New York Times

California dreaming.

For all those starry-eyed readers of Floyd Norris' New York Times real-estate column this morning who have been out viewing new homes this afternoon and already scratching together the down-payment with the family's EBT cards, we have a little contextual reality checking. Norris points to the factual reality that a broad ratio of all financial obligations - both homeowners and renters - relative to disposable income stands at an impressive-sounding lowest level since 1984, and uses this wondrous statistic, in its sublime uniqueness, as an indication to suggest the consumer (and home-buyer we assume) may be coming back as the household debt burden has been so reduced from a record 14% of disposable income to a 'mere' 10.9% now indicating just what good little deleveraging beings we Americans have been. However, as Nomura noted so clearly this week, this statistic is just a small part of everything when we consider the balance sheet (and not just cash-flow) of the household, 'many homeowners are likely to take little comfort from the decline in average debt service costs relative to incomes.' For millions of homeowners whose property is now worth less than the debt used to finance it, mortgage interest costs may be more usefully gauged relative to the equity they retain in their homes. For them, these monthly debt service payments are necessary to retain their claim on an asset whose value has fallen and might not recover, as the $3.7tn negative-equity 'gap' should remind us that the economic crisis of the past decade has taught a new generation a painful lesson about the dangers of excessive debt.

Hayek, while a brilliant mind, was not right on everything.  He saw the welfare state is legitimate, a need for regulation into private industries such as education and food, and the necessity of the state in providing for individual and national defense.  Yet even he was able to distinguish how political power attracts those who will use in the worst manner. The Secret Service agents who procured prostitutes may be relieved of their duty but it will only serve as a cautionary tale for the rest to keep their off-duty exploits better concealed in the future.  The waste and graft will go on despite a pledge from Obama for a “rigorous” probe and his potential successor’s promise to “clean house.”  These promises are just political theater used to conceal the playground like mentality which possesses the attitudes of all those who wield the guns of the state.

Senator Frank Church's Prophetic Warning in 1975

Government Smears Journalists Who Investigate Government Corruption

In our daily scouring of the markets we run across a plethora of charts, many of them boring, some interesting, and a few select ones, exponential, and thus completely unsustainable. The US debt load is of course one of them, global central bank assets is another, as is pretty much everything associated with Europe these days. However, the following exponential chart is one we had never encountered before: it shows the number of major "disturbances", read power outages, in America's power grid in the last decade. The chart is, well, disturbing.

Contrary to BP's Happy Talk, the Gulf Ecosystem Is Being Decimated ...

• First Japan now... Australia Ready to Help IMF (WSJ)
• "Not if, but when" for Spanish bailout, experts believe (Reuters)
• Spain’s Surging Bad Loans Cast New Doubts on Bank Cleanup (Bloomberg)
• Spain weighs financing options (FT)
• Spanish Banks Gorging on Sovereign Bonds Shifts Risk to Taxpayer (Bloomberg)
• Spain and Italy Bank on Banks (WSJ)
• Chesapeake CEO took out $1.1 billion in unreported loans (Reuters)
• China preparing to roll out OTC equity market – regulator (Reuters)
• Angry North Korea threatens retaliation, nuclear test expected (Reuters)
• North Korea Breaks Off Nuclear Accord as Food Aid Halted (Bloomberg)

Fuel Pool 35 Miles from Boston – which Is Highly Vulnerable to Earthquakes – Contains More Radioactive Cesium than Released In BOTH Major Nuclear Accidents and ALL Nuclear Bomb Tests

A lot.

Deconstructing Corzine's lawyered up rat speak.

Pay close attention because this could be a record-breaking amount of mauling ever attempted by the colossus of client care as Goldman shows it does not discriminate between millionaire and billionaire Muppets. In a bizarre story in CNN Money, we are told that two billionaire 'married' executives of Marvell Technologies - MRVL (no, not the comic book though that would be spectacular) are suing Goldman for what initially appears to be a straight-forward alleged fraud of unauthorized transfer of ownership of their MRVL shares to Goldman's internal fund to enable more borrow availability for shorts (1 Corzine-ing). But the story gets better. The executives, upon the advice of another Goldman broker were advised to take levered long positions in competitor NVDA's shares (which GS was allegedly selling out of its own book - 2 Corzine-ings) only to very rapidly face significant losses when the company missed and the stock dropped notably (3 Corzine-ings). Then, GS sends the MRVL execs margin calls on that position (4 Corzine-ings) and unwilling to accept the MRVL shares as collateral due to its low share price (5 Corzine-ings), forces the former MRVL executives to sell their MRVL shares (6 Corzine-ings) to meet cash calls - all the while remembering that GS had transferred the ownership in order that they could allegedly have more of this hard-to-borrow stock to short (7 Corzine-ings). What's more, the couple's suit alleges that Goldman and a hedge fund run by Goldman were buying MRVL's shares at the same time the firm was forcing Sutardja and Dai to sell (8 Corzine-ings). Both NVDA and MRVL's shares have since more than doubled from their late 2008 lows. The couple claim they lost more than $100 million because of their forced sales and general Muppet massacre.

Do not, however, feel too bad for these two Muppets as Sutardja and Dia are not without controversy themselves. In 2008, MRVL paid a $10 million fine to settle allegations from the SEC that the company backdated the options it paid out to its executives. As part of the settlement, Dai, who was once Marvell's COO, paid a personal fine of $500,000 and was barred from being a director or officer of a publicly traded company for five years.

Another deal gets dissolved. But threats abound. And it's only going to get worse.

In an interview with Louis James, the inimitable Doug Casey throws cold water on those celebrating the economic recovery. "Get out your mower; it's time to cut down some green shoots again, and debunk a bit of the so-called recovery."

All you need to read.