Katla Volcano Rumbling

Posted By on May 17, 2010

Katla Volcano Just Rumbled


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Is the sleeping Katla waking up?

On May 17, 2010 08:32 UTC, The Iceland Met office indicates that a small earthquake has occurred at the Katla location. In what could be an early indication of the event that is expected to occur (an eruption of Katla), a small earthquake is reported at the site. Although a single earthquake is not a precursor of an eminent eruption, it could be the first ’sigh’ of the awakening powerful giant.

Historically, Katla has erupted after the eruption of it’s close neighbor, Eyjafjallajokull, which first erupted on April 14, 2010 and is ongoing at this moment. Magma channels beneath the two volcanoes are thought to be interconnected. A Katla eruption would likely be about ten times as powerful at the Eyjafjallajokull eruption and could cause worldwide disruption while expelling huge volumes of volcanic ash into the stratosphere which would circle the globe potentially for years, depending upon the magnitude of the eruption.

Not to be alarmist, but have you started  your food storage plan? Basic survival preparedness is a personal responsibility that was simply a way of life of our ancestors. Let’s not forget how.

Will Iceland’s Katla Volcano Blow Next?

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All About Oil

Posted By on May 17, 2010

With only so much oil to go around, every new off-take agreement signed by the Chinese with the Saudis or Venezuelans, for example, is a net loss in supply to other bidders, notably the world’s largest energy consumer, the United States.

That the Chinese, and other countries, are aggressively securing long- term energy arrangements, coincidental with what appears to be an official US diplomatic initiative to actively offend all the major energy producers, makes the securing of US-controlled reserves and production critical.

The problem with cheap oil can be seen in the chart here.

Oil Discoveries

And it has been confirmed in a recent report issued by the US military, conveniently summarized by DailyFinance: “A recent Joint Operating Environment report issued by the US Joint Forces Command suggests that the US could face oil shortages much sooner than many have anticipated.

“The report speculates that by 2012, surplus oil production capacity will dry up; by 2015, the world could face shortages of nearly 10 million barrels per day; and by 2030, the world will require production of 118 million barrels of oil per day, but will produce only 100 million barrels a day.”

The US needs secure oil sources, and “on the double,” as a military type might say. And so the pressure has increased for the US government to remove its actual and effective regulatory bans on offshore drilling.

www.dailyreckoning.com

Category: Commentary, Commodities, Economy, Gold and Silver, National News, Oil and Nat Gas, Wall Street | 48 Comments »
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Gulf of Mexico Oil Spill……..Scientists Find Giant Plumes Of Oil Forming Under The Gulf

Posted By on May 15, 2010

 
Jim Wilson/The New York Times

By JUSTIN GILLIS
Published: May 15, 2010

Scientists are finding enormous oil plumes in the deep waters of the Gulf of Mexico, including one as large as 10 miles long, 3 miles wide and 300 feet thick. The discovery is fresh evidence that the leak from the broken undersea well could be substantially worse than estimates that the government and BP have given.

“There’s a shocking amount of oil in the deep water, relative to what you see in the surface water,” said Samantha Joye, a researcher at the University of Georgia who is involved in one of the first scientific missions to gather details about what is happening in the gulf. “There’s a tremendous amount of oil in multiple layers, three or four or five layers deep in the water column.”

The plumes are depleting the oxygen dissolved in the gulf, worrying scientists, who fear that the oxygen level could eventually fall so low as to kill off much of the sea life near the plumes.

Dr. Joye said the oxygen had already dropped 30 percent near some of the plumes in the month that the broken oil well had been flowing. “If you keep those kinds of rates up, you could draw the oxygen down to very low levels that are dangerous to animals in a couple of months,” she said Saturday. “That is alarming.”

Scientists studying video of the gushing oil well have tentatively calculated that it could be flowing at a rate of 25,000 to 80,000 barrels of oil a day. But the government, working from satellite images of the ocean surface, has calculated a flow rate of only 5,000 barrels a day.

The undersea plumes may go a long way toward explaining the discrepancy, suggesting that much of the oil emerging from the well could be lingering far below the sea surface.

working,” Doug Suttles, BP’s chief operating officer for exploration and production, said Saturday after flying over the area above the oil well. “The oil in the immediate vicinity of the well and the ships and rigs working in the area is diminished from previous observations.”

Many scientists had hoped the dispersants would cause oil droplets to spread so widely that they would be less of a problem in any one place. If it turns out that is not happening, the strategy of using the chemicals could come under greater scrutiny. Dispersants have never been used in an oil leak of this magnitude a mile under the ocean, and their effects at such depth are largely unknown.

Much about the situation below the water remains unclear, and the scientists stressed that their results were preliminary. Interviewed on Saturday by satellite phone, one researcher aboard the Pelican, Vernon Asper of the University of Southern Mississippi, said the shallowest oil plume the group had detected was at about 2,300 feet, while the deepest was near the seafloor at about 4,200 feet.

Dr. Joye said the findings about declining oxygen levels were especially worrisome, since oxygen is so slow to move from the surface of the ocean to the bottom. She suspects that oil-eating bacteria are consuming the oxygen at a feverish clip as they work to break down the undersea plumes.

While the oxygen depletion so far is not enough to kill off sea life, the possibility looms that oxygen levels could fall so low as to create large dead zones, especially at the seafloor. “That’s the big worry,” said Ray Highsmith, head of the Mississippi center that sponsored the mission, known as the National Institute for Undersea Science and Technology.

“This is a new type of event, and it’s critically important that we really understand it, because of the incredible number of oil platforms not only in the Gulf of Mexico but all over the world now,” Dr. Highsmith said. “We need to know what these events are like, and what their outcomes can be, and what can be done to deal with the next one.”

Shaila Dewan contributed reporting from Robert, La.

 Complete Article At: http://www.nytimes.com/2010/05/16/us/16oil.html?hp

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U.S. Bankruptcies Resume Upward Path In 1st Quarter

Posted By on May 14, 2010

Fri May 14, 2010 3:01pm EDT

 * Nevada has most filings per capita, Arizona filings soar

 By Jonathan Stempel

 NEW YORK, May 14 (Reuters) – U.S. bankruptcy filings resumed their upward climb in the first quarter, nearly equaling their highest level since 2005, as high unemployment and a still-strained housing market squeezed consumers.

There were 388,148 filings between January and September, up 17 percent from 330,394 a year earlier, according to data released Friday by the Administrative Office of the U.S. Courts. Consumer filings rose 18 percent to 373,541, while business filings edged up 2 percent to 14,607.

Filings also rose 4 percent from last year’s fourth quarter, the government data show. That had been the first period with a quarter-to-quarter drop in filings since 2006.

For the 12 months ended March 31, there were 1.53 million filings, up 27 percent from a year earlier and the most since 2006. Some experts expect the number to stay above 1.5 million in future periods.

“We’re not anyway near through our housing situation, and are going to see more foreclosures, perhaps for another three years,” said David Jones, president of the Association of Independent Consumer Credit Counseling Agencies in Fairfax, Virginia. “The job situation is also serious. It’s not just that people cannot find jobs, but many who have found jobs are finding them at lower wages.”

First-quarter filings were the second-most since the fourth quarter of 2005, when Congress overhauled federal bankruptcy laws to make it tougher for people to file. They nearly equaled the 388,485 filings in the third quarter of 2009.

According to the American Bankruptcy Institute, Arizona had a 69 percent rise in total filings over the last year, the biggest increase in any federal district.

On a per capita basis, Nevada had the most filings, with 11.7 per 1,000 people.

Both states have been among the hardest hit by the nation’s housing and commercial real estate problems.

Tennessee ranked second per capita, followed by Georgia, Indiana and Alabama. Among the most populous states, California was 8th per capita, Texas 48th, New York 41st and Florida 15th. Alaska had the fewest filings per capita, with 1.54 per 1,000 people.

In the quarter, about 73 percent of bankruptcy filings came under Chapter 7 of the U.S. bankruptcy code, 26 percent under Chapter 13, and most of the rest under Chapter 11.

