Posts Tagged ‘bank lending’

An Avoidable Depression

An Avoidable Depression

Great DepressionCourtesy of MIKE WHITNEY at CounterPunch

The economy has gone from bad to worse. On Friday the Commerce Department reported that GDP had slipped from 3.7% to 2.4% in one quarter. Now that depleted stockpiles have been rebuilt and fiscal stimulus is running out, activity will continue to sputter increasing the likelihood of a double dip recession. Consumer credit and spending have taken a sharp downturn and data released on Tuesday show that the personal savings rate has soared to 6.4%. Mushrooming savings indicate that household deleveraging is ongoing which will reduce spending and further exacerbate the second-half slowdown. The jobs situation is equally grim; 8 million jobs have been lost since the beginning of the recession, but policymakers on Capital Hill and at the Fed refuse to initiate government programs or provide funding that will put the country back to work. Long-term "structural" unemployment is here to stay.

The stock market has continued its highwire act due to corporate earnings reports that surprised to the upside. 75% of S&P companies beat analysts estimates which helped send shares higher on low volume. Corporate profits increased but revenues fell; companies laid off workers and trimmed expenses to fatten the bottom line. Profitability has been maintained even though the overall size of the pie has shrunk. Stocks rallied on what is essentially bad news.

This is from ABC News:

"Consumer confidence matched its low for the year this week, with the ABC News Consumer Comfort Index extending a steep 9-point, six-week drop from what had been its 2010 high….The weekly index, based on Americans’ views of the national economy, the buying climate and their personal finances, stands at -50 on its scale of +100 to -100, just 4 points from its lowest on record in nearly 25 years of weekly polls…It’s in effect the death zone for consumer sentiment."

Consumer confidence has plunged due to persistent high unemployment, flat-lining personal incomes, and falling home prices. Ordinary working people do not care about the budget deficits; that’s a myth propagated by the right wing think tanks. They care about jobs, wages, and providing for their families. Congress’s unwillingness to address the problems that face the middle class has led to an erosion of confidence in government. This is from the Wall Street Journal:

"The lackluster job market continued to weigh on confidence. The share of


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Atlanta Fed asks: How “Discouraged” are Small Businesses?

Atlanta Fed asks: How "Discouraged" are Small Businesses?

Courtesy of Mish  

Girl at lemonade stand

The Federal Reserve Bank of Atlanta Asks How "Discouraged" are Small Businesses? Here are some Insights from an Atlanta Fed small business lending survey.

Roughly half of U.S. workers are employed at firms with fewer than 500 employees, and about 90 percent of U.S. firms have fewer than 20 employees. While estimates vary, small businesses are also credited with creating the lion’s share of net new jobs. Small businesses are, in total, a big deal.

Many people have noted the decline in small business lending during the recession, and some have suggested proposals to give incentives to banks to increase their small business portfolios. But is a lack of willingness to lend to small businesses really what’s behind the decline in small business lending? Or is it the lack of creditworthy demand resulting from the effects of the recession and housing market distress?

We at the Federal Reserve Bank of Atlanta have also noted the paucity of data in this area and have begun a series of small business credit surveys. Leveraging the contacts in our Regional Economic Information Network (REIN), we polled 311 small businesses in the states of the Sixth District (Alabama, Florida, Georgia, Louisiana, Mississippi and Tennessee) on their credit experiences and future plans. While the survey is not a stratified random sample and so should not be viewed as a statistical representation of small business firms in the Sixth District, we believe the results are informative.

Indeed, the results of our April 2010 survey suggest that demand-side factors may be the driving force behind lower levels of small business credit. To be sure, when asked about the recent obstacles to accessing credit, some firms (34 firms, or 11 percent of our sample) cited banks’ unwillingness to lend, but many more firms cited factors that may reflect low credit quality on the part of prospective borrowers. For example, 32 percent of firms cited a decline in sales over the past two years as an obstacle, 19 percent cited a high level of outstanding business or personal debt, 10 percent cited a less than stellar credit score, and 112 firms (32 percent) report no recent obstacles to credit.

Perhaps not surprisingly, outside of the troubled construction and real estate industries, close to half the firms polled (46 percent) do not believe there


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Bernanke’s Outlook For Recovery and What It Means For Jobs

Bernanke’s Outlook For Recovery and What It Means For Jobs

Man Plugging his Ears

Courtesy of Mish

Earlier today, At the Economic Club of New York, Fed Chairman Ben Bernanke gave his Outlook for the Economy and Policy.

His speech contains much self-serving claptrap about how Federal Reserve policy save the day. Nowhere has the Fed admitted its role in creating the mess.

