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EJ
02-19-10, 08:07 PM
http://www.itulip.com/images2/atomiccloud300.jpgGreat Recession Fallout- Part I: Economic Mutations

After the crisis, life goes on... sort of

March 2010 marks two years since the market for securitized mortgage debt went critical and sent a cloud of radioactive economic fallout rolling over the land. The explosion blasted through a eggshell thin regulatory containment vessel that self-interested optimists assured us was sufficient to keep any possible, albeit unlikely, financial crisis fallout away from polluting the so-called real economy. Instead, the fiery gas of credit crisis rolled over the economy like a firestorm.

Damage report: Ten million unemployed, $11 trillion loss in household net worth, $8 trillion in real estate losses, three million home foreclosures, auto industry in a deep depression, and dozens of states, cities and towns on the brink of bankruptcy.

Emergency response: Reclassification of dozens of credit card companies and investment banks as commercial banks so they can receive more than $13 trillion in emergency federal loans, near zero Fed Funds rate, a tripling of budget deficit from a projected four percent of GDP to 13% as tax receipts collapsed and government outlays are expanded to stimulate the economy, and an explosion in government debt as trillion in new government borrowing.

Albert Einstein was once asked how many years the world might need to recover from a nuclear war. He replied, with characteristic dry humor, that the recovery rate will depend on how many lawyers survived. In our case economic recovery from the economic crisis depends on how many leaders remain under the influence of the finance, insurance, and real estate industries after the 2010 mid-term elections, to direct our public and semi-public institutions to benefit the interests of this minority over the interest of their constituency. These are the men and women who collectively and systemically created the conditions for crisis over the decades preceding the event, who are now making every effort to rebuild the firetrap, at the expense of the nation’s solvency under the banner of fiscal stimulus.

Fiscal stimulus, otherwise known as deficit spending, is a gamble that spending tomorrow’s tax revenue today during a downturn will help the economy in the long run. When private sector demand from businesses and household falters government demand can take up the slack. Once the economy gets going again, government outlays can be reduced as tax revenues rise with economic growth, and the debt taken on during the period of stimulus spending can be repaid. The trouble with the theory is that recession fighting fiscal stimulus always collides with election cycles. To increase government spending is to increase one's chances of getting elected. To cut government spending is to guarantee an election loss. This is why no administration since Eisenhower has cut the budget deficit through reductions in outlays or higher taxes during economic expansions. The Clinton administration nurtured a budget surplus with capital gains tax receipts from Greenspan's asset bubble.

In 2006, before the crisis, by way of alerting our readers to ignore the warnings of those who falsely predicted a deflationary crash, we depicted money flows in a healthy economy as follows.

http://www.itulip.com/images/moneyflowsHealthy.gif





In our credit-based money system, money is borrowed into existence, whether by the public or private sector. Our forecast was for a radical rise in government spending and credit to compensate for future declines in private sector borrowing when the crash came. We expected the Fed to take the bad debts off the balance sheets of the banks, the discount window to be thrown wide open to provide hundreds of billions in cheap, short-term loans to banks to keep them afloat, a near zero Fed Funds rate to try to stimulate private spending, and trillions in government stimulus programs, such as on infrastructure projects, to “create jobs” to compensate for losses in the private sector labor market.

And so it was. We got TARP, ZIRP, the nationalization of Fannie Mae and Freddie Mac, and the $862 billion American Recovery and Reinvestment Act. As expected, with private credit markets still wobbly, money flows in the U.S. economy depend on government, and at very low interest rates. We parked our money in gold and Treasury bonds to ride out the inevitable, at least to our way of seeing things.

http://www.itulip.com/images/moneyflowsCreditBust.gif





The policy question today, now that the acute phase of the financial crisis is over yet the fallout of structural high unemployment, crushed asset prices, and high energy prices linger, how to wean the economy off government spending and credit? This means gradually offloading the bad debts back onto the banks, raising interest rates, and reducing government spending.

None of this will happen this year, and very likely not until after mid-term elections. Increases in taxes to help cover the deficit is more likely than a reduction in outlays, with the usual result, an even more sluggish recovery than we are seeing already. Long-term, we expect to see a VAT tax in the U.S. Before we get to that, here’s is what’s behind yesterday’s surprise discount rate hike. No, it does not signal the beginning or rate hikes overall.

Fed to banks: “Step away from the window”

Yesterday the Fed raised the Primary Credit Rate by ¼ percent, from 0.5% to 0.75%. The Primary Credit Rate is the interest rate that the Fed charges banks that use primary credit facility to borrow from the Fed’s emergency lending “discount window” for emergency usually overnight loans.

http://www.itulip.com/images2/FedFundsvsDiscountRate2003-2010.gif





As you can see, one night leads to another. Many large banks borrowed over and over again, day after day starting at the end of 2007. As of the end of January 2010 banks borrowed a total of $150 billion in primary credit from the discount window on an “emergency” basis.

http://www.itulip.com/images2/BORROW2007-2010.gif





Emergency discount window borrowing is down from $700 billion at the peak of the crisis in November 2008, but $150 billion in a month is still an extraordinarily high level of “emergency” borrowing by historical measures. Discount window borrowing at the peak of the S&L crisis in the late 1980s, for example, barely shows up as a blip on the graph going back to 1919.

http://www.itulip.com/images2/BORROW1919-2010.gif





In the announcement of the hike in the Primary Credit Rate the Fed made it clear that the move in rates does not signal a tightening of credit. In fact, the opposite. The Fed is trying to expand credit not tighten it.

