well, if housing prices only fall 15% PEAK to trough, he may be right, though I think he's wildly out of bounds . . . . . . . . on the recessionary path we're on, there's a real danger that one or two major financial institutions vanish from the landscape rather abruptly - IMO, it's far far better to try to avoid THAT outcome inadvance, because once investors have truly panicked and begun to stampede like buffalo, they're not nearly as receptive to 25 bp cuts as they are when they're sitting quietly in their living rooms waiting for godot.
"well, if housing prices only fall 15% PEAK to trough, he may be right, though I think he's wildly out of bounds . . . . . . . "
Some places in the SF Bay Area are already there....
"According to DataQuick's analysis, the number of homes purchased using jumbo loans tumbled 50 percent between July and October.
Price data show a bifurcated market, with decreases in many of the counties outside the region's urban core. For instance, in Solano County, the price for a detached home plunged nearly 18 percent; in Sonoma County, the median dropped nearly 12 percent.
On the flip side, prices in Santa Clara County and San Francisco were up 7.4 percent and 4.3 percent, respectively. Even in those submarkets, however, DataQuick analyst Andrew LePage and others say the picture is mixed. Sales at the higher end of the market are relatively brisk compared with the lower end, helping to draw the overall median higher."
Politics enter into the equation as well. Which would be worse for the Republicans in an election year: a recession or a recession with an inflation kicker? Pick your poison.
In a nutshell, if it comes to Citibank on one hand, and inflation on the other, the Fed will risk inflation. The equation, seemingly not understood by Mr. (Dr?) Kroszner is really quite simple.
I'd be curious about your opinion on Grantham's comments that we have "the first truly global bubble and we can't know how severe the shocks to the system will be when it bursts" (I'm paraphrasing something from memory; hopefully I'm not misrepresenting his actual statements).
This is what concerns me. The fact that we may be dealing with an unprecedented situation where we have no relevant historical data to make meaningful predictions.
"This reminds me of a teeter totter; it can be balanced with a few pounds at each end, or with hundreds of pounds at each end. If the risks are balanced, the concerns about inflation must be significant."
CR-
CNBC must have been reading your blog for analysis, the verbage used couldn't have been much closer.
"In a nutshell, if it comes to Citibank on one hand, and inflation on the other, the Fed will risk inflation. The equation, seemingly not understood by Mr. (Dr?) Kroszner is really quite simple."
Back in the '70s and '80s, wages were a major component of inflation. Now, they're really not. Inflation never goes down well, but it'll be even worse than usual if, for the common man, it's concentrated in prices with no corresponding bump in wages.
If Bernanke goes with inflation, he'll risk turning the whole political order against finance as we know it. He's short-sighted enough to do it; all of his class are. And I wouldn't mind a bit.
Wall Street opened higher Friday as investors were assured by U.S. Treasury Secretary Henry Paulson that the battered dollar is poised to recover in the long term.
In summer 2004 a friend was telling me: "My guys are shorting homebuilders. It's game over for the economy because if the Fed hikes everything collapses and if the Fed lowers they would stoke inflation."
In early 2006, Mish coined the term Bernanke's Box.
And now, three years later, we are still talking about the same thing. But in all fairness, I think we are really close to the point where the Fed cannot and should not lower rates.
CR, that teeter-totter analogy was wonderful, especially the part of being balanced with SIGNIFICANT weights at either end. In that context, this para from the speech jives :
Looking forward, one feature of monetary policy to keep in mind is that, all else equal, each successive action in the same direction tends to lower the incremental benefits and to raise the incremental costs of additional actions. For example, unless underlying economic conditions or risks change substantially, reductions in the target federal funds rate tend to be associated with decreasing incremental benefits in terms of further mitigating tail risks and with increasing incremental costs in terms of the potential for inflation to increase.
But do I believe them ? nahhh, they are still Wall St's b*tch as far as I'm concerned. Well, alright, perhaps this has slightly tilted the balance away from whore towards tart. But the path back to virginal purity is going to be long and rocky.
Am I the cynical one , but haven't we heard these types of speeches ( Poole's infamous " tough talk " interview on CNBC , shortly before the August 17th 50 bps discount cut comes immediately to mind ) from Fed Governors and then rates were cut at the Sept and Oct meeting ? Right now , the bond market is declaring that the Fed will cut in Dec and Jan regardless of what Kroszner says. Until I see these guy walk the walk on holding the line on rate cuts , I'm discounting this as just an attempt to talk up the dollar. As someone aptly noted on this thread , if the choice is C versus inflation , I know what the outcome will be in Dec and Jan... moreover , if there isn't a cut in dec , forget about MLEC being able to ride to the rescue... things may very well get ugly real quick for ABCP.
The big unknown on the inflation front is China. The second the Chinese raise prices or revalue the yuan, the inflation index will jump off the charts, and the Fed will be forced to act, or publicaly admit that they don't really care about inflation.
The "conventional wisdom" has been that the Chinese will keep prices low, but now that they virtually dominate manufacturing in so many sectors, they're calling the shots. Remember the "apology" from Mattel?
I think this is more akin to a catapult, with the carbage weighing us down held in place by the tension of magnified CDO leverage and our savings is in the other end, but the leather strap holding everything in place is starting to fray.
I think unfortunately the see saw will break in half and we get both inflation and recession. Which will be followed by deflation and depression. Will the FED cut probably especially if Black Friday becomes RED Friday. I personally am going out to watch the festivities but just to see what people are buying. I am keeping my powder dry for the real sales later. Used ZO6 vettes are falling as fast as the ABX
Stretching the analogy further: I am concerned about the structural adequacy of the teeter-totter board--an elephant at each end of the board will break the board--then where will we be?
Nice call, CR, on the point that if it's balanced then the inflation must be really bad. I don't think the intention of the Fedaganda was to reveal that insight, but their quality is slipping.
Personally, I think that Krosner is full of BS. They are going to cut to bail out Wall Street banks again, and then again.
Those clowns' credibility is zero. Lie, lie, and lie some more. But don't tell anybody that you really are going to trash the dollar with your foolish rate cuts to bail out your foolish housing boom. Lie so your scumbag friends at the banks can position themselves.
The less the markets expect a cut, the more of an effect it will have. So these statements could just be an attempt to lower expectations in preparation for the cut.
That is certainly what the punters on the CBOE seem to think; the futures did not move very much. Time for more tough talk from the Fed I guess.
...
On the previous topic, I think Goldman Sachs may be right that we are headed for a heavily protracted period of anemic growth rather than a recession. And that is not a good thing. There would be a high risk, in my opinion, of 70s-style almost-stagflation as the Fed kept trying to prevent "anemic growth" from becoming "negative growth". Never mind what would happen to the dollar...
China's problem is that internally they need to sell their stuff a whole lot more than we need to buy it.
They have to hide inflation and social unrest under the rice basket until after the 2008 Olympics. At 4 coal plants a week even a tiny stumble could cause a cascade failure of an economy that doesn't have a sophisticated banking system. Think of the "Bailey Savings & Loan" just with a billion people in the lobby during a bank run.
... one feature of monetary policy to keep in mind is that, all else equal, each successive action in the same direction tends to lower the incremental benefits and to raise the incremental costs of additional actions. ...
It's encouraging to hear someone from the Fed say something smart.
Maybe they're starting to realize that when somebody gets sick you don't hand them a crack pipe and tell them to get back to work.
CR said: "Economic weakness and rising prices. A teeter totter balanced with significant weight on both ends."
Actually, there's just not that much weight on either side. Measured Q3 2006-Q3 2007, GDP is +2.6%. Measured Oct. 2006-Oct. 2007, CPI-U is +3.5%. Neither is outside of their normal ranges.
What's really weird is that a housing bear is concerned about inflation, when housing prices (a significant chunk of overall prices) are coming down.
... one feature of monetary policy to keep in mind is that, all else equal, each successive action in the same direction tends to lower the incremental benefits and to raise the incremental costs of additional actions. ...
most have interpreted this to mean that the Fed won't cut again in the future, since each successive cut will be less powerful than the last.
but there is a different way to interpret this paragraph.
it could mean that the fed will need to cut 50+ next time.
clearly they are going to cut. this speech makes me think they'll cut 50-75 instead of 25bps. They have to...
