Every day there are a number of significant stories that come my way that I do not have time to make in depth comments on. Here is a collection on my stack worth a quick peek.
Google Inc.’s threat to pull out of China is the most visible reflection of U.S. companies’ growing disillusionment with the country nine years after it joined the World Trade Organization, business groups said.
Washington trade organizations representing companies such as Microsoft Corp., Boeing Co., Intel Corp. and Cigna Corp., which all backed China’s entry into the WTO and fought off legislation to punish Chinese imports, say China is increasingly discriminating against them on government contracts and through unfair subsidies.
Google, owner of the most-used search engine, said Jan. 12 that it would end self-censorship of its product in China after attacks on e-mail accounts of human-rights activists. The Mountain View, California-based company said the move may cause it to close offices in the country.
Such comments from longtime backers of U.S.-China relations represent growing dissatisfaction among U.S. companies, said Susan Aaronson, a professor at George Washington University in Washington who writes about U.S.-China trade relations.
“I see much greater disillusionment as China is promoting its national champion companies,” Aaronson said in an interview. “More and more firms are going to say: I can do without this market.”
This story is far more significant than the play it will get. It signals growing protectionism as well as dissatisfaction with dealing in China. To top things off, Chinese money supply is growing completely out of control and it is only a matter of time before China implodes or explodes. More on that in another post later.
Money Talks With Protest Slogans
Facing hard-line forces on the streets, Iran’s anti-government demonstrators have taken their protests to a new venue: writing "Death to the Dictator" and other opposition slogans on bank notes, while officials scramble to yank the bills from circulation.
"What did they die for?" asked one message on a bill, referring to the estimated dozens of demonstrators killed in the wake of vote-rigging allegations in last summer’s re-election of President Mahmoud Ahmadinejad.
Others were stamped with the imprint of a red hand, signifying the images of protesters showing bloodstained palms, or the slogans "Death to the Dictator" and "Down with Khamenei" scrawled across the edges. All Iranian bank notes feature a portrait of Supreme Leader Ayatollah Ali Khamenei’s predecessor, the Islamic Revolution founder Ayatollah Ruhollah Khomeini.
"The irony is that these kinds of things, such as fliers and pamphlets, were used in the revolution," said Alireza Nourizadeh, chief researcher at the Center for Arab-Iranian Studies in London. "It’s still an effective tactic."
Last month, the Central Bank of Iran governor, Mahmoud Bamani, said writing slogans on money would be considered a crime. But the images of the bills have become a favorite posting on Facebook, YouTube and Twitter — the same Internet sites that Iranian officials are trying to muzzle.
It’s the simple-but-potent aspect of the money campaign that captured most praise. One Farsi blogger featured pictures of the protest cash under the heading "Money Talks."
Every time the citizens of Iran lean towards the West, the US or Israel smacks them down and they rally around their dictator. The lesson here is to not meddle, but we never seem to learn it. A second lesson is that few crazed loonies does not make an entire nation so. Iran could easily have been our friend save for ridiculous US policy over the years.
Obama The Warmonger
The Obama administration plans to ask Congress for an additional $33 billion to fight unpopular wars in Afghanistan and Iraq, on top of a record request for $708 billion for the Defense Department next year, The Associated Press has learned.
Military officials have suggested that the 2011 request would top $700 billion for the first time, but the precise figure has not been made public.
But the budget debate is also likely to expose a widening rift between Obama’s administration – it sees more troops and money as necessary to winning the war – and Democratic leaders, who have watched public opinion turn against the military campaign.
"The president’s going to have to make his case," House Speaker Nancy Pelosi, D-Calif., told reporters last month at her year-end briefing.
$700 billion for war. Is that insane or what? I voted for Ron Paul so my conscious is clear, but I certainly expected better on this scorecard. Of all the predictions I have ever made, the worst one by far was thinking Obama would bring the troops home.
The sad thing is Pelosi who is against this spending will not have the guts to stand up to the president and say no. Democrats will vote for it because their president wants it. Republicans will vote for it because it is their platform. When Bush was president, Republicans voted for a lot of things just because their president wanted them. Every day I shake my head over the madness asking when it will stop.
Illinois Governor Quinn Calls For Higher Taxes
Gov. Pat Quinn today renewed his call for state lawmakers to work with him on raising taxes to balance the state budget while also offering targeted tax relief to lower- and middle-income workers.
