Today’s Economic Recovery News
[Guest post by DRJ]
Treasury Secretary Timothy Geithner announced today new ideas for keeping the TARP ball rolling: Give TARP money repaid by large banks to smaller banks not included in the initial bailout. Geithner also reiterated the Administration’s view that the economy is healing even though “the process of financial recovery and repair is going to take time.”
Meanwhile, the Dow is down more than 2% (200 points as of 2PM EST) on surprising news that April retail sales fell a seasonally adjusted 0.4%. Consumers are spending “less on gasoline, appliances and groceries, signaling that they are not likely to begin spending in droves anytime soon.” Forecasters and the government had thought retail sales would stabilize in April.
— DRJ
Surprising that Geithner’s inclusion in People’s 100 Sexiest List didn’t immediately heal the economy. Color me confused.
Vivian Louise (eeeb3a) — 5/13/2009 @ 11:53 amThis is a bear market rally and will come to an end. When it does, and when tax receipts go down, down, down, there is going to be some serious pain. Pertinent to the health care payment thread, this news should get someone’s attention. Didn’t Obama ever take an economics course at Harvard or Columbia ?
Prices have risen on credit default insurance on US government bonds, meaning it costs investors more to protect their investment in Treasury bonds against default than before the crisis hit. It even, briefly, cost more to buy protection on US government debt than on debt issued by McDonald’s. Another warning sign has come from across the Pacific, where the Chinese premier and the head of the People’s Bank of China have expressed concern about America’s longer-term credit worthiness and the value of the dollar.
And, about healthcare,
First, while comprehensive healthcare reform is needed, it must not further harm our nation’s financial condition. Doing so would send a signal that fiscal prudence is being ignored in the drive to meet societal wants, further mortgaging the country’s future.
Second, failure by the federal government to create a process that would enable tough spending, tax and budget control choices to be made after we turn the corner on the economy would send a signal that our political system is not up to the task of addressing the large, known and growing structural imbalances confronting us.
They are perfectly capable of wrecking the economy but there must be some adult around there.
Mike K (2cf494) — 5/13/2009 @ 12:20 pmPersonally, I am refusing to do business (or to expand any business I am committed to) with companiesthat have taken TARP funds. In fact, if it comes to the point where I must decide which bills to pay, first in line will be the companies that have not taken TARP funds.
I urge others to consider similar actions.
Dr. K (b922e9) — 5/13/2009 @ 12:37 pmDr. K – We are just putting off all large capital improvements/expenditures for the foreseeable future, or at least while Barcky is in office.
JD (a7fa4a) — 5/13/2009 @ 12:44 pmDoes this mean people are saving more?
Richard Aubrey (a9ba34) — 5/13/2009 @ 12:45 pmWhere?
Banks?
Give TARP money to small banks?????
Why? Are small banks refusing to go along with Obama plans like the Chrylser bondholders?
Obama looking for leverage over compensation rules of more private enterprises?
Shipwreckedcrew (7f73f0) — 5/13/2009 @ 1:08 pmShipwreckedcrew – That would appear to be a yes.
Vivian Louise (eeeb3a) — 5/13/2009 @ 1:13 pmWLS – Apparently so. Kind of scary.
JD (a7fa4a) — 5/13/2009 @ 1:18 pm#5:
Personally, I am parking money in precious metals and taking physical delivery.
Damn near impossible to trace.
Dr. K (b922e9) — 5/13/2009 @ 1:22 pmJD @4: I have a Home equity line with one of the entities that took TARP funds (and need to raise additional capital according to the stress tests) – I will take no more advances.
I have a lease on a GM vehicle. Once it is over, I will never own another GM vehicle.
I have other obligations with another bank that took TARP funds – I am paying that off as quickly as I can.
I am lucky, I am not “underwater” on my home like so many are.
But then again, I was responsible.
Dr. K (b922e9) — 5/13/2009 @ 1:26 pmObama has demonstrated that the only thing he’s been able to “stimulate” are sales of firearms and ammunition.
