Daily Digest

Daily Digest - September 12

Saturday, September 12, 2009, 10:48 AM
  • 4 Out of 4 Stars (Ted Video, H/T GregRoberts)
  • August 2009 FIRE Economy Depression update – Part I: Snowball in Summer (H/T Jeff Borsuk & CM)
  • Chart of the Day
  • Two Beers With Steve - Episode 20 - Investing For Uncertainty
  • American Casino
  • "Feds" "Balance" Sheet (Chart)
  • Insiders sell like there's no tomorrow
  • 8.5 Billion Stimulus Well Spent Congress! (Video)

Economy

4 Out of 4 Stars (Ted Video, H/T GregRoberts)

August 2009 FIRE Economy Depression update – Part I: Snowball in Summer (H/T Jeff Borsuk & CM)

Substitution and the weak dollar: Welcome to the third world

This is not deflation. A three quarters full box of corn flakes sold for the same price today as a full box last year is not deflation. Fish and chips made with cheap versus premium cod and sold for the same price is not deflation. Getting packed like a sardine into a passenger jet that flies a given route half as often as before the depression started is not deflation. Getting a giant plate of rice or spaghetti sprinkled with vegetables and meat is not deflation.

Chart of the Day

Two Beers With Steve - Episode 20 - Investing For Uncertainty

In Episode 20 - Investing for uncertainty I outline the approach that I (Steve) will be taking to navigate the near future. I am not a speculator but with interest rates on certificates of deposit near zero and the dollar in jeopardy I've moved into more non-traditional markets.

This podcast has a slow start because I go from reading 'Goodnight Moon' and Thomas and the Big Big Bridge' to walking into my office and recording 'Two Beers With Steve'. Enjoy.

American Casino

Foreclosures good for Catfish sales (Repost)

The code compliance department was paying nearly 7,000 dollars a year to dump chemicals into the pools to treat the scummy buildup.

That's when Mitchell and some of her colleagues came up with an environmentally-friendly idea to get rid of the green. An idea with a much lower price tag of just 700 dollars.

"Feds" "Balance" Sheet (Chart)

Insiders sell like there's no tomorrow

Can hundreds of stock-selling insiders be wrong?

8.5 Billion Stimulus Well Spent Congress! (Video)

26 Comments

Ignignokt's picture
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Re: Daily Digest - September 12

And now the trade war begins.  Unions at their "finest" hour, looking out for American workers.

http://www.yahoo.com/r/fj/*-http://us.rd.yahoo.com/finance/news/rss/stor...

From Mish

http://globaleconomicanalysis.blogspot.com/2009/09/us-fires-opening-salv...

Also from Mish..

http://globaleconomicanalysis.blogspot.com/2009/09/bakery-union-win-batt...

With China being the largest potential buyer/consumer of American products...in a time when we need manufacturing jobs...We instead begin a trade war with the fastest growing market on the planet.  Huh? 

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Re: Daily Digest - September 12

 Peter Schiff on FinancialSenseHour deflation vs Inflation debate 12 Sept 2009

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Re: Daily Digest - September 12

Not that many of us would brag about visiting this guy's site, but he posted

an interesting  video from CNBC.

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Re: Daily Digest - September 12

Great Ted video. Thanks, Greg!

However, as fascinating as it is, my reaction is almost one of terror. Yet not because I'm some kind of Luddite but because I feel that virtually all of the mindboggling technology highlighted in the excellent presentation will be only available to a minute sliver of the world's population and that it will mostly be hijacked by governments to wage war and suppress liberty.

The sound of marching jackboots in the distance and corporate media propaganda is one thing. But gelatinous, cellular Big Brother chills me to the bone. And who can say it won't be used for that.

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Re: Daily Digest - September 12

Where's the beef???

The president’s chief economic adviser warned Friday that the nation’s unemployment rate could stay “unacceptably high” for years to come — a situation that would seriously complicate Barack Obama’s ability to convince Americans that he’s beating back the recession.

