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Weekly Market Wrap-Up

Russia to the US “You Call That Socialism?”

Russia is looking at a bail-out of its banks that would go further than the emergency action taken by the US, amid growing fears that bad loans could paralyse the country’s economy.

The proposal, one of several under consideration, would see the government issue OFZ treasury bills, a type of bond, to boost the balance sheets of the biggest banks. In return, the state would receive preferred shares. Unlike the US bank bail-out, the Russian scheme would see the government take board seats and have veto rights.

http://www.ft.com/cms/s/0/67bf237c-61a7-11de-9e03-00144feabdc0.html

 

Ben Bernanke’s BS Re-Cap.

11:45: The questions return to the “threat/no threat” debate. Bernanke say if the Fed wants to remove a CEO, it will do so. Just look at AIG, where the Fed fired the CEO as a condition of the insurance giant’s bail out. But I didn’t threaten to fire Lewis.

11:52: Rep. Cummings: Did you think that Ken Lewis was competent (at time of the Merrill deal)?

Bernanke: That’s not a yes or no answer. (Ben just won’t bite)

High noon: Rep. Clay.: Shouldn’t you have disclosed what you knew about the mounting losses at Merrill to the shareholders and to the broader public.

Bernanke: Again, he punts. “It was up to Bofa to disclose those losses.” Our job was to make sure the system was stabilized.

http://themessthatgreenspanmade.blogspot.com/2009/06/bernanke-testimony-recap.html

 

Congress Wants Fannie/ Freddie to LOOSEN Lending Standards!?!

Two U.S. Democratic lawmakers want Fannie Mae and Freddie Mac to relax recently tightened standards for mortgages on new condominiums. In March, Fannie Mae (FNM.N)(FNM.P) said it would no longer guarantee mortgages on condos in buildings where fewer than 70 percent of the units have been sold, up from 51 percent, the paper said. Freddie Mac (FRE.P)(FRE.N) is due to implement similar policies next month, the paper said.

In a letter to the CEO's of both companies, Representatives Barney Frank, the chairman of the House Financial Services Committee, and Anthony Weiner warned that a 70 percent sales threshold "may be too onerous" and could lead condo buyers to shun new developments, according to the paper.

http://www.reuters.com/article/GCA-Housing/idUSTRE55L39120090622

 

Private Sector Jobs Haven’t Grown in 10 Years

Between May 1999 and May 2009, employment in the private sector only rose by 1.1%, by far the lowest 10-year increase in the post-depression period. It’s impossible to overstate how bad this is. Basically speaking, the private sector job machine has almost completely stalled over the past ten years.

Over the past 10 years, the private sector has generated roughly 1.1 million additional jobs, or about 100K per year. The public sector created about 2.4 million jobs. But even that gives the private sector too much credit. Remember that the private sector includes health care, social assistance, and education, all areas which receive a lot of government support.

http://www.businessweek.com/the_thread/economicsunbound/archives/2009/06/a_lost_decade_f.html

 

Number of Mass Layoffs Hits All-Time High

The number of mass layoffs by U.S. employers rose last month to tie a record set in March, according to government data released on Tuesday that suggested the labor market has yet to stabilize.

The Labor Department said the number of mass layoff actions -- defined as job cuts involving at least 50 people from a single employer -- increased to 2,933 in May from 2,712 in April, resulting in the loss of 312,880 jobs. It was the largest loss of jobs connected to mass layoffs on records dating to 1995.

http://news.yahoo.com/s/nm/20090623/us_nm/us_usa_economy_layoffs

 

Investing In CDs Provides BETTER Returns Than Stocks

…you’re probably wondering how someone did by simply investing in 6 month CDs. The answer is for any holding period of less than 25 years, a stock market investor who made regular and equal contributions has actually underperformed a CD investor! Yes, you read that right for time periods of 1 – 20 years a CD investor outperformed the stock market by 1.6 to 20.1 annual percentage points.

Additionally, if one extends the time window to 50 years (clearly “long term”) CDs again have outperformed the stock market by 0.3 annual percentage points. Even when one extends out the time period to the full 59+ years (the start of the S&P 500 index); the stock market has outperformed short-term CDs by a mere 0.2 annual percentage points – not much of an equity premium.

http://globaleconomicanalysis.blogspot.com/2009/06/long-term-buy-and-hold-is-still-bad.html