Thursday, January 31, 2008

SAR #8032

On Fed actions: The only thing we have to fear,
is their fear itself.
W/apologies to FDR.

On Order: Companies exist to make profits, not to build new factories because interest rates are low. The economy is profit driven, not cheap debt driven. Getting a bigger truck only works in jokes.

Overdrawn: A survey shows that more than one million Iraqis have died as a result of the US invasion. It was a British survey; Iraqis don't count.

Signing Statement: Attorney General Mukasey again casually told Congress that the President has the right to violate their laws and that Congress has no power to do anything about it. Go read his testimony, before it's redacted.

Add Yeast: First the Federal Home Loan Banks rescued Countrywide & friends with $163 billion in loans at bargain basement rates, now the SEC is permitting lenders to engage in misleading accounting. To quote Yeves Smith, "this society is supposed to operate under the rule of law. But it is becoming apparent on every level that it doesn't, that this is increasingly a nation of might makes right and expediency." Who suspected?

Make Believe : Another bond insurer looses its stripes: FGIC was cut two levels to AA. Fitch Rating Service has pretended that FGIC deserved an AAA rating for years. Now it wants you to pretend FGIC deserves to be AA.

Morals vs Ethics: Moral arguments against abortion do not consider the physical limits of the planet. Seen in the context of the human misery, suffering and starvation, "pro-life" favors misery, suffering and starvation. The the earth cannot support the 6 billion of us today. Think about tomorrow. In 2050, it's 9 billion.

Quo Vadis: "Another effect we are seeing is that consumers are willing to walk away from homes. We are seeing a lot of that." The CEO of Flagstar Bancorp seemed puzzled that a large number of homeowners just "go under". It's called drowning.

Snow Job : Chinese travelers are stranded by the millions, power plants shutting down for lack of coal; yet winter's worst may be the damage to the wheat and vegetable crops. When things get better, they won't be getting better.

Introductions: S&P points out that "Under accounting rules, smaller banks haven't been required to write down their holdings until the credit ratings on them fall. This has let them avoid 'recognizing' the losses. Thousands of small banks hold trillions in worthless paper." When the bond insurers finally fail, so will they.

Alladin's Lamp: India had planned to import LNG to meet growing demands, but has been unable to sign a deal for long-term supplies.

Knife Edge: Randomness, Chaos, Complexity; popular topics of late. Could one grain of sand bring the whole thing down? Last week we saw how quickly a financial burp can cause worldwide indigestion. Antacid, anyone?

Candle in the Wind : South Africa's Government is telling the public to prepare for months of blackouts. "Go to sleep earlier... Boil less water, use the microwave rather than stove, take a shower and not a shallow bath," is Energy Minister Sonjica's advice.

Thanksgiving Dinner : Saudi Arabia's December oil production was 2% above November's level, but their exports were down 2.2%. The bread on my table does not feed your family.

Someday: The energy crisis, like the climate crisis, may not hit us until 2025. If you were 21 in 1991, you'll be 55 in 2025. Ready or not.

Wednesday, January 30, 2008

SAR #8031

The four most dangerous words in investing are
'This time it's different.'
- Sir John Templeton

Down Spot! S&P just lowered of the investment ratings on $534 billion in mortgage securities - 5% of all the mortgage debt in this country. Financial institution losses "will reach more than $265 billion" - 47%, of subprime mortgage bonds rated between January 2006 and June 2007. Remember when subprime was a pup and we were paper-training it?

What A Difference A Day Makes: Monday, Bush in SOTU: "Let us fund new technologies that can generate coal power while capturing carbon emissions." Wednesday, Bush administration drops support for the FutureGen carbon sequestration project because it would cost too much to save civilization. Maybe it's time to admit that 'clean coal' will never happen and come up with another make-believe way to solve our energy problems without reaching Fahrenheit 451.

Nickel and Dime: Some banks, desperate to raise for cash to meet capital requirements, are paying 5% to attract money to CD's and savings. A desperate few are raising their ATM fees for non-depositors to $3.00. Some are imposing fees for using the bank's own ATMs. It's like checking under the chair cushion for loose change. Desperate times call for foolish measures.

Platform Diving: McCain's platform this fall, according to fellow Republicans, will consist of assuring voters that the jobs are never coming back, the illegals are never going home, but the economy will do well because we'll have a lot more wars. And these are his co-defendants.

