Daily Digest

Daily Digest - December 8

Tuesday, December 8, 2009, 10:45 AM
  • Most Recent Insider Selling to Buying Ratio: 82:1 
  • Moody’s Says U.K., U.S. Aaa Ratings Relatively Weaker
  • Bernanke Says Recovery May Not Last
  • Fed's Unemployment Projections From Mars
  • It's Time For Wall Street To Just Shut Up
  • A Reformist Manifesto
  • FDIC Regulators Running Amok
  • Bank Failures More Costly Now Than Earlier Wave 
  • Are Small Banks Too Good To Save?
  • IRS Seizes And Sells American Indian Land
  • Healthcare Nation
  • Pre-Existing Condition
  • The Rise Of Foreclosure Filings
  • The Geography Of Unemployment
  • Citizens Lay Down The Law On US Debt
  • I Live In A Van Down By Duke University
  • Economic Outrages Against Our Soldiers
  • S&P Puts Greece On Notice For Imminent Downgrade
  • China Says Goldman, Others, Committed Investment Fraud With Evil Intentions
  • The 7 Laws Of Inconspicuous Consumption


Most Recent Insider Selling to Buying Ratio: 82:1 (E.S.)

You would think that insiders would finally change their tune after almost a year of straight line gains in the market. Think again. The most recent insider trading data from finviz indicates that insider sellling outpaces buying by a ratio of 82!

Moody’s Says U.K., U.S. Aaa Ratings Relatively Weaker (Saxplayer00o1)

Moody’s Investors Service said its top debt ratings on the U.S. and the U.K. may “test the Aaa boundaries” because their public finances are worsening in the wake of the global financial crisis."

“There has been a huge increase in debt-to-gross-domestic- product ratios as a result of the crisis,” said David Keeble, head of fixed-income strategy in London at Calyon, the investment-banking unit of Credit Agricole SA. “It’s right that there should be a lot of attention and pressure on these numbers.”

The U.S.’s debt burden will climb to 97.5 percent of gross domestic product next year from 87.4 percent, the Organization for Economic Cooperation and Development forecast in June. National debt in the U.S. climbed to $7.17 trillion in November. The U.K.’s public debt will swell to 89.3 percent of the economy in 2010 from 75.3 percent this year, according to the OECD."

Bernanke Says Recovery May Not Last (M.W.)

He cautioned that the economy was confronting some “formidable headwinds” — including a weak job market, cautious consumers and still-tight credit. The Fed has warned that it could take five or six years for the job market to return to normal.

Fed's Unemployment Projections From Mars (M.W.)

In the wake of last Friday's miracle job performance with unemployment dropping by .2% let's take a look at unemployment scenarios offered by the Fed to see how realistic they are.

It's Time For Wall Street To Just Shut Up (M.W.)

The Epicurean Dealmaker has posted a 10-point manifesto for regulatory reform. Point one: Ban political campaign contributions by the financial industry. At Baseline Scenario J Kwak observes that "there is at least one constitutional problem and possibly two" involved in the recommendation. That's a non-trivial issue. But the financial industry's influence on legislation is equally non-trivial. There's got to be a better way.

A Reformist Manifesto (M.W.)

Right now, all this [financial reform] debate is being conducted in the back offices and lobbies of Capitol Hill, out of public view, by the self-interested financial parties we seek to regulate and the craven legislators who hold themselves in thrall to them. This is no way to reform our financial system, much less run a representative democracy.

FDIC Regulators Running Amok (M.W.)

Eighteen Washington "community" banks have been served with regulatory orders from the FDIC forcing them to make changes in areas such as risk funding and lending policies. Some are told they can’t pay dividends. Others are forced to increase the amount of money they hold in case loans go bad – and that’s money that can’t be loaned to existing businesses trying to survive the recession. Officials from the FDIC say they simply want to ensure that depositors are protected.

Bank Failures More Costly Now Than Earlier Wave (M.W.)