"I think what we ought to do this year…is reform our tax system," Quinn told the General Assembly nearly an hour into his 75-minute State of the State address. "The taxes should be based on ability to pay."
That’s all you need to know right there. Vote the bum out.
California’s Credit Rating Cut by S&P
California’s Credit Cut by S&P Amid Budget Deficit
California’s credit rating on $64 billion of general obligation bonds was cut by Standard & Poor’s today as the most-populous U.S. state faces renewed strains over a $20 billion budget deficit.
Gabriel Petek, a San Francisco-based S&P analyst, said the rating was lowered one level to A-, the seventh-highest investment grade. He said the company has a negative outlook on California debt, a sign its standing may decline further. The rating company also cut $13.3 billion of other state debt, including that backed by lease payments.
California is the largest borrower in the municipal bond market, issuing $36 billion of debt last year. Lockyer warned last week that California may need to delay or shut down thousands of infrastructure projects if budget problems prevent it from raising additional funds from investors.
“It’s going to make last year’s budget cycle look not so bad,” said George Strickland, who manages $4.5 billion in municipal debt for Thornburg Investment Management in Santa Fe, New Mexico. He hasn’t been buying California’s state debt.
Moody’s lowered its assessment of California’s debt in March and again in July, leaving it just three steps above so- called junk, or non-investment grade, according to the California Treasurer’s office. Fitch reduced the state three times last year and now rates it two steps above junk, according to the Treasurer.
California is 3 steps from disaster. There are a lot of bond funds that cannot buy junk. A few more downgrades and there will be a mass exodus. It’s long overdue actually.
Venezuela Closes Stores Accused Of Price Gouging
Venezuelan authorities backed by soldiers temporarily closed dozens of retail outlets for price gouging after a currency devaluation that triggered a frenzy of shopping but met with market approval.
Chavez is a strong believer in state intervention in the economy and has nationalized many industries in the OPEC nation. He uses currency controls to prevent capital flight.
Thousands of shoppers have mobbed stores to snap up imported TVs and computers, worried their savings will lose value and prices will rise.
In a bid to calm nerves, Chavez sent troops to monitor prices in shopping districts. A total of 70 retailers have been shuttered and raids continued on Tuesday.
U.S. companies operating in Venezuela are bracing for the impact of the devaluation, which will raise the cost of their imports and is likely to reduce the value of bolivar profits.
Price controls mean shortages. Venezuela is set to explode.
Option ARM Recast To Bring More Misery
Thousands of American homeowners are starting to see their monthly mortgage payments skyrocket, dealing a fresh blow to the already shaky housing recovery.
The widely feared reset of thousands of option adjustable-rate mortgages-where both interest and principal payments rise sharply-is already leaving many homeowners struggling to keep a roof over their head.
"It’s going to kill off housing," warns Patrick Pulatie, CEO of Loan Fraud Investigations, a predatory lending audit firm. "We have pretty close to 500,000 option ARM payments going higher in California over the next couple of years. The impact of the higher payments will be devastating for homeowners who are having trouble now making ends meet."
"I don’t see how the option ARM problem is not a huge issue," says Sylvia Alayon, vice president and director of operations for the Consumer Mortgage Audit Center, which provides auditing services to advocacy groups. "This is a major hit for housing. It will continue to feed the excess supply of housing with more foreclosures."
While the number of foreclosures has slowed somewhat, it could reach 4 million in the US in 2010 according to RealtyTrac. Numbers like that, says one analyst, mean housing needs a major financial overhaul.
"We need to have these option ARM loans modified and help homeowners pay them off," says Alayon. "People who say ‘don’t help my neighbor because I made my payments’ are missing the point. Missed mortgage payments mean foreclosures and falling home values. This effects us all."
We (taxpayers) should not bailout anyone. However, if banks want to do it voluntarily at their expense not mine, I have no problem. The smart ones will walk anyway.
Eurozone Unemployment Soars
Eurozone unemployment hits 10%
Unemployment in the eurozone breached the 10 per cent mark for the first time since the introduction of the single currency over a decade ago.
Despite extraordinary measures to protect the labour market during the downturn, 4m have lost jobs across the 16 countries that use the euro, according to the European Commission’s statistical arm.
As of November, there were 15.7m jobless in the bloc, the highest since the data series was first compiled in 1994.
The rise brings eurozone unemployment in line with that in the US, also at 10 per cent, and triggered concerns among some economists about the prospects for continued economic recovery in the eurozone.
