Sunday, August 16, 2009

August 16 2009: Real men pay their debts and move on

Detroit Publishing Co. Happy Flags!! 1900
Betsy Ross house, Philadelphia, "birthplace of Old Glory"

Ilargi: When it comes to finance, and the economy in general, there are two prevailing questions these days, or so it seems. First, how long can the stock market rally last? And second, how many bank failures still lie ahead of us? Actually, as a sort of cross-over third question, you might ask: what will banks stocks do?

As for bank failures, in the US I’ve long had the impression -and I'm by no means the only one- that the FDIC (Federal Deposit Insurance Corporation) is simply not doing what it's supposed to do: liquidate failing banks. That may be to a large extent due to the lack of both qualified personnel on the one hand and sufficient funds on the other; a lack of political will could also play a part. Whatever the reasons are, a very odd and possibly borderline illegal situation is being created and maintained.

If a bank does not comply with the standards set by law (and by FDIC regulations), it should be closed down. If that doesn't happen, both depositors and shareholders risk putting their money where they wouldn't have put it had they known the true extent of a given bank's financial troubles, and risk losing (part of) that money.

If you have a banking regulator, it surely should serve to warn the public about dangers in the system, in order to facilitate the best informed decisions possible with their funds. And there's precious little evidence out there that says that is what the FDIC is presently trying to do.

If you look for instance at what's happened with Colonial Bank, which was closed on Friday in the biggest US bank failure in 11 months, it's hard not to wonder how long it had been in serious trouble before it was seized. A bank that size automatically poses huge headaches for the FDIC, so much is clear. Still, if they knew months ago Colonial was beyond rescue, what are the ethical and legal implications of letting it continue until a solution is found, and without informing the public ahead of time?

And, by now more importantly, how many banks are there that are in more or less equally deep trouble but continue to function as though there were nothing wrong, selling shares, accepting deposits and opening their doors every morning with a sunny face??

The FDIC added dozens of banks to its "endangered" list in one big move a while back, making it very obvious that many of the "newly endangered" should have been added earlier. So when will we see the next update to the list? How many banks out there are already marked down as dead by the FDIC? I don't want to go all the way back to the administration's promises of transparency, but aren't investors and depositors simply entitled to the most accurate and the most current information available?

If the FDIC would in reality need to close down 100 banks tomorrow morning, then it should do that. But that's not the impression that you get from looking at what goes on. Maybe it's time for bank shares to plunge in the near future, so Sheila Bair's hands are forced. And for a true realization across the board about the deep doodoo commercial real estate is in, a little nuisance that all by itself is capable of finishing of hundreds of small and intermediate banks.

You think perhaps it's time to get serious about the FDIC and its tasks? To close a bank when the laws and regulations say it should be, and not when the FDIC just so happens to have some time in its schedule? I don't mean to imply that the FDIC is the main culprit here, don’t get me wrong. It's the government, and in particular the Treasury, that should act here.

There are over 300 banks on the FDIC endangered list. 150 banks, according to Bloomberg, are known to have over 5% nonperforming loans (I'd volunteer to make that 1500, and easily).

Every single day now I see people asking which banks are still safe to put their money in. You’re building a giant confidence crisis here. That's what you get from a lack of transparency. And yes, I do know it would change the whole picture we have of the economy if everyone came clean, we'd go into painting with a much darker palette of colors. But if that's all there truly is in reality, wouldn't it be better to be brave and stand tall in front of it, instead of running away like so many cowards?

What happened to all that courage America was supposedly built upon? Can't even face yourselves anymore? When businesses fail, you close the doors, it happens all the time, what's the big deal all of a sudden? You’re broke, as a nation, as individuals, very broke, awfully terribly broke. Deal with it like real men do. Real men pay their debts and move on. They don't play Mr. Big off their children's piggy banks. It's a matter of honor. Quit lying to yourself, quit whining, get over it and get to work. I'd say, the sooner the better. You're in for troubled times no matter what, that much is cast in stone.

Might as well do it with your heads held up high.

Bears prowl Wall Street as insiders dump stock
A massive rally in U.S. stocks since March has reawakened bullish spirits, but insiders are jumping out of the market in a sign the run up is getting stretched. Company executives are selling stock at a rate not seen in two years after a near 50 percent rise in the S&P 500 from a March 9 low. That suggests directors and managers may think stock prices are nearing the top end of their range in the current economic climate.

There has been a decline in short interest -- borrowed shares sold but not yet repurchased -- which some analysts see as a warning. Some investors sell short to profit from price declines, and some say the recent rally has been supported by the reversing of short positions. For brokerage Jefferies & Co., a significant increase in insider selling transactions as well as a decrease in short interest across most sectors of the S&P 500 demonstrates the weathering of the bear market rally.

Short interest fell in mid-July and firms with insider selling activity outnumber those with buying activity two to one, according to research firm "Both of those (factors) lends to our general thesis" that the equity market rally is running on borrowed time, said Patrick Neal, head of U.S. equity strategy at Jefferies & Co. Since early March investors have piled back into the stock market in the hope of an economic recovery, bank sector stabilization and expectations many more will follow them.

But there are doubts the run-up is warranted amid signs of a difficult economic recovery. Increased insider selling has in the past been an indicator of an inflection point for equity markets, said Ben Silverman, director of research at Sales of stock by company insiders suggests managers have a dim view of the market's prospects. According to InsiderScore, buying peaked this year around the market low in early March. For the week ended March 3, six days before the market sank to a 12-year low, insider bullishness as reflected in buying activity recorded its fourth-highest reading ever.

"Insiders historically have a strong correlation on a macro level to buying and selling, said Silverman, who is based in Princeton, New Jersey. "There's a lot of negative signs right now coming from insiders." Jefferies said the selling has taken place in the consumer staples, information technology, materials and energy, and utilities sectors, with Neal pointing to a "huge" acceleration in some economically sensitive areas such as energy.

In the second half of July, short positions held by investors fell 10.3 percent on the New York Stock Exchange and 5.1 percent on the Nasdaq, according to the exchanges. Investors who sell securities short seek to profit from bets the shares will fall. Short-sellers borrow the shares and then sell them in the hope of buying back the shares at a lower price, pocketing the difference. The decline in short interest arguably removes a component of what has built the run-up in stocks. Fewer short positions means less potential short covering.

"A decrease in short interest takes away one element of support for the market," said Neal, who expects the market to pull back after the first week of September. However, analysts have questioned how much a role short covering has had in the current rally. "It's a reasonable point if you're seeing a 25 to 30 percent drop (in short positions)," said Eric Newman, a portfolio manager at TFS Capital in West Chester, Pennsylvania. "Then, you don't have that kind of fuel later on to push the market up, but I don't think this is a significant enough move to warrant that."

Newman said much of that 10 percent fall in short positions on the New York Stock Exchange was due to a huge drop in bets on Citigroup, which saw a 72 percent decline in short positions on its stock in the second half of July. Without Citigroup, short positions would have dipped less than 5 percent. Short interest on the NYSE is still higher now than it was at the beginning of the year, suggesting that a rally that runs on the back of bearish players forced to cover positions is still possible.

A rally with troubling aspects
US stocks have risen almost 50 per cent from their lows in March, a turbo-charged performance that ranks as the best post-war market rebound. Five months and counting since the lows in March has the S&P up 49 per cent, eclipsing the 43 per cent rally reached 105 trading days after the lows of August 1982. Investors in other established equity markets have also enjoyed big rallies from their March lows.

Japan’s Nikkei 225 index has bounced 50 per cent, London’s FTSE 100 climbing 36 per cent and the FTSE Eurofirst 300 as much as 45 per cent. Emerging market equities have recorded bigger rises with investors banking on stronger growth outside the US and particularly in Asia. Hong Kong is up 85 per cent from its March low while Brazil has rallied 57 per cent.

The nature of the US economic recovery and the behaviour of the consumer hold the key as to whether the 2009 rally continues. By June 1983, 10 months after the market bottomed, the S&P was sitting on a gain of 67 per cent and it would keep climbing until the great bull run of that era peaked in August 1987. Based on data compiled by Mizuho Securities, the S&P’s current rise is more than double the average 22 per cent gain seen during the first 105 days of a post-war bull run.

That has left the S&P 500 valued at 18.6 times the profit of its companies – the highest valuation since 2004. The index is now up 11.7 per cent so far this year but remains 35 per cent below its record high in October 2007. There have been signs of consolidation this week with sentiment taking a hit from poor retail sales data and weak consumer sentiment. Some warn the rally may have run its course for the time being as it is already pricing in a lot of good news.

"An analysis of past US recessions and recoveries suggests the rally could run out of steam soon," says John Higgins, senior market economist at Capital Economics. "Most of the re-rating of the stock market that we would usually see prior to – and in the early stages of – an economic recovery has already taken place." One troubling aspect of the rally is that, from a historical perspective, equity volatility remains elevated, with the CBOE’s Vix volatility index showing a reading of about 25. Before the credit squeeze in the summer of 2007, the Vix rarely rose to more than 20.

There is also concern that the strong run has largely reflected short sellers reversing bearish bets on stocks. According to Bespoke Investment Group, the average stock in the S&P 500 had 4.97 per cent of its float sold short as of the end of July, the lowest level since January 30. "It’s not just a short squeeze, when the market goes to 1,000 from 660," says Bill Strazzullo, chief market strategist at Bell Curve Trading. "There has been some sign of improvement in the economic data and overall sentiment while investors have also started chasing the rally."

Low summer trading volumes are a cause for concern. Daily share volume on NYSE Euronext has not been above 2bn since June 25 and, in recent weeks, is behind April and May. "I would like to see better volumes – it’s hard to put faith in this rally when volumes are low," says Jim Paulsen, chief investment strategist at Wells Capital Management. "It’s the missing ingredient – and I think buyers are waiting for a bigger correction before they enter the market." Others reply that retail investors have not yet joined the rally.

Carmine Grigoli, chief investment strategist at Mizuho Securities, says equity inflows since the market bottomed in March total $47.3bn, less than the $60bn liquidated during the three weeks before the stock market turnround: "We have yet to see the widespread optimism and the high levels of public participation that usually occur in the early stages of new bull markets." For that to occur, bulls are waiting for economic expansion to flow directly into company earnings. Mr Grigoli says: "The profit turnaround may be at hand."

Based on the bank’s calculations, quarter-to-quarter earnings and revenue growth turned positive during the second quarter. As the second-quarter earnings season fades, cost-cutting helped many companies exceed lowered estimates. Almost three-quarters of S&P companies beat estimates but many recorded revenue shortfalls. That disturbed some analysts but the market appears to be betting that lean and mean companies will prosper when the economy rebounds. Economists forecast expansion in the third quarter, the economy having fallen in the previous four quarters and enduring its longest decline since 1947 when records began.

The rebound is based on restocking of inventories but, once that is complete, there are concerns about sustainability of growth in 2010 as the consumer remains burdened by high debt, rising job losses and sharply lower housing prices. This week, the Federal Reserve highlighted the expectation of "sluggish income growth" in its latest policy statement. For the time being, the equity market bets on the strength of the recovery – but Mr Strazzullo says technical factors are driving stocks. "The money trade right now is the March rally, it’s a momentum play and not based on a fundamental change ... Between 1,100 and 1,150 [on the S&P] is where we think this rally will top itself out."

Coming Soon: Banking Crisis of Historic Proportions
With everyone (well, almost everyone - I am one of the lonely skeptics) convinced that we have stepped back from the "edge of the abyss", the title of this article may be viewed as laughable. When you connect the dots, as I will in this article, you will at least stop laughing, and, maybe, realize that we still have a big problem.

We have a confluence of five factors that have the potential to create damage to banking not seen in 80 years, and that includes the Great Depression. We'll hit these factors one at a time.

First Factor: Banks Are Not Doing Enough Business

Commercial bank credit growth has dropped to 2%, according to Jesse's Cafe Americain (here). The recent history of credit growth is shown in the following graph.

Now, it is a good thing that banks are conserving capital, since they need to increase capital to offset bad loans.

But, if asset valuations deteriorate (and that is quite possible), the banks need to increase earnings to "earn their way" out of their problem. Interest paid by the Fed for reserves on deposit there (by the commercial banks) are not producing nearly the same level of income as new credit issued commercially under our fractional reserve banking system with much higher interest .

If credit issuance does not increase year over year, banks can not improve their financial condition unless the quality of their existing loan portfolio improves.

As discussed in the third factor, below, just the opposite is anticipated for loan portfolios.

So the first factor in this perfect storm is that the banks are not doing enough business.

Second Factor: Banks Are Failing at a Rate Not Anticipated Two Months Ago

In his article, Jesse mentions reports by Bloomberg that 150 banks are in trouble. Some of these will be larger than many of the 77 (mostly community) banks that have gone under FDIC receivership so far in 2009.

Banks mentioned being in trouble by Bloomberg (here) include Wisconsin’s Marshall & Ilsley Corp. (MI), Georgia’s Synovus Financial Corp. (SNV), Michigan’s Flagstar Bancorp (FBC), Chicago-based Corus Bankshares Inc. (CORS), Austin-based Guaranty Financial Group Inc (GFG), and Colonial BancGroup Inc. (CNB) in Montgomery, Alabama.

These six banks became five at the close of business Friday, Aug. 14, as Colonial BancGroup was taken over by the State of Alabama and the FDIC. This was the largest bank failure since IndyMac Bank went under in the summer of 2008.

The following table shows some data regarding the six banks singled out by name in the Bloomberg article.

On July 5, Bill Cassill wrote (here) that he projected 125 bank failures for 2009 and 230 in 2010.

However, as of that date, Bill projected 82 closings by 9/30 and we have already reached 77 on 8/14. We still have half the quarter to go. With the 150 additional banks estimated by the Bloomberg article, and the 77 already closed thus far this year, we could be closer to 230 closings in 2009 than the 125 estimated just six weeks ago. Bill is not alone. I recall hearing other estimates of bank failures for 2009 of the order of 100 for the entire year.

