Unemployment Claims: 4 Week Average above 600 Thousand
Submitted by
CalculatedRisk on Thu, 02/12/2009 - 6:31am (174 comments)
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TAKE THE MARKET ON THAT!
Good thing that stimulus thingy is creating or saving 3-4 million jobs.
hmmm... barely to 90-91 levels and people are talking '29 or worse (1873).
sigh, maybe phil gramm was right after all...
Kermit is dead. 7 handle on the SP. Then?
barely to 90-91 levels
jeebus jeebuss | 02.12.09 - 9:09 am | #
-----
A few things to consider:
1) 1099 Workers
2) Undocumented Workers
3) U-6
4) Not All Unemployment Is Distributed Evenly Across States
what's interesting is to look at the raw state income tax withholding figures. Takes into account underemployment, lost bonuses, etc. Easily seeing 10-15% decreases.
cr writes: "Another weak unemployment claims report ..."
## Not so much news as begs the question: Is it baked into the cake? The S&P is still above the critical support levels. What about volume? Anyone sense conviction in the market?
Ya know, when the day comes, and most would agree it is approaching with some increasing velocity, and the support level is broken, will the averages swoon? Or will they just dribble out?
These graphs, as bad as they are, don't give the full picture. You need to see them together with the graph showing those in involuntary part-time employment.
Seasonally adjusted numbers aren't valid for recessions in this case. Look at the unadjusted numbers and you'll see that things are getting better faster in 2009 than they did in 1975 or 1982.
I hope the Dow soon has a 6 handle, I wanna go long. Enough "down goes Frazier,"-- time for some Namath to Maynard chants.
and the support level is broken, will the averages swoon? Or will they just dribble out?
volker the viking
I hear 799 on the SP triggers huge selloff.
Interesting to see the growing persistence of unemployment in recent recessions, unlike the almost immediate falls from peaks until the '80s.
These graphs, as bad as they are, don't give the full picture. You need to see them together with the graph showing those in involuntary part-time employment.
Carlomagno | 02.12.09 - 9:12 am | #
That data only comes out monthly, think CR put up a chart of U-6 last week after the employment report, check the archives
S&P500 futures now down 12
wow
time to try and break the "bottom"
Dirk, I wasn't picking on CR - just providing a health warning.
market will likey the retail sales numbers, since any excuse for a rally will do.
and the market ALWAYS likes high unemployment numbers.
"I hope the Dow soon has a 6 handle, I wanna go long. Enough "down goes Frazier,"-- time for some Namath to Maynard chants."
......you're still about a decade too early.
Cool, differing people in here with different levels of knowledge of when data comes out, since you are a relative newcomer (or mostly lurker) just thought I would point out the data frequency on that
Interesting to see the growing persistence of unemployment in recent recessions, unlike the almost immediate falls from peaks until the '80s.
Markel
Typical business cycle recessions cause spikes, Fed tightens, future is easier to see, clean out, re-tool. We'll see spikes like that soon once it becomes clear to more where we're at.
I seem to remember when 400k was considered bad.
market will likey the retail sales numbers, since any excuse for a rally will do.
JimPortlandOR
SP futures at -.90 when announced, now -1.62. Markets know those numbers are an anomaly, surely not a trend.
It seems like people and the markets are becoming more desensitized (no longked shocked ) as to the severity the the problem .
Journeyman writes:
I seem to remember when 400k was considered bad.
Journeyman | 02.12.09 - 9:23 am | #
if sales are 'improving' then why are retailers going BK???
'Nowadays' shopping at wholesalers like BJs is a total rip off. The prices have not come down and in most cases the local retailer can beat those prices.
Why pay a yearly fee?
Also Sony cut prices on their electronics by nearly 50%. Others followed. That must have had some effect on the 'total sales'.
Depression, not a recession
http://2.bp.blogspot.com/_Et4TQ-a0gGU/SZQXBOIj0fI/AAAAAAAABYk/RZWJeBa0m4Y/s1600-h/export_growth_recessions.png
News N Economics
i can see why retail sales could be up, a breather from prior two months of consumers just frozen in the headlights, but i dont' think it's the beginning of a trend. also, i'd really want to see what margins will be on those sales. methinks that volume was done by giving up a tom of profit margin. any fool can pump sales numbers, but it's much tougher to pump sales and make profits while doing it.
February retail sales will be up thanks to my replacement head gasket in my car, $2200.
Journeyman writes:
I seem to remember when 400k was considered bad.
Journeyman | 02.12.09 - 9:23 am
And when Citi losing a few billion was a big deal. It seems as slow as molasses, but if I step back, we be flying right along here on the highway to hell.
Can we get a chart of retail sales ex-Merrill bonuses?
February retail sales will be up thanks to my replacement head gasket in my car, $2200.
