"Economists are pessimists: they've predicted 8 of the last 3 depressions."
--Barry Asmus

The Required Disclosures

The information presented in this blog and its individual articles is provided for informational use only and should not be considered investment advice or an offer for a particular security. The contents reflect the views and opinions of the individual writer as of the date the article was written and do not necessarily represent the views of the individual writer on the current date. They also do not in any way, shape, or form represent the views of the Firm Never-To-Be-Named. Any such views are subject to change at any time based upon market or other conditions and The Great Redoubt and its individual writers disclaim any responsibility to update such views. These views should not be relied on as investment advice, and because investment decisions for any security are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any contributor to The Great Redoubt. Neither The Great Redoubt nor any individual author can be held responsible for any direct or incidental loss incurred by applying any of the information offered. Please consult your tax or financial advisor for additional information concerning your specific situation.

Friday, December 3, 2010

Taxpayers Receive Additional $1.8 Billion in Proceeds from GM IPO

That's nice. Too bad there's no word on when we'll see the rest of it.

December 2, 2010

Taxpayers Receive Additional $1.8 Billion in Proceeds from GM IPO

Exercise of Over-allotment Option Brings Total Taxpayer
Proceeds from GM IPO to $13.5 Billion

IPO Reduced Treasury's Common Stock Stake in GM
by Nearly Half from 60.8 Percent to 33.3 Percent

WASHINGTON – The U.S. Department of the Treasury announced that it today received $1.8 billion in additional net proceeds from General Motors' (GM) initial public offering (IPO), bringing overall net proceeds for taxpayers from the GM IPO to $13.5 billion.

On November 23, Treasury received $11.7 billion in net proceeds from the sale of 358,546,795 shares of common stock in GM's IPO. The underwriters in the offering had a 30-day option to purchase up to 53,782,019 additional shares of common stock from Treasury at the same price to cover over-allotments. The underwriters exercised this over-allotment option in full on November 26, and Treasury today received $1.8 billion in net proceeds from the sale of those additional shares.

"General Motors' IPO is a testament to that company's turnaround and the significant progress we have made continuing to exit our investments and recover taxpayer dollars," said Tim Massad, Acting Assistant Secretary for Financial Stability.

The exercise of the over-allotment option increased the overall amount of GM common stock that Treasury sold in the GM IPO to 412,328,814 shares. In total, the GM IPO reduced Treasury's ownership of GM's outstanding common stock by nearly half from 60.8 percent to 33.3 percent.

U.S. Department of Treasury Participation in the GM IPO

Shares of Common Stock Sold

Net Proceeds ($ billions)

Initial Sale









Treasury has invested a total of $49.5 billion in General Motors. In October, Treasury announced that it accepted an offer by GM to repurchase $2.1 billion of preferred stock – a transaction that is expected to occur in mid-December 2010. With this repurchase and the IPO, taxpayers will have received a total of $23.1 billion from GM through repayments, interest, and dividends since the company emerged from bankruptcy in July 2009. Following the IPO and the preferred stock repurchase, Treasury's remaining stake in GM will consist of 500,065,254 shares of common stock.

Treasury Investment in GM

($ billions)

Return from GM

($ billions)

Pre-January 2009


Net IPO Proceeds


Post-January 2009


Debt Repayment


Proposed Preferred Stock Repurchase


Interest & Dividends



$ 49.5


$ 23.1

The proceeds from the GM IPO bring the total amount of TARP funds that have been returned to taxpayers to nearly $254 billion.

TARP Funds Returned to Taxpayers

($ billions)

Repayments Prior to GM IPO


Profits from Dividends, Interest, Warrant Sales, and Other Income


Cancelled Commitments (Asset Guarantee Program)







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Employment Situation: The 800 lb Gorilla Of Metrics

It's that time of the month. The time of the month when the Bureau of Labor Statistics collates data points and puts out a report that makes the markets sweat blood.

Yes, sir, it's time for the Employment Situation.

Let's start off with a recap of October: nonfarm payrolls were up a total of 151,000, with private payrolls up 159,000. The unemployment rate was 9.6%, and average hourly earnings increased by 0.2%.

For November, the Street is feeling optimistic. They're expecting to see an additional 168,000 nonfarm jobs created, and they're expecting to see average hourly earnings increase an additional 0.2%. They are also, however, expecting to see the unemployment rate rise to 9.7%.

Now, how did we do? To start with, go ahead and pull up the Employment Situation at http://www.bls.gov/news.release/empsit.nr0.htm. Go ahead. I'll wait.

Now, let's start with the dry facts. Nonfarm payroll employment was up only 39,000 in November - far less than the 168,000 consensus projection (far less than the low end of the consensus range for that matter, which still called for a 100k increase). The breakout is as follows:
* Temporary Help Services jobs increased by 40,000
* Health Care jobs increased by 19,000 (8,000 of which were in hospitals)
* Mining jobs increased by 6000.
* Retail Trade employment fell 28,000 (9000 in department stores, 6000 in home furnishing stores)
* Manufacturing Jobs fell 13,000.

The unemployment rate hit 9.8%, with 15.1 million unemployed - a figure that includes the 390,000 people who lost their jobs in November, the 9.1 million people who are "short term" unemployed [1], and the 6.3 million who are "long-term" unemployed [2].

This unemployment figure does not count in three categories of people: individuals not looking for employment, individuals "marginally attached to the labor force" [3], and individuals "employed part time for economic reasons" (aka "involuntary part-time workers' or "the underemployed"). There are obviously no figures on people who are not looking for and are not interested in obtaining work. There are 2.5 million people who are "marginally attached to the labor force" (1.3 million of whom no longer believe they will be able to find a job), and 9.0 million "involuntary part-time workers". In other words, the unemployment rate would be 11.39% if we actually counted the "marginally attached to the labor force" unemployed, and goes up to 17.23% if you also include the "involuntary part-time workers" (which is not unreasonable if you think about it).

Average hourly earnings for the people who are still employed increased by $0.01 to $22.75. In percentage terms, that is not quite unchanged - it was up 0.04%.

So, the results? Grim. No matter how you slice it, the employment situation is bad.

[1] Unemployed for less than 27 weeks.
[2] Unemployed for 27+ weeks.
[3] The difference between people not looking for work and people marginally attached is this: the second category want a job, can't find one, and haven't looked for at least 4 weeks because they've run out of hope. Source: "Who is counted as unemployed?" from http://www.bls.gov/cps/cps_htgm.htm#unemployed.

Thursday, December 2, 2010

In Which I Attract The Attention Of Homeland Security

Deviating from my normal policy of only sneering at politics when they intersect with the marketplace, I felt that this could not pass without remark.

