marți, 24 mai 2011

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis


Foreclosure-Gate Screw Tightens: Banks Face $17 Billion in Suits Over Foreclosures; Common Sense Says $5 Billion is Very Generous

Posted: 24 May 2011 09:44 PM PDT

State attorneys general are not happy with a $5 billion offer by major banks to settle lawsuits regarding robo-foreclosures and other alleged grievances. Some officials want as much as $20 billion. The compromise threat is on the high end.

Please consider Banks Face $17 Billion in Suits Over Foreclosures
State attorneys general told five of the nation's largest banks on Tuesday they face a potential liability of at least $17 billion in civil lawsuits if a settlement isn't reached to address improper foreclosure practices, according to people familiar with the matter.

The figure doesn't cover additional billions of dollars in potential claims from federal agencies such as the Department of Housing and Urban Development and the Justice Department. State and federal officials haven't proposed a specific comprehensive settlement figure, but Tuesday's discussions represented the first effort to formally quantify potential liability.

Banks have proposed a $5 billion settlement that would be used to compensate any borrowers previously wronged in the foreclosure process and provide transition assistance for borrowers who are ousted from their homes. Federal and state officials have dismissed that as insufficient. Some officials have pushed for a total price tag of more than $20 billion to resolve foreclosure-handling abuses that surfaced last fall.

The U.S. Trustee Program, a part of the Justice Department that oversees bankruptcy cases, has asked for an additional $500 million to $1 billion in penalties, according to people familiar with the matter. Officials of the unit have raised questions in several cases over the authenticity of foreclosure documents.

Banks have argued that their problems are largely technical and that few if any borrowers have faced wrongful foreclosures. State and federal officials have faulted mortgage companies for not hiring enough staff to provide assistance to millions of borrowers that have fallen behind on their mortgages.

The latest development comes as state and federal officials are intensifying their scrutiny of other parts of the mortgage machine. Attorneys general in California and New York have announced wide-ranging mortgage investigations.
What are the Damages?

This is what I want to know:

  1. How many people lost their home to foreclosure out of an error? By error I mean the wrong person, a home with no mortgage, or a major procedural error.
  2. How many people think they deserve a free house and clear or a principal reduction over "show me the note" nonsense or other problems including unemployment?
  3. How many people did banks string along for many months with promises of work-outs, where the person paid their mortgage for months, then lost their home.

Throw Category #2 in the Ash Can

I am sure category #2 is the largest. Throw those cases in the ash can where they belong.

No one want to admit they were stupid. Yet people paid stupid prices for homes. Others were unlucky. Some lost their jobs. Even then, one can ask "did you have a year's worth of living expenses saved up in the bank, in case you lost your job?" Regardless of the answer, banks should not be on the hook for people losing their jobs or having medical problems.

Here's the cold simple truth: If you do not pay your mortgage, it is reasonable to expect to lose your home. There is no other realistic way of looking at it. Robo-signing may not be right, but it is irrelevant.

Category #1 the Real Problem

I have deep sympathy for those in cases where banks foreclosed on the wrong home, the wrong address, or on homes with no mortgage at all. Those people deserve their home paid free and clear and some huge penalty on top of it.

I suspect the number of such cases is minuscule. They receive enormous publicity but is the number 10,000? 5,000? 500? or 50? I suspect the number is far closer to the lower end than the higher end. 50 might easily be on the high side.

Whatever the number is, banks should pay mightily and punitively for it. The money should go to those wronged, not to the states. Even with massive penalties I doubt the total would come close to $200 million.

Category 3 is Where the Uncertainty Is

I do not know how big the "strung along" category is, but the only ones in this category who were genuinely harmed to any significant degree are those who continued to make mortgage payments, strung along on a promise, when instead they could have and should have walked away.

How many is that? You tell me. However, the harm is easy to quantify. The harm is extra payments people made (if any), while the banks engaged in deceptive practices or were simply understaffed.

Assume banks engaged in deceptive practices and people made extra payments instead of walking away. Would those extra payments amount to as much as $1 billion? I rather doubt it.

$5 Billion is Very Generous

What is a valid penalty? $4 billion seems like a lot of money to me. That would be a 400% penalty if the total wrong-doing amounted to $1 billion which I doubt.

The sad truth of the matter is we have a full scale witch-hunt over robo-signing and other alleged grievances even though there was little actual damage caused by banks.

If you disagree then total up the damages. However, I insist you start from two essential points.

  1. If you do not pay your mortgage, it is reasonable to expect to lose your home.
  2. Robo-signing may not be right, but it is irrelevant as per point #1.

