Year: 2008

Economics Update

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Oil hits another record, breaking $106/bbl, and the Dollar falls again another record against the Euro, and a 3 year low against the Yen.

As I’ve noted before, these are tied together. The expectation of a falling dollar pushes up the dollar denominated cost of oil to maintain the same global purchasing power.

Closer to home, the US lost 63,000 Jobs in February, which was an unexpected 5 year high.

Not surprisingly, this is accompanied by consumer confidence at a six year low.

Luckily for us, the Fed is riding to the rescue, and printing up more money to give to the jerks who screwed this up in the first place. The March money sales have been increased from $60 billion to $100 billion.

Carlyle Capital is being to forced to liquidate securities, one would assume well below purchase price, to meet its margin calls.

That’s what 32:1 leverage gets you.

The lenders are getting skittish, and they are starting to ask for some or all of their money back from hedge funds and other speculative entities.

And why shouldn’t they as the housing crash is chewing up their balance sheets like a great white shark.

So we have money fleeing to the safe haven of US treasuries, because they are expecting another shoe to drop, like, for example, the possibility that, Fitch Ratings might downgrade $160 billion in Alt-A mortgage backed securities, which is rumored to be imminent.

The Tanker Soap Opera, Part 1 of Way Too Many

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Well, you can check out just how aggressively the politicians from Boeing Washington and Kansas are flipping out, here, and here.

I haven’t heard such hystirical muddled thinking since I argued with someone over the lone gunman theory.

Mostly, I see this as parochial politics, though there are Democrats out there who also see it as a club to use against John McCain, who torpedoed the original, highly corrupt and expensive, deal, it what might have been the only time he’s been right in his entire career.

There is at least a small good coming from the folks running around like chickens with their heads chopped off though, it appears that the outbrief on the decision, giving a rundown of the competition, will be accelerated to provide data as soon as possible to lawmakers and the public.

Even so, I expect a challenge from Boeing that will not be resolved until 2009 at the earliest.

There are also some indications that Boeing was sloppy on its bid. It appears that they did not provide a lot of deal on some of their cost estimates, which led to some downrating.

DID also has an analysis of the 9 Key Performance Parameters (KPP) for the bid, and it’s pretty clear that EADS won or tied them all, and I would particularly note that it demolished the Boeing bid for cargo capacity, and tanking at 1000 and 2000 miles from a base, both of which are critical in the Pacific theater.

Torture Looks Set to Free Terror Suspects in Canada

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It appears that a significant amount of the evidence against two Canadians was from Abu Zubaydah, the clinically insane man tortured by the CIA.

As a result Mohammed Harkat, and Adil Charkaoui are now free on bail.

Either they never will terrorists, or they are free on bail and are terrorists.

They are so lucky that they are in the custody of Canada, a country with the rule of law and a functioning justice system.

A hundred miles further south, and they would be in Gitmo now.

That torturing mentally ill al Queida travel agent thing worked out great, didn’t it.

Florida and Michigan Update

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I think that it is clear is something will be done to reselect delegates.

The options are a primary and a caucus, and neither the states or the DNC are willing to front for a primary, which would cost about $25 million, $10m for Michigan and $15m for Florida.

My guess is that its probably going to be a caucus, but you could fund the primaries with soft money, so theoretically 1 person could cut two checks to make it happen.

This is Funny, in a Very Sad Way

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It appears that musicians are disappointed that they haven’t seen any money as a result of the royalty deals that Youtube cut with the RIAA.

They are expecting to get some money out of their record distributors?

What are they smoking????

Oh…Yeah…They are rock and rollers….That’s what they are smoking.

Seriously though, the RIAA does not, and has no interest in, raising money for the artists. They represent the record distributors, who make money by shafting the artists.

They Sold Me To Buy Dunkin Donuts, and They Have Defaulted

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Not joking. I used to work at United Defense, and the Carlyle Group sold us BAE to buy Dunkin Donuts, at DFA meetings, I’d introduce myself, and say, “I work for the Carlyle Group”, just to see the double takes.

It now appears that the
Carlyle Capital Corp. division has defaulted on about $21 billion in loans.

They invested in “high quality” mortgage backed securities from the GSEs (Fannie and Freddie), but they have not been able to sell them in order to pay some notes coming due.

Not surprising. $21.7 billion backed by $670 million in equity is a 32.3:1 leverage, which means that if things tend down about 3%, you are broke.

Our Bogus Unemployment Statistics

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David Leonhardt at the times has a very good article on unemployment statistics, and it explains how it has become less accurate over time.

Consider this: the average unemployment rate in this decade, just above 5 percent, has been lower than in any decade since the 1960s. Yet the percentage of prime-age men (those 25 to 54 years old) who are not working has been higher than in any decade since World War II. In January, almost 13 percent of prime-age men did not hold a job, up from 11 percent in 1998, 11 percent in 1988, 9 percent in 1978 and just 6 percent in 1968.

It’s a good read, and better written than I can do.

Another Gloom and Doom Article About an Aerospace Brain Drain

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They are wringing their hands because all these people will be retiring over the next few years, and there is no one in the wings to replace them.

It’s because the course of study is hard, the pay is not great, particularly once one gets past the 5 or 10 year mark, and at the slightest whiff of a downturn, you get laid off.

It doesn’t help that what once took 6 months (the P-80 shooting star), now takes 18 years or so (F-22), either.

These folks can do numbers, they know that they will be poorly paid, won’t have a secretary, and half-way through their careers, they may be asking, “Would you like fries with that”.

People don’t go into the field because it is an underpaid unattractive field.

Economics Update

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Well, we don’t need to feel so alone any more, U.K. house prices Fell 0.3% in February. What the French call “Anglo-Saxon” capitalism seems to be working wonderfully.

Back in the US, the housing market is not looking up, with Foreclosures hitting an all time high:

Over 900,000 households are in the foreclosure process, up 71% from a year ago, according to a survey by the Mortgage Bankers Association. That figure represents 2.04% of all mortgages, the highest rate in the report’s quarterly, 36-year history.

Even if you are paying your mortgage, you are probably still losing home equity. Total home equity is below 50% for the first time ever. It was 49.7% in Q2 2007, and 47.9% in Q3 2007, and the total equity dropped from $9.65 trillion from $9.93 trillion, or about $1000 for every man woman and child in the united states.

There is not a whole bunch of confidence in real estate now, so the spread on mortgage backed bonds is at its highest level in 22 years, and S&P has downgraded WaMu to BBB from BBB+.

We don’t have a stampede out of mortgages and real estate yet, but there are now rumors that UBS dumped $24 billion in Alt-A residential mortgage backed securities (RMBS). If this is reality, we could very see a stampede for the door, and Alt-A, which is for people with credit ratings above 700, will go the way of subprime.

So it’s no wonder that Fannie has dropped to a 12 year low.

It looks like the world is noticing this because the Dollar hit another record low, and oil hit another high.

This may have been driven by the European Central Bank and Bank of England not lowering rates, when it is expected that the Fed will.

We do have some mildly positive news retail sales were good in February, and new unemployment claims have fallen, though continuing claims are still going up.

It seems that Ambac is going to be a laugh a minute, see here, here,
and here. Basically, they have a plan to raise much needed capital, but no one thinks that it will work, and the markets halted trading at one point due to volatility over rumors.

Finally, in a case of the weak helping the even weaker, GM will provide $3 billion in loans to Delphi in an attempt to help them emerge from bankruptcy.

If that ain’t good money after bad, I don’t know what is.