Wednesday, January 23, 2008

SAR #8024

It’s puzzling why bankers had come up with new ways
to lose money; the old ways were working so well.”

Wells Fargo CEO John Stumpf

Drought : DOE is building a salt dome repository for 160 million barrels of oil. It will take 250 miles of pipe so they can pump 50 million gallons of fresh water into the ground to dissolve the salt and pump it again. Every day. For 5 years. Then we're going to buy enough oil to fill it up. By then it'll be $200 x 160 million = $32 billion. Could build a lot of windmills for $32 billion. Solar panels.

Priority : Wall Street's excitement is vastly less important than this: Mexico's crude oil production fell 5.3% in 2007, exports fell 15%. At this rate Mexico will not have oil to export after 2014. The same thing holds for most of the top oil exporters; falling production, falling exports. If there's no oil, no energy, what the stock market does will hardly matter.

100 Ways: BofA : "There's been a change in social attitudes toward default." People who could pay, are deciding not to because they have lost their equity. About 20 million homeowners will owe more on their homes than their homes are worth in the next couple of years. Sneak out the back, Jack.

Brooklyn Bridge : BofA intends to spin off all of Countrywide except for its Federal Savings Bank, and let that entity guarantee payments to bondholders as long as the remaining assets permit. Eventually it goes bankrupt and Countrywide bondholders end up holding wallpaper, while BofA makes off with the bank's $130bn in assets. There are, in fact , laws against this sort of thing. On the books, at least.

Homeland : The war in Democratic Republic of the Congo goes on and on. Ten years now, even though it "officially ended" in 2002. This, the deadliest conflict since WWII, kills about 45,000 a month, mostly children. The DRC makes nothing we want, buys nothing we make. Trees in the forest, they fall unheard.

Really ! A study shows that Bush and Company made at least 935 false statements about Iraq in the two years leading up to the US invasion. The lies "were part of an orchestrated campaign that... led the nation to war under false pretenses." The study was undertaken by the 7th Grade Journalism class at Mencken Middle School.

Bigger House ! Sorry, the overnight Fed Funds rate has no bearing on the rate for 30 year mortgages. Those rates are based on the long-term outlook for the economy, and the long term outlook for the economy is less than rosy.

Precision : China's Petrochemical Corporation announced that the nation's second largest oil field's proven reserves were 11.79% higher than previously reported. Or was it 11.785%?

Elevator Music : Merrill Lynch forecasts nationwide U.S. home prices to decline 25% to 30% over the next three years They cite rising unemployment, $6 trillion in lost housing wealth combined with slumping equity valuations, and predict the worst consumer recession since 1980. These guys are optimists.

Lone Rangers : Some combination of politicians will soon bial out MBIA and Ambac , the biggest bond insurers. We cannot face a $2.4 trillion collapse of the CDO bond market, and without a government rescue it will happen. Sure it's not legal; it is simply necessary.

Sold ! Sovereign investment funds offer the easiest prop for our ruined financial system, far easier than raising taxes to bail them out. We must finance our deficit spending by selling off our investment companies, just as we earlier sold our factories to our foreign competition. It will turn out just as well, too.

Blind Man's Bluff : The market is tanking, so it's no longer a question of if, but how deep and how long will the recession be. Politicians propose a $150 billion cure. Peanuts. If we can spend $1 trillion destroying Iraq, surely we can invest $2 trillion rebuilding America.

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