Consumers use Chapter 7 to get a fresh financial start. Chapter 13 lets people discharge some debts. Businesses often use Chapters 7 and 11. Farmers use Chapter 12 of the code. (Reporting by Jonathan Stempel, editing by Gerald E. McCormick)

More at     http://www.reuters.com/article/idUSN1418760920100514

* Consumer filings up 18 pct, business filings up 2 pct

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The Road To Default

Posted By on May 14, 2010

The Road to Default

Follow the capital flows, people. As money flees from the European bond market, it runs to the safety of US debt, stocks, and gold. The race to the fiat bottom, however, ensures that it’s only a matter of time before the US devalues again and capital begins to flee the safe haven illusion of the US bond market.

Greece needs to borrow from everyone else to cover it budget deficit. Excuse me, but are we not doing the same thing when we go hat in hand and sell our debt to China and Japan? What is happening is that capital is starting to notice we are in the final stages ready for major default?

Source: martinarmstrong.org

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What A Travesty….Newest Wall St. Probe Focuses On Muni Bets…..

Posted By on May 14, 2010

These security firms are dirty skunk smelling sewer rats in 30 feet of nuclear waste…..they’re so bad that they glow in the dark.

The latest in a string of Wall Street inquiries is focused on municipal bonds. The SEC has reportedly opened a preliminary investigation into possible conflicts of interest among firms that sold municipal bonds and then set themselves up to profit if the bonds failed. The probe also seeks to determine whether firms used their own money to bet against the bonds and, if so, whether that fact was properly disclosed to investors. Several states are investigating the issue as well, including California, the country’s largest bond issuer. California’s inquiry is focused on Bank of America (BAC), Barclays (BCS), Citigroup (C), Goldman Sachs (GS), JPMorgan (JPM) and Morgan Stanley (MS).

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Jim Sinclair Says The Bailout Of U.S. States Is Coming, 33 Are In Trouble.

Posted By on May 14, 2010

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Illinois Deep In Debt, Doesn’t Pay Bills

Posted By on May 14, 2010

Illinois deep in debt, doesn’t pay bills
Crisis pushes businesses, organizations to edge of bankruptcy

 
By CHRISTOPHER WILLS

SPRINGFIELD, Ill. – For 35 years, frail senior citizens in southern Illinois could turn to the Shawnee Development Council for help cleaning the house, buying groceries or any of the chores that make the difference between living at home or moving to an institution.

No more. The council shut down the program Thursday because of a budget crisis created by the state of Illinois’ failure to pay its bills.

Paralyzed by the worst deficit in its history, the state has fallen months behind in paying what it owes to businesses and organizations, pushing some of them to the edge of bankruptcy.

Illinois isn’t bothering with the formality of issuing IOUs, as California did last year. It simply doesn’t pay.

Plenty of states face major deficits as the recession continues. They’re cutting services or raising taxes or expanding gambling to close the gap. But Illinois is taking the extra step of ignoring bills.

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Oil Slickonomics – Part 3

Posted By on May 13, 2010

May 13, 2010
 
 
“We have breaking news on the oil spill in the Gulf.  
 
Anderson Cooper, 10 PM, May 13, 2010, CNN
 
CNN breaking news tonight reports that the estimate of 5000 barrels a day spilling from the BP well in the Gulf of Mexico may be very low.  A Purdue University professor has used sophisticated scientific analysis to estimate the flow visible in the now-famous video, and has revised the estimate to 70,000 barrels a day, with a margin of error of plus or minus 20 percent.  That is the equivalent of an Exxon Valdez spill every four days.  Another way to put it is that about 20 million gallons a week or some 60 million gallons have polluted the Gulf since this started.
 
The new estimate helps explain the large size of the slick, as estimated by NOAA.  It also leads us to move to our second case among the three scenarios we have discussed in part 1 and part 2 of this series. See www.cumber.com for the other parts of the series.  We were already at “bad.”  Now we may be at “worse” if tonight’s effort by BP is unsuccessful.  We should know within 48 hours.   
 
According to Anderson Cooper, other experts who have responded to the new estimate have now called on the federal government to intervene massively and to stop leaving this issue to the oil company.  They allege BP is purposefully covering up or excluding information and keeping professionals from participating in a coordinated national effort to deal with this catastrophe. 
 
We have no way to know what is going on inside BP.  We do know that the reports continue to be alarming. 
 
Tonight there is another attempt by BP to use another method to stop the flow.  BP says that we shouldn’t deal with measuring and that we should focus on stopping the spewing of oil.  They are partially correct. 
 
Of course the stoppage must come first.  But measuring is a way to determine the responses needed to minimize the damage and clean up the mess.  And this is a very big mess.  BP’s liabilities are growing exponentially, as are those of its suppliers and partners who are involved.
 
In addition there is now risk to shipping lanes, because ships and barges cannot safely navigate through oil spills and slicks.  The fire hazard has also greatly intensified.  There are insurance requirements to prevent the transiting of ships.  In sum, it is not wise to sail through a dangerous stretch of oil-contaminated ocean.
 
We have seen some firms make investment recommendations favorable to BP and the others involved.  They claim the existing loss of market cap makes them cheap.  We think that an unknown and growing liability is enough to dissuade us from attempting to bottom fish.  You could catch a falling knife.  We are not positioned in the ETFs that have heavy weights of these companies.  
 
The other issue has to do with the 30,000 existing drilling rigs in the Gulf.  They too must be cognizant of the risk of operating with an oil slick underneath them that is spread widely on the surface.  Fire hazard again emerges as one of the considerations.  We are told by petroleum engineers that these rigs may have to be evacuated if the slick reaches the sort of proportions to be dangerous to them.  This is true for both drilling rigs and production platforms. 
 
This situation in the Gulf has gone from bad to worse.  It still may be contained.  BP’s efforts to capture the gushing oil with the funnel-type device they are attempting to use tonight may still work.  We certainly hope so.
 
Meanwhile the combined federal and oil company effort has now widened to over 500 vessels and 13,000 people.  1.5 million miles of boom and containment-type barriers have been installed, and more are coming.  Coastal cities in Florida are making emergency plans.  We have evidence of oil spill damage in three states: Mississippi, Louisiana, and Alabama.  
 
Like Yogi Berra said: “It ain’t over till it’s over.”   
 
David R. Kotok, Chairman and Chief Investment Officer
 
*********
Copyright 2010, Cumberland Advisors. All rights reserved.

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Australian Prime Minister Speaks Out

Posted By on May 13, 2010

Muslims who want to live under Islamic Sharia law were told on Wednesday to get out of Australia , as the government targeted radicals in a bid to head off potential terror attacks.I am tired of this nation worrying about whether we are offending some individual or their culture. Since the terrorist attacks on Bali , we have experienced a surge in patriotism by the majority of Australians. ‘  

‘This culture has been developed over two centuries of struggles, trials and victories by millions of men and women who have sought freedom’ 

‘We speak mainly ENGLISH, not Spanish, Lebanese, Arabic, Chinese, Japanese, Russian, or any other language. Therefore, if you wish to become part of our society . Learn the language!’ 

‘Most Australians believe in God. This is not some Christian, right wing, political push, but a fact, because Christian men and women, on Christian principles, founded this nation, and this is clearly documented. It is certainly appropriate to display it on the walls of our schools. If God offends you, then I suggest you consider another part of the world as your new home, because God is part of our culture.’ 

‘We will accept your beliefs, and will not question why. All we ask is that you accept ours, and live in harmony and peaceful enjoyment with us.’ 

‘This is OUR COUNTRY, OUR LAND, and OUR LIFESTYLE, and we will allow you every opportunity to enjoy all this. But once you are done complaining, whining, and griping about Our Flag, Our Pledge, Our Christian beliefs, or Our Way of Life, I highly encourage you take advantage of one other great Australian freedom, ‘THE RIGHT TO LEAVE’.’

‘If you aren’t happy here then LEAVE. We didn’t force you to come here. You asked to be here. So accept the country YOU accepted.’ 

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Are Tax Credits for Homebuyers Still Available? Yes

Posted By on May 12, 2010

May 12th, 2010                     by Tim Manni

Have you heard of any other government programs or tax credits for home buyers?

While the federal homebuyer tax credit for both first-time and repeat buyers have expired, several states are offering their own incentives to promote and maintain homeownership.

