Daily Digest

Daily Digest - May 6

Thursday, May 6, 2010, 9:45 AM
  • Euro Falls to Lowest in Year as Greek Concern Persists
  • Analysis: Budget Surprise Stings
  • Mikis Theodorakis: Omen Of Great Disasters 
  • Containment Fails: European CDS Explode As Market Looks To Future Bail Outs, Bank Runs
  • Desperate Governments Do Desperate Things With 401K's
  • Nationwide Strike Tests Greece
  • Spain Feels Pain As Recession Bites
  • Mortgage Lending Plummets By 83%
  • Japan's Child Population Drops To Record Low
  • Gold Under Selling Pressure as U.S. Dollar Soars, Crude Oil Tumbles
  • Lew Rockwell: The Rich Continue To Use Government To Cut Out Their Competition
  • Moody's Warns Portugal Of Possible Debt Downgrade
  • Effort To Expand Audits Of Fed Picks Up Steam In Senate
  • Jim Sinclair: Inflation and Bailouts Go Hand in Hand
  • Japan Reactor Reopens After 1995 Accident
  • Optimism Versus Reality In Peak Oil Media Battle
  • Pentagon in Race for Raw Materials
  • Oil Spill Costs: What Will BP Really Pay?
  • Study Suggests Decline In UK Fish Stocks More Severe Than Thought
  • The Effects Of 118 Years Of Industrial Fishing On UK Bottom Trawl Fisheries

Economy

Euro Falls to Lowest in Year as Greek Concern Persists (mhoop)

The 16-nation currency fell the most in a week against the yen as bond yields from Spain to Portugal to Ireland rose on concern the crisis that began in Greece is spreading. Global stocks slumped and commodity prices slid as growth-related assets lost favor. Spanish Prime Minister Jose Luis Rodriguez Zapatero told reporters in Brussels today that rumors of a bailout for his country are “complete madness.”

Analysis: Budget Surprise Stings (Kansas) (Steve M.)

The Senate Ways and Means Committee approved a $434 million tax package Friday, suggesting that a long-predicted alliance of Democrats and GOP moderates finally had gathered enough strength to push through a status quo budget and a tax plan to support it. It seemed to signal the eventual loss of conservative Republicans who'd like block tax increases. Perhaps the session even could end quickly.

But only hours later, Democratic Gov. Mark Parkinson and the Republican-controlled Legislature learned that tax collections in April were a staggering $65 million short of expectations a 10 percent shortfall.

Mikis Theodorakis: Omen Of Great Disasters (Regina)

With such common sense as I possess I cannot explain, much less justify, the speed with which our country has slumped from the 2009 level to the point where we lose part of our national sovereignty to the IMF and are placed under trusteeship.

And it is strange that until now, no one has done the simplest thing, that is, traced the course of our economy from then until now with facts and figures, so that we, the uninitiated, can understand the real reasons for this unprecedented and dizzying turn of events, which has resulted in the loss of our national independence and, along with it, international humiliation.

Containment Fails: European CDS Explode As Market Looks To Future Bail Outs, Bank Runs (Ben Johnson)

Now that Greece is thoroughly irrelevant, the market just told the ECB, the IMF, and the EMU to prepare another $1 trillion in bailout packages. The reason: the Greek bailout just made it abundantly clear the bond vigilantes have free reign to call the bureaucrats' bluff whenever they see fit. The result: CDS of all non Greek PIIGS are now blowing out, and represent the top 4 names of all biggest CDS wideners for the day, each pushing a 10%+ change from yesterday.

Desperate Governments Do Desperate Things With 401K's (Davos)

The Vice President’s comments are troubling, insofar as they come on the heels of testimony before Congress from supporters of GRAs proposing to eliminate the favorable tax treatment currently afforded to 401(k) plans, and instead use those dollars to fund government-invested GRAs into which all employees would be required to contribute a portion of their salary – again, with a government subsidy. These advocates would, essentially, dismantle the present private-sector 401(k) system, replacing it instead with a government-run investment plan, the size and scope of which remain to be seen. This despite data showing that 90 percent of households have a favorable opinion of the existing 401(k)/IRA system.

Nationwide Strike Tests Greece (Christian W.)

Greece was paralyzed by a nationwide general strike Wednesday, in what is seen as a key test of the government's ability to shepherd through tough austerity measures in exchange for a multibillion-euro bailout.

Spain Feels Pain As Recession Bites (Christian W.)

Figures from the first quarter of 2010 showed that Spain has 20.05% unemployment - the highest in the eurozone.

Mortgage Lending Plummets By 83% (Christian W.)

Mortgage lending dived by 83% during March, fuelling speculation that the housing market recovery is running out of steam, figures showed today.

Net lending, which strips out redemptions and repayments, fell to just £318 million during the month, down from £1.85 billion in February and the lowest level since July last year, when it was negative, according to the Bank of England.

Japan's Child Population Drops To Record Low (Christian W.)

The report by the Ministry of Internal Affairs and Communications, released a day ahead of the Children’s Day national holiday in Japan, showed that children comprised 13.3% of the population, declining for the 36th consecutive year and remaining at the lowest level worldwide.

Gold Under Selling Pressure as U.S. Dollar Soars, Crude Oil Tumbles (mhoop)

Comex gold futures have come under renewed selling pressure at mid-morning Wednesday. The U.S. dollar index has extended its gains to hit another fresh 12-month high, while crude oil prices are sharply lower and have dropped below $80.00 a barrel. These two bearish "outside market" forces have worked to press the gold market lower on the day.

Lew Rockwell: The Rich Continue To Use Government To Cut Out Their Competition (mhoop)

One of the scams that the rich use the government for in order to stop less wealthy people from getting richer is to promote the lie that, since venture capital is “riskier” than investing in public securities on the NYSE (another lie), individuals with less than a certain minimum net worth should not be allowed to invest in these “riskier” VC investments. Bankster puppet Sen. Chris Dodd (D-CT) has inserted into the upcoming financial “reform” bill a clause that would more than double the minimum net worth of a potential venture capital investor from $1 million to $2.5 million, or require an annual salary of $450,000 for the past two years to the current annual salary requirement of $200,000 [the article mistakenly says it is $250,000] for the past two years.

Moody's Warns Portugal Of Possible Debt Downgrade (mhoop)

Moody's Investor Services warned it may downgrade Portugal's Aa2 debt rating in the next three months, a week after its rival Standard & Poor's cut its rating and stoked market concerns that the crisis in Greece was spreading to other financially troubled countries in the eurozone.

Effort To Expand Audits Of Fed Picks Up Steam In Senate (SteveS)

A contentious effort to expand audits of the Federal Reserve that sailed through the House despite heavy criticism appears to be picking up steam as the Senate considers broad new financial regulations.

Jim Sinclair: Inflation and Bailouts Go Hand in Hand (Davos)

I keep trying to find ways to explain the scope of what is going on in the world financial markets to friends and readers of this site. I told an acquaintance at dinner last night the money printing going on “has never happened on this scale in human history.” The guy just looked at me and said that he thought it was a good idea to invest in municipal bonds! How are broke cities and states going to pay the interest, let alone the principal, back. If the cities and states are bailed out, massive inflation will render the bonds worthless or near worthless.

Energy

Japan Reactor Reopens After 1995 Accident (Samuel A.)

Japan restarted a costly fast-breeder nuclear reactor Thursday for the first time since it was shut down 14 years ago because of a major accident and cover-up. The experimental reactor Monju, which means wisdom, uses plutonium fuel instead of conventional uranium and produces radioactive substances that can be reused as fuel. It would reach operating level Saturday and continue its test runs before entering full-fledged operation in 2013.

Optimism Versus Reality In Peak Oil Media Battle (Christian W.)

The optimists may have long been winning the peak oil media battle – as Matt Simmons observes – but we are beginning to see information coming out on the business pages that allows us to piece together a more balanced story.

Pentagon in Race for Raw Materials (rector)

The U.S. military is gearing up to become a more active player in the global scramble for raw materials, as competition from China and other countries raises concerns about the cost and availability of resources deemed vital to national security.

The Defense Department holds in government warehouses a limited number of critical materials—such as cobalt, tin and zinc—worth about $1.6 billion as of late 2008. In the coming weeks, the Pentagon is likely to present a plan for Congress to overhaul its stockpiling program.

