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Daily Digest - Feb 12

Wednesday, February 11, 2009, 5:26 PM
  • Economy How We Can Restore Confidence, By Charles T. Munger
  • Jim Rogers (Video, Bloomberg, Hat Tip JoeManC)
  • Congressman Capuano to Banks, "I don't have one penny in a bank." (Video)
  • Chinese exports (-17.5%); imports (-43%)
  • European bank bail-out could push EU into crisis
  • Fed Looking Unlikely to Buy Treasurys
  • Chairman Ben S. Bernanke
  • Real Treasury Yields Moving Lower (Chart)
  • More...
  • Treasury Will Back up to $1 Trillion in Toxic Assets 
  • Coming Wave of Resets - Is there a Simple Answer?
  • Government Involvement Should Be Limited If Possible, Geithner Says 
  • Ireland to take control of banks, while plans for Fortis are rebuffed
  • California's Pain Is Only Beginning (Hat Tip Jason A.)
  • Compensation Ratios (Table)
  • Wholesale Inventories Rising Dramatically  
  • Banking Committee: Videos of CEOs' opening statements 
  • Meltdown 101: Highlights of economic stimulus plan
  • Jobs (Interactive)

Economy 


How We Can Restore Confidence, By Charles T. Munger
 

Our situation is dire. Moderate booms and busts are inevitable in free-market capitalism. But a boom-bust cycle as gross as the one that caused our present misery is dangerous, and recurrences should be prevented. The country is understandably depressed -- mired in issues involving fiscal stimulus, which is needed, and improvements in bank strength. A key question: Should we opt for even more pain now to gain a better future? For instance, should we create new controls to stamp out much sin and folly and thus dampen future booms? The answer is yes. 

Sensible reform cannot avoid causing significant pain, which is worth enduring to gain extra safety and more exemplary conduct. And only when there is strong public revulsion, such as exists today, can legislators minimize the influence of powerful special interests enough to bring about needed revisions in law. 

Jim Rogers (Video, Bloomberg, Hat Tip JoeManC)

Congressman Capuano to Banks, "I don't have one penny in a bank." (Video) 

Coming Wave of Resets - Is there a Simple Answer? 

Brad Setser notes that, in spite of interference from Chinese holidays, further collapse is likely indicated by east asian exports to china. a devastating collapse in global trade, all in all -- but Setser goes further: 

What worries me the most? The possibility that the sharp y/y fall in imports doesn't just reflect a fall in imported components or a fall in commodity prices, but rather a major deceleration in China's domestic economy.

In some sense, it is hard to imagine a worse combination. China's export are falling, making China understandably reluctant to allow its currency to appreciate. But China's trade surplus is also rising ... certainly in nominal terms and quite possibly in real terms. That isn't good for the world.

At a time when the world is short demand, China seems to be subtracting from global demand not adding to it. The best solution: an absolutely enormous domestic stimulus in China. 

European bank bail-out could push EU into crisis 

"Estimates of total expected asset write-downs suggest that the budgetary costs - actual and contingent - of asset relief could be very large both in absolute terms and relative to GDP in member states," the EC document, seen by The Daily Telegraph, cautioned. 

"It is essential that government support through asset relief should not be on a scale that raises concern about over-indebtedness or financing problems."

The secret 17-page paper was discussed by finance ministers, including the Chancellor Alistair Darling on Tuesday.

National leaders and EU officials share fears that a second bank bail-out in Europe will raise government borrowing at a time when investors - particularly those who lend money to European governments - have growing doubts over the ability of countries such as Spain, Greece, Portugal, Ireland, Italy and Britain to pay it back.

The Commission figure is significant because of the role EU officials will play in devising rules to evaluate "toxic" bank assets later this month. New moves to bail out banks will be discussed at an emergency EU summit at the end of February. The EU is deeply worried at widening spreads on bonds sold by different European countries.

In line with the risk, and the weak performance of some EU economies compared to others, investors are demanding increasingly higher interest to lend to countries such as Italy instead of Germany. Ministers and officials fear that the process could lead to vicious spiral that threatens to tear both the euro and the EU apart.

"Such considerations are particularly important in the current context of widening budget deficits, rising public debt levels and challenges in sovereign bond issuance," the EC paper warned. 

Fed Looking Unlikely to Buy Treasurys 

The Federal Reserve is looking increasingly unlikely to purchase long-term U.S. Treasury securities any time soon, as the central bank gears up to launch a different program aimed at jumpstarting the market for consumer loans. 

Federal Reserve Chairman Ben Bernanke raised the idea of purchasing Treasury bonds in November and the Fed has tipped its hand to the possibility of such purchases in its last two policy statements.

Such a move could help to bring down long-term interest rates, something that could indirectly help consumers and businesses since many loans are benchmarked to Treasury yields.

But Mr. Bernanke notably left the idea out of his testimony to the House Banking Committee Tuesday.

Fed officials could be preoccupied by a new program aimed at jumpstarting consumer loan markets, an effort being coordinated with the Treasury Department. That program represents an enormous commitment by the Fed. The Term Asset-backed Securities Loan Facility, which will help finance asset backed securities tied to consumer loans, could result in as much as $1 trillion in new Fed loans, a huge expansion in its balance sheet.

