ragerunner

In the past I have touched on the derivatives markets and how MASSIVE and unregulated it is. I also believe that a lot of the effort going on to save banks and keep countries from defaulting is really about keeping the deriviatives market from coming undone. Because, if it ever does come undone all the money on the planet will not be able to overcome these leveraged debts. What is a Derivative? http://en.wikipedia.org/wiki/Derivative_(finance) As you can see from this article, BoA has about $1.04 trillion in deposits (and I am sure they have a nice chuck of other assets). But I am also sure it doesn't come close to covering their $75 trillion in derivatives. So what has BoA done. They have moved a noticable amount of derivatives onto their 'insured' subsidiary. This move would put the FDIC on the hook for some of the loses if the subsidiary or BoA would go under. In other words they are moving leverage debt onto the taxpayer. BofA Said to Split Regulators Over Moving Merrill Derivatives to Bank Unit "Bank of America Corp. (BAC), hit by a credit downgrade last month, has moved derivatives from its Merrill Lynch unit to a subsidiary flush with insured deposits, according to people with direct knowledge of the situation." "The Federal Reserve and Federal Deposit Insurance Corp. disagree over the transfers, which are being requested by counterparties, said the people, who asked to remain anonymous because they weren’t authorized to speak publicly. The Fed has signaled that it favors moving the derivatives to give relief to the bank holding company, while the FDIC, which would have to pay off depositors in the event of a bank failure, is objecting, said the people. The bank doesn’t believe regulatory approval is needed, said people with knowledge of its position." "Bank of America, which got a $45 billion bailout during the financial crisis, had $1.04 trillion in deposits as of midyear, ranking it second among U.S. firms." “The concern is that there is always an enormous temptation to dump the losers on the insured institution,” said William Black, professor of economics and law at the University of Missouri-Kansas City and a former bank regulator. “We should have fairly tight restrictions on that.” "Bank of America’s holding company -- the parent of both the retail bank and the Merrill Lynch securities unit -- held almost $75 trillion of derivatives at the end of June, according to data compiled by the OCC." http://www.bloomberg.com/news/2011-10-18/bofa-said-to-split-regulators-over-moving-merrill-derivatives-to-bank-unit.html

U.S. "misery index" rises to highest since 1983 "CHICAGO (Reuters) - An unofficial gauge of human misery in the United States rose last month to a 28-year high as Americans struggled with rising inflation and high unemployment. The misery index -- which is simply the sum of the country's inflation and unemployment rates -- rose to 13.0, pushed up by higher price data the government reported on Wednesday. Consumer prices rose 3.9 percent in the 12 months through September, the fastest pace in three years." http://finance.yahoo.com/news/US-misery-index-rises-to-rb-3376231513.html?x=0&.v=1

Hope you got that my comment was just a joke (should have used a funny face). I agree, their needs to be a balanced approach to the issues. I would add to the list the need to enforce current laws related to business/wall street.

We can just print more money, right? Matter of fact, just print $500,000,000,000.00, it won't be worth anything on the world market, but everyone will get paid. I am sure their might be some minor side effects for doing this, but the bill will paid.

Greece on strike again as more austerity looms Greek parliament to vote on more austerity measures "LONDON (MarketWatch) — Normal life in Greece was once again disrupted Wednesday, as tens of thousands joined a 48-hour general strike to protest the latest round of austerity measures as the nation teeters on the brink of default." "The protests underscore the level of public frustration with the cost-cutting measures the government has taken in an attempt to reduce Greece’s deficit and keep receiving financial aid from international lenders, as the local economy remains mired in a severe recession." "The BBC, citing police, reported that more than 70,000 people took part in demonstrations in central Athens." http://www.marketwatch.com/story/greece-on-strike-again-as-more-austerity-looms-2011-10-19 And speaking of Spain. Moody's downgrades Spain on growth slowdown "SAN FRANCISCO (MarketWatch) -- Moody's Investors Service said late Tuesday it downgraded Spain's government bond ratings to A1 from Aa2. The ratings agency said "no credible resolution of the current sovereign debt crisis has emerged," and that worsening global growth is hurting Spain's already moderate growth prospects. "Lower economic growth in turn will make the achievement of the ambitious fiscal targets even more challenging for Spain," Moody's said in a statement. The outlook is negative." http://www.marketwatch.com/story/moodys-downgrades-spain-on-growth-slowdown-2011-10-18

Nothing a BK won't fix. But you are correct, many are already getting 'surprised' by the banks coming after them for the balance of the bill.

