Some realistic downside projections: U3: 17-21%; U6: 30-37%.
Best case scenario: U3: 14-17%; U6: 26-31%
And here is what Bernanke, and everyone else who wonders where we are headed, should be looking at:
“If the job market does not turn around by late summer or early fall of 2009, the projections easily exceed the Great Depression. At that point the only way to prevent catastrophic economic conditions would be through massive inflation of the US dollar achieved by either congress allowing the Federal Reserve to issue its own debt, or by accelerating the rate at which the Federal Reserve monetizes US debt while funneling the newly printed dollars into wages so that the money can circulate within the economy.”
Yes, wage inflation is wonderful, however recent data indicate that just the opposite is happening, and the only people who have seen their base pay increase are, ironically, Wall Street bankers, however, at the expense of losing their bonuses. Which is why bank excess reserves are likely to continue skyrocketing as literally boxes full of cash continue gathering dust, while a deleveraging consumer spends his money on guns and ammo.
And here, for some more data on why the unemployment number, is for the most part, rubbish.
Bank failure # 37 for the year was Bank of Lincolnwood, Lincolnwood, Illinois. Republic Bank of Chicago, Oak Brook, Illinois will assume all the deposits.
As of May 26, 2009, Bank of Lincolnwood had total assets of approximately $214 million and total deposits of $202 million. Republic Bank of Chicago agreed to purchase approximately $162 million in assets. The FDIC will retain the remaining assets for later disposition.
The FDIC estimates that the cost to the Deposit Insurance Fund will be $83 million. Republic Bank of Chicago’s acquisition of all the deposits was the “least costly” resolution for the DIF compared to alternatives. Bank of Lincolnwood is the 37th FDIC-insured institution to fail in the nation this year and the sixth in Illinois. The last bank to fail in the state was Citizens National Bank, Macomb, on May 22, 2009.
Does anyone even care about this data anymore? There obviously isnt one bank in the US which, on a long enough timeline, won’t fail.
Looks like even the FDIC is flexing its perfectly inelastic supply curve in Commercial Real Estate Loans. After selling a whopping 1,328 performing and non-performing loans in March for $218 million (a 54% discount), the FDIC sold just 315 loans in April for $177 million, a 40% discount. Presumably the investors who have purchased these loans are ineligible for PPIP or else they would know they could have purchased everything at par and paid less than half in equity, resulting in much better IRRs (to themselves, not taxpayers). A novel development for this month, is that in addition to long-time fan of the FDIC loan auction process Beal Bank (LNV), now Colony Capital has also joined in the bidding fray (under Matrix Advisors LLC in the list below). It is notable that all of Colony’s loan auctions were won at exactly the same bid: 67.1% of par. Something is definitely quite odd about this result. Reader feedback is welcome.
Compliments of a much happier and much less Merrill “Is that the most bullish piece you can come up with” Lynch-supervised David Rosenberg.
We have to put the data into perspective. Before the Lehman collapse, when equities were in a moderate bear market and bonds in a moderate bull market, the worst nonfarm payroll result we saw was -175,000. We don’t seem to recall too many pundits rejoicing over employment declines at that time, which were basically half of what was just posted in May. Moreover, the worst nonfarm payroll number in the 2001 recession — right after 9-11 — was -325,000; and before that, at the depths of the 1990-91 recession, the worst report showed a -306,000 print. So basically, what we saw today was a number consistent with a deep recession — just not quite as deep as the near-6% at an annual rate contraction we saw in the first quarter. It is difficult to rejoice over an employment data that is consistent with real GDP still declining anywhere from a 2% to 4% at an annual rate. Now here we are, close to nine months after the Lehman collapse, and we are still printing employment numbers that are double what they were before pre-Lehman. That is the bigger picture.
