Thursday, May 06, 2010

Oops

CNBC:

In one of the most dizzying half-hours in stock market history, the Dow plunged nearly 1,000 points before paring those losses—all apparently due to a trader error.

According to multiple sources, a trader entered a "b" for billion instead of an "m" for million in a trade possibly involving Procter & Gamble, a component in the Dow...

Sources tell CNBC the erroneous trade may have been made at Citigroup...

The Nasdaq and New York Stock Exchange took the unusual step of declaring that they would cancel some trades that took place during the height of the selloff. Both markets said they will cancel all trades more than 60 percent above or below market that occurred between 2:40 p.m. and 3:00 p.m. New York time.

...Amid the sell-off, Procter & Gamble shares plummeted nearly 37 percent to $39.37 at 2:47 p.m. EDT

It reminds me of the scene from Tommy Boy where Chris Farley accidentally rips the door off David Spade's 'cherry' convertible.

Carefully positioning it back on its hinges, Spade returns and pulls the door open at which point Farley exclaims:

What'd you do?

Larwyn's Linx: An Army of Black Conservatives Are Running for Congress

Have a great link you'd like me to review? Drop me an email. You can also install a Larwyn's Linx blog widget.

Nation

An Army of Black Conservatives Running for Congress: GWP
News beneath the news: Hanson
Why Was Shahzad Given A Play-By-Play?: Ace

Radical Pro-Abortion Diane Wood at Top of SCOTUS List: APP
Change: MI school bans white kids from field trip: BlogProf
Franklin Graham: Obama 'giving Islam a pass': Newsmax

Economy

Awesome: Freddie Mac Needs Another Bailout: RWN
A Day in the Life of the Regulatory State: RWN
There's A Global Shortage Of U.S. Dollars: Insider

Climate & Energy

Bald Eagles Arrested For Eating Endangered Species: RWN
Ash cloud grounds more flights: Maktoob
90 Percent of EUrotard Carbon Market is Fraud: CBullitt

Media

Bury Newsweek ... The Sooner the Better...: AmPower
CBS 2 Chicago reporter tells Mark Kirk to lay off Broadway Bank: Marathon
Race and Resentment: Sowell

Profound Insights from Beltway Pundits: LegalIns
Can We All Agree That There’s Nothing More Nazi Than Saying ‘Show Me Your Papers’?: NiceDeb
Guns needed to stop Chicago murders: Times

World

Is Osama Bin Laden Enjoying a Safe Haven in Iran?: PJM
It has begun: Obama approves UNSC resolution demanding Israel give up its nukes: TAB
'¡Cuba Si! - Arizona No!' Says Mexican President Felipe Calderón: AT

Divinity Abuse: StyleWeekly
Global Citizenship and the Cosmopolitan: NAS
Ex-CIA lawyer: Gitmo IDs graver than Plame leak: Times

Obama Stands with Muslims as He Promised: AT
The 'anti-austerity' riots in Greece: Malkin
Is Michelle Obama a Birther?: AT

SciTech

FCC to claim some broadband regulatory power: NetWorld
Video: The surprisingly awesome “Star Wars lego trilogy in two minutes” clip: HotAir
Report: UC Davis ending Gmail pilot program: CNet

Cornucopia

Message to Major League Baseball: iOTW
I needa Bambulance: Bob & Tom (language warning)
Knee-deep in the Hooplalista: MOTUS

Image: Denninger.
Today's Larwyn's Linx sponsored by: PA-12: Calling All Tea Party People! Volunteers Needed in Pennsylvania


Wednesday, May 05, 2010

Moody's: Debt 'Contagion' Could Infect U.S. In as Little as 3 Years

They're calling it a 'contagion' in Europe: the fear that weaker governments are poised to default on their debt instruments. It started with Greece a few months ago as it became clear that the Mediterranean country would be unable to make its multi-billion Euro bond payments, which are due later this month. But the uncertainty around sovereign debt extends to all of the "PIIGS" -- Portugal, Italy, Ireland, Greece and Spain.

