Daily Digest

Daily Digest - October 26

Monday, October 26, 2009, 10:42 AM
  • The US - The Real Economy and the False Economy
  • Food Will Never Be So Cheap Again
  • Do not ignore the need for financial reform
  • Russia to sell 20-50 T Gold in 2009
  • More Stress Test Shenanigans
  • Fair Game - If the Lender Can't Find the Mortgage
  • Volcker: Bernanke Didn't Go Far Enough
  • Experts see rebounding economy shedding jobs
  • Philippines sold $1 billion of dollar-denominated bonds
  • State of Alabama Grapples With Cost Of Benefits (Graph)
  • Dollar Falls Vs Euro,Yen On China Reserves Report

Economy

The US - The Real Economy and the False Economy (james_knight_chaucer)

What I am trying to do is paint a picture of the real economy and the false economy. On the one hand, we have banks that are now under stress greater than that which was the worst case scenario, we have huge numbers of bank failures, money being kept on the sidelines due to the terrible state of credit markets, rising unemployment, increasing numbers of foreclosures, and on the other we have a booming stock market. Something is wrong in this picture. It looks very much like many people will be losing a considerable amount of money on the US stock market in the near future.

Food Will Never Be So Cheap Again (M.W.)

Biofuel refineries in the US have set fresh records for grain use every month since May. Almost a third of the US corn harvest will be diverted into ethanol for motors this year, or 12pc of the global crop... The UN says global farm yields must rise 77pc, which means redoubling Norman Borlaug's "green revolution". It will not be easy.

Do not ignore the need for financial reform (SolidSwede)

The efficient market hypothesis holds that financial markets tend towards equilibrium and accurately reflect all available information about the future. Deviations from equilibrium are caused by exogenous shocks and occur in a random manner.



The crash of 2008 falsified this hypothesis. I contend that financial markets always present a distorted picture of reality. Moreover, the mispricing of financial assets can affect the so-called fundamentals that the price of those assets is supposed to reflect.

Russia to sell 20-50 T gold in 2009 (Vinny A.)

Sale as much as 1.25 percent of annual world gold consumption. Sale could raise as much as $1.7 billion at current prices. Russian government says approval not signed yet (Adds quotes from traders, analysts) By Polina Devitt MOSCOW, Oct 23 (Reuters) - Russia plans to sell as much as 50 tonnes of gold this year to help plug a budget deficit in the first major bullion sale by its precious metals repository since the fall of the Soviet Union, a high level source told Reuters.

More Stress Test Shenanigans (Vinny A.)

AFP reports: The Federal Reserve will expand its so-called stress tests of the banking system to ensure they have enough capital during difficult periods, Fed chairman Ben Bernanke said Friday. Bernanke highlighted the positive impact of stress tests conducted earlier this year on major banks, a move aimed at ensuring their financial health and building confidence.

Fair Game - If the Lender Can't Find the Mortgage (chrismartenson)

For decades, when troubled homeowners and banks battled over delinquent mortgages, it wasn’t a contest. Homes went into foreclosure, and lenders took control of the property. One surprising smackdown occurred on Oct. 9 in federal bankruptcy court in the Southern District of New York. Ruling that a lender, PHH Mortgage, hadn’t proved its claim to a delinquent borrower’s home in White Plains, Judge Robert D. Drain wiped out a $461,263 mortgage debt on the property. That’s right: the mortgage debt disappeared, via a court order.

Volcker: Bernanke Didn't Go Far Enough (chrismartenson)

Volcker wants to keep major commercial banks that enjoy federal-deposit guarantees away from big-time speculative trading. "They shouldn't be doing risky capital-market stuff," Volcker told NEWSWEEK before the Fed announcement. But, he adds, the president "obviously decided not to accept" his recommendations. Volcker says he was used as "some kind of symbol of responsibility and prudence" by the administration during the campaign, and now speaks to Obama only occasionally.

Experts see rebounding economy shedding jobs (saxplayer00o1)

Forget a jobless recovery. The economy may be entering a recovery with job losses." "Employment mystery Economists are puzzled as to why job growth has slowed, citing everything from higher health care costs, to higher productivity, to Chinese currency manipulation. "The answer is, we don't know," said Tim Bartik, a liberal economist with the Upjohn Institute for Employment Research in Michigan who is proposing a tax credit for employers who hire new workers."

