Daily Digest

Daily Digest - November 6

Friday, November 6, 2009, 10:48 AM
  • Peter Schiff Vlog-Web Site Sabotage-Government Stupidity (Video)
  • State and Local Pension Gap May Be $1 Trillion, Kramer Says
  • N.Y. state 3-year deficit may top governor's forecast
  • New Monetary Base number goes even higher
  • Dollar shortage in China's foreign exchange market
  • Junk Default Rate Is Highest Since Great Depression
  • CMBS Delinquencies Swell to 5.5% in October, says BarCap
  • Social Security inundated by new disability claims
  • Zombie Banks

Economy

Peter Schiff Vlog-Web Site Sabotage-Government Stupidity (Video) (saxplayer00o1)

Listen at 1 1/2 minutes into the video. Peter Schiff explains why the rent rather than foreclose idea that the government has for Fannie is such a bad idea.

State and Local Pension Gap May Be $1 Trillion, Kramer Says (saxplayer00o1)

U.S. state and local government pensions are underfunded by $1 trillion and may need to seek federal guarantees for their debt, according to Orin Kramer, chairman of New Jersey’s Investment Council

N.Y. state 3-year deficit may top governor's forecast (saxplayer00o1)

New York state's three-year deficit might top the governor's forecast by $3.6 billion, hitting $27.5 billion, as income and sales taxes continue to lag, the state comptroller said in a report on Thursday.

New Monetary Base number goes even higher (saxplayer00o1)

Scroll down and look at the numbers under "latest observations"

Dollar shortage in China's foreign exchange market (saxplayer00o1)

Resurging expectations of yuan appreciation have made dollars more scarce in China's foreign exchange market, tripling six-month dollar fundingcosts and creating new complications for Beijing's stable yuan policy. Over the past two months, Chinese banks have become eager to sell extra dollars to the central bank, fearing the US currency could fall in value, while their corporate clients are increasingly keen to borrow dollars to buy yuan, to speculate on yuan appreciation or for arbitrage.

Junk Default Rate Is Highest Since Great Depression (saxplayer00o1)

The global speculative-grade default rate rose to 12.4 percent in October, the highest proportion of defaults since the Great Depression, according to Moody’s Investors Service

CMBS Delinquencies Swell to 5.5% in October, says BarCap (saxplayer00o1)

Delinquencies in commercial mortgage-backed securities (CMBS) accelerated in October, according to a report from Barclays Capital (BarCap). The 30-plus day delinquency rate jumped 41bps to 5.5% in October as current loans deteriorated and transferred to special servicers. For the past three months, delinquencies have grown an average of 34bps, and BarCap analysts expect the pace to increase through 2009 and into 2010

Social Security inundated by new disability claims (saxplayer00o1)

As the worst recession since the Great Depression appears to be ending, the Social Security Administration grapples with an unprecedented flood of disability applications due to aging baby-boomers and heavy job losses. Pending claims are expected to jump 70 percent this year, said Dan Allsup, spokesman for Illinois-based Allsup Inc., which represents people applying for disability payments. "The number of people held up at the initial level is just exploding," Allsup said, blaming that giant jump on the ailing economy and what he terms the "silver tsunami" of America's graying population

Zombie Banks (hucklejohn, pinecarr)

Goldman Sachs is a favored bank whereas Bank of America and other banks are zombie banks being force fed near worthless Treasuries.

11 Comments

saxplayer00o1's picture
saxplayer00o1
Status: Diamond Member (Offline)
Joined: Jul 30 2009
Posts: 4066
Re: Daily Digest - November 6

"Governments may take as long as a decade to cut debt issuance back to the levels before global markets seized up following the collapse of Lehman Brothers Holdings Inc. last year, according to Moody’s Investors Service."

"The so-called underemployment rate -- which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking -- reached a record 17.5 percent from 17 percent in September."

"The U.S. may have to default on its debt payments after 2019, writes economist Robert Samuelson.

If the deficit spending continues on the current path it will consume 82 percent of gross domestic product within a decade. There will be no wiggle room for tax cuts, and spending cuts may be politically unpalatable, he surmises."....

“Deprived of international or domestic credit, defaulting countries in the past have suffered deep economic downturns, hyperinflation, or both.”

"Another source of stability is the difficulty central banks have disposing of dollars they already hold. Dumping dollars on world markets would only depress its value further, undermining nations' own reserves. "Central banks will continue to get out of dollars on the margins, but they don't want to be seen selling dollars hand over fist," Englander says."

"Moinho Pacifico Industria e Comercio, Brazil’s largest independent wheat processor, is increasing dollar-denominated debt on bets the real will not weaken against the U.S. currency for the next six months.

“The flow is too strong and there isn’t much the government can do to stop the real,” said Chief Executive Officer Lawrence Pih. Moinho Pacifico now around $20 million in debt and that level may rise to $50 million, he said in an interview at Bloomberg’s offices in Sao Paulo."

"LONDON (MarketWatch) -- At its high point, the federal government was guaranteeing or insuring $4.3 trillion in face value of financial assets, according to a report released Friday by the Congressional Oversight Panel."

