Month: December 2008

Automaker Updates

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Well, it looks like George W. Bush is throwing a hissy fit, and dragging his feet on an auto bailout. My guess is that he wants to show that he still has relevance….Even though he doesn’t.

In any case, Toyota just signaled its displeasure with the Senate filibuster by delaying the completion and opening of a new plant in Mississippi indefinitely, which is a pretty clear indicator about how the transplant automakers feel about having their supply chain cut too.

I imagine that they are getting some frantic calls from state officials, and I imaging that potential supply chain issues if GM goes under have come up.

In the mean time, it appears that GMAC swap holders have agreed to changes that may allow it to become a bank holding company, which means that they can sign up for one of the 11 new Federal Reserve sh$#pile for cash programs its offering banks.

Yeah, Like That Whole Countrywide Thing is Working Out Sooooo Well!

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So, as a result of belt tightening operations Bank of America has laid20 senior executives, “including some longtime supporters of Chief Executive Officer Kenneth Lewis.”

To take out the tree, go after the roots first. Kenny boy, architect of the buyout of Countrywide Financial that has made BoA the target of suits by both states protecting mortgage holders and investors who hold Countrywide mortgaged backed securities, is on the way out.

Yet another “Master of the Universe” who thought that he could spin sh%$ into gold.

Not Enough Bullets: Disgraced Investment Bank CEO Edition

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In this case, former Merrill Lynch CEO Stan O’Neal, who just transferred complete ownership of his $20 million Park Avenue Co-Op to his wife, because he has been targeted in class action suits of disgruntled investors who claim that he misled them about Merrill’s exposure to toxic debt securities, and he wants to shield it from lawsuits.

If this is the case, this is a criminal conspiracy, and both he and his wife should be frog marched out of their swanky Park Avenue digs in handcuffs.

If they are getting a divorce, then there is no conspiracy, and they are just divvying up their life, and I hope he’s left with nothing but a pair of shoes.

Economics Update

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It’s Monday, so let’s start with real estate.

The first is this story on San Francisco real estate. It’s falling like a poleaxed steer, so both of the most desirable locations on both coasts are hit by the slump, which should come as no surprise.

Additionally, we have the NAHB reporting that builder confidence is staying at a record this month, which makes sense: If builders are not near suicidally depressed they are crazier than Rod Blagojevich.

Of course, it appears that Fitch ratings is actually crazier than Blago, or perhaps just dumber, because only now have they adjusted their ratings of Alt-A mortgage backed securities, which have been collapsing for at least 6 months.

In the rest of the economy, we have New York Federal Reserve’s Empire State Manufacturing Survey deteriorating significantly, which, considering the capital intensive nature of manufacturing, is probably why business bankruptcies are jumping, with 58,000 through the end of November, as compared with 43,000 for all of 2007.

Quick math says that we are looking about 61K for the year, or about a 40% increase.

Under these conditions, its inevitable that a flight to safety would drive 30-year US bonds to record low yields, below 3%.

In currencies, we have another devaluation of the ruble, and the dollar is at a 2 month low on the expectation of a Fed rate cut.

In energy, retail gasoline was down again, after yesterday’s bump that followed 86 days of decline, while oil fell about 2%, though it was above $50/bbl earlier today, and OPEC is saying that they are really serious about cutting production this time….Yeah sure.

Because Republicans Know that Counting the Votes is Communist

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So the Coleman campaign has filed suit to stop it

Republican Sen. Norm Coleman’s campaign today asked the Minnesota Supreme Court to issue an emergency order banning county election officials from opening any rejected absentee ballots. The court has scheduled a hearing on the issue for Wednesday. The Franken campaign accuses the Coleman side of trying to keep wrongly rejected ballots from being included in the recount.

As an aside here, in addition to hitting on right and wrong, the Franken campaign should be saying flat out that Coleman knows that a real count would show him losing, because it’s both the truth and good PR.

