"Our Children and Grandchildren are not merely statistics towards which we can be indifferent" JFK

Sunday, February 28, 2010

Sunday Comics

Fitch Downgrades Aflac to A from A+

Consumer Confidence Report released 2-23-10

AIG Chairman Harvey Golub in a letter to shareholders:
"Limits on compensation made no business sense
and hurt the firms ability to repay its bailout".

Ben Bernanke's testimony before the
House Financial Services Committee

Warren Buffett: The national slump in housing should
be over in a year or so.

Barron's Cover Story
could be General Motors. That's right. GM.

House Financial Services Committee

I feel more confident about the state of the nation than I have in
two-and-a-half or three years,” Geithner said

Typical Nancy Pelosi response to a coherent, fiscally prudent and
grandchild focused perspective.

Saturday, February 27, 2010

Diana Olick sets the record straight on existing home sales and the "snow factor"

Two reports, two sets of bad numbers from the housing market. Both new construction and existing homes sold pretty poorly in January, pushing months' supplies up and putting more downward pressure on prices.

But it was the snow I tell you!  All those record blizzards!!!

I heard that a few times this week, and it was included in the weekly report from the Mortgage Bankers about depressed mortgage applications, but the fact of the matter is, bad weather has nothing to do with the storm in housing right now.

Unfortunately, you need to suffer through a few seconds of Simon Hobbs before Diana Olick provides the recap. Suggestion: engage mute until you see Diana..

Jon Stewart and John Oliver on Government Unity

The Daily Show With Jon StewartMon - Thurs 11p / 10c
Bipartisan Health Care Reform Summit 2010 - Government Unity
Daily Show
Full Episodes
Political HumorVancouverage 2010

FDIC Friday, rather quiet however 2 more banks closed

One could say this was almost a boring week for the FDIC however they did manage closing two more banks bringing this year's total to 22 banks.

Carson City, NV and the estimated cost to FDIC is $7.9 million
Tacoma, WA and the estimated cost to the FDIC is $95.2 million

702 banks made the FDIC Troubled bank list as of the end of 2009. Two down and 700 to go; unless of course Q1 2010 turns out to be not as robust as the bullish pundits paraded around on CNBC have been touting.

Friday, February 26, 2010

Senante adjourns withour passing unemployment benefits extension

Washington (CNN) -- The Senate adjourned Friday without approving extensions of cash and health insurance benefits for the unemployed, as well as a handful of other federal programs that run out Sunday, after a lone senator insisted that Congress pay for the $10 billion package.

Retiring Republican Sen. Jim Bunning of Kentucky led a spirited Senate debate with Democrats over the issue, at one time cursing while another senator spoke on the floor Thursday night.

Bunning said he doesn't oppose extending the programs but doesn't want to add to the deficit.

Democrats argued that the safety net funds are classified as "emergency" and therefore don't need to be paid for by cutting spending elsewhere or raising taxes.

With the Senate now not in a position to vote on the extensions until Tuesday at the earliest, senators and their staff members scrambled to determine the practical implication of letting the programs lapse, even if for just a few days.

In addition to funding unemployment insurance and the COBRA health insurance program for people who have lost their jobs, the bill would prevent a scheduled 21 percent cut in Medicare payments to doctors.

Those cuts will technically go into place when doctors' offices open Monday morning. But because there is a two-week delay processing Medicare payments, a short-term lapse of the program is unlikely to affect payments, according to experts in the medical community and a Senate Finance Committee aide.

Likewise, unemployment benefits could be delayed, but if Congress acts next week, as expected, the impact is likely to be minor, according to a Labor Department analyst. That's because Congress will likely approve the funds retroactively to make up for the missing days.

An aide to Finance Committee Chairman Max Baucus confirmed that the Senate will try to pass the funds retroactively.

On Friday, Sen. Barbara Boxer, D-California, sent Bunning a letter asking him to "stand down immediately."

"Unemployment insurance is a lifeline to the long-term unemployed whose families have been hit very hard by this recession," Boxer wrote.

For his part, Bunning maintained Friday that if all senators could agree the benefits are so important, then they could find a way to pay for them.

"If we can't find $10 billion somewhere for a bill that everybody in this body supports, we will never pay for anything," he said.

Maybe it is time for you to stand down Ms. Boxer. You entered the halls of congress 27 years ago and with 27 years "experience" you can not figure out a way to pay for the $10 billion bill?

One of the reasons our grandchildren have a heap of debt already piled on their backs is the number of you "career" politicians that chose not to assume and implement prudent fiscal policy. Grandpa shares Mr. Bunning's support of the need to extend however he clearly believes the expense should not be shouldered by our grandkids.

Recap of Q4 U.S. Government Investments this past week

Yes Amercia, our best and brightest representatives and government officials continue to display their MENSA like qualities with respect to fiancial matters.

This week produced the following results from the U.S. Government investment (a.k.a. takeover) in 3 entities. The fact that Geithner has a job, Bernanke is reappointed for another 4 years and the fact we do not yet have a draft of financial reform is simply astonishing. ROME IS BURNING!

