February 15, 2015

Bits Bucket for February 15, 2015

Post off-topic ideas, links, and Craigslist finds here.

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Comment by Professor Bear
2015-02-15 04:58:07

Why does the MSM make a huge fuss after any decline in stock prices, yet mostly ignores a huge selloff in Treasurys? Isn’t the bond market far larger in value than the stock market?

Comment by CA renter
2015-02-15 05:19:46

Nobody ever really likes to talk about the bond market…it’s just not sexy enough, apparently. That’s always seemed odd to me, too.

Comment by Professor Bear
2015-02-15 07:42:56

It’s gonna get sexy again when the bubble pops and all the old folks who put money there for safety lose a bundle.

Comment by Shillow
2015-02-15 09:59:07

Lose? No one loses anymore it’s bailouts all the way down.

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Comment by Raymond K Hessel
2015-02-15 10:31:15

Taxpayers and future generations lose big-time.

Comment by Shillow
2015-02-15 15:46:27

Just keep borrowing and printing, it’ll be fine.

Comment by Professor Bear
2015-02-15 18:57:38

ft dot com > Comment >
The Big Read
February 15, 2015 7:04 pm
Corporate bonds: Emerging bubble
Jonathan Wheatley
Signs of distress are appearing in companies’ debt
A helicopter flies over the skyline of Sao Paulo February 12, 2015. REUTERS/Paulo Whitaker (BRAZIL - Tags: TRANSPORT SOCIETY CITYSCAPE)©Reuters

A decade ago, the market for EM hard currency corporate bonds hardly existed. Today, it is bigger than the US high-yield corporate bond market, an asset class familiar to investors for decades, and more than four times the size of Europe’s high-yield bond market.

What has driven such extraordinary growth? In just a few years before the global financial crisis of 2008-09, emerging markets won over the world’s investors. In 2001, Goldman Sachs identified the Bric economies — Brazil, Russia, India and China — as the new engines of global growth. Chinese demand drove a commodity boom that helped billions of people rise out of poverty and into the consuming classes.

After the crisis, the developed world’s expansionary monetary policies kept the party going, pushing cheap credit to EM consumers and sending ever more foreign money into EM assets. Emerging companies, many able to tap overseas markets for the first time, embarked on a borrowing spree. Yield-hungry foreign investors were happy to help.

David Spegel, global head of EM sovereign and corporate bond strategy at BNP Paribas, has been following hard currency EM corporate bonds since 1994. His figures show that the value of such bonds in the market has grown from $107bn then to more than $2tn today.

But with Brazil’s economy imploding, China slowing and dark shadows over markets from Venezuela to Russia and Ukraine, some analysts worry that the party has gone on too long.

Stuart Oakley, global head of EM foreign exchange trading at Nomura in London, points to how easily things could go wrong. “It is entirely possible that we could see a default by a big, emerging market commodity exporting corporate,” he says.

“In that scenario you would get people redeeming money from big EM asset managers, bids for the bonds from banks would dry up, there would be sharp price drops on those and all associated assets and a sell-off across this or another asset class.”

Fears of a rout

One source of danger is that the EM corporate bond market, pumped up by years of often indiscriminate buying, is still being engorged by a search for yield among global investors. It is also showing alarming signs of distress at a time when the ability of the financial system to handle trades between buyers and sellers is much reduced, increasing the risk that any sudden exit could quickly turn into a disorderly rout.

Part of the problem stems from the bond-buying schemes launched by the US Federal Reserve and other central banks to revive growth after the financial crisis. The aim of these “quantitative easing” programmes is to lower borrowing costs across the bond markets, especially for corporate issuers. As yields have fallen in one asset class, such as investment grade US corporate bonds, they have dragged down yields across other classes, such as US high-yield and EM corporates.

For investors in search of yield, this has been traumatic. As noted recently by Zoltan Pozsar, a former senior adviser at the US Treasury, while the yield on the benchmark US Treasury bond has fallen from 6 per cent in 2000 to less than 2 per cent today, the returns sought by many US public pension funds have barely changed at about 8 per cent. Other big institutional investors also have imperatives that are hard to satisfy by investing in what are usually seen as safe assets.

The result is known as “forced buying” — asset managers buying assets outside their usual area of expertise because they have to put their clients’ cash to work somewhere.

“If I give my money to an asset manager, German Bunds and US Treasuries don’t cut it,” says Mr Oakley at Nomura. “From retail investors to big institutions, people have been pushed further down the curve into riskier assets.”

This has led to a process that Sergio Trigo Paz, head of EM debt at BlackRock, calls “shut your eyes and buy”. Many crossover investors, who are new and often far from committed to emerging markets, have driven up the price of some bonds even as risks have become more apparent.

This, says Kathleen Middlemiss, head of Emea and Latin American credit research at UBS, has been going on for years. “The question is, how long can you sit on the sidelines of a rally, even if you don’t think it makes sense?” she says. “Investors have become way too complacent.”

Surge in downgrades

Only in the past few months have they become more cautious — and with good reason. Mr Spegel at BNP Paribas points to a deterioration in credit quality, illustrated by a recent sharp increase in the number of bonds being downgraded by the three big rating agencies.

In the last quarter of 2014, he notes, there were 111 more downgrades than upgrades for EM corporate bonds, up from 26 in the third. This year, there were a net 56 downgrades in January alone.

“If you look at the history of investment flows to EM, it very closely tracks the credit cycle,” he says. As the rate of downgrades increases, “borrowers can’t raise money in the bond markets, which further exacerbates the default cycle, which leads to more downgrades, and you’re in a negative feedback loop.”

Adding to the danger is the recent steep fall in global oil prices since last summer. More than 30 per cent of EM hard currency bonds have been issued by energy related sovereigns and corporates and the banks that are exposed to them. According to one industry estimate, every $10 fall in the price of oil leads to lost earnings in the EM corporate bond universe of $25bn a year.

Does this presage a wave of defaults? Few analysts expect that. Mr Spegel sees the value of EM corporate defaults rising to $15bn this year, up from $12bn last year.

Even in Venezuela and Ukraine, two countries where sovereign defaults are largely priced in, investors expect some form of restructuring rather than outright default. Some Ukrainian corporates, all of which could be expected to restructure in the wake of the sovereign, are already negotiating exchanges, extensions or other restructuring with their bondholders.

Flight to quality

The greater danger is that investors start to leave the asset class altogether. That could be triggered by a default, but also by a much lesser event. If a bond falls sharply in price, any investor who has borrowed money to buy it — as hedge funds habitually do — will have to sell others to make up the loss. Such waves of selling can spread quickly, not only to other bonds but also to other asset classes.

The likelihood of this is greater because of changed conditions on secondary markets, where bonds are traded, as opposed to on primary markets, where they are issued.

