Posts Tagged ‘small businesses’

Community Bank Director Chimes In Regarding Small Business Lending

Community Bank Director Chimes In Regarding Small Business Lending

Courtesy of Mish

In response to $30 Billion Offer No One Wants – Small Businesses Hit by Deflation I received this email from a director of a small bank.

Hello Mish,

I sit on the board of a small community bank and I can attest to the fact that our loan portfolio is in excellent shape even when taking into consideration today’s dismal economy. That is not to say a loan is good when made can go bad but if that happens, our bank has sufficient collateral pledged against the loan to cover such short falls. We also review our loan loss reserve and increase as needed based on criteria established under current banking regulations.

Sure there are numerous troubled banks identified by the FDIC but I feel many of these banks will survive.

All banks should be making reasonable earnings with today’s low interest rate environment. For community banks, loans are vital and banks are interested in making loans to individuals or businesses that meet our underwriting standards but loan demand is down. A big majority of our loans are just loans leaving another financial institution. Why would someone leave one bank for another?

Of course loan interest rates play a part in the decision but I think a big part is the relationship a customer develops with the loan officer. Dealing directly with a local loan officer who understands your business and is genuinely interested in your business is vital.

Today many larger banks only use local loan officers to bring in the loan request but the decision to make the loan and the terms rest in some committee located in a town far away. Most small business persons will leave such a bank for a local bank with more personalized service.

It’s ridiculous that Congress passed and our president signed a bill to provide funds to smaller banks for more loans. As a bank director, there is no way this plan can work. If a bank needs more deposits for loans, assuming the bank has sufficient capital, a banker can easily get more deposits from the public at a much lower cost than the bill passed by congress.

Our government is totally out of touch with the real world and passed this legislation strictly as a political move to make the public think they are


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CFOs not optimistic on economy

CFOs not optimistic on economy

Courtesy of Edward Harrison of Credit Writedowns 

The Duke University/CFO Magazine Global Business Outlook Survey which concluded last week showed a high level of concern amongst top financial officers in major organizations worldwide. Of note are the CFOs ideas regarding employment and credit where they are less upbeat than I expected. Their views that credit markets remain tight and that employment growth will remain subdued dovetail with some of the comments we have heard from small businesses in the U.S.

Here is what the press release said.

Optimism about the U.S. economy has fallen back to recession levels among chief financial officers (CFOs), who foresee minimal increases in expected hiring, weak consumer demand and heightened economic uncertainty.

Credit is still tight for small firms and many firms continue to hoard cash. Without improvement in the economy, CFOs say earnings growth and capital spending will falter within six to 12 months. 

These are some of the findings of the most recent Duke University/CFO Magazine Global Business Outlook Survey. The survey, which concluded Sept. 10, asked 937 CFOs from a broad range of global public and private companies about their expectations for the economy. (See end of release for survey methodology.) The research has been conducted for 58 consecutive quarters. Presented results are for U.S. firms unless otherwise noted.

SUMMARY OF FINDINGS 

– CFO optimism about the U.S. economy has fallen to 49 on a zero-to-100 scale, well below the rating of 58 from the last quarter. Pessimists outnumber optimists four-to-one. European CFOs’ optimism rate is 58; Asian CFOs’ rate is 70.

– Half of CFOs say they will cling tightly to cash due to economic uncertainty and as a liquidity buffer. The other half will spend some cash reserves in the next year, primarily for investment, to pay down debt and to make acquisitions.

– Earnings are expected to rise 12 percent and capital spending almost 7 percent in the next 12 months. However, nearly half of CFOs say unless the overall economy improves, there is only a six-month window during which they can maintain this level of growth.

– U.S. CFOs expect to increase domestic full-time employment by 0.7 percent in the next year. Nearly one-fourth of all recent hires have been contract and temporary employees.

– Credit markets remain tight, especially for small companies. Most CFOs believe financial reform will add costs and restrictions that will dampen lending.


