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Sunday, March 4, 2012

Mish's Global Economic Trend Analysis

Australia Services Index Plunges to Significant Contraction; Bleakest of Views From Retail Shops; Retail and Housing Bloodbath Coming Up
Ron Paul on Face the Nation Blasts Rush Limbaugh's Insincere Apology, Santorum's Fake Conservatism, Government Mandates; Rooting for Santorum; 10 Things That Should Be Clear
Super Tuesday Delegate Rules and Preview; Brokered Convention Revised Math

Australia Services Index Plunges to Significant Contraction; Bleakest of Views From Retail Shops; Retail and Housing Bloodbath Coming Up

Posted: 04 Mar 2012 05:54 PM PST

Two more signs surfaced today that suggest Australia is headed for if not in recession.

Australia Services Index Plunges, Now in Contraction

Bloomberg reports Australian February Services Fall to Lowest in Almost a Year

Australia's services industry declined in February to the lowest level in almost a year, driven by a drop in new orders as the gap between resources and other industries widens, a private survey showed.

The performance of services index sank to 46.7 last month from 51.9 in January, the weakest reading since March last year, Commonwealth Bank of Australia and the Australian Industry Group said in Sydney today. Fifty is the dividing line between expansion and contraction.

Today's report, based on a poll of about 200 companies, is similar to the U.S. non-manufacturing ISM index.

Australia Service Index Components

Index sank to 46.7 from 51.9
Selling prices fell to 44.2 from 46.9
Employment measure slid to 47.5 from 51.2
Sales declined to 47.5 from 49.4
New orders plunged to 45.6 from 54.1
Wages indicator dipped to 57.7 from 57.8

This is nothing short of an absolute disaster. That wages have held up is not good news either. Think retailers or any other service industries will be hiring? If so, think again.

Bleakest of Views From Retail Shops

The Herald Sun comments on the Bleakest of views from the shopfronts.

THE Australian retail sector is in trouble like it's never been before. Not even in the dark days of the 1990 recession.

That should have been made blindingly clear when Woolworths, our biggest and most successful retail group, unveiled on Thursday its first drop in profit in nearly 20 years.

Yes, Woolies is getting out of electronics because it stuffed up with Dick Smith.

This story is repeated, with varying degrees of intensity, across all retail.

The casualty list is long and growing. From women's fashions - one of the mainstays of shopping - to housewares and home furnishings, to the big department stores.

Sales are struggling, profits are plunging, jobs are being slashed and names are disappearing from high streets and shopping centres.

The article concludes with complete economic drivel...

The numbers from the big listed retailers, such as Harvey Norman and David Jones, are ominous enough. We are not really seeing the havoc wreaked across small mum-and-dad retailing.

Lower interest rates would help, leaving more money in consumers' pockets.

That's why it's not wise to rule out further rate cuts, just because of the continued boom in the resources sector.

The jobs and spending from the boom, at least, put some floor under retail. But for the foreseeable future it's going to be good for shoppers.

Not so good for shopkeepers. Or the broader economy.

Retail and Housing Bloodbath Coming Up

There is so much misguided drivel in the article that I hardly know where to start.

Here is some nonsense about a shopper's sweet spot: "For shoppers, it's something of a sweet spot. They've never had it so good. The $100 you spend in a supermarket buys you about 5 per cent more in goods than it did a year ago."

Retail prices in Australia are absurd. A 5% reduction in prices is hardly a bargain. As for the notion mining will carry the economy, forget about it. Commodity prices are going to plunge, and besides, commodities are not a big driver of jobs anyway.

There is no "floor" under retail. The bottom is going to fall out, and unemployment is going to soar. In turn, rising unemployment will clobber Australia's already deep-in-trouble housing sector.

As for small shops, they are completely doomed. Store owners with little leeway on wages will not get the income they need to pay taxes, interest, utilities, and rent.

Expect an across the board retail and housing bloodbath because one is coming.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Ron Paul on Face the Nation Blasts Rush Limbaugh's Insincere Apology, Santorum's Fake Conservatism, Government Mandates; Rooting for Santorum; 10 Things That Should Be Clear

Posted: 04 Mar 2012 03:27 PM PST

Ron Paul was on Face the Nation today discussing Rush Limbaugh, Rick Santorum, and Government Mandates.

CBS News reports Paul: Limbaugh apologized for personal gain.

Republican presidential candidate Rep. Ron Paul said an apology by conservative talk radio host Rush Limbaugh to Georgetown Law student Sandra Fluke for calling her a "slut" and a "prostitute" was not sincere, and was made only because it best served Limbaugh.

"He's doing it because some people were taking their advertisements off of his program. It was his bottom line he was concerned about," Paul said.

Paul referred to three companies that pulled advertisements from Limbaugh's show following incendiary remarks Limbaugh made about Fluke for testifying before a mock Congressional committee in favor of free contraception insurance coverage at Georgetown, a Jesuit university. [One company's spokesman said that Limbaugh's comments "do not align [with] our values." Another pulled out "Due to continued inflammatory comments - along with valuable feedback from clients and team members" about the remarks.]

Although Paul disagreed with Limbaugh's remarks and called them "over the top," he said the government should not mandate that insurance companies provide contraception coverage.

"This is philosophically and politically important because, does the government have a mandate to tell insurance (companies) what to give?" Paul asked, and then responded to his own question: "So they're saying that the insurance companies should give everybody free birth control pill, that strikes me as rather odd."

Paul was specific in his attack against former Pennsylvania Senator Rick Santorum and his support (as Senator) for Planned Parenthood dollars in a government funding bill.

"He pretends to be the champion of social values," Paul told Schieffer. "That to me is rather bizarre, and that's why I call him a fake conservative."

Attack by Limbaugh Awakens a 'Stop Rush' Campaign

The New York Times reports Attack by Limbaugh Awakens a 'Stop Rush' Campaign

Some of the same activists that persuaded advertisers to boycott Glenn Beck's television show on Fox News in 2009 are now mobilizing against Rush Limbaugh in the wake of his verbal attacks on a Georgetown University law school student this week.

Actually, they are remobilizing. A Twitter account, "Stop Rush," which has been dormant since late 2010, woke up on Wednesday, when Mr. Limbaugh first called the student, Sandra Fluke, a "slut."

On Friday, as complaints from "Stop Rush" and others about Mr. Limbaugh's comments mounted, a handful of companies said that they had halted their advertising on "The Rush Limbaugh Show," at least temporarily.

One of the companies, Quicken Loans, wrote on Twitter, "Due to continued inflammatory comments — along with valuable feedback from clients and team members — QL has suspended ads on Rush Limbaugh program."