I have to agree with dotcommunist. I use everything those compulsive liars say as a perfect negative indicators. With interest on the debt approaching half a trillion, boomers approaching retirement ( and additional unfunded future federal commitments), imbalance of trade, and consumer debt on credit cards alone near one trillion, I guess they have little choice but to monetize the debt. The printing presses will roll, the dollar will take hit after hit. They have no choice because if the Fed defends the dollar we will have public insurrection with incalculable costs and outcomes.
Junkies are snorting and licking dollar bills and dancing on the streets. Why? Because Columbian drug cartels have just exchanged their "dusty" dollar cash reserves
Housing doesn't pay for lunch, at least not right away.
I can tell that you don't remember much about the 70's, Sebastian.
Just watch what we have to pay for everything that can be shipped worldwide. Houses are a tad immobile. Grain, metals, food, art, stuff that can be exported with ease and sold on world markets will be much higher by the time all of this really begins to settle down. What you pay for dinner will actually impact your pocket faster than a putative decline in rents. Gas? Get used to $3+ handles. Energy costs will once again begin to matter. Stuff from China? Inflation is already in the pipeline and will just manifest with higher prices.
Why do you think I picked such a depressive tagline- because this will go on far far longer than you believe possible.
I don't think the case has been made that a rate cuts helps either housing or big banks. Both face problems rooted in credit and risk, not in rates.
However, if the Fed finally smells a recession coming, they are not going to want to look like they triggered it. Kroszner sounds like he is speaking with the confidence that he is not alone, but I think, like many posters above, it is hard to take what he says at face value.
Allen,
I thought Sebastian's comment was tongue in cheek.
On a side note, speaking of inflation and china...
I watched a brief news report (on CNBC maybe?) that showed that the Chinese are becoming insatiable CONSUMERS over the last several months.
It discussed how some reasons for this were:
-increased Chinese wealth
-increased feeling of wealth due to stock returns
but more importantly I wonder about:
-increased inflation causing the Chinese to not want on to their Renminbi...
Looks like the Chinese may find themselves in the America-trap... Renminbi losing value, thus moving purchases to today... causing more CPI causing more to spend now...
Money markets are rapidly starting to seize up again, so it's probable the Fed will be forced to cut again next month, and be joined this time by the Bank of England, to keep the funding markets functioning, even though the economic data do not justify cuts at this time. The Fed needs a period of weak growth to get inflation back under control - problem is, their forecast is so close to the line, and the economy has so little ability left to deal with further shocks, that it's very difficult for them to say no.
Its clear that a weaker dollar will, other things equal, boost import prices and possibly inflation expectations, and thus inflation. But other things arent equal: I think that the economy is weakening, pricing power is fading, and thus, in todays circumstances, the dollars influence on inflation likely will be small. That logic also applies to the influence of rising commodity prices on inflation. Thus, notwithstanding the Feds legitimate concerns about inflation risks, officials will have some latitude to respond to the incipient and palpable weakening in economic activity
They have to hide inflation and social unrest under the rice basket until after the 2008 Olympics.
And then,...? And when we talk about what China's going to do: Are they as smart as you all, or as clueless as me?
So the Fed's message boils down to "Weebles wobble but they don't fall down"?
Banker, I am not sure if pricing power weakness will stem inflation in these circumstances. The whole "weak pricing power" fails when inputs rise enough. A lot of companies with falling sales have announced early 2008 price increases.
I think constraints on consumer spending will limit some of these increases, but I don't think they'll buy the Fed a whole lot of room.
When can I expect my recession? - I think we can agree that any calls for 2007 recession were wrong. Now, many of my bear-friends continue unabated with renewed horror scenarios. I would like to have dates, though. When is the US economy going into recession as defined by two quarters with negative growths? When is this going to start (finally)? Maybe this is worth a post by CR?
My call is for no recession until past 2009 (that's where my economic forecasting horizon ends; not that I automatically expect one in 2010).
Sebastian What's really weird is that a housing bear is concerned about inflation, when housing prices (a significant chunk of overall prices) are coming down.
Not really. Oh, sure, rent equivalents are big chunk of CPI, but CPI is getting to the point at which it has only a tenuous relationship to inflation for the top 20% and the lower 40% of consumers. The top 20% are experiencing negative inflation and the lower 40% are experiencing extremely high inflation - well over 7% annually.
In the real world, housing prices only matter much to FTHB or years-out STHB, and given rapid tightening in credit terms, there aren't going to be many of the FTHB.
If you want to consider the effect inflation has on real world consumer consumption in the short term, it's clear that dropping prices are taking potential spending power out of millions of people's hands.
It says something very basic about this economy that prices for new homes and autos are dropping, and prices for things that people HAVE to buy are rising. I don't see that home prices will affect inflation as we are now experiencing it one way or another.
Also, Fannie's March announcements effectively make purchasing homes more expensive for most buyers.
O-Joe I think we can agree that any calls for 2007 recession were wrong.
I totally disagree with that statement. Classically speaking, we are in a recession right now. We have months of declining YoY freight stats, real negatives on retail purchases, and a bunch of large states are going negative YoY on sales taxes. Thankfully things have moved rather slowly, which gives us more time to compensate with a weaker dollar and a chance to move some merchandise.
If you were a state budgeting official in any one of about 34 states, you'd be hearing the word "recession" a lot. They are quite worried about revenues.
When can I expect my recession? - I think we can agree that any calls for 2007 recession were wrong.
Maybe you shouldn't expect any recession at all as long as Americans stay patriotic and spend to the hilt this holiday season. Remember: "Go out and shop, or the terrists will win".
Looks like FirstFed released updated balance sheet info during the day. Just like its kissing cousin Downey, NPA spiked dramatically in just the last month.
"When can I expect my recession? - I think we can agree that any calls for 2007 recession were wrong. "
Pretty sure we have one in California right now. Home sales in many areas at 20-year-ago levels, tax collections way down, governator asking for 10 percent budget cuts across the board, construction 'way down, retail down, gas and energy headed up...
I agree. If we simply use pre-clinton era CPI, inflation is running at 7% and heading up sharply. Since reported growth for 07 is ~2.5% and admitted CPI is ~3%, that gives a negative GDP of ~1.5%.
Banker, I am not sure if pricing power weakness will stem inflation in these circumstances. The whole "weak pricing power" fails when inputs rise enough.
I'm not saying I buy it, but it is an interesting argument he makes.
A lot of companies with falling sales have announced early 2008 price increases.
I don't believe that is true (but of course am willing to be convinced I'm wrong). Can you name me just a couple with "falling sales" for whom that is true? Thanks.
Classically speaking, we are in a recession right now. We have months of declining YoY freight stats, real negatives on retail purchases, and a bunch of large states are going negative YoY on sales taxes.
Respectfully none of that is involved in the classic definition of a recession. That definition is simply two or more consecutive quarters of negative GDP growth. If the last quarter really was a 5%+ quarter (as the speculation is), it seems awfully tough to me to go all the way negative in only six weeks.
the PPT is working hard because the childs top is wobbling badly now.
This guy has a pretty good rant about the PPT, but you might find the delivery a bit harsh if you've lost a lot of money because they keep manipulating the market:
I am not sure, are we also citing if Canadian banks are visiting the CR confessional?
BMO taking $320M in debt-woe writedowns, $185M MasterCard loyalty hit
1 hour ago
TORONTO - The Bank of Montreal (TSX:BMO) has joined the array of big banks hurt by the U.S. subprime mortgage crash, revealing that it will book half a billion dollars in writedowns partly connected to disorder in world credit markets.
The bank said Friday that $320 million in writedowns come from debt-instrument woes at BMO Capital Markets, and $185 million from the bank's credit card loyalty program.
John Aiken, an analyst and Dundee Capital Markets, noted that the BMO credit-market charges, to be booked in the fourth quarter ended Oct. 31, were smaller than some market watchers had predicted.
The "valuation adjustments" at BMO Capital Markets include $170 million on trading and structured credit-related positions and preferred shares, $135 million on Canadian asset-backed commercial paper and $15 million on Links Finance Corp. and Parkland Finance Corp., two U.S. structured investment vehicles managed by BMO.
The SIV writedown represents 21 per cent of BMO's $70-million investment in Links and Parkland. The bank also said it will help support the SIVs by making much as $1.6 billion available to them.
