Posts filed under “Really, really bad calls”
I am watching Squawk Box around 6:30am as I get dressed this morning. The conversation turns to various incentives in Germany, where firms are actually paid not to lay people off in a downturn. (Firms cut hours, but keep most of their staff). The lower German unemployment rate of 7% has less people with financial hardship, so the public continues to work, spend, save, invest, engage in all manner of economic activity. We are told this is the reason Germany’s economic data — employment, sentiment, retail consumption, etc. – looks so much more robust vs. the US.
But the German approach of maintaining taxpayer supported employment is immediately criticized. Any discussion such as this — more taxes! — must immediately be criticized.
A guest notes that in the US, a recent report finds CEOs that engage in the greatest number layoffs are rewarded with the highest levels of pay and bonuses; apparently, this is proof of its appropriateness. Guest host Andrew Ross Sorkin makes an effort to argue that the cuts are short term, some of these companies have cut too far into the bone — and is mostly steamrolled. The massive USA layoffs are defended, erroneously acknowledges as a Tragedy of the Commons. (The correct dilemma they were looking for is the Paradox of Thrift).
Now for the fun part: Not only is the German approach of less layoffs, better sentiment, higher economic activity not worthy of much actual debate, it is actually unAmerican (well yes, because its German). The layoffs in the USA are defended as raising productivity to record levels, and (at least over the short term) enhancing profits. One of the hosts suggest this high level of productivity “Is what makes America great.”
Gee, I always thought it was creativity, entrepreneurship, innovation, risk taking, economic opportunity, and freedom.
Turns out it was productivity enhancing layoffs.
What ever happened to the theme that Mortgage Defaults were driving consumer spending? Forget the anecdotes, I am compelled to point out that defaults, foreclosures and walkaways are at record levels, and retail sales have fallen dramatically. I am just asking . . .
Everyone knew that Existing Home Sales were going to stink the joint up today — but I just had to laugh when I read the NAR commentary; The headline along was priceless: July Existing-Home Sales Fall as Expected but Prices Rise. Too bad they don’t cover other events: “Lincoln attends theater opening; leaves early with…Read More
One of the things we have harped on around here is the tendency for humans to be backwards looking in their sentiment. The Recency Effect means we monkeys place disproportionate emphasis on recent stimuli or observations, regardless of worth or significance. Indeed, investors become bullish after they buy stocks, bearish after they sell them, as…Read More
“Something has to happen for this product to be marketable. I just find the whole thing ironic that FHA is providing financing for luxury housing.” -Jonathan Miller, Miller Samuel Inc. > That’s my pal JM discussing condos in today’s WTF?! article. Via Bloomberg, we learn: “The Federal Housing Administration agreed in March to insure mortgages…Read More
There are two OpEds in today’s New York Times regarding the GSEs. One of them is full of insight and intelligence and rationality. The other is by John Carney. The insightful column, Say Goodbye to Fannie and Freddie, was written by former St. Louis Fed president Bill Poole. During the credit bubble and housing boom,…Read More
While it’s interesting to see how the Fed statement changes from one meeting to the next, it’s also instructive to see how it changes over time. That said, let’s look at almost one year’s worth of commentary on the housing market and see how far we’ve come:
Sept. 23, 2009 (link is to all statements and minutes):
Conditions in financial markets have improved further, and activity in the housing sector has increased.
Nov. 4, 2009:
Activity in the housing sector has increased over recent months.
Dec. 16, 2009:
The housing sector has shown some signs of improvement over recent months.
Mar. 16, 2010
However, investment in nonresidential structures is declining, housing starts have been flat at a depressed level, and employers remain reluctant to add to payrolls.
April 28, 2010
Housing starts have edged up but remain at a depressed level.
June 23, 2010
Housing starts remain at a depressed level.
Aug. 10, 2010
Housing starts remain at a depressed level.
When something is “depressed” long enough, is it fair to say it’s a “depression”?
And my post would not be complete without a few words about Mr. Hoenig’s dissent (making five in a row). Today’s Yesterday’s release says:
Voting against the policy was Thomas M. Hoenig, who judges that the economy is recovering modestly, as projected.
“As projected?” As projected by whom? Back in April, the Fed upgraded — yes, upgraded — its central tendency for 2010 GDP from its January forecasts. January’s forecasts had been for 2010 to fall in a range of 2.8 to 3.5, and that was raised in April to a range of 3.2 to 3.7. We’ve now got Q2 coming in at 2.4 (with a downward revision likely) and no one looking for anything better for the balance of the year. So what, exactly, is he talking about?
The Treasury Dept today announced that they had begun compiling a list of the economically insane, and will be publishing this list on a regular basis, according to a Washington Post article. The reason for this: Commentaries regarding mortgage refinancing and/or forgiveness — from both political and investment players — that the Treasury department said…Read More
It is a very hot August and the heat seems to be getting to people on Wall Street. In Washington the greater heat stems from fears about the impact of the economy and housing on the mid-term elections. As a result, Wall Street is expecting a big “surprise” in the form of a massive GSE…Read More
Over at Economix, Harvard economics professor Ed Glaeser looks at the ultra-low interest rates of the aughts, and does not find them to be much to blame for the US Housing boom and bust: “The most common explanation for the great surge in prices is the availability of easy credit, which took the form of…Read More