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- The Ticking U.S. Fiscal Bomb
- Gold’s Pick Pockets Continue To Prosper
- Fears of 'Lehman-style' tsunami as crisis hits Spain and Portugal
- World Oil Capacity to Peak in 2010 Says Petrobras CEO
Economy
The Ticking U.S. Fiscal Bomb (Ben Johnson)
Despite the ticking fiscal bomb, midterm and presidential elections in November 2010 and 2012 respectively will further constrain the political will to undertake necessary reforms. With a subpar economic recovery and an unemployment rate above 8% during 2011-12, the Democrats, struggling to maintain power, are unlikely to approve spending cuts, while the Republicans, seeking to revive their prominence, will be unyielding on tax hikes.
Gold’s Pick Pockets Continue To Prosper (Davos)
Please return to December of 2009 when the impending dollar rally was sold based on a sustainable US economic recovery. That was enough to convince money managers. That demand then triggers the algorithms which fires off huge fund buying for what today is no reason at all.
Our friends at the COMEX use this phenomena to bomb gold and so many of you have a heart attack selling your insurance in both shares and metals. It is like living in a mental hospital where emotions drive all decisions and most of those are total madness.
Fears of 'Lehman-style' tsunami as crisis hits Spain and Portugal (joemanc)
The Greek debt crisis has spread to Spain and Portugal in a dangerous escalation as global markets test whether Europe is willing to shore up monetary union with muscle rather than mere words.
Julian Callow from Barclays Capital said the EU may to need to invoke emergency treaty powers under Article 122 to halt the contagion, issuing an EU guarantee for Greek debt. “If not contained, this could result in a `Lehman-style’ tsunami spreading across much of the EU.”
Energy
World Oil Capacity to Peak in 2010 Says Petrobras CEO (Ben Johnson)
Mr. Gabrielli, the CEO of Petrobras, gave a presentation in December 2009 in which he shows world oil capacity, including biofuels, peaking in 2010 due to oil capacity additions from new projects being unable to offset world oil decline rates.
Please send article submissions to: dd@chrismartenson.com
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"LONDON—The pressure in sovereign debt markets continued Friday with the cost of insuring Greek and Portuguese debt against default remaining at record wide levels."
""With sovereign debt and fiscal difficulties remaining a concern, sovereign spread volatility will not disappear soon," said Tim Brunne at UniCredit SpA. "
""The crisis in euro-area sovereigns is reaching new proportions, and the contagion is getting more serious," said analysts at Royal Bank of Scotland in a note. "
(Note: The Wall Street Journal changed the story. Original headline still shows up on Google News search here)
"Feb. 5 (Bloomberg) -- The cost of insuring against U.S. and U.K. debt defaults may rise in the same way as it has for so- called European peripheral nations including Greece and Portugal, Deutsche Bank AG said.
“The problems currently faced by peripheral Europe could be a dress rehearsal for what the U.S. and U.K. may face further down the road,” Jim Reid, a strategist at Deutsche Bank in London, wrote in a research note today.
“These countries have similar issues to those facing peripheral Europe but have the luxury of a flexible currency up their sleeves as a first defense if the market wants to attack them,” Reid said. “Such a defense means that the market, for now, thinks there are easier targets.”"
“This is basically payback time for the rescue of the global economy last year, which was through government over- spending,” said Dariusz Kowalczyk, chief investment strategist in Hong Kong at SJS Markets Ltd. “Because of exposure to exports and high foreign debt, the Korean won is vulnerable to what’s happening with European sovereign credit.”
"LONDON — The euro tumbled on Friday to the lowest point against the dollar in since May as concerns mounted about a potential sovereign debt default in Europe, dealers said."
"LONDON: The euro sank under the 1.38-dollar mark for the first time in seven months yesterday as the debt troubles in some eurozone countries weighed down on the single European currency, analysts said. "
"The European currency has been under pressure for weeks due to persistent concerns about the health of Greece’s public finances and analyst have warned that the problem could spread to Spain and Portugal. “It would appear the sovereign debt problem is turning into a contagion in the Euro zone,” said Michael Hewson of CMC Markets. The European Central Bank welcomed Greece’s plan to tackle its debt crisis but warned all eurozone countries to get their finances in order.
“It is of paramount importance that the stability programme of each euro area country clearly defines the fiscal exit and consolidation strategies,” the ECB said after holding interest rates steady at a record low of 1.0 percent. "
"Feb. 5 (Bloomberg) -- The cost of protecting Asia-Pacific corporate and sovereign bonds from default surged on concerns that weak U.S. jobs data and sovereign debt risk in Europe may stifle the global economic recovery.
