Important News - Dec. 23

• 1) We’re Screwed!

“Do you believe everything the government tells you? Economist and statistician John Williams sure doesn’t. Williams, who has consulted for individuals and Fortune 500 companies, now uncovers the truth behind the U.S. government’s economic numbers on his Web site at ShadowStats.com. Williams says, over the last several decades, the feds have been infusing their data with optimistic biases to make the economy seem far rosier than it really is. His site reruns the numbers using the original methodology. What he found was not good.

Maymin: So we are technically bankrupt?

Williams: Yes, and when countries are in that state, what they usually do is rev up the printing presses and print the money they need to meet their obligations. And that creates inflation, hyperinflation, and makes the currency worthless.”

• 2) 12/22/2009 Peter Schiff On Fast Money (Video)

Hyperinflation In 2010?

• 3) Shrinking Credit Threatens Almost $9 Billion in Holiday Sales

“Target Corp. and U.S. retailers may lose almost $9 billion in holiday sales as banks rein in lending to cash-strapped consumers before a new credit-card law takes effect.

Sales in November and December may fall 1.2 percent to $436.7 billion from the same period in 2008, said Britt Beemer, chairman of consumer polling firm America’s Research Group. If lenders weren’t cutting customer spending limits and rejecting more credit-card applicants, sales would gain about 0.8 percent to $445.5 billion, he said in a Dec. 21 interview.”

• 4) State borrows $1 billion to pay out unemployment benefits (Illinois)

“The state of Illinois has been forced to borrow $1 billion from the federal government since mid-summer to help cover unemployment benefits, and some estimates are that the figure could go as high as $8 billion by 2012.

It is basic math resulting from a harsh recession. State figures show $4.1 billion in unemployment benefits were paid through the end of November, or nearly double the figure for all of 2008.

“The trust fund just eclipsed $1 billion. It is borrowing, and I’m not trying to split hairs, but it is drawing on a line of credit from the federal government,” Greg Rivara, spokesman for the Illinois Department of Employment Security, said Tuesday.”

• 5) Storm hit East Coast retailers

“Research firm ShopperTrak reported yesterday that Super Saturday sales dropped 12.6 percent from a year ago, while foot traffic fell 12.4 percent, as a winter storm lashed the East Coast. That’s on top of a 12.4 percent sales decline and a 17 percent drop in foot traffic on Super Saturday in 2008 compared with the prior year. The firm, based in Chicago, tracks total retail sales at more than 50,000 outlets.

ShopperTrak reported that Saturday’s sales totaled $6.9 billion, compared with $7.9 billion last year and $8.7 billion in 2007. For the full weekend, sales slipped 2.1 percent to $18.8 billion compared with a year ago.

“Mother Nature was very unkind to retailers on Saturday,’’ Bill Martin, cofounder of ShopperTrak, said in a statement.

He added that the sales decline was the steepest for the Saturday before Christmas since it started reporting holiday sales figures in 2002.”

• 6) Schwarzenegger to seek federal help for California budget

“Facing another huge deficit, the governor wants $8 billion or threatens massive cuts in social services. He also plans to renew push for offshore oil drilling.”

“If Washington does not provide roughly $8 billion in new aid for the state, the governor threatens to severely cut back — if not eliminate — CalWORKS, the state’s main welfare program; the In-Home Health Care Services program for the disabled and elderly poor, and two tax breaks for large corporations recently approved by the Legislature, the officials said.

Schwarzenegger also will propose extending a cut in the state payroll that is scheduled to expire this summer. That cut has translated into 200,000 state workers being furloughed three days a month, the equivalent of a 14% pay cut. Lawmakers would have the option of extending the furloughs, imposing layoffs or some combination of the two. ”

• 7) $118 billion in treasury auctions in just three days?

“Record Auctions

The U.S. may sell $44 billion in two-year notes on Dec. 28, $42 billion in five-year debt the next day and $32 billion in seven-year securities the day after that, Wrightson ICAP LLC, an economic advisory firm in Jersey City, New Jersey, estimated.

A $44 billion two-year auction would match the record offerings of October and November. A $42 billion five-year sale and a $32 billion seven-year offering would equal the all-time highest issues set last month.

“When the U.S. has to fund its deficit through the combination of issuing more Treasuries and printing more dollars, it is inevitable that the dollar will continue to weaken,” Deputy Governer Zhu said on Dec. 17 at a forum in Beijing.

Efforts by the U.S. to cut its current-account deficit mean other nations accumulate fewer dollars through trade, leaving them with less money to buy Treasuries, Zhu said.”

