Daily Digest

Daily Digest - May 8

Saturday, May 8, 2010, 10:43 AM
  • Meet The Unemployable Man
  • Jim Sinclair: Main Street Is In The Hands Of A Roulette Wheel
  • The Global Crisis of Legitimacy
  • The Speculative Peak Cheap Oil Trade

Economy

Meet The Unemployable Man (Don S.)

The betting is that the Labor Department's Friday snapshot of the job market will show that employers added workers in April, perhaps even that the unemployment rate fell.

That would be good news, but not good enough. It's hard to exaggerate how bad the job market is. Here's one arresting fact: One of every five men 25 to 54 isn't working.

Jim Sinclair: Main Street Is In The Hands Of A Roulette Wheel (hucklejohn)

You are either ready now, or there will be no chance of readiness. Right now ready means gold and gold equivalents. The last currencies to be attacked will be the Cando and the Swiss Franc. It is all over. The fat lady has sung.

The Global Crisis of Legitimacy (pinecarr)

Political crises - as opposed to normal financial panics - emerge when the reckless appear to be the beneficiaries of the crisis they have caused, while the rest of society bears the burdens of their recklessness. At that point, the crisis ceases to be financial or economic. It becomes political.

Energy

The Speculative Peak Cheap Oil Trade (Erik T.)

My contention is that at this point in the Peak Cheap Oil cycle, the most prudent bet to make is on contango, not absolute price. At first, it might seem logical to buy long-dated futures or options contracts; in other words, to go long on crude oil for delivery in the 2012 – 2015 early crisis window that I wrote about in the previous article. But who the heck knows where the price of oil is headed from here? I thought it was headed much higher because of the mounting disaster in the Gulf, but it turned out that the currency crisis that has embroiled Greece and is about to spread across southern Europe led to a big sell-off.

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5 Comments

saxplayer00o1's picture
saxplayer00o1
Status: Diamond Member (Offline)
Joined: Jul 30 2009
Posts: 4145
Re: Daily Digest - May 8

"May 8 (Bloomberg) -- European leaders agreed to set up an emergency fund to halt the spread of Greece’s fiscal woes, seeking to prevent a sovereign debt crisis from shattering confidence in the 11-year-old euro.

Jolted into action by the sliding currency and soaring bond yields in Portugal and Spain, leaders of the 16 euro countries said the workings of the financial backstop will be hammered out before Asian markets open late tomorrow European time.

“We will defend the euro, whatever it takes,” European Commission President Jose Barroso told reporters early today after the leaders met in Brussels."

"Surging Spreads

The extra yield that investors demand to hold Greek, Portuguese and Spanish debt instead of benchmark German bonds rose to euro-era highs yesterday. The premium on 10-year government bonds jumped as high as 973 basis points for Greece, 354 basis points for Portugal and 173 basis points for Spain."

.........................1A) EU crisis fund plan ready by Sunday lunch: Official

"While bailouts are banned by EU treaties, the commission is planning to use powers in "exceptional circumstances" that previously allowed it to help non-euro members like Hungary, Latvia or Romania, by borrowing on the bond market.

Sources said 70 billion euros (90 billion dollars) could be raised in this way, while European Central Bank chief Jean-Claude Trichet is not ruling out a so-called 'nuclear' option, introducing emergency provisions for the buying of government debt, according to Italian Prime Minister Silvio Berlusconi. "

"The Greek financial crisis is filtering into the banking market, where worries about the exposure of Europe’s leading lenders to weak eurozone governments are raising the cost of insuring bank debt.

Shares in the big French lenders, including Crédit Agricole, Société Générale and BNP, fell and credit default swaps on Crédit Agricole widened as markets continued to speculate on a Greek default.

Signs that confidence is eroding in the banking sector emerged as a summit of eurozone leaders convened to approve the €110 billion Greek bailout. Olli Rehn, the European Monetary Affairs Commissioner, warned that a Greek bankruptcy could have the same effect on the markets as that of Lehman Brothers in 2008."

"Two of Britain’s biggest banks admitted they’ve already taken multi-million pounds hit on their exposure to Greek debt, amid mounting fears that the crisis-hit nation will default on its loans.

Taxpayer-controlled Royal Bank of Scotland said it has taken a £400m provision against its £1.5bn holding in Greek bonds. HSBC said it has marked down the value of its £1.3bn exposure, but described it as a ‘dent rather than a crash’.