 

California Offers $10,000 to Homebuyers

One example is California’s homebuyer tax credit of up to $10,000 for both first-time and repeat buyers. The reaction of homebuyers in California has been astounding. According to the San Jose Mercury News, the money allocated for the credit in 2009 was used up in only four weeks. Based on the current demand in California, experts are predicting the money allocated for 2010 will be used up in only two to three weeks.

Don’t Forget About the NCSHA

The National Council of State Housing Agencies (NCSHA) is a national, nonprofit organization created by the nation’s state Housing Finance Agencies (HFAs) to assist them in increasing housing opportunities for lower income and underserved people through the financing, development and preservation of affordable housing.

Housing Finance Agencies can help you determine whether you qualify for any of a variety of programs, including the Low Income Housing Tax Credit, Mortgage Revenue Bonds (MRBs), and the HOME Investment Partnerships (HOME) Program.

Click here to view each state’s HFAs and their program information.

Help for Homeowners (and Homebuyers)

Do you live in one of the states with the worst housing markets in the country? The federal government is providing extra funding to ten states that have been hit especially hard by the housing downturn. While five states have yet to announce how they plan to allocate the added funds, so far, principal reductions, subsidized monthly payments for unemployed borrowers and down-payment assistance seems to be the recurring strategies for the states that have announced their spending plans.

http://blog.hsh.com/index.php/2010/05/are-tax-credits-for-homebuyers-still-available-yes/

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Lets Look At The 1929 Crash…..Heads Up, Just A Reminder Of The Unthinkable!

Posted By on May 11, 2010

1929 Crash

www.ingerletter.com

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The Average American Has Very Little In Retirement Savings!

Posted By on May 11, 2010

Source:  U.S. Census

The average person will have a hard time once retired.  These stats are numbing to say the least.

The average retirement accounts for many Americans is near $50,000, but half of Americans have $2,000 or less in their account. Many middle class Americans are simply not prepared for retirement.  Even with Social Security, this will only be a small amount.  So with a large number of baby boomer depending on a smaller income in years to come, what does this do to our consumption based economy?  Also, you have to sell your stocks to get the funds out of them so what is going to happen with millions of baby boomer selling stocks into a market where younger Americans have very little to save, not to mention save for retirement?

http://www.mybudget360.com/

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Federal Food-stamps ……Sets New Record At Almost 40 Million People! That’s About One In Every Eight

Posted By on May 11, 2010

(Reuters) – Nearly 40 million Americans received food stamps — the latest in an ever-higher string of record enrollment that dates from December 2008 and the U.S. recession, according to a government update.

Food stamps are the primary federal anti-hunger program, helping poor people buy food. Enrollment is highest during times of economic distress. The jobless rate was 9.9 percent, the government said on Friday.

The Agriculture Department said 39.68 million people, or 1 in 8 Americans, were enrolled for food stamps during February, an increase of 260,000 from January. USDA updated its figures on Wednesday.

“This is the highest share of the U.S. population on SNAP/food stamps,” said the anti-hunger group Food Research and Action Center, using the new name for food stamps, Supplemental Nutrition Assistance Program (SNAP). “Research suggests that one in three eligible people are not receiving … benefits.”

Enrollment has set a record each month since reaching 31.78 million in December 2008. USDA estimates enrollment will average 40.5 million people this fiscal year, which ends Sept 30, at a cost of up to $59 billion. For fiscal 2011, average enrollment is forecast for 43.3 million people.

http://www.reuters.com/article/idUSTRE6465E220100507

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Art Cashin From The Floor Of The New York Stock Exchange……..Dissecting The Somewhat (?) Suspect Payroll Data

Posted By on May 11, 2010

When we read this from Art Cashin, it becomes painfully clear why the government can’t be trusted on its statistics which are self serving to say the least!

Dissecting The Somewhat Suspect Payroll Data – As we suggested in yesterday’s Comments, Friday’s non-farm payroll numbers got swallowed up by the on-going worries about Greece.  But, the “jump” of 290,000 new jobs was a big topic on the weekend talk shows.  There was a lot of “we’ve turned the corner” portrayals.

Longtime readers know I’ve thought some of the improvement in the data was “suspect” (to be kind).  For the last eight weeks, Initial Unemployment Claims have averaged 450,000 per week.  So, over the last four weeks, 1.8 million people were laid off.  How does that fit in with the claim that 290,000 new jobs were created?  The obvious answer is that it doesn’t.

So, let’s drill down into the payroll numbers to see what’s going on.  The CES Birth/Death adjustment added 188,000 of those jobs.  Birth/Death does not refer to people but to businesses.  The BLS guesses how many new companies opened versus how many closed their doors.  The BLS then uses that guess to guess again how many jobs those business created or lost.

Another 66,000 of the new jobs came from census hiring.  Those are temporary jobs and those folks will be laid off later in the year.  Speaking of temporary, another 26,000 of the new jobs were non-census temporary.  Let’s recap.  A guess produced 188,000 of the jobs, 66,000 were census and 26,000 were temporary.  Thus, it seems 280,000 of the 290,000 “new jobs” were either temporary or the result of guesswork.  Some turn.  Some corner.

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Bank Owned Homes (REO) Set New All Time Record

Posted By on May 10, 2010

REO Homes

www.ingerletter.com

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Volcano Air Travel Disrupted Over Europe Again

Posted By on May 10, 2010

Gordon_Gekko    05/10/2010
 
 

Volcano

Satellite photo of Iceland’s Eyjafjallajökull volcano May 7th, 2010 (via NASA Earth Observatory) 

I know right now everyone is focused on the drama playing out in Europe over Greece et. al., but there is another little sideshow being produced over there by Mother Nature which has the potential to take centerestage and prove to be equally, if not more, devastating.

It is being reported that the Icelandic volcano Eyjafjallajokull is again causing flight disruptions across Europe, although not to the extent of the previous disruption in April, which was one of the largest in Europe post WWII and caused Eurocontrol, the agency in charge of European air traffic, to shutdown airports across Europe for six days. It grounded more than 100,000 flights and cost the airlines approx. $1.7 billion in lost sales. 

The Current Disruption

The bulk of the cloud measures 2100 miles long and 1400 miles wide. The main ash cloud is spread over the North Atlantic with an offshoot spreading from Portugal through Spain, southern France and northern Italy, then up to Germany, the Czech Republic and Austria. A high pressure system in the mid-Atlantic is expected to continue to drive northerly winds into Europe for the next few days thus increasing the chances of further disruption. 

Eurocontrol is reporting today that around 1500 flights were cancelled on Sunday. Flights were affected in Italy, France, Spain, Portugal, Germany, Switzerland, Ireland, Austria and Croatia. Regional airports in Spain France and Italy were closed for much of Sunday. Although no airports are closed today, about 500 fewer than normal flights are expected.

Volcano 2

This little nugget in The Times of UK:

Scientists have produced the first internal map of Eyjafjallajokull’s network of magma chambers, which extend 12 miles below the ground.
The map shows how the volcano’s tubes plunge deep down through the earth’s crust to the start of the mantle, which is made of semi-molten rock. It reveals the huge scale of the eruption and the potential for a far greater one. This is because the magma chamber of Eyjafjallajokull is dwarfed by the much larger one under Katla, a volcano 15 miles to the east. Two of Katla’s eruptions, in 1612 and 1821, are thought to have been triggered by those of its neighbour.
The workings of the volcanoes have been provisionally drawn up by Professor Erik Sturkell, a geologist at the Nordic Volcanological Centre, University of Iceland. Sturkell suggests the Eyjafjallajokull eruption has been building since 1994, when new lava began rising, forming two reservoirs three miles beneath the volcano. They now feed into a much larger magma chamber a mile under the crater.
A surge of earthquakes under Katla mean it has experienced a similar influx of lava, Sturkell said. “This suggests the volcano is close to failure [eruption].”
Of course, it doesn’t help that Iceland sits directly on top of a the Mid-Atlantic ridge – a tectonic plate boundary located along the floor of the Atlantic Ocean separating the Eurasian and North American Continental Plates and a hot spot for volcanic activity.  With around 35 volcanoes surrounding Iceland, the thing is a  powder keg at this point.

http://www.zerohedge.com/article/air-travel-disrupted-over-europe-again-major-global-disaster-making-%E2%80%93-part-i

 

 

The Iceland Met Office has said that there are no indications that the eruption is about to end.

