no_vaseline_IHB
New member
Thank God man! I thought we lost you.
Economic Commentary
- Thread starter BondTrader_IHB
- Start date
NEW -> Contingent Buyer Assistance Program
BondTrader_IHB
New member
<strong>A BULLISH CONSENSUS</strong>
Barron?s runs with a take on the consensus outlook for the market (page 21 ?
Fall Outlook) ? the S&P 500 is seen going to 1,056 by year-end, or another 4%
upside from current levels. Few are predisposed to the Treasury market and the
consensus is 3.7% on the 10-year Treasury note yield. Fully 80% of the
PMs/strategists polled favour technology; 70% like energy; and 50% are
recommending the financials.
<strong>MORE BANK FAILURES</strong>
It is amazing that so many pundits favour the financials when so many are failing
by the week. Regulators just shut down First Bank of Kansas City, pushing the
number of banks that have failed this year to 85 ? as many as failed in the prior
14 years combined. Hundreds more are expected to fail in the next few years on
the back of souring loans for commercial real estate (see Construction Loans
Falter, a Bad Omen For Banks on page B3 of the Saturday NYT). The number of
banks on the FDIC's confidential ?problem list? jumped to 416 at the end of June
from 305 in the first quarter ? the highest since June 1994.
*Gold rallies past $1,000 and dollar hit a 12 month low today. (I will be surprised if the govt won't support the dollar at current level)
*Beijing issues first 6 billion, non-dollar denominated renminbi bond sale (FT)
*Watch S&P 1028, if it fails to rally past that, the correction will continue and I believe 920-950 will likely be the support before the next leg up.
Barron?s runs with a take on the consensus outlook for the market (page 21 ?
Fall Outlook) ? the S&P 500 is seen going to 1,056 by year-end, or another 4%
upside from current levels. Few are predisposed to the Treasury market and the
consensus is 3.7% on the 10-year Treasury note yield. Fully 80% of the
PMs/strategists polled favour technology; 70% like energy; and 50% are
recommending the financials.
<strong>MORE BANK FAILURES</strong>
It is amazing that so many pundits favour the financials when so many are failing
by the week. Regulators just shut down First Bank of Kansas City, pushing the
number of banks that have failed this year to 85 ? as many as failed in the prior
14 years combined. Hundreds more are expected to fail in the next few years on
the back of souring loans for commercial real estate (see Construction Loans
Falter, a Bad Omen For Banks on page B3 of the Saturday NYT). The number of
banks on the FDIC's confidential ?problem list? jumped to 416 at the end of June
from 305 in the first quarter ? the highest since June 1994.
*Gold rallies past $1,000 and dollar hit a 12 month low today. (I will be surprised if the govt won't support the dollar at current level)
*Beijing issues first 6 billion, non-dollar denominated renminbi bond sale (FT)
*Watch S&P 1028, if it fails to rally past that, the correction will continue and I believe 920-950 will likely be the support before the next leg up.
BondTrader_IHB
New member
<strong>ANOTHER TAXPAYER-FUNDED BAILOUT
</strong>
The era of free money is back ? courtesy of the U.S. government
In case you are wondering how it is that the housing market has suddenly
sprung back, it?s because the era of free money is back, courtesy of the
benevolent U.S. government. The FHA?s share of the mortgage market has
ballooned from a residual 3.0% in 2006 to 23.0% currently as the government
moves in to replace the private subprime lending industry. So now we are back
to the thought process that insuring mortgages with a 3.5% down payment is a
good thing for the economy ? little surprise that the FHA delinquency rate has
soared to nearly 8.0% from 5.4% a year ago, and the taxpayer is on the hook.
How is it that there is no public outrage for a government policy of giving another
shot of scotch to the drunken sailor is totally beyond our comprehension.
</strong>
The era of free money is back ? courtesy of the U.S. government
In case you are wondering how it is that the housing market has suddenly
sprung back, it?s because the era of free money is back, courtesy of the
benevolent U.S. government. The FHA?s share of the mortgage market has
ballooned from a residual 3.0% in 2006 to 23.0% currently as the government
moves in to replace the private subprime lending industry. So now we are back
to the thought process that insuring mortgages with a 3.5% down payment is a
good thing for the economy ? little surprise that the FHA delinquency rate has
soared to nearly 8.0% from 5.4% a year ago, and the taxpayer is on the hook.
How is it that there is no public outrage for a government policy of giving another
shot of scotch to the drunken sailor is totally beyond our comprehension.
Nude_IHB
New member
[quote author="BondTrader" date=1252452120]How is it that there is no public outrage for a government policy of giving another
shot of scotch to the drunken sailor is totally beyond our comprehension.</blockquote>
He's not drunk, he was suffering from delirium tremens and the scotch was to get him back to a manageable state. Not the best way to treat a drunken sailor, obviously, but they aren't really doctors now are they?