The Markit iTraxx Australia index jumped 11 basis points to 107 basis points as of 9:14 a.m. in Sydney, according to prices from Westpac Banking Corp. That’s the biggest increase since Aug. 17 and takes the index to its highest since Oct. 9, according to prices from CMA DataVision in New York. Benchmarks in Asia and Japan also rose."
"The Federal Reserve would consider reopening its program to support the mortgage market if interest rates spiked or the economy showed new weakness, Federal Reserve Bank of New York President William C. Dudley said in two new interviews. "
"The number of people who were declared insolvent in England and Wales hit a record high in the last quarter of 2009 and during the year in full.
The figures from the Insolvency Service marked the depth of the recession, with 35,574 people declared insolvent in the last three months of the year.
That was a rise of 25% on the same period a year earlier. "
"Feb. 5 (Bloomberg) -- Non-performing loans in China have risen into the “trillions of renminbi” because of poor lending practices, an insolvency lawyer said.
“We work really closely with SASAC, the state-owned enterprise regulator in China, and there are literally trillions and trillions of renminbi of, frankly, defaulting loans already in China that no one is doing anything about,” Neil McDonald, a Hong Kong-based business restructuring and insolvency partner with Lovells LLP, said at an Asia-Pacific Loan Market Association conference yesterday. “At some point there’s going to be a reckoning for that.”"
"U.S. Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke were meeting with their counterparts from the other G-7 countries.
Geithner is expected to urge other G-7 nations to keep providing stimulus through the rest of this year, arguing that without continued government support the fledgling recoveries could falter, plunging the world back into recession. "
"A sharp increase in the number of people giving up looking for work helped to depress the jobless rate. The number of 'discouraged job seekers' rose to 1.1 million in January from 734,000 a year ago."
"Last month, the services sector added 40,000 jobs after shedding 96,000 positions. The figure included a rise in federal government employment, partly as a result of the hiring of staff for the 2010 Census. Temporary help employment rose 52,000, maintaining a rising trend seen in the past month."
"The Senate shifted into jobs gear on Thursday, priming the pump for a new $80 billion economic injection Democrats hope to pass next week.
With the Dow plummeting 268 points on word that unemployment unexpectedly rose last week, Senate leaders unveiled the rough outlines of their package of tax breaks and new spending to spur a recovering but still-sluggish economy."
"The budget crisis New Jersey is facing appears to only be getting worse.
David J. Rosen, the Grim Reaper of the New Jersey state government's fiscal nightmare, appeared before the Senate Budget and Appropriations Committee Thursday and told them the deficit legislators and the governor must overcome when crafting the 2010-11 budget by June 30 could climb as high as $11 billion.
Rosen, the budget and finance officer for the non-partisan state Office of Legislative Services, also warned the legislators that even if tax revenue should grow at a rate of 4 percent or 5 percent annually, it will take until 2014 for the government to recover to where it was financially in 2008."
.................................13A) Wealth is leaving New Jersey, BC study shows
"From 2004 through 2008, $70 billion dollars in wealth left New Jersey while the state’s charitable capacity declined by $1.13 billion, according to a new report from Boston College’s Center on Wealth and Philanthropy.
"Wealth began to leave New Jersey around the time when a series of changes to the state’s tax structure made it less competitive for charitable families compared to neighboring states," a press release on the BC report said. "New Jersey’s state income taxes have risen to levels above New York, Pennsylvania, and Connecticut, and there is not a deduction on state income taxes for charitable giving.""
"France's budget deficit stood at EUR 137.99 billion in December, the Budget Ministry said on Friday. This compares to a budget deficit of EUR 56.27 billion recorded in the same month a year ago.
State expenditure totaled EUR 367.10 billion in December, up 5.5% from a year ago. At the same time, state revenue came to EUR 237.25 billion, down 18.5%. "
"Joerg Asmussen told reporters that the deficit is projected to climb to 5.5% of GDP this year as the government continues stimulus programs and other measures to battle the financial crisis. He said "2010 is still a crisis year." "
"NEW YORK, Feb 5 (Reuters) - U.S. commercial real estate prices fell 4.9 percent in the fourth quarter, setting a new low for the current downturn, according to a leading property index released on Friday.