It’s a job loss recovery everywhere.
Burning Books In The UK To Keep Warm
Some cash-strapped British pensioners are buying books from charity shops and burn them to keep warm as freezing temperatures gripped the UK, a London newspaper reported Tuesday.
Workers at a charity shop in Swansea, in south Wales, told London newspaper Metro that pensioners were looking for thick books such as encyclopedias — which are sold for a few pennies second hand — as a cheaper alternative to coal.
"A lot of them buy up large hardback volumes so they can stick them in the fire to last all night."
Prime Jumbo RMBS Delinquencies Nearly Triple to 9%
More U.S. prime jumbo borrowers are falling and staying behind on their monthly mortgage payments, with states such as California and Florida driving the elevated underperformance, according to Fitch Ratings in the latest edition of its U.S. RMBS delinquency updates through Performance Metrics.
Overall, prime RMBS 60+ days delinquencies rose to 9.2% for December 2009, up almost three times compared to the same period last year (3.2% in December 2008). The 2006/2007 vintages combined rose to 12.7% from 4.3%.
The five states with the highest volume of prime jumbo loans outstanding (California, New York, Florida, Virginia, and New Jersey) comprise approximately two-thirds of the loans in question.
- California: 10.8%, up from 3.5% (44% share)
- New York: 5.8%, up from 1.8% (7% share)
- Florida: 16%, up from 7.3% (6% share)
- Virginia: 5.4%, up from 2.3% (5% share)
- New Jersey: 7.1%, up from 2.3% (4% share)
FHA to Lenders: ‘We Are Watching You Very Carefully’
The Federal Housing Administration initiated on Tuesday a probe of 15 mortgage companies that have disproportionately high default rates on loans insured by the government agency.
Officials served subpoenas on the companies on Tuesday. The agency is looking at mortgage companies that have had above-average rates of loans that default shortly after origination, which is often a sign of fraud or sloppy underwriting.
Tuesday’s action was designed to “crack down on bad practices,” Mr. Stevens said. “There’s a responsibility within the FHA as a public institution to make sure those lenders who are part of this system perform responsibly.”
The only action the industry understands other than prison is shutting them down. Pray tell why is the FHA still dealing with these outfits?
Apartment-Vacancy Rate at 30-Year High
U.S. Now a Renters’ Market
Apartment vacancies hit a 30-year high in the fourth quarter, and rents fell as landlords scrambled to retain existing tenants and attract new ones.
The vacancy rate ended the year at 8%, the highest level since Reis Inc., a New York research firm that tracks vacancies and rents in the top 79 U.S. markets, began its tally in 1980.
Rents fell 3% last year, according to Reis, led by declines in San Jose, Calif., Seattle, San Francisco and other cities that had brisk growth until the recession.
Effective rents — which include concessions such as one month of free rent — fell 5.6% in New York last year, the worst since Reis began tracking the data in 1990.
Few markets have been spared. During the fourth quarter, vacancies increased in 52 markets, while they improved in 17 and stayed flat in 10. Vacancies increased most sharply for the year in Tucson, Ariz.; Charlotte, N.C.; and Lexington, Ky.
Landlords were also hit last year by competition from a wave of new supply that hit the market. The 120,000 units that came onto the market last year, including some busted condo projects that had to be converted to rentals, represented the most new construction since 2003, according to Reis.
Home ownership is down, yet rental supply is up. Does condo construction account for all of the supply? One also has to factor in those in their 20′s moving back home and an increasing number of people sharing apartments or houses. I have seen no numbers on those happenings.
More Keynesian Claptrap
Wilbur Ross Jr., the billionaire investor whose holdings include auto suppliers, said the U.S. government should introduce “tomorrow” another car-buying incentive program to stimulate the economy and create jobs.
A new “cash-for-clunkers” initiative must be simpler, larger and last longer than the $3 billion version run by the Transportation Department in July and August, said Ross, who formed International Automotive Components Group by buying distressed partsmakers.
“They should do it tomorrow morning,” Ross told reporters today after a speech at the Automotive News World Congress conference in Detroit. “I think a fair amount of the growth in the third quarter of last year was due to the cash-for-clunkers and the first-time home buyer subsidies.”
This is sheer idiocy. What’s next? Do we just buy a car for everyone? What then? What happens when everyone has new car? Is Ross that stupid or is he simply talking his book? If the former, how did he amass $1 billion?