Mish's Global Economic Trend Analysis

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“Student Loan ‘Debt Bomb"; Obama's Misguided Proposal and Mish's Two-Point Alternative Proposal Posted: 11 Feb 2012 11:11 AM PST It's interesting to watch some of the terms bandied about in headline news. For example, the LA Times headline reads S&P says student loan debt could be next financial bubble. Next? Could Be? What with the word "next"? Also what's with the words "could be"? Without a doubt student loans are in a bubble and have been for many years. The source of the problem, as it always is with financial bubbles, is cheap money, loans to nearly anyone, and in the case of student loans, no way to discharge the debt, even in bankruptcy. From the article ... "Student-loan debt has ballooned and may turn into a bubble," S&P said. "There are more defaults and downgrades for some student loan asset-backed securities." Federal and private student-loan debt is approaching $1 trillion and surpassed credit-card debt for the first time in 2010, according to Mark Kantrowitz, publisher of FinAid.org, a college grant and loan website. Under U.S. law, student-loan debt -- unlike credit-card borrowings -- can rarely be discharged in bankruptcy court. President Barack Obama last month proposed linking federal aid to a college's ability to control tuition costs. The plan calls for increasing campus-based aid only for schools that limit tuition-cost increases and penalizing those that don't. The Next "Debt Bomb" The Huffington Post says Student Loans Could Be America's Next "Debt Bomb" Growing numbers of Americans are finding themselves bankrupt, with their college diplomas partially to blame. Slightly more than 80 percent of bankruptcy attorneys say the number of their potential clients with student loan debt have increased "significantly" or "somewhat" in the past three to four years, according to a survey by the National Association of Consumer Bankruptcy Attorneys. And there's little hope those debtors will get out of their obligations; 95 percent of bankruptcy attorneys surveyed said that very few student loan debtors will be discharged from their loan as a result of undue hardship. "Take it from those of us on the frontline of economic distress in America: This could very well be the next debt bomb for the U.S. economy," William E. Brewer, Jr., president of the NACBA said in a statement accompanying the survey. With so many college graduates burdened with so much debt, the potential for bankruptcies is huge. Nearly 25 percent of bankruptcy attorneys said they've seen potential student loan client cases surge by 50 to more than 100 percent, according to the NACBA survey. That despite the number of Americans that filed for bankruptcy overall falling last year, according to The New York Times. Americans that graduated college with loans in 2010 owe an average of about $25,000 -- a five percent boost from the year before, according to The Project on Student Debt. In addition, because they faced an unemployment rate of 9.1 percent upon graduation they're at a disadvantage when it comes to paying back the loans.  4 of 5 Bankruptcy Attorneys Report Major Jump in Student Loan Debtors Seeking Help Inquiring minds may be interested in a link to Student Loan Survey taken by the National Association of Consumer Bankruptcy Attorneys (NACBA). The NACBA survey of 860 bankruptcy attorneys nationwide found that: More than four out of five bankruptcy attorneys (81 percent) say that potential clients with student loan debt have increased "significantly" or "somewhat" in the last three-four years. Overall, about half (48 percent) of bankruptcy attorneys reported significant increases in such potential clients. Nearly two out of five of bankruptcy attorneys (39 percent) have seen potential student loan client cases jump 25-50 percent in the last three-four years. An additional quarter (23 percent) of bankruptcy attorneys have seen such cases jump by 50 percent to more than 100 percent. Most bankruptcy attorneys (95 percent) report that few student loan debtors are seen as having any chance of obtaining a discharge as a result of undue hardship. Titled "Student Loan 'Debt Bomb': America's Next Mortgage-Style Economic Crisis," the companion NACBA paper published today points out: College seniors who graduated with student loans in 2010 owed an average of $25,250, up five percent from the previous year. Borrowing has grown far more quickly for those in the 35-49 age group, with school debt burden increasing by a staggering 47 percent. Students are not alone in borrowing at record rates, so too are their parents. Loans to parents for the college education of children have jumped 75 percent since the 2005-2006 academic year. Parents have an average of $34,000 in student loans and that figure rises to about $50,000 over a standard 10-year loan repayment period. An estimated 17 percent of parents whose children graduated in 2010 took out loans, up from 5.6 percent in 1992-1993. Of the Class of 2005 borrowers who began repayments the year they graduated, one analysis found 25 percent became delinquent at some point and 15 percent defaulted. The Chronicle of Education puts the default rate on government loans at 20 percent. Obama's Misguided Plan to Fix the Problem President Obama proposes to "fix" the problem by throwing more money at it. Instead, I propose the problem and solution is two-fold. Two-Point Problem Guaranteed loans of any kind are a huge problem. An even bigger problem is guaranteed loans that cannot be discharged in bankruptcy. Schools have every incentive to drive up costs and to make loans to kids who simply do not belong in school at all,  as well as to kids whose benefit of education is far less than the cost of education. Lack of competition. We need more accredited universities that can offer online programs, at far cheaper prices. Two-Point Solution Cancel the student loan program in entirety for new students and phase out student loans over the next three years for anyone already in such programs.   Accrediting some online education programs say from India, would certainly go a long way towards massively increasing competition and reducing costs. Obviously some classes need to be hands-on type (lab work), but I am sure that can easily be arranged in conjunction with local colleges. My proposal would get government out of the student loan business where it does not belong, while increasing free-market competition to dramatically drive down prices. Obama's solution is to throw more money at the problem. Recent Rise in Non-Revolving Loans By the way, the recent reported rise in non-revolving loans was entirely due to a huge rise in student loans, further increasing the size of the problem. Please take a look at Consumer Credit "Demolishes Expectations" Really? No Not Really! The "Non-Bounce" in Non-Revolving Credit for some very interesting graphs and comments on the rise in student loans. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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Damn Cool Pics

