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    Daily Digest 11/18 – Hyperinflation in USA, GM Stock Sale Gears Up, Stress Tests for Banks

    by DailyDigest

    Thursday, November 18, 2010, 4:00 PM

  • Man Makes Ridiculously Complicated Chart to See Who Owns His Mortgage
  • How Hyperinflation Will Happen In America
  • World of Worry Wednesday – The China Syndrome
  • GM Stock Sale in High Gear
  • Bernanke Makes Case to Senators
  • Fed Announces New Stress Tests for Biggest Banks
  • The Shale Gas Shell Game
  • Interview with Chris Martenson: “Prepare for peak oil while there is time.”

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Economy

Man Makes Ridiculously Complicated Chart to See Who Owns His Mortgage (suzie)



We all know the mortgage securitization process is complicated. But just how complicated? This chart from Zero Hedge shows the convoluted journey a mortgage takes as it morphs into a security. Dan Edstrom, of DTC Systems, who performs securitization audits, and who is giving a seminar in California next month, spent a year putting together a diagram that traces the path of his own house’s mortgage. “Just When You Thought You Knew Something About Mortgage Securitizations,” says Zero Hedge, you are presented with this almost hilariously complicated chart.

How Hyperinflation Will Happen In America (johan)



The Too Big To Fail banks will play a crucial part in this game. See, the problem with the American Zombies is, they weren’t nationalized. They got the best bits of nationalization—total liquidity, suspension of accounting and regulatory rules—but they still get to act under their own volition, and in their own best interest. Hence their obscene bonuses, paid out in the teeth of their practical bankruptcy. Hence their lack of lending into the weakened economy. Hence their hoarding of bailout monies, and predatory business practices. They’ve understood that, to get that sweet bail-out money (and those yummy bonuses), they have had to play the Fed’s game and buy up Treasuries, and thereby help disguise the monetization of the fiscal debt that has been going on since the Fed began purchasing the toxic assets from their balance sheets in 2008. 

World of Worry Wednesday – The China Syndrome (ilene)



Nomura Holdings joined Goldman Sachs in advising investors to cash out of China and that sent the Hang Seng down 478 points for the day (2%) along with another 2% loss on the Shanghai.  “The likelihood of a re-introduction of price controls on food is growing,” Nomura’s Sean Darby said in a report today. “The recent run-up in agriculture prices worldwide and signs of hoarding appear to have pushed the authorities to reconsider draconian measures.”  Premier Wen Jiabao confirmed on state television that the cabinet is drafting measures to counter overly rapid price gains.  “Command style economic principles generally mean much lower multiples over time on the sector and stocks,” said Darby.

GM Stock Sale in High Gear 



GM sold about 478 million shares Wednesday at $33 each, a price higher than the company and its bankers thought was possible just days ago. An additional 71.7 million shares are expected to be sold by GM’s bankers as part of an “overallotment” allowed when sales are stronger than expected. And it sold $4.35 billion in preferred shares. Wednesday afternoon at the Manhattan headquarters of one of the lead bankers, Morgan Stanley, GM executives were greeted by traders and bankers standing and cheering while wearing blue GM T-shirts over their shirts and ties.

Bernanke Makes Case to Senators 



The Fed chairman denied the U.S. was manipulating the currency through its plan to purchase $600 billion of U.S. Treasury bonds and pointed to research by the Federal Reserve Bank of Boston which estimated the program could create 700,000 to one million jobs over two years. Sen. Richard Shelby, an Alabama Republican, said he “wasn’t persuaded” and noted that “even some Fed officials have doubts” about the central bank program. Republican lawmakers said in a letter to Mr. Bernanke released Wednesday that the Fed’s move “introduces significant uncertainty regarding the future strength of the dollar and could result…in hard-to-control, long-term inflation.”

Fed Announces New Stress Tests for Biggest Banks 



Officially, the new stress tests are only mandatory for banks that plan to increase their dividend or conduct stock repurchases. But the Fed makes it pretty clear that all 19 banks should submit “comprehensive capital plans” by January 7 of next year. “SCAP BHCs are encouraged to have their capital plans filed by January 7, 2011, irrespective of whether they intend to undertake any capital distributions,” the Fed writes.





Energy

The Shale Gas Shell Game (debu)



With the election frenzy behind us, and the Fed printing money like there’s no tomorrow, it seems like a good time to return to the shale gas “boom” in the Marcellus. You will recall that shale gas production, not only in Pennsylvania but elsewhere in the lower 48, Canada and all over the world, is going to provide us with far more energy over the next 250 years than we could ever figure out what to do with. In Shale Gas Shenanigans, I questioned whether development (in the Marcellus and elsewhere in the U.S.) was economic with natural gas prices well below $5/MMBtu.

Interview with Chris Martenson: “Prepare for peak oil while there is time.” (debu)



ASPO peak oil conference held in Washington was an unique opportunity to meet Dr. Chris Martenson. Chris is devoted to finances, economics, energy and environment and connects together these separate fields. He says that the next 20 years will be very different from the last 20 years. Peak oil “will change everything” and there is never too soon for preparations. The key is resilience, self-dependency and versatility. He is an optimist and believes that many people will survive peak oil happily – if they prepare themselves. As all people researching peak oil and its impacts, he advises people to get out of debt.

Article suggestions for the Daily Digest can be sent to [email protected]. All suggestions are filtered by the Daily Digest team and preference is given to those that are in alignment with the message of the Crash Course and the “3 Es.”

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