Free Republic

Fannie / Freddie - What Does Treasury Know? by: Karl DenningerDecember 25, 2009 On Christmas Eve one would think you could have a nice evening with your family. Little did I know what Timmy Geithner had up his sleeve: The two companies, the largest sources of mortgage financing in the U.S., are currently under government conservatorship and have caps of $200 billion each on backstop capital from the Treasury. Under the new agreement announced today, these limits can rise as needed to cover net worth losses through 2012. I see. But I thought housing was getting better? That's what I...

Stop Calling This 'Recovery' by: Tom Lindmark December 23, 2009 So yesterday we learned that the “recovery” wasn’t quite as strong as we originally supposed. In fact, when you dig through the numbers it didn’t amount to much at all. First, the facts. Third quarter GDP growth was downgraded from 3.5% (the initial estimate) to 2.2%, the current estimate. In between, it temporarily was placed at 2.8%. To add salt to the wound, the contribution from automobile sales is estimated to account for 1.45 percentage points of the 2.2% (link). Remember Cash For Clunkers? Without that artifice we would have...

Stocks, Dollar Rise After Strong U.S. Data On Wednesday December 23, 2009, 4:19 am EST By Natsuko Waki LONDON (Reuters) - World stocks rose for a third straight session on Wednesday and the dollar set a two-month peak against the yen after upbeat U.S. housing market data fanned expectations for a solid recovery in the U.S. economy.[snip] Data showed on Tuesday that sales of previously owned U.S. homes jumped to the highest level in nearly three years last month, offering the latest evidence that the housing market -- the main trigger of the worst U.S. recession in 70 years --...

Bernanke On The Doom Loop By Peter Boone and Simon Johnson December 22, 2009 Senator David Vitter submitted one of my questions to Federal Reserve Chairman Ben Bernanke, as part of his reconfirmation hearings, and received the following reply in writing (as already published in the WSJ on-line). Q. Simon Johnson, Massachusetts Institute of Technology and blogger: Andrew Haldane, head of financial stability at the Bank of England, argues that the relationship between the banking system and the government (in the U.K. and the U.S.) creates a “doom loop” in which there are repeated boom-bust-bailout cycles that tend to get...

This time last year, as investors, economists, and analysts contemplated the future, there was a general feeling that the economy and the markets had already been through hell. As it turned out, the worst was yet to come. Few— actually nobody— accurately forecast the economic and market slides that occurred during the fourth quarter of 2008 and the opening quarters of 2009. Those who claim to have foreseen the disaster can hardly brag, since they generally have always held a pessimistic, sometimes apocalyptic outlook, sometimes for decades. For others, it has been a humbling and sobering experience, to say the...

Roubini: Latin America Will Have Killer Growth In 2010 Gus LubinDec. 21, 2009, 9:56 AM Although bearish for the U.S. economy, Nourel Roubini can't get enough of Latin America. To wit, he recently upgraded his growth outlook for Latin America in 2010 from 3.3 to 3.8. The economist explained this upgrade in an interview with the Americas Society: AS: What is behind this increasingly positive outlook for Latin America? Roubini: There are two things. One is that global economic and financial conditions are improving. There is a recovery of growth even if it’s going to be anemic. Commodity prices have...

There Is No Way Out Of This Box....Friday, December 18. 2009 Posted by Karl Denninger in Macro Economics at 18:31... that does not involve serious pain. Go ahead folks - tell me how we can simply ignore this. How we can pretend that the outstanding debt does not have to come back down to reasonable levels. That these levels are "reasonable" - and that these rates of growth are "reasonable." This is the "magic of compounding" writ large - and in a fashion that is going to inflict severe pain on our population - and the longer we wait to...

Largest Rise in New Business Creation of the Century Under Obama The Obama administration can be credited with the largest creation of new entrepreneurial activity the nation has seen since the start of this century. New businesses and community organizations are being created at a blistering pace and many Americans are realizing their dreams of cutting the corporate ties and becoming entrepreneurs for the first time. Green Technology This gentleman has begun his own successful carbon-neutral recycling business: We will be seeing more and more people becoming active in green technologies such as this as people become increasingly conscious of...

