Financial News

[mr_genius]

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.

 

i suppose predicting a total collapse may have been a bit ambitious on my part. i just like referring to things as 'a house of cards'.

 

i'm not sure why.

Edited October 31, 2009 by mr_genius

[Balta1701]

Coming Sunday: Goldman Sachs' low road to high profits

 

No Wall Street investment firm has emerged from the global financial crisis more intact than Goldman Sachs. Now a five-month McClatchy investigation shows that the firm's winning strategy may have violated U.S. securities laws. The first installment of this four-part series goes live at www.mcclatchydc.com at midnight Eastern time.

Link

[NorthSideSox72]

Link

I just read part one. If parts two through four are equally weak, then this is a pointless piece of journalism. What he is accusing GS of doing - selling debt instruments it feels are riskier than their rating suggests - is not only not illegal, its exactly what an IB should do. This is one of the most basic fundamentals of investing. If you hold an instrument, and receive data that suggests its risk level is going up without a priced-in premium for that risk - you sell it.

 

How is this illegal? Do you expect investors to go to market every time they want to sell and say "I'm sorry but, this dog is a loser, I'm just warning you in advance"? That's absurd.

 

[southsider2k5]

I just read part one. If parts two through four are equally weak, then this is a pointless piece of journalism. What he is accusing GS of doing - selling debt instruments it feels are riskier than their rating suggests - is not only not illegal, its exactly what an IB should do. This is one of the most basic fundamentals of investing. If you hold an instrument, and receive data that suggests its risk level is going up without a priced-in premium for that risk - you sell it.

 

How is this illegal? Do you expect investors to go to market every time they want to sell and say "I'm sorry but, this dog is a loser, I'm just warning you in advance"? That's absurd.

 

lol, so now mitigating risk is bad, along with taking on risk. Nice.

[Balta1701]

In more interesting news, down goes Citi.

CIT Group Inc. filed for bankruptcy Sunday afternoon, said people familiar with the matter, in a high-stakes restructuring intended to keep the doors open at one of the U.S.'s largest small-business lenders.

 

CIT's board met early Sunday afternoon, these people said, and the company sought Chapter 11 protection in New York a few hours later. The lender expected to have considerable support from creditors for its "prepackaged" reorganization, which could allow CIT to have its plan approved quickly and emerge from bankruptcy by the end of the year, other people familiar with the matter said.

U.S. taxpayers could lose several billion in TARP funds.

[NorthSideSox72]

In more interesting news, down goes Citi.

U.S. taxpayers could lose several billion in TARP funds.

I think you misunderstood the story - CIT is not CITI. Two different organizations.

 

[mr_genius]

if CIT goes bankrupt the whole economy will collapse!!!

[Balta1701]

Oh, it's that other company. Forgot about that.

[NorthSideSox72]

if CIT goes bankrupt the whole economy will collapse!!!

I know you are being sarcastic, but, no one ever said that about CIT. They may have said it about C, aka Citibank, which is entirely different.

 

[mr_genius]

I know you are being sarcastic, but, no one ever said that about CIT. They may have said it about C, aka Citibank, which is entirely different.

 

But they are all tied together! If one goes bankrupt they all do! The entire economy is going to collapse!

[jasonxctf]

CIT was/is huge in my industry. They were the biggest lender of capital to small-medium sized businesses. They used to have a partnership providing financing to any/all of Dell's business customers not to mention hundreds of others of manufacturers.

[southsider2k5]

I know you are being sarcastic, but, no one ever said that about CIT. They may have said it about C, aka Citibank, which is entirely different.

 

lol.

 

C is the one you have to worry about...

[Cknolls]

 

http://theblogprof.blogspot.com/2009/11/ci...n-brink-of.html

 

 

I feel we see a lot more of this on every level of gov't. And rightfully so. I hope Chicago follows. But unions are good, I forgot.

 

We haven't seen the worst of the downside yet. Pass healthcare, cap and trade, and combine those with the outrageous, exorbitant benefits of public employee unions and what do you have: DEPRESSION. Again the thing we should fear is DEFLATION not INFLATION. Stimulus has not and will not increase the velocity of money. And that is what this economy needs.

