KeNo's Housing and Economic Portal: Friday July 23 Housing and Economic stories

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Governor puts 200,000 state workers on minimum wage - (www.sacbee.com) Roughly 200,000 state workers will receive minimum wage paychecks next month under terms of an order issued Thursday by the Schwarzenegger administration. According to a letter delivered to Controller John Chiang in late afternoon, July pay for most hourly state employees will be withheld to the minimum allowed by federal law – $7.25 an hour – and then restored once there's a budget. Chiang, whose office cuts state paychecks, said Thursday that he won't follow the order unless a court tells him to. The letter from the governor's Department of Personnel Administration instructs Chiang to withhold employees' pay because the state started the 2010-11 fiscal year Thursday without a budget appropriating money for payroll. Hours earlier, Gov. Arnold Schwarzenegger officially ended 17 months of furloughs for state workers.

Energy Hedge Funds Close After Investor Withdrawals - (www.bloomberg.com) Energy hedge funds in Europe are collapsing after investor withdrawals forced managers to scale back bets amid sliding prices for oil, coal and electricity. At least six funds managing more than $158 million shut in the first half, including four in May and June, according to data compiled by Bloomberg. London-based Rampart Capital LLP succumbed after failing to reach “critical mass” within nine months of opening, according to Chief Investment Officer Marcello Romano. The funds were battered after Brent crude fell in May by the most since November 2008 and German power had its fourth monthly drop this year. The average loss from January through May for global energy funds was 19 percent, according to a June 10 report from JPMorgan Chase & Co., compared with a 0.9 percent gain for Hedge Fund Research Inc.’s main index of more than 2,000 members. “The industry is limping,” said Fredrik Adolfson, a 43- year-old manager for Stockholm-based Adapto Energy Fund, which started on Jan. 18 and returned about 3 percent through June 30. “Risk capital has dropped off radically.” Liquidations around the world rose to about 240 in the first quarter, compared with 165 in the previous three months, Chicago-based Hedge Fund Research reported June 8.

1.3 million unemployed won't get benefits restored - (news.yahoo.com/s/ap) More than 1.3 million laid-off workers won't get theirunemployment benefits reinstated before Congress goes on a weeklong break for Independence Day. And hundreds of thousands more will lose their benefits in the coming weeks. The House voted 270-153 Thursday to extend jobless benefits for people who have been laid off for long stretches, but the gesture was made futile by the Senate's inability to pass the bill. For the third time in as many weeks, Republicans in the Senate successfully filibustered a similar measure Wednesday night before senators adjourned for vacation. A little more than 1.3 million people have already lost benefits since the last extension ran out at the end of May, according to the Labor Department. By the end of the week, the number will jump to 1.7 million. By the end of July, it would top 3 million.

Goldman Defends Valuations That Helped Put AIG In Bind - (online.wsj.com) Goldman Sachs Group Inc., already under scrutiny from regulators, faced new questions from a congressional commission about whether it aggressively marked down the value of its mortgage-securities positions to benefit a bet Goldman made against the mortgage market. A bipartisan panel reviewing causes of the financial crisis grilled Goldman executives about valuations of mortgage assets the Wall Street firm provided American International Group Inc. and other trading partners in the mortgage crisis of 2007 and 2008. Documents released by the panel showed Goldman repeatedly valued these securities lower than rivals did, demanding additional money from AIG, which was insuring against losses in the securities. These and other banks' collateral demands strained AIG, which was bailed out by the U.S. government in September 2008. At the time, Goldman had placed a trading bet with the firm's money against the mortgage market. Lower valuations, or "marks," would have made that bet more profitable. Goldman executives defended their practices. "Our marks were based on actionable prices, informed by market information from comparable transactions," David Lehman, a Goldman managing director, told members of the Financial Crisis Inquiry Commission. In any case, the questions underscored an unnerving reality in the financial world: Investors have no way of knowing with any certainty the value of many securities. Fewer than half of all securities these days trade on exchanges with readily available price information, making large parts of the U.S. financial markets essentially a hall of mirrors. Phil Angelides, the commission's chairman, said this week that Goldman "built the bomb" by developing complex mortgage securities and "built a bomb shelter" by betting against the mortgage market in 2007. "The question is, did they light the fuse" by lowering the value of mortgage securities, he said.

VIDEO: Calling out CNBC - (market-ticker.denninger.net) For those who have short memories, this was what started my feud with Dennis Kneale on CNBC....

We as a society and government are doing everything in our power to avoid the banks and others having to take their medicine - that is, to allow the excessive debt to be defaulted. We have in fact shifted more than $2 trillion dollars of actual bad debt onto the Treasury and Federal Reserve rather than allow the market to declare it defaulted and force those who hold too much of it into bankruptcy, and we continue this asinine and exactly backward program to this very day.

Elliot Wave predicts triple-digit Dow in 2016 - (finance.yahoo.com) An investment letter that called the Crash of 2008 said that this would be a bad year — and it now says it will get worse. A whole generation of investors think that Robert Prechter and his Elliott Wave Theory letters, Elliott Wave Financial Forecasts and Elliott Wave Theorist, are permabears. And they've certainly seemed that way for the last decade -- although it should be noted that the stock market is now roughly back where it started. But Prechter was very bullish after the 1974 low and, briefly, after being one of the very few services to make money in 2008. Then he announced that "2010 is the year when the bear market in stocks returns in full force." Elliott Wave Financial Forecasts (EWFF) makes recommendations specific enough to be tracked by the Hulbert Financial Digest. (The Elliott Wave Theorist is too, well, theoretical.)