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The Daily Digest -Nov 20, 2008

Thursday, November 20, 2008, 1:26 PM

Hello,

Chris here.

I’d like to introduce D. Sherman Okst whom many of you know as Davos on the site. I’ve really liked the links that Sherman has been finding and posting throughout the site and I asked him if he’d be willing to post them directly to a blog where more people might see them. Sherman has graciously offered to do this and so I want you all to welcome him as a contributor at large for the Daily Digest.

Welcome Sherman!

Please help Sherman provide you with information that you can use. Is he providing too much? Too little? Do you want more commentary with each link? Less? The goal here is to help you stay on top of the important news, so let us know how things are working.

If you have a link that you think belongs on the page send it to [email protected]

Take it away Sherman!


Economy:

 

Good Article and a List of Failed Companies

As I mentioned in a previous post, 225 bankruptcies would fall far short of the 289 bankruptcies in 2000 and 383 in 2001 (the dotcom bust). We will not reach 289 bankruptcies this year. However, I would not be surprised to see 2009 challenge the 383 mark from 2001 (or about 32 bankruptcies per month). In fact, if we believe the predictions of my colleague Edward Altman, we should not be surprised to see the number of bankruptcies exceed 32 per month (see NYU's Altman Sees 2009 Default Rate Doubling). Obviously default is not the same thing as bankruptcy; however, they trend together.

 

More Consumers Get Dragged Into Bankruptcy

The number of personal bankruptcy filings jumped nearly 8 percent in October from September, after marching steadily upward for the last two years, said Mike Bickford, president of Automated Access to Court Electronic Records, a bankruptcy data and management company.

 

How Far Could the DJIA and S&P Fall?

Video: As markets continue their volatile streak, Nicole Elliott from Mizuho Corporate Bank takes a look at the charts for the Dow, euro/yen and Aussie dollar/US dollar to find out where they are heading.

 

Who Holds the US of A's Mortgage?

America is the largest debtor nation in history. And given the economic weakness in the global economy right now, the debt load is likely to get worse. Recently, China surpassed Japan to become America's largest creditor. 

 

What Will This Look Like "If" Gas Prices Go Up?

alg_subway-crowd.jpg

 

The MTA's doomsday budget will wipe out the W line, zap the Z line and ax more than 1,500 NYC Transit jobs, the Daily News has learned. 

 

Meltdown Leaves Ghost Resorts

Hundreds of luxury villas are positioned to take in the view, but there are no guests. There are no roofs either; neatly tied bundles of red tiles are stacked outside. The wind slams doors and rustles the yellowed newspaper taped to the windows. 

 

Continued Unemployment Claims Over 4 Million

Sherman's Comment:  According to a recent newsletter from www.WeldonOnline.com  TEN MILLION AMERCIANS are out of work. Worse, the Number of Persons Working Part Time for Economic Reasons has hit 6.7 million, likely to exceed the 8.8 million record set 30 years ago. Bailing our corporations will keep their doors open but not bring comsumers into them. The cart goes behind the horse.

 

Home Construction Falls to 1959 Records. 

National Association of Home Builders/Well Fargo Housing Market Index from 1985 through Oct. 2008;

 

WASHINGTON (AP) -- Construction of new homes plunged last month to the lowest level on records going back nearly 50 years as U.S. builders slashed production while Wall Street nosedived.

Sherman's Comment: I recall an article showing 18.5 million vacant homes.Some Facts about the Housing Market

There are 129 million housing units in the United States, comprising owner-occupied, rented, and vacant units. Of these, 18.5 million are empty. This vacancy rate is 2.5 percentage points higher than it has been at any point in the half century the data have been tracked, translating into at least 3 million too many empty housing units in the country. This number, moreover, is rising. This is the most intractable part of the real estate bubble, for we cannot find a true bottom to home prices until this inventory of empty units starts to clear, and we cannot find a bottom to the mortgage finance market until home prices bottom out.

