Daily Digest

Daily Digest - October 30

Friday, October 30, 2009, 10:53 AM
  • The Odd Couple
  • Dangerous Side Effects of Ultra-Easy Money
  • Gold Market Reaching The Breaking Point
  • China and Brazil trade in yuan
  • U.S. Home Vacancies Rise to 18.8 Million on Defaults (Update1)
  • Malpass Says U.S. Economy Will Slow, Enter ‘Gloomy Period’
  • Ravitch Says States Face Total Deficits of $500 Billion in 2011
  • Moody’s May Downgrade Mortgage Bonds With New Outlook
  • Common Currency Weighs on Airbus
  • Why The Foreclosure Crisis Is Unsalvagable
  • Long Live The Gold Basis
  • The Right Way To Break Up With Your Credit Card
  • China-U.S. Group Announces Plans to Build Massive Wind Farm In Texas
  • Northeast Renewable Energy Projects Are A Growing Trend
  • Cheaper Desalination- A Fresh Way To Take Salt Out Of Seawater

Economy

The Odd Couple (SolidSwede)

As the world begins recovering from the worst financial crisis in 70 years, an odd couple of winners have emerged: stocks and gold. So far this year, the Dow Jones Industrial Average, a bet on economic recovery, is up 14%. Gold futures, a bet on calamity, are up 19%. The reason: Low interest rates and heavy government stimulus have poured cheap money into financial markets, helping both the economy and stocks. But the creation of all that money, together with the Federal Reserve's maintenance of near-zero benchmark interest rates and the prospect of heavy government borrowing to fund deficits, threatens to weaken the dollar and fuel inflation and economic volatility later.

Dangerous Side Effects of Ultra-Easy Money (pinecarr)

In order to engineer a 180-degree turnaround in trader psychology, from the chronic fear of meltdowns last year, to the opposite side of the spectrum - the euphoric illusions of V-shaped recoveries, the “Group-of-20” have committed $12-trillion of taxpayer money, equivalent to a fifth of the entire globe’s annual economic output. The G-20’s largesse has been used to fund capital injections into banks, soaking-up toxic assets, guaranteeing financial company debt, and flooding the world credit and stock markets with ultra-cheap liquidity.

Gold Market Reaching The Breaking Point (pinecarr)

On October 29, 2008, the TOCOM added a 'physically backed commodity ETF' as a possible physical for EFP (Exchange of Futures for Physicals) transactions at the exchange. An exchange for physicals (EFP) transaction is when a client gives an IOU for a physical commodity to a broker and that broker opens a short position on the futures exchange in that commodity. Normally, Exchange for physicals is the legitimate process used by producers to sell futures against their future production. However, if the IOU portion of the EFP is not from a commodity producer (ie: borrowed a GLD Ishares), then you have a problem.]

China and Brazil trade in yuan (saxplayer00o1)

China and Brazil have started to trade in yuan, Kazakhstan Today agency reports citing the Russian information resource NEWSru. According to NEWSru, China and Brazil established international payments in national currency of the Peoples Republic of China. Geli Corporation has already received from San Paolo a few million yuans. According to Vice President of the Brazilian branch of Bank of China, all formalities required by the local bodies of control have been met

Ravitch Says States Face Total Deficits of $500 Billion in 2011 (saxplayer00o1)

Oct. 28 (Bloomberg) -- New York Lieutenant Governor Richard Ravitch predicted states across the U.S. would face deficits totaling as much as $500 billion in 2011 after the federal government stops paying them economic stimulus grants. Ravitch, 76, a real estate developer and former chairman of New York’s Metropolitan Transportation Authority, said the looming nationwide fiscal crisis would first become apparent as states’ credit ratings falter, making it more expensive to borrow money

Moody’s May Downgrade Mortgage Bonds With New Outlook (saxplayer00o1)

The company will boost its loss projections for prime- jumbo, Alt-A, option adjustable-rate and subprime mortgages backing bonds issued between 2005 and 2008 after seeing higher losses per foreclosure than expected, Moody’s said today in a statement

Common Currency Weighs on Airbus (saxplayer00o1)

Since 2001, when Air France agreed to buy ten of the world's biggest passenger jets, the euro has strengthened by more than 60% against the dollar. That means Airbus, which translates all its finances into euros, is pocketing significantly less revenue per plane than it initially expected. And since Airbus books most of its costs in euros, the currency swings go straight to its bottom line. "This situation is critical for a company like EADS, which has costs in euros and sales in dollars," EADS Chief Executive Louis Gallois recently told a French parliamentary committee. EADS estimates that a 10-cent drop in the dollar against the euro wipes €1 billion off earnings.

