Afghanistan's Biggest Bank Hopes to Join the Troubled List

Karzai: "America should do something"

Thursday, September 2nd, 2010 - By Steve Christ

 

According to the FDIC, the government's list of problem banks is now at its highest level since 1993.

In all according to the most recent data, 829 banks are now at the risk of failure, up 53 from the 755 from the first quarter of this year.

That's on top of the 118 banks that have closed this year including the 45 closings during the most recent quarter.

That's troublesome since the FDIC fund set aside to potentially bailout these troubled institutions is itself already $15.2 billion in the red!

But as bad as that is that's not exactly the banking story that has me so worked up today

Instead, it's the prospect of bailing out the biggest bank in Afghanistan that has me so irked today that I can barely type out this rant.

After all, everyday I ask myself what exactly in the hell is going on over there. First it's our blood and now it's been suggested that we donate even more of our treasure.

Either way, I'm certain that this stone age paradise will never be worth any of it.

As for the story it is by Andrew Higgins and Ernesto Londono entitled: Karzai's brother calls for U.S. to shore up Kabul Bank as withdrawals accelerate

“As depositors thronged branches of Afghanistan's biggest bank, Mahmoud Karzai, the brother of the Afghan president and a major shareholder in beleaguered Kabul Bank called on Thursday for intervention by the United States to head off a financial meltdown.

"America should do something," said Karzai in a telephone interview, suggesting that the U.S. Treasury Department guarantee the funds of Kabul Bank's clients, who number about a million and have more than a billion dollars on deposits with the bank.

Kabul Bank handles salary payments for soldiers, police and teachers. It has scores of branches across Afghanistan and holds the accounts of key Afghan government agencies. The collapse of the bank would likely spread panic throughout the country's fledgling financial sector and wipe out nine years of effort by the United States to establish a sound Afghan banking system, seen as essential to the establishment of a functioning economy.

Action by the United States, said Mahmoud Karzai, would prevent a run on Kabul Bank and protect other banks, too. He said Kabul Bank is "stable and has money" but cannot withstand a stampede by panicked depositors.

"If the Treasury Department will guarantee that everyone will get their money, maybe that will work," said Karzai, who holds 7 percent of the bank's shares, making him the third-biggest shareholder.

Karzai, who spends most of his time in Dubai - where he lives in a waterfront villa paid for by Kabul Bank - rushed to Kabul on Wednesday to join efforts to salvage the bank.

Treasury officials have said they have confidence in Afghanistan's Central Bank, which ousted Kabul Bank's top officials earlier this week and has sought to stabilize the bank's finances.

But those moves may have spurred a panic: Depositors, said people familiar with the situation, yanked at least $90 million from Kabul Bank on Wednesday and the hemorrhaging of funds accelerated Thursday.

"Yesterday was not too bad, but today is worse," said a Kabul Bank insider. "It is a very bad situation."

This is absolute madness I tell you.

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Jim Rogers: "They are printing too much money..."

Legendary Investor is Afraid to Go Short

Wednesday, September 1st, 2010 - By Steve Christ

Here's the latest word from legendary investor Jim Rogers. As usual Jim is as bearish as ever and long commodities.....

However, that is not to say Rogers is loading up on the short side.

In fact, Jim says:

"They're printing so much money that I would not be short. I have no shorts. In most of my life, I've always had a short of 2, or 3, or 16... because I'm afraid they're printing so much money that stocks will go to 20,000 or 30,000. Of course it will be in worthless money, but it could happen,"

Roll the tape....

Great stuff, Mr. Rogers.

But seriously, the Dow could go to 30K??

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Art Cashin Eyes 1066 on the S&P

Another Volitale Week

Monday, August 30th, 2010 - By Steve Christ

As the summer winds down, here’s the latest from CNBC’s Art Cashin.

With the Labor Day holiday looming and light volume likely, Art expects a volatile week.

Either way, the payroll number on Friday promises to a big one—as usual.

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Intel CEO Bodyslams Big Government

A National Tragedy

Friday, August 27th, 2010 - By Steve Christ

Here's a thought to start off your weekend.

People that can do—do. People that can't do—only work to get in their way.

Thats' the bottom line in this piece as Intel CEO Paul Otellini explains why Big Government isn't the answer.

From CNET News by Declan McCullagh entitled: Intel CEO: U.S. faces looming tech decline

“Intel Chief Executive Officer Paul Otellini offered a depressing set of observations about the economy and the Obama administration Monday evening, coupled with a dark commentary on the future of the technology industry if nothing changes.

The U.S. legal environment has become so hostile to business, Otellini said, that there is likely to be "an inevitable erosion and shift of wealth, much like we're seeing today in Europe—this is the bitter truth."

Otellini singled out the political state of affairs in Democrat-dominated Washington, saying: "I think this group does not understand what it takes to create jobs. And I think they're flummoxed by their experiment in Keynesian economics not working."

Since an unusually sharp downturn accelerated in late 2008, the Obama administration and its allies in the U.S. Congress have enacted trillions in deficit spending they say will create an economic stimulus but have not extended the Bush tax cuts and have pushed to levy extensive new health care and carbon regulations on businesses.

