Category: Finance

Well, All Signs Point to a Senate Appointment of Ben Bernanke Soon

No Comments

The current whip count has more than 50 Senators voting for him, and because Wall Street wants him, it appears that arms are being twisted in the Senate to get Senators who vote against him to vote for cloture, because, I guess, a stimulus package to reduce unemployment, or a fix to America’s broken healthcare plan, both of which required 60 votes to clear the Senate are less important than reappointing Wall Street’s lapdog at the Federal reserve.

Paul Krugman nails it in one sentence

I can hardly think of anything more calculated to solidify the view that Wall Street doesn’t have to play by the rules that apply to everyone else.

We have had reports of a number of Senators, including Barbara Boxer, who now appears to have a contentious reelection bid ahead of her.

I think that the two are tied together: Voting for Bernanke is voting for Wall Street, and your opponent can make hay of it.

Harry Reid took a slightly lower key approach, announcing his support for Helicopter Ben late on a Friday evening, so it would not get much press, and the wording is intended to make it sound conditional (it’s not). Faint praise indeed.

FWIW, if you vote for cloture, your opponent will make just as much hay of it.

Interestingly enough it is the arguments for his reappointment that make the best argument against his reappointment.

For example, we have a story saying that a Bernanke defeat would rattle Wall Street and so might precipitate a double dip recession.

It’s wrong on a number of levels, not the least of which is that we are going to have a double dip recession anyway, because, between new defaults in residential and commercial real estate and the increase in oil prices, the so-called recovery that we have seen won’t happen.

The bigger point though is the reason that Bernanke leaving the post would rattle the financial markets is because that they feel that if they screw up royally, then Bernanke will bail them out by pumping money into the system or slashing rates.

Wall Street is looking at a “Bernanke put,” which much like his predecessor’s “Greenspan put,” (both described at the same link) create moral hazard and encourage risk taking.

It’s pretty clear that Ben Bernanke is aggressively lobbying Senators to get reappointed, see his promises of transparency in the Federal Reserve that he made in a meeting with Dick Durbin, but it is just as true that all the moves toward transparency and consumer protection will end once he is reappointed and the audit bill is killed.

At this point, I think that the only chance that he won’t be reappointed lies with the accusations by Senator Jim Bunning and Darryl Issa that Bernanke is lying about his involvement in the AIG fiasco, and relying on those two lying chowder-heads is not something that I am particularly sanguine about.

Sent to My Senators, Re: Bernanke (Please Vote No)

No Comments

I sent them the following:

I am writing to ask you to vote against reappointing Ben Bernanke as Chairman of the Federal Reserve. Additionally, I am requesting that you support a filibuster of his nomination.

While I believe that he is a very talented economist, I believe that his outlook, and his prior performance, make him unsuited for continued service in this position.

First, and most importantly, he has made it clear that he will not move on unemployment if it means moving away from a 2% inflation target by the Federal Reserve.

His statements saying that his goal was to preserve, “the anchoring of inflation expectations,” is simply dangerous and wrong in the midst of the worst downturn since the Great Depression.

By expressly stating that he will choose to ignore the 2nd mission of the Federal, the maintenance of full employment, he has shown himself to be ideologically unsuited to the post.

Given that unemployment is at 10% by the U-3 measure, or 17.3% by the more representative U-6 measure, and there is little if any indication that there will be significant improvement in the jobless rate this year, this is short sighted and destructive.

Additionally, his fierce opposition to reforms of the financial system, particularly his opposition to the Financial Consumer Protection Agency (FCPA) shows that he is out of touch with the need to protect consumers from predatory institutions marketing dishonest financial instruments.

His suggestion that the Federal Reserve would fulfill this role, when it had that role pre-crisis, and refused to act on credible evidence of fraud and deception, is simply nonsense.

This is further compounded by his position on transparency at the Federal Reserve, where he is clearly stonewalling every effort for investigators to understand the nature of the financial meltdown of 2008.

