Daily Digest

Daily Digest - May 13

Thursday, May 13, 2010, 9:48 AM
  • It’s Deja Vu All Over Again
  • What Do Elena Kagan And The European Bailout Have In Common?
  • ECB Risks Its Reputation And A German Backlash Over Mass Bond Purchases
  • The Big Short: How Wall Street Destroyed Main Street
  • Mish: Visualization About Violent Market Drops 1928-2010; Gold And The K-Cycle Revisited
  • Beijing Home Prices Plunge 31.4%
  • Coalition Government: British Banks Face Break-Up In Just One Year
  • Lessons From The 80's: Nothing New Under The Sun 
  • The Black Swan Returns
  • Chesapeake Bay Settlement Has EPA Agreeing To Enforce Pollution Reduction Goals
  • Eco Currency – A Proposal to Balance Economical and Environmental Value

Economy

It’s Deja Vu All Over Again (Ilene)

Our "friendbuddypal" Cramer says "Even after today’s run, the market is still oversold" (yes, I know, he just said "Don’t Buy Till Dow 9,000" on Friday - TFF) but I had to disagree (with Monday’s Cramer - hard to keep track…), telling Members in our Alert to cash out of longs, saying: "Don’t be greedy, 5% in a day is A LOT" and I followed up just 15 minutes later with a comment in Member Chat saying: "Time to take money and run at 5% rule - we can reload if 4% holds."

What Do Elena Kagan And The European Bailout Have In Common? (Truthsavvy)

President Obama's nomination of Elena Kagan to the U.S. Supreme Court is, essentially, the same type of governing act as the EU decision to bail out European banks vulnerable to the Greek crisis. In both instances political leadership serves the interests of financial elites - plutocracy advancing while veiled by supposedly democratic institutions. In both cases the power of government grows as it defends the critical interests of financial policy overlords.

ECB Risks Its Reputation And A German Backlash Over Mass Bond Purchases (pinecarr)

The European Central Bank risks irreparable damage to its reputation by agreeing to the mass purchases of southern European bonds in defiance of the German Bundesbank and apparently under orders from EU leaders.

The Big Short: How Wall Street Destroyed Main Street (Jim Q.)

Day after day, bankers have been paraded before Congressional committees regarding their role in the financial crisis which brought the financial system to the edge of the abyss on September 18, 2008. Everyone has claimed that they were not responsible in any way for the disaster. They blame once in a lifetime circumstances that no one could have anticipated.



It was a perfect storm and they had no way of knowing. These Harvard MBA Wall Street geniuses, who collected compensation in excess of $100 million each before the collapse, had no idea what was going on within their own firms. Ignorance and stupidity is no excuse for losing a trillion dollars.

Mish: Visualization About Violent Market Drops 1928-2010; Gold And The K-Cycle Revisited (mhoop)

The late 1920's and 1930's were characterized by deflation, the 1980's by stagflation, and in the 2000's, deflation and deflation fighting by the Fed were both back in play.

Those familiar with Kondratieff Cycle theory will note that stagflation and deflation are on opposite poles (summer and winter), with deflation being the more violent.

Beijing Home Prices Plunge 31.4% (Ben Johnson)

The average transaction price of commercial residential properties in Beijing for the week ended May 9 fell 1,790 yuan per square meter or 9.6 percent week-on-week to 16,898 yuan per square meter, reports The Beijing News, citing statistics released by Beijing Real Estate Information Network.

Compared with the week ended April 11, the average transaction price of commercial residential properties in Beijing plunged 31.43 percent to 7,744 yuan per square meter.

Coalition Government: British Banks Face Break-Up In Just One Year (pinecarr)

Britain's giant lenders are facing the threat of extinction after the new coalition Government pledged to establish an independent commission to decide whether to break up the banks.

