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Daily Digest - Dec 1

Monday, December 1, 2008, 7:49 AM

Credit card industry may cut $2 trillion of lines, Korelin economics report, Britain joining the Euro?,  Trump busted again, durable orders down, affordable electric car, and Beverly Hillbillies keep pumping.

Economy

Credit-Card Industry May Cut $2 Trillion of Lines

The U.S. credit-card industry may pull back well over $2 trillion of lines over the next 18 months due to risk aversion and regulatory changes, leading to sharp declines in consumer spending, prominent banking analyst Meredith Whitney said.

The credit card is the second key source of consumer liquidity, the first being jobs, the Oppenheimer & Co analyst noted.

"In other words, we expect available consumer liquidity in the form or credit-card lines to decline by 45 percent."

Bank of America [BAC 16.25 0.82 (+5.31%) ], JPMorgan Chase [JPM 31.66 1.04 (+3.4%) ] and Citigroup represent over half of the estimated U.S. card outstandings as of Sept. 30, and each company has discussed reducing card exposure or slowing growth, Whitney said.

A consolidated U.S. lending market that is pulling back on credit is also posing a risk to the overall consumer liquidity, Whitney said.

 

Oct. 7 Video Jurg Kiener CEO Swiss Asia Capital (COMEX two tier market, 1:40, 1:55, 2:07 Defaults)  

 

Korelin Economics Report (Audio COMEX, OI) 11/29/2008

 

Britain thinking of joining Euro: Barroso 

Britain is considering joining the eurozone as a direct consequence of global financial turmoil, European Commission President Jose Manuel Barroso said Sunday. 

"We are now closer than ever before. I'm not going to break the confidentiality of certain conversations, but some British politicians have already told me: 'If we had the euro, we would have been better off'," Barroso told a weekly French news programme, referring to the fall in the pound's value since markets and liquidity meltdown earlier this year.  

 

Trump: Let Me Take This Opportunity To Remind You How Rich I Am (TRMP) 

That "The Donald" is a blowhard self-promoter is rarely noteworthy, but the latest episode at his perpetually failing gaming company Trump Entertainment Resorts (TRMP) is a good one. Once again, it's teetering on the brink. Its stock is at 31 cents, and on Friday after the close -- when absolutely zero people were paying attention -- it announced that it would skip a $53.1 million interest payment due on Monday.  

 

 

The Biggest Losers

 

October durable orders down 6.2%, transportation orders fall 

WASHINGTON (MarketWatch) -- Orders for U.S.-made durable goods fell 6.2% in October, the largest decline in two years, the Commerce Department estimated Wednesday, as orders for transportation goods fell 11.1%. Economists surveyed by MarketWatch had expected an overall decline of 2.5%. Excluding transportation, orders fell 4.4%. Orders for core capital equipment - the kind of investments businesses make to expand or update their productive capacity - fell 4% in October, after a 3.3% decline in September. October shipments fell 2.4% after a 0.2% dip in September. Excluding transportation, shipments fell 1.7% in October after a 0.9% decline in September. New orders for September were revised to a decline of 0.2%, compared with the prior estimate of a 0.9% gain. 

Energy 

 

Wheego Whips Up A $19K EV 

If you're eager to get your hands on an EV but don't have the money for a Tesla or Mini-E, the time to wait for a Mitsubishi iMiEV or the smarts to build your own, the guys at Ruff & Tuff Electric Vehicles may have just the ticket - an electric car that looks a lot like a Smart and costs $19,000. 

Ruff & Tuff has teamed up with China's Shuanghuan Automobile Company to bring the little EV to America as early as next spring. The two companies hope to break into the budding market for EVs that are (relatively) inexpensive, safe and cool enough for urban environs. The way they see it, the time is right to bring an affordable EV to the masses.  

 

Los Angeles is home to new rush of oil drilling 

Beverly Hills is one of the most fertile oil fields in Los Angeles, producing nearly a million barrels a year. Many wells are camouflaged or hidden inside buildings. One on the property of Beverly Hills High School is covered in quilt-like floral blankets. 