Oil Spill Costs: What Will BP Really Pay? (Ben Johnson)

Under federal law, BP and its minority partners in the well, Anadarko (APC, Fortune 500) and Mitsui, have to cover all the cleanup costs. BP Chief Executive Tony Hayward has pledged several times to honor that commitment. But then there are the losses to the fishing, tourism and shipping industries if the oil closes parts of the coast. These costs could easily exceed the cleanup bill.

Environment

Study Suggests Decline In UK Fish Stocks More Severe Than Thought (Christian W.)

The UK's modern fishing fleet must work 17 times harder for the same catch as their sail-powered Victorian counterparts, a study has claimed, suggesting the decline in fish stocks is more profound than previously thought.

The Effects Of 118 Years Of Industrial Fishing On UK Bottom Trawl Fisheries (Jeff B.)

In 2009, the European Commission estimated that 88% of monitored marine fish stocks were overfished, on the basis of data that go back 20 to 40 years and depending on the species investigated. However, commercial sea fishing goes back centuries, calling into question the validity of management conclusions drawn from recent data. We compiled statistics of annual demersal fish landings from bottom trawl catches landing in England and Wales dating back to 1889, using previously neglected UK Government data.

Please send article submissions to: [email protected]

27 Comments

saxplayer00o1's picture
saxplayer00o1
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Re: Daily Digest - May 6

"May 6 (Bloomberg) -- Russia may have been the last developing nation to tap record-low bond yields as the spreading Greek financial crisis makes emerging-market bonds unprofitable for the first time since 2008."

"$753 Billion Maturing

The retreat is raising interest costs as governments and companies in emerging markets plan to borrow at least $39 billion on top of the $234 billion sold so far in 2010, according to data compiled by Bloomberg. More than $753 billion of developing-country debt matures in the second, third and fourth quarters of 2010, the data show."

"PARIS - Moody's ratings agency on Thursday warned that the fallout from the Greek debt crisis presented a risk of "contagion" for the credit rating of banks in Britain, Ireland, Italy, Portugal and Spain.

Moody's said in a report that "the potential contagion of sovereign risks to banking systems could spread to other countries such as Portugal, Spain, Italy, as well as Ireland and the UK."

It said these banking systems therefore faced "very real, common threats.""

........................2A) Moody's: Debt crisis may hurt banks outside Greece

........................2B) Bank Swaps Surge as Moody's Raises Sovereign Contagion Alert

"BERLIN (Dow Jones)--A restructuring of Greek debt would have dangerous consequences, with the country's sovereign debt crisis possibly spilling over to other nations, German Finance Minister Wolfgang Schaeuble warned Thursday.

"If we opted for a restructuring [of debt], this would cause exactly the kind of conflagration that we won't be able to control," Schaeuble said at the Europe Forum organized by WDR television."

"MADRID — Spain's borrowing costs rose significantly Thursday in its first debt auction since its credit rating was downgraded last week by Standard & Poor's amid concerns it might be hit by a Greek-style debt crisis.

The Spanish Treasury said it issued euro2.345 billion in 5-year bonds at an interest rate of 3.58 percent, up from 2.84 percent in the last auction in March."

.................4A) Spain Pays Most Yield Since 2008 During Greek ‘Fire’

"McLean-based Freddie Mac is seeking an additional $10.6 billion from the federal government after reporting an $8 billion loss in the first quarter.

The results included $1.3 billion in dividend payments to the U.S. Treasury, which received stock when it took over Freddie Mac and Fannie Mae in September 2008 and put them into conservatorship.

The quarter’s results also reflected credit losses of $5.4 billion, a derivative loss of $4.7 billion because of a decline in long-term rates and net interest income of $4.1 billion."

"The average adult in the UK has personal debt of £30,258 including mortgage loans - the equivalent of 131 per cent of typical annual earnings, a new report has shown.

Figures from financial charity Credit Action put total debt at the end of March at £1.46 trillion.

It said that the typical household owed an average of £57,950 including mortgage finance.

If figures from the 2010 Budget for the projected public sector deficit in 2014-15 are factored in, this increases to £113,742."

"Even as the International Monetary Fund and eurozone have virtually finalized an unprecedented three-year financing package of 110 billion euros for Greece, financial markets remain unimpressed. The common currency continued to plunge this week, and long-term government bond yields in Greece and the periphery countries, including Italy, spiked again after a short relief rally before the agreement.

The market's lukewarm reaction to the financing package confirms our view that a traditional financing package (Plan A), extended at unsustainable interest rates, will not allay solvency fears but rather lead to disorder and contagion."

"BERLIN: The German government forecast a massive fiscal hole on Thursday, giving Chancellor Angela Merkel precious little room to deliver on tax cuts promised in her 2009 re-election campaign.

Figures from the finance ministry showed that tax receipts over the period 2011 to 2013 would be almost 39 billion euros (50 billion dollars) less than predicted last year.

Germany, quick to lecture Greece over its debt crisis, has considerable fiscal problems of its own that were exacerbated by its biggest recession since World War II last year when output shrank five percent.

Europe’s biggest economy, now pressing for tougher European Union rules on deficits in light of the Greek turmoil, expects to borrow around 80 billion euros this year and to spend far more than it earns.

Its budget deficit is forecast by Brussels to reach some five percent of gross domestic output (GDP) this year, well above the three percent limit set out in the 27-nation bloc’s fiscal rule book. "

"May 6 (Bloomberg) -- The Czech Republic will delay further a planned sale of international bonds as concern that Greece’s debt crisis might spread in Europe hurts demand for government debt, Finance Minister Eduard Janota said.

“We are watching the markets and they are very volatile now,” Janota said in a phone interview today. A planned sale of at least 1 billion euros ($1.28 billion) of bonds “probably isn’t feasible at this moment,” Janota said."

"(Reuters) - The property unit of conglomerate Swire Pacific (0019.HK) has pulled plans to raise up to $2.7 billion through a Hong Kong initial public offering because of deteriorating market conditions, the parent company said on Thursday.

Swire Properties, deep into its spin-off process, is one of several deals in the last few days to be yanked or downsized, as local stock and bond markets suffer from a combination of Chinese government tightening measures to fears of further financial troubles in Greece and the rest of Europe."

"(Reuters) - Gold rose nearly 1 percent toward $1,185 an ounce in Europe on Thursday and hit record highs in euros, sterling and Swiss francs as investors worried Greece's debt problems could spread elsewhere in the euro zone.

Gold is becoming increasingly attractive as a hedge against sovereign risk and the resulting volatility in the foreign exchange markets, analysts said."

"DUBAI (Zawya Dow Jones)--The Greek debt crisis will make it harder for sovereign borrowers in the Gulf's Arab states to raise funds as investors shun riskier regions, bankers and analysts said Thursday.

"There's a general panic in credit markets and a feeling of capitulation," said Abdulkadir Hussein, the chief executive officer of Dubai-based Mashreq Capital. "People who were looking to raise new debt will see the market window closed at the moment.""

"BUDAPEST, May 6 (Reuters) - Hungary's incoming government said that on current projections the budget deficit this year could be 7-8 percent of GDP, but it will try to cut it to 5-6 percent, economy minister-designate Gyorgy Matolcsy said on Thursday. "

"The primary market for bank bonds has been effectively closed for two weeks because uncertainty over the Greek debt bailout has created volatility in credit markets, particularly for banks."

""The market has been shut for the last 10 days, when banks clearly have a lot of funding to do and market capacity is limited," said a financials institutions banker at a European banking group.

Fears of financial contagion in the euro zone despite an IMF/European Union rescue package for Greece have this week driven spreads wider still on bank cash bonds as well as credit derivatives."

"LISBON/NEW YORK, May 5 (Reuters) - Moody's Investors Service put its credit rating for Portugal on a three-month review on Wednesday, and a senior Moody's analyst said that as a result a downgrade of the credit rating is now likely."

"WASHINGTON — California state legislative leaders made the rounds in Washington this week to lobby for billions in federal funding to help implement health care reform in the state and plug its projected $20 billion deficit.

California Senate leader Darrell Steinberg, D-Sacramento, and Assembly Speaker John Perez, D-Los Angeles, said Wednesday that they feel optimistic California will get federal help based on meetings with Health and Human Services Secretary Kathleen Sebelius, House Speaker Nancy Pelosi, D-Calif., and White House staff.

