Author: Matthew G. Saroff

Economics Update

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H/t Calculated Risk


It appears that inventories are now in line with sales.
Downward trend is the result of increased efficiencies
H/t Calculated Risk

In the good news/bad news dichotomy, we see that retail sales rose ½% in January but consumer confidence fell:

January sales at U.S. retailers climbed more than anticipated, while consumer confidence unexpectedly fell this month from a two-year high, showing a recovery in household spending may be gradual.

Retail purchases increased 0.5 percent, the third gain in the past four months, Commerce Department figures showed today in Washington. The Reuters/University of Michigan’s consumer sentiment gauge dropped to 73.7 from 74.4 the prior month.

Not sure what this all means, to tell the truth.

Sometimes teasing meaning out of the data is like drinking from a fire hose.

On the other hand, the data from Europe, where disappointing GDP numbers from Italy and Germany have unexpectedly fallen in the 4th quarter, is pretty easy to understand, as is the fact that Bloomberg’s Professional Global Confidence Index, fell on concerns that deficit problems among some nations in the Euro zone will hinder recovery.

By some countries, I mean, of course, the PIIGS (Portugal, Italy, Ireland, Greece and Spain), who are largely hamstrung in their ability to deal with the crisis because of deficit requirements of, and the fixed exchange rate from, being in the Euro zone.

BTW, here’s a story that we may here more of in the next few months: there has been a surprising outflow of funds from “junk bond mutual funds:

High-yield, high-risk bond mutual funds last week had their biggest outflows since 2008, adding to signs that the junk debt market may be set for a “reversal.”

Investors withdrew $1.13 billion from mutual funds invested in high-yield debt, including exchange-traded funds, in the week ended Feb. 5, according to research firm EPFR Global. That’s the most since early in the third quarter of 2008 and reverses a $335.6 million inflow from the previous week, according to Cambridge, Massachusetts-based EPFR.

I do not know what is up (or more accurately down) here but someone out there knows something and is acting on it.

In any case, the problems in Europe, along with new Chinese actions to reign in lending by increasing bank reserve requirements, have raised concerns about the economy which driven crude oil down, and led to a flight to safety which has driven the dollar up.

Don’t Let the Door Hit Your Ass on the Way Out, Billy Boy

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So PhRMA (the Pharmaceutical Research and Manufacturers of America) has just fired* Billy Tauzin, because the deal that he cut with the Obama administration, basically a few penniess in promised savings so as to forestall price controls and drug reimportation.

Now that the healthcare plan is in shambles, it’s likely that stuff will be passed piecemeal, and high on that list will be drug reimportation.

Tauzin got his $2 million a year job because he pushed through the Medicare drug benefit, which was basically sloppy anilingus to PhRMA, and the gig was his payoff.

Couldn’t happen to a more evil piece of sh%$.

*Yes, I know that the story says that a, “friend of Mr. Tauzin, speaking on condition of anonymity,” says that he is, “leaving the trade group job voluntarily to pursue other activities,” but seriously, don’t take us for idiots.

Speaking of Not Having Real Regulation in the United States

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It looks like one of the major changes in regulation of financial services firms, that they act in their clients best interest, a so-called fiduciary responsibility, as opposed to the current standard of “industry standard” behavior, which basically says that the only crime is to get caught.

Well, Tim Johnson, no doubt still suffering from the effects of his stroke 3 years ago, has decided to kill the fiduciary requirement, and send the idea to the SEC for a “study”:

Lobbying by insurers and banks including Morgan Stanley may result in the elimination of a proposed new standard that would make retail brokers more accountable to their clients.

Tim Johnson, the South Dakota Democrat in line to become the next chairman of the Senate Banking Committee, is circulating a proposal that would drop the so-called fiduciary standard for brokers from the panel’s reform package, according to a copy obtained by Bloomberg News. Johnson instead proposes that the U.S. Securities and Exchange Commission conduct an 18- month study to see if there’s need for a new broker standard.

