Sunday, January 2, 2011

First Time On Record US Credit Spreads Drop Below Global Corporate Debt; Thoughts On Relative Value

The love affair with US corporate bonds continues unabated. Please consider U.S. Yield Spreads Fall Below Rest of the World
For the first time on record, investors are demanding a smaller premium to own U.S. corporate bonds than global company debt.

Bondholders require 166 basis points more yield to hold U.S. investment-grade company debt instead of Treasuries, compared with an average 169 basis-point spread worldwide, according to Bank of America Merrill Lynch data. At the height of the credit crisis in December 2008, companies had the disadvantage of having to pay about 150 basis points more to lure U.S. investors to their bonds than borrowers seeking buyers elsewhere in the world.

�With the strong stimulus package and QE2, I expect 2011 to be a relatively strong economy and corporate bonds tend to do pretty well in that environment,� Brynjolfsson, who oversees $362 million, said Dec. 3 on Bloomberg Television. �Even if corporate yields rise a little bit it�s likely spreads tighten, which corporate bond managers like to see.�
I did not think corporate bond buyers were compensated for the risk in October, and I still do not feel that way now.

In October, people were plowing into IBM and Walmart 3-year bonds at .7% because treasuries were yielding less. 3-year treasuries are now 1%. This is the silliness of buying relative value when there is no value at all.

US corporate bonds may be a relative value, but who should care? Is there any value in them? I think not but those speaking their book argue otherwise.

By the way, I am often presented with the argument that IBM is less likely to default than the US government. This is my response: If the US defaults (which I highly doubt), you sure will not want to be in any US denominated bonds.

All of this relative bargain positioning, including PIMCO's love affair with Municipal bonds, is economic madness.

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

Australia Heads For Economic Crunch; Similarities Between Australian and Chinese Stock Markets; Global Property Bubble Cycles

The party is over in Australia. Many anti-dollar investors and Pollyannas living down under just don't realize it yet. Nonetheless, Australia faces an economic crunch as family finances collapse under the burden of record debts, rising interest rates and utility bills.

Please consider Australians sinking under debt burden
With banks warning they will be forced to raise mortgage rates by 0.50 per cent in 2011 and Sydney rents forecast to rise by between $160 and $190 a month, according to analysts Residex, householders look set to suffer.

Repossessions and tenant evictions are expected to rise sharply. "It's going to be tough" said Shane Oliver, chief economist at AMP Capital. "Families face many rising costs and while most people have slowed their borrowing, our debt is still growing and that's a big problem."

Despite more cautious spending in recent months, household debt is still up by 5.8 per cent on a year ago and a recent survey by Westpac found only about 20 per cent of people thought paying off debts was the best use of their money. Most households in the US, UK and much of Europe are still busily paying down their borrowings, particularly unsecured debts such as personal loans and credit cards.

"Unlike the rest of the world, Australia has slipped back into its old habits," said Steve Keen, professor of economics at the University of Western Sydney. "We're spending ourselves right back into trouble. With so much extra debt to service, we don't need interest rates to reach anything like the 9.6 per cent they hit in 2008.

"We may find repossessions spiking much more quickly than they did two years ago."
Weekly Living Costs Up $100

Real estate has peaked and so has the shopping center economic model based on the strong Australian dollar. There is no reason here to like either Australian equities or the Australian dollar. Strong commodity prices will no longer help Australia.

Australian real estate has already been hit by rising interest rates and with Weekly living costs up $100, more rate hikes may be coming.
FAMILIES face cost-of-living increases that could drain the weekly budget by up to $100 this year.

New data shows Australians are being levelled with record expenses for basic services and Sydney residents are some of the hardest hit in the country.

After floods that have wiped out crops in Queensland and NSW, fruit and vegetable prices are predicted to rise by up to 50 per cent.
Advertisement: Story continues below

Any hope the strong Australian dollar would shield motorists from increases in fuel prices have been dashed - global oil prices are tipped to hit record highs.

This year's price increases will compound the cost pressures already inflicted on households.

The trio of utility costs alone represents an extra yearly burden of about $1000 - or $20 a week - for an average household of four, while grocery bills are set to rise on average by $50 a week, based on a weekly bill of $150.

Housing affordability has taken another dive, with industry figures showing the largest annual decrease in a decade.

A report by the Real Estate Institute of Australia showed the proportion of income required to meet loan repayments increased 5.8 per cent to 34.8 per cent over last year, a 10-year high.

Additionally, the amount of rent people are paying has increased by 18.6 per cent in Sydney over three years, above the national average.

The Bureau of Statistics also identified health costs, communications services and petrol prices as having risen sharply over the year.
$AORD - Australian Stock Market Index Monthly



$AORD - Australian Stock Market Index Weekly



$SSEC - Shanghai Stock Market Index Weekly



Both the Australian stock market and the Chinese stock market have been weak. This is in spite of the fact that commodities have been on fire. Both countries have had overheating economies led by real estate bubbles.

