May 2009
76 posts
Pondering
No banks failed tonight, so I thought I’d give you a reading list instead. I desperately tried to weave some narrative structure together, but it still looks like a reading list.
Did you catch Krugman’s op-ed yesterday? He titled it The Big Inflation Scare, and it should sound familiar. Krugman says:
Banks aren’t lending out their extra reserves. They’re just sitting on them — in...
GM Bondholders Accept Revised Offer
Wow, this is pretty big. It’s possible that the world’s messiest bankruptcy is going to go a little smoother.
The AP reports GM says bondholders support sweetened offer:
General Motors Corp. says a committee of bondholders has agreed to a sweetened deal to erase some of the automaker’s debt in exchange for company stock.
The company said in a statement Thursday that it...
Unemployment Mixed Again
The story of decreased layoffs followed by a bigger decrease in hiring continues. Today’s Unemployment Insurance Weekly Claims Report is out. New claims are slightly down while continuing claims moved to 6,788,000, setting the record once again. Bloomberg reports U.S. Initial Jobless Claims Fall 13,000 to 623,000:
Fewer Americans filed claims for unemployment benefits last week, a sign the...
Unemployment at 8 Percent Is the New Normal as... →
Bloomberg adopted a Breaking News format for the above headline, which is different than the headline you’ll get if you click through. There was also this blurb:
Americans may have to get used to unemployment greater than 8 percent for the first time since 1983 as potential economic growth slows from 3 percent to 2 percent. Lasting shifts in consumer spending and saving may crimp
...
Consumer Confidence
The consumer confidence report came out today. It’s widely covered, so I assume you know that it had a huge positive spike. Here’s the press release. I’m not actually going to pay to read the full survey, though sometimes I feel like I should. I find it funny that a stock market rally is typically a cause of increased confidence (it’s a noticeable effect), and the market...
Homes vs. I-Bonds
Over at The Consumerist, there’s a post titled WSJ Asks, “Is Your Home A Good Investment?”:
Brett Arends at The Wall Street Journal has compared Case-Shiller house price data to annual inflation rates, and speculates that owning a home may not be a very good investment. “You can often do better on long-term inflation protected government bonds,” he writes.
In...
Pediatric carbon monoxide poisoning linked to... →
Hours after Hurricane Ike roared ashore in Texas, more than two million homes were without power, which left some scrambling to preserve food and others looking for ways to entertain children, a move that proved to be, in some instances, poisonous. Researchers at The University of Texas Health Science Center at Houston found that 75 percent of children treated for carbon monoxide poisoning...
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Things That Are Inflationary
If you want to look for inflationary actions, take a look at the Telegraph article US bonds sale faces market resistance (via Naked Capitalism):
The US Treasury is selling $40bn of two-year notes on Tuesday, $35bn of five-year bonds on Wednesday, and $25bn of seven-year debt on Thursday. While the US has not yet suffered the indignity of a failed auction – unlike Britain and Germany – traders...
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Bank Failure Friday
BankUnited wasn’t the only bank to fail this week. It’s a typical Friday. Two banks failed today.
Citizens National Bank, Macomb, IL — Total deposits of $400 million and an estimated cost to the FDIC fund of $106 million. Morton Community Bank will be taking over the deposits. About $200 million in brokered deposits will not be transferred. Hope they were under the FDIC...
Got Work? →
Following commencement, the class of 2009 faces the worst job market in years.
Just 19.7% of 2009 graduates who applied for a job actually have one (it was 51% in 2007). Good luck to all new grads.
CBO GDP Projections
Since Gilmoure asked, here are the nominal GDP estimates from the CBO (and nominal % change):
2008 - 14.26 T, 3.3%
2009 - 14.05 T, -1.5%
2010 - 14.58 T, 3.8%
2011 - 15.23 T, 4.5%
2012-2015 (average) - 18.14 T, 4.5%
2016-2019 (average) - 21.16 T, 3.9%
I use nominal GDP because debts are nominal. I do think these projections are a bit rosy. I still...
U.S. to Steer GM Toward Bankruptcy →
This is going to go well. I PROMISE!
No. That’s a lie. I don’t see any version of this that qualifies as “good.” Certain outcomes might be better than others, but they’re all going to hurt. Perhaps investing in Procter and Gamble is a good way to play this.
I Learned Something Today
It’s cool to ask a colleague how they write their name in Chinese characters. It’s not cool to ask if they can write their name in the snow.
In related news: apparently it doesn’t snow in Taiwan. This makes it necessary to explain what you mean when you ask certain people about writing your name in the snow. This is also frowned upon, although it may have been the gestures that...
