* The swine flu outbreak has set off alarm bells for the $770 billion U.S. travel industry, which one expert warns could become the "ground zero" of the economic impact from this latest health threat. full story
* Wall Street Journal reports that banking giant Citi is asking Treasury if it can pay out bonuses, as some employees threaten to quit.
* At least 17 of 30 large regional banks that have less than $100 billion in assets may need to raise additional government or private capital, according to a report by Oppenheimer & Co. Inc. on Tuesday.
* Bharat Borge, the aviation mechanic who first found pebbles and gravel in the filler neck of Anil Ambani's helicopter, was found dead.
* Chrysler's biggest lenders and the U.S. government reached a breakthrough framework deal to cut the automakers' debt by $6.9 billion, but bankruptcy still loomed as a strong possibility to complete restructuring.
* U.S. consumers are considerably less gloomy about the economy, as a key gauge of consumer confidence remains relatively weak despite a large increase in April, a private research group said Tuesday. The consumer confidence index jumped to a reading of 39.2 in April from 26.9 in March, the Conference Board reported.
* Home prices fell in February for the 31st month in a row, but at a slower pace than in January, according to the Case-Shiller home price index released Tuesday by Standard & Poor's. Home prices in 20 major cities fell 2.2% in February after a record 2.8% decline in January, S&P reported.
* A number of leading indicators, project investment that refuses to flag, a pick-up in hiring, freight movement at the major ports and encouraging data from a number of key manufacturing segments indicate that the downturn has bottomed out and that the economy will regain its lost vigour shortly.
News Today - Apr 28
* General Motors announced plans to cut 23,000 U.S. jobs by 2011, drop its storied Pontiac brand and slash 40% of its dealer network in its latest bid to stay out of bankruptcy. full story
* Japanese retail sales drop 3.9% in March as consumers cut down on spending, though the fall was not as bad as expected.
* President Obama says swine-flu outbreak is cause for alert, but not alarm.
* China has reported that it has been secretly increasing its gold reserves.It was able to keep it secret by buying domestically produced metal, almost doubling the amount of gold it holds to more than 1,000 tons.
* The United Auto Workers union announced Sunday it had reached an agreement with Chrysler, Fiat and the U.S. government that meets the requirements of the Treasury Department for loans to the auto giant.
* Regulators have told BofA and Citigroup that they may need to raise more capital, based on early results of the government's stress tests.
* Lawmakers should create a new federal authority to help unwind large-scale institutions important to the nation's financial system, should that become necessary, a key bank regulator said Monday. "We need a new resolution regime for large financial institutions," said Sheila Bair, chairwoman of the Federal Deposit Insurance Corp., in a speech before the Economics Club of New York.
* Japanese retail sales drop 3.9% in March as consumers cut down on spending, though the fall was not as bad as expected.
* President Obama says swine-flu outbreak is cause for alert, but not alarm.
* China has reported that it has been secretly increasing its gold reserves.It was able to keep it secret by buying domestically produced metal, almost doubling the amount of gold it holds to more than 1,000 tons.
* The United Auto Workers union announced Sunday it had reached an agreement with Chrysler, Fiat and the U.S. government that meets the requirements of the Treasury Department for loans to the auto giant.
* Regulators have told BofA and Citigroup that they may need to raise more capital, based on early results of the government's stress tests.
* Lawmakers should create a new federal authority to help unwind large-scale institutions important to the nation's financial system, should that become necessary, a key bank regulator said Monday. "We need a new resolution regime for large financial institutions," said Sheila Bair, chairwoman of the Federal Deposit Insurance Corp., in a speech before the Economics Club of New York.
A glimmer of hope?
economist.com
The worst thing for the world economy would be to assume the worst is over
THE rays are diffuse, but the specks of light are unmistakable. Share prices are up sharply. Even after slipping early this week, two-thirds of the 42 stockmarkets that The Economist tracks have risen in the past six weeks by more than 20%. Different economic indicators from different parts of the world have brightened. China’s economy is picking up. The slump in global manufacturing seems to be easing. Property markets in America and Britain are showing signs of life, as mortgage rates fall and homes become more affordable. Confidence is growing. A widely tracked index of investor sentiment in Germany has turned positive for the first time in almost two years.