SPQR (72771e) — 5/13/2009 @ 1:29 pmDr K – It pains me in re. autos, since I am a Saab junkie, and they are part of GM. We were going to buy the Saab SUV next month, but are now looking for alternatives.
JD (a7fa4a) — 5/13/2009 @ 1:33 pmOoo, how fun if someone could graph the growth rates in industries untouched by the TARP and other interferance vs TARPed industries. You could track the fiscal touch of death in real time.
Vivian Louise (eeeb3a) — 5/13/2009 @ 1:34 pmI will possibly just resume driving my behemoth Ford Expedition, and destroy my little bit of Mother Gaia in the process 😉
JD (a7fa4a) — 5/13/2009 @ 1:36 pmJD: Seriously look at the BMW SUV. The x5 series is assembled in the US; the x3 is assembled in Germany. You can also take European delivery on the x3, drive it in Europe for up to a month and save about 5-7% off the MSRP – enough to pay for the trip to Germany.
Dr. K (b922e9) — 5/13/2009 @ 1:39 pmThe future is very unstable as long as the combination of Obama and Pelosi are in power. I would not look for a recovery until the GOP takes over Congress in 2010 but that may just be a wish, not a real prospect. I would suggest that the left wingers take a look at the stock market graph for the Clinton Administration and see when the bull market began.
This chart is interesting, showing the Dow adjusted for inflation. ALWAYS adjust for inflation when comparing different periods since 1920.
Mike K (2cf494) — 5/13/2009 @ 1:41 pmGreat idea, Dr. K. I am taking clients to Germany this summer to see a FIFA 2-star rated pitch we did, so I might just have to do some shopping while I am there. Thanks.
Dark could be construed as black which makes that drive-by a racist.
JD (a7fa4a) — 5/13/2009 @ 1:43 pmDark Beergod – this is a sucker’s rally. There are many small investors that have absolutely NO confidence in the market or the government’s interference in the same.
When the Fed Chariman and the SecTreas directly instruct a recipient of TARP funds to withhold adverse material information on the ML merger in violation of SEC regs and no investigation is forthcoming – we have a proble.
When the president calls Chrysler’s secured bondholders “speculators” and forces them to give up their property rights so the president can pay off the unions for their support – we have a problem.
When copmanies that have received TARP funds have better looking balance sheets because of the capital infusion and they report “profits” with no real profitable economic activity – we have a problem.
So go ahead and buy. But don’t come bitching to me when the market tanks.
Dr. K (b922e9) — 5/13/2009 @ 1:50 pm18 – JD, you need to order at your local BMW center and make arrangements. They have to build the car to order. and they need about 2 months to allow for shipping once you finish your european test drive. This summer may be a stretch. But check out the BMW website.
Also, see abut the special car tax break for 2009.
Dr. K (b922e9) — 5/13/2009 @ 1:53 pm18 – or he just likes dark beer.
Dr. K (b922e9) — 5/13/2009 @ 1:53 pmDr K – Are the prices good for a used BMW, say 1 or 2 years old? What do you have to do to ship it over? I am fascinated.
JD (a7fa4a) — 5/13/2009 @ 1:55 pmNever mind, we cross posted there …
JD (a7fa4a) — 5/13/2009 @ 1:57 pmActually, it’s a NEW car. Check the website, they have a “build your own” feature so you can look at the available options – it also has a running price total.
Then, you go to the local BMW Center (that’s what they call the dealerships), and state that you want to discuss European Delivery with the sales rep. The cost of the car is reduced by between 5-7%. They will take the order and in a few days they will tell you when it will be ready.
BMW has a special deal with Lufthansa (2 for 1 airfares), and you start planning your “vacation”. You pick up the car at the factory and get a tour. Then you drive your new car for up to a month. When you are ready to go home, they will have a list of places where you can drop it off, and they handle the shipping to the BMW center where you ordered it.
In about 6-8 weeks, you pick up your “used” car, where you were the previous “owner”.
Dr. K (b922e9) — 5/13/2009 @ 2:02 pmWow, a midwestern rube neocon fascist conservative rethuglican xenophobe knows that it’s called a “pitch.” Nice.
