Friday, February 29, 2008

SAR #8061

You do not need ovens to create a fascist state.
. . Naomi Wolf.

Can You Hear Me Now? Sprint Nextel lost $29 billion in the last quarter, mainly "due to a huge goodwill write-off ". A goodwill write-off is finance speak for 'we paid too much for Nextel.' That, and losing a million customers to T-Mobile, did in dividends for the foreseeable future. Another great merger by the Captains of Industry, Inc.

Dictionary Improvement: A journalist for Canadian TV who had been held for four months without being charged has now been designated an unlawful enemy combatant. The Pentagon said Mr. Ahmad was not targeted because of his work as a journalist. Today's dictionary deletion is 'habeus corpus', an old fashioned concept dating from 1305 concerning rights and due process. It is no longer used in today's dictatorship. society.

Revival: Thornburg Mortgage Corp. shares plunged on news that the company "was forced to sell assets in order to meet collateral requirements." This used to be known as a 'margin call.' Down on the docks it's called picking up a marker. On The Waterfront, The Godfather, one of those.

Contest: Make a list of the services your city provides that you are willing to do away with as the recession grows and tax revenues decline, then put them in order from disposable to essential. Don't forget the zoning board.

Swim Wings: More Americans are using their credit cards as a lifeline, choosing to pay their Visa bill before the mortgage. The ATM-like refinancing has stopped, home equity lines of credit have stopped; owning part of a declining asset doesn't put food on the table, but Wal-Mart still takes Visa.

Circle-nomics: We buy their oil and send them dollars. A dollar is an IOU, just a handy way of keeping score. Why are we surprised when they use the dollars we gave them to buy up our factories, farms, politicians?

Wink: Right now, reports say, there are 200,000 newly constructed single-family houses sitting empty in the US, about 370,000 more new houses are for sale because people who contracted to buy them backed out, and an additional 216,000 homes under construction. 760,000 brand new, empty houses would make quite a ghost town.

Scales: The US has more of its citizens in prison than any other nation. One out of 100. For $50 billion a year. Probably more than state governments spend on higher education.

Name That Tune: An Australian Justice of the Peace visiting Pakistan was scooped up by the US, kidnapped and drugged and hooded and sent to Egypt where he was imprisoned and tortured for 6 months, then transferred to Guantanamo where the US imprisoned him for 4 years before repatriating him to Australia. Feel better now? More secure?

Now You See Her, Now You Don't: The American Chemistry Council had Dr. D. Rice removed from an EPA panel reviewing chemicals' safety. She had been the panel's chair. Seems she wanted to include scientific data in the decision process and the manufacturers felt this showed a bias on her part. The EPA agreed. Same tune, different words.

SAR #8060

Why bother with trials if you can hold someone forever?

Truants: A delinquency report card: 34 % of Subprime loans are 30+ days delinquent, Alt-A mortgages 18%, Prime jumbo loans 18%, Home Equity loans 12%. The dog ate their homework.

Bargain: People sit around Starbucks drinking coffee at $55 a gallon, complaining about the profit Exxon makes at $3.10 a gallon. There is more profit in the bottled water at the Grab&Run.

Fixer-Upper: Some of the rough edge need smoothing if we are to move towards a sustainable alternate energy supply. Calm winds in West Texas during a sudden increase in demand triggered an electric emergency leading to a cut in service to some large customers. 'Calm winds' is a curious phrase.

Peter/Paul: South Korea is increasing its import of Saudi oil by 50% starting next month. OPEC says it isn't increasing production. The report did not say what country is reducing its oil use by 50%.

Menu: There's another flurry of articles out today about the world's increasingly thin backstock of grains. Some cite the increased price fuels and fertilizers, some the diversion of 1/3 of the US corn crop to ethanol, some cite climate change and severe weather patterns. Whatever the cause, it's a growing problem.

Tweedledee: Turkey has announced that its 'incursion' into Iraq will "last as long as necessary. There is no need for us to stay there after we finish (off) the terrorist infrastructure… We have no intention to interfere in (Iraqi) domestic politics, no intention to occupy any area.” Sounds vaguely familiar...

Wet Noodle: Chief Justice Roberts wants to know "what can a corporation do to protect itself against punitive-damages awards such as this?” Seems unreasonable that Exxon should actually pay $2.5 billion in damages for destroying Alaskan coastline, wildlife and fisheries. That sort of fine would eat into most of Exxon's profits over the next three weeks.

Pogo: The USAF is denying airmen access to websites having the word "blog" in their name or address. The Air Force explains that it is not censuring the internet, but rather protecting troops from sites that are not "established, reliable sources of information."

Chalkboard: Pennsylvania will stop making student loans next month. The interest rates they must pay on their "auction rate" bonds is so high that the interest charged students will no longer cover the cost the state pays to get the money. The state was able to figure out that loaning out money for less than it costs you is not a Good Idea.

Errata: Left off yesterday's list of new financial terms was "structured finance collateralized debt obligations" (SFCDOs), which have exposure to "residential mortgage-backed securities "(RMBS). Any inconvenience is regretted.