\t 8 Ball | \t \t \t \t02.12.09 - 9:32 am | #
## Somebody has to pay retail
OT:
Morgan Stanley said in a filing to the Securities and Exchange Commission yesterday that it had recently uncovered actions related to an employee based in China in an overseas real estate subsidiary that appear to have violated the Foreign Corrupt Practices Act. Morgan Stanley terminated the employee, reported the activities to appropriate authorities and is continuing to investigate the matter.
Morgan Stanley Real Estate Said to Put Kalsi on Leave (Update1) - Bloomberg.com
--
Total Number of Net Jobs During the Last Cycle, 6.75 Years In Duration = 5502K
Jobs Lost Since the Beginning of the Current Recession, In 14 Months = 3452K
SOON ALL THE JOBS CREATED DURING THE LAST CYCLE WOULD BE LOST. This only happened during the Great Depression. If that were to be the case the Greater Depression could have begun in 2001 with the last cycle being nothing more than 1933-37 up cycle within the general depression. BTW, GDP growth excluding growth due to MEW also shows that the US has been in depression since 2001.
There are still born-and-bred American dopes, many of them economists, that deny that the current recession is a severe recession. These dopes do not understand the debt-addicted economy.
Jas
The Foreign Corrupt Practices Act is a U.S. law that prohibits corporate bribery.
Some interesting facts :
Shortage of Critical Commodities Seen Already
Safe Haven | Shortage of Critical Commodities Seen Already
DOWN GOES FRAZIER
DOWN GOES FRAZIER
What did I miss? The futures looked ok? I was in another room w/o a tv...
February retail sales will be up thanks to my replacement head gasket in my car, $2200.
8 Ball
I remember doing V8 head gaskets for about $200 Early 70's. I also remember an old timer showing one of his shops receipts (GD1) for a tune up for $1.93.
The greatest drop was in the numbers of employed economists...would have been much worse, but half the unemployed economists found new positions as weathermen...
One found a job with Madam Risha's Tarot and Visons Emporium....
re: the "100 examiners at Citi".
When these folks get oriented and see the books, they will be so shocked we won't hear from them for 6 months, if ever - officially that is. Those that move on to something else will leak a horror story that even Kudlow can't shout down.
CBO on effects of stimulus bill
PDF Alert
http://www.cbo.gov/ftpdocs/99xx/doc9987/Gregg_Year-by-Year_Stimulus.pdf
In contrast to its positive near-term macroeconomic effects, the legislation would reduce
output slightly in the long run, CBO estimates, as would other similar proposals. The
principal channel for this effect is that the legislation would result in an increase in
government debt. To the extent that people hold their wealth as government bonds
rather than in a form that can be used to finance private investment, the increased debt
would tend to reduce the stock of productive private capital.
aked capitalism points out why 100 regulators at Citi are far, far too few.
"To the extent that people hold their wealth as government bonds
rather than in a form that can be used to finance private investment, the increased debt
would tend to reduce the stock of productive private capital."
Eating the seed corn reduces next year's potential harvest!
Hoocoodanode!
Nostrovia,
aked capitalism points out why 100 regulators at Citi are far, far too few.
\t JimPortlandOR | \t \t \t \t02.12.09 - 9:44 am | #
## Yves is correct, so is 1929er.
An asymptotic curve!
This is clearly unsustainable (from a curve perspective).
However, the decline seems very sustainable because it's so structural and we're losing more and more credit, income, trade, resource, etc, every day!
So how can an unsustainable curve be reconciled with a decline that's not going to be over anytime soon?
Is the end result that unemployment reaches something crazy, like 80%? (then we have a LONG WAY TO go from that curve's perspective); or that we end up with a permanently high plateau in the curve, not a "spike up and spike down" like most of our other recessions.
I vote that the #2 one will happebn although I hope for the #1.
JimPortlandOR,
"100 regulators at Citi..."
Wouldn't be enough to audit the lunchroom supply budget.
Nostrovia,
WTF happened? Blood everywhere?
Wouldn't be enough to audit the lunchroom supply budget.
How many people do you need to smell rotting meat?
Greenspan quote for tv show on CNBC tonight...if you are the regulator and you have no idea..
So everybody in retrospect now knows that that boom was developing under the markets for quite a period of time, but nobody knew it, Mr. Greenspan told CNBCs David Faber. In 2004, there was just no credible information on that. It wasnt until we got well into 2005 that the first inklings that that was developing was emerging, he said.
Greenspan Says He Was Mystified by Subprime Market - DealBook Blog - NYTimes.com
They will swoon, because the degree of false belief in the infallibility of the market (media-driven) has been so high for so long.
You could make the case that on the basis of P/E and earnings, the market is worth virtually nothing at this point. That's because earnings are already so low, have fallen so far, are continuing to fall fast, and there is no visibility.
