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Daily Digest - March 1

Sunday, March 1, 2009, 9:59 AM
  • Jim Rogers Doesn't Mince Words About the Crisis
  • Cheery chart du jour
  • Blunt Honesty
  • Berkshire Hathaway, 2008 Worst Year in 44 Years
  • Buffett, Shambles 2009 AND WELL BEYOND
  • Economy moving in reverse faster than predicted
  • 1 in 10 Californians is out of work, worse in L.A. County
  • State Budget Troubles Worsen (Table of States in Article)
  • Bill Gross, the $747 billion bond man, declares the death of equities
  • Week # 9 Bank Failure # 16
  • FDIC Raises Fees but Does Not Extend Loan Guarantee Program
  • Zombie Banks I.V. Drip Capitalization
  • Open Secrets
  • The Smell Of Coffee
  • Lloyds 500,000 customers slip into negative equity
  • Antiquity realized that debts grow in excess of the ability to pay 
  • CIA and Pentagon Wonder: Could Mexico Implode? (Hat Tip Zombie210)
  • China signs $2 bln purchase deals with Britain (Hat Tip PineCarr)
  • Water 'more important than oil' businesses told (Hat Tip Zombie210)

Economy 

Jim Rogers Doesn't Mince Words About the Crisis 

In 1970 a young Wall Streeter named Jim Rogers hooked up with George Soros to start the legendary Quantum Fund. The ensuing decades have seen Rogers build an iconoclastic career as an author, adventurer, and creator of the Rogers International Commodities Index. And throughout, Rogers-now based in Singapore-has remained an outspoken global investor. Today is no different. He has harsh words for former Fed Chairman Alan Greenspan, suggests President Barack Obama and his economic team are not up to the task, and thinks tough love is the answer for America. 

MARIA BARTIROMO
What do you think of the government's response to the economic crisis?

JIM ROGERS
Terrible. They're making it worse. It's pretty embarrassing for President Obama, who doesn't seem to have a clue what's going on-which would make sense from his background. And he has hired people who are part of the problem. [Treasury Secretary Tim] Geithner was head of the New York Fed, which was supposedly in charge of Wall Street and the banks more than anybody else. And as you remember, [Obama's chief economic adviser, Larry] Summers helped bail out Long-Term Capital Management years ago. These are people who think the only solution is to save their friends on Wall Street rather than to save 300 million Americans.

So what should they be doing?

Cheery chart du jour

Blunt Honesty 

Buffett admits that "I made at least one major mistake of commission and several lesser ones that also hurt... Furthermore, I made some errors of omission, sucking my thumb when new facts came in that should have caused me to re-examine my thinking and promptly take action."

Berkshire Hathaway, 2008 Worst Year in 44 Years

Buffett, Shambles 2009 AND WELL BEYOND 

Feb. 28 (Bloomberg) -- Billionaire Warren Buffett said the economy will be "in shambles" for the rest of this year as financial firms take losses tied to reckless loans made during the housing boom. 

The Standard & Poor's 500 Index will probably gain in three quarters of the next 44 years, just as it did in the period since Buffett took over Berkshire Hathaway Inc. in 1965, he said today in his annual letter to the company's shareholders.

While Buffett and business partner Charlie Munger can't predict how stocks will perform in 2009, they're certain "that the economy will be in shambles throughout 2009 -- and, for that matter, probably well beyond," he wrote.

Gross domestic product shrank at a 6.2 percent annual pace from October through December, the most since 1982, the Commerce Department said yesterday in Washington. Buffett said the consequences of the U.S. housing bubble are now "reverberating through every corner of our economy."

Home purchases should involve an "honest-to-God down payment of at least 10 percent," Buffett said. "Putting people into homes, though a desirable goal, shouldn't be our country's primary objective."

Buffett endorsed efforts by the U.S. government to prevent the failure of financial firms including Bear Stearns Cos., which was sold to JPMorgan Chase & Co.

Economy moving in reverse faster than predicted 

WASHINGTON (AP) -- The economy is moving in reverse faster than the government can measure.

The contraction for the fourth quarter of 2008 had been estimated at
3.8 percent just a month ago. Then the Commerce Department raised it to
an astonishing 6.2 percent Friday -- the largest revision since the
government started keeping records in 1976.

That was the economy's worst showing in a quarter-century and
raised the prospect that the nation could suffer its worst year since
1946.

