Author: Steve Boren

Early parole and its effect on the region: Wary of inmate release
Despite reassurances from state officials that the thousands of inmates due to be released early from prisons will be low-risk offenders, Glendale and Burbank authorities say the state is abdicating its duties, forcing their officers to act as parole agents. Glendale, Burbank, La Cañada Flintridge and La Crescenta could see up to 44 newly released inmates move into their communities without supervision, although local officials say that number could be far higher.
Glendale News Press

LAPPL responds to death of LAPD officer Jacqueline Montalvo

President Paul M. Weber responded this afternoon to the death of Officer Jacqueline Montalvo, who had over 11 years with the Los Angeles Police Department: "On behalf of all Los Angeles police officers, we extend our condolences to the family and friends of LAPD Officer Jacqueline Montalvo. Jacqueline was a well-known and respected officer in the community, and her death is a huge loss to both the residents she served and to the Department. Our condolences also go out to the officers who worked with her, many of whom have expressed feelings of losing a family member."
LAPPL Press Release

A college newspaper gets it, why can’t the city’s leaders?
One of the best-framed commentaries we’ve read on the budget crisis appeared recently in the Daily 49er newspaper of California State University, Long Beach. Noting that Villaraigosa wants to keep hiring police officers even as he proposes to cut the pay of the existing city workforce, the newspaper said: "In other words, those already working for the LAPD will be punished and others would be brought in to share in the burden. Apparently, he just wants to reach his 10,000-officer quota. Doesn’t it make more sense to stop hiring? The LAPD has already carried out several cutbacks such as relinquishing overtime pay and pay for unused sick days." The Daily 49er nailed it and we thank them for it.
LAPPL Blog

In Case You Missed It…

By Nicholas Melvoin

When the Los Angeles Unified School District laid off thousands of teachers last spring, the school where I teach, Markham Middle School in Watts, was decimated. Already one of the lowest performing in the state, Markham lost more than half its teachers…

Because experienced teachers from throughout the district weren’t lining up to transfer here, the school was left scrambling to staff classes. Today, months into the school year, many students are still without permanent teachers…

…

Currently, more than 20% of Markham’s teaching staff consists of long-term substitutes, and as late as December, we still had six vacant classrooms where students were taught by a constantly rotating parade of substitutes… at a school like ours, where many students are desperately poor and often have language difficulties as well, it has been catastrophic.

… I applaud the lawsuit filed last week by a coalition of civil rights attorneys to defend California’s most neglected children by seeking to stop the layoffs at three inner-city middle schools.

The lawsuit argues that students at schools like Markham have been denied their constitutional right to equal educational opportunities as a result of the layoffs.

…

Opportunities for instruction have been wasted in classrooms where struggling substitutes cope by handing out crossword puzzles or by having students copy pages out of a textbook.

It can be tough to establish discipline in middle school classrooms in the best of circumstances, and with so many different substitutes, many classrooms were too chaotic for learning to occur.

… The lawsuit cites the story of one student who lost her 4.0 GPA because a teacher simply didn’t have enough information to evaluate her, and so assigned an arbitrary grade.

Even in classrooms where teachers have now been hired permanently, students are desperately far behind…

… they face daunting challenges in classrooms where children have gone months without stable, qualified instructors. The system has failed both the students in the classroom and the teachers who are trying to educate them.
…

Half a century after Brown vs. Board of Education, and years after we committed ourselves to leaving no child behind, we still have a long way to go…

…

The city and its schools need to come to grips with this situation. If there is another round of layoffs, many of our children will lose more than their teachers. They will lose their futures.

Nicholas Melvoin teaches English as a second language at Markham Middle School.

(This article can be read at: http://www.latimes.com/news/opinion/commentary/la-oe-melvoin2-2010mar02,0,3154086,print.story)

Tubby teens pushed towards diabetes drugs for weight loss

Your kid may not have diabetes, but that won’t stop the pediatric pushers from trying to get him hooked on diabetes drugs in order to shed a few pounds.

The latest bit of shockingly underwhelming research found that kids taking metformin XR lost very little weight over a very long time…yet it’s being hailed as some kind of breakthrough.

These teens managed to shave an average of just 0.9 off their body-mass index over a year, according to the study published in the Archives of Pediatrics & Adolescent Medicine. That’s around five measly pounds…for kids who generally need to lose 30 or 40 pounds, or more.

And yet the delusional authors of this study had the nerve to call this complete failure a success.

"These results indicate that metformin may have an important role in the treatment of adolescent obesity," they wrote, apparently unaware of what words like "important" and "treatment" mean.

Then they had the stones to add that longer-term studies are needed.

Sorry, pal — but if you got nowhere in a year, you don’t get a second shot.

The fact is, drugs are never the real answer for weight loss — especially diabetes meds like metformin.

Sure, they might help you or your kid lose a few pounds. And you might kill some mice by setting up land mines in your home, too.

This drug causes nausea, vomiting, cramps and diarrhea — so of course your kids will lose some weight on it. They’ll be too sick to eat…and when they do, they’ll have trouble keeping it all down.

And if you thought your kid was an outcast because he’s fat, wait until you see how his social life blossoms with those side effects. It’s also known to cause plenty of flatulence, but you know kids — maybe they’ll find that one funny.

Never kidding when it comes to children’s health,

William Campbell Douglass II, M.D.

Why you should skip this free diabetes test

When Oprah speaks, her flock leaps. And now, she wants her viewers to run, too — right out the door for a diabetes test.

It’s a great big game of "Oprah Says," but no one wins this one…except for Oprah and her favorite sponsors.

In her biggest act of self-importance yet, the queen of TV blather is trying to solve America’s diabetes problem by sending her viewers out to Walgreens for free blood tests.

Hurry up, now…Oprah says.

