Brent Nyitray
Fairlington Blade
Let the mutherfuker burn!
jnc4p
Kevin S. Willis
Michigoose
lmsinca
markinaustin
Arcanaut
novahockey
quarterback
ScottC
yellojktVital Statistics:
| Last | Change | Percent | |
| S&P Futures | 1266 | 28.6 | 2.31% |
| Eurostoxx Index | 2464.6 | 129.540 | 5.55% |
| Oil (WTI) | 92.98 | 2.780 | 3.08% |
| US Dollar Index (DXY) | 75.502 | -0.715 | -0.94% |
| 10 Year Govt Bond Yield | 2.28% | 0.08% |
Stock markets are rallying on news that the Europeans have come to an agreement to deal with Greece, with bondholders taking a 50% haircut and boosting the rescue fund to 1 trillion euros. Is this the silver bullet that will solve this problem once and for all? The initial take seems to be no. The bigger question will be whether this quarantines the Greece problem or does the contagion spread to the rest of the PIIGS. For the moment, the markets are breathing a big sigh of relief.
3Q GDP came in with an annualized increase of 2.5%, more or less in line with the economists survey. Consumption came in higher than expected (2.4% vs 1.9% expected), which tells us there is a growing discrepancy between what consumers feel (as shown in the consumer confidence numbers) and what they actually do (as evidenced by spending numbers). As I have discussed before, this is how recessions end – consumers don’t start spending because they want to, they do it because they have to. Eventually the 10 year old car becomes too expensive to fix, Dad’s 5 year old dress shirts become ratty, and need to be replaced. The other headwinds in the economy will undoubtedly overpower any consumer strength for the moment, but those headwinds are becoming milder as time goes on. I am not buying the double-dip recession thesis. Just not buying it.
In other data, the labor market is still stuck, with initial jobless claims above 400k again and continuing claims at 3.65 million. The labor market is always the last to improve.
Chart: Initial Jobless Claims:
Filed under: Europe, Greece, Initial Jobless Claims | Tagged: PIIGS |
All Things in Moderation 
Brent, I'm late to your morning reports, but many thanks. I'm backtracking on reading them, trying to catch up. This is not an area I can offer any expertise at all and need lots of simple information with some explanation, and these are most helpful to me.Off to work.
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"The labor market is always the last to improve."But there's still reasons to be optimistic, right? Tell me there are reasons to be optimistic.
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I keep thinking that better days are just around the corner and then I remember I live in CA and our rebound is probably further down the pipeline. Housing has nearly killed us and many of the small bedroom communities that surround the larger cities are nearly bankrupt. I just read in the local paper that my own little town has one of the top 5 rises in the poverty level in the Inland Empire, yikes. And we used to be the 2nd highest median income level in the IE. We managed to buy a new shiny fire engine though, right before leasing it to Cal Fire, which has taken over our Fire Department.
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Felix Salmon has a post up about the newly baked EU deal, he calls it half-baked though.There are three main parts to the deal. The first is an agreement, in principle, to leverage the European Financial Stability Facility by a factor of about four. Good idea! Except, the EFSF can’t just borrow $750 billion from its friendly prime broker. So where’s the extra money going to come from? There are a few ideas; foremost among them are “risk insurance” (which would be intended to raise the rest of the money from the private sector), and borrowing the money from Uncle Jintao in Beijing. At the moment it’s all rather inchoate. One place the money’s not coming from is the ECB, which found it hard enough just to keep on buying bonds from Spain and Italy.The second main part of the deal is the bank recapitalization, where 70 banks — primarily in Greece and Spain — are going to be given €106 billion in order to bring their core capital up to 9%. This is a move in the right direction, but it’s also pretty marginal: the big French banks, for instance, aren’t going to need any more money at all, and in fact almost no bank you’ve actually heard of is covered by this. It’s mainly a way of forcing bailout funds to be injected straight into the banking sector.Finally, there’s the Greek default, which has now been upgraded from a 21% haircut to a 50% haircut. This is the headline-grabbing announcement, but don’t hold your breath. The deal was negotiated by the IIF, a membership organization which represents banks but can’t commit them to anything. While the IIF’s head, Charles Dallara, walks around feeling important, his member banks are ultimately going to have to make their own decisions on whether they’re going to tender their holdings of Greek debt into a new exchange, and if so how much of their debt they will tender. What are the chances that all IIF members are going to tender all their bonds? Exactly zero.
