May 2009
76 posts
Bankruptcy Cramdown Defeated
This is something that I probably should have an opinion on, but don’t. The bankruptcy cramdown legislation would have given bankruptcy judges the ability to alter loan terms, specifically mortgages. From Bloomberg’s Senate Defeats Mortgage ‘Cram-Down’ as Democrats Balk (the headline is of questionable accuracy):
The U.S. Senate rejected a measure that would let bankruptcy judges...
April 2009
71 posts
Chrysler Said to File for Bankruptcy in New York... →
— And here’s an article. Filing in New York is going to upset a few people in Michigan.
Chrysler Declares Bankruptcy
I suppose it’s official. President Obama just announced the Chrysler/Fiat alliance. It took a while, but he eventually mentioned that the evil hedge funds (holding senior secured debt) forced them to use bankruptcy. The filing is expected later today.
I’m still curious about the pension plans. What happens to the pensions? There was one mention of the pension plan in association with...
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Unemployment Mixed
There’s a positive headline, but the data is summarized by the first sentence. AP via Yahoo Finance reports New jobless claims unexpectedly drop to 631K:
The number of newly laid-off workers signing up for unemployment benefits dropped unexpectedly last week, but the number of people continuing to draw jobless aid rose to nearly 6.3 million, setting a record high for the 13th straight...
GM Bondholders Said to Ask for Majority Stake in... →
— I wonder how this game will change tomorrow. If the government proves willing to push Chrysler into bankruptcy, the GM bondholders may realize their bluff has been called. If Chrysler avoids bankruptcy, the sheer unlikelihood of it all will harden the GM bondholders’ resolve. On the other hand, if the Chrysler bankruptcy doesn’t go smoothly (it won’t), the GM bondholders...
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GDP Down 6.1% Annualized
The BEA released the official GDP report for Q1 2009. GDP was down an annualized 6.1%, and there was a small downward revision to Q4 2008. This was toward the low end of the Bloomberg consensus range (-6.2 % to -3.5 %). Take into account that this is the preliminary report, and subject to massive revision (Q4 2008 went from -3.8 to -6.3). That said, I don’t expect...
Fiat-Chrysler Tie-Up Said to Be Planned With or... →
— I think Fiat taking over Chrysler is a great thing. However, what isn’t mentioned in this article is extremely important: what is going to happen to the pension obligations? Is the US government going to take over pension obligations without a bankruptcy proceeding?
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Ahhh... The Old "Swine Flu" Excuse
First, from the CDC:
Can people catch swine flu from eating pork?
No. Swine influenza viruses are not transmitted by food. You can not get swine influenza from eating pork or pork products. Eating properly handled and cooked pork and pork products is safe. Cooking pork to an internal temperature of 160°F kills the swine flu virus as it does other bacteria and viruses.
But that...
That Was Quick
Early today, GM offered an equity swap to its bondholders. From Bloomberg, GM Steps Up Job Cuts, Offers Shares to Bondholders:
General Motors Corp., working to stave off a June 1 U.S.-backed bankruptcy, stepped up dealer shutdowns and job cuts and offered equity to bondholders under a plan to reduce liabilities by $44 billion.
GM will shrink the number of dealers 42 percent to 3,600 and...
Bank Failure Friday
Four banks and a credit union failed today. First, the banks, from the FDIC failed bank list:
First Bank of Idaho, Ketchum, ID — Total deposits of $374.0 million and an estimated cost to the FDIC fund of $191.2 million.
First Bank of Beverly Hills, Calabasas, CA — Total deposits of $1 billion and an estimated cost to the FDIC fund of $394 million. It is estimated that the bank has...
TBA
One bank and one credit have already failed today. I’m going to happy hour before making a Bank Failure Friday post because there’s still time for more FDIC updates. Oh, look, another failure. Make that TWO banks and one credit union.
