Daily Digest

Daily Digest - June 10

Wednesday, June 10, 2009, 10:39 AM
  • Uh oh, Year over Year GDP (Chart)
  • Foreclosures and the Home ATM
  • From Michael Covel's Blog, Fed Inflation Video
  • Michigan closing eight prison facilities by year's end (H/TMesaBoogieMan)
  • The Psychology of Short Sales by Tanta, April 2008
  • Parent Resources for Growing Green Children
  • Shiller: Home Prices May Keep Falling
  • Rainwater Harvesting Poised To Grow In US West
  • On American sustainability: anatomy of societal collapse (Crash Course Cited)
  • Banks Try to Stiff-Arm New Rule (H/T Fujisan)

Economy

Uh oh, Year over Year GDP (Chart)

Foreclosures and the Home ATM

From Matt Padilla at the O.C. Register: Do these homeowners deserve help?

Homeowners who treated their houses like cash machines, tapping the equity as home values rose, are among the most likely to end in foreclosure, even more than those who bought at housing’s peak, a new study finds.

Often homeowners have had second, third and even fourth mortgages at time of foreclosure — a trend not adequately addressed by any of the federal or state foreclosure avoidance progams, said Michael LaCour-Little, a finance professor at Cal State Fullerton who authored the study.

I plan a bigger story on his findings, but wanted to share a few results now.

For example, for the early November 2008 data sample, he tracked 2,358 properties. Here’s what he found:

  • They were purchased at an average price of $354,000 and average year of 2002 (long before the housing peak of 2005).
  • Total debt on the properties averaged $551,000 at time of foreclosure. That’s 56% more than the properties were worth when purchased, meaning at least that much was cashed out!
  • An automatic valuation model estimated average value at time of foreclosure was $317,000, which suggests a combined loan-to-value at foreclosure of more than 170% ($551,000/$317,000). And that is a conservative estimate. Properties that banks later sold had an average resale price of $271,000!
  • During the housing bubble, many bought homes they could not afford using "affordability products" like Option ARMs. But there was another group of speculators that lived beyond their means, using their homes like ATM cash machines. I think this an important issues and I'm looking forward to Padilla's article.

From Michael Covel's Blog, Fed Inflation Video

Michigan closing eight prison facilities by year's end (H/TMesaBoogieMan)

With Michigan facing a $1.4 billion deficit in the next fiscal year they are closing eight prison facilities by the end of the year. It is believed that almost 1,000 state workers will lose their jobs.
Director Patricia Caruso made the announcement today which facilities will be closed.

There are five prison camps that Michigan Department of Corrections (MDOC) ran. These five camps are to be closed thus ending MDOT's camp program. Three of these camps are in the Upper Peninsula of Michigan.

They are Camp Cusino in Singleton, Camp Kitwen in Houghton County and Camp Ottawa in Iron River. The other two camps are Camp Lehman in Grayling and Camp White Lake in Oakland County. The camps are low-security prison camps.

The other three prisons are Hiawatha Correctional Facility in Kincheloe, in the Upper Peninsula, the Muskegon Correctional facility and the Maximum Correctional Facility in Standish.

Mike Prusi ( D-Ishpeming ) stated that he is upset because the UP of Michigan will be hit hard with the closing of the facilities there.

He said, “These closures are a slap in the face to communities who stepped up to the plate to accept prisons when the state was in need. I am concerned about how these closures will affect workers and their families in these communities, and I hope the Department’s Lansing bureaucracy will not be spared from the budget knife as well.”

The Standish Maximum Correctional Facility (SMF), in Standish, will have 350 employees at the prison lose their jobs.

According to Arenac County Clerk Ricky Rockwell, "Standish looked to that facility to stabilize a shaky economy in the late '80s after losing a significant employer, Riverside Products, that employed 4-500 people.”

City manager Mike Moran said in city sewer/water debt, the city will lose $1,400,000 in payments after the loss of SMF.

