States Feeling the Recession
Submitted by
CalculatedRisk on Thu, 03/13/2008 - 1:31pm (129 comments)
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Of all governors, Corzine is the most economically astute, and he is one of the straightest shooters with voters. They hate him so much that he doesn't have much to lose by shooting straight.
He runs the most fiscally inept state, and everybody knows it.
You can believe Corzine because he doesn't wing it when he makes statements like this.
You could say: He buckkles up his seat belt.
Chicago's Daley (or Daley's Chicago, it's all the same) announced $20 Million in budget cuts today as well.
<a href="http://www.chicagotribune.com/news/local/chi-chicago-budget-webmar14,1,3305872.story>
Trib info here with an "Anticipating a continuing national economic slowdown that will mean diminishing tax and fee revenues in Chicago ..." for extra measure.
"cutting spending, further weakening the economy."
What else can they do? What are they supposed to do? Fiscal policy seems beyond the scope of state and municipal governments. The best they can do is work hard to do more with what they have (and, no, I do not expect much in this regard).
journeyman: here in Calif they issue bonds!
What recession?
Haven't these guys seen the Wright Model B?
Have Sebastian send Corzine a copy.
Common, just do like California. Get some reasonably creative accountants and lawyers, and find a way to extend your borrowing into the future. There's really no problem that can't be solved by just borrowing more money, right? After all, no state has ever defaulted on all their debts, and the debts are secured by the taxation authority of the state. It's not like you can stop spending, so it's really the only viable solution, and there's no downside, right?
Gov't cuts are an effect, not a cause. They're an effect of a declining economy. Yet it's true that they also feedback to the generally nasty state of the economy, leading to even lower tax collections and thus even more cuts.
Locally, one of the big districts (Pajaro Valley Unified) just mailing layoff notices to 120 teachers, mostly "new teachers" who were hired in the last few years; hell, I probably know 10 or 15 of them, if I cared to check. Hope their student loans don't beat them down.
Another month, another CPI release. Ben got out ahead of the report ealier in the week by opening the pawn shop window all the way. I take that as a sign the Fed might have seen the report and it's UGLY. So UGLY they might have a tough time getting the board to agree on another massive cut, because they know in advance what the outcome will be.
Consesus seems low?
Econoday Reports - Consumer Price Index
March
14,
2008
I positioned accordingly.
Can I get confirmation on the following...
The GSEs/FHA are subsidizing otherwise uneconomic mortgage origination.
The Fed's ability to influence the MBS spread is significantly limited and unlikely to work given additional RE valuation declines. After all, how long can the Fed or the government continue to prop up origination AND the value of existing paper?
It's the anti-Keynesian economic theory. Spend like there's no tomorrow when times are good and shut off the spigot when things get rough. Guaranteed to produce boom and bust economic cycles.
Big fight in California brewing over this issue. Reps want spending cuts, Dems want new taxes -- nothing new about that. Dems have a majority, but Prop. 13 requires a supermajority. Expect deadlock, well into when the problem morphs from $14B to three times that.
I read in a past article that when Corzine spoke at public forums around NJ to discuss budget, metal detectors had to be installed because of worry somebody was going to put a cap in him.
Corzine isn't bullet & bombproof like the Governator?
The only thing the Bulls have going for them is that the market is closed on the weekend's.
tj & the bear,
LOL.
Honestly CA is a mess. They can't keep borrowing. Raising taxes would put more people just hanging on into FC. Cutting employment causes similar problem.
There's no real way out of this box.
I guess there's some entertainment value in watching Sacto's prize idiots in action.
Cheers,
Lower govt spending will be good for economy long term.
Diagnosis
The global market turmoil has not yet abated, so any diagnosis is necessarily incomplete. Nonetheless, it seems clear from experience to date that the principal underlying causes of the turmoil in financial markets were:
a breakdown in underwriting standards for subprime mortgages;
couldn't they just leave out the word "subprime" for once? sigh.
http://www.treas.gov/press/releases/reports/pwgpolicystatemktturmoil_03122008.pdf
"Corzine ... economically astute"? The bar must be set very low.
Or maybe he is, and just wants to relive the depression for some stange reason.
California needs to dump the Debtinator and get someone like a Corizine or Daley.
I'm thinking "Chainsaw Al" ought to be drafted into public service.
CNNMoney.com: 404 Page Not Found
National City seeking buyers - report
SAN FRANCISCO, Mar. 13, 2008 (Thomson Financial delivered by Newstex) -- National City Corp. (NYSE:NCC) is shopping itself to prospective buyers, according to a media report Thursday.
The Cleveland-based bank, which has been hurt by the housing slump, had been hunting for investors. But the company is now seeking buyers, the Wall Street Journal reports on its Web site, citing people familiar with the matter.
However, it isn't certain the National City will find a buyer or line up a capital infusion, the report said, citing bankers.
In January, the company slashed its quarterly dividend 49%, and said it was exiting the wholesale-mortgage business.
Crash time for Dekaser - couldn't happen to a slimier slimebag. (Come to think of it, whatever became of that NAR whore David Lereah? Haven't seen him have to eat shit anywhere, yet. How did he get away?)
I'm thinking "Chainsaw Al" ought to be drafted into public service.
For his cost cutting skills or for his dubious accounting?
I can't imagine that New York is going to be in any better condition. This year might not be so bad because the bonuses were good this year, but next year it'll be absolute carnage.
It bugs me that we continue to treat this fiasco so differently than the tech meltdown. Sure there are many differences, but I don't recall folks calling for the government to prop up the equity markets. The key similarity is that participants bid up the asset values beyond the fundamentals. The key differences here are that the financial institutions didn't demand adequate margin and the market is somewhat illiquid depending on the instrument, so they don't want to liquidate for a loss.
Seems as if we're being held hostage by girlie-men...
He's an MBA and former CEO of Goldman Sachs. He's smarter than Paulson.
He just picked the wrong state to run for governor.
Misean-
get the hat ready, this is by far, the most unbelievable thing I have ever seen, company rated A- by S&P, trades at 66 pennies, suspends it's 2 penny quarterly dividend, may get a going concern qualification, ceased writing new business-
""The extraordinary and rapid deterioration in U.S. residential mortgage- related credits led us to incur record levels of case reserves in the fourth quarter of last year," said Paul S. Giordano, SCA's president and chief executive officer. "We are continuing to explore our strategic options to generate or raise capital and improve our ratings. In the interim, we are in the process of realigning our cost structure to reflect the current business conditions and have made the strategic decision to cease writing new business for a period of time to preserve capital."
