August 2009
78 posts
The Great Reflation Experiment →
This is excellently written. It provides good contrast to my own opinions on things. In fact, it offers a good couple sentences as to why I disagree:
The bottom line is that the Fed is in a very difficult position. Its room to maneuver is either small or non-existent and the markets understand this. That is why there is a sharp divergence between those worried about price inflation and those...
2 tags
Bank Failure Friday
The FDIC have updated their Failed Bank List. Here’s the summary of the impacts:
First BankAmericano, Elizabeth, NJ — Total deposits of approximately $157 million and an estimated hit to the FDIC fund of $15 million.
Peoples Community Bank, West Chester, OH — Total deposits of approximately $598.2 million and an estimated hit to the FDIC fund of $129.5 million.
Integrity...
July 2009
40 posts
Congress just buying people cars now →
Best summary of the cash for clunkers program, though I am the first to admit that when analyzing opportunity costs for a political policy, you must first make sure that the alternatives are politically feasible.
Washington Post swings to a profit →
The headline sure grabbed my attention. The contents of the article are a little less surprising. Kaplan’s education services and WaPo’s cable investments were revenue winners. The newspaper division didn’t do as well:
The newspaper division posted a loss of $89 million in the second quarter, as publishing revenue dropped 14% to $169 million. Print-advertising revenue fell...
Recession Worse Than Prior Estimates, Revisions... →
The first 12 months of the U.S. recession saw the economy shrink more than twice as much as previously estimated, reflecting even bigger declines in consumer spending and housing, revised figures showed.
The world’s largest economy contracted 1.9 percent from the fourth quarter of 2007 to the last three months of 2008, compared with the 0.8 percent drop previously on the books, the...
2 tags
GDP Down 1.0% Annualized
The BEA released the official GDP report for Q2 2009. GDP was down an annualized 1.0%, and there was a small downward revision to Q1 2009 (from -6.1% to -6.4%). This was in the middle of the Bloomberg consensus range (-2.8% to 0.7%, listing the expected change at -0.7%). Other sources (read: CNBC) reported expectations of -1.5%, so this is slightly better or slightly worse than expected...
Cash-for-Clunkers to be Suspended →
I don’t really like subsidies of any sort, so it’s not surprising that I’m not a fan of the cash for clunkers program. I don’t particularly like the definition of “clunkers” the program uses, as many cars that should be considered clunkers are excluded. However, if the objective is to get people to buy cars, then the cash for clunkers program is as effective, if...
1 tag
Unemployment Bad, Expected
The Unemployment Insurance Weekly Claims Report has been released. Seasonally adjusted initial claims rose to 584,000, which was inside the Bloomberg consensus range of 565K to 600K. From the report:
In the week ending July 25, the advance figure for seasonally adjusted initial claims was 584,000, an increase of 25,000 from the previous week’s revised figure of 559,000. The 4-week moving...
Project Mayhem Research: Multiple Anomalies... →
Zero Hedge has been on fire recently. This will be interesting to watch.
Summary of the worst case scenario: JP Morgan received approval to settle silver futures contracts with shares of SLV. However, what if it simply printed extra shares of SLV without actually having those shares backed by physical silver? 11% of the entries in the bar listing for SLV appear to be duplicate entries. When...
Why Are Banks Holding So Many Excess Reserves? →
I worry when someone from the Fed says something that I agree with. However, this paper does a decent job of addressing the concerns that the growth in the base money supply and the banks’ excess reserves is inflationary (it isn’t because the money multiplier isn’t taking hold. Banks are not lending). It also gives a reasonable explanation that the Fed liquidity programs do not...
California Foreclosures > National New Home Sales →
I had read Ritholtz’ quote of the day, and was wondering how accurate it was. Fortunately, Jake at EconomPic provides us with an accurate version of the quote:
“National New Home Sales, on a monthly basis, don’t even add up to 80% of the total foreclosure activity in California alone in a single month.”
Things are bad in California. I hope your local market is better.
“We review the burgeoning literature on the employment effects of minimum wages -...”
– Minimum Wages and Employment by David Neumark, William Wascher
I provide this as a contrast to the EPI quote that has been circulating. Unlike the EPI, which is an organization with the stated goal of providing evidence for increased minimum wages, NBER and PPIC are a little more unbiased on the...
4 tags
Bank Failure Friday
FDIC Failed Bank List, how do I love thee? Let me count the ways:
Security Bank of Jones County, Gray, GA — $387 million in deposits.
Security Bank of Houston County, Perry, GA — $320 million in deposits.
Security Bank of Bibb County, Macon, GA — $1 billion in deposits
Security Bank of North Metro, Woodstock, GA — $212 million in deposits.
