Tuesday, December 18, 2007

SAR #7354

"Anyone who believes exponential growth can go on

forever in a finite world
is either a madman or an economist.

Update: Yesterday we reported Eurobank would offer "unlimited funds at below market rates." Unlimited turned out to be €328 billion at 4.21%. That's over half a trillion dollars. If you're a banker, Virginia, there is a Santa, yes indeed.

Consequences: Mining our productive topsoil to grow ethanol was a bad idea, now we learn that it will significantly increase the Dead Zone at the mouth of the Mississippi. Way to go.

Whack-a-Mole : Using our drones, our U2's, our satellite intel, and our permission, Turkey attacked Kurds in Iraq. Cheaper than paying Blackwater to do it. Safer to use the Turks - we can blame them for beating up our friends the Kurds (remember, Kirkuk & oil). If the collateral damage includes a bunch of women and children - and it will - blame the Turks, not us. How many sides are involved in Iraq? Quick, there's one! Bomb it!

A First: Last January a very heavy star exploded in a massive gamma-ray burst. No biggie, that's what they do. The twist: this explosion came from the middle of nowhere -- thousands of light-years from the nearest galaxy. Stars don't hang out all alone. What was a nice star like GRB-070125 doing in a place like that?

Economics 101: In slashing tuition for students whose families earn up to $180,000 by 30 - 50% and saying it will "no longer consider home equity in determining a family’s ability to pay for college", Harvard acknowledged that serious deflation has begun, prices are 30%-50% too high, taking out more debt won't help, and a house is a place to live, not an investment. So they tell you at Harvard.

Shopping: Former press secretary Tony Snow has been whining about the war on conservatives, claiming "The average Iranian is more Pro-American than virtually any college faculty in this country.” He spoke of “the second war in this country, the war on God.” Snow complained that the Christmas store didn’t have anything about Jesus. Glad he pointed that out; I'm going to take the diamond back, cancel the Lexus, and go to church Christmas eve.

Bridge Loan: Last September, Macklowe Realty bought $6.8 billion in NY buildings with $50 million of their own money and a $7.6 billion mortgage. (Don't ask: walking around money.) So far they have missed payments of $615 million. They got the billions even though it was known that the rents would not cover the payments. Approximately $5.0 billion must be paid off in February. Want to buy a bridge building?

Me First! The challenge of global warming is urgent enough the world has agreed to spend two more years talking about getting together to talk about making a plan to promise to try to reduce CO2 emissions over an indefinite span in the future with non-binding goals. Lipstick on a pig. Bali was a failure.

Terminology: The $500 billion "emergency funding" from the ECB was just a year-end prop to dress up the annual statements of some banks. This is not a liquidity issue. This a solvency issue. Solvency as in having insufficient assets. The solvency issue is simple: there's no one around who has viable assets to use as collateral. It's not credit problem, banks just don't trust anyone to pay them back.

Disaster Insurance: Goldman Sachs is offering notes paying 10% per annum as long a basket of 50 large bank stocks do not decline by more than 50% during the next three years". Bearish Goldman is willing to bet they will. Making money betting that a bunch of banks go belly up seems distasteful.

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