Posts filed under “Think Tank”

30 year bond auction was light

The record $16b 30 year bond auction was light as the yield was a few bps above where the when issued was trading and the bid to cover at 2.26 was the weakest since May and below the ’09 average of 2.43. Indirect bidders totaled 44% which is about in line with the ’09 average. Going out 30 years to collect a nominal yield of 4.47% with no inflation protection is taking huge faith that the return will compare favorably to other asset classes with the backdrop of the current impact of a weaker US$, higher gold, rising inflation expectations and worsening government finances. The long bond is lower following the auction but was on the weak side just ahead of it.

Category: MacroNotes


David A. Rosenberg is Chief Economist & Strategist at Gluskin Sheff, with a focus on providing a top-down perspective to the Firm’s investment process. Mr. Rosenberg has earned both Bachelor of Arts and Master of Arts degrees in Economics from the University of Toronto. Prior to joining Gluskin Sheff, David was Chief North American Economist at Bank of America-Merrill Lynch in New York and prior thereto, he was a Senior Economist at BMO Nesbitt Burns and Bank of Nova Scotia. Mr. Rosenberg has ranked first in economics in the Brendan Wood International Survey for Canada for the past seven years and was on the U.S. Institutional Investor All American All Star Team for the last four years.





There are serious structural issues undermining the U.S. labour market as companies continue to adjust their order books, production schedules and staffing requirements to a semi-permanently impaired credit backdrop. The bottom line is that the level of credit per unit of GDP is going to be much, much lower in the future than has been the case in the last two decades. While we may be getting close to a bottom in terms of employment, the jobless rate is very likely going to be climbing much further in the future due to the secular dynamics within the labour market that need to be discussed:

• For the first time in at least six decades, private sector employment is negative on a 10-year basis (first turned negative in August). Hence, the changes are not merely cyclical or short-term in nature. Many of the jobs created between the 2001 and 2008 recessions were related either directly or indirectly to the parabolic extension of credit.

• During this two-year recession, employment has declined a record 8 million. Even in percent terms, this is a record in the post-WWII experience.

• Looking at the split, there were 11 million full-time jobs lost (usually we see three million in a garden-variety recession), of which three million were shifted into part-time work.

• There are now a record 9.3 million Americans working part-time because they have no choice. In past recessions, that number rarely got much above six million.

• The workweek was sliced this cycle from 33.8 hours to a record low 33.0 hours — the labour input equivalent is another 2.4 million jobs lost. So when you count in hours, it’s as if we lost over 10 million jobs this cycle. Remarkable.

• The number of permanent job losses this cycle (unemployed but not for temporary purposes) increased by a record 6.2 million. In fact, well over half of the total unemployment pool of 15.7 million was generated just in this past recession alone. A record 5.6 million people have been unemployed for at least six months (this number rarely gets above two million in a normal downturn) which is nearly a 36% share of the jobless ranks (again, this rarely gets above 20%). Both the median (18.7 weeks) and average (26.9 weeks) duration of unemployment have risen to all-time highs.

• The longer it takes for these folks to find employment (and now they can go on the government benefit list for up to two years) the more difficult it is going to be to retrain them in the future when labour demand does begin to pick up. Not only that, but we have a youth unemployment rate now approaching a record 20%. Again, this is going to prove to be very problematic for employers in the future who are going to be looking for skills and experience when the boomers finally do begin to retire.

In a nutshell, to be calling for a 12.0-13.0% unemployment rate is meaningless except that it is very likely going to be a headline grabber.

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Category: Employment, Think Tank

Banks Are Getting Desperate With Principal Reduction Offers

Calculated Risk has a fascinating and detailed look at an UNSOLICITED Principal Reduction Loan Modification (pdf) offer from BofA. A few background details: The homeowner bought the house in May 2005 for $420,000. The homeowner refinanced in March 2006. This included a negatively amortizing adjustable rate mortgage (NegAM ARM) first with BofA for $392,000, and…Read More

Category: Bailouts, Credit, Real Estate, Think Tank

Initial Claims continue downward trend but…

Initial Claims totaled 502k, 8k less than expected and its the lowest level since the 1st week of Jan when it was 488k (Oct ’08 was time before that where claims were below 500k) and down from 514k last week which was revised up by 2k. Continuing Claims fell 139k and were 69k below forecasts…Read More

Category: MacroNotes

Morning stuff

The MBA said weekly purchases fell 11.7% to the lowest level since Dec ’00 as the uncertainty over whether the home buying tax credit would be extended clearly froze activity. With it now being resumed into the spring, purchases should tick up again but we’ll get to see how much demand was pulled forward. The…Read More