It Seems that I am Not Alone

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Remember when I wrote that the arrests of Madoff and Dryer made me feel good, because at least they were going to jail for what they did?

Well, Frank Rich, who probably isn’t following Madoff and Dryer, just espressed what are largely the same feelings

But the entertainment is escapist only up to a point. What went down in the Land of Lincoln is just the reductio ad absurdum of an American era where both entitlement and corruption have been the calling cards of power. Blagojevich’s alleged crimes pale next to the larger scandals of Washington and Wall Street. Yet those who promoted and condoned the twin national catastrophes of reckless war in Iraq and reckless gambling in our markets have largely escaped the accountability that now seems to await the Chicago punk nabbed by the United States attorney, Patrick Fitzgerald.

We all want the Wall Street bankers, and Bush and His Evil Minions™, to go to jail.

In a best case scenario, they would end up like Richard Whitney, who spend his next 33 years working with his hands as a farmer, and not Michael Milken, who came out of stir still so wealthy that his children, and probably his grandchildren will never have to work an honest day in their lives.

Wanker of the Day: The Always Reliable Shailagh Murray

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Quoth the Murray

The Republicans are responding in a totally reasonable way — they are wildly overreacting and hoping the facts catch up with their hyperbole. There isn’t a reasonable person around who thinks this scandal will taint Obama in any meaningful way, but at the very least, it reminds people of the political world from whence he came. This story could be a useful preamble to something bigger down the road. I’m not saying it will turn out that way, but you have to push. The same way the Dems are pushing on Coleman in Minnesota right now.

Except, of course, the FBI is investigating Norm Coleman, and there are suspicious transfers both of money and items to him and his wife, and nothing about Coleman makes it past page A11.

As versus a statement from the US Attorney Patrick Fitzgerald in which he categorically states that no one from the Obama campaign is involved, most likely because it was someone from the Obama campaign who dropped a dime on Governor Impossible Hair.

She was alleged to have teared up at Ted Stevens’ valedictory speech to the Senate (though the never reliable Dana Milbank now puts it off to allergies, which Murray says she never had), so she’s gone native, as have far too many of the WaPo staff.

When all is said and done, Washington, DC is a small, one industry town, and everyone goes to the same parties (except, of course for the black majority of the population), and we get crony journalism.

Because It’s all a Scam, and They are All Well Dressed Crooks

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So, the Federal Reserve has refused to release any details about the participants in its various bailout plans:

The Federal Reserve refused a request by Bloomberg News to disclose the recipients of more than $2 trillion of emergency loans from U.S. taxpayers and the assets the central bank is accepting as collateral.

Bloomberg filed suit Nov. 7 under the U.S. Freedom of Information Act requesting details about the terms of 11 Fed lending programs, most created during the deepest financial crisis since the Great Depression.

The Fed responded Dec. 8, saying it’s allowed to withhold internal memos as well as information about trade secrets and commercial information. The institution confirmed that a records search found 231 pages of documents pertaining to some of the requests.

When you look at the recent financial scandals Madoff and Dryer, one question that keeps coming up is, “How could two guys, acting largely on their own, concoct such large criminal enterprises?”

Based on the Federal Reserve’s reticence in releasing even the most basic details of their 11 sh^%pile for cash programs, I would feel compelled to state that it is a distinct possibility that such corruption is not the exception, but the rule, and that they are terrified that an independent investigation will turn over enough rocks to completely destroy Wall Street, because they will run out of gullible idiots to sell their stuff to.

In any case, the court proceedings should be interesting.

Even a Stopped Clock: Federal Reserve Edition

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It appears that the Federal Reserve is considering major changes to the regulations regarding credit cards:

The Federal Reserve on Thursday will vote on sweeping reform of the credit card industry that would ban practices such as retroactively increasing interest rates at will [the so called universal default]and charging late fees when consumers are not given a reasonable amount of time to make payments.