So total up the damages, add a huge penalty, and let me know what you come up with.

No doubt, many will accuse me of siding with banks. The reality is I am siding with common sense. No one fought against bank bailouts harder than I did. Banks should have been allowed to go under.

Unfortunately they were bailed out. However, two wrongs do not make a right.

I am all for punishing banks provided the punishment is based on damages rather than the widespread belief "we need to stick it to the banks".

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


Chinese Rating Agency Downgrades UK Sovereign Debt; Downgrade Party Needed

Posted: 24 May 2011 03:09 PM PDT

The Wall Street Journal, the Telegraph, and International Business Times have stories regarding a downgrade of UK sovereign debt by a Chinese rating company. Much of the information overlaps, but some snips vary site-by-site.

Wall Street Journal: China Ratings Agency Downgrades UK Sovereign Credit Ratings
Chinese ratings provider Dagong Global Credit Rating Co. said Tuesday it downgraded the local and foreign currency sovereign credit rating of the U.K. from AA- to A+ with a negative outlook.

"The downgrade reflects the true status of the deteriorating debt repayment capability of the U.K. and the difficulty in improving its sovereign credit level in a moderately long term in the future," Dagong said in a statement.

"Considering that the uncertainty arising from (future) monetary policy adjustments of the Bank of England and the spillover effect of the European countries...are likely to further worsen the government's fiscal status, Dagong gives the negative outlook on the local and foreign currency sovereign credit rating of the U.K. (for the next) one to two years," Dagong said.

Dagong said the data indicate a deterioration in the U.K.'s ability to service its debt, while global inflation triggered by excessive issuance of the U.S. dollar will also affect growth.

The U.K.'s debt burden leaves it little room to use monetary and fiscal policies to boost domestic demand and stimulate its economy, and its deficit will remain a high level, Dagong said, without giving a time frame.

The U.K.'s banking system has a large amount of risk exposure, which could create risks for the government, Dagong said, adding it estimates that about 40% of the banking system's GBP2 trillion worth of assets is exposed to risk.
The Telegraph: Chinese rating agency downgrades UK debt
Dagong Global Credit Rating Company downgraded the UK's local and foreign currency sovereign credit rating to A+ from AA- with a "negative" outlook for its solvency, the company said in a statement.

The downgrade reflected "the deteriorating debt repayment capability of the UK and the difficulty in improving its sovereign credit level in a moderately long term in the future," it said.

Uncertainties arising from the Bank of England's future monetary policy and the impact of debt-laden European countries on the British financial system are "likely to further worsen the government's fiscal status", it said.

Dagong has made a name for itself by hitting out at its Western rivals - Moody's, Fitch and Standard & Poor's - saying the big three caused the financial crisis by failing to properly disclose risk.

Britain's deficit for the 2010-2011 financial year fell from almost €162bn (£141bn) the previous year to just below €147bn, after a swathe of cuts ordered by Prime Minister David Cameron.

That meant the deficit was logged at 10pc of national output, down from 11.5pc 12 months earlier.

It is the third-highest in the European Union after that of Ireland and Greece - higher than either Spain or Portugal, next in line at just above 9pc each.

Britain's cumulative national debt, however, rose by almost 20pc year-on-year to more than €1.2 trillion - and now accounts for 82.5pc of GDP.
International Business Times: UK credit rating downgraded by Chinese rating agency
Dagong sees relatively low growth and high inflation. This is simply another institution pointing out the new global phenomenon, Stagflation.

It also stated that because of the slow growth, the budget deficit would still overshoot the government's 7.9% to 9% target.
Downgrade Party Needed

Ironically, Iceland deserves an upgrade for telling the EU where to shove it, thereby getting its fiscal house back on the right track. Nearly every other country deserves a downgrade.

Let's have a downgrade party.

We may as well downgrade some states too. In case you missed it, the Illinois Treasurer Warns Against Lending to Illinois

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


Structural Problems in Greece Compared to US

Posted: 24 May 2011 09:32 AM PDT

Many countries have restrictions and requirements on doctors, nurses, lawyers etc. Greece carries the idea to extreme.

According to Keep Talking Greece "closed professions" include beauticians, drama and dance school instructors, bakers, antiques dealers, insurance agents, insurance consultants, employment consultants, diagnostics centre staff, translators, divers, cameramen, driving school instructors, cab drivers, tourist bus drivers, newspaper stand owners, electricians, sound technicians, private school owners, tobacco sellers, gun manufacturers and sellers, hairdressers, private investigators, port workers, real estate agents, lifeguards, carpenters, financiers, opticians, auditors, movie/theatre director and even car mechanics.