Quantitative easing has pumped up the primary markets but, since the financial crisis, regulatory and other changes have caused a drought of liquidity on secondary markets. Investment banks that used to hold large inventories of bonds on their books can no longer do so. Analysts at UBS say the volume of assets held by banks is half the level of five years ago, while the volume of assets held by investors is four times what it was.

“When there are bouts of buying there are no sellers and when there are bouts of selling there are no buyers,” says Mr Spegel. “It creates the perfect environment for distressed markets to get worse. This is the year of negative feedback loops.”

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Comment by Ben Jones
2015-02-15 19:02:43

‘After the crisis, the developed world’s expansionary monetary policies kept the party going, pushing cheap credit to EM consumers and sending ever more foreign money into EM assets. Emerging companies, many able to tap overseas markets for the first time, embarked on a borrowing spree. Yield-hungry foreign investors were happy to help.’

It’s gonna be a disaster.

Comment by Blue Skye
2015-02-15 19:34:40

“crossover investors”

a real cross-vestor disaster.

How can all these analysts be so tepidly optimistic when the underlying asset of the mania has not only stopped going to the moon, but has already collapsed 50%? Most of these companies could only make it to next year if prices kept rising.

Comment by Professor Bear
2015-02-15 21:27:19

“It creates the perfect environment for distressed markets to get worse. This is the year of negative feedback loops.”

Is anyone planning to sell a home this year? I’d be curious to here if you are worried that global financial turmoil may thwart your plans. Are you preparing for the contingency of another 2008-style global financial meltdown as you get ready to sell your home?

Comment by Royal Jelly
2015-02-15 08:00:58

“Why does the MSM …”

(my bought-and-paid-for-lackeys)

“… make a huge fuss after any decline in stock prices …)

(because you ignorant pukes have been conditioned to give a sh1t)

“… yet mostly ignores a huge selloff in Treasurys?”

(because the action - THE ACTION - is with stock prices, prole, not with bond prices. You ignorant pukes have been conditioned to pay attention TO ACTION and we, The Anointed ones, have decided that you should pay attention to the action of stocks and not bonds.)

(and pro football, we, The Anointed Ones, have decide that you should pay attention to what goes on with pro football, and by golly you do! And other sports as well!)

Comment by rms
2015-02-15 09:09:30

…aka Bread and Circuses.

Comment by Selfish Hoarder
2015-02-15 08:31:18

I would expect people selling their longer maturities to trade them in on shorter maturities such as two year notes and tBills.

Also this money seems to be going into stocks, which are already too high.

My gut feeling is that if the bond sell off continues another couple of years there will be a spike in stock prices and then followed by a rush to the exits.

The excess cash will go into precious metals in that scenario because there is a vacuum. Gold is about 15% above its five year low.

Comment by Professor Bear
2015-02-15 05:02:48

Are Grexit fears a fleeting memory?

Comment by Professor Bear
2015-02-15 05:04:48

ft dot com
All Grexit needs is a few more bad weeks
Wolfgang Münchau

The first two weeks after Syriza’s victory in the Greek elections had the effect I feared. A sceptical northern European public was converted into a hostile one.

We saw Yanis Varoufakis unilaterally dismissing the troika — the technocrats who oversee Greek economic policy. We followed with amazement how the Greek finance minister staged a grand European tour like a rock star. We saw him walking into a meeting with hedge fund managers in London and posing outside Downing Street. By the time he reached Berlin on Thursday, German politicians and the media were more hostile than ever. By Friday, Athens found itself isolated at a meeting of finance officials in Brussels.

Politically, the situation is now as bad as it was in 2010 when the Greek debt crisis began. It was an utterly disastrous week of economic diplomacy. All that separates us from Grexit are a few more weeks like that one.

Comment by Oddfellow
2015-02-15 09:52:03

“It was an utterly disastrous week of economic diplomacy.”

In other words, the Greeks aren’t bending over and grabbing their ankles over any more.

Comment by Raymond K Hessel
2015-02-15 10:33:56

Trust me, the new Greek leadership will be blackmailed into grabbing their ankles forthwith, especially if capital flight continues. But at least unlike the 95% of the ‘Murican electorate who grabbed their ankles in 2008 and 2012 for the Republicrat duopoly’s status quo, the Greeks put up resistance first.

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Comment by Raymond K Hessel
2015-02-15 10:53:01

Unlike the 95% of the American electorate who tossed Wall Street’s salad by voting for its annointed Republicrat candidates in 2008 and 2012, and will do so again in 2016, the Greeks and Germans are starting to demand that their governments stand up to the corrupt and larcenous .1% that is steering the Troika’s policies.


Comment by Oddfellow
2015-02-15 12:18:08

The next few weeks should tell.

Comment by RioAmericanInBrasil
2015-02-15 15:51:40

“(Greek finance minister) Varoufakis described the austerity measures as “trying to extract more milk from a sick cow by whipping it.”

“You will kill it. You will not get more milk out of it.”

Comment by Professor Bear
2015-02-15 21:36:33

The Wall Street Journal
Deadline for Greek bailout agreement looms
Published: Feb 15, 2015 11:33 p.m. ET
Protesters take part in an anti-austerity pro-government demonstration in front of the parliament in Athens February 11, 2015.
By Gabriele Steinhauser
Bertrand Benoit

After two steps back and one forward last week, it is crunch time in the talks over Greece’s finances—and its future in Europe’s currency union. Talks start in earnest at a meeting of eurozone finance ministers in Brussels on Monday night.

Any changes to the content or expiration date of Greece’s existing €240 billion ($273 billion) bailout have to be decided by Friday, to give national parliaments in Germany, Finland and the Netherlands enough time to approve them before the end of the month. Without such a deal, Greece will be on its own on March 1, cut loose from the rescue loans from the eurozone and the International Monetary Fund that have sustained it for almost five years.

Comment by Professor Bear
2015-02-15 05:06:50

Got snow?

Comment by azdude
2015-02-15 06:32:01

snowpack in central sierras is a terrible. I umagine the ski season has been in the dumps. We will be in for a long summer if we dont get some rain in next two months.

Comment by Selfish Hoarder
2015-02-15 08:33:08

My part of Orange County is in a hilly area. Lots of brush. Going to be another scary fire danger year.

Comment by Little Al
2015-02-15 23:53:30

I was already getting ready to plant my garden in Los Angeles today. I have not seen one morning of frost this Winter. Anyone who denies global warming needs to step away from Fox faux reporting and face the reality of our times.

Comment by Housing Analyst
2015-02-16 22:35:10

You really like petunias and pansies that much?

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Comment by Blue Skye
2015-02-15 07:01:56

The water will be high when this all melts.