Why The Foreclosure Crisis Is Unsalvagable (M.W.)

States that have been devastated by unemployment are seeing dramatic increases of foreclosures that are much harder to salvage because those people have no income and no federal loan program will help. The demographics of the foreclosure crisis are changing and affecting people who were blue collar and entry to midlevel white collar. If you're unemployed, you don't qualify for a loan modification. The first wave {of foreclosures] was caused by bad loan products, while the second will be driven by unemployment. Right now, we're at the beginning of wave two.

U.S. Home Vacancies Rise to 18.8 Million on Defaults (Vinny A.)

About 18.8 million homes stood empty in the U.S. during the third quarter as banks seized properties from delinquent borrowers and new home sales fell in September. The number of vacant properties, including foreclosures, residences for sale and vacation homes, rose from 18.4 million a year earlier and 18.7 million in the second quarter, the U.S. Census Bureau said in a report today. The record high was in the first quarter, when 18.95 million homes were vacant. The homeownership rate, meaning households that own their own residence, stood at 67.6 percent.

Malpass Says U.S. Economy Will Slow, Enter ‘Gloomy Period’ (Vinny A.)

Economic growth in the U.S. will slow after the rebound in the third quarter and enter “a very gloomy period” of high unemployment, said economist David Malpass, president of Encima Global in New York. “We are moving into this very gloomy new normal” of 2 percent growth and a “very high unemployment rate,” Malpass said today in an interview on Bloomberg Radio. As a result, “Washington will reach around and thrust around desperately” for new programs to boost growth.

Long Live The Gold Basis (Claire H.)

According to some reports independent auditors, at the insistence of parties holding expired forward purchase contracts to deliver gold, are descending on ETF's and check their vault's contents against their books. The noose is tightening around the neck of fraudulent banksters caught in the short squeeze.

The Right Way To Break Up With Your Credit Card (M.W.)

It's a frequent question for American consumers these days. Half of all account holders say they've been hit either with a higher rate or a lower limit in recent months. While consumers are customarily given the choice to decline the new terms and close the account, doing so flies in the face of all standard advice from personal finance experts because closing credit cards usually has a negative impact on credit scores. So which bad choice is right for consumers? The answer is perhaps even more maddening than the question: "It depends" and "there's no surefire way to know ahead of time." But there are some clear guidelines that can help and strategies for minimizing the negative impact once you do so.

Energy

China-U.S. Group Announces Plans to Build Massive Wind Farm In Texas (M.W.)

A consortium of Chinese and American companies announced a joint venture on Thursday to build a 600-megawatt wind farm in West Texas, using turbines made in China. The wind farm will be the first instance of a Chinese manufacturer exporting wind turbines to the U.S. The farm, to be built on 36,000 acres in West Texas, will use 240 of its 2.5-megawatt turbines. Construction is scheduled to begin in March 2010. Six hundred megawatts of wind power is enough to meet the electricity needs of between 135,000 and 180,000 American homes for a year.

Northeast Renewable Energy Projects Are A Growing Trend (M.W.)

More than half of all planned energy projects in the Northeast Power Coordinating Council region — an electric grid reliability cooperative linking northeastern states and parts of Canada — are renewable energy projects. Approximately 17,000 megawatts of planned renewable energy projects in the region will be completed in the next two to five years. The ambitious renewable energy requirements set by many states have been partly behind the trend, and have helped make clean energy projects an attractive investment. Renewable energy projects analyzed by the study include biomass, geothermal, hydroelectric, solar and wind resources.

Environment

Cheaper Desalination- A Fresh Way To Take Salt Out Of Seawater (M.W.)

There is a lot of water on Earth, but more than 97% of it is salty and over half of the remainder is frozen at the poles or in glaciers. Meanwhile, around a fifth of the world’s population suffers from a shortage of drinking water and that fraction is expected to grow. One answer is desalination—but it is an expensive answer because it requires a lot of energy. Now, though, a pair of Canadian engineers have come up with an ingenious way of using the heat of the sun to drive the process. Such heat, in many places that have a shortage of fresh water, is one thing that is in abundant supply. Saltworks Technologies has set up a test plant beside the sea in Vancouver and will open for business in November.

20 Comments

saxplayer00o1's picture
saxplayer00o1
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Re: Daily Digest - October 30

"A three-fourth cent sales tax will cost residents in the city of Springfield an extra seven cents every time they buy a ten-dollar meal. However, City Manager Greg Burris says if the sales tax doesn’t pass, it could cost residents much more.