Although the lawmakers said they didn't get any concrete commitments, they credited a similar visit to Washington in January by Gov. Arnold Schwarzenegger and legislative leaders with bringing in $675 million in financial relief through enhanced reimbursements for Medicare prescription drug benefits. "

"Among the requests were:
$2 billion a year for the next five years through a Medicaid waiver to help the state bolster its health care system before major federal health reform measures take effect in 2014.
A six-month extension of an enhanced federal match for the state's Medi-Cal and child welfare programs
A one-year extension of federal stimulus funding for social services. "

"China may be forced to bail out some of its banks if the nation's property market collapses, Fitch Ratings said.“If we do see a pretty serious correction in the property market, banks' balance sheets will likely be severely impacted and this could at some point necessitate bailouts for the banks,” Charlene Chu, a senior director in Fitch's financial institutions ratings team in Beijing, said on a conference call Wednesday."

"BRUSSELS (Bloomberg) — European governments' debt burden may continue to swell for "some time", the European Commission said, as the Greek fiscal crisis threatens to spread and more nations risk having their credit ratings cut.

The average deficit in the 16-nation euro region may rise to 6.6 percent of gross domestic product this year from 6.3 percent in 2009, the commission, the European Union's executive arm in Brussels, said in semi-annual economic forecasts published yesterday.

Overall government debt may surge to 88.5 percent of GDP in 2011 from 84.7 percent this year. Those debt and deficit figures would be the highest since the introduction of the euro in 1999. "

"The euro slumped to its weakest level in almost 14 months against the dollar and depreciated versus the yen as the European Central Bank kept its main refinancing rate at a record low.

The pound slid against the greenback as Britons voted in an election that may fail to produce a parliamentary majority for the first time since 1974.

The ECB may announce additional measures to contain Greece’s debt crisis, analysts said. Greece’s finance minister said the country doesn’t have the money to repay debt due this month."

"Extended Benefits

Those who’ve used up their traditional benefits and are now collecting emergency and extended payments increased by 153,000 to 5.56 million in the week ended April 17. "

"(Reuters) - Europe may be months, conceivably weeks away from an expanded debt crisis that cuts more countries off from access to the markets and forces fresh emergency action by rich governments or the European Central Bank.

The many potential triggers for an expanded crisis include a failed bond auction, any signs that Athens or donor nations were backing away from a 110 billion euro ($141 billion) bailout of Greece, and a freezing up of Europe's interbank money market.

For now, Portugal, Ireland and Spain, widely seen as the next possible "dominos" after Greece, remain in significantly better shape. The interbank market is far from grinding to a halt as it did after Lehman Brothers collapsed in late 2008.

But the spread of investor jitters in the past 24 hours, affecting markets as distant as yen swaps in Tokyo, suggests market conditions could deteriorate as rapidly as they did during the global financial crisis of 2007-2009."

"One of the incidents that I remember from my youth was the first time I saw a chicken slaughtered and running around headless for quite a few minutes before it keeled over and died. The euro is at that stage. Its life is finished, but it will be around for some time before it becomes a subject of historical analysis. Actually the euro was always a short term solution, even on the day it was born. There were only two possible outcomes: the euro would blow up, or it would lead to an EU with taxing and borrowing authority. Theoretically those two choices are still possible, but the euro’s disintegration is moving so quickly and the political barriers are rising so fast that the chances of a much closer and ever tightening political bond between the internal surplus countries and the internal deficit countries is basically non-existent."

"The current European debt crisis likely will not end until the euro collapses as a currency and takes the entire European Union with it, said Dennis Gartman, hedge fund manager and author of "The Gartman Letter."

"I think the whole thing will go down to defeat, the whole thing will eventually unravel," Gartman said in an interview with CNBC.com.

Gartman said he doesn't have a specific timetable for how long it will take for the collapse of the 17-year-old EU, but said, "it doesn't look good.""

"In what's shaping up as a brutal showdown with Albany, Mayor Bloomberg will announce plans today to get rid of 6,400 teachers and 300 other school workers unless the state restores $493 million in education aid that's on the chopping block, sources said last night.

The deadline is June 30, when the city's budget must be approved by the City Council.

One administration source said the cuts would be accomplished by layoffs. But another said the cutbacks -- amounting to about 8 percent of the 80,000-teacher workforce -- would be accomplished by a combination of layoffs and attrition."

................24A) Black Thursday: Ax to fall on 12000 city jobs

"On the heels of another attempted terrorist attack, Mayor Michael Bloomberg will restore $55 million to the NYPD budget to keep 892 police officers in uniform, according to an administration official.

But the executive budget the mayor will release today is expected to make up for a multibillion-dollar shortfall by cutting nearly 12,000 other city workers, including 6,700 teachers, and shutting down 20 fire companies and 75 senior centers, according to sources familiar with the plan.

Bloomberg hinted he would restore cuts to the Police Department if city revenues came in higher than previously projected, during his radio show several weeks ago. But the need to protect the public became more pressing after a failed car bombing in Times Square this past weekend.

The city has also seen a 20 percent spike in murders in the first four months of 2010 as compared to last year, according to NYPD statistics."

"STOCKTON - Mayor Ann Johnston told about 150 people at a town hall meeting Wednesday that the city is in a depression, beleaguered by unemployment, the foreclosure crisis and a projected city budget deficit of $23 million.

"Things are not getting any better for the city of Stockton," she said. "There is no good this year. It's all bad.""

"Montgomery County Executive Isiah Leggett's newest cost-cutting proposal is the latest chapter in the battle between county officials and Rockville Library patrons about whether visitors should have to pay for parking at the county-owned library.

Two weeks ago, Leggett (D) proposed charging for parking at the library as part of a budget adjustment for the current fiscal year, which ends in June, as well as fiscal 2011.

The reductions are needed to compensate for an additional $196 million deficit in the coming fiscal year, which is largely the result of a $168 million decrease in income tax revenue. The proposal is subject to the County Council's approval.

The county executive was faced with a $779 million deficit when he proposed his fiscal 2011 budget several weeks ago. "

"As Miami tries to turn around its depleted budget, the city has invoked a rarely used statute that will force the fire union to renegotiate its contract."

"Miami City Manager Carlos Migoya has taken aim at the powerful fire union and its hefty salaries, decreeing that the city faces a ``financial urgency''' that could force contract concessions.

Bidding to curtail salaries and lessen a bulging pension obligation that spikes to $101 million this year, Miami turned to an obscure state statute that provides for the state of urgency.

That declaration allows the sides two weeks to negotiate a middle ground before steeper measures are enforced. "

  • Other news and headlines:

Nashville flood damage could top $1 billion, mayor says (Video)

US senators ask $3.5 billion for Haiti recovery

Greece cannot avoid default: Mesirow economist

Greece says bailout is only hope

Wealthy Greeks Turn to London Property as Safe Haven in Crisis

Greek community fears for tourism hit in wake of Athens riots

Oakland Is About To Go Bust (Mish)

State could take over city (WOONSOCKET)

Bailed out Homebuilders Collect Fat Paychecks

Peak Oil and the Return of the Jet Set

City headed for cliff  (San Luis Obispo)

A proposed ballot initiative would stop the state from poaching city revenues (California)

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Re: Daily Digest - May 6

Moody's warns of "contagion" risk for European banks

Looks the term "domino theory" will be getting a major definition makeover for the 21st century.  Who'd a thunk it back in the heady days of the space race?

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Re: Daily Digest - May 6 - 401Ks

Boehner Press Release

This despite data showing that 90 percent of households have a favorable opinion of the existing 401(k)/IRA system.

 

I find this statement to be an outright misleading lie that I find offensive. I admit that I can't back up my opinion with some contrived survey, however anyone I have spoken with (in addition to my own experience) is disgusted with the 401K system. It is a trap carefully set by the Wall Street/banksters in collusion with the politicians to funnel wealth from the average hardworking American into blocks of manageable funding to be manipulated at will by the so-called experts of Wall Street for their own benefit. The whole concept is a carefully planned scam backed by so-called tax incentives backed by withdrawal penalties - simply a means to put wealth in the hands of scheming "professionals" that have used the system to line their own packets.