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Sneak Peak at the Greatest Toy in the Universe Posted: 10 Feb 2012 09:13 PM PST Jaimie Mantzel is heralding this prototype robot as the "greatest toy in the universe." After watching the video below, you may actually agree with him. Not only is this 6-legged robot remote control, it's central area can be fitted with several different projectile-shooting modules. The two shown are capable of firing discs great distances, or ping pong balls at varying angles. There also seems to be a dart module that isn't demonstrated. The only problem is the six legged robot does not have a name, Jamie has reached out to the internet and is asking for suggestions. If he picks your name for the toy he will send you a free one.

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Weekly Address: Extending the Payroll Tax Cut for the Middle Class

Your Daily Snapshot for Saturday, February 11, 2012   Weekly Address: Extending the Payroll Tax Cut for the Middle Class President Obama urges Congress to extend the payroll tax cut to prevent a tax hike on 160 million hardworking Americans. Back in December, Congress faced this exact same predicament. People all over the country tweeted, emailed and wrote to explain how losing $40 each check would affect them. Ultimately, thanks to your stories, Congress did the right thing and passed a two-month tax cut extension. It’s more important than ever that you make sure your story is part of the debate here in Washington.  Watch the weekly address and tell us what $40 means to you and your family. President Barack Obama tapes the weekly address in the East Room of the White House, Feb. 10, 2012. (Official White House Photo by Lawrence Jackson) In Case You Missed It A quick look at what happened this week on WhiteHouse.gov: All-hands-on-deck for Science and Innovation: Monday marked the second annual White House Science Fair, featuring research and inventions from more than 100 students representing 30 student teams. With marshmallows catapulting through the State Dining Room and robots roaming around the Blue Room, this celebration of research highlighted the talent of America’s next generation and their ability to change the world through science and engineering. If you missed President Obama’s historic launch of 14-year-old Joey Hudy’s marshmallow cannon, you can check it out here. Housing Agreement: On Thursday morning, President Obama spoke about what he called a “landmark settlement”– an agreement with the nation’s five largest mortgage providers that will result in their issuing at least $25 billion to address mortgage loan servicing and foreclosure abuses. This settlement, in which “America’s biggest banks – banks that were rescued by taxpayer dollars – will be required to right these wrongs,” will aid thousands of working families now, and establish new protections for homeowners henceforward. Kids Can’t Wait: From the East Room of the White House, the President announced that 10 states have agreed to implement impactful education reforms and will receive waivers from the burdensome mandates of the Elementary and Secondary Education Act (ESEA), also known as No Child Left Behind. These waivers will ensure that states have the flexibility necessary to raise student achievement standards, improve school accountability and increase teacher effectiveness. Happy Second Birthday, Let’s Move!: There’s reason to celebrate – Thursday marked the Let’s Move! initiative’s second anniversary. Significant progress has been made to solve the problem of childhood obesity over the course of the past two years – President Obama signed the Healthy, Hunger-Free Kids Act into law in December 2012; grocers including Walgreens, Supervalu and Walmart committed to build or expand 1,500 stores in food deserts; among many other accomplishments that are making a difference in the lives of our children. West Wing Week: Your guide to everything at 1600 Pennsylvania Avenue. Check out the video. Get Updates Sign up for the Daily Snapshot Stay Connected     Facebook Twitter YouTube Flickr iTunes       This email was sent to e0nstar1.blog@gmail.com Manage Subscriptions for e0nstar1.blog@gmail.com Sign Up for Updates from the White House Unsubscribe this email address | Privacy Policy Please do not reply to this email. Contact the White House The White House • 1600 Pennsylvania Ave NW • Washington, DC 20500 • 202-456-1111

