XIAM007 - Making Unique Observations in a Very Cluttered World

Saturday, 12 June 2010

Warren Buffett Predicts the Next Crisis - we're going to see a lot of states and municipalities go broke -

With the stock market finally bouncing back from its double-digit percentage drop, investors want to know: Was that the long anticipated "technical correction"? Is it over, and are we now headed back into a sustained bull market?

According to two of the sharpest minds in investing -- Warren Buffett and George Soros -- the answer is no, the bull is not back. To the contrary, "Financial Crisis, Part II" may be coming soon to a theater near you.

Something wicked this way comes
Testifying before Congress last week, Buffett warned that we could be standing on the brink of the next financial crisis. A brink which begins, as it turns out, right at your city limits.

Congress had asked Mr. Buffett to testify about the role that credit raters Moody's (NYSE:MCO) and Standard & Poor's played in the last financial crisis. But in the course of doing so, lawmakers couldn't resist the urge to pick Buffett's brain. And so it was that Financial Crisis Inquiry Commission chairman Phil Angelides asked: Where's the next big risk to our economy? Buffett's reply:

If you are looking now at something where you could look back later on and say, "These ratings were crazy," [municipal bonds] would be the area. I don't think [Moody's or S&P] or I can come up with anything terribly insightful about the question of the state and municipal finance five or 10 years from now except for the fact there will be a terrible problem and then the question becomes: will the federal government bail them out?

Buffett's backing up his views with actions. In 2009, Berkshire only insured $40 million in new muni bond issues versus a whopping $595 million than in 2008. So if you were wondering why you're hearing how so much state and municipal debt has been "sold short" by way of credit default swaps in recent months, then you have an answer: Investors think munis are going down.

Roadmap to the next bailout
How did the states and municipalities get in their current fix? Take your pick(s): Runaway entitlement spending. Massive unfunded liabilities in public pensions. In short: Debt loads that more resemble a mountain than a molehill. Unless something happens quickly to slow and reverse the tide, we're going to see a lot of states and municipalities go broke. In fact, up in Rhode Island, one town took the unusual step of having a receiver appointed, as an alternative to bankruptcy in a state that doesn't allow towns to file for it.

Of course, the governments that issue muni bonds will tell you this is all just bunk. They'll cite historical statistics showing that municipalities hardly ever default, and argue that their bonds should enjoy high ratings from the raters to reflect that fact.

But here's the thing -- quoting now from Buffett's letter to shareholders in Berkshire's 2008 annual report: "[T]hat record [of low default rates] largely reflects the experience of entities that issued uninsured bonds. Insurance of tax-exempt bonds didn't exist before 1971, and even after that most bonds remained uninsured." Indeed, as recently as 1980, only 3% of new bond issues were insured; by 2007, that number had climbed to 60%. Today, more than half the estimated $2.8 trillion worth of municipal bonds floating around out there carry some form of insurance.

As for who's doing the insuring, the biggest player in the municipal bond insurance industry today is Assured Guaranty, but there are several others. Berkshire Hathaway (NYSE:BRK-B), of course. But also, CIFG Assurance, Syncora Guarantee, and specialized subsidiaries of Ambac Financial (NYSE: ABK), PMI Group (NYSE: PMI), and MBIA (NYSE:MBI) all play a role here.

Playing with fire
But if you are considering playing in this market, beware: You could get burned. You see, it used to be that default by a state or municipality would mean massive losses for the "citizens and businesses" who had bought those bonds -- "citizens and businesses" who often were the very taxpayers who supported the local community.

When a government's default threatened to ruin its own citizenry, that made for a strong disincentive to do so. But the same doesn't hold true when there's a far-away insurer with (presumed) deep pockets backing the debt. Sure, California might balk at the idea of stiffing its own citizens. But default and let MBIA and Ambac pick up the tab? Why not?

