Daily Digest

Daily Digest - May 18

Tuesday, May 18, 2010, 9:42 AM
  • China Grabs More Treasurys
  • China Home Sales Down 50% In A Month
  • New York State Parks and Historical Site Closures Total 55
  • Ron Paul: The Government as Identity Thieves
  • Ron Paul Discusses Contagion, Gold, Goldman And The Fed
  • March TIC Data Released: Broke UK's Treasury Holdings Go Exponential
  • In The News Today
  • Lessons from Argentina on the Outcomes of a Possible Greek Default
  • How We Wrecked The Oceans
  • Worry That Gulf Oil Spreading Into Major Current


China Grabs More Treasurys (Ben Johnson)

Whatever the actual number for Chinese Treasury holdings, it is clear that right now the U.S. is not facing a funding crisis. Just the opposite, in fact: the prospect of a meltdown in Europe this month sent investors scurrying into Treasury debt with renewed abandon. The 10-year Treasury yield, which hit 4.01% in early April after spending much of March around 3.75%, has recently fallen below 3.5%.

All this offers another suggestion that though the United States faces huge financial challenges, figuring out what the Chinese will do in the bond markets isn't one of them.

China Home Sales Down 50% In A Month (Ben Johnson)

Sellers have started to lower the prices,” said Hu Jinghui, vice general manager of 5i5j, a real estate agency chain that has around 600 outlets in eight cities across China. “But the buyers are still waiting.”

Since the capital put in place the austerity measures on April 30, prices have dropped an average 10-15 percent, with the number of home purchases slumping by 50 percent, according to Hu.

New York State Parks and Historical Site Closures Total 55 (pinecarr)

With New York State facing financial hardship, 41 state parks and 14 historical sites will be closing.

Ron Paul: The Government as Identity Thieves (pinecarr)

If someone incurred debts against you as an individual, without your knowledge or consent, you would call it identity theft. You would call your bank for a full accounting of the debts incurred in your name, and after some verification, those debts would be declared invalid and you would not be held responsible for them. Furthermore, if the culprit was found, they would be prosecuted and sent to jail. Not so with governments and central banks.

Ron Paul Discusses Contagion, Gold, Goldman And The Fed (pinecarr)

The man who will soon be proven to have been right all along, Ron Paul, was interviewed on CNBC earlier discussing topics such as the Greek contagion, Goldman Sachs, surging gold and, of course, the Fed.

March TIC Data Released: Broke UK's Treasury Holdings Go Exponential (pinecarr)

The March TIC data was released. We will provide a longer analysis later in the day, but there is just one thing that readers need to know: UK has now gone exponential in its holdings of Treasuries, with total US Treasuries "held" by the UK increasing by $45.5 mbillion over February, or 20%, to a new total of $279 billion.

In The News Today (pinecarr)

"You have the great problem of a potential disintegration of the euro,” Volcker, 82, said in a speech in London yesterday. “…Will economic and financial distress finally be resolved by looking toward more integration in a closely integrated Europe, politically as well as economically?” said Volcker, who chairs President Barack Obama’s Economic Recovery Advisory Board. “I do have my hopes, as a believer in the euro.”

Lessons from Argentina on the Outcomes of a Possible Greek Default (sammy)

Intuitively, the Argentina default is the most instructive for the current situation as it is both the most recent debt collapse by an industrialized country (last year's Jamaican default didn't attract much fanfare) and the largest in history at $82 billion. For comparison, Greece will need to roll-over roughly €104 billion ($130 billion) between now and 2013, which does not include additional deficit-financing as needed. Regardless, the scope is comparable. Despite the similarities, the ongoing Argentine restructuring process has been unique, though some of the idiosyncrasies of the process do shed some light.


How We Wrecked The Oceans (cmartenson)

The question is how are we all going to respond to this? And we can do all sorts of things to fix it, but in the final analysis, the thing we really need to fix is ourselves. It's not about the fish, it's not about the pollution, it's not about the climate change, it's about us and our greed and our need for growth, and our inability to imagine a world which is different from the Selfish World We Live In Today.

