Robert "Doom is Nigh" blog: 2009-01-25

Saturday, January 31, 2009

Obama continues to make Machiavellian moves

http://voices.washingtonpost.com/44/2009/01/31/greggs_appointment_to_commerce.html?hpid=topnews
You can say many things about Obama but he is clearly an excellent player of the game. By appointing a Republican senator from a Democratic controlled state he is doing what his party could not. Control of congress. In the end absolute power has always corrupted. Be careful what you wish for Democratics.

Korea nearing war?

http://www.google.com/hostednews/ap/article/ALeqM5jaGRMYGX4AoL2n076WwmIZr1IgMQD9620B580
As if Obama was not busy enough North Korea is upping the rhetoric.

So we end the month with 6 failed banks

http://www.fdic.gov/news/news/press/2009/pr09013.html
This trend as well has been accelerating. But still mild.

January Economic Summary in Graphs

http://www.calculatedriskblog.com/2009/01/january-economic-summary-in-graphs.html
Just ugly and not signs of slowing

Friday, January 30, 2009

Soros and what could be done

http://www.ft.com/cms/s/0/49b1654a-ed60-11dd-bd60-0000779fd2ac.html

Very difficult and almost for sure undoable.

techincal warning

A close below 8046 will indicate a strong move down in the following weeks.

Watching closely and preparing to go short against the Dow and SP.

The difference between a severe recession and a full-scale Depression is famine

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/01/30/MNC615JNHB.DTL

Lets take a look at how the stimulis will benefit Cali

http://www.latimes.com/news/nationworld/nation/la-na-california-stimulus29-2009jan29,0,4279485.story

The $63-billion projection for California -- provided by the Center for American Progress, a liberal think tank with ties to President Obama -- includes about $44 billion to help pay for things such as infrastructure projects, health care for the poor and increased unemployment benefits.

The remaining $19 billion would cover the cost of the individual tax cuts to Californians.

So the $19 Billion is another check to people. No Jobs there.

$4.4 billion would go to California schools; $2.8 billion to road projects

$4.4 Billion to schools is for improvements and will provide little to no job creation.

And California, which has been hard hit by home foreclosures, should get a large chunk of the $4 billion provided nationwide to help communities buy and fix up abandoned properties.

Hmm.. I guess some contractor work.

The measure also would increase the weekly unemployment checks by $25 for about 2.4 million Californians, according to the National Employment Law Project, as well as extend by 33 weeks the jobless benefits for about 500,000 people.

No jobs here.

So roughly half of the $44 billion will go to infrastrure projects spread out around the state.

The budget defict for Cali is $40 Billion or so. This will reduce it by 25% (Coming from cost reduction on projects paid for the feds now)

$181 million for creating summer youth jobs

Rough guess at $40,00 for a job you get 4500 jobs.

So applying the same math to 25 Billion you get about 62,500 jobs.
The unemployment rate is 9.3%
California lost 78,200 jobs in December

So you are not even covering the month of Decemeber.

Tell me how this works again?

New york City Budget Problems

http://www.bloomberg.com/apps/news?pid=20601087&sid=alL.wJ2mO_Bo&refer=home

“Defined benefit plans have bankrupted Detroit, bankrupted the airlines. If we don’t do something about it, it will fundamentally bankrupt municipalities,”

In my top 20 for 2009 I talked about the war over pensions this is the just the start. Cali and the Governor are having massive heartburn for the mismanagement of CALpers and the problems it will cause.

Good intentions cause bad problems

http://clusterstock.alleyinsider.com/2009/1/big-oil-big-tobacco-meet-big-toys
I think we all agree lead in toys is bad. Equally bad is destroying small business. In this case I can think of a worse time to cause business to fail.

GDP not nearly as 'good' as it looks

http://www.ft.com/cms/s/0/b918bb98-ee3e-11dd-b791-0000779fd2ac.html

The US economy contracted by an annualised 3.8 per cent in the final quarter of 2008, according to advance estimates released on Friday, a much smaller percentage than expected, but still its worst performance since 1982.