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Banks Recruit Investors to Oppose Honest Valuation of Assets; Just how Unprepared are Banks for Major Losses?

Banks Recruit Investors to Oppose Honest Valuation of Assets; Just how Unprepared are Banks for Major Losses?

Courtesy of Mish 

Reader "Henry" has a question on the loan loss provision chart I posted in Former Fed Vice Chairman vs. Mish: Is the Fed Out of Ammo?

Henry writes …

Hello Mish,

Thanks for writing and sharing your wonderful column. It has been very informative and educational.

Could you please help us mere mortals decipher the ALLL/LLRNPT chart in a follow up post?

I have difficulty reconciling the units, and I suspect I’m not the only one. Exactly what does that chart depict?

Thanks.

Henry

From my previous post …

Assets at Banks whose ALLL Exceeds their Nonperforming Loans

The ALLL is a bank’s best estimate of the amount it will not be able to collect on its loans and leases based on current information and events. To fund the ALLL, the bank takes a periodic charge against earnings. Such a charge is called a provision for loan and lease losses.

One look at the above chart in light of an economy headed back into recession and a housing market already back in the toilet should be enough to convince anyone that banks already have insufficient loan loss provisions.

That is one of the reasons banks are reluctant to lend. Lack of creditworthy customers is a second. Quite frankly would be idiotic to force more lending in such an environment.

To further clarify, the chart depicts the ratio of loan loss provisions to nonperforming loans across the entire banking system (all banks). There are 33 ALLL charts by bank size and region for inquiring minds to consider. The above chart is the aggregate.

The implication what the chart suggests is that banks believe nonperforming loans are NOT a problem (or alternatively they are simply ignoring expected losses to goose earnings).

The implication what I suggest is banks earnings have been overstated. Why? Because provisions for loan losses are a hit to earnings. I believe losses are coming for which there are no provisions.

The chart depicts a form of "extend and pretend" and overvaluation of assets on bank balance sheets. The Fed and the accounting board ignore this happening (encourage is probably a better word), hoping the problem will get better. With more foreclosures and bankruptcies on the horizon, I suggest it won’t.

Magnitude of the Problem

The above…
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Why is US revolving credit decreasing?

Why is US revolving credit decreasing?

Courtesy of Edward Harrison at Credit Writedowns 

Revolving Door

This morning David Rosenberg noted:

We also received the U.S. consumer credit data for April yesterday afternoon and the $1.0bln rise in total outstanding should be viewed in the context of the sharp revision in March (to now show a $5.0bln decline versus the initially reading of a $2.0bln increase). What really caught our eye in the guts of the report was the significant retrenchment in credit card usage. Revolving credit sagged $8.5bln in April and is down an epic $88.8bln in the last 12 months (-9.6%).

Rosenberg goes on to write that household sector demand for mortgages is at a 13-year low. His conclusion is that consumers have discovered frugality in the aftermath of the great noughties asset bubble. Certainly, revolving lines of credit are down.  But the real question is who is doing the cutting – consumers or lenders?

I mention this because Rosenberg later notes that banks are still in deleveraging mode, questioning whether lenders or consumers are responsible:

Whether this is due to a lack of demand (the National Association of Credit Managers index fell in May) or supply, the reality is that banking sector is contracting and once the fiscal largesse is through the system, so will the economy. Banking sector assets contracted at a 10.8% annual rate and the declines were broad based:

  • Residential mortgages fell 10.4% at an annual rate;
  • Home equity loans of credit fell 4.5%;
  • Commercial real estate loans slipped 8.9%; and,
  • Consumer credit slid at a 16.6% pace (with credit cards down an amazing 24.8%).

I say it is more about lenders than consumers.  After all, in the last post I wrote about the psychology of change, saying:

If something works, people keep doing it.  The repetition creates a sense of complacency such that when people are confronted with the initial need to change, they resist. That means people don’t change unless they are forced to do so, making crisis inevitable.