"The Washington-based company, which posted $101.6 billion in losses over the previous eight quarters, has already tapped $44.9 billion from the $200 billion emergency lifeline.

“They’re going to need that $200 billion in capital, if not more, when this thing’s all said and done,” said Paul Miller, an analyst at FBR Capital Markets in Arlington, Virginia."

"Respondents said lack of access to debt financing was the No. 1 barrier to recovery, followed by high asking prices and uncertainty about future cash flows."

"Banks are in for another ugly year in 2010. But this time the problem will be the big batch of deteriorating commercial real estate loans on their books. That’s because the big banks were operating with the same loose standards—and aggressive behavoir—as the investment banks in order to compete in the real estate market during the boom years. (Read our cover story about why this real estate bust is different.) Commercial real estate loans that banks underwrote and held on their books skyrocketed to approximately $190 billion in 2007, up from $11 billion in a single year, a decade earlier. In all, banks hold some $1.8 trillion of commercial real estate debt on their books."

Trouble is, nobody knows just what the values of the loans on bank books’ are since they are not required to mark them to market prices"

"CMBS Defaults

The rate of defaults and late payments on property loans sold as commercial mortgage-backed securities jumped more than fivefold in the third quarter, to 4.52 percent from 0.8 percent a year earlier, according to Reis Inc., a New York-based real estate research firm. About $26.6 billion of CMBS loans were 60 days or more past due.

About $550 billion in outstanding commercial loans are “going badly at a rapid rate” and will lead to the closure of an additional 200 small banks across the U.S., Kenneth Rosen, who heads the University of California’s Fisher Center for Real Estate and Urban Economics in Berkeley, said at the ULI conference."

"A much-anticipated audit of the Federal Housing Administration was abruptly postponed just before it was supposed to be made public, after questions arose about its accuracy.

The auditor, Integrated Financial Engineering, said it notified the F.H.A. late Tuesday that its computer models were creating unexplained inconsistencies. A news conference scheduled for Wednesday morning was canceled.

The delay came amid broad public concern about the financial condition of the F.H.A., and appeared likely to add to questions about whether the agency is running excessive risks with taxpayers’ money."

"Loan program to aid small firms is expected to see 60% default rate"

"McGurk said the budget shortfall stems from a combination of factors, including dramatic drops in sales tax and property tax revenues, a declining economy, the state's raid on local resources and requirements that the city compensate for losses in its two pension funds.

The city manager's report indicates that if the projected deficit is not resolved through other means, it could lead to the elimination of more than 700 positions in the city."

"The dollar will get "utterly destroyed" and become "virtually worthless", said Damon Vickers, chief investment officer of Nine Points Capital Partners.".......""If the global currency crisis unfolds, then inevitably you get an alignment of a global world government. A new global currency and a new world order, so we may be moving towards that," he said."

"The fiscal strain of deteriorating pension funding levels on local and state governments could contribute to downgrades in the next several years, especially among those governments that entered the recession with poor funding ratios or have little flexibility in their funding requirements, a new report from Moody’s Investors Service warns."

"On the state level, Illinois and New Jersey’s massive unfunded pension obligations and their failures to fully make required annual contributions have contributed to negative credit action. At the local level, poor pension funding decisions contributed to Indianapolis, Evanston, Ill., and Omaha’s loss of their top-level ratings."

"Oakland's budget is in trouble again.

A city report projects a deficit of $18.9 million in Oakland's general fund by the end of the 2009-10 fiscal year because of revenue shortfalls and some overspending from July through September. "....

""It's beyond me where we're going to find (the money)," said City Council President Jane Brunner (North Oakland). "But we're going to have to figure it out." "

"LORAIN — Assessments for street lighting and leaf pickup to deeper staff cuts and eliminating the city jail were among the suggestions given by Mayor Tony Krasienko to City Council’s Finance Committee on Thursday on how to pull the city out of debt.

City Auditor Ron Mantini opened the meeting with a bleak financial forecast that questioned whether the city will have the cash to cover payroll in December.

“The one I think will be a really big problem is the Dec. 4 payroll,” Mantini said."

"The year 2009 kicked off with a deficit of about $27 million. In 2010, we can expect a deficit of $25 million.

City council finance chairman George Sarantou says 2010 will be another financial challenge Tax revenues will be about $146 million. But Toledo will spend $3 million more in pension pick-ups, a new $3 million on a police and fire class, $2 million in fire overtime and get $3 million less funding from the state."

"Some 170,000 residents of unincorporated Salt Lake County can expect a new monthly piece of mail starting next year — a bill for law enforcement services.

Those residents, along with businesses and organizations with addresses in the unincorporated regions, will shoulder an $11 million county deficit — one caused, in large part, by slumping sales tax revenues that have decimated the fund that pays for police services in those areas."

"President Obama is set to sign a $24 billion economic stimulus bill providing tax incentives to prospective homebuyers and extending unemployment benefits to the longtime jobless who have been left behind as the economy veers toward recovery."

"Issuing bonds to help pay off $246 million in unfunded liability in the police and fire retirement fund is eating up about half of Lexington's bonding capacity, threatening city improvement projects."