Restrictions will be lifted July 2. That is a much needed maneuver, and the same applies in the US as well.

Many states have prevailing wage laws and other restrictions that have nearly the same effect as the insanity in Greece.

Greek Asset Fire Sale

Please consider Greece Will Accelerate State Asset Sales to Stem Debt Crisis as Bonds Drop
The Greek government endorsed an accelerated asset-sale plan and 6 billion euros ($8.4 billion) of budget cuts to win extra aid and stem a market slide that threatens to swamp the most debt-laden euro-area nations.

Greek Prime Minister George Papandreou's Cabinet agreed yesterday to sell stakes in Hellenic Telecommunications Organization SA (HTO) by the end of next month, as well as Public Power Corp SA (PPC), Hellenic Postbank SA, and the country's ports.

The state's direct stakes in those three companies currently have a market value of 2.1 billion euros. The government also said it would create a fund comprising assets to accelerate the sales, intended to raise 50 billion euros by 2015. The bulk of that will come from selling 35 billion euros of real estate.

The government plans to complete the sale of Postbank by the end of the year, and to sell 75 percent stakes in Piraeus Port Authority and Thessaloniki Port Authority SA. It also intends to extend the concession for Athens International Airport this year.

Greece owns 20 percent of Hellenic Telecommunications, or OTE, with a market value of 3.2 billion euros. It has the right to sell a 10 percent stake to Deutsche Telekom AG, which already holds 30 percent. The government is seeking financial advisers to exercise the put option, and for the sale of a further 6 percent of the company, the finance ministry said.

The Cabinet also announced the additional budget cuts worth about 2.8 percent of gross domestic product need to reach a 7.5 percent deficit target for 2011 even as its economy contracts for a third year, Finance Minister George Papaconstantinou said.

Greece has a "refinancing hole" of 30 billion euros for both 2012 and 2013, according to economist Nouriel Roubini. The nation could restructure by issuing debt with lower interest payments and extend maturities as it's unlikely the nation will "regain market access for the next five to 10 years," he said in an interview last week.
Untenable Timeline

Note that Roubini's timeline is 5-10 years. The ECB an EU expect Greece to return to the dent markets by 2013.

Structural reforms or not, Greece will not pay back its debt in two years, nor will Greece return to a healthy bond market in two years.

Greece will default.

Greece Compared to US

Ending Restrictions on 130 "Closed Professions" is a badly needed reform. However, the near-term effect will be lower wages, lower benefits, and increased competition.

Increased competition needs to happen in the US as well, with public unions kicking and screaming every step of the way. The SEIU, like the Greek unions, don't want reform at all.

Regardless, the US desperately needs to reduce red-tape and open up competition for jobs in education, in garbage collection, in prisons, in healthcare, in all government work.

Unfortunately Keynesian clowns and politicians alike want results now, and when it doesn't happen now, they clamor for more stimulus, even though stimulus is a problem.

Fed's Misguided Tactics

Compounding the problem, the Fed fights wage destruction with policies that encourage speculation and debase the dollar but don't increase wages. The result is repetitive asset bubbles and debt that cannot possible be paid back.

Wages have not gone up, nor have housing prices, nor has employment, yet the Fed persists with failed policies that slowly destroy the middle class.

It's a nasty brew. In many ways the US has more in common with Greece than most realize, especially when it comes to public unions and lack of competition for protected government jobs.

Interestingly, self-serving extortionists compared the public union protests in Madison to freedom fighters in Egypt.

As I pointed out in Public Union Protesters More Like Greek Extortionists than Egyptian Freedom Fighters; Unions Under Fire in Wisconsin, Ohio, Tennessee; Student Idiocy, comparing SEIU protests to freedom fighting is sheer lunacy.

The Gimme, Gimme, Gimme "Better Way" Chanting Mob looks more like the Greek public union extortion than it does anything else.

Our cure is simple. Pass national right-to-work laws, scrap Davis-Bacon and all prevailing wage laws, and end the Fed.

Dissimilarities

Bear in mind Greece has other problems that are not comparable, so does the US. For example, the US has untenable military spending and a health-care system that is the most costly in the civilized world.

Greece is in a currency union with no fiscal union. Greece has no way to devalue its currency or set interest rates. Greece has few exports while the US is a huge exporter that simply imports far more than it exports.