 The Psychology of Short Sales by Tanta, April 2008

There are no doubt some bargains to be had for real estate investors looking into short sales, but for nearly anyone except an expert in certain markets, I think I’d suggest not wasting your time. Unless, that is, the listed “short” price has already been “pre-approved” by the owner’s servicer. That does sometimes happen; the seller will in that case have a letter from the servicer indicating the minimum allowable sales price/maximum concessions. It will also help to be working with a real estate agent who knows more than a little about doing short sales. Otherwise I suspect you’ll end up waiting for Godot. I hate to spoil the plot, if you’ve never seen that play, but in the end he never arrives.

Parent Resources for Growing Green Children

What we do as parents is important for the world and environment to come for our children, but even more than our efforts to preserve and conserve, is our efforts to teach our children why we do what we do to protect the environment and provide them with the education, information, and tools to continue those efforts as what will do today will truly affect the life that our children live tomorrow.

Shiller: Home Prices May Keep Falling

Included: A total fall in housing prices of 41 percent from 2006 through 2010.

Rainwater Harvesting Poised To Grow In US West

There's more good news...collection systems don't have to be make-shift ugly. For more about the example pictured above, visit the go-to site The Rainwater Observer, Rainwater News And Blogs From Around The World. More pics from the Observer, below

On American sustainability: anatomy of societal collapse (Crash Course Cited)

Clugston writes, “On American Sustainability—Significant Findings and Conclusions.” This man writes from deep research and profound understanding of what we face. No name calling can degrade pure scientific facts. Clugston writes:

“Our American way of life—300+ million people enjoying historically unprecedented material living standards—is not sustainable."

Let me repeat Clugston’s words, “…not sustainable.” California cannot sustain its own addition of 1,700 people and 400 vehicles added to that state—daily! It cannot sustain its projected added 20 million people. It does not possess enough water today! The USA cannot continue adding 3.1 million annually, net gain, on its way to adding 100 million in 26 years.

“America is irreparably overextended—we are living hopelessly beyond our means, both ecologically and economically. The available supplies of many critical ecological resources and economic resources upon which we depend will soon be insufficient to enable our American way of life,” Clugston said.

He’s not pretending or making this up! We exploded our civilization to over 300 million people that need to be watered, fed, housed and educated. We’re failing across the nation in May 2009 so what will it be like with an added 100 million? Darned frightening!

“The extent to which we are overextended is appalling. Under the best case scenario, the US can support sustainably less than 20% of our existing population living at less than 20% of our current average living standard,” Clugston said.

Look at California for an example. That state accelerates into a basket-case. It won’t get better but it will get worse. Projections show 100 million people added to this country in 26 years. Get a grip! It won’t happen without horrific consequences.

“Our culture of persistent resource overexploitation, which has enabled our “success”—our extraordinary American way of life, is also responsible for our “predicament”—our unsustainable American way of life,” Clugston said.
(More)

Banks Try to Stiff-Arm New Rule (H/T Fujisan)

Delay Sought in Accounting Change, as Investor Groups Plot Own Response

The financial-services industry is taking steps to delay an accounting rule that would force banks and others to bring some of their off-balance-sheet vehicles back onto their books next year, which could force some to raise additional capital.

A group that includes the Chamber of Commerce, the Mortgage Bankers Association, and the American Council of Life Insurers and others sent a letter on June 1 to Treasury Secretary Timothy Geithner, regarding the off-balance-sheet accounting-rule change, saying it should be adopted "cautiously and seek to minimize any chilling effect on our frozen credit markets."

The letter was signed by 16 industry ..

20 Comments

cpkj's picture
cpkj
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Re: Daily Digest - June 10

not related to above, but..

WHO soon may declare swine flu ‘pandemic’

The World Health Organization said Tuesday a spike in swine flu cases in Australia may push it to finally announce the first flu pandemic in 41 years. It also expressed concern about an unusual rise in severe illness from the disease in Canada. WHO flu chief Keiji Fukuda said the agency has wanted to avoid “adverse effects” and panic in announcing a global outbreak of swine flu. WHO said the virus has infected 26,563 people in 73 countries and caused 140 deaths. Most cases have been in North America, but Australia also has seen a sharp increase in recent days.

