From Market Movers….

Wachovia’s real problem with Golden West, it turns out, is not the headline acquisition cost, so much as the inherited Golden West loan portfolio, which includes a staggering $121 billion – no, that’s not a misprint – in “pick-a-pay” mortgages.

These loans behave just like you think they do: borrowers get to decide how much money they’re going to pay back each month. Predictably enough, that isn’t working out too well.

On Monday, Wachovia conceded total losses from Pick-A-Pay loans could eventually amount to a staggering 7% to 8% of the loans’ combined value, a range of $8.5 billion to $9.7 billion.

Read on Naked Capitalism…..

Ah, what cheery news this morning. Oil at a new high, producer price increases running twice as high as expectations, real estate repossessions running double the rate of last year. Yet the Dow is up a tad on the report that New York manufacturing increased. Pray tell what is New York manufacturing, besides the garment business, artisanal cheese, Long Island wine, and tree farms? The last three items probably aren’t included in the factory index; nevertheless, a clearer image might staunch unwarranted enthusiasm.

Read on CNN…

Riots from Haiti to Bangladesh to Egypt over the soaring costs of basic foods have brought the issue to a boiling point and catapulted it to the forefront of the world’s attention, the head of an agency focused on global development said Monday.

“This is the world’s big story,” said Jeffrey Sachs, director of Columbia University’s Earth Institute.

“The finance ministers were in shock, almost in panic this weekend,” he said on CNN’s “American Morning,” in a reference to top economic officials who gathered in Washington. “There are riots all over the world in the poor countries … and, of course, our own poor are feeling it in the United States.”

Read in the Times….

CITIGROUP and Merrill Lynch will heap further pain on Wall Street this week as they reveal additional sub-prime write-downs totalling $15 billion (£7.6 billion) or more.

In another sign of the intense pressure on leading banks, Deutsche Bank is attempting to offload some of its €35 billion (£28 billion) of toxic debt to a consortium of private-equity firms.

Huge exposure to American mortgages is expected to result in Citi taking a $10 billion hit to its accounts, dragging the bank to a first-quarter loss of almost $3 billion. Some analysts believe Citi’s write-downs could stretch to as much as $12 billion.

Merrill will suffer $5 billion of write-downs, analysts say, which would push the bank $2.7 billion into the red.

Dryfly is a regular commentator on calculated risk and one of the better (best?) ones. He really should start his own blog. Here is what he had to to say about high levels of investment in China…..

I work for companies who have put plants in China – they have been racing to get the plants in & operational & then transfer over & convert money about as fast as they can. As much as the Chinese will allow. They did it to get in under the revaluation should it happen. Lotsa companies are doing that.

Currency controls in PRC make it difficult to move big sums fast so the way to get around it is buy or build a plant IN China. Then liquidate it when the revaluation occurs – you should come away with more dollars for doing little or nothing IF all goes as planned…

In response to further questions he elaborated a bit more by saying…..

He doesn’t know where the ‘hot money’ is – no one does or isn’t saying – my guess is companies like the one’s I sell for are moving way more in than they need to operate. WAY MORE. They want it in RMB IN CHINA BANKS before the revaluation. So some of this transfer is in bricks & mortar and illiquid and some is liquid ‘operating capital’.

A lot of smart folks are going to end up too smart by half before this is all over.

The “he” in the above comment is talking about Brad Setser who has been wondering about China’s accounts lately.

Dryfly mostly worries about these “smart” people getting margin calls. But I wonder if anyone will want to buy the factories from them when they want to cash in. To me, that is the biggest risk.

A week ago, or around then, P.B. messaged me that there was a person who needed light duty work, and he was going to utilize this person to help me catch up on claims. Technically, P.B. is not the person to do that; I report to K.K. But K.K. doesn’t care if someone else takes Click Here to continue reading.

This map of foreclosures is the best thing since sliced bread once you figure out how to navigate it. It starts off showing you a color coded map of the US showing which parts of the country are having the most problems with real estate foreclosures. But you can pick what ever part of country you want and zoom in on it. You can zoom all the way down to the township level and the map will still be color coded. I had expected it to stop at the county level.

Plus, you can see all the individual house that are in foreclosure if you zoom in fare enough.

You remember this rant from Sippican Cottage on how it was hard to get a doctor now that every one had health insurance? Now even the New York Times has noticed. Now those people who only believe those things that appear in the New York Times can no longer call Sippican Cottage a liar.

About a year ago P.B. instituted a policy that the truck drivers were not to load their own trucks; only Acme personnel could use the forklifts and load the trucks. I no longer remember the nominal reasons, much less whether they made sense. I think it had to do with legal liability for the truck Click Here to continue reading.

From the Associated Press we learn that New York State is facing some fiscal problems this year. As the article says…..

A national recession that’s all but declared, layoffs and losses on Wall Street that provide 20 percent of state revenues, and declining revenue from income, sales and other taxes tied to the economy.

Yet the proposed state budget, due Tuesday and being detailed this weekend, calls for about a 4.5 percent increase in spending, perhaps even a bit higher. And one of the biggest pieces _ state school aid _ will still be a whopper: A record $1.8 billion increase for state school aid already at about $20 billion, which includes among the highest per-pupil funding in the nation

So how is New York State going to balance the books? By increasing the taxes on the poor and and the cooperations that provided jobs. The article from the Associated Press spells this out pretty clearly. First off there is the doubling of the cigarette taxes. As the Associated Press article says…

Smokers face up to a $1.50 per pack increase in the cigarette tax. The state tax is already $1.50 per pack and, in New York City because of an additional local tax, it’s $4.50 a pack.

How many rich people do you know that smoke? More to point, how stupid do you think New Yorkers who smoke are? Even if you live so far from a state border that you can not easily cross the border to get you smokes, you can easily pay for a long distance trip to get smokes by brining back enough for your buddies.

But taxing those evil smokers who have no rights is not the only way that New York intends to raise revenue. The state is also looking to increase liquor taxes and raise its lottery income. From the same Associated Press article…..

Add to that other “revenue raisers” still on the table surrounded by lawmakers desperate for cash: Expanding the hours of the Quick Draw lottery game sometimes called “video crack”; redefining some malt beverages to light liquor and little cigars into cigarettes to snag higher tax rates; and countless other increases to user fees.

You got to love New York State. They make laws to protect stupid people from themselves, like mandating that everyone wears helmets when they are riding bikes and then turn around and taxes people who don’t understand mathematical odds. I guess the assumption is that if you are stupid enough to get addicted to quick draw you are too dumb to vote.

Who would have thought that a state as liberal as New York would embrace the soak the poor philosophy so eagerly? But of course, this being New York, it is not just about soaking the poor. It is also about driving away business to other states. Again, from the Associated Press story…..

For some of New York’s businesses, the cost of hard times in Albany could be measured in the millions. That’s because “loophole closers” were still on the table Saturday.

Now I am all for closing loop holes. I think all taxes should be straight forward and hard to game. But the only way I would support closing loopholes for New York State businesses is if overall tax rate that businesses had to pay was lowered. Businesses are already leaving Upstate New York like rats leaving a sinking ship. I don’t see the point of encouraging them.

There is more that I could go about. But the basic point is that it is absurd to raising taxes just as the state is going into recession. Especially when the state is still planing on having across the board spending increases.