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Housing was up in Michigan and I think it actually increased more here than anywhere else! Looks like I bought just in time. At the same time, the increase brought Michigan back to 1995 levels. Thanks for the post Brent.
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"But there's still reasons to be optimistic, right? Tell me there are reasons to be optimistic. "I am not buying the double dip argument. That doesn't mean I am predicting happy days are here again, either. I think we are in for a tough, but manageable slog as we de-lever. We will probably have 2% to 2.5% GDP growth for the near future, which will be enough to bring down unemployment gradually. As I have said before, housing needs to bottom to get a robust economic recovery going. Unfortunately, Obama does not believe that, or believes he can engineer an artificial bottom in the housing market, which is really only constipating the foreclosure pipeline and dragging out the recovery.
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Interesting data. The first half of this year, especially the second quarter, was a real killer. I am wary of simple solutions, but that oil spike was a killer. Other events (quake, Greece, US govt) played a role, but I look squarely at oil. Don't forget that the great crash was preceded by a spike in oil prices.I suppose the Republican answer is Drill, Baby, Drill (or Frack, Baby, Frack). The Democratic answer makes me think of the Jetsons: Jane get me off this stupid thing!BB
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Fairlington:The Democratic answer makes me think of the Jetsons: Jane get me off this stupid thing!Obviously not a true fan. It's crazy thing. Get me off this crazy thing. 😉
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Mostly, the Republican answer is to talk about drilling, support fracking, and subsidize ethanol. And import more oil from Canada!
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@BB,I think oil has hit its peak and is only going to fall further to $10 a barrel. The electric car is at the inflection point of the "S" curve and is only going to get better and cheaper. If you tell a consumer they can go 100 miles on $4.00 worth of electricity or $12.00 worth of gas, they will become interested once the price differential between electric and gas gets small enough. It will increase electricity demand, and since we aren't building any more coal or nuclear plants, we will be consuming more natural gas. Until we figure out a way to store electricity, coal, nuclear or natural gas will have to do the heavy lifting or providing capacity. So yes, it is horizontal drill and frack, in an environmentally sensible manner. The reason why I am bullish going forward is that I believe we will be a net energy exporter in 5 years, exporting oil and LNG to China and the developing world. This will go a long way towards fixing the trade deficit, reducing the military to defending our borders, and increasing disposable income for consumers.
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This was interesting to note, courtesy of Shrink2 over at PlumLine:Regulator said to mull forgiving mortgage debt"WASHINGTON | Wed Oct 26, 2011 9:29pm EDTWASHINGTON (Reuters) – The regulator for Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB) was reviewing a proposal to help troubled homeowners by forgiving a portion of their outstanding mortgage debt, Democrats in the House of Representatives said on Wednesday.The head of the Federal Housing Finance Agency (FHFA), which oversees the mortgage-financing companies, met with 19 Democrats and discussed a proposal that would allow bankruptcy judges to reduce principal amounts on loans."The main question is whether or not the FHFA has the authority to do this for the loans that Fannie & Freddie own without new legislation. The article was unclear on that point.
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"Until we figure out a way to store electricity, coal, nuclear or natural gas will have to do the heavy lifting or providing capacity. "But we already know how electricity is stored, it's called coal and oil and and natural gas and uranium and…
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One word, Brent. Plastics. Oil is an incredibly valuable material that's a basis for so many commodities. It's idiotic to just burn it. Kind of like taking cherry wood and burning it for fuel.I like the optimism. We have a lot of energy in this country and not all of it is in the ground.BB
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Energy falls from the sky constantly. We need to seriously figure out the harvesting of said radiant energy.
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