News What is wrong with the US economy? Part 2

[mgb_phys]

Check the 2/25 story on the Grand View Coffee shop. The owner was running out of options, so he opened a coffee shop staffed with topless wait-staff. There are actually a few guys on the crew, though most are women. He had over 150 applicants for 10 positions in unpaid, tips-only jobs.

Presumably not such an attractive option for the Union of AutoWorkers?

 

[turbo]

You paid a visit yet? Where does it say the owner was running out of options?

No, and given my horrible reactions to perfumes, I won't be visiting. The "running out of options" was part of the back-story. He had tried to start up and run several businesses in that location over the last few years until he decided to try to "topless coffee shop" gimmick. It's a small town, and there was some very vocal opposition from some residents; however the planning board had no legal reason to deny the business a permit. This has been in and out of the news since his initial application for the permit.

 

[Astronuc]

Insurance giant AIG facing possible breakup
http://news.yahoo.com/s/ap/20090227/ap_on_bi_ge/aig_bailout

CHARLOTTE, N.C. – Nearly six months after American International Group Inc. got its first massive bailout from the government, it's still stumbling.

The big insurer keeps losing money and is unable to sell some of its biggest assets. Some Wall Street analysts have stopped tracking it. And it appears on the verge of getting another helping hand from Washington.

Like Citigroup Inc., which on Friday received another round of federal support, AIG is considered too big and too important to fail.

"If the government let's AIG fail, I think you are going to see an enormous sort of shock wave across all industries because AIG had their finger in a lot of different areas," said Russell Walker, a risk management professor at Northwestern University in Chicago.

Expectations are that AIG and the government will announce soon, perhaps as early as Monday, their latest plan to prop up the New York-based company. Late Friday, AIG confirmed it will report its fourth-quarter earnings on Monday before the market opens.

The Financial Times, citing people who spoke on condition of anonymity, reported this week that the government will swap the 80 percent stake it currently holds in AIG for even bigger pieces of three units that would be split off from the company: AIG's Asian operations, its international life insurance business and its U.S. personal lines business. A fourth unit made up of AIG's other businesses and troubled assets could be created as well or sold off in pieces, according to the FT report.

In return for the breakup, the government would relax the terms, or cancel, a portion of the $60 billion loan that was at the center of a restructured $150 billion rescue package, the newspaper said.

The company may also need another loan, its fourth, from the government as it is expected to report a $60 billion fourth-quarter loss Monday.

. . . .

The government is apparently about take a 36-38% stake in Citigroup.

The government revised the contraction of GDP downward from -3.8% to -6.2% on an annual basis.

Banks and economy to keep bears' grip on stocks
http://news.yahoo.com/s/nm/20090227/bs_nm/us_column_stocks_outlook

NEW YORK (Reuters) – Wall Street is unlikely to get a reprieve next week as relentless worries about U.S. banks and the economy could embolden bears to drive the market below the 12-year lows hit on Friday.

Investors will also be looking for further action from the government in its campaign to shore up the financial system. The Federal Reserve will release details early next week on its latest plans, a massive program to support consumer and small business lending, a Fed official said on Friday.

The Term Asset-Backed Securities Loan Facility, also known as TALF, is a key part of the efforts to stop the unraveling of the financial system in the wake of the credit crisis and U.S. housing collapse. The program could grow to up to $1 trillion in size.

A raft of data due out is expected to show the recession-hit economy is worsening. Among the reports, non-farm payrolls for February will shed light on the labor market, with analysts expecting unemployment to reach 7.9 percent.

Following Friday's fall in U.S. stocks, with the S&P 500 closing at a 12-year low, analysts are watching to see if indexes can hold and recover from these lows, suggesting a bottom has been formed, or whether stocks have further depths to plumb.

. . . .

http://marketplace.publicradio.org/display/web/2009/02/27/pm_gdp/

. . .
In this economy the Commerce Department's models didn't work, at all. They overestimated the amount businesses would spend on inventories by $25 billion -- inflating the GDP. But Lowe says the fact business spent less is actually good news.

Lowe: The biggest fear in a recession is that products start to pile up on the shelves to such an extent that stores don't need to order anything anymore.

That leads to more layoffs. But don't get too excited. The Commerce Department also overestimated consumer spending and business spending on big-ticket items, which fell an astounding 27 percent.
. . . .

 

[Astronuc]

Insurer AIG reports $61.7B 4th-qtr loss on continued market turmoil, gov't provides new aid
http://biz.yahoo.com/ap/090302/earns_aig.html

CHARLOTTE, N.C. (AP) -- American International Group is reporting that continued financial market turmoil has resulted in a large fourth-quarter loss.
Monday's results come as the U.S. government is announcing a restructuring of a bailout plan for the troubled insurer, extending $30 billion in additional aid to the company.

New York-based AIG, once the world's largest insurer, said Monday it lost $61.7 billion, or $22.95 per share, after a loss of $5.3 billion, or $2.08 per share, a year ago.

The latest results include $7.2 billion in unrealized losses and credit valuation adjustments at AIG Financial Products, the source of credit-default swaps, and pretax losses of $21.6 billion tied to the declining value of AIG's investment portfolio.
. . . .

HSBC to raise $17.7 billion, cut 6,100 jobs in US after 70 percent drop in 2008 profit
http://biz.yahoo.com/ap/090302/eu_britain_earns_hsbc.html

LONDON (AP) -- HSBC PLC, Europe's largest bank by market value, on Monday reported a 70 percent drop in 2008 net profit and said it would raise $17.7 billion in new capital through a share issue while cutting 6,100 jobs in the U.S.

