POSTS: FRIDAY 07-02-10
GEO-POLITICAL TENSIONS - ISRAEL / KOREA / IRAN
U.S. Adds Its Own Iran Sanctions WSJ
Israel and Turkey hold secret talks FT
SOVEREIGN DEBT & CREDIT CRISIS
Fears mount over slowing global demand
SPAIN / PORTUGAL
EU's 'Opposite Twins' Clash Over Future
|France and Germany are on different sides of crucial issues in
Europe's debate over its economic future. The awkward personal
chemistry between their leaders has complicated the two countries'
French public debt hits 80% of GDP
Merkel's political woes punctures euphoria
GE chief says Beijing growing hostile to
German banks expected to call on rescue fund
1.3 million Brits to lose jobs in 'Austerity Budget'
|Over a million people will lose their jobs due to the
Government’s spending cuts over the next five years, a leaked
document projects. George Osborne’s Budget last week said that
there would be a net increase of 1.3m jobs by 2015 but the
Chancellor did not mention the figures used to arrive at that
conclusion. Last night, unpublished Treasury documents disclosed
that officials had estimated 2.5m jobs would be created but that a
total of 1.2m would be lost in the same period, the Guardian
reported. Both the public and private sector are expected to be
hit, the analysis concluded, with the losses narrowly greater in
the private sector.
John Philpott, the chief economist at the Chartered Institute for
Personnel and Development, said: "There is not a hope in hell’s
chance of this [increase] happening: there would have to be
extraordinarily strong private sector employment growth in a much
less conducive economic environment than it was during the boom."
Brendan Barber, the TUC’s general secretary, said: "It is
absurd to think that the private sector will create 2.5m new jobs
over the next five years." An extract from a Treasury presentation
for Mr Osborne’s budget – seen by the Guardian – said:
"100-120,000 public sector jobs and 120-140,000 private sector
jobs assumed to be lost per annum for five years through cuts."
Alistair Darling, the shadow chancellor, said: "George Osborne
failed to tell the country there would be very substantial job
losses as a result of his budget.
"Hundreds of thousands of
people will pay the price for the poor judgement of the
Conservatives, fully supported by the Liberal Democrats." A
spokesman for the Treasury said: "The OBR forecast unemployment to
fall in every year and employment to rise in every year."
Immelt hits out at China and Obama FT
GE chief gives vent to frustration over China
US groups wary of China strikes record
Complete Guide To The Inevitable American Debt Default
Budget Maneuvers Leave Huge Deficit WSJ
Long-Term Budget Outlook- Anyone Still Laughing At Greece-
Long-Term Budget Outlook
from the Congressional Budget Office (CBO) is out.
What a surprise, the previously optimistic
forecasts by the US administration do not appear to come to
The CBO is hedging their bets now with what they
call an "alternative fiscal scenario".
The budget outlook is much bleaker under the
alternative fiscal scenario. Debt as a share of GDP would
exceed its historical peak of 109 percent by 2025 and would
reach 185 percent in 2035.
A very gloomy picture is starting to emerge,
looking at the projections.
Source: Congressional Budget Office
We are not quite there yet, the current numbers are
still somewhat better than other debt-ridden economies.
External debt (as % of GDP): 96.5%
Gross external debt: $13.77 trillion
(est): $14.26 trillion
External debt (as % of GDP): 170.5%
Gross external debt: $581.68 billion
2009 GDP (est): $341 billion
However, given the projections under the
“alternative scenario”, should anyone still be laughing at
Unemployed dumping car leases OC
|The unemployed are walking away from their car leases in
droves as more laid-off workers see their jobless benefits cut
off, reports LeaseTrader.com. The company, which helps match up
people who want out of their car leases with those looking for a
shorter-term lease, said it expects to process 7.3% more listings
in June from people whose unemployment benefits have ended or are
about to end.
"Unemployment benefits have been keeping
millions of Americans afloat since the recession began," said
Sergio Stiberman, chief executive of LeaseTrader.com. "When the
clock runs out on benefits, people still jobless look to find ways
of further cutting their bills. The ability to transfer a car
lease contract can save a person more than $500 each month while
keeping their credit intact." The company said the majority of its
lease listings are in California and other high-unemployment
states including Florida, Arizona, Nevada and Michigan.