“The level of unemployment is unacceptably high,” National Economic Council Director Larry Summers said Friday. “And will, by all forecasts, remain unacceptably high for a number of years.” (Politico Article)

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Re: Daily Digest - September 12
turbo wrote:

Where's the beef???

The president’s chief economic adviser warned Friday that the nation’s unemployment rate could stay “unacceptably high” for years to come — a situation that would seriously complicate Barack Obama’s ability to convince Americans that he’s beating back the recession.

“The level of unemployment is unacceptably high,” National Economic Council Director Larry Summers said Friday. “And will, by all forecasts, remain unacceptably high for a number of years.” (Politico Article)

Since the government and corporate media always soft-peddle things and/or prepare the mass psyche through gentle hints, this indicates to me that Summers really thinks that things will be much worse. Then in six months he'll say something like, "None of us in the fall of '09 could have anticipated how bad unemployment was going to get."

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Re: Daily Digest - September 12

Davos & Greg,

Thanks for the TED video, it was really interesting.  He does a great job in explaining fractional lending:

If a Citibank loan goes bad, it goes bad 47 times; if a BoA loan goes bad, it goes bad 32 times.

Larry

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Re: Daily Digest - September 12

http://ad.vu/jpd3

An interesting bit - Philadelphia public library closing down completely on Oct 2nd because of budget cuts.

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FSN Inflation/Deflation Debate-Round 2

Davos,

I just listened to Peter Schiff's counterpunch to the deflation argument established by Pretcher last week. The primary point that I took away from his argument is that deflationary forecast is more relevant from the reference point of gold, rather than the from a reference point of the USD. This seems like a reasonable argument to me, and has been supported by prominent deflationists as well (other than Pretcher). 

I do still believe that the dollar will rebound, mainly from endogenous currency market forces (the bearish USD trade is too crowded), but also possibly from a future safety/unwinding trade. But though I anxiously await the opportunity to divest my remaining capital from the USD, I'm certainly not going to sell low (USD) and buy high (Gold) in the meantime to relieve my anxiety.

Also, I was really impressed with how Puplava has handled the interviews thus far. If you didn't know about him, you wouldn't know where he personally stood on this debate by the manner in which he interviewed his guest. That is very professional, and I respect him for that.

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Re: FSN Inflation/Deflation Debate-Round 2
JAG wrote:

Davos,

I just listened to Peter Schiff's counterpunch to the deflation argument established by Pretcher last week. The primary point that I took away from his argument is that deflationary forecast is more relevant from the reference point of gold, rather than the from a reference point of the USD. This seems like a reasonable argument to me, and has been supported by prominent deflationists as well (other than Pretcher). 

I do still believe that the dollar will rebound, mainly from endogenous currency market forces (the bearish USD trade is too crowded), but also possibly from a future safety/unwinding trade. But though I anxiously await the opportunity to divest my remaining capital from the USD, I'm certainly not going to sell low (USD) and buy high (Gold) in the meantime to relieve my anxiety.

Also, I was really impressed with how Puplava has handled the interviews thus far. If you didn't know about him, you wouldn't know where he personally stood on this debate by the manner in which he interviewed his guest. That is very professional, and I respect him for that.

Hello Jag:

I'm most of the way through it between family obligations and soccer and so on. Very good so far. Though a few of the answers were less robust than I had hoped for. But, overall very good.

I sincerely agree with his point of view on gold, as you mentioned above. I think the chart of the day emphasizes that perspective.

I too wonder if the dollar will show some strenght like it did in late 08 when everyone was using it to settle transactions or yanked money out of equities and parked them in perceived securities.

I've bought all the gold and silver I can afford, but in truth, if I come into more money I will buy more. Uncle Buck is a marked man. How many last breaths? I don't know. Bernake has riddled him with holes and will continue to ruin him. My concern is that folks are prepared, if there is manipulation with gold or if everyone runs for that one door when things are optimal then it could be too late.

Take care

PS I like your camera, we have tons of them especially by the gate. I kid my neighbors all the time about the eggs being on the honor system....honor system with video surveillance. 

