STOCK MARKET WATCH, Monday April 6

[ozymandius]

Source: du

STOCK MARKET WATCH, Monday April 6, 2009

Bush Administration Officials Under Indictment = 2
Financial Sector Officials Under Indictment = 0
Financial Sector Officials In Prison = 2

AT THE CLOSING BELL ON April 3, 2009

Dow... 8,017.59 +39.51 (+0.49%)
Nasdaq... 1,621.87 +19.24 (+1.20%)
S&P 500... 842.50 +8.12 (+0.97%)
Gold future... 897.30 -11.60 (-1.29%)
30-Year Bond 3.72% +0.14 (+4.03%)
10-Yr Bond... 2.91% +0.16 (+5.63%)

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U.S. FUTURES & MARKETS INDICATORS
NASDAQ FUTURES..............................................S&P FUTURES

Market Conditions During Trading Hours

GOLD, EURO, YEN, Loonie and Silver

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Read more: du

[ozymandius]

1. Market WrapUp with Tim W. Wood

A Brief Update on the Markets and Dow Theory and the Tooth Fairy

http://www.financialsense.com/Market/wrapup.htm

[Demeter]

7. He Didn't Say Anything About the Tooth Fairy!

Good morning Ozy! You're celebrating April Fool's a bit late?

[ozymandius]

9. I found the Tooth Fairy Theory an implied message.

Tim Wood has no credibility with me on his Dow Theory/Robert Rhea shtick. So whenever he appears, spouting his drivel about how the Dow behaves exactly the way it did 100 years ago, then the Tooth Fairy cannot be far behind.

[ozymandius]

2. no goobermental reports today n/t

[Demeter]

3. The New World Order by Bill Bonner

http://www.dailyreckoning.com/the-new-world-order/

..It's all very well for the capitalists to make money... but when they begin to lose it, well government has to step in and bail them out. The "creative" part of capitalism is fine...but spare us the destruction, okay?

Yesterday, the heads of state of the world's 20 leading countries decided to put more muscle into their efforts to stop capitalism's downswing. Notably, they decided to treble the budget of the IMF. In all, today's International Herald Tribune tells us it's a "One Trillion Dollar Deal."

Gordon Brown pronounced it a "New World Order," which sounds a lot like what George Bush I was aiming for 15 years ago. One world government. One multi-national police force. Harmonized tax collection. (No more tax havens...nowhere to run...nowhere to hide...) Keep the masses happy with bread and circuses...and "wars" against imaginary and unnecessary enemies. (The War on Terror and now - the War on Depression.)

Hey, maybe we'll all have to speak Esperanto, too...

But at least now the IMF will be about to bailout more bankrupt governments before it goes broke itself.

Most of the money is coming from a country that doesn't have any: the U.S.A.

Look up. What do you see? Why, it's our Dollar Crash Flag. The dollar's days are numbered. What's the number? We don't know. But whatever it was a week ago, it is a smaller number now...


Hugo Chavez was in the Mideast this week at a meeting of oil producers. He called for a new petro-currency...which, we suppose, is a currency backed by oil. The Associated Press:

"Venezuelan President Hugo Chavez sought Arab support Tuesday for a proposed oil-backed currency to challenge the U.S. dollar in his latest swipe at Washington's dominance in global financial affairs."

He probably won't get very far with that. But he's not the only one looking for a solution to a crisis that hasn't happened yet.

The dollar's been king of the monetary mountain for a long time. But it had better be careful...watch it's back ...give a little of the food to a dog before eating it itself. Rivals are plotting against it. Much of the world wants to dethrone "King Dollar," says the French financial journal, La Tribune. China has already called for a new reserve currency based on IMF Special Drawing Rights. What's more, it's worked out bilateral agreements with many of its neighbors to swap goods, rather than use the dollar as a common unit of exchange. This week, it went further afield, making a deal with Argentina. This is the first deal of its kind in the Latin American world. But it's probably not the last. People see trouble coming with the greenback. They don't want it to hurt their sales of raw materials to China.

The Russians, too, have called for a new reserve currency. They, like the Arabs and Chavez, are sellers of raw materials. They don't want to get stuck with dollars that are losing their value.

That's the real New World Order...the United States will find it harder to stay in the driver's seat of this bus...and the U.S. currency will no longer give Americans an automatic ticket to the first class section...

[Demeter]

8. A Bit More From Bill Bonner

As GM goes, so goes the nation. Obama assured the nation that America would be the leader in car manufacturing. Alas, it is probably not to be. What makes Germany and Japan so competitive today is the fact that their industries were destroyed in WWII. They were forced to rebuild…amid tough competition. The United States, on the other hand, never had the benefit of aerial bombardment. And its auto industry has had such huge advantages – it was practically doomed from the beginning. Detroit has ready supplies of steel…rubber…plastic…labor – everything you need to make a modern automobile. Japan and Germany had to import almost everything. U.S. automakers also had a much bigger domestic market than either of its competitors…protected by two grand oceans. And it had vastly more open road…and gasoline that sold for only a fraction of the price in Japan or Germany. U.S. automakers would have to be numbskulls to blow this opportunity.

Of course, that is exactly what they did.

Not that it is any of our business. How they run the auto business is entirely up to them, as far as we’re concerned. We just note, and not for the first time, that you’ve got to get in the habit of compensating for your strengths. Because it is your advantages that will kill you, not your weaknesses.

Why are Americans broke? Because they had the world’s strongest economy and the world’s most trusted money. As a result, everybody wanted to lend them money.

Why are the Chinese sitting on the biggest pile of money on earth? Because they had to live under one of the worst governments in history…because they were starving only a few years ago…and because nobody would lend them any money.

Now, what Americans have is the world’s most powerful military machine…immensely more powerful than the closest rival. In fact, the word “rival” has no sense to it. In order to match the United States, you’d have to put together all the rest of the world’s military forces. Even then, they’d be no match for the United States…neither in technology nor in organization.

With that, we invite you to imagine how the world’s most successful military will destroy itself…just as the world’s most successful economy just did. Cursed with far too much money…and far too much luck, (its major enemy just gave up!) it’s just a matter of time before the Pentagon finds its own road to Hell. Maybe it already has!

[happyslug]

53. True in the 1960s, but NOT today.

The bombing did eliminate obsolete factories, which were rebuilt as new factories after WWII, but that affect was over the the 1960s. It is only in the 1960s that foreign cars started to make serious inroads into the American Market, mostly on the low cost end (The VW Bug was sold as a COMPACT car from the late 1950s onward). The Big three did introduce cars into the Compact Market but tended to view it as a low profit market and thus to be avoided (The Dealers had an even worse view of these low cost cars, seeing that people in that market were the most affected by Price, then any other segment of the market).

Thus the big three gave up the sub-compact market to foreign car makers in the 1960s. The Chevy Nova was the "Compact" car of GM, and you could get it with a 350 V8 (And some models 400 ci and larger engines). Thus you ended up with two cars in the "Compact" car market, Ford Mustangs (and other "Pony" Cars) and the VW Bug (and other foreign made true Compacts). The big exception was the AMC Rambler, which was a Compact car that dominated the market when introduced in the late 1950s, but AMC did NOT have the resources to dominate that market (And its management, after the success of the Rambler, decided to try to compete in the more profitable Mid-size and large car markets).

That was the US Car market just prior to the 1973 Oil Embargo. People had been warning since the 1950s the the US would become a net Oil Importer in or around 1969, but this was ignored. Europe was hard hit by the 1956 Arab Oil Embargo and the 1967 Arab Oil Embargo (Causing a drive the compact and subcompact and even City Cars) but the US, being an net oil exporter, actually GAINED on each embargo (and the price of oil was kept low in the US at about 25 cents a gallon). In 1969 the Texas Railroad Commission, for the first time since WWII, permitted all Texas oil fields to produce as much oil as possible. The Texas Railroad Commission did this in a effort to drive the price DOWN, the price of oil was reaching 30-35 cents a gallon, to high for the Commission. The US Exportation of oil ended and the US became a Net Importer do to the high price of Oil. People started to look at and buy smaller cars with better fuel economy (The VW Bug had been popular prior to 1968, but become more popular afterward, and the Japanese started their invasion of the US West Coast at that time for the same reason, people wanted smaller cars with better fuel economy, cars produced in Germany and Japan but not the US do to the affects the Arab Oil Embargo of 1956 and 1967 had on both Countries.

This was the situation BEFORE the Arab oil Embargo of 1973, which hit the US hard do to the fact the US had BENEFITED during the other two embargoes (i.e. US price for oil stayed the same do to the US being a net oil exporter prior to 1969). Thus into the 1970 the Big Three and AMC faced a problem. They were all set up to produce large cars that needed large V8s. To produce smaller cars they first had to produce smaller engines. While all four produced some four Cylinders, the vast majority of their production capacity was in V8s or Line sixes. It is easy to change body style, but engine production is hard to switch. Could the Big Three produce Subcompact cars in the 1970s? Yes and they did (The Vega, Chevette and Fiesta are good examples of this) but the production capacity was limited do to a shortage of engines. Furthermore Dealers and the big three themselves looked at the profit margin on the low end and saw it was quite small. The Big Profit was in the larger cars. In fact the purpose of the "Corporate Fleet Average Rule" was to encourage the big three to produce Subcompact cars, subsidized by the sale of larger cars. Thus low MPG cars cold still be made if you sold a high MPG car to Average out the MPG of the two.

The problem with this system was it hurt development of low end cars (and that seems to have been the intent by the Big Three when they lobbied for it over a straight ban on low MPG cars). Since that time (The 1970s) the biggest innovation in cars have come from overseas, why? First the Big Three were so large they could and did dominate what ever wast the most profitable section for themselves. The Big Three only had to look at each other in these high profit market areas. Being one of three, they knew what each was doing and any radical change would be know years before it hit the market, and even then never to far from what was perceived as sell-able today.

In Germany and Japan, you had twice the number of car markers, given the high price of fuel, the percentage of large cars was limited. Furthermore each of the car makers saw it was more profitable to dominate a niche in the market rather then the entire market. Most of these niches (Like the American niches of Compact, Mid Size and Large Cars) overlapped, but to a degree unheard of it the US do to the high price of oil and the greater emphasis on fuel efficiency. Having so many car producers you increased the possibility of one of them introducing an innovation that leaves the others behind. The First example of this was the using galvanized steel in the lower parts of cars and the fenders of cars. In the US these were the first areas to rust out, with galvanized steel this rusting out was not only reduced but in most cases stopped. The Japanese did it first in the early 1970s, one did it won the idea that its cars did NOT Rust out and the rest of the Japanese Market Followed. Thus by the late 1970s Made in Japan Cars were known NOT to rust out, even while Americans cars continued to rust out. The US Car makers followed, but by a 5-10 years delay, a delay that gave the cars they made the reputation as inferior to the Japanese (a reputation that American Cars have ever since).

On top of the Rust Problem the Japanese better fuel economy (Do to having a huge domestic market for high fuel efficient cars) were another plus point for Japanese Cars over Made in US Cars. This tended to end in the 1980s during the oil glut of the 1980s (at the same time US Car makers finally caught up with the Japanese on using Galvanized Steel on their Cars) but the reputation of US Cars were ruined and the US Car makers made no real effort to gain back the groups that had defected away (mostly east and West Coasters). When the SUV craze came about in the 1990s, the US Car makers found themselves in a Niche they could dominate with the same V8s and other large engines that they still had capability to make. The Big Three did NOt want to understand let alone foresee that the days of low price for Gasoline was going to last no more then a decade. The Big Three just saw short term profits and jumped at the chance and ended up in the same situation they had been in the late 1960s, huge capacity to produce large Vehicles with Large Engines, but facing a market that wanted nether. Furthermore the Big Three had another problem, in the 1970s the Japanese importation tide was just beginning so most Americans had to buy US when it came to a new car, but today Foreign cars can be purchased almost everywhere in the US AND given the increase rust protection used on cars since the 1970s, the days when a person HAD to replace his cars do to it being rusted out are long gone. While many people still only keep a car four to five years, many people can keep a car twice as long and have been doing so.

