Page 3 of 3 CREDIT BUBBLE BULLETIN Washington's guilty sermonizers
Commentary and weekly watch
by Doug Noland
from the Japanese government as private investors demand up to 50% more in
interest for the company's debt. The company's financial unit may ask for 200
billion yen ($2bn) in loans, public broadcaster NHK reported…"
India Watch
March 6 - Wall Street Journal (Abhrajit Gangopadhyay): "India's deficit is
likely to be 6% of gross domestic product in the next financial year ... Junior
Finance Minister P.K. Bansal said ... 'There is a sense within the government
that a 6% fiscal deficit is
acceptable, given the current conditions,' Mr. Bansal told Dow Jones…" Asia
Reflation Watch
March 2 - Bloomberg (Seyoon Kim): "South Korea's exports fell for a fourth
month in February, the longest run of declines since 2002, on weaker demand
from the US , Japan and Europe. Overseas shipments decreased 17.1% to $25.8
billion from a year earlier…"
March 3 - Bloomberg (Kyunghee Park and Seonjin Cha): "South Korea's biggest
port is running out of room to store shipping containers ... The bigger concern
is that the boxes are almost all empty. Container trade at Busan, the world's
fifth-largest port, has fallen about 40% in recent months…"
March 3 - Wall Street Journal (Evan Ramstad): "Shinchang Electrics Co. offered
union leaders a proposal that would reduce wages at the auto-parts company by
20% in exchange for no layoffs among its 810 workers this year. Eight days
later, the union agreed. The deal is one sign of the unusual way South Korea is
grappling with the global economic crisis. Across the country, executives,
salaried employees and hourly workers at companies from banks to shipbuilders
are joining to slash wages and other costs with the goal of avoiding layoffs.
'We have to go through this together. We are colleagues and friends,' says Shim
Ho-yong, a seven-year employee who molds ignition components for Shinchang."
March 3 - Bloomberg (Shinhye Kang and Heejin Koo): "South Korea's inflation
unexpectedly accelerated in February for the first time in seven months because
of increased costs for food, furnishings and clothing. The consumer price index
rose 4.1%..."
March 2 - Bloomberg (Aloysius Unditu and Arijit Ghosh): "Indonesia's exports
fell the most in more than 22 years in January and inflation slowed the
following month, increasing scope for the central bank to reduce its benchmark
interest rate this week. Overseas shipments plunged 35.5% to $7.15 billion from
a year earlier…"
March 4 - Bloomberg (Ta Bao Long): "Vietnam's government said it will spend 300
trillion dong ($17 billion) this year to halt a slowdown in economic growth
amid the global financial crisis. The amount, almost a quarter of the Southeast
Asian nation's $71 billion economy, will be used to develop infrastructure,
spur exports, and fund other social security projects, Prime Minister Nguyen
Tan Dung said…"
Latin America Watch
March 2 - Bloomberg (Eliana Raszewski): "Argentina's financing options may dry
up next year as the global financial crisis erodes tax revenue from commodity
exports, Moody's Investors Service said. 'Argentina should have more than
enough to finance 2009 needs, but if the crisis continues to dampen revenues,
2010 will be much more challenging," Moody's analyst Gabriel Torres said…"
Central Banker Watch
March 5 - Bloomberg (Jennifer Ryan): "The Bank of England reduced the benchmark
interest rate to the lowest ever and said it would start purchasing 75 billion
pounds ($105 billion) in assets, printing money to fight the recession. The
bank's nine-member panel ... cut the rate a half point to 0.5%, the lowest
since the bank was founded in 1694 ... 'In these highly uncertain times, there
are merits to stimulating the economy through a variety of different channels,'
King wrote…"
March 6 - Bloomberg (Brian Swint and Jennifer Ryan): "Bank of England Governor
Mervyn King, criticized for his initial response to the credit crisis, is now
embarking on one of the biggest risks in British economic history. The central
bank yesterday won authority to print as much as 150 billion pounds ($212
billion) and pump it into an economy facing its worst recession since World War
II, after cutting interest rates close to zero. With markets clogged and
economic activity shriveling, King can't be sure the gamble will work."