It will be interesting to see how the Reserve Bank of Australia handles this. Failure to hike rates would hurt the Australian dollar and increase the price of imports while hiking rates further will crush the real estate bubble.

China's problem is far more complex. For more on China please see


There are no good solutions when the central bank lets real estate bubbles get out of hand as has happened in the US, China, Australia, Canada, Ireland, Spain, the UK and numerous other places.

The difference so far is the US, Ireland, and Spain property bubble have popped, while those in Australia, Canada, and China are just now facing the pressure.

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

Sony DSCF707 Cyber-shot 5MP Digital Still Camera w/ 5x Optical Zoom

Sony DSCF707 Cyber-shot 5MP Digital Still Camera w/ 5x Optical Zoom Review


Sony DSCF707 Cyber-shot 5MP Digital Still Camera w/ 5x Optical Zoom Feature

  • 5-megapixel sensor creates 2,560 x 1,920 images for prints at 11 x 14 inches and beyond
  • Carl Zeiss autofocus lens with 5x optical/2x digital (10x total) zoom
  • Included 16 MB Memory Stick holds 11 images at default settings
  • Connects with PCs and Macs via USB port
  • Uses proprietary lithium-ion rechargeable battery(included)

Sony DSCF707 Cyber-shot 5MP Digital Still Camera w/ 5x Optical Zoom Overview

Accurately realistic photos are captured using this digital camera that has a 5.0 effective CCD and 5.2 gross pixel count. The included 16MB Memory Stick� media stores your shots that can be easily downloaded using the USB interface. A Carl ZeissM-^Y Vario Sonnar lens with 5x Optical/10x Digital zoom captures the essence of each shot with clarity and precision accuracy. For consistently great shots even in low or no light conditions try using the built-in NightFinderM-^Y system.

Sony DSCF707 Cyber-shot 5MP Digital Still Camera w/ 5x Optical Zoom Specifications

Stay ahead of the digital curve with the Sony DSC-F707. Showcasing superb functionality and some of the most advanced technology currently available, the DSC-F707 combines a 5.24-megapixel CCD, a swivel Carl Zeiss lens, hologram AF laser focus assist, and Sony's NightShot technology, which enables you to shoot infrared photos.

Optics and Resolution
The Sony DSC-F707 features a Carl Zeiss Vario-Sonnar lens with 5x optical and 2x digital zoom (for a 10x total), an f2.0 maximum aperture, and a focal range of 9.7-48.5mm (equivalent to 38-190mm). It contains a 5.0-megapixel (effective) CCD, or 5.2-million gross pixels.

More Features
The DSC-F707 uses Sony's NightShot technology, the same feature seen on Sony's camcorders, which uses infrared illumination and an infrared filter to take photos in complete darkness. The night-framing system provides infrared light as a composition assist, and utilizes hologram AF focusing and preflash exposure metering for consistently great shots even in low- or zero-light conditions.

Picture quality is enhanced with clear-color NR (noise reduction) that reduces color noise and slow-shutter NR that captures and subtracts CCD noise from long time exposures.

Movie Mode
In movie mode, the DSC-F707 produces color digital videos in multiple creative formats, including 320 x 240 (high quality), 320 x 240 (normal), and 160 x 112. You can fill up the Memory Stick with digital video, but you are limited to 15-second movies with 320 x 240 mode. Another movielike feature is called ClipMotion, which will take 10 images and put them into an animated GIF.

The limited resolution of your movies guarantees that this feature won't replace your camcorder, but it's perfect for when you just want to capture a quick movie and e-mail it to a friend or relative.

Storage and Transfer
Images are stored on Memory Sticks, Sony's proprietary memory-card format. The included 16 MB stick holds approximately 11 images at the camera's standard 5-megapixel setting (2,560 x 1,920 pixels). Memory Sticks are reusable, but if you tend to take more than 11 images per outing, then you'll want a bigger card. A 128 MB stick is a great size for this camera, storing around 70 images.

To transfer images to your computer, simply attach the included USB cable between your PC and your camera--your computer should automatically recognize the camera and let you move the pictures to your hard drive. If you own a Sony desktop or laptop, your computer may also have a built-in Memory Stick reader, which makes transferring as easy as reading a floppy disk.

Power
The DSC-F707 uses a proprietary rechargeable Infolithium battery (model M).

Size
The DSC-F707 measures 4.75 by 2.75 by 6 inches and weighs 25.06 ounces with battery, Memory Stick, lens cap, and shoulder strap attached.

