Daily Digest

Daily Digest - July 22

Wednesday, July 22, 2009, 11:00 AM
  • BIS, The Central Bank of all Central Bankers: The Central Bank WAS Warned in 2003 (Repost)
  • Roach: The Financial Crisis Isn’t Over (Video on page)
  • Broke (Video Outtake)
  • Earnings results at Swedish banks show large writedowns in Baltics
  • Michael Covel on IndyMac (Video)
  • CIT: More than $1.5 billion in losses, No FDIC Guaranteed Debt
  • CNBC Attempts Assasination on Barofsky (Video)
  • California Comes to Cowardly Compromise
  • Commercial mortgages, mortgage re-sets to trigger NEXT U.S.down-leg
  • Rep. Cliff Stearns not heart GS

Economy

BIS, The Central Bank of all Central Bankers: The Central Bank WAS Warned in 2003 (Repost)

I respectfully suggest reading the entire piece.

Roach: The Financial Crisis Isn’t Over (Video on page)

Broke (Video Outtake)

Earnings results at Swedish banks show large writedowns in Baltics

Swedbank, the largest lender in the Baltics, posted net losses of SKr2.01bn ($257m), compared with net profits of SKr3.6bn a year earlier.

It was the bank’s second consecutive quarterly loss and much worse than the SKr1.27bn deficit forecast by analysts.

Loan losses soared from SKr423m a year ago to SKr6.67bn, with about two-thirds of the amount in the Baltics and a third in Ukraine.

In response, the bank said it planned to reduce staff by 3,600, about 16 per cent of its workforce, by this time next year, with most of the cutbacks in the Baltic states.
 

Michael Covel on IndyMac (Video)

CIT: More than $1.5 billion in losses, No FDIC Guaranteed Debt

See losses of more than $1.5 billion.

Insufficient liquidity.May seek bankruptcy without successful tender offer.

CNBC Attempts Assasination on Barofsky (Video)

California comes to cowardly Compromise

California governor Arnold Schwarzenegger and the idealogues in the state legislature proclaimed they have “solved” California's budget-gap impasse. In reality, all they did was postpone dealing with the problem by creating a much bigger shortfall next year.

Commercial mortgages, mortgage re-sets to trigger NEXT U.S. down-leg

The U.S. commercial mortgage market is huge. With a total size of $6.7 trillion, the commercial real estate market accounts for 13% of total GDP, all by itself. In comparison, the (total) U.S. residential mortgage market is roughly twice as large. However, what must be noted is that the U.S. real-estate crash was caused almost entirely by the sub-prime real estate market. It's only this year that “alt-A” and now “prime” mortgages are also hitting record default levels.

Rep. Cliff Stearns not heart GS

20 Comments

gregroberts's picture
gregroberts
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Jeff Borsuk's picture
Jeff Borsuk
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Re: Daily Digest - July 22

Hey Davos!

Thanks for your continued deligence!

Here's one that may be interesting for tomorrow:

http://www.moneyandmarkets.com/investors-just-witnessed-the-perfect-bear-trap-3-34827

Jeff

Davos's picture
Davos
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Re: Daily Digest - July 22

Hello Jeff: A pleasure to contribute to this fine comunity Chris built. That was an enjoyable read and having completed the 23rd's I posted it on the 24th. Thanks and take care

 

SteveS's picture
SteveS
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Weird stuff

Davos, continuing thanks for pulling out these gems each day (I know, I  know, you do it anyway and it's no big deal - but it is)

Anyway, that CNBC vs,. Barofsky clip was just weird. Don't know anything about this guy, but he sure seemed pretty straightforward to me. Did CNBC even read his report? 

And Stearns vs Paulson.You know a lot of good questions get asked in these hearings, but it seems no one wants to hear the answers. Now, I'm no Paulson fan, but I would have liked to have heard it out. After seeing a bunch of these clips over the months it seems these hearings are more like vent sessions - I don't get the point. I think the quote that really clarified the whole process was Stearns saying "I don't want you to use all my time" after Paulson spoke maybe two (though halting) sentences.

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propamanda
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Re: Daily Digest - July 22

Hi Davos.

As always, thanks for the daily newsbrief.  It amazes me that you never seem to go on vacation

Check this out

http://www.nytimes.com/2009/07/22/business/economy/22fed.html?hpw

NY Times wrote:

The pace will pick up next year and accelerate in 2011, he said, but unemployment will remain high, damping down inflation for two more years.

...

In his testimony, Mr. Bernanke addressed growing concerns in Congress and on Wall Street that a burst of inflation might be the inevitable result of the Fed’s decision to hold down rates indefinitely while pumping hundreds of billions of dollars into the economy to rescue banks and bolster the credit system.