Foreclosure rates up 14 per cent amid fears home values will plummet again "More foreclosure filings were reported this quarter because of a quick jump in the number of default notices, meaning bad news for the U.S. economy as home prices are expected to drop as a result. Banks have stepped up the pace of home seizures after a year-long slowdown brought on by the 'robo-signing' scandal in which banks were accused of seizing properties without a proper review of loan documents. "The increase was driven by a 14 per cent jump in default notices, the first gain in five quarters and a sign lenders were preparing to step up repossessions of homes. Foreclosure filings began dropping off in September of last year as major lenders halted property seizures to ensure their paperwork was in order housing prices have begun to stabilize and shift higher in recent months. The S&P Case-Shiller index of home values in 20 U.S. cities rose 0.9 per cent in July, its fourth straight monthly increase, as 17 of the cities posted gains. Despite the improvement, it remained 4.1 per cent below its year-ago level." Read more: http://www.dailymail.co.uk/news/article-2048981/Foreclosure-rates-14-cent-means-bad-news-housing-market.html#ixzz1bALYVm5M

The real question on Spain, is not will they become the next Greece, but when and how will it unfold. Spain Feels the Housing Pain "This makes Spain, in many senses, the worst case of a property bust in the developed world—the country is already deep in its third consecutive year of falling prices, with no rebounds. Last year, the pace of decline slowed significantly, signalling some light at the end of the tunnel, but another metaphor is called for instead: that last year’s respite was nothing more than a dead cat’s bounce. The good news should be the overall amount of the decline, since Spain’s government says prices are only down 18%, in nominal terms, since their peak in early 2008. But that doesn’t include the effect of Spain’s persistent inflation, one of the highest in the euro zone, which makes the real drop closer to 30%—Spain’s government didn’t provide real price data in today’s release. After earlier predictions of a short-term correction have been smashed, some analysts now say prices may keep falling for the next two years, eroding Spain’s household wealth and banking balance sheets. Meanwhile, banks are struggling to keep up with the loss in value of the collateral against €400 billion worth of loans to construction and real estate firms, an amount that remains unchanged since 2008." http://blogs.wsj.com/source/2011/10/18/spain-continues-to-feel-the-housing-pain/

Ramen noodles and spam sales may see a nice uptick if this keeps going. U.S. wholesale prices surge in September Gasoline, vegetables propel 0.8% increase last month "Yet consumer costs have also risen sharply over the past year. The consumer price index is up 3.8% over the 12 months ended in August, outstripping the increase in worker wages over the same span. The result: many families have had to make do with less. That’s contributed to a weaker U.S. economy." http://www.marketwatch.com/story/us-wholesale-prices-surge-in-september-2011-10-18 Chanos: China’s hard-landing has already begun China’s bust will be a thousand times worse than Dubai “The numbers are falling faster than we thought,” said Chanos during an exclusive interview with MarketWatch on the sidelines of the 7th Annual New York Value Investing Congress. “Real estate sales in September and October, which are peak months, fell 40%-60% on-year,” he said. Chanos also pointed out that Chinese financial and real-estate stocks are down 30% from their peak, while cement and steel prices are declining." http://www.marketwatch.com/story/chanos-chinas-hard-landing-has-already-begun-2011-10-17

