Youth joblessness near crisis peak: ILO
by ilene - May 22nd, 2012 3:07 am
Youth joblessness near crisis peak: ILO (via AFP)
Youth joblessness is almost back at its peak following the outbreak of the global economic crisis and is unlikely to ease until at least 2016, the International Labour Organization warned Tuesday. The ILO said nearly 75 million youths or 12.7 percent of people aged 15 to 24 will be out of work this…
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DiggGreek Voters Need to Look Beyond the Lies of Bloomberg, Merkel, ECB, IMF, Ekathimerini; Greece Nightmare Coming or Already at Hand?
by ilene - May 22nd, 2012 2:45 am
Courtesy of Mish
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
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Full-Fledged European Bank Run; ECB Deposit Insurance is Not the Answer
by ilene - May 21st, 2012 9:58 pm
Full-Fledged European Bank Run; ECB Deposit Insurance is Not the Answer; How FDIC Played a Part in the US Real Estate Bust; Monetarist Fools are Everywhere; Believe in Gold
Courtesy of Mish
One chart is all it takes to prove a full-fledged European bank run on the banks is well underway in the Club-Med countries and Ireland.
The above chart is from the Financial Times article The anatomy of the eurozone bank run by Gavyn Davies.
A bank run is now happening within the eurozone. So far it has been relatively slow and prolonged, but it is a run nonetheless. And last week, it showed signs of accelerating sharply, in a way which demands an urgent response from policy-makers.
The fear of bank runs is deeply ingrained in all economists who know anything about the genesis of the Great Depression in the United States in the early 1930s. Then, the failure of the Bank of United States in December 1930 led to multiple bank runs across the country. Bank failures in the following two years wiped out personal savings and greatly exacerbated the collapse of demand in the economy.
The classic account of the crisis, by Milton Friedman and Anna Schwartz, concluded that the collapse was largely the fault of the Federal Reserve, which failed to provide enough liquidity to keep the banks functioning and thus end the panic.
Classical Nonsense
We need to stop right there for a bit because the "classic account" Davies believes in is complete nonsense. The crisis then and now is a crisis of solvency.
The culprit is fractional reserve lending coupled with fraudulent lending practices that allow banks to secure deposits for 2 years or less but lend money out for 30 years.
The way to stop runs on the bank is easy enough: stop fractional reserve lending and other fraudulent lending practices.
Davies continues with still more nonsense.
After the crash, the establishment of the Federal Deposit Insurance Corporation was intended to ensure that deposit holders never again had to live in fear that their savings would be in jeopardy. What are the lessons for the eurozone?
How FDIC Played a Part in the US Real Estate Bust
Clearly there was fear depositors would lose money and the run on Lehman
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First Time Ever – Majority of Unemployed Have Some College Education; Five Solutions to Education, Student-Loan Crisis
by ilene - May 21st, 2012 9:57 pm
Courtesy of Mish
Those who think the answer to the unemployment problem is more education might be surprised to learn the Majority of Unemployed Attended College.
For the first time in history, the number of jobless workers age 25 and up who have attended some college now exceeds the ranks of those who settled for a high school diploma or less.
Out of 9 million unemployed in April, 4.7 million had gone to college or graduated and 4.3 million had not, seasonally adjusted Labor Department data show.
click on chart for sharper image
In 2011, 57% of those 25 and up had attended some college vs. 43% in 1992. Those without a high school diploma fell from 21% to 12% over that span.
But along with the increasing prevalence of college attendance has come a growing number of dropouts, who have left school burdened by student loan debt but without much to kick-start their careers.
Among everyone up to age 24 who has left college or earned a two-year degree — including those not actively searching — the full-time employment-to-population ratio has plummeted from 69% in 2000 to 62% in 2003 to 54%.
This has occurred even as student lending and enrollment at community colleges has soared, elevating the student loan crisis to the center of political debate and a rallying cry for the Occupy Wall Street movement.
Those who graduated with a four-year degree fared better employment-wise but many of those still struggle with student loans. Many other end up underemployed in retail sector jobs as opposed to the curriculum they studied.
Student loans are a trillion dollar problem, and growing every quarter. President Obama wants more student loans, but all that does is make many graduates debt slaves for the rest of their lives.
The cost of education is preposterous and the solutions are easy to describe.
