Daily Digest

Daily Digest - October 9

Friday, October 9, 2009, 10:49 AM
  • The Great 'Shift' - China and the West
  • More American Workers Outsourcing Their Own Jobs Overseas (Humor)
  • Only Fed Buying Agency Debt
  • The Great 'Shift'- China And The West
  • Congressmen Grayson and Paul Ask Senate Banking to Delay Confirmation of Bernanke Until Fed Releases Information on Secret Bailouts
  • Gold Hits New Record High For Third Day
  • I-Believe-in-Strong-Dollar Turns Relic as China Begs Stability
  • Buffett Selling Means You Shouldn’t Be Buying: Jonathan Weil
  • Recession Spells End for Many Family Businesses
  • Cash Binge to End as Central Banks Jive to Exit: Mark Gilbert
  • Kremlin aide sees value in possible non-dollar oil payments
  • Home Sellers in U.S. Cut Prices by $28.4 Billion, Trulia Says 
  • Britain's Greenest House Unveiled
  • Could Food Shortages Bring Down Civilization?

Economy 

The Great 'Shift' - China and the West (james_knight_chaucer)

I have long argued that China will emerge as the winner from this crisis, and have argued that their currency will be the new reserve currency in the future. Over many, many posts, I have tracked their steady process of internationalisation of the RMB, and consistently argued that the $US is so weak that it must collapse.

More American Workers Outsourcing Their Own Jobs Overseas (Humor) (MW)

Only Fed Buying Agency Debt (Anton M.)

But here's a stark fact, via the Council on Foreign Relations: Only the Fed is buying agency debt. Foreign buyers, who once consumed it voraciously, have been net sellers so far this year.

Congressmen Grayson and Paul Ask Senate Banking to Delay Confirmation of Bernanke Until Fed Releases Information on Secret Bailouts (Vinny A.)

"Dear Chairman Dodd and members of the Banking Committee,



We are writing to ask you to postpone the confirmation of Ben Bernanke until the Federal Reserve releases documentation that will allow the public and the Senate to have a full understanding of the commitments that the Federal Reserve has made on our behalf. Without such an understanding, it is impossible to know whether Chairman Bernanke is fit to serve another term and fulfill the Federal Reserve’s dual mandate to ensure price stability and full employment."

Gold Hits New Record High For Third Day (Vinny A.)

Gold hit new record highs for a third day on Thursday, as funds moved in and the dollar weakened further. The spot price, which closed at $1,044 an ounce on Wednesday, rose above $1,055, helped by dollar weakness.

I-Believe-in-Strong-Dollar Turns Relic as China Begs Stability (Vinny A.)

More than a decade after former Treasury Secretary Robert Rubin made the “strong dollar” national policy, currency traders say the same words coming from the Obama administration have little meaning. Timothy Geithner, the current Treasury secretary, has tolerated the greenback’s 12 percent slide from its peak this year in March as measured by the Federal Reserve’s trade- weighted Real Major Currencies Dollar Index. While he said as recently as Oct. 3 that “it is very important to the United States that we continue to have a strong dollar,” the last time the U.S. intervened in markets to support its currency was 1995.

Buffett Selling Means You Shouldn’t Be Buying: Jonathan Weil (Vinny A.)

It’s not often that Warren Buffett gives the investing public a reason to believe he’s not on their side. Then again, it’s not every day that Buffett’s Berkshire Hathaway Inc. shows up on the list of selling shareholders in another company’s initial public offering.

Recession Spells End for Many Family Businesses (Vinny A.)

Siblings Georgia, Jimmy and John Roussos have spent most of their lives working in the kitchen of the restaurant their father opened in 1954. The eatery managed to survive a hurricane and other setbacks, but it wasn't until this August that the recession took its toll, forcing Roussos Restaurant in Daphne, Ala., to permanently shut its doors. After months of slow sales, family businesses are being forced to close, ending legacies and leaving behind a wake of sad customers and loyal employees. "Some family businesses that were just hanging on have said it's time to get out," says Dann Van Der Vliet, director of the Vermont Family Business Initiative at the University of Vermont.

Cash Binge to End as Central Banks Jive to Exit: Mark Gilbert (Vinny A.)

For bingers who claim that they’re not ready to leave the party yet, central bankers are jiving hard to convince us that they know where the exits are. My bet is that they’ll bail sooner than financial markets think. But hey, what a swell party this is! Official interest rates at or near record lows almost everywhere; bond yields signaling a benign inflation outlook; equity markets roaring ahead; emerging markets on fire; and commodity prices pointing to a V-shaped recovery that seemed impossible as the year started. Cheers!

