Sidetalk

Jim Manzi thinks so:

“According to the Wall Street Journal, Massachusetts legislators are studying a plan to levy a 2.5% annual tax on the portion of college endowments that exceed $1 billion. The high-wage union workforce with lifetime employment contracts and restrictive work rules tenured faculty is not amused.

Harvard’s official response is pretty funny:

Kevin Casey, a spokesman for Harvard, said the proposal would hurt Massachusetts and colleges because it would damage “stable bedrock institutions” that have helped shield the region from the worst of the economic slowdown.

But why isn’t this statement true of, say, Akamai, Biogen and Raytheon?” Keep reading →

euroarealendingsurvey0408  ←link to full report

The Euro Area lending survey for April 2008 is out, and shows considerable tightening in both lending standards and in loan demand across consumer, enterprise and mortgage credits. 

Something is happening at the nation’s largest pension fund, the Sacramento-based California Public Employees’ Retirement System, which has nearly a quarter-trillion dollars in investments ranging from real estate to stocks.  Keep reading →

Grameen Bank, the micro-credit financier initially set up to help the poorest in Bangladesh, has opened its first branch in the United States. The Bangladesh-based outfit known as the poor people’s bank plans to hand out loans to the less well-off in one of the most ethnically-diverse neighbourhoods in the US. Muhammad Muhammad Yunus, who founded the bank in 1976, said the branch in Queens, New York City, was to cater to thousands of new immigrants without access to basic banking services. “They think ‘What you come from Bangladesh to do banking in NYC? That sounds so ridiculous.  “This is [the] city where [the] whole world learnt banking from’.” But the Nobel laureate said New York also had its share of poor people just like any other city “so we are actually working in [a] third world” environment. 

Keep reading →

The decade of bling is over in the USA.  Now it’s supposed to be cool to dump the SUV, dumpster dive and freecycle.  Having read reams of articles on this trend, I’ve selected the one I think is the best from the San Francisco Chronicle which is fairly long but required reading.  It does a good job of showing the macro and micro reasons for the changes, and showing exactly how the economics translate into real everyday life for many people.  Link to read full article:  frugalamerica

Here’s the chart:

Source: Chronicle research, BudgetSavvyMag.com

The Treasury Department’s TBAC has released its report dated April 28.  It is grim but required reading.  Full report here:  treasurybacreportreleased050208

Excerpts:

The Federal government’s budget balance is deteriorating in fiscal year 2008. Weaker economic activity has dampened the pace of revenue collection and lifted growth in economically sensitive spending. A recent survey of primary dealers estimates that the deficit for the 2008 fiscal year ending in September will exceed $400 billion with some economists expecting a deficit of more than $500 billion–a significant deterioration from fiscal 2007’s deficit of $163 billion. Economic stimulus measures will complement the forces widening the budget deficit. This year’s shortfall may surpass fiscal year 2004 as the largest on record in nominal dollars. Keep reading →

The other alternative perhaps being a 1929 style crash. 

A DERIVATIVES expert who two years ago warned of a potential meltdown in global credit markets has cautioned that the crisis is far from over, and has endorsed recent calls to relax controls on inflation and allow higher prices to help markets trade their way out of their problems.  Longtime critic of derivatives markets, Satyajit Das, says those who believe the US sub-prime loans crisis, and the drought in credit markets it triggered, are nearly over are wrong.

Full article:  das0508

Is your pension plan underfunded now that the true value of its investments is beginning to come to light?  It’s possible that you will receive a deficit notice from your pension fund similar to this one sent out recently to Sheet Metal Workers pensioners:  criticalstatusfinal Keep reading →

Fictitious capital to the tune of $536 Billion in household assets in the United States has already evaporated.  Read Kasriel’s April 29 report here → kasriel042908halftrillion

For curiosity’s sake, take a look at the historical dollar amount of borrowing by depository institutions (banks) from the Federal Reserve.  It is hard not to notice that what we have here is unprecedented over the last 100 years.  When you hear someone say the credit crisis is almost over, check this chart and think again.

Total Borrowings of Depository Institutions from Fed. Reserve 1910 - present (Billions $US)

 Link to March 2008 Public Debt Balance Sheet:  publicdebtbalsheet0308

Here are the current and recent historical totals: 

Keep reading →

None other than Barclays Capital warned Tuesday that roughly half of all subprime and Alt-A borrowers in the U.S. could soon owe more than their house is worth, or have extremely minimal equity left — a problem that is imperiling more homeowners in the States than mortgage rate resets, which have received far greater press coverage.  Continued price declines are likely to put as much as $800 billion worth of debt at risk. http://www.housingwire.com/2008/04/29/barclays-issues-warning-on-underwater-borrowers/

According to the Associated Press, Defense Secretary Robert Gates said Tuesday that sending a second U.S. aircraft carrier to the Persian Gulf could serve as a “reminder” to Iran, but he said it’s not an escalation of force. Asked if the carrier move went hand in hand with the rising U.S. rhetoric against Iran, Gates said, “I don’t see it as an escalation. I think it could be seen, though, as a reminder.”