Two mattress companies, Sleep Train and Sleep Number, made similar statements on Friday. A representative of Sleep Number wrote on Twitter, "Recent comments by Rush Limbaugh do not align w/ our values, so we made decision to immediately suspend all advertising on that program."

Limbaugh the Epitome of Everything Wrong With Republican Party

Rush Limbaugh and his ilk are the epitome of everything wrong with the Republican party. Limbaugh is a chickenhawk, a sexist, was fired from sports broadcasting for being a racist, was arrested on drug charges, and was addicted to pain killers.

Yet the blazing hypocrite stated "Drug use, some might say, is destroying this country. And we have laws against selling drugs, pushing drugs, using drugs, importing drugs. ... And so if people are violating the law by doing drugs, they ought to be accused and they ought to be convicted and they ought to be sent up."

Asinine talk might appeal to the far right, but the far right is not going to carry the day. Republicans need to be seeking the middle ground and independents. Divisive attacks on abortion, birth control pills, and refusal to consider military cuts are not going to win over independents.

Rooting for Santorum

New York Times columnist Joe Nocera says he is Rooting for Santorum.

I'm rooting for Rick Santorum to win the Republican nomination. Seriously.

You probably think that is because it would be the best possible outcome for President Obama. No doubt it would be. If Santorum were the Republican nominee for president, the independents disenchanted with Obama would come flocking back; their fear of Santorum's unyielding brand of social conservatism would far outweigh their reservations about the incumbent president. A Santorum nomination would likely lead to an epic defeat, ranking with Richard Nixon's 49-to-1 state landslide victory over George McGovern in 1972, or Ronald Reagan's 49-to-1 state whipping of Walter Mondale 12 years later.

But it's not the Democrats I'm really concerned with. It's the Republicans. For more than a decade now, moderate Republicans have been an endangered species, either losing elections or choosing to retire in the face of a hard-line challenger.

During the McGovern-Mondale era, the Democrats were exactly where the Republicans are now: the party had been taken over by its most extreme liberal faction, and it had lost touch with the core concerns of the middle class, just as the Republicans have now.

One person who was drummed out is Lincoln Chafee, the governor of Rhode Island, a Republican turned independent. "I care about deficits," he told me, "but, on social issues, I believe that people should have the right to make their own decisions." As a result, he said, "I realized that there wasn't any room in the Republican Party for me."

When I asked him what it would take to change the Republican Party, he had a quick answer: "What it usually takes is a good drubbing at election time."

If Mitt Romney takes the nomination and then loses to Obama, the extremists who've taken over the party will surely say the problem was Romney's lack of ideological purity. If, however, Santorum is the nominee — and then loses in a landslide — the party will no longer be able to delude itself about where its ideological rigidity has taken it.

An alcoholic doesn't stop drinking until he hits bottom. The Republican Party won't change until it hits bottom. Only Santorum offers that possibility.

The Republican party needs to get rid of the extreme right-wingers like Limbaugh and Santorum, the phonies like Mitt Romney, and the war-mongers like McCain. If they did, they could hold the center for decades (assuming there was anything left of the party).

10 Things That Should Be Clear

It should be clear by now that cutting taxes and spending more money will not shrink the budget.
It should be clear by now the US cannot afford to have troops in 140 countries
It should be clear by now that wars are expensive and we cannot afford more of them
It should be clear by now that some bargaining is needed to bring the deficit under control
It should be clear by now that some tax hikes coupled with genuine structural reforms to rein in collective bargaining of public unions would be a good idea
It should be clear by now that republicans need independents and the center to win
It should be clear by now that the war on drugs cannot be won, should not be fought, and US prisons are overloaded at great expense as a result
It should be clear we need less government on social issues, on drugs, on war-mongering, on taxes, on education, on spending, on everything, not just half of everything along party lines.
It should be clear that Mitt Romney, Rick Santorum, and Rush Limbaugh are not the future of the Republican party
It should be clear Republicans risk losing to a very weak, unpopular Democrat president in the midst of economic uncertainty and miserably high unemployment rates

Those things should be clear but obviously they are not. Perhaps a Democrat landslide is what it takes to make the case clear.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Super Tuesday Delegate Rules and Preview; Brokered Convention Revised Math

Posted: 04 Mar 2012 01:55 AM PST

On Monday February 27, I laid out the Mathematical Case for Brokered Convention. Since then, Michigan, Wyoming, and Washington have posted results. The table below reflects those results.

I made additional changes to my super Tuesday estimates based on new information regarding delegate rules. For example, many states have minimum percentages to receive any delegates and this favors Mitt Romney and Rick Santorum except in Georgia where rules heavily favor Gingrich.

Finally, the LA times and Krem have posted different explanations for how the Idaho caucus works. There are now three possible scenarios for Idaho in play (depending on which explanation is correct).

Totals through March 3 in the table below are from Real Clear Politics 2012 Republican Delegates.

March 6 Super Tuesday numbers are my estimates.

State	Primary	Count	Romney	Santorum	Gingrich	Paul
Total to Date	-	374	166	72	33	29
Iowa	Jan 3	28	6	7	0	0
New Hampshire	Jan 10	12*	7	0	0	3
South Carolina	Jan 21	25	2	0	23	0
Florida	Jan 31	50*	50	0	0	0
Nevada	Feb 4	28	14	3	6	5
Minnesota **	Feb 7	40	2	17	1	4
Colorado **	Feb 7	36	9	17	2	1
Maine **	Feb 11	24	9	3	0	7
Michigan	Feb 28	30*	16	14	0	0
Arizona	Feb 28	29	29	0	0	0
Wyoming **	Feb 29	29	10	8	1	6
Washington **	Mar 3	43	12	3	0	3
Georgia	Mar 6	76	24	6	46	0
Ohio	Mar 6	66	36	30	0	0
Tennessee	Mar 6	58	20	38	0	0
Virginia	Mar 6	49	49	0	0	0
Oklahoma	Mar 6	43	12	21	10	0
Massachusetts	Mar 6	41	38	3	0	0
Idaho **	Mar 6	32	18	0	0	14
North Dakota	Mar 6	28	8	7	6	7
Alaska	Mar 6	27	10	11	3	3
Vermont	Mar 6	17	15	2	0	0
Super Tuesday Est	Mar 6	811	396	190	131	53

* States penalized half of their delegates.
** Not all delegates assigned, or assigned to candidates who have dropped out
*** Idaho Rules are in Question. See explanation below.

Thru Super-Tuesday (If Idaho Splits)
Romney: 396
Santorum + Gingrich + Paul: 374
Other: 41

Thru Super-Tuesday (If Idaho Goes to Paul)
Romney: 378
Santorum + Gingrich + Paul: 392
Other: 41

Thru Super-Tuesday (If Idaho Goes to Romney)
Romney: 410
Santorum + Gingrich + Paul: 360
Other: 41

As you can see there is a decent-sized swing in play for Idaho, depending on the exact caucus rules. Even assuming Romney wins 100% of the Idaho delegates, he would still have barely over 50% of the delegates to date. However, that would probably, but not necessarily be enough as he would pick up some of those 41 and he rates to do reasonably well in California.