The following graph (and the prediction below it) was provided on July 12 (here) by Colin Peterson.

How is Colin's prediction doing? The following graph shows how bank failure rates have been trending.

Give Colin the handicapper award here. Not only have bank failure rates spiked, the current annualized rate would be in a virtual three-way tie for second highest in history if maintained for another nine months.

And a lot of the banks going under are a lot larger than the average savings and loan in the previous crisis.

According to (here): Between 1986-1995, over 1,000 banks with total assets of over $500 billion failed. Even if the current crisis falls far short of the 1,000 bank total, the total assets involved will still be vastly larger. Just in the failures of Wachovia Bank and Washington Mutual, the total assets were $619 billion. Add to that the IndyMac failure and the six banks in the troubled list above and there is another $164 billion.

And I am not even mentioning the shadow banks (Merrill, Bear Stearns, Lehman and AIG are examples), which add hundreds of billions more.

There should be no false comfort taken in the prospect that we may have far fewer bank failures this time compared to the S&L crisis. The dollar amounts are likely to be many times larger.

Third Factor: Defaults Are Going to Increase for Several More Quarters

With home mortgage foreclosure rates remaining very high (and possibly increasing) and with the bulk of the commercial real estate defaults yet to come, the failure rate of banks is likely to increase further in the next nine to twelve months, not decline. The situation will be compounded if commercial and industrial (C&I) loans also default at higher rates because of a weak or non-existent recovery.

Reading some of the latest quarterly reports for a number of banks, C&I loan portfolios have generally been performing better than many other categories, but will that continue?

A reference for this subject is a Jeffrey Bernstein article published in late May entitled "C&I Loans Are Starting to Unravel" (here), which discussed the status of a wide variety of loan portfolio categories. C&I defaults may, at this time, be like an iceberg, with 90%+ still not visible above water.

Default rates in all credit areas have started to rise, although some have yet to reach levels of other recent recessions (see Bernstein article here). Residential mortgage defaults have been the elephant in the room. We have to continue to worry that problem may increase further, but we better also worry about all the baby elephants.

We may have "saved the financial system", but it seems likely that we will lose banks at levels far exceeding anything seen in our history. Even if we fall short in mumber of the approximately 1,000 S&Ls, the assets involved will be much larger.

We need one hell of a recovery here to prevent disaster. Muddle through will not do it. A return to 3% GDP growth may not do it. We need a couple of years at 4% (or higher) GDP growth to have any chance that some of these banks can earn their way out of the quagmire.

I don't think that type of economic growth can be realized. It certainly is not going to happen if commercial bank credit growth doesn't expand drastically and quickly.

Fourth Factor: The FDIC Is in Trouble

Rolfe Winkler (here) points out that the accelerating rate of bank failures may exhaust the Deposit Insurance Fund (DIF) at the FDIC, requiring that agency to draw on its credit line with the Fed. Rolfe calculates that the FDIC is currently on the hook for $8.3 trillion in insured deposits, had only $41.5 billion in reserves as of March 31 and has drawn that lower since.

Since only a small portion of deposits actually are paid out of DIF (failed banks have assets that cover most deposits), FDIC needs only a small fraction of covered deposits in reserve.

However, less than 0.05% is most likely several fold too small in a distressed banking system. The section title says the FDIC is in trouble. That is a polite way of saying they are bankrupt.

Fifth Factor: We May Be Going to Historic Lows in Bank Credit

Because we are approaching the one year anniversary of a growth spike in bank credit in September, 2008 (see the first graph in this article), there is likely to be continued pressure on the year-over-year growth rate. The year over year growth of credit may be driven much lower than the current 2% within the next couple months due to the negative effect on comparison due to the spike a year earlier.

As shown below, this would be an historic low.

There is one possible piece of good news here. Looking at a longer history from the Fed FRED data base (here), the current situation is similar to those seen after the end of the recessions of 1973-75, 1990-91, and 2001. A similar minimum was also reached in 1997.

It should be noted that several minima in commercial bank credit have occurred that were not associated with the end of a recession. This indicates there are non-recessionary factors related to dips in commercial credit.

All recessions have dips in commercial bank credit, but all dips in commerical bank credit are not associated with recessions.

This time, the minimum may not have been reached yet because of the spike in credit volume in September, 2008 (mentioned above). If September 2009 does see a minimum in commercial bank credit, this would be another sign that the recession probably ended earlier in the year.

However, the banks need far more than an end to the recession; they need a recovery of unlikely proportions.

One cautionary note: Although the minimum was much higher in the 1981-82 recession, the lowest point occurred about a year before the recession actually ended. That could always happen again.

Is There Any Hope?

Well, since so many people are predicting a weak recovery, that has a good chance of not happening, based on the observation that, in economic matters, agreement by a majority is often wrong. So, if the majority is wrong, which way do you think things will go? Back into recession? The robust recovery predicted by only a few?

I'll leave a definitive answer to the reader - after all I can't do all the work. I'll just share my bias, based on all the factors I can collect: An advance in real GDP of 4-5% in 2010 and 2011 (2-2.5% per year) seems to me to be the very best that might be obtained, but less is more likely.

Without a strong recovery, there is little hope of a good outcome for the non-oligarchy banks. With a return to recession, in 2010 (and possibly 2011 and 2012) there could be carnage in regional and local banks not seen since the early 1900s, and maybe even worse than what occurred then.

I hope we don't have to compare what happens in 2010 to 1873.

The banking crisis of 1873 started what has been called "The Long Depression". This consisted of a period of rolling recessions that continued for almost 40 years and included additional banking crises in 1893 and 1907. This long period of economic and financial turmoil was a major motivator in the formation of the Federal Reserve Bank. The Fed was the first true central national bank for the U.S. since the dissolution of the Second Bank of the United States in 1837 by Andrew Jackson.

Fifth Third Leads Banks Lower After Six-Month Surge
Fifth Third Bancorp led the nation’s largest lenders lower in New York trading on concern earnings prospects don’t justify average gains of about 74 percent in the past six months.
Fifth Third, based in Cincinnati, declined 2.9 percent, while Pittsburgh-based PNC Financial Services Group Inc. dropped 1.6 percent. Seventeen of the 24 companies on the KBW Bank Index fell today, after the index climbed 146 percent since March 6.

"The easy money has been made," said Bill Fitzpatrick, an analyst at Optique Capital Management, which manages $900 million, including Bank of America shares, in Racine, Wisconsin. "We are not convinced that the risk appetite is going to be as strong as it has been over the last month or so." Bank stocks have gained since March after first- and second-quarter earnings at companies including Goldman Sachs Group Inc. beat analysts’ estimates, and economic indicators including employment and gross domestic product reports showed that the worst U.S. recession in at least 50 years is coming to an end. Ten of the biggest recipients of government bailout funds repaid a total of $68 billion in May.

Billionaire hedge fund investor John Paulson is betting there’s room for more gains. Paulson, who manages about $29 billion, started the Paulson Recovery Fund last year to invest in financial firms hurt by mortgage writedowns. He bought 168 million shares of Bank of America Corp. in the second quarter, a regulatory filing showed this week, becoming the lender’s fourth-largest shareholder. Bank of America’s expected price-earnings ratio for next year is 18, based on 24 analysts’ earnings estimates compiled by Bloomberg. The company, the biggest U.S. bank by assets, had an average PE ratio over the past five years of 13.9.

Fifth Third shares have surged fivefold in the past six months, the most in the KBW index, and Bank of America has tripled. Regions Financial has gained 54 percent. Bank of America jumped 94 percent in the second quarter as concern the government would take an ownership stake eased amid signs of an improving economy. Citigroup Inc. was raised to "buy" from "underperform" today by analysts at Bank of America, who cited "stabilizing" credit markets. New York-based Citigroup, which has more than quadrupled since March, fell 2 cents to $4.04.

"In the short run, these stocks have gotten ahead of themselves because in the third quarter they’re likely to lose a lot of money," Rochdale Securities analyst Dick Bove said in an interview. "These stocks have made huge moves and none of the fundamentals have improved. Every earnings indicator that you would look at would suggest that this is not going to be a very attractive quarter for banks."

Paulson in the second quarter bought 35 million shares of Regions Financial, becoming the second-largest shareholder, according to the filing. Regions declined 5.2 percent during the quarter. The stock rose 44 cents today to $5.64. BB&T Corp. was the biggest gainer, with a 9.4 percent advance, after reports that the company would buy Colonial BancGroup Inc. in a deal backed by the Federal Deposit Insurance Corp.

For investors with a longer time horizon, 12 to 18 months, bank stocks are the place to be, Gerard Cassidy, an analyst at RBC Capital Markets in Portland, Maine, said in an interview. Many of the 19 banks that underwent government stress tests earlier this year are trading below book value, and Cassidy said they will probably move back toward book value as the economy recovers. Bank stocks will "be one of the most profitable sectors to be in," Cassidy said. "The biggest positive impact coming to earnings will be the reduction in credit costs over the next 12 to 18 months. Investors will be surprised how dramatic that’s going to be as the economy recovers." Cassidy expects that some bank stocks could climb a further 100 percent to 120 percent.

The Paulson group "was very smart on the downside and I think they are going to be as smart on the upside," Cassidy said. "We’re not out of the woods yet," said Josh Siegel, co- founder of New York-based StoneCastle Partners LLC, which manages about $3.1 billion, including shares of Bank of America. "What we’ve seen so far is a little bit of fool’s gold. There’s very little actual evidence other than companies beating earnings expectations," which he said had been pushed too low. Siegel said third-quarter earnings will probably show stability, not growth, and most investors won’t be willing to pay large earnings multiples for what may be a "slow crawl" that could last for years.

How many more Colonials are out there?
The expected failure-turned-rescue of Colonial BancGroup Inc. by BB&T Corp. underscores the lingering danger in the banking industry: small- to medium-sized institutions unable to meet obligations as deposits dwindle. In this case, Montgomery, Ala.-based Colonial is being rewarded for the size of its recent expansion, not for the shrewdness of it. Strategically minded BB&T is eager to tack on what is the fourth-biggest market share in Alabama, according to reports.

There are more than 300 banks on the Federal Deposit Insurance Corp.'s list of troubled institutions. And a Congressional Oversight Panel concluded this week that "an overwhelming portion of the troubled assets from last October remain on bank balance sheets today." It's also the small banks most at risk because most government bailout programs have been designed to aid big banks shed problem assets, the panel found.

For the smaller banks such as Colonial, a BB&T takeover may be a difficult end, but it is far preferable to an FDIC seizure. The question is: how many banks will take the risky path BB&T is taking? After all, Wells Fargo Corp. has struggled to absorb Wachovia Corp., while Bank of America Corp. has been criticized not only for its acquisition of Merrill Lynch & Co. but for snapping up Countrywide Financial Corp. as well.

Bank CEOs are an egotistical lot. Acquiring smaller rivals to build their empires is a favorite pastime. But in today's climate, buying a broken competitor is a big risk -- as Bank of America CEO Ken Lewis can certainly attest. By the same token, the FDIC may not be able to handle all of the bank failures if healthier players don't step up. BB&T's Kelly King reportedly is making the move now. Should things get worse, are there enough CEOs to follow in his footsteps?

There's no quick fix to the global economy's excess capacity
There is one overwhelming fact about the world economy that cannot be wished away. Excess capacity in industry is hovering at levels not seen since the Great Depression. Too many steel mills have been built, too many plants making cars, computer chips or solar panels, too many ships, too many houses. They have outstripped the spending power of those supposed to buy the products. This is more or less what happened in the 1920s when electrification and Ford’s assembly line methods lifted output faster than wages. It is a key reason why the Slump proved so intractable, though debt then was far lower than today.

Thankfully, leaders in the US and Europe have this time prevented an implosion of the money supply and domino bank failures. But they have not resolved the elemental causes of our (misnamed) Credit Crisis; nor can they. Excess plant will hang over us like an oppressive fog until cleared by liquidation, or incomes slowly catch up, or both. Until this occurs, we risk lurching from one false dawn to another, endlessly disappointed.

Justin Lin, the World Bank’s chief economist, warned last month that half-empty factories risk setting off a "deflationary spiral". We are moving into a phase where the "real economy crisis" bites deeper – meaning mass lay-offs and drastic falls in investment as firms retrench. "Unless we deal with excess capacity, it will wreak havoc on all countries," he said. Mr Lin said capacity use had fallen to 72pc in Germany, 69pc in the US, 65pc in Japan, and near 50pc in some poorer countries. These are post-War lows. Fresh data from the Federal Reserve is actually worse. Capacity use in US manufacturing fell to 65.4pc in July.

My discovery as a journalist is that deflation is a taboo subject. Those who came of age in the 1970s mostly refuse to accept that such an outcome is remotely possible, and that includes a few regional Fed governors and the German-led core of the European Central Bank. As a matter of strict fact, two- thirds of the global economy is already in "deflation-lite". US prices fell 2.1pc in July year-on-year, the steepest drop since 1950. Import prices are down 7.3pc, even after stripping out energy. At almost every stage over the last year, in almost every country (except Britain), deflationary forces have proved stronger than expected.

Elsewhere, the CPI figures are: Ireland (-5.9), Thailand (-4.4), Taiwan (-2.3), Japan (-1.8), China (-1.8), Belgium (-1.7), Spain (-1.4), Malaysia (-1.4), Switzerland (-1.2), France (-0.7), Germany (-0.6), Canada (-0.3). Even countries such as France and Germany eking out slight recoveries are seeing a contraction in "nominal" GDP. This is new outside Japan, and matters for debt dynamics. Ireland’s nominal GDP is shrinking 13pc annually: debt stays still. Global prices will rebound later this year as commodity costs feed through – though that may not last once China pricks its credit bubble after the 60th anniversary of the revolution in October. My fear – hopefully wrong – is that we are being boiled slowly like frogs, complacent until it is too late to jump out of the deflation pot.

