Daily Digest

Daily Digest - June 5

Saturday, June 5, 2010, 12:56 PM
  • Bay Area jobs hit harder by recession than U.S.
  • Euro sinks to four-year low as Hungary fears being the next Greece
  • G20 drops support for fiscal stimulus
  • Markets rocked as jobs data disappoint
  • Obama hits out at BP over dividend
  • China defends ban on top military links with US
  • Gulf Oil Spill Siphoning Shows Progress
  • Three ETFs to Capitalize on Water Scarcity

Economy

Bay Area jobs hit harder by recession than U.S.

Federal figures show that the Bay Area lost a much higher percentage of jobs than the rest of the nation between April 2009 and April 2010.

The bureau says the nationwide job count shrank 1 percent from April 2009 to April 2010.

During that same period, five Bay Area counties - Alameda, Contra Costa, Marin, San Francisco and San Mateo - experienced a 3.4 percent decline.

Euro sinks to four-year low as Hungary fears being the next Greece

The euro sank to a four-year low against the dollar today amid warnings that Hungary could be the next European country to suffer a Greek-style debt crisis.

< p> Fresh fears around unwieldy European sovereign debts sent the euro falling through $1.20 and knocked stock markets in Europe and the US. A spokesman for Hungarian prime minister Viktor Orban set off alarm bells among investors when he conceded in a television interview that the Hungarian budget was in a "much worse" state than the previous government had indicated and "skeletons were continuously falling out of the closet".

G20 drops support for fiscal stimulus

Finance ministers from the world’s leading economies ripped up their support for fiscal stimulus on Saturday, recognising that financial market concerns over sovereign debt had forced a much greater focus on deficit reduction.

The meeting of the Group of 20 finance ministers and central bank governors in Busan, South Korea, also dropped proposals for a global banking levy, instead giving countries leeway to do what they thought best for their domestic circumstances.

The communiqué of the meeting made it clear that the G20 no longer thought that expansionary fiscal policy was sustainable or effective in fostering an economic recovery because investors were no longer confident about some countries’ public finances. “The recent events highlight the importance of sustainable public finances and the need for our countries to put in place credible, growth-friendly measures, to deliver fiscal sustainability,” the communiqué stated.

Markets rocked as jobs data disappoint

Stocks fell sharply on Friday as a report showing that the US added just 41,000 private sector jobs in May shook confidence in a sustained economic recovery.

The increase of 431,000 in non-farm payrolls was swollen by temporary government hiring of 411,000 workers for the national census. That boost had been expected.

The S&P 500 fell 3.4 per cent – its worst decline in more than two weeks – as investors sought the safety of government debt, pushing the yield on 10-year Treasury notes down 18 basis points to 3.20 per cent. The dollar index hit its highest level since March 2009 as the euro fell 1.6 per cent to below $1.20, a four-year low.

China defends ban on top military links with US

China’s military has broken off top-level links with the US because Washington has reneged on an undertaking to wind down arms sales to Taiwan, a top Chinese general said on Saturday.

In China’s strongest public comment on the issue, General Ma Xiaotian, deputy chief of staff of the People’s Liberation Army, said Beijing had “temporarily suspended” high level military visits, although lower level contacts were continuing.

Energy

Gulf Oil Spill Siphoning Shows Progress

VENICE, La/PENSACOLA BEACH, Fla (Reuters) - Efforts to siphon off oil gushing from a ruptured deep-sea wellhead in the Gulf of Mexico were starting to work, U.S. officials said on Saturday, while President Barack Obama defended his handling of the environmental crisis.

The containment cap that British energy giant BP Plc clamped over the ruptured wellhead collected about 6,000 barrels of oil on Friday, U.S. Coast Guard Admiral Thad Allen said at a briefing in Theodore, Alabama.

Obama hits out at BP over dividend

Barack Obama on Friday night warned BP against “nickel and diming the folks” of the Gulf of Mexico coast as the group’s attempt to trap oil from the leaking well recorded some initial success.

The US president, on his third trip to Louisiana since the spill, criticised BP for spending $50m (£35m) on television advertising to manage its image while still considering whether to pay out $10bn in dividends this quarter.

Environment

Three ETFs to Capitalize on Water Scarcity

As global populations continue to grow, advancements in medical technology continue to prolong life, and developing economies add wealth, the global imbalance in supply and demand for water make it a hot resource for the future.

