Daily Digest

Daily Digest - June 29

Tuesday, June 29, 2010, 9:49 AM
  • Why We Are Totally Finished
  • Jim Sinclair: Debt Crisis Cannot Be Manipulated Away
  • Spanish Banks Rage At End Of ECB Offer
  • Refineries Process 7.7% More In May, Crude And Gas Output Up
  • Preparing for Next Big One
  • Wichita Water Supply Lines Are At Their Limit
  • State Ends Funds For Funerals Of Poor
  • BP Discussing a Backup Strategy to Contain Oil
  • Alex to Become Hurricane as Swells Reach Gulf Spill
  • Gulf Coast Beach Clean-Up Crew Hiring Remains Murky As Oil Keeps Washing Ashore


Why We Are Totally Finished (Davos The Narcissist)

Capitalism is what we should be relying on to fix our problems. Capitalism has it's own ecosystem, just like biology's ecosystem. An economic ecosystem that weeds out the weak, has parasites that eat the failures and new bacteria that evolves and grows replacements for that which failed. A system that keeps everything in balance.

The problem is we are no longer a capitalistic society. What we were taught in school is now utter and absolute nonsense. Capitalism is a thing of the past.

Jim Sinclair: Debt Crisis Cannot Be Manipulated Away (Davos)

If the market for gold had not done its runaway/runaway common to overleveraged long morons, it would have broken out of the neat cup and handle formation going on to $1650. It will definitely break out of that formation.

The short term bullies that manipulated today’s market cannot manipulate the reality of the debt crisis away.

Spanish Banks Rage At End Of ECB Offer (Anton95)

Banks across the eurozone, but in Spain in particular, have found it hard in recent weeks to secure liquid funding in the commercial markets, with inter-bank funding virtually non-existent.

The €442bn ECB facility, which charges interest at a rate of 1 per cent, is not set to be renewed, something that banks in Spain and elsewhere in Europe say ignores current commercial realities.

Refineries Process 7.7% More In May, Crude And Gas Output Up (Deepak)

According to a data released by the Petroleum Ministry, the 17 public sector refineries processed 6.7 per cent more crude oil during the month at 9.37 million tonne year-on-year. The private refiners – Reliance and Essar Oil Ltd – processed 10 per cent more crude at 4.383 million tonne in May.

The 17 PSU and two private sector refineries (data of Reliance Industries' second refinery at Jamnagar is not available) in May operated at 104.2 per cent capacity.

Preparing for Next Big One (jdargis)

In those giddy years before the Great Recession, it seemed as if we had grown accustomed to the wild ride. Wall Street certainly had. Jamie Dimon, the chairman and chief executive of JPMorgan Chase and Company, likes to say that when his daughter came home from school one day and asked what a financial crisis was, he told her: ‘It’s the kind of thing that happens every five to seven years.’

Wichita Water Supply Lines Are At Their Limit (Steve M.)

But its aging and underdeveloped infrastructure can process and deliver only a bit more than half of that — 130 million gallons a day. That's not enough to meet demands of the city in a long, dry summer, much less during a prolonged drought.

State Ends Funds For Funerals Of Poor (Steve M.)

Starting Thursday, Kansas will no long help pay to bury people whose families can't afford funeral expenses.


BP Discussing a Backup Strategy to Contain Oil (jdargis)

Kent Wells, a BP senior vice president in charge of subsea containment and capping efforts, said Monday that the first relief well was “progressing very well” and on target to intercept the runaway well more than three miles below the surface of the gulf.

“It’s not a matter so much of if, as when,” Mr. Wells said of the effort, which will involve pumping heavy mud and cement through the relief well into the damaged well to plug the damaged well permanently.

Alex to Become Hurricane as Swells Reach Gulf Spill (VeganD)

A hurricane warning was issued for the coast of Texas near Padre Island to the mouth of the Rio Grande and south of the Mexico border to La Cruz, the hurricane center said. The storm will intensify and turn more to the northwest today, moving further from the oil spill, it said. BP Plc said efforts to contain the spill may be disrupted as weather conditions worsen.