Pardon me for not feeling all warm and fuzzy inside, but I doubt Oprah will ever come close to even hinting at the kind of changes people need to make to avoid diabetes.

She has advertisers to worry about, after all.

The truth is, lowering your risk for diabetes is beyond simple: Swear off the sugar, cut the carbs down to the barest of minimums and eat a diet rich in fresh animal fats and protein.

Works nearly every time…but that kind of crazy talk isn’t going to sell a lot of commercials, and it’s not going to make Oprah viewers feel good about their own carb-fueled misery.

So instead, she’s teamed up with Walgreens — which has no financial interest in making America healthy. Ever walk the aisles in a big chain pharmacy? The "food" section is chips, cookies, frozen dinners, soda and ice cream.

The healthiest thing in the store is probably the beer — and that’s only if local liquor laws allow them to sell it.

Chain pharmacies make money by catering to sick fatties who will buy more chips and ice cream while they wait for their prescriptions to be filled.

That, and overpriced dollar-store junk.

Show up for that free blood test, and after your run the potato-chip gauntlet to get to the pharmacy in the back, you’ll be asked to sign a consent form. Take a look at the fine print — it says right on the bottom that they’ll share your information. It doesn’t say whom they’ll share it with, but it doesn’t take much detective work to figure it out — the list of sponsors on the Walgreens website reads like a Who’s Who of Big Pharma: Bayer, Merck, Sanofi Aventis, and Pfizer, just to name of few.

You can bet your glucose they’re salivating at the idea of getting the names, addresses, phone numbers and blood-sugar levels of Oprah viewers who are at risk for diabetes.

But go ahead, sign that form — Oprah says.

If, on the other hand, you really want to eliminate your risk for diabetes, change the channel.

William Campbell Douglass II, M.D.

03.01.10 12:29 PM

Today I am sitting listening to Ralph Merkle lecture on nanotechnology, part of a 9-day-long series of lectures on how accelerating change in technologies of all types will affect our world. 15-hour days and intense discussions are stretching my brain, but I still have to make sure you get your Outside the Box. Fortunately, I came across today's OTB last week from my friends at GaveKal, who offer a way to think about the Greek crisis and what it means for all European bonds.

There are a lot of allegations about manipulation of European bonds. It's those nasty traders. GaveKal shows us data that bond yields are actually quite logical, given the debt of various countries. But they also warn us, as part of their conclusions:

“As of today, there seems to be no additional risk premium related to the possible dislocation of the Eurozone. Clearly, this possibility would have such devastating effect on world financial markets that investors cannot even think of it (even if many talk about it).”

I suggest you read at least the beginning and then the end of this piece, even if the data makes your eyes glaze over. (I must admit the data made me feel all warm and fuzzy, but then I am somewhat of a wonk.)

Have a great week. I am getting overwhelmed here in California, learning about the future. It is going to be amazing, even if our bonds drop in price. We will live in what may be the most interesting and exciting period of human history. What a contrast between the financial markets and what the scientists continue to amaze us with. It is one of the reasons I think we Muddle Through, in spite of our rather negative economic environment.

John Mauldin, Editor
Outside the Box

An Attempt to Think Through the Greek Crisis

GaveKal Ad-Hoc Comment
Asset Allocation & Economic Research
http://www.gavekal.com

Thursday, February 25, 2010

When covering a news-event such as a train-wreck, journalists will typically take one of two angles: the descriptive narrative, full of gory details and hair-rising tidbits; or the human angle, with stories inviting reactions such as anger, admiration, pity, sadness, etc. from their readers. Which brings us to the latest financial train-wreck, namely Greece and the possibility that some of Southern Europe's weakest states will face difficulties in rolling over ever larger amounts of debt issued in a currency they cannot print.

Unfortunately, the looming crisis in Europe has typically led journalists scurrying to file either 'descriptive stories' on how a country like Greece could find itself in its current predicament, or 'human interest' stories on who has made, or lost, money out of recent events. But such stories clearly miss the forest for the trees. Surely the more interesting and important question is what the current unraveling in Europe means for economies going forward? Of course, figuring out what will happen next in Europe is as easy to grasp as a soapy eel. But this should not stop us from drawing some already very obvious conclusions. Moreover, one can probably assume that the panic-like situation currently prevailing in the markets must be generating some opportunities. But how can we identify those? Answering these questions is the aim of this paper.

1- A Review of Recent History

In spite of significant differences between countries in fiscal and regulatory policies, risk premiums on sovereign bonds in the first decade of Euroland's monetary union were hardly discernable. All across the Eurozone, governments enjoyed much lower interest rates and, for most, healthy growth in tax receipts. The atmosphere on financial markets was friendly.

This European version of the 'bond conundrum' ended with the financial crisis. For a number of reasons, the EMU monetary party that had masked both the deterioration, and the dispersion, of underlying fiscal balances in the Euro area came to a crashing halt:

Now as everyone knows, the budgetary constitution of the EMU–the Stability and Growth Pact (SGP)–explicitly imposes limits to both public debt (60%) and deficit (3%) ratios. In turn, this means that the very existence of the Euro is constitutionally anchored on sound public finances; a key difference with other areas of the world. This is one of the reasons why although suffering from a comparatively less ugly fiscal situation than that of the USA, Japan or the UK, the Eurozone is now in the firing line. This also explains why, all of a sudden, everyone is scrambling for data to assess the health of public finances across the Eurozone (in a bid to make life easy for our clients, we have compiled this data in the table below. Please note that i) clicking on the source for each type of data will open a web link. ii) European Commission and OECD estimates for structural balances can differ for a number of reasons: date of estimates, method for calculating potential GDP and automatic stabilizers, exclusion of one-off measures, etc and iii) colored rows indicate the variable we use later in the paper in our model for explaining the structure of bond yield spreads in the euro area).

