Friday, September 4, 2009

[Long] Weekend Reading Part 1

Special "long weekend" edition - part 1

News we just did not have time to dissect during the week but still deserve notice

(1) WSJ: US Buys Pork to Support Industry. Look, I am getting sick of all this pork spending. Wait a second... I didn't mean literally, or did I? As you know, the solution to overcapacity in America is letting free market capitalism reign and a process of ... wait, a second. That's HOG wash (sorry I could not resist). The solution is to subsidize those who lobby the most effectively, so as to never let the industry correct. Bailout / subsidization nation continues in a country which is technically broke. It's not the money, it's the mindset that you should be completely petrified about. Just put it on the grandkids tab - Cash for Clunker Hogs.

The Agriculture Department, in a bid to help the ailing pork industry, said Thursday it will buy another $30 million of pork in an effort to boost prices. The USDA already has pledged to purchase $121 million of pork this year for government food-assistance programs, but producers continue to struggle.

The National Pork Producers Council has been lobbying the USDA hard this year to buy more pork....

Mr. Vilsack told lawmakers during a May hearing that the group was asking for an additional $50 million purchase, but the USDA didn't have the money in its budget. The council upped the pressure in August, though, holding a media event to publicize its plea to the Obama administration for "immediate financial assistance."

(2) Bloomberg: PetroChina Agrees to Biggest North America Acquisition. The Chinese continue to slowly but surely make long term investments in global resources; this time right up north in Canada in those oil sands. We've spoken about this initiative countless times; the U.S. plans for 1 election cycle, Japan plans for 1 decade, China plans for 1 century.

PetroChina Co. has agreed to pay C$1.9 billion ($1.7 billion) for a stake in a Canadian oil sands project in its biggest North American acquisition, widening the search for energy resources overseas. China’s largest oil company will buy 60 percent of Athabasca Oil Sands Corp.’s MacKay River and Dover oil-sands projects, the Canadian company said in a statement yesterday.

PetroChina has acquired gas fields in Kazakhstan and a Singapore refinery in deals accounting for about a fifth of China’s $17 billion spending on overseas energy assets since December. Oil sands resources are harder to exploit than conventional fields and the Athabasca transaction underscores China’s determination to snare reserves

(3) NYT: Call to Jury Dury Strikes Fear of Financial Ruin. The green shoots are so real in the Main Street economy that countless appear to be fearing jury dury because being away from work or their businesses could spell financial doomsday. At this point we should only be filling jury duty with the unemployed; at least they get some pay to supplement their unemployment checks, and there are plenty of them out there.

Few people like jury duty. But for many people squeezed by the recession, a jury summons holds a new fear: financial ruin. Judges and court officials around the country say they are seeing the impact of the recession in their courtrooms.

While no one keeps overall statistics on juror excuses, those closest to the process say that in many parts of the country an increasing number of jurors are trying to get out of service, forcing courts to call an ever larger pool of jurors to meet their needs.

Ranae Johnson, the jury commissioner for Bonneville County, Idaho, said that she typically summoned 400 people for each two-week term of service, but that lately she “had to pop it up to 500” because of rising numbers of economic hardship claims. “We’re hearing it more than we used to,” Ms. Johnson said. “A lot more.

She read from her notes of recent calls. “I was laid off, have no car, no job and no friends that can even bring me there,” one caller had argued. Another said, “I cannot even afford the gas to have to come down there.”

Jane Hybarger, the jury administrator for the United States District Court in Las Vegas, said the pleas she was hearing were more urgent, even desperate. “Now I’m hearing people who are living day to day, who are months behind in their mortgage,” Ms. Hybarger said. “There’s tears in their voice — they don’t know how they’re going to put food on the table.”

(4) WSJ: Rethinking Stocks' Starring Role. Is the 60% stocks/40% bonds - always buy stocks as they outperform in the long run dying a slow death? It's already happened in Japan which is working on its 2nd lost decade [Oct 27, 2008: Japan's Lost Quarter Century] , but then again we are nothing like Japan - we've only had 1 lost decade. [Oct 7, 2008: 2000s Stock Market Worse than 1930s] [Mar 26, 2008 - WSJ: Stocks Tarnished by Lost Decade] [Feb 5, 2009: Mutual Funds Have Tough Decade] Let me just say anything that shakes people out of the conventional view, built on the back of a once in a lifetime bull market (1983-1999) is a good thing.

For at least a generation, financial professionals have urged mutual-fund investors to put more money in stocks than in bonds. The logic: Stocks power a portfolio, while bonds provide some protection.