In the past, military officials have said that beefing up the Navy’s presence in the Gulf was a way to show that that the U.S. remains committed to the region. And they have acknowledged it also serves as a show of force for other countries there, such as Iran. In recent weeks, U.S. officials have ratcheted up their complaints that Iran is increasing its efforts to supply weapons and training to militants in Iraq.

Keep reading →

From Calculated Risk: ”The composite 10 index (10 large cities) is off 13.6% YoY. (15.8% from peak).  The composite 20 index is off 12.7% YoY. (14.8% from peak).  The Case-Shiller national index will probably be off close to 12% YoY (will be released in earlylate May). Currently (as of Q4) the national index is off 10.1% from the peak.”

 New data on Iraq oil revenues suggests that country’s government will reap an even larger than expected windfall this year—as much as $70 billion—according to the special U.S. auditor for Iraq.  Read details from the AP:  iraqiwindfall

The British banking authorities have been “cooperative” with the US financial markets over the last decade, buying up countless questionable derivatives.  Now it seems they are realizing that it may be “every man for himself.”  From Financial Times’ Alphaville blog, this comment on American “dis” of LIBOR:

“They say the only time the British consider themselves European is during the Ryder cup. Also perhaps, when reading the Wall Street Journal: Keep reading →

With food riots going on all over the world in emerging nations and food scarcities in still more countries, there is a sudden focus on the future of America’s food security.  This attention is also being drawn to the food issue because of the rising prices of food noticed by everyone who goes grocery shopping. 

Because of rising wheat prices, bakeries across the United States have been forced to post signs apologizing for their prices to consumers, and restaurant owners are fearful prices will cause consumers to eat out less.  An article in the Guardian reported that “the last time America’s grain silos were so empty was in the early seventies, when the Soviet Union bought much of the harvest.”  And American officials warn it will only grow worse.  “There’s going to be real food inflation in this country,” said C. Larry Pope, president and chief executive of U.S. beef processor Smithfield Foods (USAToday).  Although analysts have labeled the food crisis a “perfect storm of conditions,” they recognize that it will take more than just good weather and lowering the food prices to stop the continuing shortages—it would involve a reassessment of world policy toward foodstuffs.

Scrap metal thieves are becoming increasingly audacious, with some even stealing from cemeteries and memorials. Now some 1,000 bronze plaques have gone missing from the former concentration camp at Theresienstadt. Semi-precious metal, as it happens, is everywhere. It can be found on church roofs; copper pipes run through many a house wall; and wiring is almost ubiquitous. Scrap metal thieves, though, have recently discovered a valuable new source of copper: Cemeteries and memorials.  This week, a particularly audacious bandit apparently made off with over 1,000 bronze plaques from the Holocaust memorial Theresienstadt just outside of Prague.

  New phenomenon:  condo owners forced to sell their properties in failed apartment to condo conversions.  Read about it forcedoutofcondos

Iranian President Mahmoud Ahmadinejad said that oil is priced too low at 115 dollars a barrel adding that the commodity “should find its real value”, the state-run broadcasting website reported Saturday, April 19.

“Oil at 115 dollars a barrel in today’s market is a deceiving figure, oil is a strategic commodity and should find its real value,” Ahmadinejad was quoted as saying. Keep reading →

It is coming to light that China has spent a boatload of money on creating and maintaining a model socialist community.  So much money in fact that it will take 200 years for the village to pay back its debts.  But this model socialist community is not what we might expect - there’s a reason it’s called the “Billionaire Red Village. Keep reading →

“Some investors might think they have had a rough ride on the stock market over the past seven or eight months. But the recent share price gyrations pale into insignificance when compared with the biggest stock market falls of all time.