RBS chief executive Stephen Hester believes the sovereign debt crisis gripping markets is an ‘uncomfortable reminder’ of the fragility of the global economic recovery."

"The company, like its counterpart Freddie Mac (FRE.N), is in the process of buying back tens of billions of dollars in troubled home loans that now collateralize its securities. The loans being repurchased are at least 120 days late and are a capital drain.

The serious delinquency rate on Fannie Mae single-family loans rose 7 basis points in February, the latest month for which data is available, to 5.59 percent. The rate rose 4 basis points on multifamily loans to 0.73 percent.

A year earlier, the single-family rate stood at 2.96 percent and the multifamily rate at 0.32 percent."

"WASHINGTON (Reuters) – Nearly 40 million Americans received food stamps -- the latest in an ever-higher string of record enrollment that dates from December 2008 and the U.S. recession, according to a government update.

Food stamps are the primary federal anti-hunger program, helping poor people buy food. Enrollment is highest during times of economic distress. The jobless rate was 9.9 percent, the government said on Friday.

The Agriculture Department said 39.68 million people, or 1 in 8 Americans, were enrolled for food stamps during February, an increase of 260,000 from January. USDA updated its figures on Wednesday.

"This is the highest share of the U.S. population on SNAP/food stamps," said the anti-hunger group Food Research and Action Center, using the new name for food stamps, Supplemental Nutrition Assistance Program (SNAP). "Research suggests that one in three eligible people are not receiving ... benefits."

Enrollment has set a record each month since reaching 31.78 million in December 2008. USDA estimates enrollment will average 40.5 million people this fiscal year, which ends Sept 30, at a cost of up to $59 billion. For fiscal 2011, average enrollment is forecast for 43.3 million people.""

"Egypt's demand for petroleum and gas will reach 103 billion tons annually by the beginning of 2020, the equivalent of 750 million barrels of oil, said Hussein Abdallah, former first undersecretary of the Ministry of Petroleum.

Egypt's oil and gas reserves are officially estimated at 16 billion barrels of oil and 12 billion tons of gas, the equivalent of 2200 tons of petroleum, said Abdallah, therefore, Egypt's share of these reserves, after its foreign partners take their share, may be fully depleted by the beginning of 2020. This would force Egypt to purchase its petroleum and gas at world market prices, which is not expected to be less than US$120 a barrel. At this price, Egypt would have to pay US$90 billion annually to satisfy its demand for petroleum and gas."

"There's a golden rule in politics: Bury bad news on a Friday afternoon. And that's just what the state controller's office has done with the latest batch of state revenue figures.

A release from John Chiang's office says the state's already grim fiscal picture just got a little worse. April's "receipts dropped below the Governor’s 2010-11 budget estimates by $3.6 billion, or 26.4 percent. Through March, the state's revenues were tracking more than $2.3 billion ahead of projections."

A quick bit of rough math indicates that, through April, the state's overall revenue figures are about $1.3 billion below projections.

Have a nice weekend!

--Anthony York in Sacramento"

"May 7 (Bloomberg) -- Brazil is scaling back weekly domestic bond sales as benchmark yields climb to a 14-month high and the currency plunges on concern European leaders aren’t doing enough to stem Greece’s spreading financial crisis.

The government sold 81 million reais ($44 million) of the 300 million reais in fixed-rate notes it offered yesterday, the smallest amount at a weekly auction since February 2009. The 10 percent notes due 2014 yielded 12.89 percent. In secondary trading, yields have soared 34 basis points since April 30 to 12.99 percent, putting them on pace for the worst week in 11 months, according to data compiled by Bloomberg."

"The Austrians Called It

What we are seeing now for the eurozone is a clear instance of the Von Mises prophecy. (Ludwig Von Mises is the father of Austrian economics. We have quoted him - and his prophecy - many times in these pages.)

To go to the well one more time - and probably not for the last time! - many decades ago Von Mises taught and predicted as follows (emhasis mine):

There is no means of avoiding the final collapse of a boom expansion brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."

"MOUNTAIN HOUSE — Advertised as "The Town of Tomorrow," this new bedroom community near the Altamont Pass windmills once seemed like an ideal investment for the California Public Employees' Retirement System.

Then the real estate bubble burst. Mountain House became the most "underwater" community in America — and much of CalPERS' money sank along with it.