" FedEx Corp. lowered its earnings outlook Friday, citing high fuel costs and weakness in its less-than-truckload freight business.
The Memphis, Tenn., company had already cut its earnings forecast in September and said it would reduce capital spending ...
And from Reuters: UPS to hike delivery charges by 4.9 percent
Package delivery company United Parcel Service Inc said on Friday it was raising its prices for 2008 by about 4.9 percent, matching a planned hike by rival FedEx Corp ..."
Seems awfully quiet on the hedge fund front...aren't any of them suffering from all the ratings cuts on MBS, CDO and the like? Could their silence be entirely due to the lack of regulation on the hedgies (as opposed to the banks and IBs, which at least have some minimal amount of transparency)?
Smells sorta fishy to me.
When will we hear about the loss of their clients money?
Or are they all disciplined and brilliant traders with perfect risk management, all of them on the right side of the mortgage debacle trade?
Erm, did you read MOM's claim or the article? Fedex is still expecting growth in volume, as close to sales as the article lets us get. UPS has said nothing about declining sales in the article either.
No soup for you!
AC,
If there is no PPT, then who the f*$#@ are all those guys in my basement?
It amazes me that all we hear about in regards to mortgage delinquencies and foreclosures is subprime. Wait until the payment option arms start to "recast". Kroszner say that when subprime rates reset the payment increases 25%. When payment option arm's recast, the payment usually increases by close to 100%! Not even prime borrowers will be able to handle that increase. AND, there equity will be gone as the result of negative amortization and falling home values.
A couple weeks ago on this blog there was a great graph of pending payment option arm resets.
Maybe the market has priced payment option arm problems in, but we're still not hearing about it in the press.
Is it under the radar screen, or are payment option arms currently being classified as subprime?
Hmmm, I took this to mean, for Fed Ex, sales were down:
"weakness in its less-than-truckload freight business."
I read this to mean, for Fed-Ex, weaker business is being met by higher prices to customers:
"United Parcel Service Inc said on Friday it was raising its prices for 2008 by about 4.9 percent, matching a planned hike by rival FedEx Corp"
OK, so I got UPS wrong. But that should at least be a cup of soup.
BTW, when the bo...packages arrive for your guests in the basement, it would be wise to excuse yourself and be a few blocks away before they go of...get opened.
The 2nd 25bp cut tells us that the Fed has a gloomier picture of GDP than the official 'advance' Q3 3.9% stat.
Kroz bites this so oddly with his remark about the diminution of successive moves in the same direction that I needed to run through the alternative: the Fed duz an about face and increases the FF rate...causing the severest of diminutions of respect for the data dependent Fed.
A continuation will at least supply the large players with cheaper financing to enable stock buybacks and extend financial liabilities...while the yield curve steepens --exacerbating the housing market downturn with more expensive mortgage rates.
With no wage pricing power, the inflation scare is all bark and no bite. Similarly, that "loosening" is a response to IBs circumstances, not the debt saddled consumers...who are feeling the affects of drying MEW.
It's clear that one of the factors sustaining consumption spending has been fraudulent stripping of wealth from the economic system by means of the myriad financial scams. The many varieties of fraud we've seen in mortgage lending and securitization are only part of the picture, another part is the other varieties going on at higher levels in the financial system.
A whole lot of managers have been making money the old-fashioned way -- by booking short-term profits on business that's actually money-losing long-term, taking the bonuses up front, and leaving the stockholders (or hedge fund investors) holding the bag.
Since many of these financial businesses are inherently zero-sum games, when we read of numerous players racking up huge winnings, without others reporting corresponding losses, that's a compelling indication there's fraud afoot.
When is the US economy going into recession as defined by two quarters with negative growths?
O-Joe, you must be a government shill. We are absolutely already in recession and have been for a while. But using the fudged lying government numbers it says no. But the economy is crumbling and you jokers still deny it all.
Keep on fudging, O-Joe. Uncle Liar needs you so bad. Meanwhile, the real economy still collapses.
It's important to distinguish between inflation -- a rise in the overall price level due to money supply expanding faster than the supply of things to buy -- and rising CPI.
If the money supply is rising only as fast as the overall supply of goods and services, then if fuel prices are rising because of rising demand with static or declining supply, other prices will have to fall, and there'll be no real overall inflation.
Back in the days when the world ran on the gold standard, rising productivity led naturally to falling prices. From 1800 thru 1900, the overall price level in the US fell about 50%, despite huge gold discoveries that greatly increased the money supply.
If there's no monetary inflation, and fuel and food prices rise due to supply:demand influences as Asia and Eastern Europe consume more, then prices of other things must fall.
"Politics enter into the equation as well. Which would be worse for the Republicans in an election year: a recession or a recession with an inflation kicker? Pick your poison."
Prediction: A recession will be announced Nov. 6, 2008 - retroactive to Q1 2008. If there's a republican president-elect, the situation couldn't be avoided. If a democrat, it's all the democrats' fault.
On the rate cut: Kroszner's statement about balance can be read as, "Today, things appear to be balanced. Maybe not tomorrow, and maybe not in December." Or, like a magic 8-ball, "Ask again later."
Basically the same story again from the bears. My ideology/cult dictates there is a recession right now, so the government statistics are all fudged and everybody who disagrees is a "shill". Well, with this attitude, expect many crashes with the economic reality ahead. Good luck.
I also see nobody really thinks there will be a real recession ahead as per two neg. growth quarters. What are we descussing here then if nobody expects a real recession? Glad, we're finaaly on the same bull page.
Yes, what we have isn't true inflation - at least then our wages would go up. Nope, we have the worst of all worlds: people deeply in debt, prices rising, salaries dwindling, jobs fleeing.
Banker - 2 consecutive quarters of negative GDP growth is more the popular definition. NBER's definition is slightly broader.
As for companies, most consumer brands are having to raise costs. Coca Cola's is pretty much inline: The company shipped 2.5 percent fewer cases during the quarter, compared with a year earlier, while costs rose 6 percent and price per case rose 4 percent, excluding the impact of the weaker dollar.
With high commodity prices and a weak dollar the agricultural sector should do quite well over the next couple years. This might cushion the economy in the farm states, where the housing sector didn't bubble as much.
Thanks for bringing that point to the 'he said/she said' back and forth on the where's my recession, dude? discussion - recession calls have all been rearview mirror events - so chill out, kids!
Also, there IS a bit more going on here than tinfoil hatters, perma-bears and perma-bulls, its the thoughtful discussion that differentiates CR from the rest of the blogosphere, so more signal and less noise please.
"It's encouraging to hear someone from the Fed say something smart.
Maybe they're starting to realize that when somebody gets sick you don't hand them a crack pipe and tell them to get back to work."
ac | 11.16.07 - 1:25 pm
Dont count on it ac, trashing the dollar is an old favorite the good old boyz pull from the playbook when needed. As for the contrarians betting against super-models and rappers, my guess is that they can afford top-flight financial advice most on this blog could never dream of patronizing!
What's really weird is that a housing bear is concerned about inflation, when housing prices (a significant chunk of overall prices) are coming down.
Sebastian
What's really weird to me is that there are bulls who somehow find optimism riding the line between the the deflationary Great Depression and the inflationary 1970s.
How does one interpolate a situation between two awful periods and find chocolatey candy goodness?
I'm thinking the Canadians must find it especially weird, since they look at our S&P 500 and see no recovery at all since the dotcom crash (since our falling currency is offsetting our "illusionary" gains to them).
And then there is gold. I take no great comfort that a simple rock is beating the Dow. But hey, maybe that's just me. I can say that if gold was sentient, it is probably laughing its frickin' head off at us right now.
No offense intended. I just find it really weird, that's all.
"if gold was sentient, it is probably laughing its frickin' head off at us right now."
"Dear Liberty Dollar Supporters:
I sincerely regret to inform you that about 8:00 this morning a dozen FBI and Secret Service agents raided the Liberty Dollar office in Evansville.
For approximately six hours they took all the gold, all the silver, all the platinum and almost two tons of Ron Paul Dollars that where just delivered last Friday. They also took all the files, all the computers and froze our bank accounts.