Nonetheless, even if Romney does as outlined above, the possibility for a brokered convention still exists. If Romney does worse than expected on Super Tuesday, it's a whole new ball game. It would also be a whole new ballgame if Romney were to do poorly in California, or split the delegates three ways here on out.

Super Tuesday Delegate Rules, Preview, Estimates

The rules for each primary are from the LA Times article Super Tuesday 2012: What's at stake and who's in the lead

Except where noted, polls are from Real Clear Politics Super Tuesday Poll.

GEORGIA PRIMARY
Delegates at stake: 76
How it works: 34 delegates will be awarded proportionally to any candidate receiving more than 20% of the statewide vote. The winner in each of the state's 14 congressional districts will earn another two delegates, and the second-place finisher will win one, unless one candidate wins more than 50% in a district.

Georgia Predictions
Gingrich wins all 14 districts for 28
Romney comes in second in all 14 districts for 14
Gingrich gets 52% of 34 for 18
Romney gets 28% of 34 for 10
Santorum gets 20% of 34 for 6

Totals
Gingrich: 46
Romney: 24
Santorum: 6
Paul: 0

OHIO PRIMARY
Delegates at stake: 66
How it works: 15 delegates will be awarded on a proportional basis to any candidate receiving more than 20% of the statewide vote. If a candidate has more than 50%, though, he wins all 15. Another three delegates will be awarded to the winner in each of the state's 16 congressional districts.
In both cases, voters are electing delegates who have pledged to vote for a presidential nominee. Santorum, it should be noted, did not file delegate lists in all of the congressional districts.
The final three delegates are the elected state party leaders.

Santorum is not on the ballot in 3 of 13 districts.
See Family of three GOP delegates gets Santorum on ballot in an Ohio district for an explanation.

Ohio Predictions
Of the 15 at-large

Romney: 7
Santorum: 8

Of 16 Districts
Romney wins 3 by default and 6 contested for 27 delegates
Santorum wins 7 contested for 21 delegates

State Party Leaders give Romney 2, Santorum 1

Totals
Romney: 36
Santorum: 30

TENNESSEE PRIMARY
Delegates at stake: 58
How it works: 28 delegates will be awarded on a proportional basis to any candidate receiving more than 20% of the statewide vote. If one candidate has more than 66% of the vote, he wins all 28. In the nine congressional districts, a candidate will win all three delegates if he wins 66% of the vote. If the winner and runner-up both have between 20% and 66% of the vote, the winner receives two delegates and the runner-up gets one. The other three delegates are the elected state party leaders.

A more recent MTSU Poll show those percentages are holding.

Tennessee Predictions
Of the 28 at-large Santorum wins 18
Of the 28 at-large Romney wins 10

In the 9 Congressional Districts Santorum wins all 9 for 18
Romney come in second in all 9 for 9

State party leaders give 2 to Santorum, 1 to Romney

Totals
Romney: 20
Santorum: 38

VIRGINIA PRIMARY
Delegates at stake: 49
How it works: 13 delegates will be awarded proportionally to any candidate receiving 15% of the vote. But because there are only two candidates on the ballot -- Romney and Paul -- it will likely be winner-take-all. Three delegates will also be awarded to the winner in each of the 11 congressional districts.

Prediction
Romney wins all 49

OKLAHOMA PRIMARY
Delegates at stake: 43
How it works: 25 delegates will be awarded on a proportional basis to any candidate receiving more than 15% of the statewide vote, unless one candidate has more than 50%, in which case he wins all 25. In each of the state's five congressional districts, three delegates will be awarded proportionally to candidates with 15% of the vote, unless, again, one had more than 50% of the vote in that district. The other three delegates are the elected state party leaders.

Oklahoma Predictions
Santorum wins 48% of 25 for 12
Romney wins 28% of 25 for 7
Gingrich wins 24% of 25 for 6

15 district Delegates
Santorum wins 7
Romney wins 4
Gingrich wins 4

Santorum wins 2 party leader votes, Romney 1

Totals
Romney: 12
Santorum: 21
Gingrich: 10

MASSACHUSETTS PRIMARY
Delegates at stake: 41
How it works: 11 delegates will be awarded proportionally to any candidate receiving more than 15% of the statewide vote. Another three delegates will be awarded based on the vote in each of the state's nine congressional districts, again proportionally to any candidate receiving more than 15% of the vote. The other three delegates are the elected state party leaders.

Based on the rules it appears Santorum will be lucky to win even a handful.
Totals
Romney 38
Santorum 3

IDAHO CAUCUSES
Delegates at stake: 32
How it works: According to the Idaho Republican Party, a secret vote will be held at each county caucus, lasting several rounds. In each round, the candidate with the least number of votes is eliminated until one reaches 50%. County results will then be tabulated statewide, with 29 delegates awarded proportionally based on the final tallies. The other three delegates are the elected state party leaders.

Note: That description from the LA Times differs considerably from this
Idaho Caucus Explanation:

Voters will go to locations for their county and use ballots or tokens to support a candidate on Tuesday, March 6th. There are five candidates for Idaho voters to choose from and they will keep voting until a winner is selected.

In each round the candidate with the fewest votes or anyone with less than 15% is out of the race. The voting ends at the county level when there is a final vote for two candidates or one has more than 50% of the vote for that county.

The delegates assigned for that county will then represent the winning candidate. Counties will report their winner to the state office in Boise. If one candidate has more than 50% of the vote for all of Idaho, they get all 32 delegates. Otherwise, the candidates split delegates they won in each county

Predictions
Assuming the LA Times is correct, the delegate totals will be split between Mitt Romney and Ron Paul. Otherwise Paul or Romney will win them all.

Scenario 1: Mitt Romney: 18 Ron Paul: 14
Scenario 2: Mitt Romney 32
Scenario 3: Ron Paul 32

NORTH DAKOTA CAUCUSES
Delegates at stake: 28
How it works: The caucuses will begin the process of allocating delegates to the national convention, but all 28 will remain unbound, meaning they can ultimately vote for whichever candidate they choose.

Predictions
This is somewhat of a crapshoot but no one is likely to dominate and Paul's organization in caucus states should help.

Romney: 8
Santorum: 7
Paul: 7
Gingrich: 6

ALASKA DISTRICT CONVENTIONS
Delegates at stake: 27
How it works: 24 delegates will be awarded on a proportional basis to candidates, based on the statewide vote, at individual district conventions. The other three delegates are the elected state party leaders.