"FAYETTEVILLE — The Fayetteville Firemen’s Pension and Relief Fund Board of Trustees may not be able to reduce retirement benefits for its members, even though the pension fund seems headed for insolvency.

“Because you have not indicated that the fund is currently unable to pay benefits, it is my opinion that the answer to this question is no,” wrote Elisabeth Walker, deputy Arkansas Attorney General in a Nov. 4 opinion."

"Raises would cost more than transit agency can afford, officials say"

"Metro will appeal an arbitration award that gives its front-line workers three consecutive 3 percent annual pay raises, part of a package that would cost the transit agency an additional $104.5 million over four years, officials said."

"Metro, like government agencies everywhere, is facing budget shortfalls: a projected $30 million this fiscal year and an even bigger one, about $144 million, next year."

Scroll down past the first four graphs.

 

 ....................For those of you that thought that the stimulus plans and bailouts would help everybody stay employed and that everything would get better by printing money, let's tell you how you did on that today.

 

Johnny Oxygen's picture
Johnny Oxygen
Status: Diamond Member (Offline)
Joined: Sep 9 2009
Posts: 1443
Re: Daily Digest - November 6

Good read:

There's No Bubble in China

http://seekingalpha.com/article/171754-there-s-no-bubble-in-china

 

To provide even further assistance in educating the experts, let me introduce them to a real “bubble”: the U.S. bond market. At a time when the U.S. is dumping more supply onto the market than at any time in history, bond prices remain near all-time highs. It is straight out of Economics 101 (presumably the experts managed to pass that course) that when you increase the supply of any good that you depress the price. An extreme increase in supply should result in an extreme decline in price. Thus, the first condition for a bubble is satisfied: a grossly over-valued market.

It is even easier to point out the excessive leverage, because it exists in so many ways. To begin with, the U.S. debt-to-GDP ratio is increasing exponentially – a sure sign of excessive leverage of the U.S. government, by itself. However, there is an even more obvious indicator of excessive leverage: the need for the U.S. government to “buy” much of its own bonds to prop-up the prices. Without any possible doubt, this is the most blatant example of an over-leveraged market on the planet – yet it remains “invisible” to most of the experts (and all the China-bashers).

alcatwize's picture
alcatwize
Status: Bronze Member (Offline)
Joined: Dec 24 2008
Posts: 78
hucklejohn's picture
hucklejohn
Status: Gold Member (Offline)
Joined: Dec 13 2008
Posts: 281
Re: This week's must read

Here is the proper link for Zombie banks (above):

http://inpoints.blogspot.com/2009/11/zombie-banks-game-has-changed.html

This is good!

alcatwize's picture
alcatwize
Status: Bronze Member (Offline)
Joined: Dec 24 2008
Posts: 78
Fannie Mae to Allow Borrowers to Lease Homes

http://www.nytimes.com/2009/11/06/business/economy/06fannie.html?_r=1&ref=business?partner=yahoofinance

Huh????? If the owner of the property can't pay the mortgage, then how can thy pay the monthly lease?  As things get more desperate you seem to see more absurd ideas bubbling up to the surface.

 

 

JAG's picture
JAG
Status: Diamond Member (Offline)
Joined: Oct 26 2008
Posts: 2492
Geithner Summons the Blog Squad

On Nov. 2nd, Treasury officials invited 25 bloggers to a meeting to discuss the new financial regulations and reform.

http://watch.bnn.ca/clip231967#clip231967

Too bad they didn't ask Dr. M, or did they?

SteveS's picture
SteveS
Status: Gold Member (Offline)
Joined: Sep 6 2008
Posts: 358
Glenn Beck, Jon Stewart Style

It's just funny, no matter what you think of either one.

http://www.thedailyshow.com/ 

The 11/3 project.

 

r101958's picture
r101958
Status: Martenson Brigade Member (Offline)
Joined: Aug 24 2008
Posts: 257
Re: Daily Digest - November 6

Here is a more accurate number:

From SGS: "Adding the excluded long-term discouraged workers back into the total unemployed, unemployment more in line with common experience — as estimated by the SGS-Alternate Unemployment Measure — rose to about 22.1% in October, up from 21.4% in September. See the Alternate Data tab at www.shadowstats.com for a graph and more detail."

idoctor's picture
idoctor
Status: Diamond Member (Offline)
Joined: Oct 4 2008
Posts: 1731
Re: Daily Digest - November 6

pinecarr's picture
pinecarr
Status: Diamond Member (Offline)
Joined: Apr 13 2008
Posts: 2237
Re: Daily Digest - November 6

WOW r202959!!  I knew the real unemployment numbers were a lot worse than the figures we are fed.  But 22.1% in October?  What a blast of cold air that is!!

idoctor's picture
idoctor
Status: Diamond Member (Offline)
Joined: Oct 4 2008
Posts: 1731
Re: Daily Digest - November 6

Regulators shut banks in 5 states; marks 120 US bank failures this year
http://finance.yahoo.com/news/Banks-in-Ga-Mich-Minn-Mo-apf-3282864371.html?x=0&sec=topStories&pos=1&asset=&ccode=

Comment viewing options

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