The slide to 139.25 points wiped out a 4 percent rise recorded in the third quarter and takes the index -- by the MIT Center for Real Estate (MIT/CRE) -- below 140.06, the cycle's previous low reached in the second quarter.
For the year, the index, which includes prices for commercial property sold by major institutional investors, is down 22.5 percent since the end of 2008. At the end of the 2009, the index was 39.5 percent below the second quarter 2007 peak of 230.26."
"NEW YORK, Feb 4 (Reuters) - Smaller-sized U.S. banks will be hardest hit by their exposure to commercial real estate loans, and many of those banks will collapse, Moody's Investors Service said in a report released on Thursday.
A large number of smaller-sized banks, which are not rated by Moody's, make up only 15 percent of U.S. bank system assets but carry 50 percent of commercial real estate loans outstanding, and will struggle under the weight of that exposure, Moody's said."
"Los Angeles Mayor Antonio Villaraigosa ordered officials Thursday to eliminate 1,000 city jobs and begin planning employee layoffs, one day after the City Council failed to do so amid a deepening budget crisis."
"With a $484-million shortfall looming next year, Santana said, he planned to recommend another round of job cuts within a few months. "We won't lay off any coalition members this year," he said. "But we plan to next year.""
"Officer Jason Willingham says nearly one-third of the department's officers were laid off because of budget cuts. The city laid off 124 officers Jan. 29 with the majority of them working in patrol.
Willingham says there are enough officers to respond to emergency calls.
He says officers will not respond to noninjury collisions unless a crime is involved. And they will not respond to crimes such as fraud and forgery, burglary from vehicles and larcenies — unless the crime is in progress."
"Arbitration briefs filed by the city describe West Haven as “one of the most financially distressed municipalities in the state,” and say even a few extra snowstorms this year could push its finances over the edge.
The revelation comes just weeks after the city angered cops by borrowing $1.2 million from the police pension fund to make payroll in December. The city has since returned the money, but questions remain about how dire the city’s situation is."
"More than 100,000 state residents could lose their unemployment benefits by the end of April unless emergency measures are taken soon, state lawmakers warned Thursday.
The state Department of Workforce Development already sent about 8,000 letters on Tuesday notifying people their unemployment benefits will end within several weeks, spokesman John Dipko said. Once the remaining amount is gone, additional benefits will not be available, the letters said."
"Feb. 4 (Bloomberg) -- Serbia is following the terms of a 3 billion-euro ($4.2 billion) International Monetary Fund bailout, the government said today, disputing a report that the country is risking its next loan payment."
"Times are tough in the mansion market. Last year's sales of $1 million-plus homes in California were paltry compared to the boom days, according to a real estate report released Thursday. "
Tight credit, skittish buyers and sagging prices caused the number of homes changing hands for more than $1 million to fall 23.8 percent in 2009 compared with 2008, according to MDA DataQuick, a San Diego real-estate firm.
A total of 18,621 California homes sold for more than $1 million last year. That's barely a third of the 54,773 such homes that changed hands in 2005."
"The news you should have heard, but didn't. "
Listen about Fannie and Freddie at 7 minutes into this.
"Please go to page 5 and 6 of the above report and you will find discussion and tables of the annual revisions. While they present the table, they don’t bother to add up the revisions, but I did… and the number is 617,000 more jobs were lost than they originally reported! This is largely due to their use of a totally false “Birth/ Death model” for businesses. Below is a picture of their revision table, note only one month was positive, and in the average month, jobs were overestimated by 51,400 people!"
"All city employees hired before Jan. 10, 2009, have a vested right to lifetime retiree health benefits after only five years on the job. Thus, for each vested employee — active and retired — The City has a debt obligation. Add them all together (there are about 60,000, not including dependents), and we have one big debt. How big? According to an actuarial study released in July 2006, the number is — hold onto your hats — $4.9 billion.
The problem is, instead of setting money aside to pay the debt, San Francisco has been doing “pay as you go,” which is the equivalent of paying the minimum on a credit card. Each year, The City only pays the cost of covering current retirees. For fiscal year 2009-10, that number is budgeted at almost $129 million."
""WASHINGTON (Reuters) - The Labor Department on Friday blamed faulty estimates of how many companies were created or destroyed for its unusually large revision to payrolls that showed job losses were considerably steeper than first thought.
U.S.
Once a year, the Labor Department compares its payroll data with unemployment insurance tax reports and releases a "benchmark revision" that adjusts for discrepancies.