Stress-Free Stress Test
The Fed announced some details of their stress test methodology (this article in the NYT is interesting, too). Unfortunately, there wasn’t really anything new in the announcement. Some people criticized the Fed for this. They wanted to know some details, like “What is the minimum capital ratios you used?” The Fed, of course, didn’t release this information because enough...
Jobs 4/23/09
I was enjoying the break from bad jobs headlines. Today they’re back:
Wells Fargo Said to Eliminate About 150 Jobs in Investment Bank — The article points out that Wells has been on a hiring binge because of the uptick in mortgage originations. +5,000 vs -150? Not too shabby.
Lloyds Banking to Cut 985 Jobs at Motor Finance Unit — Yeah, car sales aren’t going so well in...
Weekly Unemployment Mixed
Fewer fired, fewer hired. That would be my summary of the Unemployment Insurance Weekly Claims Report:
In the week ending April 18, the advance figure for seasonally adjusted initial claims was 640,000, an increase of 27,000 from the previous week’s revised figure of 613,000. The 4-week moving average was 646,750, a decrease of 4,250 from the previous week’s unrevised average of...
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Crime Pays in Contra Costa, CA
While I often speak about doom and gloom, I try to remain grounded. When I talk about worst case scenarios, I think about hyperinflation and the breakdown of social order. I don’t usually think of something so mundane as counties not prosecuting crimes to save money:
Misdemeanors such as assaults, thefts and burglaries will no longer be prosecuted in Contra Costa County because of budget...
UK Debt Concerns
At least the US isn’t the UK. They’ve had trouble with gilt auctions in the recent past, and have a lot of debt left to be financed. Bloomberg reports Gilt ‘Indigestion’ Looms as U.K. Prepares Record Bond Sales:
The U.K.’s plan to sell a record 220 billion pounds ($318 billion) of gilts this year to revive the economy may cause investor “indigestion,” according to some of Britain’s...
AP Sources:GM to shut many US plants up to 9 weeks →
— I am sharing this because of the last post. GM is playing for keeps. The Michigan AG has written a polite letter to GM suggesting that GM declare bankruptcy in Michigan.
GM to Default
From the WSJ, GM Plans to Skip $1 Billion Debt Payment:
General Motors Corp. Chief Financial Officer Ray Young said the company doesn’t plan on making a $1 billion debt payment due June 1 and is relying on either a successful debt-for-equity exchange or court protection to dramatically lower its outstanding debt.
These are endgame moves. GM likely has the cash on hand, but wants to be...
New York and Pension Fraud
By now, everyone knows that underfunded pensions are a global problem (just read Pension Pulse for a bit). But there are other, potentially criminal, problems as well. New York AG has looked into various problems, including the use of kickbacks to convince pension managers to breach their fiduciary responsibilities. Today, Bloomberg reports New York Bans Agents, Lobbyists in State Pension...
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IMF puts financial losses at $4,100bn →
— I almost forgot to post this. The official report came out. It said exactly what everyone said it would. Not really news when everything was leaked ahead of time.
Jobs 4/21/09
Only one article I want to share today. AP via Yahoo Finance reports Yahoo to cut 600 to 700 jobs after 1Q results fall:
Yahoo Inc. will lay off more than 600 workers after getting off to another bumpy start under a tough-talking new boss who has promised to engineer a long-awaited turnaround at one of the Internet’s best-known franchises.
Neither the lackluster first-quarter...
Some lose a job and become an entrepreneur →
— Look, I’m linking to another article on becoming an entrepreneur with questionable advice. This one is from USA Today. I’ll continue to post these until someone offers me a job as an assistant baker or seamster (I had to look up the masculine version of seamstress). Seriously, we need more entrepreneurs.
True story: my first business failed because I took a lawyer associated...
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Jubilee
The Jubilee. The debtor’s mulligan. If the problem with the current economic crisis was too much debt, then what better solution than to eliminate all debt?
I first posted a link to an article advocating a Jubilee in December. Months went by. Then, squashed and I briefly discussed a Jubilee at the beginning of the month. On Sunday, this article at the Huffington Post advocated a debt...