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Re: Daily Digest - September 12

I do still believe that the dollar will rebound, mainly from endogenous currency market forces (the bearish USD trade is too crowded), but also possibly from a future safety/unwinding trade. But though I anxiously await the opportunity to divest my remaining capital from the USD, I'm certainly not going to sell low (USD) and buy high (Gold) in the meantime to relieve my anxiety.

+1

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Re: Daily Digest - September 12

Global Recession Over

 

I get the feeling that listening to all this feel good talk will not help you. Looking at the fundamentals I get the feelling that things could get worse faster and faster. I mean how can the fundamentals keep getting worse yet the economy keep getting better. People can no longer take on any more debt, they have no more spending money yet the economy is getting better. How long can this go on?

 

Still wondering what oil is going do to. Is it on permanent decline, briefly down due to the recession, or up? Given the declines we've seen in major oil fields it could go from were okay to catastrophic in months. It's like waiting for the pot to boil or toast to pop or something.  I should just stop reading blogs like this and work more on preparations.

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Re: Daily Digest - September 12

Hey FireJack-

   Here are a couple of pieces of anctedotal evidence from my local area that are frankly scaring me about the current state of our local (and national/US) economy.  For context, let me add that I live in a somewhat rural area that didn't bubble or crash to the extreme that some larger metropolitan areas did.  That said:

   - My husband recently told me how a friend of his from work and his wife, who have very good credit, put in a purchase offer for a house at their local bank.  They were approved, and everything went through fine right to the very end. At that time, the purchase fell through because "the bank didn't have the money".  Let me say this again: you have my husband, who for the last couple years has thought that I was the one being overly pessimistic telling ME about a bank not having $ to lend!! 

- I have been looking at real estate ads for nearby land that might promote sustainability better for me and my family, for the last couple of years (I can't really afford it, but a girl can dream!).  Among other things, I like looking in local bi-weekly real estate magazines and newspaper real estate inserts.  All of a sudden, I noticed how different these real estate listings are than in past.  Specifically, I only saw ONE "Sold" banner across an ad in the latest real estate magazine, and ONE "sold" banner in the most recent newspaper insert!  ONLY ONE piece of real estate sold out of a COUPLE HUNDRED local real estate ads!!  These ads span SEVERAL realtors, several local towns, and several school districts!  I cannot tell you what a chill this put down my spine!! In the past I was accustomed to seeing many"Sold" banners in each issue (at least a couple per page, if my memory serves me right)!

   So I concur with your sense that things could get worse faster, and that we all would do well to spend more time on preparations!  Like Chris says, better a year early than a day late!

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Re: Daily Digest - September 12

deleted...accidental double post

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Re: Daily Digest - September 12
mainecooncat wrote:

However, as fascinating as it is, my reaction is almost one of terror. Yet not because I'm some kind of Luddite but because I feel that virtually all of the mindboggling technology highlighted in the excellent presentation will be only available to a minute sliver of the world's population and that it will mostly be hijacked by governments to wage war and suppress liberty.

Maine,

I had a slightly different reaction when I first watched the Juan Enriquez TED video a couple of months ago. I felt a complete disconnect between the first half and second half of his presentation, as though they were completely unrelated.  The segue was tenuous at best.

He starts by giving an interesting picture of the world and its economic situation, and then as most big-picture scientists do, he handwaves all of it and says, "it's simple, we just need to say 'no' to entitlements, have people work longer, cut military spending, have smaller government...", etc.  Great in theory, but getting from point A to point B on any issue has shown to be a monumental challenge for this country.

Then he follows this up with further handwaving, letting us know that the financial crisis is not really what matters (it is the "small wave"), but rather future investment in science and technology?  I love science and technology as much as the next person, but isn't he in essence saying just as others do, that technology will solve all our problems?  Cellular and genetic engineering is fascinating stuff, but won't matter much if there aren't effective forms of energy to keep the entire system running at optimal levels.

Ron

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Re: Daily Digest - September 12

Dr. Marc Faber on Goldseek Radio 12 Sept 2009

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Re: Daily Digest - September 12

Ron Shimshock said:

"The segue was tenuous at best."

Agree! I'm surprised he got away with that at a TED conference. I'd be surprised if he ever gets the invite again.

