mp,
I used to setup and operate a 4 million dollar centrally computer controlled duel Mitsubishi horizontal machining center fed by a Fastems crane system with a washing machine. 40 pallets of many preset jobs on tombstones and bins of raw parts on call to fill any order at a moments notice. It took 2 people to run but many times I ran it by myself. With tooling it probably was worth 10 million. A real workhorse that beast and me too. Oh, and they paid me $15.20/hour to do it. I finally got fed up and told them to fuck off.
Things in the general economy have gotten worse, but liquidity in some markets are returning to semi-normal(I'd say in this risk environment, quite normal.)
So the money center banks(save Citi) are past the worst, but now it's the turn of the regional banks to catch the swine flu from the wallowing in the lagoons of CRE & condo merde.
Absolute bottom should be spread over the next three months(thanks to last year's stimulus), slightly positive GDP in Q4, officially out of recession by next March, joyless recovery until 2012 easily.
If you think back to 2007, some of the subprime lenders like New Century imploded, but then there was a lull until things got interesting in the late summer when Bear's problems started really flaring up. Then there was a lull until March 2008 when Bear imploded. Then there a lull until the late summer of 2008 when the world came crashing down (Fannie, Freddie, Lehman, WaMu, later Wachovia...). There has been a cycle of relative clam as things otherwise head downhill.
But, IMO, the signs for a flare up in late summer 2009 are clearly there. I think a lot of the effect of the massive stimulus plan is being offset by the contraction in government at the state and local level (e.g. in Durham, NC, 10% of the teachers are set to be laid off due to state and local budget woes). Further, the interest rate on the 30 year Treasury has been soaring. The consumer, regardless of "green shoots," is tapped out and - until the unemployment rate decreases - in more and more of a bunker mentality. As unemployment nears 10%, we'll be surprised at whose business model is no longer working (retailers, financials, government). Worse, after the huge government commitment that has spawned stock market optimism, if things are worse in late summer, the disillusion will be palpable.
Can't those big machine centers replicate themselves yet? That's deflationary, no? Profits go to zero. (The societal costs of deflated blowhards are absorbed by the commentariat, heh heh.)
I just don't trust the data anymore. The disconnects are not credible. Sure whatever commercial paper you are lending is going to look more an more AAA as you stop lending to those horrible risky AA- companies like Berkshire Hathaway that might not pay you back but without the volume those spreads are money losers. This is just the banksters playing the game of "How much is 2+2?"
anyhow, just seems like a hotter version of the broader market, 90% fueled by shorts. i'd recommend using tight stops on current positions. i had a small flip of kol from 9 to 11 a few months ago, obviously wish i'd got back on board after that pullback.
it would be nice to get another crack at peabody under 20, i see them as being the only real long-term hold in this climate. i'd really love to be able to load up under 10, which may well happen if the market cracks big time.
I'll just offer this anecdotal piece of information: my business has turned on a dime, every other CEO I've spoken to in the past 2 weeks has said the same thing. Green shoots of optimism are turning into real, improved economic gains. Sectors I know most closely are software and related services.
samdog,
" there are a dozen who couldn't even put a soft taco on their card. "
We have to get the banks to 'start lending' if folks with average to good credit rating are being denied credit. Do we know if this is the case?
If banks are denying credit to people with bad credit -
Would an average investor lend money to those with bad credit? If not, why should policy makers set banks lending to people with bad credit a goal? Banks are already falling of the cliff, why push them over another cliff?
OT Hack, I don't follow energy, just wanted to keep commodity inflation hedge and take a loss on oil in December. PKOL tracks Nasdaq, KOL the "Stowe index". I'll look at Peabody, thanks.
Glad to hear there's some improvement. But is there really?
On the other hand, how many of these indicators represent markets functioning on their own, as opposed to markets being forced out of natural equilibrium by expensive government interventions? In other words, these indicators don't mean what they used to mean, because all the rules have been changed!
As Hong Konger explained very eloquently, Dollar Libor is not a meaningful rate because it doesn't reflect actual reported transactions.
The A2/P2 spread would presumably reflect Federal Reserve intervention policies and not actual corporate credit risks, no? Or does someone who actuall participates in this market have a clearer sense?
The lower TED spread appears to reflect market participants' belief that the TARP'ed and Zombie banks will be kept alive, rather than the belief that they are intrinsically solvent. That and the market participants' ability to hedge against counterparty failures using CDS...
The corporate bond spreads reflect market relief that financial corporation bondholders will be spared major haircuts as a result of things like the Stress Test and ongoing capture of the government. Remember that GE and many other "industrial" operations became heavily financial as well during the credit boom -- must as companies did in Japan -- so the fraction of "financial" corporate paper is large.
Also, the corporate bond spreads are still at a level consistent with the depths of the previous 4 recessions. Not exactly "low"!!!
I don't think the Merrill OAS spread shows a meaningful improvement yet, since it's only back to October 2008 values!
All I can say is that I wish I had more cash right now- finally deals on ebay and craigslist have started.
Yeah, very vulture, but I was tired as heck of having stuff taken out waaaay above what I wanted to pay for the last several years.
That aside, too many folks are trying to use craigslist and ebay as outlets for their failing businesses right now.
That trend is quite sad, as they have no concept of what stuff goes for on the real cheap side. Just troll the completed listings on ebay and see the number of red ones.
Phoenix is crawling with deals, but a lot of folks are still believing in the return of the bubble. That prices will eventually return to the level of the bubble is pretty much assured after we get real inflation, but meanwhile, there will be deals. That is the lesson of the houses selling like hotcakes, folks have money and are willing to spend it when they perceive value. Now, long term they may be wrong, but flippers are returning on the bottom end as thrashed out houses find a level where a modest investment can bring 30% in three months.
The biggest problem is that everyone here is waaaaay too anticipatory.
Now that the first wave of the crisis is past, we just have to wait for a while- the next steps are most likely not going to happen here- watch China and the Middle East.
As CR notes, credit market indicators are improving....but the key is whether credit access is a critical factor – or perhaps even a ‘key log’ - in the economic crisis of 2009. No, it is not.
For 2009, the crisis is NO LONGER about sub-prime residential mortgages or about access to commercial paper. Nor is it no longer about whether CDS can be cross-defaulted.
It is now about the excess production capacity, excess retail space, excess leisure/hospitality facilities, and excess office space. It is about surplus FIRE headcounts, surplus auto worker headcounts, surplus retail headcounts, and surplus state & local government headcounts. It is about declining demand for all manner of products and services, and the rising jettisoning of surplus white-collar and blue-collar workers. The latter means declining real incomes and rising risks in creditworthiness.
This Debt Unwind is a shape-shifting economic crisis. These new 2009 primacy factors are all undermining the value of collateral for debt; therefore easier access to more debt is not a relevant solution to the current problem. What was logical for mid-2008 (easier access to credit) is no longer a logical solution for mid-2009.
We must resist the analytical temptation to fight the war that we have the most data on, for sometimes that is no longer than most relevant war.
I can understand feeling more EZ credit may buttress firms....and slow lay-offs...but those dots are no longer connecting as well as they did before; the ‘Causality’ between those wishes is fraying.
Another way of putting it, is that with government price controls being applied to all manner of credit "products", of course the metrics that the government is targeting will move... in the short term!
But in the long term, the perverse incentives created by the government's price controls will create perverse outcomes, unintended consequences. Credit products whose price is being artificially reduced will see non-government supply curtailed. Those whose price is being artificially supported will either see demand get crushed or malinvestment in additional supply.
Ah well, at least we can shore up the price of the remaining houses by razing the unoccupied ones...
Say Avl Dao, what's your latest take on the influenza? I just posted some analysis on energyecon's blog (http://energyecon.blogspot.com), where he's charting the number of confirmed cases each day. My conclusion is that given the lack of natural resistance, and the high rate at which this thing is spreading, even for a flu with "normal" (mild) symptoms, and thus a 0.1% mortality rate, the U.S. is likely to experience 100,000 deaths in the next several months, and the world at least 1,000,000.
Those looking only at the WHO's current total of about 20 deaths are looking in the rear-view mirror at a train which is accelerating at an exponential rate...
As others above noted, we have a new $15 Trillion 'faux' financial system that Bernanke/Paulson-Geithner/Blair hastily conjured up between March ‘08 and today, using all manner of wizardry and alchemy. The bulk of the $15 Trillion consists of new obligations, new guarantees, and new purchases of toxic debts.
This is an unsustainable financial sleigh-of-hand; if any of these major obligations were called upon to be honored, the whole psychological fantasy would evaporate.
Beyond it being psycho-unsustainable, it is also financially unsustainable.
But yes, the 'data' indicates that credit-markets are less tight.
Pensions are kaput and now your tax dollars will bail it out. Add 5-10% pension tax onto you bill today.
"Third, let us work towards the establishment of a safe pension system that is based on portable contributions and that will pay secure life-time annuities."
"The recent drop in the stock market has decimated the individual retirement accounts on which many Americans now depend. Decades ago, most Americans retired with a defined pension benefit from their employer. That financial security was based on life-long employment by one company and the slow build-up of financial assets in that company's retirement account."
"Again, I am not trying to re-invent the wheel here but merely advocate a general system similar to the University of California Retirement System or CalPERS which provides pensions for public employees like teachers, judges and legislators. In turn, the new retirement fund could place its investment in the stocks and bonds securities trading on the Prudent Investor Exchange that I have described earlier."
Robert Heller at the Commonwealth Club in San Francisco on Wednesday, April 29.
Heller is former governor of the Federal Reserve
REBear (profile) wrote on Sun, 5/3/2009 - 4:26 pm
When people say "Banks should/will start lending again", what exactly do they mean?
Banks are lending. My BAC credit card is still valid. My 6 year old has stopped getting credit card offers but that was expected. When Banks 'start lending', will my 6 year old start getting credit card offers??
Samdog (profile) wrote on Sun, 5/3/2009 - 4:34 pm
REBear,
For everyone solvent consumer like you, there are a dozen who couldn't even put a soft taco on their card.
REBear (profile) wrote on Sun, 5/3/2009 - 5:11 pm
samdog,
" there are a dozen who couldn't even put a soft taco on their card. "
We have to get the banks to 'start lending' if folks with average to good credit rating are being denied credit. Do we know if this is the case?
If banks are denying credit to people with bad credit -
Would an average investor lend money to those with bad credit? If not, why should policy makers set banks lending to people with bad credit a goal? Banks are already falling of the cliff, why push them over another cliff?
REBear,
I guess I'm confused about what your point is.
In the original post, I read your comment as: "People say the banks aren't lending, but they are lending--to me, at least. See, my credit card still works ...."
Of course they shouldn't be lending to bad credit risks.
So, in your opinion, are banks lending or not? Seems to me you're arguing both sides.
"Third, let us work towards the establishment of a safe pension system that is based on portable contributions and that will pay secure life-time annuities."
Ahhhh, the new government paradigm. "If it's broke; expand it."
I thought we already HAD "a safe pension system that is based on portable contributions and that will pay secure life-time annuities", and it was known as Social Security???
If we're going to fix the system: all I really want is to be able to have my 401(k) money direct-deposited into my IRA account, where I can control the service provider and have access to the full spectrum of investment options, without nonsensical restrictions on trading, at competitive transaction rates. The idea that 401(k) plans should be captive and provide limited services is really perverse.
Sounds like psychology has turned. The question is whether it will manifest itself in reality. I'm in the camp that this crisis is only in the early-mid stages, but that we'll have periods of time where people believe that the worst is past. Right now is likely one of those times. The question is how long the hope can last. The abomination that is our ponzi economy is not going to meaningfully recover until we recognize the problems and make a concerted effort to fix them. NOT paper them over.
But it looks like I'm going to have to seriously consider closing some of my shorter dated puts.
Wisdom, I haven’t revisited the Swine Flu data...don’t think I will for a # of reasons starting with the worst case scenario and working backwards to the most hopeful scenarios.
As you know, in the worst case, if you can't hermetically de-couple from human contact and society, you remain vulnerable if you live. I know I can’t fully de-couple.
The next case is that the outbreak's disability rate (not the mortality rate) destroys national social infrastructure , and leaves only local networks to adapt and eke out a functioning existance. Surprisingly, ‘that’ scenario actually resembles many Post-Apocalyptic Peak Oil scenarios...and for those scenario, parts of Asheville where I live are actually well-prepared, all things being relative.
P.S. I'm perfectly aware that Social Security isn't actually a pension system. But as long as we're going to print money willy-nilly to meet every whim of our leadership, we might as well finally fix that whole system and switch it from pay-as-you-go to a real buy-your-own-annuity arrangement. Sort of a "guaranteed option" to backstop the 401k/IRA "play at your own risk" option!
"Again, I am not trying to re-invent the wheel here but merely advocate a general system similar to the University of California Retirement System or CalPERS which provides pensions for public employees like teachers, judges and legislators. In turn, the new retirement fund could place its investment in the stocks and bonds securities trading on the Prudent Investor Exchange that I have described earlier."
Question is who will decide what is in the "safe investment" exchange? Will these be things the gov't chooses? Wells Fargo and Citi common shares backed by the gov't? Who will be anointed?
