We are in a crisis in the western world. As a result, it seems silly to take note of the minor problems swirling around in the world. Still, it does not seem totally healthy to only pay attention to the big picture.
So here is a story about Palestinians who are made at Hamas.
Here is a story about a growing shortage of a critical industrial solvent.
Here is a story about the death of the iconic flight simulator.
The bank probably needs to maintain a tangible equity ratio of 6% to 9%, he said. “It would take over $80 billion of new common equity to reach even the low end of the range, and we believe Bank of America simply is not generating sufficient capital internally in this environment to put a dent in this size capital hole.”
This is on top of all the other money already given to the Bank of America. And this is only the tip of the iceberg. Bank after bank has been posting horrendous losses. As this Calculated Risk post shows, bank stocks are getting killed. And they were already worth almost nothing. Wall Street is waking up to the fact that the banking system is insolvent and there is panic on the street.
What is really scaring people is that prime mortgage defaults have started to shoot up just when banks had thought they had worked through their sub prime losses. As more and more people lose their jobs it is only going to get worse. And if prime defaults are going up, the Agencies are really going to start needing cash. People are just beginning to see how much this is going to cost.
Edit: I forgot to add in this from the New York Times….
Stock markets had one of their worst Inauguration Day losses in more than a century, skidding more than 4 percent. Financial companies plunged more than 15 percent, their biggest one-day drop in nearly two decades, as investors worried that the troubles facing the country’s biggest banks might be larger and deeper than anyone had thought.
Even after record corporate write-downs and a $700 billion bailout to shore up the financial system, banks are still reporting huge losses, lining up for new government lifelines and cutting their profit outlooks.
The stock market drooped so much that the Dow is now below 8,000 if anyone cares about such meaningless number anymore.
From later on in the same New York Times article comes the money quote….
“At the end of the year, we saw some light at the end of the tunnel,” said Art Hogan, chief market strategist at Jefferies & Company. “Unfortunately, we found out that the light at the end of the tunnel was a train.”
Russian natural gas finally flowed into Europe once again Tuesday, after Moscow and Kiev pulled back from an energy war that drastically reduced supplies to many nations for two tough winter weeks.
But the resolution looked more like a cease-fire than a permanent peace, with no guarantee against renewed hostilities between Russia and Ukraine, two former Soviet neighbors with sharply contrasting views of the future.
From later on in the article…..
Ukraine is to receive gas at a 20 percent discount from this year’s average European price, which Russia says is $450 per 1,000 cubic meters. That price is likely to decrease as the effect of slumping oil prices kicks in, but it still means a hike from the $179.50 Ukraine paid last year.
Russia pays the same amount as last year to ship the gas through Ukraine’s pipelines. But in 2010, both countries are to pay market prices — Ukraine for the Russian gas it uses and Russia for the transit of gas to Europe.
Any price increases will further cripple Ukraine’s inefficient economy, already badly hurt by the global financial crisis. The office of Ukrainian President Viktor Yushchenko — Tymoshenko’s political rival — already has criticized the deal.
With the ink barely dry, Gazprom chief Alexei Miller suggested Ukraine might not be trusted to pay higher prices.
This is a complete defeat for Ukraine. But as the head of Gazprom cynically notes, it does not really matter. Ukraine is going to go broke in any case no matter what. It does not matter what they charge you when you know you can’t pay the bill.
From the Wall Street Journal….
Under terms of a pact that is being hammered out, Fiat is likely to take a 35% stake in Chrysler by the middle of this year. It would have the option of increasing that to as much as 55%, these people said.
Fiat, the stronger of the two, wouldn’t immediately put cash into Chrysler. Instead it would obtain its stake mainly in exchange for covering the cost of retooling a Chrysler plant to produce one or more Fiat models to be sold in the U.S., these people said.
In other words, Chrysler is giving itself away for practically nothing. Why is it doing this? From later on in the same article….
The pact with Fiat could give Chrysler a stronger case as it seeks more loans from the U.S. government. Chrysler nearly ran out of money late last year, before the Treasury Department provided $4 billion in emergency loans, and has suffered a steep drop in sales in the past three months. The auto maker needs to show it can remain a viable business by March to keep those loans and to qualify for the $3 billion in additional government aid it says it needs.
It shows how messed up everything is that giving yourself away to a failing Italian car company is seen as a way of increasing the chance that you will get more federal money.
Acme Tool Co. still calls layoffs “reorganizations.” How lame. See how cool companies do it–compare two Google announcements.
Pay attention to the titles–this is CHANGE, people! Oh boy!
First engineers get changed, then People Operators (see signature) get changed. Shortchanged?
Of the two, I think I prefer the changes to the People Operators. It basically says, you’re fired, Click Here to continue reading.
Well. . .not as right as you’d think. The big splash of cold water, at least as I remember it, was when the Human Genome Project folks announced the total number of human genes, and it came in way below what some people had been estimating – like, ten times less. If you added up all the genes that people had claimed to have filed applications on up until then, it was well in excess of the number of genes that turned out to actually exist. This embarrassing patent excess was one problem (some of which could be explained by multiple filings by different companies), but the unexpectedly small number was the other one, and the more worrisome. How could there be so few genes when we knew there there were a lot more proteins than that? And so the importance of post-translational processes finally began to be appreciated by a wider public. It wasn’t “one gene, one protein” – it was “one gene, a bunch of proteins, and we’re not sure quite how or quite how many”.
