Daily Digest

Daily Digest - November 19

Thursday, November 19, 2009, 11:43 AM
  • Geithner in the doghouse over AIG debacle
  • Democrats want homeowners and workers to get money from TARP
  • What They Really Believe
  • Société Générale tells clients how to prepare for 'global collapse'
  • The Gold Trifecta?
  • The Coming Nuclear Crisis
  • John Paulson Making Huge New Bet On Gold
  • Wells Fargo To Buy Back $1.4 Billion In Securities To Settle Fraud Lawsuit
  • Philadelphia Gives Homeowners A Way To Stay Put
  • Memo To Buffett: Put Down The Pom-Poms And Tell The Truth About The Economy
  • 5 Million 'Pink Slips' Sent To Congress
  • Wall Street's Ego Bubble
  • Should Goldman Sachs Be Forgiven?
  • Consumers Losing Millions In Scams On Well Known E-Commerce Sites
  • We Have Not Escaped Prospect Of Global Economic Collapse
  • Stickups And Burglaries On The Rise - At The Office
  • More Holiday Shoppers To Use Cash Only - No Credit Cards
  • The One Thing Depleting Faster Than Oil Is The Credibility Of Those Measuring It
  • California Sets Energy-Efficient Rules For TVs
  • A Scramble To Prepare For Electric Car Charging Stations
  • Small Farmers And Community Gardening
  • Floods And Droughts: How Climate Change Is Impacting Africa

Economy

Geithner in the doghouse over AIG debacle (nncita)

Is Timothy Geithner tough enough to be an effective US treasury secretary? The Obama administration's finance man is getting a true kicking today over his role in last year's botched bail-out of AIG in which Wall Street banks seem to have run rings round the government.

Democrats want homeowners and workers to get money from TARP (nncita)

Congressional Democrats want struggling workers and homeowners to receive money from the $700 billion Wall Street bailout. That conflicts with the Obama administration’s idea of dedicating some of the money toward reducing the deficit.

What They Really Believe (Doug A.)

"So either the opponents of a serious energy/climate bill with a price on carbon don’t care about our being addicted to oil and dependent on petro-dictators forever or they really believe that we will not be adding 2.5 billion more people who want to live like us, so the price of oil won’t go up very far and, therefore, we shouldn’t raise taxes to stimulate clean, renewable alternatives and energy efficiency."

Société Générale tells clients how to prepare for 'global collapse' (Joemanc, M.W.)

Société Générale has advised clients to be ready for a possible "global economic collapse" over the next two years, mapping a strategy of defensive investments to avoid wealth destruction.

The Gold Trifecta? (Joemanc)

Since the July lows we have witnessed gold rocket northward first through the $1,000 per ounce mark and then the $1,100 per ounce mark, hitting an all-time high of $1,152.85 today. The move in gold off the July lows led to a more than 25% gain in the yellow metal with silver putting in an even more impressive move of more than a 42% rise. Clearly precious metals have been on a tear lately and there are perhaps several reasons for this that are all contributing to strength in precious metals.

The Coming Nuclear Crisis (Samuel A.)

"Perhaps the most worrying problem is the misconception that uranium is plentiful. The world's nuclear plants today eat through some 65,000 tons of uranium each year. Of this, the mining industry supplies about 40,000 tons. The rest comes from secondary sources such as civilian and military stockpiles, reprocessed fuel and re-enriched uranium. "But without access to the military stocks, the civilian western uranium stocks will be exhausted by 2013, concludes Dittmar."

John Paulson Making Huge New Bet On Gold (M.W.)

One of the biggest investors is placing a big new bet on gold. John Paulson, who scored about $20 billion of profits for his hedge fund between 2007 and early 2009 wagering against the housing market and financial companies, is launching a fund dedicated to buying up shares of gold miners and other bullion-related investments.

Wells Fargo To Buy Back $1.4 Billion In Securities To Settle Fraud Lawsuit (M.W.)

Wells Fargo & Co. has agreed to buy back $1.4 billion in securities it sold to thousands of customers as part of a settlement in a state fraud lawsuit over its role in the investment meltdown.

