Dave Gonigam – June 26, 2012
- The “baby box” — an old idea that’s new again, for parents who can’t cope with the cost of a newborn
- Barry Ritholtz with a reminder why the housing market has “stabilized” (Warning: It no longer exists)
- Dan Amoss on why six more months of Operation Twist will accomplish little… and when you can expect QE3
- Kicking a can over the “fiscal cliff”… A change that could light a fire under gold on Jan. 1… A business owner’s phone-booth dilemma… and more!
Call it a sign of the times in Europe. Medieval times, in this instance.
“Boxes in which parents can leave an unwanted baby, common in medieval Europe, have been making a comeback over the last 10 years,” according to a BBC report.
“Supporters say a heated box, monitored by nurses, is better for babies than abandonment on the street — but the U.N. says it violates the rights of the child.”
We won’t take sides. We’ll note, however, that Germany has 99 baby boxes, Poland has 45 and the Czech Republic has 44:
There are none in Greece, by the BBC’s reckoning. Maybe the hospitals there are too broke to take care of unwanted babies. For sure, medicines are running out, and many health care workers volunteer to work unpaid.
And in the United States? “Baby hatches as such are not known in the United States,” claims Wikipedia. But all 50 states have enacted “safe haven” laws. They allow parents to give up a newborn baby at places like a hospital or fire station. Texas was the first to enact such a law in 1999.
Alaska and Nebraska were the last, in 2008. Just in time for the onset of the worst financial crisis in decades…
In a reminder that “the next Greece” might be closer to home than you think, Stockton, Calif., is on the verge of becoming the biggest U.S. city ever to file for bankruptcy.
The city council votes tonight on a budget plan that assumes its creditors won’t come through with concessions to close a $26 million budget gap.
“Stockton’s finances collapsed along with its housing market,” Reuters reports by way of background, “forcing city officials to slash $90 million in spending in recent years and a quarter of positions across agencies.” Gee, guess it hasn’t been enough.
“Many of the houses built and bought in that boom have been abandoned, repossessed and sold at deep discount, as Stockton has been at the top or near the top of lists of housing markets suffering a glut of foreclosures in recent years.”
The drop in U.S. real estate prices is decelerating, according to the Case-Shiller Home Price Index, out this morning.
The 20-city index registered a 1.9% year-over-year decline in April — the smallest since November 2010. Prices rose in 10 of the 20 cities, led by Phoenix. Among the cities where prices fell, Atlanta was the worst. Seems as if Georgia’s a couple of years behind the proverbial “sand states.”
“There is a tendency among many analysts to forget about the context in which residential real estate market has stabilized,” cautions Barry Ritholtz.
The Fusion IQ chief and Vancouver favorite shares a chart that puts yesterday’s cheery new-home sales figure in context:
“In terms of price,” says Mr. Ritholtz, “we know that not having distressed assets in the mix makes it appear prices are improving; what you actually are seeing are the impacts of no foreclosures for a year.”
“Similarly, without as many distressed homes in the mix — they are often sold for less than replacement cost — new homes have less competition, and sales can tick up.”
Major U.S. stock indexes are flat today, traders waiting for the next shoe to drop in Europe and at the Supreme Court.
Alas, those shoes will remain suspended in midair till Thursday… the date of both the next EU summit and the health care ruling.
From Washington comes word of a new exercise in kicking the can. The automatic budget cuts due to kick in Jan. 1 of next year might be put off till March.
Recall that under the debt-ceiling deal the president and Congress reached last August, $1.2 trillion in spending cuts are to take place over the decade from 2013-22. Of course, in wonk-speak “spending cuts” means a cut in the rate of previously planned increases. Heh…
Now congressional leaders are talking about putting off the budget-cut part of the “fiscal cliff” from January until March. At least that’s according to “a House aide and industry officials who were briefed on the discussions” and spilled it to Bloomberg.
Left unresolved in this are the expiring tax cuts and tax increases that kick in Jan. 1. And an increase in the debt ceiling, which will likely be hit before Jan. 1.
And the U.S. credit rating isn’t being downgraded today… why?
“Operation Twist will do little for either the markets or the economy,” declares our macro strategist, Dan Amoss.
“We’re well beyond the point where lower long-term interest rates can boost the economy. Those who can refinance have done so already. Low rates also keep the weaker players in many industries from restructuring, which lowers returns for every other company in that industry.”
“Meanwhile, retirees and pension managers are looking at low rates on fixed income for many years into the future. Fed Chairman Ben Bernanke’s stated goal of pushing investors out of bonds and into stocks has not worked, and will not work until valuations are low enough to compensate investors for the risk of violent market swings.”
“How many retirees are willing to lock in a 2% or 3% dividend yield in stocks when days like last Thursday [when the Dow fell 250] completely offset a year’s worth of dividends in a matter of hours? Not many, I suspect.”
“Retirees will react to this market environment by saving more, not by piling into stocks — until dividend yields are high enough (say, 5-6%) to compensate for volatility.”