Looks Like Commercial Real Estate is "On Deck" for Wave Two of the Real Estate Meltdown

NEW YORK, Nov 19 (Reuters) - The prices of bonds and stocks with exposure to commercial real estate plunged on Wednesday on fears the weakening U.S. economy could lead to a wave of defaults on loans for office buildings, retail stores, and hotels.

The value of commercial mortgage-backed securities (CMBS) has tumbled this year amid fears that poor underwriting standards and slower economic growth will boost defaults from historically low rates.

 

Proof of What Happens When the Cart is Put in the Horses Way

Debt-laden mall giant General Growth Properties Inc. has hired the law firm Sidley Austin as bankruptcy counsel while it negotiates with lenders for more time to restructure its $27 billion debt load.

...General Growth's financial situation has steadily deteriorated this year and it's stock is trading for loose change. The company, which owns more than 200 U.S. malls, has struggled ...

 

I'm a Bank, You're a Bank, We Are All Banks

As a bank-holding company, GMAC said it would gain greater flexibility and stability as a provider of automotive and mortgage loans to consumers and businesses, as well as have expanded opportunities for funding and access to capital.

 

Chart of 1929, 1973, 2000 and 2007 Recessions/Depressions

Sherman's Comment:  All are S&P EXCEPT for 1929-19323

 

One Thing I Missed on the 401(k) Privatization Talk - Your Kid(s) Get Half, Uncle Sam Inherits The Rest?!?!

Analysts point to another disturbing part of the plan. With a GRA, workers could bequeath only half of their account balances to their heirs, unlike full balances from existing 401(k) and IRA accounts. For workers who die after retiring, they could bequeath just their own contributions plus the interest but minus any benefits received and minus the employer contributions.

Sherman's Comment: Oh boy, don't get me going. Warren Buffett calls permanent investment the oil in the engine. Just talking about this is enough to drain the oil out of the engine. Earning 3% is stupid. I love my country but my kids come first. You want to even consider me giving 50% to a Social Security "Trust" Fund which is empty and insolvent? I'd take out two car loans, buy a boat on credit, max out every piece of plastic, get cable TV before I consider doing something this nuts. Insane Asylum comes to mind. These "people" need to be commited before they run the rest of this into the ground. - There, I feel better!

 

A Sea of Unwanted Imports:

19ports_600.JPG

 

For now, the port itself is the destination. Unwelcome by dealers and buyers, thousands of cars worth tens of millions of dollars are being warehoused on increasingly crowded port property.

Sherman's Comment: Well, if you bail out the big three then maybe you could lease commercial property for what they manufacture. My buddy works for the largest car stereo online/catalog company. Dealers in the UVA area are well insulated, sales are down from 150 cars a month to 50. Some ships should just sink at sea. Forget roads, get these workers building green.

 

Driving Much?!?!

Sherman's Comment: We don't need more cars right now.

 

Moving onto the Fed:

Policy Adrift, by Tim Duy: I understand the Federal Reserve Chairman Ben Bernanke is considered something of a sacred cow, our one point of light in an uncertain world. An academic who cannot be questioned by other academics. A smart person who has mastered the Great Depression and therefore "knows" what to do, and is providing the leadership to do it. 

I am beginning to question all of these assumptions.

... Meanwhile, Kohn added that the Fed has “already” engaged in forms of quantitative easing, and “we should be looking carefully” at the effect that could have “as a contingency plan should that still-remote possibility, but I think less remote than it was, occur.” ... He said the Fed hasn’t abandoned monetary policy in favor of quantitative easing, noting the Fed’s recent reduction in its target federal funds rate. “I don’t think we’ve given up on one in favor of the other,” Kohn said. He also said there’s no “arithmetic” reason why the Fed can’t “blow up” the size of its balance sheet, which has already swelled in recent weeks to over $2 trillion.

Sherman's Comment: If Ben Bernanke really has a plan, I'd suspect it is "Inflate or Die." To get a better take on my take on where this will head, plan or no plan listen to this: Salient points at 4:19, 8:20 & Here I think we will have hyper inflation which will destroy our Federal and personal debt.

