that we have deflation now until we loose confidence in the monetary system and the government. When the world looses confidence in USD, the result would be extremely high money velocity. Consider the huge deficit and 70% USD is outside of US, hyperinflation would occur. Is something wrong with my reasoning?

If so, I would stock some gold and silver now instead of freshly printed USD. I would like to be 2 years ahead than 2 minutes too late for the coming hyperinflation.

Davos's picture
Davos
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Posts: 3620
Re: Daily Digest - August 22

IMHO, and I know this sounds out there, but I don't think we have deflation now.

What I think we are experiencing is:

  1. Demand is down for certain assets and supply is up as a result
  2. I think that explains the low prices we are seeing with respect to  many assets
  3. I think the true meaning of inflation is an increase in the supply of money - and I think we have a huge increase there
  4. In my mind if they don't use Quantitative Easing we will default on the debt
  5. I have asked myself if ultra high interest rates would sell more bonds, enough to cover the deficit. I don't know the answer to that, but I question how that interest would be paid when the bonds matured. In fact I question how the principle would even be paid, especially with revenues and expense where they are
  6. I think the value of our dollar will fall precipitously as a result of QE

Just my two (devalued) cents

Farmer Brown's picture
Farmer Brown
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Posts: 1503
Re: Daily Digest - August 22

[quote=Davos]

  • Demand is down for certain assets and supply is up as a result

[/quote]

  • Yes, but why is demand down?  Isn't it because the availability of money is down?

[quote=Davos]

  • I think the true meaning of inflation is an increase in the supply of money - and I think we have a huge increase there

[/quote]

  • More specifically, it is an increase of money and credit.  Credit is being destroyed faster than money is being created, so the net change of money+credit is negative.

[quote=Davos]

  • In my mind if they don't use Quantitative Easing we will default on the debt

[/quote]

  • No doubt.  Same is true with private debt - that's why they've been shoveling money to the banks.  What I'd really like to see are some charts showing the export of dollars due to importing goods (which should show a sudden collapse) and the export of dollars due to debt payments (which I don't know what it should show - borrowing is way up but rates are way down).  Together, these two charts should tell us if there has been a net change in dollar outflows, which I think is the key to understanding how the dollar will behave vs. other currencies, and whether foreigners are finding themselves with too many dollars or too few.  My gut tells me they have too few.

[quote=Davos]

  • I have asked myself if ultra high interest rates would sell more bonds, enough to cover the deficit. I don't know the answer to that, but I question how that interest would be paid when the bonds matured. In fact I question how the principle would even be paid, especially with revenues and expense where they are

[/quote]

  • That's why I'd love to see those charts.  Foreigners have stopped buying.  Is it because they don't buy the interest rates, or because they are out of dollars?

[quote=Davos]

  • I think the value of our dollar will fall precipitously as a result of QE

[/quote]

  • Right on.  The endpoint is no doubt Ms. Hyperinflation.  My question is, do we visit Dr. Deflation's whirlpool of insanity first and if so, for how long and how deep?
  • sorry about the "bullets" - I tried to get rid of them, but I couldn't.

Ed.: Fixed the post for you. All enrolled members can change their Input format to "Filtered HTML - Enrolled Member." Doing so will provide additional toolbar options, including options to remove existing formats and cleanup messy code.

RSLCOUNSEL's picture
RSLCOUNSEL
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Re: Daily Digest - August 22

 

  1. DAVOS:
  1. Thanks for the great work.  You are my daily stop on the web.
  1. I would just say that "it isn't debt if you never plan to pay it off".
Davos's picture
Davos
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Posts: 3620
Re: Daily Digest - August 22
RSLCOUNSEL wrote:

 

  1. DAVOS:
  1. Thanks for the great work.  You are my daily stop on the web.
  1. I would just say that "it isn't debt if you never plan to pay it off".

Anytime, a pleasure to contribute to the fine community here that CM built. I'd agree, maybe albatross is better.

FireJack's picture
FireJack
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Posts: 156
Re: Daily Digest - August 22

I still can't understand why the guy at calculated risk thinks this is the end of the recession. See's a slow recovery from now on. Every other blog points out the giant looming problems that are bigger than anything that have affected us about to hit.

Nathan's blog is interesting and it's becoming pretty obvious that the US government will do the worst thing it can do.

It's still a question if peak oil will rear it's ugly head this fall along with all this other stuff thats happening. Too many lies and conflicting reports to be certain on anything right now. We shall see soon.

Davos's picture
Davos
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Posts: 3620
Re: Daily Digest - August 22
FireJack wrote:

I still can't understand why the guy at calculated risk thinks this is the end of the recession. See's a slow recovery from now on. Every other blog points out the giant looming problems that are bigger than anything that have affected us about to hit.

Nathan's blog is interesting and it's becoming pretty obvious that the US government will do the worst thing it can do.