-A few thoughts about the euro crisis and the psychology of change

I don’t think consumers are frugal in the least. Debt to GDP levels are not down substantially for households. If consumers were frugal, then why are premium priced non-essentials like iPads selling like hotcakes? Why until last month was the personal…
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SMALL BUSINESSES REMAIN BEST REFLECTION OF WEAK ECONOMY

SMALL BUSINESSES REMAIN BEST REFLECTION OF WEAK ECONOMY

Courtesy of The Pragmatic Capitalist 

The National Federation of Independent Business continues to report a very weak economic environment for small businesses.  The NFIB’s small index optimism index improved this month, but the outlook for the economy remains very tepid.  William C. Dunkelberg, NFIB’s chief economist says the economy remains very weak:

“The performance of the economy is mediocre at best.  Given the extent of the decline over the past two years, pent up demand should be immense, but it is not triggering a rapid pickup in economic activity.  “Compared to past recoveries, it is clear that the current economic recovery has not impacted the expectations of small business owners.  They do not trust the economic policies in place or proposed and are distressed by global and national developments that make the future more uncertain.”

The outlook index remains just shy of its lows:

NFIB1 SMALL BUSINESSES REMAIN BEST REFLECTION OF WEAK ECONOMY

This is having a direct impact on employment as small businesses remain hesitant to ramp up hiring.  The index actually declined for the month as small businesses continue to shed jobs:

NFIB2 SMALL BUSINESSES REMAIN BEST REFLECTION OF WEAK ECONOMY

Source: NFIB 

 


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Mish Mailbag: IBM Abandons U.S. Workers

Mish Mailbag: IBM Abandons U.S. Workers

Courtesy of Mish

Here is an Email from "Voice in the Dark" about IBM and outsourcing. VID writes …

Hello Mish

IBM Building, Chicago, Illinois, USA

I read your blog every day. I do not comment much, but I think the MSM and most blogs are missing out on the greatest story not being told.

Large corporations are abandoning the US. I work for IBM. Here is a snapshot of IBM’s US headcount:

2005 133,789
2006 127,000
2007 121,000
2008 115,000
2009 105,000
2010 98,000 estimate

These are all good paying jobs that can support a family and pay taxes.

Today, 75% of the total headcount is overseas. The overseas revenue is 65%. The company reported record profits last year. IBM decided to stop reporting their US headcount this year.

You know that many companies are moving their resources overseas. China is the new spot to build development centers. These incremental loses are adding up. But the saddest thing is that they are giving away the building blocks for innovation.

I just read a few weeks ago the Applied Material is planning to replace their US research center for a new one in China. That is another example of what is going on.

And no venture capitalist would attempt to build a solar panel factory from scratch in the US. The costs and the EPA will prevent that.

Please tell this story.

Sign me: Just Another Voice in The Dark 

Hello "Voice in the Dark".

I covered the situation with Applied Materials in High Tech Research Moves From U.S. To China

Goodbye Silicon Valley, hello Xi’an China. Applied Materials will do new cutting edge research on solar panels in Xi’an. …

Please see Brain Drain as a followup.

Two Drivers For Outsourcing 

Outsourcing jobs has been going on quite some time. Let’s address why.

For starters, global wage arbitrage is one huge factor in play.

Unfortunately, wage equalization and standard of living adjustments between industrialized countries and emerging markets will be a long painful process for Western society.

On that score, there is little that can be done except reduce wages and benefits in the public sector and stop wasting money being the world’s policeman. We simply can no longer afford it. Besides, neither of those things ever made any sense anyway.

