November 2009
43 posts
Big Fat Turkey
What a turkey. I am, of course, referring to Dubai. The oil-rich nation-state-kingdom (blame my social studies teacher for my failure to know what an Emirate is) has had to take a break from converting oil into gold plated island resorts. Apparently, issuing massive amounts of debt to fill out a giant real estate boom, premised on the idea that property values never drop, is a flawed strategy. Who...
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Unemployment: New Claims Under 500,000
The 500k hurdle was cleared with room to spare. This week’s Unemployment Insurance Weekly Claims Report has been released a day earlier than normal due to the Thanksgiving holiday. Initial claims dropped considerably to 466,000. Last week’s number was revised down 4,000 to 501k. This was inside the Bloomberg consensus range of 460k to 500k. From the report:
In the week ending Nov. 21,...
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2.8%
The BEA revised Q3 GDP growth down to 2.8% from 3.5%. When the initial report came out, there was a lot of discussion of anything less than 3% being a complete disaster. Now that the number was revised lower, people are trying not to dwell on the past. That’s a fine idea. Let’s look toward the future. If we expected 3.5% growth in Q3 followed by 4% growth in Q4, but instead we revised...
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Watchcontinuum:
Ron Paul: Audit the Fed - CNBC.com
I thought Dr. Paul did a good job in this interview. He attempted to address a very real concern: the only thing worse than leaving the Fed in charge of monetary policy is putting Congress in charge. I thought he could have done better, though. By simply requiring that the Fed always report all actions 6 months after taking the actions, the idea...
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Government Debt
I found both of these government debt articles via Naked Capitalism. The first is a moderately alarmist piece on the US. The second is an even more alarmist piece on Greece.
US
The New York Times has a piece titled Wave of Debt Payments Facing U.S. Government. In it, you have the usual: the US is running a large deficit, much of it is short term, interest rates won’t be low forever,...
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“With that, I’ll stop. And, in the best traditional practice of central bankers,...”
– Richard Fisher, Dallas Fed President, in Paradise Lost: Addressing ‘Too Big to Fail’ (With Reference to John Milton and Irving Kristol)
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Paranoia
In the last 24 hours, a series of peculiar stories have grabbed my attention.
Short Term T Bills Go Negative — Yesterday and today both saw short term bill rates drop into negative territory. Paying Uncle Sam to give you your money back could be interpreted as a sign of extreme fear. Of course, if you were a large fund manager and thought that the safest place was in cash, you might be a...
Foreign Currency Swap Amendment Passes House... →
Alan Grayson and Ron Paul both deserve a lot of respect for this piece of legislation. It attempts to make it slightly more difficult and much more transparent for the Fed to extend large foreign currency swaps with foreign central banks. This would make the dollar carry trade slightly less desirable.
What would be the consequence for everyday people? Oh, that’s easy: the dollar carry...
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Unemployment: New Claims H--Wait a Second...
I’ve revised my short term outlook for the unemployed negatively. But first, the weekly statistics. This week’s Unemployment Insurance Weekly Claims Report has been released. Initial claims were “unchanged” at 505,000. This isn’t much comfort because it required an upward revision of 3,000 to last week’s number. This was inside the Bloomberg consensus range of 500k to...
I feel the need to post something, just to prove I’m not on vacation. There were even important releases today (CPI, New Residential Construction (pdf)), but nothing struck me as must read.
CPI is always a bit annoying to me because of the fact that owner’s equivalent rent (OER) is pulled out of someone’s rectum, but is responsible for 25% of the total reading. OER is supposed...
SEC Falls Short in Financial Audit →
That’s not an Onion headline.
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12 Trillion Dollars →
We’re rather close to hitting our limit. Any word from Congress on raising the debt ceiling?
Bank of America Foreclosure Shenanigans? →
There’s a sinister point here: When Bank of America auctions a foreclosure property and it is bought by Bank of America Home Loan Servicing (formerly Countrywide), it counts as an existing home sale. This inflates housing statistics, both for numbers sold and for home prices.
Accounting is important.
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Links Disguised as a Narrative on the Next Shoe to...