 

Love how the media reported this.

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Re: Daily Digest - June 10

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idoctor
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Re: Daily Digest - June 10

Peter Schiff link

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CB
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Re: Daily Digest - June 10

How, exactly, is this good news?

From the NYTimes:

Quote:

U.S. Trade Deficit Widens as Oil Moves Higher

 

Published: June 10, 2009

As oil prices march higher, the United States trade deficit is again widening as consumers spend more on gasoline, the government reported on Wednesday.

The gap between what the United States sells to the rest of the world and the goods and services the country buys from foreign markets grew for a second month in April, the Commerce Department reported. The deficit widened to $29.2 billion from $28.5 billion in March as falling imports leveled off slightly and exports to other countries continued to slump.

The United States imported $150.3 billion worth of goods and services in April and exported $121.1 billion. Exports fell $2.8 billion in April from a month earlier, or 2.3 percent, and reached the lowest level since mid-2006. Imports fell a slightly smaller $2.2 billion.

Imports of crude oil rose $1 billion for the month, although the total value of crude-oil imports is down sharply this year compared with 2008. The United States also imported more consumer goods like pharmaceuticals, gems, jewelry and televisions.

The country’s exports of airplanes, industrial machines, automobiles and consumer goods fell for the month.

The balance of trade was roughly in line with economists’ expectations.

The collapse in the global economy seems to be ending,” said James O’Sullivan, senior economist at UBS. “The global economy’s just not plunging the way it was. You’re not seeing outright growth yet, but it does look like the rate of decline has faded significantly.” ....................

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Re: Daily Digest - June 10

It´s fun the see the comments on the dailyshow website. Most of them discard Schiff´s views and cheer up for keynesian "Spend your way out of debt" Krugman. 

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Re: Daily Digest - June 10

Viacom muzzled the Peter Schiff video.

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Farmer Brown
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Re: Daily Digest - June 10

Pete, try the other links posted above.

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becky
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Re: Daily Digest - June 10

Here is a quote from the AP article about the elderly gunman who just tried to shoot up the Holocaust Museum in Washington DC.

"In 1983, he was convicted of attempting to kidnap members of the Federal Reserve Board.... At the time, police said Von Brunn wanted to take the members hostage because of high interest rates and the nation's economic difficulties."

 

I hope this incident doesn't get used to paint all those who question the Federal Reserve with the same wacko brush.

becky

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Re: Daily Digest - June 10

"With the news that the US State of Colorado has decided to make it legal for small farmers to collect rainwater....."

You mean it's ILLEGAL to collect water in the USA?  There must be millions of homes in Australia with water tanks...  we have two, holding 5,500 gallons each, and we got a government rebate for one of them.

Mike

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Re: Daily Digest - June 10

Mike,

If it makes sense and is reasonable, it's probably illegal.  That's how it works sometimes. 

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Re: Daily Digest - June 10

I once had a conversation with a local rancher about water issues. Flooding (from a 1 or 200 yr event) had dumped sand on his bottom-land fields and I asked him if he could divert silt-laden flood water from normal summer flooding onto these fields to replenish the soil. He said and diversion was illegal as he had no surface water rights - yet, he could put a well in that would draw from the sub-surface flow (and diminish the surface flow by some amount) and that was perfectly ok.

Water law in the Western states is rigid, arcane, and very difficult to change.

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pir8don
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Re: Daily Digest - June 10

Yeah, you guys in the US seem to have a bigger problem with your governance than many of us elsewhere. I was staggered to learn that your food can't be labelled to show that it is not or does not contain genetically modified organisms.

No wonder .........

Don

____________________________________

Too big to fail, too big to fix, too big to care

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Re: Daily Digest - June 10
Damnthematrix wrote:

"With the news that the US State of Colorado has decided to make it legal for small farmers to collect rainwater....."

You mean it's ILLEGAL to collect water in the USA?  There must be millions of homes in Australia with water tanks...  we have two, holding 5,500 gallons each, and we got a government rebate for one of them.