As Buffett explains, the introduction of insurers backstopping government spending excess has changed the game. The "belt-tightening, tax increases, [and] labor concessions" he cites as saving NYC from bankruptcy in 1975, for example, are no longer needed. Today, any city or any state that's forced into bankruptcy, and that's already paid good money to have its debt insured, is going to want payback for their bondholders. The insurers will be forced to, in Buffett's words, "share in the required sacrifices."

Don't sacrifice yourself on the altar of municipal excess
According to Buffett, the cost to repair municipal balance sheets today is "simply staggering." George Soros agrees. Discussing the related issue of massive short-selling of collateral default swaps back in April, Soros warned that: "Going short on bonds by buying a CDS contract carries ... almost unlimited profit potential."

That's great news for the hedge funds that invest in such things. It's pretty good news, too, I suspect, for banks like JPMorgan Chase (NYSE: JPM) and Citigroup (NYSE: C), that have been making a market in selling municipal CDS lately. But for investors in the debt insurers themselves and the taxpayers who may be called upon once again to bail 'em out, it's nothing short of The Next Financial Crisis. And it's coming soon to a town near you.

Japan's New PM Warns Country At "Risk Of Collapse - our public finances have become the worst of any developed country" -

A week ago Hungary had the unfortunate mishap of telling the truth when it compared itself to Greece, resulting in a massive selloff of the Forint and leading to fresh lows for the euro. Today, it is Japan which is using the very same strategy in an attempt to devalue its own currency. So far it's working. The BBC reports that Naoto Kan has been a little truthier than the G-20 plenary sessions generally allow. We now look for the PM's reign of truth to be even shorter than that of his thousands of predecessors during the past couple of years: "Naoto Kan, in his first major speech since taking over, said Japan needed a financial restructuring to avert a Greece-style crisis."Our country's outstanding public debt is huge... our public finances have become the worst of any developed country," he said." Obviously, none of this is news. However, the market certainly does not appreciate when it is told that what it sees day after day in the non-mainstream media is actually the truth and nothing but the truth. What next - Tim Geithner coming out to say that a downgrade of the US is actually long overdue?

Friday, 11 June 2010

‘Fail whale' pops up as World Cup fans overwhelm Twitter - 65 million tweets a day from 190 million users -

Despite assurances that Twitter would be ready to handle the hype of the World Cup, users were seeing a lot of the fail whale on Friday.

The fail whale is a smiling cartoon whale that pops up whenever Twitter is overwhelmed with traffic.

Earlier in the week, a spokeswoman told The Canadian Press that Twitter should be able to handle the floods of traffic the World Cup was sure to bring.

Robin Sloan said Twitter is used to high levels of traffic, although she conceded the World Cup will probably be the biggest event the site has dealt with to date.

Twitter typically gets 65 million tweets a day from its more than 190 million users.

"The World Cup is probably the biggest organized human event on the planet, with more people paying attention to the same thing at the same time — for a whole month!" she said.

"We're checking and double-checking our capacity — although keep in mind that at this point, we're already handling more than 65 million tweets per day, so while the World Cup is indeed going to be huge, we're used to huge."

Tuesday, 8 June 2010

Comet McNaught with green atmosphere is swinging through the inner solar system, and it is brightening rapidly -

Michael Jäger of Stixendorf, Austria, took the picture on June 6th using an 8-inch telescope. The comet's green atmosphere is larger than the planet Jupiter, while the long willowy ion tail stretches more than a million kilometers through space. These dimensions make the comet a fine target for backyard telescopes.

Comet McNaught can be found low in the northeastern sky before dawn gliding through the constellation Perseus. It is brightening as it approaches Earth for a 1.13 AU close encounter on June 15th and 16th. Currently, the comet is at the threshold of naked eye visibility (5th to 6th magnitude) and could become as bright as the stars of the Big Dipper (2nd magnitude) before the end of the month. Because this is the comet's first visit to the inner solar system, predictions of future brightness are necessarily uncertain; amateur astronomers should be alert for the unexpected.