California's unemployment was 12.4% in May, third highest in the
LeaseTrader.com noted the surge in listings
coincides with the failure by Congress to approve HB 4213, a bill
that would allow extended unemployment benefits through November.
One version of the bill was approved by the House just before
Memorial Day, but it has gotten bogged down in the Senate in a
disagreement over how to pay for the $100 billion cost.
Unemployment aid is just one of a host of issues included in the
bill that have delayed its passage. The California Employment
Development Department estimates more than 234,000 laid-off
workers in this state alone have had their benefits cut off since
the last unemployment extension bill expired in early June.
Cash calls expected as Europe’s banks face tests
Lenders told to set up emergency plans
German banks expected to call on rescue fund
Europe's banks are still on 'life support', BIS warns
House Approves War Funding, State Aid After Obama Veto Threat
Mortgage Rates on 30-Year U.S. Loans Fall to Record
Mortgage Bonds Booming WSJ
|Investors are seeking out mortgage bonds backed by the U.S.
government as a safe haven from the tumult of the global economy,
a reversal of fortune that has helped drive mortgage rates for
consumers to record lows.
Munis Underperform Treasuries as Default Speculation Mounts
& LOCAL GOVERNMENT/b>
Fiscal 2011 could be hardest yet for states Reuters
LA braces for pink
slips Daily News
Made Taxpayers Unwitting Junk-Bond Buyers
“Either the Fed did not understand the distressed state of some of
the assets...or it understood that it was buying weak assets and
attempted to obscure that fact”
DODD FRANK ACT
Companies Push for Clarity on Derivatives Regulation WSJ
|Democrats are trying to quell an outcry over a last-minute
change to their financial-regulation overhaul that has sparked
confusion over regulation of the giant derivatives market.
Bearish Sentiment at Highest Levels Since July 2009
Gold Below $1,200 As Asset Liquidations Spread Like Wildfire ZH
The European liquidations we
discussed earlier courtesy of the ECB MRO and the repo rate
spike, which resulted in a massive EURUSD covering squeeze, have
followed through into industrial commodities such as oil and
lastly into gold. And as liquidations are merely emblematic of a
broken liquidity system (as the name implies), the unwind behind
the scenes must be fierce. On the other hand, as the only recourse
to prevent an all out systemic collapse should the deflationary
trend continue, from Ben Bernanke's perspective, is just to print
more money and thus solidify the position of the precious metal as
undilutable and a currency which can not be backed with toxic MBS
and Greek Sov Bonds, today's sell off is a much welcomed respite
for the commodity which traded at record highs as recently as this
our recent disclosure of PM market manipulation via disclosed
COMEX-OTC arbing by such former behemoths as AIG then (and
presumably JPM now), should only add to your comfort that once the
finger on the scales is removed, the natural reaction will be that
of a coiled spring.
In the meantime, here is a one year gold price chart.
RRESIDENTIAL REAL ESTATE - PHASE II
Not So Neighborly Associations Foreclosing On Homes NPR
EXPIRATION FINANCIAL CRISIS PROGRAM/b>
PENSION & ENTITLEMENTS CRISIS
New proposal would push US retirement age to 70 for Social Security
Reversion To 10 Year Average Labor Force Participation Rate Implies 11.8%
Unemployment Rate ZH
The only reason for the decline in the unemployment rate to
9.5% was yet another decline in the labor force participation
rate, which according to the BLS dropped another 652k people in
the month of June. This resulted in a labor force to the civilian
non-institutional population ratio of 64.7%: the second lowest
number in decades of data, and only better than December 2009,
when this number was 64.6%. The problem with this is that it badly
underestimates the split between those who are marginally attached
and those 14,623 who were formally unemployed in June. As the
chart below shows, the double dip in the labor force participation
is now very much pronounced.
What this chart implies is that if there was a mean reversion
to the last 10 year labor force participation average rate of
66.2%, there should be another 3.5 million jobless added to the
14.6 million tally. And as this differential is the easiest thing
in the world for the BLS to fudge, adding the two and dividing by
the labor force of 153,74, we get an unemployment rate of
11.8%, leaving aside all other such fudge factors are
government hiring, temporary workers, birth death, etc. 9.5% or
11.8% - which one is more realistic for an economy finally
realizing it never left the second great depression, you decide.