Normally the difference is relatively modest. This time, the Labor Department revised the level of employment for December 2009 down by 1.39 million, bringing the total number of jobs lost since the start of the recession to 8.4 million.
The primary culprit behind that huge revision was the so-called "birth-death" model, a method the Labor Department uses to try to estimate how many jobs were gained or lost because of companies opening or closing in a given month.
While economists have long questioned the accuracy of the model, it had performed well up until the latest recession.
This time, it overstated job creation by 779,000 in the year that ended in March 2009. The Labor Department also revised its monthly jobs data for April through December 2009, and found the birth-death model had overstated job creation by another 405,000."
"The pronounced recession led to a breakdown in that stability from March 2008 to March 2009," the Labor Department said in an article posted on its website, detailing the massive revisions. The article is available here: www.bls.gov/web/cesbmart.htm
"These errors started to grow in the fourth quarter of 2008 and got significantly larger in the first quarter of 2009," the Labor Department said.
Economists at the department are still researching ways to improve the model so that it can better estimate job creation and destruction, particularly in times of economic upheaval.
The Labor Department said it was investigating whether it would be helpful to run the model quarterly instead of once a year, and adding other variables."
a little comic relief from our northern neighbors, who dont seem to take all this seriously:
Finance ministers promised a meal of seal at G7 summit in Iqaluit - Seal meat, an Inuit delicacy still legally hunted, and a traditional meat pie made with caribou are both on the menu for the Canadian gathering of the world's leading economic ministers. In a decision described by one European official as "crazy", the Canadian government has chosen the city of Iqaluit, home to 7,000 in an icy landscape 200 miles south of the arctic circle, as the venue for a gathering of G7 finance ministers. With patchy phone coverage and February temperatures dipping to -20C, Iqaluit has only 300 hotel rooms, obliging some visiting officials to sleep in dormitories.
Good grief. On days like today you almost have to watch CNBC. Too bad you have to sit through Jim Cramer/Maria Bartiromo talking nonsense. Maria asked Jim just now if the dollar going up means the US is respected again? Of course Jim agreed it did. What a bunch of 3-yr olds! I can't believe this passes for financial news/insight.
Gold production is going down and dollar production is going up... isn't there only one thing that can happen? Gold is money.
Listen at 1 1/2 minutes into this. They also talk about the huge revisions in the unemployment numbers.
The big problem with this video is the solution that follows.
At 2 1/2 minutes into this it goes downhill, since they think we can spend our way back. It then gets even
worse with the Paul Krugman comments.
Good grief. On days like today you almost have to watch CNBC. Too bad you have to sit through Jim Cramer/Maria Bartiromo talking nonsense. Maria asked Jim just now if the dollar going up means the US is respected again? Of course Jim agreed it did. What a bunch of 3-yr olds! I can't believe this passes for financial news/insight.
Account deactivated per user's request.
Deep Blue Friday?
http://theautomaticearth.blogspot.com/2010/02/february-4-2010-deep-blue-friday.html
"Even if we are occupied with important things and even if we attain honor or fall into misfortune, still let us remember how good it once was here, when we were all together, united by a good and kind feeling which made us perhaps better than we are." - Fyodor Dostovevsky
Gosh, big suprise, the DJIA is having a magical late day rally. Hmmmm. Cui Bono.
Gosh, big suprise, the DJIA is having a magical late day rally. Hmmmm. Cui Bono.
"Thanks, PPT!!"
"Show some !@#$%^ ADAPTABILITY!!" -- Sergeant Jack Shaftoe, USMC ("Cryptonomicon")
"It's all goin' *down*, man! Martha Stewart's polishing the brass on the Titanic!" -- Tyler Durden
"Have the courage to use your own understanding!' -- Immanuel Kant
"Dreams are the seedbed of the possible." -- William Greider
"One day you finally knew what you had to do, and began, though the voices around you kept shouting their bad advice." -- Mary Oliver
Plunge Protection Team. Patriot Act. Anti Dog eat dog measures. So many ways to lie.
Technically we're right here at the DOW 10,000 and notice that the S&P 500 technical level of 1050 was breached during trading today as well. Prop. trading (proprietary and now propping up) is in full effect. As long as the Fed can print money, the primary broker dealers can push the markets higher. Ultimately this will, and has always, failed. They just don't get it. There's no economic recovery taking place, just the opposite is happening. Sooner or later technical levels of the stock markets re-align themselves with the fundamentals. PEs are astronomical. Take defensive measures now if you are long side investors/traders.
regards,
Solitonsurfer