Consumer advocates have pushed for the fiduciary standard, arguing that investors are misled by the adviser title used by thousands of brokers. Investors have difficulty distinguishing between investment advisers and brokers, and most see their brokers as advisers, according to a 2008 Rand Corp. study commissioned by the SEC. Without the fiduciary requirement, brokers don’t have the same accountability for their advice as investment advisers and have more leeway to sell financial products created by their own firms instead of seeking the best investment for the customer.

Not only is this bad policy, it’s bad politics.

Make the Republicans vote against a law that says, “Financial advisers must act in their client’s best interests,” if you push it, people will understand it.

Home Prices Fell 12% in 2009

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Better, but still grim

Actually, 11.9%, but why quibble over 10 basis points?

If you listen to the National Association of Realtors, (and if you have 2 brain cells to rub together, don’t listen to the NAR) they say that this is encouraging because the 4th quarter drop was the smallest quarterly drop in 2 years, but that’s because we had the little gold rush for the tax credit.

If you look at the latest rent-to-own ratio, we still have some price declines to go, though, as I have noted before, rents are trending downward too, which would indicate that there is a lot more pain on the way than the rather facile analysis at the first link.

Deep Thought

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Received via email:

TRIP TO COSTCO

Yesterday I was at my local COSTCO buying a large bag of Purina dog chow for my loyal pet, Biscuit, the Wonder Dog and was in the checkout line when a woman behind me asked if I had a dog.

What did she think I had an elephant?

So since I’m retired and have little to do, on impulse I told her that no, I didn’t have a dog, I was starting the Purina Diet again.

I added that I probably shouldn’t, because I ended up in the hospital last time, but that I’d lost 50 pounds before I awakened in an intensive care ward with tubes coming out of most of my orifices and IVs in both arms. I told her that it was essentially a perfect diet and that the way that it works is to load your pants pockets with Purina nuggets and simply eat one or two every time you feel hungry. The food is nutritionally complete so it works well and I was going to try it again. (I have to mention here that practically everyone in line was now enthralled with my story.)

Horrified, she asked if I ended up in intensive care because the dog food poisoned me.

I told her no, I stepped off a curb to sniff an Irish Setter’s ass and a car hit us both.

I thought the guy behind her was going to have a heart attack he was laughing so hard.

Costco won’t let me shop there anymore.

Better watch what you ask retired people. They have all the time in the world to think of crazy things to say.

Forward this (especially) to all your retired friends……it will be their Laugh for the day

We Are All Max Bialystock*

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Have you heard the latest derivative?

Cantor-Fitzgerald, showing evidence that they are still insane with grief after having 2/3 of their employees on 911, have come up with a twist to their new and innovative financial product, the Hollywood Stock Exchange, a game where people can “bet” funny on the success and failure of movies.

The twist, they are asking for regulatory approval to allow people to bet real money.

If any of you have seen The Producers, then you understand the possibilities:

Here’s how it would work. Hollywood studios, actors, directors, investment banks, hedge funds, and anyone else would be able to buy and sell contracts based on the value of all ticket sales in the first four weeks of a movie’s release. According to Cantor Fitzgerald’s plans, the contracts would each be worth one-millionth of a given movie’s gross sales during that four-week period. Let’s say that you thought Avatar would pull in $500 million during its first four weeks. So, you buy 100 futures contracts at $490, figuring that when Avatar made $500 million you’d be up $1,000. Unfortunately, as it turned out, Avatar “only” made some $430 million domestically in the first month after its release—meaning that you’d lose a cool six grand.

One problem, skeptics say, is that Hollywood insiders could have a huge advantage in such a market. People in the movie business often have far greater access to crucial information about a film’s box office prospects than ordinary investors do—such as how big the marketing budget will be or how bad the performances are. “If the industry is selling, odds are that it is a bad idea to buy,” says Dean Baker, the codirector of the Center for Economic and Policy Research.