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Is the Federal Reserve Behind The European Bailout?

Posted By on May 10, 2010

By Larry Doyle|May 10, 2010, 12:57 PM|Author’s Website  

Is the American taxpayer ultimately bailing out the European Union? Far fetched? Don’t be so sure.

While the focus of the European bailout is on the European Central Bank, the European Union, and the IMF, little attention is being given to swap lines which were reopened between the Federal Reserve and the European Central Bank.

The ECB has steadfastly fought the idea of breeching the principles which formed the European common currency, the Euro, in order to fashion a bailout for the EU. Did the ECB crater to political pressure by the EU? Or did the risks of the bailout shift from the ECB to another large central bank? Such as? The Federal Reserve!!

Adding fuel to this fire is the fact that the Fed reopened swap lines with the ECB and other central banks just yesterday. The Wall Street Journal reports, Fed’s Swap Decision Could Ratchet Up Political Pressure,

The U.S. Federal Reserve’s decision to reopen swap lines with the European Central Bank and central banks in Japan, Switzerland, England and Canada puts it in a delicate political position.

The U.S. Congress is in the midst of rewriting a financial regulatory overhaul that could rein in the Fed amid sharp criticism of its actions before and during the financial crisis. The overseas lending program it reopened Sunday in response to pleas from Europe has been among the programs lawmakers have criticized, with some suggesting it is bailing out foreign banks and other saying the Fed is too secretive about details.

Is the American taxpayer ultimately bailing out the EU? While the German populace is livid at the idea of providing bailout funds for the wastefulness and fiscal follies in other EU countries, has the wool just been pulled over the American public’s eyes?

Will the America public ever learn what is going on here?

http://wallstreetpit.com/26998-is-the-federal-reserve-behind-the-european-bailout

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Morgan Stanley’s Stephen Roach See’s Increasingly More Frequent And More Dire Crises Coming Up

Posted By on May 10, 2010

Tyler Durden    05/10/2010
 
Morgan Stanley’s Stephen Roach spoke with Bloomberg’s Tom Keene earlier, pointing out the most troubling statistic about recent market activity, which has to do with both the frequency and amplitude of catastrophes: “The crises are coming with greater frequency. Over the last 25 years we have had an average of one crisis every 3 years. The gap this time is 18 months. The scale is bigger. This is a much more serious problem in the eurozone than the Asian financial crisis.” So intercrisis half-life continues to decline as the severity jumps exponentially. In other words, in nine months we will need a combined Fed-ECB-BOE-PBoC-BOJ effort for about $10 trillion just to calm the markets. 4.5 months after that, $100 trillion more… And so forth.

 

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Oil Slickonomics Update

Posted By on May 10, 2010

May 10, 2010

In “Oil Slickonomics”, part 1, http://www.cumber.com/commentary.aspx?file=050210.asp , we set forth three scenarios for the BP disaster.  They are “bad,” “worse,” and “ugliest.”  Events are now moving from bad to worse.  
 
BP’s attempt to install a large funnel-type device is running into problems.  They have shifted the device several hundred yards away from the well as they try to deal with complex technical issues.  Meanwhile the damaged well continues to spew at least 200,000 gallons of oil a day. 
 
Within days we will have reached the second level of damages in the Gulf of Mexico.  Under our “worse” scenario the total will be in the many tens of billions before this is all over.  There are now early reports of “tar balls” washing up on beaches.  Damage is now witnessed in Alabama, Louisiana, and Mississippi.  NOAA has expanded the no-fishing zone to about “4.5 percent of Gulf of Mexico federal waters.” The original closure boundaries, which took effect Sunday, May 2, encompassed “less than three percent.”
 
Readers please note that this event is still mostly confined to United States “federal waters,” which are under NOAA jurisdiction.  International claims are a more complex financial liability for BP and its partners.
 
So far, BP has offered US-based fishermen a one-month-pay settlement package.  This is being routinely rejected, according to the professional fishermen we have been able to reach.  If this spillage continues, as we project under our second and “worse” scenario, and IF it can be limited to that scenario and doesn’t worsen to “ugliest,” the ultimate loss of income to fisherman will continue over many, many months or even years. 
 
According to NOAA, “There are 3.2 million recreational fishermen in the Gulf of Mexico region who took 24 million fishing trips in 2008. Commercial fishermen in the Gulf harvested more than 1 billion pounds of finfish and shellfish in 2008.”  BP’s offer of one month’s pay is a pittance when compared with the ultimate damages that will be suffered by the fishing industry.
 
Some readers have asked about the federal fund that is designed to pay for cleanups of oil spills.  It is funded by an eight-cent-per-barrel tax and is wholly inadequate for this type of catastrophic event.  In the wake of the BP explosion, three Senators have offered a bill to broaden the scope of the fund and raise the tax. 
 
One May 1, the New York Times reported that, “A count made by the Department of Homeland Security last August found that since 1991, there had been 51 instances in which liability exceeded caps.  In most years it was a handful; in 1999 there were 11, because of a typhoon in American Samoa that wrecked eight fishing vessels that spilled oil.  Numerically, cargo vessels and fishing vessels are the biggest culprits, but oil tankers and barges cause the most dollar damage.  The fund’s single largest expense so far came after a tanker in the Delaware River, the Athos I, spilled tens of thousands of gallons of crude oil in 2004. Money can be sought by the states for expenses like restoration of a damaged wetland or compensation for loss of use of a resource.”
 
We wondered about the details surrounding the federal fund and asked Jim Lucier of Capitol Alpha Partners for his views.  Jim is one very smart analyst, whose firm does superb research on federal political activities and Washington-based intelligence.  He is current with the BP spill issue.  Jim gave us permission to share his piece on this federal fund.  You can find “How the OPA Trust Fund Works” on our website, at http://www.cumber.com/content/Special/HowOPA050410.pdf.
 
We thank Jim for giving us permission to share it.  Please note that Jim is a member of the GIC and will be speaking on the Washington scene at our briefing in Paris on June 18. 
 
David R. Kotok, Chairman and Chief Investment Officer
 
*********
Copyright 2010, Cumberland Advisors. All rights reserved.

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Looks Like The Biggest “Save” Ever…..EU Crafts $962 Billion Show Of Force

Posted By on May 9, 2010

This is huge……..European policy makers unveiled an unprecedented loan package worth nearly $1 trillion and a program of securities purchases as they spearheaded a drive to stop a sovereign-debt crisis. 
 
Inflation dead ahead………Gold and Silver looks to be the ultimate store of wealth.  The world debt will be staggering!
 
 
 By James G. Neuger and Meera Louis
 

May 10 (Bloomberg) — European policy makers unveiled an unprecedented loan package worth nearly $1 trillion and a program of securities purchases as they spearheaded a drive to stop a sovereign-debt crisis that threatened to shatter confidence in the euro.     Jolted into action by last week’s slide in the currency to a 14-month low and soaring bond yields in Portugal and Spain, governments of the 16 euro nations agreed to make loans of as much as 750 billion euros ($962 billion) available to countries under attack from speculators.

The ECB will also embark on very significant operations,   European Union Economic and Monetary Commissioner Olli Rehn told reporters in Brussels after the 14-hour meeting. The ECB has taken a decision to intervene in the secondary markets of government securities.

Under pressure from the U.S. and Asia to stabilize markets, the European governments gambled that the show of financial force would prevent a sovereign-debt crisis and muffle speculation that the 11-year-old euro might break apart.

Europe’s failure to contain Greece’s fiscal crisis triggered a 4.1 percent drop in the euro last week, the biggest weekly decline since the aftermath of Lehman Brothers Holdings Inc.’s collapse. It prompted President Barack Obama to call German Chancellor Angela Merkel and French President Nicolas Sarkozy yesterday to urge resolute steps in Europe to prevent the crisis from cascading around the world.

Under the loan package, euro-area governments pledged to make 440 billion euros available, with 60 billion euros more from the EU’s budget and as much as 250 billion euros from the International Monetary Fund, said Spanish Economy Minister Elena Salgado.

