Daily Digest

Daily Digest - May 5

Wednesday, May 5, 2010, 10:44 AM
  • Wadhwani Sees Sovereign Crises ‘Recurring’ After Greek Bailout
  • Calpers Suit Against Ratings Services Can Proceed
  • New York's Paterson to Include Furloughs in Spending Bill
  • Rockefeller Institute: Federal Income Tax Collections Foretell More Bad News for States
  • Los Angeles on the Brink of Bankruptcy
  • French indignant over government plan to raise retirement age
  • Pennsylvania Governor Warns Lawmakers To Act On Transportation
  • MWRA Water Crisis Over, Boil Water Order Lifted
  • Official: Fund Cuts Would Hurt Oklahoma Road Projects
  • Report: North Dakota Homeless Population Hits Record Level
  • 1 in 9 Canadians Admit to Experience Homelessness or Close to it
  • Even the bears aren't bearish enough on Spain's coming sovereign debt problem
  • Spanish, Portuguese CDS spreads soar on debt fears
  • Australian Bond Risk Surges Most in 10 Months on Debt Fears
  • Euro Falls Below $1.30 on Concern Greek Debt Crisis May Spread
  • Judge upholds state raid on redevelopment funds; San Jose to pay $75 million
  • Mortgage Bond Spreads at Widest in Five Months: Credit Markets
  • Russia Seeks Ukraine Assets as EU Focuses on Greece, Rahr Says
  • PBGC deficit could reach combined $34 billion by 2019
  • Spanish PM says reports of €280bn aid is madness
  • Idaho tax revenues fall $55M short in April; official says gov has 'tools' to address issue
  • Pound Weakens as Hung Parliament Seen More Likely in Election
  • California' budget crisis expected to linger
  • Failed $2B Bloomfield Park project a monument to downturn
  • Pound Will Drop as Policy Makers Favor Weaker Currency, BNP Says
  • Arkansas governor taps rainy day fund to plug budget holes
  • County budget gives officials a bleak feeling
  • Experts paint grim picture for local tourism economy
  • Gulf Oil Leak Could Be 12 Times More If Not Capped, Markey Says
  • Bee keepers blame sponsorship deal over collapse in numbers

Economy

Wadhwani Sees Sovereign Crises ‘Recurring’ After Greek Bailout

“We don’t really have a credible mechanism in place to deal with potentially Portugal and Spain,” Wadhwani said in a televised interview at an event hosted by Fathom Financial Consulting in London yesterday. “My strong suspicion is that we have recurring sovereign debt crises. Although I’m not sure how long it’ll take for the next one.”

Calpers Suit Against Ratings Services Can Proceed

A state court judge in San Francisco rejected the companies’ requests to dismiss Calpers’ claims of negligent misrepresentation, Brad Pacheco, a spokesman for Calpers, the largest U.S. pension fund, said today in a phone interview.

Calpers sued the three major bond-rating companies for $1 billion in losses it said were caused by “wildly inaccurate” risk assessments. They used methods to analyze medium-term notes and commercial paper that were “seriously flawed in conception and incompetently applied,” Calpers said in its lawsuit filed July 9.

New York's Paterson to Include Furloughs in Spending Bill

New York Governor David Paterson said his next emergency spending bill will furlough 100,000 state workers for one day a week to help keep the government operating in the absence of a budget.

Rockefeller Institute: Federal Income Tax Collections Foretell More Bad News for States (Posted by rjs)

Through April 30, the federal government’s nonwithheld income taxes are down 17.6 percent from a year earlier. That is likely a close estimate to the final decline the Internal Revenue Service will see in nonwithheld income tax collections in this period; in 2009, 96 percent of April and May's nonwithheld taxes were known by April 30.

“We have been watching this data closely since our last report, when we discussed this issue,” said Institute Senior Fellow Donald J. Boyd. “With the data now in hand, it’s all over but the crying.

Los Angeles on the Brink of Bankruptcy

According to the city's own forecasts, in the next four years annual pension and post-retirement health-care costs will increase by about $2.5 billion if no action is taken by the city government. Even if Mr. Villaraigosa were to enact drastic pension reform today—which he shows no signs of doing—the city would only save a few hundred million per year.

As a result of his delays in responding to the city's fiscal emergency, Mr. Villaraigosa has squandered not just his career, but his relevancy. He continues to insist that bankruptcy is not an option for Los Angeles even as anyone who can count understands there is no other option.

French indignant over government plan to raise retirement age

Few issues are as sensitive in a region where the right to retire at a decent age, and retire well, is considered almost an inalienable social right. For many here, it's one of the defining elements of their identity as Europeans, part of what they feel makes them different - more reasonable, more humane - from overworked, overstressed Americans.