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Audit Cites $900 Million Loss on Citigroup Assets →
— Our Citigroup “investment” isn’t doing well? This is me, feigning shock.
Busted ...
gilmoure calls shenanigans on my Slow News Day post.
gilmoure:
crazynutjob:
There wasn’t really anything worth linking to for jobs headlines today. There really wasn’t much worth looking at today in economic reports. This is a little odd given the fact that the S&P dropped over 4 percent.
…
What do you think of White House plan to take remaining $150B recovery funds and rather...
Slow News Day
There wasn’t really anything worth linking to for jobs headlines today. There really wasn’t much worth looking at today in economic reports. This is a little odd given the fact that the S&P dropped over 4 percent. Last week I mentioned that there were as many technical reasons to expect a continued rally as there were to expect a reversal soon. The one thing I felt was certain was...
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Bank Failure Friday
It wasn’t that banks didn’t fail yesterday, it’s that I was hanging out with friends I hadn’t seen in a while until 3am. And yes, the conversation from midnight to 3am was all economics (that’s how we roll). The FDIC updated their failed bank list with 2 new failures:
Great Basin Bank of Nevada, Elko, NV — total deposits of $221.4 million and an estimated...
Wasted Capital
No, I’m not referring to capital wasted at the margin, like buying a bigger TV than you need, or that ninja sword that sits by your bed (just in case the zombie apocalypse is tomorrow). That’s (maybe) a poor investment. I’m talking about wasted capital. I’m talking about paying someone to dig a ditch and then paying someone else to fill it in. The bigger waste isn’t...
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Jobs 4/16/09
Only one thing worth looking at today:
Harley Tops Profit Estimate, to Cut Jobs; Shares Rise. From the article:
Net income slid 37 percent to $117.3 million, or 50 cents a share, from $187.6 million, or 79 cents, a year earlier, the Milwaukee-based company said in a statement today. That was better than analysts expected, excluding some costs.
The earnings decline was Harley’s seventh...
World Trade Center Rebuilders Clash Over Financing →
— Is anybody else bothered by this?
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Better Unemployment News
Today’s Unemployment Insurance claims report did not disappoint. From the AP story via Yahoo Finance New jobless claims fall; March housing starts drop:
New jobless claims fell more than expected for the second straight week, but the number of Americans continuing to receive unemployment insurance benefits rose above 6 million for the first time.
Analysts expect the labor market to...
Jobs 4/15/09
A big announcement from UBS:
Atkins Cuts 1,200 Jobs Amid Middle East Cash Squeeze — I always wondered who designed all those buildings in the Middle East. Apparently some of it was Atkins, the UK’s largest engineering-design firm.
Air France-KLM to Cut as Many as 3,000 Jobs by 2011 — Airlines are still hurting.
UBS Says It Plans to Reduce 8,700 Jobs Until 2010 — Big...
Goldman Sachs and December
A lot of neat things happened in December. Christmas happened (unless you were a retailer, in which case, it didn’t). Other things happened. If you decided to trade stocks or invest in something stupid, you might have lost money. If you were Goldman Sachs, none of it showed up on any quarterly report. The last quarter ended in November. The current quarter began in January.
Interesting.
...
Jobs 4/14/09
Nothing unexpected today:
Discover Will Slash 500 Employee Positions Next Month — 4.2% of their workforce. Spending is down and defaults are up. Not the best business environment for a credit card company.
UBS to Cut 240 Jobs in Asia-Pacific Wealth Management — This is only 3% of their workforce in the area. They’ve cut over 11,000 jobs. Expect more.
Wal-Mart May Cut Many...
Reflection: 4/13/09
So, after I made this post today, mostly for entertainment purposes, I read up on the GM bankruptcy situation. This article from NYT was interesting. I disagree with the titular premise entirely. Even the article provides scant evidence for a fast GM bankruptcy procedure. Here’s the best plan that the article offers:
One plan under consideration would create a new company that would buy...