All this is welcome—not least because the slump has been made so much worse by panic and despair. When the financial system was on the brink of collapse in September, investors shunned all but the safest assets, consumers stopped spending and firms shut down. That plunge into the depths could be succeeded by a virtuous cycle, where the wheels of finance turn again, cheerier consumers open their wallets and ambitious firms turn from hoarding cash to pursuing profits
Luminous Indicators
The worst thing for the world economy would be to assume the worst is over
THE rays are diffuse, but the specks of light are unmistakable. Share prices are up sharply. Even after slipping early this week, two-thirds of the 42 stockmarkets that The Economist tracks have risen in the past six weeks by more than 20%. Different economic indicators from different parts of the world have brightened. China’s economy is picking up. The slump in global manufacturing seems to be easing. Property markets in America and Britain are showing signs of life, as mortgage rates fall and homes become more affordable. Confidence is growing. A widely tracked index of investor sentiment in Germany has turned positive for the first time in almost two years.
All this is welcome—not least because the slump has been made so much worse by panic and despair. When the financial system was on the brink of collapse in September, investors shunned all but the safest assets, consumers stopped spending and firms shut down. That plunge into the depths could be succeeded by a virtuous cycle, where the wheels of finance turn again, cheerier consumers open their wallets and ambitious firms turn from hoarding cash to pursuing profits
But, welcome as it is, optimism contains two traps, one obvious, the other more subtle. The obvious trap is that confidence proves misplaced—that the glimmers of hope are misinterpreted as the beginnings of a strong recovery when all they really show is that the rate of decline is slowing. The subtler trap, particularly for politicians, is that confidence and better news create ruinous complacency. Optimism is one thing, but hubris that the world economy is returning to normal could hinder recovery and block policies to protect against a further plunge into the depths.
Luminous Indicators
Begin with those glimmers. It is easy to read too much into the gain in share prices. Stockmarkets usually rally before economies improve, because investors spy the promise of fatter profits before the statisticians document a turnaround. But plenty of rallies fizzle into nothing. Between 1929 and 1932, the Dow Jones Industrial Average soared by more than 20% four times, only to fall back below its previous lows. Today’s crisis has seen five separate rallies in which share prices rose more than 10% only to subside again.
Read the full article here
News Today - Apr 27
* The United Auto Workers union announced it had reached an agreement with Chrysler, Fiat and the U.S. government that meets the requirements of the Treasury Department for loans to the auto giant. full story
* Japan's government expects the nation's economy to contract a record 3.3% for fiscal 2009, as overseas demand continues to decline.
* Twenty confirmed cases of swine flu in the U.S. prompt declaration of public health emergency, mirroring action by WHO.
* The US economy probably plunged again in the first quarter, reflecting a drop in inventories that may set the stage for a return to growth later this year.Gross domestic product shrank at a 4.7% annual pace after contracting at a 6.3% rate in the last three months of 2008, according to the median estimate of economists surveyed by Bloomberg News ahead of a Commerce Department report April 29.
* A push by Brazil, Russia, India and China to have the IMF issue bonds is part of a strategy by developing nations to gain a bigger Quota.
* TCS, Infosys and Wipro, plan to increase foreign employees in their workforce as they seek to position themselves as 'job creators' in the mkts they serve
* The sense of "unremitting freefall" in the U.S. economy has disappeared and the picture is no longer completely negative but rather mixed, President Barack Obama's economic adviser Lawrence Summers said on Sunday.
* One of the 19 financial institutions that received a government stress test would require additional capital, based on the initial findings, according to an industry source.
* Japan's government expects the nation's economy to contract a record 3.3% for fiscal 2009, as overseas demand continues to decline.
* Twenty confirmed cases of swine flu in the U.S. prompt declaration of public health emergency, mirroring action by WHO.
* The US economy probably plunged again in the first quarter, reflecting a drop in inventories that may set the stage for a return to growth later this year.Gross domestic product shrank at a 4.7% annual pace after contracting at a 6.3% rate in the last three months of 2008, according to the median estimate of economists surveyed by Bloomberg News ahead of a Commerce Department report April 29.
* A push by Brazil, Russia, India and China to have the IMF issue bonds is part of a strategy by developing nations to gain a bigger Quota.
* TCS, Infosys and Wipro, plan to increase foreign employees in their workforce as they seek to position themselves as 'job creators' in the mkts they serve
* The sense of "unremitting freefall" in the U.S. economy has disappeared and the picture is no longer completely negative but rather mixed, President Barack Obama's economic adviser Lawrence Summers said on Sunday.
* One of the 19 financial institutions that received a government stress test would require additional capital, based on the initial findings, according to an industry source.
