Tuesday, February 5, 2008

SAR #8037

We are entering "a period of involuntary thrift".
John Goodman

Chop Block: Several investment houses are trying to put together enough capital to rescue some of the financial guarantors (bond insurers). Tuesday a major rating agency said that anticipated losses "call into question" the AAA ratings of these companies "regardless of their ultimate capitalization." In other words, don't bother. Fifteen yards, replay the down.

Yule See: Europe did not have a good Christmas Season. Even Belgian chocolates weren't moving - down 6.9%. Germany's sales were limited to lumps of coal: down 6.7% And we complained about the weak 1.2% growth in sales.

Preposition Proposition: The ratio of the interest rate between AAA corporate bonds and US Treasury 10 year notes is a measure of fear/trust. If bonds pay 30% more than Treasuries that's pretty normal. The all time high is about 105% , today's 90% means investors are more concerned with the return of principal than the return on principal.

Pick A Number, Any Number: Defense spending in Bush's 2009 budget totals (in billions): $515, $518, $608, $611, $844, or $851. The answer is, in the budget document, each of the first four. If you want to count nuclear weapons, veteran's health, military retirement and such - both of the last two. Multiple choice.

Quite Desperation: Climate scientists have a list of crucial tipping points that will mark irreversible climate changes. Some are here now, or tomorrow: Disappearance of Arctic sea ice, melting of the Greenland ice cap, die-off of cold-adapted trees in Siberia and Canada, Amazon deforestation, collapse of the West Antarctic Ice Sheet. We know what is happening. We know what we have to do to moderate this disaster. We simply will not do it.

Levee : The usual suspects are trying to bail out the bond-insurers. While saving everyone's bacon is an honorable impulse, in reality this is going to resemble our response to flooding in the 9th Ward.

Clarification: Energy Solutions wants to import radioactive waste for disposal in the US. Traditionally we unload our crap on the great unwashed. The idea that we might one day become the dumping ground for others' trash is... Have you seen those pictures from Godforstakenstan of whole families picking over trash in immense dumps? Radioactive trash? Here? Wow.

Marat Sade: The press obsesses on the tens of billions lost in "the sub-prime mortgage mess." Big news, risky loans are risky. Sub-prime wasn't exciting enough, so they made up credit derivatives and placed side bets on them. The bets total over $50 trillion. No one much talks about the elephant.

Last Lasts: Guangdong, the birthplace of China's growth into world trade dominance, is being reborn. It started out making labor intensive shoes, Adidas, Nike, etc. Now the region is becoming a high value-added center and is too expensive for unskilled shoemakers. As many as 10,000 shops will close this month, sending millions of workers back to the hinterlands as the factories go to Vietnam, seeking cheaper labor. Outsourcing.

Stalling: Steve Turner dropped off his car at Wal Mart for an oil change, went to the bathroom and died. Took them nine hours to figure out why he didn't come out and pay for the oil change.

Here's My Plan: A couple of billionaires have suggested a solution to the current mortgage default crisis: You (in the role of taxpayer) buy a one-third interest in the defaulting mortgages. The private investors (these guys) would get that money immediately, and you (in your continuing role as taxpayer) get the right to collect one-third the payments that are not being made. Could we go halvesies?

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