The unwillingness to come clean on the failures that might have happened at the Federal Reserve Board and the regional banks means that there will be no meaningful disclosure, and without disclosure, no lessons will be learned, and this cycle will be repeated, particularly given his record of being an enthusiastic cheerleader for the housing bubble, and the associated dodgy mortgage bubble, before they popped.

The primary argument for his reappointment is that if he is not reappointed, it will somehow shake the financial markets, and trigger another disaster.

This analysis assumes two things:

  1. That he has been thoroughly captured by Wall Street, and so the large investment banks are demanding that he kept to serve their interests, and not those of the people.
  2. That he is simply indispensable, and as Charles de Gaulle said, “The graveyards are full of indispensable men.”

If there are lessons to be learned from Alan Greenspan’s disastrous tenure, it is that the “Greenspan Put”, where the expectation of bailout created moral hazard that led to reckless behavior, and that the “Rock Star” Fed Chair is to be avoided at all cost.

I followed up with a phone call to both offices.

Economics Update (a Day Late)

No Comments

So, we now have some idea just how much the new home buyer tax credit artificially inflated the market, because existing home sales fell 16.7% from November to December.

Since existing home sales are recorded at closing, and in order to qualify for the tax credit, the sale had to close before the end of November, this (seasonally adjusted) number shows that just anemic residential real estate is.

In overseas central banks, the Bank of Japan has kept its benchmark rate at 0.1% (effectively 0%) as they continue to fight what is now a nearly 20 year long deflationary spiral.

In energy, oil was up slightly, while in currency, the US dollar fell slightly.

Now This is An Interesting Phenomenon

1 Comment

The Dallas, TX alternate weekly, the Dallas Observer, has the story of a guy with hundreds of thousands of dollars in debt from the collapse of the real estate bubble (and short sighted greed, but I repeat myself) who is now earning money by suing debt collectors who contact him and forget to cross their “i”s and dot their “t”s:

………

He [Craig Cunningham of Northeast Dallas ] leans forward to lift some paperwork out of a plastic tub on the coffee table. The phone rings, and he answers with a soft voice. It’s just a friend, and soon he hangs up. He’s waiting for a particular type of phone call—one from a representative of a debt collection agency or a credit card company, whom he’ll try to ensnare like a Venus fly trap. It’s not unlikely that Cunningham’s next call will be from a bill collector, since he’s between jobs—except for being in the Army Reserve—and owes $100,000 in debts.

While most Americans with unpaid bills dread the collector’s call, Cunningham sees them as lucrative opportunities. Many collection and credit card companies, intentionally or not, violate little-known consumer rights laws, and Cunningham’s favorite pastime is catching them doing so and then suing them. In fact, it’s a profitable side job.

Call it ironic, but the only house on the block that appears to be the foreclosed end to some sad financial story is in fact the home of one of the debt collection industry’s emerging and persistent threats. Cunningham calls himself a private attorney general—someone who files private lawsuits in the public interest. Debt collectors call him a credit terrorist.

………

I do not think that he is a terrorist, but I do think that Mr. Cunningham is a slime, not because he’s using the small print to make money from, and avoid debt, that is, after all, the game, but because he went and used things like student loans in his attempts to juice his credit score [go to the full article] in an attempt to become wealthy without really working.

I know that some would argue that becoming wealthy without work or other productive activity is the American way, but it’s slimy, and if it is the American way, then the American way over the past 30 years has become slimy and parasitic.

The way that he gets money is that the the Fair Debt Collection Practices Act (FDCPA), the Fair Credit Reporting Act (FCRA) and the Telephone Consumer Protection Act (TCPA), which forbid debt collectors from violating federal or state laws, and provides for statutory damages for each instance, so if a collector threatens to garnish wages in Texas, where it is illegal, they are liable, even if the caller is in Butte Montana or Bangalore, India.

