April 2009
71 posts
We Need More Entrepreneurs
The Huffington Post had an article on Saturday titled 5 Things you Need to Know to Start a New Business: Why Right Now is the Perfect Time. I generally find such “5 simple rules for success” articles annoying. I think too many people don’t actually know why they succeeded (or why they failed) to make such lists genuinely useful. Still, the article made me think.
My first...
March 2009
75 posts
Banks can do ‘You Walk Away’ too →
— Three thoughts on this:
People need to make certain that their foreclosure goes through. Nobody wants to be liable for the demolition costs on their own home.
This makes sense for the banks on trashouts. In many cases, the resulting property is worth less than zero because demolition costs may be greater than the value of the land.
This implies a rather large loss on the mortgage for...
1 tag
Jobs 3/30/09
Only two articles I wanted to link to today:
GM’s Wagoner May Receive $20.2 Million in Pensions — I think this is rather generous. Recent UAW buyouts focused on eliminating pension benefits (which is why many of the 2008 buyouts were funded with pension money). No severance pay, though.
KLA-Tencor to Cut 10% of Jobs as Customer Orders Ebb — Round 2 for the US’s second...
Social Security Surplus Gone?
Bloomberg had a rather alarmist article by Kevin Hassett today titled Recession Bites Into Social Security’s Surplus. While Hassett’s objectivity is questionable, the article is rather interesting. It’s an easy read on a rather uncomfortable subject.
Criminals know that people who are distracted might forget to keep an eye on their valuables. It’s just happened to us as a nation.
...
AIG Was Responsible For The Banks' January &... →
— This provides a pretty good explanation of how AIG was hosing the US Government, funneling the bailout funds to every bank that traded with AIG.
Excellent Headline Pair
These came up together on Bloomberg (clicking through gave slightly different headlines):
Obama Says He Told Bank CEOs to Show `Restraint’ at White House Meeting
Bank of America May Boost Investment-Banker Pay 70% After Merrill Takeover
Restraint?
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Bank Failure Friday
Just one bank was added to the FDIC Failed Bank List. Omni National Bank of Atlanta, GA has failed. They had deposits of $796.8 million and will have an estimated cost to the FDIC fund of $290 million. Wow, this looks like another case of the FDIC dropping the ball. The bank is being taken over by SunTrust Bank of Atlanta, GA.
I wonder how the FDIC fund is doing given that they’re pitching...
Tax Dodgers Multiply as ‘Underground Economy’... →
— This is both interesting and infuriating. Make sure to click the tabs, there’s a cool graphic.
Our Own Dust Bowl?
I just heard some disturbing news on CNBC, but I can’t find an equivalent article online (and this provides some mitigation). One of the most unfortunate parts of American agricultural history happened to occur during the Great Depression. A combination of unsustainable agricultural practices and a drought lead to the Dust Bowl which, among other things, caused the second greatest population...
Jobs 3/26/09
Despite the GDP revision and the unemployment numbers, which were pretty bad, today wasn’t a bad day. Even the jobs headlines gave a respite. Not great, but better than a few days we’ve had recently:
Google to Cut About 200 Jobs in Sales and Marketing — This is a sensible move by the company.
New York Times plans temporary pay cut, layoffs — 100 non-newsroom staff jobs...
How Much Do You Need to Save for Retirement? →
robot-heart:
Something I worry about (crazily enough) a lot.
This is an important question that deserves some thought. If you are under the age of 23, and you max out your 401(k) and Roth IRA this year (let’s say 100% equities, S&P index), and contribute nothing else for the rest of your working life, you’ll very likely be a millionaire at retirement. If you are over the age of...
New Data Point
That concern I had yesterday? Not an issue. The auction went well today. Everyone is happy (though the economy is still poop). We can keep the treasuries bubble going for a while longer.
Unemployment Rising Again
It’s Thursday, and time for the Unemployment Insurance Weekly Claims Report. Oddly enough, the news wasn’t as good as last week, and it made headlines this week. The GDP revision came out today, so there was arguably more important news competing for headline space. From the report:
In the week ending March 21, the advance figure for seasonally adjusted initial claims was 652,000, an...
Jobs 3/25/09
IBM made a big announcement today. The others are unsurprising. The headlines:
IBM to lay off 5,000 U.S.-based workers — If the Sun acquisition goes through, expect even more layoffs.
Atlanta Journal-Constitution to Cut 30% of Newsroom — 90 jobs.
Canadian Broadcaster Cuts 800 Jobs as Revenue Falls — Roughly 10% of the workforce.
UniCredit to Cut 1,400 Jobs in Ukraine,...
A Prescient Article from 2005 →
(via master-of-none)
This was an interesting read. I’m not a gold bug. I have a small amount myself, mostly as a hedge. Of course, if I believed in the collapse of the dollar, I’d own physical coins instead of shares of GLD. Hyperinflation has no domestic investment strategy other than bunkers of canned foods, water, and guns (or plane tickets, but that’s not nearly as fun)....