My point is the Bombing of WWII did clean out many obsolete factories in Europe and Japan and were replaced by new Factories after WWII, that affect of that rebuilt was largely felt in the 1960s and 1970s NOT today. The reason the US Car Industry is in the Shape it is in is that the Federal Government left the Big Three alone in the 1950s and 1960s, so they became interconnected monopoly that was more interested in total profitability then what it was producing. The Germans and Japaneses had 7-8 car makers each trying to grab a share of a much smaller market with cars design for a market concerned about lack of fuel. The double the size of car makers, made them more competitive with each other and quicker to introduce new concepts into their cars and adjust to changing Market Conditions. Furthermore not only could they adapt quicker to changing Market Conditions, the market they were facing domestic ly was much more like the situation the US went into in the 1970s and today then what the US market was in the 1960s and 1990s. The reason FORD is not in the same Boat and GM and Chrysler is FORD is not only a US Car Maker but a European Car Maker, and thus saw some of what was going on overseas better then GM or Chrysler. I should Note while Ford did see the situation better then the other members of the Big Three, it did NOT see it as while as the Japanese car makers (Through probably as while as the German Car Makers).

Just to point out that while the Bombing of WWII did have some affect, most of that effect was over by 1960 lets alone 1970. The problem has been NOT new factories to replace ones bombed out after WWII, but NOT seeing how the Car Market will be after 1970 and again after 2000.

[Demeter]

57. Good Summary, Happy!

Bill Bonner likes to cherry-pick his "facts" and "history" to fit his political views, which are rather neanderthal.

The real killer is what the American car manufacturers DIDN'T do after 1973 oil shocks. Like anything.

It's an education reading his stuff--and entertaining, mostly.

[happyslug]

76. Most of it is from memory, I could do better if I had the time to do the Research

But Right now I am to lazy, and given this is a latest new thread NOT worth the effort, more details can be found on this subject from me and other people on longer terms threads on this site, including the Peak Oil Forum and Public Transportation Forum.

In the 1960s and 1970s they were people in the Automotive press advocating the break up of GM under anti-trust laws. They argued GM was TO BIG and could NOT adjust to any change in the market. It now appears that those writers were right, GM could NOT adjust and is not only taking GM down but also Chrysler do to the fact Chrysler (like Ford) tried to compete with GM in its dominate market. Ford is lucky that it is bigger overseas then GM and thus has greater access to small cars and how to design small cars, but Ford was NOT exempt from the affect of GM and its almost 60 % domination of the Domestic Car market after WWII. GM should have been broken up, if GM had been broken up you would be facing 2-3 smaller companies, each better able to adapt to the Changing Market place then could GM. We may see that situation yet, looks like GM will be broken into two companies, one a viable one built around Chevrolet selling Compact to Large Cars, and the other selling Buick, Saturn, Hummer Pontiac and other not as while known companies. Cadillac may end up as part of Chevrolet (And Buick may also be with Chevrolet). This would provide Chevrolet a luxury car to go with its smaller cars and trucks. We will have to see what happens.

[54anickel]

13. Wow, a barter system between countries half-way around the world. It's not just for your local

neighborhood anymore.



http://www.bartertheatre.com/purchase_tickets/BarterNights.php

A few times a year, Barter holds Barter Nights in the celebration of the history of Barter and to assist the Second Harvest Food Bank—Appalachian Branch. This organization needs everyone’s help. Rally up your friends, bring what you can, and enjoy a Barter production as a bonus. Even if you cannot attend the show, all donations are still welcome. If you are unable to attend Barter Night, The Second Harvest Food Bank is always happy to accept donations.

As many people already know, Barter Theatre got its name through the practice of bartering. Robert Porterfield brought a team of actors to Abingdon during the Great Depression. These actors were starving in New York while the farming people of Southwestern Virginia had an abundance of food they could not sell.

So, Porterfield gave these Virginians something valuable to spend their spoiling vegetables on—a good laugh. Now you can experience part of the rich history of Barter Theatre by bartering your own admission. More importantly, you can help your community.

edit to replace large graphic with link

[ozymandius]

4. Oil rises above $53 as investors eye earnings

SINGAPORE – Oil prices rose above $53 a barrel Monday in Asia as investors looked to U.S. corporate earnings reports this week for signs of economic recovery that could sustain crude's two-month rally.

Benchmark crude for May delivery rose 66 cents to $53.17 a barrel by midafternoon in Singapore in electronic trading on the New York Mercantile Exchange. The contract fell 13 cents on Friday to settle at $52.51.

Crude has jumped from below $35 a barrel in February as investor concerns have eased that the ailing U.S. economy would enter a depression and drag the rest of the world with it. Traders will be watching corporate earnings announcements for signs the recession may have bottomed in the first quarter and for company guidance about coming quarters.

.....

In other Nymex trading, gasoline for May delivery rose 1.59 cents to $1.51 a gallon and heating oil gained 1.24 cents to $1.46 a gallon. Natural gas for May delivery jumped 2.7 cents to $3.83 per 1,000 cubic feet.

http://news.yahoo.com/s/ap/oil_prices

[ozymandius]

6. Bad economy holds highway deaths to 1960s levels

WASHINGTON – Less money in the pockets of Americans means fewer highway deaths. As the economy slid deeper into recession and gas prices reached $4 a gallon last year, the number of people killed in auto accidents hit its lowest level in five decades.

In addition to fewer miles logged by drivers worried about expenses, experts also cited record-high seat-belt use, tighter enforcement of drunken driving laws and the work of advocacy groups that encourage safer driving habits.

Preliminary figures released by the government Monday show that 37,313 people died in motor vehicle traffic crashes last year. That's 9.1 percent lower than the year before, when 41,059 died, and the fewest since 1961, when there were 36,285 deaths.

http://news.yahoo.com/s/ap/20090406/ap_on_go_ot/highway_deaths

[fasttense]

41. Yahoo! More people to starve during the sequel to the Grapes of Wrath.

Great cartoon Ozy. Thanks.

[defendandprotect]

44. In NJ, we're paying more than $1.80 per gallon . . . ???

[Demeter]

58. Try $2+ in Michigan, with 12% unemployment.

[defendandprotect]

78. At this point, it's Democrats letting them get away with this . . .

I still say, NATIONALIZE the oil industry.

And we should get busy building electric cars -- take over those auto plants and

the workers --

And, don't want to make you feel worse, but I think the unemployment firgures are

probably understated by about 100% -- and long have been!

I can't imagine what the home heating bills must have been this winter!!

[Demeter]

5. Bread Lines

http://www.dailyreckoning.com/the-new-world-order/

"First Friday of the month, you know what this means...time for the U.S. employment scene to hit a new low," writes Ian in today's issue of The 5 Min. Forecast.

"663,000 Americans lost their jobs in March, the Labor Department claims today. That puts the official unemployment rate up to 8.5%, the highest its been since 1983. March's loss marks the 15th month in a row of net job losses. Since the recession began, the government estimates 5 million Americans have lost their jobs."



"Today's number stands in line with the jobless claims details earlier this week - a record 5.7 million people are currently filing for unemployment benefits.

"But from a trading perspective, as dark as this might sound, today's jobs number was a non-event," continues Ian. "March's losses were just a bit higher than the Street anticipated, and the small details were mostly in line with expectations.

"The only real surprise came in the form of a big January revision. The government added 86,000 lost jobs during the month, to a January tally of 741,000. That's actually the biggest monthly drop in 59 years. Such a number would have sent stocks to the woodshed back in early February, but since the revision is now so backward looking, there isn't much traders can do. Clever trick, eh?"

[fasttense]

42. Remember when Raygun decided to add the military as employment numbers to

the BLS statistics? So when one of our troops is killed does that mean a job is created?

Just a reminder of how the employment/unemployment number are being manipulated.

[ozymandius]

10. To sustain rally, market looks to earnings

NEW YORK – Enthusiasm over government programs aimed at breaking a logjam in bank lending has become the key driver of the market's recent surge. But that could take a back seat in coming weeks as investors return to their bread-and-butter indicator: quarterly earnings data.

.....

But as investors' focus shifts, so might momentum. This week they'll begin poring over first-quarter earnings results to see if anything has improved. Aluminum producer Alcoa Inc. is set to kick off first-quarter earnings season on Tuesday with a quarterly loss.

The current rally will only last if companies show some improvement in quarterly results. Disappointing results, especially in key sectors such as banking and retail, would likely kill market momentum.

The banking sector, which has been a culprit in the economic downturn and the focus of so much recent government intervention and support, will be closely monitored.

http://news.yahoo.com/s/ap/20090405/ap_on_bi_ge/wall_street_week_ahead

[Tansy_Gold]

77. This is humor, right? n/t

[Demeter]

81. Either That, or Fantasy/Sci Fi

I've had a headache for days now. It's the weather, the Kid, and everything else. But mostly the weather. I'm wearing long johns and snow boots, in April!


For bone fide humor, see the end of the thread--Dave Barry.

[ozymandius]

11. Recession outlasts even extended jobless benefits

WASHINGTON – In the coming weeks and months, hundreds of thousands of jobless Americans will exhaust their unemployment benefits, just when it's never been harder to find a job.

Congress extended unemployment aid twice last year, allowing people to draw a total of up to 59 weeks of benefits. Now, as the recession drags on, a rolling wave of people who were laid off early last year will lose them.

Precise figures are hard to determine, but Wayne Vroman, an economist at the Urban Institute, estimates that up to 700,000 people could exhaust their extended benefits by the second half of this year.

Some will find new jobs, but prospects will be grim: Layoffs are projected to go on, and many economists expect the jobless rate, already at 8.5 percent, to hit 10 percent by year's end.

....

That so many people have remained on jobless aid for more than a year underscores the depth and duration of the recession, which began in December 2007. If the downturn extends into May, it will be the longest recession since the Great Depression.

http://news.yahoo.com/s/ap/20090405/ap_on_bi_ge/unemployment_losing_benefits

[Demeter]

12. Japan and US Economies--Graphic!

http://www.csis.org/media/csis/events/090326_koo_presentation.pdf

[Demeter]

14. Fannie, Freddie Quietly Lift Moratorium on Foreclosures

http://washingtonindependent.com/37160/fannie-freddie-quietly-lift-moratorium-on-foreclosures


A ban on foreclosure sales and evictions from houses owned by mortgage giants Fannie Mae and Freddie Mac, which began as a high-profile effort just before the holidays to keep people in their homes as the government tried to come up with homeowner rescue plans, is over.

Spokesmen for Fannie Mae and Freddie Mac confirmed the ban ended March 31, in a response to an inquiry from TWI...But its expiration didn’t seem to merit the same level of fanfare...Fannie and Freddie have repeatedly extended the ban, which was originally expected to expire on Jan. 9.

Fannie Mae said in a brief statement from spokesman Brian Faith that “Fannie Mae’s suspension of foreclosure-related evictions concludes as of March 31, 2009. The company has in place special foreclosure sale requirements that take into account the Making Home Affordable program. A foreclosure sale may not occur on any Fannie Mae loan until the loan servicer verifies that the borrower is ineligible for a Home Affordable Modification and all other foreclosure prevention alternatives have been exhausted.”

