Author: Matthew G. Saroff

Economics Update

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It looks like the divergence between new and existing home sales is distressed sales
H/t The Mess That Greenspan Made

New unemployment claim numbers are out, and they posted a surprise gain, rising 15K, to 627K, as opposed to the predicted drop to 600K, while continuing claims rose slightly, and the 4 week moving average was basically unchanged.

We also have the revised figures for the 1st quarter GDP, which fell at a 5.5% annual rate, a slight upward revision from the 5.7% estimate last month.

Meanwhile, yesterday’s Fed statement appears to have fears of increasing interest rates, so 2-Year Treasuries rose, meaning that the yield fell.

Additionally, the Fed announced that it is extending its emergency facilities from October to February, so the sh&^pile for cash has at least 5 more months life.

The jobs numbers served to drive the dollar up as investors looked for safe havens, and oil rose on more reports of Nigerian unrest.

The Next Conservative Hissy Fit

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John Kerry made a joke again

[Kerry] was telling a group of business and civic leaders in town at his invitation about the “bizarre’’ tale of how South Carolina Gov. Mark Sanford had “disappeared for four days’’ and claimed to be hiking along the Appalachian Trail, but no one was really certain of his whereabouts.

“Too bad,’’ Kerry said, “if a governor had to go missing it couldn’t have been the governor of Alaska. You know, Sarah Palin.’’

(emphasis mine)

I figure that after about 72 hours or so of faux outrage from the right, John Kerry will call a press conference to apologize.

He shouldn’t though, it was damn funny.

Now is the Time to Fire an Officer, President Obama

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Stars and Stripes is reporting that the US Army has barred one of its reporters from embedding with a unit because they found his coverage too aggressive:

Asserting that Stars and Stripes “refused to highlight” good news in Iraq that the U.S. military wanted to emphasize, Army officials have barred a Stripes reporter from embedding with a unit of the 1st Cavalry Division that is attempting to secure the violent city of Mosul.

…

Despite the opportunity to visit areas of the city where Iraqi Army leaders, soldiers, national police and Iraqi police displayed commitment to partnership, Mr. Druzin refused to highlight any of this news,” Major Ramona Bellard, a public affairs officer, wrote in denying Druzin’s embed request.

…

The Army’s denial of Druzin’s embed request appears to violate the Pentagon’s established ground rules regarding embedded reporters, which state: “These ground rules recognize the inherent right of the media to cover combat operations and are in no way intended to prevent release of embarrassing, negative or derogatory information.”

Whoever gave this order, and whatever superiors backed them up on this, are in violation of military regulations, federal laws, military policy, and the basic values of this republic, and Barack Obama should fire them.

There is no allegation of a security breach, just that the reporter was not “cooperative.”

We Are Seeing a Real Change in Politics Here

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We now have a second threatened Democratic pol coming out in favor of gay marriage, the 1st was Chris Dodd, New Jersey Governor John Corzine, who currently trails his challenger significantly.

What this represents is a change in the politics of gay rights and gay marriage.

Democratic politicians are now seeing this position as a political asset rather than a political liability.

Barack Obama should note this when dealing with DOMA and DADT.

Why I Love Barney Frank*

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In describing the defense budget, the distinguished gentleman from Massachusetts correctly describes the folks pushing for more defense spending, who normally oppose all spending because of deficit issues, as thinking thinking that, “the Pentagon is funded with Monopoly money that somehow doesn’t count.

It gets better when he talks about F-22 supporters:

These arguments will come from the very people who denied that the economic recovery plan created any jobs. We have a very odd economic philosophy in Washington: It’s called weaponized Keynesianism. It is the view that the government does not create jobs when it funds the building of bridges or important research or retrains workers, but when it builds airplanes that are never going to be used in combat, that is of course economic salvation.

Heh.

Here is a recording of the interview.

*In a 110% purely heterosexual kind of way, of course, as the General would say.

Economics Update

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New Home sales and interest rates (H/t The Big Picture)

So the OMC of the Fed held its meeting, and left interest rates and purchases of debt unchanged, which basically means that they are still concerned about the recession, and not inflation, which they called “subdued”.

You can see the full statement here.

On a more general level, we have durable goods rose unexpectedly in May, primarily on increased aircraft sales, but new home sales unexpectedly decreased in May.

We have a further indication of weakness in real estate from the Architecture billings index, which was up only 1/10 point, and still indicates continued contraction.

Mortgage applications rose last week, but that week was hit hard by the higher interest rates at that time.

We also have an indication that it’s not just real-estate where banks will be hurting. The Moody’s Credit Card Index showed charge offs in excess of 10% for the first time ever, so in addition, to subprime, prime, and commercial real estate, expect to see big losses from credit cards.

Meanwhile, the Fed statement drove the dollar up, and oil down.

Mark Sanford Returns from Narnia*

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My bad, he was in Argentina, not hiking in Appalachia.

Oh, and while he was there, he was screwing some chippie, as he admitted at his press conference.

Real classy guy. He apologized to his girl friend and the press before he apologized to his wife, see video below.