Welcome back BT
shot of scotch to the drunken sailor is totally beyond our comprehension.</blockquote>
He's not drunk, he was suffering from delirium tremens and the scotch was to get him back to a manageable state. Not the best way to treat a drunken sailor, obviously, but they aren't really doctors now are they?
Welcome back BT
BondTrader_IHB
New member
<strong>NEITHER A LENDER NOR A BORROWER BE</strong>
U.S. consumer credit was released yesterday and it fell a record $21.6bln in
July on top of the revised -$15.5bln reading in June (was -$10.3bln) ? consensus
was expecting a decline of -$3.6bln. Consumer credit is now down six months in a
row for a total $92.3bln in credit being paid off. On an annual rate, consumer
credit is falling 10.4% in July, which is the fastest pace of consumer deleveraging
since June 1975. The year-on-year trend is now at -4.24% (or -$109.5bln), which
is the fastest pace of decline in consumer credit since June 1944.
As for the breakdown, revolving credit fell $6.1bln in July and is now down 10
months in a row totaling to a record -$69.6 decline in revolving credit. Nonrevolving
credit is down $15.4bln in July on top of the $10.7bln reduction in June.
<strong> Manpower Survey </strong>
Employment services company Manpower Inc. released its employment outlook survey for the U.S. for
4Q and the net figure fell a point to -3 ? the lowest on record (data back to
1976). The low in the 1990s was 2 and back in the 1980s it was -2. On a fourquarter
basis, the average is also at a record reading of 1, which way surpasses
the lowest reading we saw back in the early ?80 of 3.
The amount of respondents seeing an increase in employment fell to a record
low of 12% while those seeing a decrease rose back to 14% (same level as in 2Q
2009 and the highest since 1Q2001). Region wise, the Northeast had the
largest decrease in hiring intentions, down 5 points to -5 after being at 0 in the
last two quarter and the Midwest saw its hiring intentions fall a point to -3 in 4Q.
The West was unchanged at a record low (data back to 1995) of -3 and the
South region?s hiring intentions rose 2 points to 0 in 4Q.
<strong>NFIB INDEX STAYS ?SMALL?</strong>
National Federation of Independent Business small business optimism index rose
2.1 points to 88.6 in August ? nearly reversing the entire decline seen in the last
two months and the highest level since May. However, on a 12-month basis, the
small business optimism remains depressed, still at a record low of 86.6.
The biggest improvement in the index was due to the percent of firms
expecting the economy to improve, which jumped 13 points in August to 10%;
however, besides from that pop, all the other components were pretty tepid.
U.S. consumer credit was released yesterday and it fell a record $21.6bln in
July on top of the revised -$15.5bln reading in June (was -$10.3bln) ? consensus
was expecting a decline of -$3.6bln. Consumer credit is now down six months in a
row for a total $92.3bln in credit being paid off. On an annual rate, consumer
credit is falling 10.4% in July, which is the fastest pace of consumer deleveraging
since June 1975. The year-on-year trend is now at -4.24% (or -$109.5bln), which
is the fastest pace of decline in consumer credit since June 1944.
As for the breakdown, revolving credit fell $6.1bln in July and is now down 10
months in a row totaling to a record -$69.6 decline in revolving credit. Nonrevolving
credit is down $15.4bln in July on top of the $10.7bln reduction in June.
<strong> Manpower Survey </strong>
Employment services company Manpower Inc. released its employment outlook survey for the U.S. for
4Q and the net figure fell a point to -3 ? the lowest on record (data back to
1976). The low in the 1990s was 2 and back in the 1980s it was -2. On a fourquarter
basis, the average is also at a record reading of 1, which way surpasses
the lowest reading we saw back in the early ?80 of 3.
The amount of respondents seeing an increase in employment fell to a record
low of 12% while those seeing a decrease rose back to 14% (same level as in 2Q
2009 and the highest since 1Q2001). Region wise, the Northeast had the
largest decrease in hiring intentions, down 5 points to -5 after being at 0 in the
last two quarter and the Midwest saw its hiring intentions fall a point to -3 in 4Q.
The West was unchanged at a record low (data back to 1995) of -3 and the
South region?s hiring intentions rose 2 points to 0 in 4Q.
<strong>NFIB INDEX STAYS ?SMALL?</strong>
National Federation of Independent Business small business optimism index rose
2.1 points to 88.6 in August ? nearly reversing the entire decline seen in the last
two months and the highest level since May. However, on a 12-month basis, the
small business optimism remains depressed, still at a record low of 86.6.
The biggest improvement in the index was due to the percent of firms
expecting the economy to improve, which jumped 13 points in August to 10%;
however, besides from that pop, all the other components were pretty tepid.
irvine_grad_IHB
New member
Interesting happenings on the global front...
