Daily Digest

Daily Digest - July 30

Thursday, July 30, 2009, 9:40 AM
  • $235,000,000,000.00 Primary Dealers buying. Where is the money coming from?
  • 5 Year Bond Auction Fails
  • Notes on the Dollar....
  • Another Piece of the Money Trail (TIC Data - White Paper on Page)
  • Weak Treasury Sales Raise Worries About U.S. Debt Burden
  • Option Arms
  • Schumer Letter To Mary Shapiro (White paper)
  • IMF-Latvia deal foundering
  • Groundhog Day
  • Bank "Making" Money and Cutting 10% of it's Branches
  • US, China have pointed questions in private
  • Jim Rogers on TV Investment Advice (Video, Repost)
  • Gold Coast CRE Meltdown Visualized (Slides)
  • The "Jobless Recovery's" Impact on the Hotel Industry (Video)
  • Argentina (Video, H/T JAG)

Economy

$235,000,000,000.00 Primary Dealers buying. Where is the money coming from?

[Charts and tables on page]

Bond and dollar futures are both higher. Higher during a week that they are issuing $235 billion??? Now here’s my question… how do we finance $235 billion of bond auctions in one week – WHERE DOES THE MONEY COME FROM? Well, if we look at the bid results, we find that the Primary Dealers (PDs) are doing more and more buying each week. And when we look at the TIC data, we find that international buyers are doing more selling than buying. So, if the money to buy such massive issuances is coming from the PDs, then they have to be using their own cash or equivalents to buy them – correct?

5 Year Bond Auction Fails

That's right, FAILS.

No, you didn't hear it reported this way and won't, but that's the math.

Notes on the Dollar....

Hey, we’re about to find out what’s truly important to the powers that be. Of course they talk up a strong dollar while simultaneously killing it with their actions – you know, little things like auctioning off $235 billion in new DEBT just this week!

Another Piece of the Money Trail (TIC Data - White Paper on Page)

As I’ve been mentioning in my reports on the flow of Treasury International Capital (TIC Flows), foreigners have been net sellers of our debt. This last report, released July 16th, shows a net outflow of foreign private capital of $82.2 billion and the outflow of foreign official flows were $15.6 billion.As I’ve been mentioning in my reports on the flow of Treasury International Capital (TIC Flows), foreigners have been net sellers of our debt. This last report, released July 16th, shows a net outflow of foreign private capital of $82.2 billion and the outflow of foreign official flows were $15.6 billion.

Weak Treasury Sales Raise Worries About U.S. Debt Burden

The U.S. Treasury sold $39 billion in five-year debt Wednesday in an auction that drew poor demand, raising worries over the cost of financing the government's burgeoning budget deficit.

It was the second lackluster showing in as many days, convincing analysts that the stellar results of debt auctions just a few weeks ago were a fluke and that Thursday's $28 billion seven-year offering could suffer a similar fate.

Groundhog Day

Bonds, tech stocks, credit, housing, commodities... a would-be bubble in everything. Marc Faber, by way of Michael Panzner illustrates just how removed from any kind of sound economic foundation we became (Will They Ever Grasp the Simple Truths?) by the time the rolling bubbles of the 2003-2007 time frame had hit full throttle around mid-decade.

You've seen the movie Groundhog Day, with events repeating over and over in a maddeningly similar pattern? Our policy makers have been schooled in a system that has proved itself to be unsound or worse, disastrous and yet in their densely myopic fashion, these bureaucratic stooges move forward pumping the same old policy as heroin into the [debt] junkie as the first and most privileged abusers, the big banks, laugh all the way to the... bank. That would be our children's piggy banks. We have eaten their future, and it is criminal.

Bank "Making" Money and Cutting 10% of it's Branches

CHARLOTTE, N.C. – Bank of America Corp. could eventually shrink its 6,100-branch network by about 10 percent as consumers utilize other methods of banking, a company spokesman said Tuesday.

