March 2009

Trade Exports and Imports Implode

January's trade statistics are out and imports dropped 22.8% while exports dropped 16.4%. So, a ring of good news, our trade deficit dropped. But the bad news: U.S. exports have dropped 44% on a yearly scale. From the BEA:

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that total January exports of $124.9 billion and imports of $160.9 billion resulted in a goods and services deficit of $36.0 billion, down from $39.9 billion in December, revised. January exports were $7.6 billion less than December exports of $132.5 billion. January imports were $11.5 billion less than December imports of $172.4 billion.

It is Insolvency Stupid!

The Term Asset-Backed Securities Loan Facility (TALF) deadline has been extended. This doesn't sound good but you can be the judge:

Today, the Fed delayed by two days the March 17 deadline for submissions of proposed packages of debt that investors can buy with Fed financing. No agreements have been announced yet for proposed securities. Brokers and investors have had difficulty agreeing over contract terms for the Term Asset-Backed Securities Loan Facility, the people said.

After reading the article, I thought to myself is there an interest in or demand for such a facility present. Secretary Geithner is counting on TALF to unfreeze the credit markets. Look, I want to see him succeed and I hope I am wrong. But something tells me we should be focusing like a laser beam on the issue of solvency and dedicate our very limited resources to addressing this issue.

Obama's CIO Vivek Kundra Previous Close Employees Arrested for Fraud, Bribery

This is one hell of a story. One week after President Obama announced his new CIO of the United States, the FBI raided the very office where Kundra just held the position of CTO and arrested Kundra's former CSO and another former employee, for massive fraud and bribes.

D.C.'s top IT security official charged with bribery

Arrested this morning was Yusuf Acar, who currently is the District of Columbia's acting chief security officer; police said they found $70,000 in cash in his Washington home. Acar's annual salary is $127,468, according to court documents.

The second suspect arraigned on bribery charges is Sushil Bansal, CEO and founder of Advanced Integrated Technologies Corp. (AITC), a Washington-based outsourcing vendor that has won a number of contracts from the district's IT department.

China's premier worried about safety of U.S. debt

Looks like China has finally woken up to their predicament. It's not a question of if they do something about it, but when.

(Bloomberg) -- China, the U.S. government’s largest creditor, is “worried” about its holdings of Treasuries and wants assurances that the investment is safe, Premier Wen Jiabao said.

“We have lent a huge amount of money to the United States,” Wen said at a press briefing in Beijing today after the annual meeting of the legislature. “Of course we are concerned about the safety of our assets. To be honest, I am a little bit worried. I request the U.S. to maintain its good credit, to honor its promises and to guarantee the safety of China’s assets.”

Baby Strikers

On July 3, 1835, in Paterson, New Jersey, nearly 2,000 textile workers walked off the job. The strike was notable for several reasons.

For one thing the strikers weren't demanding more money, despite the fact that they only made $2 a week (adjusted for inflation, that would be $44 a week today). Their central demand was an 11-hour day (as opposed to the 13.5-hour days they were currently working), and only 9 hours on Saturday instead of a full day.
That in itself was significant enough. The first strike in American history to limit hours had happened only 7 years earlier, and was also in Paterson, New Jersey. That strike had been crushed after a week when the militia was called in.

Why Are They Allowed to Talk-up Their Stock?

The last couple of days we have been hearing from the CEOs of three of largest financial conglomerates (Citigroup, Bank of America and JP Morgan Chase). All three are talking up the profitability of their companies. And of course as a result of public statements about profitability the price of their respective stocks goes up. How convenient is that? Is this stock price manipulation? What they fail to mention is the hundreds of billions of dollars in toxic stuff still on their balance sheets.

There was a time when a person could get in trouble with the Securities and Exchange Commission (SEC) for making publicly misleading statements. But these CEOs statements are probably border line legal. Besides, I am sure that the SEC has its hands full with other matters.

U.S. health care system has become a liability for global economy

It really says something when the health care system of our country isn't just a danger to American workers, but to the entire global economy.

Americans spend $2.4 trillion a year on health care. The Business Roundtable report says Americans in 2006 spent $1,928 per capita on health care, at least two-and-a-half times more per person than any other advanced country.

In a different twist, the report took those costs and factored benefits into the equation.

It compares statistics on life expectancy, death rates and even cholesterol readings and blood pressures. The health measures are factored together with costs into a 100-point "value" scale. That hasn't been done before, the authors said.

The results are not encouraging.

Record fall in household net worth

The fact that it is happening shouldn't surprise anyone, considering the housing bust and the stock market crash. But the size and speed of the decline is still breathtaking.

The net worth of American households fell by the largest amount in more than a half-century of record keeping during the fourth quarter of last year.

The Federal Reserve said Thursday that household net worth dropped by a record 9 percent from the level in the third quarter.

The decline was the sixth straight quarterly drop in net worth and underscored the battering that U.S. families are undergoing in the midst of a steep recession with unemployment surging and the value of their homes and investments plunging.

Net worth represents total assets such as homes and checking accounts minus liabilities like mortgages and credit card debt.

Retail sales stabilize!

A couple of weeks ago I speculated that the US consumer may be coming back from the grave.

Today, Bloomberg reports that:

Sales at U.S. retailers in February fell less than forecast and January’s gain was almost double the previous estimate, indicating the biggest part of the economy may be starting to stabilize.

Purchases decreased by 0.1 percent, led by the slump in demand for cars, following a revised 1.8 percent jump in January, the Commerce Department said today in Washington. Excluding automobiles, sales unexpectedly climbed 0.7 percent.

Please note that gasoline sales, which continued to (cough, cough) tank, are a significant part of even the -0.1% decline.

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