Yes, that’s number 217 of the things that I never expected to say, but when I read that Angela Merkel’s governing coalition is looking to put statutory limits on executive pay, that is what I thought. When the conservatives in government argue that, in addition to encouraging bad behavior, “that growing wage disparities “pose a threat” to social cohesion,” I wonder why our policies are run by John Galt wannabes.
Category: Europe
Europeans Want 50% Stake in Opel for GM Aid
It looks like GM May divest itself of something around 50% of Opel in exchange for €3 billion in aid.
Note that this is a loans and loan guarantees primarily from from German federal and state governments, not a sale, but these nations are demanding that GM give up a significant proportion of its ownership shares.
I think that this comes down to the European governments believing that GM would otherwise use Opel as a unwilling organ donor.
Economics Update
Well, the revised GDP numbers are in for Q4 of 2008, and they are a horror-show, with GDP declining 6.2%, when the initial numbers had been -3.8%.
With numbers like this it’s no wonder that the FDIC is reporting that the banking industry posted an aggregate net loss for a quarter for the first time since 1990.
If we are expecting real estate to rebound any time soon and save us, I wouldn’t hold my breath with condo developers trying auctions to move properties, and And apartment buyers walking away from deposits….Six and seven figure deposits….in Manhattan.
I would also note that the consumer does not appear to be their either, with the finally tally for the Consumer Confidence Index falling to a 29 year low.
With numbers like this, it’s no surprise that S&P is considering downgrading the ratings on $140 billion of prime jumbo mortgage CDOs, and non-prime mortgage origination hit a 17-year low last year.
Real estate, and hence banking, is in a sad enough condition that the FDIC has instituted a temporary emergency rate hike in order to bolster its reserves.
More generally, we have The Institute for Supply Management’s Chicago Purchasers’ Index showing continued contraction. It rose to 34.2 from 33.3, but anything under 50 means contraction, and the 30s are significant contraction.
The fact that GE cut its dividend to 10 cents from 31 cents indicates that no one is doing well here.
The same is going on overseas, with most of eastern Europe in dire straits, getting emergency loans totaling about $31 billion, and Japanese factory output falling, and new jobs drying up.
Economics Update
Well, the Conference Board’s consumer confidence report came out and it is starkly grim, dropping to a record low of 25, lower than had been predicted.
BTW, it’s not just us, German business confidence has fallen, and Standard & Poor’s lowered Latvia’s debt rating to junk.
This means that German businesses have no confidence in the new future, and no one has any confidence in Latvia.
Even the New York Stock Exchange is getting in the act, looking at temporarily suspending a requirement of a $1/share price in order to avoid delisting….I call it a Citi Special, though the two most prominent companies at risk of delisting right now are AIG and Ford.
The fact that the Case-Shiller numbers for the top 20 real estate markets show a price decline of 18.5% year over year, has a lot to do with that.
In currency, the dollar fell a bit, while in energy, oil rose.
Gripen/JSF in the Netherlands Gets Odd
So, Saab is talking about cutting its losses on the fighter competition in the Netherlands if they order two F-35 test aircraft in the next few months, which brings them into the JSF test program, which makes sense, the fix has been in for some time here, with Lockheed throwing too much business Dutch industry’s way for them to say no.
But wait, there’s more.
The Netherlands is demanding a firm fixed price for the F-35, which Lockheed Martin is simply unable to do….The aircraft is still (!) not mature enough, and we are seeing price ranges from $60m to $160 million from various sources and what is counted. (The last number is from Air Power Australia, and they really dislike the JSF[Update: the Israelis are saying $200 million, more than the F-22])
Saab, meanwhile, has given a firm fixed price offer which covers pretty much everything from soup to nuts of around $79 million.
I don’t think that Saab has the least chance of winning this, but this is definitely interesting.
Fear and Loathing in Euro Missile Defense
Click Pictures for full size images
Tehran to DC
Tehran to DC
Masshad to Washington, DC
Masshad to San Francisco
Masshad to Rome
Masshad to Madrid
Masshad to Istambul
Masshad to Athens
Masshad to Chicago
I’m thoroughly skeptical of BMD systems to begin with, particularly the current Ground-Based Midcourse Defense system.
The technology for decoys is simply too easy, it’s basically the same as the shiny metalized children’s balloons you can get at party city, and striking a reentry vehicle when closing speeds are in excess of a mile per second seems to me to involve awfully long odds.
I call it “faith based missile defense,” and one of the earliest goals of the Bush administration was to ensure that it be deployed into service come hell or high water, on the theory that once it was there, it would be politically costly to remove it.
OK, so we all know the game, scary Persians are going to lob an IRBM at Europe, so we have to put an Ballistic Missile Defense (BMD) system into Poland, so as to protect everyone.
Thing is, Poland is a pretty crappy place to put a BMD system to protect our NATO allies, and this installation, along with the associated radar at Brdy in the Czech Republic* and it’s gotten the Russians absolutely batsh$# insane.