Lessons From The 80's: Nothing New Under The Sun (Davos)

Greider argues convincingly that Volcker held rates too high for too long, which a) transferred vast amounts of wealth from debtors to creditors; and b) raised the value of the dollar in international FX markets to the point where domestic producers could no longer compete, forcing manufacturing jobs to move permanently overseas.

The Black Swan Returns (tomadkins)

Environment

Chesapeake Bay Settlement Has EPA Agreeing To Enforce Pollution Reduction Goals (mhoop)

The pollution reductions could affect how lawns and farm fields are fertilized; how livestock is managed; what sewage treatment costs taxpayers; where housing developments, office complexes and shopping centers can be built; and other aspects of life with the potential to taint the water that flows into the 200-mile-long bay.

Eco Currency – A Proposal to Balance Economical and Environmental Value (jdargis)

The starting point of the ECO–currency Project is the hypothesis that an important factor in the ongoing environmental crisis is the disconnect between the economical ecology and the environmental ecology. With the latter we mean the ecology of plants, trees, animals, and other organic material. Whereas the economical ecology is defined by our financial system of market, money, goods and other economical exchange. Our second working hypothesis states that we could address environmental issues by linking the economical sphere and the environmental sphere in a better way than that is currently the case.

Please send article submissions to: [email protected]

7 Comments

saxplayer00o1's picture
saxplayer00o1
Status: Diamond Member (Offline)
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Posts: 4066
Re: Daily Digest - May 13

"A record 92,432 bank repossessions were reported in April, up 45 percent from a year earlier and 1 percent from March, Irvine, California-based RealtyTrac said today in a statement. Foreclosure filings, including default and auction notices, were 333,837. One out of every 387 U.S. households got a filing.

Unemployment of 9.9 percent and a rising percentage of U.S. homes worth less than the mortgages on them are combining to thwart a housing recovery, according to RealtyTrac. About 5 million delinquent loans will probably end up in the foreclosure process in addition to the 1.2 million homes already taken back by lenders, Sharga said."

"The euro’s emergence as an alternative to the dollar as a major currency is in doubt because none of the European member states “follow budget deficit rules set by the Maastricht Treaty,” said Daisuke Uno, chief strategist at the unit of Japan’s third-largest banking group. The treaty stipulates that EU states should keep their budget deficits within 3 percent of gross domestic product.

“The time has come to reconsider the status of the euro,” Uno said. “The currency needs to go back to the drawing board and start over.” "

"May 13 (Bloomberg) -- China’s policy makers may start easing monetary policy in the coming months as bond yields signal that the economy is heading for a “hard landing,” BNP Paribas said.

The curve tracking the difference between the yields on 2- and 5-year bonds has “collapsed” in the past 10 days and an inversion may signal a recession in China, BNP strategists Clive McDonnell and Ryan Tsai said in a report today. That outcome would be “unthinkable” for China, they said.

“While the yield curve is telling us that the economy is heading for a hard landing, we believe there is no appetite among policy makers for such an outcome,” the strategists wrote. "

"Former U.S. Treasury Secretary John Snow suggested the euro may not survive unless member nations agree to merge policies from budgets to labor markets."

"The problem is that this is so widespread, the United States has its own exposure to fiscal risk, sovereign risk, most of Europe does -- Greece is the canary in the coal mine, as they say,” he said. “Who do you turn to if we get a run on sovereign debt, who backstops it? That’s the whole problem, there isn’t a backstop.”

The International Monetary Fund can’t be relied on to rescue faltering states because it depends on donations from member countries, Snow said.

Countries that refuse to get their finances in order also pose a risk to the global economy because they may start printing money to meet liabilities, which could fuel inflation and undermine debt markets linked to government bonds.

‘Hyperinflation’

“It’s a really serious problem, and you get the risk of hyperinflation, governments printing money to pay their debts, a race to see who can print first to get ahead of the others, so their currency has more purchasing power than their neighbors’,” he said. “It’s not a pretty picture. All the other paper trades off the government paper, once government paper gets into default condition, what happens to the whole debt market, the fixed-income market?”"

