Financial News

[Balta1701]

“socialism for the rich and free enterprise for the poor”.

It's worked great for the rich for the last 50+ years.

[Cknolls]

Roung three for GMAC bailout anyone? What a joke. Shut the f***er down already.

[Cknolls]

Roung three for GMAC bailout anyone? What a joke. Shut the f***er down already.

 

 

Tell GMAC the housing mkt has bottomed. I would like to see the results of RESCAP, DITECH, and the annoying commercials ALLY bank. ..Can you say new lows 2010?

[Cknolls]

http://blogs.knoxnews.com/silence/archives...s_oversta.shtml

 

 

So with three small examples we have cut the govt's bogus jobs saved/created number by 10%. WTG. Keep up the good work. More Stimulus!

[Texsox]

new account with USAA

 

They are awesome. From auto insurance to banking.

[NorthSideSox72]

They are awesome. From auto insurance to banking.

I was fortunate to marry the daughter of a marine, so we have USAA and they are indeed awesome.

 

[southsider2k5]

I don't buy the modern bias anymore. It wasn't too long ago that people believed that the market has gotten so effecient at pricing in information, that a negative PE could be interpreted as a good thing. 10 years later over 90% of the dotcoms are busts or buyouts. I still believe in history and understanding what the numbers are telling you, and why they are saying what they are.

 

The housing market has all of the signs of a deadcat bounce. Unemployment is still rising, as is the hidden unemployment of people who either have been taken off of the official roles because they have exhausted their benefits, or have taken much less paying/part time work out of desparation. The other big factor in homebuying is ease of credit, and that hasn't really changed that much in the last 10 months or so either. Also remember that employment lags confidence in the system by 6-12 months, and foreclosures also lag unemployment by about the same margin. There is still a large chunk of supply that hasn't come onto the housing market, not to mention, much like the hidden auto demand, there is also the hidden housing supply of people who want to sell their houses, but feel that they can't for one reason or another (worried about losing job, upside down on loan, houses not selling in area so not trying, etc). Even if hiring really did take off today, it would be a year to two years before you could really point to a true housing recovery.

 

More numbers I have seen bantered around as proof are the durable goods and GDP revisions... This is pretty simple stuff to explain away as well. The two biggest components in durable goods are airplanes and autos. Autos numbers being reported are in the midst of the cash for clunkers bounce. Once you remove auto numbers from durable goods, that number becomes near zero growth. That same growth is also responsible for a good chunk of GDP growth. Remember, no one seemed to be able to forecast how successful this program would be, which means it wasn't factored in as "expected" in any of the growth figures for Q3. Now moving on to Q4 you have removed pretty much all automotive demand from this system, both pent up demand and the future demand from people who realized that this was the best deal they were going to ever see, so they moved and took delivery sooner than they probably would have. As for other durables, people who are employed and able to buy are also still scared of losing their jobs, as unemployment is still increasing. If you are scared of losing your job, you aren't going to run out and spend savings money to buy a new fridge or TV unless you have to do so. The proof here is that savings rates in the US are still at levels we haven't seen in decades, and again, even the slight dip in the number can be explained by the artificial demand of cash for clunkers spending.

 

I also saw your point about articles of people investing in the stock market, but I am still reading articles about people who are afraid to invest in the same market, in other, less market biased media outlets. The Sunday Tribune just had one.

 

Finally I really believe that we have to see unemployment take a real turn before I will believe actual growth is coming. The fundementals of the markets have to change, and not just by artificial government means. For all of those auto sales, does anyone think any jobs are going to be saved? That is the question we should be asking. Until jobs come back for real (not just accounting tricks brought on by people who can't file for benefits anymore, or are working part time/at a fraction of former salaries.) we aren't going to sustain anything. History bears this out, not just me.

 

Well that ended up being pretty right, all of the way down to the "surprise" Q3 GDP numbers. Now we see how Q4 does.

[Cknolls]

Also the GDP deflator fell from 1.4 to .8. This articficially props up GDP. Not to mention the juicing provided by the gov't. So take these numbers with a grain of salt.