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Jobs 4/13/09
I saw one jobs headline (the AP story while using the Wii) this weekend that was important:
BT May Slash 10,000 Jobs, Dividend By 60%, Sunday Times Says — Round 2 will be just as big as round 1. That’s scary. 10,000 jobs is big news anywhere.
That’s the big news. I also saw these two headlines today:
Qantas Slashes Profit Forecast, to Cut Jobs, Flights — This was a...
US govt tells GM to prepare for bankruptcy filing →
sexypants:
randyhaddock:
The US Treasury Department has told General Motors to make all necessary preparations for a possible bankruptcy filing by June 1, even though the troubled automaker insists it can restructure its business on its own, The New York Times reported.
Silly companies, you no longer have a say in how your business is run.
We are so [unhappy, as if the victim of prison...
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Texas is wind king, but Iowa breezes past... →
— Well, that blows.
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The Business Model for Banks
Wells Fargo recently made a preliminary report that crushed analysts’ estimates. Goldman Sachs is expected to complete a stock sale to repay the Treasury. There was quite an impressive rally last week, adding to an already impressive move up from the recent lows. This has lead some to declare that the worst is behind us. If that’s true, then it’s worth examining the mechanism for...
“In 1935, Franklin D. Roosevelt raised the top rate to 79 percent, from 63...”
– David Leonhardt - Richly Undeserved
When reading about historical tax rates, I often forget to account for inflation. I thought today’s debates over progressive taxes were interesting. Imagine the debates when a tax rate targets a single individual.
Bank Failure Friday Continued
I was checking the various blogs I read and noticed that Calculated Risk posted on another bank failure. New Frontier Bank of Greeley, CO has failed. The bank had total deposits of $1.5 billion and the estimated hit to the FDIC fund is $670 million. This is big news. In fact, if you just look at the press releases, you’ll notice how big this is. Check the New Frontier press release and the...
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Bank Failure Friday
It has been a couple weeks, but the FDIC is back in the business of shutting down insolvent institutions. Cape Fear Bank of Wilmington, NC, has failed. They had deposits of $403 million, and will have an estimated impact of $131 million on the FDIC fund. First Federal Savings and Loan Association of Charleston in Charleston, South Carolina (yeah, the first Charleston is in the name) has acquired...
“We said from the beginning the stress tests were a complete sham. Just look at...”
– Yves Smith — naked capitalism: Quelle Surprise! Bank Stress Tests Producing Expected Results!
Jobs 4/9/09
Mostly bad news today. The headlines:
J&J Cuts 900 Drug Jobs Amid Rising Competition — 6% of the Johnson & Johnson pharmaceutical jobs is pretty bad, but this isn’t particularly unexpected. The fact that this is from increased competition is a positive.
Hays Will See ‘Pricing Pressure’ as Temp Fees Decline — Hays is the UK’s largest recruiter. This is...
Steelmakers Accuse China of ‘Dumping’ Pipes in... →
— Wow, this is news? I think I read about this last June. Incidentally, the consequence will be the same. A Canadian company will buy the steel from China, provide a slight markup with some “processing” (like money laundering), and sell the steel in the US. The US steel industry wants buyers to pay more for steel. Buyers will pay more due to the tariff (rather, the Canadian...
Capitalism is neither inevitable nor natural
Squashed is never happy with the status quo, and is currently giving his usual thoroughness to the idea of improving capitalism. I’m throwing in my two bits, more with the intent of helping him refine his argument than with the intent of refuting him (though I’ll attempt to refute his titular premise).
squashed:
There are other possible systems
Jewish law, for example, has a...
Why reward intelligence?
squashed:
Capitalism purports to reward merit. (In our practice, it tends to award just having capital—but ideally it’s supposed to reward merit.) By “merit” we mean some combination of a willingness to work hard hard work and things like talent, strength, and (mostly) intelligence. Roughly paraphrased, smart people should have more money.
For lack of a better alternative, I’m a half-hearted...