The central bank's balance sheet has already swelled from less than $900 billion a few months ago to $1.8 trillion. Moreover, the loans the Fed will be making under the asset backed securities program are three year loans, long-term commitments that could be a challenge to unwind later.

Officials don't want to take any options off the table. But given those potential long-term encumbrances, a dive into purchases of long-term Treasury bonds looks less likely in the near-term.

The big commitment to the asset backed securities program could lead to another change for the Fed and Treasury. Last year, the Treasury helped the Fed to finance the expansion of its balance sheet by issuing short-term bills and leaving the cash from those bills on deposit at the central bank for the Fed to use in lending programs.

Chairman Ben S. Bernanke 

Federal Reserve programs to strengthen credit markets and the economy
Before the Committee on Financial Services, U.S. House of Representatives, Washington, D.C.

February 10, 2009 

Chairman Frank, Ranking Member Bachus, and other members of the Committee, I appreciate this opportunity to provide a brief review of the Federal Reserve's various credit programs, including those relying on our emergency authorities under Section 13(3) of the Federal Reserve Act. I will also discuss the Federal Reserve's ongoing efforts to inform the Congress and the public about these activities.

Federal Reserve Programs to Strengthen Credit Markets and the Economy As you know, the past 18 months or so have been extraordinarily challenging for policymakers around the globe, not least for central banks. The Federal Reserve has responded forcefully to the financial and economic crisis since its emergence in the summer of 2007. Monetary policy has been especially proactive. The Federal Open Market Committee (FOMC) began to ease monetary policy in September 2007 and continued to ease in response to a weakening economic outlook. In December 2008, the Committee set a range of 0 to 25 basis points for the target federal funds rate.

Although the target for the federal funds rate is at its effective floor, the Federal Reserve has employed at least three types of additional tools to improve the functioning of credit markets, ease financial conditions, and support economic activity.

The first set of tools is closely tied to the central bank's traditional role of providing short-term liquidity to sound financial institutions. Over the course of the crisis, the Fed has taken a number of extraordinary actions, including the creation of a number of new facilities for auctioning short-term credit, to ensure that financial institutions have adequate access to liquidity. In fulfilling its traditional lending function, the Federal Reserve enhances the stability of our financial system, increases the willingness of financial institutions to extend credit, and helps to ease conditions in interbank lending markets, reducing the overall cost of capital to banks. In addition, some interest rates, including the rates on some adjustable-rate mortgages, are tied contractually to key interbank rates, such as the London interbank offered rate (Libor). To the extent that the provision of ample liquidity to banks reduces Libor, other borrowers will also see their payments decline. 

Real Treasury Yields Moving Lower  

Even with the Treasury sell-off witnessed over the past few weeks, with expectations for inflation on the rise, real yields of Treasury bonds (as computed by taking the nominal Treasury rate and subtracting the implied inflation rate embedded in an inflation swap) have been declining at a rapid rate.(Note that I didn't just graph TIPS real rates as TIPS are trading cheap due to technical / liquidity issues). What does this all mean? 

The Good: The U.S. Government is borrowing on the cheap (and needs to borrow a lot so cheap = good)

The Bad: Real rates are the lowest they have been since Lehman went under... signifying continued stress in markets if investors are willing to take 0.50% real returns over the next 5 AND 10 years 

Real Treasury Yields Moving Lower (Chart)

Treasury Will Back up to $1 Trillion in Toxic Assets  

Up to $1.0 trillion in insurance financing for the purchase of toxic assets was announced by the U.S. Treasury on Tuesday. For its part, the Federal Reserve announced the expansion of the Fed lending facility, the TALF - to include up to another $1.0 trillion in consumer debt, such as mortgage-backed securities. 

The U.S. Treasury's program will enter into a private and public sector partnership where both sides will provide insurance financing on toxic debt.

The solution is hoped to jump-start trading in frozen markets and spur price discovery on the debt.

However, the final details of the toxic debt program remain unclear, according to Treasury Secretary Tim Geithner.

"We are exploring a range of different structures for this program, and we will seek input from market participants and the public as we design it," Geithner said. "We believe this program should ultimately provide up to $1 trillion in financing capacity, but we plan to start it on a scale of $500 billion, and expand it based on what works."

Geithner said the strategy is likely to take time to impact the markets.

Coming Wave of Resets - Is there a Simple Answer? 

Want some more bad news? Well sorry about that because London's Financial Times says we ain't seen nothing yet. 

According to an article written last week by Eric Uhlfelder, Credit Suisse maintains that about $1 trillion in Alt-A and option payment mortgages are scheduled to have rate resets in the next 30 months. These resets, the bank says, could cause as much future damage as the subprime crisis has already inflicted.

If these resets and the resulting increased monthly payments send defaults soaring, and given other factors such as job losses and falling home prices there is every indication they will, the bank projects that foreclosures over the next four years could reach nine million or 18 percent of all mortgages.

The newspaper estimates that there are approximately three million Alt-A loans outstanding with a value of $1 trillion. Fannie Mae, which owns or guarantees about 30 percent of them has called them loans with a higher risk of default than non-Alt-A loans.

At the time they were issued they weren't viewed as particularly risky. They were primarily given to borrowers with reasonable credit scores who would have been prime prospects except for an inability to document sufficient income. No one seemed to much care whether this indicated a lack of documentation or a lack of income. As many of these loans carried introductory or teaser rates, the amount that borrowers owe each month (and in the case of option payment loans the amount they owe in total) has increased as home prices have fallen.