 

 

 

[Y2HH]

http://theblogprof.blogspot.com/2009/11/ci...n-brink-of.html

 

 

I feel we see a lot more of this on every level of gov't. And rightfully so. I hope Chicago follows. But unions are good, I forgot.

 

We haven't seen the worst of the downside yet. Pass healthcare, cap and trade, and combine those with the outrageous, exorbitant benefits of public employee unions and what do you have: DEPRESSION. Again the thing we should fear is DEFLATION not INFLATION. Stimulus has not and will not increase the velocity of money. And that is what this economy needs.

 

I don't see deflation happening with how much money they've "printed". I put printed in "'s because it's not actually physically printed, but the ledger shows it's existence, which was created out of thin air. As this money begins circulating in larger amounts, inflation will undoubtedly set in. We've already seen signs of this as the dollar has devalued in recent weeks against other major currencies. Our current debt load/deficit is scary, and other nations are taking notice. Not that it matters, we go down, they're coming with us...so they'd better hope for the best.

 

That said, yes, deflation is a scary thought, but I don't see it happening with how much money they're flooding the world with, diluted or not.

Edited November 3, 2009 by Y2HH

[Cknolls]

I don't see deflation happening with how much money they've "printed". I put printed in "'s because it's not actually physically printed, but the ledger shows it's existence, which was created out of thin air. As this money begins circulating in larger amounts, inflation will undoubtedly set in. We've already seen signs of this as the dollar has devalued in recent weeks against other major currencies. Our current debt load/deficit is scary, and other nations are taking notice. Not that it matters, we go down, they're coming with us...so they'd better hope for the best.

 

That said, yes, deflation is a scary thought, but I don't see it happening with how much money they're flooding the world with, diluted or not.

 

 

The question is : what happens if deflation really sets in despite all the money printed? We could have another "lost decade".

[NorthSideSox72]

The question is : what happens if deflation really sets in despite all the money printed? We could have another "lost decade".

That's like asking what if unemployment hits 25%. Its just incredibly unlikely, and none of the indicators are saying anything like that. Deflation is scary, but we aren't seeing any signs that its even a remote possibility.

 

[Balta1701]

That's like asking what if unemployment hits 25%. Its just incredibly unlikely, and none of the indicators are saying anything like that. Deflation is scary, but we aren't seeing any signs that its even a remote possibility.

Actually...we were seeing signs it was a distinct possibility earlier this year. But that's where the stimulus package and the free money from the Fed have been so important.

[NorthSideSox72]

Actually...we were seeing signs it was a distinct possibility earlier this year. But that's where the stimulus package and the free money from the Fed have been so important.

I am not talking about 8 months ago, I am talking about now. Way too much money out there, all sorts of indicator saying we are no longer in free fall, and commodity prices (particularly oil) are still pretty strong. Deflation is just not in the cards, barring a huge second dip.

 

[southsider2k5]

The state of California is about to help itself to an interest free loan, out of its citizens paychecks. Merry Christmas!

 

http://www.latimes.com/business/la-fi-stat...0,2028140.story

 

California to withhold a bigger chunk of paychecks

The amount goes up 10% on Sunday as Sacramento borrows from taxpayers. Technically, it's not an income tax increase: You'll get the money back eventually.

 

Reporting from Los Angeles and Sacramento - Starting Sunday, cash-strapped California will dig deeper into the pocketbooks of wage earners -- holding back 10% more than it already does in state income taxes just as the biggest shopping season of the year kicks into gear.

 

Technically, it's not a tax increase, even though it may feel like one when your next paycheck arrives. As part of a bundle of budget patches adopted in the summer, the state is taking more money now in withholding, even though workers' annual tax bills won't change.

 

Think of it as a forced, interest-free loan: You'll be repaid any extra withholding in April. Those who would receive a refund anyway will receive a larger one, and those who owe taxes will owe less.

 

But with rising gas costs, depressed home prices and double-digit unemployment, the state's added reach into residents' regular paycheck isn't sitting well with many.

 

"The state's suddenly slapping people upside the head," said Mack Reed, 50, of Silver Lake. "It's appalling how brash that is."

 

Brittney McKaig, 23, of Santa Ana said she expects the additional withholding to affect her holiday spending.

 

"Coming into the holidays, we're getting squeezed anyway," she said. "We're not getting Christmas bonuses and other perks we used to get. So it all falls back on spending. The $40 gift will become a $20 gift."