Slow and Steady: The Bush administration “is sending strong signals that U.S. troop reductions in Iraq will slow or stop altogether this summer," because of fears that the civil war/violence will resume once we go home. Bush wants to get to Crawford first. Okay with me; how about next Tuesday?

Contest: First to send me a citation in the Constitution that provides for Presidential dismissal of enacted laws through "signing statements" wins the usual prize.

Candy Coated: Bush asked Congress for $300 million this year for poor kids. He also demanded Congress extend his tax cuts for millionaires at a cost of $4.3 trillion over 10 years. Officially there are 15 million American children living in poverty; there are also about 15 million millionaires in the US. One group will get $28,667 every year for ten years, the other $20. Which hand has the M&Ms?

Secret Sauce: The Fed auctioned off another $30 billion to the banks, providing funds "to cash strapped banks". "Cash strapped banks" are banks which do not have enough capital to meet their reserve requirements. Bernanke said "the current auction process will continue for as long as needed to make sure that banks have sufficient reserves." That is, the banks are insolvent, but we're going to pretend that's not true. Don't look behind the curtain.

Dignity: “We must ensure that all life is treated with the dignity it deserves,” Bush in SOTU during what better damned well be his final State of the Union address. He didn’t talk about dignity in terms of ravaged pensions, working longer for lower wages, or the loss of healthcare and other benefits. He didn’t talk about the rise in poverty - 1 in 8 Americans now live below the poverty line. A coded message to the anti-abortion nuts.

Rescue Me ! Statistically the economy hasn't weakened much yet. Fed funds at 3.0% is a negative interest rate since inflation is running at 5.7%. Arthur Burns would have Fed's rate at 12% by now. What's scaring our betters? The invisible hand of the free market. That's what brought on the Crash, the Depression, the social changes, and the regulation of markets. That's what scares 'em. Payback.

Tuesday, January 29, 2008

SAR #8030

The economic system is about to teach us a lesson;
we never did much like school anyway.

Spoonful of Honey? Orders for durable goods rose 5.2% in December, the largest gain in five months. Even without an 11% surge in (Boeing) aircraft to offset a 2.3% fall in the auto sector, there was an overall rise in manufacturing. Smile; once in a while things go right.

Net Serve: A week ago, SAR pointed out that the Fed was reporting negative net bank reserves as of December. The reports for Jan 2 and Jan 16th are even more negative. Finally, today, Mish brings it to a wider audience with "Bank Reserves Go Negative."

Another Brick: For those who thought the worst was over and it was time to rush out and buy: Countrywide, the nation's largest mortgage servicer, reports that one out of three subprime loans is delinquent. There are about $1.3 trillion in subprime loans outstanding, one third of which is $400 billion. So far the problems have been the result of only $100 billion in foreclosures. Next!

For My Next Trick: French prosecutors have withdrawn fraud charges from the 'great fraudster', reducing his crime to 'breach of trust.' This undermines SG's allegation of massive fraud as the cause of their meltdown. Kerviel, the accused, claims his superiors knew of his trades and did not complain as long as he made them money. Much of the SG senior staff are 'assisting with inquires'. One of SG's director's sale off $150 million worth of SG shares eight days before the abrupt asset sale is being questioned. Citibank, which knows about such things, has cut the value of SG's stock in half.

All Together Now: Just as the EPA won't let California regulate car emissions because CO2 is a global problem and needs a global solution, Bush's nominee for the Consumer Products Safety Commission feels that since mercury emissions is a global problem, the US should not limit emissions unilaterally. Same with lead paint on children's toys, apparently.

Revival: New home sales fell 26% to a 12-year low in 2007, the worst sales year on record. Median price dropped 10% from 2006. Existing home resales - the bulk of house sales - suffered their biggest annual drop in 25 years. Who'll stop the rain?

And Yet It Moves: The White House Office of Management and Budget reviews all scientific testimony and interviews of government scientists to make sure that it’s “consistent with the President’s budget”. In Indonesia at least 100 people have died from 'bird flu' (H5N1). The White House is reviewing the information to see if it conforms to policy. The Pope once had a similar problem with Galileo.

Whiter Shade of Pale: Escalating climate warming is seen in our chaotic, unstable weather. Global grain production peaked in 1985. Human population now exceeds the globe's ability to sustain it by 20%. Natural gas production in North America peaked in the 1990's. Global oil peaked in 2005. By 2002 over 75% of the world's oceans were over-fished, or fished out. Two thirds of the world's forests have disappeared. Bret Favre may retire.