$8.87 billion LOSS AIG
$6.47 billion LOSS Freddie Mac
$16.32 billion LOSSFannie Mae

$31.66 BILLION LOSS total (accounting gimmicks not yet revealed)

Fannie Mae Reports a $16.3 BILLION LOSS

Fannie Mae just released their Quarter 4 report and in an effort to not be outdone by Freddie Mac:

1. Lost $16.3 billion
2. $11.9 billion in credit losses & a $5 billion write-down for low income tax credit investments
3. Nonperforming loans totaled $216.5 billion as of end of 2009, up from $119.2 billion at the end of 2008

SHOCK OF SHOCKS: Fannie Mae is asking for a federal cash infusion of $15.3 billion after posting another big loss in the fourth quarter of last year.

Fannie Mae has already received about $60 billion from taxpayers. This new request will bring that total to more than $75 billion.

Late last year, the Obama administration pledged to cover unlimited losses through 2012 for Freddie and Fannie, lifting an earlier cap of $400 billion.

Need grandpa say anymore...

State of CA putting buildings on the sale block

California's current budget deficit is $20 BILLION

LA Times
Two dozen state office buildings across California officially go on sale Friday as the cash-strapped state seeks to raise more than $2 billion to pay off some of its long-term debt.

The state plans to sell the buildings, which include the Ronald Reagan State Building in downtown Los Angeles, and then lease back the office space for state use for at least 20 years. Gov. Arnold Schwarzenegger and the Legislature approved the sale last June.

Under the proposal, for example, the twin-towered Reagan state office building at 3rd and Spring streets would be purchased by an investor who would in turn lease it to the state. The state would pay the new owner an estimated $12.2 million a year in rent, according to the plan.

State officials will now accept bids on 24 office buildings on 11 sites in Los Angeles, Sacramento, San Francisco, Oakland and Santa Rosa. Investors may buy the properties en masse or individually.

The planned sale comes during one of the worst real estate markets since the Great Depression. Commercial property values have fallen as much as 40% from their 2007 peak, according to industry analysts. Although the depressed market may hold sales prices down, it may also help the state as it negotiates how much to pay in rent after it leases back the buildings.

The recession drove up vacancy rates in many privately owned office buildings as white-collar companies contracted through layoffs or closed their doors. Landlords in most of the country's major office markets have been forced to reduce rents to attract or keep tenants.

The sales would add an additional 7.3 million square feet of rented office space to the 20 million square feet the state already leases from the private sector, according to the Department of General Services. Acting Director Ron Diedrich said he approved of the plan to sell the offices.

Freddie Mac to cease purchasing interest only mortgages

Freddie Mac announced today that it will stop purchasing and securitizing interest-only mortgages as of Sept. 1, including Freddie Mac Initial Interest fixed-rate and adjustable-rate mortgages.

“We’re stopping purchases of all interest-only type mortgages as a result of the continuing poor performance of these products,” said Michael Cosgrove, a Freddie Mac spokesman.

Interest-only mortgages made up 7 percent of the company’s portfolio as of Dec. 31, and 17.6 percent of the loans were seriously delinquent. The overall delinquency rate of the company’s loan portfolio is 3.98 percent.

"We start 2010 with some early signs of stabilization in the housing market," said Freddie Mac CEO Charles Haldeman Jr. "Still, the housing recovery remains fragile, with significant downside risk posed by higher unemployment and a potential large wave of foreclosures."

Mr. Haldeman is well deserving of his $6 million compensation package
given his truly insightful business decisions. Who would have even dreamed
interest only mortgages would produce high levels of delinquency?

Existing Home Sales Miss the "experts" estimate by 8.2%

National Association of Realtors (NAR):
Existing Home Sales including single-family, townhomes, condominiums and co-ops – dropped 7.2 percent to a seasonally adjusted annual rate1 of 5.05 million units in January from a revised 5.44 million in December, but remain 11.5 percent above the 4.53 million-unit level in January 2009.

Lawrence Yun NAR Chief economist, said there is still some delay between shopping and closing that affected current sales. “Most of the completed deals in January were based on contracts in November and December. People who got into the market after the home buyer tax credit was extended in November have only recently started to offer contracts, so it will take a couple months to close those sales,” he said. “Still, the latest monthly sales decline is not encouraging, and raises concern about the strength of a recovery.”

Total housing inventory at the end of January fell 0.5 percent to 3.27 million existing homes available for sale, which represents a 7.8-month supply at the current sales pace, up from a 7.2-month supply in December. Raw unsold inventory is 9.6 percent below a year ago, and is at the lowest level since March 2006.

1. The brilliant, always bullish and giddy pundits forecast a 5.5 million rate
2. 7.2% drop from December's 5.44 million units
3. December was 16% lower than November's 6.49 million
5. 38% of January sales were "distressed" properties
6. 40% of January sales were first time homebuyers
7. 78% of total sales were distressed or first time buyers (not a balanced marketplace)

The Federal Government continues to pour BILLIONS of dollars to prop up the housing market and all they have accomplished is to pile added burden our children and grandchildren.

It is time for the current generation to buck up, assume responsibility for its greed and fiscal irresponsibility and give our grandchildren a chance!
The portfolio decreased to $743.7 billion in January from $755.3 billion the previous month, the McLean, Virginia-based company said in its monthly volume summary.

Delinquencies, which increase stress on the company's capital, jumped to 4.03 percent of its book of business in January from 3.87 percent in December. One year earlier the rate was 1.98 percent.

The multifamily delinquency rate was unchanged month-over-month in January, at 0.15 percent, but up from 0.03 percent a year earlier.

