Author: Matthew G. Saroff

Economics Update

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Housing Starts, Courtesy Calculated Risk

I guess that it’s time to rejoice, because the IMF’s chief economist is saying that the global recession is over…Seeing as how they handled things like the Asian Financial Crisis of the 1990s, I’m inclined to believe that they are not a reliable source.

I would also note that he has a huge caveat in this, “we may not go back to the old growth path … potential output may be lower than it was before the crisis,” which to my mind sounds like a permanent decline in economic activity, and thus the recession might be over because normalcy is being redefined.

That being said, we are seeing signs of either a recovery, or a pause in the path downward, with credit card defaults moderating somewhat, so, for example, BoA’s charge-off rate dropped to 13.81% last month, down 0.05% from the level in June.

Basically, the numbers are still pretty horrible, but they aren’t getting any worse…yet.

We also have a stronger consumer confidence level in August, with the Investor’s Business Daily and TechnoMetrica Market Intelligence (IBD/TIPP) Economic Optimism Index rising to 50.3 in August from 46.3 last month, and this is a real positive number as 50 is the dividing line between optimism and pessimism.

In inflation, producer prices fell by -0.9% from the previous month, and the year over year price decline was -6.8%, beating the predictions of -0.3% and -5.9% respectively.

Meanwhile, in the UK, consumer inflation remained steady at 1.8%, but it had been predicted to drop to 1.5%.

Real estate is confusing, or at least the reporting of it is.

The data came out today, and the coverage is interesting, with Bloomberg noting that single-family housing starts rose for the 5th straight month, but CNN noting that housing starts and building permits declined with only single family housing starts showing an improvement, and that the year over year numbers are way down.

I’d go with CNN here, because:

  • We know that more than a third of single family home sales are distressed.
    • As an aside, we know that people are coming out of the woodwork looking for distressed sales, and prices are still falling, driven by foreclosures and short sales, as evidenced by the latest data out of California.
  • The month to month numbers are seasonally adjusted, but I think that the current market is so out of whack that the seasonal adjustments do not serve their intended purpose.
  • The drop in multi-residential buildings indicates that fewer people are moving into condos/townhouses, from which they would trade up to single family structures.

Then again, YMMV, and I always see the economic glass as half empty.

Oil was briefly back above $70/bbl before settling at $69.19, largely on a report that US crude inventories have dropped, and the dollar and Yen both fell against the Euro, largely on more optimistic business sentiment in Germany.

Talk About Damning With Faint Praise

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As some of might know, professor Niall Ferguson wrote an article in the Financial Times where he said that, “President Barack Obama reminds me of Felix the Cat. One of the best-loved cartoon characters of the 1920s, Felix was not only black. He was also very, very lucky. And that pretty much sums up the 44th president of the US.“

I saw it, I read it, and thought that it was sophomoric bullsh@$ of the sort you frequently see college students who want to play at radicalism, both left and right.

One of the people who called him out on this was Paul Krugman, who said that he could not, “fathom is how any editor could think this was a good thing to appear in the FT’s pages,” and James Fallows, who suggested that would like to see him, “discussing this over a beer with his Harvard colleague Henry Louis Gates.“

I did not blog about it, because I didn’t have anything to add, but Niall Furguson decided not to let sleeping dogs lie, and he did discuss it with Dr. Gates.

So Krugman offers an apology of sorts:

What can I say? While the Ferguson line was deeply offensive — everyone I know asked, “Did he really write that? Did the FT actually publish it?” — it never occurred to me that it had anything to do with the question of whether Felix the Cat was supposed to be African-American. The mind reels.

For the record, I don’t think that Professor Ferguson is a racist.

I think he’s a poseur.

I’m told that some of his straight historical work is very good. When it comes to economics, however, he hasn’t bothered to understand the basics, relying on snide comments and surface cleverness to convey the impression of wisdom. It’s all style, no comprehension of substance.

And this time he ended up choking on his own snark.

(emphasis mine)

Remind me to never demand an apology of Nobel Prize winning economists.

Best Comment on Star Trek Ever

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Most of the family has seen the new Star Trek film, and reviews have been circulating via email, some positive, and some negative, but my younger brother, Daniel had the best statement about the franchise ever:

I AM SOOOOO SICK OF THE WHOLE SPOCK INNER CONFLICT BETWEEN HIS HUMAN AND VULCAN HALF. Seen it in 3 years of orginal Trek, 6+ movies, even stolen for that stupid android Data! ENOUGH ALREADY. Have him shoot a moose, drink some bud, and read “Juggs” magazine and GET OVER IT!

Word.

Economics Update

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Graph Pr0n, courtesy of Calculated Risk

Lets lead with some good news, the New York Bank of the Federal Reserve’s Empire State Manufacturing Index hit its highest level since November, 2007, and it’s actually positive, as opposed to the “falling less slowly,” good news we frequently see from hack economic reporters. (See top pic)

We also have home builder confidence, as measured by the National Association of Home Builders/Wells Fargo Housing Market Index, rising to its highest level in more than a year.

<Paul Harvey>And now, the rest of the story:</Paul Harvey>

We have the delinquency rates at commercial banks rising sharply in Q2, and the banks responded by tightening credit significantly.