"May 13 (Bloomberg) -- Chinese Premier Wen Jiabao struck a cautious note about the world economy, saying the sovereign-debt crisis in some countries is “deepening” and the foundations of a global recovery are not yet “solid.”

“We should never underestimate the gravity and complexity of this crisis and its far-reaching impact on the world political and economic landscape,” Wen said at a biannual China-Arab ministerial meeting in the Chinese city of Tianjin today."

"Wen said the financial crisis was leading to “profound changes in the international balance of power.”

“We should recognize that as a result of this once-in-a- century financial crisis, the world political and economic landscape is undergoing major adjustments and transformation,” Wen said."

"NEW YORK: U.S. lawmakers must act quickly to tackle a large budget deficit if the United States wants to avoid the kind of debt crisis that hit

Greece, the White House's top budget official said on Wednesday. "

"The United States also spends more than it earns in tax revenue. But global investors have remained eager buyers of U.S. Treasury debt, particularly during times of crisis.

Orszag said this buys lawmakers some time but should not encourage complacency. "Right now, there is no imminent danger, but to try to predict exactly when that will shift is a fool's errand." "

"The Portuguese government prepared Thursday to announce a “fiscal shock” in the form of tax hikes and deep wage cuts to speed up a deficit reduction drive, press reports said here.

“All taxes are going up,” reported Diario de Noticias."

"But these days, trading isn't risky at all. In fact, it's safer than walking down the street.

Why?

Because the US government is lending money to the big banks at near-zero interest rates. And the banks are then turning around and lending that money back to the US government at 3%-4% interest rates, making 3%+ on the spread. What's more, the banks are leveraging this trade, borrowing at least $10 for every $1 of equity capital they have, to increase the size of their bets. Which means the banks can turn relatively small amounts of equity into huge profits--by borrowing from the taxpayer and then lending back to the taxpayer."

"Lawmakers have cast their ballots in favor of keeping mortgage giants Fannie Mae and Freddie Mae intact. In a 56 to 43 vote Tuesday essentially split down party lines, Democratic senators defeated an amendment to the

financial regulatory reform package that would have set a finite end date for taxpayers’ support of the GSEs and laid out a 15-year plan for the companies’ ultimate wind-down and dissolution. "

"The U.S. Treasury has issued a new Supplemental Directive introducing its payment relief program for homeowners who have lost their jobs.

The Home Affordable Unemployment Program (UP), initially announced by the administration in March, becomes effective July 1, 2010, and offers eligible unemployed borrowers a forbearance plan to temporarily reduce or suspend their mortgage payments for a minimum of three months."

"Extensive money printing by central banks to buy securities in emergency measures, such as those the European Central Bank recently announced to stabilize euro zone government bond markets, will ultimately stoke inflation, wrote Mohamed El-Erian, CEO and co-CIO of Pacific Investment Management Co. (PIMCO) in a 3-5 year "Secular Outlook" summary.

"This potential evolution from disinflation to inflation will likely proceed at different speeds in different parts of the globe. It is already well in train in emerging economies and will remain so," El-Erian wrote.

This week, gold rose to a record above $1,240 an ounce on concerns about the European sovereign debt crisis. Flight into gold can also reflect investors' concerns about the potential for paper currencies to depreciate because of central banks' money printing and worries that inflation could gain momentum.

"Over the medium term, the U.S. will be next, with Europe and, even more, Japan lagging," he added.

In the global financial crisis, "too many balance sheets deleveraged simultaneously, threatening a global depression and forcing governments to step in with their own balance sheets to arrest an increasingly disorderly process," El-Erian wrote."

