2009-04-09 USER


[Skip to the end]

Karim writes:

View on US EconomySharp drawdown of inventories to lead to restocking to lead to positive contribution to Q2 growth (which will still be negative overall). This has reduced ‘depression’ view in markets. But fact remains that consumer spending (70% of GDP) will remain dire for some time as: labor market remains in tatters, massive household wealth loss from equities/housing, and savings rate continues to climb.

Savings is being fed by the growing deficit spending so that consumption and savings can now be sustained, as some of the recent consumption numbers seem to indicate. So flat consumption (off a low base) and any inventory build (off an extremely low base) has a chance of getting q2 to modestly positive gdp.

Fiscal policy will help.

Yes, adding more than 6% to gdp in q2 from where it would have been other wise.
That’s historically been sufficient to restore gdp to positive territory and fuel the next credit boom.

But with massive output gap (-7% according to CBO last week), economy faces deflationary threat for period ahead (see Fed minutes from yesterday). Fed to keep rates near zero through at least 2010.

Europe

  • German industrial production -2.9% in Feb (after -6.1% in Jan) and Italian industrial production -3.5% in Feb
  • Looks like Q1 at least -6 to -7% for European GDP

Yes, they recover only well after we do.

Report today calling for another 25bp cut to 1% in May, plan to announce framework to buy corporates, no clarity if 1% to be the low for o/n money.

ECB also ‘low for long’: Austrian Governor Nowotny today stated he expects inflation to remain below the ECB’s 2% target over the ‘medium term’, giving the bank room to keep rates at historically low levels for ‘some time’.

Other labor markets weakening sharply as well:

  • Chief Economist of Economic and Social Institute (affiliated with Japanese Cabinet Office) stated unemployment in Japan could climb from 3milllion to 5million between July and December this year
  • Canadian employment down 61k in March (was down over 90k prior month) and unemployment rate up from 7.7% to 8.0%
  • Australian employment down 34k in March, with unemployment rate rising from 5.2% to 5.7%
  • Both looking to substantial fiscal support as well.


    Trade Balance (Feb)

    Survey -$36.0B
    Actual -$26.0B
    Prior -$36.0B
    Revised -$36.2B

     
    Karim writes:

    • Surprise was trade balance improving from -36.bn to -26bn (-44bn to -35bn in real terms)
    • But cause for improvement was 5.1% collapse in imports (not caused by energy); capital goods imports -6%; industrial supplies -9.3%; consumer goods -3.9% and not a sign of a healthy economy

    Right, imports should be picking back up with April numbers which won’t be out for quite a while as the additional fiscal adjustments pile on to the automatic stabilizers which already may have the deficit north of 6$ of gdp annually.

    [top][end]

    Exports MoM (Feb)

    Survey n/a
    Actual 1.6%
    Prior -5.9%
    Revised n/a

     
    Karim writes:

  • Exports up 1.6% after 20% fall in prior 4mths
  • [top][end]

    Imports MoM (Feb)

    Survey n/a
    Actual -5.1%
    Prior -6.7%
    Revised n/a

    [top][end]

    Exports YoY (Feb)

    Survey n/a
    Actual -16.9%
    Prior -16.5%
    Revised n/a

    [top][end]

    Imports YoY (Feb)

    Survey n/a
    Actual -28.8%
    Prior -22.8%
    Revised n/a

    [top][end]

    Trade Balance ALLX (Feb)

    [top][end]


    Import Price Index MoM (Mar)

    Survey 0.9%
    Actual 0.5%
    Prior -0.2%
    Revised -0.1%

     
    Karim writes:

  • Import prices up 0.5%, -0.7% ex-petroleum, and -0.6% from China.
  • Yes, any recovery will see crude prices pushing up the inflation indicators, however recent Saudi price cuts may indicate this could be delayed some.

    [top][end]

    Import Price Index YoY (Mar)

    Survey -14.7%
    Actual -14.9%
    Prior -12.8%
    Revised -12.7%

    [top][end]

    Import Price Index ALLX 1 (Mar)

    [top][end]

    Import Price Index ALLX 2 (Mar)

    [top][end]


    Initial Jobless Claims (Apr 4)

    Survey 660K
    Actual 654K
    Prior 669K
    Revised 674K

     
    Karim writes:

  • Initial claims down 20k to 654k from upwardly revised prior week 674k; continuing claims continue to defy gravity, rising another 112k
  • While unemployment will continue to go up until nominal growth exceeds productivity increases, claims should start falling soon.

