Housing Depression: October 2008

Thursday, October 9, 2008

Jobless claims drop to 478,000

Jobless claims dropped by 20,000 last week to a seasonally adjusted 478,000. The four-week moving average is at 482,000. That is the highest since October 2001. And the numbers are going to get worse as the downturn begins.

All this does not bode well for consumer spending, who are already strapped with lower home prices (although I never understood why your home price should effect spending - especially your primary home. I know it's MEW, but taking out a mortgage on a mortgage free home bothers me...but that's an issue for a different time.) and lower stock-market plunge.

Technorati Tags JoblessClaims

Tuesday, October 7, 2008

Fed to Purchase Commercial Paper

From WSJ:

The Fed announced a plan to purchase commercial paper directly from issuers. The Treasury Department will make a special deposit at the Fed to back the facility.

Looks like yet more expansion of feds authority.

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Technorati Tags Fed

Fed to Purchase Commercial Paper

From WSJ:

The Fed announced a plan to purchase commercial paper directly from issuers. The Treasury Department will make a special deposit at the Fed to back the facility.

Looks like yet more expansion of feds authority.

Technorati Tags Fed

Friday, October 3, 2008

Monthly Payroll

Nonfarm payrolls tumbled by 159,000 in September. That was the fastest pace in five years. The unemployment rate was unchanged at 6.1%.

Once again, there were 42,000 jobs created by the birth/death model. The model has 12,000 jobs created in construction. Not only is the next president going to inherit a horrible economy, but watch out when those adjustments come in January!

So now everyone is asking for a rate cut. But if you look at the overnight fed funds rate, you see that the feds have already had a stealth cut. While there was a worry about deflation, with the way HeliBen is operating there has to be a worry about hyperinflation. He's got low rates, he's got all the liquidity pumping, and now another $700 billion (treasury) to buy junk from banks.

In other news, Wells Fargo Buys Wachovia

Now Wells Fargo is buying Wachovia with a stock swap. So now with Wells Fargo buying Wachovia, it leaves the FDIC off the hook (well not really since they still have to worry about the deposits - which they seemed to be worried about). WF is paying $15.1 billion in stock. WF will raise up to $20 billion by issuing common shares.

Thursday, October 2, 2008

Jobless claims rise to 497,000

From WSJ:

Even accounting for the roughly 45,000 claims that the government said were related to Hurricanes Gustav and Ike, the trend remains very weak for labor markets at a time when the crisis on Wall Street threatens to pull consumer spending and the overall economy into a deeper downturn.

Initial claims for jobless benefits rose 1,000 on a seasonally-adjusted basis to 497,000 in the week ended Sept. 27, the Labor Department said in its weekly report Thursday. That's the highest since Sept. 29, 2001. Economists surveyed by Dow Jones Newswires had expected claims would fall by 18,000.

For those who think we've hit bottom in housing, we've been telling you there are still more risks out there. We have been talking about umemployment getting worse. And this report shows us it's going to get worse.

We've had pretty bad data on the economy this week. First we saw signs of stagflation on Monday. We saw a big drop in manufacturing activity. And now this weekly unemployment report. We can probably be sure we are in a recession.

In other news, the SEC extended the short sale ban. From Reuters:

The Securities and Exchange Commission said the ban would expire three business days after a $700 billion federal bailout bill was enacted, but would not last beyond October 17.

Didn't Wachovia and Wamu go down while the ban was in effect? But that doesn't matter. Once these rules are added, they are hard to undo. Just ask Ben B. He's just can't stop any of his alphabet soup lending facilities.

Technorati Tags economy,SEC,weeklyunemployment,shortsaleban

Wednesday, October 1, 2008

GE Raising $15 Billion

Nothing bothers me more than lying analysts. I am probably not as smart as most analysts, but one thing I promise is honesty. That is the whole purpose of this blog.

GE is raising $12 billion in common shares to public, and raising another $3 billion by selling preferred shares to Warren Buffett at 10% interest rate! Yet Jim cramer claims there is no problem. Hello? That's $3 billion at 10%! Remember that's what Lehman and other financial companies said when they raised capital - We are raising capital not that we need to.

“I don’t think there’s a company in the country that if they can raise cash shouldn’t do it right now,” he said.

It looks like he has it backwards. No company would want to raise cash in this environment if it didn't have to. This is absolutely the worse period to raise cash. The fact they are trying to raise $12 billion shows their desperation.

Once again this is not something I am happy about. I am just pointing out the lie that they don't need capital.

http://www.cnbc.com/id/26975872

Technorati Tags ge,JimCramer

Ford Sales drop 35%

Ford sales dropped 35% despite customer incentives. WOW! 35% drop. As credit crunch spreads, this is going to effect more people.

"Consumers and businesses are in a very fragile place," Ford marketing executive Jim Farley said in the company's press release. "An already weak economy compounded by very tight credit conditions has created an atmosphere of caution."......
"February 1993 was the last time that fewer than one million new vehicles were sold in a month, and we're coming remarkably close to that volume again," said Jesse Toprak, executive director of industry analysis at Edmunds.com. He added that October sales traditionally are worse than September.

It's going to get even worse next month!

GM's sales fell only 16%.

http://online.wsj.com/article/SB122286679412694031.html?mod=googlenews_wsj

Technorati Tags automakers,ford,gm

Credit Crunch is getting worse

WSJ is reporting that many companies like GE, Verizon, and Microsoft are lobbying congress to pass the bailout package.

Corporate-bond issuance in the quarter plunged to $76.7 billion from $337.3 billion in the second quarter, according to figures from Thomson Reuters. Companies overall were forced to reduce their borrowings on the short-term commercial paper market by $212 billion between the end of February and last Wednesday, as investors continued to back away from the corporate IOUs.
Randall Stephenson, AT&T Inc.'s chief executive, said the telecom giant's access to short-term commercial paper was limited to overnight loans for a few days last week. An AT&T spokesman said the situation has since improved and the company now has "full and ready access" to such credit for longer terms and at "reasonable rates."

You can imagine how bad it must be if the largest telecommunications company is having trouble selling short-term debt.

The finance arm of Caterpillar Inc. last week sold $1.3 billion of bonds in a two-part offering. The world's largest maker of earth-moving machinery is rated single-A, but the company said it had to offer yields upward of 6% and 7% to lure investors. In August, Caterpillar issued $300 million in bonds at a yield of 4.9%.

These are top companies that are having problems raising money.

We probably need some kind of a bill to pass. But I would rather congress take its time, have good economists give their views and then pass the bill. We need to make sure we are not just throwing away $700 billion.

http://online.wsj.com/article/SB122281874953692447.html

Technorati Tags creditcrunch,rescuebill

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Thursday, October 9, 2008

Jobless claims drop to 478,000

Tuesday, October 7, 2008

Fed to Purchase Commercial Paper

Fed to Purchase Commercial Paper

Friday, October 3, 2008

Monthly Payroll

Thursday, October 2, 2008

Jobless claims rise to 497,000

Wednesday, October 1, 2008

GE Raising $15 Billion

Ford Sales drop 35%

Credit Crunch is getting worse

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