March 2009

Which Side Are You On?

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On August 3, 1986, Florence Reece passed away at the age of 86. She was one of the greatest poets, songwriters, and social activists to ever come out of the Kentucky hills. Her signature song was "Which Side Are You On?"

The song is probably second only to The Internationale as a favorite for striking workers everywhere. It's a simple and powerful song that is only upstaged by the story behind it, and that's the story I want to tell.

Hospitals Paying Wall Street Instead of Workers and Helping Patients

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A fairly amazing story is on Swaps Backfire on Hospitals Firing Workers to Pay Wall Street:

at least 500 nonprofits that entered into the derivatives with Wall Street in an effort to cut costs, according to Moody’s Investors Service. Instead of being able to take advantage of the lowest interest rates since Dwight D. Eisenhower was president, tax-exempt groups are getting hit with a double whammy of rising borrowing costs and demands for collateral from financing tools they didn’t understand.

I don't understand this either but it appears financial managers of non-profits bought swaps to hedge on interest rates.

From wikipedia:

What is Mark to Market and Why Should You Care?

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Relax the rules! Override the FASB! No, it's all a Ponzi scheme enabler, it's Enron Style accounting!

What are these people even talking about with mark-to-market accounting methods?

Mark to market accounting simply means assets are valued at the current market prices. Where the controversy comes into play is in those assets which are not easily assessable since there is no actual market upon which to evaluate them.

So, what happened was we had fictional financial models created to evaluate the value for some types of derivatives. This is what the Enron scandal was in part about. There was no separate established market for energy derivatives, thus Enron with their conspirators, made up some over-inflated fiction on these contracts since there was no real world check to determine their true value.

If You Could Ask AIG CEO Edward Libby a Question, What Would it Be?

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If you could ask AIG CEO Edward Libby a question, what would it be? Sound too good to be true? Think again.

Tomorrow, March 18th, 10 am, EST, the House Financial Services Subcommittee, Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises, is holding a hearing, American International Group’s Impact on the Global Economy: Before, During, and After Federal Intervention.

Congressman Paul E. Kanjorski (D-PA), Chairman of the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises, today announced that the Subcommittee will hold a hearing to fully examine the American International Group (AIG), how it got into its current situation, why it has received so much federal assistance, and how to move forward.

"A disaster waiting to happen"

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That's how Marc Faber described the market for treasuries today.
Why would he say this? To answer that you have to look at two different factors - supply and demand. For the demand side, you should look at today's Treasury International Capital (TIC) report.

Net foreign purchases of long-term securities were negative $43.0 billion.
...
Foreign holdings of Treasury bills decreased $15.4 billion.

Monthly net TIC flows were negative $148.9 billion. Of this, net foreign private flows were negative $158.1 billion, and net foreign official flows were $9.2 billion.

Remember when ...

Remember when buying Tech stocks would make you wealthy?
Then that bubble burst.
Remember when buying a house would make you wealthy?
Then that bubble burst
Remember when...

Remember when the present crisis broke in 2007, the reassurances that it would not spread beyond the confines of subprime; when it did spread, the forecasts that Wall Street banks
' losses would amount only to a total of about US$200 billion. Remember when "experts" insisted no widespread credit crunch would result. Remember when they insisted that the crisis was unlikely to spread from Wall Street to the real economy on Main Street?

More evidence the Housing market is transitioning (Updated)

Today the Census Bureau reported on Housing permits and Housing starts.

New housing starts for February came in at a seasonally adjusted 583,000, up from a revised 477,000 in January.

This ~20% increase is by far the biggest increase in any month's data since the top of the housing market at the beginning of 2006.

Permits had a similar increase.

This data is more evidence that the Housing market is transitioning from Cliff-diving to rubble-bouncing. This is good news!

Just How Intensely Do Other Countries Demand U.S. Jobs? - Mexico Does Tariffs When Denied

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When is the United States going to make it clear, once and for all, U.S. jobs and workers are not for trade?

Because Congress finally stopped Mexican trucks from entering the United States, which obviously would labor arbitrage U.S. truckers in addition to security and safety issues, Mexico is retailiating by tariffs.

Mexico slapped tariffs on 90 American agricultural and manufactured exports on Monday in retaliation for Washington's move to block Mexican trucks from using U.S. highways.

Mexican Economy Minister Gerardo Ruiz said about $2.4 billion worth of exports from 40 U.S. states would be affected and that his government would soon publish a list of them.

Ralph Gomory and the Ketchum Goals

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Ralph Gomory wants to change a fundamental problem in the United States. What is this fundamental problem? Corporate interests and the national interests are divergent. In Country and Company: Part I - Divergent Goals, Gomory calls these much needed changes the Ketchum Goals:

  1. We want companies that are productive, each contributing as much as possible to the total of goods and services produced in the United States. It is the sum of these efforts that make America a prosperous nation.
  2. We want these companies to provide productive and well-paying jobs so that the value the companies create is widely shared by Americans. It is this widely shared wealth that gives the nation and its people economic security and stability.

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