From ATA: ATA Truck Tonnage Fell 1.1% in April

The American Trucking Associations’ advanced seasonally adjusted (SA) For-Hire Truck Tonnage Index decreased 1.1% in April after increasing 0.6% in March. (March’s gain was more than the preliminary 0.2% increase ATA reported on April 24.) The latest drop put the SA index at 118.7 (2000=100), down from March’s level of 120. Compared with April 2011, the SA index was up 3.5%, better than March’s 3.1% increase. Year-to-date, compared with the same period last year, tonnage was up 3.8%.
...
“While April’s decrease was a little disappointing, the March gain turned out to be stronger than originally thought,” ATA Chief Economist Bob Costello said. “The ups and downs so far this year are similar to other economic indicators.”

“While just one month, the April’s decrease also matches with an economy that is likely to grow slightly slower in the second quarter than in the first quarter,” he said. Costello reiterated last month’s noting that the industry should not expect the rate of growth seen over the last couple of years, when tonnage grew 5.8% in both 2010 and 2011. “I continue to expect tonnage to moderate from the pace over the last two years. Annualized growth in the 3% to 3.9% seems more likely.”

Click on graph for larger image.

Here is a long term graph that shows ATA's For-Hire Truck Tonnage index.

The dashed line is the current level of the index. The index is above the pre-recession level and up 3.5% year-over-year.

From ATA:

Trucking serves as a barometer of the U.S. economy, representing 67.2% of tonnage carried by all modes of domestic freight transportation, including manufactured and retail goods. Trucks hauled 9 billion tons of freight in 2010. Motor carriers collected $563.4 billion, or 81.2% of total revenue earned by all transport modes.

Earlier on existing home sales:
• Existing Home Sales in April: 4.62 million SAAR, 6.6 months of supply
• Existing Home Sales: Inventory and NSA Sales Graph
• Existing Home Sales graphs

I have no idea what the actual number of times Germany Has ruled out Eurobonds. It could be 504 or even 1004. I Made up the number 104 which simply means "a lot".

Nonetheless, the Eurobond idea resurfaces every other week or so, and every time, someone from Germany (typically Merkel, the Bundesbank, or the Finance Minister) rules them out.

Once again, this time under pressure from French president François Hollande, Germany rules out common euro bonds.

Germany refused to share the debt burden of stressed eurozone peers on Tuesday, ignoring two of the most influential international economic bodies which offered support for proposals championed by Paris, Rome and Brussels ahead of a summit.

Angela Merkel, Germany’s chancellor, has argued that any co-mingling of eurozone debt would remove incentives for southern economies to adopt structural reforms. The calls from the International Monetary Fund and the Organisation for Economic Co-operation and Development came on the eve of Wednesday’s EU summit.

François Hollande, France’s new president, has strongly backed common eurozone bonds – which would ease funding constraints for the eurozone’s stressed periphery but potentially raise German borrowing costs by diluting its creditworthiness across the currency union.

German officials made clear the idea was a non-starter in Berlin.

“There is no way of introducing them under the current [EU] treaties. Indeed, there is an explicit ban on them,” one senior German official said, adding Berlin would not drop its opposition in the foreseeable future. “That’s a firm conviction which will not change in June.”

Diplomats said the summit, which just last week looked like it would be a highly scripted affair on European growth, had become increasingly unpredictable, with leaders struggling with how to respond to the havoc wreaked by political instability in Greece. Officials emphasised that no formal decisions would be taken.

The euro bonds debate could produce fireworks between Mr Hollande and Ms Merkel – a possibility that has captivated officials involved, given the comparatively harmonious Franco-German relationship in the latter years of Nicolas Sarkozy’s tenure. But most diplomats believe Ms Merkel would succeed in blocking any proposal, producing more smoke than fire.

Damned if They Do, Damned if They Don't;

“They say that when Germany and France don’t co-operate, we have a problem,” one senior diplomat from a smaller EU country said. “And when they do, we have a problem, too.”

The paragraph from the article sums up the situation nicely. Europe is scrambling madly for a solution acceptable to everyone, but the only solution that works is the one no one wants to hear: a breakup of the eurozone.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

IGM is the latest firm to make a cut

A survey of some 200 auto industry executives by Booz & Co. finds that 94% of the auto maker executives and 92% of automotive-technology-supplier executives are bullish.

CBO warns about the fiscal cliff; post-op of the Facebook IPO; J.P. Morgan and Europe; pondering the meaning of wealth.

Dell shares fell sharply in late trading after the company's weak first-quarter earnings report.

Stocks fell into the red after former Greek Prime Minister Papademos said the risk of Greece dropping the euro is "real."

As our political system sputters, a wave of innovative thinking and bold experimentation is quietly sweeping away outmoded economic models. In ‘New Economic Visions’, a special five-part AlterNet series edited by Economics Editor Lynn Parramore in partnership with political economist Gar Alperovitz of the Democracy Collaborative, creative thinkers come together to explore the exciting ideas and projects that are shaping the philosophical and political vision of the movement that could take our economy back.

Just beneath the surface of traditional media attention, something vital has been gathering force and is about to explode into public consciousness. The “New Economy Movement” is a far-ranging coming together of organizations, projects, activists, theorists and ordinary citizens committed to rebuilding the American political-economic system from the ground up.

The broad goal is democratized ownership of the economy for the “99 percent” in an ecologically sustainable and participatory community-building fashion. The name of the game is practical work in the here and now—and a hands-on process that is also informed by big picture theory and in-depth knowledge.

Thousands of real world projects — from solar-powered businesses to worker-owned cooperatives and state-owned banks — are underway across the country. Many are self-consciously understood as attempts to develop working prototypes in state and local “laboratories of democracy” that may be applied at regional and national scale when the right political moment occurs.

The movement includes young and old, “Occupy” people, student activists, and what one older participant describes as thousands of “people in their 60s from the ’60s” rolling up their sleeves to apply some of the lessons of an earlier movement.

Explosion of Energy

A powerful trend of hands-on activity includes a range of economic models that change both ownership and ecological outcomes. Co-ops, for instance, are very much on target—especially those which emphasize participation and green concerns. The Evergreen Cooperatives in a desperately poor, predominantly black neighborhood of Cleveland, Ohio are a leading example. They include a worker-owned solar installation and weatherization co-op; a state-of-the-art, industrial-scale commercial laundry in a LEED-Gold certified building that uses—and therefore has to heat—only around a third of the water of other laundries; and a soon-to-open large scale hydroponic greenhouse capable of producing three million head of lettuce and 300,000 pounds of herbs a year. Hospitals and universities in the area have agreed to use the co-ops’ services, and several cities—including Pittsburgh, Atlanta, Washington, DC and Amarillo, Texas are now exploring similar efforts.

Other models fit into what author Marjorie Kelly calls the “generative economy”–efforts that inherently nurture the community and respect the natural environment. Organic Valley is a cooperative dairy producer in based in Wisconsin with more than $700 million in revenue and nearly 1,700 farmer-owners. Upstream 21 Corporation is a “socially responsible” holding company that purchases and expands sustainable small businesses. Greyston Bakery is a Yonkers, New York “B-Corporation” (a new type of corporation designed to benefit the public) that was initially founded to provide jobs for neighborhood residents. Today, Greystone generates around $6.5 million in annual sales.

Recently, the United Steelworkers union broke modern labor movement tradition and entered into a historic agreement with the Mondragón Cooperative Corporation and the Ohio Employee Ownership Center to help build worker-owned cooperatives in the United States along the lines of a new “union-co-op” model.

The movement is also serious about building on earlier models. More than 130 million Americans, in fact, already belong to one or another form of cooperative—and especially the most widely known form: the credit union. Similarly, there are some 2,000 municipally owned utilities, a number of which are ecological leaders. (Twenty-five percent of American electricity is provided by co-ops and public utilities.) Upwards of 10 million Americans now also work at some 11,000 employee-owned firms (ESOP companies).

More than 200 communities also operate or are establishing community land trusts that take land and housing out of the market and preserve it for the community. And hundreds of “social enterprises” use profits for social or community serving goals. Beyond these efforts, roughly 4,500 Community Development Corporations and 1.5 million non-profit organizations currently operate in every state in the nation.

The movement is also represented by the “Move Your Money” and “bank transfer day” campaigns, widespread efforts to shift millions of dollars from corporate giants like Bank of America to one or another form of democratic or community-benefiting institution. Related to this are other “new banking” strategies. Since 2010, 17 states, for instance, have considered legislation to set up public banks along the lines of the long-standing Bank of North Dakota.

Several cities—including Los Angeles and Kansas City— have passed “responsible banking” ordinances that require banks to reveal their impact on the community and/or require city officials to only do business with banks that are responsive to community needs. Other cities, like San Jose and Portland, are developing efforts to move their money out of Wall Street banks and into other commercial banks, community banks or credit unions. Politicians and activists in San Francisco have taken this a step further and proposed the creation of a publicly owned municipal bank.

There are also a number of innovative non-public, non-co-op banks—including the New Resource Bank in San Francisco, founded in 2006 “with a vision of bringing new resources to sustainable businesses and ultimately creating more sustainable communities.” Similarly, One PacificCoast Bank, an Oakland-based certified community development financial institution, grew out of the desire to “create a sustainable, meaningful community development bank and a supporting nonprofit organization.” And One United Bank—the largest black-owned bank in the country with offices in Los Angeles, Boston and Miami—has financed more than $1 billion in loans, most in low-income neighborhoods.

Ex-JP Morgan managing director John Fullerton has added legitimacy and force to the debate about new directions in finance at the ecologically oriented Capital Institute. And in several parts of the country, alternative currencies have long been used to help local community building—notably “BerkShares” in Great Barrington, Massachusetts, and “Ithaca Hours” in Ithaca, New York.

Active protest efforts are also underway. The Occupy movement, along with many others, has increasingly used direct action in support of new banking directions—and in clear opposition to old. On April 24, 2012 over 1,000 people protested bank practices at the Wells Fargo shareholder meeting in San Francisco. Similar actions, some involving physical “occupations” of bank branches, have been occurring in many parts of the country since the Occupy movement started in 2011. Large-scale demonstrations occurred at the Bank of America’s annual shareholder meeting in May 2012.

What to do about large-scale enterprise in a “new economy” is also on the agenda. A number of advocates, like Boston College professor Charles Derber, contemplate putting worker, consumer, environmental, or community representatives of “stakeholder” groups on corporate boards. Others point to the Alaska Permanent Fund which invests a significant portion of the state’s mineral revenues and returns dividends to citizens as a matter of right. Still others, like David Schweickart and Richard Wolff, propose system-wide change that emphasizes one or another form of worker ownership and management. (In the Schweickart version, smaller firms would be essentially directly managed by workers; large-scale national firms would be nationalized but also managed by workers.) A broad and fast-growing group seeks to end “corporate personhood,” and still others urge a reinvigoration of anti-trust efforts to reduce corporate power. (Breaking up banks deemed too big to fail is one element of this.)