Philippines sold $1 billion of dollar-denominated bonds (saxplayer00o1)

The Philippines, which sold dollar- denominated debt three times this year, may turn to the domestic market to raise funds to help temper currency gains, Finance Secretary Gary Teves said." "The Philippines sold $1 billion of dollar-denominated bonds on Oct. 17, bringing total overseas sales this year to $3.25 billion to cover a record budget deficit."

State of Alabama Grapples With Cost Of Benefits (Graph) (saxplayer00o1)

Dollar Falls Vs Euro,Yen On China Reserves Report (saxplayer00o1)

The dollar fell against the euro and the yen in Asia on Monday after an official newspaper of the Chinese central bank said China should cut its U.S. dollar holdings, adding to concerns over the unit's global reserve currency status. The dollar could weaken further later in the day, particularly against the risk-sensitive euro, which is also benefiting from stronger share markets, dealers said. During morning trade in Tokyo, the People's Bank of China-affiliated Financial News reported that China should shift more foreign reserves away from the dollar and into the euro and yen.

18 Comments

saxplayer00o1's picture
saxplayer00o1
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Posts: 4167
Re: Daily Digest - October 26

"Capmark, based in Horsham, Pennsylvania, is one of the largest U.S. commercial real estate finance companies, with more than $10 billion in originations, according to Moody’s Investors Service. The company, formerly known as GMAC Commercial Holding Corp., services more than $360 billion of debt. It has struggled as the default rate on commercial mortgages held by U.S. banks more than doubled to the highest since 1994. "

'

"Capmark and its units owe $7.1 billion to the 30 largest creditors without collateral backing their claims, according to the filed court documents. "

"OAKLAND, CA-The total delinquency rate for commercial mortgages expanded 60 basis points in the third quarter to 4.7%, according to an early estimate by locally based Applied Analysis. While final figures for the third quarter are not due out until late November, the real estate market analysis and forecasting specialist uses earnings reports and call report filings from many smaller banks to produce its quarterly estimates."

"Oct. 26 (Bloomberg) -- Dubai’s government plans to sell five-year dollar and dirham denominated bonds as part of its $6.5 billion medium-term fund-raising plan, according to three investors who have been approached for the sale."

"Oct. 26 (Bloomberg) -- The U.S. Standard & Poor’s 500 Index is about 40 percent overvalued and headed for a drop as central banks pull back on securities purchases that pushed up asset prices, according to economist Andrew Smithers.

Declines are also likely because banks will need to sell more shares to raise capital and restore their financial health, the economist and president of research firm Smithers & Co. said in an Oct. 23 interview at Bloomberg’s Tokyo office. A 40 percent tumble from the S&P 500’s price at the end of last week of 1,079.60 would take the gauge to 647.76, below its March low."

"Figone said the city would have to cut 763 jobs to cover the projected $90 million deficit without a boost in revenues or concessions from the workforce.

She noted that the city's deficits have soared this decade along with costs for its employees' pay and benefits. While the city's full-time workforce has shrunk from 7,000 to 6,600 since 2000, the average cost for each worker has shot up 64 percent to $120,418."

"Message to citizens: Brace yourself for potentially big cuts in government services.

New budget estimates obtained by The Sunday Capital project the county will fall $90.6 million short of what it needs to operate next year, leaving officials scrambling for about the same amount of money required to run the police department.

"I don't know how to make it work," County Auditor Teresa Sutherland said, calling the figure a "mighty big number."

"There are no more buckets of money, and no more money that hasn't been put on the table," Sutherland said. "I don't see how they can (balance the budget) without cuts to the programs that citizens are used to having.""

"About 18,000 U.S. Postal Service employees are expected to take $15,000 buyouts to leave their jobs this year — far fewer than the 30,000 originally hoped for by the agency."

'

"Postmaster General John Potter said this month that he expects deficits of more than $5 billion “for years to come.” Potter expects mail volume to fall by between 8 billion and 15 billion pieces in fiscal 2010.

A 15 billion-piece drop would translate to a mail volume of 160 billion pieces — fully 20 percent below 2008 levels.