Five Solutions
- Kill federally funded student loan program entirely. Student loans do nothing but drive up the cost of education. Anyone can get a student loan because the loans are guaranteed and cannot be discharged in bankruptcy. The beneficiaries of this horrendous setup are teachers and administrators, not the kids receiving loans.
- Kill state aid to colleges as well
- Increase competition by accrediting more online universities, even foreign universities. This will drive down costs
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JPMorgan loss is only going to get worse
by ilene - May 21st, 2012 9:48 pm
NEW YORK (CNNMoney) — One thing seems clear about JPMorgan Chase's $2 billion loss. It's no longer $2 billion. It's likely much higher.
The number being bandied about now is closer to a range of $6 billion to $7 billion, according to several people working on trading desks that specialize in the derivatives JPMorgan Chase (JPM, Fortune 500) used to make its trades and from two sources with knowledge of the bank's positions.JPMorgan Chase declined to comment on its trading activities. Of course, it is impossible to know with absolute certainty just how high the losses are at any given moment.
But experts said there are few scenarios in which hedge funds on the other side of the bank's giant bet will let JPMorgan Chase out of it without significantly more pain.
"The market knows roughly what [JPMorgan] has and what the sizes are," said a source with knowledge of the bank's positions.
Keep reading: JPMorgan loss is only going to get worse – May. 20, 2012.
Paul Krugman’s Economic Blinders
by ilene - May 21st, 2012 5:22 pm
Paul Krugman’s Economic Blinders
Paul Krugman is widely appreciated for his New York Times columns criticizing Republican demands for fiscal austerity. He rightly argues that cutting back public spending will worsen the economic depression into which we are sinking. And despite his partisan Democratic Party politicking, he warned from the outset in 2009 that President Obama’s modest counter-cyclical spending program was not sufficiently bold to spur recovery.
These are the themes of his new book, End This Depression Now. In old-fashioned Keynesian style he believes that the solution to insufficient market demand is for the government to run larger budget deficits. It should start by giving revenue-sharing grants of $300 billion annually to states and localities whose budgets are being squeezed by the decline in property taxes and the general economic slowdown.
All this is a good idea as far as it goes. But Mr. Krugman stops there – as if that is all that is needed today. So what he has done is basically get into a fight with intellectual pygmies. Thus dumbs down his argument, and actually distracts attention from what is needed to avoid the financial and fiscal depression he is warning about.
Here’s the problem: To focus the argument against “Austerian” advocates of fiscal balance, Mr. Krugman hopes that economists will stop distracting attention by talking about what he deems not necessary. It seems not necessary to write down debts, for example. All that is needed is to reduce interest rates on existing debts, enabling them to be carried.
Mr. Krugman also does not advocate shifting taxes off labor onto property. The implication is that California can afford its Proposition #13 – the tax freeze on commercial property and homes at long-ago levels, which has fiscally strangled the state and led to an explosion of debt-leveraged housing prices by leaving the site value untaxed and hence free to be pledged to banks for larger and larger mortgage loans instead of being paid to the public authorities. There is no hint in Mr. Krugman’s journalism of a need to reverse the tax shift off real estate and finance (onto income and sales taxes), except to restore a bit more progressive taxation.
The effect of Mr. Krugman’s suggestions is for the government to subsidize the existing financial and tax structures, leaving the debts intact and ignoring the largely
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Lowe’s Weeklies Active As Shares Tumble
by Option Review - May 21st, 2012 3:01 pm
Today’s tickers: LOW, CBE & AIG
LOW - Lowe’s Companies, Inc. – Shares in Lowe’s were hammered Monday after the home improvement retailer lowered its full-year earnings forecast and reported a smaller-than-expected increase in same-store sales. The stock is currently down 9.7% at $25.72 as of 12:30 p.m. ET following the company’s first-quarter earnings report this morning. Options activity in the front month is mixed, with some traders positioning for the stock to rebound, while others brace for further downside in the near term. Strategists constructing positions that benefit from a recovery in the shares homed in on the June $27 strike call, trading upwards of 5,800 contracts versus open interest of 18 positions. It looks like most of the calls were purchased for an average premium of $0.45 apiece, thus positioning longs to profit should LOW’s shares rally 6.7% to top $27.45 by June expiration. Meanwhile, put buying at the June $25 strike points to near-term bearish sentiment on the stock. Traders exchanged more than 2,300 of the $25 strike put options, purchasing most of the volume at an average premium of $0.65 each. The strategy may be profitable at expiration next month should Lowe’s shares decline another 5.3% to breach the average breakeven price of $24.35. Options volume of 30,715 on the second-largest U.S. home improvement retailer this afternoon today runs at twice the 90-day average options volume for the name.
