Daily Digest

Daily Digest - November 9

Monday, November 9, 2009, 10:45 AM
  • Windfall Seen As Bank Bonuses Are Paid In Stock 
  • New Bill Would Keep Public In Dark About Threats To Financial System
  • $300,000 Of Gold In The Palm Of My Hand
  • Slouching Toward Sanity
  • Zimbabwe's Economy Coming Back From The Dead 
  • We Rescued The Top, Left The Bottom To Fend For Itself 
  • Fresh Dollar Weakness
  • Large Corporations Sitting On Piles Of Cash
  • Franchises In A Tough Spot
  • Britain And US Clash At G-20
  • Spain reaches new wind record: 45.1% of Spain’s total electricity demand
  • Tea Farmers struggle for survival in fields of gold
  • Chickens Come Home To Roost In Backyards In America 

Economy

Windfall Seen As Bank Bonuses Are Paid In Stock (M.W.)

The bonuses Wall Street received last year, billed as paltry at the time, are turning out to be among the most lucrative payouts ever. The stock payouts strike some experts as a way to simply defer windfalls into the future.

New Bill Would Keep Public In Dark About Threats To Financial System (M.W.)

Members of Congress and the general public may not be told of "potential emerging threats to the stability of the financial system," thanks to a Thursday vote by a House panel.

$300,000 Of Gold In The Palm Of My Hand (M.W.)

Below Wall Street, five stories down into the solid bedrock underneath the New York Fed, 30 feet below the level of the New York subway system and 50 feet below sea level, the New York Fed has a vault containing about $300 billion in gold bars.When you are inside, you are in a water-tight, air-tight room half the size of a football field stacked to the rafters with gold bricks weighing 27 pounds each.

Slouching Toward Sanity (M.W.)

What would the world economy look like today if we hadn't bailed out the banks?

Zimbabwe's Economy Coming Back From The Dead (M.W.)

Prices were doubling every 24 hours, a feat matched only by Hungary's hyperinflation in 1946. Schools and hospitals were shut. Confiscatory exchange policies had caused almost every mine, mill, and factory to close. Yet somehow the economy is coming back from the dead. "The fundamental change is that we have stopped printing money to cover our deficit," said Tendai Biti, the MDC's finance minister.

We Rescued The Top, Left The Bottom To Fend For Itself (M.W.)

Elizabeth Warren, the chair of the Congressional Oversight Panel charged with monitoring the bank bailout, was on 'Morning Joe' Friday morning to dig in to the newly released unemployment report.

Fresh Dollar Weakness (M.W.)

A meeting this weekend of top finance ministers failed to address China's currency, which could drive money flows away from the U.S. dollar.

Large Corporations Sitting On Piles Of Cash (M.W.)

Between Jan. 1 and Nov. 2, U.S. corporations overall raised $740.8 billion by issuing bonds, up from the $522.2 billion raised during the same period last year and almost as much as the $779.8 billion raised in 2007.

Franchises In A Tough Spot (M.W.)

To get to the root of why the U.S. is facing a jobless recovery, look no further than the state of franchising.

Britain And US Clash At G-20 (M.W.)

Gordon Brown of Britain told G-20 finance ministers that the world needed a system to force banks, not taxpayers, to cover future bailouts.

Energy

Spain reaches new wind record: 45.1% of Spain’s total electricity demand (Joemanc, Samuel A.)

Wind energy in Spain reached a new record last night, providing at its peak 45.1% of Spain’s total electricity demand – 2.1% greater than the previous record set in November last year. The Spanish Wind Energy Association said the sustained peak in wind powered electricity production proves that “wind energy is no longer marginal”. By 2020 Spain is expected to double its wind-power producing capacity from the current level of 16 gigawatts to 40 GW. “With this expected growth in capacity we could envisage wind meeting the vast majority of demand during times of peak supply by 2020,” Moccia said.

Environment

Tea Farmers struggle for survival in fields of gold (Joemanc)

The villagers of Thatarber Manihatty in south India knew they had no choice but to mortgage their small plots of farmland when they found they could not afford to bury dead relatives or send children to school without the generosity of neighbours. Six thousand feet up in the breathtaking Nilgiri hills of Tamil Nadu, hope was thin on the ground until Sumani Subramani, a 30-year-old former office clerk, drew a line in the brick-red soil.

Chickens Come Home To Roost In Backyards In America (M.W.)

A trend in backyard chicken farming is taking hold as urbanites discover how easy it is to get started.

20 Comments

saxplayer00o1's picture
saxplayer00o1
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Re: Daily Digest - November 9

"Nov. 9 (Bloomberg) -- The U.S. unemployment rate may rise to a post-World War II high of 13 percent in the aftermath of the recession, said David Rosenberg, chief economist at Gluskin Sheff & Associates Inc. in Toronto.

