Harrah's to issue $1B in new notes to pay old debtLAS VEGAS—Casino operator Harrah's Entertainment Inc. says it plans to sell $1 billion in new notes through a private offering to help it pay older debt and company expenses.Meanwhile, a Mr. Barnum Harrah of Las Vegas, Nevada says he plans to issue himself $10,000 in new credit card debt through a private offering to help him pay older debt and his company's expenses. Coincidence?
His older debt includes but is not limited to debt he ran up betting on "sure things" in Sin City.
His company's expenses currently includes those of Joe, his unemployed construction worker brother and Floyd, his out of work investment banking uncle. Joe and Floyd were only supposed to be visiting him for a month, but you know how company can be.
That being said, Barnum continues to be optimistic about the future. He's planning to pay off all this new debt off as soon as he wins the Nevada State Lottery. Why Nevada? He's got a lucky feeling. What Barnum doesn't realize is that there is no Nevada State Lottery though. Who would have guessed?State lottery bill appears dead -- againLee long has opposed lotteries on the grounds they attract poor people who cannot afford to gamble away their grocery money.
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Lotteries have been outlawed in Nevada since the state constitution was drawn up in 1864.Once a lottery appears, who knows what other forms of gambling might come along with it. I salute you Nevada. Way to take the high moral ground when it comes to legalized gambling. I stand by your zero tolerance policy. It starts with a lottery and it no doubt ends with the state being overrun with slot machines and casinos. Can't have that.
I mean really, that's just ridiculous. Before you know it Las Vegas would get the nickname of Sin City and speculators would gamble on the state's real estate market too. Where would it end? Every building lit up like a Christmas tree? Non-stop gambling action? Loans being handed out to people with no jobs so that they too could speculate? Can't you just picture it? It's never going to happen. Period.File:Las Vegas Strip.png
Disclaimer: Barnum, Joe, and Floyd are fictional characters. Any resemblance to actual people is simply a coincidence. A sad and tragic coincidence. Sigh.
Sarcasm, it isn't just for breakfast any more.
Show of hands? How many more days can oil rise before something seriously breaks again?
It took $140+ to kill the global economy last time around. I don't think it will take anywhere near that this time around.
Slumping Treasury bond prices send stocks lower"Will the economy grow and expand vigorously in the face of sustained higher interest rates?"Oh oh. Something seems horribly wrong. This is WAY too easy. What's that "vigorously" doing there? Holy cow! It's a frickin' rhetorical question with just a hint of sarcasm. Why didn't I see that earlier? I can't use sarcasm to heckle valid sarcasm. The entire integrity of my blog fall would fall apart. Yet, I can't back down now. I've already committed to this sarcasm report and I've gone live!
What would mainstream media do? Is there a way to gracefully recover and somehow work some sarcasm in from another angle? How much could sustained higher interest rates really hurt our resilient economy? Hmmm...Whew! That was a close one.
Using monthly data going back to July of 2001, I have come up with the following closest match to the shape of the current yield curve (as of April, 2009). I used a least squares approach with all time periods being equally weighted.
As you can see, the shape of the yield curve in November of 2002 is extremely similar to the shape of the yield curve in April of 2009. The only real difference is the overall change in interest rates. They fell.
Using hindsight, November of 2002 was a really good time to be buying stocks, assuming you sold them before they came crashing back down to even lower levels in 2008 that is.
Interest rates have been falling for decades. Some of it can clearly be seen in the chart above. If the trend continues, interest rates will need to go negative to keep the party going during the next downturn. How's that going to work? Just imagine how great it would be if it truly did work though. Our government would earn interest on all the debt it has. Can't you just picture negative 1% interest rates? Prosperity baby! For each trillion we owe China, China could pay us $10 billion annually. Problem solved! Sarcasm!Mankiw's Negative Interest Rate Solution?One outcome is implementing Mankiw's theories and hoping nobody screams currency crisis in a crowded movie theater. Yeah, I really like that one. Maybe he can get Japan to try it first, lol. Sarcasm! Another outcome could be using inflation as a way to simulate negative interest rates. We saw how well that worked last time. How high did oil go before things seriously fell apart?
The question of the century therefore continues. Do I brace for deflation or inflation? I've been a bear since 2004 and I'm still not sure.
If the price of housing is any indicator, then we bought way too much stuff on credit. It seems unlikely that buying MORE stuff (hoarding) and/or piling on more debt is the greatest of plans. That's the deflationist in me talking.
However, Ben Bernanke said, "But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services."
I believe it is a threat. I believe it is credible. I believe it truly creeps me out too. Perhaps I never really thought of a monetary printing press that can create dollars at essentially no cost as being some sort of technological breakthrough. That's the inflationist in me talking.
What do I do when I feel threatened? No matter how much money appears, all I seem to do is hoard future needs. Is going to the mall a future need? Not really. Is eating at restaurants a future need? Not really. Doesn't our economy need people going to the mall and eating at restaurants? That's the long-term stagflationist in me talking.
Perhaps our economy shouldn't need people going to the mall and eating at restaurants as much as it does though. Wouldn't it be nice if our "advanced economy" didn't import much of what it needs from other countries? Oil? Made in China? That's just me being bearish again. Sorry!
Who should we ask? The people? Banks? China?
Oh, I know. Let's ask the People's Bank of China!World Economy Is Yet to Bottom, People’s Bank Says (Update1)The “external economy has yet to bottom out or establish a trend towards a recovery,” the People’s Bank of China said in regional reports posted on its Web site today. “The global financial crisis is still spreading and the impact on China is deepening.”I hope all this Chinese bearishness doesn't become a "pandamic"!
Thank you. Thank you very much. I'll be performing pun-based dark sarcastic gallows humor until the illusion of prosperity is fully restored. You've been a great audience. Oh please. Stop already.
