Archive for January, 2009

The New York Stock Exchange reduces its listing requirements from $25 million in minimum market capitalization to $15 million. They call it temporary, but how long is “temporary”?

The new Secretary of the US Treasury Master Geithner and boss of the boss of the IRS intentionally underpaid his taxes for a series of 4 straight years, and when he was caught on two of the years, properly paid for only two of the four years. Only when he was in the nomination process to be Secretary did he make good to the IRS for the balance he underpaid. (Oh, by the way, he must have perjured himself under oath in saying “Oh, I forgot.” But that is a story for another day.)

Not to beat on Master Geithner but, Master Geithner, even before earning the Senate’s blessing to carry on the irrational and inconsistent policies of the Goldman Sachs Governmental Programs (aka Paulson and Friends), has begun a new WAR with China. He has explicitly stated verbally and in writing that China is manipulating their currency. Meaning that He and Our New Fearless Leader President Obama believe that the Yuan is undervalued relative to the dollar, as China has stepped in over the past year and stopped its long-term appreciation against the dollar. Any Econ 101 C grader or better knows that it China did not brindle its Yuan, then the value of their US $ investments would fall, their appetite for US Treasuries (at a time when we desperately need them to buy $3 trillion USD of our bonds) would collapse. Their banks would become troubled and their economy, rather than being on a growth mode and trying to stabilize would be thrown into a state of chaos, not dissimilar to that of out own. WHY WOULD HE TRY TO TAKE THEM DOWN WITH US? WHAT IS THE BENEFIT?

China is considered one of the global leaders in capitalism!!! With the recent and further steps in US Socialization and Nationalization of Companies, Industries and Spreading of Wealth, China is better looking than we are. (Unless the mirror we use is warped, fogged and scratched!)

NY State’s new Senator to the US Congress is a Democrat with Strong Republican traits (oh, I almost wrote “taints”.) A committed member of the NRA, advent opponent of gun control, an anti-fan of the GLBT and others groups, and an ardent “non-compromiser”. At least she we know she won’t be toeing any party lines as she goes in!

Russia can shut down its gas pipelines supplying Central and Western Europe and hold them at ransom, as we saw over the past two weeks.

Unofficial underemployment in the US is at an all time high in excess of 20% currently and projected to hit 28% before this thing turns.

Detroit will stop building and designing cars for car buyers but instead to please their political owners and our new industry/political czars or dictators.

After the worst year in the stock markets’ history, the US markets continue to plunge in the first three weeks of the new year. So much for the optimism from a new administration and “Hope and Change”.

Mortgage rates on the conforming 30 year have increased almost 0.5% even though Uncle Sam and his family members have been talking about moving it lower. (What, are they now powerless? Or are their capabilities limited or muted?)

Please help me out. Add some additional ideas, as I know I have only touched on the tip of an iceberg.

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Ge, which had for all intents and purposes closed down GE Capital, its finance division, in November, has finally announced layoffs.

Back in November, GE very quietly announced that it would not be doing any financing through GE Capital, except to only the highest rated credit risks. They completely killed their Senior Bank Lending programs, their Health Care Financing, their trade financing and reviewing of most new deals.

Their announcement came as a surprise to Wall Street investment bankers, who had come to rely on GE Capital as the leading source for Senior Bank Debt when doing M&A. With GE out of the market, hundreds of deals died on the table in the 4th quarter.

GE had inidicated they would review their position re GE Capital and new lending in the first quarter. They had made some remarks in a news release, but it was very unclear as to what steps they were taking.

With the layoffs announced today, comprising of 11,000 highly paid financial professionals (15% of the employees of GE Capital), GE’s intentions and expected operations are quite clear.

GE Capital, which had once generated approximately half of GE’s net income, will be no more as we knew it. Thus, GE’s earnings, as we knew them, will be no more.

The main questions that still exist have to do with the level of potential write-offs that exist on GE Capital’s balance sheet.

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In his article, which you can read at http://www.forbes.com/manufacturing/forbes/2009/0202/031.html?story_url=http%3A%2F%2Fwww.forbes.com%2Fforbes%2F2009%2F0202%2F031.html&username=MoneyAssistant&email=dijana.howard%40gmail.com&title=General+Manager

you will note that he is very optimistic about the future of the industry. He firmly believes and I agree with him that 10-15 years from now, there will be more auto companies, rather than less. He believes that though the changes are traumatic, the ultimate outcome will be beneficial. The future industry will be stronger, more diverse, offer a greater variation of vehicle with various energy sources, and greater flexibility in environmental compatibility.

I agree, we have much to look forward to. After, we get through the current economic storms.