Comment by Professor Bear
2015-02-15 07:47:36

Was definitely thinking about your end of North America!

Comment by Royal Jelly
2015-02-15 08:32:18

You mean MY end of North America.

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Comment by Housing Analyst
2015-02-15 05:13:46

Rocklin, CA List Prices Dive 20% YoY; Excess Inventory Balloons As Speculators Slash


Comment by jd3
2015-02-17 11:03:16

One nit to pick..text says Rocklin, link is to Placerville.

Comment by CA renter
2015-02-15 05:17:23

Hi, PB!

Just saw you on here at this ridiculous hour and wanted to say hello. Hope all is going well with you and your family! :)

The markets are still crazy. Wish we had a crystal ball. I shorted the DIA and SPY last year and lost because the crazies still have control of everything. Should have been happy with the success in shorting ahead of the financial crisis. Some people never learn…markets always go up, and the Fed/govt will always be there to bail everyone out. Oh well!

I’ve not been able to read here as regularly as I used to, but still pop in every now and again and love seeing many of the original posters here.

Comment by Housing Analyst
2015-02-15 05:19:47

Never follow the lead of degenerate gamblers.

Comment by Professor Bear
2015-02-15 07:46:00

I was up washing dishes…a sort of late night Valentines Day gift for my wife, who was too tired to muster the effort.

Comment by phony scandals
2015-02-15 07:58:23

“a sort of late night Valentines Day gift for my wife, who was too tired to muster the effort.”

I won’t ask why she was too tired to muster the effort but I will say…

Way to go Dawg. :)

Comment by Professor Bear
2015-02-15 08:12:27

If only…

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Comment by Royal Jelly
2015-02-15 08:09:35

“I shorted the DIA and SPY last year and lost because the crazies still have control of everything.”

No, you lost because we, The Anointed Ones, have decided that you should lose.

“The markets are still crazy.”

Wrong! The markets are doing just what they should be doing and that is returning ignorant proletariat money back into the hands of its rightful owners, The Anointed Ones.

“Some people never learn …”

And there it is.

Comment by scdave
2015-02-15 08:31:12

Nice to here from you again CA…

Comment by Selfish Hoarder
2015-02-15 08:37:22

I am leery about puts and gets on anything. My preference is limits. When my limit expires it just returns to cash. As for the S&P 500, when your average buy level is at 900 through decades of dollar cost averaging, you don’t wast time worrying that it is at 2090. You just enjoy the dividend reinvestments and continue to dollar cost average.

Comment by Professor Bear
2015-02-15 19:02:32

P.S. Hope all is well with you and yours.

As for puts, I tried those when we all saw the homebuilders were going into the toilet. The share prices took a lot longer to drop than the time until my (long-term) puts expired. I suspect one game played by investors with tremendous fire power is to write puts on assets which are clearly headed into the crapper, then manipulate share prices to hold them aloft until after said puts expire. Efficient market theory does not work when you buy puts on assets which anyone with half a brain can tell are going to crash, yet the prices take forever to reflect fundamentals.

Comment by phony scandals
2015-02-15 07:48:06

I’m getting a whiff of False Flag here.

“No bank has come forward acknowledging the theft, a common problem that President Obama alluded to on Friday when he attended the first White House summit meeting on cybersecurity and consumer protection at Stanford University. He urged passage of a law that would require public disclosure of any breach that compromised personal or financial information.”

Bank Hackers Steal Millions via Malware


PALO ALTO, Calif. — In late 2013, an A.T.M. in Kiev started dispensing cash at seemingly random times of day. No one had put in a card or touched a button. Cameras showed that the piles of money had been swept up by customers who appeared lucky to be there at the right moment.

But when a Russian cybersecurity firm, Kaspersky Lab, was called to Ukraine to investigate, it discovered that the errant machine was the least of the bank’s problems.

The bank’s internal computers, used by employees who process daily transfers and conduct bookkeeping, had been penetrated by malware that allowed cybercriminals to record their every move. The malicious software lurked for months, sending back video feeds and images that told a criminal group — including Russians, Chinese and Europeans — how the bank conducted its daily routines, according to the investigators.

Then the group impersonated bank officers, not only turning on various cash machines, but also transferring millions of dollars from banks in Russia, Japan, Switzerland, the United States and the Netherlands into dummy accounts set up in other countries.

In a report to be published on Monday, and provided in advance to The New York Times, Kaspersky Lab says that the scope of this attack on more than 100 banks and other financial institutions in 30 nations could make it one of the largest bank thefts ever — and one conducted without the usual signs of robbery.

The majority of the targets were in Russia, but many were in Japan, the United States and Europe.

http://www.nytimes.com/2015/02/15/world/bank-hackers-steal-millions-via-malware.html -

Comment by Raymond K Hessel
2015-02-15 10:35:15

I thought only bankers were allowed to steal from banks.

Comment by Housing Analyst
2015-02-15 07:52:55

California Realtor Charged With Bank And Wire Fraud


“accused of falsely inflating the prices of beachfront condominiums in Long Beach to pocket the difference.”

Standard practice in California.

Comment by rms
2015-02-15 09:20:51

You have to be creative when your work doesn’t produce anything tangible. :)

Comment by 2banana
2015-02-15 08:09:46

Too funny…

Western political correctness meets islam. Guess which side wins?


Graffiti artist attacked by gang in Paris ghetto for painting the word ‘coexist’ with Christian, Muslim and Jewish symbols in bid to inspire religious harmony

Simon Tomlinson - MailOnline - 10 February 2015

A French graffiti artist has told how he was attacked by a gang after refusing to take down a mural calling for religious harmony in Paris.

The artist, known as Combo, 28, was left with a dislocated shoulder and bruises across his face after being set upon in a ghetto in the east of the capital.

He had just finished a design that featured the word ‘coexist’ written with a Muslim crescent for letter C, a Star of David as the X and a Christian cross as the ‘T’.

It was accompanied by a life-size self-portrait and his tag ‘combo’.

Four youths reportedly asked him to remove it and then attacked him when he refused, it was reported by Le Monde.

‘They were tired that I wasn’t giving, so they left me bleeding and fled,’ he wrote.

‘They promised me the same treatment if I did it again and told me to shave off my beard.’

He declined to discuss the identity of his attackers, saying ‘it would only add fuel to the fire’, adding: ‘I won’t forgive them for what they did of course, but I won’t seek revenge either.

Comment by Raymond K Hessel
2015-02-15 10:39:09

The “religion of peace” apologists have a real aversion to looking at the explict texts in the Koran calling for the bloody repression or worse of the “apostates” who refuse to convert to Islam.


Comment by Professor Bear
2015-02-15 08:11:23

We live in a society where an influential minority behave dangerously out of ignorance or simple idiocy, and a dangerous minority of politicians support individual rights to such behavior.

