Boom2Bust.com

U.S. To Suffer Biological, Nuclear Terrorist Attack Before 2013

Seeing that we’re so loved by the rest of the world, the following isn’t too surprising. From FOX News earlier today:

Terrorists are likely to attack the United States using nuclear or more likely biological weapons before 2013, reports a bipartisan commission in a study being briefed Tuesday to Vice President-elect Joe Biden.

It suggests the Obama administration bolster efforts to counter and prepare for germ warfare by terrorists…

The commission believes biological weapons are more likely to be obtained and used before nuclear or radioactive weapons because nuclear facilities are more carefully guarded. Civilian laboratories with potentially dangerous pathogens abound, however, and could easily be compromised.

“The biological threat is greater than the nuclear; the acquisition of deadly pathogens, and their weaponization and dissemination in aerosol form, would entail fewer technical hurdles than the theft or production of weapons-grade uranium or plutonium and its assembly into an improvised nuclear device,” states the report.

It notes that the U.S. government’s counterproliferation activities have been geared toward preventing nuclear terrorism. The commission recommends the prevention of biological terrorism be made a higher priority.

FOX News staff added that terrorists still don’t have the technical prowess to make WMDs. From the piece:

The report of the Commission on the Prevention of WMD Proliferation and Terrorism, led by former Sens. Bob Graham of Florida and Jim Talent of Missouri, acknowledges that terrorist groups still lack the needed scientific and technical ability to make weapons out of pathogens or nuclear bombs.

“Still lack the needed scientific and technical ability.” Rubbish. Folks, telling that to the American people is like telling American soldiers in Word War 2 that their Japanese counterparts couldn’t shoot straight because of the shape of their eyes. Ever heard of the “Nth Country Experiment”? According to Graham T. Allison, Director of the Belfer Center for Science and International Affairs at Harvard University, in his book Nuclear Terrorism: The Ultimate Preventable Catastrophe, in 1964 U.S. government scientists at the Lawrence Livermore National Laboratory, one of the nation’s premier nuclear weapons design labs, wanted to see if a nuclear weapon could be designed by a few individuals without access to classified information. In the ensuing experiment, two recent Ph.D. students were chosen, precisely for their lack of knowledge of nuclear physics. One of the students even admitted to having only a high-school level understanding of nuclear fission. Using the scientific literature available during that time, the two young men researched nuclear fission, the shaping of conventional explosives, and even dug up charts and data from the first Los Alamos experiments. The resulting document, which included details on what materials were required and how to build the bomb, was turned over to nuclear weapons experts at Livermore. Their conclusion? If built, the proposed device, which was small enough to be transported in a cargo container or van, would not only work, but would explode with a force equal to the bomb dropped on Hiroshima during World War Two…

A copy of the report (in .pdf format) of the Commission on the Prevention of WMD Proliferation and Terrorism can be accessed on the FOX News website here.

Sources:

“Nuclear or Bioterror Attack on U.S. Likely by 2013, Panel Warns”
FOX News, December 2, 2008

Nuclear Terrorism: The Ultimate Preventable Catastrophe
Graham T. Allison, 2004

One-Third Of First-Time Home Buyers Use No Money Down In 2007-2008

You’d think some people would learn a thing or two from the Great American Housing Bust. Chicago Tribune real estate columnist Mary Umberger wrote this past weekend:

Each year, the National Association of Realtors meticulously surveys thousands of real estate consumers in order to get an idea of which ones, exactly, got to the closing table, and how they did it.

The 10,000 consumers who responded to the latest survey revealed a couple of things about first-time buyers. Their numbers grew in this 2007-08 study—not terribly surprising, given that first-timers were unencumbered by having a house to unload. First-time buyers accounted for 41 percent of all transactions, up from 39 percent the year before, and up from 36 percent in the 2005-06 study.

