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 | 1373.3 | 1.9 | 0.14% |
| Eurostoxx Index | 2531.5 | 11.8 | 0.47% |
| Oil (WTI) | 106.82 | 0.3 | 0.25% |
| LIBOR | 0.4843 | -0.003 | -0.67% |
| US Dollar Index (DXY) | 78.171 | -0.076 | -0.10% |
| 10 Year Govt Bond Yield | 1.92% | -0.02% |
World markets are slightly firmer this morning on the back of in increased commitment from the ECB to lend to European banks. The ECB said it will lend 529.5 billion euros, much higher than previous commitments and higher than economists were predicting. Most sovereign yields are lower this morning with the exception of Portugal, which is blowing out again.
4Q GDP (this is the 2nd of 3 reports) came in at 3% vs the initial 2.8% reports. Personal consumption improved to 2.1%. The GDP price index and core PCE came in higher than expected. Bonds and mortgage backed securities are slightly stronger on the data.
The banking system is on the mend. The FDIC released its quarterly report on the state of the banking system yesterday, noting that lending has increased and problem loans have decreased. Profits have increased, but decreases in loan-loss provisions have been the main driver in that increase. Return on Assets is a paltry .76%, as financial repression (Bill Gross’s term for ZIRP) continues to weigh on bank profitability.
HUD Secretary Shaun Donovan testified before the Senate Committee on Banking, Housing and Urban Affairs yesterday. The questioning focused on the health of the FHA and Administration initiatives to help prevent foreclosures. The second panel included acting FHFA Director DeMarco, and the questioning focused on allowing principal modifications for Fannie and Freddie loans. This issue has been a bone of contention between the liberal wing of the Democratic Party who want mass principal forgiveness and DeMarco who is charged with maximizing value for taxpayers.
Filed under: Uncategorized |
All Things in Moderation 
“bannedagain5446, on February 28, 2012 at 11:14 am said:
Same thing with GM and Chrysler. They were allowed to carry their losses forward, and won’t pay corporate taxes for years as a result.”
Looks like John was right and I was wrong, despite the fact that GM actually had to file bankruptcy.
WSJ today:
“Corporations in the red, as GM was for years, are allowed to carry forward net operating losses that reduce their future tax liability when they are making money. GM had accumulated about $45 billion in such profit-shielding chits by 2008, with a book value of about $18 billion. When companies enter bankruptcy, carry-forwards disappear or are greatly limited under IRS section 382, which kicks in when ownership changes by more than 50 percentage points.
The point is to prevent companies from buying assets solely for tax arbitrage or tax avoidance. But starting in 2009, Treasury began to issue regulatory “notices” that suspend this law when it comes to Treasury-owned stock. The provisions also apply to AIG and Citigroup.
So when GM entered bankruptcy in June 2009, the government swapped the debt the auto maker owed it as a creditor for 61% of “new GM,” while handing another chunk to the United Auto Workers. But new GM also inherited the accumulated net operating losses that would have turned into a pumpkin in normal bankruptcy. ”
http://online.wsj.com/article/SB10001424052970204653604577251461989702208.html?mod=WSJ_Opinion_AboveLEFTTop
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Do any of you guys know whether the Canadian government has sold it shares of GM and/or Chrysler?
I recall that Magna, the giant Canadian parts mfr., was at the table but did not snatch Opel in the end. Canada and Ontario got maybe 12% of GM. Do they still have it?
As I recall, the Pension Guaranty Trust would have been busted if the UAW had not traded its pension claims for cash in the plan and stock in GM, and severed the pension responsibility from GM. Is that right?
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“As I recall, the Pension Guaranty Trust would have been busted if the UAW had not traded its pension claims for cash in the plan and stock in GM, and severed the pension responsibility from GM. Is that right?”
I believe that is true, but I also recall that the total exposure to the Federal government would have been less than what they have lost so far in the bailout due to the fact that the PBGC (Pension Benefit Guaranty Corporation) pays out far less generous benefits than GM had obligated itself to.
http://www.pbgc.gov/
Note the recent write up about the issues surrounding American Airlines bankruptcy and the associated pension costs.
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This is completely off topic but thought I’d drop a link in here for you guys as it’s energy related. Our daughter saw this documentary last weekend and found it very informative without all the usual political positioning. It was very well received by both the environmentalists and the oil crowd. Eventually it’ll be shown on HBO or similar but if you have a chance to see it in a larger screen venue she said it was well worth it. Since it was an educational environment for their screening a discussion followed the film which was very interesting she said.
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jnc:
That’s why crises are good for business and government. Both parties get to ignore the carefully crafted existing laws, and do what ever the hell they have been secretly trying to do for years!
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nark:
That’s not true. Only the health care went to he the union. Nothing changed about the pension plan.
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“bannedagain5446, on February 29, 2012 at 9:21 am said: Edit Comment
Mark:
That’s not true. Only the health care went to he the union. Nothing changed about the pension plan.”
Yes, but I believe his point is that it wasn’t transferred to the PBGC either. Benefits remain fully committed to by the new GM, despite the bankruptcy of the old GM.
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jncp4 and john, thanks for the clarifications.
Brent and john, isn’t the revision to 3% growth significant? Obviously, not if it cannot be sustained, but it is a “feel good” number. I know we are healthier in TX than some other places, but it almost “feels normal” in Austin again, meaning that everything is humming.
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“markinaustin, on February 29, 2012 at 11:27 am said: Edit Comment
jncp4 and john, thanks for the clarifications.
Brent and john, isn’t the revision to 3% growth significant? Obviously, not if it cannot be sustained, but it is a “feel good” number. I know we are healthier in TX than some other places, but it almost “feels normal” in Austin again, meaning that everything is humming.”
That’s my impression as well, but I also believe that there are a significant number of people who won’t be returning to the labor force the way that they were prior to the recession. I believe we are now in the “new normal”.
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mark:
it’s actually early. That’s what I was predicting for this quarter.
However I am still gloomy over oil prices, and now the ECB’s liqudity efforts add to the troubles over commodity prices.
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“I am still gloomy over oil prices”
Speaking of the new normal, shouldn’t we expect them to continue heading up, given expanding global demand?
There really isn’t enough that could be brought online to maintain the low prices, is there?
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bsimon:
No not in the near term. Absent MIddle Eastern fighting, there is currently no oil shortage in the world.
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