"Consumers are just hunkering down and saying 'game over,' and
businesses in response are cutting back on investment and employment,"
said Brian Bethune, economist at IHS Global Insight. "It's a negative
feedback loop."

1 in 10 Californians is out of work, worse in L.A. County 

Unemployment in California shot up to its highest level in nearly 26 years in January, leaving more than 1 in 10 workers without a job. 

Figures released Friday show that 79,300 jobs were lost in the state last month, bringing the total number of unemployed to 1,863,000, or 10.1% of the workforce. That's the highest since the rate touched 10.4% in 1983.

Conditions are even worse in Los Angeles County, which saw its unemployment rate jump to 10.5% in January from 9.2% the month before. 

State Budget Troubles Worsen (Table of States in Article)

States are facing a great fiscal crisis. At least 46 states faced or are facing shortfalls in their budgets for this and/or next year, and severe fiscal problems are highly likely to continue into the following year as well. Combined budget gaps for the remainder of this fiscal year and state fiscal years 2010 and 2011 are estimated to total more than $350 billion.

States are currently at the mid-point of fiscal year 2009 - which started July 1 in most states - and are in the process of preparing their budgets for the next year. Over half the states had already cut spending, used reserves, or raised revenues in order to adopt a balanced budget for the current fiscal year - which started July 1 in most states. Now, their budgets have fallen out of balance again. New gaps of $51 billion (over 10% of state budgets) have opened up in the budgets of at least 42 states plus the District of Columbia. These budget gaps are in addition to the $48 billion shortfalls that these and other states faced as they adopted their budgets for the current fiscal year, bringing total gaps for the year to 15 percent of budgets.

The states fiscal problems are continuing into the next two years. At least 45 states have looked ahead and anticipate deficits for fiscal year 2010 and beyond. These gaps total almost $94 billion - 16 percent of budgets - for the 36 states that have estimated the size of these gaps and are likely to grow as gaps are re-estimated in the next few months.

Figure 2 shows the size and duration of the deficits in the recession that occurred in the first part of this decade, and estimates of the likely deficits this time. This recession is more severe - deeper and longer - than the last recession, and thus state fiscal problems are likely to be worse. 

Week # 9 Bank Failure # 16 

Security Savings Bank, Henderson, Nevada was closed today by the Nevada Financial Institutions Division, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Bank of Nevada, Las Vegas, Nevada, to assume all of the deposits of Security Savings Bank. 

The two offices of Security Savings Bank will reopen on Monday as branches of Bank of Nevada. Depositors of Security Savings Bank will automatically become depositors of Bank of Nevada. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their deposit insurance coverage. Customers of both banks should continue to use their existing branches until Bank of Nevada can fully integrate the deposit records of Security Savings Bank.

Over the weekend, depositors of Security Savings Bank can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual.

FDIC Raises Fees but Does Not Extend Loan Guarantee Program 

Rising bank failures forced the U.S. to raise premiums and implement a one-time fee in order to cover the cost of deposit insurance. There were rumours of changes to a debt guarantee program but only minor changes were announced. 

The Federal Deposit Insurance Corp. (FDIC) voted to charge banks an additional $27 billion this year due to an expected rise in bank failures. The government-run corporation reimburses customers for up to $250,000 when a bank is forced to close its doors.

The board estimates that bank failures will cost $65 billion through 2013. The fund has fallen far below its government-mandated cushion; it sat at an estimated at $18.9 billion in the fourth quarter.

"We're taking steps today to ensure that the deposit insurance system remains sound," FDIC Chairman Sheila Bair said at a board meeting broadcast on the FDIC website. "These steps are necessary because banks, and not taxpayers, are expected to fund the system." 

A one-time fee of 20 cents per $100 in insured deposits will be collected in the third quarter, generating $15 billion according to a Bloomberg report.
The regular fee will also be increased to 12-16 cents from 10-14 cents beginning in April. In 2007, FDIC insurance premiums averaged 5.4 cents and before that, more than 90% of banks didn't pay for deposit insurance.

There was also considerable speculation that the FDIC would extend the Temporary Liquidity Guarantee Program (TLDP). The program allows FDIC-insured banks and bank holding companies to issue government-insured debt with a maturity date of no later than June 30, 2012.

Market watchers suggested the deadline could be extended as late as 2019. The companies pay the FDIC a premium of up to 100 basis point per year to insure senior unsecured debt.

Last week, JPMorgan Chase and Co. used the program to raise $10 billion at a spread of 71.4 - 89 basis points above comparable Treasury notes.