Pennsylvania Governor Warns Lawmakers To Act On Transportation

The Pennsylvania Department of Transportation says about a fifth of the state's highway miles -- and a similar portion of its bridges -- are in poor condition. It calculates the total backlog of maintenance needs at about $14 billion, or roughly half the state's annual general fund budget.

MWRA Water Crisis Over, Boil Water Order Lifted

Environmentalists said the rupture highlights the need for greater attention to water infrastructure. There is an estimated $8.5 billion needed to ensure clean drinking water in Massachusetts. The authorities said that people should think where the water comes from and the cost that goes into maintaining clean water.

Official: Fund Cuts Would Hurt Oklahoma Road Projects

The Department of Transportation would lose $492 million over eight years if lawmakers impose a 20 percent cut, severely curtailing the state's effort to upgrade and rebuild obsolete and deficient roads and bridges, said Transportation Secretary Gary Ridley.

Report: North Dakota Homeless Population Hits Record Level

Volunteers counted 1,126 homeless people during a Jan. 27 survey, according to the report issued by the North Dakota Coalition for Homeless People. That was up from 987 people counted last year and 836 in 2008, said Michael Carbone, the group's executive director.

More than 7,100 people are expected to experience homelessness this year, more than double the number earlier in the decade, Carbone said. "It's the highest it's ever been," he said.

1 in 9 Canadians Admit to Experience Homelessness or Close to it

Respondents included in Saskatchewan and Manitoba posted the highest rate, with nearly 20% admitting that they had been homeless or near to it.

Even the bears aren't bearish enough on Spain's coming sovereign debt problem

There are two ways we look at how likely a country is to default on its debt. First, we consider the ratio of budget deficit-to-GDP. Here, Spain is clearly in trouble. As of the end of 2009, Spain's ratio was 11.2% of GDP, and set to accelerate in 2010. Historically, anything beyond 10% is in the danger zone of potential for sovereign debt downgrades, and will lead to an acceleration of borrowing costs. Based on that metric, Spain will need roughly 150 billion euros in debt to fund its budget this fiscal year.

Spanish, Portuguese CDS spreads soar on debt fears

The cost of insuring Spanish and Portuguese government debt against default soared on Tuesday, while stock markets in Madrid, Lisbon and Athens posted sharp losses, as fears that the European debt crisis is spreading returned in full force.

Australian Bond Risk Surges Most in 10 Months on Debt Fears

The cost of protecting Australian corporate bonds from non-payment surged the most in more than 10 months after the euro, U.S. and European stocks plunged on fears Greece’s debt crisis may spread.

Euro Falls Below $1.30 on Concern Greek Debt Crisis May Spread

The euro slipped against 12 of 16 major counterparts before German Chancellor Angela Merkel speaks to parliament on the bailout. Her coalition has stepped up calls for allowing the “orderly” default of region members burdened with debt to avoid a repeat of the Greek crisis. The dollar advanced against the yen on speculation Asian stocks will extend a worldwide slump in equities.

Judge upholds state raid on redevelopment funds; San Jose to pay $75 million

Sacramento County Superior Court Judge Lloyd Connelly ruled the state can transfer more than $2 billion from local redevelopment funds to school operations. Local governments objected to diverting the money, which generally is used for public works projects and to rehabilitate downtowns.

"Once again, Sacramento's budget failures have serious consequences for San Jose and the entire state," Mayor Chuck Reed said in a statement. "We've had to cancel and delay projects that would get our economy moving again."

Mortgage Bond Spreads at Widest in Five Months: Credit Markets

Yields on Fannie Mae and Freddie Mac mortgage securities that guide home-loan rates climbed to the highest in five months relative to U.S. Treasuries as Europe’s worsening government finances led investors to shun all but the safest assets.

Russia Seeks Ukraine Assets as EU Focuses on Greece, Rahr Says

Prime Minister Vladimir Putin proposed uniting Gazprom with NAK Naftogaz Ukrainy at an April 30 meeting with Ukrainian premier, Mykola Azarov. Russia already agreed to give Ukraine as much as $45 billion in gas subsidies and talks have begun on closer ties in nuclear energy, aviation and agriculture. Russia’s second-biggest lender, VTB Group, is ready to lend Ukraine $500 million if asked, Putin also said.

PBGC deficit could reach combined $34 billion by 2019

The PBGC’s single-employer pension plan program could have a deficit of $30 billion by 2019, while its multiemployer plan program could see a $4 billion shortfall by then, according to the agency’s 2009 annual report issued Tuesday.

The deficits represent the average possibilities for the two pension programs calculated using the PBGC’s pension insurance modeling, or PIMS, system.

Spanish PM says reports of €280bn aid is madness

"I was told something about that rumour and the truth is I give it no credit, it is complete madness," he told journalists. "These rumours can increase differences and hurt the interests of our country, which is simply intolerable and of course we intend to fight it," he said.