The theory behind the Fed’s decision to raise the cost of bank borrowing from the discount window is to motivate banks to borrow from the private credit markets instead of from the Fed, expanding private credit. A look at the liabilities side of the household balance sheet shows why.

http://www.itulip.com/images2/householdcredit1954-2010.gif


Households continue to reduce debt levels. Debt liabilities of households are the assets of banks. As household debt levels fall, so do bank assets. Unfortunately for the banks, high unemployment and a the crash in both the residential real estate market and commercial real estate, that we forecast at the peak in June 2008, means that loans keep going bad as asset prices fall. This shows up as the ratio of bank assets to ALLL, the allowance for loan and lease losses that is adequate for a bank to absorb estimated credit losses associated with the loan and lease portfolio as filed with the SEC. For the very largest banks, with assets over $10 billion, the ratio of assets to ALLL collapsed from over 90% before the crisis to 10% today.


http://www.itulip.com/images2/AssetsvsALLL1986-2010.gif





Banks are in no condition to weather a credit tightening cycle. When the Fed says it has no plans to raise the Fed Funds rate for the foreseeable future, they’re not kidding. The Fed hopes that yesterday’s rate hike was stimulative.

http://www.itulip.com/images2/bankcredit1973-2010.gif





In Part II we look into our Economic Markers of housing, autos, unemployment, and inflation so that we can keep our bearings during the so-called recovery. Given those readings, and the debt data above, anyone who reads yesterday’s hike in the Primary Credit Rate as an indication of future Fed tightening is in for a nasty surprise.

Today, by sheer coincidence, the BLS announced a lower than expected CPI, signaling that the Fed will keep its promise to support the Treasury Department’s unstated weak dollar policy and continued commodity price inflation from high energy import prices.

After an initial knee-jerk reaction to the primary credit market rate hike news that sent stock futures down and the dollar up last night in Asian and European markets, market participants quickly came to their senses and deduced the Fed’s intentions. Gold market participants were not fooled even briefly. The gold price went up 1% on the news. With oil at $78, if anything we may have to abandon our hope of buying oil at $60, a price considered an indicator of an oil “bubble” as recently as 2006.

The Fed’s dilemma

Returning to our model of money and credit flows that allowed is to accurately forecast the absence of a deflation spiral following the private credit market crisis, the Fed wants to reduce the portion of credit and money flows that currently depend on government borrowing. By increasing the credit flows that originate from the private credit markets, the Fed hopes to see more money borrowed into existence by households and businesses, and by the banks themselves, to return the economy to normal. But with the securitization machine down for the count, and the prices of assets to back paper low and falling, how can this be made to happen? How can the Fed get the private credit markets operating as before, to lift debt levels seen back to debt boom times when securitization and asset-backed debt underpinned the lending boom?

The short answer is that they cannot, and no graph more clearly depicts the problem than the level of asset-backed commercial paper outstanding. It has declined from $1.2 billion to $400 billion since late 2007.

http://www.itulip.com/images2/asset-backedcommpaper2001-2010.gif





At some point over the next couple of years, and no later than 2013 after the U.S. presidential elections, the long-term need for so-called short-term “emergency” lending, of which the discount window is but a small part, will sink in. Around the same time, the “temporary” expedient of fiscal stimulus will begin to look permanent. As we have warned readers for years, this will spell rising inflation and taxes in the best case, with a potential for a major debt and currency crisis if the process does not go according to plan.

Studying such calamities as the 1906 San Francisco fire, one cannot but be impressed by how quickly the survivors were able to rebuild within five to ten years. Decades after the disasters, not a trace remains.

http://www.itulip.com/images2/sfquakebeforeafter600.jpg



View up Market Street from 4th Street in 1903 before the earthquake, in 1906 after, and today.





If the damage to our economy had resulted from an earthquake or other physically devastating catastrophe rather than a financial and credit crisis the process of rebuilding would be straight forward, provided that the money, will, and institutions needed to rebuild survived and were well managed.

But we are faced with the opposite challenge. The physical world—the buildings and houses, industries, and some of the jobs—left over from the debt boom remain. These ever so slowly devolve as the debt left over from the boom, combined with the government policies intended to counter the short-term effects of private market debt deflation, such as the weak dollar, together act like radioactivity, slowly and invisibly changing the economy, and not for the better.

http://www.itulip.com/images2/pamphletcantseeit.jpg


From a pamphlet created by the U.S. government in the 1940s to educate
the American public about the dangers of nuclear fallout





The process--commodity price inflation combined with asset price deflation--is so devilishly gradual that we tend to adjust to it over time, and only by reviewing landmarks can we keep track of what is happening to us and our world as influenced by economic change.

http://www.itulip.com/images2/housingbeforeafter300.jpgGreat Recession Fallout - Part II: Cars and Houses (http://www.itulip.com/forums/showthread.php?p=149735#post149735) ($ubscription) (http://www.itulip.com/forums/showthread.php?p=149735#post149735)

Remember when
Stagflation arrives
Purchasing power lost
Don’t be surprised by a VAT

One seemingly ancient yet only two year old fact about The Great Recession is that it started with a collapse of the housing bubble in mid 2006, as we noted at the time. It engenders a simple axiom: if no housing starts, then no housing recovery, and no economic recovery.

For a simple measure of growing consumer demand, of the strength of the recovery, nothing beats automobile sales. Are we selling more cars?