“It’s not as much a question of can we afford to do this? It’s a question of can we afford not to do this? I don’t know where we’re headed if it fails, but one possibility is municipal bankruptcy.”" 

"With the value of their investment assets plunging for the year ending June 30, Montana's two major state pension funds racked up massive increases in their unfunded liabilities, a legislative committee learned Friday.

Unfunded liabilities are potential shortfalls in pension funds. Large unfunded liabilities can signal serious future financial problems if major changes aren't made."

"More than likely, the City will attempt to float a massive, “covenant lite,” long term bond offering to fund the estimated $3.5 billion unfunded pension liability for LACERS. This will alleviate the pressure on the General Fund for the short term, but future revenues will be used to fund current and past operating expenses."

"Paying for these programs out of tax revenues is pure redistribution; it takes money out of one person's pocket and gives it to someone else without creating any new wealth. Besides, tax revenues have fallen drastically as unemployment has risen, yet government spending continues to increase. As for Treasury debt, the Chinese and other foreign investors are more and more reluctant to buy it, denominated as it is in depreciating dollars.

The only remaining option is to have the Fed create new money out of thin air. This is inflation. Higher prices lead to a devalued dollar and a lower standard of living for Americans. The Fed has already overseen a 95% loss in the dollar's purchasing power since 1913. If we do not stop this profligate spending soon, we risk hyperinflation and seeing a 95% devaluation every year."

"ALBANY - With the recession pinching tax collections, this year's state budget deficit has climbed $1.1 billion since July to $3.2 billion, according to a report due out Friday.

The state Budget Division also predicts next year's deficit will total $6.8 billion, up $2.2 billion from July's estimate."

....5A) Paterson says Combined Budget Deficit Now at $10b

"ALBANY, NEW YORK (WXXI) - Governor Paterson, at a meeting with legislative leaders, said the state's budget deficit has grown even bigger, and that lawmakers now face closing a combined $10 billion dollar gap for the end of this fiscal year and the start of the next."

"Arizona Gov. Jan Brewer told the Yuma Sun during her Wednesday visit to the city that the state faces a now-estimated $2 billion deficit for the coming year.

And she said if there isn't a solution soon, the estimated deficit could reach $5 billion."

"The nonpartisan Office of Legislative Services projects the state will confront a deficit of as much as $8 billion next year as rising unemployment and damped consumer spending depress tax receipts. The revenue gap is more than 25 percent of the $29 billion budget enacted by Governor Jon Corzine, the former co- chairman of Goldman Sachs & Co., in June."

"Hospital administrators in virtually every community in the state are scrambling to save critical health care services and tens of thousands of jobs as repeated state budget cuts and the weak economy cause a catastrophic collapse in hospital finances.

Hospital bottom line margins fell to a staggering (negative) -6.22% in 2008, down precipitously from the 2007 level of positive 3.15%, according to the Healthcare Association of New York State's (HANYS) review of the most recent available full-year audited financial statements.

In raw dollars, that collapse amounts to a reversal of nearly $5 billion in just one year, netting a total loss of $3.15 billion in 2008 alone. Similarly, hospital operating margins fell from 1.65% in 2007 to -0.9% in 2008, a collapse of nearly $1.3 billion over the year, resulting in a net operating loss of $480 million in 2008."

"According to a 2009 American Society of Civil Engineers report, more than 26 percent of the nation's bridges are either structurally deficient or functionally obsolete. The American Association of State Highway and Transportation Officials estimated in 2008 that it would cost roughly $140 billion to repair every deficient bridge in the country."

"The governor’s decision to exercise his 9C budget-cutting powers follows news that first-quarter tax revenues collected between July and September came in not only $477 million lower than last year, but also $212 million short of the year-to-date benchmarks. With revenues continuing to trend downward, some economists believe the actual deficit could end up being closer to $1 billion or more."

"ANKARA, Oct 30 (Reuters) - Turkey is seeking to switch to payments in national currencies for $10 billion worth of trade with neighbouring Iran to lessen exchange rate risks and bolster trade volumes, a Turkish government source said on Friday."

"Oct. 30 (Bloomberg) -- CIT Group Inc. bond and credit- default swap prices show that investors are betting the 101- year-old commercial lender will file for bankruptcy after the deadline for a debt exchange expired overnight."

" NEW YORK, Oct 30 (Reuters) - Moody's Investors Service on Friday said it has downgraded $180 billion of U.S. collateralized loan obligations, or about 65 percent of deals it reviewed, as part of a broad appraisal of CLO ratings."

