Agricultural Economic News November 20, 2009

Comment:
Isn't Mr. Tom, above, a beauty? Having grown up on a farm, my parents had a few turkeys just one year, and that was the year after I left home. My younger brother detested them because they'd get on top of his car and leave scratches.

As for fowl, both of my grandmothers raised free range ducks every year. One grandmother went a bit overboard with her duck raising, in fact, she always hatched too many and gave us the overflow. Each year, my mother told her that she'd take them this one last year but please don't give us any next year. And then, every next year, Grandmother happened to have an extra brood, once again. And so it went. As a child, I relished letting the day old smiling and peeping ducklings swim around in the sink. I just loved the farm animals that I was around while growing up, both wild and domestic. Oh, but I could tell you so many more duck and animal stories...



So, what this meant was that every holiday menu at my grandmother's house meant duck. No other meat was to be found. She had mostly mallards, and to this day there is no other meat that I would prefer about for a special meal. But, I no longer know a source of domestic mallard ducks. And if anyone has priced domestic duck in their local grocer, lately, I can promise you sticker shock. Hint: Small organic farm business tip here.

Sigh. Memories of the good old days and the good old fashioned unhealthy farm food that made the people where I'm from live to be 100 and marriages lasted 60 years.

I hope to do a lot of cooking in a few days as I've been the Thanksgiving cook in our family for fifteen years, now, give or take. Next to the food, it's the aroma of the food which fills the house that is so wonderful. Oh, yeah, and sweet potatoes are way better than yams, in my opinion....Have a good one, count your blessings, enjoy family and friends, and remember your local food bank this season!

Just for fun, today, here is a chocolate pecan pie recipe that is wonderful:

~~~~~
Cocoa Pecan Pie

1 c. sugar
1/3 c. cocoa
1/4 c. flour
1/2 t. salt
3 eggs, well beaten
3/4 c. dark corn syrup
3/4 c. half & half
1/4 c. melted butter
1 t. vanilla
1 c. pecan halves
9" unbaked pie shell

Combine the sugar, cocoa, flour and salt in a small bowl. Set aside. Combine the eggs, dark corn syrup, half-and-half, melted butter and vanilla in a large mixing bowl. Add the dry ingredients, stirring until smooth. Stir in pecan halves. Pour into pie shell. Bake at 325 degrees for 60-70 minutes or until center is firm to the touch. Cool.
~~~~~

--Kalpa


WEATHER AND WATER:

AGRICULTURE SECRETARY VILSACK ANNOUNCES $117.3 MILLION FOR RURAL WATER PROJECTS

Agriculture Secretary Tom Vilsack today announced the selection of $117.3 million in water and environmental project loans and grants that are being funded through the American Recovery and Reinvestment Act. "Recovery Act projects are helping rural communities of all sizes build a foundation for economic strength, future prosperity, and a healthy environment," said Vilsack. "The 31 water and wastewater projects we're announcing today are helping to achieve the Obama Administration's economic recovery goals to rebuild and revitalize the nation's infrastructure while creating or retaining jobs."...

Sand dams voted best solution in water crisis debate

An ancient water-saving technique thousands of years old that could save millions of people from drought last night won the ringing endorsement of an audience at the Geographical Society in London. Sand dams, which are constructed out of concrete barriers 1-5m high and backfilled with sand, were voted as the best idea from five different proposals. Each idea had a champion who argued how they would use the virtual prize of $1bn at the Earthwatch debate entitled From tsunami to drought to solve the world's water crisis.

When seasonal rains fall, water collects behind the dam. The sand acts like a sponge and filters the water and slows evaporation. Clean water can be drawn for up to several months after the rains have fallen through pipes underneath the dams or by digging a hole in the sand...

Drought Causes Blackouts in Ecuador

A lack of rain has caused severe power shortages leading to blackouts throughout the country of Ecuador. For up to eight hours per day, Ecuadorians have been dealing with power outages for two weeks now. The rationing is expected to continue until March or until rain comes to refill depleted reservoirs...

U.S. NEWS:

Survey suggests improving but weak Plains economy

Business appears to be slowly improving in rural areas of 11 Midwest and Plains states, but the economy there remains weak, according to a new survey of bankers. "The decline in farm income related to pullbacks in agricultural commodities from last year continues to weigh on the rural, agriculturally dependent economy," Creighton University economist Ernie Goss said. The Rural Mainstreet survey's overall economic index rose to 38.4 this month from 37.5 in October and 36.5 in September, but it remained in negative territory below 50.

...Goss said the uncertainty about income has made farmers and ranchers more cautious about land and equipment purchases. The survey's farmland price index improved to 45.6 in November from 43 in October....."Over the past 12 months, the region that we survey has lost almost 265,000 jobs. Recent surveys indicate that these job losses are likely to continue for the near term," Goss said....

Good Weather Helps Corn Harvest Progress in Some Areas

Favorable harvest conditions across the Midwest over the past two weeks allowed growers to make considerable harvest progress – even at night – bringing in more than a quarter of the crop since the beginning of November. However, they are still well behind the normal pace, the U.S. Department of Agriculture reports...

Pumpkin shortage could mean empty shelves after Thanksgiving

..On Tuesday, food giant Nestle, which controls about 85% of the pumpkin crop for canning, issued a rare apology and said that rain appeared to have destroyed what remained of a small harvest this year and that it expected to stop shipping the holiday staple by Thanksgiving. Supermarkets say supplies are tight, depending on the store...

Feds give record loans to Kansas farmers

The federal government has delivered a record-setting $148 million in loans to Kansas farmers during the 2009 fiscal year. The U.S. Department of Agriculture's Farm Service Agency in Kansas recently announced that the money went to about 1,300 family farmers...

Rural U.S. towns struggle as big employers shut down

...The brothers have cut down their staff to 12 from 60 and say they are in survival mode for the business their father started out of his garage in the 1960s. “We're hunkering down,” Pete said. “We've always been debt free, so we're hanging on. But we can't hold on forever.” What's going on in Baraga and the rest of the Upper Peninsula, or UP, mirrors the slow burn that the recession has made through hundreds of small rural U.S. towns. For such communities, the loss of a large local employer casts a long shadow. Tax revenue falls, hitting local services from schools and health care to police forces and firefighters....

Stink bug that's new to US munches nuisance kudzu, but also threatens bean crops in South

Researchers recently found an insect in north Georgia that has never before been reported in the Western Hemisphere — and its arrival could be both a blessing and a curse. Some might celebrate the arrival of the kudzu-munching bug, which could help control the invasive vine that drapes much of the South. However, the bug also feasts on valuable crops like soybeans and other legumes. As of Nov. 12, the insect was reported in nine north Georgia counties, mostly on homes and other buildings with nearby kudzu patches. Experts aren't sure yet how fast or wide the bug will spread or how damaging it might be to crops....

Amaizeing: Corn genome decoded

In recent years, scientists have decoded the DNA of humans and a menagerie of creatures but none with genes as complex as a stalk of corn, the latest genome to be unraveled. A team of scientists led by The Genome Center at Washington University School of Medicine in St. Louis published the completed corn genome in the Nov. 20 journal Science, an accomplishment that will speed efforts to develop better crop varieties to meet the world's growing demands for food, livestock feed and fuel.

Iowa State

"Seed companies and maize geneticists will pounce on this data to find their favorite genes," says senior author Richard K. Wilson, Ph.D., director of Washington University's Genome Center, who led the multi-institutional sequencing effort. "Now they'll know exactly where those genes are. Having the complete genome in hand will make it easier to breed new varieties of corn that produce higher yields or are more tolerant to extreme heat, drought, or other conditions."

Researchers ask: Are caged chickens miserable?
By MICHAEL J. CRUMB

Researchers are trying to answer that question through several studies that intend to take emotions out of an angry debate between animal welfare groups and producers. At issue are small cages, typically 24 inches wide by 25 1/2 inches deep, that can be shared by up to nine hens. About 96 percent of eggs sold in the United States come from hens who live in the so-called battery cages from the day they're born until their egg-laying days end 18 to 24 months later.

Public opinion appears to side with those who oppose the cages. Voters in California approved a proposition last year that bans cramped cages for hens. And Michigan's governor signed legislation last month requiring confined animals to have enough room to turn around and fully extend their limbs....

URBAN AGRICULTURE:

Community garden grows on college campus

For the past 30 years, Scottsdale resident Joe Lobue has tended to his vegetable garden at Scottsdale Community College. Lobue, 66, a retired maintenance employee with St. Daniel the Prophet Catholic Church in Scottsdale, grows Italian zucchini, fava beans, peas, onions, artichokes and eggplants. An old monkey bar serves as a support for the plastic he uses to protect his tomatoes...

Urban agriculture, the next cool thing

... As education officials told Dallas Morning News reporter Matt Peterson earlier this week, most of the ag-related jobs now and in the future are based in urban areas, not on the farm. "For that reason," said the Texas Education Agency's Ron Whitson, "I think these courses are very relevant to our young people."

Are the future farmers of America actually living in suburbia? Not quite. As educators point out, agriculture is a far more diverse industry than the growing and harvesting of crops and raising of farm animals. Even so, there's no denying that there's a rising tide of interest among urban young folks in agriculture. ...

Shoppers going green despite struggling economy

Despite the worst U.S. recession in decades, sales of organic and sustainable products have continued to grow, experts say, with shoppers willing to spend a few more dollars in a bid to become more green....