Two years of kicking the can and now they are suppose to fix it in one week. Good luck. Here is my guess, they will provide some more hope, nice words a few more dollars and say they should have everything fixed early in 2012. The real problem is, debt levels have become unsustainable. EU Given a Week to Fix Crisis as G-20 Warns of Global Threat "European leaders have one week to settle differences and flesh out a strategy to terminate their sovereign debt crisis as global finance chiefs warn failure to do so would endanger the world economy. Group of 20 finance ministers and central banks concluded weekend talks in Paris endorsing parts of the emerging plan to avoid a Greek default, bolster banks and curb contagion. They set an Oct. 23 summit of European leaders in Brussels as the deadline for it to be delivered. “The risk of a recession would be increased dramatically were the Europeans to fail to accomplish goals that they’ve set for themselves,” Canadian Finance Minister Jim Flaherty said after the G-20 meeting, which ended Oct. 15." http://www.bloomberg.com/news/2011-10-16/eu-given-one-week-to-fix-crisis-as-g-20-warns-world-economy-is-threatened.html

The solution is simple, someone is going to eat a LOT of debt, its just a matter of who (public, private, combo). I really don't think Germany has the political support internally to bail the system out and France will face a downgrade by the rating agencies if they provide to much more financial support for more bailouts. Germany Shoots Down ‘Dreams’ of Swift Crisis Fix "German Chancellor Angela Merkel has made it clear that “dreams that are taking hold again now that with this package everything will be solved and everything will be over on Monday won’t be able to be fulfilled,” Steffen Seibert, Merkel’s chief spokesman, said at a briefing in Berlin today. The search for an end to the crisis “surely extends well into next year.” http://www.bloomberg.com/news/2011-10-17/germany-shoots-down-dreams-of-early-end-to-europe-sovereign-debt-crisis.html

The growing erosion of the middle class and the increase in the poverty in the US (and many other european nations) have historically been issues that has created some significant stability problems for many countries throughout world history. We must find ways to stabilize and regrow the middle class for the longer term stability of our country. Police fire tear gas as protesters riot in Rome "ROME (AP) — Italian police fired tear gas and water cannons as protesters in Rome turned a demonstration against corporate greed into a riot Saturday, smashing shop and bank windows, torching cars and hurling bottles. The protest in the Italian capital was part of "Occupy Wall Street" demonstrations against capitalism and austerity measures that went global Saturday, leading to dozens of marches and protests worldwide." http://news.yahoo.com/police-fire-tear-gas-protesters-riot-rome-153335569.html Record number of Americans living in poverty "Last year, 46.2 million Americans lived in poverty--the highest total since record keeping began more than half a century ago, the Census Bureau reported Tuesday." http://news.yahoo.com/blogs/lookout/record-number-americans-living-poverty-211711911.html

The Town of Vail Colorado has a population of about 5,000 residents and is part of a string of small towns along the 1-70 corridor that include Avon, Eagle and the Beaver Creek ski area. The area operates the largest free bus system in the US and is very pedestrian and bicycle oriented. Vail is also one of the top ski destinations in North America. It architectural focus is on creating a swiss/rustic mountain setting with attention to detail and lots of public art. Hope you enjoy. NOTE: These picture where taken during the middle of October which is the heart of the off season, so crowds were light (mainly locals), plus I try and take pictures without people. Local Library Hospital Back of a stop sign. Town play park. Transit bus. Some fall color still left. Alpine gardens in Ford Park. Thanks for looking.

