Daily Digest

Daily Digest - May 12

Wednesday, May 12, 2010, 9:46 AM
  • U.S. Exposure to EU Bailout: $50 Billion and Counting
  • Britain On Its Own If Market Strikes: France
  • New Path To Foreclosure - Delinquent Water Bills
  • Four Of 10 South Florida Homes Are `Underwater'
  • Report: Foreclosures Up 46% In April
  • Italy Pays High Premium To Sell Debt
  • Insured Workers' Health Costs Still Rising
  • L.A. Layoffs Could Cost The City More Than $32 Million
  • Schwarzenegger Preps ‘Terrible Cuts’ to Close Deficit
  • Fannie, Freddie Aid Cost Unclear: Regulator
  • Regulators Unable To Explain Dow's 700-Point Fall
  • Gold Trades Near Record on Europe Debt Threat to Currencies
  • Alarmed At The Plunging Value Of Their Currency, Europeans Are Leading An Exodus Out Of The Euro And Into Gold
  • Japan May Increase Reliance on Foreign Bond Buyers, Kaizuka Says

Economy

U.S. Exposure to EU Bailout: $50 Billion and Counting (CNBC)

US taxpayers could be on the hook for $50 billion or more as part of the European debt bailout, which is likely to be a close cousin to the strategy used to rescue the American financial system. And that doesn't count the added exposure created by the Federal Reserve's decision over the weekend to participate in currency swaps to provide liquidity to jittery European banks.

Britain On Its Own If Market Strikes: France

Britain is not part of the eurozone single currency bloc and refused to help pay for the 750-bil-lion-euro ($952 billion) package put together this week by its European Union partners to shore up debt-ridden economies like Greece.

"The British will certainly find themselves targeted, given the political difficulties they have," said Jean-Pierre Jouyet, head of France's AMF market regulator, as Britain's political parties struggle in London to negotiate a coalition.

Speaking on Europe 1 radio, the French official said that by standing outside the European rescue package, Britain had left itself alone to face a possible onslaught by currency traders on the pound

New Path To Foreclosure - Delinquent Water Bills (New York)

The city has threatened to turn the water bill debts of 7,045 New York properties over to a collections agent powerful enough to usurp their property titles. And if misery loves company, those debtors can rejoice. At a Thursday City Council hearing, the Department of Environmental Protection (DEP) suggested amending the law to add thousands more to the debtors' sad ranks.

Four of 10 South Florida homes are `under water'

More than 40 percent of homeowners in South Florida owed more on their mortgages than their homes were worth in the first quarter -- a sign that the region's backlog of foreclosured homes will be hard to escape.

According to a report released Monday by Web-based real estate services firm Zillow.com, 44.3 percent of homes -- that's 371,387 -- in Miami-Dade, Broward and Palm Beach counties were under water at the end of March. That's an increase over the previous quarter. Nationally, 23 percent of homes had negative equity.

Report: Foreclosures Up 46% In April (Sacramento)

The number of homes in the four-county area that went back to the lender or were sold to a third party at auction during April was up 46 percent, from 1,202 in April 2009 to 1,757 last month.

Sacramento County accounted for most of that with 44 percent more foreclosures from 877 last year to 1,267 homes last month. That number is also up from the 1,049 foreclosures the company reported in Sacramento County in March.

Italy Pays High Premium To Sell Debt

Italy paid a high price for the sale of debt on Tuesday in the first test of investor appetite for new eurozone debt since the unveiling of a €750bn international support package.

Although the €5.5bn auction of 12-month loans was twice covered, Italy had to pay the highest yield on 12-month loans for a year to attract investors. It paid 1.442 per cent, a premium of 15 basis points over existing debt.

Insured Workers' Health Costs Still Rising

American workers spent 7.4% more on their health care coverage over the past year, according to the sixth annual survey conducted by health care consulting firm Milliman Inc. The increase translates to about $506 more that workers contributed to their care - $321 for their company's health plan and $185 for employee out-of-pocket expenses. But, in a bright spot for workers, the increase was lower than the 10.6% boost in the survey a year ago.

L.A. Layoffs Could Cost The City More Than $32 Million

Under contracts negotiated last year, layoffs would trigger two raises in the coming fiscal year for union coalition workers.