"Nov. 9 (Bloomberg) -- Stocks and commodities rallied and the dollar plunged after the Group of 20 nations agreed to maintain measures to boost economic growth and remained silent on the U.S. currency’s weakness. Gold advanced to a record."

(Look at the number for the 52 week low and compare to today's low)

"JAMES CHANOS, THE FAMED SHORT SELLER who was among the first to foresee the collapse of Enron, recently sounded the alarm on the municipal-bond market -- in the hallowed halls of the New York Historical Society, no less.

The "cracking of state and local municipalities is coming," he predicted at a recent meeting attended by Barron's staffer Susan Witty, adding that he wouldn't touch munis."

"Distress among commercial real estate mortgages in New Jersey is intensifying, with more properties in the state going back to the lenders. Some industry insiders say a crisis may be in the works if the economy continues to falter."

"New Jersey currently has nearly $3.6 billion of distressed commercial assets, according to Real Capital Analytics, a New York-based research and consulting firm. Distressed assets include those in foreclosure or bankruptcy, have been restructured or modified, or have been taken back by the lender through foreclosure."

"NEW YORK (Reuters) - The joint venture that borrowed heavily to buy Stuyvesant Town and Peter Cooper Village in 2006 could be among the first to take advantage of changes in U.S. tax law that let borrowers seek payment relief, when it said last week that it could not keep paying interest on a $3 billion loan."

"Slammed by huge investment losses in last year's meltdown of financial markets, the nation's largest public retirement plan faces questions about its long-term ability to make good on the benefits it owes more than 1.6 million workers, retirees and their families.

All Californians have a stake in the fund's performance: If CalPERS' $200-billion portfolio comes up short, and state and local governments refuse to cut workers' benefits, the bill falls to taxpayers -- many of whom have no guaranteed pension benefits of their own.

Already, CalPERS has notified state and local government authorities that their contributions to the fund will have to rise beginning in 2011 or 2012, reflecting the steep drop in the system's assets during the markets' crash."

"Montgomery County officials, reeling from what could amount to a $500 million budget shortfall next year, have started to point fingers."

"HARTFORD -- Plummeting income tax revenues are threatening to undermine the already shaky foundations of the state budget.

This downward trend is a disconcerting development for Gov. M Jodi Rell and the legislature because the income tax represents one-third of this year's $18.6 billion budget.

"We are all very concerned about it," said Rep. Cameron C. Staples, D-New Haven, the House chairman of the tax-writing Finance, Revenue and Bonding Committee.

The income tax raised nearly $1.3 billion less than budgeted in the last fiscal year, which ended in a record $925.6 million deficit. The state government is covering that shortfall with borrowed money.

The current year is showing no signs of improvement."

"A $76 million budget deficit, a standoff between the University of Hawaii's administration and its faculty union, and fears of massive cuts to programs, departments and schools have longtime professors calling the situation at UH the worst money and morale crisis they have known.

"This is far and away the worst I've seen — I'm not exaggerating. For the first time, we are simply looking at the real possibility of damage to the whole institution," said professor David Stannard, chairman of the American studies department. He has been at UH since 1979, and his views reflected those of several colleagues."

"West Virginia officials are predicting deficits in the Medicaid program of $95 million in fiscal year 2013 and another $169 million in 2014 unless the economy improves and enrollment goes down."

"Advanta's bankruptcy comes just one week after another top small business lender, CIT Group, filed its own bankruptcy petition. Both companies were hit with a sharp rise in defaults as the recession deepened. Advanta's default rate reached 24% in September, up from 11% one year ago, according to the company's financial filings."

"U.S. citizens are joining immigrants in store parking lots

In the latest sign of the Las Vegas Valley’s economic free fall, U.S. citizens are starting to show up in the early mornings outside home improvement stores and plant nurseries across the Las Vegas Valley, jostling with illegal immigrants for a shot at a few hours of work.

Experts say the slow-starting but seemingly inexorable trend is occurring nationwide."

"Back in August of this year I did an article that showed how bad the math was with the unemployment system ( Unemployment Benefits – More Math that Just Doesn’t Work/ More Data Hiding? ). Well, the math is just getting worse… back in August the total 2009 outlays had already hit a record but were well under $60 billion. Now they are approaching $100 billion, already almost 5 times the amount paid out in the year 2000"

 

..........Come on, Nate! These guys have experts doing the math for the Unemployment Trust Fund!