The 401 K concept is designed to place much of the country's wealth in the hands of so-called professionals thereby creating a disconnect between the real investors and the investments. How comfortable to be a CEO of a major corporation and deal with fund managers rather than real investors when it comes to things like executive compensation -- much easier to manipulate as one "professional" to another

Just for fun, I left about $6500 in the system when I left the employ of a company in 1992. It was "managed" by UBS Financial. After all these years, I cashed it in for $6300 this year. Admittedly it did rise to slightly over $8500 for a while, but when inflation is taken into account, it is worth roughly 1/3 of the funding originally invested. My wife, a nurse for 25 years also cashed in last year, (paid penalties) in disgust after losing about 1/2 of her hard earned dollars. I have spoken with dozens of others who have had similar experiences at the hands of the thieves.

Our current retirement system has degenerated into a scam and needs to be overhauled completely (as most of the rest of our economic system) By the way, imagine where we could be if we had gone with the de-regulated transfer of Social Security to the thieves of Wall Street. 

Jim

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jamesdvetter
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Re: Daily Digest - May 6 - 401Ks
jpitre wrote:

Boehner Press Release

This despite data showing that 90 percent of households have a favorable opinion of the existing 401(k)/IRA system.

 

I find this statement to be an outright misleading lie that I find offensive. I admit that I can't back up my opinion with some contrived survey, however anyone I have spoken with (in addition to my own experience) is disgusted with the 401K system. It is a trap carefully set by the Wall Street/banksters in collusion with the politicians to funnel wealth from the average hardworking American into blocks of manageable funding to be manipulated at will by the so-called experts of Wall Street for their own benefit. The whole concept is a carefully planned scam backed by so-called tax incentives backed by withdrawal penalties - simply a means to put wealth in the hands of scheming "professionals" that have used the system to line their own packets.

The 401 K concept is designed to place much of the country's wealth in the hands of so-called professionals thereby creating a disconnect between the real investors and the investments. How comfortable to be a CEO of a major corporation and deal with fund managers rather than real investors when it comes to things like executive compensation -- much easier to manipulate as one "professional" to another

Just for fun, I left about $6500 in the system when I left the employ of a company in 1992. It was "managed" by UBS Financial. After all these years, I cashed it in for $6300 this year. Admittedly it did rise to slightly over $8500 for a while, but when inflation is taken into account, it is worth roughly 1/3 of the funding originally invested. My wife, a nurse for 25 years also cashed in last year, (paid penalties) in disgust after losing about 1/2 of her hard earned dollars. I have spoken with dozens of others who have had similar experiences at the hands of the thieves.

Our current retirement system has degenerated into a scam and needs to be overhauled completely (as most of the rest of our economic system) By the way, imagine where we could be if we had gone with the de-regulated transfer of Social Security to the thieves of Wall Street. 

Jim

While I understand the frustration noted above, the government and others did not choose the investment vehicle here..the individual did.  The possible proposals of MORE government involvement (read control here), will further exacerbate the loss of the individual's control over his own financial destiny, not improve it.  When people ask for change they need to understand that "change" does not always mean for the better.

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Re: Daily Digest - May 6

Jim, I totally agree - but like he said they are taking it from bad to worse.

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Re: Daily Digest - May 6

Davos..I agree, too.  I guess my point is that while there certainly are issues with the current "401k/IRA system," I suspect that we should leave it alone and the vast majority of Americans DO like the system.  If government alters it in any way, rest assured it will NOT be for the benefit of the individual...IMHO

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Good read from Casey's BUD CONRAD

I thought this was some excellent perspective from Doug Casey's chief economist, Bud Conrad:

L: I'm sitting in Las Vegas, Nevada, with Casey Research Chief Economist Bud Conrad, who's just delivered a spellbinding talk, the opening salvo of our first 2010 Crisis and Opportunity Summit. But, oddly enough, Bud is an engineer by training… So, the first question is, Bud, how the heck did you wind up being our chief economist?

Bud: Thanks, Louis, it's great to be speaking with you here at a conference where so many interesting and important ideas are being discussed. But yes, let's start with an introduction. My background was in electrical engineering, the undergraduate degree I got from Yale. I worked a whole career in the computer industry. So my approach to the way the world works, in terms of systems and analysis, is what you might call highly analytical. I mean that in the sense of starting with the data and trying to figure out how all the parts and pieces fit together into a system.

L: It's a deeply empirical approach. You're always saying, "What do the numbers say?"

Bud: Yes, and it's quite different from the traditional way most economists are trained, right up through the top levels of Ph.D. economists. I think that tradition is intellectually bankrupt. It's why economists have, for the most part, been unable to foresee the big inflection points in the economy and why they seem unable to do anything but predict a return to the way things were before any major turning points.

So I think I have something to bring to the economics community. That's why I took a year and a half to work on and publish my book, which is full of my ideas on how the world economy works. Being based on my electrical systems analyst approach, it's full of things like feedback loops and other factors that cause systems to move beyond equilibrium and cycle back and forth in a more dynamic process that's not unlike what electrical circuits do.

L: Okay, but let's come back to the book later. How did an electrical engineer become an economist?

Bud: Well, I've always had an interest in investing, and I've always had a fundamental interest in how things work. As early as 1978, I looked at the financial system of the United States and thought that it would fall apart. At one point, I worked for TRW and was told to go look at X company to acquire, and that company was providing a new thing: online charts. I asked the owner, who was considering selling the company to TRW, if he made a lot of money selling his charts. He said, "No, I make money by using the charts to find ways to invest in silver."

L: [Laughs] I begin to see the connection.

Bud: So I asked him how he invested in silver, and he explained commodities futures to me. I invested about $2,000 and made about $100,000 during the precious metals bubble of 1980.

L: Wow! You realized that?

Bud: Yes, and I've been hooked, watching the markets you specialize in, ever since, even though my career was in computers. I've spent the whole time since then watching and learning, and trying to figure out how to predict these big economic events that impact our investments so strongly.

L: That explains a lot. I remember when you first started with us. You met Doug Casey at a conference in San Francisco and gave him some interesting charts – so interesting, we couldn't ignore them. You were the "chart guy." And anyone who's been to one of your presentations knows you like to pack about 100 charts into 50 minutes. Now it all makes sense; you got started with a big chart-based success. No wonder you value charts as tools so highly.

Bud: Sure, but charts are just a way of presenting data to make it easily digestible. It's about the numbers. I'm not a chartist in the sense of what technical analysts do. I consider myself a much more fundamental analyst. The focus is not on looking for trends in charts, but on trying to understand how systems work, in order to predict what they will do in the future.

L: And like a typical engineer, you had to take it apart and tinker with it. That makes perfect sense – we're glad to have you with us, Bud. Your perspective really adds value to our organization, and your work has been an essential tool in our efforts to look forward. So, let's talk about that. Where are we going? What's the big picture your systems analysis paints for the future?

Bud: I start by looking at society's growth – and decline. I look at our situation today and try to look for parallels with other societies, to see if they can give us any ideas on where we may go. I think the most important historical comparison is to the Roman Empire; it lasted many generations, grew to great strength in its day, and then declined. I see parallels between that and the growth and decline of Western civilization, which appears to be headed for the wings as Asia prepares to take over the mantle.

L: Asian barbarians at the gates… Hm. So, where do we stand? Where in this cycle are we?

Bud: I think we've just about peaked. That's sad to me, being a product of Western civilization, but I think it's an important perspective to keep in mind as we look at the size of the problems we face. It tells me the current situation is a much bigger and longer-term problem than most economists believe or are willing to say. We did not just experience a typical business cycle bust period such as we've had many times since World War II. I think we're into a major change, handing off the baton of new economic growth to Asia.

L: Evidence?

Bud: There are some parallels that, though simplistic, seem to apply. American culture has changed from what it was for my father's generation. He told me: "Work like hell, and be honest with all your associates." Kids today ask only what the latest thing on the iPod is. It's a very different society. It's not one that has faced scarcity and values work and production. Today's America is all about enjoyment; the focus is partying, friends, self-indulgence. Las Vegas didn't exist in my father's day as it does today.

You see the same transition in Roman history, with the society starting out close to its agrarian roots, working hard to build their empire, but then changing to debauchery in the later years, with the famous Roman orgies and throwing people to the lions in the circus for sport. It was horrific and brutal, and the empire ended up being torn apart by endless internal warfare, which left it vulnerable to its barbarian attackers.

L: Watching the news these days and knowing that most Americans are now net recipients of government largesse, I wonder at times if the powers-that-be have not found a more effective form of bread and circuses to keep the people distracted.

