Daily Digest

Daily Digest - February 19

Friday, February 19, 2010, 10:52 AM
  • In Surprise Move, Fed Signals Pivot to Normal Policy
  • Fed Fires Gun On U.S. Exit Strategy As It Raises Discount Rate To 0.75%
  • Mish: Fed Raises Discount Rate, Dollar Soars, Equity Futures Sink, What's It Really Mean?
  • Federal Reserve Balance Sheet Update: New Records In Total Assets And Excess Reserves
  • Jobless Claims in U.S. Rose Last Week to 473,000
  • Jobless Claims, Inflation Jump as Economy Wobbles
  • Coming Soon: Chapter 9 Municipal Bankruptcies
  • Walmart Suffers First Ever Fall In U.S. Quarterly Sales
  • George Soros Buys Gold Despite Dubbing It 'Ultimate Bubble'
  • Money Supply Flood To Drown US Economy
  • Ron Paul: Are US Taxpayers Bailing Out Greece?
  • Baby Boomers Busted By Housing Market Collapse
  • China's "Ant Tribe" Poses Policy Challenge For Beijing
  • Wall Street's Bailout Hustle
  • The Peak Oil Crisis: The Crunch

Economy

In Surprise Move, Fed Signals Pivot to Normal Policy (Amanda P.)

Taking a step to normalize lending after holding interest rates to extraordinary lows for more than a year to prop up the financial system, the Federal Reserve on Thursday raised the interest rate it charges on short-term loans to banks.

Fed Fires Gun On U.S. Exit Strategy As It Raises Discount Rate To 0.75% (pinecarr)

The Federal Reserve has officially begun the US "exit strategy" from its emergency economic support measures of the past two years, raising the rate at which American banks can borrow money

Mish: Fed Raises Discount Rate, Dollar Soars, Equity Futures Sink, What's It Really Mean? (Amanda P.)

The Fed has been talking about its "exit strategy" for quite some time. Few believed he would pull the trigger on anything soon. Yet, Bernanke, unexpectedly raised the discount rate headed into options expiration.

Federal Reserve Balance Sheet Update: Week Of February 18 - New Records In Total Assets And Excess Reserves (Erik T.)

The Federal Reserve's balance just hit another record high, at $2.29 trillion, jumping by a whopping $54 billion sequentially (the biggest weekly increase since mid-November).

Jobless Claims in U.S. Rose Last Week to 473,000 (Ben Johnson)

The number of Americans filing first-time claims for unemployment insurance unexpectedly increased last week, pointing to an uneven recovery in the labor market.

Initial jobless applications rose by 31,000 to 473,000 in the week ended Feb. 13, Labor Department figures showed today in Washington. The total number of people receiving unemployment insurance was unchanged and those receiving extended benefits increased.

Jobless Claims, Inflation Jump as Economy Wobbles (mhoop)

Both the number of workers filing new applications for unemployment insurance and producer prices unexpectedly surged, dealing a setback to hopes the economy was showing a strong recovery. 

Coming Soon: Chapter 9 Municipal Bankruptcies (Davos)

“People believe that municipal debt is safe based on assumptions that are no longer true.” -Kenneth Buckfire

The above quote comes from the CEO of Miller Buckfire & Co., an investment bank that is currently advising cities on municipal restructurings. Technically, these are called Chapter 9 reorganizations.

Walmart Suffers First Ever Fall In U.S. Quarterly Sales (Ben Johnson)

Walmart has suffered its first fall in quarterly sales at its US discount stores, underlining the challenges facing future growth in its home market as the economy recovers.

During the important holiday quarter ending on January 31, net sales at Walmart's 3,400 plus US stores fell 0.5 per cent year-on-year to $71bn, while comparable store sales declined 2 per cent. Customer traffic also fell.

George Soros Buys Gold Despite Dubbing It 'Ultimate Bubble' (pinecarr)

George Soros doubled his investment in the world's largest gold fund – just weeks before claiming investing in the precious metal is now the "ultimate bubble".

Money Supply Flood To Drown US Economy (pinecarr)

"Call one drop of water a dollar. Five drops equals one milliliter. Question: What is the volume of water of $14 trillion?” He was pretty quick coming up with the answer: “Twenty times the volume of the Great Lakes. That puts the entire area of the United States 50 meters underwater.”

Ron Paul: Are US Taxpayers Bailing Out Greece? (strangefoliage)

Is it possible that our Federal Reserve has had some hand in bailing out Greece? The fact is, we don’t know, and current laws exempt agreements between the Fed and foreign central banks from disclosure or audit.