The wisdom of your logic is accurate, that any intervention will affect prices and rates, but I quibble with the notion of a "natural equilibrium". The price of an asset can not be derived independently of the cost of protecting it from fire, theft, vandalism, not to mention the cost of developing it in the first place with a stable, healthy, educated society.
What is the natural equilibrium price for a mortgage on a Miami condo? Depends if the costs of removing the crack smoking squatter next door and bringing in clean water are borne socially.
BTW, if we allowed 401k money to be direct-deposited just like take-home pay (whatever IRA the customer wants), the average annual total return for each customer would probably increase by 0.3 to 0.7% a year (due to competitive pricing eliminating needless fees), and we'd do a lot to bring the FIRE economy back down to a more natural size, while also making it a lot easier for Joe Six-Pack to retire (the amount he would have to set aside each month would drop by perhaps 20%, assuming 5% average total return each year). That's like a $200,000 benefit for those thinking of a $40k/year retirement!
Avl Dao (profile) wrote on Sun, 5/3/2009 - 5:28 pm
As CR notes, credit market indicators are improving....but the key is whether credit access is a critical factor – or perhaps even a ‘key log’ - in the economic crisis of 2009. For 2009, the crisis is NO LONGER about sub-prime residential mortgages or about access to commercial paper.
Avl Dao,
You read my mind.
I get the feeling many want to treat business data as though it were following some immutable law.
Business is not a science--unless you consider social science to be in the same class as chemistry or physics, in which case you'd be led very astray. That's not the same thing as saying "business is not important," or "business concepts are all BS."
The same variables be tracked today are being driving by completely different forces from what drove them, say, ten years ago.
RE Bear, you’re being too general with your terminology. Lending involves loan terms, conditions, loan guarantees, etc, for which borrowers may conclude "I can’t get a loan".
In fact that was what actually happened last year - applicants could not get the lending terms they wanted from the lenders of choice.
And...we all could have gotten pay-day loans and mafia loans...but who wanted those?
The bigger point is that collateral is declining in value because the economy is much weaker, job security is less reliable, and assets continue to devalue in price. Large-scale en masse lending to tens & tens -of-millions of households (we have about 129 million HH in the US) on 'good terms' will not resume in this climate.
Ditto for a return of en masse lending on anything we already have a surplus of, i.e. strip malls, auto plants, condo hi-rise towers, etc.
REBear (profile) wrote on Sun, 5/3/2009 - 5:44 pm
"Of course they shouldn't be lending to bad credit risks."
Sorry i thought you were trying to defend govt's policy of trying to get 'credit flowing again' like it was 2006.
Then it looks like we're on the same page on this point.
Funny, he also says "Furthermore, the Glass Steagall Act of 1933 separated commercial banking and investment banking. This fragmented banking system made it impossible to diversify risk -- which is absolutely essential to ensure safety."
I don't think he understands that when risk is "diversified away", you inevitably get more of it, and you end up with systemic risk.
I'd rather see a system with more granular risk that's (a) accountable, and (b) easier to isolate and repair. I don't think you can make risk go away by applying financial engineering; you just hide it so someone else who didn't notice it gets stuck with it later...
What i want to know is... well i see all these low mortgage rates, car loans being advertised on bank and credit union sites. What happens when the cost of money for these places start to rise? they are gonna be screwed or what?
I like this quote from Heller: "In essence, the traders were gambling with the shareholders capital -- and they [shareholders] did not like it: if the trader's bet pays off, he stands to gain a large bonus. If the bet does not pay off, the bank's shareholders are on the hook. That scenario no longer plays well."
Heads I win, tails you lose, does not make for large P/E ratios!
Wisdom good point. This guy is a banker so you know which side he's on. The "national pension" fund scares me as I feel this will be a vehicle to fund "bailout bonds" under the guise of a "national safety net"
rascal, there is always/often set pool of funds available at ‘promotional’ and ‘special’ debt terms...and what I hear is that the most heavily-advertised are bait-n-switch terms applicable only to buyers with pristine credit.
We blog readers are awash with anecdotal stories from friends and colleagues. In a polite society, we don’t demand documentation of these 'great terms' obtained by these story-tellers. Too bad, because most are just water-cooler stories. The lending data is not supporting such anecdotal undocumented water-cooler talk. See what the ABA is reporting from its surveys of bankers.'; 'survey says' its still tight because of creditworthiness and collateral concerns. Is also why AMEX is tightening and paying people to cancel their Amex cards.
rascal; "What happens when the cost of money for these places start to rise?"
Nothing at first, then a fall-off in sales, and if rates go high enough, they either find another source of financing or close down.
Unless, of course, we get embedded wage inflation before the cost of money starts to rise. But that seems unlikely at best.
Eventually, it seems that the great middle class is going to have to trade down. Imagine the horror of parking a brand new $20K car in your driveway. What would the Jonez think?
@Samdog: Exactly! While there are some enduring principles (supply-and-demand), the financial system is a complex, chaotic beast which goes through all manner of changes. The young quants, heavily trained in math and physics and perhaps lacking street smarts, engineered a lot of financial products using a lot of faulty assumptions. The first being that you can "engineer" something in a world where the financial equivalent to the "laws of physics" change over time.
I remember this old cartoon... "Every time I learn all the answers, they change all the questions!"
@Avl Dao: I enjoy all your postings here. I agree wholeheartedly about the folks complaining last fall that they couldn't get a loan on their preferred terms. When there's less collateral value behind a given loan proposal, and the lender's willingness to leverage the borrower has also gone down, those effects are vicious-cycle material.
rascal (profile) wrote on Sun, 5/3/2009 - 5:57 pm
What i want to know is... well i see all these low mortgage rates, car loans being advertised on bank and credit union sites. What happens when the cost of money for these places start to rise? they are gonna be screwed or what?
Not if they're following the old, low-risk model practiced for decades following GD1.
Sounds like psychology has turned. The question is whether it will manifest itself in reality. I'm in the camp that this crisis is only in the early-mid stages, but that we'll have periods of time where people believe that the worst is past. Right now is likely one of those times.
My general impression is that the farther a business is from the consumer, the more likely it is that they're confident right now. I think we're seeing the positive piece of an ordinary inventory cycle superimposed on the debt deflation bust. When that inventory doesn't clear we'll be back where we were a few months ago.
The short term Treasuries have been interesting in the last month (as an indicator). I think the 3 month jumped from .8 to .12, but that area of short-term liquidity and yield is still crashing IMHO and it has a very long way to go before being anywhere near normal, and that aint gonna happen soon!
Additionally the ISM Manufacturing Index continues its trend in a positive direction. It is now above 40. A reading above 43 usually correlates to overall GDP growth and a reading above 50 that the manufacturing sector has returned to growth. The current trend line has a return to growth by summer and a return to manufacturing growth by the end of the year... ISM Data Signals Return to Growth is Near
"rascal, there is always/often set pool of funds available at ‘promotional’ and ‘special’ debt terms...and what I hear is that the most heavily-advertised are bait-n-switch terms applicable only to buyers with pristine credit."
A Smith Barney (Citi) broker called my 75 year old free and clear mother touting a 2% HELOC. Naturally I wanted to play some poker with that free money, and assured my mother she could buy FDIC guaranteed Citi paper and beat the house. Upon further review (my belligerent phone call), the 2% somehow disappeared.
We went out for Sunday dinner today, and let me tell you people are spending again around here. Restaurants full with people waiting to get in, and local stores seeing heavy traffic. No fear of swine flu. Crisis over. I think this will be an interesting week with the markets, I still believe we have quite a ways down to go, but there are signs that defy my gut feelings. I just can't believe we can go back to business as usual when the curtain was pulled back and we didn't even have a fake wizard, just a fat hamster spinning his wheel. I feel like everyone is in denial, but it could be me. I have always been a glass half-empty type, can't operate on faith, I need reasons.
I've also seen a notable uptick in the anecpointal datadotes in terms of eateries, retail, but really only in lower-priced stuff. the higher end is weaker than ever.
tax refunds are giving a nice blip on the radar. that will dry up very soon as the long hot summer of high-end RE collapse begins.
Thanks Wisdom.
I have to return to a local posting on yet another business here in Asheville that's gone belly-up.
This place (Asheville) is amazing; the current crop of business leaders have no grasp of Debt Unwind and Debt DeLeveraging, or on how Bernanke/Geithner/Blair are using alchemy, sorcery and $ trillions in guarantees and new obligations to maintain the facade of a functioning debt system. The leadership is mainly home-grown Realtors and owners of cafes/hotels that cater to our biggest industries of tourism and real estate speculation, so it's not like a strong grasp of banking & finance was ever needed anyway, especially during the bubble years when any trained-monkey-turned-biz-owner could make $$ flipping land & condos, and selling shiny trinkets to the HELOC-fueled credit-card-wielding tourists.
But even 18-months into this downturn, these biz leaders remain completely flummoxed that “nothing is selling” even though “the TV news folks said the Recovery has begun”. A more vulnerable group to CNBC mis-information can not be found anywhere.
So once again I have to post online explanations on how tourists/visitors from 2003-2007 were using Re-fi cash-outs and HELOCs to buy all those great Biltmore vacation packages in 2003-2007, and that nothing from 2003-07 is now financially sustainable in this Post-Bubble world.
Nonetheless, the Realtors still say, “As soon as folks sell their condo in Florida, they’re going to buy a $400K condo here because everyone wants to live here”.
In the last week of April, there seems to be two contradictory inflections in the anecdotes
Downers:
* car sales are said to have fallen off a cliff (from low to very low, probably due to impending Chrysler bk)
* dryfly reported one of his major client's orders fell off a cliff (from low to very low)
Uppers:
* CR / Jim the Realtor report hot sales of $700K homes
* RockyR reports upturn in software
Perhaps a recovery is starting, but manufacturing won't participate??
They say that hunh? Sell a condo in Fla???? Hahahahahahahahahahahahahahahahahahahahah!
The hub is starting to buy the green shoots thing. I think this is a pause before the deluge, but when even mp start seeing hope, I must question my negativity.
I think the tax refunds could be in play too. We saw a lot of friends and family groups out. I haven't seen a pick up in home sales. All the homes in my neighborhood are still up. Lots of new for rent and owner finance offers. Used car sales up, but not new cars. This may be a quick uptick in spending due to spring fever. I do know everyone is planning on local vacations this year that we know. Staying in-state.
Yalt - (from previous thread)
It [Fed injected money] is not intended to reach the streets. The Fed has created incentives to discourage the lending of this money (interest paid on reserves). As far as I can surmise, it's intended to heat up the financial sector and produce asset inflation without getting into wages. Got to maintain confidence in everyone's "retirement", I suppose.
Provocative thought. Do you really think it's not intended to reach the streets or is could it be just an unintended consequence?
Chrysler, in its April 30 filings, listed assets of $39.3 billion and liabilities of $55.2 billion, making it the fifth- largest bankruptcy in U.S. history, according to data compiled by Bloomberg News.
I can add an "upper", sort of: I met some friends from a former job last week and I can report (with no surprise) that force-placed property insurance is having a boom the likes of which has never been seen. It's making some specialty insurance brokers very happy indeed.
On the down-anecdote side, I also learned that two friends who lost their jobs in the early days of the crunch are still unemployed and one of them has essentially given up the search. I wonder how much of that is going on.
"It [Fed injected money] is not intended to reach the streets. The Fed has created incentives to discourage the lending of this money (interest paid on reserves). As far as I can surmise, it's intended to heat up the financial sector and produce asset inflation without getting into wages. Got to maintain confidence in everyone's "retirement", I suppose."
Provocative thought. Do you really think it's not intended to reach the streets or is could it be just an unintended consequence?
The decision to pay interest on Fed bank reserves had a single, obvious and therefore intended consequence--it incentivized keeping funds on reserve at the Fed instead of lending them out.
I hope we still understand that anecdotal observation is not data
20 years ago, when someone said, ‘son, you’re using anecdotal evidence’ they were not issuing you a compliment, in fact it was often a mild rebuke.
We’ve become such a polite society since then that we actually feel the ‘anecdotal’ label is something like a ‘smart’ or ‘good’ label.
Nope, ‘anecdotal’ is still a mild dismissive, rightfully so, or at least still means, ‘not to be trusted’ beyond the 1 or 2 or 3 or so cases one directly observed.
Thankfully, CR points us to data sources to test the validity of our observations.
LawyerLiz, you'd die of laughter if you lived in metro Asheville where not only are realtors our dominant 'business class', they are defacto political leadership.
But then, none of our banks or bankers have political clout here. They're quiet mousey types.
CR didn't report on the most important credit crisis indicator, the 10 year Treasury yield. Its up to 3.15 on Friday from a low of 2.5 after the Fed announcement it would buy (monetize) $300 Billion. With China no longer buying Treasuries, skyrocketing Treasury yields will be the center of the next crises, IMO.
But at some point, some task force members acknowledge, the drive for profitability is likely to collide with Mr. Obama’s fuel-efficiency and low-emission goals. G.M. produced heavy gas-guzzlers because they were among the most profitable in its line and, for a long time, the most popular. It is unclear whether smaller cars can be as profitable — or, for a few years, competitive with offerings from Toyota and Honda and a raft of inexpensive cars under development in China.
