Daily Digest

Daily Digest - June 4

Friday, June 4, 2010, 10:46 AM
  • No-Thrills Thursday - Where’s the Kaboom?
  • Into the Abyss: The Cycle of Debt Deflation
  • Hungary in ‘Grave’ State, Official Says; Forint Falls
  • U.S. Fears Pakistani Outages Give More Power To Militants
  • Model Suggests Slick Could Zoom Up East Coast
  • Salmon Study Pits Fish Against Alaskan Mega-Mine

Economy

No-Thrills Thursday - Where’s the Kaboom? (Ilene)

OYG was a complex spread from our 12:50 Alert to Members with a max profit at $55 but STP was a very simple, VERY bullish play where we bought the $9 calls for $1 and sold the $9 puts for .47, for a net .53 entry and no limit to our upside over $9. Even if your margin requirement is 50% on the puts, you can pick up a single contract spread like this for $497 in buying power and your risk is being assigned the stock at net $9.53 but a move over $10 nets you a 10% gain in one day. As long as you don’t mind owning the stock on a move down, these are fun earnings plays to make…

Into the Abyss: The Cycle of Debt Deflation (mhoop)

A variety of positive economic data has been reported in recent months. Retail sales rose 0.4% in April 2010 as consumer spending rose and the US gross domestic product (GDP) grew at a rate of 3%. In May 2010, home sales rose to a five-month high and consumer confidence rose 17% (from 57.7 to 63.3). Industrial production rose 0.8% and durable goods orders rose 2.9%, more than had been forecast. However, the modest gains reported represent the continuing adaptation of economic activity at dramatically lower levels compared to the pre-recession period and most of the reported gains have been substantially manufactured by massive government deficit spending.

Hungary in ‘Grave’ State, Official Says; Forint Falls (txfloods)

Hungary needed a 20 billion-euro ($24 billion) international bailout to avert a default in 2008. Orban, who took over May 29 after winning elections by pledging to cut taxes and stimulate the economy, yesterday failed to get European Union approval for looser fiscal policy.

Energy

U.S. Fears Pakistani Outages Give More Power To Militants (Nickbert)

The shortfall is estimated at 4,000 megawatts, one-fourth of maximum capacity, and practically no one in the nation of 180 million can escape the outages. They disrupt the workday. They shut down fans and air conditioning. Urban dwellers often return to a dark home, unable to watch a cricket match on TV or have a cold drink. The blackouts are even worse in villages. The summer, when temperatures can reach 122 degrees, has only just started, and already rallies against blackouts are drawing hundreds of protesters. Some have turned violent, with cars and property destroyed.

Environment

Model Suggests Slick Could Zoom Up East Coast (Nickbert)

New supercomputer studies suggest it is "very likely" ocean currents will carry oil from the Deepwater Horizon spill in the Gulf of Mexico around the tip of Florida and thousands of miles up the U.S. East Coast this summer, researchers announced Thursday.

Salmon Study Pits Fish Against Alaskan Mega-Mine (Nickbert)

An Alaskan bay bitterly contested by fishermen and miners has become the site of a landmark study on population dynamics — and the findings favor the fish.

Published June 2 in Nature, the analysis of Bristol Bay salmon quantifies a common-sense tenet of population dynamics: Diversity produces resilience. Had the proposed Pebble Mine been built in earlier decades, it’s possible the bay’s sockeye salmon fishery — the world’s largest, worth more than $100 million annually — might not exist today.

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16 Comments

saxplayer00o1's picture
saxplayer00o1
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Re: Daily Digest - June 4
 

"June 4 (Bloomberg) -- Gold sales to Europe from the Perth Mint surged in May as the Greek sovereign-debt crisis triggered a flight to haven investments, draining stockpiles at the producer of 6 percent of the world’s bullion. "

"June 4 (Bloomberg) -- Sales of U.S. corporate bonds fell 53 percent this week and issuance of high-yield company debt halted on sustained concern that the sovereign debt crisis in Europe may slow global economic growth."