The pension fund's $1.12 billion investment in Mountain House shrank to just under $200 million in five years, CalPERS records show. That's a loss of more than $920 million, making it one of the biggest headaches in CalPERS' troubled real estate portfolio.

For now the loss is just on paper, like a share of stock that has dropped, and CalPERS has said it is not bailing out.

"We have made a decision to retain the asset in the long-term for the recovery of California's housing market," fund spokesman Brad Pacheco said in an e-mail."

"Miriam is an American expatriate in Calgary who has lived in Canada all of her adult life. Born in the U.S., she took out Canadian citizenship after marrying a Canadian she met at an American university in her native Midwest.

A hopeless romantic at 21, she moved with him to Canada in the mid-1970s, raised three children here and has not earned a nickel in the U.S. since. A permanent Canadian resident for more than 30 years who has long held Canadian citizenship, she uses no U.S. services and is not eligible for U.S. social security when she retires.

Yet, like millions of other American expats around the globe, she remains subject to rapacious American tax laws that could require her to pay taxes to the U.S. government on her Canadian income, in addition to the taxes she already pays to Canada.

The draconian U.S. tax policy is creating a chill within Calgary's 80,000-member American expatriate community, the largest in Canada. Faced with increasingly aggressive enforcement by the U.S. -- the only industrialized nation in the world that taxes its expatriates -- many U.S. expats worldwide are considering what was once an unthinkable act, a formal renunciation of their cherished U.S. citizenship."

"Gov. Tim Pawlenty took the first step Friday toward a possible shutdown of some state government functions in response to Minnesota's budget meltdown.

In a move likely to increase pressure on DFL legislative leaders, Pawlenty issued an executive order directing that his cabinet members identify "core government services" that should continue operating as the state faces "a severe cash flow crisis."

The trigger, the order says, is this week's ruling by the state Supreme Court that overturned the unilateral budget cuts Pawlenty made last year.

Pawlenty called the court's decision "a very misguided, unwise decision ... but it is what it is.""

A) French President Nicolas Sarkozy Vows to "Confront Speculators Mercilessly" via Secret Plan he cannot Reveal

B)Rep. Alan Grayson: You Own the Red Roof Inn, Thanks to the Fed; Why the Fed Does Not Want an Audit; America is Wall Street's Sucker (Video)

  • Other news stories, blogs and headlines:

Dow suffers largest weekly drop since 2008

European Stocks Post Biggest Weekly Drop in 18 Months on Debt

Financial Author Wiedemer: Debt Crisis Will Hit US

France and Germany forced Greece to buy arms: MEP

Romania faces unrest over plan for 25% pay cuts in state sector

City Weighs Employment Tax As Pension Fix (Pittsburgh)

NDC has sold Ghanaians into slavery (Opinion)

Ireland's borrowing costs hit record high over Greek fears

US Banks in Four States Closed, Failure Count Climbs to 68

Venezuelan Prices Surge to 7-Year High on Food Hikes

Portuguese PM slams financial speculation

At-fault motorists targeted to pay for rescuers' services (San Diego)

ISU tuition going up 9 percent for new students; meals and dorms will cost more, too (Illinois)

Santelli Warns Greek Riots America's 'Ghost of Christmas Future' (CNBC Video)

Thai gov't warns of violence if protests don't end

End Of Unemployment Checks Will Mean No Income For Many

 Cyber attack 'could fell US within 15 minutes'

 Kansas House coalition puts $300 million tax hike into budget

County looking at property tax hike of 22.6% or 42.1% (Arizona)

Study: Bakersfield homes won't regain 2006 prices until 2039

 

......................Enjoy the weekend.

smirking pig's picture
smirking pig
Status: Bronze Member (Offline)
Joined: Sep 26 2009
Posts: 26
Re: Daily Digest - May 8

Exponential Growth and Depletion: Chart of the Century?
  (May 3, 2010)

http://www.oftwominds.com/blogmay10/exponential-growth05-10.html

 

this is great read.....goes along with Chris M's   thoughts on the Crash Course

 

lpowell23's picture
lpowell23
Status: Bronze Member (Offline)
Joined: Oct 18 2008
Posts: 27
Re: Daily Digest - May 8

Is this the future of the world?   Someone posted a similar version of this movie back in December '08 which displayed pictures of President Obama at the end.    I'm afraid events in the movie may come to fruition afterall.