When should you expect QE3? “Another bout of unbridled money printing would arrive,” says Dan, “only after much more stress in financial markets, including lower stock prices. So by bidding up stock prices in anticipation of more quantitative easing, investors ironically lower the chances of easing.
“We won’t see more broad support for QE unless stocks go lower.”
Precious metals have given up all of their late-day gains from yesterday. Gold is back to $1,572. Silver is hovering right around $27.
Here’s something that could change on Jan. 1 that hardly anyone is noticing: U.S. banks might have a much greater incentive to load up on gold.
The Fed, the FDIC (Federal Deposit Insurance Corp.) and the Office of the Comptroller of the Currency are asking for comment on a proposal to rejigger the “risk weightings” of assorted assets — including gold.
“For the first time,” writes John Butler of Amphora Capital, “unencumbered gold bullion is to be classified as zero risk, in line with dollar cash, U.S. Treasuries and other explicitly government-guaranteed assets.” Right now, gold has a 50% risk weighting.
“If implemented, this will be an important step in the remonetization of gold and, other factors equal, should be strongly supportive of the gold price, both outright and relative to that for government bonds, the primary beneficiaries of the most-recent flight to safety.”
The world is slowly waking up to the words of Rep. Ron Paul in his “lost” gold bible of 30 years ago. Much of it reads as if it was written yesterday… which is why we’re going out of our way to make it available to you today.
We return to Europe as we wind down today’s episode. Seems an old form of dance has become a new form of protest against the banks.
People in Spain are marching into banks and breaking out in flamenco dances… and generating a YouTube sensation:
The favorite target is Bankia, the big sickly bank that resulted from a merger of four smaller sickly banks and is now a ward of the state.
“You’ve changed, my friend, since you came in to money. I need two jobs to pay my mortgage,” says one flamenco cantaor at a Bankia branch in Seville. “You get in trouble, and I get thrown out in the street.”
Other protests at Spanish banks take the form of older men dressed in prison garb. Some of them, we’re told, took part in protests against the Franco regime in the ’60s and early ’70s. They sound like the type you don’t want to mess with…
“You guys will love this one,” writes a reader with a try-to-top-this tale of bureaucracy.
“Some months ago, the oil change place I have been going to in the town of Simi Valley, Calif., for many years stopped washing the car windows as part of their service. The owner of the place just said they couldn’t afford the extra permit cost. I let it go. Just today, I noticed they were again doing the windows, but only the windshield. I asked the owner about it. Here is the full story…”
“The city had wanted $1,200 a year in fees if they were going to wash car windows because the window cleaner was suspected of contributing to cancer. The owner pointed out this was the same window cleaner that everyone else buys at the dollar store, and since he ran an oil change shop, that was probably the least toxic thing in the place. This logic was lost on the city employee.”
“He recently started using a vinegar solution instead, but kept the window work to just the windshields. (Less liability? Vinegar allergies?)”
“A month ago, someone else had come by from the city to serve him notice of a fine for having additional signs out on the small lawn area in front of his business (small yard signs planted in his own lawn over the holiday weekend). The fine was $100 per day for three days over this holiday.”
“He went to see the mayor and then the city council to argue that he wasn’t even open two of those days. Perhaps in an attempt to be visibly fair, they sent out an inspector to look at the property. The inspector pointed out that the two palm trees planted in the corners of the small lawn made him liable for any accidents, due to lack of full visibility. He offered to take out the trees (and has since done so).”
“The inspector also told him to remove the pay phone at the edge of the sidewalk (they still have those?) for the same reason, and he replied that he didn’t own it. I am filling in here, since I forgot to ask if he knew who owned it, so I am assuming he wasn’t able to get it removed using normal channels. He had his crew remove the antiqued device with old-fashioned sledgehammers and was promptly arrested for destruction of property when he decided to take it to the scrap metal yard to cover the wages of his crew.”
“The correct answer is ‘Freedonia,’” writes a reader after a letter yesterday in which a reader suggested the Three Stooges run the European Union, while Laurel and Hardy run the United States… and we asked what it is the Marx Brothers run.
Should’ve known! Other answers proffered by readers:
- International Monetary Fund
- Congress
- Department of Homeland Security
- Bank for International Settlements.
“Chico,” adds another reader, “is running the 10th-biggest economy in the world, the state of California.”
“Harpo is harping as Rome burns.”
“Groucho is running the Middle East — fits in with their attitudinal problems.”
“Gummo is running the U.N. and gumming up the works.”
“Zeppo is not running anything; he is just about ready to use his Zippo lighter and see what happens when flame is applied to a lot of paper. Can’t buy anything with it, so maybe it can keep us warm.”
“One of my favorite quotes from Groucho is,” a reader reminds us, “‘Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly and applying the wrong remedies.’”
“Sound familiar?”
The 5: Yes. And what’s that about familiarity breeding contempt?
Cheers,
Dave Gonigam
The 5 Min. Forecast
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