<a href="http://globaleconomicanalysis.blogspot.com/2009/09/us-fires-opening-salvo-in-trade-wars.html">Mish: US Fires Opening Salvo In Trade Wars With China</a>
<a href="http://globaleconomicanalysis.blogspot.com/2009/09/us-fires-opening-salvo-in-trade-wars.html">Mish: US Fires Opening Salvo In Trade Wars With China</a>
Nude_IHB
New member
[quote author="irvine_grad" date=1252564071]Interesting happenings on the global front...
<a href="http://globaleconomicanalysis.blogspot.com/2009/09/us-fires-opening-salvo-in-trade-wars.html">Mish: US Fires Opening Salvo In Trade Wars With China</a></blockquote>
From the link: "In aggregate it is clear (at least it should be clear) that trade wars cost jobs."
But so does having a free trade agreement. I'm not pro-union or pro-tariffs, but it's pretty clear that we are damned if we do and damned if we don't when it comes to imports. You cannot compete with labor costs that are 95% lower than domestic costs... until you reduce labor costs.
<a href="http://globaleconomicanalysis.blogspot.com/2009/09/us-fires-opening-salvo-in-trade-wars.html">Mish: US Fires Opening Salvo In Trade Wars With China</a></blockquote>
From the link: "In aggregate it is clear (at least it should be clear) that trade wars cost jobs."
But so does having a free trade agreement. I'm not pro-union or pro-tariffs, but it's pretty clear that we are damned if we do and damned if we don't when it comes to imports. You cannot compete with labor costs that are 95% lower than domestic costs... until you reduce labor costs.
no_vaseline_IHB
New member
[quote author="Nude" date=1252564637][quote author="irvine_grad" date=1252564071]Interesting happenings on the global front...
<a href="http://globaleconomicanalysis.blogspot.com/2009/09/us-fires-opening-salvo-in-trade-wars.html">Mish: US Fires Opening Salvo In Trade Wars With China</a></blockquote>
From the link: "In aggregate it is clear (at least it should be clear) that trade wars cost jobs."
But so does having a free trade agreement. I'm not pro-union or pro-tariffs, but it's pretty clear that we are damned if we do and damned if we don't when it comes to imports. You cannot compete with labor costs that are 95% lower than domestic costs... until you reduce labor costs.</blockquote>
You can't compete with the labor costs when China keeps thier exchange rates artifcally low against ours, creating a cost advantage of about 45% over the US. Strip that away and they don't look so hot anymore.
You know what cars sell well in China? Buicks. China slaps a 25% import tarraff so GM is forced to build them over there. And that means they have to take the supply chain along with them..............
<a href="http://globaleconomicanalysis.blogspot.com/2009/09/us-fires-opening-salvo-in-trade-wars.html">Mish: US Fires Opening Salvo In Trade Wars With China</a></blockquote>
From the link: "In aggregate it is clear (at least it should be clear) that trade wars cost jobs."
But so does having a free trade agreement. I'm not pro-union or pro-tariffs, but it's pretty clear that we are damned if we do and damned if we don't when it comes to imports. You cannot compete with labor costs that are 95% lower than domestic costs... until you reduce labor costs.</blockquote>
You can't compete with the labor costs when China keeps thier exchange rates artifcally low against ours, creating a cost advantage of about 45% over the US. Strip that away and they don't look so hot anymore.
You know what cars sell well in China? Buicks. China slaps a 25% import tarraff so GM is forced to build them over there. And that means they have to take the supply chain along with them..............
Nude_IHB
New member
[quote author="no_vaseline" date=1252590550][quote author="Nude" date=1252564637][quote author="irvine_grad" date=1252564071]Interesting happenings on the global front...
<a href="http://globaleconomicanalysis.blogspot.com/2009/09/us-fires-opening-salvo-in-trade-wars.html">Mish: US Fires Opening Salvo In Trade Wars With China</a></blockquote>
From the link: "In aggregate it is clear (at least it should be clear) that trade wars cost jobs."
But so does having a free trade agreement. I'm not pro-union or pro-tariffs, but it's pretty clear that we are damned if we do and damned if we don't when it comes to imports. You cannot compete with labor costs that are 95% lower than domestic costs... until you reduce labor costs.</blockquote>
You can't compete with the labor costs when China keeps thier exchange rates artifcally low against ours, creating a cost advantage of about 45% over the US. Strip that away and they don't look so hot anymore.
You know what cars sell well in China? Buicks. China slaps a 25% import tarraff so GM is forced to build them over there. And that means they have to take the supply chain along with them..............</blockquote>
How many supply chain jobs go to China if the US Gov cuts GM's taxes by an equal offsetting amount? Is is cheaper than <a href="http://www.nytimes.com/2008/03/10/business/worldbusiness/10iht-chilabor.1.10866224.html?_r=1&pagewanted=2">paying some guy $292 a month</a> in Guangzhou? Hell, they could make ALL their cars in China and ship them back here and still beat the domestic production costs.