Water is a commodity that is absolutely essential to life and is becoming increasingly scarce. At current rates, it is expected that demand for potable water will grow 6% annually. This, in conjunction with natural disasters and the water shortage already seen in many parts of the world, is drawing heavy attention to the commodity which comprises the vast majority of the world.

The imbalances are currently hitting India and China and are expected to get worse. According to a study conducted by McKinsey & Co., water demand in the next two decades will double in India to 1.5 trillion cubic meters and rise 32 percent in China to 818 billion cubic meters. Additionally, at current consumption rates, the 1.2 billion people in India, where farmers use 80 percent of available water, will exhaust their fresh-water supplies by 2050.

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11 Comments

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
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Posts: 5752
Re: Daily Digest - June 5

The G20 article is the real economic shocker of the weekend.  It tells of a very dramatic split between the US and European approaches to the crisis.  You can be that Geithner et al. are not happy about this...after all, unless everybody is being profligate it becomes much harder for the US to maintain its 10% of GDP deficits.

And it's an election year in the US...the pressure builds.

saxplayer00o1's picture
saxplayer00o1
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Posts: 4164
Re: Daily Digest - June 5

From Saxplayer:

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

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

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

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

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

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

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

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

CDS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

 

 

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

May Was Hedge Funds' Worst Month Thus Far In 2010

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

Gulf states spending $50 billion to increase oil output

France losing Africa to China

Talk of Hungary default "wildly exaggerated" - EU

IRS Audits Send Chill Through Build America Program

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

107000 Floridians lose jobless checks today

700 CPS teachers receive layoff letters (Chicago)

Goldman bet $35m against California

Fitch: Delinquent commercial loans rose in May

Moody's: Offshore drilling insurance rates to jump

Cincinnati 2011 Budget Deficit Estimated At $50 Million

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

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

r's picture
r
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Posts: 262
Re: Daily Digest - June 5

A Negative 2% GDP in the Third Quarter?

From John Mauldin's hedge fund newsletter:

"And now let me introduce you to a new economic metric from the Consumer Metrics Institute. They track consumer discretionary spending on a daily basis. ( http://www.consumerindexes.com/index.html – hat tip Bill King.) From their web site:

"The Consumer Metrics Institute was founded on a simple observation: many 'leading' economic indicators are published, but few (if any) are sufficiently 'leading' to be meaningful to investors. In fact, many 'leading' indicators use the prior month's equity market results as a key component of their indexes. Investors may find their most recent month-end account statements more timely.

"To remedy this, the Consumer Metrics Institute has developed (and is continuing to develop) techniques for monitoring 'up-stream' economic activities on a daily basis. The daily consumer sampling process commenced in 2004, and several years of data were required to refine the process and statistically analyze how the timing of our indexes related to other 'leading' indicators, including the equity markets. The 2008-2009 recession provided a final validation of the methodologies and confirmed a multi-month lead relative to other commonly referenced indicators."

Their Consumer Metrics Institute Growth Index, which is the composite of a number of sub-indices, seems to lead GDP growth by about 4-5 months. Look at this chart showing the index and GDP growth for the past four years."

Consumer Metric Ins. Daily Growth vs BEA's Quart. GDP

http://www.consumerindexes.com/index.html

"On May 27th the BEA released its first revision to its 1st Quarter 2010 GDP growth rate measurement, lowering the number from a 3.2% annualized growth rate to 3.0% annualized growth. One day later the Consumer Metrics Institute's 'Daily Growth Index' was signaling what we should expect the BEA's measurement of the 3rd Quarter 2010 GDP growth rate to be contracting at about a 2.0% rate.

"The prior BEA estimate of 1st Quarter 2010 GDP growth trailed our 'Daily Growth Index' by 127 days, and because of the rapid rate that the economy was cooling when the measurements were being made the newly adjusted estimate is now trailing our 'Daily Growth Index' by 125 days. Since the 3rd Quarter of 2010 ends 125 days after May 28th (when our 'Daily Growth Index' was recording a 'growth' rate of -1.99%), if the BEA estimates continue to trail our 'Daily Growth Index' in a consistent manner we should expect that the 3rd Quarter's GDP 'growth' rate will be in the -2.0% neighborhood."

Wow. A negative 2% in the quarter starting next month? How can that be? Let's look at what caused the recent growth.