Officials did not announce an extension of the maturity but instead voted to expand the program to include mandatory convertible debt. Officials called it a "very narrow targeted improvement."

Zombie Banks I.V. Drip Capitalization

Zombie Banks I.V. Drip Capitalization 

Stocks are dead for the rest of your life. That's the gist of my exclusive interview with the head of PIMCO Total Return -- the biggest bond fund you've never heard of. But you should know PIMCO because its chief, Bill Gross, is one of the world's most powerful bond investors.

Open Secrets

Following the money in the Wall Street shakeout? Start here. 

The Smell Of Coffee 

Focus on this instead: the European banking and fiscal fiasco is a dagger pointed at the heart of major US banks, which have a great deal of exposure - one way or another - to much of Europe. Ask any U.S.-based "global bank".[enphasis mine] 

Lloyds 500,000 customers slip into negative equity  

Michael Saunders, chief economist at Citigroup, said last month that the bank estimated homeowners with negative equity was up to about 1.2 million, from 100,000 a year ago, out of a total of between 11 million and 12 million mortgages. "There is no sign that the decline in house prices - and hence the surge in negative equity - is yet close to ending," he said. 

He said in December that about one owner in four could be in negative equity if prices fell by a total of 30 per cent by 2010, as many analysts expect.

The Council of Mortgage Lenders, which represents 90 per cent of mortgage lenders, said that the number of those who were in arrears had risen to 220,000 and it expected the figure to hit 500,000 by the end of this year.

Antiquity realized that debts grow in excess of the ability to pay

CIA and Pentagon Wonder: Could Mexico Implode? (Hat Tip Zombie210)

China signs $2 bln purchase deals with Britain (Hat Tip PineCarr)

A Chinese business delegation sealed deals amounting to $2 billion with British firms
Agreement between Hainan Airlines Co. Ltd and Rolls-Royce Plc was the largest deal.
11 procurement deals covered areas ranging from textile, metal services, etc. 

Environment

Water 'more important than oil' businesses told (HatTip Zombie210) 

Dwindling water supplies are a greater risk to businesses than oil running out, a report for investors has warned. 

Among the industries most at risk are high-tech companies, especially those using huge quantities of water to manufacture silicon chips; electricity suppliers who use vast amounts of water for cooling; and agriculture, which uses 70% of global freshwater, , says the study, commissioned by the powerful CERES group, whose members have $7tn under management. Other high-risk sectors are beverages, clothing, biotechnology and pharmaceuticals, forest products, and metals and mining, it says.

"Water is one of our most critical resources - even more important than oil," says the report, published today . "The impact of water scarcity and declining water on businesses will be far-reaching. We've already seen decreases in companies' water allotments, more stringent regulations [and] higher costs for water." 

 

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19 Comments

Davos's picture
Davos
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Re: Daily Digest - March 1

debt.jpg

Goal Digger's picture
Goal Digger
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Dwindling Water Supplies

This topic is obviously lost in the discussion today in light of the more pressing problems.  But, before too long, I see the Great Lakes region once again being the center of American industry.  We've seen automotive and steel production leave the Great Lakes/Midwest, but when it comes to fresh water supply there is nowhere else in the US, or the world for that matter, with the supply on hand like the Great Lakes.  Fortunately, with global warming (I'm kidding), we've seen steady rains and snow in the Great Lakes the last couple years, which means lake levels are staying within normal ranges.  Hopefully this will continue and we can ultimately see industry return to the region.  Lord knows we've got the blue collar work force ready, willing, and able to get involved!

In that regard, it still confuses me to see hardcore enviros who don't see the forest for the trees fighting against new state of the art industry coming on line in the Great Lakes.  We all lament the loss of jobs, but when you have a golden opportunity to add jobs that produce real things the enviros are up in arms to no end.  (FDS Coke in Toledo is a perfect example.)

I'm always dumbfounded by the flight from the industrial center and breadbasket of America for the mariginal lands in the desert.  And, Arizona thinks they can run a pipeline up to the Great Lakes so they can keep living in the desert!  Brilliant!  I suppose this is just another example of Americans seeking the good life where it doesn't snow, rain, or get overcast for days at a time.  Geez, to think we should have to make such sacrifices!!!

suesullivan's picture
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Re: Daily Digest - March 1

This quote from the smell of coffee piece really struck me, because it echoes something the Argentinian blogger wrote about the collapse of Argentina's economy seemingly happening overnight (something along the lines of waking up and hearing the banks are closed and the stock market is shut down indefinitely).