JAG's picture
JAG
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I'm A Modern Man

Just a quick reminder, in case you were lacking an identity in this economy.

saxplayer00o1's picture
saxplayer00o1
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Re: Daily Digest - November 9

"Now recasts are starting to come due for the first wave of option ARMs and there is some evidence the first wave of defaults is ahead of schedule. In a highly publicized report last September, Fitch Ratings predicted roughly $29 billion worth of loans would recast to higher monthly payments by the end of 2009 and an additional $67 billion would recast in 2010 and would not abate until 2012. Borrowers will find themselves paying an additional $1,053 on average each month. Fitch also found that many of the option ARMs taken out in 2004 and 2005 are resetting at much higher payment schedules — often to the astonishment of people who thought the low installments were fixed for at least five years. In July, about 40 percent of borrowers with option ARMs were already delinquent, and “many” of the others will start missing payments before their obligations change, according to analysts at Barclays."

"According to Retro Appraisals, 70 percent of appraisals made for mortgage financing between 2005 and 2007 were overstated and inflated. They added that mortgage brokers, real estate agents, and lenders had close contact with appraisers, and most appraisal order forms have a line item asking the borrower or agent to write down the value that was needed from the appraiser."

"With no Home Valuations Code of Conduct (HVCC) and no appraisal management companies, Retro Appraisals alleged that the entire chain of the loan process from broker to lender was geared to closing as many loans as quickly possible. Additionally, the company said lenders’ risk management was non-existent in most cases, claiming most lenders sold off their loans in a very short period of time so the risk of holding too many loans with low values on their subject properties was minimal."

 

.........I wonder what  those resets for the overvalued properties will do to the holders of the loans??

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Tommygun
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Re: Tidal Wave of New Defaults

It would be hard to imagine that the average mortgage adjustment on the option ARM loans will be $1053. a month. That amount will bring a whole new wave of foreclosures. I am in Phoenix, AZ. I am sure a lot of those loan resets will happen here.I have no idea what people will do then.

I live in a decent neighborhood and the house two doors down has five guys living there renting and the house across the street has three people renting. My neighbor two doors down the other way bought his house for $618,000 in July of 2006 and it recently appraised for $339,000. He won't be moving anywhere soon. People are on the edge.

I wanted to believe we are at the economic bottom in 2009 and skipping along the bottom, but now with the pension funds going bust and the city governments underfunded, and more mortgage defaults on the way...looks like there is stormy weather ahead in 2010.

Great article on the backyard chickens. I have 9 chickens!! Just gotta get a goose to lay a golden egg now.

 

dcm's picture
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Re: Daily Digest - November 9

http://www.evwind.es/noticias.php?id_not=2168 

Had to Adjust the Sails in the Spanish WInd Link

how many percentage points is the US behind.....

 

Davos's picture
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Re: Daily Digest - November 9
dcm wrote:

http://www.evwind.es/noticias.php?id_not=2168 

Had to Adjust the Sails in the Spanish WInd Link

how many percentage points is the US behind.....

 

 Absolutely amazing. And our "leaders" (who couldn't collectively lead themselves out of a paper bag) are engrossed in a socialized health care spending spree. 

FireJack's picture
FireJack
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Re: Daily Digest - November 9

What will happen if things continue on as they are? I am assuming that world governemnts will continue to print money to stop or hide economic problems, so at what point will that cease to be effective? Seems to me that once that happens everything will go downhill fast so I'm always wondering what are the warning signs of an immenent collapse.

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eternal sunshine
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Re: Daily Digest - November 9

More Peak Oil validation

The world is much closer to running out of oil than official estimates admit, according to a whistleblower at the International Energy Agency who claims it has been deliberately underplaying a looming shortage for fear of triggering panic buying.

http://www.guardian.co.uk/environment/2009/nov/09/peak-oil-international-energy-agency

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Re: Daily Digest - November 9

Very good insight from Nate today:

http://economicedge.blogspot.com/2009/11/technical-update.html

He isn't the only one pointing out the extreme divergence between different indicators.  And I love the line, "I guarantee you I have more patience than Goldman has quant computers"! 

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mesaboogieman
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Re: Daily Digest - November 9

You beat me to it Sunshine, was just about to post that link. 

     Scary stuff,   I keep hoping C.M. has got it wrong, but deep down I know we're being lied to by the very people who should be looking out for us.  It'll be interesting to see what happens to the price of oil!

   BTW I'm really interested in setting up a shop selling all the niche eco products such as cargo bikes, they'll be in every high street soon, it'd be good to get ahead of the game.  Is there anyone out there who would like to get involved ?    (UK southeast)

FireJack's picture
FireJack
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Re: Daily Digest - November 9

That one paragraph is intersting:

A second senior IEA source, who has now left but was also unwilling to give his name, said a key rule at the organisation was that it was "imperative not to anger the Americans" but the fact was that there was not as much oil in the world as had been admitted. "We have [already] entered the 'peak oil' zone. I think that the situation is really bad," he added.