As I told you here 20 months ago, you can deny earnings fundamentals for a long time. But there comes a time, near a bottom, when they suddenly seem to matter. That's why you have climactic sell-offs.
In very few big bear markets is there just one climactic selloff.
One other factor this time is the gathering distrust for all things financial. It's not just J6P. It's also endowments, pensions, sovereign funds, etc.
DOW36000 writes:
WTF happened? Blood everywhere?
Isn't it time you lost a "0"?
on the examiners (re-post from after the bot on the examiners thread - ignore as you like)
read the Yves post and some of the responses there. important points offered on the scale and complexity of the problems. But . . .
a few quick thoughts:
1) the regulators could report back that Citi, for example, is too opaque, too off the balance sheet, and thus unregulateable in its current form - ie. an institution dependent on the opposite of transparency that itself stands in the way of a transparent and monitorable system.
2) 100 examiners might be just the start. Is the whole team always there on the first day? Or are specialists called in as needed?
3) I don't think this is a public relations ploy. If it had been, Geithner and Obama would have trumpeted the descent of swarms of examiners into the bankers' nests. They didn't do that, and the story reported is that the examiners results won't all be shared. That's not the sign of a PR move.
Question: Does nationalization of a large bank imply a full deposit guarantee?
If you're a business or foreign entity with $XXX million parked in a nationalized account, what would be your expectations of guarantee.
Clearly, Iceland couldn't guarantee it all. But the US could?
Did the army of 100 step into the CitiMorg and were overcome with the stench of toxic asssets and reported back saying:
"No F$*King way we're going in there..."
wow, Dubai is worse off than I thought...
Laid-Off Foreigners Flee as Once Booming Dubai Spirals Down - NY Times
Blood everywhere? Come on. This is just a mild prelude. Real hardcore will begin when s&p breaks 800
Fat bastard trader on bloomie says we're doomed unless we repeal mark to market. Well fat man, I guess we're doomed
DOW36000, you made my side hurt from laughing about the "No F$*King Way"
Those 100 Citi dudes are going to be all kinds of fun over the next few weeks.
Gold, Jerry! Gold!
Consumer spending was unsustainable and lead to price inflation in many areas of the market including one bubble.
Corrections, including massive drops in stocks, should continue until the excess leverage and virtual wealth is wrung from the system. We will continue to have "aftershocks" ( job losses, deflation, drop in stocks ) for years until a sustainable level of employment, consumer spending, government spending, and investing resumes. The market is a harsh mistress, but it's corrections will eventually work out for the best.
You can not avoid this correction, you can only decide how you want to take the hit.
--
Economists are the single best evidence that vast majority of born-and-bred Americans ARE dopes. They all believe in the same propaganda regarding the housing demand, CRE, recession, recovery and future growth rate, etc.
Those who doubt the above assertion should look into what NABE, ECRI, Conference Board, UCLA Andersen Forecast, etc., etc., were saying during 2007Q3-2008Q2. Also, all economists were lying about the housing demand and they greatly contributed to the housing bubble by giving verifiably false estimates of the housing demand.
The real problem in America IS that vast majority of "educated" Americans are born-and-bred dopes-for-life. Of course, having a bad political system and being led by Crooks doesn't help.
Jas
Sure repeal mark to market. Fuck this bear market! Let politburo set the prices. They sure know the right prices!
half way now on SP500 between open and under 800
repeal mark to market. Well fat man, I guess we're doomed
take a name ass wipe
More like fat man is doomed.
Naples beats Merced
Large home price drops hit home to Naples, Marco» Naples Daily News
One hedge fund buddy tells me that another large multi-billion hedge fund is liquidating. Fun times - wait until these gates are torn down at some of the biggest hedge funds - the shadow banking system is done like dinner - Jamie Dimon pointed out that normal banks are only 25% of the real lending economy with the shadow banking industry making up the rest - who knows what evil lurks in the minds of men - the shadow does
Is Frasier gonna get up ?
N.Y. attorney general lists Merrill's top bonuses
N.Y. attorney general lists Merrill's top bonuses - The New York Times
If that $3.6 billion had been evenly disbursed among Merrill's workers, each person would have received about $91,000. Instead, the top four bonus recipients received a total of $121 million, Cuomo wrote.
Cuomo also wrote that 20 people had been paid more than $8 million and 53 people had been paid more than $5 million. Some of the bonuses - 30 percent - were paid in stock, according to people with knowledge of the matter.
One hedge fund buddy tells me that another large multi-billion hedge fund is liquidating.
Ian in Austin | 02.12.09 - 10:02 am | #
Yeah, this smacks of a major liquidation. The Harvard endowment just announced it's out; I wonder where this shoe is falling...
