SAR #10015

If you can't fail, there is no risk.

Smoke, Looking for a Fire:   Goldman Sachs sees inflation in China increasing rapidly.  Great Britain's GDP fell 4.8% last year, a bigger fall than in any year of the Great Depression and the biggest contraction for 88 years.  The German economy shrank in 2009 for the first time in six years.  The 5.0%  decline in the GDP was their largest since World War II.  Japan is probably facing hyperinflation.  And it looks like the Euro Union is about to break apart.

Sources:  The Mortgage Bankers Association says that mortgage originations will drop by 40% this year.  They should know.

Wink and Nudge:  In testimony before the House Armed Services Committee, a State Department witness said the US was “pursuing intensive dialogue with the Chinese on the subject of energy security, in which we have raised our concerns about Chinese efforts to lock up oil reserves with long-term contracts."  Note that this concern was raised before the Armed Services Committee.

Taps:  T. Boone Pickens is backing out of the 667 machine wind farm in the Texas Panhandle.  If Boone can't make money with alternative energy, it is pretty much a dead issue.

Accounting for Receivables:  US consumers have found a way to handle their bills in these tough times – don't pay them.  In December one of every eight dollars owed on store-branded retail cards (12.56% of their accounts receivable) was written off as uncollectable.  No improvement is seen in the coming months as rising unemployment and continuing deleveraging by consumers continues.

Test Question:  What value will the world's ten largest banks have when the ten largest oil fields are gone?

Schizophrenia:  While the House/Senate conference committee whittles away at the heath care bill – apparently killing the public option and abandoning employer mandates – a CBS survey finds that a plurality of Americans think the bill does too little to regulate the insurers, too little to hold down costs, and does not extend coverage to enough people.  The study contradicts the view of the GOP and conservative Democrats that the bill forces too much change upon their corporate health care donors the American people.

On a Roll:  One in eight Americans – 38 million – received food stamps, up a million in the last month.  The average monthly benefit was $133.60 per person.

Piece Work:  About 440,000 Americans filed their initial claim for unemployment last week and 10.9 million received unemployment payments.  The CBO forecasts unemployment to remain above 8% until 2012 and will not return to 'normal' (5.5%) until 2014.  Until then, the CBO says,many workers would remain unemployed, and much capacity of equipment and buildings will be unused.

Mark-Down Bin:  2009 retail sales fell 6.2%, the biggest decline on record (back to 1992) and only the second time that annual sales have fallen y/y (they slipped 0.5% in 2008).

Plan Ahead:  Barclays says a depression may have been postponed, not avoided. They expect an even greater crisis in late 2010 as higher taxes, higher interest rates and lower government spending take effect. The problem is that politicians are trying to resurrect a financial system which has already failed.  The longer that effort continues the more likely another crash.  They give it a 40% chance of happening.

Scorecard:  There were 2.8 million foreclosures in 2009, a record of course, and a 21% increase over 2008 and  120%  over 2007.   Plus there should be a pickup in foreclosure activity in February when government support of the housing market begins to end.

Porn O'Graph:  It's your option...