Santa Barbara is still on fire, but I cannot see flames by simply walking outside. We’ve had help from many outside fire departments. I think every fire department within 100 miles responded. That includes a large portion of LA, so that’s a lot of fire fighters.
Freddie Mac now has negative equity after record losses. They’ll be tapping the taxpayer for $13.8 billion. Bloomberg reports Freddie Mac Posts Record Loss, Asks for $13.8 Billion:
Freddie Mac, seized by the government two months ago, asked the Treasury for $13.8 billion after a record quarterly loss caused its net worth to fall below zero.
The third-quarter net loss widened to $25.3 billion, or $19.44 a share, after writing down tax assets and providing for bad mortgages and securities, McLean, Virginia-based Freddie said in a regulatory filing today. The losses forced Freddie to request government funds and the company said it expects to receive the money by Nov. 29.
I’ll be honest, I don’t think this was a big surprise. It’s negative news, but expectations were actually pretty poor.
The retail numbers for October were the worst on record. Bloomberg reports U.S. Retail Sales Drop in October by Most on Record:
Retail sales in the U.S. dropped in October by the most on record, pushing the economy toward the worst slump in decades.
The 2.8 percent decrease was the fourth consecutive drop and the biggest since records began in 1992, the Commerce Department said today in Washington. Purchases excluding automobiles also posted their worst performance.
Spending may continue to falter as mounting job losses, plunging stocks and falling home values leave household finances in tatters. Retailers from Best Buy Co. to Nordstrom Inc. are cutting revenue forecasts ahead of what may be the worst holiday shopping season in six years.
“We are in the eye of the storm,” said James O’Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut, who accurately projected the decline in sales. “The recession is clearly intensifying. The next few months will look pretty bad. The fourth quarter will be even weaker.”
James O’Sullivan has no idea how to make a proper analogy. The “eye of the storm?” That’s a period of calm before the backside of the storm knocks everything over by blowing everything in the opposite direction. This isn’t a period of calm. Once again, expectations were pretty low. However, this is pretty terrible.
I think today might just go down because yesterday overshot to the plus side. Days like that are hard to day trade (it’s possible most of the move occurred at open).
Some people are claiming that the dismal numbers from department-store “giant” J.C. Penny might drive the market down. They did surprise to the downside, but I’m not at all certain anyone cares about J.C. Penny’s numbers more than the retail report (aside from J.C. Penny investors). Still, here’s the report from Bloomberg, J.C. Penney Forecasts Lower Profit as Sales Slump:
J.C. Penney Co., the third-largest U.S. department-store company, forecast earnings that trailed analysts’ estimates and posted its fifth straight quarterly profit decline as shoppers cut spending on home goods and jewelry.
Fourth-quarter profit will drop to 90 cents to $1.05 a share, the Plano, Texas-based company said today, after $1.93 a year earlier. Analysts surveyed by Bloomberg estimated adjusted profit of $1.28.
Consumers besieged by rising joblessness and increased housing costs have stopped spending on discretionary goods. Smaller Kohl’s Corp. and luxury chain Nordstrom Inc. posted profit declines yesterday and cut their full-year earnings forecasts. J.C. Penney said comparable sales at stores open at least a year will fall as much as 11 percent in the fourth quarter.
For any retailer other than Wal-Mart, this quarter is going to suck. Expect some big consumer-oriented bankruptcies after Christmas. Also, expect some great after-Christmas sales. Unfortunately, waiting for the after-Christmas sales will be a big contributing factor in the bankruptcies. The longer people wait, the better the deals and the worse the fallout.