Other features include:

  • Through-the-lens (TTL) preflash metering and red-eye reduction, cold-shoe and accessory terminal for HVL-F1000
  • Twilight, portrait, and landscape mode autoexposure
  • Multipattern measuring exposure system
  • 46-step shutter priority (30 sec to 1/1,000 sec)
  • 13-step aperture priority (f2.0 to f8.0)
  • Full manual exposure
  • High-speed scan autofocus
  • Manual focus ring with LCD magnifier

Contents and Recommended Accessories
This package includes the DSC-F707 digital camera, Infolithium M battery, AC adaptor/in-camera charger, AV output cable, USB cable, shoulder strap, lens cap, 16 MB Memory Stick, printed manual, and CD-ROM featuring MGI PhotoSuite and drivers.

Available at Amazon Check Price Now!


*** Product Information and Prices Stored: Jan 02, 2011 12:00:57

Sunday Funnies 2011-01-02 Good Luck Kid



For a look at problems for the new year, please see Ten Economic and Investment Themes for 2011

Whisper of a Thrill - Earth Song - By Thomas Newman

To get your mind off those problems, at least for a moment, please play this:



Link if the embedded video does not play: http://www.youtube.com/watch?v=NFq42IibUeY

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

Saturday, January 1, 2011

Looking back and moving forward

Well hello! Hope your New Year�s Eve was great! We spent a very low key evening at home, and it was perfect. (Have I mentioned we�ve become complete homebodies??)

I�m loving all the recaps of the year all over blogland over the past week, and I wanted to chime in with a couple more of my own.

First of all, I have to thank my lovely blog friends � ALL of you who link TDC. I truly, truly appreciate it. I can�t tell you the thrill I get when I�m blog-hopping and I see that you�ve linked to my site.

It�s still surreal. :)

I wish I could link to you all, but in the interest of time and space, I�m listing my top ten blog referrers for the year:

LOVE THESE WOMEN. This year, I�ve roomed with two of them and met (and had a blast with) four others. I hope to meet the last four this year! (Wanna come over ladies??)

I had fun looking through Google Analytics and figuring out the top posts of the year (not all were written in 2010!):

  1. 7. Christmas tree party
    8. The hardest easiest DIY wreath ever
    9. Make a sofa table for under $20
    10. DIY drum shade chandelier

FUN! I love this stuff! :)

I�m so excited about 2011 (have to get used to writing that!) and all it will bring. Looking forward, I plan on continuing the Before and After Party the first Monday of every month:

beforeAndAfterButton

To see all of the parties from 2010, click here.

I failed miserably at my Tool School series last year. (Hangs head in shame.):

TDC_toolSchoolButton

But I am determined to be better about it this year! I hope to share my favorite tools, how to use them, and the basic gadgets you should have around the house to accomplish your own DIY projects.

I�ve got some more fun stuff coming in the new year! First of all -- if you are human and breathing, you most likely have an overwhelming desire to throw out half of the stuff in your house and clean every little crevice right now. :) I�m with you. I got you. I�ve already taken two car loads to Goodwill in the past week.

It feels amazing!!!

I�m planning another organization party � it will probably be later this month. I just have to get a button made and then I�ll announce it. I�ll make sure to give you time to prepare, but I�ll be harassing you plenty between now and then so no worries. :) Just be sure to take a before picture before you get all productive, OK? (I luuuurve before pictures!!)

And back by popular demand, I�ll be hosting another Goodwill party as well! It�s been a while since I�ve shared some of my finds, and I�m really looking forward to seeing your treasures and transformations.

Finally, I want to thank you all again � this blog wouldn�t be here without you tuning in and reading my ramblings. Well�it may be here, but I�d be talking to myself. A lot.

It�s been an amazing, unbelievable year for Thrifty Decor Chick. I pinch myself at the fun I�ve had, the connections I�ve made, the opportunites I�ve experienced.

IT HAS BEEN A BLAST.

Thank you so very much. :)

 

P.S. The January Before and After Party will go up on Monday � hope you can join in!

In Praise of Volunteer Fire Departments (Do we really need paid union fire departments anywhere? What about police?)

In response to "Crash Tax" Ripoff Expands in California and New York I received an email from "MB" a 20 year career police officer and firefighter who writes ...
Hello Mish

I have been an avid reader of your blog for the last. I place great value on your economic analysis particularly in regards to the dangers of unbridled debt accumulation. I am a police officer and firefighter with more than 20 years of service behind me. I am a member of a union though I am definitely not a union proponent. Our pension is entirely funded by member contributions. The city I work for has not contributed a dime to it in over 17 years.

There is no doubt that some police and fire unions are very insensitive to the strains they place on taxpayers. I for one do not believe in government taking from others to pay for my retirement. Considering that you read numerous accounts of greedy union bosses, I can understand some of your less than flattering characterizations of those in my profession.

