Posts filed under “Finance”

There will be some good news and some bad news this morning at 8:30. That’s when GDP will be released.

The Good News will be that we are no longer contracting at the painful rate of 6% annually; Call it the end of the Freefall period we saw from September 2008 to March 2009. The Bad News will be twofold: 1) That the national economy is still contracting; the 2) Why we are contracting — the real world factors — will show the recession marches on.

My best guess — and given the oddities of this data point, we can only accurately call this a guess — is 1.5- 2.0%. If the number comes in negative, it will be the 4th consecutive quarter in a row of contraction.

In an odd twist, with US consumers are weaker than their Asian and European counterparts, it turns out to be a positive for the GDP data. Why? When imports fall faster than exports, it is a net gain for the way GDP is calculated. I know that sounds bizarre, but on a relative basis, less US consumption of imports, is additive to the final GDP number.

What else do we know about economic activity this quarter?

• Unemployment has risen;

• Wages continue to slide;

• Industrial production has fallen every month;

• Deflation continues to stalk many asset classes;

• Credit availability is weak, lending standards are tight;

• Capacity utilization is at a very low rate of 68%;

• Retail sales (other than gasoline price increases) are soft;

What does this mean in terms of the end of the recession? The NBER calls a recession –the way they use the word– as “a period of diminishing activity.” If economic activity is poor, but flat — meaning, a low plateau at the trough — they very well could call the end of the recession.

However, they describe their procedure for identifying ends of recessions by looking at when the contraction ends. That is unlikely to be Q2 of 2009.

As Paul Vigna notes in this morning’s WSJ, “The elements that will drive a recovery — rising wages, consumer demand, production and sales — haven’t appeared.”

Hence, regardless of GDP data, the Recession is likely continuing, albeit in an ordinary, form.

Category: Economy, Finance

Withholding Taxes Chart (July 15, 2009)

We have not run these charts from Matt Trivisonno in some time;  they are simply jaw dropping: > >

Category: Economy, Finance, Taxes and Policy

Quarterly Review

I have the lead quote in the this page one NYT Business section article on the Markets — which came out prior to this NFP: “Less-worse isn’t the same as better,” said Barry Ritholtz, chief executive of FusionIQ, a research firm. “We want to see ‘good.’ In order to grow profits, in order for earnings…Read More

Category: Economy, Federal Reserve, Finance, Friday Night Jazz, Media

Continuing Claims “Exhaustion Rate”

Last week, we saw Continuing Claims decrease — proof, said the green shooters, of the imminent economic recovery. Only, not so much: Those of you (who can still afford the luxury of) a trusty Bloomberg will note the ‘exhaustion rate’ for jobless benefits – EXHTRATE – reveals that people are not leaving the pool of…Read More

Category: Film, Finance, Friday Night Jazz, Investing, Markets

My friend David Grais has started a blog devoted to structured finance and the law.  David is a very skilled litigator who spent most of his career doing corporate defense work, but has defected from the Dark Side to become a plaintiff lawyer working on a number of very important ABS cases.

David just posted a comment on the his firm’s blog [http://www.absinvestoradvocate.com] that has some interesting insights about the Obama Administration’s plans for “reforming” the securitization markets.  His comment follows below.  — Chris

Proving yet again that it has become a puppet of its sell-side parent SIFMA, the American Securitization Forum has just released a 241-page study that it commissioned from National Economic Research Associates, Inc. (here) to prove that securitization increases the amount and lowers the cost of consumer credit. It is as though the White Star Line commissioned a book on the RMS Titanic in which the author was told to extol the power of Titanic’s engines, the elegance of the china in its dining rooms, and the verve of its dance bands, while strictly ignoring its shortage of lifeboats.

There is only one question worth asking about securitization: why did securitization become the seedbed of the broadest and costliest epidemic of fraud in history? Until we face that question squarely and answer it honestly, securitization will remain in its coma. Unfortunately, the Obama Administration missed a chance to address that question in its plan to regulate the securitization market. (See the post immediately below.) ASF’s sponsorship of the NERA report is more insidious. By a combination of forbidding mathematics and emollient prose (“Recent experience appears to demonstrate readily that securitization is not inherently ‘good’ or ‘bad.’”), ASF tries to whisk us past that looming question and past the one measure that will best restore confidence in securitization: effective redress for investors against those that turned securitization from a useful financial tool into an orgy of misconduct.
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Category: Finance, Investing, Markets, Think Tank

Regulating Big Firm Bad Behavior

In today’s WSJ, we learn of the proposed shift in standards for retail stock brokers — from “Suitability” to “Fiduciary:” “Buried in President Obama’s proposed regulatory overhaul is a change that could upend Wall Street: Brokers would be held to a higher “fiduciary” standard that would compel them to place their client’s interests ahead of…Read More

Category: Finance, Investing, Regulation

Green Shoots Everywhere ?

Two interesting articles in today’s NYT touch upon some of our favorite themes: Indebtedness of Consumers, the poor condition of bailed out banks, and the ongoing softness in the labor market. The first is a front page article on the Credit Card firms reducing debt for delinquent borrowers, noting “The creditors would rather have a…Read More

Category: Bailouts, Credit, Employment, Finance, Markets, Real Estate

Technology & Finance Bubble Aftermaths

Another pair of charts courtesy of the terrific Ron Griess of The Chart Store. The first looks at the 2000 bubble in Technology, and how stocks behaved after that crash. The second is a look at a similar boom and bust — the financial sector bubble and collapse. The technology boom was actually bigger than…Read More

Category: Finance, Markets, Technical Analysis, Technology

Worsening Bank Loans

Floyd Norris on the bad  — and worsening — loan problem: “OVERALL loan quality at American banks is the worst in at least a quarter century, and the quality of loans is deteriorating at the fastest pace ever, according to statistics released this week by the Federal Deposit Insurance Corporation. The report highlighted that even…Read More

Category: Credit, Finance

End of “Dumb Money” Era for Private Equity

Dan Gross:

“Nine of the 10 biggest leveraged buyouts were done between 2006-2007. They bought into cyclical industries right at the peak and loaded a ton of debt on them, which is not a winning proposition.”

May 01, 2009

Category: Finance, Video