News Today - Apr 24
* Microsoft has said that declining PC sales hurt revenue, as the software giant reported quarterly sales that fell for the first time in its 23-year history as a public company. full story
* Leaders from the Group of Seven are still debating who's responsible for what as they gather in Washington this weekend.
* Bank of Japan Gov. Masaaki Shirakawa U.S. stimulus won't be enough to revive the economy without additional measures on ills such as excessive household debt.
* Korea manages to avoid a second-straight quarter of contraction, as GDP grows by 0.1%, with construction offering big boost.
* The Treasury Department is preparing a Chapter 11 bankruptcy filing for Chrysler LLC that could come as early as next week, The New York Times reported Thursday on its Web site, citing people close to the situation.
* The global economy has shown signs that the worst of the recession may be easing in recent weeks, US Treasury Secretary Timothy Geithner"In recent weeks, there have been some encouraging signs that the global economic downturn may be slackening," he wrote. "Conditions in some financial markets have improved and the decline in world trade may be abating."
* Leaders from the Group of Seven are still debating who's responsible for what as they gather in Washington this weekend.
* Bank of Japan Gov. Masaaki Shirakawa U.S. stimulus won't be enough to revive the economy without additional measures on ills such as excessive household debt.
* Korea manages to avoid a second-straight quarter of contraction, as GDP grows by 0.1%, with construction offering big boost.
* The Treasury Department is preparing a Chapter 11 bankruptcy filing for Chrysler LLC that could come as early as next week, The New York Times reported Thursday on its Web site, citing people close to the situation.
* The global economy has shown signs that the worst of the recession may be easing in recent weeks, US Treasury Secretary Timothy Geithner"In recent weeks, there have been some encouraging signs that the global economic downturn may be slackening," he wrote. "Conditions in some financial markets have improved and the decline in world trade may be abating."
News Today -Apr 23
* World economy -- better luck next year.The International Monetary Authority has downgraded its forecast by 2 percent, predicting the global economy will have its worst contraction since World War II. full story
* Britain's finance minister on Wednesday said the country's economy is facing its worst year since World War II as he unveiled measures including higher taxes for top earners in an annual spring budget aimed at countering recession.
* Japanese exports tumbled in March, the government reported Wednesday.Trade figures in Japan are the latest bad news for its export driven economy.Exports fell 45.6 percent last month, compared with March 2008. Although still a significant decline, the numbers were slightly better than those from February, when the slump approached 50 percent.
* Boeing Co. on Wednesday reported sharply lower first-quarter earnings, cut its full-year forecast and said that delivery deferrals of new aircraft in the first quarter rose to more than 60, as airlines and shipping companies adapted to a rapid drop in air-traffic demand.
* The World Bank on Wednesday said India leads all countries in exports of information communication technology (ICT) services.
* Morgan Stanley shares shed 9% on Wednesday after the company reported a first-quarter loss as results at almost all its business units worsened from year-ago levels and lagged those of rivals like Goldman Sachs and J.P. Morgan Chase.
* Apple reported a jump in quarterly earnings, easily topping analyst expectations and sending shares higher in late trading.
* The economy is not “out of the woods yet, but there are encouraging signs,” Howard Atkins, CFO of Wells Fargo, said in an interview
* Auto giant GM will fail to make $1 billion debt payment that's due June 1, Wall Street Journal reports. Spokeswoman says GM working to reach deal with bondholders. Finance chief says bankruptcy 'probable.'
* Britain's finance minister on Wednesday said the country's economy is facing its worst year since World War II as he unveiled measures including higher taxes for top earners in an annual spring budget aimed at countering recession.
* Japanese exports tumbled in March, the government reported Wednesday.Trade figures in Japan are the latest bad news for its export driven economy.Exports fell 45.6 percent last month, compared with March 2008. Although still a significant decline, the numbers were slightly better than those from February, when the slump approached 50 percent.
* Boeing Co. on Wednesday reported sharply lower first-quarter earnings, cut its full-year forecast and said that delivery deferrals of new aircraft in the first quarter rose to more than 60, as airlines and shipping companies adapted to a rapid drop in air-traffic demand.
* The World Bank on Wednesday said India leads all countries in exports of information communication technology (ICT) services.
* Morgan Stanley shares shed 9% on Wednesday after the company reported a first-quarter loss as results at almost all its business units worsened from year-ago levels and lagged those of rivals like Goldman Sachs and J.P. Morgan Chase.
* Apple reported a jump in quarterly earnings, easily topping analyst expectations and sending shares higher in late trading.