They are likely to kick down the road a proposal to require the banks to provide opt-out to the confiscatory fees for “overdraft protection”, as both banks and consumer advocates see the current proposal as “flawed”.

Weekend Economics Update

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Just because it’s the end of a very long streak, I have to note that retail gasoline prices rose Sunday from $1.66/gal to $1.663/gal following 86 straight days of declines.

In currency, the dollar dropped, largely on the entire auto industry bailout clusterf%$# that the Republicans made, and the Pound fell below the Euro for the first time ever.

I think that the Pound breaking 1€ is actually the most significant thing here.

While “The Street” in London is smaller than Wall Street in New York, it is a much larger portion of the UK economy, and so the damage is relatively larger.

People no longer have faith in the international institutions that are the exemplars of what is called “Anglo-Saxon Capitalism”, nor the governments that are shoveling increasingly large amounts of (soon to be debased?) currency in their direction.

Ecuador won’t pay foreign debt interest – CNN.com

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As I mentioned earlier, Ecuador has made assertions that much, if not all, of its foreign debt is illegal, claiming that the borrowing was made without proper authorizations and other irregularities.

Well, Ecuadorian President Rafael Correa is now saying that they won’t pay interest on $4 billion in foreign debt, for which they have paid $7 billion in interest since the 1980s with no appreciable paydown in the principal.

Of course, paying $7 billion in interest on $4 billion in debt sounds grim, but it’s only about 6% a year if you assume that the payments were made over 30 years.

By the same token, the infrastructure of international sovereign debt, most notably through the IMF and World Bank, is structured in such a way as to prevent any meaningful payback on those loans.

They require that the economy be restructured to allow extensive foreign ownership and the free flow of capital, and that the internal economy be placed secondary to the export economy.

This means that whenever there is a downturn, and there will always be a downturn, governments are forced to borrow to repay their loans, and the cycle continues.

GOP: ‘Action Alert – Auto Bailout’ – The News Hole – msnbc.com

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I’m shocked, shocked to find that gambling is going on here!

Well, it looks like the good folks at MSNBC’s Countdown, have come across a memo to Republican senators detailing strategies on the auto maker bailout.

We are all stunned and saddened that it seems to show that that the the use of the filibuster in the Senate was a crass political anti-union ploy.

Needless to say, I am disappointed. I could never imagine the Republicans using the Senate and the filibuster as nothing more than a vehicle* for crass political posturing:

From:
Sent: Wednesday, December 10, 2008 9:12 AM
To:
Subject: Action Alert — Auto Bailout

Today at noon, Senators Ensign, Shelby, Coburn and DeMint will hold a press conference in the Senate Radio/TV Gallery. They would appreciate our support through messaging and attending the press conference, if possible. The message they want us to deliver is:

1. This is the democrats first opportunity to payoff organized labor after the election. This is a precursor to card check and other items. Republicans should stand firm and take their first shot against organized labor, instead of taking their first blow from it.

2. This rush to judgment is the same thing that happened with the TARP. Members did not have an opportunity to read or digest the legislation and therefore could not understand the consequences of it. We should not rush to pass this because Detroit says the sky is falling.

The sooner you can have press releases and documents like this in the hands of members and the press, the better. Please contact me if you need additional information. Again, the hardest thing for the democrats to do is get 60 votes. If we can hold the Republicans, we can beat this.

(emphasis mine)

So all this Sturm and Drang is just a way to take cheap shots at labor….Hoocoodanode?

*Pun not intended

Sheila Bair Starting to Get Glowing MSM Coverage

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So, the head of the FDIC is now starting to get laudatory coverage, the link is to CNN, just a week after Timothy Geithner leaked that he wanted her gone.