HSBC said it would scale back its consumer lending in the U.S. after being hit hard by the subprime mortgage crisis there, shrinking its consumer loan business there -- although its HSBC USA branch banking business will remain.

By turning to investors for new capital instead of asking for government aid, the bank would avoid the strings that go with the bailouts given to other British banks. It also said it would cut its dividen and not pay bonuses to top executives.

In 2008, net profit tumbled to $5.7 billion from $19.1 billion a year earlier as the company wrote down the value of assets, particularly in the U.S.

. . . .

Dow set to break below 7,000 [a loss of 50% since it's all time high] as AIG gets more gov't funding, posts $61.7B loss
http://biz.yahoo.com/ap/090302/wall_street.html

NEW YORK (AP) -- Wall Street headed for another big drop Monday, one that could hurl the Dow Jones industrials below 7,000, after American International Group Inc. posted a $61.7 billion quarterly loss.

The government said it would give AIG another $30 billion in loans, in addition to the $150 billion it has already given the ailing insurer.

Concerns about the struggling financial sector and the weakening economy have sent stocks to their lowest levels in 12 years. The Dow Jones industrial average has dropped for six consecutive months, and is worth less than half of its October 2007 record high of 14,164.53.

Billionaire Warren Buffett, in his highly anticipated annual letter to investors Saturday, said his insurance and investment company, Berkshire Hathaway Inc., had its worst year ever in 2008. The grim news came a day after the government said gross domestic product for the fourth quarter shrank at an annual rate of 6.2 percent.

Buffett said he is sure "the economy will be in shambles throughout 2009 -- and, for that matter, probably well beyond -- but that conclusion does not tell us whether the stock market will rise or fall."

Ahead of the market's open, Dow futures tumbled 152, or 2.16 percent, to 6,900. Standard & Poor's 500 index futures sank 14.60, or 1.99 percent, to 719.60, while Nasdaq 100 index futures lost 21.25, or 1.90 percent, to 1,095.75.
. . . .

The Dow 30 would be even lower if AIG had remained a component.

 

[DrClapeyron]

AIG and this rest of this crisis are a bigger scam than Enron and World Com and the US Government wants to bail them out? It appears that AIG has less to do with insuring and more to do with investing.

 

[Astronuc]

AIG and this rest of this crisis are a bigger scam than Enron and World Com and the US Government wants to bail them out? It appears that AIG has less to do with insuring and more to do with investing.

Gambling actually - and they lost big time. All those Credit Default Swaps that went bad - because way too many people defaulted and folks like Bear Stearns, Lehman Brothers, Merrill Lynch, et al had huge losses simultaneously.

But business is business.

Dow30 - 10:44am ET: 6,901.40 -161.53 (-2.29%)

Dow industrials fall below 7,000; lowest since '97
Dow breaks 7,000 for first time since '97 as AIG gets more gov't funding, posts $61.7B loss
http://finance.yahoo.com/news/Dow-falls-below-7000-as-apf-14510516.html

NEW YORK (AP) -- The Dow Jones industrial average plunged below 7,000 Monday for the first time in more than 11 years as investors grew pessimistic about the health of banks, and in turn the economy.

The Dow hadn't traded below 7,000 since Oct. 28, 1997, and last closed below that mark on May 1 of that year. The credit crisis and recession have now slashed half the average's value since it hit a record high over 14,000 in October 2007.

Investors are again fleeing stocks in response to bad news about financial companies. The government said it would give American International Group Inc. another $30 billion in loans, in addition to the $150 billion it has already given the insurer. AIG also said it lost a record $61.7 billion in the fourth quarter.

Investors are worried about European financial companies, too. HSBC PLC, Europe's largest bank by market value, reported a 70 percent drop in 2008 profit and said it needs to raise $17.7 billion and cut 6,100 jobs.

Meanwhile, billionaire Warren Buffett wrote in his annual letter to investors Saturday he is sure "the economy will be in shambles throughout 2009 -- and, for that matter, probably well beyond -- but that conclusion does not tell us whether the stock market will rise or fall."

. . . .

No more buying on margin.

 

[Astronuc]

Not a good day in the equities markets.

12:24pm ET: 6,836.33 -226.60 (-3.21%) Dow Jones Industrial Average (^DJI)


Perhaps it will recover somewhat this afternoon.

Update:

3:27PM ET: 6,781.53 -281.40 (-3.98%)

About 1/2 hr to go and recovery no where in sight.

Ouch!
Dow 6,762.82 -300.11 (-4.25%) 4:03 PM (12 yr low)
Nasdaq 1,322.85 -54.99 -3.99%
S&P 500 700.82 -34.27 -4.66% (12 yr low)


S&P 500's trouble mostly rooted in just 10 issues

NEW YORK (MarketWatch) -- Ten companies, led by ConocoPhillips, Time Warner Inc. and recently acquired Merrill Lynch, are behind the bulk of the carnage that helped fuel the worst two-month start ever for the S&P 500 Index, which on Monday made another run through its November lows.

 

[Astronuc]

A volatile day after yesterday's selloff.

3:45pm ET: 6,725.46 -37.83 (-0.56%) - not bad, but the index has been up and down twice today - bottomed out about noon, recovered by 12:30, the bottomed again just after 1:30 pm, then rallied through 3 pm, then bottomed out about 4 pm.