A lot of people are pondering the next shoe to drop in the global economy. Most that I read are concerned primarily with the US economy, but that’s simple selection bias. There are many contenders, of course: residential real estate, commercial real estate, consumer spending, pensions, state governments, (US or European) banks, oil, private equity, a currency crisis, or some sort of problems...
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Bank Failure Friday
Hat trick! Three banks were added to the FDIC’s failed bank list tonight:
Pacific Coast National Bank, San Clemente, CA — Total deposits of approximately $130.9 million and an estimated hit to the Deposit Insurance Fund (DIF) of $27.4 million.
Orion Bank, Naples, FL — Total deposits of approximately $2.1 billion and an estimated hit to the DIF of $615 million....
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New Unemployment Claims Drop to 502k
So close. I know I said that because of the lack of hiring the celebration point for the new claims number should be dropped from 500k to 400k. The truth is that I would celebrate just a little when we drop below the 500k mark. I’ll also celebrate a little when the numbers improve year over year, even if we’re comparing to a time when the economy was hemorrhaging jobs. It is true,...
Defense Spending and Job Losses
I saw this earlier today: Massive Defense Spending Leads to Job Loss - CEPR. It didn’t really trip my “Must Read” meter until I saw Edward Harrison’s post on the same subject. Indeed, Ed cites the article almost in its entirety.
I believe that the assertion that excessive defense spending costs jobs would probably be true even if we weren’t waging an expensive...
Hewlett-Packard’s Takeover of 3Com Heats Up... →
This was a big story today. And I’m not just saying that because of the possible insider trading story (follow up). Unfortunately, big deals like this happen in healthy times and at the tops of bubbles, so it can’t be read into too much. It looks good for HP, though.
Why can't they make Emergen-C taste good?
streetsofchicago:
muppetpants:
(via kimbaland)
They can, it’s a secret recipe I call “Chugging orange juice then eating Flintstones chewables.”
Emergen-C tastes great when mixed with a blue powerade. But Joe’s idea works just as well.
If you’ve ever doubted the potential of the Internet to enable people to solve difficult problems through collaboration, I hope this changes your...
The Famous 'Kelo House' Property Is Now A Vacant... →
A decade ago, the town of New London, Connecticut claimed Kelo’s house by right of eminent domain.
…
The promised 3,169 new jobs and $1.2 million a year in tax revenues vanished when the housing bubble popped and brought on the recession.
Just a sad reminder that “for Pfizer” was legally determined by the Supreme Court to be “public use.”
Mishkin Makes Friends
Former Fed Governor Frederic Mishkin wrote a piece in the FT called Not all bubbles present a risk to the economy. In it, he defends the actions of the Fed:
There is increasing concern that we may be experiencing another round of asset-price bubbles that could pose great danger to the economy. Does this danger provide a case for the US Federal Reserve to exit from its zero-interest-rate policy...
Key oil figures were distorted by US pressure,... →
This would be a good basis for a movie. Conspiracies and attempts to cover up peak oil. Just add explosions and sexy ladies. Of course, watching paint dry is a good basis for a movie if you add enough explosions and sexy ladies.
(via Zero Hedge)
Fed Says Fewer Banks Tightened Standards Last... →
I thought we were starting to move beyond the “less bad is good news” phase. Guess not.
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Bank Failure Friday →
Five more banks failed, but as great as the tumblr iPhone app is, I’m simply not going to go through the details. Time for S’mores.
Anyone in the vicinity of Lake Cachuma is invited.
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Unemployment: 10.2%
The October Employment Situation Report was released today. Payrolls declined by 190,000, after a 263,000 drop in September and a 216,000 drop in August (originally, it was revised in September’s report). Both preceding months were substantially revised: September to -219,000 and August to -154,000. So, according to the BLS revisions, October was worse than August. The unemployment rate...
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Michael Milken On The Five Biggest Systemic... →
I applauded QtC for a series of posts that had great content from extremely dubious sources. This is in the same vein. Michael Milken, of certain dubious junk bond endeavors, on systemic risk (I should also point out that Milken has done quite a bit to rebuild his reputation, unlike certain other people).