The sugar rush of fiscal stimulus in the West will subside within a few months. Those "cash-for-clunkers" schemes that have lifted France and Germany out of recession – just – change nothing. They draw forward spending, leading to a cliff-edge fall later. (This is not a criticism. Governments did the right thing given the emergency). The thaw in trade finance has led to a V-shaped rebound in East Asia as pent up exports are shipped. But again, nothing fundamental has changed. Deficit countries in the Anglo-Sphere, Club Med, and East Europe are all on diets. People talk too much about "liquidity" – a slippery term – and not enough about concrete demand.

Professor James Livingston at Rutgers University says we have been blinded by Milton Friedman, who convinced our economic elites and above all Fed chair Ben Bernanke that the Depression was a "credit event" that could have been avoided by a monetary blast (helicopters/QE). Under that schema, we should be safely clear of trouble before long this time.

Mr Livingston’s "Left-Keynesian" view is that a widening gap between rich and poor in the 1920s incubated the Slump. The profit share of GDP grew: the wage share fell – just as now, in today’s case because globalisation lets business exploit "labour arbitrage" by playing off Western workers against the Asian wages. The rich do not spend (much), they accumulate capital. Hence the investment bubble of the 1920s, even as consumption stagnated.\ I reserve judgment on this thesis, which amounts to an indictment of our economic model. But whether we like it or not, Left or Right, we may have to pay more attention to such thinking if Bernanke’s credit fix fails to do the job. Back to socialism anybody?

A Nation Of Part-Time Workers
Here's another vivid reason why the unemployment rate and the "10% question" is meaningless. The percentage of workers not working full time for "economic reasons" is nothing like it has been in the past. Today's chart, put together by the Atlanta Fed, show how many of these forced part-time workers exist compared to the start of the recession. As you can see, we've almost doubled this number, which represents vastly higher numbers than in past recessions.

The Countrywide Senators
How do you define 'substantial credible evidence'?

As the old Irish toast goes, may your sins be judged by the Senate ethics committee. Actually that's not an Irish toast but it must be the fervent hope of every politician who received a "Friend of Angelo" loan from former Countrywide Financial CEO Angelo Mozilo. Late last week the six Senators on the ethics panel dismissed complaints against Senators Kent Conrad and Chris Dodd with a mere admonishment about the appearance of impropriety.

The three Republican and three Democratic Senators say they conducted an exhaustive probe and inspected 18,000 pages of documents. They say they found "no substantial credible evidence as required by Committee rules" that the Senators received mortgage rates or services that weren't commonly available to the public, and thus did not violate the Senate gift ban. We'll have to take their word that the evidence wasn't "substantial," because they didn't release those documents, nor did they encourage Mr. Dodd to release any of his records. Readers will recall that in February Mr. Dodd staged a peek-a-boo release with selected reporters but did not allow anyone to have copies of the documents. If the evidence was so clear-cut, why the months of stonewalling?

The Associated Press may have the answer. AP recently noted that among the peek-a-boo papers were two documents titled, "Loan Policy Analysis." Reports AP, "The documents had separate columns: one showing points 'actl chrgd' Dodd — zero; and a second column showing 'policy' was to charge .250 points on one loan and .375 points on the other. Another heading on the documents said 'reasons for override.' A notation under that heading identified a Countrywide section that approved the policy change for Dodd."

How does Mr. Dodd explain that one? He may not have had to. The Senate ethicists don't seem to have required either Mr. Dodd or Mr. Conrad to provide sworn testimony. In its letters to Messrs. Conrad and Dodd, the committee referred to the "depositions" it collected from Countrywide employees, but it described only "responses" and "explanations" from the Senators. Mr. Dodd never spoke to committee members or staff, and never communicated directly with them.

When committee Senators wrote to Mr. Dodd to get answers to their questions about his VIP loans, they received a response signed by his attorney Marc Elias of Perkins Coie. We remember former Senator Robert Torricelli providing a sworn deposition before he was admonished by the committee in 2002. Perhaps he should have tried the Dodd strategy. As for Mr. Conrad, his staff won't say if the Senator answered questions directly or let his lawyers handle it. Either way, he has to be thrilled that his colleagues found no violation of Senate rules, even after he acknowledged last summer that he had received a benefit and promptly donated $10,500 to charity.

We'd also like to know what committee members thought of Robert Feinberg, the former Countrywide loan officer who told us last year that Mr. Dodd received, and knew he was receiving, preferential treatment. The Washington Post reported last month that Mr. Feinberg told the same thing, under oath, to Senate investigators and said that Mr. Conrad also knew he was receiving special treatment. Mr. Feinberg said the same to the minority staff of the House Oversight and Government Reform Committee.

Does the committee think he's lying, or that his testimony simply wasn't "substantial" enough? Again, we don't know because the letters released by the ethics committee don't mention Mr. Feinberg. Mr. Dodd is running for his sixth term next year and will no doubt claim this as vindication. Voters will have to decide if a Banking Committee Chairman who allowed himself even to be considered a VIP by the nation's foremost subprime lender deserves it.

Dealers yet to see most Cash for Clunkers payments
Auto dealers say they still haven't been repaid for the majority of Cash for Clunkers deals they have made, creating cash crunches for many as they wait for the government to reimburse them under the popular $3 billion vehicle trade-in program. Some dealers report they have hundreds of thousands of dollars worth of rebates they have submitted to the federal government for repayment that are still outstanding, including deals that were made in the first days of the program nearly three weeks ago.

Duane Paddock, who owns a Chevrolet dealership near Buffalo, N.Y., said dealers may stop selling clunkers under the program because of the funding lags. "I've got dealers who are reporting to me that they've got over $3 million that they've fronted and they haven't been paid anything. It's just killing dealer cash flow right now," said Paddock, who serves as co-chair of GM's northeast region dealer council. The National Highway Traffic Safety Administration, the federal agency overseeing the program also known as NHTSA, said Friday that dealers have submitted requests for rebates that total $1.5 billion — half of the money allocated to the program — through the online system set up to process and pay the claims. But NHTSA did not provide a dollar figure for the total amount that has actually been paid since the program began July 27.

There are indications that not much of that money has actually flowed to dealers. A survey of about one-fifth of Virginia's 519 dealerships done this week by the Virginia Automobile Dealers Association found that only 2.8 percent of the roughly 4,000 Cash for Clunkers deals submitted to the government have been paid. The program has also been plagued by heavy demand that has overwhelmed the computer system and review process NHTSA set up. The agency has since hired more staff to process claims and has increased the capacity of the computer network. NHTSA has also held regular information sessions with dealers to help them file claims that will meet the legal requirements for reimbursement.

"The Department of Transportation is committing enormous resources and working overtime to process the overwhelming volume of applications both quickly and responsibly while getting rebates paid for complete and valid deals," said Sasha Johnson, a department spokeswoman. Under Cash for Clunkers, car buyers are eligible for discounts of $3,500 or $4,500 depending on the fuel economy of the vehicles they trade in and buy. Dealers take the amount of the rebate off the sale price, then submit paperwork to the government proving the sale and that the trade-in will be scrapped. Data released Friday shows the Toyota Corolla is the best-selling vehicle under the program, while the most popular trade-in is the Ford Explorer. The majority of consumers are purchasing passenger vehicles while trading in trucks and SUVs.

NHTSA has told dealers they can expect to wait 10 days to be repaid if their paperwork is in order and the deal is approved. But if there is a problem, dealers must resubmit their claim, leading to another potential wait period. That can create problems for dealers, who usually borrow money to put new cars on their lots and must repay lenders within a few days of a sale. Government officials a big hitch has been that dealers are not following proper procedures by filing incomplete or inaccurate materials. For example, one of the main reasons Cash for Clunkers deals were rejected early on was because dealers failed to write "Junk Automobile," in black magic marker on the title of the older cars that buyers were trading in.

A major reason for the close scrutiny of paperwork is fraud prevention. Citing the heavy volume of deals, Sen. Chuck Grassley, R-Iowa, asked the Transportation Department's inspector general Thursday to review the program for potential wrongdoing. Many dealers still expect long waits. David McGreevy, sales manager for AutoServ, a New Hampshire dealer chain, said it may take up to a month to get repaid for $250,000 worth of rebates. "That is quite some time," he said.

Ilargi: Doug Short with yet another angle on the crisis. Always interesting.

Six Lobbyists Per Lawmaker Work to Influence Obama's Health-Care Overhaul
If there is any doubt that President Barack Obama’s plan to overhaul U.S. health care is the hottest topic in Congress, just ask the 3,300 lobbyists who have lined up to work on the issue. That’s six lobbyists for each of the 535 members of the House and Senate, according to Senate records, and three times the number of people registered to lobby on defense. More than 1,500 organizations have health-care lobbyists, and about three more are signing up each day. Every one of the 10 biggest lobbying firms by revenue is involved in an effort that could affect 17 percent of the U.S. economy.

These groups spent $263.4 million on lobbying during the first six months of 2009, according to the Center for Responsive Politics, a Washington-based research group, more than any other industry. They spent $241.4 million during the same period of 2008. Drugmakers alone spent $134.5 million, 64 percent more than the next biggest spenders, oil and gas companies. "Whenever you have a big piece of legislation like this, it’s like ringing the dinner bell for K Street," said Bill Allison, a senior fellow at the Sunlight Foundation, a Washington-based watchdog group, referring to the street in the capital where many lobbying firms have offices.

Health-insurer and managed-care stocks have gained this year, led by WellCare Health Plans Inc., based in Tampa, Florida; Cigna Corp., based in Philadelphia; and Coventry Health Care Inc., a Bethesda, Maryland, company. The three paced a 13 percent increase in the Standard & Poor’s Supercomposite Managed Health Care Index since Jan. 1. Drugmaker shares have stagnated. Health-care lobbyists said their efforts are the biggest since the successful 1986 effort to overhaul the tax code. The result is a debate involving thousands of disparate voices, forcing Congress to pick winners and losers. "There’s a lot of money at stake and there are a lot of special interests who don’t want their ox gored," Allison said.

The lobbyists are on all sides of the issue. Pharmaceutical Research and Manufacturers of America, the Washington-based trade group for drug companies such as Thousand Oaks, California-based Amgen Inc. and New York-based Pfizer Inc., has embraced a health-care overhaul. Lobbying by Amgen, the world’s largest biotechnology company, is intended to "effectively shape health-care policy," said Kelley Davenport, a spokeswoman. Pfizer, the world’s largest drugmaker, is "dedicated to insuring that our voice is heard," said spokesman Ray Kerins.

The Washington-based U.S. Chamber of Commerce, the nation’s largest business lobby, is opposing efforts to offer government- run health insurance to compete with private companies. The chamber spent $26 million in the first six months of 2009 to lobby, more than any other group. For lobbyists, the goal is to ensure that whatever measure eventually becomes law doesn’t cripple the industry they represent. "They assume health-care reform is going to happen and they want to be protected," said John Jonas, a partner with the lobbying firm of Patton Boggs LLP in Washington.

Patton Boggs, the top lobbying firm in terms of revenue, has three dozen clients in the health-care debate, including New York-based Bristol-Myers Squibb Co., and Bentonville, Arkansas- based Wal-Mart Stores Inc., more than any other lobbying firm. Brian Henry, a spokesman for Bristol-Myers, maker of the world’s No. 2 best-selling drug Plavix, said the company wants to ensure any legislation preserves incentives for innovation. "We believe the health-care system needs to be reformed and we’ve specifically supported an employer mandate and cost- containment measures," said Greg Rossiter, a spokesman for Walmart, the largest U.S. employer.

The lobbyists fill the appointment books of lawmakers, and line up at House and Senate office buildings. The staff of Senate Finance Committee Chairman Max Baucus, a Montana Democrat, rotates weekly meetings among the various groups in the health-care debate, providers one week, purchasers a second, consumers a third. "We hear from lobbyists all the time," said Representative Frank Pallone, a New Jersey Democrat who heads the House Energy and Commerce health subcommittee.

The blitz by lobbyists carries a risk for the public, said Larry McNeely, a health-care advocate with the Boston-based U.S. Public Interest Research Group. "The sheer quantity of money that’s sloshed around Washington is drowning out the voices of citizens and the groups that speak up for them," said McNeely, whose group backs a public health plan, which Obama and many Democrats consider a centerpiece of any proposal and most Republicans oppose. The lobbying push also risks delaying legislation, said Rogan Kersh, associate dean at New York University’s Wagner School of Public Service. "That amount of activity is inevitably going to slow down the process," Kersh said.

The quest for influence isn’t limited to lobbying. Health- care advocates have spent $53 million on commercials, according to Arlington, Virginia-based TNS Media Intelligence/Campaign Media Analysis, which tracks advertising spending. The health-care industry also contributed $20.5 million to federal candidates and the political parties during the first six months of the year, according to the Center for Responsive Politics. Senate Majority Leader Harry Reid, a Nevada Democrat who is up for re-election next year, received $382,400, more than any other lawmaker.

"There is a cacophony going on with so much money and so many individuals hoping to shape the legislation," said Sheila Krumholz, executive director of the Center for Responsive Politics, a Washington-based research group. The number of lobbyists could grow once Congress returns next month and resumes efforts to enact legislation by the end of the year. "They have just decided this is serious enough and more fully understand the impact it’s going to have," Jonas said.

Treasury Bailout's Limits on Lobbyists Still Haven't Taken Effect
A plan by Treasury Secretary Timothy Geithner to limit lobbyists' influence over the $700 billion bailout program has yet to get off the ground -- even as the program nears an end. Just a few hours after being sworn in last January, Mr. Geithner promised to craft rules preventing external influence over bailout decisions. More than six months later -- and 100 days before the financial-industry bailout program is scheduled to stop taking applications for aid -- those rules have yet to be finalized.