[mr_genius]

Also the GDP deflator fell from 1.4 to .8. This articficially props up GDP. Not to mention the juicing provided by the gov't. So take these numbers with a grain of salt.

 

Businessweek has a really intersting article about the GDP 'increase'. Seems compaines are selling out their future for a quick buck. Not a good sign.

 

http://www.businessweek.com/magazine/conte...54034724383.htm

[NorthSideSox72]

Businessweek has a really intersting article about the GDP 'increase'. Seems compaines are selling out their future for a quick buck. Not a good sign.

 

http://www.businessweek.com/magazine/conte...54034724383.htm

This is what 90% of American businesses do, and have done for a few decades. It is, unfortunately, the common model, and its part and parcel with the way executives are compensated.

 

[southsider2k5]

Diving into the numbers, like I suggested a couple of months ago...

 

http://blogs.reuters.com/james-pethokoukis...temkin-economy/

 

That the US economy has stopped shrinking is certainly good news. But what kind of recovery is this? Strip out Cash for Clunkers and 3Q GDP growth came in at 1.6 percent. Also strip out slowing inventory cuts and GDP would have been just 0.6 percent. Then you have a report that the WH has overestimated the number of jobs created by the stimulus.

 

More from economist Robert Brusca:

 

1) But the fact is that inventories are still being cut, not being built up. Although less inventory cutting is a technical boost to GDP the fact of cutting tells us that the economy has not yet turned any corner very sharply.

 

2) Consumer spending spurted at a 3.4% pace this quarter, spurred important by cash for clunkers. But that program has come and gone and spending levels have SUNK BACK. So consumption is not yet on a strong sustainable expansion path. … Cash for clunkers carried the quarter. It’s gone in Q4 and spending levels will recede, with GDP growth taking a hit. Will other spending pick up and compensate?

 

3) Business investment spending was a net negative this quarter and commercial real estate is under pressure – it will be no source of growth. Still business spending on equipment and software turned positive for the first time in six quarters.

 

4) Government spending rose by 2.3% the fifth highest rise in the last seven quarters. This is not a very good return on our stimulus monies spent. About three-quarters of a trillion dollars has been spent and with no discernable impact on GDP or on jobs.

 

In other words, hiring is still not happening, spending is falling, which is what the entire rally in the Dow has been about, and stimulus money isn't making the impact that was hoped for.

[mr_genius]

This is what 90% of American businesses do, and have done for a few decades. It is, unfortunately, the common model, and its part and parcel with the way executives are compensated.

 

But this new trend is to cut/eliminate research and development, I don't remember this happening in the 90's. They are basically ensuring that future products they sell will suck and technological progress is slowed. Not a good recipe for success.

 

But on a positive note, companies that actually invest wisely in R&D seem to be kicking ass. Such as Apple. I'll be honest, I didn't see Apple coming out as the major innovator in our economy a decade ago. They have impressed.

Edited October 29, 2009 by mr_genius

[mr_genius]

Diving into the numbers, like I suggested a couple of months ago...

 

http://blogs.reuters.com/james-pethokoukis...temkin-economy/

 

 

 

In other words, hiring is still not happening, spending is falling, which is what the entire rally in the Dow has been about, and stimulus money isn't making the impact that was hoped for.

 

If anything it created a very small and temporary sugar high. The basics of the economy are still messed up. The stimulus spending wasn't worth it IMO, didn't get real results.

[Rex Kickass]

If anything it created a very small and temporary sugar high. The basics of the economy are still messed up. The stimulus spending wasn't worth it IMO, didn't get real results.

 

The stimulus spending isn't close to halfway done yet.

[kapkomet]

The stimulus spending isn't close to halfway done yet.

The "stimulus" spending is not "stimulus" because it doesn't go to the right places.

[NorthSideSox72]

The "stimulus" spending is not "stimulus" because it doesn't go to the right places.

Well, I agree it went to a lot of the wrong places, but that doesn't make it less of a "stimulus", it just makes it less sustainable, and less valuable in the long run.