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Ben Bernanke's (Lack of an) Exit Strategy →
continuum:
A Mises Institute presentation from this past October, questioning Ben Bernanke’s (lack of an) exit strategy for the current fiscal policy.
This is quite good, but the embedded player in continuum’s post didn’t work for me. Here it is as a link. Important questions are asked that will remain unanswered for a while. This link is the first graph he mentions, since...
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For improving early literacy, reading comics is no... →
Carol L. Tilley, a professor of library and information science at Illinois, says that comics are just as sophisticated as other forms of literature, and children benefit from reading them at least as much as they do from reading other types of books.
China Faces A Dollar Shortage! →
Welcome to Bizarro World.
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Unemployment Drops
This week’s Unemployment Insurance Weekly Claims Report has been released. Initial claims dropped to 512,000. This soundly beat the Bloomberg consensus range of 515k to 525k. Last week’s number was revised up 2,000 to 532,000. From the report:
In the week ending Oct. 31, the advance figure for seasonally adjusted initial claims was 512,000, a decrease of 20,000 from the previous...
“If, as happened in the USA on a vast scale, the central bank allows itself to be...”
– Willem Buiter, quoted by Edward Harrison in The creeping power grab by the executive branch and Federal Reserve - Credit Writedowns (via quotingthecrisis)
This is certainly worth reblogging. Good article, too.
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Links
There wasn’t much worth commenting on today. The three items that are getting headlines are:
The FOMC statement — The Fed is going to keep rates at zero for a while. Also, they’re running out of crap to buy. It’s not that they don’t want to buy more crap, because they’d be quite willing to pay top dollar for it. This was expected.
October 2009...
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California to withhold a bigger chunk of paychecks →
This is now old news, but I haven’t seen much discussion of it. California enacted a non-tax (interest free loan) on lazy people. They changed the withholding amount, but not the tax rate. As a consequence, people using the default withholding rate will see less of their paycheck.
I manually set my withholding and can change it by logging in to a website (ADP). My withholding rate is set...
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Did we just hit $12 Trillion?
Normally I just use Treasury Direct’s Debt to the Penny. That lags by a day. The number is $11,974,737,715,216.11, but there was a $28 billion 4-week auction today. It depends on whether the bills paid on Monday were accounted for in today’s figure. We pay more bills on Thursday, so it’s likely that we’ll drop back below the 12T mark. Remember that Congress hasn’t yet...
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October Auto Numbers
The October numbers have come in from the automakers. Not too shabby:
GM up 4.7%
Ford up 2.6%
Chrysler down 30%
Toyota flat (they sold 64 additional vehicles)
Nissan up 5.6%
Honda down 4%
Kia up 45.3%
Hyundai up 48.9%
Volkswagen up 7.2%
BMW down 19.1%
Daimler up 9.4% with Mercedes-Benz up 21.3% and Smart down 70%
Porsche up 15.1%
Overall that was a SAAR of 10.46 million vehicles,...
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My fiancée learned to tie a bowline tonight. If you don’t know why this is sexy, we probably can’t be friends.
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“[B]anks are simply an immensely large, somewhat malfunctioning machine. The guy...”
– Squashed, arguing that servicers are not engaged in some clever, coordinated behavior because servicers are neither clever, nor coordinated.
You won’t find this in a post. You have to email him to get gems like this.
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Another Bullish Report
The October 2009 Manufacturing ISM Report On Business was released today. The report was quite positive. As a heads up, numbers greater than 50 are good news. The actual ISM PMI (Purchasing Managers’ Index) came in at 55.7, which killed the 52.0 to 54.0 Bloomberg consensus range. The two areas I’d like to highlight are employment and inventories. First, employment:
ISM’s...
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Half of US kids will get food stamps, study says... →
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CIT Files Bankruptcy; U.S. Unlikely to Recoup... →
The latest chapter in the CIT saga is Chapter 11.
The article has some good stuff in it. I consider this passage to be the most important:
CIT accounts for about 70 percent of all short-term U.S. financing known as factoring, worth about $40 billion a year, according to Ray Ecke, president of Credit Management Resource in Oakland, New Jersey.
In factoring, suppliers and manufacturers...