Must-Know News - Feb. 04

• 1) Sovereign Credit Risk Surges to Record Amid Confidence ‘Crisis’

“Portugal and Greece led a surge in the cost of insuring against losses on sovereign debt to a record as concern that nations will struggle to cut budget deficits deepens a “crisis of confidence” in Europe.”

……………..1A) Greek Strikes Threaten Papandreou Deficit-Cut Plan

“Greece’s biggest union is set to approve the second mass strike this month, showing that Prime Minister George Papandreou’s parliamentary majority may not be enough to guarantee implementation of his plan to cut the European Union’s largest deficit.”

……………..1B) Portugal, Spain Lead Worldwide Decline in Stocks; Dollar Gains

“Feb. 4 (Bloomberg) — Stocks and bonds fell in Spain, Portugal and Hungary on concern governments will struggle to fund their budget deficits as spending cuts in Greece trigger strikes. The dollar rallied.

Spain’s IBEX Index dropped 2.2 percent to the lowest level since August at 10:19 a.m. in London, Portuguese credit-default swaps jumped to a record and the Budapest Stock Exchange Index declined 1.4 percent, the most in two weeks.”

……………1C) Portuguese Bonds Drop as Borrowing Costs Soar at Bill Auction

“Feb. 3 (Bloomberg) — Portuguese bonds slid, pushing the yield on the 10-year note up by the most in 11 months, as the country’s borrowing costs soared at a sale of bills on concern the government will fail to curb its budget deficit.”

• 2) Gold to Reach $1,500 as Haven Status Restored, Nichols Says

“Gold will climb to $1,500 an ounce and silver will top $25 this year as the dollar loses its haven status, according to Jeffrey Nichols, managing director of American Precious Metals Advisors.

“Fear of sovereign debt defaults by one or another European country could benefit the dollar and temporarily hurt gold,” New York-based Nichols said in an e-mail to Bloomberg yesterday. “But gold is the ultimate safe haven and the dollar, without the support of sound monetary and fiscal policies, is a depreciating asset.” ”

• 3) US Public Health Care Spending Hits Record High

“The paper estimated that U.S. health spending hit $2.5 trillion in 2009, up 5.7 percent from the previous year. That represents 17.3 percent of gross domestic product, up from 16.2 percent in 2008, because the overall economy shrank last year. A decade from now, health spending is projected to hit about $4.5 trillion a year.

Growth of Medicaid accounts for much of the shift toward publicly funded health care. The paper predicted enrollment in Medicaid would rise 5.6 percent this year and spending would rise 8.9 percent.

Meanwhile, the number of people with private health insurance is falling slightly because of high unemployment.

Many states are having trouble funding their share of Medicaid. President Barack Obama’s budget proposal for the fiscal year beginning Oct. 1 calls for $25 billion in federal help for covering Medicaid costs.

Over the longer term, the public share of health spending is expected to rise further because the first baby boomers will turn 65 in 2011 and become eligible for Medicare.”

• 4) UK consumer debt reaches £56,000 per household

“Figures from the National Audit Office revealed that personal debt in the UK has reached a massive £1.5 trillion as the downturn continues to impact upon consumer finances. This figure of £1.5 trillion includes credit cards, mortgages and personal loans and equates to a debt for each UK household of £56,000, 60% higher than the average household income and the highest figure ever.”

• 5) Japan MOF (Finance Ministry) sees 25 pct rise in borrowing by 2013/14

“Still, these estimated show Japan’s borrowing needs will continue to rise as the aging in population boosts welfare spending and its snowballing debt pushes up debt servicing costs.

The increased borrowing also would not account for any additional costs that will arise if the ruling Democratic Party carries out its campaign pledges, which included full payouts to households with children, a ministry official said.

Ratings firms have warned the lack of a plan to curb its debt could lead to credit downgrades.”

• 6) State budget deficit balloons to $8.2 billion (New York)

“ALBANY — Gov. David Paterson announced Wednesday that the state’s budget deficit for the coming fiscal year was $750 million higher than projections just two weeks ago, largely because of lower than expected income-tax revenue from Wall Street and higher Medicaid costs.

The estimates bring the state’s deficit for the 2010-11 fiscal year, which starts April 1, to $8.2 billion, up from $7.4 billion when Paterson introduced his budget proposal Jan. 19.”

• 7) Pennsylvania State Capital Mulls Bankruptcy as a Budget Option

“Feb. 4 (Bloomberg) — Harrisburg, the capital of Pennsylvania, will consider Chapter 9 bankruptcy protection along with tax increases and asset sales as options to address $68 million in debt service payments due this year, the chairwoman of a City Council committee said last night. ”

• 8) U.S. 5Y Treasury CDS spread widest since April-CMA

“NEW YORK, Feb 4 (Reuters) - The cost of insuring U.S. government debt against default over five years rose on Thursday to its highest level since April 2009, amid jitters over rising sovereign risks, according to CMA DataVision.”