Now some pros are questioning that conventional wisdom. After last year's stock crash, and ahead of a potentially weak economic recovery, they're arguing that bonds and alternative asset classes such as commodities deserve more weight.

What's more, the classic 60-40 split between stocks and bonds—the formula that many balanced funds use to allocate investments—ignores alternative asset classes that can deliver returns with different levels of risk.

"The whole 60-40 idea is almost like Betamax videotapes—it's now passé," says Andrew Silverberg, co-manager of Alger Balanced Fund. "It gained popularity while we were still in a bull market."

Over the past 200 years, Mr. Arnott says, stocks have beaten bonds by 2.5 percentage points a year—but half of that advantage comes from the 1949-1965 period.

(5) Huffington Post: Madoff Claims He was Considered for SEC. This headline seems so outrageous until you consider everything that has happened the past few years, indeed decade. At this point Bernie has no reason to make up things - and it should tell you everything you need to know about the state of our regulatory system in capital markets. Can you only imagine if it happened? As I said, this is the Wild Wild West - don't believe for a second the SEC is a competent sheriff - this would of been the ultimate hood ornament for the foxes running the hen house. laughable - simply laughable.

Bernard Madoff once boasted that he "was on the short list" to be the next chairman of the Securities and Exchange Commission, according to a report issued Wednesday by the agency's internal watchdog. Madoff's claim came during a 2005 interview with agency investigators.

The report doesn't detail whether Madoff's claim was ultimately verified but it did note that Madoff told the investigators that Christopher Cox -- the now-disgraced former SEC chairman -- would be appointed to the position "a few weeks prior" to the official announcement.

As the foregoing demonstrates, despite numerous credible and detailed complaints, the SEC never properly examined or investigated Madoff's trading and never took the necessary, but basic, steps to determine if Madoff was operating a Ponzi scheme. Had these efforts been made with appropriate follow-up at any time beginning in June of 1992 until December 2008, the SEC could have uncovered the Ponzi scheme well before Madoff confessed.

(6) CBSMarketwatch: Hong Kong Recalls Gold Reserves, Touts High Security Vault. Gold bugs should have a field day with this one; Hong Kong is repatriating its physical gold from London. I mean, if things really get all crazy in the coming decade do you really want to have your gold thousands of miles away? With that said, putting the vault in your airport? Seems strange to me, but it's a small country.

Hong Kong is pulling all its physical gold holdings from depositories in London, transferring them to a high-security depository newly built at the city's airport, in a move that won praise from local traders Thursday.

The facility, industry professionals said, would support Hong Kong's emergence as a Swiss-style trading hub for bullion and would lessen London's status as a key settlement-and-storage center. The 3,660-square-foot depository, located at the city's main Chek Lap Kok Airport, will serve as a "storage facility for local and overseas government institutions," according to the government statement.

Martin Hennecke, a financial advisor with the Hong Kong-based Tyche Group Ltd., said that could be appealing to regional central banks unnerved after watching the global financial system teeter on verge of implosion last year. "Central banks are increasingly aware of the importance of having gold reserves at time of financial crisis and having it easily available at their own disposal," he said.

(7) WSJ: The Reluctant Landlords. Just another reason this housing recovery is going to take a LONG time to play out. We have not really even begun the stage of "shadow inventory" sales - that is where people who want to get out of their homes but feel prices are too low or "unfair" versus what they bought wait for some recovery in prices so they can put their "For Sale" sign out. For now, many of these are turning into landlords - whether they want to or not.

With housing prices still in the dumps, many Americans are finding themselves in the uncomfortable position of landlord. Some have been forced to relocate for a job and can't sell their houses. Others have moved, but are holding on to their previous homes, hoping for prices to rebound before selling. Many are finding that rent checks don't come close to covering their mortgage payments.

In one indication of the trend: More homeowners are converting their homeowners insurance to landlord policies that cover the additional risks of leasing out a home. Allstate Corp., the second largest home insurer in the U.S., reported a 27% increase in conversions in the first quarter from the previous year.

Experts generally advise against becoming a landlord in hopes of recouping lost home value. In some hard-hit parts of the country, such as Florida, Nevada, Arizona and parts of Ohio, prices may not climb back to mid-2000s levels anytime soon. Landlords have to pony up money each year for property taxes, insurance, maintenance and repairs. Meanwhile, demand for rentals in many parts of the U.S. isn't strong: Apartment vacancy rates nationally are the highest in more than two decades and rents are falling in some areas, compounding the difficulty of finding a good, steady tenant.

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