It's still a question if peak oil will rear it's ugly head this fall along with all this other stuff thats happening. Too many lies and conflicting reports to be certain on anything right now. We shall see soon.

McBride is a sharp guy and he and Tonta did some amazing work. I don't know what he is looking at when he comes to these conclusions. I keep hos blog on my rss reader for the work he does with banks and real estate. While I hope he is right and I'm wrong I tend to think we are teetering on a cliff and have really recently entered the beginning of a depression. 20% unemployment in my mind would trigger that definition. Blowing up the currency will. Not being able to pay debt even with borrowed money would also constitute it.

But hey, Enron fooled lots of smart people right to their end.

Headless's picture
Headless
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Posts: 363
Re: Daily Digest - August 22

For those who need multiple citations of fact that refer to purported reliable quantitative indicators, they wont' be found below. Thus, skip this post and save yourself the frustration. Really!

The Absurdity of the Inflation-Deflation Debate:

Many people--those who should probably remove the hook, line, and sinker from their mouths--act as if there is some arbitrary magic number, some point on the quantitative number line regarding the quantity of dollars in circulation that will cause the phenomenon known as hyperinflation; actually, it has little to nothing to do with the "number of dollars "in consumers' hands" reaching some level; it has everything to do with the phenomenon related to "the stone age didn't end because we ran out of stones." If there were one Bluefin tuna left on Earth; one which was made solely of mercury, that would be enough to create a superabundance of Bluefin tuna. "Fish bad for heawth. No eat bwuefin. Bwuefin wowthwess."

 By the way, the more dollars there are out there, the more the banksters will claim that it will take to spur that Zimbabwean tradition of "a wheelbarrow for every worker."

Once there is a viable--and useful--alternative (to the dollar, which there are currently no shortage of in terms of life-sustaining goods), the formerly valued (dollar, in this case) ceases to be valued. There are, without the slightest doubt, already enough dollars in circulation to  cause them to cease to be valued tender--given a certain level of change in perception among those who hold them. (The last four years of my life, which were spent in asia, leave no doubt in my mind that the required shift in perception has already been voraciously embraced. But, of course, a large holder of artfully colored paper such as a large asian country must be more strategic about "sharing" its beliefs; imagine the plunge when they are sufficiently positioned to express their lack of confidence...)

Just like Zimbabwe, when the shift in perception is large enough--too large to hide--we will all be unable to deny that the number of dollars in circulation--already--far exceeds the number required for a hyperinflationary event; and surely by some large multiple. The people in Zimbabwe weren't able to collect wheelbarrow loads of  currency without it already having been in infinitely superfluous supply.

Let's put a halt--right now--to this absurd bankster propoganda that there aren't already enough U.S. dollars in circulation to cause a hyperinflationary event! By definition, as a reserve currency for decades, there are X-fold  too many U.S. dollars in circulation. It just amazes me that people like Mish completely overlook this obvious fact; and, of course, that's why he will end up being a flash in the pan...

Finally, for those who just cast the above comments aside without a thought: I'll give you an analogous event that is already under way: Various asian businesses and schools (those that seek teachers of English to train their workers or students) are currently placing adverts that seek "English  teachers" ; in the adverts themselves, there are often requests for teachers from "Canada, New Zealand, Australia, and the U.K." Conspicuously  absent from some of these adverts is the term "American." I have actually seen adverts that proclaim "No Americans." What does that say about the perception of "things" made in America?

Headless

P.S. If this somehow seems cryptic (i.e., devoid of all the irrelevant numbers that are offered by the manipulators, parroted by those like Mish et al, and latched onto by those who are about to lose more of their hard-earned wages), it's not out of disrespect or lack of concern; quite the contrary. Sometimes you just need to look "behind" you to see if you;re being fu*&$d. That is to say, you don't need a calculator--especially one that's been pre-programmed and given out freely by the "Concerced investment advisors" at Goldman Sachs...

P.P.S. Was at a Home Depot today in San Diego; there were only six cars in the parking lot. Six!.Later in the evening, I went to a wedding reception at a very posh office complex which was built in the style of a traditional pre-20th century Hispanic home (gardened courtyard surrounded by various buildings (a fortress); a style that Jim Kunstler would much appreciate); there was one white guy who was rich; most of the Mexicans were filthy rich. This, and various other experiences I've had recently push me a little closer to believing Professor Igor Panarin's prediction of the U.S. splitting into 6 regions, one of which will become a part of Mexico. As I sit in my front yard and observe the pedestrains who pass by on the boardwalk that is adjacent to the beach,  I am hearing more and more Spanish and less and less English...

Repeat after me: Hypernflation is inevitable. Hyperinflation is inevitable. Hyperinflation is inevitable...

But, no, I don't believe gold is the answer. That's just where Goldman Sachs, long ago, and with the conspiratorial assistance of the Bank of England, has stolen its next tranch of middle-class wealth. We're not in Kansas anymore, and we're not playing checkers Toto...

 

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