"Gov. Paterson warned this morning that the state might have another $1 billion budget headache on its hands.Paterson, during his weekly appearance on WOR's "The John Gambling Show" said the federal government has yet to approve the additional Medicaid - or FMAP - money that the state is counting on to help balance its budget."The federal government in the tax bill last week did not pass the FMAP money, which is Medicaid money," Paterson told Gambling. "If New York doesn't get that money, our deficit is going to balloon from $9.2 billion to $10.2 billion.""

............................3A) City, State Brace For Funding Shortfall (New York....News video......Up to 10,000 layoffs)

.............................3B) Nonprofits Lose Funding (NY)

..............................3C) At State Budget Meeting, Mayor Warns of 10000 Layoffs (NY)

"June 3 (Bloomberg) -- U.S. states reduced spending for a second consecutive year as the worst U.S. recession since the 1930s cut tax revenue, a survey by two associations found.

Governors may struggle to raise spending in fiscal 2011, which begins July 1 for 46 states, as they close deficits without the aid of federal stimulus money that runs out this year, the report by the National Governors Association and National Association of State Budget Officers said.

States will have dealt with $296.6 billion of budget deficits from fiscal 2009 to 2012, covered in part by $135 billion of federal money received under stimulus legislation, according to the groups. Governors still face $127.4 billion of deficits for the rest of fiscal 2010, 2011 and 2012."

..............................4A) Text: Fiscal Condition Of US States Continues To Deteriorate

"LONDON—The cost of insuring debt issued by European sovereign borrowers rose Friday as a weaker euro, speculation in the market about losses at French banks and concerns about Hungary added to persisting doubts over economic recovery in Europe.

While Spain has taken a beating lately, investors also appear to be taking their frustration out on stronger euro members like Italy and even France—Europe's second-biggest economy after Germany. French banking giant Société Générale Friday was hit by rumors of losses tied to derivatives, which has sent its stock plummeting."

"INDIANAPOLIS – State tax collections continued to lag projections in May, bringing the budget deficit to more than $1 billion.

That means tax revenue has come in $1 billion short of the spending levels passed in the budget for the current 2010 fiscal year.

“Despite actions to reduce budgeted spending, the state’s reserves were once again drawn down further this month,” State Budget Director Chris Ruhl said. “Without the necessary spending reductions ordered by (Gov. Mitch Daniels), Indiana would be broke like so many other states with no remaining options other than raising taxes."

"June 3 (Bloomberg) -- Connecticut, the state with the highest tax-supported debt, had its bond rating lowered one level to AA by Fitch Ratings as it prepares to borrow money to cover a budget deficit for a second straight year.

The state, whose residents are the wealthiest in the U.S., relies “on borrowing to address its ongoing fiscal challenges in the context of already high liabilities and large projected structural gaps,” Fitch analysts Doug Offerman and Laura Porter wrote in a press release today. The analysts didn’t immediately return calls seeking comment.

Connecticut is preparing to borrow $956 million to close a budget gap in the fiscal year beginning July 1, after borrowing money last year to cover a deficit of $947.6 million, the analysts said. Lawmakers also chose to draw down the state’s rainy-day fund and raise the top income tax for residents after tax collections fell almost 15 percent in the year ending June 30, 2009, according to Fitch."

"June 4 (Bloomberg) -- Hungary’s economy is in a “very grave situation,” a government official said, adding to concern about Europe’s sovereign debt crisis, hurting U.S. stock futures and sending to forint to a 12-month low.

“It’s clear that the economy is in a very grave situation,” Peter Szijjarto, spokesman for Prime Minister Viktor Orban, said today in Budapest. “I don’t think it’s an exaggeration at all to talk about a default.”"

...................8A) Hungary Warns About Deficit

"The European Commission on Thursday urged Hungary to cut its budget deficit faster as the government warned that its 2010 fiscal deficitfiscal deficit may reach almost twice the target agreed with lenders including the EU."

.....................8B) Sovereign Credit-Default Swaps Surge on Hungarian Debt Crisis

.....................8C) Hungary's Forint Weakens to 12-Month Low; Bonds, Stocks Plunge

"QUINCY, Ill. — Adams County officials said Thursday they have had to eliminate programs, including those meant to prevent domestic violence and teen pregnancy, because the state of Illinois isn't paying its bills on time. "

""The question I posed to my Board of Health was: 'Do you want to continue to do business with the state of Illinois?' And over a period of five months they came to the answer of 'no,"' Bluhm said. "We're telling the state of Illinois, we're not going to do business with them."