Bernanke thinks printing money and borrowing from the future via cash-for-clunkers can have lasting benefits. I think that if anything lasting comes from cash-for-clunkers, it will be net-negative.

Bernanke is still extremely concerned about commercial real estate, bank lending, and jobs. On those issues he is certainly right to be concerned. Here are a few snips from the speech.

Bank Lending Practices

Access to credit remains strained for borrowers who are particularly dependent on banks, such as households and small businesses. Bank lending has contracted sharply this year, and the Federal Reserve’s Senior Loan Officer Opinion Survey on Bank Lending Practices shows that banks continue to tighten the terms on which they extend credit for most kinds of loans--although recently the pace of tightening has slowed somewhat. Partly as a result of these pressures, household debt has declined in recent quarters for the first time since 1951. For their part, many small businesses have seen their bank credit lines reduced or eliminated, or they have been able to obtain credit only on significantly more restrictive terms. The fraction of small businesses reporting difficulty in obtaining credit is near a record high, and many of these businesses expect credit conditions to tighten further.

While I am on the topic of bank lending, I would like to add a few words about commercial real estate (CRE). Demand for commercial property has dropped as the economy has weakened, leading to significant declines in property values, increased vacancy rates, and falling rents. These poor fundamentals have caused a sharp deterioration in the credit quality of CRE loans on banks’ books and of the loans that back commercial mortgage-backed securities (CMBS). Pressures may be particularly acute at smaller regional and community banks that entered the crisis with high concentrations of CRE loans. In response, banks have been reducing their exposure to these loans quite rapidly in recent months. Meanwhile, the market for securitizations backed by these loans remains all but closed. With nearly $500 billion of


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Speculation In China Does Not Mean Inflation In The US

Speculation In China Does Not Mean Inflation In The US

Courtesy of Mish

Inflationists and even hyperinflationist are coming out of the woodwork. Even some people I highly respect have jumped on the hyperinflation bandwagon. Given that the Flow of Funds Report Offers Hard Evidence of Deflation, I am not changing my tune.

Some of the inflation fears stem from a falling US dollar that seems to me to be range bound. In addition, there has been a strong rebound in commodity prices. OK oil prices more than doubled from the December low to over $70. However that is a far cry from $140.

Even many deflationists (at least me) thought oil prices bottomed and Treasury yields may have. Yet, suddenly a snapback rally in commodity prices is supposed to mean a powerful surge in inflation, perhaps even hyperinflation?

WTIC – Light Sweet Crude Weekly

WTIC chart

click on chart for sharper image

On a log chart the oil rebound looks impressive. On a retrace perspective, the story is different. The first Fibonacci retrace level at 38.2% has not even been reached. This is hyperinflation?

Fear the Dark Side of China’s Lending Surge

The easy scapegoat for rising commodity prices is a collapsing US dollar, strong inflation or even hyperinflation in the US. Sadly, few seem to have noticed (except when it is convenient to their theories) that this is a global economy, peak oil is a factor, and so are happenings in China.

I had a bookmark of an interesting post by Andy Xie lined up for today to talk about. It’s called "Fear the Dark Side of China’s Lending Surge". Unfortunately the post is no longer available or the site is now restricted.

However, Yves Smith at Naked Capitalism posted it earlier this weekend. Please consider Xie: Chinese Banks Funding Commodities Speculation, Casting Doubt on Recovery

The current surge in commodity prices, for example, is being fueled by China’s demand for speculative inventory.

Commodity prices have skyrocketed since March. The weak global economy can’t support high commodity prices. Instead, low interest rates and inflation fears are driving money into commodity buying.

Exchange-traded funds (ETFs) alone account for half of the activity on the oil futures market. ETFs allow retail investors to act like hedge funds. This product has serious implications for monetary policymaking. One consequence is that inflation


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Phil's Favorites

100 years ago African-Americans marched down 5th Avenue to declare that black lives matter

 

100 years ago African-Americans marched down 5th Avenue to declare that black lives matter

Courtesy of Chad WilliamsBrandeis University

Silent protest parade in New York against the East St. Louis riots, 1917. Library of Congress

The only sounds were those of muffled drums, the shuffling of feet and the gentle sobs of some of the estimated 20,000 onlookers. The women and children wore all white. The men dressed in black.

On the afternoon of Saturday, July 28, 1917, nearly 10,000 African-Americans marched down Fifth Avenue, in silence, to protest racial violence and white supremacy in the Uni...