    [top][end]

    Continuing Claims (Mar 28)

    Survey 5800K
    Actual 5840K
    Prior 5728K
    Revised 5745K

    [top][end]

    Jobless Claims ALLX (Apr 4)


    [top]

TARP not working


[Skip to the end]

It hasn’t done anything for the same reasons outlined in my initial response to the Paulson plan.

She doesn’t get it either except that it isn’t working as hoped for.

TARP is now 6 Months Old, Little Evidence of Success

by Joe Weisenthal

Apr 8 (Business Insider) — Elizabeth Warren, the TARP watchdog, has released her six month report card on the state of TARP. Yep, it’s been six months and we’re still mainly here and in one piece, so take a second to be glad for that.

As was reported a few days ago, Warren’s report calls for the government to administer tough justice to the banks, arguing that there are four keys to the success of any banking system rescue, when looking throughout history.

  • Transparency
  • Assertiveness
  • Accountability
  • Clarity (as in, a full explanation of why and what the government’s doing with taxpayer money)

The other key point, which we’re really glad Warren made, is that Tim Geithner’s strategy only works if this is a temporary, liquidity problem, rather than something more profound. That’s key. Few others in government are acknowleding that crucial point.


[top]

2001 Quantitative-easing letter- nothing has changed


[Skip to the end]

Quantitative Easing is Simply a ‘Bank Tax’

Letters to the Editor- Financial Times; Feb 23, 2001

by Warren B. Mosler

From Mr. Warren B. Mosler

Sir, The Group of Seven’s call for monetary easing to solve Japan’s economic problems seems to misunderstand bank mechanics. I suspect that most who advocate quantitative easing do not recognize that it is but a “bank tax”. The purchase of securities by the Bank of Japan reduces private sector holdings of Japanese government bonds and increases member bank reserve account balances at the BOJ. As reserve accounts do not earn interest, banks are left holding a higher percentage of their capital in these non- interest-bearing BOJ accounts.

Quantitative easing would reduce the interbank rate in Japan from 0.25 per cent back to 0 per cent. But, since lending is not reserve constrained, loans would increase only to the extent that lower interest rates would attract additional borrowers. Recent experience shows that to be negligible. Furthermore, since Japan is a large net payer of interest on its public debt, cutting rates reduces government interest payments and therefore private sector income.

Warren B. Mosler, Principal, AVM LP, 250 So Australian Avenue, W Palm Beach, FL 33401, US.


[top]

2009-04-08 USER


[Skip to the end]


MBA Mortgage Applications (Apr 3)

Survey n/a
Actual 4.7%
Prior 3.0%
Revised n/a

 
More reasons nominal Q2 GDP can be positive- starting from some very low Q1 numbers.

[top][end]

MBA Purchasing Applications (Apr 3)

Survey n/a
Actual 297.70
Prior 268.00
Revised n/a

[top][end]

MBA Refinancing Applications (Apr 3)

Survey n/a
Actual 6813.50
Prior 6600.10
Revised n/a

[top][end]

Wholesale Inventories MoM (Feb)

Survey -0.7%
Actual -1.5%
Prior -0.7%
Revised -.09%

[top][end]

Wholesale Inventories YoY (Feb)

Survey n/a
Actual -1.7%
Prior 0.8%
Revised n/a

[top][end]

Wholesale Inventories ALLX 1 (Feb)

[top][end]

Wholesale Inventories ALLX 2 (Feb)


[top]

Off Topic Comments


[Skip to the end]