Then there's the unemployment data. They tell us how employers are feeling about the recovery.

Finally, we have data on commodity price inflation and personal income that tells us how well or badly the government’s cure for the debt deflation disease is working to create new ailments all its own. Here we go. more... ($ubscription) (http://www.itulip.com/forums/showthread.php?p=149735#post149735)

(Photo credits: Photograph [Operation Cue]: A few minutes after detonation (http://www.archives.gov/education/lessons/fallout-docs/images/atomic-cloud.gif) the atomic blast in Operation Cue looked like this, May 5, 1955. ARC Identifier: 541787 (http://arcweb.archives.gov/arc/action/ExternalIdSearch?id=541787), Photograph [Operation Cue]: Two-story wood frame house at 5,500 feet (http://www.archives.gov/education/lessons/fallout-docs/images/house-before.gif) (from blast site), May 5, 1955. ARC Identifier: 541785 (http://arcweb.archives.gov/arc/action/ExternalIdSearch?id=541785). Photograph [Operation Cue] - Two-story wood frame house at 5,500 feet after the blast, May 5, 1955 (http://www.archives.gov/education/lessons/fallout-docs/images/house-after.gif). ARC Identifier: 541788 (http://arcweb.archives.gov/arc/action/ExternalIdSearch?id=541788))

iTulip Select (http://www.itulip.com/forums/showthread.php?t=1032): The Investment Thesis for the Next Cycle™
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cjppjc
02-19-10, 11:15 PM
The process--commodity price inflation combined with asset price deflation--is so devilishly gradual that we tend to adjust to it over time, and only by reviewing landmarks can we keep track of what is happening to us and our world as influenced by economic change.



Nice piece. Don't you just want to say Biflation?:D It will make you feel better.

FRED
02-19-10, 11:18 PM
The process--commodity price inflation combined with asset price deflation--is so devilishly gradual that we tend to adjust to it over time, and only by reviewing landmarks can we keep track of what is happening to us and our world as influenced by economic change.



Nice piece. Don't you just want to say Biflation?:D It will make you feel better.

We would except that we forecast this outcome several years ago, and rejected the term "biflation" at the time because it doesn't accurately describe the underlying process.

Chief Tomahawk
02-20-10, 02:01 AM
"If the damage to our economy had resulted from an earthquake or other physically devastating catastrophe rather than a financial and credit crisis the process of rebuilding would be straight forward, provided that the money, will, and institutions needed to rebuild survived and were well managed."

We're 8+ years into the "9/11" rebuild effort, and coming up on 5 years post Katrina. Management is NOT one of this generation's strong suits.:mad: If it had been, self-regulation;) on behalf of the fiscal crisis participants:mad: would've prevented the clusterf*ck we're engaged in now.:mad::mad::mad:!

I wonder how those buried in Arlington National Cemetery would feel about the stewardship/management they fought to defend and protect???

LargoWinch
02-20-10, 08:26 AM
We're 8+ years into the "9/11" rebuild effort, and coming up on 5 years post Katrina. Management is NOT one of this generation's strong suits.:mad: If it had been, self-regulation;) on behalf of the fiscal crisis participants:mad: would've prevented the clusterf*ck we're engaged in now.:mad::mad::mad:!



I think what Chief Tomahawk is trying to say is: "Thanks for the truth, it hurts. Nice article". ;)

jk
02-20-10, 09:29 AM
re: commodity prices - how much is speculation driving prices?

i think that the price of oil is being supported in part by people and institutions using it as a store of value. this use will support the process of inflating oil's price over the long term. another contributor, of course, is inelasticity of supply [peak cheap oil] and the relentless, albeit uneven, growth of new sources of demand in the developing world. but at least some price support comes from speculators who are likely to sell if/when the next downwave of economic activity occurs.

any thoughts on the relative contributions of these phenomena? this gets to the question of whether there will be an opportunity to buy oil at $60

GRG55
02-20-10, 11:10 AM
re: commodity prices - how much is speculation driving prices?

i think that the price of oil is being supported in part by people and institutions using it as a store of value. this use will support the process of inflating oil's price over the long term. another contributor, of course, is inelasticity of supply [peak cheap oil] and the relentless, albeit uneven, growth of new sources of demand in the developing world. but at least some price support comes from speculators who are likely to sell if/when the next downwave of economic activity occurs.

any thoughts on the relative contributions of these phenomena? this gets to the question of whether there will be an opportunity to buy oil at $60

Well, if history is any guide, oil will probably head down to $60 right about the time "everyone" is convinced that won't [can't?] happen...:)

I remain quite certain that this global economy cannot tolerate $80 oil, and that only the distortion of massive monetary and fiscal reflation efforts keeps it from adjusting - your store of value argument. Yes, US Dollar purchasing power has declined this decade, but so has the absolute purchasing power of every other major currency in the world...everyone is seeing higher oil prices, not just US Dollar economies.

It's very difficult in the current environment to get a good bead on the supply and demand dynamic.

I'm just back from another trip to the Arab Gulf countries [GCC]. The bank centred financial crisis that swept most of the rest of the world in the winter of 2008/09 has finally arrived in the GCC.

Six months ago many there were still talking confidently about the global financial crisis largely bypassing the GCC, and most pointed to the rapid rebound in oil prices last year to support that view.