Commons Courtesy: Comcast Corp. admitted yesterday that it paid people to attend a Congressional hearing, hoping to deprive supporters of net neutrality an opportunity to be present. Comcast and other Big Net companies want charge more for preferential access to the internet by both users and sites. It seems overkill for a corporation to buy seat warmers on the panel and in the audience.

Truth or Dare: There are now over 900,000 names on Homeland Security's list of potential terrorists, which includes thousands of names belonging to US consumers citizens it suspects of being domestic terrorists . Question: If you file a Freedom of Information request to see if you are on the list, will you be on the list?

Thursday, February 28, 2008

SAR #8059

Nobody loved Cassandra.

Rosebud: The 42 room Hearst Mansion on Florida's Jupiter Island went for $22 million at a foreclosure sale at the Palm Beach County Courthouse. The owner, William Randolph's widow, defaulted on $40 million in loans secured by the property. There goes the neighborhood.

Medal of Freedom? Moody's reaffirmed MBIA's AAA rating today, and kept Pfizer's investment rating at Aa1. MBIA's return on equity is a -35%, while Pfizer actually makes a 12% profit. MBIA lost -$15.22 a share, Pfizer made $1.20 a share. Moody's existence is based on the ratings it gives MBIA, Pfizer pushes pills. For service to the US financial sector above and beyond any sense of propriety, Moody's should be given George Tenant's Medal of Freedom.

Photo Finish: In January, California foreclosures just exceeded home sales, 19,821 to 19,145 .

Depreciation! Has oil really gone up in price? Two weeks ago oil was 65.3 euro /$94.05 a barrel and Tuesday it was $100.82 a barrel but only 67.6 euro a barrel. Up 7.2% in greenbacks, but only half as much, 3.5%, in euros. Is the problem expensive oil or a cheap dollar? Is it Exxon or our massive debt that is driving up the cost of imports?

English 401: Define the following: Sub-prime, Alt-A, Interest Only, Liar's Loan, Credit derivative, Credit swap, ABS, MBS, Special Investment Vehicle, Sovereign Fund, Special Purpose Vehicle, Variable Interest Entities, Auction Bonds. Answer: Bad Ideas.

Gospel: U.S. home foreclosures for January increased 57% from a year earlier, only 8% higher than the prior month. Like our budget deficits, the rate of increase is decreasing even though the rate itself is still increasing. According to the government, this is good news.

Q&A: In an interview with U.S. News, Bill Gates, CEO of PIMCO, the world's largest family of bond funds was asked: Is it necessary for the government to subsidize mortgages? To which this captain of capitalism replied simply: "Yes." Here endeth the lesson.

Observation: To date the governments attempts to bail out the bankers and mortgage investment leaders have been about as successful as any other 'Save the Whales" campaign.

Cradle of Civilization: As recently as 1929 there were only about two billion people on the planet. That's the number that scientists say the planet can support. If we want to meet reasonable goals for human society, nine billion people are too many.

Savior? Fannie Mae, the largest source of monehy for US mortgages, lost $3.2 billion on credit derivatives in the last quarter. This is the agency that is going to bail everybody on Wall Street out? Seems like just another greedy investor chasing higher yield into the dumpster.

Things Could Be Worse: Citigroup admitted that the investment geniuses in their trading department lost $100 million or more in a single day on 15 different days. Morgan Stanley lost $390 million in one day's trading. Flipping a coin gives a 50/50 chance and is a lot cheaper than these guys' salaries.

Tuesday, February 26, 2008

SAR #8058

"I always thought if you worked hard enough and
tried hard enough, things would work out. I was wrong."

--Katharine Graham

Just Relax: After Eli Lilly's suppressed clinical trials were obtained from the FDA under Freedom Of Information requests, a major review concluded that patients taking placebos improved just as much (or as little) as those on Prozac. The National Institute for Health suggests counseling be tried. It was unclear if this suggestion was directed at the management of Lilly.

So'wester. Mexico's oil money is evaporating. Budgets are strained. The US economy is down, so are remittances home from Mexican workers in the US, just as food - especially corn - is becoming more expensive. Drug cartels are the effective government in much of northern Mexico. The common folk have three choices: Hide, Fight, or Flee. They are now hiding. They are not strong enough to fight. That leaves Tucson.

Saddle Up: The world has about 70 days of grain stores left. Worldwide, people obtain around 70% of their daily calories from grains: specifically corn, wheat, rice, and millet. Prices are going higher. Ever more serious food shortages will be featured on the evening news this summer and fall. Better fill up the car, price of ethanol is going to rise.

Credulity: After being mislead by so many for so long, it seems reasonable that the Grab&Run clerk who "bought" a house with a no-money-down, payment-option, adjustable rate mortgage cannot believe that her home is being repossessed and wants the government to Do Something.

Constitutional Law: The next time the administration celebrates murdering reports killing people terrorists in Pakistan with a Hellfire missile launched from a Predator drone, or strafes a village in Somalia, remember that dropping bombs on other nations is generally considered an Act of War. Then try and remember just when it was that Congress declared war against Pakistan or Somalia.