Since the ban started, both Fannie and Freddie have developed rental programs to keep tenants from being evicted from foreclosed properties owned by the two agencies.

In addition, the Obama administration in March unveiled its plan to help troubled borrowers either refinance their homes or modify their mortgages.

The lifting of the ban will be a testing ground for the administration’s approach to foreclosures. A bill to allow bankruptcy judges to modify mortgages has stalled in Congress. Money from the Troubled Assets Relief Program has gone to banks and bailout efforts. The ban, enacted as foreclosures soared and the holidays approached, was the government’s first dramatic step to help homeowners. The housing rescue plan was developed and announced only after the Treasury Department first unveiled its plan to buy toxic assets from banks.

Separate programs launched recently by Fannie and Freddie to allow tenants to stay in Real Estate Owned (REO) foreclosed properties owned by the agencies and lease them on a month by month basis at market rents, until they can be sold again, are not affected by the ban’s expiration, German said. Those programs will continue, with no expiration date scheduled. Fannie’s program covers renters of foreclosed properties, while both former owners and renters can qualify for Freddie’s program.

MUCH MORE AT LINK

[Kolesar]

15. How to Clean a Dirty Bank by Andrew Rosenfield

http://www.nytimes.com/2009/04/06/opinion/06rosenfield.html?ref=opinion

Published: April 5, 2009
Chicago

Commercial banks in the United States are not subject to the bankruptcy statute — when they become insolvent they are simply acquired by the government. This is what banks sign on for in return for a charter, deposit insurance and direct access to the Federal Reserve lending window, which generally allow banks to prosper as long as they control risk.

Now Treasury Secretary Timothy Geithner wants to apply this same swift acquisition process to large insolvent “shadow banks” that risk doing damage to the financial system — big hedge funds, investment banks, insurance holding companies and the like — because bankruptcy proceedings move too slowly to allow these institutions to be quickly refinanced or restructured.

Secretary Geithner says the lack of a good mechanism to restructure Lehman Brothers contributed to that firm’s failure last fall. And it is why the Bush administration’s ill-designed overnight infusion of capital into American International Group turned out to be such a mess. The company avoided bankruptcy, but could not be properly restructured.

Mr. Geithner is right to want a rapid seizure system for shadow banks. What’s odd is that at the same time that he is proposing one, the government is failing to use powers it already has to restructure insolvent commercial banks. Instead, Mr. Geithner continues to suggest a variety of other actions that seem unlikely to solve the banks’ central problem — a lack of equity capital. Perhaps he fears what would happen if large bank holding companies were to default on their bonds, which are held by insurance companies and other institutional investors. But that is a problem that needs to be tackled head-on, not by propping up failing banks.

...snip...

There is a simpler, sounder and fairer way to recapitalize an insolvent bank. The government should seize it, as it is already authorized — indeed, compelled — to do. Then it could inject cash (in the form of Treasury notes) as equity in the bank and, at the same time, remove the toxic assets the bank holds. Bank regulators might perhaps swap Treasury securities for toxic assets “at par” — that is, in an amount equal to the original purchase price of the assets removed. This would be a fair transaction, and it would cost nothing, because the government would own both the bank and the bonds. The toxic assets could then be placed in the basement of the Treasury building while we wait to see what they turn out to be worth.

The government could then quickly — say within a month — auction off the bank. Speed would be critical: If Treasury were to hold a large bank for a long time, it would be difficult to retain the most talented employees, and it is the people, along with a clean balance sheet, that make a bank valuable.
...more, more, more...

[Demeter]

16. Should We Abolish Bonuses? by Leo Kolivakis, publisher of Pension Pulse.

http://www.nakedcapitalism.com/2009/04/guest-post-should-we-abolish-bonuses.html

Me: Tom, I see two systems developing, one where public sector workers get cushy pensions and one where private sector workers see their retirement dreams evaporating in front of their eyes.

Tom: That's why we need one state pension system which guarantees pensions for everyone. This notion of defined benefits for some and defined contributions for others is stupid.

Me: Yes, I agree, but I am against one mega fund where power is concentrated in too few hands. Interestingly, before CPPIB or PSPIB were created, pension contributions were invested in non-marketable government bonds.

Tom: Precisely, they were safe and now they are at the mercy of Casino Capitalism.

Me: You didn't think much of that Bill Moyers' interview?

Tom: No, I didn't think much of it. Black is missing the bigger point thinking you can regulate a better system but the problem is that the whole financial system, and the perverse incentives that feed it, are corrupt. The meltdown exposed this. I would abolish bonuses all-around, including at pension funds.

Me: Really? That is blasphemy! They will say you are against financial innovation!

Tom: So what? Let them get a real job if they don't like it. These people are social parasites. They've innovated so much that they brought the whole global financial system to its knees, causing social devastation as unemployment soars around the world.

Me: But what about fixing the incentives like fixing the benchmarks?

Tom: You know they will always find a way of tinkering with the benchmarks. Besides, benchmarks are part of the problem because they compensate people to take on reckless risks.

Me: True, but I still think we need to fix these benchmarks and introduce performance and operational audits at pension funds by independent industry experts. Also, I would introduce high-water marks so these pension funds have to recoup their losses before doling out one dime of bonus. Finally, unlike hedge funds, senior executives at pension funds do not have skin in the game. They are paid way too much for delivering "alpha" based on bogus benchmarks.

Tom: Yes, and the lion's share of their performance should be based on ten year returns. I would hold them to that and if someone leaves prior to delivering those returns, I would introduce a clawback on any previous bonuses, as you stated on your blog. But if you ask me, just abolish bonuses altogether and pay them salaries.

Tom and I had a follow-up conversation on "profits" and how bonuses should be tied to real profits, not perceived profits based on some accountant's valuation. "Either they have the money in the bank after a certain period or they don't".
That is why in private markets, I always liked the notion of cash on cash returns. What was the value of the investment at cost, and what was it once you exited? It's that simple notion of "profit" that we have distorted using all sorts of accounting shenanigans that's gotten us into this mess....

[AnneD]

48. Morning Marketeers....

:donut: and lurkers. Let me throw a bucket of the cold water of reality on this man's assumptions.

As a Nurse working in the Med Center I would command 80+K for my 15 years experience. Working for the state as a School Nurse with 15 years I make 52K. I took a 10K a year pay cut when I took this job. I would work three days part time at the hospital and make more than my 2 week check. What attracted me was that as a single mom-I would have the same schedule as my daughter-thus saving me day care money. The one benefit they kept stressing to me was the pension. I thought that was interesting but I knew that from my own efforts-I was doing better saving from my hospital check.

That 'plush' pension is a certain percentage of my 3 highest salaries averaged -with a COLA on average of ever 10 years. I cannot draw social security even though I contributed for enough quarters and they recently passed a law so the I cannot get survivors or widows benefits. I have to save in additional vehicles like a 403b to avoid a cat food diet in my old age.

One of the reasons civil service has a semi decent pension is to attract folks of caliber to low paying, difficult work. You are rewarded later for sacrifices today.

Other than that mis perception-his plan doesn't sound bad. I just don't want to perpetuate this myth that I did nothing and got the huge salary and retirement by going into public health. It hasn't been that easy.

Happy hunting and watch out for the bears.

PS Demeter-I am surprised no one thought of the Godfather quote....leave the gun take the canolli. :spray: Now there is someone with priorities.

[Demeter]

17. It Really Is All Greenspan's Fault

http://www.forbes.com/2009/04/02/greenspan-john-taylor-fed-rates-china-opinions-columnists-housing-bubble.html

[ozymandius]

18. Geithner May Oust Executives at Banks Needing ‘Exceptional’ Aid

April 6 (Bloomberg) -- Treasury Secretary Timothy Geithner said he’s prepared to oust executives and directors at banks that require “exceptional” assistance from the U.S. government.

“If in the future, banks need exceptional assistance in order to get through this, then we will make sure that assistance comes,” while ensuring taxpayers are protected, Geithner said yesterday in an interview on the CBS “Face the Nation” program. “Where that requires a change in management and the board, then we will do that.”

Geithner noted that American International Group Inc., Fannie Mae and Freddie Mac had their chief executives removed after it became clear the companies couldn’t survive without government rescues. The Treasury is reviewing how much capital the biggest U.S. financial companies need in order to endure a severe economic downturn.

http://www.bloomberg.com/apps/news?pid=20601068&sid=ayKsEHMDMxVk&refer=home

[Demeter]

20. Geithner's Plan: Loopholes Galore

http://www.businessweek.com/magazine/content/09_15/b4126020226641.htm?campaign_id=rss_daily

[ozymandius]

25. Geithner is a mole.

Evidence mounts that he was put there to protect banks - never to change any fundamentals they have used to create illusory profits at our expense.

[natrat]

38. sadly half the adminastration work for the junta

[Demeter]

60. And the Rest Are Leftover Bushbots (or both)

[ozymandius]

19. European Producer Prices Fall More Than Expected

April 6 (Bloomberg) -- European producer prices fell more than economists forecast in February and retail sales dropped by a record, highlighting the increasing risk of deflation in the region.

Factory-gate prices in the euro region fell 1.8 percent from the year-earlier month, the most since April 1999, the European Union’s statistics office in Luxembourg said today. Economists had forecast a 1.5 percent decline, according to the median of 21 estimates in a Bloomberg News survey. Retail sales dropped 4 percent from a year earlier, a separate report showed.

The deepening of the global slump and a 60 percent drop in oil prices from a July record have eased inflation pressures across the euro area. The region may record a temporary decline in annual consumer prices this year, European Central Bank President Jean-Claude Trichet said on April 2 after cutting the benchmark interest rate by a quarter-point to 1.25 percent, less than the half-point reduction economists expected.

http://www.bloomberg.com/apps/news?pid=20601068&sid=aLfPXOZ9wUEQ

[Demeter]

21. On the Urgency of Restructuring Bank and Mortgage Debt, and of Abandoning Toxic Asset Purchases

http://hussmanfunds.com/wmc/wmc090330.htm

Steps to Stability - Needed Legislation

1) Enable the receivership of distressed bank and non-bank financial institutions (including bank holding companies), encouraging voluntary debt-equity swaps as an alternative to the receivership / conservatorship of insolvent institutions.

2) Stabilize insolvent financial institutions through receivership if the bondholders of the institution are unwilling to swap debt for equity. In virtually all cases, the liabilities of these companies to their own bondholders are capable of fully absorbing all losses without the need for public funds to defend those bondholders. Receivership involves defending the customer assets, changing the management, wiping out the common stock and a portion of the bondholders' claims, continuing the operation of the institution in receivership, and eventually selling or reissuing the company to private ownership, leaving the bondholders with the residual. Massive bailouts using public funds are unnecessary, as are disorganized Lehman-style failures.

3) Allow “toxic asset” purchases using public funds only to the extent that the entire issuance of various securitized mortgage pools can be purchased “all or none” at a moderate percentage of face value. This would allow the underlying mortgages to be restructured - ideally writing them down to a similar percentage of face - reducing their foreclosure risk, and increasing the likelihood that public funds will be recovered.

4) Act quickly on foreclosure mitigation. Establish a Treasury conduit to administer (but not guarantee) property appreciation rights on restructured mortgages, again encouraging voluntary restructuring, using the Treasury conduit as a coordinating mechanism (additional details below).

5) Allow bankruptcy judges to substitute a portion of foreclosed mortgage obligations with equivalent claims on subsequent property appreciation. “Push-down” of mortgage principal without offsetting compensation rights to lenders should be emphatically avoided.