NFP Down 125,000, Unemployment Rate 9.5%, +83K Private Payrolls With +147K
Birth Death, Workweek Down 0.1 Hours - Another Disappointment
Private payrolls were a disappointment at just +83k, versus
consensus of 112k. Birth-death added 147k. Census removed 225k, in
line with consensus. Temporary help was another terrific "green
shoot" increasing by +21k. And the Unemployment rate
dropped to 9.5% because 652k people walked out of the labor force,
which dropped from 154.393 million to 153.741 million.
Another big miss for the recovery story and another confirmation
of the data point. The only improvement was the percentage of
those unemployed 26 weeks and longer dropped from 46% to 45.5%, or
from 6.763 million to 6.751 million. Yet the most troubling
indicator was the downward inflection in the average workweek,
which once again dropped by 0.1 hours to 34.1 hours, while in
manufacturing the drop was a severe 0.5 hours, following a rise of
0.4 hours in May. The slack in the laborforce is once again
building up. Also, average hourly earnings declined by 0.1%, after
an increase of 0.2% in May.
Total nonfarm payroll employment declined
by 125,000 in June, and the unemployment rate edged down to 9.5
percent, the U.S. Bureau of Labor Statistics reported today. The
decline in payroll employment reflected
a decrease (-225,000)
in the number of temporary employees working on census 2010.
Private-sector payroll employment edged up by 83,000.
nonfarm payroll employment decreased by 125,000 in June,
reflecting the departure of 225,000 temporary Census 2010 workers
from federal government payrolls. Total private employment edged
up over the month (+83,000) due to modest increases in several
industries. So far this year, private-sector employment has
increased by 593,000 but in June was 7.9 million below its
December 2007 level.
In June, the average workweek for all
employees on private nonfarm payrolls decreased by 0.1 hour to
34.1 hours. The manufacturing workweek for all employees decreased
by 0.5 hour to 40.0 hours; this followed an increase of 0.4 hour
in May. The average workweek for production and nonsupervisory
employees on private nonfarm payrolls was unchanged at 33.4 hours
Unemployment Extension Narrowly Fails In Senate
Jobless Claims in U.S. Increased 13,000 Last Week to 472,000
Jobless Claims Show U.S. Job Machine Sputtering in Recovery
Employment in U.S. Likely Dropped in June on Census Cutbacks BL
GOVERNMENT BACKSTOP INSURANCE
Fannie and Freddie are top Wall St customers FT
OTHER TIPPING POINT CATEGORIES NOT LISTED ABOVE/b>
dollar as sole reserve currency: U.N. report
Manufacturing Shows Weakening From China to Europe
CHART OF THE DAY- Russia Is On A Crazy Gold Binge BI
If anyone has been buying gold on strength, then it's
Russia. The nation just bought another 22.5 tonnes of gold
reserves in May, after adding 27.6 tonnes in April. This
continues a long streak of gold additions since 2005, as shown
in the chart below.
If Russia kept up the April-May 2010 rate of gold additions
in June, then Q2 buying will prove itself the largest
quarterly accumulation of gold reserves for Russia in recent
history. (Note the last data point shown is only a 2-month
period comprised of April and May)
Given gold's performance, Russia has been looking smart, so
far at least, despite today's
golden air pocket. Across the same period, America has
added virtually nothing, as shown in blue. Luckily America's
stagnant gold reserves are still more than 10 times even
Russia's latest 703 tonne stash.
had worst start for stocks in nearly a decade
FLASH CRASH - HFT - DARK POOLS
VIDEO TO WATCH
INTERESTING ARTICLES - GENERAL
How to Make an American Job Before It's Too Late- Andy Grove BL
Recently an acquaintance at the next table in a Palo Alto,
California, restaurant introduced me to his companions: three
young venture capitalists from China. They explained, with visible
excitement, that they were touring promising companies in Silicon
Valley. I’ve lived in the Valley a long time, and usually when I
see how the region has become such a draw for global investments,
I feel a little proud.
QUOTE OF THE WEEK
If you feel comfortable being in the US dollar you would feel
comfortable living in Chernobyl selling Real Estate.
ZHHstrong> - Zero Hedge, BI - Business Insider,
WSJ - Wall Street Journal, BL -
Bloomberg, FT - Financial Times