Needless to say, and the article points this out, her relationship with other regulators is very much like former CFTC chairman Brooksley Born, who correctly predicted the CDS train wreck, and was run out of town on a rail by Larry Summers. (Yeah, him again)

Also, we now know why Geithner wants her out:

And Bair is a mother bear about the FDIC. That has got her into hot water with the other regulators, who are more focused on stabilizing institutions like Citigroup and AIG. They didn’t like it when she reversed her position on a Citi-Wachovia merger in late September when Wells Fargo came in with a deal that alleviated the need for government help.

When Citi required a capital infusion last month, she stood firm about limiting the FDIC’s exposure, according to a person knowledgeable with the negotiations, and attached some conditions, for example requiring Citi to modify troubled mortgages along the lines of IndyMac’s program.

Her vigilance is less about ego than it is about protecting the FDIC and all that it stands for. Created by Congress in 1933 to restore public confidence in the nation’s banking system, the agency is funded not by the government but by fees from the bank whose deposits it insures. So it’s not a bottomless pit.

So, she appears to be the only one there who does not think that big banking are in fact a bunch of Ivy League educated geniuses who not only need to be bailed out, but she also disagrees that they should get a free ride on that bailout.

She objects to policies that puts the nation’s guarantees to depositors in jeopardy, and requires that the recipients do things that might cause short term damage to the balance sheet, and to their year end bonuses, but will benefit the companies and the nation in the long term.

Heresy!

OK, We Have Entered Bizarro World

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So, Bush sneaks into Baghdad for another round of grandstanding, and he holds a press conference, and things go pear shaped:

A man identified as an Iraqi journalist threw shoes at — but missed — President Bush during a news conference Sunday evening in Baghdad, where Bush was making a farewell visit.
President Bush, left, ducks a thrown shoe as Iraqi Prime Minister Nuri al-Maliki tries to protect him Sunday.

Bush ducked, and the shoes, flung one at a time, sailed past his head during the news conference with Prime Minister Nuri al-Maliki in his palace in the heavily fortified Green Zone.

The shoe-thrower — identified as Muntadhar al-Zaidi, an Iraqi journalist with Egypt-based al-Baghdadia television network — could be heard yelling in Arabic: “This is a farewell … you dog!”

While pinned on the ground by security personnel, he screamed: “You killed the Iraqis!”

Roll tape:

Quote of the Day..

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Well, it appears that David Vitter has been doing celebratory dances about his role in killing the auto bailout, and some people beg to differ:

“I don’t know what Sen. Vitter has against GM or the United Auto Workers or the entire domestic auto industry; whatever it is, whatever he thinks we’ve done, it’s time for him to forgive us, just like Sen. Vitter has asked the citizens of Louisiana to forgive him, ” said Johnson [Morgan Johnson, president of the UAW local for GM in Shreveport], president of Local 2166. Otherwise, Johnson said of Vitter, it would appear, “He’d rather pay a prostitute than pay auto workers.”

Dassault Goes Hard Sell on Indian MMRCA Program

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One of the most hotly contested fighter procurement programs in the world right now is the Indian Medium Multi-Role Combat Aircraft (MMRCA) program, which is intended to replace India’s aging MiG-21s, and Dassault is very aggressively pursuing this.

Basically, Dassault has stated that it has gotten clearance from the French government for near total technology transfer.

Additionally unlike all of the other western competitors, its US content is near zero, and so is not subject to the US export restrictions.

To refresh your memory (more here), the competitors are competitors are the MiG-35 (a Mig-29 derivative), Gripen, Rafale, Typhoon, F-16 and F-18E, and my analysis in my earlier posts stands, I think that the Gripen, F-16, F-18E, and Eurofighter are all too tied up in US export restrictions, that the Eurofighter and Rafale are too expensive, which leaves the MiG-35.

I think that the Gripen’s low cost over its lifetime, it’s about ½ the size of most of the competitors may give it an outside chance, but my money is still on the MiG.

The Indians have been using Russian equipment for about half a century, and the low purchase price and familiarity will mean a lot here.