"Nope, ‘anecdotal’ is still a mild dismissive, rightfully so, or at least still means, ‘not to be trusted’ beyond the 1 or 2 or 3 or so cases one directly observed."
True, but in a lot of cases it's all you can get. And some of the broader stats are so broad as to have have limited direct applicability. A good example of this is the C-S numbers, which tell you nothing about prices in a given neighborhood, particularly in enormous MSAs like Los Angeles.
"Pavel thanks for your early flu warnings, no matter how severe it turns out to be. Usually I ignore the flu (I don't even have a general physician)."
I just copy and paste.
I note, though, that the WHO and CDC are reluctant to express optimism at this point. That's understandable. The organism is not fully understood. Mutation is possible. It would be unfortunate to put people off their guard at this point in case something changes. Also worrisome is the excess of risk to the young.
I'm only a layman, but I sense that if we can get through fall and early winter without an increase in virulence we'll have done well.
Roubini was far from the first. The guys at iTulip made the case in 1999. As is usually the case, it's taken longer to play out than the forecast, but otherwise things are progressing as expected...
The decision to pay interest on Fed bank reserves had a single, obvious and therefore intended consequence--it incentivized keeping funds on reserve at the Fed instead of lending them out.
I've heard this argument before and it doesn't make sense in isolation. If you're a bank, there's no way that you keep the money in reserves, especially with so much guaranteed lending right now (e.g. FHA) unless (1) you're scared $hitless for capitalization reasons or (2) you don't have enough borrowers.
"And as Americans were faced daily with dramatic headlines out of Detroit about the fates of Chrysler and GM, showroom traffic and sales actually faded toward the end of the month rather than pick up as it usually does. "Retail sales hit the wall in the last week of April for most OEMs," DiGiovanni said."
Somebody better put some Miracle Gro on those green shoots.
sm_landlord (profile) wrote on Sun, 5/3/2009 -
True, but in a lot of cases it's all you can get. And some of the broader stats are so broad as to have have limited direct applicability. A good example of this is the C-S numbers, which tell you nothing about prices in a given neighborhood, particularly in enormous MSAs like Los Angeles.
There's other options. Even for a given neighborhood, you cant trust the validity of casual observations as it relates to RE. The good invesors/developers actually pick up the phone and call apt mgrs, etc., or collect their own data from the courthouse, MLS, etc, before making a big $$ decision.
As for us lay people, we simply need to avoid watching all the lovers smooching in the park and assuming marriage rates are about to increase.
'"And as Americans were faced daily with dramatic headlines out of Detroit about the fates of Chrysler and GM, showroom traffic and sales actually faded toward the end of the month rather than pick up as it usually does. "Retail sales hit the wall in the last week of April for most OEMs," DiGiovanni said."'
My wife and I drove this afternoon to a Montgomery County library about five miles from our home in NW DC. There's a swell used book store in the basement, with a very sizable collection of excellent books at very low prices, priced to move. I bought an American Heritage volume, published in 1968, of rare 19th century and early 20th century American photographs, for five dollars. It occurred to me that a hundred years ago we could have got to the library and back on a since abandoned highly advanced urban transport system called the street car.
If such a system existed now I think we would gladly have taken it instead of driving there in our car.
I did not submit my observations as evidence. Just merely reporting a change in what I have grown accustomed in seeing around here. I do know DFW is not a litmus test for the rest of the country as well. I come here to share thoughts and observations like many did at the country stores of old. I am not an expert in any methodology of finance or monetary policy and do not expect to be taken seriously by the more experienced and educated posters at this site. Hell I have a hard time keeping up with what some of you post but I love to learn and that is why I am here. The end of the day, I am a philosopher. I love to observe, and what goes on in here is part of what I like to watch. I know nothing, and never will.
doesn't it also improve the banks earnings on reserves they already had at the fed?
Yes, but the incentive to increase reserves cannot possibly have been accidental.
If the idea was to get this liquidity into the general economy, it would have been given to the healthiest commercial banks, who would have been the likeliest to lend it out. Instead it was given to the sickest of the sick, and banks having an investment-banking rather than a commercial-banking model. I don't know how to reach any other conclusion than that the intentions were (1) to prop up large zombie commercial banks and (2) to get money into the markets.
Bobn, I agree. but at least I can understand why, back in mid-2008, the orthodox biz community and economists (mistakenly) THOUGHT more debt would keep businesses running and prevent layoffs.
To think so now in 2009 is frighteningly laughable.
WSJ:
DETROIT -- U.S. vehicle sales turned out even worse than expected in April, muting optimism that the auto market is poised to rebound.
Auto makers blamed the high-profile troubles at General Motors Corp. and Chrysler LLC for dragging down sales last month across the industry. Chrysler sought bankruptcy protection on Thursday.
"We've been fighting all these rumors left and right and it doesn't help," GM sales chief Mark LaNeve said. "I thought we were going to close much better than we did."
Shaky consumer confidence and high unemployment levels also offset benefits of increased credit availability, deep auto discounts and U.S. government backing of warranties on GM and Chrysler vehicles.
April sales totaled 819,540 cars and light trucks, a decline of 34% from a year earlier, according to market research firm Autodata Corp. The seasonally adjusted, annualized sales pace was 9.32 million vehicles, down from March's 9.86 million rate.
9.32m SAAR is barely sufficient to keep two automakers operating.
Lucifer, I believe that the 25-yr (1982-2007) experiment of operating a 300+ million-person nation on a GDP that is 70% driven by Debt-Enabled Consumer Spending is over; that GDP model is dying and the liklihood of re-animating its dead flesh looks dim.
That means all things consumer-spending-driven remain highly vulnerable to sustained downturns, stuck in a cycle of Debt Unwind, Recession, and Rising Joblessness.
The implcations of the death of this GDP model are gi-normous.
An 'L'-shaped Descent with no prospects for ascent; the permanent loss of jobs in retailing & hospitality, and in banking.
The spectre of re-inflating debt bubbles only to see cascading re-collapses until we learn our lessons.
That's why we're really in a Structural Economic Transformation, driven by Debt Unwind atop deflating debt collateral; and not a simple 'V', 'U' or 'W' Recession-then-Recovery.
This is the question I keep wrestling with. We can't go back to business as usual. I mean the Emperor had no clothes, honestly. But most of my friends and family believe he does and is still the greatest and best and want that illusion back. Better to be a satisfied pig than a dissatisfied Socrates.
seroy, Toyota's sales have declined for 12 consecutive month; that is why they ousted their Top Guys...the news on declines, on historic profit drops, etc, was publicized in Bloomberg News every month as it unfolded, but our Cognitive Dissonance deafens most of us. We only hear a simplistic story-narrative that Toyota Is Good, Prius is Great; while GM is Bad, GM sales are down.
Google Toyota News going back to June 2008 and see.
Well said! Please note that the 25-yr experiment also covers 90% of the period wherein government spending consistently exceeded revenues; IOW, we've been running on "stimulus" the entire time. I could cite many more unique aspects of this era that do not bode well for the future.
Avl Dao (profile) wrote on Sun, 5/3/2009 - 4:19 pm reply Ignore user
seroy, Toyota's sales have declined for 12 consecutive month; that is why they ousted their Top Guys...
They should have tried massive retention bonuses. Works for US banks.
TOYOTA CITY, Japan — For years, Toyota City prospered along with the giant carmaker that shares its name, growing into a global automotive manufacturing
center as its official sister city, Detroit, slid into decline.
Credit Crisis Indicators for USA - stay tuned !
1) The projected budget deficit for 2009 is $2 trillion
2) The debt-drowned United States debt is already 350 percent of G.D.P and rising fast !
3) The Fed is now holding $10 Trillion of ‘assets’ ( mostly toxic ) transferred from too big to fail banks.
4) The Triumph of the Banking Oligarchs continues at huge taxpayer expense
5) perhaps most Americans should look forward to being a much BIGGER version of Argentina or Mexico in the near future !
To answer a question from above: "enterprise software". Performance is up in about everything - automation, BI, sales & marketing platforms, web 2, etc.
It's my unqualified opinion that we have very, very hard times ahead. However, right now, it appears that at least some of 2009 is going to be a bit of calm before the storm. I say that just given the data that we have right now. When the next leg down comes is a guess better left to you guys. I'm just sure of the fact that bigger, scarier crises are yet to come... could be 3 months or 3 years away.
People will keep spending whatever they can afford to give up, just so long as the Chinese keep giving us their money
Man, I thought the swine flu stuff had died down, I just read that WHO is prepared to up the level to six this week based on the spread of the virus despite the severity of symptoms. Texas has 43 confirmed cases spread through 12 counties with more school closings coming. This is really turning into a classic case study for future generations.
Can anyone see a currency that is likely to be in better shape than the dollar for the next few years?
The Yen was real strong until a few months ago. The Swiss Franc is probably toast without banking secrecy.
Maybe resource-based economies like the Oz Dollar?
People will keep spending whatever they can afford to give up, just so long as the Chinese keep giving us their money Wink
Hey Rocky jokes are fine but reality can be sobering
China has ‘canceled US credit card’ The Raw Story | China has 'canceled US credit card': lawmaker
Kirk was alarmed at how much debt was being bought by the US Federal Reserve due to absence of foreign investors. “There will come a time where the lack of Chinese participation may have a significant impact,” Kirk said.
Of course tomost American rubes have no freaking clue !
Not every small business can afford an IT department.
No small business should be running their own mail servers, and many are starting to figure that out.
Avl Dao (profile) wrote on Sun, 5/3/2009
Toyota's sales have declined for 12 consecutive month
The surprise was not in the decline but in the relative difference of decline. Until last month, honda and toyota's declines generally matched each other (within 5% points). But, for April, Toyota declined at a much more rapid pace than honda.
The 25-yr Experiment is fascinating and it floored me to realize my entire professional life was spent in a bubble.
The 9-11 years of wrenching structural transformation, 1973 to 1982/84, is equally fascinating and a Cautionary tale for us.
We entered that period with President’s Economic Stabilization Plan and Address to Congress in January 1973 and no one had a clue of the nightmares to come from 1973-1982: 3 'official recessions" ergo we had two headfake recoveries; 2 Energy Shocks & shortages; 2-digit job losses and interest rates and mortgage rates; the destruction of the Rustbelt’s mfg core; the mass-migration of Rust belt workers to the SunBelt with massive political implications,; a stagnate DOW for 9 years and an S&P Bear in 73-75.
Mind-numbing.
The electorate lost all tolerance for Presidential political mis-steps & stumbles, let alone crimes, and ousted Nixon, Ford & Carter, in short order.
The Great Communicator, Reagan faced a 50% disapproval rating in 1982 when unemployment stubbornly stayed above 10% and he too would have been ousted had hiring not resumed in 1984.
It is Juvenile to believe the Dems or Team Obama have any permanency (i.e. 2 terms) this early in the game given how intolerant the electorate will be with 1+million job losses and/or furloughs/give-backs-per-month from now til 2010 mid-terms.
Read that 1973 Economic Stabilization Plan in Time Magazine’s archives and the news analysis and weep at how NO ONE had any idea what was getting ready to slam them for not 3-4 years, but NINE years...11 years if you feel recovery didn’t begin until hiring resumed in 1984. I'll get the link; reading the TIME Mag assessments is like watching The Pianist and listening as the Polish family assumes France & Britain will deter Hitler from invading. Yet, the 1973 Economists and journalists sound so 'learned".
We are being juvenile with our talk of national sector-wide recovery in 2010.
Avl Dao: back in mid-2008, the orthodox biz community and economists (mistakenly) THOUGHT more debt would keep businesses running and prevent layoffs.
To think so now in 2009 is frighteningly laughable.
Queue Obama and Timmay jabbering about "jump starting" the economy - even though the wheels have come off, the engine has seized up solid, and there's no oil or radiator fluid.
And actually, I don't think that Bernanke or Paulson ever believed it would work. With everything he has at his disposal, do you really think Bernanke meant it when he said subprime was "contained"? I find that very hard to believe. At best they're all buying time and praying for a miracle. At worst, they're a bunch of the biggest looters and power-grabbers ever known.
sm_landlord (profile) wrote on Sun, 5/3/2009 - 4:36 pm reply Ignore user
"But, for April, Toyota declined at a much more rapid pace than honda."
Maybe people started doing the math on the illusory savings of owning a Priapus.
Snigger. I've always been kind of proud of mine although I'm not so egotistical that I'd measure it in miles or gallons.
Toyota has several unique problems but I expect Honda to follow soon with unique problems of their own. While Honda generally makes excellent products they have made way too many of them and demand for new Honda products is going to crash as well.
We have passed the financial crisis part of the downturn. However, no we have the long, slow, painful process of wringing the excess capacity out of the system. This will take years and require the loss of additional millions of jobs.
I am a natural pessimist, but my gut feelings have served me well over the years.
We have passed the financial crisis part of the downturn. However, no we have the long, slow, painful process of wringing the excess capacity out of the system. This will take years and require the loss of additional millions of jobs.
I am a natural pessimist, but my gut feelings have served me well over the years.
Again, folks sounded so knowledgeable in 1973. Sad.
Weird too that we forget that Nixon was involved in so many failed stabilization efforts; folks think Nixon's story is just Watergate and Vietnam. It aint; it's about years of failed stabilization and recovery efforts...ditto for Ford and Carter amd Reagan's 1st half-term.