* The economy is not “out of the woods yet, but there are encouraging signs,” Howard Atkins, CFO of Wells Fargo, said in an interview
* Auto giant GM will fail to make $1 billion debt payment that's due June 1, Wall Street Journal reports. Spokeswoman says GM working to reach deal with bondholders. Finance chief says bankruptcy 'probable.'
News Today - Apr 22
* Internet search company Yahoo Inc. announced Tuesday that it would slash 5 percent of its workforce, as it reported a first-quarter profit that fell sharply from a year earlier but still managed to beat Wall Street's forecasts. full story
* The world's biggest miner, BHP Billiton, posts a 1% slip in iron-ore production for quarter,
with sharper falls for other base metals.
* In testimony to Congress, Treasury Secretary Tim Geithner defends the government's financial stability plan and says there is enough capital to implement the measures.
* Japanese trade surplus is decimated in March, diving to 1/100th of its year-ago level, with fiscal 2008 posting first deficit in 28 years.
* Current economic conditions in Germany continue to deteriorate, but investment professionals became more upbeat in April about future prospects in part due to economic stimulus measures, according to a monthly survey.
* New York Times Co. shares fell 16% Tuesday after the company reported a wider loss in the first quarter.
* The Reserve Bank of India Tuesday walked down the middle path of expectations and cut its benchmark lending rate by a quarter-point to 4.75%, in response to the impact of the global downturn on the domestic economy.
* The British economyhas entered deflation for the first time in almost half a century, heralding a fall in wages and freeze in pensions, Retail Prices Index (RPI) measure of inflation fell to -0.4 percent in March, indicating that prices paid by consumers last month were lower than a year ago - a trend not seen since March 1960, The Telegraph reported.
* The world's biggest miner, BHP Billiton, posts a 1% slip in iron-ore production for quarter,
with sharper falls for other base metals.
* In testimony to Congress, Treasury Secretary Tim Geithner defends the government's financial stability plan and says there is enough capital to implement the measures.
* Japanese trade surplus is decimated in March, diving to 1/100th of its year-ago level, with fiscal 2008 posting first deficit in 28 years.
* Current economic conditions in Germany continue to deteriorate, but investment professionals became more upbeat in April about future prospects in part due to economic stimulus measures, according to a monthly survey.
* New York Times Co. shares fell 16% Tuesday after the company reported a wider loss in the first quarter.
* The Reserve Bank of India Tuesday walked down the middle path of expectations and cut its benchmark lending rate by a quarter-point to 4.75%, in response to the impact of the global downturn on the domestic economy.
* The British economyhas entered deflation for the first time in almost half a century, heralding a fall in wages and freeze in pensions, Retail Prices Index (RPI) measure of inflation fell to -0.4 percent in March, indicating that prices paid by consumers last month were lower than a year ago - a trend not seen since March 1960, The Telegraph reported.
IMF puts financial losses at $4.1 Trillion !
ft.com :The deteriorating global economy means financial institutions now face total losses of $4,100bn on loans and other assets, the International Monetary Fund said on Tuesday, urging governments to take “bolder steps” to shore up institutions – including nationalising them where necessary.
The IMF said in its Global Financial Stability Report that many loans sitting on institutions’ balance sheets were eroding in value, not just the toxic sub-prime securities which first triggered the crisis.
This is far higher than Doctor Doom Nouriel Roubini's projections of losses.
Nouriel also adds "This consensus optimism is, I believe, not supported by the facts. Indeed, I expect that while the rate of US contraction will slow from -6 per cent in the last two quarters, US growth will still be negative (around -1.5 to -2 per cent) in the second half of the year (compared to the bullish consensus of +2 per cent).
Moreover, growth next year will be so weak (0.5 to 1 per cent, as opposed to the consensus of 2 per cent or more) and unemployment so high (above 10 per cent) that it will still feel like a recession.
In the euro zone and Japan, the outlook for 2009 and 2010 is even worse, with growth close to zero even next year. China will have a more rapid recovery later this year, but growth will reach only 5 per cent this year and 7 per cent in 2010, well below the average of 10 per cent over the last decade.
Given this weak outlook for the major economies, losses by banks and other financial institutions will continue to grow. My latest estimates are $3.6 trillion in losses for loans and securities issued by US institutions, and $1 trillion for the rest of the world."