Bud: I worry that we're moving in that direction. Our society is becoming much more oriented towards war – America spends half of all the money spent worldwide on military expenditures. That's typical of what an empire does when trying to maintain a crumbling position in its later stages. England did similar things, even as they came closer to passing their mantle of World Empire over to the United States.

There are still many good things about our culture, and some optimistic things happening in the Western world, so I'm not ready to abandon it, but I think we've hit our limit. We should be open to the fact that we can't be the top dog forever.

L: Okay, so is all of this just context for understanding, or are there chains of cause and effect from your observations on the decline of the American Empire that explain and predict what's going on?

Bud: There are two main ideas I want to focus on in answering that. The first can be summed up by the title of our Crisis and Opportunity Summit: Out of the "Eye of the Storm." The global economy is in the blue-sky center of a huge hurricane, the leading edge of which has just passed over us. We had the tempest winds of a credit collapse from overleveraging the private debt sector, particularly into housing – that collapse was a disaster, sparking the worst recession we've had since World War II. It now looks like things have recovered; blue sky overhead.

L: But anyone paying attention can see the dark cloud swirling around us…

Bud: Yes. Unless, of course, their economic training or their most heart-felt wishes prevent them from seeing it. The so-called recovery is simply the direct result of government spending. Private debt dried up and remains greatly reduced, but the government has stepped in with government debt. So, instead of the private sector buying houses with money they didn't have, we now have the government spending money it doesn't have.

There were bellwethers of the original credit crisis. We were writing about the coming credit crisis before the collapse of Lehman Brothers. Just last week, we heard the loud peals of a new warning bell, this time for a sovereign debt crisis. It looks different in detail but similar in structure, as Greek debt looks close to being repudiated.

There's a promise of bailout by the EU, just as, in some sense, Bear Stearns was bailed out by guarantees that came with the Fed's backing of their takeover by JPMorgan. Bailing out Bear Stearns didn't fix the credit crisis, and I doubt bailing out Greece will stop the sovereign debt crisis. It leaves the whole system under great stress, and it will get much worse if Portugal, Italy, and Spain follow Greece. 

And those could be just the beginning cracks. Look at the parallels to Lehman Brothers and the others that had to be merged out of existence.  The whole government debt system could fail in a spectacular way if people lose confidence in paper money entirely. The current financial order of the world is very much in the balance.

The trailing edge of the storm, once the eye passes from overhead, will take the form of a sovereign debt crisis, like the credit crisis of 2007/2008, but based on governments having too much debt.

L: Those are pretty high stakes, Bud. What do you say to the skeptics who argue that the government has always been able to stimulate the economy back into health before, to "prime the pump," as they say, with government spending that gets the private economy going again?

Bud: Let's look at the numbers. The Fed spent $1.5 trillion last year to support the mortgage market and therefore housing. The U.S. Treasury increased the deficit by $1.5 trillion last year, which adds up to $3 trillion in spending to try to fix our economy. The government is reporting that economic growth has turned positive again, by 3% of GDP. GDP is about $14 trillion, so that means we got about $400 billion in growth for about $3 trillion spent. Yes, there is a little blue sky. If you blow $3 trillion, the party will go on a little longer, but they're still spending trillions and we're only getting billions back for it.

The problem, I think, is that the government has made so many promises to make people feel good – not only for the short term but for the longer term – that we are past the "point of no return." The government's debt will never be paid off. As people realize this, they will question whether they should loan any more money to the government, and that means that interest rates will go up – and that rising interest rates will create a feedback loop, a vicious cycle of rising rates and more borrowing that will ultimately destroy not only the dollar but paper currencies throughout the world. They are all based on nothing but confidence.

I call that the world's largest confidence scam ever carried out in human history.

L: You're talking about financial Armageddon. That's a big prediction, and a hard pill for many to swallow. Can you give us some facts and figures to back this conclusion up? How do you convince someone who can't conceive of the U.S. following the path of Mugabe that this could really happen?

Bud: I can't help whether or not people want to face reality, but the fact is that paper money is worthless. The only reason it's accepted as money is because of laws that have forced people to use it for so long that most people have forgotten what real money is, and that bank notes were meant only to represent real money on deposit in some bank somewhere. You and Doug have talked about that in past conversations. It became a convention to accept paper as money when it was redeemable in gold, and we've carried on with that convention, even though Nixon closed the gold window in 1971.

As is so well documented in Ken Rogoff and Carmen Reinhart's book, This Time Is Different, people are kidding themselves if they think the U.S. dollar can't fail. Currencies fail all the time. Currency collapses have been documented throughout history, averaging about one per generation. This is a regular occurrence, and we're about to see it in the U.S.

L: So, what you're saying is that the question should not be, "Can it happen here?" but rather, "Why shouldn't it happen here, when it happens everywhere else?"

Bud: Nicely put. But let's get back to the numbers. We're sitting here on a $12 trillion national debt, a $1.5 trillion deficit last year, probably a $1.5 trillion deficit this year, and a new health care package that we're promised will save money but that includes no incentives to save money. On top of this, we have an aging demographic trend, with promises galore in the form of Social Security and Medicare… If you discount that future spending back to the present, we have a $75 trillion unfunded pension liability.

If the U.S. government were a private company, that liability would have to be on the books and funded. The government simply mentions in passing, from time to time, that it has unfunded mandates that have to be dealt with at some future time. That's not surprising, because there simply are no good answers to the problem. The only way those obligations can ever be paid is through greatly inflated dollars. These numbers are just too big to paper over. This is not like past recessions, which the government has stimulated away…

L: Thereby causing the next boom in the so-called boom-bust business cycle.

Bud: I think we're on a trajectory that will, within our lifetimes, cause the dollar to lose its purchasing power to the point that it will have to be replaced with something else.

L: Given what I could get for my dollars in Europe last week, it seems that the dollar is already well on its way to revealing to the world that it's as worthless as any other lie printed up by governments.

Bud: Yes… You know, a perennial question at investment conferences is the inflation/deflation debate. And I always wonder how the deflationists even get time on the stage. Deflations are very rare. We've had some deflation in Japan recently, as they've had a strong currency and a very positive trade surplus. But, historically, the periods of inflation always greatly outnumber those of deflation, because the incentives for governments to inflate money supplies are always present.

Governments can print up more money, and they get to spend it first, while it still holds its previous value. The money spreads out through an unaware population, diluting the value of the currency units already in circulation, almost always causing price inflation, but the government has already benefitted from its spending.

We are certainly now in a system where the incentives are for us to have inflation. There are many ways of looking at the value of the dollar, with the simplest being to look at its purchasing power within our own country. Using CPI for that, the dollar is worth about a nickel, compared to what it was worth when the Federal Reserve was founded. A large part of that loss of value happened in the 1970s, when the country was dealing with the large deficits that came out of the Viet Nam war, though that cause was partially masked by the effect taking five to ten years to show up in earnest. That, combined with the energy crises of 1973 and 1979, drove the prices of lots of things much higher.

L: And CPI being the government's estimate for U.S. price inflation, we can take that as a best-case scenario. I just looked, and the government says it takes $21.98 today to buy what one dollar bought in 1913, so, your round figure of a nickel is right on target.

Bud: This brings us to the second main idea I wanted to focus on in this interview. We've talked about government spending, deficits and inflation, but there's a second issue that has nothing to do with the government, and that's the state of the planet itself and its resources. Specifically, it took about 100 million years for nature to lay down the fossil fuel deposits that have become our major source of energy. We've used up approximately half of that resource in 100 years. Harnessing that store of wealth has allowed our species to grow from 1.5 billion people to 6.5 billion people and create a life of abundance for so many of them today.

L: Most people think of wealth as being things like houses and cars, not untapped resources in the ground…

Bud: Humanity is wealthy because it has access to the energy needed to make those things that are visible signs of wealth. So it's a major problem to have used up half of our main supply; it means we won't be able to increase production in the future. In such a situation, we face much higher prices, which acts like increased friction in a mechanical system, slowing everything down. It will also lead to conflicts over natural resources.

L: But there's unconventional oil and gas, tar sands, shale oil, coal bed methane, etc., so it's not that there won't be any more oil, but that it will be there in a permanently higher price context.