Yoerger, the postal spokeswoman, said the agency is hoping to eliminate 93 million work hours this year, the equivalent of 53,000 full-time employees.

“[The] reduction comes from a combination of using less overtime and part-time employee hours, fewer contract workers, and the retirements and other attrition,” she said."

"South Florida is already a veritable Atlantis of underwater borrowers. In September, homeowners here collectively owed $62.7 billion more than their homes were worth, according to an analysis by First American CoreLogic. The analysis found that about half of all outstanding mortgages in Miami-Dade and Broward are underwater."

"The cost of Oregon's Public Employees Retirement System is about to skyrocket to budget-busting levels.

As a result of PERS' $17 billion investment loss in 2008, every state agency, municipality and school district that participates in the system is staring at an average 50 percent increase in the base rates PERS charges to fund their employees' retirement benefits in 2011 and 2012."

"New Jersey's taxpayers owe almost $1 billion to municipal workers for not taking sick, vacation and comp time during their careers, budget figures show.

Add in the total accumulated sick time owed public school employees, and taxpayers' collective bill likely will climb toward the $2 billion mark, according to an Asbury Park Press review of municipal and school budgets.

How does it work? If an employee banks 200 days of sick and vacation time, he can cash in on it upon retirement - at his final rate of pay. It's an institutionalized practice that has been going on for decades."

"DAYTON — A record number of uniformed officers set to retire in 2011 will leave the city’s public safety departments at all-time lows as plans to replace them remain, at best, up in the air."

"Oct. 26 – India and Russia are considering returning to a rupee-ruble trade arrangement to end the dependency on the dollar and step up economic interactions, which are set to triple in bilateral trade within five years.

Indo-Russian trade was based on rupee-ruble transactions during the Soviet era, which led to India emerging as the biggest trade partner of the former USSR in the developing world. Bilateral trade between India and the former USSR was US$5 billion in 1991.

Current bilateral trade is around US$7 billion, although this is in what is now a smaller market. Nonetheless, the feeling is that U.S. dollar-denominated bilateral trade has not assisted with any major developments in cross-border economics and is now becoming an unnecessary liability."

(More info)

 ..........Our dollar is now an unnecessary liability to them?

 

JAG's picture
JAG
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Is The Euro Crashing?

I can't seem to be able to pull up any charts on this....(fear monday?)

 

1026-eur

 

cat233's picture
cat233
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Re: Is The Euro Crashing?

from Briefing.com

11:51

Market drops sharply after key failure at resistance in the Nasdaq 100 and coincident failure of euro to hold onto key 1.50 level

The dramatic inverse correlation between large-cap stocks and the dollar index has become highly ingrained in the minds of traders over recent months, and it played a key roll in the technical reversal we saw in US markets at about 11:12 ET this morning, when the Euro broke sharply through the important 1.50 level in a move that coincided with a key failure by the tech-heavy Nasdaq 100 index to break through important resistance in the futures market at the 1775 level.

 

JAG's picture
JAG
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Got Credit? How About a 79.9% APR Credit Card.

Unbelievable. Yeah, the credit crisis is over....pa-lease.

No, Your Reading That Right

Gordon Hageman couldn’t believe the credit card offer he got in the mail.

"My first thought, it was a mistake," Hageman said.

The wine distributor called the number on the offer, gave them the offer code and verified his information. Sure enough, it was right:  the pre-approved credit card came with a 79.9 percent APR.

Yes, 79.9 percent.

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One1776
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Re: Daily Digest - October 26

Crisis, crisis, crisis.
Tax, tax, tax.
Lies, lies, lies.

I have a haunting question: What is the breaking point?

When has the public had enough? I don't wish for anything to be violent, in fact that would play into the hands of the current administration, but enough is enough. WE THE PEOPLE must take our country back!!

Thomas Hedin's picture
Thomas Hedin
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Re: Daily Digest - October 26

In Germany during their hyper-inflation the interest rate on all their borrowed money(which is all they had just like that is all we have) was at 900%.  Can you see how having to pay 79.9 percent interest you would have to raise your prices just to stay ahead of your interest?