The quote from the baselinescenario.com piece is:

The late Rudi Dornbsuch of MIT had a way of cutting to the chase, preferably in public and with a minister of finance present.  He knew a huge amount about financial crisis, and could distill a lifetime of study and involvement in collapses succinctly: “it always takes longer than you think; but when it happens, it always happens faster than you can imagine.”

 

 

I definitely feel like I"m in the "it takes longer than you think" stage, and losing DH's attention and willingness to stay with the doom-and-gloom-what-more-can-we-do-to-prepare-for-who-the-hell-knows-what's-coming-down-the pike discussions. I can't blame him. Out in the real world, people are by and large going about life as usual in my corner of the world.

I think I need to shake off some recently building complacency and take a bit more drastic action -- I'm thinking about pulling another chunk of IRA money out and buying more PMs.

Is anyone else waiting and waiting for the shoe to drop, and wondering when to pull the trigger on some of the more extreme preparedness measures? (by that I mean things that cost money that don't make sense if we don't collapse, mostly)

 

 

 

Davos's picture
Davos
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Re: Daily Digest - March 1

Hello SueSullivan:

I trusted my gut more than I trusted our officals to fix something they can't or won't identify - that this is a solvency crisis with our nation and our banks. I have, and I'm sure you have, read plenty about GRA's (the govt. taking your IRA/401k and making it a Social Security Trust fund, of which they'd pay you 3% above their inflation rate and when you pass your kids get 50% not 100%) and I'm sure you have read about them talking about closing the markets to make changes to them when TSHTF.

Take care, 

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Doug
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Re: Dwindling Water Supplies

Goal Digger

I also live in the Great Lakes formerly industrial basin.  I've lived in and within commuting distance of Buffalo for 27 years.  There are some definite advantages to living in a perpetually depressed area.  We didn't profit from the real estate bubble, so haven't suffered from the collapse.  In fact, I was talking to a local town clerk the other day.  She claims real estate prices are actually going up a little as the urbanites still seeking their bit of nature are buying vacant land, of which there is plenty.  I commute about 45 miles each way two days a week.  The drive is usually easy, except for those lake effect snow days, then I just stay home.  Our zoning is agricultural, so there aren't a lot of rules about what we do with our land.  Much of the countryside is now covered with second growth forest with small fragments of ancient forest.  The climate is really very mild with none of those catastrophic storms other places get.  Just a lot of snow, for which we are well prepared.

Buffalo itself really hasn't recovered from the industrial collapse, but that's more a result of long term incompetent leadership than anything else.  It's a mystery to me how one city can reliably elect dunderheads election cycle after election cycle for decades.  But, the city is built on an Olmstead plan and has lots of great architecture and park space.  Its very liveable and easy to get around.  Prices, including real estate, are low.  I really don't miss the overcrowding that is naturally a part of economically growing areas.

I agree with you about the water.  20% of the world's surface fresh water is in the Great Lakes, and inevitably it will attract all kinds of industry.  But, think about what industry did to the Lakes when it proliferated.  It was really bad and took a long time to ameliorate, and they still are far from cleaned up.  The Great Lakes states and provinces have been busy locking up the water with compacts and treaties so it can't be diverted away from the basin.  There will be battles over the resource eventually, but not yet.  So, enjoy it while you can.

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SkylightMT
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Re: Daily Digest - March 1
suesullivan wrote:

  

Is anyone else waiting and waiting for the shoe to drop, and wondering when to pull the trigger on some of the more extreme preparedness measures? (by that I mean things that cost money that don't make sense if we don't collapse, mostly)

I am. DH is mostly on board with things, and since right now I am the primary breadwinner (he got laid off in October) its not "his" money we're spending on getting prepared, so he hasn't complained.

I've been stockpiling lots of food and we planted 8 fruit trees last week. We're expanding the vegetable garden and are making rain barrels. I bought a handcrank radio/flashlight when it was on sale half price.

We've looked for several months for a wood stove and finally found a used one in our price range, so we bought that. Now we're working on building up a stock of logs to burn.

So mainly, we're focusing on what we can do now for little money because we have little money. If I really thought we were going to turn into Argentina next week, I would probably charge up the credit card with gold, guns, ammo, hens and coop, sell one of cars for cash, etc. But I don't have the sense that its urgent to do so right now. I may regret waiting but its hard to know what to do, and to find a balance between being thoroughly prepared vs. finding ourselves in a difficult position if it doesn't happen as soon or as severely as many think it might.