If you figure out the trajectory of a Ballistic missile,† and the tools to the this can be found in a number of places on the web, the location does not make sense.
It does not protect Turkey, Greece, Spain, Portugal, Bulgaria, Romania, Slovenia, or southern France.
I’ve had discussions with people sho have suggested that it would protect the eastern seaboard, and it would, if you launched the missiles from downtown Tehran, but just like our ballistic missiles are not located on Washington DC or Crystal City, it’s unlikely that they would put their installation there.
They would want to locate it as far away from a potential aircraft carrier, NATO airbases in Turkey, and the US base at Diego Garcia.
This would put a missile base in the North East corner of the country about 500 miles east of Tehran, in the general vicinity of Masshad, the 2nd largest city in Iran.
Suddenly that interceptor in poland does not do such a good job protecting the east coast.
For an attack on the West Coast, it’s path is too far from either Poland, or the base at Fort Greely, and the installation at Vandenberg seems iffy for covering San Francisco and points north.
Now, the folks the Missile defense agency claim that the installation in Poland is unable to intercept Russian ICBMs (bottom picture), but unsurprisingly the Russians do not believe them.
The Russians did offer a site at Qabala, which they rent from Azerbaijan, if the US dropped the Polish installation, but the respons, at least by Bush and His Evil Minions™ was to go pound sand.
In any case, it’s clear that Azerbaijan, Turkmenestan, Uzbekistan, and Georgia would be prime locations for such a site, though there are serious political issues there, but sites in Turkey, Romania, or Bulgaria would provide better coverage of Europe, and might have a shot at intercepting something headed for Chicagoland, which none of the current installations do.
*In fact, the radar, which can surveil all the airspace in European Russia, may be more of a sticking point than the missile base in Poland.
†I used Google Maps. Go there, then click “my maps”, and then click on “browse the directory”, and click on the distance measurement tool, and it will compute great circle‡ distances, which is what modern aircraft, and ballistic missiles, do .
‡It’s the shortest distance between two points on a sphere. The straight line on a Mercator projection is actually longer. It’s what you would get if you used a globe, and a tight string between two points on that globe.
The EU Gets a Major Case of the Stupids
The European parliament’s legal affairs committee just voted to extend copyright on music performances to 95 years. It was 50 years.
It has to go to the full parliament, but it’s likely to pass next month.
Stupid.
This won’t create any more performances, people don’t perform in the expectation of revenues on year 51, so it won’t create any more music, but what it will do is ensure that obscure works will be lost over time, because the difficulties of preserving and reproducing them will be too great.
Under the rules that they are proposing….Hell under the rules that they have now, Shakespeare’s works would have been forever lost to decay.
They would be gone, but we have to protect the f^%$ing mouse for another 45 f^%$ing years.
Economics Update
Well, GDP in the Euro Zone fell by 1.5% in the 4rth quarter, and 1.2% from the 4th quarter of 2007.
The quarterly drop is the largest in 13 years, and the year over year drop is the first recorded ever…..One of the joys of integrating your economy is that you integrate your recessions.
It’s no wonder that OPEC’s predictions for world oil consumption have been slashed again, though interestingly enough, oil is up today, by the largest amount this year, largely on the expectation that the stimulus bill will pass.
In real estate, the New York Federal Reserve is continuing its aggressive policy of buying from the sh$% pile, purchasing another $23.2 billion in agency mortgage-backed securities this week, for a total of $114.96 billion.
There is an interesting bit here though, this quote, “The Fed has also said it may soon begin modifying mortgages it owns within the assets it owns.”
Somehow I figure that this is part of a much bigger story, only I don’t know what it is yet.
Also we have Citi and J.P. Morgan Chase Agreeing to a foreclosure moratorium, and I think that this might be a part of the rest of that story. Specifically, I think that they are worried about Geithner’s “Stress Test,” and they are doing this because they are hoping for goodwill from regulators.
Finally, the dollar is down today, for the same reason that oil is up. The stimulus package looks like a light at the end of the tunnel, and so the “flight to safety” moderated a bit.
Is the A400M Cursed
In addition to everything else, it appears that the Airbus A400M is significantly overweight.
The first 6 produced will be 12 tons overweight, and the production models are looking at a 5-7 ton weight problem, which means that it would have to enlarge the wing to meet performance guarantees.
Iceland Looking to Join EU
Or possibly to just adopt the Euro as its currency.
It looks like they may be making an application in the next few months.
One complication is that the new governing coalition would be at odds over this, with the Social Democrats favoring it, and the Left Greens opposing it.
There will be an election in May, and I think that the Left Greens will do well, if just because the Social Dems were previously in coalition with the Independence Party, and so had a hand in creating the laissez-faire policies that have left them in a lurch.
Iceland’s Conservatives Out for the First Time in 20 Years
No surprise at the change in government.
The free-market mousketeers ran the country into the ditch, so the new government will be led by the Social Democrats, and will include the Left Green Party.