I see your point, B2. But to the extent that these guarantee programs encourage lending they seem to be targeting loans that will have the effect of propping of the values of financial assets, as opposed to anything that might threaten to leak into wages.
"Special Message to the Congress Announcing Phase III of the Economic Stabilization Program and Requesting Extension of Authorizing Legislation"..."and no one had a clue of the nightmares to come from 1973-1982:"
It was clear to many people at the time that Nixxon's programs were a disaster.
And he wasn't the only politician who did great damage at the time - It was around then that Jerry Brown was elected governor of California.
The 25-yr Experiment is fascinating and it floored me to realize my entire professional life was spent in a bubble.
Tell me about it. I graduated from High School in '82, so my professional life basically started there, too.
When the RE bubble started percolating here in SoCal right after dot-bomb (and a dozen or so years after the last RE boom) I knew something was up, so I started doing some reading & net research. Found out I was friggin' clueless! Luckily I read some books that should rank in history as scarily prophetic, and putting them all together I came to the "AHA!" moment regarding the "25-yr experiment" back about 2004. I've been preparing for the worst ever since.
TJ, After a long-career in financing real estate, and then playing stocks in late 2007, I had my own "OH-MY-GAWD" moment and sounded every claxxon i could for friends/family in 2008. I do wish I had focused more on this in 2004, the extra years of warning would have helped many relatives and friends IF they would have been able to hear anything I said since it would have run contrary to everything they knew.
In this graph(*) it's obvious that we're in a middle of two big wave, so Timmy and Ben is trying to enforce the dams (the balance sheets of the banks) and improve morale of the banksters-troops. But as the mortgage rate resets increase in the next 6 months and peak in a year, well, reality will set in and the banks will be overrun by further massive writedowns.
At that time U3==12%, which is about as in California right now.
It's the Ponzi's business model is being replaced by real socialists' business model and central planning. Good luck to the green shoots.
I think this flu is a big nothingburger. It's just the latest thing the MSM can talk about so they can continue not to talk about how truly screwed we are getting by the folks that own them one way or another.
Yes, this flu could mutate. So can any other. Until it does, it's just an off-season newbie.
Calamity is here when this comes to pass in earnest. Don't mistake my quip for lack of understanding of the seriousness of this matter.
Hey Rocky jokes are fine but reality can be sobering
China has ‘canceled US credit card’ The Raw Story | China has 'canceled US credit card': lawmaker
Kirk was alarmed at how much debt was being bought by the US Federal Reserve due to absence of foreign investors. “There will come a time where the lack of Chinese participation may have a significant impact,” Kirk said.
I think no one knows anything but it's fun to bloviate in the meantime, until something else happens. Then we'll have to come up with all new bloviations.
My favorite story about Nixon's stabilization efforts is about his trying to hype the stock market at one of his press conferences. In response to a question from
Sam Donaldson , the President said , "If I weren't President, I'd buy stocks." Sam Donaldson immediately replied, "Mr. President, if you weren't president, so would I."
My understanding is that if the WHO takes it to level six though, nations are required to act in ways that disrupt travel and trade. So while I agree the msm is using this as an attention getter to lure the public from economic issues, a level six declaration will manifest itself in economic realities.
Credit Crisis Indicators for USA that translate into no return to ‘normal’ for the US economy.....yes this is unprecedented but its reality folks !
Why ?
1) The projected budget deficit for 2009 is $2 trillion
2) The debt-drowned United States debt is already 350 percent of G.D.P and rising fast !
3) The Fed is now holding $10 Trillion of ‘assets’ ( mostly toxic ) transferred from too big to fail banks.
4) Other countries are now buying less of our debt
So what can most Americans look forward to ?
a) for production businesses the wages of American workers will drop in order to compete
b) We already know most service based businesses ( excluding legal, medical, financial, a few others ) don't pay that well.
Bottom line: being frugal is the new black and with 70% of US GDP historically driven by consumer spending this is simply not sustainable going forward !
So how does this end ?
It only ends with a new GDP model that is financially sustainable and environmentally-sound for a massive nation of 300+ million persons. We're not Singapore or Malaysia, for us a GDP built purely on services (paid by debt) won’t cut it.
The challenge for us is how to use the 11-yrs of Wrenching (1973-1984) as a pace-setter in running our lives amidst so much economic chaos and turmoil, and not get seduced by desires and cries for "it to all be over".
There will likely be many head fake recoveries that are also opportunities to make some $$s, change careers, and then escape and take cover and batten-down-all-hatches.
Repeat above...say twice or 3 times?
Until 2017 ?
There will likely be many head fake recoveries that are also opportunities to make some $$s, change careers, and then escape and take cover and batten-down-all-hatches.
The tough part of convincing anyone is that there's no one thing to point to; rather, it's "overwhelming circumstantial evidence". Give people too much information and they get lost, too little and it's dismissed. They just can't put all the pieces together.
TJ, that's what happenned in jan 1973. There was no blinking 'Neon Sign' of things to come.
The clueless ness of orthodox economists along with the American business and geo-political community in January 1973, about what was to come in 1973-194, reminds me of Nassim's The Black Swan and how we grossly over-estimate what we think we know and get ossified in our thinking, expectations and behavior.
I actually made myself re-watch The Pianist weeks before Fannie/Freddie/Lehman/Wachovia collapsed in Sept 08, to immerse myself in how entire societies embrace ‘denial’ as ‘wisdom’.
I don't believe that there is a conspiracy to manipulate the news. I do believe in the power of the collective unconscious and how that affects the masses. Even among the press there is a need to conform within certain lines. This is why the news is almost always the same no matter the source. The sames stories are overlooked, the same stories are pushed. With the advent of the internet this has become worse. More choices and yet less and less news and more and more talking points and headlines. No substance, no analysis, just one sentence blogs to evoke emotional response. Sometimes we claim the reason is that these stories are more profitable, I don't believe that is true. I honestly believe as animals we are social herd creatures. Herds react to stimulus. The news serves as one of those stimuli that moves the human herd. I think we stand next to a cliff and our collective unconscious is trying not to spook us anymore. There is danger yes, but go about your normal lives. See the flashing sign but don't react. We are being programmed. I don't see this as sinister, I think it lacks that. If anything this is an evolutionary response to the the crazy world we live in. Amoral and provided to make sure the herd survives.
"...to immerse myself in how entire societies embrace ‘denial’ as ‘wisdom’."
What else can they do?
Denial is normal. Pandemics are also normal - on a somewhat extended time scale in terms of human lifetimes. Climate change is really happening, as it always has, except that now with human input it's happening rapidly - as it has in the past with other inputs.
Acidification of the oceans because of climate change, acceleration of soil bacteria metabolism because of climate warming, melting of the perma-frost - all of these phenomena can have astonishing and dismaying results from the human point of view. Given the inputs, they're completely normal.
As we've seen recently, imbalances in human economies also have astonishing and dismaying results. Balance is eventually restored, but the situation that obtained before the imbalance came into play will not be so restored.
Buddhists will say that the universe is out of joint. Christians will say that human beings are fallen. I suppose secularists will say that the system is out of joint and the bankers are crooked. I think the bankers are you and me as bankers.
Securitization and automated loan processing go hand-in-hand. Without securitization, someone at the bank would have to decide whether the applicant is qualifed for the loan.
Many banks no longer have people with the knowledge necessary to process a loan application.
SML, one of the regular forumites at irvinehousingblog actually puts together a monthly costa mesa C-S by hand. I'd guess it is reasonably accurate. And I trust anecdotal info, in context, far more than the soothsaying of your average Fed governor - or things like unemployment or GDP #s which may be adjusted many times in many ways.
The one 'truth' I have learned is that all human understanding is based on observation. We don't know anything until we 'see' it. The trouble with this is that human observation depends upon the truth appearing to us. Whether it is Moses and his burning bush or a climatologist and his melting ice caps,. we always assume that our perspective is relevant to what we are watching. That is hubris. Human perspective has changed over time. Our truths, our facts, our gods have all changed as our 'eyes' have seen more. I argue that our increased understanding is ultimately pointless. Knowing that we are chained to the wall and seeing a shadow of the sun, doesn't change the fact that we are still chained to the wall. True knowledge burns the eyes. It changes mankind, and I don't think it ultimately comes from mankind. In that sense I am more a deist than a Buddhist. I believe the watchmaker made the universe. We have a hereditary curiosity that makes us seek out the fingerprints of god in everything we observe, but in the end we don't know anything more about our creator than a computer. I find this strangely comforting to the endless frustration of my Southern Baptist family.
Thanks for the most recent comments, interesting speculation on the current R0 for A/H1N1 which will be key for how this wave plays out. That even "normal" influenza mortality will result in a significant amount of mortality depending on the base number of infections...latest update to the lab confirmed cases and countries involved plot.
Pavel said: I think the bankers are you and me as bankers.
I could not disagree more. These are people who destroyed the world so they could make their second or 3rd $100 million. These people are different - they have no souls. You yourself have cast it as a moral issue.
CR never sleeps
So, OK, governments have spent countless trillions and all they have to show is an improvement in some abstract credit indicators.
What's really moved in the world? From where I sit, things are worse than they were in early March.
CR,
Just wake me up after the 'all clear' has been given ...
mp,
I used to setup and operate a 4 million dollar centrally computer controlled duel Mitsubishi horizontal machining center fed by a Fastems crane system with a washing machine. 40 pallets of many preset jobs on tombstones and bins of raw parts on call to fill any order at a moments notice. It took 2 people to run but many times I ran it by myself. With tooling it probably was worth 10 million. A real workhorse that beast and me too. Oh, and they paid me $15.20/hour to do it. I finally got fed up and told them to fuck off.
"Hey Credit Suisse?"
"Yeah"
"We need to rollover some overnight stuff."
"Yeah?"
"What will it cost me?"
"Around 100bips"
Pause
"Well, can I have some?"
"No"
Things in the general economy have gotten worse, but liquidity in some markets are returning to semi-normal(I'd say in this risk environment, quite normal.)
So the money center banks(save Citi) are past the worst, but now it's the turn of the regional banks to catch the swine flu from the wallowing in the lagoons of CRE & condo merde.
Absolute bottom should be spread over the next three months(thanks to last year's stimulus), slightly positive GDP in Q4, officially out of recession by next March, joyless recovery until 2012 easily.
I think we're in a lull in bad news for now.
If you think back to 2007, some of the subprime lenders like New Century imploded, but then there was a lull until things got interesting in the late summer when Bear's problems started really flaring up. Then there was a lull until March 2008 when Bear imploded. Then there a lull until the late summer of 2008 when the world came crashing down (Fannie, Freddie, Lehman, WaMu, later Wachovia...). There has been a cycle of relative clam as things otherwise head downhill.
But, IMO, the signs for a flare up in late summer 2009 are clearly there. I think a lot of the effect of the massive stimulus plan is being offset by the contraction in government at the state and local level (e.g. in Durham, NC, 10% of the teachers are set to be laid off due to state and local budget woes). Further, the interest rate on the 30 year Treasury has been soaring. The consumer, regardless of "green shoots," is tapped out and - until the unemployment rate decreases - in more and more of a bunker mentality. As unemployment nears 10%, we'll be surprised at whose business model is no longer working (retailers, financials, government). Worse, after the huge government commitment that has spawned stock market optimism, if things are worse in late summer, the disillusion will be palpable.
Hello?
HELLO? . . . HELlo? . . . HEllo? . . . Hello? . . . hello? . . . hel... . . . h... . . . .
mp,
Tooling was cat 50 with each tool changer holding 400 tools.
I guess the banksters have things under control, more or less. It sure took a lot of money, tho.
I'm not impressed. When oil spikes again (and it will sometime, someday), any recovery is gonna get snipped.
I'll bet when there are 3 big banks left the TED spread will get really small. But for some odd reason spreads on consumer loans will rise.
re: machinations.
Can't those big machine centers replicate themselves yet? That's deflationary, no? Profits go to zero. (The societal costs of deflated blowhards are absorbed by the commentariat, heh heh.)
I just don't trust the data anymore. The disconnects are not credible. Sure whatever commercial paper you are lending is going to look more an more AAA as you stop lending to those horrible risky AA- companies like Berkshire Hathaway that might not pay you back but without the volume those spreads are money losers. This is just the banksters playing the game of "How much is 2+2?"
Ans: "How much do you want it to be?"
OT, yogi, don't really get the difference between pkol and kol. does pkol have the chinese stuff? here's my coal ticker, btw, nice day:
http://finance.yahoo.com/q/cq?s=^djuscl,xle,ANR,NRP,ARLP,CNX,FDG,BTU,ACI,FCL,MEE,JRCC,PVR,AHGP,ICO,SSL,RDS-a&d=e
anyhow, just seems like a hotter version of the broader market, 90% fueled by shorts. i'd recommend using tight stops on current positions. i had a small flip of kol from 9 to 11 a few months ago, obviously wish i'd got back on board after that pullback.
it would be nice to get another crack at peabody under 20, i see them as being the only real long-term hold in this climate. i'd really love to be able to load up under 10, which may well happen if the market cracks big time.