Exhibit A: measles vaccinations

Comment by Royal Jelly
2015-02-15 08:22:19

“We live in a society where an influential minority behave dangerously out of ignorance or simple idiocy …”

No, you ignorant prole puke, we live in a society where an influential minority can and will seize any issue at all and make a big deal out of it and use it to separate its portion of ignorant sheep away from the larger flock of ignorant sheep and thus win by consolidating its control over its portion of ignorant sheep.

Divide and conquer.

Comment by 2banana
2015-02-15 08:37:11

Exhibit A: measles vaccinations

And most of those were illegal criminals.

There is an obvious solution to this.

But that would mean upholding the law and Constitution.

The FSA votes.

Comment by Professor Bear
2015-02-15 19:08:53

While big name Republican politicians score political points, a deadly virus makes a comeback thanks to their ignorant constituents who don’t get their kids vaccinated on the basis of junk science.

Measles Outbreak 2015: Chris Christie, Rand Paul Slammed For Anti-Vaxxer Comments
By Alessandria Masi @alessandriamasi a.masi@ibtimes.com on February 02 2015 10:06 PM
New Jersey Gov. Chris Christie said he favors vaccinating children but the ultimate choice should belong to parents. He is pictured delivering his state of the state address at the New Jersey State House in Trenton, Jan. 13, 2015. REUTERS/Mike Segar

A recent outbreak of the measles has sparked a hot debate among politicians about whether or not parents should be forced to vaccinate their children against the virus. Sen. Rand Paul, R-Ky., and Gov. Chris Christie of New Jersey Monday weighed in on the side of a parent’s right to choose.

President Barack Obama urged parents to make sure their children are vaccinated in an NBC interview that aired Monday, adding the science behind the benefits of vaccines is indisputable. Before Obama’s statement, Christie said parents “need to have some measure of choice” when it comes to the measles vaccine but later clarified his statement, aligning it with the president’s views.

“You know, it’s much more important what you think as a parent than what you think as a public official. And that’s what we do,” said Christie, who has had his own children vaccinated. “But I also understand that parents need to have some measure of choice in things as well, so that’s the balance that the government has to decide.”

Despite his quick clarification, the pro-vaccination community immediately slammed Christie’s original comment.

“I’m as libertarian as it comes, but the social contract includes not letting your kids die of preventable diseases or spread them to others,” Republican strategist Rick Wilson wrote on Twitter, according to Business Insider. “Not dinging Christie because I have another dog in the 2016 fight. It’s because this statement is wildly irresponsible for a public figure.”

“Wow, I’m getting really sick of politicians who deny basic science,” Political Wire publisher Taegan Goddard wrote on Twitter.

Paul expressed his distrust of government-mandated vaccinations, sticking to his belief they should be “voluntary” and adding a parent’s right to choose is an “issue of freedom,” NBC News reported.

“I’m not arguing vaccines are a bad idea. I think they’re a good thing,” Rand said in an interview with CNBC News. He added he has “heard of many tragic cases of walking, talking normal children who wound up with profound mental disorders after vaccines.”

The relationship between vaccines and autism has been a concern for years but researchers have yet to find a substantiated link.

Despite being eradicated from the U.S. in 2000, the highly contagious virus saw a resurgence in the last several years. This month an outbreak was traced back to California’s Disneyland theme park. The Centers for Disease Control and Prevention said there have been 102 reported cases of the measles across 14 states so far.

Comment by Oddfellow
2015-02-15 09:26:14

“Exhibit A: measles vaccinations”

Vaccinations are going to be a hot-button issue in the coming presidential election. It’s an issue that splits both parties, but will most effectively be used as a wedge issue against the GOP.

Comment by Blue Skye
2015-02-15 10:54:55

Must we sink that low?

Comment by Oddfellow
2015-02-15 11:36:25

In an election, if we can, we must.

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Comment by MightyMike
2015-02-15 13:21:30

I have a feeling that vaccinations will be off of the front pages long before the two parties nominate their candidates.

Comment by Oddfellow
2015-02-15 16:49:20

Reporters are sure to ask Christie and Paul to clarify their previous statements that appeared to support parental choice opt-outs. That will bring it right back to the headlines.

It’s also an issue that cuts right to the heart of government authority vs. personal freedom, and the trustworthiness of science. I bet it plays a pretty big role in the primaries, then will diminish if/when two establishment pols (Clinton, Bush) are picked to run in the election.

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Comment by scdave
2015-02-15 14:30:34

Vaccinations are going to be a hot-button issue in the coming presidential election ??

Why ??…The science is indisputable…Get vaccinated or get out of the friggen country…

Comment by Oddfellow
2015-02-15 16:35:31

“The science is indisputable”

If you believe in science.

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Comment by Professor Bear
2015-02-15 19:10:22

Do you mean like Creation Science: The world was created in six days 6000 years ago, etc?

Comment by Oddfellow
2015-02-15 20:01:31

“Do you mean like Creation Science”

Exactly. We’ve all got our own scientists now.Just look at the climate change denial industry.

Comment by Professor Bear
2015-02-15 21:32:34

Business Day
After the Housing Crisis, a Cash Flood and Silence
FEB. 14, 2015
Fair Game

On Aug. 17, 2012, the federal government began expropriating all the earnings of Fannie Mae and Freddie Mac, the mortgage finance giants that succumbed to the 2008 crisis.

Now the government is taking extraordinary measures to keep secret the deliberations surrounding that action. What exactly is it trying to hide?

That is the question being asked by a Fannie and Freddie shareholder who has sued the government over the 2012 profit grab. The investor contends that the move amounted to an improper taking of its property; the government disagrees.

Margaret M. Sweeney, a judge in the Court of Federal Claims, will determine who is right. But in the meantime, consider the remarkable secrecy demands that the government has made in the matter.

Previously undisclosed court records show that the Justice Department has asserted presidential privilege to prevent 45 documents from being produced. These materials — emails, draft memos and news releases — were created by officials at the Treasury Department and the Federal Housing Finance Agency, the overseer of Fannie and Freddie since they collapsed in 2008.

There’s no doubt the taxpayer bailout of Fannie and Freddie in September 2008 was a political nightmare. For decades, the companies had maintained that their mortgage operations posed no risk to taxpayers; their pals in Congress echoed this refrain.

But then came the mortgage debacle, and taxpayers had to shore up the companies with $187.5 billion.

Initially, Fannie and Freddie had to pay interest on the loan. But in August 2012, the Treasury and F.H.F.A. abruptly changed the agreement; under the so-called third amendment, the government began sweeping all the companies’ profits into the Treasury.

