February 2009

$7.7 Billion in earmarks of House Omnibus bill

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Taxpayers for Common Sense ferreted some earmarks in a recently passed by the House Omnibus spending bill.

Examples of Earmarks in the Omnibus

$713,625 Woody Biomass at SUNY-ESF. Walsh and Schumer sponsors

$951,500 Sustainable Las Vegas. Berkeley and Reid sponsors.

$24,000 A+ for Abstinence. Specter is sponsor.

$300,000 Montana World Trade Center. Rehberg sponsor.

$950,000 Myrtle Beach International Trade and Convention Center. Graham sponsor.

$200,000 Oil Region Alliance. Peterson sponsor.

$190,000 Buffalo Bill Historical Center, Cody, WY for digitizing and editing the Cody collection. Barbara Cubin is the sponsor

$143,000 Las Vegas Natural History Museum, Las Vegas, NV, to expand natural history education programs. Sponsored by Harry Reid

The Budget of 2010

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Oh here we go. The headlines scream the biggest budget in history, it is wealth redistribution and on and on.

So, let's find out what is in the Obama administration Budget Proposal of 2010. Firstly the actual budget is on The White House website. Secondly, here is the total cost:

government outlays for this year will end up at $3.94 trillion, up 32 percent from a year ago. That would yield a record deficit of $1.75 trillion in the year ending Sept. 30, equal to about 12 percent of the nation’s gross domestic product, the highest since World War II.

Here are some hard numbers discovered so far that might be of interest:

  • E-verify legal worker: $110 million
  • TARP II: $750 billion
  • Bush Tax Cuts expire: -$318 billion

Moody's: Default rate may exceed Great Depression

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I think this article speaks for itself.

In what will be seen by many as die-cast confirmation that the world economy is plummeting towards an economic and corporate implosion of unprecedented proportions, Moody's said it anticipated a tidal wave of defaults was approaching.

It said that in the coming months more than 15pc of speculative-grade bonds and loans - all but the most highly-rated - would default on their debts.

This peak is even higher than the peak reached in 1933, when bank after bank throughout America was collapsing, taking hoards of other companies with them. Back then, the default rate peaked at 15.4pc; moreover these companies were former investment grade issuers regarded as more reliable credit prospects than their contemporary counterparts.
...

DOL Jobless claims indicate the U.S. is bleeding jobs

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The DOL has released Unemployment weekly claims.

New claims jumped to 667,000. That's just unreal and the increase from last week is 36,000

The advance number for seasonally adjusted insured unemployment during the week ending Feb. 14 was 5,112,000, an increase of 114,000 from the preceding week's revised level of 4,998,000. The 4-week moving average was 4,932,250, an increase of 89,250 from the preceding week's revised average of 4,843,000.

We're bleeding jobs!

We are not hitting the worst rates since 1982 and if anyone recalls this was the time period when interest rates were put on 20% range to stop stagflation, which of course caused an immediate deep recession in the readjustment period.

VHP group in India wants to Ban U.S. Products over H-1B guest worker Visas

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This one is just too ridiculous. Since when is the United States responsible and must provide a guaranteed employment program for the citizens of India....for guaranteed jobs in the United States?

You getting that? We cannot even get U.S. citizens preferred for jobs in their own country and check out this insanity!

VHP wants India to ban American products over H1B visa issue:

The VHP on Wednesday asked the Indian Government to ban all American products unless the Barack Obama administration amends its decision on H1B visa curbs.

He said the decision meant that lakhs of Indian students studying in various US universities would not get employment there.

''About one million Indians will be made jobless by a single decision of Obama,'' he told reporters here.

David Sirota to Get MSNBC Show

It looks like David Sirota just might be chosen to host a show at the 10 PM slot on MSNBC.

It seems very possible: Last month the New York Times ran a story about MSNBC looking for a host to fill its open 10 p.m. time-slot. The slot follows “The Rachel Maddow Show” at 9 p.m. and “Countdown With Keith Olbermann” at 8 p.m. (which is currently rebroadcast at 10).

David Sirota wants the job. Join the Facebook group “David Sirota for MSNBC!” Email letters@msnbc.com and ask the network to ask the man to join its increasingly popular prime-time roster. And don’t be shy about blogging/twittering about his prospects.....

As Sirota himself writes:

Uptick rule...obsolete?

Today I was watching Federal Reserve Chairman, Ben Bernanke testify before Congress. One of the committeemen brought up the uptick rule to him, and whether we should bring it back. He gave one of those cryptic answers where one wondered whether we should or shouldn't have it.

 

(As reported from Bloomberg, on the 25th of February, 2009.)

A primer on the uptick rule

We want the formula, we want the formula, the actual equation of CDOs

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Like the scene from the The Return of the Secaucus 7, earlier I was asking for details on the actual mathematics upon which derivatives, CDOs (Collateralized debt obligations) are based.

Wired Magazine has answered the call in the article Recipe for Disaster. This article outlines the actual mathematical formula, a Gaussian copula, upon which so many derivatives are based.

In 2000, while working at JPMorgan Chase, Li published a paper in The Journal of Fixed Income titled "On Default Correlation: A Copula Function Approach." (In statistics, a copula is used to couple the behavior of two or more variables.) Using some relatively simple math—by Wall Street standards, anyway—Li came up with an ingenious way to model default correlation without even looking at historical default data. Instead, he used market data about the prices of instruments known as credit default swaps.

You must read the entire article, yes they mention mathematics, but they are explaining it all in layman's terms.

One thing I did not know, pointed out in the article, is that there are no limits on the number of CDS (credit default swaps) that can be issued against one borrower. CDSes are literally unconstrained by are subject to mark-to-market.

How much risk is there in treasuries?

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Jesse puts this into perspective.

One of the lunch regulars, Dave the BondMan, notes for to our suprise that the Rate for a Credit Default Swap, the cost of insuring against default, on a 5 Year US Treasury Note is now a full 100 basis points.

The cost of credit default insurance is a real world, market assessment of the risk of default of the U.S. Govt, as opposed to the fantastical ratings issued by Moodys and S&P.

The Yield on a 5 Year T Bond is 1.92%.

It now costs more than one half of your return to guarantee a midrange US sovereign debt note.

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