News Today - Apr 21
* Bank of America surprised Wall Street Monday, reporting a first quarter profit of $4.2 billion well ahead of expectations. On a per share basis, the company said it earned 44 cents during the quarter. A year ago, the bank reported a profit of $1.21 billion, or 23 cents a share. full story
* BoA Shares drop 24% as investors focus on rising credit costs and dismiss almost tripling of its first-quarter profits due to special gains.
* Business software maker Oracle Corp. said Monday it has entered into a definitive agreement to buy server builder Sun Microsystems in a deal worth $7.4 billion.
* President orders Cabinet chiefs to slash $100 million from their budgets, saying the cuts would "start setting a tone" in Washington.
* Reserve Bank of Australia sees economic outlook as weaker than previously thought, according to minutes from its last meeting.
* Japanese auto giant Toyota's production level set to fall below the key 3 million level for the first time since 1978.
* Spain’s Falling Prices Fuel Deflation Fears in Europe .Economists fear that the country may be in the early grips of deflation, which can result in a downward spiral that is difficult to reverse.
* Anand Mahindra and Vineet Nayyar made it clear that tough decisions will have to be taken to bring Satyam back to sound financial health.
* The Reserve Bank of India (RBI) has painted a rather pessimistic outlook for FY10, though it’s anybody’s guess what stance the centralbank will take on Tuesday, when it announces its monetary policy statement for FY10. The RBI’s professional forecasters’ study points to a further slowdown while its business optimism survey also indicates that India Inc is not too positive about the near term.
* Oil prices slid more than 8% to around $46 a barrel on Monday, depressed by a rising US dollar and growing caution about the pace of any economic recovery and its impact on oil demand.
* BoA Shares drop 24% as investors focus on rising credit costs and dismiss almost tripling of its first-quarter profits due to special gains.
* Business software maker Oracle Corp. said Monday it has entered into a definitive agreement to buy server builder Sun Microsystems in a deal worth $7.4 billion.
* President orders Cabinet chiefs to slash $100 million from their budgets, saying the cuts would "start setting a tone" in Washington.
* Reserve Bank of Australia sees economic outlook as weaker than previously thought, according to minutes from its last meeting.
* Japanese auto giant Toyota's production level set to fall below the key 3 million level for the first time since 1978.
* Spain’s Falling Prices Fuel Deflation Fears in Europe .Economists fear that the country may be in the early grips of deflation, which can result in a downward spiral that is difficult to reverse.
* Anand Mahindra and Vineet Nayyar made it clear that tough decisions will have to be taken to bring Satyam back to sound financial health.
* The Reserve Bank of India (RBI) has painted a rather pessimistic outlook for FY10, though it’s anybody’s guess what stance the centralbank will take on Tuesday, when it announces its monetary policy statement for FY10. The RBI’s professional forecasters’ study points to a further slowdown while its business optimism survey also indicates that India Inc is not too positive about the near term.
* Oil prices slid more than 8% to around $46 a barrel on Monday, depressed by a rising US dollar and growing caution about the pace of any economic recovery and its impact on oil demand.
News Today - Apr 20
* Chinese Premier Wen Jiabao calls for more surveillance of countries that issue major reserve currencies, but doesn't mention the U.S. or greenback by name.
* Losers outpaced winners on the new Fortune 500 annual list of largest U.S. companies. full story
* U.S. housing sales are near a bottom, and a third of sales are now of foreclosed properties, the chief economist of Freddie Mac, Frank Nothaft, said on Saturday.
* President Obama says he'll require accountability from U.S. banks that require additional bailout funds and vows not to put taxpayer money into a black hole.
* A major business lobby group predicted Monday that the worst of Britain's recession may be over, but growth would only resume next year, in a forecast just days before ministers unveil a crunch budget.
* White House Director of the National Economic Council Lawrence Summers told Recent US economic data has gotten better but recovery will be a slow process, "We 've seen some more mixed statistics after a period when there was no positive statistics to be found"
* US Treasury secretary Timothy Geithner does not see a second wave of banking collapses and the government is ready to support capital-raising when needed, a Japanese newspaper said on Sunday.
* ECB president Trichet tells Japanese media the bank is considering a 25-basis point rate cut and says that new 'non-standard' measures will be announced at May policy meeting.
* American Sterling Bank was closed by regulators Friday, marking the 24th bank failure of the year in US as the credit crunch continues to spread through the economy.
* Losers outpaced winners on the new Fortune 500 annual list of largest U.S. companies. full story
* U.S. housing sales are near a bottom, and a third of sales are now of foreclosed properties, the chief economist of Freddie Mac, Frank Nothaft, said on Saturday.
