Terrible news for cockroaches.  What will they eat in the event of a nuclear holocaust?

 

Fast food. French fries will outlast everything.

 

Half of the nation's 40 biggest publicly traded corporate spenders have announced plans to curtail capital expenditures this year or next, according to a review by The Wall Street Journal of securities filings and conference calls.

 

There's the wrinkle: "the 40 largest publicly traded companies." And what kinds of businesses create most new jobs?

 

Bad News for Small Business: VC Investments Decline

"Recently, we posted here about the growth in angel capital investments. Now, there’s some not-so-good news for small businesses about venture capital. The most recent MoneyTree survey from PricewaterhouseCoopers and the National Venture Capital Association reports that in the third quarter of 2012, VC investments shrunk both in terms of overall dollars (down by 11 percent from the second quarter of 2012) and in terms of deal volume (down by 5 percent from the second quarter of 2012)."

http://www.networksolutions.com/smallbusiness/2012/11/bad-news-for-small-business-vc-investments-decline/

 

 

Small Businesses Grow Wary, See Fewer Hires, Investments

"Confidence among U.S. small businesses cooled in September as fewer companies said they planned to hire or invest in new equipment, a survey found."

Read more: Small Businesses Grow Wary, See Fewer Hires, Investments

Important: Can you afford to Retire?

http://www.moneynews.com/Economy/Small-Businesses-Hires-Investments/2012/10/09/id/459211

Debt crisis: Eurozone remains split on Greek aid - live

"Eurogroup leader Jean-Claude Juncker and Finland raise doubts about reaching a deal on Greek aid as eurozone finance minister prepare to meet in Brussels later today."

http://www.telegraph.co.uk/finance/debt-crisis-live/9688943/Debt-crisis-Eurozone-remains-split-on-Greek-aid-live.html

 

 

France's rating downgrade a warning for banks

"PARIS, Nov 20 (Reuters) - French banks were reminded of risks to their own growth and credit ratings when Moody's stripped France of its triple-A badge because of an uncertain fiscal and economic outlook."

http://www.reuters.com/article/2012/11/20/france-moodys-banks-idUSL5E8MK3XI20121120

 

 

 

We've been through this.  Some of you dislike the negative economic data presented by ragerunner, but can't or won't produce data indicating otherwise.

 

Oh FFS, I'll take the bait.  From 30 seconds of googling below is a sampling from the past three days. Obviously the fiscal cliff is a major wildcard, and things are still messy, but the high doom and gloom ratio here is the very definition of cherry-picked.

 

Housing Market Posts Gains

Sales of Previously Owned Homes Rose in October; Supply of Properties Shrinks

http://online.wsj.com/article/SB10001424127887324307204578128900029337018.html

 

California posts strong job gains as employers add 45,800 workers

http://articles.latimes.com/2012/nov/17/business/la-fi-california-jobs-20121117

 

GDP Accelerating to 2.9% Helping U.S. Overcome Sandy Woes

http://www.bloomberg.com/news/2012-11-19/gdp-accelerating-to-2-9-helping-u-s-overcome-sandy-budg.html

Great.  Keep it up.  I like reading good news.

I like getting good news. Seems to me that the national news believes its viewers want more doomer porn. So I don't give them my ratings. I do watch BBC-America and Bloomberg however.

Great.  Keep it up.  I like reading good news.

 

Doh! I think it's impossible to comprehensively keep up with all the economy news, so I'm not going to try.  I like this thread when people discuss broader issues and real, verifiable trends and stuff, I just don't really see the point of posting every layoff notice [or plant opening] or dour forecast [or optimistic projection]. That's no knock on anyone- people should feel free to post what they think is significant, but if some of us have a different opinion, it doesn't mean we have our head in the sand.

When I talked to a realtor this past Sunday who represents a number of Freddie Mac-owned homes (including the one we were looking at, which is one reason I was soliciting renovation advice in another thread), he told me that the turnaround time on offers is now usually days, whereas it used to be weeks, because the inventory has thinned greatly.

Great.  Keep it up.  I like reading good news.

 

Doh! I think it's impossible to comprehensively keep up with all the economy news, so I'm not going to try.  I like this thread when people discuss broader issues and real, verifiable trends and stuff,

 

Let me take a stab at this to get the conversation restarted...

 

Americans, for the most part, have made sizeable gains in personal wealth through 401k's, IRA's, and other investments in the market, and in home equity gains.  Those two sources have recovered somewhat since the crash, but not enough to really put people back to where they were.  Maybe the housing bubble was something that never should've happened and Wall Street fatcats created it to benefit themselves, but reality is many a common man benefitted from it, whether they were a homeowner, a general contractor, or a mortgage/real estate agent.

 

The housing market is recovering but so many people got swept up in mortgage loans and delinquency, it will still be several years before any of those people consider owning a home again or finding a bank to approve them.  So while the housing market may be recovering, I don't think you'll see much increase in the rate of home ownership.  Too many young people are staying in the rental market because they don't have the income or down payment to buy, or they don't want the long term commitment of being in one location for 5+ years.

 

Much of the posts from ragerunner focus on what's happening on Wall Street, specifically large companies, hiring, laying off, posting profits, etc.  While most of us could care less, these things are a barometer for what's happening in the big picture.  The market is struggling right now and that does affect people's investments.  If the market were to shoot up to 14,000 in the next 2 years, you'd see more people retiring, buying second homes, taking vacations, reinvesting in businesses, etc.  That's a good thing.  So its worth cheering for even if it means Bain Capital types also post record profits.

