Financial News

[Balta1701]

Monthly Jobs Report comes out Friday. The current estimate for private sector job growth, which doesn't include the continuing government job cuts, is 38,000.

 

That is not good.

[NorthSideSox72]

Monthly Jobs Report comes out Friday. The current estimate for private sector job growth, which doesn't include the continuing government job cuts, is 38,000.

 

That is not good.

The jobs picture has definitely been getting worse the past couple months. Not looking good at all. Of course its also an uneven thing across industries, with some (health and financial) still growing pretty well, and others just falling like a rock.

 

And the housing picture is still going through its girations around the bottom, with prices decreasing but activity increasing.

 

[Balta1701]

And the housing picture is still going through its girations around the bottom, with prices decreasing but activity increasing.

The "Activity Increasing" tells you nothing other than "It's summer". Housing sale activity falls in the winter and rises in the Summer. It's also almost useless to make comparisons to how the activity was changing in previous years of this calamity, since last year at this time was the 2nd expiration of the Housing Tax Credit, which throughly distorted the market. I'd call any data on "activity" pretty much useless for the next couple years, because there's essentially nothing that it can be compared to.

[southsider2k5]

The "Activity Increasing" tells you nothing other than "It's summer". Housing sale activity falls in the winter and rises in the Summer. It's also almost useless to make comparisons to how the activity was changing in previous years of this calamity, since last year at this time was the 2nd expiration of the Housing Tax Credit, which throughly distorted the market. I'd call any data on "activity" pretty much useless for the next couple years, because there's essentially nothing that it can be compared to.

 

Housing numbers aren't seasonally adjusted, or at least YoY analyzed?

[Balta1701]

Housing numbers aren't seasonally adjusted, or at least YoY analyzed?

Housing numbers are not seasonally adjusted, either for the number of sales or for price or anything like that, and any seasonal adjustment you tried right now would get you no where, because the data for the last decade is completely compromised by the inflation of an enormous housing bubble (~1999-2007) the bursting of an enormous housing bubble (2007-present) and multiple one-time government interventions (Irony in phrase duly noted).

 

You can try to do an intelligent YOY operation if you wanted, but that's the kind of thing you'd have to pay me to do. I'd have to account for how much of the YOY changes were driven by those one-time interventions and by the bubble in order to come up with a reasonable comparison. It doesn't make sense to straight up compare year over year home sales right now to year over year home sales in May 2006, or to May 2008, because of how massive the shifts have been, somehow you have to account for that.

[NorthSideSox72]

Housing numbers aren't seasonally adjusted, or at least YoY analyzed?

Yes and no. No, the numbers aren't adjusted in the same sense you'd think. But yes, they generally published trends vs previous YoY and such. If you look at the curve of activity, it hit a bottom then spiked around the housing tax credit deals, then bottomed again, now is back up a little. So as I said, there is some increase there... but prices are still plummeting because such a large percentage of sales are foreclosures. This is ultimately healthy for the market, but for now, it sucks. Just need to keep the new home building really low (which it is) for a while longer.

 

 

[StrangeSox]

some (health and financial) still growing pretty well

[NorthSideSox72]

Am I incorrect?

 

[Balta1701]

Somewhat on topic...a "Chart of the day" that appeared whilest I was out.

 

 

Compared to a decade ago...the formation of new small businesses has plummeted, to the point where small business isn't necessarily the biggest driver of job growth any more, it's larger, more well-connected firms.

[southsider2k5]

Yes and no. No, the numbers aren't adjusted in the same sense you'd think. But yes, they generally published trends vs previous YoY and such. If you look at the curve of activity, it hit a bottom then spiked around the housing tax credit deals, then bottomed again, now is back up a little. So as I said, there is some increase there... but prices are still plummeting because such a large percentage of sales are foreclosures. This is ultimately healthy for the market, but for now, it sucks. Just need to keep the new home building really low (which it is) for a while longer.

 

Makes sense. I couldn't have imagined the government publishing a number that wasn't somehow manipulated.

 

And yes, this is going to healthy in the long run for the housing market. The repricing of assets has to happen, as does purging the bad debts off of your books. Otherwise you end up like Japan.

[Balta1701]

Yes and no. No, the numbers aren't adjusted in the same sense you'd think. But yes, they generally published trends vs previous YoY and such. If you look at the curve of activity, it hit a bottom then spiked around the housing tax credit deals, then bottomed again, now is back up a little. So as I said, there is some increase there... but prices are still plummeting because such a large percentage of sales are foreclosures. This is ultimately healthy for the market, but for now, it sucks. Just need to keep the new home building really low (which it is) for a while longer.