US stimulus: Where the money would go
FT.com / Video & Audio / Interactive graphics - US stimulus: Where the money will go
The stated aim of the US fiscal stimulus package is job creation. The American Recovery and Reinvestment Act of 2009 was priced at $819bn when it was passed by the House of Representatives on January 30. The bill passed by Senate on February 10 totals $841bn. We are awaiting the final reconciliation bill, which will be signed into law by President Obama. This graphic compares the two bills.
mal-
IF ever there was a country (and region) to be able to short as a whole entity....UAE, Dubai, Qatar etc. they would be it.
Ciao
MS
wait until CALPERS starts selling. I read they are already down 40%....
Bye-bye DIS when they do......
Ciao
MS
U.S. Homeowners Will Lose Up to $10 Trillion, Talbott Estimates
Bloomberg.com
His new book, “Contagion,” predicts that prices are only halfway through a potential decline that will see homeowners lose up to $10 trillion. Values will fall for four to five more years, he says, as defaults move from subprime to prime mortgages.
Anyone one else have the feeling this maybe a semi-historic day?
A real Depression comparison.
As of the latest update for the SP500 earnings/estimate:
http://www2.standardandpoors.com/spf/xls/index/SP500EPSEST.XLS
...as-reported earnings for Q4 2008 are actually below the level of cash dividends.
If you look at Prof. Robert Shiller's data, updated to December, 2008:
http://www.econ.yale.edu/~shiller/data/ie_data.xls
...you'll see that this hasn't happened since the 1930's.
Sebastia
Sebastian. Don;t join the doomers. You are my personal ray of hope and sunshine.
what like a circuit day??
Can't see that happening however they had more control over it before.
Ciao
MS
The Harvard endowment just announced it's out
link please
I am so glad they passed that stimulus package. For a while, I thought the market was going to just keep falling.
I tend to agree Nova...and I quickly reentered my short positions this AM...my phone is ringing in an alarming/getting to a panicky way
wait until CALPERS starts selling. I read they are already down 40%....
MS | 02.12.09 - 10:10 am | #
CalPERS will never sell. They've been holding for 10 years, why sell now?
tomorrow is Friday the Thirteenth
holding for the last 10 years is much different then the coming 10....that's why.
Ciao
MS
Harvard link:
Harvard Endowment Cut Stock Holdings - WSJ.com
these things have habit of happening over a Thursday to Monday time frame, of course past performance should not be considered as a predictor of outcomes
Niall says tis but a flesh wound:
FORA.tv - Geopolitical Consequences of the Credit Crunch
Also says on p. 58 of "The Ascent of Money"
"The gold standard was a long time dying, but there were few mourners when the last meaningful vestige of it was removed 15 August 1971 by Nixon. From that day onward, the centuries old link between money and precious metals was broken"
ty max
Feb. 12 (Bloomberg) -- Morgan Stanley put Sonny Kalsi, its global head of real estate investing, on administrative leave effective immediately, giving direct oversight of his division to two executives who had run it previously, according to a person with knowledge of the decisions.
So this is Black Stars bribery boy?
--
"U.S. Homeowners Will Lose Up to $10 Trillion, Talbott Estimates"
The US has already lost more than $8Tr. in RRE and about the same in the Scam Market.
No severe recession, CR? How about depression?
Jas
Just Imagine Blankfein Questioning Barney Frank: Caroline Baum
- Bloomberg.com
Chairman Frank, on July 14, 2008, you made the following pronouncements about Fannie Mae and Freddie Mac, the two huge government-sponsored enterprises that are the key players in mortgage finance:
“Fannie and Freddie are fundamentally sound.”
“They are not in danger of going under.”
“Looking at the financials, they’re solid.”
You followed that analysis with a forecast. Referring to legislation before your committee to allow the Treasury to lend to and buy unlimited shares in the GSEs, you said: “We’re doing three separate things that make it much less likely -- very, very unlikely -- that we’ll have this kind of a housing crisis six months or a year from now.”
Less than two months later, Fannie and Freddie were wards of the state.
Just answer the questions, Mr. Chairman.
This is just a rumor I am starting, but I heard that a team of strippers had been ushered in the back door at Citigroup.
In contrast to its positive near-term macroeconomic effects, the legislation would reduce
output slightly in the long run, CBO estimates, as would other similar proposals. The
principal channel for this effect is that the legislation would result in an increase in
government debt. To the extent that people hold their wealth as government bonds
rather than in a form that can be used to finance private investment, the increased debt
would tend to reduce the stock of productive private capital.