Mr. Geithner's Treasury has disbursed $10.2 billion to various institutions since January, part of the more than $200 billion the government has funneled into the banking system. Several firms already have repaid more than a combined $70 billion, entering and exiting from the program before the adoption of rules aimed at curbing external influences. Mr. Geithner told a government watchdog that "other issues had consumed Treasury's time and taken precedence over completing the guidance," according to a report released Aug. 6 by a special inspector general overseeing the government's bailout.

The Treasury, which didn't respond to requests for comment Friday, has largely been consumed with trying to respond to the financial crisis, operating at the outset with just Mr. Geithner and a skeleton crew of advisers. The watchdog report said the Treasury was completing its draft policy limiting lobbyist communication with Treasury officials. It said the Treasury was waiting for the White House to finalize lobbying restrictions related to the $787 billion economic-stimulus program before issuing its bank-rescue guidelines.

The report noted that while available information gave "little indication" that special interests have influenced the government's bailout decisions, it said inconsistent record-keeping made it "impossible to examine the impact of all potential external inquiries" on the process. When the Treasury announced its plans to curb bailout lobbying earlier this year, a spokeswoman said the department intended to publish weekly communication logs showing contact between public officials and external entities -- such as lobbyists -- discussing rescue plans for specific institutions. No such logs have been made available.

Did Treasury Lie About Its AIG "Investment"?
That AIG is a giant sink-hole for taxpayer dollars is no secret now. But that's not what Washington communicated last year, maintaining that the bailout of AIG was an investment that would be paid back.

New documents show, however, that Washington never really believed what it was saying, and that the "this is an investment" rhetoric was just to make the gigantic bailout more palatable. Conservative watchdog group Judicial Watch just dug up some juicy Treasury documents on Washington's bailout of AIG.

The documents, obtained through a FOIA request, include internal Treasury emails, presentation slides and articles outlining the details of the government's "investment" in AIG, which at the time totaled as much $152 billion.

"Clearly Treasury Department officials felt strongly that the $152 billion 'investment' in AIG would not be recovered by the taxpayers. And it appears someone at Treasury did not want the risky nature of the deal to be relayed to the American people," said Judicial Watch President Tom Fitton in a statement. "These documents show that some government officials recognize their responsibility to measure the effectiveness of their TARP investments. Yet the American people are misinformed and remain in the dark about how their money is being spent."

Some highlights:

1. A series of presentation slides detailing bailout terms. Included is a slide titled "Investment Considerations." On the slide the words, "The prospects of recovery of capital and a return on the equity investment to the taxpayer are highly speculative" are crossed out by hand:

AIG treasury bailout

2. An outline that describes the strict controls "imposed" on AIG as a condition of the cash infusion, including those related to private executive compensation and corporate expenses. On the bottom of the third page, it notes that the government's corporate expense policy "…shall remain in effect at least until such time as any of the shares of the Senior Preferred are owned by the UST (United States Treasury). Any material amendments to such policy shall require the prior written consent of the UST until such time as the UST no longer owns any shares of Senior Preferred."

TARP AIG SSFI Investment


3. A December 15, 2008 Treasury internal email from Jonathan Fletcher, Chief Interim Risk Officer for TARP, revealing the existence of an internal government program to track the effectiveness of the AIG bailout. Fletcher writes: "As you know, we are obligated by EESA (Emergency Economic Stabilization Act) to determine the effectiveness of TARP investments…We would propose to follow up on the TARP investment by preparing a risk assessment note that spells out the objectives…and then create both a benchmark for AIG today and then establish metrics to track AIG's progress (or lack thereof) in coming months." As Judicial Watch notes, no documents related to this government tracking program have been released to the public.

Treasury AIG Email 12-15-08

'Tarantula' blew the whistle on Swiss secrecy
Two years ago almost to the day, the phone in the FT’s Zurich office rang as I reached the door. "My name is Tarantula," said the mystery caller. "That is not my real name. But the information I will provide will put my life in danger and be the end of Swiss bank secrecy." Loonies on the line are not unfamiliar in journalism. But in the months of contact that followed, it emerged that my informant, though driven, was entirely compos mentis.

"Tarantula" turned out to be Bradley Birkenfeld, the American private banker whose disclosures have played a crucial part in the massive crackdown by US authorities on Switzerland’s hallowed bank secrecy. This week, the US and UBS, Switzerland’s biggest bank and target of the campaign, reached an out-of-court settlement on efforts by the Internal Revenue Service – the US tax authority – to gain the names of up to 52,000 Americans with secret accounts. Reflecting the importance of the case for one of the Swiss economy’s biggest money-spinners, Bern was party to the deal.

Details should be released next week. Lawyers reckon the settlement will require the disclosure of at least 5,000 names and a possible fine on a bank already reeling from more than $50bn (£30bn, €35bn) in writedowns from the credit crisis. Bank secrecy looks in tatters. None of this may have come to pass without Mr Birkenfeld and the information he provided on how, over the years, UBS solicited business from rich American clients and helped create structures that enabled them to avoid tax. A tall, well-built man of 43, his manner is anything but cloak-and-dagger. The son of a Boston brain surgeon, he grew up in the city’s privileged southern suburbs. He began his banking career at State Street, the local lender, before moving into international wealth management at Credit Suisse, Barclays and UBS.

Mr Birkenfeld spent much of the past 15 years in Switzerland, where he burnished his upper middle-class US credentials with the charm and savvy of a pukka Swiss private banker. He worked in Geneva as one of about 60 UBS private bankers in three Swiss cities, providing services for clients that ranged from advice on buying jewellery and art to tricks such as squeezing diamonds into toothpaste tubes so as to move them without detection.

The material trappings came in tow. Over the years, Mr Birkenfeld accumulated a flat in Geneva and a dream chalet in Zermatt with an unblocked view of the Matterhorn. So established was he in Switzerland that he gained a coveted "C" residency status – the category allowing permanent residence only available to those who have put down roots and show an unblemished record. With so much going for him, it seems extraordinary that Mr Birkenfeld blew the whistle. He says he felt obliged as his bosses, driven by demands from above and incentivised by big bonuses, put pressure on client advisers such as himself to break internal guidelines and US laws on what Swiss-based bankers could do in America.

In 2006, Mr Birkenfeld formally pointed out the irregularities, copying in Marcel Rohner, then UBS’s head of private banking and later chief executive, and Peter Kurer, then UBS’s top lawyer and later chairman. An internal investigation prompted some improvements in policies. But the regular trips across the Atlantic with encrypted computers and training in counter-surveillance continued. So did the participation at events such as Art Basel Miami or yacht racing in Newport, Rhode Island, where UBS bankers would meet clients and try to make new contacts.

Others say Mr Birkenfeld’s motives were venal. His whistleblower letter came only at the end of the six-month "gardening leave" taken after quitting UBS in 2005. Revenge may have played a part: Mr Birkenfeld successfully sued the bank over his final bonus. Others still suggest he might have been "turned" by the US authorities, having come to their attention in earlier inquiries. US law offers registered whistleblowers up to 30 per cent of any unpaid tax their information reveals. The reward has no ceiling, and applies to everyone, including convicted felons. With estimates that UBS’s clients had assets of $20bn, the temptation would have been mesmerising.

That other Swiss bankers have never come forward reflects Mr Birkenfeld’s status as a maverick. Earning handsomely from managing rich people’s money, no sensible banker asks too many questions about clients’ tax compliance. A reputation as a troublemaker would ruin one’s prospects. Client confidentiality in Switzerland is strictly enforced by law. In spite of his acclimatisation, Mr Birkenfeld was always an outsider. Colleagues recall his "Tequila Tuesdays", when he cracked open a bottle to enliven quiet afternoons at the sober Geneva office. A big man with bright blue eyes and a barely noticeable goatee beard, he has the look of a former athlete gone slightly to seed. "He’s one of the funniest people you’d want to be around," says a former colleague.

Ultimately, Mr Birkenfeld may end up punished by all. In Switzerland, his name is anathema. The chalet in Zermatt is history. Among bankers in the now dissolved UBS team, incomprehension is the most charitable reaction. Higher echelons prefer not to comment: while not directly responsible, the fact that Mr Rohner and Mr Kurer were recipients of Mr Birkenfeld’s whistleblower letter almost certainly contributed to their departure from UBS. Even in the US, things have not gone right. On his return to Boston in May 2008, Mr Birkenfeld was arrested in spite of hopes to secure immunity. He has been charged with conspiracy to defraud the US government by helping tax evasion: sentencing, progressively postponed, is due next week.

Mr Birkenfeld still hopes to benefit from the whistleblower reward scheme. The US authorities have acknowledged his role, if grudgingly. But the fact he has ended up under arrest has fed suspicions among former colleagues that his position may have been compromised from the start. That Mr Birkenfeld has spent the past year with an electronic "bracelet" around his ankle, restricted to his home state and with a 10pm curfew, will count in his favour. Even so, the tarantula that sank its fangs into UBS could well end up in jail.

UK councils 'not prepared for next wave of the recession'
• Addiction and domestic violence set to increase • Low-income households 'hardest hit and ignored'

Councils are not doing enough to prepare their communities for the fallout from the recession and face a surge in social problems such as addiction, alcoholism and domestic violence, the leading public sector watchdog warned yesterday. The Audit Commission said that local authorities in England were now facing the "second wave" of the downturn, as the effects of rising business failures, bankruptcies and unemployment bite.

"Many councils should be doing more to prepare for the expected social, financial and economic development challenges ahead," it said. "This includes councils that have escaped the worst effects to date, some of which are complacent." It coincided with a separate report that found that despite predictions that the recession would lead to an exodus of non-UK nationals, one in 12 employers in the UK plan to recruit migrant workers in the next few months. The study, by the Chartered Institute of Personnel and Development and the consultants KPMG, found that the number of migrant workers rose between the first quarters of 2008 and 2009 while employment of UK nationals fell.

Gerwyn Davies, public policy adviser at the CIPD, said many employers found it hard to fill vacancies with UK workers. "The idea that migrant workers comprise a marginal segment of the UK workforce that is dispensed with when times are tough is clearly wide of the mark. Most are recruited and retained by employers because they provide skills or attitudes to work in short supply amongst the home-grown workforce." Official figures due to be published this morning will be closely scrutinised for evidence that the economy is bottoming out. The broad measure of joblessness, which covers those looking for work rather than simply those eligible for state benefits, has been rising at a record rate.

A third report found that low earners are being disproportionately hit by the recession. Amid growing political concern about the alienation of UK-born workers, the Resolution Foundation, a charity, said people with household incomes of between £11,600 and £27,150 were facing severe financial pain, were being overlooked by the government, and missed out on help from employers. The chief executive of the Resolution Foundation, Sue Regan, said despite signs of economic recovery it was likely that job losses among low earners would continue to rise. "If you look at the sectors where they are most likely to work, they are areas which are likely to [have been] depressed for a long time," she said.

In its report, Squeezed: The Low Earners Audit, the Resolution Foundation said low earners in work were more vulnerable to the softening labour market "than benefit-dependent households – who are less likely to be reliant on earned income – or higher earner households – who are more likely to have savings and insurance". The charity reported a 45% jump in benefit claimants in the distribution, hotels and restaurants sector since April 2008, from 49,000 to 71,000.

The charity estimates that 400,000 low earners were receiving jobseeker's allowance in April 2008 and at least 180,000 more have joined them since the recession began. "In truth, the figure is likely to be higher because of the higher levels of vulnerability and job insecurity faced by low earners," it said. The charity said these workers were likely to have difficulty "bouncing back" from unemployment because "employers don't tend to invest as much in training them … but the government tends to focus on people with no skills. We would like to see the skills strategy extended specifically to help low earners."

Venezuela, Russian Group Plan $30 Billion Oil Venture in Orinoco Region
Petroleos de Venezuela SA and a group of Russian oil companies plan to spend $30 billion on a joint venture in Venezuela’s Orinoco region. The 40-year venture will seek to produce crude in the Junin 6 area and may expand to other Orinoco blocks, Russian Deputy Prime Minister Igor Sechin told reporters in St. Petersburg today after meeting with Venezuelan Vice President Ramon Carrizalez. Russian investors will include OAO Gazprom, OAO Rosneft, OAO Lukoil, TNK-BP and OAO Surgutneftegaz. The venture will be signed "in the coming months," Sechin said.

Presidents Dmitry Medvedev and Hugo Chavez are expected to sign an agreement to create a bank to fund projects during Chavez’s visit to Russia in September, Carrizalez told reporters. Russian and Venezuelan officials signed accords today covering energy, education, tourism, environment and drug enforcement cooperation. PDVSA-Servicios, the state oil company’s oilfield services subsidiary, and Gazprom’s Latin American division agreed last month to form a venture to operate drilling rigs and gas compression equipment. Venezuela has reached out to Russia in an attempt to obtain financing and reduce dependency on the U.S., the country’s main trading partner.

Gazprom will use its Gazprombank unit to lend $4 billion to Venezuela starting at the end of August, Boris Ivanov, chief executive officer of Gazprom EP International BV, told Chavez on state television on July 28. The loan will be collateralized by Venezuelan exports, he said. Five Russian oil companies last year formed a company known as Consorcio Ruso to pursue joint ventures in the South American country.


bluebird said...

Fifth Third Bank - We use that bank in Ohio. It is based in Cincinnati. We have no issues with 5th3rd, but, fyi, a few years ago, it started buying up banks in other states.

el gallinazo said...


The temperature in the mountains doesn't vary that much with the seasons. It rains a lot more in their summer, our winter. Truth is I have been there only in Sep & Oct as I would flee STJ during the height of hurricane season.

Anonymous said...

Why is Bill Gates selling?
* AUGUST 14, 2009, 10:06 P.M. ET

Gates Foundation Sells Off Most Health-Care, Pharmaceutical Holdings
Bill Gates continues selling off Microsoft stock

Microsoft chairman and extremely rich dude Bill Gates has sold off another 1 million shares of Microsoft stock, according to a Securities and Exchange Commission filing on Monday, bringing up his August stock sell-off to 8 million.