A year ago I might have agreed with you...but the longer this goes on, the more I'm starting to flip and think that the fact that the housing market is down has now imposed societal changes that will keep the housing market "Down" at least until something happens with unemployment.

 

Although prices have not undershot the pre-bubble levels yet, I've seen some data suggesting that the total housing construction has already undershot where it should be relative to a hypothetical bubble-less condition. In other words, we're already underinvesting in Housing (and everything else) relative to the long term trend...but there's been very little sign of growth because we're no where near working through the distressed sale gap and won't be for years.

 

The lack of spending on construction/lack of jobs at some point might well be feeding back to a situation where the number of people who would buy houses decreases, causing less and less spending on housing and a long-term stagnation in this market.

[southsider2k5]

A year ago I might have agreed with you...but the longer this goes on, the more I'm starting to flip and think that the fact that the housing market is down has now imposed societal changes that will keep the housing market "Down" at least until something happens with unemployment.

 

Although prices have not undershot the pre-bubble levels yet, I've seen some data suggesting that the total housing construction has already undershot where it should be relative to a hypothetical bubble-less condition. In other words, we're already underinvesting in Housing (and everything else) relative to the long term trend...but there's been very little sign of growth because we're no where near working through the distressed sale gap and won't be for years.

 

The lack of spending on construction/lack of jobs at some point might well be feeding back to a situation where the number of people who would buy houses decreases, causing less and less spending on housing and a long-term stagnation in this market.

 

Actually in your scenario, it would give a real basis for some much needed price increases in housing, and it would begin to force resources back into the industry. It would also go a long way towards curing people being underwater and bank's balance sheets.

[StrangeSox]

Am I incorrect?

 

No, but it seems to me that it's the explosion of those two industries over the past couple of decades that's been a big part of the ongoing economic problems. Finance and health care have been making up ever-larger chunks of our GDP.

[NorthSideSox72]

A year ago I might have agreed with you...but the longer this goes on, the more I'm starting to flip and think that the fact that the housing market is down has now imposed societal changes that will keep the housing market "Down" at least until something happens with unemployment.

 

Although prices have not undershot the pre-bubble levels yet, I've seen some data suggesting that the total housing construction has already undershot where it should be relative to a hypothetical bubble-less condition. In other words, we're already underinvesting in Housing (and everything else) relative to the long term trend...but there's been very little sign of growth because we're no where near working through the distressed sale gap and won't be for years.

 

The lack of spending on construction/lack of jobs at some point might well be feeding back to a situation where the number of people who would buy houses decreases, causing less and less spending on housing and a long-term stagnation in this market.

See, my opinion has changed since a year ago as well, but in a different way. A year ago I would not have thought the prices would drop this much further... but I also would have thought the recovery would be very slow and long.

 

Now, I think we're going to see a much bigger snap back. I see a situation here where the powder is being overloaded in the gun. Prices continue to plummet... foreclosures are coming off the books pretty nicely... new housing is underperforming, so less supply going on... rental market is very hot, to the point where rent levels are way higher than equivalent mortgage costs in many places. Add it all up, and really, the buyers are waiting on just one thing - easier lending. Once lending loosens significantly, I think you see not a slow recovery, but a pretty quick one.

 

So the question THEN is... when will lending loosen? Believe it or not, I don't think its unemployment that's going to be the key here - though that is a major underpinning of the economy as a whole. Here is what is going on... banks got a whole boatload of cash to lend out, but what they ended up doing is, instead of lending it, they stash it away as reg and questioning capital. Its waiting to see what happens with various new laws and rules. Now, as the next year or two go on, those things will settle out. You have, in essence, a current "bubble" in regulatory and compliance spending in the financial sector that will not last.

 

What this means is, in a year or two, as interest rates go up with all the cash being flooded in, and the regulatory environment solidifying... banks will then see that opportunistic situation in housing, and lending will start to loosen - banks going for better return on capital than they will get from a market that already priced in a recovery AND inflation.

 

See where I'm going here?

 

[Chisoxfn]

Though I generally agree with Y2HH on the valuation of LinkedIn, he's definitely wrong about recruiting. People use LinkedIn to find candidates all the time. Heck I have recruiters contacting me at least once a month who found me that way, and all I have up there is a very basic profile with little detail beyond position title, company and timeframe, and what degrees I hold.

 

That said, I think that tends to happen more with professionals who have an established career track, that can be easily gleaned from the information on the site. For a recent college grad, its probably not real helpful.