Cause for Concern
Today we had a 5 year treasury auction. It didn’t go so well. Bloomberg reports Treasuries Fall as Five-Year Note Auction Draws Yield of 1.849%:
Treasury notes fell for a fifth day after an auction of $34 billion in five-year notes drew a higher-than-forecast yield, spurring concern record sales of U.S. debt are overwhelming demand.
U.S. securities dropped even after the Federal...
Call for help: Postal chief says agency crashing →
— One plan to cut costs is to defer funding of retirees’ benefits. This strategy did not work so well for the automakers.
Jobs 3/24/09
Today’s headlines lack any surprises:
HSBC Said to Plan 1,000 U.K. Job Cuts, Consider Closing Offices — This amounts to almost 2% of their UK personnel. The office closings are targeting administration jobs.
Legg Mason’s Western Bond Unit Eliminates 10% of Jobs — 100 jobs lost due to client redemptions.
New York Threatens 8,900 Firings If Union Rejects Wage Cuts —...
Gaming Geithner Without Collusion
Yesterday I created a little scenario that would allow banks to game the Geithner plan at government expense. I labeled it low probability because it required collusion. The problem was, like so many others, I was looking at a single trade (ok, two trades). It turns out that there is a way to game Geithner’s plan that doesn’t require collusion, and shifts huge amounts of money from the...
“We don’t know how much of banking profits in recent years were illusory and...”
– Simon Johnson on the Economics of Vilification, via Baselinescenario.com (via master-of-none)
I am curious: what are the consequences of admitting that much of the wealth created in the last bubble didn’t just disappear, but was never there to begin with?
Jobs 3/23/09
These first two headlines grabbed my attention:
S&P Sued by Ex-Ratings Manager for Targeting Women in Job Cuts — Given that the credit ratings agencies are actually hell-spawn, I’m just going to believe that this is actually a conspiracy to distract us from something far worse than gender discrimination. I’ll bet that they’re actually eating babies… I...
27 Visualizations and Infographics to Understand... →
— Found this via Naked Capitalism. I hadn’t seen most of these. Pretty (depressing).
Troubled Asset Plan: Bad
Paul Krugman has a brief explanation as to why the non-recourse loans from the government are a subsidy to increase the asset price of the troubled assets.
Mish goes as far as to call the whole thing a giant con.
Naked Capitalism has three pieces discussing the problems with the plan here, here, and here.
Calculated Risk has the links for the details. This post provides some arguments from...
Regulators Seize Two Large Credit Unions: U.S.... →
Credit Union failures are significantly rarer than bank failures, so this is pretty big news. There’s no hyperbole calling these institutions large.
Bank Failure Friday
It’s Friday. Today the FDIC scored a hat trick:
TeamBank, N.A., Paola, KS — $492.8 million in deposits and an estimated loss of $98 million to the FDIC fund.
Colorado National Bank, Colorado Springs, CO — $82.7 million in deposits vs. $9 million in estimated loss.
FirstCity Bank, Stockbridge, GA — $278 million in deposits vs. $100 million in estimated loss.
...
Asset Classes
I’ve been annoying my friends recently by asking them what asset class they think will perform the best over the next 10 years, then playing devil’s advocate and providing a scenario under which the chosen asset class will underperform. I’ve debated both sides of gold, oil, other specific commodities[1], stocks, corporate bonds, government bonds, real estate, and cash. I also had...
Jobs 3/19/09
Not much from the US today, but some interesting stories from the rest of the world. The headlines:
U.S. Olympic Committee Cost Cutting Eliminates 54 Jobs, AP Says — No details.
South Korea to Spend 4.9 Trillion Won on Job Creation — $3.5 billion goes a long way in South Korea.
French Refinery, Power, Port Operations Hit by Strike — A related article here.
ThyssenKrupp...
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Unemployment Dips?
It’s Thursday, and time for the Unemployment Insurance Weekly Claims Report. It didn’t make headlines this week, which is too bad. The news is pretty good. The seasonally adjusted initial claims decreased:
In the week ending March 14, the advance figure for seasonally adjusted initial claims was 646,000, a decrease of 12,000 from the previous week’s revised figure of 658,000....
Jobs 3/18/09
Not a lot today. Good news for some, bad news from the UK. The headlines:
Brazil Creates Jobs for First Time in Four Months — Some people still believe that Brazil can avoid a recession. This is 9,179 votes in agreement.
Taser May Gain Year’s Worth of Sales From Stimulus — 300 potential new jobs trying to arm cops with things that aren’t designed to kill. I personally favor...