 

[NorthSideSox72]

If anything it created a very small and temporary sugar high. The basics of the economy are still messed up. The stimulus spending wasn't worth it IMO, didn't get real results.

Still hard to say on the stimulus money at this point.

 

If by fundamentals you mean employment, and credit position among consumers and businesses, then I agree that things are still very messed up. I think the bounce we've seen in some areas - housing, consumer spending, consumer confidence (though that corrected down recently), GDP - are indicative of things stabilizing. SS2K5 might call that a dead cat bounce, though that may not be the most accurate description here.

 

I'm sticking with what I've said in recent months. The key is employment and housing. If the UE numbers stay near where they are or rise a little more, then I think we'll keep our footing, and see real growth in 2010, though slowly. And while housing will probably fall back a bit off the temporary bump we've seen, as long as it doesn't dip significantly below where it was in August-ish, I think that's an OK sign as well. Those would indicate to me that we're not likely to see a double-dip.

 

My biggest LONG term concern remains that we are spending a ton of tax money in the wrong places. These are not good long term investments.

 

[Cknolls]

Still hard to say on the stimulus money at this point.

 

If by fundamentals you mean employment, and credit position among consumers and businesses, then I agree that things are still very messed up. I think the bounce we've seen in some areas - housing, consumer spending, consumer confidence (though that corrected down recently), GDP - are indicative of things stabilizing. SS2K5 might call that a dead cat bounce, though that may not be the most accurate description here.

 

I'm sticking with what I've said in recent months. The key is employment and housing. If the UE numbers stay near where they are or rise a little more, then I think we'll keep our footing, and see real growth in 2010, though slowly. And while housing will probably fall back a bit off the temporary bump we've seen, as long as it doesn't dip significantly below where it was in August-ish, I think that's an OK sign as well. Those would indicate to me that we're not likely to see a double-dip.

 

My biggest LONG term concern remains that we are spending a ton of tax money in the wrong places. These are not good long term investments.

 

 

With the Fed done purchasing MBS's mortgage rates should start their climb. This in turn, imo, will crimp the next round of gov't stimulus, i.e., the home buyer credit extension. Why can't they let housing find its own bottom naturally? It is going to anyway, and they can save a lot of people a lot of money if they let the market find equilibrium.

[NorthSideSox72]

With the Fed done purchasing MBS's mortgage rates should start their climb. This in turn, imo, will crimp the next round of gov't stimulus, i.e., the home buyer credit extension. Why can't they let housing find its own bottom naturally? It is going to anyway, and they can save a lot of people a lot of money if they let the market find equilibrium.

I get the impression they won't be doing an extension on the credit. If they do one, I'd be its at a lower dollar amount. That would be smart in any case.

 

Rates climbing a little is OK anyway, they probably should, and a small climb won't materially hurt the market.

 

[Balta1701]

I get the impression they won't be doing an extension on the credit. If they do one, I'd be its at a lower dollar amount. That would be smart in any case.

You are misinformed.

Majority Leader Harry Reid’s office just sent me an outline of the Senate Democrats’ plan to extend and expand the home buyer tax credit. Much of this was covered in my previous blog post. But there’s one new detail that hasn’t been reported elsewhere. It will cost $10.8 billion. That’s a bit more expensive than the existing credit, which will have cost taxpayers about $8.5 billion by the time it expires Nov. 30.

 

Some more details:

 

*The credit is available for homes that go under contract by April 30, 2010 and close within 60 days after that.

 

*It will be attached to a bill to extend unemployment benefits, but it’s unclear when that bill will be voted on.

 

* First-time buyers (those who have not owned a home for three years) can claim an $8,000 credit. Homeowners who buy a new principal residence after living in their current home for at least the last five years can claim up to $6,500.

 

*Income limits: $125,000 a year for individuals, $225,000 a year for married couples.

[Y2HH]

I get the impression they won't be doing an extension on the credit. If they do one, I'd be its at a lower dollar amount. That would be smart in any case.