See layoffs for the month of January, by the largest US employers, at:
http://www.forbes.com/2009/01/09/january-layoffs-fires-lead-cx_kk_0109january09layoffs.html

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Amazingly, the US Department of labor reported only 524,000 jobs were lost in December. The market was almost overjoyed, as they had expected a number in the range of 650,000 to 750,000. The 524,000 did not include the “revision” to the prior months numbers downward by 154,000. Thus, adding the 154k to the 524k, one may come to a sum of 678,000, right in line with the nightmare expectations.

There is also further distortion due to a “birth-death” quotient applied by the Department of Labor, but we will not get into that here, except to say that it is currently making the reported numbers look better than they really are, rather than worse.

Other very weak numbers not reported in the headlines include:

Average workweek has declined to 33.3 hours among all employed workers in December. This is the lowest number of hours worked since Uncle Sam started watching these numbers in 1964. (Some economists anticipate that this number will correlate to another 500,000 job losses in the coming months.)

Since January 1, nine calendar days ago and 6 business days ago, major employers (those with 5,000 plus employees each) have announced job cuts of more than 30,000. On a daily basis this is an average run rate of 5,000 per day, or annualized rate of additional 1.1 million of job cuts!

Some may say that the run rate of 1.1 million is less than half of the newly unemployed of 2.5 million fellow Americans in the US during 2008, but there are numerous other facets as well.

Keep in mind, when an unemployed worker takes a job at because they must at 30%, 50% or 75% of their former compensation, they are no longer statistically unemployed.

Key numbers to continue to watch includes average compensation per hour, average numbers of hours worked, and the U6 unemployment numbers which reflect a much broader and economically relevant calculation of the unemployment levels.

Also check out http://alphainventions.com/ a great website for all new posts!

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Citi yesterday agreed to “cramdowns” for resetting mortgage amounts and rates for troubled borrowers.

Politicians all across America declared that this was a breakthrough, etc.

One would not think it at all surprising though, given the $45 billion pumped into Citi by our great Uncle, and our Uncle’s willingness to absorb more than $300 billion of future Citi losses.

Socialism clearly has some benefits. With a tight leash (like Citi is on), the master can dictate many things.

It is amazing of late to watch the news wires and see the number of successful business people who are committing suicide due to the “Red Plague” and its economic chaos.

Yesterday, we read the Steven Good of the Sheldon Good Real Estate Auction house committed suicide.

The day before we read that Adolf Merckle, one of Germany’s wealthiest men, committed suicide as his business conglomerate began having finance problems brought on the the credit crisis and the global economic slow down.

There have been hedge fund managers in the US and England who have given up hope and have left their families, as well as Rene-Thierry Magon de la Villehuchet, a private investor and aristocrat who trusted Madoff with his family fortune and the fortunes of his clients.

All these men have been successful, powerful, professionals with years of experience, as well as diverse skill sets.

The question is “Is the situation so dire as there is no escape, no hope, no solution?” We should hope and pray not.

If these men, at apexes in their careers and industries, have no hope, what about you and me? What about those folks being forced from their homes? The unemployed, the folks with credit way over their heads, the people whose life is more of a daily struggle than a “success story”.

Each should be thankful. Irregardless of how dire seems appear, there are always solutions, answers and ways of resolving things, without “escaping to the next world”.

This will get better, they always do. This time is no different in that regard. There will be opportunities ahead. Staying alive is important to future success!

Today’s Wall Street Journal had a small article buried within the paper which once again demonstrated how screwed up our American Government/Financial Systems are.

See http://online.wsj.com/article/SB123094029211850265.html

Fannie Mae announced on Monday that it is raising its fees to lenders for guaranteeing or buying certain mortgages. The article notes that the fees will increase to 3.25% of the loan amounts after April 1st, from the current 1.25%.

At a time when our Federal government is spending billions to buy up mortgage paper with the effect of lowering market rates for conforming mortgages, the two agencies now under conservatorship have the gaul to raise the fees. This has the same impact of adding 2 points to a mortgage or stepping the rates back up.

The Federal Housing Agency spokesperson has stated that they will review the public’s objections to the rate increase.

Crazy, but believable…………… Help us Barney Frank!!!!


Congrats to Chip for taking such a dire subject and injecting a sense of humor and a bit of hope.

From our perspective at MoneyAssistant.org there is a ton of pain ahead. In addition to expected spikes in unemployment and further underemployment, tightened credit and higher interest rates, and expected deficits at all levels of government, housing and other asset values are continuing lower.

With an expected $2 trillion of consumer debt defaults over the coming year, many of us will either be in various modes of workouts with our lenders, creditors and governments.

There is much to fear out there in the business community. This is evidenced by continued severe tightness of credit markets, recent bond issues by some fairly solid companies at rates between 13% and 16%, the bond markets pricing in default levels of 12%+ (more than 1 in 10 large companies are expected to go bust), and corporate valuations that are at 60% of values just 12 months back.

