Wednesday, September 30, 2009

SAR #9272

Disney World should not be confused with reality; ditto Wall Street.

Tender Mercies: For incomprehensible reasons (Hint: Follow the money) five Senate Democrats have condemned Americans to continued servitude to the health insurance industry. The Senate, you may remember, was designed to represent the property owners. Nice to see the system still works.

Down is Still Down: House prices fell another 13.3% y/y in July. The data is not seasonally adjusted nor was the effect of the $8,000 buyers bribe considered. Prices are back to their 2003 level.

Two Rights Make a Wrong: Iran has the right to develop a nuclear power industry. And yes, it has the right to develop missiles. But nowhere is it written that they have to be so damned stupid about these things, especially when the US is more than willing to misunderstand.

On the Never-Never: The FDIC wants the banks to give it an advance on its allowance. A three year advance, as the banks pay their 2010, 11, and 12 assessments now, giving the FDIC $45 billion to use to rescue failed banks - an undertaking the FDIC has said will require at least another $100 billion. How this solves the problem was unclear. What have you got planned for 2013?

Training Wheels: Not only do Fannie and Freddie and the FHA now underwrite 90% of mortgages, the Fed buys up more than 100% of them. Ah, capitalism. And Bernanke says he's going to wean the housing market from government support.

Trouble Now, Trouble Later : US bank loans have been defaulting at an annualized 14% rate this summer. US car sales are expected to finish September 40% down y/y, and new house sales are still 70% below their peak rate. Private credit is contracting on both sides of the Atlantic and the M3 money data indicates deflation for much of the world next year.

New Indoor Record: In 2010 and 2011, for the first time, Social Security will take in less than it pays out. Previously, Social Security has run surpluses - $142 billion in FY 2009 – which Congress has gleefully spent on other things and left IOU's on Social Security's desk. Next year the federal government will have to find tax income to replace the $142 billion, plus come up with $10 billion or so more to start paying back what they've so gladly borrowed over the years. The big surprise is not that the day is here already, it wasn't expected until 2017 or later, but the economic crash moved things along.

Tangles: Physicists have figured out how to make quantum entanglement (sort of telepathy for tiny things like photons) visible to the human eye. Now if they could just make it understandable to the human brain.

Planning Ahead: If the US does not solve its health cost problems, solving the other financial problems facing the country is immaterial.

Excess Excesses: No mater how bright the brains behind derivatives are – or were - it is not possible for the cumulative value of the “products” after slicing and dicing to be higher than the original loan. There is no free lunch, no matter how many times you cut the sandwich up and slap it back together.

Egress: To get out of the unemployment swamp, the US must crate a quarter million jobs every month for the next five years. That would bring unemployment down to the 5% range. This would require a GDP growth rate of about 7% each year for the next five years. Neither is going to happen.

A Quote: "The recovery is not real... Deep structural problems haven't been solved and it's unclear how we will create jobs and get the economy growing again -- that's long been my thesis and it still is."

Porn O'Graph: The Peak Housing curve.

Tuesday, September 29, 2009

SAR 9271

Some things you suspect, some you guess at and some you just know.

Winding Down: The government wants to wean the housing industry from the federal teat, but before it can, something will have take its place. So far a Bigger Fool has not been spotted on the horizon.

Full Of It: Full employment, in the 1990's, meant 5% unemployment. In 2000, unemployment stood at 3.8%. Now economists say the “natural unemployment rate” is more like 7%. Or maybe 9%. Or maybe 10% for a couple of years before dropping a little. How's housing going to fare if permanent natural unemployment is close to 10%? They're full of something all right, but it ain't unemployment.

Peaceable Assembly: Tasers are sooo 20th century. Now the government can disband unwanted crowds using the “Long Range Acoustic Device” which is even more painful than sitting in traffic next to a teen blasting out rap. Expect it to pop up at protest rallies everywhere – they say it's nonlethal.

Be Prepared: What if Iran's actually trying to do something to get ready for when the oil runs out...

Them That Has, Keeps: Most of us accept that the science is right, there is a climate disaster just ahead. And most of us also understand that we are not going to do anything to prevent it because it would cost big oil, big coal and their bankers too much money. Monkeys with their fists stuck in a jar.

Good Old Days : Morgan Stanley has a new business plan, which involves paying their employees more to take risks. It's pretty much the old plan, just before Bear Stearns and Lehman Brothers...

Numbers Game: The UK's Meteorological Office now sees the average global temperature rising 4ºC by 2060 – long before the 2100 date usually cited. This will bring droughts around the world, a rise in sea level, and the collapse of ecosystems, with the Arctic – which warms much more than the mid-latitutdes, warming as much as 16ºC (28ºF), while sub Saharan Africa and interior North America will 'warm' by 10ºC (18ºF) on average. Someday soon the governments of the world will get together to make plans to convene a session to propose guidelines to be discussed and voted upon at a date to be decided, possibly before 2050.

Excellent Question: “Why Haven't Bernanke And Geitner Been Canned Yet?”