Bud: Not entirely. One of the biggest unconventional oil sources is the oil sands, but the problem there is energy in vs. energy out. It takes a lot of energy to scrape those tar sands out of the frozen Canadian wilderness, so the net energy you get is much less than with conventional oil. It is a viable source and we will use it, but it's not enough to overcome the drop-off in conventional oil production, which has reached a plateau over the last six years. I believe that's the "peak" of oil production predicted over 50 years ago by Hubbert, and none of the alternatives will be able to keep oil production increasing, and that spells big trouble.

Look, the West has shown the world a lifestyle that's a lot of fun. Those who do not yet enjoy that standard of living aspire to rise to it, and that would take a lot of energy. If those in China alone aspired to rise only to the standard of living in Mexico, they'd have to use roughly as much oil as the U.S. currently uses. The U.S. uses about a quarter of the world's oil production for about five percent of the world's population -- clearly an unsustainable situation. I think we're going to see more and more conflict over resources, and I think that's why we are in Iraq, why we're sending more troops to Afghanistan. We want to maintain our lifestyle, and we want "our" oil.

That's my belief. I'm scared as hell that the world is much closer to the brink of WWIII than most people want to believe as they sit at home watching reality TV and American Idol.

L: So… you're not just talking about financial Armageddon, but Armageddon Armageddon. Do you think modern civilization itself could collapse and bring on a new dark age, or does the world "merely" go through a painful and possibly violent transition and then emerge into a new, stable, but different social order?

Bud: That's the crux, isn't it? Which direction will society go? Frankly, I don't know.

L: I don't think anyone really can, and I know I'm asking you to gaze into a crystal ball, but what's your hunch, as a systems analyst looking at this disintegrating, unsustainable system?

Bud: My feeling is to agree with people like Doug Casey, who says it's going to be even worse than he thinks it's going to be. And here's a key point: I think it's going to get worse before it gets better, because not enough people realize how bad it is.

In particular, I'm thinking of the financial system here. The government has decided to create a commission, with no power, no budget to speak of, no subpoena authority, no real legislative capability, to look at the budget and report -- after the next election. That's not bullish for anything positive happening on the budget problem.

On the energy side, the American ability to maintain oil supplies, or to make sure the other guy doesn't get it, is extremely limited. China wants oil. Russia has oil, but not enough. I believe there will be a shooting war over resources. I don't know when, nor how bad, but I believe it will happen.

L: Back on the financial side, a huge amount of inflation seems baked in the cake at this point, because we have price destruction in certain asset classes, particularly real estate, masking the government's inflationary policies. That means they'll keep on causing inflation, thinking that they are getting away with it, and will only realize they've gone too far – way, way too far – after it's too late.

Bud: I agree, that's a very important point. But I don't want to be all gloom and doom – I do also see hopeful signs all around me. Literally. From my home in Northern California, I can ride my bike up the hill and see Google, Cisco, Sun Microsystems, Intel, Yahoo… I can't quite see Oracle, because it's a little way up the Bay Shore freeway. There are some wonderful things going on in this valley, and I think this, broadly understood as technological innovation, is what can save our future.

New technology is particularly needed in the case of the energy problem I brought up. We're going to run out of fossil fuels, but if we can figure out ways to make nuclear fusion, wind power, solar power, electric cars, etc. economic, an empty tank of fossil fuels doesn't have to be the end of the road. New technology is the answer to the issue of scarce resources. Ultimately, it's the only way to deal with the reality of what our planet is and what its limitations are.

My own background was in computers. I saw the computer revolution, the Internet… In the early days of the Internet, I edited an article in which the author said he didn't think the Internet would ever be used for commercial applications because it's unsafe and no one would give credit card information online, etc.

L: That sounds like the IBM guy who said back in the 1940s that he thought the global market for computers was about four.

Bud: Yes, exactly. But the Internet is so recent – I still know the people who said these things. That just shows how fast new technology can transform life these days. And it is revolutionary. Personal computing and the Internet have greatly increased human productivity, making it cheaper, faster, and better.

And the coming biotech revolution is even more exciting. I'm not that kind of technologist, but it is truly revolutionary that we've cracked the code and mapped out the entire human genome. It's staggering to think we can direct the evolution of mankind.

L: We know how to turn genes on and off – we've got a map, and we know how to use it. I think we're very close to one of those pivotal "This changes everything" moments in history.

Bud: It's amazing. And it's extremely positive news for medicine. The new biological approach to medicine is a completely different way of doing things than the mostly chemical approach of current medicine, handing out pills all the time. The biological approach uses living organisms to potentially regenerate broken body parts. I said earlier that we have a huge healthcare problem, courtesy of the Obama administration. That's so, but we may have completely new ways of doing things in the not-so-distant future that could help greatly.

If America can emphasize and encourage technology, especially in energy, medicine, and computation/communication, that's the salvation of humanity – and not just the U.S. That's the wave of the future we should invest in.

In contrast, if the government focuses on building bridges and railroads we don't need, just to create employment, we won't be any better off.

If you value American preeminence in the world, then investing in technological innovation is the way to go. And you improve the human situation while obtaining returns on your investments, if you bet correctly.

L: This conversation is a sort of distillation of Casey Research itself; you're talking about Armageddon and the hope for humanity, crisis and opportunity. So let's talk more about the broad investment implications of what you're saying. What should people do, Bud?

Bud: Well, perhaps the most obvious thing is to buy oil. Invest in anything sound that will benefit from higher oil prices. The prediction I made last year that I'm most proud of is when I said, when oil was trading at about $40 a barrel, that it would double. Guess what: it did. That call shocked many analysts who'd lost sight of the forest for all their detailed modeling of the trees. But looking at the bigger picture, I saw the limits on oil production and that society needs and would use and would be willing to pay much more for oil. I was right – and I think it's still going much higher.

L: You made a call on gold last year as well, and you nailed it. Gold was around $900 in late 2008, and you said it would go to $1,150 by the end of 2009, and it hit $1,200.

Bud: I did, but that was an easier call, and it wasn't as dramatic – I didn't call for a double in the price of gold – so I find that less impressive, though it was a very accurate call. So, in addition to investing in oil, gold is one of my main long-term investments. The reasons are obvious, when you look at the corruption of our whole financial system. But you and Doug have talked a great deal about why people should invest in gold, so I won't repeat all of that.

L: So, oil, gold – what else?

Bud: The obvious one is that if the dollar is collapsing, interest rates on dollar instruments will have to go up dramatically before the collapse is complete. So the third main strategy I recommend to investors is to invest in rising interest rates. There are many ways to do that, but the details are probably more than we want to get into in this conversation. We discuss how to best invest in all three of these areas in The Casey Report and more specifically in Casey's Energy Opportunities for oil and in Casey's Gold and Resource Report for gold.

L: And, there's more on all of this in your book, including, as anyone who's seen you give a presentation – or now has read this interview – would expect, a gazillion charts.

Bud: I have to say that the book is a different product from what most people do when writing a book to make money, or fame, or for vanity's sake. Mine was an intellectual process of trying to organize and express on paper all my new ways of thinking about economics, all collected in one volume, hopefully to enable readers to grasp the method, the insights, and the conclusions in a useful way. I try to explain all these systems, how they work together, and how they drive certain outcomes, like the prices of oil and gold and interest rates and agriculture.

It was disastrously difficult, personally, to get it all done, but having done it, I'm proud to say that the book contains many of my ideas and enough data to think of it as a reference work. But I also hope it's a little more exciting than a reference tome; I make some near- and long-term predictions, predicated on the crises I see unfolding.

L: Sounds great – I look forward to seeing how your predictions work out.

Bud: I guess you're not alone in that. The book has sold out at Amazon and is, as we speak, #1 in three category rankings and #24 in the overall Amazon rankings.

L: That's fantastic. People need to understand how these things work, and I had no idea you were reaching so many of them. You could actually be making a more positive contribution to that future of mankind you speak of than you know. Congratulations.

But if your book is sold out at Amazon, where can people get it?

Bud: You can still order it at Amazon, though it may be a while before they deliver, and they have electronic versions for the Kindle , of course, that you can have instantly. You can also get it at Bordersand at Barnes & Noble at the moment. It is not yet in most physical stores, but they can order it for you.

L: Great. Well, thanks a lot for your time, Bud. It's always interesting talking with you.

Bud: You're very welcome.

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saxplayer00o1
Status: Diamond Member (Offline)
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Posts: 4065
Re: Daily Digest - May 6

 

"The bad news keeps coming for Toledo Public Schools as it tries to steady its financial ship.

