The margin for making a barrel of crude oil into one of gasoline was negative on March 17 for the first time since February 2005, according to closing futures prices. The spread rose as high as $7.804 a barrel yesterday compared with more than $25 a year ago.
EngyEcn had this thought months ago... time to squeeze...gas going higher.
Correct me if I'm wrong, but I'm under the impression JC Penney has been in a decline for several years now. This economy isn't helping it any, but it may not be JC Penney's only problem.
Outsider writes:
Correct me if I'm wrong, but I'm under the impression JC Penney has been in a decline for several years now. This economy isn't helping it any, but it may not be JC Penney's only problem.
Outsider | 04.16.08 - 9:36 pm | #
Penny's & Kohls go hammer-n-tongs in a lot of markets. Kohls is like Penny's on a perpetual 30% sale.
I second dryfly. Lack of visibility was one of the dominant themes echoed by CEOs during the Internet bust. More like running out of matches before being pitched into total darkness.
Am I the only one who keeps waiting for these dire unemployment figures that never seem to ever materialize? Many explained away the lack of significant construction unemployment figures by blaming it on the mass lay-off of illegal, hence unregistered, construction workers. Is Penny's and other retailers using illegal laborers too?
Anotherajh, it sounds like Libor is Lie-bor. Heh. That's really distressing news. Efficient pricing is critical to a market functioning properly, and it seems like the ratings agencies and now Libor are giving false signals to the financial sector.
Angry Renter.com, yes the dishonesty is distressing, but a more tangible aspect could be an abrupt rise in the libor rate - this will aggrevate balance sheets. We'll know soon enough.
Earnings up due to dollar devaluation ain't that special. Next we'll be like the nikkie everytime the dollar falls stocks rally on the good news.
Anonymous | 04.16.08 - 10:02 pm
Earnings & stock prices are very different animals.
I ran into a buddy at the grocery - he works as an engineer at a nearby auto components factory. He should be retired but they keep calling him back. He said even though car sales are down they are getting busier and busier - they might have to expand. Their top customers are Honda, Toyota then also Deere & Cat.
What's happening is the OEMs are building more engines here and importing fewer - he said its not uncommon for his crew (and then he with them) to do 60 hr weeks.
Its clearly a result of the dollar.
Their management is reluctant to expand because they just don't believe this hyper-demand is sustainable given the overall economy... but then another big order gets placed & goes into tooling phase and its back to crazy hours (both in the tool room & then also out in production).
They can't keep working these people that hard for as long as they have been... its been ramping up for a couple years there now. I've been there and done that (60 hr weeks in a factory is unbelievably hard on a person - even a modern automated factory).
But I was in my 20s when I did it, my friend is 66 - he could retire... but he lost a number of years of good earning during 'rust belt' and he and his wife are back-filling their savings.
His wife is the same age and was also called back but at a different company/biz - health care. Similar story - need experienced bodies.
JP Morgan needs more capital. This ballgame is going into extra innings!
I would just like to say there is a trend going on that almost nobody can yet see.
U.S. public companies are raising capital at an alarming rate in "unconventional" ways.
These ways involve: 1) private placements; 2) floating rate debt issues; 3) warrants; and 4) resets based on benchmarks and covenants so that any future offerings or losses will result in massive dilution of common shareholders.
Even as common shareholders bid stocks higher and higher, the ground is being dug out from under their feet.
It's getting ridiculously impossible to do basic fundamental analysis on U.S. public companies, because they are agreeing to so many potential "time bombs" just to raise indispensable capital.
Some analysts who are "covering" these companies don't even know about the terms or potential dilution effects in the private placements the companies are arranging. I some cases, there are hundreds of millions of potential warrants outstanding.
So much of the burden of these opaque private placements is being put on public common shareholders in devious and undisclosed ways.
It means that everything is just "leveraging up." Any future failure will fall down on common shareholders in nightmarish ways, as bad as Bear Stearns.
Basically, it's a trend of public companies arranging private and opaque potential death spirals. If all goes well, they will dig out. If anything goes wrong, the company may survive but the public shareholders could lose almost all.
You have to realize that when a company like Penney says they are cutting back new store openings from 50 to 36, they are really saying: "We'll be closing down between 36 and 50 stores over the next year and opening almost none."
They just can't say it all at once.
Otherwise, nobody who covers "growth retailers" would ever look at them again.
It's pathetic how almost all retailers sold their souls to Wall Street and had to open X number of new stores per year just to stay on the radar.
I'm an experienced body 53 now, but I ain't working for devalued dollars and have to give half of them back to uncle for the privilege. For that I'll sit at home on my ass and watch Ben blow the commodity bubble.
I'm an experienced body 53 now, but I ain't working for devalued dollars and have to give half of them back to uncle for the privilege. For that I'll sit at home on my ass and watch Ben blow the commodity bubble.
Anonymous | 04.16.08 - 10:43 pm | #
I hear ya - I tried to quit working for one of my clients today - seriously - emailed them notification.
I wasn't happy with the way I was being treated. They wanted me to work a lot harder at non-productive activities. I'm independent and that means I spend more money but don't get paid more... negative gain for me not just lousy return or higher tax bracket.
I have no problem working hard if there is pay day for me - but show me the money. They backed off so we signed a truce. I still might quit on them in a week or so if they turn the heat back up.
But my buddy at the auto parts plant is making better money than he has ever made even considering inflation. The factory is running balls-to-the-wall and he's a critical part of it.
Part of the reason he's taking all they will give him now is he doesn't think it can last either. He said exactly that to me tonight - how can it? He's been through a number of recessions and doesn't believe the economy can take these repeat hits - eventually it will get to his plant too - it has to. Weak dollar not withstanding.
He better hope so or that factory is going to kill him before he retires.
I finally got it, way to late, I know see I'm retarded. I failed to see the relationship between CDO collateral and the issues related to The Fed stepping into the dance to support collateral, i.e, the reason the market is going straight up, is because a heck of a lot, of collateral is related to stock valuations, i.e, stock prices, i.e, valuations of course have nothing at all to do with the magic show, it's the stock price retard (I tell myself). I look in an empty world for a metaphor that will help ground me, but as much as I try to think of a casino with free drinks, all I can think about is how nice the waitress is and how cool the coaster is beneath my free drink, as I watch it absorb the condensation from the ice in my free drink. This free ride with nice people and booze only happens because of my cash on the table and of course the casino doesn't give a crap if i borrowed the money, if I stole it, if I found it, if I'm up or down, they just want my bet and my cash -- not my collateral! Same with The Fed -- but in this game, you get a free drink, free room, free hookers, free coke, free dinner, free car, free ride and it's all on the house!