Headline: US Military says China's weapons exceed self-defense needs. Don't look in the mirror, just shut up and sell them some weapons; that's one of the few things we still manufacture.

Ubiquity: Bangladesh is giving fertilizer plants priority access to natural gas, at the expense of electric power generators - to the extent of curtailing generation if need be. It's not miles per gallon that they're worried about. Elsewhere, Eskom - which supplies 90% the power for South Africa and several of its neighbors - reports that coal shortages are limiting its coal-fired power production to 75% of capacity; China has stopped exporting coal; Pakistan has no power 15 hours a day and Nepal is out of diesel fuel. There are more, but it gets boring.

Spoils: On display in Chaney's office is a piece of the house where Zarqawi died. Tasteful, Mr. Vice President, really, really tasteful.

Monday, January 28, 2008

SAR #8029

Following orders does not relieve one of responsibility.
Principle IV, Nuremberg War Crimes Trials

Little Dutch French Boy: Trying to save itself from huge losses from 'unauthorized trading', Société Générale dumped $75 billion in stock over a weekend and plunged the world's exchanges into a panic that destroyed $1 trillion in paper assets. The Fed over-reacted with a huge rate cut and the emergency recession thwarting package. So the little French boy seems to have stuck Bernake's finger in the dike.

Weight Watchers: Placing the blame correctly is getting harder and harder. For example, food's price inflation in the last year is due to: a) too many people, b) oil prices, c) bio-fuel production, d) lack of water e) lack of arable land, f) too many people eating like Americans. All of the above.

Prophets and Loss: Less than 10% of the CEOs of the world's 500 largest companies think global warming has anything to do with them. Their job is to quickly burn as much fossil fuel as possible to increase their profits and bonuses. Next question: what the hell are we all morticians?

Self-Inflicted: In Fulluja, Abu Marouf, commander of 13,000 fighters temporarily on the American side, says he will withdraw his support and allow al-Qa'ida to return if his fighters are not incorporated into the Iraqi army and police. Marouf says, "If the Americans think they can use us to crush al-Qa'ida and then push us to one side, they are mistaken." An old story, mistakes were made.

Prosecution Rests: If you have trouble understanding that water-boarding is not torture, that the United States does not torture prisoners unlawful combatants the people we pick up off the street, please follow this simple logic: (1) we saw off fingers; but (2) we do not torture; thus (3) sawing off fingers isn't torture.

How Dry I Am : UN Secretary-General Ban Ki-moon says that water belongs at the top of the world's agenda. He's not talking about feel-good programs to dig wells, he is warning of "a high risk of violent conflict" over scarce water supplies, among 2.7 billion people in nearly 50 countries. I can't imagine where more potable water will come from. I can imagine how fewer people will go thirsty, eventually.

Escher: Each time an 'upside down' homeowner walks off having lost the economic interest to stay, or an over-housed family gets foreclosed, property values sink. That in turn puts the neighbors into negative equity, giving them the motivation to walk off. The economy slows and ARM's keep resetting and more houses stand empty. Repeat until when? Where does it stop?

Mighty Mouse: Never fear! George Bush is riding to the rescue! He has decided to focus on keeping the US out of recession during his remaining time in office, just as earlier he focused on Osama bin Laden, Iraq, helping the people of New Orleans, being compassionate, leaving no child behind and being a uniter.

Sunday, January 27, 2008

SAR #8028

Supply and demand seems a rather harmless expression,
until demand is an angry mob in the streets.

Tweety Bird: In exchange for immunity from criminal prosecution, a company that evaluated loans for investment banks has agreed to provide documents and testimony to the NY Attorney General investigating fraud in the marketing of mortgage derivatives. Job security for lawyers.

Horse Manure: Farmers are finding fertilizers difficult to buy this spring. Factory farming requires petroleum for diesel fuel, natural gas for nitrogen fertilizers, and potassium, all of which are becoming scarce. The continuing shortage of natural gas in the US has driven urea / ammonium manufacturing overseas. Potassium is found in a very few places. Good thing food doesn't count in the CPI.

Don't Let Them Eat Cake: The idea of increasing food stamp spending as part of the recession rescue package was quickly killed. The GOP is knows poor people are obese and should not be offered even more food. They should eat less and join a health club.