We have no money. We have no products. We have no records to even know what was ordered or what you are owed. We have nothing but the will to push forward and overcome this massive assault on our liberty and our right to have real money as defined by the US Constitution. We should not to be defrauded by the fake government money.
But to make matters worse, all the gold and silver that backs up the paper certificates and digital currency held in the vault at Sunshine Mint has also been confiscated. Even the dies for mint the Gold and Silver Liberties have been taken.
This in spite of the fact that Edmond C. Moy, the Director of the Mint, acknowledged in a letter to a US Senator that the paper certificates did not violate Section 486 and were not illegal. But the FBI and Services took all the paper currency too.
The possibility of such action was the reason the Liberty Dollar was designed so that the vast majority of the money was in specie form and in the peoples hands. Of the $20 million Liberty Dollars, only about a million is in paper or digital form.
I regret that if you are due an order. It may be some time until it will be filled... if ever... it now all depends on our actions.
Everyone who has an unfulfilled order or has digital or paper currency should band together for a class action suit and demand redemption. We cannot allow the government to steal our money! Please dont let this happen!!! Many of you read the articles quoting the government and Federal Reserve officials that the Liberty Dollar was legal. You did nothing wrong. You are legally entitled to your property. Let us use this terrible act to band together and further our goal to return America to a value based currency."
"normally", Banker. Have you looked at the details of GDP lately?
The current dollar net export figure has barely budged for three quarters. After adjusting to real, all of sudden there were relatively big decreases in "real" export deficits, which respectively contributed 38.2 and 27.7 of total change in GDP. Total changes were 107.5 and 110.6. (Table 3)
Gross private domestic investment has slowed to a crawl. In third quarter, it would have been negative except for an inventory build in the third quarter.
Nonfinancial corporate profits have fallen in the first two quarters compared to 2006 (Table 12). I'll be really interested to see how they show up in the third quarter. 2006 was 814, and the first two 2007 quarters were 781.1 & 806.4.
We all know where financial profits are doomed to go. The ratio of financial to nonfinancial profit has steadily increased for years, and now the question is whether the nonfinancial sector can pick up the slack.
There's a very good reason why the Fed predicted a drop in growth. The numbers are intimidating. In the last four years, a huge chunk of gross private domestic investment came from retail, including retail banking/mortgages and general retail. It looks to me as if most retail chains are slowing their investment plans.
The real forward impetus to this economy either has to come from federal government spending, which I think we cannot afford, or from private investment. Unlike many, I don't think we are moving into a depression. It does look to me as if the stimulus is falling out of the economy.
The reason I am watching retail sales and prices so closely is because that is the only sector that is likely to contribute much to gross private domestic investment for the next few quarters.
Liberty Dollar FAQs The Liberty Dollar is NOT an investment. It is a currency. If your goal is to buy silver then you should buy silver bullion.
Might just as well take a giant stick to a hornet's nest. The end result is the same.
When the price of silver rises near $10 per ounce, a new $20 Warehouse Receipt series will be issued. All new Certificates will be identified with "$20 Silver Base". The new $20 denomination certificate will be backed by one ounce of .999 silver, and the new $10 certificate will be backed by half ounce, $5 by quartrer ounce and the $1 by one twentieth ounce of silver.
Note how the "currency" is debased right out of the starting gate. Why would I want to pay $20 for $10 worth of silver? So where did the other $10 go? (It isn't cheap running a private "currency" business apparently.)
I chose the 1964 silver quarters when I owned silver. Why not just stick with legal tender? Tulving will give you the coins at 14 cents under the spot price of silver and ship them to you for free. The coins are relatively liquid (as long as silver rises anyway, might become illiquid if silver someday follows housing prices down).
This is not an endorsement of Tulving. I have not used them (I used a local dealer). It is also not investment advice. I have no idea where silver heads next. I'm mostly centered on the deflation/inflation fence (right where the Fed wants me no doubt). If we hyperinflate, I expect the fence I'm sitting on to collapse and take me with it, lol. (D'oh!)
I say that the recession has started in Q4-2007 and if not, then Q1-2008. Also, if Q4 is not a negative GDP number, then it will be sub 1%. Technically not a recession, but not much fun. Especially since it will be followed by 2 negative quarters.
CPI - Just like CPI stayed tame with rising home prices because rent stayed weak, I expect mirror-like numbers over the next few years. Residential rent numbers have been solid in the face of declining home prices.
Task for the Fed: come up with a better way to include asset values in visible stats for both the Fed and the public to follow. Since 1995, we ignore asset price increases when setting policy, and then are shocked when the asset price declines come. I don't have any answer for this.
A teeter totter balanced with significant weight on both ends.
Is that Paulson propping up his strong US dollar policy ?
http://www.understand-accounting.net/images/Fulcrum.jpg
You could see this coming back in '04 and '05. I TOLD people not to get into these ARMs, and to save their money.
Oh well. Now the bill has come due.
km4, just imagine if both those guys were really fat - and one fell off. We are talking serious injury!
That is how the risks are "balanced".
Best Wishes.
well, if housing prices only fall 15% PEAK to trough, he may be right, though I think he's wildly out of bounds . . . . . . . . on the recessionary path we're on, there's a real danger that one or two major financial institutions vanish from the landscape rather abruptly - IMO, it's far far better to try to avoid THAT outcome inadvance, because once investors have truly panicked and begun to stampede like buffalo, they're not nearly as receptive to 25 bp cuts as they are when they're sitting quietly in their living rooms waiting for godot.
"well, if housing prices only fall 15% PEAK to trough, he may be right, though I think he's wildly out of bounds . . . . . . . "
Some places in the SF Bay Area are already there....
"According to DataQuick's analysis, the number of homes purchased using jumbo loans tumbled 50 percent between July and October.
Price data show a bifurcated market, with decreases in many of the counties outside the region's urban core. For instance, in Solano County, the price for a detached home plunged nearly 18 percent; in Sonoma County, the median dropped nearly 12 percent.
On the flip side, prices in Santa Clara County and San Francisco were up 7.4 percent and 4.3 percent, respectively. Even in those submarkets, however, DataQuick analyst Andrew LePage and others say the picture is mixed. Sales at the higher end of the market are relatively brisk compared with the lower end, helping to draw the overall median higher."
Dwindling mortgage options leaves Bay Area home sales mired in misery
I think that these bifurcated markets won't stay so bifurcated forever.
Politics enter into the equation as well. Which would be worse for the Republicans in an election year: a recession or a recession with an inflation kicker? Pick your poison.
In a nutshell, if it comes to Citibank on one hand, and inflation on the other, the Fed will risk inflation. The equation, seemingly not understood by Mr. (Dr?) Kroszner is really quite simple.
The market doesn't seem to have found him too convincing, the futures are still pretty sure of a cut.
CR,
I'd be curious about your opinion on Grantham's comments that we have "the first truly global bubble and we can't know how severe the shocks to the system will be when it bursts" (I'm paraphrasing something from memory; hopefully I'm not misrepresenting his actual statements).
This is what concerns me. The fact that we may be dealing with an unprecedented situation where we have no relevant historical data to make meaningful predictions.
"This reminds me of a teeter totter; it can be balanced with a few pounds at each end, or with hundreds of pounds at each end. If the risks are balanced, the concerns about inflation must be significant."
CR-
CNBC must have been reading your blog for analysis, the verbage used couldn't have been much closer.
"In a nutshell, if it comes to Citibank on one hand, and inflation on the other, the Fed will risk inflation. The equation, seemingly not understood by Mr. (Dr?) Kroszner is really quite simple."
Back in the '70s and '80s, wages were a major component of inflation. Now, they're really not. Inflation never goes down well, but it'll be even worse than usual if, for the common man, it's concentrated in prices with no corresponding bump in wages.
If Bernanke goes with inflation, he'll risk turning the whole political order against finance as we know it. He's short-sighted enough to do it; all of his class are. And I wouldn't mind a bit.
Dear CR
LOL two fat men ! Some of your analogies really make me laugh for some reason.
By the way Danielle DiMartino (remember her articles in the Dallas Morning News?) has a report (The Rise and Fall of Subprime Mortgages - Economic Letter, Nov. 2007 - FRB Dallas )on sub-prime mortgages. I really like how after the fact everything can be explained so clearly, why didn't we see this? (sarcasm intended)
Also, some of her circular flow charts remind me of some you did or did you have different charts?