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Mish's Global Economic Trend Analysis

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Violent Protests in Greece; 6 Cabinet Members Resign; LAOS leader "I Would Rather Starve Than be Under German Jackboot"; Controversy Over Missing Paragraphs Posted: 10 Feb 2012 10:50 PM PST Imagine you are asked to sign a document but three pages were missing. Further imagine the documents you were asked to sign were written in English but you only speak Greek. Would you sign? That is exactly the predicament Greek officials were placed in by the Troika. Here is the story sent to me by Demetri Kofinas at Capital Account. Hello Mish George Karatzaferis leader of LOAS political party gave a speech today addressing why he refused to sign this latest agreement. In his speech, he said that he asked for a translated document of the agreement so that he could read it and sign it since his English is not as good as Papademos'. When he got a copy, it was not only smaller than the English version, but was also missing pieces, including the last paragraph! He refused to sign it because he felt pressured and wants more time. Youtube has a video of Karatzaferis where he compares the documents. At the 11:35 mark he translates the last paragraph for the listeners, which was not provided to him in the translated copy that he was to read. The video is in Greek so not many can understand it. Moreover, the video was somewhat garbled and some things do not easily translate, so I do not have a good account of the missing paragraphs, but it is clearly absurd that anything should be missing. "I Would Rather Starve Than be Under German Jackboot" Facing down protests, dissent, Greece vows to push through austerity warns of default 'chaos' Greece's future in the eurozone came under renewed threat Friday as popular protests again turned violent and dissent grew among its lawmakers after European leaders demanded deeper spending cuts. The country's beleaguered coalition government promised to push through the tough new austerity measures and rescue a crucial euro130 billion ($170 billion) bailout deal after six members of the Cabinet resigned. Prime Minister Lucas Papademos promised to "do everything necessary" to ensure parliament passes the new austerity measures that would slap Greeks with a minimum wage cut during a fifth year of recession. He also promised to replace any other Cabinet members who did not fully back his efforts. Earlier Friday, the small right-wing LAOS party in Papademos' coalition said it would not back the new measures and four of its officials in the cabinet resigned, including the country's transport minister. Two Socialists cabinet members have also quit. LAOS leader George Karatzaferis said rescue creditors had humiliated Greece. "Of course we do not want to be outside the EU, but we can get by without being under the German jackboot," he said. "I would rather starve." 6 Cabinet Members Resign Reuters reports Anger in Greece as parliament to vote on bailout Greek lawmakers will vote this weekend on a controversial austerity bill that Athens needs to avoid a messy default but which is fuelling a domestic political and social crisis that has brought thousands of Greeks out on the streets in protest. The cabinet approved the draft bill late on Friday - paving the way for a new multi-billion euro bailout and a debt-cut plan - after another day of rocky politics where six cabinet members resigned over the additional austerity demands. Violent Protests in Greece Please consider Greek premier says default would lead to 'chaos' Greece's future in the eurozone came under renewed threat Friday as popular protests again turned violent and dissent grew among its lawmakers after European leaders demanded deeper spending cuts. In central Athens, clashes erupted outside Parliament between dozens of hooded youths and police in riot gear. Police said eight officers and two members of the public were injured, while six suspected rioters were arrested. The violence broke as more than 15,000 people took to the streets of the capital after unions launched a two-day general strike that disrupted transport and other public services and left state hospitals running on emergency staff. Scores of youths, some in gas masks, used sledge hammers to smash up marble paving stones in Athens' main Syntagma Square before hurling the rubble at riot police. Note the irony of that last headline. It should be perfectly clear Greece is already in a state of dysfunctional chaos. That said, things can always get worse, and they will. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Petroleum 3-Month Rolling Average Turns Sharply Lower; Negative Shipping Rates; Collapse in Global Trade Posted: 10 Feb 2012 09:36 AM PST On February 6, I noted (with huge thanks to reader Tim Wallace) a Huge Plunge In Petroleum and Gasoline Usage. Tim used weekly numbers, which show, much week-to-week volatility. Instead, I proposed using rolling three-month averages, compared to the same three months in prior years. Today I received some updated charts that are much easier to see precisely what is happening. Gasoline Usage Last Three Months vs. Last Three Months Prior Years click on any chart for sharper image Gasoline Usage by Quarter Ending December 2011 Petroleum Usage by Quarter Ending December 2011 Wallace writes "Gasoline and petroleum demand recently has plunged more than at any time in the recession. When you see petroleum usage back to numbers in the 1990's, you know there is serious economic trouble no matter what the talking heads say." Wallace willing, each month I will post the "Petroleum Rolling Three-Month Average Index". Hopefully we can get a derivative of that first chart, "Percent Change From a Year Ago". At the end of February the comparison will be December - January - February vs. the same three months in prior years. Negative Shipping Rents Amazingly, shipping rates have dropped so low, shippers will pay you to ship, just to get the cargo vessels to better locations. Bloomberg reports Charter Rates Go Negative Glencore International Plc paid nothing to hire a dry-bulk ship with the vessel's operator paying $2,000 a day of the trader's fuel costs after freight rates plunged to all-time lows. The vessel will haul a cargo of grains to Europe, putting the carrier in a better position for its next shipment, he said. "Our other option was to stay in the Pacific and earn poor revenues or ballast to the Atlantic and pay the fuel ourselves," Rodley said. Ballasting refers to sailing without a cargo. Charles Watenphul, a spokesman for Glencore, declined to comment in an e-mailed response to questions. Charters for the so-called backhaul routes that reposition ships to the Atlantic Ocean region from the Pacific are falling to the lowest since indexes started, exchange data show. Rents for Capesize ships that haul ore and grain on backhaul routes were at minus $7,342 a day, the lowest since that index began in 1999, exchange data show. D/S Norden A/S, Europe's biggest publicly trading commodity shipping company, said Feb. 3 it hired a Supramax vessel at no cost other than fuel charges, its first such transaction in a quarter century. Baltic Dry Index - $BDI The Baltic Dry shipping index (a measure of shipping costs) was down 32 days in a row before turning up on Tuesday. The Harper-Peterson Shipping Index is also in dismal shape. Many ships came online in the last couple years but a plunge this deep cannot be blamed entirely on new ships added. Rather, the huge dropoff in gasoline and petroleum usage in the US, coupled with falling shipping rates, a drop in Japanese Exports Three Consecutive Months, and a European Recession poised to get much worse, makes a strong case that a collapse in global trade is underway. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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Damn Cool Pics