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Zero Hedge

Swedish Government On Verge Of Collapse After Admitting 'Accidental Leak' Of Entire Nation's Info

Courtesy of ZeroHedge. View original post here.

Sweden’s government is being quietly rocked by a major scandal. So far the market has paid it little regard, but, as Citi warns, it may soon escalate...

Sweden appears to have accidentally leaked the details of almost all of its citizens. And now it's getting worse as the leak happened in 2015, but only emerged las...



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ValueWalk

Warren Buffett Goes Into Genius Mode!

By VW Staff. Originally published at ValueWalk.

Check out the top times that Warren Buffett goes into Genius mode!

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Chart School

U.S. Dollar; Triple support test after rare 30-week decline

Courtesy of Chris Kimble

From 2011 to the start of this year, the US$ has been pretty strong, as it rallied nearly 30% in 6-years. Over the past 30-weeks, King Dollar has been rather weak.

Below looks at the US$ over the past 18-years, with 30-week performance applied-

King Dollar has declined over 9% in the last 30-weeks at (1). As one can see, this sharp of a decline in 30-weeks hasn’t taken place a ton of times since the late 1990’s. The decline has the US$ testing the bottom of a 24-month trading range and two rising support lines at the same time at (2...



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Digital Currencies

Bitcoin (BTC/USD) Consolidating Near All-Time High Ahead of Aug 1 Fork

Courtesy of ZeroHedge. View original post here.

Bitcoin (BTC/USD) Weekly/Daily

Bitcoin (BTC/USD) slid yesterday on more profittaking, and now sits just above where it had broken above the daily chart's downchannel resistance. On the weekly chart, with last week's massive rally, the BTC/USD appears potentially to be in the late stages of a bullish flag pattern. With the August 1st fork looming, and daily RSI, Stochastics and MACD tiring, BTC/USD can be expected to continue consolidating today ahead of this key date. Although the negative weekly MACD crossover has proved a false signal for now...



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Insider Scoop

3 Reasons Comcast Should Acquire Verizon, And Why This Cost Dish A Downgrade

Courtesy of Benzinga.

Related CMCSA Analyst Says 31 Million Homes Could Cut Cord On Legacy Media; New Study Shows 64% Of U.S. Households Now Stream Programs ...

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Biotech

Biologics: The pricey drugs transforming medicine

Reminder: Pharmboy and Ilene available to chat with Members, comments are found below each post.

 

Biologics: The pricey drugs transforming medicine

Courtesy of Ian HaydonUniversity of Washington

The cells inside this bioreactor are the real pharmaceutical factories. Sanofi Pasteur, CC BY-NC-ND

In a factory just outside San Francisco, there’s an upright stainless steel vat the size of a small car, and it’s got something swirling inside.

The vat is stud...



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OpTrader

Swing trading portfolio - week of July 24th, 2017

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).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Members' Corner

Why we need to act on climate change now

 

Why we need to act on climate change now

Interview with Jan Dash PhD, by Ilene Carrie, Editor at Phil’s Stock World

Jan Dash PhD is a physicist, an expert at quantitative finance and risk management, and a consultant at Bloomberg LP. In his thought-provoking book, Quantitative Finance and Risk Management, A Physicist's Approach, Jan devotes a chapter to climate change and its long-term systemic risk. In this article, Ilene interviews Jan regarding his thoughts on climate change and the way it can affect our futu...



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Mapping The Market

The App Economy Will Be Worth $6 Trillion in Five Years

Courtesy of Jean-Luc

This would be excellent news for AAPL and GOOG to a lesser extent although not inconsequential:

The App Economy Will Be Worth $6 Trillion in Five Years 

In five years, the app economy will be worth $6.3 trillion, up from $1.3 trillion last year, according to a report released today by app measurement company App Annie. What explains the growth? More people are spending more time and -- crucially -- more money in apps. While on average people aren't downloading many more apps, App Annie expects global app usership to nearly double to 6.3 billion people in the next five years while the time spent in apps will more than double. And, it expects the...



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Promotions

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Kimble Charting Solutions

Brazil; Waterfall in prices starting? Impact U.S.?

Courtesy of Chris Kimble.

Below looks at the Brazil ETF (EWZ) over the last decade. The rally over the past year has it facing a critical level, from a Power of the Pattern perspective.

CLICK ON CHART TO ENLARGE

EWZ is facing dual resistance at (1), while in a 9-year down trend of lower highs and lower lows. The counter trend rally over the past 17-months has it testing key falling resistance. Did the counter trend reflation rally just end at dual resistance???

If EWZ b...



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All About Trends

Mid-Day Update

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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...

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