Monday, January 10, 2011

notes on the week ended Jan 8th

the headline on the jobs report was that unemployment had fallen to 9.4%, but that was largely because of the shrinking of the denominator, as 260,000 americans no longer count in the official statistics because they've dropped out of the workforce, which is now at the lowest it's been in over 27 years, back to the time before women were forced to enter the workforce by anti-labor policies that made it impossible to support a family with just one wage earner...only 103,000 jobs were added, less than needed to make up for population growth....these are seasonally adjusted numbers and i havent checked the exact data, but december is typically an outlier, and seasonal hiring this year was the highest since 07....since the recession ended in july of 2009, we're now well into our second year of recovery; over the past year the economy has only added back 1.1 million of the 8.4 million jobs that were lost during the recession; however, just to create jobs to make up for the increase in the population, we should be adding 1.5 million jobs a year; thus at the rate jobs are being added in this recovery, the labor force participation rate will continue to shrink, and we'll never get out of this hole...

Part Time for Economic Reasons
Part Time Workers

  click on either graph to enlarge

a blog post that had me unsettled most of the week was from a Pew survey that wasnt covered by the lamestream media or the blogs except to quote from the executive summary, which only had some rather general statements about the number who are unsatisfied with economic conditions; the only one who appears to have read the details to the end was dave cohen; and he found the depressing details that 29% are having trouble affording food, and 48% are finding it difficult to pay for electric and heating bills...i posted the results in comments on several blogs early this week, but when i google searched for it, the only places where these details showed up were where cohen's article was reprinted or my web comments; as cohen asks, why isnt this a page one story: 29% Of Americans Say It's Difficult To Afford Food ?

there were a few important pieces of mortgage securitization news this week; first, there was a settlement in the lawsuit of BofA by fannie mae, wherein fannie was attempting to force BofA to buy back mortgage securities it had misrepresented; BofA agreed to pay $1.28B to settle claims on $127B of loans sold by their countrywide unit, setting a template for another bailout of the banks who have been offloading their toxic junk on the taxpayer guaranteed GSEs...the second was an important ruling by the Mass Supreme court that the "one size fits all" automated securitization transfer process developed by the banks does not meet the requirements of massachusetts real estate law...the unanimous decision acknowledged that the borrowers were in default, but the foreclosures were invalid because the banks didn’t prove they owned the mortgages in question, in that the note and deed were not properly conveyed properly to Wells Fargo & US Bancorp in accordance with Mass. law; the ownership of the properties was thus returned to the defaulted borrowers...

Option ARM Recast

with the caveat that this only applies in one state so far, the banks have been told that if they want to take people's mortgages & create a multitude of financial products to create income streams for investors in those products and skim off profits on the side, they still have to treat the mortgages as titles to a person's home...they have to keep the paperwork in order, and each step in the many transfers in their securitization process must be accompanied by complete paperwork...without the properly notarized paperwork, foreclosures are invalid because none of the banks can prove they own the mortgages...

the adjacent chart is an update to a chart i used in a post last year: banks insolvent? extend and pretend… although the subprime loans criris which was responsible for most of the toxic MBS assets now on the banks books played out in 2008 & 2009, there are still over a trillion $ of option ARMS (adjustable rate mortgages) which will reset as indicated over the next three years...as long as interest rates remain low over this period, there shouldnt be much of a problem will ballooning housepayments, but it's just something to watch for in light of the fact that interest rates have spiked in the face of the Fed's best efforts to keep them down... (this updated chart from SNL Financial : Credit Suisse: $1 trillion worth of ARMs still face resets )

in the change we can believe in department, obama appointed bill daley as white house chief of staff, in order to improve his relations with the banksters...daley, the son of ex-chicago kingpin mayor richard daley, was the former right hand man of JPMorgan chief jamie dimon; he has opposed health-care reform and opposed the creation of the Consumer Financial Protection Bureau and worked for the Chamber of Commerce in attempts to loosen post-enron accounting and auditing rules...elizabeth warren is now engaged in a search to find someone acceptable to head the CFPB...also, former goldman sachs exec & clinton rubinite gene sperling, who negotiated the tax cuts for the rich, will take over for larry summers as head of the national economic council, and paul volcker was shown the door...and as the door revolves, former chief of staff rahm emanuel goes to chicago to try to take richard daley's old job...it should be clear to anyone watching by now that it has hardly mattered which party has been in the white house, its still run by the banksters...even the clinton administration was the one that initiated the financial deregulation that got us into this mess, twice reappointed alan greenspan, promoted free trade polices to the benefit the corporate globalists, and started the shredding of the new deal welfare safety net; they even talked about privatizing social security...and after this years "Citizens United" supreme court ruling that gives corporation unfettered control of campaign finance, control of the government by the plutocracy is only going to get worse...

with many states changing administrations at this time of year, the multitude of budget problems faced by the administrations in each has been in the news, and the proposed solutions have been as varied as the states, running the gamut from pay freezes (NY), union busting (NJ), tax increases (cal & ill), cutting state funding for health care and education (Texas) to shifting programs to the cities or counties....with the end of the build america bond program negotiated in the GOP-obama tax deal, issuance of muni-bonds collapsed 91% this week from previous levels, and muni-bond holders continued to unload them at the fastest pace in 14 years; it was suggested that the Fed could step in & buy muni-bonds, but in testimony before congress on Friday, bernanke rejected that idea...

the widespread flooding in queensland has shut down the coal mines there and it may take as long as two months for the mines to be pumped out & put back in operation...although a small part of global thermal coal, these mines produce 50% of the world's metallugical coal, primarily used in steelmaking...prices are already up by one-third, and as china produces 50% of the worlds steel, they are the ones being hit, with US producers of coking coal profiteering...since most US steel is made in mini-mills from scrap, our steel industry is not expected to be affected...the index of 55 food commodities tracked by the UN's food & agriculture unit hit a new all-time high, surpassing the levels seen in 2008, when food riots were widespread...in light of high copper prices, the US department of energy reports a $1 billion/year problem with copper theft, with everything from construction sites to foreclosed homes to isolated utility installations being stripped...

i know this sound like a repeat (it does to me), but the european crisis was back again in full force again...portuguese 10 year bonds approached 7%, irelands was back over 9%, and greek bonds hit a record 12.64% last i checked; moreover, the costs to insure the bonds from the 15 western europe economies is now higher than a similar index of insurance costs for eastern european countries such as hungary, poland & ukraine...in irish bailout news, it was revealed that as a participant in the IMF portion of the bailout, U.S. taxpayers will contribute $5 billion...

there were also a couple disconcerting scientific studies in the news this week; first, four major species of bumblebees have been documented to have declined 96% over the last 20 years, and their range has declined by as much as 87%...since they fly at cooler temperatures than the already depleted honeybees, a new range of native plants can be considered threatened...at this rate, we'll all be limited to a grass & pinecone diet eventually...the other study found a "drastic" shift in north atlantic currents, most notably the cold labrador current, which interacts with the warm gulf stream near new england...together they have a complex interaction with weather in north america, and especially europe...a decrease in gulf stream flow could mean much colder winters for western europe...

the above are my weekly comments that accompanied my sunday morning links mailing, which in turn was selected from my weekly blog post on the global glass onion…if you’d be interested in getting my weekly emailing of selected links that accompanies these commentaries, most coming from the aforementioned GGO posts, contact me...

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