 

 

 

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13 Comments

Rob Z's picture
Rob Z
Status: Bronze Member (Offline)
Joined: Nov 30 2008
Posts: 49
Re: Daily Digest - Dec 1

Starting Now: America’s Second Great Depressionby Martin D. Weiss, Ph.D. “Money and Markets”  12-01-08 On this first weekday after Thanksgiving, it’s time to take a moment, look at the changes swirling all around us and think about the tasks we must achieve together in the weeks ahead.  After more than six decades of growth, America is sinking into its Second Great Depression of modern times. The place is every home, business, and community. The time is now. America’s Second Great Depression is not a typical 20th century recession that happens to strike a bit harder or linger somewhat longer. Nor is it merely a fictional scenario conjured up by economists with a murky crystal ball. 

America’s Second Great Depression is the probable consequence of a great housing bust, a massive mortgage meltdown and the biggest financial crisis in history.

 

Read more at - Money and Markets…

 

http://www.moneyandmarkets.com/starting-now-americas-second-great-depression-3-28428

 

Mike Pilat's picture
Mike Pilat
Status: Platinum Member (Offline)
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Posts: 929
Re: Daily Digest - Dec 1

I think it's most important to understand the role of energy in all of this. We can call it a financial crisis - and it is one - but it is being driven fundamentally by resource depletion. If there was pletiful energy and resources, growth would continue to accelerate and we wouldn't see the massive defaults we do now.

Until there is actual acknowledgment of the role of resource depletion in this crisis, then I remain doubtful that the politicians will even be aiming in the right direction. This is not a happy proposition to them, because all we hear about is "economic growth" and "prosperity" without seeming to have an understanding of what these imply.

I believe that a sustainable society will eventually be inherently decentralizing in that the future will trend towards smaller, more local communities. This break up of the huge world superpowers will render the positions of power that now command them obsolete. The power mongers and the greedy, more than any other group, do not want to relinquish their power and will continue to cling to the illusion of growth until it undoes them.

Interestingly enough, a friend just showed me the Lakota free bank, a bank created by the Lakota that has deposits backed in gold and silver. They speak out against fractional reserve banking on the main page. Interestingly enough, the Natives, who never got too obsessed with oil in the first place, seem to have a clearer vision of a sustainable financial future than do the people commanding the powers of the world. See here: http://press.freelakotabank.com/

 

ds's picture
ds
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Posts: 43
Re: Daily Digest - Dec 1
Rob Z wrote:

 

Read more at - Money and Markets…

 

http://www.moneyandmarkets.com/starting-now-americas-second-great-depression-3-28428

 

Am I the only one who thinks that was a bunch of overly simplistic crap designed to part you from some of your money?

capesurvivor's picture
capesurvivor
Status: Platinum Member (Offline)
Joined: Sep 12 2008
Posts: 963
Re: Daily Digest - Dec 1

I don't subscribe to Weiss' reports but I respect him and don't think he's a shyster. I've read his books and he has been right on. I think you need 1 Mill minimum for him to manage your $ for you; dk what he charges or his actual track record. Maybe someone else knows. He focuses on safe banks and, I think, insurers.

 

SG

Damnthematrix's picture
Damnthematrix
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Posts: 3998
Re: Daily Digest - Dec 1
uvakid wrote:

I think it's most important to understand the role of energy in all of this. We can call it a financial crisis - and it is one - but it is being driven fundamentally by resource depletion. If there was plentiful energy and resources, growth would continue to accelerate and we wouldn't see the massive defaults we do now.  See here: http://press.freelakotabank.com/

Welcome aboard uvakid.....  I totally agree.

What I think confuses people about resource depletion is that it still appears as though resources are plentiful.  I mean you go to the gas station, and there's plenty of gas, and the shops are full of consumables, so there are no signals that resources are running out....  THAT I think is the reason most people still refuse to accept our message...

What no one (except most people here I guess!) don't get is that to feed the growth monster at current rates we would need to find twice as much 'stuff' and energy to continue over the next 20 years or so.  Hardly anyone I know understands the exponential function.  The water is lapping at their feet in the stadium, and they still haven't worked out how to unshacle themselves from the top row of seats... 

And all this at a time when the production of nearly everything has plateaued or is about to..

