Daily Digest

Daily Digest - November 8

Sunday, November 8, 2009, 11:05 AM
  • Public Pensions Face Ugly Choices...Bankruptcy, taxpayer bailouts appear inevitable
  • RBI may’ve sold US T-bills to buy gold
  • Gold is over $1000 an ounce; now what?
  • All About Mises From The Wall Street Journal
  • Inside The Global Gold Frenzy
  • Deep Trouble: How This Real Estate Bust Is Different
  • The Coming Bloodbath In Commercial Real Estate
  • The FED And Fannie Mae: Throwing Money Down A Black Hole
  • Help Not Wanted
  • The Ugliest Unemployment Charts Yet 
  • US Debt Default: The Unthinkable Becomes Thinkable 
  • Buffett's Burlington Buy Is Really A Bet On China 
  • The Berkeley Solar Map
  • Cutting-Edge Green Homes Of The Future


Public Pensions Face Ugly Choices...Bankruptcy, taxpayer bailouts appear inevitable (Saxplayer00o1)

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."

RBI may’ve sold US T-bills to buy gold (Saxplayer00o1)

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.

Gold is over $1000 an ounce; now what? (E.S.)

Since the increase in the US money supply equals the increase in the money created by the Fed we also know that new bank loan creation was almost exactly offset by the recapitalization of the banks through equity issuances, bond issuances and from operating profits.

All About Mises From The Wall Street Journal (M.W.)

Ludwig von Mises was snubbed by economists world-wide as he warned of a credit crisis in the 1920s. We ignore the great Austrian at our peril today.

Inside The Global Gold Frenzy (M.W.)

Last month, Harrods, the 160-year-old London department store, began selling coins as well as gold bullion ranging from tiny 1-gram ingots to the hefty, 12.5-kilogram, 400-Troy-ounce bricks that are so often featured in movies and stocked inside the vaults of Fort Knox. Harrods’s lower ground floor, where the gold is peddled, has been packed with interested shoppers.

Deep Trouble: How This Real Estate Bust Is Different (M.W.)

Unrealistic assumptions, layers of investors, sky-high prices, and fraud will make it hard to clean up the mess in commercial real estate.

The Coming Bloodbath In Commercial Real Estate (M.W.)

According to the "Emerging Trends in Real Estate" forecast, "2010 looks like an unavoidable bloodbath for a multitude of 'zombie' borrowers, investors and lenders. The shake-out period may extend several years as even some conservative owners with well-underwritten loans from the early 2000s see their equity destroyed."

The FED And Fannie Mae: Throwing Money Down A Black Hole (M.W.)

Fannie, by its own disclosure, is surviving ONLY due to the extraordinary acts of Treasury and, I would argue, the blatantly impermissible acts of The Federal Reserve. Fannie has turned into nothing more than a politically-motivated toxic waste receptacle, first abused by Countrywide and now by the FHA! This is a black hole that has consumed almost $1 trillion dollars of taxpayer money thus far.

Help Not Wanted (M.W.)

Nearly two years of recession have left businesses stripped to the bone. ADP estimates that 2.6 million jobs at small companies have disappeared since early 2008. When will jobs return?

The Ugliest Unemployment Charts Yet (M.W.)

You have to see it to believe it.

US Debt Default: The Unthinkable Becomes Thinkable (M.W.)

In my latest column, I suggested that some advanced society might someday default on its government debt. Just a few days later, the International Monetary Fund (IMF) issued a report that added credence to this unsettling hypothesis.

Buffett's Burlington Buy Is Really A Bet On China (M.W.)

The purchase was hailed by the Oracle himself as a “bet on America”. We see it a little bit differently.


The Berkeley Solar Map (M.W.)

A cool way to quickly calculate the cost/benefit of a solar system for your own home.

Cutting-Edge Green Homes Of The Future (M.W.)

In New Orleans, a new kind of house is rising from the ruins of Katrina. Cheap, green, and radically hip, these homes offer displaced residents affordable, cutting-edge, radically green homes designed by name-brand architects.


saxplayer00o1's picture
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Re: Daily Digest - November 8

  The other National Debt Clock is close to $12 Trillion

"In upscale communities such as Los Altos, Greenbrae and Alamo, where median prices top $1 million, about twice as many households received default notices from January to September as in the same period in 2008, according to recorders' office data compiled by MDA DataQuick, a San Diego real estate research firm.

The same is true for mid-scale areas with median prices around $500,000, such as Walnut Creek, Los Gatos and Campbell."

2A) Web of foreclosure spreads in Marin

"Ludwig von Mises was snubbed by economists world-wide as he warned of a credit crisis in the 1920s. We ignore the great Austrian at our peril today."

