January 2010
50 posts
2 tags
GDP Up 5.7% Annualized
The BEA has released the Fourth Quarter GDP Report. The annualized growth came in at 5.7%, which was at the high end of the Bloomberg consensus range of 3.5% to 5.7%. This is the result of inventory buildup that analysts have been waiting for:
Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an...
Poland only EU Nation with '09 Growth →
Ready for the Protectionist Backlash?
Two stories from earlier today lead me to believe that a bit of a protectionist backlash is just around the corner.
First, Stimulus-Funded High Speed Rail Likely To Lose Money And Be Built By Chinese Companies:
China’s railroad giants are licking their lips at the thought of America’s large stimulus hand-outs for high-speed rail.
In preparation for their potential market,...
Ecuador Default ‘Clear and Present Danger,’ S&P... →
It looks like the UK and Greece aren’t the only ones on the receiving end of S&P’s hate-fest. The last default from Ecuador occurred way back in 2009.
Checking in on Greece
It didn’t take too long for Greece to get into more trouble. A single bond auction success quickly became old news. These are headlines from today.
First, Greeks Taking Bribes Thwart Papandreou’s Effort to Solve Crisis. Choice bit (emphasis mine):
Greece’s attempt to dig itself out of its worst financial crisis in about 16 years and avoid a bailout is hampered by rampant bribery and...
Pound Drops Against Dollar as S&P Says U.K. Banks... →
This is a bit funny:
The pound fell against the dollar after Standard & Poor’s said U.K. banks are no longer among the world’s “most stable and low-risk” as the economy stagnates.
How is it funny? Apparently S&P issued the report over a month ago, and nobody cared at the time:
S&P had already lowered the U.K.’s place in its Banking Industry Country Risk Assessment gauge to...
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Unemployment: New Claims Down
This week’s Unemployment Insurance Weekly Claims Report has been released. Initial claims fell to 470,000 while last week’s number was revised down 4,000. This wasn’t quite good enough to hit the Bloomberg consensus range of 430k to 460k. From the report:
In the week ending Jan. 23, the advance figure for seasonally adjusted initial claims was 470,000, a decrease of 8,000 from the...
The New Jim Crow →
(via azspot) (emphasis mine)
The Great Depression effectuated a sea change in American race relations and party alignment. The New Deal—spearheaded by the Democratic Party of President Franklin D. Roosevelt—was designed to alleviate the suffering of poor people in the midst of the Depression, and blacks, the poorest of the poor, benefited disproportionately. While New Deal programs were rife...
Jobs
I saw some mention today of Ford’s plans to hire 1,200 workers in Illinois. Workers were interviewed on television saying they felt more secure in their own employment. I didn’t see as much coverage of Home Depot’s announcement to lay off 1,000 workers. Both of these announcements were small potatoes compared to Verizon’s announcement to cut 13,000 jobs. Verizon made...
GM Agrees to Sell Saab to Sports-Car Maker Spyker →
Zombie Carpocalypse!
General Motors Co. agreed to sell its Saab unit to sports-car maker Spyker Cars NV in a deal that would save the 72-year-old Swedish brand from extinction.
The transaction, subject to a 400 million-euro ($563 million) European Investment Bank loan for Saab, will probably be completed in February, enabling Saab to halt a wind-down, GM and Spyker said today. Spyker will...
Greece Raises $11.3 Billion Offering ‘Generous’... →
Greece sold 8 billion euros ($11.3 billion) of bonds at premium yields to ensure the country’s first debt issue since being downgraded was a success.
The five-year securities had a coupon of 6.1 percent, the Greek Public Debt Management Agency said in a statement on its Web site after the bonds were priced today. The government received 25 billion euros in orders, after offering 0.3...
Optimistism, Pessimism, and Jobs
Someone just asked me where I stood on the optimism / pessimism spectrum. I thought I’d clarify.
