The Daily Digest - Nov 23

Sunday, November 23, 2008, 9:06 AM


Mortgage forclosures in Wayne County (Detroit MI).  Or, why this crisis still has some legs.

How Mortgage Banking Changed 

Hedge Fund Interview (Starts at 2 minute point)

Sherman's Comment: I thought his explanation of How Hedge Funds, Derivatives, and Swaps work was super (3:38), Longs and Shorts (4:38) Govt. changed rules (5:18) how Derivatives Credit Swaps worked (5:40) Trading Swaps (8:38) Criticism of Rating Agency (10:28) Redemption's (13:00) Congress looking for Scape-Goat (14:28) Who is investing and SEC Changes (15:20) I didn't agree with investing now (16:10) Credit Default Swaps & Regulation of, and companies that got into trouble (very interesting) (17:30) AIG (18:57) Bankruptcy (19:18) I totally disconnected at (22:15) though I agreed with GM thoughts, Fannie/Freddie and Congress making mistake with tax money, didn't agree with bail outs of banks or real estate improving (28:58) or turning corner- hope I'm wrong! Ends at (31:21)

Obama Targets 2.5 Million Jobs With Stimulus Plan 

"It's likely to get worse before it gets better," Obama said today in his weekly radio address. He said that this week "financial markets faced more turmoil," potentially leading to a "deflationary spiral" that may plunge the nation further into debt and cost millions more jobs. 

Sherman's Comment: Caught on the National News that these jobs will be created by 2011, as of right now we are at about 10 million unemployed.

Every Stock Mutual Fund Has Lost Money in2008, Except One

Out of the 11,585 U.S. and international stock mutual funds tracked by Morningstar Inc., 11,584 have lost money in 2008, according to fund data through Nov. 20.

In other words, just one fund hasn't lost money this year-and that is the APX Mid Cap Growth Fund, which was flat through Thursday's close. That's right, folks, its return-or lack thereof-is a mere zero thus far in 2008. 

Sherman's Preface: Ever since finding Chris's site I have been spending an increasing amount of time in the blogosphere following links from one blog to another. Here, folks like Chris have some amazing insight and substantiate their views with serious facts (like the Crash Course). Lately I noticed something that took me by surprise. I see two camps formed inside the blogosphere. Smart guys like Mish are saying deflation and smart guys like Schiff are saying hyperinflation. Not taking sides, just an observation and I thought I'd put it out there.

Why-Not Hyperinflation? 

Almost every day I get notes wondering, "Why not hyperinflation?" 

This is a good question. I'll try and explain why I believe a deflationary debt unwind is now underway, and why I believe it will be many years before we should start worrying about inflation again. In fact, by the time inflation becomes a legitimate concern, I expect the vast majority of people will find it as outrageous to worry about inflation then as found it outrageous last year when I made deflation one of my Five Themes for 2008.  

The Beginning of the End 

While I have warned for years that the United States was headed into the eye of an economic hurricane, nearly every other "expert" from Washington, Wall Street, the press and academia saw nothing ahead but sunny skies. 

...In the end, by refusing to allow market forces to work their cure, our economy will inevitably die from the disease. Our economy will now face death by hyperinflation, which will cause a complete loss of confidence in the dollar and result in prices and interest rates skyrocketing out of sight. The evaporation of our national wealth will lead to... 

And for an interesting read on the myriad of definitions out there on Inflation, Hyperinflation and Deflation here is a piece I caught on the Financial Sense News Hour earlier in November. 

JOHN: I remember a little ways back, Jim, as commodity prices began to drop, we began getting a lot of emails from people saying, Why don't you guys just admit you were wrong, you said it was going to be inflation and it's turned out to be deflation. And I thought to myself, how long has it been since people have been listening to the show? They do not understand the definition of inflation or deflation. They were looking at it as price inflation rather than a genuine definition of what inflation and deflation are. So let us go back and define some of these terms once again 

JIM: Well, first of all, I have two dictionaries in my office. The old dictionary defines inflation the way the Austrians and the monetarists do, and I'm going to read the definition of inflation.


Green Power: Buyer Beware 

It's one of the latest ways big business claims to be curbing global warming: More than 750 utilities across the country now offer customers the chance to pay a premium on their electricity bills to generate "green power." But it turns out that, in many cases, most of the money goes for marketing costs, and little can be traced to the generation of additional renewable energy. 

Energy: Only Nuclear Dreams Mushrooming 

"The IEA does not say from where the enormous amounts of uranium shall come to meet the new demand represented by 1,400 new nuclear power plants," he said. "With this report, the IEA has lost its last credibility." Fell said the price of uranium has been surging since 2005, and this price increase is an indicator of the scarcity of uranium."


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wdstk46's picture
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Re: The Daily Digest - Nov 23

I don't know where the writers of the article on nuclear energy are getting their numbers but the price of uranium has been in free fall since the spring of '07.  It has only just started to try to form a base in the last month.

radiance's picture
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Re: The Daily Digest - Nov 23

The first You tube says 2009 TAX foreclosure. Is this just tax foreclosure or is this also maybe bank mortgage foreclosure?

I have recently driven around Wayne county/Detroit city it has whole tracts of land with hundreds of abandoned homes. They are burned out looted of any copper and plain old trashed. Coyotes roam the streets large areas are ghost towns of a modern kind. No one is safe! It was chilling to go down even main streets. 

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Ray Hewitt
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Re: The Daily Digest - Nov 23

Any scarcity of uranium has to do with the time lag between a surge in demand and the long lead times for mining ore.

The future is in breeder reactors where it becomes economical to separate uranium from sea water. Breeders can even work off spent fuel rods (plutonium 239). If Americans maintain their phobia on nuclear power plants, the Asians don't have that problem. That's how we'll become a third world country.

An excellent book for energy skeptics and nuclear-phobes: Underexposed.

pir8don's picture
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Re: The Daily Digest - Nov 23

I'm trying to understand how money interfaces with what I call reality and must admit to some trouble with homes abandonned due to unpaid mortgages. I can see how it might work from the point of view of those who do pay their mortgages but that the homes should be left to be trashed just seems not to make any sort of real sense. Is moving out the only option for people who can't make their mortgage payments? Is there any way people could rent their former homes and lose their equity but at least keep living there?


Just realised they probably have negative equity. But do they realy have to leave?

Davos's picture
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Re: The Daily Digest - Nov 23


Yeah, you have a really good point! Even if they paid ten cents on the dollar it would prevent properties adjacent to them from devaluing. Not to mention the entire social aspect, kids going to school while living in homeless shelters.

I don't get this. In the end it is our dollar paying the "bailout", the banks get our tax money, they get the house and the people get sc$#@%d. W said we'd have toxic debt to sell, the ex-aid to the Watergate plumber changed that, now the Fed is a pawn shop awash in toxic debt.

Insane asylum!

Take care. 


pir8don's picture
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Re: The Daily Digest - Nov 23

Thanks Davos,

I like to think that we would walk out the front door and back in the rear but I don't know because I haven't been placed in the situation (yet!).

I am suspicious that the reason people leave their homes when told to by the bank is to do with beliefs about money and authority which are in part promoted by the media. That is very effective control if correct.


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