Even with a non-pegged currency, domestic labor can't compete. If it's not China, it's Malaysia... then Philippines... then Vietnam... eventually it will be some West African nation where they promise to crack down on genocide in exchange for lifting a trade embargo so their people can assemble laptops for $4 a week. The point is that there will always be someplace cheaper to have people press buttons and tape boxes. A consumer-driven economy is going to cannibalize itself eventually because price is what drives sales and labor is the only flexible cost left. At some point, we run out of jobs that pay people enough to consume.
<a href="http://globaleconomicanalysis.blogspot.com/2009/09/us-fires-opening-salvo-in-trade-wars.html">Mish: US Fires Opening Salvo In Trade Wars With China</a></blockquote>
From the link: "In aggregate it is clear (at least it should be clear) that trade wars cost jobs."
But so does having a free trade agreement. I'm not pro-union or pro-tariffs, but it's pretty clear that we are damned if we do and damned if we don't when it comes to imports. You cannot compete with labor costs that are 95% lower than domestic costs... until you reduce labor costs.</blockquote>
You can't compete with the labor costs when China keeps thier exchange rates artifcally low against ours, creating a cost advantage of about 45% over the US. Strip that away and they don't look so hot anymore.
You know what cars sell well in China? Buicks. China slaps a 25% import tarraff so GM is forced to build them over there. And that means they have to take the supply chain along with them..............</blockquote>
How many supply chain jobs go to China if the US Gov cuts GM's taxes by an equal offsetting amount? Is is cheaper than <a href="http://www.nytimes.com/2008/03/10/business/worldbusiness/10iht-chilabor.1.10866224.html?_r=1&pagewanted=2">paying some guy $292 a month</a> in Guangzhou? Hell, they could make ALL their cars in China and ship them back here and still beat the domestic production costs.
Even with a non-pegged currency, domestic labor can't compete. If it's not China, it's Malaysia... then Philippines... then Vietnam... eventually it will be some West African nation where they promise to crack down on genocide in exchange for lifting a trade embargo so their people can assemble laptops for $4 a week. The point is that there will always be someplace cheaper to have people press buttons and tape boxes. A consumer-driven economy is going to cannibalize itself eventually because price is what drives sales and labor is the only flexible cost left. At some point, we run out of jobs that pay people enough to consume.
no_vaseline_IHB
New member
But Nude, you ingored my point!
When I was in MBA school (over a decade ago now, yikes!) we used to do a ton of Harvard Business school cases. I remember this one very vividly because Kenhar was a vendor of mine at the time.
<a href="http://www.primisonline.com/cgi-bin/POL_CaseLink.cgi?dispOrdNum=1872708&dispTitle=Waddock: Leading Corporate Citizens: Vision, Values, Value Added, Third Edition">Link for Cite</a>
Case ? Kenhar Products, Inc.
<blockquote>Kenneth F. Harling, Alan DeRoo Kenhar Products, Inc., a Canadian company selling most of its output in the United States, is a world leader in the manufacture of steel fork arms. Kenhar?s major U.S. competitor, Dyson and Sons, has asked the U.S. International Trade Commission to impose a temporary tariff of 35 percent on imported forks. Bill Harrison, Kenhar president, must decide how to respond.
Source: North American Case Research Association, Case Research Journal, Winter 1993, Volume 13, Issue 1. Copyright 1993.
Courses: Business and Society; Business Policy/Strategy; International Business; Operations Management</blockquote>
You have to pay for the HBS cases, so I'll give you the cliffs notes:
Dyson and Kenhar were competitors that were 20 miles away from each other, but it might as well been a million because one was in Canada and the other was in the US. Kenhar (the Canadian company) had a 35% cost advantage specifically because of the favorable exchange rate. Thier labor forces were about equal (hell, they were the same!) and input costs were the same. Kenhar's comparative advantage was strictly being on the right side of the currency trade.
This was 1993. By 1996 Dyson was broke and Kenhar was the only supplier for the whole industry.
The Chinese currency is roughly 45% undervalued vs the US$ (way worse than in the Kenhar case), and that acts as a "shadow subsidy" to everyone in China exporting here, and a "shadow tax" to everyone importing to China, PLUS the tacit import duties that may exist. And that's the big lie in all the "free trade" arguments. Exchange rates are not a durable competitive advantage, but they certainly are a comparable advantage that can crush companies and industries for no good reason. And everybody in China has a 45% head start on everybody in the US ? for no good reason.
When I was in MBA school (over a decade ago now, yikes!) we used to do a ton of Harvard Business school cases. I remember this one very vividly because Kenhar was a vendor of mine at the time.