March 2 - Bloomberg (Craig Torres and Steve Matthews): "The Federal Reserve may
need to hand over emergency credit programs to the US Treasury to keep its
focus on monetary policy and protect against political interference, Richmond
Fed Bank President Jeffrey Lacker said. An accord with the Treasury 'could
stipulate that the emergency lending is transferred to the books of the
Treasury after a brief period of time has elapsed,' Lacker said…" Fiscal Watch
March 6 - Wall Street Journal (Damian Paletta): "Senate Banking Committee
Chairman Christopher Dodd is moving to allow the Federal Deposit Insurance
Corp. to temporarily borrow as much as $500 billion from the Treasury
Department."
Unbalanced Global Economy Watch
March 6 - Bloomberg (Adam Haigh): "Profits in the U.K. will plunge more than
during the Great Depression ... Earnings will fall 60 percent from peak to
trough, London- based equity strategists Graham Secker and Charlotte Swing
wrote…"
March 4 - Bloomberg (Fergal O'Brien): "Irish jobless claims rose to a
seasonally adjusted 352,800 in February, the country's statistics office said
on its Web site today. The unemployment rate was 10.4%."
March 3 - Bloomberg (Andrew MacAskill): "Northern Rock Plc, the first U.K.
lender nationalized during the credit crunch, said new residential lending
plunged 90% last year ... The company registered a quadrupling of bad loan
impairments, which more than tripled to 894 million pounds from 239.7 million
ponds a year earlier."
March 5 - Bloomberg (Emma Ross-Thomas): "Spain's industrial production fell by
20% in January, matching a record drop the month before, after automakers cut
jobs and output in the deepening recession."
March 5 - Bloomberg (Alex Nicholson): "Russia's inflation rate rose to a
four-month high in February as the weaker ruble drove up the price of imports.
The rate jumped to 13.9%..."
March 4 - Bloomberg (Victoria Batchelor): "Australian sales of new cars and
light trucks slumped 21.9% in February from a year earlier as slowing economic
growth and faltering confidence reduced demand."
Bursting Bubble Economy Watch
March 6 - Bloomberg (Bob Willis): "The US unemployment rate jumped in February
to 8.1 percent, the highest level in more than a quarter century, a surge
likely to send more Americans into bankruptcy and force further cutbacks in
consumer spending. Employers eliminated 651,000 jobs, the third straight month
that losses surpassed 600,000 -- the first time that's happened since the data
began in 1939…"
March 5 - Bloomberg (Matt Townsend): "Interior designer J.C. Trabanco began
applying for sales jobs after his Wall Street clients stopped calling last
year. 'It's humbling,' Trabanco said ... The 50-year-old, who said he used to
earn more than $100,000 a year, only briefly considered leaving when he
realized he was among the oldest people in line for a chance at a job that may
pay as little as $9 an hour. "You can't be proud,' he said. As Macy's Inc.
eliminates 7,000 positions, Sears Holdings Corp. shuts 24 stores and furniture
merchants slash payrolls by 11%, retail jobs are disappearing at a faster rate
in this recession than in any other since the US government began keeping track
in 1939."
March 4 - Bloomberg (Bill Rochelle and Bob Willis): "Bankruptcy filings in the
US surged 37% in February from a year earlier ... Total filings for individuals
and companies rose to more than 103,000, according to ... Automated Access to
Court Electronic Records ... Commercial filings rose to 6,303, up 47% from the
same month a year earlier, the group said."
