Daily Digest

Daily Digest - November 7

Saturday, November 7, 2009, 11:41 AM
  • Metals And Currencies: A Long-Term Dynamic Strategically Used To Preserve Wealth
  • Mauldin: The Glide Path Option
  • Dollar Will be "Utterly Destroyed": Strategist (Video) 
  • Fannie Mae...up to $200 billion needed
  • The Commercial Loan Nightmare Facing U.S. Banks
  • Moody’s: Pension Strains Put Pressure on Ratings
  • (D.C.) Metro to appeal arbitrators' pay decision
  • Auditor: Lorain will have trouble meeting December payroll

Economy

Metals And Currencies: A Long-Term Dynamic Strategically Used To Preserve Wealth (Claire H.)

When gold reached its record high against the US dollar of $1064.20 on October 13th, the price of gold in euros, Swiss francs and British pounds did not confirm. On that day they were still below their recent high by 10.1%, 7.5% and 4.4% respectively.

Mauldin: The Glide Path Option (JRB)

If Congress and the president decided to lay out a real (and credible) plan to reduce the deficit over time, say 5-6 years, to where it was less than nominal GDP, the bond market would (I think) behave. Reducing deficits by $150 billion a year through a combination of cuts in growth and spending would get us there in five years.

Dollar Will be "Utterly Destroyed": Strategist (Video) (saxplayer00o1)

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 

Fannie Mae...up to $200 billion needed (saxplayer00o1)

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

The Commercial Loan Nightmare Facing U.S. Banks (saxplayer00o1)

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

Moody’s: Pension Strains Put Pressure on Ratings (saxplayer00o1)

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

(D.C.) Metro to appeal arbitrators' pay decision (saxplayer00o1)

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

Auditor: Lorain will have trouble meeting December payroll (saxplayer00o1)

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

10 Comments

Doug's picture
Doug
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Re: Daily Digest - November 7

I am pleased to see you added the Mauldin article.  I find the summary to be a clear eyed look at where we go from here. 

http://www.frontlinethoughts.com/article.asp?id=mwo110609

Quote:

We are left with no good choices, only bad ones. We have created a situation that is going to cause a lot of pain. It is not a question of pain or no pain, it is just when and how we decide (or are forced) to take it. There are no easy paths, but some bad choices are less bad than others. So, let's review some of the choices we can make. (Again, I am being very general here. You can go to the archives for more specifics. This is a summary letter.)

Given the Austrian school's influence on this blog, I found his short assessment to be of particular interest.  I think his comment could be an interesting launch point for a discussion here by those more versed in the philosophy than I.

Doug

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saxplayer00o1
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Re: Daily Digest - November 7
  • 1) What our green shoots look like........ from St. Louis Fed (Graphs...Updated)

A)  DMANEMP, All Employees: Durable Goods Manufacturing

B) NDMANEMP, All Employees: Nondurable Goods Manufacturing

C) UEMP15OV, Civilians Unemployed - 15 Weeks & Over

D) UEMP15T26, Civilians Unemployed for 15-26 Weeks

E) UEMP27OV, Civilians Unemployed for 27 Weeks and Over

F) MANEMP, Employees on Nonfarm Payrolls: Manufacturing

G) UNEMPLOY, Unemployed

H) UEMPMEAN, Average (Mean) Duration of Unemployment

I) EMRATIO, Civilian Employment-Population Ratio

"COLOMBO — Sri Lanka's central bank on Saturday said it has been buying gold to diversify its reserves amid volatile currency markets, days after India announced it had purchased 200 tonnes of the precious metal."

"The failure of United Commercial Bank is expected to cost the federal deposit insurance fund an estimated $1.4 billion; the failure of the other four banks a combined $132.7 million."

"“This purchase suggests that the Indian monetary authorities are seeking to change the composition of their foreign reserve holdings, most likely diversifying away from US Treasury securities,” said Nikhilesh Bhattacharya, an economist with the research arm of ratings firm Moody’s in a report."

"China is, probably, diversifying investments from US treasuries to more stable commodity assets. While central banks of many countries, including China are increasing investment in gold, China appears to be using its foreign currency reserves for acquiring a basket of high consumption commodities also, both as a hedge against inflation and also as a hedge against possible raw material scarcity in future."

