Daily Digest

Daily Digest - February 4

Thursday, February 4, 2010, 10:48 AM
  • Debt Time Bomb Ready to Go Ka-Boom
  • Ron Paul Warns Of Coming Social And Political Chaos
  • No Help in Sight, More Homeowners Walk Away
  • Next In Line For A Bailout: Social Security
  • Could Greece Be Expelled From The Eurozone?
  • More Borrowers Pay Credit Cards Before Mortgages
  • Bloomberg Joins The Direct Bidder Inquiry, Even As DB Identities And Rationales Continue To Evade
  • Eliot Spitzer on the Colbert Report
  • Saudi Oil Flows East: China's Ever Increasing Appetite for Oil
  • High-Tech Aerogels Wrap Homes With Insulation
  • Toronto Junior Khan Resources Focus Of China-Russia Fight for Mongolian Uranium
  • Why Big Ag Won't Feed the World
  • Britain Facing Food Crisis As World's Soil 'Vanishes In 60 Years'

Economy

Debt Time Bomb Ready to Go Ka-Boom (kelvinator)

Retire? You can fuggetaboutit if the new Global Debt Time Bomb is detonated by any one of 20 made-in-America trigger mechanisms.

Ron Paul Warns Of Coming Social And Political Chaos (Davos)

No Help in Sight, More Homeowners Walk Away (re-post - Ben Johnson, Robert C.)

New research suggests that when a home’s value falls below 75 percent of the amount owed on the mortgage, the owner starts to think hard about walking away, even if he or she has the money to keep paying.

Next In Line For A Bailout: Social Security (Ben Johnson)

A report from the Congressional Budget Office shows that for the first time in 25 years, Social Security is taking in less in taxes than it is spending on benefits. Instead of helping to finance the rest of the government, as it has done for decades, our nation's biggest social program needs help from the Treasury to keep benefit checks from bouncing -- in other words, a taxpayer bailout.

Could Greece Be Expelled From The Eurozone? (Nickbert)

In a working paper published on the European Central Bank's website, Phoebus Athanassiou writes about the possibility of secession from the European Union and from Economic and Monetary Union - the process which created the euro. Such talk, he acknowledges, would until recently have been "next to absurd". But not now.

More Borrowers Pay Credit Cards Before Mortgages (joemanc)

Welcome to the new world order.

The percentage of borrowers who are delinquent on their mortgages but paying their credit card bills on time is growing, to 6.6 percent in the third quarter of 2009 from 4.9 percent in the same quarter of 2008, according to a new study by Chicago-based TransUnion. In an interview with Reuters, the author of the study, Sean Reardon, confirmed, "This goes against conventional wisdom and that has always been that, when faced with a financial crisis, consumers will pay their secured obligations first, specifically their mortgages."

Bloomberg Joins The Direct Bidder Inquiry, Even As DB Identities And Rationales Continue To Evade (pinecarr)

We have previously speculated extensively on the recent appearance of direct bidders as a key participant in Treasury auctions. What is known is that the direct take down during the last 2-3 months has at least doubled for most coupon auctions up to and including the 7 year. What is not known is/are the identities of the bidder(s).

Eliot Spitzer on the Colbert Report (pinecarr)

Eliot Spitzer thinks Americans should be furious that the financial system is being rebuilt exactly as it was before the economic collapse.

Energy

Saudi Oil Flows East: China's Ever Increasing Appetite for Oil (Ben Johnson)

One more measure of China’s growing global clout – so much Saudi oil is flowing China’s way that it may soon replace the U.S. as the leading market for the world’s largest oil exporter.

High-Tech Aerogels Wrap Homes With Insulation (Nickbert)

Aerogels are a high-tech material used in space missions. How about for insulating our buildings?

Toronto Junior Khan Resources Focus Of China-Russia Fight for Mongolian Uranium (Nickbert)

With the announcement that uranium explorer Khan Resources hopes to sell all of its shares to China's largest provider of nuclear power, the recent long nightmare surrounding the company's ability to continue to conduct business in Mongolia may be finally coming to a close. But, Russia's largest uranium producer isn't about to give up on Russia's lengthy battle with the Chinese to control Mongolia's mineral wealth.

Environment

Why Big Ag Won't Feed the World (Brandon)

The answer for Deutsche Bank: increase yields by investing in industrial agriculture in the developing world, with an emphasis on technology; put lots of capital into rural land to shift subsistence and local market agricultures to commodity export agriculture. The answer for Monsanto: increase yields by decreasing resource dependence using genetically modified crops.