Philadelphia Gives Homeowners A Way To Stay Put (M.W.)

Under a program begun last year to try to keep people in their homes, no owner-occupied house may be foreclosed on and sold by the sheriff’s office before a “conciliation conference,” a face-to-face meeting between the homeowner and the lender aimed at striking a workable compromise. Every homeowner facing a default filing is furnished with counseling, and sometimes legal representation.

Memo To Buffett: Put Down The Pom-Poms And Tell The Truth About The Economy (M.W.)

Difficult times need wise men to tell difficult truths. For many years, Warren Buffett, the "Sage of Omaha," has done just that. He was one of the first to sound the alarm about the danger of derivatives, warning that they were "financial weapons of mass destruction" that could lead to a "corporate meltdown." Despite Buffett's acknowledgment that "we've got 60 million people with an income of $21,000 or less," it looks as if he's out of the truth telling business.

5 Million 'Pink Slips' Sent To Congress (M.W.)

Five million "pink slips" have been sent to Congress by voters telling them to abandon Washington's "charge-it-and-spend-it" programs. The initiative lets people send a 'pink slip' to every member of Congress. On tuesday, several Republican politicians endorsed the campaign on Capitol Hill. "The pink slips program is a great way to [address the problem of] out-of-control spending and Washington power grabs," Rep. Bachmann said.

Wall Street's Ego Bubble (M.W.)

Last week, we got more proof of Wall Street's utter disconnect from the rest of the world when Goldman chief Lloyd Blankfein was quoted as saying he's doing "God's work." Blankfein's hubris generated disbelief among the foreign CEOs and government officials attending a Chinese business conference in Lisbon. "Do you think those quotes might be made up?" one participant asked.

Should Goldman Sachs Be Forgiven? (M.W.)

Could it be time to forgive the vampire squid? CEO Lloyd Blankfein is sorry. Apologies can go a long way. When doctors apologize for medical mistakes, they're a lot less likely to get sued.

Consumers Losing Millions In Scams On Well Known E-Commerce Sites (M.W.)

Hundreds of well known ecommerce companies add post transaction marketing offers to consumers immediately after something is purchased on the site. Consumers are usually offered cash back if they just hit a confirmation button. But when they do, their credit card is automatically charged for a subscription to a package of useless services.

Stickups And Burglaries On The Rise - At The Office (M.W.)

These days thieves are really reaching. As traditional targets for theft have beefed up their security and the recession has driven people to desperate measures, robbers are infiltrating corporate offices. Many of the incidences involve small companies with ground-level offices that offer easy access. And sometimes the perpetrators are armed, heightening fear among office workers who thought their sleepy cubicle farms were safe.

More Holiday Shoppers To Use Cash Only - No Credit Cards (M.W.)

A shift away from credit cards could make what is expected to be a difficult holiday season even more challenging for retailers.

Energy

The One Thing Depleting Faster Than Oil is the Credibility Of Those Measuring It (nncita)

Nothing the whistle-blowers said has scared me as much as the conversation I had last week with a Pembrokeshire farmer. Wyn Evans, who runs a mixed farm of 170 acres, has been trying to reduce his dependency on fossil fuels since 1977. He has installed an anaerobic digester, a wind turbine, solar panels and a ground-sourced heat pump. He has sought wherever possible to replace diesel with his own electricity. Instead of using his tractor to spread slurry, he pumps it from the digester on to nearby fields. He's replaced his tractor-driven irrigation system with an electric one, and set up a new system for drying hay indoors, which means he has to turn it in the field only once. Whatever else he does is likely to produce smaller savings. But these innovations have reduced his use of diesel by only around 25%.

California Sets Energy-Efficient Rules For TVs (M.W.)

California created the nation's first energy-efficiency standard for television sets, arguing that it needed to take action because federal energy officials have been slow to confront the issue.

A Scramble To Prepare For Electric Car Charging Stations (M.W.)

There are fewer than 1,500 plug-in electric vehicles on the road today. But over the next 18 months the number will grow exponentially as automakers, such as GM, Nissan, and Ford, roll out models that use electricity for all or part of the car's energy. Utilities, retailers, hamburger joints and others are scrambling to prepare for the new swarm of electric and hybrid vehicles.