So the question is will we respond to this? Or not? I would say that the Future of Life and the Dignity of Human Beings depends on our [response]. Thank you.

Worry That Gulf Oil Spreading Into Major Current (pinecarr)

"This can't be passed off as 'it's not going to be a problem,'" said William Hogarth, dean of the University of South Florida's College of Marine Science. "This is a very sensitive area. We are concerned with what happens in the Florida Keys."

Please send article submissions to: [email protected]


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Re: Daily Digest - May 18

"WASHINGTON (AP) -- The Treasury Department said Monday it will lose $1.6 billion on a loan made to Chrysler in early 2009.

Taxpayer losses from bailing out Chrysler and General Motors are expected to rise as high as $34 billion, congressional auditors have said."

......................1A) Chrysler loan loss may be pebble on road to $34 billion taxpayer hit

"WASHINGTON (MarketWatch) -- The Senate on Monday evening rejected a measure that would have re-established a $400 billion cap on taxpayer assistance to Fannie Mae and Freddie Mac. The Obama administration had removed a previous $400 billion cap on taxpayer exposure to Fannie Mae and Freddie Mac in late 2009. "

"The pound was unable to hold on to its gains on Tuesday after UK inflation came in higher than expected.

Sterling rose to a session high of $1.4520 against the dollar after figures showed UK consumer price inflation rose to a 17-month high of 3.7 per cent in April, way above the Bank of England’s 2 per cent target."

"May 18 (Bloomberg) -- China’s economic planning agency predicted inflation of about 3 percent this month, a level that economists say could lead to the nation’s first interest-rate increase since the financial crisis."

"Greece received a 14.5 billion euro ($18 billion) loan from the European Union on Tuesday and can now repay its immediate debt, but still faces a mammoth task to claw its way out of recession."

"Concerns that other EU countries such as Portugal and Spain could follow Greece and need aid from the bloc have hit the euro, while investors are still watching Athens to see whether its austerity plan will stave off the prospect of default.

The EU and IMF agreed at the beginning of the month to lend Greece 110 billion euros ($137 billion) over three years to help it pay billions in expiring debt after being shut out of financial markets by the high cost of borrowing."

"MADRID, May 18 (Reuters) - Spain fell just short of its target for selling Treasury bills in an auction on Tuesday and yields almost doubled, as investors shy away from peripheral euro zone debt.

The government sold 6.44 billion euros ($7.94 billion) of 12- and 18-month treasury bills, narrowly under its target range of 6.5-7.5 billion euros.

"The Treasury has had to issue at a bit of a premium, and has sold less than the band they'd fixed," said economist at Caja Madrid Juan Antonio Cabrera."

"May 18 (Bloomberg) -- The crisis engulfing the euro area is not over yet as Greece remains the “tip of an iceberg,” New York University professor Nouriel Roubini said.

“It’s not over,” Roubini said in an interview with BBC radio broadcast today. “What we’re facing right now in the eurozone is a second stage of a typical financial crisis.”"

"BATON ROUGE — Louisiana's "rainy day" fund will be used to help plug a $319 million deficit and rebalance the state's budget with six weeks left in the fiscal year, after the state House gave the proposal final legislative passage Monday.

The legislation by Senate President Joel Chaisson, D-Destrehan, authorizes the use of as much as $198 million from the Budget Stabilization Fund — the maximum allowed under the trust fund's rules."

"Lansing -- Filling the $1.7 billion state budget hole this year won't come close to solving Michigan's nagging fiscal crisis, economic experts warned Monday. "

"Gary Olson, director of the Senate Fiscal Agency, projected that with annual economic growth at 3 percent, the state will face a $1.2 billion, or 13 percent, imbalance in the 2012 budget year; a $1.6 billion, or 17 percent, shortfall in the 2013 fiscal year; and a $1.8 billion, or 19 percent, deficit in the 2014 budget year.