Reuters (2/24/2010):
Freedie Mac, the second-largest provider of U.S. residential mortgage funds, on Wednesday said it lost $7.8 billion in the fourth quarter and warned it would need to tap more government funds this quarter as the housing market remains fragile.
The government-controlled entity said its loss came as rising defaults kept credit-related expenses elevated at $7.1 billion and as it wrote down the value of low-income tax credit partnership investments.
The loss was $6.5 billion before a $1.3 billion dividend payment on senior preferred stock owned by the U.S. Treasury.
Freddie Mac has been struggling to contain losses sustained from its massive exposure to the U.S. housing market that is in the throes of its worst downturn since the 1930s. Fearing that losses would harm Freddie Mac's ability to support housing, the government placed the company into conservatorship in September 2008 and recently pledged unlimited financial backing.

Serious delinquencies on mortgages guaranteed by Freddie Mac jumped to 3.87 percent as of December from 3.33 percent in the third quarter, and 1.72 percent at the end of 2008. As in previous periods, Freddie Mac said the delinquencies, and related costs, rose as government and other loss mitigation programs extended the foreclosure process.

Freddie Mac said it made errors in calculating prospective losses, requiring it to revise results for the first three quarters of 2009 and increase its third-quarter credit loss provision by $396 million.

While Freddie has managed three straight quarters without tapping the Treasury credit line, it said changes to accounting rules adopted in 2010 would likely result in another trip to Uncle Sam in the current quarter.

Frank told a U.S. House Financial Services Committee that he
rescheduled the hearing from March 2 to allow for a field hearing on
commercial fishing issues in Massachusetts, and to allow the Obama
administration more time to prepare for the hearing.

AIG Q4 Loss $8.9 BILLION

American International Group, Inc. (AIG) today reported a net loss attributable to AIG common shareholders of $8.9 billion for the fourth quarter of 2009, or $65.51 per diluted common share, compared to a net loss of $61.7 billion or $458.99 per diluted share in the fourth quarter of 2008. Fourth quarter 2009 adjusted net loss was $7.2 billion, compared to an adjusted net loss of $38.5 billion in the fourth quarter of 2008.

AIG also stated it might need additional government support as obligations come due.

17 months have passed since the initial government bailout of AIG and $182 billion later, AIG states it might need additional government assistance!

2/10/2010: Ben Bernanke reiterated that he expects the Fed will “ultimately incur no loss” on the Bear Stearns and AIG bailouts ($116 billion is the Federal Reserve portion).

AIG Q4 Report Link

Thursday, February 25, 2010

Obama May Prohibit Home-Loan Foreclosures Without HAMP Review (Bloomberg)

Feb. 25 (Bloomberg) -- The Obama administration may expand efforts to ease the housing crisis by banning all foreclosures on home loans unless they have been screened and rejected by the government’s Home Affordable Modification Program.

The proposal, reviewed by lenders last week on a White House conference call, “prohibits referral to foreclosure until borrower is evaluated and found ineligible for HAMP or reasonable contact efforts have failed,” according to a Treasury Department document outlining the plan.

“It is one of the many ideas under consideration in the administration’s ongoing housing stabilization efforts,” Treasury spokeswoman Meg Reilly said in an e-mail. “This proposal has not been approved and there are no immediate planned announcements on the issue.”

She confirmed the authenticity of the document, which hasn’t been made public.

At present, lenders can initiate foreclosure proceedings on any loan that hasn’t been submitted for HAMP eligibility. Under current HAMP rules, foreclosure litigation can proceed while borrowers are under review for the program or even in a trial modification.

The proposed changes would prohibit lenders from initiating new foreclosure actions before loan screening by HAMP and would require lenders to halt existing proceedings for borrowers once they are in a trial repayment plan.

Obama may prohibit home-loan foreclosure..full article link

What's next? The White House is proposing an extension of the 3 day settlement of all equity transactions until such a time as the investor is made whole plus a nominal profit. Specifics of an acceptable profit margin have yet to be worked out however a Blair House Summit will be scheduled to discuss...

Persona Non Grata at CNBC (Barry Ritholtz, The Big Picture)

Barry Ritholtz
I had lunch the other day with several other analysts, strategists, money managers and economists, all of whom shall remain nameless.

All make frequent media appearances.

The conversation drifted over to CNBC. The consensus is everyone at the table wants to do less of it.

The reasons given:
-Producers try to tailor the discussion (“Be more Bullish/Bearish”);
-Too time consuming;
-Law of diminishing returns — the benefits are less and less each appearance;
-Nuance has become a dirty word (“Pick a Letter to describe the economy”);
-Last minute cancellations when “better” names become available;
-Dumbing down of the discourse (One person called it “Foxification”)

I then mention that while I still do a ton of media, I have become Persona Non Grata at CNBC.

There was an issue with some really obnoxious blog comments (they were deleted); I started asking not to be booked with really dumb guests (I also requested no Octobox). I did do Fox a few times (But really, who cares about that? I do all media outlets on behalf of my firm).

With Dylan gone, I dont hear from Fast Money, and with Kudlow, I was told I was “too nuanced“– a phrase that is hardly ever used to describe me. I hadn’t done Squawk Box in years, and I know Joe Kernan ain’t no fan of blogs.

Such is life in the big city . . .

