Wow, this is kinda cool:
Amazon (but not Barnes & Noble or Borders) is showing an estimated delivery date for Bailout Nation on May 8th, 2009:
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Another classic “Read it here 1st” at TBP:
What Good Are Economists Anyway? (Business Week)
Why they failed to predict the global economic crisis—and why their help is still crucial to a recoveryEconomists mostly failed to predict the worst economic crisis since the 1930s. Now they can’t agree how to solve it. People are starting to wonder: What good are economists anyway? A commenter on a housing blog wrote recently that economists did a worse job of forecasting the housing market than either his father, who has no formal education, or his mother, who got up to second grade. “If you are an economist and did not see this coming, you should seriously reconsider the value of your education and maybe do something with a tangible value to society, like picking vegetables,” he wrote on patrick.net.
Take that, you pointy-headed failures! Go jump off a supply curve!”
Interesting take — looks kinda familiar. Now where else have I seen that sentiment expressed?
Hmmmm . . . Perhaps I spilled a few pixels on the same subject previously. Let’s do a quick search — hey, whattataknow:
Why Economists Missed the Crises (January 5th, 2009)
http://www.ritholtz.com/blog/2009/01/why-economists-suck/
RIP Chicago School of Economics: 1976-2008 (December 23rd, 2008)
http://www.ritholtz.com/blog/2008/12/chicago-repudiation/
The Mystery of the Awful Economists
RealMoney.com, 3/2/2005 3:42 PM ESThttp://www.thestreet.com/p/rmoney/barryritholtz/10211333.html
Mystery of the Awful Economists, part II (April 8th, 2005)
http://www.ritholtz.com/blog/2005/04/mystery-of-the-awful-economists-part-2/
Mystery of the Awful Economists (Part III) (April 13th, 2005)
http://www.ritholtz.com/blog/2005/04/mystery-of-the-awful-economists-part-iii/
The Illusory World of Economic Forecasting (September 19th, 2006)
http://www.ritholtz.com/blog/2006/09/the-illusory-world-of-economic-forecasting
You can read it in the MSM, or you can read it here first — in some cases, 4 years ago!
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Source:
What Good Are Economists Anyway?
Peter Coy
Why they failed to predict the global economic crisis—and why their help is still crucial to a recovery
Business Week, April 16, 2009, 5:00PM EST
http://www.businessweek.com/magazine/content/09_17/b4128026000502.htm
Via New Scientist, comes this enormo chart on how long various resources will last:
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click for ginormo chart
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Hat tip Flowing Data
If its Saturday, that means its time for a cool chart from Floyd Norris:
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Chart courtesy of NYT
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Excerpt:
“THE current recession has become the second-worst in the last half-century and is close to surpassing the severe 1973-75 downturn, according to the Index of Coincident Indicators, based on government data and compiled each month by the Conference Board, a private organization. Unlike the more widely followed Index of Leading Indicators, which is supposed to help forecast changes in the economy, the coincident index is aimed at simply recording how the economy is doing now.
The accompanying chart shows how far that index has declined from pre-recession peaks during each downturn since 1960. The figure for March, released this week, showed a decline of 5.6 percent from the high set in November 2007, the month before the recession began, according to the National Bureau of Economic Research.”
Interesting stuff . . .
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Source:
Recession, Far From Over, Already Setting Records
Floyd Norris
NYT, April 24, 2009
http://www.nytimes.com/2009/04/25/business/economy/25charts.html
With stock market indexes down almost half the levels they were a year ago, Barron’s Big Money Managers are bullish for next year. But they’re pretty pessimistic about the rest of 2009. They look for things to improve next year.
4/25/2009
April 24, 2009
By John Mauldin
This week we look at the second half of my speech from a few weeks ago at my annual Strategic Investment Conference in La Jolla. If you have not read the first part, you can review it here.
The first few paragraphs are a repeat from last week, to give us some context. Please note that this is somewhat edited from the original, and I have added a few ideas. You can also go there to sign up to get this letter sent to you free each week.
Okay, when you become a central banker, you are taken into a back room and they do a DNA change on you. You are henceforth and forever genetically incapable of allowing deflation on your watch. It becomes the first and foremost thought on your mind: deflation, we can’t have it.