This, of course, is the "US Department of Homeland Security Privacy Impact Assessment for the Office of Operations Coordination and Planning Publicly Available Social Media Monitoring and Situational Awareness Initiative". In short, "Federal law requires the NOC [National Operations Center] to provide situational awareness and establish a common operating picture for the entire federal government, and for state, local, and tribal governments as appropriate, and to ensure that critical disaster-related information reaches government decision makers." To this end,
The NOC will use Internet-based platforms that provide a variety of ways to follow activity related to monitoring publicly available online forums, blogs, public websites, and message boards. Through the use of publicly available search engines and content aggregators the NOC will monitor activities on the social media sites listed in Appendix A for information that the NOC can use to provide situational awareness and establish a common operating picture. Appendix A is a current list of sites that the NOC will use as a starting point under this Initiative. Initial sites listed may link to other sites not listed. The NOC may also monitor those sites if they are within the scope of this Initiative. The NOC will gather, store, analyze, and disseminate relevant and appropriate de-identified information to federal, state, local, and foreign governments, and private sector partners authorized to receive situational awareness and a common operating picture.
In other words, they will spy on you. But fear not.
Under this initiative, OPS will not: 1) actively seek personally identifiable information (PII); 2) post any information; 3) actively seek to connect with other internal/external personal users; 4) accept other internal/external personal users’ invitations to connect; or 5) interact on social media sites.
Because the US government has never spied on its own citizens, and then used that information to try to subvert organizations, repress civil rights, or criminalize behavior. No, sir, they would never do that.

So, in order to express my absolute confidence in our government, here is every single phrase the NOC monitors for as of June 22, 2010:

DHS & Other Agencies
Department of Homeland Security (DHS)
Federal Emergency Management Agency (FEMA)
Coast Guard (USCG)
Customs and Border Protection (CBP)
Border Patrol
Secret Service (USSS)
National Operations Center (NOC)
Homeland Defense
Immigration Customs Enforcement (ICE)
Task Force
Central Intelligence Agency (CIA)
Fusion Center
Drug Enforcement Agency (DEA)
Secure Border Initiative (SBI)
Federal Bureau of Investigation (FBI)
Alcohol Tobacco and Firearms (ATF)
U.S. Citizenship and Immigration Services (CIS)
Federal Air Marshal Service (FAMS)
Transportation Security Administration (TSA)
Air Marshal
Federal Aviation Administration (FAA)
National Guard
Red Cross
United Nations (UN)

Domestic Security
Domestic security
Law enforcement
Disaster assistance
Disaster management
DNDO (Domestic Nuclear Detection Office)
National preparedness
Dirty bomb
Domestic nuclear detection
Emergency management
Emergency response
First responder
Homeland security
Maritime domain awareness (MDA)
National preparedness initiative
Shots fired
Explosion (explosive)
Disaster medical assistance team (DMAT)
Organized crime
National security
State of emergency
Bomb (squad or threat)
Emergency Landing
Pipe bomb

HAZMAT & Nuclear
Chemical spill
Suspicious package/device
National laboratory
Nuclear facility
Nuclear threat
Biological infection (or event)
Chemical burn
Hazardous material incident
Industrial spill
Powder (white)
Blister agent
Chemical agent
Nerve agent
North Korea

Health Concern + H1N1
Food Poisoning
Foot and Mouth (FMD)
Small Pox
Human to human
Human to Animal
Center for Disease Control (CDC)
Drug Administration (FDA)
Public Health
Agro Terror
Tuberculosis (TB)
Water/air borne
Norvo Virus
World Health Organization (WHO) (and components)
Viral Hemorrhagic Fever
E. Coli

Infrastructure Security
Infrastructure security
Airplane (and derivatives)
Chemical fire
CIKR (Critical Infrastructure & Key Resources)
Computer infrastructure
Communications infrastructure
Critical infrastructure
National infrastructure
Port Authority
NBIC (National Biosurveillance Integration Center)
Transportation security
Body scanner
Failure or outage
Black out
Brown out
Service disruption
Power lines

Southwest Border Violence
Drug cartel
U.S. Consulate
El Paso
Fort Hancock
San Diego
Ciudad Juarez
Mara salvatrucha
MS13 or MS-13
Drug war
Mexican army
Cartel de Golfo
Gulf Cartel
La Familia
Nuevo Leon
Narco banners (Spanish equivalents)
Los Zetas
Meth Lab
Drug trade
Illegal immigrants
Smuggling (smugglers)
Barrio Azteca
Artistic Assassins
New Federation

Al Qaeda (all spellings)
Environmental terrorist
Eco terrorism
Conventional weapon
Weapons grade
Dirty bomb
Chemical weapon
Biological weapon
Ammonium nitrate
Improvised explosive device
IED (Improvised Explosive Device)
Abu Sayyaf
FARC (Armed Revolutionary Forces Colombia)
IRA (Irish Republican Army)
ETA (Euskadi ta Askatasuna) Basque Separatists
Tamil Tigers
PLF (Palestine Liberation Front)
PLO (Palestine Liberation Organization
Car bomb
Weapons cache
Suicide bomber
Suicide attack
Suspicious substance
AQAP (AL Qaeda Arabian Peninsula)
AQIM (Al Qaeda in the Islamic Maghreb)
TTP (Tehrik-i-Taliban Pakistan)
Home grown

Extreme weather
Forest fire
Brush fire
Tsunami Warning Center
Mud slide or Mudslide
Power outage
Brown out
Emergency Broadcast System

Cyber Security
Cyber security
DDOS (dedicated denial of service)
Denial of service
Cyber Command
Cain and abel
Brute forcing
Mysql injection
Cyber attack
Cyber terror
Social media
Breaking News

To Homeland Security: Welcome to The Great Redoubt, guys. Hope you like it.

To everyone else: Sleep tight, secure in the knowledge that your government is watching you.

Morning Metrics

We're looking for one big one (Pending Home Sales) and one moderate one (first time jobless claims).

If you recall, last week we had surprisingly good first time jobless claims: only 407,000 people filed for unemployment insurance for the first time that week. This week, the analysts aren't so optimistic. Analysts are looking for a consensus average of 425,000 new claims (with a range of anywhere from 412k to 440k). That's not great, but it won't push the markets around the way tomorrow's employment situation report will.

Pending Home Sales? That's the big dog for the day. It's a measure of how many houses are due to be purchased, but have not yet been closed on. It's huge, for all the same reasons that existing home sales and new home sales are huge: trickle-down impact on the economy. Econoday doesn't have the consensus up yet, so I'm flying blind here, but September's index was down 1.8% to a level of 80.9.

I won't be back with timely commentary on the metrics today, due to a family emergency.

How Dare A Rumor Not Be True!