1a. Oil prices rose much faster (in percentage terms) than stock prices and housing prices on the way up.
1b. Oil prices crashed much harder (in percentage terms) than stock prices and housing prices on the way down.
So where are we now?
2a. Oil prices are now rising much faster (in percentage terms) than stock prices and housing prices on the way up, again. In fact, oil is beating the living daylights out of housing prices right now (since housing prices are still going down).
I have this strange feeling of déjà vu. Will there be a 2b? How much longer before we get the rest of the cycle? I therefore offer the stagflationary theme song as sung through the lungs of oil. Oil is such a great performer!I heard the following joke on the radio. I doubt I can do it justice but I'm going to give it a shot (and seriously embellish the heck out of it for dramatic effect ;)).
A guy sees an ad in the paper for a dog. He visits the house and asks the owner if he can see it. The owner tells him that the dog is in the back yard.
The guy heads off to the back yard. The dog is just sitting there, looking at him. The guy says, "Hey, you are a pretty good looking dog." The dog replies, "Thanks."
The guy is blown away! He exclaims, "Holy cow! You are a talking dog!" The dog replies, "Yeah, it's a long story." The guy wants to know all the details and the dog is more than happy to comply. Here is his story.
"I learned to talk as a puppy. I was able to read the lips of all the animals that I have met and that combined with my advanced intellect allowed me to pick up their languages fluently. Humans are one such animal. At the age of one, I convinced my owner to send me off to college. I told him there would be money in it for him and his small investment would pay off big time. It would have too, in ways he couldn't have possibly even imagined, except that I was halfway through my PhD in Physics when the CIA caught wind of my genius. I was shipped off quietly to Langley for advanced training.
The training didn't take long since I'm such a faster learner and was naturally adept at the obstacle courses. Once complete, I found myself on a military transport plane headed overseas. I was dropped near a terrorist training camp and had no problem whatsoever infiltrating their network. Nobody expected a talking dog, much less one with an IQ off the charts. After thwarting many serious threats to our country, I was then sent to Europe. There, I uncovered a threat to use nuclear weapons against us. In the days that followed, I single-handedly managed to save the entire planet from global war. Of course, nobody knows about that. Nobody ever hears of the successes in the CIA, only the failures.
After putting in a few more years of hard work, and after saving the planet numerous additional times, I finally convinced the CIA that it was time to retire. Sure, they attempted to stop me but by that point they were no match for my counterattempts. In the end, they knew it was best to just let me go peacefully."
The dog then says, "That's where you come in. I'm done saving the country. I'm also burned out. I just need an owner who wants to play frisbee every now and then, but mostly I'd just like to kick back on the couch, perhaps sharing stories of my exploits. Can you blame me?"
The guy can't believe it. He walks back into the house to speak to the owner. He says, "So let me get this straight. You only want $10 for THAT dog? How can it be?" The owner replies...
"That dog is SUCH a liar! He didn't do ANY of that stuff!"
That dog reminds me of our economy for some strange reason. Hahaha! Sigh.
Never thought I'd say that, but consider...
May 25, 2009Jobless Graduates Face Dismal Jobs MarketOkay, the headline isn't all that optimistic. I'll grant you that.Graduates hoping to become Wall Street wunderkinds or commercial real estate tycoons better be thinking about Plan B. Other than those with specialties in bankruptcy, the Plan A jobs simply are not there.He's not all that optimistic about Plan A and Plan B. I'll grant you that too.Moreover, those who waste too much time pursuing jobs that are not available are likely to end up in Plan C, working at Starbucks.There's way too much optimism about Plan C though. In his defense, perhaps Plan C was intended to be symbolic and I'm just taking it way too literally?
May 26, 2009A Fan Hits a Roadblock on Drive to See Every StarbucksA man on a mission to visit every Starbucks in the world has a problem: Starbucks Corp. is closing scores of stores he has yet to visit.
The freelance software programmer, 37 years old, calls himself Winter. He was on a job in Wisconsin last month when he learned that a Starbucks in Prince George, British Columbia, would close the next day. He spent $1,400 to jet there for a cup of coffee -- sugar, no cream -- and a photograph.
"If the store closed before I visited, I would lose another piece of my soul," Winter says.Imagine spending $1,400 to buy a cup of coffee but not actually getting it? Oh the humanity! You really have to sympathize with Winters. This downturn is likely to cost him yet another piece of his soul. By the looks of it, there isn't much soul left to lose. Further, you just can't put a price on unsecured souls these days.
May 14, 2009
Moody's lowers Starbucks debt ratingMoody's Investors Service has lowered its rating on Starbucks Corp.'s $550 million senior unsecured notes to just above junk, citing the Seattle-based coffee retailer's challenge of refocusing its business amid the recession without "significantly damaging" its brand.We're All "Just Above Junk" Now!Same-store sales, or sales at stores open at least a year, fell 8 percent both worldwide and in the U.S. That was a slight improvement from the prior quarter when Starbucks' global same-store sales fell 9 percent and U.S. same-store sales declined 10 percent.The ship was sinking at a 9 to 10 percent rate and now it is only sinking at an 8 percent rate? Oh happy days!
If you are a passenger, please enjoy this complimentary party hat!
If you are a member of the general crew, please rearrange the deck chairs so that there is a clear path to the life boats. Don't forget to keep the music playing though.
If you are a ship's officer, please move calmly and quietly to the life boats. Do not put your life jacket on until you are free of the ship and safely out to sea. There's no reason to create a panic.
May 22, 2009Starbucks bails out some employee stock optionsBecause the company’s share price has significantly dropped in the past year, officials at Starbucks Corp. are giving employees with stock options a chance to swap out their “underwater” options.
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