The current wave of GA bank failures is proving much more costly than the Savings & Loan crisis of the late 1980s and early 1990s. Back then, the average failure cost the FDIC about 10% of an institution’s total assets. The figure is now 32%. Why the huge jump in the cost of failures?

Are Small Banks Too Good To Save? (M.W.)

People are fed up with actions that hurt Main Street and endanger our community banks in favor of Wall Street. Why are community banks being jammed with higher FDIC insurance premiums when it was the big banks and their subprime subsidiaries that caused this mess?

IRS Seizes And Sells American Indian Land (M.W.)

US tax officials have sold off thousands of acres of an impoverished Indian reservation in what the tribe claims is a "shameful" and unprecedented breach of laws protecting Native Americans. The land, part of the tribe's original reservation established in an 1868 treaty, was originally held by the federal government in a trust for the tribe.

Healthcare Nation (M.W.)

In 1980, the federal government spent $65 billion on health care; that was 11 percent of all its spending. By 2008, health outlays had grown to $752 billion — 25 percent of the total, one dollar in four. Historian Niall Ferguson recently argued that the huge federal debt threatens America's global power by an "inexorable reduction in the resources" for the military. Ferguson got it half right.

Pre-Existing Condition (M.W.)

Health care has been on the docket longer than most Americans can expect to live, with or without it. Let’s take a quick trip back in time.

The Rise Of Foreclosure Filings (M.W.)

US map shows the increase in foreclosures state by state.

The Geography Of Unemployment (M.W.)

Watch the deteriorationg transformation of the economy on this interactive time-lapse map which illustrates unemployment rates from Jan 2007 until now.

Citizens Lay Down The Law On US Debt (M.W.)

When it comes to managing the country's purse strings, Washington gets a failing grade from several groups of citizens and experts across the country.

I Live In A Van Down By Duke University (M.W.)

How do I afford grad school without going into debt? A '94 Econoline, bulk food and creative civil disobedience.

Economic Outrages Against Our Soldiers (M.W.)

If America is going to send our troops to fight dangerous wars, we need to make sure that the troop's support systems are "too big to fail." The war in Iraq has gone on longer than World War II. And with an economic crisis and unemployment going full tilt, the military gets overlooked in the media cycle.

S&P Puts Greece On Notice For Imminent Downgrade (M.W.)

Fears over the solvency of Greece reached a new level on Monday night as Standard & Poors put the country's debt on notice for an imminent downgrade. The agency placed the country on credit watch negative, meaning it is likely to lose its A- rating within months.The news pushed interest rates on Greek bonds to their highest levels in seven months.

China Says Goldman, Others, Committed Investment Fraud With Evil Intentions (M.W.)

Beijing singled out Goldman, Morgan Stanley, Merrill Lynch, and Citigroup in a highly critical article. "The large losses suffered by Chinese companies were associated with the intentionally highly leveraged products that were fraudulently peddled by international investment banks with evil intentions... and were the chief criminals and the root of ruin for the Chinese enterprises who encountered this financial derivatives Waterloo."

The 7 Laws Of Inconspicuous Consumption (M.W.)

When I first heard the phrase "inconspicuous consumption," it sounded like an oxymoron, especially coming from a California-based luxury hotel CEO I hold in high regard. But when I got to thinking about it, I realized that he was onto something that makes very good sense.


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Re: Daily Digest - December 8

"DANA POINT, Calif., Dec 7 (Reuters) - The credit crisis that rocked U.S. residential mortgages and corporate credit markets may roil commercial real estate and sovereign debt markets next, senior investment managers said on Monday.

Now that the first two waves of the global credit crisis have largely passed, the next test will come in commercial real estate markets in 2010, and then government debt markets, particularly in the United States, where public debt has soared to $53 trillion.

"I think the next shoe to drop, which will be the world's biggest shoe, is the continued decline of the dollar and ultimately the breaking of the U.S. government market, which will set the other markets on another terrible path," said Steve Shenfeld, president of MidOcean Credit Partners, which started in 2003 as the private equity arm of Deutsche Bank."

