Cash For Clunkers
Empire State Manufacturing Continues Plunging, Drops From 23.5 To 2.55 In November, 34.6 In SeptemberSubmitted by Tyler Durden on 12/15/2009 08:45 -0500
Cash for Clunkers is long forgotten, and it is now time for another manufacturing stimulus: from 34.6 in September to 24.5 in October to a mere 2.55 most recently. Diffusion data suggested further contraction in margins, evaporation of optimism and an ongoing decline in inventories: the whole 5% of Q4 GDP is becoming a Liesmanian myth.
Christina Romer is one of Obama's chief economic advisors. But she has absolutely no clue what to do about this crisis. Her recent letter defending the Administration's policies is just the usual hack political stuff one would expect from them. She is typical of the problems in Washington. She means well, but she is fabricating the truth in order to justify their actions. Their approach to using government power is one we should all be afraid of. She spells it out quite clearly.
It appears that all the improvements in the housing market have not been due to market corrections, but are from government stimulus, and the numbers are fake. Such actions will only delay a recovery and housing prices will continue to fall.
Yesterday it was Philly Fed's Plossner, today it is Richmond Fed's Jeff Lacker who joins the chorus demanding an end to Bernanke's insane monetary policy of drowning the market with unprecedented liquidity which is not getting to consumers but merely propping Amazon stock at a bubblelicious 100x P/E. In a speech before the Charlotte Chamber of Commerce, Lacker stated: "The perception of inflation risk could be particularly pertinent to the current recovery, given the massive and unprecedented expansion in bank reserves that has occurred, and the widespread market commentary expressing uncertainty over whether the Federal Reserve is willing and able to promptly reverse that expansion... If we hope to keep inflation in check, we cannot be paralyzed by patches of lingering weakness, which could persist well into the recovery. In assessing when we will need to begin taking monetary stimulus out, I will be looking for the time at which economic growth is strong enough and well-enough established, even if it is not yet especially vigorous. Although it is hard to predict when that will occur, I can confidently predict that monetary policy will remain particularly challenging for some time to come." Then again, the stock market does not seem to share Mr. Lacker's concerns.
Don't say the market is unkind to Goldman. First the firm's employees are about to rake in all time record bonuses. Then, courtesy of of a rocking bear market rally, top-tick Goldman is about to get the hell out of dodge in another GS Capital Partners LBO, Adesa, basically a vehicle auction firm, which the firm bought in conjunction with Kelso in 2006. And who gets to pocket the underwriting fee? Why, Goldman. No way is the squid going to let any capital leave the firm. As for the company: prepare to own a 10x EV/EBITDA Craigslist knock off which will spew $100 million in free cash flow on a good year (and with consumers waiting for Cash for Clunkers 2 thru 100, don't expect a whole lot of car auction activity any time soon).
The Most Recent Recipient Of Obama's Middle Class-Funded Generosity: Key Largo's Ocean Reef Club For The Mega WealthySubmitted by Tyler Durden on 11/22/2009 20:12 -0500
A reader submits the following disclosure released by Ocean Reef Club, a country club, which very much unlike America's 35 million food-stamp recipients, has roughly a $35 million net worth cutoff for members, who enjoy such amenities as 100 foot yachts, a private airport, and two golf courses. It is precisely in connection with golf that we see these very needy multi-millionaires follow in Wall Street's footsteps and proceed to redistribute wealth away from those who actually work for their money, to those who merely use the dollar as a temporary (or otherwise) replacement for one-ply Cottonelle.
The Federal Reserve's balance sheet hit a new all time record of $2.19 Trillion in assets, after an unprecedented spike of over $70 billion in MBS purchases pushed the number over the previous record from late April.
Birds are singing, the sun is shining and life is beautiful again. On the surface, the vital signs of our economy are improving with every economic report. In some areas, like unemployment, the rate of decline is decelerating; in others, like GDP, decline is turning into growth. The stock market is behaving as if the history of the last twenty years is about to repeat itself: recession will turn into a robust expansion.