Thankfully, Uncle Sam has put bailouts, restructurings, recapitalizations, and HOPE into the current language of our economic chaos (I refer to it as the Red Plague.) If they will expand the circle from Wall Street, Banks, Detroit, to include Main Street and its small businesses and the consumers/homeowners, we may all survive and be in better shape at the end of this ordeal.

See https://guruatmoneyassistant.wordpress.com for additional comments and thoughts.
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More on Economy
Read the Article at HuffingtonPost


Great article.
Lots of risk and parallels, but fortunately (hopefully) different due to FDIC protection of depositors and fast government intervention.

See additional thoughts at https://guruatmoneyassistant.wordpress.com
Read the Article at HuffingtonPost

Two Wall Street Journal columns jump from their website today.
After Dow’s Collapse, Guarded Hope

After the U.S. stock market’s third-worst year in more than a century, many investors are hoping for a turnaround in 2009. But considering the pain that has continued for more than a year, they are reluctant to bet on it.

Stimulus Versus Recession

The U.S. is preparing massive efforts to battle the twin threats of deep recession and deflation in 2009. The results will affect the investment climate for years to come.

These two observations are right on target, but the impact and implications so grand, that the folks at the WSJ should be shouting from the building tops in Manhattan, Greenwich, The Hamptons, and DC.

First, it should not be understated but the International Monetary Fund had estimated financial security losses in the range of $1.4 trillion as of this past October. To date, US institutions have only written off less than $800 billion! The IMF estimates were before the $50 billion evaporation of Madoff assets and the severe financial market declines of late October and November.

Additionally, there have been several estimates in the area of $2 trillion for the total losses to be expected by the inability of the “two pillars” of homeowners/credit users and small businesses to obtain any lifelines quickly and without “strings” of steel to further sink them. The lifelines are not appearing on Uncle Sam’s drawing boards at the moment, which means that we should not count on them in the near future. Uh, oh!!

Current LIBOR based mortgage rates are in the area of 2.25% currently for up to $2 million!!! The rates are less than the average yield of a local CD for a few months. Fixed rate conforming mortgages are at less than 5% for 30 years. We can expect mortgage rates to further decline as the Fed continues to intervene in the market for Fannie and Freddie securities. (They have billions of $ in their pockets to manipulate the market and lower the rates further.) Unfortunately, other than the variable LIBOR loans, jumbo fixed mortgages are still in the range of 8% or so. Because the government is ignoring this sector of the market, there has been only increases in the rates as the riskiness of the credits have increased.

Banks are demanding more collateral, rather than less. In a time of declining asset values, with collateral worth less, fewer and fewer are able to meet the stricter lending requirements. Where is Super Paulson and our Hero Bernacke when we need them???????? Will HOPE and CHANGE help? Or should we turn to God as our only salvation?

Today’s WSJ made the analogy of an individual escaping from a very painful marriage. The journalist stated that this individual would be very likely to resist remarrying. The journalist paralleled the experience to a stock investor during 2008 and their fear of buying stocks in 2009. I thought this very appropriate.

In a world of great interconnection, with great uncertainties, the need for faith and confidence in systems and governments, unified and coordinated efforts are crucial. Given all we have seen from our government over the past year and years, can we have confidence? Should we have hope?

Given the way America has been raped and brutalized by Wall Street, can we have faith in the Heroes of Capitalism to save us?

Please share your thoughts and ideas………

Check out the referenced article of 30 Money Sites to check out in 2009:

Highly recommended and lots of good information.

Thanks Thursday Bram!!!

Link tag

According to a press release, “The Federation of Small Businesses is . . . calling on the Government, the banks, local councils and consumers to play their part during the year by providing support to small businesses in fighting regulation, accessing finance and maintaining cash flow to buck the increasing trend of business closures.”

The Federation for Small Businesses needs to do more than just issue a press release.

The government has financed the banks, protected Wall Street and back stopped the auto industry, but government and our political and financial leaders have ignored the needs and potential catastrophic impact of the small business failure.

Limiting interest rates is just one limited step. Encouraging banks to lend, promoting a major SBA program similar to “HOPE for Homes”, encouraging lenders to extend credit rather than reduce amounts available, are but a few of the many steps they could take.

The FSB is to be commended, but at the same time must call upon the communities across the US to mobilize and lobby Uncle Sam to work to protect our small businesses, their employees, and the core of the American Economy.

As a small business owner suffering from a reduction in income levels due to the recession, I am very familiar with the shortage of credit for small businesses. It impacts the small businesses directly, as credit cards and other signature loans are their liquidity lifeblood. Also, customers and clients rely on credit to purchase services and products and with credit levels being reduced and credit needs not being fulfilled, consumption and purchase levels are down significantly.

Much comes back to the Federal Government and their missteps regarding the TARP and providing capital to our banks. One would think that the government bailout would have helped the small businesses indirectly, but then again, nothing has been as “one would have thought” over the past 6 months.