Mystery Economic Theater 2010

[xilman]

Originally Posted by ewmayer

The U.S. has a decent native supply of rare earths, but China can extract and refine them much more cheaply due to the usual reasons ...

Most everywhere has a decent native supply of rare earths. They are not particularly rare and they are very widely distributed. Chemists tend to call them lanthanides these days at least in part because of the "rare" misnomer.

The main problem is that they are pretty uniformly distributed, which means their concentration is generally rather low. China has cornered the great majority of the uncommon sources of rocks which have a relatively high concentration of lanthanides.

Paul

[garo]

Couple of good reads today:
http://www.bloomberg.com/news/2010-0...d-condemn.html

While Forest Laboratories Inc., the medicine’s maker, sells Lexapro only in the U.S., the voyage ensures most of its profits aren’t taxed there -- and they face little tax anywhere else. Forest cut its U.S. tax bill by more than a third last year with a technique known as transfer pricing, a method that carves an estimated $60 billion a year from the U.S. Treasury as it combines tax planning and alchemy. (See an interactive graphic on Forest’s tax strategy here.)
Transfer pricing lets companies such as Forest, Oracle Corp., Eli Lilly & Co. and Pfizer Inc., legally avoid some income taxes by converting sales in one country to profits in another -- on paper only, and often in places where they have few employees or actual sales.

The Left Right Paradigm is Over: Its You vs. Corporations

The new dynamic, however, has moved past the old Left Right paradigm. We now live in an era defined by increasing Corporate influence and authority over the individual. These two “interest groups” – I can barely suppress snorting derisively over that phrase – have been on a headlong collision course for decades, which came to a head with the financial collapse and bailouts. Where there is massive concentrations of wealth and influence, there will be abuse of power. The Individual has been supplanted in the political process nearly entirely by corporate money, legislative influence, campaign contributions, even free speech rights.

[R.D. Silverman]

Originally Posted by ewmayer

<snip>

especially coming in the wake of the recent announcement that China has passed Japan to become the second-largest economy in the world.

Let's open a betting pool: What year will they overtake the U.S.?
It will happen; they have 4 to 5 times our population.

[ewmayer]

Originally Posted by R.D. Silverman

Let's open a betting pool: What year will they overtake the U.S.?
It will happen; they have 4 to 5 times our population.

I agree, it is inevitable, but I also fear the day it happens, because if it means that they have become as per-capita resource-use-intensive as most of the developed nations currently are (with the U.S. being the "world leader" in that dismal category), it will represent an unprecedented ecological catastrophe. This is not to blame the Chinese for doing what pretty much every other developed nation has done - merely a statement of fact, that the world cannot handle U.S.-style resource pillaging and pollution-spewing, on a scale an order of magnitude greater, without what are likely to be extremely dire consequences.

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So last week we saw a big old Wall street rally day to end the week, even though the economic data are mixed-to-bad at best. Allow me to attempt to capture the bipolar nature of the dynamic by way of a letter (e-mail) I just sent to the editor of the local paper, the San Jose Mercury News, commenting on Saturday's business section.

I`ve supplemented the message text with the original AP story links as hosted on google.com, as at least one of the SJ Merc ones is subscriber-only - They have a nominal 125-word limit so I had to be very terse:

To the editor, San Jose Mercury News (letters@mercurynews.com)
Subject: Fact-Checking August New-Home Sales

I couldn`t suppress a chuckle at reading your loud headline in Saturday`s business secton, "Markets Riding a Hot Streak". Among the various "reasons" cited for Friday`s rally, especially guffaw-worthy was: "...An increase in new-home sales last month." On page 3 of the very same section, we have, "New-home sales: Pace is second-slowest on record", which states "The only time new home sales were slower was in May, when the sales pace was 282,000. That`s the worst pace on records dating back to 1963. July`s results had been the worst on record, but were adjusted upward." Do you fact-check this stuff or simply reprint it as issued by the Ministry of Economic Propaganda? Interestingly, despite its actually having the facts correct. the latter article was apparently of insufficiently relentless bullishness to warrant a front-page treatment.

[cheesehead]

Originally Posted by ewmayer

< snip > a letter (e-mail) I just sent to the editor of the local paper, the San Jose Mercury News, commenting on Saturday's business section.

Sock it to them!

(BTW, isn't that the paper that gets exclusive first-notice of new Mersenne primes?)

[ewmayer]

Originally Posted by cheesehead

Sock it to them!

(BTW, isn't that the paper that gets exclusive first-notice of new Mersenne primes?)

They didn't print it ... "these facts are not bullish enough, we must print some better-sounding replacements".