2- The Return of the Bond Vigilantes

As we argued in The Return of the Bond Market Vigilantes, the first obvious conclusion one needs to draw from the Greek crisis, is that for the first time since the Asian Crisis, bond markets are back into control of fiscal policies. In our view, this is a reality that is set to last. Needless to say, European politicians would most likely prefer not to deal with this pressure but they should nevertheless see a silver lining to the current cloud: financial markets have now become the main and most efficient tool for the SGP to, finally, work! In that regards, the predictable postures denouncing the so-called 'attacks by financial speculators' look particularly misplaced. The reality is that, politicians having failed at the task, financial markets have now become the best ally of the Euro's founding fathers. Indeed, since the beginning of the year, sovereign spreads have been nearly perfectly aligned with the level of fiscal constraint imposed by the Maastricht Treaty to each country of the Eurozone. In other words, the market is doing the job that policymakers could not tackle.

The fiscal data presented on the table above helps us to understand the current structure of bond yields in the Eurozone. Working with publicly available official data rather than with potentially opaque in-house assumptions, we obtain a very good fit (97% correlation) between actual bond yields and a small number of key variables. Namely:

1. The difference between the level of public debt estimated for 2011 by the European commission and the 60% Maastricht limit. The debt ratio carries several pieces of key information about past, current and future fiscal developments: the track record of the country, the debt burden, and the need for future adjustments. The correlation between public debt ratios and Eurozone bond yields has systematically been above 70% over recent months.

1. The immediate pressure on governments as derived from the Excessive Deficit Procedure (EDP), which applies to countries experiencing a deficit-to-GDP ratio above 3% (except when the excess deficit is solely due to an economic recession). With the sole exception of Finland and Luxembourg, all Eurozone countries are currently being subject to an EDP. The European Commission estimates the required annual adjustment of the structural fiscal balance that is necessary to meet the 3% target within the coming two to three years. This is the number we use in our model.
2. Our third factor measures the liquidity risk premium. Indeed, everything else being equal, small government bond markets will tend to be relatively more expensive than large ones for liquidity reasons. We have used the logarithm of the size of each bond market (in billions Euro), since the liquidity premium is not exactly proportional to the size of the market. The importance of the liquidity risk premium has been one of the surprising results of our exercise. It seems to explain why, for example, Portuguese sovereigns carry a much higher yield than French OATs, even though the overall fiscal risks for these two countries look roughly similar.

The chart below shows how bond yields are being affected by each of the three selected variables. Since the beginning of the year, the relative importance of our three factors has remained fairly stable, which is a good sign for the credibility of the analysis.

3- Singling Out the Misfits

In our work, we have been using these three factors in a simple linear regression model. And since the beginning of the year, we find that, on average, 10-year bond yields in the Euro area have been organized according to the following pattern:

Yield = 4.31+ 0.0201*(excess debt)+0.4723*(EDP adjustment)-0.564*(liquidity)

We have then calculated the theoretical spread over German Bunds for each individual country and compared it to the market price. The results can be found in the chart below:

Thus, for all of the complaints about market manipulation, it seems that the hierarchy of spreads over German Bunds has followed, since the beginning of this year, a pretty rational walk. Actual debt levels and short-term pressure on government accounts have systematically explained more than 85% of yield spreads. When a liquidity risk premium is applied, the explaining power of our model rises to above 95%. A very interesting predictability which leads us to the following conclusions:

1. The hierarchy of sovereign spreads on Euro financial markets closely follows the logic of the Stability and Growth Pact (SGP). The European bond markets are thus remarkably consistent and sending a clear and powerful message to the governments of the euro zone to stick to the agreed rules or suffer the consequences.
2. As of today, there seems to be no additional risk premium related to the possible dislocation of the Eurozone. Clearly, this possibility would have such devastating effect on world financial markets that investors cannot even think of it (even if many talk about it).
3. Based on the fitted curve we can identify a few markets that potentially deserve either a lower or a higher spread than the one currently prevailing. Of course, one should not build too much on small deviations to the fitted curve, but one sovereign bond market looks particularly expensive, namely Belgium. The OLO market should normally trade with yield significantly above that of Austria, or even Italy (see The Italian Job). The credentials for the management of the Belgian debt crisis of 1993 may play a role in the overvaluation of the OLO market. But with Belgian public debt now rising again (it should pass the 100% mark next year) and with the Belgian banking system in deep crisis, we see little reason to hold any OLO in bond portfolios. Rather, we would advise to sell OLOs against a basket of Austrian and Italian bonds. Aside from Belgium, France and Ireland are the two markets that currently look vulnerable.

4- The Return of Country Risk

As mentioned above, it is hard to foresee how the current situation in Europe will play out, but the one thing we can be sure of is that the crisis is an important turning point for European investors in that it marks the return of country risk. Indeed, regardless of what the European Union may do to help Greece through its current crisis, the new reality is that Greece's funding costs (along with those of other European nations) will, from now on, increasingly be a reflection of Greek fundamentals rather than German fundamentals. This must mean that, like a phoenix rising from the ashes, country risk in Europe is all of a sudden back from the dead. It also means that discerning which countries are set to experience a rise in financing costs, and which countries enjoy a pull-back will once again be a driver of relative stock market performance. In that regards, we hope that our reader will find the equation we offered above both interesting and useful.

http://feedproxy.google.com/~r/John_…ek-crisis.aspx

Canned tuna linked to mercury

If you’re partial to canned foods, you’re probably getting a little something extra in your tuna salad: a heaping helping of mercury.

But let’s face it — if you’re partial to canned foods, you’ve got bigger fish to fry. You’re eating your way into an early grave, and your lousy processed-food diet will kill you long before the mercury can.

The seafood-mercury scare is nothing new…but if you stick to healthy, deep-water wild-caught fish, don’t panic. You should be far more worried about the mercury in your fillings, tap water and vaccinations than anything in your seafood.