Obama's Health Care Summit

Thursday, February 25th, 2010 Mr. Obama is hosting the Health Care Summit. This is an exclusive, invitation only (a.k.a. in congress since junior high) event and will likely produce absolutely NADDA.

Grandpa is not on the list however given my active imagination, allow me to share my perception via the wonderful world of photographs.
Venue: Blair House (the official state guest house
 and purchased by the U.S. Government in 1942)

Official Inviation sent to 22 of our most illustreous lawmakers
Grandpa could not secure a copy of the entire invitation...
Secret Service has really notched it up since Tareq and Michaele Salahi

The summit is scheduled from 10:00 am to 4:00 pm ET. President Obama will kick things off with an introduction speech and reiterate the overall summit objective and location of restrooms.

The 4 core discusion areas:

                          Controlling Costs

Insurance Reforms

Reducing Budget Deficits

 Expanding Insurance Coverage

Buffet Lunch

Team Building Activity Break Out Session

Update to follow.....

Wednesday, February 24, 2010

No More Hummer

NEW YORK (AP) -- Hummer, the off-road vehicle that once symbolized America's love for hulking SUVs, has hit a dead end after its sale to a Chinese heavy equipment maker collapsed late Wednesday.

Sichuan Tengzhong Heavy Industrial Machines Co. pulled out of the deal to buy the company from General Motors Co. Tengzhong failed to get clearance from Chinese regulators within the proposed timeframe for the sale, the Chinese manufacturer said Wednesday.

GM said it will continue to honor existing Hummer warranties.

"We are disappointed that the deal with Tengzhong could not be completed," said John Smith, GM vice president of corporate planning and alliances. "GM will now work closely with Hummer employees, dealers and suppliers to wind down the business in an orderly and responsible manner."

Sales peaked at 71,524 in 2006. But in December 2009, only 325 Hummers were sold, down 85 percent from the previous year, according to Autodata Corp.

Sticker prices start at more than $42,500 and run to about $63,000, according to data posted at the Hummer.com Web site. The H3, the most fuel-efficient vehicle in Hummer's lineup, averages about 16 mpg. The vehicles are built at GM's factory in Shreveport, La.

Hummer is the second brand after Saturn that GM has failed to sell as part of its restructuring. GM sold Swedish brand Saab to Dutch carmaker Spyker Cars NV earlier this year. Pontiac is being discontinued.

Alternative fuel was not enough Arnold...

Ben Bernanke: Recap of more Federal Reserve Spewing 2/24/2010

The U.S. economic recovery is still not yet on a sustainable path, and near-zero interest rates are still needed, Federal Reserve Board Chairman Ben Bernanke told lawmakers Wednesday.
Grandpa: The overall economy will tank if we were not there to place countless of billions of dollars of debt on our grandchildren’s backs let alone the inflation time bomb... 

Bernanke noted that economic growth expanded at a 4% pace over the past two quarters of 2009, but was pushed higher by temporary factors. Whether the recovery can last depends on whether businesses and consumers open their wallets, he said.
Grandpa: Wait a minute Ben, Sheila Bair (FDIC) just kicked off "America Saves Week"?

"As the impetus provided by the inventory cycle is temporary, and as the fiscal support for economic growth likely will diminish later this year, a sustained recovery will depend on continued growth in private-sector final demand for goods and services," Bernanke remarked. He described the recovery as "nascent."
Grandpa: See "America Saves Week".

We don't see inflation as an imminent threat," Bernanke said. Conditions "are likely to warrant exceptionally low levels of the federal funds rate for an extended period." "Most indicators suggest that inflation likely will be subdued for some time."
Grandpa: As long as Ben is able to coerce other government agencies into manipulating the Consumer Price Index, he can continue the “inflation is not an imminent threat” spew. Let's not forget the manipulated CPI figures also reduce or eliminate cost of living increases to an entire parental generation!

Bernanke added that the economy appears to be headed in the right direction. "Private final demand does seem to be growing at a moderate pace." He noted that consumer spending has recently picked up and said there were "tentative signs of stabilization in the labor market." More than 40% of the unemployed have been out of work for six months or more, he observed.

"Notwithstanding these positive signs, the job market remains quite weak," according to Bernanke.
Grandpa: WHAT, tentative signs of stabilization and remains quite weak?

Tentative signs of stabilization in the labor market 

"Although the federal funds rate is likely to remain exceptionally low for an extended period, as the expansion matures, the Federal Reserve will at some point need to tighten monetary conditions to prevent the development of inflationary pressures.
Grandpa: As the expansion matures?
"We are confident that we have the tools we need to firm the stance of monetary policy at the appropriate time," Bernanke said.

Commercial real estate remained the "biggest credit issue" facing the country, according to Bernanke.



Short Sale Rule Passes After 3-2 Party-Line Vote, Shorting Anything To Be Illegal Shortly (Zero Hedge)

Zero Hedge:
By the thinnest of margins, the SEC just voted 3-2 to institute the short-selling rule which will put curbs on shorting individual securities that fall over 10% in any one day. Dow Jones points out that even market decisions are now split according to party lines: "Republican Commissioners Kathleen Casey and Troy Paredes said Wednesday they would vote against the proposal. Democratic Commissioners Luis Aguilar and Elisse Walter signaled their support for it, along with SEC Chairman Mary Schapiro, who was appointed last year by President Barack Obama." Paredes was further quotes as saying that the rule is "rooted in conjecture and too speculative." Not surprisingly, Aguilar and Walter, both likely reading from the party lines said that this would "help bolster market confidence."

