Saturday, May 22, 2010

World Financial Report, May 21, 2010

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Global OTC derivatives

The notional amount of outstanding over-the-counter (OTC) derivatives stood at $615 trillion in December 2009, up from $605 trillion six months earlier, according to the Bank for International Settlements (BIS). That is still well below June 2008’s figure of $684 trillion, which was the highest figure since the BIS began to collect such data in 1998. The amount of credit-default swaps outstanding fell by almost 10% in the second half of 2009. Notional amounts are useful as a measure of market size. But the BIS reckons that gross market values provide a more accurate measure of the amounts that are actually at risk. The gross market values fell by 15% in the six months to December 2009, to $21.6 trillion. (more)

The Economist - May 22nd - May 28th 2010

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Stocks Sinking to Crash Low Signals Worse to Come

Any investor who wants to gauge how serious the stock market’s retreat is need only know the Standard & Poor’s 500 Index has fallen below its low on May 6, when panic selling prompted calls for reform.

The equity index retreated 3.9 percent yesterday in its biggest loss in 14 months, sinking to 1,071.59, and slipped as low as 1,055.90 today. That compares with 1,065.79, the low two weeks ago when $862 billion was wiped out in 20 minutes. The options market benchmark known as the VIX soared 30 percent to 45.79 yesterday, meaning expectations for volatility are the highest in 13 months. (more)

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Casey Research: Perfect Storm of Debt to Hit US

President Barack Obama’s new fiscal commission, organized in response to a Congressional Budget Office projection that the United States will accumulate $6 trillion in debt during the next decade, is mostly for show, say three researchers from Casey Research.

Though the commission’s task is to come up with ways to limit future deficits to 3 percent of GDP, the 3 percent limit is “just a hoop for the clowns to jump through,” says Casey.

“U.S. government finances are now past the point of no return,” Casey researchers write in a report. (more)

Bloomberg Business Week - May 24 - May 30, 2010

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32 States Have Borrowed from the Federal Government to Make Unemployment Payments; California Has Borrowed $7 Billion has learned that 32 states have run out funds to make unemployment benefit payments and that the federal governmant has been supplying these states with funds so that they can make their payments to the unemployed. In some cases, states have borrowed billions. As of May 20, the total balance outstanding by 32 states (and the Virgin Islands) is $37.8 billion.

The state of California has borrowed $6.9 billion. Michigan has borrowed $3.9 billion, Illinois $2.2 billion.

Below is the full list of the 32 states (and the Virgin Islands) that have borrowed from the Fed to make unemployment payments, and the amounts that remain borrowed as of May 20 . (Numbers in red are billions) (more)

Smart Money - June 2010

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FDIC: 'Problem' Banks at 775

A total of 775 banks, or one-tenth of all U.S. banks, were on the Federal Deposit Insurance Corp.'s list of "problem" institutions in the first quarter, as bad loans in the commercial real-estate market weighed on bank balance sheets.

Poor loan performance in other sectors also continued to hurt banks, with the total number of loans at least three months past due climbing for the 16th consecutive quarter, FDIC officials said in a briefing on Thursday.

"The banking system still has many problems to work through, and we cannot ignore the possibility of more financial market volatility," FDIC Chairman Sheila Bair said. (more)

Chart of the Day