Since then, Fannie and Freddie have been immensely profitable. As of last December, the Treasury had received a total of $225.4 billion from the companies. An additional $153.3 billion in receipts from Fannie and Freddie could be generated through fiscal year 2025, according to estimates in the 2016 budget offered by the president.

The initial $187.5 billion loan remains outstanding, however, because of the deal’s structure.

Watching these profits pour into the Treasury, shareholders cried foul. Contending the sweep was unjust, one of those with large stakes in both Fannie and Freddie securities — the Fairholme Fund — sued the government in July 2013. From the outset, the government demanded extreme secrecy in the case. Lawyers at the Justice Department secured confidential treatment of almost all the 150,000 pages of documents submitted by the Treasury and F.H.F.A. by late January. Even the plaintiff bringing the case is barred from viewing these documents; only its lawyers can see them.

The government has also fought every discovery request made by the Fannie and Freddie shareholder. Officials at the Treasury and F.H.F.A. claim that disclosure of documents relating to their actions would destabilize the economy and financial markets and raise mortgage rates.
Continue reading the main story Continue reading the main story
Continue reading the main story

Really? The documents the judge has ordered the government to produce were created three to seven years ago. How could they unsettle the markets now?

Even more intriguing, though, is the Justice Department’s broad assertions that 669 of the documents it must produce are subject to various privileges and not to be disclosed. The government even claimed that privileges applied to documents it had not yet reviewed, court records show.

According to previously undisclosed logs filed as part of the case, most of the documents are said to be covered by attorney-client privilege or deliberative process privilege, which protects intragovernment communications before a final decision is made in a matter.

But the government has invoked presidential privilege on 45 documents created either by officials at the Treasury or the F.H.F.A., the regulator charged with conserving Fannie and Freddie’s assets and stabilizing the institutions “with the objective of returning the entities to normal business operations,” as its website states.

The privilege logs, which are not confidential and were obtained by The New York Times, offer clues about what the government does not want revealed.

Comment by rms
2015-02-16 00:59:29

“The government has also fought every discovery request made by the Fannie and Freddie shareholder. Officials at the Treasury and F.H.F.A. claim that disclosure of documents relating to their actions would destabilize the economy and financial markets and raise mortgage rates.”

Interesting admission.

Comment by Blue Skye
2015-02-15 10:58:53

“Forbidden History: Did You Know that Raggedy Ann is an Iconic symbol for Vaccine Induced Injury and Death?”


Comment by Housing Analyst
2015-02-15 08:23:45

CraterRage® Photo Of The Day


Comment by Selfish Hoarder
2015-02-15 08:39:25

Ha ha! The fella must have bought an overpriced stucco box in a gang banger hood instead of hoard cash.

Comment by 2banana
2015-02-15 08:38:57

The Free Sh*t Army up close and personal.

Very angry customer at mcdonalds asking for refund


The FSA votes. And when they don’t get more free sh*t - they act like this.

Comment by Raymond K Hessel
2015-02-15 10:41:50

Imagine what it’s going to look like when their EBT cards fail to work at Wal-Mart after the Fed’s money-printing and our ballooning debt collapses the economy.

Comment by oxide
2015-02-16 13:54:10

Speaking of which, where is that link describing the rush at Wal-Mart the midnight before the EBT cards refill on the first of the month? This is going to sound silly, but watching that in action is on my bucket list, and I want to confirm that it’s true.

Comment by RioAmericanInBrasil
2015-02-15 11:59:13

The Free Sh*t Army up close and personal….when they don’t get more free sh*t - “they act like this.”

…”they act like this.”? Who’s “they” and what website promotes these videos as individuals representing and entire group of Americans?

So tell me again how it’s Obama who’s the one that’s “dividing America”.

Comment by phony scandals
2015-02-15 13:56:34

“Who’s “they”


Comment by 2banana
2015-02-15 08:45:48

The only solution to any problem is bigger and bigger government, more and more regulations and higher ans higher taxes.


Whac-A-Mole and the Clueless Politician
Townhall.com | February 15, 2015 | Paul Jacob

The Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law in 2010 by President Barack Obama. Its supporters said that it would increase financial stability and transparency, prevent bailouts, and protect consumers from “abusive practices.”

Marshall Lux and Robert Greene, in a new study entitled “The State and Fate of Community Banking,” show that the long-term trend in which community banks have diminished in number and importance has doubled in severity since Dodd-Frank. Community banks are dropping from the landscape of commerce in greater and greater number, more under the new regulatory regime than under the old.

You don’t have to be a “small-is-beautiful” fetishist to worry about this. The authors mention that community banks do serve smaller businesses, especially agriculture, more consistently than do larger institutions. But perhaps more importantly, the bigger banks remaining are just all that much bigger in the “too big to fail” department. Further, the fewer in number of small banks, the fewer that are able to rise to compete with the big ones. This seems to scuttle two of capitalism’s most obvious and irreplaceable features — openness to rivalry, competition, and loss, as in profit-and-loss. That is, only the smaller-sized businesses (in this case financial institutions) experience capitalism’s twin forces, competition and possibility of loss.

Big businesses receive protection from both. From government.

see a “problem”; propose a “fix”; that fix puts us in a worse fix, as unintended consequences multiply; bureaucrats, intellectuals and activists identify anything but the previous fix as the cause of the new problems; and politicians and lobbyists scramble to add an additional fix to the mix.

That is why laws keep piling up. Each addition to the regulatory morass causes more problems, each typically identified as caused by “greed” or “lack of regulation,” not the regulation that set markets out of balance. And so more laws, more regulations, are put into the books. And the problems multiply.

And remember, interventionists have had their way for a very long time. Mises was writing as an underdog, back in the 1930s. And the progressive agenda of high taxes, income redistribution, centralized financial management (central banking), and massive, ever-increasing regulation, has been at the heart of American political life since World War I. Once you realize that progressive ideas have dominated modern life, things make a great deal of sense.

Comment by Mr. Banker
2015-02-15 09:07:35

As God’s Plan unfolds …

“… the long-term trend in which community banks have diminished in number and importance has doubled in severity since Dodd-Frank.”

And continues to unfold …

“Community banks are dropping from the landscape of commerce in greater and greater number, more under the new regulatory regime than under the old.”

Resulting in …

“This seems to scuttle two of capitalism’s most obvious and irreplaceable features — openness to rivalry, competition, and loss, as in profit-and-loss.”

Bahahahaha … “openness to rivalry, competition, and loss, as in profit-and-loss.” And just why would I want to have any part of this?

If any politician lackey that I decided should get elected ever seriously tried to pull this sh1t on me I’d have his a$$.

Comment by In Colorado
2015-02-15 10:13:21

I just can’t wait for my credit union to fold so I can have the privilege of banking with with either Chase, Wells, Citi or BofA

Comment by Mr. Banker
2015-02-15 10:27:30

“… so I can have the privilege of banking with with either Chase, Wells, Citi or BofA.”