JAG's picture
JAG
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Re: Daily Digest - March 1

Thanks Davos for all your work. I really look forward to reading your DG everyday, and that says a lot given that the nature of the content is not easy to digest. Thanks again and I can't wait to see what you dig up for us tomorrow.

Jeff 

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Re: Daily Digest - March 1
suesullivan wrote:

<snip>

Is anyone else waiting and waiting for the shoe to drop, and wondering when to pull the trigger on some of the more extreme preparedness measures? (by that I mean things that cost money that don't make sense if we don't collapse, mostly)

suesullivan, SkylightMT,

I'm definately not waiting as I have no doubt that the poo will meet the blades in a big way!  I have had a gut feeling for some time that all was not well. The day after I completed the CC the final pieces of the puzzle were in place. My wife and I are on the same page and we are disconnecting from the matrix.

No more 401s, no more IRAs, no credit card debt, no auto loans, restructuring our business and eliminating all debt and any future committments that are not vital, water pump windmill on site and in process of getting operational, garden plot fenced, goats in pasture, organic seeds ordered, food supplies underway and so on. (now the real work begins!)

We are focusing on community as our major activity and working to connect up with those who share the perception and try and educate those that don't. We gave a presentation to Rotary last week and it was really exciting to communicate with the diverse viewpoints. Anyway, we are moving forward assuming that the three Es  will bring about the greatest change to mankind that has ever happened and that no matter how fast we move that it will seem like it was too little in the not too distant future.

My $.02 recommendation .....DON'T WAIT!

Coop

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Damnthematrix
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Commentary - from Downunder

Commentary

7:02 AM, 2 Mar 2009
http://www.businessspectator.com.au/bs.nsf/Article/Fear-of-the-known-$pd20090302-PQR5T?OpenDocument&src=ei

Alan
Kohler

Fear
of the known

A
dangerous, rather idiotic idea is beginning to sprout, or perhaps re-sprout
– that we have nothing to fear but fear itself.

Franklin D
Roosevelt said it first in his 1933 inaugural address: “First of all, let
me assert my firm belief that the only thing we have to fear is fear itself
– nameless, unreasoning, unjustified terror which paralyses needed
efforts to convert retreat into advance.”

This is the
proposition currently resurfacing – that we are talking ourselves into
recession, or perhaps talking recession into depression, and that if only we
weren’t gloomy there’d be nothing to be gloomy about. It sounds
appealingly hopeful, but it was wrong in 1933, and it’s wrong again.

Here are two
real things to be fearful of, and for political leaders to do something about,
rather than simply encouraging us to whistle a happy tune: the great and
continuing credit derivatives overhang and the problem of China.

As Paul Krugman pointed out in his New
York Times
blog recently, the view is starting to take hold that the
appalling valuations of “toxic assets” in bank balances sheets,
which is leading to their near-insolvency, are due to “irrational
despondency”.

As we have
written in Business Spectator
repeatedly, the problem is credit derivatives, specifically collateralised debt
obligations, but it’s true that most of the CDO losses that have ruined
bank balance sheets are based on theoretical pricing models rather than real
valuations.

But as Warren
Buffett wrote in his shareholders’ letter published at the weekend,
“derivatives are dangerous”.

And analysts at
JPMorgan in New York have now shown just how dangerous. They have sifted
through the data to find out what has actually been happening to these CDOs,
and the result of their work was published a few days ago in the Financial Times.

Between 2005
and 2007, about $US450 billion of CDOs of asset backed securities were issued.
Of those, $US305 billion are in a formal state of default, with those
underwritten by Merrill Lynch accounting for the largest proportion, followed
by UBS and Citigroup.

The real
problem is what has happened after the default. JPMorgan estimates that $US102
billion of the CDOs have been liquidated; the average recovery rate for the
super senior tranches – rated AAA – has been 32 per cent. For the
'mezzanine' tranches – created from mortgage-backed bonds – the
recovery rate is just 5 per cent.

A 95 per cent
real loss rate on AAA debt CDOs is not what I would call irrational
despondency.

The issue is
specifically relevant to the bank stress tests that the Obama Administration is
now conducting. Will the credit derivatives on their balance sheets be valued
according to theoretical models based on the ABX indices, or will Treasury
officials conduct auctions of the CDOs to get real price discovery?