Though I absolutely agree that charging accident victims for emergency response is double dipping the taxpayer, your comments insisting that anyone could competently do my job on whim to get out of property taxes is ludicrous. If one of your loved ones was trapped in a burning building or held by a violent criminal, would you be content have your neighbor the tax attorney try to save them?

Happy New Year
MB
Trapped Loved Ones

I expected a lot of flak over that post, yet that mild rebuttal was all that came in. Let's start with "MB's" final question: "If one of your loved ones was trapped in a burning building or held by a violent criminal, would you be content have your neighbor the tax attorney try to save them?"

Of course not. I never implied I would. That does not mean I want to pay union salaries or wages either. I certainly would not be opposed to having trained sheriffs respond to someone being held by a violent criminal. And I would not mind having someone from a volunteer fire department respond to an accident or fire.

73% of Firefighters are Volunteers Already

According to the National Volunteer Fire Council, 73 percent of firefighters in the United States are members of Volunteer Fire Fighters.

I fail to see why 95% or even 99% percent of them could not be. Perhaps some would not do it for property tax reductions. Perhaps it depends on what one's property taxes are. Perhaps not. Those 73% right now get nothing at all!

Let's look at it another way. How many would do it for tax rebates plus $500 a month tax free to both state and federal government?

With unemployment at 10% and underemployment at 20%, I bet I could fill every fire department in the country.

Would those people require training? Of course they would. Moreover, we would need a phase-in transition period to get to an all-volunteer state. I would not want all rookies, nor would anyone else. Thus, we could not get to 99% overnight. Could we get there in 5-7 years? Yes, we could.

Pensions

MB claimed "Our pension is entirely funded by member contributions".

No, it's not. It is 100% funded by taxpayers. Taxpayers pay 100% of police and firefighters' salary. Police and firefighters put some of their salary into a pension plan (percentage widely varies by city), but the source of the money is the taxpayer.

"MB's" particular case may be different, but most often the city (taxpayers) contribute the vast majority of what goes into these plans. Even in cases where the police and firefighter contributes 100%, it is important to recognize that money that comes from taxpayers who pay police and fire salaries.

Finally, if one took the typically paltry union-member contributions and totaled them up, it would come to far less than the untenable pension benefits that have been promised. That is exactly the source of the pension underfunding right now.

Certainly, not every plan is overly generous. Perhaps "MB's" plans is one of them. However, in cases where cities are in financial trouble, the very first place to look for reasons why is untenable wage and benefit packages of public union workers in general (not just police and fire).

My statements do not imply in any way, shape, or form, those police and fire officers are anything but dedicated, hard-working, employees. I suspect most of them are.

I only make the case the plans (in general), are far too generous and have bankrupted numerous cities.

Comments From My Blog

Docberg Writes ...
We had a volunteer department in my home town in its pre-yuppie invasion days, and they were highly trained and very effective. When I was a city administrator, I had both a volunteer fire department and a volunteer rescue squad. Both were staffed with some highly motivated and competent people. But, this was not in California.
Ron Writes ...
Ditto on the volunteer firefighters. We have had them in our community for years and I never felt like we were at a disadvantage. These people donate their time and money to serve their community. They go through extensive training.

I salute all of the volunteer firefighters in our country thank them for their service.
BB Writes ...
Mish - local volunteers are the best 1st responders out there!

When I was 16, my best bud from down the road was T-boned as he
turned into my driveway. The local farmer, volunteer, and 1st responder
was the first adult person on the scene. He ripped the door off the cracked
up Ford Ranger like tinfoil, and administered CPR/1st aid to my buddy.

These volunteers get no union, no pension, no pay.

When I was 29 I woke up at 3am writhing in pain with what I thought
was an appendix bursting. 1st responder? Volunteer EMT/firefighter from
the farm 1/4 mile to the north of me. We cut and split wood every year
together for the last 2 years, as well as hunting the same property together.

My point? know your neighbors because you will depend on them to survive.
Dedicated fire professionals do not want to hear they can be replaced by volunteers, but clearly they can.

Can police officers be replaced by volunteers? In some instances, quite easily. A prime example would be traffic direction duties at events and games. I bet many volunteers would gladly direct traffic for a couple of free tickets to games or concerts. There certainly is no reason to pay police to do those duties, often on overtime.

Can on-call volunteers replace police in a shootout? For the sake of argument let's assume no. However, I bet I could get many Libertarians to say "why not?" Either way, there is nothing that implies the need for unions or excessive pension benefits to the point cities are going bankrupt.

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

New Year's Eve Celebration Images From Around The World

Here are six of 30 New Year's Eve Celebration Images from around the world.

London



Sydney



Munich



Vienna



New York City



Rio de Janeiro city, Brasil



Happy New Year!

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