Bank of America spokesman James Mahoney made the comments when asked about a published report that CEO Ken Lewis and another bank executive described such a plan to investors at a meeting last week in Charlotte, N.C., where the bank is based.

US, China have pointed questions in private

The Chinese, who have the largest foreign holdings of U.S. Treasury debt at $801.5 billion, have been expressing worries that soaring deficits could spark inflation or a sudden drop in the value of the dollar, thus jeopardizing their investments. Chinese officials said those concerns were raised during Monday's talks.

"We sincerely hope the U.S. fiscal deficit will be reduced, year after year," Assistant Finance Minister Zhu Guangyao told reporters after the Monday talks had ended.

"The Chinese government is a responsible government and first and foremost our responsibility is the Chinese people, so of course we are concerned about the security of the Chinese assets," Zhu said, speaking through an interpreter.

The discussions on America's deficits and China's role in financing them highlighted the growing economic importance of China, now the world's third largest economy.

The discussions in Washington represent the continuation of talks begun by the Bush administration. While the initial talks focused on economic issues, Obama wanted the agenda expanded to include foreign policy issues such as America's drive to get China's support for more international pressure to curb North Korea's nuclear ambitions.

Jim Rogers on TV Investment Advice (Video)

Gold Coast CRE Meltdown Visualized (Slides, Please see link on page)

A reader submits the following photo essay on the absolute commercial real estate carnage in Florida. Has to be seen to be believed: you will not see these pictures anywhere in traditional media.

The "Jobless Recovery's" Impact on the Hotel Industry (Video)

Argintina (Video, H/T JAG)

Full article this was taken from

16 Comments

Davos's picture
Davos
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ELIZABETH S.'s picture
ELIZABETH S.
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Re: Daily Digest - July 30

The Argentina clip is a MUST-WATCH for anyone who visits this site and wants to have it all spelled out....

FireJack's picture
FireJack
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Re: Daily Digest - July 30

Nathan also brings up the bond fiasco this week and adds this little piece:

While they can technically go slightly lower than zero, we are at the end of an era. Sure, interest rates can stay low for quite some time, but NOT when you can’t pay your debts. And trust me, we cannot possibly pay $235 billion per week forever. We are bankrupt, and interest rates are going to rise at some point, that’s why TLT is down over 24% from its peak. Rates are being held artificially low, and that simply cannot be sustained.

What I don’t like is that the numbers are not adding up and there is no transparency as to where the money is coming from. This is no joke, this is a very, very serious issue, one with criminal and traitorous implications. The Fed, the Treasury, and the Primary Dealers need to be audited, and it needs to happen NOW.

Bold mine.

 

Looks like its going to get real bad real soon. Of course if one reads the papers all you see is this on the front page: Canada's Recovery In Sight

But the rebound is being spurred mainly by huge government stimulus packages, the Conference Board warned. Provincial coffers will be in such a mess when the recession is over that many Canadians should expect higher taxes and fewer services in the years to come.

As the U.S. and Canadian housing markets recover, B.C.'s forestry industry should get a lift, note economists at Bank of Nova Scotia

But the Bank of Nova Scotia thinks Saskatchewan will be the only province to growth his year, because potash will rebound and healthy household finances will fuel consumer spending.

Signs that the auto sector is coming back to life will help Ontario turn the corner.

Yep, when you look closely its all about how the bubble is going to re-inflate. Air Canada gets loaned 1 billion, at a borrowing rate of 12.75%.  Should last them a year, then people are going to be pissed.

 

I can't help but notice after watching the argentina video that protests have become useless of late. You protest peacefully nothing happens. Violent protests just give them an excuse to gun you down. The people responsible just continue on or walk away.

isjrb029's picture
isjrb029
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Re: Daily Digest - July 30

I ran across this and thought it was interesting. Notice the less than expected. They guys just amaze me.