First-quarter GDP was revised down to 3% last week by the BEA (Bureau of Economic Analysis). But buried in that release was an upward revision to inventories, which accounted for over half of that 3%. At some point inventories become balanced and no longer grow.

And that may already be happening. We got the ISM number on Wednesday, and it came in somewhat above consensus at a quite robust 59.7. But when you look at the inventory sub-component, you find a different picture. It was slightly negative in April and dropped another 3.8 in May to be down to 45.6. This is a drop in that index of 9.7 points in just two months (anything north of 50 shows growth and below 50 suggests no growth or actual retreat).

Increases in inventory count as a plus when you are figuring GDP. If inventories are not growing, that figures to be a drag on second-quarter GDP.

And a significant part of the growth in the past three quarters came from transfer payments from the government (AKA stimulus), which are going away. The money received by state and local governments, which allowed them to keep employees on the job, is now being taken off the table; and the stories of state and local governments having to cut back are everywhere."

mono's picture
mono
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Posts: 70
Re: Daily Digest - June 5

A european perspective.

Geithner is out alone now. Europe does not follow the philosophy of " More Debt Is A Good Thing"!

I´d be very interested to hear what the words are which he uses to explain this to Pres. Obama, who seems to understand f__k   all!

Off course this is a huge problem for Bernanke , Geithner and their Wall Street possy. It´s impossible to keep inflating when a block like europe, and apparently China, all over sudden start to bring down deficits and propagate fiscal prudence. America has to realize it is them who is running in danger of losing the status of the World Reserve Currency, not others.

Europe may be facing a lot of work and a rough ride ahead, but while europe may appear weak, it´s the US that´s hitting the brick wall.

A system that lost it´s abilitiy to reform itself is doomed and, one way or the other, will go down and vanish.

 

LogansRun's picture
LogansRun
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Peak Oil going Mainstream

Ugh!  Propaganda at its best.  


Can't get the dang thing to copy over an excerpt!  Trust me, you'll want to read this MSM piece of propaganda.  


http://www.msnbc.msn.com/d/37530595/ns/us_news-the_new_york_times/

Again I feel selfish in saying this but, I hope not too many people take this article seriously.  I'm not ready!  Maybe I'll never be ready but, I want more of a head start!  

Selfish?  Yes.  Do I care?  Not one bit.InnocentEmbarassed

Damnthematrix's picture
Damnthematrix
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Posts: 3998
Re: Peak Oil going Mainstream

We are now at the point of 'peak technology', where the risks of drilling technology have become greater than we are willing to support.

 

A slippery business: It's the end of easy oil - and maybe BP too

By William Rees-Mogg

http://www.dailymail.co.uk/debate/article-1284250/Rees-Mogg-A-slippery-b...

 

We have recently been discovering some of the limits of Man's power over Nature, first in terms of volcanic ash, and now oil.

The Gulf of Mexico spillage reflects the risk of pushing oil exploration to the limit of technology 5,000ft below the sea's surface.

Something very like this disaster occurred 30 years ago, in a well operated by Petroleos Mexicanos, also in the Mexican Gulf area. That well was called Ixtoc 1, and was operating only 150ft below the surface of the water.

This reflects not only the development of oil recovery technology, but also the growth in demand for oil, and the shortage of supply.

Nobody would be looking for oil at 5,000ft if there were new supplies in shallower waters.

The oil market registers the scarcity of oil. Last week oil was $74 a barrel for Brent Crude.

The progressive rise in the price over the past 30 years has been a measure of the growth in demand and the failure of supply to meet that demand.

If the oil companies are to satisfy their markets, they have no choice but to develop high-cost sources which in earlier decades would have been regarded as hopelessly uneconomic.

Indeed, President Barack Obama's administration started with a pledge to make the United States nearer self-sufficient in oil by encouraging development projects offshore.

The BP spillage in the Gulf of Mexico has done considerable damage to that policy.

Barack Obama's self-sufficient oil policy has been hit hard by the BP spill

There are three facts which have to be recognised. The first - and most important - is that the age of readily available petroleum is over.

For some time there has been a theory that the world had already reached 'peak oil': the point at which the growth of demand for oil exceeds the growth in supply.

The BP disaster goes beyond the doctrine of peak oil. We are now at the point of 'peak technology', where the risks of drilling technology have become greater than society is willing to support.