If you remember, the European markets were partly up on the rumor that the ECB was going to take action to deal with Europe's debt crisis by massively ramping up their purchase of the sovereign debt of troubled (and by troubled I mean PIIGS, not all the other troubled nations) debt.

Now? It appears that the ECB plans to just maintain its existing programs - i.e., it is ready to bail nations out if they self destruct, but it's not going to do anything else. And the markets are "disappointed". Their final response will wait until after 1330 GMT today, when ECB President Jean-Claude Trichet addresses the press, but only the delusional (I mean, optimistic) expect anything new.

So, what will happen when and/or if President Trichet disappoints the European markets? Well, in fine European fashion, probably.

Wednesday, December 1, 2010

“Debt is a prolific mother of folly and of crime”

Benjamin Disraeli said that. I have no idea how well he lived up to that as Prime Minister of Britain, but it doesn't actually impact the truth of the quote.

Recently, I've realized that my "dismal blog about this most dismal of sciences" has lacked any of the actual dismal science. So, let's rectify that with some basic concepts. We begin with definitions, courtesy of Investopedia:
Deficit: a situation in which liabilities exceed assets, expenditures exceed income, imports exceed exports, or losses exceed profits.

Debt: an amount of money borrowed by one party from another. Many corporations/individuals use debt as a method for making large purchases that they could not afford under normal circumstances. A debt arrangement gives the borrowing party permission to borrow money under the condition that it is to be paid back at a later date, usually with interest.
If you are facing a budget deficit - which is to say, you are spending more than you earn - you have three options:
  1. You can reduce the amount you spend.
  2. You can take on debt.
  3. You can attempt to generate more income.
In reality, these are not mutually exclusive. All three, or any of the three in any combination, can be used simultaneously in an effort to reduce the deficit. But, regardless of which option(s) you choose to take, there are some things to keep in mind:
  1. Spending less means actually reducing your total spending. It does not mean reducing the amount you spend on your current liabilities, and then taking the remainder and using it to take on more liabilities.
  2. Debt is a liability. If not utilized properly, and if not managed wisely, it will make your situation far worse.
  3. You may not actually succeed at generating more income. If you spend the income before you actually have it, and then you do not get it, you will make your situation worse.
If select option 1, and you fail to reduce your total spending, you increase your deficit. The fault, however, does not lie with the entity that encouraged you to take on the new liability.

If you select option 2, and you fail to manage your debt properly, you increase your deficit. The fault, however, does not lie with your lender.

If you select option 3, and you take on additional liabilities in anticipation of that income, and then you do not generate the anticipated income, you increase your deficit. The fault, however, does not lie with either the anticipated source of the anticipated income or the entity that encouraged you to take on the new liability.

The fault, in each case, lies with you. After all, you made the decision to take on the additional liability.

Beige Book Released, Says Everything Is Mediocre

The Federal Reserve has released the Beige Book!

If you aren't familiar with this, it's also called the Summary of commentary of Current Economic Conditions. From the Fed's web page, "each Federal Reserve Bank gathers anecdotal information on current economic conditions in its District through reports from Bank and Branch directors and interviews with key business contacts, economists, market experts, and other sources. The Beige Book summarizes this information by District and sector. An overall summary of the twelve district reports is prepared by a designated Federal Reserve Bank on a rotating basis."

In short, they say that the economy has continued to improve from early October to mid-November. Manufacturing activity was up (except in New York where activity declined), particularly in metal fabrication and automotive industries. consumer spending reports are positive, although "households remain price sensitive and focused on buying necessities."[1] Housing markets remain depressed, and several Districts reported weakening housing sales.[1] Commercial real estate is mixed, agriculture was favorable (with several Districts reporting yields near historic highs), and off-shore agricultural sales increased.

Lots of steadiness, based on the anecdotal reports. Nothing to write home about, but nothing to leap out a window over either.

[1] Really?

ISM Manufacturing Index, Construction Spending, And Wow, Look At The Dow

Real quick here, the ISM Manufacturing Index is a survey of 300 manufacturing firms about employment, production, new orders, etc, etc, etc. Anything above 50% is considered a sign of an expanding factory sector. The Street wants to see the factory sector expand because, when you get right down to it, factories are one the sector that actually produces useful things in the economy.

October saw a 56.9%. The Street is looking for a 57% for November. Did we achieve it? Check for yourself at http://www.ism.ws/ISMReport/MfgROB.cfm?navItemNumber=12942, or read the highlights.

Overall, the index comes in at 56.6%, still growing but slower than October. The overall economy is considered to be growing, but at a slowing rate, a trend which has continued for the last 19 months. The result is mildly disappointing, but not terrible by any means.

Construction spending saw an overall increase of 0.5% from September to October, but a 10.4% decrease from October 2009 to October 2010. The Street is expecting construction spending to decrease in October, falling 0.4%. The figures are at http://www.census.gov/const/C30/totsa.pdf, and here's the highlights:

Overall construction spending increased by 0.7%, with residential construction spending leading the pack with 2.4% growth. Much better than expected.

Oh, and the Dow is up 196.75. Yee-haw?

The First Half Of The Measures

We kick off the market measures today with the ADP Employment Report and Productivity and Costs.

Automatic Data Processing, Inc. is, according to their web site, "one of the world's largest providers of business outsourcing solutions." They provide "...HR, payroll, tax and benefits administration solutions." This puts them in a good place to examine the employment situation, because they're providing payroll services to some 550,000 clients. Their report doesn't carry the same weight as the BLS Employment Situation report, but it still provides a good look at what nonfarm private sector employment looks like.

Their report can be read at http://www.adpemploymentreport.com/, which shows that private sector employment rose by 93,000 in November. That's up from a (revised) 82,000 increase in October, and represents the 10th consecutive month of gains (with an average of 47,000 new jobs per month). They do not, however, expect this to be enough gains to lower the unemployment rate. Their prediction is that unemployment will remain above 9% through 2011. 79,000 of the new jobs came from the service sector and 14,000 came from the goods-producing sector. Small businesses saw an increase of 54,000 jobs, medium-size businesses saw an increase of 37,000, and large businesses saw a 2000 increase.

Moving on to productivity and costs, this measures the Q/Q change in nonfarm productivity and in unit labor costs. The information is compiled by the Bureau of Labor Statistics, and the Street likes it because they like seeing the companies they invest in maximizing production while minimizing costs (because that means maximizing profits). This month, we get the Q3 2010 revised estimates.

The initial data (released in September) indicated that nonfarm productivity had increased by 1.9% and unit labor costs were down 0.1%. Looking to the final revision, analysts were looking to see a nonfarm productivity revised to up 2.0% and unit labor costs revised to a net change of 0.0%.