"Ordinarily, any random spikes in credit would be quickly absorbed by the system—the pricing errors corrected, the half-baked investments liquidated, like a supple tree yielding to the wind and then returning. But when the government holds rates artificially low in order to feed ever higher capital investment in otherwise unsound, unsustainable businesses, it creates the conditions for a crash. Everyone looks smart for a while, but eventually the whole monstrosity collapses under its own weight through a credit contraction or, worse, a banking collapse."

"San Diego is facing a $179 million deficit in its city budget next year, a shortfall that Mayor Jerry Sanders blames primarily on the economy but critics say was worsened by increased city spending on his watch."

"Steve Francis, who ran against Sanders for mayor last year, said the city should have kept its budget frozen since 2005 until it resolved its $1 billion-plus pension deficit and fiscal woes.

“They let the expenses continue to rise, and now with the economic downturn, we have basically a tsunami,” Francis said. “If they had done the heavy lifting early on, the dramatic cuts that are going to take place now would not have been so bad, and they may have also had a little wiggle room.”"

"Gov.-elect Chris Christie shifted into governing mode this week as the glow of election victory dissipated quickly.

The news came quickly that state revenue numbers continue to fall. So Gov. Jon Corzine ordered $400 million cut from the current state budget, double the amount announced in October.

Meanwhile, an $8 billion or more budget hole still looms for fiscal year 2011, which starts in July, and the Superfund that pays for the state's highway and transportation construction projects is expected to run out of available money by the end of next year.

That's not to mention state unemployment near double digits or the upward of $100 billion in debt and unfunded pension and health-care obligations."

"Welcome to another public pension fiasco. The state's unfunded pension liability plus its other pension debt will total $95 billion by the end of the fiscal year. That's north of $7,000 for each of Illinois' 12.9 million residents -- including babies, retirees ... and the state lawmakers who created this travesty. Gov. Quinn and legislators: You can't afford to ignore this problem any longer."

"Statewide beer sales were down 3.3 percent for the first nine months of 2009, said Pat Higgins, owner of Orrison Beverage Company in Cheyenne, quoting from a new report last week.

Higgins believes the decline correlates with the exodus of oil and gas field workers, a hard-working, hard-drinking, well-paid bunch.

Beer sellers in Carbon County and the western part of Wyoming are feeling the drop the most, he said.

The slump also extends to liquor and wine sales.

Greg Cook, director of the Wyoming Liquor Division, said sales statewide dropped 2.23 percent between May 1 and October 31.

This decrease reverses a previous trend of 2 and 3 percent increases.

"You are seeing people trading down to less expensive brands," Cook said."

"People have read plenty about the effect of the national recession and the market on state revenues, particularly mineral income.

The state alone has lost about $1 billion in expected dollars over the past year. The local governments are getting pinched on sales tax income."

"From 2001 to 2008, the town's annual contributions to cover its pension obligations more than tripled, from $2.2 million to $7.5 million. The trend is expected to continue in the next decade, Finance Director Jane Struder said. Depending on market developments, one analysis shows the town's annual costs could double in five years, and drive the operating budget, currently at $67 million, into deficit as early as 2012."

"The council is reviewing a consultant's report on ways to cut pension costs and plans a meeting on Dec. 3.

"Even if we raise taxes to the legal limit [set by the state legislature], the way the projections are currently coming out, we still wouldn't have enough money to fund town operations and meet the pension obligations going forward," Councilman Robert Wildrick said."

"The state's contribution to the teachers' pension fund has risen 70 percent in the past five years, from $24.4 million to $41.5 million. Next year, the bill is expected to hit $63.5 million as the General Fund faces an $85 million drop in revenues.

The problem goes beyond benefits for teachers.

Spaulding projects Vermont will see the benefits payout for state employees and teachers hit $255.8 million in five years, compared with $172 million this year. To keep up, the state must put more money toward retiree benefits each year. The combined state pension contribution for last year was $66.3 million, or 5.5 percent of General Fund revenues, and rises to $73.5 million, or 7.1 percent, for the current year. By fiscal year 2011, the state contribution is projected to hit $103 million, or about 9.5 percent of General Fund revenues.

That's a whole lot of money unavailable for everything else state government is supposed to do, from fixing roads to paying state troopers to looking after the welfare of Vermonters unable to care for themselves.

This is clearly an unsustainable scenario."

"LONDON (Reuters) - The chief executive of Goldman Sachs, which has attracted widespread media attention over the size of its staff bonuses, believes banks serve a social purpose and are doing "God's work.""


"SHARM EL-SHEIKH, Egypt (Reuters) - China hopes that the United States will keep its deficit to an appropriate size to ensure basic stability in the U.S. dollar exchange rate, Chinese Premier Wen Jiabao said on Sunday.

"I hope that as the largest economy in the world and an issuing country of a major reserve currency, the United States will effectively discharge its responsibilities," Wen told a news conference in Egypt.