And why should
we fear China? Isn’t it going to save us with its colossal fiscal
stimulus?

Actually,
output in China is collapsing so quickly that it is in danger of falling into
an actual recession, not just the so-called Chinese version (sub-7 per cent
growth).

But in any
case, as Michael Pettis of Beijing University points
out, most of China’s stimulus is aimed at increasing production, not
consumption – actions such as “more credit access for firms in the
petrochemical sector”, “tax rebates for electronics and information
product exports”, and “increased credit support for ship
builders”, to list just three of dozens of measures designed to assist
exporters.

This might
sound good for Australia, since more manufacturing production equals more
demand for raw materials and higher commodity prices.

However,
Michael Pettis equates it with the Smoot-Hawley
Tariff of June 1930, which was the genuine thing to be feared in the Great
Depression (as opposed to fear itself).

“The
stupid and destructive Smoot-Hawley Act, which was terrible not because it was
passed by the US but because it was passed by the country with the largest
export of overcapacity in the world at the time, is perceived by some as
something that can only happen in the US, and not in China.

“On the
contrary – US policies can be extremely unhelpful, of course, and it
would come as no surprise to me that many of their policies turn out to be
harmful to US and global interests, but the US cannot possibly engineer a
repeat of Smoot-Hawley’s disastrous impact on global trade and the US economy.
As the largest trade deficit country in the world, anything that results in a
contraction in net US demand is not only not bad, it is a necessary part of any
adjustment.”

Only China,
says Pettis, can bring about a repeat of
Smoot-Hawley, not by putting a tariff on imports, but through policies that
expand their massive export of overcapacity. Instead China must increase its
contribution to net demand to help reduce global overcapacity.

“The
point is, the reason Smoot-Hawley was such a disaster is because it involved an
attempt by the largest trade surplus country in the world (the US) to increase
its trade surplus in spite of collapsing world demand, and the 2009 equivalent
must necessarily be Chinese or German moves that have the same effect.”

The global employment
collapse is only just getting started. The trouble began with a credit crisis
caused by the evaporation of trillions of dollars in bank capital that has now
exposed massive production overcapacity as demand slumps as a result of the
shocking wealth destruction.

The two things
I have highlighted this morning – actual CDO values and the true impact
of China’s stimulus – are operating on both ends of the feedback
loop between the financial and real economies. And they are genuinely scary.

 

Mon Mar 2, 2009 11:50 am
"Bucko" <[email protected]>


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Damnthematrix's picture
Damnthematrix
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Re: Daily Digest - March 1

"We've looked for several months for a wood stove and finally found a
used one in our price range, so we bought that. Now we're working on
building up a stock of logs to burn."

That's all very well, but unless you grow your own firewood, and demand from everyone else goes through the roof, what will you put in your stove?

MIke 

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Re: Daily Digest - March 1
Davos wrote:

 I have, and I'm sure you have, read plenty about GRA's (the govt. taking your IRA/401k and making it a Social Security Trust fund, of which they'd pay you 3% above their inflation rate and when you pass your kids get 50% not 100%) and I'm sure you have read about them talking about closing the markets to make changes to them when TSHTF.

 Actually, I haven't and my Google-fu appears to be failing me.  Can you provide a link to some sources?

 Thanks.

Davos's picture
Davos
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Re: Daily Digest - March 1

Hello AZDan:

This is a trial baloon right now....

http://www.carolinajournal.com/exclusives/dems-target-private-retirement-accounts.html 

 GRAs would guarantee a fixed 3 percent annual rate of return, although later in her article Ghilarducci explained that participants would not “earn a 3% real return in perpetuity.” 

With a GRA, workers could bequeath only half of their account balances to their heirs, unlike full balances from existing 401(k) and IRA accounts.

I'm searching my spreadsheet for the best article on, I think it was Paulson at the time, talking about the possibility of closing the markets and "reworking" them. INHO that to me sounds like the mother of all breakers has been built in as to keep the oil in the engine if it gets below x points.

Take care 

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fujisan
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Re: Daily Digest - March 1

This may already have been published here, but I didn't found it...

 Bloomberg.com: Bank Tests Ignore Black Swans, Rely on Grey Goose: David Reilly

Quote:

The Treasury plans to have the banks conduct the stress tests themselves; regulators will check the results.


Banks conducting the stress tests themselves ????  Absolutly unreliable.

