Baltic Dry Continues Collapse – Worst Slide Since Financial Crisis

Despite 'blaming' the drop in the cost of dry bulk shipping on Colombian coal restrictions, it seems increasingly clear that the 40% collapse in the Baltic Dry Index since the start of the year is more than just that. While this is the worst start to a year in over 30 years, the scale of this meltdown is only matched by the total devastation that occurred in Q3 2008. Of course, the mainstream media will continue to ignore this dour index until it decides to rise once again, but for now, 9 days in a row of plunging prices is yet another canary in the global trade coalmine and suggests what inventory stacking that occurred in Q3/4 2013 is anything but sustained.

 

Baltic Dry costs are the lowest in 4 months, down 40% for the start of the year, and the worst start to a year in over 30 years…

 

As we noted yesterday…

Of course, we are sure the 'lead' that the Baltic Dry seems to have over global macro will be quickly ignored…

 

Charts: Bloomberg


    



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Unemployment Rate Set To Plunge As Bill To Restore Jobless Benefits Fails To Pass Senate

Following last week’s surprising passage of the preliminary approval to extend emergency unemployment claims, i.e. emergency jobless claims, for 3 months, when six republicans sided with democrats and gave approval to the original $6.4 billion legislation, there was an expectation that up to 1.4 million Americans would get their benefits extended once again (despite the so-called recovery in the economy, and the job market, instead of just all time high S&P500). Moments ago such hopes were dashed, when a Senate plan to restore long-term jobless benefits hit a wall Tuesday after Republicans withdrew their support amid complaints over cost and other issues.

The $18 billion bill, which would restore the benefits through the end of 2014, failed to clear a key test vote. Senate Majority Leader Harry Reid needed to attract 60 senators to move the bill forward, but the bill stalled on a 52-48 vote.

 

No Republicans voted in favor.

What happened between then and now, and why did those republicans revert back to the party line?

Reid lost their support when he amended the bill and failed to come up with a plan to offset the cost within 10 years.

 

“It doesn’t look good,” Maine GOP Sen. Susan Collins said before the vote and after a meeting with Reid.

 

Collins and Nevada GOP Sen. Dean Heller unsuccessfully proposed that Reid go back to the three-month extension. “We’re back to ground zero,” Heller said.

 

The senators are expected to return to the negotiating table. The GOP-controlled House has yet to vote on extending the benefits.

 

Reid postponed a prior vote Monday night upon realizing he didn’t have enough support and said he needed time to talk with members of both parties.

It almost makes one wonder if Reid isn’t trying to sabotage his own legislation. Whatever the answer, it increasingly seems that no law, retroactive or otherwise, will pass before the end of the month, which also means that up to (a record) 1.4 million Americans will fall out of the labor force, in addition to the now traditional 200K-600K people who quietly exit the labor pool every month. Which also means that, as we explained previously, since the impact on the unemployment rate could be as high as 0.8% from just the EUC expiration alone, that the unemployment rate for January could crash to under 6% just as the economy is starting to really backslide, as shown by the recent horrendous data from retailers across the board.


    



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You can help support our troops — here’s how

I want to tell you three things about honoring those who serve our country in uniform.

First, Peachtree City’s own Mimi Gentilini has a long record of supporting our deployed troops. I remember a number of years her restaurant staff gathered donations in cash and in kind, and loaded up an SUV to the gills with goodies, to be delivered to a central collection point for flight to young Americans in Iraq and Afghanistan.

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Wanna Be Dictator Obama Claims “I’ve Got a Pen” as He Vows to Legislate via Executive Order

If this isn’t one of the creepier things you’ve seen in a while, then I don’t know what to tell you. Obama’s emotional expressions in this clip are one of a man who has been utterly defeated following several years of rampant cronyism and epic public failures. As such, it seems as if he is prepared to step up further to the “wanna be dictator” plate and just start doing whatever he wants via executive orders.

I mean, why even bother pretending to have a Congress at this point? Hasn’t this guy done enough harm…

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Wanna Be Dictator Obama Claims “I’ve Got a Pen” as He Vows to Legislate via Executive Order originally appeared on A Lightning War for Liberty on January 14, 2014.