DISCUSSION AT LINK

[Demeter]

23. Sign of Our times

http://4.bp.blogspot.com/_qFiyjwMlP0Y/SdL14xcAH2I/AAAAAAAAAq0/tqWkMHVjB6s/s400/capitalism+not+working.jpg

[ozymandius]

22. S&P 500 Can’t See Enough Money to Feed Stocks’ Rally

April 6 (Bloomberg) -- Investors are depending on banks more than at any time in at least 60 years to lead the U.S. out of the longest earnings slump since the Great Depression.

American companies will end more than two years of declining income by the fourth quarter, according to analyst forecasts compiled by Bloomberg. Banks will be responsible for all of the 76 percent rebound in the final three months of the year, because without financial companies, the gain turns into a 4.5 percent decline, the data show.

Rathbone Brothers Plc, MFS Investment Management and TD Ameritrade Holding Corp. say the reliance on banks is making them increasingly concerned that the 25 percent gain by the Standard & Poor’s 500 Index since March 9, the steepest rally since 1938, will dissipate. While rising home sales and durable- goods orders show the economy may be bottoming, unemployment and consumer debt as well as prospects that banks will be forced to write down more loans may halt the gain in equities.

...

For S&P 500 companies, profits will probably fall 37 percent, according to estimates from more than 1,700 securities analysts compiled by Bloomberg. Earnings may drop 31 percent in the second quarter and 18 percent in the next before gaining in the last three months of the year, they predict. The 76 percent jump would be the biggest quarterly increase in earnings in more than two decades, based on Bloomberg and S&P data.

http://www.bloomberg.com/apps/news?pid=20601103&sid=al6lArvbSwuI&refer=us

---

"the biggest quarterly increase in earnings": I think the author meant "the biggest quarterly decrease in earnings" unless "loss" is the new name for "gain".

[ozymandius]

28. Earnings Season is Crunch Time

from The Big Picture

There are lots of reasons for the current rally to lose steam just about now. By many technical measures, it is extremely overbought. On a charting basis, the major indices are bumping right up against key resistance levels. At the very least, the strongest 4 week S&P500 period since 1933 suggests a little “back and filling.”

The biggest factor, however, is likely to be earnings. As I noted back in October ‘08, the analyst community remains way to optimistic about Q1 numbers, despite their horrific over-optimism throughout the debacle that was 2008.

Corporate profits will be suffering from a one two punch: Continued writedowns from bad investments, and a recessionary drop in sales that was fairly substantial.

David Gaffen of the WSJ writes:

“Analysts are expecting earnings will decline 37% from the year-ago period. All 10 groups in the S&P 500 show a year-over-year profit slide, a uniform decline that hasn’t happened in the 10 years Thomson Financial has been tracking such data.

The key to keeping the stock rally going won’t so much be whether first-quarter earnings meet or beat those expectations. Instead, the gains will be more dependent on what company executives say about the second, third and fourth quarters.”

37% is a pretty ugly number. But even worse, I disagree with that last statement. What corporate executive has the foggiest clue about Q3 or Q4? In fact, I don’t think they even have a clue about Q2.

more...

[Festivito]

24. Debt: 04/02/2009 11,124,519,301,253.21 (UP 13,864,944,043.88) (Up a bit.)

(Not a big rise.)

= Held by the Public + Intragovernmental(FICA)
= 6,839,564,838,148.81 + 4,284,954,463,104.40
UP 7,764,243,786.78 + UP 6,100,700,257.10

Source: Debt to the penny:
http://www.treasurydirect.gov/NP/BPDLogin?application=np

THINKING IN BILLIONS: Think 3 or 4 dollars per billion in a 306-Million person America.
If every American, man, woman and child puts in $3.27 each THAT'S 1B$.
A family of three: Mom, Dad, Child: $9.8, ABOUT TEN BUCKS for a 1B$ federal program.
I hope that is clear. However, I'd suggest using $3 per 1B$ to underestimate it.
Use $4 per 1B$ to overestimate the cost when thinking: Is the federal program worth it?
Aid to Dependant Children: 2B$/yr =$8/yr(a movie a year) Family of 3: $24/yr(an hour of bowling)

PERSONALIZED DEBT:
Every 14 seconds we net gain a another American, so at the end of the workday of this report, there should be 306,091,286 people in America.
http://www.census.gov/population/www/popclockus.html
Currently, each of these American's owe $36,343.8.
A family of three owes $109,031.39. (And that is IN ADDITION to their mortgage.)

ANALYSIS:
There were 24 reports in the last 30 to 31 days.
The average for the last 24 reports is 7,598,083,608.43.
The average for the last 30 days would be 6,078,466,886.75.
The average for the last 31 days would be 5,882,387,309.75.
There were 252 reports in 365 days of FY2007 averaging 1.99B$ per report, 1.37B$/day.
There were 253 reports in 366 days of FY2008 averaging 4.02B$ per report, 2.78B$/day.
There were 75 reports in 112 days of GWB's part of FY2009 averaging 8.03B$ per report, 5.38B$/day.
There were 51 reports in 72 days of Obama's part of FY2009 averaging 0.70B$ per report, 0.60B$/day so far.
There were 126 reports in 184 days of FY2009 averaging 8.73B$ per report, 5.98B$/day.

PROJECTION:
There are 1,389 days remaining in this Obama 1st term.
By that time the debt could be between 13.0 and 19.4T$.
It could be higher. It could be lower.

HISTORICAL:
President's term begins and ends on Jan 20.
(Guess who might want to hide the Reagan Bush years. Jan 20 data is missing before 1993.)
01/20/1993 _4,188,092,107,183.60 WJC Inaugural
01/22/2001 _5,728,195,796,181.57 WJC (UP 1,540,103,688,997.97)
01/20/2009 10,626,877,048,913.08 GWB (UP 4,898,681,252,731.43)
04/02/2009 11,124,519,301,253.21 BHO (UP 497,642,252,340.13 so far since Obama took office.)

Fiscal Year ends: Sep 30
Borrowed in FY1993: (Maybe later.)
Borrowed in FY1994: 281,261,026,873.94
Borrowed in FY1995: 281,232,990,696.07
Borrowed in FY1996: 250,828,038,426.34
Borrowed in FY1997: 188,335,072,261.61
Borrowed in FY1998: 113,046,997,500.28
Borrowed in FY1999: 130,077,892,735.81
Borrowed in FY2000: _17,907,308,253.43 Bill alone
Borrowed in FY2001: 133,285,202,313.20 Bill and George
Borrowed in FY2002: 420,772,553,397.10 All George
Borrowed in FY2003: 554,995,097,146.46
Borrowed in FY2004: 595,821,633,586.70
Borrowed in FY2005: 553,656,965,393.18
Borrowed in FY2006: 574,264,237,491.73
Borrowed in FY2007: 500,679,473,047.25
Borrowed in FY2008: 1,017,071,524,650.01
Borrowed in FY2009: 1,099,794,404,340.80 so far this fiscal year.

LAST FIFTEEN REPORTS OF ADDITIONS TO PUBLIC DEBT(NOT FICA):
03/13/2009 -000,013,659,079.13 ----
03/16/2009 +047,789,810,398.18 ------------********** Mon
03/17/2009 +000,031,463,665.67 ------------*******
03/18/2009 +000,237,422,838.19 ------------********
03/19/2009 +004,087,134,960.77 ------------*********
03/20/2009 +000,429,200,142.60 ------------********
03/23/2009 -000,116,003,157.82 --- Mon
03/24/2009 +000,222,913,900.31 ------------********
03/25/2009 +000,059,898,960.86 ------------*******
03/26/2009 +007,175,786,187.90 ------------*********
03/27/2009 -000,468,145,936.78 ---
03/30/2009 +000,069,902,880.68 ------------******* Mon
03/31/2009 +079,841,314,678.25 ------------**********
04/01/2009 -001,742,860,350.87 --
04/02/2009 +007,764,243,786.78 ------------*********

145,368,423,875.59 Total of 15 above reports.

Heavy borrowing seems to start after 09/18/2008.
US borrowed $1,459,887,497,994.14 in last 196 days.
That's 1,460B$ in 196 days.
More than any year ever, including last year, and it's 144% of that highest year ever only in 196 days.
And it is over 100% of ANY dismal Bush, for any dismal Bush-year, ONLY IN 196 DAYS NOT 365.

For a prettier and more explanatory view of our nation's debt:
http://www.brillig.com/debt_clock

(Debt to the penny keeps changing. Stuff is missing. Best to keep our own history.) LAST REPORT:
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=3812945&mesg_id=3812974

[Festivito]

72. Debt: 04/03/2009 11,146,566,832,297.33 (UP 22,047,531,044.12) (Up 28B.)

(A reasonable rise today.)

= Held by the Public + Intragovernmental(FICA)
= 6,868,532,515,279.65 + 4,278,034,317,017.68
UP 28,967,677,130.84 + DOWN 6,920,146,086.72

Source: Debt to the penny:
http://www.treasurydirect.gov/NP/BPDLogin?application=np

THINKING IN BILLIONS: Think 3 or 4 dollars per billion in a 306-Million person America.
If every American, man, woman and child puts in $3.27 each THAT'S 1B$.
A family of three: Mom, Dad, Child: $9.8, ABOUT TEN BUCKS for a 1B$ federal program.
I hope that is clear. However, I'd suggest using $3 per 1B$ to underestimate it.
Use $4 per 1B$ to overestimate the cost when thinking: Is the federal program worth it?
Aid to Dependant Children: 2B$/yr =$8/yr(a movie a year) Family of 3: $24/yr(an hour of bowling)

PERSONALIZED DEBT:
Every 14 seconds we net gain a another American, so at the end of the workday of this report, there should be 306,097,458 people in America.
http://www.census.gov/population/www/popclockus.html
Currently, each of these American's owe $36,415.09.
A family of three owes $109,245.27. (And that is IN ADDITION to their mortgage.)

ANALYSIS:
There were 24 reports in the last 30 to 31 days.
The average for the last 24 reports is 8,446,995,952.60.
The average for the last 30 days would be 6,757,596,762.08.
The average for the last 31 days would be 6,539,609,769.75.
There were 252 reports in 365 days of FY2007 averaging 1.99B$ per report, 1.37B$/day.
There were 253 reports in 366 days of FY2008 averaging 4.02B$ per report, 2.78B$/day.
There were 75 reports in 112 days of GWB's part of FY2009 averaging 8.03B$ per report, 5.38B$/day.
There were 52 reports in 73 days of Obama's part of FY2009 averaging 0.80B$ per report, 0.68B$/day so far.
There were 127 reports in 185 days of FY2009 averaging 8.83B$ per report, 6.06B$/day.

PROJECTION:
There are 1,388 days remaining in this Obama 1st term.
By that time the debt could be between 13.1 and 20.2T$.
It could be higher. It could be lower.

HISTORICAL:
President's term begins and ends on Jan 20.
(Guess who might want to hide the Reagan Bush years. Jan 20 data is missing before 1993.)
01/20/1993 _4,188,092,107,183.60 WJC Inaugural
01/22/2001 _5,728,195,796,181.57 WJC (UP 1,540,103,688,997.97)
01/20/2009 10,626,877,048,913.08 GWB (UP 4,898,681,252,731.43)
04/03/2009 11,146,566,832,297.33 BHO (UP 519,689,783,384.25 so far since Obama took office.)