The smaller-than-expected decline, led by a build-up in inventories which boosted GDP by 1.3 percentage points, offered little hope for an economic turnaround, since production will likely continue to slow as companies seek to draw down their stock.

So the decline was really -5.1% and each GDP has been revised downward so the true number may be as bad as -7%

Edge of teh Abyss. One Man's take

http://market-ticker.denninger.net/archives/756-On-The-Edge-of-The-Abyss.html

While I find this article's to be serious negative. I can argue with it. There is a serious problem in the banks. It needs to be fixed and it will not be pretty. Is it as bad as he paints it? Not sure but things are going lower.

Our geovernment at work

http://www.bloomberg.com/apps/news?pid=20601109&sid=aYYHKPn4DOe8&refer=home
And people wondering why we hate to pay taxes now.

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IMF needs to raise cash?

http://ftalphaville.ft.com/blog/2009/01/30/51878/the-imf-runs-out-of-cash/

US will most likely block this move as it would be a competitor to US treasuries.

Why a Good Bank is needed instead of a Bad Bank

http://blogs.ft.com/maverecon/2009/01/the-good-bank-solution/

Thursday, January 29, 2009

Trader Talk

http://www.minyanville.com/articles/TGT-bac-gm-target/index/a/20871
Most of what we hear on TV from CNBC/Bloomberg is about trading not investing. Investing involes a different mind set, a lack of talking heads. Trading is all about the news.

But most of the people I sold my GM and banks to were, for stock trading purposes, clueless. They are part of the ongoing stream of victims in this utterly cruel bear market. They are human beings with IRA's or pension fund managers who should have been suit salesmen. The dark comedy of the constant stream of bad ideas coming out of DC is obvious but, after a while, it's hard not to notice you're making a living selling stocks to folks who have no business buying them.

You can not take trading or news items and invest only trade. If none of this makes sense get out of the stock market now. Please.

Air Cargo plumments

http://www.calculatedriskblog.com/2009/01/unprecedented-and-shocking-decline-in.html

“The 22.6% free fall in global cargo is unprecedented and shocking. There is no clearer description of the slowdown in world trade. Even in September 2001, when much of the global fleet was grounded, the decline was only 13.9%,”

4 trillion

http://www.reuters.com/article/politicsNews/idUSTRE50S5PI20090129

Just print and print and print. Seriously at this point just buy all the consumer debt and forgive it. It would not cost anymore and would be instant economic stimulus.

Barter wave of the future?

http://www.themoscowtimes.com/article/600/42/373902.htm

Barter trade was widespread in Russia in the 1990s, when economic turmoil following the Soviet collapse prompted companies to pay employees and creditors with the products they produced — anything from bricks to vegetable oil.

1923

http://www.thedailybeast.com/blogs-and-stories/2009-01-23/what-the-richest-men-in-the-world-dont-know/

Meredith Whitney: A Bad Bank Won't Save Banks

http://clusterstock.alleyinsider.com/2009/1/meredith-whitney-a-bad-bank-wont-save-us
More form the top Bank analyst.

I have two words for you 'Chicken wings'

http://www.tampabays10.com/news/columnist/story.aspx?storyid=99077&catid=79
Massive shortage causes prices to double overnight....NO I am not kidding.

Madooff losses less money then TARP.

http://www.time.com/time/business/article/0,8599,1874702,00.html

In Wall Street terms, that's throwing good money after bad. All told, the government's annualized rate of return on its investment in the nation's largest banks is -1,096%. That's well beyond Bernie Madoff territory; he topped out at a mere -100%

Glad we are making money! Any more and we will all be broke.

By the end of 2007, many banks were lending $30 for every dollar they had in the vault. "Changing the net-capital rule was an unfortunate misjudgment by the SEC," says former SEC official Lee Pickard. "It's one of the leading contributors to the current financial crisis."

Innovation at work. Bankers should be outlawed from innovation.

But given the way banks capitalize themselves these days, if 5% of a bank's loan portfolio goes bad in a single year, the bank is toast.

Gosh what happens when 10% go bad every year....