<a href="http://www.primisonline.com/cgi-bin/POL_CaseLink.cgi?dispOrdNum=1872708&dispTitle=Waddock: Leading Corporate Citizens: Vision, Values, Value Added, Third Edition">Link for Cite</a>
Case ? Kenhar Products, Inc.
<blockquote>Kenneth F. Harling, Alan DeRoo Kenhar Products, Inc., a Canadian company selling most of its output in the United States, is a world leader in the manufacture of steel fork arms. Kenhar?s major U.S. competitor, Dyson and Sons, has asked the U.S. International Trade Commission to impose a temporary tariff of 35 percent on imported forks. Bill Harrison, Kenhar president, must decide how to respond.
Source: North American Case Research Association, Case Research Journal, Winter 1993, Volume 13, Issue 1. Copyright 1993.
Courses: Business and Society; Business Policy/Strategy; International Business; Operations Management</blockquote>
You have to pay for the HBS cases, so I'll give you the cliffs notes:
Dyson and Kenhar were competitors that were 20 miles away from each other, but it might as well been a million because one was in Canada and the other was in the US. Kenhar (the Canadian company) had a 35% cost advantage specifically because of the favorable exchange rate. Thier labor forces were about equal (hell, they were the same!) and input costs were the same. Kenhar's comparative advantage was strictly being on the right side of the currency trade.
This was 1993. By 1996 Dyson was broke and Kenhar was the only supplier for the whole industry.
The Chinese currency is roughly 45% undervalued vs the US$ (way worse than in the Kenhar case), and that acts as a "shadow subsidy" to everyone in China exporting here, and a "shadow tax" to everyone importing to China, PLUS the tacit import duties that may exist. And that's the big lie in all the "free trade" arguments. Exchange rates are not a durable competitive advantage, but they certainly are a comparable advantage that can crush companies and industries for no good reason. And everybody in China has a 45% head start on everybody in the US ? for no good reason.
BondTrader_IHB
New member
<strong>A LIGHTER SHADE OF BEIGE</strong>
The Fed?s Beige Book is a wonderful insights regarding the Fed districts? markets. In particular, we have sector shifts.
<strong>Sectors that were WEAK but are Now Improving</strong>
? Tourism
? Staffing firms
? Railroads (over trucking and ? Small parcel service firms
? Automotive (cash for clunkers)
? Paper products/containerboard
? Chemical manufacturing
? Semiconductors
? Entry-level housing
? Grocery chains
? Apparel retailing (
youth)
<strong>Sectors that are SOLID and remain Solid</strong>
? IT Services
? Health Services
? Pharma
? Aerospace
? Discount stores
? Public construction (roads)
? Food manufacturing
<strong>Sectors that were SOLID but are Now Weakening</strong>
? Tobacco
? Oil and gas drilling
<strong>Sectors that remain WEAK:</strong>
? Financial services
? Commercial construction
? Luxury goods retailers
? Appliance manufacturers
? Home and garden centers
? High-end real estate
? Multi-family housing
? Commercial real estate
? Coal mining producers
? Electric utilities
? Heavy trucks
? Restaurants
The Fed?s Beige Book is a wonderful insights regarding the Fed districts? markets. In particular, we have sector shifts.
<strong>Sectors that were WEAK but are Now Improving</strong>
? Tourism
? Staffing firms
? Railroads (over trucking and ? Small parcel service firms
? Automotive (cash for clunkers)
? Paper products/containerboard
? Chemical manufacturing
? Semiconductors
? Entry-level housing
? Grocery chains
? Apparel retailing (
youth)
<strong>Sectors that are SOLID and remain Solid</strong>
? IT Services
? Health Services
? Pharma
? Aerospace
? Discount stores
? Public construction (roads)
? Food manufacturing
<strong>Sectors that were SOLID but are Now Weakening</strong>
? Tobacco
? Oil and gas drilling
<strong>Sectors that remain WEAK:</strong>
? Financial services
? Commercial construction
? Luxury goods retailers
? Appliance manufacturers
? Home and garden centers
? High-end real estate
? Multi-family housing
? Commercial real estate
? Coal mining producers
? Electric utilities
? Heavy trucks
? Restaurants
BondTrader_IHB
New member
<strong>Friday Specials Continues </strong>
The FDIC quietly shuttered three more banks on Friday, including Chicago based Corus Bank, which was riddled with commercial real estate exposure
and brings to 92 the total number of banks that have been forced to close so
far in 2009, and the year still has more than three months to go. So far this
year, there have been more bank failures than in the last 15 years
combined.
<strong>WTF! </strong>
Obama team decided to side with the United Steelworkers and against the
consumer as it imposed tariffs on Chinese cars for the next three years (35% in
year one). The move will essentially cut off the source of nearly 17% of all tires
sold in the U.S. China has already indicated that it would restrict U.S. imports of
chicken and auto products after Washington's punitive slap ? raising tensions in
a trade dispute ahead of two planned meetings between the countries? leaders.