To some degree the rebound in oil prices probably did contribute to the delayed onset of the banking stress. 2009 revenues from oil and oil products surpassed government budget estimates that were set in the spring of 2009, and the major oil exporters Kuwait, Saudi Arabia and Abu Dhabi went back into surplus before the end of the year. Ongoing high levels of government spending in economies already dominated by the government was a stabilizing factor...

...Until the widening cracks in the one area of these economies with large scale private participation...the property sector...were finally exposed with the blow up in Dubai. The pent up correction is now contracting the regional economy faster than the stimulus from $80 oil and budget driven government spending increases.

The Islamic banking system, which was a huge enabler and participant in the GCC region real estate insanity, is now under enormous stress and there is fear within the governments that a default by any one of the Islamic banks will completely wreck this embryonic banking sector in which they have lavished much support and reputation. This is the reason that the first Abu Dhabi bailout was primarily to make good on and pay out the Nakeel sukuk [Islamic bond].

The Algosaibi/Saad Group debt defaults shocked Saudi and the region. The surplus governments are now hunkering down and keeping their powder dry as they now realize that they will need to intervene and likely fund more bailouts.

Unfortunately, these surplus governments are also the regions major oil exporters. My take is that as they build cash reserves, spending on hydrocarbon development is already being curtailed [they will never admit that, of course] compared to the high levels of the past few years, and future supply increments are likely to be below previous forecasts.

So the game of supply destruction and demand destruction continues, and how this will play out in the short to medium term is anybody's guess. I expect volatility as fears of one and then the other alternate depending, in part, on the news flow of the moment...but timing the shifts in sentiment in the markets will be a real challenge.

photoncounter
02-20-10, 11:10 AM
Correction -- Just above asset-backed commercial paper outstanding graph, $1.2 billion should be $1.2 trillion.


The short answer is that they cannot, and no graph more clearly depicts the problem than the level of asset-backed commercial paper outstanding. It has declined from $1.2 billion to $400 billion since late 2007.

If I understand correctly, the article suggests continuation of dollar decline --
does that mean we see no correction in stock market either ?

necron99
02-20-10, 01:26 PM
I had to chip in to say that EJ's prose in the first paragraph, comparing the financial crisis to a nuclear bomb, is fantastic. Hugo Award, JD Salinger great American novel, type of prose. Huge smile. :D:D:D I haven't even read the rest of the piece yet.

I just wish EJ was writing fiction instead of describing reality...

LargoWinch
02-20-10, 05:45 PM
I had to chip in to say that EJ's prose in the first paragraph, comparing the financial crisis to a nuclear bomb, is fantastic. Hugo Award, JD Salinger great American novel, type of prose. Huge smile. :D:D:D I haven't even read the rest of the piece yet.

I just wish EJ was writing fiction instead of describing reality...

Well, I believe that EJ is about to finish writting about a boat the shape of country; so there you have it necron99. ;)


http://ecx.images-amazon.com/images/I/51%2BOvAfD9rL._SL500_AA240_.jpg

magicvent
02-20-10, 09:54 PM
EJ --

Seeking clarification of what you are saying to avoid investing errors: Are you recommending the purchase of oil now?
Also, does your taget for the DOW at the end of 2010 remain the same (around 7500)?

Sharky
02-20-10, 11:16 PM
@GRG -- thanks for the great post.

From what I've heard from friends and contacts in the area, things in Dubai are a long way from reaching an equilibrium point; still lots of defaults to come; assets aren't yet being recognized at their true value on corporate or bank balance sheets, lots of resistance to paying back Western lenders and investors, etc, etc.

Does that correspond with what you've heard? Do you think it's widely recognized / accepted in the area yet?

Chris Coles
02-21-10, 04:06 AM
Like others, I am commenting here before reading part 2 but my own take on the situation begs the question: If the FED is now asking the private sector to borrow money from the banks to finesse the debt from public to private hands, has anyone given a detailed thought to another aspect of the debate, where does the capital, (not borrowing), to rebuild the private economy come from - if all the assets are used to prop up the banking balance sheets?

phirang
02-21-10, 07:37 AM
Good article, EJ!

I liked it a lot.

I also appreciate your analysis of the discount hike: force credit expansion in the US. Like the Fed forced inflation in 2009 (they did, to your credit), can they force net credit expansion? What does that imply for asset prices and economic activity?

What the Fed needs to do, also, is get banks back into the mtg game and "take" their losses.... of course, when the panic from that ensues, buying XLF will be a very smart trade: we all know the banks WON'T eat the losses!!! An easy 20% upside when the "panic" hits then, too.

I think what I've learned from the Greece debacle is the following: EFFECTIVE austerity measures are intellectually appealing but totally impractical. Even if imposed, people work around them and the economy contracts, forcing currency devaluation or grinding deflation (impossible in our era of hyperleverage). For example, if subsidies for old people are retrenched, then old people spend less money - done. Net-net, you've reduced transfer payments and improved the deficit at t=0, but you've shrunk GDP at t = 1, and so how does that affect the revenue side of the gov's I/S?

THERE is another way out - a sneaky, cruel, and wealth-destroying way out: graduated deleveraging. This is, in fact, what I think the Fed is up to, but I'm not sure in practice it's going to work.

btw: would a VAT make Carmax an even better investment idea? :D

dummass
02-21-10, 03:33 PM
[QUOTE=EJ;149736]
Today, by sheer coincidence, the BLS announced a lower than expected CPI, signaling that the Fed will keep its promise to support the Treasury Department’s unstated weak dollar policy and continued commodity price inflation from high energy import prices. [QUOTE]

THE NUMBER WAS FAKED (The Fed has reached a new low):

http://seekingalpha.com/article/189721-cpi-number-reported-intentionally-incorrect?source=email

GRG55
02-21-10, 11:04 PM
@GRG -- thanks for the great post.