“We are placing considerable sums in the interests of stability in Europe,  Salgado told reporters after chairing the meeting.

http://www.bloomberg.com/apps/news?pid=20601087&sid=ap50DW8IqhBo&pos=1

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The Latest Oil Slick Map

Posted By on May 8, 2010

Oil Slick Map

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Let’s Not Forget What Warren Buffett Said…..Financial Derivatives Are Weapons Of Mass Destruction! Next Up, Interest Rate Derivatives

Posted By on May 8, 2010

Over-The-Counter Derivatives

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Beware Of The Mortgage Modification Plan….Foregiven Debt Is Taxed As Income In Most Cases

Posted By on May 8, 2010

Though not every homeowner who’s underwater on a mortgage need worry, many are finding that a foreclosure or other form of housing loss can lead to a big tax obligation.

[W.FORECLOSURE]

As the U.S. economy continues struggling with the fallout of the debt-induced housing crisis, millions of homeowners like Ms. McDaniel are discovering that their decision to walk away from a mortgage could result in tax bills running into the thousands or tens of thousands of dollars.

The upshot: anyone weighing whether or not to seek a mortgage modification—or debating whether to abandon a house that is worth less than the mortgage—should consider the tax treatment carefully before making a move. The same holds for any form of consumer debt that a bank ultimately cancels, including credit-card balances or an auto lease.

Federal and state tax laws have long viewed canceled debt as income because consumers who borrow money to buy a house—or who pull money out of their house to buy cars and such—and then don’t pay it back “wind up ahead of where they were,” says an IRS spokesman.

Thus far this year, Michele Knight, a CPA with a high-end clientele in Keystone, Colo., has had five clients owe taxes tied to houses and another five tied to credit cards and auto leases. “They’re calling me in tears and saying, ‘What do you mean I owe taxes?'” she says. “I never would have expected it.”

Dianne Corsbie, a White Plains, N.Y., financial planner, says about 5% of her 200-client practice owes taxes because of a foreclosure, most tied to investment properties. In Napa, Calif., Duane Carey, owner of a Ranch Tax Service, says every fifth person he sees “comes in angry, holding one of these 1099s.”

Overall, the IRS estimates that individual taxpayers will have filed nearly 3.6 million tax returns for 2009 that include income from canceled debt. That’s down a bit from 2008, but up 17% from 2007. The numbers include taxes due on primary homes, vacation and rental property, credit cards, auto leases and other canceled debts. The IRS projects the numbers to rise in coming years.

Part of that rise will likely come as the government expands its mortgage-modification program, including a call in March by the Obama administration for banks to reduce principal as a way to help people remain in their homes. That reduction could lead to tax obligations.

At first the government’s mortgage-modification program focused on primary mortgages, which are tied to the purchase or construction of a primary residence, and which are eligible for exemption under a 2007 Congressional act aimed at helping homeowners avoid the tax implications of a foreclosure.

That act—the 2007 Mortgage Forgiveness Debt Relief Act—exempts taxpayers from as much as $2 million in forgiven debt. But the debt had to be acquired before Jan. 1, 2009—and had to have been used solely to buy, build or remodel/repair a primary residence.

The government’s new, expanded modification programs include short sales, in which a bank agrees to accept as full payment less than the value of the mortgage balance; deed-in-lieu transactions, when a homeowner gives the house to the bank instead of repaying the mortgage; and second mortgages such as home-equity lines of credit.

In many of those instances, say Treasury officials, homeowners used mortgage money to fund everything from tuition and medical bills to vacations and cars and even the down payment on a second home or investment property. That debt, however, isn’t eligible for exemption.

Sometimes the tax bills are so high that people can’t afford to pay. In such a situation, the IRS will allow taxpayers to apply for an installment-payment plan.

Some homeowners can avoid the taxes completely if they can prove insolvency, in which the total value of debt exceeds total assets. But even that could leave some owing taxes.

IRS rules stipulate that a taxpayer can escape taxes up to the extent of insolvency, meaning that if one’s liabilities are $500,000 and assets are $300,000, the $200,000 difference is the extent of the insolvency. But if the person has $250,000 in debt canceled, then $50,000 is taxable income.

http://online.wsj.com/article/SB10001424052748703686304575228783947789118.html?mod=WSJ_hps_MIDDLESecondNews

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Why The Center Cannot Hold……John Mauldin’s “Outside The Box”

Posted By on May 7, 2010

Risks associated with the fiscal deficits. And by the way, we should note that 25 of 27 European countries are running deficits in excess of 3% of GDP. Ireland has a deficit of 14.3%. Portugal is at almost 10%. Greece is almost 14%.

Here is a table from Variant Perception in London, from data from The Economist. Notice that France is over 8%. Germany is almost 6%. Wow. We’ll look at the implications of this later.

image001

The first risk…. is of course, higher interest rates brought about by what they term increased risk premia. In essence, investors want to get paid more for their increased risk. Interest on Greek debt for 5-year bonds is now 15%. There is no way for them to grow their way out of the problem if interest rates are at 15%, up almost fourfold in less than a year. Rates are rising for other European peripheral countries as well.

The second risk “… associated with high levels of public debt comes from potentially lower long-term growth. A higher level of public debt implies that a larger share of society’s resources is permanently being spent servicing the debt. This means that a government intent on maintaining a given level of public services and transfers must raise taxes as debt increases. Taxes distort resource allocation, and can lead to lower levels of growth. Given the level of taxes in some countries, one has to wonder if further increases will actually raise revenue.

“The distortionary impact of taxes is normally further compounded by the crowding-out of productive private capital. In a closed economy, a higher level of public debt will eventually absorb a larger share of national wealth, pushing up real interest rates and causing an offsetting fall in the stock of private capital.

“This not only lowers the level of output but, since new capital is invariably more productive than old capital, a reduced rate of capital accumulation can also lead to a persistent slowdown in the rate of economic growth. In an open economy, international financial markets can moderate these effects so long as investors remain confident in a country’s ability to repay. But, even when private capital is not crowded out, larger borrowing from abroad means that domestic income is reduced by interest paid to foreigners, increasing the gap between GDP and GNP.”

From….www.FrontLineThoughts.com

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The Credit Default Swaps “Roulette Wheel”…..Jim Sinclair Shares His Opinion

Posted By on May 7, 2010

The solution is the problem. “Main Street is in the hands of a Roulette Wheel.” 
 
The name of the “Roulette Wheel” is Credit Default Swaps. It does not matter what the G-7 or the G-20 does. It does not matter what the IMF, ECB and Fed under a beard do. Mrs. Merkel’s foolish political strategy fits right into the equation.
 
CDS are going to take down every major currency, making trillions for the players. It will in time turn on the USA as it is already operating against the financially weaker Illinois and New York debt.
 
The dollar, as it gains ground due to the mirror image of the euro, becomes weaker and weaker due to overvaluation with no fundamental legs. The dollar’s time will come.
 
The OTC derivative credit default swap is about to clean the clock of the world. Der Spiegel is right but the debt is there. It will not go away but only grow bigger. The situation is in the cross hairs of the richest people on the planet hell bent on getting richer. That is the message of the Dow dropping 1000 points regardless of how it happened.
 
Nothing the G-7 or G-20 does will stop the predetermined avalanche in the world of fiat currency. Armstrong is right in that when it comes time for the great coming apart it will be akin to the Big Bang.
 
You are either ready now, or there will be no chance of readiness. Right now ready means gold and gold equivalents. The last currencies to be attacked will be the Cando and the Swiss Franc.
 
It is all over. The fat lady has sung. 
 
Respectfully,
         Jim Sinclair
 

The Mother of All Bubbles

Huge National Debts Could Push Euro Zone into Bankruptcy
Greece is only the beginning. The world’s leading economies have long lived beyond their means, and the financial crisis caused government debt to swell dramatically. Now the bill is coming due, but not all countries will be able to pay it.


By SPIEGEL staff.
 
Savvas Robolis is one of Greece’s most distinguished economics professors. He advises cabinet ministers and union bosses. He is also a successful author and a frequent guest on the country’s highest-rated talk shows. But for several days now, it has been clear to Robolis, 64, the elder statesman of Greece’s left-wing academia, that he no longer has any influence.
 