And you thought the government was not out to screw you. According to a research report released by the Treasury Department's Inspector General for Tax Administration, over 15 million people may own $250 (and in same cases more than $400) on the tax "credit" received earlier in the year, purely as a function of how the tax break was set up by the IRS. The payment will come as either a smaller tax refund or larger tax bill. As a reminder, Obama's tax break earlier in 2009 (first of many) provided individuals up to $400 and couples up to $800 in one-time benefits. It turns out that money may now have to be repaid. And as the credit impacted 95% of all wage earners, the number of people impacted is estimated at about 15.4 million. But at least it got these 15.4 million soon to be angry taxpayers to consumer a little more than they otherwise would in Q2. And now, it is time for another "one-time" jolt to the system.
So many future bailouts to look forward to, so little time. So many cans do kick down the road via accounting adjustments, so few feet do keep doing the kicking. While I read this piece I was struck by my own reaction... not even $30 billion in deficit? This is peanuts! We've become so numb to bailouts that anything less than hundreds of billions seems like a normal part of Bailout Nation. Yet just over a decade ago the world was in a panic over hedge fund Long Term Capital and its gaping hole of $3.6 billion. How quickly we've adjusted to brushing off our shoulders handouts and bailouts 10 times that size. The cost for one of the smallest handouts, Cash for Clunkers was more than the bailout of LTCM in 1998. Need to manipulate housing prices higher? It's worth it! Only costs $16 billion; or with Cash for Cul de Sacs v 2.0 - $30B+. Peanuts.
The foreign exchange value of the dollar has moved over a wide range during the past year or so. When financial stresses were most pronounced, a flight to the deepest and most liquid capital markets resulted in a marked increase in the dollar. More recently, as financial market functioning has improved and global economic activity has stabilized, these safe haven flows have abated, and the dollar has accordingly retraced its gains. The Federal Reserve will continue to monitor these developments closely. We are attentive to the implications of changes in the value of the dollar and will continue to formulate policy to guard against risks to our dual mandate to foster both maximum employment and price stability. Our commitment to our dual objectives, together with the underlying strengths of the U.S. economy, will help ensure that the dollar is strong and a source of global financial stability.
No mention of Gold
Cash for Clunkers hangover is permeating everywhere, with the latest casualty being the Empire States Manufacturing Index General Business Conditions, which tumbled from 34.6 to 24.5 in October. Never one to leave on a sour note, the NY Fed's survey indicated that respondents are even more optimistic even as coincident data trends turn negative, curiously on expectations of deteriorating margins, and a hope that no additional cash will have to be spent as the "new normal" is attained.
Wherever his spirit rests, Benjamin Franklin must be livid. When the hardearned savings of ordinary people are looted to enrich greedy bankers, and when they are told that this process is necessary to make America prosperous again, no wonder so many citizens have displayed so much anger at “Tea Parties.” - Coxe Report
The one must read report this weekend.
Quantitative Easing Has Been A Monetary Failure; Persistent Deflation Means More Fed Intervention Coming SoonSubmitted by Tyler Durden on 11/12/2009 19:24 -0500
Economic observations courtesy of Fed Fund futures, and the Taylor Rule, imply that not only is the economy now worse than it was before the Fed embarked on the colossal monetization ploy that is QE, but that rampant deflation courtesy of a much worse economic picture than presented by the government, will force the Fed to launch QE 2.0 imminently. The probability of a Fed Fund increase for a long, long time is zero.
September Consumer Credit Lower By $14.8 Billion, Worse Than ($10) Billion Estimate; Consumers Refuse To BorrowSubmitted by Tyler Durden on 11/06/2009 15:10 -0500
Total consumer credit has dropped for the 8th straight month as consumers refuse to buy stocks while maxing out their credit cards, contrary to what GE, Bernstein and Bernanke want them to do. 4 more months and the US consumer will have given the administration the reflation finger for one straight year. Excess reserves to hit $2 trillion shortly.
Total credit came in at $2.456 trillion, consisting of $889 billion ($10 billion lower than August) and $1,5667billion ($5 billion lower than August). The later category is primarily related to auto purchases thus so much for the Cash for Clunkers attempt at releveraging.