"Most importantly, we hope the United States will keep an appropriate size to its deficit so that there will be basic stability in the exchange rate, and that is conducive to stability and the recovery of the global economy," he added.

The premier had expressed concern in March that massive U.S. deficit spending and near-zero interest rates would erode the value of China's huge U.S. bond holdings.

China is the biggest holder of U.S. government debt and has invested an estimated 70 percent of its more than $2 trillion stockpile of foreign exchange reserves, the world's largest, in dollar assets."



..........The future of China's U.S. bond holdings.

brjohnson789's picture
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Re: Daily Digest - November 8

If fifty years ago you told someone that someday  a spokesman from China would basically say they 'hope' the US can be fiscally responsible because its deficit is so huge, and most people in the world feel the same, that person 50 years ago would say 'fiddle sticks'. 

Davos's picture
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Re: Daily Digest - November 8
brjohnson789 wrote:

If fifty years ago you told someone that someday  a spokesman from China would basically say they 'hope' the US can be fiscally responsible because its deficit is so huge, and most people in the world feel the same, that person 50 years ago would say 'fiddle sticks'. 

Now Nancy et al put a pretty robin for China on their top secret trillion dollar health care plan. Can't wait to see gold's reaction in a few hours. Bah bye Uncle Buck!

Johnny Oxygen's picture
Johnny Oxygen
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Re: Daily Digest - November 8

Apparently China gave the US some sort of ultimatum a few months back when Clinton visited China to beg for them to continue to buy or debt. I'm sure they said "Stop printing money!". At any rate I think there was a deadline of some sort that id due some time in the 2nd week of this month. Does anyone know anything about this?

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NY Times article on gold

These 2 paragraphs were funny:


Long considered the ultimate refuge for nervous investors, gold has climbed as the dollar has steadily weakened, budget deficits have expanded in the United States and Europe, and central banks have continued to pump trillions of dollars into weak economies, creating fears of another asset bubble that will ultimately pop.

What about the bond market? or the stock market? These writers have ZERO respect for that barbaric metal!!!


Jewelry store shoppers aren’t the only ones forecasting lofty prices. Jim Rogers, an investor who has made his name investing overseas and in commodities, predicted to Bloomberg Television last week that gold might reach $2,000 an ounce — prompting a rebuke from Nouriel Roubini, an economist who gained attention for his early warnings about the global economic crisis. At a conference in New York on Wednesday, Mr. Roubini described Mr. Rogers’s forecast as “utter nonsense,” saying that there aren’t any inflationary or economic pressures that would drive the price of gold to $2,000 an ounce.

Nouriel, Nouriel - see my above comment.

But wait, there's more....


In addition to high anxiety about the future, recent political trends may also be playing a part in the global gold fever. With a crackdown on tax havens worldwide and Swiss bankers handing over the names of wealthy American clients to authorities, some experts say rich people now prefer an investment that can easily be hidden from the prying eyes of tax collectors.

“In Europe, people want physical gold to store themselves, with no documents,” said Bernhard Schnellmann, director for precious-metal services at Argor-Heraeus. Often, the company doesn’t know the ultimate destination of the bars it makes, only the identity of the bank in Zurich or London that is handling the order.

Ah, those billions in secret Swiss accounts had to go somewhere!

I had a feeling this would happen!!  Money mouth


Tycer's picture
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Re: Daily Digest - November 8

IMO those houses should have been built elsewhere.

The houses in the Ninth Ward are still below sea level. That area should have never been built on years ago and the same still holds true. True, a couple of generations of Louisianans have been born there, but it's still a poor choice of home location. It should have been leveled and returned to wetland. 


Davos's picture
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Re: Daily Digest - November 8

Thank you Nancy et al. I can alway count on you to get it wrong making my 4th G right.

If Lieberman doesn't follow through with his filibuster I think gold is going for a moonshot while they burry Uncle Buck. 


TtotheA's picture
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Re: Daily Digest - November 8

The numbers coming out of D.C. aren't even close to reality...as this NY Times article suggests.

The fundamental shortcoming is in the way imports are accounted for. A carburetor bought for $50 in China as a component of an American-made car, for example, more often than not shows up in the statistics as if it were the American-made version valued at, say, $100. The failure to distinguish adequately between what is made in America and what is made abroad falsely inflates the GDP, which sums up all value added within the country.






robie robinson's picture
robie robinson
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Re: Daily Digest - November 8

but alas, the solar system map calculator...... works only in the...

city of berkley(no caps intentional)




Davos's picture
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Re: Daily Digest - November 8
robie robinson wrote:

but alas, the solar system map calculator...... works only in the...

city of berkley(no caps intentional)




Berkly city of the big 0's energy Czar. 

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