Kremlin aide sees value in possible non-dollar oil payments (Vinny A.)

A Kremlin aide said on Thursday it could be advantageous to switch to non-dollar oil payments, but that he had not heard of any discussions on the issue. Britain's Independent newspaper reported on Tuesday that Russian officials had held "secret meetings" with Arab states, China and France on ending the use of the U.S. dollar in international oil trading. "We have long been saying that there is some sense in creating the conditions for making ruble payments, including for oil, attractive," Arkady Dvorkovich said. "The subject is worth discussing, but I do not know if specific talks on the issue are underway."

Home Sellers in U.S. Cut Prices by $28.4 Billion, Trulia Says (Vinny A.)

U.S. home sellers cut their asking prices by a total of $28.4 billion to attract buyers as the real estate recovery stalled, Trulia Inc. said. The average discount was 10 percent as of Oct. 1, the San Francisco-based real estate data provider said today. Homes listed for more than $2 million were cut the most, with owners taking an average of 14 percent off the original price. Luxury homes accounted for 25 percent of all of the reductions.

Environment

Britain's Greenest House Unveiled (joemanc)

While most people dread their astronomical winter fuel bills, Geoff and Kate Tunstall won't be feeling the heat. They've commissioned a pioneering home, which combines British construction techniques with German technology. The special green house is set to become the most energy-efficient home in Britain, and will leave them with fuel bills of just £70 a year.

Could Food Shortages Bring Down Civilization? (Rajiv B.)

In early 2008, Saudi Arabia announced that, after being self-sufficient in wheat for over 20 years, the non-replenishable aquifer it had been pumping for irrigation was largely depleted,” writes Lester R. Brown in his new book, Plan B 4.0: Mobilizing to Save Civilization (W.W. Norton & Company). In response, officials said they would reduce their wheat harvest by one eighth each year until production would cease entirely in 2016. The Saudis then plan to use their oil wealth to import virtually all the grain consumed by their Canada-sized population of nearly 30 million people,” notes Brown, President and Founder of the Earth Policy Institute, a Washington, D.C.-based independent environmental research organization.

9 Comments

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

"California suffered a painful snub by investors Thursday as the state's attempt to sell $4.5 billion in general obligation bonds failed to attract enough demand to raise the full amount.

After boosting interest rates on a chunk of the debt, the state cut the total size of the deal by 8% to $4.14 billion, Treasurer Bill Lockyer said."

"Oct. 8 (Bloomberg) -- The Federal Housing Administration, which insures mortgages with low down payments, may require a U.S. bailout because it has $54 billion more in losses than it can withstand, a former Fannie Mae executive said.

“It appears destined for a taxpayer bailout in the next 24 to 36 months,” consultant Edward Pinto said in testimony prepared for a House committee hearing in Washington today."

---2A)  The number of F.H.A. mortgage holders in default is 410,916, up 76 percent from a year ago, when 232,864 were in default, according to agency data.

Despite the agency’s attempt to outrun its fate by insuring ever-larger amounts of new loans to such borrowers as Ms. Shimon — the current rate is over a billion dollars a day — 7.77 percent of the portfolio is in default, up from 5.6 percent a year ago.

Barney Frank, the Massachusetts Democrat who is chairman of the House Financial Services Committee, said in an interview that the defaults were, in essence, worth it.

“I don’t think it’s a bad thing that the bad loans occurred,” he said. “It was an effort to keep prices from falling too fast. That’s a policy.”

"Even if Congress approves new legislation and allows companies to postpone funding obligations, companies would have to contribute a total of at least $120.8 billion into their funds in 2011, according to consulting firm Watson Wyatt. Without the legislation, that figure could be as high as $146.5 billion,

"There has never been a required contribution that large," says Mark Warshawsky, director of retirement research at Watson Wyatt.

The largest previous annual contribution was $100 billion in 2003. After that, many companies decided to stop offering pensions and to freeze benefits for current participants, to reduce future obligations.

Companies are required to fund their pensions even if they have frozen their plans. Current legislative proposals would allow businesses to make up any 2009 and 2010 funding shortfalls with interest-only payments in those years and then gives them seven years to catch up.

Norman Stein, a professor at the University of Alabama School of Law, says without help "there's a real chance that (businesses) will freeze their plans if they can't get relief."

In the best of circumstances, most plans will be significantly underfunded in 2011: The average plan would be 74.5% to 77.1% funded depending on which of the three legislative proposals is approved, according to Watson Wyatt."

  •  4) "The Pennsylvania Public School Employees Retirement System plan,

which has more than 400,000 members, has a $10 billion unfunded liability total, said Richard Dreyfus, a fellow at the Harrisburg-based Commonwealth Foundation."