Idaho tax revenues fall $55M short in April; official says gov has 'tools' to address issue

Preliminary tax revenue data show Idaho collections in the critical month of April fell more than $55 million below the estimates set by the state's chief economist, a shortfall due in part to higher-than-expected income tax refunds.

Pound Weakens as Hung Parliament Seen More Likely in Election

The pound fell for a third day against the dollar, the longest run of declines in more than five weeks, on speculation this week's election will leave the nation with a government too weak to rein in its record budget deficit.

California' budget crisis expected to linger

April is the biggest revenue month because it is when most Californians pay their taxes.

The drop wiped out months of steady gains that legislators hoped would ease their budget troubles and restore California's economy faster than experts predicted, the report noted.

Failed $2B Bloomfield Park project a monument to downturn (Michigan)

To the thousands daily who cruise by the 93-acre site on Telegraph Road near Square Lake, Bloomfield Park has become the most visible, glaring reminder of Oakland County's recent reversal of fortune. To those who live and work in the area, the impact of seeing this looming hulk is emotional, a recurring psychic blow. "I cringe when I drive by," says Bloomfield Township Supervisor David Payne, who fought the project for 15 years. "It's our worst nightmare."

Pound Will Drop as Policy Makers Favor Weaker Currency, BNP Says

The pound will decline against the dollar and the euro as investors speculate that policy makers will favor a weaker currency to boost growth and lure foreign investors to fund Britain’s budget deficit, BNP Paribas SA said.

“The pound will be one of the biggest losers of 2010,” Ian Stannard, a foreign-exchange strategist at BNP Paribas, said at a conference in London today.

Arkansas governor taps rainy day fund to plug budget holes

The Arkansas Department of Finance and Administration recommended the cuts after reporting a sharp decrease in the state's individual income tax collections in April. Net available revenues for the month were $32 million below the Department's forecast.

"We did not think we would have a hit this big," said Richard Weiss, director of the Department of Finance and Administration.

County budget gives officials a bleak feeling (Annapolis)

"I don't think anyone should have any big expectations. There are years you can come up with $10 million like that," Dillon said, snapping his fingers. "At the end of May, there won't be any piggy banks left to raid. I really thought all the piggy banks were gone last year."

Experts paint grim picture for local tourism economy (Florida)

“It’s horrific. It’s hard to comprehend,” said Bos, president of Legendary Inc. “We don’t really know what we’re dealing with. We don’t know what to expect. We know how to respond to a hurricane. It’s going to be very detrimental to most businesses.”..Tourism represents about 10 to 12 percent of the local economy in Santa Rosa County. That number increases to about 20 to 25 percent in Okaloosa County and more than 50 percent in Walton County.

“If we do have dead fish, oily beaches, we can reasonably expect visitors to stay away. And this hits right at the start of our peak visitation season,” Harper said.

Energy

Gulf Oil Leak Could Be 12 Times More If Not Capped, Markey Says

Oil leaking from a BP Plc well in the Gulf of Mexico could increase as much as 12 times to 60,000 barrels a day if the company fails to stem the flow, Representative Edward Markey said after a briefing by industry executives. “The amount of oil per day could actually rise from 5,000 to 60,000 barrels,” Markey, a Massachusetts Democrat, told reporters in Washington today. “Although in a worst-case scenario the most likely number was in a 40,000-barrel range.”

Environment

Bee keepers blame sponsorship deal over collapse in numbers

A group of former members have split from the British Bee Keepers Association and criticised its 12-year-sponsorship deal with chemical companies Bayer Crop Sciences and Syngenta who produce pesticides that the group say are harmful to bees.

Bee numbers in England have tumbled by more than half over the last 20 years, and the situation is twice as bad in Britain as across the channel, according to Reading University.

16 Comments

saxplayer00o1's picture
saxplayer00o1
Status: Diamond Member (Offline)
Joined: Jul 30 2009
Posts: 4167
Re: Daily Digest - May 5

"Poland’s government may scale back its planned bond auction today as Raiffeisen Centrobank SA and ING Groep NV expect the first jump in borrowing costs this year on concern Greece’s debt crisis will spread. "

"May 5 (Bloomberg) -- European Central Bank council member Axel Weber said Greece’s fiscal crisis is threatening “grave contagion effects” in the euro area, justifying Germany’s contribution to a 110 billion-euro ($142 billion) aid package."

(Once again Bloomberg changed the story, so here's a link to see some of the original)

"Capital markets may be facing the biggest crisis in a century with governments all but powerless to ward off a sovereign debt disaster, according to Gary Jenkins at Evolution Securities Ltd.

Investors greeted plans for a 110 billion-euro ($143 billion) bailout of Greece by shunning the bonds of Europe’s debt-ridden nations on concern the aid package won’t solve the country’s deficit crisis or prevent contagion. Credit-default swaps on Greece, Spain, Portugal and Italy surged and the euro tumbled.