Monday, 7 June 2010

BP buys Google, Yahoo search words to keep people away from real news on Gulf oil spill disaster -

In their most tenacious effort to control the ‘spin’ on the worst oil spill disaster in the history, BP has purchased top internet search engine words so they can re-direct people away from real news on the Deepwater Horizon catastrophe.

BP spokesman Toby Odone confirmed to ABC News that the oil giant had in fact bought internet search terms. So now when someone searches the words ‘oil spill’, on the internet, the top link will re-direct them to BP’s official company website.

This would not be the first time that BP has tried to control information to protect the company’s public image.

Shortly after the Deepwater Horizon exploded on April 20, 2010, BP executives quickly underestimated the size of the disastrous oil spill. Some suggest they did it to avoid costly EPA per-gallon spill fines. The less oil spilled, the lower the fines.

A month into the spill, the public learned through independent science, that the spill was in fact a million gallon a day gusher.BP got caught in their own lie when the used a syphon pipe in one of the broken riser pipes and proudly proclaimed that they were capturing 5,000 barrels of oil a day. With the oil obviously still gushing, they had to up their spill rate to explain the reported discrepancy in their earlier estimates.

As the dead bodies of birds, turtles and dolphins began showing up on land, BP used a private security company as their ‘oil spill police’ to try to keep photographers and reporters away from the true death toll from their spill. Tides of black goo lapping a shore lined in corpses did not portray the company image Tony Hayward and his oil rich executives wanted.

BP can spend millions on advertising campaigns, and they can try to misdirect people on the internet. But no matter how hard BP tries or how much money they spend on public relations, they will never be able to hide the apocalypse unfolding in the Gulf of Mexico. You just can’t buy or smile your way out of a multi-billion gallon oil spill disaster.

The world is watching the Gulf of Mexico from airplanes, boats and satellite images. Sending people to the BP company website when they click on the words ‘oil spill’ is not going to erase the horrors of the Deepwater Horizon disaster, nor will the trickery of British Petroleum.

Read more - http://www.examiner.com/x-33986-Political-Spin-Examiner~y2010m6d6-BP-buys-Google-Yahoo-search-engine-words-to-keep-people-away-from-real-news-on-Gulf-oil-spill-disas

Sunday, 6 June 2010

Great video of How The Russians Stop Oil/Gas Leaks - Nuke it! -

Saturday, 5 June 2010

Adobe reports 'critical' flaw in Flash, Acrobat - says could let attackers take control of people's computers -

Adobe has issued a security advisory about a "critical" vulnerability in its Flash Player and Adobe Reader and Acrobat products that it says could let attackers take control of people's computers.

Affected software includes:The company said late Friday that there had been reports of the hole actually being exploited and that an official patch was not yet available.

Adobe Flash Player 10.0.45.2, 9.0.262, and earlier 10.0.x and 9.0.x versions for Windows, Macintosh, Linux, and Solaris
Adobe Reader and Acrobat 9.3.2 and earlier 9.x versions for Windows, Macintosh, and UNIX

The company said the Flash Player 10.1 Release Candidate does not seem to be vulnerable and that Adobe Reader and Acrobat 8.x are confirmed not vulnerable.

Adobe didn't say when an official fix would be released, but according to the company, computer users can mitigate the Flash issue by downloading the release candidate mentioned above. The Acrobat and Reader issue can be addressed by "deleting, renaming, or removing access to the authplay.dll file" that ships with those products, Adobe said. This will, however, cause a nonexploitable crash or error message if a user opens a PDF file that contains SWF content. The .dll file is typically located at C:\Program Files\Adobe\Reader 9.0\Reader\authplay.dll for Adobe Reader or C:\Program Files\Adobe\Acrobat 9.0\Acrobat\authplay.dll for Acrobat, Adobe said.

The complete security advisory is available here.

