May 2010
78 posts
April 2010
55 posts
1 tag
What do you want to read about?
I’ve flogged the stuffing out of Greece recently, but only because it really is quite important. I shortchanged my GDP analysis this morning because I spent all of my time looking up information on Spain and Portugal, but I don’t plan on going deeper into that unless anyone has specific questions. 3 banks have already failed today, including 2 of the big 3 banks that dominate Puerto...
It’s worth pointing out that over the last 200 years, Greece has been in a state of default in roughly 100 of those years. It’s not an unusual event. Predicting default isn’t some sort of extreme or fringe position. It may not happen all the time, but it quite literally happens half of the time. (first google link as source)
My Greek Weekend Checklist
Word is that we will find out the extent of the Greek bailout and austerity measures this weekend. Since it’s fun to beat a dead horse (living horses kick back), I thought I’d make a list of the specific things I’m looking for.
First, the bailout:
Actual amount initially approved - Although everyone is still tossing around this €120 billion number, it’s likely that the...
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GDP Up 3.2% Annualized
The BEA has released the First Quarter GDP Report. The annualized growth came in at 3.2%, which was at the middle of the Bloomberg consensus range of 2.7% to 4.5% (though the consensus number was 3.4%). Last quarter, inventories were the growth story. Now consumers are starting to buy the stuff (emphasis mine):
Real gross domestic product — the output of goods and services produced by...
Spanish Unemployment Tops 20%, Hurting Deficit... →
Remember Henry Higgins’ words of linguistic wisdom: The rain in Spain stays mainly with 20% of the population. Three key things from the article.
Deputy Finance Minister Jose Manuel Campa said the unemployment rate would not affect Spain’s budget-deficit forecasts, and the government was sticking to a forecast for an average jobless rate of 19 percent this year. Finance Minister Elena...
Beijing property prices reportedly easing Emerging... →
Apartment prices in Beijing’s Tongzhou district have dropped 13% to 18,500 yuan ($2,710) per square meter, from 21,500 yuan per square meter before the central government announced tighter mortgage-lending requirements on April 15, according to a report Wednesday by the Beijing Times, which cited data by Beijing Centaline Property.
Holy smokes, a 13% decline counts as...
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Unemployment: New Claims Down
Employment stabilization improved again. That’s two weeks in a row, following a nasty bump in the numbers. This week’s Unemployment Insurance Weekly Claims Report provided no surprises. New claims came in at 448k while last week’s number was revised up 3k. New claims fell within the Bloomberg consensus range of 440k to 460k. From the report:
In the week ending April 24, the advance...
ptbruiser asked: Imagine a minarchist government, a so-called "Night Watchman State." This government concerns itself only with a system of police and courts to prevent violence and fraud, and defending the country from foreign invasion. How, in your opinion, should this government raise the revenue to carry out its few tasks, so as to cause the least economic harm and/or to be as just a system of...
I’ll spare you the long version I just typed up and erased, but I did want to say that the likelihood of Greece defaulting isn’t related to the likelihood of Italy defaulting. I do expect some sort of effort by Greece to voluntarily restructure some short term debt into longer duration bonds. Depending on the terms, Eurobanks will probably play ball with some of the bonds they hold. I...
muppetpants asked: What are the repercussions of Italy defaulting? Will it make vacationing cheaper?
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4/28/2010
Sorry, I’m lazy again. I hope you don’t feel slighted by the potpourri version.
Europe
I had a conversation yesterday with someone about doom and gloom in Europe. I tried to play devil’s advocate and come up with a scenario that would be most stabilizing for markets in the short term. If you’ll recall, there were rumors that the IMF would be able to boost the Greek...
Portugal Cut Two Steps to A- by S&P as Greek... →
Greece cut to Junk (BB+) by S&P as well.
I believe this should provide some comfort. From European Central Bank Vice President Lucas Papademos:
The actions to be taken after the program’s conclusion will convince markets about the credibility of the fiscal adjustments and will contain potential contagion effects in the euro area.
I feel safer already. The contagion we are seeing now...
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I slipped out of town Friday after work. I rode up to Pismo Beach for a friend’s bachelor party. A small group of us rented a condo and enjoyed a weekend of quiet camaraderie. A few interesting things have transpired since then:
Seven more banks failed. Illinois was the place to be if you worked for the FDIC.