<strong>
V-shaped recovery? </strong>
It is so evident, with fiscal stimulus accounting for 100% of global economic
activity this year and an estimated 80% government contribution to world GDP
growth in 2010, that this entire recovery is as illusory and artificial as it was in
the treacherous 1930s. Even after the bottom at that time, a bottom that was
aided and abetted by a 40% dollar devaluation, and after seven years of
rampant New Deal stimulus, the CPI was still deflating at a 2% annual rate by
the end of the decade, the unemployment rate was still north of 15%, and the
level of GDP was still below its 1929 peak. The equity market had merely traded
<strong>Bank credit continues to contract at an alarming rate</strong>
During theSeptember 2nd week, U.S. commercial banks cut back on their commercial &
industrial (C&I) loans by $10.3 billion; their real estate credit by a huge $15.3
billion; and their lines to consumers by $6.4 billion. In sum, $32 billion of banking
sector lending evaporated during the week, bringing the total contraction to over
$200 billion since the end of July. Not only is that unprecedented, but it is also a
record decline in percent terms ? down at over a 12% annual rate on a 13-week
basis. Indeed, we have massive government stimulus that is still just patching a
leaky boat, and the consensus economics community is trying to ?sell? this idea to
investors that credit typically lags the cycle. That may well be true, but not by this
much ? these declines in lending activity are triple the most severe downdrafts we
have seen in the modern era ? there is no comparison.
The FDIC quietly shuttered three more banks on Friday, including Chicago based Corus Bank, which was riddled with commercial real estate exposure
and brings to 92 the total number of banks that have been forced to close so
far in 2009, and the year still has more than three months to go. So far this
year, there have been more bank failures than in the last 15 years
combined.
<strong>WTF! </strong>
Obama team decided to side with the United Steelworkers and against the
consumer as it imposed tariffs on Chinese cars for the next three years (35% in
year one). The move will essentially cut off the source of nearly 17% of all tires
sold in the U.S. China has already indicated that it would restrict U.S. imports of
chicken and auto products after Washington's punitive slap ? raising tensions in
a trade dispute ahead of two planned meetings between the countries? leaders.
<strong>
V-shaped recovery? </strong>
It is so evident, with fiscal stimulus accounting for 100% of global economic
activity this year and an estimated 80% government contribution to world GDP
growth in 2010, that this entire recovery is as illusory and artificial as it was in
the treacherous 1930s. Even after the bottom at that time, a bottom that was
aided and abetted by a 40% dollar devaluation, and after seven years of
rampant New Deal stimulus, the CPI was still deflating at a 2% annual rate by
the end of the decade, the unemployment rate was still north of 15%, and the
level of GDP was still below its 1929 peak. The equity market had merely traded
<strong>Bank credit continues to contract at an alarming rate</strong>
During theSeptember 2nd week, U.S. commercial banks cut back on their commercial &
industrial (C&I) loans by $10.3 billion; their real estate credit by a huge $15.3
billion; and their lines to consumers by $6.4 billion. In sum, $32 billion of banking
sector lending evaporated during the week, bringing the total contraction to over
$200 billion since the end of July. Not only is that unprecedented, but it is also a
record decline in percent terms ? down at over a 12% annual rate on a 13-week
basis. Indeed, we have massive government stimulus that is still just patching a
leaky boat, and the consensus economics community is trying to ?sell? this idea to
investors that credit typically lags the cycle. That may well be true, but not by this
much ? these declines in lending activity are triple the most severe downdrafts we
have seen in the modern era ? there is no comparison.
profette_IHB
New member
<a href="http://news.yahoo.com/s/ap/20090915/ap_on_bi_ge/us_bernanke">Bernanke says recession 'very likely over'</a>
WASHINGTON ? Federal Reserve Chairman Ben Bernanke said Tuesday the worst recession since the 1930s is probably over, although he cautioned that pain ? especially for the nearly 15 million unemployed Americans ? will persist.
Bernanke said the economy likely is growing now, but he warned that won't be sufficient to prevent the unemployment rate, now at a 26-year high of 9.7 percent, from rising.
With expectations for a lethargic recovery, the Fed predicts that unemployment will top 10 percent this year. The post-World War II high was 10.8 percent at the end of 1982.
<span style="color: red;">Some economists say it will take at least four years for the jobless rate to drop down to a more normal range of 5 percent.</span>
<img src="http://rds.yahoo.com/_ylt=A9G_bDhX1K9KTVkBNoijzbkF/SIG=13406658h/EXP=1253123543/**http://i27.photobucket.com/albums/c176/skibumcolo/2008/ben-bernanke-superman.jpg" alt="" />
WASHINGTON ? Federal Reserve Chairman Ben Bernanke said Tuesday the worst recession since the 1930s is probably over, although he cautioned that pain ? especially for the nearly 15 million unemployed Americans ? will persist.
