from WSJ:
Fannie Mae and Freddie Mac, already reeling in red ink, are warning they could face additional losses from the weakening condition of mortgage-insurance companies.
Fannie and Freddie together have required capital injections from the Treasury of $112 billion since the government took them over through conservatorship last year. Their need for government support would have been greater without collecting on claims from mortgage-insurance companies. Fannie and Freddie have received payouts of $2.3 billion and $658 million, respectively, from mortgage insurers through September this year.
Wednesday, November 11, 2009
Fannie and Freddie Beg for More Tax-Payer Money!
Eminent Domain Ruling Eminently Despicable!
It is the vacant lot where the home of Susette Kelo once stood.
A decade ago, the town of New London, Connecticut claimed Kelo's house by right of eminent domain. The plan was to demolish the residential neighborhood so that Pfizer could built a massive research and development plant on the adjacent land. Pfizer got the land for next to nothing. Five Supreme Court justices upheld the taking, ruling that although the primary beneficiary was a corporation, it met the constitutional requirement of "public use."
Now Pfizer has announced that it is shutting down the plant.
The Hartford Courant reports:
Pfizer Inc. will shut down its massive New London research and development headquarters and transfer most of the 1,400 people working there to Groton, the pharmaceutical giant said Monday....
Pfizer is now deciding what to do with its giant New London offices, and will consider selling it, leasing it and other options, a company spokeswoman said.
Scott Bullock, Kelo's co-counsel in the case, told the Examiner's Tim Carney: "This shows the folly of these redevelopment projects that use massive taxpayer subsidies and other forms of corporate welfare and abuse eminent domain."Here's how the Associated Press describes the vacant lot:
Weeds, glass, bricks, pieces of pipe and shingle splinters have replaced the knot of aging homes at the site of the nation's most notorious eminent domain project.
There are a few signs of life: Feral cats glare at visitors from a miniature jungle of Queen Anne's lace, thistle and goldenrod. Gulls swoop between the lot's towering trees and the adjacent sewage treatment plant.
The promised 3,169 new jobs and $1.2 million a year in tax revenues vanished when the housing bubble popped and brought on the recession.Vacant lot photo credit:
Dollar Continues Slide, Gold Continues Meteoric RIse
In its third-quarter monetary policy report, the People's Bank of China departed from well-worn language on keeping the yuan "basically stable at a reasonable and balanced level." It hinted instead at a shift from an effective dollar peg that has been in place since the middle of last year.
"Following the principles of initiative, controllability and gradualism, with reference to international capital flows and changes in major currencies, we will improve the yuan exchange rate formation mechanism," the central bank said in a 46-page monetary policy report.
The comments, published just days before a visit to Shanghai and Beijing by U.S. President Barack Obama, set out the possibility of a return to exchange rate appreciation that began with a landmark July 2005 revaluation.
The yuan strengthened by nearly 20 percent against the dollar until concern over the impact of the global financial crisis prompted Beijing to hit the brakes in the middle of last year to protect exporters.
The yuan has been stuck at around 6.83 per dollar ever since, drawing increasing ire from other countries, especially as it has followed the dollar downwards against other currencies.
The dollar has dropped 13 percent against a basket of major currencies including the yen and euro since mid-February.
Some analysts have called for the return to a genuine basket of currencies, which the central bank said in 2005 it would use as a reference for the yuan.
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"I think the wording change ... shows that it is an irresistible trend for China to resume yuan appreciation," said Xing Ziqiang, an economist at China International Capital Corp (CICC) in Beijing.
"It is not sustainable for the yuan to always be pegged to the U.S. dollar; after all, the repegging since late 2008 was just part of China's measures to address the global financial crisis, and now the impact of the financial crisis is fading, so the yuan should resume appreciation sooner or later."
The central bank's report came just hours after data that showed the world's third-largest economy had firmly put the worst of the global financial crisis behind it. Factory output growth surged to a 19-month high of 16.2 percent in October.
While exports were still down in year-on-year terms, economists pointed to the likelihood that they would start growing again soon.
Some analysts said the statement could have been timed to send a signal ahead of Obama's Nov. 15-18 visit to China.