Schwarzenegger Preps ‘Terrible Cuts’ to Close Deficit

California Governor Arnold Schwarzenegger will seek “terrible cuts” to eliminate an $18.6 billion budget deficit facing the most-populous U.S. state through June 2011, his spokesman said.

Schwarzenegger, 62, who will introduce his revised budget plans on May 14, has said he won’t seek tax increases to bolster California’s finances. The Republican’s forecast for the budget gap may rise after revenue fell short of his targets last month. “We can’t get through this deficit without very terrible cuts,” Schwarzenegger spokesman Aaron McLear told reporters in Sacramento.

Fannie, Freddie Aid Cost Unclear: Regulator

It is unclear how much U.S. taxpayers will eventually have to shell out to help mortgage finance giants Fannie Mae and Freddie Mac, the regulator of the two companies said on Tuesday.....The two firms have now tapped about $145 billion from the government and the Obama administration has said it will backstop losses, no matter how high they go, through 2012.

Regulators Unable To Explain Dow's 700-Point Fall

SEC chairwoman says a 'fat-finger' error and other rumored causes have been ruled out, but new trading rules to prevent a repeat are being formulated. Federal regulators working around the clock have yet to pinpoint the cause of last week's rapid stock market plunge, but they've learned enough to propose changes to prevent a repeat, Securities and Exchange Commission Chairwoman Mary Schapiro said Tuesday.

Gold Trades Near Record on Europe Debt Threat to Currencies

Gold traded near a record in Asia after surging to an all-time high yesterday on investor concern international financial support for indebted European states will depress currencies.

Alarmed At The Plunging Value Of Their Currency, Europeans Are Leading An Exodus Out Of The Euro And Into Gold

The burgeoning demand pushed gold for delivery this month up 1.6% on Tuesday to settle at an exchange-record $1,219.90 on the Comex division of the New York Mercantile Exchange. The gains continued in electronic trading after the close, where gold reached $1,233.50 an ounce......Anecdotal evidence shows Europeans are leading the charge.

ETF Securities, a London-based fund manager, had an inflow of $490 million into its gold-backed funds in the past two weeks. All of that came from European investors, said Nick Brooks, the firm's head of research and investment strategy.

Japan May Increase Reliance on Foreign Bond Buyers, Kaizuka Says

Japan may need to increase reliance on foreign buyers of government bonds in the long term, a Finance Ministry official said today. Masaaki Kaizuka, director of debt management at the ministry, told a conference in Tokyo that flexibility and transparency are important for bond sales. More than 90 percent of Japan's sovereign debt is held by domestic investors.

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13 Comments

saxplayer00o1's picture
saxplayer00o1
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Re: Daily Digest - May 12

"Bank of England Governor Mervyn King warned Wednesday that the banking crisis has turned into a potential sovereign debt crisis and governments must tackle excessive fiscal deficits without delay.

In a press conference, King said he had seen the details of fiscal plans by the new U.K. Conservative-Liberal Democrat coalition, and that they provided a "very strong and powerful agreement to reduce [the U.K.] deficit.""

......................1A) The financial crisis is far from over, warns Mervyn King

"The Governor of the Bank of England warned this morning that the financial crisis was not yet over and left open the prospect of further quantitative easing.

As the Bank published its latest quarterly Inflation Report, Mervyn King said: “The financial crisis is far from over. As debt has moved from the financial to the public sector, the banking crisis has turned into a potential sovereign debt crisis.” "

"May 12 (Bloomberg) -- Russia faces a “massive” capital influx as investors look for alternatives to Europe’s crisis- ridden debt markets, said Mikhail Dmitriev, president of the Center for Strategic Development.

That’s putting pressure on Russian policy makers to implement capital controls soon to stem the flows and avoid ruble volatility, Dmitriev, whose think tank conducts research for the government, said in an interview in Moscow yesterday."

"May 12 (Bloomberg) -- Investor Jim Rogers said Europe’s bailout of indebted nations to overcome the sovereign-debt crisis is just “another nail in the coffin” for the euro as higher spending increases the region’s debt.