From what I've heard from friends and contacts in the area, things in Dubai are a long way from reaching an equilibrium point; still lots of defaults to come; assets aren't yet being recognized at their true value on corporate or bank balance sheets, lots of resistance to paying back Western lenders and investors, etc, etc.

Does that correspond with what you've heard? Do you think it's widely recognized / accepted in the area yet?

Your description fits with what I saw and heard. They are about the point where the USA, UK and much of Europe was one year ago...so lots more to come as you point out.

Apparently the Abu Dhabi government has put the clamps on any new investments by its sovereign wealth funds, anticipating it may need cash reserves of as much as US $100 Billion for upcoming bailouts, mostly related to Dubai - I have no verification but this was repeated to me by several sources that would be knowledgable. They did close a deal to buy a stake in London's Gatwick airport while I was there, but that deal was probably in the works for some time, so it will be interesting to see how much activity there is from Abu Dhabi, if any, in the coming weeks.



Abu Dhabi wealth fund buys into Gatwick Airport (http://www.reuters.com/article/idUSTRE61403S20100205)

LONDON/AMSTERDAM (Reuters) - Abu Dhabi Investment Authority (Adia), the world's largest sovereign wealth fund, said on Friday it had bought a stake in Britain's Gatwick Airport as it increased its exposure to infrastructure assets...

GRG55
02-22-10, 09:05 AM
Well, if history is any guide, oil will probably head down to $60 right about the time "everyone" is convinced that won't [can't?] happen...:)

I remain quite certain that this global economy cannot tolerate $80 oil, and that only the distortion of massive monetary and fiscal reflation efforts keeps it from adjusting - your store of value argument. Yes, US Dollar purchasing power has declined this decade, but so has the absolute purchasing power of every other major currency in the world...everyone is seeing higher oil prices, not just US Dollar economies.

It's very difficult in the current environment to get a good bead on the supply and demand dynamic.

I'm just back from another trip to the Arab Gulf countries [GCC]. The bank centred financial crisis that swept most of the rest of the world in the winter of 2008/09 has finally arrived in the GCC.

Six months ago many there were still talking confidently about the global financial crisis largely bypassing the GCC, and most pointed to the rapid rebound in oil prices last year to support that view.

To some degree the rebound in oil prices probably did contribute to the delayed onset of the banking stress. 2009 revenues from oil and oil products surpassed government budget estimates that were set in the spring of 2009, and the major oil exporters Kuwait, Saudi Arabia and Abu Dhabi went back into surplus before the end of the year. Ongoing high levels of government spending in economies already dominated by the government was a stabilizing factor...

...Until the widening cracks in the one area of these economies with large scale private participation...the property sector...were finally exposed with the blow up in Dubai. The pent up correction is now contracting the regional economy faster than the stimulus from $80 oil and budget driven government spending increases.

The Islamic banking system, which was a huge enabler and participant in the GCC region real estate insanity, is now under enormous stress and there is fear within the governments that a default by any one of the Islamic banks will completely wreck this embryonic banking sector in which they have lavished much support and reputation. This is the reason that the first Abu Dhabi bailout was primarily to make good on and pay out the Nakeel sukuk .

The Algosaibi/Saad Group debt defaults shocked Saudi and the region. The surplus governments are now hunkering down and keeping their powder dry as they now realize that they will need to intervene and likely fund more bailouts.

Unfortunately, these surplus governments are also the regions major oil exporters. My take is that as they build cash reserves, spending on hydrocarbon development is already being curtailed [they will never admit that, of course] compared to the high levels of the past few years, and future supply increments are likely to be below previous forecasts.

So the game of supply destruction and demand destruction continues, and how this will play out in the short to medium term is anybody's guess. I expect volatility as fears of one and then the other alternate depending, in part, on the news flow of the moment...but timing the shifts in sentiment in the markets will be a real challenge.


A couple of related articles from the FT:



Debt threat to Kuwait investment houses (http://www.ft.com/cms/s/0/87f5a690-1f19-11df-9584-00144feab49a.html)

By Robin Wigglesworth in Kuwait
Published: February 21 2010 21:31 | Last updated: February 21 2010 21:31

Most of Kuwait’s multibillion-dollar investment company industry could be wiped out by debt repayments on the finance houses’ leveraged investments made before the recession, senior bankers have warned.
Spurred by cheap credit, abundant liquidity and few other opportunities in the government-dominated economy, Kuwaitis have set up scores of investment houses to bet on international and regional real estate, private equity and stocks. At its peak, the industry had assets of more than $50bn...

...While bankers said the investment company woes were largely contained in Kuwait and should not spread, they could lead to distressed sales of overseas assets and were weighing on the exposed local banking sector.

Two of the largest investment companies defaulted on international loans last year. While no other finance house has publicly collapsed, bankers and analysts said almost all were struggling to meet debt repayments in the face of crippling losses – some of them on investments in Dubai, the troubled Gulf emirate. There were 100 investment houses in Kuwait but “you will not see half of them still operating in 2011”, said Jasem Al-Sadoun, chairman of Alshall Investment...

...The industry’s woes were having knock-on effects on Kuwaiti banks, which were reluctant to lend while they faced delayed payments or losses on loans to investment companies...