INTERNATIONAL NEWS:

Zimbabwe farmers a boon for Nigerian agriculture
By Hannington Osodo

When white Zimbabwean farmer Irvin Reid arrived in Nigeria almost five years ago, he was given a set of grid references in the remote bush and told to find water and build a new farm. His dairy farm now has 300 Jersey cows, some of among 800 imported from South Africa to start cattle farms in the region. It's a sharp contrast to things back in Zimbabwe, where campaigners say farmers face their worst year ever.

Reid was one of 13 white farmers invited with their families to Nigeria in 2005 after land seizures in Zimbabwe -- which President Robert Mugabe says are necessary to correct the legacy of colonialism -- stripped them of their livelihoods. Africa's most populous nation of more than 140 million people, Nigeria imports about $3 billion worth of food annually and has been trying to boost its self-sufficiency....

Dutch Cooperative Blurs Food Prejudices

...In a Europe where conservative attitudes to farming are entrenched and the hostility of consumers and ecologists to genetically modified crops is sometimes obsessive, Food Valley is different. Its entrepreneurs and scientists are trying to use all available techniques, including genetic modification, to improve agriculture around the world. Since its creation in 2004, Food Valley has set itself multiple missions: responding to the increasingly dire threats of famine in Africa and Asia; reducing agriculture’s reliance on chemical pesticides, and using genetic science to increase the nutritional value of farm products.

For example, Henk Schouten, of the Plant Research Institute of Wageningen University, is trying to use genetic engineering to fight scab disease, a major threat to apple trees. Mr. Schouten uses a technique called cisgenesis to implant scab resistance genes from wild apples into table fruit, short-cutting conventional plant breeding processes by decades or even hundreds of years....

Kenya harvest example on reversing food shortage

...Kenya's program could serve as a model for a radical change in aid policy — getting people to feed themselves. "When they wake up, there is somewhere they can go and work," Abiero said of his neighbors Friday as he sat at the edge of the four-acre paddy he's had since 1968. "Before they used to go to sleep hungry and did not know whether they will be able to get food the following day."...Small farmers in the developing world could feed themselves and their compatriots if only they had access to basic items like seeds, tools, irrigation systems as well as training and infrastructure such as storage facilities and roads from fields to markets, FAO says....

FARMLAND PRICES:

UN to regulate farmland grab deals

The United Nations has started drawing up a code of conduct to regulate overseas investment in farmland, but the voluntary rules will not be ready for at least a year. The code is the first attempt to control the growing trend of so-called “farmland grab” deals, which involve rich countries such as Saudi Arabia and South Korea investing in overseas farming to boost their own food security. The trend gained prominence after an attempt by South Korea’s Daewoo Logistics to secure a large chunk of land in Madagascar contributed to the collapse of the African country’s government....

Kilton Auction Brings In Over $10 Million (Illinois)

A sea of pick-up trucks flooded the parking lot of the Knights of Columbus Hall in Taylor Springs for part two of one of the biggest land auctions ever seen in Montgomery County. Almost 3,100 acres of land formerly owned by Kilton Farms were auctioned off on Tuesday, Nov. 17, fetching just over $10.1 million in the end. Approximately 250 registered bidders and a total estimated crowd of 500 people packed the KC Hall for the event.

Split into 41 tracts, the land was close to a 60-40 split of tillable ground and timber, resulting in a lower sale price than the previous Kilton auction in Springfield in January. In that auction, which was mostly tillable ground, the per acre price reached nearly $6,000 per acre, netting a little over $24 million for the 3,912 acres of farmland in Montgomery and Macoupin counties...

Cornbelt Update

Land values in the Chicago Federal Reserve Bank district rose 2% for the third quarter of 2009, based on a survey of local bankers. But currently, the price of “good” farmland is 4% less than it was at this time last year, and that makes the third successive quarter that land values were less than they were 12 months earlier. Land values in the northern 2/3 of IL dropped 4% from 2009 and IA land values are 7% less than they were in 2009.

Farmland prices will stabilize, 69% of bankers told the Chicago Fed, but 27% expect a decline, and most bankers believe farmers generally will back away from land purchases. The reason for the trend was a diminished earnings stream because of grain markets, lower net cash earnings, and high input costs that will reduce profitability.

BIOFUELS:

Oil company won’t sell E15

At least one oil company says it likely won’t sell E15 any time soon, even if the EPA raises the ethanol limit in gasoline from 10 percent to 15 percent. Leister, an official with Marathon Petroleum Co., says his company is worried motorists are going to claim E15 is damaging their cars. He says the adequate research needs to be done first to prove that the higher octane would be safe to use in the cars and trucks now on the road...

Ethanol industry complains to Gore

The ethanol industry is unhappy with Al Gore for disparaging ethanol in his new book, Our Choice. In the book, Gore criticizes the environmental impact of corn ethanol and says the fuel “has been a disappointment.” In a letter to Gore, the president of the Renewable Fuels Association, Bob Dinneen tells the former vice president that “many of your characterizations of today’s American ethanol industry are out of date or simply wrong.”...

Corn mold worries farmers, ethanol producers

Cool, wet fall weather that's caused mold to appear in some of Indiana's corn crop is now creating problems for livestock and ethanol producers. Mold, which is present in much of the Midwest this year, can produce toxins that can reduce livestock weight and value because some animals won't eat poor-quality grains...

FOOD INSECURITY:

Are Americans really 'food insecure'?
by Charles Lane

Many families are struggling in today’s economy, and this has hurt their food budgets. This week an Agriculture Department study showed that 16.4 million U.S. households containing 49.1 million people experienced “food insecurity” in 2008, up from 12.2 million households containing 36.2 million people in 2007. Fortunately, Congress has already addressed some of the problem with a significant food-stamp boost in the stimulus package adopted in February.

But is “hunger” widespread in America these days? That is the misleading impression created by press coverage of the USDA study. Headlines in the New York Times print edition (“49 Million Americans report a lack of food”), USA Today (“1 in 6 went hungry in America in 2008”), and The Washington Post (“America’s economic pain brings hunger pangs”) made it sound as if famine stalks the land. The stories were salted with terms such as "alarming" and "dramatic." When you crack into the data, however, they don’t support this dire portrayal. The USDA report is based on a survey of 44,000 households....

COMMODITIES:

Futures:
Wheat 5.57
corn 3.93
soybeans 10.35
feeder cattle 92.32
pork bellies 88.5

OTHER:

Ground-breaking moments in global agriculture

Organized cultivation of food crops like wheat and barley began about 10,000 to 12,000 years ago in the Fertile Crescent, what is now the Middle East....

(Timeline of agricultural developments at the source)

Job prospects yield large crop of students in ag schools

Tristesse Jones will probably never drive a tractor or guide a combine through rows of soybeans at harvest time. There isn't a farm within miles of where she grew up on Chicago's west side, but she's set to graduate with a bachelor's degree in crop sciences from the University of Illinois' agriculture school next spring. "People ask me what is my major, and they say 'What is that? So you want to grow plants?"' Jones said. She is one of a growing number of students being drawn to ag schools around the country, not by ties to a farm but by science, the job prospects for those who are good at it and, for some, an interest in the environment...

Is Balsamic Vinegar Poisoning you?

Studies show concerning levels of lead, which can cause permanent brain damage when children are exposed, in certain vinegars, even high-end balsamic varieties...

Sweet Potatoes

Some vegetables really need to hire better PR people. The poor sweet potato suffers from being confused with the yam. No relation. And the potato. No relation. Sweet potatoes are high in fiber and good sources of Vitamins A & C. How many sweet foods can claim that?

Although they're available year round, they're in season in November and December, making them popular holiday foods. But did you ever think of growing your own sweet potatoes and having a few baby sweet potatoes to snack on in early fall? Or harvesting sweet potato greens all summer? Unfortunately sweet potatoes need a fairly long growing season and a good amount of space, but it's nice to try growing everything at least once, just to know what they're really supposed to taste like.

Previous links:
If you wish to go back and read previous threads of Ag Econ news here are the links to the past 6 weeks.

November 13th

November 6th

October 30th

October 23rd

October 16th

October 9th




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Economic Opinion Picks November 19, 2009

Comment:
Today, there are four chosen articles, plus a bonus link.

1) This is Bill Gross's December PIMCO newsletter. He says the little investor should consider buying utilities to beat the ZIRP rates. He's always an interesting, wise read.

2) Peter Solomon, for NYT's, writes a good article about where we are since TARP began with a theme of unintended consequences.

3) This is Evans-Pritchard's UK Telegraph doom article for the day, citing Société Générale's advice to clients of meltdown plans.

4) Tim Iacono writes on interest rates vs. jobless rates. Very pertinent. Don't expect rates to rise until jobless numbers stabilize, is what they say...

5) If you click on this W-P link, there are three graphs summarizing the hole we are in.

--Kalpa


Anything but .01%
by William Gross

...during the week surrounding the Lehman crisis in September of 2008, yours truly frantically called my wife Sue to empty our two local bank accounts into apparently safer Treasury bills. I was not the only PIMCO professional to do so. Preserving principal as opposed to making it grow was the priority of the day...0% yield is not a joke....f I was hoping to double my money, it would take approximately 6,932 years to get there.

...When viewed from 30,000 feet, there is even a systemic risk that new asset bubbles are in the formative stages – perhaps because of the .01%. Gold at $1,130 an ounce, global equity markets up 60-70% from their 2009 lows, a cascading dollar now 15% lower against a basket of global currencies just 12 months ago, oil at 80 bucks, mortgage rates at 4% thanks to a $1 trillion dollar credit card from the Fed; the list goes on...Raise interest rates with 15 million jobless and 25 million part-time working Americans? All because gold is above $1,100? You must be joking or smoking – something. We will need another 12 months of 4-5% nominal GDP growth before Bernanke and company dare lift their heads out of the 0% foxhole – mini-bubbles or not. Instead, the heavy lifting or the charging of enemy lines in the case of this metaphor will likely be done by other central banks – already in Australia and Norway.