If, on the other hand, you think fish are caught with can openers, do yourself a favor and pay attention to the new study from the University of Nevada, Las Vegas. Researchers examined 300 cans of tuna from the top three brands, and found 55 percent had higher-than-safe levels of mercury.

Bad? Sure. But unless you’re locked in a shelter and the bombs are falling, you shouldn’t be eating anything that comes in a can, period. The processed garbage inside is bad enough, but the cans themselves are lined with a dangerous estrogen-like chemical called bisphenol-A, or BPA.

Add some mercury to the mix, and you’ve got a toxic stew that only a government regulator could love. After all, the EPA still lists canned tuna as a low-mercury choice… despite repeated studies that prove otherwise. And the FDA continues to say BPA is perfectly safe to use in can linings and plastics – despite admitting "concern" over it.

If you really want to lower your risk, there are other fish in the sea. The safest — and healthiest — include freshwater trout, flounder, salmon, catfish, whitefish and herring, along with oysters and clams. If you have to have tuna, stick to the fresh stuff caught in deep waters.

And if the catch of the day includes farmed fish, throw it back. Farmed fish often have higher levels of mercury, lead and PCBs. They’re also much lower in the essential omega-3 fatty acids that make fish so healthy to begin with.

Should you decide to skip seafood altogether, get your fins on a quality fish oil supplement and eat plenty of fresh, fatty grass-fed beef to make sure you’re getting enough of those omega-3s.

Casting a wide net,

William Campbell Douglass II, M.D.

How sunlight boosts your love life

I’ve been shedding light on America’s sex problems for decades…and now the mainstream is finally coming around.

Toss your dangerous penis pills, because the REAL answer to most cases of erectile dysfunction can be found in a single hormone: testosterone. And a new study suggests that you can get your own bedroom boost by simply stepping outside — because your testosterone rises and falls alongside your sun-powered vitamin D levels.

But don’t count on the sun alone to get your sex life cooking. It might give your testosterone levels a little kick, but it won’t be enough for most sexually challenged men.

There’s a simple reason for that: As you get older, your body makes less testosterone. It happens to the best of us. Getting fat will also cause your levels to go limp. And if you’re fat and old, you’re up the creek — but let me throw you a paddle: Switch to a high-protein diet rich in animal fats, and drop the carbs down to almost nothing.

The protein will give you energy. The zinc in the meat will boost your testosterone levels. And the lack of carbs will help you shed those extra pounds. Add it all up, and you’ll be back on track in the sack — but most men over 50 will need an extra hormone boost to really complete the picture.

Forget off-the-shelf testosterone supplements. Visit a doc who knows something about natural hormones. He can check your levels and top you off the right way: with a series of injections.

Finally, don’t be afraid of that big yellow thing in the sky. The media’s Chicken Little act over sunlight is out of control — I actually read an article in the online edition of the St. Petersburg Times that said you should get your vitamin D through sunlight "only with your doctor’s approval."

I kept looking for the punchline, but it wasn’t a joke.

So consider this your permission slip — get outside and bask for a few minutes every day. Skip the sunblock and head back inside when your skin turns just a little pink.

The sun won’t poison you if you use some common sense, but your food might. Keep reading for the latest tuna trauma…

William Campbell Douglass II, M.D.

Sugar’s secret accomplice fuels cancer growth

I’ve been writing for years that sugar helps to fuel cancers. It’s just one of the many reasons that I tell you to steer clear of processed sugars.

But according to new research done at the Huntsman Cancer Institute at the University of Utah, sugar (glucose) cannot fuel cancer cells by itself. The amino acid glutamine plays a critical role in the process.

According to study author Don Ayer, Ph.D., "Essentially, if you don’t have glutamine, the cell is short circuited due to a lack of glucose, which halts the growth of the tumor cell."

Of course, the researchers are saying that this information is paving the way for the development of new drugs that could interfere with the process and inhibit tumor growth.

I say the idea is absurd. Why take a drug to manipulate the process when you can do it naturally by cutting sugar out of your diet?

Your best bet is always to keep your sugar intake at a minimum. It may be tasty, but its impact is anything but sweet.

Keeping it short and sweet,

William Campbell Douglass II, M.D.

L.A. Shares Offers Much-Needed Materials to Non-Profits and Schools in the Northwest Valley…

Our Chief of Staff Mitch Englander was on hand to welcome nearly 50 representatives of schools, Neighborhood Councils and non-profit organizations from our District on Thursday, Feb. 25 for a free shopping spree at L.A. Shares.

LA Shares is a non-profit organization that partners with local businesses and the City of L.A. to gather surplus materials and equipment donated by local businesses and donates it to schools and non-profits in our community.

LA Shares designates a separate shopping day for each Council District. On Thursday, the organizations from Council District 12 were allowed into the warehouse to browse the thousands of items, ranging from school and office supplies to lightbulbs, art supplies and carpet.

By gathering these surplus materials from businesses that would otherwise go to the landfill, LA Shares helps the companies, protects the environment and helps community-based organizations. The organizations get free materials that they badly need, which is even more important now during these tough economic times.

To learn more about LA Shares visit http://www.lashares.org/.
Info. from Mitchell Englander Chief of Staff for Councilman Greig Smith 12 District

Library’s Digital Bookmobile Coming to the Valley…

Don’t miss the L.A. Public Library’s high-tech version of the Bookmobile on Thursday, March 4 at Mid-Valley Regional Branch Library in North Hills.

The Library’s 71-foot, 18-wheeler Digital Bookmobile will showcase the Library’s extensive collections of books, music,audiobooks, photos, videos, audio recordings and other digital media that can be downloaded from the Library’s website and Library branches.