“The capital markets could soon be in the midst of the largest financial crisis of the last 100 years,” said London- based Jenkins, Evolution’s head of credit strategy. “With government debt itself perceived to be the problem the potential for political and economic change is much greater.”

A continuation of yesterday’s trading patterns will mean the European Union will have to act and the only card it has left to play is to ask the European Central Bank to buy government bonds, Jenkins said."

"Gold prices tumbled on Tuesday after hitting five-month highs above $1,190 in earlier trading, as investors sold bullion to raise cash amid a global equities sell-off.

Silver, platinum and palladium all posted their biggest one-day losses since February on fears the financial rescue package for Greece might not be enough to contain a sovereign debt crisis. The S&P 500 stock index <.SPX> tumbled 2.5 percent.

"You have worries today that this contagion is extending much longer than everybody thought would be possible. When that happens, you sell what you have and you sell what you can," said Zachary Oxman, managing director of California-based TrendMax Futures.

"You are seeing a lot of funds selling a lot of inventory, trying to raise cash and getting themselves away from risks.""

.........................4A) Gold May Extend Decline From 2010 Peak as Dollar Strengthens

.........................4B) Gold-Silver Ratio at Two-Month High as Risk Aversion Grows

"More than $1.1 trillion was wiped from the value of global stocks yesterday"

"According to China Electricity Council Central and southeastern parts of China may be short of power during peak hours in this summer, due to tight supply, price hikes of thermal coal and drought in hydropower generating region."

"There are only two solutions to the sovereign debt crisis — raise taxes or cut spending — but the political gridlock may prevent either from happening"

"While the markets these days are worrying about Greece, it is only the tip of the iceberg, or the canary in the coal mine of a much broader range of fiscal crises. Today it is Greece. Tomorrow it will be Spain, Portugal, Ireland and Iceland. Sooner or later Japan and the US will be at the core of the problem, shaking the global economy.

We need to recognize that we are in the next stage of financial crisis. The coming issue is not private-sector liabilities, but public-sector liabilities."

"Contagion from the Greek deficit crisis swept through European credit markets, triggering a surge in the cost of insuring European banks against default to a one- year high and driving Spanish and Portuguese debt swaps wider.

The Markit iTraxx Financial Index of credit-default swaps on 25 banks and insurers increased as much as 11 basis points to 146, the highest since April 29, 2009. Swaps on Portugal surged as much as 55 basis points to 401, according to CMA DataVision prices, and contracts on Italy, Ireland and Greece also rose.

There’s a threat of “grave contagion effects” from the Greek fiscal crisis, European Central Bank council member Axel Weber said. Policy makers must “contain the bush fire,” said EU Economic and Monetary Affairs Commissioner Olli Rehn, although financial assistance for other countries isn’t being proposed."

............................8A) Spain, Greece default insurance costs at record

"The Greek five-year CDS spread rose to a record of 856.8 basis points, CMA said, up from 764.5, while the Portuguese spread widened to 391 basis points from 344. Italy widened to 178.4 basis points from 162.3 and Ireland widened to 244.8 basis points from 219.3 basis points."

"May 5 (Bloomberg) -- Spain faces an “explosive cocktail of risk factors” as it wrestles with a fiscal deficit at 11 percent of gross domestic product caused by bad loans to builders and swelling unemployment, UniCredit SpA said.

The nation’s budget gap is the third largest in the European Union and with an unemployment rate of more than 20 percent, the government in Madrid has limited room to maneuver, according to Stefan Kolek, a credit strategist at UniCredit. Bad loans at Spanish lenders climbed to 5.3 percent of total credit in January as the worst recession in 60 years forced borrowers to miss payments on their debt.

“The high dependence of the economy on a highly leveraged construction sector in conjunction with still falling housing prices makes an explosive cocktail of risk factors,” Munich- based Kolek wrote in a note to investors."

...........9A) Spain's Deficit to Exceed Greek Gap; EU Says Warns on Growth

"May 5 (Bloomberg) -- Spain’s budget deficit will be larger than Greece’s shortfall this year, the European Commission forecast, signaling the Madrid government’s growth forecasts may be too optimistic."

...........9B) Spain's Borrowing Costs May Rise as Zapatero Confronts 'Abyss'

"May 5 (Bloomberg) -- Spain's borrowing costs may climb tomorrow at the country's first debt sale since its credit rating was cut last week on concern the fiscal crisis pummeling Greek bonds will spread to fellow euro-region countries.

The Treasury may sell as much as 3 billion euros ($3.89 billion) of five-year notes to yield 3.34 percent, according to the median estimate of seven analysts and investors in a Bloomberg News survey. The yield was 2.84 percent when Spain auctioned 4.5 billion euros of the same securities on March 4."

"The JPMorgan economists said their calculations, while highly sensitive to growth and interest rate assumptions, showed the task ahead for the world's major economies was daunting.