If the retailing sector is worsening, it tells us materially that consumer spending is shrinking and if PCE retreats, definitely, we would be in a reception very soon if not today. We could applaud Intel's seemingly good performance but if we dig deeper, we know their profit margin is shrinking and the credit crunch is not over yet although the Fed is determined to be the white knight to save every burning houses but it would be at the expense of worsening inflation as well as opening the floodgate for accepting "pennies for the dollar" which would have to be reflected in the balance sheet of the Fed, which would definitely impact on our economy. The worse is not over yet and we may be in for a catastrophe.
rich writes:
You have to realize that when a company like Penney says they are cutting back new store openings from 50 to 36, they are really saying: "We'll be closing down between 36 and 50 stores over the next year and opening almost none."
Yes, rich. I agree. It's the "if we're are not expanding, we're shrinking mode," but shrinking b/c of store closures, layoffs, and no revenue. Building new stores would only be a quicker way to BK.
Remember, it's JC Pennys. Soon they might change to something less like JC CDOs.
Anecdotal.I called yesterday to make an appointment for a haircut,I have had to make appointments at least a week in advance for 2 years,sometimes 2 weeks.The receptionist asked if i wanted a same day appointment,and I told her no,make it thursday,and she asked me when would be convenient,they had 6 openings...so I went in today to gossip central,and the gal told me business was off 50% in march,and looks worse this month.This business has been in the same good location 15 years,the prices are good and the service is excellent...parking was easy,there were 3 spaces within 30 feet of the door which is something I have not seen in the 4 years i have lived here.
Hey, I warned them if they insisted on charging me $14 to ship two bras after advertising "free shipping", which, oh fine print, was only for new spring catalog merchandise, they would lose hundreds of dollars in my business. They didn't care.
The French are naturally thrifty; but, with such masses of money and with
such uncertainty as to its future value, the ordinary motives for saving
and care diminished... a loose luxury spread throughout the country. A
still worse outgrowth was the increase of speculation and gambling...
For at the great metropolitan centers grew a luxurious, speculative,
stock-gambling body...
At these city centers... abundant wealth seemed to be piled up: in the
country at, large theregrew a dislike of steady labor and a contempt for
moderate gains and simple living. In a pamphlet published in May, 1791,
we see how, in regard to this also, public opinion was blinded...
"What shall I say of the stock-jobbing, as frightful as it is scandalous,
which goes on in Paris under the very eyes of our legislators,--a most
terrible evil, yet, under the present circumstances,--necessary?"
The author also speaks of these stock-gamblers as using the most insidious
means to influence public opinion in favor of their measures; and then
proposes, seriously, a change in various matters of detail, thinking this
would prove a sufficient remedy for an evil which had its roots far down
in the whole system of irredeemable currency. As well might a physician
prescribe a pimple wash for a diseased liver.
Now began to be seen more plainly some of the many ways in which an
inflation policy robs the working class... In the schemes and
speculations put forth by stock-jobbers and stimulated by the printing
of more currency, multitudes of small fortunes were absorbed and lost
while a few swollen fortunes were rapidly aggregated in the larger
cities. This crippled a large class in the country districts, which
had employed a great number of workmen.
"What a prospect for a country when its rural population was changed
into a great band of gamblers!"
Yah, I'm still working on a spell/check system and grammer translation blaster.
I'm also trying to figure out how high this mkt will go before exploding, but if collateral needs to be converted into a new higher value religion, this pump up by PPT and WS could last for months....and this bubble will be very delusional, as oil goes higher, dollar goes lower and stocks hit new records?
Amazing how The Home Ownership Society turned into a subprime recession, which is now fueling the next derivative bubble, which will fuel the next housing bubble. It all comes down to unobservable level 3 assets and the ability of corporations to frontrun accounting fraud....
If you want my opinion, and I'm sure you don't, .. I think any bank using The Fed at this point should have to re-state earnings. I'm not 100% sure (Tanta may be) but I don't think GAAP accounting allows for this type of game-playing with The Fed. I just started going back to look at some precedents as to what impact this type of borrowing has on EPS, but as usual, this is all under the table, and with no regulations in place and an anything goes policy, the devil don't care....and God is playing dice...
On a periodic basis (at least monthly), a DFI will send a fixed position text file containing detail on pledged loans that are held in a Borrower-In-Custody (BIC) arrangement, held by the DI in accordance with Treasury Investment Program (TIP) requirements, and/or held at an approved Third Party Custodian (TPC).
Re: JP Morgan - Maybe they're going hunting and decided they needed a bigger gun. There have been some rumors that they're on the look-out for regional banks but, given the continued write-downs, I'm wondering whether they're gunning for Merrill or Lehman. They're better fits.
Revised Article 9 affects the Federal Reserve with respect to loan portfolios considered as collateral. Loan portfolios are pledged under a "Borrower-in-Custody-of-Collateral" (BIC) arrangement, whereby depository institutions that pledge loans as collateral for Discount Window, payments system risk, or Treasury, Tax and Loan purposes are permitted to retain possession of that collateral on their own premises, subject to specific terms and conditions. While the current article permits Reserve Banks to file UCC-1 financing statements on certain types of loans (auto loans and credit cards, for example) to perfect their security interest, instruments such as promissory notes are not included because they have alternative collateral-perfection approaches.
To ensure the Reserve Bank has a first-priority perfected interest in pledged collateral, including instruments submitted under BIC arrangements, all depository institutions that have pledged such collateral must execute and return a UCC-1 financing statement.
I wanna see the loans from LEH, MER, GS, BAC, BS, JPM...