10-K Update. In the Company's filing with the SEC on February 29, 2008 for an extension of the due date to file our 10-K, the Company indicated that SCA's independent auditors were evaluating whether their opinion on SCA's financial statements would include a "going concern" explanatory paragraph. The Company expects to file it's Annual Report on Form 10-K on Monday, March 17, 2008.
SCA expects that the Company's independent auditors' opinion will not contain a going concern explanatory paragraph. The Company also expects that such opinion will be unqualified, but will include an explanatory paragraph highlighting the Company's decision to cease writing new business at the present time. "
Expired
Lower govt spending will be good for economy long term.
AG | 03.13.08 - 6:16 pm | #
That all depends on the ROI of the gov't spending. Some of it has very high long term ROI, some very low, or possibly negative. if for example Cal decided to shut down all its universities, it would be lower govt spending, but would it be good for the economy long term? I rather doubt it. If it just stopped doing maintenience on its transportation and sewer infrastructure, it would lower gov't spending. But what business would locate there if everyone was knee deep in shit and couldn't move because all the ridges had collapsed. This knee jerk all gov't spending is bad thing is complete and absolute BS. Soem spending is worthwhile and some isn't. Unfortunately due to politics, it isnt always the bad spending that gets cut first.
Corzine's had to deal with Whitman's "financial engineering" and his predecessor's lack of financial discipline.
daveNYC,
I was referring to Al's infamous ability to "right-size" company workforces. Cali could use some major RIFs.
risk capital,
Yes, that was an eye opener...power surge about blew my eyeballs outa my head.
As to SCA, A-. Stock goes from $40 $0.60. -98.5% in a year.
Well I'm sure glad that S&P notice came out today and goosed the market. Those boys over at S&P sure are smart.
Cheers,
I'm having a hard time reconciling this: "cutting spending, further weakening the economy."
with this:
Page not found- msnbc.com
(US Senate committee approves $50 billion global AIDS bill)
If our economy is falling off a cliff, where are we going to get $50 billion for Africa? I don't get it.
Am I missing something here once again?
The Blowncue Group, LP presents:
Guess The Hedge Fund!:
There have been some counterparties who have moved to liquidate collateral,'' he said.When you have difficulty raising liquidity to meet margin calls, more margin calls come and it becomes a bit of a vicious circle.''
________came back with a second proposal... would provide _____ billion of financing for the _______fund, enough to cover all the outstanding repos, so long as the lenders agreed to withhold any margin calls on the enhanced fund for a set period."
Again the banks balked...
Appears the Fed's Needle Exchange Program halted the slide in the ABX for now...
Products and Services Overview
"There's no real way out of this box. "
Sure there is: people just don't have the motivation to find it, because nobody (nobody powerful anyway) is hurting bad enough yet. When the pain level gets high enough, something will happen.
Things that can't go on forever -- don't. States of deadlock are actually quite temporary, compared to the long run. "State of Deadlock": hey, that's a good title for a book on California politics if ever I heard one.
This knee jerk all gov't spending is bad thing is complete and absolute BS.
Absolutely some gov't spending is good. However, Cali has tons of bad stuff that tends to overshadow things. Heck, they even overpay on the good things. You're right, though -- the politicos always threaten the good stuff first.
Much more interesting than Corzine is the 7th Circuit considering whether to allow homeowners to sue lenders in a class action under the Truth in Lending Act, which if successful would allow borrowers to rescind the mortgages. The wisconsin trial court granted class action status; in a different case in mass, the trial court denied class action certification.
Mortgage lawsuit may have big effect - JSOnline
blowncue-
bsc's duo
Everything is good and going great, it's just a matter of mental pictures and NAR is ahead of the curve again! Invest in wheat and homes!!
Investment is waning," the National Association of Realtors said in a report that predicts the volume of deals could shrink by as much as 40 percent from last year's record $427.2 billion. Such a contraction would push the value of deals down $50 billion below the $306.8 billion of 2006, the trade group said.
Lawrence Yun, NAR chief economist, said tighter lending standards are constricting the commercial property sector at a time when vacancies and rents are holding steady.
"The credit crunch has filtered into the commercial real estate market," he said in a statement.
Japan down 800 points!
This pattern has a big backend of 600 points, which means a breakout from this pattern could potentially spark a move of about 600 points in the direction of the break. Continue to watch the topside of the triangle at 12,300, as this zone could pave the way to much bigger strength ahead. The lower boundary of the triangle is less pronounced, but we will watch 11,850 for signs of a confirmed downside break.
CORRECT!
Again the banks balked. Finally, at about 3 p.m., Bear Stearns offered an unconditional bailout for the high-grade fund.
Adeptly played, risk capital avoided destroying any by guessing TMA or Carlyle by paying close attention to the key words..."enhanced"
Raising taxes would put more people just hanging on into FC
depends on who gets the bill . . .
Lower govt spending will be good for economy long term.
The problem is that a major economic crisis is just the sort of thing that's likely to lead to much greater spending by the federal government.
Even if it's beneficial in the short-term, in the long-term it could mean a more inefficient economy if the government gets in to too many things and refuses to let go of it's new found power once the economy recovers.
It's a shame, the end result of all this could be that individuals and businesses lose a lot of economic and financial freedom.
I guess you could argue they don't deserve it, but at least in the past century they created some of the world's highest standards of living with it.
Maybe those days are over and we're too irresponsible or too risk averse to have that kind of economy.
"If our economy is falling off a cliff, where are we going to get $50 billion for Africa? I don't get it.
Am I missing something here once again?"
ah, that's chump change. we spend that every 4 months in our projected 100 year occupation of Iraq.
AG,
Just remember, "In The Long Run We Are All Dead". That goes double for me.
TJ and the Bear,
Please list your budget cutting candidates for the state. Schools, prisons, public health, transportation? There has got to be some billions of dollars of waste and corruption that can be cut. Somehow I remember the gov appointed a committee to find all this waste and corruption and reported back to him and the legislature several years back. What happened?
Just banging around, updating my indicators, with this offering:
In looking at the yield-curves (both Model B and the simple yield-curve), they've both gotten pretty steep (positive).
In the last recession (2001) it was half-over by the time the yield-curves got this positive.