^What exactly is the news posted here a barometer of? I think that's kind of the point some of us have been trying to make. It's not that I don't care about people being laid off, I just don't know if something so anecdotal adds much to the US Economy thread. As for the rest of your post...I'm not sure I understand if it was directed at any particular view or poster.  I'd be thrilled if the stock market shot up and of course housing wealth lost has been devastating for a majority of US households. I have concerns about inequality (focused primarily on the lower end of the spectrum), and I have concerns about management compensation structures that rip off shareholders, and, through TBTF financial institutions, arguably put us all at risk, but I don't otherwise begrudge people for making a lot of money.

 

I do find it personally annoying when people making 8 digits in the financial sector equate their success with other measures of human value, but that's a different issue (a non Mitt-related issue).

 

We've been through this.  Some of you dislike the negative economic data presented by ragerunner, but can't or won't produce data indicating otherwise.

 

Oh FFS, I'll take the bait.  From 30 seconds of googling below is a sampling from the past three days. Obviously the fiscal cliff is a major wildcard, and things are still messy, but the high doom and gloom ratio here is the very definition of cherry-picked.

 

Housing Market Posts Gains

Sales of Previously Owned Homes Rose in October; Supply of Properties Shrinks

http://online.wsj.com/article/SB10001424127887324307204578128900029337018.html

 

California posts strong job gains as employers add 45,800 workers

http://articles.latimes.com/2012/nov/17/business/la-fi-california-jobs-20121117

 

GDP Accelerating to 2.9% Helping U.S. Overcome Sandy Woes

http://www.bloomberg.com/news/2012-11-19/gdp-accelerating-to-2-9-helping-u-s-overcome-sandy-budg.html

 

Thanks for the post. But I have already posted on most of those items. I always post about GDP and I have dozens of post about the growth in housing and home prices. What I didn't post is the California job increase, which I didn't see. Good find.

What's going on with these big public companies is that they want to, and have been, building up major cash reserves because they've been scared since the bubble burst. They also want those big cash reserves to be attractive to prospective bondholders and, to a lesser degree, prospective equity buyers. If that takes firing people, fine by them.

 

Twinkies maker Hostess going out of business

The liquidation of the company will mean that most of its 18,500 employees will lose their jobs, Hostess said on Friday.

http://money.msn.com/top-stocks/post.aspx?post=6d7b095e-e558-4dc4-83e9-1859d177e676&ocid=ansmony11

 

 

Screw Hostess and its Wall Street fraud-docs who are so eager to carve the company's organs for sale to the highest bidders.

 

From what I gather, Hostess was jacking executive pay while cutting its workers (obviously pretty common these days). A lot of people got out with golden parachutes. I'm not surprised the union striked. Who would be happy working for guys who come in for a few years to get rich quick and jump ship?

 

BCTGM members are well aware that as the company was preparing to file for bankruptcy earlier this year, the then CEO of Hostess was awarded a 300 percent raise (from approximately $750,000 to $2,550,000) and at least nine other top executives of the company received massive pay raises. One such executive received a pay increase from $500,000 to $900,000 and another received one taking his salary from $375,000 to $656,256.

 

http://ragingbull.quote.com/mboard/viewreplies.cgi?board=GOV&reply=2619860

That news has been popularized, but it isn't the whole story.

 

For one thing, the CEO (Driscoll) that tripled his own pay was forced out.  The new CEO (Greg Rayburn) agreed to take a salary of $1 through December 31, along with the three other top executives.  Other executives who got substantial pre-bankruptcy pay increases saw the pay increases rescinded (they didn't go down to $1, but went back to their old pay).

 

Of course, Rayburn is also a partner in a restructuring firm retained by Hostess and his firm continues to get paid something like $120,000 per month, though Rayburn's personal cut of that is much less because his firm has other personnel and operating costs that those payments go to defray.

 

All the finger-pointing between unions and management is somewhat secondary in this case, though, IMHO.  Hostess simply did not adapt to the changing market.  The market for empty calories simply isn't what it used to be, and Hostess' Nature's Pride breads were a milquetoast foray into healthier fare.  (The Pepperidge Farm product line is much more impressive, IMHO.)

 

Note that Hostess is not exactly completely alone among struggling sugary snack food companies.  Philadelphia-based Tastykake was sold in 2011.  Keebler is not the cash cow for Kraft (its parent company) that it used to be.  Tastykake was smaller, though, so it wasn't as prohibitively expensive for another less-well-known company to acquire it as a going concern.  And Keebler is part of the Kraft empire, so even if it doesn't have much product category diversity itself, it's part of a conglomerate that does.  Hostess was a one-trick pony and consumers were no longer impressed with the trick.  Even if the executives had worked for minimum wage and the workers had all worked for free, the company was going nowhere unless it updated its product lines.

$2.5 million salary to run a company the size of Hostess is nothing.  These are pennies when you consider what the impact of 18,500 hourly workers' wages impact is. 

 

Figure a $0.50 cent/hr wage increase for employees across the board... x 52 weeks x 18,500 employees... and you're over $19 million.... 