Another set of problems came on a bit more slowly. The companies that did the whopper genomic deals came to realize that (1) even 50,000 genes was rather a lot, when you had no idea what most of them did, what pathways they fit into, what diseases they might be associated with, and what might possibly happen if you found a compound that affected their associated proteins, and (2) it didn’t look as if we were going to even get a chance to find out about that last part, because most of these things came up empty when you screened against them anyway. These were (and are) all major problems. We still have only fuzzy ideas of what a lot of genes actually do, and we still have a terrible time finding useful chemical hits against a lot of our new targets – more on these later; they’re perennial topics around here.
The whole thing is worth reading. I was happy to find out that most of those companies who rushed to patent human genes are likely to get nothing for their pains. I still think that it sets a dangerous precedent though.
Check out this report from 24/7 Wall Street, surveying what the writer says will be the worst year in media that anybody in the business will ever have seen. It’s really incredible. I knew the Miami Herald was in trouble, but I didn’t realize that it’s likely to go under this year. The Miami Herald! Can you imagine? Same with the San Francisco Chronicle. Mind you, I have friends working at both papers, and I feel for them. My paper is doing poorly too. Nobody’s paper is doing well, frankly. Reading that report, I got a glimmer of hope when I saw that the McClatchy company, which owns the Fort Worth Star-Telegram, is on the brink of default, which could result in the Star-Telegram’s closing. “Oh good,” I thought. “If it goes under, the Dallas Morning News could pick up a good chunk of those readers, and get a lift.” Then I felt like a schmuck for looking on the suffering of others as a hopeful sign for me and my co-workers. But that’s the world we media people are in today: it’s panic time, and we search for lifeboats where we can find them.
New York Times is in trouble too. But due to their prestige they can find sugar daddies to bail them out of trouble.
This year alone, more than $700 billion in corporate loans will come due, according to Standard & Poor’s. That is the size of the federal bailout of the financial sector. Many companies were counting on being able to borrow more money to meet those obligations and kick their debt farther down the road.
But with the credit markets still tight, corporations are being forced to pay much higher interest rates than they did a few years ago, putting more strain on balance sheets already hammered by falling profits and a grinding recession.
Events are moving fast in Europe. The worst riots since the fall of Communism have swept the Baltics and the south Balkans. An incipient crisis is taking shape in the Club Med bond markets. S&P has cut Greek debt to near junk. Spanish, Portuguese, and Irish bonds are on negative watch.
Dublin has nationalised Anglo Irish Bank with its half-built folly on North Wall Quay and €73bn (£65bn) of liabilities, moving a step nearer the line where markets probe the solvency of the Irish state.
A great ring of EU states stretching from Eastern Europe down across Mare Nostrum to the Celtic fringe are either in a 1930s depression already or soon will be. Greece’s social fabric is unravelling before the pain begins, which bodes ill.
The article goes on to detail a lot of events that we have not taken the time to cover here at the Voice.
Shipping journal Lloyd’s List said brokers in Singapore are now waiving fees for containers travelling from South China, charging only for the minimal “bunker” costs. Container fees from North Asia have dropped $200, taking them below operating cost.
Industry sources said they have never seen rates fall so low. “This is a whole new ball game,” said one trader.
The Baltic Dry Index (BDI) which measures freight rates for bulk commodities such as iron ore and grains crashed several months ago, falling 96pc. The BDI – though a useful early-warning index – is highly volatile and exaggerates apparent ups and downs in trade. However, the latest phase of the shipping crisis is different. It has spread to core trade of finished industrial goods, the lifeblood of the world economy.
Trade data from Asia’s export tigers has been disastrous over recent weeks, reflecting the collapse in US, UK and European markets.
All the country’s top commercial banks and the publicly owned regional banks known as Landesbanken took part in the survey which revealed that the banks hold so-called “toxic” securities totalling just under €300 billion ($398 billion), of which only a quarter has been written off.
They hold the remainder in their books at values that are now illusory. The government expects the banks to make further writedowns as a result, which should lead to further big losses for the banks. That in turn means that even more banks are likely to require government cash injections in the near future.
The Finance Ministry in Berlin estimates that the entire German banking sector is still holding risky securities totalling up to €1 trillion. Given that volume, Finance Minister Peer Steinbrück of the center-left Social Democrats, believes it would be irresponsible for the government to set up a so-called Bad Bank as a respository for toxic assets stemming largely from the devastated subprime mortgage market, as banks have suggested.
“In the worst case that would cause the federal government debt to more than double,” said one member of Steinbrück’s staff. At present the federal government debt amounts to almost €1 trillion.
The taxpayer will be forced to underwrite up to £200 billion of bad banking debt under a government plan to take control of assets belonging to Britain’s major high street lenders, The Daily Telegraph can disclose.
Calculated Risk notes that if the the US handed out as big as a bailout in proportion to its GDP it would have to be almost 10 trillion dollars. Markets are not reacting well to this news. Unlike Macro Man, I personally feel that an Iceland like collapse is coming for Great Britain in the near future.
This week’s essay of the week is The End by Michael Lewis.