Submitted on 2009/04/10 at 1:07pm by high tech redneck

“profits for investing, not for working for a living”
There used to be a time I was amazed how the labor class kept taking the abuses piled upon them.
On Cspan I just watched Jesse Jackson say Obama would have been the first president to enter office with a student loan if his books hadn’t been so successful and he recently got to pay off the loans with his book profits. Jesse was very angry that blacks still have to pay for student loans and housing loans when bankers can get much cheaper or even free talf loans. He was adamant that we should give free education to everyone that wants it. I go into the library and I read mosler economics and it doesn’t cost me anything but my very valuable time, so what is Jesse so mad about? MIT offers many of thier courses for free over the internet. I think most laborers could put down the budweiser and not go fishing this weekend and READ if they really wanted too.
Who wants to enable working class to equality in the investor class?
Warren you don’t want a bunch of poor working class blacks to be ahead of you in line to fill up their boats with gas when you want to take the superboat out for a joyride do you? Why should their boating needs/wants eat into 3 or 4 hours of your boating time while you wait to gas up? Also you don’t want a bunch of working class blacks out clogging the roads on sunday drives when you want to take the supercar out for a 200mph jaunt do you? What good does a supercar do you when you are in bumper to bumper traffic doing 5mph? There are very deep rooted desires in most of the “investor” class to keep the status quo.
The gods of Greece lived up on Mt. Olympus, they didn’t want to be burdened with the sufferings of overcrowded streets and cities down in the valley.

________________________________________________________________________

Submitted on 2009/04/12 at 3:14am by Comments Encouraged

If they have little purchasing power, what does it matter how many social security dollars you get? How sad you worked your whole life for a promise from the government that was used like a carrot to sucker you like a donkey.
_\
/`b
/####J
|\ ||

_________________________________________________________________________

Submitted on 2009/04/10 at 4:55pm by Pocahontas

Making Banking Boring – Paul Krugman

I agree Warren, I think they should do what Krugman says and take away your supercar, your house, and your superboat. It is not enough to just make banking boring again, to stop this boom/bust cycle we need to strip YOU and every other person like you of the wealth you have to send a message this will not be tolerated anymore. That will remove the incentive for future generations to try these tricks again, thinking they can get away with it.
It is ridiculous that because you clicked buttons back and forth trading financial instruments that you should live so much better than other human beings. My native american indian friends tried to play the white mans game and open casinos on the reservations and the governator is taxing us and taking all our wealth back – where are our bailouts?
Your distribution of the wealth in this world needs to be returned to the borg, sooner rather than later.

_________________________________________________________________________

Submitted on 2009/04/08 at 5:22pm

Wikipedia review of Lila:
Major themes
As in his past book, the narrative is embedded between rounds of philosophical discussion. The main goal of this book is to develop a complete metaphysical system based on the idea of Quality introduced in his first book. Unlike his previous book, in which he creates a dichotomy between Classical and Romantic Quality, this book centers on the division of Quality into the Static and the Dynamic.
Another goal of this book is to critique the field of anthropology. Pirsig claims traditional objectivity renders the field ineffective. He then turns his concept of Quality toward an explanation of the difficulties Western society has had in understanding the values and perspectives of American Indians. One interesting conclusion is that modern American culture is the result of a melding of Native American and European values.
Another theme analyzed using the Metaphysics of Quality is the interaction between Intellectual and Social patterns. Pirsig states that until the end of the Victorian era, social patterns dominated the conduct of members of the American culture. In the aftermath of World War I, intellectual patterns and the scientific method acceded to that position, becoming responsible for directing the nation’s goals and actions. The later occurrences of fascism are seen as an anti-intellectual struggle to return social patterns to the dominant position. The hippie movement, having perceived the flaws inherent in both social and intellectual patterns, sought to transcend them, but failed to provide a stable replacement, degenerating instead into lower level biological patterns as noted in its calls for free love.
Criticism
The book has been criticised for being presented in a way that suits neither fact nor fiction. The title suggests a factual inquiry, but the characters appear fictional. While the book’s narrative is mostly from the perspective of the main character, who is a thinly disguised version of the author, some sections come directly from Lila, and since her thoughts generally support the author’s viewpoint in real life, appear a bit dishonest. [3]
The basis of the philosophical argument presented by the book is that Quality (which can be very basically understood as similar to Sophocles’ ‘good’, or as, in some religions, ‘god’, in the sense that Quality is universal and undefinable; at once the stimulus and the goal of human development) is a property of the interaction between subject and object and is more fundamental than either; subjects and objects only attain existence through interaction, and that interaction, Quality, therefore comes first. This has been challenged as unconvincing when set aside an alternative explanation in terms of evolutionary psychology. One of Pirsig’s examples, of a man sitting on a hot stove and perceiving the experience as one of ‘low quality’, to some, fails to demonstrate that quality is a fundamental property of things, since it is easy to explain his actions in terms of an evolutionarily evolved instinct to avoid things that our senses tell us will damage our bodies.[3]
In an interview, the author has said that he is disappointed that more ’seriously thinking people’ do not really understand his ideas fully. Many people, he says, write to him that they re-read the book many times but still don’t really understand it, adding “I have read many reviews criticising my ideas, but I have yet to see anything that proves me wrong. I’d like to give a prize to the first person who can convince me that my ideas about a metaphysics of quality are wrong.”[4]