But many first-timers managed their deals in a way that I find troubling, given that we’re now reminded every single day that easy credit is what led us into our current national financial bind: A huge number of them bought with no money down—34 percent of all first-time buyers financed 100 percent of their purchases. (Among all types of buyers, 23 percent purchased with 0 down.)

Hope these new homeowners keep their jobs in the 2008-? U.S. Recession. Otherwise, there’s going to be a lot more jingle mail down the road…

Find your place at Apartments.com. View photos, floor plans, take a virtual tour and more!

Source:

“No down payment? Buyers still able to score homes”
Mary Umberger
Chicago Tribune, November 30, 2008

AIG To Taxpayers: It’s Raining

Last week, Bloomberg reported that insurance giant AIG was not going to award bonuses to top executives. Or are they? From Bloomberg’s Hugh Son back on November 26:

American International Group Inc., the insurer that said yesterday it scrapped bonuses for top executives after a U.S. bailout, will still pay 130 managers “cash awards” to stay with the firm, including $3 million to retirement services chief Jay Wintrob.

Wintrob, 51, will get the “retention” payment in two installments, the first in April 2009 and the rest a year later, New York-based AIG said today in a regulatory filing. The firm previously disclosed the program in a Sept. 26 filing and said today that Wintrob and Chief Financial Officer David Herzog elected to get the payments four months later than planned.

“The expectation from the public and Congress was that they weren’t getting bonuses, not that they’d be pushed off by several months,” said David Schmidt, a consultant at executive pay firm James F. Reda & Associates. “That clearly violates the spirit of AIG saying they’ll forgo their bonuses.”

AIG’s response? Son wrote:

“We’ve said they aren’t eligible for annual bonuses, and they’re not,” Nicholas Ashooh, spokesman for AIG, said today in an interview. “What we’re talking about are retention agreements — they’ve been pushed back by several months — and it’s our hope that those businesses will be sold in several months.”

What’s that saying? “Don’t piss on my leg and tell me it’s raining.”

Source:

“AIG Gives ‘Retention’ Pay After Scrapping Bonuses (Update2)”
Hugh Son
Bloomberg, November 26, 2008

Quote For The Week

It’s a recession when your neighbor loses his job; it’s a depression when you lose yours.

-Harry S. Truman (33rd U.S. President. 1884-1972)

Related Post

It’s not often you see a “crash prophet” criticize another prophet’s investment style. From our sister blog Investorazzi.com tonight:

“Mark Faber: Forget Warren Buffett Aproach, This Is A Traders’ Market”

“I think The Warren Buffett approach is dead, and it’s been dead for ten years, and it’s going to be dead for another ten years. We’re moving into very high volatility, big swings in all markets.”

Maintenance And Upgrades

Hope everyone had a nice weekend— or holiday, in the case of my American readers.

Today I’ll be carrying out some maintenance and upgrades on Boom2Bust, so please be patient if you notice some “funny stuff” going on while on the weblog.

Thanks!

Christopher E. Hill
Editor

Weekend Video

I think the following says loads about what’s going on in the global financial system these days…

The whole thing’s daft, I don’t know why,
You have to laugh, or else you cry,
You have to live or else you die,
You have to laugh or else you cry.

The Piranhas, “Tom Hark” (1980)
YouTube Video Link

Stock Market Losses Threaten Baby Boomer Retirements

It’s never a “good” time for the bear to growl down on Wall Street. But this one couldn’t have come at a more inopportune time, as far as Baby Boomers are concerned. From Reuters staff earlier today:

Wall Street is currently in its worst bear market since the Great Depression, and its stunning destruction of wealth and retirement savings has sent a wave of distress through investors, especially older ones…

The Organization for Economic Cooperation and Development estimates U.S. household wealth has taken a $7 trillion hit from the tumbling housing and stock markets.

Last week’s stock market losses took the S&P 500 down to 11-year lows and amounted to a 52 percent decline from record highs hit a year ago.