The problem with this analysis is that the Fed has already stated that they will print money to buy the debt. The real threat comes from a possible flight from the dollar and dollar based assets if the stimulus is implemented poorly. Ultimately it might amount to the same thing - government use of resources crowding out private use of resources, but that's not a given depending on how the resources are utilized, and the relationship between private and public debt isn't a s rigid as some people seem to think: There's not a box of x number of dollars that must be shared between the two. The question is whether the implementation of the stimulus further degrades the credibility of the US, something it might well do given our recent track record.
Sebastian's a bear? I'm sure its been said before, but we must be near a bottom.
This is just a rumor I am starting, but I heard that a team of strippers had been ushered in the back door at Citigroup.
Yancey Ward | 02.12.09 - 10:19 am | #
They're hoping to smuggle out the solid gold stripper pole from Rubin's old office. You know, the one behind the secret door in the bookcase that holds all those SEC guidelines? I wish them good luck, and godspeed.
Looks like the Magenau 8000 line has been well breached. Dow 7000 here we come.
With a computer in every home now, giving rise to self-employment in many industries --
how can we really compare unemployment figures today to unemployment figures in the 70s?
Is there a measure that includes the figure of "uncovered" employment?
Anonymous | 02.12.09 - 10:23 am | #
Ooops. that was me.
Is there a measure that includes the figure of "uncovered" employment?
Anonymous | 02.12.09 - 10:23 am | #
That is a great question, and has generated more than one discussion here, though no one has done the data slog...how best to normalize covered employment to total employment?
CalPERS will never sell. They've been holding for 10 years, why sell now?
Max | Homepage | 02.12.09 - 10:15 am | #
My WA state fund is a bomb. I don't even look at the statements anymore, just hold my nose and chuck. I figure it's my charity donation to the great bankster dive.
DOW36000 said: "Sebastian's a bear? I'm sure its been said before, but we must be near a bottom."
I'm a tricky indicator. If I'm a bear, I'm obviously a contrarian indicator meaning that the market is bottoming-out, because I never get anything right.
On the other hand, if I'm a bull, I'm a Pollyana who doesn't get it about how bad things are.
Re: Harvard Endowment news. This could be a genuine contrarian indication, a capitulation by one of the most-successful, deepest-pocketed investment entities anywhere. Sort of like Warren Buffett capitulating.
Sebastia
sigh, maybe phil gramm was right after all...
jeebus jeebuss | 02.12.09 - 9:09 am | #
Phil Gramm is never right over the last 10-15 years. Once upon a time with Gramm-Rudman-Hollings, maybe, but never since. He's king of the assholes.
Gold seems to be holding $950
Silver, Silver Bar, Silver Bars, Silver Bullion, Gold and More - APMEX.com
--
"Sebastian's a bear?"
Sebastian is clueless! Please don't draw any conclusions from what clueless people say.
Also, ignore forecasts and estimates by clueless people, economists or not.
Jas
And now for some Horsey :
Seattle Post-Intelligencer: David Horsey
The S&P is still above the critical support levels
volker the viking | 02.12.09 - 9:11 am | #
IMO, The market is a secondary inidcator. Unless you're brave enough to be in it, it means little if anything. It's just the aggregate of a bunch of people's opinions, most of them not very bright.
Max, yes it is a sh-t show at the harvard endowment - I have some friends there and a former alum I am embarrassed to say. I don't give them any money as it was and is an embarrassment of riches.
I am waiting for the Suzie Orman crowd who held last fall to start to panic and will get excited when we get to S&P 600. $50 earnings x 12P/E
Goldman smacked. Fear of the stress testers...
Erin where's the silver lining?
Looks like the 10 year T is having trouble - trying to sell off a bit as well?
10-YEAR TREASURY NOTE Index Chart - Yahoo! Finance
Don't we have the 30 year T auction today?
"Goldman smacked."
I'd say it's doing fairly well considering the run it's had over the last 2 weeks. "'tis but a scratch"...for the moment.
Ciao
MS
a former alum I am embarrassed to say.
Ian in Austin | 02.12.09 - 10:29 am | #
You should be. Alum status is permanent.
energy-
yes we do....
I'm trying to get more "in tune" with the bond market since I really think that is going to tell the tale going forward. Normally it's a very boring and non-event market...not anymore.
Ciao
MS
Yahoo! 404 - Page Not Found
life in prison for under $2mm.
uhhh, how bout the guys that stole billions?
Today's Auction Results
results in a few hours....
Ciao
MS
someone said the auctions would all sell out this week, mebbelaterwhenitsovermorewillberevealed
The bond market is going to catch the flow from the next wave of panic.
Then it's going to tank.
volker the viking writes:
February retail sales will be up thanks to my replacement head gasket in my car, $2200.
8 Ball | 02.12.09 - 9:32 am | #
I am sure had of you walked into an auto dealership with that money in hand, you could have driven off in a new car instead of repairing the old one.