His opposite number, Poul Thomsen, the Danish chief negotiator for the International Monetary Fund (IMF), is currently something of a chief debt inspector in the virtually bankrupt Mediterranean country. He recently took three-quarters of an hour to meet with Robolis and Giannis Panagopoulos, the president of the powerful trade union confederation GSEE. At 9 a.m. on Tuesday of last week, the men met behind closed doors in a conference room in the basement of the Grande Bretagne, a luxury hotel in Athens. The mood, says Robolis, was “icy.”
 
Robolis told the IMF negotiator that radical wage cuts would be toxic for Greece’s already comatose economy. He said that the Greeks, given their weak competitive position, primarily needed innovation and investment, and that a one-sided fixation on cleaning up the national budget would destroy the last vestiges of economic strength in Greece. The IMF, according to Robolis, could not make the same mistake as it did in Argentina in the early 1990s. “Don’t put Greece on ice!” the professor warned.
 
But the tall Dane was not very impressed. He has negotiated aid packages with Iceland, Ukraine and Romania in the past, and when he and his 20-member delegation landed in Athens on April 18, they had come to impose a rigorous austerity program on the Greeks, not to devise long-term growth programs.
 
Thomsen’s mandate is to save the euro zone. And any Greek resistance is futile.
 
Time to Foot the Bill
 
Robolis versus Thomsen. For the moment, this is the last skirmish between the old ideas and ideals of prosperity paid for on credit and a generous state, against the new realization that the time has come to foot the bill. The only question is: Who’s paying?
 
The euro zone is pinning its hopes on Thomsen and his team. His goal is to achieve what Europe’s politicians are not confident they can do on their own, namely to bring discipline to a country that, through manipulation and financial inefficiency, has plunged the European single currency into its worst-ever crisis.
 
If the emergency surgery isn’t successful, there will be much more at stake than the fate of the euro. Indeed, Europe could begin to erode politically as a result. The historic project of a united continent, promoted by an entire generation of politicians, could suffer irreparable damage, and European integration would suffer a serious setback — perhaps even permanently.
 
And the global financial world would be faced with a new Lehman Brothers, the American investment bank that collapsed in September 2008, taking the global economy to the brink of the abyss. It was only through massive government bailout packages that a collapse of the entire financial system was averted at the time.
 
More…

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European Debt Turmoil

Posted By on May 7, 2010

The Globe and Mail in Toronto put together a good visual (below) on how financially exposed the larger and stronger economies of Western Europe are to the region’s teetering nations. Think of all the turmoil caused by Greece – the external debt load of Spain and Ireland together is more than eight times greater.

Europe Turmoil

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Chart Of The Four Bad Bears….Updated

Posted By on May 6, 2010

Chart Of The Four Bad Bears….Updated

Four Bad Bears

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Oh Oh….Roaches In The Computer Trading Systems…..But I Think We Got’em

Posted By on May 6, 2010

Roaches On The Floor

http://www.greenfaucet.com/

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Oops…..Hit The Wrong Button At The Market Trading Desk, Run Baby Run

Posted By on May 6, 2010

Run Baby Run

http://www.greenfaucet.com/

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The ABC’s Of Trading…..B For Billion Is Different Than M For Million

Posted By on May 6, 2010

If  True………..

According to ForexLive, a big error at a major trading firm caused today’s -1,000 point market crash, before staging a huge come back.

ForexLive:

“Major US bank had an order to sell $15 mln of S&P e-mini contracts.    Accidentally sold $15 bln…”

Update:

CNBC is now reporting that a trader entered a “b” for billion instead of an “m” for million in a trade possibly involving Procter & Gamble (PG). The Dow plunged nearly 1,000 points before paring those losses.

“Sources tell CNBC the firm in question that handled the erroneous trade is Citigroup (C). The bank said it has no evidence of a bad trade but is investigating the situation.”

http://wallstreetpit.com/articles/market-latest?source=refreshed

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Arnott: Odds Of Double-Dip Recession Better Than 50%

Posted By on May 5, 2010

Research Affiliates chairman, along with BlackRock’s Dennis Stattman, paint a gloomy picture of U.S. economy; prepare clients ‘to weather the storm’.   The U.S. economy could well be headed for another downturn  and advisers should be helping clients find opportunities overseas and in alternative-asset classes, two well-known investment managers said Tuesday.  Our basic problem as a nation is that we’re essentially consuming beyond our means, Mr. Stattman said. He added that U.S. investors are living in an artificial world of zero-interest rates.  Both investment managers were stark in their criticism of the world’s largest economy. Both pointed to America’s crippling debt, its dwindling labor force, and the sizable imbalance between consumption and production.
 
 By Hilary Johnson

May 5, 2010 2:45 pm ET

The U.S. economy could well be headed for another downturn  and advisers should be helping clients find opportunities overseas and in alternative-asset classes, two well-known investment managers said Tuesday.

Speaking at the InvestmentNews Retirement Income Summit in Chicago, Robert Arnott, chairman of Research Affiliates, and Dennis Stattman, managing director and senior portfolio manager of the BlackRock Global Allocation Fund, sounded a clear warning about America’s economic prospects.

“There’s a better than 50% chance that we will see a second dip in the economy, Mr. Arnott cautioned. The market is not pricing that in.

Both investment managers were stark in their criticism of the world’s largest economy. Both pointed to America’s crippling debt, its dwindling labor force, and the sizable imbalance between consumption and production.

“Our basic problem as a nation is that we’re essentially consuming beyond our means, Mr. Stattman said. We’re not producing enough with respect to what we spend. Until we get production moving up in line with consumption, we are building a bigger and bigger problem.

He added that U.S. investors are living in an artificial world of zero-interest rates. It’s pulling down the short end and long end of the yield curve, and keeping interest rates lower than they would otherwise be. It’s probably pushing stock prices higher than they otherwise would be. This leaves markets vulnerable to a correction.

“The opportunity to buy commodities and the opportunity to buy emerging-markets stock and bonds could be a generational opportunity, he said.

Both men see an austere future for retirees, especially those who haven’t saved enough, and who limited themselves to more traditional investments.

Mr. Arnott said advisers need to convince clients to ratchet down return expectations to reasonable levels and boost savings and investments.

That way, he said, they can be prepared to weather the storm.

http://www.investmentnews.com/article/20100505/FREE/100509949/-1/INDaily01

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Greeks Protest EU Austerity Plan

Posted By on May 5, 2010

So what happens when you take away entitlements that the Greeks have had for years?……….We here in the United States should take notice, because our time is coming and it will forced upon us by those that own our debt, at the moment China sits high on that list.      
 

By Maria Petrakis and Natalie Weeks

May 5 (Bloomberg) — Greek demonstrations against government austerity measures turned deadly when three people were killed after protesters set fire to a bank in central Athens in what Prime Minister George Papandreou called a “murderous act.

“Greeks have a right to demonstrate, not a right to violence, especially violence which leads to murder, Papandreou told parliament today. He said all Greek political parties were united in opposing violence.

The violence came during a general strike called after Papandreou announced a second set of wage cuts for public workers, a freeze on pensions and a second sales-tax increase to secure a bailout from the European Union and the International Monetary Fund. The measures, which aim to tame a budget deficit of almost 14 percent of economic output, were denounced as savage by union leaders.

For the complet story:http://www.bloomberg.com/apps/news?pid=20601087&sid=avSGW7ZQxfNU&pos=8

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Freddie Mac Seeking Another $10.6 Billion

Posted By on May 5, 2010

The government owned businesses are the only ones we’ve ever heard of that will never break even or make money, but still manage to stay around, even though they have a monopoly on things.

 

By Lorraine Woellert

May 5 (Bloomberg) — Freddie Mac, the mortgage-finance company in government conservatorship, said it will need $10.6 billion more from the U.S. Treasury after posting its third- straight quarterly loss.

The first-quarter net loss narrowed to $6.7 billion from $9.9 billion a year earlier, the McLean, Virginia-based company said today in a Securities and Exchange Commission filing. Freddie Mac, which buys mortgages and guarantees home-loan securities, has tapped $50.7 billion in Treasury aid since November 2008.

Freddie Mac and larger rival Fannie Mae have been surviving on government aid since regulators seized the companies in September 2008 amid rising delinquencies and foreclosures. In December, the Treasury removed a $200 billion limit on support for each company, extending unlimited backing through 2012.