Predictions
This is another crapshoot but one that favors Santorum and Romney
Totals
Romney: 10
Santorum: 11
Paul: 3
Gingrich: 3

VERMONT PRIMARY
Delegates at stake: 17
How they're awarded: 11 delegates will be awarded on a proportional basis to any candidate receiving more than 20% of the statewide vote, unless one candidate received a majority. Another three delegates will be allocated to the overall statewide winner. The final three delegates are the elected state party leaders.

Rules are such that Romney will walk away with the lion's share
Predictions
Romney: 15
Santorum: 2

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Saturday, March 3, 2012

Mish's Global Economic Trend Analysis

Brazil Declares New Currency War on US and Europe; Japan Losing Balance of Trade Battle
Vancouver B.C. vs. Donegal Ireland Real Estate: What Will $890,000 Buy?
Eurozone Wrapup: Unemployment Rate 10.7%, Highest Since 1999; Manufacturing PMI Contracts 7th Month; German Retail Sales Unexpectedly Fall

Brazil Declares New Currency War on US and Europe; Japan Losing Balance of Trade Battle

Posted: 03 Mar 2012 06:12 PM PST

In hope-against-hope scenario, countries with balance-of-trade surpluses struggle to maintain it. Put Japan, Germany, Brazil, and China in that group.

In that group, Japan is losing the Balance of Trade Battle.

Japan's trade deficit widened to a record level in January, as falling exports combined with surging imports of energy.

Imports rose 9.8 per cent from a year earlier, while exports were down 9.3 per cent, resulting in a record monthly deficit of Y1.48tn ($19bn).

Last year Japan's trade balance fell into an annual deficit for the first time since 1980, driven by subdued global demand and soaring fossil fuel imports in the wake of the Fukushima nuclear power crisis.

Japan reported a trade deficit equivalent to 1475 Million JPY in January of 2012. Exports have been the main engine of Japan's economic growth in the past six years. Japan imports raw materials and processes them into high technology products. Japan's major exports are: consumer electronics, automobiles, semiconductors, optical fibers, optoelectronics, optical media, facsimile and copy machines. Its main trading partners are The United States, China and European Union.

Brazil Declares New Currency War on US and Europe

The Financial Times reports Brazil declares new 'currency war'

Brazil has declared a fresh "currency war" on the US and Europe, extending a tax on foreign borrowings and threatening further capital controls in an effort to protect the country's struggling manufacturers.

Guido Mantega, the finance minister who was the first to use the controversial term in 2010, said the government would not "sit by passively" as developed nations continue to pursue expansionary monetary policies at the expense of Brazil.

"When the real appreciates, it reduces our competitiveness. Exports are more expensive, imports are cheaper and it creates unfair competition for businesses in Brazil," he said on Thursday after announcing changes to the so-called IOF tax.

In a presidential decree, the government extended the existing 6 per cent financial transactions tax on overseas loans maturing in up to three years. Previously, the levy was applied only to loans with maturities of under two years.

President Dilma Rousseff later weighed in on the debate, vowing to defend Brazilian industry and stop developed countries' policies from causing the "cannibalisation" of emerging markets.

The move comes as Brazil's central bank also steps up direct intervention in the market, selling dollars and offering derivatives called reverse currency swaps to curb the real's near 9 per cent surge against the US dollar this year.

Brazilian Real vs. US Dollar

The chart shows the Brazilian Real has pretty much been on a tear vs. the US dollar since 2003. Now Brazil is concerned about loss of exports, just as Japan is concerned about loss of exports.

Mathematically speaking, the desire for every country to be net exporters is impossible. Massive trade wars are on the horizon as a result.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Vancouver B.C. vs. Donegal Ireland Real Estate: What Will $890,000 Buy?

Posted: 03 Mar 2012 12:16 PM PST

Inquiring minds seeing new data on Vancouver's massively overpriced real estate just might be seeking new comparisons to other places. First, Let's take a look at what $890,000+- will buy in Vancouver.

Vancouver Real Estate

2119 East 3rd Ave, Vancouver
MLS® Number V934050
Listing Price: $899,500
Description: "This 1 ? story home has been extensively renovated over the last few years. The spacious kitchen has birch cabinets and Soapstone counters and opens to a 20x12' deck. On this level are 2 B/Rs and a modern 4pce bath. Upstairs has an office/den area, a 4pce bath and a big master B/R with a W/I closet and 12x8 view deck. The bsmt has a 1 B/R suite rented at $960 P.M. and the attached garage has been converted to a workshop with French doors opening to the fenced garden, with B/I bench, a patio and a kid's sandbox. "

That creative listing puts a new meaning to the the word "upstairs". Is the number of stories listed at "1?" really in question?

2564 East Pender Street, Vancouver
MLS® Number V930595
Listing Price: $899,000
Description: "Complete Transformation! Brand New Envelope! Hardie plank & cedar shingles, new windows, new electrical panel, new HW tank, new plumbing. Spacious 3 level home on extra deep lot!"

I believe it's safe to say the above creative listing puts a new meaning to the phrase "extra deep lot!"

At least the above homes were arguably livable. Check out this next beauty, and guess the price without looking too far ahead.

1016 East 7th Ave, Vancouver
MLS® Number V930461
Listing Price: $899,000
Description: "Opportunity knocks! Builders and investors need look no further if they desire a view property with multi-family zoning (RM-4). This property overlooks China Creek Park, with amazing views of the North Shore mountains and close to Commercial Drive and two skytrain stations. Priced at lot value, the property is being sold 'As Is, Where Is.'"

Congratulations to those who guessed the "opportunity knocks" price of $899,000 for this "As Is, Where Is" bargain complete with "amazing views", presumably through the opening where one would normally expect to find a workable door as opposed to the windows that are all boarded up.

All of the above listings are from Vancouver East Homes From $850,000 to $900,000

Donegal, Ireland

With those bargain listings in hand, let's consider a single property sale that just took place in Ireland. The previous price for the Sandhouse Hotel located in Donegal, Ireland sold at auction was $6 million.

Please consider Spectacular Irish hotel, massive discount price

Paul Diver has purchased a spectacular 55 bedroom hotel overlooking the Donegal coastline for a mere $860,000, down from the $6 million price the original owners sought for the Sandhouse Hotel three years ago.

Diver, who managed the Sandhouse Hotel in Rosnowlagh for 20 years, was delighted to secure the 50 staff members their jobs. He told msnbc.com on Friday that he had been willing to go "a bit higher" when the hotel was auctioned this week in Dublin, but was delighted when his reserve-price bid was accepted by the auctioneers.

Overall, Irish real estate prices have crashed since 2007-08, when the so-called "Celtic Tiger" economy collapsed. Home values have fallen more than 60 percent below their peak five years ago, and commercial properties have suffered similar declines.

