Daily Digest

Daily Digest - October 18

Sunday, October 18, 2009, 9:48 AM
  • What Does The Return Of Dow 10,000 Really Mean? 
  • Iran is leaving, and taking all of their toys with them... 
  • Goldman Sachs Entrenched in SEC, Emplants Own As COO/Enforcement Division 
  • Russia ready to abandon dollar in oil, gas trade with China

Economy

What Does The Return Of Dow 10,000 Really Mean? (Doug S.)

There are too many variables to predict short and intermediate stock market trends from here. But one thing is very probable: Democratic plutocracy will triumph over America and much of the world within twenty years — maybe in half that time. Fortunately, the new system will not likely hold together, giving the United States a good chance of being reborn to a better future after its fiery trial and a partial depopulation of the world. In the meantime, it may be prudent for many “buy and hold” investors to liquidate up to one-third of their long-term stock portfolios here at Dow 10,000, using the proceeds to pay down mortgage debt, enhance liquidity, and prepare for mobility if needed. This is not capitulating at the bottom. This is prudently managing risk in the upper one-third of whatever this cyclical bull ends up accomplishing.

Iran is leaving, and taking all of their toys with them... (Claire H.)

The Trade Promotion Organization of Iran (TPOI) announced this week that it plans to exclude the U.S. dollar from Iran’s foreign exchange reserves.

Goldman Sachs Entrenched in SEC, Emplants Own As COO/Enforcement Division (Claire H.)

The U.S. Securities and Exchange Commission named Adam Storch, a 29-year-old from Goldman Sachs Group Inc.’s business intelligence unit, as the enforcement division’s first chief operating officer.

Russia ready to abandon dollar in oil, gas trade with China (Claire H.)

Russia is ready to consider using the Russian and Chinese national currencies instead of the dollar in bilateral oil and gas dealings, Prime Minister Vladimir Putin said on Wednesday.

10 Comments

saxplayer00o1's picture
saxplayer00o1
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Re: Daily Digest - October 18

 

"In the city of Milwaukee, current delinquent real estate taxes from the past four years totaled $29.2 million, a 19 percent increase over the $24.5 million total in 2007, according to the city treasurer’s office. The amount in the Milwaukee County suburbs rose 14 percent at the end of 2008, from $13.5 million in 2007 to $15.4 million, according to Dan Diliberti, the Milwaukee County treasurer.

This increase brings the total four-year increase since 2005 for Milwaukee County to $9.5 million, a jump of 62 percent, said Diliberti."

"In the past couple of years, Florida has lost about 200,000 construction jobs as new-home sales plunged 80 percent. As a result, many construction companies are hungry for cash. Selling their unused equipment helps get them through the hard times. Much of the equipment is relatively new — model years 2004 to 2007 — another sign of how desperate things have become."

"As gift horses go, this was a beauty.

Just as Washington state was trying to balance a budget knocked on its backside by the worst recession since World War II, the feds rode to the rescue.

About $3 billion in stimulus dollars were shipped West to maintain funding for schools, colleges and social agencies. That and some budget sleight-of-hand helped reduce the need for hard budget cuts from $9 billion to $4.5 billion, all this to a two-year budget of $31 billion.

Yes, it is rude to look such horses in the mouth. Still, state budget writers knew there were potential flaws in this federal generosity, especially something called “maintenance of effort.” By taking the money, the state had to agree not to reduce spending in the areas that were being backfilled.

“We were very aware of it when we were getting it and spending it,” said state budget director Victor Moore. “It would be fine if this budget had played out.”

But it didn’t play out."

"18 October 2009

MUSCAT: Gulf finance ministers and central bank governors yesterday reiterated their commitment to a monetary union and a single currency which four states plan to launch next year. The top officials from Bahrain, Kuwait, Qatar and Saudi Arabia meeting in Muscat called on the United Arab Emirates and Oman, which have previously withdrawn from the plan, to rejoin."

"To effectively cope with the globally weak dollar, the government should make an all-out effort not only to stabilize the won's value against the greenback, but also to increase a portion of gold, the euro and other non-dollar assets in the nation's foreign exchange reserves, Korea Institute of Finance (KIF) said Sunday."

 

.........The U.S. dollar is not a great singer, so it hired these guys to sing for the Arab states listed above and for Korea.

Davos's picture
Davos
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Re: Daily Digest - October 18

Don't know if this has been posted. Part II with Latvia is, IMHO, an important watch....The "ifs" are what I underscored.

Keiser Oct 16th

joemanc's picture
joemanc
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Re: Goldman Sachs/SEC appointment

The revolving door between corporations and government swings around again. I guess that will mean the end of any thoughts the government might investigate Goldman Sachs on how they make so much money.

Call it speculation, but I almost wonder if the arrest on Friday of the Galleon hedge fund founder is a way for the SEC/government to say "Hey, we are cracking down on the financial industry". While at the same time, the big boys who pass through the revolving door, like G.S. and JPM, get to keep playing at the Wall Street Casino.

npwebb's picture
npwebb
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Re: Daily Digest - October 18

I'm not informed enough in economics and finance to understand every thing stated, but I am smart enough to understand that the Fed is doing EXACTLY what it stated would undermind confidence in the institution and its ABILITY to fulfill its stated mission of maintaining a stable dollar!!!!