Thursday, 3 June 2010

50 Statistics About The U.S. Economy That Are Almost Too Crazy To Believe - the end for the greatest economic machine -

Most Americans know that the U.S. economy is in bad shape, but what most Americans don't know is how truly desperate the financial situation of the United States really is. The truth is that what we are experiencing is not simply a "downturn" or a "recession". What we are witnessing is the beginning of the end for the greatest economic machine that the world has ever seen. Our greed and our debt are literally eating our economy alive. Total government, corporate and personal debt has now reached 360 percent of GDP, which is far higher than it ever reached during the Great Depression era. We have nearly totally dismantled our once colossal manufacturing base, we have shipped millions upon millions of middle class jobs overseas, we have lived far beyond our means for decades and we have created the biggest debt bubble in the history of the world. A great day of financial reckoning is fast approaching, and the vast majority of Americans are totally oblivious.
But the truth is that you cannot defy the financial laws of the universe forever. What goes up must come down. The borrower is the servant of the lender. Cutting corners always catches up with you in the end.
Sometimes it takes cold, hard numbers for many of us to fully realize the situation that we are facing.
So, the following are 50 very revealing statistics about the U.S. economy that are almost too crazy to believe....
#50) In 2010 the U.S. government is projected to issue almost as much new debt as the rest of the governments of the world combined.
#49) It is being projected that the U.S. government will have a budget deficit of approximately 1.6 trillion dollars in 2010.
#48) If you went out and spent one dollar every single second, it would take you more than 31,000 years to spend a trillion dollars.
#47) In fact, if you spent one million dollars every single day since the birth of Christ, you still would not have spent one trillion dollars by now.
#46) Total U.S. government debt is now up to 90 percent of gross domestic product.
#45) Total credit market debt in the United States, including government, corporate and personal debt, has reached 360 percent of GDP.
#44) U.S. corporate income tax receipts were down 55% (to $138 billion) for the year ending September 30th, 2009.
#43) There are now 8 counties in the state of California that have unemployment ratesof over 20 percent.
#42) In the area around Sacramento, California there is one closed business for every six that are still open.
#41) In February, there were 5.5 unemployed Americans for every job opening.
#40) According to a Pew Research Center study, approximately 37% of all Americans between the ages of 18 and 29 have either been unemployed or underemployed at some point during the recession.
#39) More than 40% of those employed in the United States are now working in low-wage service jobs.
#38) According to one new survey, 24% of American workers say that they have postponed their planned retirement age in the past year.
#37) Over 1.4 million Americans filed for personal bankruptcy in 2009, which represented a 32 percent increase over 2008. Not only that, more Americans filed for bankruptcy in March 2010 than during any month since U.S. bankruptcy law was tightened in October 2005.
#36) Mortgage purchase applications in the United States are down nearly 40 percentfrom a month ago to their lowest level since April of 1997.
#35) RealtyTrac has announced that foreclosure filings in the U.S. established an all time record for the second consecutive year in 2009.
#34) According to RealtyTrac, foreclosure filings were reported on 367,056 properties in March 2010, an increase of nearly 19 percent from February, an increase of nearly 8 percent from March 2009 and the highest monthly total since RealtyTrac began issuing its report in January 2005.
#33) In Pinellas and Pasco counties, which include St. Petersburg, Florida and the suburbs to the north, there are 34,000 open foreclosure cases. Ten years ago, there were only about 4,000.
#32) In California's Central Valley, 1 out of every 16 homes is in some phase of foreclosure.
#31) The Mortgage Bankers Association recently announced that more than 10 percent of all U.S. homeowners with a mortgage had missed at least one payment during the January to March time period. That was a record high and up from 9.1 percent a year ago.
#30) U.S. banks repossessed nearly 258,000 homes nationwide in the first quarter of 2010, a 35 percent jump from the first quarter of 2009.
#29) For the first time in U.S. history, banks own a greater share of residential housing net worth in the United States than all individual Americans put together.
#28) More than 24% of all homes with mortgages in the United States were underwater as of the end of 2009.