Environment

Small Farmers And Community Gardening (M.W.)

Five years ago, I gave up a career as a business writer to take over a small farm in the Mountains. From the start, our goal was to help rebuild an ecologically sane local-food economy accessible to everyone in our community. We quickly found ourselves in a paradox: we were growing great food for the rich and losing our shirts doing it. Why was it so hard to squeeze out a living on a small farm? And why were large agribusiness companies making out like bandits?

Floods And Droughts: How Climate Change Is Impacting Africa (M.W.)

In Africa, climate change is no longer a future threat - it is displacing and killing people today. This year 23 million people in 7 African countries are being fed by aid agencies after a decade of poor rains have decimated crops. It's impossible to quantify how much of the change in rainfall is cause.

13 Comments

saxplayer00o1's picture
saxplayer00o1
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Re: Daily Digest - November 19

"Office landlords in the U.S. will confront vacancy rates approaching 20 percent next year as employers hold off hiring, commercial property brokers Jones Lang LaSalle Inc. and Grubb & Ellis Co. said today." 

"The U.K.’s Royal Mint, established in the 13th century, more than quadrupled production of gold coins in the third quarter after demand for the metal increased as investors sought to hedge against a weakening dollar."

(Dallas Fed President Richard Fisher)

"On the other hand, in terms of its inflationary input, unless it becomes disorderly, a depreciating dollar -- a gradually depreciating dollar -- doesn't necessarily add an enormous inflation impulse."

"The surge in the price of gold is likely to continue, in the face of a weakening dollar and the threat of hyper-inflation in the United States.

The yellow metal remains the "best wealth preserving asset", analysts told a conference in Zürich this week."

"“There is all this cash available in the world for the moment in search of a home, and the home is rare, precious objects,” Curiel said. “There is this talk that there should be inflation someday because governments have printed so much money.”

The auction houses set world records for green diamonds, intense blue diamonds and so-called “chameleon” diamonds this week in Switzerland. Johann Rupert, the South African billionaire who controls luxury brands including Cartier and Van Cleef & Arpels, said last week that hyperinflation concern may lead to people running into jewelry stores." 

"Analyst Charlie Sernatinger of Fortis Clearing Americas echoed the sentiment. "The money supply keeps increasing, it's up 18 percent for this year and some of the money is going into commodities."

"The real problem is that interest rates are too low so speculators are borrowing money and buying stocks and commodities, anything that has value," he said.

Some experts and politicians have warned that a period of hyper-inflation lies ahead, including soaring commodity prices if the money supply continues to grow, pressuring the dollar." 

"The chief investment strategist for Key Private Bank said Wednesday morning that the employment outlook along the Wasatch Front is more dismal than the national average.

As evidence, Bruce McCain cited job growth after the 2001 recession."

"Most of McCain's presentation Wednesday featured national economic trends, including inflation and hyperinflation. Inflation can occur when government needs to spend money and doesn't have any money to spend, he said.

Typically a government obtains money by borrowing overseas, but when the debt is high a government cannot borrow. So the only other way to obtain cash is by printing more of it, which causes inflation, McCain said.

The federal government can reverse the course toward inflation by keeping interest rates low and cutting government spending, which is politically risky.

"We do think, however, there are several warning stages along the way to hyperinflation," McCain said, noting that they include a high deficit, high interest rates and a weak dollar." 

"The World Gold Council (‘WGC’) said that demand for Gold is likely to remain well supported by continued economic and currency uncertainty, inflation concerns and the search for diversification. According to the industry’s lobbying group, central banks were likely to continue ‘diversifying their dollar exposure in favour of the proven store of value represented by gold’." 

"The bankrupt investment firm is contending with more than 64,000 claims from creditors with a face amount value of more than $820 billion. Lehman's chief executive, turnaround specialist Bryan Marsal, said in bankruptcy court on Wednesday it was possible the claims could reach $1 trillion due to certain unresolved issues." 