Back to the future: Stocks' fall may be a milestone
Breach of 12-year lows has some analysts wondering if it's 1932 or 1974

NEW YORK (MarketWatch) -- As U.S. stocks on Tuesday tried and then failed to bounce back from the prior day's stumble to 12-year lows, analysts, technicians and would-be historians debated the significance of the fall, which may or may not signal an important market milestone.
. . . .

GE is down near $7. GE's 52-wk range: $7.02 - 38.52 Hay caramba! Warren Buffett bought it at about $20. Ouch!

GE didn't expect global crisis; aims to `weather the cycle'

TEL AVIV (MarketWatch) -- General Electric Co.'s top executives never expected the financial system's failure and the economic fallout that followed, Chairman and Chief Executive Jeffrey Immelt said in a letter to shareholders. The executive said in the letter that he couldn't say how deep the recession will be or how long it will last but that management is "running GE to `weather the cycle.'" The Fairfield, Conn., industrial and financial-services giant is geographically diverse, taking in 53% of revenue from outside the U.S., and it has a $172 billion backlog in infrastructure projects, Immelt said. But despite management's efforts, he said, GE stock "got hammered. Companies with a presence in financial services, like GE, are simply out of favor." Going forward, the financial industry will be less leveraged, with fewer competitors "and a fundamental repricing of risk," he said.

Yikes! Oops!

 

[mheslep]

...GE is down near $7. GE's 52-wk range: $7.02 - 38.52 Hay caramba! Warren Buffett bought it at about $20. Ouch!...

Yes I'd like that kind of an ouch - guaranteed 10% dividend on preferred shares, net $300m/yr, forever, unless GE pays a penalty to pay him off. Buffett only gets hurt if his dividend gets inflated away. This goes for a lot of the news about his company B. Hathaway - the accounting has to periodically update based on the value of the underlying falling assets but in many cases, so what, the cash is still flowing.
http://www.genewscenter.com/Content/Detail.asp?ReleaseID=4220&NewsAreaID=2&MenuSearchCategoryID=
http://online.wsj.com/article/SB122288377688594651.html

 

[nottheone]

I wonder what it would be like now if a certain idiot hadn't occupied the white house for the last 8 years and the man that really won the election had been president till now.

 

[OmCheeto]

I wonder what it would be like now if a certain idiot hadn't occupied the white house for the last 8 years and the man that really won the election had been president till now.

And would he still have won the Nobel prize?

 

[Astronuc]

GM auditors raise doubts on automaker's viability
http://biz.yahoo.com/ap/090305/gm_annual_report.html

. . . .
GM says in its report that its auditors cited recurring losses from operations, stockholders' deficit and an inability to generate enough cash to meet its obligations in raising substantial doubts about its ability to continue as a going concern.

World stocks mixed as China stimulus hopes fade
European markets fall ahead of interest rate decisions by Europe's leading central banks
http://biz.yahoo.com/ap/090305/world_markets.html
Thursday March 5, 6:44 am ET

. . .
Europe's two leading central banks are expected to cut interest rates, but with the scope for further reductions limited, speculation is growing that the European Central Bank and the Bank of England will effectively start printing money to give their ailing economies a kick start.

Amid increasingly grim economic news, the European and British central banks are likely to cut their benchmark rates by a half percentage point to new record lows of 1.5 percent and 0.5 percent.

. . . .

 

[Count Iblis]

http://www.google.com/hostednews/ap/article/ALeqM5gHs5OM3gFG_DytQQZFbWfgPT08MAD96O0H2G1"

 

[Astronuc]

Citigroup stock falls below $1 a share
http://news.yahoo.com/s/ap/20090305/ap_on_bi_ge/citigroup_stock

CHARLOTTE, N.C. – Shares of Citigroup Inc., once the nation's most powerful bank, fell below $1 a share Thursday.

The stock fell to 97 cents in late morning trading, down 16 cents or 14.2 percent from Wednesday.

New York-based Citi has lost more than 85 percent of its value so far this year, and is down more than 95 percent from a year ago as the bank was pummeled by the financial market crisis.

Citigroup's shares will remain on the New York Stock Exchange. Last week, the NYSE relaxed its listing rules to allow stocks that fall under $1 to still be listed and traded on the exchange.

The exchange said the change was warranted given the "current period of unusual market volatility and decline."

Ordinarily, an NYSE-listed company's shares cannot remain below $1 for more than 30 consecutive days. If that happens, the company gets about six months to prove to the NYSE it can boost its stock price.

. . . .

What a difference a year makes.

 

[Greg Bernhardt]

http://www.comedycentral.com/?source=SEO_SSP_Y&intcmp=SEO_SSP_Y&extcmp=SEO_SSP_Y

 

[Astronuc]

2:33pm ET: 6,625.50 -250.34 (-3.64%)

12 pct. are behind on mortgage or in foreclosure
http://news.yahoo.com/s/ap/20090305/ap_on_bi_ge/states_foreclosures

NEW YORK – A stunning 48 percent of the nation's homeowners who have a subprime, adjustable-rate mortgage are behind on their payments or in foreclosure, and the rate for homeowners with all mortgage types hit a new record, new data Thursday showed.

But that's not the worst of it.

The reckless lending practices in states like Florida, California and Nevada that were the epicenter of the housing crisis are no longer driving up the nation's delinquency rate. Instead, the foreclosure crisis now is being fueled by a spike in defaults in states like Louisiana, New York, Georgia and Texas, where the economies are rapidly deteriorating and thousands are losing their jobs.