Gulf Coast Beach Clean-Up Crew Hiring Remains Murky As Oil Keeps Washing Ashore (VeganD)

Dauphin Island, a fish-shaped sliver of land at the southwest end of Mobile Bay, is home to about 1,300 permanent residents, vacation homes, and the businesses that cater to them. The day I'm there, many of the shops and restaurants are closed. Oil began washing ashore here in early May. There's no boom along the water line and little visual evidence of oil now except small tar balls. BP has a claims office here, and Catholic Charities is offering qualifying residents emergency gas and electricity assistance.

Please send article submissions to: [email protected]


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Re: Daily Digest - June 29

"The budget skips a $3 billion contribution to the state pension system, for example, and saves $848 million over last year by suspending property tax rebates."

...........................1A) Business news in brief (NJ....From June 24)

"New Jersey's public pension system for about 800,000 teachers and public employees is underfunded by $174 billion, more than triple what the state tells investors in bond documents, a George Mason University report says."

"June 29 (Bloomberg) -- Spanish Finance Minister Elena Salgado said she hopes the European Central Bank is aware of lenders’ cash needs as the ECB’s first 12-month loan expires.

Banks on July 1 need to repay 442 billion euros ($540 billion), the biggest amount ever awarded by the ECB and a key plank in its efforts to fight the financial crisis last year."

........................2A) Strikes hit Greece and Spain as ECB deadline looms

........................2B) Subway strike leads to transport chaos in Madrid

"An overlooked fiscal crisis looms: the depletion of the trust funds out of which states pay unemployment benefits. As of June 24, unemployment insurance (UI) trust funds in 30 states and the Virgin Islands were insolvent, requiring loans from the federal government totaling over $38 billion. The Department of Labor expects that as many as 40 states will require federal loans in fiscal 2013, with borrowing totaling $93 billion. This amount is above and beyond the $130 billion in additional federal spending on unemployment benefits in the current economic cycle.

To put these amounts in context, the federal government will loan more to the states than the stimulus bill provided for Medicaid. From a different angle, the $93 billion in projected loans is less than the rescue package that European nations and the International Monetary Fund provided to Greece ($146 billion), but federal spending to extend UI benefits since July 2008 has already exceeded $131 billion, and the net federal spending in this area far exceeds the Greek bailout."

"June 29 (Bloomberg) -- New York’s Metropolitan Transportation Authority, which eliminated two subway lines and cut bus service to save money, plans to sell $600 million in bonds as it grapples with an $800 million spending gap.

The largest U.S. transit system’s yield premium has surged 24 percent since April 1 while subsidy payments were delayed as the state operated without a budget, and a payroll tax and dedicated real-estate levies produced less revenue than forecast."

"For at least 30 cash-strapped states counting on federal stimulus money, the news was a stunning blow: A deficit-weary Congress had rejected billions in additional aid, forcing lawmakers into a mad scramble to balance their budgets.

Now, with a new fiscal year just days away in most states, many governors are proposing to make up for the shortfall with tax increases, cuts in essential services and potential layoffs of thousands of public employees.

"I support restraining federal spending, but cutting the only funding designed to help states maintain the very safety-net programs Congress mandates us to preserve will have devastating consequences," California Gov. Arnold Schwarzenegger said in a letter to his state's congressional delegation.

California faces a whopping $19 billion deficit — more than 20 percent of the state's total budget — despite deep cuts that have already been made to many programs. Its new fiscal year begins July 1, and a budget deal there is nowhere in sight."

"As the GSEs and other federal agencies involved in housing finance sell their collective inventory of repossessed homes, they will generate significant pressure on prices, according to a new report from the real

estate analytics firm Radar Logic. And with an even larger share of government-backed loans in the delinquency pipeline, their influence over home prices could last for years, the New York-based company says.