"Spend, spend, spend

During the boom years, many middle-class Americans lived beyond their means.

"People have been negligent with their finances," says Doan. "They've taken a lot of money out of their homes like it's an ATM."

Middle-class families were encouraged to spend. But that often turned into a disaster when their bills increased and wages dwindled." 

"Banks in recent years have been hammered by losses on home mortgages, buyouts and corporate defaults. Now, lenders face big losses from loans backed by commercial real estate, where a stagnant economy will eventually take its toll, financial services executives told the Reuters Global Finance Summit.

"The commercial real estate business still has not been marked down. It's not been marked to market," Cantor Fitzgerald LP Chief Executive Howard Lutnick said. "The economy can't, in my opinion, grow fast enough that the tenants are going to go out and start hiring and growing and building and take up all these rents at $60 a foot. It's nonsense."

U.S. banks held $1.65 trillion of commercial real estate loans on their balance sheets as of November 4, according to the Federal Reserve. Total assets were $11.8 trillion."

(More info at the Wall Street Journal: "A sector too tough to save")

"NASHVILLE, Tenn., Nov. 19 /PRNewswire/ -- HealthLeaders-InterStudy, the leading provider of managed care market intelligence, reports that nationwide, Medicaid enrollment grew by two million lives in the first half of 2009 to more than 52 million, reflecting the economic downturn and exacerbating many states' budget concerns. According to data from Managed Market Surveyor-Rx, Medicaid growth nationwide increased nearly five percent, with 25 states, including Florida and Michigan, experiencing enrollment growth of more than five percent."

"Unused money might be used to reduce U.S. debt

 The Obama administration is poised to extend the life of the highly unpopular $700 billion financial bailout and, to display a commitment to fiscal responsibility, is planning to use much of the leftover funds to reduce the national debt, government sources said."

"Delinquencies and foreclosures set 9th straight record in 3rd quarter as layoffs keep rising

WASHINGTON (AP) -- A rising proportion of fixed-rate home loans made to people with good credit are sinking into foreclosure, adding to concerns about the strength of the economic recovery.

Driven by rising unemployment, such loans accounted for nearly 33 percent of new foreclosures last quarter. That compares with just 21 percent a year ago, when high-risk subprime loans made during the housing boom were the main reason for default.

At the same time, the proportion of homeowners with a mortgage who were either behind on their payments or in foreclosure hit a record-high for the ninth straight quarter."

"Eric Sprott, CEO of Sprott Asset Management, says quantitative easing is "just debasing the currency, which will eventually lead to hyperinflation."

The recent extension of the homeowner credit and giving corporations loss carry-backs while paying unemployment benefits for an additional 20 weeks augur an inflationary if not an hyperinflationary scenario, Sprott notes.

“I really think that once the Fed has spent the $1.25 trillion buying the GSE paper that we might yet see another level of quantitative easing in the States,” he says."

  • 16) California

......A) "The budget crisis had pushed California, which would have the world's eighth largest economy if it were a country, to the brink of bankruptcy, sending the state's credit-rating plunging and forcing it to start paying bills with IOUs."

.......B) "California's finances have been so bad that the governor's finance director, Mike Genest, told a budget forum in Washington last week that back in February he had combed through the U.S. Constitution to research whether California could legally declare bankruptcy -- or revert to some kind of territorial status. (Neither was realistic, he determined.)"

.....C) "What to expect in the next 5 years "

"Medi-Cal funding is expected to grow by $7.4 billion.

Prison spending will grow by nearly $2 billion."

  • 17) Treasury to sell $118 billion in notes next week

 (Details at MarketWatch)

"HARTFORD, Conn. — Connecticut lawmakers learned that the state's budget woes may get much worse in 2012, possibly growing to $3.4 billion from the current $385 million.

Both the governor's budget office and the General Assembly's Office of Fiscal Analysis on Wednesday told legislative budget committees they expect the deficit will reach $3.2 billion to $3.4 billion.

"We're in a world of hurt," Robert Genuario, Gov. M. Jodi Rell's budget chief and head of the Office of Policy and Management, said."