In March 2012, the Left Forum held in New York also heard many calls for a return to nationalization. And even among “Small is Beautiful” followers of the late E. F. Schumacher, a number recall this historic build-from-the-bottom-up advocate’s argument that “[w]hen we come to large-scale enterprises, the idea of private ownership becomes an absurdity.” (Schumacher continuously searched for national models that were as supportive of community values as local forms.)

Theory and Action

A range of new theorists have also increasingly given intellectual muscle to the movement. Some, like Richard Heinberg, stress the radical implications of ending economic growth. Former presidential adviser James Gustav Speth calls for restructuring the entire system as the only way to deal with ecological problems in general and growth in particular. David Korten has offered an agenda for a new economy which stresses small Main Street business and building from the bottom up. (Korten also co-chairs a “New Economy Working Group” with John Cavanagh at the Institute of Policy Studies.) Juliet Schor has proposed a vision of “Plentitude” oriented in significant part around medium-scale high tech industry. My own work on a Pluralist Commonwealth emphasizes a community-building system characterized by a mix of democratized forms of ownership ranging from small co-ops all the way up to public/worker-owned firms where large scale cannot be avoided.

Writers like Herman Daly and David Bollier have also helped establish theoretical foundations for fundamental challenges to endless economic growth, on the one hand, and the need to transcend privatized economics in favor of a “commons” understanding, on the other. The awarding in 2009 of the Nobel Prize to Elinor Ostrom for work on commons-based development underlined recognition at still another level of some of the critical themes of the movement.

Around the country, thinkers are clamoring to meet and discuss new ideas. The New Economy Institute, led primarily by ecologists and ecological economists, hoped to attract a few hundred participants to a gathering to be held at Bard College in June 2012. The event sold out almost two months in advance! An apologetic email went out turning away hundreds who could not be accommodated with the promise of much bigger venue the next year.

And that’s just one example. From April to May 2012, the Social Venture Network held its annual gathering in Stevenson, Washington. The Public Banking Institute gathered in Philadelphia. The National Center for Employee Ownership met in Minneapolis—also to record-breaking attendance. And the Business Alliance for Local Living Economies (BALLE) held a major conference in Grand Rapids, Michigan. Other events planned for 2012 include the Consumer Cooperative Management Association’s meeting in Philadelphia; the U.S. Federation of Worker Cooperatives’ gathering in Boston; a Farmer Cooperatives conference organized by the University of Wisconsin Center for Cooperatives; and meetings of the National Community Land Trust Network and the Bioneers. The American Sustainable Business Council, a network of 100,000 businesses and 300,000 individuals, has been holding ongoing events and activities throughout 2012.

Daunting Challenges

The New Economy Movement is already energetically involved in an extraordinary range of activities, but it faces large-scale, daunting challenges. The first of these derives from the task it has set for itself—nothing less than changing and democratizing the very essence of the American economic system’s institutional structure.

Even viewed as a long-range goal, the movement obviously confronts the enormous entrenched power of an American political economic system dominated by very large banking and corporate interests—and bolstered by a politics heavily dependent on the financial muscle of elites at the top. (One recent calculation is that

400 individuals at the top now own more wealth than the bottom 160 million.)

A second fundamental challenge derives from the increasingly widespread new economy judgment that economic growth must ultimately be reduced, indeed, even possibly ended if the dangers presented by climate change are to be avoided—and if resource and other environmental limits are to be responsibly dealt with.

Complicating all this is the fact that most labor unions—the core institution of the traditional progressive alliance—are committed to growth as absolutely essential (as the economy is now organized) to maintaining jobs.

History dramatizes the implacable power of the existing institutions—until, somehow, that power gives way to the force of social movements. Most of those in the New Economy movement understand the challenge as both immediate and long-term: how to put an end to the most egregious social and economically destructive practices in the near term; how to lay foundations for a possible transformation in the longer term.

And driving the movement’s steady build up, day by day, year by year, is the growing economic and social pain millions of Americans now experience in their own lives—and a sense that something fundamental is wrong. The New Economy Movement speaks to this reality, and just possibly, despite all the obstacles—as with the civil rights, feminist, environmental and so many other earlier historic movements—it, too, will overcome. If so, the integrity of its goals and the practicality of its developmental work may allow it to help establish foundations for the next great progressive era of American history. It is already adding positive vision and practical change to everyday life.

Facebook shares now 18 per cent below IPO price

There’s been a lot of chatter in recent days about Japan and their debt issue.  John Carney and Joe Weisenthal both wrote good pieces on their sites and then today Bloomberg reported the Fitch downgrade of Japanese debt citing:

“A lack of new fiscal policy measures aimed at stabilising public finances amid continued rises in government debt ratios could lead to a further downgrade. A shock to Japan’s sovereign funding conditions such as a steep and sustained rise in yields would be strongly negative for the ratings, although Fitch does not consider this likely.”

I would say that I do not consider this “likely” either.  Now, I don’t know if I’d go as far as Joe goes in saying that Japan won’t ever default.  They could very well choose to default much like Russia did in the 90′s.  And I certainly wouldn’t make big bets on the political intelligence of Japanese officials (in either direction).  After all, there are a lot of politicians in this world who simply don’t know how the monetary system works and they might even conclude that a default would be good.  Who knows?  The Euro crisis that never ends hasn’t yet convinced some people that austerity is crushing these economies, but sometimes evidence in front of your face just isn’t enough.

But the more important point is that Japan is like the USA in being an autonomous currency issuer.  In essence, the US Treasury would never run into trouble procuring funds to pay bondholders because of its unique relationship with the Federal Reserve.  Bondholders know this so US bonds are seen as a save haven.  As an act of Congress and the lender of last resort the Fed can always be counted on to supply fund to the US government so bond holders can be paid and remain whole.  In this regard, the US government is a currency issuer because of its explicit political unity between its central bank and treasury (the exact thing missing in Europe).  The same relationship exists in Japan.  So, unless you think central bankers are bad at “printing money” for their governments then it’s rather silly to assume that Japan or the USA can’t obtain the funds to remain “solvent”.   Of course, Japan could suffer hyperinflation at some point, but as I’ve previously explained, this is quite a different phenomenon than “running out of money”.

The Bank of Canada has found a valuable sidekick in the OECD

Speculators couldn't speculate

Greed has quickly turned to fear as our manic friend, Mr. Market, resumes his generally bi-polar behavior.   The note below is a fear barometer courtesy of CitiGroup (via Business Insider).   It is consistent with levels also seen in the AAII readings of late:

“Panic” resurfaces. Admittedly, markets rarely get that “cataclysmic crescendo of capitulation” to call for buying stocks, but proprietary measures such as the Panic/Euphoria Model now are intimating that upside opportunity has re-emerged. Meetings with institutional investors do not anecdotally demonstrate that people are “freaked out,” but the sharp decline over the past six weeks has caused significant deterioration of sentiment (even amongst credit investors). Other metrics still are not providing the requisite buy inflection such that a more positive view for stocks is appropriate but that nuance does not imply a willingness to grow long bull horns yet.”

Infrastructure giant announces big deal with Inmet Mining

The limited resources that U.S. banks apply to residential lending could keep them from matching lower rates in the mortgage bond market for "some time," according to a San Francisco Fed study of central bank asset-purchase programs.

Paper money will last 10 months longer before it wears out, thanks to a new and faster method of sorting currency that doesn't automatically destroy bills processed face-side down.

Fed officials noted “further improvement in economic activity” and expected growth would continue at a “moderate pace,” but expressed concern over global financial risks and uncertainty over the U.S. budget policy, according to minutes of discount-rate meetings held last month and released Tuesday.

The poor execution regarding Facebook's IPO could have "unintended consequences" in broadening the trend of retail investors and/or their financial advisers moving from major brokerages to online or independent firms, says CLSA.

Dell reports earnings after the bell, and while some say they could top consensus estimates, stagnant revenue is an issue.

Even as a just-completed sale of two-year Treasury notes saw the highest demand of the year, Treasury prices are holding around session lows.

Several economic reports from regional Fed offices show the economy remains vulnerable to backsliding.

Or the Greek-German relationship, told through tourism.

I ask Germans to choose Greece for their summer holidays.

That’s Alexis Tsipras speaking to reporters in Berlin on Tuesday –...

One more bit of quick evidence on manufacturing and its share of GDP - this time, international evidence.  I found some data from the United Nations for the period 1970 to 2010 and calculated the manufacturing to GDP ratios for Canada, the other six G-7 countries as well as Brazil, China, India, Australia and also the Netherlands.

  If we are going to talk about "Dutch Disease" it seems only fitting that we include the Dutch. Figures 1 and 2 provide two perspectives on the evolution of the manufacturing to GDP ratio.

The results show that all of the G-7 countries have seen a decline in the share of GDP accounted for by manufacturing.  It would be a stretch to argue that they are somehow all suffering from "Dutch Disease".

Japan and Germany have traditionally had the highest G-7 manufacturing to GDP shares but nevertheless declined from 35 and 31 percent respectively in 1970 to 20 and 19 percent by 2010.  Over the same period, Italy went from 25 to 15 percent, the United States from 24 to 13 percent, Great Britain from 29 to 10 percent, France from 22 to 10 percent and Canada from 19 to 11 percent.  In 1970, Canada already had the lowest manufactuirng to GDP ratio of the G-7 countries.  Australia and the Netherlands have had performances comparable to the G-7 when it comes to the evolution of their manufacturing to GDP ratios.

As for the so-called BRIC countries - Brazil paralleled the performance of the G-7 going from a manufacturing to GDP ratio of 25 percent in 1970 to 13 percent by 2010.  China and India, on the other hand, have largely maintained their manufacturing sectors relative to their GDP.  However, India's manufacturing to GDP ratio was 13 percent in 1970 and is still at 13 percent in 2010.  China is the exceptional performer with a manufacturing to GDP ratio of 37 percent in 1970 but with a small decline to 33 percent by 2010.

The decline of Canada's manufacturing sector has parallels with other countries.  Our experience parallels Australia - which can be viewed as a resource staples or resource exporting country - but it also parallels France, Great Britain and Italy which are not viewed as natural resource driven economies.  Generally speaking, all developed economies have seen declines in their manufacturing sector's share of GDP over time.  A high manufacturing to GDP ratio is often more representative of an earlier stage of economic development - the early stages of transition from agricultural to industrial development.  Canada certainly fits into that pattern prior to the Second World War.  China certainly can be seen as an economy that over the last forty years has been transitioning from agriculture to industry but on the other hand it had a high manufacturing to GDP ratio even fifty years ago when relatively underdeveloped - no doubt the legacy of centrally planned industrial policy.  India on the other hand has had quite a different performance from China in this regard. Certainly interesting stuff.

 

 

Plenty of Blame to Share for Faulty Facebook IPO: Ritholtz

Click for ginormous chart:

 

 

 

Source: Bank Of The Internet

Poor sovereign government finances are not just the province of Europe. Fitch this morning downgraded the credit rating of Japan to A+, one notch below both S&P and Moody’s. Fitch stated the obvious extraordinary amount of debt they have relative to GDP but said “the country’s fiscal consolidation plan looks leisurely relative even to other fiscally challenged high income countries.” As in some European countries, there will never be enough growth in Japan to sustain their debt so policy makers have only two choices, debt restructuring/writedown or print money and unfortunately printing money will be the politically easier decision. The BoJ may announce its 3rd QE in 3 mo’s tomorrow. Also of note and ahead of our own debt ceiling battle again upcoming, 5 yr US CDS is rising to the highest in 4 mo’s.