The state government is struggling with a $13 billion deficit, including roughly $6 billion in overdue bills from organizations that provide services on the state's behalf. Many groups have already cut jobs and reduced services. "

"Reuters) - Sanctions for violators of European Union budget rules may be a good idea for euro zone members, but should not apply to countries like Britain that have their own currency, Foreign Secretary William Hague said on Thursday."

"Britain's budget deficit is running at around 11 percent of Gross Domestic Product, a similar level to that of Greece."

"Miami, already eating away at its rainy day fund to keep the budget afloat, now confronts a $100 million deficit for 2011 -- a gap likely to force a choice of steep salary cuts, more layoffs or additional fees levied on already stressed taxpayers.

City Manager Carlos Migoya's deficit projection ballooned this week with the release of property tax revenue numbers from the Miami-Dade appraiser's office.

The city, which was anticipating a deficit of $86 million for next year -- in large part due to decreased property values and escalating pension costs -- was told its property values dropped by more than 15 percent from a year ago. That factors into an additional $13.6 million in lost revenue.

Miami's reserve fund, which by law should hover at nearly $80 million, has fallen to $39 million from a high of $141 million less than a decade ago. The figure could dip further to cover lawsuit costs and back taxes before the city closes its books at the end of September, said Commission Chairman Marc Sarnoff.

``We're one hurricane away from what?'' Sarnoff asked. ``Closing the doors.''"

"NEW YORK, June 3 (Reuters) - The pace of U.S. bankruptcy filings edged up in May to the second-highest daily level since 2005, reflecting the difficulty Americans have in working off excess debt even as the economy improves.

There were 133,459 U.S. bankruptcy petitions filed in May, 10 percent more than a year earlier, according to preliminary data released Thursday by Automated Access to Court Electronic Records, or AACER.

While filings fell 9 percent from April's 146,209, this was because there were just 20 business days in May compared with 22 in April. Average filings per day edged up to 6,673 from 6,646."

"Baltimore’s police and firefighting unions are suing the city for breaking its commitment to paying their pension benefits.

The City Council is currently considering changes to the amount public safety officials contribute to their pensions, and changes to who qualifies for pension benefits. That’s because the pension system is on pace to run out of money, despite its obligation to fulfill the pensions of thousands of current and former city employees.

The city is grappling with a $121 million budget deficit and trimming how much it spends on the pension benefits is among the proposals to help close the gap.

The pension fund paid out $184 million to nearly 6,000 fire and police department retirees and their families in fiscal year 2009.The lawsuit argues that the city has rendered the pension system “grossly underfunded and actuarially unsound.”"

"The latest report from the Santa Clara County Civil Grand Jury concludes that employee costs for the county's 15 cities continue to grow at an unsustainable rate, while cities make up for it with service cuts and employee layoffs.

"In order to attract qualified workers during the dot-com boom, the cities, flush with revenue, increased wages and benefits, especially pension benefits, with unrealistic expectations that the economy and the stock market would continue to expand. These increases are largely guaranteed by union collective bargaining agreements," the report said.

But now tax revenues are decreasing and cities are using their reserves and cutting services to keep up with rising employee costs, the report said.

"Wages and salaries climb, even as the economy struggles," the report reads.

"Pension and health care benefits have risen substantially since 2000. Vacation, holiday and sick leave policies are overly generous and exceed those of private industry. Cities need to negotiate, approve and implement considerable cost containment measures so that employee financial obligations do not continue to escalate.""

"Mackinac Island (WWJ) -- The budget battle in Detroit continues, as City Council plans to override Mayor Dave Bing's budget veto.

Speaking with WWJ's Vickie Thomas and other reporters at the Mackinac Policy Conference, Bing said bankruptcy is still on the table, and the override vote wouldn't do the city any good."