Parsing Thursday's Jobless Claims Report: An Almost Textbook Peak by: Sold At The Top December 17, 2009 Today, the Department of Labor released its latest read of Joblessness showing seasonally adjusted “initial” unemployment claims increased by 7,000 to 480,000 claims from last week’s revised 473,000 claims while “continued” claims increased 5,000 resulting in an “insured” unemployment rate of 3.9%. Today’s results, though still significantly elevated, continues to indicate that the descent to both initial and continued claims is continuing in earnest resulting in an almost textbook peak. At this point, we are either in the "post-crisis" recovery or the "eye...

WASHINGTON (AP) - The number of newly laid off workers filing claims for unemployment benefits unexpectedly rose last week as the recovery of the nation's battered labor market proceeds in fits and starts. The Labor Department said Thursday that the number of new jobless claims rose to 480,000 last week, up 7,000 from the previous week. That was a worse performance than the decline to 465,000 that economists had expected.

This past weekend, President Obama’s top economic advisor, Larry Summers, said the “recession is over.” But in the next breath he called for more government action to stimulate the economy, in particular, the pace of hiring. As far as the Administration is concerned, it is government stimulus that brought us this recovery. Now, it’s just a matter of piling on even more government spending to generate job growth. In one sense we agree completely with Mr. Summers. The recession is over. In fact, the economy has been growing since June. This came as no surprise to us. “An economic recovery...

Niall Ferguson: The World Is In Denial, The Great Repression Lives On Joe WeisenthalDec. 14, 2009, 5:10 AM Niall Ferguson is in the media a lot, but this interview with Consuelo Mack (via Paul Kedrosky) is one of the best summations of he's views we've come across. Some of the points he gets across: * Governments and households are in denial about how the world has changed post-crisis. * Wall Street is in a worse state than prior to the crisis because now the government backstop is explicit, and because the remaining players now have a bigger oligopoly than before....

US Retail Sales Stronger Than Expected By Chuck Butler 12/14/09 St. Louis, Missouri – It was announced this morning that Dubai’s government received $10 billion in financing from Abu Dhabi… Hmmm… You know, I read somewhere a couple of weeks ago, when this debt/loan repayment problem was announced, that in the end, the Abu Dhabi government would step in to bail out Dubai, since the people running the two governments are blood related; and even though there had been shots fired between the two, blood would run thick here… And voila that’s exactly what happened! In fact, at the time,...

U.S. Economy Looking Very Sick Indeed Economics / Recession 2008 - 2010 Dec 14, 2009 - 03:39 AM By: Gerard Jackson No matter how the administration's friends and media lapdogs try to paint it the US economy is still in rotten shape. In fact, the situation is far worse than most people realise. Manufacturing surveys suggest a slow though steady recovery. I don't buy it, at least not yet. These surveys also report that the situation for unfilled orders is deteriorating, which means that orders for capital goods in the form of machinery is falling. Industrial production for October to...

Prechter: We’re Going To Have Another Leg Down By Rocky Vega 12/11/09 Stockholm, Sweden – Author and Elliott wave guru Robert Prechter is famous for writing bestseller Conquer the Crash. Earlier today, in a live interview with Bloomberg, he announced that “2010 is going to be a very down year.” Here’s the question he was asked, a part of his answer, and the video below. QUESTION: “Well, how much a correction do you expect though, Bob?” ANSWER: “I think we’re going to have another leg down, not just a correction. I think the bear market is not over. We had...

China Economy Recovery Gathers Pace: China has shown further signs of economic recovery with its industrial output surging and its export slump easing. Consumer prices also grew year-on-year in November for the first time in 10 months. The index rise of 0.6% beat expert expectations of 0.4%. Industrial output rose to its strongest position since June 2007. November's year-on-year fall in exports of 1.2% was the slowest of 2009, although growth had been expected. Imports rose 26.7% in November from a year earlier. The trade surplus narrowed to $19.9bn in November compared to $24bn in October. Crackdown The latest figures...