The report is available at http://www.bls.gov/news.release/pdf/prod2.pdf. Nonfarm productivity was revised to a 2.3% increase, with unit labor costs down 0.1%. Not too shabby. Pretty much in line with expectations.

See you in about half an hour or so with the ISM Manufacturing Index and Constructions Spending.

Your Word For The Day: Grotty

First off, the euro is up and PIIGS bond yields are down on rumors. The rumors start with a report from "G20 sources" that deputy finance ministers from the G20 nations had discussed the terrible European situation in a conference call on Monday. This, combined with the US Treasury announcing it would send someone to Europe to discuss the EU's pending economic collapse with governments in Berlin, Madrid and Paris[1], has naturally (obviously) led to the conclusion that the European Central Bank will calm the situation by massively increasing their purchases of European sovereign debt.

Jim Cramer, in his lucid days, said that "tips are for waiters". Keep that in mind, until the ECB actually says it will do something.

The European rumors and good factory data out of China (specifically, their Purchasing Managers' Index hit a 7-month high of 55.2) seem to be driving the futures up. There are a few bits of domestic news that could hinder the joyous rumor-driven market frenzy, however.

First off, the Fed is going to have to release details about the emergency loans they handed out during the 2007-2009 market collapse. You remember those, right? The massive bailouts of AIG, and Goldman Sachs, and Morgan Stanley, and Merrill Lynch, and Lehman Brothers...

Oh, wait. That's right. They didn't bail out Lehman Bros. The people who are really excited about the release of the data are curious to see why they didn't get bailed out. Also, most analysts are expecting the data to be disclosed in a less-than-helpful fashion. Or, as Christopher Whalen (managing director at Institutional Risk Analytics) puts it: "My sense is they're going to give us the disclosure in the same grotty fashion (as before). It's not going to be well organized so you'll have to sort through it."[2]

Imagine that. The Fed might not want people to figure out what they're doing. Shocking. Shocking, I say.

Second, Challenger, Gray & Christmas, Inc. has released a report that employers announced 48,711 job cuts in November, up 28% from the 37,986 job cuts in October. In what passes for good news, this is still down 3.3% from the job cuts announced a year ago in November. But hey, they're being offset by plans to add 15,900 seasonal employees in the retail sector and 500 in the transportation sector last month. {3]

[1] Because the US is obviously in a position to explain to other nations how to bring their economic problems under control, and to explain how to implement austerity measures.
[2] Grotty. Adjective. seedy, wretched, dirty
[3] Because temporary seasonal jobs obviously offset the loss of full time permanent jobs. Obviously.

Articles cited:
ECB talk lifts battered euro as crisis worries spread (http://www.reuters.com/article/idUSLDE6AO0HG20101201)
Futures rally on euro bounce, strong Chinese data (http://www.reuters.com/article/idUSTRE69O1D320101201)
Time for Fed to show who crisis loaned benefited (http://www.reuters.com/article/idUSTRE6B014S20101201)
48,711 November Job Cuts UP 28% From October (http://www.challengergray.com/press/PressRelease.aspx?PressUid=151)
Short on votes, deficit panel delays decision (http://www.reuters.com/article/idUSTRE6AS4Z120101201)

Tuesday, November 30, 2010

That Was An Unexpected Rally

"Rally?" I can hear you all asking. "Have you lost your mind?"

No, not really. Hear me out. At one point, the Dow was down 109.51, or nearly 1% (0.99%, if you want to get technical). It closed only 46.47 (0.42%) down. That's not a great rally, but it is a rally.

Now, what drove it? Part of it was the unexpectedly good consumer confidence figures. Part of it was President Obama and Republican congressional Leaders agreeing to seek a compromise on the expiring Bush tax cuts (says the AP)[1]. Still, despite the guarded optimism and weak rally, it was a sad, sad ending to a sad, sad month.

Still, Pyongyang hasn't unleashed the People's Glorious Revolutionary Atomic Mushroom Brigade, so things are looking up. For the moment.

[1] Yes, the markets were mildly happy about a promise to try and reach a compromise. Expectations have been lowered for your convenience.

Articles cited:
Stocks pare losses on optimism over tax cuts (http://hosted.ap.org/dynamic/stories/U/US_WALL_STREET?SITE=SCAND&SECTION=HOME&TEMPLATE=DEFAULT)
Obama, GOP promise to work on differences on taxes (http://hosted.ap.org/dynamic/stories/U/US_OBAMA_CONGRESS?SITE=SCAND&SECTION=HOME&TEMPLATE=DEFAULT)

U.S., Panama Sign New Tax Information Exchange Agreement

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November 30, 2010

U.S., Panama Sign New Tax Information Exchange Agreement

WASHINGTON – In a ceremony at the U.S. Department of the Treasury today, Treasury Secretary Tim Geithner and Panamanian Vice President and Minister of Foreign Affairs Juan Carlos Varela signed a new tax information exchange agreement (TIEA) between the United States and Panama.

"Today, we are ushering in a new era of openness and transparency for tax information between the United States and Panama" Secretary Geithner said. "This bilateral agreement to provide for the exchange of tax information between our two countries reflects the commitment of the United States and Panama to the importance of transparency of tax information."

Upon entry into force, the new TIEA will provide the United States with access to the information it needs to enforce U.S. tax laws, including information related to bank accounts in Panama.

The TIEA will permit the United States and Panama to seek information from each other on all types of national taxes in both civil and criminal matters for tax years beginning on or after November 30, 2007. Information exchanged pursuant to the TIEA shall be used for tax purposes, although the information may also be used for other purposes as permitted under the the provisions of the Treaty on Mutual Legal Assistance in Criminal Matters between the United States and Panama as long as the tax authorities of the country providing the information consents to such use in writing.

The full text of the TIEA and the TIEA Joint Declaration can be viewed at the links below.



U.S. Department of the Treasury Logo Questions? Contact Us

Consumer Confidence. Is There Any?

The Conference Boards Consumer Confidence Index is a survey of some five thousand households, looking for information on consumer attitudes on the current economy and their expectations for the future. The Street likes this measure because, although consumer confidence does not have a causal link with consumer spending, the more confident consumers are about the economy the more likely they are to part with their hard-earned (and ever-debasing [1]) money. The index is benchmarked to 1995 equaling 100.

Now, consumer confidence hit a level of 49.9 in October. Analysts are looking for a further increase of 2.1 in November, bringing the level to 52.0. How did we do?

You can read the report on The Conference Board's website. In short form, the index improved to 54.1 (an unexpectedly good increase of 4.2). The Present Situation Index is still bleak (rising 0.5 to a level of 24.0), and the Expectations Index increased 6.7 to a level of 74.2. 43.6% believe business conditions are bad (up 1.3%), while only 8.1% of respondents believe business conditions are good (down 0.2%). Far more respondents also believe jobs are hard to et (46.5%, up 0.2%) than those who believe jobs are plentiful (4.0%, but up 0.5%). 16.7% of respondents expect business conditions to improve in the next six months (up 0.9%), and 15.5% of respondents expect the job market to improve (up 1.0%).