Today the panic continued to ripple through the European financial system as investors assessed the exposure of banks, insurers and other private entities to sovereign default.

The euro fell to a 14-month low on the dollar and one-year low on the yen, raising concerns over the currency’s reserve status... The pressure on the euro came as investors continued to fret over the fiscal position of Greece and other countries on the periphery of the eurozone and as protests in Athens against austerity measures designed to rein in the country’s deficit turned violent.

Yield on 10-year Greek debt reached a new high, and the price of insurance on Portuguese and Spanish debts also set records. Ratings agency Moody’s warned Lisbon’s credit rating could be cut further.

The 'contagion' is reflected in the increasing prices for credit default swaps (CDS), which serve as 'insurance policies' against defaults. If you want to buy 'insurance' that pays off if Greece defaults on its bond payments, you'll pay more today for CDS than you paid yesterday.

Portugal, Ireland, Spain and Italy -- in that order -- are the next highest default risks if CDS prices are to be believed.

And what of the U.S.? Could the 'contagion' spread to our shores?

According to the rating agency Moody's, our own debt shock may hit as soon as 2013.

...In the wake of the financial crisis and recession, Moody's Investors Service has brought new transparency to its sovereign ratings analysis — so much so that 2018 lights up as the year the U.S. could be in line for a downgrade if Congressional Budget Office projections hold.

The key data point in Moody's view is the size of federal interest payments on the public debt as a percentage of tax revenue. For the U.S., debt service of 18%-20% of federal revenue is the outer limit of AAA-territory, Moody's managing director Pierre Cailleteau confirmed in an e-mail.

Under the Obama budget, interest would top 18% of revenue in 2018 and 20% in 2020, CBO projects... But under more adverse scenarios than the CBO considered, including higher interest rates, Moody's projects that debt service could hit 22.4% of revenue by 2013.

...a financial market shock from higher interest rates could precede the threat of a downgrade. In other words, investors might be less forgiving of U.S. fiscal policy than Moody's.

For instance, markets began pricing in a Greek default as a real possibility well before Standard & Poor's downgraded that nation's debt rating to junk last week.

...The [CBO's] outlook assumes discretionary spending restraint, broad-based tax hikes and well-behaved interest rates. Nevertheless, it sees debt reaching 90% of GDP in 2020, up from 53% at the end of 2009.

Some observers describe the CBO's projections as 'wildly optimistic'.

Just as the housing meltdown caught many 'experts' unaware, so too could a sovereign debt crisis. As investors demand higher premiums (interest payments) to offset higher risks, the U.S. would suffer catastrophic financial damage in the form of unacceptably high interest payments on existing debt.

Put simply, President Obama and Democrats in Congress have set the country on a course for fiscal disaster. They've spent trillions on bogus "Stimulus", "Omnibus Spending" and 99-week Unemployment programs. The result is that there's no breathing room in the current federal budget. A single unexpected event -- a financial meltdown in Europe, a massive terrorist attack, a huge natural disaster -- any one of a number of scenarios could lead to a financial calamity.

Vote accordingly in November.


Related: Photos: War on the streets of Greece as public sector unions and Communists rebel against austerity measures.

What are the odds? Obama biggest recipient of BP cash in last 20 years; U.S. exempted BP's Deepwater site from environmental oversight in '09

Obama biggest recipient of BP cash


Politico, 5 May 2010

BP and its employees have given more than $3.5 million to federal candidates over the past 20 years, with the largest chunk of their money going to Obama, according to the Center for Responsive Politics... During his time in the Senate and while running for president, Obama received a total of $77,051 from the oil giant and is the top recipient of BP PAC and individual money over the past 20 years, according to financial disclosure records.

* * * * * * * * *

U.S. exempted BP's Gulf of Mexico drilling from environmental impact study


Washington Post, 5 May 2010

The Interior Department exempted BP's calamitous Gulf of Mexico drilling operation from a detailed environmental impact analysis last year, according to government documents, after three reviews of the area concluded that a massive oil spill was unlikely...