Qui Bono? Visa is offering to sell half of itself to the public. Why? The banks that now own Visa need to raise capital. The banks that now own Visa are looking to sell off their liabilities in two lawsuits, one for cheating customers on foreign exchange charges, one for anti-trust violations. The offering is priced so that the public will bail out Visa and the banks will still end up owning half the company. Heck of a deal. For them.

Footprint: Eat locally and lower your carbon footprint, they say. How much can one glass of orange juice hurt, right? Well, first the diesel used in the groves and harvesting, and the electricity in pulping and squeezing and then the packaging and diesel to get it to the store. And the water. It takes nearly 50 gallons of water to grow and process one glass of orange juice.

Heinz: Repossessions rose 90 percent last month from a year ago. Banks will have about a million foreclosed properties to sell this year, forcing prices down even further, More than 1 percent of all US households were in some stage of foreclosure during 2007. Total foreclosure filings increased 57%. Pass the ketchup.

3 Card Monte: Citigroup, which incurred $22 billion in subprime losses, expects $10 - $15 billion in other credit derivative write offs, and has $320 billion in "significant unconsolidated VIEs." VIEs are Variable Interest Entities - they were known as "Special Purpose Vehicles" when Enron used them to hide their shady deals. VIEs are worth as little as 27 cents on the dollar. Is there a snowball's chance in hell that Citigroup is solvent?

Monday, February 25, 2008

SAR #8056

We are no longer "The American Citizen"
and have become "The American Consumer".

Immediate Openings: The FDIC has been "bulking up" its staff over the last several months in anticipation of a wave of bank failures numbering in the hundreds, many in the Rust Belt, along with California, Florida and Georgia. The agency is also advertising for bids from outside firms to manage mortgages and other assets from failed banks. FTA: Fun, travel, and accounting.

Talking Points: New housing data is out. Headline said "Sales Slipped". Here's "slip": Existing-home sales down 23.4%. Prices down 5.1%. Unsold inventory: Up 5.5% to a 10 month supply, highest since 1982. Play on.

Re-Appraisal: On their first visit to a Chicago townhouse they bought at a foreclosure auction, the new owners found a human skeleton in a red tracksuit. Next to him lay a dead dog. It was the previous owner, who apparently stopped paying because he was dead. The house had traded ownership three times since then, but no one had actually inspected the place.

Sorry? Countrywide's executives are throwing a party at the Ritz-Carlton Bachelor Gulch ski resort in Avon, Colo. Rooms are $750 a night. Supper at Spago will go $110 before the wine. Don't worry, the company's picking up the tab for 30 representatives of smaller banks for three nights, all included. Countrywide's stockholders, who have lost 80% of their investment in the last year, are not invited.

Friday the 13th Part VIII If the US had no "peer competitor", how could the Pentagon justify its $750 billion budget? No problem, they'll always have China. Pentagon strategists talk about U.S.-China competition for energy in Africa, in the Caspian Sea basin, and in the Persian Gulf. The US has to be able to counter them, it's our oil.

Seeds of Doubt: For several years now I have invested on the idea that Peak Oil was real, that shortages were coming, and that energy prices were heading up. I've done pretty well at it. But now I have to reconsider; Greenspan is saying the same thing.

Rule Britannia: North Sea oil and gas are running out, world oil stocks are falling. The UK’s last few nuclear plants are of interest only to demolition contractors, as are many of its older coal-fired power plants. One third of the UK’s current generating capacity will be gone by the middle of the next decade. They'll always have Trafalgar.

Reading Comprehension: In their September 2007, Citibank listed $3.0 trillion in credit derivatives and JPMorgan $7.8 trillion. Since then Citibank has taken over $18 billion in write-offs and wanders the face of the earth seeking cash infusion from the Chinese, Dubai, etc. JPMorgan, on the other hand, is playing Caesar's Wife, with no losses to report. How's this possible? Hint: In May 2006 Bush gave his intelligence czar authority, in the name of national security, "to excuse publicly traded companies from their usual accounting and securities-disclosure obligations."

High/Low: The spread between corporate bond yields and 10-year Treasuries exceeds 3 percentage points, the widest since the Depression. Some say this is a sign bond investors are increasingly worried about corporate defaults. I just take notes.

Public Service Announcement: Sunday evening, 60 Minutes ran an expo of Karl Rove's trumped up prosecution and jailing of Alabama's Democratic Governor Don Siegelman. If you live in Alabama you may want go to 60 minutes website and view the program, which was blacked out by CBS stations in the state. Technical difficulties, same as with voting machines in Ohio.

Sunday, February 24, 2008

SAR #8056

The problem with globalization is that there are some things
cheap labor can't produce - oil among them.

.. The Daily Reckoning

Dictionary: Webster's Newest Collegiate Dictionary announced Sunday that the definition for pathetic had been shortened to read simply "Ralph Nader."