Fiscal Year ends: Sep 30
Borrowed in FY1993: (Maybe later.)
Borrowed in FY1994: 281,261,026,873.94
Borrowed in FY1995: 281,232,990,696.07
Borrowed in FY1996: 250,828,038,426.34
Borrowed in FY1997: 188,335,072,261.61
Borrowed in FY1998: 113,046,997,500.28
Borrowed in FY1999: 130,077,892,735.81
Borrowed in FY2000: _17,907,308,253.43 Bill alone
Borrowed in FY2001: 133,285,202,313.20 Bill and George
Borrowed in FY2002: 420,772,553,397.10 All George
Borrowed in FY2003: 554,995,097,146.46
Borrowed in FY2004: 595,821,633,586.70
Borrowed in FY2005: 553,656,965,393.18
Borrowed in FY2006: 574,264,237,491.73
Borrowed in FY2007: 500,679,473,047.25
Borrowed in FY2008: 1,017,071,524,650.01
Borrowed in FY2009: 1,121,841,935,384.90 so far this fiscal year.

LAST FIFTEEN REPORTS OF ADDITIONS TO PUBLIC DEBT(NOT FICA):
03/16/2009 +047,789,810,398.18 ------------********** Mon
03/17/2009 +000,031,463,665.67 ------------*******
03/18/2009 +000,237,422,838.19 ------------********
03/19/2009 +004,087,134,960.77 ------------*********
03/20/2009 +000,429,200,142.60 ------------********
03/23/2009 -000,116,003,157.82 --- Mon
03/24/2009 +000,222,913,900.31 ------------********
03/25/2009 +000,059,898,960.86 ------------*******
03/26/2009 +007,175,786,187.90 ------------*********
03/27/2009 -000,468,145,936.78 ---
03/30/2009 +000,069,902,880.68 ------------******* Mon
03/31/2009 +079,841,314,678.25 ------------**********
04/01/2009 -001,742,860,350.87 --
04/02/2009 +007,764,243,786.78 ------------*********
04/03/2009 +028,967,677,130.84 ------------**********

174,349,760,085.56 Total of 15 above reports.

Heavy borrowing seems to start after 09/18/2008.
US borrowed $1,481,935,029,038.26 in last 197 days.
That's 1,482B$ in 197 days.
More than any year ever, including last year, and it's 146% of that highest year ever only in 197 days.
And it is over 100% of ANY dismal Bush, for any dismal Bush-year, ONLY IN 197 DAYS NOT 365.

For a prettier and more explanatory view of our nation's debt:
http://www.brillig.com/debt_clock

(Debt to the penny keeps changing. Stuff is missing. Best to keep our own history.) LAST REPORT:
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=3817407&mesg_id=3817457

[Demeter]

26. Credit Default Swaps, Herald of Doom (for Beginners)

http://baselinescenario.com/2008/11/28/credit-default-swaps-bankruptcy-prediction/

No, this isn’t another article about how credit default swaps (CDS) have ruined or are going to ruin the economy. It’s about one of the nice side benefits of CDS: the habit they have of pointing out who is going to get into trouble next. And it has pretty Bloomberg charts!

As everyone probably knows by know, a CDS is insurance against default on a bond or bond-like security. If you think about it for a while, you will realize that this means the price of the CDS reflects the market expectation that the issuer will default.

The price of a credit default swap is referred to as its “spread,” and is denominated in basis points (bp), or one-hundredths of a percentage point. For example, right now a Citigroup CDS has a spread of 255.5 bp, or 2.555%. That means that, to insure $100 of Citigroup debt, you have to pay $2.555 per year.

CDS exist for various durations and on many different kinds of debt. If someone doesn’t specify the duration or the type of debt, he is usually referring to a 5-year CDS on senior debt. That means that the contract will be open for 5 years, during which one party (the insured) pays premiums and the other (the insurer) promises to pay off if Citigroup defaults. If there is no default within 5 years, the insurer gets to keep the premiums....

MUCH MUCH MORE AT LINK

[Demeter]

27. Geithner's Treasury Department Fiasco / Jacob Heilbrunn

http://www.huffingtonpost.com/jacob-heilbrunn/geithners-treasury-depart_b_174576.html

It's four and counting at Timothy Geithner's Treasury department. The Washington Post reports today that H. Rodgin Cohen, chairman of the New York law firm Sullivan & Cromwell, has bailed out on becoming deputy Treasury Secretary. Three others have removed themselves as well, including Annette Nazareth, Lee Sachs, and Caroline Atkinson. According to a British official, the Treasury department resembles an abandoned building -- "There is nobody there."

There are several possibilities here. Could it be that the Treasury department doesn't really need all those top officials? Is it time to start purging federal agencies, just as businesses are shedding their employees?

Or are murky vetting issues the real problem? The rot in America's financial and legal system may be so deep that it's become almost impossible to find candidates suitable for government service. New York Times columnist Tom Friedman is fretting that the ethics rules are too tight, that it's like insisting that a heart surgeon to prove he hasn't eaten a chocolate bar in the past year before he's allowed to operate on a dying patient.

The bottom line may be this: if Geithner can't even hire staff for his own department, how on earth is he going to lower America's unemployment?

[Demeter]

29. Merrill socked with $39.8M arbitration ruling

http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20090330/REG/903309975/1094/INDaily01

In one of the single largest securities arbitration awards ever, Merrill Lynch & Co. Inc. has been ordered pay $39.8 million to a group affiliated with the Freemasons.

The arbitration award, handed down by a three-member panel of the New York- and Washington-based Financial Industry Regulatory Authority Inc., ruled March 16 that Merrill Lynch of New York is liable for $30.6 million in compensatory damages — plus interest — to the Trustees of the Masonic Hall and Asylum Fund in Utica, N.Y.

The interest on the claim dates back to November 2005 and totals $9.2 million.

The fund alleged that Merrill Lynch and its subsidiary broker-dealer Advest Inc. of Hartford, Conn., committed negligence, breached their contract and fiduciary duty, and also misrepresented information about the SPhinX Managed Futures Index Fund LP...

[ozymandius]

30. Ritholtz asks a question.

What is a Depression?

Interesting array of comments. You can leave yours too. But please - the "a recession is when my neighbor loses his job. A depression is when I lose mine" comparison has been used to ridiculous death. Oh look! Somebody just could not help themselves.

[DemReadingDU]

36. Look how long it took to declare we are in a recession

Most people were aware of things slowing down a year ago, but it wasn't formally a 'recession' until December 2008. So things are even much worse now. By the time it is formally announced a 'depression', we'll probably be in another major war.

[CatholicEdHead]

56. To not declare it also keeps a general panic away

If it officially declared a Depression, it would increase the general panic and unrest around the country. It would also fall mostly on the shoulders of the Obama Administration. Even though the fall was set up over the past 30yrs, Obama would get much of the blame and the White House does not want that counter-productive extra burden when trying to turn things around. He would be blamed for not doing enough, even though some blame will fall on the W Administration, but the media and most of the population have very short memories.

In retrospect you probably could put the start at the end of the W Administration, sometime around Halloween or Thanksgiving 2008.

[DemReadingDU]

64. Agreed

Like the Bush administration, I sometimes feel that Obama is passing the ball down the field, delaying the inevitable, trying to keep the economy in the recession until 2013 when somebody else could be the President. But the things I'm reading, that is going to be very difficult to delay an official depression until 2013. But the spinmeisters will try it anyway they can.

[Demeter]

31. Blogging From Inside AIG: Exec Says Everyone Else Is Lying

http://www.businessinsider.com/blogging-from-inside-aig-exec-says-everyone-else-is-lying-2009-3


he executive director at AIG's Financial Products unit hid his blog behind a firewall last night, after we linked to it yesterday. Fortunately, we had already grabbed his latest entry.

Here it is:

For 15 years, I have helped tend to the portfolio of positions making up the whole of the business. As a member of the support team, I am still, for as long as I am here, responsible for all of the practical technical things - computers, data, lights, air conditioning - that keep the place running. The job is highly technical, spanning multiple disciplines (hardware, software, an understanding of the business, familiarity with multiple classes of market data, facilities management, disaster recovery and business continuity, the list goes on) and the business critical nature of the portfolio has meant that I have been, for the past 15 years, on call 24x7x365, for any operational problem which could affect the business.

And for many years, the business was good. The vast majority of the deals done were sound. And the portfolio grew, and became more intricate, and encompassed more classes of products.

Contrary to what is being said - by people who don't know anything about the business - about "unhedged positions", the business worked on hedging. This is not a hedge fund, which is a particular kind of investment company. The entire portfolio had to be valued and hedged every night, and new axes (hedging instructions) generated and actioned. For over 20 years, the nightly cycle was never skipped. To do so would have lost track of the true value of the book, and that would have been a true disaster, because we would no longer be able to predict cashflows. The entire machine worked on cashflows. Fixed cashflows across variable foreign exchange rates would generate profits or losses, likewise, cashflows of fixed interest rates flowing against variable interest rates would generate profits and losses.

Although risky, it thrived on volatility. But it has always required maintenance.

Unwinding thousands of intertwined, complex deals in a market where your counterparties know what you are trying to do, without losing even bigger amounts of money, takes specific knowledge of the transactions, and knowledge of the systems, the vast majority of which were developed in-house. Business continuity plans, reporting to our regulators (there's another lie being told, that it isn't regulated - it was most certainly regulated!), and paying the bills have to happen right to the close of the last book. Whatever moron that started flogging people already on a death march, obviously does not care about the 1.6 trillion dollars in contracts still on the books, which can still blow up, making the world that much poorer. Perhaps by blowing up the economy, bigger targets than the maintainers can be claimed. I don't know.

As it was, we managed to wind down nearly 40% of the whole portfolio - another news item being ignored - derisking almost a trillion dollars worth of risk that the American taxpayer doesn't have to pay for. We hope to finish the job. We're professionals like that.

It's amusing to hear people say we should be fired, or that the job isn't all that hard, or there's 50 people willing to do any of our jobs. To all of those folks, here's a clue: This is not a going concern, we have been working ourselves out of a job for the last 6 months, we will not have jobs when we are done, and any replacement will be doing it slower than we can, and is very likely to screw it up much worse than it already is. Oh, and a replacement might not get paid at all, if the government changes its mind again. The only reason I stayed was because I was told that I was a valued member of the team and I was promised a payment. Nobody ever actually tried to renegotiate the terms. It was never a secret, the ERP was disclosed many times. Anybody telling you otherwise is lying. Anybody - Geithner, Cuomo, Blumenthal, Dodd, all of them and also those guys in Congress - they all had that information back in October. Cummings has been railing at Liddy about it since at least October...

THE NEXT ENTRY IS EVEN MORE HEART-RENDING. POOR BABY! YES, COVERING UP CRIME AND JUGGLING A PONZI SCHEME CAN BE STRESSFUL.

[Demeter]

32. ABC: FBI & Prosecutors "Closing In" on AIG's Cassano By Paul Kedrosky

http://paul.kedrosky.com/archives/2009/03/abc_fbi_prosecu.html

I have no idea what "closing in" means when you know someone's name and where they live and what they did, but ABC News has a story out saying that the Feds are closing in on AIG Financial Products' ex-honcho Joe Cassano. Maybe that means they have found good parking somewhere near his house in The City.

http://abcnews.go.com/print?id=7210007

[Demeter]

33. AIG Debacle Not My Fault, Says Greenberg; Testifies April 2nd

http://online.wsj.com/article/SB123863459729781065.html#mod=testMod

[willing dwarf]

35. Reading his blog makes me think that this crisis is really a product of computer technology

The whole matter of assessing the value of their holdings and generating cash flow plans across money markets would have been really unwieldy without computers. THe data analysis has become faster and faster,but our rules and our expectations of appropriate behavior were really from a different era.

I never saw it this way before, but there it is.

I remember when the dot com bubble went bust (wasn't it then?) and all the NASDAQ automated sell orders were kicked off. That was a moment when we saw how we have become captives of the computer age, but that seems like nothing compared to the world of Credit Default Swaps and Securitized Debt.

Perhaps being an outsider, I am painting with too broad a brush, but I wonder if really the boutique aspect of trading created a false sense of security?