(page 2)

"According to the actuarial accounting method -- used for governmental accounting purposes -- the fund's assets stood at about $147 million in June, with accrued liabilities of about $317 million. By that approach, the pension system is 46.5 percent funded, with an unfunded liability of about $169 million."

"I think everybody ought to be a part of this discussion," he told reporters. "We have according to the state treasurer an unfunded liability of about $1.6 billion, including past-retirement health benefits that we've got to deal with. This is quite serious."

 having declined from 95% in 2000 to 68.8% as of June 30, 2008, with the unfunded liability exceeding $5 billion."

(True unemployment at 20%)

in August compared with the previous year, said First American CoreLogic Inc.

The delinquency rate of more than 90 days in August was 18.7 percent, up from 9 percent in August 2008. Meanwhile, the August 2009 foreclosure rate — the percentage of loans in some stage of foreclosure — was 10.7 percent, versus 5.8 percent in the same month a year prior."

  • 11) 

By the numbers: Unemployment taxes

Texas unemployment insurance taxes paid by employers:

2009: $1.1 billion

2010: $1.7 billion to

$2.6 billion*

2011: $2.5 billion to

$3.8 billion*

"The city’s current predicament

Last week, Mayor Jerry Sanders and his office released its Five-Year Financial Outlook, and estimated deficits well over $100 million every year through 2015.

San Diego’s general fund deficit has grown incrementally the last few months, from a projected $60 million, to the mayor’s estimate last week - $179 million - to the Independent Budget Analyst (IBA) office’s most recent guess, $200 million."

"The Los Angeles County Board of Supervisors is seeking to reform its largest welfare program amid a dramatic increase in the number of people who seek help.

The county’s General Relief program is welfare of last resort. It’s a monthly cash payment of $221 to L.A.’s most down and out. As the unemployment rate’s skyrocketed in the last year-and-a-half, the number of recipients has jumped by 25,000, to more than 80,000 adults.

That pressure on county resources – the program now costs L.A. more than $200 million a year – prompted proposals for restructuring."

 "A staggering 2.3 million Floridians are on food stamps, 12 percent of the state's population. Welfare rolls are swelling, standing at 107,000 residents, the highest rate since President Clinton's 1996 federal welfare reform. And prisons are packed, with over 101,000 inmates, near record levels."

"WASHINGTON (MarketWatch) -- U.S. banks are reducing their lending at the fastest rate on record, tightening the credit squeeze and threatening to leave many otherwise viable businesses unable to borrow money to expand their businesses, meet their payroll or refinance their maturing debts.

According to weekly figures provided by the Federal Reserve, total loans at commercial banks have fallen at a 19% annual rate over the past three months, while loans to businesses have dropped at a 28% annualized pace."

"Note the date of that chart, it is current as of this week. Still near 140, the P/E has turned down slightly from the high last month. There are two ways to get this ratio down… one is for the PRICE of stocks to go down, and the other is for earnings to go up. The bulls are arguing that earnings are going to go up while the bears are arguing that the price is going to come down. Reality will almost always be found in the middle, but it will most certainly not be found here at a P/E of 140!"

====================

  • Just a thought: As we continue to watch the

National Debt Clock go higher and higher does anyone else think that the Chinese see us as being more and more like this guy?

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eternal sunshine
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New UK report into Peak Oil

A new report which has been published by a policy group supported by the UK government to clarify difficult or contentious issues for policy makers, and finds that the evidence stongly suggests a significant risk of peak oil prior to 2020.

http://www.ukerc.ac.uk/support/Global%20Oil%20Depletion

There is a good analysis here:

http://www.theecologist.org/News/news_analysis/333587/peak_oil_before_2020_a_significant_risk_say_experts.html

Here are some 'fascinating' findings:

The UKERC found that total production from existing fields is declining at 4 per cent or more each year, meaning the world has to add 3 million barrels of daily production capacity annually just to stand still, equivalent to developing a new Saudi Arabia every three years. This will present 'a major challenge, even if ‘above-ground’ conditions are favourable', says the report.

Once the economy comes out of recession, satisfying demand growth would usually require another 1 million barrels of daily production capacity each year.

The report also puts the breathless reporting of recent discoveries in the Gulf of Mexico and offshore Brazil into a more sober context. BG’s Guara field, discovered last month, contains 2 billion barrels of recoverable oil and was lauded as a ‘supergiant’, prompting some pundits to claim such finds would banish peak oil for decades.

However, the UKERC argues that each additional 1 billion barrels delays peak oil by less than a week. To postpone the peak by a year would take 7 times what was discovered in 2007.

