Daily Digest

Daily Digest - June 12

Friday, June 12, 2009, 11:03 AM
  • Financial Sense News hour 3, June 6
  • Renegade Economist -- 28 May 09 (8 minutes):
  • California contemplates ultimate reform - no welfare
  • Peter Schiff on CNBC, Hello Argentina or Mike Hello Argentina (H/T iDoctor)
  • 5 days after the fact: The Truth About Jobs (Video)
  • A Tale of Two Depressions
  • Behind on Car Payments? Torch it. Ditch it. Sink it.
  • Thunder Road News
  • Weiss - The Biggest Victim of the Debt Crisis
  • American Trucking Association Truck Tonnage Index (Chart)
  • Alexis de Tocqueville Still on the Money
  • Out for the Day, Deferring to Denninger and Point (Video)

Economy

Financial Sense News hour 3, June 6

  • 6:04 Minsky, Bubbles, 5 Steps of: 1.) A Displacing Event 2.) Credit Creation/Fuel/Expanding Money Supply 3.) Captivates Investors Euphoric State 4.)  Critical Stage, Financial Distress 5.) Revulsion
  • 9:00 copper and oil, India and China
  • 11:30 Insolvency, 100 trillion
  • 15:00 60% tax or 10% per year inflation needed to balance budget
  • 23:00 School kids laugh at Geithner
  • 30:00 (Can't read notes)
  • 31:00 USD falling
  • 33:00 Geithner Image
  • 34:00 Kid for an auto Czar
  • 37:00 Unfunded liabilities
  • 41:00 Oil
  • 48:00 Electricity
  • 52:00 Demand
  • 56:00 A or B, EV's or War for oil
  • 1:01 Reverse Globalization
  • Part 2 of 3rd Hour: 2:00 How Ben How?
  • 4:30 Inflation
  • 6:30 (Can't read notes)
  • 14:00 Second wave up

This was a good listen, I'd make it a point to catch it.

Renegade Economist – 28 May 09 (8 minutes):

California contemplates ultimate reform - no welfare

Could California become the first state in the nation to do away with welfare?

That doomsday scenario is on the table as lawmakers wrestle with a staggering $24.3 billion budget deficit.

County welfare directors are "in shock" at the very idea of getting rid of CalWORKs, which has been widely viewed as one of the most successful social programs in the state's history, said Bruce Wagstaff, director of the Department of Human Assistance in Sacramento.

"It's difficult to come up with the right adjective to react to this," Wagstaff said. "It would be devastating to the people we serve."

Peter Schiff on CNBC, Hello Argentina or Mike Hello Argentina (H/T iDoctor)

5 days after the fact: The Truth About Jobs (Video)

A Tale of Two Depressions…(Repost)

Barry Eichengreen and Kevin H. O’Rourke assembled a terrific piece showing the WORLD ECONOMY now versus during the Great Depression. Regular readers of my blog will not be surprised to find that the data they point to indicate that today’s depression is WORSE than the original Great Depression.

Here’s a link to their article, please follow that link and read it there are a ton of good charts and very useful information:

A Tale of Two Depressions…

This article is an update of their original and their new findings are:

  • World industrial production continues to track closely the 1930s fall, with no clear signs of ‘green shoots’.
  • World stock markets have rebounded a bit since March, and world trade has stabilised, but these are still following paths far below the ones they followed in the Great Depression.
  • There are new charts for individual nations’ industrial output. The big-4 EU nations divide north-south; today’s German and British industrial output are closely tracking their rate of fall in the 1930s, while Italy and France are doing much worse.
  • The North Americans (US & Canada) continue to see their industrial output fall approximately in line with what happened in the 1929 crisis, with no clear signs of a turn around.
  • Japan’s industrial output in February was 25 percentage points lower than at the equivalent stage in the Great Depression. There was however a sharp rebound in March.

Behind on Car Payments? Torch it. Ditch it. Sink it.

Suspicious car fires or arson rise 27% in the first quarter compared with a year earlier as owners seek a payoff.

