Wednesday, December 2, 2009

News Time!

Since unemployment numbers appear to be steady (which is a great thing!), the market salutes the 169k newly canned (jit for Xmas) Americans by piercing to new highs! Nothing like spiking that 401(k) to make them feel better about their current situation. Have you figured out the liquidity driven, carry trade supported HFT dominated market yet? Nah, I did not think so. I have not either. I do know one thing, look for a few sharts coming soon to signal the top is near.

Let me put the pieces together for you!

Zero Hedge - October Credit-Card Delinquencies Rise Again, Approach Record Highs Says Fitch - "As Zero Hedge pointed out, and as Meredith Whitney has voiced her concernes about, the biggest threat to the economy going into 2010 may be that not only are banks dropping reducing overall credit availability, but that ongoing credit contraction to the tune of almost $2 trillion over the next several years will mean existing credit limits are tapped out as existing ones become increasingly maxed out." No consumer = No GDP The government can't perpetually support 70% of GDP (esp in non job producing efforts). The HNW (high net worth) can not spend enough to make up for the loss os the little guy. The balance is gone and the consumer is dead and getting worse. The banks are hoarding cash for some sort of impending rainy day disaster that is in the plans. It is painfully obvious.

Mish - 24 States Borrow Money To Pay Unemployment Benefits  - Was there an unemployment report today? Do they really even matter anymore? "The key take-away from this series are the millions of workers whose hours will rise before companies start hiring more workers. Unemployment will be structurally high for a decade." Uh huh, he said structurally high for a DECADE. I agree. Uh, Mish, how about the wage deflation that comes with the increased hours? Hell, where is all the money coming from? (I believe you know and feel the answer - and will feel it even worse in the future). "I sense a huge tax increase coming. Add that tax increase to concerns over cap-and-trade, rising taxes on the wealthy (many are small business owners), concerns over health care costs, etc, and small businesses have lots of reasons not to hire."  We are soooooo screwed. 23 friggin states? Half of the US of A? Our saviors have done nothing but plug the hole in the employment damn with some expensive chewing gum, and if you remember those cartoons when they tried the same remedy, it always failed miserably. NOTHING has been done (or really can be done) to stem the tide of Americans hitting the streets right now. Wait till the new year and those businesses that have been hanging on just to get thru one more Xmas start shuttering their doors. More empty retail space coming! 

Washington's Blog - Robert Reich Confirms Permanent Destruction of Jobs in America - Since we are dealing with some serious unemployment issues, why not highlight them and give them the moment in the sun they deserve (no one else is covering the topic). "Under the pressure of this awful recession, many companies have found ways to cut their payrolls for good. They've discovered that new software and computer technologies have made workers in Asia and Latin America just about as productive as Americans, and that the Internet allows far more work to be efficiently outsourced abroad."  Sounds reasonable to me. More with less for less pay! BRILLIANT! Folks, we have some serious problems. If there is not enough work for say a 4% unemployment number (real not fake), we're really screwed.

naked capitalism -AmTrust Financial bankruptcy a bad sign for regional banks - (via Edward Harrison of Credit Writedowns) "AmTrust Financial, a privately held regional bank holding company based in Cleveland, has just filed for bankruptcy. With $11 billion in assets, AmTrust Bank is fairly large. The circumstances surrounding its failure are unusual in that the Bank Holding Company (BHC) has filed for bankruptcy but the banking subsidiary is still operating. The picture this event reveals is one of continued distress in the banking industry, especially for regionals." This is a good one. "What does that tell you? I see it as a sign of many more busts to come. You might recall that I mentioned a growing dichotomy between the fortunes of big banks and small banks about two weeks ago. Too big to fail banks have been bailed out. Regional banks not so much. Therefore, regional banks have turned off the spigot and are holding on for dear life. This is what is behind the drop in lending."  Was I just covering above something about unemployment and lack of credit and banks hoarding money for some reason? Yup, I thought so. (more on AmTrust HERE from Calculated Risk)

The Pragmatic Capitalist -THE BANK PROFIT MIRAGE  -"The following is a guest contribution from Annaly Capital Management.  They eloquently show how bank earnings are still in dire capital positions and that their profits are nothing more than a mirage.  There are many hurdles ahead for the banks:"

SUMMARY - Mmmmkayyy, so banks are hoarding cash, not lending and the profits they make are a mirage leading to more impending bankruptcies while unemployment continues to rise while states have to borrow money to pay unemployment claims while we will not be able to create enough jobs to solve the current employment black hole while the the consumer credit card default rates near record levels while the government is looking to tax you for every fart over the legal limit. Got it? Good! So do you now understand the physics underlying the bull market 2009 and all the upgrades that are based on increased earnings assumptions?

Kind of scary that little 'ol me can put the pieces together and the greatest economists on the planet totally disagree with my fact driven assumptions. Guess if I was on the Fed's payroll I would not be able to figure it out either.

Have a great night and enjoy the season.