Job Odds: There are six job seekers for every job opening – 14.5 million unemployed and only 2.4 million jobs. And there are about 150,000 more looking for work every month, while the number of jobs keeps getting smaller.

Nanomedicine: University of Toronto scientists have developed a fingertip-sized microchip that can determine the type and severity of a patient's cancer in about half an hour – far faster than the time it will take to fill out the insurance paperwork.

Hydra-Headed Myth: All that cash in MM funds, or bank accounts, or anywhere but under the mattress is really nothing but IOU's there is no idle cash on the sidelines. Not even the money in your checking account is actually in your checking account. Someone's using it. Just hope they can pay you back when you need the cash. There is no “cash on the sidelines” waiting idly for something to do.

The Invisibles : If you are between 16 and 24 and are not a student, thEre is a better than 50/50 chance you are unemployed. But even if you are looking, if you've never had a job you are not “unemployed”. Nor are you likely to be contributing to society.

Porn O'Graph: Can't pump what you don't find.

Monday, September 28, 2009

SAR #9270

You did not miss out, you did not escape; you're next.

Job Opportunity: The US has an immediate opening for someone to convincingly explain how an economic recovery can lead to 3% GDP growth if the consumer is unemployed.

Speed Trap: Global warming is exceeding the most extreme predictions of the last IPCC report, as global carbon emissions have accelerated from a 1.1% annual increase to over 3.5% per year. Events the IPCC saw as unlikely to ever occur are already happening.

Statistical Sophists: The American Enterprise Institute thinks you're dumb. How else to explain the claim that the early 1980s were economically worse than today based on four iterations of the interest rate and the unemployment figure. Things not going on in the early 1980's: millions of foreclosures, incredible levels of public and private debt, frozen credit markets, a commercial real estate collapse, Wall Street on federal life support, literally trillions in stimulus money... But never fear, the AEI says a “barnburning economic recovery” is just around the corner, waiting for lower taxes on the rich.

Resurrection: Margret Thatcher has been apparently been elected Chancellor of Germany, as Merkel plunges ahead with a regime of tax cuts for business and reduced protection for labor.

Prom Date: The Fed, suspecting the Primary Dealers do not have enough capacity to provide the needed funds, is considering having the money market mutual funds to play the role of piggy bank.

Training Wheels: The government is going to wean the US economy from the stimulus and housing/mortgage life support systems in a few months, even as 14% of US bank loans are going sour – the highest rate since the last depression.

Foresight: Several airlines have had the sudden premonition that aviation fuel prices will surge on November 29th and again on January 2nd and 3rd, requiring that flights on those days carry an extra $10 fuel surcharge. Merry Christmas.

Good Old Days: Remember when Scientific American wasn't a shill for the energy lobby?

Foreplay: We keep hearing that the economy is “about to recover” and more recently “the recovery has already started”. It doesn't matter that 1 out of 6 Americans is unemployed or underemployed, that some 7 million foreclosures hover in the background, and that consumer credit is evaporating at the fastest rate in history - the recovery is about to recover. Soon. Real soon. Pretty please?

Rhetorical Question: What will happen when the homebuyer tax credit expires?

What Goes Around: Unusually high temperatures in the Arctic and heavy rains in the tropics have increased the release of methane into the atmosphere. Increases in atmospheric methane is causing higher temperatures in the Arctic and heavy rains....

The Pain in Spain: Spain's GDP will decline about 11% over the next three years, with unemployment reaching 25% and no recovery anticipated until well into the next decade. Somebody had to be first.

Porn O'Graph : Lay off the Layoffs.

Saturday, September 26, 2009

SAR #9268/Weekender

If you have food medicine and a child does not,

how much should you charge?

Paradigm Shift: Initial unemployment claims declined again in the latest report. Not much, but a decline. Continuing claims, on the other hand, remain very high. One way to read this is that we are headed to a jobless recovery, where we stop losing jobs but do not add any, and 10% unemployment becomes the norm.

Quiz: Under the Constitution, the authority to set foreign policy, specifically wars, resides with: (a) Congress. (b) the President. (c) Generals Petraeus and McChrystal. (d) Constitution?

Some are More Equal than Others: Six Republican senators want you to pay ATT, Comcast, Verison and such an additional fee to go to the head of the line on the internet, while Microsoft and Google think that first come first served is a fine way to treat the public commons that is the internet. But the GOP never stands up for the people, unless the people represent big business and have checks in their hands.

Assignment: Given that Commercial Real Estate sales in 2Q09 were $5.2 billion, an 80% decline y/y and a 95% decline from 2Q07, write a happy press release about the great recovery now underway.

Evolving, or Not: Research show that children who are spanked have lower IQs. Another case of acorn, tree.

Salvation's Price: If new oil discoveries can be brought to market only through advanced technologies that cost $150 a barrel and the economy begins to tank when oil gets to $80 a barrel, how useful are the new finds?

What If: The Air Force is so enamored of its Predators, maybe the Navy's jealous and wants Predator Subs; small, silent, lying quietly at selected locations, waiting, waiting...

As Good As Gold: In 1988 the median house went for 160 ounces of gold. By 2005 it was up to 490 ounces of gold. Today it's back to 160 ounces of gold. How much is that in barrels?

