SAR #8151

Most people forget what the government can do
in extreme times. Bernard Reis

Schizoid: The number of Americans filing first- time claims for unemployment benefits increased last week, a sign the labor market is deteriorating as the economy slows. CNBC, on the other hand, just said the downturn is over.

Welcome Spam : Unlike the stuff in your inbox, Hormell says that customers are flocking to Spam, with sales increasing 10% over last year. Go to their website for delicious recipes.

Wait, Wait: Janet Yellen, president of the San Francisco Fed said Tuesday that the Fed will not permit a return of 1970's style stagflation, but that it was too soon to beging doing so. Why apply an ounce of prevention now when you can wait until it's too late and try a pound?

Not, Not, Not: Oil at $130 a barrel is not caused by speculators. It is not caused by Exxon' profits. It is not caused by Saudi shieks or Hugo Chavez's politics. The US Energy Department says it is simple: The world's oil producers are unable to meet the world's demand for oil. World oil exports fell 2.5% last year even though prices rose nearly 60%. Repeat after me: Supply cannot meet demand. It is called peak oil and it will continue to go higher and higher as bidders compete for less and less oil.

Clarification: Bear Stearns stockholders have voted to let Morgan gobble them up. Bear Stearns will now be cannibalized. If only the financial press would stop calling it a "rescue".

Paracelsus : The dollar used to be backed by gold. Then it wasn't. The Fed's assets used to be Treasuries. Now the Fed has traded over half of its assets for securitized debt backed by mortgages that are going belly up at record rates. Rather like the transmutation of gold into lead.

Comb-Over: Unhappy buyers of repackaged subprime mortgages, home-equity loans and such are trying to force banks and mortgage companies to repurchase troubled loans. Many loan sales had provisions that require lenders to take back loans that default unusually fast or contained mistakes or fraud. Of course, in this case the fraud was not a mistake.

Infrastructure: Hundreds of thousands of people in England await an explanation for a massive electrical blackout caused when seven power stations were shut down. Some view it as a sign of the vulnerability of Britain's aging power infrastructure. More see it as a predecessor of higher rates.

Humpty Dumpty: Mexico, once the third largest supplier of oil to the US, will become a net oil importer by 2016. Over the next 8 years the US will have to out-bid the world for the 2mbd it has been getting from Mexico.

Beaten Path: The number of severely delinquent Alt-A borrowers continues to grow. Those in the 2007 cohort have reached a 16% default rate. The 2006's are over 19% delinquent more than 60 days. And neither the 2006's nor the 2007's have yet reached their reset dates. Remember the when all this was 'contained'?

Porn O'Graph: Alt-A mortgage reset schedule.