 

Anyone want to restate what the union was asking for when they went on strike and compare that to the bottom line of $2 -$3 million in executive salaries?  Even better question, everyone admits the company was mismanaged for years, maybe they should've hiked the executive salary years ago to bring in some better management???

I think everything would function much better with employee owned businesses. shareholders and board members have too much power. Yes I know they own the business, but the needs of the many outweigh the needs of the few.

You mean we have some underlining structural economic issues that have not been solved with bailouts and QE dumps and are creating challenges to growth?!! What a shock.

 

Economy has lost some fundamental pop: Bernanke

"WASHINGTON (MarketWatch) — The financial crisis appears to have lowered how quickly the economy can grow in the long term, Fed Reserve Board Chairman Ben Bernanke said Tuesday.

Before the crisis hit, the growth rate of potential output was about 2.5%. But evidence indicates that the crisis has cut that rate, Bernanke said Tuesday in a speech at the New York Economic Club."

"Josh Shapiro, chief U.S. economist at MFR Inc., said the Congressional Budget Office estimates that potential growth is near 1.6%."

http://www.marketwatch.com/story/economy-has-lost-some-fundamental-pop-bernanke-2012-11-20

 

 

SEC alleges largest-ever insider-trading scheme

CR Intrinsic Investors is owned by Steven A. Cohen’s firm

"WASHINGTON (MarketWatch) — A hedge-fund manager and a doctor are at the heart of what securities regulators said Tuesday may be the largest insider-trading scheme ever pursued, a case that now has implicated one of the highest-profile investors on Wall Street."

http://www.marketwatch.com/story/sec-alleges-largest-ever-insider-trading-scheme-2012-11-20?dist=afterbell 

 

Hostess simply did not adapt to the changing market.  The market for empty calories simply isn't what it used to be

 

True. Kellogg's and General Mills have run into this too with their "dessert cereals."

I hope Twinkies and some of the other brands can eventually be resold to someone 2-3 owners from now for so cheap that they can feel free to do whatever they want with the brand. Too much downward pressure on a company like Hostess.

The revisions to the data produced just before the election are starting to come in. Of note consumer sentiment actually only rose .1, in other words their was no noticable rise in consumer sentiment. But it made for great headlines. NOTE: This is not a political statement. If a republican president had been in office the same would have happened and has in the past. What is interesting about this number is it usually is not revised much in either direction.

 

U.S. initial jobless claims drop to 410,000

Filings remain elevated as Northeast grapples with Sandy fallout

"Applications for jobless benefits soared in the prior week as the deadly late-season superstorm slammed into the Northeast. Claims rose a revised 90,000 to 451,000 in the prior week, up from the initial estimate of a 78,000 increase to 439,000."

http://www.marketwatch.com/story/us-initial-jobless-claims-drop-to-410000-2012-11-21?dist=lcountdown

 

 

Final UMich sentiment reading revised lower

"WASHINGTON (MarketWatch) -- Consumer sentiment in November gained slightly to a reading of 82.7 but wasn't as strong as initially estimated, the University of Michigan and Thomson Reuters said Wednesday. Initially, they had reported a reading of 84.9 in November from a final October reading of 82.6. Economists polled by MarketWatch had expected a downward adjustment to 84.0."

http://www.marketwatch.com/story/final-umich-sentiment-reading-revised-lower-2012-11-21?dist=lcountdown

Looks like Argentina may have taken a few pointers from Iceland.

 

Argentina at risk of default after US court ruling on debt

"Argentina is at risk of defaulting on $24bn (£15bn) of debt after hedge funds were awarded more than $1.3bn by a US court, a move which its economy minister called “legal colonialism”.

“All we need now is for [Judge Thomas] Griesa to send us the Fifth Fleet,” said Hernán Lorenzino, Agentina's economy minister.

However, New York District Court Judge Grisa was firm. “Argentina owes this and owes it now,” he said. “After 10 years of litigation this is a just result.”

A deadline for payment was set for December 15.

Cristina Fernandez de Kirchner, Argentina’s outspoken president, had vowed that the government will not pay “one dollar” to the funds. Payment could divert money from other bondholders, tipping the nation into a technical default."

http://www.telegraph.co.uk/finance/financialcrisis/9697724/Argentina-at-risk-of-default-after-US-court-ruling-on-debt.html

 

 

EU summit: budget talks collapse as David Cameron says 'non' to Brussels

Talks on a new European Union budget have collapsed as David Cameron accused Brussels of 'living in a parallel universe' and said there could not be a 'deal at any cost.'

"Talks on a new European Union budget have collapsed after David Cameron won German support in a row with France about his demands for more cuts in spending.

The Prime Minister accused Brussels of 'living in a parallel universe' and said there could not be a 'deal at any cost.'

Speaking at the end of the failed summit Mr Cameron said: "We're not going to be tough on budgets at home just to come here and sign up to an increase."

http://www.telegraph.co.uk/news/politics/9699264/EU-summit-budget-talks-collapse-as-David-Cameron-says-non-to-Brussels.html

Morgan Stanley’s Doom Scenario: Major Recession in 2013

"The global economy is likely to be stuck in the “twilight zone” of sluggish growth in 2013, Morgan Stanley has warned, but if policymakers fail to act, it could get a lot worse."

"The bank’s economics team forecasts a full-blown recession next year, under a pessimistic scenario, with global gross domestic product (GDP) likely to plunge 2 percent."