Thursday, March 4
10:00 am to 4:00 pm
Mid-Valley Regional Branch Library
16244 Nordhoff St., North Hills

The L.A. Library has kept pace with the world of digital media. Interactive learning stations and demonstrations will show visitors what kinds of materials can be found in the Libary’s vast digital collections, as well as how to access and use them. Visitors can also try out iPods, computers with high-speed internet connections, high-definition monitors and high-quality sound systems.

The Library’s digital collections can be accessed at any time online at www.LAPD.org.

EMail from Councilmember Greig Smith’s Office

Participate in Neighborhood Council Elections March 2…

Most Neighborhood Councils in our District have their elections on Tuesday, March 2. (Encino and Lake Balboa Neighborhood Councils have their elections on May 27.) Check your Neighborhood Council’s website for each Council’s individual polling place.

For more information call City Clerk’s Neighborhood Council Election Unit at (213) 978-0444 or email [email protected].

Canoga Park http://www.canogaparknc.org/
Chatsworth http://www.chatsworthcouncil.org/
Granada Hills North http://www.ghnnc.org/
Granada Hills South http://www.ghsnc.org/
Northridge East http://www.northridgeeast.com/
Northridge West http://www.northridgewest.org/home/
North Hills West http://www.nhwnc.org/
Porter Ranch http://www.prnc.org/
Reseda http://www.resedacouncil.org/
Winnetka http://www.winnetkanc.com/
West Hills http://www.westhillsnc.org/
Encino http://www.encinocouncil.org/
Lake Balboa http://www.lakebalboanc.org/

Upcoming Household Hazardous Waste & Electronic Waste Collection Event…

The City is holding a free household hazardous waste and electronic waste collection event on Saturday, Feb. 27 and Sunday, Feb. 28 at Pratt & Whitney Rocketdyne in Canoga Park.

Bring old electronic devices, fluorescent lightbulbs, paint, motor oil, pool and garden chemicals and other household hazardous waste to be disposed of safely and properly. It is now illegal to throw such items in the regular trash. They can leach hazardous substances into the air, water and soil.

Saturday, Feb. 27
Sunday, Feb. 28
9:00 am to 3:00 pm
Pratt & Whitney Rocketdyne
De Soto Ave & Gresham St.
Canoga Park

For more information, call (800) 988-6942 or visit www.LACitysan.org.

Neighborhood Council Elections…

The March 2 elections for most of the Neighborhood Councils in our District are moving forward as planned. Contrary to rumos circulating, it was never proposed to postpone or cancel them.

Greig Smith submitted a motion this week in response to specific requests by Neighborhood Councils in my District who asked to have the authority over Neighborhood Council elections returned to them from the Clerk’s Office.

Since the elections were moved into the City Clerk’s office, we had received numerous complaints from Neighborhood Councils that they were poorly run and wrought with mistakes and problems.

Greig Smith agreed that Neighborhood Councils would benefit by running their own elections, and that they could do it better.

This would put up to $1.9 million – the funds allocated to the City Clerk for running the elections – into the City’s emergency reserves and hopefully help preserve Neighborhood Council funding from cuts. Considering the current budget crisis, the City Council is justified in searching for every available dollar in our effort to cover the $212 million budget deficit and avoid insolvency before July 1. This would have been a win-win.

It would have taken effect after the March 2 elections scheduled for most of the Neighborhood Councils in my District. Rumors and misunderstanding have led some in the community and the Neighborhood Councils to believe that shifting the funds and the election authority would cancel the March 2 elections. This is absolutely not true. The March 2 elections would have, and will, go forward as planned.

We were focused on future elections that could be returned to the Neighborhood Councils, saving as much as $1 million.

As Greig Smith have stated before, failure is not an option.
Email [email protected] to request official City services or information, and please include your address.

Thanks for the info. from Councilman Greig Smith’s Office.

02.26.10 07:13 PM

Where Is All that Greek Gold?
The Greeks Write Back
The Euro and a Conspiracy of Hedge Funds
So Where's the Inflation?
No Help for Homebuilders
The Singularity, San Antonio, Home, and Addictions

The economy grew in the fourth quarter by 5.9%, the most in years. The adjusted monetary base is exploding. Bank reserves are literally through the roof. The Fed is flooding money into the system in an effort to get banks to lend. An historically normal response by banks (to increase lending) would have been massively inflationary, causing the Fed to stomp on the brakes. Despite raising the almost meaningless discount rate (as who uses it?), this week Ben Bernanke assured Congress of an easy monetary policy, with rates remaining low for a long time. Many ask, how can this not be inflationary?

This week we look at some fundamentals of money supply and the economy. If you understand this, you won't get misled by people selling investments, telling you to buy this or that based on some chart that shows whatever they are selling to be what you absolutely have to have to protect your portfolio and/or make massive profits. And we touch on a few odds and ends. And yes, I can't resist, a few more thoughts on Greece. It will make for an interesting letter, as I'm writing on a plane to San Jose. And it will print a bit longer than usual, because there are a lot of charts.

Before we get into the meat of the letter, I want to give you a chance to register for my 7th (where do the years go?!) annual Strategic Investment Conference, cosponsored with my friends at Altegris Investments. The conference will be held April 22-24 and, as always, in La Jolla, California. The speaker lineup is powerful. Already committed are Dr. Gary Shilling, David Rosenberg, Dr. Lacy Hunt, Dr. Niall Ferguson, and George Friedman, as well as your humble analyst. We are talking with several other equally exciting speakers and expect those to firm up shortly.

Look at that lineup. These are the guys who got the calls right over the past few years. They called the housing crisis, the credit bubble, and the recession. And, in my opinion, these are some of the best in the world at giving us ideas about where we are headed.

Comments from those who attend the annual affair generally run along the lines of, “This is the best conference we have ever been to.” And each year it seems to get better. This year we are going to focus on “The End Game,” that is, on the paths the various nations are likely to take as they try to solve their various deficit problems, and how that will affect the world and local economies and our investments. We make sure you have access to our speakers and get your questions answered, and you'll come away with excellent, practical investment ideas.

