What Stories Aren't Being Told? 34 comments
-
Font Size:
-
Print
- TweetThis
I did not start blogging in order to start a media career, but sometimes the media finds its way to my door. I received a call Thursday from a reporter for one of the major television networks, and after talking a while, she asked me, “What big stories aren’t being told? Some of my best stories come from asking this question.” I told her I needed to think, and would e-mail her back on the topic. I decided I would review my last month of posts to look for out-of-consensus ideas, and I came up with these:
- China is overstimulating businesses through loans and they are buying up commodities that they don’t need now, leading to a possible correction in commodity prices.
- Western European banks are in trouble because of loans to Eastern European nations denominated in Euros. With the rise in the Euro, defaults are likely.
- Water shortages in China and India.
- Most entities that the US Government has bailed out will have stocks that are zero eventually — GM, Chrysler, AIG, and maybe Fannie Mae (FNM) and Freddie Mac (FRE). For an opposing opinion on the GSEs, read the intelligent John Hempton at Bronte Capital.
- With dud residential mortgage loans, modifications don’t work well unless there is a forgiveness of some of the principal.
- The foreign funding base of the US is getting shorter in maturity — could this be a sign of trouble? Is there a lack of confidence?
- If we marked the value of commercial real estate loans to market for banks, using data from the CMBS market, some banks would be insolvent.
That’s all for me, for now. Now, I don’t watch television, listen to radio much, and I don’t subscribe to anything aside from the WSJ. I don’t see everything. That is why I am asking my clever readers to answer the question that the reporter asked me — what significant economic stories aren’t being told? These can be small issues as well as big issues. Please let me know in the comments below. Thanks.
Related Articles
|
-
The Seeking Alpha 100
See allThe top 100 stock
market authors
selected for publication
Seeking Alpha 100 » -
Fastest Climbers
Authors with the largestSee all
increase in followers
in the last 7 days
Fastest Climbers » -
Top Commenters
Top commenters,See all
as ranked by their peers
Top Commenters » -
Top Instabloggers
The 100 most active
Instabloggers.-
1
David Fry
-
2
TraderMark
-
3
Don Dion
-
4
Cliff Wachtel
-
5
Mike Havrilla
Top Instabloggers » -
1
-
Top StockTalkers
TopSee all
StockTalkers.
Top StockTalkers »
This article has 34 comments:
The traditional MSM slam against the blogosphere is that it's all commentary on a core of facts/research done by mainstream news orgs (i.e. MSM). And sure, there's plenty of commentary -- wacky and otherwise. But there are also a number of highly economically literate commentators (including yourself) who are doing basic analysis and providing it gratis to those with the discernment to recognize it.
MSM reporters -- predominantly people who have never actually worked in business and who are ideologically suspicious of it -- are increasingly tapping into this resource and using it to educate themselves, then in turn educating the public.
Sorry, that's not what you asked for. I think your bullets are good points. But again, they're all topics you'll find discussed here.
In 2009, China opened up various exchanges for investment in both gold and silver to the Chinese public, which previously was not allowed to invest in gold and silver. The opening of silver exchanges to the Chinese public is the most recent development and was accompanied by a ban on silver exports. The Chinese government is actively touting both gold and silver as an investment to the Chinese public, and with good reason. The yuan, like the dollar and virtually all other paper currencies, with the exception of the euro, are one hundred percent fiat currencies backed by absolutely nothing but government promises which aren't worth the powder to blow them to hell.
Now, suddenly, we hear that China is considering walking away from responsibility on certain OTC derivative contracts held by foreign banks as counterparties, which contracts cover various commodities, in the event that those contracts result in losses to their sovereign wealth funds. You may recall from prior discussions in the IF that these unlisted OTC derivative contracts include massive short positions in both gold and silver, but especially in silver, and are used to back the listed COMEX short positions of the large commercials in both gold and silver
These two developments, namely the Chinese government's promotion of gold and silver to its public as an investment, along with its intention to renege on its OTC derivative contracts covering certain commodities, are obviously interrelated. The implications of the Chinese abandonment of their responsibility under derivative contracts are nothing short of tremendous and the entire derivatives market could collapse.