MV=PQ. This is an important equation, right up there with E=MC2. M (money or the supply of money)
times V (velocity — which is how fast the money goes through the system — if you have seven kids it goes faster than if you have one) is equal to P (the price of money in terms of inflation or deflation) times Q (roughly standing for the Quantity of production, or GDP)
So what happens is, if we increase the supply of money and velocity stays the same, and if GDP does not grow, that means we’ll have inflation, because this equation always balances. But if you reduce velocity (which is happening today) and if you don’t increase the supply of money, you are going to see deflation. We are watching, for reasons we’ll get into in a minute, the velocity of money slow. People are getting nervous, they are not borrowing as much, either because they can’t or the animal spirits that Keynes talked about are not quite there.
To fight this deflation (which we saw in this week’s Producer and Consumer Price Indexes) the Fed is going to print money. A few thoughts on that. The Fed has announced they intend to print $300 billion (quantitative easing, they call it). That is different than buying mortgages and securitized credit card debt — that money (credit) already exists.
When they just print the money and buy Treasuries, as with the $300 billion announced, they can sop that up pretty easily if they find themselves facing inflation down the road. But that problem is a long way off.
Sports fans, $300 billion is just a down payment on the “quantitative easing” they will eventually need to do. They can’t announce what they are really going to do or the market would throw up. But we are going to get quarterly or semi-annual announcements, saying, we are going to do another $300 billion here, another $500 billion there. Pretty soon it will be a really large total number.
When we first started out with TALF and everything, it was a couple hundred billion, and now we just throw the word trillions around and it just drips off of our tongues and we don’t even think about it. A trillion is a lot. It’s a big number. And the total guarantees and backups and all this stuff we are into — I saw an estimate of $10-12 trillion. That’s a lot of money.
Understand, the Fed is going to keep pumping money until we get inflation. You can count on it. I don’t know what that number is; I’m guessing maybe as much as $2 trillion. I’ve seen various studies. Ray Dalio of Bridgewater thinks it’s about $1.5 trillion. It’s some very big number way beyond $300 billion, and they are going to keep at it until we get inflation.
Side point: what happens if the $300 billion they put in the system comes back to the Fed’s books because banks don’t put it into the Libor market because they are worried about credit risks? It does absolutely nothing for the money supply. Okay? It’s like, goes here, goes back there — it doesn’t help us. The Fed has somehow got to get it into the financial system. They’ve got to figure out how to create some movement.
Will it create an asset bubble in stocks again? I don’t know, it could. Dennis [Gartman] talked about being nervous yesterday. I would be nervous about stock markets both on the long side, as I think we are in a bear market rally, but also there is real risk in being short. Bill Fleckenstein will be here tonight. He is a very famous short trader. He closed a short fund a couple of months ago. He says he doesn’t have as many good opportunities, and basically he’s scared of being short with so much stimulus coming in. So it’s going to work, at least in terms of reflation, but the question is, when? A year? Two years?
Set your TIVOs: Tonight’s show (Apr 24, 2009) looks to be a good one:
1. A conversation with hedge fund manager Bill Ackman and Columbia economics professor and Nobel Laureate Joe Stiglitz;
2. A conversation with Lionel Barber, editor of the “Financial Times”
I’ll post the video once the show puts it online . . .
I am reviewing the White Paper the Fed just released:
“All U.S. bank holding companies with year-end 2008 assets exceeding $100 billion were required to participate in the assessment, which began February 25. These institutions collectively hold two-thirds of the assets and more than half the loans in the U.S. banking system.”
One thing struck me right away — unless I am misunderstanding something, this stress test does not appear to be very stressful.
Consider the following baseline and “Stressed” components:
Further, let me point out that the Consensus estimates, professional forecasters and blue chip surveys have all been awful — terribly wrong — during this entire fiasco. Using their wildly optimistic estimates impugns this entire process. When your marriage is on the rocks, you don’t ask the same jamoke who introduced you to your spouse for marital advice. (Let me hasten to add that I am happily married and this is just a visceral example).
Using the Q4 as the starting point, have a look at the charts:>
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The baseline GDP scenario starts from Q4, then adds an additional modest contraction for the baseline, and a less modest deeper contraction for the “more adverse” test, i.e., a modest worsening of the economy.
None of these reflect another deep set of contractions — and they certianly do not reflect the sort of panic economy we saw from September 2008 til January of this year.
The bottom line is that for a stress test, these weren’t very stressful . . .