  • Other news stories and headlines: 

Banks Embrace ‘Extend and Pretend’ as U.S. Hotels Await Rebound

Greek Unemployment Hits 12.1%

Ecuador to Sell $1.5 Billion of Bonds to Finance Gap

Widening trade gap hits UK's export-led recovery hope (If link doesn't work try this one)

Germans face bitter round of budget cuts as the price of eurozone bailout ("Toughest austerity measures in Germany since 1945")....(If that link doesn't work try this one)

Distressed Fort Lee office building's mortgage sells at discount (NJ...Worth $44m in 2007...Asian inestors buy it for $10m)

Feds' health tab for state: $3.6 billion (Indiana)

Fed scores wins in Wall Street reform

CMBS Loan Delinquencies Keep Rising, Moody's Says

Prosecutors Ask if 8 Banks Duped Rating Agencies (NY)

Spain to slash wages to cut deficit, unions angry

Gunfire as Thai Army Starts Protest Siege; Phones Cut

Thai Renegade General Shot as Army Begins Siege of Protest Area

Greek Unions Call New Strike Amid Economic Woe

Hundreds of Romanian retirees protest over announced pension cuts

saxplayer00o1's picture
saxplayer00o1
Status: Diamond Member (Offline)
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Posts: 4066
Re: Daily Digest - May 13

"British oil giant, BP has spent 450 million U.S. dollars already on trying to contain an oil spill in the Gulf of Mexice. Experts believe the full cost with compensation payments could be anything up to 12 billion."

"As mentioned, bullion American coins are on fire, driven by all-time record gold prices and the highest silver prices since March 2008. Compared to last week’s report, the:

24-karat bullion American Gold Buffalos are up 20,000, rising to 33,500 in May

22-karat bullion American Gold Eagles jumped 39,500, reaching 57,000 in May

Bullion American Silver Eagles soared more than 1.1 million, hitting 1,508,500 for May and impressively topping 13 million for the year

With precious metals prices not showing signs of a pullback, the Mint’s bullion coins should have another solid week."

"Sales of smaller gold investment products like coins and bars also jumped. The Austrian Mint, which produces the popular Philharmonic gold coin, said it sold more gold in the two weeks from April 26 than in the entire first quarter.

Elsewhere Swiss refinery Argor-Heraeus said investor demand for small gold bars and minted products had jumped tenfold since the start of the year.

"Our trading desk has seen a marked increase in demand - especially for allocated gold and physical gold coins and bars. Demand for silver coins and bars has risen as well," bullion dealer Goldcore said in a note."

 

 

idoctor's picture
idoctor
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Posts: 1731
Re: Daily Digest - May 13

Gold Returns Put Dow at 50,000http://www.cnbc.com/id/37131162

If the Dow Jones Industrial Average posted the same returns as gold over the last 10 years, the benchmark for U.S. stocks would be over 50,000, according to Bespoke Investment Group.

The metal has increased for ten straight years, producing returns of about 17 percent annually.

Even the guy who wrote ‘Dow 36,000’ back in October 1999 would have been right!” wrote Paul Hickey of the always-provocative Bespoke research team, in a note to clients last night.

This year alone, the price of gold is up 29 percent in Euro terms and if the stock market posted that kind of gain “people would be calling it a bubble.”

Damnthematrix's picture
Damnthematrix
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Posts: 3998
Re: Daily Digest - May 13
 
The gold price didn't break away from the US$400 /oz level till mid-2004,
just as Peak Oil was starting to reach its plateau phase.
Then as the US paid for its oil with confetti dollars,
the price of gold in confetti also went up.
 
idoctor's picture
idoctor
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Posts: 1731
Re: Daily Digest - May 13

affert's picture
affert
Status: Silver Member (Offline)
Joined: Sep 22 2008
Posts: 100
question

Does someone have or know where I could find a chart that shows the price of gold in barrels of oil over the past 20 years?

saxplayer00o1's picture
saxplayer00o1
Status: Diamond Member (Offline)
Joined: Jul 30 2009
Posts: 4066
Re: Daily Digest - May 13

Oops. Posted on wrong date.

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