Nothing happened to resolve the Greek crisis. That didn’t stop it from...
Illinois' Monetary Award Program is out of cash →
About 220,000 low-income students who are eligible for so-called MAP grants will not get financial assistance.
This recovery still isn’t working out so well for California, Illinois, New Jersey, …
At least we aren’t Greece. Our monetary union also has a political union to go along with it. Dollarzone > Eurozone (for now, at least).
(via HuffPo)
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Unemployment: New Claims Down
This week’s Unemployment Insurance Weekly Claims Report brought no surprises. The claim is that this reflects making it past two weeks of administrative delays adding to the numbers. Of course, that means that the period before the bump, when the delays were adding to the backlog, was worse than reported. Smoothing the bump also makes this week look substantially less impressive. New claims came...
New Jersey Voters Defeat Record Majority of School... →
I’m sure this will be getting some widespread attention.
New Jersey voters rejected a majority of school budgets for the first time in more than three decades, defeating a record 59 percent of the plans as districts sought to raise the highest property taxes in the U.S.
Voters shot down 315 of the 537 proposals, according to the New Jersey School Boards Association. The last time...
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The Sovereign Difference
Note: I don’t intend for this post to sound patronizing. I wanted to make an accessible follow up to my previous post. If you want the TL;DR version, just read the first paragraph.
The sovereign debt crisis outbreak phase will look very different from the previous outbreak phase. In the previous phase, the financial sector played two different parts. Financial firms not only went bankrupt...
Global economic crisis shifting into ‘new phase,’... →
The IMF appears to be well aware of the next crisis unfolding in sovereign debt. This is good, because it looks like they’ll be at the heart of the next “outbreak” phase. That should be in about two weeks, when the Greek outcome is certain.
Interestingly enough, the IMF calls out the US first as belonging to a group of countries whose “banking systems remain poorly...
Coolest Apartment Ever? →
340 square feet, 24 room configurations. Just don’t leave your laundry on the floor.
(via coworker, reddit)
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Bank Failure Friday
This was not a good day for bank survival in the US. Eight banks were added to the FDIC Failed Bank List:
City Bank, Lynnwood, WA - $1.02 billion in total deposits and an estimated hit to the Deposit Insurance Fund (DIF) of $323.4 million. The FDIC and Whidbey Island Bank entered into a loss-share transaction on $455.6 million of City Bank’s assets.
Tamalpais Bank, San Rafael, CA -...
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Goldman charged with fraud over Paulson CDO trade →
Summary: Goldman sold a collection of subprime mortgages hand-picked by John Paulson. Paulson put together the portfolio specifically to bet against it. Goldman packaged it as a (synthetic) CDO and told investors it was put together by someone else (a specific someone else considered an expert in such matters). Paulson made a billion dollars when the mortgages went bad. The SEC is now calling...
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Unemployment: New Claims Up
Last week’s snag became this week’s tear. This week’s Unemployment Insurance Weekly Claims Report indicates further problems in job market stability. New claims rose to 484k. Last week’s number was unrevised. This was increase moved in the opposite direction of the Bloomberg consensus range of 425k to 450k. From the report:
In the week ending April 10, the advance figure for...
Jim Chanos on China (on Charlie Rose) →
This 30 minute interview provides an interesting perspective on China from Mr. “1,000 times worse than Dubai” himself.
One thing Jim sort of glosses over is the down payment problem in China. Bubble skeptics cite the fact that Chinese homebuyers are putting down 20%. In the US, people were putting down 0% at the height of the bubble. While he mentions the average income vs the...
Finally finished my taxes.
The Pulitzer Prizes - Explanatory Reporting →
This is cool. I was quite excited to see Kirsten Grind listed as a finalist. Very cool.
“Although we have hitherto characterized Greece as the EMU’s “Lehman” problem,...”
– Marshall Auerback in The PIIGS Problem: Maginot Line Economics
NBER Says Premature to Declare End of U.S.... →
I link to this because it doesn’t have the incredibly misleading “NBER: Recession Not Over” headline. Interestingly enough, though, this article fails to mention that the NBER frequently takes more than a year after the end of a recession to declare the recession over. It would not be out of character for the NBER to wait another six months before declaring that the recession...