Based on Radar Logic’s analysis, the federal government’s REO inventory — including homes owned by Fannie Mae, Freddie Mac, HUD, and the Department of Veterans Affairs (VA) — has increased steadily for over 24 months and now accounts for approximately 46 percent of the nation’s total REO supply.

Looking at information from the GSEs and HUD, Radar Logic says the government currently owns 209,500 homes as a result of foreclosure, and the company estimates there could be an additional 9,560 homes held by the VA, for a total of 219,060 government-owned foreclosed homes.

In addition to the glut of homes already tagged as REOs, there is a growing number of non-performing loans soon heading for foreclosure that will raise the government’s stake in distressed property ownership significantly.

According to estimates by Zillow and Lender Processing Services, 2.3 million U.S. homeowners are 30 to 90 days delinquent on their mortgages. Based on data from the U.S. Treasury Department, Radar Logic estimates that 69 percent of these mortgages are owned or guaranteed by the GSEs, the FHA, or the VA."

  • Other news and headlines:

Insurer Aflac offloads Greek bonds at 75 cents

Europe weighing capital injections for banks: report

IMF chief says would consider yuan for SDR basket

ECB Covered-Bond Purchases Exceed Original Goal of EU60 Billion

BP Says Oil Spill Cleanup Operation May Be Delayed by Storm

Most Germans want to ditch the euro

700 Pink Slips For Wayne County Workers

Corporate Bond Risk Rises in Asia-Pacific, Credit-Default Swap Prices Show

Corporate Bond Risk Rises in Europe, Credit-Default Swaps Show

Commercial Mortgage Borrowers Fail to Retire Debts Even as Lending Rises

China's Stocks Decline Most in Six Weeks on Economy Concerns

Minn. strike would hit systems' bond ratings: Moody's

Another Lee County deficit looms; reserves in jeopardy (Florida)

Mt. Diablo School District facing state takeover (California...news video)

Illinois Borrowing $900 Million as Credit-Default Cost Doubles

Obama on faux deficit hawks: 'I'm calling their bluff'

Classrooms or Prison Cells? (California...notice the chart they put up)

Recession Warning (John P. Hussman, Ph.D)

U.S. consumer confidence plummets on job worries ("plummeted to 52.9 in June - the lowest level since March -- from a downwardly revised 62.7 in May.")

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Re: Daily Digest - June 29

There are even doomday bunkers being sold in CA for $50K per adult, pessissm may be overboard?

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Re: Daily Digest - June 29

Davos, as always thanks for the thoughtful and well written piece.

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Re: Daily Digest - June 29

Davos, as always thanks for the thoughtful and well written piece.

+1 really enjoyed the read!

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Re: Daily Digest - June 29

Can't get a loan recently - This may be the reason why                                 etfguide              

The chart below shows money on banks' balance sheets categorized as cash. More money for banks means less money for loans, which translates into lower consumer spending and business development. This ultimately results in a negative feedback loop.


The chart below shows money on banks' balance sheets categorized as cash. More money for banks means less money for loans, which translates into lower consumer spending and business development. This ultimately results in a negative feedback loop.


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Re: Daily Digest - June 29

Thanks 4 the kinds words!

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Re: Daily Digest - June 29

Davos, great articles!

I did try to submit them for you this AM -3 times!- but each time my e-mail came back with a "domain name unresolved" error or some such thing.  I had to give up and go to work. 

For those who aren't aware of it, Davos submitted ANOTHER article to FInancialSense a couple of days ago that I'm sure many here would be interested in.  It's entitiled "The Other Road To Hell: Inflation or Deflation?"  It is at:  http://www.financialsense.com/fsu/editorials/okst/2010/0626.html

Here's a clip:

“I'd add to the minority voice to the chorus already singing the road to Hell song. The one that says that it is paved with deficits and inflation wil come about as the direct result of a currency crisis.”

You go, Davos!

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the rot spreads to Australia

Homeowners 'living on rice' to pay mortgage

By Western Sydney reporter George Roberts


There are claims that Australians suffering mortgage stress are living on rice so they can avoid the shame of losing the family home.