2.7.1 Lockbox Account . (a) During the term of the Loan, Borrower shall establish and maintain an account (the Lockbox Account ) with Lockbox Bank in trust for the benefit of Lender, which Lockbox Account shall be under the sole dominion and control of Lender. The Lockbox Account shall be entitled Acadia Merrillville Realty, L.P., as Borrower and Bear Stearns Commercial Mortgage, Inc., as Lender, pursuant to Loan Agreement dated as of July 2, 2007 Lockbox Account. Borrower hereby grants to Lender a first-priority security interest in the Lockbox Account and all deposits at any time contained therein and the proceeds thereof and will take all actions necessary to maintain in favor of Lender a perfected first priority security interest in the Lockbox Account, including, without limitation, executing and filing UCC-1 Financing Statements and continuations thereof. Subject to Sections 2.7.1(c) and 2.7.2(a) hereof, Lender and Servicer shall have the right to make withdrawals from the Lockbox Account and all costs and expenses for establishing and maintaining the Lockbox Account shall be paid by Borrower. All monies now or hereafter deposited into the Lockbox Account shall be deemed additional security for the Debt.
c) Borrower shall or shall cause Manager to, obtain from Lockbox Bank its agreement to transfer to the Cash Management Account upon the occurrence and during the continuance of a Lockbox Trigger Event, in immediately available funds by federal wire transfer all amounts on deposit in the Lockbox Account once every Business Day. If no Lockbox Trigger Event exists, all amounts on deposit in the Lockbox Account shall be disbursed to or at the direction of Borrower.
I agree with you. I'm bewildered by the continued rise in the markets. Is it just that RE has tanked, cash/money markets are running at an inflation-adjusted loss, gold's inconvenient and already high and bonds are stuck in park? So maybe people feel that equities are the only place to put any extra $ they manage to pull together. I fear they're headed for a lickin'.
Personally, I'm beginning to think that burying cash and jewelry in peanut butter jars in the back yard may be the safest bet.
The record of government bailouts of private financial institutions in the 1930s, of Continental Illinois Bank in 1984 (which cost $8 billion) and of the entire U.S. savings & loan industry in the late 1980s and early 1990s (which cost $125 billion) teaches that emergency loans keep weak institutions alive just long enough for their problems to increase. Bailouts encourage more risk-taking and eliminate the freedom to fail that is just as essential to a free-market economy as the freedom to succeed
"Is Penny's and other retailers using illegal laborers too? :)"
In my experience retailers like JPC rarely fire people; they'll just severely cut hours or make it miserable so people leave on their own to avoid paying unemployment.
"Anecdotal.I called yesterday to make an appointment for a haircut"
I got a haircut a few days ago and the barber said business is way down (along with tips) and people are getting their hair cut very short.
Are plastic peanut butter jars safe? The last time I did it, the jars were made of glass with metal lids.
I worried that the metal lids would rust through so I wrapped the jars in saran wrap.
Do you mean, Simian, are plastic peanut jar safes safe?
Depends on how long you want to leave them underground. They're probably good for a year or two.
I'm always amused when people start one of these dire straights topics. Aside from the usual - guns, canned goods, coins - I never see mentioned two basics: fuel (for lighting&cooking) and antibiotics (nothing takes the fun out of functional survival more than a painful infection.)
Our favorite HELOC canary in a coal mine (HOG) has reported and while they pretty much scraped to the expected EPS, a closer inspection of their report tells me (I think) that their inventories jumped by $100m (thats a lot of bikes!), their cashflow during the quarter fell off a cliff, and their finance receivables jumped. So it seems to me that they were selling a lot of bikes to themselves and giving customers the keys..
they don't give more breakdowns on their finance activities so it is hard to tell for sure but their is plenty of room to prop their sales up I think.
that would be confirmed by their guidance which is basically: we're going to cut production and lay people off.
Haven't got an answer on fuel. But the internet has taken care of antibiotics.
There are literally dozens of overseas firms that sell antibiotics at reasonable prices. It is always good to have a stash of amoxicillin or ampicillin just in case.
You can also get it from Amazon.com for your pets in standard 500 mg human dosage tablets.
Re your "balls to the wall" comment about demand in engineering oriented exports.
Here in New Zealand there is 9 month lag between order & delivery for large[1] agricultural tractors.
I don't think it can last either.
Kiwi
[1]Large may have a different context here then in US.
kiwi | 04.17.08 - 1:04 am | #
I'm less than three hours drive from Deere's Tractor Assembly Plant (TAD) - their largest facility world wide and lead times for orders are something like nine months here too. If you don't have your tractor into the schedule already - you won't receive it until 2009 - that's how far they are backed up right now.
These are the BIG ONES by North American standards... the 9030 series 'four wheel drive articulated' tractors. And 'yes' more than a few farmers on the great plains have spreads so large (>>1000 acres) they can actually utilize these things effectively. I am guessing the same is true for Aus.
But I live in a 'Great River Valley' - the Mississippi - where plots are broken up into smaller sections (say 200-600 acres) by the bluffs & tributaries flowing into the river so 'mid-sized tractors' make more sense around me... they are still quite large(7030's. My guess is those are what you would consider 'large' in NZ... yes/no?
Best fuel is kerosene (keeps longer + OK for cooking and lighting.)
Hair cuts: go to amazon, type in: Oster Fast Feed Clipper with Attachments (don't be tempted to buy the more expensive item below. The one I mention already has attachments.)
My first one lasted for 15 years; made the haircuts for about a penny each. 3/8" crewcut is quite presentable. Have an SO trim the back.
OnTopic: Looks like JCP is still going to spend 240 million on more stores? You have to admire an optimistic biz plan. "Hey, let's grow like a cancer. Those are always good."
There are literally dozens of overseas firms that sell antibiotics at reasonable prices. It is always good to have a stash of amoxicillin or ampicillin just in case.
There are so many strains resistant to those two that they are almost useless against a major infection. A better strategy is to make friends with a pharmacist & have something to barter. If shit really happens - he will have a stash somewhere for his own personal family needs - make sure you have something to trade he really wants. There's you drug supply right there.
Personally I'm not a 'survivalist' but if I was I'd spend way more time & energy building good relationships than hoarding crap. Of course 'making good relationships' is probably the last thing most survivalists are really good at. They are much better at hiding away in their bunker - alone with their stuff.
Of course 'making good relationships' is probably the last thing most survivalists are really good at. They are much better at hiding away in their bunker - alone with their stuff.
True but the little woman is great at it opposites attract plus she was a pharamcy tech for 15 years.