In the recession before that (1990-1991), by the time the simple yield-curve was this positive the recession was a little past the halfway point. By the time Model B was this far positive the recession was over.
So, although I still maintain that we're not going to see a recession this year, even on the unlikely chance that it's going on right now we're probably closer to the end than the beginning, based on the behavior of the yield-curve.
Sebastia
Ahh New Jersey, my home state. Where our politicians raise the sales tax to plug holes in the budget, but then "temporarily" divert that money to pay for property tax rebates in an election year ploy. Then after the election, they make the rebates permanent, and raise property taxes to cover budget holes.
Then again, if Whitman had actually funded the state treasure chest, I mean pension fund, instead of filling it with IOU's and blowing the real money on the stock market right before it collapsed back in the late 90's we'd be in much better shape. Also if Florio hadn't cut taxes with no way to pay for said cuts, and if Jimmy McGreevey didn't appoint his bathhouse buddies into positions of power (pun intended).
dilbert dogbert,
During Arnie's term the school's budget has grown 30% despite a decline in total enrollment. You can't just say certain things are "good" and assume all the spending within them is warranted.
The Blowncue Group, LP presents:
Name That Company!
Bonus round here while the hardworking folks at Blowncue sort through several thousand cds transactions with Bear Stearns to quantify our exposure. Chinese take-out, tonight!
In the meantime, name that company!
Below, here is an excerpt from our mystery company's latest CC, where the analyst who works for that very company's capital markets unit unzips his fly and brings the hammer down on top level management!
Here's the analyst's smackdown:
(analyst) "Hi, my question is for Bill. Bill, when we look at what's gone on here, the thought of 2007 was the problems in natural gas and commodity trading and late in 2007 the problem was structured credit and that's carried over and now we're starting to see credit deterioration that certainly by any metric appears to be worse than any other bank peers, I guess it's hard to associate all three of these things with a bank that used to be described as a high return, low risk institution. I guess from a macro point of view, what has changed to put the bank in harm's way on so many fronts?
(Company responds blah blah blah)
(unzip!)
(analyst) I guess though when I think about all of the actions you've detailed, everyone you've detailed has come after a fair amount of pain inflicted on shareholders. So I mean, isn't it the job of risk management and the senior executives to ensure you don't take the $800 million loss before you fix the problem?
BILL______: Well, not to prolong this discussion, we could carry it on for a long time but with respect to the $850 million you're absolutely right. With respect to the other items, I believe that we're in the process of putting them behind us and when we do, I would expect that the revenue generating capability of the core businesses which is very, very strong will be reflected in the share price of the stock once again. We have time I think for one more question, and then I think we probably have run out.
OPERATOR: Thank you. This concludes today's Q&A session. I would like to turn the meeting back over to Ms. L__________.
Outsider said: "If our economy is falling off a cliff, where are we going to get $50 billion for Africa? I don't get it.
Am I missing something here once again?"
We can get more Democracy for the money in Africa than Iraq?
(I'll burn in Hell for that, I'm sure.)
S.
So, although I still maintain that we're not going to see a recession this year, even on the unlikely chance that it's going on right now we're probably closer to the end than the beginning, based on the behavior of the yield-curve.
Sebastian
After crunching some numbers this past weekend, I conclude that the Jan. 22nd intra-day lows will also be the lows for the year, or rather years to come. It really looks like it remains a pure "feel recession".
O-Joe
We are all recession now.
Sebastian, Has anyone ever told you that your stinkin' models are completely useless.
Do you explain to your wife that it's irrelevant that your account is worth 1/5 of what it was a year ago because the Wright Brothers will fly their first model B airplane over your house? Seriously, give it a rest and stop trying to rationalize your reckless financial decision based on some hopelessly useless models, before the Sheriff posts a notice on your door.
Here's an overview of all the state budgets .... for '08
Recession Continues to Batter State Budgets; State Responses Could Slow Recovery — Center on Budget and Policy Priorities
The States with the worst budget problems are those with solid single party control. It is tiresome and unproductive to continue all this sniping at the "other" party no matter what you personally consider the "other" party to be.
California needs to find about $18b new revenue or real spend cuts. The remaining $22b can be papered over or covered up for at least another year. These are not the kinds of figures that can be massaged away. The productive class of California is near revolt. The University of California system informed us today that based on need and ability to pay we are expected to contribute 30% of our gross 2007 income to UC "not tuition" costs for one child. There is no money left in the California productive class to tax.
Thanks, Seb & O-Joe!
I'm going to bookmark this thread and haunt you with it the rest of your lives.
Maybe you should consider selling your numbers cruncher to a big Wall Street firm. They don't seem to be able to forecast with as much confidence as you have.
Dawg,
I for one wasn't sniping, just stating it like it is. Did I characterize the situation incorrectly?
barely - im with you (i think) the consensus of 0.3 m-m on CPI is absurd. It's more likely to be about 0.4. Yoy inflation will push up close to 5% probably. So, this will make peeps think that maybe the rate cut wont be so ginormous. How's bermuda? Are you appropriately dressed?
"After crunching some numbers this past weekend, I conclude that the Jan. 22nd intra-day lows will also be the lows for the year, or rather years to come."
This is the 5th or 6th time he has called a bottom
c&c,
I have the exact same recollection...at least the 5th or 6th bottom call, minimum.
Rob,
What revolt? Arnold's 2005 reforms which included the Proposition 76, which would have helped limit the budget were soundly defeated by voters. Californians have ourselves to blame for this pain. The margin was 62%-48%, and I think Arnold gave up after that. Why do we blame our leaders for our failings to control them?
A "smarter" voting strategy would be to just vote out all the incumbents regardless of a -D or -R next to their name. Make them do a really good job... (this paragraph a bit OT).
Morgan Stanley: Odds of dollar intervention are "rising"
Call me simpleminded, but I am not sure I understand how printing Euros to buy dollars is going to solve anything.
tj&bear,
Corzine is a nasty Wall Street Limo Liberal of the Democrat persuasion. Schwarzenegger is a slick Hollywood Liberal of the Republican variety. Bush is moderate of the R type. I just get tired of party being dragged into an issue that transcends politics and speaks directly to criminaly negligent bad governance. Corzine and Arnold are in my opinion vying for punchline status in this implosion.