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britinbe
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Johnny Oxygen's picture
Johnny Oxygen
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Re: Daily Digest - October 26

We will Turbo right after this one collapses. So take a breath, watch the light show and prepare to assert yourself into the rebuilding.

JAG's picture
JAG
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How To Fix The 2010 Depression

Not sure I agree with all that is said here, but I think most here will appreciated this:

alcatwize's picture
alcatwize
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Re: Daily Digest - October 26

I would like to see how many people have actually signed up for a rate of 79% or higher.... then again, maybe I don't want to know because I would like to believe that people are just not that stupid.

 

Thomas Hedin's picture
Thomas Hedin
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Re: Daily Digest - October 26

I would like to see how many people have actually signed up for a rate of 79% or higher.... then again, maybe I don't want to know because I would like to believe that people are just not that stupid.

What if the banks collectively get together and force everyone to use that rate?

saxplayer00o1's picture
saxplayer00o1
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Posts: 4167
Re: Daily Digest - October 26

"FRANKFORT - Facing a bleak budget situation, the 2010 legislature will nevertheless be asked to increase the General Fund contribution to the public employee retirement plans by at least $74 million in the next two-year budget period, according to early Legislative Research Commission estimates.

That's on top of the more than $177 million allocated in the last biennium for pension and health care costs for non-hazardous-duty personnel.

“(The retirement fund) is in a critical funding situation, and we need to get on track,” Kentucky Retirement Systems Executive Director Mike Burnside said.

Even before the economy tanked last year, the retirement systems faced a roughly $30billion shortfall, and steep investment losses have exacerbated the situation, Burnside said.

The KRS pension fund, which had a value of $9.81 billion as of June 30, suffered a 17 percent decline last fiscal year. The $2 billion health insurance fund experienced a 23 percent loss.

In the summer of 2008 the legislature passed House Bill 1, which put the state on a 20-year timeline to get state pension systems back to full funding.

That requires a jump in the state's contribution rate from 11.5 percent of payroll for non-hazardous-duty workers this fiscal year to 16.04 percent next year and 18.6 percent the following year, according to preliminary retirement systems estimates."

 

18 Years of Age

Through July 25, 2009, we identified 582 taxpayers under 18 years of age who claimed almost

$4 million in First-Time Homebuyer Credits. The youngest taxpayers receiving the Credit were

4 years old. Contract law generally exempts children under the age of 18 from being bound by

the terms of a contract. Therefore, it is unlikely that these taxpayers would have entered into an

arms-length transaction for the purchase of a home."

 (use the link in the heading and either scroll to page 8 or click on the arrow in the upper left until you get to 15/33)

 

......She does great on the piano, but can she make the house payment?

joemanc's picture
joemanc
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Posts: 834
When does Volcker resign?

From the Newsweek article:

Quote:

"They shouldn't be doing risky capital-market stuff," Volcker told NEWSWEEK before the Fed announcement. But, he adds, the president "obviously decided not to accept" his recommendations. Volcker says he was used as "some kind of symbol of responsibility and prudence" by the administration during the campaign, and now speaks to Obama only occasionally.

What's the over/under on when Volcker resigns? I'm predicting by the end of the year.

Mr. Fri's picture
Mr. Fri
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Posts: 220
Re: Daily Digest - October 26
turbo1776 wrote:

I have a haunting question: What is the breaking point?

I'm not very good at predicting but my guess is:

- The majority of people in the US are too busy or distracted with menial things (TV shows, etc.) to care about "politics: even though the economy will have a big impact on their future.

- The breaking point (i.e. tipping point) will probably be something like major losses in the pension funds or in state funds (most notably, California) where the losses can't be denied and large numbers of people start to be affected. But, by the time this happens, it will be too late to do much about it.

 

drmrmd's picture
drmrmd
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Re: Daily Digest - October 26

saxplayer00o1, thank you for your additions to the dailydigest.

Damnthematrix's picture
Damnthematrix
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Re: Daily Digest - October 26
When being green may mean better business PDF Print E-mail
Thursday, 22 October 2009 01:24

Addthis

Climate change is not only a threat to the environment – it appears that it may also have an impact on a company’s
bottom line

Climate change is not only a threat to the environment – it appears that it may also have an impact on a company’s bottom line.