Whitney Tilson, a partner in T2 Partners an asset management firm, told The Times that he expects the reset in rates to accelerate default rates, further flood the housing market, and put even more downward pressure on housing prices preventing establishment of a price floor which is viewed as critical to ending the current economic crisis. And he projects an even more grim scenario than Credit Suisse - a 50 percent default in both option ARM and Alt-A loans.

As these defaults happen it will spill over into the securities market where a T. Rowe Price spokesperson estimates some $800 billion in securities are backed by Alt-A mortgages. As these securities fall in value, perhaps to pennies on the dollar, there will be a further tightening of credit markets.

Most of you reading this are mortgage professionals and all of this brings me to a question. I know full well that I am not the only one asking it, yet I have yet to hear a reasonable answer. Why don't the powers that be, the wizards behind the screen, waive these resets? For that matter, why don't they lower rates across the board at least temporarily so as to reduce payments for everyone. I know about securitization and all of the nameless and faceless investors that supposedly won't allow this to happen. But wouldn't they rather be collecting 4 percent on their investment rather than not collecting 9 percent?

It seems like such a simple thing to do. Or am I just simple for asking? 

Government Involvement Should Be Limited If Possible, Geithner Says  

The
U.S. government wishes to limit its involvement in the financial
marketplace wherever possible, according to U.S. Treasury Secretary
Timothy Geithner speaking before the Senate Budget Committee on the
Troubled Asset Relief Program on Wednesday. 

Aside from his
comments on limiting government involvement, the Treasury Secretary's
opening remarks before the body remained virtually identical to those
delivered on Tuesday, when he promised to seek input from the Senate
regarding his proposed private-public Financial Stability Trust plan. 

His
comments echoed his televised speech on Tuesday, outlining plans to
increase transparency on how funds are spent; creating a "stress test"
for major financial institutions participating in the program; the
establishment of a so-called Private-Public Investment Fund that will
lift the burden of toxic assets by insuring them; initiatives to boost
consumer and business lending in cooperation with the Federal Reserve;
and finally, a housing program designed to stem foreclosures.

"Finally,
President Obama is committed to moving quickly to reform our entire
system of financial regulation so that we never again face a crisis of
this severity," he said. 

Ireland to take control of banks, while plans for Fortis are rebuffed 

Ireland moved toward greater government control of its financial system Wednesday by bailing out its two largest lenders, while shareholders in Fortis, once the biggest bank in Belgium, derailed state-led plans to sell the nationalized business to BNP Paribas of France. 

Together, the moves suggested that Europe - like the United States - was still struggling to find the right template for stabilizing its banks, one that could soothe jittery markets and an increasingly incensed public.

The Irish government, meeting Wednesday night, approved a capital injection of €3.5 billion, or $4.5 billion, each for Allied Irish Banks and Bank of Ireland, a Finance Ministry official said. Bloomberg News reported later Wednesday night that the ministry confirmed the move in an e-mail message.

That made Ireland the first European Union country to take de facto control of all of its most important banks. Last month, the government stepped in to nationalize the teetering Anglo Irish Bank, which was No.3.

In Brussels, the vote by Fortis shareholders left the bank's Belgian operations in government hands while BNP Paribas decided whether to go to court or take its money - nearly €7 billion - and walk away. 

California's Pain Is Only Beginning (Hat Tip Jason A.) 

BIG SUR, Calif. -- As Sacramento squabbles over the state's $42 billion deficit, Californians are getting a bitter taste of what's to come after the steep budget cuts that are inevitable when legislators and Gov. Arnold Schwarzenegger finally hammer out a deal. 

Some world-famous parks like Pfeiffer Big Sur State Park may not open this year. After-school programs in low-income areas are being scuttled, putting high-risk teens on the street just as police forces are being cut. Schools are closing classrooms, and some highway projects have ground to a halt. The state may not be able to monitor some sex offenders as required under law.

A budget deal may restore some of the missing funds. But everyone knows that not all monies will flow again after a deal, and Californians increasingly fear they are seeing a hint of their future.

"Before it gets better, it's going to get a lot worse," said Joseph Valentine, director of Contra Costa County's Department of Employment and Human Services. The department, which administers social services such as food stamps, has cut 12%, or $25 million, of its budget. It has managers answering reception-desk phones, and Mr. Valentine expects another round of cuts.

The empty coffers have hit some California icons. Pfeiffer Big Sur may not reopen this summer because work on a new bridge to the campground was halted, part of a $6 million renovation project that state officials have ordered frozen along with hundreds of millions of dollars in other state infrastructure projects. Dan and Vickie Coughlin of Torrance, Calif., face not camping in the park with their daughters, ages 10 and 13, for the first time since they were born. When they were advised they couldn't book reservations, "it just broke my heart, and my kids almost cried," said Ms. Coughlin.

Other states face budget cuts too, but California's budget mess stands out for its size. Its deficit is projected at $42 billion by mid-2010. Since Gov. Schwarzenegger declared a fiscal emergency 14 weeks ago, he and lawmakers have been deadlocked over how to close the gap. Democrats want tax increases and moderate spending cuts; Republicans seek deep cuts and no tax increases; the governor wants a combination. 