At this point we are too lazy to pull the S&P chart of what happened in 2008 when shorting in select stocks was proclaimed verboten for a certain amount of time. We fail to see, however, how eliminating this critical piece of market testing will do anything but further increase speculation that the entire market is now a sham, propped up by various regulations and money printing practices.

At least the SEC can now go back to doing what it does best, which is not enforcing the law against blatantly obvious instances of insider trading and market manipulation.

Senate Passes $15 billion "jobs" bill

The bill passed 70 to 28, with 13 Republicans and 57 Democrats voting in favor of the package. One Democrat, Sen. Ben Nelson of Nebraska, voted against it. This is the same Ben "bandit" Nelson that assured his vote on the healthcare reform bill for a cool $100 million.

The measure includes a new program that would give companies a break from paying Social Security taxes on new employees for the remainder of 2010. It also carries a one-year extension of the Highway Trust Fund, an expansion of the Build America Bonds program and a provision to allow companies to write off equipment purchases.

The bill, however, does not extend the deadline to apply for unemployment benefits and the COBRA health insurance subsidy. The House, in passing its $154 billion bill last year, included $79 billion in funding to extend unemployment benefits and a COBRA extension.

The next stop is the House, where Democratic leaders will weigh whether to pass the Senate version or go to conference to reconcile it with the $154 billion jobs bill the House passed in December.


Freddie Mac: $21.6 BILLION loss for 2009

Freddie Mac Press Release (2/24/10):
Full-year 2009 net loss was $21.6 billion. After dividend payments of $4.1 billion during the year to Treasury on the senior preferred stock, net loss attributable to common stockholders was $25.7 billion, or $7.89 per diluted common share, for the full-year 2009.

Fourth quarter 2009 net loss was $6.5 billion. After the dividend payment of $1.3 billion to the U.S. Department of the Treasury (Treasury) on the senior preferred stock, net loss attributable to common stockholders was $7.8 billion, or $2.39 per diluted common share, for the fourth quarter of 2009.

"In a trying and turbulent year, Freddie Mac played a critical role in supporting the nation's housing recovery," said Freddie Mac Chief Executive Officer Charles E. Haldeman, Jr. "We provided a constant source of liquidity – purchasing one out of every four home loans originated last year – and our presence in the market helped keep mortgage rates at historic lows. We also helped approximately 1.8 million borrowers lower their mortgage payments, and more than a quarter million families avoid foreclosure.

"We start 2010 with some early signs of stabilization in the housing market, with house prices and home sales likely nearing the bottom sometime in 2010. We expect that low mortgage rates, relatively high affordability and the homebuyer tax credit will help continue to fuel the recovery.

Still, the housing recovery remains fragile, with significant downside risk posed by high unemployment and a potential large wave of foreclosures. That's why our commitment to help struggling homeowners is steadfast – and we will continue working to find ways to keep families in their homes through both our own programs and the Obama Administration's Making Home Affordable Program."

Since the government took over Fannie and Freddie, the incurred losses continue to be the burden of the taxpayer and we did not have a choice in the matter. Freddie losses $6.5 billion in a single quarter yet the CEO recently received the green light on a $6 million compensation package. What a SHAM!

Maybe if Ben Bernanke had some real life experience

27 years working and only 4 outside of academia. He has missed his forecasts by a country mile, yet he is responsible for setting monetary policy! Compared to Ben, congress is even more incompetent as they afforded him another 4 years of mis-information.

Ben's new "winging it" economic forecasts commence today as he is back to tell congress what they want to hear.

Tuesday, February 23, 2010

Bernanke to testify before congress 2/24/2010

Bernanke to testify before congress 2/24/2010

Bernanke is readying his first visit back to congress since our elected representatives afforded him another four years (at the expense of future generations). Ben begins two days of his annual Humphrey-Hawkins testimony on monetary policy before the House Financial Services Committee. He is scheduled to give his latest view on the economy.

The "green shoots" of economic revival are already evident, Bernanke told CBS program "60 Minutes" during a March 15, 2009 interview. "And I think as those green shoots begin to appear in different markets, and as some confidence begins to come back, that will begin the positive dynamic that brings our economy back," he said.

The unemployment rate was 8.5% in March 2009 and currently sits at 9.7% (courtesy of the government’s seasonal adjustment magic). The consumer confidence figure was 26 in March of 2009 and today, the reading for January 2010 came in at 46. The reading in March 2009 for “jobs hard to get” registered at 48.7% while the January 2010 read was 47.7%. “Green shoots” will likely not be roll off his lips as many of the green shoots have withered.

Grandpa expects some variation of the following:
Today, financial conditions are considerably better than they were then, but significant economic challenges remain. The flow of credit remains constrained, economic activity weak, and unemployment much too high. Future setbacks are possible. Nevertheless, I think it is fair to say that policymakers’ forceful actions in late 2008, and others that followed, were instrumental in bringing our financial system and our economy back from the brink. The stabilization of financial markets and the gradual restoration of confidence are in turn helping to provide a necessary foundation for economic recovery. We are seeing early evidence of that recovery….continued modest growth”.