Gold, is now the time?

http://ftalphaville.ft.com/blog/2009/01/29/51827/gold-is-the-new-money/

However the percentage change in the last bull market low to high was 764% (A perfect Fibonacci ratio interestingly enough). A repetition of that this time would target a price of $2,178.

So you can chase another bubble.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aqvwUIqllyRc

Nor are they the only ones.

Starbucks index down again

http://www.marketwatch.com/News/Story/Story.aspx?guid=%7bD8DE922A-87E5-455D-AAE8-9A0E1BA379CB%7d
Leading indicator of disposal spending.

Wednesday, January 28, 2009

Unemployment cracks 10% in two states.

http://online.wsj.com/article/SB123307958229020395.html

It is likely several more states will join that ranks soon. One has to wonder if the weight of 9% in Cali is more harmful cause the economy of Cali is such a high percent of the overall USA GDP. Also I wonder if illegal aliens unemployment is masking the true rate of unemployment since one the largest area's hit so far is construction. This would mean that the impact is much larger and therefore more underrated at the moment as it impacts the overall GDP effect.

Stimulus Plan not simulating

http://clusterstock.alleyinsider.com/2009/1/wsj-rips-the-stimulus

In what may be viewed as major mistake, Obama is planning to spend his polictical captial on a pork laden package. Less then 12% to create jobs or help economy. Most is a reward to cause or people who help win elections. Let me ask you if had the $6,000 per person this will cost and you had to spend it help the economy how much of what is being proposed would spend? I can say most of it I would not bother with.

Why 10% may be a major bomb on consumer credit

http://globaleconomicanalysis.blogspot.com/2009/01/bankers-worst-nightmare-materialize.html

Excellent post from Mish. It is clear no one is preparing for what looks like a major unemployment event. With the charts in a accelerating motion it looks like 10% may not be the peak. I would not be surprised to see 12% by the end of 2009.
10% would cause all Credit companies to sustain more losses than we have seen so far.

Report from Davos

http://www.reuters.com/article/newsOne/idUSTRE50M4BE20090128

"Forty percent of the world's wealth was destroyed in last five quarters. It is an almost incomprehensible number," said Stephen Schwarzman, chairman of the leading private equity company Blackstone Group.

Hopes for a short "V"-shaped recession appear to have evaporated with most business leaders expecting no more than a slow and gradual recovery over the next three years.

Even this gloomy picture -- with confidence the lowest in the survey's seven-year history -- may be over-optimistic, given a slew of bad news since it was completed in early December.

So this is supposed to be a 'happy' time for most CEO's and government leaders at Davos. in the past it has been more of a party then a serious conference. It appears that cold water has been thrown on everyone.

The economic downturn has forced the makers of Girl Scout cookies to reduce the number of cookies they put in each box and shrink certain varieties.

First we buying less toliet paper now we are going to get less cookies where does the maddness end!

http://www.nytimes.com/2009/01/04/magazine/04risk-t.html?_r=1

Why VAR may have led to problems. Once again models can not account for all data. Cause you unknowns unknowns. IE you dont know what you dont know or dont known to ask.

For super in depth check out this book.

It quickly became a symbol of the "beggar-thy-neighbor" policies of the 1930s. Such policies, which were adopted by many countries during this time, contributed to a drastic contraction of international trade.

http://www.time.com/time/business/article/0,8599,1872565,00.html

 No one apparently has told Vladimir Putin. Last month the Russian government announced an increase in tariffs on imported cars, sparking angry protests from motorists. The move is meant to support a local car industry that temporarily shuttered factories because of withering demand.

Russia is not the only one following done the path to protectionism.

"Directing unsubstantiated criticism at China on the exchange-rate issue will only help U.S. protectionism and will not help toward a real solution to the issue," the ministry said in its statement.

It is clear Obama is feeling pressure to be tough with China. This is not good for anyone. China hold most of the economic nukes. They can drop the bombs on treasury or devalue the yuan to make exports cheap. Both would be serious problems for the USA which is in a weak position to respond. I don't think it will stop the Obama administration from doing something.
http://online.wsj.com/article/SB123292276271213615.html?mod=googlenews_wsj