Daily Digest

Daily Digest - June 26

Friday, June 26, 2009, 10:14 AM
  • Dylan Ratigan Asking the GOOD QUESTIONS..(Video)
  • Downside skew
  • CRE: "pretend and extend"
  • Fear Factor (Chart)
  • Swine flu 'could infect up to half the population'
  • Joachim de Posada says, Don’t eat the marshmallow yet (TED Video)
  • 16 Quick Lines That Explain Trend Following
  • Executives Selling shares frantically. The Public will be the bag holders AGAIN!
  • John Hodgman (I'm a PC) at Radio & TV Correspondents’ Dinner (Video)
  • Risk Asset Rebound... Then Why are Insiders Selling
  • The Worrying I in the C + I G + NX (Chart and link to Larry Summers study on page)
  • Steve's Economic Forum - Two Beers with Steve (Podcast)

Economy

Dylan Ratigan Asking the GOOD QUESTIONS..(Video)

Downside skew

Downside skew, which gauges the relative cost of buying insurance against a slide in stocks, is now higher than it was when the Standard & Poor’s 500 Index dropped to a 12-year low on March 9. That indicates a “relatively high chance of downside moves,” the brokerage wrote in a report dated yesterday. ...

CRE: "pretend and extend"

Aside from the discussions of government policy, there was a consensus that banks largely are trying to delay the days of reckoning when they will have to recognize losses and writedowns by extending loans as much as they can. The phrase “pretend and extend” came up more than once, as in, banks are pretending that borrowers can pay off their loans and therefore granting extensions to them. However, no one thinks that can go on forever. As Barone described the process with dealing with troubled borrowers, “Banks are granting extensions at low rates and hoping the economy recovers quickly enough to get the loans performing. But things have gotten worse instead of better.”

Fear Factor (Chart)

Swine flu 'could infect up to half the population'

Economic toll: Pandemic to cost Britain £42bn

£42bn losses are predicted to hit Britain as a result of a three per cent fall in gross domestic product (GDP) due to the swine flu pandemic, according to a new report from the Oxford Economics think tank, due to be released tomorrow. Researchers claim that swine flu could threaten already fragile businesses and put further strains on financial markets in what could become a "vicious cycle that postpones the recovery".

Deflation is a "significant risk" as a result of the pandemic's impact on the economy – putting back economic recovery by two years, says the report. The predictions are based on a 30 per cent infection rate, should a pandemic begin in October and last for six months.

A $2.5 trillion cut in global GDP is a possibility – with a flu outbreak in the autumn hitting the world economy just as it starts to recover from the credit crunch.

 Joachim de Posada says, Don’t eat the marshmallow yet (TED Video)

Ability to delay gratficiation, years later how are we doing?

16 Quick Lines That Explain Trend Following

9. Trading Runs in Cycles, Some Good, Most Bad: Trade large and aggressively when trading well; trade small and ever smaller when trading poorly. In “good times,” even errors turn to profits; in “bad times,” the most well-researched trade will go awry. This is the nature of trading; accept it and move on.

10. Keep Your Technical Systems Simple: Complicated systems breed confusion; simplicity breeds elegance. The great traders we’ve known have the simplest methods of trading. There is a correlation here!

11. In Trading/Investing, An Understanding of Mass Psychology Is Often More Important Than an Understanding of Economics: Simply put, “When they are cryin’, you should be buyin’! And when they are yellin’, you should be sellin’!”

12. Bear Market Corrections Are More Violent and Far Swifter Than Bull Market Corrections: Why they are is still a mystery to us, but they are; we accept it as fact and we move on.

13. There Is Never Just One Cockroach: The lesson of bad news on most stocks is that more shall follow… usually hard upon and always with detrimental effect upon price, until such time as panic prevails and the weakest hands finally exit their positions.

Executives Selling shares frantically. The Public will be the bag holders AGAIN!

Insiders of Standard & Poor’s 500 Index companies were net sellers for 14 straight weeks as the gauge rose 36 percent, data compiled by InsiderScore.com show.

John Hodgman (I'm a PC) at Radio & TV Correspondents’ Dinner (Video)

Risk Asset Rebound... Then Why are Insiders Selling

Sales by CEOs, directors and senior officers have accelerated to the highest level since June 2007, two months before credit markets froze, as the S&P 500 rebounded from its 12-year low in March. The increase is making investors more skittish because executives presumably have the best information about their companies' prospects.

The Worrying I in the C + I G + NX (Chart and link to Larry Summers study on page)

Investment is important to long-term economic growth and/or recovery. One such study by Brad De Long and Larry Summers on the relationship between equipment investment and economic growth noted:

We find that producers’ machinery and equipment has a very strong association with growth: in our cross section of nations each percent of GDP invested in equipment raises GDP growth rate by 1/3 of a percentage point per year. This is a much stronger association than can be found between any of the other components.
For that reason, a massive drop in investment is not only cause for concern now, but for future and lasting economic growth. And the size of the drop in investment is massive.

Steve's Economic Forum - Two Beers with Steve (Podcast)

 In this episode we talk with another notable face from the www.PeakProsperity.com website, Erik Townsend. Erik answers our questions about whether or not these green shoots of a recovery are legitimate and we again re-visit the question 'What if Nothing happens?'... at least not for the next few years.