"June 4 (Bloomberg) -- Calpine Corp., the largest U.S. generator of natural-gas-fueled electricity, and at least five more borrowers are being forced to boost interest rates on proposed loans after the market’s worst month since 2008.

The margin Calpine offered to pay over lending benchmarks for a $1.3 billion loan increased by as much as 2 percentage points to 5.5 percentage points, while the remaining companies had to raise rates from 0.75 percentage point to 4.5 percentage points, according to people familiar with the talks who declined to be identified because the terms weren’t set. For Houston- based Calpine, that’s an extra $26 million a year in interest."

"BEIJING, June 4 (Reuters) - Chinese exporters who made a big push only a year ago to bill in euros are increasingly turning their backs on the wounded European currency and demanding dollars instead.

By contrst, Beijing last week said a report it was reviewing the euro portion in its mountain of foreign exchange reserves was groundless and it calmed markets by saying that Europe remained a key investment market."

  •  Other news and headlines:

Japan May Spark Next Sovereign Debt Crisis, Kusano Global Says

 Europe Faces Reckoning as Rescue Fails, Niagara Hedge Fund Says

 States Shrink 'Unaffordable' Benefits to Bridge $1 Trillion Gap

 Fed lends $6.64 billion in `swap' program

 Food crisis looms in India

 Romanian official warns 125000 public sector jobs need to go in 2011

 India Bonds Down On Inflation Worries, Pre-Debt Sale; Rupee Up

 Bonds would put the state in a deeper hole (N.C.)

 Property tax deferrals rise significantly (Canada)

 Sacramento proposes layoffs, fire station 'brownouts' to balance budget

 Belgian, French Yields Versus Bunds Climb on Contagion Concern

 Fears grow over pension shortfall (UK)

 4-day school weeks gain popularity across US

"Longer-term Issues for America Are Really, Really Serious," Bishop Says (Tech Ticker video)

Waterfront Homes Auctioned At Up To 75 Percent Off

Young Greeks Mull Emigration, Ask Parents for Help, Poll Shows

=========================================

From Nathan's Economic Edge:

"One thing’s for certain, the market is not buying into the Employment Situation Report. In fact, it’s a confidence losing event. The headline numbers? We added 431,000 “jobs,” and the advertised unemployment rate fell to 9.7 trumped-up percent. The Reality? We LOST massive jobs when you remove temporary Census workers and birth/death model false jobs. And the market finally gets it – Obama’s great jobs report isn’t really great at all, in fact it flat out missed the boat.

This report is 110,000 below consensus expectations and the prior two months were revised downwards. But if that’s not bad enough, get a load of the business “birth/death” adjustments for May – 215,000 “workers!”"

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Re: Daily Digest - June 4

God bless the Hungarians.  They get it.  To survive, enterprise must survive.

What they must do now to save themselves is default on any non  Forint denominated debt.  Those on the outside of Hungary do not deserve to strip the country of assets to get their debts paid.  They probably need to default on other forms of government debt to get their budget in line.  Outside debt and asset stripping led to Weimar.  The Hungarians have a more recent memory of hyperinflation when the Communists took over.  Their hyperinflation was evern more severe.

 

 

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Sometimes being "the least heinous" is good enough...

Euro has now dipped under 1.20.  Dollar index up 10% in the last weeks.  It brings on cognitive dissonance to think that people across the planet are running to the US$ in a flight to "safety"...  I'll be thankful while for as long as our "strong"  "recovery" lasts, but man oh man is it a strange time to be alive (and aware).

Viva -- Sager

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Re: Sometimes being "the least heinous" is good enough...
Sager wrote:

Euro has now dipped under 1.20.  Dollar index up 10% in the last weeks.  It brings on cognitive dissonance to think that people across the planet are running to the US$ in a flight to "safety"...  I'll be thankful while for as long as our "strong"  "recovery" lasts, but man oh man is it a strange time to be alive (and aware).

I'm with you Sager!!  It feels like I'm living in an alternate universe from everyone around me! 

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Re: Daily Digest - June 4

Anyone want to make guesses as to how far off (days, weeks, months) we are from a major crash of at least another 1,000 to 2,000 points on the Dow?