Volunteers, Please: The Fed has about $10 billion of the $300 billion it had allotted to buy Treasury bonds. In that foreign purchases have been concentrated on the shorter dated bonds, once the Fed stops buying the longer notes, who is going to step up?

Poster Child: In May, Mexico's Cantarell was producing 713,000 barrels of oil a day. Today it is down to 500,000 bpd – a 30% output drop in 4 months. At this rate they'll soon be buying oil to pour back down the hole.

Left Behind: As long as the US educational system results in a populace that does not understand evolution, it will remain a second rate, failed system. Without a grounding in science, there is no hope that the citizens will understand – much less support – efforts to control carbon emissions, extend stem cell research, or curtail our suicidal dependence on fossil fuels.

Porn O'Graph: Credit where credit was due.

Matinee: It's the weekend, spend 20 minutes watching icebergs being born.

Friday, September 25, 2009

SAR #9267

The supply of greater fools is large, not endless.

Down, and Downer: Even with the $8,000 bribe and 3.5% down payments, existing house sales fell 2.7% m/m in August. The median price of a house sold in July was $177,700, down 12.5% y/y. 'Distressed properties' – foreclosed places – made up 31% of August sales. Foreclosures – and thus distressed properties, which sell for 15-20% less than normal houses – will increase significantly in the next year, driving prices further down.

Spade, Spade: Czech President Vaclav Klaus described the UN climate change meeting as a sad, frustrating, undignified propaganda exercise. Excuse me, that should have been “accurately described.”

No Exit: The Fed will keep buying all the mortgage securities in sight, plus all of the GSEs' debt, for at least three months longer than originally planned. The idea is to keep mortgage rates low enough to get more people to buy rapidly depreciating houses.

Non-Profit Prophet: The IG for TARP says we shouldn't be fooled by a couple of small payments, for the odds of the taxpayer getting back all – or even most – of the $700 billion given to Wall Street are very small. “Extremely unlikely” were his words. AIG, for one, seems unlikely to repay its $184 billion. And there never was an intent to collect on the $50 billion given away to keep the hapless in their homes.

Weight Watchers: Scientists monitoring Antarctic coastal ice report that it is thinning rapidly as glaciers speed up their flow into the seas. The pattern is widespread and extends hundreds of kilometers inland.

Future Fuels: Civilization will depend on oil-fueled transportation and electricity from coal-fired generators for as far into the future as we can peer. The DOE says oil, coal and natural gas will make up 82% of the US primary energy supply in 2030, just 2% less than today. If the future belongs to alternative energy, the future won't start until long after 2030.

Well, Sheet: Now the ecopeople want me to use TP made from recycled paper. I did that as a kid, camping. My dedication to saving the world has come to an end. My end.

Stop Hummming! The German army wants several wind-power projects shut down because it's afraid the turbines will interfere with its radar systems. They could run some tests and see, but it's an army and it's afraid and you don't want to upset the German army.

If the Shoe Fits: The Swiss say the current attack on their tradition of banking secrecy will make criminals of those who try to hide their money from taxation, which the Swiss call “diversifying away from their home country”.

Count to 10 : The IMF says global growth will not return to normal rates until 2015 or later. The Bank of England warns that optimism can easily be overdone and that the British banking system is “not in good shape”.

Making Ends Meet: The UN's FAO says world food production must increase by 70 percent by 2050, to nourish a human population then likely to be 9.1 billion. Why don't they ever say “Look, in 2050 we're going to have x amount of food. Plan accordingly.”

Pre-Due Bills: The FDIC is close to broke and may raise funds by pre-collecting future assessments - sort of a reverse charge account. Or it could charge them more, now. Or, most likely, it'll hit up the Treasury – which is asking the taxpayers to pay for their own deposit insurance.

Two from Column B: China understands the “peak resources” idea – that the world has run up against the long forecast “limits to growth.” And they're spending their American dollars to buy up nearly everything, everywhere. We're giving ours to Wall Street.

Easy Answers: All the energy the US needs could be provided by covering 75 square miles of western desert with solar plants using current technologies. The cost would be about 10 years worth of oil at current prices. But then we would not need to fight the wars, so that's a non-starter.

Porn O'Graph: What's wrong with this picture?

Thursday, September 24, 2009

SAR #9266

It's never too late. Maybe it is.

High Noonish: The War Lovers demand more troops for Afghanistan (fast becoming the only war they have),but Obama seems tempted to stand up to them.

Obfuscation: Bof A is apparently trying to pull a fast one on the taxpayers. 'Apparently' because the numbers and conditions for paying back the government loans and guarantees gets more than a little confusing. The contract said BofA could “negotiate in good faith as to an appropriate fee...” and Bof A feels the 'appropriate fee' should be paid out of petty cash.

Troublemaker: Reports claim China is supplying gasoline to Iran, which will probably cause the US to frown mightily.

Throat Clearing: In what might be taken as a reminder to the world that it is still around, India has launched seven satellites into orbit, one of their own to surveil things like the weather and Pakistan, and six for various universities.