Interesting times indeed. 

Damnthematrix's picture
Damnthematrix
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Posts: 3998
Re: Daily Digest - Dec 1

DJI fell 700 points ( 7.7% ) , oil down 9.7% to US$49.17, gold down 5.2%, yield on US 10-year T-bonds fell to 2.75% as the deleveraging grinds on.

Damnthematrix's picture
Damnthematrix
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Posts: 3998
Peak Oil Rigs...?

NEW YORK (MarketWatch) -- The Philadelphia Oil Service Index ($OSX:

Philadelphia Oil Service Sector Index
 Last: 115.82-21.84-15.87%

:

BJS 9.80,
-2.19,
-18.3%)
.
Pritchard Capital Partners noted that industry estimates have grown
more bleak for oil rig operators, with consensus expectations worsening
from a 200-400 rig decline in late October to a 600-rig decline
expected now. Operators are rapidly and severely reducing their capital
spending budgets, with leading edge dayrates down 10%-15%.

mainecooncat's picture
mainecooncat
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Posts: 488
Re: Daily Digest - Dec 1

Welcome uvakid,

Like Matrix, I enthusiastically agree with you. What you point out is still denied (or they are in a state of denial) by most -- even including those knowledgeabl about the Three E's and the financial crisis in general. Getting people to fully realize the thrust of your post is my main goal here on this site.

switters's picture
switters
Status: Platinum Member (Offline)
Joined: Jul 19 2008
Posts: 744
Re: Peak Oil Rigs...?
Damnthematrix wrote:

NEW YORK (MarketWatch) -- The Philadelphia Oil Service Index ($OSX:

Philadelphia Oil Service Sector Index
 Last: 115.82-21.84-15.87%

:

BJS 9.80,
-2.19,
-18.3%)
.
Pritchard Capital Partners noted that industry estimates have grown
more bleak for oil rig operators, with consensus expectations worsening
from a 200-400 rig decline in late October to a 600-rig decline
expected now. Operators are rapidly and severely reducing their capital
spending budgets, with leading edge dayrates down 10%-15%.

Yes, this is a serious problem.  At $50 a barrel the oil industry cannot invest in the infrastructure necessary to maintain production, much less what's needed to expand it.  

Gail the Actuary's article on The Oil Drum explains this quite clearly.  The financial crisis is destroying investment in both conventional and alternative energy, which makes it extremely likely that we hit "peak energy" sometime back in July.  

And of course, the energy crisis not only precipitated the financial crisis, it worsening and sustaining it as well.

As Kunstler always says, we're in a huge clusterf$ck.

 

mainecooncat's picture
mainecooncat
Status: Gold Member (Offline)
Joined: Sep 7 2008
Posts: 488
Re: Daily Digest - Dec 1

This is where so-called price mechanisms absolutely fail. As Matt Simmons has argued, and is now quite obvious, the price of things (Simmon's is talking about oil) has now become decoupled from their actual, inherent worth. This is one of the intrinsic weaknesses of our particular form of capitalism. It's both funny and tragic that the price of oil could collapse so much that potentially we as humans could stop producing it even though we need it as much as the body needs food and water. Talk about perverse. I'd like to talk more about this but don't have the time now. Cheers.

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
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Posts: 3998
Re: Daily Digest - Dec 1

I hope hewittr is reading this.....  because if ever there was proof the free market is a hoax, this has to be it...

ckessel's picture
ckessel
Status: Martenson Brigade Member (Offline)
Joined: Nov 12 2008
Posts: 465
Re: Daily Digest - Dec 1
Damnthematrix wrote:
uvakid wrote:

I think it's most important to understand the role of energy in all of this. We can call it a financial crisis - and it is one - but it is being driven fundamentally by resource depletion. If there was plentiful energy and resources, growth would continue to accelerate and we wouldn't see the massive defaults we do now.  See here: http://press.freelakotabank.com/

Welcome aboard uvakid.....  I totally agree.

What I think confuses people about resource depletion is that it still appears as though resources are plentiful.  I mean you go to the gas station, and there's plenty of gas, and the shops are full of consumables, so there are no signals that resources are running out....  THAT I think is the reason most people still refuse to accept our message...