Kuwaiti investment model feels strain (http://www.ft.com/cms/s/0/9679f4f6-1f13-11df-9584-00144feab49a.html)

By Robin Wigglesworth in Kuwait City
Published: February 21 2010 21:31 | Last updated: February 21 2010 21:31

Buoyed by inflows of petrodollars and cheap credit, Kuwait’s [I]finance houses (http://www.ft.com/cms/s/0/9c0e53e8-3e8c-11de-9a6c-00144feabdc0.html) have been aggressive investors in regional and international markets in the past decade, snapping up trophy assets in everything from luxury car brand Aston Martin to property and stocks.

But the financial crisis has starkly exposed a toxic mismatch (http://www.ft.com/cms/s/0/c8b02bb0-bfcf-11dd-9222-0000779fd18c.html) between short-term loans and often illiquid assets whilst also highlighting a reliance on paper investment gains rather than asset management or brokerage fees, or recurring revenue from portfolio ­companies.

The sector’s woes are not new. Problems first emerged towards the end of 2008 and two of the largest finance houses are now tentatively emerging from restructuring after defaulting (http://www.ft.com/cms/s/0/5e56220e-3e48-11de-9a6c-00144feabdc0,s01=1.html) in the wake of the collapse of Lehman Brothers.

However, bankers say the rest of the bloated sector has yet to tackle its debt woes, depressing lending and weighing on the oil-rich emirate’s economy...

...Common to all of them were freewheeling investment strategies that swelled the sector’s total assets from $16.5bn in 2004 to a peak of $52bn in 2007, according to Kamco research.

While the value of assets has since shrunk to $47bn by September 2009, analysts and bankers say the true extent of the global financial crash has yet to be ­recognised by investment companies.

Meanwhile, liabilities have remained relatively steady at about $31bn...

...International bankers say that, rather than facing up to the fact that many investment companies may never be able to repay their debts, clean up their balance sheets and rebuild capital bases, local banks are merely rolling over loans to avoid embarrassing themselves and their clients – a common practice in the Gulf.

“Banks are pushing as much as possible under the carpet, restructuring and rescheduling loans so they don’t have the true extent of the hits, and the central bank is tacitly allowing it,” a Kuwait-based analyst says...

icm63
02-26-10, 05:18 PM
NOTE TO EJ:

Is it possible subscribers can download a PDF of the lastest report(and in the future), as reading a large report on the browser is just not that easy. :D

phirang
02-26-10, 05:51 PM
Good Soros interview:

http://english.caing.com/2010-02-24/100120459.html

ThePythonicCow
02-26-10, 06:18 PM
NOTE TO EJ:

Is it possible subscribers can download a PDF of the lastest report(and in the future), as reading a large report on the browser is just not that easy. :D
A search for "convert html to pdf" will find a number of tools and websites, often free. On the first one I found, I ran Post #1 of this thread through that site and got the attached pdf document. Some of the graphics lost resolution to the point of being unreadable. Otherwise it is readable.

My guess is that this pdf conversion is too cumbersome for post individuals to bother with for their own use, but it might be worthwhile if the pdf were posted, as you suggest, for others to read.

I do not find much difference in readability between pdf and html myself, so I'm not suggesting anyone worry about this on my account. Given both formats, I'll tend to read the html form as it works better in a tabbed browser (Firefox) with many pages open at once on various sites.

icm63
02-26-10, 09:41 PM
PDF: excellent tool..can you post the site you used as the results you show are very clear..

EJ time to install this on your docs...

http://www.web2pdfconvert.com/pdf-button.aspx

jpatter666
02-26-10, 10:01 PM
PDF: excellent tool..can you post the site you used as the results you show are very clear..

EJ time to install this on your docs...

http://www.web2pdfconvert.com/pdf-button.aspx

Agree -- if for no other reason than we could search EJ postings much more effectively [envisions a folder of EJ pdf postings]-- and thus save Metalman some cycles. :D

metalman
02-26-10, 10:06 PM
Agree -- if for no other reason than we could search EJ postings much more effectively [envisions a folder of EJ pdf postings]-- and thus save Metalman some cycles. :D

thx for thinking of me. :D

ThePythonicCow
02-26-10, 11:12 PM
PDF: excellent tool..can you post the site you used as the results you show are very clear..The site I used for that html to pdf conversion was http://html-pdf-converter.com/. Others may be as good; that was just the first one that came up in my Google search for "convert html to pdf".

A useful trick in the conversion was to click on the #1 (http://www.itulip.com/forums/showpost.php?p=149736&postcount=1) (View Single Post) link for the post I wanted to view, in order to get a "clean" html version of the post I wanted to convert. This might not work as easily for articles on the "iTulip Select" side, as I doubt that another web server could access the page in question for you. You might have to save and upload the page to be converted in that case, rather than just giving the converter web server the URL of the iTulip page to convert.

ThePythonicCow
03-01-10, 03:21 PM
EJ time to install this on your docs...

http://www.web2pdfconvert.com/pdf-button.aspxYou ask, they deliver. Cool.

I now see on each post:

http://www.itulip.com/forums/attachment.php?attachmentid=2879&stc=1&d=1267474805

FRED
03-01-10, 05:04 PM
You ask, they deliver. Cool.

I now see on each post:
http://www.itulip.com/forums/attachment.php?attachmentid=2879&stc=1&d=1267474805

Glad you like it! Thanks for finding this service. Does not work for Select, however.