JD – I’m pretty sure that the program is only used to move new cars – they have the program all set up that way. Porche and I think one of the Swedish guys do it too. Buying a used car in Germany is going to be a pain than it’s worth to you, in my opinion.
carlitos (aa025a) — 5/13/2009 @ 2:04 pmFederal tax revenues are going down, down, down now.
LarryD (243b3d) — 5/13/2009 @ 2:26 pmThe Dow closed at -2.18% from yesterday’s close.
Scott Jacobs (90ff96) — 5/13/2009 @ 2:30 pmGeithner also reiterated the Administration’s view that the economy is healing even though “the process of financial recovery and repair is going to take time.”
They have really put themselves in quite a pickle, haven’t they? They spent much of January and February talking about how horrid the economy was and what absolute dire straits we were in and how that justified the spending orgy that they proposed, and then noticed that the markets responded by reflecting the doom and gloom and racing toward daily new lows. Then they tried out all this optimistic gibber-jabber about how the “stimulus” was going to save jobs and get the economy back on track, but we continue to see job losses and sluggish consumer behavior. The new policy apparently is to talk about how the economy is in a strong recovery thanks to the timely intervention by Dear Leader’s people, it’s just that none of it is showing up yet on the key indicators.
The joke of it is that so many economists, including some associated with Dear Leader, were predicting that we would come out of this recession in the 4Q of 2009. That was before Obama’s stimulus plans had even been proposed, and did not include any alleged benefits from it. If and when we do see that economic improvement, Obama and his academic and media allies will no doubt attribute it to the administrations “quick action” and no one will be allowed to remember that this was predicted as part of the normal economic cycle.
JVW (eabe68) — 5/13/2009 @ 2:37 pmPointing out these numbers is racist for sure.
BMW has a great website for that Euro-delivery option. They even have a blog. You have to build the car at bmwusa.com, though. I just built a nice M6 for only $116,570.
carlitos (aa025a) — 5/13/2009 @ 2:47 pmGeithner’s making Morgenthal’s tenure under FDR look almost quaint by comparison – and at least Morgenthal had the decency to admit how FUBAR their spendulus plans were after he was safely out of office.
Dmac (1ddf7e) — 5/13/2009 @ 2:51 pmMeanwhile, polling suggests that the bloom is off the Democrats rose in more ways than one.
SPQR (72771e) — 5/13/2009 @ 3:18 pmWatch your back, Moody’s. It’s only a matter of time before the Pitchfork Army is directed at those evil “credit rating agencies” that Obama “doesn’t stand with”.
Techie (9c008e) — 5/13/2009 @ 3:26 pmGreat news! keep it up, Mr President.
The Emperor (0c8c2c) — 5/13/2009 @ 3:31 pm“the process of financial recovery and repair is going to take time.”
This sort of positioning sounds awful familiar to us Iraq war and GWOT supporters, doesn’t it? Repeating this sort of mantra ended up hurting GWB, and it’s most certainly going to bite Tax Cheat Timmy in the rear (and sooner than he thinks).
Now, rightosphere, focus. Focus on the inflation rate. Focus on the number of jobs lost since 11/4. Focus on the ballooning deficits. (BTW, the next time some lefty yells at you for supposedly sitting idly by while Bush spent us into a pickle, simply tell him “So expanding and ramping up Bush’s spending on TARP is Hope and Change, eh?” while showing him the chart.)
Don’t worry about “intellectual consistency” that some lefty defined for you. FOCUS!
Brad S (5709e3) — 5/13/2009 @ 3:36 pmA short list of reasons for the March to present stock rally:
1- Hellacious short squeeze. I have bandages to prove it.
2- Large money has begun shorting UST long bonds and putting the proceeds into equities and high yield corporate debt of whatever sound corporations that remain. Preferred shares of same corps are getting more precious, confirming that notion.
3- The lion’s share of the rally monkeys’ monies has gone to the most beaten up equities which historically are the first to rise when risk aversion begins to dissipate. Historically, meaning looking back at past bear market rallies. The thinking is that the savaged low prices of once high flying stocks are just too tempting to pass up for a quick double or better. I will testify that’s true.