Goal Digger's picture
Goal Digger
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Posts: 39
"Stress" Tests

Of course I can't find it now, but I recall seeing a recent article headline indicating that the UAE is reviewing its holding of CITI.  I also remember seeing some Middle Eastern dignitary making a huge investment in CITI around the end of 2008.  I keep asking myself why the feds won't let the big banks fail and/or nationalize like the Swedes did in the 1990's.  Why not bring things to a head sooner, rather than later (after we've mortgaged the future of the next two generations).  The only rationale I can come up with is foreign investors, i.e. the Middle East, having huge stakes in these banks and the feds do not want to rock the boat by taking over these banks and/or letting them fail, which would wipe out the common shareholders.  And, possibly disrupt the flow of oil.  None of this behavior makes business sense in a so-called capitalist/free market society.

What other possible reason could there be to keep throwing money at the banks and AIG?  And, now that we have a "stress" test in place its becoming clear that the "test" is nothing but window dressing.

Nime's picture
Nime
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Joined: Jan 29 2009
Posts: 88
Re: Daily Digest - March 1

Glenn Beck talking about people buying guns in the US like crazy. No hard data to back it up but a nice presentation of anecdotical evidence.

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capesurvivor
Status: Platinum Member (Offline)
Joined: Sep 12 2008
Posts: 963
Re: Daily Digest - March 1

Well,

There is no "personal defense ammo" to be found anywhere, he's accurate on that.

 

SG

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Davos
Status: Diamond Member (Offline)
Joined: Sep 17 2008
Posts: 3620
Re: Daily Digest - March 1

Hello AZDan:

Hey, I can't find the referecne article, I do recall it, if correctly it was back in 2008 when the markets tanked, there was talk of a major overhaul to the securities market, during which time they'd be closed down. The only one I could find was about circuit breakers and the 3 levels of them and when they trip.

Sorry not to be of more help, take care 

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EndGamePlayer
Status: Platinum Member (Offline)
Joined: Sep 2 2008
Posts: 546
MN State Budget - poorest, elderly + minorities will suffer

Without a long term plan the U.S. is flying blind in the night.
This applies to the State of Minnesota. That's most likely how we got
to this place. If the politicians are serious about moving us forward and do not want a full
scale uprising on their hands because people are cold, starving and fed
up then they need to look a little more to the future.

Our long term plan
needs to include preparation for climate change events like droughts in
areas where food production comes from - like we are seeing in
California, Florida and Texas. Likewise, we need to think in terms that
Climate Changes will affect our own climate in more severe ways - more
tornadoes, longer winters or more flooding can occur.

We also
need to take into account the long term energy needs as countries like
Mexico and Venezuela become unstable political hot houses and are known
to be in a peak oil production (meaning it is only a matter of time
before they can no longer maintain high levels of production and
require oil fields to "rest" before drilling deeper). If we don't
address these issues asap we will be paralyzed like deer in headlights.

The
fact that there are vulnerable people not ready for these budget cuts
and future events makes Minnesota particularly alerted to the need to
prepare meticulously, rather than throw money now at short term money
pits.

I have lived in poverty as a single parent and so this
issue is close to my heart. I was able to fight my way out of poverty
with an education but I think this will only be part of the future long
term solution for the present economic landslide.

These are the list of items that need to be addressed:
Investing
in MN now means investing local food sources - promote local food
sources by integrating children with gardens, food plots and orchards.
Built perimeters around schools and churches of orchard trees and
un-used lawn space into permaculture gardens. The used lawn areas can
be planted with low maintenance grasses like the no mowing grasses for
future low energy consumption. The idea that young low-income children
will bring home food for their family will create a greater sense of
self-worth for the children and the family than any hand-out can give
them. This should create 1 leadership position per grade school/ middle
school per state. During the Great Depression - some estimate 5 million
died in the US of starvation. This issue needs to be addressed before
it comes up on the horizon.

Teach low income gardening skills
via every community's gardening club or Farmer's Market. As a matter of
fact, Farmer's Markets could be an avenue for which training is done
through internships so the population has a higher percentage of people
capable of food production as an insurance measure to Climate and
Energy changes. For more information on Permaculture (permanent food
gardening) See Rob Hopkins Transition Towns as he is promoting the U.K.
to prepare for the transitions ahead. This will create jobs for lower
income people, reduce dependency on food lines and help create
Minnesota's independence. This means developing greenhouse food
production in every city in MN and "food farms" instead of mono-crop
farms need to be promoted. This could create 100 jobs per 1,000.