Compensation Ratios (Table)

Wholesale Inventories Rising Dramatically  

In other words, even if final consumer demand picks up, wholesalers won't necessarily be buying from producers as they already have the inventory piling up. 

Banking Committee: Videos of CEOs' opening statements

Meltdown 101: Highlights of economic stimulus plan 

Q: What are some of the tax breaks in the bill?
A:
It includes Obama's signature "Making Work Pay" tax credit for 95
percent of workers, though negotiators agreed to trim the credit to
$400 a year instead of $500 - or $800 for married couples, cut from
Obama's original proposal of $1,000. It would begin showing up in most
workers' paychecks in June as an extra $13 a week in take-home pay,
falling to about $8 a week next January. 

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42 Comments

Davos's picture
Davos
Status: Diamond Member (Offline)
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Posts: 3620
Re: Daily Digest - Feb 12

9

RedShift's picture
RedShift
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Please Explain This...

If the Federal Reserve is not a Federal Institution, then why was this cop ready to arrest this photographer for taking pictures of a "federal building"?

See Liveleak video "Federal Reserve Police Tells Reporter to Stop Filming" at: http://www.liveleak.com/view?i=a15_1234390062

I see this as a symptom of times yet to come: an American police state perfected out of the fear, ignorance and sheepishness of its people.

Learn more about the true nature of the FED: "The Creature from Jekyll Island: A Second Look at the Federal Reserve" by Edward Griffin

See: http://www.amazon.com/Creature-Jekyll-Island-Federal-Reserve/dp/0912986395

 

 

 

Dogs_In_A_Pile's picture
Dogs_In_A_Pile
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Re: Please Explain This...
RedShift wrote:

Learn more about the true nature of the FED: "The Creature from Jekyll Island: A Second Look at the Federal Reserve" by Edward Griffin.

Red -

Jekyll Island is required reading here on the site.

Davos's picture
Davos
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Re: Please Explain This...

RedShift:

When I was an airline captain another crew-member told me that when Greenspan flew in the secret service was in the cab (tower) and he had his own entourage of ss agents.

The funniest story I could tell was the secret service agent I flew form HVN to DCA. The guy comes up to the cockpit flashes his badge and I ask him if his dog was a bomb sniffer. Nope, counterfeit sniffer. So the ss can ride up front, I let him in the jumpseat and learn that counterfeiters use chemicals like acetone to remove the ink off dollar bills, then they run them through a printer and make them 20's with a scanner.

They look at it this way: Good paper, "authentic" paper is a buck a sheet. 

Funny, because years later I learn the biggest counterfeiter of them all is the fed chairman.

The protect the king counterfeiter from nut jobs and they protect his art from hacks.

Insane asylum. 

Ruhh's picture
Ruhh
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Re: Daily Digest - Feb 12

Rogers is always good to hear and WOW! that Capuano video made my day.

Thanks
r.

Davos's picture
Davos
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Re: Daily Digest - Feb 12

Hello Ruhh:

Made mine to, then I got to relly thinking about it and (Click Here)... 

Take care, 

Dogs_In_A_Pile's picture
Dogs_In_A_Pile
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Re: Daily Digest - Feb 12

Davos, Ruhh -

Capuano's little snit was entertaining, but in retrospect don't you think he was a bit disingenuous given the amount of pork in the stimulus package he defended as rabidly as he went off during the hearing?

joemanc's picture
joemanc
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Re: Daily Digest - Feb 12

Having just read The Great Crash of 1929 and the meetings that took place amongst the big bankers, seeing this in the news today does not give me the warm and fuzzies: 

Quote:

How worried was Wall Street about a lack clarity in Treasury Secretary Tim Geithner’s plan to save the banking system by buying toxic debt? So worried that Goldman Sachs called a meeting to figure out how to fix the problem.

 

—This meeting known as the “Goldman Sachs rountable” took place just hours after Geithner’s speech (and the dismal market reaction) on Tuesday at the headquarters of Goldman Sachs in lower Manhattan.

—Around 20 of the firm’s biggest hedge fund and private equity clients from around the country showed up—a testament to just how concerned financial industry insiders are about what few details geithner presented.

http://www.cnbc.com/id/29163525

Davos's picture
Davos
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Re: Daily Digest - Feb 12

Hello DIAP:

I do think it is. Having said that I think they just don't get it. We are as broke as Enron. Back the Fuzzy Math out of GDP add in the off balance sheet debt and our solvency is what Enron's was when they shut the doors.

Take care, 

suesullivan's picture
suesullivan
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Posts: 305
March Atlantic Cover story

Is about how the economic crisis/crash is going to reshape American economies and regions. I haven't gotten all the way through it, and they're only addressing the financial crisis, but it's an interesting read...

http://www.theatlantic.com/doc/200903/meltdown-geography

Dogs_In_A_Pile's picture
Dogs_In_A_Pile
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Re: Daily Digest - Feb 12
Davos wrote:

Hello DIAP:

I do think it is. Having said that I think they just don't get it. We are as broke as Enron. Back the Fuzzy Math out of GDP add in the off balance sheet debt and our solvency is what Enron's was when they shut the doors.

Take care, 

Shifting gears slightly - if you are in Puts is it necessarily bad to profit off of a company's ill fortune?  I say no since purchasing put contracts doesn't move the price of the underlying equity.  Selling short does, because you are actually selling stock.