Source: Calculated Risk

 

Existing Home Sales were released today. To back out the strong effect seasonality has on this data, we prefer using the NSA chart (above).

Existing-home sales rose in April and remain above a year ago at a slightly better sales pace than April 2011, but they remains significantly lower than April 2010. (If you use seasonally adjusted data. The National Association of Realtors (a/k/a the hype-meisters of housing) touted a 10.1% increase in median price to $177,400.

Don’t be misled by this data point. The key driver of it price difference is the result of the voluntary foreclosure abatement while the robo-signing settlement was progressing. When we compare year-over-year distressed sales (foreclosures and short sales) we see they were down to 28% for April 2012 (17% foreclosures, 11% short sales), a whopping 9% lower than the 37% in April 2011.

Thus, the increase in price can be accounted for by lack of distressed sales in the mix — the price dispersion — and not by any actual increase in home prices.

Now that those legal issues are behind the banks, we should expect mortgage loan servicers to begin once again the foreclosure process — and that means more distressed sales to come . . .

 

 

Source:
April Existing-Home Sales Up, Prices Rise Again
Realtor.org May 22, 2012   
http://www.realtor.org/news-releases/2012/05/april-existing-home-sales-up-prices-rise-again

Existing Home Sales in April: 4.62 million SAAR, 6.6 months of supply
CalculatedRisk 5/22/2012
http://www.calculatedriskblog.com/2012/05/existing-home-sales-in-april-462.html

Existing Home Sales totaled 4.62mm annualized in April, a touch above estimates and up from 4.47mm in March which was revised slightly lower. For contracts likely signed in Feb and March, closings rose for both single family and condos/co-ops. Because though the amount of homes for sale rose, months supply rose to 6.6 from 6.2 to the most since Nov. The median sales price rose 10.1% y/o/y to $177,400, the highest since July ’10, likely helped by what the NAR said was “a diminishing share of foreclosed property sales.” Distressed home sales made up 28% of the total, down from 29% in March and 37% in April 2011. Bottom line, it will be a few months before we know whether the spring selling season started in Jan/Feb because of the mild winter and it remains to be seen the full extent of the shadow inventory that is out there. The foreclosure process should start to pick up as the banks have made their settlement with the states. This said, there is a better tone to the housing market (relatively speaking) but with what’s been seen, it wasn’t going to take much other than time.

Some comments from housing economist Tom Lawler:

The National Association of Realtors estimated that US existing home sales ran at a seasonally adjusted annual rate of 4.62 million in April, up 3.4% from March’s downwardly revised (to 4.47 million from 4.48 million) pace and up 10.0% from last April’s pace. The NAR’s estimate exceeded my estimate based on regional tracking, though almost all of my “miss” was related to the NAR’s seasonal adjustment factor: while seasonally adjusted sales were up 10.0% YOY, unadjusted sales showed just a 6.7% YOY gain (I guess the timing of Easter was the reason; my bad).

The NAR also estimated that the inventory of existing homes for sale at the end of April totaled 2.540 million, up 9.5% from March’s downwardly revised (to 2.32 million from 2.37 million) level and down 20.6% from last April. This was pretty close to my “guess” for a 21% YOY decline, and today’s report continued the trend for the NAR’s inventory estimates to show significantly lower monthly gains (or larger declines) in March and significantly larger monthly gains in April than that suggested by actual listings data.

Finally, the NAR estimated that the median existing home sales price in April was $177,400, up a whopping 10.1% from last April. The median existing SF sales price last month was $178,000, up 10.4% from last April. According to the NAR, the median existing SF sales price in the Northeast showed a YOY gain of 10.9%; in the Midwest, 8.1%; in the South, 8.5%; and in the West, 14.7%. While I was looking for a YOY increase exceeding 5%, this gain was obviously a boatload larger. Based on regional data I’ve seen the gain in the Northeast that the NAR reported seemed particularly “whacky,” though other regions – including the West – seemed high as well (Phoenix had a YOY gain of around 24%, but that was an outlier!).

CR Note: Remember the median price is impacted by the change in mix, and there are fewer low end foreclosures for sale this year and that pushes up the median price.

Lawler on FHA REO:

HUD finally got around to releasing the Monthly Report to the FHA Commissioner for March, and one “stand-out” stat was the sharp rise in SF property conveyances in March. Here are some historical stats (from the current and past monthly commissioner reports).

The number of SF properties “conveyed” to FHA has been surprising low over the last year given the number of properties in the foreclosure process, and FHA had noted that servicing “issues” were artificially depressing conveyances. Obviously, that was not the case in March!

Monthly Report to FHA Commissioner
	SF REO Inventory (EOM)	Conveyances	Sales	Adjustments
10-Jun	44,850	8,487	8,893	41
10-Jul	44,944	8,341	8,508	261
10-Aug	47,007	9,810	7,686	-61
10-Sep	51,487	11,411	7,439	508
10-Oct	54,609	9,908	7,289	503
10-Nov	55,488	6,752	5,817	-56
10-Dec	60,739	7,728	2,749	272
11-Jan	65,639	7,709	2,632	-177
11-Feb	68,801	7,383	4,221	0
11-Mar	68,997	8,647	8,728	277
11-Apr	65,063	7,410	11,375	31
11-May	59,465	7,032	12,659	29
11-Jun	53,164	7,240	13,600	59
11-Jul	48,507	6,509	11,379	213
11-Aug	44,749	8,005	11,701	-62
11-Sep	40,719	6,567	10,554	-43
11-Oct	37,922	6,541	9,883	545
11-Nov	35,192	6,212	9,178	236
11-Dec	32,170	5,997	8,800	-219
12-Jan	31,046	6,771	7,670	-225
12-Feb	30,005	7,132	7,637	-536
12-Mar	35,613	14,007	8,219	-180

CR Note: This probably means FHA REO sales will increase in May and June.

Click on graph for larger image.

This graph shows the combined REO inventory for Fannie, Freddie and the FHA.

The combined REO inventory is down to 209 thousand in Q1 2012, down about 16% from Q1 2011.

CR Note: Even though REO inventories are down, there are still more distressed sales coming because of all the loans 90+ days delinquent and in the foreclosure process.

Earlier on existing home sales:
• Existing Home Sales in April: 4.62 million SAAR, 6.6 months of supply
• Existing Home Sales: Inventory and NSA Sales Graph
• Existing Home Sales graphs

This is by Yves Smith, cross-posted from the New York Times Room for Debate…

Preventing blow-ups like the JPMorgan “hedge” that bears no resemblance to any known hedge isn’t difficult. What makes preventing it difficult is that banks that exist only by virtue of state-granted charters — and more recently, huge transfers from the public — have persuaded public officials and regulators that they have a God-granted right not just to high levels of profit but also high levels of employee and executive compensation.

Banks enjoy state support because they provide essential services, like a payments system and a repository for deposits. One proposal to limit them to these vital services is “narrow banking,” or requiring that deposits be invested in only safe and liquid instruments. This idea was put forward by Irving Fisher and Henry Simons in the 1930s, and has been championed by the right (Milton Friedman), the left (James Tobin) and banking experts (Lowell Bryan of McKinsey).

A less radical idea would be to eliminate credit default swaps over time (they are too embedded in current practice to ban them; banks need to be weaned off them). There are no socially valuable uses for the product. Contrary to defenders’ claims, they aren’t a good way to short bonds (not only does it deal with only one attribute of bond risk, it does so badly: payouts in actual credit events on credit default swaps vary considerably, and are generally less than payouts to holders of real bonds). These swaps were the driver of the crisis. They were the mechanism that allowed real economy exposures to risky subprime bonds to be multiplied well beyond the number of actual borrowers and thus cause vastly more damage.

Another route would be to implement the Volcker Rule as Paul Volcker envisaged, meaning without the portfolio hedging exemption that JPMorgan relied on. Or officials could enforce Sarbanes Oxley, which has the chief executive officer certify the adequacy of internal controls, which for a major financial firm includes risk controls. Had any chief executives been targeted for Sarbanes Oxley violations for the massive risk management failures during the financial crisis, it’s pretty likely thatJamie Dimon, head of JPMorgan, would have thought twice before giving the chief investment officer both the mandate and the rope to enter into risky trades.

Maybe it’s time to recognize that these firms are too big and in too many complex businesses to be managed. Jamie Dimon was touted as a star who could supervise a sprawling firm running huge risks, and he fell short because no one can do the job adequately. A less disaster-prone financial system requires more simplicity and redundancy. Re-instituting Glass-Steagall or other variants on the narrow banking theme isn’t a full solution, but it would make for a good start.

Sustainability of big bounce is questionable

Hey Zuck, congrats on your wedding! I hate to disturb your honeymoon, but your stock’s honeymoon is seriously over.

Measuring from Friday’s high to today’s low, you’re out $7 billion. LOLZ.

Anywho…have a great rest of the honeymoon!

From Reuters:

If you want to know how ethical your broker is, give them a moral dilemma and see how much they sweat before deciding what to do.

It’s quite a jump from the laboratory to real-world decisions about asset management but British researchers have found that gut feeling can override rational thought when people are faced with financial offers that look unfair.
Even when we could benefit, a physical response like sweating can make people reject a financial proposition they consider to be unjust. The key is how tuned in they are to their own bodies.

Researchers from the University of Exeter, the Medical Research Council Cognition and Brain Sciences Unit and the University of Cambridge, gave 51 people a series of offers based on dividing 10 pounds ($16) between two people. They found that although an offer to split the money 50:50 was mostly accepted, an offer of less than a ‘fair share’ was often rejected, even though rejecting it left them with nothing.

The game, a version of a well-known psychological test called the Ultimatum Game, showed gut reactions, especially made under time pressure with incomplete information, can lead to decisions that are irrational from a purely economic perspective.

The researchers measured how much participants sweated through their fingertips and how much their heart rate changed.

Clinical psychologist Barney Dunn, who led the study, told Reuters that participants were also tested on how accurately they could monitor their physical responses by counting their own heartbeats. Those who were most accurate were more prone to having their bodies dictate their decisions in the game.

“It’s a bizarre finding but it’s very robust,” said Dunn.

The New York Times has an interesting article this morning: “As Facebook’s Stock Struggles, Fingers Start Pointing.”

Apparently, stocks are only allowed to go up, and if they don’t, it must be someone’s fault.

Wall Street is playing the Facebook blame game.

As shares of the social network tumbled in their second day of trading, bankers, investors and analysts wondered what had gone wrong with the initial public offering of Facebook, the most highly anticipated technology debut in years.

Some fingers are pointing at Morgan Stanley, the lead banker on the I.P.O., while others criticize Nasdaq and even Facebook itself. In the aftermath, critics contend that Facebook’s offering price was too high and too many shares were sold to the public, hurting the stock’s performance out of the gate.