"As of June 2008, the state teachers retirement fund had a $6.5 billion unfunded liability. The state employee retirement fund has only half the assets needed to meet its expected obligations and an unfunded liability of $9.3 billion. The estimates of total unfunded pension liability for state employees, when other retirement benefits are included, range from $11.4 billion to $21.7 billion"

"Alaska has about $16 billion set aside to pay future retirement costs, but expects those costs to total $23.5 billion, giving it an unfunded liability of $7.5 billion, as of its most recent annual accounting."

"Depletion of the trust fund used to pay unemployment benefits has triggered what the state Revenue Department is calling a record tax increase in 2010 for Florida's half-million employers.

The minimum annual rate — charged to an employer with a solid history of retaining employees — will jump almost twelvefold, from $8.40 per employee to $100.30, revenue officials said Wednesday."

"About one million laid-off workers will see their unemployment benefits end in January unless Congress acts quickly to renew existing federally paid extensions, according to a new survey and legislators and state officials."

"Some nine million people now receive unemployment benefits, five million on the initial state programs and four million through federal extensions."

(Thank Nathan's Economic Edge for catching that last number)

 

.............Maybe Little Timothy Geithner wouldn't be in so much trouble if this wasn't his top employee at the treasury.

................Please read your headline before posting your news story.

JAG's picture
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Geithner's Days Are Numbered

Is about time.....

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dcm's picture
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Re: Daily Digest - November 19

I love the look on Geithner's face when, after he tries to blame everything on the prior administration, he's asked what job title he held during the same period. Attitude is no substitute for integrity. 

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Re: Daily Digest - November 19
dcm wrote:

I love the look on Geithner's face when, after he tries to blame everything on the prior administration, he's asked what job title he held during the same period. Attitude is no substitute for integrity. 

+1 and dog food or horse manure is no substitute for brains Foot in mouth

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Re: Daily Digest - November 19

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Re: Daily Digest - November 19

To much credit and liquidity push the greedy to the cliff (banksters and Madoffs types)

Politicians and CB (fed) print money as never before and throw it from helicopters, but there seems to be no Grand plan, so prosperity is hit badly.

People is complaining about asset/money loss and complain about voting certain people to power, that do the same stupid things again and again.

People will actually notice that the "emperor has no clothes".

Now between last april until next mars we are seeing incredible events. QE, monetizing debt, gold rush (rumours about tungsten gold), bond auctions, carry trade, and probably food shortages (or to expensive food due to HI).

Dollar (fiat currency) will then collapse into oblivion (hyperinflation) and prosperity is gone. Equities, bonds and assets will "burn up in flames".

The banks will be attacked by the hungry people desperately getting their "assets" back and riots will occur.

Gov will be despised due to this hyperinflation and people will rise against them.

Yes indeed we live in interesting times!

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Re: Daily Digest - November 19

More proof of the 4Gs. Apparently common sense isn't common.

Link to votes

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Re: Daily Digest - November 19

Regarding that Friedman column "What They Really Believe" http://www.nytimes.com/2009/11/18/opinion/18friedman.html?_r=1&th&emc=th

It's good to see a commentator with such a large audience acknowledge climate change, peak oil, resource depletion and overpopulation and to advocate for a carbon tax. However, the degree he thinks that there will be a technological fix is a bit maddening. Yes, technological inovation will play a role, but it'lll be relocalization of our way of life -- so that we are less energy -- that will carry the day.  Bloggers like James Howard Kunstler and John Michael Greer understand this. Unfortunatley their message doesn't reach the size audience that Friedman's does.

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A PMS Crisis?

http://www.newsletter.co.uk/news/Wilson-tells-of-problems-in.5838859.jp

Wow, looks like that one slipped by the editing department!!! Laughing Good find!

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Re: Daily Digest - November 19

dcm's picture
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Re: Daily Digest - November 19

"Spend, spend, spend . During the boom years, many middle-class Americans lived beyond their means."

unfortunately, they were only following their leaders' example and advice

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Tycer
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Re: Daily Digest - November 19

Société Générale telling clients how to protect themselves?

Fox telling chickens how to protect themselves.

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