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idoctor
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Re: Daily Digest - October 9

Icahn Says 2nd Downturn Could Cause ‘Bloodbath’

http://www.cnbc.com/id/33238210

A NUE Approach

http://www.cnbc.com/id/15840232?video=1289135096&play=1

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Stan Robertson
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Re: Daily Digest - October 9

So suppose the Fed has acquired the toxic assets of Fannie, Freddie, FHA and the big banks. What did the Fed give for them? If it gave Federal Reserve money (i.e. computer digits) and not  Treasury notes, why would there be any claim on taxpayer money when losses on the assets are finally admitted? Couldn't  we just tell the Fed to take a hike? What happens when the Fed acquires losses? Can't they just erase the chalkboard and start a new game with their monopoly money and leave everyone else smiling and solvent? What is wrong with this picture? I don't get it.

Stan Robertson's picture
Stan Robertson
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Re: Daily Digest - October 9
Stan Robertson wrote:

So suppose the Fed has acquired the toxic assets of Fannie, Freddie, FHA and the big banks. What did the Fed give for them? If it gave Federal Reserve money (i.e. computer digits) and not  Treasury notes, why would there be any claim on taxpayer money when losses on the assets are finally admitted? Couldn't  we just tell the Fed to take a hike? What happens when the Fed acquires losses? Can't they just erase the chalkboard and start a new game with their monopoly money and leave everyone else smiling and solvent? What is wrong with this picture? I don't get it.

Oops, that should have been posted under the heading of The Sound of One Hand Clapping.

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dickB
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Re: Daily Digest - October 9

This is a rather belated 'thank you' to Davos for all his work on the daily digests. The situation there in the US does appear rather dire. There, as here (Oz/Tasmania), there is 'reality' (as preached on this site) and there is media-led perpetuation in the belief in the resumption of the endless boom times.

Thank you Davos. And thanks to those carrying on his good work.

Dick B.

 

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Vanityfox451
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...And The World Is Like An Apple Whirling Silently In Space...

World 

Poland to ratify Lisbon treaty

02:4110/10/2009

WARSAW, October 10 (RIA Novosti) - Polish President Lech Kaczynski will sign on Saturday the European Union reform treaty, also known as the Lisbon Treaty, the president's office said.

The reform treaty, signed in December 2007 to streamline decision-making following the bloc's expansion, cannot come into effect until ratified by all 27 member states. Poland and the Czech Republic remain the only EU states to ratify the document after Ireland voted in its favor in a referendum on October 3.

The signing ceremony will be held at the presidential palace in Warsaw at 10.00 GMT and will be attended by senior EU officials, including President of the European Commission Jose Manuel Barroso and European Parliament President Jerzy Buzek.

The Polish president has previously said he would sign the Lisbon Treaty only after it is ratified by Ireland.

Ireland was the only nation constitutionally required to put the decision to a referendum. The Irish voters approved the document last Saturday in a second referendum after their first "no" vote to the treaty in June 2008.

The Czech Republic has been reluctant to approve Lisbon Treaty, citing concerns that the reforms would diminish Czech sovereignty. However, Czech Prime Minister Jan Fischer reassured EU officials on Wednesday that Czech President Vaclav Klaus would soon sign the document.

Russia has said the ratification of the EU reform treaty will contribute to developing Russia-EU relations.

... and I wonder how all of the above played out as a decision after all of those lovely IMF and World Bank dollar$ bailed out most if not all of these countries just a year ago? Just an 'Opinion' of mine that is clearly clouding 'Facts' maybe ....

Best,

Paul

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fujisan
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Re: Daily Digest - October 9

Obama Blasts Banks Over Lobbying Blitz - Washington Wire - WSJ

President Barack Obama doesn’t pull any punches – in fact, he will throw a few – today when he chastises banks and the business community over their efforts to block creation of a new agency to regulate mortgages, credit cards, and other financial products.

“They’re doing what they always do – descending on Congress and using every bit of influence they have to maintain a status quo that has maximized their profits at the expense of American consumers,” he will say in a speech in the White House’s East Room, according to prepared remarks.

“And since they’re worried they may not be able to kill this agency, they’re trying their hardest to weaken it – by asking for exemptions from this agency’s rules and enforcement, by fighting to keep open every gap and loophole they can find.”

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fujisan
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Re: Daily Digest - October 9

Bill Moyers Journal . Watch & Listen | PBS

Just over a year after economic calamity brought promises of reform from Washington, has Wall Street really changed? Former International Monetary Fund chief economist Simon Johnson and US Rep. Marcy Kaptur (D-OH) report on the state of the economy.

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