Yes, this will be another circus comprised of two wasted days as each representative makes irrelevant and self serving opening statements and when they finally get around to asking a question; Barney Frank gives them the hook.

Most of the House Financial Services Committee could not reconcile their personal checkbook let alone comprehend entry level economics so once again, Bernanke will bamboozle them with his assurances that he and his crack team have a PhD proven monetary policy exit strategy; as he will personally turn off the money spewing faucet at the precise and strategic moment.

The committee will also breathe a sigh of relief when Ben tells them that he will keep interest rates low for the foreseeable future. Even though the Federal Reserve is an “independent entity within the government”, Ben knows the Democrats do not need any more challenges with their mid-term elections.

Barney Frank and Paul Kanjorski will once again use up more fresh air than they are entitled however look for a potentially “lively” spar with Ben courtesy of Alan Grayson (FL), Jeb Hensarling (TX) and of course Ron Paul (TX).

Michele Bachman (MN) is a member of the committee and she could be worth the price of admission. Identifying Michele is relatively easy; simply look for the woman struggling to pull a foot out of her mouth before her turn to ask questions.

Enjoy the show and keep your expectations really low.

The Conference Board Consumer Confidence Index® Declines Sharply

The Conference Board Consumer Confidence Index®, which had increased in January, declined sharply in February. The Index now stands at 46.0 (1985=100), down from 56.5 in January. The Present Situation Index decreased to 19.4 from 25.2. The Expectations Index declined to 63.8 from 77.3 last month.

The Consumer Confidence Survey® is based on a representative sample of 5,000 U.S. households. The monthly survey is conducted for The Conference Board by TNS. TNS is the world's largest custom research company. The cutoff date for February’s preliminary results was February 17th.

Consumers' assessment of current-day conditions soured in February. Those claiming conditions are "good" decreased to 6.2 percent from 8.5 percent, while those claiming business conditions are "bad" increased to 46.3 percent from 44.7 percent. Consumers' assessment of the labor market was also more pessimistic. Those saying jobs are "hard to get" rose to 47.7 percent from 46.5 percent, while those saying jobs are "plentiful" decreased to 3.6 percent from 4.4 percent.

Consumers' short-term outlook, which had been improving, lost considerable ground in February. The percentage of consumers anticipating an improvement in business conditions over the next six months decreased to 16.7 percent from 20.7 percent, while those anticipating conditions will worsen increased to 15.3 percent from 12.7 percent. Regarding the outlook for the labor market, the percentage of consumers expecting fewer jobs increased to 24.6 percent from 18.9 percent. Those anticipating more jobs will become available in the months ahead declined to 13.4 percent from 15.8 percent. The proportion of consumers anticipating an increase in their incomes declined to 9.5 percent from 11.0 percent.

FDIC Quarterly Report on Banks

The FDIC noted that indicators of asset quality continued to deteriorate during the fourth quarter, although the pace of deterioration slowed for a third consecutive quarter. Insured banks and thrifts charged off $53.0 billion in uncollectible loans during the quarter, up from $38.6 billion a year earlier, and non-current loans and leases increased by $24.3 billion during the fourth quarter. At the end of 2009, non-current loans and leases totaled $391.3 billion, or 5.37 percent of the industry's total loans and leases.

As expected, the number and total assets of institutions on the FDIC's "Problem List" continued to rise. At the end of December, there were 702 insured institutions on the "Problem List," up from 552 on September 30. In addition, the total assets of "problem" institutions increased during the quarter from $345.9 billion to $402.8 billion. Forty-five institutions failed during the fourth quarter, bringing the total number of failures for the year to 140, the highest annual total since 1992.

The Deposit Insurance Fund (DIF) balance – the net worth of the fund – decreased by $12.7 billion during the fourth quarter. The fund balance of negative $20.9 billion (unaudited) as of December 31 reflects a $44 billion contingent loss reserve that has been set aside to cover estimated losses. Just as banks reserve for loan losses, the FDIC has to set aside reserves for anticipated losses to the DIF from insured institution failures. Combining the fund balance with this contingent loss reserve shows total DIF reserves of $23.1 billion.

The agency also collected three years of assessments on banks in advance at the end of 2009, along with banks' fourth quarter assessments, which brought in roughly $46 billion of capital to help handle failed institutions.

Bair reiterated that she expects 2010 to be the peak year for bank failures. "The pace is probably going to pick up this year and for the total year it will exceed where we were last year," Bair said.

The agency may require banks to pay additional assessments to cover losses to the fund if bank failures expand in greater numbers than anticipated by the agency.

Bureau of Labor Statistics: Mass Layoffs-- January 2010 (BLS)

Employers took 1,761 mass layoff actions in January that resulted in the separation of 182,261 workers, seasonally adjusted, as measured by new filings for unemployment insurance benefits during the month, the U.S. Bureau of Labor Statistics reported today. Each action involved at least 50 persons from a single employer. Both mass layoff events and initial claims increased from the prior month after four consecutive over-the-month decreases. In January, 486 mass layoff events were reported in the manufacturing sector, seasonally adjusted, resulting in 62,556 initial claims. Both figures increased over the month--the first increases since August 2009 for events and since September 2009 for initial claims.