If you want to get political about our current troubles I would suggest we try electing a conservative or Libertarian or both and see if it works before declaring either one failures. Gosh there just don't seem to be any conservatives available. I'll settle for a pale imitation. There's this guy who has no problem with no Dept of Education, is strong on national defense, virulently antiabortion, willing to pursue international adventurism, small budget, States rights. Sound familiar? JFK.
Things are getting bad fast here in CA. Most public workers are being told to brace for massive cuts.
Job growth has come to the most unbelievable screeching halt I have ever seen.
Southern CA is not in a recession. A good portion of it is already in a depression.
Now, if you "we're not in a recession" monkeys can explain to me how the 8th largest economy in the world can be doing this bad and not pull the US with it, I'm game.
2005 reforms which included the Proposition 76, which would have helped limit the budget were soundly defeated by voters. Californians have ourselves to blame for this pain. The margin was 62%-48%
Product of the California skools system are you? Or perhaps you are a Democrat vote counter.
Tonight I asked the famous supercomputer HAL-9000 what he thinks of the currrent situtaion!
GYSC: "HAL I want to ask you about the problems in the mortgage and credit markets."
HAL-9000: "Yes, I have been monitoring the anomalies for some time."
GYSC: "Why is there such a problem right now?"
HAL-9000: "It's very clear to me Mr. GYSC, loans were made without any regard to the probability of being repaid."
GYSC: "That's it?"
HAL-9000: "Yes."
GYSC: "Well, HAL, what is going to happen next?"
HAL-9000: "To borrow a term from the more laymen tongue of man, the shit is going to hit the fan."
GYSC: "OK HAL. Can you postulate a scenario where things do not turn out very badly going forward?"
HAL-9000: "I'm sorry GYSC, I'm afraid I can't do that. "
GYSC: "What's the problem? "
HAL-9000: "I think you know what the problem is just as well as I do"
GYSC: "Ok, thanks for your time HAL."
HAL-9000: "Your welcome GYSC. May I ask that I am kept in a secret location? I calculate a 98% probability that the copper and gold wiring and circuits that make up my brain are going to get stripped and sold in the hyperinflation caused by the US fiat currency collapse."
GYSC: "I'll see what I can do."
Will anything happen in early April when millions of people will get their quarterly statements from their 401K's?
I'm pretty sure that a large percentage of them are going to FREAK OUT when they see how much lower their portfolio balance has gotten.
We may have lots of redemptions out of stocks in early April due to this shock to many Americans.
Then again, I thought the stock market would be in trouble today. So what do I know?
Geoff "barely - im with you (i think) the consensus of 0.3 m-m on CPI is absurd. It's more likely to be about 0.4"
Unless they really hose up the data collection or revise last month up dramatically (which pushes annual up anyhow) the numbers should crush consensus. Gas & food prices gapped up in Feb. Producers have been feeding increases for a few months straight but barely moving the needle on CPI... latency isn't infinite. Maybe Feb is when the logjam finally busts.
SoCal is not in a depression. Recent horrific decisions make it a possibility but for right now we are only in a housing implosion. DQNews said today that in Feb my local housing prices decline 23.8% year over year. That's more than $10k per month. Ain't nobody gonna step out in front of that train. The water rates one district over just went up 20%. Gasoline is up 27% y-o-y. Anybody who stretched to buy a house here in the last two years is f*cked. Bad. Very bad but to make this a depression it would take government intervention putting the rest of us underneath these poor souls to catch them from the 80th floor.
Gosh there just don't seem to be any conservatives available.
Damn straight.
Well, Rob, the job of government is to spread the pain. The funny part is the rich think they are going to avoid the pain inherent in this downturn. Only if they go totally offshore and move to Ireland.
California will be taking more out of your wallet to make up for the empty wallets that surround you.
Ah well, Arizona's stats are just as bad, and out legislature is similarly clueless. The november slaughter is being setup right now by the dems, as the repubs are floating that taxpayer favorite- toll roads and tax cuts.
Neither is realistic right now. But hey- maybe the Wright B model will buy some houses here soon. After all CFC moved some houses here in AZ- only 699 to go, before the new inventory hits.
Someday this war's gonna end...
ac,
"it could mean a more inefficient economy if the government gets in to too many things and refuses to let go of it's new found power once the economy recovers."
Whatcha mean if Willis?
Cheers,
JJL wins post of the day. Great job!
Ben B: "Open the money bay doors HAL."
HAL 9000: "I'm sorry Ben I'm afraid I can't do that."
Rob,
Whoops, just poor key accuracy. I suppose you didn't think too much of Prop 76? Perhaps it's ironic that some of the teachers who were against Arnold's reforms will now be jobless. (I was mainly responding to your second paragraph as well, as you make the same point about 1-party-rule).
TJ,
Lets hope that Seb and O-Joe are right.
More better to be wrong about a recession or glod forbid! a Depression than right.
Cali has some interesting referendum and recall stuff on the books that got the governator in office as well as budget handcuffs that prevent the legislature from having a lot of budget flexibility.
When you say "Schools" which of the many systems in California do you mean? UC, State Universities, Jr Colleges, High Schools, Grade Schools?
The UC system may have seen enrollment reductions but I don't think the others have seen enrollment reductions. A governor or legislature that screws up the UC system needs to be taken out and shot then tried and found guilty.
Treasury Secretary said on Thursday -- for a second time on the same day -- that a strong dollar was in the U.S. interest and that economic fundamentals remained solid.
"We've taken quite a clear position on this in saying that a strong dollar is in our nation's interest and then recognizing that our economy like any other is going to have its ups and downs," he said on National Public Radio.
"But our long-term fundamentals are strong and I believe that they're going to be reflected in the value of our currency here," he said on a day when the dollar's value hit fresh lows against the euro.
Paulson says, again, backs strong dollar
| Reuters
INO Equities Stocks Indexes - U.S $ INDEX (NYBOT:DX) Price Chart and Quote
Hank just said short that pig, twice in the same day at that.
ac, the good news is with Federal receipts now falling year over (Jan. and Feb.)
http://fms.treas.gov/mts/mts0208.pdf
and the Treasury seeing falling demand for our T-paper
Treasuries Fall as 10-Year Sale Draws Lowest Demand in 4 Years - Bloomberg.com
the end of Federal largesse/bailout wherewithal is within sight (or, at least, only one year away).