...The Fed is trying to reflate the U.S. economy. The process of reflation involves lowering short-term rates to such a painful level that investors are forced or enticed to term out their short-term cash into higher-risk bonds or stocks. Once your cash has recapitalized and revitalized corporate America and homeowners, well, then the Fed will start to be concerned about inflation – not until....OK, so where does that leave you, the individual investor, the small saver who is paying the price of the .01%? Damned if you do, damned if you don’t. Do you buy the investment grade bond market with its average yield of 3.75% (less than 3% after upfront fees and annual expenses at most run-of-the-mill bond funds)? Do you buy high yield bonds at 8% and assume the risk of default bullets whizzing at you? Or 2% yielding stocks that have already appreciated 65% from the recent bottom, which according to some estimates are now well above their long-term PE average on a cyclically adjusted basis?.

...OK, so where does that leave you, the individual investor, the small saver who is paying the price of the .01%? ...why not just buy utilities if that’s what the future American capitalistic model is likely to resemble. Pricewise, they’re only halfway between their 2007 peaks and 2008 lows – 25% off the top, 25% from the bottom. Their growth in earnings should mimic the U.S. economy as they always have, and most importantly they yield 5-6% not .01%! In a low growth environment, it seems to me that a company’s stock should yield more than its less risky debt, and many utilities provide just that opportunity. Utilities and even quasi-utility telecommunication companies now yield between 5 and 6%, whereas their 10- and 30-year yield less and at a higher tax rate to you the investor...

Unintended Consequences on Wall St.
by Peter Solomon

... What are the results that were unintended, and about which we legitimately lament? The banking system moved closer to an oligopoly, creating fewer powerful firms like Goldman Sachs and JPMorgan Chase. These firms took the government’s largesse and speculated for their own accounts, principally in trading activities. The commercial banks did not use the Fed window to increase their lending to smaller companies. They reduced risk and raised credit standards, prodded by Congress and regulators.

Goldman and Morgan Stanley, newly converted to bank holding companies, do not lend. They used the Fed’s capital and federal guarantees to buy higher-yielding securities, thus arbitraging the Fed. They did almost everything that one would expect of a profit-making business, even on Main Street.

...Wall Street was not always composed of publicly owned limited liability firms. Prior to 1970, Wall Street firms were private partnerships. Partners’ capital supported the firms’ operations. Compensation was a private matter among partners, generally tracking ownership. Extraordinary value added could be recognized....

Société Générale tells clients how to prepare for potential 'global collapse'
By Ambrose Evans-Pritchard

In a report entitled "Worst-case debt scenario", the bank's asset team said state rescue packages over the last year have merely transferred private liabilities onto sagging sovereign shoulders, creating a fresh set of problems. Overall debt is still far too high in almost all rich economies as a share of GDP (350pc in the US), whether public or private. It must be reduced by the hard slog of "deleveraging", for years. "As yet, nobody can say with any certainty whether we have in fact escaped the prospect of a global economic collapse," said the 68-page report, headed by asset chief Daniel Fermon. It is an exploration of the dangers, not a forecast.

Under the French bank's "Bear Case" scenario (the gloomiest of three possible outcomes), the dollar would slide further and global equities would retest the March lows. Property prices would tumble again. Oil would fall back to $50 in 2010. Governments have already shot their fiscal bolts. Even without fresh spending, public debt would explode within two years to 105pc of GDP in the UK, 125pc in the US and the eurozone, and 270pc in Japan. Worldwide state debt would reach $45 trillion, up two-and-a-half times in a decade....

The jobless rate-interest rate conundrum
by Tim Iacono

Just about everywhere you look these days in the financial media, when the topic of discussion turns to the plunging U.S. dollar, you'll hear someone saying something like, "Unless the Fed raises interest rates, the dollar's got nowhere to go but down". And then someone invariably says, "But the central bank can't raise interest rates. Not with the unemployment rate at over ten percent!" What's a central banker to do?

A look at history with the help of the chart below sheds some light on the current jobless rate-interest rate conundrum and, as you might expect, things don't look good for Fed chief Ben Bernanke if he's at all concerned about the value of the nation's currency.
Obviously, this graphic is too chock full of information to be addressed as a whole so it will be broken down in detail below, however, it is interesting to note that the 55-year time span above with just these two curves - U3 unemployment and the Fed funds rates - has two very distinct features.

First, current short term interest rates of around 0.15 percent are without precedent and, based on all but the most optimistic forecasts for the labor market, the jobless rate will soon share that attribute. In fact, if you were to simply subtract today's Fed funds rate from the unemployment rate you'd get 10.1 percentage points, an all-time high. Prior to 2009, over a period of almost six decades, this measure had exceeded six percentage points during only four months, back in 1958 when unemployment was around 7 percent and the Fed funds rate was just under 1 percent.

Second, "jobless recoveries" are a relatively new development. It's clear to see that, as you move from left to right in the chart, the unemployment rate falls at a slower and slower pace during economic recoveries. When weighed against economic cycles that have grown longer and longer, part of what was once affectionately known as The Great Moderation, this may not have seemed like such a bad trade off, however, the Great Moderation is not likely to fare well in history books now that the jobless rate has risen so sharply over the last year with little hope of "full employment" returning in the U.S. anytime soon.

A look back at the historical relationship between jobless rates and interest rates will help to understand the difficulty ahead for the Federal Reserve in formulating monetary policy....

BONUS: GOOD GRAPHS (W-P):
Digging out of a deep hole




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Economic News November 19, 2009

source

Comment:
Everyone is confused about the current state of the economy. For CNBC, Jeff Cox writes Where Are Stocks, Economy Headed? Even Pros Disagree. I wrote on this a few days ago, and have revised the article which appears on Seeking Alpha today, This Muddy Economic Picture. I say it all comes down to policy and re-regulation and getting the right people into our economic positions of power in the next elections. It is a shame our government moves at such a snails pace in reaction to a crisis as large as this, but it does, if it moves at all. Besides that, a complacent and self-indulgent citizenry can't be bothered with the details of what goes on in the world of finance, telling themselves that it's too complex to understand anyway.

An ongoing concern now and into the future is whether there will be adequate demand for our government debt offerings. Today's news is that a short supply along with strong demand for new issuance of short term treasury bills is pushing yields into negative rates again. This certainly sheds some light on what some people are thinking in regards to the above paragraph, doesn't it? It's a flight to safety for the non-bubble blowers! At the same time, a growing chorus of advisers and worriers, such as Bill Gross in his December newsletter, don't tolerate ZIRP well and look for higher returns.

We are at a cross roads. Time will tell who is right.

--Kalpa


....Jobs...

Aetna to cut up to 3.5% of workforce
AOL offers buyouts to 2,500, a third of work force

THE LATEST:

Stronger dollar, weak economic data pummels stocks

...Analysts said the dollar was the biggest force behind Thursday's trading, as it has been in recent months. A stronger dollar makes commodities more expensive to foreign buyers, and companies that produce the commodities make less money from them...

New Jobless Claims Flat at 505,000

Initial claims for jobless benefits remained steady at 505,000 in the week ended Nov. 14. The previous week's level was revised to 505,000 from 502,000...

U.S. NEWS:

Geithner Rejects Call to Resign, Faults Republicans

Treasury Secretary Timothy Geithner defended the Obama administration’s economic record and dismissed a call for his resignation from the senior House Republican on the Joint Economic Committee. Geithner blamed the policies of the Republican party and President George W. Bush for the financial crisis that pushed the nation into the deepest recession since the 1930s. Republicans “gave this president an economy falling off the cliff,” Geithner told Representative Kevin Brady of Texas as the two men interrupted each other a hearing before the congressional panel today. “I can’t take responsibility for the legacy of crises you bequeathed the country.”...

Treasury Bill Demand Seen Pushing 3-Month Yield Negative

Demand for the three-month Treasury bill is ramping up as investors seeking protection toward end of the year stock up on the safest securities. At a time when Treasury bills are in short supply, the situation is driving the bond equivalent yield on the three-month T-bill down. Strategists said its yield is likely to fall into negative territory before the end of the year. When market participants buy Treasury bills at negative rates, they're essentially paying the government to keep their money safe. The three-month bond equivalent yield fell as low as 0.15% Thursday, according to TradeWeb...

The 'Real' Jobless Rate: 17.5% Of Workers Are Unemployed

As experts debate the potential speed of the US recovery, one figure looms large but is often overlooked: nearly 1 in 5 Americans is either out of work or under-employed. According to the government's broadest measure of unemployment, some 17.5 percent are either without a job entirely or underemployed...

Fear of Double Dip in Housing

...One measure of the role of housing in the economy earlier this decade: During the boom, residential investment peaked to make up 6.3% of gross domestic product. That number fell to 2.5% in the third quarter, according to Macroeconomic Advisers. The average U.S. home price nearly doubled between January 2000 and April 2006, according to the First American LoanPerformance index. Since then, the average has dropped about 30%. In most parts of the U.S., prices are still down from year-ago levels, but prices in some markets, including San Diego and Orange County, Calif., have leveled off, at least temporarily....

Interest due on U.S. debt: Close to $5 trillion

Here's a new way to think about the U.S. government's epic borrowing: More than half of the $9 trillion in debt that Uncle Sam is expected to build up over the next decade will be interest. More than half. In fact, $4.8 trillion...