Poet

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Re: Daily Digest - June 4

Anyone want to make guesses as to how far off (days, weeks, months) we are from a major crash of at least another 1,000 to 2,000 points on the Dow?

Not me.  There are way too many variables to make an accurate estimate.  The next crash will happen when there is some sort of loss of confidence -- and trying to predict that aspect of human behavior is really, really hard to do, given the huge amount of denial that exists out there.

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Re: Daily Digest - June 4

Hi Poet...I'm betting by the end of the summer/beginning of fall.

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Re: Daily Digest - June 4
lwb0706 wrote:

Anyone want to make guesses as to how far off (days, weeks, months) we are from a major crash of at least another 1,000 to 2,000 points on the Dow?

Not me.  There are way too many variables to make an accurate estimate.  The next crash will happen when there is some sort of loss of confidence -- and trying to predict that aspect of human behavior is really, really hard to do, given the huge amount of denial that exists out there.

IMO it'll be when some non-market-related event occurs (terror?  hurricane?  Brewers win the World Series?) and that'll crystallize investors' vague feeling of unease and POW.  

Of course, as I noted in the "Coffee Talk" thread, I am a pundit whose unreliability approaches infinitude.  The next crash therefore will be brought on by Conan O'Brien's repeated use of the word "extemporaneous" in his "Legally Prohibited from Being Funny on TV" tour/show.

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Re: Daily Digest - June 4

 POET ,   Is it a pool  ?    My  uneducated bet is   Sept. 8th  .    Best get my butt off here and get busy Wink 

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Re: Daily Digest - June 4

Well, my uneducated guess would be, a crash of 2000 points on the dow is not something even the man behind the curtain could keep under control. If or when that happens the thing that we call volatility now, will look like a charming breeze. Psychologically speaking, any numbers in the thousands or ten-thousands is useless to the press, those low numbers don´t sell papers nowadays. Millions was yesterday, billions is now, but it really is trillions that tickle the fancy nowadays!! Now, 2000 points loss on the dow is big news for the insider because he understands what that means. To the public the number of -2000 will mean nothing. it will read like,  some f....n bankers gets scre..d, so it´s a good thing.

From that point on we will learn what volatility really means and it´s not gonna be month´s, it will be days `till we worry about where to buy the milk....

 

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Re: Daily Digest - June 4

Poet,

I'm with lwb0706 on 'confidence loss' being the key and being hard to predict.  However..... this is just my gut instinct, but something tells me the escalating situation with the Gulf oil spill will be the final straw to trigger a major loss in confidence and the next step down.  Namely, once the oil starts significantly spreading up the East Coast and into the Atlantic.  This video simulation has been widely circulated here and elsewhere as to a possible timeframe of the oil spreading out:

Around day 75 it spreads dramatically up the East Coast and by day 132 it has also significantly spread into the Atlantic.  We're on day 46 I think?  My hunch is that once the oil starts showing significant visibility and impact on the East Coast, that may represent the final straw.  So sometime between day 75 and 132... giving us between 4-12 weeks assuming the Gulf currents behave normally and that the oil spill isn't stopped in the next week (though something tells me too much has already leaked out for that to make a difference there). 

I thought about this quite a bit when I saw the video yesterday.  I made a promise to myself then to act as though I only have 30 days until a new economic crisis hits.... I've been making fair progress in my preparations and lifestyle changes thus far, but there is so much more I need to do.  If I end up being wrong about it, well I at least will have sufficiently lit a larger fire under my butt to undertake and address some of my unfinished tasks/projects, something that should serve me well whether I'm right or wrong about this. 

Anyway, something to think about. 

- Nick

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Re: Daily Digest - June 4

Nickbert,

 

be careful. the joke is, if you have a house on the waterfront you can use that extra oil for heating, plus the sardines are already oiled.

Don´t underestimate everyone´s will to keep up with what we all think is " normality". Nobody, I bet nobody is going out to protest just because something that looks like East Texas or Gulf One is beeing spilled on their beaches.