I'll just offer this anecdotal piece of information: my business has turned on a dime, every other CEO I've spoken to in the past 2 weeks has said the same thing. Green shoots of optimism are turning into real, improved economic gains. Sectors I know most closely are software and related services.
samdog,
" there are a dozen who couldn't even put a soft taco on their card. "
We have to get the banks to 'start lending' if folks with average to good credit rating are being denied credit. Do we know if this is the case?
If banks are denying credit to people with bad credit -
Would an average investor lend money to those with bad credit? If not, why should policy makers set banks lending to people with bad credit a goal? Banks are already falling of the cliff, why push them over another cliff?
OT Hack, I don't follow energy, just wanted to keep commodity inflation hedge and take a loss on oil in December. PKOL tracks Nasdaq, KOL the "Stowe index". I'll look at Peabody, thanks.
[The dollar LIBOR might break below 1.0% this week]
Stress tests this week. Somehow no matter what the Fed says I think there's going to be skepticism, and uncertainty.
Glad to hear there's some improvement. But is there really?
On the other hand, how many of these indicators represent markets functioning on their own, as opposed to markets being forced out of natural equilibrium by expensive government interventions? In other words, these indicators don't mean what they used to mean, because all the rules have been changed!
As Hong Konger explained very eloquently, Dollar Libor is not a meaningful rate because it doesn't reflect actual reported transactions.
The A2/P2 spread would presumably reflect Federal Reserve intervention policies and not actual corporate credit risks, no? Or does someone who actuall participates in this market have a clearer sense?
The lower TED spread appears to reflect market participants' belief that the TARP'ed and Zombie banks will be kept alive, rather than the belief that they are intrinsically solvent. That and the market participants' ability to hedge against counterparty failures using CDS...
The corporate bond spreads reflect market relief that financial corporation bondholders will be spared major haircuts as a result of things like the Stress Test and ongoing capture of the government. Remember that GE and many other "industrial" operations became heavily financial as well during the credit boom -- must as companies did in Japan -- so the fraction of "financial" corporate paper is large.
Also, the corporate bond spreads are still at a level consistent with the depths of the previous 4 recessions. Not exactly "low"!!!
I don't think the Merrill OAS spread shows a meaningful improvement yet, since it's only back to October 2008 values!
All I can say is that I wish I had more cash right now- finally deals on ebay and craigslist have started.
Yeah, very vulture, but I was tired as heck of having stuff taken out waaaay above what I wanted to pay for the last several years.
That aside, too many folks are trying to use craigslist and ebay as outlets for their failing businesses right now.
That trend is quite sad, as they have no concept of what stuff goes for on the real cheap side. Just troll the completed listings on ebay and see the number of red ones.
Phoenix is crawling with deals, but a lot of folks are still believing in the return of the bubble. That prices will eventually return to the level of the bubble is pretty much assured after we get real inflation, but meanwhile, there will be deals. That is the lesson of the houses selling like hotcakes, folks have money and are willing to spend it when they perceive value. Now, long term they may be wrong, but flippers are returning on the bottom end as thrashed out houses find a level where a modest investment can bring 30% in three months.
The biggest problem is that everyone here is waaaaay too anticipatory.
Now that the first wave of the crisis is past, we just have to wait for a while- the next steps are most likely not going to happen here- watch China and the Middle East.
Boredom will be the biggest enemy.
Someday this war's gonna end...
As CR notes, credit market indicators are improving....but the key is whether credit access is a critical factor – or perhaps even a ‘key log’ - in the economic crisis of 2009. No, it is not.
For 2009, the crisis is NO LONGER about sub-prime residential mortgages or about access to commercial paper. Nor is it no longer about whether CDS can be cross-defaulted.
It is now about the excess production capacity, excess retail space, excess leisure/hospitality facilities, and excess office space. It is about surplus FIRE headcounts, surplus auto worker headcounts, surplus retail headcounts, and surplus state & local government headcounts. It is about declining demand for all manner of products and services, and the rising jettisoning of surplus white-collar and blue-collar workers. The latter means declining real incomes and rising risks in creditworthiness.
This Debt Unwind is a shape-shifting economic crisis. These new 2009 primacy factors are all undermining the value of collateral for debt; therefore easier access to more debt is not a relevant solution to the current problem. What was logical for mid-2008 (easier access to credit) is no longer a logical solution for mid-2009.
We must resist the analytical temptation to fight the war that we have the most data on, for sometimes that is no longer than most relevant war.
I can understand feeling more EZ credit may buttress firms....and slow lay-offs...but those dots are no longer connecting as well as they did before; the ‘Causality’ between those wishes is fraying.
Another way of putting it, is that with government price controls being applied to all manner of credit "products", of course the metrics that the government is targeting will move... in the short term!
But in the long term, the perverse incentives created by the government's price controls will create perverse outcomes, unintended consequences. Credit products whose price is being artificially reduced will see non-government supply curtailed. Those whose price is being artificially supported will either see demand get crushed or malinvestment in additional supply.
Ah well, at least we can shore up the price of the remaining houses by razing the unoccupied ones...
Say Avl Dao, what's your latest take on the influenza? I just posted some analysis on energyecon's blog (http://energyecon.blogspot.com), where he's charting the number of confirmed cases each day. My conclusion is that given the lack of natural resistance, and the high rate at which this thing is spreading, even for a flu with "normal" (mild) symptoms, and thus a 0.1% mortality rate, the U.S. is likely to experience 100,000 deaths in the next several months, and the world at least 1,000,000.
Those looking only at the WHO's current total of about 20 deaths are looking in the rear-view mirror at a train which is accelerating at an exponential rate...
[edit: fixed typos ("that"-> at, ", ," -> ",")
As others above noted, we have a new $15 Trillion 'faux' financial system that Bernanke/Paulson-Geithner/Blair hastily conjured up between March ‘08 and today, using all manner of wizardry and alchemy. The bulk of the $15 Trillion consists of new obligations, new guarantees, and new purchases of toxic debts.
This is an unsustainable financial sleigh-of-hand; if any of these major obligations were called upon to be honored, the whole psychological fantasy would evaporate.
Beyond it being psycho-unsustainable, it is also financially unsustainable.
But yes, the 'data' indicates that credit-markets are less tight.
Coming Pension Bailout
Pensions are kaput and now your tax dollars will bail it out. Add 5-10% pension tax onto you bill today.
"Third, let us work towards the establishment of a safe pension system that is based on portable contributions and that will pay secure life-time annuities."
"The recent drop in the stock market has decimated the individual retirement accounts on which many Americans now depend. Decades ago, most Americans retired with a defined pension benefit from their employer. That financial security was based on life-long employment by one company and the slow build-up of financial assets in that company's retirement account."
"Again, I am not trying to re-invent the wheel here but merely advocate a general system similar to the University of California Retirement System or CalPERS which provides pensions for public employees like teachers, judges and legislators. In turn, the new retirement fund could place its investment in the stocks and bonds securities trading on the Prudent Investor Exchange that I have described earlier."
Robert Heller at the Commonwealth Club in San Francisco on Wednesday, April 29.
Heller is former governor of the Federal Reserve
REBear (profile) wrote on Sun, 5/3/2009 - 4:26 pm
When people say "Banks should/will start lending again", what exactly do they mean?
Banks are lending. My BAC credit card is still valid. My 6 year old has stopped getting credit card offers but that was expected. When Banks 'start lending', will my 6 year old start getting credit card offers??
Samdog (profile) wrote on Sun, 5/3/2009 - 4:34 pm
REBear,
For everyone solvent consumer like you, there are a dozen who couldn't even put a soft taco on their card.
REBear (profile) wrote on Sun, 5/3/2009 - 5:11 pm
samdog,
" there are a dozen who couldn't even put a soft taco on their card. "
We have to get the banks to 'start lending' if folks with average to good credit rating are being denied credit. Do we know if this is the case?
If banks are denying credit to people with bad credit -
Would an average investor lend money to those with bad credit? If not, why should policy makers set banks lending to people with bad credit a goal? Banks are already falling of the cliff, why push them over another cliff?
REBear,
I guess I'm confused about what your point is.
In the original post, I read your comment as: "People say the banks aren't lending, but they are lending--to me, at least. See, my credit card still works ...."
Of course they shouldn't be lending to bad credit risks.
So, in your opinion, are banks lending or not? Seems to me you're arguing both sides.
Rocky - what kind of software?
"Third, let us work towards the establishment of a safe pension system that is based on portable contributions and that will pay secure life-time annuities."
Ahhhh, the new government paradigm. "If it's broke; expand it."
Tim waiting for 2012, got a link for that?
I thought we already HAD "a safe pension system that is based on portable contributions and that will pay secure life-time annuities", and it was known as Social Security???
If we're going to fix the system: all I really want is to be able to have my 401(k) money direct-deposited into my IRA account, where I can control the service provider and have access to the full spectrum of investment options, without nonsensical restrictions on trading, at competitive transaction rates. The idea that 401(k) plans should be captive and provide limited services is really perverse.
Sounds like psychology has turned. The question is whether it will manifest itself in reality. I'm in the camp that this crisis is only in the early-mid stages, but that we'll have periods of time where people believe that the worst is past. Right now is likely one of those times. The question is how long the hope can last. The abomination that is our ponzi economy is not going to meaningfully recover until we recognize the problems and make a concerted effort to fix them. NOT paper them over.
But it looks like I'm going to have to seriously consider closing some of my shorter dated puts.
Wisdom, I haven’t revisited the Swine Flu data...don’t think I will for a # of reasons starting with the worst case scenario and working backwards to the most hopeful scenarios.
As you know, in the worst case, if you can't hermetically de-couple from human contact and society, you remain vulnerable if you live. I know I can’t fully de-couple.
The next case is that the outbreak's disability rate (not the mortality rate) destroys national social infrastructure , and leaves only local networks to adapt and eke out a functioning existance. Surprisingly, ‘that’ scenario actually resembles many Post-Apocalyptic Peak Oil scenarios...and for those scenario, parts of Asheville where I live are actually well-prepared, all things being relative.
"Of course they shouldn't be lending to bad credit risks."
Sorry i thought you were trying to defend govt's policy of trying to get 'credit flowing again' like it was 2006.
P.S. I'm perfectly aware that Social Security isn't actually a pension system. But as long as we're going to print money willy-nilly to meet every whim of our leadership, we might as well finally fix that whole system and switch it from pay-as-you-go to a real buy-your-own-annuity arrangement. Sort of a "guaranteed option" to backstop the 401k/IRA "play at your own risk" option!
"Again, I am not trying to re-invent the wheel here but merely advocate a general system similar to the University of California Retirement System or CalPERS which provides pensions for public employees like teachers, judges and legislators. In turn, the new retirement fund could place its investment in the stocks and bonds securities trading on the Prudent Investor Exchange that I have described earlier."
Question is who will decide what is in the "safe investment" exchange? Will these be things the gov't chooses? Wells Fargo and Citi common shares backed by the gov't? Who will be anointed?
The wisdom of your logic is accurate, that any intervention will affect prices and rates, but I quibble with the notion of a "natural equilibrium". The price of an asset can not be derived independently of the cost of protecting it from fire, theft, vandalism, not to mention the cost of developing it in the first place with a stable, healthy, educated society.
What is the natural equilibrium price for a mortgage on a Miami condo? Depends if the costs of removing the crack smoking squatter next door and bringing in clean water are borne socially.
Wisdon Here is the Link
Bottom Line : Fixing the financial system :
"Wisdom" excuse me
BTW, if we allowed 401k money to be direct-deposited just like take-home pay (whatever IRA the customer wants), the average annual total return for each customer would probably increase by 0.3 to 0.7% a year (due to competitive pricing eliminating needless fees), and we'd do a lot to bring the FIRE economy back down to a more natural size, while also making it a lot easier for Joe Six-Pack to retire (the amount he would have to set aside each month would drop by perhaps 20%, assuming 5% average total return each year). That's like a $200,000 benefit for those thinking of a $40k/year retirement!
Avl Dao (profile) wrote on Sun, 5/3/2009 - 5:28 pm
As CR notes, credit market indicators are improving....but the key is whether credit access is a critical factor – or perhaps even a ‘key log’ - in the economic crisis of 2009. For 2009, the crisis is NO LONGER about sub-prime residential mortgages or about access to commercial paper.
Avl Dao,
You read my mind.
I get the feeling many want to treat business data as though it were following some immutable law.
Business is not a science--unless you consider social science to be in the same class as chemistry or physics, in which case you'd be led very astray. That's not the same thing as saying "business is not important," or "business concepts are all BS."
The same variables be tracked today are being driving by completely different forces from what drove them, say, ten years ago.
Tim, thanks, I wanted to see the whole speech!
RE Bear, you’re being too general with your terminology. Lending involves loan terms, conditions, loan guarantees, etc, for which borrowers may conclude "I can’t get a loan".
In fact that was what actually happened last year - applicants could not get the lending terms they wanted from the lenders of choice.
And...we all could have gotten pay-day loans and mafia loans...but who wanted those?
The bigger point is that collateral is declining in value because the economy is much weaker, job security is less reliable, and assets continue to devalue in price. Large-scale en masse lending to tens & tens -of-millions of households (we have about 129 million HH in the US) on 'good terms' will not resume in this climate.
