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Economy - Economics USA

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CNBC

The world economy needs a second stimulus if it is to avoid the fate of Japan in the 1990s when the country was stuck with years of sluggish growth, Nobel laureate and professor of economics Paul Krugman told CNBC Monday. RELATED LINKS Fed to Keep Rates at Record LowBoE to Warn of Deflation?Unemployment Benefits May Be ExtendedWhy US Job Creation May Be 'Iffy' "The good news is that it does not look like the 2nd great depression. For a few months it did," Krugman said.

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WSJ

Since Americans are BROKE here is a thought stop LOOTING them to pay for Foreign Aid and Socialist programs! Economists are boosting growth forecasts. Employment numbers are improving. Manufacturing activity is bottoming. Housing demand is strengthening. Business leaders are starting to say the worst may be over. Markets are celebrating, hoping the good news will keep on coming. But there is a smudge on the picture. A surprisingly large number of money managers and economists are warning that, despite the hopeful signs, the economy is still deep in the woods, not strong enough to support a long-running stock and bond recovery. The Dow Jones Industrial Average now has jumped 43% from the 12-year low hit March 9. It finished Friday at 9370.07, its highest close since Nov. 4. Risky credit investments, such as junk bonds and even mortgage-backed securities, also have been recovering. "The question now is, 'Where do we go from here?' " John Osterweis, chief investment

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stellaconcepts, Youtube.com

Insiders getting out of the stock market at historic proportions, Last Week's Insiders Transactions: 5 Buys For $13.4 Million, 145 Sells For Over $1 Billion. Treasury Secretary asks for a credit increase to the tune of 2 TRILLION, U.S. Treasury Secretary Timothy Geithner formally requested that Congress raise the $12.1 trillion statutory debt limit on Friday, saying that it could be breached as early as mid-October.

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Investment Watch

I must mention this. I finally read the full Associated Press story on the new unemployment numbers, and even the AP admits that unemployment didn’t really dip. “Employers sharply scale back layoffs in July. The unemployment rate dips for the first time in 15 months, sending a strong signal, the worst recession…” Then you go to the end of the article, buried at the bottom: “The dip in the unemployment rate was the first since April 2008. One of the reasons the rate declined, though, was that hundreds of thousands of people left the labor force. The labor force includes only those who are either employed or are looking for work.” So even AP admits unemployment didn’t really dip. We just had a hell of a lot of people give up looking, and they’re not counted as members of the labor force. That’s what we now know in the BLS figures they put out, Bureau of Labor Statistics. The U6, unemployment 6… Like 9.4% is U3 and that’s people who are employed, looking for work, not employed, on une

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The Golden Truth

We have been maintaining all along that what the Government and media refer to as "green shoots" is nothing more than a temporary slowdown in the rate of decline of the economic conditions in the U.S. Today's employment number is a perfect example. The 247,000 jobs lost in July as reported today is being heralded as big a victory for the Obama Administration and another "green shoot" sign of a recovering economy. Notwithstanding that the Goverment employment number is subjected to unbelievable statistical manipulations and future revisions, it was still a quarter of a million jobs lost just in one month AND huge private sector job losses were offset by massive Governent hiring. Not the sign of a healthy economy. But I wanted to bring your attention to the 33% decline in the Baltic Dry Index since its recent peak in early June. The Baltic Dry Index is considered a very accurate barometer of actual global economic activity, as it measures globally the shipment

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Ernest Hancock

Sometime this weekend I hope you have time to listen to Bud explain what has happened and what is going to happen with the 'collective' wealth of the planet. Full show is here http://www.freedomsphoenix.com/Article/055033-2009-08-06-declare-your-independence-with-ernest-hancock-august-6th-2009.htm

The Healthcare discussion/distraction will result in a new government bucket for your money. It won't matter if the Bucket has an "R" or a "D" on it. Think of it as a new line on your paycheck withholding... "Mrs. FICA". And Mrs. FICA likes to Shop.

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Commodity Trade Alert

Goldman Sachs said it expects commodity prices to spike sharply higher next year, mimicking the moves in 2008 when oil almost hit $150 a barrel and other commodities touched a series of all-time highs. The U.S. bank said potential supply shortages created by years of underinvestment have been exacerbated by the global financial crisis and tight credit conditions.