Nuremberg : The White House wants to ditch the FISA system for a new law authorizing wholesale government monitoring of every American’s telephone and internet activities. They're already doing it, they just want to make it legal, retroactively. Their defense lawyers think it might help, later on.

Please Release Me, Let Me Go... Stories from places like California, Florida, and Ohio and from lenders like BofA, Wacovia, and First America tell of homeowners with no equity to lose, just their jacked-up payments, seeking foreclosure so they can buy a similar home for half the money. Feeling left out? Don't worry, by this time next year 20% of us will have the same opportunity.

Coming Soon: Closing elderly coal and nuclear plants, combined with a shortage of natural gas, will cause serious electrical shortages in Great Britain within 5 years. Zimbabwe and South Africa are patterns for the future. It's the new vacation: you stay home and the exotic experience of third world living is brought to your doorstep.

Redundant: Lowering the bar, a bit of slight of hand once reserved for children's games and presidential expectations, has spread to the world of business compensation. La-Z-Boy's stock has dropped 48% , the company lost $9.9 million, so the bonus targets were reduced so management would not go shoeless, their children hungry.

Buying the Rope: I know the '911' tax on phone bills (and on plane and train tickets, too) has nothing to do with Giuliani campaign, but tell me, does some of it go to pay for Bush's wiretapping us?

Bleu Cheese: A 31 year old trader supposedly defeated Societe Generale's control procedures for nearly a year, costing SG $7 billion. Analysts doubt a single trader could carry out such a scheme "without tacit agreement of the bank's management." It's not just the cheese that smells.

Saturday, January 26, 2008

SAR #8027

War is not the alternative, it's been
the plan for a long time
E. Swanson

Score Card : In George's wars, 4372 American soldiers have died, another 67,671 wounded, and as many as 25,000 veterans have committed suicide. Over 300,000 Iraqis killed, mostly civilians , many children. Saddam was executed and his sons gunned down. Let's call it even and go home.

Shadow World : Japan underwent a recession in the early 1990's, the early stages of which -both in cause and cure - much resemble our current experience. The good news is that Japanese real estate prices rose last year. For the first time since 1991.

Threat : Few hurricanes are predicted to hit the US in 2008; a disaster for the Southeast. No major storms means no major rains. If drought conditions worsen, nuclear power plants will shut down due to a lack of cooling water. Imagine, cities evacuated due to a lack of hurricanes.

Growth Spurt : Bank robbing is 40% more popular in Florida this year than last. Safer, too: the FBI caught 30% fewer of the villains. Out fighting global warming, I guess.

Goliath Goeth : Mexico's Cantarell oilfield, the second largest oilfield ever discovered, continues to decline. It reached its peak of production in 2004 at 2.15 million barrels per day. In December 2007 production was down to 1.26 mbd, a 16% drop from the previous December. It will be effectively gone in 5 years.

Defense : I've just got through calling the police. I'd shot my neighbor's dog. I was sure it would one day get loose and attack me or someone I liked. They were upset until I explained it was simply a pre-emptive act, and that my lawyer, Mr. Bush, said I had the absolute right to defend myself.

Hippocratic Oath : The Fed's interest rate cuts may eventually lower mortgage rates a bit. If the lower rates cause good credit risks to re-finance their homes, it will lower the value of existing mortgage backed securities (they won't earn as much interest) and make them even more likely to default - because those who can't get a new mortgage (and likely to default) will remain in the old, failing ones. First, the rule says, do no harm...

Potato/Patato : Roget says contract, arrangement, understanding, agreement, and protocol mean the same as 'treaty': . Mr. Bush claims these words are not in the Constitution.

For Want of a Nail : Gold has hit all-time highs not because of the inflated dollar, the crashing economy, or credit worries. Simple supply and demand. In South Africa: no fuel, no electricity; no electricity, no mining; no mining, no supply. The other stuff doesn't help, either.

It's In The Mail : The CIA claims its use of national security letters - which compels businesses to turn over information to the government - is always voluntary. Yet it is against the law for a recipient to keep a copy of the letter or to ever admit one was issued. Cooperate voluntarily or voluntarily go to prison.

Friday, January 25, 2008

SAR #8026

No pointing at the elephant.

Wolf Cries Wolf ! Shell CEO Jeroen van der Veer estimates that oil and natural gas supplies will not meet demand after 2015. Meanwhile Russian crude oil exports are down 9% this year. At this rate Russia - currently the world's largest petroleum exporter - will not export petroleum after 2016. Wall Street's a distraction. Soon there will not be enough energy to let companies do enough business keep operating. Keep your eye on the oil supply. Your 10-year-old child will still be in high school in 2016.