Moreover, the internals of today’s report, in a word, were awful. Not only are businesses still cutting jobs but they are also reducing the hours that their employees are working; the private workweek hit a new record low of 33.1 hours (from 33.2 hours in April). So, total labour input was much weaker than the headline payroll suggests and this is vividly illustrated in the aggregate-hours worked index, which fell 0.7% MoM and something ‘green shoot’ advocates will not like discuss since this was actually worse than the 0.3% MoM drop in April; this takes the three-month trend to a -8.6% annual rate. Think about that for a moment because what goes into GDP is total hours worked and productivity — so the latter better continue to hang in there or else we are going to be seeing some nasty output data going forward that may well take Mr.
And I thought last month was bad. Total consumer credit in April dropped by almost $15 billion to just above $2.5 trillion, on expectations of -$6 billion, a 7.4% annual rate reduction. As for the March revision, it just does not compute how manipulated higher that number initially was.
Someone tell that house of dimon SPY permabid that consumer credit down -> savings up -> economy bad.
Also, when it seems like Steve is about to crack in “explaining how we live and how the system is set up”, Melissa storms to the front, providing that critical second wind of intellectual superstardom. Michael Pento must still be shell-shocked from that episode.
Courtesy of Shah Gilani, Contributing Editor Money Morning
Inside Wall Street: Does a Potential New Wall Street Pandemic Fester Underneath Apparent BlackRock Conflicts?
The U.S. Treasury Department recently announced it has preliminarily granted BlackRock Inc. (NYSE: BLK), a mega-money-management and risk-advisory firm, a second-round interview to potentially buy toxic assets from beleaguered U.S. banks. The Treasury’s plan was to let a chosen few investment firms borrow cheaply from the Fed in order to massively leverage up their capital pools to purchase toxic assets, and then to backstop almost all potential losses with taxpayer money. This plan was itself crafted in large measure with help from BlackRock. It’s as if the moral hazards of cronyism, leverage, laissez-faire government and the doctrine of too-big-to-fail never happened.
The Background on BlackRock
In 1988, The Blackstone Group LP (NYSE: BX) – then a young-and-aggressive leveraged buyout shop that would eventually go public and is now the largest private equity company in the world – bankrolled a small asset-management startup called Financial Management Group. Heralding its roots out of Blackstone, Financial Management Group later changed its name to BlackRock. BlackRock was originally run by Ralph L. Schlosstein, a former Lehman Brothers Holdings Inc. (OTC: LEHMQ) managing director of the mortgage-backed bond group, who stepped down as BlackRock’s president last year, and Laurence D. Fink, a former First Boston Group [now part of giant Credit Suisse Group AG (NYSE ADR: CS)] and a master-of-the-universe, fixed-income mortgage trader. That the expertise of the firm’s founders was in mortgage-backed securities is hardly ironic in this story. As it happens, the story goes that Fink was one of the early pioneers at First Boston who helped create collateralized mortgage obligations (CMOs) out of fairly transparent mortgage-backed securities. Collateralized mortgage obligations, not unlike a virus, eventually yielded a whole host of spin-off products, now collectively lumped under the banner of collateralized debt obligations, or CDOs.
Imagine you are asked to sign a document but three pages were missing. Further imagine the documents you were asked to sign were written in English but you only speak Greek. Would you sign?
That is exactly the predicament Greek officials were placed in by the Troika. Here is the story sent to me by Demetri Kofinas at Capital Account.
Hello Mish
George Karatzaferis leader of LOAS political party gave a speech today addressing why he refused to sign this latest agreement. In his speech, he said that he a...
Top 5 RisersStockRatingAnalysisICABUYThe projected value for Empresas ICA is still rising quickly even though past earnings have already improved significantly.XBUYThe projected value for US Steel is still rising quickly even though past earnings have already improved significantly.FEICBUYProjected value continues to rise for FEI while long term increases in earnings growth are also becoming more widely expected.ASBCBUYMany analysts are expecting higher than previously expected long term growth from Associated Bancorp, and its near-term earnings outlook is also improving....