Because the scapel is unlikely to be taken to public finances in earnest before 2012, it worked out what primary budget surpluses -- which exclude debt interest payments -- would be needed in the major economies to cut 2013 debt -to-gross-domestic-product ratios back to 2007 levels by 2023.

The upshot was the United States needed a sustained primary surplus of nearly 4 percent of GDP for 10 years to reduce a 2013 debt ratio of 101 percent back to 2007 levels of 62 percent.

That compares to an estimated 2010 U.S. primary deficit of some 7 percent of GDP.

To put it in some context, it would exceed the massive U.S. budgetary correction after World War Two when, according to IMF data, it took 17 years to 1963 get a bloated U.S. debt-to-GDP ratio of 108 percent back down to 1941 levels of 42 percent.

In that correction, the primary balance averaged only 1.4 percent of GDP and was in surplus 14 of the 17 years.

And this time around, governments have the added problem of an expected explosion of entitlement spending as the baby boomer generation starts retiring in droves over the next 10 years.

It's not just the United States. JPMorgan's calculations show Britain would need even bigger surpluses of up to 5 percent a year for 10 years to 2023 and Japan would need a whopping primary surplus of almost 7 percent of GDP by the same metrics.

The euro zone as a whole -- despite big national variations obvious in the heat felt by Greece, Portugal and Spain -- needs a still hefty but more modest 2.7 percent primary surplus due to the more stable position of its "core" in Germany and France."

"The city of San Diego is suing its retirement system in a dispute regarding how much financial responsibility, if any, city workers should bear for a pension deficit topping $2 billion.

If successful, the lawsuit could lead to city workers helping pay for the pension fund’s investment losses rather than the current practice of having taxpayers make up for any deficiencies. The potential taxpayer savings have been estimated at $40 million for the fiscal year that begins July 1.

The lawsuit is based on City Attorney Jan Goldsmith’s interpretation of the city charter."

"NEW YORK (CNNMoney.com) -- Think states have made deep spending cuts? You ain't seen nothing yet.

States have been struggling with huge budget gaps since 2008, but this year could be worse as federal stimulus funds wind down. "

"As of mid-April, states and localities have received nearly $109 billion since the American Recovery & Reinvestment Act was passed in February 2009, according to the U.S. Government Accountability Office. The vast majority of that money went to help states maintain their Medicaid services and education funding in the face of steep drops in tax revenues due to the recession.

In all, the stimulus funds helped plug between 30% and 40% of the $291 billion in budget gaps that states have faced over the past two years, experts said. But Recovery Act money will only be sufficient to plug 20% or less of the coming fiscal year's shortfalls, according to the Center on Budget and Policy Priorities. By fiscal 2012, most of the money will be gone.

Already, many states will have used up much of their education allotments by the start of fiscal 2011, which begins on July 1 in 46 states. And the Medicaid assistance will dry up by the end of the year, unless Congress extends it."

"May 5 (Bloomberg) -- Portugal may have its credit rating cut by Moody’s Investors Service as the country struggles to reduce its budget deficit and revive economic growth a sign that contagion from the Greek crisis is spreading.

Moody’s today placed its Aa2 rating on review for a possible downgrade, a process that will conclude within three months, the company said in a statement. The rating is currently the third-highest investment grade."

........................13A) UPDATE 1-Portugal T-bill yield soars amid contagion fear

"Portugal sold 500 million euros($666 million) in six-month T-bills on Wednesday, but paid four times more than in the previous equivalent auction as investors priced in concern about possible contagion from Greece's debt crisis. The yield of 2.955 percent was the highest on Portuguese six-month paper since November 2008 and compared with 0.739 percent at the previous sale on March 3 -- but analysts wererelieved it wasn't higher."

"Oakland voters will likely be asked in November to approve higher taxes to halve a $42 million deficit, but even if they agree, the city will face an even deeper crisis within months.

Ballooning pension costs will push the city's projected deficit to $58.7 million by July 2011."

"Last year, Oakland was supposed to pay $85.7 million for retiree medical care, according to a city staff report. But the city only paid $12.5 million, the report said.

"This is not sustainable," said De La Fuente. "There's no way that those things can continue."

Part of the city's problem is that tax revenues - including sales, hotel and real estate taxes - have been plummeting. The other is that the investments that undergird the pension system have lost much of their value during this recession. But the scale of benefits are fixed. The Police and Fire Retirement System, at the center of next year's budget woes, is one of the pension funds that is threatening to swamp the city's budget."

"WASHINGTON (AP) -- The Treasury Department said Wednesday that it plans to borrow $78 billion in a series of three debt auctions next week, down from a record $81 billion at the last quarterly auction.

It marked the first reduction in the size of the auctions since 2007 and reflected the fact that the government is projecting that total borrowing will fall by 18.3 percent for this budget year after setting an all-time high last year.