Reporting from Sacramento - Motorists unable to afford payments on pricey cars and gas-guzzling sport utility vehicles in this recession are turning to a time-tested financing solution: matches.

Insurance cheats are torching their vehicles in remote deserts. They're pushing them off cliffs. They're sinking them in lakes or ditching them in Mexico in the hopes of getting their policies to pay off, fraud investigators say.

Nationwide, suspicious vehicle fires or arson increased 27% in the first quarter of this year compared with a year earlier, according to the National Insurance Crime Bureau, an industry-supported agency that investigates all types of insurance fraud. So-called owner give-ups -- cars intentionally destroyed or abandoned -- jumped 24%.

Barbecuing a Beamer is one of the more dramatic types of suspected insurance fraud that's increasing in this economic downturn, the deepest in more than half a century.

Thunder Road News(letter)

Weiss - The Biggest Victim of the Debt Crisis… 

I have been posting a lot of Martin Weiss’s writing lately, and for good reason, they are spot on in regards to our structural debt problems. The following is one of his most important pieces EVER. It’s very important to understand the dynamic he is expressing, it is getting directly to the roots of the problems.

American Trucking Association Truck Tonnage Index (Chart)

Alexis de Tocqueville Still on the Money

A reader posted an Alexis de Tocqueville quotation today in response to a post. It said:
“The American Republic will endure until the day Congress discovers that it can bribe the public with the public’s money.” - Alexis de Tocqueville

Out for the Day, Deferring to Denninger and Point…(Video)

15 Comments

fujisan's picture
fujisan
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Re: Daily Digest - June 12

SMALL INVESTORS ARE PILING INTO STOCKS | THE PRAGMATIC CAPITALIST 

 

Small investors are knocking eachother down trying to get into equity mutual funds as the rally picks up momentum.  Equity funds added a sizable $13.6B for the week ended May 3rd after adding $4.63B the previous week.   As we pointed out before, small investors have timed this market wrong at just about every juncture.  The fact that they’re piling into stocks right now can’t make the smart money feel good about their bets….

fndflws

Davos's picture
Davos
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Re: Daily Digest - June 12

 he fact that they’re piling into stocks right now can’t make the smart money feel good about their bets….

Hello Fujisan:

Reminds me of the 13 minute pount of the 3b (part 2) of the FSN podcast above. Take care

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suesullivan
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Tax revenues worse than forecast in Colorado...

Another state-level report of tax revenues pours Roundup on those green shoots...

http://www.denverpost.com/ci_12574179

 

Just when it seemed Colorado's economy was improving, tax collections are backsliding and there are new worries the state budget will be $150 million to $300 million deeper in the hole than expected, a top lawmaker warned Thursday.

As a result, colleges and universities — spared from cuts during the legislative session — might take a hit next year, said Sen. Moe Keller, D-Wheat Ridge, chairwoman of the Joint Budget Committee.

Other cuts could hit state prisons and K-12 funding. Budget cutting "will be brutal" next year, Keller said.

The prospect of renewed budget woes also has added fuel to discussions about long-term fiscal solutions that could include tax hikes or changes to the Taxpayer's Bill of Rights in the state constitution.

State tax collections for May were $77 million below projections, Keller said, and economists believe income-tax payments that are still being collected may come up as much as $80 million less than expected.

Legislative leaders say that probably means the state will be short in the current budget year that ends June 30, a prospect that could require an emergency withdrawal of cash funds slated for the next year's budget, which begins July 1.

"We will be $150 million short of what we budgeted at a minimum," Keller said. "It could be double that."

That's disappointing news compared with last month, when tax collections were actually $14 million higher than economists had projected. Lawmakers hoped that state revenues were starting to stabilize.

May revenue figures show that sales- and excise-tax collections were down 18.7 percent from the same month a year earlier and 7.3 percent lower for the year to date over 2008.

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rht1786
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Re: Daily Digest - June 12

Fujisan, and Davos,

If anything, people piling into stocks will be a positive for the "smart money". I'm assuming, of course, that the "smart money" that you refer to composes those investors who (a) are diversifying out of the dollar, (b) are shorting equity markets and the dollar, and (c) are moving invested capital into investments with strong fundamentals.  