A record 5.4 million American homeowners with a mortgage of any kind, or nearly 12 percent, were at least one month late or in foreclosure at the end of last year, the Mortgage Bankers Association reported. That's up from 10 percent at the end of the third quarter, and up from 8 percent at the end of 2007.

. . . .

 

[LowlyPion]

http://www.comedycentral.com/?source=SEO_SSP_Y&intcmp=SEO_SSP_Y&extcmp=SEO_SSP_Y

Sadly I think Stewart has a legitimate point about CNBC. Many of them spew the company propaganda in order to secure their continued access. Maria was always deferential to that toad that ran the NYSE Dick Grasso, while he was sucking down his huge salary. These days Gasparino is a total toady to his "sources" defending their high salaries and poor performances. A number of them have done a real disservice to the investing public.

As for Rick Santelli, I think he has gotten a bit of a bad rap. He's always spoken his mind and reflects a certain thinking in the CBOE that only has interest in making profit. At least that's honest. Cramer and that total Republican Party suck up Larry Kudlow, have other agendas than investor well being and reporting the actual news. Like Limbaugh they have figured out that adopting extreme positions, means bread and butter for them.

Broadcasters should be required to carry broadcast malpractice insurance. But of course they are quick to hide behind all their disclaimers after practicing disingenuous dissemination in the name of entertainment.

 

[mheslep]

Broadcasters should be required to carry broadcast malpractice insurance. But of course they are quick to hide behind all their disclaimers after practicing disingenuous dissemination in the name of entertainment.

And posters.

 

[Astronuc]

Headlines from a WSJ/MarketWatch email (March 5, 2009)

Citigroup pushed below a buck a share in latest sell-off

BOSTON (MarketWatch) -- Citigroup Inc. shares dropped below a dollar on Thursday for the first time ever amid the latest sell-off in financial shares as investors questioned the future of the embattled banking giant.


Reporter's Notebook: Plenty of hybrids at AutoNation

AutoNation CEO Mike Jackson has a problem: There are way too many Toyota Prius hybrids sitting on his car lots across America.


GM, auditor express doubts over survival; shares skid below $2

General Motors and auditor Deloitte & Touche voice doubts over the automaker's ability to survive, which in part will depend on car sales rising next year. Shares of GM and smaller rival Ford both come under selling pressure.

 

[Count Iblis]

http://oxdown.firedoglake.com/diary/1884"

 

[Astronuc]

Investors worry about GE's outlook
http://marketplace.publicradio.org/display/web/2009/03/05/pm_ge/

GE shares close lower, even as it defends finances
http://biz.yahoo.com/ap/090305/na_us_general_electric_stock.html

GE Says Capital Unit Will Be Profitable in First Quarter, Full Year
http://online.wsj.com/article/SB123627807190242471.html

General Electric Co.'s troubled financial unit will be profitable for the first quarter and full year and won't need fresh capital or government assistance except under an unlikely disaster scenario, GE's chief financial officer said Thursday.

In a written statement and a TV interview, CFO Keith Sherin said recent speculation about risk at GE Capital is "overdone." Mr. Sherin said GE has enough capital to fund itself through 2010, with $45 billion in cash and an additional $60 billion available under the U.S. government's Temporary Loan Guarantee Program. There are no short-term "triggers" that would strain the cash position, he added.

Mr. Sherin spoke one day after GE shares sank to 18-year lows amid record volume of 752.9 million shares on Wednesday, according to FactSet Research System. On Thursday, the share price fell 3 cents to $6.66, as major market indexes fells sharply.

GE expects to generate $16 billion in cash this year, but Mr. Sherin said funding would be adequate even if it were to fall to $14 billion. Below that, he said the company could conserve cash by making fewer new loans at GE Capital.
. . . .

Apparently GE has cut its dividend.


Both parties play the blame game for economic woes
http://news.yahoo.com/s/ap/20090305/ap_on_go_co/spin_meter_whose_economy

Safe to say that both parties and the last several administrations have contributed to the current problems.

 

[LowlyPion]

Sadly that's what GM, BoA, Bear Sterns, etc. were saying last year.

 

[edward]

Someone needs to tie a long rope to a big rock and drop it into this toxic crud and see how deep it really goes. I have a feeling we haven't come close to the bottom yet.

 

[turbo]

With Citi under a buck and GM under two bucks, who is willing to buy stock and hang onto them? After the auditors' reports on GM came out today, I don't think I would be buying stock in that company... Citi?... Well, if the US government thinks that bank is "too big to fail", their penny-stocks might be a fun low-risk buy.

 

[Astronuc]

I heard a report today that the newest wave of foreclosures is tied to unemployment or loss of income, and those foreclosures are happening outside the 4 states (CA, FL, AZ, NV) at the heart of the subprime mortgage crisis.


Here's an interesting perspective on the mortgage crisis:

They Warned Us About the Mortgage Crisis
http://www.businessweek.com/print/magazine/content/08_42/b4104036827981.htm

It seems that the federal government undermined states' efforts to rein in the mortgage companies who were pushing risky mortgages.

More than five years ago, in April 2003, the attorneys general of two small states traveled to Washington with a stern warning for the nation's top bank regulator. Sitting in the spacious Office of the Comptroller of the Currency, with its panoramic view of the capital, the AGs from North Carolina and Iowa said lenders were pushing increasingly risky mortgages. Their host, John D. Hawke Jr., expressed skepticism.

Roy Cooper of North Carolina and Tom Miller of Iowa headed a committee of state officials concerned about new forms of "predatory" lending. They urged Hawke to give states more latitude to limit exorbitant interest rates and fine-print fees. "People out there are struggling with oppressive loans," Cooper recalls saying.