Where's Waldo? If the monolines get downgraded, the banks have north of 175 billion in losses at stake. Big excitement Friday when 8 banks were said to be meeting over the weekend to come up with $3 to $10 billion to rescue Ambac. Bank of America plopped down $4 billion for Countrywide's mess, no problem. Yet 8 banks cant come up with, at most, a little over $1 billion each to save the bacon? I just don't get the joke.

Fair's Fair: The man in the ski mask walked into the bank, brandished a gun and yelled out "You took my house, now I'm going to take your money!" The FBI is reviewing the bank's foreclosure records for clues. The suspect is presumed to be ARM'ed and dangerous.

Your End of the Boat: There is far too much debt in the economy compared to real earned income. We all wandered into this mess alone, as individuals, corporations, governments - each in our selfish and greedy ways, trying to maximize our slice of the pie. But we are all in the same boat; just because your part of the deck isn't wet yet doesn't mean the boat isn't sinking.

End Construction Zone: Taxes on a gallon of gasoline are fixed, not a percentage like sales taxes. Nation-wide, the average tax per-gallon is 23.6¢ for state and 18.4¢ for federal taxes. Gasoline taxes are nearly the sole source of funds for highway building and repair. With more economical cars and fewer miles driven per car, highway trust funds are expected to run out of money soon. To hell with potholes and falling bridges, we don't want no new taxes round here! We prefer to let Spain build toll roads.

Bargains! Commercial real estate mortgages are going bad at a faster rate than sub-prime did a year ago; banks are taking 50 cents on the dollar. Get yours while the getting's good.

Take a Deep Breath: Nepal is suffering shortages of petroleum, cooking gas, and electricity, and has gone to an even/odd plate number rationing of gasoline. To encourage the government to find a magic solution, the Consumers' Struggle Committee has given the government 15 days, or else they'll "cut the power supply to the minister's quarters."

A Walk In The Park: Washington Mutual issued $500 million in Alt-A mortgage backed bonds in July 2007. $476 million of this was rated AAA . As of now - only 8 months later - 13.4% of these have already foreclosed. In December, 5% of the homeowners mailed in the keys and walked away. Just walked away.

Nothing Personal: A division of Turkish troops invaded Iraq. Yet the Iraqis continue to ship 350,000 barrels of crude to Turkey. This raises money the Iraqi central government will need to fight their civil war with Iraqi Kurds once Turkey goes home.

Hymnal: The USDA says wheat stocks will approach zero this year, and stay there. We've passed Peak Wheat and are heading into wheat's own Olduvai Gorge now. Let us now join hands and sing "We Shall Overcome".

Little Minds: Other than a couple of CEOs, there doesn't seem to be much loss of either face or job in the investment houses, even though the leaders and top managers screwed things up not just in sub-prime, but in credit derivatives, bond insurance, credit swaps and now commercial real estate. Consistency counts.

Words of One Syllable: To clarify the problem with the credit market and the economy, picture a long conveyor belt running from an immense pile of money down to a huge furnace at the far end. Every time a house is foreclosed, two big guys throw money equal to at least 10 times the amount of the mortgage (those credit derivatives) on the belt and it trundles off to be burned. Whoosh, gone.

Saturday, February 23, 2008

SAR #8055

Those who think military spending will decrease
after Iraq have not been paying attention.

Hush Money: Bank of America secretly has asked Congress for a bailout for troubled banks reaching far beyond the $200 billion the S&Ls owners got from Reagan, perhaps as much as $739 billion. But, they are quick to point out, "We believe that any intervention by the federal government will be acceptable only if it is not perceived as a bailout of the bond market." They also said they would manage this project for only a few hundred million a year.

Our Daily Bread: Flour costs posted in an Ottawa bakery: August 2007 - $23.92 February 2008 - $60.48 for 40 kilo. For the math challenged, that's about a 250% increase.

Falling Demand: Markets are ruled, we are told, by supply and demand. Indonesia has decided to cut its demand for crude oil by 1.5 million barrels a day because "crude oil is so expensive." This is called "demand destruction."

Fire and Ice, Revised: Which will get us first, global warming or peak oil? I'm inclined to think that we will burn up the fossil fuel as fast as possible (see yesterday's Coal-to-Liquid rant), crash our economy, then face the decades of disaster without the economic strength to do anything. Which form of suicide do you favor?

Petro the Great: Russia, the worlds 1st or 2nd oil producer (they alternate with the Saudis), is concerned about the decline in its oil production. Their 9% GDP growth rate gobbles up oil quickly. Less production, more consumption, much less for export.

Closed Circle: Our dependence on biological production is absolute. World cereal production per person peaked in the 1980s, and has since slowly decreased. There are two limiting factors. One is phosphate: it is not clear where future reserves might lie. But the more immediate problem is water. Water scarcity, already acute in many regions, will get worse.

Civilization: We live in a world where almost ten million children under five years old die every year from preventable causes. Five million people were killed in the Congo over the last decade; no one in the developed world noticed. People all over the planet are suffering, and no one is coming to their aid. It's an uncaring world, and the sun will come up tomorrow.