Two
Toxic Assets
The Congressional Oversight Panel report also says that banks remain threatened by billions of dollars of bad loans on their balance sheets, more could fail if the economy worsens, and that - if unemployment rises sharply or the commercial real estate market collapses – the banking system could again crash:
Three
Commercial Real Estate
Moreover, a crash in commercial real estate is now picking up speed. Unlike the subprime mortgage meltdown - which affected mainly the biggest banks - the commercial meltdown will apparently affect a huge number of small to medium-sized banks.
On August 11, 2009, the Congressional Oversight Panel on the bailouts issued a report saying that small and medium sized banks are especially vulnerable, the report will say, in part they hold greater numbers of commercial real estate loans, "which pose a potential threat of high defaults."
Four
Loan Loss Rates
Loan loss rates in could also be worse than the Great Depression, at least in the United States. Specifically, during the depths of the Great Depression, the loss rate which banks suffered on their loans climbed as high as 3.4% (it is normally well under 2.0%).
Last month, banking analyst Mike Mayo predicted that loan loss rates could go as high as 5.5%, which is substantially higher than during the 1930s.
Five
Destruction of Credit
The amount of credit outstanding has been reduced by trillions of dollars in the past year.
For example, the amount of consumer credit outstanding has plummeted:
Six
Private sector job creation has only increased 1.1% from 1999-2009, which means the job creation engine has shut down.
I could go on & on & On & OnnNNnn.
People have forgotten that we are a nation at war. Likely efforts by our enemies are not being publicly discussed, and we have no idea how we are being protected against them. This is a large risk, unreported, unprepared for, and severely unappreciated. This is the news event that everyone is missing.
Why can't the gov't. take over where Rex & Co. left off, by offering homeowners a premium (say 15% of the house's current valuation) in exchange for a share of future profits (say 50% beyond its current market value) on the sale of the house? This would buffer the effects of the current crunch on the homeowner, allowing him to make his mortgage payments and/or renegotiate his mortgage, while being a good long-term buy for the gov't. It’s win/win.
=======
"The risk of terrorist attacks on U.S. soil. ... This is a large risk, unreported, unprepared for, ..."
The media should encourage the populace to acquire a survivalist larder of food, tools, and supplies, and describe its contents. (Maybe the gov't. could hand one out to everyone.) Even acquisition of a portion of its contents would be beneficial.
The motives of Gore, who really forced it into the public eye, are suspect at best.
Personally I think we need to be good to the environment because we live here, but global warming. Can't say.
On Sep 10 03:37 PM Roger Knights wrote:
> PS: The untold story in the MSM is the rising tide of dissent against
> the supposed consensus on global warming. Alarming press releases
> and study abstracts are quoted as gospel, without a skeptical opinion
> to counterbalance them. Reporters should consult the websites for
> (among others) Climate Depot www.climatedepot.com/ , Climate
> Audit www.climateaudit.org/ and Watt's Up With That wattsupwiththat.com/
This only applies to voluntary walkaways when the owner is under water.
Mods are worthless when the owner is jobless.
Locking the mtg against adjustments would help more.
"If we marked the value of commercial real estate loans to market for banks, using data from the CMBS market, some banks would be insolvent."
In other words, commercial developers and landlords are about to start walking away or filing BK.
hotels very empty
2) Free market capitalism really does need some improved re-regulation. The two areas I think are paramount are limits on leverage and explicitly counter-cyclical rules (e.g. variable counter-cyclical capital reserve ratios, drastic modification of mark-to-market). The former is getting a little attention, the latter nil.
3) A variation on 2). Statistical analysis based risk metrics basically don't work. But Basel II is based entirely on these metrics and the US and the whole developed world is still moving towards some unified Basel II framework. (The I-bank leverage limits were removed in 2004 as a response to a required Basel II compliance.) While there has been a slight effort to modify Basel II in the wake of this recession, both Basel II and the Financial Stability Board are still deeply flawed.