Baby Boomers Busted By Housing Market Collapse (Ben Johnson)

I'm a baby boomer who thinks it's probably time to sell the manse and move to someplace smaller. That's what I'm thinking, anyway. Barring some nationwide economic miracle, however, that's not going to happen. Until housing finds its footing again and home prices start to look up, I'm going nowhere, unless I'm keen to lose money.

I have plenty of company. My fellow boomers and I, it appears, are suffering from a serious case of real estate irony. Housing, the very thing that fueled our generation's legendary mobility and free spending, is keeping us right where we are.

China's "Ant Tribe" Poses Policy Challenge For Beijing (Ben Johnson)

They sleep in boxy rooms crammed into dingy low-rises and spend hours commuting to work on crowded buses as part of a trend of poorer white-collar workers being forced to the fringes of China's wealthiest cities. Some say these struggling college graduates who swarm out of their cramped accommodations and head to work in the urban sprawl each morning are reminiscent of worker insects in a colony. Not surprisingly, they are often referred to as China's ant tribe.

The growing ranks of 'worker ants' poses a policy challenge for Beijing's Communist Party leaders as high property prices and dim career prospects thwart the ambitions of many graduates for a comfortable middle-class lifestyle.

Wall Street's Bailout Hustle (nncita)

Goldman Sachs and other big banks aren't just pocketing the trillions we gave them to rescue the economy - they're re-creating the conditions for another crash.

Energy

The Peak Oil Crisis: The Crunch (pinecarr)

The new report, produced by the UK's Industry Taskforce for Peak Oil and Energy Security, is of interest because it updates the estimates of when the oil "crunch" (when demand exceeds production) will occur to account for the global economic slowdown. In addition, the amount of unbiased attention that has been given to the report including that of the British government shows that a wider understanding of the problem is starting to take hold.

Please send article submissions to: [email protected]

8 Comments

saxplayer00o1's picture
saxplayer00o1
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Joined: Jul 30 2009
Posts: 4064
Re: Daily Digest - February 19

"While publicly Mayor Mike Bell and his staff discuss the need for budget cuts and tax hikes to solve the city’s budget woes, behind closed doors there is increasing talk that the only solution to the budget deficit is to have the state step in and put the city into receivership. Toledo Free Press obtained a copy of an eight-page internal memorandum from acting law director Adam Loukx to deputy mayor Stephen Herwat outlining the processes and conditions by which Toledo might make use of insolvency mechanisms to address its budget woes.

The memo details the background, definitions and possible resolutions of Fiscal Watch and Fiscal Emergency.

Bell reiterated in an interview that he considers receivership a last resort."

"BANGALORE (Reuters) - Bankruptcies in the U.S. trucking industry are expected to escalate this year as higher fuel prices and excess capacity squeeze margins further and lenders start to tighten their noose on the sector."

"Feb. 19 (Bloomberg) -- Greece may have to pay as much as 7.3 percent to attract buyers for an issue of 10-year bonds as the government struggles to persuade investors it can reduce its budget deficit, according to UniCredit SpA."

"The Reserve Bank governor says it is highly unlikely Australia would default on its debt, in the way that a Nationals Senator suggested.

The Opposition's finance spokesman, Barnaby Joyce, has questioned whether Australia will be able to repay its borrowings and has speculated on how sustainable its debt levels are."

"The purchases brought the U.S. central bank's purchase of mortgage bonds guaranteed by Fannie Mae (FNM.N: Quote, Profile, Research), Freddie Mac (FRE.N: Quote, Profile, Research) and Ginnie Mae to roughly $1.195 trillion since January 2009."

"The Fed aims to buy $1.25 trillion of agency MBS in a bid to bring down mortgage rates and to stimulate the battered housing sector and the overall economy."

..............5A) Fed MBS Program Update: $55 Billion Left to Spend. Private Funding Needed

"MADRID, Feb 18 (Reuters) - Bad loans held by Spanish financial institutions rose to a new 13-year high in December as banks reined in new credit and borrowers struggled to repay debts as recession maintained its grip on the economy. "

"Japanese agriculture is in a freefall decline. In the years between 1960 and 2005, the share of agricultural output in gross domestic product (GDP) dropped from 9% to 1%, the food self-sufficiency ratio from 79% to 41%, and agricultural land, indispensable for food security, from 6.09 million hectares to 4.63 million hectares. "

"Feb. 19 (Bloomberg) -- More than 20 billion euros ($27 billion) of top-rated bonds backed by Greek loans have been placed on review for possible downgrade because of the country’s worsening economy, Moody’s Investors Service said."

