Posts Tagged ‘real economy’

2009: The Year Wall Street Bounced Back and Main Street Got Shafted

2009: The Year Wall Street Bounced Back and Main Street Got Shafted

Courtesy of Robert Reich, of Robert Reich’s Blog

Mature businessman dancing along street with briefcase and umbrella

In September 2008, as the worst of the financial crisis engulfed Wall Street, George W. Bush issued a warning: "This sucker could go down." Around the same time, as Congress hashed out a bailout bill, New Hampshire Sen. Judd Gregg, the leading Republican negotiator of the bill, warned that "if we do not do this, the trauma, the chaos and the disruption to everyday Americans’ lives will be overwhelming, and that’s a price we can’t afford to risk paying."

In less than a year, Wall Street was back. The five largest remaining banks are today larger, their executives and traders richer, their strategies of placing large bets with other people’s money no less bold than before the meltdown. The possibility of new regulations emanating from Congress has barely inhibited the Street’s exuberance.

But if Wall Street is back on top, the everyday lives of large numbers of Americans continue to be subject to overwhelming trauma, chaos and disruption.

View of town's main street with mountains in the distance

It is commonplace among policymakers to fervently and sincerely believe that Wall Street’s financial health is not only a precondition for a prosperous real economy but that when the former thrives, the latter will necessarily follow. Few fictions of modern economic life are more assiduously defended than the central importance of the Street to the well-being of the rest of us, as has been proved in 2009.

Inhabitants of the real economy are dependent on the financial economy to borrow money. But their overwhelming reliance on Wall Street is a relatively recent phenomenon. Back when middle-class Americans earned enough to be able to save more of their incomes, they borrowed from one another, largely through local and regional banks. Small businesses also did.

It’s easy to understand economic policymakers being seduced by the great flows of wealth created among Wall Streeters, from whom they invariably seek advice. One of the basic assumptions of capitalism is that anyone paid huge sums of money must be very smart.

But if 2009 has proved anything, it’s that the bailout of Wall Street didn’t trickle down to Main Street. Mortgage delinquencies continue to rise. Small businesses can’t get credit. And people everywhere, it seems, are worried about losing their…
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YRCW: NO SUSTAINED ECONOMIC RECOVERY

YRCW: NO SUSTAINED ECONOMIC RECOVERY

YRCWCourtesy of The Pragmatic Capitalist

YRC WorldWide is tanking over 50% on bankruptcy speculation.  The large trucking company has been entangled in brutal labor renegotiation’s and is at the heart of the economic downturn with their highly economically sensitive transport based business.

On Friday the company reported a $158.7MM loss which was followed up by a debt exchange announcement this morning.  Investors are growing increasingly concerned that the announcement could result in an eventual Chapter 11 filing.  Although the company is having cost difficulties (primarily labor related) the weakness at the company is primarily economically related.  On the conference call CEO Bill Zollars detailed the economic struggles which we continue to see across the entire real economy.  His comments would be most unwelcome to anyone who has bought into the recent stock market surge which is now not only very expensive, but pricing in very optimistic economic and earnings growth in 2010:

“The operating environment remains very challenging as we continue to face a difficult economy that appears to have stabilized, but is not showing any signs of sustained positive momentum.  We remain cautiously optimistic that the economy has bottomed out, but it remains too early to know for sure.  We’re not anticipating any growth in the economy for the remainder of this year and at least for the first half of next year.”

I think it’s safe to say that the stimulus based recovery is almost entirely non-organic.  Without further aid from the government and the Federal Reserve this liquidity driven market is likely staring at a very difficult road ahead, if not the dreaded double dip.

 


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How the Servant Became a Predator: Finance’s Five Fatal Flaws

Here’s an excellent, must-read article by William K. Black.  Special thanks to New Deal 2.0. - Ilene

How the Servant Became a Predator: Finance’s Five Fatal Flaws

By Bill Black, Courtesy of New Deal 2.0

money-shark-150 - preditor stateRoosevelt Institute Braintruster William K. Black explains how the finance economy preys on the real economy instead of serving it. He shows how both have become dysfunctional and warns that we must not neglect the real economy — the source of our jobs, our incomes, and the creator of goods and services — as we focus on financial reform.

What exactly is the function of the financial sector in our society? Simply this: Its sole function is supplying capital efficiently to aid the real economy. The financial sector is a tool to help those that make real tools, not an end in itself. But five fatal flaws in the financial sector’s current structure have created a monster that drains the real economy, promotes fraud and corruption, threatens democracy, and causes recurrent, intensifying crises.