 

The extra withholding may seem like a small amount siphoned from each paycheck, but it adds up to a $1.7-billion fix for California's deficit-riddled books.

 

From a single taxpayer earning $51,000 a year with no dependents, the state will be grabbing an extra $17.59 each month, according to state tax officials. A married person earning $90,000 with two dependents would receive $24.87 less in monthly pay.

 

California will probably continue to collect the tax at a higher rate for many years -- or find an additional $1.7 billion to slice from a future budget, an unlikely occurrence. All workers who have state taxes withheld will see their paychecks shrink.

 

"Many families are sitting at their kitchen table wondering how they're going to make ends meet," said state Sen. Tony Strickland (R-Thousand Oaks). "At the same time, the state of California is taking a no-interest loan."

 

The provision is one of numerous maneuvers state lawmakers and Gov. Arnold Schwarzenegger approved in the summer to paper over the state's deficit. Many of the changes, including the extra withholding, were little noticed outside of Sacramento.

 

Savvy taxpayers can get around the state's maneuver by increasing the number of personal withholding allowances they claim on their employer tax forms, said Brenda Voet, a spokeswoman for the state's Franchise Tax Board.

 

"People can get out of this," she said, noting that most people would have to change their allowances through their employers. California's budget leaders are banking on the hope that most won't.

 

The increase is coming at a bad time for store owners, many of whom depend on the holiday shopping season to keep their businesses alive.

 

"I don't think there's any question it's going to impact consumers' spending," said Bill Dombrowski, president of the California Retailers Assn. "Any time you reduce people's disposable income, there's going to be a negative effect on the retail sector."

 

But Stephen Levy, director of the Center for Continuing Study of the California Economy, wasn't so sure.

 

"It's having a relatively small impact on people's income," Levy said, pointing out that many families will receive only $12 to $40 less each month.

 

Yet Erika Wendt, 28, of San Diego said she already lived on a tight budget: She rides her bike to work, for instance, to save on gasoline and parking costs.

 

"I am frustrated as this directly impacts my weekly budget -- what groceries I buy, how much I drive and can spend on gas," she said. "Now money will just be tighter, and I'm not sure where else I can cut back."

 

The extra withholding comes in addition to tax hikes the state enacted this year.

 

In February, state income tax rates were bumped up 0.25 of a percentage point for every tax bracket. The dependent credit was slashed by two-thirds. The state sales tax rate rose 1 percentage point. The vehicle license fee nearly doubled to 1.15% of a car's value.

 

Lawmakers and the governor also approved deep cuts to schools, social services and prisons to fend off one of the steepest revenue losses in California history.

 

Temporary budget bandages, such as the increase in withholding, were included at several points this year to avoid higher taxes and deeper cuts, said H.D. Palmer, a spokesman for the state Department of Finance.

 

Sacramento, meanwhile, is awash in red ink again. The state controller recently said revenue in the budget year already had fallen more than $1 billion short of assumptions. Outsize deficits are projected for years to come.

 

Such temporary measures as the withholding tax increase don't really fix the budget gap, "they just more or less hid it," said Christopher Thornberg, a principal with Beacon Economics in Los Angeles. "I call it a fraud."

 

shane.goldmacher@ latimes.com

 

william.hennigan@ latimes.com

[NorthSideSox72]

The state of California is about to help itself to an interest free loan, out of its citizens paychecks. Merry Christmas!

 

http://www.latimes.com/business/la-fi-stat...0,2028140.story

Now that's just stupid. The state won't have the money for more than a few months, and they cannot possibly project the actual amount because they have no way of knowing how many people will simply change their withholdings. This isn't a solution to anything.

 

[Balta1701]

This isn't a solution to anything.

That's exactly how the people in charge of California want it.

[Y2HH]

That's exactly how the people in charge of California want it.

 

What it is, is downright scary that they can just decide to do this on a whim...

[NorthSideSox72]

That's exactly how the people in charge of California want it.

Huh?

 

[Balta1701]

Huh?

The people with the most power in california benefit when nothing changes and the government keeps screwing over the other 99% of its citizens.

[kapkomet]

The people with the most power in california the United States benefit when nothing changes and the government keeps screwing over the other 99% of its citizens.

Fixed that for you.