Things I’m optimistic about:
Jobs
Q4 2009 GDP
Q1 2010 GDP
Things I’m pessimistic about:
Jobs
Stock Market
Housing Market
State Budgets
Treasury Market
US Economy
Global Economy
Just because I’m pessimistic about something doesn’t mean that I...
Existing U.S. Home Sales Decreased More Than... →
Purchases decreased 17 percent, the biggest decline since records began in 1968, to a 5.45 million annual rate from 6.54 million pace the prior month, the National Association of Realtors said today in Washington. The median sales price increased for the first time in two years, reflecting fewer first-time buyers, the group said.
Worst decline on record. Hear that? Panic.
Don’t...
Eye-popping GDP number not sustainable →
The consensus (reported by MarketWatch) for Friday’s fourth quarter 2009 GDP report is 5.5%. It looks like inventory buildup did occur. I find this a little surprising given the weakness in the Manufacturing ISM data. The employment data was very strong, but the inventory numbers were not. From the ISM data alone, I would have predicted better inventory growth in Q1, not Q4.
This headline...
Walmart to Cut 11,200 Sam’s Club Jobs, Outsource... →
Some of these jobs will come back through Shopper Events (the hired product demonstration company), but I’m guessing that most will not.
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Bank Failure Friday
This is going to be a busy year for the FDIC. Recall that they budgeted for additional closure teams, so they’re well aware of this. Tonight, 5 banks were added to the FDIC Failed Bank List:
Premier American Bank, Miami, FL - $326.3 million in total deposits and an estimated hit to the Deposit Insurance Fund (DIF) of $85 million. This one must have been painful for the FDIC, because they...
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Unemployment: New Claims Up
This week’s unemployment statistics are moving in the wrong direction, but with a possible silver lining. The Unemployment Insurance Weekly Claims Report has been released. Initial claims rose to 482,000. Last week’s number was revised up 2,000. This was above the Bloomberg consensus range of 435k to 450k. From the report:
In the week ending Jan. 16, the advance figure for seasonally...
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Illinois Wins? →
No, the race for state insolvency isn’t over. In fact, the handicapping has yet to finish. I’ve got a bid on California to show. It now looks like Illinois is the favorite. The odds are constantly being revised. It’s going to be a close race.
Debt and deleveraging: The global credit bubble... →
I saw this first via vruz, and decided to download and read the report after seeing his excerpt from the executive summary.
My translation:
Certain countries (Spain, UK, US) are still extremely indebted/leveraged.
Deleveraging (massive defaults, belt tightening, then growth), is likely.
Deleveraging is painful and we’re all in for a world of hurt lasting the next 7 years.
McKinsey...
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Bank Failure Friday
Hat trick. Three new banks were added to the FDIC Failed Bank List:
Town Community Bank and Trust, Antioch, IL - $67.4 million in total deposits and an estimated hit to the Deposit Insurance Fund (DIF) of $17.8 million. This involves a loss-share agreement with First American Bank on $56.2 million of TCBT’s assets. On the plus side, the bank will re-open tomorrow.
St. Stephen State...
Big Banks Accused of Short Sale Fraud →
I’ve seen this posted everywhere, so I am duty-bound to post a link. The article itself is actually as good as any of the commentary I’ve read, so I’m just linking straight to it. A teaser:
…But here’s what’s not legal and what’s apparently happening quite often recently. Since many second lien holders are getting very little, they are now allegedly...
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Unemployment: New Claims Up
This week’s Unemployment Insurance Weekly Claims Report brings some bad news, even on a seasonally adjusted basis. Initial claims rose to 444,000. Last week’s number was revised down 1,000. This was toward the high end of the Bloomberg consensus range of 400k to 450k. From the report:
In the week ending Jan. 9, the advance figure for seasonally adjusted initial claims was 444,000, an increase...
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City Budgets under Stress →
One of the ways California made it through 2009 was by cutting aid to cities, and that has led to severe cutbacks in local spending.