The Four Pillars.

(Who could ask for anything more?)

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Comment by Bring Back the WPA
2015-02-15 10:19:57

Yeah, and the USA’s finest years of prosperity — 50’s, 60’s, 90’s — occurred after those evil “progressive ideas” were put in place, while the USA’s worst depression was a direct result of laissez-faire free market ideals put in place by Coolidge/Hoover. Just sayin.’

Oh, and we don’t need more taxes and regulations to fix the banks. We don’t need Dodd-Frank. Just bring back Glass-Steagall, which required banks to be banks, and prohibited them from speculating in commodities and derivatives.

Comment by Mr. Banker
2015-02-15 10:24:08

“Just bring back Glass-Steagall …”

Hush your mouth!

Comment by Bring Back the WPA
2015-02-15 10:34:07

LOL. How boring it would be for Mr. Banker if you have to make money the old fashioned way, you know, by capturing the spread between loan interest paid in minus savings account interest paid out. No more casino gambling for you.

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Comment by Raymond K Hessel
2015-02-15 10:42:57

And no more systemic risk to the larger economy and US taxpayers.

Comment by Raymond K Hessel
2015-02-15 10:47:50

Hey WPA, being of a lefty pursuasion, I’m guessing you will choose to overlook the central role played by your idol Bill Clinton and his Citi-owned Treasury Secretary Rubin in repealing Glass-Steagall. It is no coincidence that the Clinton’s have racked up a net worth of $200-300 million since leaving office, primarily through Hillary’s $300K speaking fees for speeches given to audiences that seem to have an uncanny correlation with officers and employees of the financial firms like Goldman Sachs the benefited the most from the repeal of Glass-Steagall. Some would consider that legalized bribery…not me, of course, but some….

Comment by Oddfellow
2015-02-15 11:17:06

Nixon was the last progressive president. Clinton was a Wall Street stooge.

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Comment by MightyMike
2015-02-15 13:34:37

That’s a good point. Both parties moved to the right since the days of Nixon. That move was not accompanied by the American people.

Comment by MightyMike
2015-02-15 13:32:40

It is no coincidence that the Clinton’s have racked up a net worth of $200-300 million since leaving office, primarily through Hillary’s $300K speaking fees

This sounds unlikely. Hillary left her government job just two years ago. I doubt that she could have accumulated $100 million after taxes making speeches in that time.

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Comment by Blue Skye
2015-02-15 19:41:19

Shortly after leaving the White house, Hillary spent $10M of her own money to “campaign” for the Senate. Like it was pocket change.

Comment by scdave
2015-02-15 14:41:09

Clinton’s have racked up a net worth of $200-300 million since leaving office, primarily through Hillary’s $300K speaking fees ??

Your extreme bias against democrats is revealing its ugly face…

Hmmm…lets see….$300k speaking fee minus taxes leaves you roughly $150k….$150k divided into your lower number of $200-mil means that she has given 1333 speeches since she left office of Sec.of State….That means she has given 666 speeches “per year” over the last two years…Busy lady…

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Comment by Bring Back the WPA
2015-02-15 14:53:35

@ Raymond — firstly, I’m not a “lefty.” I’m more centrist. You guys on the right shifted more to the right and make me look like a lefty. I’m not a die-hard partisan except now I am by default because moderate Repubs are now extinct.

I agree, repealing Glass-Steagall was probably Bill Clinton’s 2nd biggest mistake :-) A few years ago there was an interview of Bill and when he was asked if repealing Glass contributed to the ‘08 financial collapse, he got visibly irritated and defensive about it. Also no argument with respect to Bill and Hillary being too cozy with the big banks.

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Comment by Oddfellow
2015-02-15 16:55:26

” 2nd biggest mistake”

1st was NAFTA? Or not having Monica’s dress dry cleaned?

Comment by phony scandals
2015-02-15 09:03:53

Ron Paul: Ukraine Coup Planned By Nato And EU

Submitted by Tyler Durden on 02/14/2015 13:30 -0500

As Ron Paul recently exclaimed, the war propagandists are very active and are winning over the support of many unsuspecting American citizens. So we thought the followingg 90 seconds of ‘pure Paul’ would provide a refreshingly different perspective as he explains, “I’m not pro-Russia, I’m not pro-Putin, I’m pro-facts.”

“The Ukraine coup was planned by NATO and EU… The best thing we can do for Ukraine is get the foreigners out.”

As Ron Paul previously concluded:

Our government has no more credibility in telling us the truth about the facts that require us to expand our military presence in this region than Brian Williams.

Constant war propaganda has proven too often to be our nemesis in supporting constant war promoted by the neoconservatives and the military industrial complex.

The only way that Congress can be persuaded to back off with our dangerous interventionism, whether it’s in the Middle East or Ukraine, is for the American people to speak out clearly in opposition.

http://www.zerohedge.com/news/2015-02-14/ron-paul-ukraine-coup-planned-nato-and-eu - 176k -

Comment by Bring Back the WPA
2015-02-15 10:28:47

It’s The Scab That Won’t Heal

Seems some folks down in Dixie are still sore about the Civil War. To them John Wilkes Booth is a hero for gunning down Abe Lincoln: http://leagueofthesouth.com/honoring-john-wilkes-booth569/ meanwhile,

Rick Perry Gets Lincoln Dead Wrong

Rick Perry says “Abraham Lincoln read the Constitution, and he also read the Bill of Rights, and he got down to the Tenth Amendment, and he liked it.” Except he forgot the small detail that was all about exerting federal control over the states and expressly forbidding the states from seceding nor practicing slavery. The people at the first link above have it right — if you love States Rights, you hate Lincoln.


Comment by Ethan in NoVA
2015-02-15 10:33:00

Heads up there is a documentary on NetFlix called Money For Nothing. It hits on the housing bubble, and even includes our beloved 21st Century commercial as at least one other I wasn’t aware of. It calls out Greenspan and Bernanke, and I like the fact that it exists on such a popular system (NetFlix) where it will be seen by many. Shiller Graph even!

Comment by Raymond K Hessel
2015-02-15 10:54:08

Is there a companion documentary called “Chicks for Free”?

Comment by 2banana
2015-02-15 11:13:33

Another good documentary is called “Broke” about NFL starts with multi million dollar contracts that are bankrupt a few years after retirement.

Comment by Mr. Banker
2015-02-15 11:57:26

Bahahahaha … dumb ‘em down, and profit.


(13 minute video)

Comment by scdave
2015-02-15 14:47:44

good documentary is called “Broke” ??