Record number of mortgage loans are delinquent

Mortgage borrowers are still falling behind on their payments in record numbers, despite the many foreclosure prevention efforts initiated by the government and non-profits. In the third quarter, 9.64% of all mortgage loans were delinquent, according to a report released on Thursday by the Mortgage Bankers Association. That represents 4.5 million borrowers and is an increase from 9.24% in the prior three months...

A sector too tough to save

...Why is this sector so rescue-resistant? First, helping commercial-mortgage holders doesn't buy votes the way helping homeowners does. Second, look at where commercial real estate lies in the banking sector. In theory, the Troubled Asset Relief Program, or TARP, should have given banks the capital to absorb loan losses, including those on commercial real-estate debt. TARP injections, along with Fed-run stress tests, helped big banks with more than $100 billion in assets. But those lenders held only 29% of the $1.84 trillion of commercial real-estate debt on bank balance sheets in the second quarter, according to Foresight Analytics....

Claims Against Lehman May Hit $1 Trillion, Chief Says

Lehman Brothers Holdings‘ creditors filed $824 billion in bankruptcy claims against the collapsed investment bank, and the total may reach $1 trillion, Lehman chief executive Bryan Marsal said...

As pensions dried up, four firms paid top execs $49.5M

Top executives at four companies that jettisoned their employee pension plans received $49.5 million in retirement and severance benefits in the years before the companies filed for bankruptcy, while retirees saw their benefits cut by as much as two thirds, congressional investigators conclude in a report released Thursday. The Government Accountability Office (GAO) reports that pensions at the companies, United Airlines, US Airways, Polaroid and Reliance Insurance, were underfunded by more than $11 billion when the companies turned them over to a government-backed insurance fund. The report says executives at those four companies and six others that abandoned their pension plans took in a total of $350 million in pay and perks in the years leading up to the bankruptcies...

New-Issue CMBS Sees Strong Investor Interest

The Federal Reserve’s Term Asset-Backed Securities Loan Facility (TALF) saw the sale of its first commercial mortgage bond this week. The $400 million in debt backed by 28 retail shopping centers was offered up by Developers Diversified Realty Corp. and underwritten by Goldman Sachs. According to Dow Jones Newswires, it was the first commercial mortgage bond deal in more than a year and sold at the price it was launched. Multiple media reports indicate that investor demand was strong for the new commercial offering....

INTERNATIONAL NEWS:

Record October rate for UK public sector borrowing

The UK's public sector net borrowing reached £11.42bn last month, official figures have shown...

OTHER:

Hiring Boom in Mortgage Restructuring

Mortgage restructuring for strapped homeowners has emerged as a rare growth area in the economy as companies in the field keep hiring. Four of the largest mortgages servicers -- Bank of America Corp., Citigroup Inc., J.P. Morgan Chase & Co. and Wells Fargo & Co. -- have collectively hired almost 17,000 people this year, mostly to work with financially ailing homeowners...

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Economic News November 18, 2009

source
Comment:
Ouch! That cartoon hurt!

I will touch briefly upon two subjects today.

The first topic is that of the exit strategy of the Fed from the mortgage backed securities acquisition program, which isn't even completed, yet, and I'd expect may be extended. Many smart people have asked what the strategy will be? Obviously, no one in the private sector will want these acquisitions unless the prices appreciate, or, in other words, inflation takes off. In the mean time, expect more of the government landlord rental program, as has begun with Fannie Mae. Something really doesn't feel right about this whole picture. I recently re-read the helicopter Ben speech in this excellent Credit Writedowns article which is a good reminder of Ben's goal here, at all costs. You might want to read it as well.

The second topic I want to mention today is that of inflated manufacturing reports in the U.S. They are misleadingly high because we import a huge percentage of the components necessary for production. The outsourcing of jobs story which we all knew could not be healthy for any economy is catching up with us. Every nation knows that it must have a market for produced products and goods in order to overcome currently high debt loads. Yet, too often, the U.S. manufacturer who wants to produce something concludes that it is more profitable to set up elsewhere. My pick of the day article for you to read on this subject is by Charles Hugh Smith here. This paints a very gloomy scenario. Protectionism, anyone? So, where will the growth come from?

Seize the remainder of your day.

--Kalpa



THE LATEST:

U.S. inflation edges up, housing starts fall sharply

Construction of new homes in the United States fell sharply last month, showing potential weakness in the economy's recovery, while consumer prices rose slightly more than expected. The Commerce Department said on Wednesday housing starts dropped 10.6 percent to a seasonally adjusted annual rate of 529,000 units, the lowest level since April and the percentage drop was the biggest since January...

U.S. NEWS:

Fed's Bullard Says Shrinking Reserves Key to Exit

..."The main challenge for monetary policy going forward will be how to adjust the asset purchase program without generating inflation while interest rates are near zero," Bullard said.

Medium-term inflation hinges on what the Fed will do with this program, he said...The Fed has committed to buy up to $1.725 trillion in longer-term mortgage-related and government securities by the end of March.

To Rise, Inflation Faces an Uphill Climb

...A weak labor market can keep inflation in check, even if commodity prices rise. Petroleum-related costs account for just 2.3% of U.S. production costs, according to an analysis by Capital Economics. Employee compensation, on the other hand, accounts for 30.3% of production costs. In fact, if rising commodity prices lead to more corporate cost cutting, then that will put more downward pressure on inflation. To the extent that already-cash-strapped consumers, facing 10% unemployment, cut back on other items to pay for higher food and energy prices, that will also hurt demand, and prices, for everything else.

Potential Dodd Challenger Calls for Geithner to Quit Over AIG

Former Republican congressman Rob Simmons, seeking a U.S. Senate seat from Connecticut, called on Treasury Secretary Timothy Geithner to resign over his role in the bailout of insurer American International Group Inc. Simmons, who is bidding to challenge Democratic incumbent Christopher Dodd in the 2010 election, cited a report issued Nov. 16 by the watchdog of the $700 billion Troubled Asset Relief Program that faulted the Federal Reserve Bank of New York for making “limited efforts” to protect taxpayer funds during last year’s rescue of AIG. Geithner was president of the bank at the time.

...The “policy decisions came with a cost -- they led directly to a negotiating strategy with the counterparties that even then-New York Fed President Geithner acknowledged had little likelihood of success,” the TARP special inspector general, Neil Barofsky, said in the report.

California faces a projected deficit of $21 billion

Reporting from Sacramento - Less than four months after California leaders stitched together a patchwork budget, a projected deficit of nearly $21 billion already looms over Sacramento, according to a report to be released today by the chief budget analyst. The new figure -- the nonpartisan analyst's first projection for the coming budget -- threatens to send Sacramento back into budgetary gridlock and force more across-the-board cuts in state programs....

Renting From Fannie Mae

Homeowners going through foreclosure can rent their houses through Fannie Mae rather than lose them entirely. The "deed for lease" program lets homeowners transfer their title to Fannie Mae and sign up for a one-year lease, then month-to-month extensions. Though this program is helping to keep people in their homes, is it helping the housing market, too? The number of foreclosures has been declining for the past three months, according to Realtytrac. There were 332,292 foreclosed properties in October, down 3% from September but up approximately 19% from last October...

Fannie, Freddie Woes Hurt Apartments

The deteriorating commercial real-estate market is hitting Fannie Mae and Freddie Mac, the housing-finance giants that were taken over by the government last year after billions of dollars in losses on residential real estate. The firms, which together have taken more than $110 billion in capital infusions from the Treasury, stepped up their lending for apartment buildings as the commercial real-estate market peaked, and they are now facing rapidly rising loan losses.

Fannie, which has been more active than Freddie, faces the biggest problems. Its serious delinquency rate, or loans that were 60 days or more past due, stood at 0.62% at the end of September, up from 0.16% a year ago. One troubling sign: one-quarter of the $180 billion of apartment-building loans on Fannie’s books were originated near the top of the market in 2007 and those loans account for nearly half of all its commercial-loan delinquencies...

OTHER:

Philadelphia Gives Homeowners a Way to Stay Put

...Under the rules adopted by Philadelphia’s primary civil court, no owner-occupied house may be foreclosed on and sold by the sheriff’s office before a “conciliation conference,” a face-to-face meeting between the homeowner and the lender aimed at striking a workable compromise. Every homeowner facing a default filing is furnished with counseling, and sometimes legal representation...

Forget $100 oil. $80 oil is a problem

...The U.S. economy remains weak and one in six Americans can't find enough work. Yet oil prices have risen steadily this year. A barrel of crude costs $79 and change, more than double its price at the end of 2008. This year's runup pales in comparison to the one that peaked last summer above $145 a barrel. Even so, some researchers warn we could once again be approaching the point at which rising energy costs will squeeze consumers. That could complicate recovery in an economy that, despite the tumult of the past two years, remains as consumer-driven as ever....

Tiny chip could diagnose disease

Researchers have demonstrated a tiny chip based on silicon that could be used to diagnose dozens of diseases. A tiny drop of blood is drawn through the chip, where disease markers are caught and show up under light...Now, scientists at IBM's research labs in Zurich have developed a cheap lab-on-a-chip that has the potential to diagnose dozens of diseases...

No Time to Read This? Read This

Are things you need to get done falling between the cracks? Does taking an entire day off seem impossible? Maybe you need a time-management system. Many readers seem to think they do, based on the email response to my recent column on the importance of taking time off...