• State still looking for jobs (Florida)

“Federal stimulus money has been a boon to the state”

“On a more positive note, the state ranked fourth in jobs created or saved (29,321) because of help from the federal government, according to the Government Accountability Office.

But any jobs gained or saved were swamped by the 284,000 lost during the last year. ”

• 9) FDIC Draws Brisk Bidding on Loans by Failed Banks

“Investors are jostling for the chance to buy a $1.1 billion package of commercial real-estate loans extended by failed banks, as these once-toxic assets attract growing interest.

More than a dozen investors, including Texas banker Andrew Beal, have submitted bids to the Federal Deposit Insurance Corp. for the portfolio of loans held by Franklin Bank, IndyMac Bank and other failed lenders, according to people familiar with the matter.

But the portfolio represents only a fraction of the real-estate loans held by the FDIC and the volume is mounting as more banks fail. ”

“But many banks won’t sell. Some, especially community and regional banks, haven’t marked down the value of their existing loan portfolios to current market rates—something that could jeopardize the survival of weaker lenders. Many hope the low cost of funds offered by historically low interest rates will let them earn their way out of trouble.”

“Since last year, the FDIC has sold residential and commercial loans through eight such partnerships, with the agency’s equity interest ranging from 50% to 80%. Those partnerships bought loans at discounts ranging from pennies on the dollar to more than 50 cents on the dollar of face value.

These structured deals, however, carry additional risk for the FDIC and, by extension, taxpayers. Because the agency takes a big chunk of the equity and provides financing, it stands to lose more if the markets continue to decline.”

• 10) Freddie Mac portfolio extends slide in November

“NEW YORK, Dec 23 (Reuters) - Freddie Mac’s mortgage investment portfolio shrank in November while the rate of delinquencies on the loans in guarantees escalated, the U.S. home funding company said on Wednesday.

The unpaid principal balance of its mortgage-related investments fell at a 12.9 percent annual rate last month to $761.8 billion, for a 5.8 percent through the first 11 months of the year.

The delinquency rate on its single-family mortgage portfolio jumped 18 basis points to 3.72 percent in November.”

• 11) U.S. States Look Abroad for Debt Buyers

“U.S. state governments, seeking to expand the pool of potential lenders as their borrowing balloons, are beginning to look offshore.

Illinois has registered bonds for sale in Europe as part of a $3.5 billion offering next week. New York State is considering tapping into foreign demand, and California Treasurer Bill Lockyer said last week that his state, the largest muni bond issuer, is considering peddling its taxable debt abroad.”

• 12) New York governor says deficit growing at $83 million per day since January

“Paterson said that tough choices are necessary to reverse a state deficit that has been growing by $83 million a day since January.”

“Paterson said his biggest challenge is to change the culture in Albany so that Democrats and Republicans are debating over which party is more fiscally disciplined.

“One wants to tax and spend, the other wants to borrow and spend, but they both want to spend,” he said.”

• 13) Arizona close to bankruptcy

“Over the weekend Arizona state lawmakers approved a budget for fiscal year 2010. Governor Jan Brewer said that these are, “the worst financial days ever.” Arizona still faces a $1.5 billion dollar deficit this year, and a projected $3.4 billion dollar shortfall next fiscal year.”

“Arizona State Representative Linda Lopez says Arizona is so close to bankruptcy, we could follow in California’s footsteps. April tax returns could come in the form of IOUs, instead of a check.”

• 14) Editor for the San Diego News Network writes on potential state defaults

““The worst case would be the mother of all financial crises. According to the California State Treasurer’s office, California has over $68 billion in public debt, but the Sacramento Bee’s Dan Walters has tried to count total California public debt, including that of local municipalities, and his total reaches $500 billion.

“Whatever the amount, the impact of default could be larger than the debt amount would imply. Other states - New York, Illinois, New Jersey, for example - are in almost as bad shape as California, and they could follow California’s example. The realization that a state could default would shock markets every bit as much as when Lehman Brothers failed. Given the precarious state of our economy and the financial sector, another fiscal crisis would be disastrous, with impacts far beyond California’s borders.””

• 15)  Jacksonville pension fund sparks debate

“For every dollar Jacksonville pays a police officer or firefighter in the next two years, the city must put another 49 cents into the pension fund.

That math is at the heart of the city’s argument for pension reform and claims that current costs cannot continue.