Ditto for a return of en masse lending on anything we already have a surplus of, i.e. strip malls, auto plants, condo hi-rise towers, etc.
REBear (profile) wrote on Sun, 5/3/2009 - 5:44 pm
"Of course they shouldn't be lending to bad credit risks."
Sorry i thought you were trying to defend govt's policy of trying to get 'credit flowing again' like it was 2006.
Then it looks like we're on the same page on this point.
Funny, he also says "Furthermore, the Glass Steagall Act of 1933 separated commercial banking and investment banking. This fragmented banking system made it impossible to diversify risk -- which is absolutely essential to ensure safety."
I don't think he understands that when risk is "diversified away", you inevitably get more of it, and you end up with systemic risk.
I'd rather see a system with more granular risk that's (a) accountable, and (b) easier to isolate and repair. I don't think you can make risk go away by applying financial engineering; you just hide it so someone else who didn't notice it gets stuck with it later...
What i want to know is... well i see all these low mortgage rates, car loans being advertised on bank and credit union sites. What happens when the cost of money for these places start to rise? they are gonna be screwed or what?
I like this quote from Heller: "In essence, the traders were gambling with the shareholders capital -- and they [shareholders] did not like it: if the trader's bet pays off, he stands to gain a large bonus. If the bet does not pay off, the bank's shareholders are on the hook. That scenario no longer plays well."
Heads I win, tails you lose, does not make for large P/E ratios!
Wisdom good point. This guy is a banker so you know which side he's on. The "national pension" fund scares me as I feel this will be a vehicle to fund "bailout bonds" under the guise of a "national safety net"
rascal, there is always/often set pool of funds available at ‘promotional’ and ‘special’ debt terms...and what I hear is that the most heavily-advertised are bait-n-switch terms applicable only to buyers with pristine credit.
We blog readers are awash with anecdotal stories from friends and colleagues. In a polite society, we don’t demand documentation of these 'great terms' obtained by these story-tellers. Too bad, because most are just water-cooler stories. The lending data is not supporting such anecdotal undocumented water-cooler talk. See what the ABA is reporting from its surveys of bankers.'; 'survey says' its still tight because of creditworthiness and collateral concerns. Is also why AMEX is tightening and paying people to cancel their Amex cards.
rascal; "What happens when the cost of money for these places start to rise?"
Nothing at first, then a fall-off in sales, and if rates go high enough, they either find another source of financing or close down.
Unless, of course, we get embedded wage inflation before the cost of money starts to rise. But that seems unlikely at best.
Eventually, it seems that the great middle class is going to have to trade down. Imagine the horror of parking a brand new $20K car in your driveway. What would the Jonez think?
@Samdog: Exactly! While there are some enduring principles (supply-and-demand), the financial system is a complex, chaotic beast which goes through all manner of changes. The young quants, heavily trained in math and physics and perhaps lacking street smarts, engineered a lot of financial products using a lot of faulty assumptions. The first being that you can "engineer" something in a world where the financial equivalent to the "laws of physics" change over time.
I remember this old cartoon... "Every time I learn all the answers, they change all the questions!"
@Avl Dao: I enjoy all your postings here. I agree wholeheartedly about the folks complaining last fall that they couldn't get a loan on their preferred terms. When there's less collateral value behind a given loan proposal, and the lender's willingness to leverage the borrower has also gone down, those effects are vicious-cycle material.
Anyone following the Berkshire meeting at all?
Gotta go back to real life...
rascal (profile) wrote on Sun, 5/3/2009 - 5:57 pm
What i want to know is... well i see all these low mortgage rates, car loans being advertised on bank and credit union sites. What happens when the cost of money for these places start to rise? they are gonna be screwed or what?
Not if they're following the old, low-risk model practiced for decades following GD1.
Sounds like psychology has turned. The question is whether it will manifest itself in reality. I'm in the camp that this crisis is only in the early-mid stages, but that we'll have periods of time where people believe that the worst is past. Right now is likely one of those times.
My general impression is that the farther a business is from the consumer, the more likely it is that they're confident right now. I think we're seeing the positive piece of an ordinary inventory cycle superimposed on the debt deflation bust. When that inventory doesn't clear we'll be back where we were a few months ago.
CR,
The short term Treasuries have been interesting in the last month (as an indicator). I think the 3 month jumped from .8 to .12, but that area of short-term liquidity and yield is still crashing IMHO and it has a very long way to go before being anywhere near normal, and that aint gonna happen soon!
Additionally the ISM Manufacturing Index continues its trend in a positive direction. It is now above 40. A reading above 43 usually correlates to overall GDP growth and a reading above 50 that the manufacturing sector has returned to growth. The current trend line has a return to growth by summer and a return to manufacturing growth by the end of the year...
ISM Data Signals Return to Growth is Near
"rascal, there is always/often set pool of funds available at ‘promotional’ and ‘special’ debt terms...and what I hear is that the most heavily-advertised are bait-n-switch terms applicable only to buyers with pristine credit."
A Smith Barney (Citi) broker called my 75 year old free and clear mother touting a 2% HELOC. Naturally I wanted to play some poker with that free money, and assured my mother she could buy FDIC guaranteed Citi paper and beat the house. Upon further review (my belligerent phone call), the 2% somehow disappeared.
We went out for Sunday dinner today, and let me tell you people are spending again around here. Restaurants full with people waiting to get in, and local stores seeing heavy traffic. No fear of swine flu. Crisis over. I think this will be an interesting week with the markets, I still believe we have quite a ways down to go, but there are signs that defy my gut feelings. I just can't believe we can go back to business as usual when the curtain was pulled back and we didn't even have a fake wizard, just a fat hamster spinning his wheel. I feel like everyone is in denial, but it could be me. I have always been a glass half-empty type, can't operate on faith, I need reasons.
"Say Avl Dao, what's your latest take on the influenza? "
Once again, those infected are generally the young, children to young adults, and very few people over 50 being affected.
I've also seen a notable uptick in the anecpointal datadotes in terms of eateries, retail, but really only in lower-priced stuff. the higher end is weaker than ever.
tax refunds are giving a nice blip on the radar. that will dry up very soon as the long hot summer of high-end RE collapse begins.
Pontiac Still bringing "Total Confidence"
GM Total Confidence - Assurance You Need | General Motors
Vonbeck
What part of the country are you in?
Fort Worth Texas.
Thanks Wisdom.
I have to return to a local posting on yet another business here in Asheville that's gone belly-up.
This place (Asheville) is amazing; the current crop of business leaders have no grasp of Debt Unwind and Debt DeLeveraging, or on how Bernanke/Geithner/Blair are using alchemy, sorcery and $ trillions in guarantees and new obligations to maintain the facade of a functioning debt system. The leadership is mainly home-grown Realtors and owners of cafes/hotels that cater to our biggest industries of tourism and real estate speculation, so it's not like a strong grasp of banking & finance was ever needed anyway, especially during the bubble years when any trained-monkey-turned-biz-owner could make $$ flipping land & condos, and selling shiny trinkets to the HELOC-fueled credit-card-wielding tourists.
But even 18-months into this downturn, these biz leaders remain completely flummoxed that “nothing is selling” even though “the TV news folks said the Recovery has begun”. A more vulnerable group to CNBC mis-information can not be found anywhere.
So once again I have to post online explanations on how tourists/visitors from 2003-2007 were using Re-fi cash-outs and HELOCs to buy all those great Biltmore vacation packages in 2003-2007, and that nothing from 2003-07 is now financially sustainable in this Post-Bubble world.
Nonetheless, the Realtors still say, “As soon as folks sell their condo in Florida, they’re going to buy a $400K condo here because everyone wants to live here”.
Von Beck
1st of the Month? Mothers Day?
One Realtor finally admitted that at the rate closings are going, there's a 70-year supply of some For Sale housing stock in Metro Asheville.
Fort Worth/Dallas MetroPlex didnt boom in RE so it's not busting in RE. But it's not a barometer for America.
Look at its Case-Shiller data.
In the last week of April, there seems to be two contradictory inflections in the anecdotes
Downers:
* car sales are said to have fallen off a cliff (from low to very low, probably due to impending Chrysler bk)
* dryfly reported one of his major client's orders fell off a cliff (from low to very low)
Uppers:
* CR / Jim the Realtor report hot sales of $700K homes
* RockyR reports upturn in software
Perhaps a recovery is starting, but manufacturing won't participate??
They say that hunh? Sell a condo in Fla???? Hahahahahahahahahahahahahahahahahahahahah!
The hub is starting to buy the green shoots thing. I think this is a pause before the deluge, but when even mp start seeing hope, I must question my negativity.
I think the tax refunds could be in play too. We saw a lot of friends and family groups out. I haven't seen a pick up in home sales. All the homes in my neighborhood are still up. Lots of new for rent and owner finance offers. Used car sales up, but not new cars. This may be a quick uptick in spending due to spring fever. I do know everyone is planning on local vacations this year that we know. Staying in-state.
Which reminds me, is mp multimillenial too, and if not, who did conjure hang around with previously?
Yalt - (from previous thread)
It [Fed injected money] is not intended to reach the streets. The Fed has created incentives to discourage the lending of this money (interest paid on reserves). As far as I can surmise, it's intended to heat up the financial sector and produce asset inflation without getting into wages. Got to maintain confidence in everyone's "retirement", I suppose.
Provocative thought. Do you really think it's not intended to reach the streets or is could it be just an unintended consequence?
Chrysler, in its April 30 filings, listed assets of $39.3 billion and liabilities of $55.2 billion, making it the fifth- largest bankruptcy in U.S. history, according to data compiled by Bloomberg News.
Guess who gets the liabilities??????
I can add an "upper", sort of: I met some friends from a former job last week and I can report (with no surprise) that force-placed property insurance is having a boom the likes of which has never been seen. It's making some specialty insurance brokers very happy indeed.
On the down-anecdote side, I also learned that two friends who lost their jobs in the early days of the crunch are still unemployed and one of them has essentially given up the search. I wonder how much of that is going on.
Pavel thanks for your early flu warnings, no matter how severe it turns out to be. Usually I ignore the flu (I don't even have a general physician).
"It [Fed injected money] is not intended to reach the streets. The Fed has created incentives to discourage the lending of this money (interest paid on reserves). As far as I can surmise, it's intended to heat up the financial sector and produce asset inflation without getting into wages. Got to maintain confidence in everyone's "retirement", I suppose."
Provocative thought. Do you really think it's not intended to reach the streets or is could it be just an unintended consequence?
The decision to pay interest on Fed bank reserves had a single, obvious and therefore intended consequence--it incentivized keeping funds on reserve at the Fed instead of lending them out.
Yalt,
Your "upper" sounds as optimistic as a surge in business for bankruptcy lawyers.
Lots of churn in the Internet services business right now. It appears to be a net positive at this point.
I hope we still understand that anecdotal observation is not data
20 years ago, when someone said, ‘son, you’re using anecdotal evidence’ they were not issuing you a compliment, in fact it was often a mild rebuke.
We’ve become such a polite society since then that we actually feel the ‘anecdotal’ label is something like a ‘smart’ or ‘good’ label.
Nope, ‘anecdotal’ is still a mild dismissive, rightfully so, or at least still means, ‘not to be trusted’ beyond the 1 or 2 or 3 or so cases one directly observed.
Thankfully, CR points us to data sources to test the validity of our observations.
LawyerLiz, you'd die of laughter if you lived in metro Asheville where not only are realtors our dominant 'business class', they are defacto political leadership.
But then, none of our banks or bankers have political clout here. They're quiet mousey types.
CR didn't report on the most important credit crisis indicator, the 10 year Treasury yield. Its up to 3.15 on Friday from a low of 2.5 after the Fed announcement it would buy (monetize) $300 Billion. With China no longer buying Treasuries, skyrocketing Treasury yields will be the center of the next crises, IMO.
But at some point, some task force members acknowledge, the drive for profitability is likely to collide with Mr. Obama’s fuel-efficiency and low-emission goals. G.M. produced heavy gas-guzzlers because they were among the most profitable in its line and, for a long time, the most popular. It is unclear whether smaller cars can be as profitable — or, for a few years, competitive with offerings from Toyota and Honda and a raft of inexpensive cars under development in China.
it incentivized keeping funds on reserve at the Fed
doesn't it also improve the banks earnings on reserves they already had at the fed?
Anon2 Roubini has been warning about this for years.
"Nope, ‘anecdotal’ is still a mild dismissive, rightfully so, or at least still means, ‘not to be trusted’ beyond the 1 or 2 or 3 or so cases one directly observed."
True, but in a lot of cases it's all you can get. And some of the broader stats are so broad as to have have limited direct applicability. A good example of this is the C-S numbers, which tell you nothing about prices in a given neighborhood, particularly in enormous MSAs like Los Angeles.
"Pavel thanks for your early flu warnings, no matter how severe it turns out to be. Usually I ignore the flu (I don't even have a general physician)."
I just copy and paste.
I note, though, that the WHO and CDC are reluctant to express optimism at this point. That's understandable. The organism is not fully understood. Mutation is possible. It would be unfortunate to put people off their guard at this point in case something changes. Also worrisome is the excess of risk to the young.