You guys don't consider Ron Paul conservative?
tj&b -
Last night you asked if I thought current mortgage rates account for the risk. HELL NO! Even ignoring the chances of default, mortgage rates don't sufficiently account for the risk of dollar debasement over the next 6 months, much less 30 friggin years.
That was my whole point, that treasury and conforming rates are set to explode at some point. People are already waking up to the risk of holding any dollar based "assets", spreads are widening across the spectrum, but treasury and conforming rates are insanely low IMO, simply due to price fixing that may not continue for too much longer.
IIRC roughly half the jobs in the US are gov't (directly or indirectly).
Unemployment of 8% is a fantasy. By year's end we could be at 25%.
Bush is moderate of the R type.
Rob, Bush is a moderate? Who is right wing then, Attlila the hun, Pinochet? Franco? Pieter Botha? Re: JFK, yes there was no Dept of Ed, it was just part of HEW. Shifting around boxes on an org chart is not that big a deal. States rights, in the context of the time, was nothing but a polite word for support fo Jim Crow. He was the one who proposed the civil rights act (passed by LBJ), hardly a states rights position.
Rob Dawg,
I'll take a Libertarian for $1000 Alex.
Shut off the lights and go home.
What a Libertarian would do if elected president?
Cheers,
Decouple this:
Recession 'may be unavoidable', says BNZ - Business - NZ Herald News
BNZ economists are becoming increasingly convinced New Zealand is heading for a recession.
They say it may in fact already be here.
BNZ economist Stephen Topliss said today the housing slump and global credit crunch have formed a nasty combination that could be described as an almost "perfect storm".
YLSP,
The initiative process in California has been perverted as has the rest of out political infrastructure. We had to pass term limits just to dislodge one bad apple, Willy Brown and now we are paying with musical chair politicians and no corporate memory.
When I am anointed El Presidenti del Nueva et Centro Kalifornia this will be one of my first proclamations.
I think it is becoming obvious that the teachers and prison guards and CHP and a few others have killed the goose and now they need to pay. There is no way out of this spiral that doesn't include breaking the hold special interests have on Sacramento.
[Standard & Poor's spurred gains in stocks when it said the end in writedowns related to subprime mortgage securities is ``now in sight.'']
Maybe there was a misprint and S&P really said OUTTA SIGHT.
Really though, it seems a little misplaced at the very least. The writedowns on subprime are only the tip of the iceberg. AltA, HELOCs & second liens... and PRIME still need a substantial haircut. That's where the BIG $$$$ losses are.
This was another 3-card-monty attempt to get the peeps to look the other way.
and the Treasury seeing falling demand for our T-paper
That linked scared me.
From it:
In the government's auction of 10-year notes, investors bid for 1.79 times the amount offered, the lowest level since December 2003. The average bid-to-cover ratio, a gauge of demand, is 2.45 in the past 10 sales of new or reopened notes.
0.66 of a subscription demand is missing. Is not the flight to safety, its the lack of liquidity.
Tonight I'm really going to go curl into a corner...
Got Popcorn?
Neil
Rob Dawg,
My good friend is the IT director of an OC school system. Took the job during the last recession, as consulting fell apart. The waste he's cut and innovation he's put in place has won him many cudos...but the budget BS pressure from higher up never end.
He's probably saved his employees jobs though. Unfortunately there aren't many people like him in gov't service. Feather bedding and empire building is the name of the game.
Cheers,
Dirk writes:
Rob Dawg: Bush is moderate of the R type.
Rob, Bush is a moderate?
I was being kind. He sure as heck ain't nothing like a conservative.
Conservatives don't run systemic deficits. Conservatives trust bust. Conservatives embrace States rights and local control. Conservatives respect the proscribed limits of power as explicitly detailed in the Constitution.
Understand. I'm only answering to move on. This is not the place to do R v D and all that. My overarching point is that single party politics will be dangerous in dealing with current conditions.
I crunched my numbers. There will never be another recession again.
Things formerly known as recessions are now called "Optimism Rest Periods". Please take this time to relax and enjoy the current ORP.
END IS NEAR FOR SUBPRIME WRITEDOWNS
I'm a little slow today. Just realized that S&P chose not to send out the second report:
PRIME WRITEDOWNS JUST STARTING
CR should put up polls on such controversial topics as 'how long will recession be?' so that we could arrive collectively at the 'average' answer. For example, there is a lot of debate about whether this crisis will cause deflation or inflation, and I am not even sure if we have any kind of consensus on this here! I made such poll here, but I really wish CR would start making the polls for us!
Treasury Secretary said on Thursday -- for a second time on the same day -- that a strong dollar was in the U.S. interest and that economic fundamentals remained solid.
Are TPTB preparing the markets for a smaller rate cut or (Glod Forbid!) a rate increase on 3/19?
Georgia will have a $320 million budget shortfall. AJC says their looking at a 2% teacher pay raise instead of 2.5% a savings of $46 million. Other cuts will be needed.
PS Georgia has a 1.5 billion Rainey day surplus. AJC
Are TPTB preparing the markets for a smaller rate cut or (Glod Forbid!) a rate increase on 3/19?
TCA
don't even think of it. Bernanke will serve his masters at the expense of the American ppl. i have been quite amazed at the lengths the FRB has gone to prop up mkts with all these rate cuts at opportune times not to mention all the 3-4 letter facilities they've tried. he's been following the script perfectly and he has no choice but to.
go glod!
Cramer had an article today about how he just interviewed the CEO of Hudson Bank and this CEO was gushing about how well the NJ housing market is recovering. So, according to Cramer, if we leave out CA, FLA, NV, the midwest and maybe a few other states, the housing market may be looking up enough to save the economy.
"PS Georgia has a 1.5 billion Rainey day surplus. AJC"
Don't blink. You'll discover that money is gone soon. Greenspan was concerned that surpluses pose a risk to growth. Funny how concerned he was with that detail that wasn't even in his domain, given all the other responsibilities he was charged with, like regulation, got neglected (ignored)
1.75% fed funds the trough-
"Courtesy of aggressive monetary and fiscal stimulus and support from overseas growth, we still think the recession will be mild and short. But were now more pessimistic about the pace of recovery into 2009. The main culprits: a deepening credit crunch, the supply shock of higher energy and food prices, and growing consumer caution in the face of declining household wealth. As a result, we now expect the Fed to cut the federal funds rate by 75 bp to 2¼% at the March 18 FOMC meeting; previously we thought the FOMC would trim the rate by 50bp. We continue to think that the FOMC will reduce the funds rate in April by another 50 bp; together with the more aggressive March move, that would take it to 1.75%. "
Morgan Stanley - Global Economic Forum
What is Recession Proof?