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The Business Insider

Two thousand foreclosures in just one county! More than 2,000 commercial properties in Maricopa County, Arizona have received 90-day foreclosure notices since the beginning of the year. In total, that represents $6.3 billion in real-estate loans. That foreclosure number is horrific. Arizona was one of the canaries in the coal mine of the housing bubble. If it’s playing that role for commercial real estate, we’re in for a lot of pain.

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arclein

In President Obama’s July 17 weekly address, he repeated his call for a public option in health care, in order to “increase competition and keep insurance companies honest” and to “put an end to the worst practices of the insurance industry.” The same call needs to be made for a public option in banking. In some countries, publicly-owned banks have operated alongside privately-owned banks for decades; and in those countries, the current crisis has served to show that public banks generally do a better job of serving the people and protecting their interests than their private counterparts.

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The Business Insider

Goldman Sachs is once again warning the world of a coming spike in oil prices that will remind everyone of 2008. The current financial crisis is to blame. While we focus on fixing the banking sector, we've forgotten that there are fundamental problems with the commodites markets. The spike from 2008 will return because there's been "decades" of poor investment decisions by oil producers.

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MSNBC

Imagine that and the messiah wants to take over your healthcare???? Since the economic stimulus bill passed nearly six months ago, the Obama administration has repeatedly pledged that the money would reach middle America, seeping into the communities hardest hit by the recession. But analysis of the most comprehensive list of stimulus spending to date found no relationship between where the money is going and unemployment and poverty.

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The Mess That Greenspan Made

Insanity doing the same thing over and over and expecting a different outcome. The video report does tell how dire the situation really is wow all along I was led to believe by the Resident that the first porkulus was working. Yale economist Robert Shiller was on Bloomberg yesterday talking about the need for more action by the U.S. government to ward off a dreaded "double-dip" recession.

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The Market Ticker

I love how the media (CNBC in particular) "spins" the weekly unemployment report. Let's dissect it - again. Continuing claims is the key number. It rose 69,000 from the week previous on a seasonally-adjusted basis. But look down the table in that report. 139,291 people rolled off the continuing claims numbers into "extended benefits." Those folks are still unemployed, yet they understate the continuing claims number by a whopping 140,000. This is the distortion that creeps into the numbers, and over time it gets quite ugly. What's worse is that we're now starting to see people drop off the extended programs, and this will accelerate into August and beyond (although Congress is threatening to extend those benefit times once again.) The market spiked on the release but again, the issue for the economy is consumption going forward. Government money dumps ultimately must be funded and while this has so far "worked", it cannot continue for

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Reuters

Never saw that coming (extreme sarc) The percentage of U.S. homeowners who owe more than their house is worth will nearly double to 48 percent in 2011 from 26 percent at the end of March, portending another blow to the housing market, Deutsche Bank said on Wednesday. Home price declines will have their biggest impact on prime "conforming" loans that meet underwriting and size guidelines of Fannie Mae and Freddie Mac, the bank said in a report. Prime conforming loans make up two-thirds of mortgages, and are typically less risky because of stringent requirements. "We project the next phase of the housing decline will have a far greater impact on prime borrowers," Deutsche analysts Karen Weaver and Ying Shen said in the report.

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The Golden Truth

Who Is Geithner Kidding? The Treasury announced a record $75 billion quarterly refunding auction next week. The number of Treasury auctions have doubled from 36 to 72 over the past year. In the same breath, Treasury Secretary Tim Geithner "has pledged to reduce government borrowing to a sustainable path once the economy returns to firmer footing." http://www.marketwatch.com/story/treasury-plans-to-sell-a-record-amount-of-debt-2009-08-05 Seriously, who is he kidding? He made a similar comment to an audience of Chinese university students in his spring trip to China and they laughed at him. The reality is that the Obama Government essentially quadrupled the spending deficit in it's first year from the deficit level in Bush's last term ($500 billion to $2 trillion, roughly). But I would love to see the real spending numbers, and thus the real deficit, because multi-billion spending programs like the war on terror and the Government takeover of Fannie Mae and Fred

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Ritholtz.com/blog

 Construction loans are structured with upfront reserves — meaning that it takes much longer for CRE defaults to occur. Low short-term interest rates also means reserves can last longer — BUT, as DB notes, Once reserves are exhausted, defaults will skyrocket. • By far the riskiest type of loan product in bank portfolios; • Substantial portion represents loans to homebuilders; • Market currently penalizing properties with vacancy issues extremely severely; • Newly constructed (or only partially constructed) properties are the poster children for vacancy problems in CRE; • Values of most newly constructed properties are down massively; • Expect extremely high default rates and extremely high loss severity rates, both likely to be in excess of 50%; • Total expected losses of 25% or more.