Hawke, a veteran banking industry lawyer appointed to head the OCC by President Bill Clinton in 1998, wouldn't budge. He said he would reinforce federal policies that hindered states from reining in lenders. The AGs left the tense hour-long meeting realizing that Washington had become a foe in the nascent fight against reckless real estate finance. The OCC "took 50 sheriffs off the job during the time the mortgage lending industry was becoming the Wild West," Cooper says.

This was but one of many instances of state posses sounding early alarms about the irresponsible lending at the heart of the current financial crisis. Federal officials brushed aside their concerns. The OCC and its sister agency, the Office of Thrift Supervision (OTS), instead sided with lenders. The beneficiaries ranged from now-defunct subprime factories, such as First Franklin Financial, to a savings and loan owned by Lehman Brothers, the collapsed investment bank.

Some states, including North Carolina and Georgia, passed laws aimed at deterring rash loans only to have federal authorities undercut them. In Iowa and other states, mortgage mills arranged to be acquired by nationally regulated banks and in the process fended off more-assertive state supervision. In Ohio the story took a different twist: State lawmakers acting at the behest of lenders squelched an attempt by the Cleveland City Council to slow the subprime frenzy.

A number of factors contributed to the mortgage disaster and credit crunch. Interest rate cuts and unprecedented foreign capital infusions fueled thoughtless lending on Main Street and arrogant gambling on Wall Street. The trading of esoteric derivatives amplified risks it was supposed to mute.

One cause, though, has been largely overlooked: the stifling of prescient state enforcers and legislators who tried to contain the greed and foolishness. They were thwarted in many cases by Washington officials hostile to regulation and a financial industry adept at exploiting this ideology.

The Bush Administration and many banks clung to what is known as "preemption." It is a legal doctrine that can be invoked in court and at the rulemaking table to assert that, when federal and state authority over business conflict, the feds prevail—even if it means little or no regulation.

. . . .

But this started under Clinton.

 

[OmCheeto]

The reckless lending practices in states like Florida, California and Nevada that were the epicenter of the housing crisis

Can we sell those states to China, or Saudi Arabia? Kind of like we did land deals about 200 years ago?

At $1e5 per acre, we might be ahead after it's all said and done.

Then we could travel to foreign countries by just bicycling across a border.

 

[turbo]

Can we sell those states to China, or Saudi Arabia? Kind of like we did land deals about 200 years ago?

At $1e5 per acre, we might be ahead after it's all said and done.

Then we could travel to foreign countries by just bicycling across a border.

Maybe Dubai would buy CA and take it off our hands... That would take off a lot of the load.

 

[Count Iblis]

With Citi under a buck and GM under two bucks, who is willing to buy stock and hang onto them? After the auditors' reports on GM came out today, I don't think I would be buying stock in that company... Citi?... Well, if the US government thinks that bank is "too big to fail", their penny-stocks might be a fun low-risk buy.

Buying credit default swaps could perhaps be more profitable, provided the banks who issued them can pay out if GM fails

 

[Astronuc]

How to Handle Your Job and Finances If There's a (Yikes!) Depression
http://finance.yahoo.com/banking-budgeting/article/106695/How-to-Handle-Your-Job-and-Finances-If-There-Is-a-Depression

I think some are not calling the current economic sitution "The Great Recession"

Brace yourself, America. What if the already terrible economy gets even worse? And not just a little bit worse, but a lot worse? Look at it this way: If you put a group of brainiac economists together in a room and told them to create a computer model of a Great Depression 2.0, the key ingredients would probably be a) plunging stock prices, b) collapsing home values, c) soaring unemployment, and d) a banking system on the verge of complete implosion.

And do we have all those terrible factors in play today? Check, check, check and check. But there are also some big positives to counterbalance those huge negatives, such as a Federal Reserve that is lowering interest rates and printing money, as well as trillion-dollar government plans to stimulate the economy and keep people in their homes.

But things can get a lot nastier without reaching a total Great Depression scenario where the economy shrinks by 25 percent and unemployment soars by 25 percent. So just how bad might the economy get? And if there is a mini-depression, what should you do about it? Your questions, our answers.

. . . .

Workers clobbered by relentless layoffs
http://biz.yahoo.com/ap/090306/economy.html

Employers resorting to bigger layoffs to survive recession and there's no relief in sight

WASHINGTON (AP) -- Cost-cutting employers are resorting to even bigger layoffs as they scramble to survive the recession, feeding insecurities among those who still have jobs and those who desperately want them.

The Labor Department on Friday is slated to release a report expected to show that February was an especially cruel month for America's workers.

Employers likely slashed a net total of 648,000 jobs last month, according to economists' forecasts. If they are right, it would mark the worst month of job losses since the recession started in December 2007. It also would represent the single biggest month of job reductions since October 1949, when the country was just pulling out of a painful recession, although the labor force has grown significantly since then.

"The pace of layoffs is fast and furious," said Stuart Hoffman, chief economist at PNC Financial Services Group. "We're still in the teeth of this recession and the bite has not let up at all."

With employers slashing payrolls, the nation's unemployment rate is expected to jump to 7.9 percent, from 7.6 percent in January. If that happens, it would mark the highest jobless rate since reaching 8 percent in January 1984, a time when the unemployment rate was still slowly moving down after having topped 10 percent during the early 1980s recession.
. . . .
General Dynamics Corp. said Thursday it will lay off 1,200 workers due partly to plummeting sales of business and personal jets that forced it to cut production. Defense contractor Northrop Grumman Corp., and Tyco Electronics Ltd., which makes electronic components, undersea telecommunications systems and wireless equipment, also are trimming payrolls.