In the United States, the oil risk has become a political risk.

EndGamePlayer's picture
EndGamePlayer
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Posts: 546
Re: Daily Digest - June 5

Hey LogansRun-

I used to feel that way too - hoping I could run my "game plan" well ahead of the crowd. Then I realized - me and My Family are not safe if I don't offer help to the people next door and teach them to help the people next door to them and the next ones on to the next. ...and on and on.. . .no matter how many guns, ammo or other security measures are taken. 

I can spend less energy in passing someone a dvd to help inform them verse spend night/day sitting guard around my perimeter. I can offer someone seeds now and tell them how to grow some food in anyway they can and take the seed from that food to have even more the next season -  because it is a commodity more precious than gold when times get really rough. The investment is small compared to the pay-off and a stash of seed is a jackpot of riches.

There is ALWAYS an initial reaction from those few people who "get it" - of over-reacting, fear of the future and self-preservation. Remain calm and now is the time to think about how we want to re-build a new world - not an extreme of what humanity can be in the worst of times. Let your end game plan be an example to how to get through this - not just for yourself - but the family next door and hope encourage them to pay-it-forward too.

So put your emotions aside and do what is best for us all - including yourself. Man up.

EGP

saxplayer00o1's picture
saxplayer00o1
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Posts: 4164
Re: Daily Digest - June 5

Thanks for the repost! (comment #2).

 

deggleton's picture
deggleton
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Posts: 250
Re: Daily Digest - June 5

"Water is a commodity that is absolutely essential to life and is becoming increasingly scarce."

That commodity precedes absolutely essential to life says much about the divide-and-captivate economy.

LogansRun's picture
LogansRun
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Posts: 1444
Re: Daily Digest - June 5

EGP,

I agree and am doing as you say.  I've set up the neighborhood "watch and prepare" program in which we (4 neighbors) are all growing different vegi's and have put together orchards and canning parties.  Next is chickens and windmills.  So I am sharing and getting people of like mind together.

My sense of selfishness comes from the future pricing of readiness.  I know that once this info gets mainstream, the price of getting better prepared is going to skyrocket.  And I'm not ready yet!  

At least this is getting me and my community moving a little faster!  We're now buying the windmills and solar setup in the next 2 weeks.  I'm also buying 2 extra solar arrays to be put into storage for future use.  We've also begun to dig our wells and put up proper fencing.  I guess you could call it a compound;-)  We're hoping that as we get more and more advanced in our planning that more of the neighborhood will figure it out and join in......or maybe not.

Best!

 

EndGamePlayer wrote:

Hey LogansRun-

I used to feel that way too - hoping I could run my "game plan" well ahead of the crowd. Then I realized - me and My Family are not safe if I don't offer help to the people next door and teach them to help the people next door to them and the next ones on to the next. ...and on and on.. . .no matter how many guns, ammo or other security measures are taken. 

I can spend less energy in passing someone a dvd to help inform them verse spend night/day sitting guard around my perimeter. I can offer someone seeds now and tell them how to grow some food in anyway they can and take the seed from that food to have even more the next season -  because it is a commodity more precious than gold when times get really rough. The investment is small compared to the pay-off and a stash of seed is a jackpot of riches.

There is ALWAYS an initial reaction from those few people who "get it" - of over-reacting, fear of the future and self-preservation. Remain calm and now is the time to think about how we want to re-build a new world - not an extreme of what humanity can be in the worst of times. Let your end game plan be an example to how to get through this - not just for yourself - but the family next door and hope encourage them to pay-it-forward too.

So put your emotions aside and do what is best for us all - including yourself. Man up.

EGP

Poet's picture
Poet
Status: Diamond Member (Offline)
Joined: Jan 21 2009
Posts: 1891
Re: Daily Digest - June 5
LogansRun wrote:

My sense of selfishness comes from the future pricing of readiness.  I know that once this info gets mainstream, the price of getting better prepared is going to skyrocket.  And I'm not ready yet!  

LogansRun

I feel similarly. Despite being debt free, I am low on resources. I live in a one-bedroom apartment community with my wife. We have balcony space - not yard space - with which to plant. We are still on a waiting list for a community garden plot. It's been over 2 years. My hope is that there is at least a few more years during which I can become more prepared.

Poet

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