Head On: Sub-prime losses cost the bankers $160 billion. "Prime" mortgages defaults will top $320 billion, plus another $300 billion in "Alt-A" and "Interest-Only" defaults. Now 'securitized' credit card debt looks iffy and the car repo business is picking up. Take two aspirin and call your broker in the morning.

Just Say No: Can we stabilize climate in the future? Halfway measures won’t do. To stabilize our planet’s climate, we need to kick the carbon habit altogether. No more coal fired power plants, no more natural gas warmed homes, no more gasoline powered cars, trucks, tractors, planes. If we did that today, the temperature will still be elevated in 2500. Why bother?

Proportion: A $1.2 billion B-2 Stealth bomber crashed in Guam. Thankfully the crew safely ejected. Earlier the Administration canceled the Carbon Capture and Sequestration project (which might just save our economy and slow global warming) in order to save $250 million.

Success, Sort of: Last year, with little more than a "there, that's done" attitude, the Chinese destroyed a satellite in space. With great fanfare, we managed the feat this year. Did anyone note in the flag waving when we, with great fanfare, did it last week, that the worlds only superpower was following in China's footprints?

Friday, February 22, 2008

SAR #8054

Trickle-down economics - the idea that if one feeds the horse
enough oats, some will pass through for the sparrows.

. John Kenneth Galbraith

Suicide Note: China acknowledges that “substantial and long-term reduction in net global greenhouse gas emissions” is essential. Thus they are only building three commercial scale coal-to-liquids plants. So far. Making Nazi CTL fuel "guarantees the end of the planet’s livability by 2100.” For its part, the US has abandoned efforts to develop carbon sequestration and is building more coal-fired power plants. Asphyxiation.

Real Estate Problems Spread: Rep. Rick Renzi (R-AZ) has been indicted for extortion, wire fraud money laundering and making poor choices involving conveying government land to some real estate developers. The price was $4.5 million.

Mulligan: On Feb. 13, the Administration, faced with a faltering economy, announced it would be shutting down the government's economic data site " due to budgetary constraints." Thel press - NYT, WSJ, Forbes - cried foul and accused the Bushies of hiding unflattering data. Today it was quietly announced that $17.83 had been found in an undisclosed location and the site would remain available.

Slummybrook Farm: The subprime crisis is just the tip of the iceberg. Fundamental changes in American life may turn today’s McMansions into tomorrow’s slums. The details are on-line in the Atlantic. Go read.

Field Trip: In defending his decision not to send US troops to Darfur, The Liberator of Baghdad said that "foreign troops would only be divisive." He observed: "Outside forces that tend to divide people up inside their country are unbelievably counterproductive. In other words, people came from other countries — I guess you’d call them colonialists..." Travel seems educational.

Castrato: Explaining its intention to continue the embargo of Cuba, a US government spokesman said, "Castro may be gone, but we can never lift the embargo on Cuba as long as that government is engaged in torture, wiretapping, secret military tribunals, warrantless arrests and indefinite incarceration....

Hands, Please: Ten thousand Turkish ground forces have pushed into Iraq, widening their conflict with Kurds who are, nominally, Iraqi citizens. The US has urged Turkey to bring current military operations in Iraq to a swift conclusion. How many out there think the Turks did this without getting the car keys from Daddy?

Danger, Danger! The US has warned Serbia that if they burn down another of our embassies we are going to Do Something. That'll make everyone respect us in the morning.

Sit In: The New York Times sat on the McClain story for months and only published it when The New Republic called them and said they were going to go with the story that NYT was protecting McClain. Remember, the Times sat on a report revealing NSA's wiretaps for a year, and didn't publish until after that fall's elections and only then because a book on the program was being published.

Creationism: The Bush devotion to the free market/globalization philosophy has lead to the un-creation of 209,000 jobs in Ohio from 2000 to 2007, 3.7% of the workforce. During the same time Michigan lost 9.1% of its jobs. Have you ever read a piece where "greed" could not be substituted for "free market forces" or "globalization"?

Three Little Words: It's simple, we have a serious Depression in housing (another 25% down in prices according to Merrill Lynch), Inflation is ready to pounce (4.6% in December, and rising) and the specter of Famine if this year's grain harvest is sub-par (we're down to 51 days supply). Depression, Inflation, Famine. I love you, too. Keep your hands off.

Saving Behinds A DuPage County Illinois school district has refused to give the NCLB tests to students who do not speak English. You would think that was reasonable if you had no experience with mandatory federal testing. Everyone gets to take the same, non-discriminatory tests: kids that speak little English, the autistic, kids with learning or behavior disorders. At least the kids in Illinois are learning about civil disobedience.

A Capital Idea: Panicked bankers are now begging the fedsa to buy up the risky and bad mortgages they handed out in the last few years. Let's do it. But instead of taking their bad paper, why don't we-the-people rescue the banks the same way Dubai and China and all rescued Citbank, Bear, Morgan and friends. We'll provide the billions and the failing capitalists bankers give us their shares in the banks. None of this socialism for capitalists. The Peoples' Bank of The United States - has a nice ring to it.