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Re: Daily Digest - September 12

Maybe so, but personally I'd be happier seeing science get eight thousand five hundred million of stimulus money over some organization that helps pimps prostitutes and traffickers of children.

I don't think anything short of, say, creating oil genetically, will get us out of this debt. But, if they are going to blow money they don't have I'd like to see it going to things that help people and society, instead of thing thats will inevitably only feed off of it and drag it down even further.

Just my 2 cents.

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Re: Daily Digest - September 12
idoctor wrote:

I do still believe that the dollar will rebound, mainly from endogenous currency market forces (the bearish USD trade is too crowded), but also possibly from a future safety/unwinding trade. But though I anxiously await the opportunity to divest my remaining capital from the USD, I'm certainly not going to sell low (USD) and buy high (Gold) in the meantime to relieve my anxiety.

+1

If there are less dollars flowing out of the US, won't that add to the support?  The deflation/inflation debate is so passionate that it is difficult to get my head around.  I kinda wonder whether we will see asset deflation and commodity inflation...............

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Re: Daily Digest - September 12
Davos wrote:

Maybe so, but personally I'd be happier seeing science get eight thousand five hundred million of stimulus money over some organization that helps pimps prostitutes and traffickers of children.

I don't think anything short of, say, creating oil genetically, will get us out of this debt. But, if they are going to blow money they don't have I'd like to see it going to things that help people and society, instead of thing thats will inevitably only feed off of it and drag it down even further.

Just my 2 cents.

Davos

I was thinking along those lines too-one more reason to rein in healthcare costs is to free up money to go into important research and development,  not for unnecessary  "me too" replicas of blockbuster comfort meds,   for real innovation. It is a little scary seeing that 4 winged chicken though Surprised.

Regards

D

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Re: Daily Digest - September 12
VeganD wrote:
Davos wrote:

Maybe so, but personally I'd be happier seeing science get eight thousand five hundred million of stimulus money over some organization that helps pimps prostitutes and traffickers of children.

I don't think anything short of, say, creating oil genetically, will get us out of this debt. But, if they are going to blow money they don't have I'd like to see it going to things that help people and society, instead of thing thats will inevitably only feed off of it and drag it down even further.

Just my 2 cents.

Davos

I was thinking along those lines too-one more reason to rein in healthcare costs is to free up money to go into important research and development,  not for unnecessary  "me too" replicas of blockbuster comfort meds,   for real innovation. It is a little scary seeing that 4 winged chicken though Surprised.

Regards

D

I understand the thinking, but it's just as slippery of a slope as any other.  One person may say stimulus money would be better spent in medical research and development, another would say it should go to inner city health clinics, and a third would say it should be given to education programs for children so they can learn about health, disease, and nutrition... and on and on. Are any of these programs less deserving than the other?  And who has the right or authority to be the arbiter of what is the most meaningful and well-deserving project?

It reminds me of the "Not Yours to Give" speech which purportedly was delivered by Davy Crockett in Congress.  Some have doubted the authenticity of it given there are no exact Congressional records from this time, but the intent and message of the speech are worth considering.  The key point is this -- serving as a powerbroker and dividing up the pie of funds collected from nameless citizens is an easy thing to do.  Opening up our wallets and giving to worthy causes is not as easy for most.

Is it within the right of Congress (or anyone for that matter) to decide how my money or your money should best be spent?  I would believe I should have the right to make these decisions myself.  Therefore if I feel inner city health clinics are of a higher immediate value than cutting-edge medical research, I should have the ability to guide my funds to such an initative.  Citizens do not have this choice... they have others making these decisions for them.

Ron

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Re: Daily Digest - September 12

Ron

I only wish I could direct the funds but I have no idea what is truly right here.  I understand your point.  I give to my causes as do others of course.  And much of my tax money goes to stuff I oppose.

I thought the point of a democracy was to get representation by the leaders, who are supposed to be our spokesmen/spokeswomen.

In that case, they would allocate as the majority see fit (not that that is an ideal either).  But of course the system no longers works that way thanks to corporate control of politics, etc......