But given what the banks have done to us, I have no moral dilemma doing to them what they did to their shareholders.

How ironic, profit off their misery then turn around and buy gold, ammo and seeds.

cwixom's picture
cwixom
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Re: Daily Digest - Feb 12
Quote:

Most of you reading this are mortgage professionals and all of this
brings me to a question. I know full well that I am not the only one
asking it, yet I have yet to hear a reasonable answer. Why don't the
powers that be, the wizards behind the screen, waive these resets? For
that matter, why don't they lower rates across the board at least
temporarily so as to reduce payments for everyone. I know about
securitization and all of the nameless and faceless investors that
supposedly won't allow this to happen. But wouldn't they rather be
collecting 4 percent on their investment rather than not collecting 9
percent?

It seems like such a simple thing to do. Or am I just simple for asking?

Obvioulsy this guy doesn't know that resetting a mortgage rate or amount of principal without the consent of the parties of the contract is a breach of contract law.  But hey, the mortgage brokers have been operating outside of the law for so long that it is not surprising that they don't even know what it is.

And while "the powers that be" are busy reseting and waiving maybe they could just take everything this clown owns without compensation.  Then maybe he would understand what he is asking them to do to the contract holders.  It is not the "powers that be's" right to forcefully renegotiate the terms of the mortgage.  

He is right on one point however,... he is simple!

dlsife's picture
dlsife
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re does this site only post bad news?

I love reading this site and check it everyday, but it seems to me that if it seeks to be credible, that positive news must be posted as well.  I realize there isn't much of it these days, but to be intellectually honest, we can't simply regurgitate things that only support our conlcusions.  We must realize that there is conflicting data out there at times, and not everything supports the conclusions of many on this site (conclusions that I share).

I just think that to avoid the "kook" label that gets through around at sites like this, we should deal openly and honestly with news and opinions that don't exactly fit with the way we see things going.  

My two cents.  

MarkM's picture
MarkM
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Posts: 837
Re: Daily Digest - Feb 12

I don't think the consensus here sees any "real" good news regarding the 3 E's.  The good news you will see here is how to deal with what is perceived to be the major problems that confront us all.  I would like to see the "good" news, but I can't find any that I deem credible. 

straight's picture
straight
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Posts: 103
Re: Daily Digest - Feb 12

Positive news: Thats why god invented the main stream media.

Personally, my good news is that i got lucky the other night ;0),  I wont go into details, my Gold and Silver has gone up very nicely in the last four months in A$ terms, and i made a few K's on my Gold mining companies in the last two days.

Other than that, it's bleak.... my landlord wants to move back in, by dad is sick and my kids are acting more like teenagers every day.

Perhaps you could buy a puppy?

ps. Moses was a "kook".  [Yeh, OK, he was a fictional character, but you get my point]

pss. the puppy comment was out of line....  there is nothing kooky about CM, or his site, only the people that frequent it.  The good news, as i see it, is that the titanic will hit the wall with a few enlightened passangers drinking at the bar.

Dogs_In_A_Pile's picture
Dogs_In_A_Pile
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Re: re does this site only post bad news?
dlsife wrote:

I love reading this site and check it everyday, but it seems to me that if it seeks to be credible, that positive news must be posted as well.  I realize there isn't much of it these days, but to be intellectually honest, we can't simply regurgitate things that only support our conlcusions.

Immanuel Kant would disagree.  The credibility of 'bad news' has no deterministic link to the presence of 'good news'.  The existence or credibility of 'good news' has no causal relationship with the existence or credibility of 'bad news'.

They are two discrete events - if people only choose to discuss 'bad news' and they present it with objective, measurable data or reasonably presented subjective opinion, that is all the intellectual honesty that is needed.  Regurgitation of things that support conclusions (as long as they are regurgitated facts) is all we need to do.

Or in other words - there isn't any good news.

straight's picture
straight
Status: Silver Member (Offline)
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Posts: 103
Re: Daily Digest - Feb 12

More good news, Gold just hit an all time high in A$ terms at A$1474 !

Martini please... no ice, there will be plenty of that soon enough!

MarkP's picture
MarkP
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Posts: 16
Re: Daily Digest - Feb 12

I think the way I would put it is that I want to be updated on what is actually happening, without any spin. "I want news."  I don't want to ask that it is 'good' or 'bad', I'll make that determination myself, thank you.

'straight' is right, turn on your TV for good news.  Just don't base any decisions for your future on it.

 

Educate yourself.  At this point, that fact that you can, IS good news.

 

My $.02. (in gold, of course ;o)

 

Mark 

Davos's picture
Davos
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Re: Daily Digest - Feb 12

Hello Dlsife:

There is a lot of stuff I post just because it has one or two good diamonds burried in the mine.

For instance: I watched a 60 minute clip, the guy was really sharp, but then pegged the inventory [housing] at 4.5 million and bemoaned the fact that it was up from 2.3 million in past 2-3 years. This on the heals of reading an article in Bloomberg that vacant homes were at the 19 million point level. So 4.5 on the market and 19 matriculating in made me thing that 24 million is really bad, why gripe about 4.5.

I suppose there is just sooooooo much data that no one can possibly parse it all.

The only thing that gets me is the blatant stuff (calling it a credit crisis when we are as insolvent as Enron) - and we seem to have a lot of stuff like that lately (Congress and B.O'.s advisors). It is like watching a plane crash and knowing how to fly and you aren't even allowed up front, you'd bail but no chutes.