Ending Fossil Fuel Subsidies: Obama wants a worldwide end to government subsidies to fossil fuel producers. It was not immediately clear if this means ExxonMobil will have to start paying for their own oil wars.

Sky, Falling: Kuwait's Burgan oil field, the world's second largest, will reach the abandonment stage within 10 – 20 years. The same fate awaits most super-giant fields including Ghawar. The worldwide decline rate is now 6.7%/year and increasing.

Forecast: Large numbers of postponed foreclosures will soon be entering the marketplace. As of July, 1.5 million houses were in the foreclosure process, foreclosure had not begun for 1.2 million houses for which payments were least 90 days past due, and foreclosure had not begun for over 200,000 houses for which no payment had been made in over a year.

Career Guidance: You might want to consider carpentry, farming or gardening, sewing, weaving, plumbing, canning. Also, making friends with a doctor, a dentist and a butcher and baker would not be amiss.

Duhh: The headline reads “Commmods rally won't last unless demand recovers.” I'd like to add that if we had some ham we could have ham and eggs if we had some eggs.

Another Chapter: In 2005 the Bush administration favored the financial industry with the Debt Enslavement Act which made it much harder for ordinary folks to file bankruptcy. Filings dropped substantially, from 6,339 per day to 2,372 per day. Now the rate is back to 5,593 per day.

Warm-Ups: Warm water from the Gulf Stream is eating away at Greenland's outflow glaciers from below, causing them to flow into the sea faster than any time on record. Waters at 39F (4C) have been found deep inside the fjords.

Winnig Losers: More corporate debt will default this year than ever before. Companies in the consumer-discretionary sector lead in the default-rate race.

Surface Tension: It seems likely that those who produce the basics will continue to be far more necessary than those who don't, and that there will be an ever-growing group that is not needed at all. Except as each other's customers, playing tea party.

Tax on Stupidity: I've long thought that lotteries were a tax on the numerically challenged, mostly targeting the poorer among us. But sugar-laden soft drinks may be worse, all round. It doesn't make wasting money on lottery tickets a good idea, just shows there are worse things we do to our selves. Want to talk about bottled water?

Porn O'Graph: When did you get your first credit card?

Wednesday, September 23, 2009

SAR #9265

We were taught there is always a happy ending. We were lied to.

Playing Chopsticks: China's 's defense minister says that it's military capability has taken a "quantum leap" thanks to a modernization drive, and that its weaponry rivals that of Western countries. He also pointed to the “tremendous changes in national science and technology strength” represented by these advances, in case the Pentagon hadn't noticed.

Private Option: Here's how the 'private option' healthcare is working out. The average family premium increased 5% in 2008 (inflation was a negative .7%) to $13,375. Private option health insurance has gone up 131% in the last decade, while wages went up 38% on average. Yep, we sure can't afford no public option.

My Question, Too: “How can the Dow Jones Industrial Average be flirting with 10,000 when consumers, who make up 70 percent of the economy, have had to cut way back on buying because they have no money?” Or jobs. Or credit.

Ups and Downs: The Baltic Dry Index has dried up again, but the container counts at US ports, both inbound and outbound, are nearly back to pre-crash averages. Yet supertankers are losing money on every voyage.

Volunteers? The Fed is buying about half of all new Treasurys, and buying about 80% of mortgage-backed securities (Fannie, Freddie, mostly). The traditional buyers – foreigners, households and primary dealers are all noticeably absent. Who is going to buy F/F's questionable paper when the Fed stops doing so in January? You, in the back, did I see your hand up?

Pot & Kettle: Retail stocks showed a bit of life today after Citigroup upgraded Macy's. Who upgraded Citigroup?

Countdown: Nicholas Stern, former chief economist of the World Bank, says the world must reduce greenhouse gas emissions by 30% in the next 20 years and by 60% by 2050. He knows, but didn't say, that this would mean a 30% reduction in the developed world's standard of living. Probably slipped his mind.

Tumbling Down: The government – through Fannie, Freddie, FHA and Ginnie Mae own about 90% of all US house mortgages. Something like 40% are underwater. Prices are going to fall at least another 25%. It means millions more foreclosures. It means as many as 75% of mortgagees will be underwater on their loans. How are you going to make good on your mortgage after you can't make good on your mortgage?

Some Doctor, Some Cure: Engineers are getting itchy to save the world through 'geo-engineering', which seems to mean manipulating the environment some more, on even larger scales. Why not, it's worked out so well so far.

Check Mating : A report by Britain's Royal Society states that “there is no doubt that the current rate of human population growth is unsustainable." A million and a half more people show up on the planet each week, looking for sustenance and support that the Earth is not able to provide. Unchecked population growth increases global warming, resource consumption, environmental destruction and societal collapse. Education, family planning, and contraceptives – which have been inadequate in the past – are again the suggested solution.

Tell Me Why: Speculators hold a net 93.6% long position in gold. What do they think they know, and do they?

Re-runs: Italian authorities and the US Secret Service are investigating another $100 billion in US government bonds confiscated in Northern Italy from apparent smugglers. The two men under investigation for the earlier $134 billion in bogus US bonds have “slipped away”.