Security Bank of North...
1 tag
“One of the more amusing quirks of the “birther” movement is the quality of the...”
– Key Birther Lawyer Was Disbarred … In 2004 | The Washington Independent (via ericmortensen) (via thesmarttart)
I don’t necessarily think you need to be a proven and qualified legal mind to be smart and be able to participate in our legal system…but when so many of the people associated with this...
1 tag
Unemployment Statistics Begin Return to Normal
I can’t commit to a good / bad news headline this week. The Unemployment Insurance Weekly Claims Report has been released. Unfortunately, due to the auto industry revisions from the last two reports, it is difficult to decide whether the report represents good news or not. New claims came in at 554,000, which was a bit below the Bloomberg consensus of 560,000 (well within the consensus range...
CIT Bond Advisers Said to Push for Bankruptcy... →
This isn’t surprising, but it is good that it is being acknowledged now. I sincerely hope the restructuring goes well. I don’t think anyone wants to see CIT simply disappear.
1 tag
CIT Will Fail
CIT was at risk of failing an August debt payment, so they sought a government bailout. The government declined, and suddenly CIT was going to fail in a day (never quite understood that one). This weekend, CIT worked out a deal with a few creditors. Bloomberg reports in CIT Bondholder Pact Proves Life After Death With Markets Rescue:
CIT, led by Chief Executive Officer Jeffrey Peek, is...
CalPERS Lawsuit "Just the Tip of the Iceberg" for... →
continuum:
A big story that got a little lost in all the earnings and healthcare headlines this week comes to us out of California. The California Public Employees’ Retirement System (aka CalPERS) - the nation’s largest pension fund - is suing Wall Street’s top three credit rating agencies.
I saw this last night and thought, “Is this the same CalPERS that invested in a real estate...
“Except as provided in this paragraph, the individual health insurance issuer...”
– section 102 of the ironically-titled America’s Affordable Health Choices Act of 2009 effectively forces enrollment in the public plan, thereby eliminating private insurance altogether. IBD goes on:
“The legislation is also likely to finish off health savings accounts, a goal that Democrats have...
1 tag
Unemployment Worse
This week’s Unemployment Insurance Weekly Claims Report has been released. Like last week, the seasonally adjusted numbers fell. Unfortunately, like last week, the seasonally adjusted numbers are skewed because auto industry layoffs struck early this year. In Jobless claims drop, but clouded by auto ms drop, but clouded by auto, Yahoo Finance reports:
The number of newly laid-off...
Denial of CIT bailout unlikely to rattle markets →
CIT said late Wednesday that negotiations with regulators about a possible rescue had broken off after days of round-the-clock talks, raising expectations that the New York-based company will file for bankruptcy. The move marked a defining moment for the Obama administration and showed it’s drawing a line in the sand on federal rescues for troubled financial firms.
Well, that unraveled...
“Given our current tax code, the simplest way to bring down medical costs would...”
– Peter Schiff (via Moneynews - Schiff: Healthcare Fix Is Simple)
an interesting suggestion. what say you, tumblrs?
(via hilker)
This was something I used to endorse (as recently as a couple days ago). Actually, I still do, but there is recent evidence that it won’t be terribly effective....
Reset Chart from Credit Suisse has a Major Error →
This is the most troubling thing I read today. This is a $100 billion ticking time bomb, and nobody really seems to know when it is going to go off.
As you might know, Option ARMs are performing worse than subprime, and the Option ARM market is bigger than the subprime market. For those that don’t know, an Option ARM has a minimum payment option that allows negative amortization (not even...
FT.com - Business Week sale may fetch only $1 →
financegeek:
I’m going to sell Finance Geek for $2 just so that I can say it’s bigger than Business Week.
Don’t try and sell me some story about circulation, advertising sales, debt to equity ratios, or anything like that. It’s worth more. The market has spoken.
I’ll offer $5 (for Finance Geek, not Business Week). Do you accept paypal?
5 tags
CIT Bankruptcy and Main Street
CIT is perhaps the most important lender to small businesses in the US. Discussion about its impending demise started in earnest with the WSJ article Major Lender Faces Crunch (via front pages). Today it is being discussed everywhere. Bloomberg has the article CIT Group Says Its Failure Risks Demise of Customers:
CIT Group Inc., the century-old lender that hasn’t been able to persuade the...
Bank Failure Friday
Only one bank was added to the FDIC Failed Bank List. Bank of Wyoming, of Thermopolis, WY failed.