#27) U.S. commercial property values are down approximately 40 percent since 2007 and currently 18 percent of all office space in the United States is sitting vacant.
#26) Defaults on apartment building mortgages held by U.S. banks climbed to a record 4.6 percent in the first quarter of 2010. That was almost twice the level of a year earlier.
#25) In 2009, U.S. banks posted their sharpest decline in private lending since 1942.
#24) New York state has delayed paying bills totalling $2.5 billion as a short-term way of staying solvent but officials are warning that its cash crunch could soon get even worse.
#23) To make up for a projected 2010 budget shortfall of $280 million, Detroit issued $250 million of 20-year municipal notes in March. The bond issuance followed on the heels of a warning from Detroit officials that if its financial state didn't improve, it could be forced to declare bankruptcy.
#22) The National League of Cities says that municipal governments will probably come up between $56 billion and $83 billion short between now and 2012.
#21) Half a dozen cash-poor U.S. states have announced that they are delaying their tax refund checks.
#20) Two university professors recently calculated that the combined unfunded pension liability for all 50 U.S. states is 3.2 trillion dollars.
#19) According to EconomicPolicyJournal.com, 32 U.S. states have already run out of funds to make unemployment benefit payments and so the federal government has been supplying these states with funds so that they can make their payments to the unemployed.
#18) This most recession has erased 8 million private sector jobs in the United States.
#17) Paychecks from private business shrank to their smallest share of personal income in U.S. history during the first quarter of 2010.
#16) U.S. government-provided benefits (including Social Security, unemployment insurance, food stamps and other programs) rose to a record high during the first three months of 2010.
#15) 39.68 million Americans are now on food stamps, which represents a new all-time record. But things look like they are going to get even worse. The U.S. Department of Agriculture is forecasting that enrollment in the food stamp program will exceed 43 million Americans in 2011.
#14) Phoenix, Arizona features an astounding annual car theft rate of 57,000 vehicles and has become the new "Car Theft Capital of the World".
#13) U.S. law enforcement authorities claim that there are now over 1 million members of criminal gangs inside the country. These 1 million gang members are responsible for up to 80% of the crimes committed in the United States each year.
#12) The U.S. health care system was already facing a shortage of approximately 150,000 doctors in the next decade or so, but thanks to the health care "reform" bill passed by Congress, that number could swell by several hundred thousand more.
#11) According to an analysis by the Congressional Joint Committee on Taxation the health care "reform" bill will generate $409.2 billion in additional taxes on the American people by 2019.
#10) The Dow Jones Industrial Average just experienced the worst May it has seen since 1940.
#9) In 1950, the ratio of the average executive's paycheck to the average worker's paycheck was about 30 to 1. Since the year 2000, that ratio has exploded to between 300 to 500 to one.
#8) Approximately 40% of all retail spending currently comes from the 20% of American households that have the highest incomes.
#7) According to economists Thomas Piketty and Emmanuel Saez, two-thirds of income increases in the U.S. between 2002 and 2007 went to the wealthiest 1% of all Americans.
#6) The bottom 40 percent of income earners in the United States now collectively own less than 1 percent of the nation’s wealth.
#5) If you only make the minimum payment each and every time, a $6,000 credit card bill can end up costing you over $30,000 (depending on the interest rate).
#4) According to a new report based on U.S. Census Bureau data, only 26 percent of American teens between the ages of 16 and 19 had jobs in late 2009 which represents a record low since statistics began to be kept back in 1948.
#3) According to a National Foundation for Credit Counseling survey, only 58% of those in "Generation Y" pay their monthly bills on time.
#2) During the first quarter of 2010, the total number of loans that are at least three months past due in the United States increased for the 16th consecutive quarter.
#1) According to the Tax Foundation’s Microsimulation Model, to erase the 2010 U.S. budget deficit, the U.S. Congress would have to multiply each tax rate by 2.4. Thus, the 10 percent rate would be 24 percent, the 15 percent rate would be 36 percent, and the 35 percent rate would have to be 85 percent.

Read more - http://www.blacklistednews.com/news-9060-0-13-13--.html