Bernanke said the economy likely is growing now, but he warned that won't be sufficient to prevent the unemployment rate, now at a 26-year high of 9.7 percent, from rising.
With expectations for a lethargic recovery, the Fed predicts that unemployment will top 10 percent this year. The post-World War II high was 10.8 percent at the end of 1982.
<span style="color: red;">Some economists say it will take at least four years for the jobless rate to drop down to a more normal range of 5 percent.</span>
<img src="http://rds.yahoo.com/_ylt=A9G_bDhX1K9KTVkBNoijzbkF/SIG=13406658h/EXP=1253123543/**http://i27.photobucket.com/albums/c176/skibumcolo/2008/ben-bernanke-superman.jpg" alt="" />
BondTrader_IHB
New member
<strong>It?s official, market will never go down again since big Ben said the recession was over. </strong>
? <strong>Retail Sales</strong> - As for yesterday?s data, the reason retail sales in the U.S.A. exceeded
expectations was the use of very aggressive seasonal factors, which made the
raw data seem stronger than they may have been. In fact, we estimate that it
made the difference between the 2.7% gain we saw and the 2.0% gain (and flat
core number) we would have likely seen with the application of a more normal
seasonal adjustment factor. The market wants to believe that the American
consumer is poised for a sustainable recovery, but there are far too many
roadblocks and in due course, investors will be back pricing in the new frugality
that is customary after a credit collapse and asset deflation of the magnitude
that households endured over the last two years. As an aside, you know that
when you have Ben Bernanke and Ken Lewis both saying the same thing ? the
recession is over ? one of them can?t possibly be telling the truth.
<strong>? US Dollar</strong> - The U.S. dollar is clearly slipping to new lows for the year and with the DXY at
76.291, we are a hair?s breadth away from breaking below the September 22,
2008 nearby low of 75.89 and once that figure is taken out, there is nothing but
air down to the 70 level. Great news for commodities or anything else ?priced in?
U.S. dollars; terrible news for anyone earning dollars (though most pundits are
mercantilists and think this is a great reason to buy equities) and it means that the
Loonie is going to very likely break back above par sooner rather than later.
Gold, as an aside, just made a fresh 18-month high above $1,020/oz.
? <strong>Optimism abounds</strong>. Even though current quarter earnings are likely to come in
30% below consensus expectations that were prevailing at the start of the year,
the equity market has pulled off one of the major coups of all time with a 55% rally
from the lows to fresh 11-month highs. While next year?s profit forecasts are being
moved up, there should be a pretty wide error term around them ? more than
what is normal coming off a classic manufacturing inventory down-cycle.
? <strong>Retail Sales</strong> - As for yesterday?s data, the reason retail sales in the U.S.A. exceeded
expectations was the use of very aggressive seasonal factors, which made the
raw data seem stronger than they may have been. In fact, we estimate that it
made the difference between the 2.7% gain we saw and the 2.0% gain (and flat
core number) we would have likely seen with the application of a more normal
seasonal adjustment factor. The market wants to believe that the American
consumer is poised for a sustainable recovery, but there are far too many
roadblocks and in due course, investors will be back pricing in the new frugality
that is customary after a credit collapse and asset deflation of the magnitude
that households endured over the last two years. As an aside, you know that
when you have Ben Bernanke and Ken Lewis both saying the same thing ? the
recession is over ? one of them can?t possibly be telling the truth.
<strong>? US Dollar</strong> - The U.S. dollar is clearly slipping to new lows for the year and with the DXY at
76.291, we are a hair?s breadth away from breaking below the September 22,
2008 nearby low of 75.89 and once that figure is taken out, there is nothing but
air down to the 70 level. Great news for commodities or anything else ?priced in?
U.S. dollars; terrible news for anyone earning dollars (though most pundits are
mercantilists and think this is a great reason to buy equities) and it means that the
Loonie is going to very likely break back above par sooner rather than later.
Gold, as an aside, just made a fresh 18-month high above $1,020/oz.
? <strong>Optimism abounds</strong>. Even though current quarter earnings are likely to come in
30% below consensus expectations that were prevailing at the start of the year,
the equity market has pulled off one of the major coups of all time with a 55% rally
from the lows to fresh 11-month highs. While next year?s profit forecasts are being
moved up, there should be a pretty wide error term around them ? more than
what is normal coming off a classic manufacturing inventory down-cycle.
BondTrader_IHB
New member
[quote author="awgee" date=1253155921]Something to ponder: Has Bernanke ever been right about anything? Seriously.</blockquote>
Well, we all knew when Q3 GDP came out with a big plus sign in front, they will make him look like a super star.