So the media is asking if the blame should lie with the underwriter, the exchange of the company itself. My question is: What about the media?

BlueCrest Capital Management's Michael Platt spoke with Bloomberg Television about the European crisis and how he's trading the current situation.



On the financial impact of a Greek exit:

“I think the order of events would be Greece exits, shock wave across Europe, massive stress in banks, Spain turns into the battleground for the euro because of distresses in their own banking system, and then we either get a very swift and strong European solution or we get a hugely disorderly meltdown in Europe. “


On whether Spanish banks are acknowledging their real estate positions:

“No, they are not. In a country with 24% unemployment, they have a 3% provision against their mortgage book…The mortgage book of Ireland has a 10% provision. What is going on in Spain is that 22% of Spanish mortgages have been reworked, half of them more than twice. In other words, there’s evidence that the banks have been evergreening loans.  In which case, 7% of it, you have to take another allowance of 7% to get it to Irish levels against 650 billion euros. That’s another 50 billion euros there. And the same is going on in the loans to small and medium enterprises.”


On how he's trading Europe right now:

“The problem is you can make a pretty sensible argument for almost any outcome in Europe. It could be a run on the banks very quickly. The Greeks could end up staying in for a little bit longer. They could vote to take themselves out. There could be a eurobond. The whole situation could be overtaken by events. We could have bank runs in Spain. We could have LTRO. We could have a concerted bond-buying action from the ECB. You can make a sensible argument for almost any outcome it's in such a state of flux right now. I think that when you get into these sorts of situations, the first thing you want to do is you want to ensure that your money is in a place where you like the credit so that if there is a major banking problem you're not going to lose money on credit…The reason why the treasury market's doing so well. Treasuries, and the short end of Europe with German government bonds, for two years now yield being essentially zero.”


Embedded below is the video of Platt's interview with Bloomberg Television:



For more on how hedgies are playing the European crisis, head to Marc Lasry on opportunities in distressed debt.

Eric Mindich's hedge fund Eton Park Capital has just disclosed activity in two positions in UK markets.


Cove Energy

First, Mindich's firm has disclosed a new position in Cove Energy (LON: COV).  Due to trading on May 16th, the hedge fund has disclosed a position of 3.09% of outstanding shares in COV via equity swaps.

Per Google Finance, Cove Energy is "engaged in the exploration for and the development and production of oil and gas reserves. The Company operates in two segments: oil and gas exploration, and mineral exploration. The Company properties include Rovuma Offshore, where it has 8.5% working interest; Mozambique Onshore, where it has 10% working interest; Tanzania Mnazi Bay, where it has 16.38% working interest in production and 20.475% exploration interest; Kenya Offshore (L5, L7, L11A, L11B and L12), where it has 15% working interest, and Kenya Offshore (L10A and L10B), where it has 25% and 15% working interest."


Sable Mining

Second, Eton Park has significantly reduced their position in the London listed African miner Sable Mining (LON: SBLM).  Their disclosure shows they've gone below the threshold of a 3% ownership stake.  Market Folly originally flagged when Eton Park bought Sable back in April 2010 at a placing.

Sable Mining is still owned by Audley Capital who hold 7.1% of the shares outstanding.

Per Google Finance, Sable Mining is "formerly BioEnergy Africa Limited, is a mining company. It focuses on investing in early stage exploration and development mining businesses or assets located in sub-Saharan Africa."


In other activity from this hedge fund, we've detailed Eton Park's new position in Teekay (TK).

Steve Mandel's hedge fund firm Lone Pine Capital recently filed a 13G with the SEC regarding its position in Ulta Salon, Cosmetics & Fragrance (ULTA).  Per the filing, the hedge fund now owns a 5.6% stake in the company with 3,498,638 shares.

This marks a 61% increase in their position size since the beginning of April.  The disclosure was made due to activity on May 10th as it looks like they utilized the recent sell-off to add to their position.

Mandel made a rare appearance at the Ira Sohn Conference where he talked about what type of investments he likes.  You can also read notes from the entire conference here.

Per Google Finance, ULTA is "a beauty retailer, which provides one-stop shopping for prestige, mass and salon products and salon services in the United States. During the year ended January 28, 2012 (fiscal 2011), the Company opened 61 new stores. It operates full-service salons in all of its stores. Its Ulta store format includes an open and modern salon area with approximately eight to 10 stations."

Massachusetts single-family home sales rose considerably in April from a year earlier, reaching double-digit growth rates, according to studies from the Massachusetts Association of Realtors and The Warren Group.

read more

Home prices will not reach a true bottom until late 2013, Fitch Ratings said. Still, investors are busy scoping the market for deals in key areas.

read more

An extended conservatorship in which there is no foreseeable resolution will eventually undermine the stability of the GSEs’ multifamily staff, who see themselves as part of a larger housing solution.

read more

Finra issues $3.5 million fine against Citi, alleging the posting of inaccurate RMBS data.

read more

Existing-home sales and home prices rose in April, according to the National Association of Realtors on Tuesday.

read more

The median price for a home statewide hit $135,000, which is in line with year-ago levels. However, compared to March, the median price is up by $5,000 from $130,000 a month earlier.

read more

The Federal Housing Administration may ease restrictions on financing purchases of condominium units, which troubled an economic recovery in many markets.

read more

A crucial handbook that provides general guidance for tasks associated with the Department of Housing and Urban Development's involvement in multifamily projects will be revised by October. The book hasn’t been updated since 1992.

read more

A covered bond framework for U.S. banks continues to hit roadblocks in Congress. But the SEC made way for a foreign bank program over the weekend.

 

read more

Fitch Ratings downgraded Litton Loan Servicing's residential mortgage servicer ratings in the wake of Ocwen Financial Corp. acquiring Litton's residential servicing platform.

read more

Eight Republican and Democratic California congressional members introduced legislation calling for the Federal Housing Finance Agency to cease its plan to sell Fannie Mae-owned foreclosed homes in California to large investors.

read more

More on the real life harm stemming from the insistence to maintain the status quo ideology of a common currency in the Eurozone. I think the most helpful perspective on present conditions is not to think that the economy will … Continue reading →

Forget Facebook. Michael A. Gayed, chief investment strategist at Pension Partners LLC, talks about an alarming spread between junk bond prices (falling) and long treasury prices (rising). This spread typically leads equity markets and has previously served as a warning … Continue reading →

It has already been called the worst IPO of all time, but the lower Facebook (FB) goes, the more attractive it will become.  We want to get a sense of where Facebook (FB) has to trade to in order for Bespoke Readers to get interested.  So tell us, at what point would you buy shares of Facebook (FB)?

The charts below highlight the relative strength of various sectors versus the S&P 500.  These charts are updated for Bespoke Premium clients on a weekly basis as part of our Sector Snapshots report.  For each chart, a rising line indicates that the sector is outperforming the S&P 500, while a falling line indicates the sector is underperforming the overall market.

Regarding each of the individual sectors, there are some interesting trends worth pointing out.  For starters, although many retail stocks have been hit hard on earnings, the Consumer Discretionary sector has been holding up well, and remains right near its highs for the year relative to the S&P 500.  Not surprisingly, while Consumer Discretionary stocks are holding up well, the Energy sector has been getting crushed.  Although the sector has seen a bounce over the last two days, it has a long way to go before getting back to even versus the market.

From late 2011 through late April of this year, the Financial sector saw a big rebound in its relative strength.  Since the start of May, however, the sector has taken a downward turn, which was only exacerbated by the JP Morgan (JPM) trading loss earlier this month.  

The Industrials sector has been a big underperformer over the last twelve months, but after a bounce in the last few days, the sector's relative strength is attempting to make a higher low.  Within the Industrials sector, the Transportation sector has also seen an improvement in its relative strength.  That sector's peak relative performance occurred earlier this year, and the market eventually followed suit.  With that in mind, bulls are hoping the recent improvement in the relative strength of the Transportation sector is a precursor of an improvement in the overall market in the months to come.

Subscribe to  Bespoke Premium to receive more in-depth research from Bespoke.

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Regulator says the company and 5 of its former executives engaged in a ‘complex’ scheme to inflate the company’s assets and revenue

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A new working paper from Harvard Business School finds that companies with progressive environmental and social policies  significantly outperform their counterparts over the long-term, both in terms of stock market and accounting performance.

Excerpts from The Impact of a Corporate Culture of Sustainability on Corporate Behavior and Performance (free pdf download) by Robert G. Eccles (HBS) Ioannis Ioannou (London Business School) and George Serafeim (HBS).

We investigate the effect of a corporate culture of sustainability on multiple facets of corporate behavior and performance outcomes. Using a matched sample of 180 companies, we find that corporations that voluntarily adopted environmental and social policies by 1993 – termed as High Sustainability companies – exhibit fundamentally different characteristics from a matched sample of firms that adopted almost none of these policies – termed as Low Sustainability companies.

In particular, we find that the boards of directors of these companies are more likely to be responsible for sustainability and top executive incentives are more likely to be a function of sustainability metrics. Moreover, they are more likely to have organized procedures for stakeholder engagement, to be more long-term oriented, and to exhibit more measurement and disclosure of nonfinancial information.

Finally, we provide evidence that High Sustainability companies significantly outperform their counterparts over the long-term, both in terms of stock market and accounting performance.

The outperformance is stronger in sectors where the customers are individual consumers, companies compete on the basis of brands and reputation, and in sectors where companies’ products significantly depend upon extracting large amounts of natural resources.

See also Doing Well by Doing Good: Corporate Social Responsibility Lowers Capital Costs

Technorati Tags: corporate responsibility, corporate-governance, social-responsibility

A Fed policy maker wouldn't rule out further quantitative easing by the U.S. central bank, citing a sharp rise in jobless or a big shock in confidence as potential triggers.

Nothing is certain here; Greece may or may not leave, and there's a huge range of potential policy responses. Here's a rundown of the latest on some economists' and analysts' views on what could happen next.

Despite a proliferation of international volatility indexes, none as gaining much traction.

The fallout from Facebook's IPO continues to filter through the market. Aaron Lucchetti explains on the Markets Hub.

Successful or not, Facebook’s IPO has taught us one very important thing over the last two days.

The blogosphere/Twittersphere knows extremely little about greenshoe IPO mechanics....

The little guy always gets ignored, as these charts from Nomura’s Jens Nordvig and Dimitris Drakopoulos show:



What stands out is how poor Malta’s vulnerability...

Please consider an interview with Adam Fleming and James Turk on precious metals and mining. James Turk is founder of GoldMoney.

 

Interview Synopsis

Adam Fleming, Chairman of Wits Gold and Fleming Family & Partners, discusses the gold bull market with GoldMoney's Chairman James Turk. Topics include metal price action, the eurozone's debt crisis, and mining in South Africa.

Adam points out that gold bull markets usually result in a 1:1 Dow/Gold ratio, something that he expects to see happen in the coming years. In other words, it is still a great time to buy gold.

Adam is pessimistic about the eurozone, and thought plans for European Monetary Union were delusional, on account of the differences in culture and political economy between different European Union countries. He also discusses his mining experience in South Africa, and why – contrary to much negative press the country gets – it is actually still a great place to live and work. He expects companies to increase their mining investments in the Witwatersrand Basin, and thinks that this region will remain the world's premier gold mining location.