Anyway, just so you know, most stuff I don't agree with 100%, I just try to find the best of the worst out there. Sometimes I consider it 90% good, sometimes that 1% is so good it makes up for the other 99% of it. I know I'm not the most advance reader out there, so my motto is if I can get it everyone on this site will. Usually I learn more from this section (comments) then I glean from reading the article.

One observation I am going to state: It used to be burried deep in the mine (the best of the best of the economist's blogs). Lately it is oozing out of the ground (mainstream sites). I'm going to know the day is here when I read it on a few really mainstream sites, won't bash them becuase I hope they pick up Chris before that day arrives. 

I don't lean as far right as Drudge, but I am seeing a lot of good stuff on that site as of a few weeks ago. Usually his site is several days/weeks/months in front of the others... 

Take care 

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Dogs_In_A_Pile
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Re: Daily Digest - Feb 12
MarkP wrote:

 

"I want news."  I don't want to ask that it is 'good' or 'bad', I'll make that determination myself, thank you.

Gotta love a posteriori justification.

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Ruhh
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Re: Daily Digest - Feb 12
straight wrote:

Positive news: Thats why god invented the main stream media.

Isn't that ironic? I'm sure I'm not to first to observe or point it out.

MSM usually sells misery and violence with a little dash of whitewashing. Add in a cutesy human story to end on a positive note and the viewers/readers keep coming back and keep them shopping.

The bad news and truths suddenly get held back at the risk of rattling shareholders. What's most important is to keep em shoppin'

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Re: Daily Digest - Feb 12

Hello Dlsife:

As if I wasn't verbose enough, here is an example:

At or about (going from memory here) the 11 minute point, housing overhang is discussed in numbers

http://www.cbsnews.com/video/watch/?id=4668112n

Then here's Bloomberg on 19 million vacancies

http://www.bloomberg.com/apps/news?pid=20601087&sid=aKufqJK9j1cY&refer=home

And here is the Case Shiller chart which shows the dots to how bad it is going to get in the housing market

http://www.ritholtz.com/blog/wp-content/uploads/2008/12/case-shiller-chart-updated.png 

If you look at that last graph you might ask yourself well if it is this bad now why wouldn't it play out like it did in the 1930s.....

So there you have it, every article I found great but had to put them all together to see the entire big picture, and even then I'm certain that I missed a dozen other articles so I still don't have it all in site. Well at least enought to know it is an ugly date with or without my glasses. 

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cmartenson
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Re: re does this site only post bad news?

I invite you to bring and post whatever news you see fit.  If you've got what you define as good news, then by all means post it.

However, to vaguely imply that people here aren't posting material that you think would prevent "others" from thinking this place 'kooky' and/or 'credible' is really not taking responsibility for yourself. 

It is laying the onus entirely outside of yourself, first for finding material you deem appropriate and second for 'others' to receive it 'properly'.   You can fully control the former and never the latter.

Feel free to create whatever future you want.  Just don't be annoyed if nobody does it for you.

 

 

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Damnthematrix
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Re: re does this site only post bad news?

like this...?  :-|

    CLIMATE WARS
    BECAUSE WE'VE ALWAYS NEEDED REASONS TO KILL EACH OTHER
    By John McGrath
    Grist
    February 4, 2009
   
    http://gristmill.grist.org/story/2009/2/3/142425/2971
   
    Canada's public broadcaster, CBC, has just finished airing the three-part
    series Climate Wars, based on the Gwynne Dyer book of the same name. I
    haven't yet finished reading the book, but the thesis is easily summarized:
    If you thought that the effects of climate change only included withering
    droughts, torrential storms, and general freaky-deakiness, you've missed one
    of the big ones: anthropogenic mass death, or as the political scientists
    call it, "war."
   
    Yup, on top of all the other things we'll have to worry about in a melting
    world, there's the sad fact that we'll have more and more reasons to kill
    each other over dwindling water and food supplies. When you consider that
    the 20th century was bloody enough as economic and industrial opportunities
    were expanding, the 21st century is looking mighty depressing if you believe
    that wars can start over resource scarcity.
   
    You can download the podcasts of Parts I, II, and III of Climate Wars here,
    though I can't testify as to how long they'll stay up there. So give it a
    listen soon. And do check out the book -- like I said, haven't finished it,
    but it's excellent so far.

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SamLinder
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Re: re does this site only post bad news?
Damnthematrix wrote:

like this...?  :-|

CLIMATE WARS
BECAUSE WE'VE ALWAYS NEEDED REASONS TO KILL EACH OTHER
By John McGrath
Grist
February 4, 2009

That's what I like about you, mate - you always have such delightfully cheerful news to share with the rest of us. Wink

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straight
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Re: Daily Digest - Feb 12

In fareness to dlsife, I get accused by those that I know of focusing on the bad news, visiting sites that only have bad news, 'how can you expect not to be down about the world if you keep visiting those bad news sites?

Surley we must all get it from time to time?

The CC shows that we are between a rock and a hard place. 

The 'rock' is business as usual leading to a catastrophe, the 'hard place' is looking at why we behave like we do and changing.

I have said in other threads that i believe the fundamental problem is mans unwillingness to understand the roots of the denail that defines him.  

