hanson001

This Recession Ain’t Over

Great article and comments. Before working for the BLS for five years in consumer prices-CPI, I had all the concerns pointed out in this post and comments. Part of the problem with government numbers is that they become too complex over time.

Check out how many changes has been made to the CPI over the years. For instance, how can one measure the substitution effect, which is now a factor, to produce inflation numbers anyone would believe? All these "political changes" are screwing up what was once a great tool of measuring inflation. But changes also take place on the collection end of this data.

It's all way too complex for any reasonable person to collect. It's easy enough to collect data in a grocery. But try collecting price data from hospitals, repair shops, lawyers, and car dealerships, for example, and you run into a less than honest respondent on top of very complex data. Think about that real hard my gentle reader.

Add to this the way that government promotes people and you end up with management that wants everything perfect, but doesn't want to hear about how the data might not be correct. Do not ask and do not tell. Just like the teachers unions, they have to protect their secure income flow environment. And like our nation's policies, "leave it to the next generation to figure out."

Can not trust a damn thing anymore! Welcome to the new normal.

Wall Street Breakfast: Must-Know News

"The question remains whether BofA executives willfully chose to violate securities laws, or received advice from outside counsel" to do so.

Yes the devil made me do it.

Wall Street Breakfast: Must-Know News

"The U.S. dollar is safe as the world's reserve currency for now, but China took the first step towards a new reserve currency by agreeing to buy $50B of the IMF's Special Drawing Rights."

From my understanding of SDRs, they are made up of a basket of currencies of which the U.S. dollar makes up around 45% of the basket. The IMF can change the weight of the dollar (in the basket) based on exchange rates. If you purchase these, are you really diversifying away from the U.S. dollar?

If China wants diversification of its reserves why not just buy the other major currencies in the basket (from Europe, Japan, and Great Britain) in the currency market? Is the IMF the new satan?

It makes no sense for China to desire a weaker dollar however. Like Japan, it's in their interest to have a strong dollar and thus great dollar reserves. This closes the trade imbalance loop and keeps their goods and services affordable to U.S. consumers, though I understand they worry about their dollar investments depreciating. Still what do you do? If I were China, I would purchase hard U.S. assets with that ocean of dollars. It looks like a perfect time for them to be shopping.

Wall Street Breakfast: Must-Know News

"Freddie Mac (FRE) confirmed Charles E. Haldeman Jr. will be the company's new chief executive, becoming Freddie's fourth CEO in less than a year. "

Four in less than a year. Who would think it? And who would want to be the CEO of a company ran by the government that is wanting you to go out and create bad loans that will eventually get you fired?

You would have to be a complete numbskull to take that job. The person willing to take that job proves he/she is not up to the task of producing profits for the stakeholders. What a bunch of idiots. Get the cash while you can or before you get fired I guess.

Wall Street Breakfast: Must-Know News

"There simply aren't any guaranteed investment vehicles that will pay more than taxes and inflation. "

And there is our problem. The government and most everyone else will not let prices hit their new natural equilibriums. Notice the complete shifts in supply and/or demand curves for a great deal of products and services.

Wall Street Breakfast: Must-Know News

I hope Ford makes it through this slump and doesn't go to the taxpayer for a bailout like GM and Chrysler. I bet not focusing on how someone else is going to save you might produce a better business plan and better products. My next vehicle will be a Ford. Now, how about these mortgages.

Here we are with false interest rates (not market driven) for mortgages. The government and American people seem to be "all in" on the bailout of the most outrageous over consumption of an asset in history. I would like to ask everyone SA to originate your own mortgages at 4 - 4.5% and carry them on your balance sheets. If you choose to do this, I bet you would also be in line for a bailout in five years.

What's happening is crazy with no thought of the future. Interest rates will be heading a lot higher in the years to come because of all the world's government involvement.

Home prices should be allowed to adjust in the free market. The prices are too high for the new slower growing economy of the future. Someone has to take the loss. Looks like once again, it's the taxpayer, or the taxpayer that lived within his/her means.

Wall Street Breakfast: Must-Know News

The table of contents of Obama's new budget displays a heading Inheriting a Legacy of Misplaced Priorities. The verb, Inheriting, is used by Mr. Obama every time he communicates with the American population about the economy. This is a word he must use as he leads the country into greater problems. Use of this verb, he hopes, will get the blame off him. He is already looking out four years.

I can not wait for the next president to come and use the verb inherited. What happened to hope and change Mr. Obama. It looks like more of the same. Dang!

Wall Street Breakfast: Must-Know News

"What if AIG is BOTH too big to fail AND too screwed up to succeed ?"

That's what I am thinking axelrod. And this is what worried me when we started all this bailout mess. It is like we have to support a bunch of GMs; entities sucking away resources and giving nothing in return.