Quoted: “What constitutional rights should corporations have? To us, as well as many legal scholars, former justices and, indeed, drafters of the Constitution, the answer is that their rights should be quite limited - far less than those of people.”

Tuesday, September 22, 2009

SAR #9264

Our resources are limited; time is a resource.

Us or Them : If we don't send more cannon fodder to Afghanistan, we will end up surrendering control of the country to corrupt tyrants of the Taliban's choosing instead of corrupt tyrants of our choosing. Those who will need an alibi are working on getting one. If, after 8 years, the US military cannot win in Afghanistan – a country whose GDP is less than Goldman Sachs gives out in bonuses – I think the rest of the world has already drawn the appropriate conclusion.

Depends: How many banks have failed this year? (a) 94 or (b) 3,711? The answer depends on whether you count corporate names or places where you could do your banking.

Unbelievable: AIG – which only exists because the taxpayer put $183 billion under their pillow – is back at it again. Again, because AIG has already come crying to the Treasury and lowered the amount they'll pay back and limiting the oversight that our $183 billion bought. Now they want to once more lower the interest rate on their salvation. Correct that: Believable. Where's the rope?

Good, and Good For You: First they said that Activa was going to strengthen your immune system and help you poop better. Now Dannon says that if you'll fill out the paperwork they'll send you a little something for your wallet – a claim that's backed by a court.

Economic Insight: Paul Krugman on the stimulus: “The trouble is, we really have no road maps. The only model is the Great Depression itself.” That “was ended by a very large spending program known as World War II and we don’t really want to repeat that.”

Damned Either Way: Diverting today's foreign aid from economic development projects to projects designed to decrease global warming will endanger the lives of 4.5 million children. But it may save far more than that over the next 50 years. Choices, choices.

Asked & Answered: What's fueling this recovery? Government deficits. The federalies

have spent trillions and you didn't even get a Government Sacks tee shirt.

Vocabulary: A growing number of homeowners are looking ahead, see that the ever rising waters will swallow them up as house prices continue to decline, and simply stop paying the mortgage. They get free rent for quite a long while before the banks get around to actually evicting them. The word's 'strategic default'.

Shhh, It's A Secret: Turns out all this 'saving' the customer is accused of doing instead of buying stuff and helping the economy isn't saving at all. Silly buggers are paying off their credit cards. How's that going to help?

Two In A Row: The Dems were elected to do something for the people, not so the Dems could kiss up to the GOP or to give ever more money to Wall Street. Congress should pass a health care reform bill that includes a public option. The public doesn't care about Bush's deficits, or the ongoing cost of fighting unnecessary wars, and they won't give a hoot about the costs. And when they hear that the GOP is against letting people live healthier lives, they'll vote in even more Dems next time. Get to it. Fifty-one is enough.

One Per Customer: Funny, it turns out that if you buy in car in August, you don't tend to buy one in September. Or October, November or December.

Hear, Piggy Piggy: The WHO says that swine flu “could kill millions unless rich nations give $1.5 billion” for antiviral drugs and vaccines. If there's not that much vaccine available, several countries are willing to accept cash. No one is making a similar offer for the estimated one-third of Americans who will contract H1N1 in the next few months.

Bailing Out: The government – thourgh Fannie, Freddie, FHA and Ginnie Mae own about 90% of all US house mortgages. Something like 40% are underwater. Prices are going to fall at least another 25%, with millions more foreclosures. As many as 75% of mortgagees will be underwater on their loans. How are you going to make good on your neighbor's mortgage if you can't make good on your own?

Not Necessarily The News: Only those in the top 1% have increased their incomes over the last 40 years. Whistle a happy tune.

Monday, September 21, 2009

SAR #9263

Where does the trash go? Where's this place called 'away'?

Who's Bidding? Not individuals, for stock funds keep registering net outflows. Not insiders, they've been selling not buying. And it is not corporate buy-backs, they're back to 1998 levels. So who? Probably mutual fund managers who missed the bus last spring, jumping on just before the bus goes over the cliff.

Confetti: We used to make things, then we made contracts, now we cut up contracts, glue them back together in pretty patterns and sell them to each other.

The wisdom of crowds: It's not so much that the market keeps going up, but rather that it refuses to fall, even though total credit market debt relative to GDP is beyond belief, commercial real estate is melting down, more mortgages are resetting into default and the customer is actually saving, not borrowing. There are lots of signs pointing to an economic collapse of epic dimensions that are happily being ignored by CNBC, the MSM, and Joe Public. Even Alan Greenspan has noticed something's amiss.

Life is a Pre-Existing Condition: Getting pregnant is a choice, not an insurable health condition – that's what most health insurers say.

I've Got Mine: "It's not my problem. I can make it to the finish line … and my standard of living's not going to change, but for you and the generations to come, you better get it fixed," T. Boone Pickens, 81 and a billionaire, on the energy problems.