* President Obama says he'll require accountability from U.S. banks that require additional bailout funds and vows not to put taxpayer money into a black hole.
* A major business lobby group predicted Monday that the worst of Britain's recession may be over, but growth would only resume next year, in a forecast just days before ministers unveil a crunch budget.
* White House Director of the National Economic Council Lawrence Summers told Recent US economic data has gotten better but recovery will be a slow process, "We 've seen some more mixed statistics after a period when there was no positive statistics to be found"
* US Treasury secretary Timothy Geithner does not see a second wave of banking collapses and the government is ready to support capital-raising when needed, a Japanese newspaper said on Sunday.
* ECB president Trichet tells Japanese media the bank is considering a 25-basis point rate cut and says that new 'non-standard' measures will be announced at May policy meeting.
* American Sterling Bank was closed by regulators Friday, marking the 24th bank failure of the year in US as the credit crunch continues to spread through the economy.
Traders, Not Investors, Fueling This Stock Rally: NYSE Chief
CNBC : Wall Street’s stunning six-week rally has been fed more by traders looking to take advantage of quick swings in the market than investors with a long-term view, NYSE Euronext CEO Duncan Niederauer told CNBC.
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Because of that, the rally likely is to run out of steam as low volume eventually comes back to the bite the market, he said.
"It feels to me we’re in a trader’s market and not an investor’s market," Niederauer said in a live interview from the exchange floor.
Markets are likely to near their March lows after an upswing that has sent the major indexes more than 20 percent higher, he said.
Krugman says Too Early to call off Depression
Ben Bernanke, the Federal Reserve chairman, sees “green shoots.” President Obama sees “glimmers of hope.” And the stock market has been on a tear.
So is it time to sound the all clear? Here are four reasons to be cautious about the economic outlook.
1. Things are still getting worse. Industrial production just hit a 10-year low. Housing starts remain incredibly weak. Foreclosures, which dipped as mortgage companies waited for details of the Obama administration’s housing plans, are surging again.
The most you can say is that there are scattered signs that things are getting worse more slowly — that the economy isn’t plunging quite as fast as it was. And I do mean scattered: the latest edition of the Beige Book, the Fed’s periodic survey of business conditions, reports that “five of the twelve Districts noted a moderation in the pace of decline.” Whoopee.
2. Some of the good news isn’t convincing. The biggest positive news in recent days has come from banks, which have been announcing surprisingly good earnings. But some of those earnings reports look a little ... funny.
Wells Fargo, for example, announced its best quarterly earnings ever. But a bank’s reported earnings aren’t a hard number, like sales; for example, they depend a lot on the amount the bank sets aside to cover expected future losses on its loans. And some analysts expressed considerable doubt about Wells Fargo’s assumptions, as well as other accounting issues.
Meanwhile, Goldman Sachs announced a huge jump in profits from fourth-quarter 2008 to first-quarter 2009. But as analysts quickly noticed, Goldman changed its definition of “quarter” (in response to a change in its legal status), so that — I kid you not — the month of December, which happened to be a bad one for the bank, disappeared from this comparison.
I don’t want to go overboard here. Maybe the banks really have swung from deep losses to hefty profits in record time. But skepticism comes naturally in this age of Madoff.
Oh, and for those expecting the Treasury Department’s “stress tests” to make everything clear: the White House spokesman, Robert Gibbs, says that “you will see in a systematic and coordinated way the transparency of determining and showing to all involved some of the results of these stress tests.” No, I don’t know what that means, either.
3. There may be other shoes yet to drop. Even in the Great Depression, things didn’t head straight down. There was, in particular, a pause in the plunge about a year and a half in — roughly where we are now. But then came a series of bank failures on both sides of the Atlantic, combined with some disastrous policy moves as countries tried to defend the dying gold standard, and the world economy fell off another cliff.
Can this happen again? Well, commercial real estate is coming apart at the seams, credit card losses are surging and nobody knows yet just how bad things will get in Japan or Eastern Europe. We probably won’t repeat the disaster of 1931, but it’s far from certain that the worst is over.
News Today - Apr 17
* JPMorgan Chase reported a better-than-expected profit of $2.1 billion in the first quarter, even as the bank aggressively set aside money to cope with rising loan losses, the company said Thursday.
* San Francisco Federal Reserve president warns of ticking time-bomb of asset inflation, calling for central bank vigilance.
