December 2008
39 posts
Cash at 18-Year High
It’s a mountain of cash. Somebody’s just got to find the match and light it.
—Bob Doll on reports that the $8.85 trillion held in cash, bank deposits and money- market funds is equal to 74% of the market value of U.S. companies, the highest ratio since 1990, according to Federal Reserve data compiled by Leuthold Group and Bloomberg.
Our government doesn’t have enough spare cash to bail out a lemonade stand. Our standard of living must decline to reflect years of reckless consumption and the disintegration of our industrial base. Only by swallowing this tough medicine now will our sick economy ever recover.
—Peter Schiff, president of Euro Pacific Capital
We got into this mess to a considerable extent by overborrowing....
Bloomberg Survey
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Release Period Prior Median
Indicator Date Value Forecast
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Case Shiller Monthly YO 12/30 Oct. -17.4% -17.8%
Case Shiller Monthly In 12/30 Oct. ...
The real elephant in the room is falling house prices. We can fix this by lowering mortgage interest rates.
—Glenn Hubbard
Behavioral Finance
Modes of Behavioral Finance
Feedback Models
Observations
academic research has until recently hardly addressed the feedback model.
The same feedback may also produce a negative bubble, downward price movements propelling
there is a tendency for stock prices to continue in the same direction over intervals of six months to a year, but to reverse themselves over longer intervals. (Thaler, De...
The recession finally reached Silicon Valley
—Stephen Levy, reporting a 7% unemployment rate and 4,000 fewer jobs, year over year, at the Center for the Continuing Study of the California Economy said last week.
I am just wondering — as I say, it can’t be proven — I’m just wondering if a lot of this was by design to create economic panic.
—Rush, the economic powerhouse, Limbaugh
U.S. retail store traffic: down 24% last weekend from a year earlier
Retail sales: down 5.3%, Dec. 19 through Dec. 21
—ShopperTrak RCT Corp
Because we have magneto trouble, we need not assume that we shall soon be back in a rumbling waggon and that motoring is over.
It is not true that what the business men pay out as costs of production necessarily comes back to them as the sale-proceeds of what they produce. It is the characteristic of a boom that their sale-proceeds exceed their costs; and it is the characteristic of a slump that...
Housing is still in a freefall
—Nariman Behravesh, chief economist at IHS Global Insight
Economics, meet Kuhn
For those who are impatient with modeling and prefer to strike out on their own into the richness that an uninhibited use of metaphor seems to open up, the advice is to stop and think. Are you sure that you really have such deep insights that you are better off turning your back on the cumulative discourse among generally intelligent people that is modern economics? But of course you are.
And for...
If you print money like there is no tomorrow, the S&P will go up
—Marc Faber
I have abandoned free-market principles to save the free- market system
—Bush on a CNN internview
It is highly unlikely that China will reverse its course. The export sector can and should be helped by means other than devaluation. Why should China do something that is not in its long-term interests and whose impact in the short-run is uncertain?
I regard the recent devaluation as just a blip. Of course, many people here are happy to see the yuan devalue. However, I do not think a devaluation...
The availability of Fed credit might deter private credit. The lender of last resort becomes the lender of only resort.
Vincent Reinhart
The Federal Open Market Committee decided today to establish a target range for the federal funds rate of 0 to 1/4 percent.
—The Fed hits uncharted waters
Two Shoes...Two
This is the farewell kiss, you dog…This is from the widows, the orphans and those who were killed in Iraq!
—Muntadar al- Zeidi shouted in Arabic
All I can report is it is a size 10
—Bush, in response
Iraqis Protest Detention of Shoe-Tossing Journalist
Hitting someone with a shoe is considered the supreme insult in Iraq. It means that the target is even lower than the shoe,...
Early in the Clinton days, the hallmark of policy was if you did this, how would it affect the bond market. Every time I would talk to someone they would say ‘you can’t do that, it will freak the bond market out.’ I said ‘goddamn, whoever the bond market is, these bastards are powerful.
