Lunchtime Links 6-10

June 10, 2009 – 1:36 pm

by Rolfe Winkler, CFA

(Send links, videos, pics to optionarmageddon at gmail with subject “link”)

Treasurys Decline as Russia May Pare Holdings of U.S. Debt (Bloomberg)  The Russians want to move reserves out of Treasurys and into….IMF bonds.  OA admits to not understanding the concept of IMF bonds.  What is the IMF’s source of revenue to pay back those bonds?  Interst payments from busted countries who’ve received IMF loans?  As bad as the U.S. credit profile looks over the next 30 years, it still feels superior to Latvia, Pakistan and Argentina.

Fiat Closes Deal to Take Over Chrysler (WSJ)  As quickly as it got in the way, the Supreme Court stepped aside.

“Cash for Clunkers” Car Sale Plan Approved in House (Bloomberg)  The legislation would provide a $3500 government voucher for car owners to buy a new car that gets an extra 4 MPG.  $4500 for +10 MPG.  This is a backdoor bailout for automakers cloaked as “environmentalism.”  Never mind the massive waste and energy consumption of producing cars that no one would otherwise buy….

Health-Care Change Won’t Swell Deficit, Orszag Says (Bloomberg)  This is just so much bullshit.  Increased efficiency doesn’t reduce costs, it increases consumption.  Cars today get, what, 2x-3x MPG versus cars built in the 70s?  And yet our total oil consumption is significantly higher today.  The only way we’re going to save money is by saying “no” to people who want expensive care.  Under a nationalized health system, that would have to come through rationing.  But Senators crafting legislation say there won’t be any rationing: “We’ll be able to get [comparative effectiveness research] included in health reform as long as we make clear there’s no cost-benefit analysis,” [said Senator Max] Baucus. Patients and their doctors will make decisions based on costs, Baucus said.  “That’s up to them to look at cost, but it’s not up to the agent to look at what should be prescribed or not.” Huh?  So the guy paying, a government bureaucrat, won’t have any say on costs?  He’ll just be the guy that signs the checks?

Revenue at Craigslist is said to top $100 million (NYT)  The company has just 30 employees and charges for postings in certain categories in major cities.  The bigger story is all the postings that remain free.  This is an example of the internet making a particular market far more efficient.  Why should consumers spend $75 for a four days worth of classified ads in a newspaper when they can get it free (or for a huge discount) on Craigslist?  This is bad for newspapers; classified revenue once supported a big chunk of their content creation.  But it’s great for consumers.  OA certainly laments the fall of good local reporting, but we love “creative destruction.”  The challenge for newspapers is to create content that folks want to read and are willing to pay for.

U.S. Commercial Loan Servicers Seek Longer Extensions (Reuters)  Servicers working on commercial real estate are modifying loans to give borrowers more time to pay.  Lenders don’t want to take a loss on upside down mortgages, so they give upside down borrowers more time hoping that in the interim, Bernanke will have successfully reflated the economy.  In other words, instead of actually de-leveraging by paying down and/or writing off debt, lenders are increasing leverage to kick loss recognition down the road.  Think about the insanity of this:  the only way to reflate is to blow another credit bubble, to lend more to artificially increase asset prices.  But that’s just more debt to be paid down later too.

Green Shoots or Yellow Weeds (Roubini)  Dr. Doom sees nine reasons to remain pessimistic.

Revenge of the Nerd (Newsweek)  Paul Wilmott is out to save Wall Street’s soul—one dork at a time.

House Subpoenas Fed Re: Merrill Sale to BofA (NakedCapitalism)

HR 1207 Now Has 200 Cosponsors (thomas.loc.gov)  That’s the official number so far.  In the last few days, the number has ticked up to 207, including House Minority Leader John Boehner.  This is Ron Paul’s bill to audit the Fed, by the way.  And Ben Bernanke recently hired a former Enron lobbyist to fight it.  While everyone’s excited about momentum in the House, the bad news is that the companion bill in the Senate sponsored by Bernie Sanders still has zero cosponsors.  There’s a call-o-thon going on, if folks are interested.

FedEx launches pseudo blog to fight UPS Bailout (BrownBailout.com)  This site is designed to have a grass roots feel.  But take a look at the tiny type at the bottom:  “Copyright, 2009: FedEx.”  BTW, OA isn’t saying we disagree with the message.

Now….Go Break the Windows (Smoking Gun) Crank caller wreaks havoc on Arkansas hotel, duping employees, guests

  1. One Response to “Lunchtime Links 6-10”

  2. Rolfe/OA,

    I believe I linked you to this book by Henry Hazlitt in another post: From Bretton Woods to World Inflation, found here in full, free PDF –> http://www.mises.org/books/brettonwoods.pdf

    This is the play-by-play about the founding of the IMF in the Bretton Woods agreements in 1944. Hazlitt studies the developments, proposals and fallout of the conference at first with a “take it at face value” attitude, but quickly realizes there’s something screwy afoot.

    I believe if you read this, you will not only understand Bretton Woods and IMF, but also what IMF bonds and SDR (special drawing rights) are and how they work.

    By Taylor on Jun 11, 2009

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