Deed Restrictions : 2007's housing sales decline was the largest in 25 years. Median prices dropped over 12% in 2007, the first time house prices have declined nation-wide since the Great Depression.

Movie Critic : I've been losing money in the stock market for over 45 years, and I can't remember anything close, in speed or size, to the Government's reaction to a 'possible recession'. Don't listen to what they say, watch what they're doing. What I see is panic. Panic in their body language, panic in their actions.

All Together Now ! Neighbor's dog barked all night, so I called the cops. They told me that the barking was bothering the whole neighborhood, so they couldn't do anything on just one complaint. That's pretty much the story that EPA chief Stephen Johnson told California in rejecting their attempt to regulate harmful emissions. He said that global warming is a global problem that no one is allowed to solve unless everyone does. Go back to sleep.

Priorities : Hidden throughout the Federal Budget, not just in the official Defense bills, our war machine costs about $1.1 trillion a year. No wonder Mr. Decider said we couldn't afford children's healthcare.

Daily Double : Ice losses in Antarctica have increased by 75% in the last decade and are nearly as great as that seen in Greenland. Both ice sheets are melting faster than anticipated. The race is on and no matter which you bet on, Bangladesh looses.

Growth Spurt : The world's largest oil company is Exxon Petrochina. The other major's are: BP Gazprom; Shell Sinopec and Chevron Petrobras. Times change.

Debt Rattle : A single "rouge trader' who committed 'exceptional fraud' at Societe Generale caused $7.2 billion in losses as SG sold off $70 billion to clean up the mess - which prompted the market crashes which prompted the Fed's .75 point rate cut. A 27 year old staffer did this all by himself, they say. "Exceptional fraud"? Now that I believe.

Intervention: At a critical moment in Friday's Australian Open tennis match, Djokovic's mother grabbed a medallion hanging at her throat, brought it to her lips, and kissed it fervently. A brazen appeal to the Chair Umpire.

Water Wings : Peru already has border disputes with Chile ahio'nd Ecuador. Peru’s water comes from glacial melt, which is predicted to disappear within a decade . When Peru’s 27 million people start wandering into Chile and Ecuador looking for bottles of Crystal Springs, there is a fair likelihood of trouble.

Dire Straits : Politicians cannot admit they are helpless, so they'll pass a small handout to the voters and another tax break for the big guys. Both to little effect. Eventually the truth will sink in: avoiding a depression depends on the kindness of strangers. And they won't do it for free.

Thursday, January 24, 2008

SAR #8025

Fannie Mae is raising the mortgage limit to $625,000.
Because other kinds of stupidity take too long...

Tanta at Calculated Risk.

Apostates' Creed : We've gone from a President who could not tell a lie to one who could not tell the truth. We were willing to impeach a president for lying about a sexual act, but simply shrug at solid evidence that a president, vice president, secretary of state, defense secretary, and national security adviser had all lied over and over in a conscious, coordinated conspiracy to mislead us into an illegal and disastrous war of aggression.

Name Calling : Dr. James Hansen "... allowing construction of new, more efficient coal-fired power plants that do not capture and sequester CO2…. spells doom for life on the planet." And you thought I was a doomster.

Good Hands : Bail-outs for bond insurers (monoliners) are being offered. It seems sensible, for their failure would lead to cascading failures throughout the financial world. Ambac is leveraged 143 times, and MBIA 147 times. If a modest 3.5% of their commitments go south, someone's got to pony up $85 billion. Next.

Don't Forget Aunt Vi ! A Swedish university has received $590,000 to measure the greenhouse gases released when cows belch.

Other End Up : Are oil prices about to tumble due to the US recession? Here's a hint: Kuwait's budget calls for oil revenues to increase by 56% this year, while oil production remains level. Look at it this way: if an apple costs $1 today and will cost 50% more tomorrow, how much will it be tomorrow? Right, $150 an apple barrel.

Child's Play : South Africa is suffering continuous, crippling power outages severe enough to prevent the Tourist Bureau from hosting the 2010 World Cup. Meanwhile, US Energy Secretary Bodman says there is a shortage of oil in the market and OPEC says it isn't so.

Heads Up : As suspected, researchers have proven that women's skulls are thicker than men's.