Me neither any more, fly. (Thought it was The End... when Raygun ascended the throne.) But in the interest of adding to the elements necessary, thought I'd mentioned the unmentioned.
girlbear, Penney's is the place to go for nearly every pair of Levi's jeans in print.* The online JCPennney.com's service is excellent, and has good discounts on volume orders.
(*Heirloom Levi's are available only on Levi's website and through private collectors, often at hundreds of dollars per pair).
1000 acres is kinda small for australia, where the average spread size is about 8800 acres. However, a lot of that is just pasture - I dont know the average size of farms growing grains etc.
OT: it was a sad day when they split the largest spread in australia into two pieces, as we then no longer had a ranch bigger than texas. Still bigger than California though...
Kerosene will varnish over time. It's also a fire hazard.
Huh. Are you sure it's kero and not gasoline? thought it was gas, and it turned to shellac. K-1 is nowhere near the fire hazard gas is. Nonetheless, precautions are prudent.
. Vegetable oil is better. What you can't burn, you can eat! ...until it goes rancid.
Unfortunately, you can't buy the stoves in this country. Look at marine catalogs or outlets. They sell K-1 stoves for boats even in this country. Mind you, they're stainless, and so, not cheap. Also, Coleman makes/made a K-1 single burner for backpackers.
Did you mean to say that items 1-4 are the next true bubble? Should it happen, stocks must crash.
"U.S. public companies are raising capital at an alarming rate in "unconventional" ways.
These ways involve: 1) private placements; 2) floating rate debt issues; 3) warrants; and 4) resets based on benchmarks and covenants so that any future offerings or losses will result in massive dilution of common shareholders.
Even as common shareholders bid stocks higher and higher, the ground is being dug out from under their feet."
"Am I the only one who keeps waiting for these dire unemployment figures that never seem to ever materialize?"
Yo, after Q1 figures were seen in early April, there were firings in NYC ad agencies. I think months ahead are going to start showing dismissals mounting.
I see Penney's more along the lines of Sears. Kohls is more hip.
Outsider | 04.16.08 - 9:55 pm | #
I'll weigh in once more and unfairly. Outsider, I respect what you see. But to me Kohl's was just a gimmick.
They sought the niche between Target and Macy's, but their true appeal was smaller, more navigable stores. When their merchandise buyers stumbled (as all eventually do), shoppers had no reason to go except for the perpetual 30%-off sale.
Kohl's feels as 90's as Vanilla Ice. But I got a deal on bathtowels there once, and the history of retailing is full of second acts...
Hair cuts: go to amazon, type in: Oster Fast Feed Clipper with Attachments (don't be tempted to buy the more expensive item below. The one I mention already has attachments.)
My first one lasted for 15 years; made the haircuts for about a penny each. 3/8" crewcut is quite presentable. Have an SO trim the back.
If you cut your own hair how are you going to get in on the "anecdotal" gossip about the great Economic Meltdown?
primero?
Hey, this is GREAT news!
I'll bet the Dow goes up 300 points tomorrow.
The margin for making a barrel of crude oil into one of gasoline was negative on March 17 for the first time since February 2005, according to closing futures prices. The spread rose as high as $7.804 a barrel yesterday compared with more than $25 a year ago.
EngyEcn had this thought months ago... time to squeeze...gas going higher.
Ipod- buy the crack(that's your money maker)
Mike Ullman obviously has never heard of the Wrigth B model, therefore, whatever he says has no credibility.
Unpredictable?
JP Morgan needs more capital. This ballgame is going into extra innings!
JPMorgan Raises $6 Billion in Biggest Sale of Preferred Stock - Bloomberg.com
INO.com Exchanges - RBOB CRACK SWAP (NYMEX:RM) Price Charts and Quotes for Futures, Commodities, Stocks, Equities, Foreign Exchange
who even shops at JCPenny?
In Utah its still popular and called Penny's. Its popular with Latinos in CA where I am.
Correct me if I'm wrong, but I'm under the impression JC Penney has been in a decline for several years now. This economy isn't helping it any, but it may not be JC Penney's only problem.
CR, how do you decide when to put articles up? This has been on Bloomberg all day.
CR posts after he has throughly reviewed it. C'mon give the guy a break.
I thought they died back with Montgomery Wards and the Model T.
We can't give much guidance because there's no visibility."
I'm having flash backs - is it 1999 again?
Outsider writes:
Correct me if I'm wrong, but I'm under the impression JC Penney has been in a decline for several years now. This economy isn't helping it any, but it may not be JC Penney's only problem.
Outsider | 04.16.08 - 9:36 pm | #
Penny's & Kohls go hammer-n-tongs in a lot of markets. Kohls is like Penny's on a perpetual 30% sale.
"Is It 1999 again? No its 1938
JCP isn't bad. I'll go in there for shirts once in a while.
Also, I don't want to go all Sebastian here, but isn't it at least worth mentioning IBM here?
Kohls is like Penny's on a perpetual 30% sale.
I see Penney's more along the lines of Sears. Kohls is more hip.
I second dryfly. Lack of visibility was one of the dominant themes echoed by CEOs during the Internet bust. More like running out of matches before being pitched into total darkness.
Gotta like IBM with the weak dollar and the U.S. only 35% of its sales. I would bet on good results from HP also.
"isn't it at least worth mentioning IBM here?"
Earnings up due to dollar devaluation ain't that special. Next we'll be like the nikkie everytime the dollar falls stocks rally on the good news.
This may be significant:
"Banks That Misquote Money-Market Rates to Be Banned"
Banks That Misquote Money-Market Rates to Be Banned (Update1) - Bloomberg.com
I see Penney's more along the lines of Sears. Kohls is more hip.
Outsider | 04.16.08 - 9:55 pm | #
Kohls is hip? Outsider, you need to go out more often.
But I shop their too.
Am I the only one who keeps waiting for these dire unemployment figures that never seem to ever materialize? Many explained away the lack of significant construction unemployment figures by blaming it on the mass lay-off of illegal, hence unregistered, construction workers. Is Penny's and other retailers using illegal laborers too?
Anotherajh, it sounds like Libor is Lie-bor. Heh. That's really distressing news. Efficient pricing is critical to a market functioning properly, and it seems like the ratings agencies and now Libor are giving false signals to the financial sector.
who even shops at JCPenny?
your nan.
