May 2010

Obama Administration flunks "the vision thing" for mass transit

Barack Obama was elected in the hope that he would bring fundamental change to our nation’s policies. The most important change we need is to shift the basic structure of our economy away from burning fossil fuels, to renewable energies. This would solve a number of problems at the same time: climate change, dependence on foreign oil, the trade and payments deficits, economic renewal, unemployment, infrastructure maintenance. Unfortunately, President Obama has decided – or been coerced – to be a “centrist,” which basically means defending the status quo. That was all too evident in this week’s conference in Boston on mass transit, "Next Stop: A Summit on the Future of Transit."

Continuing mortgage meltdown

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The tsunami of defaults and foreclosures continue to sweep across of the American real estate market. Those investors who jumped back into the market are about to get screwed.

The delinquency rate for mortgage loans on one-to-four-unit residential properties increased to a seasonally adjusted rate of 10.06 percent of all loans outstanding as of the end of the first quarter of 2010, an increase of 59 basis points from the fourth quarter of 2009, and up 94 basis points from one year ago, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey. The non-seasonally adjusted delinquency rate decreased 106 basis points from 10.44 percent in the fourth quarter of 2009 to 9.38 percent this quarter.
The percentage of loans on which foreclosure actions were started during the first quarter was 1.23 percent, up three basis points from last quarter but down 14 basis points from one year ago.

Pecunia Emptor

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By Numerian

Dig deep enough into any financial crash and you will find leverage – someone, somewhere has borrowed money to invest in the asset in speculation. In the US stock market crash of 1929, the main culprit was margin. Investors were allowed by their broker to buy shares with money borrowed from the broker, and to buy more shares with the profits on their existing shares. When prices peaked and began to fall, the brokers discovered their customers no longer had enough value in their shares to cover the loan to the broker, so they issued a “margin call”. If the customer couldn’t come up with more pure cash to restore a positive collateral value for the broker’s loan (and many couldn’t), the shares were sold and the loan repaid. As customer after customer faced margin calls, shares were pressured lower and lower, and hence the cascading price decline known as a market crash.

Bankster Conspiracy on Muni Bonds

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Just because you're paranoid doesn't mean they aren't out to get you. Bloomberg reported on a Conspiracy of Banks rigging state and municipal bonds.

Wow.

A telephone call between a financial adviser in Beverly Hills and a trader in New York was all it took to fleece taxpayers on a water-and-sewer financing deal in West Virginia. The secret conversation was part of a conspiracy stretching across the U.S. by Wall Street banks in the $2.8 trillion municipal bond market.

The call came less than two hours before bids were due for contracts to manage $90 million raised with the sale of West Virginia bonds. On one end of the line was Steven Goldberg, a trader with Financial Security Assurance Holdings Ltd. On the other was Zevi Wolmark, of advisory firm CDR Financial Products Inc. Goldberg arranged to pay a kickback to CDR to land the deal, according to government records filed in connection with a U.S. Justice Department indictment of CDR and Wolmark.

West Virginia was just one stop in a nationwide conspiracy in which financial advisers to municipalities colluded with Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co., Lehman Brothers Holdings Inc., Wachovia Corp. and 11 other banks.

PPI for April 2010

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March Producer Price Index, or PPI for April 2010 came in at -0.1%. The original press release is on the BLS website. The reason for the drop is a -0.8% drop in energy prices. Gas dropped 2.7%. Veggies dropped 10.2% after last month's blow out. This month was egged with a drop of -28.5% (fresh eggs).

 

Below is the change in Finished Goods from one year ago.

 

 

SEC will Halt Trading on some S&P Stocks which drop 10% in 5 minutes

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The SEC is supposedly trying to rein in Flash Trading with a new rule, calling it circuit breakers. Below the SEC press release:

Washington, D.C., May 18, 2010 — The Securities and Exchange Commission announced that in response to the market disruption of May 6, the national securities exchanges and the Financial Industry Regulatory Authority (FINRA) are filing proposed rules today under which they would pause trading in certain individual stocks if the price moves 10 percent or more in a five-minute period.

The SEC is seeking comment on the proposed rules.

The markets are proposing these rules in consultation with FINRA and staff of the SEC to provide for uniform market-wide standards for individual securities in the S&P 500® Index that experience a rapid price movement.

These rules reflect a consensus that was achieved among the exchanges and FINRA after SEC Chairman Mary Schapiro convened a meeting of exchange leaders and FINRA at the SEC early last week. That meeting took place within days after the market dropped significantly and after approximately 30 S&P 500 Index stocks fell at least 10 percent in a five-minute period.

Beware of the Manager's Amendment

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Beware of the Manager's amendment! Today it was announced Senators Chris Dodd and Richard Shelby are putting a manager's amendment into the Financial Reform bill currently before Congress.

Manager's amendments are notorious. They are often massive, no one gets to read them before a vote. Literally they can gut the very bill being crafted and voted on for months in a matter of seconds.

According to the Huffington Post, a number one corporate lobbyists' priority is being considered for the manager's amendment.

Senator Dodd seems lukewarm at best on the question of state authority and has refused to rule out including a version of Carper in his manager's amendment

The Carper amendment would block states from enforcing consumer protection laws.

To introduce a massive bill, under the guise of a manger's amendment, at the last minute, which no one has read, is common. When the financial reform bill was passed out of committee, Chris Dodd introduced a manger's amendment then, at the last minute.

House Financial Services Committee Chair Barney Frank did the same thing.

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