In a study partly supported by the Reserve Bank, University of Western Sydney researchers interviewed people suffering mortgage distress.

University spokesman Professor Phillip O'Neill says shame prevented many people taking part in the study.

But he says of those who did participate, some had resorted to eating less so they could keep up with mortgage repayments.

"This is not in the past tense; people are literally eating the bare minimum - just rice - obviously looking after their children, but putting the repayment of the mortgage above every other thing that they could possibly devote an expenditure to," he said.

He says the Federal Government should be careful about overstating how easily Australia got through the crisis when so many people are still struggling.

But he says the drastic moves my some homeowners has helped prevent the kind of mass mortgage defaults seen in the United States, during the global financial crisis.

"If we did have large-scale defaulting in a neighbourhood in Australia, we would have a toxic affect spreading of negative equity and that would be alarming," he said.

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Re: Daily Digest - June 29

So, if we go into a deflationary depression, what are the consequences?  What will happen to the average joe?  Anyone want to tackle this one? 

I have my own ideas, but they're not worth listing due to the fact that they suck!  I may have gone to a nice, private university, but I can't write worth a damn!EmbarassedMoney mouth


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Re: Daily Digest - June 29

What will happen in deflationary depression ?

A deflationary period of time is necessary to offset the falsely inflated economy (through credit expansion) that we have had for years and years. But the TPTB will not allow the deflation to go too far. They will print more money to prop up the economy to creat dollar value and stability.

It is time to pay the piper, but we will see how that happens. A slow burn I would guess.

That is my view. I did not go to a private university. But I have decades of business retail experience....and I can surely say that consumerism has finally died. And I am not sad about it either.

This consumer driven economy of ours is toast.

So for now, America is for sale   50 -70 % off while supplies last.

Read the article by Davos.....I like the 5 G's !!


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Re: Daily Digest - June 29

In the 1930s they went deflationary. One thing that really stuck out is that farmers found it cheaper to plow crops under the ground than to harvest them, demand or lack thereof and gov. intervention to try to get prices back up by decreasing supply.

The result, people staved - to death.

Mish says gold will do well in a deflation. 

IMO I really don't see deflation as I consider inflation the amount of money/debt produced/out there. I see the result being a currency crisis. CM posted a good comment and I added to the Fiat Currency chart going to zip. I can see sectors deflating (housing etc.) but I can't see anything to protect the currencies. I doubt defaults will help them.

Just my 2 cents, sure shortly we will see how it plays out... Got that to look forward to.

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Re: Daily Digest - June 29

The forces of deflation seem to be much stonger than the forces of inflation at the moment but how long will it last?

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Morons on Parade

The morons are laughing all the way to the banks which they own. They are laughing all the way to Paraquay which they will soon own. They are laughing all the way to their keyboards where within  a few milliseconds the programs they have to trade on Wall Street will earn them millions a minute. They are laughing as they buy every resource known to man including water. They are laughing as they own ever more quantities of gold , silver and platinum. They are laughing as they but up every commodity and means of production.

The really funny thing is they are doing all this with the idiots money 


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Re: Daily Digest - June 29

Citigroup Trading Halt Triggered by New Circuit-Breaker http://www.cnbc.com/id/38000498

Citigroup shares were halted at 1:03 p.m. EDT on the New York Stock Exchange Tuesday after a trade of $3.3174, or 12.7 percent below the previous trade of $3.80 crossed the tape.

The stock drop triggered a new circuit breaker that the exchange adopted following the May 'flash crash' in which markets plunged out of control, the NYSE said.


[C  3.79    -0.21  (-5.25%)   ]

shares were halted for 5 minutes and reopened at $3.80, down 5 percent for the day.

The shares last traded down 5.5 percent at $3.78.

The stock specific circuit breaker, adopted earlier this month by all U.S. exchanges, halts S&P 500 stocks that move more than 10 percent within a 5-minute period.

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