—James Carville, in Bloomberg interview last year
We will be very lucky if we reach the bottom in 2009
—Martin Feldstein
Letting Lehman fail was supposed to restore market discipline by showing that not all large firms would be saved. Paradoxically, since Lehman, everybody has been bailed out, everybody has been saved or merged out of existence with taxpayer help.
—Dino Kos, a former senior Fed official and now a managing director...
Bloomberg Survey
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Release Period Prior Median
Indicator Date Value Forecast
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Empire Manu. Index 12/15 Dec. -25.4 -27.3
Ind. Prod. MOM% 12/15 Nov. ...
We’re just going into the teeth of this recession. It’s a very deep recession, a worldwide recession. Not the Great Depression, that’s hyperbole, but possibly the worst since World War II.
A lot of [the car companies] may not be in business in 10 years, anyway. On the other hand, we’re going around handing out checks left and right. It’s just very hard to tell unions to go jump in the lake.
...
JPMorgan Offers $780m to play the CLO game →
At some point we are going to get some signal, some indication that this massive policy response is getting some traction. The flight out of Treasuries is something that will be breathtaking.
—Mitchell Stapley, who oversees $22 billion as chief fixed-income officer for Grand Rapids, Michigan-based Fifth Third Asset Management.
November Foreclosure data from RealtyTrac
Foreclosure activity in November hit the lowest level we’ve seen since June thanks in part to recently enacted laws…this lower activity is simply a temporary lull before another foreclosure storm hits in the coming months.
—James J. Saccacio, chief executive officer of RealtyTrac.
National Foreclosure Filings: 259,085 U.S. properties...
Guide to the new Fed lending methods →
There’s really no solution now — except abstinence.
—Lt. Col. Greg Conti, a professor of computer science at West Point on “What search Engines have found out about all of us”
Bear markets always end for exactly the same reason, and that is the market begins to price in deflation. Equities will be incredibly cheap.
—Russell Napier on the expected direction of James Tobin’s Q Ratio
a recession with adjectives — A deep recession, a long recession, a damaging recession
—Martin Feldstein
The big problem is that there’s no bottom in sight for...
teasing is a mode of play, no doubt with a sharp edge, in which we provoke to negotiate life’s ambiguities and conflicts. And it is essential to making us fully human.
—NYT
533k Jobs - 6.5% turns to 6.7% →
With the U.S. economy suffering the worst financial crisis since the Great Depression, AARP has to decide if charging higher insurance rates in order to bolster its revenue by $497.6 million a year is the kind of help that seniors need.
—Bloomberg article on private interests at the AARP
In a veiled jab at Peter Wallison, Federal Reserve Governor Randall Kroszner observes:
Contrary to the assertion of critics, the evidence does not support the view that the CRA contributed in any substantial way to the crisis in the subprime mortgage market…lending to lower-income individuals and communities has been nearly as profitable and performed similarly to other types of lending.
Overall economic activity weakened across all Federal Reserve districts since the last report
—Beige Book
We are looking at an economy that is not only in a recession, but a recession that is deepening rapidly
—Former Fed Governor Lyle Gramley
We are in the middle of the worst quarter. Right now, we are looking for a pretty sharp decline in the fourth quarter, a little less sharp...
“If you wait for the Robins, you’ll miss the spring”
– —Buffett
Dow 5,000 Redux →
Stocks are cheap when valued within the context of a financed-based economy once dominated by leverage, cheap financing and even lower corporate tax rates. That world, however, is in our past not our future.
More regulation, lower leverage, higher taxes and a lack of entrepreneurial testosterone are what we must get used to — that and a government checkbook that allows for healing, but...
It is clearly not going to end in a few months. We would be lucky to get done with it in the middle of next year.
—Jeffrey Frankel, a member of the NBER committee and a professor at Harvard University
Recent economic evidence suggests that the pace of this downturn is accelerating
—Lawrence Summers
This sets the stage for the Federal Reserve to be more formal in its adoption of...
NBER calls a Recesion - December 2007
Although the near-term outlook for the economy is weak, a number of factors are likely over time to promote the return of solid gains in economic activity and employment in the context of low and stable inflation. Among those factors are the stimulus provided by monetary policy and possible fiscal actions, the eventual stabilization in housing markets as the correction runs its course, and the...