The deeper meaning to all of this is that these folks at Cantor Fitzgerald really see an opportunity for people to use their inside information as a way to steal from the general as a legitimate financial innovation.

It’s not, it’s a fraud, and it is transparently a fraud conceived for the purpose of generating commissions.

It is an indictment of the very concept of “financial innovation” as put forward by Wall Street.

Whoever came up with this idea should be banned from working as a broker for life.

*Seriously, if you don’t understand the reference, for Pete’s sake, get out more, or go to the Wiki.

Reid to Baucus, Drop Dead

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So, the Senate is working on a jobs program, and Max Baucus (DINO-MT), in a reprise of his disastrous negotiations with Republicans on healthcare, cuts a deal with Chuck Grassley (R-IA).

So, it includes all the goodies that the ‘Phants demand, mostly big tax cuts or extensions of tax cuts, about $31 billion, as well as a cut in the estate tax, which is currently 0%, but goes back up to its pre-Bush levels in 2011 (see Throw Mama from the Train).

Well, some Senate Democrats had a word with Harry Reid, and it appears that they made it clear that their support is by no means assured, and minority leader Mitch McConnell was unwilling to offer support, or even to support cloture, so Reid pulled out all of the tax cut goodies for Republicans. (also here)

Good for him.

Unless you get 5 Republicans swearing on a bible on video tape that they will vote for cloture, don’t give them anything, ever.

I’d also say, if Baucus wants a bill to go through his committee, you should say what Marcel Marceau said, “No.”

Economics Update (a Day Late)

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Well, yesterday was, as Atrios says, jobless Thursday, and unemployment claims fell more than forecast, falling to just 440,000, which is still not enough for an increase in non-farm employment.

The White House is predicting about 95,000 new jobs a month being created in 2010, but based on some quick numbers, a 1.1% annual labor force growth times 155,200,000 people in the US labor force divided by 12 months, there need to be about 142,000 jobs created each month just to accommodate natural growth, so things aren’t getting better, they are just getting worse more slowly.

On the other hand, the news out of California, that tax receipts are well in excess of predictions, is legitimately good news.

Finally, in a discovery of the blatantly obvious, a the TARP’s Congressional Oversight Panel has determined that commercial real estate is imploding, and this threatens the viability of many small and mid sized bank. …………Hoocoodanode?

What I Did Today

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I shoveled the f%$#ing driveway, for the 2nd time in a f%$#ing week.

At least the snow was lighter than the last time, and between the powdery nature of the snow, and the wind we got some of those wind-sculpted funny snow shapes.

I’ve never seen this phenomenon this far south before.

Well, At least the snow plows found their way our tertiary road, finally, today.

After I was done, and to be fair the kids shoveled a path to the mailbox for us and the mail man, I thought that I deserved a beer, so I drove to the liquor store, and picked up a 6 pack, because, dammit, I deserved a beer.

Took the wife and kids to Java Mama’s for hot chocolate and sweets,

As to my beer, I bought Victory Brewing Company‘s Hop Devil, which is a nice, and inexpensive, brew from a small Pennsylvania brewery/brew pub.

It’s a bit over-hopped, but that’s kind of obvious from the name, but it’s from near by and fresh.

On my 2nd bottle.

Garden State Equality Will No Longer Give to the New Jersey Democratic Party

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I guess that they are sick and tired of supporting Democrats who don’t deliver on their promises:

The largest gay-rights advocacy group in New Jersey has announced it will no longer give money to the Democratic Party.

The move follows the state legislature’s failure last month to legalize gay marriage and amid growing signs that the effort to repeal “Don’t Ask, Don’t Tell” is already faltering.

“No political party has a record good enough on LGBT civil rights that it can rightfully claim to be entitled to our money on a party-wide basis,” said the chairman of Garden State Equality, Steven Goldstein, as quoted at PolitickerNJ.com.