The good news - the economy added more jobs than in August. The bad news - Over 60% of the hiring in September was temporary help jobs or verizon workers going back to work after the strike. So the economy only create about 38,000 'real' new jobs. Since the economy needs to add about 125,000 new jobs each month just to handle new incoming workforce, we are actually increasing the amount of people unemployed in the US, not decressing the overall number. So the millions of unemployed and underemployed in the US just add to their ranks again this month, and the month before and so on. Economy added 103,000 jobs in September "The United States added 103,000 jobs in September, a burst of hiring that followed a sluggish summer for the economy. The figure at least temporarily calms fears of a new recession that have hung over Wall Street and the nation for weeks. But everyday Americans can't take much solace from that. Unemployment has been stuck at around 9 percent for more than two years. The economy has to add roughly 125,000 jobs a month just to keep up with population growth, more to bring down unemployment. The temporary help industry added almost 20,000 jobs, and the length of the average workweek increased slightly. Wages also rose a bit. Nearly half of the job gains last month came from the rehiring of 45,000 Verizon employees who had been on strike." More Americans are working part time but would prefer full-time work. When these people are added to those without jobs who have given up looking, the so-called "underemployment" rate rose to 16.5 percent from 16.2 percent." http://www.ibj.com/economy-added-103000-jobs-in-september/PARAMS/article/30023

Pretend and extend and hope something magical will finally happen down the road. Foreclosure backlog deepens "NEW YORK (CNNMoney) -- As the foreclosure backlog continues to build up, delinquent borrowers are spending even more time in their homes without making mortgage payments." "The number of defaults in the pipeline has been huge and we had more problem loans than ever before," said Herb Belcher, who supervises analytics for Lender Processing Services (LPS), which provides mortgage industry information and analytics to big banks. With so many bad loans, servicers have had to prioritize which ones they can deal with and which ones to push aside." http://money.cnn.com/2011/10/05/real_estate/foreclosure_backlog/

Are we finally seeing Main Street show some real displeasure with Wall Street and the big banks? These protest are starting to gain some momentum and are growing in other places.

Planned layoffs at US firms highest in more than two years, report shows "The number of planned layoffs at U.S. companies leapt to their highest level in more than two years amid large cutbacks in the military and Bank of America, a private report shows. Employers announced plans to shed 115,730 workers from their payrolls in September, according to the latest numbers from consultants Challenger, Gray & Christmas. September’s job cut amount was 126 percent higher than the level announced for August and they were 212 percent higher than one year ago in September 2010, the report said. The September surge brought the number of job cuts announced in the third quarter to 233,258 -- the highest quarterly toll since the third quarter of 2009." http://bottomline.msnbc.msn.com/_news/2011/10/05/8164733-planned-layoffs-at-us-firms-highest-in-more-than-two-years-report-shows Once again, at this rate we are continuing to add to the unemployed levels in the US. These types of numbers are not enough to employ the incoming workforce each month, let alone start reducing the already unemployed numbers. ADP Estimates U.S. Companies Added 91,000 Jobs in September "Companies in the U.S. added 91,000 jobs in September, according to data from ADP Employer Services. The increase followed a revised 89,000 gain the prior month, Roseland, New Jersey-based ADP said today." http://www.bloomberg.com/news/2011-10-05/u-s-companies-added-more-than-estimated-91-000-jobs-last-month-adp-says.html These forced investor losses are nothing more than a default, period. They also cause more issues in the near future as more and more investors refuse to buy other country's bonds (Italy, Spain) because they realized the EU will simply force the investors on these bonds to take larger losses in the future as well. 'Recapitalizing' the banks is nothing less than putting the citizens on the hook for billions while filling the holes in the banks. This can kicking has got be hurting a lot of feet by now. Merkel Signals More Greek Investor Losses "Chancellor Angela Merkel, the biggest contributor to European bailout funds, said investors may have to take deeper losses as part of a Greek rescue as she signaled Germany’s readiness to join efforts to recapitalize banks." "Merkel held talks in Brussels today with European Commission President Jose Barroso as financial shares rose amid speculation euro-area policy makers were working on plans to boost bank capital to contain the region’s debt crisis." "Signals that European politicians may step up efforts to aid banks and push investors to accept bigger losses as part of a Greek bailout reflect international pressure to end the debt crisis and domestic opposition to expanding rescues. Moody’s Investors Service late yesterday followed its three-level downgrade of Italy by warning that euro-area nations rated below the top Aaa level may see their rankings cut." "Merkel said that she supports recapitalizing European banks “if there is a joint assessment that the banks aren’t adequately capitalized” and finance officials develop “uniform criteria.” Germany is ready to discuss possible bank aid at this month’s EU summit, she said." http://www.bloomberg.com/news/2011-10-05/merkel-signals-more-greek-investor-losses-readiness-to-boost-bank-capital.html

If this thread has shown nothing else but one thing, I hope it is that there really isn't one elephant under the rug, its herds and herds of elephants hiding under the living room rug and the longer we continue to ignore the rug the worse it gets. Jeffery, Once again thank you for the valuable chart.