Rainbow : If there's a deep recession and large numbers of people are thrown out of work while the Usual Suspects get to keep all their ill gotten gains, maybe we'll see some changes. Voices in the streets might just get universal health care, a living wage, and reining in some of the legalized greed. Hoping for bad to get good done.

Headline : Secret Of Scottish Sheep Evolution Discovered. I didn't read it as it could not possibly have lived up to expectations.

Benched : Former Secretary of Labor Robert Reich explains that the US recession is not partaicularly bad news for the global economy, because "consumers in Japan, China, India and Europe are now far better able to fill the gap when American consumers fail to do the job." To the showers, here comes that Chinese relief pitcher.

Socialism : Part of the 'recession rescue' is raising the limit of Fannie Mae mortgages from $417,000 to $625,000. Thank god, now I can get that retirement cottage I always wanted. On the beach. In Hawaii.

New Kids : China and Russia and India have replaced the US as the market shapers for energy and resources. In both production and demand we have become superfluous. We weren't ready to go quietly. We need outplacement counseling, not a recession.

Wednesday, January 23, 2008

SAR #8024

It’s puzzling why bankers had come up with new ways
to lose money; the old ways were working so well.”

Wells Fargo CEO John Stumpf

Drought : DOE is building a salt dome repository for 160 million barrels of oil. It will take 250 miles of pipe so they can pump 50 million gallons of fresh water into the ground to dissolve the salt and pump it again. Every day. For 5 years. Then we're going to buy enough oil to fill it up. By then it'll be $200 x 160 million = $32 billion. Could build a lot of windmills for $32 billion. Solar panels.

Priority : Wall Street's excitement is vastly less important than this: Mexico's crude oil production fell 5.3% in 2007, exports fell 15%. At this rate Mexico will not have oil to export after 2014. The same thing holds for most of the top oil exporters; falling production, falling exports. If there's no oil, no energy, what the stock market does will hardly matter.

100 Ways: BofA : "There's been a change in social attitudes toward default." People who could pay, are deciding not to because they have lost their equity. About 20 million homeowners will owe more on their homes than their homes are worth in the next couple of years. Sneak out the back, Jack.

Brooklyn Bridge : BofA intends to spin off all of Countrywide except for its Federal Savings Bank, and let that entity guarantee payments to bondholders as long as the remaining assets permit. Eventually it goes bankrupt and Countrywide bondholders end up holding wallpaper, while BofA makes off with the bank's $130bn in assets. There are, in fact , laws against this sort of thing. On the books, at least.

Homeland : The war in Democratic Republic of the Congo goes on and on. Ten years now, even though it "officially ended" in 2002. This, the deadliest conflict since WWII, kills about 45,000 a month, mostly children. The DRC makes nothing we want, buys nothing we make. Trees in the forest, they fall unheard.

Really ! A study shows that Bush and Company made at least 935 false statements about Iraq in the two years leading up to the US invasion. The lies "were part of an orchestrated campaign that... led the nation to war under false pretenses." The study was undertaken by the 7th Grade Journalism class at Mencken Middle School.

Bigger House ! Sorry, the overnight Fed Funds rate has no bearing on the rate for 30 year mortgages. Those rates are based on the long-term outlook for the economy, and the long term outlook for the economy is less than rosy.

Precision : China's Petrochemical Corporation announced that the nation's second largest oil field's proven reserves were 11.79% higher than previously reported. Or was it 11.785%?

Elevator Music : Merrill Lynch forecasts nationwide U.S. home prices to decline 25% to 30% over the next three years They cite rising unemployment, $6 trillion in lost housing wealth combined with slumping equity valuations, and predict the worst consumer recession since 1980. These guys are optimists.

Lone Rangers : Some combination of politicians will soon bial out MBIA and Ambac , the biggest bond insurers. We cannot face a $2.4 trillion collapse of the CDO bond market, and without a government rescue it will happen. Sure it's not legal; it is simply necessary.

Sold ! Sovereign investment funds offer the easiest prop for our ruined financial system, far easier than raising taxes to bail them out. We must finance our deficit spending by selling off our investment companies, just as we earlier sold our factories to our foreign competition. It will turn out just as well, too.

Blind Man's Bluff : The market is tanking, so it's no longer a question of if, but how deep and how long will the recession be. Politicians propose a $150 billion cure. Peanuts. If we can spend $1 trillion destroying Iraq, surely we can invest $2 trillion rebuilding America.