In this case, "smart money" would be pleased to see herding towards equities, especially given the fact that small investors historically make the wrong moves. If this trend continues, as all signs show it will, the equity markets will collapse, again, and the "smart money" will be rewarded. Perhaps not immediately, in the short term, with instant gratification, but "smart money" investors should feel pleased that they did not invest with the general public, and did not see their hard-earned incomes slashed and burned by price discovery in equity markets.

Davos's picture
Davos
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Re: Daily Digest - June 12

 Fujisan, and Davos,

If anything, people piling into stocks will be a positive for the "smart money". I'm assuming, of course, that the "smart money" that you refer to composes those investors who (a) are diversifying out of the dollar, (b) are shorting equity markets and the dollar, and (c) are moving invested capital into investments with strong fundamentals.

In this case, "smart money" would be pleased to see herding towards equities, especially given the fact that small investors historically make the wrong moves. If this trend continues, as all signs show it will, the equity markets will collapse, again, and the "smart money" will be rewarded. Perhaps not immediately, in the short term, with instant gratification, but "smart money" investors should feel pleased that they did not invest with the general public, and did not see their hard-earned incomes slashed and burned by price discovery in equity markets.

Hello Rht1746:

I never disputed that. If you listen to the 13-15 minute portion of the clip you'll get what I'm driving at. If I recall somewhere there is a lawnmower mentioned.

TtotheA's picture
TtotheA
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Re: Daily Digest - June 12

"The length of the average work week fell to its lowest since 1964 ! The graph below shows that, not only did total hours worked decline in May, but the rate of decline (0.7%) was very much in line with the rate of contraction that workers have experienced since September. Hours worked suggests that the hope-inspiring May moderation in the job loss series may have been a monthly aberration. If firms were really gearing up to start hiring workers once again, why would they now be cutting back as strongly as ever on the hours that they ask their existing employees to work? If one factors in falling wages, to compute total weekly earnings, the picture looks still worse. My bottom line: the labor market does not quite yet suggest that the economy has hit bottom."

Read more, view graphs here:
http://belfercenter.ksg.harvard.edu/analysis/frankel/?p=215

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Headless
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Re: Daily Digest - June 12

Off topic, but if it is still possible to be shocked in this environment, I was by the following "article"; I have circled the key words in red. Would love to hear your reactions...

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Re: Daily Digest - June 12

Peter Schiff Wall street unspun.

1

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5

6

Other interesting video.

Davos's picture
Davos
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idoctor's picture
idoctor
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Re: Daily Digest - June 12

More Peter.....

Gerald Celente On The Infowarrior with Jason Bermas

1.

2.

3. 

4.

 

fujisan's picture
fujisan
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Re: Daily Digest - June 12

Bank Rescue Costs EU States $5.3 Trillion, More Than German GDP - Bloomberg.com

June 12 (Bloomberg) -- European governments have approved $5.3 trillion of aid, more than the annual gross domestic product of Germany, to support banks during the credit crunch, according to a European Union document.
...

Following is a table of European government’s commitments. All figures are in billions of euros and include capital injections, guarantees granted, effective asset relief and liquidity interventions.

United Kingdom 781.2
Denmark 593.9
Germany 554.2
Ireland 384.5
France 350.1
Belgium 264.5
Netherlands 246.1
Austria 165
Sweden 142
Spain 130

I converted into % of GDP for 2008. This gives:

Denmark 255%
Ireland 207%
Belgium 77%
Austria 59%
United Kingdom 43%
Sweden 43%
Netherlands 41%
Germany 22%
France 18%
Spain 12%

fujisan's picture
fujisan
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Re: Daily Digest - June 12

 Black Swan Currency CurrentsThe $18,100,000,000 question!

The numbers are staggering...really incomprehensible...it’s the kind of stuff that if you made it up no one would believe you...I’m talking about the amount of money both the US and European Union have committed to this crisis:

• The US government and Fed spent or lent or committed $12.8 trillion, an amount that approaches the value of everything produced in the country last year.