No Credit. No Economy. By Eric Fry 12/09/09 Laguna Beach, California – “The great American consumer deleveraging continues,” our colleagues at The 5-Minute Forecast observed yesterday. “The Fed announced that consumer credit shrank for a record ninth month in a row in October.” Consumer credit, as we all know, drives a big chunk of consumer spending, which drives a big chunk of the American economy. Ergo, no credit; no economy. But consumers are not the only borrowers between the Atlantic and the Pacific who contribute to economic activity. Commercial and industrial (C&I) borrowers also play a large role. The dots...

An Action Plan for Economic Recovery by Roger Thompson Most books about the nation’s financial crisis tell us what happened. In his new book, HBS senior lecturer Robert Pozen tells us how to fix the system. A financial industry veteran and chairman of MFS Investment Management, a Boston firm that oversees more than $170 billion in pension and mutual funds, Pozen writes with authority and unusual clarity about complex issues in Too Big to Save? How to Fix the U.S. Financial System (Wiley). Q: How does the government figure out which financial institutions are too big to fail? There are...

Negative Data For Global Growth By Chris Gaffney 12/09/09 St. Louis, Missouri – The dollar continued to gain strength throughout Tuesday, but gave back some of these gains overnight. The big story yesterday was the downgrade of Greece’s debt rating by Fitch Ratings, and warnings of possible rating downgrades for the US and UK. The sell off in oil has also weighed on some of the commodity-based currencies, but I’ll start today’s Pfennig with some data releases. Japan’s economy expanded less than a third of the pace initially reported as companies slashed spending. GDP rose an annualized 1.3% in the...

Have We Avoided The Economic Depression Many Feared? Economics / Great Depression II Dec 09, 2009 - 08:35 AM By: Mac_Slavo President Obama spoke about the economy at the Brookings Institution. “We acted to get lending flowing again, so businesses could get loans to buy equipment and ordinary Americans could get financing to buy homes and cars, to go to college, and to start or run businesses. We enacted measures to stem the tide of foreclosures in our housing market, helping responsible home owners stay in their homes and helping to stop the broader decline in home values which was...

Misleading Mainstreet: The Keys To The Phony Recovery By Bill Bonner 12/08/09 Johannesburg, South Africa – The Dow stayed in the same place yesterday. The correction in the gold market continued, with a $5 loss in the gold price. The employment news on Friday was better than a poke in the eye with a stick. But how much better? Better enough to justify higher prices on Wall Street? Better enough to sell your gold because you believe that it will be clear sailing from here on out? Uh…we wouldn’t advise it. Maybe Main Street has been misled – again –...

Wall Street Falls On Recovery Uncertainty On 2:38 pm EST, Tuesday December 8, 2009 By Angela Moon NEW YORK (Reuters) - Stocks fell on Tuesday after a disappointing outlook from 3M Co and weak domestic sales at McDonald's Corp fanned worries that sluggish consumer spending threatened the economic recovery. Equities also faced pressure from a stronger U.S. dollar as investors sought more safe-haven assets amid worries about Dubai's unresolved debt problems and Fitch Ratings' downgrade of Greece's bond rating. Diversified manufacturer 3M (NYSE:MMM - News) fell 1.2 percent to $76.98 after it gave a 2009 outlook that fell short of...

Fund executive: Don’t Expect V-Shaped Recovery Published: Monday, December 7, 2009 By Trevor Delaney, AP Personal Finance Editor NEW YORK — There’s something different about the Masters’ Select Funds. Though it’s not unusual for mutual funds to be managed by a team of professionals, these funds put a different spin on it. Rather than bulk up with a sizable in-house team of analysts and portfolio managers, to establish their Masters’ Select Funds, Litman/Gregory Fund Advisors chose to play the role of overseer. It hired highly-regarded money managers as sub-advisors — each responsible for a portion of one of its funds....

"Rich-ieee!" the gleaming Caribbean ex-addict sings my name as the worship music soars and pounds to start the service. We embrace and I can feel the crazy coming off of him. We stand back and I look wildly into his wild-eyed grin, yelping, "Yeah! God likes the crazy people!" And he yelps back, "Rich-ieee! Because we'll get crazy for him!"And I let out a cackling bipolar howl as the music blares. This man knows something about "crazy." He decided to get clean only after a drug deal got him thrown into the trunk of a car; driven into a field...