"Morgan Stanley isn’t alone in warning about a recession next year. Noted bear, Nouriel Roubini warned on Monday that certain key developments would exacerbate the downside risks to global growth in 2013.

“Until now, the recessionary fiscal drag has been concentrated in the euro zone periphery and the U.K.. But now it is permeating the euro zone’s core,” Roubini wrote. “And in the U.S., even if President Barack Obama and the Republicans in Congress agree on a budget plan that avoids the looming “fiscal cliff,” spending cuts and tax increases will invariably lead to some drag on growth in 2013 – at least 1 percent of GDP.”

http://www.cnbc.com/id/49898014

 

 

 

Dallas Fed Mfg Survey

"Perceptions of broader business conditions worsened in November. The general business activity index fell to minus 2.8 from plus 1.8 in October, returning to negative territory. The company outlook index moved down to minus 4.8 in November from plus 2.4 in October, registering its first negative reading since April.

Labor market indicators were mixed. The employment index edged up to 6.7 in November, with more than 20 percent of firms reporting hiring compared with 15 percent reporting layoffs. The hours worked index dipped from minus 5.9 to minus 7.1.

Indexes reflecting future business conditions fell sharply in November. The index of future general business activity plunged from 16.8 to minus 5.3, its lowest reading in four months. The index of future company outlook dropped from 20.9 to 1.8. Indexes for future manufacturing activity also fell this month but remained positive."

http://bloomberg.econoday.com/byshoweventfull.asp?fid=451659&cust=bloomberg-us&year=2012&lid=0

The Housing Recovery Is Getting Real

"Home builders up 2 percent on strong housing starts data. October housing starts at 894,000, the highest level since July 2008.

Single-family home starts were basically flat, but there was a big increase in multifamily home starts.

Bottom line: The housing recovery is real, and housing starts are approaching the psychologically important 1 million level. This is far below the record of 2.2 million set in 2006, but those were unrealistic levels — the 10-year average is close to 1.2 million units."

http://www.cnbc.com/id/49900307

 

Credit Card debt is rising and HELOC's are back to 2008 levels. This type of debt increase worked out so well last time. Why not try it again?!!!

 

Home Equity Loans Make Comeback Fueling U.S. Spending

"Home equity lines of credit that fueled a spending spree during the U.S. property boom are back.

After six years of declines, lending for so-called Helocs will rise 30 percent to $79.6 billion in 2012, the highest level since the start of the financial crisis in 2008, according to the economics research unit of Moody’s Corp. Originations next year will jump another 31 percent to $104 billion, it projected."

http://www.bloomberg.com/news/2012-11-26/home-equity-loans-make-comeback-fueling-u-s-spending-mortgages.html

 

 

What is all that new credit card debt and HELOC fueling? The crazy game of debt equals growth surges again.

 

Retailers hail holiday shopping weekend as best ever

"The biggest holiday shopping weekend of the season still has one day left, but retailers can already consider it their best yet.

More shoppers came out Thanksgiving night, more shoppers hit stores on Black Friday, more shopped online and everyone spent more. The result: more than $59 billion in estimated sales from Thursday through Sunday, according to a BIGInsight survey conducted for the National Retail Federation.

That's up from $52.4 billion last year. And all signs point to a huge Cyber Monday, as more consumers turned to their computers or mobile devices to shop during the weekend."

http://www.freep.com/article/20121126/BUSINESS07/121126018/Retailers-hail-holiday-shopping-weekend-as-best-ever

over in Indiana, the Hillenbrand company is diversifying, leaving Batesville casket a smaller & smaller piece of their revenue pie. Burials are down as cremation becomes more & more popular.

"Batesville, which manufactures caskets, burial vaults, and urns, has been the company’s main source of revenue and operating earnings for years.

But Hillenbrand has been diversifying its business model, primarily through acquisitions, and Batesville is becoming a smaller piece of the pie."

 

http://connectingdirectors.com/articles/37355-could-batesville-be-for-sale-soon

and

http://connectingdirectors.com/articles/37351-hillenbrand-moving-away-from-batesville-casket-cash

Here is the latest revised down data, now that the elections are over. September's numbers were revised down noticably as well.

 

Sales of new homes decline 0.3% in October

"The sales pace in September was revised down to 369,000 from a prior estimate of 389,000. Economists surveyed by MarketWatch had expected new-home sales in October to remain steady at a rate of 390,000 on more demand and lean inventories. The median sales price in October declined 4.2% to $237,700, and is up 5.7% from October 2011. The supply of new homes increased to 4.8 months at October's sales rate from 4.7 months in September."

http://www.marketwatch.com/story/sales-of-new-homes-decline-03-in-october-2012-11-28?link=MW_story_latest_news

 

http://www.zerohedge.com/news/2012-11-28/surprise-right-after-election-new-home-sales-tumble-downward-revised-two-year-high

U.S. consumer spending drops in October

Incomes flat as Hurricane Sandy disrupts work routines

"If the effects of Sandy are discounted, however, the government’s spending and incomes report was still disappointing, especially after September’s strong gains, economists say."

http://www.marketwatch.com/story/us-personal-spending-drops-in-october-2012-11-30

 

 

More stuff sitting in the warehouse, consumer spending is starting to drop, business investment is falling and income growth was revised downward. The strength, people are buying houses? The first four items on the list do not support long term housing growth. So something will have to give, one way or the other. Its a good thing the taxpayer is back stopping interest rates and home loans or the economy would be well in negative GDP territory. Look for Bernanke to make good on his comment, the other day, about trying to loosen home loan standards to increase home sales or future GDPs are not going to look so good.

