May 2010

Trade Deficit for March 2010 - $40.4 billion

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The March 2010 U.S. trade deficit increased $1 billion from last month $39.4 billion (revised) to $40.4 billion. Exports were up $4.6 billion from last month whereas imports increased $5.6 billion from January.

 

March exports of $147.9 billion and imports of $188.3 billion resulted in a goods and services deficit of $40.4 billion, up from $39.4 billion in February, revised. March exports were $4.6 billion more than February exports of $143.3 billion. March imports were $5.6 billion more than February imports of $182.7 billion

Exports were up 20.4%, imports, 24.2% for the year and exports increased 3.2% and imports 3.06%.

Spillonomics - Some Job Loss Estimates on the Gulf Oil Spill

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The Atlanta Federal Reserve gives some estimates on the jobs at risk from the Gulf Oil Spill disaster. They are saying it's 132,000. That said, there are 2.8 million jobs in the region associated with tourism in 2008. In 2003, 71% percent of the jobs in the region are associated with tourism and recreation along the Gulf.

Gold hits new record on Euro fallout

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The price of gold surpassed its 2009 peak today, hitting an all-time record high of $1,232.50 an ounce. The reason for this is quite simple - Europe is printing nearly $1 Trillion dollar to stem their financial crisis and the markets think all that money will be wasted.
This is leading people to blasphemous conclusions.

“People are in panic mode,” said Matt Zeman, a metals trader at LaSalle Futures Group in Chicago. “There is absolute panic over the risk of contagion spreading to other countries in Europe. Yields on Treasuries are so low, people are starting to look to gold as an alternative.”
“This is the beginning of the unraveling of fiat currencies,” said Michael Pento, the chief economist at Delta Global Advisors Inc. in Huntington Beach, California. “Money has to be backed by something. People are beginning to realize that gold is the world’s reserve currency.”

Supreme Court nominee former Goldman Sachs employee

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It's not often that someone gets nominated to the Supreme Court after working for an investment bank that already has far too much influence in Washington.

The White House said Friday that Elena Kagan's membership on an advisory panel for the securities firm Goldman Sachs Group Inc. wouldn't disqualify her for a position on the Supreme Court.

Derivatives Reform is Under Siege!

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This is astounding. We have former Federal Reserve chair, Paul Volcker, attacking the derivatives reform bill currently in the Senate.

The provision of derivatives by commercial banks to their customers in the usual course of a banking relationship should not be prohibited.

Really? Why is it then only 5 banks, Goldman Sachs, JP Morgan Chase, Citigroup, Morgan Stanley and BoA are 90% of the derivatives market? Yeah right, that's really helping Joe Blow in his small manufacturing business in Ohio. Oh yeah, Joe Blow, running his $20 million dollar part business is really busy trading derivatives to hedge risk in a global market. Right, and he's also hedging to control his energy costs. Uh huh. Show me the numbers on that claim! Even more importantly, Joe Blow is an end user. There is no reason he, as a banking customer, has to trade derivatives with that bank.

FDIC chair Sheila Bair also came out blasting on stopping banks from gambling with customers and taxpayer money.

Fannie Mae Loses $11.5 Billion in Q1 2010

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Wow. Freddie and Fannie reported a loss $11.5 Billion dollars and sees no end in sight for future losses. From their press release:

Due to current trends in the housing and financial markets, we continue to expect to have a net worth deficit in future periods, and therefore will be required to obtain additional funding from Treasury pursuant to the senior preferred stock purchase agreement.

Fannie and Freddie asked for another $8.4 billion from Treasury and last month received $15.3 billion from Treasury, bringing the tally up to $92.7 billion dollars.

Our estimated market share of new single-family mortgage-related securities issuances was 40.8 percent in the first quarter of 2010, compared with 38.9 percent in the fourth quarter of 2009. Our mortgage credit book of business was $3.18 trillion as of March 31, 2010.

Fannie and Freddie also have a host of Mortgage Backed Securities on their books and look at these statements in regard to them:

  • Elimination of fair value losses on credit-impaired loans acquired from MBS trusts we have consolidated, as the underlying loans in our MBS trusts are already recognized in our condensed consolidated balance sheets.

Europe Does a TARP Redux of almost $1 trillion dollars

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Europe is putting up a $952 billion loan package.

European policy makers unveiled an unprecedented loan package worth almost $1 trillion and a program of bond purchases as they spearheaded a global drive to stop a sovereign-debt crisis that threatened to shatter confidence in the euro.

Jolted into action by last week’s slide in the currency and soaring bond yields in Portugal and Spain, the 16 euro nations agreed to offer financial assistance worth as much as 750 billion euros ($962 billion) to countries under attack from speculators. The European Central Bank will counter “severe tensions” in “certain” markets by purchasing government and private debt.

So, instead of bailing out banks, this sounds similar to TARP except it is to bail out European countries.

Meanwhile, the Federal Reserve is opening up currency swaps to loan to foreign central banks. From their press release:

Press Release
Federal Reserve Press Release

Release Date: May 9, 2010
For release at 9:15 p.m. EDT

The Ouzo Effect Redux

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When the stock market plunged 1,000 point in half of an hour on Thursday, the immediate rumors were of a "fat finger" trader who punched in $16 billion instead of $16 million. It's a disturbing idea, that a single trader could cause such financial destruction, but its better than the alternative - that the stock market plunge happened while the markets were functioning the way they were supposed to.

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