10) Wall Street 1901-03 -46%
The market was spooked by the assassination of President McKinley in 1901, coupled with a severe drought later the same year. Keep reading →

And then nothing bad will happen? From Naked Capitalism, the Tinkerbell market explanation:

” I am frequently mystified at what goes on in the markets. I am even more mystified when people who ought to know better make pronouncements that appear to be profoundly counter-factual. Even if they are talking their own book, the high odds of being revealed as (bald-faced liars) proven wrong ought to make them worry about damaging their credibility. Keep reading →

The Financial Times reports that two of the world’s biggest grain exporting countries have halted exports. 
“Biggest grain exporters halt foreign sales”
By Javier Blas in London, Isabel Gorst in Moscow and Lindsay Whipp in Tokyo

The global food crisis intensified on Tuesday as Kazakhstan, one of the world’s biggest wheat exporters halted foreign sales and rice prices shot to a record high after Indonesia stopped its farmers from selling the grain abroad. Keep reading →

 Read the article (click) The Madness of Ben Bernanke  The G7 Meeting

The dollar is in a tailspin, the trade deficit is growing and a recession is on the horizon. The American way of life is in serious danger. But the head of the Federal Reserve keeps on pumping easy credit into the system — a crazy policy that will worsen the crisis.   So begins today’s article in Der Spiegel. 

This follows the recent revelation that the German bund was given a higher credit rating than US Treasuries for the first time in history.  Now, another warning that taking Fannie Mae and Freddie Mac loans onto the balance sheet of the US government will affect the United States’ credit rating.  Obviously, this is not good news if it occurs. Keep reading →

From the “Mogambo Guru”:

“This same bankrupt America is getting ready to send out $160 billion in ‘economic stimulus’ checks, where the government is literally giving people free money even though the government is borrowing like crazy just to keep afloat, which means that we that are truly, truly toast. Keep reading →

This in Wednesday, via a Reuters conference in London: Hugh Hendry, CIO of hedge fund Eclectica Asset Management, declared that financial stocks could take 25 years to recover from the subprime disaster and added that Citigroup Inc. would fall below $10 a share. Keep reading →

As property values drop, look for more of this.  States will be fighting for survival.  “With the General Assembly’s passage of the new 6.25 percent top tax rate on incomes above $1 million, and Gov. Martin O’Malley’s signing of the bill yesterday, Maryland has apparently become the first state to create an actual millionaires’ bracket.” Keep reading →

This guy saved his cash not under his mattress but in a bank safe deposit box - safe, eh?  Um, guess not.  Termites ate it.   BBC news article:  http://news.bbc.co.uk/2/hi/south_asia/7334033.stm

According to reporting by Bloomberg, lenders are trending towards looking the other way when homeowners become deliquent on mortgage payment due to a glut of pending foreclosures.  Click through for the article →

http://www.bloomberg.com/apps/news?pid=20601109&sid=aefAJU_88vfs&refer=home

This is not advice to stop paying mortgage payments.  Obviously, lenders act in their own self-interest, so this is probably a business decision based on the volume of deliquencies and foreclosures.  It would seem that sitting on a delinquency would just postpone the pain and make it worse by adding penalties, interest, late fees, etc.

From Interfluidity, a good explanation of what really happened in the Fed-Bear Stearns-JP Morgan deal: 

http://www.interfluidity.com/posts/1207251546.shtml

The only thing I’d add is that the U.S. Treasury is actually the counterparty of last resort because it has guaranteed any losses from the deal up to $29 billion.  So, the Fed is the counterparty of next-to-last resort.  Hmmm.

Fannie Mae is increasing length of time a foreclosure will stay on your credit report for purposes of mortgage  lending from 4 years to 5 years.  http://mortgage.freedomblogging.com/2008/04/03/foreclosures-to-ding-borrowers-credit-longer/

MINNEAPOLIS, April 2 (UPI) — Fair Isaac, a credit-rating firm with headquarters in Minneapolis, will cut 420 jobs through layoffs and by jettisoning certain units, the firm announced.  The reduction amounts to 14 percent of the workforce at Fair Isaac, known for its FICO credit score, the St. Paul Pioneer Press reported Wednesday. The company will close or consolidate about a dozen offices around the world, with operations in San Diego expected to be hit hardest, the newspaper said.  “We will produce a smaller yet more profitable Fair Isaac,” Chief Executive Officer Mark Greene said.

We shall see what happens.  In the meantime, consider the vested interests to which some in Congress may be beholden.  Example (courtesy of Center for Responsive Politics):  Sen. Chris Dodd’s big contributors (note - the corporations are not the contributors; the actual contributors are their Political Action Committees)

CHRISTOPHER J. DODD (D-CT)
Top Contributors

In many parts of the world people are protesting, including rioting and striking, over the high price of food, as they simply cannot feed their families.  The BBC reports today that one is dead in a food price riot in the Ivory Coast.

 →  http://news.bbc.co.uk/2/hi/africa/7325733.stm  

This is us folks.  The US government, i.e. taxpayers, guarantees the NY Federal Reserve loan of $29,000,000,000 to JPMorgan/Bear Stearns.  Call and write your congressional representatives if you disagree.  Otherwise, you need not do anything.  Click to read the letter →  treasuryletter0308.pdf