Tuesday, January 22, 2008

SAR #8023

The global south may have moral leverage
in global discussions; the north has the guns.

One If By Sea : NATO says the west must be ready to resort to a pre-emptive nuclear attack to halt the “imminent” spread of nuclear weapons. Sort of use 'em or lose 'em.

Pig Pen : The National Academy of Sciences has reports that cropland in the U.S. is being eroded 10 times faster than the time it takes for the lost soil to be replaced. “Globally, it’s pretty clear we’re running out of dirt.”

K-P Duty : Whatever concoction President Bush and the Democratic-led Congress now cook up to minister to the ailing economy is likely to have a chicken-soup effect. Many people will feel better, and things might perk up. A temporary boost, not a cure.

Dropout : Fred Thompson has withdrawn from the GOP presidential primary race. For those of you who are puzzled by this announcement, Fred was one of the rich white guys running for the GOP nomination, second from the right. The wrinkly one.

Coincidence : On the day that NATO embraces nuclear first strike as a tactic and the capital markets of the world plunge, energy-rich Russia has sent two long-range bombers to the Bay of Biscay, off the French and Spanish Atlantic coasts, to test-fire missiles.

Fish Story : Last year 6,000 Africans died in the attempt to escape their crippled economies and reach Europe, a lack of fish in the traditional grounds off Africa's coast spurring the exodus. Trawlers from Western Europe, Russia, and China are largely responsible for the over-fishing. And the deaths.

Clippers : The cost of fuel keeps going up, even for the ships that carry the fuel. To lower costs, shippers are slowing down - a 10% slower passage can save 25% of the fuel bill. Lower CO2 emissions, too. One ship is experimenting with a computer-guided kite/sail to help the engines. What'll they think of next?

Compass : Does anyone remember how we got here? Greenspan slashed interest rates to 1% and kept them there. Banks took this free money; borrowed short, lent long. Now everything's going to hell in a handbasket. The Fed's cure? Lower interest rates! Free cash to buy more stuff from China! Deja vu all over again.

Practiced : The United States has blocked scientists from releasing a report assessing the effects of oil and gas activity in the Arctic. The Interior Department is selling off part of the frozen Chukchi Sea off Alaska. Cheney agonized for several moments before choosing between polar bears and Halliburton.

Fat Lady Sings : Electricity will be missed, far more than gasoline. In much of the world, the grid shuts down for long periods each day, or is off most of the time. Electricity generated by oil and natural gas does not have a future. The world is becoming divided into countries that have electricity and those that do not. Come the day, what little electricity remains will be used to maintain a public services like the water supply and the police. Especially the police.

Waiting for Godot : Remember the good old days when the free market would solve all problems, when regulation was not needed and supervision superfluous? Me neither.

Very Reserved : As of December 31st, the Fed is reporting negative net reserves in the banking system. Seems to mean that all of the banking reserves (or maybe just over 50%) in this country are borrowed. This has never happened before. This can't be good. If you go to an ATM, it will ask you for money. $4.64 seems to be your share. Pony up.

Monday, January 21, 2008

SAR #8022

Free Market Rule #1
The perpetrators are too powerful to go to jail.

Timing : From an e-mail by Paul McCulley, CEO of Pimco, "The authority on bonds": “Sometimes when you are ill, you make an appointment with your doctor; other times, you go straight to the emergency room. Now is an 'other' time. ... Time is of the essence. What needs to be done needs to be done. Now." To quote Calculated Risk, "Some people are really scared." Only some ?

Horses Not Zebras : Studies show major cause of fractures in old folks is falling. This is poorly recognized by doctors, perhaps because, unlike osteoporosis, it is not treatable with drugs. It's the sort of thing one just stumbles upon.

New News : Three oil tankers and a container carrying goods for NATO forces in southern Afghanistan were blown up in Chaman, a Pakistani border town. Two other fuel tankers were blown up in Sranan. Bet you didn't hear about that on PBS this morning.

Strategy : Until the last decade, drug makers tried to stay a step ahead of resistance developing in their targets by developing new antibiotics. But in the past decade major drug makers have dropped out of the field. New antibiotics in development have plummeted from 16 in 1987 to only 5 over the last five years. An antibiotic cures an infection in days. Treating the symptoms can take a lifetime. The economics of cure vs. treatment.