This video was recorded on May 18 2012 in Jersey, British Channel Islands.

Relationship With GoldMoney

Once again I need to point out I have a relationship with GoldMoney.

I have no comment on the relative value of South Africa miners or any set of miners from any country vs. another country. Instead, I suggest in general that miners and gold are undervalued here.

The interesting part of the interview is where James Turk and Adam Fleming discuss interest rates and currencies.

Gold Does Not Pay Interest (Neither Do Dollars in Your Wallet)

The knock on gold is that it does not pay interest. However, as Turk points out, the US dollar bears no interest either. Nor does the Australian dollar, the Loonie, the Euro, or any other currency.

Currencies only bear interest if you loan the money out, thereby converting the currency into a financial asset. Financial assets have risk as we have seen with corporate defaults, bankruptcies of GM, Lehman, Worldcom, and especially the collapse of the housing market in the US.

A collapse of the housing market in Australia and China is underway now as well. In short, the only way to collect interest is to take risk.

Please note that aFull-Fledged European Bank Run is underway now and the reason is fractional reserve lending.

In the above link I explain ....

• Why ECB Deposit Insurance is Not the Answer to a Run on the Bank
• How FDIC Played a Part in the US Real Estate Bust 
• That Monetarist Fools are Everywhere 
• Why People Believe in Gold

As noted previously: For the sake of full disclosure, my physical precious metals holdings are now entirely at GoldMoney and I have an affiliate relationship with them.

If anyone wants information about GoldMoney or investing in physical gold and silver in general, please Email Mish

Questions On Swapping Gold For Silver

Numerous people have asked about my post on May 1, I'm Swapping Some Gold for Silver.

There is little to tell. I decided for a portion of my assets I was willing to take the risk-reward setup of silver vs. gold.

While gold is money, I do not know if the free market would turn to silver as money or not.

Silver certainly has a major industrial component, while gold does not, and that makes silver more vulnerable than gold to a global slowdown.

After swapping all my silver for gold (See Taking Silver Profits - Swapping Silver for Gold April 27, 2011) I simply decided to take a little more risk in silver.

Clearly I was early. Should silver get to my original target of the low $20's I will swap more gold for silver. Perhaps silver gets to that price, perhaps not. I do not know, nor does anyone else. At least I do not pretend to.

 There is little more that I can add other than silver is more volatile than gold and I still believe overweighting gold vs. silver substantially is a good idea.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

The NAR reported inventory increased to 2.54 million units in April, up 9.5% from the downwardly revised 2.32 million in March (revised down from 2.40 million). This is down 20.6% from April 2011, and up 2.7% from the inventory level in April 2005 (mid-2005 was when inventory started increasing sharply). Inventory was down slightly compared to April 2004 (see first graph below). This decline in inventory remains a significant story.

There is a seasonal pattern for inventory - usually inventory is the lowest in the winter months, and inventory usually peaks mid-summer. However most of the seasonal increase typically happens by April - so we could be close to the peak for this year.

Earlier this year, there were several analysts projecting that inventory would increase to 3 million by mid-summer. I thought that was too high, and it now looks like inventory will peak in the 2.6+ million range. That would be well below the inventory peak in 2005 of 2.9 million units.

At the current sales rate, 2.6 million units of inventory this would push the months-of-supply measure up to 6.7 to 6.8 months from the current 6.6 months. Note: Months-of-supply uses the seasonally adjusted sales rate, and the not seasonally adjusted inventory (even though there is a seasonal pattern for inventory). That would be the lowest seasonal peak for months-of-supply since 2005.

Important: The NAR reports active listings, and although there is some variability across the country in what is considered active, most "contingent short sales" are not included. "Contingent short sales" are strange listings since the listings were frequently NEVER on the market (they were listed as contingent), and they hang around for a long time - they are probably more closely related to shadow inventory than active inventory. However when we comparing inventory to 2005, we need to remember there were no "short sale contingent" listings in 2005. However, in the areas I track, the number of "short sale contingent" listings is also down sharply year-over-year.

The following graph shows inventory by month since 2004. In 2005 (dark blue columns), inventory kept rising all year - and that was a clear sign that the housing bubble was ending.

Click on graph for larger image.

This year (dark red for 2012) inventory is at the lowest level for the month of April since 2005, and inventory is slightly below the level in April 2004 (not counting contingent sales). Sometime this summer, I expect inventory to be below the same month in 2005. However inventory is still elevated - especially with the much lower sales rate.

The following graph shows existing home sales Not Seasonally Adjusted (NSA).

Sales NSA (red column) are above the sales for the 2008, 2009 and 2011 (2010 was higher because of the tax credit). Sales are well below the bubble years of 2005 and 2006.

Also it appears distressed sales were down in April. From the NAR:

Distressed homes – foreclosures and short sales sold at deep discounts – accounted for 28 percent of April sales (17 percent were foreclosures and 11 percent were short sales), down from 29 percent in March and 37 percent in April 2011.

The increase in existing home sales, combined with fewer distressed sales, is a positive sign for the housing market.

Earlier:
• Existing Home Sales in April: 4.62 million SAAR, 6.6 months of supply
• Existing Home Sales graphs

On Sunday, roughly one thousand people from liberal community organizing group National People’s Action showed up at Tim Geithner’s house to ask that he investigate the banks.  ”Are you with the people”, asked these activists.  In response to this exceptionally mild pressure, the administration and New York “Attorney General” Eric Schneiderman have decided that they have no choice but to do a bit more PR around the task force.  They have doubled its size, and they have appointed a coordinator.

Senior administration officials and New York Attorney General Eric Schneiderman said they’re busy behind the scenes doubling their team to more than 100 federal and state financial experts and drawing on staff in 10 U.S. attorneys offices around the country. Matthew Stegman, an assistant U.S. attorney, has been tapped as the group’s lead coordinator, according to three sources familiar with the task force’s work.

The unit has also delivered more than 20 civil subpoenas, collected more than a million documents and deposed many witnesses as it digs through the work of bankers, mortgage brokers, appraisers and others who from about 2004 to 2007 helped millions of Americans buy homes they couldn’t afford at prices that didn’t match their property values — all while bundling the mortgages into securities for sale to investors.

20 civil subpoenas on appraisers and brokers?  How… adorable!  And they finally tapped a coordinator, an assistant US Attorney based in eastern California.  That’s a clear tell, appointing someone far from a place where they could easily coordinate among multiple agencies.

The truth is, there is no task force.  Obama is lying.  Schneiderman is lying.  The Department of Justice simply took various individuals already working on cases involving foreclosure rescue scams and petty mortgage fraud, and designated them a new task force. It’s absurd.  The reality is that Obama and Schneiderman are both working on behalf of financial elites who will fund their campaigns and pay them a lot of money when they are out of office.  That’s the game, as I noted this morning in discussing Bill Clinton’s $80 million payday from banks (among other entities).

If you look at the video above, you’ll see that protesters are asking the question of whether Geithner is with the banks or with the people.  Um, he’s with the banks.  That’s been clear for years now.  The real question is why protesters are even bothering to ask.  And I suspect the answer is that no matter how many times Barack Obama proves himself to be a corrupt and dishonest politician, it’s too painful to concede that those who want social justice in America are truly without representation.

By lambert (Yves being on vacation).

‘Rare’ Genetic Variants Are Surprisingly Common, Life Scientists Report Science Daily

Kansas town to auction first flush of giant public toilet on eBay McClatchy

“The anatomy of the eurozone bank run” FT

Merkel Resists G-8 Spending Pressure as Soccer Breaks the Ice Business Week.

Austerity-only cure for crisis out of fashion, but growth rhetoric covers difficult realities Pravda. I thought that Bsns W article was mush.

Germany resists sense  Macrobusiness

“Supply Lines Cast Shadow at NATO Meeting on Afghan War” Times

Nato talks security and peace, Chicago has neither Guardian

Citizen Journalists Detained at Gunpoint by CPD NBC Chicago. Tim Pool. 

Rising US recession risk poses the real threat to Europe Ambrose Evans-Pritchard

“China buyers defer raw material cargos” FT

Wen changes his tune Macrobusiness

Vietnam Economic Slowdown Seen in Cobweb-Covered Crates Bloomberg

The Current Post-Recession Labor Market in Historical Perspective Brad DeLong. Awww. Just when I was buying into the happy talk!

Riot in privatized AL prison Chicago Tribune

“Factories begin to shift back to US” FT

“Seeing Bailouts Through Rose-Colored Glasses” Gretchen Morgensen (Dean Baker comments).

JP Morgan executive to walk away with millions following trading loss Telegraph ($32m)

JPMorgan CIO Risk Overseer Said to Have Record of Trading Losses Bloomberg

Zombie Preparedness Week: Are you ready? From the British Columbia government.

The end of fish, in one chart Brad Plumer for Ezra Klein™

Gazprom Hopes to Build Second Baltic Sea Pipeline Der Spiegel

U.S. Government Authorizes Killing of Endangered Bighorns in Path of Wind Project East County Magazine (KH)

How did James Hansen’s 1981 global warming predictions work out?  (America Blog)

What Makes Countries Rich or Poor? Jared Diamond

Does “culture” require microfoundations? Understanding Society

“Philip K. Dick, Sci-Fi Philosopher, Part 1″ Times

What Trayvon Martin and George Zimmerman Heard New Yorker

House approves East Coast missile shield site in $643 billion defense bill The Hill. Missed this one.

Joe Strummer: The angry young man who grew up. [Harvard Square Theatre, February 16, 1979.]

And in Montreal band wars, I’ll see the good professor’s Arcade Fire and raise him one Me Mom and Morgentaler.

World cosplay summit Bangkok Post

* * *

D – 110 and counting*

I got elected, Sweetscent, but the drats knocked me right out of office in a no-confidence recall thing they cooked up. Having to do with the Pact of Peace. They were right, of course; I shouldn’t have gotten involved in it. But who wants to make a deal with four-armed shiny bugs who can’t even talk, who have to go around carrying a translation box like an indoor potty?’ –Philip K. Dick, Now Wait for Last Year

These links are lighter than usual. Sorry! Tomorrow I’ll do much more extensive work on both Chicago and Montreal. For now, it’s quite late….

Occupy Montreal: “The camera loves you, baby!” Good, detailed, vivid blog of today’s march. Not getting a clear picture of what the march is achieving other than, well, occupying the streets. (Not “unfiltered” because the reporter’s sensibility is clear, but better than the official Gazette story.) Oakland: Portraits from the Occupation. Representatives of the Oakland Police Department, and the police union, declined our invitations to participate, as did the editors of Adbusters magazine.

NATO summit Bobbleheads translate MTP: “GREGORY: wow look at these crazy violent NATO protestors! Audience: ooh white people.” The summit actually opened: “The global leaders met over a large round table” (around, surely). Bernard Harcourt: “Welcome, Nato, to Chicago’s police state”. And a hearty thank you to President Obama, his BFF, Rahm Emmanuel, and D operatives and enablers everywhere for making it all possible! RNN video of march (DCBlogger). “In the age of camera phones, the message is that protesters are watching police too.” Miscellaneous Chicago NATO Links (Bob).