 

GDP Pushed Up — Yet Look Closer

"The latest figures on third-quarter economic growth are best described by a cliché: The devil is in the details.

Gross domestic product accelerated to a 2.7 percent annual rate, revised upward from a 2 percent pace previously reported by the Commerce Department and well above the 1.3 percent gain in the second quarter of 2012."

"A closer look at the report shows consumer spending, the biggest part of the economy, was revised downward to a 1.4 percent pace, the slowest in more than a year. Moreover, a big chunk of the pickup in growth came from a stronger-than-projected buildup of inventories, which poses a potential headwind for this quarter."

"Wage gains also were revised downward for the past two quarters, helping explain why American consumers may have restrained purchases and hardly encouraging for the outlook in coming months unless the labor market begins to show faster Among the other not-so-rosy details, business investment in equipment and software fell instead of being unchanged last quarter, the GDP revisions showed. And while exports expanded, the pace was the weakest in three years. That leaves housing as the one silver lining: growth in residential investment almost matched the previous estimate."

http://go.bloomberg.com/political-capital/2012-11-29/gdp-pushed-up-yet-look-closer/

A list of some of the job cut annoucements just over the last couple of days.

 

LivingSocial expected to lay off 400 in U.S.

http://www.bizjournals.com/washington/blog/techflash/2012/11/major-layoffs-set-for-livingsocial.html

 

Body armor manufacturer in Eden to lay off 280 employees

http://myfox8.com/2012/11/29/body-armor-manufacturer-in-eden-to-lay-off-280-employees/

 

Hundreds of SBB&T Employees Being Laid Off

"Up to 600 bank employees between Ventura and San Jose could lose their jobs."

http://www.keyt.com/news/local/Santa-Barbara-Bank--Trust-Employees-on-Notice-181384731.html

 

Northrop Grumman to cut 200 jobs at two sites

"Northrop offers voluntary buyouts to workers at its electronics division complexes in Woodland Hills and Salt Lake City amid efforts to cut the defense budget."

http://www.latimes.com/business/la-fi-northrop-job-cuts-20121130,0,593340.story

 

Citigroup Securities Unit Said to Cut Bonuses, 150 Jobs

http://www.businessweek.com/news/2012-11-29/citigroup-said-to-pare-bonuses-as-investment-bank-cuts-150-jobs

Whenever I feel at peace with the world, I come to this thread. It depresses me right up!

lol, ragerunner never disappoints

Hopefully, happiness is not based off of economic success (as a country and/or as an individual).

 

 

ISM index drops to 49.5% in November

"WASHINGTON (MarketWatch) - U.S. manufacturers contracted in November and activity fell to the lowest level since July 2009, as new orders sank and employment plans were scaled back, according to the closely followed ISM index."

http://www.marketwatch.com/story/ism-index-drops-to-495-in-november-2012-12-03?dist=lcountdown

 

 

U.S.construction spending jumps 1.4% in October

"WASHINGTON (MarketWatch) - Outlays for U.S. construction projects surged in October, the Commerce Department reported Monday."

http://www.marketwatch.com/story/usconstruction-spending-jumps-14-in-october-2012-12-03

 

 

Euro-zone manufacturing shrinks for 16th month

"FRANKFURT (MarketWatch) -- Manufacturing activity across the 17-nation euro zone contracted for a sixteenth consecutive month in November, according to the final reading of the Markit purchasing managers' index, or PMI, for the sector released Monday. Manufacturing PMI came in at 46.2, matching a preliminary estimate, and marking the sixteenth consecutive month the index has posted a reading below the 50.0 level, signaling a contraction in activity."

http://www.marketwatch.com/story/euro-zone-manufacturing-shrinks-for-16th-month-2012-12-03 

 

 

Loss of income caused by banks as bad as a 'world war', says BoE's Andrew Haldane

"The economic impact of the global financial crisis has been as bad as a world war and as a result public anger at banks was reasonable and understandable, said Andrew Haldane, a senior Bank of England official.

"If we are fortunate, the cost of the crisis will be paid for by our children. More likely it will still be being paid for by our grandchildren."

http://www.telegraph.co.uk/finance/financialcrisis/9719300/Loss-of-income-caused-by-banks-as-bad-as-a-world-war-says-BoEs-Andrew-Haldane.html

 

 

And a quick look at the political 'white noise' of the day. Blah, Blah, Blah.

 

Republicans, Democrats play political dare ahead of more fiscal talks this week

Read more: http://www.foxnews.com/politics/2012/12/03/geithner-democrat-fiscal-plan-in-detailed-and-balanced/#ixzz2E0YXh6yr

 

 

Dollar at Risk From Budget Squabbling

http://online.wsj.com/article/SB10001424127887323401904578156702917139468.html?mod=googlenews_wsj

Hopefully, happiness is not based off of economic success (as a country and/or as an individual).

 

Apparently, for some, happiness is based on economic disaster. Or at least reading articles about it!

Hopefully, happiness is not based off of economic success (as a country and/or as an individual).

 

Apparently, for some, happiness is based on economic disaster. Or at least reading articles about it!

 

To funny. You act like the data I post is made up by me. I guess you should avoid Bloomberg news, Marketwatch, the Telegraph and other such publications that make up most of the posts. Along with the ISM government release, the employment reports, GDP, Freddie and Fannie reports, the growth in the Federal debt, etc. Because if you avoid these things it will magically turn to wonderful fairy dust and it will not have any impact on you or others.

I am sure the 10,000 of thousands that have lost their jobs over the last month or two, that I have been posting about, probably think this stuff is a little bigger deal.

 

I remember all the comments in the first housing/economic thread that the info or viewpoint was just to much doom and gloom, this info can't be right, until we ended up in the greatest recession since the great depression and millions lost their homes, jobs, etc. Now here we are 5 years later and the citizens of this country must add billions/trillions in debt every year just to get a very low positive GDP print. I think that is a real issue.

...Now here we are 5 years later and the citizens of this country must add billions/trillions in debt every year just to get a very low positive GDP print. I think that is a real issue.

The "quantitative easing" by the Federal Reserve does not cost "the  US Treasury".  A trillion dollars of stimulus was spent one year, in 2009, and has discontinued.  The TARP bank bailouts cost the public about $60 billion and that is over, too.  What stimulus to get "a low positive GDP" is adding trillions of debt per year?  I am sure that extended unemployment benefits and food stamps are not a trillion dollars per year.

 

...Now here we are 5 years later and the citizens of this country must add billions/trillions in debt every year just to get a very low positive GDP print. I think that is a real issue.

The "quantitative easing" by the Federal Reserve does not cost "the  US Treasury".  A trillion dollars of stimulus was spent one year, in 2009, and has discontinued.  The TARP bank bailouts cost the public about $60 billion and that is over, too.  What stimulus to get "a low positive GDP" is adding trillions of debt per year?  I am sure that extended unemployment benefits and food stamps are not a trillion dollars per year.

 

 

It cost the FEDs and at the end of the day the taxpayers does give support to that institution's balance sheet. Also the FEDs are buying the treasury debt to keep interest rates low. We are also on the hook for billions as the taxpayer now backstops Freddie and Fannie for every 9 out of 10 home loans now being given out.

This program that was just started will add almost 500 billion to the Feds balance sheet over the next 12 months. Also the FEDs balance sheet has grown by $2 trillion dollars and is still growing today and into the future.

 

US Fed balance sheet to grow 5% to $2.9 trillion end-2012 - Cleveland Fed study

"The balance sheet of the U.S. Federal Reserve will expand about 5 percent to around $2.9 trillion by the end of 2012 as a result of its latest plan to purchase additional mortgage-backed securities (MBS), according to a study by the Federal Reserve Bank of Cleveland.

The Federal Reserve's policy-making body, the Federal Open Market Committee (FOMC), decided on Sept. 13 to expand its purchase of assets to strengthen the U.S. economy and improve the jobs market, a move known as QE3 (Quantitative Easing 3).

The Federal Reserve's balance sheet was just under $900 billion in early 2008 but it has expanded to just over $2.8 trillion currently, following earlier rounds of purchases of assets, such as Treasury bonds, MBSs and other debt issued by government agencies.

Under the latest asset purchase program, the Federal Reserve will purchase $40 billion of agency MBSs a month."

http://www.centralbanknews.info/2012/09/us-fed-balance-sheet-to-grow-5-to-29.html

 

 

After the bailout: few fans but no fix for Fannie and Freddie

"But more dramatic actions could be politically treacherous in an election year. Home buyers still rely on the government backstop in nine of 10 new mortgages, and the fragile market must be weaned slowly from its dependence on federal programs providing financial backing."

http://www.reuters.com/article/2012/04/23/us-usa-housing-idUSBRE8350MS20120423

 

These are just two of the programs currently being done to stimulate the economy with more debt to manipulate the housing market. The first one is a QE program and the other one is a backdoor stimulus program.

 

This brings up the question, should the taxpayer be used to manipulate homes sales and home prices? The growth in these two programs alone will/have been well over a trillion dollars (and will be next year as well). Maybe its worth it? If it wasn't for the growth in RE construction and sales GDP would have been negative in the 3rd quarter. Maybe the US economy has to have easy, cheap debt or it can't grow? Even with these efforts 3rd quarter GDP looked like this:

 

"A closer look at the report shows consumer spending, the biggest part of the economy, was revised downward to a 1.4 percent pace, the slowest in more than a year. Moreover, a big chunk of the pickup in growth came from a stronger-than-projected buildup of inventories, which poses a potential headwind for this quarter."

"Wage gains also were revised downward for the past two quarters, helping explain why American consumers may have restrained purchases and hardly encouraging for the outlook in coming months unless the labor market begins to show faster Among the other not-so-rosy details, business investment in equipment and software fell instead of being unchanged last quarter, the GDP revisions showed. And while exports expanded, the pace was the weakest in three years. That leaves housing as the one silver lining: growth in residential investment almost matched the previous estimate."

http://go.bloomberg.com/political-capital/2012-11-29/gdp-pushed-up-yet-look-closer/

When you focus on little things like TARP you miss the real growth in taxpayer/public backed debt/stimulus. This is not something that is now over, it's growing everyday at an incredible rate. There is no way this type of growth in debt will not have negative consequences in the future.