4- Corporations with cash and ‘stable’ cashflows [i.e., don’t need debt to stay in operation] are starting to borrow some of that TARP stuff (my speculation on that) sitting in banks, and buying back their own shares knowing that the coming inflation will allow them to pay back those loans in cheaper dollars.
All these things add fuel to the fire, and allows this market to have some legs. Looks as if the first correction is close at hand. If so, it will tell us many things depending on the depth of it and recovery strength. Don’t be distracted by unemployment woes or economic bad news. Bear markets are notorious for ignoring such things. I’d only offer one suggestion if you don’t trade…don’t trade this market. Whips and saws are bad enough, but a whipsaw is purely evil incarnate.
fly on the wall (a90394) — 5/13/2009 @ 3:42 pmYou Rethuglicans and your aircraft carrier wheels. No wonder carbon dioxide is “toxic” and destroying the planet. I’ve been getting spam telling me how to lower my pets carbon footprint. Don’t any of you care about our dying planet? If Algore was worthy of an oscar, nobel peace prize and emmy, surely you can all strive to emulate him. Well, actually he and his ilk are exceptions because they have to get the word out. Hence the houseboat, private jets, home in Tenn. that uses 20 times the juice of average home, etc. Let’s all sing Kumbaya. Or send fatass Mikey Moore to a village in Botswana where he can be the main entree out of the pot.
aoibhneas (4c25df) — 5/13/2009 @ 3:58 pmAnd why is it that so many of you, including many Jooooo,insist on buying from the nazis? Mercedes high cosy of service and repair is Germany’s way of making up for losing the war. I’m an Anglophile and looking at 10 year old Aston Martins for under $40k.
Obama, putting the great back in the depression.
bill-tb (26027c) — 5/13/2009 @ 4:28 pm“…Mercedes high cosy (sic) of service and repair is Germany’s way of making up for losing the war…”
Comment by aoibhneas — 5/13/2009 @ 3:58 pm
I am reminded of the views of a Beverly Hills Dermatologist (Jewish) I knew back before M-B’s became trendy…
AD - RtR/OS! (e8f920) — 5/13/2009 @ 4:47 pmHe would ask his friends if they realized that M-B’s were made from pressed Jews.
Watch your back, Moody’s. It’s only a matter of time before the Pitchfork Army is directed at those evil “credit rating agencies” that Obama “doesn’t stand with”.
Comment by Techie
Rick Santelli is already getting the Obama enemies treatment.
Rick Santelli can get on the Obama administration’s case by ranting on television. But the administration can get on Rick Santelli’s case by changing the tax code! On page 110 of the administration’s tax green book (pdf) — the detailed explanation the administration’s tax plans, which came out yesterday — there is a small provision that would end preferential tax treatment for certain derivatives and commodities traders, like Santelli and his friends on the floor of the Chicago Mercantile Exchange. The proposal:
would require commodities derivatives dealers, dealers in securities and dealers in equity options and commodities and to treat the income from their day-to-day dealer activities as ordinary in character, not capital.
As a comment on that blog points out;
Broker dealers pay a blend of capital gains rates and not ordinary rates because they are taxed on UNREALIZED gains and losses. They are the only business so taxed. If they have inventory that has a gain on Decemeber 31, they pay tax on that value, EVEN IF THEY HAVE NOT SOLD THE POSITION. That’s the original trade off of WHY they have the rate tax break. Let me guess, Obama is NOT proposing to change the tax on UNREALIZED gains and losses.
Details, details ! That wasn’t in economics 101 at Occidental College.
Mike K (2cf494) — 5/13/2009 @ 5:10 pmI hold no pity parties for Moody’s in this debacle – they were complicit in rating the very same banks that later imploded, as long as they got their fees from them on time. Those ratings were usually quite robust, and it’s obvious that no one there bothered to look under the hoods too strenuously.
Dmac (1ddf7e) — 5/13/2009 @ 6:40 pmDear Dr. Mike K…. Oh, please don’t get me started on that.
Eric Blair (262ccd) — 5/13/2009 @ 7:04 pmAmen, Dmac. The ratings agencies were practically complicit with the banks and mortgage lenders.