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Chicago on the Verge of Banning E-Cigarettes in Public Places Because They ‘Normalize Smoking’

Remember when the Chicago City Council,
unlike its counterpart in
New York
, decided not to rush into banning the use of
electronic cigarettes in public places? As I
noted
last month, the proposal, backed by Mayor Rahm Emanuel,
encountered what the Chicago Sun-Times called “a
surprise outpouring of opposition” from critics who cited the
dearth of evidence that e-cigarettes pose a hazard to bystanders
and worried that treating them like the real thing would discourage
smokers from switching to a much healthier alternative. While those
points remain valid, they are no longer dissuading Chicago’s
aldermen from imposing the same restrictions on vaping that
currently apply to smoking. Yesterday, by a vote of 15 to 5, the
city council’s health and finance committtees
approved
a bill adding e-cigarettes to Chicago’s Clean Indoor
Air Act. The full city council, where a total of 26 votes are
needed to pass the ordinance, is
expected
to follow suit tomorrow. 

As in New York, supporters of the ban say vaping looks too much
like smoking to be tolerated. E-cigarettes “normalize smoking,”
complained Alderman Will Burns, a co-sponsor of the ordinance.
“They make it seem OK to smoke.” Alderman Ray Colon, who opposes
the ban, highlighted the absurdity of this argument:

The campaign is [more] against normalization of the appearance
of mimicking smoking inside than it is [about] the health benefits.
If we could prove that there is no health risk, you would still be
here before us saying that normalization of smoking indoors is bad
enough. We don’t want the look of smoking inside. We don’t even
want you to pretend to smoke.

Chicago’s
Clean Indoor Act
“prohibits smoking in virtually all enclosed
public places and enclosed places of employment, including but
not necessarily limited to bars, restaurants, shopping malls,
recreational facilities (including enclosed sports arenas,
stadiums, swimming pools, ice and roller rinks, arcades and bowling
alleys), concert halls, auditoriums, convention facilities,
government buildings and vehicles, public transportation
facilities, coin laundries, meeting rooms, private clubs, public
restrooms, lobbies, reception areas, hallways and other common-use
areas in public buildings, apartment buildings and condominium
buildings.” Hence vaping will be allowed only in private
residences, designated hotel rooms, and tobacco (and e-cigarette?)
stores. You also can vape outdoors, as long as you remain more than
15 feet from building entrances. The temperature
in Chicago peaked at 34 degrees today; the expected low tonight is
16.

“You’re making people go outside,” Colon
noted
. “You’re treating it just as you would [a] tobacco
cigarette. You’re lumping it together in the same category,
even though you don’t really have any proof that it has any harm.
You’re saying, ‘We’re going to regulate first and ask questions
later.'” Although New York City Health Commissioner Thomas
Farley claims
regulating out of ignorance is the only responsible approach,
that’s true only if you ignore the costs of regulation. Alderrman
Brendan Reilly told his fellow council members he has “friends and
family members who are using [e-cigarettes] to quit, to get away
from combustible tobacco that kills people.” If pushing vapers out
into the cold deters such harm reduction, which seems likely, it
will endanger people’s health instead of protecting
it.  

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Chicago on the Verge of Banning E-Cigarettes in Public Places Because They 'Normalize Smoking'

Remember when the Chicago City Council,
unlike its counterpart in
New York
, decided not to rush into banning the use of
electronic cigarettes in public places? As I
noted
last month, the proposal, backed by Mayor Rahm Emanuel,
encountered what the Chicago Sun-Times called “a
surprise outpouring of opposition” from critics who cited the
dearth of evidence that e-cigarettes pose a hazard to bystanders
and worried that treating them like the real thing would discourage
smokers from switching to a much healthier alternative. While those
points remain valid, they are no longer dissuading Chicago’s
aldermen from imposing the same restrictions on vaping that
currently apply to smoking. Yesterday, by a vote of 15 to 5, the
city council’s health and finance committtees
approved
a bill adding e-cigarettes to Chicago’s Clean Indoor
Air Act. The full city council, where a total of 26 votes are
needed to pass the ordinance, is
expected
to follow suit tomorrow. 

As in New York, supporters of the ban say vaping looks too much
like smoking to be tolerated. E-cigarettes “normalize smoking,”
complained Alderman Will Burns, a co-sponsor of the ordinance.
“They make it seem OK to smoke.” Alderman Ray Colon, who opposes
the ban, highlighted the absurdity of this argument:

The campaign is [more] against normalization of the appearance
of mimicking smoking inside than it is [about] the health benefits.
If we could prove that there is no health risk, you would still be
here before us saying that normalization of smoking indoors is bad
enough. We don’t want the look of smoking inside. We don’t even
want you to pretend to smoke.