 

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Re: Daily Digest - June 4

mono,

Yeah, I know it's easily possible confidence in the economy can plod along and ignore the spill for many months, and if it had instead happened last summer I figure that would be a good probability.  But in the wake of the Euro crisis, prolonged high unemployment, and recent increasing tensions in the Middle East and Korean peninsula, I sense it will be harder for business, government, and the person on the street to pass it off as something that will come and go.  But as I said earlier, part of the reason I'm taking this hunch more seriously is because it helps keep me motivated in my preparations and long-term goals.  Stuff I meant to be doing by now anyway Wink

I do feel more confident though in saying that if the spread of the oil to the East Coast doesn't affect confidence in the markets in the next few months, the markets and economy will find it increasingly difficult to ignore the affected Gulf states' fishing/tourism economies sinking into ruin later in the year.  I remember how bad the Exxon Valdez spill affected people here in Alaska when I was a kid, and this looks like it could end up being several orders of magnitude worse.  Cry

- Nick

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Re: Daily Digest - June 4

Nickbert,

 

maybe your right and this one is too big to ignore.

Unfortunately i fear that Marc Faber may be right in predicting that Big Buisiness and Big Governement will not allow for any necessarey systemic adjustments because that would mean 2 things, 1) The mistakes they made in the past would become apparent. 2) They would lose power.

In order to shift public attention away from their own failure it´s more likely they will magnify a geopolitical conflict into a war. That maybe Korea or the middle east, it maybe Myanmar who´s currently making rounds by attempting nuclear status. If none of these is comfortable enough, I´m sure the guys at the CIA and the Pentagon already have some neat scenarios thought up in their think tanks.

Tiny book " The Spectacular Achievements of Propaganda" by Noam Chomsky and the 500 year old " Ill principe" by Machiavelli to me explain both beautifully how those things are done efficiently.

It`s certainly scary and I hope I´m wrong with beeing so critical about the people in the "driver seat".

I saw this presentation which was linked from here, where a guy talked about the united organisation of origins who would vote us humans of this planet. Sounded sane in comparison to what the news deliver nowadays.

 

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Signs of another collapse in equity markets

http://www.goldinvestor.com/articles/heading-down-very-hard.html

Quote:

First, let me share with you some indicators that the financial markets are about ready to implode and, I think, in the process lead the major equity markets down to test the March 9 lows. That means we should approach 6547.05 on the Dow. The question then will be whether we bounce off that low, as Bob Hoye thinks, or go straight through it, as Ian Gordon has suggested to me. I’m betting Bob is right on this one, although even he thinks it will be short lived and that over the next couple of years we will plunge well below 6,000 on the Dow. Only God knows, but I can’t personally see any way out of the disaster that Lord Keynes and his communist buddies in the Kremlin have created with their socialist-collectivist theories and the subsequent implementation of governments like the U.S., which is supposed to be free-market, private-property-loving, limited entities.

com_swap.jpgOkay. So what is telling me we are nearing another financial market implosion? I credit the Weiss Group and specifically Mike Larson for some tips that I think are 100% valid alert signals that cannot be ignored. In his May 28 missive, Mr. Larson noted three distinct warning signs, which, by the way, cemented the deal for me to personally increase my holdings of the Direxion Daily Financial Bear 3X Shares (NYSE-FAZ). 

First, Larson pointed out that the swap spreads have increased dramatically since they bottomed in April. This indicates that the cost to swap fixed-rate payments for floating rate payments based on floating rates in the derivatives markets has risen dramatically. What’s the big deal about that? Well, it means that banks are beginning to fear the solvency of other banks that are on the other side of the trade. When banks think that risk is rising they seek increased compensation to help offset anticipated losses, just as banks do with all loans they make. And who knows the banking business better than the banks themselves. When the temperature spikes up, as you see in the chart above, that may well be telling you the banking industry is again on the precipice of a nasty insolvency crisis once again. 

com_bank.jpgSecondly, Larson has pointed to the sharp rise in LIBOR rates. When credit markets function normally, short-term LIBOR tends to move in lockstep with the federal funds rate. But when they start going nuts, LIBOR costs rise as banks price in the risk that the guys they’re lending to won’t be able to pay them back.

