Some News Highlights

Here is what I'm reading that you may or may not find interesting...

• Fortune believes the next President could obliterate the auto industry as we know it with new fuel standards... coming from Michigan all I can say is ... the hits keep coming. "He or she will have the power to enact unbearably strict fuel economy standards on the cars and trucks sold in half the country. By so doing, he could render vast swaths of the current car and truck lineup obsolete and doom their manufacturers to the scrapyard."
• Bank of America, the nations largest consumer bank, says losses on home equity loans will be even worse than they predicted.... 3 weeks ago. How quickly things are degrading in the real economy and more specific to stock investing, the Kool Aid continues to be drunk as reality continues to hit these companies. Key takeaway? Something we've been saying for a long while "More customers are under financial stress and using credit cards to pay for necessities"
• Polar Bears are newly designated as endangered. Why do you care? More obstacles to any new energy exploration in the Arctic.
  
• Recession? Not so fast says the Wall Street Journal, citing big bank economists - the same economists who were not even calling for any recession until December 07 or January 08. Ironic, eh? Most of this story focuses on how much "better than expected" the government reports are, and how helpful the Federal Reserve has been :) I'll leave it at that.
• The TelegraphUK disagrees saying the global slump of 2008-2009 is just beginning. The avalanche of bankruptcies has begun. Six US companies of substance have defaulted on bonds over the past fortnight, against 17 for the whole of last year. As the Fed's latest loan survey makes clear, lenders have dropped the guillotine. With the usual delay, the poison is spreading from banks to the real world. Diane Vazza, S&P's credit chief, says defaults are rising at almost twice the rate of past downturns. "Companies are heading into this recession with a much more toxic mix. Their margin for error is razor-thin," she said.

Let me pull out an interesting quote from the Telegraph story

• "Nowhere and nothing will be immune. We are on the cusp of an equity meltdown that will slash and shred portfolios," said Albert Edward, SG's global strategist.
• "We see a global recession unfolding. Liquidity will drain away and crush the twin emerging market and commodity bubbles. The recent hope that 'the worst might be over' is truly staggering. Profits are disintegrating," he said.
• Lehman Brothers' Sun Mingchun says China will tip over in the second half of this year. "With so much latent overcapacity, an export-led slowdown could trigger a chain reaction which, in the worst case, could threaten the stability of [its] financial and economic system," he said.

Conclusion: So this is where I buy stocks, right? I mean "it's all priced in" Damn I hate these UK newspapers full of reasonable conclusions and gravitas. Give me some Larry Kudlow! Not one mention of Goldilocks in that article is unacceptable.

• China's Earthquake Exposes a Widening Wealth Gap - something I believe is happening in more and more countries (including ours) and will cause more and more social acrimony globally in the years/decades to come. The global have's and have not's.
• One of my favorite topics is the slew of executive perks that never get reported and/or if the common public really knew about they'd be shocked. The real estate meltdown is exposing yet another - the fact companies are picking up the tabs for executives homes during recruiting or relocations. Can't sell on the open market? No problem - we have a ready buyer: the corporation - even if said corporation needs to turn around and sell it on the free market for a large loss. Remember, these are already the most well compensated folks in America even without the perks. (one of my favorites is CEOs telling the companies to pick up the tab for their income taxes - guys making millions, hundreds of millions who won't pay the $10, $20, $30K it takes to do their taxes) "Other shareholders are in for similarly rude shocks this spring, as companies disclose sizable bills to cover real-estate losses of transferred senior officers. At least eight companies say they've spent $500,000 or more to help an executive sell a former residence."
• The weak dollar claims another victim - American students studying abroad in Europe. Many other college students, hit by sticker shock, also are steering clear of Western Europe, especially the United Kingdom, and opting for study-abroad programs in Asia, Africa and Latin America.
• Toll Brothers CEO says there is no spring homebuying boom as we were promised last fall... because you see, last fall people were saying everything would be fine "in 6 months"... and here we are 6 months later. No recovery. But we are assured once again, it's going to happen.... "in 6 months". We'll see you in November when we're laughing at the same garbage. At which point they will be pointing to spring 2009 as the turnaround for housing, because (ding ding) that is 6 months after November. And so we'll keep going into the squirrel eventually finds a nut.
• Although America is the one country on Earth with no inflation, our closest cousin (finance based, asset based, debt ridden) the UK has leaders who actually expect inflation to accelerate. Again, let's thank our lucky stars as Americans we don't have to deal with these issues. Whew! The Bank of England painted a bleak picture of Britain’s economy on Wednesday, saying that it expected inflation to accelerate, making further rate cuts unlikely. The Bank of England painted a bleak picture of Britain’s economy on Wednesday, saying that it expected inflation to accelerate, making further rate cuts unlikely.