 11,990,561,444,829.48

"States and municipalities are in deep financial trouble. Pension performance has faltered. Over a trillion dollars worth of municipal pension fund assets have been erased in the recent market meltdown. The average public pension plan is 35% under-funded, and things are getting worse.

A wave of municipal bankruptcies could well follow."

"The world economic crisis helped reduce U.S. employee participation in retirement plans in 2008 to 40.4% of all workers...."

"Aside from a slight uptick in 2003, the percentage of worker participation has declined steadily since 1999, when 60.4% of full-time, full-year wage and salary workers ages 21 to 64 were enrolled in a retirement plan."

 Take a look at the graph of P/E ratio for the S&P

"Nov. 6 (Bloomberg) -- U.S. Senator Bernie Sanders unveiled legislation requiring Treasury Secretary Timothy Geithner to name banks whose collapse may shake the economy and break up the firms in a year, fueling efforts to end taxpayers bailouts.

“If an institution is too big to fail, it is too big to exist,” said Sanders, a Vermont independent." Tongue out

 

 

.........In Timothy Geithner's defense I would just like to say that there was a crisis. Hey, I know we weren't really sure what to do about the "banking" crisis, so the "too big to fail" bailouts were at least a way to show that something was being done, even if these bailouts didn't make much sense. A sense of security and well being is therefore more important than getting a logical solution to a difficult problem in some circumstances.

idoctor's picture
idoctor
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Re: Daily Digest - November 7

Damnthematrix's picture
Damnthematrix
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Re: Daily Digest - November 7

Brown joins call for global tax on banks

http://www.abc.net.au/news/stories/2009/11/08/2736297.htm?section=justin


Gordon Brown: "I believe in a strong global financial sector." (AFP: Kirsty Wigglesworth/Pool, file photo)

British Prime Minister Gordon Brown has called on the G20 to consider a tax on financial transactions to fund future bailouts and make banks more accountable to society.

Mr Brown told G20 finance ministers meeting in Scotland that "a global financial transactions levy" would be one way "to reflect the global responsibilities of financial institutions to society".

Although the British premier warned of the need to avoid "prohibitive costs" on the banking sector, he added: "I do not think these difficulties should prevent us from considering with urgency the legitimate issues."

Mr Brown stressed Britain would not act alone on the so-called Tobin Tax, saying it would also have to be implemented by all the world's major financial centres, including the US, Europe, Asia, the Middle East and Switzerland.

idoctor's picture
idoctor
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Re: Daily Digest - November 7

WASHINGTON - It hurts more to be unemployed now than the last time the jobless rate hit 10 percent.

Americans have more than triple the debt they had in 1982, and less than half the savings. They spend 10 weeks longer off the job. And a bigger share of them have no health insurance, leaving them one medical emergency away from financial ruin.

http://www.cnbc.com/id/33752598

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saxplayer00o1
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Re: Daily Digest - November 7

IMF Says Overvalued Dollar Used for ‘Carry Trades’

"Nov. 7 (Bloomberg) -- The International Monetary Fund said traders are probably using the dollar to fund “carry trades” across the world and the currency may still be overvalued even after its slide this year."

Davos's picture
Davos
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Re: Daily Digest - November 7

This guy is good.

Doug's picture
Doug
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Re: Daily Digest - November 7

I gotta say, every time I hear some financial guy like Vickers extolling the virtues of production on the back of peon labor, while criticizing our workers because they make a decent buck actually producing things, and while he sits back and makes piles of money doing nothing productive, I start simmering.  Remember, it wasn't the labor movement that got us into this mess.  It was the whiz kids on Wall St. producing ever fancier derivatives, enriching themselves and their hedge fund clients eventually landing the whole mess in the taxpayers' laps.  Give me a few thousand workers producing things at union scale wages over the few thousand leeches on Wall St., or managers at GM, or the insurance industry, or the corporate sycophants in Congress any time.  I ask you, who among them is actually producing something?

JAG's picture
JAG
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Re: Daily Digest - November 7
Davos wrote:

This guy is good.

Maybe not.Sealed

idoctor's picture
idoctor
Status: Diamond Member (Offline)
Joined: Oct 4 2008
Posts: 1731
Re: Daily Digest - November 7

Maybe not.Sealed

Wow I wonder if he is still short.....ouch!

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