I think we might as well order another drink, put on a life jacket, try to live through the impact, and try to make the most of it when we are bobbing around in the ocean wondering wtf that iceberg came from.

More good news,

Australian troops were unhurt in a gun battle that saw our troops gun down 5 Afghan children.  Fitzgibbon, the Oz Defense Minister said that Australian troops always stick to their rules of engagement, and that they use care.

From my email to Mr. Fitzgibbon:

"I could not believe my ears. I heard you talk of sticking to the rules of engagement, I even heard you say that Australian troops always use care.... CARE, you say they use CARE when gunning down innocent children! YOU .... i wont say what i think of you, you are beneath my contempt!"

This is the world we live in.

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Damnthematrix
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Will You Help Me With My Next Film? ...a request from Michael Mo

Will You Help Me With My Next Film? ...a request from Michael Moore

February 11, 2009

Friends,

I am in the middle of shooting my next movie and I am looking for a few
brave people who work on Wall Street or in the financial industry to
come forward and share with me what they know. Based on those who have
already contacted me, I believe there are a number of you who know "the
real deal" about the abuses that have been happening. You have
information that the American people need to hear. I am humbly asking
you for a moment of courage, to be a hero and help me expose the
biggest swindle in American history.

All correspondence with me will be kept confidential. Your identity
will be protected and you will decide to what extent you wish to
participate in telling the greatest crime story ever told.

The important thing here is for you to step up as an American and do
your duty of shedding some light on this financial collapse. A few good
people have already come forward, which leads me to believe there are
many more of you out there who know what's going on. Here's your chance
to let your fellow citizens in on the truth.

If you have any info that would help, please contact me at my private email address: [email protected].

For the rest of you on my email list who don't work in the financial
industry, you're probably wondering, "What the heck is this all about?
I thought he said he was making a romantic comedy!"

Well, I just can't say much right now. I'm sure you can understand
why. One thing I can tell you is that you're gonna like this movie when
I'm done with it. Oh, yeah...

So, again, if you work for a bank, a brokerage firm or an insurance
company -- or if you have seen things or heard things that you believe
the American people have a right to know -- please contact me at [email protected].

Thank you in advance for your help!

Yours,
Michael Moore
[email protected]
MichaelMoore.com

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DavidC
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Re: Please Explain This...

RedShift,

At least the Fed Reserve videographer wasn't arrested.

A photographer friend of  mine told me about an artist who was arrested recently under Britain's anti terrorist laws for taking photographs of old buildings being torn down, as part of a project he was putting together to show urban change. I didn't believe him, but it's true.

http://www.london-se1.co.uk/news/view/3684

Worrying.

David

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CB
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Posts: 365
Re: Daily Digest - Feb 12

MSNBC aired their "House of Cards" program on the mortgage mess and the role of CDOs last night. There are some interesting interviews including one with Greenspan who say esentially "there was nothing I could have done - its just human nature to be greedy - people should have had better judgement and gotten out of the game sooner..."

http://www.msnbc.msn.com/id/29163182/

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gregroberts
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Re: Daily Digest - Feb 12

You Can't Fool Gold

Mish Shedlock

 Gold 1980 - Present

Gold fell from $850 to $250 over 20 years yet there was inflation, every step of the way.

http://globaleconomicanalysis.blogspot.com/2009/02/you-cant-fool-gold.html

I am thinking this has something to do with it,

The chart begins on August 12, 1987, when Alan Greenspan became
chairman of the Federal Reserve. The light blue line is the fed funds
rate, and the yellow line is the two-year moving average dollar price
of gold.

For almost ten years the funds rate tracked the gold price with
astonishing precision. Who can really know what was going on in
Greenspan's mind -- but by all appearances, he was conducting monetary
policy on a "virtual gold standard" or "price rule." The chart suggests
that he was withdrawing liquidity by raising the funds rate when a
rising gold price signaled inflationary pressures, and adding liquidity
by lowering the funds rate when a falling gold price signaled
deflationary pressures.

  http://capmag.com/article.asp?ID=2929

Greg

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hucklejohn
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Re: Daily Digest - Feb 12

I notice a number of posts refer to our insolvency.  There is no question that the federal government is broke.  But is there somewhere on the site where the insolvency of the "financial system" is more fully explained?  Also, is there more explanation about the insolvency of the larger banks?  Insolvency of the whole banking system?

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Dogs_In_A_Pile
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Re: Daily Digest - Feb 12
hucklejohn wrote:

I notice a number of posts refer to our insolvency.  There is no question that the federal government is broke.  But is there somewhere on the site where the insolvency of the "financial system" is more fully explained?  Also, is there more explanation about the insolvency of the larger banks?  Insolvency of the whole banking system?

Hucklejohn - This should help.  Post #29 is particularly illuminating - but I would encourage you to read them all.

http://www.peakprosperity.com/blog/crisis-explained-one-chart-debt-gdp/11570

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Davos
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Re: Daily Digest - Feb 12

Hello HuckleJohn:

Far as the banks I'd refer you to Chris's latest member only post.http://www.peakprosperity.com/blog/new-martenson-report-subscribers-feb-10-2009/13026

As for the debt to equity, I pulled the bulk of my idealogy from chapter 16 Fuzzy Math http://www.peakprosperity.com/crashcourse/chapter-16-fuzzy-numbers?cc=share-this-2009

AND I.O.U.S.A. the book, most of it was on page 84 I believe....