* Search giant Google posts higher earnings, handily beating expectations, thanks to spending by search advertisers and a clampdown on costs.
* India's Annual inflation based on wholesale prices hit a new record low of 0.18% for the week to April 4, continuing a decline that started early this year, but a sharp rise in vegetable prices and higher fuel costs prevented its widely-expected fall into negative territory.
* After averaging at 8.8 per cent growth over the past four years, India's growth rate in 2009-10 is expected to slow down to 5.5 per cent mainly due to lower investment and declining external demand, the US Treasury Secretary Timothy Geithner has said.
* Jim Rogers: How He's Investing After the Crisis, Read
* San Francisco Federal Reserve president warns of ticking time-bomb of asset inflation, calling for central bank vigilance.
* Search giant Google posts higher earnings, handily beating expectations, thanks to spending by search advertisers and a clampdown on costs.
* India's Annual inflation based on wholesale prices hit a new record low of 0.18% for the week to April 4, continuing a decline that started early this year, but a sharp rise in vegetable prices and higher fuel costs prevented its widely-expected fall into negative territory.
* After averaging at 8.8 per cent growth over the past four years, India's growth rate in 2009-10 is expected to slow down to 5.5 per cent mainly due to lower investment and declining external demand, the US Treasury Secretary Timothy Geithner has said.
* Jim Rogers: How He's Investing After the Crisis, Read
News Today - Apr 16
* China down but not out, GDP rises 6.1% in first quarter, but government sounds cautious note
Beijing releases economic growth numbers just above market expectations, slower than the previous quarter but possibly marking a sign that slowdown is bottoming.
* The US economy continued to worsen across the United States in March and early April, amid scattered signs that the pace of the decline was lessening in some regions, the Federal Reserve reported Wednesday in its Beige Book account of the economy.
* Biggest recessionary output drop since World War II
U.S. production falls 1.5% in March, despite bounce in autos and utilities.
* Infosys' Q4 performance and FY10 guidance confirm the weakening fundamentals of country's export-driven IT sector says no layoffs no salary hikes.
* The US Treasury Department said Wednesday its latest monthly survey of lending activities at the nation's biggest banks showed nine reported increases and 12 posted declines. The median, or midpoint, for lending activity dipped 2.2 percent in February.
* Switzerland's largest bank UBS will shed nearly 9,000 more employees as it tries to recover from the global financial crisis, its CEO said Wednesday. full story
* Treasury Secretary Tim Geithner will host a meeting of international finance ministers next week, the Treasury Department said Monday.
Beijing releases economic growth numbers just above market expectations, slower than the previous quarter but possibly marking a sign that slowdown is bottoming.
* The US economy continued to worsen across the United States in March and early April, amid scattered signs that the pace of the decline was lessening in some regions, the Federal Reserve reported Wednesday in its Beige Book account of the economy.
* Biggest recessionary output drop since World War II
U.S. production falls 1.5% in March, despite bounce in autos and utilities.
* Infosys' Q4 performance and FY10 guidance confirm the weakening fundamentals of country's export-driven IT sector says no layoffs no salary hikes.
* The US Treasury Department said Wednesday its latest monthly survey of lending activities at the nation's biggest banks showed nine reported increases and 12 posted declines. The median, or midpoint, for lending activity dipped 2.2 percent in February.
* Switzerland's largest bank UBS will shed nearly 9,000 more employees as it tries to recover from the global financial crisis, its CEO said Wednesday. full story
* Treasury Secretary Tim Geithner will host a meeting of international finance ministers next week, the Treasury Department said Monday.
News Today - Apr 15
* Australia's key leading growth index drops to a 26-year low, hinting
at a deeper recession than feared.
* President Obama said Tuesday that recent stimulus measures "are starting to generate signs of economic progress," but more tough times are ahead. But economic improvements do "not mean that hard times are over -- 2009 will continue to be a difficult year for America's economy," he said. full story
* Federal Reserve considers holding 'European style' regular press conferences, according to a Wall Street Journal report.
* Standard & Poor’s warned today that Goldman's awesome earnings last quarter may not be sustainable. The ratings agency is leaving in place its its negative outlook on the firm’s credit rating of A.
* J.P. Morgan, Wells Fargo and others are stepping up foreclosures on delinquent homeowners, a move that could further depress home prices.
* Intel said computer sales "bottomed out" in the first quarter, as the chip giant's net dropped 55%.
*The U.S. government is considering swapping some of the $13.4 billion it lent GM for an ownership stake.
at a deeper recession than feared.