The 16-nation currency weakened for a second day against the dollar after rallying as much as 2.7 percent on May 10, when the governments of the 16 euro nations agreed to make loans of as much as 750 billion euros ($962 billion) available to countries under attack from speculators and the European Central Bank pledged to intervene in government securities markets.

“I was stunned,” Rogers, chairman of Rogers Holdings, said in a Bloomberg Television interview in Singapore. “This means that they’ve given up on the euro, they don’t particularly care if they have a sound currency, you have all these countries spending money they don’t have and it’s now going to continue.”"

"May 11 (Bloomberg) -- The Metropolitan Washington Airports Authority postponed a $650 million bond sale for the second time, citing financial market volatility, and said it will return to market when conditions have “normalized.”

The authority’s offering to individual investors, scheduled for yesterday, had been delayed to today because of market “uncertainty” about a financial rescue of highly indebted European nations including Greece, said Andrew Rountree, its acting chief financial officer, in an interview yesterday. Last month, Wake County, North Carolina, postponed by a day a $383 million sale of tax-exempt securities because of the turmoil."

"Despite the recent recession and the global financial crisis, Canadians went deeper into personal debt.

According to a report released Tuesday by the Certified General Accountants Association of Canada, the household debt of Canadians peaked at $1.41 trillion in December 2009.

On a per capita basis, it translates into a debt of $41,740 per resident – 2.5 times higher than in 1989."

"A new Standard & Poor report consolidated data and estimates of borrowing by local and regional governments (LRGs) in 12 Western European countries. They report the borrowing would reach nearly 1.3 trillion Euros this year

The report estimates that German LRGs will continue to account for the largest proportion (47%) of total gross borrowing in the region, followed by LRGs in Spain (17%), France (8%), Switzerland (7%), and Sweden (5%).

"We estimate LRGs in the region will borrow a total €260 billion in 2010, representing a 20% year-on-year increase and continuing the surge in borrowing that we observed in 2009 after the economic downturn," said Standard & Poor's credit analyst Alois Strasser.

"As in 2009, we believe the main causes of this marked increase will continue to be extensive refinancing needs and new debt issuance to balance deteriorating financial performance," Mr. Strasser said.

"We believe borrowing could be even more pronounced in 2010 because the economic downturn that began in 2009 could result in substantial tax shortfalls in 2010 and possibly beyond. We also expect that several countries will continue to make reasonably high investments to stimulate economic activity," he added."

"May 12 (Bloomberg) -- Argentine Economy Minister Amado Boudou said last week’s jump in bond yields may prompt the government to shelve plans to sell as much as $1 billion of bonds, its first international offer since defaulting in 2001.

The government aimed to price new 8.75 percent dollar bonds due in 2017 on May 14, part of its proposal to restructure $20 billion of defaulted debt left out of a 2005 settlement. Any sale would set a benchmark rate and isn’t needed to raise funds, Boudou said at a press conference last night in New York.

“If the conditions are not acceptable to our country, we won’t do it,” Boudou said. “Argentina can change the deadline. We can postpone it because it is a very complex week.”"

"At nearly 80%, France had the fourth-highest ratio of government debt to gross domestic product in the euro zone in 2009. It is rising inexorably, forecast by BNP Paribas to hit 90% in 2012.

French government refinancing this year is more onerous than the U.K.'s. France's budget deficit, forecast at 8% of GDP for 2010, is above the euro-zone average of 6.6%. And French tax receipts as a proportion of GDP are already the highest in the euro zone, making it risky to raise taxes without throttling a sluggish recovery"

"But financing France's ballooning social-security deficit, forecast at €10.5 billion this year, is the long-term budgetary challenge. Mr. Sarkozy, his authority weakened by a poor midterm election results, faces powerful public-sector unions and a Socialist opposition set against major change, notably increasing the retirement age above 60, the best solution in the long run.

France's fiscal credibility ultimately rests on Mr. Sarkozy pushing through the reforms which, though mild by Greek standards, have proved too much for French governments over the years."

"HARRISBURG, Pennsylvania (Reuters) - The story of how Pennsylvania's capital city Harrisburg has lurched toward the precipice of financial ruin is a cuckoo tale involving one man's vision of creating a hub for museum lovers, a possible FBI investigation, and a $45,000 tomahawk that may or may not have been owned by Chief Crazy Horse.