The rate of 3-month LIBOR in the chart on your left has more than doubled since early this year, to 0.54%, which is still low by historical comparisons. But it comes at a time when policymakers are doing all they can to keep market rates low by pumping huge amounts of money into the banking system. Yet the market is saying those policies are not working. Despite monetary stimulus, rates are rising. It is not the rigged rates by government but the market rates that are rising. So using the LIBOR thermometer, we have another indication of a sick financial system in our midst.

The third item mentioned by Mike Larson was the credit default swap market. That is a market where financial market players sell insurance against credit risk. A rising insurance premium not surprisingly indicates rising perceived risk by those providing the insurance. Larson points out that in January an investor would have had to pay a $76,000 insurance policy to protect himself against a risk of default on $10 million of investment-grade corporate bonds. So we are not talking about junk bonds here. We are talking about what is considered to be relatively strong corporate credit. But the shocking fact is that now, that same investor would have to pay $131,000 to protect himself against the potential failure of an investment-grade corporate bond obligation.

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Re: Daily Digest - June 4

For Saturday morning. A repost by someone of this info would be great when the DD is posted, since my day starts too early to stick around.

 

"June 4 (Bloomberg) -- Unemployed Americans are facing the longest wait on record to find work, a sign faster economic growth is needed to reduce the jobless rate from close to a 26- year high.

The average duration of unemployment jumped to 34.4 weeks in May from 33 weeks the prior month and 16.5 weeks in December 2007, when the recession began, a Labor Department report showed today in Washington. The number of unemployed has almost doubled to 15 million since the start of worst slump since the 1930s."

......................1A) Series: UEMPMEAN, Average (Mean) Duration of Unemployment (Graph...starts in 1948)

"NEW YORK (MarketWatch) -- They say that bad things come in threes, and in the past decade investors have seen two market bubbles burst. Now some money-managers believe a third downturn is in the making -- in bonds.

And just as the previous losses were made worse by investors rushing headlong into assets that showed signs of overheating, bond prices are being inflated by investors pouring cash in at record rates. "

"The cost of insuring debt issued by European sovereign borrowers rose Friday as a weaker euro, speculation in the market about losses at French banks and concerns about Hungary added to persisting doubts over economic recovery in Europe.

While Spain has taken a beating lately, investors also appear to be taking their frustration out on stronger euro members like Italy and even France—Europe's second-biggest economy after Germany.

Budget deficits in France and Italy are small compared with those in Greece and Ireland—and possibly Hungary, which isn't a euro-zone member. But the derivatives market is growing concerned regardless as European debt jitters persist. It now costs $290,000 a year to insure $10 million of Italian government bonds against default for five years, up from $237,000 on Thursday, according to data provider Markit."

CDS

"New Delhi, June 5 (PTI) Gold prices today jumped Rs 430 to an all-time high of Rs 19,070 per ten grams in the bullion market here as investors rushed for the metal, considered as a safe bet, after global equity markets crashed on concerns over worsening eurozone debt crisis."

"Falling stock markets in May sent pension plan assets lower, resulting in the worst funded status for the typical U.S. corporate pension plan since October 2009, according to monthly statistics published by BNY Mellon Asset Management. The funded status in May declined 4.3 percentage points to 82.0 percent.

Through the end of May, the funded status of the typical U.S. corporate plan is down 3.5 percentage points for the year.

The falling stock markets resulted in a decline of 4.8 percent in assets at the typical U.S. corporate plan, while liabilities were little changed in May, rising 0.3 percent, as reported by the BNY Mellon Pension Summary Report for May 2010. Plan liabilities are calculated using the yields of long-term investment grade corporate bonds. Lower yields on these bonds result in higher liabilities. "

"June 5 (Bloomberg) -- Three banks with total deposits of almost $2.3 billion were seized by regulators amid losses stemming from soured real-estate loans, raising to 81 the number of U.S. lenders that have collapsed this year.

Banks in Nebraska, Mississippi and Illinois were shut yesterday, according to statements on the Federal Deposit Insurance Corp.’s website. The failures drained $313.6 million from the FDIC’s deposit-insurance fund."

"NEW YORK (CNNMoney.com) -- Taxpayers have lent AIG $132.6 billion, but getting that money back is looking less likely.

