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This was a big day for economic reports and the Case Shiller Q4 report, the Consumer Confidence Index, and the FDIC Q4 report came out with not-so-surprising results. Since I am occasionally accused of cherry-picking negative data, I wish to point out that the following is a report and analysis of the data as it [...] The core Consumer Price Index fell for the first time since 1982–0.1%–in January. Economists are lauding this deflation as a good thing on the theory that it gives the Fed more flexibility: in keeping interest rates low, as they have been doing, they don’t have to worry about inflation. I’m not sure what they mean [...] The word is out that the Fed will rely on money market funds to help sop up the “excess” liquidity created by the Fed’s record shattering explosion of credit. The Fed has been discussing it’s “exit strategy” ever since they pumped huge amounts of credit into the markets since mid-2008. The dilemma, in Ben Bernanke’s mind, [...] President Obama used his bully pulpit on Thursday to chastise banks and bankers while announcing a punitive tax on them to assuage an angry populace. Is his rage against the big paydays justified? Not for the reasons he [...] This has been a phenomenal year for the economy. There have been major, fundamental changes that will affect our lives for many years to come. I don’t see these changes as a good thing for the short or long term. These changes are generational in that they don’t occur often and they will radically impact the [...] By Jeff Harding.
I’ve been thinking a lot about gold lately. Especially now that Nouriel Roubini has come out and trashed the noble metal (see Tyler Durden’s article). Anyone who tells you they know what’s going to happen with gold is guessing. Roubini is guessing. Roubini also makes some fundamental errors in his analysis, and [...] By Jeff Harding. Since the biggest financial collapse in world history was built on credit related to housing, it is pretty obvious that we should be paying very close attention to that market. The reasons are complex, but a recovery must be based on the liquidation of bad debt. The sooner that happens the quicker a recovery [...] By Jeff Harding. The Commerce Department announced Thursday that GDP grew 3.5% in Q3 2009. This is the “Third Quarter Bump” I had been expecting. Economists and the news media are jumping on the “It’s Over!” bandwagon. Their conclusion is based on the premise that government spending (“stimulus”) will actually create real economic growth. It won’t and never [...] Four hotels owned by Beanie Baby tycoon and Montecito resident, Ty Warner have a $425 million loan due in January, 2010. S&P just put the bond that the loan backs on “credit watch.” The loans are on the Four Seasons in New York, the Four Seasons Biltmore Resort and the San Ysidro Ranch, a 38-room [...] By Jeff Harding. As readers of this blog know, I am a big fan of Nassim Nicholas Taleb, author of Black Swan and Fooled By Randomness. He is an independent thinker and he has enlightened us on some basic epistemological issues about investment risk. He seems to embrace the Hayekian-Misean concepts of the fallacies [...] The FDIC is proposing new rules that will allow banks to lower underwriting standards and capital requirements in order to encourage them to rewrite commercial real estate loans. This will cause more deflation, stagnation, and tightening of credit and lengthen the [...] By Jeff Harding Our banks are not in good health. By any measure they are still fragile because their capital ratios remain low. What does this mean? The Tangible Common Equity (TCE) Ratio is the equity of a bank minus its preferred shares, goodwill and intelligible assets as a percentage of tangible assets. The Tangible Common Equity [...] By Jeff Harding The Wall Street Journal reported on the fact banks are still contracting credit. They reported that the 15 largest banks’ loans shrank by 2.8% in the second quarter. They blamed it on tighter lending standards and lesser demand for loans. Here is David Rosenberg’s (Gluskin Sheff) take on the data: AN ‘F’ IN FINANCE We highlighted [...] By Jeff Harding Here is David Rosenberg, chief economist and strategist for Gluskin Sheff on bank liquidity. Rosenberg was formerly the chief economist for Merrill Lynch. He called the Crash and is a perceptive guy. I am reprinting this to show you that I am not the only one talking about deflation. This is an excerpt on [...] By Jeff Harding I wasn’t going to report on the bank stress tests because I saw it as political theater rather than as anything significant. I knew it wasn’t going to be a rigorous test. It’s like the physical education requirements in public schools where they have lowered the standards [...] There has been a huge controversy among economists, politicians, regulators, and bankers on how to deal with bank assets that have lost value. There is a FASB rule (Statement 157) that requires public companies (i. e., banks) to value some of their capital assets on their balance sheets at fair market value. This is the [...] |
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