[MattSh]

39. Actually, it's a crisis of human arrogance.

It always happens, it's like a circle, we always come back to the same place.

100 years ago, it was thought you could build an unsinkable ship. Now, how many times in the last 15 years have we been told "it's different this time"? That indeed they could build an unsinkable economy? Well guess what. Everything can be sunk. And the bigger it is, the bigger the waves (and the death toll) when it goes under.

Well, this economy sunk, just like that ship sunk.

[willing dwarf]

40. Well yes, but

that goes without saying. I think we can assume the arrogance, especially in the halls of power, any power. But this debacle reached a new level of complexity thanks to the speed of computer computations that could slice, dice and quantify minutiae beyond our common sense ability to reason.

[Demeter]

61. In Other Words, To Err Is Human; To REALLY Fuck Things Up, Use a Computer!

That dates from the big mainframe days (talk about dating yourself!)

[Danascot]

47. If he said he was doing it for the good of the country

I wouldn't believe it anyway. But it's revealing that he didn't even bother to say it.

"The only reason I stayed was because I was told that I was a valued member of the team and I was promised a payment."

[Demeter]

34. In Other News. It's Snowing and Schools Are Closed

thank god I'm too depressed to do violence to myself or others....

[Tansy_Gold]

45. Hang in there.

Remind yourself that this is where you want to be.

I just sent a long email to a friend of mine describing my two-art-shows-in-one-week-end-is-hell experience, and at the end of it I realized I had just taught myself a fabulous lesson. The whole week-end, with its still lingering aches and pains and as yet incomplete unpacking, became a real success.

The sun is out, the birds are chirping outrageously, and I'm where I want to be. I'll tackle the world's problems after I get some coffee and visit with friends.


Love to all you SMWers!


Tansy Gold, the caffeine-deficient

[Demeter]

62. Maybe What I Need Is Time Travel

I want to be here in a different decade....

[Tansy_Gold]

70. A quote

If I remember it correctly:

Attributed to basketball great Bill Russell and quoted by Phoenix Suns coach Paul Westphal before the 1993 NBA playoffs: "The game is scheduled. We have to play it. We might as well win."





Tansy Gold, not much of a sports fan but a rememberer of good quotes

[UpInArms]

37. dollar watch

http://quotes.ino.com/chart/?s=NYBOT_DX&v=i

Last trade 84.218 Change +0.042 (+0.05%)

US Dollar Could Resume Uptrend on Safe-Haven Demand This Week

http://www.dailyfx.com/story/currency/eur_fundamentals/US_Dollar_Could_Resume_Uptrend_1238799360267.html

The US dollar was driven lower throughout last week as increased risk appetite only worked to the benefit of high-yielding currencies, and by Friday, the US dollar index settled right above intraday trendline support, which connects the March and early April lows, at 84.20. Where the greenback goes from here will depend, not surprisingly, on risk trends as fundamentals have yet to really matter again for the currency. Indeed, for the most part, US economic data has beaten expectations – with the exception of Friday’s NFP and ISM non-manufacturing figures – and yet the US dollar has continued to fall. As a result, it will be important to watch how US releases impact investor sentiment, and looking at the US economic calendar, Wednesday’s Federal Open Market Committee (FOMC) meeting minutes will likely be the big event to watch.

In March, the FOMC left the fed funds target range at 0.0 percent - 0.25 percent but the big surprise was that they officially announced quantitative easing efforts. Since this information has already been revealed, the release of the minutes may not be very market-moving, but they will likely add to indications that the FOMC will leave the target unchanged throughout much of 2009 and that they will continue to use the central bank’s balance sheet in an effort to improve credit conditions. The one thing that may capture the market’s attention is the FOMC’s long-run projections for growth, unemployment, and inflation as revisions that indicate that the outlook appears to be even worse than previously anticipated could hurt risk appetite throughout the financial markets, and thus lift safe-haven currencies like the US dollar. However, if the revisions go unchanged, traders may shrug-off this once critical release.



...more...

Euro Pares Gains Following the Drop in Inflation, U.S. Dollar to Face Risk Trends as Market Sentiment Improves

http://www.dailyfx.com/story/bio1/Euro_Pares_Gains_Following_the_1239013427647.html

The Euro rallied against the U.S. dollar for the third day to reach a high of1.3584 as market sentiment improved however, deteriorating fundamentals in the region weighed on the single-currency as the economic calendar continued to reinforce a weakening outlook for growth and inflation. The Sentix investor confidence survey for the Euro-Zone rebounded from a record low reading of -42.7 to -35.3 in April, which was much higher than the -40.7 forecast held by economists, while retail spending in the region dropped 0.6% in February as households face a weakening labor. Moreover, producer prices fell 0.5% in February, while the annualized rate dropped another 4.0% from the previous year, which is the biggest decline since April 1999. Falling price pressures paired with fading demands from home and abroad continues to reinforce fears of a deepening recession in the euro-region, and as the ECB maintains a 2% target for price growth, the central bank may continue to ease policy in the month ahead as the risks for deflation intensify.

Furthermore, the British pound strengthened against the greenback for the fifth day to break above 1.4900, and the pair may continue to push higher over the next 24 hours of trading as market participants move into higher risk/reward investments. Meanwhile, the economic docket for the U.K. showed that new car registrations plunged 30.5% from the previous year after falling 21.9% in the previous month, and the outlook for private-spending remains bleak as households continue to face tightening credit conditions paired with fading demands for employment. Nevertheless, as the Bank of England is widely expected to hold the benchmark interest rate at the record-low this week in an effort to mitigate the downside risks for growth and inflation, and the board may step up its purchases of Gilts to jump-start the economy as the region faces its worst recession since World War II.

The U.S. dollar strengthened to a five-month high against the Japanese yen as the pair surged above 101.00 for the first time since October, and the exchange rate is likely to push higher as investors raise demands for carry trades. However, the economic docket for Japan continued to foreshadow a deepening downturn in the world economy as the leading index slipped to a record-low of 75.2 in February from 77.2 in the previous month, and as the fundamental outlook for the world’s second largest economy continues to deteriorate at a rapid pace, the marked slowdown in global trade could weigh on the markets as economic activity falters.

As the U.S. economic calendar lacks market-moving potential, risk trends are likely to dictate price action in the currency markets, and the rise in market sentiment may continue to weigh on the dollar as investors move into higher-yielding assets. Nevertheless, Fed Governor Kevin Warsh is schedule to speak at the Council of Institutional Investors in Washington at 17:00 GMT, and comments from the board member is likely to reinforce a dour outlook for growth and inflation as the economy faces its worst economic downturn in over half a century. Meanwhile, U.S. equity futures foreshadows a higher open for the market today, and the rise in confidence is likely to weigh on the reserve currency as investors continue to boost their appetite for higher risk/reward investments.

...more...

[DemReadingDU]

43. 'Bailout psychology' destroying the economy

4/5/09 'Bailout psychology' destroying the economy by Sean Olender

President Obama must stop the bailouts and start the prosecutions. It's time to focus on anti-poverty programs to protect the growing unemployed from hunger and homelessness. Stealth payments to billionaire bondholders must cease immediately. Since the mid-1970s, average Americans' wages have stayed flat when adjusted for inflation. Productivity rose, profits rose, but not wages. To compensate for stagnant wages and the desire to consume more each year, Americans worked more, retired later, spouses went to work, and many burned savings. Then they started borrowing. Debt became America's growth industry.

The scheme collapsed because Americans' wages weren't sufficient to pay the interest on existing debts. The only way out of this is to tighten our belts and pay down debt, the opposite of what our bank-owned government is advising. The administration and the banks keep talking about a credit crisis, but there isn't one. Banks are lending. If you want a mortgage and can afford to pay it back, you can borrow at low rates today. You can finance a car at low rates for seven years. But most Americans don't want more debt because it is a debilitating path to poverty. The average American family already pays 14 percent of annual income in interest to banks. To fix this fake crisis, there are fake discussions about what the government must do. The endlessly recycled plan to buy "troubled" assets isn't to get banks lending again, because they haven't stopped lending.

The plan seeks for taxpayers to buy worthless assets at high prices to absorb rich investors' losses. That's it. It keeps coming back as a different plan, but with that same goal. There is no goal beyond that one goal: keep rich people from taking losses. Obama and his economic gurus all chant, "Credit is the lifeblood of the economy," but they don't mean credit. They mean debt. Imagine the president saying, "Debt is the lifeblood of our economy. We desperately need to get more American families deeper in debt." That's what he means, and that's what these bailouts hope to do. In a Sept. 14 article in this newspaper, I noted that banks push senators, with the blessing of the administration, to introduce bills that are bailouts, but disguised to appear not to be bailouts. The goal is to accomplish the desired result without risking your bought-and-paid-for representative.

Imagine you bet $500,000 on a stock and it dropped to $20,000. If you owned Treasury Secretary Tim Geithner, he'd get on TV and explain that if the government didn't buy your shares for $500,000, the economy would suffer because you couldn't invest anymore. He'd say the "free market" isn't pricing the stock "right," and we have to "help" the market with taxpayer money to make sure you get the "right" price. Bailout psychology is destroying the economy. Banks hold off on foreclosures in the hope of refinancing borrowers into government-backed loans that will almost certainly default - at taxpayer expense. I've talked to ordinary people delinquent on credit cards who put off bankruptcy because they "heard" the president was unhappy with unfair bank practices and "help was coming soon." Millions of homeowners desperate to sell are keeping empty houses off the market waiting for a "rebound," flushing a stream of income down the toilet.

Worsening economic figures are being used to confirm that more bailouts are needed rather than that previous ones might be failing. The logic is much like medieval blood letting: The patient died because we didn't drain enough of his blood. The promise of more bailouts also keeps everyone from doing what's necessary. Millions of houses sit empty, open to vandalism and destruction, while millions of Americans live in cars or on the street. Our tax money is given to banks and speculators to hold houses empty. On March 20, 2007, I wrote here that a mortgage bailout was coming and would cost at least $1 trillion, yet not bail out homeowners. As it turned out, the bailout did nothing to stop foreclosures from going through the roof. On Feb. 8, 2008, I wrote here that Fannie and Freddie would be taken into receivership within a year - an event that occurred Sept. 7.

I argued here on Sept. 18 that most loan modifications were a fraud and "I optimistically predict that within 12 months half of these refinanced loans will result in default." On Dec. 8, the Office of the Comptroller of the Currency announced that 53 percent of modified loans were in default. To "fix" all these problems, the George W. Bush administration, and now the Obama administration, have chosen people (or their accomplices) who stole from the public. That's why no one has been prosecuted. Would former Treasury Secretary and Goldman Sachs chief Henry Paulson have pressured for an investigation of Goldman Sachs? Right. As president of the Federal Reserve Bank of New York, current Treasury Secretary Geithner had a front-row seat during the run-up to the crisis and watched for years while pushing a "no regulation" policy. Why? At that time his friends were winning their bets and making a lot of money.

Why didn't Bush or Obama pick Brooksley Born (the Commodity Futures Trading Commission chair who tried to regulate credit default swaps) or Harry Markopolos (the whistle-blower in the Madoff scandal) to serve as treasury secretary or chairman of the SEC? Because Born and Markopolos are technically competent and possess integrity. Banks would tolerate neither quality in an administration official. We have a crisis of confidence, because fraud permeates most of our banks and financial institutions. The solution is law enforcement, not handouts. On Jan. 31, 2009, Santa Barbara police held a 53-year-old homeless man on $20,000 bail for shoplifting $7.69 worth of soup and bread. Yet Bush did not move to prosecute a single executive at any of these banks, and Obama likewise doesn't want to be "vengeful" by investigating the crimes of investment bankers.