“No longer will we let any political party take our money and volunteers with one hand, and slap us in the face with the other when we seek full equality,” Goldstein added.

It’s mirrors on a state level John Aravosis’s “Don’t Ask, Don’t Give,” donor boycott, and quite honestly, considering how the Democratic Party acts as a party, you just don’t see vigorous party whips on gay rights issues, this may be the only way to get results.

A Good Start

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The New Mexico legislature has just voted to move a significant portion of the state bank accounts to small community banks and credit unions:

New Mexico’s House of Representatives voted Monday to pass a bill that allows the state to move $2 billion – $5 billion of state funds to credit unions and small banks.

The municipal funds bill was approved 65-0, and is subject to a vote by New Mexico’s Senate. Governor Bill Richardson told the bill’s sponsor that he supports the legislation.

It’s a good start.

If we can defund the to big to fail institutions, they shrink, and lose influence in the corridors of power.

Ben Nelson and Blanch Lincoln Need to be Reminded What it Means to Be a Democrat

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It’s one thing to oppose a presidential appointee of your own party, but Ben Nelson Blanche Lincoln, just filibustered Craig Becker to serve on the National Labor Relations Board, and that crosses a line.

Their committee chairmanships should be in doubt, though that won’t happen with Harry “Sta-Puft Marshmallow Man” Reid leading the senate.

Note also that Nelson spoke out strongly against filibustering Bush appointees, but he’s with it when it involves Obama.

In either case, this is where a line should be drawn.

The reason for the filibuster? Because Craig Becker has represented labor unions as a lawyer. No problem with nominating union busting lawyers, but nominating a lawyer that supports workers’ rights? So Ben Nelson, and the Senator from WalMart filibustered him.

Needless to say, the AFL-CIO has blown a gasket over Nelson’s vote, I think that they understand that Lincoln is bought and paid for by WalMart.

Capitulation On Healthcare?

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So, Obama has announced a televised summit with the Dems and the ‘Phants on healthcare, where everything is on the table.

It appears that he’s pushing Dems to come on board for the idea, which appears to me to continue to be, “Just put ‘Healthcare’ on a piece of paper, and I’ll sign it.

Well, the response from the Republicans was that he must kill the House and Senate bills and forswear reconciliation before any such meeting, and the White House response to this, at least insofar is Press Secretary Robert Gibbs is concerned, is to say that they are willing to talk without preconditions.

One interesting twist to this is that John Boehner is also objecting to it being televised, because, I think that he realizes that “no” is not photogenic.

So, is this yet another misguided attempt by Obama to get Republicans to like him (my choice), or is it a bit of elventy dimensional chess where Obama gets Republicans to hang themselves on live TV? (What Boehner fears)

OK, Now, it’s Time To Roll Tom Tomorrow

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Tom Tomorrow, from Sept. 19, 2005 and Feb. 1, 2010

So Barack Obama is now saying that he, “doesn’t begrudge the $19 million in bonuses for Goldman Sach CEO Lloyd Blankfein and JP Morgan Chase CEO Jamie Domon:

“I know both those guys; they are very savvy businessmen,” Obama said in the interview yesterday in the Oval Office with Bloomberg BusinessWeek, which will appear on newsstands Friday. “I, like most of the American people, don’t begrudge people success or wealth. That is part of the free- market system.”

This is simbply a complete mind f%$#.

It is as Krugman notes, clueless, and Simon Johnson notes that this is an example of, “One of the most complete (and awful) instances ever of savvy businessmen capturing a state and the minds of the people who run it.”

Even if you accept the argument, such as was made by Greg Seargant, that Obama was actually making a nuanced statement where he attempted to show concern without being too “anti-business” in his statements, an to be fair, both Simon Johnson and Paul Krugman, as well as yours truly accept this, it’s still wrong, and shows a concern that is warping the decision making process at the white house.