I am sure had of you walked into an auto dealership with that money in hand, you could have driven off in a new car instead of repairing the old one.
Barley | 02.12.09 - 10:34 am
If it was a Chrysler dealership you might have gotten a car and a truck.
pretty sure we see a 7 year auction next week?
Thought I saw one...
Ciao
MS
I don't give them any money as it was and is an embarrassment of riches.
Ian in Austin | 02.12.09 - 10:29 am | #
If they held their funds in conservative investments, they could have paid every student's tuition forever. Instead, they gambled like a 21 year old frat boy on his first trip to Vegas. Did they really believe they were smarter than the market? I guess donated rich people OPM is still OPM.
In case anyone missed it :
China to stick with US bonds
FT.com / Companies / Financial Services - China to stick with US bonds
Luo Ping, a director-general at the China Banking Regulatory Commission, said after a speech in New York on Wednesday that China would continue to buy Treasuries in spite of its misgivings about US finances.
Mr Luo, whose English tends toward the colloquial, added: “We hate you guys. Once you start issuing $1 trillion-$2 trillion [$1,000bn-$2,000bn] . . .we know the dollar is going to depreciate, so we hate you guys but there is nothing much we can do.”
gasket in my car, $2200.
Hmm nice to have friends I had one fixed for under $600
rich | 02.12.09 - 10:34 am |
Is that corporate paper ot Ts, iyho?
ova,
"If it was a Chrysler dealership you might have gotten a car and a truck."
Chrysler's doing twofers now?
BRB.
Nostrovia,
barley-
All of it.....not just T notes or bonds...IMO. Could be the last gasp of desperation....get as much as you can (treasury) and then........
Ciao
MS
Argh writes:
In case anyone missed it
When I read that last night it gave me some comfort then I relaized up is down and down is up, yes really means no, and if a CEO says its all good it really means things are are tanking big time.
Trouble in Euro bond land:
German 10-year Bund auction fails for second successive time
By David Oakley
Published: February 12 2009 02:00 | Last updated: February 12 2009 02:00
A German sovereign bond auction failed yesterday amid growing danger signs for governments as they attempt to raise record amounts of debt to pay for fiscal stimulus packages and bank bail-outs, writes David Oakley .
It was the second successive failure this year of a 10-year Bund auction - usually one of the most sought-after - as demand fell 20 per cent short of the €6bn (£5.4bn)the German government wanted.
Gary Jenkins, head of fixed income at Evolution, said: "The failure of a German bond auction is a sign of the difficulties governments are going to face in raising debt at these historically low yields."
The outcome signals trouble for governments as a record $3,000bn of debt is ex-pected to be raised this year in sovereign bonds - three times that of 2008.
German bond auction failures were rare until the credit crisis. Before the seven that failed last year, the last German bond auction not to reach its target was in July 2000, after the dotcom crash.
Carl Norrey, head of Eur-op-ean rates trading at JPMorgan said the restricted demand for this latest issue - sold at a yield of 3.28 per cent - highlighted the price sensitive nature of government bond markets as investors have ever more debt to choose from. "Price is all important in a market with an enormous supply."
With spreads between German yields and those of other eurozone countries close to record wides, investors bought other eurozone paper this week be-cause of the extra premiums they could obtain for this debt.
Greece, the lowest-rated eurozone country that suffered a downgrade last month, comfortably sold €7bn on Monday, although it had to pay much higher yields than existing debt to sell the notes.
The Netherlands was also forced to pay higher yields than existing debt to sell 10-year bonds on Tuesday.
If it was a Chrysler dealership you might have gotten a car and a truck.
And some of the fixtures. And a coupon for a Fiat.
Argh writes:
ba857b...0077b07658.html
In case anyone missed it :
China to stick with US bonds
FT.com / Registration / Sign-up
Sorry China, you go with what got you there. See you on the way down.
A gal from naked capitalism on CNBC just called for preprivatized term for the banks. She must reading CR.
I'm trying to get more "in tune" with the bond market since I really think that is going to tell the tale going forward. Normally it's a very boring and non-event market...not anymore.
MS | 02.12.09 - 10:32 am | #
Somebody said to me a while back that the bond market was boring, and my response was "buy some zero coupon long bonds with 6x leverage and let me know if you still think it's boring."
Max, agreed. It must be fundraising time as I have had over six calls over the past 30 days.
So many pension and endowments will be reverting back to the old 1950's model - 80% bonds 20% equities - fu-ck the exotic esoteric stuff.
Yale CIO thought he was a god investing in illiquid investments where choosing managers mattered. He is likely learning that there is a liquidity premium to more generally used investment vehicles.
All the geniuses will be made to look like fools during this bear market. Let me know when Buffett and all his financial and reinsurance business goes TU.