The 7 year note auction was good as the yield was about 3 bps less than expected. The bid to cover of 2.63 was above the average seen in the previous 5 of 2.4 but below the June auction of 2.82. The level of indirect bidders totaled 62.5%, below the 67.2% seen in June which was the first auction that reflected the new methodology. After the poor 5 year yesterday, yields backed up enough to find buyers today, especially with yields at the highest level since late June. The results are a relief in terms of government funding. Does it reflect a benign outlook on inflation and not as much of a confident growth outlook as the stock market has and/or is it comfort that government deficits will continue to have little problem getting financed? Or is it as simple as yields backed up over the past month and buyers took advantage? In two weeks we’ll get the benchmark 10 yr auction followed by the 30 yr. That will be the real test in terms of sentiment.

Jeff Borsuk's picture
Jeff Borsuk
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Re: Daily Digest - July 30

Tim Geitner selling his house for more than $300,000 the 2004 purchase price! Seller mentality cracks me up!!

I actually had a homeowner tell me his house was worth more than a model match that sold a week prior because he owned it!

Maybe Timmy boy as the previous owner "adds value" like he's a rock star or something? Wow!

...soooo entertaining!

Jeff

 

SagerXX's picture
SagerXX
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Re: Daily Digest - July 30
Jeff Borsuk wrote:

Maybe Timmy boy as the previous owner "adds value" like he's a rock star or something? Wow!

I heard he re-did the Rumpus Room in leopard-skin and added a disco ball.  That's gotta be half the 300k added value right there...

Viva -- Sager

idoctor's picture
idoctor
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Re: Daily Digest - July 30

Davos here is something I ran across & it looks like some people are getting a little irritated. I don't mean for this to be on any one political side but I thought it of interest that many of these people are elderly & didn't hesitate to give their names & have their picture taken.  

Monday, July 27, 2009

Sen. McCaskill's Office Holds Town Hall-- TEA PARTY BREAKS OUT

 
Senator Claire "ACORN" McCaskill's office agreed to hold a town hall meeting on Obamacare.
A massive Tea Party Protest broke out!
Check this out:
 
 
http://gatewaypundit.blogspot.com/2009/07/sen-mccaskills-office-holds-town-hall.html
 
http://rebootcongress.blogspot.com/2009/07/mccaskills-question-session.html
 
 
LogansRun's picture
LogansRun
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Re: Daily Digest - July 30

Watched the Claire McCaskill video and was impressed that many people showed and voiced their opinions.  BUT, I'll put money down that says the idiot votes for it anyway.  The two party system is a sham and the people better wake up.  This is a beginning but this should have been taking place years ago!

Tapani's picture
Tapani
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Re: Daily Digest - July 30

Just wanted to second the opinion to watch the whole Argentina clip series.

Before watching them, I was under the impression that business might influence a goverment, but not run it. That Argentina clip was eye-opening.

As a curiosity, one of the reasons it is known how corrupt different govt officials were is due to internal struggle among the leading caste. When someone needed to discredit an opponent, one strategy was to reveal (to the media) information about some corrupt deal the target politician had been involved with.

 

DavidC's picture
DavidC
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Re: Daily Digest - July 30

Good piece by Karl Denninger today. I thought the move at the time he's talking about was bizarre - to hear him talking about it from another standpoint only confirms my own thoughts.

http://market-ticker.org/archives/1274-VIDEO-Ticker-TRIN-Data-Dislocation-Spikes-Market.html

DavidC

pinecarr's picture
pinecarr
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Re: Daily Digest - July 30

Hey Elizabeth S. and Tapani-

   Thanks for the nudge to watch the Argentina clip.  Listening to the interviews with the people talking about losing their life's savings to the "scoundrel banks" was chilling; a little too familiar.  Tapani, I've only watched the one clip that JAG submitted today (thanks JAG!).  But I do plan to watch all the rest of them now. 