March 3 - Wall Street Journal (Alex P. Kellogg and Matthew Dolan): "US auto
sales plunged yet again in February, falling 41% to 688,000 vehicles, according
to Autodata Corp ... General Motors Corp.'s sales fell 53% from February 2008
to 126,170 ... while Ford Motor Co.'s dropped 48% to 99,050 ... Toyota Motor
Corp.'s sales slid 40% to 109,583, Honda Motor Co.'s fell 38% to 71,575 and
Nissan Motor Co.'s dropped 37% to 54,249."
March 5 - Bloomberg (Mary Jane Credeur): "United Airlines and American Airlines
led the six biggest US carriers to a combined 11% drop in passenger traffic
last month as the worsening recession spurred businesses and consumers to curb
spending."
March 3 - Bloomberg (David Evans): "Public pension funds across the US are
hiding the size of a crisis that's been looming for years. Retirement plans
play accounting games with numbers, giving the illusion that the funds are
healthy. The paper alchemy gives governors and legislators the easy choice to
contribute too little or nothing to the funds, year after year. The misleading
numbers posted by retirement fund administrators help mask this reality: Public
pensions in the US had total liabilities of $2.9 trillion as of Dec. 16,
according to the Center for Retirement Research at Boston College. Their total
assets are about 30 % less than that, at $2 trillion."
March 5 - Bloomberg (Gillian Wee): "US college and university endowments lost
an average of 24.1% in the last six months of 2008, more than in any year since
the returns have been tracked ... Endowments had their worst full year in 1974,
when they reported an average loss of 11%."
March 3 - Bloomberg (Sree Vidya Bhaktavatsalam): "The value of college-savings
plans fell 21% last year, a loss of $23.4 billion ... Assets in the savings
accounts, called 529 plans, declined to $88.5 billion from $111.9 billion at
the end of 2007…"
MBS/ABS/CDO/CP/Money Funds and Derivatives Watch
March 6 - Bloomberg (Christine Harper): "Myron Scholes, the Nobel prize-
winning economist who helped invent a model for pricing options, said
regulators need to 'blow up or burn' over-the-counter derivative trading
markets to help solve the financial crisis. The markets have stopped
functioning and are failing to provide pricing signals, Scholes, 67, said ...
The "solution is really to blow up or burn the OTC market, the CDSs and swaps
and structured products, and let us start over," he said…" GSE Watch
March 5 - Bloomberg (Dawn Kopecki): "Fannie Mae and Freddie Mac are being used
by the Obama administration to help dig the US out of an economic 'hole,' yet
that public policy role won't affect the mortgage-finance companies' future,
House Financial Services Committee Chairman Barney Frank said."
Real Estate Bust Watch
March 3 - UPI: "The percentage of US homeowners 60 days behind on their
mortgages increased 16% in the fourth quarter of 2008, TransUnion.com said ...
The loan delinquency rate jumped to a national average 4.58%, up sharply from
the third quarter's 3.96% and dramatically higher than the fourth quarter of
2007, when the delinquency rate was 2.99%." Muni Watch
March 5 - Bloomberg (William Selway): "Arizona Governor Jan Brewer is seeking
to raise taxes and slash government spending to meet a $3 billion deficit in
the coming fiscal year caused by the slumping economy. 'We cannot afford the
size of government we now have, and even a slowly recovering economy won't fix
the problem…'"
California Watch
March 6 - San Francisco Chronicle (Tom Abate): "Unemployment rates in the Bay
Area jumped into record territory in January, reaching 9.4% in the San Jose
area, 9.2% in the East Bay and 7.5% in San Francisco and its vicinity."
Speculator Watch
March 2 - Bloomberg (Helen Yuan): "The Carlyle Group may lose 500,000 yuan
($73,068) per house on the sale of 100 villas in Shanghai, China Business News
said ... Carlyle has paid $120 million, or 9.5 million yuan each, for the
villas…"
Doug Noland is a market strategist for the Prudent Bear Funds.
(Republished with permission from PrudentBear.com.
Copyright 2005-2009 David W Tice & Associates. All rights reserved.)
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