But those running the Police and Fire Pension Fund say years of decisions and trade-offs combined to produce that 49 percent contribution rate. ”

• 16) Atlanta Tackles Pension Problems

“Atlanta is joinging the many other state and local governments trying to deal with large increases in pension costs. Atlanta Mayor-elect Kasim Reed is forming a panel to look into the problem.

Reed has selected former AJC publisher, John Mellott, to head the group.

Atlanta`s pension costs are around $100 million or about 20% of the city`s budget.

Among the options Reed is willing to consider are changing the years to a person being vested in the plan from 10 to 15. He is also open to the city switching to Social Security.”

• 17)  NJ Gov cuts pension fund contributions by $100 million to balance budget

“TRENTON, N.J. (AP) - New Jersey Gov. Jon Corzine has whacked more than $800 million from the current state budget less than a month before leaving office, he said Tuesday as his successor announced preparations for steep reductions for the fiscal year ahead.

The $839 million in Corzine’s additional cuts include $100 million from eliminating the state’s contribution to the employee pension fund, $5 million from cancer research, $2.3 million from charter school aid and $607,000 from a hiring freeze at motor vehicle agencies.”

• 18) Will Pensions Bankrupt Your District? (Three pages long. Please take the time and read this one)

“In an effort to make up a large funding shortfall, Louisiana’s two largest teacher retirement systems will be raising their required employer contribution rates, one from 15.5 percent of salary to 20 percent, the other from 17.6 percent to 24.3 percent. Aguillard estimates the total increase will add between $2.3 million and $2.6 million to his district’s annual budget of $83 million. “ The rates are calculated by each retirement system, and we do not have any power to alter them,” Aguillard says, adding that the sudden rate increases “will have devastating impacts on our operating budget.”

A similar situation exists in nearly every state in the country. The financial state of the nation’s public pension funds—which provide the retirement incomes for all state employees but in most states are dominated by teachers, administrators and other school employees—has gone from bad to worse, and for most it is only projected to worsen in coming decades. A perfect storm of factors has combined in the past year. Long-term trends of insufficient state funding, ever-increasing payment obligations and retirees living longer than ever, coupled with the market crash at the end of 2008, have put most teacher retirement funds on a path to financial disaster. ”

• 19) Project to Aid Oakland Students Facing Foreclosure Fizzles

“Flynt noted that the Oakland school district identified 1,500 students as homeless for the 2008-09 school year, which entitled them to certain federally mandated services. The previous year, there were fewer than 1,000 such students.

Given the grim housing outlook, Oakland schools can anticipate even more homeless students in their classrooms. An analysis by the Urban Strategies Council found that one in 16 homes in Oakland has received a notice of default on its mortgage; one in 29 homes is in a trustee sale, the second stage in a foreclosure proceeding; and one in 77 residential properties is now owned by the lending bank.

By December 2010, another 3,711 adjustable rate mortgages on Oakland homes will reset higher, ushering in another wave of foreclosure. And with it will likely come another cohort of Oakland students on the brink of homelessness.”

• 20) Up to 45,000 people in Las Vegas have not made home payment in 18 months and got no notice of default

“Some analysts predict Las Vegas home prices will drop another 10 percent to 25 percent as more foreclosures flood the market.

Realtor Steve Hawks of Platinum Real Estate said there are more than 100,000 distressed homes in Las Vegas, including 70,000 already in some stage of foreclosure. He’s heard reports of 25,000 to 45,000 people who’ve been living in their homes for a year to 18 months without making a mortgage payment and have yet to receive a notice of default.”

• 21) Priest Tells People to Steal! Bankruptcies RISING (Video..Demcad)

(Click on “more info” to see his links)

• 22) One of Five Modified Loans Fails in 90 Days

“Mortgages that were modified in the second quarter of 2009, which had a greater proportion of modifications that reduced monthly payments, are re-defaulting at a lower than those modified earlier. But nearly one out of five borrowers is still re-defaulting only three months after the lowered payments took effect.”

• 23) Mendelsohn sees high double-dip risk

Granted the two headlines below are for different things, new versus
existing homes, but how much different of a take can you have on the
economy, both articles from the AP and the same writer and they really
stood out because I saw both of them as top stories on Yahoo finance one
day apart.

Yesterday (12/22/2009)

November existing home sales soar 7.4 percent

Washington — Home resales surged last month to the highest
level in nearly three years, reflecting an extraordinary level
of federal support hat has pulled the housing market back from
the worst downturn since the Great Depression.

Today (12/23/2009)

November new home sales sink 11 percent

Washington — Sales on new homes plunged unexpectedly last month
to the lowest level since April, a sign the housing market
recovery will be rocky.