This conference sells out every year, and it looks like it will do so this year. You do not want to miss it. There is a physical limit to the space. Every year I have to tell people, including good friends, that there is no more room. Don't wait to sign up. There is still an early-registration discount. And while it pains me to say it, you must be an accredited investor to attend the conference, as there are regulations we must follow in order to offer specific advice and ideas. Click on the link and sign up now. https://hedge-fund-conference.com/20…px?ref=mauldin

Where Is All that Greek Gold?

Last week I mentioned the (what seemed to me and much of the world) odd incident of Greek politicians talking about the need for Germany to pay its debts to Greece. I got this response from a Greek reader. Comments afterword.

“Dear Mr. Mauldin,

I am an avid reader and I just wanted to correct you about a comment in one of your articles, “The Pain in Spain”, specifically:

'Somehow they forgot about the German government paying 115 million deutschmarks in 1960 — not a small sum back then.'

This repayment of 1960 is undeniable. but the total amount owed was $10 billion ($3.5 billion for the return of the gold stolen and the repayment of the war loans Greece was forced into giving Germany, and $7 billion in war reparations awarded to Greece in 1946). As the DM/$ parity was then four for one, this means they gave Greece $29 million out of the $10 billion owed.

Germany also proclaims that they have given Greece over the years, in one form or another, €16.5 billion. But the fact of the matter is that despite these alleged payments, the issue of the war loans and gold is still not settled.

Greece has never stopped asking for the money to be paid back … it is estimated that this sum owed now totals $70 billion [I assume the Greeks want interest – JM]. So even taking into account the €16.5 billion, more than $50 billion is still owed.

Helmut Kohl refused to even discuss the repayment, presenting as an excuse that this amount was owed by the whole of Germany and until Germany is unified the issue could not be discussed.

Guess what, Germany is unified….

Best Regards,

Anthony Kioussopoulos

P.S. Do not take my e-mail as a refusal to acknowledge the fault of successive Greek governments in creating this mess; just take it as a correction for a specific issue.”

+++++

The point here is not that Anthony is 100% right, though his statements have the ring of authenticity. The point is that the Greeks believe it. And thus my lack of surprise last week when I noted that leading Greek politicians of both the conservative and liberal parties were talking the same line. This is an issue that runs across the Greek political spectrum. And that makes the situation all the more intractable, as emotional responses are not the stuff of rational debates.

(I should note that if the US demanded payment from Europe of all the money we loaned them after the war, at full interest, our national balance would be a lot better. But I doubt that ever gets brought up, nor should it at a remove of 65 years.)

This week saw riots and a national strike as Greek unions demonstrated against budget cuts. Yet polls seem to indicate a majority of Greeks recognize the need for rather serious austerity measures. As I have documented, they really have no good choices, only very bad and disastrous choices. The austerity measures that will be forced on them by market realities if they default will be far worse than those they can self-impose over time. In fact, yesterday EU inspectors visiting Athens told authorities they see a deeper than expected recession.

Two very condensed reports from European media:

1. After the German magazine Focus ran an issue with a Photoshopped picture of Venus de Milo giving the middle finger to “Greek con artists” (referring to the fraud the Greeks perpetrated when they joined the EU by hiding debt), street protests demanding the boycott of German goods were organized in Athens and endorsed by the Greek administration. There was also name calling by the Greek administration, blaming Germany for all of Greece's economic and financial problems because the Nazis stole all of Greece's gold in World War II. In general, the Greek public believes that all this is just excuse-making on the part of the Government, but a boycott is loudly supported by members of all the public workers' unions. (Reuters report)

The situation is exacerbated by news today that Greece needs to refinance $27bn of bonds in March, vs. the statements JUST TWO DAYS AGO that only half that amount was coming due, and then not until April and May.

2. Financial Times Deutschland reported the results of a poll of German banks that was conducted yesterday. No German bank polled said it would make any further investments in Greek sovereign debt. The following banks and building societies are at risk of collapse due to excessive Greek bond holdings: Hypo Real Estate ($13 billion exposure), Commerzbank ($7 billion exposure, and the bank was bailed out last year by the German government), LBBW ($4 billion), Bayern Landesbank ($2.2 billion). It should be pointed out that Greece is a small country, with 11 million people and a GDP of $313 billion that is running a trade deficit of $11bn. Banking experts generally stated that any private purchases of Greek bonds are now completely out of the question. Any future aid will have to be government to government, and that will exclude Germany, as Angela Merkel stated earlier in the week. Within the eurozone, there are no other countries outside of Germany that have, or can raise, any capital to invest in Greece. (Hat tip to Steve Stough for the above points.)

For what it's worth, I do not see Germany bailing out Greece in the current climate. If Germany were to force Greece to undertake the severe measures they would be required to take for a bailout, the streets of Greece would be full of demonstrators denouncing Germany. I just don't see it happening.

If not Germany, who? France? Spain? Italy? They all have their own very real problems. Everyone else is too small. The US will not. Neither will China.

My guess is that at the end of the day (which will come soon) the IMF is going to have to step in. It will be a blow to European pride, but what else is there?