My son told me about it 2-fruit…He said it was pretty incredible how they pissed away their money…

Comment by scdave
2015-02-15 14:44:16

Hey thanks Ethan…I will be watching for it…

Comment by Combotechie
2015-02-15 18:05:33

Go here:


The run time is about an hour and twenty minutes.

Comment by Raymond K Hessel
2015-02-15 11:01:03


Bankers never go to jail. This is one of the unwritten new laws to which most of us have grown wearily accustomed in this new post-crisis reality. Also begrudgingly taken for granted is the fact that a banker’s fortune will never be seized or confiscated by the authorities; in today’s new Gilded Age a banker’s gains, whether ill-gotten or not, are his of hers until death do them part.

However, nobody seems to have told any of this to Fernando Andreu, the Spanish judge investigating Bankia’s allegedly fraudulent and for investors disastrous 2011 IPO. On Friday 13th, he ordered Bankia, its parent company BFA, the bank’s former chairman, Rodrigo Rato, its former deputy chairman, José Manuel Olivas, and former Bankia board members Francisco Verdú and José Manuel Fernández to pay an €800 million civil liability bond for signing off on the bank’s 2010 financial statements – financial statements that were included in the IPO brochure and “whose veracity is questioned with solid and well-founded evidence”.

Comment by Raymond K Hessel
2015-02-15 11:08:11

A Pelosi DNC import gets shot by police for throwing rocks at cars and people at a busy intersection, and now the family will file a $25 million lawsuit against the municipality for wrong death - which a “jury of his peers” will doubtless award to stick it to The Man. How long can home prices keep rising in such increasingly dystopian Democrat-maladministered urban centers?


Comment by MightyMike
2015-02-15 13:43:18

The city of Pasco, WA has a population of around 60,000. It’s not an urban center.

Comment by phony scandals
2015-02-15 14:42:20

Now was the citizen of Mexico throwing rocks at the “Good Police”?

“Hundreds gathered in southeastern Washington on Saturday to protest police brutality in the wake of a deadly shooting of a man who had been throwing rocks at the police.”

“A large sign hanging over the bandstand at Volunteer Park said, “Stop Police Brutality: It was just a rock!!!” Hand-lettered signs said, “Use Your Training, Not Guns,” and “Good Police We Respect You.”

“The family of the orchard worker, who was a citizen of Mexico, has filed a $25 million claim with the city of Pasco, the first step toward a lawsuit”

Comment by dude
2015-02-15 11:44:37

Following up on my post yesterday, thanks for all the responses. I value the opinions expressed here, and even the things being said by those with agendas are informative.
I just try my best to keep my BS detector calibrated…
Truth be told I actually hadn’t even thought about the effect of the oil patch bust on the RE in those areas from an investment standpoint, I guess mostly because I am really leery of it. I’ve never been burned by RE investing and I don’t think I want to start now.
Again thanks for the input.

Comment by Housing Analyst
2015-02-15 13:00:49

Cling to that rapidly depreciating shanty and you’ll find out what it’s like to be burned on housing.

Comment by dude
2015-02-15 13:26:33

What are you talking about? I think you must be confusing me with someone else…

Comment by azdude
2015-02-15 14:15:58

buy a house today be underwater tomorrow?

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Comment by scdave
2015-02-15 14:52:28

I actually hadn’t even thought about the effect of the oil patch bust on the RE ??

Ben experienced it “first hand” in Texas….

Comment by RioAmericanInBrasil
2015-02-15 15:05:45

I actually hadn’t even thought about the effect of the oil patch bust

It changed my entire life’s course. I graduated with a degree in Geology into the beginning of the oil bust.

When I was a sophomore my friends would say “You’re gonna make a lot of money!”

But when I was graduating into a crashed oil market my friends would ask “What are you gonna do??”

Comment by Raymond K Hessel
2015-02-15 12:07:09

The downside of the Nanny State is that the mounting costs of subsizing personal irresponsiblility mount, the Powers that Be might recalculate the cost-benefit ratio of FSA voters and decide to impose disciplinary as well as austerity measures. Couldn’t find any mention of this in the MSM (imagine that) - but British PM Cameron is now threatening to cut the benefits granted to drunks, druggies, fatties, and others who refuse to take personal responsibility for their own health and wellness while sponging off the taxpayers. Could the pendelum finally be swinging the other way? Judging by what I saw of the general demeaner and disposition of the FSA lowbrows I saw at Wal-Mart on my last trip there, as well as the contents of their EBT-funded shopping carts, these fat, tatooed Democrats-for-Benefits slobs would react poorly to any external efforts to impose greater self-discipline and responsibility on their freeloading lifestyles.


Comment by Raymond K Hessel
2015-02-15 13:42:47

Something tells me this dog has a happy future with some carefree renter who isn’t stressed by the falling value of his or her “investment.”


Comment by Raymond K Hessel
2015-02-15 14:00:53

Is super-strong weed with high THC concentrations making people psychotic? Reefer madness, indeed. Don’t indulge, personally, and maybe you shouldn’t either.


One in four new cases of psychotic mental conditions such as schizophrenia could be the direct result of smoking new extra-strong varieties of cannabis, known as skunk, a major new study on the toll on the nation’s mental health from the drug concludes.

Comment by RioAmericanInBrasil
2015-02-15 14:26:41

Is super-strong weed with high THC concentrations making people psychotic?

I was talking to a friend who used to smoke back in college and he recently smoked a skunk joint in the USA and he told me he was smoking it taking a bunch of hits like he used to do back in the day. He didn’t realize how strong it was and he said it turned into like a bad acid trip it was so intense. He said he does not want to ever smoke again.

(Thanks for the shout-out the other day.)

Comment by scdave
2015-02-15 14:56:52

He didn’t realize how strong it was ??

They can drip all kinds of crap on those buds….If it does not come out of a dispensary, don’t smoke it…

Comment by Raymond K Hessel
2015-02-15 15:05:30

Maybe you shouldn’t smoke it regardless, unless you have some compelling medical reason to.

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Comment by phony scandals
2015-02-15 14:03:22

Like every crisis this should be paid for by “someone else”.

What Do Americans Think About the Pension Crisis?

Most realize the problems, but they don’t want tax increases or spending cuts to fix them

by Scott Shackford | Reason | February 15, 2015

There is as much as a $4 trillion gap between what states have promised their public workers in retirement pensions and what they’ve actually set aside and invested in order to pay for them.

There are enough reasons this has happened to count as a survey question on the most boring episode of Family Feud ever—states and cities didn’t set aside enough money, employees didn’t contribute enough, and guaranteed investment returns are overestimated, among many other problems.

But what does the average American think about the pension crisis and what would they do? A small number of communities like Phoenix, Arizona, and San Jose, California, have put pension reform in the voters’ hands, with mixed results. In our latest Reason-Rupe poll, we decided to focus almost entirely on the pension crisis, asking Americans how seriously they view the problem and what sort of trade-offs they would accept to fix it.