Best regards,
There is a limit to how much weight can be piled onto each end before the teeter-totter breaks at the fulcrum.
Wall Street opened higher Friday as investors were assured by U.S. Treasury Secretary Henry Paulson that the battered dollar is poised to recover in the long term.
So Hank how is the US poised ?
So Hank how is how do you define long term ?
So Hank why should we trust your judgment ?
Meltdown Man, did they use the teeter totter analogy? That would be funny.
Kett82, DiMartino was on top of these issues as a journalist. I'll check out her piece. Thanks!
Lumpeninvestor, very true!
Best to all.
I'm waiting for Sebastian to give us an update on his long positions.
In summer 2004 a friend was telling me: "My guys are shorting homebuilders. It's game over for the economy because if the Fed hikes everything collapses and if the Fed lowers they would stoke inflation."
In early 2006, Mish coined the term Bernanke's Box.
And now, three years later, we are still talking about the same thing. But in all fairness, I think we are really close to the point where the Fed cannot and should not lower rates.
"Economic weakness and rising prices"
Hmmm... there ought to be a name for that situation....
Darn, lumpeninvestor said it first. Since the chance of high inflation and recession are both approaching unity, they look balanced to me.
INO Futures and Commodities - Interest Rates - 10 YEAR T-NOTES Mar 2010 (CBOT:TY.H10) Price Chart and Quote
paulson defending dollar?
i believe him, this time...
Back to 109
CR, that teeter-totter analogy was wonderful, especially the part of being balanced with SIGNIFICANT weights at either end. In that context, this para from the speech jives :
Looking forward, one feature of monetary policy to keep in mind is that, all else equal, each successive action in the same direction tends to lower the incremental benefits and to raise the incremental costs of additional actions. For example, unless underlying economic conditions or risks change substantially, reductions in the target federal funds rate tend to be associated with decreasing incremental benefits in terms of further mitigating tail risks and with increasing incremental costs in terms of the potential for inflation to increase.
But do I believe them ? nahhh, they are still Wall St's b*tch as far as I'm concerned. Well, alright, perhaps this has slightly tilted the balance away from whore towards tart. But the path back to virginal purity is going to be long and rocky.
-K
Am I the cynical one , but haven't we heard these types of speeches ( Poole's infamous " tough talk " interview on CNBC , shortly before the August 17th 50 bps discount cut comes immediately to mind ) from Fed Governors and then rates were cut at the Sept and Oct meeting ? Right now , the bond market is declaring that the Fed will cut in Dec and Jan regardless of what Kroszner says. Until I see these guy walk the walk on holding the line on rate cuts , I'm discounting this as just an attempt to talk up the dollar. As someone aptly noted on this thread , if the choice is C versus inflation , I know what the outcome will be in Dec and Jan... moreover , if there isn't a cut in dec , forget about MLEC being able to ride to the rescue... things may very well get ugly real quick for ABCP.
The big unknown on the inflation front is China. The second the Chinese raise prices or revalue the yuan, the inflation index will jump off the charts, and the Fed will be forced to act, or publicaly admit that they don't really care about inflation.
The "conventional wisdom" has been that the Chinese will keep prices low, but now that they virtually dominate manufacturing in so many sectors, they're calling the shots. Remember the "apology" from Mattel?
I think this is more akin to a catapult, with the carbage weighing us down held in place by the tension of magnified CDO leverage and our savings is in the other end, but the leather strap holding everything in place is starting to fray.
I think unfortunately the see saw will break in half and we get both inflation and recession. Which will be followed by deflation and depression. Will the FED cut probably especially if Black Friday becomes RED Friday. I personally am going out to watch the festivities but just to see what people are buying. I am keeping my powder dry for the real sales later. Used ZO6 vettes are falling as fast as the ABX
Stretching the analogy further: I am concerned about the structural adequacy of the teeter-totter board--an elephant at each end of the board will break the board--then where will we be?
Joe D. Banks, I didn't see your post, I agree, why not the worst of both worlds?
Northern Cali said: " I'm waiting for Sebastian to give us an update on his long positions."
My posts are boring enough already.
S.
Nice call, CR, on the point that if it's balanced then the inflation must be really bad. I don't think the intention of the Fedaganda was to reveal that insight, but their quality is slipping.
Personally, I think that Krosner is full of BS. They are going to cut to bail out Wall Street banks again, and then again.
Those clowns' credibility is zero. Lie, lie, and lie some more. But don't tell anybody that you really are going to trash the dollar with your foolish rate cuts to bail out your foolish housing boom. Lie so your scumbag friends at the banks can position themselves.
¡Viva la revolucion!
Of this much I am sure: The little piggies on Wall Street will get their bonuses. Destroying the US economy rates an especially large bonus.
The less the markets expect a cut, the more of an effect it will have. So these statements could just be an attempt to lower expectations in preparation for the cut.
That is certainly what the punters on the CBOE seem to think; the futures did not move very much. Time for more tough talk from the Fed I guess.
...
On the previous topic, I think Goldman Sachs may be right that we are headed for a heavily protracted period of anemic growth rather than a recession. And that is not a good thing. There would be a high risk, in my opinion, of 70s-style almost-stagflation as the Fed kept trying to prevent "anemic growth" from becoming "negative growth". Never mind what would happen to the dollar...
China's problem is that internally they need to sell their stuff a whole lot more than we need to buy it.
They have to hide inflation and social unrest under the rice basket until after the 2008 Olympics. At 4 coal plants a week even a tiny stumble could cause a cascade failure of an economy that doesn't have a sophisticated banking system. Think of the "Bailey Savings & Loan" just with a billion people in the lobby during a bank run.
Fedaganda doesn't quite work. Maybe it should be called Prop-it-up-aganda.
... one feature of monetary policy to keep in mind is that, all else equal, each successive action in the same direction tends to lower the incremental benefits and to raise the incremental costs of additional actions. ...
It's encouraging to hear someone from the Fed say something smart.
Maybe they're starting to realize that when somebody gets sick you don't hand them a crack pipe and tell them to get back to work.
CR said: "Economic weakness and rising prices. A teeter totter balanced with significant weight on both ends."
Actually, there's just not that much weight on either side. Measured Q3 2006-Q3 2007, GDP is +2.6%. Measured Oct. 2006-Oct. 2007, CPI-U is +3.5%. Neither is outside of their normal ranges.
What's really weird is that a housing bear is concerned about inflation, when housing prices (a significant chunk of overall prices) are coming down.
Sebastia
... one feature of monetary policy to keep in mind is that, all else equal, each successive action in the same direction tends to lower the incremental benefits and to raise the incremental costs of additional actions. ...
most have interpreted this to mean that the Fed won't cut again in the future, since each successive cut will be less powerful than the last.
but there is a different way to interpret this paragraph.
it could mean that the fed will need to cut 50+ next time.
clearly they are going to cut. this speech makes me think they'll cut 50-75 instead of 25bps. They have to...
makes me sick.
bunch of liars.
I have to agree with dotcommunist. I use everything those compulsive liars say as a perfect negative indicators. With interest on the debt approaching half a trillion, boomers approaching retirement ( and additional unfunded future federal commitments), imbalance of trade, and consumer debt on credit cards alone near one trillion, I guess they have little choice but to monetize the debt. The printing presses will roll, the dollar will take hit after hit. They have no choice because if the Fed defends the dollar we will have public insurrection with incalculable costs and outcomes.
Viva La PPT. (
How do you know when dollar has collapsed?
Junkies are snorting and licking dollar bills and dancing on the streets. Why? Because Columbian drug cartels have just exchanged their "dusty" dollar cash reserves
Housing doesn't pay for lunch, at least not right away.
I can tell that you don't remember much about the 70's, Sebastian.
Just watch what we have to pay for everything that can be shipped worldwide. Houses are a tad immobile. Grain, metals, food, art, stuff that can be exported with ease and sold on world markets will be much higher by the time all of this really begins to settle down. What you pay for dinner will actually impact your pocket faster than a putative decline in rents. Gas? Get used to $3+ handles. Energy costs will once again begin to matter. Stuff from China? Inflation is already in the pipeline and will just manifest with higher prices.