Category: MacroNotes

Follow up to the WSJ article on the CDS of Japan

The back page of section C of today’s WSJ talked about the recent rise in the CDS of sovereign Japan and its recent rise. As of today, 5 year CDS for Japan is at 72 bps (costs $72k per $10mm of notional value), just a few bps off the highest level since April. UK 5…Read More

Category: MacroNotes

Richard W. Fisher
The Current State of the Economy and a Look to the Future (With Reference to William ‘Sidestroke’ Miles, W. Somerset Maugham, Don Ameche and Kenneth Arrow)
Remarks before the Austin Headliners Club
Austin, Texas
November 10, 2009

Thank you, Tom [Granger], for that kind introduction.

Coming in from the airport, I again saw that fabled bumper sticker calling on local voters to “Keep Austin Weird.” It reminded me of the old saw that Washington is 10 square miles surrounded by reality.

Austin might be justly proud to consider itself 272 square miles surrounded by normality. But I know better. When I made my hapless run for the U.S. Senate in 1994, I managed to visit every nook and cranny of this state. I know from personal experience that, thankfully, there is nothing normal about Texas.

Take my wife’s family, for example. Her great-great grandfather was William Miles. He hailed from Nip ’n Tuck, a little town near what is now Longview in East Texas. He served gallantly in the Mexican Wars and then, after a substantial interlude, joined the 14th Regiment of the Texas Unmounted Cavalry—they had no horses but they were proud Texans and called themselves “cavalry” nonetheless—and went off to fight for the Confederacy. He had his arm shot off in battle, was discharged and sent home. To get back, he swam across the Mississippi—no small feat for a one-armed man. He is memorialized by the nickname “Sidestroke” in the family annals. Old “Sidestroke” then walked back to Nip ’n Tuck to become a dirt farmer.

He arrived home broke; he could not immediately afford a mule, so until he could, he hitched a plow to his six daughters—there was a seventh but she got smart, married a Yankee and was promptly disowned. William Miles never spent a dime; he saved every penny he earned and prospered handsomely. He died in 1910. His will instructed his executor to auction off all he had accumulated—his house, his equipment, the works—so his net worth could be calculated in hard currency.

All this is captured on his tombstone in the Gum Springs graveyard near Longview. His stone records the dates of his and his wife Nancy’s births and deaths, and the dates of his service in both the Army of the U.S.A. and the Army of Jefferson Davis. On the back of the stone, for all the world to see, are carved the words “Value of my estate $44,378.34.” That’s nearly $1 million in today’s dollars. That’s the good news. He died a rich man. The bad news is that his will required his daughters to buy everything back that was sold in his estate sale.

You cannot tell me that Austin has a corner on the market for being “weird.”

Interesting as all of that is, I know you didn’t ask me to return tonight to regale you with the legends and lore of my wife’s family. You asked me here to provide insight into something even more resilient and more “weird” than William “Sidestroke” Miles—our economy. So let’s get down to business.

As you all know, the Federal Reserve’s principal monetary policymaking group, the Federal Open Market Committee (FOMC), met last Tuesday and Wednesday. Our statement—released like clockwork at the conclusion of every FOMC meeting precisely at 1:15 p.m. Central time—summed up our collective wisdom: With a host of caveats, we noted that activity in the American economy has continued to pick up and appears to be on the mend. Despite this progress, however, we remain vigilant.

Let me explain why.

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Category: Federal Reserve, Think Tank

Jim Chanos’ presentation at the Virginia Value Investing Conference: > Chanos Presentation: Ten Lessons From The Financial Crisis That Investors Will Soon Forget (If They Haven’t…

Category: Psychology, Really, really bad calls, Think Tank

Damn the torpedos, full spead ahead!

Fed Pres Fisher last night followed dovish speeches from Lockhart, Yellen and Rosengren where all reiterated that policy will remain easy for longer and “time is not now to tighten.” This of course follows the message of last week’s FOMC statement. Fisher still believes deflation is more of an immediate worry than inflation. The Fed…Read More

Category: MacroNotes

Innovative Ideas for Revitalizing the LIHTC Market

Release Date: November 10, 2009 For immediate release The Federal Reserve Board on Tuesday announced the availability of a collection of brief articles that examine ways to improve the availability of housing options for low-income renters. The publication, commissioned in conjunction with the Community Affairs staff at the Federal Reserve Bank of St. Louis, focuses…Read More

Category: Federal Reserve, Think Tank