_______________________________________________________________________

Submitted on 2009/04/08 at 1:44pm by Comments Encouraged

Comments Encouraged, that needs to be revised to – Mosler Economic Hitler Youth Comments Encouraged – dissenting voices will be silenced. What point am I missing exactly when I walk into a miami bank and because I am a native american indian I don’t get a loan, but if I was the latino cousin of the loan officer, I get lots of money?

Trust the government – just ask my forefather geronimo!

____________________________________________________________

Submitted on 2009/04/08 at 1:39pm by Richard Benson

Censorship, so that like minds can stroke each other’s pet theories, wonderful!

_____________________________________________________________

Submitted on 2009/04/08 at 1:34pm by Keynes Liquidity Fetish

Energy technology, superboat technology, supercar technology, aids and cancer research, etc etc etc – how does any of this progress with everyone on the planet becoming a Mike Norman clone and clicking buttons back and forth on a trading terminal all day? The whole system is a heaping pile of dogs**t, it does not make humans do anything productive, all it does is make them zombies to a bloomberg terminal.

http://online.wsj.com/article/SB123915041409099017.html#mod=todays_us_personal_journal

…For much of the past decade, Kenneth Kimmons of Bedford, Texas, was a buy-and-hold investor. He regularly socked away money in mutual funds across his 401(k) plans, individual retirement accounts and a brokerage account.

But after watching his investments fall by about 50% last year, he started trading individual stocks and options full-time last fall. He generally buys stocks at the start of the trading day — lately, it’s been bank stocks — and sells them a few hours later. “I just got tired of putting money away and losing it,” says the 31-year-old. He says he’s doubled his money since he started trading full-time.

…Mr. Catalano trades mostly stocks and exchange-traded funds, usually four to five times a week. He writes covered-call option contracts to generate income off his shares, a tactic that could lose him some of the upside if share prices rise substantially. Since he started trading in September, he is down about 5% but has done better than the market.
… “The problem I have with the buy-and-hold strategy is that it’s a bull-market strategy,” say Matthew Tuttle, a financial adviser in Stamford, Conn. “In the bust, you give all of your profits back.” Mr. Tuttle has recently taken a more active approach to trading. While short-term investors are likely to face higher tax bills — since short-term gains are taxed at higher rates than long-term gains — he notes that some people who incurred big losses last year will be able to carry those losses forward to offset taxes in future years.

…The uncertain environment has prompted David Dilley of Bonita Springs, Fla., to trade more frequently. The 76-year-old retiree believes there has been a “sea change” in economic philosophy … So, while he had considered himself a longtime buy-and-hold investor, he’s now trading Canadian oil trusts in his E*Trade account several times a week. Mr. Dilley didn’t provide exact numbers but says he’s beating the broader market averages so far this year.

…Sue Cirillo of Pelham Manor, N.Y., used to hold on to household names such as Apple. But last fall, she sold some of her longtime holdings, moved to cash and started trading. “The difference between now and then is that when I’ve made money, I take it off the table and look for the next opportunity,” says the 47-year-old music producer. “Before, I was more focused on companies that I felt were going to be profitable.” Now, she pays attention to daily market swings, subscribes to online advice services such as Mr. Parness’s for trading ideas, and has recently learned to short stocks.

…Mark Swenson of southern New Hampshire says he typically trades with exchange-traded funds, instead of buying individual stocks. The 40-year-old says he started trading for the first time last October, in part to generate additional income in case his work as a plumber dried up. Although he says he got “slaughtered” when he first started trading, he says that he has since made up much of that initial loss and that it’s easier for him to trade than do nothing.

“I could no longer stomach it — watching my money disappear,” he says. “For right now, it’s a traders’ market. Until I get the sense that the market is on the rise, I generally don’t plan on doing any buying and holding — not for the long term.”

…Linda Smith of Denver fired her broker, saying it was a waste of money to pay her adviser 1.5% in annual fees for picking mutual funds she believed she could pick herself. “No one on this planet knows better what to do with my finances than me,” says the 53-year-old. For the year, she figures her portfolio is up about 5%, including the interest from her CDs. “Nobody can time the market 100% correctly 100% of the time,” she says. “However, that doesn’t mean you can’t get lucky now and then.”

_______________________________________________________________


[top]

“Lessons from the Global Crisis: A New Paradigm?”


[Skip to the end]

2nd Mecpoc Symposium


LESSONS FROM THE GLOBAL CRISIS: A NEW PARADIGM?


Sponsored by the Mosler Economic Policy Center

Each year the Mosler Economic Policy Center at Franklin College Switzerland is the proud sponsor of the annual Mecpoc Symposium.

This year’s Mecpoc Symposium, Lessons from the Global Crisis: A New Paradigm?, will take place in Franklin College’s Kaletsch campus auditorium on Tuesday, April 21, 2009 from 2:00 – 7:00 pm. For a complete program of the symposium and the guest speakers’ biographies, please visit Franklin College’s Conference site at www.fc.edu/mecpoc.

Thanks to the Mosler Economic Policy Center this conference is free of charge.

Kindly let us know if you will be able to attend by sending an email to mecpoc_symposium@fc.edu or by calling us in Lugano (Tel. +41 91 986-3609 or
Fax. +41 91 986-3640) at your earliest convenience

Mecpoc, the Mosler Economic Policy Center, at Franklin College Switzerland promotes and encourages education and research in new concepts and methods of economic policy analysis. For more information about Mecpoc please visit www.mecpoc.org.

Conference Details:

Tuesday, April 21, 2009
14.00 – 19.00
Franklin College Auditorium
Kaletsch Campus
Via Ponte Tresa 29, Sorengo (Lugano Switzerland)


[top]

The latest from our Treasury


[Skip to the end]

  • TREASURY AIMING TO NOT HAVE BANK STRESS TEST RESULTS REVEALED UNTIL END OF APRIL AT EARLIEST–SOURCE FAMILIAR WITH TREASURY TALKS
  • TREASURY WANTS TO DELAY ANY PUBLIC RESULTS OF COMPLETED TESTS SO AS NOT TO COMPLICATE MARKET’S REACTION TO BANKS’ Q1 EARNINGS–SOURCE

This is most peculiar. This administration continues to make one blunder after another.

Feeling a lot like the Carter days.

  • TREASURY STILL DISCUSSING HOW THE BANK STRESS TEST RESULTS WILL BE REVEALED

  • TREASURY CONSIDERING RELEASING RESULTS IN SOME AGGREGATE FORM, NOT INSTITUTION-SPECIFIC RESULTS–SOURCE


[top]

PPIP- everyone wants in- “at least 15 states”


[Skip to the end]

This gets worse by the day, from a variety of angles.

That’s what happens with an administration that doesn’t understand their own monetary system.

The US government doesn’t have any use for private or state funds.

If they want the states to have more money better to simply write them a check.

State pension funds weigh toxic assets: report

by James Kelleher

Apr 5 (International Business Times) — New Jersey’s beleaguered pension fund would buy troubled loans and securities – so-called “toxic assets” – as part of a Wall Street recovery plan discussed Friday with the head of the Federal Deposit Insurance Fund.

Bill Clark, director of the state’s Division of Investment, was among officials from at least 15 states who discussed the proposal with FDIC chairwoman Sheila Bair on Friday.

Present at the midday meeting were pension officials from New York City, New York State and Connecticut, said Orin Kramer, chairman of the New Jersey State Investment Council, who helped coordinate the meeting.

Representatives of 12 other states, including Pennsylvania, California and Florida, participated in the meeting by phone, Kramer said.

The states are interested in investing in the Public-Private Investment Program for Legacy Assets, believing it could provide a good return on investment, Kramer said. Bair is open to the idea, but the details need to be worked out, Kramer said.

The program, unveiled by the U.S. Treasury on Mar. 23, would provide federal funding to form public-private partnerships that would buy up so called “legacy assets,” including commercial and residential mortgages and securities. The intent is to reduce the bad assets on the balance sheets of banks, and free them to lend more.

Kramer said Governor Corzine believes the program could provide a lucrative opportunity for New Jersey’s pension fund, which has been battered in recent months by the general problems in the financial markets.

In a statement, Corzine’s spokesman Robert Corrales said the meeting was a “good opportunity” for federal officials and states to develop a plan to involve pension funds “without having to accept the traditional fee structure charged by private sector managers to invest in these types of assets.”

The latest available valuation report for the state pension fund, dated Feb. 27, 2009, listed the total value at $56.3 billion, down $3 billion from the report released at the end of January. Last year, the fund was valued at more than $80 billion.

Crozine, Kramer and Brown have also faced criticism over the last several months over the fund’s losses.

Andrew Gray, Director of Public Affairs at the FDIC, said “Chairman Bair met with a broad range of investor groups today as another step in the ongoing dialogue with stakeholders as the FDIC develops the Legacy Loans Program.”


[top]

2009-04-07 USER


[Skip to the end]


ICSC UBS Store Sales YoY (Apr 7)

Survey n/a
Actual -0.3%
Prior -0.2%
Revised n/a

[top][end]

ICSC UBS Store Sales WoW (Apr 7)

Survey n/a
Actual 0.6%
Prior 1.1%
Revised n/a

[top][end]

Redbook Store Sales Weekly YoY (Apr 7)

Survey n/a
Actual 0.4%
Prior -0.6%
Revised n/a

[top][end]

Redbook Store Sales MoM (Apr 7)

Survey n/a
Actual 0.5%
Prior 0.2%
Revised n/a

[top][end]

ICSC UBS Redbook Comparison TABLE (Apr 7)

[top][end]

IBD TIPP Economic Optimism (Apr)

Survey 45.8
Actual 49.1
Prior 45.3
Revised n/a


[top]

Saudi price cuts


[Skip to the end]

This should keep a lid on crude prices, as Saudis decide to set lower prices:

Saudi Arabia cuts oil prices for US, Europe for May

by Timothy Coulter and Diana ben-Aaron

Apr 6 (Tehran Times) — Saudi Aramco, the world’s largest state-owned oil company, cut its official selling prices for all grades for customers in the U.S., Northwestern and Mediterranean Europe.

Saudi Arabia slashed the U.S. price of its Arab Heavy Crude the most, cutting it by $5.50 a barrel to $4.85 below the price of the West Texas Intermediate grade made in the U.S., the state oil company said in a faxed statement today. That wiped out its April price premium of 65 cents more than WTI, the first time Saudi heavy oil traded for more than the U.S. benchmark in at least 10 years.

Saudi Arab Light Crude was reduced by $4.15 a barrel in the U.S. and will sell for $2.25 less than WTI, Saudi Aramco said. Its April price was $1.90 more than WTI.

In Northwest Europe, Saudi light crude will be priced at $4.05 less than the IPE benchmark, a cut of $1.60 from a $2.45 discount last month, according to the statement. Heavy crude from Saudi Arabia for Europe declined $2.10, putting it $5.80 below the IPE equivalent.

Mediterranean, Asian Prices

Oil for Mediterranean destinations also cheapened, with Saudi light oil declining 90 cents to $3.05 below the IPE benchmark, and heavy oil falling $1.75 to $5.55 below the Brent weighted average equivalent as listed on IPE.

Saudi Arabia increased Asian prices for light grades. Saudi Arab Light Crude will sell in Asia for 80 cents more than crude from Dubai and Oman, a reduction of 10 cents from the 90 cent- per-barrel premium last month. The Saudi heavy crude price was cut $1.20 to fall $1.85 below Dubai/Oman crude.


[top]