The Euro and a Conspiracy of Hedge Funds

The lead story in this morning's Wall Street Journal is that hedge funds are holding “idea meetings” and deciding that shorting the euro is a good bet. Der Spiegel called them “secret meetings,” as if somehow a cabal of hedge funds is conspiring to push the euro down. A few points for the writers of Der Spiegel:

1. There is no secret about the problems with the euro. Let's see, when the head of Germany's leading debt-management agency warned this week that the euro would collapse if any member defaulted on its debt, was he part of a secret conspiracy? If he is right, do you want to bet that Greece will behave, and go long the euro?
2. The currency market is a $2 trillion dollar a DAY market. That's over $50 trillion a month. Even with 20:1 leverage, $50 billion in hedge funds shorting the euro is a drop in the bucket, and I seriously doubt anywhere close to that much is at risk. George Soros won his bet against the pound sterling because the pound was fundamentally flawed and overvalued, and he put his money where his mouth was.
3. If a hedge fund is betting against the euro, someone has to be on the other side of that trade. Are those guys (on the other side) conspiring in secret to drive the euro up and the dollar down? Are they in “secret” meetings to take advantage of the poor, dumb, misinformed hedge funds? Who are they? The world needs to know who is conspiring against the dollar and other currencies! Whatever. One side will be wrong. Fundamentals will out.
4. I get invited to “idea dinners” from time to time. They are indeed private, but they don't rise to the level of “secret.” I do very little trading, but these meetings help to hone my ideas, and I hope that helps make this letter a better source for you.

The Journal wrote that these hedge-fund managers expect the euro to go to parity with the dollar, as if that is some novel idea. I made that prediction in 2002 when the euro was at $.88, suggesting that it would rise to $1.50 and then fall back to parity by the middle of the next decade. Maybe it will get there a little faster than I thought. Stay tuned, and I do NOT suggest making 20:1 bets on currency moves. A lot of those hedge funds will lose a lot of money if the market moves against them.

So Where's the Inflation?

Now for a series of graphs. First, let's look at the Adjusted Monetary Base (or M0). This is the one monetary aggregate that the Federal Reserve actually controls. Notice that it exploded in the middle of 2008, as the Fed started quantitative easing and pushed rates to zero. They were desperate to try and thaw out the credit markets that had frozen.

That in turn caused M1 to increase.

But the broader measure on money that is M2 rose into 2009 and has then gone sideways. Normally the stimulus of such raw money growth in M0 would have M2 exploding upward, as you get a money multiplier effect.

We all know that a US bank can lend out about nine times the deposits it has on hand. When the Fed puts money into the system, it can be multiplied rather quickly if banks choose to lend. This is called the money multiplier.

“Restated, increases in central bank money may not result in commercial bank money because the money is not required to be lent out – it may instead result in a growth of unlent reserves (excess reserves). This situation is referred to as 'pushing on a string': withdrawal of central bank money compels commercial banks to curtail lending (one can pull money via this mechanism), but input of central bank money does not compel commercial banks to lend (one cannot push via this mechanism).” (Wikipedia)

This described growth in excess reserves has indeed occurred in the financial crisis of 2007–2010, with US bank excess reserves growing over 500-fold, from under $2 billion in August 2008 to over $1,000 billion recently. Look at the chart below. This is what has all the gold bugs salivating. Where else has this happened without hyperinflation?

Now let's turn to our old friend Paul Samuelson and his textbook that we all read in Econ 101 to learn about the money multiplier:

“By increasing the volume of their government securities and loans and by lowering Member Bank legal reserve requirements, the Reserve Banks can encourage an increase in the supply of money and bank deposits. They can encourage but, without taking drastic action, they cannot compel. For in the middle of a deep depression just when we want Reserve policy to be most effective, the Member Banks are likely to be timid about buying new investments or making loans. If the Reserve authorities buy government bonds in the open market and thereby swell bank reserves, the banks will not put these funds to work but will simply hold reserves. Result: no 5 for 1, 'no nothing,' simply a substitution on the bank's balance sheet of idle cash for old government bonds.”

–(Samuelson 1948, pp. 353–354)

And that is what has happened. And all those mortgage bonds and other assets the Federal Reserve has purchased? They have been put right back into the Fed by the banks. There has been no money multiplier. In fact, the money multiplier, as measured by the ratio of MO to M1 growth is at its lowest level ever. Look at the graph below:

What this graph shows, astonishingly, is that a dollar added to the monetary base now has a NEGATIVE multiplier effect. Without showing yet another chart, bank lending has fallen percentagewise the most in 67 years. The actual amount of bank loans is falling each and every quarter, with no signs of a bottom. Consumers are reducing their debt and leverage. Bank loans are being written off at staggering rates. Over 700 banks (I think that is the figure I saw) are officially on watch by the FDIC, with more banks being closed each week.

There is at least $300-400 billion in losses on commercial real estate waiting to be written down. Housing foreclosures are rising and hundreds of billions have yet to be written off. As more families fall into unemployment or underemployment, there will be more writedowns. Is it any wonder that banks are having to shore up their balance sheets and make fewer loans?

With capacity utilization just off all-time lows, why should we expect businesses to borrow to increase capacity? Inventory levels are much lower than two years ago. Businesses no longer need to finance as much inventory. They simply need less.

Dennis Gartman writes:

“Effectively the Fed had become a cash machine rather than a monetary expansion machine. At the end of last year, the multiplier had actually fallen to less than 1.0 and the trend remains downward. If anyone had told us five years ago that the money multiplier would be down to 1.0 we would have laughed. The laugh, however, would have been upon us, for it is there and it is still falling. Hard it shall be to sponsor strong economic growth when no one really wants to take a loan or when few banks want to make a loan. The “game” of banking has been turned upon its head, and the strength of the economy suffers while inflationary pressures (at least for now) remain virtually non-existent.”

Next week (or within a few weeks) we will review the velocity of money, as the normal, accustomed relationships about money supply and inflation are proving to be wrong. We live in extraordinary times. We are coming to the End Game of the debt supercycle that has lasted for 70 years. Everything is changing in front of our eyes. It compels us to understand the basics of how economies function, and what is both different and not different about the times we are in.

No Help for Homebuilders

Before we close, this note from Mark Hanson about the home-building market:

“In January, builders sold a whopping 1000 houses per day nationally. During the same month, Foreclosures rang up at 4300 and Notice-of-Defaults at 5100 per day nationally. What a mess. I really thought earlier in the year with massive mortgage rate and tax stimuli — and the purposeful lack of distressed inventory due to HAMP and other mortgage mod and foreclosure prevention initiatives — that builders had a shot at some volume.