At first glance, these answers make both Monsanto and Deutsche Bank look virtuous. But they rest on a false premise: "There will be over 9 billion people by 2050. We have less than 7 billion today, and people go hungry. We need to increase food production if we are going to feed them."

Britain Facing Food Crisis As World's Soil 'Vanishes In 60 Years' (joemanc)

British farming soil could run out within 60 years, leading to a catastrophic food crisis and drastically higher prices for consumers, scientists warn. Fertile soil is being lost faster than it can be replenished and will eventually lead to the “topsoil bank” becoming empty, an Australian conference heard. 

Please send article submissions to: [email protected]

11 Comments

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

"Portugal and Greece led a surge in the cost of insuring against losses on sovereign debt to a record as concern that nations will struggle to cut budget deficits deepens a “crisis of confidence” in Europe."

.................1A) Greek Strikes Threaten Papandreou Deficit-Cut Plan

"Greece’s biggest union is set to approve the second mass strike this month, showing that Prime Minister George Papandreou’s parliamentary majority may not be enough to guarantee implementation of his plan to cut the European Union’s largest deficit."

.................1B) Portugal, Spain Lead Worldwide Decline in Stocks; Dollar Gains

"Feb. 4 (Bloomberg) -- Stocks and bonds fell in Spain, Portugal and Hungary on concern governments will struggle to fund their budget deficits as spending cuts in Greece trigger strikes. The dollar rallied.

Spain’s IBEX Index dropped 2.2 percent to the lowest level since August at 10:19 a.m. in London, Portuguese credit-default swaps jumped to a record and the Budapest Stock Exchange Index declined 1.4 percent, the most in two weeks."

...............1C) Portuguese Bonds Drop as Borrowing Costs Soar at Bill Auction

"Feb. 3 (Bloomberg) -- Portuguese bonds slid, pushing the yield on the 10-year note up by the most in 11 months, as the country’s borrowing costs soared at a sale of bills on concern the government will fail to curb its budget deficit."

"Gold will climb to $1,500 an ounce and silver will top $25 this year as the dollar loses its haven status, according to Jeffrey Nichols, managing director of American Precious Metals Advisors.

“Fear of sovereign debt defaults by one or another European country could benefit the dollar and temporarily hurt gold,” New York-based Nichols said in an e-mail to Bloomberg yesterday. “But gold is the ultimate safe haven and the dollar, without the support of sound monetary and fiscal policies, is a depreciating asset.” "

"The paper estimated that U.S. health spending hit $2.5 trillion in 2009, up 5.7 percent from the previous year. That represents 17.3 percent of gross domestic product, up from 16.2 percent in 2008, because the overall economy shrank last year. A decade from now, health spending is projected to hit about $4.5 trillion a year.

Growth of Medicaid accounts for much of the shift toward publicly funded health care. The paper predicted enrollment in Medicaid would rise 5.6 percent this year and spending would rise 8.9 percent.

Meanwhile, the number of people with private health insurance is falling slightly because of high unemployment.

Many states are having trouble funding their share of Medicaid. President Barack Obama's budget proposal for the fiscal year beginning Oct. 1 calls for $25 billion in federal help for covering Medicaid costs.

Over the longer term, the public share of health spending is expected to rise further because the first baby boomers will turn 65 in 2011 and become eligible for Medicare."

"Figures from the National Audit Office revealed that personal debt in the UK has reached a massive £1.5 trillion as the downturn continues to impact upon consumer finances. This figure of £1.5 trillion includes credit cards, mortgages and personal loans and equates to a debt for each UK household of £56,000, 60% higher than the average household income and the highest figure ever."

"Still, these estimated show Japan's borrowing needs will continue to rise as the aging in population boosts welfare spending and its snowballing debt pushes up debt servicing costs.

The increased borrowing also would not account for any additional costs that will arise if the ruling Democratic Party carries out its campaign pledges, which included full payouts to households with children, a ministry official said.

Ratings firms have warned the lack of a plan to curb its debt could lead to credit downgrades."

"ALBANY — Gov. David Paterson announced Wednesday that the state’s budget deficit for the coming fiscal year was $750 million higher than projections just two weeks ago, largely because of lower than expected income-tax revenue from Wall Street and higher Medicaid costs.

The estimates bring the state’s deficit for the 2010-11 fiscal year, which starts April 1, to $8.2 billion, up from $7.4 billion when Paterson introduced his budget proposal Jan. 19."