Completely agree and I also agree that the valuation of Linked in (and the IPO pricing) and eventual blow up was absolutely assinine.

[Jenksismyhero]

anyone know why this is a "loss" and not a "they haven't paid it back yet, but they will, or else we'll sell their assets and close their doors?"

 

http://news.yahoo.com/s/ap/20110601/ap_on_...s_obama_autos_2

 

 

[Balta1701]

What this means is, in a year or two, as interest rates go up with all the cash being flooded in, and the regulatory environment solidifying... banks will then see that opportunistic situation in housing, and lending will start to loosen - banks going for better return on capital than they will get from a market that already priced in a recovery AND inflation.

 

See where I'm going here?

I get where you're going.

 

Problem is...I still don't see interest rates going up. Or if they do go up, it's a mistake that they're doing so, as we're seeing in the Eurozone right now...where the Rise in Interest rates hits the demand side on ordinary goods again.

 

We saw a general bump towards higher interest rate expectations earlier this year associated with the commodity price spike, and the end result has been Europe basically moving back into recession and U.S. growth entirely stalling, to the point that interest rates have once again turned around and QE3 looks like the right move (even if it won't happen).

[StrangeSox]

anyone know why this is a "loss" and not a "they haven't paid it back yet, but they will, or else we'll sell their assets and close their doors?"

 

http://news.yahoo.com/s/ap/20110601/ap_on_...s_obama_autos_2

 

 

 

In a report from the president's National Economic Council, officials said that figure is down from the 60 percent the Treasury Department originally estimated the government would lose following its $80 billion bailout of Chrysler and General Motors in 2009.

 

It was ostensibly to keep the American economy from collapsing in on itself, not to turn a profit or even break even. Losses were expected from the start. The alternative is to keep having the government hold on to a large share.

[Jenksismyhero]

It was ostensibly to keep the American economy from collapsing in on itself, not to turn a profit or even break even. Losses were expected from the start. The alternative is to keep having the government hold on to a large share.

 

Holding on to a large share or not, I fail to see why we don't consider that a debt that must be repaid, regardless of how long it takes. WTF did we just give them 80 billion. It's a LOAN, with the expectation of REPAYMENT.

[Balta1701]

Holding on to a large share or not, I fail to see why we don't consider that a debt that must be repaid, regardless of how long it takes. WTF did we just give them 80 billion. It's a LOAN, with the expectation of REPAYMENT.

Don't we still own a ****load of shares in those companies?

[StrangeSox]

Holding on to a large share or not, I fail to see why we don't consider that a debt that must be repaid, regardless of how long it takes. WTF did we just give them 80 billion. It's a LOAN, with the expectation of REPAYMENT.

 

Not all loans are repaid. There's an on-going housing crisis I could point to for that.

 

Additionally, when this loan was made, they never expected it to be paid back in full. You can argue against the wisdom of that, but you can't act surprised that the treasury will lose some money on this.

 

Don't we still own a ****load of shares in those companies?

 

Chrysler's debts are paid-in-full, apparently. But the US government still holds a 6.6% share.

[Jenksismyhero]

Not all loans are repaid. There's an on-going housing crisis I could point to for that.

 

Additionally, when this loan was made, they never expected it to be paid back in full. You can argue against the wisdom of that, but you can't act surprised that the treasury will lose some money on this.

 

 

Chrysler's debts are paid-in-full, apparently. But the US government still holds a 6.6% share.

 

Yeah, that's kinda what i'm saying. Why on earth did we agree to just give them money without expecting them to pay it back if they stayed in business? What idiot signed us up for that?

[StrangeSox]

Yeah, that's kinda what i'm saying. Why on earth did we agree to just give them money without expecting them to pay it back if they stayed in business? What idiot signed us up for that?

 

Bush

 

The idea was to save potentially millions of jobs from disappearing overnight and turning this into a full-blown depression. $14B seems like a bargain for that, no?

Edited June 1, 2011 by StrangeSox

[StrangeSox]

They got a ton of stock in return for the loans. The government is looking to divest from a private corporation. So it's either do that now, take minimal losses and let the "free market" get back to work for GM and Chrysler, or have the government continue to hang on to the shares until they go up enough.

 

Kinda deflate all the "ZOMG! Obummer gonna nationalize it all!" hysteria that was rampant, though.

[NorthSideSox72]

Yeah, that's kinda what i'm saying. Why on earth did we agree to just give them money without expecting them to pay it back if they stayed in business? What idiot signed us up for that?

TARP was wildly successful, one of the few large pieces of legislation in recent memory where that can be said. How is that idiotic?