 

How come month after month we still havn't seen shortages? Just how close are we?

 

idoctor's picture
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Re: Daily Digest - November 9

Davos's picture
Davos
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Re: Daily Digest - November 9
idoctor wrote:

How could the dollar go to 0? How could anyone lose faith in the dollar?


2008

2009

Social Security $15.8 $17.5
Medicare Part A $34.7 $36.7
Medicare Part B $34.0 $37.0
Medicare Part D $17.2 $15.6
Total $101.7 $106.8
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Erik T.
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Re: Daily Digest - November 9

"Uh, well, I don't know about that specific one G-L-D that you mentioned, but the other gold stocks are doing well..."

Heaven forbid that the reporter for a major news network who specializes in this area of financial markets should actually know the symbol for what is probably the most widely traded non-index ETF on the planet!

These people should wear helmets...

Erik

 

Davos's picture
Davos
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Re: Daily Digest - November 9
ErikTownsend wrote:

These people should wear helmets...

Erik

 

It took me aout three minutes before I laughed so hard that apple cider (well you get the idea). Thanks for the laugh Erik.

dcm's picture
dcm
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Re: Daily Digest - November 9

.

guardia's picture
guardia
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Re: Daily Digest - November 9

The article above about wind production record in Spain dates from November _8th_. The more recent peak by the REE in Spain was actually yesterday, November _9th_ covering 53.7% of demand... the article appears only available in Spanish, but here is the Google translated link:

http://translate.google.com/translate?prev=hp&hl=en&js=y&u=http%3A%2F%2F...

Now this is seriously good news!

Next I hope that maybe people start throwing rocks at Goldman Sachs and JP Morgan.. That'll teach them playing God :)

idoctor's picture
idoctor
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Re: Daily Digest - November 9

guardia's picture
guardia
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Re: Daily Digest - November 9
guardia wrote:

The article above about wind production record in Spain dates from November _8th_. The more recent peak by the REE in Spain was actually yesterday, November _9th_ covering 53.7% of demand... the article appears only available in Spanish, but here is the Google translated link:

Oh there is an English version of the article now ...

http://www.evwind.es/noticias.php?id_not=2168

fujisan's picture
fujisan
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Re: Daily Digest - November 9

BBC NEWS | Special Reports | Free market flawed, says survey

Twenty years after the fall of the Berlin Wall, a new BBC poll has found widespread dissatisfaction with free-market capitalism.

In the global poll for the BBC World Service, only 11% of those questioned across 27 countries said that it was working well.

Most thought regulation and reform of the capitalist system were necessary.

...

More than 29,000 people in 27 countries were questioned. In only two countries, the United States and Pakistan, did more than one in five people feel that capitalism works well as it stands.

Almost a quarter - 23% of those who responded - feel it is fatally flawed. That is the view of 43% in France, 38% in Mexico and 35% in Brazil.

And there is very strong support around the world for governments to distribute wealth more evenly. That is backed by majorities in 22 of the 27 countries.

If there is one issue where a global consensus seems to emerge from the survey it is this: there are majorities almost everywhere wanting government to be more active in regulating business.

...

Wide Dissatisfaction with Capitalism — Twenty Years after Fall of Berlin Wall

Despite sharing a similar perspective on many key issues, French and Germans disagree sharply when it comes to free market capitalism. In France, 47% feel that its problems can be solved by regulation and reform whilst nearly as many think that it has fatal flaws (43%). In Germany, however, there is very little support (8%) for a different economic system, with nearly three in four (74%) feeling that free market capitalism’s problems can be addressed by regulation and reform.

Latin Americans are particularly enthusiastic about a more active role for government in running the economy, with around nine in ten supporting more redistribution of wealth in Mexico (92%), Chile (91%), and Brazil (89%). Support for redistributing wealth more evenly is lowest in Turkey (9 %)—but those who do not support a greater role for government in this area are also in the majority in India (60%), Pakistan (66%), Poland (61%), and the US (59%).

The proportions wanting to see government be more active in regulating business are highest in Brazil (87%), Chile (84%), France (76%), Spain (73%), China (71%), and Russia (68%). Only in Turkey (71%), does a majority think their government should do less to regulate business. However, there is more widespread opposition elsewhere, including the Philippines (47% oppose), Pakistan (36%), Nigeria (32%) and India (29%).

The direct ownership or control of industries by government is generally more controversial, with large numbers opposed to it in, not only the US (52%) but also Germany (50%), Turkey (71%), and the Philippines (54%).

 ...

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