But if this historic city of nearly 50,000 does end up defaulting on its debt -- a move that would send shockwaves through the $2.8 trillion municipal bond market -- most of the blame can be placed squarely on a single incinerator.

A financing scheme to fund its state-of-the-art trash-burning plant has left the 150-year-old Harrisburg scrambling to pay $68 million of interest this year. The payments exceed the annual city budget by some $3 million and the city council has recently begun to explore a possible bankruptcy filing, an event that would cast a shadow far beyond the Keystone state."

"AUSTIN -- The state government's fiscal outlook worsened Tuesday as the chief budget writer in the House said a projected shortfall facing lawmakers is at least $18 billion.

The latest estimate by House Appropriations Committee Chairman Jim Pitts, R-Waxahachie, was considerably higher than previous projections and came on a day filled with mostly bad news as Pitts' committee looked toward the looming budget crunch.

House Speaker Joe Straus, appearing at the outset of the committee hearing, warned that a 5 percent budget cut already imposed on state agencies was "just the beginning.""

"The U.S. trade deficit widened in March to its highest level since December 2008, as surging oil prices pushed up the cost of oil imports to a 17-month high.

The U.S. deficit in international trade of goods and services increased 2.5% to $40.42 billion from a downwardly revised $39.43 billion the month before, the Commerce Department said Wednesday. The February trade gap was originally reported as $39.70 billion.

Still, the March deficit was slightly smaller than Wall Street expectations. Economists surveyed by Dow Jones Newswires had estimated a $40.5 billion gap."

"May 12 (Bloomberg) -- Four of the largest U.S. banks, including Citigroup Inc., racked up perfect quarters in their trading businesses between January and March, underscoring how government support and less competition is fueling Wall Street’s revival.

Bank of America Corp., JPMorgan Chase & Co. and Goldman Sachs Group Inc., the first, second and fifth-biggest U.S. banks by assets, all said in regulatory filings that they had zero days of trading losses in the first quarter. Citigroup Inc., the third-largest, doesn’t break out its daily trading revenue by quarter. It recorded a profit on each trading day, two people with knowledge of the results said.

“The trading profits of the Street is just another way of measuring the subsidy the Fed is giving to the banks,” said Christopher Whalen, managing director of Torrance, California- based Institutional Risk Analytics. “It’s a transfer from savers to banks.” "

"The state contribution to CalPERS should increase to $3.9 billion in the new fiscal year beginning July 1, up $600 million from the current year, actuaries for the giant public pension fund calculate.

The recommendation to the CalPERS board next week comes as Gov. Arnold Schwarzenegger is scheduled to issue a revision Friday of the state budget he proposed in January, which assumed a $200 million CalPERS increase to $3.5 billion."

  • Other news stories and headlines:

Greek Economic Contraction Seen Deepening

European Debt Woes Punish Corporate Borrowers: Credit Markets

Spain cuts salaries as Europe faces up to crisis

ECB Will Hold the Bonds it Buys to Maturity

Gov’t debt increases 4.6% to P4.3 trillion by end-February (PHILIPPINES)

Homeowners face hardship if rates rise (Canada)

Euro zone GDP shows frailty

US probing Morgan Stanley deals: Report

Wayne County to raze 450 Detroit structures in 45 days (funded through federal stimulus money)

U.K. Unemployment Climbs as Cameron Takes Office

The Trouble with Trillions: ECB Monetization and the European Bank Bailouts (Mcalvany interview...at 24 minutes listen to the comments about gold.....at about 45 minutes he says he expects stock market meltdown (Dow to triple digits))

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Re: Daily Digest - May 12

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Re: Daily Digest - May 12

Capital Gains Tax rise: should you act now?

By Lorna Bourke | 11:31:44 | 12 May 2010

http://www.citywire.co.uk/personal/-/news/money-property-and-tax/content.aspx?ID=399228

 

Intro:

Capital Gains Tax is definitely going to rise under the new coalition, possibly to come into line with income tax rates of up to 50%.  So investors must start thinking about realising assets to take advantage of the current flat rate of 18%.