 

One hand offers and the other hand buys. But at the end of the day the same 'person' (US government/taxpayer) owes the debt.

 

Treasury Scarcity to Grow as Fed Buys 90% of New Bonds

"Even as U.S. government debt swells to more than $16 trillion, Treasuries and other dollar fixed- income securities will be in short supply next year as the Federal Reserve soaks up almost all the net new bonds."

"Gross U.S. borrowing through Treasury sales rose to more than $2.1 trillion in each of the last three years from $922 billion in 2008, according to government data. Debt owned by the public jumped to $10.1 trillion in January 2012 from $5.75 trillion in January 2009."

"Programs to pay for the bailout of the financial system, an extension of unemployment benefits and to bolster housing helped caused the size of the U.S. taxable debt market to swell 27 percent since 2007 to $31.3 trillion, according to Nomura Holdings Inc. The figures exclude money-market securities such as commercial paper."

http://www.bloomberg.com/news/2012-12-03/treasury-scarcity-to-grow-as-fed-buys-90-of-new-bonds.html

The Federal Reserve is not the same as the public debt.

How much is Fannie May and Freddie Mac adding to the public debt?  Is that what you are claiming?  I cannot tell.

The Federal Reserve is not the same as the public debt.

How much is Fannie May and Freddie Mac adding to the public debt?  Is that what you are claiming?  I cannot tell.

 

The Federal Reserve is the central banking system of the United States. While people may debate its constitutionality there is no doubt that its debts are backed by the United States (taxpayer). Even if its debt are put into a different column on the United States governments spreadsheet.

 

Freddie and Fannie are now publicly owned by the US and its debts are backed by the United States (taxpayer). This backing has been affirmed by the taxpayer funded bailout(s) it has received and will receive in the future. (Matter of fact, there has been recent news reports that in 2013 they make as for more taxpayer money.)

 

However you wish to look at things the "Debt owned by the public jumped to $10.1 trillion in January 2012 from $5.75 trillion in January 2009." (It took decades for the US debt to rise to $5.75 trillion, but only 3 years to almost double it. All of this happened after TARP and other official bailouts were basically over.)

Freddie and Fannie debt as of the 2008 takeover and its just keeps getting bigger as it supports more and more of the housing market. All backed now by the US taxpayer.

 

"The two GSEs have outstanding more than US$ 5 trillion in mortgage backed securities (MBS) and debt; the debt portion alone is $1.6 trillion."

http://en.wikipedia.org/wiki/Federal_takeover_of_Fannie_Mae_and_Freddie_Mac

Speaking of debt that is being taken on by Freddie and Fannie and the taxpayer. It is actually a very simple game, the banks make money by dumping the debt/risk onto the taxpayer backed agencies. It is a shame that most American's have no idea what is going on.

 

Banks book record profits off Fannie and Freddie

"FORTUNE -- Bank executives ought to be picking out nice holiday gifts for Fannie Mae and Freddie Mac. Financial firms have made a mint this year offloading home loans on the giant government-backed mortgage insurers. In the third quarter, bank profits from that business hit an all-time high."

"Much of the improvement, though, appears to be coming from loans sales, and much of those profits appear to be coming from the mortgage business. Wells Fargo (WFC), for instance, made $248 million selling residential home loans predominantly to Fannie and Freddie in the third quarter. That compares to a loss of $75 million for all other loan sales."

http://finance.fortune.cnn.com/2012/12/04/bank-profits-fannie-freddie/?source=yahoo_quote

^You make it sound like a nefarious scheme, but this what Fannie and Freddie were created to do.  It may or may not be good policy, but it's how prime lending worked even in "the good ole days" before the bubble.  The newsworthy part, buried in the article, is that mysteriously wide spread between mortgage rates and other government-backed rates.  Prepayment risk explains some it, but not all. The "cost" that spread is born by new borrowers, not by Fannie and Freddie themselves.

 

To answer the earlier question, the federal bailout of Fannie and Freddie has so far cost about $140B, but that cost is likely decreasing as Fannie and Freddie shovel more profits back the federal treasury.

^You make it sound like a nefarious scheme, but this what Fannie and Freddie were created to do.  It may or may not be good policy, but it's how prime lending worked even in "the good ole days" before the bubble.  The newsworthy part, buried in the article, is that mysteriously wide spread between mortgage rates and other government-backed rates.  Prepayment risk explains some it, but not all. The "cost" that spread is born by new borrowers, not by Fannie and Freddie themselves.

 

To answer the earlier question, the federal bailout of Fannie and Freddie has so far cost about $140B, but that cost is likely decreasing as Fannie and Freddie shovel more profits back the federal treasury.

 

In the 'good ole days' the taxpayer was not the one on the hook.

Also there is a difference between debt that is being taken on a balance sheet and debt that goes into the loss column. The post above are more about debt that is being taken on, not just about losses.

^I don't think that's quite right. Everyone and their mother has known since the late 60s when they were privatized that the treasury would back Fannie and Freddie if necessary. It was a universally understood implicit guaranty and it was baked into mortgage rates the entire time (largely to the benefit of borrowers, but also to shareholders). It was a uniquely terrible set-up.  The fact that it was formalized through conservatorship a few years ago was a legal change, not a substantive one. And before privatization, the mortgage exposure of Fannie and Freddie was explicitly on the federal balance sheet.