The Obama administration has stressed that while the U.S. budget deficit soared to a record high of $1.4 trillion last year, the United States, unlike Greece, has not had trouble financing its huge deficits."

"The council's action is the latest in its effort to generate money for the cash-strapped city, which is facing a budget deficit of $212 million for the fiscal year that ends June 30. The gap between revenue and expenditures is expected to widen to $484 million in fiscal 2010-11."

  •  Other news stories and headlines:

Effort to expand audits of Fed picks up steam in Senate

Buffett Says GM Rescue May Mean US Can't Say No to States

General strike paralyzes Greece also Tens of thousands across Greece protest austerity measures and 3 dead in fire at Greek bank during Athens riots and Police clash with protesters in Athens (Reuters video)

Greek Protests 'Scaring Off' Markets, Nobel Winner Phelps Says

Pimco CEO El-Erian: Greek Crisis Far From Over

Petroleum subsidies on the rise, say IMF

Romania considers tax hikes to slash a gaping public deficit

In Two Years, University Debt Nearly Doubles (Weill Cornell Medical College in NY...to $1.96 billion)

San Jose workers march to save jobs (Video)

Cash-strapped Fresno police enlist volunteers

School Board, Unions Brawl Over Budget Issues (Florida...$130 million short, could cost 1,000 teacher jobs)

State reserves nearly half gone; Ind. on pace for deficit

Islamic finance embraces derivatives

Jim Rogers: This is only the beginning of Currency crisis

City shortfall grows to $12.3M (Omaha)

Long-Term Unemployment: 80 Percent Of People Jobless Last Summer Still Out Of Work

Greek economy 'to shrink by 3% this year'

Ravitch Says Late Payments May Beat Notes as NY Cash Drains

 

.......................Portals....Thanks for the comment. Yes, still playing the sax.

portals's picture
portals
Status: Member (Offline)
Joined: Apr 20 2009
Posts: 22
Re: Daily Digest - May 5

Sax, you are unbelievable!  BTW, do you really play the SAX?   I posted the following message on the Oil Drum this morning.  Thought that if anybody here has stock in these corporations, they might be interested.

----------------------------------------

BP should change its name soon to something like "Outstanding Ocean Petroleum Systems", or OOPS for short. :) I'd give almost anything to have a hidden camera in the board rooms of BP's corporate offices. These guys have got to be going nuts playing the "It's your fault" version of musical chairs. This is especially true considering that the PBS Nightly Business Report reported last night that BP's market capitalization has fallen by 34 billion dollars in the last two weeks, with their contemporaries falling precipitously as well.

Perhaps, BP, Transocean, and Halliburton should join together to form a new fraternaty, the "Bankruptcy of the month" club. If the result of this whole Deepwater Horizon situation was not so tragic to those living on the Gulf coast it would be an absolute comedic montage that could be a multi-million dollar opening night on Broadstreet.

I always told my kids that they should invest in a company called Chattem, Inc. They make a medication that is now the drug of highest demand on Wall Street, the Oil industry, and even in our central government. It's called Kaopectate.

idoctor's picture
idoctor
Status: Diamond Member (Offline)
Joined: Oct 4 2008
Posts: 1731
Re: Daily Digest - May 5

WOW!!!!! Sax slow down man...my eyes are burning LOL......you are amazing. Really I enjoy greatly what you do. This site is the most interesting single site I have ever seen. Thanks to all the different minds that post here whether I agree with all of them or not it gives one a lot to thing about. IMHO all the different views are most welcome.

gregroberts's picture
gregroberts
Status: Diamond Member (Offline)
Joined: Oct 6 2008
Posts: 1024
CIA Officer Explains New World Order's Demise

brjohnson789's picture
brjohnson789
Status: Bronze Member (Offline)
Joined: Aug 27 2008
Posts: 52
Re: Daily Digest - May 5
idoctor wrote:

WOW!!!!! Sax slow down man...my eyes are burning LOL......you are amazing. Really I enjoy greatly what you do. This site is the most interesting single site I have ever seen. Thanks to all the different minds that post here whether I agree with all of them or not it gives one a lot to thing about. IMHO all the different views are most welcome.

Ditto, although my eyes are tearing up enough to keep them from burning, heh.

lightningben's picture
lightningben
Status: Member (Offline)
Joined: Jan 29 2009
Posts: 4
Re: Daily Digest - May 5

Exponential Rise in the number of Bad Fiscal News articles

If the current growth in bad financial news being reported continues, by the end of next month the entire news industry will be devoted solely to reporting bad financial woes.

It's almost as if there was something wrong with the debt based monetary system but I can't quite put my finger on it....

Tongue out

Thanks for all those posting links - it will soon be a full-time job!