 

 

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Re: Daily Digest - May 12

connect the dots:

Federal Reserve opens credit line to Europe - The Federal Reserve late Sunday opened a program to ship U.S. dollars to Europe in a move to head off a broader financial crisis on the continent. Other central banks, including the Bank of Canada, the Bank of England, the European Central Bank, the Swiss National Bank and the Bank of Japan also are involved in the dollar swap effort. The move comes after the European Union and International Monetary Fund pledged a nearly $1 trillion defense package for the embattled euro, hoping to calm jittery markets and halt attacks on the eurozone's weakest members. The ECB also jumped into the bond market Sunday night, saying it is ready to buy eurozone bonds to shore up liquidity in "dysfunctional" markets.

U.S. Exposure to EU Bailout: $50 Billion and Counting (CNBC) - US taxpayers could be on the hook for $50 billion or more as part of the European debt bailout, which is likely to be a close cousin to the strategy used to rescue the American financial system. And that doesn't count the added exposure created by the Federal Reserve's decision over the weekend to participate in currency swaps to provide liquidity to jittery European banks. But one rule-of-thumb formula puts potential US exposure at $54 billion should the entire IMF loan fund be tapped. And that doesn't count the added exposure created by the Federal Reserve's decision over the weekend to participate in currency swaps to provide liquidity to jittery European banks. The swaps move resembles the Term Auction Facility the Fed instituted when the worst of the US financial crisis hit in 2007-08.And the entire bailout package has been nicknamed "Le Tarp" by some for its similarity to the Troubled Asset Relief Program that bailed out US companies with taxpayer-backed loans.US involvement in the European crisis already has drawn critics from Congress and economists who think the domestic financial issues should be cleared up first.

JPMorgan Has Biggest Exposure to Debt Risks in Europe (Bloomberg) -- JPMorgan Chase & Co., the second- biggest U.S. bank by assets, has a larger exposure than any of its peers to Portugal, Italy, Ireland, Greece and Spain, according to Wells Fargo & Co.  “Regulatory data suggests JPMorgan’s exposure is largest in aggregate, but Morgan Stanley held the largest aggregate exposure to the PIIGS relative to Tier 1 capital,” the analysts wrote. Overall U.S. bank “exposure to Greece is lower than exposure to Ireland, Italy and Spain.” U.S. banks held a total of $236.8 billion of exposure to the five nations, including $18.1 billion to Greece, Wells Fargo said. European banks have claims totaling $193.1 billion on Greece, according to the Bank for International Settlements, with another $832.2 billion of claims on Spain.

 

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Re: Daily Digest - May 12

One more truck on the bridge.....LOL. Remove the cancer or treat it with pain pills......good video IMHO.

Hugh Hendry

Nouriel Roubini

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Budget Deficit in U.S. Widened to $82.7 Billion

"May 12 (Bloomberg) -- The U.S. posted its largest April budget deficit on record as receipts declined in a month that typically sees an increase in individual income tax payments.

The excess of spending over revenue rose to $82.7 billion last month compared with a $20.9 billion gap in April 2009, the Treasury Department said today in Washington. It was the second April deficit since 1983 and exceeded the median forecast in a Bloomberg News survey.

April marked a record 19th straight monthly shortfall, highlighting the challenges facing the Obama administration. Deterioration in the government’s balance sheet in coming years raises the risk of higher interest rates even as an improving economy helps lift tax receipts."

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Re: Daily Digest - May 12

What a good Daily Digest. And thanks to iDoctor for the videos. Things seem to be moving faster again in the world financial melt down. It is actually refreshing to come here and read and stay informed about what is really going on out there, and then make the necessary adjustments in my world to stay abreast of the situation as much as possible. I always think of that song by the Police..."When the world is going down, you make the best of whats still around."

thanks for the great posts and all the time and effort.

Tom

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Re: Daily Digest - May 12

Basically: It's done - stick a fork in it.

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Re: Daily Digest - May 12

In my opinion the Nassim Taleb interview is a very good example of what the leading neurosis of our society" Narcism"

can do to people. 

In that respect that video is very revealing.

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Re: Daily Digest - May 12

Jim Rogers on Bloomberg 5/12/10: Gold has HUGE potential!

 

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Re: Daily Digest - May 12

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