If the government feels lenient, can't it let alone families camping in a vacant lot in Sacramento, or homeless people stealing bread? We can stop this by closing our accounts at any bank that took government money. A list is on the Treasury's Web site. Close your accounts and move them. If we do, those banks will suffer receivership or bankruptcy within a few months, and then there will be no need for bailouts. Our healthy community banks will thrive, while billionaire bondholders will have to downsize their G-5 fleets and take a haircut. If you buy an American car, buy a Ford. Do not buy GM or Chrysler. GM and Chrysler took bailout money. If everyone who would buy a GM or Chrysler bought a Ford, GM and Chrysler would quickly go bankrupt, the government would be forced to stop giving them tycoon welfare, and Ford would probably have enough customers to get through this. If Ford takes bailout money, don't buy a Ford, either. You don't need to buy anything. Save your money until the government stops the bailouts. Your children will thank you for the peace and security.

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/04/04/INR316Q4F5.DTL

[Demeter]

63. This Deserves a Separate Posting So It Can Be Recced to the Greatest Page

[DemReadingDU]

66. Sounds good to me, can you post it in a new thread?

People know your ID better than mine. Whatever forum you like.

[Demeter]

67. Done. It's in Editorials --go Give It a Rec, Since Now I can't!

[Demeter]

87. It's Got 21 Recs Already

[Dr.Phool]

46. Eight heads in a dufflebag. Robert Reich on Gietner.

Sorry for the title. I'm still in the gangster mode. And that was a funny movie.


http://tpmcafe.talkingpointsmemo.com/talk/blogs/robert_reich/2009/04/will-geithner-fire-corporate-a.php

Will Geithner Fire Corporate America?
April 5, 2009, 10:22PM

Tim Geithner said on Sunday's Face the Nation that the Treasury might fire the heads of big banks that depend on financing from the federal government, just as it summarily deposed Rick Wagoner, the former CEO of General Motors -- and before Wagoner, the heads of AIG, Fannie Mae, and Freddie Mac. "Where that requires a change in management and the board, then we will do that," said Geithner.

I suppose it's comforting to know our government stands ready to fire corporate executives and directors whenever taxpayer money is on the line. But I suspect Geithner's new tough line is mostly designed to reassure a public that's lost all faith in the wisdom of bailing out Wall Street.

For the sake of the argument, assume he's sincere. What criterion will an axe-wielding Geithner be using? If precipitous loss of shareholder value is enough to "require a change in management and the board," presumably every CEO and director of every big bank now being bailed out should be fired, starting with Ken Lewis of Bank of America.

If the criterion is diversion of taxpayer money to uses other than Congress intended when it first authorized the $700 billion bailout, the list of soon-to-be-fired CEOs is a bit shorter but still large. Surely it includes all the bailed-out banks that continue to fly their executives around the world in company jets, award them extraordinary pay packages, and run junkets at fancy resorts. Citigroup's Vikram Pandit (who collected $38.2 million for his taxpayer-subsidized services in 2008) comes immediately to mind.

Why stop there? Perhaps Geithner intends to fire executives and directors of any company that's dependent on taxpayers and is now losing money. Just think of the corporate house-cleaning this will mean. Hundreds of agribusiness executives are now at risk as are scores of military contractors. Hell, the whole pharmaceutical industry depends on taxpayer support (research subsidized by National Institutes of Health, sales subsidized through Medicare and Medicaid), and it's doing badly, so their executives and directors will be gone soon, too.

All told, about one out of every five large American companies depends on government contracts, and a majority of these firms are losing money right now. So ... off with their heads.

[DemReadingDU]

49. Charles Hugh Smith: SURVIVAL+ Chapter Eight

Survival+ 8: The Forces Behind Cycles of History (April 6, 2009)
Charles Hugh Smith

There are two basic critiques of historical cycles:

1. Cycles are essentially arbitrary, an order extracted from random data to support a priori claims (i.e. finding data to support pre-selected positions)
2. Without an explanation of the causal mechanisms which power the cycles, then cycles cannot be predictive

The first argument has the strength of skepticism but the weakness of forced obscurity. Anyone looking at displays of prices over time notices patterns; the question is whether they are regular enough to suggest underlying causes are at work.

For example, if we discern cycles of crop prices, we might look first at crop yields and population growth, that is, supply and demand. We might next profitably look for regular variations in weather (rain/drought, warm/cool, etc.) which might explain why crop yields rose or fell in what appear to be cycles.

Taking the investigation one step further, we might look at the sun's energy output and the orbital variations in the planet's rotation around the sun. And indeed, we would find an imperfect but discernable cycle of sunspot activity that correlates to weather and crop yields.

The more inputs/feedback loops there are in a system, then naturally the more complex the interactions between all the "moving parts" will be. Nonetheless, within the "noise" of weather data various long-term patterns do emerge.

So if we are positing cycles in human history which we claim predictably repeat, what are the causal mechanisms for these cycles?

1. Environmental/demographic overreach. Like all other organisms, humans tend to fill every available niche to the maximum carrying capacity of that environment. This cause is explored in The Great Wave: Price Revolutions and the Rhythm of History. In essence, humans expand their population and resource extraction right up to the high-tide line. Then, when the tide recedes--as it inevitably does in droughts and other weather patterns, resource depletion, etc.—humans are suddenly faced with starvation/pandemics and endless conflicts over remaining diminishing resources.
2. State overreach. States tend to expand whenever the opportunity presents itself as the spoils of conquest (not necessarily of territory but of markets) outweigh the costs. States also relentlessly expand their share of the national income via higher taxation.
3. Plutocracy overreach. As the state expands, the Plutocracy leverages its growing wealth into greater power over state functions. With no natural limits on its power or share of the national income, the Plutocracy inevitably overreaches, taking so much of the national income and wealth that the middle class, the backbone of the state's tax revenues and support, breaks down. Caught between the pincers of ever-more onerous taxes and the state-granted privileges of the Plutocracy, the middle class is driven into penury and insolvency.
4. The four-generation cycle of forgetfulness. As individuals, we tend to truly trust only what we have experienced directly or heard directly from parents and grandparents. As a result, the follies of excess and overreach that caused declines or collapses in previous generations are forgotten in the passage of four generations, or roughly 80 years. Even cultures with written histories exhibit this pattern. Please read The Fourth Turning for more on this topic.
5. Marginal returns. Expansions run out steam for many reasons, but exhaustion of resources and increasingly marginal returns on investment are proximate causes. (see below)
6. Illusion of incremental change. As trends run out steam and reverse course, the state and Plutocracy respond with incremental changes which they hope will reverse the decline without affecting their power, wealth and privilege. Alas, merely adjusting the parameters in a failing system is not enough to rescue it from collapse.

Continue reading Chapter Eight...
http://www.oftwominds.com/blogapr09/survival8-04-09.html


link backwards to previous chapters...
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=3812945&mesg_id=3813073

[Danascot]

50. US watchdog calls for bank executives to be sacked

Money quote:

"The very notion that anyone would infuse money into a financially troubled entity without demanding changes in management is preposterous."


US watchdog calls for bank executives to be sacked

Elizabeth Warren, chief watchdog of America's $700bn (£472bn) bank bailout plan, will this week call for the removal of top executives from Citigroup, AIG and other institutions that have received government funds in a damning report that will question the administration's approach to saving the financial system from collapse.

Warren, a Harvard law professor and chair of the congressional oversight committee monitoring the government's Troubled Asset Relief Program (Tarp), is also set to call for shareholders in those institutions to be "wiped out". "It is crucial for these things to happen," she said. "Japan tried to avoid them and just offered subsidy with little or no consequences for management or equity investors, and this is why Japan suffered a lost decade." She declined to give more detail but confirmed that she would refer to insurance group AIG, which has received $173bn in bailout money, and banking giant Citigroup, which has had $45bn in funds and more than $316bn of loan guarantees.

Warren also believes there are "dangers inherent" in the approach taken by treasury secretary Tim Geithner, who she says has offered "open-ended subsidies" to some of the world's biggest financial institutions without adequately weighing potential pitfalls. "We want to ensure that the treasury gives the public an alternative approach," she said, adding that she was worried that banks would not recover while they were being fed subsidies. "When are they going to say, enough?" she said.

She said she did not want to be too hard on Geithner but that he must address the issues in the report. "The very notion that anyone would infuse money into a financially troubled entity without demanding changes in management is preposterous."

The report will also look at how earlier crises were overcome - the Swedish and Japanese problems of the 1990s, the US savings and loan crisis of the 1980s and the 30s Depression. "Three things had to happen," Warren said. "Firstly, the banks must have confidence that the valuation of the troubled assets in question is accurate; then the management of the institutions receiving subsidies from the government must be replaced; and thirdly, the equity investors are always wiped out."

http://www.guardian.co.uk/business/2009/apr/05/useconomy-regulators

[Dr.Phool]

51. Timmeh finally squeaked yesterday, after this article came out.

"We might have to get rid of some of my buddies,er, bankers.

[AnneD]

52. Any thoughts as to why gold is doing a nose dive????????

Curious minds want to know.

[Danascot]

54. Gold is falling because

1. Individuals worldwide are selling gold items to raise cash
2. Some investors are getting back into the "bull" equities market (emphasis on bull)
3. More conservative investors are staying in money market and bonds
4. Smart money knows the gold market is routinely manipulated. Why trade in a fixed market?
5. Commodities are being dragged down in general because traders think a long recession will keep a lid on demand for them.

My opinion. YMMV

[antigop]

59. Gold falls below $870 on possible IMF gold sales, rising dollar

http://www.marketwatch.com/news/story/gold-falls-below-870-possible/story.aspx?guid={134D52C8-E108-4848-BEAE-321B7835610F}&dist=news

Gold futures fell Monday for a third straight session to below $870 an ounce, wiping out their yearly gains as traders shaved positions on worries that the 403 tons of gold sales by the International Monetary Fund will increase supply and depress gold prices.
"There is still this fear of a lot of selling coming from different central banks and the IMF," said George Gero, a precious metals trader for RBC Capital Markets. "The perception is that 'I am getting out of the way until all the sales are completed and let's see how it's absorbed.'"

http://www.marketwatch.com/News/Story/g20-supports-imf-plan-raise/story.aspx?guid={5ABAE8F2-060D-44BC-9905-EB79665AEACE}
G20 supports IMF's plan to sell 403 tons of gold

The announcement from G20 leaders helped add pressures to Thursday's gold trading. Gold futures fell $20.30, or 2.2%, to $905.80 an ounce in recent trading on the Comex division of the New York Mercantile Exchange. See Metals Stocks.
The G20 vowed in its statement to "use the additional resources from agreed IMF gold sales for concessional finance for the poorest countries." Read more on G20.
The endorsement suggests that the IMF's gold sales plan is likely to be approved by its member countries later this year.

[Demeter]

65. The PTB Have Been Trying to Pry That Gold Out of the IMF for Decades

It pisses them off that it's not in private pockets. My understanding was that most of that gold came from Ft. Knox in the first place.

[AnneD]

73. Thanks for the opinions and thoughts.......

I can understand people selling because they need too. I know that the IMF promised they were not going to dump the gold all at once. I like a lot of eggs in my basket so this is a good thing the long run. Like every other market-TPTB just can't keep their fingers out of the pie.

But I wonder why it is not all that easy to get your hands on it. Folks around here aren't selling. Of course our economy here is doing better too, which can explain some of the reluctance to sell.

It should get fun when inflation hits or maybe when the dollar is dethroned.

[Dr.Phool]

74. The only good reason I can figure, is because I own some.

Kiss of death!