So, for example, when a collection agency started leaving pre-recorded messages on his mobile, a violation of the, and refused to stop when he asked, while refusing to show that the bill (a tiny Comcast bill), both violations of the TCPA and FDCPA, and the collection agency has

CMI has countersued Cunningham, and even asked the court for a protective order from Cunningham: “Plaintiff Craig Cunningham (herein “Plaintiff”) has filed suit against a business, Credit Management, LP (herein “CMI”), and twenty-seven (27) of its employees in their individual capacities,” reads the motion for a protective order filed in Northern District of Texas in December 2009. “Defendants move for a protective order to protect Defendants from the annoyance, oppression, undue burden and expense of objecting and responding to improper, repetitive and irrelevant discovery requests.”

In December, Cunningham was called in for a six-hour deposition, the longest he’s ever sat through, at which the lawyers printed out pages of his online comments to accuse him of acting like a lawyer. Plus, CMI insists that they didn’t violate any laws and that Cunningham is acting in bad faith. Although the company already offered Cunningham money to settle the case, Cunningham refused, asking for much more than the “industry standard,” as Cunningham calls it, of $3,500.

“If they don’t pay a bunch of money, if they don’t feel pain, they will not change,” he says.

A big win in his case against CMI could go a long way toward clearing Cunningham’s debts—if he ever chose to pay them, that is.

“I took outsize risks, and I got burned,” he says. “When myself and some other fellow small investors were losing their assets, nobody cared.”

Up until now, everything was about making easy money for Cunningham. Now, it’s about justice—or at least what he sees as justice.

He’s right about that point: All those people who scream about how the small print, and the rule of law, matter for the small debtor, seem to think that it’s somehow evil to expect large debtor and their agents.

I see courts being more amenable to claims like Cunningham’s in the future, and that is not a bad thing.

H/t The Big Picture.

Economics Update (For the Week)

No Comments

Well, it’s “Jobless Thursday”, as Atrios is wont to say, and it ain’t a good Thursday, with initial claims up 36,000 to 482,000 and hitting a 2 month high, the 4-week moving average up 7,000 to 448,250, though continuing claims fell by 18K to 4,599,000.

Additionally, the Philadelphia Federal Reserve Bank’s business activity index fell from 22.5 to 15.2, which still indicates growth, positive numbers indicate growth, but might show that the stimulus package is running out of steam.

Also, it looks like finances may be catching up with the bank, with Citi reporting a loss for the year on a horrible 3rd quarter, and Bank of America posted a large loss, largely as a result of its eagerness to pay off the TARP so that it could go back to overpaying its incompetent executives, while Morgan Stanley misses its earning estimate, though it still turned a profit.

I had kind of figured that a lot of the obscene profits earlier in the year were the result of rearranging deck chairs, and I think that the 4th quarter results give credence to this view.

Note that these numbers were turning worse even as consumer defaults were falling.

BTW, in the UK, we are seeing journalists running around like chickens with their heads cut off over the recent spike in consumer prices, up to a 2.9% annual rate.

Kind of silly when you think about it.

US inflation seems well in check, with the
Producer Price Index for up 0.2% in December,

In real estate, home builder confidence fell in January, but the Architecture Billings Index was up slightly, though still below 50, indicating further contraction.

The jump in building applications, would seem to indicate improvements in the real estate market, but the FHA is increasing premiums and tightening loan standards, which may deflate the balloon.

The FHA really does not have a choice. Their balance sheet is a complete mess.

Obama Proposes a Return to Glass Steagall

No Comments
Click for full size


First Photo of Volker and Obama Together in Months

Or something very much like that.

The changes proposed are very significant, or at least they appear to be significant.

Among snap shot of the provisions are:

  • Commercial banks would be prohibited from trading on their own behalf, so called proprietary trading.
  • Commercial banks would, “would no longer be allowed to engage in trading unrelated to their customers’ interests.”
  • Commercial banks would be prohibited from investing in or advising hedge funds or private-equity firms.
  • Extending the current cap of 10% of US federally insured deposits to non-insured assets.