Do you ever get the feeling they may actually be running out of 'ammo'. Way back in this thread I made a comment that if the FEDs were going to go down this liquidity route then they better not run out of options before they had things stable or all %@*%@ was going to happen. I think they are getting closer to this edge. I hope they can avoid falling over the cliff, but the options are absolutely getting less and less. Bernanke says Twist equals half-point rate cut "WASHINGTON (MarketWatch) — Federal Reserve Chairman Ben Bernanke Tuesday said the central bank’s new policy of swapping bonds is not a “game-changer” but should help the economy avoid a new downturn." “I would just put it as a moderate support, not something that is expected to radically change the picture, but should be helpful” to support growth while keeping prices stable, Bernanke told the Joint Economic Committee of Congress." http://www.marketwatch.com/story/bernanke-downbeat-about-job-outlook-2011-10-04 Europe recession fears mount Goldman Sachs, S&P see rising risks "FRANKFURT (MarketWatch) — A long-running, home-grown debt crisis and further evidence of slowing growth continues to stoke doubts about Europe’s ability to avoid slipping into recession." http://www.marketwatch.com/story/europe-recession-fears-mount-2011-10-04

New orders continue to be at contraction levels. ISM reading picks up in September to 51.6% "WASHINGTON (MarketWatch) -- The Institute for Supply Management's manufacturing index picked up a bit in September, rising to 51.6% from a 50.6% reading in August. Economists polled by MarketWatch had anticipated an unchanged reading. Of key components, the new orders reading stayed at 49.6%, production rose 2.6 points to 51.2% and employment rose 2 points to 53.8%." http://www.marketwatch.com/story/ism-reading-picks-up-in-september-to-516-2011-10-03

Our regulatory system is so broke and so manipulated by the big boys is just a joke. So they wanted taxpayer money, but once they got it they didn't want to follow the rules that were set for that money and didn't want their big bonuses reduced. So, they 'pressured' the regulators to ignore the rules for them and they did. It must be great to be a big bank in today's environment. The system just bends and flexes to their desires and needs. This house of cards will one day crash and burn and that burning will be so big that it will be visible from outerspace. Watchdog: Regulators bowed to banks on bailout Regulators bowed to big banks by easing rules for repaying bailout money, watchdog report says "WASHINGTON (AP) -- Federal regulators bowed to pressure from big banks seeking a quick exit from the financial bailout program and did not uniformly apply the government's own conditions set for repaying the taxpayer funds, a new watchdog report says." "Meanwhile, the banks wanted to get out quickly from the so-called Troubled Asset Relief Program, or TARP, because they wanted to avoid its limits on executive compensation and the stigma associated with receiving rescue money, according to the report." "Because the regulators failed to enforce the policy for repayments set by the Federal Reserve, the new report says, "the process to review a TARP bank's exit proposal was ... inconsistent." That policy required banks to issue at least $1 in new common stock for every $2 in bailout money they repaid." "But the banks doggedly resisted the regulators' demands to issue common stock, seeking instead to use cheaper and "less sturdy" alternatives such as selling assets or issuing preferred stock, the report found. Issuing common stock is a better way to shore up a bank's capital base, it said." http://finance.yahoo.com/news/Watchdog-Regulators-bowed-to-apf-3217329384.html?x=0&sec=topStories&pos=main&asset=&ccode=