 

Rates climbing a little is OK anyway, they probably should, and a small climb won't materially hurt the market.

 

They will not extend this. There are already over 600,000 counts of fraud on this, that we will end up paying for...

 

Anytime you give money away for free, people will skim it. I know this because I just closed on my house sale yesterday and I was discussing this with my lawyer, and he was telling me the multitude of scams people have been pulling on this.

 

The two biggest examples he said:

 

1) People are selling their homes to their children (who are first time buyers) for a nominal sale price. That's 8 grand...for free.

2) People are scamming fake loans to buy non existent property as first time buyers...since they didn't actually buy anything, there is no loan...but they still get 8k tax credit.

 

People are obviously going to get caught doing these things...but still, he said there are over 600,000 active cases of this, so he doubts they will extend it as it is now. He said he expects this to get shot down, and they'll return to the way they once did it by extending the credit up front, but you pay it back over the years...which means the money is no longer free and clear...it's merely borrowing against the future.

Edited October 30, 2009 by Y2HH

[NorthSideSox72]

You are misinformed.

 

This is new:

 

Homeowners who buy a new principal residence after living in their current home for at least the last five years can claim up to $6,500.

 

Before, it was just first-timers. That probably is why it costs more.

 

We'll see if this passes.

 

[Cknolls]

This is new:

 

Homeowners who buy a new principal residence after living in their current home for at least the last five years can claim up to $6,500.

 

Before, it was just first-timers. That probably is why it costs more.

 

We'll see if this passes.

 

I believe they are attaching this to the unemployment extension bill. So it will pass. Good through the end of March.

[mr_genius]

Still hard to say on the stimulus money at this point.

 

If by fundamentals you mean employment, and credit position among consumers and businesses, then I agree that things are still very messed up. I think the bounce we've seen in some areas - housing, consumer spending, consumer confidence (though that corrected down recently), GDP - are indicative of things stabilizing. SS2K5 might call that a dead cat bounce, though that may not be the most accurate description here.

 

Consumer spending is down recently and way way down from before this long term recession, the US just lost a s*** load of jobs last week alone, housing sales dropped. There hasn't been a turnaround yet. The GDP boost was a mirage, mortgaged on the countries future. I don't see a light at the end of the tunnel yet.

 

Projections of a U6 rate of around 18% until at least 2014 seem like they might come true. Could even be worse. Not to be a jerk, but the house of cards is still yet to collapse.

Edited October 30, 2009 by mr_genius

[NorthSideSox72]

Consumer spending is down recently and way way down from before this long term recession, the US just lost a s*** load of jobs last week alone, housing sales dropped. There hasn't been a turnaround yet. The GDP boost was a mirage, mortgaged on the countries future. I don't see a light at the end of the tunnel yet.

 

Projections of a U6 rate of around 18% until at least 2014 seem like they might come true. Could even be worse. Not to be a jerk, but the house of cards is still yet to collapse.

Actually, consumer spending was just announced as up 0.5% on non-durables - durables went down 7%, because of the expiration of cash for clunkers. So in reality, spending continues to do what I said it would - reseting a little bit higher (not a lot), because Americans had retrenched more than was realistic for their habits. I've been right on, on this, for a few months. Not sure it will continue this way, though.

 

NEW housing sales dropped, a lot, but frankly I find that to be a positive sign in the long run, since new housing STARTS have also been in free-fall. As they should be. Waaaaaaay to much capacity in the market. This will help the overall market later.

 

Employment though, I'm right with you, that is the huge negative right now. That's why I said its my primary concern in the short run. Most data I am seeing shows we won't see significant job growth until 2011 or 2012. So what we're really hoping for is a stable 2010.

 

The foreclosure rate is worrisome too, and I don't think there is a lot of upward play left in consumer spending unless the employment picture gets better. so there are still plenty of things to worry about. I just think you folks talking about a house of cards are a little late to the game. I think we're past that now, AS LONG AS the UE rates (whichever you choose) climb significantly in the next few months. If that happens, then yeah, we're in deep doo-doo and in for a second dip.