From Zero Hedge

http://www.zerohedge.com/article/stern-opponent-funding-fdics-depleted-deposit-insurance-fund-and-monetization-alan-greenspan

Quote:

What a difference twenty years makes. The man whose actions basically lead to the eradication of the American middle class in its aspirational pursuit of buying massive SUVs, Prada bags, and 3rd investment properties, compliments of cheap credit, in order to appear ever so much like the upper class yet ultimately drowning itself in debt, Alan Greenspan, is probably the most critical reason why America's debt service will be nearly 90% of GDP within several decades. The adoption of his actions by the current deranged operator of the reserve currency printing press, is merely a continuation of a multiple decade long process of keeping inflation contained at the expense of devaluing the US currency, as the global liquidity pyramid recently hit one quadrillion, and continues to grow exponentially, yet pair by an ever-moderating increase (read flatline) in global GDP (Zero Hedge will discuss the topic of disappearing marginal utility of debt in depth soon).

In the meantime, as we are one bank away from 100 bank failures for 2009, while the FDIC is now insolvent and any incremental bank failure could prompt the much-dreaded terminal run on the bank, yet as Congress and the Fed have no problems with pumping billions more into yet another failed government enterprise, taking a trip back in time to 1991 reveals some curious facts. In that year, it was none other than then-Chairman Greenspan warning that funding not just the Treasury's, but specifically the FDIC's DIF obligations directly would be a bad diea. The below excerpt is taken from a Greenspan address to the Bush Administration's early 1991 proposal, with which some members of Congress seemed sympathetic, to have the Reserve Banks lend up to $25 billion directly to the FDIC's Bank Insurance Fund (BIF):

[A]n element of the Treasury's proposal that has troubled the Board is the use of the Federal Reserve Banks as the source of these loans. To prevent such loans from affecting monetary policy, the loans would need to be matched by sales from the Federal Reserve's portfolio of Treasury securities.... Not only would use of the Reserve Banks for funding the BIF [ZH: Bank Insurance Fund, the DIF's parent] serve no apparent economic purpose, it could create potential problems of precedent and perception for the Federal Reserve. In particular, the proposal involves the Federal Reserve directly funding the government. The Congress has always severely limited and, more recently, has forbidden the direct placement ol Treasury debt with the Federal Reserve, apparently out of concern that such a practice could compromise the independent conduct of monetary policy and would allow the Treasury to escape the discipline of selling its debt directly to the market. Implementation of the proposal could create perceptions, both in the United States and abroad, that the nature or function of our central bank had been altered. In addition, if implementation of the proposal created a precedent for further loans to the BIF or to other entities, the liquidity of the Federal Reserve's portfolio could be reduced sufficiently to create concerns about the ability of the Federal Reserve to control the supply of reserves and, thereby, to achieve its monetary policy objectives.

How is it that Alan Greenspan was so objective and prudent 18 years ago, yet his successor is so careless when it comes to where the tentacles of monetary policy reach (or, as the case is these days, do not). Ironically, these days, Bernanke has threatened the independence of monetary policy only in the context of increased transparency of the Fed: should HR 1207 pass, the Chairman claims, inflation pressures will grow, and Spengler and Venkman will inevtiably cross the streams, leading to the anihilation of everything we know. Well of course inflation will grow: the one quadrillion in excess liquidity (10x world GDP) will cause not inflation but massive, unprecedented hyperinflation, if there is no reserve currency to moderate the impact of all this "money" hitting global markets without a devaluation buffer. The dollar is and has always been fiat banking's and excess liquidity's punching bag.

Yet what do we have now: 18 years after Greenspan's statement - a condition where the Fed, and the Treasury are both considered to be next in line to subsidize a bankrupt FDIC. The proposal to collect special assessments with the hope that these will plug the upcomign $100 billion hole, is as ludicrious as it is naive. One wonders: what is more dangerous to the Fed's "independent conduct of monetary policy" - the FDIC bailout threat as Greenspan foretold, or the danger of actually understanding how many bankrupt companies' equities the Fed is willing to accept in its discount window when dealing with even worse financial organizations (not too many out there, but see Lehman Brothers).

And while we are on the topic of the Central Bank, we would like to present a paper by the Cleveland Fed from 1992, which in addition to discussing the RFC, has a very intereting analysis of what the true role of a Central Bank should be.