"NEW YORK, Feb 18 (Reuters) - U.S. Treasuries fell on Thursday after the government announced a record amount of bonds for its auctions next week and data suggested the economy's tepid recovery from the worst recession in decades remained on track.

The government said it would auction a record $126 billion in coupon debt next week, including the first sale of 30-year Treasury Inflation Protected Securities."

"WASHINGTON — Sometimes pleading pays.

The high-profile lobbying campaign that Gov. Arnold Schwarzenegger launched with the state's Democratic senators for more cash from the federal government yielded a $675 million dividend Thursday, a welcome bit of relief for the state's deficit-riddled budget.

U.S. Health and Human Services Secretary Kathleen Sebelius said the Obama administration will forgive $4.3 billion in health care payments owed by states to the federal government through the end of the year. California's share is $675 million.

The news came a month after Schwarzenegger made a high-profile trip to Washington to lobby for some $7 billion in federal relief he said the state is due. California faces a nearly $20 billion budget shortfall."

...................10A) White House Provides $4.3B to Help States with Drug Costs

"Over 50% of the states are cutting back Medicaid services and payments to providers of health-care during the ongoing year, with the recession hiking enrollments to record levels and sapping money from treasuries. "

"Millions of seniors who signed up for popular private health plans through Medicare are facing sharp premium increases this year — another sign that spiraling costs are a problem even for those with solid insurance."

"Britain has one of the worst deficits as a percentage of GDP in the world, according to OECD figures. Only Iceland and Greece have higher deficits and experts fear it could overtake Greece. Here is a table of how the UK compares with other nations. "

"MEMPHIS (MNI) - St. Louis Federal Reserve Bank President James Bullard said Thursday night that a Fed interest rate hike is "as far away as it ever was" in wake of the discount rate increase that the Fed announced earlier Thursday. "

"Total formula aid to schools is currently about $7.5 billion, according to a spokeswoman for the state Department of Education. A cut of 15 percent of that would be about $1.1 billion.

"I don't know how we would survive it," said Perth Amboy Superintendent John Rodecker. "There would be massive layoffs. It would in turn mean that everything we've built up to this point, to make us what I consider to be an outstanding school district, would be lost." "

"“Kyodo Securities” analysts believe that 2010 is set to the year when the attention shifts from individual organizations going bankrupt to entire sovereign nations. This, they believe, is likely to prompt a currency crisis.

Despite the precarious nature of the economy in the United States, some investors still appear to perceive the US dollar as a safe haven said one of the “Kyodo Securities” sources. This, he suggested, was likely to be exposed as the greatest fallacy in the financial markets."

"Total gross U.S. debt is now $50 trillion or 12 times the nation's total gross income, according to Ortel, whose debt calculation excludes unfunded mandates such as Social Security and Medicaid but does include corporate debt which he says are "potentially eligible for bailouts." "

"Feb. 18 (Bloomberg) -- Bloomberg's Philip Encz reports on the increasing numbers of European workers protesting over pay and conditions."

  • 19) Headlines:

Louisiana's per capita debt grows, nears ceiling

In DC, more evidence that commercial real estate headed for foreclosure crisis

 La Costa Resort debt sold at big loss..$380 million loan goes for about $120 million

Pain seen in local commercial real estate...Some worry industry is headed for collapse like housing meltdown (Knoxville)

OC seen losing 7000 real estate jobs (Orange County)

Office Vacancy In Boroughs Area Hits 30% (MA)

LA council votes to cut a total of 4000 jobs

State won't pay Hawaii health plans on time

Freeholders vote to disband Burlington County Police Academy

150 jobs to be cut in Lorain Schools consolidation

School board makes tough cuts (156 layoffs...Plainfield)

Water/sewer fee hike likely coming soon (Plainfield...10-15%)

Pines Treatment Center in Shreveport to close this summer (165 layoffs)

San Jose Mayor Urges City Employees To Take Pay Cut (10 - 15% cut)

Kaneland plan: Lay off 112 teachers to prepare for budget disaster (Illinois)

Pomona holds off issuing 328 layoff notes to teachers but sends them to 143 administrative employees

10 percent layoffs loom for school district (CA...600 layoffs)

Vista Unified SD to cut more than 165 teachers

Layoff notices expected for 80 Flint police officers, firefighters

Audits soar as state hunts for cash (NY)

NJ Transit May Increase Fares as Much as 30% by May

BT downgrade over pension raises investor concerns (UK)... (From 2/11 Regulator warns BT over £9bn pension deficit plan )

The Next Chapter (11) In Buying Distressed Hotels: Bankruptcy Sales (Writes about buying bankrupt hotels)

Fuel shortage hits Greece as strikes grow .......also Fuel shortage hits Greece, France

State Parks Dept. recommends closing 41 parks (NY)

Spain economy 'to shrink by 0.5%'

U.S. Mortgage Foreclosures Rose to Record in Fourth Quarter

Goodyear warns of “significant” underfunding of pension plans  ("could put the 110-year-old business at risk")

Sacramento-area home sales were terrible in January

Foreclosure Activity in California is Up Again as Stalemate Continues

brjohnson789's picture
brjohnson789
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Re: Daily Digest - February 19

I grew up near Plainfield.  People used to move there because of the schools.