I think that the first thing to note here is that Barack Obama has had this in his back pocket for some time, not because he wanted to do this, but because there might come a time where he needed to, and following the Coakley debacle in Massachusetts, he felt that he had to do this

A majority of Obama voters who switched to Brown said that, “Democratic policies were doing more to help Wall Street than Main Street.” A full 95 percent said the economy was important or very important when it came to deciding their vote.

I don’t think that until Tuesday, Obama understood how tremendously pissed off the voters are about the bank bailout, and the bonuses, so chalk one up for my hope that if Coakley lost, Obama would get a clue.

Of course, it still has to go through the banking committees, where the Republicans will be unified against it, and where many of the Blue Dog and New Dem corporatist pukes sit, because it’s a good place to raise money from.

His proposals will only work if Obama kicks ass and takes name in Congress, otherwise, they will remain in committee for a long time, or be watered down to the point on meaninglessness.

*Alas, I cannot claim credit for this bon mot, it was coined by the great Matt Taibbi, in his article on the massive criminal conspiracy investment firm, The Great American Bubble Machine.
†Or perhaps leaving a loophole for the Calamari bankers is considered to be a feature, rather than a bug. Summers and Geithner still work for him after all.

Full text of statement after break:

The Obama-Volcker remarks in full:

REMARKS BY PRESIDENT BARACK OBAMA

SUBJECT: ADDITIONAL REFORMS TO THE FINANCIAL SYSTEM

THE DIPLOMATIC RECEPTION ROOM, THE WHITE HOUSE, WASHINGTON, D.C.
11:39 A.M. EST, THURSDAY, JANUARY 21, 2010

PRESIDENT OBAMA: Good morning, everybody. I just had a very productive meeting with two members of my Economic Recovery Advisory Board: Paul Volcker, who is the former chair of the Federal Reserve Board, and Bill Donaldson, previously the head of the SEC. And I deeply appreciate the counsel of these two leaders and the board, that they’ve offered as we have dealt with a broad array of very difficult economic challenges.

Now over the past two years more than 7 million Americans have lost their jobs in the deepest recession our country has known in generations. Rarely does a day go by that I don’t hear from folks who are hurting. And every day we are working to put our economy back on track and put America back to work.

But even as we dig our way out of this deep hole, it’s important that we not lose sight of what led us into this mess in the first place. This economic crisis began as a financial crisis when banks and financial institutions took huge, reckless risks in pursuit of quick profits and massive bonuses. When the dust settled and this binge of irresponsibility was over, several of the world’s oldest and largest financial institutions had collapsed or were on the verge of doing so. Markets plummeted, credit dried up, and jobs were vanishing by hundreds of thousands each month. We were on the precipice — precipice of a second Great Depression.

And to avoid this calamity, the American people, who were already struggling in their own right, were forced to rescue financial firms facing crisis largely of their own creation. And that rescue, undertaken by the previous administration, was deeply offensive, but it was a necessary thing to do, and it succeeded in stabilizing financial systems and helping to avert that depression.

Since that time, over the past year, my administration has recovered most of what the federal government provided the banks. And last week I proposed a fee to be paid by the largest financial firms in order to recover every last dime.

But that’s not all we have to do. We have to enact common-sense reforms that will protect American taxpayers and the American economy from future crises as well.

For while the financial system is far stronger today than it was one year ago, it’s still operating under the same rules that led to its near collapse.

These are rules that allowed firms to act contrary to the interests of customers, to conceal their exposure to debt through complex financial dealings, to benefit from taxpayer-insured deposits while making speculative investments, and to take on risks so vast that they posed threats to the entire system. That’s why we are seeking reforms to protect consumers.

We intend to close loopholes that allowed big financial firms to trade risky financial products, like credit-default swaps and other derivatives, without oversight; to identify system-wide risks that could cause a meltdown; to strengthen capital and liquidity requirements, to make the system more stable, and to ensure that the failure of any large firm does not take the entire economy down with it.

Never again will the American taxpayer be held hostage by a bank that is too big to fail.