"What is clear to me is the current budget is not sustainable," Olson said. "There must be massive changes to the revenue side of the equation and spending side as well." "

"May 18 (Bloomberg) -- Two years after suffering $213.2 billion of losses when debt markets froze, investors in junk bond are accepting what Moody’s Investors Service calls the weakest creditor protections since 2007.

Even with housing starts hovering at their lowest levels on record, Beazer Homes USA Inc. managed to sell bonds this month on terms that allow it to add more debt. The Atlanta-based builder couldn’t even do that when it issued debentures at the height of the housing bubble in 2006 and its credit rating was seven levels higher. In a report last week Moody’s singled out CF Industries Inc., Standard Pacific Corp., AK Steel Corp. as borrowers offering debt on terms historically available only to higher-rated companies.

“We got ourselves in trouble with that in the past and here it is again,” James Kochan, the chief fixed-income strategist at Wells Fargo Fund Management in Menomonee Falls, Wisconsin, said of the trend toward looser debt covenants. “It’s not that surprising, but it is disturbing,” said Kochan, who helps oversee $179 billion."

"WASHINGTON D.C. (NEWSCHANNEL 3) - Congress will lay out a new plan to save Social Security Tuesday.

The system faces a more than $5 trillion shortfall over the next 75 years, but a new report from Congress says that Social Security can be fixed with just a few small tweaks.

The report recommends things like increasing payroll taxes, reducing annual cost-of-living increases and gradually raising the age to get benefits."

"Germany is well down the path to national insolvency--a path shared by all developed nations attempting to fund unsustainable Savior States.

That the Savior State appeared sustainable was an accidental coincidence of cheap oil and favorable demographics. The notion that a central government could provide cradle-to-grave care for all its citizenry was only possible when the worker-to-retiree/recipient was on the order of 10-to-1 or 5-to-1. Now that it is effectively 2-to-1 in most of the developed world, the demographics have turned decidedly unfavorable."

"The price of brand name drugs widely used by Medicare recipients rose an average 9.7 percent over the past year, according to the latest report from AARP, which notes inflation rose only 0.3 percent.

The price increase is the biggest year-over-year jump since AARP began tracking drug prices in 2002."

"PARIS—The French government said it plans to increase the retirement age, setting up a battle with unions who want the French to continue retiring earlier than most other Europeans.

The government said it plans to introduce a bill to raise the retirement age from the current minimum of 60—though it didn't say to what age—and create a new tax on high earners, to try to fix the nation's debt-choked pension system.

Unions have scheduled a nationwide demonstration on May 27 to protest the proposed overhaul"

"Foreign holders of Greek and Portuguese debt have seized on emergency intervention by the European Central Bank to exit their positions, leaving eurozone taxpayers exposed to the credit risk.

The Bank of New Mellon said its custodial data showed a "sharp acceleration" of net sales of debt from the two countries after the ECB began purchasing €16.5bn of bonds from southern Europe and Ireland in bid to halt market panic. "It rather suggests that investors leapt at the opportunity to clear their balance sheets of intolerable risk," said Neil Mellor, the bank’s currency strategist. "This leaves the ECB itself in an unpleasant situation since it now faces a deterioration in its own balance sheet." "


  • Other news stories, headlines and blogs:

Sacramento: May Revise would add $24 million to local mental health shortfall

Retail vacancy rate rises to 20-year high of 8 percent, report says (New Jersey)

Dallas-Fort Worth commercial real estate foreclosures hit 1,649 for year

City pension solutions all painful (Cincinnati)

More Texas doctors dropping Medicare patients

German business sees Europe bailout stifling growth

Oil sands risks similar to BP oil spill: report (Requires $65 - $95 crude oil prices)

Utah GOP lawmakers face decision on $100 million budget deficit, Garn replacement

Dallas Faces $131.1 Million Budget Shortfall; Tax Hike Possible

Clayton schools will deplete reserve funds (Atlanta)

Worst of times for Niagara County school districts

S&P warns of worsening Spanish regional government deficits

Merced County owes retirement fund; stock losses, accounting errors cost $10 million