US Tax policy…
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Goldman’s Ten Questions For 2010

Goldman’s Ten Questions For 2010

Courtesy of Tyler Durden

One of the great paradoxes of life is that the smarter one is, the better one realizes just how little one knows. The same thing is  true with forecasts: one can hypothesize and conjecture, but if one is unlucky, one is screwed: no matter how thought out, error-proof or logical the narrative – it is the unpredictable events that ultimately shape events, not the "priced in" obvious factors. The Heisenberg Uncertainty Principle applies in a perverse fashion not only to the wave-particle duality in the quantum realm, but to the very underpinning of economics: by predicting the future we implicitly change it. The futility of forecasts is well known to all those, who with the exception of a several few, whose very existence is an economy of scale "strange attractor" (think Warren Buffett and Goldman Sachs), have tried to repeat a winning performance, be it based on fundamentals, technicals, or kangaroo entrails. It is also sufficiently useless to the point where we will spare you a Zero Hedge set of observations of what to expect: if you have been reading this blog, you know what we believe is relevant as we enter 2010. How it will all pan out, however, is a totally different story. It is therefore not too ironic, and somewhat fitting, that Goldman Sachs’ chief economists do not leave 2009 with a dogmatic set of forecasts, which, just like every other year would have the success rate of a coin toss, but with 10 key questions addressed exactly one year into the future. Here are Goldman’s 10 Questions for December 31, 2010.

*****

Our forecast for 2010 features sluggish GDP growth, employment gains that are too slow to prevent a further modest increase in the unemployment rate, low (and probably falling) core inflation, and a Federal Reserve that “exits” from some unconventional monetary policies but keeps the funds rate at its current near-zero level.  For the last US Economics Analyst of the year, we try to answer what we think are the 10 most important questions for 2010.

1. Have house prices bottomed?

Probably not yet, but we are quite uncertain.  Although US homes are no longer significantly overvalued, we believe that much of the increase in prices over the past six months has been due to three temporary factors: a) the homebuyer tax…
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Phil's Favorites

Why Jack Dorsey's Square paid a record $39 billion for Afterpay

 

Why Jack Dorsey’s Square paid a record $39 billion for Afterpay

Courtesy of Lien Duong, Curtin University and Sonny Pham, Curtin University

The A$39 billion (US$29 billion) that Twitter founder Jack Dorsey’s digital payments company Square is paying to acquire Australian upstart payments outfit Afterpay is the biggest takeover deal in Australian corporate history.

It surpasses the A$32 billion European commercial real estate giant Unibail-Rodamco agreed to pay for Frank Lowy’s Westfield Corporation in 2...



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Zero Hedge

Texas Judge Blocks Governor's Order Halting Transport Of Covid-Positive Illegals

Courtesy of ZeroHedge View original post here.

In a short-term victory for the Biden administration, a federal judge in Texas blocked an executive order which restricts the transport of infected illegal immigrants on Tuesday, suggesting that the order itself would have the effect of "exacerbating the spread of COVID-19."

U.S. District Judge Kathleen Cardone of El Paso agreed with the Justice Department, which accused Governor Greg Abbott (R) of potentially worsening the spread of the virus - as impeding the transfer of undocumented migrants would prolong the ...



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Chart School

RTT browsing latest..

Courtesy of Read the Ticker

Please review a collection of WWW browsing results. The information here is delayed by a few months, members get the most recent content.



Date Found: Saturday, 13 March 2021, 06:40:57 PM

Click for popup. Clear your browser cache if image is not showing.


Comment: @crossbordercap Peak liquidity already evidence from our GLI momentum signal...has 6-9 month lead-time on markets and 15-20 months on economies



Date Found: Friday, 19 March 2021, 10:55:22 PM

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Comment: ...



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Biotech/COVID-19

Americans Tend To Stick To Their Stance On COVID-19 Vaccines

 

Source: Bloomberg, via ZeroHedge

Courtesy of Felix Richter, Statista

As U.S. health officials and the Biden administration desperately try to kickstart the stalling rollout of COVID-19 vaccines in face of the highly contagious Delta variant, President Biden...



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Digital Currencies

What are stablecoins? A blockchain expert explains

 

What are stablecoins? A blockchain expert explains

Stablecoins promise more stability than other cryptocurrencies. DenBoma/iStock via Getty Images

Courtesy of Stephen McKeon, University of Oregon

Stablecoins are a type of cryptocurrency linked to an asset like the U.S. dollar that doesn’t change much in value.