The biggest threat to financial markets is actually the climate crisis, said Alexandra Saunders, president and chief executive of Mirrageos Inc., a company that provides sustainability analytics for land and resource management in the agricultural and agroforestry industries.

Ms. Saunders, who once served as the managing director of BGS Financial, said: “Food security, climate security, water security, energy security and economic security are inextricably linked. Until we find resolution to the climate crisis and the degradation of our ecosystems, we are all at grave risk.”

She stressed the importance of green practices, saying that it will not only benefit society and the community, it will also improve the operations of a company.

“What is good for the planet is good for business,” she stressed.

Despite the economic downturn, many corporate players are now investing in sustainability strategies and clean technologies because of the profits that these new opportunities present.

By being green, companies can either profit immediately through cost reductions or profit in the future by positioning themselves in the emergent low-carbon economies, Ms. Saunders said.

According to a survey conducted by Retail Systems Research in partnership with the Retail Industry Leaders Association, companies that show success in annual sales are embracing green practices as a company-wide initiative, viewing it as a strategic move that will not only increase energy efficiency and bring revenue savings, but it also boosts their brand image to the consumers.

‘Winners’ and ‘laggards’

While it does not tie sustainability with sales success, the report explores the fundamental differences in sustainability practices between “winners” and “laggards.” Winners are defined as companies that experienced growth in annual sales greater than the industry average of 3 percent.

The study shows that both groups have different motivations for addressing environmental responsibilities. While cost reduction still remains the primary motivator for green practices, retail winners also seek an opportunity to create some market advantage over the competition by projecting an image of corporate responsibility.

Unlike retail laggards who merely see energy savings from a perspective of cost control, the retail winners also take into account consumer’s increasing demand for more ecologically-conscious behaviour and products, a trend that all retailers must heed to remain competitive in the market, the study stresses.

Retail winners also take a more holistic view on green practices, going beyond cost reduction benefits of their green initiatives.

“The important thing is to begin and recognize that ‘being green’ is not a destination or just a labelling process,” Ms. Saunders put in.

Additionally, the study shows that retail winners increasingly focused on the means they use in delivering products, as well as optimizing logistics, supply chains and packaging to ensure increased energy efficiency and lower carbon emissions.

“Corporations need to become focused on the services which they can provide to society and in so doing, benefit from those services. Being ecologically aware and responsible in their use of resources is primary to the role that they can and should play for society,” explained Ms. Saunders.

The survey put Wal-Mart on the spotlight, being one of big companies leading in the adoption of green practices and technologies. Apart from implementing energy efficient technologies, which include “daylight harvesting” and centralized energy management, the retail giant is also working with its suppliers to develop sustainable solutions to product packaging, aiming to reduce packaging by five percent globally by 2013.

Wal-Mart also aims to offset 100 percent of its electricity use with renewable energy. The company has purchased more than 243 million kilowatt-hours of renewable energy credits consisting of solar and wind generation. The Environmental Protection Agency has recognized Wal-Mart’s efforts, placing the company in its overall list of the largest green power purchasers in the United States.

There are so many opportunities for organizations to practice sustainable innovations, said Ms. Saunders, and while green initiatives may not show immediate financial results, the benefits that these companies would get are “endless, with all of them being tied to a better bottom line.”

fujisan's picture
fujisan
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Re: Daily Digest - October 26

John Gerzema: The post-crisis consumer | Video on TED.com

John Gerzema says there's an upside to the recent financial crisis -- the opportunity for positive change. Speaking at TEDxKC, he identifies four major cultural shifts driving new consumer behavior and shows how businesses are evolving to connect with thoughtful spending.

Johnny Oxygen's picture
Johnny Oxygen
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Posts: 1443
Re: Daily Digest - October 26

Turbo and Mr. Fri

I have to say that I don't think there will be 'A' tipping point. I think thing will continue to degrade rather slowly. We may see some 500-700 point drops in the Dow but I think the average person is going to be slow to get on board. With all the outrageous stuff that has happened recently you see very little reaction from the public. Remember a year and a half ago milk was $1.80 a gallon and now its $4.00? Remember when gas shot up to $140 a barrel?

It appears like there won't be a 'breaking point' from the average US citizen. I think fear and worry will keep most of them in line.

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