JPMorgan's aggregate global manufacturing and services indicators both tell the same unfortunate story -- the global economic recovery slowed down in November. JPMorgan: "The global economic recovery continued in November, but a growth pause in services hit the overall rate of expansion. However, new business is still rising and this should support growth looking ahead. In addition, official activity data continue to advance, suggesting the underlying recovery remains intact." Yet while both the global services and manufacturing indices are slightly above the 50-level, which indicates continued expansion, it's clear that the up-trend in the data has lost steam. They also...

The US job market lost in November only 11,000 jobs, much better than what economists expected. The four month average is a minus of 103,000 jobs per month. This indeed are better numbers than what the economy had a while ago, but When the economy gained on average 141,000 jobs leading up to the 2006 midterm elections, was it reported as a good economy? When the economy gained on average 169,000 jobs leading up to the 2004 president elections, was it reported as a strong economy? When the economy lost on average 42,000 jobs leading up to the 2002 midterm...

Risk Of Double-Dip Recession Is Rising, Says Krugman Henry BlodgetDec. 3, 2009, 8:23 PM Several recent reports suggest that the recovery is faltering. See today's ISM index, for example, as well as the global PMI, continuing jobless claims, and the house-price recovery. Paul Krugman cites other disappointing news (as well as the ISM) and says that the risk of a double-dip is increasing: I’ve never been fully committed to the notion that we’re going to have a “double dip” — that the economy will slide back into recession. But it has been clear for a while that it’s a serious...

Don’t Rule Out The Double Dip By Ian Mathias 12/03/09 Baltimore, Maryland – Initial claims for unemployment insurance fell to their lowest level in over a year last week. Likely a precursor to their jobs report tomorrow, the Labor Department proudly announced that “just” 457,000 Americans filed for their first week of unemployment benefits. That’s the fifth straight week of decline, the lowest number since September 2008 and the second consecutive report under half a million… a sort of “Dow 10,000” headline grabber. It would appear that the jobs scene has suffered its worst: But what how does this same...

The Reverse Repo By Bill Bonner 12/02/09 London, England – The crisis is over, say the feds. Now, they can begin turning off the taps. “Fed takes first step in exit strategy,” is the headline in The Financial Times. A more accurate headline would have been… “Fed dodges and weaves…fakes exit.” The only way to exit is by the door the Fed came in. It barged into the market buying up toxic assets and Treasury notes and bonds. In order to get back out the door, it has to get rid of all the debt it gobbled up. How? It...

Economic Recovery? Commodity Charts Don't Think So by: Wildebeest November 30, 2009 These are buoyant times for (some) commodity investors, and (some) commodity producers, but what does it mean in terms of a global recovery? A common feature among people drawing conclusions about the economy from commodity markets tends to be a sole focus on price, and even then only prices in exchange traded commodities. If buyers outnumber sellers prices rise, so rising prices mean a return of global demand, which in turn means global recovery -- right? Well not quite, despite the enthusiasm displayed in many articles pushing that...

A little over a week ago, the Putnam County Courier joined the list of regional newspapers that have begun asking serious questions about Porkulus job accounting. The Courier goes as far as to call the “saved or created” claims of the Obama administration “Recovery.con,” in its headline. Michael Brendan Dougherty finds many of the same kinds of fraud that newspapers around the nation have in the claims by the White House of stimulus success:

Presidents George W. Bush and Barack Obama signed a combined nearly $1.5 trillion in federal spending in the attempt to correct the nation's economic tailspin, but with unemployment soaring over 10 percent, Congress is gearing up to pass yet another economic "stimulus" package, perhaps as soon as January.

<p>Beyond fiscal stimulus and government bailouts, the economic recovery that appears under way may be based on little more than self-fulfilling prophecy.</p> <p>Consider this possibility: after all these months, people start to think it’s time for the recession to end. The very thought begins to renew confidence, and some people start spending again — in turn, generating visible signs of recovery. This may seem absurd, and is rarely mentioned as an explanation for mass behavior late in a recession, but economic theorists have long been fascinated by such a possibility.</p>

When all is said and done after the holidays, filing for Chapter 11 bankruptcy protection may be the only option for many chains, Cohen added. Then again, maybe retailers can rely on Cramer's optimism that everyone is massively underestimating the unemployed consumer who has bet the house and the dog on those one hundred shares of Amazon stock. In the past, for example, retailers like Nordstrom would bring in holiday merchandise early and reorder the best-selling items. This strategic tool likely will not be available to them this year. “Reorders will be down significantly this year, simply because the merchandise...