Its income tax levy failed Tuesday, meaning more layoffs and program cuts to close a $30 million budget hole next fiscal year.

Now there also could be $2 million to $4 million more in losses over the next fiscal year from lagging tax collections to add to the red ink in the new budget, which takes effect July 1.

That's because property-tax delinquencies are rising in addition to successful appeals from Lucas County property owners to reduce their tax bills, said TPS Treasurer Dan Romano, who said he learned of the development this month from the county auditor's office.

“Are we surprised, yes,” said Mr. Romano, who added his staff is trying to win some federal grants to close the hole. “There is some opportunity for us, if we can make our case.”"

"Escalating pension costs will mean an $8 million hit to Sonoma County government and five other government groups in 2011, and the bill threatens to rise significantly over the next six years.

That sobering news came Wednesday in a report accepted by the board of the Sonoma County Employees' Retirement Association.

The association, which represents about 8,000 retired and current employees, suffered a $670million investment loss in the 2008 stock market downturn.

To recoup that money and fund benefits going forward, taxpayer payments into the pension fund will have to increase in mid-2011 by 2.6 percent — or $8.3 million — and possibly by millions thereafter until 2017, the report stated. "

"The bill will, for one year, cause hospitals to pay about $230 million into state coffers. That, in turn, will mean the federal government will send the state an extra $439 million in matching funds for the TennCare program.

Armstrong and Overbey both described the bill as allowing hospitals to "step into the state's shoes." Proponents avoided describing the measure as a tax or fee. They also said it will not increase the federal deficit because Congress has already appropriated the money and the bill will simply allow Tennessee to collect it."

"Reserve funds are important to help cover unexpected costs, such as road repairs during a hot summer or snow plowing during a harsh winter, said Dan Thompson, executive director of the League of Wisconsin Municipalities. Carrying a negative fund balance “would be like someone running up a huge credit card debt for food or clothing,” Thompson said. “You can certainly do it for short periods of time, but you can’t do it forever.”"

"After a brief Thursday morning meeting with Minnesota Gov. Tim Pawlenty, state leaders said Minnesota’s budget problem was sobering, serious and could produce an unchartered crisis.

The state’s deficit could be as large as $3 billion and could mean Minnesota will be out of cash to pay its bills in short order, said Senate Majority Leader Larry Pogemiller, DFL-Minneapolis. It is a gap borne in part of a Wednesday State Supreme Court decision that ruled Pawlenty’s 2009 unilateral budget cutting was illegal and could not stand."

.........................5A) Federal inaction on Medicaid may add back $408 million to Minnesota’s looming deficit

"Raising tensions is $408 million in federal Medicaid funds that both parties were counting on to help balance the state’s books. Earlier in the legislative session, it looked like a safe bet that Congress would allocate $25 billion in increased Medicaid reimbursements for next year. Roughly two-thirds of states across the country drew up their 2011 budgets assuming that they could utilize the enhanced payments to help square the books, according to the National Conference of State Legislatures.

But the prospects for passage don’t look so bright any more. The basic problem: There’s no apparent political will to add an additional $25 billion to a federal deficit that is already a political liability to the White House and the Democratic Congress."

"Frankfurt. The euro slid further on Thursday on fears Greece’s debt crisis will spread across the continent, after a ratings agency warned that contagion could hit banks in weaker countries.

The euro, which will take a severe blow in case of a government default, sagged to below $1.27.

A default by Greece on its debt is out of the question, European Central Bank President Jean-Claude Trichet insisted in Lisbon on Thursday. The ECB held its main interest rate steady at a record low of 1 percent, as governors sought to keep the Greek debt crisis from threatening the entire 16-nation euro zone.

Meeting in Lisbon for a twice-yearly gathering away from the ECB’s Frankfurt base, central bank governors faced the biggest challenge to Europe’s single currency in its 11-year history.

“Pressure on the ECB is very strong,” Deutsche Bank economist Gilles Moec said after the rate decision. "

"To balance the budget, the compromise plan delays a second $100 million payment to the state's employee pension fund, and relies on improved state tax collections and anticipated federal economic stimulus funds. It also cuts $171 million in state spending, sweeps an energy conservation fund, and borrows nearly $1 billion.

Those bonds will be paid off by continuing a surcharge on electric bills for the next eight years."

"“I will just simply say that any transaction that is done in the marketplace has got to be done with the highest standards of fair dealing,” said Mr Paulson. He added: “Frankly, [in] every one of these market making transactions – or many of them – the client or the customer expects the banker to take the other side of the trade.”"

...............8A) Ex-Treasury Chief Paulson Says ‘Wolf Pack’ Menaced Bear Stearns

"May 6 (Bloomberg) -- Former Treasury Secretary Henry Paulson said bets against the survival of Bear Stearns Cos. before the firm’s sale to JPMorgan Chase & Co. amounted to “the wolf pack trying to pull down the weak deer.”

“I don’t use the word collusive because it’s got a legal connotation,” Paulson said today at a hearing of the Financial Crisis Inquiry Commission in Washington. “It sure looked to me like some kind of coordinated action.”

Paulson said he wasn’t “saying there was behavior that was illegal” and he thinks short-selling “is essential for the price-discovery process.” "

"Lawmakers want to issue $4 billion in bonds later this year in order to fund their legally required annual payment to the state’s five public employee pension systems.

State government has struggled in recent years to make that annual payment. Last year, lawmakers used a similar borrowing tactic to make its annual pension contribution.

“It’s déjà vu all over again. And we can’t do this much longer. At some point we’re going to have to straighten this out,” said state Sen. Dale Risinger, R-Peoria."

"But state Rep. Jack Franks, D-Woodstock, said it was irresponsible to continue passing on the burden.

“We cannot continue to underfund the pensions. We need to acknowledge our obligations and ‘pay-as-you-go.’ Furthermore, borrowing here will hurt the retirement system because there will be no principle paid in. This is a death spiral folks,” he said.

A recent study by the Pew Center for the States indicated that Illinois had the worst unfunded pension liability in the nation at $80 billion."

"May 6 (Bloomberg) -- An increased tax on executives at hedge funds and private equity firms will probably be included in legislation extending jobless benefits and a number of tax cuts, the House’s top tax-writer said.

House Ways and Means Committee Chairman Sander Levin, a Michigan Democrat, said today that lawmakers will likely seek to raise the tax on so-called “carried interest” to help finance the bill, though he said details are still being worked out.

The measure will likely include extensions of the Build America Bonds program, unemployment benefits, Cobra subsidies to help the jobless buy health insurance and a series of business tax cuts that expire every year.

Lawmakers also may include a provision preventing scheduled cuts in Medicare reimbursements to doctors for as long as five years, he said. The measure is unlikely to include President Barack Obama’s proposed bank tax, Levin said. All of that could push the cost of the legislation to $200 billion."

"May 6 (Bloomberg) -- The U.S. House will consider raising liability for oil-spill damage from $75 million to $10 billion, Speaker Nancy Pelosi said today.

Lawmakers have proposed such an increase following the oil spill in the Gulf of Mexico after an oil rig leased by BP Plc exploded. "

12) U.S. Corporate Credit Risk Rises to 2010 High on Europe Crisis

"May 6 (Bloomberg) -- The cost to protect against defaults on U.S. corporate bonds rose to the highest this year on concern European leaders aren’t doing enough to avert a sovereign debt crisis. "

  • Other headlines:

Government taking over pensions for Grand Rapids-area auto supplier

Muhlenberg School District could go bankrupt by 2013-2014, business manager says

Municipal budget to boost average taxes $66 (New Jersey)

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SagerXX
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Joined: Feb 11 2009
Posts: 2219
Holy Guacamole -- Dow down 350 (2:40 p.m. EST)

!

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gregroberts
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Gold just passed $1200

Interesting, Gold just passed $1200, the dollar is up, and silver has disconnected from it's normal path of following golds direction and not a word on CM's site, what's up?

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Holy Guacamole -- Dow down 411 (2:40 p.m. EST)

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SagerXX
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Holy Guacamole -- Dow down 512 (2:44 p.m. EST)

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SagerXX
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Holy Guacamole -- Dow down 727 (2:45 p.m. EST)

!

 

Allright.  Even if it goes down 1000 points, I'm not posting again.  