The majority of the dozens of stablecoins that currently exist use the dollar as their benchm...



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Politics

Bipartisan infrastructure deal begins to address consequences of a warming planet: 3 essential reads

 

Bipartisan infrastructure deal begins to address consequences of a warming planet: 3 essential reads

A lot of coastal infrastructure wasn’t designed for the frequent flooding and crashing waves brought by rising seas. Jeffrey Greenberg/Universal Images Group via Getty Images

Courtesy of Bryan Keogh, The Conversation and Stacy Morford, The Conversation

...



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Promotions

Free Webinar Wednesday: July 7, 1:00 pm EST

 

Don't miss Phil's Webinar on July 7 at 1:00 pm EST. It's FREE and open to all who wish to join.

Click here: 

https://attendee.gotowebinar.com/register/6552545459443187211

Join us to learn Phil's trading tactics and strategies in real-time!

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Kimble Charting Solutions

Crude Oil Cleared For Blast Off On This Dual Breakout?

Courtesy of Chris Kimble

Is Crude Oil about to blast off and hit much higher prices? It might be worth being aware of what could be taking place this month in this important commodity!

Crude Oil has created lower highs over the past 13-years, since peaking back in 2008, along line (1).

It created a “Double Top at (2), then it proceeded to decline more than 60% in four months.

The countertrend rally in Crude Oil has it attempting to break above its 13-year falling resistance as well as its double top at (3).

A successful breakout at (3) would suggest Crude Oil is about to mo...



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ValueWalk

Managing Investments As A Charity Or Nonprofit

By Anna Peel. Originally published at ValueWalk.

Maintaining financial viability is a constant challenge for charities and nonprofit organizations.

Q4 2020 hedge fund letters, conferences and more

The past year has underscored that challenge. The pandemic has not just affected investment returns – it’s also had serious implications for charitable activities and the ability to fundraise. For some organizations, it’s even raised doubts about whether they can continue to operate.

Finding ways to generate long-term, sustainable returns for ...



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Mapping The Market

Suez Canal: Critical Waterway Comes to a Halt

 

Suez Canal: Critical Waterway Comes to a Halt

Courtesy of Marcus Lu, Visual Capitalist

The Suez Canal: A Critical Waterway Comes to a Halt

On March 23, 2021, a massive ship named Ever Given became lodged in the Suez Canal, completely blocking traffic in both directions. According to the Suez Canal Authority, the 1,312 foot long (400 m) container ship ran aground during a sandstorm that caused low visibility, impacting the ship’s navigation. The vessel is owned by Taiwanese shipping firm, Evergreen Marine.

With over 2...



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The Technical Traders

Adaptive Fibonacci Price Modeling System Suggests Market Peak May Be Near

Courtesy of Technical Traders

Our Adaptive Fibonacci Price Modeling system is suggesting a moderate price peak may be already setting up in the NASDAQ while the Dow Jones, S&P500, and Transportation Index continue to rally beyond the projected Fibonacci Price Expansion Levels.  This indicates that capital may be shifting away from the already lofty Technology sector and into Basic Materials, Financials, Energy, Consumer Staples, Utilities, as well as other sectors.

This type of a structural market shift indicates a move away from speculation and towards Blue Chip returns. It suggests traders and investors are expecting the US consumer to come back strong (or at least hold up the market at...



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Lee's Free Thinking

Texas, Florida, Arizona, Georgia - The Branch COVIDIANS Are Still Burning Down the House

 

Texas, Florida, Arizona, Georgia – The Branch COVIDIANS Are Still Burning Down the House

Courtesy of Lee Adler, WallStreetExaminer 

The numbers of new cases in some of the hardest hit COVID19 states have started to plateau, or even decline, over the past few days. A few pundits have noted it and concluded that it was a hopeful sign. 

Is it real or is something else going on? Like a restriction in the numbers of tests, or simply the inability to test enough, or are some people simply giving up on getting tested? Because as we all know from our dear leader, the less testing, the less...



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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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