Hmm...  Ya think?

(Also, didn't Chris M. say that an inflationary period may begin around 2012-ish?  I thought it was interesting that Bernanke and Chris M. would agree on this time frame.  I also thought it was interesting that the Fed is already anticipating hiking up interest rates to combat the inflationary period, meaning that they must view it as an impending problem, not just the "normal" amount of inflation that we were used to before).

Davos's picture
Davos
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Re: Daily Digest - July 22

Hello SteveS and PropAmanda:

Pleasure to add something, really takes nothing at all to do, I read a lot each day.

I'm not certain how this will play out - time wise. The CRE mess and the Alt-A's and Option Arms look like they will make the Subprimes wave look a drizzle. I'm now seeing estimates up 3 trillion this week in CRE, they are now forecasting a 6.5 trillion dollar CRE wave on top of a 1.5 trillion dollar residential wave.

I think Whitney will be revising those bank ratings once again.

How the money moves from equities to securities I think will be key and IMHO that will depend on when the market takes its next u turn and makes a severe leg south.

Bernanke looks like he is fighting Summers and Janet Louise Yellen for his job, with all this in the mix I really don't even have a guess on hyperinflation.

Off to the beach...

Take care,

 

 

DavidC's picture
DavidC
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Re: Daily Digest - July 22

Here we go again. Another day up in the markets and the pundits on TV talking about 'return to normalcy' . Must be the new paradigm.

I've attached a chart - apologies in advance if it doesn't show up properly! - showing the S & P from 1960 to today - it's a linear y-axis (log axis is even better!) and shows that there's no reason at all why prices shouldn't go lower. The two massive peaks represent the .com buble and the housing/property market bubbles. If we genuinely are in a deleveraging time and the 'normalcy' that the powers-that-be are trying to inflate back to are the levels around 1500 I only see one direction from here.

The level of the S & P is about where it was in 2003, which is only 5 years ago - not long in the scheme of things. The other thing that's just struck me, looking at it, is the 950 area has been strong resistance or support in 1998, 2001, 2003/4...and now?

DavidC

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fabiocastellanos
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Re: Daily Digest - July 22

It is indeed a disgrace to see the video interview that CNBC made to Mr. Barofsky. It was quite evident how vehement the interviewers were with him and how tilted were their views in terms of favoring not so much disclosure. It is indeed sad to see how the majority of the population are run by specific interests and there is so much outright misguidance. This is one further source of loss of credibility that is adding up the tally of other credibility losses... Is there anything else left where anyone can get some level of credibility!!! The more once sees these things happening day in and day out, the conclusion that reasserts itself is that it is so much better not to watch TV to ensure one is not mis-informed!!!.

LogansRun's picture
LogansRun
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Re: Daily Digest - July 22

SteveC,

Charts are meaningless at this time due to the manipulation taking place on many levels.  The charts showed a lower call 3 months ago but it didn't happen due to the manipulation.  Charts at this time are worthless IMO. 

mono's picture
mono
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Re: Daily Digest - July 22

 Wow, Wow, Wow,

 

Unbelievable. If that Congressman Stearns Video doesnt not shake up all of America and in particular

your President Barack Obama,  then nothing will.

 

I AM SPEACHLESS. GS is the Mafia!!

fabiocastellanos's picture
fabiocastellanos
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Re: Daily Digest - July 22

Thanks for sharing the article on Dark Years. Useful read.

Davos's picture
Davos
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Re: Daily Digest - July 22

Hello FabioCastellanos:

I turned off my TV years ago and don't miss it a bit.

Take care

DavidC's picture
DavidC
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Re: Daily Digest - July 22

Hi LogansRun,

I assume your response was to me, DavidC, as there is no SteveC on today's posts. I wasn't nor am I making a call on the markets, I was merely showing the chart as an illustration of where the stock market is now and where it's come from.

1) Like you I perceive that there is market manipulation at the moment although I don't have proof of it, and in some ways one might expect TPTB to try and maintain the 'normalcy' of the what has been (even if it wasn't normal!). Apart from maintaining their own power and wealth it keeps the sheeple happy.

2) The chart DOES show that in 2003 the S&P was around where it is today - now, while that may mean that anyone invested since then has made no money, 5 years in the grand scheme of things (heck, the Fed's over 90 years old!) is not that long, so when people cry about the fall since 2008 it should be borne in context.

3) The chart also shows that after the dotcom bubble burst, the fall was from almost the same high and fell almost the same as in the latest finanical crisis, albeit it rose back up to similar previous levels as the property bubble followed the tech bubble. With interest rates now near zero and with no other potential bubble on the horizon (Cap and Trade? Not for some time yet?) are we likely to get a rise back up to 1500 even with manipulation? I don't think so.