"This is basically cleaning house for a lot of firms," said John Silvia, chief economist at Wachovia. "They are using the first quarter to cut back employment and figure out what they want."

Disappearing jobs and evaporating wealth from tanking home values, 401(k)s and other investments have forced consumers to retrench, driving companies to lay off workers. It's a vicious cycle in which all the economy's negative problems feed on each other, worsening the downward spiral.
. . . .

Former KB Home CEO indicted on fraud charges
http://news.yahoo.com/s/ap/20090306/ap_on_bi_ge/kb_home_backdating

A federal grand jury has charged the former chairman and chief executive of KB Home with multiple counts of fraud and other crimes related to a stock option backdating scheme that authorities say bilked the homebuilder's shareholders out of millions of dollars.
. . . .
Last month, another ex-KB executive, Gary A. Ray, pleaded guilty to conspiring with Karatz to obstruct justice by causing KB Home to file a false report on its option-granting practices in a bid to avert an SEC probe.

Stock option backdating isn't necessarily illegal as long as the stock options are properly recorded on the company's books. But if the accounting of the perks is bungled, it can exaggerate corporate profits and improperly lower taxes.

According to the indictment, for seven years, Karatz altered the grant date on his options to one on which KB Home shares traded more cheaply, but didn't report it in public filings. That hid the actual value of stock-based compensation that KB was awarding him and other executives, prosecutors said.

This enabled Karatz to reap millions of dollars when he exercised his options, while making it appear the gains were the result of the normal appreciation of the market value of KB's stock, prosecutors said.
. . . .

 

[Art]

The UK government announced yesterday it was going to try quantitative easing to try and keep their economy afloat. Initially they will create £75 billion of new money rising to £150 billion over the next 3 months. The idea being once this money is placed on deposit with Britain's investment banks it will flood the financial market with cash thus improving liquidity. There is a certain symmetry about buying fictitious assets with fictitious money.

The Japanese used this mechanism in the 90's but instead of lending the money to customers their banks just sat on it. Given the option it is likely the British banks will do the same but what is different about this is the gov't appears to be planning on lending around £50 billion of the total directly to businesses in return for bonds and commercial paper.

Unfortunately, although these figures looked huge, they were dwarfed by news the same day that Lloyd's bank may require a handout of £250 billion just to survive

 

[Jimmy Snyder]

We're now officially in Obama's bear market. The Dow Jones Industrial Average fell 20 percent since Inauguration Day. In the Bush years, the Dow had climbed to as high as $14164 and never went below $7286. In spite this, Obama has brought the Dow to a level we haven't seen since the last Democratic Presidency. Obviously, even though people say they like Obama, they won't put their money where their mouth is.

 

[Art]

We're now officially in Obama's bear market. The Dow Jones Industrial Average fell 20 percent since Inauguration Day. In the Bush years, the Dow had climbed to as high as $14164 and never went below $7286. In spite this, Obama has brought the Dow to a level we haven't seen since the last Democratic Presidency. Obviously, even though people say they like Obama, they won't put their money where their mouth is.

I take it you meant this to be a satirical comment on the Bush years?

 

[Count Iblis]

We're now officially in Obama's bear market. The Dow Jones Industrial Average fell 20 percent since Inauguration Day. In the Bush years, the Dow had climbed to as high as $14164 and never went below $7286. In spite this, Obama has brought the Dow to a level we haven't seen since the last Democratic Presidency. Obviously, even though people say they like Obama, they won't put their money where their mouth is.

14164 was a huge bubble the investors failed to see. The Dow is back to where it should be, probably it is still a bit overvalued. Obama has nothing to do with that, other than changing course in the correct direction which exposes the reality of the problem, leading to the Dow sinking to new lows where they should have been in the first place.


I've read that the Dow could sink to 4000 or lower before slowly recovering to 10,000 over the course of the next few decades.

 

[Astronuc]

Unfortunately although these figures looked huge they were dwarfed by news the same day that Lloyd's bank may require a handout of £250 billion just to survive.

Despite the fact that ~$1 trillion have already been injected into the financial system in the US, there is still great uncertainty with respect to the viability of several banks and financial institutions. That is weighing down the equities markets, and that has prompted a significant reduction in capitalization.


Meanwhile -

Unemployment hits 25-year high
Jobless rate hits 8.1% in February as a record-high 12.5 million people are unemployed.

The expected unemployment rate was 7.9%. Of course, the number could be revised upward or downward next month.


Jobless rate bolts to 8.1 percent, 651K jobs lost
http://finance.yahoo.com/news/Jobless-rate-bolts-to-81-apf-14564130.html
Jobless rate jumps to 8.1 percent in Feb., highest since late 1983; employers cut 651,000 jobs

Job losses were widespread in February.

Construction companies eliminated 104,000 jobs. Factories axed 168,000. Retailers cut nearly 40,000. Professional and business services got rid of 180,000, with 78,000 jobs lost at temporary-help agencies. Financial companies reduced payrolls by 44,000. Leisure and hospitality firms chopped 33,000 positions.

The few areas spared: education and health services, as well as government, which boosted employment last month.

Actually locally, we're seeing people in education taking early retirement to reduce staff. Layoffs and school closings are still possible.