   -pinecarr

saxplayer00o1's picture
saxplayer00o1
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Re: Daily Digest - July 30

 

I've been watching how close a lot of cities have been to declaring Chapter 9 bankruptcy recently.

This one looks like a bad joke:

http://www.stltoday.com/stltoday/news/stories.nsf/illinoisnews/story/16A770E52C7AFB548625760300753D07?OpenDocument

saxplayer00o1's picture
saxplayer00o1
Status: Diamond Member (Offline)
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Posts: 4236
Re: Daily Digest - July 30

 

I've been watching how close a lot of cities have been to declaring Chapter 9 bankruptcy recently.

This one looks like a bad joke:

http://www.stltoday.com/stltoday/news/stories.nsf/illinoisnews/story/16A770E52C7AFB548625760300753D07?OpenDocument

fujisan's picture
fujisan
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Posts: 296
Re: Daily Digest - July 30

Rich Nations Fall Short on Bank Recovery Spending - WSJ.com

Wealthy industrialized nations have provided less than half of the support they pledged to prop up their financial sectors, according to new data from the International Monetary Fund.

The so-called advanced economies of the Group of 20 have made capital injections of $425 billion in banks and other financial institutions, 42.3% of the amount announced, the IMF said. The countries' treasuries have also spent $333 billion to purchase assets and make loans to financial institutions -- just 18.4% of the amount announced over the past year or so as they sought to address the effects of the global financial crisis.

The IMF said the relatively limited spending suggested the financial crisis hasn't turned out to be as dire as once anticipated. "This outcome appears to reflect a variety of factors including the precautionary nature of initial announcements, indications of increasing stability and improved bank liquidity," said an IMF report.

The IMF warned that the rate of spending could reflect "lags in implementation." If that were to occur, debt levels would rise even more steeply than they have thus far. The G-20 includes industrialized and large developing nations. Among the industrialized nations are Canada, Australia, France, Italy, Germany, Japan, Britain and the U.S.

...

 

fujisan's picture
fujisan
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Posts: 296
Re: Daily Digest - July 30

The Return of Greed: Banks Reopen Global Casino - SPIEGEL ONLINE - News - International

THE RETURN OF GREED
Banks Reopen Global Casino

By Frank Hornig, Christoph Pauly and Wolfgang Reuter

Investment banks, of all things, are making serious money again, thanks in part to government aid. Ironically, they are benefiting from the crisis they helped to create. As profits go up, so do salaries -- only this time, it's the taxpayers who are shouldering the risks.
...

The casino is open again, worldwide. Many investment banks are raking in massive profits once again, driving up risks and attracting talent with high salaries. It's as if nothing had happened, and as if it hadn't been precisely this type of behavior that brought the financial system to the brink of collapse last fall and then plunged the world economy into its worst crisis since World War II.
The collapse of the financial system was averted, but only through colossal public spending, as governments bolstered ailing banks with loan guarantees and equity injections and central banks pumped billions in liquidity into the markets.

But now that the worst seems to be over, banks are back to behaving the same way they did before the crisis. Even worse, thanks to government guarantees for the financial sector and cheap money from central banks, it has never been easier for banks to make money.

...
 

 

crash_watcher's picture
crash_watcher
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Posts: 146
Lessons from Argentina's economic collape

It's a pretty long read, but I thought that this was an interesting account by "ferfal" who apparently lived through Argentina's collapse.  It gives some interesting perspectives and some ideas on how one might prepare for a US-style collapse. 

http://www.silverbearcafe.com/private/10.08/tshtf1.html

FYI, apparently ferfal has turn this into a book: "The Modern Survival Manual: Surviving the Economic Collapse " advertized at his web site: http://ferfal.blogspot.com/ and available at amazon:

http://www.amazon.com/Modern-Survival-Manual-Surviving-Economic/dp/9870563457/ref=sr_1_1?ie=UTF8&qid=1248322192&sr=8-1 

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