* President Obama said Tuesday that recent stimulus measures "are starting to generate signs of economic progress," but more tough times are ahead. But economic improvements do "not mean that hard times are over -- 2009 will continue to be a difficult year for America's economy," he said. full story
* Federal Reserve considers holding 'European style' regular press conferences, according to a Wall Street Journal report.
* Standard & Poor’s warned today that Goldman's awesome earnings last quarter may not be sustainable. The ratings agency is leaving in place its its negative outlook on the firm’s credit rating of A.
* J.P. Morgan, Wells Fargo and others are stepping up foreclosures on delinquent homeowners, a move that could further depress home prices.
* Intel said computer sales "bottomed out" in the first quarter, as the chip giant's net dropped 55%.
*The U.S. government is considering swapping some of the $13.4 billion it lent GM for an ownership stake.
Merrill's Rosenberg: A New Bull Market? Are You Out Of Your Mind?
Business insider : Merrill's economist David Rosenberg is unfortunately leaving the firm. Before he goes, however, he wants to warn you again that this boomlet is all just a sucker's rally. In fact, he thinks the market is headed to startling new lows.
Why?"
It all starts with the housing market.
Here are some excerpts from the report David published yesterday:
Need to see housing stabilize to put in a definitive bottom
We have said it once and we shall say it again, that it all comes down to housing, the quintessential leading indicator. It was the deflation in home prices in the summer of 2006 that led the crunch in the mortgage market later that year, which in turn led the credit collapse in the summer of 2007. That led the onset of the bear market in the fall of 2007; which subsequently led the recession at the end of that year. That finally triggered the severe consumer down-leg, which is ongoing, notwithstanding the seasonal noise in the data through the first two months of 2009. So, for the domino game to flip in the other direction, as is it did in the aftermath of the 1990-91 meltdown in the economy, stock market and consumer confidence – we desperately need to see housing prices stabilize to put in a definitive bottom.
A total lack of equilibrium in the housing market
To reiterate, there is simply no sustainable recovery in the economy, the stock market or the financial backdrop until we get some clarity on the outlook for residential real estate prices. It was rather telling that the Case-Shiller home price index sagged a record 2.8% in December. As the nearby table illustrates, every major city had double-digit home price declines over the past three months. And not only was January the 30th consecutive monthly decline, taking the cumulative decline from the mid-2006 peak to an unprecedented 29%, it is a critical sign that we continue to have a total lack of equilibrium in the housing market. In other words, the “price” is still telling us that, at the latest data point, we still have more sellers than buyers, which is amazing considering that this is now a three-year-old depression in the housing market, despite the fact that affordability has improved to its best level ever recorded.
Would take over three years to achieve price stability
The problem is that prices do not begin to stabilize until we break below eight months’ supply – and they tend to deflate 3% per quarter until that happens. So as impressive as it is that the builders have taken single-family starts below underlying sales, their efforts are just not sufficient to prevent real estate prices from falling further. In fact, even if the builders were to declare a moratorium immediately – that is taking starts to ZERO – demand is so weak and the unsold inventory so intractable that it would now take over three years to achieve the holy grail of price stability in the residential real estate market.
A lethal deflationary combination
The combination of a 10% savings rate and 10% unemployment rate is a lethal deflationary combination that the Obama dream team of economists seems prepared to fight hard against, and we wish them good luck, but we think we are in for another year of very weak economic growth that warrants a focus on safe income wherever you can get it, and a focus on high-quality assets and defensive sectors in the equity market.
S&P 500 will hit new lows, in our view
We remain of the view that the risk of earnings disappointments will take the S&P 500 to new lows before the bear market runs its course. Based on the outlook for corporate profits and the typical trough P/E multiple that characterized recession bear markets, it would not surprise us to see the S&P 500 gravitate in a 475-650 range for an extended period of time.
Will retest or break below 2% on the 10-year Treasury note
As for the here and now, just consider that consumer discretionary stocks have outperformed the market by 520 bps since the S&P 500 hit its interim low back on March 9, while the homebuilders have outperformed by nearly 2000 basis points. It could be time to sell some calls. As for bonds, we would just have to assume that if the yield on the 10-year note sank to 2% in December on the rumor of the Fed buying Treasuries, we will ultimately retest or perhaps even break below that level on the fact. Considering that the 10-year T-note tested the 3% threshold no fewer than four times before the Fed made its quantitative easing announcement last month, at least we know what the risks are to the view. It seems pretty one-sided.