 

I don't really understand your other distinction.  Fannie and Freddie have been bailed out. The federal government is theoretically on the hook for any future losses, but the two companies have positive expected values now.  They are generating significant operating profits; their legacy portfolios have been shrinking rapidly; and their new loan books are very high quality. The total size of their book (i.e., their max theoretical exposure) is not growing.  Their relatively success and stability in the past couple years is one reason why there's practically no appetite for any significant mortgage system reform in the short term.

 

However you wish to look at things the "Debt owned by the public jumped to $10.1 trillion in January 2012 from $5.75 trillion in January 2009." (It took decades for the US debt to rise to $5.75 trillion, but only 3 years to almost double it. All of this happened after TARP and other official bailouts were basically over.)

President Obama decided to deploy another 50,000 troops to Afghanistan to fight that expensive war that Bush had botched.  We were still fighting Bush's war in Iraq until one year ago.  Those wars cost a lot of money.  Income tax receipts to the federal treasury decreased and that added to the deficit.  Millions of people were kept in their homes by unemployment insurance. Unemployment payments, Medicaid, and food stamps added to the deficit.  The "prescription drug program" Bush launched was unfunded and added to the deficit.  You Republicans like to act like none of that would have happened if your "MBA President" had still been running things for the last four years.   

 

If we had not been making support payments like unemployment insurance, families would not have been able to keep their homes and dumped them on the market or been foreclosed upon.  The real estate market would have been in a deeper hole at a time when " banks weren't lending".  The US GDP would have decreased annually instead of getting the modest growth that occurred.

 

Something tells me that you have not been reading the same newspapers that I have. 

Trillions of dollars of our national debt is due to the Bush Tax Cuts.

 

http://www.cbsnews.com/8301-505123_162-39741024/did-the-bush-tax-cuts-lead-to-economic-growth/

...Why didn't the tax cuts have a stronger impact on growth?

For one, most of the tax cuts Bush initiated in 2001 weren't of the type that would be expected to have a large impact on growth. As noted by former Reagan economic advisor Bruce Bartlett, "the Bush plan was a hodge-podge of tax gimmicks designed more to win the support of various voting blocs than stimulate growth."...

However you wish to look at things the "Debt owned by the public jumped to $10.1 trillion in January 2012 from $5.75 trillion in January 2009." (It took decades for the US debt to rise to $5.75 trillion, but only 3 years to almost double it. All of this happened after TARP and other official bailouts were basically over.)

President Obama decided to deploy another 50,000 troops to Afghanistan to fight that expensive war that Bush had botched.  We were still fighting Bush's war in Iraq until one year ago.  Those wars cost a lot of money.  Income tax receipts to the federal treasury decreased and that added to the deficit.  Millions of people were kept in their homes by unemployment insurance. Unemployment payments, Medicaid, and food stamps added to the deficit.  The "prescription drug program" Bush launched was unfunded and added to the deficit.  You Republicans like to act like none of that would have happened if your "MBA President" had still been running things for the last four years.   

 

If we had not been making support payments like unemployment insurance, families would not have been able to keep their homes and dumped them on the market or been foreclosed upon.  The real estate market would have been in a deeper hole at a time when " banks weren't lending".  The US GDP would have decreased annually instead of getting the modest growth that occurred.

 

Something tells me that you have not been reading the same newspapers that I have. 

 

I will not engage in a political conversation on this thread. I am not a Republican or a Democrat and believe both parties are a mess and are owned by Wall Street and big business. Both groups continue to line Wall Street pockets and the banking groups. In my book, once you try and turn economics just into a political conversation you have already missed what is really going on.

Then how do you account for the four trillion dollar increase in the public debt, ragerunner?

^I don't think that's quite right. Everyone and their mother has known since the late 60s when they were privatized that the treasury would back Fannie and Freddie if necessary. It was a universally understood implicit guaranty and it was baked into mortgage rates the entire time (largely to the benefit of borrowers, but also to shareholders). It was a uniquely terrible set-up.  The fact that it was formalized through conservatorship a few years ago was a legal change, not a substantive one. And before privatization, the mortgage exposure of Fannie and Freddie was explicitly on the federal balance sheet.

 

I don't really understand your other distinction.  Fannie and Freddie have been bailed out. The federal government is theoretically on the hook for any future losses, but the two companies have positive expected values now.  They are generating significant operating profits; their legacy portfolios have been shrinking rapidly; and their new loan books are very high quality. The total size of their book (i.e., their max theoretical exposure) is not growing.  Their relatively success and stability in the past couple years is one reason why there's practically no appetite for any significant mortgage system reform in the short term.

 

 

You are correct that before they were officially taken over that the Treasury would back them up. But now its official.

 

I believe I posted it several pages back that Freddie and Fannie are expected to asked for another bailout soon. You are correct that if things go great the debt risk shrinks and if things go bad again the debt risk rises rapidly.

Then how do you account for the four trillion dollar increase in the public debt, ragerunner?

 

Its your turn to do some work. You tell us.

Then how do you account for the four trillion dollar increase in the public debt, ragerunner?

It's your turn to do some work. You tell us.

Haven't you heard?

http://www.urbanohio.com/forum2/index.php/topic,17905.msg652739.html#msg652739