Source: American Chronicle

What makes this stock downturn so potentially devastating is that a sizeable portion of retirement assets belongs to older Americans. From the Reuters piece:

Households aged 50 and older held $5.1 trillion in retirement accounts as of Sept. 30, 2008, according to the Urban Institute. That means 71.5 percent of all retirement account assets are in the hands of those vulnerable to financial losses as they approach the end of their salary-earning years.

Of households ages 50 and older, 49 percent own retirement accounts, and nearly 80 percent of those accounts include stock holdings, according to the Urban Institute.

The typical retirement account for 50-and-older savers has half its assets in stocks, compounding the damage just as many enter the final stretch before retirement. This could also have a chilling effect on the economy if they are forced to adopt a more austere lifestyle to shore up savings.

FREE VIDEO FOR TRADERS/INVESTORS: Is gold the last store of value?

Source:

“Falling Stocks Crush Boomers’ Retirement Funds”
Reuters, November 28, 2008

Commercial Real Estate Crisis Grows

Bad news is quickly shifting from residential real estate to the commercial real estate market. Matt Apuzzo of the Associated Press wrote Thursday:

The full scope of the housing meltdown isn’t clear and already there are ominous signs of a new crisis — one that could turn out the lights on malls, hotels and storefronts nationwide.

Even as the holiday shopping season begins in full swing, the same events poisoning the housing market are now at work on commercial properties, and the bad news is trickling in. Malls from Michigan to Georgia are entering foreclosure.

Hotels in Tucson, Ariz., and Hilton Head, S.C., also are about to default on their mortgages.

That pace is expected to quicken. The number of late payments and defaults will double, if not triple, by the end of next year, according to analysts from Fitch Ratings Ltd., which evaluates companies’ credit.

“We’re probably in the first inning of the commercial mortgage problem,” said Scott Tross, a real estate lawyer with Herrick Feinstein in New Jersey.

That’s bad news for more than just property owners. When businesses go dark, employees lose jobs. Towns lose tax revenue. School budgets and social services feel the pinch.

Apuzzo explained that the CRE crisis could grow into a full-blown meltdown. From the piece:

Companies have survived plenty of downturns, but economists see this one playing out like never before.

In the past, when businesses hit rough patches, owners negotiated with banks or refinanced their loans.

But many banks no longer hold the loans they made. Over the past decade, banks have increasingly bundled mortgages and sold them to investors. Pension funds, insurance companies, and hedge funds bought the seemingly safe securities and are now bracing for losses that could ripple through the financial system.

Unlike home mortgages, businesses don’t pay their loans over 30 years. Commercial mortgages are usually written for five, seven or 10 years with big payments due at the end. About $20 billion will be due next year, covering everything from office and condo complexes to hotels and malls.

The retail outlook is particularly bad. Circuit City and Linens ‘n Things have sought bankruptcy protection. Home Depot, Sears, Ann Taylor and Foot Locker are closing stores.

Those retailers typically were paying rent that was expected to cover mortgage payments. When those $20 billion in mortgages come due next year — 2010 and 2011 totals are projected to be even higher — many property owners won’t have the money. Some will survive, but those property owners whose loans required little money up front will have less incentive to weather the storm.

Refinancing formerly was an option, but many properties are worth less than when they were purchased. And since investors no longer want to buy commercial mortgages, banks are reluctant to write new loans to refinance those facing foreclosure.

California, New York, Texas and Florida — states with a high concentration of mortgages in the securities market, according to Fitch — are particularly vulnerable. Texas and Florida are already seeing increased delinquencies and defaults, as are Michigan, Tennessee and Georgia.

The worst-case scenario goes something like this: With banks unwilling to refinance, a shopping center goes into foreclosure. Nobody can buy the mall because banks won’t write mortgages as long as investors won’t purchase them.

Look at the bright side. At least the mall rats will be back.