No one in Europe is willing to call the last 10+ years of work on Basel II a failure. Basel I was simple, primitive, and it worked. It was obvious and correct to improve upon it, but the result was and is an abject failure.
Dow at 11 000, property (commercial and residential) up 20% will sort out the insolvency problem. Thise who think we can not sort out this problem without monetising debt need their head checked out.
We need asset inflation and we need it quickly....
The best way to do this is through devaluing fiat money, controlling the price of the commodities through manipulation and moving the price of assets up.
Is it possible that the oil stored on offshore tankers is in preparation for this?
Americans, respond to these crises, will define our fate and destiny.
We can and must at this critical time in history join forces as one
family of 300+ million Americans and show the world that we are
indeed the greatest nation on earth.
Also, what do you mean by manipulating commodoties? Do you mean drive down oil prices? I agree wholeheartedly with that, only I personally believe the markets are manipulating the price up, so the government would be going head to head against the free market, and I don't think it's a fight they will win.
On Sep 11 04:19 AM James Lewis wrote:
> The US Government better hurry up and get the fed to buy 1 trillion
> USD of treasury notes. We need some monetary inflation in assets
> and quick. Or the system will go down again.
>
> Dow at 11 000, property (commercial and residential) up 20% will
> sort out the insolvency problem. Thise who think we can not sort
> out this problem without monetising debt need their head checked
> out.
>
> We need asset inflation and we need it quickly....
> The best way to do this is through devaluing fiat money, controlling
> the price of the commodities through manipulation and moving the
> price of assets up.
The sollar has essentially collapsed and even though, oil has not broken out above 75. Why? Because oil demand is falling. The dollar will rally and watch commodity prices fall. When?
Expect current rally to continue into Q3 reporting, then watch out as companies will again take every write-off they can in Q4.
Talk about liar loans [Alt-A], the real issue is liar valuation, where the banks now do not have to market assets to market, but to recovery.
When the big boys [GS] have sold into the public buying and have their shorts in hand, watch how fast the news will turn to doom and gloom from the happy days of recovery we have now.
variantperceptions.wor.../
On Sep 11 09:58 AM Popham wrote:
> Gosh, between the Chinese manipulating their economy, Western European
> banks on the verge of crashing, Russia's economy and peope on the
> brink, the severe drought conditions in Kenya, the threat of terrorism,
> failing banks, low ebb of consumer confidence, foreclosures still
> happening, commercial and industrial real estate bubble bursting,
> double digit unemployment near, health care reform, cap & trade,
> more taxes, the H1N1 flu; but most of all, the rabbid sophistry of
> the White House and Congress, which for the past 30 years have been
> dragging this country down to where we find ourselves today. Indeed,
> the list goes on, but how we, as responsible
> Americans, respond to these crises, will define our fate and destiny.
>
> We can and must at this critical time in history join forces as one
>
> family of 300+ million Americans and show the world that we are<br/>indeed
> the greatest nation on earth.
While many assume/believe that we are solidly on the road to economic recovery, I do not agree. One should be very cognizant of the fact that often, during long periods of economic weakness (like that we are in now) there are intermittent periods of economic strength that lead to further economic weakness.
The reasons for this are various, and are discussed at my blog found below:
bit.ly/19Gll0
And China & others think the RMB could be a reserve currency?
Not in our grandchildren's lifetime.
It took the dollar 150 years to become a reserve currency,
there won't be a fast track for anyone else,
no matter how much they'd like it.
MSM works on advertising revenue. MSM media copies formats which attract the most viewers. most viewers do not want real news. this is why we watch CNBC over Bloomberg, Fox over CNN, BBC over Al Jazeera.
"MSM works on advertising revenue. MSM media copies formats which attract the most viewers. most viewers do not want real news. this is why we watch CNBC over Bloomberg, Fox over CNN, BBC over Al Jazeera."
...and all of them over Democracy Now/Link TV. I've found it to be a window into unvarnished truth.
We are on board a freight train to civilization's collapse due to entrapment in a consumption-based economic model based on unsustainable perpetual growth.
