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solarbird[Cafe Ladro pays music over the speakers more loudly on Saturdays. Or at least this Saturday. So taking my mandolin to play while hanging out waiting for Anna to get done with massage therapy was kind of a fail. Foo. So here, you get this.]
Comptroller of the Currency John C. Dugan says banks are going to need to ramp up reserves dramatically to deal with HELOC and other home-equity-loan losses, nothing that at "some banks, the portion of reserves attributable to home equity loans just barely covers 2007 chargeoffs. With losses accelerating, those reserves are simply not going to be adequate." Similarly, Mish at Global Econcomic Trend Analysis notes that loan-to-value (LTV) ratios are terrible and getting worse, with data.
Calling for increased reserves is all fine and dandy, and almost certainly correct - Mr. Dugan has a pretty good track record - but let's see what the banks have in reserves according to the latest H.3 banking system reserves report - oh, look, a new record nonborrowed shortfall of US$-174 billion, another new record. Tasty.
As for yesterday's oil futures price leap - the move actually triggered the tiny circuit breaker system in place (in the cash markets only) when prices spiked up $10/barrel. However, the circuit breaker is only in place for five minutes and only in cash, so irrelevant - but I note it anyway, as a milestone. More importantly, Saudi Arabia has changed its sales pricing methodology for July, changing over to charging a "premium of $2.40 a barrel above the West Texas Intermediate benchmark, compared with a discount of $1.45" previously. To Europe, on the other hand, Saudi "Aramco will lower its price differentials by between 10 cents and $1.90 a barrel." And, mostly symbolically, a member of the Shura Council, the Saudi "consultative" parliament, called for oil production curbs, to preserve the fields. "Marri will seek to persuade council members that the oil production must be linked to the country's actual development needs not the needs of foreign consumers." For amusement value, compare and contrast with this June 2000 article Mish found with then-Governor George W. Bush saying he would lower oil prices by "work[ing] with our friends in OPEC to convince them to open up the spigot, to increase the supply."
Also in energy - sorta - Brad Setser (at the Council on Foreign Relations, formerly of RGE Monitor) notes that in 2009, the US expects 33% of the corn it produces will go to biofuels. Note that corn ethanol is a net energy loss. Let me bold that: corn ethanol, as produced in this programme, takes more energy to make than you get back by consuming it. This programme, particularly in this climate, is insane.
Mish at Global Econcomic Trend Analysis (same as above) deconstructs the latest job report, noting that despite measurable contractions in all areas of the job market, the BLS's black-box birth/death model added 217,000 jobs, including 42,000 in construction. (Remember that the 3rd quarter of 2007's job statistics were recently revised from three months of job gains to three months of job losses at a rate of about 100,000/month. These numbers do not use birth-death models but are actual hard data only.) He notes that this chart indicates a more reasonably likely unemployment rate of around 9.7%, tho' he considers that estimate possibly low.
Lastly, Nouriel Roubini thinks that the recent "complacency that the worst was behind us in [the] financial markets is breaking, and that people are realising that this isn't close to over. (See first paragraph above.) Salon notes a rush to more credit-card debt, with HELOCs and other home-equity lines being pulled. CNBC notes the credit-card half of the phenomenon, adding that delinquency rates are soaring. Going back to Mish again, he notes that Fed governors are starting to openly question Bernanke's policies (and by implication, competence), suggesting that he may not be Fed chair for that much longer. (We've already had one high-profile resignation, remember.)
Oh, and bond insurers MBIA Inc. and Ambac Financial Corp. had their ratings cut to Aa from Aaa. The problem with that is that their business model relies on having Aaa ratings. Oh well.
eta: D00d, omg. lookie this map. It's of the huge jumps in prime mortgage foreclosures.
Comptroller of the Currency John C. Dugan says banks are going to need to ramp up reserves dramatically to deal with HELOC and other home-equity-loan losses, nothing that at "some banks, the portion of reserves attributable to home equity loans just barely covers 2007 chargeoffs. With losses accelerating, those reserves are simply not going to be adequate." Similarly, Mish at Global Econcomic Trend Analysis notes that loan-to-value (LTV) ratios are terrible and getting worse, with data.
Calling for increased reserves is all fine and dandy, and almost certainly correct - Mr. Dugan has a pretty good track record - but let's see what the banks have in reserves according to the latest H.3 banking system reserves report - oh, look, a new record nonborrowed shortfall of US$-174 billion, another new record. Tasty.
As for yesterday's oil futures price leap - the move actually triggered the tiny circuit breaker system in place (in the cash markets only) when prices spiked up $10/barrel. However, the circuit breaker is only in place for five minutes and only in cash, so irrelevant - but I note it anyway, as a milestone. More importantly, Saudi Arabia has changed its sales pricing methodology for July, changing over to charging a "premium of $2.40 a barrel above the West Texas Intermediate benchmark, compared with a discount of $1.45" previously. To Europe, on the other hand, Saudi "Aramco will lower its price differentials by between 10 cents and $1.90 a barrel." And, mostly symbolically, a member of the Shura Council, the Saudi "consultative" parliament, called for oil production curbs, to preserve the fields. "Marri will seek to persuade council members that the oil production must be linked to the country's actual development needs not the needs of foreign consumers." For amusement value, compare and contrast with this June 2000 article Mish found with then-Governor George W. Bush saying he would lower oil prices by "work[ing] with our friends in OPEC to convince them to open up the spigot, to increase the supply."
