The Subprime Mortage Problem Dissected in 9 Minutes.

Confused about the subprime mortgage fiasco? Who isn’t??? Gain clarity by watching this 9 minute video. It’s from England, but explains things very well.

Absolutely priceless…

HT: The Oil Drum 

‘This Peak Oil Theory We’re Really Starting to See Coming to Fruition’

The Iron Triangle is starting to lose its grip on the message. Guest analyst Kevin Kerr talks on CNBC about the current spike in oil prices, and how the ‘peak oil theory is coming to fruition.’ No denial, no derision from the host, just a question about when the gas lines form. A year or two ago, a guest mentioning peak oil would have been lambasted as a conspiracy nutcase or worse; today, he’s simply stating his interpretation of current events.

Goldman Sachs Profits Update

It was almost a month ago that I wrote about GS having an excellent quarter compared to most of its peers. Now it’s coming out that one of the main reasons Goldman cleaned up was due to ‘gains’ in ‘financial instruments’ (read: derivatives & the like) whose value can only be determined through Goldman’s in-house estimates. This is CNN’s take on it:

Goldman’s stock has gained 13% since its earnings came out, as investors have bought into the notion that the bank is a cut above its peers and is able to weather, and even profit from, tough market conditions.

But that view could get revised, now that it can be seen in the numbers that a large proportion of its third quarter profits were ‘unrealized’ – i.e. paper gains, and not hard cash payments from fully closed out trades – and came from financial instruments that Goldman values largely according to its own estimates.

I’m no financial genius, so I may be incorrect, but this sure sounds like a case of Goldman saying “our proprietary computer models show that we made huge money, so we did!” Paper (or in this case digital) gains mean little in this case, I think, until Goldman can actually sell their ‘instruments’ for real assets. Until then, it’s all vapor money in my opinion.

This is yet another example of how Wall Street has become detached from Main Street. Some computer model shows that a tranche of now-unsellable financial derivatives posted theoretical ( and unprovable) huge gains, so Goldman trumpets that fact, their stock jumps, and so does the broader market. This isn’t coming from some shady hedge fund based in the Caribbean, folks; this is from one of the main drivers of Wall Street. Perception is more important than reality these days…

Stealth Food Inflation Hits Home

I went to the grocery store this morning to pick up a few items. One of the things I grabbed was a 16 oz. tub of Old Home plain yogurt. I use this for soaking oatmeal per the instructions in Nourishing Traditions.

I opened the tub this evening while preparing tomorrow’s breakfast and noticed the tub wasn’t filled up all the way. There was about an inch of headspace from the looks of it. I suspected something was up and grabbed the food scale. Sure enough, my 16 ounce tub of yogurt weighed 13.15 ounces, including the tub. So, I got 82 % of the product I paid for. Welcome to stealth inflation, folks.

I’ve noticed more and more weird sizes at the grocery store lately… I got a 29 oz. can of tomatoes that probably used to be 32 oz. sometime in the near past. Food producers are getting squeezed by rising costs, so instead of raising prices and causing a general outcry, more and more of them are quietly cutting the amount of product being sold and leaving the price the same. The idea must be that most people won’t notice, and that’s probably true.

The next time you had out to purchase groceries, make a quick note of the sizes of the cans, jugs or tubs of food you’re buying. You might find some interesting discrepancies or oddities like I did today.

Hitting Bottom?

As a follow-on to yesterday’s post about the local housing market, I was watching the late news last night and one of the main stories was on the housing market & foreclosures.   All things being equal, it was a pretty balanced piece, but the rep for the local realtor’s association was trying to put a positive spin on things, notably stating that in his opinion ‘We really are at a point where the bottom, if that’s the right word, has just about been reached.’

I’m willing to believe that some of the numbers are getting better, but as the story notes, that may be due to frustrated sellers yanking their homes off the market or deciding not to sell in the first place.   I have trouble believing that the bottom is close to being hit, since foreclosure rates are still rising and the subprime ARM reset  wave isn’t supposed to reach it’s crescendo until sometime early next year.    Time will tell, right?

Twin Cities Home Forclosures on the Rise

The foreclosure juggernaut is just starting to pick up steam here in Mud Duck land. The Saint Paul Pioneer Press is reporting that there are 325 foreclosed properties begin auctioned off later this month. The properties in question range from $1,000,000 + estates all the way down to run-down tenements in the inner city.

New Video Page

Just a short note to alert folks to the new “Videos” page. I’ll add to this over time as I run across stuff.

It’s mostly long films right now, based off of ones I’ve previously viewed. I hope you find some of these titles of interest. Some of them you’ve probably seen before, but perhaps there’s something new that you can use.

Also, I’d like to welcome to new readers that came here via “The Oil Drum.” Professor Goose & associates were kind enough to link my post on Jeffrey Rubin’s interview on their DrumBeat page and I saw a nice spike in traffic today.

Jeffrey Rubin on CNBC: The Export/Land Model in Action

If you haven’t read up on Jeffrey Brown’s (aka Westexas on The Oil Drum) Export Land Model, please do so. This will be one of, if not the most important factors affecting the price of oil, and therefore the world economy over the next decade.

CNBC had economist Jeffrey Rubin on one of it’s live shows this week to discuss future energy prices, and it’s obvious that he both gave them an answer they didn’t care for, nor one they could easily refute.

Watch and learn: