A number of economists have suggested that the world economy has become “decoupled”, and that a recession in the US may not cause a recession elsewhere.<\/p>\n
If the latest information coming out of Japan<\/a> is any indication, these economists are wrong, as Japan seems to be heading into a recession too, though one could argue that the 1990s Japanese recession still hasn’t fully ended.<\/p>\n Not surprisingly, this driven the dollar up, and it hits a 7-month high vs the Yen<\/a>, \u00a5109.56.<\/p>\n In the ongoing GSE soap opera, the Treasury Department has hired Morgan Stanley<\/a> to look at at the financial structure of Fannie Mae and Freddie Mac.<\/p>\n There was a competitive bid process to select Morgan, though I still wonder if this is prudent oversight, or the fox guarding the hen house.<\/p>\n In either case, I think the fact that Freddie Mac has cut dividends<\/a> after posting an $821 million loss, about 3 times what was expected, was a sensible move.<\/p>\n Dividends are for when you make a profit.<\/p>\n The monoliner insurers are not a soap opera though, they are farce, and the latest case is Ambac claiming a $823.1 million profit<\/a>, which appears to be entirely due to an accounting change:<\/p>\n Ambac, once the second-largest bond insurer, reported a $1.7 billion net loss in the first quarter after a $3.3 billion loss in the fourth quarter of 2007. A rise in the risk premiums on Ambac’s own debt in the second quarter lowered the value of bond guarantees, which was allowed to be reflected as a gain under new accounting rules, resulting in the quarterly profit.<\/p>\n Ambac rose 35 cents, or 7.4 percent, to $5.08 at 10:08 a.m. in New York Stock Exchange composite trading.<\/p>\n Ambac and other financial companies are taking advantage of the accounting standard change — intended by rulemakers to expand so-called mark-to-market accounting — to report gains when market prices for their liabilities fall.<\/p><\/blockquote>\n I’d appreciate a translation from accountant-speak, but it appears to me that they are profiting from the fact that no one is willing to pay face value on the debts that they owe.<\/p>\n In real estate, nirtgage applications rose last week<\/a>, though only a little, and the week to week numbers are, as I always remind my reader(s) noisy. It’s still way down.<\/p>\n In energy, oil fell on reports of increased inventories<\/a> to $118.58\/bbl, and
retail gasoline fell again<\/a>. It’s now $0.25 off of the record, so you save two bits a gallon.<\/p>\n