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11 Comments

Jeff Borsuk's picture
Jeff Borsuk
Status: Silver Member (Offline)
Joined: Jul 25 2008
Posts: 150
Re: November 20, 2008

Great research Sherman! Now I've got plenty of reading material for this evening!

 Jeff

Futuo's picture
Futuo
Status: Martenson Brigade Member (Offline)
Joined: Apr 15 2008
Posts: 155
Re: November 20, 2008

Thank you oh-so-very much! Great stuff. Keep it coming, if you can.

James Wandler's picture
James Wandler
Status: Martenson Brigade Member (Offline)
Joined: Aug 12 2008
Posts: 219
Re: November 20, 2008

Davos,

I'm overwhelmed.  Thank you.

You are clearly part of the Solution. 

I can feel the momentum of this site accelerating. 

All the best,

James

TruthSpeak's picture
TruthSpeak
Status: Member (Offline)
Joined: Aug 26 2008
Posts: 21
Re: November 20, 2008

"One Thing I Missed on the 401(k) Privatization Talk - Your Kid(s) Get Half, Uncle Sam Inherits The Rest?!?!"

 

I am on board with you on that one. I just lost a few hairs from reading that one. 

miranda's picture
miranda
Status: Bronze Member (Offline)
Joined: Apr 29 2008
Posts: 28
Re: November 20, 2008

Sherman's Comment: If Ben Bernanke
really has a plan, I'd suspect it is "Inflate or Die." To get a better
take on my take on where this will head, plan or no plan listen to
this: Salient points at 4:19, 8:20 & Here I think we will have hyper inflation which will destroy our Federal and personal debt.

I can't open these files. Are they a Windows only format?

Any help much appreciated as I would like to hear these.

Thanks

Davos's picture
Davos
Status: Diamond Member (Offline)
Joined: Sep 17 2008
Posts: 3620
Re: November 20, 2008

Hello:

Thanks, no extra work, I spend a few hours a day keeping up on stuff, glad to cut an paste it in and pass it over to this great site. If anyone has some sites I'm missing please gmail me at [email protected]

Take care! 

Davos's picture
Davos
Status: Diamond Member (Offline)
Joined: Sep 17 2008
Posts: 3620
Re: November 20, 2008

Miranda:

I'll pull the transcript up and post it here this weekend. Sorry for the e-Issues. 

Woodman's picture
Woodman
Status: Diamond Member (Offline)
Joined: Sep 26 2008
Posts: 1028
Re: November 20, 2008

This is a nice summary on The Oil Drum explaining the need to transition away from a debt based economy.

"An Overlooked Detail - Finite Resources Explain the Financial Crisis"

http://www.theoildrum.com/node/4770#more

 

djhester1940's picture
djhester1940
Status: Bronze Member (Offline)
Joined: Sep 22 2008
Posts: 35
Stay away from Gift Cards

 The day that Circuit City  announced that it was going bankrupt, I was listening to Marketplace on NPR radio. The discussion centered around the fact that Circuit City has over $70 million in gift cards that it will not be able to redeem. The moral of this story is: beware of gift cards. You never know who's going to be next in the "belly up" column.

I think it would be a good idea to pass this on to everybody you know. Not much sense in buying gift cards that can't be redeemed.

drb's picture
drb
Status: Bronze Member (Offline)
Joined: Oct 11 2008
Posts: 95
Re: November 20, 2008: There are no coincidences

From "Who Holds the US of A's Mortgage link:

Quote:

China became the largest foreign holder of US Treasuries, owning $US585
billion ($A897.1 billion) worth as of September, according to US
Treasury Department figures.

From http://english.people.com.cn/90001/90776/90884/6534337.html

Quote:

China's 4-trillion-yuan (about 586
billion U.S. dollars) stimulus package, which was announced last
Sunday, about one week before the G20 summit scheduled for Saturday in
Washington,..
was announced at the right time...

 

1215's picture
1215
Status: Member (Offline)
Joined: Sep 26 2008
Posts: 6
Re: November 20, 2008

Another version of the Crash Course: http://perotcharts.com/challenges/

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