Mike

Yea Mike,

Remember on a different thread where I said in the US we have a bureaucracy that is "A well oiled productivity killing machine". I stand by that statement.

 

Ken

 

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A. M.
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Re: Daily Digest - June 10

Mike, KenC,

Same thing here in Washington, though it only applies to farms that sell produce.
Costs about $15,000 to get all the processing fees out of the way, and the wait varies in length from 3-10 years.

Ken you nailed it. Government interference is the antithesis of a productive citizenry.

Heinlein said it best.

Cheers,

Aaron

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Re: Daily Digest - June 10

http://www.guardian.co.uk/business/2009/jun/10/oil-market-reserves

The price of oil burst through the $71 a barrel mark today amid revelations that proven reserves had fallen for the first time in 10 years and predictions that the price could eventually hit $250.

The latest high – from lows of $30 only four months ago – came on the New York Mercantile Exchange, where the cost of July deliveries rose by $1.35 to $71.36.

This comes on top of a $2 rise the day before as investors rushed into the market on the back of lower stockpile figures, higher demand estimates and speculation against further falls in the dollar.

"I wouldn't be surprised if we're testing $80 in a week or two," said one analyst, while BP's chief executive, Tony Hayward, questioned whether $90 could be the "right" value.

Kuwait's oil minister, Sheikh Ahmad al-Abdullah al-Sabah, put some of the rise down to signs of recovery in Asia but warned that overall demand was still weaker than last year. Opec would not raise supply at current oil prices but did not rule it out "if it reached $100", he said.

Alexei Miller, chairman of the Russian energy group Gazprom, raised the stakes further when he reiterated last year's estimates of $250 a barrel. "This forecast has not become reality yet, given that the [credit] crisis gained momentum and exerted a powerful impact on the global energy market. But does this mean that our forecast was unrealistic? Not at all."

The latest surge has also raised fears that higher energy costs could snuff out the nascent economic recovery. Shares on Wall Street's Nasdaq index fell 1%.

The febrile atmosphere in oil markets was fed by the publication of BP's Statistical Review of World Energy, which showed that the world's proven crude reserves had fallen by 3bn barrels to 1.258tn by 2008 from a revised 1.261tn in 2007.

Declines in important producers such as Russia and Norway offset rises in new areas such as Vietnam, India and Egypt. The figures did not include Canada's tar sands, which are put at 150bn barrels.

The drop is partly attributed to a drop in exploration drilling due to the precipitous fall in oil prices last year but also to the end of "easy" oil. Conflict this week in the Amazon and speculation about Arctic drilling underlined how oil companies are pushing into environmentally sensitive places to find new reserves.

Tony Hayward, BP's chief executive, insisted there was enough crude to last 42 years at current consumption levels, roughly the same as last year. Adherents of "peak oil" – the theory that the maximum rate of oil production has been reached – believe supplies will run out much sooner because of growing demand.

The BP boss said: "Our data confirms that the world has enough proved reserves of oil, natural gas and coal to meet the world's energy needs for decades to come." Higher prices allowed companies to invest in finding further reserves while not choking off demand, he said.

"There is a rational argument to say that somewhere between $60 to $90 a barrel is the right sort of level," he said.

Global oil consumption fell 0.6% to 81.8m barrels a day in 2008, the first decline since 1993 and the largest drop for 27 years. North Sea output dropped 6.3% to its lowest level for three decades.

By contrast, gas use rose by 2.5% globally and 16% in China. The use of coal, the heaviest emitter of climate-changing carbon, rose 3.1%, with Chinese demand up 6.8%, leaving it with a market share of 43% despite more high-profile announcements about its commitment to renewables.

BP says it is difficult to compare "primary" carbon fuels with renewable sources of electricity. BP notes that globally solar capacity rose nearly 70% and wind by 30% year on year but says renewables only generated 1.5% of global electricity and therefore began at a low base.But it notes these sources are playing an increasingly important role in some countries with wind power providing 20% of total electricity generation in Denmark, 11% in Spain and 7% in Germany.