CO (Swing state). Moms battle fracking.

FL (Swing State) “Most of Bern’s Steak House produce is not organic or locally grown on its own farm.” Another revered institution #FAIL! (Ha ha ha ha!)

OH (Swing state) Shalersville speaks out against fracking.

NC (Swing state) - “The Romney and Obama campaigns also seem to be behaving as though their internal polling is showing at least a very close race.”

WI (swing state) Journal-Sentinel endorses Walker (again): “It’s time to end the bickering and get back to the business of the state. We’ve had our differences with the governor, but he deserves a chance to complete his term. We recommended him in 2010. We see no reason to change that recommendation.”

Inside Baseball HCR in classic NYRB letters exchange. Martha Angell: “So the mandate that requires uninsured people to buy private insurance, which is at the heart of the Supreme Court challenge, would cover only 16 million people, a mere 5 percent of the population.” So (to my mind) it really is the mandate — forcing citizens to purchase a defective product, private health insurance — that’s the goal. Not the care. Think of the possibilities! How the Senate “avoids unpredictable democratic floor action, and the accountability of public debate. Picking the speakers for the RNC in Tampa. Whenever you read “delicate balancing act,” stop and do something else. The phrase is a tell for insiderese. (And if you’re attending the RNC, check the FL listening above). The issue nobody mentions: “Can Washington govern?” No, but I bet a man on a white horse could!

Ron Paul MN GOP convention: “They took over, basically. Nobody else was organizing.”

Greens Jill Stein interviewed in the Sun Times: “The politics of fear has brought us everything we were afraid of.” (OK, a Sun Times blog. But still.)

Romney Romney’s new ad introducing himself: Squee! Gary Wills: “Everyone has noticed by now the non-laugh laugh of Mitt Romney, a kind of half-stifled barking.” (I’m trying to remember what Obama’s laugh sounds like. But I can’t.) Bain gives more campaign money to Democrats than it does to Republicans.

Obama Obama 2.0 is the Wanker of the Day. (Leading one to ask the obvious question…) Of course, Axelrod used ____ for a fundraising pitch (____, in this case, being the Ricketts/Wright flap).

Feeding frenzies. None.

* 110 days ’til the Democratic National Convention ends with bottomless steins in a giant beer garden specially constructed by Walt Disney and the Department of Homeland Security in a public/private partnership on the floor of Bank of America Stadium, Charlotte, NC. The Sears Tower in Chicago has 110 stories.

* * *

Antidote du jour:

A weak trend, but still a trend

Traders catch up to solid advances in commodities and global markets

Followers of my various writings on sites such as MarketWatch, Minyanville, SeekingAlpha, and theStreet know that I have been wildly bullish on stocks for 2012, making the case that we could see a 2003/2009-like move as the reflation trade takes hold (see my segment on Bloomberg in late March).  On April 6th, I argued that conditions were favoring a “mini-correction” for stocks and that if markets were resilient, it would further increase the chances of the “Spring Switch” out of bonds and into stocks taking place as a “Great Re-Allocation” takes place.

Stock markets began to severely break down post-European elections, sending international equities down on a year-to-date basis while stocks have held on to slight gains in the U.S. as deflation expectations suddenly returned.  While I maintain that this has been the “mini-correction” I addressed in early April and which my company’s ATAC (Accelerated Time And Capital) models prepared for by positioning our own clients largely into bonds out of stocks, there is something which greatly concerns me.

Treasury yields in the U.S. have dropped even deeper into panic mode with the 10 year yield near all-time record lows as the 30 year Treasury stays below the 3% level independent of the Fed’s stated inflation target of 2%.  Last week a significant break in credit markets occurred, behaving eerily similar to the Flash Crash of May 6, 2010 and the Summer Crash of 2011.

Take a look below at the price ratios of Emerging Market Debt (EMB) and Junk Debt (JNK) ETFs both relative to 7-10 Year Treasuries (IEF).  A rising ratio means credit spreads are narrowing, while a falling one means credit stress is returning as those spreads widen.

Notice the speed and magnitude under which Emerging Market Debt and Junk Debt collapsed relative to U.S. Treasuries in recent trading days.  The move is very reminiscent of the 2010 and 2011 crashes.  A credit spread shock tends to filter through to stocks with a lag.  This should make sense given that equities have a lower priority on the capital structure scale than debt, so a break in debt likely must by definition result in a break in stocks.  The concern is that should the breakdown not reverse shortly, a waterfall decline from oversold levels in stocks could occur as event risk gets quickly re-priced.  I spoke about this on Bloomberg last Friday at http://www.bloomberg.com/video/93006859/.

The next few days are crucial.  Should a V-formation occur in the above price ratio charts, things may turn out okay and a snap-back rally for stocks may be in order.  Unless a move higher is confirmed though by healing in credit markets from the break last week, caution likely remains highly warranted.  Either way, if it looks like a duck…

Source:
Michael A. Gayed
Chief Investment Strategist
Pension Partners, LLC

Lowry’s had this very astute observation about those who called yesterday’s market action “Strong” –

“All the major price indexes ended yesterday essentially at their highs for the day, as CNBC proclaimed a “strong rally for stocks.” This assessment of strength was apparently based on the point and percentage gains in the market indexes. But, classifying a rally as “strong” based on price is somewhat like judging a boat as seaworthy based on its paint job.

In fact, the quality of yesterday’s rally was anything but strong. Rather, the characteristics of the rally appeared to fit nicely into a classification as a reflex rally based on a short-term oversold condition.

It’s possible that the decline since early May finally exhausted Supply, allowing the market to rebound on lackluster Demand and Volume. But, if that’s the case, then any further rebound should show a distinct improvement in both Demand and Volume. Lacking that, any further rally will probably be living on borrowed time.”

I agree.

 

Visit msnbc.com for breaking news, world news, and news about the economy

China Securities Journal suggests that the government will accelerate approvals and funding for infrastructure projects. I remain sceptical and certainly believe that the pop in the miners, due to these comments, is way overdone. Inventories af raw materials in China and, indeed, finished products eg steel remain high. In addition, the Chinese don’t need more infrastructure (bridges to nowhere) and are focusing on domestic consumption. A$ should weaken further as a result, in my humble view;

Fitch has cut Japan’s long term credit rating by 1 notch to A+, with a negative outlook. The foreign currency rating was cut by 2 notches to A+.The “downgrade and negative outlooks reflect growing risks to Japan’s sovereign credit profile, as a result of high and rising public debt ratios”. With debt to GDP in excess of 200%, the news should not come as a surprise (the OECD forecasts that debt to GDP will rise to 223% next year, from 214% at the end of this – though over 95% is held domestically), but the Yen continues to remain strong, even though it dropped on the Fitch news. One day however,……..;

The FT reports on a fascinating subject, namely that US$ denominated deposits in China are rising at the fastest pace in at least 5 years. Foreign currency deposits increased by US$89.4bn in the last four months to US$364.5bn, the largest increase since 2007, the PBoC reports. Chinese banks sold a net Yuan60.6bn (US$9.6bn) of foreign currency in April – capital flight do you think – yep. Dim Sum bonds have underperformed. I would expect that Chinese demand for the US$ will increase as the economy slows and as Chinese capital flight continues. A number of you remain sceptical of my view that the Yuan is not undervalued, as widely believed – personally, I believe there is mounting evidence to support my view;

Finally, analysts are beginning to cut India’s GDP forecasts. Morgan Stanley has reduced it’s forecast for GDP growth to +6.3% (previously +6.9%) for the fiscal year ending 31st March 2013. They cite the current account deficit of around 4.0%, the fiscal deficit of 5.8%, the whopping trade deficit of near 10% and inflation at 7.23%, as reasons. Furthermore, the high budget deficit of between 9.0% to 10.0% (ex one off telecoms revenues), with declining private sector investment does not bode well for the future. Income growth is slowing, whilst credit growth exceeds deposits (17.3% as opposed to deposit growth of just 13.9%), resulting in loans to deposits rising to near 80%. As banks hold nearly 30% of their deposits in Government securities, lending is being financed via inter bank liquidity from the RBI, resulting in high short term interest rates. Government has to reduce spending – that’s the bottom line – but politics and a bumbling administration…….The Indian Rupee fell to its 5th consecutive all-time low earlier today, though bounced back on Central Bank buying. The Rupee is the worst performing in EM Asia forex;

The Director general of the International Atomic Energy Agency stated today that he had reached a deal with Iran on it’s nuclear programme. He added that the agreement “will be signed quite soon”. The statement comes ahead of the next meeting between the P5 + 1 and Iran tomorrow. There’s nothing simple when Iran is concerned, but, on the face of it, it looks like better news;

Russian watchers suggest that Putin’s new cabinet is largely as anticipated. As expected, Sechin has been kicked out (numerous stories about that gentleman) and a new face Arkady Dvorkovich, Medvedev’s chief economic aide appointed – he will be responsible for Russia’s energy sector. The RTS rose +2.5% yesterday on the news (it’s down over 25% since mid March), suggesting the appointments are positive? or, at least, not negative. Russia needs an oil price in the high US$110′s to meet its spending programmes, without incurring a budget deficit;

EM bond issues (US$403.2bn) for the 1st 5 months of the year are at a record high (Source Dealogic) and fund inflows have soared. However EM bond defaults are rising and have risen to US$6bn in the 1st 4 months of the year, which is more than the US$4.3bn recorded for the whole of 2011, according to ING. In addition, some US$73bn are trading at distressed levels and US$53bn at stressed levels. The default rate peaked at 13% following the 2008 financial crisis – if liquidity dries up (remember European banks are exiting), default rates will rise. Latin America accounted for 48% of corporate distressed debt, with the oil and gas sector the main culprit (55%). The surge of investment in EM bonds looks misplaced and mispriced, in my humble view (Source FT);

The FT reports that the Greek banking system is being propped up by some E100bn in emergency (and allegedly temporary) liquidity, provided in accordance with the ELA arrangements. In theory, losses in respect of ELA lending are borne by the relevant National Central Bank, but if that Central Bank cant pay up, the losses are borne by the other 16 EZ Central banks on a predetermined ratio, with Germany the biggest loser. The ELA can be stopped for a country if 2/3rds of the 23 member ECB council oppose it, one way of forcing Greece out of the Euro, though the ECB is likely to seek political cover if it was ever to exercise such a move. However, the ECB is thought to have used this lever to force Ireland to seek a bail out. The ELA is not supposed to be used for insolvent banks – why then, you may well ask, are Greek banks being provided with funds?. The ECB is extremely reluctant to discuss ELA issues;

The IIF (which is an association of some 450 banks around the world) reports that losses by Spanish banks could rise to between E216bn to E260bn, with the banks needing some E60bn in new capital. However, they warn the the higher number (in terms of losses) was more likely, given the high unemployment rate and the macro economic conditions in Spain. The study was based on the Irish example
Spain raised E2.5bn through a bond auction today, though rates continue to rise – well above sustainable levels;