There you have it: "amazing views" in Vancouver for $899,000 vs. "amazing views" in Donegal for $860,000.

It is indeed "different" in Canada.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Eurozone Wrapup: Unemployment Rate 10.7%, Highest Since 1999; Manufacturing PMI Contracts 7th Month; German Retail Sales Unexpectedly Fall

Posted: 03 Mar 2012 01:51 AM PST

There was lots of Eurozone news this week outside of the typical Greek default fodder. Nearly all of that news was not pretty. Let's take a look at the key stories.

Eurozone Unemployment Rate 10.7%, Highest Since 1999

The Telegraph reports Eurozone unemployment hits record high of 10.7pc

Data from Eurostat showed that the region lost 185,000 jobs in one month, with the vast gap between North and South growing ever wider. The figures for the previous four months were also revised upwards sharply. There are now more than 450,000 more people without jobs than assumed a month ago.

Klaus Baader from Societe Generale said the outlook was "deteriorating drastically" in the region. "Economic slowdown and fiscal austerity has hit the labour market much harder than previously thought."

Eurozone inflation nudged up to 2.7pc, while the latest PMI data for February confirmed that Euroland's manufacturing is still contracting, though the index rose slighty to 49. The "misery mix" of rising unemployment and inflation is a nasty headache for policymakers, threatening incipient stagflation.

Spain's jobless rate continued its relentless climb to 23.2pc, rising to 49.9pc for youths.

The jobless toll rose to 14.8pc in both Ireland and Portugal, though the latter began its austerity drive later. Dimitris Drakopoulos from Nomura said Portugal's economy is likely to contract by 4.4pc this year and another 2.7pc next year, a slightly milder version of the fiscal asphyxiation that brought Greece to its knees.

Eurostat's 19.9pc rate for Greece is already out of date. The Hellenic Statistical Authority said the country lost 126,000 jobs in November alone, pushing the rate to 20.9pc.

At the other extreme, Austria's jobless rate fell to 4pc. Germany's unemployment is at a 20-year low of 5.8pc, and some regions are crying out for skilled workers.

Italian Unemployment Hits Record

Please consider Italian unemployment hits record

The unemployment rate in the eurozone continued to rise in January, hitting another record high. There are now 16.9 million people out of work in the bloc, Eurostat said.

In Italy, the unemployment rate rose to 9.2% in January, the highest since monthly records began, the national statistics agency Istat said.

Italian unemployment had stood at 8.9% in December, but it is now at the highest rate since the first quarter of 2001, as the country finds itself in a second recession in four years.

'Double whammy'

Meanwhile, separate data from Eurostat showed that inflation in the euro area rose to 2.7% in February, rising slightly from 2.6% in January. It marks the 15th month in a row that inflation has been above the ECB's target of just below 2%.

Howard Archer, chief European economist at IHS Global Insight, said it amounted to a "double whammy of bad news" for the eurozone. "This is particularly bad news for consumers, as they are not only facing high and rising unemployment, but also still squeezed purchasing power," he said.

French Unemployment Rate Hits 9.4 Percent

Please note French unemployment up to 9.4 per cent in Q4 of 2011

France's unemployment rate rose by 0.1 per cent in the fourth quarter of 2011 to 9.4 per cent of the active population, state statistics agency INSEE said on Thursday.

The 0.1 per cent rise applied to both the increase from the third quarter of 2011 and the year-on-year increase from the fourth quarter of 2010.

France's growing joblessness is a major issue as President Nicolas Sarkozy bids for re-election in an April-May two-round presidential election.

Eurozone Unemployment Rates at a Glance

Eurozone Average 10.7%
Spain 23.2%
Greece 20.9%
Ireland 14.8%
Portugal 14.8%
Latvia 14.7%
Lithuania 14.3%
Estonia 11.7%
Cyprus 9.6%
Italy 9.2%
France 9.4%
Germany 5.8%
Luxembourg 5.1%
Netherlands 5.0%
Austria 4.0%

Take a look at those varying unemployment rates. That is what a "one size fits Germany" interest rate policy and misguided currency union will do.

About that 5.8% German Unemployment Rate

Is Germany's unemployment rate really 5.8%? I think not. Wolf Richter comments on the German Unemployment Obfuscation.

Richter counts up all the groups that don't count and comes up with 1,701,534. That number is a bit off the mark given the officially unemployed number is 3,081,706 but 5,394,064 people actually received unemployment compensation.

There's still more obfuscation as shown in the following snip.

People 58 and older are excluded from the official unemployment numbers, even if they're desperately looking for a job. They don't receive unemployment compensation but, conveniently, pre-retirement compensation. So they don't count for the simple reason that they're too old to count. That's the German baby-boom generation. They're turning 58 in massive numbers and fall unceremoniously off the unemployment lists. In September 2011, the last month for which official numbers were available: 374,592.

Add them to the 5,394,064 official recipients of unemployment compensation to obtain 5,768,656.

And what about those who aren't eligible for unemployment compensation? While they receive "social aid" and other forms of support, they don't count as unemployed.

So, like in the US, the actual number of unemployed people and the actual unemployment rate remain a mystery, despite the confidence-inducing but false sense of accuracy that these grotesquely unrounded numbers provide. And in the end, unemployment in Germany is probably close to double the official headline number.

So what's the real German unemployment rate?

German Retail Sales Unexpectedly Fall

Bloomberg reports German Retail Sales Unexpectedly Fall

German retail sales unexpectedly declined in January as rising oil prices fueled inflation.

Sales, adjusted for inflation and seasonal swings, fell 1.6 percent from December, when they increased 0.1 percent, the Federal Statistics Office in Wiesbaden said today. Economists forecast a gain of 0.5 percent, the median of 22 estimates in a Bloomberg News survey showed

Europe's debt crisis is curbing growth across the euro area, Germany's largest export market, and higher energy costs pushed inflation to 2.5 percent last month. Still, unemployment is running at a two-decade low and recent data suggest the country may avoid a recession. Consumer confidence will increase to a 12-month high in March, [consumer research group] GfK SE (GFK) predicted this week.

German companies may create as many as 250,000 new jobs this year, the DIHK national industry and trade chambers said on Feb. 17, citing a survey.

Avoid a Recession?

What the hell is Bloomberg writer Jeff Black smoking? The recession is right here, right now. As for jobs creation, forget about it. The European-wide recession is going to be long and deep, so who pray tell is Germany going to be exporting to?

By the way, why was this drop unexpected? I have been calling for it for some time, and it's going to get worse, much worse.

Eurozone Manufacturing PMI® Contracts 7th Consecutive Month

Inquiring minds are reading the Markit Eurozone Manufacturing PMI® Report.