Thursday, February 21, 2008

SAR #8053

Peak oil -- a dismal theory that keeps getting more plausible.
Paul Krugman

Joe McCarthy: Senator Collins (R-ME) wants to resurrect the McCarthy days and the House Un-American Activities Commission. She thinks we need a standing Congressional commission to investigate the loyalty and subservience of the citizenry by investigating “violent radicalization,” “homegrown terrorism” and “ideologically based violence.” A pending amendment to her bill would add "voting Democratic" to the offenses. Another amendment would strike 'Democratic' from the previous motion.

Definition Inflation is when the price of stuff goes up because there's more money around chasing it. The CRB Commodity Index is 60% higher today than just 5 years ago. That is a 10% a year increase in the price of stuff. That's inflation. No mater what the data from the US government says. That's why they're going to stop publishing economic data. They don't want us to worry. (Go here and click on some of the charts.)

People's Exhibit #72: A Boston area restaurant's routine supply order from Sysco was short a 50# bag of flour. On the invoice it was listed as "Out of Stock." What, me worry?

Time Travel: Location is not everything in real estate; time seems to count too. Seems that after a house has been 'listed' for a while it becomes an unattractive old hag. But if after 70 days the listing is canceled and re-listed the next day, the clock starts over at zero. Time travel at the corner of Maple and Old Hickory.

Home on the Range: We're building a 700 mile border fence to keep illegals from crossing into Texas. Except for across Ray's place. Texas who had turned away surveyors for the fence were given 30 days to permit access. Except for Ray. Ray Hunt, Texas gazillionaire who put up $32 million to fund Bush's library at SMU. The fence ends at the edge of his property.

Asleep at the Wheel: Reading on some arcane aspects of the monoline bond insurers problems, I was stunned to come across this: "with economists now estimating that as many as one in four of the mortgages written since 2005 will not be repaid." Woke me right up.

A Little Viagra, Please: The price of the 50 top-selling drugs rose an average of 7.8 percent last year. Luckily, the VA is able to negotiate prices that are 40% less than the market. There is no obvious reason that Medicare, which represents a much larger share of the market than the VA, would not be able to negotiate prices comparable to the prices negotiated by the VA, other than Bush's gift to Big Pharma. They probably gave him a tie for Christmas, something like that.

Extra! Extra! The economic news. A Harvard economist believes that the total loss from real estate loans, car loans, credit card loans, and business loans all going bad will be over $1 trillion. Big money at my house, especially in that the total capitalization of all the banks in America is about $1 trillion.

Grain Drain: The Agriculture Department believes global demand for wheat will continue to exceed supply again this year, making it 7 out of the last 8. That will push wheat stocks to their lowest level since 1948. World grain stocks have fallen from 200 million tons in 2002 to 100 million tons today, while the price has risen from an 2002 - 2006 average of $4 to well over $12. Grain farmers need to harvest record crops every year to meet increasing global food demand and avoid famine. Global grain stockpiles fell to about 53 days of supply last year, the lowest level since record-keeping began. Sell gold, buy grain.

Wednesday, February 20, 2008

SAR #8052

Access to energy is a prerequisite to human development.
Fatih Birol

Yogi Berra Memorial Prize! Headline: Forget about crude going to $100 a barrel. "Despite oil's record high last week, forget about crude going to $100 a barrel. Prices have already dropped about 7 percent since last week, and are likely to fall even more in the coming years. That's the consensus of analysts, who say rising production, the advent of biofuels, and conservation measures will likely lead to oil prices in the $20 to $60 range by 2015." CNN, August 7, 2007.

Pull the Other One: George "Supreme Court" Bush, on Castro's retirement, urged Cuba to let citizens chose the future, "and I mean free and fair, not those staged elections the Castro brothers try to foist off on the people." Then he offered to lend them Ohio's voting machines.

Pawn Shop: Citibank is selling off its assets. Their office building in Japan went for $450 million. If you'd like to bid on their Brazilian credit card business, make an offer in the $600 million range. Maybe less, these people really need to raise some cash. Maybe a pawn shop across the street from 399 Park Ave...

How High Is Up? The IPCC thinks it is "very unlikely" that the Gulf Stream (North Atlantic Meridional Overturning Circulation) will collapse during this century. They also didn't think Greenland was melting as fast as it is, nor that the Arctic would soon be ice free either. Would you get on a plane if there was "only" a 10% chance it would crash? And what about soon after 2100? Are we like the person who has just jumped off a cliff, taking comfort that the next few seconds are going to be pain free and not worried about the long term outlook?

Double Reverse: The US, Bush says, is not planning to build new military bases in Africa and played down the risk of rivalry with China for influence on the continent. Naming rights for the base will go to the reader first correctly identifying the country where these bases will be built, ours and theirs.

Staking a Claim : Industry expert (i.e. banker) Michael Lynch of Strategic Energy and Economic Research says that the price of gasoline will not be affected by crude oil's rapid climb to $100 a barrel. "It's a psychological thing," he said, "like finding a bat and getting scared and then you realize, it's just a mouse with wings." So's a vampire.

