Financial topics

[Higgenbotham]

There are a few factors that would question whether the fall in gasoline usage is due to other than economic factors.

1. Most important, the sudden fall in gasoline usage rather than it being a steady fall.
2. The concurrent, recent drops in vehicle miles travelled, which is 95% correlated with GDP.
3. That many of the natural gas conversions are being done on vehicles that burn diesel, rather than gasoline, though I'm not sure whether school buses use diesel (city buses do though).

I see school buses use diesel too, so the conversions aren't impacting gasoline usage.

I searched the seattletimes article for the production/consumption data and found it. The numbers I remember from 5 or 6 years ago are 5 and 20, so we now produce nearly a third of our petroleum usage rather than a quarter. Most of the gap is being closed by decreased usage rather than increased production, so it's interesting that most of the article is devoted to how and why production has increased.

The United States produced 5.9 million barrels of crude oil a day in December, while consuming 18.5 million barrels of petroleum products, according to the Energy Department.

[OLD1953]

Given the huge number of factors, it's hard to say exactly what portion of the gas decrease is due to better cars, what portion is due to fleet changes to LNG and what portion is due to people simply not being able to afford to drive. Vehicle miles driven did decline by .9% in November, but how much of that was actually due to people shopping online vs shopping in person on black friday in previous years?

http://www.calculatedriskblog.com/2012/ ... 09-in.html

I don't doubt that a portion of the decline is due to simple economics, but what portion? It's extremely hard to do more than guess.

[Marc]

I just came across this recent article dealing with the "robosigning" scandal involving mortgage-related foreclosures in the United States. Am I the only one left shaking his head regarding how easy the banks are being let off with this? (About 40 US states have so far signed on to a tentative agreement assessing $25 billion from the banks; homeowners who improperly lost their homes to foreclosure would get $1,500 apiece.) If someone was making proper payments to their mortgagee and got improperly foreclosed on and the house taken away, does $1,500 do them justice? Yes, homeowners/others can try to litigate further, but it may be very difficult for them to do so. I'm thinking that many state attorneys general are not only not wanting to get into loggerheads with the Feds, but fear even more the potential of smear campaigns against them by corporations or deep-pocketed individuals if they don't "go along" with this deal (or at least something not too far removed from it).

The article is found at http://www.mortgagenewsdaily.com/020720 ... lement.asp, and also appears below.

* * *

Majority of States Reported on Board with Robo-Signing Settlement

By Jann Swanson

Feb 7 2012, 10:27AM

Details are still sketchy, but apparently a settlement has been agreed upon between five major banks and a majority of the states' attorneys general. The settlement involves Bank of America, Wells Fargo, Citigroup, JPMorgan Chase, and Ally Financial and arises out of charges that the banks and their subsidiary servicers used robo-signing and other abuses in processing thousands of foreclosures.

The settlement was announced by lead negotiator, Iowa Attorney General Tom Miller who, according to CNBC said of the deal, "This enables us to move forward into the very final stages of remaining work. Federal and state officials, as well as representatives from the banks, continue to address matters that they must complete before finalizing any settlement," Miller said in a statement released late Monday."

There were no further details available on the Miller's office website and he refused to provide more information to CNBC including the number of states who have signed. The deadline for reaching an agreement was Monday night, however bright lines in these talks have been fungible in the past.

The agreement has been reported to involve cash in the amount of $25 billion from the banks. $17 billion of which would go toward writing down mortgage principal balances for some 850,000 troubled homeowners. Of the remainder, $3 billion would go to restitution payments of $1,500 each to borrowers who lost their homes to foreclosure and the rest toward state funds for foreclosure relief.

CNBC is speculating that 40 states have agreed to participate in the settlement. Delaware AG Beau Biden was clear in an interview on MSNBC Monday night that his state was not party to it and there is speculation that New York's Eric Schneiderman, head of the President's new mortgage fraud office has not agreed to it either. California's AG Kamila Harris is the big IF. She walked away from negotiations four months ago claiming that the settlement did not do enough for homeowners in her state which has led the nation in the number of foreclosures.

According to Inside Mortgage Finance, Harris recently returned to the table "in exchange for a commitment of a solid dollar amount from the banks" and other sources say that might involve raising the settlement from $19 billion to the $25 billion referenced above. The Wall Street Journal, reported that any special treatment of California would leave other AGs feeling disgruntled, specifically mentioning Florida's Pam Bondi.