“But their window of opportunity has now passed. With HAFA coming on line and foreclosures, short sales and deeds-in-lieu about to dump significantly more distressed inventory on the market throughout 2010, the odds that of any meaningful pickup in builder output or sales is significantly decreasing daily.”

The Singularity, San Antonio, Home, and Addictions

It is time to hit the send button. In order to have some mercy on you, gentle reader, I am saving the last 8 pages of this letter for another time. All things in moderation.

As noted above, I am on a plane to San Jose, where I will take a short ride to NASA Ames to spend the next 9 days listening to experts talk about how various technologies will change over the next 10 years, and how that will impact business, society – well, everything. I am really pumped about it. 12 hours a day of lectures and some local tours, with a small group that appears to include some very bright attendees (from their bios). Your humble analyst will speak for just an hour on the future of the world economy. Sadly, my assessment will not be as optimistic as theirs, at least with regard to the next 5 years. If I am allowed, I am going to publish my abbreviated notes in next week's letter, assuming I can take notes and keep up at the same time.

Then I must miss the final day, as I fly to San Antonio for a speech on Saturday morning to the top level of Cambridge brokers, then back home for a month! A whole month! Maybe I can catch up on my writing and emails.

I met with George Friedman of Stratfor this Tuesday. (Tiffani went with me, her first trip away from my granddaughter Lively. Ryan got to play Mr. Mom.) I was sitting in George's office at the end of the day, waiting for everyone else to show up so we could go to dinner. I had been busy trying to coordinate meetings and keep up with my reading and research, emails, and phone calls.

“George, I have a problem. I feel like I am drinking information through a fire hose. I am addicted to information. It is beginning to interfere with my productivity, as I get so much high-quality material from the best sources that I feel I need to absorb. Each bit of information becomes a clue to the larger puzzle. But I have to write more. I am going to have to start randomly deleting things every now and then if I am going to stay on top of it all, and get some of these books that are in me done.”

I am determined to have a life outside of work (family and friends are important), and am for the most part successful at that, but I am not getting done all that I wish I could do when I'm at work. And there are books piled on my desk that simply scream for attention.

I thought George would understand. He has some 90 analysts all over the world feeding him up-to-the-minute analysis on country and issue situations. Surely, he must have an idea for me on how to handle the “download” problem.

“John,” he replied quietly, sighing heavily, “I know what you mean. But if I started randomly deleting, I'd be afraid I would miss something important. What else can you do but keep at it?”

It is the conundrum of our age. I hope, gentle reader, that I help you in some ways to keep up and stay informed without overloading you! Have a great week, and learn something new!

Your really ready to think about the future analyst,

John Mauldin

http://feedproxy.google.com/~r/Thoug…-of-money.aspx

PTC Featured Member: Marie Harris

PTC Declares Cuss-Free Week — Nationwide!

Buffalo Chicken and Potatoes

Ranch dressing and cream of celery soup offsets the spice from buffalo wing sauce in a satisfying, meat-and-potatoes casserole.
Prep Time: 10 min
Total Time: 1 hour 5 min
Makes: 6 servings (1 3/4 cups each)

1 1/4 lb boneless skinless chicken breasts, cut into 1-inch strips

1/3 cup buffalo wing sauce6cups frozen (thawed) southern-style hash brown potatoes1cup ranch or blue cheese dressing

1/2 cup shredded Cheddar cheese

(2 oz)1can (10 oz) condensed cream of celery soup

1/2 cup corn flake crumbs2tablespoons butter or margarine, melted

1/4 cup chopped green onions

(3 to 4 medium1 1/4lb boneless skinless chicken breasts, cut into 1-inch strips

1/3 cup buffalo wing sauce

6 cups frozen (thawed) southern-style hash brown potatoes1cup ranch or blue cheese dressing

1/2 cup shredded Cheddar cheese

(2 oz)1can (10 oz) condensed cream of celery soup1/2cup corn flake crumbs2tablespoons butter or margarine, melted

1/4 cup chopped green onions (3 to 4 medium)

1.Heat oven to 350°F. Spray 13×9-inch (3-quart) baking dish with cooking spray.

2.In medium bowl, stir together chicken strips and wing sauce.

3.In large bowl, stir together potatoes, dressing, cheese and soup. Spoon into baking dish. Place chicken strips in single layer over potato mixture.

4.In small bowl, stir together crumbs and butter. Sprinkle in baking dish.

5.Cover with foil. Bake 30 minutes; uncover and bake 20 to 25 minutes longer or until potatoes are tender and juice of chicken is no longer pink when centers of thickest pieces are cut. Sprinkle with green onions.High Altitude (3500-6500 ft): Heat oven to 375°F. In step 3, stir 1/4 cup water in with the potatoes.

TipsFor authentic flavor, go with red hot buffalo wing sauce. Other flavors to try include teriyaki, sweet and sour or barbecue.For a cheesy hash brown side dish, omit the chicken and wing sauce. Serve casserole with barbecued chicken or baked ham.Try using precut chicken tenders to make prep time shorter.Serve with additional blue cheese dressing.

Nutrition Information:
1 Serving: Calories 620 (Calories from Fat 300); Total Fat 33g (Saturated Fat 9g, Trans Fat 0g); Cholesterol 90mg; Sodium 1240mg; Total Carbohydrate 51g (Dietary Fiber 5g, Sugars 5g); Protein 28g Percent Daily Value*: Vitamin A 20%; Vitamin C 15%; Calcium 10%; Iron 15% Exchanges: 2 1/2 Starch; 1 Other Carbohydrate; 0 Vegetable; 3 Lean Meat; 4 1/2 Fat Carbohydrate Choices: 3 1/2
*Percent Daily Values are based on a 2,000 calorie diet.