Call Him Smokey: Credit problems continue to spread, not just through other ranks of mortgages, but also commercial real estate, muni bonds, and credit derivatives. is sweeping through the banking/investment business very quickly and more securities are going under. Treasury Secretary Paulson called the sub-prime defaults "a spark in a dry forest." That makes him and Bernanke smoke-jumpers.

Next Stop, Brooklyn: In Western Bohemia, between December 5th and January 11th, someone stole a 4 ton iron railway bridge. Bet they wondered why the train was so late.

Ugly Betty: China is building a coal-to-liquid plant in Inner Mongolia, with many more to come. The ultimate insult to the environment, right on time and right where it was expected. US Coal companies are just waiting for the phone to ring and get invited to the dance. I told you we weren't going to do anything about global warming except make it worse.

Future Shock: V___ , a medium sized city, will be broke by June. The usual suspects:City salaries are too high and pension plans, especially for the police and fire departments, are too generous.. The tax base (property values) is falling and the citizens are unwilling to be taxed at higher rates. The city needs capital improvements but is unable to afford new bonds. Payments on old bonds are coming due with no money to pay them. Just put in the name of a different city each week and speed read.

Trivia: The 8 warmest years on record all occurred in the last decade. For 7 of the last 8 years, the world has consumed more grain than it produced. Grain stocks are now at a historic low. Twenty percent of the US grain harvest is now being turned into fuel ethanol.

Tuesday, February 19, 2008

SAR #8051

Net worth is always measured after taxes.

Goldilocks: How much surplus housing is there? If we viewed the entire US as a single market with all houses being equal, we would not need to build another house until 2010. I know, I know: Houses are not identical; yours is above average.

What's On TV? Research shows that the French get away with eating all that rich food and drinking the wine and eating the pastries because they stop eating when they're full. Americans eat until their plate is clean, until the program is over, until the beer and chips are gone, the whole damned Happy Meal.

Preview: A Reuters story reporting that Russian refineries will use 300,000 barrels of crude a day over the next 3 years was interesting because of its conclusion: "As crude production growth flags, that could mean a cut in exports." Not startling, you heard it here first: what gets used at home doesn't go to market, and producers are using more and more at home.

The Commons: Ask people if they are worried about global warming, they say "Yes!" Ask if they're willing to help reduce it, they say "Yes." Ask if they'll pay $10 a day in carbon taxes and they say "Let's wait and see how bad it gets." The average person just doesn't see this as a problem serious enough to make meaningful sacrifices over. We've done nothing since Kyoto. And we won't until the environmental cost become prohibitive. And then it will be too late.

Memo: Immediately after the Titanic hit the iceberg, there were two types of passengers: those who realized that the ship was sinking, and those who would soon realize that the ship was sinking. Can't remember what brought that up...

Punchline: The National Association of Realtors is running national television ads saying there has never been a better time to buy a home. Never.

Progress: When I was in short pants, bankers lent money based on Collateral, Character, and Cash Flow. By the time I retired there were NINA loans (No Income, No Assets) and the popular Liars' Loans. Now the parade is huddled under the overpass to get out of the rain because banks have rediscovered the idea that borrowers should actually be able to pay back the loan. It is not a "liquidity" problem. The problem is we're broke.

Urban Myth #487: Turns out that the dangerous sex fiends and Republican Congressmen are not lurking on the web after all. "Unjustified over-reaction" was the description offered by researchers. What goes unchallenged is the fact that children are most likely to be abused by a straight male relative.

Scrabble: Today's word: 'Deflation' explained: Behind the alphabet intimidation of CDOs, CLOs, ABCPs & CDSs were humble real things: mortgages, corporate debt and not quite so real things: inflated price mortgages, credit receivables (cards, cars). The ABCs created money out of thin air and that money chased up the price of assets like cars and houses and stock. The money is now evaporating and the price of assets is going to return to earth. It is called deflation. How much? Well something on the order of $45 trillion was magicked into being. Divide to find your share and deduct that from the value of your assets. That is 'Deflation." Class dismissed.

Monday, February 18, 2008

SAR #8050

Government : those with a monopoly on force.

They Won: The terrorists have long since won. Giving up our Constitutional rights was not enough, now we are spending billions on SWAT team gear for the small towns in America while our roads and bridges and parks and healthcare fall into ruins . We give billions to subsidize impractical ethanol production at the cost of food, clothing, and shelter for our homeless. If it was about values, we surrendered.

Dumber: Housing became a Ponzi scheme when the bank and the borrower both bet the house would appreciate enough so refinancing forever would keep the loan afloat. So too did corporate bonds when their ever-rising "value" in the slice and dice pit allowed the interest due to be paid by issuing yet another bond.

Rehearsal: Harlem's 94th District is pretty black, yet Obama got zero votes there, or in 80 other polling places in the city. The proposed solution is to buy new electronic voting machines. It's November 4th; do you know where your vote is?