Lots of other stories, but they pale in comparison or are somehow related to the one I just mentioned. You mentioned one factor of the freight train story:
"Water shortages in China and India."
Here are the other major monsters bearing down on us:
-the 6th mass extinction ocurring right now:
www.austinchronicle.co...
-peak oil:
www.propertyinvesting....
-climate change
www.youtube.com/watch?...
-overpopulation:
globalextinction.org/E...
It is a myth propagated by government, and the environmentalists. Big oil does not go out of its way to disprove it either.
It benefits ALL of them.
Justification of a higher crude oil price means more profits to the majors and the nations that export crude oil. It means justification to squander billions of research dollars on alternative fuels that will NEVER be economically feasible without permanent gov. subsidies. These same fuels almost always end up doing more harm to the environment than petroleum. It also legitimizes the environmentalists existence. However, when you take a look at their lifestyles, you'll find that most of them are ignorant hypocrites.
If you really want to know the truth about peak oil and the price of crude, you should read "The Prize" by Daniel Yergin. It won a Pulitzer.
tinyurl.com/kmcfwz
www.amazon.com/Prize-E...
On Sep 11 11:48 PM Sober Realist wrote:
> -peak oil:
> www.propertyinvesting....
realclimate.org
The people running our countries (this certainly is not you or I!) want us to be focused on consumption. It distracts us from holding them accountable and from caring about the people around us.
Just an anecdotal story. In 2008, if you were in a a housing related industry and with a big bank- US BANK, WELLS, etc- you were kicked out. Here I'm talking about plumbing distributors whatever. This meant that you were forced to a smaller regional bank. In the process fo the shift your credit line was probably shrunk.
As a result of that you are forced to go to JIT inventories etc. This gives you NO competitive advantage over any other competitor. As such, you start to see margin erosion. You try and explain to your bank that you need a credit line increase in order to maintain market share and they say- "your cash flows don't justify it". You say, "well it's a chicken and egg proposition, I have to have the inventory in order to increase my cash flows".
It's a goddamn disaster out there. The whole thing has gone so well beyond delveraging and is grinding to a halt.
Manufacturers rely on distributors/dealers to get products to market. If distributors can't get access to capital to trade goods then the system breaks down. That is what is going on.
The reality is that distribution, no matter what it is, is a business that relies on a 22% GPM with operating costs (SG&A costs) that run 18%. It's thin margin. When you get price pressure, as a result of the competitive forces, then ontop of that you get volume decrease this equals commerce/profitability arrest.
NO CREDIT- NO BUSINESS.
If you want manufacturing growth to return credit has to get back on the street. Manufacturers cannot become the creditors of their customers. The system needs to work and in order for it to work banks have to start lending again and taking some bloody risk. It's called credit- derived from the Greek "belief": the belief that you will get your money back eventually.
Right now, I hear the term "banker" in the same vain as I hear the word "lawyer". If the sentimate towards bankers today isn't the same as it was during the great depression well, then, it's damn close.
Is sum, there are serious inventory shortfalls out there. If you were to try and build a facility right now your building would be out 6-8 months. Equipment and Electric are way out, ironically you would thin with things being as slow as they are that companies would be dying for business and service levels would be up but that is not the case.
But there won't be a huge inventory build becasue companies can't get lines of credit to build inventories so they can have products to sell. The system is all gummed up. Without credit to build inventories manufacturers can't gear back up and put people to work. Distributors cannot justify putting outside sales people back on the street. This is stifilling all matters of commerce including product innovation.
If you want to get a new prodcut to market that takes a massive amount of capital- bank or other wise. The reality is that no distributor wants to take on a new prodcut becasue they have no available credit to do it- bring in new products means investment in merchandizing AND new inventories.
I'm telling you until the banking system starts to work again this country is screwed.
So, one of two things or both need to happen: 1)the banks need to start working with customers no matter what. 2) the regulators have to get off the banks asses and let them work with customers instead of against.
If banks continue to pound away at small business the problems in this country will only conintue to be exasperated. It becomes a negative feed back loop that is where we are today- however, no one is talking about it it is the story that isn't ever told because small business is not one unified voice but, rather, small and unheard.