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rhare
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Re: Daily Digest - February 19

"Call one drop of water a dollar. Five drops equals one milliliter. Question: What is the volume of water of $14 trillion?” He was pretty quick coming up with the answer: “Twenty times the volume of the Great Lakes. That puts the entire area of the United States 50 meters underwater.”

$14,000,000,000,000 / 5 = 2,800,000,000,000 ml = 2,269 acre feet (used http://www.onlineconversion.com)

2,269 acres is about 3.5 sq miles.   So that means (very rough) it would be about 1 sq mile 3.5 feet (1 meter) deep. Don't you just love the mixing of English and Metric...... But for those of us in the US I have a better handle on an acre and sq. mile than I do a sq. kilometer.Tongue out

I like analogies, but this was just way whacked.Smile

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rjs
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Re: Daily Digest - February 19

British finances to be 'worse than Greek deficit' - Times Online - The Government is on course to run up a higher budget deficit this year than Greece after dire figures on the public finances today showed that it borrowed £4.3 billion more than it received in taxes in January, the first time this has happened. January is usually a bumper month for tax receipts as people submit their tax returns and corporation tax payments fall due. However, a steep decline in income tax and capital gains tax payments, coupled with a sharp rise in interest payments to cover the Government's debts, forced the Treasury to borrow money to balance its books. The dire data confounded economists' expectations of a surplus of £2.8 billion, and falls far short of the £5.3 billion surplus recorded in January last year.

GrouchoMarxist's picture
GrouchoMarxist
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Posts: 34
Re: Daily Digest - February 19

Hey Sax Player - calm down a bit, we can't read all that - this is exponential news-gathering, you're approaching the curve of the hocky stick - don't go vertical. Ease back a little, by the time I've read all that It'll be tomorrow spend some more time practicing your scales, and listen to more Coleman Hawkins with a splif and less John Coltrane on speed.

Apart from that 10 out of 10 - keep it coming

Grouch

PS - d'ya like the beard - thought the moustache by itself looked a bit passe.

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Damnthematrix
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Re: Daily Digest - February 19

By Ambrose Evans-Pritchard
<http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/> ,
International Business Editor
Published: 9:32PM GMT 18 Feb 2010

Bank of America and Barclays Capital, two leading oil traders, have told clients
to brace for crude above $100 (£64) a barrel by next year, before it pushes
relentlessly higher over the decade. This is a stark contrast from recessions in
the 1980s and 1990s, when it took years to work off excess drilling capacity
built in the boom.

"Oil has the potential to flirt with $100 this year. We forecast an average
price of $137 by 2015," said Amrita Sen, an oil expert at BarCap. The price has
doubled to $78 in the last year.

"The groundwork for the next sustained step up in oil prices is now almost
complete. Global spare capacity is likely to be reduced to low levels within a
relatively short time. The global economic crisis has postponed, but not
cancelled, a crunch which would otherwise be starting to bite now," said
Barclays.

Francisco Blanch, from Bank of America Merrill Lynch, said crude may touch $105
next year, with $150 in sight by 2014. "Approximately 1.7bn consumers in
emerging markets with a per capita income of $5,000 to $20,000 are eagerly
waiting to buy cars, air-conditioning units, or white goods," he said.

China has overtaken the US as the world's top car market. Mr Blanch expects oil
demand to rise by a further 2.8m barrels per day (bpd) in China and 2.5m bpd in
India by 2015, when two giants will be absorbing the lion's share of Gulf
output. Consumption in the West has already peaked and will fall each year as
populations shrink and we waste less, but the West no longer sets the price.
Global use will increase by 8.8m bpd to 95m bpd.

Woodman's picture
Woodman
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Posts: 1028
Re: Daily Digest - February 19

 

Mish picked up this story local to me.  The city turned down ARRA stimulus funds because it would have actually been more expensive to accept the funds. 

http://globaleconomicanalysis.blogspot.com/2010/02/city-turns-down-25-million-stimulus.html

The huge amount of money being spent on ARRA red tape will not provide a return on investment.

 

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ComancheLee
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