"The downgrades reflect "unprecedented credit stress that the corporate sector has been experiencing," Moody's said."

“In commercial real estate and leveraged buyouts, the bloodletting is yet to come,” Soros said today during a lecture organized by the Central European University in Budapest, where he was born. “These factors will continue to weigh on the American economy, and the American consumer will no longer be able to serve as the motor for the world economy.”

"The national industrial vacancy rate rose to a decade-high 10.5 percent in the third quarter as the recession prompted companies to close their doors or scale back operations, according to a report released Thursday by commercial real estate firm Colliers International Inc."

"Facing a $60 million shortfall in this budget cycle, Dixon said she already is preparing to meet further gaps with what were once considered solutions of last resort. Hiking property, energy or personal income taxes; weighing other “revenue measures” explored in a soon-to-be released study on fees; and tapping into the rainy day fund are all options, she said."

  • 19)

Louisiana health secretary says deficit tops $250M

  • "Louisiana's Medicaid program is more than $250 million over budget this year, as swine flu made costs rise and Medicaid rolls grew amid the national recession, the state health secretary said."
  • 20)

Wilbur Ross Sees ‘Huge’ Commercial Real Estate Crash

"Oct. 30 (Bloomberg) -- Billionaire investor Wilbur L. Ross Jr. said today that the U.S. is at the beginning of a “huge crash in commercial real estate.”

“All of the components of real estate value are going in the wrong direction simultaneously,” said Ross, one of nine money managers participating in a government program to remove toxic assets from bank balance sheets. “Occupancy rates are going down. Rent rates are going down and the capitalization rate -- the return that investors are demanding to buy a property -- are going up.”"

"Another three corporate debt issuers defaulted this week, bringing the year-to-date total to 238, triple the level at this point last year, according to Standard & Poor's."

"MONTGOMERY, Ala. — More than 20 percent of Alabama's court system employees might have to be laid off and jury trials postponed if its budget is cut as deeply as some have projected, the state's chief justice said."

"Oct. 30 (Bloomberg) -- The pension system that provides benefits for 365,000 Illinois teachers, the 68th-largest such system in the U.S., has barely one-third of what it needs to pay promised benefits, a new actuarial report shows."

 

.....By far the most  news I've seen come out on a Friday. Here's where our  economy went. Maybe the media can spin all of the bad financial news again into something that it isn't.

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Re: Daily Digest - October 30

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Re: Daily Digest - October 30

Greg that is great!

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Mikey1052
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Re: Daily Digest - October 30

Greg love the day light savings time joke as well but...

 

Did you know:

Daylight Saving Donut

In the U.S., Arizona doesn’t observe Daylight Saving Time, but the Navajo Nation (parts of which are in three states) does. However, the Hopi Reservation, which is entirely surrounded by the Navajo Nation, doesn’t observe DST. In effect, there is a donut-shaped area of Arizona that does observe DST, but the “hole” in the center does not

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Re: Daily Digest - October 30

Funny. I heard a piece way back when on NPR that said Daylight Savings Time wastes more energy because we burn more heat and lights. Like Al Bartlett says, our solutions create more problems.

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Re: Daily Digest - October 30

Cartoon of the day:

http://www.vortmax.us/images/recessionover.jpg

 

 

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Re: Daily Digest - October 30

Wow, saxplayer; I look at the headlines you post, and compare it to the BS propoganda headlines our media is spewing about the economy, and am amazed at the contrast.  Great posts, keep 'em coming!

BTW, did you know the economy is getting better?  "Whew!" It must be so 'cuz I heard it on tv last night from an "expert"!

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Re: Daily Digest - October 30

Before I leave to go play some music tonight I wanted to do a quick test to see if anybody here might need to start

taking blood pressure pills.

 

 

......They're (Goldman) coming to get you.

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Re: Daily Digest - October 30

Looked through the latest few daily digests, the two recent TV-appearances from Peter Schiff, albeit short, seem to have gone unnoticed, hence:

CNBC 21th of october

CNBC 27th of october

 

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Re: Daily Digest - October 30

With respect to daylight savings time, why not leave the clocks the same but change the hour in which we go to work and school?  When using data with a local time stamp, you end up with two hours of data having the same time in the Fall and an "empty" hour with no data in the Spring. Idiocy.

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Re: Daily Digest - October 30

Don't know how to link to the specific entry, but this will work till next Wednesday.  Anyway, it's always good.

http://thearchdruidreport.blogspot.com/

On the failure of neoclassical economics to process peak oil and other incconvieniencies.

