News and Views.

Investment and vacation homes accounted for 30% of all purchases of existing and new homes in the United States in 2008, the National Association of Realtors said yesterday (Monday 3/30/09).

What the Treasury needs to worry about is a run on the insurers. Annuity and whole life policies are at risk, and the blogs are starting to buzz about it. If customers rush to cash policies in, a number of insurers will be at serious risk.

Once again: the Treasury is pursuing the phantom of a bank-led economic recovery, when it should be fighting the risk of an insurer-led crash. If Americans think their insurance policies and annuities are at risk, it’s a different and much worse sort of crisis.

Bank protection has gotten very pricy during the past month, despite the Geithner plan. The cost of insuring Citigroup’s 5-year senior debt has jumped from LIBOR +300 bps to LIBOR +600 bps between the end of January and the end of March, while Bank of America has jumped from +200 bps to +400 bps.

As the equity price approaches zero, that is, the obligor’s option to default gets closer to the money, the price of the option (reflected in credit protection) rises vertically. The key driver of credit default swap spreads is the perception that banks either will go up a great deal or go down a great deal. Credit default swaps are an option, and the extreme volatility of bank stocks makes options more valuable. Again, they will either go up a lot or go down a lot. Volatility reconciles widening credit spreads and higher stock prices.

In the relative short term, say, the next two quarters, Citigroup’s profits are whatever the government says they are. Timothy Geithner owns 36% of the bank.

Peak Oil's courageous spokesman, Matt Simmons, claims that production from the world's aging oilfields is dropping by as much as 20% a year.

By the end of 2009, two-thirds of the state's banks will be operating under cease-and-desist orders or other regulatory actions, Anaheim-based banking consultant Gary S. Findley predicts. (LATimes) Regulators are preparing for a major wave of failures.

As IBM was firing thousands of American workers last week, the U.S. Patent and Trademark Office published Big Blue's application to copyright a computerized system that calculates how to offshore jobs while maximizing government tax breaks.

City officials and housing advocates here (So. Bend) and in cities as varied as Buffalo, Kansas City, Mo., and Jacksonville, Fla., say they are seeing an unsettling development: Banks are quietly declining to take possession of properties at the end of the foreclosure process, most often because the cost of the ordeal — from legal fees to maintenance — exceeds the diminishing value of the real estate.

Word from China’s Xinhua News Agency is that China and Argentina have agreed to set up a currency swap worth $10.24 billion. That is, trade between the two countries will henceforth be settled in yuan. China already has similar agreements with South Korea, Malaysia, Indonesia and Belarus.

Half of the U.S. work force is on the payrolls of companies with 500 or fewer employees.

Kunstler: What’s going on now is nature’s way of telling you that America’s standard of living has to be reduced by something between 20 and 50 percent. Banking (capital deployment) is already mortally wounded. It remains to be seen how this will affect the food supply half a year ahead in the harvest system. Capital is as big an “input” for our method of farming as diesel fuel or fertilizers made from methane gas. The failure of banking will combine with city and state insolvency to crush public transit, law enforcement, fire protection, and whatever flimsy local safety nets exist to keep the ultra-poor and helpless from die-off.
It's shocking to me that the consensus among the hotshots of climate and energy science and the elder statespersons of environmentalism is that the energy problem merely amounts to finding other means for running cars. The assumption that we must remain car-dependent remains absolutely entrenched among people who ought to know better. Of course, the words “public transit are barely uttered. It’s disappointing to find such idiocy among this particular elite.

Based on the statistics from the Energy Information Administration, the U.S. pumped out more than 9.6 million barrels of oil per day in 1970. In 2007, production barely averaged over 5 million barrels a day. As you can see, we briefly managed to keep production at a plateau before falling down the backside of the peak.

And if you really want to crunch the numbers, the news is even more grim. In 2008, our production averaged 4.95 million barrels per day. We haven't seen a yearly production average under 5 million barrels since 1946.

Stretching across North Dakota, Montana, South Dakota, and southern Saskatchewan is the Williston Basin,home to the Bakken formation, one of the few areas in the US where oil production is expected to increase.

The fall in the 'core core' CPI underlines that deflation might become an issue in Japan with the output gap opening up massively and the labor market getting weaker. Declining demand at home combined with an inflow of cheaper goods from abroad triggered by recent appreciation of the yen, could drive down prices into the feared deflationary spiral.

March 31 (Bloomberg): The U.S. government and the Federal Reserve have spent, lent or committed $12.8 trillion, an amount that approaches the value of everything produced in the country last year, to stem the longest recession since the 1930s.

Deutsche Bank AG Chief Risk Officer Hugo Banziger said the credit crisis is “far from over” and global financial regulations must be overhauled. Banziger said credit spreads are higher than before Lehman Brothers Holdings Inc. collapsed last year, which he said signaled the crisis was far from ending.