Italy's Prime Minister (and self appointed economy minister) shot over to CNBC after his meeting with President Obama this afternoon to discuss how well everything looks for Italy since he was elected took over.
Here's the latest weekend update from Serge Perreault, a Chartered Accountant and market technician located near Montreal, Canada. Serge has been following the U.S. market in a series of weekly charts. Here is his update on the S&P 500.
This week, the S&P 500 could not break so much resistance and now paused its ascension, on average volume and on falling momentum.
Notice also how the "Volume EMA10" has continued its downtrend.
The following are the M&A deals, rumors and chatter circulating on Wall Street for Friday February 10, 2012:
Actuant Acquires Jeyco Pty
The Deal: Actuant (NYSE: ATU) announced Friday that it has acquired Jeyco Pty Ltd (“Jeyco”). Headquartered near Perth, Australia, Jeyco designs and provides specialized mooring, rigging and towing systems and services to the offshore oil & gas industry in Australia and other international markets. Additionally, its highly engineered products are used in a variety of applications for other markets including cyclone mooring and marine, defense and mining tow systems. Jeyco generates annual revenues of approximately $20 million.
Actuant shares closed at $27.33 Friday, a loss of 0.18% on average volume.
A little flurry of buying in the closing 5 minutes tacked on 2 S&P points and took the major indexes off the lows. Only the Russell 2000 finished with a greater than 1% loss (1.4%) as it has been relatively weak versus the senior indexes for the past few sessions. While today was the "worst day of the year" – it was quite a low bar as the previous biggest loss on the S&P 500 was -0.57%.
The S&P 500 held well above the 10 day moving average (didn't even really touch it) and did not even attempt to fill the gap from last Friday's employment report. The teflon market rolls on for now. Specul...
Greece was “saved” for less than 24 hours but now major ETFs around the world skid into the weekend on Greek fears
After wangling for a week or more, Greek took their new deal to the European Ministers meeting, only to have it promptly rejected and so as we go into the weekend, major global markets and ETFs have again hit the skids on Greece.
After two years of wangling, the European zone is demanding yet more and deeper cuts for Greece to qualify for the next round of bailout loans that will keep the country from going bankrupt on March 20th.
Major European and United States ETF responded negatively to the new developments:
To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...
Reminder: OpTrader is available to chat with Members, comments are found below each post.
This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).
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Here is a quick update of past trades and our current position.
AA Money
No trade this week as we wait for AA to settle. Phil remarked last week that AA seemed overvalued. In the meantime, it looks like we might have to roll our Feb 9 calls. Good thing we sold only 5 of them against our position.
Last week P&L - 310.00
We lost ground last week, but we still have 11 months to sell premium!
FAS Money
Very good week for FAS Money as we benefited from the large amount of premium sold the previous week. We covered most of the shorts in advance of the Fed speech, but sold another set of options on Wednesday after the speech - 2 FAS calls that expired worthless on Friday, 2 FAS put that we are still holding and 2 FAZ put that we bought back for a profit on Friday. A late stick comparable to last week's almost gave us problems at the end of the day though!
Last week P&L - $4277.00
IWM Money
A decent week in this virtual portfo...
Reminder: Pharmboy is available to chat with Members, comments are found below each post.
Finding new and exciting Biotech companies that target novel mechanisms is like trying to find a needle in a haystack. Sure there are many companies working on cutting edge science, but investing in those companies to reap the rewards of their work is a very dangerous game. More often than not, companies fail because the mechanism does not pan out, the compound(s) do not have pharmacokinetics (get into the body or last very long in the body), or an adverse event happens that knocks years off a development timeline. In addition, the stock can be manipulated by market makers so investors don't know which way is up. I approach investing in biotechs as a long term prospect. I continue to like our current portfolio of biotech companies (join in chat for many of those plays), and we continually add/subtract shares and sell/buy options on ...
Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
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