Dunno if the Merc ever had any special arrangement to break news of an M-prime ... I vaguely seem to recall there may have been such an arrangement once, but don't recall it being a regular deal. Perhaps George or Luke Welsh can refresh my memory.

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Obama not "Lying About Jobs", Obama "Widely Misunderstood About Jobs"

(If you saw Denninger`s "he lies" about this yesterday afternoon, it`s because I sent him (and Mish, and Barry) the Reuters link)

Obama says U.S. not in a jobless recovery: President Barack Obama said on Monday the United States must accelerate job growth, but he said the country was not experiencing a "jobless recovery" as it pulled out of a recession.

"We've seen eight months in a row of private sector job growth. We're actually seeing more job growth so far in this recovery than we did in the last recovery that we had back in 2001," Obama said during an interview on NBC television.

My Comment: Ah yes, a comparison with those heady days of massive job creation which were the “recovery” from the 2001 recession…talk about setting the bar low…

President Obama is correct - We`re not in a "jobless recovery", we`re in a "job loss recovery", since we are not creating enough jobs to absorb new entrants into the workforce, much less put a dent in the ranks of the 8 million folks who lost their jobs during the past 3 years.


Iceland refers former prime minister to court over bank crisis

Iceland refers former prime minister to court over bank crisis: Iceland's former prime minister has been referred to a special court, a development Tuesday that could make him the first world leader to be charged in connection with the global financial crisis.

Lawmakers voted 33-30 to refer charges against former prime minister Geir Haarde for allegedly failing to prevent Iceland's 2008 financial crash that toppled the government, brought protests and crippled the national currency.

The special court has never before been convened. The court handles cases in which the parliament, the Althingi, decides to act against ministers on their handling of duties.

Mr. Haarde, former prime minister and ex-leader of Independence Party, is no longer in parliament. He did not run in the 2009 elections.

Iceland, a volcanic island with a population of just 320,000, went from economic wunderkind to fiscal basket case almost overnight when the credit crunch took hold.

After dizzying economic growth that saw banks and companies in this tiny Nordic nation snap up assets around the world for a decade, the global financial crisis wreaked political and economic havoc in Iceland. Its banks collapsed within a week in October, 2008

My Comment: Icelanders not dicking around ... here in the U.S. we have yet to even indict a single bankster-crook, ratings-agency crook or gross-regulatory-negligence perpetrator ... there they are going straight for the (now toppled) top.

At the risk of harping, I must also once again point out that what happened in Iceland was not "economic growth" nearly so much as "risk and leverage explosion". It is important to call such things by terms reflecting their true nature... if one continually refers to X as "Y", one risks a kid of subliminal cognitive self-delusion which may prevent one from truly admitting the X-nature of the thing. Referring to the fiscal insanity in Iceland even in passing as "economic growth" makes it sound like here was a potential good thing which somehow went awry, when the whole scheme was rotten from the very beginning and at best guaranteed to hollow out Iceland`s productive economy by luring the citizenry into the fast-money casino of Ponzi finance.

Apple Gets Bitten by Mini-flash Crashes

Apple shares (AAPL) had a couple of "mini-flash-crashes today ... well-known that that stock is a favorite of the HFT bots, but to see such sudden moves in such a liquid issue should be worrisome to anyone holding it - after the huge run-up it's had one normally wants to protect one's profits by setting a stop-loss sell order, a sensible range would be in the 5-10% range ... but these moves seem specifically designed to take out those kinds of stops, while not being large enough to trigger the post-May-6th "circuit breakers" and get the trades nixed as a result. Live by the HFTs, die by the HFTs. And Wall Street wonders why retail investors continue to flee the casino.

[garo]

The Apple flash crash was because of a rumour that their COO Tim Cook - who ran the company while Jobs was sick - was leaving.

[Fusion_power]

Correct me if I am wrong, I thought Iceland's woes were primarily a result of using excessive leverage combined with overpaying for underperforming "assets".

DarJones

[ewmayer]

@garo: You mean "2 separate rumors about Cook departing, spaced roughly 3 hours apart"? I can see how such a rumor could cause someone to dump a wad of shares, but to do so "at market" is odd for a big shareholder (which apparently is what happened - this wasn't thousands of day-traders getting stopped out here, though that certainly may have been a side effect). Also, the suddenness and steepness of the plunges were apparently very reminiscent of the flash crash, in that AAPL literally went bidless for a time. For that to happen in an issue that liquid is very suspect. Perhaps it's not so much outright manipulation as simply a broken market structure ... time will tell.

@Fusion: The issue s to what extent key politicians and regulators in Iceland may have aided and abetted the financial insanity - much as here in the U.S., just that in Iceland the people still have some semblance of a functioning representative democracy, "balls" if you will.

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Foreclosure Fraud Update: Fake Court Summons!