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The Show Must Go On

THE SHOW MUST GO ON ---Three Dog Night
This song popped into my head today, and made me think that it may be a window into the mind of Ben Bernanke....Geithner....Obama... The title says it all about today's economy! And though I could probably use the song and the headline every single day, I have the perfect show to relate it to.

The show was this. I actually saw Tim Geithner on the TV news describing the administration's new task force to fight financial fraud by using tougher regulations with "proactive" enforcement. Now, I don't know about you, but when I look at Tim Geithner, I always think about how he came into office on charges of tax evasion, and arrogantly pronounced that these oversights were just careless mistakes and that it was unfortunate that they needed to spend so much time on these issues. Yet he went on to become confirmed to be in charge of our IRS. So, now, this insider is telling us to trust them with their new and improved fraud fighting task force. (Bush set one up in 2002 and we know how much good that one did.)

Ironically, on this same day that he made the fraud fighting task force announcement, headlines declared Geithner 'missed chances' to cut cost of AIG rescue because while he was in charge of the New York Fed, he agreed to pay out the full value of AIG contracts which cost taxpayers $27.1 billion to banks including Goldman and Merrill Lynch in a backdoor style bailout.

They don't give us much credit for intelligence, do they?

This truly is a circus show. And the show must go on!

--Kalpa



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Economic News November 17, 2009

Via Steve Breen

Comment:
Just the news, today. Apologies for so much!
---Kalpa


....more earnings reports...

GM Reports $1.15 Billion Loss, Plans Repayments
Home Depot 3rd-qtr earnings fall 8.9 percent
Sina's Profit Falls 11%, but Outlook Bright

THE LATEST:

Stocks zigzag on earnings data, rising dollar

Stocks mostly fell Tuesday as disappointing reports about retailers and manufacturing gave investors little incentive to keep buying after two weeks of big gains. A rebounding dollar also sapped investors' appetite for stocks....

Factory production dips; wholesale inflation muted

Factory production declined in October, signaling that consumers and businesses remain cautious in their spending and suggesting a sluggish economic recovery. At the same time, the weak economy is keeping inflation in check. Wholesale prices rose less than expected last month...

U.S. NEWS:

America's Newest Land Baron: FDIC

...The financial crisis started with Americans buying homes they couldn't afford. It is ending with the government struggling to sell buildings it never wanted. In the past two years, the FDIC has taken over 150 failed banks. In the process, it has seized more than 5,000 houses, subdivisions, buildings, parcels and other foreclosed assets. The current backlog of property stuck on the agency's books, with an appraised value of $1.8 billion, ranges from an $18,700 clapboard home with stained carpets in Birmingham, Ala., to a $1.7 million mountainside lodge with a heated driveway in Steamboat Springs, Colo....

Mortgage delinquencies slow, but keep climbing in 3Q

The pace at which people fell behind on their mortgages slowed during the summer for a third consecutive quarter, but the delinquency rate hit another record, according to credit reporting agency TransUnion. For the three months ended Sept. 30, 6.25% of U.S. mortgage loans were 60 or more days past due, TransUnion says. That's up 58% from 3.96% a year ago. Being two months behind is considered a first step toward foreclosure, because it's so hard to catch up with payments at that point. The rate was up 7.6% from the second quarter...

TARP Can't Save Some Banks

U.S. regulators have seized or threatened at least 27 banks that received capital infusions from the Troubled Asset Relief Program, including some lenders that government officials knew were troubled when they awarded the money. The troubles put taxpayers at risk of losing as much as $5.1 billion invested in the banks since TARP was launched in October 2008. For example, Friday's three bank failures, increasing the 2009 total to 123, included a unit of Pacific Coast National Bancorp, a San Clemente, Calif., bank that sold $4.1 million of preferred shares to the Treasury Department in January. "There are going to be more losses," predicts Jeff Davis, a banking analyst at FTN Equity Capital Markets Corp. in Memphis, Tenn....

China, U.S. eye pact to help troubled banks: sources

Chinese and U.S. regulators are negotiating a pact aimed at encouraging Chinese financial institutions to buy into small and medium-sized banks in the United States, bankers briefed on the plan said on Tuesday. Chinese bankers have complained that it's been difficult for them to set up branches or invest in banks in the world's leading economy, due partly to U.S. regulators' tough supervision and strict approval process for financial deals...

Treasurys Fall After Debt-Buying Binge

Treasury prices slipped Tuesday as market participants took some profits after Monday's government debt buying binge. Bond yields, which move inversely to prices, fell a little too far Monday, traders said, making shorter-term Treasurys look a bit too expensive. The two-year yield, which moves inversely to its price, fell to its lowest level since January on Monday, as low as 0.758%....

Nations boost demand for long-term U.S. assets

Foreign demand for long-term U.S. financial assets rose in September as China and other countries boosted their holdings of Treasury securities. Continued strong foreign demand for U.S. debt is critical to financing America's soaring budget deficits and keeping American interest rates low enough to support a recovery from the recession...

Wall Street Lost Fewer Jobs Than Forecast in Recovery

Wall Street is recovering faster than the national economy, with New York City’s four largest investment firms reaping profits of $22.6 billion through Sept. 30 after losing more than $40.3 billion last year, state Comptroller Thomas DiNapoli reported. The comptroller’s annual report on the city’s securities
industry also found that job cuts following the worst credit crunch since the Great Depression may not exceed 35,000. The total is about what Wall Street lost following the 2001 recession and terrorist attacks and less than the 47,000 officials predicted when preparing the city’s June financial plan. The six largest U.S. bank holding companies set aside $112 billion for compensation in the first nine months and bonus pools, including stock options, which may be higher than in 2008, DiNapoli said...

Fed reduces length of emergency loans

The Federal Reserve said Tuesday that it will reduce the length of loans banks can draw from its emergency lending program "in light of the continued improvement in financial conditions." The maximum loan duration will be cut to 28 days, from 90 days, starting on Jan. 14, the Fed said...

More Households Request Food Aid

The U.S. Agriculture Department said Monday the number of households that reported struggling to buy enough food in 2008 jumped 31% over the previous year. According to the USDA's annual poll, 17 million U.S. households reported some degree of food insecurity in 2008, up from 13 million households in 2007."It is time for America to get very serious about food security and hunger," said Agriculture Secretary Tom Vilsack, who is pressing Congress to expand such programs as food stamps and free school lunches that consume roughly 70% of his department's budget...

U.S. to aid some local mortgage programs

A Treasury Department program aimed at propping up local housing finance agencies will help inject $29 billion into these groups over the next year, according to government data scheduled to be released Tuesday. The program focuses on state and local housing finance agencies, which provide loans to low- and moderate-income borrowers and have struggled in the past year as investors shied away from buying their debt. Under the program, Treasury, along with mortgage financiers Fannie Mae and Freddie Mac, will buy bonds used by housing finance agencies to fund mortgages....

Geithner 'missed chances' to cut cost of AIG rescue

...The payments, including $5.6 billion to Goldman Sachs and $3.1 billion to Merrill Lynch, led to accusations that the Government had conducted a "backdoor bailout" of banks that had already received billions of dollars of state aid....n his report, Mr Barofsky recounted the seemingly feeble attempts made by Federal Reserve Bank of New York officials to convince the eight biggest counterparties to AIG's CDSs - Societe Generale, Goldman Sachs, Merrill Lynch, Deutsche Bank, UBS, Calyon, Barclays and Bank of America - to take a "haircut" on what they were owed by the insurer....Mr Barofsky questioned why the Federal Reserve Bank of New York and the US Federal Reserve were reluctant to pressure the banks into taking haircuts, given that the Government had already strong-armed many of the same group into accepting bailouts that they did not want...

Why Banks Aren’t Lending

The motivating idea behind the various U.S. bank rescue measures was to do whatever it would take to get bank loans to the private sector growing again. That mission remains distinctly unaccomplished...

Falling U.S. Dollar: It's Lack of Demand, Not Rising Supply, Pharo's Dow Says

...Dow notes the Fed is not tirelessly printing money and debasing the dollar as many think. The Fed balance sheet has remained relatively steady at about $2.1 trillion since October last year. But wasn't there a big spike leading up to that period and thus overhang? Standing by his thesis, Dow adds the shrinking dollar instead reflects a drop in money demand as the world deleverages and diversifies...

Small business loans: $10 billion evaporates

Eight months after President Obama began prodding the nation's banks to increase their small business lending, the loan numbers continue to move in the opposite direction. The 22 banks that got the most help from the Treasury's bailout programs cut their small business loan balances by a collective $10.5 billion over the past six months, according to a government report released Monday...

The not-so-small small bank CRE problem

Thanks to Deutsche Bank’s fixed income team, we can now present the problem in pictorial form.

First though, a bit of comment from the FI analysts:

. . . Small regional banks have a disproportionate exposure to CRE . . . Moreover, unlike for residential real estate, the best assets have been securitized in CMBS, and banks tend to hold in their loan portfolio the riskiest assets. Also, the downturn in commercial real estate has started later than the downturn in residential real estate and as a result loss recognition to date is likely to be low. Finally, the CRE sector is more likely to be prone to a “Japan-type” resolution, i.e. one in which banks will delay loss recognition and possibly modify loans that are fundamentally insolvent.

Here’s the table:

And given that Deutsche’s securitisation team estimates losses of 11 to 16 per cent on that $1.8 trillion ($1,800bn) worth of CRE assets in the US banking system, the FI analysts see a likelihood that a large number of banks will end up undercapitalised...