...[The] Minerals Management Service (MMS) [gave] BP's lease at Deepwater Horizon a "categorical exclusion" from the National Environmental Policy Act (NEPA) on April 6, 2009...

Given the squeaky clean record of our beloved Democrat leaders, I'm certain these stories represent mere coincidences.


Hat tip: Memeorandum.

Photos: War on the streets of Greece as public sector unions and Communists rebel against austerity measures

It was chaos on the streets of Greece today as anti-austerity protests turned violent around the country. The debt-ridden country had gone, hat in hand, to the European Union (EU) and the International Monetary Fund (IMF) with an implicit threat: bail us out, or the whole EU could collapse.

The EU and IMF were forced to come up with a plan to save the Greek financial system -- primarily because European banks owe so much Greek debt. But they also laid down the law to the Greek government: cut public sector employment to the bone, get your financial house in order, otherwise -- no deal. And, as predicted, the public sector unions and other hard-core leftists aren't playing ball with the terms of the proposed bailout. The country was paralyzed with nationwide strikes today and three employees were killed when a bank was set afire.


Lest you think this sort of thing could never happen here, consider the bankrupt city of Oakland, California: the bluest of cities in the bluest of states. A real Democrat and public sector union -- but I repeat myself -- stronghold.

The party is over for Oakland even whether its city council is willing to admit it or not. As always, union contracts and pension benefits drove the city into the ground.

"...Oakland voters will likely be asked in November to approve higher taxes to halve a $42 million deficit, but even if they agree, the city will face an even deeper crisis within months... The biggest portion of that budget shortfall is a debt payment of $43.9 million due July 1, 2011, to the old Police and Fire Retirement System. The payment would be more than 10 percent of the roughly $400 million city budget."

The main problem facing the city is their absurdly generous pension system called PFERS. City Administrator Dan Lindheim says "PFERS is locked in stone. It's impossible to change."

That is one hell of an attitude to take when the city you are running is bankrupt.

...Unfortunately for Oakland, its teachers do not understand simple math. The city is broke, bankrupt, yet Oakland teachers vote to OK a strike, insisting on a wage hike.

"Oakland teachers are ready to strike again if necessary if talks sour at the bargaining table, union officials said Tuesday... On the heels of last week's one-day walkout, the teachers voted 565-184 late Monday to give union leaders the option to 'take further actions to secure a fair contract, up to and including a strike' ...Union leaders have said a raise must be part of any deal... Administrators have said they can't afford it, given an $85 million budget shortfall for the next school year."

The vote authorizing a strike was 565-184. This tells me that a minimum of 565 Oakland teachers are unfit to teach because they do not comprehend simple math. They should be fired.

When ever you think the bloated public sector union bosses have hit bottom, they find a new trapdoor to drop into and keep digging. So, yes, unfortunately Greece could happen here if we don't restore Constitutionality to our system of government -- and soon.


Update: The 'anti-austerity' riots in Greece.


Larwyn's Linx: Democrats' Worst Fear Is About To Come True

Have a great link you'd like me to review? Drop me an email. You can also install a Larwyn's Linx blog widget.

Nation

Democrats' Worst Fear Is About To Come True: LegalIns
The jihadists’ deadly path to citizenship: Malkin
'Once again an attempted attack has been... failed': Pundette

Christie to NJ Supreme Court Justice: You're Fired: RWN
Civility: Obama using the word 'teabaggers' now: Hot Air
Schumer Gets a Challenger: RWN

Economy

Fixing What Aint Broke, Hiding What Is: AT
Alarm Sounds on Administration Plan to Seize 401(k)s: HE
Punish GM's False Advertising: Malkin

California = the Venezuela of North America!: Kesler
Teachers’ Unions Exposed in The Cartel: PJM
'Truther' Pelosi Says Bush Knew Market Would Crash, Kept It Secret: FoxNation