Potemkin Village : Since Bank of America agreed to buy out Countrywide for $6.55 a share, Countrywide's price has fallen to $4.96. Does that mean that 24% of the bloom is off the rose?

Fair and Balanced : Questioned about manipulating elections, restricting the press, firing judges, and letting religious militants run amok, Pakistani President Musharraf said Western Leaders must stop their ‘obsession’ with democracy and human rights in the country. Much as they have in their own.

Tractor Man ! It has been calculated by a number of credible sources that roughly 80% of retail price of food in the U.S. is the cost of fossil fuel inputs. And that's not counting the artificial flavors and coloring.

Waiting Lists : It's true that Canada has a waiting list for many elective procedures. So do we. When is the last time you tried to make an appointment with an endocrinologist or urologist and had less than a sixty day wait? That's if you have insurance. If you don't have insurance the wait is infinite.

Free Speech Museum : To remind future generations of the past, the administration is planning on making the area around the Capitol reflecting pool "free speech pit". Perhaps there will be re-enactments of historic gatherings and demonstrations on certain holidays. Attempts to actually use any 'quaint' First Amendment rights will continue to be suppressed.

Mining Topsoil : As grain prices keep going up, farmers plant more wheat and corn - and make more money. Now ethanol makers are bidding up the price of crop waste - corn stover and wheat straw - that used to be plowed under. Soil fertility will rapidly decrease, but we can always mine fertilizer elsewhere and truck it in, or make it from natural gas. For a while.

On Message : For years Bush has claimed that al Qaeda "hates us for our freedoms, for our prosperity." Bush has pretty well done in the first, now it looks like the markets are going to take care of the second. Expect peace to break out soon.

SAR #8021

No farmers, no food. No diesel, no farmers.
Not intuitive, but true.

More Hints : Reversing itself, Canada is rewriting its training manual for diplomats that cited the US as a hotbed of torture. "I regret the embarrassment caused by the public disclosure of the manual," Canada's Foreign Affairs Minister said. Canada neither withdrew nor apologized for including the US among the world's leading torturers; merely stated they were embarrassed for us. Me too.

Teen Pregnancy : Dinosaurs went through a phase of rapid growth and maturation, complete with teen pregnancy, according to a new study. Imagine telling a horny teenage dinosaur to 'just say no.'

For Your Own Good : One of Britain's biggest property funds was forced to shut its doors to withdrawals following panic selling by small investors. Scottish Equitable said that 129,000 small investors in its £2bn property fund will not be able to access their money for up to a year. The closing was taken "to protect investors following a significant level of customer withdrawals." Ah, they are not letting the customers withdraw their money in order to protect the customers from withdrawing their money.

Ethics : To fill up the tank of one SUV once with ethanol requires enough grain to feed one person for a year.

Sounds : According to historian Andrew Gause, "One thing to realize about our fractional reserve banking system is that, like a child's game of musical chairs, as long as the music is playing there are no losers." Music? I don't hear any music.

Competition : Computer experts claim a mass cyber attack could leave 70% of the US without electricity for six months. An attack not reported in the news media was a recent attack in an unidentified country that "caused a power outage affecting multiple cities." The goal seems to have been extortion, operating much like the local power company.

Understanding the size of the swamp : Look at this another way. Banks have written off over $100 billion in capital. Under our system of fractional reserve lending, most banks are leveraged 10 to 1. A destruction of $100 billion in bank capital results in reducing available lending by $1 trillion. Now do you understand the... concern?

Selflessness : Ever wonder how Big Pharma gets the 'volunteers' for the human trials of new concoctions? Simple, they pay people. Which people? Well, not Donald Trump. The poor, of course. Imagine, all those poor people lining up so rich people can get new and better drugs the very same poor will never be able to afford.

Grouper : Worldwide, the United Nations Food and Agriculture Organization estimates that 75 percent of fish stocks are over-fished. In poor regions fish are the main source of protein. Rich nations grind up the fish and feed it to cattle and cats.

Monoline : Trouble in the $2.3 trillion bond-insurance business (monoline insurance) could trigger another wave of write-downs from banks and brokerage firms. When a bond insurer is downgraded, all the securities it has guaranteed are also downgraded. Ambac, which guaranteed $67 billion, has been cut from AAA to AA ; 137,390 muni bond issues and 114 other securities have been downgraded. New terms to learn, replacing 'subprime' as villaio;0n: monoline and sleazy.