Also in energy - sorta - Brad Setser (at the Council on Foreign Relations, formerly of RGE Monitor) notes that in 2009, the US expects 33% of the corn it produces will go to biofuels. Note that corn ethanol is a net energy loss. Let me bold that: corn ethanol, as produced in this programme, takes more energy to make than you get back by consuming it. This programme, particularly in this climate, is insane.
Mish at Global Econcomic Trend Analysis (same as above) deconstructs the latest job report, noting that despite measurable contractions in all areas of the job market, the BLS's black-box birth/death model added 217,000 jobs, including 42,000 in construction. (Remember that the 3rd quarter of 2007's job statistics were recently revised from three months of job gains to three months of job losses at a rate of about 100,000/month. These numbers do not use birth-death models but are actual hard data only.) He notes that this chart indicates a more reasonably likely unemployment rate of around 9.7%, tho' he considers that estimate possibly low.
Lastly, Nouriel Roubini thinks that the recent "complacency that the worst was behind us in [the] financial markets is breaking, and that people are realising that this isn't close to over. (See first paragraph above.) Salon notes a rush to more credit-card debt, with HELOCs and other home-equity lines being pulled. CNBC notes the credit-card half of the phenomenon, adding that delinquency rates are soaring. Going back to Mish again, he notes that Fed governors are starting to openly question Bernanke's policies (and by implication, competence), suggesting that he may not be Fed chair for that much longer. (We've already had one high-profile resignation, remember.)
Oh, and bond insurers MBIA Inc. and Ambac Financial Corp. had their ratings cut to Aa from Aaa. The problem with that is that their business model relies on having Aaa ratings. Oh well.
eta: D00d, omg. lookie this map. It's of the huge jumps in prime mortgage foreclosures.
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no subject
Date: 2008-06-08 05:31 am (UTC)no subject
Date: 2008-06-08 06:27 am (UTC)For what it's worth, the type of corn typically used in this (Yellow Corn nr. 2) is, while absolutely edible, considered generally a non-food-quality grain - it's used mostly for livestock feed, ethanol production (hate), high-fructose corn syrup production, and other corn syrups and oils. It's not sweet corn.
no subject
Date: 2008-06-08 08:23 am (UTC)i have heard (but cannot substantiate) that raising corn for ethanol is, or will, drive up the price of corn products. what you are saying is that the corn being raised is not THAT corn... does this also mean it is not having that affect?
i keep trying, and keep failing, to understand economics. i think that i am just a born socialist...
no subject
Date: 2008-06-08 03:46 pm (UTC)More money than what?
i have heard (but cannot substantiate) that raising corn for ethanol is, or will, drive up the price of corn products. what you are saying is that the corn being raised is not THAT corn... does this also mean it is not having that effect?
The effect is real - corn oil, for example, is a direct food product made from Nr. 2 Yellow corn. Also, livestock feed becomes more expensive, leading to higher milk and cheese prices, and which has led perhaps counter-intuitively in the short term to lower meat prices as ranchers cull herds to cut the number of cattle they have to feed. This floods the market with meat, driving meat prices down in the short term. Then meat will get more expensive again due to lower supply, so look for that in another few months.
i keep trying, and keep failing, to understand economics. i think that i am just a born socialist...
The socialists would certainly say so. But don't think "socialism" means "no economics." It doesn't mean that. It means different economics, which are not at all simpler.
no subject
Date: 2008-06-08 05:13 pm (UTC)It's not enough to make the country insanely rich. They have to mediate their growth to handle the eventual tapping of the fields and plow that back into national development. An entire generation of religiously-trained but economically inept people has produced nothing great out of SA in the past twenty years. The rest of the world is going to look for alternatives, otherwise we'll all roll over and die. The SA's know this. I hope Prince Marri gets what he wants.
no subject
Date: 2008-06-08 08:07 pm (UTC)and the meat thing... i remember reading about stuff that took place in the 70s (cuz i was born in 77, so i dont really remember); people joking about taking another mortage to buy a pot roast... and its not as if meat is *cheap* NOW... just that i can see what you mean when you say it will become even more expensive.
i don't understand our oligopoly-type economics. i understand the BASICS of free market (and central marketcommand economy) economics, but that isn't what we have anymore; we have a semi-monopolistic economy that i JUST DON'T GET because every part of it has to look ONLY at the short term, and it looks like every owner must be willing to shoot him/herself in the foot to guarantee current products. its just so short-sighted and wasteful and i don't see how even WalMart is willing to do it, becase it guarantees them no business later. thats why i think i am a born socialist; i can't see how cutting off my nose for current profits is a GOOD thing