Why do you think I picked such a depressive tagline- because this will go on far far longer than you believe possible.
Someday this war's gonna end...
I don't think the case has been made that a rate cuts helps either housing or big banks. Both face problems rooted in credit and risk, not in rates.
However, if the Fed finally smells a recession coming, they are not going to want to look like they triggered it. Kroszner sounds like he is speaking with the confidence that he is not alone, but I think, like many posters above, it is hard to take what he says at face value.
Allen,
I thought Sebastian's comment was tongue in cheek.
On a side note, speaking of inflation and china...
I watched a brief news report (on CNBC maybe?) that showed that the Chinese are becoming insatiable CONSUMERS over the last several months.
It discussed how some reasons for this were:
-increased Chinese wealth
-increased feeling of wealth due to stock returns
but more importantly I wonder about:
-increased inflation causing the Chinese to not want on to their Renminbi...
Looks like the Chinese may find themselves in the America-trap... Renminbi losing value, thus moving purchases to today... causing more CPI causing more to spend now...
that wouldn't be nice for America, now would it?
Money markets are rapidly starting to seize up again, so it's probable the Fed will be forced to cut again next month, and be joined this time by the Bank of England, to keep the funding markets functioning, even though the economic data do not justify cuts at this time. The Fed needs a period of weak growth to get inflation back under control - problem is, their forecast is so close to the line, and the economy has so little ability left to deal with further shocks, that it's very difficult for them to say no.
this is at least the third such story in the past 45 days. each time the headline is something like "...fed makes the biggest injection since 911...)
Yahoo! 404 - Page Not Found
the PPT is working hard because the childs top is wobbling badly now.
Viva La PPT (
Berner has an interesting dollar/inflation take
Its clear that a weaker dollar will, other things equal, boost import prices and possibly inflation expectations, and thus inflation. But other things arent equal: I think that the economy is weakening, pricing power is fading, and thus, in todays circumstances, the dollars influence on inflation likely will be small. That logic also applies to the influence of rising commodity prices on inflation. Thus, notwithstanding the Feds legitimate concerns about inflation risks, officials will have some latitude to respond to the incipient and palpable weakening in economic activity
Morgan Stanley - Global Economic Forum
Fed injecting this and that..when FED is going to overdose?
HIGH & LOW FINANCE; Bank Profits Had Whiff Of Suspicion - NY Times
They have to hide inflation and social unrest under the rice basket until after the 2008 Olympics.
And then,...? And when we talk about what China's going to do: Are they as smart as you all, or as clueless as me?
So the Fed's message boils down to "Weebles wobble but they don't fall down"?
Banker, I am not sure if pricing power weakness will stem inflation in these circumstances. The whole "weak pricing power" fails when inputs rise enough. A lot of companies with falling sales have announced early 2008 price increases.
I think constraints on consumer spending will limit some of these increases, but I don't think they'll buy the Fed a whole lot of room.
Bears,
When can I expect my recession? - I think we can agree that any calls for 2007 recession were wrong. Now, many of my bear-friends continue unabated with renewed horror scenarios. I would like to have dates, though. When is the US economy going into recession as defined by two quarters with negative growths? When is this going to start (finally)? Maybe this is worth a post by CR?
My call is for no recession until past 2009 (that's where my economic forecasting horizon ends; not that I automatically expect one in 2010).
O-Joe
Sebastian What's really weird is that a housing bear is concerned about inflation, when housing prices (a significant chunk of overall prices) are coming down.
Not really. Oh, sure, rent equivalents are big chunk of CPI, but CPI is getting to the point at which it has only a tenuous relationship to inflation for the top 20% and the lower 40% of consumers. The top 20% are experiencing negative inflation and the lower 40% are experiencing extremely high inflation - well over 7% annually.
In the real world, housing prices only matter much to FTHB or years-out STHB, and given rapid tightening in credit terms, there aren't going to be many of the FTHB.
If you want to consider the effect inflation has on real world consumer consumption in the short term, it's clear that dropping prices are taking potential spending power out of millions of people's hands.
It says something very basic about this economy that prices for new homes and autos are dropping, and prices for things that people HAVE to buy are rising. I don't see that home prices will affect inflation as we are now experiencing it one way or another.
Also, Fannie's March announcements effectively make purchasing homes more expensive for most buyers.
O-Joe I think we can agree that any calls for 2007 recession were wrong.
I totally disagree with that statement. Classically speaking, we are in a recession right now. We have months of declining YoY freight stats, real negatives on retail purchases, and a bunch of large states are going negative YoY on sales taxes. Thankfully things have moved rather slowly, which gives us more time to compensate with a weaker dollar and a chance to move some merchandise.
If you were a state budgeting official in any one of about 34 states, you'd be hearing the word "recession" a lot. They are quite worried about revenues.
When can I expect my recession? - I think we can agree that any calls for 2007 recession were wrong.
Maybe you shouldn't expect any recession at all as long as Americans stay patriotic and spend to the hilt this holiday season. Remember: "Go out and shop, or the terrists will win".
Have a nice day.
"yet higher rates of delinquencies and foreclosures over the next several quarters"
How many is several? And does "yet higher rates" refer to absolute terms, or relatively accelerating rates?
It makes a big difference in what steps the FED takes to stick to their goals of full employment and low inflation.
When can I expect my recession? - I think we can agree that any calls for 2007 recession were wrong.
Just quit your job next Monday. You'll think very much very quickly that your recession has arrived.
mock turtle,
Erm...Unless that article states the number of repo's the Fed rolled over, it is PURE propaganda.
I can't take these idiotic headlines anymore.
Cheers,
Looks like FirstFed released updated balance sheet info during the day. Just like its kissing cousin Downey, NPA spiked dramatically in just the last month.
"When can I expect my recession? - I think we can agree that any calls for 2007 recession were wrong. "
Pretty sure we have one in California right now. Home sales in many areas at 20-year-ago levels, tax collections way down, governator asking for 10 percent budget cuts across the board, construction 'way down, retail down, gas and energy headed up...
I wouldn't exactly call it slow growth.
Marc Faber says we are in recession now. Government's numbers are no good. For anyone that just wants to learn he has a great monthly newsletter.
Welcome to gloomboomdoom.com
Any guesses on what bombs will be dropped after hours today? I love Fridays...
MOM,
I agree. If we simply use pre-clinton era CPI, inflation is running at 7% and heading up sharply. Since reported growth for 07 is ~2.5% and admitted CPI is ~3%, that gives a negative GDP of ~1.5%.
Shadow Statistics:
Shadow Government Statistics - Home Page?
Smells like recession to me.
CHeers,
MOM,
Banker, I am not sure if pricing power weakness will stem inflation in these circumstances. The whole "weak pricing power" fails when inputs rise enough.
I'm not saying I buy it, but it is an interesting argument he makes.
A lot of companies with falling sales have announced early 2008 price increases.
I don't believe that is true (but of course am willing to be convinced I'm wrong). Can you name me just a couple with "falling sales" for whom that is true? Thanks.
Classically speaking, we are in a recession right now. We have months of declining YoY freight stats, real negatives on retail purchases, and a bunch of large states are going negative YoY on sales taxes.
Respectfully none of that is involved in the classic definition of a recession. That definition is simply two or more consecutive quarters of negative GDP growth. If the last quarter really was a 5%+ quarter (as the speculation is), it seems awfully tough to me to go all the way negative in only six weeks.
Of course, as always, we'll see.
CNBC sensed earlier that Dow was poised for a "tech rally" today. Then market responded, "Come here you investors, I'll learn ya!"
Sometimes, investors are just too optimistic. O-this, and O-that. Incredible. Here's wishing them an "O-full" day...
Someone at AP (or Yahoo) is having fun today...
Fannie Slapped; Stock Falls to Decade Low
Expired
the PPT is working hard because the childs top is wobbling badly now.
This guy has a pretty good rant about the PPT, but you might find the delivery a bit harsh if you've lost a lot of money because they keep manipulating the market:
The Market Ticker
Dallas-Fort Worth area foreclosures surge 10% almost 43,000 area home foreclosure postings were recorded for 2007 probably a record... .. .
Dallas-Fort Worth area foreclosures surge 10% |
News for Dallas, Texas | Dallas Morning News
| Dallas Business News
I am not sure, are we also citing if Canadian banks are visiting the CR confessional?