"Feb. 4 (Bloomberg) -- Harrisburg, the capital of Pennsylvania, will consider Chapter 9 bankruptcy protection along with tax increases and asset sales as options to address $68 million in debt service payments due this year, the chairwoman of a City Council committee said last night. "

"NEW YORK, Feb 4 (Reuters) - The cost of insuring U.S. government debt against default over five years rose on Thursday to its highest level since April 2009, amid jitters over rising sovereign risks, according to CMA DataVision."

"NEW YORK (Reuters) - GMAC Financial Services, a lender that is majority-owned by the U.S. government after multiple bailouts, said it lost $5 billion in the fourth quarter after writing down bad mortgage assets."

.......................9A) GMAC Reports Record Loss on Home Mortgage Defaults

......................9B) GMAC Cuts More Than 500 Jobs in Mortgage, Auto Finance Units

"But the so-called continuing claims do not include millions of people who have used up the regular 26 weeks of benefits typically provided by states, and are receiving extended benefits for up to 73 additional weeks, paid for by the federal government.

More than 5.8 million people were receiving extended benefits in the week ended Jan. 16, the latest data available, up from about 5.6 million the previous week. The extended benefit data isn't seasonally adjusted and is volatile from week to week."

"Unless the union and the CTA reach a last-minute deal on pay cuts, 1,067 workers will be laid off on Sunday.

CTA is making service cuts in conjunction with the layoffs, which will reduce frequency of service on seven CTA rail lines, eliminate nine express bus routes and reduce frequency of service on 119 bus routes and hours on 41."

"The Hawaii Foodbank distributed 1 million more pounds of emergency food in the last fiscal year than it did the previous year, reflecting an upward trend that has seen a nearly 40 percent rise in demand over the past four years."

"Hawaii Foodbank director of development Polly Kauahi said the rise is mainly attributable to a spike in demand over the last year as job furloughs, pay cuts, layoffs and other effects of the economic downturn have destabilized many Island households."

"Moody's Investors Service said Thursday the outlook on the Lithuanian government's ratings is negative, reflecting the persistent impact of the recession on its financial strength. The credit rating agency also said it will assign a Baa1 rating to Lithuania's U.S. dollar global bond maturing in 2020. "The debt to GDP ratio is likely to reach almost 50% of GDP by 2012, which is very high for a country with a currency board. "

" It said the MTA faces a 2010 budget shortfall of about $391 million, representing about 4% of projected revenues pledged to debt service on the Transportation Revenue Bonds. "

"The state late last spring closed a combined budget gap of $2.7 billion for fiscal years 2009 through 2011. The state now faces another budget gap of $1.2 billion for the two-year period, representing about 12% of revenue."

"Moody's Investors Service has downgraded $1.7 billion in bonds for the Alameda Corridor Transportation Authority, which oversees the 20-mile rail route built to speed the flow of cargo from the ports of Los Angeles and Long Beach to retail shelves across the U.S.

Moody's on Wednesday lowered ratings on the senior lien bonds to A3 from A2 and subordinate lien bonds to Baa1 from A3. It also put the ratings on a watch list for possible further downgrades."

"Connecticut, the state with the highest tax-supported debt, may sell bonds backed by revenue from electric-bill surcharges to raise $1.3 billion to help close a budget gap under a plan from Governor Jodi Rell.

Connecticut should issue the securities this year because the state’s “cash position” was depleted after lawmakers drew down the $1.4 billion rainy day fund as tax revenue plummeted, according to a report the governor released today. The state faces a deficit of $535 million this year and $725 million in the year starting July 1 even with the one-time budget fixes, the Legislature’s fiscal analysis office said today."

"Budget reductions recommended by Gov. Jim Gibbons' office late Wednesday include laying off 234 workers, roughly 10 percent spending cuts to education and most other agencies, and closing the aging Nevada State Prison in Carson City.

But even if all the governor's recommendations were enacted, they'd cover less than half the anticipated $880 million funding gap facing the state for the rest of the biennium that ends June 30, 2011 _ meaning more cuts or added revenues must be found.

"We're squeezing the blood out of every rock," Chief of Staff Robin Reedy said after a three-hour meeting with legislative leaders."

"The city is facing a $43.8 million general fund deficit for 2010."

"Toledo could be labeled as a fiscal-watch city, which is a warning label, or in fiscal emergency.

If Toledo would be declared in "fiscal emergency," a seven-member financial planning and supervision commission would be empowered to advise the city on its spending decisions."

"Baltimore County’s budget woes have deepened.

County Auditor Mary Allen told members of the county’s Spending Affordability Committee on Tuesday that revenues continue to decline from projections — and are now $144 million below what the county had expected.

That number represents a shortfall that has grown by $6 million over the $138 million revenue deficit reported in December.