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But... It's not Friday
BankUnited, FSB of Coral Gables, FL has failed. I didn’t even find out by obsessively refreshing the FDIC web page. Instead, I found out by obsessively refreshing Zero Hedge. The last bank failure to occur on a non-Friday was, of course, Washington Mutual. With deposits of $8.6 billion, BankUnited is much smaller, but still falls into the “painful” category. The estimated cost to...
“Beer has utility: one of my favorite utilities.”
– Hilker, deciding whether to invest in gold or beer.
Sovereign Debt Downgrades
Remember when the US was at risk of losing its coveted AAA rating? That was when times were actually good, and we had a couple trillion dollars less in debt. HA! We certainly called the ratings agencies’ bluff… didn’t we?
Japan’s loss of AAA rating (via Naked Capitalism) — The link chain passes through Zero Hedge, so I don’t know how I missed this. Japan...
Senate bids for 145% hike on beer tax. →
sexypants:hilker:omg-nowai:
Moving to Canada, etc.
Libertarians thought their ranks would swell as people preferred gold *to* dollars. Maybe people will prefer dollars *and* gold(en sweet nectar).
Unemployment Mixed
Thursday’s Unemployment Insurance Weekly Claims Report is out. New claims are slightly down while continuing claims moved over 6.66 million (yes, I needed to include that precision), setting the record once again. The headline on Bloomberg’s homepage was Jobless Claims in U.S. Are Higher Than Estimated; Benefit Rolls at Record, which was a little more intriguing than the headline over...
Cramer Master Class →
For those who would prefer not waste their time (with either Mad Money or the paper), here is the punchline: “Cramer’s stockpicking was in line with the market. One could replicate Cramer’s performance by constructing an index composed of 18% Russell 1000 Growth, 29% Russell 1000 Value, and 53% Russell 2000 Growth.”
My friend’s father views Cramer as some kind...
Singapore economy shrinks 10.1%, no recovery seen →
The Singaporean economy was 10.1% smaller in the first quarter than it was at the same time last year, with no indication of a turnaround in the near term, according to a statement Thursday by the Ministry of Trade and Industry.
On a quarterly annualized basis, Singapore’s gross domestic product in the January-March period fell 14.6%, with the ministry saying it saw “no...
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Some California Headlines
I promised some headline responses to the California special election. Here’s a sampling:
California Rejects Schwarzenegger’s Budget Measures — This just announces the results of the election.
California Confronts Growing Cash Crisis After Defeat — Governator Schwarzenegger says we’re going to have to cut, since the taxpayers voted against more taxes.
California...
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BankUnited Bidders Said to Be Told Bank to Be... →
If anyone still has an account over the FDIC limit at BankUnited, they’re trying to lose money.
Watch California Go Bankrupt! →
Is anyone offering odds on a federal bailout of California?
While the results aren’t all in, it appears as if California residents have decided that we don’t want to pay for all of our government services. And yes, Massachusetts, we are jealous that you pay less in taxes and get more in services without going bankrupt—but if we were any good at value shopping, our housing...
Capital Raising Done?
I think the round of capital raising may be complete. Bloomberg reports Bank of America Raises $13.5 Billion in Sale of Stock:
Bank of America Corp., the biggest U.S. bank by assets, said it raised about $13.5 billion in a sale of common stock as part of an effort to boost capital and weather an extended recession.
The bank issued 1.25 billion shares at an average price of $10.77 each,...
Japan’s Economy Shrank Record 15.2% Last Quarter →
Japan’s economy shrank at a record 15.2 percent annual pace last quarter as exports collapsed and consumers and businesses cut spending.
The contraction followed a revised fourth-quarter drop of 14.4 percent, the Cabinet Office said today in Tokyo. Gross domestic product fell 3.5 percent in the year ended March 31, the most since records began in 1955, confirming that the recession is...
Credit Card Reform Bill Passes With Guts Intact →
dandrews:
crazynutjob:
This short summary is better than the NYT article it references.
I find it arbitrary that 13 year olds can get tried as an adult for murder, 16 year olds can drive, 18 year olds can vote, serve in the military, and get married, but you have to wait to be 21 to drink alcohol and, now, get a credit card.
I personally think one of the most important parts of the...
AmEx climbs after trimming 4,000 jobs →
MarketWatch wrote this headline a little early. AmEx closed down 5% today. 4,000 jobs is nothing to sneeze at, but the move is still likely to be insufficient. Consumer credit defaults are on the rise, and this isn’t likely to change.
AmEx cards are attractive to a lot of small businesses. I had one for the first company I worked for out of college (and have one with my current employer)....
Credit Card Reform Bill Passes With Guts Intact →
This short summary is better than the NYT article it references.
I find it arbitrary that 13 year olds can get tried as an adult for murder, 16 year olds can drive, 18 year olds can vote, serve in the military, and get married, but you have to wait to be 21 to drink alcohol and, now, get a credit card.