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• Macaulay Culkin Aging Timeline
• Hello Kitty Jet
• The 2012 Guide to Dating Everything You Need To Know [Infographic]

Macaulay Culkin Aging Timeline Posted: 10 Feb 2012 04:29 PM PST Macaulay Culkin born August 26, 1980 is an American actor. He became widely known for his portrayal of Kevin McCallister in Home Alone and Home Alone 2: Lost in New York. He is also known for his roles in Richie Rich, Uncle Buck, My Girl, The Pagemaster, and Party Monster, as well as Michael Jackson's music video Black or White. Presented below is the the official Macaulay Culkin aging timeline

Hello Kitty Jet Posted: 10 Feb 2012 01:53 PM PST Japan's comic company, Sanrio, which owns the Hello Kitty brand and Taiwan's EVA Air have collaborated in producing three Hello Kitty branded jets; 'Apple Jet', 'Global jet' and 'Magic Jet'. Bursting with cuteness, these jets will run for at least a year on different routes in Asia originating from Taipei. Everything on board has been Hello Kitty themed; from the very soap you'll use in the toilet to the flight attendants. Passengers can also purchase limited edition duty-free products, such as Hello Kitty-shaped pasta, from flight attendants wearing Hello Kitty aprons. Via: cnngo

The 2012 Guide to Dating Everything You Need To Know [Infographic] Posted: 10 Feb 2012 01:33 PM PST In addition to the top 10 cities to find a date in 2012, Cheap Sally's infographic highlights the most popular first date ideas this year (dinner and drinks!) and the things you absolutely must have on your online dating profile. Plus, I never would have guessed that 33% of men fall in love on a first date! Learn something new everyday! Click on Image to Enlarge.

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