The Congressional Budget Office in January estimated that direct U.S. aid to the government-sponsored entities could total $389 billion by 2019. Washington-based Fannie Mae said in February it would seek $15.3 billion in additional aid after a 10th-straight quarterly loss, bringing its total Treasury borrowings to $76.2 billion.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aIxv5mE0Xcbo

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International Intrigue In The Gulf Of Mexico?

Posted By on May 4, 2010

Interesting musings from the Inger Letter’s Gene Inger……………this is one bizarre report regarding international intrigue and the Gulf of Mexico oil disaster.  The White House ordered a news blackout on the story!
 
There is a circulating story about what really happened in the Gulf of Mexico; which we would give no credence to at all if not for what the US Government did in the wake of the disaster, which was dispatch military SWAT teams to most outlying oil platforms. That has nothing to do with containment or resolution in the case of oil spills or leakage; and everything to do with protection of U.S. assets.
 
I do not want to however encourage acceptance of a Russian story out of the Kremlin this morning despite the specificity (including registration numbers) of a North Korean freighter claimed to have deviated from a filed ‘float plan,’ from Havana to Venezuela; in which the report ‘claims’ they launched a mini-sub about 75 miles from the platform and proceeded to ‘torpedo’ the American oil platform. What would they gain from this Administration, which already turned a blind-eye on North Korea’s flat-out sinking of a South Korean warship in international waters a couple weeks back? Hard to say of course unless they ‘want’ to provoke a new hot war with the United States. So I’d like to not believe the Russian story; but it’s out there, and for that reason we’ll share it as the reports say that ‘if so’, the White House ordered a news blackout on the story (for sure, if that did happen, something like that doesn’t get buried even by Washington).

Oil Disaster

The ‘worst case scenario’ of the uncapped BP oil ‘gusher’ (that’s why it is; flowing) is generally considered to be polluting the ‘Delta’, and damaging the Southeast’s overall economy, due to shipping transit issues. Actually the risk of the oil not being capped, but making its way into the Gulfstream, is an even worse picture for Florida, as (not at all exaggerating this) I heard last night that the State of Florida will issue new formal ‘State of Emergency’ orders later this week if the slick gets caught up by NW winds in the ‘loop current’, which could send it toward the delicate Keys and then up the East Coast of Florida, where nobody has really been considering the implication of that!

If you really want a ‘worst case’ consider ‘what if’ the Russian story isn’t a fabrication. Eventually that comes out. North Korea is an ally of Iran, whether anyone says so or not. Lots of the nuclear knowhow and even the missiles basically came from them its been reported. First a provocation of South Korea (the ship sinking) and now of the US would be not only an Act of War, but might be intended (again letting imagination run wild a bit) to destroy much of America’s ability to expand domestic oil production; so that if in a future conflict Iran were to block the Straits of Hormuz (we wouldn’t let them, presuming the Navy was successful, though they could sink one tanker there and tie it up for awhile), the Teheran fanatics might think that would leave the West in an economic quandary worse than we’ve seen, with $200 oil and another big disaster for which they’d quietly try to engineer without starting a nuclear war. In any event, its far-fetched, but again, the Administration’s initial response was a military one, not just a spill-containment effort. And Iran already made deals with Venezuela to put troops in there; just a reminder. So obviously one can see how this could escalate, and that is even if BP and other companies are successful in capping the well with a bunker sort of cement enclosure, as a temporary fix. And deep-water drillings dealt a setback no matter what it appears, which also keeps the oil price relatively high aside moves like today, that were primarily related to currency shifts.

Furthermore, you don’t have a demand-pull recovery in the world with very high oil and with austerity in Europe by the way; a little detail that few are grasping while they act as if the world is recovering with no interruptions. We think that while you can try to isolate the Goldman story or the ‘sovereign debt’ issue, or ‘terrorism’; what you really have is like a train wreck; or as that is usually described you get a combination of ingredients that contributes to the mix or even a ‘perfect storm’.

It might be timely to remind citizens once more of our soft underbelly or the reported deployment of Iranian shock-troops to Venezuela to wrack-havoc in event hostilities break out. In any event there’s obviously growing awareness (we hope) that Southern Command (now in Miami after almost being decimated by Pres. Carter after he gave-up our fine U.S. facilities in the Panama Canal zone, which China has occupied and nobody ever talks about) was correct in demanding that the Pentagon increase their resources; or do we assume that Americans are aware a new U.S. Navy Caribbean task force has been established, which is the first time such a Fleet’s been formed since WW II; at a time when Nazi submarines harassed shipping and oil facilities on the Gulf Coast. Post-yuppie pundits trying to make light of the risks are skating all on thin ice. Perhaps overreacting isn’t appropriate (and we’re not; just the facts and the realities of risk); but as Intel’s best leader titled his book: ‘only the paranoid survive’. If that applies here, we’ll say it’s combinations of ‘don’t tread on me’, and ‘be prepared’. I wonder if Washington is prepared to cope with reality; financially and geopolitically. I think they are starting to ‘get it’, but ever so slowly (unless they’re actually preparing).

(By the way; one thing that has me irritated is the perpetuating of the absurd ‘order’ of the White House to authorities -as if government has any right to do so- not to use all words that would indicate profiling; to wit: they can’t say Islamic or Moslem terrorist. If you read everything out there today, you see references to ‘extremist groups’, or for the case of WCBS in New York the term ‘radical extremist organizations’ in Pakistan or elsewhere. If this were WW II would they refer to the Nazi’s as militant huns? Or to the Japanese warriors as ‘Shinto throwbacks’? My point is underplaying is dangerous too; and gives citizens the idea we’re not in a ‘war’. Want a world war out of all of this in the future? Just keep minimizing situations by not calling our enemy who they are.)

www.ingerletter.com

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The Real Story Is Americans Have The Lowest Level Of Housing Equity In Nearly 60 Years:

Posted By on May 3, 2010

As of today, over 7 million current mortgage holders are 30+ days late or in some stage of foreclosure.  This is at peak levels.  And part of the reason why after 27 months of this recession and trillions in bailouts to Wall Street and banks, not much has changed on the housing front.  Wall Street and the banks are richer, but in terms of improving the housing market nothing has really changed.  And most middle class Americans have their net worth in housing values so is it any wonder why the middle class is questioning this recovery and more importantly, where all those trillions of dollars went?

This is why Americans have the lowest level of housing equity in nearly 60 years:

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The $3 Trillion Commercial Real Estate Problem

Posted By on May 3, 2010

Commercial real estate pushes $7.4 billion in FDIC Losses in one day – Hard to hear the CRE collapse with investment banks finally being called out in the court of public opinion. $3 trillion CRE market will keep Fridays busy for the FDIC.

 

Posted: Mon, 03 May 2010

The $3 trillion commercial real estate market is still in a state of economic turmoil.  Many people might have missed the big news on Friday given the massive spotlight on Goldman Sachs.  On Friday, the FDIC closed down 7 banks at a stunning cost of $7.4 billion to the FDIC.  As we have mentioned, the FDIC deposit insurance fund (DIF) is already depleted yet the FDIC has front-loaded premiums to make sure they have a buffer to combat the continuing bank collapses.  The Friday bank failures will cost the FDIC the most since the collapse of IndyMac almost two years ago.  IndyMac collapsed because of toxic residential loans including option ARMs.  Many of the banks collapsing now are deep in the commercial real estate game and that is the next thing to go bust.

Commercial real estate prices have fallen a stunning 42 percent from their peak only a few years ago:

Source:  MIT

Unlike residential real estate that usually has a liquid market, many commercial real estate deals take years to put together.  Many deals are developed in booming times (i.e., 2005) and only come online when things are completely bust (i.e., 2008).  Many of the regional banks were unable to compete with Wall Street and the big GSE lenders for the residential market so they decided to dive in head first into the commercial real estate game.  That proved to be an ill-timed bet.

The FDIC looks after 8,000 institutions with $13 trillion in combined assets:

Source:  FDIC

Take a look at the construction and development line but also the commercial and industrial loan line.  These are only a few places where those CRE deals show up.  Banks are taking major hits on these deals because during the boom times, many businesses were assuming razor thin margins in the best of times and expecting credit to be easily available for a long time.  Both those situations are no longer applicable today in the market.  Credit is tight for commercial loans and the economy isn’t exactly in good shape outside of Wall Street.