The Best Job Markets for Recent College Grads -... →
(via robot-heart)
It appears as if new grads should move to the East Coast.
Is the Obama administration condoning Ecuador’s... →
The fact that there are no international political consequences isn’t really that interesting to me. There will be economic consequences, though hopefully they will be limited to Ecuador.
The short version: Ecuador has the money to pay its debt, but has decided not to. Contrast this with the US, who doesn’t have the money to pay its debt, but continues to try.
Interesting analysis...
Venture Financial Group says 10-Q will be late →
Another obvious call for a bank run. Also, this article is written by an old friend of mine. RSS feeds are a wonderful stalking tool.
Hipsters In Portland Can't Get Jobs Writing For... →
A friendly jab for those living in Portland.
Germany needs more than an accounting trick →
I found this via Naked Capitalism. I was expecting a bit more from this article. Germany is rather heavily exposed to the crisis developing in Eastern Europe. This article tries to pick apart the current solution offered by the German government without getting into reasons why the problem may be even bigger in the near future.
I’d like to point out that German financial institutions were...
Slovakia GDP Drops 11.2% In Three Months →
Slovakia’s economy contracted by 5.4 percent year on year during the first three months of 2009. By way of comparison we could note that the economy expanded by 8.7 percent year on year in the first quarter of 2008. The latest results simply confirm what most Slovak economy watchers, the central bank, the European Commission and others already knew: the country is set to enter recession...
India Stocks, Rupee, Bonds Surge on Congress Win;... →
India’s benchmark stock index jumped a record 17 percent, bonds rose and the rupee gained the most in two decades after Prime Minister Manmohan Singh’s Congress Party won nationwide elections.
Share trading was halted for the first time ever after the Sensitive Index, or Sensex, breached a daily limit set by the market regulator. The rupee climbed 3 percent against the dollar and the...
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Ally Bank →
Hey, this looks nice. It’s a new bank. They even have “NO SNEAKY DISCLAIMERS” as part of their little ad. They offer pretty good rates and … wait a second:
We are Ally Bank, built on the foundation of GMAC Financial Services. And with that experience we’ve learned that these times demand change and a new way of doing business. So we’re taking banking in a new...
A Financial Bunker for Scary Times →
sds:
Suppose there was a financial instrument with a track record stretching back 1,400 years; that was so solid it could survive the Great Depression intact; that earned untaxed interest at a competitive rate; that could be borrowed against at will regardless of credit conditions; and that could be used by individuals as well as major corporations and banks as a safe harbor during economic...
Obama Says U.S. Long-Term Debt Load... →
“We can’t keep on just borrowing from China,” Obama said at a town-hall meeting in Rio Rancho, New Mexico, outside Albuquerque. “We have to pay interest on that debt, and that means we are mortgaging our children’s future with more and more debt.”
Holders of U.S. debt will eventually “get tired” of buying it, causing interest rates on everything from auto loans to home mortgages to...
'Slumdog Millionaire' child star's home demolished →
Despite the hit movie’s mega-millions in box-office receipts, Azharuddin Mohammed Ismail’s life changed little after he returned home to Mumbai, India’s, Garib Nagar, or city of the poor.
On Thursday, even the roof over the real-life slum dweller’s head was taken away as Indian authorities tore down the shanty where Ismail’s family lived.
Authorities said...
Genuine Good News
This caught me off guard. It’s good news about entrepreneurship and newspapers all in one. The Denver Business Journal reports Ex-Rocky Mountain News staffers to try again with online news project:
Former Rocky Mountain News staffers who led the aborted effort to start an online Denver newspaper have regrouped and will instead launch an online magazine later this summer.
The Rocky...
FDIC economist pushes aggressive new approach... →
I knew that the FDIC fund was running a bit low, but robbing banks is much less efficient than robbing the taxpayer (or healthy banks).
BankUnited Deadline Extended →
Once again, a very clear call for a bank run.
Estonian GDP Shrinks By An Annual 15.6% →
Estonia’s economy contracted the most in at least 15 years in the first quarter, making it the second-worst performance in the European Union. Behind the number lay a sharp fall in consumer spending and a plunge in industrial output. GDP was down by an annual 15.6 percent, the sharpest drop since at least the first quarter of 1994, according to the flash estimate from the statistics office. The...
Unemployment Back Up
The Unemployment Insurance Weekly Claims Report has been released. The Bloomberg consensus was 609,000 with a range of 590,000 to 625,000. The actual number surprised to the upside at 637,000. Bloomberg reports Jobless Claims in U.S. Increase More Than Forecast:
More Americans than forecast filed first-time claims for unemployment insurance last week, mainly reflecting a jump in applications...