I'm only a layman, but I sense that if we can get through fall and early winter without an increase in virulence we'll have done well.
As have many others. My point is the change in 10 year Treasury yields is a very important indicator of the credit crisis, and it is deteriorating.
Tim,
Roubini was far from the first. The guys at iTulip made the case in 1999. As is usually the case, it's taken longer to play out than the forecast, but otherwise things are progressing as expected...
ka-poom
The decision to pay interest on Fed bank reserves had a single, obvious and therefore intended consequence--it incentivized keeping funds on reserve at the Fed instead of lending them out.
I've heard this argument before and it doesn't make sense in isolation. If you're a bank, there's no way that you keep the money in reserves, especially with so much guaranteed lending right now (e.g. FHA) unless (1) you're scared $hitless for capitalization reasons or (2) you don't have enough borrowers.
From Edmunds on April auto sales:
"And as Americans were faced daily with dramatic headlines out of Detroit about the fates of Chrysler and GM, showroom traffic and sales actually faded toward the end of the month rather than pick up as it usually does. "Retail sales hit the wall in the last week of April for most OEMs," DiGiovanni said."
Somebody better put some Miracle Gro on those green shoots.
sm_landlord (profile) wrote on Sun, 5/3/2009 -
True, but in a lot of cases it's all you can get. And some of the broader stats are so broad as to have have limited direct applicability. A good example of this is the C-S numbers, which tell you nothing about prices in a given neighborhood, particularly in enormous MSAs like Los Angeles.
There's other options. Even for a given neighborhood, you cant trust the validity of casual observations as it relates to RE. The good invesors/developers actually pick up the phone and call apt mgrs, etc., or collect their own data from the courthouse, MLS, etc, before making a big $$ decision.
As for us lay people, we simply need to avoid watching all the lovers smooching in the park and assuming marriage rates are about to increase.
Avl Dao said:
What was logical for mid-2008 (easier access to credit)
More debt was never the logical answer.
'"And as Americans were faced daily with dramatic headlines out of Detroit about the fates of Chrysler and GM, showroom traffic and sales actually faded toward the end of the month rather than pick up as it usually does. "Retail sales hit the wall in the last week of April for most OEMs," DiGiovanni said."'
My wife and I drove this afternoon to a Montgomery County library about five miles from our home in NW DC. There's a swell used book store in the basement, with a very sizable collection of excellent books at very low prices, priced to move. I bought an American Heritage volume, published in 1968, of rare 19th century and early 20th century American photographs, for five dollars. It occurred to me that a hundred years ago we could have got to the library and back on a since abandoned highly advanced urban transport system called the street car.
If such a system existed now I think we would gladly have taken it instead of driving there in our car.
What have we done? And can we undo it?
I did not submit my observations as evidence. Just merely reporting a change in what I have grown accustomed in seeing around here. I do know DFW is not a litmus test for the rest of the country as well. I come here to share thoughts and observations like many did at the country stores of old. I am not an expert in any methodology of finance or monetary policy and do not expect to be taken seriously by the more experienced and educated posters at this site. Hell I have a hard time keeping up with what some of you post but I love to learn and that is why I am here. The end of the day, I am a philosopher. I love to observe, and what goes on in here is part of what I like to watch. I know nothing, and never will.
doesn't it also improve the banks earnings on reserves they already had at the fed?
Yes, but the incentive to increase reserves cannot possibly have been accidental.
If the idea was to get this liquidity into the general economy, it would have been given to the healthiest commercial banks, who would have been the likeliest to lend it out. Instead it was given to the sickest of the sick, and banks having an investment-banking rather than a commercial-banking model. I don't know how to reach any other conclusion than that the intentions were (1) to prop up large zombie commercial banks and (2) to get money into the markets.
Do you guys think that a recovery of any consequence is possible without rethinking some basic but obsolescent assumptions.<\b>
Bobn, I agree. but at least I can understand why, back in mid-2008, the orthodox biz community and economists (mistakenly) THOUGHT more debt would keep businesses running and prevent layoffs.
To think so now in 2009 is frighteningly laughable.
(1) you're scared $hitless for capitalization reasons
yes.
"I just copy and paste."
I buy generic labels whenever possible. But when sifting comments, the label adds value even to a paste-ry.
WSJ:
DETROIT -- U.S. vehicle sales turned out even worse than expected in April, muting optimism that the auto market is poised to rebound.
Auto makers blamed the high-profile troubles at General Motors Corp. and Chrysler LLC for dragging down sales last month across the industry. Chrysler sought bankruptcy protection on Thursday.
"We've been fighting all these rumors left and right and it doesn't help," GM sales chief Mark LaNeve said. "I thought we were going to close much better than we did."
Shaky consumer confidence and high unemployment levels also offset benefits of increased credit availability, deep auto discounts and U.S. government backing of warranties on GM and Chrysler vehicles.
April sales totaled 819,540 cars and light trucks, a decline of 34% from a year earlier, according to market research firm Autodata Corp. The seasonally adjusted, annualized sales pace was 9.32 million vehicles, down from March's 9.86 million rate.
9.32m SAAR is barely sufficient to keep two automakers operating.
"We've been fighting all these rumors left and right and it doesn't help," GM sales chief Mark LaNeve said.
Sure. Reports of difficulties at GM and Chrysler are just unsubstantiated rumors.
I suppose it isn't really lying if you've lost any conception of "truth".
The most surprising data point for me was the 42% drop for Toyota - this included a 42% drop for corolla and 37% drop for camry.
Lucifer, I believe that the 25-yr (1982-2007) experiment of operating a 300+ million-person nation on a GDP that is 70% driven by Debt-Enabled Consumer Spending is over; that GDP model is dying and the liklihood of re-animating its dead flesh looks dim.
That means all things consumer-spending-driven remain highly vulnerable to sustained downturns, stuck in a cycle of Debt Unwind, Recession, and Rising Joblessness.
The implcations of the death of this GDP model are gi-normous.
An 'L'-shaped Descent with no prospects for ascent; the permanent loss of jobs in retailing & hospitality, and in banking.
The spectre of re-inflating debt bubbles only to see cascading re-collapses until we learn our lessons.
That's why we're really in a Structural Economic Transformation, driven by Debt Unwind atop deflating debt collateral; and not a simple 'V', 'U' or 'W' Recession-then-Recovery.
This is the question I keep wrestling with. We can't go back to business as usual. I mean the Emperor had no clothes, honestly. But most of my friends and family believe he does and is still the greatest and best and want that illusion back. Better to be a satisfied pig than a dissatisfied Socrates.
seroy, Toyota's sales have declined for 12 consecutive month; that is why they ousted their Top Guys...the news on declines, on historic profit drops, etc, was publicized in Bloomberg News every month as it unfolded, but our Cognitive Dissonance deafens most of us. We only hear a simplistic story-narrative that Toyota Is Good, Prius is Great; while GM is Bad, GM sales are down.
Google Toyota News going back to June 2008 and see.
Avl Dao,
Well said! Please note that the 25-yr experiment also covers 90% of the period wherein government spending consistently exceeded revenues; IOW, we've been running on "stimulus" the entire time. I could cite many more unique aspects of this era that do not bode well for the future.
Avl Dao (profile) wrote on Sun, 5/3/2009 - 4:19 pm reply Ignore user
seroy, Toyota's sales have declined for 12 consecutive month; that is why they ousted their Top Guys...
They should have tried massive retention bonuses. Works for US banks.
TOYOTA CITY, Japan — For years, Toyota City prospered along with the giant carmaker that shares its name, growing into a global automotive manufacturing
center as its official sister city, Detroit, slid into decline.
Toyota's Troubles Slam Japan's Motor City - NY Times
Dawg and Avl Dao,
Check out the latest statistics from Japan: JAMA Current Statistics
January was bad enough, but February? WOOF!!!
Credit Crisis Indicators for USA - stay tuned !
1) The projected budget deficit for 2009 is $2 trillion
2) The debt-drowned United States debt is already 350 percent of G.D.P and rising fast !
3) The Fed is now holding $10 Trillion of ‘assets’ ( mostly toxic ) transferred from too big to fail banks.
4) The Triumph of the Banking Oligarchs continues at huge taxpayer expense
5) perhaps most Americans should look forward to being a much BIGGER version of Argentina or Mexico in the near future !
TJ and The Bear (profile) wrote on Sun, 5/3/2009 - 4:24 pm reply Ignore user
Check out the latest statistics from Japan...
I'm glad I got those fork seals for my '83 GS1100ES before they turned out the lights.
To answer a question from above: "enterprise software". Performance is up in about everything - automation, BI, sales & marketing platforms, web 2, etc.
It's my unqualified opinion that we have very, very hard times ahead. However, right now, it appears that at least some of 2009 is going to be a bit of calm before the storm. I say that just given the data that we have right now. When the next leg down comes is a guess better left to you guys. I'm just sure of the fact that bigger, scarier crises are yet to come... could be 3 months or 3 years away.
People will keep spending whatever they can afford to give up, just so long as the Chinese keep giving us their money
Man, I thought the swine flu stuff had died down, I just read that WHO is prepared to up the level to six this week based on the spread of the virus despite the severity of symptoms. Texas has 43 confirmed cases spread through 12 counties with more school closings coming. This is really turning into a classic case study for future generations.
OK, so here's a question:
Can anyone see a currency that is likely to be in better shape than the dollar for the next few years?
The Yen was real strong until a few months ago. The Swiss Franc is probably toast without banking secrecy.
Maybe resource-based economies like the Oz Dollar?
Hey Rocky jokes are fine but reality can be sobering
China has ‘canceled US credit card’
The Raw Story | China has 'canceled US credit card': lawmaker
Kirk was alarmed at how much debt was being bought by the US Federal Reserve due to absence of foreign investors. “There will come a time where the lack of Chinese participation may have a significant impact,” Kirk said.
Of course tomost American rubes have no freaking clue !
RockyR,
A pessimist could say that you're seeing investments geared towards running even leaner shops in the near future.
RockyR: That correlates with what I am seeing in Internet services.
TJ: Thinking onshore outsourcing.
Not every small business can afford an IT department.
No small business should be running their own mail servers, and many are starting to figure that out.
Avl Dao (profile) wrote on Sun, 5/3/2009
Toyota's sales have declined for 12 consecutive month
The surprise was not in the decline but in the relative difference of decline. Until last month, honda and toyota's declines generally matched each other (within 5% points). But, for April, Toyota declined at a much more rapid pace than honda.
"But, for April, Toyota declined at a much more rapid pace than honda."
Maybe people started doing the math on the illusory savings of owning a Priapus.
Samdog (profile) wrote on Sun, 5/3/2009 - 3:50 pm
* reply
* Ignore user
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Welcome to WalMart, may I help you?
Rocky, TJ and VonBeck,
The 25-yr Experiment is fascinating and it floored me to realize my entire professional life was spent in a bubble.
The 9-11 years of wrenching structural transformation, 1973 to 1982/84, is equally fascinating and a Cautionary tale for us.
We entered that period with President’s Economic Stabilization Plan and Address to Congress in January 1973 and no one had a clue of the nightmares to come from 1973-1982: 3 'official recessions" ergo we had two headfake recoveries; 2 Energy Shocks & shortages; 2-digit job losses and interest rates and mortgage rates; the destruction of the Rustbelt’s mfg core; the mass-migration of Rust belt workers to the SunBelt with massive political implications,; a stagnate DOW for 9 years and an S&P Bear in 73-75.
Mind-numbing.
The electorate lost all tolerance for Presidential political mis-steps & stumbles, let alone crimes, and ousted Nixon, Ford & Carter, in short order.
The Great Communicator, Reagan faced a 50% disapproval rating in 1982 when unemployment stubbornly stayed above 10% and he too would have been ousted had hiring not resumed in 1984.
It is Juvenile to believe the Dems or Team Obama have any permanency (i.e. 2 terms) this early in the game given how intolerant the electorate will be with 1+million job losses and/or furloughs/give-backs-per-month from now til 2010 mid-terms.
Read that 1973 Economic Stabilization Plan in Time Magazine’s archives and the news analysis and weep at how NO ONE had any idea what was getting ready to slam them for not 3-4 years, but NINE years...11 years if you feel recovery didn’t begin until hiring resumed in 1984. I'll get the link; reading the TIME Mag assessments is like watching The Pianist and listening as the Polish family assumes France & Britain will deter Hitler from invading. Yet, the 1973 Economists and journalists sound so 'learned".
We are being juvenile with our talk of national sector-wide recovery in 2010.
Avl Dao:
back in mid-2008, the orthodox biz community and economists (mistakenly) THOUGHT more debt would keep businesses running and prevent layoffs.
To think so now in 2009 is frighteningly laughable.
Queue Obama and Timmay jabbering about "jump starting" the economy - even though the wheels have come off, the engine has seized up solid, and there's no oil or radiator fluid.
And actually, I don't think that Bernanke or Paulson ever believed it would work. With everything he has at his disposal, do you really think Bernanke meant it when he said subprime was "contained"? I find that very hard to believe. At best they're all buying time and praying for a miracle. At worst, they're a bunch of the biggest looters and power-grabbers ever known.