Minnesota
needs 100% of all it's buildings insulated to reduce energy
consumption. (See Albert Bartlett's youtube video he made in Colorado).
The growing demand needs to be addressed by conservation. We can't tell
people how many children to have in this country so we need to be
prepared by converting present buildings to total energy conservation
as soon as possible. This can also be done by offering training to low
income people and teaching them the principles of conservation and how
to convert present buildings to streamline modern living spaces. Areas
to address in a 5 week training: all windows need insulating window
coverings for the night cold, insulating building walls and roofs,
sealing up leaks, audits of energy consumption and using Hy Tech paint
additives to create thermal shielding. With energy conservation as a
main theme, farmer's producing soy for insulation will benefit, people
will benefit through lower energy consumption and the hard times might
not (at least) seem so cold. This should create 20-30 jobs per 1,000
people in the state.

Wind Generator Installation training is
another great job we need through out the mid-west wind belt. There are
so few great training places for this and the transmission of power.
Ditto for solar installation. We actually have huge solar gains here in
Minnesota once the snow is down. Snow bounces light like mirrors and is
a great source of heat in south facing windows in winter (and can cause
snow blindness) but the development of harnessing this energy when heat
is needed most is not an idea beyond comprehension and is a technology
that we could spread throughout the other northern states.

Encourage
"internet education courses" for most general educational activities.
This will lower the cost of education by nearly 30% of the present cost
and make it more affordable. Should this extend to high schools, the
buildings could be converted to house and care for elderly - which is
expected to become a growing issue as us baby-boomers age.

Cut
government costs: Encourage internet county services (apply online) and
reduce county inefficiency by 50%. Use the savings from both education
and county internet moves to improve health care and services.
Likewise, cut government Senator, Congress-person's, Representative and
all legislative pay by 10% a year for 3 or more years. Make taking
lobby money by special interest groups in MN a crime.

Here's my
"ideas" on increasing our tax base without increasing home owners,
income or people's taxes in general: tax churches 2% of all donations.
Yes, yes, yes, I know we have a separation of church & state but in
turn, give them deductions when they do their part in serving the
vulnerable.
Increase energy tax through consecutive years - as the state becomes more conservative- increase the energy use tax.

Sure,
we can build roads in Minnesota, assuming the average person will be
able to afford gas when it gets to $200/barrel (and it will one day).
Or, we can develop alternate transportation via more long distance
regular rail trains and between town buses. The Personal Railway
Transport System should be put on hold until the US can afford such
luxury travel and the average person would not afford it's use for
another 25 years.

We do need more free clinics for basic care
for everyone. As a small business owner - health care is my biggest
financial issue . . after getting through this economy.

We
need endless supplies of heating gas in Minnesota so make it mandatory
for all sewage facilities to cap gases for methane production to be
used in public buildings and then any excess sold at competitive rates.
Another option for this unlimited resource is to compress the gas for
liquid gas similar in hydro-carbon value to gasoline and can be used as
a substitute with little engine modification. Add in ethanol to the mix
of energy resources and Minnesota could be an energy producer and
exporter instead of a dependent energy state like California. And, this
concept reduces costs (verses the present way sewage is handled) AND
reduces pollution!

Hold off on increases taxes until
hyper-inflation kicks in somewhere around the time Mexico and Venezuela
reduce gas/oil imports or sooner if the political scene doesn't
straighten out and the cost of energy increases before 2011. (See
theOilDrum.com for peak countries). The reasoning is - when energy
increases - so does the cost of everything associated with it (as we
saw last summer when gas went to $4). Hyper-inflation also makes debts
"locked in" - for example: if you bought a house in 1970 for $7,500 and
that house is valued in 2000 at $200,000 and you payment is still $75 a
month - your debt has been "locked in" but your income has most likely
increased with inflation. This means it makes sense to lock into
certain debts now as we can be sure hyper-inflation will kick in when
energy costs rise (and we know that will be by 2011 as Mexico peaked
production in 2004). Therefore, it makes sense to have some debts now
to offset the future costs of energy both from lack of production and
increased demand.

These are the top of my head thoughts, I'm
sure there are many more greater thinkers out there who are looking
further than I am but without this kind of thinking - Minnesota (and
the rest of the country) will remain flying blind in the night. We need
to remind ourselves the the Former Soviet Union were not adequately
prepared when they were "too big to fail" and we should not find
ourselves in the same position.

MyBackAchers.com - Zero Energy Farm

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