ThePythonicCow
03-01-10, 08:30 PM
Does not work for Select, however.For Select articles (not visible over the web to third party servers) I presume an iTulip select member could download (save) the HTML web page to their own disk, then upload to a site that does html-to-pdf conversions. The results might be ugly however, as I don't know if or how this would get graphical images included in the final result. A Google search for "html to pdf conversions" (or some such search phrase) should find sites that do html-to-pdf conversions.

P.S. -- See also <a href='http://lists.econsultant.com/top-convert-to-pdf-for-free-websites.html '>Top 14 Convert To PDF For Free Sites</a> for alternative conversion sites.

EricPhan
03-01-10, 11:31 PM
One free program that I've found to be extremely valuable in staying organized by going paperless is CutePDF - it gives you an option to print to a PDF file. Simple and effective.

jk
03-02-10, 11:01 AM
One free program that I've found to be extremely valuable in staying organized by going paperless is CutePDF - it gives you an option to print to a PDF file. Simple and effective.
just downloaded it and converted a doc file. thanks for the tip.

icm63
03-03-10, 12:09 AM
NOTE TO EJ:

Is it possible subscribers can download a PDF of the lastest report(and in the future), as reading a large report on the browser is just not that easy

GREAT STUFF...thanks for listening !:D:D:D:D

Morelia
03-03-10, 01:37 PM
GREAT STUFF...thanks for listening !:D:D:D:D

listening or pandering?

a "save as pdf" button on every post?

ridiculous clutter.

i would like to see a higher-level button that would remove these pdf buttons. or, better yet, a setting in the user control panel to override this scourge of pdf buttons.

otherwise, i will investigate using a text-only browser for the itulip fora.

icm63
03-03-10, 01:47 PM
Morelia,

Are you kidding me, let me guess you are over a certain age were snail mail ruled !

Get a better ISP or use Firefox. TO load the little bit extra HTML/JS !:)

icm63
03-03-10, 01:53 PM
ED, EJ, FRED,

PDF tool: If you wanted to reduce buttons.

They only other way to do this PDF thing is to have the PDF button visible when in the address bar 'postcount=' is present.

So your would need customize the code to enable/visible (true/false) when the above condition is present.

ThePythonicCow
03-03-10, 06:19 PM
ridiculous clutter.
That particular piece of screen real estate was otherwise unused, so little harm is done, in my view.

If you're using Firefox, then you might want to check out Greasemonkey (https://addons.mozilla.org/en-US/firefox/addon/748) if you find it worthwhile to rewrite web pages on the fly so that they display more (or less) to your liking.

Morelia
03-04-10, 12:26 AM
In our case economic recovery from the economic crisis depends on how many leaders remain under the influence of the [FIRE] industries...

http://www.newdeal20.org/?p=8698


Roosevelt Conference Sets the House on Fire

Wednesday, 03/3/2010 - 4:36 pm by Lynn Parramore

It was like the League of Justice gathered on the stage today at New York’s Time Warner Center.

Nobel laureate Joe Stiglitz, Chief Economist for the Roosevelt Institute, urged us not to give up the fight to fix our broken financial system. Rob Johnson, Director of the Institute’s Project on Global Finance, charged a do-nothing Administration with endangering our future as The Animals’ “We Gotta Get Out of This Place” played in the background. TARP overseer Elizabeth Warren denounced credit card companies for preying on the little guy and plunging hard-working families into debt.

They were from academia. And from the private sector. They were lawyers, judges, former regulators — and even billionaires, like the famed financier George Soros. They were people like financial analyst Josh Rosner, one of the first to call the subprime mortgage crisis — and who now says that the securitization market is stalling our economy like a broken car transmission. And Simon Johnson, who warned of a financial ‘Doom Cycle’ that will spiral out of control if we don’t wake up very soon. And Roosevelt fellow Mike Konczal, who forcefully showed how investment banks’ risky business puts the entire economy in jeaopardy.

Over and over, the participants warned that the banks — bigger and more dangerous than ever — are calling the shots. They have not been reigned in. And they are fighting with everything they’ve got to do things their way. “We’ve gone from ‘we the people‘ to ‘I the banks‘”, said Lynn Turner, former Chief Accountant of the SEC.

Rob Johnson made it clear: current proposals floating through Congress don’t cut it. “We are at a fork in the road,” he said, warning that we are inevitably headed for another, worse financial crisis if we don’t take serious steps to address the critical faults in the system.

Seeing such eminent figures gathered together on stage — one after the other pointing out how 18 months after the worst crisis since the Great Depression we are more vulnerable than ever – it would be IMPOSSIBLE to dismiss what they say.

They have given the public, and the Obama Administration, a comprehensive plan to fix what’s broken. No one can ever say “We didn’t know.” Read a full report of their recommendations here.

The question: Obama, are you listening?

**We apologize for the audio difficulties for those who tried to watch the live stream this morning. Fortunately, Bloomberg taped the event and we will have highlights up on New Deal 2.0 very soon.

Morelia
03-04-10, 12:51 AM
That particular piece of screen real estate was otherwise unused, so little harm is done, in my view.