BMO taking $320M in debt-woe writedowns, $185M MasterCard loyalty hit
1 hour ago
TORONTO - The Bank of Montreal (TSX:BMO) has joined the array of big banks hurt by the U.S. subprime mortgage crash, revealing that it will book half a billion dollars in writedowns partly connected to disorder in world credit markets.
The bank said Friday that $320 million in writedowns come from debt-instrument woes at BMO Capital Markets, and $185 million from the bank's credit card loyalty program.
John Aiken, an analyst and Dundee Capital Markets, noted that the BMO credit-market charges, to be booked in the fourth quarter ended Oct. 31, were smaller than some market watchers had predicted.
The "valuation adjustments" at BMO Capital Markets include $170 million on trading and structured credit-related positions and preferred shares, $135 million on Canadian asset-backed commercial paper and $15 million on Links Finance Corp. and Parkland Finance Corp., two U.S. structured investment vehicles managed by BMO.
The SIV writedown represents 21 per cent of BMO's $70-million investment in Links and Parkland. The bank also said it will help support the SIVs by making much as $1.6 billion available to them.
The PPT worked through lunch, ordered pizza, but it arrived cold.
ac - thanks for posting that link.
Banker,
Erm, did you read CR's post?
" FedEx Corp. lowered its earnings outlook Friday, citing high fuel costs and weakness in its less-than-truckload freight business.
The Memphis, Tenn., company had already cut its earnings forecast in September and said it would reduce capital spending ...
And from Reuters: UPS to hike delivery charges by 4.9 percent
Package delivery company United Parcel Service Inc said on Friday it was raising its prices for 2008 by about 4.9 percent, matching a planned hike by rival FedEx Corp ..."
OK there's two for MOM.
Cheers,
PPT just sent a runner to the corner drugstore for Tums.
"but there is a different way to interpret this paragraph.
it could mean that the fed will need to cut 50+ next time.
clearly they are going to cut. this speech makes me think they'll cut 50-75 instead of 25bps. They have to..."
They need to save some ammo for when the stuff really hits the fan. I think we're just getting a glimpse of it at this point.
Seems awfully quiet on the hedge fund front...aren't any of them suffering from all the ratings cuts on MBS, CDO and the like? Could their silence be entirely due to the lack of regulation on the hedgies (as opposed to the banks and IBs, which at least have some minimal amount of transparency)?
Smells sorta fishy to me.
When will we hear about the loss of their clients money?
Or are they all disciplined and brilliant traders with perfect risk management, all of them on the right side of the mortgage debacle trade?
Misean,
Erm, did you read MOM's claim or the article? Fedex is still expecting growth in volume, as close to sales as the article lets us get. UPS has said nothing about declining sales in the article either.
No soup for you!
AC,
If there is no PPT, then who the f*$#@ are all those guys in my basement?
It amazes me that all we hear about in regards to mortgage delinquencies and foreclosures is subprime. Wait until the payment option arms start to "recast". Kroszner say that when subprime rates reset the payment increases 25%. When payment option arm's recast, the payment usually increases by close to 100%! Not even prime borrowers will be able to handle that increase. AND, there equity will be gone as the result of negative amortization and falling home values.
A couple weeks ago on this blog there was a great graph of pending payment option arm resets.
Maybe the market has priced payment option arm problems in, but we're still not hearing about it in the press.
Is it under the radar screen, or are payment option arms currently being classified as subprime?
Banker,
Hmmm, I took this to mean, for Fed Ex, sales were down:
"weakness in its less-than-truckload freight business."
I read this to mean, for Fed-Ex, weaker business is being met by higher prices to customers:
"United Parcel Service Inc said on Friday it was raising its prices for 2008 by about 4.9 percent, matching a planned hike by rival FedEx Corp"
OK, so I got UPS wrong. But that should at least be a cup of soup.
BTW, when the bo...packages arrive for your guests in the basement, it would be wise to excuse yourself and be a few blocks away before they go of...get opened.
Cheers,
The 2nd 25bp cut tells us that the Fed has a gloomier picture of GDP than the official 'advance' Q3 3.9% stat.
Kroz bites this so oddly with his remark about the diminution of successive moves in the same direction that I needed to run through the alternative: the Fed duz an about face and increases the FF rate...causing the severest of diminutions of respect for the data dependent Fed.
A continuation will at least supply the large players with cheaper financing to enable stock buybacks and extend financial liabilities...while the yield curve steepens --exacerbating the housing market downturn with more expensive mortgage rates.
With no wage pricing power, the inflation scare is all bark and no bite. Similarly, that "loosening" is a response to IBs circumstances, not the debt saddled consumers...who are feeling the affects of drying MEW.
It's clear that one of the factors sustaining consumption spending has been fraudulent stripping of wealth from the economic system by means of the myriad financial scams. The many varieties of fraud we've seen in mortgage lending and securitization are only part of the picture, another part is the other varieties going on at higher levels in the financial system.
A whole lot of managers have been making money the old-fashioned way -- by booking short-term profits on business that's actually money-losing long-term, taking the bonuses up front, and leaving the stockholders (or hedge fund investors) holding the bag.
Since many of these financial businesses are inherently zero-sum games, when we read of numerous players racking up huge winnings, without others reporting corresponding losses, that's a compelling indication there's fraud afoot.
Misean,
Thanks for the heads up...am I going to be having a little touch up work done? Or is this a full-scale remodel?
Starbucks needs the help, I'll send you a a half double decaffeinated half-caf, with a twist of lemon. 9hat tip LA Story)
AllenM said: "...I can tell that you don't remember much about the 70's, Sebastian."
On the contrary.
I know considerable about the economic conditions of the '70's, which is why I'm not concerned. Current conditions aren't comparable.
Sebastia
When is the US economy going into recession as defined by two quarters with negative growths?
O-Joe, you must be a government shill. We are absolutely already in recession and have been for a while. But using the fudged lying government numbers it says no. But the economy is crumbling and you jokers still deny it all.
Keep on fudging, O-Joe. Uncle Liar needs you so bad. Meanwhile, the real economy still collapses.
It's important to distinguish between inflation -- a rise in the overall price level due to money supply expanding faster than the supply of things to buy -- and rising CPI.
If the money supply is rising only as fast as the overall supply of goods and services, then if fuel prices are rising because of rising demand with static or declining supply, other prices will have to fall, and there'll be no real overall inflation.
Back in the days when the world ran on the gold standard, rising productivity led naturally to falling prices. From 1800 thru 1900, the overall price level in the US fell about 50%, despite huge gold discoveries that greatly increased the money supply.
If there's no monetary inflation, and fuel and food prices rise due to supply:demand influences as Asia and Eastern Europe consume more, then prices of other things must fall.
"Politics enter into the equation as well. Which would be worse for the Republicans in an election year: a recession or a recession with an inflation kicker? Pick your poison."
Prediction: A recession will be announced Nov. 6, 2008 - retroactive to Q1 2008. If there's a republican president-elect, the situation couldn't be avoided. If a democrat, it's all the democrats' fault.
On the rate cut: Kroszner's statement about balance can be read as, "Today, things appear to be balanced. Maybe not tomorrow, and maybe not in December." Or, like a magic 8-ball, "Ask again later."
Basically the same story again from the bears. My ideology/cult dictates there is a recession right now, so the government statistics are all fudged and everybody who disagrees is a "shill". Well, with this attitude, expect many crashes with the economic reality ahead. Good luck.
I also see nobody really thinks there will be a real recession ahead as per two neg. growth quarters. What are we descussing here then if nobody expects a real recession? Glad, we're finaaly on the same bull page.
O-Joe
Yes, what we have isn't true inflation - at least then our wages would go up. Nope, we have the worst of all worlds: people deeply in debt, prices rising, salaries dwindling, jobs fleeing.
Heck of a job, Bernie/Paulson/Greenspam/etc!
Banker - 2 consecutive quarters of negative GDP growth is more the popular definition. NBER's definition
is slightly broader.
As for companies, most consumer brands are having to raise costs. Coca Cola's is pretty much inline:
The company shipped 2.5 percent fewer cases during the quarter, compared with a year earlier, while costs rose 6 percent and price per case rose 4 percent, excluding the impact of the weaker dollar.