Uncle Vinny: When you borrow from the local loan shark, it's not the repayment he's interested in, it's the vig. As long as you can make the vig, he doesn't break your legs. How much longer can the American citizen, and the US Government, keep making the vig? When will the interest exceed our available income? And whose legs get broken when we start paying interest on the interest? The dollar's, in devaluation?

Getting Serious: How much do we need to reduce CO2 emissions? How soon can you get to it?

Fixer-Upper: Nothing has yet been done to minimize the danger from the quadrillion or so dollars in derivatives. Bankers tell us not to worry because the “net exposure” is small. If there's no exposure to loss, why did everybody get into the fray? You can make a profit, but you can't lose – ah, where have I heard that one before?

Future Now? “I built it in stages, added things as I got the money to do so.” What a strange concept.

A Minsky Moment: “Instability is an inherent and inescapable flaw of capitalism.” Minsky figured out that capitalism is prone to collapse from its own excesses. Or put another way, greed and avarice lead to bubbles which collapse, then after a period of rational investing, folks forget and repeat the process. Rings a bell, no?

Six Easy Pieces: Wind – at high altitudes. Waves, 24/7. Algae – pond scum to the rescue. Geothermal. Solar panels in outer space. Fusion reactors. For extra credit, please identify which of the above is shovel ready and able to replace oil and coal within a meaningful time horizon.

Asked and Answered: "Is Wells Fargo Making AIG’s Suicidal Mistake?” Apparently. But remember, with assets over $1.250 trillion Wells Fargo's is too big to fail, to big to survive on its own and too big to be swallowed. Bailout, Ben.

... 'Til It Hurts : TThe FHA's reserves are below 2%. The FDIC is down to its last $10 million. (Or down to your last $500 billion!) The FHA's loans are running about 15% past due, more banks will fail – and the taxpayer will be tapped to cover these losses too. The taxpayers should cut out the middleman and send their money directly to the banks.

Good Intentions: As long as the US remains dependent on imported oil, it will support authoritarian regimes – or install its own.

Think First: Environmentalists have stopped a solar energy project in the California desert in order to “save” the desert. As if global warming – which solar energy will help fight – isn't going to make a lot more of California into desert.

Porn O'Graph : Heads they win, tails we lose, again.

Saturday, September 19, 2009

SAR #9261/Weekender

This is not the moment of truth; truth has nothing to do with it.

Confusion: The government reports initial unemployment claims fell 12,000 last week, while the number seeking continuing unemployment payments increased 129,000. Did unemployment go up or down? Are things better or worse? Who's on first?

Nose Holding: It is pretty clear that any healthcare bill will be a disappointment, falling far short of meaningful reform. How bad does a bill have to be to make it too bad to vote for? How much money must we give the insurance companies? What's the maximum number of Americans we're willing to let die unnecessarily just because they're unemployed or poor?

Plus ça change, plus c'est la même chose: Yes, the rich still run the United States. And most other places...

Recovery, Oh Boy!: Household debt (mortgages and consumer credit) is down 7% to only 120% of disposable income. The recession may technically be over, but the consumer is in no position to demand anything but relief.

Because I Said So: Taking a very broad reading of its authority to oversee the soundness of the nation's banking system, the Fed is going to place regulators directly inside banks to monitor pay and bonus agreements. And they can, because they say they can. And because they control the money.

Check's in the Mail: The Chinese central bank said the country’s economy surged at an annualized rate of 14.9 percent in the second quarter. Bush said Saddam had WMD.

A Quote: “The government's programs and promises to return the country to 'economic growth' is nothing but a con. And it is every bit in the nature of the government to prolong the con, since the country ceased being a functioning democracy long ago. Indeed, we aren't even a capitalist country anymore.” And there will be no recovery, either.

Wobble: The Arctic ice cap did not shrink as much this year as in the last two years, but was the third smallest minimum in history, 24% smaller than the 1979-2000 average. The reason for the pause in the progressive decline in ice coverage was not yet understood.

Peace Victory in Our Time: US General Petraeus acknowledges that the situation in Afghanistan is getting worse, but says the mission is still “do-able”. British Chief of Staff Richards warns that a failure to prevail ( aka defeat) would have an "enduring grand strategic impact" on Britain's global reputation and would embolden terrorists. He's sure the allies will eventually stumble into a workable strategy. General McChrystal, our man in Afghanistan, wants 30,000 40,000 more soldiers, bringing the total to 100,000. There were only 30,000 in January. Yet McChrystal admits there are no signs of al Qaeda's presence in Afghanistan, even though the Taliban control 80% of the country. Yet we must stay to honor our dead by adding to their number.

Multiple Choice: The future (a) will be, (b) could be, (c) might be, (d) should be, or (e) will not be better than today.

What's In the Bag, Little Girl ? When Wachovia moved in with Wells Fargo after their shotgun marriage, a trunk full of credit default swaps on the weakest parts of Wachovia's commercial mortgage-backed securities was part of the deal. Turns out to be a surprise package, and Wells has no idea yet on how big an exposure it has inherited.

Look Out!: Nobel-winning former World Bank head Joseph Stiglitz didn't get the memo. He says there will be more economic turbulence, that the recession will worsen and will last until at least 2012. He also said bad things about the continued existence of complex derivatives which are not in the public's interest.