"They're in a 'Do' loop right now trying to figure out what the answer is," Otellini said.

As a result, he said, "every business in America has a list of more variables than I've ever seen in my career." If variables like capital gains taxes and the R&D tax credit are resolved correctly, jobs will stay here, but if politicians make decisions "the wrong way, people will not invest in the United States. They'll invest elsewhere."

Take factories. "I can tell you definitively that it costs $1 billion more per factory for me to build, equip, and operate a semiconductor manufacturing facility in the United States," Otellini said.

The rub: Ninety percent of that additional cost of a $4 billion factory is not labor but the cost to comply with taxes and regulations that other nations don't impose. (Cypress Semiconductor CEO T.J. Rodgers elaborated on this in an interview with CNET, saying the problem is not higher U.S. wages but antibusiness laws: "The killer factor in California for a manufacturer to create, say, a thousand blue-collar jobs is a hostile government that doesn't want you there and demonstrates it in thousands of ways.")

"If our tax rate approached that of the rest of the world, corporations would have an incentive to invest here," Otellini said. But instead, it's the second highest in the industrialized world, making the United States a less attractive place to invest—and create jobs—than places in Europe and Asia that are "clamoring" for Intel's business.

Chris Marangi, associate portfolio manager at Gamco Investors in Rye, N.Y., said Tuesday: "Capital is agnostic. It doesn't have a religion. It doesn't have a philosophy. It goes where it finds the highest returns." The problem, Marangi said, is that many other "countries have a more friendly regulatory regime than we do."

 

You don't have to have an MBA in business from Wharton to understand that one.

Great stuff.

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Home Depot and Lowe's Adjust to the New Normal

Caulk and Paint Instead of Stainless Steel and Granite

Thursday, August 26th, 2010 - By Steve Christ

 

Like any party that went on about five hours after it should have ended, the housing bubble has delivered up quite a hangover.

Because for a large portion of the market, those “big gains” in equity turned out to be pretty short lived.

And when the price of homes suddenly turned south, quite a few people woke up worse off then when they started.

But I guess it was fun while it lasted. Granite counter-tops, Hummers, trips to Mexico, and your own cement pond out back.

Boy those were the days... too bad they had to end.

In that regard, here's another story on the “New Normal”...

From Bloomberg by Chris Burritt entitled: Caulk Replaces Show Kitchen at Home Depot. Lowe's

Dyane Townley craves new kitchen counters for her home in Greensboro, North Carolina. Husband Jeff, a Honda Aircraft Co. engineer, wants a bigger back deck. With money tight, the Townleys are putting those dreams on hold

Many Americans, having splurged on show kitchens, spa bathrooms and surround-sound media rooms during the housing boom, are doing the same. Spending on home renovation for the 12 months ending Sept. 30 will fall 25 percent to $107.7 billion compared with the same period in 2007, according to Harvard University’s Joint Center for Housing Studies.

The pullback is hurting companies large and small — from Home Depot Inc. and Lowe’s Cos. to building contractors and interior design shops.

“There are still consumers putting in new kitchens,” Robert Niblock, the chairman and chief executive officer of Lowe’s, said in a telephone interview. “But they’re doing it because they’re going to be in their homes longer. That’s the change from the go-go days.”

The highest unemployment rate since 1983 also is making Americans cautious about fixing up their homes, said Niblock, 47. Many homeowners are painting, caulking and re-carpeting, he said, and many are doing it themselves.

The Townleys, still trying to sell their previous house in Savannah, Georgia, are typical. They re-carpeted and repainted much of the inside of their blue, four-bedroom Greensboro home.

“Anything we can do ourselves, we do because it’s cheaper,” said Dyane, 34. “We aren’t splurging on anything right now.”

 

An illusion and nothing more. That's all it amounted to.

Sad but true....It's funny how the times change.

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Rosenburg: Depression not Recession

Analyst Remains Bearish

Wednesday, August 25th, 2010 - By Steve Christ

According to a report this morning, the Spectrem millionaire investor confidence index fell to its lowest level in more than a year as wealthy U.S. investors worried about politics and unemployment.

The Spectrem Millionaire Investor Confidence Index fell 11 points in August to -18, its lowest level since June 2009, when it fell a record 18 points to -20 shortly after the S&P 500 index hit a 12-year low.

Meanwhile, the Spectrem Affluent Investor Confidence Index which measures the outlook of households with $500,000 or more in investable assets, fell 4 points in August to a mildly bearish -20, its third-straight monthly decline.

“The millionaires' decline is particularly troubling since it suggests millionaires, typically more sophisticated than the broader affluent population, are reverting to a bearish frame of mind." said George H. Walper, Jr., President of Spectrem Group.

So what do all these folks know that David Rosenberg doesn’t know? Apparently not much.

True to form, Rosenberg is as bearish as ever….

From CNBC by Jeff Cox entitled: Economy Caught in Depression, Not Recession: Rosenburg

Positive gross domestic product readings and other mildly hopeful signs are masking an ugly truth: The US economy is in a 1930s-style Depression, Gluskin Sheff economist David Rosenberg said Tuesday.