Overall, that's good news. Not great, but good. It shows that Americans are more confident about the future than the present, "but a man's reach should exceed his grasp, or what's a heaven for?"[2].

[1] Inflation. The more it rises, the less your current money is worth. Money that is worth less than it was is pretty much the definition of debased currency.
[2] Robert Browning

S&P Case-Shiller HPI

After the revelations of the DPRK's mad plan to breed an army of giant radioactive mushroom men to conquer the free world [1], the S&P Case-Shiller HPI will be both slightly boring and a welcome return to humdrum sanity.

The S&P Case-Shiller Home Price Indices are, of course, a series of indices tracking changes in home prices nationally (the US National Index), in a 20-city region (the 20-city composite index), a 10-city region (the 10-city composite index), and then twenty individual metro area indices. It is normalized to have a value of 100 in Q1 2000. Data is released with a two month lag.

While the Street is interested this index, most analysts don't really spend any time trying to predict the results. Still, they like to see rising home values because this tends to spur new home construction. And, as we know, new home construction spurs GDP-enhancing economic activity. Also, since the single most valuable investment most everyone in the US has is their home, improving home values are seen as a signal of increasing personal wealth.

Speaking of results, you can read the press release right here. The highlights are:
* The US National Index has declined 2.0% from Q2 to Q3 2010, and is down 1.5% from Q3 2009 to Q3 2010, with the Q3 2010 level coming in at 135.48.
*The Composite-20 index is down 0.7% from August to September, but is up 0.6% from September 2009 to September 2010. The Level comes in at 147.49.
* The Composite-10 is down 0.5% from August to September, but is up 1.6% from September 2009 to September 2010. The Level comes in at 161.25.

Obviously, the results really aren't that good. Sure, the Composite-20 and Composite-10 look good, but almost all of the positive numbers come out of California. Everywhere else is either barely improving (Boston) or is watching their home values hurl themselves from a cliff like a mob of lemmings [2]. It is possible that some market analysts will declare the results positive (off the strength of the Composite-20 and Composite-10), but those analysts will most likely reside in California.

[1] You have to read between the lines, but why else would the DPRK announce both a uranium enrichment plant and new mushroom cultivation technologies on the same day?
[2] A mob of lemmings stampeded towards a cliff by filmmakers from the Walt Disney Corporation, that is. Lemmings don't actually hurl themselves from cliffs as a general rule. They have to be very depressed first.

What's Going On This Morning?

Much of it is the "same old same old". The 85 billion euro Irish bailout isn't giving anyone in Europe any comfort. Sovereign bond investors are demanding an increasing premium to hold Spanish and Italian debt, because (in the words of Everett Brown, IDEAglobal European bond strategists) "Spain is almost too big to be bailed out whereas Italy is too big to be bailed out." Italian and Spanish bond yields are up, the euro is down, European equities are weak, and US Treasury prices are up.

North Korea Crazy [1] isn't making things any better as it announces construction of a uranium enrichment plant. But rest assured, the nation that shelled Yeongpyeong Island last week and then declared the US and South Korea to be "arch criminals disturbing peace and security" (for the crime of, y'know, calling Kim Jong-il a raging nutbar), will use it entirely for peaceful purposes. Oddly enough, their new mushroom cultivation technologies have not calmed anyone's concern.

Closer to home, the Street is watching with keen interest the "negotiations" between President Obama and the new Republican Congressional majority over whether or not to extend the Bush-era tax cuts. The president wants to extend them for the middle class [2], as he feels that the loss of some $700 billion in tax revenue would have a negative impact on the Federal budget. Meanwhile the Republicans want to extend them for everyone and then cut spending [3] to prevent the negative impact on the Federal budget.

[1] "BANG! There It Is" still in the top 10 a week after release.
[2] No word yet on how "middle class" will be defined.
[3] No word yet on what actual spending they would cut. Except probably NPR, which they seem to believe is staffed by Nazis.

Articles cited:
Euro debt contagion keeps markets uneasy (http://www.reuters.com/article/idUSTRE69K04L20101130)
DPRK says to actively develop nuclear capability for peaceful use (http://news.xinhuanet.com/english2010/world/2010-11/30/c_13628272.htm)
US-S. Korea Wholly to Blame for Escalated Tension and Danger of War (http://www.kcna.co.jp/index-e.htm)
New Mushroom Cultivation Technologies Developed (http://www.kcna.co.jp/index-e.htm)
Obama, Republicans in tax face-off at White House (http://www.reuters.com/article/idUSTRE6A44K020101130)

I Seem To Owe The CBO An Apology

I was a little (well, a lot) unfair when I went on my rant about the report on the effects of the stimulus.
That's it. That is all the report can really tell us. 671,607 FTE jobs for three months. Everything else is conjecture and estimates and, when you get right down to it, make-believe. There is no data to support the report's claims that they impacted real GDP or that they had any meaningful impact on unemployment. There is not enough data to prove that ARRA had any real or meaningful impact.

Try again, CBO. Bring us actual evidence next time. A report telling us that you can't actually demonstrate any causal link between ARRA and anything meaningful in the economy is not good enough.
A little further research indicates that it really isn't the CBO's fault that the data was a joke. They don't set or implement policy. All they do is interpret data for Congress. It was ARRA itself (specifically section 1512) that set the compliance and reporting standards.

The reports are still a joke. That hasn't changed. But we should blame the legislators that wrote the joke into law, rather than the Federal agency that is forced to make sense out of the joke.

Monday, November 29, 2010

There Ain't No Good Guys. There Ain't No Bad Guys. There's Only Comcast And Level 3 And They Just Disagree

Let's set the stage with some music:

On the surface, it looks like a David and Goliath story: Level 3 Communications (with a $1.64 billion market capitalization) versus Comcast (with a whopping $41.85 billion market capitalization). It is, as Level 3 Communications tells it, a story of a large-cap corporation threatening the livelihood of a company that only qualifies as mid-cap on a good day. In the words of Thomas Stortz, Chief Legal Officer of Level 3:
“On November 19, 2010, Comcast informed Level 3 that, for the first time, it will demand a recurring fee from Level 3 to transmit Internet online movies and other content to Comcast’s customers who request such content. By taking this action, Comcast is effectively putting up a toll booth at the borders of its broadband Internet access network, enabling it to unilaterally decide how much to charge for content which competes with its own cable TV and Xfinity delivered content. This action by Comcast threatens the open Internet and is a clear abuse of the dominant control that Comcast exerts in broadband access markets as the nation’s largest cable provider.