But no worries for the Gates family: According to the SEC filing, William H. Gates III still owns more than 725 million shares - 8 percent of outstanding Microsoft stock. At Monday's market-closing price of $23.42 per share (down 0.59 percent on the day, by the way), that took Gates' stake in Microsoft down to, um, just $16.98 billion.

In an SEC filing Aug. 3, Gates reported selling 2 million shares at $24.17 a pop. The next day, he reported selling 1 million more ($23.78). Another day, another 2 million shares ($23.74). Last Thursday, he dumped yet another 1 million shares at $23.64 each. Friday was 1 million at $24.01 and today saw Gates sell 1 million more at $23.70.

Anonymous said...

From the Boston Globe: President shifts focus to renting, not owning

The Obama administration, in a major shift on housing policy, is abandoning George W. Bush’s vision of creating an “ownership society’’ and instead plans to pump $4.25 billion of economic stimulus money into creating tens of thousands of federally subsidized rental units in American cities.

The idea is to pay for the construction of low-rise rental apartment buildings and town houses, as well as the purchase of foreclosed homes that can be refurbished and rented to low- and moderate-income families at affordable rates.

Anonymous said...

Bill Fleckenstein article dated for tomorrow. Warns about the inevitable Social Security crunch coming sooner (possibly next year) rather than later.

DIYer said...

El G,

Yeah, Texas needs about 3 feet of rain. Preferably not all in one storm, but that's the way things work out sometimes here in what will soon become part of the Chihuahuan Desert.

I'll post the bank-evaluation link again, and linkify it this time:
For what it's worth ... I don't think the not-good-at-fractions bank had the best statistics -- well according to banktracker they accepted TARP money. You can put in the name of a bank, and the site will list statistics, based on public information, about how much troubled debt the bank has.

Anonymous said...

The toxic assets on almost all bank books, big, medium and small, should immediately sink more than just a few hundred of them, try a few thousand.

Crooked deceitful, peep-a-boo accounting is the only thing holding back the dam at this point. That and no regulation, or should I say no regulation on the politically connected.

What are they waiting for, a convenient time to let go of the puppet show and let it all explode in one big show stopper?

The Sheeple are completely confident in the promise of the FDIC. I argued with someone recently and they said it CAN'T fail, the government won't let it. It's hard to reason with an all trusting attitude like that.

When this all inevitability implodes, I can't wait for the twisted, surreal rationalizations of why it did.

The general public is infantilized.

So who's their Daddy now?

jal said...

Coming Soon: Banking Crisis of Historic Proportions

Now, it is a good thing that banks are conserving capital, since they need to increase capital to offset bad loans.
I would add …

Companies are also trying to conserve capital to cover their loans and to try to operate within their revenue streams.

Companies are not borrowing except to renew their present loans and line of credit.

Consumers are maxed out and banks are the restricting the credit to try to limit defaults.
… as well as the purchase of foreclosed homes that can be refurbished and rented to low- and moderate-income families at affordable rates.

Like I said before, Fannie and Freddie will not have to write off those loans because the will be rental units. Some will have with option to buy.

RC said...

I am reposting this here as it came up just after the new post announcement and it may have a germ of value for some of the readers beyond El G. Thank You.

August 16, 2009 1:34 PM
Anonymous RC said...

El G, I was going to comment that the DDS must be a Cepeda, but you corrected that. The pharmacists on the Plaza of all the little towns of Latin America know everything you ever need to know about the town and its persons and most either speak English to some degree or can call in a friend or family member who can.
Many of these pharmacists do more doctoring than the doctors and I think all do more prescribing. They often provide services like B12 shots, right there standing in front of the counter. They know and have all the common and cheap remedies for the insects that bite and they know how to avoid those insects. They know all the important things. El G, I knew you were ahead of the crowd in the gray matter department, but I can see you will plainly be fine in your Latin travels if you continue to confer with the farmacia savants. Dreda is the savant here in my little town. She knows all, sees all.
Now, a small suggestion, G. Once you arrive {or even while you are in Florida} speak Spanish all the time no matter how wrong it is. Read the local Spanish paper to add two nouns a day and two verbs a week. Bit by bit, over a year or two the thing will right itself and you'll be much more fluent. People will laugh at your hilarious usages and unintended double entendres. But we laugh at the way children speak also, but we aren't laughing at them, it's just that what they say is very funny by accident.
In my 30 years of observing the very sad general Gringo incapacity to grasp the idioma, it comes down to that. The ego doesn't like the laughing. There is also a more serious degree of ignorance {and perhaps mental illness} that sets in here. The non speaker begins to feel {and this may happen the first week they are here} that the native speakers are "talking about me and laughing". Usually this occurs in a restaurant where the folks at an adjoining table may be glancing our way in a friendly manner, and since I know the lingo, I have to say in 30 years I've never seen an actual case of the imagined ridicule.
The gringo that adopts this view is the gringo that even I do my best to avoid.
I am not at all saying that G is in this category or the bad grammar category, but I will say this, and in fact do say it to the other North American English speakers here all the time.
Living in a country and not speaking the language is like swimming without getting wet. Why would you want to ever do that?
Buen Viaje G and enjoy being laughed at. Been there, done that,
laughed along with my fellows. What occurs is that the laughers become your mentors and they adopt you as a project. I learned Spanish by speaking it, I have no schooling. In order to expand my abilities beyond buying food and building homes I read {present and past tense} the most erudite newspaper I could find. I might add that although my IQ is considered off the scale, in school I never did any actual studying and as a result was one of the world's worst language students learning very little of several languages other than English which I seemed to absorb by, you guessed, reading the New York papers at the age of three. So, even though I, typical Gringo Flojo in the language department, never learned a damn thing in school, I learned French by being laughed at by my French wife and Spanish by being laughed at by everyone in town, and thus, I recommend the technique. BTW, for anyone amongst the readers who doubts the viewpoint of G about the Island Life, I must state that he is very accurate. He is also very accurate about his sociological navigations in Peru. I would accept the advice as Bible. BUT, be sure Dr. Cepeda isn't on a little vacacion before you go. Call that Farmacia to find out. Ask them anything. In Spanish.

August 16, 2009 2:09 PM

rapier said...

This spring the congress gave the FDIC a $500billion "line of credit". The stated reason was to fund PPIP, the toxic loan program that is moving at a glacial pace. If that can be drawn on to fund depostit insurance, according to the legislation I don't know. I do know that when it comes to the Treasury, of which the FDIC is part, the law doesn't apply.

Hardly anyone, even mighty bears,worry much about bank deposits disappearing. Everyone thinking that one way or another the Fed will print that. That's probably about right.

The nightmare scenarios that might come from that are too numerous to mention. For now pretending is much easier.

snuffy said...

While personally of the mind,its all going to go "bye bye" this fall,I don't feel it will happen in a uniform manner...

We will probably see how a complex system "dies",or the way I look at it,reverts to a lower energy stages.

First the extremities,

then core functions

Then a complete system reboot.

By this time,no one will "recognize"their home town,much less their home.

One year ago,I was at the top of my game at my company...good could see a few clouds,IF,you looked ...but all the overtime you was good.

1 year later...

5 months of less than 20 hours a week..2 months of <5...finding myself in a new "position" that is "tenuous" to say the least[at this point 40 hrs a week is a blessing]

I don't recognize my company...The economy has changed it beyond words...I dont want to think about this fall...What little we have will drop off a cliff..then ,My guess, I join the ranks of the un-employed...again..

Except this time it may last a long long time...

It will be Bees,and fruit trees,and garden.I have some ideas to spark some small business...Like gasifiers...that could power a home "stand alone"using whatever is available..but those have to wait until I have time to work on them.

I think our gentle hosts are on the money when they say folks wont recognize their towns...mine is changing so fast it is difficult to track I have given up.I will look at Portland more carefully when I have the luxury of time ...

Time to be productive...


SouthFlorida said...

To me, the single most important villain of the current insane bailout era - in both symbolic and substantive terms - is Henry Paulson. The crucial turn to the current era of complete fiscal insanity and multi trillion dollar scale-criminality came with his gangsterish strong-arming of Congress last fall for the $700 billion bailout. He should be the lead figure in a long line of financial criminals to be indicted, convicted, and sent away for long prison terms - both for his actions at Goldman Sachs and at the Treasury Department.

Regarding the bankruptcy of FDIC and the $8 trillion in outstanding covered deposits: In the event of a fullblown banking system meltdown, wouldn't the path of least resistance for The Powers That Be involve simply creating the money to cover it all out of thin air? After all, it does appear easy enough for these conjurers to do on a purely technical level. Just look at the ease with which they have put $24 trillion and counting so far into place over the past year.

snuffy said...

A note for RC on Spanish...What gringos don't get is that most latin humor is based on "word play" many times you are unintentional hilarious when you carefully butcher their language....

[mrs snuffy is mexican,and has been a translator for money]


Anonymous said...

A fine piece of writing today by Ilargi; however, I have wondered in the past if “coming clean” as it were, would only lead to they type of chaos and trauma that perhaps a kicking the can down the road strategy could possibly evade. Staying alive until the storm passes and better times return. No matter, according to Ilargi, there is no running away from the systemic cancer--“tapeworms” as some have so creatively suggested--and the only option is facing up to the disease and taking a bitter dose of medicine.

Beyond that, I have also noticed a peculiarity in Ilargi’s writing. He writes as one of “US” when he seeks to beat the drum of populist concern and outrage, and refers to “ YOU” when he is waving a castigating finger at all of us limp-wrested Americans suffering from a severe case of moral laxity.

Not that any of that really matters, however. The content of his post was outstanding and right-on.


RC said...

About the banks: my money is in a Co-op that I own along with the other depositors. Our basic cash on hand value is 33%. We also hold shares in the bank as well deposits and checking and card accounts and we receive annual payouts on our shares that most of us roll over. I owed my Co-op $8,000 and they owed me $9,500 as of last May, so because of the general instability and all the unprecedented economic and financial events, I zeroed out the sums and left the minimum amounts in the shares to cover my services.
I can't understand why anyone who has this option for personal banking wouldn't exercise the Co-op membership model. I say this as the son of the man who was VP of CIT in the sixties and seventies. I know a few things about loans and banks that the Old Man taught me and I have zero reverence for the bank and finance corporations. Maybe this opinion is of use to someone here.
The 33% I refer to is our percentage of value of total obligations that we always have available for immediate payout. We never buy or own any exotic issues of any kind. It is a very tactile operation. The Co-op bought a large building on La Calle Ancha as it was a fire sale, and now they have the space to install the first safe deposit boxes the town will have {in the modern era}, and my debate at the moment is how much silver and gold to store there as we use it in casting dental devices. Yes, I have lowered the amount of cash I have at the bank, No, I am not sure how safe the safe deposit game will be in the near future. Most of my money will be in metals in the near future as I use them every day and must stock them. Steel, Copper, Silver and Gold is what I do. It isn't a theory. The last 5 years have been a rough ride, but I did well in copper. I have cut most of my metal supplies way down at present and will restock seriously when commodities fall off a cliff again.

Anonymous said...

@bluebird: Thanks for the suggestion of Credit Unions. Yes, that's in the plan. One bank, one credit union, both with Nothing's certain, but I'll sleep better with that kind of diversification.


WOW! THANK YOU! That site is golden! I cross-checked it with some of my results of going through Call Reports, and it matches up with what I found.

It also does one other critical thing, namely it reports who owns it.

I came across one bank before I found that site, which looked good. They touted themselves as a safe bank.

I did some extra effort with a yahoo search of news, which revealed that they had been bought up by Wells Fargo recently. Sigh. It was back to the drawing board on that one.

RC said...

The Snuff is correct that word play is humor here, but we also derive the great mass of our jokes on this island commenting on our client's obliviousness, the phenomenal incompetence and corruption of our dear Freely Associated State and it's politicians {a governor who was a poet thought that one up and Yes, Munoz milked it for plenty of jokes, just as you claim Snuff}and many other observations of Cotidiana serve as our grist {or masa}.
One of my early goals in the struggle with Spanish was to be fluent enough to tell jokes, since, being mostly raised Irish, life IS a joke. How nice that on my first day in the country I discovered a juice bar named "La Vida en Broma" which I needed the owner to translate for me. After that, I was sure I would be OK, as long as I mastered the chistes, bromas and the local sayings which are themselves, poetic. Decades later, my jokes are finely honed and I use these important tools all day in all settings. I'm always inventing and collecting others. Life may sometimes be hell, but hell may often be seen with some degree of humor for the no cost alleviation it affords.
In my case, knowing the jokes and the local herbs and plants allows me to be seen by all those I meet as part of the scene and not an interloper. Plus, because I read the papers and know the history of all the state politicians, when I meet them on the street {happens often} I can tailor a cutting comment to their particular form of egotism or chicanery in such a way that they can't be sure if I am being snotty or erudite. I am particularly delighted that a Senador that I ran into at a luxury villa two years ago and was able to freak out completely with my blond blue eyed Spanish 25 word or less commentary on his entire career while shaking his hand and saying "a pleasure" is now in the Federal Pen for at least a decade.
I'll stop now, all of this is WAY off topic. Jokes to all, as important as breath! Excuse me while I cackle.

el gallinazo said...


I agree with everything you wrote except that very few people speak more than a smattering of English in Peru. Airline pilots, tour guides and better tourist hotel staff, the rich in Lima who travel to Europe. That's about it. Young people tell me that they studied English in school, but when I ask them what the course was like, it turns out that it was one hour, twice a month. With the exception of Brazil, their whole continent speaks Spanish, and the Brazilians seem to get by outside their borders as the Portuguese appears to be pretty similar.