Econ 201: Credit Default Swaps: A way of speculating on the ability of a company to pay its bonds. There are $45.5 trillion of these bets. The total market value amount of the underlying bonds is $5.7 trillion. For example: There is $1 trillion in swaps bet on GM, yet its entire market value is $15 billion. When Delphi went bankrupt, the credit default swaps were ten times the value of the underlying bonds. If only 5% of all corporate bonds fail during this recession, nearly $3 trillion in losses will follow. Who's watching the children?

Obese : The population grows each year; our land remains the same and our resources diminish. To maintain our consumption-based society, we import 65% of our oil, borrow $3 billion a day, including $400 million to pay the interest on the national debt. Growth is the basis of our existence. More people, more consumption, more oil, more imports. How much longer can you hold your breath?

Under-served: The Grameen Bank became famous for its "microfinance" approach to helping Bangladeshi women start small shops and home-based production. The bank, which started with $27 and now has over $6 billion in assets, has opened offices in NY and so far has loaned $50,000 to immigrant women in the city. They were not Citibank customers.

Job Security: The Holy Grail turns out to be splitting the monoline insurers into 'safe' and 'disastrous' halves. The trouble is that this tramples the rights of the shareholders, of the insured, and of those stuck with the bad paper. These days, when you rob Peter to pay Paul, Peter gets a lawyer. Usual prize goes to the closest estimate, in whole years, that the litigation will last. Bonus points for the number of lawyers involved, to the closest 1,000.

Cradle of Civilization: Ten million children under age five die every year from preventable causes. Five million people were killed in the Congo over the last decade and no one noticed. People all over the planet are suffering. It's an uncaring world, and the sun will come up tomorrow.

Sunday School: After the recall of 150 million pounds of tainted beef, Hallmark's CEO said "Hallmark has never been found in violation of USDA rules." When it was pointed out that as recently as 2005 Hallmark was cited for several violations, he added "We certainly wouldn't have failed to disclose that, if we knew it was in the public record."

Fries With That? In London, Italian restaurants are warning customers that spaghetti may soon be off the menu. Blame falls on Italian farmers, who used to grow the durum wheat UK pasta was made from. Now the farmers are cashing in by selling it for biofuel.

Sunday, February 17, 2008

SAR #8049

Cemeteries are full of the rich and the beautiful.

Trouble On Tap: Hops have increased as much as 400% in the last year, driving up the cost of beer.

Two Faces of Eve: Bush's budget killed government research into 'carbon capture and sequestration' otherwise known as Clean Coal. The folks dumping the tops off mountains into Kentucky's creeks, known as King Coal, are continuing to pollute the environment, make profits, and kill the planet.

Little Mary Sunshine: Jim Rogers, the famed investor who predicted this recession and made billions shorting the shares of tanking Wall Street investment banks, is "extremely worried. I just see things getting much worse... We could have just had a recession, but Bernanke is printing huge amounts of money, and Fed is out of control. It's not a good scene."

Shoemaker's Kid: In the world-wide scramble for ever more oil, China is universally seen as the 600 pound gorilla, with a thirst growing at 6% a year. Hidden in China's shadow, the economies of the Gulf oil states are a very close second at 5%. What they use at home, they don't ship to us.

Take 2 Aspirin: The British government, which has already spent £55bn ($100 bn) stopping the first run on a British bank in over a century, has now nationalized Northern Rock. This is "temporary, only until market conditions improve. Saver's deposits will be secure and the taxpayer-owners will benefit as the bank grows." Each Brit has decided to put up $2500 as part of this investment.

Surge: The surge is working, Bush claims. Normalcy is returning to the cities, he says. As proof, the cost to be picked up at Baghdad airport and driven the six miles to the Green Zone is now only $3,000. Tip not included.

Fixer-Upper : Each of the 60 outlying communities in Cuyahoga County (Cleveland) have been hit by waves of foreclosures. Slavic Village with 1,500 abandoned houses is the worst. In Cleveland, HUD has 120 houses it cannot sell - even for a dollar. But it can't happen here, my neighborhood's not going to devalue.

Eternity: David M. Walker, head of the Government Accountability Office, announced Friday that he would resign his position effective March 12. That means Bush gets to appoint his successor, who will serve for fifteen years. Government accountability, my foot.

Eat Your Gruel: Never mind gold, or that oil prices are at $100 a barrel again; what is really catching the analysts' attention is the outlook for agricultural prices. Goldman Sachs thinks "we could go into crisis mode in many commodities sectors in the next 12 to 18 months, and agriculture is key here."

NPK? In Arkansas, farmers will grow zero rice this year; fertilizer costs are too high. Rice is at $16 a bushel and going higher and farmers cannot profitably grow the stuff. None of this 'bigger truck next year' stuff.

Nag, Nag, Nag: The banks' negative net borrowed reserves still bother me, because they are growing. Without the Fed's "Temporary Auction Facility" the US banking system would be closed by now. Bankrupt, gone, along with ATMs that don't give out money, checks that don't get cleared and credit cards good for scraping windshields. Doesn't seem to bother but a few of us.