The EU is to accelerate a E939mn payment to Spain in respect of the “cohesion fund”. Sounds like a back handed way of providing financial assistance, especially as Spain is entitled to such payments, but only on a transitional basis ie to be phased out;

Whilst a number are calling for the ECB to launch another LTRO, personally, I believe that such a move is unlikely. A number of EZ banks used the funds to buy their sovereign debt, which are now trading at below their purchase price, eroding their capital even further. Whilst I had expected small and absolutely clapped out banks to play the carry trade, the number of much bigger players who participated in this ludicrous game has really shocked me – and they call themselves bankers. Much better, I would have thought for the ECB to buy Italian and Spanish bonds directly – will help some of these banks exit their losing positions as well;

The OECD is calling for the EZ to issue Euro bonds and for the ECB to buy peripheral bonds and, in addition, to cut rates to zero. They warned that the European crisis may well have a material impact on the global economy. In addition, they are forecasting a contraction of -0.1% in the EZ this year (+0.2% previously), rising to +0.9% in 2013 !!!, as compared with growth of +2.4% (2.0% previously) in the US and +2.0% in Japan, slowing to 1.5% next year. Interestingly, they forecast that China will grow by +8.2% this year and by 9.3% next – wildly optimistic in my humble view. Germany is expected to grow by +1.0% this year and by +1.9% next, France by +0.6% this year and +1.2% in 2013. Spain and Italy will contract by -1.6% and -1.7% this year and by -0.8% and -0.4% respectively next. Greece is expected to contract by -5.3% this year, but stabilise next. The situation in Ireland is improving – GDP is expected to rise by +0.6% this year and by +2.1% next, though down from previous forecasts of growth of +1.0% this year and +2.4% next.
Finally, the OECD suggests that the FED should not abandon QE;

UK April CPI rose by +0.6% MoM (as expected) or +3.0% YoY (+3.1% expected), though much lower than the +3.5% YoY in March and the lowest rate of inflation since February 2010. Mr King does not have to write a letter to the UK Chancellor to explain why inflation is above target. The sharp decline in oil will reduce inflation further in both the UK and across the globe this month. Core inflation declined to 2.1%, from 2.5% previously. RPI, slowed to 3.5%, from 3.6% previously. Sterling declined on the news – further QE is more likely, especially if the EZ continues to face problems;

The IMF has suggested that the BoE should cut interest rates and increase QE to boost demand, in particular, if the economy fails to pick up. It has also suggested that the government may need to slow down cuts in infrastructure spending and temporarily lower taxes, whilst cutting spending elsewhere – for example in public sector wages. The IMF stated that “fiscal easing and further use of the government’s balance sheet should be considered if downside risks materialise and recovery fails to take off”. Mrs Lagarde repeated that UK growth is too slow and unemployment too high. Sterling declined on the news
In common with the OECD, Mrs Lagarde suggested Euro bonds as a necessity;

The National Association of Business Economics forecasts that US payrolls will rise by an average of 180k per month this year, up from 170k forecast in February. They forecast 2012 GDP at +2.3%, in line with the FED’s estimate, with +2.7% in 2013. Housing starts are expected to rise to 720k this year, compared with 700k in February, and a jump to 850k in 2013;

Here comes more bad news. JPM’s Jamie Dimon stated that the bank would suspend it’s US$15bn share buy back programme, though would maintain it’s dividend payout. Core capital is expected to decline to 8.2%, from 8.4% previously – based on US$3bn of losses on the synthetic credit portfolio. Intriguingly, Mr Dimon stated that the losses at the CIO were probably “an isolated mistake”. Probably !!!! . Morgan Stanley is the latest bank who suggests that the losses may come in at US$5bn (some reports suggest US$7bn), rather than the US$3bn recently forecast by Mr Dimon. However, the size of potential losses remains a total guess as the position is open and unlikely to be closed for quite some time. Hmmmm. The shares closed nearly 2.9% lower yesterday. Analysts continue to suggest buying the stock – me, I prefer to sit back and wait;

Facebook closed at US$34.03, some 11% lower yesterday, or 10.4% lower than the IPO price of US$38. Underwriters are likely to be holding big positions, which will encourage the shorts. A definite whoops;

The Brazilian government announced a stimulus programme yesterday. They reduced (a) reserve requirements for auto loans (b) IPI industrial tax on various autos (c) general IOF transaction tax on borrowings for individuals to 1.5%, from 2.5% previously and (d) the Brazilian state development bank BNDES reduced interest rates for some buyers of machinery and equipment. The measures have raised increasing scepticism;

Outlook

Asian markets responded to strong overnight US markets and closed, in the main, over 1.0% higher, though India is weaker (down near 1.0%). I would expect that May data will reflect a significant withdrawal of funds from India by overseas investors.

US futures suggest that markets will add to yesterdays strong gains.

European markets are trading higher at present – some +1.0%+ higher for the major markets. Spot Brent has reversed earlier falls and is flat to slightly higher. Gold is weaker.

The Euro is weaker against the US$, as is Sterling.

Expectations (by equity markets) for the EU Heads of State meeting seem pretty optimistic, suggesting to little old me, that there are (significant?) downside risks. Some kind of Euro project bonds are likely, as is waffle about growth measures, but I do not expect decisions on Euro Bonds etc (which for some reason the market does), though they are inevitable in due course. Given deposit flight from EZ peripheral countries, some comments on bank (rescues) could well be possible – if not, watch out.

The frighteners about the impact of a Greek Euro exit continue – amazingly from very senior individuals in the financial sector. Personally, as you know, I believe they are wrong. First I don’t believe, based on present info, that the head of the Syriza party, Mr Tsipras, will succeed in forming a government with him leading – a coalition comprising New Democrats and Pasok will be able to form a coalition, based on the most recent polls, though I totally accept that it’s early days. There is to be a TV debate nearer the election, which could well be crucial. I’m sure that Mr Tsipras’s opponents are, even now, warning Greeks that his win would result in a Greek exit from the Euro, something well over 75% of Greeks do not want.

However, much more importantly, even if I’m wrong, a Greek exit, would force the EZ/ECB to pull out all the stops (ECB bond buying of peripheral bonds, lower ECB interest rates, more ECB liquidity for banks, ESM to recap banks, possibly /likely even Euro Bonds (or at least a definitive assurance that they will be created), etc, etc – ie everything the market wants and something most of us have been calling for.

These measures will come as a huge relief to the other EZ countries, especially the peripherals. The EZ/ECB will have no alternative and essentially it also gets Mrs Merkel off the hook on having to take difficult decisions, even though I suspect she knows that that’s the eventual outcome. As a result, I believe that any initial sell off following a Greek exit will result in a markets rebound, following a more careful consideration of the matter. The added bonus is that Greece will disappear from the headlines. Please note that Greece is just 2.0% of EZ GDP and whilst financial losses within the EZ will be large, they will be containable. The real problem is contagion and I believe the above will deal with that.

All I can say is Mr Tsipras please win. I can assure you that most in Europe would be delighted to see a Grexit.

Kiron Sarkar

22nd May 2012

My early morning reads to start the week:

• Two market perspectives:
…..-Leading indicators of a market top (Market Watch)
…..-S&P 500 Has Biggest Gain in Two Months on China Signals (Bloomberg)
• U.S. lets China bypass Wall Street for Treasury orders (Reuters)
• JP Morgan’s Isn’t the Only Bad Bank Chart (Market Watch)
• Getting to Retirement With Minimal Financial Risk (NYT)
• The Magnetar Fallout: Who’s Been Charged, Has Settled, or is Now Being Investigated? (Pro Pubica)
• The Right Way to Try to Buy Happiness (NYT)
• Greeks embrace some new myths about life with the euro (Reuters)
• Would Romney Be Another Bill Clinton or Another George W. Bush? (NYT)
• Former Record Label Exec Ethan Kaplan: Duh, Of Course More File Sharing Leads To More Sales (Tech Dirt) see also What Filesharing Studies Really Say – Conclusions and Links (Zero Paid)

What are you reading?

Calm Seas Can Mask Market Risks That Remain

Source: WSJ

Northern lights, camera, action: Wonders of the Aurora Borealis now captured on film

While Canadians were celebrating Victoria Day yesterday, NASDAQ-listed Silicon Laboratories (SLAB-Q) announced that it has agreed to acquire Ember Corp., a Boston-based short-range wireless technology company. The price was US$72 million in cash, subject to a working capital adjustment and an earn-out formula that could drive the price higher.

According to Forbes, “Silicon Labs is making a play on ‘the Internet of things’.”

SLAB said Ember should contribute $10 million to $12 million in revenue in the 2012 second half, and should be accretive on a non-GAAP basis in 2013.

Wellington Financial announced its first US$5 million credit facility for Ember in 2009, and then renewed it earlier this year. A great example of how ready we are to back our existing portfolio companies with our patient, non-amortizing debt capital. Some of Ember’s primary venture capital investors include Polaris Ventures, GrandBanks Capital, RRE Ventures, Vulcan Capital, DFJ ePlanet Ventures and New Atlantic Ventures.

Ember’s ZigBee networking systems – CMOS wireless semiconductors, ZigBee protocol software and tools – are extensively used for monitoring and control operations in the Connected Home including, Smart Energy, Security Monitoring and Automation (SMA), Home Automation, Smart Lighting and Communicating Appliances. These applications enable more comfort, convenience and security in the home for consumers while allowing them to work with utilities to better manage energy consumption.

Congrats to Bob, Jim and the entire Ember team.

MRM

A half-baked editorial on Bloomberg, full of one-sided distortion, warns Greek Voters Need to Look Beyond Syriza’s Dangerous Lies.

Tsipras and his Syriza party are selling the Greek people a falsehood: namely, that Greece can renounce the terms of its bailout agreements with the euro-area governments and still receive their money. If voters believe him, and he attracts enough votes in elections on June 17 to follow through with his threats, then his country, Europe and the global economy will live for years with the consequences.

Tsipras hardly has a mandate -- he won 16.8 percent of the vote on May 6, and may increase that to 20 percent or more in June. But polls suggest Syriza is now fighting for first place with the center-right New Democracy party. In Greece, that matters, because the top party gets an extra 50 seats in the 300-seat parliament.

Europe’s politicians, across the political spectrum, need to make clear the distinction between Syriza and other parties that disagree with Europe’s austerity strategy. They need to say, repeatedly, that they want to help Greece, but they cannot, and it cannot remain in the euro, if its leaders simply abandon the commitments the country signed.

Greeks need to know that when they vote on June 17. And they need to know that what Syriza and its young leader are telling them is a lie.

Snakeoil vs. Lies

It's certainly true that it is highly unlikely for Greece to stay in the eurozone if it defaults on debt.

I am not a fan of lies (and I have pointed out lies by Tsipras). However, I am not a fan of snakeoil, thievery, and one-sided analysis either.

Snake Oil and One-Sided Analysis

Check out the Bloomberg hypocrisy in this statement: "Other Greek politicians say they’ll seek to renegotiate the austerity package, and Europe may now listen."

Bloomberg knows full well those are blatant lies. Bloomberg could have and should have blasted the New Democrats and Pasok leaders for those lies (but chose not to).