The sale of AIG's Asian life insurance unit for more than $35 billion would have helped a lot, but the deal went bust this week when the buyer, Prudential PLC, sought a lower price."

"SPRINGFIELD — At least one bond rating agency is taking notice that Illinois lawmakers and Gov. Pat Quinn did little to fix the state's finances this year.

On Friday, Moody's lowered Illinois' bond rating down one notch to A1 in reaction to the failure of lawmakers to address the state's long-term structural budget woes.

"We view the failure to enact significant new recurring fiscal measures as a troublesome indicator with respect to Illinois' governance and management profile," Moody's said.

Although the rating service said Illinois' outlook is stable because it can raise taxes and cut spending, it warned that recent budgeting failures don't bode well for the future.

"The longer the solutions to the state's challenges are deferred, the more difficult they will become to implement," Moody's said."

"Wisconsin continues to borrow federal money at a record pace to help offset shortfalls in the state's unemployment fund.

Officials with the state Department of Workforce Development confirmed Friday that Wisconsin's unemployment debt has reached $1.42 billion, putting it on pace to surpass a dubious state record set more than 30 years ago.

In 1982, the state borrowed $988 million from the federal government to help pay jobless claims, an amount that equals about $2.1 billion in today's dollars. That was the only other time Wisconsin has borrowed federal money to help pay for unemployment.

Wisconsin's current unemployment fund faces a projected deficit of nearly $2.9 billion by the end of 2011 — more than twice the amount forecast last year."

"June 4 (Bloomberg) -- Interest rates on adjustable-rate municipal bonds guaranteed by BP Plc have risen as much as 10- fold on concern that cleanup and litigation costs related to the Gulf of Mexico oil spill will further damage its credit rating.

Yields on $288.5 million of floating-rate debt issued by a Lincoln, Nebraska, municipal gas utility and guaranteed by BP rose to 5 percent on June 2 from 0.5 percent last week, Municipal Securities Rulemaking Board data show. Bonds issued to finance sewage and solid-waste disposal facilities at BP’s U.S. refineries and chemical plants rose to 2.7 percent from 0.27 percent in the same period. BP backs more than $3.5 billion of U.S. municipal obligations, according to data compiled by Bloomberg.

“Money-market funds don’t want to be near anything that feels like it’s toxic,” said Matt Dalton, chief executive officer of Belle Haven Investments Inc."

"CalSTRS postponed a decision Friday on reducing its forecast of investment returns, deferring a delicate question that could cost taxpayers hundreds of millions of dollars at a difficult time politically.

The board of the California State Teachers' Retirement System wasn't willing to approve a staff recommendation to cut the pension fund's official forecast a half point, to 7.5 percent a year."

.................11A) On The Money: Troubled Teachers Fund (CalSTRS underfunded by $60 billion)

"SAN CARLOS, Calif. -- Caltrain has declared a fiscal emergency, which will allow the agency to raise fares and cut service.

Board officials also discussed Thursday the possibility of the railroad shutting down in 2012 if they can't resolve its budget problems - projected to be a $36 million deficit for the next fiscal year"

 

 

 

Flint City Councilman Scott Kincaid: City could use bond to help pay for Genesee Towers (Bankruptcy?)

May Was Hedge Funds' Worst Month Thus Far In 2010

US's $13 Trillion Debt Poised to Overtake GDP: Chart of Day

Gulf states spending $50 billion to increase oil output

France losing Africa to China

Talk of Hungary default "wildly exaggerated" - EU

IRS Audits Send Chill Through Build America Program

Public debt surges by Rs883bn to Rs8,160bn in nine months (Pakistan)

107000 Floridians lose jobless checks today

700 CPS teachers receive layoff letters (Chicago)

Goldman bet $35m against California

Fitch: Delinquent commercial loans rose in May

Moody's: Offshore drilling insurance rates to jump

Cincinnati 2011 Budget Deficit Estimated At $50 Million

Emerging-Market Debt Falls On Hungary Woes, Weak US Jobs Report

U.S. Banks' Foreclosure Holdings Increased 12.5% in Q1: Report

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