He’s resigning as chairman of the Republican Governors’ Association, which means that he’s suffered enough, so <Chris Crocker>leave Sanford alone!!!</Chris Crocker>

Meanwhile, the emails between the two of them have been leaked, and the late night comics will have a field day with this.

Visit msnbc.com for Breaking News, World News, and News about the Economy

*Not my joke, I got it from Cthulhu.†
†No, not the unspeakably malevolent super-being, the contributor to the Shortskoolbus BBS.‡
‡OK, I’ve never seen the two of them together, so Cthulhu might actually be the Cthulu, but the mere fact that he is on a BBS, interacting with humans§ would seem to mitigate against this.
§Yes, I know, this is the internet, where no one knows if you are a dog.

Elections Make a Difference: Prescription Drug Edition

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The Federal Trade Commission is coming out in support of legislation outlawing pay for delay deals between brand-name and generic drug manufacturers.

Pay for delay is where the drug maker that created a drug pays generic drug manufacturers not to make a generic equivalent once the patent has expired.

Eliminating this practice should save consumers about $35 billion over the next 10 years.

Three Banks Halt TARP Dividend Payments

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They don’t have the cash to make dividend payments, so they are no longer making payments, though, under the terms of the TARP they have 20 quarters, or 5 years (!) to defer interest payments without technically being in default.

The banks in question are Pacific Capital Bancorp, Seacoast Banking Corp, and Midwest Banc Holdings.

According to a GAO report, there are 17 banks that did not pay dividends in May, but they did not list names, so there is no knowing who the other 14 institutions are.

Economics Update

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Philly Fed Coincident Index(red is bad)

The Philadelphia Bank of the Federal Reserve has released its “state coincident indicators”, and 49 of 50 states showed contraction during the past quarter.

And another day, another S&P downgrades of residential mortgage backed securities. They review 101, and downgraded 93 of them.

Meanwhile, May existing home roes, but the year over number is still down, and median home prices have declined 16.7% year over year, so there is no incication that prices are falling.

Distressed home sales, foreclosures, short sales, etc., declined to only 33% (!) of sales from 45% (!!!) in April, so we are still well in vulture territory.

There looks to be downward pressure on interest rates, as treasurys have risen, pushing the yield down.

Not much in the way of “green shoots” in Europe, with both consumer spending in France and the a purchasing managers’ index in Germany falling.

Of course everyone is holding their breath about what the Federal Open Market Committee will do tomorrow, though the consensus is that they will not raise rates, which pushed the dollar lower.

The falling dollar, and unrest in Nigeria, drove oil up today/a>, it finished the session at just below $70/bbl.

David Paterson May Not Be the Chief Clown in the New York State Politics Clown Show

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In fact, he may not even be number 2…or number 3, or even number 31, or for that matter, he may not even be number 62

You see, the New York Senate Democrats have locked themselves in the Senate chambers to prevent the Republicans from holding their own special session, which they did anyway, and claimed to have passed everything by 62-0, and that the session is over.

Of course with 31 people on each side, there is no quorum, so neither side of the aisle is acting with anything resembling sanity.

Only there was nothing to pass, because David Paterson had not bothered to finish the bills and send them to the legislature for the emergency session called by one David Paterson.

That being said, I think that NY State Senator Pedro Espada is the chief clown.

It appears now that he’s trying to extort money from the Democratic caucus, asking for $2 million for his “not-for-profit” health clinic chainwhen jumped to the other side over not getting $75 thousand for his little scam.

What’s more after weeks of claiming that thieves had broken into his “second” home in tony Mamaronack, he represents the Bronx, and stolen only those papers, the documents have turned up:

Sen. Pedro Espada Jr. now says thieves didn’t get the key documents he suggested might have been swiped during a reported burglary at his “second home” in Westchester County.

Espada, under investigation for living outside his Bronx district, raised eyebrows last week when he said that whoever broke into his Mamaroneck home stole files and documents – but no other valuables.

(emphasis mine)

How the hell this guy stays out of jail, I’ll never know.

Additionally, he had to be threatened with criminal charges before he was willing turn over his campaign donation information to state campaign finance authorities, though it appears that he still hasn’t paid the fines.

Meanwhile, a grand jury has been convened, and is investigating whether Espada committed fraud by misstating his true residence, and the Bronx DA is now going back further, looking at his earlier campaigns.

You know, relative to this crap, I live in a good government state, and I live in Maryland.

I never ever thought that I would put the phrase “good government” and “Maryland” in the same sentence.

Goldman Sachs is at the Heart of this Mess

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It’s not just Goldman, it’s a systemic thing, but their role in the collapse of AIG:

Goldman Sachs Group Inc. and Societe Generale SA extracted about $11.4 billion from American International Group Inc. before the insurer’s collapse as the firms demanded to hold cash against losses on mortgage-linked securities, according to regulatory filings.

The problem with credit default swaps is that unlike short selling, which only effects a share price (though naked shorts should be banned, and the ban enforced), credit default swaps (CDS) can have the effect of bankrupting a company in a matter of hours, and frequently the holders of these securities have no interest in the survival of the underlying assets.