“On November 22, after being informed by Comcast that its demand for payment was ‘take it or leave it,’ Level 3 agreed to the terms, under protest, in order to ensure customers did not experience any disruptions.

“Level 3 operates one of several broadband backbone networks, which are part of the Internet and which independent providers of online content use to transmit movies, sports, games and other entertainment to consumers. When a Comcast customer requests such content, for example an online movie or game, Level 3 transmits the content to Comcast for delivery to consumers.

“Level 3 believes Comcast’s current position violates the spirit and letter of the FCC’s proposed Internet Policy principles and other regulations and statutes, as well as Comcast’s previous public statements about favoring an open Internet.

“While the network neutrality debate in Washington has focused on what actions a broadband access provider might take to filter, prioritize or manage content requested by its subscribers, Comcast’s decision goes well beyond this. With this action, Comcast is preventing competing content from ever being delivered to Comcast’s subscribers at all, unless Comcast’s unilaterally-determined toll is paid – even though Comcast’s subscribers requested the content. With this action, Comcast demonstrates the risk of a ‘closed’ Internet, where a retail broadband Internet access provider decides whether and how their subscribers interact with content.“
Can't you already feel your heartstrings being tugged by this press release? Brave Level 3, a (comparatively) tiny company - almost a mom-and-pop home business, really - is being menaced by the faceless corporate juggernaut that is Comcast. Should Level 3 fall, nothing will stand between Comcast and an absolute iron-fisted mastery of all data in the internet!

Or maybe, just maybe, there is more than one side to the story. Maybe, just maybe, Comcast also has something to say about this. Maybe someone like Joe Waz, Comcast SVP, External Affairs and Public Policy Counsel, might have a different take.
Level 3 has inaccurately portrayed the commercial negotiations between it and Comcast. These discussions have nothing to do with Level 3's desire to distribute different types of network traffic.

Comcast has long established and mutually acceptable commercial arrangements with Level 3's Content Delivery Network (CDN) competitors in delivering the same types of traffic to our customers. Comcast offered Level 3 the same terms it offers to Level 3's CDN competitors for the same traffic. But Level 3 is trying to gain an unfair business advantage over its CDN competitors by claiming it's entitled to be treated differently and trying to force Comcast to give Level 3 unlimited and highly imbalanced traffic and shift all the cost onto Comcast and its customers.

To quantify this, what Level 3 wants is to pressure Comcast into accepting more than a twofold increase in the amount of traffic Level 3 delivers onto Comcast's network -- for free. In other words, Level 3 wants to compete with other CDNs, but pass all the costs of that business onto Comcast and Comcast's customers, instead of Level 3 and its customers.

Level 3's position is simply duplicitous. When another network provider tried to pass traffic onto Level 3 this way, Level 3 said this is not the way settlement-free peering works in the Internet world. When traffic is way out of balance, Level 3 said, it will insist on a commercially negotiated solution.

Now, Level 3 proposes to send traffic to Comcast at a 5:1 ratio over what Comcast sends to Level 3, so Comcast is proposing the same type of commercial solution endorsed by Level 3. Comcast is meeting with Level 3 later this week for that purpose. We are happy to maintain a balanced, no-cost traffic exchange with Level 3. However, when one provider exploits this type of relationship by pushing the burden of massive traffic growth onto the other provider and its customers, we believe this is not fair. To use Level 3's own words:

"To be lasting, business relationships should be mutually beneficial. In cases where the benefit we receive is in line with the benefit we deliver, we will exchange traffic on a settlement-free basis. Contrary to [other ISPs] public statements, reasonable, balanced, and mutually beneficial agreements for the exchange of traffic do not represent a threat to the Internet. They don't represent a threat to anyone other than those trying to get a free ride on someone else's network."
So. Maybe, just maybe, Level 3 isn't being entirely forthcoming. Maybe, just maybe - this is crazy, but hear me out - maybe Level 3 has embellished the truth a little. The little guy in the fight isn't always the honest one, after all.

Who do I believe? Frankly, I tend to assume that all corporations will lie to, cheat, steal, and kill anyone and anything in their paths in the pursuit of the all-mighty dollar (or yen, or euro, or ruble, or yuan, or whatever else profit can be expressed in). So, I assume that both Comcast and Level 3 are lying about (excuse me, I mean spinning) what happened.

I don't think Level 3 cares in the slightest about "net neutrality". They just want to charge as much as possible when competitors have to route data through their backbone networks, while paying as little as possible when they have to route data through their competitors backbone networks.

I don't think Comcast is attempting to extort anything out of Level 3. They just want to charge as much as possible when competitors have to route data through their backbone networks, while paying as little as possible when they have to route data through their competitors backbone networks.

Business as usual. That's all this is.

No Metrics. Just Despair.

You know the drill by now. Doom and gloom. PIIGS rooting up the European economy. North Korea Crazy is crazy [1]. WikiLeaks...

Wait, what?

Yeah. Apparently WikiLeaks is getting a share of the blame for today's poor market performance. Why? Well, the cables they've released make us (and by us I mean the United States) look like a massive collection of tools. Although I suspect that this is not really a surprise to many other nations.

Looking to the rest of the week, we've got the S&P Case-Shiller HPI (tracking home price changes) and Consumer Confidence (expected to rise from 50.2 to 52.0) tomorrow. We then start off December with a bang on Wednesday by reviewing the ADP Employment Report, Productivity and Costs (productivity expected to be up 50 bps with unit labor costs rising only 10 bps), the ISM Manufacturing Index (expected to rise from 56.9 to 57.0), and Construction Spending (where the analysts are expecting a 90 bps drop). Thursday gets the weekly first time jobless claims report (looking for an 18k increase in claims) and the Pending Home Sales Index. Friday wraps up with the Employment Situation (where analysts are looking for a 17k increase in nonfarm payrolls and a 10 bps increase in the unemployment rate).

So, Metrics. Hooray, metrics!

[1] The cover of their new album:

UBS Accused of Aiding in Madoff's Fraud

UBS Accused of Aiding in Madoff's Fraud

UBS is facing a $2 billion lawsuit from the trustee charged with recouping money for Bernard Madoff’s victims, who claims the firm “lent an aura of legitimacy” to Madoff’s Ponzi scheme. So reports the Wall Street Journal.

Irving Picard filed 23 counts of financial fraud and misconduct against UBS and related entities in a New York bankruptcy court on Wednesday, claiming UBS actively participated in the scam. The firm denies any wrongdoing.

The suit was filed in redacted form because UBS has designated as “confidential” information related to its dealings with Madoff. Picard has accused UBS of “trying to shield this information from the public.”