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Re: Daily Digest - May 5

Bernanke's Biggest Bailout

By Mike Whitney

May 03, 2010 "Information Clearing House" - -The right-wing think-tank, the American Enterprise Institute, is helping the Federal Reserve to develop a strategy to transfer $1.25 trillion in toxic mortgage-backed securities (MBS) and non performing loans onto the public's balance sheet. Although it's unknown whether Fed chair Ben Bernanke will act on the AEI's recommendations, it does show that the Fed's Quantitative Easing program (QE)--which moved the bulk of garbage assets from the banks to the Fed's balance sheet--poses long-term problems that will need to be addressed. Bernanke never intended to keep these assets any longer than necessary. Now he is actively exploring options for getting rid of them.

Ostensibly, the QE program was designed as the first leg in a two-step process to remove the bad paper from the banks balance sheets and then dump it on Fannie Mae and Freddie Mac as discreetly as possible. So far, Bernanke has been relatively successful in convincing people that he was buying the assets to increase lending, which was clearly never the objective. Quantitative Easing was a fraud from the get-go. Here's an excerpt from the AEI's web page by the eerily-named "Shadow Financial Regulatory Committee" which explains what's going on:

"Freddie and Fannie have been placed in conservatorship and the Treasury has confirmed that their debt is now guaranteed by the U.S. Government. This means that their debt is essentially identical to Treasury debt. The Treasury could simply issue Treasury debt to Freddie and Fannie with the offsetting accounting transaction being an IOU to the U.S. Treasury. Freddie and Fannie could then swap the acquired Treasury debt for MBS held by the Federal Reserve. This transaction would have several desirable features. It would place housing debt on the books of Freddie and Fannie where it belongs and remove the Fed from financing U.S. housing policy, which is appropriately a fiscal policy and not a monetary policy function. This would also help to re-establish Federal Reserve independence from the Treasury and fiscal policy. Finally, it would free the Fed to device strategies to reduce its balance sheet by engaging in more traditional asset sales in the much deeper Treasury market where the pricing impacts would be smaller and would accommodate a more rapid reduction in excess reserves." ("Mortgage Backed Securities in the Federal Reserve’s Portfolio" Shadow Statement No. 294, American Enterprise Institute)

So, there it is in black and white; the committee believes that the "transaction would have several desirable features. It would place housing debt on the books of Freddie and Fannie where it belongs and remove the Fed" from any further obligation. Naturally, the Fed will need an excuse to justify what-amounts-to another gigantic bailout. The AEI thinks that the fear of inflation will do the trick, and they are probably right. Expect the Fed to mobilize its allies in the media to launch a public relations campaign that focuses on the imminent threat of hyperinflation. That way--when Bernanke dumps more than a trillion dollars of toxic sludge into Uncle Sam's mortgage-recycling center--he'll only be performing his statutory duties to maintain price stability.

There's nothing fancy about the AEI's strategy; it's a pretty straightforward "no frills" ripoff. Bernanke buys the garbage from the banks and then transfers it to the GSE's. No muss, no fuss.

It's a shame that congress can't figure this stuff out. Bernanke is merely acting as one would expect. He's bent-over-backwards to save the banks from nationalization and to keep their political and financial power intact. He's also usurped congress's power over the purse-strings by initiating fiscal policy (in the purchasing of the toxic assets) which is well-beyond the Fed's mandate. Now he's putting the finishing touches on another giant bailout so he can clear the Fed's books and resume the arduous task of bubblemaking.

Is it really that hard for congress to figure out what's going on?

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Re: Daily Digest - May 5

http://www.csmonitor.com/Commentary/Opinion/2010/0429/Cyberattacks-Washington-is-hyping-the-threat-to-justify-regulating-the-Internet/%28page%29/2

Cyberattacks: Washington is hyping the threat to justify regulating the Internet

Networks have been under attack -- and successfully handled by operators -- as long as they’ve been around. Be wary of calls for more government supervision of the Internet.

By Jerry Brito and Tate Watkins / April 29, 2010

Arlington, Va.

We marched into Baghdad on flimsy evidence and we might be about to make the same mistake in cyberspace.

Over the past few weeks, there has been a steady drumbeat of alarmist rhetoric about potential threats online. At a Senate Armed Services Committee hearing this month, chairman Carl Levin said that “cyberweapons and cyberattacks potentially can be devastating, approaching weapons of mass destruction in their effects.”

The increased consternation began with the suspected Chinese breach of Google’s servers earlier this year. Since then, press accounts, congressional pronouncements, and security industry talk have increasingly sown panic about an amorphous cyberthreat.

Bush administration cybersecurity chief Michael McConnell recently warned that the United States “is fighting a cyber-war today, and we are losing.”

According to McConnell, now a vice president at Booz Allen Hamilton, “our power grids, air and ground transportation, telecommunications, and water-filtration systems are in jeopardy.” More recently, Sens. Jay Rockefeller (D) and Olympia Snowe (R) wrote about “sophisticated cyber adversaries” with the potential “to disrupt or disable vital information networks, which could cause catastrophic economic loss and social havoc.”