Ross Perot has a good site (without his voice) as well.

I think the only thing saving us now is every country is Fiat, they all stink, and up untill now we just didn't s*ck as worse (from a dollar is worhtless point of view.)

Take care,

Oh, to compare it to Enron I watched the Smartest Guys in the Room video on watch now on NetFlix, had a ton of figures, I then backed out the cooked portion of GDP and added in the off balance debt from IOUSA and realised we are as busted as Enron was and when people realise this the lady will be singing and the show will be over.  

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nickbert
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Re: re does this site only post bad news?
dlsife wrote:

I love reading this site and check it everyday, but it seems to me that if it seeks to be credible, that positive news must be posted as well.  I realize there isn't much of it these days, but to be intellectually honest, we can't simply regurgitate things that only support our conlcusions.  We must realize that there is conflicting data out there at times, and not everything supports the conclusions of many on this site (conclusions that I share).

I just think that to avoid the "kook" label that gets through around at sites like this, we should deal openly and honestly with news and opinions that don't exactly fit with the way we see things going.  

My two cents.  

Whether a given piece of news is 'good' or 'bad' is a subjective judgement, and depends on who you are and how the news will affect you.  Usually the term bad news applies to events that affect either the status quo or a majority of people in some negative way, but that doesn't mean it isn't good for other people.

Here's a good example of finding good in otherwise 'bad' news.  We are seeing a historic shakeup in large retail stores, resulting in store closures, layoffs, and corporate bankruptcies, all of which would usually be considered bad news.  However in the long run, this retail vacuum means more opportunities for local small businesses and entrepreneurs to fill that void.  So from the perspective of small businesses and entrepreneurs who are less reliant on easy credit and quicker to adapt than their very large competitors, this could be considered very good news in the long run.  This is actually one of the major positive sides I see in regards to the current economic crisis and coming changes... more opportunities for locally-owned businesses, more emphasis on quality over dirt-cheap poorly-made products, and more opportunities for the average person to start their own business.  In many cases there will still be large corporations and people who will want to work for them, however the playing field will no longer be tilted so far in favor of the large (and often too-big-to-fail) corporate interests  :^)

Perhaps what you're looking for is not so much 'good news', but rather more discussion on the positive aspects of the current news and the changes ahead?  Just a thought...

- Nickbert

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Dogs_In_A_Pile
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Posts: 2606
Re: Daily Digest - Feb 12

Nickbert -

Good points.  The subjective distinction needs to be made - I am in puts and have been quite happy that the market is down 400 points for the week.

A down market is bad news for most, good news for some. 

 

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grl
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Posts: 188
Re: re does this site only post bad news?

Maybe because the "good" news goes something like this:

http://finance.yahoo.com/news/Why-This-Recession-Seems-cnbc-14354968.html

Does this good news ring true to you or does something seem not exactly right about this kind of subtle cheer leading? The problem as I see it, is the "good" news is often disingenuous and/or ignores the truth. 

 

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cmartenson
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Re: Daily Digest - Feb 12
hucklejohn wrote:

I notice a number of posts refer to our insolvency.  There is no question that the federal government is broke.  But is there somewhere on the site where the insolvency of the "financial system" is more fully explained?  Also, is there more explanation about the insolvency of the larger banks?  Insolvency of the whole banking system?

 Be sure to watch the PBS link that was just posted to the blog area.  I get into that there.

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SamLinder
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Re: re does this site only post bad news?
Lisa G wrote:

Maybe because the "good" news goes something like this:

http://finance.yahoo.com/news/Why-This-Recession-Seems-cnbc-14354968.html

Does this good news ring true to you or does something seem not exactly right about this kind of subtle cheer leading? The problem as I see it, is the "good" news is often disingenuous and/or ignores the truth. 

 

Lisa,

I lived through the previous recessions. This is the first one that has simultaneously gone world-wide since The Great Depression. As you so aptly note, " the "good" news is often disingenuous and/or ignores the truth."

I especially liked the following quote [Emphasis mine]:

"The current situation has nothing in common with the Great
Depression," says economist Steve Hanke of the Cato Institute and Johns
Hopkins University. "The sooner they [in Washington] stop spinning the
bad news story and say nothing, the sooner we'll be more confident."

Don't you just love it? Stop telling me the truth and I'll be more confident!

hahahahahahahahahaha ........................... Tongue out

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tsneds
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Re: Daily Digest - Feb 12

Good video but you made a misleading title. He said he didn't have any money in their banks. I would imagine that means he puts money in a small credit union.

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dlsife
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Re: Daily Digest - Feb 12

He didn't say "I don't have one penny in a bank".  He said "I don't have one penny in any of YOUR banks."

This is the sort of thing that is tengentially related to what I'm talking about above. 

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hucklejohn
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Posts: 281
Re: Daily Digest - Feb 12

Thanks, Dogs_In_A_Pile, Davos & Chris for your help & responses to my question on insolvency.  Regarding the overall debt situation the chart on the ratio of debt to GDP says it best.      

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Davos
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Posts: 3620
Re: Daily Digest - Feb 12

Hello HuckleJohn:

 Glad you found answers, that is a super chart. After listening to chapter 16 of the CC it really strikes a chord knowing that GDP is cooked by about 40%, so the disparity is even greater. Take care 

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