• Nissan is bringing an electric car to the US by 2010 - much needed and the type of technological breakthroughs we need to help with the "World of Shortages" coming ahead; GM's Volt is also coming that year. And while "free market" people (who love free markets until they go wrong and then they ask for government handouts) believe incentives are evil, the Israeli government shows that sensible incentives that help the greater good (as opposed to whomever is lining politicians pockets) can actually lead to positive outcomes; just another example of our government is now at the point where it is literally hurting us, not being "neutral" as it used to be (or for god sakes helping us) In this country we are still fighting off solar incentives (because there is no solar lobby) but giving $300B to large industrial corporate farmers. Mr. Ghosn, who also serves as chief executive of Renault, said the Israeli government would encourage sales of electric cars by sharply cutting taxes to levels below those on gasoline-powered vehicles. “We would never have done this if the Israeli government was not encouraging it,” he said. “Whoever puts the most incentive on the table is going to get the technology first.”
• Speaking of said farming bill - any presidential veto will be overturned by our grubby Congress. The House overwhelmingly approved a $300 billion farm bill on Wednesday afternoon, making it probable that the measure will become law despite President Bush’s anticipated veto. Among other things, Wednesday afternoon’s vote reflected the desire of many lawmakers not to oppose a politically popular bill in an election year. Unlike some House members, every senator has constituents who are farmers, so support is believed to be even stronger in that chamber, which is likely to vote before the end of the week.
• That stimulus check that is propping up stock prices in retailers, restaurants, and other early cycle stocks as each company claims THEY are going to see a big push from said money? Ah... as predicted it's going to go mostly go to (1) pay for gas (2) pay for food and (3) pay for debt. The latter would never happen unless Americans were truly scared and/or tapped out. Somehow I think Walmart will end up getting 20-30% of all this money, which we can send to China. So let's review, we borrowed money from China in the form of Treasury Bills so we could place more debt on the shoulders of our grandchildren. Then we give that money (borrowed from China) to Americans, who temporarily hold it for a few days/weeks, before spending it at Walmart, who sends the money back to China to pay for the goods they sold to Americans. Do you see how it is so ironic? And why we are in such trouble here. So let's clap like seals as we await the next "stimulus plan" which I believe will be sent to Americans by this fall/early winter. So we can repeat the same thing again.
  

• And let's finish with this somewhat funny (funny only in the quotes) about the Indian backlash to some recent comments from American leaders, that in Indians' eyes points the finger of rising food costs at them.... instead of say a Federal Reserve printing money like a madman, a corn ethanol boondoggle, a total lack of vision or investment, farm bills that pay farmers to not plant, high tariffs that keep out sugar cane ethanol (by the country that promotes "free markets" in all its literature), etc. No, it's the Indians fault :) I could go on... but let's see what the Indians think. Is there any country this administration has not been able to offend? This is very similar to a country with 5% of the world's population that uses 25% of its energy, blaming others for high costs... par for the course. But our circus act is going to fall on deaf ears as each year passes and our impact on global GDP and decision making lessens. Oh, Bush.
  

Instead of blaming India and other developing nations for the rise in food prices, Americans should rethink their energy policy — and go on a diet. That has been the response, basically, of a growing number of politicians, economists and academics in this country, who are angry at statements by top United States officials that India’s rising prosperity is to blame for food inflation.

Pradeep S. Mehta, secretary general of the center for international trade, economics and the environment of CUTS International, an independent research institute based here, said that if Americans slimmed down to the weight of middle-class Indians, “many hungry people in sub-Saharan Africa would find food on their plates.” (nice!)

He added, archly, that the money spent in the United States on liposuction to get rid of fat from excess consumption could be funneled to feed famine victims. (snap!)

Mr. Mehta’s comments may sound like the macroeconomic equivalent of “so’s your old man,” but they reflect genuine outrage — and ballooning criticism — toward the United States in particular, over recent remarks by President Bush.

In response to the president’s remarks, a ranking official in the commerce ministry, Jairam Ramesh, told the Press Trust of India, “George Bush has never been known for his knowledge of economics,” and the remarks proved again how “comprehensively wrong” he is. (ouch! and I cannot think of a better way to end a blog entry!)

ok ok, I could not end there - a few more....
The Asian Age, a newspaper based here, argued in an editorial last week that Mr. Bush’s “ignorance on most matters is widely known and openly acknowledged by his own countrymen,” and that he must not be allowed to “get away” with an effort to “divert global attention from the truth by passing the buck on to India.”

There may be some foundation to Indians’ accusations of hypocrisy by the West. The United States uses — or throws away — 3,770 calories a person each day, according to data from the United Nations Food and Agriculture Organization collected in 2001-3, compared with 2,440 calories per person in India. Americans are also the largest per capita consumers in any major economy of the most energy-intensive common food source, beef, the Agriculture Department says.

Food prices have not been rising continually as developing nations grew.....“They were static until 2006, then in 2007 and 2008 there was a sudden spark,” he said. But India has been growing for the last decade. This is “not last year’s phenomena,” he said. (I'm sure it has nothing to do with flooding the world with US paper currency, as the Fed was cutting rates, causing every country on the globe pegged to the dollar to also have to cut rates and flood the world with more paper currency to keep their dollar peg.... nope, nothing to do with that. Or corn ethanol. Nope - I say blame the Canadians.)