Monday, June 22, 2009

Required Reading: Monday, June 22nd 2009

Don't believe the hyperinflation hype - dare to make cuts – Telegraph, Ambrose Evans-Pritchard

Flush from last year's 234pc rise in their Black Swan Fund, they are betting that quantitative easing and war-time deficits have sown the seeds of inflation reaching "10pc, 15pc, 20pc, or more". They capture the mood of the times, but are they right?

We know that the Fed's balance sheet has exploded (to $2.07 trillion), but that is only half the story. Data from the St Louis Fed shows that the "monetary multiplier" has collapsed from a decade-average of 1.6 to the depths of 0.893. The "velocity" of money has slowed to a crawl.

Starbucks to grind and brew coffee more frequently – The Los Angeles Times

Starbucks Corp. plans to start grinding and brewing coffee more frequently in U.S. stores to ensure fresh batches are always available.

Baristas will refresh each container of coffee about every 24 minutes, said Sanja Gould, a spokeswoman for Seattle-based Starbucks. As stores typically have three batches going at once, a new pot could be ready as often as every eight minutes, she said.

Foreclosure numbers don’t add up – The Atlanta Journal Constitution

What’s the right number? That’s a surprisingly difficult question to answer.

At a time when an explosion in the number of distressed mortgage loans has emerged as the most pressing economic issue in decades, there is no official government source for foreclosure statistics.

Private companies across the country tabulate statistics and produce estimates of national and local foreclosure trends. The best known among these is RealtyTrac. The California-based company, the source of the April statistics for Atlanta, has repeatedly faced questions about the accuracy of its data.

The lack of solid foreclosure information makes it difficult for policy makers to fashion solutions that make sense. Even now, Congress is debating dramatic changes to laws that govern mortgage lending without the benefit of detailed data about foreclosures.

Kung fu master cracks record 4 coconuts with finger – Breitbart News

A kung fu master has jabbed his way into the Malaysian records book after piercing four coconuts with his index finger in a little over 30 seconds, a newspaper reported on Monday.

World Bank Cuts Forecast for Developed Economies – The New York Times

The bank earlier this month said it expected a deeper global recession, forecasting a 2.9 percent contraction in gross domestic product for this year, rather than 1.7 percent, as it projected as recently as March.

More detailed forecasts released Monday showed that much of this pain will be in high-income areas like the euro zone, the United States and Japan. The bank said that it expected economies in high-income nations to contract a total of 4.2 percent this year.

It expects the U.S. economy to shrink 3 percent and the euro zone 4.5 percent, rather than the 2.4 percent and 2.7 percent it forecast in March. For Japan, the World Bank now projects contraction of as much as 6.8 percent this year — significantly higher than the 5.3 percent it forecast three months ago.

Moody’s Joins S.& P. in Warning on California Debt – The New York Times

The state of California is facing a multinotch downgrade of its debt if it fails to resolve its budget woes, Moody’s Investors Service said Friday.

The warning follows a similar one from Standard & Poor’s, which put the state on a negative credit watch earlier this week because of its dismal financial condition.

“If the legislature does not take action quickly, the state’s cash situation will deteriorate to the point where the controller will have to delay most nonpriority payments in July,” Moody’s said. “Lack of action could result in a multinotch downgrade.”

The Housing Wealth Effect? – Calculated Risk

Here we go again on this hotly debated topic: How much do changes in house prices impact consumption?


Trucks Sit Idle; Rail Traffic Horrific – Mish

Five Things: What Really Caused the Debt Crisis – Minyanville, Kevin Depew

Reports of Economy's Recovery Have Been Greatly Exaggerated – Minyanville, John Mauldin

Ben Bernanke's career will be analyzed and written about for many years. But the one thing that's caused me the most pain is his bringing the term "green shoots" into the investment lexicon. These may be the 2 most overused and annoying words I've encountered in my investment career. Every possible sign of a recovery is described in this way.

Analysts have lately tended to interpret numbers or statistics that are "less bad" as signs of recovery. They glance back at previous recoveries and say, "Now looks like then. When such and such happens, it means that recovery is on the way. Therefore, we should buy stock (or whatever)."

We're on a track that looks far more like the Great Depression than the recessions of our lifetimes. To expect a normal recovery cycle -- whether it's corporate profits, lending, consumer spending, capital investment, or any other --  just isn't reasonable. This is a period that's  different in so many ways. And the recovery -- and there will be one!-- will also be of a different warp and woof throughout the entire world economy.

Budget crisis forces deep cuts at Calif. schools – MyWay

Slammed by an epic housing bust and massive job losses, California faces a $24 billion budget deficit and could run out of cash by late July if Gov. Arnold Schwarzenegger and the Legislature cannot reach a budget deal.

To balance the budget, the governor has proposed closing more than 200 state parks, releasing prisoners early, selling state property, laying off state workers and cutting health care.

Under the governor's plan, K-12 schools and community colleges would lose $5.3 billion over the coming year - on top of billions of dollars in recent reductions and payment delays.

The state would spend $7,806 per K-12 student in 2009-10, almost 10 percent less than two years ago, according to the Legislative Analyst's Office.

Harvard: Housing recovery yet to emerge – The Orange County Register, Lasner On Real Estate

The U.S. housing market will rebound eventually, according to a Harvard University report. Demographics and underbuilding are conspiring to up demand and revive home prices.

But that day still is a long way off, perhaps not until sometime after 2010, the university’s Joint Center for Housing Studies said in its 2009 State of the Nation’s Housing report.

US To Trade Gold Reserves For Cash Through – The Onion

US To Trade Gold Reserves For Cash Through