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Source:
The Supervisory Capital Assessment Program: Design Summary (287 KB PDF)
Board of Governors of the Federal Reserve System, April 24, 2009
http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20090424a1.pdf
Video-o-rama: Economy – recovery or relapse?
The video clips below come via my hotel room at Dana Point, California, where I am attending a conference hosted by Rob Arnott’s Research Affiliates. Also present are financial luminaries such as Peter Bernstein, Burton Malkiel, Harry Markowitz and Jack Treynor. It will be fascinating to hear whether these gentlemen see any signs of the economy starting to bottom, and how they are investing at this juncture.
On the video front, the IMF upped its forecast of total global credit crisis-related losses to $4.1 trillion by the end of 2010 and the Congressional Oversight Panel on Tarp conducted a hearing on Capitol Hill, whereas a host of commentators – including Martin Feldstein, Joseph Stiglitz, Nouriel Roubini, Frederic Mishkin, Paul McCulley and John Mauldin – weighed in with a combination of gloomy and “bottom-in-sight” economic forecasts, as well as comments on the imminent results of the bank stress tests.
Other clips worth viewing include the Charlie Rose interview with Mikhail Gorbachev and Martin Wolf’s take on the UK economy.
Enjoy the footage while I enjoy the views across the North Pacific.
Bloomberg: IMF’s Vinals says losses from crisis may hit $4 trillion
“Jose Vinals, director of monetary affairs and capital markets at the International Monetary Fund, speaks about the outlook for global losses on distressed loans and securitized assets due to financial market turmoil and the recession. Banks will shoulder about 61% of the writedowns, with insurers, pension funds and other nonbanks assuming the rest, IMF said in a report today on the state of the global financial system. The fund forecast $4.1 trillion in losses by the end of 2010 with $2.7 trillion in losses from US-originated loans and assets, compared to its estimates of $2.2 trillion in January and $1.4 trillion in October.”
Source: Bloomberg, April 21, 2009.
CNBC: Treasury’s TARP update
“Treasury Secretary Timothy Geithner updates the Congressional Oversight Committee on TARP.”
Source: CNBC, April 21, 2009.
Fox Business: TARP oversight panel questions Geithner
Source: Fox Business, April 21, 2009.
CNBC: Treasury hearing – Elizabeth Warren’s statements
“Congressional Oversight Panel chair Elizabeth Warren makes statements on the Treasury’s TARP update.”
Source: CNBC, April 21, 2009.
Yahoo Finance, Tech Ticker: Will bank “stress tests” kill market … or government credibility?
“Believe it or not, the ‘stress tests’ that the government is performing to see how that banks will do if the economy continues to get worse were originally intended to inspire confidence.
“The government would subject the banks to all sorts of horrifying scenarios, the theory went, and it would then report that the banks had passed with flying colors – thus reassuring a nervous public that the financial system was sound.
“Alas, from the beginning, the stress tests weren’t stressful enough. The government then said it was planning to withhold the results of the stress test to avoid harming the bad banks – which defeated the whole purpose.
“Josh Rosner, managing director at Graham Fisher, is as frustrated as many analysts with the flaws of the stress tests, but he hasn’t lost all hope. Rosner cites two key dates: Friday, April 24, when the government will reveal details of the tests, and May 4, when some ‘results’ will be revealed. He says he hopes the tests will force the government to begin to differentiate between strong banks and weak banks, which he thinks is critical to the recovery process.”
Source: Yahoo Finance, Tech Ticker, April 20, 2009.
YouTube: Banks go on the offensive
“Many banks are starting to take aim at customers who are falling behind on payments by increasing fees and credit card rates, much to the chagrin of the White House. Kimberly Dozier reports.”
Source: YouTube, April 19, 2009.
Forbes: The Roubini recovery
Source: Steve Forbes, Forbes, April 20, 2009.
"I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale." -Thomas Jefferson (letter to John Taylor in 1816)
After 3 quarters in a row that averaged just 1.2%, Q4 GDP grew 2.8%, a touch below expectations of 3.0% BUT Nominal GDP grew well below forecasts. Because the price deflator was up just .4% vs the estimate of 1.9%, Nominal GDP was up 3.2% vs the estimate of 4.9%. Personal Consumption rose 2.0% vs the forecast of 2.4%. Fixed Investment rose 3.3% helped by a 5.2% increase in equipment and software spending and residential construction rose by 10.9%. Trade was a slight drag on GDP growth and government spending was as well led by a 12.5% decline on national...
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