Now, limits on the risks major financial firms can take are central to the reforms that I have proposed. They are central to the legislation that has passed the House, under the leadership of Chairman Barney Frank, and that we’re working to pass in the Senate, under the leadership of Chairman Chris Dodd.

As part of these efforts, today, I’m proposing two additional reforms that I believe will strengthen the financial system while preventing future crises.

First, we should no longer allow banks to stray too far from their central mission of serving their customers. In recent years, too many financial firms have put taxpayer money at risk by operating hedge funds and private equity funds and making riskier investments, to reap a quick reward.

And these firms have taken these risks while benefitting from special financial privileges that are reserved only for banks. Our government provides deposit insurance and other safeguards and guarantees to firms that operate banks.

We do so because a stable and reliable banking system promotes sustained growth and because we learned how dangerous the failure of that system can be during the Great Depression. But these privileges were not created to bestow banks operating hedge funds or private equity funds with an unfair advantage.

When banks benefit from the safety net that taxpayers provide, which includes lower-cost capital, it is not appropriate for them to turn around and use that cheap money to trade for profit. And that is especially true when this kind of trading often puts banks in direct conflict with their customers’ interests.

The fact is, these kinds of trading operations can create enormous and costly risks, endangering the entire bank if things go wrong.

We simply cannot accept a system in which hedge funds or private- equity firms inside banks can place huge, risky bets that are subsidized by taxpayers and that could pose a conflict of interest. And we cannot accept a system in which shareholders make money on these operations if a bank wins, but taxpayers foot the bill if a bank loses.

It’s for these reasons that I’m proposing a simple and common- sense reform, which we’re calling the Volcker rule, after this tall guy behind me. Banks will no longer be allowed to own, invest or sponsor hedge funds, private-equity funds or proprietary trading operations for their own profit, unrelated to serving their customers. If financial firms want to trade for profit, that’s something they’re free to do. Indeed, doing so responsibly is a good thing for the markets and the economy. But these firms should not be allowed to run these hedge funds and private equities — funds while running a bank backed by the American people.

In addition, as part of our efforts to protect against future crises, I’m also proposing that we prevent the further consolidation of our financial system. There has long been a deposit cap in place to guard against too much risk being concentrated in a single bank. The same principle should apply to wider forms of funding employed by large financial institutions in today’s economy. The American people will not be served by a financial system that comprises just a few massive firms. That’s not good for consumers; it’s not good for the economy. And through this policy, that is an outcome we will avoid.

And my message to members of Congress of both parties is that we have to get this done. And my message to leaders of the financial industry is to work with us, and not against us, on needed reforms. I welcome constructive input from folks in the financial sector. But what we’ve seen so far in recent weeks is an army of industry lobbyists from Wall Street descending on Capitol Hill to try and block basic and common-sense rules of the road that would protect our economy and the American people.

So if these folks want a fight, it’s a fight I’m ready to have. And my resolve is only strengthened when I see a return to old practices in some of the very firms fighting reform; when I see soaring profits and obscene bonuses at some of the very firms claiming that they can’t lend more to small businesses, they can’t keep credit- card rates low, they can’t pay a fee to refund taxpayers for the bailout without passing on the cost to shareholders or customers. That’s the claims they’re making.

It’s exactly this kind of irresponsibility that makes clear reform is necessary.

Now, we’ve come through a terrible crisis. The American people have paid a very high price. We simply cannot return to business as usual. That’s why we’re going to ensure that Wall Street pays back the American people for the bailout. That’s why we’re going to rein in the excess and abuse that nearly brought down our financial system. That’s why we’re going to pass these reforms into law.

Not Enough Bullets

No Comments

It looks like the fat cat Wall Street Bankers are looking at a legal challenge to Obama’s proposed bank tax:

Wall Street’s main lobbying arm has hired a top Supreme Court litigator to study a possible legal battle against a bank tax proposed by the Obama administration, on the theory that it would be unconstitutional, according to three industry officials briefed on the matter.