Despite the 2008 rise in coal consumption, the BP data showed growth in the use of the fuel continued to decline compared with 2007 when it rose 5% and five years ago when it went up by 8%.

But the coal figures will alarm environmentalists and increase the calls for companies and governments to speed up trials on "clean coal" technology and the use of carbon capture and storage.

China has promised to increase its use of renewables: Zhang Xiaoqiang, vice-chairman of the China's national development and reform commission, says the country may produce as much as 20% of its energy from wind and solar by 2020.

 

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Re: Daily Digest - June 10

 Please Take Your Seats Ladies and Gentlement, the Online Screening of ‘In Transition’Starts Now… » Transition Culture


The film ‘In Transition’ is now available for viewing, for the next 72 hours.  The version being screened is not the final version, it still has a sequence to add and some tidying up to do, but is almost there.  We very much hope you enjoy it (you will need Quicktime on your computer)….  Please leave comments and feedback below.  For more information on the film’s release click here.  Also, if having seen it you would like to make a donation to help us finish it, please use the Paypal button below. So, to watch ‘In Transition’, click here.  Enjoy it and no rusting your popcorn at the back now please…. hey, and you two in the back row, do you mind?

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Re: Rain collection

Although the rain collection laws are ridiculous in a sustainable culture, there is a reason for them in our current environment.  If rain collection and surface water diversion were allowed, there would be massive collection for industrial and agricultural use.  This would divert water from existing streams, rivers, lakes, etc and cause even more damage to our battered ecosystems.

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Re: Daily Digest - June 10

http://www.asianews.it/index.php?l=en&art=15456&size=A

 

US government securities seized from Japanese nationals, not clear whether real or fake
Bonds worth US$ 134.5 billion are seized. This is the largest financial smuggling case in history. But are they real? Concern over ‘funny money’ or counterfeit securities is spreading in Asia. The international press is silent.

 

Italian authorities have not yet determined whether they are real or fake, but if they are real the attempt to take them into Switzerland would be the largest financial smuggling operation in history; if they are fake, the matter would be even more mind-boggling because the quality of the counterfeit work is such that the fake bonds are undistinguishable from the real ones.

What caught the policemen’s attention were the billion dollar securities. Such a large denomination is not available in regular financial and banking markets. Only states handle such amounts of money.

The question now is who could or would counterfeit or smuggle these non-negotiable bonds.

In order to stop money laundering Italian law sets a ceiling of 10,000 euros per person for importing or exporting money without declaring it. The penalty for violating the law is 40 per cent of the money seized.

If the certificates were real, for Italy it would be like hitting the jackpot. The fine alone would amount to US$ 38 billion, five times the estimated cost of rebuilding quake-devastated Abruzzi region. It would help Italy’s eliminate its public deficit.

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Re: Daily Digest - June 10
Quote:

Business

Calif. resort that hosted AIG faces foreclosure

Jun 10th, 2009 | DANA POINT, Calif. -- The Southern California resort where AIG sponsored a luxury retreat after receiving federal bailout money is facing a foreclosure auction, according to a published report.

The owners of the St. Regis Monarch Beach in Dana Point are in default on a $70 million loan from Citigroup Global Markets Realty Group, and the coastal resort will go on the block July 7 unless they can negotiate a new agreement with the lender, the Los Angeles Times reported in Wednesday's edition.

The newspaper cites unnamed sources knowledgeable about the debt but speaking on condition of anonymity because of the sensitivity of the situation. The sources say the owners refinanced the property in 2007 and incurred $300 million in debt. They said the owners are current on two other mortgages totaling $230 million.

The St. Regis, which has 400 rooms, a golf course, several restaurants and a private beach club, has seen a steep drop in bookings amid the deepening recession.

Citigroup and resort co-owners Capital Pacific Holdings Inc. and Farralon Capital Management declined to comment.

"The situation will have no impact on our regular operation," St. Regis spokeswoman Leah Goldstein said, adding that Starwood Hotels & Resorts will continue to manage the property.

The sprawling resort became a symbol of corporate excess when the giant insurer American International Group Inc. spent some $440,000 on a posh retreat for its executives.

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