Here is some potential help, create financial funds/tools that flow money into smaller banks and small businesses instead of feeding Wall Street and the Big banks all the time. That will help with job growth and then, allow home prices to actually adjusted to income levels so that housing becomes affordable and its cost returns to a historic level of 30% of a households income or less. Until housing finally comes in line with income levels at reasonable historic costs, the amount of forclosures and debt burdens households will continue to pull the US economic down. Bernanke calls unemployment a 'national crisis' "WASHINGTON (MarketWatch) -- The nation's weak labor market was "a national crisis" that required attention from the White House and Congress, Federal Reserve Chairman Ben Bernanke said Wednesday. "We've had close to 10% unemployment now for a number of years, and of the people who are unemployed, about 45% have been unemployed for six months or more. This is unheard of," Bernanke said in a question-and-answer session following a speech in Cleveland. He called for policies "that could help them find work, train for work and retain their skills." Bernanke also urged policy makers to consider "strong housing policies to help the housing market recover." Better housing policies would "clearly be very useful," and would allow the low mortgage rates stemming from easy Fed policy to have more effect and help the economy recover." http://www.marketwatch.com/story/bernanke-calls-unemployment-a-national-crisis-2011-09-28

This thread shows the Town of Alamosa (Population around 10,000), Adams State College and some mountain photos around the San Luis Valley along highway 160. All photos were taken around September 21st. The Town of Alamosa is home to Adams State College, the Rio Grande Scenic Railroad and a redeveloping downtown. Hope you enjoy. Downtown Alamosa. Rio Grande Scenic Railroad and Depot Adams State College Wolf Creek Pass Area (Highway 160) Treasure Falls Fall Color

Interesting read, I think many on Urban Ohio will be interested in this article. Could these changes also show that manufacturing in the US continues to decline and that decline is now becoming more pronounced in the South that had become the 'new' manufacturing center for America? Deep Recession Sharply Altered U.S. Jobless Map "When the unemployment rate rose in most states last month, it underscored the extent to which the deep recession, the anemic recovery and the lingering crisis of joblessness are beginning to reshape the nation’s economic map. The once-booming South, which entered the recession with the lowest unemployment rate in the nation, is now struggling with some of the highest rates, recent data from the Bureau of Labor Statistics show. Several Southern states — including South Carolina, whose 11.1 percent unemployment rate is the fourth highest in the nation — have higher unemployment rates than they did a year ago. Unemployment in the South is now higher than it is in the Northeast and the Midwest, which include Rust Belt states that were struggling even before the recession. For decades, the nation’s economic landscape consisted of a prospering Sun Belt and a struggling Rust Belt. Since the recession hit, though, that is no longer the case. Unemployment remains high across much of the country — the national rate is 9.1 percent — but the regions have recovered at different speeds." "In Pennsylvania, the analysis found, the Pittsburgh area — which is heavily reliant on education and health care — is weathering the downturn better than the Philadelphia area. In New York, areas around long-struggling upstate cities like Buffalo and Rochester are recovering faster by some measures than the New York City metropolitan area. And the rate of recovery in Rust Belt areas around Youngstown and Akron, two Ohio cities that were hit hard, has outpaced that of former boomtowns like Colorado Springs and Tucson." http://www.nytimes.com/2011/09/27/us/unrelenting-downturn-is-redrawing-americas-economic-map.html?_r=2&ref=business

Coming to a market near you, with Cincy leading the way in the region. US seeking to unload foreclosed homes "The government wants to unload 677 foreclosed single-family homes in the 15-county Greater Cincinnati region that it or government-sponsored Fannie Mae and Freddie Mac now own. Washington is so stumped about a list of 92,000 properties that it holds nationally that it’s asking investors and others to send in ideas on what to do. The Cincinnati region has more government-owned foreclosures on the list than any market in Ohio, Kentucky or Indiana. In fact, the region’s total is higher than those for 19 states, including Kentucky." http://news.cincinnati.com/article/20110913/BIZ01/109140315/US-seeking-unload-foreclosed-homes?odyssey=tab|topnews|text|News