Mexico is a special case with the dominant English speaking power to the north. When you get into the heart of South America, it's different. And the Caribbean has been polyglot since Francis Drake and Blackbeard.

I will get back into Spanish intensely. My problem is that my memory is failing. It is like a sprinter who has gone permanently lame. Wikipedia has become my memory :-( However, I realize that I have to work with what brains I have left.

Nassim said...

Yesterday, Ilargi wrote:

The difference between what people on both sides of the ocean presently perceive as their likely future lives, and what they will actually face, is much greater than the difference between their present circumstances.

I would love to know what this means. Does it mean that Europe will suffer even more than the USA or the converse? Perhaps it has an altogether different meaning that passed over my head. Please enlighten me.

Michael said...

The amount of insiders dumping stock is interesting, though not the least bit surprising. I suspect that another major plunge in the global equity markets is just about inevitable come fall, when trading volume picks up once again after the end of the summer holidays. P/E ratios are at or near all-time highs, and there’s no justification whatsoever for this being the case, as nothing has really changed since this time last year. The banks are every bit as insolvent now as they were then -- in fact, even more so, as millions of more defaults have occurred over the past year, leaving ever-bigger, crater-sized holes in the banks balance sheets. Even the toxic CDO ‘assets’ that supposedly sparked off this whole mess in the first place remain hidden in the deepest, darkest vaults found on Wall Street. From my point of view, this picture presents the shorting opportunity of a lifetime -- but only time will tell.

bluebird said...

DIYer - Thank you for that banktracker site. You can search for credit unions too!

Coy Ote said...

DYIer - I checked on our local bank (using your link) which has went somewhat downhill since last fall.

My credit union however is doing just fine! Thanks for the reminder and link.

Anonymous said...

The tsunami's wake is a year halved down the road. What pablum can the TAE elite furrow to fill the hours from now, thence? That's a lot of clackity-clack to those more import filled days this way cometh. Can Ilargi herd the crowd so the farthing haf' meaning?

"I doubt, I doubt", cried the sparrow to his mate.

David said...

Bluebird said:

"It hasn't registered, at all, that these bailouts are being added to the debt for their kids and grandkids to pay off. Hey, their life is humming along very nicely, so far, so they see nothing to prepare for.

Well, Joe Bageant nails it in his most recent post:

"High and low, we have been transfigured into a society of performers behaving the way we are expected to behave as productive citizens. Production as measured by the [corporate] bastards. And we cannot expect to find any Gandhis or Simón Bolivars among that high caste. One does not get there by leading salt strikes, nor does one appear in their boardrooms on behalf of the masses wearing beggar's cloth.

"The masses, the masses, the masses. Whatever are we to do with them?" laughed a political adviser friend, only half-jokingly. True, we've always been such a herd, always been given to self-imposed blindness of the whole. But now we are blindfolded. There is a difference.

During earlier times in this fabled republic -- and much of it has always been just that, a fable -- there were somewhat better odds of escaping such blindness. Now it is considered the normal condition; we see it as in our best interests to embrace such national blindness. In doing so, we all but ensure a new Dark Age."

The unwholesome fact is that today, regarding the ability to see things as they truly are, Americans fall into one of two camps -- the Complacent or the Defeated.

The Complacent are blinded by an inability to interpret anything other than what they are spoon-fed, and the Defeated are so desperately holding on to life by their fingernails that they have not the luxury of time to evaluate their nation's mendacious leadership.

There will be no pitchforks.

The steely one-eyed men will skillfully direct the blind to their oblivion.

Coy Ote said...

David - "Americans fall into one of two camps -- the Complacent or the Defeated."

Far too many are complacent, and many do feel defeated I am sure, but I think there is a lot of variations in between.

To use a golf analogy, this predicament is like a very long par 5, and some of us are just "laying up." It could be a smart play in terms of survival.

Also, I am not sure this predicament applies only to we usacos. Seems pretty widespread at the moment.

Dr J said...

From the Associated Press today:

"Bowing to Republican pressure, President Barack Obama's administration signaled on Sunday it is ready to abandon the idea of giving Americans the option of government-run insurance as part of a new health care system."

el g - looks like you were right on in your prognostication. I am just surprised they caved so early.

Anonymous said...


I ran a search on the CU's in our area with DIYer's site (thanks again, DIYer!).

The CU's in our area are in as bad a shape as the banks! I would've thought that CU's would be safer, but I was wrong.

Out of 15 CU's, all but one were at, or above, the median for Troubled Assets. Only 2 were about the median.

No wonder it's a pain to get this information.

Coy Ote said...

Bluebird and DIYer - Just a FYI on my particular situation. We have assets in a bank and a CU.

First Merchants Bank
Troubled asset ratio,March 2009
National median, March 2009

First County FCU
Troubled asset ratioMarch 2009
National median, March 2009

Coy Ote said...


National median, March 2009

el gallinazo said...
This comment has been removed by the author.
Farmerod said...

Paraphrasing Doug Short: March 2000 was the beginning of the stock market inflation-adjusted decline.

Ilargi said Doug Short with yet another angle on the crisis. Always interesting.

It was interesting when your partner said it at least a year ago. Now it just seems like a re-hash of the same angle. Or am I missing something?

el gallinazo said...

Well, Dr. J,

There is something really special about the USA. How else could we be the only developed country without single payer health care? I am truly a believer in "American exceptionalism."


At the risk of putting words in Ilargi's mouth, which is quite a risk, I think what he is saying is that whether we start out 10 degrees C or 20 degrees C on any side of any puddle, we are all headed for a few hundredths of a degree above zero K.

Coy Ote said...

El G - "How else could we be the only developed country without single payer health care?"

Good question.

My answer would be, corporate control of the media and the politicians.

I sincerely believe most Americans have wanted some kind of a sensible health care system, term limits, and many other sensible alternatives for a long time, but representative government has been totally diluted.

What the CEO's want, Gold in Sacks gets!

Armando Gascón said...

Gallinazo, son los kilos no los años -It's the Kgs not the years.
A few years ago i noticed that my memory, never very good to start with, was really slipping away, and perhaps other mental functions. I have improved that.
I started doing Sudoku and I ought to pickup crosswords, the English style ones, very curious and very difficult for me, but laziness and frustration puts that off.
Sudoku made wonders, I even forced myself to do it when almost falling asleep.
I suppose that the brain is not too different from a muscle, any exercise is good for it.
I drink green tea with some black tea added, because I don't like the bland taste of green tea, also herbal teas and the like.
500 mg of vitamin C daily, sometimes a gram or more. Cod liver oil, and aspirin for my funny left shoulder blade seems to work right.

I drink about 2 liters of beer a week, as much fruit and vegs as I can stand -not a lot- and yes, I ought to do gymnastics and some running but I can't be arsed to do it, there are limits in the pursuit of good health if it interferes with my basic laziness.

Learning another language may cause headaches, I am told. It may be that the brain expands against the skull -probably this explanation is too simplistic- or new neuronal circuits grow or just the stress of speaking it, one has to find the correct word quickly and understand quickly the other fellow, because I don't think it happens when you are just reading.

In this day and age, with such wonderful things as DVDs in several languages and with subtitles too, learning a foreign language is very easy and enjoyable for any one.

Anonymous said...

Wow. Thanks for that banktracker link.

Homestreet Bank had been considered a good local bank -- According to banktracker its troubled asset ratio is 98.9% compared to the national mediam of 11.7 (March 2009 data). Bankrate gives one star.

Looking at credit unions...


RC said...

El G, the memory problem is real, but must be overcome as much as possible. I am 57 and at 17 and 47 I suffered severely debilitating impacts to my cranium that have left large information gaps, gaps that I am sometimes conscious of and at other times my children or my siblings must relate long histories of common occurrences that I have no memory of whatsoever. On the typical Alzheimer scale, I never lose my keys or other items and I know what my keys are for. I have forgotten how to speak French {know the accent, can understand it, can no longer reply very well, can read it perfectly, can't recall it to speak it, never speak it here} and am now forgetting large portions of English vocabulary that I seldom use and if not for the net and having English speaking clients, I'd be in real trouble. I now understand how a Thai girlfriend I once lived with was embarrassed to speak to Thais she met because she had to keep asking them the word for "X" and many were common words. She never used the language. Many days I cannot remember what an hipoteca is in English. But I soldier on.
With Spanish, just do it, bypass the memory location, just swim with it. When I lived in Ponce, PR, the number of English speakers there was very small and it was there that I first had to get a grip on the language {1979}. I was building a library at a University, yet English speakers were few. I couldn't buy a hammer or a papaya {or a lechosa, whole story of double entendre there folks} without major incident and every night after work {I was the boss} my head hurt from the strain of my ignorance. I still maintain that while English is not common south of Belize or Guyana, there are practitioners of the language that are willing to be called upon. Professional translators here phone me for help with political references {what does one call the head of an agency} and legal references related to property law as I have to study and have conversations about these areas constantly and often the translator doesn't know everything. We are speaking of those translators who need help from Spanish to English. I'm glad they don't ask me about grammar. My verb forms in Spanish are to larf. Again, no schooling. Yes, though I am 1/4 Portuguese, I never studied a word of the Idiom, yet I can read that and Italian almost perfectly. Not much of a trick, and now I understand most of the Operas. Is life great, or what?
I did study Latin for three years, was the school's worst student, can read it now but can't remember the verb tenses and I probably never actually absorbed the structure in the first place and so I doubt I am in the correct time frame when reading. But in some subconscious layer I am sure the thousands of hours of exposure have helped with the other Romances. It shames me even now that all those years that the Brothers of the Sacred Heart swore they were not trying to torture me with the language of the Caesars {lots of it was the actual words of the damned Caesars especially that Julius guy} and promised me that one day I would come to appreciate their efforts to Latinize me, yes, it shames me that indeed my life would have been a very different one without the Latin cheat sheet stored back there in the dim memory vaults. And yes, the Brothers, as usual, were right. Ave Hermanos. One day before they are all dead I must make a pilgrimage there and ask forgiveness, although the primary mentor died at a very ripe age a few years ago. Remarkably, all of his Latin, imparted to me while we played golf, was spoken with a Georgia, USA {JAHWJAH}accent. I often picture {to this day} Julius Caesar conquering Gallia and speaking to his confederates in Jimmy Carter's voice. Other times Julius might speak English as when he appears in my polyglot Dreamscapes. "Now, Cuz", he begins.

Coy Ote said...

Is Nigeria next? I have to wonder about the energy connection here...

1 - ABUJA, Nigeria (CNN) -- U.S. Secretary of State Hillary Clinton on Wednesday visited Nigeria, warning it could be a target for al Qaeda.

2 - Nigeria ... African nation blessed with enormous sudden wealth... as the oil that first gushed from the Niger Delta's marshy ground in 1956The world market craved delta crude, a "sweet," low-sulfur liquid called Bonny Light, easily refined into gasoline and diesel.

Ilargi said...

"Paraphrasing Doug Short: March 2000 was the beginning of the stock market inflation-adjusted decline. Ilargi said Doug Short with yet another angle on the crisis. Always interesting. It was interesting when "your partner" said it at least a year ago. Now it just seems like a re-hash of the same angle. Or am I missing something"

I was referring to all the different graphs Short keeps on coming up with.

Ilargi said...

"How else could we be the only developed country without single payer health care?"

..... and the only developed country WITH the death penalty.....

A combination that makes a body reflect..

Ilargi said...

”The difference between what people on both sides of the ocean presently perceive as their likely future lives, and what they will actually face, is much greater than the difference between their present circumstances.

I would love to know what this means. Does it mean that Europe will suffer even more than the USA or the converse? Perhaps it has an altogether different meaning that passed over my head. Please enlighten me.

Just that present differences Europe <-> America are negligible compared to the difference between where either are now and where they’re headed.

Frank said...

@Ilargi reflect that the US and it's predecessor colonies imported a substantial fraction of the British Isles' loonies. (Happy to enumerate on request) William Penn sent agents to Germany to recruit refugees from the 30 years war. Oddly enough many had 'unusual' religious beliefs.

The trend continued throughout the 19th and 20th centuries and probably still does.

So sayeth the descendant of draft dodgers, debt evaders and the Oxford scholar who spent The Queen's Prize in Chemistry to set up as an assayer in the California gold fields.

el gallinazo said...

Ilargi said...
"How else could we be the only developed country without single payer health care?"

..... and the only developed country WITH the death penalty.....

Not quite. Japan has it also.

Armando Gascón

Thanks for the advice. I have saved it to my hard drive and will look into implimentation when I settle down a bit in a few weeks. The place where I have been living is very difficult to eat healthy if you haven't made your first billion.

Armando Gascón and RC

Thanks for the language learning advice. In Peru I would often go for a week without a word of English, and I did get headaches. Learning a language in ones sixties does jostle up the neurons. As a former teacher, I worry too much about conjugating the verbs correctly and it screws up my fluency.

Anonymous said...

"Is Nigeria next? I have to wonder about the energy connection here...

1 - ABUJA, Nigeria (CNN) -- U.S. Secretary of State Hillary Clinton on Wednesday visited Nigeria, warning it could be a target for al Qaeda."

When Christopher Columbus set sail for the New World in 1492 he carried with him the words of his patron, King Ferdinand of Spain: “Get gold, humanely if possible, but at all hazards – get gold!”

In this case it's black gold the devils tears.

Rats and Monkeys said...

Snuffy wrote:

"It will be Bees,and fruit trees,and garden."

Good luck with the trees. I've been building an "ark" since the 80's in the far northeast (but with trees rather than animals)

If you don't already have this, here is a link to a free pdf of J Russell Smiths "Tree Crops, a permanent agriculture" written about 60 to 70 years ago.