I bumped into a friend of mine who works in the Goleta city hall today. He said that they were suing California to get additional funds. Goleta (the town next to Santa Barbara) actually has a pretty decent tax base. They have a Costco center that provides...
Consumer chief warns: take cheap jewelry from kids →
The country’s top product safety regulator warned parents and caretakers Wednesday to take cheap metal jewelry away from children out of concern they could be exposed to toxic heavy metals such as lead and cadmium.
I must be feeling a little grouchy today. I read the headline and thought, “Also, candy.”
Responding to the Haiti Earthquake
squashed:
There aren’t a lot of natural disasters worse than the earthquake that just struck Haiti. The earthquake is such a disaster that the people who are normally in charge of telling you what a disaster it is are mostly dead or missing.
Earlier, I posted a list of charities that are set up to quickly get relief to those who need it. All of these charities are legitimate and regardless of...
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Major Groundwater Loss in California's Heartland →
A little background: California has historically tried to suppress water prices as a means of enhancing the state’s agriculture business. This has lead to shortages. The drought has exacerbated the problem. Now, California has allowed water prices to rise, and farmers are getting hit with both the higher prices and the shortages. If this isn’t a wet year for California, we may actually...
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California Budget Not Likely to Get Much Federal... →
You don’t really need to read the article. California is still screwed. The key piece of new information is that March is an effective deadline for either a wheelbarrow full of money from the federal government or a set of program cutbacks. If March comes and goes without either option (which, let’s face it, has about a 50% chance of happening), then California enters into a budgetary...
Jon Stewart Questions John Yoo, Author Of 'Crisis... →
What an uncomfortable (3 part) interview. I would like to see others attempt to take Yoo to task. Remember, we have executed people for (and not, as Yoo states, only for things well beyond) waterboarding.
“In 2040, the Chinese economy will reach $123 trillion, or nearly three times the...”
– Why China’s Economy Will Grow to $123 Trillion by 2040 - By Robert Fogel | Foreign Policy
Sometimes I wonder about all the assumptions that go into a 30 year forcast
10 Years
A good friend of mine reminded me this morning that the world’s worst mega-merger in history was 10 years old. It is appropriate that there were articles today about AOL cutting over 1,000 jobs in an effort to meet certain arbitrary goals.
I was also thinking about another 10 year milestone. The census is coming up. 10 years ago was the last big census in the US. Since then, the US has...
Dubai’s First Foreclosure May Open Floodgates in... →
I saw this referenced a few times today. The opening is nice:
Dubai’s housing rout sent prices down 52 percent in the past year, prompting some homeowners to abandon their cars and mortgage payments and flee the country. Not one received a foreclosure notice.
Until now.
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Bank Failure Friday
It looks like a gentle warm-up exercise for the FDIC teams this year. Two weeks off and only a single bank failure to start the new year. Horizon Bank of Bellingham, WA has failed. From the press release:
Horizon Bank, Bellingham, Washington, was closed today by the Washington State Department of Financial Institutions, which appointed the Federal Deposit Insurance Corporation (FDIC) as...
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Unemployment: 10.0%
The unemployment rate was reported as unchanged today, which was what most analysts expected. December’s Employment Situation report was released this morning. The number of jobs in the US decreased 85,000. This was a bit worse than the Bloomberg consensus range of -50,000 to 40,000. From the report:
Nonfarm payroll employment edged down (-85,000) in December, and the unem-
ployment...
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Unemployment: New Claims Steady
This week’s Unemployment Insurance Weekly Claims Report is remarkably close to last week’s data point, on a seasonally adjusted basis. Last night I graphed the unadjusted and adjusted claims for the last 10 years to highlight the importance and meaning of that statement. Initial claims rose slightly to 434,000. Last week’s number was revised up 1,000. This was toward the low end of the...