The Eurozone manufacturing sector showed further signs of stabilisation in February. The seasonally adjusted Markit Eurozone Manufacturing PMI® rose to a six-month high of 49.0, unchanged from the earlier flash estimate and above January's 48.8.

New Orders Fell 9th Month

New orders fell for the ninth month running (though slightly less than indicated by the flash release), with the downturn in demand generally remaining broad-based by nation as only Austria and the Netherlands reported increases. Greece saw record falls in both output and new orders.

Export Orders Fall 8th Month

The level of new export orders fell for the eighth month running, albeit at the weakest pace since last July. The drop in foreign demand was led by a steep reduction in Greece and marked falls in Spain and Germany, the region's largest exporter.

Muted pricing power resulting from weak demand and strong competition meant that the rise in costs was largely absorbed by manufacturers.

German job creation slowed sharply

Job losses were reported for the third time in the past four months in February. The steepest falls in employment were seen in Greece and Spain, though further marginal cuts in staffing levels were also signalled in Italy, the Netherlands, Austria and Ireland.

Stabilization? Really? No, Not Really!

Given the drop in new orders, export orders, and German employment, coupled with rising input prices and a huge profit squeeze, it takes a real stretch of the imagination to even hint at stabilization. Moreover, austerity measures in Spain, Portugal, Greece, France, and Ireland suggest things are going to get much worse.

There is no way the vaunted German export machine stays intact in the face of those facts.

Within two months, and probably next month, the bottom will fall out of numerous eurozone production and retail sales numbers. Moreover, the lid will blow off the top of numerous eurozone unemployment numbers.

In both cases, the biggest "unexpected" downward surprises will be in Germany, even though it should be perfectly obvious what is going to happen.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Friday, March 2, 2012

Mish's Global Economic Trend Analysis

Bank of America Clash with Fannie Mae Intensifies; Insurance Disputes Put Taxpayers On the Hook For Still More Losses
Money for Debt Swaps but No Money for Greece; Eurozone Delays Rescue Funds on Failure to Meet Conditions
Public Pension Ponzi Scheme; New York Cities Borrow From Pension Plan to Make Contributions

Bank of America Clash with Fannie Mae Intensifies; Insurance Disputes Put Taxpayers On the Hook For Still More Losses

Posted: 02 Mar 2012 02:52 PM PST

Taxpayers are already on the hook for $180 billion in losses at Fannie Mae and Freddie Mac. That number is going to rise, perhaps significantly.

The clever synonym for more taxpayer losses is "treasury Advance". With that understanding, please consider Fannie Mae's Losses Narrow but Treasury Advance Requested.

Fannie Mae is reporting a net loss of $2.4 billion for the fourth quarter of 2011 compared to a net loss of $5.1 billion in the third Quarter. For the entire 2011 year it reports a net loss of $16.9 billion compared to $14.0 billion in 2010.

The net worth of the company had a net deficit of $4.6 billion as of December 31 reflecting the $1.9 billion loss and its payment to Treasury of $2.6 billion in senior preferred stock dividends during the fourth quarter compared to $2.5 billion in Quarter Three. The Federal Home Mortgage Finance Agency (FNFA), conservator of Fannie Mae, will submit a request to the Treasury Department for a draw of $4.57 billion to eliminate the net worth deficit.

Bank of America Clash with Fannie Mae Intensifies

In simple terms, Fannie Mae will cost taxpayers another $4.6 billion. That's not the worst of it.

Taxpayers may be on the hook for still more losses as BofA Clash With Fannie Intensifies.

Bank of America Corp. said it's facing more demands by Fannie Mae for refunds on flawed home loans because mortgage insurers who cover defaults rejected 25 percent more claims last year.

Unresolved insurance rejections rose to 90,000 at the end of 2011 from 72,000 the year earlier, Bank of America said last week in its annual filing with regulators. Last year's denials equal $1.2 billion in unpaid loan balances, according to a note yesterday by Compass Point Research and Trading LLC.

The rejections heighten tension between Brian T. Moynihan, the bank's chief executive officer, and U.S.-owned Fannie Mae in their disputes over who must pay for billions of dollars in failed loans made during the housing boom. When mortgage insurers deny claims, the two firms are left to squabble over whether losses will be borne by bank shareholders or the taxpayers who bailed out Fannie Mae.

Shorter Deadline

Pressure on Bank of America, the second-biggest U.S. lender by assets, may rise in July when Fannie Mae shrinks the amount of time it gives a bank to appeal an insurer's denial to 30 days from 90 days before pressing for a refund. Repurchase costs probably would rise if the firm is forced to adhere to Fannie Mae's policy, Bank of America has said.

Fannie Mae and Freddie Mac buy mortgages from lenders and package them into securities for sale to investors. Both firms were seized by the U.S. in 2008 to stave off collapse, and have collectively drawn more than $180 billion in taxpayer funds. The bill is likely to rise -- Fannie Mae this week requested $4.6 billion more from the U.S. Treasury Department -- and the firms' regulator is pressing banks for refunds on bad loans to limit the bailout's cost to the public.

Insurance Disputes

Bank of America is involved in legal disputes with mortgage insurers, including MGIC, saying the firms are denying valid claims.

In the second half of last year, Bank of America has "materially increased" the percentage of denials it argues are improper, Milwaukee-based MGIC said this week in a filing. AIG's mortgage guarantor said last week that lenders were devoting more resources to reversing rejections.

Bank of America has committed about $42 billion to deal with flawed mortgages, foreclosures and writedowns since the start of 2007. The lender accounts for half of Fannie Mae's pending repurchase demands after insurance denials, the Washington-based firm said this week in an annual filing.

Outstanding repurchase claims against Bank of America from all sources jumped 22 percent to a record $14.3 billion as of Dec. 31, the lender said in January. That increase was fueled in part by other demands from Fannie Mae. The mortgage financing firm has started asking for refunds on loans that have performed for 2 years or more before defaulting, requests Bank of America has deemed invalid.

More Public Money

Fannie Mae faces its own squeeze and asked for more public funds this week after posting a $2.4 billion loss in the fourth quarter. The company said that while Bank of America has failed to "honor repurchase obligations in a timely manner," it still expects to get reimbursed.

"If we collect less than the amount we expect from Bank of America, we may be required to seek additional funds from Treasury," the company said in the Feb. 29 filing.

By the way, look at the potential losses mounting up at Bank of America if Fannie Mae does succeed on those push-backs. Think Bank of America has sufficient reserves for credit losses? I don't.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Money for Debt Swaps but No Money for Greece; Eurozone Delays Rescue Funds on Failure to Meet Conditions

Posted: 02 Mar 2012 09:49 AM PST

The Financial Times reports Eurozone delays Athens rescue funds

Eurozone members have delayed approval of more than half of the €130bn bail-out for Greece after deeming that Athens has yet to meet all the terms set as the price of a second rescue.