I hope all your trees aren't in the rosaceae family: apples,pears,cherries,peaches,etc. Extremely disease prone. I've learned the hard way how essential bio-diversity is. (Be sure to include nut trees, especially blight resistant filberts/hazels which bear early)

My motivation for my day job has always been only to support my own "more important" projects. Had considered operating a nursery when retiring, but I guess now my edible-horticultural skills and diverese collection of propagating material will be devoted to making sure I am too valuable to my neighbours to consider eating me ;-)

If you end up with a herd of unemployed relatives maybe you can put them to work grafting and budding and create your own neighbourhood nursery.

good luck with the bees and all.

DIYer said...
This comment has been removed by the author.
DIYer said...

Ote -- having a surplus of otes; exhibiting otistic characteristics.

I just ran the bank check on my own CU and:
Troubled asset ratio, March 2009 - 107.7
National median, March 2009 - - 5.6
Troubled asset ratio, March 2008 - 52.2
National median, March 2008 - - 4.2
Ewww ...

Sometimes we hear the coyotes sing in the greenbelt behind our house. We're dog people so we like it, but some of the neighbors get all in a tizzy.

Greenpa said...

El Gal, and RC - I have another language tactic-

"I read {present and past tense} the most erudite newspaper I could find. "

yeah. AND- read the funnies, buy comic books, and read them assiduously and repeatedly. It will acquaint you with current slang the eruditers never touch. And the pictures and context can make a dictionary unnecessary.

I have very fond memories of "Unca Scrooge" in German.

Anonymous said...

Ilargi wrote:
If a bank does not comply with the standards set by law (and by FDIC regulations), it should be closed down. If that doesn't happen, both depositors and shareholders risk putting their money where they wouldn't have put it had they known the true extent of a given bank's financial troubles, and risk losing (part of) that money.

And it's unfair to the stronger banks that have to compete with zombie banks...especially when the zombie banks are propped up with public money.

PKP said...

The Debt Crisis Cannot Be Solved with More Debt

RC said...

El G -- The Conjugated is the enemy of the Fluent. But, if only my verbs would behave themselves I could run for mayor. It's a thankless job, but the pay scale is very good. I'm working on the perfect tenses not making me perfectly tense. I already have the jokes for the stump speech lined up. That's what's motivating me.

Wild Gypsy said...

Re: Americans complacent or defeated?

I have met a lot of folks who are feeling defeated, but dang few lately who are complacent. Those who were holding on by the threads of a paycheck and have lost that are feeling overwhelmed by forces larger than themselves, but on the bright side there are less well-meaning people snidely telling them to "get a job."

In the non-complacent category, I've also met a number people looking to make real changes in their lifestyles and their methods of doing business... mostly on account of watching their hard-earned retirement accounts vanish with a cloud of California smog and a winning smile on the face of their local politicians.

Those who think we Sheep are all oblivious and mentally deficient need to get out more and talk to us at the local pancake houses and community bake sales.

Anonymous said...

This rally is a joke, banks are failing and nobody knows which one is next..but the market still keeps on climbing and ignoring this very important fact. oh, have created a mess here.

Anonymous said...

About the site DIYer mentioned. If you run a search on Citibank, you'll get a Troubled asset ratio of 3.8; well below the national median of 11.7.

Bank of America reports a TAR of 14.5.

Both of these seem low to me. Especially the Citibank one. From just that number, one would think that Citi was doing just fine, when we all know that they are one of the most insolvent banks around.


Anonymous said...

The time to affect rational non violent change is gone. For decades, I railed against unchecked growth and the living beyond your means mentality that apparently is America's God Given Birth Right.

The changes that will happen from waiting too long will be very violent indeed.

In fact, in just the last year alone, the delaying tactics of spending the last trillions on bailing big banks out of their gambling debts instead of transitioning to some reliable basic living arraignments will cost millions of people their very lives.

The stress levels, once the Sheeple have fully come to grips with the sheer scope of the Never Ending Emergency that is about to fall on them like a pack of starving wolves, will push many into unmanageable health crises.

And with no real Health Care System in place, only an overpriced, energy wasting, incompetent, bureaucratically encumbered high tech pill pushing Disease Treatment System, well, like I said, millions will die in the shadows.

Everyone had decades running up to this to do the 'rational stuff'.

Now it's time for the truly Irrational Stuff to begin.

It's not rocket science. You try to pimp Infinite Growth on a Finite planet and the end result is tragedy on a global scale never seen before in history.

RC said...

Greenpa, well, watching TV in the country you are in with local productions in Latin America might work and local comics might work, but for slang it is very localized, indeed, in San Juan it's a machete and in Vieques it's a mocho. It could be a papaya or it could be a lechosa. A yucca or a casaba or a casava. In PR there are thousands of Anglicisms. Ay! Me Siento bien Relax hoy! Yes, that is the patois here. Dame un Break! Hay parking? Tienes un Chipi Hammer? Una Puerta Rollin' pa' mi garage?
You can get in a great deal of trouble using the wrong slang in Latin America. There are large tomes that cover the rules and the details and the feast is movable.
Additionally, try to NOT speak Castilian or even Andalusian down here. You'll sound really stuck up and who needs that? That lisp thing all happened due to some ass kissing court that got into it centuries ago. Forget it. Speak whatever they are speaking in your little town with precisely the same accent and even the mannerisms. The special nose twitches and ear flicks, the elbow pats, the whole nine yards. Everywhere down here except I think for Uruguay and Paraguay, a great deal of the language isn't Spanish at all. It's got a very high element of indigenous {each country different indigenous}, African, Arabic and other dominant language influxes would be apparent. I am not discussing Brazil here, but it has the same mixes with Portuguese {that is not really what it is} being dominant.
In PR most of the native trees and herbs all have indigenous names and the plants that came from africa have african names and the arabian plants have arabian names. So we have Mavi trees, quingombo {gumbo, okra} and albahaca herb {Basil}.
Comics won't tell you any of that. Also, the Spanish language is not pure in the Old World either and the influences go back to the Celts and Visigoths, the Romans and the Moors, and beyond to indigenous cave dweller antiquity.
But it IS mostly Latin.
Olga, a common Spanish name, is Visigoth. It's a big mess, no one is all that interested in purity, so just sponge it up wherever you are and go native, be happy and get cut rate dental care. Then, Smile. In my little town the Smile is the most important communication. That's why I choose to live here. It's not that way in Manhattan. Eye contact isn't even encouraged there.

DIYer said...

A 11:26,

The bankcheck site uses publicly available data for its calculations. My guess would be that the "too big to fail" banks do not publish all their data. Like anything else, you have to be careful in how you interpret the stats.

DIYer said...

A 11:26,

Another thought on Citi. Its balance sheet has been much improved, I understand, by the infusion of mind boggling quantities of your and my treasury money.

We owe. And Citi's stats look better.

Nassim said...

el gallinazo, Illargi,

Thanks for making clear that paragraph. It now seems obvious. :)

In the past 2 days, a small discussion took place as to whether one's "home town" is still recognizable as such. I have a tiny contribution there.

Yesterday, I went went with some friends and our kids to a local adventure park. The weather was fantastic and it was a Sunday in August. The last time I went there was 2 years ago in June.

Last time I was there, it was running at 110% of capacity. It was crowded and one had to queue a while to go on the most popular attractions. Yesterday, there were no queues whatsoever and I think it was running at 50% of capacity. We (the more childish of the grown-ups, like myself, and all the kids) went on some of the more exciting attractions 4 or even 5 times. Colossus, the giant swinging boat (my favourite), was never more than half-full. The kids spent an hour going through the maze repeatedly until they all mastered it.

A lot has been made of the pound Sterling dropping and making the UK a more attractive destination. Also, a big effort has been made to encourage people to vacation at home. It looks to me that it is not quite working out like that. People are still moving about but they are spending much less on their kids.

Oh, by the way, this adventure park used to allow visitors to make one return trip over the following 7 days for free. Now, you can have unlimited return trips for 7 days. I expect they make some money from the restaurants and the souvenirs.

NZSanctuary said...

El G

Re: fading memory.

The brain is very plastic, even when you get older. Learning a language can actually reverse the deterioration you (think you) may be experiencing... don't give up on learning a new lingo.

Nassim said...

The discussion about the different versions of "Spanish" brought to mind a scene in the film l'Auberge Espagnol (The Spanish Apartment).

A large group of European students on an exchange program are at a lecture theatre at Barcelona University for their first lecture. The professor starts off by telling everyone that he will be lecturing in catalan, since they are in Cataluña, and if they submit their work in castellano, he will not read it. A minor riot breaks out. BTW, great film.

My mother started learning "spanish" (i.e. castellano) when she moved to Sitges, in Spain in the mid-60's. She was quite shocked when one day she found out that the locals spoke another language. Of course, during the Franco era, the locals had to keep quiet about the language they spoke among one another and to only reply in castellano when addressed by the Guardia Civil.

It was my pleasure on one occasion to witness an impromptu baton charge by the Guardia Civil when they saw a group on noisy and drunk Britons coming up the Calle Mayor at 3AM and singing in their loudest voices. I think the word got about and that sort of thing happened very rarely - unlike these days - 'Genital burn attack' woman presses charges

ogardener said...

Blogger Anonymous said...

It's not rocket science. You try to pimp Infinite Growth on a Finite planet and the end result is tragedy on a global scale never seen before in history.

August 16, 2009 11:30 PM

Your entire post is right on the money!

VK said...

@ El G

Shanghai stocks down by a blistering 5.8%!!

Coy Ote said...

Rats - Thanks for the post on tree crops. I imagine many of us will take a look at it. sounds interesting.

I noticed the Dow futures heading south. ? Something is up (or rather down) I deduce.

scandia said...

Along the theme of how health affects the economy I've been listening to a CBC radio interview with a Cd. doctor saying Cdns are having trouble sleeping due to worry about the economy. Don't have the exact stats but approx 34% of Cdns are losing sleep. No neeed to outline the vicious circle here of sleep deprived workers being less productive, less growth,less well being...round and round we go!Will there be an increase in prescriptions for sleeping tablets? Or more Dr. notes authorizing sick leave?
Again the pharmceutical industry wins.
@ Kassim, I have travelled more than most and am always disheartened to observe the disrespect shown to the host culture. For the lug tourists out there money is power enabling them to behave badly and worse. Behaviour they would never exhibit at home.Now that the average person can afford to travel has travel become an opportunity to experience dominance,the power to which you have no access at home? This pattern is also demonstrated by occupying troops.
When I arrive in a new land I tip toe in and pay discreet attention to everything, to everybody. I seek connection, not dominance.

Coy Ote said...

Wild Gypsy - "I have met a lot of folks who are feeling defeated, but dang few lately who are complacent."

Less complacency as time goes by. I listened to a barage of anger on C-span this am over the dropping of the "public option," etc. There are a lot of really Pst off people out there.

Sam Dug said...

KD has a video of one William K Black on his site.

PBS has an even better video if anyone cares to view it. Black is a former senior regulator during the Savings & Loan scandal.

Why are people being so complacent and defeated... this is the biggest fraud in history!

Please take time to view Mr. Black's presentation.

At the end he quotes a Danish saying:
"It is not necessary to hope in order to persevere."

Anonymous said...

PHOENIX, Aug 17 (Reuters) - President Barack Obama will seek to shore up U.S. public support for the war in Afghanistan on Monday just days before an Afghan presidential election widely seen as a major test of his revamped strategy.

Yeah sure, keep killing our kids and bankrupting them too fighting a war in a hell hole where there is no way we can win.
Get real

Coy Ote said...

Sam Dug - Saw the William Black thing. He is our (soft spoken), truth speaking Mad Max, without the ravings. I wish he would start shouting!

Great interview.

Anonymous said...

Afghanistan is the Graveyard of Empires.

The fact that the U.S. is there at all confirmed it's own death as an imperial wannabee.

Obama's performance in this theater resembles a low rent vaudeville act complete with a his mini Idi Amin imitation.

All that's missing is for Obama to actually say 'There's Light at the End of the Tunnel' to complete the grand vision of another grotesque rape and pillage scenario being executed on yet another 3rd world country by the Mighty U.S. Eagle Legions.

There will never be a pipeline through Afghanistan, never. And that is supposedly the raison d'etre for being there.

That's ok though, because when the Chinese dump all their U.S. securities on the world market all at once and collapse the dollar overnight, these troops will instantly be converted into 'stranded costs' and abandoned to their own devices.

snuffy said...

Rats & Monkeys

Many are as you speak,members of that family...however I chose disease-resistant as a primary concern...Apple types are liberty,spartan,...pear are Asian]chojoro,20th century and European Umbileen and Bosc.After nearly 20 years I still have little problem...except for coddling moth

Lots to be said for integrated pest management...But I use no poisons on my food. to work...


Anonymous said...

Jim Kunstler had fun this weekend.

His epic description of The Last Monumental Traffic Jam off Cape Cod was telling for the near future.

Good News:

"I'm serenely confident that we're in the twilight of Happy Motoring now. Without debt service there is no auto industry, and we're toast where debt service is concerned. All we can do now is give cars away, or give US citizens free money to buy them -- which we are obviously already doing with "Cash for Clunkers" -- which is additionally hilarious in the same nation that is deeply paranoid about the government giving anybody free health care.

What a nation of morons we have become."

Amen brother.

David said...

@ Anonymous of 11:26 PM

Selecting Citibank from the BankTracker returns 3 selections: the one you picked, HQ in Century City, CA, is not the main Citibank sub of CitiGroup. The one you want to pick is the Citibank HQ in Nevada.

That one shows a Troubled Asset Ration of 26.8 in 12/08, and a TAR of 14.1 in 03/09. That is more in line with what you would expect.

Also, the Bank of America you should select as the main sub is HQ in Charlotte, NC. That shows a TAR of 22.1 in 12/08, and a TAR of 29 in 03/09, which is also what you might expect.

VK said...

Whoa! Yves Smith has some sharp writing today

I don't believe in market calls, and trying to time turns is a perilous game. But most savvy people I know have been skeptical of this rally, beyond the initial strong bounce off the bottom. It has not had the characteristics of a bull market. Volumes have been underwhelming, no new leadership group has emerged, and as greybeards like to point out, comparatively short, large amplitude rallies are a bear market speciality.