Would You Like a 3% Raise?
I had a brief discussion with H.G. Mills after my last post. After the exchange, he thought it would be a good idea for me to present an alternative viewpoint on the Chinese currency revaluation. This should help make the issue even more cloudy.
Do not confuse a warning of the consequences with a moral judgment. When I suggest that oil prices might rise and the quality of life of the average...
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Postcards And Update From Revolutionary Kyrgyzstan →
An update while we are still debating whether or not Kyrgyzstan is an actual country.
What I find encouraging is that in a crisis that brings along the downfall of a national government, people are lining up at hospitals to donate blood.
Everything is Off by One
There were several posts I almost wrote this week. In each case, I waited for a specific confirmation. In each case, the event or news release I was looking for went in the opposite direction.
Treasuries
I already commented on this and its relationship to housing. The 10 year yield is an important measure of the health of the US. It’s a mishmash of inflation expectations, risk aversion,...
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Unemployment: New Claims Up
The stabilizing forces in the jobs market apparently hit a snag last week. This week’s Unemployment Insurance Weekly Claims Report indicates a bit more trouble than anticipated. New claims rose to 460k. Last week’s number was revised up 3,000 to 442k. This was higher than the Bloomberg consensus range of 435k to 450k. From the report:
In the week ending April 3, the advance figure for...
New Update of 120-Year Residential Property Series... →
I’m too lazy to look it up, but is anyone aware of any bubbles that didn’t overshoot to the downside after the bubble popped? The linked information indicates that we haven’t come close to overshooting. Yet, Americans still view homes as good investments. That’s not the usual mentality about a bubble asset after the pop.
On the other hand, if you are expecting big...
“Zero rates are a hidden tax on savers that act to reduce NPLs [Non-Performing...”
– Edward Harrison in Three ways to keep NPLs down, recapitalize banks, and socialize losses all at the same time
Mortgage Rates and Treasuries
This morning the MBA announced Mortgage Refinance Applications Decrease. What stood out to me was this bit (emphasis in original):
The average contract interest rate for 30-year fixed-rate mortgages increased to 5.31 percent from 5.04 percent, with points decreasing to 0.64 from 1.07 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. This is the highest 30-year...
20 Percent of Florida Foreclosure Victims Have... →
I found this data point fascinating in and of itself. I wonder if you could create a multidimensional chart of state screwed-ness. Florida ranks high on housing doom, but low on pension doom. They seem to be on the brink of getting a bit worse on unemployment. I haven’t really looked into their state budget.
(via)
California's $500-billion pension time bomb →
At some point, this tragedy becomes humor. I hope it doesn’t take long.
In other news, Los Angeles is a month away from going broke. Funny yet?
I am impressed by how different the official estimates are from all of these outside estimates. I’m even a little surprised, as I would have guessed between a factor of two and four. Stanford’s gap is a factor of eight! Let’s...
What Do We Have to Show After a Year of “Extend... →
If you don’t want to read another fun article predicting Armageddon, don’t bother clicking through. Just pretend it can be summarized:
All indicators awesome; no one can be poor ever again!
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Thoughts for April 5
Today the Non-manufacturing ISM Report On Business was released. As usual, I don’t consider it the most important report, but it’s worth a mention. The index came in at 60, indicating expansion in the service sector. The employment index was slightly under 50, coming in at 49.8. Not great.
The 10 year note hit 4% today. This is not a positive event. When the 10 year rises, mortgage...
Geithner Delays Currency Report, Urges Flexible... →
This is the most intelligent thing Geithner has done.
If we label China a currency manipulator, China “must” either respond by increasing their currency value, thus increasing the costs of their exports, or by accepting trade sanctions that increase the costs of their exports. Either way, cheap stuff from China will not be so cheap. In truth, the range of Chinese responses could be...
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Unemployment: 9.7%
The unemployment rate held steady in March’s Employment Situation Report. On a seasonally adjusted basis, 162,000 jobs were added. On an unadjusted basis, 843,000 jobs were added. The Bloomberg consensus range for the adjusted number was 75,000 to 300,000. From the report:
Nonfarm payroll employment increased by 162,000 in March, and the unemployment
rate held at 9.7 percent, the U.S....
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