Sunday, June 22, 2008

SAR #8174

Neither the housing crash nor the derivatives collapse
was a black swan; they are the result of perfectly
predictable human greed.

False Dawn: Declining auto travel and canceled airline flights will reduce US petroleum demand by about a million barrels a day(mbd). The US uses about 20 mbd. A 5% reduction in US use amounts to a 1% reduction in world demand. It is going to take a bit more than that to bring the price down to where we can go back to wasting it.

Looks Like Rain: Merrill Lynch forecast more cuts in dividends and earnings - by an average of 22% - by banks like Bank of America and Wachovia, as well as "regional banks", and that higher loan losses will persist through 2009.

Point Of View: Hunger wasn't a problem last year, when a billion were hungry. Hunger became a problem only when people rioted and damaged some property. Can't have that.. Suddenly there is a concern about the world food supply. Relax. The current global food system was designed by Archer Daniels Midland, Cargill, Monsanto, Nestle and friends, with the assistance of the World Bank, IMF and WTO. It is working just fine; the profits roll in, the rich get richer. For example, Cargill's profits are up 86%. And they are (still) the ones in charge.

Lack of Faith: Selling a stock short means betting the price is going to go down. More such bets (some 17 billion of them) are now outstanding. Most ever.

The States of the Economy: States that are required to have balanced budgets (and most do) are suffering as the slowing economy reduces tax revenue. Nevada is short $1 billion with a July 1st deadline. California is spending a billion dollars a month that it does not have. Pennsylvania must slash spending or raise taxes. Arizona will shut down government come July 1st. State tax shortfalls typically lag the economy by two years, so this parade has just gotten started.

Head Count: Researchers suggest that previous techniques for measuring the death toll in wars under-estimates the slaughter by a factor of three.

Not So Innocent A Fraud: Seems fast growing retailer Steve & Barry's was a bit disingenuous about its business model. Seems their tremendous potential was based not on sales - which were a tad less than break-even - but on the up-front payments (bribes?) they received from malls to come in and occupy vacant spaces, so the mall could look busy to other prospective occupants.

Fighting Financial Terrorists : The White House claims the Fed needs "sweeping new powers ... to access necessary information from financial institutions and to intervene to protect the system when it is threatened." Bush is seeking to extend Homeland Security's mandate to include wiretaps and email intercepts of all Wall Street communications, warrantless searches of investment banks, and to include gray suited bankers among those sent to undisclosed locations for corrective interrogations.

Doom: Wages in China are rising more than 15% a year. Fuel costs to ship goods to the US are up 17% this year. The old one, two. Soon China will be outsourcing to Sudan.

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