Climate & Energy

Oops: CO2 unrelated to warming - Scientist: Telegraph
Germany wants 1 million coal-powered cars by 2010: BlogProf

Media

GOP Needs to Radically Change Tactics with Minorities: Hawkins
Liberals are from Mars, Conservatives are from Earth: AT
Interview with Dennis Miller: Newsmax

World

How Obama enables Iran's defiance: Bayefsky
Peace (Not) in Our Time: AT
Are you feeling lucky?: Dewey

German Bank Exposure To Greece Is Nothing When Compared To Spain And Italy: Insider
Merkel’s Coalition Calls for EU ‘Orderly’ Defaults: Mish
Merkel urges German lawmakers to pass Greek aid package to secure 'future of Europe' : AP

SciTech

Hypersonic Cruise Missile: America's New Global Strike Weapon: PopMech
Confirmed: ObamaCare Will Kill Medical Technology: RWN
Every Twitterer Can Be a Pundit Now: TNW

Cornucopia

Electron Boy to the rescue: Hot Air
Science for Dummies: MOTUS
Someday, Things Will Change: C&S

Image: Conservatoons
Today's Larwyn's Linx sponsored by: The Virtuous Republic.


Tuesday, May 04, 2010

Exclusive Spycam Shot: Janet Napolitano Takes Command in the Secret DHS Bunker After Attempted Times Square Bombing

Enterprising Cub Reporter Biff Spackle scoops the Enquirer again with this snapshot of DHS Chief Janet Napolitano, which was reportedly taken in the DHS Command Bunker after the attempted bombing in Times Square.

"Remain calm! All is well! All is well!!!"

In all seriousness, Napolitano offered this learned reaction to the attack: "Once again an attempted attack has been... failed."


Ruh Roh: ICAP Says Deleveraging Process Still In "Early Stages... [and] It Will All End In Tears"

Nicolas Lenoir of ICAP Futures LLC offers a sobering take on our current (global) economic situation.

Private vs. Public: Two Different Stories


• Subtracting government spending from GDP, we find that the private sector GDP is barely flat [year-over-year]
• Around the world governments have taken over for the private sector, China’s stimulus package for 2008 was 14% of GDP
• The US Federal Reserve’s balance sheet expanded by $1.4Tr to compensate for credit contraction
• But consumer credit outstanding is still shrinking and the deleveraging process is in its early stages
• The Federal Reserve’s balance sheet is expected to shrink slowly as asset purchase programs have expired

Restart Private Credit?


• A strong February reading was canceled out by March, April will be crucial to tell if the consumer is back spending money she/he does not have
• Small businesses are still reporting difficulty accessing credit
• Lending standards have been tightened and it is preferable to stay away from what caused our downfall in the first place, GSEs now represent 90% of the MBS market [Ed: and are not addressed in the so-called 'comprehensive financial reform' bill introduced by lame duck and crisis instigator Chris Dodd]
Total US debt as a percentage of GDP is skyrocketing
• The last 30 years of growth have been fueled by an expansion from 160% to 380% of the debt to GDP ratio: we simply cannot keep carrying on
• The savings rate after briefly flirting with 7% is now back to 3% and headed lower; it is dramatic

Expand Public Spending?


• Since 1970 federal spending has increased 7X as much as the median income
• Since 1980 the 5thpercentile for household income has grown at 3 times the annual pace of the average household income
• Total Public Debt Outstanding grew by $4Tr since the end of 2006
• Many worry that excessive issuance will lead to failed auctions resulting in a dangerous bear market for US Treasuries
• Japan went down the path before us; 20 years later all they have is a 200% public debt to GDP ratio to show for it along with a soon-to-be negative savings rate