• 9) GMAC posts $5 billion Q4 loss

“NEW YORK (Reuters) - GMAC Financial Services, a lender that is majority-owned by the U.S. government after multiple bailouts, said it lost $5 billion in the fourth quarter after writing down bad mortgage assets.”

…………………..9A) GMAC Reports Record Loss on Home Mortgage Defaults

………………….9B) GMAC Cuts More Than 500 Jobs in Mortgage, Auto Finance Units

• 10) New US jobless claims rise unexpectedly to 480,000 (and 5.6 million now on extended benefits)

“But the so-called continuing claims do not include millions of people who have used up the regular 26 weeks of benefits typically provided by states, and are receiving extended benefits for up to 73 additional weeks, paid for by the federal government.

More than 5.8 million people were receiving extended benefits in the week ended Jan. 16, the latest data available, up from about 5.6 million the previous week. The extended benefit data isn’t seasonally adjusted and is volatile from week to week.”

• 11) Arbitrator sides with CTA on plans to lay off more than 1,000 union workers next week (Chicago)

“Unless the union and the CTA reach a last-minute deal on pay cuts, 1,067 workers will be laid off on Sunday.

CTA is making service cuts in conjunction with the layoffs, which will reduce frequency of service on seven CTA rail lines, eliminate nine express bus routes and reduce frequency of service on 119 bus routes and hours on 41.”

• 12) Foodbank says need rising in Hawaii

“The Hawaii Foodbank distributed 1 million more pounds of emergency food in the last fiscal year than it did the previous year, reflecting an upward trend that has seen a nearly 40 percent rise in demand over the past four years.”

“Hawaii Foodbank director of development Polly Kauahi said the rise is mainly attributable to a spike in demand over the last year as job furloughs, pay cuts, layoffs and other effects of the economic downturn have destabilized many Island households.”

• 13) Moody’s: negative outlook on Lithuania’s ratings

“Moody’s Investors Service said Thursday the outlook on the Lithuanian government’s ratings is negative, reflecting the persistent impact of the recession on its financial strength. The credit rating agency also said it will assign a Baa1 rating to Lithuania’s U.S. dollar global bond maturing in 2020. “The debt to GDP ratio is likely to reach almost 50% of GDP by 2012, which is very high for a country with a currency board. ”

• 14) Moody’s Lowers New York’s MTA Rating On Revenue Woes

” It said the MTA faces a 2010 budget shortfall of about $391 million, representing about 4% of projected revenues pledged to debt service on the Transportation Revenue Bonds. ”

• 15) Moody’s Lowers Outlook On Hawaii To Negative From Stable

“The state late last spring closed a combined budget gap of $2.7 billion for fiscal years 2009 through 2011. The state now faces another budget gap of $1.2 billion for the two-year period, representing about 12% of revenue.”

• 16) Alameda Corridor debt is downgraded

“Moody’s Investors Service has downgraded $1.7 billion in bonds for the Alameda Corridor Transportation Authority, which oversees the 20-mile rail route built to speed the flow of cargo from the ports of Los Angeles and Long Beach to retail shelves across the U.S.

Moody’s on Wednesday lowered ratings on the senior lien bonds to A3 from A2 and subordinate lien bonds to Baa1 from A3. It also put the ratings on a watch list for possible further downgrades.”

• 17) Connecticut Would Borrow $1.3 Billion for Budget Fix

“Connecticut, the state with the highest tax-supported debt, may sell bonds backed by revenue from electric-bill surcharges to raise $1.3 billion to help close a budget gap under a plan from Governor Jodi Rell.

Connecticut should issue the securities this year because the state’s “cash position” was depleted after lawmakers drew down the $1.4 billion rainy day fund as tax revenue plummeted, according to a report the governor released today. The state faces a deficit of $535 million this year and $725 million in the year starting July 1 even with the one-time budget fixes, the Legislature’s fiscal analysis office said today.”

• 18) NV gov. recommendations fall short of deficit

“Budget reductions recommended by Gov. Jim Gibbons’ office late Wednesday include laying off 234 workers, roughly 10 percent spending cuts to education and most other agencies, and closing the aging Nevada State Prison in Carson City.

But even if all the governor’s recommendations were enacted, they’d cover less than half the anticipated $880 million funding gap facing the state for the rest of the biennium that ends June 30, 2011 _ meaning more cuts or added revenues must be found.

“We’re squeezing the blood out of every rock,” Chief of Staff Robin Reedy said after a three-hour meeting with legislative leaders.”