Well, we all knew when Q3 GDP came out with a big plus sign in front, they will make him look like a super star.
awgee_IHB
New member
[quote author="BondTrader" date=1253156515][quote author="awgee" date=1253155921]Something to ponder: Has Bernanke ever been right about anything? Seriously.</blockquote>
Well, we all knew when Q3 GDP came out with a big plus sign in front, they will make him look like a super star.</blockquote>
What was his prediction about the economy and the probability of recession? How about the "containment" of the sub prime mortgage problem? How about the housing market is general? I do not have his quotes in front of me, but my memory tells me he has been wrong, ... , on everything. Yeah, everything.
Well, we all knew when Q3 GDP came out with a big plus sign in front, they will make him look like a super star.</blockquote>
What was his prediction about the economy and the probability of recession? How about the "containment" of the sub prime mortgage problem? How about the housing market is general? I do not have his quotes in front of me, but my memory tells me he has been wrong, ... , on everything. Yeah, everything.
BondTrader_IHB
New member
Equities continued to rise as today?s economic data supported yesterday?s comment by Fed Chairman Bernanke that ?the recession is very likely over.? The S&P500; gained 1.5%, and was led by financials (REITs) and the energy sector.
CPI data showed that headline consumer prices were slightly stronger than expected, rising by 0.4% M/M, with the annual inflation rate rising to -1.5% Y/Y, and that core consumer prices were in line with consensus, up 0.1% M/M, with the annual rate of core inflation easing to 1.4% Y/Y. The overall report suggests that the deflation threat is now behind us, and that core prices will remain contained for some time, allowing the Fed considerable room to maintain the current accommodative monetary policy for the time being.
On balance, the Industrial Production and Capacity Utilization report suggested an improvement in the pace of economic activity and was consistent with the surge in the ISM production sub-component. Capacity utilization, however, continues to sit near the all-time low of 68.1% reached in June and speaks to the large amount of slack that still exists in the economy.
Oil jumped above $72 on bullishness as Department of Energy data showed that crude supply fell to its lowest level since January.
CPI data showed that headline consumer prices were slightly stronger than expected, rising by 0.4% M/M, with the annual inflation rate rising to -1.5% Y/Y, and that core consumer prices were in line with consensus, up 0.1% M/M, with the annual rate of core inflation easing to 1.4% Y/Y. The overall report suggests that the deflation threat is now behind us, and that core prices will remain contained for some time, allowing the Fed considerable room to maintain the current accommodative monetary policy for the time being.
On balance, the Industrial Production and Capacity Utilization report suggested an improvement in the pace of economic activity and was consistent with the surge in the ISM production sub-component. Capacity utilization, however, continues to sit near the all-time low of 68.1% reached in June and speaks to the large amount of slack that still exists in the economy.
Oil jumped above $72 on bullishness as Department of Energy data showed that crude supply fell to its lowest level since January.
Nude_IHB
New member
[quote author="BondTrader" date=1253162286]Equities continued to rise as today?s economic data supported yesterday?s comment by Fed Chairman Bernanke that ?the recession is very likely over.? The S&P500; gained 1.5%, and was led by financials (REITs) and the energy sector.
CPI data showed that headline consumer prices were slightly stronger than expected, rising by 0.4% M/M, with the annual inflation rate rising to -1.5% Y/Y, and that core consumer prices were in line with consensus, up 0.1% M/M, with the annual rate of core inflation easing to 1.4% Y/Y. The overall report <strong>suggests that the deflation threat is now behind us, and that core prices will remain contained for some time, allowing the Fed considerable room to maintain the current accommodative monetary policy </strong>for the time being.
On balance, the Industrial Production and Capacity Utilization report suggested an improvement in the pace of economic activity and was consistent with the surge in the ISM production sub-component. Capacity utilization, however, continues to sit near the all-time low of 68.1% reached in June and speaks to the large amount of slack that still exists in the economy.
<strong>Oil jumped above $72</strong> on bullishness as Department of Energy data showed that crude supply fell to its lowest level since January.</blockquote>
Excuse me BT, but isn't that the recipe for stagflation?
CPI data showed that headline consumer prices were slightly stronger than expected, rising by 0.4% M/M, with the annual inflation rate rising to -1.5% Y/Y, and that core consumer prices were in line with consensus, up 0.1% M/M, with the annual rate of core inflation easing to 1.4% Y/Y. The overall report <strong>suggests that the deflation threat is now behind us, and that core prices will remain contained for some time, allowing the Fed considerable room to maintain the current accommodative monetary policy </strong>for the time being.
On balance, the Industrial Production and Capacity Utilization report suggested an improvement in the pace of economic activity and was consistent with the surge in the ISM production sub-component. Capacity utilization, however, continues to sit near the all-time low of 68.1% reached in June and speaks to the large amount of slack that still exists in the economy.
<strong>Oil jumped above $72</strong> on bullishness as Department of Energy data showed that crude supply fell to its lowest level since January.</blockquote>
Excuse me BT, but isn't that the recipe for stagflation?