"Am I the only one who keeps waiting for these dire unemployment figures that never seem to ever materialize?"
In an election year? good luck.
Angry Renter.com, yes the dishonesty is distressing, but a more tangible aspect could be an abrupt rise in the libor rate - this will aggrevate balance sheets. We'll know soon enough.
Earnings up due to dollar devaluation ain't that special. Next we'll be like the nikkie everytime the dollar falls stocks rally on the good news.
Anonymous | 04.16.08 - 10:02 pm
Earnings & stock prices are very different animals.
I ran into a buddy at the grocery - he works as an engineer at a nearby auto components factory. He should be retired but they keep calling him back. He said even though car sales are down they are getting busier and busier - they might have to expand. Their top customers are Honda, Toyota then also Deere & Cat.
What's happening is the OEMs are building more engines here and importing fewer - he said its not uncommon for his crew (and then he with them) to do 60 hr weeks.
Its clearly a result of the dollar.
Their management is reluctant to expand because they just don't believe this hyper-demand is sustainable given the overall economy... but then another big order gets placed & goes into tooling phase and its back to crazy hours (both in the tool room & then also out in production).
They can't keep working these people that hard for as long as they have been... its been ramping up for a couple years there now. I've been there and done that (60 hr weeks in a factory is unbelievably hard on a person - even a modern automated factory).
But I was in my 20s when I did it, my friend is 66 - he could retire... but he lost a number of years of good earning during 'rust belt' and he and his wife are back-filling their savings.
His wife is the same age and was also called back but at a different company/biz - health care. Similar story - need experienced bodies.
I would just like to say there is a trend going on that almost nobody can yet see.
U.S. public companies are raising capital at an alarming rate in "unconventional" ways.
These ways involve: 1) private placements; 2) floating rate debt issues; 3) warrants; and 4) resets based on benchmarks and covenants so that any future offerings or losses will result in massive dilution of common shareholders.
Even as common shareholders bid stocks higher and higher, the ground is being dug out from under their feet.
It's getting ridiculously impossible to do basic fundamental analysis on U.S. public companies, because they are agreeing to so many potential "time bombs" just to raise indispensable capital.
Some analysts who are "covering" these companies don't even know about the terms or potential dilution effects in the private placements the companies are arranging. I some cases, there are hundreds of millions of potential warrants outstanding.
So much of the burden of these opaque private placements is being put on public common shareholders in devious and undisclosed ways.
It means that everything is just "leveraging up." Any future failure will fall down on common shareholders in nightmarish ways, as bad as Bear Stearns.
Basically, it's a trend of public companies arranging private and opaque potential death spirals. If all goes well, they will dig out. If anything goes wrong, the company may survive but the public shareholders could lose almost all.
You have to realize that when a company like Penney says they are cutting back new store openings from 50 to 36, they are really saying: "We'll be closing down between 36 and 50 stores over the next year and opening almost none."
They just can't say it all at once.
Otherwise, nobody who covers "growth retailers" would ever look at them again.
It's pathetic how almost all retailers sold their souls to Wall Street and had to open X number of new stores per year just to stay on the radar.
"Similar story - need experienced bodies."
I'm an experienced body 53 now, but I ain't working for devalued dollars and have to give half of them back to uncle for the privilege. For that I'll sit at home on my ass and watch Ben blow the commodity bubble.
I'm an experienced body 53 now, but I ain't working for devalued dollars and have to give half of them back to uncle for the privilege. For that I'll sit at home on my ass and watch Ben blow the commodity bubble.
Anonymous | 04.16.08 - 10:43 pm | #
I hear ya - I tried to quit working for one of my clients today - seriously - emailed them notification.
I wasn't happy with the way I was being treated. They wanted me to work a lot harder at non-productive activities. I'm independent and that means I spend more money but don't get paid more... negative gain for me not just lousy return or higher tax bracket.
I have no problem working hard if there is pay day for me - but show me the money. They backed off so we signed a truce. I still might quit on them in a week or so if they turn the heat back up.
But my buddy at the auto parts plant is making better money than he has ever made even considering inflation. The factory is running balls-to-the-wall and he's a critical part of it.
Part of the reason he's taking all they will give him now is he doesn't think it can last either. He said exactly that to me tonight - how can it? He's been through a number of recessions and doesn't believe the economy can take these repeat hits - eventually it will get to his plant too - it has to. Weak dollar not withstanding.
He better hope so or that factory is going to kill him before he retires.
Watch out for the Q1 GDP growth and I am sure you would see negative growth and that would start with our recession.
I finally got it, way to late, I know see I'm retarded. I failed to see the relationship between CDO collateral and the issues related to The Fed stepping into the dance to support collateral, i.e, the reason the market is going straight up, is because a heck of a lot, of collateral is related to stock valuations, i.e, stock prices, i.e, valuations of course have nothing at all to do with the magic show, it's the stock price retard (I tell myself). I look in an empty world for a metaphor that will help ground me, but as much as I try to think of a casino with free drinks, all I can think about is how nice the waitress is and how cool the coaster is beneath my free drink, as I watch it absorb the condensation from the ice in my free drink. This free ride with nice people and booze only happens because of my cash on the table and of course the casino doesn't give a crap if i borrowed the money, if I stole it, if I found it, if I'm up or down, they just want my bet and my cash -- not my collateral! Same with The Fed -- but in this game, you get a free drink, free room, free hookers, free coke, free dinner, free car, free ride and it's all on the house!
Dryfly,
This is nothing like 1999 we were only 5.6 trillion in debt and had a President who could make complete sentences then.
If the retailing sector is worsening, it tells us materially that consumer spending is shrinking and if PCE retreats, definitely, we would be in a reception very soon if not today. We could applaud Intel's seemingly good performance but if we dig deeper, we know their profit margin is shrinking and the credit crunch is not over yet although the Fed is determined to be the white knight to save every burning houses but it would be at the expense of worsening inflation as well as opening the floodgate for accepting "pennies for the dollar" which would have to be reflected in the balance sheet of the Fed, which would definitely impact on our economy. The worse is not over yet and we may be in for a catastrophe.
rich writes:
You have to realize that when a company like Penney says they are cutting back new store openings from 50 to 36, they are really saying: "We'll be closing down between 36 and 50 stores over the next year and opening almost none."