Dr K and carlitos – Thanks. I am going to try to talk Better Half into it, and tell her it was your idea.
JD (e738c0) — 5/13/2009 @ 7:08 pmWithout Moody’s and others, just how much of those MBS’s would the GSE’s have been able to peddle around the world?
Why do I think that the Plaintif’s Bar is going to make a lot of money over a very long time with this? If we can ever find bottom, this will make the Enron witch-hunt look like Sunday-school.
AD - RtR/OS! (e8f920) — 5/13/2009 @ 7:18 pm#42: Sure, I’ll happily take the blame. Her legs are probably not long enough to kick my ass (which happens to reside in estern NY).
Dr. K (b922e9) — 5/13/2009 @ 7:23 pmsimply tell him “So expanding and ramping up Bush’s spending on TARP is Hope and Change, eh?” while showing him the chart.)
Makes me think of a person who works in the same office I’m located in, who’s a big liberal, a big Obama supporter.
Last year he was ranting about the huge deficits run up under George Bush and claimed that, by contrast, the Clinton White House had generated surpluses. Being not too sure of the details, I found an article on the Internet about the Clinton “surplus” that clearly illustrated why such a claim was a bunch of BS.
However, the more hilarous thing about this big liberal — and why so many people want to label those on the left as “lefty,” which makes them sound somehow so sweet and endearing — is that he now shrugs off the pending red-ink debacle of the Obama Administration.
Beyond that, this big liberal (aka “lefty”) was sneering to me how he’d love to see Dick Cheney prosecuted for war crimes. I retorted that the thing I found so obnoxious about liberals is their belief that leftist sentiments make a person somehow superior in the area of being humane, caring, non-selfish, and compassionate.
Just to test him I mentioned that so many liberals were or are more upset by George Bush than Saddam Hussein.
Silence.
I said that so many liberals have a tendency to bleed their hearts and weep their tears over a convicted killer being sentenced to capital punishment instead of spending an equal amount of time fretting about the horror foisted upon the victims — past and possibly pending (certainly either cellmates or unwitting victims encountered after parole) — of such muderers.
No surprise, this “lefty” said he was an opponent of the death penalty and didn’t believe in an “eye for an eye.”
What was hilarious is this “lefty” was snarling about how he’d love to see Cheney hung from the rafters for war crimes (actually that should be “war crimes”).
Even more hilarious, I overheard this same “lefty” bark out last year that George Bush should be shot and hung, and that the people who voted for him also should be shot and hung.
Liberals: Not worth a godddamn.
Mark (411533) — 5/13/2009 @ 10:49 pmYou must have had a tough day, Mark. But please don’t put all liberals in the same category as your annoying colleague. There are decent ones, including some here.
I also prefer the term leftists over liberals because classical liberalism was pro-free market. I consider myself a liberal in that sense. Leftism is something else entirely — a dogmatic statist construct.
Brother Bradley J. Fikes, C.O.R. (0ea407) — 5/13/2009 @ 11:23 pmBMW’s European delivery is pretty cool. You get to pick up the car in the BMW Welt building in Munich, and then drive it out of the building and on to the Autobahn. You then can drive around Europe one one of the packages they offer, or do your own thing. Then at the end you just drop off your car with a BMW rep in one of the port cities, and they deal with the whole getting it on the boat and other details- you just fly home, and pick it up when it arrives in the US.
I think one of the reasons it works out to be cheaper then buying it in the US, is that because you already drove it before it arrives in US customs, it is technically ‘Used’ and so falls into a different tariff category.
BMWUSA European Delivery page
Jed (834a13) — 5/14/2009 @ 8:38 amIndeed, Mark, the Clinton admin “surpluses” were mostly BS but not entirely. As a result of GOP restraint on Clinton’s budgets and the dot.com bubble’s historically large capital gains taxes ( which collapsed in the final year of Clinton’s term creating a recession ) the budget briefly looked pretty good. But a large fraction of that remained the budget legerdemain of borrowing from SS surpluses.
SPQR (72771e) — 5/14/2009 @ 8:58 am