Obama told Reuters on Monday that he planned to raise the currency issue during his trip.
However, Beijing is increasingly facing complaints about its currency from other emerging economies, which see an undervalued yuan as undercutting them in global markets.
No Sudden Shift
Those concerns were evident in a draft statement from APEC finance ministers circulated on Wednesday, in which they call for flexible interest rates and exchange rates as a way of redressing economic balances.
"We agreed that flexible prices, including exchange rates and interest rates, play a critical role in allocating resources efficiently, and can facilitate the adjustments needed to support balanced and sustainable global growth," said the latest draft statement by the finance ministers dated Nov. 10.
While the statement could change in its final form, a deputy Chinese finance minister was present at discussions on it, suggesting some level of agreement by Beijing on the wording.
However, analysts were quick to caution against expecting any sudden shift in the yuan's actual value, given China's penchant for carrying out any reforms gradually.
"The central bank's worries about capital flows, liquidity, and inflation signal growing pressure for yuan appreciation," said Ben Simpfendorfer, strategist with the Royal Bank of Scotland in Hong Kong.
"But I'm not looking for gains in the currency until the second quarter as the export sector still faces large challenges and margin pressure." Markets priced in a slightly greater appreciation over the coming year.
Offshore one-year dollar/yuan non-deliverable forwards (NDFs) fell to 6.6075 bid late on Wednesday compared with Tuesday's close of 6.6320.
Yuan appreciation implied by NDFs, which moves inversely with the forwards, was around 3.3 percent in a year compared with 3.06 percent before the announcement.
Xing with CICC said he was expecting even greater appreciation, of 3 to 5 percent next year, in the face of growing external and internal pressure.
"For China's own sake of balancing its economic growth and reducing its large surplus in the trade account, it is also necessary for the government to make the yuan more flexible."
Tuesday, November 10, 2009
Corn Harvest Way Behind for Mid-November
from Arlan:
World corn stocks are the tightest of the past 34 years in terms of days of use; US stocks similar to past several years.
And the corn crop this year is still only 37% harvested -- in mid-November! However, bushels per acre is up marginally in the latest USDA report.
and from Feedstuffs:
This morning the U.S. Department of Agriculture released its latest supply and demand figures which found that farmers are reaping larger soybean yields than originally expected but this year's corn crop is down slightly.
Monday, November 9, 2009
Unemployment Reality -- Beyond Ugly!
excerpt from John Mauldin:
"The headlines said unemployment, as measured by the "establishment survey," was down by 190,000; and even though that was slightly worse than forecast, market bulls were cheered by the fact that the number was not as bad as last month's. It is an improvement that we are not falling as fast.
"Well, maybe. What I did not see in many of the stories I read was that the number of unemployed actually soared by 558,000, to 15.7 million, as measured by the household survey. The establishment survey polls larger businesses; the household survey actually calls individual households.
"Let's look at the real number in the establishment survey. If you don't seasonally adjust the number, the actual change in unemployment for October was 641,000, or about 450,000 more than the seasonally adjusted number. And the Bureau of Labor Statistics added 86,000 jobs that they simply guess were created through the so-called birth-death ratio.
"My favorite slicer and dicer of data, Greg Weldon (www.weldononline.com), offers up an even more horrific number. As I have noted before, if you have not looked for work in the last four weeks, the BLS does not count you as unemployed. Quoting Greg:
"Moreover, when we combine the monthly change in the number of Unemployed, with the number Not in the Labor Force, we might consider the result to be a proxy for the actual 'change' in the underlying labor market situation ... in which case, October's figure of 817,000 represents the fourth LARGEST yet, behind last month's (September's) second largest figure of 1,021,000 ... for a two-month combined figure of 1.838 million, in newly Unemployed, or no longer 'in' the Labor Force ...
"... the second LARGEST two-month total EVER posted, barely trailing the December-08/January-09 total 1.955 million.
"Bottom line ... basis this measure AND the 'Total Unemployment Rate,' we could conclude that not only is there NO 'improvement' in the labor market, but moreover, that it continues to DETERIORATE, intently."
Sunday, November 8, 2009
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