Yes, Americans Are Concerned About the Pension Crisis

Pension worriers will be pleased to hear that Americans are at least paying attention. A full 72 percent of those polled are either “very” or “somewhat” concerned about state and local governments’ ability to fund the pensions they’ve promised to public employees. A similar number (74 percent) are concerned that state or local governments will raise taxes in the future in order to meet these pension obligations. When asked to prioritize dealing with the pension crisis, 35 percent said pension reform should be a top priority, while 41 percent said pension reform should be an important but lower priority.

Comment by Raymond K Hessel
2015-02-15 15:04:15

The default view for Boomers is that all the messes they’ve created or made worse will be fobbed off on “someone else.” This is also the loudest voting bloc screaming, via it’s AARP proxy, for limitless benefits that younger generations and unborn taxpayers will have to fund. Never in human history has there been such a feckless generation.

Comment by RioAmericanInBrasil
2015-02-15 15:14:51

Never in human history has there been such a feckless generation.

Most of boomers worked their entire lives, saw a massive increase in productivity without their wages reflecting it while being barraged with an institutional PSYOP operation to take on massive debt.

At the same time that the top .01% became richer than any kings of the past.

And now they have the nerve to expect to retire with a little dignity? I can understand how this happened.

Comment by Shillow
2015-02-15 15:56:23

Boomers? Boomers rode the wave and wrecked the economy along the way with their me first mentality. It continues to this day into their retirement. It’s no coincidence the public largesse provided to public employee unions over the last 20 years. It’s by the boomers for the boomers.

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Comment by RioAmericanInBrasil
2015-02-15 16:09:15

It’s no coincidence the public largesse provided to public employee unions over the last 20 years.

I think a big part of the jealousy and/or anger towards public employee benefits and pay is because the public sector’s compensation kept pace with inflation, while the private sector’s wages did not come close to maintaining pace with massively increasing productivity. (We got gypped.)

If the private sector’s compensation kept pace with rising productivity, nobody would be jealous of the public sector’s “outsized” compensation because we’d be making more than them-as we used to.


Comment by Housing Analyst
2015-02-15 16:51:24

Are times that tough that you’re jealous of shiftless public employee Lola?

Comment by Shillow
2015-02-15 19:34:44

The public sector pensions went crazy in the late 90s. It was a pure and unnecessary giveaway.

Comment by Bluto
2015-02-15 16:53:50

Public worker pay and pensions are separate issues, from what I see locally in California the salaries are not so much what get people excited, it is the pensions and in particular “public safety” pensions…those are 3% X years of service so at 30 years people can leave w/ 90% pay AND are allowed to play all sorts of games their last year to jack it up much higher than that. Many who do this will live for another 30-40 years drawing close to full pay plus medical benefits, this was never funded and no way it can work in the long run, Sonoma Co. where I live is slowly going bankrupt and meanwhile the infrastructure (roads in particular) is crumbling due to lack of maintenance.
FWIW I retired from a Fortune 100 company 2 years ago and my pension amounted to about 30% pay (but I elected to cash it out due to the QE fuelled artificially low interest rates making the cashout much higher than it would be with normal interest rates)

Comment by RioAmericanInBrasil
2015-02-15 16:59:30

in California the salaries are not so much what get people excited, it is the pensions and in particular “public safety” pensions…

I agree. That part is way out of whack and cannot end well.

But our public safety workers are “heroes”. Right.

Comment by Shillow
2015-02-15 19:36:09

But I thought they were keeping pace with inflation Lola.

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Comment by Professor Bear
2015-02-15 22:28:49

For those who claim oil is going to rocket back up to over $100/bbl by year-end 2015, I’m curious: What do you think is different about this bubble’s collapse compared to the oil market collapse of the mid-1980s, after which prices stayed on the $10/bbl to $20/bbl price range for well over a decade hence?

Or how about housing? Homes in my parents’ hood (near Ferguson, MO) were “Zesstimated” at over $120K back in 2007, but since the great big 2008 financial collapse, have remained around $60K up to the present day — i.e., 50% reduction in “value”.

What is it about the oil price collapse this time around which you believe is different?

Comment by Professor Bear
2015-02-15 22:34:19

Did y’all know that Koch Industries is among the firms shipping oil out to sea in hopes of higher prices later in the year providing the chance to sell at a profit?

Comment by Professor Bear
2015-02-15 22:38:58

Gaurav Sharma Contributor
I cover oil and gas, often debunking risk premiums on the supply side
Opinions expressed by Forbes Contributors are their own.

Commodities & Currencies 2/13/2015 @ 4:49PM
Oil Storage Rush: Takes Two to Play Contango

Major oil benchmarks have seen some pretty wild swings so far into the current trading year. Medium term market forecasts remain broadly bearish. That has triggered a markedly evident oil storage rush as traders look to play contango, i.e. an expectation that the oil price would be higher in the future relative to where it is currently trading at.

The game, despite being potentially tricky, is nothing new. In plain vanilla terms, the idea revolves around buying crude oil at current prices, paying for storage for a fixed period of time and selling it at a higher price later thereby recouping costs and making a profit.

When the oil price last tanked in 2008-09, some of the biggest names in the commodities trading business played contango with large degree of successes barring a few horror stories. Perhaps unsurprisingly, they are at it again and in much greater volumes using the availability of Very Large Crude Carriers (VLCCs) like never before.

Initial market rumors about fresh oil storage escalation began to circulate in November last year when contacts at Cushing, Oklahoma started reporting an increase in queries about onshore storage. In tandem, newswires began reporting VLCCs being booked for the purpose. Last month, the IEA said around 15 VLCCs with a total capacity of 30 million barrels had been booked.

Subsequently, Genscape’s Vesseltracker, which facilitates tracking tankers in real-time, raised the figure to 24 VLCCs. Feedback, from informed contacts at the Port of Rotterdam, Netherlands, suggests the figure would rise to at least 35 vessels by the end of April, if not sooner.

While the exact number of barrels in storage is hard to predict, as trading houses rarely co-operate in these matters, around 65 million barrels floating on tankers is a realistic prospect in a matter of months. Matching lessors with providers of the vessels via informed shipbrokers reveals a predictable who’s who of the oil and gas world – Vitol, Trafigura, Koch Industries, Tesoro and Royal Dutch Shell to name a few.

With many ‘at sea’, the biggest gamble appears to have been taken by Vitol and Trafigura. According to sources, Vitol has the mammoth TI Oceania with a capacity of 3 million barrels laid up not far from Singapore. Meanwhile, Trafigura has at least six VLCCs on contract asserting its market intentions.

Comment by phony scandals
2015-02-16 08:46:46

phony scandals

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