However, finance ministers from the 17-country currency bloc meeting in Brussels signed off on funds to underpin a €206bn debt swap to cut the value of the Greek bonds held by private investors.

Jean-Claude Juncker, the Luxembourg prime minister who chairs the eurogroup, said Greece's official creditors would "finalise in the next few days" an assessment of Greece's steps to enshrine the bail-out conditions into law.

But he added that the full bail-out would only be completed on a successful completion of the debt swap with private bondholders.

The ministers decided that Athens had yet to meet all the conditions to secure the €71.5bn portion of the bail-out destined for the Greek government. The balance of the rescue funds – which, when combined with other incentives and instruments to be used in the debt swap comes to some €93bn – was agreed.

There is not much new information here actually. Greece was supposed to have met conditions at the end of October, then November, then January, then February.

Every time Greece failed and it did not matter. The EMU granted extension after extension.

However, with the debt swap and protection of the ECB, and with a bond payment due on March 20, time has run out for extensions. The sane thing to do would be for the EMU, IMF, and ECB to accept the very simple fact that Greece is bankrupt and there is no point in giving Greece another nickel, thereby forcing Greece out of the Eurozone.

All parties should have recognized that years ago actually, but stubborn ideology got in the way.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Public Pension Ponzi Scheme; New York Cities Borrow From Pension Plan to Make Contributions

Posted: 02 Mar 2012 07:51 AM PST

In the worst possible form of kicking the can down the road, at the worst possible time as well (given the lofty overvalued condition of the stock market), To Pay New York Pension Fund, Cities Borrow From It First.

When New York State officials agreed to allow local governments to use an unusual borrowing plan to put off a portion of their pension obligations, fiscal watchdogs scoffed at the arrangement, calling it irresponsible and unwise.

And now, their fears are being realized: cities throughout the state, wealthy towns such as Southampton and East Hampton, counties like Nassau and Suffolk, and other public employers like the Westchester Medical Center and the New York Public Library are all managing their rising pension bills by borrowing from the very same $140 billion pension fund to which they owe money.

Across New York, state and local governments are borrowing $750 million this year to finance their contributions to the state pension system, and are likely to borrow at least $1 billion more over the next year. The number of municipalities and public institutions using this new borrowing mechanism to pay off their annual pension bills has tripled in a year.

Public pension funds around the country assume a certain rate of return every year and, despite the market gains over the last few years, are still straining to make up for steep investment losses incurred in the 2008 financial crisis, requiring governments to contribute more to keep pension systems afloat.

Nationwide, the cost of public retiree benefits has soared in recent years, and states including California, Connecticut and Illinois have been borrowing to pay, or even deferring, their pension bills. Many states are worse off than New York. New Jersey is still paying off bonds issued in 1997 to close a hole in its pension system.

But New York appears to be unusual in allowing public employers to borrow from the state's pension system to finance their annual contributions to that system.

In Poughkeepsie, which is contributing $3.6 million into the state pension system this year and borrowing nearly $800,000, Mayor John C. Tkazyik, a Republican, said rising pension costs and new federal accounting requirements for retiree health coverage could have dire consequences.

"It could bankrupt the city," Mr. Tkazyik said, adding that the city had cut its work force, to 367 from 418 employees, in four years as it struggled to compensate.

Perverted Math

Only with the most perverted actuarial math can anyone fund a pension plan by borrowing from it.

Unfortunately, it's not just cities that are borrowing money from plans to fund them. New York state borrowed $575 million in the current fiscal year, and $782 million in the next, under Gov. Andrew M. Cuomo's proposed budget.

The True One Percent

The following video may come across as a bit over-the-top in terms of presentation, but the examples are accurate.

Link if video does not play:Government Employees: The True 1%

Public Pension Ponzi Scheme

As I have commented on numerous occasions, defined benefit pension plans are going to bankrupt numerous cities and states. Several smaller cities have already gone bankrupt over union salaries and pensions.

Numerous other cities are on deck. The public pension Ponzi scheme will fly apart as soon as one major city declares bankruptcy to get those pension benefits tossed out in court.

Realistically speaking, numerous cities such as Los Angeles, Houston, and San Diego are already bankrupt, as are second tier cities like Oakland, Newark, Cincinnati, and Baltimore and others too numerous to list, they just have not admitted it yet.

Simply put, pension promises have been made that cannot and will not be kept.

In the meantime, defined benefit plans need to end, city services privatized or eliminated, Davis-Bacon and prevailing wages laws scrapped, national right-to-work laws implemented, and at the top of the list, collective bargaining of public union workers need to stop immediately.

It's time to abolish collective bargaining, a practice that makes slaves out of everyone. I make the case in ...

Collective Bargaining neither a Privilege nor a Right

Paul Krugman, Stephen Colbert, Bill Maher, others, Ignore Extortion, Bribery, Coercion, and Slavery; No One Should Own You!

Clearly, huge battles loom over these issues.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Thursday, March 1, 2012

Mish's Global Economic Trend Analysis

President Obama's Lies Regarding U.S. Dependency On Foreign Oil
Huge Problem With Bernanke's 2% Inflation Target Explained in Pictures
Unbelievable Stress of Making "Only" $200,000 After Taxes

President Obama's Lies Regarding U.S. Dependency On Foreign Oil

Posted: 01 Mar 2012 11:13 PM PST

The Los Angeles times notes Obama, chart in hand, presses his case on gas prices

As rising gas prices are putting pressure on politicians to act, President Obama called on Congress to vote quickly to eliminate subsidies for the oil industry, returning to a favorite target the president.

Obama repeated his case, outlined in a speech last week, that there is "no silver bullet" to rising gas prices. He highlighted his administration's effort to reduce dependence on foreign oil and boost development of alternative energy.

This week he introduced a new prop to illustrate his point. As Obama spoke, a chart popped up on television screens behind him. The graph showed U.S. dependence on foreign oil falling since 2005 -- from 60% of net imports to 45% in 2011.

The White House handed out copies to the crowd. Obama told them to take it home -- "it makes for a great conversation piece at parties."

"Now, one reason our dependence on foreign oil is down is because of policies put in place by our administration and my predecessor's administration. And whoever succeeds me will have to keep it up."

Really? No, Not Really?

The Facts show that President Obama is disingenuous at best, and a blatant liar at worst. I lean towards the latter. Reader Tim Wallace provides charts to prove it.

Petroleum Distillates Usage

That looks pretty good, doesn't it? But what the heck does it have to do with reduction in foreign demand, and more importantly, Obama's role (or lack thereof) in achieving those gains.