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Michael Shedlock / Mish

 The horn tooters have to wait at least another month before the recession is over judging from the non-manufacturing ISM numbers. Please consider the July 2009 Non-Manufacturing ISM Report On Business®. The report shows the NMI (Non-Manufacturing Index) dropped .6% in July to 46.4, contracting for the 10th consecutive month at a slightly faster rate. The table shows that 8 out of 10 Non-Manufacturing components are worse this month than last month. Only deliveries are in the green while inventories are contracting at a slower rate.

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The Market Oracle

Yesterday we detailed the different between this current economic contraction, and your usual run of the mill plain vanilla recessions. We also went over the MASSIVE consumer credit contraction that needs to occur before American households have finished de-leveraging. Today, we’re detailing why stocks will Crash this coming fall. As you know the media is rife with folks calling the end of the recession and the beginning of a new bull market. It’s clear to me that this is a load of nonsense. Today I’ll show you why. Because a lot of the alleged “analysis” that is backing up the bulls’ claims of a new bull market comes from technical analysis and charts, I’m presenting the below chart from David Rosenberg of Gluskin Shef. It charts today’s bear market over that of 1929-1932.

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WSJ

And with the Federal Reserve still intervening heavily to hold down borrowing costs and the government spending money hand over fist, few want to bet against this bull run. However, every post-recession period is different, and this one still looks nasty enough to cause disappointment on fundamentals. Indeed, the bulls' weakest point is their reliance on the earnings rebound predicted by Wall Street analysts. The S&P 500 is trading at 16.8 times consensus 2009 earnings, above its level at the market peak in October 2007. That is why the bull case says investors need to look even further forward, at 2010 forecasts, which gets the multiple down to 13.3 times. But that distant-hope scenario has its shortcomings. Take a stock like Home Depot, trading at 16.8 times consensus fiscal 2011 earnings, very high for a company facing intense competition and exposed to the troubled housing market. Implicit in the bull case is the belief that the government just has to carry the economy

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LAtimes.com

 Tuesday's ruling heightens the stakes for a legislative debate over prisons that will take place later this month. As part of the agreement to close the state's $26-billion budget gap, the governor and lawmakers agreed to cut $1.2 billion from the prisons budget, but postponed decisions on how to hit that goal.

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Market-ticker.denninger.net

 While the rate of decline has slowed the fact remains that we are nowhere near "turning the corner" in terms of job loss, and yet the mantra is "green shoots, green shoots!" Note that while goods-producing layoffs have dropped materially, the services side of the economy has basically flat-lined. That is, the goods-producers have drawn down inventory (a cycle that may be nearing completion) and as such their need to lay off people has waned - however, the services side is still seeing contracting demand and that contraction appears to have flat-lined from May going forward instead of continuing to improve in June and July. Continuing contraction in the services portion of the economy is not positive no matter how you slice it, and the improvement from the January and February time frames for services appears to have stalled in June and July.

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Michael Shedlock / Mish

 The reason why we remain skeptical over the sustainability — the operative word for investors — is because the U.S. economy (or the global economy for that matter) has yet to show any ability that it can stand on its own two feet without the constant use of government steroids. At a time when the U.S. government is running a 13% fiscal deficit-to-GDP ratio, it somehow has enough in the coffers to try and perpetuate a cycle of spending by inducing a populace in which 20% are already three-car families, to go out and buy a new car to support a shrinking industry at future taxpayer (or bondholder) expense. Look at what happened in that first quarter GDP number — total GDP contracted around $30 billion at an annual rate, but when you strip out all the government activity, ranging from spending, to tax reductions, to benefit payouts, the decline exceeded $300 billion. In other words, without all the government intervention, the decline in GDP in 1Q would have been closer to an 8% annual

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