As of June 30, 2009, Bank of Wyoming had total assets of $70 million and total deposits of approximately $67 million. In addition to assuming all of the deposits of the failed bank, Central Bank and Trust agreed to purchase approximately $55 million of assets. The FDIC will retain any remaining...
New GM Emerges From Remains of Bankrupt Automaker →
New GM is born. I completely blew this call. Where’s the mess? Where’s the endless stream of litigation? I still can’t believe how smoothly this went. All legal challenges were simply brushed aside. Apparently the law was very clear and unambiguous, something every single lawyer opposing the sale didn’t understand.
continuum:
Has anyone found corroboration to this story that $18M is being spent to redesign http://recovery.gov? http://tinyurl.com/ktzsr7 #propaganda
Does fbo.gov count? The initial $9.5M is there in the award notice, but I do not see anything about a potential follow up bringing it to $18M.
Is Anybody Wrong?
robot-heart-politics:
Perhaps we should also go into the fact that “redistribution of wealth” is just a buzz word being used by conservatives as part of their rhetoric of moral superiority? We’ve been “redistributing wealth” for the last 30 years, through economic and business policies which favor big business, corporations and the wealthiest Americans, while deprivileging workers and the...
“A majority of House Members have now co-sponsored a bill to reverse those...”
– The American Scene (via southpol)
I reblogged this because I thought it was funny prose. A lot of dealers did get the shaft, though.
1 tag
Unemployment Better? Not Exactly
The Unemployment Insurance Weekly Claims Report had better numbers than were anticipated with the initial claims coming in at 565,000 (Bloomberg consensus was 610,000). The previous week was revised up 3,000 to 617,000, but the decrease of 52,000 is welcome news. As you might expect, this isn’t the whole story. Reuters provides the explanation in U.S. jobless claims drop steeply
The...
More Evidence of the "Foreclosure Backlog" →
If enough people believe the economy will get better, it will get better. This seems to be the underlying premise of many actions these days. Yet, an overwhelming sense that good times are ahead marks the tops of bubbles, not the bottoms of busts. Hiding losses isn’t going to fix things.
Negative Interest Rates
Negative nominal interest rates were an interesting theoretical construct. The mental exercise is as follows: to encourage consumption, a central bank can resort to negative (technically, just low, but we’ll ignore that for now) real interest rates. Because the real return on capital is negative, it’s better to spend money on investments or durable goods than to save money. However,...
Bank Failure Thurdsay Extravaganza
The FDIC took advantage of the long weekend. Seven banks were added to the FDIC Failed Bank List:
Founders Bank, Worth, IL — Total deposits of $848.9 million and an estimated hit to the FDIC fund of $188.5 million.
Millennium State Bank of Texas, Dallas, TX — Total deposits of $115 million and an estimated hit to the FDIC fund of $47 million.
The First National Bank of Danville,...
California's budget gap deepens $2 billion... →
State budget accounting is strange. State functions happen by default. To contain the budget, they have to be interrupted by the legislature. Otherwise, a single tick of a clock can cause a deficit to swell by $2 billion. This explains why California’s deficit has been growing by $2 billion a month, like clockwork. Completely blowing the forecasts on tax revenues also helps.
(via fp)
Unemployment: 9.5%
Today was a double feature for unemployment news. The monthly Employment Situation Report came out a day early because of the 4th of July weekend. Payrolls declined by 467,000 in June (Bloomberg consensus: -435,000 to -225,000), causing the unemployment rate to creep up to 9.5% (Bloomberg consensus: 9.5% to 9.7%). The key bits:
Nonfarm payroll employment continued to decline in June...
June Car Sales Update →
The results aren’t that good. Ford beat expectations with only 11% fewer sales. What I find interesting is that the auto manufacturers are ramping up production. This will likely be enough to cause GDP to go positive in the third quarter. However, what if auto demand stays low? Then we’ll be stuck with a lot of extra inventory, which will drag on GDP fourth quarter. Does it actually...
Cash vs IOU →
Freddie, Fannie to Provide 125% LTV Mortgages,... →
I doubt that there are going to be a lot of qualified borrowers that fit this new limit, but it’s still an interesting commentary. If anything, the average person is at greater risk for default right now (unemployment is still increasing, credit card companies are tightening the thumbscrews, wage growth is nonexistent, etc.). If Freddie and Fannie were not guaranteed by the US government,...
“As for the bill itself, 37% of all Americans at least somewhat favor it, while...”
– Rasmussen: 42% Say Climate Change Bill Will Hurt The Economy
Our congress at work.
(via southpol)
I hate to say it, but if the legislation was done correctly, it should have a negative impact on the economy, at least in the short run. Imagine if we were a big manufacturing center, but we...