She goes on to write the reasons for the demise of the stock market

More bank woes

Consumers tapped out

Foreclosures set to rise

Fed in a box

More AIG losses

Lack of political leadership

[...] And on Obama she writes

Ed Harrison has called him a black Herbert Hoover. If the economy takes another down leg, it will further confirm his inability to do anything other than compromise and try to spin it as success. The confidence game worked when he was a new President, but nice talk and not much action is already wearing thin. We could use someone at the helm who is willing to plot a course and stick with it, and instead what we have is someone long on charisma and short on resolve.

Also FDI in China down 36% from a year ago.

Aug. 17 (Bloomberg) -- Foreign direct investment in China fell for a tenth straight month in July as companies stalled expansion plans amid the global financial crisis.

Investment declined 35.7 percent from a year earlier to $5.36 billion, the Commerce Ministry said at a briefing in Beijing today. That compared with a 6.76 percent drop in June.

Sam Dug said...

Thanks Coy Ote ;)

It seems I'm a bit late to the party and the regulars here have been aware of Black months ago.

It would be nice if he "shouted" a bit more, but he seems to be quietly making his way through the Congress.

At this point it appears to be a catch 22. Calling out this gigantic, systemic ponzi scheme may cause panic and chaos in the markets... and yet, doing nothing will allow it to continue and give the corrupt more confidence to continue.

It's disheartening to read "it's not going to happen or "that's not likely" at the end of many posts (on nearly every blog).

This control fraud must be called out and reform needs to begin. The public must look this monster in the eyes and begin the unpleasant process of cleaning out the system.

The latest appeasements in the form of the housing credits and C4C is clearly a modern day version of bread and circuses. How long before the average person sees this as an unsatisfactory and temporary palliative masking the malignant fraud and theft?

RC said...

I have thousands of food trees, almost all of which are in pots for sale. Keeping this short, I find that in small installations like backyards, agricultural soap {universally approved as organic growing method} and judicious soil and mulch provision along with proper watering and pruning avoids most problems. However, in large orchards, mixed planting or not, the work becomes overwhelming for certain trees as once they get to 20 feet the practicalities applicable to the smaller trees and planting groups just don't work in terms of labor and expense.
With constant activity causing worldwide distribution of various plagues {pink hibiscus mealy bug, tababuia thrip, various borers and weevils, multiple viruses} here in the tropics we are battling it out.
I second the recommendations of tree nut crops, they seem to have far fewer problems and the product has a far longer shelf life. I know I have seen tree nuts hiding in plain sight in Greenpa's photos of his farm.
Lately I have been asked to start a vineyard {not so happy about that idea}, and am trying to encourage olives, figs and dates instead.
Yes, it is very hot and dry here for a number of months of the growing season, and then the hurricanes invade. Only the insane would farm here, but in my case, I assume that is a feature, not a bug.
Right now, outside, Ana is dumping enormous quantities of rain. Good!

Coy Ote said...

VK - Re: Yves smith... "The confidence game worked when he was a new President, but nice talk and not much action is already wearing thin. We could use someone at the helm who is willing to plot a course and stick with it, and instead what we have is someone long on charisma and short on resolve."

I think she is expressing the thinking of millions more each week. I noticed a different tone this am on CSpan about Obama, many former supporters calling him out for waffling on health care, etc.

Sam D - "This control fraud must be called out and reform needs to begin. The public must look this monster in the eyes and begin the unpleasant process of cleaning out the system."

Ilargi made a pretty strong case for that, a rather disparaging challenge, in the post. I think the intensity is beginning to click up a notch or two and it may soon that the voices in distress numbers grow exponentially.

Greenpa said...

RC- "You can get in a great deal of trouble using the wrong slang in Latin America. "

Sí, seguro. Comics are really just a place to start- and if you have the right attitude, providing folks with something to laugh at is not a bad thing to do. And- at least attempting to learn the language beyond usaco high school Spanish should make some points for you.

The multi-language patois- sure, pretty common around the world. I'm more familiar in the Pacific, where each island group has its own "pidgin", often including words from all the various serial colonist countries as well as the native language.

My favorite is the Philippines (not called pidgin there). Have you ever watched a Filipino tv chat broadcast? wow. They slide from Spanish to plain American English to Tagalog absolutely seamlessly; using all 3 about equally; and expect everyone in the audience to follow along. And, of course, they do.

The evidence that learning multiple languages increases IQ is really quite good. I think it shows.

Sam Dug said...

Coy Ote
"I think the intensity is beginning to click up a notch or two and it may soon that the voices in distress numbers grow exponentially."

Agreed, and I & S are doing a massively positive service toward this end. This blog, by far, presents some of the best, well reasoned and factual evidence to further that cause.

With all the discussion about dental work, I keep drawing the analogy that our country needs a serious root canal (as the throbbing pain intensifies) but our "dentist" keeps telling us that a tooth whitening will make everything better ;)

el gallinazo said...


With the dawn bringing in my 63rd birthday, I thought I would try my luck and put all my mad money into SH and SDS split equally. Stoneleigh sees the highest probability of a small correction and then new highs before the crash, but I don't want to miss the boat. Short of government intervention vis-a-vis shorting, I will be letting this bet ride for a while - no day to day meddling. Will try to get the money into T-Bills before the rafters start to fall in.

Like RC 80 km to my west, I am getting lots of rain from the dregs of Ana. I was scheduled to truck my stuff to St. Thomas today for shipment to FL, but I moved it back a day even though the Coast Guard decided to keep the ferries and barges running. Once my stuff finds its way to the shipping company, my fuse is lit and I can't stall any longer :-)


"don't give up on learning a new lingo."

Well, it's either gaining fluency in Spanish or passing myself off as a deaf mute gringo.

Greenpa said...

RC- "Remarkably, all of his Latin, imparted to me while we played golf, was spoken with a Georgia, USA {JAHWJAH}accent."

LOL!! oh, lordy. First time I worked in China, I was with an old professor from Alabama. You really have to hear minimal Mandarin with solid Alabama grafted onto it. ay, yi yi. Our hosts never laughed, but they were often quietly astonished.

RC said...

El G, I thought of you immediately when I saw the market drop offs this AM. Cuidado!
Greenpa, never watched Filipino TV.
But many conversations here are fractured like that with the English often being VI patois {mon} and the Spanish being full of French influence because this island was held by French cane growers for centuries. Here a power company pole is called a postel. The gentleman who wrote the electrician course texts in Spanish, Sr. Maysonet, often is driven quite insane by the Viequesisms he must hear living nearby in his retirement home. He
is a man who likes exactitude and virtually all the electricians in the country {PR} have been directly influenced by him. He does his best to not correct people outside the classroom, but I watch him sweat when certain phrases waft by him. The gods have arranged his retirement as some kind of retribution, I am not sure for what.

Anonymous said...

@David, re: Citibank

A great big THANK YOU, sir, for going to the effort of clearing that up. I thought that I was going back to the godawful task of having to read through the call reports.

There is another correlation that I've noticed with questionable banks. Namely, that the better ones don't seem to be invested in derivatives at all. That's not a surprise, but if anyone looks through a Call Report, you might want to look at those fields, in addition to the late loans and capalization ratios. The Banks are required to report that, along with their Tier 3 "assets". The Credit Unions, on the other hand, are not so required.

Having gone through some of these for Credit Unions, my impression is that almost all Credit Unions in general are in really bad shape. The exception is dedicated CU's (E.g. hospitals). Those that I've seen are in superb shape, but the average person can't join.

RC said...

Greenpa, I like to listen some Zarzuelas from Madrid that feature Gilbert and Sullivan -like choruses singing high speed phrases in Spanish, but they are in an Italian play so they are employing fake-o Italian accents over the Madrileno Spanish. This is really marvelous!

I have to go out and inspect all my flood control projects now and laugh at those who failed to act. Pardon my character flaws.

jal said...

@ Sam Dug
I have been following W. Black’s public appearances.

If he is being effective … Why is he still alive?
Same question concerning Karl D. I&I, etc.
We are spectators … to a battle of the Titans (World wide Govs. vs bankers)
Both sides have destroyed more wealth than probably all the previous wars.
Both sides have huge mental and computer resource at their disposal.
It’s like watching a master chess tournament. We are in the audience making comment on the moves made by the masters.

If we make too much noise and disturb the game we will be ejected from the room.

This game of the titans is “for keeps”.
The prize is for the control of the system.
The generation of Credit, interest and of course the economy with its billions of people that can generate billions by “nickel and dime”.
They are both aware that the system cannot be “nickel and dime” to death if you want to have a sustainable system.

I’m sure that the players are aware of the “PEAK” problems that are looming.

Watch ... learn ... record ... history is written by the winner.
(Maybe this time the blogging records will survive to influence the writing of history)

I just heard on BNN that the drop of todays market is probably due to the impending hurricanes. No comment of the fall of the Asian and European markets.
Re.: brain size
I have worn glasses all my life. Recently, ( last two years), I have found that my eyesight has improved and do not need to wear glasses.
The explanation that I give is that my brain has expanded, from all the learning that I’m doing, and is pushing against the back of my eyeballs and causing the correction to my sight.

My spouse has a big grin when I tell this explanation. I wonder why!


VK said...

@ El G

Once my stuff finds its way to the shipping company, my fuse is lit and I can't stall any longer

And so begins the adventure of a lifetime! Interesting times lie ahead that's for sure.

Happy Birthday in advance and best wishes on your riding the SDS, SH waves to the abyss that is DOW 500!! (Give it good to Golem Sacks)

@ Jal

The explanation that I give is that my brain has expanded, from all the learning that I’m doing, and is pushing against the back of my eyeballs and causing the correction to my sight.


ps - Anyone else a Jackie Chan fan here? The man is amazingly fit for a 50 year old, his skill and flexibility are astounding!

Greenpa said...

VK- "Happy Birthday in advance and best wishes on your riding the SDS, SH waves to the abyss that is DOW 500!! (Give it good to Golem Sacks)"


And re the fun we have with variations on the Goldman Sacks themes; I have a prediction.

About one year from now, the jokes will run more to "Golly Shucks!" as their real name. They've built their ponzimid right up to the sky, and right off any foundations it ever had. As far as I can tell, they've come to believe their own little fibs, and are now totally delusional. Gravity always wins in the end.

VK said...

The ULTIMATE contrarian indicator - Abby Cohen.

GS is going to go short soon, find itself some bag holders for the trash it's holding.

Aug. 17 (Bloomberg) -- The U.S. recession is ending “right now,” said Abby Joseph Cohen, a senior investment strategist at Goldman Sachs Group Inc.

The economy may grow by 3 percent in the next couple of quarters and expand by 1.5 percent to 2 percent next year, Cohen said. While consumer spending is likely to rise, it probably won’t increase as fast as at the end of prior periods when the U.S. was emerging from a recession, she said.

VK said...

@ Greenpa

You might enjoy this article, though I don't agree on the hyperinflation and hyperdeflation argument at the end though.

In "How ALL Systems Can Collapse Overnight", Martin Armstrong uses the concept of entropy. Entropy is the amount of chaos, disorder or unknowable elements in any system. A system has low entropy when it is highly organized, ordered, controlled, contained, and all the elements are known.

A system has high entropy when it is disordered, chaotic, out of control, and many elements cannot be known. Science teaches us that everything in the universe ultimately ends in absolute entropy (chaos) through the passage of time. In other words, ashes to ashes and dust to dust.


adding energy to a system usually has the opposite affect. It speeds up the journey to absolute entropy. This can be seen in an explosion.

A bomb can take an entire building from low entropy to high entropy in a fraction of a second. Another example is a forest fire. The fire is energy added to the system (the forest) and it speeds up the journey from order to chaos. A fireman can slow this process because he has the knowledge that adding water, another form of energy, will affect the progression to entropy in a positive way. But what if the fireman was acting without perfect information? What if the fireman sprayed gasoline on the fire?

I will say it once again because it is worth repeating; the economy is such a complex organism with so many variables that it simply cannot be controlled... ESPECIALLY by politicians. The same fuel that ignited this fire is being used to put it out!

I'm assuming this is what Stoneleigh is saying when she says that the system can immolate itself very, very rapidly. Once a tipping point is reached, the waterfall becomes inevitable. The system can collapse incredibly quickly!

Sam Dug said...

"I have been following W. Black’s public appearances.

If he is being effective … Why is he still alive?
Same question concerning Karl D. I&I, etc."

jal, can you help me understand this? Are you saying that Black (and anyone else who calls out the corruption) will be "ejected".

I really do like the Danish motto that Black offered at the end;
"It is not necessary to hope in order to persevere."

We, the public and the taxpayer, are being royally screwed and the titans are banking on "us" remaining meek and too afraid to confront this systemic corruption.

We are being brought to our knees with nary a whimper! I'm willing to go the peaceful route, but that requires lots of noise and a signal to the game players that we are not merely an audience.

Any comments or insight on this would be welcome.

Ilargi said...

New post up.

VK, I read some of the FOFOA piece and threw it out. It's time to get smarter.

el gallinazo said...

Thanks for the birthday wishes.


In the area of chemistry, entropy is often increased by the rearrangement of atoms in molecules to form new molecules of lower free energy. An example of this may be H2 and O2 to form water which has a very low free energy. However, under most conditions, you can store H2 and O2 in a container indefinitely without an explosion. The slightest spark, however will cause this explosion. This is due to what in the chemistry business is called the activation energy. The intermediate transitional structure has a higher free energy than the reactants and much higher than the products. So energy has to to be added to the system to start the chain reaction. Once started, the system releases so much energy that it becomes self-sustaining until a much lower free energy and much higher entropy system results.

Ironically, the graph of a reaction of this nature in free energy versus time highly resembles the suckers' rally and collapse.