ON THE ROAD For the Hotel Industry, Recovery is a Long Way Off By JOE SHARKEY IN these uncertain economic times, I am wary when I hear someone proclaiming, “We have finally bottomed out.” After all, who knows how long we may stay on the bottom? So that’s why I urge caution in evaluating small recent indicators that might mean better times ahead for the hotel industry. On Monday, for example, the hotel investment services firm Jones Lang LaSalle Hotels released a survey showing that investors saw some signs of improvement for hotels, but not for at least a year....

Recovery.gov won't correct job numbers on $18 MILLION website WH Advisor: People care about creating jobs, not counting them

The independence of the Federal Reserve is essential for credible monetary policy and doubts about the U.S. central bank's ability to do its job without political interference could hurt the nascent economic recovery, a senior Federal Reserve official said on Sunday. "Talk of eroding the Fed's independence can be counterproductive for economic recovery," St. Louis Federal Reserve Bank President James Bullard said in slides to accompany a presentation prepared for a panel discussion in New York. Bullard said that non-independent central banks have historically been forced to finance large government budget deficits. "This can be very inflationary," he added. Last...

25 Reasons We Will Not Have a Depression Kimball Corson November 20, 2009 One particularly vitriolic reader of my last article on The Distorted Shape of the Recovering Economy seemed to think I was predicting a doomsday scenario. I was not at all. Richard Duncan’s tentatively predicted Fall of Rome scenario is a true doomsday scenario, not mine. My focus of late has been much more on the need for transparency and candor from our government on TARP I and II and the stimulus program results, as well as, more importantly, on getting the stimulus infrastructure program facilitated, expanded and...

The Pending Financial, Economic, Political And Social Collapse Of The United States Politics / US Politics Nov 21, 2009 - 03:20 AM By: Submissions Timothy V. Gatto writes: The truth that most people realize but can’t openly talk about is that America has seen better days and that the system of capitalism has long outlived its usefulness. The last part of that sentence, that capitalism has outlived its usefulness, is thoroughly the fault of the capitalists themselves. For many years now, transnational corporations have sent much of America’s manufacturing overseas in order to take advantage of low cost workers. About...

Financial And Economic Situation Could Get Ugly Fast Economics / Economic Stimulus Nov 21, 2009 - 03:27 AM By: Mike_Whitney Things could get ugly fast. With the Democrats backing-off on a second round of stimulus, the Fed signaling an end to quantitative easing, and Obama moaning about rising deficits; there's a good chance that the stumbling recovery could turn into another sharp plunge. Bank lending is shrinking, consumers spending is off, housing prices are falling, unemployment is soaring and the wholesale credit markets are in a shambles. This isn't the time to slash government support in the name of "fiscal...

U.S. Economy Is A Geriatric On Viagra Economics / US Economy Nov 20, 2009 - 02:35 AM By: Brian_Bloom A retired friend, an academic in a field unrelated to the subject of economics or finance, recently asked me to tell him what I thought was happening in these (to him) surreal worlds. Why are some people so bearish that they were effectively anticipating the end of the world whilst others are insisting that a bull market is upon us? To answer him I had to provide some context, as follows. The table below shows a list of the top 14...

"A Truly Extraordinary Slump": Reports Of Robust Recovery Premature, James Galbraith Says Posted Nov 19, 2009 01:51pm EST by Aaron Task in Newsmakers, Recession Disappointing reports this week on housing starts and foreclosures, as well as the index of leading economic indicators, have cast a bit of a pall on the "robust recovery" story, putting a crimp in the stock market's ascent in the process. University of Texas professor James Galbraith was never a believer in the V-shaped recovery and says it's going to take a very long time for the U.S. to recover from a "truly extraordinary slump." What...

