SAR #9077

The first thing you need for a market is a mark.

Contract? What Contract? In a blow to the sanctity of contracts, a bankruptcy judge has ruled that contracts between governments and public employee unions do not have to be honored if it inconveniences the government. It'll probably feel different when a judge rules that a contract between investors and the government do not have to be honored either, like bonds.

Small Change: Nearly 75% of small businesses had their credit limits lowered and/or interest rates raised by December 08, while 70% of US banks have tightened credit rules for small business.

The Well Grasped Straw: The headlines read "Housing Starts Rebound!" Did they? Single family housing completions were 8.8% below January, single family housing starts were 1.1% above January, and single family permits were 11% above January. More are planned, fewer started, fewer completed. Completions of "privately-owned units"were up 2.2% from January, down 37% from 2008, Starts of "privately-owned units" were up 22% from January but down 47% from 2008. Someone is building a lot more condos in February than January. Optimists.

Sex Change? Has Ann Coulter morphed into Fox's Glen Beck? Not really, for Coulter said outrageous things for the publicity. Beck appears to believe the bizarre things he makes up.

Payday Advance: Goldman Sachs has started a Payday Loan branch in its main lobby, offering hundreds of thousands of dollars to over 1,000 employees who lost serious money on their Goldman Sachs funds. Presumably the interest rate will be lower than the 400% annual charged to the working folks from Walmart.

Tic Tock: The Treasury International Capital (TIC) report showed that foreign holdings of Treasury bills decreased by nearly $150 billion in February. They're on a diet, waiting for the big offering later on.

Unintended consequences: DEA sprays Roundup on coca plants. Most die. Farmers propagate the few that survive. Repeat for years, until spraying is a waste of money because the entire region grows Roundup-Ready coca. Now the local growers will selectively breed a new, stronger strain of coca plant to defeat whatever poison the US starts spraying.

Dr. Doom Says: The enormous sums the US must borrow to cover the federal deficit makes the bond market "a disaster in the making". The Fed will have to buy Treasuries, monetizing the debt - following the Bank of England's lead into "quantitative easing," for which read "inflation." The yield on the 30-year Treasurys has already increased 50% from its December low.

It's A Start: Mohammed ElErian, CEO of PIMCO, which manages $750 billion in assets, predicts the demise of the asset-management business. He also "would not be surprised" to see half of all hedge funds go bust.

Over There : British house prices could fall by another 55%, and there is a non-negligible chance that the whole country will go broke. Personal debt in the UK, £1.5trillion, is larger than the country's GDP. British corporate borrowing adds up to another £2 trillion. By next year the government will owe over £4 trillion. All round, nobody in Jolly Olde gets to buy a damned thing for 5 years.

Inventory Clearance: Toyota is planing to cut the cost of a Prius nearly 20%. GM is getting ready to offer even more discounts to coax customers over their fear of buying from a vanishing company so they can unload some of their inventory before they vanish.

Porn O' Graph: Meanwhile, back in the reality-based world...