"Philadelphia's $3.8 billion of general obligation bonds and similar debt were reduced to BBB, or two levels above junk, by Fitch Ratings citing the sixth-largest U.S. city's debt, revenue and employee contracts.

The downgrade was prompted by weaker-than-forecast financial results for the year that ended June 30, and for the first quarter of the current fiscal year, Fitch said in a report. Fitch removed its negative outlook from Philadelphia.

The downgrade affects $1.1 billion of general obligation debt and another $2.7 billion of debt secured by the city's general obligation pledge. Philadelphia is rated Baa1 by Moody's Investors Service and BBB by Standard & Poor's."

"Senate budget writers say that the state of Missouri will likely have one billion dollars less to work with than it did prior to the 2009 legislative session. Marshall Griffin reports

The Senate Appropriations Committee is taking testimony this week from various people and agencies who want at least the same amount of funding for the next fiscal year, if not more. But committee member and GOP Senator David Pearce believes revenues will continue to trend downward"

"Prepared by ULI and PriceWaterhouseCoopers, the report is based on survey responses from more than 500 people in the industry plus more than 275 who were interviewed."

"In the 30 years of the "Emerging Trends'' reports, 2010 will be the worst time for investors to sell properties, the report states."

"Delinquencies on commercial mortgage- backed securities rose to a record in the third quarter as unemployment rose and landlords struggled to retain tenants.

The percentage of CMBS loans at least 30 days past due rose to 4.06 percent from 1.17 percent a year earlier, the Mortgage Bankers Association said today. That’s the most since the group began tracking the data in 1997."

"The Los Angeles Unified school board is expected to vote on a two-year budget plan today that calls for the elimination of more than 5,000 district positions unless employee unions agree to furloughs and pay cuts.

The layoffs could be avoided if all district employees were to take an 11.75 percent pay cut, which could come in the form of furloughs or other cuts.

The district is facing a shortfall of some $1.2 billion through 2012, according to a report by Chief Financial Officer Megan Reilly.

The layoffs would include nearly 1,400 teachers, which would balloon class sizes in kindergarten through third grade to a student-teacher ratio of 29 to 1 from 24 to 1."

"ALBANY, N.Y. (AP) - Despite a $2.26 billion state bailout this year, New York City's transit system is facing a reported shortfall that may total more than $200 million.

The Metropolitan Transportation Authority's revenues are the concern. Revenues from the payroll tax for the counties served by the MTA are running under projections. Also, the state is cutting $143 million in transit funds as it tries to close its deficit."

"Many already cash-strapped school districts across Orange County will decide this week whether to further increase class sizes, eliminate hundreds more jobs, again cut music and arts programs, close another school, and scores of other budget cuts.

Those are some of the tough decisions facing school boards from some of the county's 27 districts as they are set to vote again on millions in cuts as the ongoing state budget crisis continues to worsen."

"From President Obama on down, Americans are hoping Friday's stronger-than-expected November jobs report marked the beginning of the end of our national unemployment nightmare.

Don't get your hopes up, says Mike "Mish" Shedlock, author of Mish's Global Economic Trend Analysis.

The November report was an "outlier" and "almost looked fabricated," according to Shedlock, an investment advisor at SitkaPacific Capital Management

Looking beyond the November jobs data, Shedlock says the odds of the unemployment rate coming down anytime soon are remote."

"Pappas said that without another federal stimulus package, the projected $5.4 billion deficit for the 2012-2013 biennium would be “devastating” for the University.

“The fear is when that federal money goes away [in the upcoming biennium], there’s going to be a big hole unless the state funding comes back up,” Sen. Claire Robling, R-Jordan, the minority leader of the committee, said, “which it doesn’t look like it’s going to be able to do any time soon.”