Between a Rock and a Hard Place


• Consumer credit has not restarted meaningfully yet, and public debt is reaching worrying levels so the government cannot keep acting as the engine of growth much longer
• Q2 numbers will impress because of inventory rebuilding but once that momentum abates the scrutiny on federal spending as the only engine of growth will intensify
• Two possible scenarios:
-- Private sector lending rises again holding growth between 2.5% and 3.5% until the inventory cycle peaks, then closer to 2% once the government progressively pulls out stimulus and the cycle peaks
-- The federal government is forced to step up again as private sector growth falters again
• Two scenarios for the economy yet three scenarios for the bond market:
-- The economy grows enough for the federal government to pull back spending and the Federal Reserve to normalize rates in 2011 avoiding a financing crisis: 10% probability
-- The economy slows and government spending keeps expanding to maintain growth in a slump that carries on for several years: 70% probability
-- The US faces a refinancing crisis after other countries default due to the same problem: 20% probability

The Deflationary Case


• Demographics are going to play a fundamental role in the next 20 years and it starts now
• Using a distribution of the average salary as a function of age, the aging of the baby boom generation has been a major boost to GDP since the 70s contributing as much as 2% and 1.5% on average
• For the next 30 years demographics will only contribute 0.65% on average
• The 65-year old or older population is going to grow between 1.7% and 2.5% over the next 30 years against 1.15% on average over the last 20 years

We Are Not Alone


• Aging in China will be exponentially worse due to the one child policy
• Also add in the fact that there are 58% men when the “natural” observed population split is 48% men and 52% women
• Currently the percentage of the Chinese population which is outside of the workforce is 43%. Starting in 2012 this number is going to move up to reach 60% in 2060
• It will reach 50% before 2020
• In the US this number is currently 35% according to the official BLS releases; it has moved up from 33% in the last 10 years

Lenoir concludes with this cheery missive:

"It will all end in tears with skyrocketing interest rates but until then we are stuck in a low yield environment that can last for some time if we believe modern Japanese history."

Vote accordingly in November.


Headlines I wouldn't be the least bit surprised to read tomorrow morning

U.S. Department of Competence Rates Administration Performance on Oil Spill an 'A+'

DOJ Officials Resign to Defend Times Square Bomber

U.S. Department of Competence Rates Border Security an 'A+'

Greek Unions Deliver Their Final Answer: Buy Me More Gyros, Euro-b***hes

Bloomberg: Suspect was Tea Party Activist, Suffering from Salt Overdose, Who Wandered into Pakistan Looking for Private Doctor

U.S. Department of Competence Rates DHS Head Janet Napolitano's Handling of Counterterrorism an 'A+'



Image Idea: American Digest.

Tomorrow's IBD Confirms: By a 2-to-1 Margin Americans Favor Arizona's Enforcement of Federal Immigration Law

Tomorrow's Investors Business Daily will confirm what other polls had found: Americans overwhelmingly support Arizona's enforcement of existing federal immigration law. By a 2-to-1 margin (60% to 30%, with 10% undecided), Americans believe that states have every right to defend citizens from an unchecked invasion of illegal immigrants.

Last time I checked, protecting the border was a constitutional duty of the federal government, which it appears to have abdicated.

The law, signed by GOP Gov. Jan Brewer on April 23, lets state and local law enforcement scrutinize a person's citizenship after a "lawful contact" (arrest or other action).

Similar laws are being proposed for Pennsylvania, Missouri, Texas, Maryland and Oklahoma, though they are in preliminary stages.

The poll also found hardened attitudes toward illegal immigrants. Now 49% agree that illegals do jobs that Americans will not do vs. 54% in 2006. Just 33% believe illegals contribute significantly to the economy vs. 44% in 2006.

Eighty percent believe employers who knowingly hire illegals should be held accountable, 66% say securing the borders trumps expanding any guest-worker program and 71% think that the borders must be secure before discussing any amnesty for existing illegal immigrants.

"If the public actually did believe the borders were secure ... the public might actually go for an amnesty," [Center for Immigration Studies head Mark] Krikorian said. But the public doesn't buy border enforcement claims, he adds.

Janet Incompetano could not be reached for comment.