June 2009

More Events Regarding Derivatives

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The headlines buried how AIG has more massive potential losses on their CDS portfolios.

learningmarkets:

According to AIG, the risk factor includes a super senior CDS portfolio with a net notional amount of $192.6 billion of AIG Financial Products Corp. and AIG Trading Group Inc. and their respective subsidiaries, collectively known as AIGFP, as of March 31, 2009. The portfolio represented derivatives written for financial institutions, principally in Europe, for the purpose of providing regulatory capital relief rather than for arbitrage purposes. The fair value of the derivative liability for these CDS transactions was $393 million at March 31, 2009.

IS it a tax or I won't raise your tax

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I don't know, is it just me that just because it is a fee, it is still a tax.

Obama told the people that he won't raise taxes for those earning under a certain amount ($250,000 or $200,000).

So first they raised the tobacco taxes. There were those that said, those people shouldn't be smoking so it isn't a tax.

Then there is this Cap and Trade Bill. In Europe Cap and Trade type of laws made the prices increase by $1,300 a year.

If the increase is caused by government, to me it is a hidden tax.

There is talk of taxing health benefits.

Then I read that Roger Altman writes under the headline, "We'll Need To Raise Taxes Soon". http://online.wsj.com/article/SB124631646572370703.html

"This suggests that, possibly next year, Congress will seriously consider a value-added tax (VAT)."

So this is what passes for "Good News" these days?

Submitted by on

It's almost embarrassing what they will try to spin as "good" economic news these days.

(Bloomberg) -- Home prices saw a “striking improvement in the rate of decline” in April and trading in funds launched today indicates investors believe the U.S. housing slump is nearing a bottom, said Yale University economist Robert Shiller.

“At this point, people are thinking the fall is over,” Shiller, co-founder of the home price index that bears his name, said in a Bloomberg Radio interview today. “The market is predicting the declines are over.”

“My guess would be that home prices are going to level off -- they’re not going to keep falling,” Shiller said in a separate interview with Bloomberg Television.

Wow! That sounds wonderful!

Consumer Confidence - Is this index overweighted?

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Oops, it dropped. Everyone run for the hills.

Conference Board:

The Conference Board Consumer Confidence Index™, which had improved considerably in May, retreated in June.

The Index now stands at 49.3 (1985=100), down from 54.8 in May. The Present Situation Index decreased to 24.8 from 29.7.

The Expectations Index declined to 65.5 from 71.5 in May.

consumer confidence June 2009

The job outlook was also more pessimistic. Those anticipating more jobs in the months ahead decreased to 17.4 percent from 19.3 percent, while those anticipating fewer jobs increased to 27.3 percent from 25.6 percent. The proportion of consumers expecting an increase in their incomes declined to 9.8 percent from 10.8 percent.

U.K. economic crisis deepens

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The economy of the UK is shrinking at its fastest rate since 1958.

Gross domestic product fell 2.4 percent from the final three months of 2008, compared with the prior measurement of a 1.9 percent drop, the Office for National Statistics said today in London. The median prediction in a Bloomberg survey of 28 economists was for a 2.1 percent decline. Construction activity plunged almost three times as much as originally estimated.

Unhappy Housing - Mortgage Metrics Report Released

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The OCC & OTC have issued a report on mortgages. These are some astounding numbers on just how many homeowners are in big trouble:

The report, based on data from loan servicing companies that manage 64 percent of all first-lien U.S. mortgages, shows:

  • The number of loan modifications significantly increased. During the quarter, servicers implemented 185,156 new loan modifications, up 55 percent from the previous quarter and 172 percent from the first quarter of 2008.

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Sears: Lost your job? Keep the fridge

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I can't recall anything ever happening like this before.

(Bloomberg) -- Sears Holdings Corp., the largest U.S. department-store chain, will let customers who lose their jobs suspend payments and keep appliances bought with store credit cards in an effort to bolster sales in the recession.

Customers who spend at least $399 on appliances and related merchandise between July 6 and Aug. 1 will have one-twelfth of the purchase price credited to their account for every month they are out of work, said Larry Costello, a company spokesman. Those who are jobless for more than a year will have the full debt forgiven, he said. The offer period may be extended, he said.
...
Customers who lose their jobs between 60 days and one year after having made the purchase qualify for the offer, Costello said. The program also covers delivery, service and installation costs, he said.
...

Banks on a Tighter Leash? Obama Says No.

The U.S. Supreme Court overruled a decision by the Bush Administration's Office of the Comptroller of the Currency which barred state enforcement of its own consumer protection laws. Some states have significant anti-predatory lending laws but the financial conglomerates were complaining to the Bush Administration that some states were busting their chops about their lending practices. So, Bush Administration responded:

Obama Economist Romer - Wishful Thinking?

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Do you ever wonder if economics has gone by the wayside and now it's all simply consumer confidence, public relations and wishful thinking?

Obama Economist Christina Romer via Financial Times:

The US economy will feel a substantial boost from the Obama administration’s emergency spending package over the next few months, says Christina Romer, a senior White House official, who has warned against tightening monetary and fiscal policy before recovery is well established.

We are going to get some serious oomph from the stimulus, there is the inventory cycle and I believe there is some pent-up demand by consumers.

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