Monday, February 25, 2008

SAR #8056

We are no longer "The American Citizen"
and have become "The American Consumer".

Immediate Openings: The FDIC has been "bulking up" its staff over the last several months in anticipation of a wave of bank failures numbering in the hundreds, many in the Rust Belt, along with California, Florida and Georgia. The agency is also advertising for bids from outside firms to manage mortgages and other assets from failed banks. FTA: Fun, travel, and accounting.

Talking Points: New housing data is out. Headline said "Sales Slipped". Here's "slip": Existing-home sales down 23.4%. Prices down 5.1%. Unsold inventory: Up 5.5% to a 10 month supply, highest since 1982. Play on.

Re-Appraisal: On their first visit to a Chicago townhouse they bought at a foreclosure auction, the new owners found a human skeleton in a red tracksuit. Next to him lay a dead dog. It was the previous owner, who apparently stopped paying because he was dead. The house had traded ownership three times since then, but no one had actually inspected the place.

Sorry? Countrywide's executives are throwing a party at the Ritz-Carlton Bachelor Gulch ski resort in Avon, Colo. Rooms are $750 a night. Supper at Spago will go $110 before the wine. Don't worry, the company's picking up the tab for 30 representatives of smaller banks for three nights, all included. Countrywide's stockholders, who have lost 80% of their investment in the last year, are not invited.

Friday the 13th Part VIII If the US had no "peer competitor", how could the Pentagon justify its $750 billion budget? No problem, they'll always have China. Pentagon strategists talk about U.S.-China competition for energy in Africa, in the Caspian Sea basin, and in the Persian Gulf. The US has to be able to counter them, it's our oil.

Seeds of Doubt: For several years now I have invested on the idea that Peak Oil was real, that shortages were coming, and that energy prices were heading up. I've done pretty well at it. But now I have to reconsider; Greenspan is saying the same thing.

Rule Britannia: North Sea oil and gas are running out, world oil stocks are falling. The UK’s last few nuclear plants are of interest only to demolition contractors, as are many of its older coal-fired power plants. One third of the UK’s current generating capacity will be gone by the middle of the next decade. They'll always have Trafalgar.

Reading Comprehension: In their September 2007, Citibank listed $3.0 trillion in credit derivatives and JPMorgan $7.8 trillion. Since then Citibank has taken over $18 billion in write-offs and wanders the face of the earth seeking cash infusion from the Chinese, Dubai, etc. JPMorgan, on the other hand, is playing Caesar's Wife, with no losses to report. How's this possible? Hint: In May 2006 Bush gave his intelligence czar authority, in the name of national security, "to excuse publicly traded companies from their usual accounting and securities-disclosure obligations."

High/Low: The spread between corporate bond yields and 10-year Treasuries exceeds 3 percentage points, the widest since the Depression. Some say this is a sign bond investors are increasingly worried about corporate defaults. I just take notes.

Public Service Announcement: Sunday evening, 60 Minutes ran an expo of Karl Rove's trumped up prosecution and jailing of Alabama's Democratic Governor Don Siegelman. If you live in Alabama you may want go to 60 minutes website and view the program, which was blacked out by CBS stations in the state. Technical difficulties, same as with voting machines in Ohio.

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