1. The financial sector harms the real economy.

Even when not in crisis, the financial sector harms the real economy. First, it is vastly too large. The finance sector is an intermediary — essentially a “middleman”. Like all middlemen, it should be as small as possible, while still being capable of accomplishing its mission. Otherwise it is inherently parasitical. Unfortunately, it is now vastly larger than necessary, dwarfing the real economy it is supposed to serve. Forty years ago, our real economy grew better with a financial sector that received one-twentieth as large a percentage of total profits (2%) than does the current financial sector (40%). The minimum measure of how much damage the bloated, grossly over-compensated finance sector causes to the real economy is this massive increase in the share of total national income wasted through the finance sector’s parasitism.

Second, the finance sector is worse than parasitic. In the title of his recent book, The Predator State, James Galbraith aptly names the problem. The financial sector functions as the sharp canines that the predator state uses to rend the nation. In addition to siphoning off capital for its own benefit, the finance sector misallocates the remaining capital in ways that harm the real economy in order to reward already-rich financial elites harming the nation. The facts are alarming:

• Corporate stock repurchases…
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THE RECESSION IN RAIL TRAFFIC CONTINUES….

THE RECESSION IN RAIL TRAFFIC CONTINUES….

Courtesy of The Pragmatic Capitalist

The recession in railroads continues unabated.  This is likely the surest proof we have that Ben is simply reflating the bubble while the real economy continues to flounder.  Carloadings were down 17.2% year over year and intermodal traffic declined 15.7%.   On the positive side, it’s quite clear that rail traffic has stabilized and doesn’t continue to decline, however, the robust recovery that equities and other markets have priced in is completely non-existent in the rail data.  The weakness was broad across all segments of the economy.  The weakness was particularly apparent in metals and forest which could be a sign that the recent weakness in housing and lumber prices is a trend:

rails2

The AAR reports:

WASHINGTON, D.C., Oct. 8, 2009 — The Association of American Railroads today reported that for the week ended Oct. 3, 2009, rail traffic continues to reflect the down economy – originating 277,734 carloads, down 17.2 percent compared with the same week in 2008. All of the 19 carload freight commodity groups were down from the same week last year, with declines ranging from 2.7 percent for chemicals to 53.2 percent for metallic ores.

Intermodal traffic of 206,293 trailers or containers on U.S. railroads was down 15.7 percent from the same week last year. Container volume fell 10 percent and trailer volume dropped 37 percent.

Regionally, carloads were down 16.4 percent in the West and 18.3 percent in the East. For the first 39 weeks of 2009, U.S. railroads reported cumulative volume of 10,381,905 carloads, down 18.1 percent from 2008; 7,347,299 trailers or containers, down 16.8 percent, and total volume of an estimated 1.11 trillion ton-miles, down 17.3 percent. Total volume on U.S. railroads for the week ending October 3 was estimated at 29.7 billion ton-miles, off 16.6 percent from the same week last year.

rails1

Source: Railfax, AAR

 


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Phil's Favorites

Ethical challenges loom over decisions to resume in-person college classes

I don't see how universities can be safely reopened. Classes may have to shift to largely or only online. Dorms, if they reopen, would probably need to limit rooms to one person, and maybe only for students without other options. This would obviously be a financial disaster for many colleges and millions of people. The federal government would ideally step in to help universities and employees survive financially. Any thoughts?

Ethical challenges loom over decisions to resume in-person college classes

It’s hard to social distance on campus. AP Photo/Rick Bowmer

Courtesy of Neta C. Crawford, ...



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Biotech/COVID-19

Ethical challenges loom over decisions to resume in-person college classes

I don't see how universities can be safely reopened. Classes may have to shift to largely or only online. Dorms, if they reopen, would probably need to limit rooms to one person, and maybe only for students without other options. This would obviously be a financial disaster for many colleges and millions of people. The federal government would ideally step in to help universities and employees survive financially. Any thoughts?

Ethical challenges loom over decisions to resume in-person college classes

It’s hard to social distance on campus. AP Photo/Rick Bowmer

Courtesy of Neta C. Crawford, ...



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ValueWalk

Facebook Stock Crashes Due To Ad Boycott - Key Investing Points

By Sven Carlin. Originally published at ValueWalk.

Facebook, Inc. (NASDAQ:FB) stock crashed 8.32% on Friday because of the announced ad boycott by many companies like Unilever, Coca Cola, recently Starbucks on Sunday that might push the stock down even more during this week.