Yes, rich. I agree. It's the "if we're are not expanding, we're shrinking mode," but shrinking b/c of store closures, layoffs, and no revenue. Building new stores would only be a quicker way to BK.
Remember, it's JC Pennys. Soon they might change to something less like JC CDOs.
rich - very interesting posts!!!
You would think anything potentially diluting shares would need to be properly reported.... scary.
rapa: I agree that it is better to be in a reception than a recession.
Then again, we are definitely in a deception; I don't know about a depression.
DH@TH - LOL! You have a rough day today too?
Anecdotal.I called yesterday to make an appointment for a haircut,I have had to make appointments at least a week in advance for 2 years,sometimes 2 weeks.The receptionist asked if i wanted a same day appointment,and I told her no,make it thursday,and she asked me when would be convenient,they had 6 openings...so I went in today to gossip central,and the gal told me business was off 50% in march,and looks worse this month.This business has been in the same good location 15 years,the prices are good and the service is excellent...parking was easy,there were 3 spaces within 30 feet of the door which is something I have not seen in the 4 years i have lived here.
Tom Stone,
Didn't anybody tell you that during a recession, peoples' hair grows a lot slower?
I thought you saw that thread.
Hey, I warned them if they insisted on charging me $14 to ship two bras after advertising "free shipping", which, oh fine print, was only for new spring catalog merchandise, they would lose hundreds of dollars in my business. They didn't care.
Can't feel sorry for them at all.
MF,
It's buried way deep in an obscure filing of a public company.
It goes something like this:
Clause A: We raised $X in a private placement.
Clause M: As part of our private placement, we agreed to the following 43 covenants.
Clause P: We issued 10,000 warrants as part of our private placement.
Clause W: If covenant 22 is triggered, the 1 million warrants will expand to 10 million warrants.
You would have to be Sherlock to figure it out. And Sherlock died some years ago.
The French are naturally thrifty; but, with such masses of money and with
such uncertainty as to its future value, the ordinary motives for saving
and care diminished... a loose luxury spread throughout the country. A
still worse outgrowth was the increase of speculation and gambling...
For at the great metropolitan centers grew a luxurious, speculative,
stock-gambling body...
At these city centers... abundant wealth seemed to be piled up: in the
country at, large theregrew a dislike of steady labor and a contempt for
moderate gains and simple living. In a pamphlet published in May, 1791,
we see how, in regard to this also, public opinion was blinded...
"What shall I say of the stock-jobbing, as frightful as it is scandalous,
which goes on in Paris under the very eyes of our legislators,--a most
terrible evil, yet, under the present circumstances,--necessary?"
The author also speaks of these stock-gamblers as using the most insidious
means to influence public opinion in favor of their measures; and then
proposes, seriously, a change in various matters of detail, thinking this
would prove a sufficient remedy for an evil which had its roots far down
in the whole system of irredeemable currency. As well might a physician
prescribe a pimple wash for a diseased liver.
Now began to be seen more plainly some of the many ways in which an
inflation policy robs the working class... In the schemes and
speculations put forth by stock-jobbers and stimulated by the printing
of more currency, multitudes of small fortunes were absorbed and lost
while a few swollen fortunes were rapidly aggregated in the larger
cities. This crippled a large class in the country districts, which
had employed a great number of workmen.
"What a prospect for a country when its rural population was changed
into a great band of gamblers!"
"What a prospect for a country when its rural population was changed
into a great band of gamblers!"
BTW, today we might say:
"What a prospect for a country when its suburban homeowners have
changed into a great band of gamblers!"
barley,
Yah, I'm still working on a spell/check system and grammer translation blaster.
I'm also trying to figure out how high this mkt will go before exploding, but if collateral needs to be converted into a new higher value religion, this pump up by PPT and WS could last for months....and this bubble will be very delusional, as oil goes higher, dollar goes lower and stocks hit new records?
Amazing how The Home Ownership Society turned into a subprime recession, which is now fueling the next derivative bubble, which will fuel the next housing bubble. It all comes down to unobservable level 3 assets and the ability of corporations to frontrun accounting fraud....
If you want my opinion, and I'm sure you don't, .. I think any bank using The Fed at this point should have to re-state earnings. I'm not 100% sure (Tanta may be) but I don't think GAAP accounting allows for this type of game-playing with The Fed. I just started going back to look at some precedents as to what impact this type of borrowing has on EPS, but as usual, this is all under the table, and with no regulations in place and an anything goes policy, the devil don't care....and God is playing dice...
Dryfly;
Re your "balls to the wall" comment about demand in engineering oriented exports.
Here in New Zealand there is 9 month lag between order & delivery for large[1] agricultural tractors.
I don't think it can last either.
Kiwi
[1]Large may have a different context here then in US.
On a periodic basis (at least monthly), a DFI will send a fixed position text file containing detail on pledged loans that are held in a Borrower-In-Custody (BIC) arrangement, held by the DI in accordance with Treasury Investment Program (TIP) requirements, and/or held at an approved Third Party Custodian (TPC).
Tim -
Re: JP Morgan - Maybe they're going hunting and decided they needed a bigger gun. There have been some rumors that they're on the look-out for regional banks but, given the continued write-downs, I'm wondering whether they're gunning for Merrill or Lehman. They're better fits.
Article 9 Revisions Affect Collateral Pledged to Federal Reserve
by John Hodgkiss, Associate Examiner
The page cannot be found
Revised Article 9 affects the Federal Reserve with respect to loan portfolios considered as collateral. Loan portfolios are pledged under a "Borrower-in-Custody-of-Collateral" (BIC) arrangement, whereby depository institutions that pledge loans as collateral for Discount Window, payments system risk, or Treasury, Tax and Loan purposes are permitted to retain possession of that collateral on their own premises, subject to specific terms and conditions. While the current article permits Reserve Banks to file UCC-1 financing statements on certain types of loans (auto loans and credit cards, for example) to perfect their security interest, instruments such as promissory notes are not included because they have alternative collateral-perfection approaches.
To ensure the Reserve Bank has a first-priority perfected interest in pledged collateral, including instruments submitted under BIC arrangements, all depository institutions that have pledged such collateral must execute and return a UCC-1 financing statement.
I wanna see the loans from LEH, MER, GS, BAC, BS, JPM...
