Wednesday, May 20, 2009

SAR #9140

"There is no error so monstrous that it fails to find

defenders among the ablest men."
- Lord Acton

Damned If/If Not: Given the choice between taxiing themselves and a budget needing $21.3 billion in cuts, Californians shot themselves in the foot. Again. Direct democracy in action.

Note: The observant may have noted a subtle deterioration in SAR of late. I am happy to advise that Louis, our long-time friend, editor & co-conspirator, has been removed from the ICU and deposited in Recovery. He may soon be back - silently - among us. I have missed him and so, unknowingly, have you.

Downslope: Japan's economy, with a 4.0% decline in 1Q09, passed Germany's 3.8% drop, reaching an annualized rate of 15.2%. Globalization, indeed.

Fun with Numbers: The Bank for International Settlements reports that outstanding derivatives fell 13% last year, to leave an outstanding total of $592 trillion. Outstanding.

Dragnet: According to the US Commerce Department, April housing starts fell 13% from March and 54% y/y on an annualized basis. Building permits were down 50% y/y. Single-family housing starts in April were at 368,000 units annual pace. N\Housing, with new starts now down 77% from their peak, isn't going to lead this parade. There are already too damned many houses sitting around, so maybe this is a good thing.

Thought Experiment: AmEx stock climbed after it announced cutting 4,000 employees, 6% of its staff. How much more would the stock soar if AmEx fired everybody?

The Delinquents: Commercial banks are experiencing the following delinquency rates: Residential real estate, 7.91%. Commercial real estate, 6.4%. Credit cards, 6.5%. Charge-offs are: 1.8% for residential real estate and 7.49 for credit cards. "Highest since records...."

My Question, Exactly: "If Consumers Won't Kick-Start the Economy, What Will?"

Clear Skies From Now On? How often do you talk to your children about thrift, saving for a rainy day. Tell them stories about squirrels and acorns? Didn't think so. And one out of four of you don't lead by example, either, having not even enough savings to survive missing more than a couple of paychecks. And 41% report buying only necessities - which seems to include iPods, cell phones, and Happy Meals.

The Short Of It: Deleveraging will not be painless, not for you and not for the banks.

Connections: Farmers, like everyone else, operate on credit. But this year the credit crunch is making it difficult for farmers to borrow. No credit, no seed,no fertilizer, no equipment. And eventually, no food.

Baby Steps: First, China and Argentina worked out a currency swap, now China and Brazil are inching closer to dropping the dollar and denominating their bilateral trade in their respective currencies. Russia and Turkey are discussing the same idea. Pretty bold of them, doing business without giving Uncle Sam his little commission on the deals.

Definition: The Cheney doctrine consists of torturing random foreigners to obtain false confessions to support a previously told lie or delusion.

Spend It All, Now: Economists have begun asking for a planed inflation rate of 6% for a few years, to eat up what little value you have left in your savings. Certainly makes Treasuries look like a good bet, huh?

Enough Said: US Said to Consider Stripping SEC of Power, Shifting Some Duties to Fed - Sure, we want to give more governing power to a private bank.

Kicking the Tires: Here's the plan: GM files bankruptcy and 'sells' the health assets (?) to a US government owned entity for about $6 billion. The GSE would pay the $6 billion to the secured lenders (pay off the rich and well connected). The other assets would be sold off to pay off some portion of outstanding claims. The GSE would then portion out the new company to the union and the bondholders while writing off the $15 billion in loans that GM has already wasted. Tiny Tim is also giving GMAC $7.5 billion.

English 101: Correct the following headline: "Some Madoff’s Victims Are Also Crooks And Liars."

Ah-ha! A somewhat long but quite convincing explanation of the path from the end of the Bretton Woods era in 1971 to today (and tomorrow) is drawn from Duncan's "The Dollar Crisis”. Get a cup of coffee go read it - after you're done here, of course.

Porn O'Graph: Here a spike, there a spike. And remember 30% have no mortgage!


ChrisA said...

Re: Thought Experiment

Back in the dot-bomb era, I remember sitting with the founders in a particularly grim meeting: our new overlords (buyers) had decided that we were losing too much money (LOL) and it had to be corrected.

The CEO announced loudly, "What we have to do right now is reduce our operating expenses. Period."

I answered quietly, "Well, John, that's easy. I can tell you how to reduce our operating expenses zero as of this afternoon."

He didn't think that was funny. But most of the engineering staff did.

kwark said...

Re "Damned if/if Not"

I still say they should simultaneously legalize pot and place a tax on its sale. That would pump-up tax receipts by several $billion and save the taxpayers God knows how much when all the non-violent potheads are released from an overcrowded prison system. But wait there's more, all that money flushed on policing to keep Californians "safe" from potheads would no longer need to be spent!