[AnneD]

80. You and me both....

We can always start making grills ;)

[ozone_man]

75. It's just a yellow rock.

:D

Cash is king in this market. Wait for it to go below $700 and then it's a buy, in my opinion.

[AnneD]

79. If I buy more...

I will buy it if it drops some more.

[Danascot]

55. Excellent economy related toons today

over at:

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x5400581

[kickysnana]

68. I don't think Obama actually has a rabbit in this hat.

I have thought and thought and the only reason I can see for Geitner, Summers and his new Glass-S gutter deputy doing what has already failed, is that Obama is going to let these guys take the fall because HE THINKS HE COULD NOT STOP ANYTHING ANYWAY, then fall on the sword himself and be a one term wonder. Too bad he doesn't have any real people left around him to give him a clue.

[Tansy_Gold]

71. Bitter, bitter, bitter observations

Was it all about Obama? Did he want to win just to show he could do it? Was that really all it was? Let others take the fall for what he himself knew he couldn't do?

I don't want to think so, if only for the simple reason that most egos big enough to take on the challenge of the campaign are also big enough to think they can solve the problems.

But I'm cynical enough -- Russell quote notwithstanding -- to not put anything past these people these days.


TG

[Demeter]

85. I Haven't Even Seen Him in a Hat, Yet!

I don't believe in rabbits, either.

[Danascot]

69. Bernanke ‘Green Shoots’ May Signal False Spring Amid Job Losses

He must be smoking those green shoots of his. Some worthwhile observations by others though.

It will be months before it’s clear whether what Federal Reserve Chairman Ben S. Bernanke calls the U.S. economy’s “green shoots” represent the early onset of recovery, or a false spring.

The Labor Department’s April 3 report that the economy shed an additional 663,000 jobs last month, while the unemployment rate rose to 8.5 percent, will be followed by months more of bad-news headlines, economists say. The recession, now in its 17th month, has already cost 5.1 million Americans their jobs, the worst drop in the postwar era; unemployment may hit 9.4 percent this year, according to the median estimate in a Bloomberg News survey, and may top out above 10 percent in 2010.

The risk is that the jobs picture turns even more bleak than forecast or the drumbeat of bad news still to come causes consumers, whose spending has firmed up in recent months, to hunker down again.

“If something happens to spook consumers and they crawl back into their tortoise shells, that would be terrible news,” says Alan Blinder, former Fed vice chairman and now an economics professor at Princeton University.

Consumer spending, which accounts for more than 70 percent of the economy, rose 0.2 percent in February after climbing 1 percent in January, breaking a six-month string of declines.

“Whether the little wisps of improvement in spending are sustained needs watching,” says Stephen Stanley, chief economist at RBS Securities Inc. in Greenwich, Connecticut.

Interest Rates

Declining interest rates on mortgages and business loans led Bernanke, 55, to tell CBS Corp.’s “60 Minutes” on March 15 that he sees “green shoots” in some financial markets, and that the pace of economic decline “will begin to moderate.”

Fueled by optimism that the economy may finally be stabilizing, the Standard & Poor’s 500 Index last month gained 8.5 percent, the most in seven years. Still, “I would be careful about chasing this rally,” Jason Trennert, chief investment strategist at Strategas Research Partners in New York, said in a March 27 interview.

With the Obama administration borrowing to finance record budget deficits, U.S. debt sales will almost triple this year to a record $2.5 trillion, according to estimates from Goldman Sachs Group Inc.

The borrowings may send 10-year yields as high as 6 percent by the end of 2010 from 2.9 percent on April 4, Trennert says, adding that it’s “hard to get optimistic” about stock prices “if you’re in a situation where it’s reasonable to expect long- term interest rates to be higher.”

Stock-Price Plunge

Another plunge in stock prices is just one of the things economists say might derail any recovery. Others include the disorderly collapse of General Motors Corp., Chrysler LLC or a major financial firm; or the failure of the Obama administration’s bank-rescue plan.

A one-month jump in the jobless rate of more than 0.6 percentage point would be a severe blow to confidence, says Alan Blinder, former Fed vice chairman and now an economics professor at Princeton University. So would monthly job losses that continue to top 600,000 into the second half of the year, says Mark Zandi, chief economist at Moody’s Economy.com in West Chester, Pennsylvania.

Payrolls have been shrinking by more than that every month since December. Losses need to come down below 500,000 in the next few months and drop close to 100,000 by year-end to confirm that the worst of the recession is over, Zandi says.

“If we continue to lose 600,000-plus jobs a month, that will burn out those green shoots pretty quickly,” he says. “If you lose jobs like that, it continues to undermine consumer spending and confidence.”

‘Head Fake’

Joseph LaVorgna, chief U.S. economist at Deutsche Bank AG in New York, says he wouldn’t be surprised to see a first- quarter gain in consumer spending that “may turn out to be a head fake, which isn’t uncommon in a recession.” Spending might turn lower in the current quarter before stabilizing in the second half, he says.

If consumers retrench, “you’d be looking at a very negative scenario again,” says David Hensley, director of global economic coordination at JPMorgan Chase & Co. in New York.

Hensley is watching the savings rate, which reached 4.4 percent of disposable income in January after hovering below 1 percent for most of the past four years. Any further surge in savings would indicate that Americans are still avoiding big purchases.

‘Not Enough Income’

“There’s just not enough income in the system to support both an increase in the savings rate and stable consumer spending,” Hensley says.

First-quarter earnings reports from Citigroup Inc. on April 17 and Bank of America Corp. on April 20 will be among early signposts. Those will be followed at the end of the month by the Treasury Department’s “stress tests” of the two firms and other major banks to identify which ones need additional capital.

Citigroup and Bank of America both reported a strong start to the year, and a rally in their shares last week helped send stock indexes to their highest levels since early February. Disappointing quarterly results might quickly reverse those gains.

What’s more, Stanley says, stress tests showing more than a few banks are too frail to continue would trigger wider credit spreads and tighter lending conditions. The so-called TED spread, the gap between what banks and the Treasury pay to borrow for three months, ended last week at 95.5 basis points, close to the low for 2009 of 90 basis points, reached Feb. 10.

Triple the Level

While that’s down from the peak of 463 basis points on Oct. 10, 2008, it’s still triple the level of two years ago, before the recession began.

The Obama administration is also looking for a solution in the next two months to the auto industry’s woes, perhaps through a merger for Chrysler and a quick and orderly bankruptcy filing for General Motors.

The administration has given Chrysler until May 1 to complete a combination with Italy’s Fiat SpA, and GM has until the end of May to “fundamentally restructure.” If they fail to meet the deadlines and one or the other collapses in a disorderly heap, the ripple effects would be felt throughout U.S. manufacturing, causing the loss of another million jobs and pushing unemployment to 11 percent, LaVorgna says.

The outlook for a second-half pickup also depends on the Treasury successfully executing its plan to help banks remove as much as $1 trillion worth of devalued loans and securities from their books so they can start lending again and resuscitate the economy.

“Basically, it’s a confidence story,” says LaVorgna. “The risk is that banks could deteriorate further and prolong the pain.”

http://www.bloomberg.com/apps/news?pid=20601068&sid=aJa8WNMvKaxg&refer=economy#

[Demeter]

82. I Think It's Slime Mold--Signs of Rot and Decay n/t

[InkAddict]

86. I know that at least 167 of Chase little people who will be retrenching soon

so Indians can live in our former homes and buy lots of Chinese crap. Yeah, right.......


If consumers retrench, “you’d be looking at a very negative scenario again,” says David Hensley, director of global economic coordination at JPMorgan Chase & Co. in New York.

JUST WTF does he think unemployed people are going to do????

[ozymandius]

83. end of the day stuff

Dow 7,975.85 Down 41.74 (0.52%)
Nasdaq 1,606.71 Down 15.16 (0.93%)
S&P 500 835.48 Down 7.02 (0.83%)
10-Yr Bond 2.939% Up 0.032
NYSE Volume 6,287,235,500
Nasdaq Volume 2,069,047,625

4:30 pm : The major indices spent the entire session in the red, but some afternoon buying helped pull stocks up from their lows. Early weakness was underpinned by the financial sector, but the afternoon ascent was generally broad-based.

Stocks were led lower by financials in the early going. Financials (-2.9%) were put under pressure when a reputable analyst from Calyon Securities gave a pessimistic analysis of the banking industry by stating that banks' loan losses relative to their total loans should increase to levels that exceed those of the Great Depression.

Adding to consternation, Treasury Secretary Geithner indicated in a weekend interview that the government would consider removing management at financial companies if the government were to offer exceptional assistance to keep those companies operating. The comments indicate the government's increased willingness to exert its influence within the private sector.

Technology stocks (-1.1%) bore weakness. Cisco (CSCO 17.53, -0.63) was a primary laggard among tech names; according to Reuters, its shares were downgraded by analysts at Goldman Sachs.

Shares of Sun Microsystems (JAVA 6.56, -1.93) logged one of their worst performances on record by shedding more than one-fifth of their market cap this session. The stock fell under heavy pressure after The Wall Street Journal reported Sun Microsystems merger talks with IBM (IBM 101.56, -0.66) could be coming undone.

Commodities were also victim of a concerted selling effort. May crude futures contracts finished pit trading with oil priced 4.9% lower at $49.95 per barrel, just above their session low.

Gold prices were under pressure for the third consecutive session. Pit trading concluded with gold priced 2.7% lower at $872.80 per ounce.

Despite the absence of positive catalysts in afternoon trading, stocks were able to pare their losses. The stock market had been down as much as 2.3%, but was able to more than cut that loss in half. As stocks ascended from session lows, health care stocks (+0.6%) and industrials stocks (+0.7%) were able to move into positive ground and post the session's only gains.

News flow is expected to be slow again Tuesday, though things will likely pick up after tomorrow's close, which is when Alcoa (AA 7.91, -0.26) unofficially kicks off earnings season. DJ30 -41.74 NASDAQ -15.16 NQ100 -0.2% R2K -1.9% SP400 -1.2% SP500 -7.02 NASDAQ Adv/Vol/Dec 812/2.05 bln/1866 NYSE Adv/Vol/Dec 923/1.30 bln/2098

[Demeter]

84. Technical difficulties BY DAVE BARRY

http://www.miamiherald.com/living/columnists/dave-barry/story/963637.html

This classic Dave Barry column was originally published May 2, 2004

Before we get to today's column, I have an important announcement regarding outsourcing.

''Outsourcing'' is a business expression that means, in layperson's terms, ''sourcing out.'' It's a trend that started years ago in manufacturing, which is a business term that means ''making things.'' You youngsters won't believe this, but there was a time when Americans actually made physical things called ''products'' right here in America. Workers would go to large grimy buildings called ''factories'' where they would take a raw material such as iron ore and perform industrial acts on it, such as ''forging'' and ''smelting.'' By the end of the day, as you can imagine, they smelt terrible (rim shot), but they had turned the ore into something useful, such as a locomotive, or a toaster, or (this was not a big seller) a toaster-locomotive.

The making of things was outsourced decades ago to foreign nations such as Asia. Today, we Americans are dimly aware that our TVs, computers, cell phones, underwear, dentures, cartoons, etc., must come from SOMEWHERE, but we have no real clue who is making them, or how. We have enough trouble figuring out how to remove the packaging.

After we stopped making things, America became a ''service economy,'' which is a business term meaning ''an economy where it is virtually impossible to get service.'' But now even our service industries are being outsourced. Take, for example, ''technical support,'' which is the department you call when you are having a technical problem and need to be placed on hold. Today, when you finally get through to a human, he or she is often in a different country. This is good news and bad news:

SEE THE LINK FOR MORE WACKY DAVE!