Ummm ……… Despite the fact that these guys destroy £7 of wealth for each dollar that they are paid, and the fact that this is intended to collect money to replace those spent under the TARP law, which required such a levy, they still believe themselves to be the masters of the universe, and they are outraged at that Obama has unveiled a modest tax on their liabilities and spoken about them with less than glowing terms.

It’s really kind of whiny, since the tax is modest, and largely geared toward forestalling more punitive measures floating around Congress.

The tax is nominally 15 basis points (0.15%) on liabilities over $50 billion, and it appears to weigh more heavily on investment banks than depositor banks, though the legal distinction was erased when the brokers all became bank holding companies. (See the FAQ from the Treasury Department)

What’s more the tax is profoundly weak tea, as the effective tax is halved, yielding a tax of 7½ basis points, which is well under the 78 basis point advantage in cost of funds that the “too big to fail banks” have over their smaller brethren.

Note also that this only covers the $117 billion or so of the TARP, but when other bailouts are considered, we are approaching $30 trillion in money handed to banks, without a thought of clawing that back.

So they are getting a sweetheart deal, and they are screaming like stuck pigs.

They do not realize how angry people are, and they won’t until people literally start burning down their houses with torches.

More Ass Covering by the Fed

No Comments

It’s clear that Bernanke does not want the rock turned over to see what slimy things live underneath, and so we have some more measures taken by the Federal Reserve to try to mute calls for an audit, and perhaps a re-evaluation of the role and powers of the institution.

They have implemented more consumer friendly credit card rules (also here and here), and now Bernanke is saying that the central bank would welcome an audit of their dealings with AIG by the GAO.

In the latter quote, the pertinent quote is this:

The invitation does not represent any procedural changes, as GAO could have reviewed the issue without such an invitation. But the does letter highlight the Fed’s sensitivity to mounting criticism to the events leading up to the bailout.

So, if the Federal Reserve has no choice, then they will write a nice letter saying, “Okily dokily, neighbor.”

I expect that if the GAO conducts an audit, it will take crowbars and explosives to actually extract any meaningful information though.

A Loophole in the Bribery Statutes

No Comments

So, Chris Dodd, after a disastrous run for the Presidency, and 2 banking scandals, one of which was created by Tim Geithner, acknowledged reality, and announced that he was not running for reelection.

The question would then be how would this change his positions on banking reform?

One possibility is that, no longer needing the campaign donations, he would get harder on banks, and the other would be that he would go easier on banks, because he would be looking for post-Senate employment.

Well, we have our answer, and it’s the latter.

The murmurs are that Dodd is looking at dropping an independent consumer financial protection agency entirely from the Senate banking reform bill the excuse is that he is looking for bipartisan support, but the fact is that anything that republicans will support will be completely toothless.

This isn’t just a “rearranging deck chairs” thing. If the agency is not independent, then it will be attached to another agency, most likely Treasury, which is largely an arm of the banks by design, and they will have no control over the budget and personnel requests.

So, Chris Dodd is well on his way to getting a high paying gig with a bank, or a law firm for the banks.

It’s depressing. He was my 1st or 2nd choice in the 2008 primaries, but much like Edwards, it appears that he has feet of clay.

Quote of the Day

No Comments

It’s from the “about” section of a blog called Paul Kedrosky’s Infectious Greed:

Even further back in time, Dr. Kedrosky was one of the first technology equity analysts at a major brokerage firm. Back before there were such things as credit default swaps, collateralized debt obligations, and subprime mortgages, we vandalism-loving greed-heads on Wall Street were forced to take down capitalism the hard way — by selling over-valued technology companies to an unsuspecting public via initial public offerings. While it eventually worked out (c.f., the tech crash of 2000), the next generation of Wall Street-ers learned from our inefficiency and took down the global money grid in half the time it took us to mess up Nasdaq. Lesson learned.

Needless to say, I put him in my feed reader.

H/t The Big Picture for the catch.

10%?