In addition to any cash from the banks, the settlement will include a mandate for new regulations for servicers. A tentative settlement document was proffered last March that, as most of the standards have since become part of the general discussion about servicing, is probably a good indication of the contents of this part of the final document. These include:

• Enforcing firm modification timelines for servicers to meet, including notifications to borrowers of actions on modification requests.
• Providing a single point of contact for borrowers over the course of the modification process.
• Requiring a freeze on foreclosures during modification considerations and providing methods for penalties and enforcement.
• Outlining steps for banks to verify the accuracy of amounts owned and placing limits on fees the banks can charge distressed borrowers.
• Adopting directives to improve tracking of mortgage notes and chain of title.
• Increasing supervision of foreclosing law firms and other third-party vendors.
The settlement agreement apparently contains nothing that would preclude the states from continuing to investigate the banks, especially in the case of suspected criminal actions. It also would do nothing to interfere with suits by individual borrowers against the banks or their servicers.

MND will update this story as more information becomes available.

[vincecate]

“Investors are numb and sedated.”
http://www.bloomberg.com/news/2012-02-0 ... -cash.html

At some point there will be inflation but by then if they "take the punch bowl away" there will be so many addicts with withdrawal symptoms that things will fall apart nearly as bad as if they keep printing and get hyperinflation. But with the US government spending about twice what they get in taxes, they just can not stop printing.

[Trevor]

Right now, I'm wondering what kind of violence we're going to see next, particularly in the United States. We've gotten off relatively easy up until now, but now that they're specifically calling for violence, I'm expecting things to get worse.

[aedens]

http://www.reuters.com/video/2012/02/03 ... =229581729
Dr. Print thinks his math will solve the problem of the paradox of thrift.
Money meet's the matress and over priced nyse me thinks. China pulled cash out also. Japan moved some funds recently also.
Japan is buying off shore assets also. When the dust clears on this Beast we already knew. http://solari.com/blog/sir-james-goldsm ... 4-warning/
NEW YORK (Reuters) - Stock index futures edged higher on Wednesday as leaders in Greece again attempted to reach a deal on reforms in exchange for a new bailout. The recent delays stirred European Union officials to warn Greece that the euro zone could continue without the fiscally troubled nation, which needs a rescue package to avoid an unruly default. California soon.

[Trevor]

It appears as if Ben Bernanke has lost much of his previous optimism. http://cnsnews.com/news/article/bernank ... cal-crisis

“Even the prospect of unsustainable deficits has costs, including an increased possibility of a sudden fiscal crisis. As we have seen in a number of countries recently, interest rates can soar quickly if investors lose confidence in the ability of a government to manage its fiscal policy.”

“Although historical experience and economic theory do not indicate the exact threshold at which the perceived risks associated with the U.S. public debt would increase markedly, we can be sure that, without corrective action, our fiscal trajectory will move the nation ever closer to that point.”

So is he still "The Man Without Agony"?

[John]

It appears as if Ben Bernanke has lost much of his previous optimism. http://cnsnews.com/news/article/bernank ... cal-crisis

“Even the prospect of unsustainable deficits has costs, including an increased possibility of a sudden fiscal crisis. As we have seen in a number of countries recently, interest rates can soar quickly if investors lose confidence in the ability of a government to manage its fiscal policy.”

“Although historical experience and economic theory do not indicate the exact threshold at which the perceived risks associated with the U.S. public debt would increase markedly, we can be sure that, without corrective action, our fiscal trajectory will move the nation ever closer to that point.”

So is he still "The Man Without Agony"?

Actually, he sounds almost exactly like Greenspan in 2005:

"Thus, this vast increase in the market value of asset claims is
in part the indirect result of investors accepting lower
compensation for risk. Such an increase in market value is too
often viewed by market participants as structural and
permanent. To some extent, those higher values may be reflecting
the increased flexibility and resilience of our economy. But what
they perceive as newly abundant liquidity can readily disappear.
Any onset of increased investor caution elevates risk premiums
and, as a consequence, lowers asset values and promotes the
liquidation of the debt that supported higher asset prices. This
is the reason that history has not dealt kindly with the aftermath
of protracted periods of low risk premiums."

John

[Trevor]

Well, I was astonished that he held onto it for as long as he did. He doesn't seem to be quite as gloomy as Greenspan was before, but he's certainly not the "This is how we can prevent a depression" confident man that he was before all of this happened.

However, I fully expect his words about our budget to go right over the politician's heads, same as what happened to his predecessor. Wonder if he believes in bubbles now...

According to a recent CBO report I read, they're projecting the U.S. economy to grow at around 2 percent, slightly above what it was in 2011. Problem is, this analysis leaves out what's going on in Europe and the very real chance that their economy will implode.

[OLD1953]

Interesting story on Iran and Israel.

http://rockcenter.msnbc.msn.com/_news/2 ... l-nbc-news

I feel strongly that we'll see some interesting developments over the next few weeks.

http://latimesblogs.latimes.com/world_n ... -move.html

Appears we'll shelter those folks to an extent. The implications of the move are interesting and not simple in scope or complexity.