Donald Ingram's  Instablog

North America's largest oil refiner, Valero Energy Corp (VLO) announced Friday November 20, it is permanently shuttering it's high cost Delaware refinery. Because it does not produce it's own crude, it is squeezed by rising oil prices and weak demand for gasoline and other petroleum products.
The company had searched for a buyer for the 190,000 barrel-per-day complex in Delaware City, which processes heavy crude oil imported from the Middle East and Africa. The plant was losing $1 million a day, it's closure will throw about 550 employees out of work.


Disclosure: No Position.

Canadians observed the sub-prime crises and consequent financial melt down with morbid fascination, all the while congratulating themselves that it would not happen to them. After all, the laws forbade anyone from walking away from an underwater mortgage and strict rules were in place to even qualify for a mortgage.
The fact is over 90% of existing mortgages in Canada are "securitized" - that's the practice of pooling mortgages and other loans, then issuing new securities backed by MBSs, or Mortgage Backed Securities. In order to find buyers for these securitized mortgage pools, the Canadian Government has put guarantees on them by directing the Canadian Mortgage and Housing Corporation (CMHC) to guarantee ALL Canadian mortgages.

So long as borrowing requirements remained tight, the percentage of mortgages that were securitized remained small. But in 2007 the Harper government allowed the CMHC to dramatically change it's rules - it dropped the down payment requirement to zero percent and extended the amortization period to 40 years! The approval rate for these risky mortgages went to 42% in 2008, the average equity as a share of home value went down to just 6% from 48% in 2003. The government tightened somewhat after the financial crises by raising the down payment to 5% and shortening the mortgage life by five years.

If these risky loans sound like sub-prime mortgages - they are! If a bank refuses you a mortgage and CMHC gives you one, the mortgage is sub-prime. The largest sub-prime lender in the world is now the Canadian government. This is the ticking time bomb Prime Minister Stephen Harper has tossed at the Canadian taxpayer. In the end this housing bubble will burst, putting taxpayers on the hook for tens of billions of dollars in defaulted mortgages.


Disclosure: No Position.

The U.S. Department of Agriculture's (USDA) Economic Research Service reports that 49 million American's, including nearly 17 million children, are food insecure. This is an increase of 36% over the numbers released one year ago by the USDA, which found that 36.2 million American's were at risk of hunger.

Ms. Vicki Escarra, president and CEO of Feeding America said, "although these new numbers are staggering, it should be noted that these numbers reflect the state of the nation one year ago, in 2008. Since then the economy has weakened significantly, and there are likely many more people struggling with hunger than this report states."

According to the 2009 Hormel Hunger Survey, released November 11 by Hormel Foods Corporation (HRL) , more than half (52%) of American's said they personally know someone who has received food from a food bank or shelter this year. In addition, more than two-thirds (69%) believe the problem of hunger has increased in the United States during the past year, and nearly half (46%) are very concerned about it.

The current loss of global confidence in the U.S. dollar, with attendant possible hyperinflation caused by it's collapse, leaves the U.S. vulnerable to famine. A famine can develop when a sizable number of people lose the economic means of acquiring food, even when there is no fall in food output or supply. Usually through unemployment or from a sharp drop in earnings compared with fast rising food prices as would be seen in a hyperinflation event. 

In January 1922, hyperinflation exploded in Germany (Weimar Republic), by December 1922 Germany was unable to feed it's population or provide employment for even 60% of the labor force. People began to die in the streets from starvation and hypothermia. This must NOT happen in America. 

Disclosure: No Position. 

The value of US residential real estate at bubble peak was about $25 trillion, mortgage debt constituted about 45% of that ($11 trillion) and owner equity of 55% ($14 trillion).

House prices;
Current fall from bubble peak - 23.4%
Projected fall, peak to trend line - 45.75%
Predicted loss, today to bottom - 26.0%

Peak value of $25 trillion, the current value is about $19 trillion, and the long term trend line value will be about $13.5 trillion. Homeowner equity will drop by 70% - if you have a typical debt-to-value ratio of 80%, your equity is going to zero. This only takes a 20% fall in the house price for that to occur, this is why so many households are now underwater. 

House values have receded not quite halfway to their long term trend line. We are still nowhere near a house price bottom. With the Feds artificially propping up the real estate market and banks holding foreclosed properties off the market, or refusing to foreclose so as to not have to recognize failed loans on their balance sheets, the housing recovery will endure much more pain before a long slow recovery can take place. 

The really sad fact is as with most inflated prices that fall back to a long term trend line, the price tends to over shoot and bottom below the long term trend line, taking that much longer to return to normal. As with all government interference in the market place (in the name of "fixing things") it ends up, not only costing the taxpayer more of their hard earned dollars, but unnecessarily delays the healing process of the market place. 

Charts & Graphs;
http://www.theautomaticearth.blogspot.com 


Disclosure: No position.    

Representative Melvin Luther Watt has revealed his hand and is undoubtedly on the side of the big banks, and could care less about the American people and trillions of taxpayer money. In his Congressional capacity as the Chairman of the Subcommittee on Domestic Monetary Policy and Technology, has single-handedly destroyed American's ability to eventually audit the Federal Reserve Bank by gutting Congressman Ron Paul's Audit the Fed Bill.

Representative Watt hails from the 12th District of North Carolina, which has been criticized as a "gerrymandered" district with a 64% black majority. The district was thrown out as unconstitutional in 1996 and has been redrawn several times. It has been described as "political pornography" and Supreme Court Justice Sandra Day O'Connor called it "bizarre." Watt's 12th District includes Charlotte, headquarters of Bank of America Corps.

In 2003 Watt vehemently opposed efforts by the administration and Congress to increase regulatory oversight of Fannie Mae and Freddie Mac, saying "the process would weaken the bargaining power of poorer families and their ability to get affordable housing." 

In 2004 Ralph Nader attended a meeting with the Congressional Black Caucus, where he alleges that Representative Watt twice uttered an "obscene racial epithet": towards him. It was alleged that Watt said: "You're just another arrogant white man - telling us what we can do - it's all about your ego - another f--king arrogant white man."
http://www.commondreams.org/headlines04/0714-11.htm 

The Audit the Fed Bill with 308 co-sponsors has been stripped of provisions that would remove Fed exemptions from audits of transactions with foreign central banks and monetary policy deliberations. Congressman Paul said "there's nothing left, it's been gutted. This is not a partisan issue. People all over the country want to know what the Fed is up to, and this legislation was supposed to help them do that."
Sounds like Representative Watt will be celebrating a VERY Merry Christmas indeed! Wonder what Santa will leave in his stocking? Hmm...


Disclosure: None. 

From the National Association of Realtors (NAR);

"Big Rebound in Existing - Home Sales Shows First - Time Buyer Momentum".

No. Existing Home Sales fell 5.4% last month, despite the nonsense you have read elsewhere. Home sales did not rebound - that was purely the result of seasonal adjustments. What the NAR has attempted to do and indeed have accomplished, is to call more sheep to the slaughter, by touting misleading headlines from messaged statistics. It is wise to remember 'caveat emptor' (Buyer Beware) when dealing with any type of financial contract in these troubled times. As for any published statistics, you must practice your due diligence in ascertaining accuracy. 

Facts and Figures Explained;
http://www.ritholtz.com/blog/wp-content/uploads/2009/10/NSA-home-sales.PNG



Disclosure: No Position.