Writing in his daily briefing to investors, Rosenberg said the Great Depression also had its high points, with a series of positive GDP reports and sharp stock market gains.

But then as now, those signs of recovery were unsustainable and only provided a false sense of stability, said Rosenberg.

 

Rosenberg calls current economic conditions "a depression, and not just some garden-variety recession," and notes that any good news both during the initial 1929-33 recession and the one that began in 2008 triggered "euphoric response."

"Such is human nature and nobody can be blamed for trying to be optimistic; however, in the money management business, we have a fiduciary responsibility to be as realistic as possible about the outlook for the economy and the market at all times," he said.

The 1929-33 recession saw six quarterly bounces in GDP with an average gain of 8 percent, sending the stock market to a 50 percent rally in early 1930 as investors thought the worst had passed.

"False premise," Rosenberg said. "And guess what? We may well be reliving history here. If you're keeping score, we have recorded four quarterly advances in real GDP, and the average is only 3%."

Rosenberg points out that the "overall economic malaise" has come despite aggressive efforts by the Federal Reserve to stimulate the economy through rate cuts.

"How's that for a reality check," Rosenberg said. "It's not too late, by the way, to shift course if you have stayed long this market."

 

Like or not, that is the reality.

And no matter how many times you try to slap a happy face on it, the economy and the markets are as tenuous as ever.

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Used Home Sales Crash in July

Another Jaw-Dropper

Tuesday, August 24th, 2010 - By Steve Christ

Here's a perfect example of what happens when Uncle Sam steps out of a the housing market.

Absent the fairy dust, it starts dropping again...

Take a look:

Absent the chart, here are dismal details....

From Bloomberg by Courtney Schlisserman entitled: Sales of U.S. Existing Homes Drop More Than Forecast

“Sales of U.S. previously owned homes plunged 27 percent in July, twice as much as forecast, evidence foreclosures and limited job growth are depressing the market.

A tax credit of up to $8,000 boosted sales earlier in the year, pulling forward demand and indicating additional advances will prove difficult. Mortgage rates at record lows have provided scant relief to the industry as unemployment hovers close to 10 percent, foreclosures hold near record-highs and the economy cools.

“This is a devastating reading on the U.S. housing market,” said Derek Holt, an economist at Scotia Capital Inc. in Toronto. “There’s such an inventory overhang, it shows there will be pressure on prices” in the months ahead.

The pace of existing home sales is the slowest since comparable records began in 1999. Purchases of single-family homes dropped to a 3.37 million annual rate, the lowest since May 1995.

Sales last month fell in all four U.S. regions, today’s report showed. Foreclosures accounted for 22 percent of total purchases in July, while short sales made up another 10 percent, the NAR said.

Purchases will be “soft for at least two more months as the housing market works through the effects of the end of the tax credit,” Lawrence Yun, the group’s chief economist, told reporters at a press conference.”

Of course, if Lawrence had the courage to tell the truth here he would have used two years in that thought not simply two months.

I'm mean does he really think that a 12.5 month supply is going to be over come by Thanksgiving or is he just whistling past the grave yard?

Something tells me the priest is in the hallway again...

That number was so bad it even made my jaw drop when it crossed the wires. 

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The Pension Gap

Truth is Numbers

Friday, August 20th, 2010 - By Steve Christ

Here’s a train that just keeps on chugging down the tracks. When it gets here it will run us over…

From Bloomberg by Dunstan McNichol entitled: Pension Cuts Won't Cover a $3 Trillion Bill in U.S., Study Says

“Taxpayers must cover at least a third of a $3 trillion bill for public employee pensions even if lawmakers eliminate cost-of-living increases and raise the retirement age, according to an academic study.

“Even if states uniformly eliminated generous early retirement deals and raised the retirement age to 74, the unfunded liability for promises already made would still be more than $1 trillion,” Joshua D. Rauh, associate professor of finance at Northwestern University’s Kellogg School of Management in Evanston, Illinois, said in a statement.

He presented the paper yesterday to the National Bureau of Economic Research’s State and Local Pensions conference in Jackson Hole, Wyoming.

The study of 116 U.S. retirement plans for teachers and government workers showed that as of June 30, 2009, they had $1.89 trillion in assets to cover $3.15 trillion in liabilities, Rauh said. The research used the typical fund’s assumption that investments will earn about 8 percent annually. That is a gap of $1.26 trillion — more than double the shortfall of a year earlier, according to a study by the Pew Center on the States.

Using more conservative investment assumptions, such as the rate of return on U.S. Treasury zero-coupon bonds on June 30, 2009, the liabilities are $5.28 trillion, Rauh calculated.

“Assuming states don’t start defaulting on their bonds and other debts, it seems that taxpayers will be footing most of the multitrillion dollar bill for the pension promises that states have already made to workers,” he said.”

Isn’t government just wonderful?

I guess the rest of us can work until we drop dead so “civil servants” can retire early.

I’ll say it again, the status quo cannot possibly be maintained.

Have a great weekend—if you can afford to be off.

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