Chicago’s
Clean Indoor Act
“prohibits smoking in virtually all enclosed
public places and enclosed places of employment, including but
not necessarily limited to bars, restaurants, shopping malls,
recreational facilities (including enclosed sports arenas,
stadiums, swimming pools, ice and roller rinks, arcades and bowling
alleys), concert halls, auditoriums, convention facilities,
government buildings and vehicles, public transportation
facilities, coin laundries, meeting rooms, private clubs, public
restrooms, lobbies, reception areas, hallways and other common-use
areas in public buildings, apartment buildings and condominium
buildings.” Hence vaping will be allowed only in private
residences, designated hotel rooms, and tobacco (and e-cigarette?)
stores. You also can vape outdoors, as long as you remain more than
15 feet from building entrances. The temperature
in Chicago peaked at 34 degrees today; the expected low tonight is
16.

“You’re making people go outside,” Colon
noted
. “You’re treating it just as you would [a] tobacco
cigarette. You’re lumping it together in the same category,
even though you don’t really have any proof that it has any harm.
You’re saying, ‘We’re going to regulate first and ask questions
later.'” Although New York City Health Commissioner Thomas
Farley claims
regulating out of ignorance is the only responsible approach,
that’s true only if you ignore the costs of regulation. Alderrman
Brendan Reilly told his fellow council members he has “friends and
family members who are using [e-cigarettes] to quit, to get away
from combustible tobacco that kills people.” If pushing vapers out
into the cold deters such harm reduction, which seems likely, it
will endanger people’s health instead of protecting
it.  

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via IFTTT

William “Bill” Henry Lasiter, age 90, of Peachtree City

William “Bill” Henry Lasiter, age 90, of Peachtree City, Ga. passed away on January 9, 2014.

Bill was born in Gibson, Tenn. to Nelle Casey Lasiter & Tee Lasiter. He married his high school sweetheart, Mildred Osborne. They were married, for almost 70 years, until her death in 2010. He served in the US Navy and was a WWII Veteran, Sunday school teacher, deacon of the church, a business owner, and VFW member. He was a dedicated Christian and a member of Peachtree City First Baptist Church right up until his passing.

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via The Citizen http://www.thecitizen.com/articles/01-14-2014/william-bill-henry-lasiter-age-90-peachtree-city

William "Bill" Henry Lasiter, age 90, of Peachtree City

William “Bill” Henry Lasiter, age 90, of Peachtree City, Ga. passed away on January 9, 2014.

Bill was born in Gibson, Tenn. to Nelle Casey Lasiter & Tee Lasiter. He married his high school sweetheart, Mildred Osborne. They were married, for almost 70 years, until her death in 2010. He served in the US Navy and was a WWII Veteran, Sunday school teacher, deacon of the church, a business owner, and VFW member. He was a dedicated Christian and a member of Peachtree City First Baptist Church right up until his passing.

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via The Citizen http://www.thecitizen.com/articles/01-14-2014/william-bill-henry-lasiter-age-90-peachtree-city

Dr. Martin Luther King, Jr.’s legacy

Several weeks ago I had the good fortune to visit my grandfather’s alma mater, Morehouse College, and listen to the featured speaker of their Leadership Series, Dr. Alveda King.

Although she is a pro-life advocate, author, and former state congressman, she is probably most known as the niece of Reverend Dr. Martin Luther King, Jr. (MLK).

My heart was lifted to see the next generation coming out to hear the words of wisdom that came from a woman who was walking out the legacy put forth by her own father, her famous uncle, as well as her grandfather.

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via The Citizen http://www.thecitizen.com/blogs/bonnie-willis/01-14-2014/dr-martin-luther-king-jr%E2%80%99s-legacy

Bob Shiller Warns Fed ‘Fire-Fighting’ Is “Not A recipe For A Happy Ending”

Authored by Robert Shiller, originally posted at Project Syndicate,

If we have learned anything since the global financial crisis peaked in 2008, it is that preventing another one is a tougher job than most people anticipated. Not only does effective crisis prevention require overhauling our financial institutions through creative application of the principles of good finance; it also requires that politicians and their constituents have a shared understanding of these principles.