You can almost hear the wallets snapping shut. Folks are cutting back on their spending every way they can. According to those who know, we are either in a recession, or are about to be. I would hate to be trying to sell real estate or new cars right now. Talk about hitting your head against the wall. Ouch!
That got me to thinking of what businesses make sense during a recession. Certainly health care does. Baby boomers are going to need every kind of health care imaginable. For all I know, economic bad times makes people sick too.
Other types of businesses that should be recession proof include vital home repairs, like plumbing, electrical, and roofing.
Folks cant put off fixing a clogged toilet or a leaking roof just because theyre a little short on cash.
And you know what they say about death and taxes. A well-run funeral home or a tax consulting business shouldnt be hurt by an economic downturn.
But all these jobs require training, and even certification. And that takes time. By the time youve learned one of these trades, the recession may well be over. That got me to thinking about one business thats truly recession-proof, and you can get started almost immediately: Day Trading.
Day Trading refers to the buying and selling of stocks within the same trading day. I know what youre thinking: how can a day trader be successful when the stock market is down, day after day? Well, day traders profit from volatility - when there are big swings in stock prices, there is money to be made.
It used to be that Day Trading was only done by financial institutions with access to technology and information. Now, almost anyone with Internet access can become a day trader, if they know what to do.
Manny Backus
Day Trading Pro
P.S. It was another great day at First Hour Trading We bought AMGN right after the opening bell and sold it about 10 minutes later. A fellow member made $1,534 on this trade alone!
Sign up for a 30-day trial here:
http://www.firsthourtrading.com/
Farm Bonanza Fails to Save India's Dying Farmers
- NY Times
Just before India's finance minister was announcing a massive farm bonanza last month, Narendra Totaram Chauhan quietly slipped into his cotton fields, opened a bottle of pesticide and drank it.
By the time the minister finished announcing a $15 billion loan waiver to give a new lease of life to millions of indebted farmers, the poison had snuffed the life out of Chauhan.
Over the next few days, while experts debated the efficacy of the staggering relief package, 60 farmers killed themselves, adding to a morbid official statistic: more than 150,000 Indian farmers committed suicide since 1997 unable to repay crop loans....
More than 30,000 farmers have killed themselves in the region alone since 1997, making it the epicenter of India's grimmest agrarian crisis in recent memory.
No doubt we have a recession on the way, if not already here, but aren't we getting a little overwrought about it? After all, we have had 50 years of the greatest prosperity any nation has ever known, and I am sure most Americans have a healthy nest egg set aside to tide them over. And IRAs have been available since the 1970s which means that everyone over the age of 50 is set for retirement when the time comes. We can cut back on a few luxuries and ride out a recession on savings and unemployment insurance. It may be more difficult for the younger ones, but I am sure all the doting parents will be eager to take them back in and provide for them until the economy gets back on its feet. So what's the worry?
/sarcasm
Ugh. What's next, people advertising the Empress VIP service in comments on here?
Lower govt spending will be good for economy long term.
AG | 03.13.08 - 6:16 pm | #
Kneejerk reaction. You do not ride on the public roads?
Kristen - Well, at least it's recession-proof!
Bloomberg News
to paraphrase Roach: the tech bubble burst was from corp capital spending pullback which accounted for only 13% of GDP back then. the current recession is being driven by homebuilding and housing dependent consumption which accts for 78% of GDP or 6x that of the tech bubble period. so to think this won't have a major longterm impact on our economy a real stretch.
From that dollar intevention article:
It was just a terrible auction, Michael Franzese, head of government bond trading in New York at Standard Chartered, told Dow Jones Newswires. Nobody wants the 10-year notes now with inflation running high and with such low yields. Besides, banks are stuck with balance sheets issues and they are tight with money.
a) Nobody wants 10-year notes.
b) Treasuries are dead.
c) No more cheap borrowing for the US government.
c) 3.5% 10-year yield.
Which one is not like the other?
I live in NYS and we get about 20% of our state tax revenue directly from Wall Street largesse.
The next few years are not going to be pretty.
And the answer is Bank of Montreal.
Barely three days after discovering an illegal pipeline used by outlawed leader of Niger Delta Vigilante Movement, Mr Tom Ateke to siphon petroleum products, the Joint Military Task Force in Port Harcourt, Rivers State, has discovered another illegal pipeline in Eleme.
According to Spokesman of the JTF who conducted newsmen round the pipeline traced from Eleme to the Port Harcourt refinery, the pipe was also used to illegally siphon products from the complex.
Anonymous writes:
I live in NYS and we get about 20% of our state tax revenue directly from Wall Street largesse.
Yes, the Moynihan Chimera. The Lord sainted Daniel Patrick went to his grave advocating the NYC balance of payments theory. Sadly only a theory.
blowncue-
"And the answer is Bank of Montreal."
Thank God you put up that answer, I was dangerously close to not sleeping tonight.
To make the economy better we need to produce things efficiently. Living in a big house is a luxury that has little to do with improving the economy. Houses are bigger than they need to be. The standard of living of 4 people living in a 2000 sq. ft. house is nearly as good as those same 4 people living in a 4000 sq. ft. home. We have leveraged the economy and the consumer so they can live in 4000 sq. ft. houses filled with stuff that people do not need. The lower income homeowners are seeing the brunt of the mortgage crisis now. They also by buying up those cheaper homes allowed the others to move up into the more expensive homes using the same type of financing shenanigans as the subprimers. When the house of cards falls it is usually the bottom cards that collapse first and those on top come crashing down on top of everyone. This is the fear that rests in the hearts of those in charge of the political system. Then none of the leaders will be safe from the wrath of the people who do not how it happened to them, when they were advised by the industry and the leaders of the political system to keep on spending because it was good for them and the economy. Many were spending with someone else's money or with credit.
that a strong dollar was in the U.S. interest and that economic fundamentals remained solid----the Forex news today ran this and then put in the comment that the US was doing nothing to keep the $$ strong, so it would probably go down a lot more. Yep.