 

[Astronuc]

We're now officially in Obama's bear market. The Dow Jones Industrial Average fell 20 percent since Inauguration Day. In the Bush years, the Dow had climbed to as high as $14164 and never went below $7286. In spite this, Obama has brought the Dow to a level we haven't seen since the last Democratic Presidency. Obviously, even though people say they like Obama, they won't put their money where their mouth is.

Did Obama Cause the Stock Slide?
Wall Street has soured on the new Administration's policy moves. Can this relationship be saved?
http://www.businessweek.com/investor/content/mar2009/pi2009034_253747.htm

At least on Wall Street, the honeymoon is over for President Barack Obama.

Polls still show the President has strong popularity among the general U.S. population, and Obama continues to command power in Congress. But among investors, fairly or unfairly, there is griping that the new Obama Administration is at least partly to blame for the recent slide in stocks. Since Nov. 4, Election Day, the broad Standard & Poor's 500-stock index is off about 25%, and since Jan. 20, when Obama took office, the "500" is down 15%.

It's never easy to determine exactly why the stock market moves in a particular direction. Plenty of other factors have influenced stock prices since November. For example, the global economy has slowed further and the outlook for corporate profits has worsened.

But BusinessWeek interviewed a wide array of investment professionals, and many said the first six weeks of the Obama Administration have soured their outlook on the stock market.

. . . .

Well there is a certain amount of inertia in the economy which is beyond the control of the president and the governments. Of course, Obama will get the blame, just like Bush got some blame.

We just have to get through this.

 

[Jimmy Snyder]

Did Obama Cause the Stock Slide?

Of course not, no individual is that powerful. I blame the Democratic congress as well.

 

[Astronuc]

Slump Humbling Blue-Chip Stocks
http://www.nytimes.com/2009/03/06/business/economy/06shares.html

The banking giant Citigroup commanded a stock price of $55 just two years ago. But at one point Thursday, as markets hurtled to their lowest close in 12 years, the shares were worth less than an item at the Dollar Store.

After months of breathtaking declines, this is what Wall Street has come to: Blue-chip companies, once considered safe investments and cornerstones of the economy, are akin to penny stocks.

The bear market is tightening its grip, despite efforts by the government to support the economy and some of its biggest companies. Fears about the depth and breadth of the recession drove the Dow Jones industrial average down another 4 percent on Thursday, bringing its losses so far this year to 25 percent — just shy of the 33 percent decline recorded for all of 2008.

“It borders on unbelievable,” said Glenn W. Tyranski, senior vice president for financial compliance at NYSE Regulation. “You’re seeing companies that are just really suffering across the board.”
. . . .
A share of General Motors stock, which fell below $2 on Thursday as it warned of possible bankruptcy, is now not even enough to buy a gallon of gasoline for your Chevy.

A share of General Electric, battered this week to little more than $6, would not be sufficient to buy two of the company’s compact fluorescent light bulbs. And at its current price of 73 cents, it would take several shares of Office Depot stock to buy a box of paper clips.
. . . .

Of course, this represents a buying opportunity of those who have loads of spare cash.

 

[mheslep]

With Citi under a buck and GM under two bucks, who is willing to buy stock and hang onto them? After the auditors' reports on GM came out today, I don't think I would be buying stock in that company... Citi?... Well, if the US government thinks that bank is "too big to fail", their penny-stocks might be a fun low-risk buy.

Citi is not low risk. If the government eventually nationalizes, and there are many who still advocate this, then you get zero.

 

[OmCheeto]

Did Obama Cause the Stock Slide?
Wall Street has soured on the new Administration's policy moves. Can this relationship be saved?
http://www.businessweek.com/investor/content/mar2009/pi2009034_253747.htm

Well there is a certain amount of inertia in the economy which is beyond the control of the president and the governments. Of course, Obama will get the blame, just like Bush got some blame.

We just have to get through this.

I would point the finger at the people primarily responsible for the whole debacle:

http://www.businessweek.com/investor/content/mar2009/pi2009034_253747.htm"
But BusinessWeek interviewed a wide array of investment professionals, and many said the first six weeks of the Obama Administration have soured their outlook on the stock market.

I get the feeling that this title is going to replace "military intelligence" as the definition of oxymoron.

Investment Professional?

Bwah, hahahahahaha!

Speaking of investment pros, last night I asked my commodities brokerage buddy what I should now invest in. He said invest in another beer.

http://www.youtube.com/watch?v=4qVZwmFZAe0"

... laughing and crying
You know its the same release

 

[turbo]

Things just keep getting worse here in Maine. On Wednesday RR Donnelly announced the closure of its printing plant in Wells. Their primary product is catalogs and promotional materials for retailers, including newspaper inserts. Then Thursday, Domtar announced that it will close its Baileyville plant due to a weakness in the hardwood pulp market. The shutdowns of those plants puts 674 people out of work. An additional 70 jobs will be lost in Eastport at Federal Marine Terminals because Domtar was their biggest shipping customer, sending most of its product to the European markets. The articles in yesterday's and today's papers cited weak consumer demand as the cause for both closings.

 

[mheslep]

Citigroup
...
A share of General Motors stock, which fell below $2 on Thursday as it warned of possible bankruptcy,
...
A share of General Electric, battered this week to little more than $6,

Slump Humbling Blue-Chip Stocks
http://www.nytimes.com/2009/03/06/business/economy/06shares.html
Of course, this represents a buying opportunity of those who have loads of spare cash.

Emphasis on spare, cash they can lose, and they might lose it all (well not w/ GE). Low price does not mean low risk. The price is low because there is high risk.