Kraft, Kellogg.
The cheese/dairy business right now is almost worse than mortgage banking.
With high commodity prices and a weak dollar the agricultural sector should do quite well over the next couple years. This might cushion the economy in the farm states, where the housing sector didn't bubble as much.
The cheese/dairy business right now is almost worse than mortgage banking.
MaxedOutMama | Homepage | 11.16.07 - 4:26 pm |
Organic dairy farmers are doing great right now, the rest, not so much.
I think we're in recession now. No conspiracy, perhaps, but all the numbers on consumption are negative, and production is going that way too.
Time will tell, as it has with past recessions, which haven't generally been recognized until well after they've started...
Detroit,
Thanks for bringing that point to the 'he said/she said' back and forth on the where's my recession, dude? discussion - recession calls have all been rearview mirror events - so chill out, kids!
Also, there IS a bit more going on here than tinfoil hatters, perma-bears and perma-bulls, its the thoughtful discussion that differentiates CR from the rest of the blogosphere, so more signal and less noise please.
Looking forward to my ARM reset next year, 1 year LIBOR + 2 should be about 4 by the
CR,
Economic weakness and rising prices. A teeter totter balanced with significant weight on both ends.
My name is somewhat "sticky" it seems. I wake up every morning hoping I'll be able to change it though.
Who am I kidding? Effervescent Mark just probably isn't ever going to work for me. I enjoy sarcasm too much if nothing else.
"It's encouraging to hear someone from the Fed say something smart.
Maybe they're starting to realize that when somebody gets sick you don't hand them a crack pipe and tell them to get back to work."
ac | 11.16.07 - 1:25 pm
Dont count on it ac, trashing the dollar is an old favorite the good old boyz pull from the playbook when needed. As for the contrarians betting against super-models and rappers, my guess is that they can afford top-flight financial advice most on this blog could never dream of patronizing!
Speaking of Shadow-Stats, Dr. Williams in a T.V. interview recently stated that we were headed for a
"hyper-inflationary depression."
Now I cant find this term in any of my econ. texts...
What's really weird is that a housing bear is concerned about inflation, when housing prices (a significant chunk of overall prices) are coming down.
Sebastian
What's really weird to me is that there are bulls who somehow find optimism riding the line between the the deflationary Great Depression and the inflationary 1970s.
How does one interpolate a situation between two awful periods and find chocolatey candy goodness?
I'm thinking the Canadians must find it especially weird, since they look at our S&P 500 and see no recovery at all since the dotcom crash (since our falling currency is offsetting our "illusionary" gains to them).
And then there is gold. I take no great comfort that a simple rock is beating the Dow. But hey, maybe that's just me. I can say that if gold was sentient, it is probably laughing its frickin' head off at us right now.
No offense intended. I just find it really weird, that's all.
MOM,
Point taken on the companies, thanks. As for the recession, it really has to include a decline in GDP even by NBER standards.
normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.
"if gold was sentient, it is probably laughing its frickin' head off at us right now."
"Dear Liberty Dollar Supporters:
I sincerely regret to inform you that about 8:00 this morning a dozen FBI and Secret Service agents raided the Liberty Dollar office in Evansville.
For approximately six hours they took all the gold, all the silver, all the platinum and almost two tons of Ron Paul Dollars that where just delivered last Friday. They also took all the files, all the computers and froze our bank accounts.
We have no money. We have no products. We have no records to even know what was ordered or what you are owed. We have nothing but the will to push forward and overcome this massive assault on our liberty and our right to have real money as defined by the US Constitution. We should not to be defrauded by the fake government money.
But to make matters worse, all the gold and silver that backs up the paper certificates and digital currency held in the vault at Sunshine Mint has also been confiscated. Even the dies for mint the Gold and Silver Liberties have been taken.
This in spite of the fact that Edmond C. Moy, the Director of the Mint, acknowledged in a letter to a US Senator that the paper certificates did not violate Section 486 and were not illegal. But the FBI and Services took all the paper currency too.
The possibility of such action was the reason the Liberty Dollar was designed so that the vast majority of the money was in specie form and in the peoples hands. Of the $20 million Liberty Dollars, only about a million is in paper or digital form.
I regret that if you are due an order. It may be some time until it will be filled... if ever... it now all depends on our actions.
Everyone who has an unfulfilled order or has digital or paper currency should band together for a class action suit and demand redemption. We cannot allow the government to steal our money! Please dont let this happen!!! Many of you read the articles quoting the government and Federal Reserve officials that the Liberty Dollar was legal. You did nothing wrong. You are legally entitled to your property. Let us use this terrible act to band together and further our goal to return America to a value based currency."
These old boys ain't laughing.
"normally", Banker. Have you looked at the details of GDP
lately?
The current dollar net export figure has barely budged for three quarters. After adjusting to real, all of sudden there were relatively big decreases in "real" export deficits, which respectively contributed 38.2 and 27.7 of total change in GDP. Total changes were 107.5 and 110.6. (Table 3)
Gross private domestic investment has slowed to a crawl. In third quarter, it would have been negative except for an inventory build in the third quarter.
Nonfinancial corporate profits have fallen in the first two quarters compared to 2006 (Table 12). I'll be really interested to see how they show up in the third quarter. 2006 was 814, and the first two 2007 quarters were 781.1 & 806.4.
We all know where financial profits are doomed to go. The ratio of financial to nonfinancial profit has steadily increased for years, and now the question is whether the nonfinancial sector can pick up the slack.
There's a very good reason why the Fed predicted a drop in growth. The numbers are intimidating. In the last four years, a huge chunk of gross private domestic investment came from retail, including retail banking/mortgages and general retail. It looks to me as if most retail chains are slowing their investment plans.
The real forward impetus to this economy either has to come from federal government spending, which I think we cannot afford, or from private investment. Unlike many, I don't think we are moving into a depression. It does look to me as if the stimulus is falling out of the economy.
The reason I am watching retail sales and prices so closely is because that is the only sector that is likely to contribute much to gross private domestic investment for the next few quarters.
Anonymous,
Liberty Dollar FAQs
The Liberty Dollar is NOT an investment. It is a currency. If your goal is to buy silver then you should buy silver bullion.
Might just as well take a giant stick to a hornet's nest. The end result is the same.
When the price of silver rises near $10 per ounce, a new $20 Warehouse Receipt series will be issued. All new Certificates will be identified with "$20 Silver Base". The new $20 denomination certificate will be backed by one ounce of .999 silver, and the new $10 certificate will be backed by half ounce, $5 by quartrer ounce and the $1 by one twentieth ounce of silver.
Note how the "currency" is debased right out of the starting gate. Why would I want to pay $20 for $10 worth of silver? So where did the other $10 go? (It isn't cheap running a private "currency" business apparently.)
I chose the 1964 silver quarters when I owned silver. Why not just stick with legal tender? Tulving
will give you the coins at 14 cents under the spot price of silver and ship them to you for free. The coins are relatively liquid (as long as silver rises anyway, might become illiquid if silver someday follows housing prices down).
This is not an endorsement of Tulving. I have not used them (I used a local dealer). It is also not investment advice. I have no idea where silver heads next. I'm mostly centered on the deflation/inflation fence (right where the Fed wants me no doubt). If we hyperinflate, I expect the fence I'm sitting on to collapse and take me with it, lol. (D'oh!)
"Economic weakness and rising prices"
Hmmm... there ought to be a name for that situation....
There is. I'll call it "banana republicanism".
No, not stagflation, but Mexico mid 80's, Argentina, 2001, Indonesia 1998, Russia 1991
I say that the recession has started in Q4-2007 and if not, then Q1-2008. Also, if Q4 is not a negative GDP number, then it will be sub 1%. Technically not a recession, but not much fun. Especially since it will be followed by 2 negative quarters.
CPI - Just like CPI stayed tame with rising home prices because rent stayed weak, I expect mirror-like numbers over the next few years. Residential rent numbers have been solid in the face of declining home prices.
Task for the Fed: come up with a better way to include asset values in visible stats for both the Fed and the public to follow. Since 1995, we ignore asset price increases when setting policy, and then are shocked when the asset price declines come. I don't have any answer for this.
The Long Beach cargo container statistics are out.
I put up some more charts to show the traffic if anyone is interested.