Picard issued a statement saying he intends to file a court application to have the confidential designation removed “and the complaint made public as soon as possible,” Bloomberg reports.

Picard says the bank’s involvement gave legitimacy to several global feeder funds by acting as their sponsor, custodian and administrator. He says UBS sidestepped legal responsibility for the actions of those funds by employing undisclosed indemnity agreements.

Picard claims UBS had inklings that fraud was taking place but still installed Madoff as the sub-custodian of the feeder funds, giving him the power to value the funds, the Journal reports.

David Sheehan, Picard’s counsel, says Madoff's scheme would not have been as successful if UBS had not “agreed not only to look the other way, but also to pretend that they were truly ensuring the existence of assets and trades when in fact they were not and never did.”

UBS on Wednesday called the allegations "completely unfounded and without merit,"

Picard is looking to recover redemptions and fees, as well as damages and disgorgement from UBS, according to Bloomberg.

The lawsuit also names the bank’s UBS (Luxembourg) SA unit and feeder funds including LuxAlpha Sicav and Groupement Financier. LuxAlpha lost 95% of its approximately $1.4 billion in assets and was dissolved four months after Madoff’s arrest in December 2008. LuxAlpha liquidators are also suing UBS and Ernst & Young, the fund’s auditor, for the return of lost assets, Bloomberg reports.

Picard alleges Luxalpha, Groupement Financier and other European feeder funds withdrew more than $1.1 billion from the Madoff funds in the six years before Madoff’s arrest; $796 million was withdrawn in the final 90 days, the New York Times reports.

Meanwhile, bail was set last week at $5 million for Madoff’s former secretary, Annette Bongiorno, who is accused of helping conceal the fraud, the Associated Press reports.

Bongiorno was arrested in Florida earlier this month and is charged with conspiracy and securities fraud. She was released under house arrest after friends and relatives posted her bail, the New York Daily News reports.

Prosecutors claim Bongiorno helped Madoff defraud his wealthy clients for decades. It is also alleged she withdrew more than $14 million for herself.

Bongiorno denies any wrongdoing, the AP reports.

By Kathleen Laverty
To read the New York Times article cited in this story, click here.
To read the Associated Press article cited in this story, click here.
To read the Wall Street Journal article cited in this story, click here if you have a paid subscription.
To read the Bloomberg article cited in this story, click here.
To read the New York Daily News article cited in this story, click here.

(News summaries based on original reports in other publications are prepared by the FundFire staff and are not created, sponsored, approved or endorsed by the publications to which the original reports are attributed.)

Sunday, November 28, 2010

The Stimulus Worked! Trust Us!

The Congressional Budget Office has its report on the effects of the stimulus out now, and both the report and the coverage of the report seems to boil down to: "See? It worked!"

But, if you dig into the report, it raises a number of questions. For instance, let's look at the report's statement about the job creation:
"During the third quarter of 2010, recipients reported, ARRA funded more than 670,000 full-time-equivalent (FTE) jobs.2 Those reports, however, do not provide a comprehensive estimate of the law’s impact on U.S. employment, which could be higher or lower than the number of FTE jobs reported, for several reasons (in addition to any issues concerning the quality of the reports’ data). First, some of the jobs included in the reports might have existed even without the stimulus package, with employees working on the same activities or other activities. Second, the reports cover employers that received ARRA funding directly and those employers’ immediate subcontractors (the so-called primary and secondary recipients of ARRA funding) but not lower level subcontractors. Third, the reports do not attempt to measure the number of jobs that were created or retained indirectly as a result of recipients’ increased income, and the increased income of their employees, which could boost demand for other products and services as they spent their paychecks. Fourth, the recipients’ reports cover only certain ARRA appropriations, which encompass about one-fifth of the total either spent by the government or conveyed through tax reductions in ARRA; the reports do not measure the effects of other provisions of the stimulus package, such as tax cuts and transfer payments (including unemployment insurance payments) to individual people."
In other words: "We don't actually have a way to prove that the stimulus created any of these jobs, nor can we actually track what the impact of the money was if it did create jobs. We're just taking credit, without presenting proof that we actually did anything."

Also, FTEs are not full-time employees. Ten people working four hours a week are 1 FTE. There's also nothing indicating that they looked to see if the FTEs did/will remain employed once the stimulus money ends.
"Estimating the law’s overall effects on employment requires a more comprehensive analysis than can be achieved by using the recipients’ reports. Therefore, looking at recorded spending to date along with estimates of the other effects of ARRA on spending and revenues, CBO has estimated the law’s impact on employment and economic output using evidence about the effects of previous similar policies and drawing on various mathematical models that represent the workings of the economy."
Again: "We can't actually verify anything based on the reports we required. So we guessed. But we used mathematical models for our guesses."

Now, in fairness, guess may be a cheap shot there. But let's be honest here. They admit in their own report that they can't actually estimate the effects of the law by using the reports the law required from the entities that accepted the money. So they just skipped out on using their data, and instead just looked at how much was spent compared to estimates about the effect of the law.
Although CBO has examined data on output and employment during the period since ARRA’s enactment, those data are not as helpful in determining ARRA’s economic effects as might be supposed because isolating the effects would require knowing what path the economy would have taken in the absence of the law. Because that path cannot be observed, the new data add only limited information about ARRA’s impact.
This is a textbook post hoc ergo propter hoc fallacy. ARRA money was spent. Then jobs were created. Therefore, the jobs were the result of ARRA. If the CBO could prove that the job creation resulted from the money ARRA spent, then this (obviously) wouldn't be a fallacy. But, they admit in their own document that they can't prove causation. Therefore, causation cannot be assumed.

The only thing ARRA can take credit for, by the report's own admission is: "According to those reports, 671,607 full-time-equivalent jobs were funded by ARRA during the third quarter."

That's it. That is all the report can really tell us. 671,607 FTE jobs for three months. Everything else is conjecture and estimates and, when you get right down to it, make-believe. There is no data to support the report's claims that they impacted real GDP or that they had any meaningful impact on unemployment. There is not enough data to prove that ARRA had any real or meaningful impact.

Try again, CBO. Bring us actual evidence next time. A report telling us that you can't actually demonstrate any causal link between ARRA and anything meaningful in the economy is not good enough.

Black Friday Bickering

Preliminary estimates are beginning to trickle in from the battle-weary front lines of the Black Friday onslaught, and the results were really really great for retailers. Really great. Unless they weren't.