I believe that we are going to see a lot more of this over the next few years.
Economics Update
Well, the FOMC meeting ended, and they relased statement saying that they will stay at zero interest rates for some time.
Additionally, they are looking at, “Unconventional Measures,” which appear to include buying longer term Treasuries.
It appears that one of those steps is that they will write down a significant of the mortgage backed securities that they picked up in the Bear and AIG bailouts, a sort of voluntary “cram down”.
Europe seems to have stabilized, at least for now, with consumer sentiment steadying.
Meanwhile, mortgage applications fell sharply, as interest rates have risen, from 4.88% at the beginning of the year to 5.22% now, in anticipation of ballooning deficits.
Of course, if reports that Moody’s is considering cutting GE’s triple-A credit rating, are true, we’re in for another big shock.
Russia May Not Deploy Missiles to Kaliningrad
We have reports that the Russians are offering not to deploy missiles on the Polish border, but we also have official Russian denials of those reports.
My guess is that the truth is somewhere in between, with the leak intended as to jump start negotiations on the matter.
Boeing Jumps into Danish Fighter Competition
Where its Super Hornet joins the Gripen NG and the JSF.
I think that the fix is in for the JSF, bribery and coercion offsets and diplomatic considerations making any other choice highly unlikely.
The Gripen is still the cheapest alternative, but the F/A-18 E/F is not only flying, but actually in service, and so is even more of a know quantity than the Gripen.
But like I said, there is a very hard full court press going on with this aircraft.
Rumors that EADS Will Abandon A400M Transport
They have suspended production and the prototype is yet to fly, though the engine has finally taken to the air in the C-130 testbed, and now the Financial Times Deutschland is reporting that EADS is considering walking away from the contract.
I’m not sure how that would work, but EADS is facing some fairly substantial penalties for the delays, and
My guess is that the rumors, and the dire statements made by EADS executives, are an attempt to move negotiations on delays in their favor.
Gripen NG Supercruises
On Wednesday, the Gripen NG prototype sustained Mach 1.2 at 28,000 feet without the use of afterburners, though it did use reheat to get to Mach 1.2, and then went full military power to settle to a speed, which it held until it “ran out of test area.”
No idea on how long the test ran, but my guess would be something on the order of 10-30 minutes total.
Economics Update
Well, it’s official now for the British, they are in recession too.
Not surprisingly, the Pound has tanked and the dollar is generally up on this news.
The Ruble further weakened too.
We also now have ING warning that France’s AAA sovereign debt rating is at risk.
Meanwhile, on this side of the pond, the New York Stock Exchange has lowered its market capitalization requirement for companies on the exchange.
They delisted a record 53 companies last year, and my guess is that they are worried about breaking 100 this year, so they changed the requirement to account for a tanking market.
A more general indicator of economic activity, the rail freight traffic, has fallen sharply.
Generally, the high energy prices of 2008 favored the industry, but when total economic activity falls, so does rail traffic, even as it grows relative to trucking. (H/T Calculated Risk: Rail Freight Traffic Off Sharply in 2009)
In the intersection of banking and real estate, it appears that the regulators of Fannie Mae, Freddie Mac and the Federal Home Loan Banks (FHLB) are seriously tightening up regulations because they are still engaging in risky activity.
I just want to note that I suggested that this might be an issue in March of last year.
Also, it appears that the inventory and foreclosure numbers are worse than you think.
Banks are not wanting to flood the market, so they are holding back on placing some of their foreclosures on the MLS and delaying foreclosures on properties in default, so there is a “ghost inventory” out there that is not showing up in the numbers.
In energy, oil was up today.
Gas is Flowing Again
Austria is reporting that it is getting gas again, which, given their location, means that the taps are opened again.
Gas Deal Reported
I hope that this one is not a false alarm
Under the reported deal, Ukraine will pay 20 percent less than the European price for this year. This means a substantial increase for Ukraine in the first quarter but the price could fall significantly later in the year as gas prices are expected to drop.
It does seem to be a fair deal to both sides….Which Is why I’m wondering when it will fall apart.
Also, Slovakia has put off restarting is Soviet era nuke plant.
They had declared an emergency because of the gas crisis, and were talking about restarting it.
There is Only One Side Here Acting Like a Thief
And it is not the Russians.
So we have an “agreement” 2 days ago, and Russia puts a little gas into the system, in order to verify that the Ukrainians are not tapping the gas going to Europe, and they get the following:
Ukraine’s state energy firm said it could not ship the gas without cutting off several of its own regions.
So, why do I believe that this points a finger at Naftogaz and the Ukrainians?
Because rerouting some of the gas in one direction, and some in another is how these networks are supposed to function.
I would also add that the fact that the Ukrainians are refusing to route the gas to Europe and refusing to allow monitors into dispatching centers and control rooms as agreed to by both sides.
This is not how an honest broker behaves.
Meanwhile, the governments on the EU side of the pipeline are freaking out, and Medvedev has called for an emergency summit on this in 3 days in Moscow.