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Headless
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Re: Daily Digest - October 30

Saxplayer,

With the link to Night of the Living Dead, and the reference to Goldman, are you suggesting Goldman employees are "dead men walking?" If so, I'd have to agree; and it's merely a matter of time, given  what's going to happen in the U.S. over the coming months. If people are already shooting at insignifcants like Lou Dobbs, imagine what's in store for the real anti-Americans like Goldman Sachs...

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Re: Daily Digest - October 30

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Re: Daily Digest - October 30

Brilliant

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Federal Reserve Policy Audit Legislation ‘Gutted,’ Paul Says

Nothing like going to bed tonight on a sour note...

Quote:

Representative Ron Paul, the Texas Republican who has called for an end to the Federal Reserve, said legislation he introduced to audit monetary policy has been “gutted” while moving toward a possible vote in the Democratic-controlled House.

“There’s nothing left, it’s been gutted,” he said in a telephone interview. “This is not a partisan issue. People all over the country want to know what the Fed is up to, and this legislation was supposed to help them do that.”

Paul, a member of the House Financial Services Committee, said Mel Watt, a Democrat from North Carolina, has eliminated “just about everything” while preparing the legislation for formal consideration. Watt is chairman of the panel’s domestic monetary policy and technology subcommittee.

Keith Kelly, a spokesman for Watt, declined to comment and said Watt wasn’t immediately available for an interview. Watt’s district includes Charlotte, headquarters of Bank of America Corp., the biggest U.S. lender.

http://www.bloomberg.com/apps/news?pid=20601103&sid=atc2o1ijLRno

rowmat's picture
rowmat
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Re: Federal Reserve Policy Audit Legislation ‘Gutted,’ ...

It was a nice try but the Fed was never going to be audited.

So then, after that minor diversion I guess it's back to the death of the Republic.

joemanc wrote:

Nothing like going to bed tonight on a sour note...

Quote:

Representative Ron Paul, the Texas Republican who has called for an end to the Federal Reserve, said legislation he introduced to audit monetary policy has been “gutted” while moving toward a possible vote in the Democratic-controlled House.

“There’s nothing left, it’s been gutted,” he said in a telephone interview. “This is not a partisan issue. People all over the country want to know what the Fed is up to, and this legislation was supposed to help them do that.”

Paul, a member of the House Financial Services Committee, said Mel Watt, a Democrat from North Carolina, has eliminated “just about everything” while preparing the legislation for formal consideration. Watt is chairman of the panel’s domestic monetary policy and technology subcommittee.

Keith Kelly, a spokesman for Watt, declined to comment and said Watt wasn’t immediately available for an interview. Watt’s district includes Charlotte, headquarters of Bank of America Corp., the biggest U.S. lender.

http://www.bloomberg.com/apps/news?pid=20601103&sid=atc2o1ijLRno

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Re: Nine more banks fail

NINE more banks closed 10/30/09.

http://www.fdic.gov/bank/individual/failed/banklist.html

It seems to me that the pace is increasing now that we have broken 100 banks failed.

 

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joemanc
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Re: Daily Digest - October 30
Quote:

It seems to me that the pace is increasing now that we have broken 100 banks failed.

Are we forming a head and shoulders pattern of bank failures yet? Laughing

Speculation on my part, but there weren't that many bank failures at the end of September, which if I remember, is the end of the fiscal year for the government. Also, the FDIC fund, which is basically broke, was going to get a replenishment with the special fee they were imposing on it's member banks. I think that fee was due October 1st. So turn the calendar to October, and the floodgates of bank failures is now gushing. Was it a case of pent up demand, err, failures? Let's see if this trend continues into November.

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rhare
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Re: Daily Digest - October 30

 

With respect to daylight savings time, why not leave the clocks the same but change the hour in which we go to work and school?  When using data with a local time stamp, you end up with two hours of data having the same time in the Fall and an "empty" hour with no data in the Spring. Idiocy.

If we are going to have daylight savings time, I think the way it works is the way to go.   Can you imagine how tough it is too coordinate the changes in time something happens.  That's "humans" having to change lots of things to make it easier for computers.  Bad idea.  The problem your seeing is crappy programing.  If you write the software correctly (ie, aware of DST and timezones in general) then you don't have problems.  If you are doing Scientic software, then you probably also have to be aware of leap seconds. :-)  Timezone and DST calculations and handling are difficult to get right but not impossible.  

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Re: Daily Digest - October 30

Edited: Sorry, somehow ended up with two posts. Ignore this. :-)

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