And with CRE defaults, we are seeing some spectacular failures.  This last week we heard that none other than the Ritz-Carlton in Tahoe has had a default notice filed against it:

“(WSJ) The developers of the Ritz-Carlton Highlands hotel at Lake Tahoe apparently have leaned a little too far over their skis. Bank of America Corp., the lead lender in the hotel’s $157 million mortgage, has filed a default notice against the property.

Developer and owner East West Partners, based in Avon, Colo.,  is “talking daily” with its lenders to resolve the situation, East West senior partner Blake Riva said. At issue: $10 million of the loan has matured without being paid, and the lenders want East West to pitch in another $8 million of capital.

Otherwise, East West and Ritz-Carlton, a unit of Marriott International Inc., say the hotel is doing well. Like many mountain-resort businesses, the Ritz is temporarily closed and slated to reopen by mid-May, after the “mud season” passes and vacationers return to the area on the California-Nevada border.”

Short of not paying a few million, all is well.  This is the kind of shell game going on in Wall Street that is allowing Bank of America to turn out billions of dollars in quarterly profits even though cash flow is drying up for many of their real estate deals.  There is an enormous problem with CRE loans coming due yet many banks like they did with residential loans, are choosing to ignore missed payments and would rather pretend all is fine.  In their current state of mind, they would rather pretend CRE values are up to $6 trillion nationwide instead of putting their value closer to what it truly is at $3 trillion.  In other words, the entire market is close to being underwater on aggregate.

The giant defaults in CRE bring on two unique problems.  For the CRE market, you have virtually no buyers (at least at current prices).  Next, you have banks that are using mark to market to keep prices elevated even though many of these current CRE note holders are unable to even keep their loans current.  So big banks on Wall Street would rather ignore the issue and keep using taxpayer money to spin out make believe profits.  Yet regional banks don’t have the political pull and access to the U.S. Treasury and Federal Reserve and are finding out that they are largely insolvent.  This is an issue of solvency, not liquidity.

Commercial real estate is also under more short-term refinancing windows (i.e., 5 or 7 years) so many loans are coming due in full.  Unlike residential real estate with longer 30 year horizons, these loans must be paid in full or refinanced every few years.  Now in more normal times, this isn’t such a problem because ideally the bank did its own due diligence before lending out billions and made sure the cash flow of the business could cover the loan.  But in the last decade, the same easy financing that occurred in residential real estate occurred with commercial properties.  So now, you have a major endgame.  These properties do not qualify for financing and borrowers are unable to pay the bill.  So the banks that can pretend continue to pretend and the other more regional banks are taken over by the FDIC.  Clearly this two-tiered system cannot continue indefinitely.

These problems are not confined only to California:

“(Washington) Among the projects on the seriously troubled list is the nearly 400,000-square-foot Metro Center III office building at University Town Center in Hyattsville, according to bond data. The building’s outstanding $20.5 million loan is 11 months delinquent and the building owners have told lenders that they can no longer pay full debt service due to expiring leases and vacancy issues. The property, which counts Kaiser Permanente as a tenant, is about 60 percent occupied.

The Hyatt Regency in Bethesda is a recent newcomer to the delinquency list at 30 days delinquent on its $140 million loan that matures in January 2012. The hotel’s debt service coverage ratio is 1.18.

“I think the area will suffer more on a property-by-property basis,” Mancuso said. “Refinancing, that is the No. 1 challenge.”

And the list goes on.  The CRE shoe has dropped but we have our hands full dealing with crooked investment banks.  When it rains it pours and we’ll have to learn to chew and walk at the same time because many issues are coming together at once after the Wall Street gambling spree.

For more, go to:http://www.mybudget360.com/

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Europe In Trouble…..The Greek Fix Contagion

Posted By on May 3, 2010

Eoro Bailout

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Hurricane Forecasters See One Of The Worst Seasons In History Looming In 2010 Atlantic Season As Meteorological Conditions Mirror 2005

Posted By on May 3, 2010

 

By Brian K. Sullivan

May 4 (Bloomberg) — The 2010 Atlantic hurricane season may rival some of the worst in history as meteorological conditions mirror 2005, the record-breaking year that spawned New Orleans- wrecking Katrina, forecasters say.

The El Nino warming in the Pacific is fading and rain is keeping dust down in Africa, cutting off two phenomena that help retard Atlantic hurricane formation.

Perhaps most significantly, sea temperatures from the Cape Verde Islands to the Caribbean, where the storms usually develop, are above normal and reaching records in some areas.

“We have only seen that in three previous seasons, 2005, 1958 and 1969, and all three of those years had five major hurricanes,” said Jeff Masters, co-founder of Weather Underground Inc. “I am definitely thinking that this is going to be a severe hurricane season.”

With less than a month to go before the official June 1 start of the season, predictions are for 14 to 18 named storms. In an average year, there are 11 named storms with winds of at least 39 mph (62 kph), six of them reaching the 74-mph threshold for hurricanes and two growing into major storms with winds of 111 mph or more, the National Hurricane Center says.

Last year’s nine named storms were the fewest since 1997. Three became hurricanes and none made landfall in the U.S. As the number of hurricanes rises, so do the chances of one striking the oil-rich Gulf of Mexico or Florida’s agricultural areas.

The Gulf is home to about 27 percent of U.S. oil and 15 percent of U.S. natural gas production, the U.S. Department of Energy says. It also has seven of the 10 busiest U.S. ports, according to the Army Corps of Engineers. Florida is the second- largest producer of oranges after Brazil.

Energy disruptions could occur if 2010 produces a repeat of 2008, when hurricanes Gustav and Ike slammed into the Gulf Coast about a week apart, said Andy Lipow, president of Lipow Oil Associates, a Houston-based consulting company.

“The good news going into hurricane season is that we have significant amounts of inventories of gasoline and distillate fuels,” he said.

In 1998, storms caused 15 million barrels of oil outages and 48 billion cubic feet of natural gas outages in the Gulf, according to AccuWeather Inc. records. In 2005, it was 110 million barrels and 683 bcf, and in 2008, 62 million barrels of oil and 408 bcf of gas were shut in.

The usual misery and destruction from a Gulf hurricane hit may be magnified if the spill of crude from a burned-out rig near Louisiana hasn’t been stopped before storms arrive with winds and waves that could push oil inland.

Joe Bastardi, chief hurricane forecaster at AccuWeather in State College, Pennsylvania, said he doesn’t think the Atlantic can produce 28 storms this year, as it did in 2005, the most active year on record.

“I have 2005 in the mix” of years to compare to 2010, Bastardi said. “But if I had to choose, I would choose 1998 over 2005.”

In 1998, 14 named storms formed, 11 of which turned into hurricanes, according to Weather Underground’s website. There were 15 hurricanes in 2005.

AccuWeather currently calls for 16 to 18 storms to form. Bastardi predicts the current El Nino will change into a La Nina, cooling the Pacific in time to influence the hurricane season, which runs through Nov. 30.

While El Nino fades, hot spots in the Atlantic set a monthly record in March, breaking a mark set in 1969, and tied the high set in June 2005, Masters said. Hurricanes draw on warm water to form and gain strength.

Colorado State University researchers William Gray and Phil Klotzbach chose 1958, 1966, 1969, 1998 and 2005 as the years that shared the most similarities with 2010.

The U.S. coast from North Carolina to Maine has a raised risk of being hit by a hurricane this year, said Todd Crawford, chief meteorologist for Andover, Massachusetts-based WSI Inc.

The Northeast usually has about a 25 percent chance of a hurricane strike, Crawford said. This year, it has a 48 percent chance, close to the 50 percent chance the Gulf of Mexico and Florida have every year, he said.

“We’re not too bullish on the Mid-Atlantic and Northeast,” said Jim Rouiller, a senior energy meteorologist at Planalytics Inc. in Berwyn, Pennsylvania. “We’re liking the track threatening Florida and the eastern Gulf, followed by the entire Gulf and the third emphasis would be on the Carolinas.”

The U.S. Climate Prediction Center will issue its forecast on May 20.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aFsWLwU9XyZY

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Commercial Paper In Free Fall

Posted By on May 2, 2010

Commercial Paper Outstanding

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