As seen on multiple finance blogs ... my link is to Barry Ritholtz` version:

Florida’s Ongoing Foreclosures Nightmare

Attached is a court order quashing a foreclosure service process service (PDF here; embed here) because of a counterfeit court summons.

Apparently what’s happening is that private process servicer companies may not be serving people with summons, and are simply counterfeiting the documents so they can keep the fees without doing the work. That means that you could theoretically be foreclosed on without ever knowing there was even a foreclosure case against you.

This judge got wise to it.

Below are two more stories about the problem. The first is from the Florida Bar News, and the second is from prominent financial blogger Mike Konczal on the rampant violations of property rights.

Florida Bar News: Faulty filings hamper clearing foreclosures

Key quote: “If we had everyone defending their foreclosure, we’d never get through this.”

Florida’s Foreclosures Nightmare

Simply astonishing ...

My Comment: If this goes viral, it will be a very easy thing for every foreclosure-notice recipient to challenge every document presented by the alleged holder of the note ... perhaps more importantly, if it becomes apparent that this sort of stuff was as widespread as is starting to look plausible, judges are going to start to treat would-be-foreclosers with much more skepticism than has been the case to date. As Barry notes, that last quote is telling.

Here is a related Washington Post piece:

Lost in the system that took the house]Lost in the system that took the house

As more of these practices are coming to light, the entire foreclosure system is facing the threat of grinding to a halt. Connecticut, California and Colorado have frozen all foreclosures by one major lender, and other states are pondering whether to follow suit.

The vast majority of families facing foreclosure do not fight their lenders. But that may change as a growing number of homeowners are contending in lawsuits that the process appears so flawed that they have the right to challenge their cases, even as they admit to missing payments.

Economists say such a trend threatens to overwhelm an overburdened legal system struggling to handle the aftermath of the housing collapse, as well as delay a correction in home values that the real estate market desperately needs to return to normalcy.

Legal experts say many homeowners may have legitimate cases, and even lenders in some instances are withdrawing foreclosure documents for fear that they might not hold up if challenged.

The deep flaws in the foreclosure process came clear last week after Stephan, an employee of Ally Financial’s GMAC mortgage unit, admitted in a sworn deposition that he signed off on up to 10,000 foreclosure documents a month for five years without reviewing them thoroughly. That prompted Ally, which took a $17 billion federal bailout and is majority-owned by the government, to halt evictions in 23 states last week. Stephan also signed foreclosures for hundreds of other mortgage companies, including J.P. Morgan Chase.

A picture is emerging is of an industry – from loan officers in local offices in neighborhood strip malls to the financial titans of Wall Street – eager to purge bad mortgages from its books. To speed that process, documents and signatures were forged, notary witnesses were faked and those responsible for checking court filings never read the massive stacks that passed across their desks at a breakneck pace, attorneys and law enforcement officials say.

[garo]

Via Barry Ritholtz:

Top 10 Ideas for Goldman Sachs New Ad Campaign
10. Goldman Rapes, Pillages & Sachs
9. Government Bailout: $29 billion
SEC Settlement: $550 million
Doing God’s work? Priceless.
8. Making you forget about Bernie Madoff one CDO at a time
7. Let us do for you what we did for Greece.
6. Goldman Sachs: America’s Counterparty
5. Like we care what you think of us . . .
4. Goldman Sachs: There Are Some Things Money Can’t Buy. For Everything Else, Use JPMorgan.
3. Putting the zero in zero-sum game.
2. The Rothschilds were Pussies
And the number 1 new advertising slogan for the new Goldman Sachs ad campaign:
1. We put the douche in fiduciary.

[Fusion_power]

http://www.cbsnews.com/stories/2010/...n6918853.shtml

Federal regulators say a large trading firm's use of a computer sell order triggered the May 6 market plunge, which sent the Dow Jones industrial average dropping nearly 1,000 points in less than a half-hour.

A report issued Friday by the Securities and Exchange Commission and the Commodity Futures Trading Commission determined the so-called “flash crash” was caused when the trading firm executed a computerized selling program in an already stressed market.

That set off two waves of “liquidity drains”, when market players swiftly pull their money from the stock market.

The Dow Jones was down about 2.5 percent at 2:30 p.m. when the trader, which the report does not name, placed an enormous sell order on a futures index of the Standard & Poor's 500 stock index. The trade on the E-Mini S&P 500 was automated by a computer algorithm that was trying to hedge its risk from prices declines.

The trade triggered aggressive selling of the futures contracts and that sent the index down about 3 percent in four minutes.

Based on the above, I don't see where anything has really been done to prevent such future events. Welcome to the world of tomorrow where flashcrash is a new word.

DarJones