"China to stick with US bonds
ba857b...0077b07658.html
FT.com / Registration / Sign-up
Luo Ping, a director-general at the China Banking Regulatory Commission, said after a speech in New York on Wednesday that China would continue to buy Treasuries in spite of its misgivings about US finances.
Mr Luo, whose English tends toward the colloquial, added: We hate you guys. Once you start issuing $1 trillion-$2 trillion [$1,000bn-$2,000bn] . . .we know the dollar is going to depreciate, so we hate you guys but there is nothing much we can do.
Argh | 02.12.09 - 10:36 am |"
There's a Chinese sucker born every millisecond.
And we'll all go down together.
Does the UI claims number include claims that employers contest? Check out the Washington Post today:
More Employers Fight Unemployment Benefits - washingtonpost.com
"buy some zero coupon long bonds with 6x leverage and let me know if you still think it's boring."
+1
How does an auction fail? Not enough demand? Is there a floor below which they refuse to sell at?
from Argh's link to FT (worth reading the whole section, Shmoe analysis at bottom):
Luo Ping, a director-general at the China Banking Regulatory Commission, said after a speech in New York on Wednesday that China would continue to buy Treasuries in spite of its misgivings about US finances.
Except for US Treasuries, what can you hold? he asked. Gold? You dont hold Japanese government bonds or UK bonds. US Treasuries are the safe haven. For everyone, including China, it is the only option.
Mr Luo, whose English tends toward the colloquial, added: We hate you guys. Once you start issuing $1 trillion-$2 trillion [$1,000bn-$2,000bn] . . .we know the dollar is going to depreciate, so we hate you guys but there is nothing much we can do.
However, Mr Luo said Chinese officials would encourage its banks to finance domestic mergers and acquisitions rather than provide rescue finance to distressed financial companies in other countries: There will be no bottom-fishing of financial institutions, particularly in the US, because there is a lot of uncertainty about the quality of the books.
Mr Luo said China intends to maintain its separation of investment and commercial banking based on its observations of the US after repeal of the Glass-Steagall Act that enforced a similar division of banking activities.
To some extent, Glass-Steagall has fuelled the crisis, Mr Luo said. The separation of commercial and investment banking is likely to stay longer [in China] than before. Like senior financial officials in other developing nations such as Mohammad Al Jasser, vice-governor of the Saudi Arabian Monetary Agency Mr Luo also spoke out against what he called Americas laissez-faire capitalism.
Government ownership was viewed as something negative but the pendulum is swinging the other way. Perhaps banking is [no different from] public utilities where government participation is necessary, he said.
Deregulation in the US has gone a little bit too far. The market cant be omnipotent.
1) world depression is an accepted fact, so taking the depreciation hit on US Treasuries is acceptable because everything else will be worse.
2) the world is going to make the US nationalize the major banks
3) The days of the US $ as global reserve currency are numbered, but the US is not without substantial clout in shaping the new regime.
4) I like Mr Luo. If he moves and takes out US citizenship I'd vote for him to become a Senator. Public utilities work.
VIX:
Index Value: 47.25 Trade Time: 10:24am ET Change: 2.72 (6.11%) Prev Close: 44.53 Open: 46.67 Day's Range: 44.50 - 48.63 52wk Range: N/A
Stockdog,that was Yves Smith who runs Naked Capitalism.Smart and blonde.
Liquor sales are down?!!
How dare you stop drinking in these times!
the stress test is today ?
She said what most of us believe. Great that CNBC let her on.
when the package will be sold on the bond market ?
BRICs Show No Death of Equities in Emerging Markets
Bloomberg.com
China’s Shanghai Composite Index rallied 23 percent this year, the biggest advance among benchmark equity indexes worldwide, while Russia’s Micex jumped 18 percent and Brazil’s Bovespa added 8.8 percent, data compiled by Bloomberg show. The Bombay Stock Exchange Sensitive Index slipped 1.9 percent, still the fourth-best performance among the world’s 15 largest markets.
No decoupling of real economies but equity markets show otherwise.
Who will lead who?
Yves on CNBC:
nationalization is on the table for debate. just quote Obama: it worked in Sweden.
as everything else fails or is shown to be impossible, all that will be left is the solution.
NYC considers 4 day work week.
RX FOR CITY: 4-DAY WEEK - NYPOST.com
Just saw a little video clip of Yves Smith and Poppy Harlow (Mmmmmm....Poppy) on money.cnn. She was talking about nationalizing but used the term preprivatize. CR was the first person I saw use that term, is it his?
I did say "normally".....
6x anything is not what I call normal.
Ciao
MS
ille_vir writes:
How does an auction fail?
Good question. But more important is what happens when auctions fail?
Mr Luo also spoke out against what he called America's laissez-faire capitalism.