U.S. Postal Service posts $3.8 billion loss

The U.S. Postal Service reported a $3.8 billion loss in the 2009 fiscal year, and plans to propose to Congress in 2010 that it drop Saturday delivery. The agency already reduced expenses by $6 billion during the year ended Sept. 30...

Obama Creates Task Force to Fight Financial Fraud

The Obama administration today announced a coordinated federal attack to combat financial fraud. President Barack Obama issued an executive order creating a task force drawing upon numerous government agencies to investigate and prosecute cases. The government-wide initiative, announced at a Justice Department news conference in Washington, replaces a corporate fraud task force created under President George W. Bush in 2002....

Southern California homes sales rise, prices firm

Home sales in Southern California in October rose 2.8 percent from September and year-earlier levels and the region's home prices last month showed "more signs of firming," real estate information service MDA DataQuick said in a report on Tuesday. Last month 22,132 new and resale houses and condominiums were sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties...

New York Personal Income Tax Collections Fell 21% Last Year

New York state’s personal income tax collections, its largest source of revenue, fell $4.73 billion, or 21 percent, from a year earlier, according to a report issued today by Comptroller Thomas DiNapoli...

Weak companies raise risk for U.S. pension agency

Weakness in the auto and airline industries, as well as retail and service sectors, has more than tripled the potential risk to the U.S. pension insurance system. The Pension Benefit Guaranty Corporation (PBGC) on Friday said its potential exposure to future pension losses from financially weak companies had increased to about $168 billion in fiscal 2009 from $47 billion a year earlier....The agency, which insures pensions covering 44 million workers and retirees, said its annual deficit grew from $11.2 billion in fiscal 2008 to $22 billion in fiscal 2009....

S.F. home value drop, jobless drain city budget

San Francisco's lowered home values and high unemployment rates have created another unwelcome side effect: far less revenue coming into city coffers than expected. A report released Monday by the controller's office shows that property tax revenues will likely be $35 million less than anticipated in the 2009-10 fiscal year that began July 1. Payroll tax revenues will probably be $24.8 million less than expected, the report said....

CIT Group says 3Q loss widened to $1.07 billion

Commercial lender CIT Group Inc. says it lost $1.07 billion during the third quarter as its cash crunch worsened ahead of filing for bankruptcy protection earlier this month. One of the nation's largest lenders to small and mid-sized businesses, CIT Group filed for bankruptcy protection Nov. 1 as it was unable to get bondholder approval to reduce its mounting debt...

Ten Questions on the Volatile Housing Market

The U.S. housing market has been in a slump for the past four years. When will it ever end? In recent years, real estate has proven as jittery and unreliable as any other market. The average U.S. home price nearly doubled between January 2000 and April 2006, according to the First American LoanPerformance index. Since then, the average has fallen about 30%. The drop has been 53% in the Las Vegas metropolitan area and 39% in Miami, where about a quarter of all households with mortgages are behind on their payments or in foreclosure. The value of your home might be determined more by whether the neighbors keep their jobs than whether the house has ample light and closet space...

A Change at the Top of GMAC as It Negotiates for Another Government Bailout

GMAC Financial Services, the former lending arm of General Motors, replaced its chief executive on Monday as it negotiates for another round of bailout financing from the federal government...

INTERNATIONAL NEWS:

Eurozone posts unexpected surplus

The 16 countries that use the euro posted an unexpected trade surplus in September, official figures have shown...

GM says 10,000 jobs could go in European shake-up

U.S. carmaker General Motors could cut up to 10,000 jobs as part of its European restructuring plan and hopes to finalize the details within three weeks, a top executive said on Tuesday.

Nick Reilly, interim head of GM's European business, said the company must reduce its production across Europe by between 20 and 25 percent as part of the 3.3 billion euros ($4.9 billion) plan...

OTHER:

Cash is king for the holidays

...One in four consumers plan to pay with cash this holiday season, according to a new survey by the National Retail Federation. That's up 9.1% from a year ago...

Stimulus surprise: 15 million may owe IRS

An estimated 15.4 million tax filers may be getting paid more of the Making Work Pay credit than they should, according to a report from a Treasury Department inspector general publicly released Monday. And that means they either will get less of a refund than they expected, or will actually owe money to the IRS on their 2009 taxes....

The new flipping: short sales

Untold millions of dollars that banks could have recovered from the sale of distressed Florida homes have instead been pocketed as profits by a new breed of property flipper. These flippers target houses on the verge of foreclosure and persuade banks and mortgage companies to accept lowball buyouts, sometimes by using questionable appraisals and not disclosing that a quick sale at a higher price has already been arranged, experts say...

Recession intensifies GenX discontent at work

They're antsy and edgy, tired of waiting for promotion opportunities at work as their elders put off retirement. A good number of them are just waiting for the economy to pick up so they can hop to the next job, find something more fulfilling and get what they think they deserve. Oh, and they want work-life balance, too.

Sounds like Gen Y, the so-called "entitlement generation," right? Not necessarily, say people who track the generations. In these hard times, they're also hearing strong rumblings of discontent from Generation X. They're the 32- to 44-year-olds who are wedged between baby boomers and their children, often feeling like forgotten middle siblings — and increasingly restless at work as a result...

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A Smart Idea: Smart for Two Rent by the Minute Program

DaimlerChrysler Mercedes Smart ForTwo Hybrid Mini Car
Comment:
During this difficult time period for smart business ideas, this one looks like a winner. Daimler is offering its two person Smart car for rent at 35 cents per minute. They have already been doing this in Germany and they will begin it in Austin, TX first, with more cities in the U.S. to follow.

Car share programs are already popular, especially in a town such as the one I live in where there are quite a few people of driving age who only own a bicycle.

Reading of the details of this program, it looks like its set up to be extremely convenient and user friendly. Plus the chic car has that special appeal which will further promote participation in the program. It fits our times. More people will chose to live without a car and more families will go from two to one vehicle.

This is exactly the type of business model adaptation that we need to see right now, and its green, too! Now, would it be too much to hope for to have more cities prioritize smarter city planning to be pedestrian and bike friendly, as well?





For more, see these articles:
Renting a Smart car by the minute
Starting Car2Go - Smart Move for Daimler

--Kalpa


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Meredith Whitney on CNBC November 16, 2009

"You haven't seen this much credit contraction ever"
MEREDITH WHITNEY ON CNBC
(Eleven Minutes of Doom and Candidness)



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Why this Economic Picture is Becoming Muddier and Muddier

source

Good analysts continue to offer explanations of why the equity markets should not be up, bringing yet another day of an up market. There is an underlying nervousness and awareness that the actual state of our economy is not what the current illusion suggests. There are fault lines growing between believers and nonbelievers in a recovery, between inflationists and deflationists. A day of reckoning will be here sometime, but could interim mini-bubbles provide a stable period of instability that could last a couple of years?

Unfortunately, the derivative laden, credit driven, central bank determining global economy is immense and complex, allowing for many conflicting dynamics to occur at any given time. In this time of seemingly stable chaos we now have so many confusing policies, deflation trends, inflating mini-bubbles, and other dynamics going on, that statistics used in trying to generalize right now are at best inadequate and misleading.

Winners and losers are now determined by policy, not by logic or mathematics. Policy creates unintended consequences and muddied pictures. That, in turn, causes frustration in analysts and taxpayers, but is the intended, and dare I say successful, outcome of the Fed and policy makers.

Some of today's and tomorrow's chaotic subjects which make and will make statistical generalizations inadequate are:

• Central bank policies
• ZIRP creating mini-bubbles
• Low volume, high-trade equity markets
  
• The role of speculation in commodity markets
• Government fiscal policies which pick winners and losers
• Artificially high real estate prices due to policy
• The borrowing of future demand through housing and auto rebate programs
  
• GDP figures
• Money supply figures
• Lack of accounting transparency of banks
• Underlying explosive CDS's and other derivatives
  
• Increasing costs of servicing national debt
  
• Dollar carry trade effects on global asset prices
• Ongoing adjustment of currency valuations
• Shifting trade imbalances
• Growing importance of energy prices
  
• A changing and unpredictable consumer
  
• Ever decreasing trust in the system, morale hazard
  
• Hidden, unfunded costs of future entitlements and pension plans
  
• Unfair imbalances in access to credit for businesses
• Lending is becoming more risky, not less
  
• Private sector's re-balancing of essential vs. nonessential projects as related to worthy credit
• Variations in state balance sheets and taxes
• Regional variations in jobs and real estate values
  
• Personal situations - employed vs. unemployed
• Those in the FIRE economy vs. the rest
• Those with pension plans and those without
  
• Destruction used as a method to inflate asset values in cars, houses (expect increased role of this in the future)
• Global nature of the crisis
  

Keep in mind that if, in fact, we live in a world of deflating asset prices:

• Fed acquisition and backing of GSE's (government-sponsored enterprises) is quantitative easing.
  
• Forbearance of bank balance sheets and toxic assets combined with a policy of publicizing all losses will lead to quantitative easing of these toxins.
  
• Any programs which convert bad debt to fiat currency will eventually become the equivalent of quantitative easing (whether it be student loans, real estate, bad banks, worthless assets).
  

For a while, a game is played with taxpayers to convince them they've made a good involuntary investment in these assets that no one else wanted. They will surely gain in value and at the same time save our economy from a dreaded collapse. But as deflationary forces advance, these investments become more and more worthless.

There is not a decent market for these assets. The Fed won't easily unwind them. Unless a successfully manufactured inflation makes them start to look cheap at current prices. It's their only hope. These programs are debasing the dollar. These methods of problem-solving will continue until they can't by default.

Many have abhorred with fear that we will become like Japan, entering its second decade of deflation.