This is the largest monthly increase since July 2009. This report does not bode well for any enhancement to the overall employment picture. Grandpa is quite sure the equity market will simply ignore the data as the market believes the "jobless recovery" fairytale.

Monday, February 22, 2010

FDIC Calls Upon Consumers to Save and Build Wealth

FDIC Release 2/22/2010:
The Federal Deposit Insurance Corporation (FDIC) is calling upon consumers across the nation during America Saves Week to consider establishing a basic savings account or boosting existing savings. FDIC Chairman Sheila Bair said, "One fundamental lesson of the financial crisis is that savings can help families withstand sudden changes in their economic well being. Establishing a savings account in a federally insured institution is a great first step to build wealth and begin a savings habit that will last a lifetime."

The personal savings rate rose to 4.6 percent in 2009 from 2.7 percent in 2008, according to the U.S. Department of Commerce. "I am pleased to see that people are saving more of their hard-earned money and building wealth. Having personal savings for an emergency fund or saving for a future expenditure, such as a college education, can make a big difference in avoiding other costly alternatives. I've always been a big advocate of a back-to-basics approach to financial services; it's my hope that Americans' increase in savings is the beginning of a long-term trend," Bair said.

"Money saved by consumers also provides a stable source of funding for investments in the economy that benefit all Americans," said Bair. "In fact, a country with robust savings generally has more capital to fund investments and support economic growth over the long-term. As demonstrated recently, it is harmful to an economy when consumers spend beyond their means, financed by debt that they cannot afford to repay."

Sheila, Sheila, Sheila, “harmful to an economy when consumers spend beyond their means, financed by debt that they cannot afford to repay." What about Wall Street? Oh, that’s different as they paid back their TARP debt. Have they also released the FDIC guaranty on the billions of bonds you backed? Speaking of DEBT, have you glanced over the Federal Deficit figures recently???

“No question building a nest egg is back to the basics and good for all. Sheila, did you neglect to check in with your peers at the Federal level? They still want people to SPEND, SPEND and SPEND a bit more. Maybe you could check in with Helicopter Ben in an effort to squeeze a higher interest rate for those of us trying to build the "nest egg".

After all, Ben has been spewing the fact that the Federal Reserve could pay banks % on their reserves. Well Sheila, if Ben and the Federal Government are willing to pay the banks, how about us?

In addition, Ben has been suppressing % rates in an effort for more people to SPEND money buying a house and government programs still enable one to purchase a home with a few percentage points of down payment. In addition, Ben's low interest rate policy is intended to enable a homeowner to refinance their existing debt so they can SPEND the difference on other items in an effort to "spur" the economy.

The government added to our grandchildren’s' debt so people could turn in that old clunker and SPEND money on a new car. This same government is expending billions to rework mortgages so people are able to SPEND the difference. Let's not forget the "clunker appliance" program as once again, the federal government does not have a problem with placing the debt burden on the same generation that is currently told “stay away from the stove”.

What is your real agenda Sheila? Grandpa has an inquiring mind.

Recap of Today's Equity Market Activity

Overseas Markets

The Opening Bell

Quant Fund Trading Activity

Institutional Trading on the NYSE Exchange

Commodity Trading

Shares Traded
Closing Bell

U.S. credit card charge-offs up, delinquencies ease a bit

The U.S. credit card sector posted mixed performance in January as charge-offs rose sharply, while early stage delinquencies declined for a third month in a row, according to Moody's Investors Service.

The writedown of uncollected credit card debt by lenders, or charge-offs, rose sharply to 11.15 percent in January, while early stage delinquencies fell below the 6 percent mark to 5.96 percent, according to Moody's Credit Card Indices.

The delinquency rate measures the proportion of account balances for which a monthly payment is more than 30 days late as a percent of the total outstanding balance.

"The improvement in the early-stage delinquency rate was contrary to seasonal patterns that typically lean toward rising early stage delinquencies this time of year," said William Black, senior vice president at Moody's.

"This month marks the first January since 2004 where early-stage delinquencies declined from the prior December, an improvement that is an encouraging indication of stability or improvement in charge-off rates by mid-year," said Black.

Moody's base expectation is for the unemployment rate to plateau for much of the second half of the year. Under this scenario, and if delinquency rate trends continue to improve, Moody's expects the charge-off rate to peak close to 12 percent during the next several months.

Link to full article:
U.S. Credit Card Charge Offs Up

Moody's base expectation is for the unemployment rate to plateau for much of the second half of the year. Moody's, isn't this the same organization that rated toxic residential mortgages as AAA as their "base expectation" was that home prices would not fall?

Moody's Investors Service

Dodd wants 'troubled' commercial loan market data

WASHINGTON (MarketWatch) - Senate Banking Committee chairman Christopher Dodd on Monday asked bank regulators to report to him on their efforts to stabilize the "troubled" commercial real estate market. The Connecticut senator's request comes after a Congressional Oversight Panel reported last week that in a worst-case scenario, hundreds of additional community and midsize banks could face insolvency, threatening America's financial system.

Hey Dodd, where have you been?
I would have lent you a buck 2 years ago!

One Million people could lose unemployment benefits in March 2010

The Senate has one week to extend the deadlines to apply for federal unemployment benefits and the COBRA health insurance subsidy. Currently, the jobless have until Feb. 28 to sign up.

Without an extension, people receiving state jobless benefits won't be able to apply for additional federally paid unemployment insurance, and anyone already receiving those checks could be cut off.