Lower than expected income and property taxes for the current budget year, which ends June 30, continue to drive the growing deficit, according to Allen"

"Dutchess County Executive William Steinhaus' 2010 State of the County, released Tuesday, includes a grim warning that if the state — faced with a $7.4 billion deficit — delays reimbursement of funds in the coming months, the county could be forced to borrow to pay its bills.

The county has "not been in the position of short-term borrowing in over 20 years," said Steinhaus, a Republican."

"In the past two years, the county saw a 62 percent rise in applications for home heating assistance and a 34 percent increase in social services cases, as foreclosures have risen 35 percent. However, revenues have fallen, with a projected $6.5 million less in sales tax in 2009 and a decline of $1.5 billion in assessed property values."

"The city faces a staggering $4.9 billion deficit for 2011. This year’s $2.9 billion surplus has gone; it was spent on reducing next year’s deficit and paying bills and bond repayments. To close the gap, Mr Bloomberg is ordering every city agency to make cuts—the seventh round he has ordered since early 2007. That should save the city $1.6 billion over the next two years.

The mayor has proposed closing four city swimming pools and a Manhattan centre for the homeless. He has also suggested removing fire-alarm boxes from city streets, to stop hoax calls. Mr Bloomberg wants to reduce the city payroll by 4,286. Every department, from police to libraries, faces cuts. "

"Yale University announced on Wednesday that it planned a number of steps to close a remaining $150 million budget gap, including cutting staff, freezing salaries for deans and officers, reducing the number of graduate students — even turning down all thermostats to 68 degrees."

"Titled "Other Savings: Coinage Material - Department of the Treasury," the proposed section seeks to grant the Department of the Treasury authority to change the composition and weights of the most common circulating coins: the penny (cent), the nickel, the dime, the quarter and the half dollar."

"According to the 2009 Annual Report recently released by the United States Mint, the total cost of producing a cent was actually 1.62 cents, for a net loss of .62 cents on each one. The nickel, only worth five cents, actually took 6.03 cents to strike during the last fiscal year, losing the Mint 1.03 cents a piece. With these figures firmly in mind, it is easy to understand why some parties are concerned with the costs associated in making the coins."

"The decision by State Supreme Court Justice Richard Braun, released Tuesday, called for the auction of the gated community and its 1,232 apartments, which were built in the 1940s. "

Court figures show Florida foreclosures increasing

Chicago foreclosures soar in 4th quarter

Mansion condos in flux as building is sold in foreclosure (Atlanta)

Apartment foreclosure to spike rents

Foreclosure rate soars in Stockton

Foreclosures Still On The Rise Across Oregon

Fannie Mae Violates Its Own Policy By Throwing Tenants Out After Foreclosure

Foreclosures Hit Wealthier Chicago Neighborhoods

Vegas Sales Up as Foreclosures Remain Dominant

Foreclosures set January record (Boulder County)

"Feb. 4 (Bloomberg) -- Nassim Nicholas Taleb, author of “The Black Swan,” said “every single human being” should bet U.S. Treasury bonds will decline, citing the policies of Federal Reserve Chairman Ben S. Bernanke and the Obama administration.

It’s “a no brainer” to sell short Treasuries, Taleb, a principal at Universa Investments LP in Santa Monica, California, said at a conference in Moscow today. “Every single human being should have that trade.” "

(Thanks zerohedge for noticing that one)

Johnny Oxygen's picture
Johnny Oxygen
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Credit Card Cleverness

Credit Card Cleverness

http://baselinescenario.com/2010/02/02/credit-card-cleverness/

The person who got the letter above used to have an 8.1% APR. This letter raises the APR to 29.99%. But, if he pays his balance on time, he will get a “credit” amounting to (at least) 70% of the interest amount, bringing the APR down to 8.99%. If he misses a minimum payment, he may not be eligible to continue in the program. In other words, he has an 8.99% APR that jumps to 29.99% immediately (retroactively, actually, since it can apply to the previous month’s balance) if he misses a payment. Furthermore, the 8.99% rate does not have to be restored after six months of making payments, because the official rate was always 29.99%, and the 70% credit is just a “program.”