Don't Touch That Dial: The unemployment rate, the housing debacle, and the declining consumer economy are inescapably intertwined on a downward spiral, even as those in white shirts and ties declare the recession over. Maybe so, but I'd keep an eye out for the buildup of social tensions between the pain and suffering of the many and the obnoxious bravado of those who want to prevent the government from providing any social assistance. Stay tuned.

Friday, September 18, 2009

SAR #9260

Maybe we should make our own plan.

Lone Ranger? Richard Cramer, a key ICE veteran anti-drug official has been arrested for acting in concert with a Mexican drug cartel, shipping large amounts of cocaine to Spain via the US, and selling US law-enforcement databases to the drug lords. Given all the money in the drug trade, do you think he's the only one?

Just the Facts, Ma'am: Someone in 27% of all US households has been laid off or lost their job. 41% of households report a cut in pay or work hours. The recession is over, Ben says.

Just Say'in: Why is the $856 billion 10-year price tag the first thing reported on the health care bill? At a paltry $85 billion a year it is far less than the money that's beenwasted every year for the past 8 years in Iraq and Afghanistan.

Quote: “We need segregated buses.” Rush Limbaugh, American spokesman.

Energizer Healthcare: Senator Bacus' proposal mandates insurance coverage for every American, but has no public option. In other words, the bill would turn every American into a customer for the insurance industry, and if they could not afford the premium, the government would pay for the insurance. A gift that will keep on giving.

Oily Days: China is putting $16 billion into Venezuelan oil exploration following Russia's announced $30 billion deal. Bidding wars beat real ones – and real wars take lots of petroleum.

Consider the Source: The man who didn't see the crash coming, even though he was paid to do just that, now says the recession is over, because he's paid to end it. But, he cautions, “"It's still going to feel like a very weak economy for some time because many people will still find that their job security and their employment status is not what they wish it was." Depends on what your definition of 'is' is.

Warm Bath: NOAA reports that this summer's average ocean temperature – at 62.5F (16.95C) - was the warmest since 1880.

Familiar Tunes: Norway's giant Victoria gas field isn't so giant after all. Tullow Oil says it has made a giant discovery off Uganda. Three big firms are competing for big reserves in the Gulf of Thailand

Different, But the Same: Single family housing starts, down 3% m/m, total starts up 1.5%. Initial unemployment claims were down 2.2% from last week, at 545,000 and down 1.5% m/m. Nothing to see here, move along.

Statistic: The American Journal of Public Health reports that 45,000 Americans die each year simply because they have no health insurance.

Giddy - Up! 12% of Wachovia's construction and development loans ($38 billion) are in default, compared to the nationwide average 3.6%. Wachovia was swallowed by Wells Fargo, with government encouragement and approval, so Uncle is probably on the hook for much of the potential losses.

Shoe / Foot : Telling Iran they can have a nuclear energy industry only if they get their fuel from a source friendly to the US is like telling them them they can have an oil industry as long as they use our oil.

Future Fads: Once peak oil percolates through the economy, everything will change: your city, your state, your transportation, your food, your housing and your way of life.

Can't Eat Just One: Massive amounts of bank securities are coming due and the only thing to be done, the banks say, is to revive the securitization market so they can roll them over into new worthless assets . This didn't work out so well the last time around.

Porn O'Graph: Who's to lead, who's to follow?

Thursday, September 17, 2009

SAR #9259

Anticipation is not a substitute for reality.

At Ease: President Obama is expected to announce that the US is canceling plans to deploy a missile defense system in Eastern Europe because Iran's long range missiles do not have a very long range and the system doesn't work anyway.

That Shrinking Feeling: US bank loans fell at a 14% annual rate over the last three months – the most rapid fall in loan balances (by %) since the 1930's. This, and similar falls in M1 and M2 money supply data, strongly indicate serious deflation is underway.

Addiction: The Obama administration wants to extend three of Bush's invasive surveillance practices. They also want to extend the government's power to demand sensitive financial records from business without giving a reason. In return, the administration is willing to consider stronger civil rights protections in the new law "provided that they do not undermine the effectiveness of these important (provisions)." Willing to consider...

Short & Sharp: Mortgage application filings fell 8.6% last week, from the previous week and down 18.7% y/y.

Behind the Headline: Industrial output – excluding the overstimulated auto sector – rose 0.4%, 10.7% down from last year. Capacity utilization also increased – but then we've shipped most of our industrial capacity overseas.

Revisions: Old: (1) The check is in the mail. (2) I'll respect you in the morning. (3) I'm from the government, and I'm here to help you." New: (1) The US does not torture. (2) The US has the world's best healthcare system. (3) The US rejects protectionism.

Cookie Jar: One out of every three votes counted in Karzai's victory at the polls appears to have been fraudulent. Imagine that.

Worse and Worser: Credit card write-offs are rapidly rising at the major banks – BofA is at 14.5%, Citi at 12.1%, Discover is at 9.1% and JPMorgan at 8.7%. These charge-offs tend to track unemployment (Hint: the unemployed can't make even minimum payments.) and unemployment will continue to rise.