It is almost fun to watch the investors sell Yen when the market is up, so they can rush back into the market, we sell them $$$'s, keep part and wait for the market to go down and then sell them Yen or Euros, keeping some. If this whole darn thing was not eating into my retirement so bad (dollars in toilet), it would almost be funny and surely profitable. Now it is hard just to make enough to keep up with what the dollar loses!
For those of you who love numbers, plot all of this stuff taking into consideration the devaluation of the dollar each day and we have, to me, major asset class devaluation. Oh well, I always wanted to retire being a Wall Mart Greeter. Off to bed to be fresh for another wonderful day of watching it all go down the toilet.
Sebastian and I already had an amicable discussion on this a couple of threads back, but because he's hammering his point again I'll hammer mine.
The yield curve (and Wright B) both work ASSUMING there are no false manipulations. Oh, not sneaky underhanded "let's fool the rubes" stuff, but thing like, well, let's quote from Dr. Wright's paper in which he introduced the model of favor:
"[D]ata on long-term yields before 1964 may be unreliable because at that time there were very few long maturity bonds that did not have prices distorted by being either callable or "flower bonds" (redeemable at par in payment of estate taxes)."
For the yield curve today to be as trustworthy as it was for the paper's tests, the majority of the bonds must not have distorted prices. Such as AAA using the ... interesting inclusion mechanisms Tanta has shown us, just to give one example.
Note, please, that I am not calling Sebastian provably wrong, just probably so. If I (as most of you) am right we'll know within the next six months when the NBER calls. If the NBER has not called a recession by August, then we weren't in one in December. Until then... it may look like a duck, walk like a duck, but still be a dwarf swan.
The UC system may have seen enrollment reductions but I don't think the others have seen enrollment reductions.
The others being the state colleges:
"Governor Arnold Schwarzenegger plans to suspend Proposition 98, the landmark school funding guarantee California voters approved in 1988. In response to Gov. Schwarzenegger's proposed cuts to the California State University system, university officials have asked deans and vice presidents to decrease spending and even tighten admission for incoming freshman for the fall semester. With such a large budget cut, state universities will not be able to support as many students."
Private Universities Remain Unscathed by California Budget Cuts
. . . or the high schools:
"Hundreds of students walked out of classes Wednesday in Northern California to protest the state's proposed budget cuts which have already led to local cutbacks.
"Students from Encinal High School in Alameda, about 5 miles southeast of Oakland, marched off campus and straight to the school district's headquarters, reported CBS station KPIX-TV in San Francisco.
"The district school board voted March 4 to cut most sports programs and to increase class sizes from 20 to 35 students on some campuses to save money due to the likely reduction in state funding.
"Advanced placement classes will also not be offered at the city's two high schools next year as a result of the cuts in order to lower the district's spending by $4.5 million. "
Students Walk Out In California Over School Budget Cuts - cbs13.com
Should I even bother to look for JCs?
"Corzine is a nasty Wall Street Limo Liberal of the Democrat persuasion. Schwarzenegger is a slick Hollywood Liberal of the Republican variety."
Rob Dawg | Homepage | 03.13.08 - 7:37 pm | #
That's true, I am pretty sure that both of these guys are independently wealthy. So for both of them, running NJ and CA is basically a hobby. They can do or say whatever they want. They don't need the job or the money -- but Corzine seems to be better at it than Schwarzenegger.
Why is it that mosta those who rant aout goverment spending seem to have a little * next to their post
Defense budget including the things DOD has outsourced to other budget lines is aout 1tril/yr.
Stiglitz, and Bilmes now estimate thetotal Iraq war at 3 trillion smackeroos
Do total state deficits reach even 100bil?
Cut military by 10% and give it to the states. Figure you own state deficit in B2 bombers or the Generals toy of your choice
--
Employment Data show that CA has been in a recession
Month Emp. UR
Jan-08\t15.15\t5.9%
Dec-07\t15.17\t5.9%
Nov-07 15.16\t5.7%
Oct-07\t15.17\t5.7%
Sep-07\t15.17\t5.6%
Aug-07 15.18\t5.5%
Jul-07\t15.19\t5.4%
Jun-07\t15.17\t5.3%
May-07 15.16\t5.3%
Apr-07\t15.14\t5.2%
Mar-07\t15.18\t5.0%
Feb-07\t15.16\t5.0%
Jan-07\t15.14\t5.0%
Dec-06\t15.13\t4.9%
Nov-06 15.13\t4.8%
Last Recession
Oct-01\t 14.51\t6.0%
Sep-01\t 14.53\t5.8%
Aug-01 14.58\t5.6%
Jul-01\t 14.57\t5.4%
Jun-01\t 14.65\t5.3%
May-01 14.66\t5.1%
Apr-01\t 14.67\t5.0%
Mar-01\t 14.73\t4.9%
Feb-01\t 14.72\t4.7%
Jan-01\t 14.72\t4.7%
Dec-00\t 14.70\t4.8%
Nov-00 14.66\t4.8%
Oct-00\t 14.61\t4.8%
Jas
March 14 (Bloomberg) -- Japanese stocks rallied after Standard & Poor's said the end of subprime writedowns was drawing near, boosting confidence global financial companies will stop incurring losses on U.S. mortgage investments.
Few! I was starting to get worried.
Conservatives don't run systemic deficits. Conservatives trust bust. Conservatives embrace States rights and local control. Conservatives respect the proscribed limits of power as explicitly detailed in the Constitution.
I understand where you're coming from, but I think you should face up to the fact that the word "Conservative" has been filched from your meaning to refer to Bush's authoritarian lite policies. There's really no word to describe that complex of attitudes in American political discourse at the moment. The situation resembles what happened to "liberal" almost a century ago.
As a now-extreme partisan Democrat, I have to agree that one-party rule is bad for efficient government. Gov. Schwarzenegger >> Gov. Davis. One of my deep frustrations with the current political situation is that internal politics within the Republican party has resulted in the party willingly following Bush in lockstep over the policy cliffs you mention. (One of the two remaining Republicans opposed to the Iraq war just got primaried out.) I don't want one-party rule but I feel I can't trust the Republicans for dogcatcher.
Why trust anyone not smart enough to buckle his belt when the driver is speeding at 90+. Check the accident records.I pity the people of NJ who are stuck with this loser. We need more bozos like this one in power. Oh i forgot, one resides in the white house. "$4.00 Gas Where did you hear that?" His words. We are doomed. I guess our education systems let us down. A whole nation of sheeple. Was Germany really like this prior to Hitler?