Tom S - I envy your hair. Where do you live? Don't get this wrong, I just want to know what state you are in.
What is lock box account?
2.7.1 Lockbox Account . (a) During the term of the Loan, Borrower shall establish and maintain an account (the Lockbox Account ) with Lockbox Bank in trust for the benefit of Lender, which Lockbox Account shall be under the sole dominion and control of Lender. The Lockbox Account shall be entitled Acadia Merrillville Realty, L.P., as Borrower and Bear Stearns Commercial Mortgage, Inc., as Lender, pursuant to Loan Agreement dated as of July 2, 2007 Lockbox Account. Borrower hereby grants to Lender a first-priority security interest in the Lockbox Account and all deposits at any time contained therein and the proceeds thereof and will take all actions necessary to maintain in favor of Lender a perfected first priority security interest in the Lockbox Account, including, without limitation, executing and filing UCC-1 Financing Statements and continuations thereof. Subject to Sections 2.7.1(c) and 2.7.2(a) hereof, Lender and Servicer shall have the right to make withdrawals from the Lockbox Account and all costs and expenses for establishing and maintaining the Lockbox Account shall be paid by Borrower. All monies now or hereafter deposited into the Lockbox Account shall be deemed additional security for the Debt.
c) Borrower shall or shall cause Manager to, obtain from Lockbox Bank its agreement to transfer to the Cash Management Account upon the occurrence and during the continuance of a Lockbox Trigger Event, in immediately available funds by federal wire transfer all amounts on deposit in the Lockbox Account once every Business Day. If no Lockbox Trigger Event exists, all amounts on deposit in the Lockbox Account shall be disbursed to or at the direction of Borrower.
Rich -
I agree with you. I'm bewildered by the continued rise in the markets. Is it just that RE has tanked, cash/money markets are running at an inflation-adjusted loss, gold's inconvenient and already high and bonds are stuck in park? So maybe people feel that equities are the only place to put any extra $ they manage to pull together. I fear they're headed for a lickin'.
Personally, I'm beginning to think that burying cash and jewelry in peanut butter jars in the back yard may be the safest bet.
This is good stuff!!
Shughart on Bailouts
Don Boudreaux
http://cafehayek.typepad.com/hayek/
The record of government bailouts of private financial institutions in the 1930s, of Continental Illinois Bank in 1984 (which cost $8 billion) and of the entire U.S. savings & loan industry in the late 1980s and early 1990s (which cost $125 billion) teaches that emergency loans keep weak institutions alive just long enough for their problems to increase. Bailouts encourage more risk-taking and eliminate the freedom to fail that is just as essential to a free-market economy as the freedom to succeed
ac,
Please keep those passages from the French fiat money text coming...it's uncanny how relevant they are to the current state of affairs+++
"Is Penny's and other retailers using illegal laborers too? :)"
In my experience retailers like JPC rarely fire people; they'll just severely cut hours or make it miserable so people leave on their own to avoid paying unemployment.
"Anecdotal.I called yesterday to make an appointment for a haircut"
I got a haircut a few days ago and the barber said business is way down (along with tips) and people are getting their hair cut very short.
G Edward Griffin - Creature From Jekyll Island A Second Look at the Federal Reserve
the creature that generates inflatio
Personally, I'm beginning to think that burying cash and jewelry in peanut butter jars in the back yard may be the safest bet.
Not if someone on this board finds out where you live...
Come to think of it, even if everyone does, it's probably still "safer."
Shanghai comp. is breaking down all supports. Does anyone know if it's true that they disallowed shortselling recently?
Are plastic peanut butter jars safe? The last time I did it, the jars were made of glass with metal lids.
I worried that the metal lids would rust through so I wrapped the jars in saran wrap.
Do you mean, Simian, are plastic peanut jar safes safe?
Depends on how long you want to leave them underground. They're probably good for a year or two.
I'm always amused when people start one of these dire straights topics. Aside from the usual - guns, canned goods, coins - I never see mentioned two basics: fuel (for lighting&cooking) and antibiotics (nothing takes the fun out of functional survival more than a painful infection.)
Our favorite HELOC canary in a coal mine (HOG) has reported and while they pretty much scraped to the expected EPS, a closer inspection of their report tells me (I think) that their inventories jumped by $100m (thats a lot of bikes!), their cashflow during the quarter fell off a cliff, and their finance receivables jumped. So it seems to me that they were selling a lot of bikes to themselves and giving customers the keys..
they don't give more breakdowns on their finance activities so it is hard to tell for sure but their is plenty of room to prop their sales up I think.
that would be confirmed by their guidance which is basically: we're going to cut production and lay people off.
Haven't got an answer on fuel. But the internet has taken care of antibiotics.
There are literally dozens of overseas firms that sell antibiotics at reasonable prices. It is always good to have a stash of amoxicillin or ampicillin just in case.
You can also get it from Amazon.com for your pets in standard 500 mg human dosage tablets.
Sim' Aren't they going to want a script from your vet? Won't the vet want to know why you need piles of 500mg antibiotics for your moggie?
(Questions like these are why I'd never succeed at a life of crime, btw.)
OT, but one of the local blogs here in NoVA recently reported that KB homes has completely pulled out of the mid-atlantic region.
http://realdiablog.typepad.com/loudounstats/2008/04/kb-homes-pulls.html
Re your "balls to the wall" comment about demand in engineering oriented exports.
Here in New Zealand there is 9 month lag between order & delivery for large[1] agricultural tractors.
I don't think it can last either.
Kiwi
[1]Large may have a different context here then in US.
kiwi | 04.17.08 - 1:04 am | #
I'm less than three hours drive from Deere's Tractor Assembly Plant (TAD) - their largest facility world wide and lead times for orders are something like nine months here too. If you don't have your tractor into the schedule already - you won't receive it until 2009 - that's how far they are backed up right now.
These are the BIG ONES by North American standards... the 9030 series 'four wheel drive articulated' tractors. And 'yes' more than a few farmers on the great plains have spreads so large (>>1000 acres) they can actually utilize these things effectively. I am guessing the same is true for Aus.
But I live in a 'Great River Valley' - the Mississippi - where plots are broken up into smaller sections (say 200-600 acres) by the bluffs & tributaries flowing into the river so 'mid-sized tractors' make more sense around me... they are still quite large(7030's. My guess is those are what you would consider 'large' in NZ... yes/no?