• 19) Toledo to discuss deficit with state auditor (fiscal emergency?)

“The city is facing a $43.8 million general fund deficit for 2010.”

“Toledo could be labeled as a fiscal-watch city, which is a warning label, or in fiscal emergency.

If Toledo would be declared in “fiscal emergency,” a seven-member financial planning and supervision commission would be empowered to advise the city on its spending decisions.”

• 20) County’s revenue shortfall now at $144 million (Baltimore)

“Baltimore County’s budget woes have deepened.

County Auditor Mary Allen told members of the county’s Spending Affordability Committee on Tuesday that revenues continue to decline from projections — and are now $144 million below what the county had expected.

That number represents a shortfall that has grown by $6 million over the $138 million revenue deficit reported in December.

Lower than expected income and property taxes for the current budget year, which ends June 30, continue to drive the growing deficit, according to Allen”

• 21) Steinhaus: County faces economic challenges (New York)

“Dutchess County Executive William Steinhaus’ 2010 State of the County, released Tuesday, includes a grim warning that if the state — faced with a $7.4 billion deficit — delays reimbursement of funds in the coming months, the county could be forced to borrow to pay its bills.

The county has “not been in the position of short-term borrowing in over 20 years,” said Steinhaus, a Republican.”

“In the past two years, the county saw a 62 percent rise in applications for home heating assistance and a 34 percent increase in social services cases, as foreclosures have risen 35 percent. However, revenues have fallen, with a projected $6.5 million less in sales tax in 2009 and a decline of $1.5 billion in assessed property values.”

• 22) New York’s mayor presents two grim economic pictures for the city (4,286 job cuts?)

“The city faces a staggering $4.9 billion deficit for 2011. This year’s $2.9 billion surplus has gone; it was spent on reducing next year’s deficit and paying bills and bond repayments. To close the gap, Mr Bloomberg is ordering every city agency to make cuts—the seventh round he has ordered since early 2007. That should save the city $1.6 billion over the next two years.

The mayor has proposed closing four city swimming pools and a Manhattan centre for the homeless. He has also suggested removing fire-alarm boxes from city streets, to stop hoax calls. Mr Bloomberg wants to reduce the city payroll by 4,286. Every department, from police to libraries, faces cuts. ”

• 23) Yale, With $150 Million Deficit, Plans Staff and Research Cuts

“Yale University announced on Wednesday that it planned a number of steps to close a remaining $150 million budget gap, including cutting staff, freezing salaries for deans and officers, reducing the number of graduate students — even turning down all thermostats to 68 degrees.”

• 24) Coin Composition Changes Proposed Yet Again, but Now in Obama’s Budget

“Titled “Other Savings: Coinage Material - Department of the Treasury,” the proposed section seeks to grant the Department of the Treasury authority to change the composition and weights of the most common circulating coins: the penny (cent), the nickel, the dime, the quarter and the half dollar.”

“According to the 2009 Annual Report recently released by the United States Mint, the total cost of producing a cent was actually 1.62 cents, for a net loss of .62 cents on each one. The nickel, only worth five cents, actually took 6.03 cents to strike during the last fiscal year, losing the Mint 1.03 cents a piece. With these figures firmly in mind, it is easy to understand why some parties are concerned with the costs associated in making the coins.”

• 25) NY judge orders foreclosure sale of middle-class Harlem housing complex

“The decision by State Supreme Court Justice Richard Braun, released Tuesday, called for the auction of the gated community and its 1,232 apartments, which were built in the 1940s. ”

Court figures show Florida foreclosures increasing

Chicago foreclosures soar in 4th quarter

Mansion condos in flux as building is sold in foreclosure (Atlanta)

Apartment foreclosure to spike rents

Foreclosure rate soars in Stockton

Foreclosures Still On The Rise Across Oregon

Fannie Mae Violates Its Own Policy By Throwing Tenants Out After Foreclosure

Foreclosures Hit Wealthier Chicago Neighborhoods

Vegas Sales Up as Foreclosures Remain Dominant

Foreclosures set January record (Boulder County)

• 26) Taleb Says ‘Every Human’ Should Short U.S. Treasuries

“Feb. 4 (Bloomberg) — Nassim Nicholas Taleb, author of “The Black Swan,” said “every single human being” should bet U.S. Treasury bonds will decline, citing the policies of Federal Reserve Chairman Ben S. Bernanke and the Obama administration.

It’s “a no brainer” to sell short Treasuries, Taleb, a principal at Universa Investments LP in Santa Monica, California, said at a conference in Moscow today. “Every single human being should have that trade.” ”

(Thanks zerohedge for noticing that one)

- Saxplayer00o1