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Jobs 3/17/09
Today was a day of non-events. The Producer Price Index seemed to be ignored (YoY change was negative, outside expectations — maybe we’ll hear more about this tomorrow with the Fed announcement). There was a somewhat upbeat housing report (click for Calculated Risk’s analysis). The US National Debt hit $11 trillion. There was some more fuss about AIG. Market reports are crediting...
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11 Trillion Dollars →
“Section 117.C.2 of the Commodity Futures Modernization Act of 2000 preempts...”
– A txt from my buddy Steve, paraphrasing a radio commentary, on 3/16/09. Pretty accurate. Note this was also the legislation with the “Enron Loophole.”
Option ARMageddon: Panics and Booms, a lesson from... →
— This is incredibly cool. An essay from 1897 on business cycle theory and the bursting of credit bubbles (via Naked Capitalism)
Jobs 3/16/09
The news feeds were rather dominated by AIG headlines today. This is a short reminder that jobs are disappearing worldwide. The headlines:
Australia to Cut Skilled Visa Intake to Protect Jobs — They are not alone in their shortsightedness. This is a decline of 18,500 visas from previous forecasts.
Dana Has $256 Million Loss, Boosts Job Cuts to 5,800 — The auto supplier recently...
naked capitalism: Wiliam Black Savages Treasury's... →
— I picture a cartoon character slowing changing from pink to purple as the pressure builds.
Misdirection
Everyone is familiar with misdirection. It’s part of what makes magicians’ acts so enjoyable. We see the same tricks performed over and over again, but the patter and the methods to trick the audience change. My personal favorite is when a magician appears to use one technique while actually employing another (like the invisible palming trick, which doesn’t actually employ...
Mark to Market
There’s been a bit of controversy about Mark-to-Market accounting rules for banks (look here or here). The powers that be will probably reach a verdict on this soon. I just wanted to share a few thoughts.
You might not know what Mark-to-Market accounting actually is and why it might cause problems. Put simply, the rules say that a bank should value their assets at “The price that would be...
Jobs 3/12/09
The headlines told a positive jobs story today. Ok, I’m discounting the weekly unemployment insurance report, but that’s looking backwards. Let’s look forward (or at least into the present) with today’s headlines:
Obama Stimulus May Get a Timely Boost From U.S. Census Hiring — This will create 1.4 million jobs over the next year. I have to share a funny story: The...
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Kindle 2 Review
This is for Jeff Miller, who seems to be collecting views on the new Kindle (AKA Kindle 2). I should preface this by saying that I haven’t previously owned an ebook of any sort. The short version of my review is this: I like it.
I didn’t buy the first version of the Kindle because I wasn’t sure how the ebook war was going to end. Sony had their offerings. I didn’t want to...
Who's AAA?
Bloomberg has the story General Electric Loses S&P’s Top-Level AAA Rating. I know that nobody still has faith in any of the ratings agencies, but the move did leave me asking: who is still on the AAA company list? Fortunately, Bloomberg answers the question:
The only remaining Aaa companies are Automatic Data Processing Inc., Berkshire Hathaway, Exxon Mobil Corp., Microsoft Corp. and...
Unemployment Bad, Expected
It’s Thursday, and time for the Unemployment Insurance Initial Claims Report. The unemployment consensus was for 645k new claims with a range of 610k to 660k. The seasonally adjusted number came in at 654k. I point out the range to provide a slightly different perspective. Yahoo Finance was carrying the headline New jobless claims rise more than expected. Here’s what they have to...
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Jobs 3/11/09
Today had another single big headline on the jobs front. The headlines:
National Semiconductor to cut 1,725 jobs — 25% of its workforce. This is bad. Interestingly, they are still profitable.
American Airlines to Lay Off 323 Attendants in April — Last month they were hoping that retirement and natural attrition would reduce the need for layoffs. Expecting people to leave a job in...
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Jobs 3/10/09
There was a big announcement today. That reduced my efforts to find too many other headlines. The list:
United Technologies cutting jobs, outlook — 11,600 jobs, 5% of their global workforce. They’re still going to spend $1 billion on share buybacks. I’m not sure why that would restore faith in management. It’s not clear how the distribution of jobs will break down.
...
Whites-Only U.K. Party Seizes on Economic Slump to... →
— A quote from their policy page:
“We will also clamp down on the flood of ‘asylum seekers’, all of whom are either bogus or can find refuge much nearer their home countries.”
Just so we’re clear on this: I think this is a bad sign, but a sign of things to come.
"Paul Krugman to the rescue: Paradox of thrift"... →
moorewr:
Debunk away!
I’ll give it a shot.
The paradox of thrift can be summarized as this: if everyone saves more, aggregate demand drops, production declines, layoffs ensue, and everyone is worse off because of it.
There are a number of problems with using the paradox of thrift as a basis for economic policy.
It makes the assumption that a decrease in aggregate demand is always...