Demographics. Japan as of March 2009 (from Bloomberg) has more people on pension than working. In the First World, only the USA is expanding its population by native births. China has at least 20 million more young men than women, and a rapidly aging population. Etc. Etc. This implies a lot everywhere economically.
Corruption, which is now universal (even on Wall Street). Corruption does not necessarily mean willful personal malice although that is often present. Rather it means any social disorder that produces disproportionately large social benefits for small effort for some, and they can even be the majority (for example wherever there is slavery). Thus the other side is disproportionately large efforts for small benefit for others (the slaves). But corruption must be popularly understood as something unjust and unjustifiable or else society will not call it corruption and will accept it. Slavery was accepted as normal everywhere until about 1500 years ago in Christian Europe, but now is universally rejected as totally and unacceptably corrupt, like a system of murder.
This is kinda scary to me.
On Sep 10 02:18 PM conceptwizard wrote:
> One
>
> In 2009, China opened up various exchanges for investment in both
> gold and silver to the Chinese public, which previously was not allowed
> to invest in gold and silver. The opening of silver exchanges to
> the Chinese public is the most recent development and was accompanied
> by a ban on silver exports. The Chinese government is actively touting
> both gold and silver as an investment to the Chinese public, and
> with good reason. The yuan, like the dollar and virtually all other
> paper currencies, with the exception of the euro, are one hundred
> percent fiat currencies backed by absolutely nothing but government
> promises which aren't worth the powder to blow them to hell.
> Now, suddenly, we hear that China is considering walking away from
> responsibility on certain OTC derivative contracts held by foreign
> banks as counterparties, which contracts cover various commodities,
> in the event that those contracts result in losses to their sovereign
> wealth funds. You may recall from prior discussions in the IF that
> these unlisted OTC derivative contracts include massive short positions
> in both gold and silver, but especially in silver, and are used to
> back the listed COMEX short positions of the large commercials in
> both gold and silver
> These two developments, namely the Chinese government's promotion
> of gold and silver to its public as an investment, along with its
> intention to renege on its OTC derivative contracts covering certain
> commodities, are obviously interrelated. The implications of the
> Chinese abandonment of their responsibility under derivative contracts
> are nothing short of tremendous and the entire derivatives market
> could collapse.
>
> Two
>
> Toxic Assets
>
> The Congressional Oversight Panel report also says that banks remain
> threatened by billions of dollars of bad loans on their balance sheets,
> more could fail if the economy worsens, and that - if unemployment
> rises sharply or the commercial real estate market collapses – the
> banking system could again crash:
>
> Three
>
> Commercial Real Estate
>
> Moreover, a crash in commercial real estate is now picking up speed.
> Unlike the subprime mortgage meltdown - which affected mainly the
> biggest banks - the commercial meltdown will apparently affect a
> huge number of small to medium-sized banks.
>
> On August 11, 2009, the Congressional Oversight Panel on the bailouts
> issued a report saying that small and medium sized banks are especially
> vulnerable, the report will say, in part they hold greater numbers
> of commercial real estate loans, "which pose a potential threat of
> high defaults."
>
> Four
>
> Loan Loss Rates
>
> Loan loss rates in could also be worse than the Great Depression,
> at least in the United States. Specifically, during the depths of
> the Great Depression, the loss rate which banks suffered on their
> loans climbed as high as 3.4% (it is normally well under 2.0%).<br/>
>
> Last month, banking analyst Mike Mayo predicted that loan loss rates
> could go as high as 5.5%, which is substantially higher than during
> the 1930s.
>
> Five
>
> Destruction of Credit
>
> The amount of credit outstanding has been reduced by trillions of
> dollars in the past year.
>
> For example, the amount of consumer credit outstanding has plummeted:
>
>
>
> Six
>
> Private sector job creation has only increased 1.1% from 1999-2009,
> which means the job creation engine has shut down.
>
>
> I could go on & on & On & OnnNNnn.
>
>
>
>
>