Q2 2020 hedge fund letters, conferences and more

However, investing is about knowing how to differentiate between the noise and fundamentals and we discuss Facebook's recent news and compare it to FB fundamentals.

  • Facebook stock crash
  • Ad boycott
  • Facebook stock volatility
  • Facebook's fundamentals
  • Be sure of volatility
  • My po...


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Zero Hedge

Dr. Fauci Is No Nostradamus: How COVID-19 Ran Amok Under His Watch

Courtesy of ZeroHedge View original post here.

Authored by James Grundvig via Vaxxter.com,

Michel de Nostradamus was born in Saint-Remy, South of France, in 1503. Beyond the gifts he would one day explore in astrology, he pursued an education to become a physician. After his first year at the University of Avignon, an outbreak of the plague swept through France, forcing the University to close.

...

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Chart School

Golds quick price move increases the odds of a correction

Courtesy of Read the Ticker

Every market corrects, maybe profit taking, maybe of allowing those who missed out, to get in!


The current open interest on the gold contract looks to high after a very fast price move, it looks like 2008 may be repeating. A quick flushing out of the weak hands open interest may take place before a real advance in price takes place. The correction may be on the back of a wider sell off of risk assets (either before of after US elections) as all assets suffer contagion selling (just like 2008).

This blog view is a gold price correction of 10% to 20% range is a buying opportunity. Of course we may see  a very minor price correction but a long time correction, a price or time is correction is expected, we shall watch and...

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The Technical Traders

Wild Volatility Continues As US Markets Attempt To Establish New Trend

Courtesy of Technical Traders

We’ve continued to attempt to warn investors of the risks ahead for the US and global markets by generating these research posts and by providing very clear data supporting our conclusions.  Throughout the entire months of May and June, we’ve seen various economic data points report very mixed results – and in some cases, surprise numbers as a result of the deep economic collapse related to the COVID-19 virus event.  This research post should help to clear things up going forward for most traders/investors.

As technical traders, we attempt to digest these economic data factors into technical and price analysis while determining where and what ...



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Kimble Charting Solutions

Nasdaq 100 Relative Strength Testing 2000 Highs

Courtesy of Chris Kimble

The tech bubble didn’t end well. BUT it did tell us that the world was shifting into the technology age…

Since the Nasdaq 100 bottomed in 2002, the broader markets have turned over leadership to the technology sector.

This can be seen in today’s chart, highlighting the ratio of Nasdaq 100 to S&P 500 performance (on a “monthly” basis).

As you can see, the bars are in a rising bullish channel and have turned sharply higher since the 2018 stock market lows. This highlights the strength of the Nasdaq 100 and large-cap tech stocks.

...

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Lee's Free Thinking

These Charts Show COVID 19 Is Spreading in the US and Will Kill the Economy

 

These Charts Show COVID 19 Is Spreading in the US and Will Kill the Economy

Courtesy of  

The COVID 19 pandemic is, predictably, worsening again in much of the US. Only the Northeast, and to a lesser extent some Midwestern states, have been consistently improving. And that trend could also reverse as those states fully reopen.

The problem in the US seems to be widespread public resistance to recommended practices of social distancing and mask wearing. In countries where these practices have been practi...



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Digital Currencies

Blockchains can trace foods from farm to plate, but the industry is still behind the curve

 

Blockchains can trace foods from farm to plate, but the industry is still behind the curve

App-etising? LDprod

Courtesy of Michael Rogerson, University of Bath and Glenn Parry, University of Surrey

Food supply chains were vulnerable long before the coronavirus pandemic. Recent scandals have ranged from modern slavery ...



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Members' Corner

Coronavirus, 'Plandemic' and the seven traits of conspiratorial thinking

 

Coronavirus, 'Plandemic' and the seven traits of conspiratorial thinking

No matter the details of the plot, conspiracy theories follow common patterns of thought. Ranta Images/iStock/Getty Images Plus

Courtesy of John Cook, George Mason University; Sander van der Linden, University of Cambridge; Stephan Lewandowsky...



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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

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Promotions

Free, Live Webinar on Stocks, Options and Trading Strategies

TODAY's LIVE webinar on stocks, options and trading strategy is open to all!

Feb. 26, 1pm EST

Click HERE to join the PSW weekly webinar at 1 pm EST.

Phil will discuss positions, COVID-19, market volatility -- the selloff -- and more! 

This week, we also have a special presentation from Mike Anton of TradeExchange.com. It's a new service that we're excited to be a part of! 

Mike will show off the TradeExchange's new platform which you can try for free.  

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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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About Phil:

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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