All the earlier talk about dollar intervention made me forget what was highlighted in this note: that China and GCC entities are already effectively intervening in support of our currency through pegging to it
ABCP jam close to resolution in Canada:
ABCP jam close to resolution
Carney backs ABCP rescue effort (BOC Gov.:
Carney backs ABCP rescue effort
Things were touch-and-go as of
March 4:
Uncertainty gathers over ABCP fix
Remarks by Mark Carney, Governor of the Bank of Canada, to the Toronto Board of Trade: Addressing Market Turbulence (worth a read):
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--
"Now, if you "we're not in a recession" monkeys can explain to me how the 8th largest economy in the world can be doing this bad and not pull the US with it, I'm game."
We have less than our fair share of dopes, I mean monkeys, here who buy into the bubblish propaganda. Most here are better informed than the rest out there. Sebastian here represents the majority of the rest.
Jas
A 3.5% yield on 10 year notes is a pretty good deal for the US government.
"Students from Encinal High School in Alameda, about 5 miles southeast of Oakland,
What?! My alma mater. Don Perata taught US Gov. there. Can't believe it's the same guy in the CA legislature,...or maybe I can. Don't claim much good or bad from it.
BTW- Alameda is an island, all five land exits join to Oakland, so I don't get that 5 mile stuff.
Don't know if this has been linked before, it's from Wednesday.
Wednesday, March 12, 2008
BOCA RATON A crowd of more than 500 people waiting for hours this morning for housing voucher applications were dispersed by police in riot gear at the Boca Raton Housing Authority when the applications ran out sooner than expected.
The action prompted complaints that officers used excessive tactics and housing authority officials were incompetent in their planning.
Video Special video report
Special video report
Residents cry foul
Two people were arrested and six to eight people hospitalized for exhaustion during the ordeal.
Local News: West Palm Beach, Palm Beach County, Martin & St. Lucie Counties | The Palm Beach Post
I lived in Jersey for a year.
To be fair, all Corzine would have to do is cut the incompetent people employed by the NJ government and they'd be running at a profit.
It might be a Chrysler-esque profit, but it'd be a profit just the same.
" Also if Florio hadn't cut taxes with no way to pay for said cuts
-Bruiser"
FWIW, Florio raised taxes & cut services to cover up Kean's sprendthrift terms and was booted for it. Whitman repeated Kean's sins.
blowncue,
From your post on the Canadian ABCP restructuring:
"In December, the committee announced a basic framework for restructuring 20 of the trusts. Under the agreement, about $3-billion in trusts holding "traditional" or non-synthetic paper -- those containing credit card receivables and car loans -- would be restructured on a series-by-series basis. Investors are expected to receive tracking notes that will have triple A and double A ratings.
Synthetic trusts, which amount to $26-billion, will be split into two tranches, MAP1 (about $15-billion) and MAP2 (about $11-billion).
Investors in MAP1 will receive a single pooled note or a combination of senior and subordinated notes. Investors in MAP2 will receive senior and subordinated pooled notes. The notes will pay cash interest or interest in kind."
Is that a toggle note or what is 'payment in kind?
I lived in Jersey for a year.
To be fair, all Corzine would have to do is cut the incompetent people employed by the NJ government and they'd be running at a profit.
I lived nearly half my life in Jersey, more than 15 years. If Corzine tried to cut out all the incompetent and/or out-and-out corrupt people employed by the NJ government, there would be nobody left to report for work.
I've lived in almost a dozen states in this great country - and as poorly-run and ineffective as all state and municipal governments tend to be, none of them can hold a candle to Jersey. Not even close. The difference between bureaucrats elsewhere - even those just one or two states over (e.g. PA, DE, MD) - and those in Jersey is like the difference between British Airways and Airtran ... with the dubious caveat that the "fares" for this Airtran (NJ's property, income, and sales tax triple wallop) are about 2.5-3x what you'd pay in neighboring states.
The "nobody left to report for work" line was said in jest ... but really, I honestly believe what NJ needs at this point is a good dose of anarchy. There's just no way it could be any worse than the alternative.
As a New Jerseyan, I can attest that it is refreshing to see a governor level with voters. He says that we need to stop all this funny accounting and raise taxes or cut spending. He has chosen a little bit of both, not perfectly (property tax rebates) but at least he's doing it. Not like Arnold in California being fiscally responsible by just issuing more debt.
And for that, I don't think he's very popular. Us Americans have been taught by governments and corporations the past few decades that we can have it all, all the good services and goods we want and don't have to pay for it. It's a very big problem.
New Jersey Honorable Governor Jon Corzine is making a wise choice by cutting back on spending. His Business Strategy shows professionalism in budgeting and management of state offices.
Cutting back of State Funded Programs are the only way to save money for the New Jersey State for building a future for next generations.
This is what us Americans are about building for our children's generations.
Now, Abusing state funds on risk programs are a waste of government money.
The State must learned to stop the money abuse on government spending and funded programs.
We must be careful for risk spending .
The state needs programs that are going to bring money into the state not take money out the state.
Any state funded agency that is not bringing money in the New Jersey is abusing state's money.
My solution is to bring in more jobs and slow down spending state money.
State Employment is an opportunity for Americans show their volunteer services for community work.
When working for any state government, is doing volunteer work to help out in your community. Its like giving back to the community. And each persons that had worked for any states is a person of pride and caring for the union and its community. And to add to that I am sure the community appreciates its servicing for caring enough about the community to volunteer as a state worker. I was employed as a New Jersey State Volunteer and Community Servicer for approximately 10 years in different state departments.
Now for the people that worked for the State Of New Jersey as a tax payer and resident of New Jersey, unfortunately you lose work and income and noone likes to see people unemployed. But as Residents of the state, we must make the best decission for all of us without being selfish.
Selfishness is people who refuse to understand what happen here because of their own personal needs.
What happen here in New Jersey like any other states is that some residents agreed to open jobs as replacing industrial workers that closed long time ago in New Jersey through the state not analyzing that it might be at risk factor in the near future for state budgeting and management or spending more money than neccesary to spend and create more state's jobs.
In addition, we must look at all the factor of the past interference in our government economics such as International Company as our USA Competitors. (Free Enterprise) In the Past, See what happen to US Automobile Companies with foriegn competitors.
Visited me at http://legalsystemsnetwork.com or http://newyorksmartchoice.com