You know posting articles and commenting is one thing, and acknowledging reality of something else.   I feel that events are becoming surreal.     There's a huge possibility that Europe will spill out of control and the crisis will head back where it sparked - right here!    Although, I've been reading this website, as well as others, since the crisis started  in 2008 I'm not sure that I'm prepared - that is psychologically prepared for possible events.    Not sure there is really a good way to prepare for a systemic collapse.   

Does anyone else feel the same?

maaa's picture
maaa
Status: Bronze Member (Offline)
Joined: Sep 22 2009
Posts: 26
Re: Daily Digest - May 8

Not surreal. But it's probably what's real about it that can get to us all psychologically. Ack. So, I had to post to encourage you not to let it freak you out. I know a lot of people who have been letting this all get to them too much.

This does kinda feel a little like one day in 2003 when I looked up at the hill behind our big dream home (paid off free and clear)  and the hill was on fire and so I said to myself this is why you train for marathons and ski races and so get out there and hustle and we got the Rain Birds rigged up to water the roof before evacuating. We saved our house by the way.

It's been a lot of work to adjust all our livelihood and finances to try to be prepared for whaz happenin' but here we go for whatever wild ride it will be again this time.

 

portals's picture
portals
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Joined: Apr 20 2009
Posts: 22
Re: Daily Digest - May 8

Believe it, or not, the best way to prepare is not to materialistically prepare at all, at least, not for the long term.  Let me explain.

When our global financial system totally falls apart, those who have prepared by stashing away bulk food, weapons, and supplies have set themselves up to be the first targets of the hungry and destitute masses.   This is especially true if they didn't hide their actions from the public, or shot their mouths off about what they were doing.  On the other hand, nobody is going threaten, or steal anything from anybody who has nothing of survival value, are they?

Keep in mind that after the fact, law enforcement will be all but gone, and nearly all social values will break down.   The latter is the most damning situation, as we no longer have the tight knit communities in the United States that used to exist when I was a kid 50 years ago.  Today, few people really know anybody in communities.  One can live next door to someone for years and never know who they are, and since most neighbors in today's communities are renters who move incessantly, the odds are that your neighbor will have little compassion for you, and your family when the crap hits the fan.   This is particularly true in large cities where even without any global problem they can't stand each other.

If you want to prepare for something as horrendous as a global economic collapse, the best way to do it is intellectually.  Learn how to do things for yourself.  Learn how to power your car without gasoline with just a few simple changes you can do yourself in less than a couple of hours using little more than pieces of scrap metal.  Learn how to do the same for your house without ever having to use conventional fuels like natural gas, gasoline, or diesel fuel, or by publicly exposing your self-proclaimed 'secure' position by using expensive solar panels to produce your own electricity. 

Always maintain the notion that, even though you have these abilities, you will never use them until the smoke clears, and the deadwood has already killed itself off.  Case in point: If the world becomes a dark place for everybody from the lack of electricity, the last thing you want to do is light your's up like a Christmas tree.    If people see it, or hear any electronically reproduced music coming from within it,  where do you think they are going to go?  Keep in mind that many of them will be punks who are used to taking what they want.  Your house will become like a bright light to moths, only these moths could kill you to get what you have.

And what about weapons?  If you listen to the conspiracy creeps, you will know that they are always telling people to stock up on guns and ammo.  Why?  What happens when you run out of bullets that aren't being made anymore.  Even worse, how far do you think an AK-47 is going to get you when a hundred hungry people are assaulting your house all at once?   There are much better alternatives, but you have to know what they are first before you can use them.

Whatever happens in the future, always remember that just because somebody calls you a friend in good times does not mean he/she will be one when the world falls apart.   I saw this phenomena personally in a micro-scenario during my jaunt as a combat veteran of this nation.   In times of catastrophic regional, national, or global upheaval, humans revert to their primordial instinct of self-preservation, not communal preservation.  Where do you think the axiom "It's every man for himself" came from?

Therefore, be wise in your preparations, and don't boast about the fact that you think you can survive anything better than those you consider to be lower forms of life, or you may find that they were better prepared to survive than you, using the preparations you made to help your own family.  As for me, they have nothing to steal, as there is nothing worth the effort.  At least, not from a survival standpoint.  What I have is safely tucked away in my mind; ready for use when I need it.  It is "on-demand", if you will.

aufrance is absolutely right.  Nobody should get freaked out about such a situation.  Only those who have not prepared correctly get freaked out, because, quite frankly, they don't know what the hell to do when disaster strikes.

 

 

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