4) I don't know whether King Canute is as well known outside the UK, but he was the King who, the story goes, tried to hold back the waves and made a fool of himself. However, as he is known to have been a wise and fair King, historians believe that he staged the scene to rebuke the flattery of his courtiers and to show the subservience of the King to God and the elements. If the metaphorical waves are on the way in then the banks or powers-that-be will succumb even if they are trying to hold them back in the short term - they could learn something from Canute's wisdom.

5) Joseph Saluzzi of Themis has spoken a lot recently about High Frequency trading (specifically mentioning Goldman Sachs) and the effect it is having on the markets (i.e. manipulative, high volume but no liquidity), and has said that when the trapdoor is sprung, which it will be, there will be such a rush for the exits that the lack of liquidity will force big volatile moves. Another thing the chart shows is that moves have become wider and wilder.

6) With all the perceived manipulation, with all the talk of green shoots and with all the results this week (even the good ones have been based on cost cutting or beating lowered analysts' estimates, not genuine growth. And banks? Well, forget any truth in them!) I still maintain the chart shows no reason why prices shouldn't go lower. I've attached the log scale version (unfortunately I could only get this back to 1980).

I'll welcome any feedback or further comments!

DavidC

PraySam's picture
PraySam
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Re: Daily Digest - July 22

I do believe this graph is a useful illustration. We have a long way to fall! Thanks for the commentary Mr. Bean/DavidC. I must admit that I feel compelled to browse the major media outlets for news on the economy. I am dismayed by their slanted reporting but nevertheless I still tune in and every once in awhile you will see John Williams or Ron Paul  or another truth teller and think maybe,just maybe  there is an effort to get at the truth. Rather it is probably just a clever sucker ploy.

Davos's picture
Davos
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Re: Daily Digest - July 22

A very, very good read: Sprott: It's the Real Economy, Stupid (White paper)

JAG's picture
JAG
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Re: Daily Digest - July 22

 Thanks for the Sprott article Davos. I thought the inflation adjusted P/E ratio was a great chart. Lets just hope that their worst-case conclusion of the S&P500 at 189 doesn't come to pass.

Headless's picture
Headless
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Re: Daily Digest - July 22

The Paulson video: I am without words. Someone please do something to stop the assault on the reputation of America, a place that is mostly composed of hard-working honest people. We are not him and his ilk!

CNBC against Barofsky: As I said last night, I would ask the "reporters/journalists, would I have been Barosfsky: Which part of The Truth would you have us omit from the report?

This brazen exhibition of propaganda is absolutely stunning and, I think, without parallel in all of history. I think that this type of behavior, when such blatent manipulation is offered as reasonable argument against fact, is surely a harbinger of the beginning of the end. I hope we all remember how much a part CNBC played in the destruction of American when things get ugly.

LogansRun's picture
LogansRun
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Re: Daily Digest - July 22

Steven/DavidC...hehe

Sorry, I had a name in my head and it stuck.  As for your view and purpose on post, that's cool.  I wasn't trying to be antagonistic, just trying to point out that people can't really rely on charting for investment purposes in todays market.  There are too many variables manipulating it in ways that history/charting can't take into account.

I will look forward to the floor dropping out from under tptb/GS.  It's past time.

Peace.

jpitre's picture
jpitre
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Re: Daily Digest - July 22

Headless

The Paulson video: I am without words. Someone please do something to stop the assault on the reputation of America, a place that is mostly composed of hard-working honest people. We are not him and his ilk!

I too am without words to explain my anger at the Paulsons of our world and the system that supports them.

The reality is that both our economy and our reputation are already in tatters. We are a country of decent, hardworking people for the most part however we have stood by, elected corrupt & incompetent politicians, supported dishonest companies in the hope of making a quick buck, trusted our hard earned savings to Wall Street so they could steal from us, and have fallen under the spell of insurance companies including health insurers. The majority of the leaders of industry, Wall Street & the Banks have schemed to line their own pockets rather than build their organizations and our country. Many deserve a small room under the Feds control with a stipulated term of residency.

In my opinion, that is reality, and our reputation reflects same. If we want to change our reputation, we need to change our collective ways, re-group, re-trench and get back on track. Hard productive work, ethical behavior and ingenuity is what this country was founded on and we need get our feet back on the ground instead of in the clouds living on borrowed money.

Jim

Jeff Borsuk's picture
Jeff Borsuk
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Re: Daily Digest - July 22

Thanks Davos!

I didn't know about the tax deferred status of Paulson stock sale proceeds! ...that conversation really got him squirming!!!

 

Jeff

 

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