I know, stick to my day job…

Scene from “Mallrats” (1995)
YouTube Video Link
Warning! Foul language and animal cruelty… sort of

Source:

“Malls, hotels next victims in new mortgage crisis”
Matt Apuzzo
Associated Press, November 27, 2008

Related Post

From our sister blog Investorazzi.com this morning:

“Tom Barrack: Commercial Real Estate In ‘Massive Meltdown’”

“Here is the Cliff Notes summary – Real estate is experiencing a seismic liquidity shock as a result of a complete closure of the credit and capital markets for both debt and equity. CRE and the debt which fueled its growth are in a massive meltdown.”

Signs Of The Time, Part 29

Bloody savages…

Black Friday took a grim turn when a Wal-Mart employee in New York died after bargain hunters broke down the doors to the store.

The 34-year-old male employee was pronounced dead one hour after shoppers broke down the doors to the shopping center in Valley Stream, N.Y., and knocked him down at around 5 a.m. Friday, police said.

“He was bum-rushed by 200 people,” Jimmy Overby, the man’s 43-year-old co-worker told the New York Daily News. “They took the doors off the hinges. He was trampled and killed in front of me. They took me down too … I literally had to fight people off my back.”

A 28-year-old pregnant woman was also taken in for observation and three other shoppers suffered minor injuries during the incident, police said.

Wal-Mart Stores Inc., in Bentonville, Ark., would not confirm the reports of a stampede at the Valley Stream outlet but said a “medical emergency” had caused them to close the store.

“Local authorities are looking into the situation,” said Wal-Mart representative Dan Fogleman. “Until such time that they’ve completed their assessment it would be inappropriate for me to share any additional information.”

Source:

“Wal-Mart Worker Dies When Shoppers Break Down Doors”
FOX News, November 28, 2008

$7.36 Trillion Already Spent, Lent, Committed To Fight U.S. Financial Crisis

According to the CNBC website Wednesday night, their calculations show that $7.36 trillion has already been spent, lent, and committed by the U.S. government to fight the ongoing crisis in the financial system. From the article:

Given the speed at which the federal government is throwing money at the financial crisis, the average taxpayer, never mind member of Congress, might not be faulted for losing track.

CNBC, however, has been paying very close attention and keeping a running tally of actual spending as well as the commitments involved. And there’s been quite a jump since we last tabulated things two weeks ago.

Try $7.36 trillion dollars. That’s more than double what was spent on WW II, if adjusted for inflation, based on our computations from a variety of estimates and sources.

Not only is it an astronomical amount of money, it’s a complicated cocktail of budgeted dollars, actual spending, guarantees, loans, swaps and other market mechanisms by the Federal Reserve, the Treasury and other offices of government taken over roughly the last year, based on government data and news releases. Strictly speaking, not every cent is a direct result of what’s called the financial crisis, but they’re all arguably related to it.

The bulk of the sum falls under the Federal Reserve’s umbrella, while another good chunk ($700 billion) is the under the Troubled Asset Relief Program (TARP) as defined under the Emergency Economic Stabilization Act, signed into law in early October. (The TARP alone is bigger than virtually any other US government endeavor dating back to the Louisiana Purchase. See slideshow.)

The total figure is a combination of what’s been committed (where it is defined) and what has actually been spent or lent (where a given program has started.)

Astonishing. Question is, how much more will be allocated in an attempt to calm the storm?

Source:

“Financial Crisis Tab Already In The Trillions and Counting”
CNBC, November 26, 2008

Related Posts

From our sister blog Investorazzi.com tonight:

“Marc Faber Says Gold Is Most Precious Asset”

“I think that precious metals are attractive because every responsible individual in this world must know— central banks have become asylums for economists that have turned insane. And in their insanity, they became money printers. And so you have to be your own central bank. You cannot trust the central banks of our governments anymore…”

“Jim Rogers Predicts Stocks Will Temporarily Rally”

“This is a mess developing. Please understand that. If you’re not worried, you should be worried.”

Holiday Schedule

There will be no new relevant material posted on Boom2Bust.com this Thursday due to the Thanksgiving holiday in the United States.

New posts are planned for Friday.

Thanks!

Christopher E. Hill
Editor