Re: Good News about the economy! and a few caveats



On Wed, 27 Jun 2007, phil scott wrote:

First the good news about the economy -

<http://english.sabah.com.tr/236DA55998454CD3BCE1C4AE2DA1ED9B.html>
Paris Hilton wins $1 million in jail

Barf

Paris Hilton's jail sentence of 45 days will end next week. Paris
Hilton will be paid $1 million for the interview at NBC channel.

Gawd! Puke! I'm gonna be sick.

Now for the rest of us -


Unsustainable debt


<http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/06/24/
cnb...>
The Bank for International Settlements, the world's most prestigious
financial body, has warned that years of loose monetary policy has
fuelled a dangerous credit bubble, leaving the global economy more
vulnerable to another 1930s-style slump than generally understood.

"1929" here we come again!

"Virtually nobody foresaw the Great Depression of the 1930s, or the
crises which affected Japan and Southeast Asia in the early and late
1990s. In fact, each downturn was preceded by a period of
non-inflationary growth exuberant enough to lead many commentators to
suggest that a 'new era' had arrived", said the bank.

Otherwise known as "Living on borrowed time"


The BIS, the ultimate bank of central bankers, pointed to a
confluence
a worrying signs, citing mass issuance of new-fangled credit
instruments, soaring levels of household debt, extreme appetite for
risk shown by investors, and entrenched imbalances in the world
currency system.

Please...don't forget greed and selfishness.


<http://www.bloomberg.com/apps/news?
pid=20601039&refer=columnist_gilbe...>
``Granddad Benny, is it true that central bankers used to believe
they
could steer the global economy with quarter-point twitches in
overnight rates?''

You ain't seen nothin' yet.


Granddad looked up from his GoogleSoft iSpread***, where a flashing
red ``health care'' box was blocking 2027's planned expenditure from
matching the income cell. ``Yes, Joel. For about a decade we all
believed central banks could ensure people had jobs, and could afford
food and housing and such. That all changed after the Gigantic Global
Bubble Burst of 2008.''

We just had good luck, that's all.


Joel put down his Mandarin dictionary. ``That's what my
socio-economics teacher says we'll learn about next week. She called
it the Giglobubu. What happened in 2008, Granddad?''

I've been looking at all those "J-shaped" curves, too. And, guess what? There is nothing any of us can do about it.


``We're still not sure, Joel,'' Granddad said
===
<http://www.atimes.com/atimes/Global_Economy/IF22Dj04.html>
In my article "US living on borrowed time - and money", I introduced
readers to the US Treasury's monthly TIC (Treasury International
Capital) report, the data that enumerate just how much foreign
capital
the US is importing every month to finance its extravagant lifestyle.
During much of 2005, the US was net-importing more than $100 billion
of investment capital every month, but the bottom line net number is
falling sharply; last December, the US actually failed to attract any
capital at all.

Hard landing ahead.


One TIC data set of particular interest to bond players is just how
great the investment in US government securities by foreign
governments is each month. These numbers are the core of the flows
that constitute Bretton Woods 2, for they derive mostly from US
dollar
reserves held at foreign central banks.

Just wait till mass psychology & herd instinct detects all this.


They've been falling, too.


Housing


<http://www.bloomberg.com/apps/news?pid=20601087&sid=aoRPU.
8hqUo4&refe...>
Sales of previously owned homes in the U.S. fell in May to the lowest
level in almost four years, reinforcing concerns about a protracted
housing slump.

Dominos ahead.


<http://www.marketwatch.com/news/story/us-inventory-homes-sale-may/
sto...>
Inventory of homes for sale hits 15-year high

See below..


<http://www.bloomberg.com/apps/news?
pid=20601087&refer=home&sid=a1lXFX...>
Financial shares tumbled on concern losses tied to subprime mortgages
will deepen, extending the U.S. stock market's worst weekly decline
since March.


See below...


<http://www.bloomberg.com/apps/news?
pid=20601009&sid=amZ.IeL2pJHo&refe...>
Bear Stearns Plans $3.2 Billion Hedge Fund Bailout


Bear Stearns Cos. offered to provide $3.2 billion in loans to bail
out
one of its money-losing hedge funds, the biggest rescue since 1998,
after creditors started seizing assets.

See below..


The firm will provide a credit line to the High-Grade Structured
Credit Strategies Fund that will be backed by the fund's assets. Bear
Stearns made the offer after creditors including Merrill Lynch & Co.,
JPMorgan Chase & Co. and Lehman Brothers Holdings Inc. put some of
their collateral up for sale to investors.
...snip
Bear Stearns offered to salvage the fund, one of two that made bad
bets on collateralized-debt obligations. Concern about a possible
collapse sent stocks and bonds of financial companies lower. An
agreement with creditors would prevent a fire sale of the collateral,
while potentially increasing the risk to Bear Stearns, the
second-biggest underwriter of mortgage bonds.


<http://www.marketwatch.com/news/story/merrill-auctions-off-assets-
tro...>
Merrill sells assets of Bear Stearns hedge funds


An auction by Merrill, one of several investment banks that lent
money
to the funds, was completed late Wednesday, but more sales are
planned
on Thursday, the person added. The assets for sale include
mortgage-backed securities, collateralized debt obligations and
credit
default swaps.


J.P. Morgan Chase, another creditor, also planned an auction for some
of the funds' assets, but cancelled it on Wednesday afternoon, two
other people familiar with the situation explained. J.P. Morgan has
now decided to negotiate directly with the Bear Stearns funds to
unwind positions via private transactions, they said.


It's usually a sign of trouble when a lender sells collateral from a
hedge fund client.


<http://www.bloomberg.com/apps/news?
pid=20601087&sid=a432Wjw5lBBk&refe...>
Bear Stearns May Put Up Less to Rescue Hedge Fund


Bear Stearns Cos. may put up only $1.6 billion to rescue one of its
money-losing hedge funds, half as much as it offered last week,
according to two people with knowledge of the situation.


The size of the bailout dropped after the Bear Stearns High- Grade
Structured Credit Fund found buyers for some assets and creditors
sold
others ...


Entitlements


<http://www.washingtonpost.com/wp-dyn/content/article/2007/06/20/
AR200...>
"I knew there was a problem, but I didn't realize it was this bad,"
Farrell, 25, marveled after a recent presentation at the University
of
South Florida, from which he is to graduate in August. "I didn't
realize there was no solution in sight. My taxes are going to be
huge."


The problem is the skyrocketing cost of government health-care and
retirement benefits. By most estimates, they will break the national
bank as the baby boom generation retires. If projections hold,
Farrell
and his contemporaries could face a near-doubling of their income
taxes over the next 35 years just to care for the burgeoning ranks of
older Americans.
...snip
Using a computer model that let her subtract individual items, Fraser
demonstrated that neither foreign aid nor pork-barrel allocations nor
the war in Iraq are driving the nation's money problems. The
projected
cost of entitlements is so enormous that eliminating the entire
Defense Department would barely make a dent.


Hyper-inflation in Africa


<http://www.timesonline.co.uk/tol/news/world/africa/
article1968867.ece>
Fuel supplies in Harare have all but dried up after service stations
refused to accept the country's wildly unstable currency in payment.


A handful of outlets in the Zimbabwean capital were serving drivers
for local currency at about Z$150,000 a litre, roughly five times the
price of fuel a month ago. Blackmarket currency trading, which has
almost overtaken the formal banking sector, began petering out as the
exchange rate for the US dollar began to double almost every day.



You didn't sign your name!

But, just wait till you go to your local bank and tell them you want some money out of your account and they say you can't have it.


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