I only hope that we will be so lucky.

~~~~~~~~~~~~~~~~~~~

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Economic Opinion Picks November 16, 2009

Bruce Beattie

Comment:
There are ten picks today.

It is yet another day of an up stock market as I read article after article of warnings and nervousness concerning the actual state of our economy vs. the current illusory state of our economy, and of why the market should not be up.

1) Paul Krugman, NYT's, is getting increasingly worried and vocal about deflation. This is good.

2) Ambrose Evan Pritchard, UK Telegraph, writes also of deflation and China's role in the global economy. This is well worth reading in its entirety.

3) Surowiecki, for the New Yorker, writes about how a debt-encouraging tax policy influences entire economies and how it cannot easily be reverted, once in place.

4) From the W-P, the FHA and more on loose lending and where this will end up.

5) Waldman, Interfluidity blog, writes about regulatory short-comings and why they always have been and always will be that way.

6) Peter Schiff writes on an important insight on jobs losses vs. production reports. Don't miss this from Market Oracle.

7) This is on China, the US currency, jobs, debt, and more, from Yves Smith on RGE Monitor.

8) Robert Samuelson, W-P, writes why health care costs will only go up under Obamacare.

9) Ed Harrision, Credit Writedowns, writes about Roubini's latest gloom on unemployment.

10) Charles Hugh Smith, on Seeking Alpha, writes why the equity market should crash.


--Kalpa


The madness of the inflation hawks
by Paul Krugman

Wow. Matthew Yglesias catches David Ignatius worrying that the Fed may not have enough political support in its efforts to raise interest rates and fight inflation. As Matt correctly notes, this is a remote issue — unemployment is high, inflation is low, and the Fed has no business raising rates any time soon.

This really can’t be overemphasized. I like to use Glenn Rudebusch’s estimate of the Taylor Rule — a rule relating interest rates to unemployment and inflation — that appears to track past Fed behavior. The chart below shows the rate predicted by the rule versus the actual rate on 3-month T-bills (I’m using that rather than the target Fed funds rate for trivial computational convenience).:

Federal Reserve of San Franciso, Federal Reserve of St. Louis

The Fed has been up against the zero lower bound since the beginning of 2009, roughly when unemployment rose above 11 percent; right now the Taylor rule says that the Fed funds rate should be minus 6.7%.

So why should the Fed even be thinking about raising rates any time soon? We’re not likely to see 7% unemployment for years — and by the time we do, inflation will probably be even lower than it is now. I’d add that the Fed really should be raising its inflation target, meaning an even longer pause before it raises rates.

Monetary tightening shouldn’t be on the agenda for a long, long time.

China has now become the biggest risk to the world economy
by Ambrose Evans Pritchard

"The inherent problems of the international economic system have not been fully addressed," said China's president Hu Jintao. Indeed not. China is still exporting overcapacity to the rest of us on a grand scale, with deflationary consequences.

While some fret about liquidity-driven inflation, Justin Lin, World Bank chief economist, said the greater danger is that record levels of idle plant almost everywhere will feed a downward spiral of job cuts and corporate busts. "I'm more worried about deflation," he said.

...The world economy is still skating on thin ice. The West is sated with debt, the East with plant. The crisis has been contained (or masked) by zero rates and a fiscal blast, trashing sovereign balance sheets. But the core problem remains. The Anglo-sphere and Club Med are tightening belts, yet Asia is not adding enough demand to compensate. It is adding supply.

My view is that markets are still in denial about the structural wreckage of the credit bubble. There are two more boils to lance: China's investment bubble; and Europe's banking cover-up. I fear that only then can we clear the rubble and, very slowly, start a fresh cycle.

The Debt Economy
by James Surowiecki

...If the benefits are illusory, the costs are all too real. Economies work best, generally speaking, when people are making decisions based on economic fundamentals, not on tax considerations. So, as much as possible, the tax system should be neutral between debt and equity, and between housing and other investments. It’s not, and, worse still, as we’ve seen in the past couple of years, debt magnifies risk: if companies or individuals rely on large amounts of leverage, it’s much easier for bad decisions to lead to insolvency, with significant ripple effects in the wider economy.

A debt-ridden economy is inherently more fragile and more volatile. This doesn’t mean that the tax system caused the financial crisis; after all, the tax breaks have been around for a long time, and the crisis is new. But, as a recent I.M.F. study found, tax distortions likely made the total amount of debt that people and companies took on much bigger. And that made the bursting of the housing bubble especially damaging. So encouraging people to take on debt qualifies as a genuinely bad idea.

...The clearest hurdle to these changes may be political, but the bigger hurdle is, in a way, psychological: because tax breaks on debt have been around so long, we can hardly imagine what it would be like if we changed them, and we tend to underestimate their influence in shaping our behavior. Subsidizing debt seems harmless simply because we’ve always done it. But the fact that you’ve had a bad habit for a long time doesn’t make it less dangerous.

The FHA's nose dive
by W-P

...The problem here is that the government is taking taxpayers on such a death-defying ride in the first place. Like Fannie Mae and Freddie Mac, the FHA represented a huge federal gamble on the politically popular cause of homeownership. Now that Washington has lost that bet, it is doubling down, in a bid to prop up home prices just enough to prevent a wider collapse of the economy...

Certainly it's odd that the FHA is helping people get houses with very little equity even as rental vacancies are running at an all-time high of 11.1 percent. But the broader lesson is that federal subsidies have made the entire economy dangerously dependent on single-family housing. The sooner Congress and the president go to work on a long-term fix for that fundamental problem, the better.

Discretion and financial regulation
by S R Waldman

...The theory of "prompt corrective action" was and is very sensible. It's pretty clear that the social costs increase and the likelihood of an equitable resolution to problems decreases the longer banks are permitted to downplay weakness, the more regulatory forbearance banks are granted, or the more public capital banks are given. (An "equitable resolution", in this context, means giving the shaft to bank managers, shareholders, and unsecured creditors to minimize costs to taxpayers and to sharpen the incentives of bank stakeholders to invest well. "Regulatory forbearance" and "public capital injection" are redundant: Under current banking practice, regulatory forbearance is economically equivalent to an uncompensated injection of public capital, like TARP but without the messy politics and with no upside for taxpayers. Make sure you understand why.)

...As you read through the roughly 1400 pages of currently proposed regulatory reform, ask yourself what, if anything, would interfere with the (uncontroversial and long-understood) dynamic that I've described. Giving regulators more power doesn't help, when regulators have repeatedly failed to use the powers they had. Putting more bank-like institutions and activities under a regulatory umbrella seems sensible, as does eliminating opportunities for firms to choose among several regulators and shop for the most permissive. But even our most vigilant and competent regulator (hi FDIC!) was totally snowed by this and the previous two banking crises.

...If we don't change the structure of the financial industry, there's no reason to think that next time around regulators won't use the proposed resolution authority to do exactly what they opted to do this time. They won't even need to go to Congress for a new TARP, as Frank's proposal gives the executive branch carte blanche to provide financial firms unlimited guarantees and support...

U.S. Job Losses Demystified
by Peter Schiff

...An article in this week's New York Times by veteran writer Louis Uchitelle confirmed a fact that I have been alleging for years. Uchitelle pointed out that foreign outsourcing of component manufacturing has led to consistent overstatement of U.S. GDP and productivity. The connection goes a long way to explain why we keep losing jobs even as GDP is apparently expanding.

As our economy becomes less competitive due to higher taxes, burdensome and uncertain regulations, and capital flight, more manufacturing and services will be outsourced to foreign firms. However, the flaw in GDP calculation allows the output of those foreign workers to be included in our domestic tally. Since we count the output but not the worker responsible for it, government statisticians attribute the gains to rising labor productivity. To them, it looks like companies are producing more goods with fewer workers.

The reality is that we are producing less with fewer workers. The added “productivity” comes from higher unemployment and larger trade deficits. This is a toxic formula that will have lethal economic consequences....

China Lambastes Dollar “Carry Trade,” Diverting Attention from Its Currency Manipulation
by Yves Smith

...Now even though China is correct in accusing the US of stoking a global carry trade, they are not exactly free of blame either. China’s past and continued currency pegs helped enable US reckless borrowing.

And despite the many complaints of readers yesterday on a post on government deficits, let me point out one ugly fact. The main argument was “we need to cut our debt levels.” Guess what, sports fans. That will not, cannot happen across the economy unless we run trade (more accurately, current account) surpluses. Do you think this has a snowball’s chance in hell of happening if China keeps its currency pegged at favorable rates to the dollar? So China’s fulminating, even if narrowly correct, serves to distract attention from its own culpability in this mess.

And low dollar interest rates pose a particular problem for China. Its dollar purchases had been, and may still be, running at levels so high as to make it impossible to sterilize the purchases. The net effect is that they wind up importing our loose money policy to the degree that they cannot fully sterilize the dollar purchases they make to suppress the value of their currency. Some recent reports (admittedly anecdotal) suggest inflation in China is running at 15%, which is the upper limits of what the population will tolerate. So the Fed’s policy is of even more immediate interest to China...

Obamacare: Buy now, pay later
by Robert Samuelson

There is an air of absurdity to what is mistakenly called "health-care reform." Everyone knows that the United States faces massive governmental budget deficits as far as calculators can project, driven heavily by an aging population and uncontrolled health costs. As we recover slowly from a devastating recession, it's widely agreed that, though deficits should not be cut abruptly (lest the economy resume its slump), a prudent society would embark on long-term policies to control health costs, reduce government spending and curb massive future deficits. The administration estimates these at $9 trillion from 2010 to 2019. The president and all his top economic advisers proclaim the same cautionary message.