I was just agreeing with Davos that the money given to the banks (from our taxes) seems to have been wasted....

Regards and thanks much for your response!

D

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Re: Daily Digest - September 12

Hello Ron:

Anything but pimps, prostitutes and underage child trafficing would be acceptable in my book.

Frankly you raise a ton of valid, in fact excellent merits. I suppose my question is why can't we get bills put into simple English and posted on a website. that anyone, say like me a guy with a HS education, can read and understand, and then why can't we vote on these bills? This entire system was set up during a time when it took days, weeks to journey to DC and during a time when the fastest method of delivery was the pony express.

These, as MH would call them, KongressKlowns are making an absolute mess of it and we are left paying for their mistakes. Worse they get good health care and good retirement. We have the web, what do we need them for?

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Re: Daily Digest - September 12
VeganD wrote:

I thought the point of a democracy was to get representation by the leaders, who are supposed to be our spokesmen/spokeswomen.

In that case, they would allocate as the majority see fit (not that that is an ideal either).  But of course the system no longers works that way thanks to corporate control of politics, etc......

Just a point of clarification... the United States is a republic, not a democracy.  A democracy is a form of government in which the people decide policy matters directly--for example by voting on ballot initiatives and referendums, or through town hall meetings. A republic is a system in which the people choose representatives who make policy decisions on their behalf.  The popular use of the word "democracy" has come to mean a form of government which derives power from the people, and is accountable to them for that power.

Davos wrote:

These, as MH would call them, KongressKlowns are making an absolute mess of it and we are left paying for their mistakes. Worse they get good health care and good retirement. We have the web, what do we need them for?

Well, the Constitution's framers were quite fearful of a pure democracy.  A modern-day example of this is California.  California extensively uses ballot initiatives and referendums to allow citizens to choose what is important to them.  However doing so has led to a state budget crisis, as citizens added initiatives to the budget which the state could not afford.

James Madison wrote the following in Federalist No. 10 (my emphasis):

From this view of the subject it may be concluded that a pure democracy, by which I mean a society consisting of a small number of citizens, who assemble and administer the government in person, can admit of no cure for the mischiefs of faction. A common passion or interest will, in almost every case, be felt by a majority of the whole; a communication and concert result from the form of government itself; and there is nothing to check the inducements to sacrifice the weaker party or an obnoxious individual. Hence it is that such democracies have ever been spectacles of turbulence and contention; have ever been found incompatible with personal security or the rights of property; and have in general been as short in their lives as they have been violent in their deaths. Theoretic politicians, who have patronized this species of government, have erroneously supposed that by reducing mankind to a perfect equality in their political rights, they would, at the same time, be perfectly equalized and assimilated in their possessions, their opinions, and their passions.

A republic, by which I mean a government in which the scheme of representation takes place, opens a different prospect, and promises the cure for which we are seeking. Let us examine the points in which it varies from pure democracy, and we shall comprehend both the nature of the cure and the efficacy which it must derive from the Union.

The framers believed a pure democracy would lead to never-ending contention, and examples of pure democracies throughout history have been short-lived.  However, Madison noted further in the paper that the republic form of government can only be successful when leaders show wisdom, "enlightened views," a love of justice, "virtuous sentiments," and are "least likely to sacrifice [public views] to temporary or partial considerations":

Under such a regulation, it may well happen that the public voice, pronounced by the representatives of the people, will be more consonant to the public good than if pronounced by the people themselves, convened for the purpose. On the other hand, the effect may be inverted. Men of factious tempers, of local prejudices, or of sinister designs, may, by intrigue, by corruption, or by other means, first obtain the suffrages, and then betray the interests, of the people.

The general theme in Federalist No. 10 is a sense that there is no perfect system, yet a republic is better than other options to hold the Union together.  I think the key question is not the form of government, but rather the responsibilities of the government.  When I pose the question of whether funds are used for an inner city health clinic or medical research, the real question I am asking is whether or not the government should be involved in any such decisions.  The same holds true for the stimulus packages, bailout funds, or any other similar program.

Ron

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