16 Comments

rocketgirl1's picture
rocketgirl1
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Re: Daily Digest - June 26

Davos, Thank you, thank you for putting Swine Flu in the forefront again and the TED video was priceless!

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Re: Daily Digest - June 26

WOW Davos, check out that post by Karl Denninger on the splitting up of AIG on the market ticker this morning, where are the regulators on this one? http://market-ticker.denninger.net/ Seems like the Fed just gets to do whatever the [email protected]#!! they want anymore. Whats the use of having regulators or laws if theres no enforcement.

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Re: Daily Digest - June 26

fujisan's picture
fujisan
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Re: Daily Digest - June 26

Bank of England: no bank 'too big to fail' - BusinessWeek

The Bank of England warned Friday that Britain's banks are far from getting a clean bill of health despite signs of improvement in the economy and in financial markets -- and said that no bank should be too big to fail.
...

Probably Too Big To Be Saved

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Dragline
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Re: Daily Digest - June 26

 Interesting observations re China, the world reserve currency and the fate of the U.S. dollar:

http://www.rgemonitor.com/roubini-monitor/257169/

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JAG
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Treasury Auction Failure in the Future?

 SEVERELY Bearish Treasury Development

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DavidC
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Re: Daily Digest - June 26

Hi Davos,

A great link for Steve's Podcast - Steve's Economic Forum - Two Beers with Steve (Podcast) - and great to hear yours, Erik's and Sam's voices (have I missed anyone?). Excellent stuff.

DavidC

 

Dragline's picture
Dragline
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Re: Daily Digest - June 26

Eric is totally right about Singapore.  That place was almost completely built in the last 40 years, is clean, vibrant and forward-looking.  Its what America was like when we actually saved our money and built infrastructure and made goods (that we needed -- not roads and bridges to nowhere).  You could take a passenger train that went 100 mph in the first half of the 20th century in America.  I'm taking an Amtrak tomorrow that probably won't do better than 60.

Probably why Jim Rogers (the investment guru who says the dollar is toast) has bailed and moved to Singapore already.

yoshhash's picture
yoshhash
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Re: Daily Digest - June 26

Loved the comment below the TED marshmallow video:

"They should have given all the kids a second marshmallow at the end, regardless of whether they ate the first, then repeat the experiment with the same kids to see how many eat the first marshmallow the second time around. Or better yet, only give a second marshmallow to the kids who ate the first. Then, send the results of the experiment to Bernanke, et al."

I really would like to see this experiment expanded to accomodate anti-incentives.

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Headless
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Re: Daily Digest - June 26

Yoshhash said:

" Or better yet, only give a second marshmallow to the kids who ate the first. Then, send the results of the experiment to Bernanke, et al"

Thank you. Exactly! Incredible feeling to be ROFLMAO (at your thought) and at the same time realize the profound horror that it encapsulates as to the future of our country under such management...

 

NZO

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Re: Daily Digest - June 26

 cap-n-tax

Davos's picture
Davos
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Re: Daily Digest - June 26

 Long on wheat? good to have food on hand

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Re: Daily Digest - June 26

It is all going to be OK Cramer thinks we need to take a chance.

http://www.cnbc.com/id/31569651

Davos thanks for the Cap-N-Tax link. If this goes like Obama wants we will accelerate the collapse. We will have a so called climate policy but no real climate change...go figure?? We will have the most expensive energy in the world to go with our very expensive labor. What a great combination that will make us sooooo competitive to make real stuff the world wants & needs.

Anybody else think the world will want to buy Americas green energy that is so expensive? My guess is they will be laughing while we think we are so clean & green as we sink to the bottom.

 

http://feeds2.feedburner.com/ScottBleier

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Davos
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Re: Daily Digest - June 26

 iDoctor wrote (reference cap-n-tax):

we will accelerate the collapse

Hello iDoctor: I think you are right on! Can't wait to the coming weeks when they add a 4 trillion plus health care to the barn fire while the cable chanel plays on. Take care

fujisan's picture
fujisan
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Re: Daily Digest - June 26

The next big investment bubble - green energy - MoneyWeek

Do investors have any bubbles left in them?

In the days of free and easy money, under the leadership of Federal Reserve chief Alan Greenspan (once dubbed the 'Maestro', though strangely enough, not any more), investment became a big game of 'spot the next bubble'.

...

Is smart grid the next green-tech bubble? | Green Tech - CNET News

WASHINGTON--Here at a conference on the utility of the future, the starring players are Google, IBM, Cisco Systems, Intel, and smart grid start-ups. The reason? Data.

...

"I worry that there's so much money being sloshed around, whether it's venture capital or corporate or government money, that it will be spent inefficiently," she said during a panel. "The risk of a bubble is real."

...

fujisan's picture
fujisan
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Re: Daily Digest - June 26
yoshhash wrote:

Or better yet, only give a second marshmallow to the kids who ate the first. Then, send the results of the experiment to Bernanke, et al.

To better reflect the actual Bernanke, et al experiment : rob the kids who didn't ate their marshmallow and give 10 extra marshmallows to those who ate them.

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