Thus, I do not want to imply the US is Greece. I simply highlighted one area that is more similar than most think.

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


Energy Shortages Spreading: Rationing in China, Pakistan, Venezuela, Japan, Argentina; China Resorts to Punitive Prices to Curb Demand

Posted: 24 May 2011 12:50 AM PDT

Electric power shortages caused by insufficient water levels at hydroelectric stations in some places, and unaffordable oil prices in others, have led to rationing, blackouts, and other problems.

China Resorts to punitive Prices to Curb Demand

Bloomberg reports China's Zhejiang Plans Punitive Power Prices to Curb Consumer Demand
China will impose punitive power prices on businesses that exceed consumption limits in Zhejiang province, a manufacturing hub bordering Shanghai, to curb demand during an expected electricity supply shortfall this summer.

China faces the worst power shortage in seven years as the economy grows faster than forecast and some utilities cut production or shut, hit by rising coal prices and government caps on tariffs. Zhejiang, on the eastern coast to the south of Shanghai, is host to companies including automaker Zhejiang Geely Holding Group Co., owner of Volvo Cars.

The province's 35.4-gigawatt generation capacity is 3.5 gigawatts short of what it needs during peak summer demand, the local government said.
High Coal Prices Cause Plant Closures

Please consider China's Power-Capacity Utilization at Record Low
China's power plants are operating at a record-low utilization rate as many have closed, potentially causing the most severe electricity shortage since 2004, Mirae Assets Securities said.

"Burdened by bulging losses, many power generators have shut," Gordon Kwan, the Hong Kong-based head of energy research at Mirae, said in an e-mailed note today. "High coal prices and the capped electricity price have also reinforced fears" that power rationing may spread to manufacturing hubs including Guangdong, Zhejiang and Jiangsu, Kwan said.

China's April electricity output fell from a seven-month high as the cost of coal rose. Prices of the fuel at Qinhuangdao port, a domestic benchmark, climbed for a sixth week as of May 9 to the highest in more than two years, according to the China Coal Transport and Distribution Association.

The country may face a summer shortage of 30 gigawatts as supply lags behind demand growth, the China Electricity Council said on April 29. That deficit is about twice the shortfall Japan faced after the March 11 earthquake, Mirae's Kwan said.
Venezuela Plans Rationing

Bloomberg reports Venezuela Plans to Ration Power for Second Year
Venezuela will ration power again this year, planning steps similar to those taken in 2010 amid an energy crisis, Electricity Minister Ali Rodriguez said.

"We're going to reapply the measures we applied in Caracas last year nationwide, which punishes the wasting of electricity and encourages energy savings," Rodriguez said in an interview on state television today. Any rationing measures require President Hugo Chavez's approval, Rodriguez said.

Venezuela has struggled to boost energy-generating capacity to keep pace with an estimated 6 percent increase in demand this year. The consumption jump, if it persists, would require an additional 2,000 megawatts of new capacity a year, which is "unsustainable," Rodriguez said.
Energy Shortages Spreading

Please consider the ASPO May 23 Energy Review
Pakistan and China continue to top the list of countries with the most serious power shortages. Last week brought in reports of energy shortages developing or worsening in Egypt, Guyana, the Dominican Republic, India, Japan, El Salvador, Bangladesh, Libya, Mozambique, Nepal, Venezuela, Argentina, Zimbabwe, Kenya, and Tanzania. Most of the reported shortages are of electric power caused by inadequate water levels at hydro dams or insufficient coal, but some of these shortages stem from unaffordable oil prices or the inability to import sufficient quantities of liquid fuels.

In most countries, electricity shortages quickly translate into increased demand for gasoline and diesel as organizations strive to keep important activities such as computers, elevators, hospitals, refrigeration and even factory production functioning with back-up generators.

Pakistan probably is suffering the worst from electricity shortages, the country simply does not have enough foreign exchange to import large quantities of expensive fuels. China however is a different situation. Beijing is committed to maintaining its economic growth which it can't do without increasing supplies of electricity.

The Chinese only report their oil imports and electricity consumption monthly so the complete picture of their energy situation will not be known for a while, but if past shortages are any indication we can expect imports to increase, perhaps significantly, in coming months. Beijing is being unusually open concerning the seriousness of its growing electricity shortages which are said to be the worst since 2004. Rationing of power has started and reports of production shortfalls are starting to appear. In the past year the price of coal has increased by 20 percent while electricity rates have increased by only 2 percent leading to substantial losses for many Chinese electricity producers.

