Important News - Dec. 31

• 1) China: US Dollar Important For Reserves; 2010 Key Year

“BEIJING (Dow Jones)–The U.S. dollar will continue to be a key reserve currency in the near term and the main asset in China’s foreign-exchange reserves, but diversifying the country’s reserves “appropriately” will help spread out risk, China’s forex regulator said Thursday, reiterating Beijing’s currency stance as the year closes.”

• 2) Hedge funds wager on collapse of Japanese bond market

“Leading hedge funds managed by the likes of Hayman Advisors, Greenlight Capital and Perella Weinberg Partners are betting on a collapse of the Japanese government-bond market, according to a report in The Wall Street Journal.

A meltdown of Japanese sovereign-debt market, which is largely dominated by domestic investors, “is going to happen; it’s a question of when,” said Hayman chief Kyle Bass. ”

• 3) IMF:Global Reserves Up; Dollar Share Of Allocated Reserves Slips

“WASHINGTON (Dow Jones)–Data released by the International Monetary Fund on Wednesday showed global official foreign exchange reserves rose to $7.52 trillion at the end of the third quarter from $7.18 trillion at the end of the second quarter.

Allocated reserves stood at $4.43 trillion, up from $4.27 trillion in the previous quarter. The amount of allocated reserves held in U.S. dollars stood at $2.73 trillion, an increase from $2.68 trillion in the second quarter but below the $2.81 trillion recorded in the third quarter of 2008.

The data showed U.S. dollar reserves account for 61.65% of allocated reserve holdings, a decline from 62.82% in the previous quarter.

Euro holdings edged up to 27.75% from 27.42%, while sterling holdings rose to 4.34% from 4.30% and yen holdings climbed to 3.23% from 3.12%. ”

• 4) US slaps new duties on Chinese steel

“The US will impose tough new duties on Chinese steel piping imports, raising tensions with its biggest trading partner and emerging geopolitical rival.”

• 5) State faces fiscal abyss (New York)

“After months of plunging revenues and weeks of budget battles, New York had a negative balance of $174 million in its general fund on Wednesday, with nearly $1 billion in bills owed by day’s end. Every sign pointed to the account still being in the hole when 2010 begins. To fill the gap, New York will be forced to rely on its own version of overdraft protection by raiding its short-term investment pool — a kind of statewide checking account. But that account itself is dangerously low, with only about $800 million on hand, compared with a balance in more flush years of as much as $16 billion.”

• 6) Fitch Rates Illinois’ $3.5B GOs ‘A’; Assigns Watch Negative

“Despite issuing a total of $2.25 billion in short-term notes (in June and August), the state’s cash position is weak. Repayment of the notes will contribute to an increase in the accounts payable backlog by $2 billion to $5.9 billion by the end of this fiscal year, equal to 21% of general fund resources. The state continues to manage its budgetary deficit by deferring payments to vendors and others. ”

• 7) Governor: State workers should pay more pension costs (Mississipi)

(From page 2)

“Currently, taxpayers contribute about $700 million to keep the retirement system solvent for about 80,000 retirees and 167,000 active employees. The counties and municipalities that participate in the system pay the employer share for the workers under their umbrella.

The unfunded liability of Mississippi’s main pension system is about 33 percent, which basically means the state has 67 percent of the assets needed to fund the projected cost of promised benefits over a 30-year period. That gap has been steadily widening.”

• 8) New Jersey employers can expect large unemployment-tax increase in July

“New Jersey employers should expect to contribute more to the unemployment-fund tax in July — which could force businesses to pay between $300 and $1,100 more per employee.

The increase is meant to raise $1 billion for the state unemployment fund.

The program funding the state’s laid-off workers is broke. The tax meant to bolster it is not likely to come down for years, according to an online report by The Star Ledger.”

• 9) 4.82 million people collecting (unemployment) extended payments

“Today’s report showed the number of people who’ve use up their traditional benefits and are now collecting extended payments climbed by about 199,000 to 4.82 million in the week ended Dec. 12. ”

• 10) Total State Tax Collections (Wall Street Journal)

“State revenues fell 11% in the third quarter of 2009 versus the same period a year ago with big drops in sales and income taxes, according to a report released by the Census Tuesday. The report shows state and local governments are only now catching the full brunt of the recession.”

• 11) Forward with caution after exposing the Fed

We suspect in the future we will have an interesting phenomenon and that is a fall in the dollar, pound and the euro, as gold moves higher as the only viable alternative. The world is going to be shocked when the euro collapses. It won’t happen overnight. It will take a year or two, but it has a good chance of happening. The US dollar cannot and will not for some time to come be a safe haven for wealth. That is because the dollar and the US economy have been deliberately destroyed.

• 12) A Top A.I.G. Executive Quits Over Pay Limits (Samuel A.)

Best New Year Resolution Ever!

………Happy New Year!

Time to turn the computer off for a day (or two?), since I don’t expect much in the way of news until Monday. Stay tuned for the 2010 headlines, as they should be even more “interesting” than the ones from 2009.