Yet none of the prognosticators of disaster presents any evidence to sustain their claims. They mention the Google breach, but that was an act of espionage that, while serious, did not lead to catastrophe.

DurangoKid's picture
DurangoKid
Status: Silver Member (Offline)
Joined: Oct 25 2008
Posts: 174
Re: Daily Digest - May 5

And the sky is falling!

Simple solution.  Isolate the system from the web.  No web access, no cyber attack.  Keep one computer on line.  Use memory sticks to upload data, reports, etc.  Do not accept downloaded control streams for process control computers.  Problem solved.  Less convenient?  Perhaps.  Consider the price of failure.  And it's a cheap solution.

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Re: Daily Digest - May 5

Freddie Mac begs for fresh $11.7b bailout

http://www.abc.net.au/news/stories/2010/05/06/2891615.htm?section=justin

Troubled US government-backed mortgage firm Freddie Mac has asked for an additional $US10.6 billion ($11.7 billion) from the US treasury department.

Announcing a $US6.7 billion loss in the first quarter, Freddie Mac said it would need the new funding by June 30.

The Washington-based company has already received more than $US50 billion ($55 billion) in taxpayers' cash to cover losses from toxic assets.

It also warned that further demands would be on the way.

"Freddie Mac expects to request additional draws," it said in a statement.

"The size and timing of such draws will be determined by a variety of factors that could adversely affect the company's net worth."

- AFP

ao's picture
ao
Status: Diamond Member (Offline)
Joined: Feb 4 2009
Posts: 2220
Re: Daily Digest - May 5

saxplayer,

I'd like to join the chorus and thank you for keeping us all abreast of current events.  I really appreciate all your work.  

SagerXX's picture
SagerXX
Status: Diamond Member (Offline)
Joined: Feb 11 2009
Posts: 2240
Exponential 1099s?

Apologies in advance is this has already been posted --

Looks like starting in 2012 (this new reg was part of the health care overhaul), every business that does $600 or more wortha biz with any other business will have to file a 1099 detailing the transactions.  Yeah, just in my little mom'n'pop shop, we'll have to file an additional 20+ 1099s that year (for '09 we filed 3).  It boggles the mind to consider what the ramifications are for any business that does millions of dollars of business per annum...

http://money.cnn.com/2010/05/05/smallbusiness/1099_health_care_tax_chang...

VeganDB12's picture
VeganDB12
Status: Platinum Member (Offline)
Joined: Jul 18 2008
Posts: 742
Re: Exponential 1099s?

Sax-Thank you!

Sager-Mish called this the 1099 Mandate From Hell and predicts it "will be the most widely ignored IRS regulation in history." What the heck does this have to do with healthcare??

I have never filed a 1099 in my life and it looks like I'll have to file them just for my office rent payments. Ridiculous but they are counting every penny there at the IRS.

SagerXX's picture
SagerXX
Status: Diamond Member (Offline)
Joined: Feb 11 2009
Posts: 2240
Re: Exponential 1099s?
VeganD wrote:

Sax-Thank you!

Sager-Mish called this the 1099 Mandate From Hell and predicts it "will be the most widely ignored IRS regulation in history." What the heck does this have to do with healthcare??

I have never filed a 1099 in my life and it looks like I'll have to file them just for my office rent payments. Ridiculous but they are counting every penny there at the IRS.

Yep.  I wonder if the blizzard of incoming 1099 forms wouldn't just crush every IRS processing facility in North America?  And if not, maybe they should be forging deepwater drillheads out of whatever they're building those IRS buildings out of?

Viva -- Sager

britinbe's picture
britinbe
Status: Gold Member (Offline)
Joined: Dec 28 2008
Posts: 381
Re: Exponential 1099s?
SagerXX wrote:
VeganD wrote:

Sax-Thank you!

Sager-Mish called this the 1099 Mandate From Hell and predicts it "will be the most widely ignored IRS regulation in history." What the heck does this have to do with healthcare??

I have never filed a 1099 in my life and it looks like I'll have to file them just for my office rent payments. Ridiculous but they are counting every penny there at the IRS.

Its an opportunity for IRS employment growth....wow, just think of the recovery Wink

Yep.  I wonder if the blizzard of incoming 1099 forms wouldn't just crush every IRS processing facility in North America?  And if not, maybe they should be forging deepwater drillheads out of whatever they're building those IRS buildings out of?

Viva -- Sager

SingleSpeak's picture
SingleSpeak
Status: Platinum Member (Offline)
Joined: Dec 1 2008
Posts: 506
Re: Daily Digest - May 5

Looks like starting in 2012 (this new reg was part of the health care overhaul), every business that does $600 or more wortha biz with any other business will have to file a 1099 detailing the transactions.

At least it's in 2012, after the collapse of the U.S. If we haven't gone down by then, this should finish us off.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Login or Register to post comments