Daily Digest

Daily Digest - December 4

Friday, December 4, 2009, 10:52 AM
  • America Without a Middle Class
  • Easy money: Goldman Sachs execs pocket $55 million in insider sale
  • Rumors Japan To Sell $100 Billion Treasuries Fuel Sell-Off
  • Japan Denies Rumors
  • Obama Tackles Jobless Woes, Suggests 'Cash For Caulkers'
  • Why Obama's Jobs Summit Won't Matter
  • Gold Touches Fresh Record As Some Query Bubble
  • Gold Leads Upswing In Roller-Coaster Year For Canadian Mining
  • Investors Taking Contradictory Path With Gold
  • How Has The Hyperinflation Outlook Changed?
  • Job Prospects Drawing Students To Agricultural Schools
  • Senator's Speech Rips Bernanke To Shreds
  • Bernanke May Use Rates To Pop Bubbles
  • Junk Mortgages: It Just Gets Worse
  • Why The Loan Modification Program Isn't Helping
  • Some Nasty Surprises In Store
  • Five Things Investors Need To Know About China
  • Economic 'Reform' In North Korea Making The Poor Poorer
  • Exxon-Mobil Is Funding Climate Skeptic 'Scientists'

Economy

America Without a Middle Class (re-post) (nncita, SolidSwede, M.W.)

The crisis facing the middle class started more than a generation ago. Even as productivity rose, the wages of the average fully-employed male have been flat since the 1970s. But core expenses kept going up. By the early 2000s, families were spending twice as much (adjusted for inflation) on mortgages than they did a generation ago -- for a house that was, on average, only ten percent bigger and 25 years older. They also had to pay twice as much to hang on to their health insurance./p>

Easy money: Goldman Sachs execs pocket $55 million in insider sale (radishcake)

Goldman Sachs was directly responsible for creating, marketing, and trading many of the toxic financial instruments behind the mortgage crisis and resulting recession. The bank's irresponsible behavior nearly caused its collapse, and taxpayers had to bail it out. Public funds saved Goldman Sachs, which this year is minting money and watching its stock soar. Last month, two Goldman vice chairmen quietly sold $55 million worth of company stock and pocketed the cash. And there you have it: from your IRS check to Goldman executives' bank accounts. And it's all legal. Congratulations, America.

Rumors Japan To Sell $100 Billion Treasuries Fuel Sell-Off (M.W.)

Treasury prices fell Thursday amid worries about an increase in debt supply. Bond yields, had fallen too low in recent days to make new debt being auctioned next week very attractive. Rumors Japan might sell as much as $100 billion of its U.S.Treasurys holdings helped fuel Thursday's sell-off.

Japan Denies Rumors (M.W.)

Japan’s government has no plan to sell some of its holdings of US Treasuries to fund its economic programs, Chief Cabinet Secretary Hirano said.

Obama Tackles Jobless Woes, Suggests 'Cash For Caulkers' (M.W.)

Obama discussed programs he said could provide bang for the buck when it comes to job creation. Among them: “cash for caulkers,” it would enlist contractors and home improvement companies like Home Depot— whose chief executive was on the panel — to advertise the benefits.

Why Obama's Jobs Summit Won't Matter (M.W.)

A presidential confab to create jobs won't work. Rethinking some of Obama's policies might.

Gold Touches Fresh Record As Some Query Bubble (M.W.)

"Commodity markets have been all gold, all the time, as if nothing else seems to matter,'' economist Dennis Gartman told clients in his Gartman Letter today.

Gold Leads Upswing In Roller-Coaster Year For Canadian Mining (M.W.)

Gold is being remonetized these days and behaving more like a currency, rather than an industrial metal. State-owned companies in China and S Korea are eager to use so-called "moose pasture mines," or undeveloped projects, as a form of currency. They'll use them quite aggressively to buy companies and to buy hard assets.

Investors Taking Contradictory Path With Gold (M.W.)

Gold's near vertical rise to new records is starting to puzzle many investors who are trying to square arguments fuelling its rise with seemingly conflicting moves in risky assets like equities or inflation-protected securities.

How Has The Hyperinflation Outlook Changed? (M.W.)

The actions taken by the gov't, Treasury and Fed, likely have advanced the timing of hyperinflation to the much nearer future, perhaps within the next year or two. Since Sept 2008, the Fed has been attempting to debase the U.S. dollar at an extraordinary pace, and such now is recognized widely among the major U.S. trading partners.

Job Prospects Drawing Students To Agricultural Schools (M.W.)