So what do they do? Just the opposite. Their far-reaching overhaul of the health-care system -- which Congress is halfway toward enacting -- would almost certainly make matters worse. It would create new, open-ended medical entitlements that threaten higher deficits and would do little to suppress surging health costs. The disconnect between what President Obama says and what he's doing is so glaring that most people could not abide it. The president, his advisers and allies have no trouble. But reconciling blatantly contradictory objectives requires them to engage in willful self-deception, public dishonesty, or both...

Roubini: For unemployment "the worst is yet to come"
by Edward Harrison

Nouriel Roubini, writing in the New York Daily News , said on Sunday that “unemployed Americans should hunker down for more job losses” given the likelihood of a job less recovery. This was as gloomy a piece as I have seen from Roubini in the past few months. He has clearly become more downbeat about the long-term picture for the U.S. economy.

The article begins:

Think the worst is over? Wrong. Conditions in the U.S. labor markets are awful and worsening. While the official unemployment rate is already 10.2% and another 200,000 jobs were lost in October, when you include discouraged workers and partially employed workers the figure is a whopping 17.5%…

…we can expect that job losses will continue until the end of 2010 at the earliest. In other words, if you are unemployed and looking for work and just waiting for the economy to turn the corner, you had better hunker down. All the economic numbers suggest this will take a while. The jobs just are not coming back.

...

Why the Stock Market Should Crash
by Charles Hugh Smith

I'm not saying the stock market will crash, only that if it had any relation to the real U.S. economy that it should crash, and soon.

The current politics of experience is so warped by misleading statistics and orchestrated propaganda that it feels strange to state the obvious and find it is "that which cannot be spoken" -- the credit-dependent, consumer-dependent U.S. economy is going down, and going down hard, and the trillions of dollars borrowed and spent by the U.S. government and Federal Reserve to crank up a recovery have failed completely, utterly and totally.

...We are walking through the desert, kept alive by the sugar-water drip of Federal stimulus, guarantees and subsidies. The "so near, yet so far" mirage of "recovery" has been propping up the stock market for nine months, and when a slight breeze blows away the thermal illusion, then the market will crash back to the March lows, or perhaps even lower. That crash will simply reflect the state of the real economy.

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Weekend Economic News Links November 15, 2009

source
Here are a few links for the weekend...

Comment:

I'll just report that the restaurants in this town recently seem to be overflowing. Last weekend there was a two hour wait at the first three places we went to until we finally found a spot with no wait. This weekend, the same. Three places we checked out were filled to capacity.

A relative reports from the Midwest that there are an above average number of new homes beginning construction in their small town and recent farmland sales are setting near all time records in price per acre. They see no evidence of a recession.

Go figure. That's just my two cents for today. Tomorrow, I'll blow with the wind in different direction.

--Kalpa


U.S. trade gap widens even as weak dollar aids exports

A weaker dollar may boost the nation's economy by increasing exports and narrowing the trade gap -- but that won't happen anytime soon. Instead, the nation's trade deficit rose in September by the largest percentage in a decade as U.S. exports grew for the fifth straight month, but imports rose faster, a government report showed Friday...

Bank failure toll reaches 123

Two Florida banks and one in California failed Friday night, bring the 2009 national tally to 123. Regulators closed Century Bank, Federal Savings Bank in Sarasota, Fla., Orion Bank in Naples, Fla., and Pacific Coast National Bank in San Clemente, Calif...

China rounds on U.S. rates as global economic risk

Ultra-low interest rates in the United States are fuelling speculation in overseas asset markets and threatening the global economic recovery, a senior Chinese official said on Sunday. In unusually blunt criticism of U.S. monetary policy on the day that President Barack Obama arrives in China for a visit, Chinese banking regulator Liu Mingkang said the Federal Reserve's pledge to hold down borrowing costs and the weak dollar had emerged as a "new systemic risk."...

Home Builders (You Heard That Right) Get a Gift

ON Nov. 6, President Obama signed the Worker, Homeownership and Business Assistance Act of 2009 into law, extending unemployment benefits by 20 weeks and renewing the first-time homebuyer tax credit until next April. But tucked inside the law was another prize: a tax break that lets big companies offset losses incurred in 2008 and 2009 against profits booked as far back as 2004. The tax cuts will generate corporate refunds or relief worth about $33 billion, according to an administration estimate...

State Finance Directors Warn of More Trouble Ahead

Michigan and California are likely to face a fresh round of budget woes when federal stimulus funds used as a fiscal crutch dry up, finance directors for the states said Friday. Short-term budget gaps have battered states as revenues plummeted during the recession. Aided by about $250 billion in funds from the stimulus package expected through the end of next year, states managed to close the gaps this year....

Small-business loan program still bogged in paperwork and hesitance

Despite Gov. Bill Ritter's attempt to ignite banks' interest in a stimulus-funded loan program for small businesses, the emergency aid is still lagging and businesses are still suffering. Some gains have been made, government records show. By October, Colorado banks had issued 39 loans worth $1.2 million through the America's Recovery Capital program, lifting the state from the bottom of the pack nationally toward the middle.

Nineteen states have made fewer loans than Colorado. And the number of banks in the state embracing the program has swelled to 16 from just a handful last summer. But state officials and businesses leaders are still flustered, saying the Small Business Administration needs to consider overhauling the program, given banks' reluctance to participate and complaints about cumbersome paperwork....

Western Slope horse shot, left to die

As investigators on the Western Slope look for the person who shot a horse in the head and left the animal to die, horse-rescue groups say equine abandonment is on the rise because of the sour economy....

CDC's swine flu toll: 4,000 dead, 22 million ill

Estimates of deaths caused by the swine flu have grown to nearly 4,000 since April, roughly quadrupling previous estimates...Most cases still don't require a doctor's care. Swine flu has sickened about 22 million Americans since April and killed about 540 children...

Blizzard Renews Storm Over China Making Snow

...This week's storm follows an unusually early snowfall that blanketed Beijing on Nov. 1. Government media attributed the intensity of that storm to the Beijing Weather Modification Office, which is responsible for cloud-seeding operations in the capital, whose downtown area is surrounded by farmland. The state-run Xinhua news agency quoted a top official at the office saying it had created 16 million metric tons of additional snow. "We won't miss any opportunity [for] artificial precipitation since Beijing is suffering from the lingering drought," the official, Zhang Qiang, was quoted as saying. The government's role in that storm angered some people....

Alleged 9/11 Plotters Face Trial

Khalid Sheikh Mohammed, the alleged mastermind of the Sept. 11, 2001, attacks, will be tried at a federal courthouse in lower Manhattan, just blocks from the former World Trade Center site, in the ultimate test of the Obama administration's strategy of trying terrorist suspects in U.S. civilian courts...Friday's announcement sets up what may be the trial of the decade, with the world's eyes fixed on lower Manhattan as the U.S. government lays out for the first time in a public courtroom how it thinks Mr. Mohammad plotted the deaths of nearly 3,000 people....

The State of the American Economy in One Chart

The chart below shows that interest rates have been decreasing by approximately 0.5% every 2 years. Put simply, As the price of debt becomes cheaper more is created and then spent, and that effectively is the economy....In 1981 the 30 year bond which is a good approximation for mortgage rates, was yielding 14% today it yields 4%....

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Falling Dollar and Growing Trade Deficit

The biggest story in the past 24 hours is that of the increasing trade deficit and the falling dollar. The trade deficit had its biggest one month increase in sixteen years in September.

A key interview is this, from the transcript of the Nightly Business Report link following:

SUSIE GHARIB: Our trade deficit is getting bigger, much bigger. The latest numbers from the Commerce Department today show the U.S. trade deficit expanded more than 18 percent in September. That's the biggest one-month increase in 10 years. Now even though American businesses increased exports, imports, especially oil imports, rose even more. Economist David Wyss says the trade gap is a threat to the economic recovery.

DAVID WYSS, CHIEF ECONOMIST, STANDARD & POOR'S: The major risk is that we get into a downward spiral that the trade deficit will put downward pressure on the dollar. That could cause foreign investors to try to pull out of U.S. assets sending interest rates higher and further slowing economic growth in the United States.

Here are two good summaries of the story for you:

1) From the Nov. 13 PBS's Nightly Business Report, watch minutes 1:30 to 5:00 11/13/09-Trade Deficit Grows & The Dollar Shrinks. Or, if you prefer, the transcript here.

2) And from Nov. 14 WSJ, Sinking Dollar Aids Exports, but Trade Gap Grows

... The 5.8% increase from August was the largest one-month percentage gain in 16 years, and helped push the trade deficit to $36.5 billion in September from $30.8 billion the month before. "The widening deficit is a warning that as U.S. domestic demand increases, imports will bounce more than exports," said Nigel Gault, chief U.S. economist at consulting firm IHS Global Insight. "That means that the trade deficit will keep widening, and that trade will be a drag on growth."

...Even so, "the dollar may need to decline further," said Mr. Pandl, to spur exports enough to help narrow the trade gap and boost U.S. economic growth.

This is a delicate balancing act. Winners and losers and unintended consequences emerge every step of the way.

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The Eliica Electric Car

Eliica stands for Electric Lithium-Ion Car.
Peak electric car, anyone???
Made in Japan.
It has eight wheels.
It goes 0 to 60 in 4 seconds.
Price +/- $400,000, 2/3 cost is batteries.
Company Website: link.
Worsleyschool.net link.
Wikipedia link.







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