Best fuel is kerosene (keeps longer + OK for cooking and lighting.)
Hair cuts: go to amazon, type in: Oster Fast Feed Clipper with Attachments (don't be tempted to buy the more expensive item below. The one I mention already has attachments.)
My first one lasted for 15 years; made the haircuts for about a penny each. 3/8" crewcut is quite presentable. Have an SO trim the back.
OnTopic: Looks like JCP is still going to spend 240 million on more stores? You have to admire an optimistic biz plan. "Hey, let's grow like a cancer. Those are always good."
Custard's Last Stand,
Na. They are for your aquarium. No stinkin' vet required.
A bottle of 30 500 mg amoxillin capsules sell for about $18 (including shipping). It will keep your fish healthy.
Amazon.com: Fish-Mox Forte (Amoxicillin) 500mg (30 capsules): Kitchen & Dining
Merrill Lynch takes it in the shorts again, this time for $6.5 Billion . . . is that good news? I can't tell anymore.
Merrill Posts Loss on Mortgage Writedowns, Cuts Jobs (Update8) - Bloomberg.com
Fuel? Well, we'll have mountains of McMansions that we can use as fuel! And lots of CDO's, MBS's, etc.
Oh, my fish. Of course. How could I forget my poor fish?
Come to think of it, they didn't look too good. Probably the clap.
Don't eat the fish.
Will amoxillin work if your fish have crabs?
There are literally dozens of overseas firms that sell antibiotics at reasonable prices. It is always good to have a stash of amoxicillin or ampicillin just in case.
There are so many strains resistant to those two that they are almost useless against a major infection. A better strategy is to make friends with a pharmacist & have something to barter. If shit really happens - he will have a stash somewhere for his own personal family needs - make sure you have something to trade he really wants. There's you drug supply right there.
Personally I'm not a 'survivalist' but if I was I'd spend way more time & energy building good relationships than hoarding crap. Of course 'making good relationships' is probably the last thing most survivalists are really good at. They are much better at hiding away in their bunker - alone with their stuff.
Fuel? There has to be a better use for them than that. Loads of bedrooms, lots of lawn around.
Fill the bdrms with young'ens. Tear up the lawns and plant turnips. Voila! McCoyMansions.
McCoyMansions.
LOL. Make sure you don't live near the Hatfield Heights Gated Community though - could cause friction...
Of course 'making good relationships' is probably the last thing most survivalists are really good at. They are much better at hiding away in their bunker - alone with their stuff.
True but the little woman is great at it opposites attract plus she was a pharamcy tech for 15 years.
Dryfly wrote: Personally I'm not a 'survivalist'
Me neither any more, fly. (Thought it was The End... when Raygun ascended the throne.) But in the interest of adding to the elements necessary, thought I'd mentioned the unmentioned.
girlbear, Penney's is the place to go for nearly every pair of Levi's jeans in print.* The online JCPennney.com's service is excellent, and has good discounts on volume orders.
(*Heirloom Levi's are available only on Levi's website and through private collectors, often at hundreds of dollars per pair).
If you're "collecting" dungarees, it's pronounced J C Penn-nay.
The luxurious, speculative, stock-gambling body just got a bit smaller...
Merrill posts loss, plans to cut 4,000 jobs
@CathyG
Youse gots penut butr? Youse rich! I likes me penut butr, but cash's gonna just take up xtra space. Gonna be useless by Xmas!
dryfly:
1000 acres is kinda small for australia, where the average spread size is about 8800 acres. However, a lot of that is just pasture - I dont know the average size of farms growing grains etc.
OT: it was a sad day when they split the largest spread in australia into two pieces, as we then no longer had a ranch bigger than texas. Still bigger than California though...
Best fuel is kerosene (keeps longer + OK for cooking and lighting.)
Kerosene will varnish over time. It's also a fire hazard.
Vegetable oil is better. What you can't burn, you can eat!
Unfortunately, you can't buy the stoves in this country.
Welcome to BSH Bosch und Siemens Hausgeräte GmbH
??? Kicker
Kerosene will varnish over time. It's also a fire hazard.
Huh. Are you sure it's kero and not gasoline? thought it was gas, and it turned to shellac. K-1 is nowhere near the fire hazard gas is. Nonetheless, precautions are prudent.
.
Vegetable oil is better. What you can't burn, you can eat! ...until it goes rancid.
Unfortunately, you can't buy the stoves in this country. Look at marine catalogs or outlets. They sell K-1 stoves for boats even in this country. Mind you, they're stainless, and so, not cheap. Also, Coleman makes/made a K-1 single burner for backpackers.
@rich:
Did you mean to say that items 1-4 are the next true bubble? Should it happen, stocks must crash.
"U.S. public companies are raising capital at an alarming rate in "unconventional" ways.
These ways involve: 1) private placements; 2) floating rate debt issues; 3) warrants; and 4) resets based on benchmarks and covenants so that any future offerings or losses will result in massive dilution of common shareholders.
Even as common shareholders bid stocks higher and higher, the ground is being dug out from under their feet."
"Am I the only one who keeps waiting for these dire unemployment figures that never seem to ever materialize?"
Yo, after Q1 figures were seen in early April, there were firings in NYC ad agencies. I think months ahead are going to start showing dismissals mounting.
I see Penney's more along the lines of Sears. Kohls is more hip.
Outsider | 04.16.08 - 9:55 pm | #
I'll weigh in once more and unfairly. Outsider, I respect what you see. But to me Kohl's was just a gimmick.
They sought the niche between Target and Macy's, but their true appeal was smaller, more navigable stores. When their merchandise buyers stumbled (as all eventually do), shoppers had no reason to go except for the perpetual 30%-off sale.
Kohl's feels as 90's as Vanilla Ice. But I got a deal on bathtowels there once, and the history of retailing is full of second acts...
Hair cuts: go to amazon, type in: Oster Fast Feed Clipper with Attachments (don't be tempted to buy the more expensive item below. The one I mention already has attachments.)
My first one lasted for 15 years; made the haircuts for about a penny each. 3/8" crewcut is quite presentable. Have an SO trim the back.
If you cut your own hair how are you going to get in on the "anecdotal" gossip about the great Economic Meltdown?