Enrollment in bachelor's degree programs in agriculture across the country grew by 21.8%. "I think that young people are recognizing all of the issues that surround our society that have to do with food, and I think there's a real interest in new ways of doing things and solving some of these problems."

Senator's Speech Rips Bernanke To Shreds (M.W.)

You promised more transparency and still refuse to provide details on the bailouts, You put the printing presses into overdrive to fund gov't spending and hand out cheap money to your masters on Wall St. You are repeating the mistakes of Japan. You refused to admit any responsibility for inflating the housing bubble. You admitted that you do not have an exit strategy. The A.I.G. bailout alone is reason enough to send you back to Princeton.

Bernanke May Use Rates To Pop Bubbles (M.W.)

The Fed chairman tells Senators that he sees no sign of "extreme misvaluations" of assets in U.S. markets "It is inherently very difficult to know if asset prices are appropriate or correctly valued," Bernanke said today.

Junk Mortgages: It Just Gets Worse (M.W.)

Two yrs ago we wrote about a particularly wretched mortgage-backed securities issue peddled by Goldman, to show how these complex securities really worked and how Moody's and S&P, aided and abetted the process by giving two-thirds of an issue backed by ultra-risky 2nd mortgages the same safety rating they gave to U.S. Treasury securities. We thought this was a cautionary tale -- but it's turned into a horror story.

Why The Loan Modification Program Isn't Helping (M.W.)

The Obama Administration wants lenders to modify more mortgages, but rising unemployment means more homeowners will be unable to pay even a reduced mortgage.

Some Nasty Surprises In Store (M.W.)

The US Dollar Index is showing signs of wanting to bottom out and this has seriously adverse implications for those who have been speculating with US Dollar carry trades.

Five Things Investors Need To Know About China (M.W.)

When it comes to China, it’s crucial to have the facts. The following Five China Profit Precepts bust a lot of widely held myths about overseas investing.

Economic 'Reform' In North Korea Making The Poor Poorer (M.W.)

Since the famine in N Korea, informal private markets have sprung up, enabling an increasing number of N Koreans to feed themselves and earn a basic living by trading. The U.N. estimates that about half the calories consumed in N Korea come from food purchased at these markets. Now, the small savers who run those markets will be stripped of the cash they need to run their businesses.

Energy

Exxon-Mobil Is Funding Climate Skeptic 'Scientists' (M.W.)

An investigation into the NIPCC reveals its numerous links to Exxon-Mobil, a vehement opponent of climate legislation and notorious for funding global warming skeptics. "Exxon-Mobil funds people to lie. To call global warming a hoax is to question every scientific journal, every scientific academy, and buy into the most extreme conspiracy theories. It's important for people to understand that they pay off the overwhelming majority of groups in the area of junk science."

12 Comments

saxplayer00o1's picture
saxplayer00o1
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Re: Daily Digest - December 4

"BEIJING (Reuters) - China has maintained a consistent allocation of its foreign exchange reserves across different currencies, a senior official said on Friday, suggesting that any diversification away from the dollar has been gradual."

 

"The report, "The $1 Trillion Wage Deficit," estimates the earnings loss of Americans from the beginning of the recession through 2012. The findings show that U.S. workers will lose a total of over $1 trillion in wages and salaries as a result of the Great Recession and the economy will continue to shed hundreds of thousands of jobs over the next three years under current policy."

 

"Dec 3 (Reuters) - Top U.S. and European banks have lost more than $1 trillion from toxic assets and bad loans since the start of 2007, and losses were expected to top $2.8 trillion from 2007-10 with roughly two thirds from loans and the remainder on securities, according to International Monetary Fund forecasts. U.S. banks were expected to take a $1 trillion hit and European bank losses will reach $1.6 trillion, the IMF said at the end of September. It said U.S. banks were about 60 percent through their losses, but British and eurozone banks were only 40 percent through their writedowns. [ID:nLU99400] Below is a list of estimated losses (in billions of dollars at current exchange rates):"

"More people are enrolled in Oklahoma's Medicaid program than ever before, but the health care services they receive will likely be cut as officials roll back costs due to a deepening statewide budget shortfall, the program's chief executive said."

""We are setting a record every day," Fogarty said Wednesday.

Enrollment in Medicaid — which serves the elderly, disabled, and children of low-income families with a combination of state revenue and federal matching funds — is at an all-time high as more and more people lose their jobs and their health insurance due to poor economic conditions." 

"“Either liabilities continue to escalate at a rate that forces the city into insolvency and causes us to lay off more and more employees, or we have pension reform,” Reed said in an interview late yesterday.