The Great Credit Crunch Is Deepening Minyanville Staff Nov 19, 2009 9:20 am Consumers will feel the effects in the form of tighter credit standards. Editor's Note: This article was written by Richard Suttmeier, chief market strategist at ValuEngine.com, which is a fundamentally-based quant research firm in Princeton, New Jersey, that covers more than 5,000 stocks every day. Within the proposed banking reform bill, the House Financial Services Committee wants banks and funds to make payments in advance for companies deemed “too-big-to-fail”. This fund will be capped at $200 billion, insuring that taxpayers won't wind up paying for a bailout...

"The Illusion of Prosperity": U.S. Destined to Lag Rest of the World, Peter Boockvar Says Posted Nov 19, 2009 09:00am EST by Aaron Task in Investing "It's dangerous to be short this market," says Peter Boockvar, equity strategist at Miller Tabak. Despite a penchant for bearishness, Boockvar says the rally can continue as long as the Fed keeps rates at zero. "When you cut rates to nothing you're encouraging people to take risk," Boockvar says. "As long as asset inflation is [the Fed's] goal, the market could go higher but there are obvious consequences," including inflation. The Fed is trying...

Deflationists Are WRONG, Prepare For The INFLATION Mega-Trend Economics / Inflation Nov 18, 2009 - 12:58 AM By: Nadeem Walayat The jist of the deflationists argument is that debt deleveraging MUST trigger huge consumer and asset price deflation. Whilst we have all witnessed huge asset price deflation and some consumer price deflation during 2008 and into 2009. However we have also witnessed unprecedented government and central bank actions of this year, which have ignited asset price inflation with more to come that is now starting to feed into consumer price inflation. Why do deflationists have it wrong ? It is...

Expecting A V-Shaped Recovery? Consider Yourself Warned Mike Mish Shedlock Nov 17, 2009 3:05 pm Bad news is on the horizon -- and it's taking the form of a different letter. Yesterday, Dallas Federal Reserve President Richard Fisher threw a little cold water on the V-shaped recovery madness everyone seems to be buying into these days. Please consider Fed's Fisher: GDP Growth In Third Quarter Likely Lower Than Reported. Speaking at a conference in Tyler, Texas, Fisher said he was willing to venture that the increase would not be "as robust as originally reported." He did say, however, that the...

The growing view that the economy is embarking on a self-sustaining recovery that could be similar in duration to the average expansionary cycle over the past century brings me to a new segment I like to call "Really!?! With Doug." Of course, this is a takeoff from "Saturday Night Live's" Amy Poehler and Seth Meyers. If you are not familiar with their "SNL" schtick during their Weekend Updates, here are a few of their Really!?! segments. Really, the economy is recovering? Really, economists? I mean, really!?! With globalization, wage deflation and with the prospects of tepid top-line sales growth, which...

Lining up at Midnight at Wal-Mart to buy Food is part of the new Recovery. Banks offering Mattress Interest Rates. The Invisible Recovery Outside of Wall Street. There seems to be a growing divide in the current U.S. economy. On the one hand, you have the financial sector swimming in their bailout-induced profits like a modern day Scrooge Mcduck. In their circles, it appears as if the recession is over. On the other hand, you have average Americans seeing access to credit cards shut down, equity in their homes vanishing, and their stock portfolios looking a little too much like...

Second U.S. Economic Stimulus Package Headed Our Way? Economics / Economic Stimulus Nov 16, 2009 - 02:37 PM By: Money_Morning Jon D. Markman writes: Is the recent market softness something to be worried about? Not if U.S. President Barack Obama & Co. comes through with a second stimulus package – as I’m expecting. Let me explain … There are a few reasons to suspect that the softness we’ve been seeing will continue for a week or so. Small-cap stocks – which continue to drag along like road kill caught on the rear bumper of the market – are our main...

Only A New Credit Bubble (That Isn’t Coming) Staves Off Deflation Economics / Liquidity Bubble Nov 16, 2009 - 09:03 AM By: Chris_Galakoutis The next issue I wanted to write about in this post is this whole notion of ballooning reserves at the Fed, and how we get to hyperinflation if this money were to ever be lent out and multiplied across the economy. Reserves might have gone from 10 Billion in August 2008, to about 1 Trillion today, but in fact, this money is not being lent out – it is simply sitting there at the Fed, earning interest....