 

idoctor's picture
idoctor
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Re: Daily Digest - February 4

Jim Chanos

http://www.cnbc.com/id/15840232?video=1404554817&play=1

Paul Kanjorski talks to Chanos.....wow???

http://www.cnbc.com/id/15840232?video=1404516695&play=1

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ffshack165
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No Help in Sight, More Homeowners Walk Away

Tired...so tired of hearing this idea that because the value of my investment has dropped "I'm walking away", or "where is my bailout?”  Its one thing if you can't make the payments it's another if you have just realized you made a bad investment.  I bought a modest home 15 years ago solely for the purpose of having a comfortable shelter for my family.   When its value went up I did not sell it to make a profit on equity and move into an even bigger debt.  We made a decision to be happy with what we had while we paid close attention to the "fringe" economist that predicted problems on the horizon.  And guess what.....we still have shelter, even though income has dropped and cost of living has increased.  I am 41 and so far our decision has paid off as we are not out in the cold after foreclosure.  Why on earth should I as a taxpayer feel in anyway sorry for the goofy 20 something year old, just out of college, moron who made a poor decision when he decided that a home was an "investment" instead of a "shelter"?  No bailout for the morons!  I don't care who they are...banks, small business, big business, or the (spoiled brat)college grad that thought he deserved "right now" what his parents worked years for!  It's the same as the guy that makes the false insurance claim.  The more people think its okay to do it, the more it cost those of us who only make legitimate claims.  It is an issue of morals and values and I'm sad to say that I believe our society is lacking in both.

It should not be acceptable in our society for these people to walk away from a bad gamble just because it did not work out their way.

And that's all I have to say about that,

Shack

propamanda's picture
propamanda
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Re: Daily Digest - February 4

(Hi joemanc & pinecarr - it was nice to meet you both at the UN event!)

Looks like the BLS is going to release job creation estimates from April 2008 and March 2009 tomorrow . . .

And they have revised job creation estimates down by 824,000 jobs.  They are finally coming clean about the major flaws in their BIRTH-DEATH model!!

(thanks Mish)

http://globaleconomicanalysis.blogspot.com/2010/02/824000-will-disappear-on-february-5-bls.html

 

Amanda

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rjs
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Posts: 445
Re: Daily Digest - February 4

Where Did They Get The Money? (BlackRock) - We counted over 1,800 13Gs that Blackrock dumped on Friday. For those less familiar with the 13G, since we don’t often write about these filings, it’s a requirement when ownership exceeds 5% of the outstanding shares. With few rare exceptions, these filings represented new positions for Blackrock since we only counted 11 amended 13Gs, Where did Blackrock get the money?  Blackrock has just $3.96 billion in cash on hand according to the most currently numbers on Yahoo Finance.  The S&P 500 alone has a market cap of some $13 trillion dollars. Something "funny" is going on here folks, and it demands an inquiry - and answer.The underlying question remains - if and when something goes wrong, what does Blackrock have available to them to deal with it when they're managing an asset base larger than that of The Federal Reserve?

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pinecarr
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Re: Daily Digest - February 4

Davos, great Ron Paul clip.  You've gotta love that guy!

Hey Amanda,  guess what?  I got in to see the Daily Show on Tuesday!  I decided if I'd been lucky enough to be able to grab an on-line ticket that someone must have given up at the last minute, I had to at least give it a try. (They over-book, so even with a ticket it is first come, first served).  What fun!  And what a great way to end the day after seeing Chris at the UN with you guys earlier!

nickbert's picture
nickbert
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Re: Daily Digest - February 4

The good news for the day:

Ex-BofA chief Lewis charged with fraud

http://money.cnn.com/2010/02/04/news/companies/bank_of_america/index.htm

Quote:

New York Attorney General Andrew Cuomo said Thursday it was bringing civil charges against senior Bank of America executives, including former company CEO Ken Lewis, for their role in the company's controversial purchase of Merrill Lynch.

I know this doesn't really change anything and the the system is still corrupt as ever, but it's still a little pleasing to see a crook take some heat.

- Nickbert

V's picture
V
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Posts: 849
Re: Daily Digest - February 4

Paul Kanjorski

" Oh my! My panties are in a wad we simply have to do something. We have to put everyone else's  politics aside . We have to take greater control of the sheeple .....er no I mean we have to govern. You see the sheeple don't know what to do without us telling them. Blah Blah Blah

Thank God oops sorry   ......I blew away my tv years ago.

Hey Paul the best thing you jerks can do is NOTHING so shut up already.

I feel much better now

V

ditchner's picture
ditchner
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Posts: 14
Italy Freezes 73.3 million Euros from BAC

http://www.businessweek.com/news/2010-02-03/italy-seizes-bank-of-america...

Not a good day for the Bank of America

pinecarr's picture
pinecarr
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Posts: 2237
Re: Daily Digest - February 4
ditchner wrote:

http://www.businessweek.com/news/2010-02...

Not a good day for the Bank of America

Wow! 

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