This is pushing up the price of treasuries, and thus lowering their yields, as investors flee to quality.

As a result, the Fed has extended its TALF facility for commercial real estate, because they (correctly) see an impending crash.

Meanwhile, on the other side of the pond, where our other partner in corrupt “Anglo-Saxon Capitalism” goes to work, asking prices of UK homes fell by 2.2% this month, (that’s for the month, not annualized) with lack of credit to home buyers being a large factor in this move.

All in all, most of the signs are not good, which is why both crude oil and natural gas fell significantly today, and the US dollar and the Japanese Yen both rose.

Man Tortured and Renderd by Obama DoJ for….Defense Congract Fraud

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Unfortunately, this is not senior staff at Lockheed-Martin, Boeing, or SAIC, but rather a relatively low level employee of a construction firm:

According to court papers, on April 7, 2009, Azar and a Lebanese-American colleague, Dinorah Cobos, were seized by “at least eight” heavily armed FBI agents in Kabul, Afghanistan, where they had traveled for a meeting to discuss the status of one of his company’s U.S. government contracts. The trip ended with Azar alighting in manacles from a Gulfstream V executive jet in Manassas, Virginia, where he was formally arrested and charged in a federal antitrust probe.

This rendition involved no black sites and was clearly driven by a desire to get the target quickly before a court. Also unlike renditions of the Bush-era, the target wasn’t even a terror suspect; rather, he was suspected of fraud. But in a troubling intimation of the last administration, accusations of torture hover menacingly over the case. According to papers filed by his lawyers, Azar was threatened, subjected to coercive interrogation techniques and induced to sign a confession. Azar claims he was hooded, stripped naked (while being photographed) and subjected to a “body cavity search.”

This is why we need to prosecute Bush and His Evil Minions™, torture always comes home.

Meet the new boss, same as the old boss.

Yeah, Deregulation Works…..

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The most deregulated telecommunications in the market is in the United States, and so is the most expensive cell phone market, and Finland, Netherlands and Sweden have the lowest rates. (OECD report here)

Surprise, surprise, surprise, when you deregulate companies that profit from making it difficult for consumers to switch services, and use the leverage to keep prices high, use this as their business model.

The problem in many areas of our economy is not too much regulation, but too little.

What’s the Word For This???? Oh….Right….Regulation

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Put this down to “Elections can mean something.”

It looks like the case of Goldman Sachs’s allegedly purloined high speed trading software, aka “Flash Trading”, which a number of observers, myself included, have noted sounds a lot like front-running the entire stock market, now appears to be creating some regulatory push-back.

Basically, this allowed high speed servers co-located with the markets to execute trades in the milliseconds between when other trades are initiated, and when they are completed.

First, as a result of questions raised by Senator Charles Schumer, both Nasdaq and Bats Global Markets have decided to stop allowing brokerages to execute trades in this manner on their exchanges.

The Financial Times notes that this sort of automated trading currently accounts for over ½ of all US stock trades.

Additionally, it appears that the S.E.C. is looking at restricting the process.

Here is a simple solution: Require that any trading done by computers be delayed by at least 15 minutes from initiation to execution.

It also looks like the S.E.C will crack down on “naked” short sales, where an investor sells shares he does not have, as opposed to borrowing shares to sell, which they would purchase and return at a later date.

On the commodities side of the equation, the FTC is issuing new rules to restrict the ability of traders to manipulate the markets.

I’m wondering when the Giethner/Summers shoe will drop, and they will push for elimination of these regulations, because it makes US markets “less competitive.”

Talking to God Does Not Make You Crazy

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But when you hear him answering back, in complete sentences, and he is saying, “Michelle Bachmann, you should run for President….Well, yes, that is batsh%$ insane.

To be fair, Michelle Bachmann is not claiming that God told her to run for President, though she did say that God told her to run for Congress, she’s just saying that she expects God to ask her to run for president.

“The phrase ‘paranoid schizophrenic with delusions of grandeur’ is not in the aardvark’s vocabulary, so, in his mind, he substitutes ‘crazy as a panrovian monk’ . . . ” (Cerebus #5 p 13)

I feel embarrassment sharing a country with her….How do her constituents not go through life with bags over their heads to conceal their identities.

“These People Are Unappeasable”

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Krugman nails it on MSNBC:

Of course, this does not prevent the White House from capitulating on the public option, because, as I’ve said before, Barack Obama does not care about healthcare reform, he cares about being able to sign some sort of healthcare reform bill, even if it is bad and has no real reform, because he gets to claim success.

They are talking Co-Ops, which we know won’t work, because they haven’t worked. If they were even marginally successful, we would see hundreds of them, some of them huge, and we don’t….They can be counted on the fingers.

Israel Looking at UAV Ambulance

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There are definitely reasons for such a craft, but I think that unmanned ambulance is not one of the better applications.

If you are evacuating someone, you want have a doctor or paramedic on site to administer things like plasma, etc., and they would likely need to monitor the patient for the trip if it is any longer than about 10 minutes, and once you have to do that, having a pilot too makes sense.

That being said, things like remote resupply would be a viable application.