Johnson notes that he is, “Not sure why he needs to strike that balance. CEOs are overpaid, bankers are overpaid, and bank CEOs are overpaid. Why not just say it plainly?”

Paul Krugman thinks that the nuance makes it worse:

I really don’t see how this makes things any better than the reporting in the Bloomberg story. We don’t begrudge wealth in the free market system — OK, but this wasn’t about free markets, this is an industry that survives only thanks to taxpayer backing. And Wall Street bonuses are like baseball salaries; please.

Just to be clear: what freaks me out about this isn’t what it says about Obama’s policies, it’s what it says about failure to read the mood of the country. The president seems solely concerned that someone might think that he’s anti-business, without — in this interview, at least — appearing to consider it necessary to say a thing about the pervasive sense of unfair Wall Street privilege. He doesn’t have to bash bankers every step of the way, but to respond to a question about bonuses solely by praising free markets and comparing bankers to baseball stars is … clueless.

Whether Tom Tomorrow is right, or whether Paul Krugman is right, what it means is that there is a distinct possibility of a President Palin in 2012.

Haitian Kidnapper Update

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First, I think that it’s pretty clear that something if fishy, since the State Department is refusing to intervene in the case, despite the fact that they, and their allies have aggressively lobbied for this.

It may have something to do with a report that this appears to be the 2nd time that they tried to abscond with children without paperwork or vetting that these were in fact orphans.

As I said before, this was a religiously motivated kidnapping.

Luckily for them, it looks like the they will be released shortly, with a finding by the judge of “the White American get out of jail free card” “no criminal intent.”

Economics Update

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H/t Calculated Risk

We have the numbers for the December trade deficit, and it increased by 10.4%, largely on the increases in energy imports. (See graph pr0n)

In the nexus of banking and real estate, home mortgage demand fell last week, despite the fact that rates fell on the 30 year fixed mortgage, and as the Mortgage Bankers Association notes, the fall is in new home purchases, refinancing continues apace:

The Refinance Index increased 1.4 percent from the previous week and the seasonally adjusted Purchase Index decreased 7.0 percent from one week earlier. The unadjusted Purchase Index decreased 1.1 percent compared with the previous week and was 7.5 percent lower than the same week one year ago.

In international finance, the Bank of Korea kept its benchmark steady 2%, largely in response to surging unemployment in South Korea.

Australia, on the other hand, experienced the largest growth in the workforce in 3 years.

In currency, the dollar was mixed, largely on reports that a deal may be in the offing in the Euro Zone for Greece’s debt mess, news of which also drove oil prices slightly higher.

Snowed In

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At least 14 inches so far, on top of the 24+ inches last week, and school has been canceled for the whole week.

What to do?

I make soup. I just put the blending stick to split pea soup.

I got a soup/pea packet at the grocery store, and followed the recipe, adding onions, celery, carrots, and (my Sharon’s* suggestion) a parsnip.

I also added cubed pastrami,† which I cooked in cheese cloth, so that the meat flavored the soup, but II could pull the meat out when I blended it, and then I add the meat back to the soup.

Off to a late lunch.

*Love of my life, light of the cosmos, she who must be obeyed, my wife.
†I know that ham and a ham bone is traditional for split pea soup, but if I were to use ham in my house, on my wife’s dishes, my continued ability to breath would be in doubt, so no thank you, I like breathing.

Remember the Furious Fuchsia Dodge Challenger?

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Oh My God it’s the Barney Car!

It’s the Barney car!I knew that it was wrong and evil, and I posted such, though I think that at tht time I focused more on stupid than evil.

Well, now now I have proof that it’s not just stupid, it’s Evil (beginning with a capital “e” and ending with a sputter).

Tekeli li!! Tekeli li!! Tekeli li!! Tekeli li!!

H/t Oggie at the Shortskoolbus BBS for the Photoshop.