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Frontrunning: September 29
- SEC weighs new rules for lending of securities (WSJ)
- GE's Immelt warns US recovery slowest in decades (AP)
- Fed may wait too long to raise rates, says Steve Hanke (Bloomberg) as if there was any doubt
- Is Paulson considering merging CIT and IndyMac, or is he still just accumulating C (NY Post)... Yes, the NY Post
- FDIC seeking to pocket years of bank advances to pretend it is not insolvent (FT)
- A week after claiming the opposite, Japan has read an econ textbook and now is intervening to keep the Yen weak (Bloomberg)
- UBS to sell Paine Webber but not yet (Reuters)
- BA launches New York-London Business-only service (WSJ)
- The Fed continues to operate blindly (RCM)
- Michael Moore: America's Teacher (The Nation)
- As subprime lending crisis unfolded, watchdog Fed didn't bother barking (WaPo)
- Intelligence and integrity personified: Bove raises Citi price target to $6.50, never mind the pro forma market cap
- Matt Taibbi on Zero Hedge (True/Slant)
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Matt Taibbi
+1
From Zacks: "Total rail shipments were down just 10.7% from year-ago levels in the last week. That is a nice improvement over the four-week average of a 13.8% year-over-year decline, which in turn is an improvement over the quarter to date 16.6% decline and even better than the year to date 18.1% decline. Two major areas have now moved into positive year over year comparisons, Grains and Chemicals."
Why do negative rail data make it to ZH, but positive ones don't?
If you drink more than 4 oz. of ZH Kool Aid a day, on a long enough timeline, your brokerage account balance will approach zero.
I agree it would be nice to see good news here also. But I don't recall where Tyler claimed to be your financial advisor. Who ever said that right and wrong and profitable are all aligned? Don't be naive.
Last year's week had Hurricane Ike. Something you neglected to mention. Comparisons are getting easier post Lehman. That does not mean things are getting better, just not getting worse. Rail car loadings are basically flatlined at 18% lower than last year and 25% lower than 2007. They have not moved more than ~2% for the last 10 weeks. They are higher than they were in winter but they have not shown any real sign of turning up. This data does not in any way support a bullish case in stocks despite the many attempts to use it in such a manner. Two weeks ago analysts tried to use this neglecting to mention the previous year had 2 hurricanes and the Labor Day holiday. I guess those things do not matter as much as being bullish regardless of facts.
Because the number itself is decieving and part about what this cite promotes: thinking beyond a headline number. Rail shipments may be down less this week year-over-year and than the previous week's year-over-year decline, but the nominal amount of rail shipment traffic is still less. Looking for slight upticks in the change of decline year-over-year ignores the fact that rail traffic is on 1993 levels. Next year, even if the same amount of rail shipment occurs, this metric of weekly year-over-year change may be positive, but that doesn't mean the situation is improving.
And given that there are many in the financial community that use this metric as a indicator of future economic growth (inventory movements generally give you a good idea of consumption later), this metric is one of many datapoints pointing to a continuing worsening economic outlook.
long-shorty...the data is an improvement. not unexpected with odds being in favor of some sort of inventory rebuild. as to grain, umm, it's kinda harvest time and the increase in food stamps has clearly assisted.
i would add that the case/shiller showed increases in home prices. i would further add that there is a shadow inventory of approx. 7 million homes not on the market, that are being held back by banks so as not to take a hit to capital, aided and abetted by regulators who are not enforcing regulations.
I agree with your point that selective reporting of data when it is negative is something to be avoided.
With regard to the most recent weekly number, it should not be surprising that the rate of decline versus prior year has moderated as we are now cycling last year's post-Lehman meltdown. If you look at the quarter to date and year to date numbers, the declines of 2009 are roughly the same versus 2008 and 2007, indicating 2008 was roughly flat versus 2007. However, if you look at the most recent week, the 2009 shipments are down 10.7% versus 2008 but down 16.7% versus 2007.
Yesterday JPM's Winters called out bankers for the greedy self serving should be taken out back and severly beaten with a rubber hose then thrown in jail bastards they are, today he is gone
Via Dealbreaker
http://www.businesswire.com/portal/site/home/permalink/?ndmViewId=news_view&newsId=20090929005656&newsLang=en
Maybe it's the other way around. Winters knew he was leaving (probably didn't play well with others)and he wanted to get in an honest/cheap shot before leaving.
"FDIC seeking to pocket years of bank advances to pretend it is not insolvent "
The sickest part of that plan is that the FDIC will allow banks to keep the amount they pay in advance as capital on their balance sheets. So the same singular fiatco can be counted as an asset on two separate balance sheets. Better banking through institutionalized fraud!
In a corrupt world the golden rule is as follows. He who controls the gold and makes or interprets the rules does anything they damn well please.
It's all about plausible deniability.
That makes no sense. As more banks fail, what will the FDIC be giving insured depositors, IOU's from other banking institutions?
Thanks for that.
I was wondering how they would attempt to implement such a plan.
I thought of last week's failed Georgian Bank with $2 (?) billion of deposits. If I understand the terminology correctly, a 10 basis point charge is .001% and three years at that rate is of course .003%. That would require a bank that is already on the edge, like Georgian if it was still around, to come up with a $6 million payment.
Of course, if you can just say you paid it and not pay it but get credit for paying it.....
The sickest part of that plan is that the FDIC will allow banks to keep the amount they pay in advance as capital on their balance sheets. So the same singular fiatco can be counted as an asset on two separate balance sheets. Better banking through institutionalized fraud!