Pension increases boosted Atlanta’s obligation for retiree benefits by 75 percent from 2000 to 2007, to $2.9 billion, Moody’s Investors Service said. The portion not covered by investment assets, the so-called unfunded liability, tripled to $1.2 billion, the New York-based credit-rating company said." 

"Detroit --The city's finances are so shaky that officials repeatedly borrow money to cover day-to-day bills, rarely go after deadbeats and have sat on millions of dollars in property tax overpayments for years, according to two recent audits.

Mayor Dave Bing has warned the city is courting receivership unless he makes drastic changes, but two little-noticed audits offer startling glimpses of how quickly the city is burning through cash, losing revenue and failing to implement seemingly routine controls of spending.

Detroit, which faces a $300 million deficit, remains "one of the weakest (financially) in the nation" and "significant economic conditions continue to cast doubt on the city's future operation," outside auditors wrote last month in a 227-page audit of the 2007-08 finances.

"In a nutshell, the city is insolvent," said Joe Harris, the city's former chief financial officer under one-time interim Mayor Ken Cockrel Jr.

"The next few weeks will determine if they will survive.""

"Arizona's line of credit is maxed out. Just days after outside lender Bank of America handed over $700 Million to the state. That money has been spent."

"Willcox schools moving to a 4-day week to save money. School board members approved the schedule change Tuesday night."

"One of the fallouts from the ongoing government budget crisis may mean most misdemeanor crimes committed in San Joaquin County will go unprosecuted."

"The end result will be the virtual elimination of all misdemeanor prosecutions in the Stockton office with the exception of domestic violence and driving under the influence."

"Lorain County Transit will terminate public bus service on all 14 of its regular routes in January, because the county just can't afford it any longer.

Lorain County Commissioners predict 300 people could lose their jobs, simply because they will no longer will have a way to get to and from work.

"The bus is not just a matter of convenience, but a necessity," commissioners Ted Kalo and Lori Kokoski told WKYC-TV."

"Strapped states hike taxes and fees by $24 billion for fiscal 2010. Residents pay more for speeding, entering horses in races and digital downloads."

""These are the highest tax increases ever," said Scott Pattison, executive director of the National Association of State Budget Officers, which co-produced the semi-annual report with the National Governors Association.

And more taxes increases are likely on the way, experts said.

States are wrestling with some of the worst budget deficits since the Great Depression. Rising unemployment has wreaked havoc on their vital revenue streams of personal income, corporate profits and sales taxes."

"Dec. 4 (Bloomberg) -- Borrowers are enjoying looser financing terms following a record 46.6 percent rally in high- yield, high-risk loans, raising concern that investors will face steeper losses if companies default.

“Issuers have become emboldened,” Scott D’Orsi, a Boston- based partner at Feingold O’Keeffe Capital LLC who oversees $1.3 billion of assets, said in a telephone interview. “I’m concerned investors are beginning to allow too much risk to creep into the leveraged loan market.”"

"The discussion about possible changes to the retirement programs of teachers and state employees came about because of the fiscal difficulties facing state government.

The state of Vermont will be obligated to put aside $73.5 million this year for those retirement systems and, without changes, it will be $103.5 million next year "a $32 million one-year increase in a year the state is facing at least a $90 million deficit," according to the state treasurer's office.

The collapse of financial markets is a large part of the reason for the increase. So is the increased number of retirees: This year there are 2,800 more retired teachers and state employees than in 2003, according to the treasurer.

"The cost of these programs are escalating faster than the state's ability to pay for them," State Treasurer Jeb Spaulding said."

Read the numbers under "Latest Observations"

"Four sectors, including the government, added jobs last month. Manufacturing payrolls fell by 41,000 after dropping 51,000 in October.

The construction sector shed 27,000 jobs, a sharp easing from the average 63,000 decline seen in the prior six months, while the service-providing sector added 58,000 workers, up from an addition of 2,000 jobs in October.

Professional and business services added 86,000 jobs, while education and health services increased payrolls by 40,000. Temporary help employment rose by 52,400, building on other recent gains."

..........14A) The services sector gained 58,000 jobs last month, while manufacturing and construction shed 69,000 positions. Education and health services added 40,000 jobs, and government employment rose 7,000.

 

.............The U.S. dollar is over 1% higher, while gold has fallen more than $40 on this jobs report. I don't know what they're smoking, but those attending this U.S. dollar party should know better.

VeganDB12's picture
VeganDB12
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Re: Daily Digest - December 4

Jesses American Cafe:

"The improvement in the unemployment rate was largely due to people dropping off the radar of the government as their benefits run out. You can see this if you look at their estimate of the population of available workers. The number is shrinking, and the people drop into the 'discouraged' category."