If you're using Firefox, then you might want to check out Greasemonkey (https://addons.mozilla.org/en-US/firefox/addon/748) if you find it worthwhile to rewrite web pages on the fly so that they display more (or less) to your liking.

thanks, pythonic. the best solution would be to have the button on ej's articles alone, i think. this is "rant and rave" stuff, so i'll quit my complaining here.

i already have the ad blocker plugin on board, so i used that. still get the text, though (as you can see in the following screen shot):

http://img695.imageshack.us/img695/7576/pdfhv.jpg

ThePythonicCow
03-04-10, 03:20 AM
i already have the ad blocker plugin on board, so i used that. still get the text, though (as you can see in the following screen shot):Showing just the text, as you've done, is easier on the eyes. I'll agree with you there.

Chris Coles
03-04-10, 05:10 AM
http://www.newdeal20.org/?p=8698

The Times, London were kind enough to publish my comment on the same subject earlier today and I repeat it here for New Deal 2 readers: (As also for iTulip readers too)

All anyone need do is insist that all financial transactions must be to the rules of a true free market.

http://www.newdeal20.org/?p=8698

http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article7048662.ece

Morelia
03-04-10, 06:36 AM
The Times, London were kind enough to publish my comment on the same subject earlier today and I repeat it here for New Deal 2 readers:

you repeat it here (http://itulip.com/forums/showpost.php?p=151598&postcount=38) for iTulip readers, not New Deal 2 readers.


(As also for iTulip readers too)

"too" or "also". one or the other. not both.


All anyone need do is insist that all financial transactions must be to the rules of a true free market.

orly? anyone? how about these rangers' or devils' fans (i trust Flyers fans would have a much better attitude)?<object height="385" width="480">


<embed src="http://www.youtube.com/v/ssZ-GmGK5g4&hl=en_US&fs=1&rel=0" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" height="385" width="480"></object>

refocus:


In our case economic recovery from the economic crisis depends on how many leaders remain under the influence of the [FIRE] industries...

your comments are irrelevant bleatings in this context. they miss the point.

simon johnson was "kind enough" to send me this, yesterday. it's addresses the point:


Can would-be reformers agree? This is probably the easy part, at least for now.
Will there be continuity and personnel development, for example in the Institute for New Economic Thinking and the Roosevelt Institute?
Where’s the “Geithner wing” of this movement – i.e., the people with practical policy experience inside the regulatory machine, who can be brought in to senior government positions?
And who will provide the political leadership? All eyes are on the Senate – but who exactly will step up and on what basis?http://baselinescenario.com/2010/03/03/after-the-hamilton-project/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+BaselineScenario+%28The+Basel ine+Scenario%29

Chris Coles
03-04-10, 07:39 AM
[quote=Morelia;151600]you repeat it here (http://itulip.com/forums/showpost.php?p=151598&postcount=38) for iTulip readers, not New Deal 2 readers.


In fact the link to new Deal will show my comment placed at the bottom of the same page that held the original story. (I do hope my English grammar is acceptable this time).

Returning to the final point you made; I do not believe that bringing in anyone from existing knowledge of the structure of regulation will solve the problem. Why? Because they have no experience of a true free market. You do not have them in the US. You think you do, but you do not. It will need people with such experience, someone outside of the system.

Morelia
03-04-10, 08:22 AM
Returning to the final point you made; I do not believe that bringing in anyone from existing knowledge of the structure of regulation will solve the problem. Why? Because they have no experience of a true free market. You do not have them in the US. You think you do, but you do not. It will need people with such experience, someone outside of the system.

send that someone over asap, if you would do that, please.

Chris Coles
03-04-10, 10:30 AM
send that someone over asap, if you would do that, please.

Having had more than one hundred related comments placed on The Times web site since last September, I put myself up. www.chriscoles.com/page5.html (http://www.chriscoles.com/page5.html)


But you need a team, Hudson, EJ and me would do nicely. (As long as someone will pay all expenses).

raja
03-04-10, 10:55 AM
http://www.newdeal20.org/?p=8698
Over and over, the participants warned that the banks — bigger and more dangerous than ever — are calling the shots. They have not been reigned in. And they are fighting with everything they’ve got to do things their way. “We’ve gone from ‘we the people‘ to ‘I the banks‘”.
Why hand over your money to someone who's robbing you -- and the country -- and driving our Nation into Debt Servitude? I understand why Joe Sixpack continually acts against his own interests -- ignorance. But it amazes me when those more informed do likewise :(

We can't control the Politician Enablers until the next election . . . but we can control our own behavior. If YOU want to reign in the Big Banks and stop their theft -- Boycott the Big Banks! Spread the word . . . .

Morelia
03-07-10, 08:30 PM
Over and over, the participants warned that the banks — bigger and more dangerous than ever — are calling the shots. They have not been reigned in. And they are fighting with everything they’ve got to do things their way. “We’ve gone from ‘we the people‘ to ‘I the banks‘”.
Why hand over your money to someone who's robbing you -- and the country -- and driving our Nation into Debt Servitude? I understand why Joe Sixpack continually acts against his own interests -- ignorance. But it amazes me when those more informed do likewise :(

We can't control the Politician Enablers until the next election . . . but we can control our own behavior. If YOU want to reign in the Big Banks and stop their theft -- Boycott the Big Banks! Spread the word . . . .

i bank at a little bank, but little banks are vulnerable to going under each Friday vs the too big to fail banks. i've researched mine, and it looks relatively safe, however.

i do have a Chase credit card that i could get rid of. i use it for convenience, and pay it off in full each month. but Chase gets its cut on each purchase i make.

i will research some better options, assuming that there are any.

Ponce
03-15-10, 12:08 AM
They all ignored the money that's going out of the country and the money that does not come into the country...... :mad:

"No Export = No Recovery"... Ponce