Friday, March 5, 2010

SAR #10064

The bill is coming due, and you're not going to like it. Ilargi

Enigma:  Of late some metrics point toward a recovery, some suggest a downward spiral; maybe that's what years of stagflation will be like. Meanwhile: Retail sales were up 3.7% in February, a third consecutive monthly increase, in the face of declining consumer confidence. Factory orders also increased.  But first-time claims for jobless benefits remain elevated, despite a drop last week of 29,000.  Nearly 5.9 million people were receiving extended benefits in the week that ended Feb. 13, up about 200,000 from the previous week.  And pending home sales fell 7.6% in January.

Greed:  Credit card companies now claim they have the right to classify your account “in default” (and thus the balance in full due immediately” “if we obtain information that causes us to believe that you may be unwilling or unable to pay your debts to us or to others on time.”  Even my first wife was more tolerant than that.

Quintessence:  Illustrating today's complete divorce Wall Street from anything approaching investing is the emphasis on speed, on being able to intercept and manipulate the market in “milliseconds” rather than draggy old “microseconds”.  It's a replay of “The Sting” without the music.

Bears in the Woods:  Over 10% of the money American banks have in outstanding loans stands a better than even chance of not being repaid.  As many as 1,000 could fail, and the FDIC along with them.  Great graphs, too.

Political Speech:  Valero Energy and Tesoro Corp have pledged to speak out against making their California refineries stop warming the planet.  The first utterance amounts to $2 million to gather signatures in support of a ballot initiative to rid the state of a bothersome anti-emissions law.

Quoted:Today’s bailouts are tomorrow’s spending cuts. The enormity of the government cutbacks that lie ahead is yet to be appreciated.”  And he wasn't talking about Greece.

Call of the Wild: A non-partisan group including Nobel economist Joseph Steiglitz and Tarp watchdog Elizabeth Warren warns that the country is in a "doomsday cycle" as banks take immense risks with TARP funds and money borrowed cheaply from the Fed, expecting the taxpayer to bail them out when things go wrong.  We don't need no stinkin' reform - what could go wrong?

Walk/Run:  California is having another baby step demonstration today as students and teacher from K -12 and college called for a strike to protest budget cuts.  In Portugal, 90% of government helath-care workers took to the streets to protest cuts in public sector wages.

The Mirror:  While everyone is beating up on Greece and Portugal &tc, the US structural deficit-to-GDP ratio is actually higher, at 7.8% than Greece's 6.1%.  But the US only takes about 30% off the top, while Greece takes 40%.  Which means the bankers see a better chance for higher taxes in the US to repay the debts – but only if the taxes are on the poor and middle class.

Re-Runs: Children born in Fallujah are being born with a "massive, unprecedented number" of birth defects.  Suspicions are being laid at the feet of the American military, which sprayed depleted uranium munitions wildly about Fallujah during the siege.  Similar birth defects have been reported repeatedly, both from other areas of Iraq and previous US crusades.  The US military says they are simply recycling – which is good for the environment.

Fun With Numbers:  The Royal Bank of Scotland – RBS of British bail out fame – hid £4.7bn of losses off the books, claimed a £5.7bn profit, then paid out £1.3bn in bonuses on an actual profit of just £1bn.

Two out of Three Ain't Are Bad.  One out of three 'militants' killed in Pakistan by the all-seeing, error-free Predators are civilians – mostly women and children, frequently at wedding parties.

8 comments:

Eric Hacker said...

re: Enigma

When the good news is really bad stats then there is no enigma, just the usual bad press pushing their corporate sponsored be happy message.

Same Store Sales increasing is a likely outcome from the remaining stores when so many other stores have closed. State sales tax revenues are still down according to Mish.

Factory orders would drop like drone into an Afghani wedding if we were to stop blowing billions a day in overseas military fiascoes.

Eric Hacker said...

Whoops. I posted without assembling all of today's items as required. The above should be 'drop like a drone in a Pakastani wedding'.

I forgot we were at war with Pakistan too. Gotta keep those factory orders up I suppose.

Vitus Capital said...

Bears in the Woods.

From the referenced NYT article (Thanks!): "The problems are greatest in construction loans for single-family homes, where nearly 40 percent of the loans either are delinquent or have been written off as uncollectible. But they are also high in mortgage loans for single-family homes".

I more or less believe the construction bit, but not the sfh bit. In the aggregate, sfh loans have been securitized one way or the other for 20 years, so banks don't have a lot of sfh loans on their books. So what are these figures? Are they the loans the banks could not securitize? Is it some guestimate of loan default of loans originated by various banks? Is it (shudder) an estimate of the loans defaulting on pieces of CDO's bought back by banks to park their capital (somewhere other than the fed or boring treasuries)?

And, of course, toward the end, credit cards and, indeed, everything which remotely looked loan-like was also securitized.

So, I'm, as always, confused, or maybe just wrong.

Bill

CKMichaelson said...

Bill - I don't even play a banker on TV, but might there not be some banks that are being nagged to make good on some of the poor paper they passed up the line? I agree with you that it makes little sense as a straightforward suggestion that many banks are holding sfh mortgages they originated. [OTOH, I know of at least one very solid small bank that has held onto every sfh mortgage they ever originated & have had damned few foreclosures.]

ckm

CKMichaelson said...

Bill - I don't even play a banker on TV, but might there not be some banks that are being nagged to make good on some of the poor paper they passed up the line? I agree with you that it makes little sense as a straightforward suggestion that many banks are holding sfh mortgages they originated. [OTOH, I know of at least one very solid small bank that has held onto every sfh mortgage they ever originated & have had damned few foreclosures.]

ckm

Vitus Capital said...

Ya. Putbacks are happening. But in volume? How motivated is a GS guy to do the work to tase out a loan from a CDO to maybe get 80% on the $, or less, from some bank who is fighting him all the way. And, if he get one loan put, getting the next put to the same bank does not work since the bank will then turn over the keys. The stuff is possible, but it's not business. imo.

Anonymous said...

Turvy-topsy
----------

on being able to intercept and manipulate the market in “milliseconds” rather than draggy old “microseconds”

milli - 1/1000th of a second

micro - 1/10,000th of a second

You probably meant dropping those draggy, unfashionable *milliseconds* in lieue of the new, improved, 'dices 'n slices', micro variety, eh?

aitrader

Anonymous said...

correction, meant:

micro - 1/1,000,000th of a second