Wall Street Breakfast: Must-Know News

The economy is already destroyed and the factors of production must be allowed to move towards their natural equilibriums. What we are doing now will prolong the pain as we muddle through as the goverment moves the most certain cliff a little each time we near it. We desire to hold on to what we have lost but this will hurt the generations that come after us. If we don't realize this, we are no different from the politicians and institutions that got us into this mess.

The patient is already dead in his coma like state. All I ask is that you unplug the machine to save electrons. We are going to need them later.

Wall Street Breakfast: Must-Know News

I watch very closely as Obama makes his public rounds. The way a great deal of people react to his presence reeks of idol worship. I mean, please, all the screaming and crying. All we need now is 150 days of games and free bread tossed into the stands.

The government needs to keep its dirty hands out of the markets. The moral hazard all this activity is creating will destroy us. Everyone is trying to save this economy, eventhough many saw years ago this day would come. All this tampering, trying to get back to the way things were, keeps the markets confused and introduces too many new variables in an already complex global economy.

Let nature take its course. We will probably have to nationalize the banks for a time to be able to wipe out all stakeholders (including me) and the dirty rotten CEOs and managers who after studying risk in business school, allowed the institutions to be run like some kind of gambling house.

Pain is good. It teaches one some important lessons. And letting businesses and consumers go bankrupt will allow dollars to go to more capable hands to eventually re-employ the idiots that got us into this mess, that is, the greedy business and consumer that leveraged too much.

Get ready for your lost decade friends.

Wall Street Breakfast: Must-Know News

"Parallel Petroleum Corp. (PLLL) will turn over half its interest in a natural gas field rather than pay to drill wells, underscoring how falling oil and gas prices have left smaller energy producers desperate for cash."

Chesapeake was paying some landowners in Louisiana (the Haynesville Shale) last year up to 22K per acre bonus and agreeing to 1/4 interest. This was when NG was trading around $14 per million Btu. Now it's under $5 and the little players might be good shorts. Heck, Parallel just gave their field away. That's some pain.

I hear the shale in Dallas can supply 6% of our nation's NG demand. The shale in Louisiana is four times that size and they are choking down the wells down here. And there are many other shales such as the Mercellus that could hold more gas than the Hanynesville Shale.

Chesapeake has a great deal of production hedged as does XTO. But I think unless a great deal of producers go out of business, NG prices will stay under $5 for longer than people think. Chesapeake's CEO stated months ago that the smaller and underfunded should start having real problems in the shales at the $5.50 price level.

Stimulus Watch: How the Devil Are They Going to Finance All of It?

Good post. I didn't know the 10 year had went up almost 100 basis points since December.

It bewildered me when the government stoped issuing the 30 year bond.This took place when long-term interest rates where trending down whick confused me to no end. Good thing they came back out with it in 2006.

Another weird thing is how the dollar has rallied as the government has issued all this new debt and the short-term rates (three and six month bills) are at historic low and almost yielding nothing. This doesn't make economic sense. I can only think the markets are saying that other economies will face a tougher time than the U.S. For example, the Euro is going for $1.28 and I remember not months ago it was in the $1.50 plus range.

The low yields of government bonds scare me. The risk is not priced in much like the junk bond and higher grade corporate bonds a couple of years ago. I look for the fed to monetize the debt because they will have to. How much of our paper do the Asians really need at this low yield? How long can the Treasury crowd out private borrowing, keeping the yields higher for corporate debt to the point that I wonder if they can make a profit with borrowing cost so high.

Seems like interest rate would be through the roof by now.

Wall Street Breakfast: Must-Know News

I was looking for the G20, when they met some months back, to come out with a coordinated stimulus package. Cerntainly they would see the importance of this coordination given the globalization that has taken place and the danger of trade wars given this global recession. It didn't happen.

Eventhough I really believe that equilibrium will eventually take place with the bad businesses going chapter 11 in the long-run, I would love to see a global Keynesian-type stimulus package just once in my life time. I would be Keynesian, if every country had net savings and not so much debt. That's why the Keynesian model, I believe, will never work.

Wall Street Breakfast: Must-Know News

"Legislators had sought out Citi's support, hoping banking industry support would help the bill be approved more quickly, and Citi was duly applauded for 'being open-minded' and 'playing a major leadership role.' Senate Democrats hope to include the bill in Obama's stimulus plan."

See, if you agree with the socialist in Washington, you are "open-minded" and playing a "major leadership role." Once you take the government money, they are going to run you. The tide is going out and now we see what dollar whores the CEO's are.

Tradermark's 13 Outlier Predictions for 2009

Loved it! Looks like you have a good feel for the behavioral sciences. What scares me is that your predictions sound a great deal like mine. Hopefully this is not the consensus because I need to trade in 2009.