Moreover, Bloomberg knows full well nearly all of Greece is dead set against more austerity measures. Bloomberg also knows full well if New Democracy and Pasok came flat out and said the deal will not be renegotiated they would be trounced to smithereens in the next election.

Bloomberg Hypocrisy

Bloombeg ignores the lies of Pasok and New Democracy while blasting a similar lie made by Syriza.

In essence Bloomberg wants to decide which set of lies is acceptable and which isn't.

In contrast, I have pointed out the lies made by all of them.

If Not Now When?

Merkel, the IMF, the ECB, and all the eurocrats in Brussels know another election is coming up. If terms of the bailout were to be renegotiated ever, logic would dictate now is the time.

Are we supposed to believe there will be a significant change of heart in Germany and Brussels after another Troika-clown is Prime Minister?

The rest of Europe is not doing anything to help Greece.

Lending Greece money in which most of the money goes straight back to the lenders to pay interest is not going to help Greece. Nor are hikes in the VAT and other taxes.

Certainly the Pact With the Devil Over Gold is not in Greece's best interest.

Simply put, Tsipras is correct in his desire to tell the Troika to go to hell. The rest of his message is clearly a lie, but at least Tsipras has the essential idea: The only way Greece can get out of its odious debt is to default.

Greece Nightmare Coming or Already at Hand?

The Greek website Ekathimerini is on a major fearmongering campaign as evidenced by Nightmare foretold if Greece heads for euro exit

In Athens, the homeless are on the streets in growing numbers, soup kitchens feed twice as many people as a year ago, and the poor are diving into garbage bins in search of scrap they can sell.

Greece is close to breaking point as it struggles with austerity targets set by creditors, but this is just a foretaste of the nightmare of unrest, hunger and even anarchy that could engulf the debt-crippled nation if it is forced out of the euro.

If the exact economic impact of such a move is hard to nail down - newly issued drachmas devalued by up to 70 percent, runaway inflation, a banking meltdown, a collapse in trade - the implications for ordinary Greeks crushed by the debt crisis are even harder to predict.

Without international bailout cash, salaries and pensions would go unpaid and violence, political extremism and uncontrolled emigration could quickly follow.

Dose of Reality

Let's stop right there for a little dose of reality. The first paragraph alone shows Greece is already in a nightmare scenario.

Greece would have been better off defaulting three years ago, two years ago, and last year.

Yet here we are with Bloomberg and Ekathimerini (among numerous others) fearmongering about a Greek exit.

They should have been equally adept at raising issues why Greece should not be in the Eurozone in the first place.

Since that is water over the dam already, the pertinent question is what is best for Greece going forward. I propose that another 10 years of austerity and depression is not the answer. I also believe that is what Greece is doomed to if it manages to stay in the eurozone that long.

Fearmongering by Ekathimerini Resumes With Intensity

Let's return now to Ekathimerini for some massive fearmongering.

Provopoulos warned as long ago as December that a return to the drachma would be «real hell», with Greeks forced to resort to barter during the transition period between the two currencies, «trading a kilo of olive oil for three kilos of flour».

 "NIGHTMARE SCENARIO"

"There will be shortages in basic staples. Without fuel, the army and the police would not be able to move their vehicles.

A former finance minister, Yiannos Papantoniou, saw trouble ahead nearly a year ago: «Greece would not be able to support 11 million people so there will be huge emigration flows,» he told Reuters Insider television last July.

«Disruptions, social disruptions will come. I would say a regime of total anarchy."

What's Best for Greece

Greece needs to do what is best for Greece.

Short-term there will likely be intense breakup pain in Greece if it exits the eurozone. However, if Greece manages its cards correctly, Greece will recover far faster by telling the Troika to go to hell than by living the nightmare for 10 more years.

Icelandic Solution

Greece and Iceland are not the same. Iceland has exports and a work ethic. However, the facts show that Iceland recovered far faster because it had the courage to default, telling eurocrats where to go.

Simply put, Greece has nothing to lose and everything to gain by exiting the euro, the exact opposite of what Bloomberg and most of mainstream media would have you believe.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

“There was a kind of inflection point during the five-year period between 1997 and 2003 — the late Clinton and/or early Bush administration — when all the rules just went away. You went from a period, a regime, where people did have at least some concern about going to jail, to a point where everything is legal, and derivatives couldn’t be regulated at all and nobody went to jail for anything. And looking back I would say that this period definitely started under Clinton. You absolutely cannot blame this on George W. Bush.” – Charles Ferguson of Inside Job

“I never had any money until I got out of the White House, you know, but I’ve done reasonably well since then.” Bill Clinton

On December 21, 2000, as President, Bill Clinton signed a bill known as the Commodities Futures Modernization Act. This law ensured that derivatives could not be regulated, setting the stage for the financial crisis.  Just two months later, on February 5, 2001, Clinton received  $125,000 from Morgan Stanley, in the form of a payment for a speech Clinton gave for the company in New York City.  A few weeks later, Credit Suisse also hired Clinton for a speech, at a $125,000 speaking fee, also in New York.  It turns out, Bill Clinton could make a lot of money, for not very much work.

Today, Clinton is worth something on the order of $80 million (probably much more, but we don’t really know), and these speeches have become a lucrative and consistent revenue stream for his family. Clinton spends his time offering policy advice, writing books, stumping for political candidates, and running a global foundation.  He’s now a vegan. He makes money from books. But the speaking fee money stream keeps coming in, year after year, in larger and larger amounts.

Most activists and political operatives are under a delusion about American politics, which goes as follows.  Politicians will do *anything* to get reelected, and they will pander, beg, borrow, lie, cheat and steal, just to stay in office.  It’s all about their job.

This is 100% wrong.  The dirty secret of American politics is that, for most politicians, getting elected is just not that important.  What matters is post-election employment.  It’s all about staying in the elite political class, which means being respected in a dense network of corporate-funded think tanks, high-powered law firms, banks, defense contractors, prestigious universities, and corporations.  If you run a campaign based on populist themes, that’s a threat to your post-election employment prospects.  This is why rising Democratic star and Newark Mayor Corey Booker reacted so strongly against criticism of private equity – he’s looking out for a potential client after his political career is over, or perhaps, during interludes between offices.   Running as a vague populist is manageable, as long as you’re lying to voters.  If you actually go after powerful interests while in office, then you better win, because if you don’t, you’ll have basically nowhere to go.  And if you lose, but you were a team player, then you’ll have plenty of money and opportunity.  The most lucrative scenario is to win and be a team player, which is what Bill and Hillary Clinton did.  The Clinton’s are the best at the political game – it’s not a coincidence that deregulation accelerated in the late 1990s, as Clinton and his whole team began thinking about their post-Presidential prospects.

Corruption used to be more overt.  Lyndon Johnson made money while in office, by illicitly garnering lucrative FCC licenses.  It was the first neoliberal President, Jimmy Carter, who began the post-career payoff trend in the Democratic Party.  In 1978, Archer Daniels Midland CEO Dwayne Andreas convinced Carter to back ethanol subsidies.  After Carter lost to Reagan, he faced financial problems, as his peanut warehouse had been mismanaged and was going bankrupt.  AMD stepped in, overpaying for the property.  But Carter wasn’t nearly as skilled as Clinton, because he didn’t stay in the club.

Over the course of the next ten years after his Presidency, Clinton brought in roughly $8-10 million a year in speaking fees.  In 2004, Clinton got $250,000 from Citigroup and $150,000 from Deutsche Bank.  Goldman paid him $300,000 for two speeches, one in Paris.  As the bubble peaked, in 2006, Clinton got $150,000 paydays each from Citigroup (twice), Lehman Brothers, the Mortgage Bankers Association, and the National Association of Realtors.  In 2007, it was Goldman again, twice, Lehman, Citigroup, and Merrill Lynch.  He didn’t just reap speaking fee cash from the financial services sector – corporate titans like Oracle and outsourcing specialist Cisco paid up, as did many Israel-focused groups, Middle Eastern interests, and universities.  Does this explain the finance-friendly, oil-friendly and Israel First-friendly policies pursued by the State Department under Hillary Clinton?  Who knows?  But if you could legally deliver millions in cash to the husband of a high-level political official, it wouldn’t hurt your policy goals.

Speaking fee money isn’t just money, it is easy money.  In one appearance, for one hour, Clinton can make $125,000 to $500,000.  At an hourly rate, that’s between $250 million to $1 billion annually.  It isn’t the case that Clinton is a billionaire, but it is the case that Clinton can, whenever he wants, make money as quickly and as easily as a billionaire.  He is awash in cash, and cash is useful.  Cash finances his lifestyle.  Cash helped backstop his wife’s Presidential campaign when it was on the ropes.

And these speaking fees aren’t the only money Clinton got, it’s just the easiest cash to find because of disclosure laws.  Apparently, Clinton’s firm apparently had a paid $100k+ a month consulting relationship with MF Global, and Clinton and Tony Blair have teamed up to help hedge funds raise money.  His daughter worked for a giant hedge fund and political ally (Avenue Capital).  And Clinton has unusual relationships with billionaires and Dubai-based investors.

Bill and Hillary Clinton are the best at what they do, but they aren’t the only ones who do it.  In fact, this is what politics is increasingly about, not elections, but staying in the club.  Erskine Bowles, former White House Chief of Staff, lost two Senate elections.  But he’s on the board of Facebook and Morgan Stanley, as well as authoring the highly influential Simpson-Bowles plan to gut Social Security and Medicare.  Tom Daschle, who lost a Senate race in 2004, is a millionaire who in large part crafted Obama’s health care plan.  Former Senator Judd Gregg is now at Goldman Sachs.  Current Chicago Mayor Rahm Emanuel made $12 million in between his stint at the Clinton White House which ended in 2000 and his election to Congress in 2002.  Former Congressman Harold Ford, now at Morgan Stanley, is routinely on TV making political claims.  Larry Summers is on the board of the high-flying start-up Square.  Meanwhile, Russ Feingold, a Senator who did go after Wall Street, is a professor in the Midwest.  Eliot Spitzer is a struggling TV host and writer.

In other words, Barack Obama and his franchise are emulating the Clinton’s, and are speaking not to voters, but to potential post-election patrons.  That’s what their policy goals are organized around.  So when you hear someone talking about how politicians just want to be reelected, roll your eyes.  When you hear an argument about the best message or policy framework to use for reelection, stop listening.  That’s not what politicians really care about.  Elections in many ways are just like regular season games in basketball – they are worth winning, but it’s not worth risking an injury.  The reason Obama won’t prosecute bankers, or run anything but a very mild sort of populism, is because he’s not really talking to voters.  He just wants to be slightly more appealing than Romney.  He’s really talking to the people who made Bill and Hillary Clinton a very wealthy couple, his future prospective clients.  We don’t call it bribery, but that’s what it is.  Bill Clinton made a lot of money when he signed the bill deregulating derivatives and repealed Glass-Steagall.  The payout just came later, in the form of speaking fees from elite banks and their allies.

Ironically, Clinton has come to express regret about deregulating derivatives.  He has not given the money back.

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