Awfully ironic given that "America's laissez-faire capitalism" has been turning China from a 3rd world country into a 1st world country.
Nobody ever looks at the big picture:
When the government was running things China was dirt poor.
When the government was running things China was dirt poor.
ac
but a lot of Culture
ac @ 10:54
+10 and most of china, relatively speaking is still dirt poor.
Ciao
MS
"10. Army rounds up all the cash rich folks and takes the cash-o-la."
.....You ought have nova write you a manuscript on THIS scenario, Barley - Movie of the Week!
Barley,
"9. Army refuses and takes out all the critters."
do loop
Nostrovia,
GLG
GLG Partners Inc., the hedge-fund firm founded as a unit of Lehman Brothers Holdings Inc., reported a 78 percent decline in adjusted profit in the fourth quarter as its funds posted losses.
hoodudaknode
Volume didn't really kick in at the 77 dow handle. Possibly clankity clank back up to an 11am dump. Futures still miserable.
C
"but a lot of Culture"
Back yard iron smelts are WAY over rated.
Nostrovia,
Why do I get the feeling this is a replay of October 2008?
Liquor sales are down?!!
How dare you stop drinking in these times!
Argh | 02.12.09 - 10:46 am | #
Is it down in $$'s or Oz?
I'll bet the former while up in the lattter.
New Thread: NAR: Distressed Sales Accounted for 45% of Q4 Activity ( 0 comments ...You could be FIRST! )
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"volker the viking writes:
February retail sales will be up thanks to my replacement head gasket in my car $2200."
We're going to buy a new stove. The drought has resulted in a scarcity of
buffalo chips.
money.cnn.com
yves smith on pre-privatization is the headline video
Maybe because the candlestick patterns looks exactly the same:
$SPX - SharpCharts Workbench : StockCharts.com
Ciao
MS
".....and most of china, relatively speaking is still dirt poor"
.....all I know is a helluva lot of Chinese own empty bucoo acres here - all with tax roll addresses with attorneys in SF
Yield up on the long bond. VIXy putting on the pounds. Current S&P losers pushing 10% down mostly fin and RE, says Bloomie.
CENTEX CORP\t8.27\t-1.32\t-13.76\t2,854,102\t10:43
LENNAR CORP-CL A\t6.69\t-0.98\t-12.78\t3,325,979\t10:42
KB HOME\t10.83\t-1.43\t-11.66\t1,575,081\t10:42
CB RICHARD ELL-A\t3.78\t-0.43\t-10.21\t1,162,710\t10:43
MASCO CORP\t6.71\t-0.74\t-9.93\t6,085,093\t10:43
ZIONS BANCORP\t11.37\t-1.24\t-9.83\t1,762,319\t10:43
HARTFORD FINL SV\t12.29\t-1.29\t-9.50\t7,438,629\t10:43
PULTE HOMES INC\t9.90\t-1.01\t-9.26\t3,196,362\t10:42
US BANCORP\t13.64\t-1.35\t-9.01\t8,890,482\t10:43
WELLS FARGO & CO\t15.93\t-1.57\t-8.97\t27,146,629\t10:42
HCP INC\t20.51\t-1.99\t-8.84\t2,026,812\t10:43
APARTMENT INVEST\t5.96\t-0.56\t-8.59\t822,60
Mr Market says snap, crackle, pop.
C
"February retail sales will be up thanks to my replacement head gasket in my car, $2200.
8 Ball | 02.12.09 - 9:32 am | #"
Back in the day, I had a car that I could not afford to own if I couldn't fix it myself. You may own one of those.
I got fast at changing out the clutch and could do the job in less than an hour. I made a special tool that helped a lot. It was a bother to have the tranny sitting on my chest while this was going on.
I was born in the GD1 and my GD lasted long in to my adulthood. Now if I can just survive GD2.
Hey CR - maybe you have covered this previously but do you have anything that shows the historic 'covered' to 'uncovered' ratio??
.....all I know is a helluva lot of Chinese own empty bucoo acres here
Black Star Ranch | 02.12.09 - 11:03 am | #
Read White Lotus. Dystopian/alt history novel, with China the winner of a world war over the US. In 1975, the US is farmland, recreation, slave source, playground, for the Chinese. The story is set in China mostly, a yound white girl slave who grows up to start an abolition movement.
But an interesting glimpse of a couldabeen.
Thanx, Joanna......
@Max: Love the Killing Joke reference there.
I think its time for me to put my dough into precious metals.
Somebody told me I should read these comments to learn how to make money shorting the stock market. I am hoping to make enough money to make up for the job I lost in January. How do I start shorting, and how much do you think I can make over the next year if I start with my savings of $25,000?
Rookie | 02.11.09 - 4:11 pm | #
PPT in actiom after 3:00 PM .
same story in uk unemployment