For the answer to those most pertinent questions, let's display the usage in terms of foreign demand.

Petroleum Distillates Percentage Usage

Chart Explanations

Reader Tim Wallace writes ...

Hello Mish -

I almost went apoplectic today reading on line that the President is now claiming to have cut our dependency on foreign oil, and that the US has imported less each year of his Presidency.

Foreign oil imports have indeed dropped throughout his Presidency, but as the attached charts show, there is a reason for that drop - a tremendous decline in USA usage overall. This is because of a declining economy, NOT because of "alternate sources" or any of the other lies tossed our way by the government.

Of more interest is the fact that although the amount of foreign oil has declined, it has grown as a percentage of our overall supply.

During the Obama Presidency we have become more dependent on foreign oil, not less!

His entire speech was disingenuous at best.

Tim

There you have it. President Obama absolutely did not cut dependency on foreign oil. In fact, foreign oil dependency rose from roughly 37% to 40% under his administration. To be more precise, foreign petroleum usage in his administration went from 37% to a peak of 41% last year, currently at 39.9%.

The only way Obama can take credit for the decline in consumption caused by the recession, is to take credit for the recession itself.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Huge Problem With Bernanke's 2% Inflation Target Explained in Pictures

Posted: 01 Mar 2012 12:22 PM PST

Ben Bernanke wants prices to rise 2%. There are numerous problems with such a proposal, the first being increases in money supply sometimes lead to asset bubbles and not increases in prices of consumer goods.

Indeed the Fed completely ignored (if not encouraged) the housing bubble because home prices are not in the CPI. A housing bubble and a housing crash was the result.

The second major problem with inflation targeting is prices may go up, but wages may not necessarily follow. Indeed they haven't. Let's start with a graph of 2% price inflation over time.

Inflation Targeting at 2% a Year

click on any chart for sharper image

Real Disposable Personal Income

That chart nicely shows a slight parabolic pattern similar to the start of the first chart. However, that growth is a mirage based on population changes. Let's factor out population increases.

Real Disposable Personal Income Per Capita

Real Disposable Personal Income Per Capita Detail

Income Gap Discussion

That "Income Gap" is not the only problem. One must also consider "skew". As a result of Fed policies, there have been some income gains, but only at the top end.

"Per Capita", by definition, averages out those gains.

In reality, a select few percent have done exceptionally well as a result of Bernanke's tremendously misguided policies. Another few percent have simply done well, and another perhaps slightly larger group have barely kept up.

The bottom 80 percent or so have fallen much further behind than the per capita charts suggest.

Except for the banks, brokers and bondholders, and everyone else bailed out by the Fed, most have been clobbered by Fed policies.

Ironically, many of those bailed out have the unmitigated gall to whine about their plight. Please See Unbelievable Stress of Making "Only" $200,000 After Taxes for details.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Unbelievable Stress of Making "Only" $200,000 After Taxes

Posted: 29 Feb 2012 11:53 PM PST

People who have nothing to eat, no job, and are about to be tossed out of their homes in foreclosure, really do not know what stress is.

To fully appreciate stress, please consider the sorry "plights" of Andrew Schiff, marketing director for Euro Pacific Capital, Daniel Arbeeny, a Wall Street headhunter, and hedge-fund manager Richard Scheiner.

Bloomberg describes the out-and-out horror stories of all three in Wall Street Bonus Withdrawal Means Trading Aspen for Coupons

Andrew Schiff said the $350,000 he earns, enough to put him in the country's top 1 percent by income, doesn't cover his family's private-school tuition, a Kent, Connecticut, summer rental and the upgrade they would like from their 1,200-square- foot Brooklyn duplex.

"People who don't have money don't understand the stress," said Alan Dlugash, a partner at accounting firm Marks Paneth & Shron LLP in New York who specializes in financial planning for the wealthy. "Could you imagine what it's like to say I got three kids in private school, I have to think about pulling them out? How do you do that?"

Wall Street's cash bonus pool fell by 14 percent last year to $19.7 billion, the lowest since 2008, according to projections by New York state Comptroller Thomas DiNapoli.

"It's a disaster," said Ilana Weinstein, chief executive officer of New York-based search firm IDW Group LLC. "The entire construct of compensation has changed."

Wall Street headhunter Daniel Arbeeny said his "income has gone down tremendously." On a recent Sunday, he drove to Fairway Market in the Red Hook section of Brooklyn to buy discounted salmon for $5.99 a pound.

$17,000 on Dogs

Richard Scheiner, 58, a real-estate investor and hedge-fund manager, said most people on Wall Street don't save.

Scheiner said he spends about $500 a month to park one of his two Audis in a garage and at least $7,500 a year each for memberships at the Trump National Golf Club in Westchester and a gun club in upstate New York. A labradoodle named Zelda and a rescued bichon frise, Duke, cost $17,000 a year, including food, health care, boarding and a daily dog-walker who charges $17 each per outing, he said.

He described a feeling of "malaise" and a "paralysis that does not allow one to believe that generally things are going to get better," listing geopolitical hot spots such as Iran and low interest rates that have been "artificially manipulated" by the Federal Reserve.

Poly Prep

The malaise is shared by Schiff, the New York-based marketing director for Euro Pacific Capital, where his brother is CEO. His family rents the lower duplex of a brownstone in Cobble Hill, where his two children share a room. His 10-year- old daughter is a student at $32,000-a-year Poly Prep Country Day School in Brooklyn. His son, 7, will apply in a few years.

"I can't imagine what I'm going to do," Schiff said. "I'm crammed into 1,200 square feet. I don't have a dishwasher. We do all our dishes by hand."

He wants 1,800 square feet -- "a room for each kid, three bedrooms, maybe four," he said. "Imagine four bedrooms. You have the luxury of a guest room, how crazy is that?"

Summer Rentals

The family rents a three-bedroom summer house in Connecticut and will go there again this year for one month instead of four. Schiff said he brings home less than $200,000 after taxes, health-insurance and 401(k) contributions.

"I wouldn't want to whine," Schiff said. "All I want is the stuff that I always thought, growing up, that successful parents had."

Imagine the Stress

Imagine the stress of renting a three-bedroom summer home for only one month instead of four.
Imagine the stress of only making $350,000 pre-tax
Imagine the stress of making a mere $200,000 after tax and IRA contributions, and having to wash dishes by hand
Imagine the stress of being able to send your kids to the $32,000-a-year for the Poly Prep Country Day School in Brooklyn

Imagine the stress knowing full well that none of the above is enough, yet not being able to whine about it.

"I wouldn't want to whine," Schiff said. "All I want is the stuff that I always thought, growing up, that successful parents had."

This is more than nauseating, so if you need to excuse yourself to take care of matters, please do so now.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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