Special Message to the Congress Announcing Phase III of the Economic Stabilization Program and Requesting Extension of Authorizing Legislation
January 11, 1973
Richard Nixon: Special Message to the Congress Announcing Phase III of the Economic Stabilization Program and Requesting Extension of Authorizing Legislation
sm_landlord (profile) wrote on Sun, 5/3/2009 - 4:36 pm reply Ignore user
"But, for April, Toyota declined at a much more rapid pace than honda."
Maybe people started doing the math on the illusory savings of owning a Priapus.
Snigger. I've always been kind of proud of mine although I'm not so egotistical that I'd measure it in miles or gallons.
Toyota has several unique problems but I expect Honda to follow soon with unique problems of their own. While Honda generally makes excellent products they have made way too many of them and demand for new Honda products is going to crash as well.
My 2 cents:
We have passed the financial crisis part of the downturn. However, no we have the long, slow, painful process of wringing the excess capacity out of the system. This will take years and require the loss of additional millions of jobs.
I am a natural pessimist, but my gut feelings have served me well over the years.
My 2 cents:
We have passed the financial crisis part of the downturn. However, no we have the long, slow, painful process of wringing the excess capacity out of the system. This will take years and require the loss of additional millions of jobs.
I am a natural pessimist, but my gut feelings have served me well over the years.
the grind goes on
Again, folks sounded so knowledgeable in 1973. Sad.
Weird too that we forget that Nixon was involved in so many failed stabilization efforts; folks think Nixon's story is just Watergate and Vietnam. It aint; it's about years of failed stabilization and recovery efforts...ditto for Ford and Carter amd Reagan's 1st half-term.
Nixon's Other Crisis: The Shrinking Dollar TIME Magazine
Monday, Jun. 18, 1973
POLICY: Nixon's Other Crisis: The Shrinking Dollar - TIME
I see your point, B2. But to the extent that these guarantee programs encourage lending they seem to be targeting loans that will have the effect of propping of the values of financial assets, as opposed to anything that might threaten to leak into wages.
Avl Dao;
"Special Message to the Congress Announcing Phase III of the Economic Stabilization Program and Requesting Extension of Authorizing Legislation"..."and no one had a clue of the nightmares to come from 1973-1982:"
It was clear to many people at the time that Nixxon's programs were a disaster.
And he wasn't the only politician who did great damage at the time - It was around then that Jerry Brown was elected governor of California.
The 25-yr Experiment is fascinating and it floored me to realize my entire professional life was spent in a bubble.
Tell me about it. I graduated from High School in '82, so my professional life basically started there, too.
When the RE bubble started percolating here in SoCal right after dot-bomb (and a dozen or so years after the last RE boom) I knew something was up, so I started doing some reading & net research. Found out I was friggin' clueless! Luckily I read some books that should rank in history as scarily prophetic, and putting them all together I came to the "AHA!" moment regarding the "25-yr experiment" back about 2004. I've been preparing for the worst ever since.
The difference between the 1970's and today was that our strategic competitor (USSR) was in much worse shape than us. That is not the case this time.
We have passed the financial crisis part of the downturn.
Beg to differ. More problems still ahead of us than behind.
TJ, After a long-career in financing real estate, and then playing stocks in late 2007, I had my own "OH-MY-GAWD" moment and sounded every claxxon i could for friends/family in 2008. I do wish I had focused more on this in 2004, the extra years of warning would have helped many relatives and friends IF they would have been able to hear anything I said since it would have run contrary to everything they knew.
In this graph(*) it's obvious that we're in a middle of two big wave, so Timmy and Ben is trying to enforce the dams (the balance sheets of the banks
) and improve morale of the banksters-troops. But as the mortgage rate resets increase in the next 6 months and peak in a year, well, reality will set in and the banks will be overrun by further massive writedowns.
At that time U3==12%, which is about as in California right now.
It's the Ponzi's business model is being replaced by real socialists' business model and central planning. Good luck to the green shoots.
(*) from Dr. Housing Bubble Blog Apr 24th.
I think this flu is a big nothingburger. It's just the latest thing the MSM can talk about so they can continue not to talk about how truly screwed we are getting by the folks that own them one way or another.
Yes, this flu could mutate. So can any other. Until it does, it's just an off-season newbie.
We have passed the financial crisis part of the downturn.
I agree with TJ avec Bear. A one period blip in economic numbers does not a trend make. Also recommend the following:
Why This Rally Is Unsustainable -- Seeking Alpha
I am curious to see how the welfare states in the EU deal with 1) demographic decline and 2) a prolonged economic malaise.
Calamity is here when this comes to pass in earnest. Don't mistake my quip for lack of understanding of the seriousness of this matter.
Hey Rocky jokes are fine but reality can be sobering
China has ‘canceled US credit card’
The Raw Story | China has 'canceled US credit card': lawmaker
Kirk was alarmed at how much debt was being bought by the US Federal Reserve due to absence of foreign investors. “There will come a time where the lack of Chinese participation may have a significant impact,” Kirk said.
I think no one knows anything but it's fun to bloviate in the meantime, until something else happens. Then we'll have to come up with all new bloviations.
My favorite story about Nixon's stabilization efforts is about his trying to hype the stock market at one of his press conferences. In response to a question from
Sam Donaldson , the President said , "If I weren't President, I'd buy stocks." Sam Donaldson immediately replied, "Mr. President, if you weren't president, so would I."
My understanding is that if the WHO takes it to level six though, nations are required to act in ways that disrupt travel and trade. So while I agree the msm is using this as an attention getter to lure the public from economic issues, a level six declaration will manifest itself in economic realities.
Credit Crisis Indicators for USA that translate into no return to ‘normal’ for the US economy.....yes this is unprecedented but its reality folks !
Why ?
1) The projected budget deficit for 2009 is $2 trillion
2) The debt-drowned United States debt is already 350 percent of G.D.P and rising fast !
3) The Fed is now holding $10 Trillion of ‘assets’ ( mostly toxic ) transferred from too big to fail banks.
4) Other countries are now buying less of our debt
So what can most Americans look forward to ?
a) for production businesses the wages of American workers will drop in order to compete
b) We already know most service based businesses ( excluding legal, medical, financial, a few others ) don't pay that well.
Bottom line: being frugal is the new black and with 70% of US GDP historically driven by consumer spending this is simply not sustainable going forward !
So how does this end ?
It only ends with a new GDP model that is financially sustainable and environmentally-sound for a massive nation of 300+ million persons. We're not Singapore or Malaysia, for us a GDP built purely on services (paid by debt) won’t cut it.
The challenge for us is how to use the 11-yrs of Wrenching (1973-1984) as a pace-setter in running our lives amidst so much economic chaos and turmoil, and not get seduced by desires and cries for "it to all be over".
There will likely be many head fake recoveries that are also opportunities to make some $$s, change careers, and then escape and take cover and batten-down-all-hatches.
Repeat above...say twice or 3 times?
Until 2017 ?
There will likely be many head fake recoveries that are also opportunities to make some $$s, change careers, and then escape and take cover and batten-down-all-hatches.
Dibs on Tahiti.
Welcome to WalMart, may I help you?
YouTube - Best of Idiocracy - Welcome to Costco
Avl,
The tough part of convincing anyone is that there's no one thing to point to; rather, it's "overwhelming circumstantial evidence". Give people too much information and they get lost, too little and it's dismissed. They just can't put all the pieces together.
"So while I agree the msm is using this as an attention getter to lure the public from economic issues..."
You believe there's a kind of central committee that decides what goes into the news, and why?
TJ, that's what happenned in jan 1973. There was no blinking 'Neon Sign' of things to come.
The clueless ness of orthodox economists along with the American business and geo-political community in January 1973, about what was to come in 1973-194, reminds me of Nassim's The Black Swan and how we grossly over-estimate what we think we know and get ossified in our thinking, expectations and behavior.
I actually made myself re-watch The Pianist weeks before Fannie/Freddie/Lehman/Wachovia collapsed in Sept 08, to immerse myself in how entire societies embrace ‘denial’ as ‘wisdom’.
Pavel said: You believe there's a kind of central committee that decides what goes into the news, and why?
No, profit motive and advertiser preferences take care of that.
If it's anything like the 1970s, there will be a lot of opportunities.
People will need to be very very flexible, though.
Wisdom Speeker-
"I don't think he understands that when risk is "diversified away", you inevitably get more of it, and you end up with systemic risk."
Nice work.
A neat and tidy summation on the failed assumptions of Modern Portfolio Theory.
I don't believe that there is a conspiracy to manipulate the news. I do believe in the power of the collective unconscious and how that affects the masses. Even among the press there is a need to conform within certain lines. This is why the news is almost always the same no matter the source. The sames stories are overlooked, the same stories are pushed. With the advent of the internet this has become worse. More choices and yet less and less news and more and more talking points and headlines. No substance, no analysis, just one sentence blogs to evoke emotional response. Sometimes we claim the reason is that these stories are more profitable, I don't believe that is true. I honestly believe as animals we are social herd creatures. Herds react to stimulus. The news serves as one of those stimuli that moves the human herd. I think we stand next to a cliff and our collective unconscious is trying not to spook us anymore. There is danger yes, but go about your normal lives. See the flashing sign but don't react. We are being programmed. I don't see this as sinister, I think it lacks that. If anything this is an evolutionary response to the the crazy world we live in. Amoral and provided to make sure the herd survives.
"...to immerse myself in how entire societies embrace ‘denial’ as ‘wisdom’."
What else can they do?
Denial is normal. Pandemics are also normal - on a somewhat extended time scale in terms of human lifetimes. Climate change is really happening, as it always has, except that now with human input it's happening rapidly - as it has in the past with other inputs.
Acidification of the oceans because of climate change, acceleration of soil bacteria metabolism because of climate warming, melting of the perma-frost - all of these phenomena can have astonishing and dismaying results from the human point of view. Given the inputs, they're completely normal.
As we've seen recently, imbalances in human economies also have astonishing and dismaying results. Balance is eventually restored, but the situation that obtained before the imbalance came into play will not be so restored.
Buddhists will say that the universe is out of joint. Christians will say that human beings are fallen. I suppose secularists will say that the system is out of joint and the bankers are crooked. I think the bankers are you and me as bankers.
Securitization and automated loan processing go hand-in-hand. Without securitization, someone at the bank would have to decide whether the applicant is qualifed for the loan.
Many banks no longer have people with the knowledge necessary to process a loan application.
"If anything this is an evolutionary response to the the crazy world we live in. "
Sure. Of course. I mean that.
"No, profit motive and advertiser preferences take care of that."
So by that logic we require a press that has no advertising and loses money. I've heard of that. And it was still full of b.s.
You mean, like blogs?
SML, one of the regular forumites at irvinehousingblog actually puts together a monthly costa mesa C-S by hand. I'd guess it is reasonably accurate. And I trust anecdotal info, in context, far more than the soothsaying of your average Fed governor - or things like unemployment or GDP #s which may be adjusted many times in many ways.
i also like the aussie dollar in the low 60s.
The one 'truth' I have learned is that all human understanding is based on observation. We don't know anything until we 'see' it. The trouble with this is that human observation depends upon the truth appearing to us. Whether it is Moses and his burning bush or a climatologist and his melting ice caps,. we always assume that our perspective is relevant to what we are watching. That is hubris. Human perspective has changed over time. Our truths, our facts, our gods have all changed as our 'eyes' have seen more. I argue that our increased understanding is ultimately pointless. Knowing that we are chained to the wall and seeing a shadow of the sun, doesn't change the fact that we are still chained to the wall. True knowledge burns the eyes. It changes mankind, and I don't think it ultimately comes from mankind. In that sense I am more a deist than a Buddhist. I believe the watchmaker made the universe. We have a hereditary curiosity that makes us seek out the fingerprints of god in everything we observe, but in the end we don't know anything more about our creator than a computer. I find this strangely comforting to the endless frustration of my Southern Baptist family.
Handy little chart reflecting where the global indexes started in this bear market and where we stand.
http://static.seekingalpha.com/uploads/2009/5/3/saupload_2_mei_v3.jpg
km4 (profile) wrote on Sun, 5/3/2009 - 7:26 pm
3) The Fed is now holding $10 Trillion of ‘assets’ ( mostly toxic ) transferred from too big to fail banks.
I'm guessing those are mark-to-market dollars ...
bobn,
"I think this flu is a big nothingburger."
I hope you're right.
But just to be on the safe side, I still want mine very well done!
Hey Wisdom Speaker,
Thanks for the most recent comments, interesting speculation on the current R0 for A/H1N1 which will be key for how this wave plays out. That even "normal" influenza mortality will result in a significant amount of mortality depending on the base number of infections...latest update to the lab confirmed cases and countries involved plot.
energyecon
Pavel said: I think the bankers are you and me as bankers.
I could not disagree more. These are people who destroyed the world so they could make their second or 3rd $100 million. These people are different - they have no souls. You yourself have cast it as a moral issue.
I am a natural pessimist, but my gut feelings have served me well over the years.
That comes from being in Cleveland. Boom times in NE Ohio feel like a Depression to those who have lived in California and the rest of the Sun-belt.
This interest rate market is without precedent. We have no frame of reference for it.
Reminds me of an old quote by H.L. Mencken (1880-1956) that seems appropriate:
"We are here and it is now. Everything else is moonshine."