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Re: Daily Digest - May 6

Any inputs on the developing and immense drop in the markets?  DOW down by over 900 points?  This is a trigger for me... no major actions, but I'm taking some money out of the bank and doing some extra grocery shopping today.

- Nick

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Okay...(2:51)

...after my last post I went and switched on CNBC, and watched the Dow go down as low as -980 or so on the day.  Now it's "recovered" to merely being off 680.  

Is this utterly unprecedented?  Or am I just a newb?

 

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Re: Gold just passed $1200
gregroberts wrote:

Interesting, Gold just passed $1200, the dollar is up, and silver has disconnected from it's normal path of following golds direction and not a word on CM's site, what's up?

Silver is a sleeper IMO. I think we will see 50-200 x increase in silver. My take right now is the carry trade is suspended, possible totally over, commodities took out 1150.

Maybe folks are looking at silver as more of an industrial metal (commodity) and not a safe haven like gold. Good. Like a sale at the store. I don't think many investors understand that silver isn't mined, it is a byproduct of other mined materials. 

Either way I kind of regret not having cable, I'd like to watch the morons on CNBS wet themselves.

~ just my 2 cents

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Murphy strikes again...

I really do think I have the worst luck on the planet...

After keeping a large short against the S&P for MONTHS, I pared it down by half just a few days before this happened. Then as the mini-crash was happening I wanted to increase the short again, but kept telling myself "wait for the bounce - wait for the bounce..."

It just kept dropping and dropping. Finally at 02:45:47pm, I couldn't wait any longer and had to add to the short. Sold 35 contracts at 1061.75. I think I may have had the low print of the day! It almost instantly bounced back 60 S&P points!

Yeesh, up until then I was having a good crash.

Erik

 

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Re: Daily Digest - May 6

Davos

Quote:

I don't think many investors understand that silver isn't mined, it is a byproduct of other mined materials.

I'm sure someone will correct me if I'm wrong, but its my understanding there is still one silver mine open in Mexico and more will probably be reopened if the price goes high enough.

Doug

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Re: Daily Digest - May 6
Doug wrote:

Davos

Quote:

I don't think many investors understand that silver isn't mined, it is a byproduct of other mined materials.

I'm sure someone will correct me if I'm wrong, but its my understanding there is still one silver mine open in Mexico and more will probably be reopened if the price goes high enough.

Doug

"Over 70 percent of the mined production of silver comes NOT from silver mines but as a by-product of the mining of other metals, such as nickel, copper, lead, zinc, and gold." ~ISBN 0-07-063734-2 (dated 1987)

Or somewhere in this SUPER podcast.

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Re: Murphy strikes again...
Erik T. wrote:

I really do think I have the worst luck on the planet...

After keeping a large short against the S&P for MONTHS, I pared it down by half just a few days before this happened. Then as the mini-crash was happening I wanted to increase the short again, but kept telling myself "wait for the bounce - wait for the bounce..."

It just kept dropping and dropping. Finally at 02:45:47pm, I couldn't wait any longer and had to add to the short. Sold 35 contracts at 1061.75. I think I may have had the low print of the day! It almost instantly bounced back 60 S&P points!

Yeesh, up until then I was having a good crash.

Erik

Erik....you are truly an honest guy. 

Unless they were a high frequency trading algo, no one had a chance to play that move.

Get em next time.....Best, Jeff

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Davos
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Re: Murphy strikes again...
JAG wrote:
Erik T. wrote:

I really do think I have the worst luck on the planet...

After keeping a large short against the S&P for MONTHS, I pared it down by half just a few days before this happened. Then as the mini-crash was happening I wanted to increase the short again, but kept telling myself "wait for the bounce - wait for the bounce..."

It just kept dropping and dropping. Finally at 02:45:47pm, I couldn't wait any longer and had to add to the short. Sold 35 contracts at 1061.75. I think I may have had the low print of the day! It almost instantly bounced back 60 S&P points!

Yeesh, up until then I was having a good crash.

Erik

Erik....you are truly an honest guy. 

Unless they were a high frequency trading algo, no one had a chance to play that move.

Get em next time.....Best, Jeff

Honest, but overall I wouldn't call your hard work that lead to your success bad luck.

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TheCollectorsCo...
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Greece Bailout & National Sovereignty

Greece Bailout & National Sovereignty Part 1

Greece Bailout & National Sovereignty Part 2

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Re: Daily Digest - May 6 - 401Ks

You don't know the half of it.

 

Besides providing the necessary "greater fool", the disinterested investor who ignores annual reports and proxy votes bears a lot of the burden for the shape capitalism is in now.

 

But wait, it gets worse.

 

Tax-deferred investing is not tax-AVOIDED investing.  Over and over again I see people saving in a 401(k) at work because it is so easy.  These are people who have no savings outside of retirement whatsoever, which means that their 401(k)s are their de facto emergency funds.  And when an emergency happens, as they usually do in a life-time, people pull the money out of the 401(k) and pay taxes on it at a HIGHER marginal rate than they saved it at PLUS penalties.  Joke's on them, they thought they were saving money on taxes and it ended up costing them more.

 

But let's say they were provident and had emergency money elsewhere and never touched their 401(k) until the day they retired.  At that point they go to implement their retirement plans, which involve buying an RV and driving around the country, or perhaps buying into an assisted living center, or maybe buying that fishing camp store they thought would make a great retirement business.  And, guess what, now they are taxed at a higher bracket than they've ever been in their life, plus get social security taxed, plus have to pay a larger medicare premium because they are so "wealthy" by taking out their retirement money in a big lump like that.

 

But wait, there's MORE!  Let's say they never take it out and die at the age of 90 in their sleep with their beloved child at their bedside, a life well-lived, never having known want.  Guess what?  The tax on that all comes due to the 55 year old child when the child is at their peak earning years!  Kablam, taxed at a higher rate than they ever saved.

 

It used to be that people took their pension and annuitized them.  Our grandparents did that.  No one in their right mind takes a fixed pension anymore, though, as anyone who has seen the Crash Course understands.  And yet, 401(k)s are ONLY not tax traps to people who annuitize them. 

 

401(k)s are just a scam, a way to trick middle class people into paying higher taxes on their pensions.  They get taxed at ordinary rates on inflation: a perfectly disguised theft that hardly anyone ever notices.  (Note: tax-deferrals on earnings aren't worth much in an era when long-term capital gains and qualified dividends are taxed at 0%, by the way.)

 

 

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idoctor
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Posts: 1731
Re: Daily Digest - May 6

 

idoctor's picture
idoctor
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Re: Daily Digest - May 6

Everyone please watch this video.....he calls it the "THE MATRIX" sell off.

http://www.cnbc.com/id/15840232?video=1487183693&play=1

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idoctor
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Re: Daily Digest - May 6

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Damnthematrix
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Re: Daily Digest - May 6

http://www.washingtonsblog.com/2010/05/are-france-and-germany-in-trouble.html

Are France and Germany In Trouble?

 

Wednesday, May 5, 2010

 You know that Greece, Portugal and Spain are in trouble.

You probably know that the UK is threatened by the sovereign debt contagion.

But as the following Reuters chart shows (based on information provided by BIS), France and Germany are the largest holder of Greek debt:

http://graphics.thomsonreuters.com/10/04/GLB_GRDEBT0410.gif


As The Street notes, France and Germany are also greatly exposed to Portugal and Spain:

France's banking sector has the second-largest exposure to Portugal and Spain debt loads, after Germany, according to the BIS.

European banks have more at-risk assets in Portugal and Spain than in Greece. European lenders are holding Portugal debt issues of $240.5 billion -- including $47.4 billion by German banks and $44.9 billion by French firms, according to BIS figures from the end of 2009 quoted in a Bloomberg report.

And as Tyler Durden points out, France Germany and the UK are getting hit with wider credit default swap spreads:

With a stunning $630 million, $558 million and $370 million in net notional derisking, France, UK and Germany are the top three most active recipients in negative bets in the prior week, not just in sovereigns but in all names...

Zero Hedge's outside bet to be the first core country to blow up, thanks to its massive PIIGS exposure, France, finally made the top spot in net derisking, with $629 million in net notional, or 189 contracts. The smart money is now massively betting that Europe's core is done for; as the PIIGS have demonstrated, the blow out in spreads for the core trifecta can not be far behind.

Given that central bankers have - for several years - focused on credit default swaps as the most important economic indicator (see this and this), widening spreads are a bad sign, indeed.

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