It has happened before, you'll recall:
https://www.physicsforums.com/showpost.php?p=1804413&postcount=60", before the shares were wiped out.

 

[mheslep]

14164 was a huge bubble the investors failed to see. The Dow is back to where it should be, probably it is still a bit overvalued.

On what do you base that 'where it should be' statement?

Obama has nothing to do with that,

As has already been cited in the BW article, investors, that is those who buy into the market and raise the price, are in part sitting out, more than before, because of administration actions:
a) The otherwise capable Geithner's much awaited Feb 11 speech contained little detail, even after Obama T'd him up the day before saying he would have details. 5% immediate sell off.
b) Investors are concerned about future deficits w/ little demonstrated interest in making cuts, and this in the face of apparent ambivalence by Obama comparing the market ups/downs to the vagaries of a political poll.
c) Investors are concerned about the constricting effect of carbon taxes and what it might to do business.

 

[Astronuc]

Emphasis on spare, cash they can lose, and they might lose it all (well not w/ GE). Low price does not mean low risk. The price is low because there is high risk.

It has happened before, you'll recall:
https://www.physicsforums.com/showpost.php?p=1804413&postcount=60", before the shares were wiped out.

I'm being facetious.

Of course, low prices could mean a buying opportunity, especially if the prices are expected to increase. On the other hand, there is certainly a reason the prices are now low, namely the trouble with the US and global economy.

I think 14,000 was way to high for the Dow, based on where things are now and what has happened since. We got here by poor decisions and practices by business and government.

If one builds a weak and faulty foundation, on weak and shaky ground, it doesn't matter how well the rest of the house or building is constructed, it will fall sometime in the future. And the economic future of then is now.

 

[mheslep]

XKCD, always timely.

On the other hand
http://xkcd.com/552/
http://xkcd.com/552/
I believe I could do an entire project presentation now w/ a ~dozen of these.

Edit: Arg, 552 is already a cliché, posted up all over the net.

 

[misgfool]

Citi going under?

http://money.cnn.com/2009/03/06/news/dodd.fdic.fortune/index.htm

 

[Art]

Jimmy - don't you think the continuing slide in the Dow has a lot to do with the fact several of it's 30 constituents are finance companies?? With all the other constituents being dependent on these finance companies.

Do you really think Obama's policies are what has driven the financial sector's share prices ever lower (some down 30% this past week alone) or do you think perhaps it is because of the steady flood of ever worsening news emanating from these businesses revealing problems in their balance sheets created long, long before Obama's inauguration??

The thing shaking investor confidence is lack of knowledge. It is impossible to accurately value these companies as they just will not come clean over exactly how much their <sic> 'assets' have devalued. Until this matter is resolved once and for all only the most risk taking, foolhardy individual would even contemplate investing in equities.

Lloyds bank, which I mentioned above is a good example. Only a few months ago they asked the UK gov't for £18 billion to 'supposedly' cover all of their problems. Today they are finally admitting the truth (at least one hopes) and are asking for an additional £250 billion!

Another element apart from the lack of transparency and out and out lies is that the securities the banks hold are continuing to fall in value.

So having come clean the next requirement for the banks to reach an equilibrium is something has to be done to stop the free fall in property prices. This is one of the issues Obama's policies are addressing.

How to solve the first problem in getting the finance sector to tell the truth about the state of their finances is a real conundrum - perhaps there is a place in society for water boarding after all

 

[Jimmy Snyder]

Jimmy - don't you think the continuing slide in the Dow has a lot to do with the fact several of it's 30 constituents are finance companies?? With all the other constituents being dependent on these finance companies.

Good point. The S & P 500 is only down 19%, not the 20% required for a bear market.

Do you really think Obama's policies are what has driven the financial sector's share prices ever lower (some down 30% this past week alone) or do you think perhaps it is because of the steady flood of ever worsening news emanating from these businesses revealing problems in their balance sheets created long, long before Obama's inauguration??

But I already conceded that these problems go back to the Clinton Administration. It will surely be years and perhaps decades before we get back to the prosperity we enjoyed under Bush. I consider the current Socialist policies to be unproductive and the main cause of the ongoing collapse.

 

[Art]

Good point. The S & P 500 is only down 19%, not the 20% required for a bear market.But I already conceded that these problems go back to the Clinton Administration. It will surely be years and perhaps decades before we get back to the prosperity we enjoyed under Bush. I consider the current Socialist policies to be unproductive and the main cause of the ongoing collapse.

And how many of the constituents of the S & P 500 are finance houses

You really have missed the fundamental point of this crisis. You were never prosperous under Bush. It was all one giant illusion which has now come crashing down.

You can enjoy the same type of prosperity you had under Bush any time you feel like it. Just take your credit cards and go on a spending spree. The downside being of course, that like the US economy now, you will eventually have to pay for it.

 

[turbo]

But I already conceded that these problems go back to the Clinton Administration. It will surely be years and perhaps decades before we get back to the prosperity we enjoyed under Bush. I consider the current Socialist policies to be unproductive and the main cause of the ongoing collapse.

The comedy is quite entertaining, jimmy. Unfortunately for those that might not have been paying attention during flush times, you might be misleading them. When did we slash deficits and run surpluses? (Clue: not the Bush years.)

 

[Astronuc]

The Daily Show
http://www.thedailyshow.com/video/index.jhtml?videoId=215930&title=bethany-mclean
Bethany McLean weighs in on financial corruption and incompetence (2000-2008+).