A tendency to use central bank resources to fund a bailout increasingly politicizes the bank's monetary policy functions, which risks causing it to resemble the way in which national development agencies are used and often abused in developing countries (providing assistance from public funds to the most powerful and politically well-connected entities in the state). [How can this have been obvious in 1992 yet nobody is willing to acknowledge it today???] Generally, industrial-economy central banks are somewhat insulated from political requests to fund specific rescue operations. For example, during 1992, Sweden, Norway, and Finland, all industrial economies, decided to bail out their banking systems, but they established new governmental agencies outside their central banks (RFC analogues) to do so. Some industrial-economy nations, however, do use their central banks to fund rescue operations. The French bankers' association has officially asked the French government for assistance with about $15 billion of nonperforming property loans on the books of the nation's banks, including "one option proposed ... for cheap refinancing of troubled loans through the Bank of France" (Dawkins [1992a, b]). Japan also has been studying methods for relieving its banking system of nonperforming real estate loans without using taxpayers' funds but has not yet settled upon a final plan (Chandler [1992]). Some Japanese bankers have requested central bank assistance in this plan, but the government has not yet committed such resources to the effort. In the case of the Federal Reserve Banks, it is official Federal Reserve policy that Reserve Banks' advances should not be used to substitute for the capital of depository institutions and that Federal Reserve resources should not be used so as to enable the Treasury to avoid the discipline of selling its debt instruments into the open market.

Mark those words, as they are a disappearing breed: "the discipline of selling debt instrument into the open market." One wonders: just how much such discipline is left these days, as Primary Brokers, who get their funding to purchase bonds from the Fed courtesy of a vertical yield curve, are the market. In other words, monetization and Fed-backed bailouts are a very bad thing. Yet what Fed apologists can't get enough of, is "explaining" day after day why the Fed is in fact doing us all a favor and how QE is so, so, so very different from monetizing, and it really is all just semantics, and, after all, just how does one define "is." Because "is" makes it so very clear that announcing the repurchase of an Agency Security 30 minutes after its auction, is one of the most expected things in a normal (banana) economy.

Full Cleveland Fed paper below:

 

idoctor's picture
idoctor
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Posts: 1731
Re: Daily Digest - October 18

Call it speculation, but I almost wonder if the arrest on Friday of the Galleon hedge fund founder is a way for the SEC/government to say "Hey, we are cracking down on the financial industry". While at the same time, the big boys who pass through the revolving door, like G.S. and JPM, get to keep playing at the Wall Street Casino.

That was my thought also! +++1

nyfiken's picture
nyfiken
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Posts: 4
Re: Daily Digest - October 18

Should we all rejoice now that the rich are spending??

http://www.bloomberg.com/apps/news?pid=20601109&sid=aHx9ytuwJJ6Y

...or should we temper that euphoria with this reality about the record foreclosure rate of all time:

http://money.cnn.com/2009/10/15/real_estate/foreclosure_crisis_deepens/

...meanwhile, the PRE-FORECLOSURE numbers are staggering - in Palm Beach County alone, Pre-Foreclosure listings outnumber Foreclosures 6800 to 375 on this site:

http://www.foreclosurelistings.com/list/FL/PALM%20BEACH/PRE-FORECLOSURE/

Sobering sobering stuff.  Think I'll go grab a beer....

 

 

 

idoctor's picture
idoctor
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Posts: 1731
Re: Daily Digest - October 18

Gold & Silver standard doesn't work??? At least it limits so much of the cheating LOL...

DavidC's picture
DavidC
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Posts: 243
Re: Daily Digest - October 18

I've just finished viewing the complete video referenced by Karl Denninger's site today;

http://market-ticker.org/archives/1516-Warning-Global-Climate-Scam.html

The complete video:

The slides associated with Lord Monckton's presentation:

http://www.friendsofscience.org/assets/documents/monckton_2009.pdf

Rivetting, thought provoking and recommended 100%. I've been watching this even as the TV news tonight here in the UK has been showing film and reportage of Climate Change protesters.

I thought he was a bit pompous at the beginning but watching through until the end that premise was utterly dispelled.

DavidC

Damnthematrix's picture
Damnthematrix
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Re: Daily Digest - October 18

http://www.informationclearinghouse.info/article23743.htm 

LatAm Leftists Tackle Dollar with New Currency

By Agence France-Presse

October 17, 2009 "

AFP" -- COCHABAMBA, Bolivia - Leftist Latin American leaders agreed here on the creation of a regional currency, the Sucre, aimed at scaling back the use of the US dollar.

Nine countries of ALBA, a leftist bloc conceived by Venezuelan President Hugo Chavez, met in Bolivia where they vowed to press ahead with a new currency for intra-regional trade to replace the US dollar.

"The document is approved," said Bolivia's President Evo Morales, who is hosting the summit.

The new currency, dubbed the Sucre, would be rolled out beginning in 2010 in a non-paper form.

That move echoes the European Union's introduction of the euro precursor, the ECU, an account unit designed to tie down stable exchange rates between member states before the national currencies were scraped.

ALBA's member states are Venezuela, Bolivia, Cuba, Ecuador, Nicaragua, Honduras, Dominica, Saint Vincent and Antigua and Barbuda.

gregroberts's picture
gregroberts
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Posts: 1024
Re: Daily Digest - October 18

The AP reporter stated the following:

Kenyan-born US Senate hopeful, Barrack Obama, appeared set to take over the Illinois Senate seat after his main rival, Jack Ryan, dropped out of the race on Friday night amid a furor over lurid sex club allegations.

http://www.infowars.com/ap-declared-obama-kenyan-born/

 

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