Summer is nearing, and temperatures across parts of South Asia are already running above 40o C. so the use of air conditioning is putting further strains on power grids. Wide spread blackouts and lost industrial production can be expected this summer if current trends continue. The liquid fuel shortages being reported in a number of the world's poorer countries suggests that demand may indeed be outstripping available supplies with the poorer countries losing out in bidding for available supplies.

The June OPEC meeting is likely to be an interesting one. Iranian President Ahmadinejad appointed himself Iran's acting Oil Minister over the objections of the Iran's Guardian Council and plans to chair the OPEC meeting where he may attempt to drive up oil prices by challenging any Saudi effort to increase production officially.
Rogers Predicts Oil Price to Rise "Beyond Anybody's Expectations"

Speaking with the British BBC, last Tuesday 17 May 2011, famed investor Jim Rogers chairman of Rogers Holding said he believes that the oil prices will rise "beyond anybody's expectations" in the foreseeable future and that America is in serious trouble.



I do not know how high oil prices go and in what timeframe. Nor does anyone else. However, I do know that the price of oil (and everything else) will not rise above people's willingness to pay for it. Demand for oil will drop with rising prices.

Currently, much of the rise in oil has been speculation, just as it was in 2008. Rampant credit expansion and overheating in China has also contributed to higher prices. Near-term, slowing global growth seems likely to put a damper on prices.

Long-term, those who assume the Chinese economy can grow at 10 percent a year for another decade are in Fantasyland. Energy constraints will not permit it.

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


Damn Cool Pics

Damn Cool Pics


Best Rapture Bombs

Posted: 24 May 2011 03:24 PM PDT

The Rapture is really happening! Just look at all the people disappearing in these pictures. Well, that's what we want people to think. I'm happy for the people, but feel absolutely horrible for those poor dogs.

Here are the best rapturebomb pictures so far.




























































China's Ghost Cities

Posted: 23 May 2011 10:24 PM PDT

Vast new cities of apartments and shops are being built across China at a rate of ten a year, but they remain almost completely uninhabited ghost towns.

It's all part of the government's efforts to keep the economy booming, and there are many people who would love to move in, but it's simply too expensive for most. More info.


15 Awesome Mazes and Labyrinths

Posted: 23 May 2011 09:10 PM PDT

Labyrinths and mazes can be found around the world and they are important cultural works, offering rich insights into our history and the human psyche. In Greek mythology, the labyrinth was designed by Daedalus to imprison the Minotaur; but the labyrinth serves a symbolic meaning, as well. "Walking the labyrinth" is said to be a deeply personal and revealing meditative experience by which a person gains insights into their true nature.

Mazes, by contrast, are designed to be a strategic challenge; they are one of humankind's original physical puzzle games. Unlike a labyrinth, which is designed to be contemplative but easy to complete, a maze is intentionally difficult to navigate. Both labyrinths and mazes symbolically reveal two sides of the human spirit: complexity and simplicity; mystery and design; intuition and sensory experience. They are emblematic of the eternal philosophical tension between free will and fate. Here are some of the most complex, beautiful, and creative mazes and labyrinths around the world.

Dole Plantation
The world's longest maze is at the Dole Plantation on Oahu, Hawai'i. Comprised of 11,400 tropical native plants and covering 3.11 miles.

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Reignac-sur-Indre

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Cherry Crest Adventure Farm

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Snakes 'n Ladders

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Davis Mega Maze

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Longleat

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Ashcombe

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Richardson Castle

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Hampton Court Maze

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The Imprint

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Grace Cathedral

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The Movie

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Victoria Park Water Maze

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Brick Maze of Capri

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Villa Pisani

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Source: webecoist


Creative Gadgets for Photography Lovers

Posted: 23 May 2011 05:08 PM PDT

This is a list of 20 really cool gadgets for photography lovers. The items vary from useful to fun, but we hope you'll find what you're looking for!

You can actually buy almost every single gadget from this list except a few which are in concept stage.

Recycled Camera Focus Lens Cuff


Photo Album Coffee Table




Camera Phone Lenses






My Photo Case


The Super-Secret Spy Lens


The Camera Lens Mug




Solar-Powered Camera Strap


Camera USB Drive




Inflatable Photo Studio


Mini Model Camera With 3 Lenses






Corner Frames


Photoshop Fridge Magnets






F-ck Photoshop: The Pencil For the Purist


Lens Bracelets




Photoshop Frame


The Level Camera Cube


SLR Pinhole Lens




Camera Lamp


Cloak Bag








The Bottle Cap Tripod

Source: boredpanda