Today, unfortunately, such an understanding is missing. The solutions are too technical for most news reporting aimed at the general public. And, while people love to hear about “reining in” or “punishing” financial leaders, they are far less enthusiastic about asking these people to expand or improve financial-risk management. But, because special-interest groups have developed around existing institutions and practices, we are basically stuck with them, subject to minor tweaking.

The financial crisis, which is still ongoing, resulted largely from the boom and bust in home prices that preceded it for several years (home prices peaked in the United States in 2006). During the pre-crisis boom, homebuyers were encouraged to borrow heavily to finance undiversified investments in a single home, while governments provided guarantees to mortgage investors. In the US, this occurred through implicit guarantees of assets held by the Federal Housing Administration (FHA) and the mortgage agencies Fannie Mae and Freddie Mac.

At a session that I chaired at the American Economic Association’s recent meeting in Philadelphia, the participants discussed the difficulty of getting any sensible reform out of governments around the world. In a paper presented at the session, Andrew Caplin of New York University spoke of the public’s lack of interest or comprehension of the rising risks associated with the FHA, which has been guaranteeing privately-issued mortgages since its creation during the housing crisis of the 1930’s.

Caplin’s discussant, Joseph Gyourko of the Wharton School, concurred. Gyourko’s own 2013 study concludes that the FHA, now effectively leveraged 30 to one on guarantees of home mortgages that are themselves leveraged 30 to one, is underwater to the tune of tens of billions of dollars. He wants the FHA shut down and replaced with a subsidized saving program that does not attempt to compete with the private sector in evaluating mortgage risk.

Similarly, Caplin testified in 2010 before the US House Committee on Financial Services that the FHA was at serious risk, a year after FHA Commissioner David Stevens told the same committee that “We will not need a bailout.” Caplin’s research evidently did not sit well with FHA officials, who were hostile to Caplin and refused to give him the data he wanted. The FHA has underestimated its losses every year since, while proclaiming itself in good health. Finally, in September, it was forced to seek a government bailout.

At the session, I asked Caplin about his effort, starting with his co-authored 1997 book Housing Partnerships, which proposed allowing homebuyers to buy only a fraction of a house, thereby reducing their risk exposure without putting taxpayers at risk. If implemented, his innovative idea would reduce homeowners’ leverage. But, while it was a highly leveraged mortgage market that fueled the financial crisis 11 years later, the idea, he said, has not made headway anywhere in the world.

Why not, I asked? Why can’t creative people with their lawyers simply create such partnerships for themselves? The answer, he replied, is complicated; but, at least in the US, one serious problem looms large: the US Internal Revenue Service’s refusal to issue an advance ruling on how such risk-managing arrangements would be taxed. Given the resulting uncertainty, no one is in a mood to be creative.

Meanwhile, there is strong public demand – angry and urgent – for a government response aimed at preventing another crisis and ending the problem of “too big to fail” financial institutions. But the political reality is that government officials lack sufficient knowledge and incentive to impose reforms that are effective but highly technical.

For example, one reform adopted in the US to help prevent the “too big to fail” problem is the risk retention rule stipulated by the 2010 Dodd Frank Act. In order to ensure that mortgage securitizers have some “skin in the game,” they are required to retain an interest in 5% of the mortgage securities that they create (unless they qualify for an exemption).

But, in another paper presented at our session, Paul Willen of the Federal Reserve Bank of Boston argued that creating such a restriction is hardly the best way for a government to improve the functioning of financial markets. Investors already know that people have a stronger incentive to manage risks better if they retain some interest in the risk. But investors also know that other factors may offset the advantages of risk retention in specific cases. In trying to balance such considerations, the government is in over its head.

The most fundamental reform of housing markets remains something that reduces homeowners’ overleverage and lack of diversification. In my own paper for the session, I returned to the idea of the government encouraging privately-issued mortgages with preplanned workouts, thereby insuring them against the calamity of ending up underwater after home prices fall. Like housing partnerships, this would be a fundamental reform, for it would address the core problem that underlay the financial crisis. But there is no impetus for such a reform from existing interest groups or the news media.

One of our discussants, Joseph Tracy of the Federal Reserve Bank of New York (and co-author of Housing Partnerships), put the problem succinctly: “Firefighting is more glamorous than fire prevention.” Just as most people are more interested in stories about fires than they are in the chemistry of fire retardants, they are more interested in stories about financial crashes than they are in the measures needed to prevent them. That is not a recipe for a happy ending.


    



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