Last spring, the University’s two-year budget from the Legislature was cut by $105 million. In June, Pawlenty cut University spending by $50 million in unallotments in efforts to balance the state budget.

“We’re only in the beginning of figuring this out,” Pappas said. “We just got the forecast, so we don’t really know what we’re going to do.”"

"Despite the cloud of scandal hanging over the Fire & Police Pension Plan and the 23.5% loss ($3.4 billion) in the market value of its investment assets, the Board of Fire and Police Pensions Commissioners has quietly changed the arcane rules that will permit the City to decrease its cash contribution by $230 million next year. This failure to properly fund the Pension Plan weakens its long term financial viability, endangering the retirements of its 26,000 members and their families.

For the year ended June 30, 2009, the unfunded liability of the Pension Plans increased 3.3 times, from under $1.8 billion to about $5.9 billion, a $4.1 billion increase. The unfunded portion increased from 11% to 35% based on market value. This means that the value of the assets needs to increase by 54% just to equal the value of the Total Future Benefits as of June 30. Of course, the increase will have to be substantially more since the benefits are increasing every year, such as the 4.6% last year."

"The system’s actuary told trustees during the meeting that the system’s unfunded liabilities were $3.4 billion on June 30, which would take 45 years to pay off. The unfunded liabilities are the amount by which the system’s liabilities exceed the value of its assets.

To get unfunded liabilities down to a payoff of 30 years or less, trustees were told the investments needed to earn 25 percent over the next two fiscal years."

"More than 25 percent of homeowners who have received assistance under the administration’s Home Affordable Modification Program (HAMP) have fallen behind on their new payments – a harrowing statistic that has stirred up more doubt about the effectiveness of the government’s $75 billion foreclosure prevention campaign."

"Analysis by the Congressional Oversight Panel shows that HAMP is saving homeowners an average of 34 percent, or about $500 a month, on their mortgage payments. But Laurie Goodman, head of mortgage strategy at Amherst Securities Group, took a closer look at past redefault rates on modifications that cut payments by 34 percent, and she told the New York Times that 65 percent of borrowers who have received that same amount of savings, fell back into delinquency."



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Mike Pilat
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Re: Daily Digest - December 8

The amount of MOPE lately is absolutely astounding in light of recent events. Ever since the gold slam, there has been a tsunami of anti gold "news" all over Bloomberg that attack the investment in all sorts of ways. In the wake of increasing controversy regarding the climate change e mail scandal there are now massive articles put for from the leaders of the movement to discredit the skeptics. And now, we are yet again reminded that the FED is "practicing" its reverse repos to the tune of a whopping $180 Million (http://www.bloomberg.com/apps/news?pid=20601087&sid=aL4Eb_sjeg7A&pos=5). All this in a week where we auction an amount of Treasury approaching 1,000 times that amount. Don't worry, all we need to do is follow the media and everything will be all better...someday...How stupid do they think we are???!!!

Johnny Oxygen's picture
Johnny Oxygen
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Re: Daily Digest - December 8

Great post by Mish today


One1776's picture
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Re: Daily Digest - December 8

Gerald Celente on fiat money and then some.

pinecarr's picture
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Re: Daily Digest - December 8

Great Celente video, turbo!  Thanks for bringing it to our attention!

MW, I liked the unemployment by county map, played over time, too  Can you imagine how bad that would look if they used real unemployment numbers?!

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Re: Moody’s Says U.K., U.S. Aaa Ratings Relatively Weaker

Re: Moody’s Says U.K., U.S. Aaa Ratings Relatively Weaker

Yeah!  That's the way for Moody's to say, "Well you're in utterly horrible financial straits..... so, we're going to have to try to sorta, kinda, maybe, I guess put our foot down...." Tongue out

Maybe in another couple months if the US and UK don't get their finances in order, Moody's will have to get REALLY tough and say 'no more gold star stickers' on their AAA ratings homework.  Boy, Moody's and the other ratings organizations really know how to take a tough stand Undecided

- Nickbert


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