No Comments

That is the current charge-off rate for Capital One US Credit Cards.

This means that today, with no sign of unemployment abating, over 10% of their debt portfolio is deemed to be uncollectable:

Capital One Financial Corp’s U.S. credit-card charge-offs rose to double digits in December, showing consumers became increasingly stressed in the holiday shopping month.

In a regulatory filing on Friday, Capital One said the annualized net charge-off rate — debts the company believes it will never collect — for U.S. credit cards rose to 10.14 percent in December from 9.60 percent in November.

I used to think that the banks couldn’t lose money when they paid 3% on savings accounts and got 18% on credit cards, but now that it’s 1½% and 28%, it looks like they are going under.

To quote The Hunt for Red October, “You arrogant ass. You’ve killed us! “

Not Enough Bullets: Shareholders Got a Gun Edition

No Comments

JPMorgan Allots $378,600 Per Investment Bank Worker:

JPMorgan Chase & Co., the second- largest U.S. bank, set aside $9.3 billion for compensation and benefits for investment-bank employees in 2009, enough to pay each worker in that unit $378,600.

The reserve is 33 percent of the investment bank’s revenue for the year, compared with 62 percent in 2008, New York-based JPMorgan said today on its Web site. That’s the lowest proportion allocated for pay since JPMorgan merged with Bank One Corp. in 2004.

You know, if shareholders had any real power to direct a company, the idea that 33% of revenue go to bonuses, much less 62%, would be a thing of the pass.

It is currently illegal for shareholders to vote on compensation plans. How about we change the law and make it legal.

Economics Update

No Comments
Click for full size


Unemployment, SA vs NSA, h/t Brad Delong

Well, it’s Thursday, and initial unemployment claims rose for the 2nd straight week, once again worse than forecast.

What might be more significant is the significant divergence between seasonally and non-seasonably adjusted numbers, because the NSA unemployment number was 800,000 initial claims. (see graph pr0n)

The 4 week moving average continued to fall though, down 9,000 to 440,750 and the continuing claims number fell by 211 thousand to 4.596 million, though it should be noted that all these numbers are seasonally adjusted, and it appears that the adjustments are getting a big hinky.

In any case, the DoL’s numbers are here.

Retail sales also were below forecast, with the December number showing a -0.3% drop, missing analysts expectations of +0.5%.

We do have some good news though, with business inventories rising in November; it is the 2nd straight month, and the 2nd month-to-month increase in 15 months.

In real estate, foreclosures rose 14% in December, and total defaults for 2009 hit a record, 2,824,674, up 21% from 2008, and more than double the number for 2007.

In central bank land, Chilean central bank kept it’s rate at 0.5%, as the economy in the Latin American nation remains mired in recession and deflation.

In the US, the bad financial numbers had Treasurys rising as investors looked for safety.

In energy, warmer weather continued to push oil prices down, while in currency, the dollar was essentially unchanged.

Economics Update

No Comments
Click for full size

H/t Calculated Risk

The Federal Reserve has released its “Summary of Commentary on Current Economic Conditions”, better known as the “Beige Book”, and there has been a small improvement.

I’m not sure where the improvement is, since transportation indices continue to disappoint, with the American Association of Railroads’ report on carload traffic showing the lowest level since 1988, and if goods aren’t moving, then people aren’t buying.

Meanwhile the trend in mortgages, with refinancing increasing and mortgages for purchases falling, continued this week.

Overseas, the GDPs of Britain and Germany both suffered the largest drop since before the 2nd World War, -4.8% and -5.0% respectively, while in Japan, machinery orders fell sharply in November.

In the world of US government finance, the US budget deficit doubled year over year in December, which probably had something to do with bond prices being mixed, with the 10-year bond falling slightly, and the 30-year bond rising slightly. (Yields move in the opposite direction of prices)

In energy, oil fell below $80/bbl, on reports of increasing US fuel inventories.

In currency, the dollar was mixed, down slightly versus the Pound and Euro, but up slightly versus the Yen.