Uvakid and Matrix,

Excellent posts. Here is some observational data from the field.

I live in a rural Calif. county where 75% of the land mass is Nat'l Forest or wilderness.

As I returned to the office today I traveled past the local lumber mill that had just cut back on labor due to the down market. The log storage yard was completely packed with logs as it usually is this time of year in preparation for winter.  And Calif. has been importing 80% of it's lumber products for several years, the majority from British Columbia  I think.

The very points you both make are clearly shown here in resource depletion and the appearance that resources are plentiful.

If you use Google Earth and go to Lat 38* 16' N ; Long 120 *08' W  you will see a portion of the Stanislaus Nat'l Forest that cannot be seen from public roads. This area was logged by steam driven winches and railroad in the early part of the century. By the early 1950s the last of the big trees ( and I do mean big) were gone. Only one log would fit on a rail car because they were 7' to 10' in diameter, the whole tree needing many railcars to haul it out to the mill. I watched these trees go past my grammer school on the railroad so this is not hearsay.

The second round of logging occured from the 60s thru about 1980. This was done with diesel trucks, bulldozers and log loaders hauling selectively cut logs marked for sale by the USFS.

The last round has been going on for about 12 years and uses "modern clearcut technology" which is  much easier on the environment we are told. Clearcutting is the only economical method of logging because there are simply not enough trees remaining to make it profitable for a logging company to do the work. These logs literally look like toothpicks they are so small. And we are told that the forest will actually regenerate faster with clearcutting because more sunlight is available to foster plantgrowth.

As you can see, there is not much of the resource left. If you pan across the Sierra Nevada Mountains at the same elevation for 100 miles north or south you will see the same view, over and over.  Keep in mind that this area of California has produced some of the largest tree canopy found anywhere in the world ..... and it is virtually gone. The single largest living organism by volume on the planet is the "General Sherman" Giant Seqouia tree at over 300 feet tall and somewhere around 54' in diameter growing in the southern Sierra forest.The coastal redwood forests are a ditto if you look at the area south of the Oregon border.

The key point here is that the log decks at the mill are literally packed with the clearcut trees and very visible to the public. The mill employees are being laid off due to cutbacks and the forests are depleted.  The common viewpoint is that all we need to do is get the market going again and start building houses so we can create jobs for all. There are certainly plenty of trees!

The reality is that the forest which has been decimated in a little over 100 years will take thousands to return to it's original condition. And this says nothing of the other species of flora and fauna which have also been affected nor impacts to the watershed which provides the primary source of water to the Central Valley farms and the millions of Bay Area residents.

I have been using Google Earth to  make my point in lectures regarding resource depletion and it has been working well.Hope this helps illustrate your points.

 

Mike Pilat's picture
Mike Pilat
Status: Platinum Member (Offline)
Joined: Sep 8 2008
Posts: 929
Re: Daily Digest - Dec 1

Mainecooncat raises a very good point when referring to Matt Simmons. I've read his now famous book Twilight in the Desert and follow him pretty closely. He knows what he's talking about.

 Without even attempting to deeply understand the mechanisms involved in our dysfunctional system, it's clear that there is a breakdown of price indications. The absolutely immense swings in the price of oil suprised even me. After extensive research, I've known the price of oil to be highly inelastic, as a result of the fact that the marginal cost curve is essentially exponentially shaped. Point is that a small reduction in demand can have a big reduction in price. But the price crash we've seen seems too extreme to be explained by "typical" economics.

 Clearly the pricing system is dysfunctional when you can get an entire barrel of oil for the same price as a couple of DVDs. I think the rudest awakening many will face is the deeply personal and physical realization of what energy does. And the answer is that energy makes life much, much easier. Under our current model, energy flat out supports life. DVDs don't. 

 The day is already dawning where we begin to look at the thought of commuting alone in a Hummer with some dismay. The day will come when oil is semi-precious and having it signifies true wealth.

I am a strong physical gold advocate and in the shorter term, it will probably outpace oil. But over a longer haul, I would rather own property on top of an oil well than own property on top of a gold mine.

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