CBE - Cooper Industries PLC – Shares in the Maynooth, Ireland-based maker of electrical products and tools rallied nearly 30.0% to a record-high of $71.73 today after diversified power management company, Eaton Corp., agreed to buy Cooper Industries in a cash and stock deal valued at $11.8 billion. Options on Cooper are more active than usual with just fewer than 800 contracts in play as of 1:00 p.m. ET versus the 90-day average options volume on the stock of 91 contracts. Open interest in July expiry call options on CBE suggests one…
Monday Market Movement – Mother and Child Reunion
by Phil - May 21st, 2012 8:19 am
I just can't believe it's so
though it seems strange to say
I never been laid so low
in such a mysterious way
and the course of a lifetime runs
over and over again.
No I would not give you false hope
on this strange and mournful day
but the mother and child reunion
is only a motion away
There's an image to inspire confidence, right?
First of all, Vlad the Impaler did not even bother to come, an historic snubbing of the G8. While I'm sure the other leaders slept better knowing that they didn't have to share a bathroom with a trained assassin, Putin did send his puppet, Medvedev to join such awe-inspiring global figures as Barroso, Van Rompuy, Harper, Hollande, Noda… stop me if I get to someone you've heard of….
Remember when there was a sort of stability to World Leadership? This Democracy stuff is making a real mess of things, I think. Even Cameron is a new guy and Obama is putting in his 4th year in the chair which makes Merkel the real constant of the group after 7 years in office. And what does everyone do? They gang up on her! Poor Merkel seems to be the only fan of austerity left in the G8, the other leaders want to put their foot back on the gas or the Global economy will never make it to the other side of the canyon.
Unfortunately, Ms. Merkel is not easily persuaded and the G8 came up empty which means we're back to being bearish as it's about $1Tn short of what they needed to come up with to get the economy back in gear and more kind words and empty promises are NOT going to pull us out of the downward spiral that our Global Economy is clearly in at this point. In fact, even the current firewall for the EU is coming up short of projections with not even enough money available for the PIIGS to stumble through:
I mean, seriously, these jokers all sat together this weekend, looked at a chart like this, looked at the global markets (which are dropping like stones) and looked at global unemployment figures and came to the conclusion that all they needed to do…
Janet Tavakoli: Jamie Dimon: JPMorgan’s Chief is the World’s Funniest Financier
by ilene - May 20th, 2012 1:55 pm
Sure the economy is still a mess, unemployment is high, civil services and pensions are being slashed, a record number of people are on food stamps, and families are losing homes. But Jamie Dimon, Chairman and CEO of JPMorgan Chase, does his best to distract the United States from these unpleasant realities.
Here's Jamie
After losing $2.2 billion (and rapidly rising1) in mark-to-market losses in credit derivatives, the multi-trillion dollar global product JPMorgan created and claims it manages well. Everyone is guessing about JPMorgan's ultimate losses. The Wall Street Journal reported on May 18 losses could potentially be as much as $5 billion, or more than 25% of JPMorgan's profits last year, but no one knows for certain, and ultimate losses could be smaller or much greater.
Dimon had the perfect response on May 13th's Meet the Press to straight man David Gregory's question: "How did this happen?"
"First of all, there was one warning signal — if you look back from today, there were other red flags. That particular red flag — you know, we made a mistake, we got very defensive and people started justifying everything we did. You know, the benefit in life is to say, 'Maybe you made a mistake, let's dig deep.' And the mistake had been brewing for a while, so it wasn't just any one thing."2
That's so funny I'll bet President Obama blew coffee out of his nose.
Keep reading: Janet Tavakoli: Jamie Dimon: JPMorgan's Chief is the World's Funniest Financier (Update).
Dr. Frankenstein’s Europe
by ilene - May 20th, 2012 12:59 pm
Dr. Frankenstein’s Europe (via JohnMauldin.com)
By John Mauldin May 19, 2012 There Is No Easy Grexit A Rational Bank Run Greek Fatigue The Alligator of Bank Runs Who Gets the Old Maid? Atlanta, New York, Philadelphia, Italy, and Singapore "Had I right, for my own benefit, to inflict this curse upon everlasting generations? I had before been moved…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
(