Let's start off with the rosy report. The National Retail Federation is reporting that:
...212 million shoppers visited stores and websites over Black Friday weekend*, up from 195 million last year. People also spent more, with the average shopper this weekend spending $365.34, up from last year’s $343.31. Total spending reached an estimated $45.0 billion.
Not too shabby. That's more than GM managed to raise with their IPO, after all. But they report additional good news:
While shoppers seemed focused on getting good deals, items of strong value seemed to win out over the absolute lowest prices. According to the survey, both department stores (52.0% this year vs. 49.4% last year) and clothing stores (24.4% vs. 22.9%) saw healthy increases in traffic, while the percentage of people who shopped at discounters declined 7.2 percent, from 43.2 percent last year to 40.3 percent this year. As retailers leverage their websites to offer Black Friday prices to shoppers who don’t want to fight crowds, the percentage of people who shopped online this weekend rose a healthy 15.2 percent, from 28.5 percent last year to 33.6 percent this year – a strong sign heading into Cyber Monday.
Based on the strength of this survey, they're predicting that overall sales for the 2010 holiday season should be up 2.3%. That's still below the 10 year average of 2.5%, but its better than 2009's 0.4% increase and far, far better than 2008's 3.9% decrease. So Merry Christmas, the recession is over!


Well, not so fast.

The NRF is not the only entity out there making these sorts of reports and projections. Let us turn now to ShopperTrak. Their survey shows a slightly different picture:
The traditional kick off to the holiday shopping season provided mixed messages to retailers as Black Friday sales showed a very slight increase over last year despite record spending for the day 0.3 percent increase versus the same period in 2009. According to ShopperTrak, retail sales increased a very slight 0.3 percent versus last year with consumers spending $10.69 billion in various retail locations. Comparatively sales on Black Friday 2009 increased 0.5 percent versus Black Friday 2008, with $10.66 billion spent.
That was a little different. What do they say about sales projections for the 2010 holiday season?
Better than expected response to early sales promotions mixed with relatively mild weather throughout the country is already driving holiday traffic to malls and retail outlets, allowing ShopperTrak to revise its 2010 holiday forecast. According to the company’s Retail Sales Estimate (NRSE), sales during the upcoming holiday shopping season (Nov. / Dec.) are now expected to increase 3.2 percent versus last year (up from the 2.9 percent originally anticipated), while the company’s Retail Traffic Index (SRTI) is forecasting a 1.0 percent traffic increase for the same period (a substantial rise from the previously expected 0.1 percent decline).
Interesting. They report far a far less dramatic increase in Black Friday sales, but project a much more dramatic improvement in overall sales for the holiday season.

So, did we see a 6.4% increase in Black Friday sales, or a 0.3% increase? Will we see a 2.3% increase in sales for the season, or a 3.2% increase? Who's right? Who should we believe?

The answer to the last question is simple. Do what economists and policy makers will do.

Pick the one that suits your agenda best.

For Your Consideration...

Just a little information, relevant to the whole PIIGS situation.

Everyone is concerned about the inability of these nations to service their debts, because of their terrifying debt-to-income ratio. Now, the least bad off of the PIIGS nations - in terms of public debt to GDP - is Spain. Its ratio is only 53.20%. For your convenience, I have bolded the names of any nation on this list that is equal to or worse than this.

Member Nations of the European Union


Public Debt as a % of GDP

Tax Revenue as a % of GDP













The Czech Republic







































The Netherlands









Republic of Ireland


















The United Kingdom



The BRIC Nations


Public Debt as a % of GDP

Tax Revenue as a % of GDP













The United States


Public Debt as a % of GDP

Tax Revenue as a % of GDP

United States of America









The Whole World, on average



Comforting, isn't it?

PIIGS! What's The Matter With PIIGS Today?

What the devil's wrong with these PIIGS today?
Who could guess the they would turn out that way!
Why can't they be like we were,
Perfect in every way?
What's the matter with PIIGS?
What's the matter with PIIGS?
What's the matter with PIIGS today?[1]

Plenty. That's what.

The European Union and the IMF have given up on getting Greece to abide by the timetable it originally agreed to when it borrowed 43% of its GDP. Originally, they were going to get 6 years to repay 110 billion euros in loans. Now, the EU and the IMF are getting ready to push it back to 11 years. Somehow, Paul Thompson (the IMF official in charge of the Greek bailout) believes that
"This (the extension) would give markets the signal: 'Don't worry about the repayment of the 110 billion euros, this is not going to affect your claims'."
I'm going to segue off into my own sordid past for a few moments, and reveal that I spent 9 months working as a credit card collector[2] for a (different) company not-to-be-named.

What does this have to do with anything? Well, when we set up a payment program that extended out the amount of time the debtor had to make payment in full, that was good for the collector. We got bonus points for "saving" the debt each month for the duration of the program.

But, when the program was over, we fully expected them to be in debt still. Because all it did was delay the problem.

Now, I know that this is inductive reasoning and potentially flawed. There are differences between household debt and sovereign debt[3]. But I don't think that, in this case, they're all that different.

Meanwhile, Ireland is set to sign the loan papers for an 85 billion euro bailout. Tens of thousands of Irish took to the streets to protest this, and it is fully expected that this will mark the end of Prime Minister Brian Cowen (of the increasingly appropriately named Fianna Fail party). As Prime Minister, that is. The protests aren't that violent yet. Not like Greece, where protesters showed their displeasure with the bailout by murdering three bank workers who had nothing to do with it.

Oh, and in non-PIIGS news, the apologetic North Korean government has put surface-to-surface missiles on the coast of the Yellow Sea.
"We will deliver a brutal military blow on any provocation which violates our territorial waters," KCNA said.
For purposes of understanding North Korean press releases, "provocation" is defined as:
  1. anything looking at us
  2. anything that the crazy man in the seat of power thinks might be looking at us
  3. having a bigger dick than the crazy man in the seat of power
  4. being something that the crazy man in the seat of power thinks might have a bigger dick than him
  5. breathing
So, yeah. I don't think there's really anything left to say about this that hasn't already been said.

[1] I now owe Lee Adams an apology as well.
[2] Feel free to hate me now.
[3] Truly staggering dollar amounts, for one thing.


So right now, everybody is singing the praises of the General Motors IPO. The underwriters have exercised in full their over-allotment options to the tune of 71.7 million additional shares, bringing the total proceeds of the IPO to $23.1 billion.

Sounds good, right? $23.1 billion dollars. A record-setting IPO! We beat the Chinese! (They held the previous record at $22.1 billion, for Agricultural Bank of China.) USA! USA! USA!

USA! USA! USA! US... oh, wait.

Yeah, that's right. If they throw all of that money at what they owe us, the collective American taxpayer, for the largess the government extended to them on our behalf, they will only owe us somewhere between $26.4 billion and $26.9 billion.

Let me say that again. If they put everything on principal, they still owe us between $26,400,000,000 and $26,900,000,000. Depending on which bailout figure you use.

Fail. Your pick on whose part.