Is this a part of Bernie Madoff's work detail?
Just imagine if you are a small community bank and you had been levied double the amount of FDIC premiums last year. You now have the "pleasure" of paying those doubled fees 3 years in advance. It really makes you wonder if the FDIC really wants to keep smaller marginal banks in business.
Meanwhile, the TBTF banks will continue to operate as if nothing has happened. Well, except that they'll be paying premiums on someone else's money.
BTW, the accounting for this is "sound" in the sense that those future payments in Year 2 and 3 should be considered accrued expenses. Doesn't help the cash flows any, though.
This does support the theory that 'actions behind the scenes' are geared towards putting the small-mid banks in the hands of the banksters. Again.
Criminal. At least this time around we have the internet and forums to shine a light.
Thank you for the clarification on the "accrued expenses" point. For any other curious folk I present below a great explanation (with examples) of how this accounting method works. Long story short, as with all government directed save-the-world operations, this is a kick the can game that puts yet another ticking time bomb on banks balance sheets.
http://www.moneyinstructor.com/doc/accruedexpense.asp
<This method of accounting for “accrued” expenses is not utilized by many of the small businesses in operation today; however, it is one of the biggest reasons for business failure today: a lack of anticipated expense, especially in the area of fixed expense.>
It's not an "accrued expense", it is a prepaid expense. When you pay 3 years of fees in advance, under GAAP you carry the prepaid expense as an asset and reduce it as you charge the appropriate amount of expense to earnings in each accounting period.
See this is why I like these comments sections...second and third opinions are a must for issues like these where the government directive is obfuscation in all maters financial. Thanks!
Yes, Green... that is indeed correct. My apologies for the brain fart.
Banks are essentially taking the cash hit today and "prepaid expenses" is the accrual accounting item that gets debited over time. In this case, banks will get to report less losses... but over a longer period of time. :)
What in the world was I thinking????
I do the same thing in my personal life.
I go to the bank and ask for a small loan.
They ask, what do you have to show as an asset, as collateral?
I say I have prepaid 6 months of my auto insurance and they quickly show me the door.
"It really makes you wonder if the FDIC really wants to keep smaller marginal banks in business."
Can you say "Banking Oligipoly", boys and girls? I know I sure can.
http://www.forbes.com/2009/09/28/mandelbrot-madoff-math-intelligent-investing-cycles.html i have been saying the same thing for years now, and everyone laughed at me when i said it. I dont rank Mandelbrot high on my list of top mathematicians( Godel, Grothendieck, Gauss ), but he is nevertheless brilliant. Read this article.
Thanks. "the road to the mean is quite chaotic"
I <3 fractals
Thanks for the link. Just finished _Fractals and Scaling in Finance_. The wisdom makes up for the fact that it is barely readable. If you believe this (I do), then MPT is meaningless, and all you can do to allocate assets is a qualitative approach involving your best guesses. What's shocking to me is that Eugene Fama was ever a student of Mandelbrot.
In addition to the most excellent article on ZH - Taibbi has just published this
An Inside Look at How Goldman Sachs Lobbies the Senatehttp://trueslant.com/matttaibbi/2009/09/29/sec-weighs-new-rules-for-lend...
Anyone care to comment on the GOLDMAN SACHS FACT SHEET that they passed out to members of the Senate and Congress? Hard to type while laughing so hard...
http://trueslant.com/matttaibbi/files/2009/09/goldmanlobbying.pdf
Well said Mr. Taibbi. I don't give TWO SHITS about what the MSM or its "journalists" (using the word journalists very lightly here) has to say about ANYTHING, much less ZH. They have lied so much and for so long - while the country was being thrown to the wolves - that their credibility is already a big fat ZERO.
Agreed. If people want to understand what ZH is all about, all they need to do is look at a chart of the S&P since March 1996 to March 2009, you could have skipped 13 years of investing in the S&P and bought in at the same price.
Or try to define the term "jobless recovery", or look at how many net new jobs have been created in the past 10 years.
People hear the rosy news and figure they are being lied to, so look elsewhere for answers.
I didn't look at the S&P timeframe from March 1996 to March 2009; however, my guess is that it is flat (as you reference "buying in at the same price"). That being said, you've only touched upon the NOMINAL app/dep. Try solving for the REAL app/dep and I think you'll find even worse results on an inflation-adjusted basis......
We're seeing a day of reckoning in the journalism industry (yet, perhaps not, as already there's talk of a bailout for media lame-assedness). The media has cozied up with the elite agenda and the reporting sucks as a result. I watch ZERO TV, listen to ZERO radio, read ZERO newspapers and mags, but I do read ZERO HEDGE. I have a well-developed bookmark list of news sites & RSS feeds in order to understand what's going on in the world. Taibbi did a good one here. Glad to see his support for ZH too.
Comment on NYMag story.
I refuse to believe that Dan Ivandjiiski is the true captain of this ship. I think of him like a reader who use to post comments back when this site started. That readers ID was 'Shill'.
Dan Ivandjiiski buys 1000 shares of Hoola-hoop holding corp the day before a big announcement (~$4000 worth of stock)?
That's like waving a red flag in the face of FINRA and saying "audit me I'm a dummy".
Apologies if already mentioned somewhere. Another hedge fund guy bites it:
http://www.foxnews.com/story/0,2933,556324,00.html?loomia_ow=t0:s0:a16:g...