Sunday, February 24, 2008

SAR #8056

The problem with globalization is that there are some things
cheap labor can't produce - oil among them.

.. The Daily Reckoning

Dictionary: Webster's Newest Collegiate Dictionary announced Sunday that the definition for pathetic had been shortened to read simply "Ralph Nader."

Where's Waldo? If the monolines get downgraded, the banks have north of 175 billion in losses at stake. Big excitement Friday when 8 banks were said to be meeting over the weekend to come up with $3 to $10 billion to rescue Ambac. Bank of America plopped down $4 billion for Countrywide's mess, no problem. Yet 8 banks cant come up with, at most, a little over $1 billion each to save the bacon? I just don't get the joke.

Fair's Fair: The man in the ski mask walked into the bank, brandished a gun and yelled out "You took my house, now I'm going to take your money!" The FBI is reviewing the bank's foreclosure records for clues. The suspect is presumed to be ARM'ed and dangerous.

Your End of the Boat: There is far too much debt in the economy compared to real earned income. We all wandered into this mess alone, as individuals, corporations, governments - each in our selfish and greedy ways, trying to maximize our slice of the pie. But we are all in the same boat; just because your part of the deck isn't wet yet doesn't mean the boat isn't sinking.

End Construction Zone: Taxes on a gallon of gasoline are fixed, not a percentage like sales taxes. Nation-wide, the average tax per-gallon is 23.6¢ for state and 18.4¢ for federal taxes. Gasoline taxes are nearly the sole source of funds for highway building and repair. With more economical cars and fewer miles driven per car, highway trust funds are expected to run out of money soon. To hell with potholes and falling bridges, we don't want no new taxes round here! We prefer to let Spain build toll roads.

Bargains! Commercial real estate mortgages are going bad at a faster rate than sub-prime did a year ago; banks are taking 50 cents on the dollar. Get yours while the getting's good.

Take a Deep Breath: Nepal is suffering shortages of petroleum, cooking gas, and electricity, and has gone to an even/odd plate number rationing of gasoline. To encourage the government to find a magic solution, the Consumers' Struggle Committee has given the government 15 days, or else they'll "cut the power supply to the minister's quarters."

A Walk In The Park: Washington Mutual issued $500 million in Alt-A mortgage backed bonds in July 2007. $476 million of this was rated AAA . As of now - only 8 months later - 13.4% of these have already foreclosed. In December, 5% of the homeowners mailed in the keys and walked away. Just walked away.

Nothing Personal: A division of Turkish troops invaded Iraq. Yet the Iraqis continue to ship 350,000 barrels of crude to Turkey. This raises money the Iraqi central government will need to fight their civil war with Iraqi Kurds once Turkey goes home.

Hymnal: The USDA says wheat stocks will approach zero this year, and stay there. We've passed Peak Wheat and are heading into wheat's own Olduvai Gorge now. Let us now join hands and sing "We Shall Overcome".

Little Minds: Other than a couple of CEOs, there doesn't seem to be much loss of either face or job in the investment houses, even though the leaders and top managers screwed things up not just in sub-prime, but in credit derivatives, bond insurance, credit swaps and now commercial real estate. Consistency counts.

Words of One Syllable: To clarify the problem with the credit market and the economy, picture a long conveyor belt running from an immense pile of money down to a huge furnace at the far end. Every time a house is foreclosed, two big guys throw money equal to at least 10 times the amount of the mortgage (those credit derivatives) on the belt and it trundles off to be burned. Whoosh, gone.

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