Economist warns VAT could come 'In disguise,' Senator calls new taxes 'A four-letter word'

Sovereign Debt Woes Spur 'Lehman II' Concern for Europe's Banks

Budget extender includes raises of up to 7 percent for some public employees (NY)

Pfizer unveils 6000 job cuts

Milliman Analysis Indicates Pension Funded Status Declined $33 Billion in April

Conspiracy of Banks Rigging States Came With Crash

Legalized Theft - UK Proposes 50% Tax on Capital Gains, Up From 18% (Mish...link is on the 3rd paragraph)

Florida tar balls fuel fears of oil slick spread

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Re: Daily Digest - May 18

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Re: Daily Digest - May 18


The Business Insider has an interesting article noting what Richard Russell, publisher of the Dow Theory Letters since 1958, has recently written:

"Do your friends a favor. Tell them to 'batten down the hatches' because there's a HARD RAIN coming. Tell them to get out of debt and sell anything they can sell (and don't need) in order to get liquid. Tell them that Richard Russell says that by the end of this year they won't recognize the country. They'll retort, 'How the dickens does Russell know -- who told him?' Tell them the stock market told him."

Source: http://www.businessinsider.com/dow-theorist-richard-russell-sell-everyth...

Note: I do not have a subscription to Russell's newsletter (it's something like $300) but would love to know more if anyone is a subscriber and is willing to pass along anything that can be legally passed along (Fair Use, synopsis, etc.)

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Re: Daily Digest - May 18

Monetary Base and Money Supply - shadow stats charts

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Re: Daily Digest - May 18

Germany will ban naked short-selling from midnight in shares of the country's 10 most important financial institutions, the  Finance Ministry said. The ban will also apply to credit default swaps on euro government bonds.

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Re: Daily Digest - May 18

May 08, 2010

By Wayne Parry, Associated Press

Lacey Township, N.J. — Radioactive water that leaked from the nation's oldest nuclear power plant has now reached a major underground aquifer that supplies drinking water to much of southern New Jersey, the state's environmental chief said Friday.

The state Department of Environmental Protection has ordered the Oyster Creek Nuclear Generating Station to halt the spread of contaminated water underground, even as it said there was no imminent threat to drinking water supplies.

The department launched a new investigation Friday into the April 9, 2009, spill and said the actions of plant owner Exelon Corp. have not been sufficient to contain water contaminated with tritium.

Tritium is found naturally in tiny amounts and is a product of nuclear fission. It has been linked to cancer if ingested, inhaled or absorbed through the skin in large amounts. At the current rate, it would be 14 or 15 years before the tainted water reaches the nearest private or commercial drinking water wells about 2 miles away.

But the mere fact that the radioactive water - at concentrations 50 times higher than those allowed by law - has reached southern New Jersey's main source of drinking water calls for urgent action, said environmental Commissioner Bob Martin.

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Re: Daily Digest - May 18
DTM wrote:


May 08, 2010 By Wayne Parry, Associated Press

Lacey Township, N.J. — Radioactive water that leaked from the nation's oldest nuclear power plant has now reached a major underground aquifer that supplies drinking water to much of southern New Jersey, the state's environmental chief said Friday.

Holy sh!#, talk about the world going to hell in a handbasket!

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Re: Daily Digest - May 18

Had a small funny moment here today in Denmark that might bring a smile to some faces:

There are basicly 2 main newspapers in Denmark that one can buy everywhere, and recently there have been some stories about the danish central-bank-chief and his family going on vacation paid with taxpayer money.

Was a good laugh when I walked by a newspaperstand earlier today and noticed the big sarcastic headline on the front page of one of the main newspapers, with the head of the danish central bank in picture, next to the sentence"YOU'D THINK HE WAS THE ONE RUNNING THE PRINTINGPRESS" in capital letters so big they took up most of the front page.

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Re: Daily Digest - May 18

check out this video ( 60minutes USA) featuring a staff member on the exploded rig.


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