• European governments have approved $5.3 trillion of aid, more than the annual gross domestic product of Germany ($3.3 trillion).

If we break the US spending down to per person living in the US, we get:

$12,800,000,000,000 divided by roughly 304,000,000 = $42,105 per person

Now I know what you’re thinking; if our government, in its infinite wisdom simply doled out that much money directly to every man woman and child, you can bet our crisis would be solved. Heck, in the Crooks family alone, four kids, my wife, and I would have racked up a cool $252,630! Granted, the kids would want their pound of flesh given that all are of age, but still, we could have paid off a whole lot of debt and bought some pretty cool toys with that, deleveraging and stimulating along the way. And I bet you a dollar to a donut that I could more efficiently spend that money than some government agency that’s only trying to “help” me by saving various dinosaur financial institutions and companies throughout our fair land.
[...]
When you look at the numbers, it’s easily understandable why many expected hyperinflation once there is even a modicum of traction.

Inflation is, and always has been, the preferred route out of trouble by governments past who issued too much debt i.e. inflate away the debt problem by paying it off with even more worthless paper. This is why you might have heard bonds referred to as, Certificates of Confiscation.

Anyway, back to some semblance of what this missive is supposed to be about. A few charts and a little quiz:
[Charts]
Do you notice which of the charts reflects why our government is having so much trouble achieving their goal of inflationism?

If you said Velocity of Circulation, you would be correct! Congrats! For those of you not versed in such arcane jargon, and be very thankful you are not, let me put it this way:

You can lead a horse to water but you can’t make him drink!

If you and I are very worried about our future earnings disappearing because our companies aren’t doing so well because there is little demand for its products or services, which represents most real people I know, then we are not predisposed to heading out to the store to find something shiny new to buy for us or our loved ones. Multiply this human action, which by the way is the title of the best book on economics ever written, by Ludwig von Mises, over and over and over again amongst the US population that does not either work for, or do business directly with, the US Federal Government, the only place with booming growth, and you can see why the Velocity of Circulation of money is falling, off a cliff.

And this goes to one of the major problems, I think, for all those neo-Keynesian economists that keep flowing from the woodwork to tell us we need more spending:

Econometric models still have a little problem with human action. They have a little trouble measuring, what they would say is “irrational behavior.” But those of us that live in the real world would call it quite rational behavior. When we are nervous about the future we make a logical decision to change the way we act with a thing called money. We viciously cut waste out of our budget. We change our spending habits dramatically. Our incentive system adjusts accordingly.

And when we watch our government commit $42,105 for every man women and child to “help” us, and eat away at the stored wealth built up by hard working Americans past, it makes us even more nervous. Thus, what the neo-Keynesians see as a rationale response, we see as incredibly irrational. And thus, we decide it’s time once again to reduce the Velocity of Circulation of our money.

Thus we end up with a self-reinforcing nasty feedback loop created by people who actually believed everything Keynes said in the General Theory, instead of moving on to von Mises Human Action and getting it right. And so it goes.

Jack Crooks
Black Swan Capital LLC

Farmer Brown's picture
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Re: Daily Digest - June 12

Davos,

Now Deninger has picked this up as well: http://market-ticker.denninger.net/

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Re: Daily Digest - June 12

Mises used logic...

Keynes used deception...

Our business degrees are pointless....

Our brilliant PROFESSORS believe in free lunch...

They never have an answer for what to do when the stimulus ends...

 

For all those aquiring a degee in business... Consider this   38,000 of the 200,000 enrolled students at the Univeristy of South Florida are declared busisness major...  The top 10 in demand jobs for 2010, didnt exist in 2004. Our eduactional system is in ruin and no one seems to notice.

 

18bogeys's picture
18bogeys
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Re: Daily Digest - June 12

The unfortunate part is that the headline missed three additional 000's.
That's because it's so hard to fathom a dollar amount of such proportions.

It should be the $18,100,000,000,000. question.

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