About 11.5 million people currently collect jobless benefits. Nearly one in 10 Americans are out of work and a record 41.2% have been unemployed for at least six months. The average unemployment period lasts a record 30.2 weeks.

While unemployment benefits now run as long as 99 weeks, depending on the state, not everyone will receive checks for that entire period. Those who run out of their 26 weeks of state-paid coverage after Feb. 28 would not be able to apply for federal benefits. The unemployed currently receiving extended federal benefits, which are divided into tiers, would stop getting checks once they complete their tier.

Lawmakers were on pace two weeks ago week to introduce legislation that would have extended the deadlines to May 31 at a cost of $25 billion over 10 years. However, Senate Majority Leader Harry Reid, D-Nevada, decided to offer a slimmed-down job creation package that did not include the provision.

Harry Reid plans to address the jobless benefits deadlines this week according to a Senate Democratic aide. "We also hope to pass an extension of expiring provisions, including unemployment insurance and COBRA, this week," the aide said. "With Republican cooperation, we should be able to do so."

More generations living under same roof

Demand is escalating for multi-generational housing as buyers scale down during the deepest housing crisis since the Great Depression, according to a survey by Coldwell Banker Real Estate in Parsippany, New Jersey.

Thirty-seven percent of the company's real estate agents polled in January said that in the past year, buyers were increasingly shopping for homes that fit more than one generation. Almost 70 percent of the agents said they expect economic conditions will drive still greater demand for this type of housing over the next year.

"More buyers are pooling investments, considering bringing mom and dad into it," said Diann Patton, a Coldwell Banker real estate consumer specialist based in Grass Valley, California, in an interview with Reuters.

Buyers were primarily driven by financial concerns when deciding to combine generations in a household, the survey found. Health concerns were the second most common reason and strong family bonds a distant third.

Link to complete Reuter's article:

More generations living under same roof

U.S. Commercial Property Index Rises 4.1% in December (Bloomberg)

By Brian Louis
Feb. 22 (Bloomberg) -- U.S. commercial property values had their biggest monthly rise on record in December as the number of transactions jumped, according to Moody’s Investors Service.

The Moody’s/REAL Commercial Property Price Index climbed 4.1 percent from November, the second straight monthly increase, Moody’s said today in a report. Transaction volume rose more than 75 percent from the previous month. Values, which fell to a seven-year low in October, are down 29 percent from a year earlier and are 41 percent lower than the peak in October 2007.

“Two months of positive returns and one month of higher transaction volume does not allow us to discern a trend just yet, particularly in light of the fact that year-end commercial real estate activity can distort the true condition of the markets,” the report said.

Landlords came under pressure in 2009 as rising joblessness cut demand for apartments, offices, retail space and distribution centers. Office vacancies jumped to a 15-year high of 17 percent in the fourth quarter, according to Reis Inc. While the period of “large” price declines is over, it is too early to say the market has bottomed, Moody’s said.

“It would be na├»ve and aggressive to say that we’ve seen the worst,” said Neal Elkin, president of Real Estate Analytics LLC, a real estate research firm in New York that provides the data for the Moody’s/REAL index.

The monthly gain in the index was the biggest in data going back to January 2000, Elkin said.

There were 716 transactions in December totaling $9 billion. The month was the first in 2009 that year-over-year dollar volume growth was positive, at just under 5 percent, Moody’s said. The dollar value was up more than 100 percent from November.

Building sales typically rise in December as buyers and sellers close deals before the end of the year.

Geithner Refuses To Come Down Off Capitol Dome (The Onion)

The Onion
WASHINGTON—Three days after a sulking Timothy Geithner climbed to the top of the U.S. Capitol dome, the treasury secretary remained steadfast Monday in his refusal to come down. "You all hate me," said Geithner, his arms crossed as he shouted at the crowd of onlookers gathered on the Capitol lawn below. "What do you care if I stay up here? You'll just make fun of me if I come down anyway. Well, I'm not coming down—not ever!" Federal security teams monitoring the situation said they believed Geithner might be planning an extended stay atop the dome, as evidenced by what appeared to be a burlap sack containing various snacks, a six-pack of root beer, and several copies of The Economist.

Judge approves $150 million settlement between Bank of America and SEC

Bank of America Corp (BAC) on Monday won approval of a $150 million settlement with the U.S. Securities and Exchange Commission over the Merrill Lynch & Co merger, ending an embarrassing public battle between the largest U.S. bank and the nation's top securities regulator.

U.S. District Judge Jed Rakoff on Monday approved the settlement but also lamented its deficiencies, calling it "half-baked justice at best."

The settlement ends two lawsuits by the SEC against Bank of America. One alleged that the bank misled shareholders about $3.6 billion of bonuses that Merrill paid out. The other alleged that the bank misled shareholders about Merrill losses, which reached $15.8 billion in the fourth quarter of 2008.

"Its greatest defect is that it advocates very modest punitive, compensatory and remedial measures that are neither directed at the specific individuals responsible for the nondisclosures nor appear likely to have more than a very modest impact on corporate practices or victim compensation," Rakoff wrote. "While better than nothing, this is half-baked justice at best."

Had Rakoff rejected the settlement, a trial over the bonuses would have begun on March 1.

The judge rejected a $33 million accord five months ago.