Given that over a million people are due to lose their unemployment benefits in January,

http://money.cnn.com/2009/11/18/news/economy/Unemployment_benefits/index...

does that mean that there will also be a wave of individuals dropping into the "discouraged" category, sort of a lagging indicator of unemployment (in this case a lagging tsunami wave....).

In that case I would expect December and January's unemployment numbers to look great, down by a million! (sarcasm again, sorry)

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gregroberts
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Re: Daily Digest - December 4

With the exception of mandatory military training, I like the idea of a trained militia

nyfarmer's picture
nyfarmer
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Re: Daily Digest - December 4

I've been reading this site for about a month and I like what it says.  To me; the only way to pay off current government debt,  trade deficit debt, ongoing government expenses,and the entitlement balloon is to run an inflation rate ahead of the payout rate.  If the payout rate expands at 10% per year then the inflation rate would need to be 15%+.  The boomer and post boomer generations (those 40-65) are living large during their best earning years will find retirement  poverty. That's if (a big if) hyperinflation does not kick in!

Is this a resonable analysis?

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Davos
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Re: Daily Digest - December 4
nyfarmer wrote:

I've been reading this site for about a month and I like what it says.  To me; the only way to pay off current government debt,  trade deficit debt, ongoing government expenses,and the entitlement balloon is to run an inflation rate ahead of the payout rate.  If the payout rate expands at 10% per year then the inflation rate would need to be 15%+.  The boomer and post boomer generations (those 40-65) are living large during their best earning years will find retirement  poverty. That's if (a big if) hyperinflation does not kick in!

Is this a resonable analysis?

www.usdebtclock.org 106 trillion + 12 trillion = 118 trillion = hyperinflate, debase/revalue, welch, war but no way in heck is this payable as is. Really, the important aspect I think is the current deficit, we take in 2 trillion and spend 4 trillion and that difference aka the deficit is no longer financeable the foreigners aren't buying the debt so Bernake is monetizing it. For every 1 trillion he does that to gold should go up 4k is what I have heard. So gold should be at 8k by now. 

Like everything else, reality always lags perception.

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Re: Daily Digest - December 4

Are You Unemployed (humor)

Damnthematrix's picture
Damnthematrix
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Re: Daily Digest - December 4

Bank bailout costs UK $1.5 trillion

By Europe Correspondent Emma Alberici

An official audit has found that the cost of bailing out the British banking system was more than $1.5 trillion.

The UK's taxpayers have invested heavily in their banks, given them loans and signed them up to state insurance schemes.

Britain's National Audit Office found that the Treasury gave the Royal Bank of Scotland a clean bill of health less than a week before having to bail it out in October last year.

The report also found that the Treasury paid $200 million for professional advice during the early days of the crisis, including to two investment banks - Credit Suisse and Deutsche Bank - which were each paid retainers worth $400,000 a month for a year to advise the government on its strategies.

idoctor's picture
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Re: Daily Digest - December 4

Headless's picture
Headless
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Re: Daily Digest - December 4

I brought you Goldman Sachs as criminal organization in 2007/2008;

I brought you Dow -5000 in Summer 2008;

I now offer: Sudden loss of internet connectivity by January 2010; that is how close the American holocaust is...

You heard it here first.

Headless

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Spill
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Re: Daily Digest - December 4

Dont know if this is real or not, or if it's been on here or not (haven't seen it), but some guy did a slight hiccup about a coal-trade......

http://thedailywtf.com/Articles/Special-Delivery.aspx

Damnthematrix's picture
Damnthematrix
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Re: Daily Digest - December 4
Headless wrote:

I brought you Goldman Sachs as criminal organization in 2007/2008;

I brought you Dow -5000 in Summer 2008;

I now offer: Sudden loss of internet connectivity by January 2010; that is how close the American holocaust is...

You heard it here first.

 

Are you planning on not paying your ISP bill......??

Mike

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mono
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Re: Daily Digest - December 4

Idoctor,  thanks for the Peter Schiff post.

It´s amazing to see how much that darkblond lady at around 3:00min is intellectually caught with her pants down and does´nt seem to get any of what Peter Schiff is saying.

You may disagree with his point of view, but she`s not even able to follow his simple argumentation.

These people`s intellectual capacity is either in total balance with the room temperature ( I wonder, is that Celsius or Fahrenheit?) or they get payed for trying to ridicule the people that don´t think along mainstream, corporate or governement lines.

Very funny!!

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