The Real (Inflation Adjusted) Dow →
When you adjust for inflation, the Dow has returned just under 1% per year over 80 years. Worse, there are 30 year spans of 0% returns, and spans of about 20 years with negative adjusted returns. If you reinvest dividends, the numbers would be more favorable.
The assumption of most pension plans is that the market returns 8% annual returns on average and that inflation only eats away 2% of that....
Lockheed to Cut Up to 1,200 Jobs After Merging... →
Ok, I just took the first jobs headline I could find on Bloomberg. This one isn’t a happy headline. I just wanted to remind everyone that December’s jobs report comes out on Friday and there’s a chance it will have a positive number. Yes, the margin of error is something like 100,000 jobs, and we need 100,000 jobs just to keep up with people entering the workforce, but a positive...
Is Balancing California's Budget Illegal?
gilmoure asks, in response to my post:
Are taxes now impossible to raise? What about corporate taxes? Can those go up or is it too easy to be based outside of CA/USA?
My claim about the difficulty of raising taxes is a legislative and political one, not an economic one.
Legislatively, you’ve got hurdles. In California, for example, raising property taxes requires a two-thirds...
Is Balancing California's Budget Illegal?
I thought I’d go for a hat trick with three posts on broken promises.
Zero Hedge had an interesting post on the role of consent decrees on municipal budgets. Many promises have been made to guarantee funds without providing a way to get those funds. Some have been made by voters in the past, and some by the legislature.
Now that tax receipts are going down the drain, its extremely...
Iceland’s Government Says It Won’t Default on Debt →
Iceland’s president vetoed a bill that would bail out foreign investors in Iceland’s failed banks. The bill was extremely unpopular in Iceland, as taxpayers were not thrilled with the prospect of paying to cover the non-guaranteed, high-risk bets made by foreigners. Apparently the foreigners wanted high returns without accepting the risks.
That’s the clean summary, but reality...
Did Peter Schiff’s senate bid just get easier or more difficult? I don’t know how Dodd’s popularity has held up in Connecticut.
Class Warfare
It may be a consequence of the types of blogs I read, but I’ve noticed a bit more postings on class warfare recently. In particular, I’d like to draw your attention to Class Warfare American Style from Jesse’s Café Américain. I’d recommend reading it and the two articles it refers to (by the acclaimed Matt Tiabbi and Zero Hedge).
I’ve also thought of the war against...
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December Auto Numbers
The December numbers have come in from the automakers (source, source, source).
Ford up 33%
GM down 6.1%
Chrysler/Fiat down 4%
Toyota up 32.3%
Honda up 24.5%
Nissan up 18.2%
Hyundai up 41%
Subaru up 33%
Overall that was a SAAR of 11.25 million cars and trucks, up from 10.3 million a year ago. Of note was the fact that the numbers gave Asian automakers a larger annual market share of...
Treasury Yields
Something struck me this morning:
Short term treasuries are yielding 0%
All of the investment banks are now bank holding companies
The Fed pays interest on (required and excess) reserves
No investment bank should have any money in short term treasuries. Instead, they should create a bank with 100% reserves. The bank wouldn’t exist much beyond the trading desk at the investment banks...
2 tags
ISM: Bullish
The December 2009 Manufacturing ISM Report On Business was released today. The report indicated expansion, more than last month’s report. The ISM PMI (Purchasing Managers’ Index) came in at 55.9, up from 53.6 last month. This came in above the Bloomberg consensus range of 52.0 to 55.5. The notes on employment and inventories are of primary interest to me. First, employment:
ISM’s...
Back in the US
I am a little burned out from too much vacationing. To my surprise, the flight back into the US didn’t enforce the stay-in-your-seats-with-nothing-on-your-lap rule. I flew into San Diego, had a quick bite to eat with my folks, and drove up to Santa Barbara yesterday.
Some interesting things did happen while I was away. The US eliminated the caps on losses for the GSEs and became the...