As Expected: US life expectancy, 77.8 years, Canadian 80.4 years. US infant mortality 6.37 per 1,000, in Canada it's 5.4. The US spends 16% of GDP on healthcare for 85% of the population, Canada's 12% covers everyone. In Canada, healthcare is a basic right. In the US, gun ownership is.

Forgotten, Not Gone: The ozone hole over the Antarctic was discovered in the 1980's and taken care of by the 1987 Montreal Protocol. Right? Well, not really. The hole appears to be stabilizing, but the damage done by CFC's will not disappear until about 2075. An object lesson.

War of Words: USCOM, which “orchestrates a 24/7 multi-media campaign formatted to the cultures and languages of relevant audiences”, is spending $10 million to set up “influence websites” specifically targeting France and Britain in support of our GWOT.

Night, After Day: The economic crisis did not sneak in the back door – the growth of leverage throughout the economy since the 1980s made it inevitable. The bailouts only transferred the debts from the private to the public sectors. It's still debt and it's still there. The more debt we add to the system, the more likely a collapse of the system.

What's Wrong With This Picture: International food aid is at a 20-year low, while there are over a billion hungry people in the world. Fortunately, Wall Street bonuses will not be affected.

Consider the Source: The International Atomic Energy Agency (the folks who were right about Saddam's non-existent nuclear weapons) and US Intelligence ( whose record is a lot more questionable) both state they have found no evidence that Iran presently has an active nuclear weapons program. Israel – which has a dog in this fight – claims it know better.

Porn O'Graph: American's agree on saving Private Ryan Social Security.

Wednesday, September 16, 2009

SAR #9258

The potholes are getting bigger.

Yea, Boo: Retail sales in August rose 2.3% m/m but were down 5.3% y/y. Less the automobile giveaway, sales were up just 1%. In the excitement don't overlook Best Buy's same store drop of 3.8% even though the Circuit City store across the street went out of business. In London, last month's retail sales were the worst in over four years.

Three out of Five Doctors: The New England Journal of Medicine reports that 62.9% of physicians support the 'public option' as part of healthcare reform, even though they know that Medicare does not reimburse them as generously as private insurance. Seems they actually care for their patients – even if it hurts their own pocketbooks.

Excellent Question : Why was the Detroit bailout so different from the Wall Street bailout? Why did the Federal government humble the auto industry while showering billions on Wall Street?

Simpleton's Truth: Most of us are afraid of the unknown. We're are afraid of our own fragility faced with the collapsing economy, rising unemployment, ridiculous healthcare expenses. We're afraid of those immigrant terrorists. And change; we're afraid of change. There's lots to fear and the cynical eagerly seize on it and turn it to their own ends, revealing Obama to be a socialist, foreign-born imposter, intent on ruining the American Way. And, oh, he's black.

Cue the Crocodile: Bankers complain that proposed regulations requiring they notify customers before gouging them will cause 1,000 to 2,000 banks and credit unions to fail. So?

Grammar Lesson: Scientists point out that the rise in temperature now underway is "largely irreversible for 1,000 years after emissions stop". About 40% of the carbon dioxide produced by humans this century will remain in the atmosphere at least a thousand years after a zero emission state is reached. Note the passive voice.

Belly Up to the Bar: Like alcoholics without a twelve step program, the world's financiers, thirsty for new risks, guzzeled derivatives totaling $426 trillion in the second quarter of the year. The BIS says they are no less opaque than before and pose “major systemic risks”. But don't worry, the financiers tell us, they've got it under control and can stop if they want to. They just don't want to.

Carbonated Beverages Clean Battery Terminals: Fully one third offall the CO2 we've thrown into the air since 1800 has settled into the oceans, where it has increased the acidity of the oceans three times over the average for the previous 20 million years. Putting key marine organisms, those at the bottom of the sea's food chain, in ever increasing acid baths is not working out very well for them, and eventually, us.

Greed, a Pre-existing Condition: Half of the big health insurers in a number of states will not pay for that broken arm, battered face or any other injury a battered spouse ends up in the ER with, because the personality of the disturbed, violent partner developed years ago and is a pre-existing condition and thus the injuries are not covered.

Four Beats Three : GM's Chevy Volt has 4 wheels, a battery and nearly unlimited government funding, therefore anything with fewer wheels and a battery that wants some government funding is obviously not a car and doesn't qualify for any of the funding that GM wants all for itself. Clear?

Prescription: To have a future we must desist from those things that have no future, rescale our daily lives to meet the constraints of the future, and rebuild those things we have abandoned that will permit daily life to continue to function, at some level, into the future.

Wish I'd Said: “The American people have been taken hostage to a broken system. A system that corrupts the most basic principles of competition and fair play, principles upon which this country was built.” And it goes on. Dylan Ratigan gives good rant.

Trickling Down: According to the WSJ, economic inequality in the US has never been a problem and if it once was, it's not now, so we neither have to worry about it nor do anything to curb the continuing bifurcation of the country into the few who have and the many who are tickled pink to get the crumbs.