October durable goods orders get “the boots”
Comments »WASHINGTON (AP) – U.S. business orders for long-lasting manufactured goods fell for a second straight month in October. While much of the weakness came from a big drop in demand for commercial aircraft, a key category that tracks business investment spending fell by the largest amount since January.
The Commerce Department reported Wednesday that orders for durable goods fell 0.7 percent following a September decline of 1.5 percent. Orders for core capital goods, considered a good proxy for business investment spending, dropped 1.8 percent, the biggest decline since a 4.8 percent fall in January.
Manufacturing has been one of the strongest sectors in the economy in this sub-par recovery, but this sector slowed this year as consumer demand faltered and auto factories had trouble getting parts following the March natural disasters in Japan.
The October drop in core capital goods, non-defense products excluding aircraft, was expected to be a temporary setback. This category has been surging this year, spurred by tax breaks that are allowing companies to write-off their investments all in one year as long as the purchases are made before the end of 2011. That has provoked a rush by companies to take advantage of this tax break which Congress passed in an effort to spur the sluggish economy.
Economic Expansion is Confirmed by Truck Tonnage
Citigroup’s Economic Surprise Index is Showing Elevated Levels
Generally this indicates a point where analysts become “excessively optimistic”
Comments »China Surpasses U.S. as the Largest Cell Phone Market
Consumer spending, income edges higher
Comments »WASHINGTON (AP) — American consumers barely increased their spending in October but their incomes rose by the most in seven months. The rise in take-home pay could boost spending during the upcoming holiday shopping season.
The Commerce Department said Wednesday that spending increased 0.1 percent last month, the poorest gain in four months. But incomes increased 0.4 percent, the best showing since March.
Private wages and salaries drove the income gain.
The slight October gain in consumer spending represented a big slowdown from a 0.7 percent September increase. Spending on durable goods such as autos showed a solid increase but spending on nondurable goods such as food and clothing fell.
Some economists predicted spending would slow because consumers spent more over the summer while earning less. Consumer spending is important because it makes up 70 percent of economic activity.
After-tax, inflation-adjusted incomes fell at a 2.1 percent rate over the summer, the biggest drop since the third quarter of 2009, just as the recession was ending.
CBO: Stimulus Hurts Economy in the Long Run
The Congressional Budget Office on Tuesday downgraded its estimate of the benefits of President Obama’s 2009 stimulus package, saying it may have sustained as few as 700,000 jobs at its peak last year and that over the long run it will actually be a net drag on the economy.
CBO said that while the Recovery Act boosted the economy in the short run, the extra debt that the stimulus piled up “crowds out” private investment and “will reduce output slightly in the long run – by between 0 and 0.2 percent after 2016.”
The analysis confirms what CBO predicted before the stimulus passed in February 2009, though the top-end decline of two-tenths of a percent is actually deeper than the agency predicted back then.
Read the rest here.
Comments »El-Erian Joins Biggs With the Chance of a U.S. Recession @ 50%
Crisis in Europe key to U.S. economy
Comments »Third quarter gross domestic product was revised down Tuesday from 2.5% to 2.0%. That’s a sizable adjustment, but when you consider GDP growth from the previous quarters this year, a .5% revision downward is hardly that bad. (See: As Gloom Rises, U.S. Economic Data Flow Strengthens)
In Q1, the U.S. economy grew a minuscule .4%. In Q2, that number rose to 1.3%. So 2.0% growth in the third quarter at a time when there were “terrible headwinds” such as the debt ceiling debate and a market drop of 8%-9% is not horrible and actually shows some resilience in the consumer, which makes up 70% of the GDP figures, says Yahoo! Breakout’s Jeff Macke.
“Consumer spending was revised slightly down to a 2.3% growth pace from 2.4% because of adjustments to motor vehicle fuels and lubricants,” reports Reuters. “It was still the quickest pace since the fourth quarter of 2010.” This is right in line with previous reports of retail sales and earnings on The Daily Ticker.
What does this all mean for next year as we head into 2012? In a word, Macke says, the outlook is “grim.”
But he acknowledges the fact that no one has a clue what next year will bring. There are just too many unknown variables plaguing the global economy, the biggest of which Macke says is the European debt crisis.
In a sea of uncertainty, one thing is clear, says Macke: The future of the U.S. economy rests upon what happens in Europe. If Europe “seizes economically,” it is going to have a huge impact on the U.S. in terms of both jobs and the ability of U.S. companies to do business there.
Young Workers Experience a Long Trip to the Real World
Earlier this fall, Steve Ferdman celebrated getting a job offer from Credit Suisse in the usual Wall Street fashion. Over expensive oysters and dark rum cocktails at a trendy Manhattan restaurant with his parents, he toasted landing the full-time position after working six months as a consultant without benefits.
A week later, Mr. Ferdman, 28, sat alone at the same place and ordered a gin and tonic to lament getting laid off by the bank, for the second time since 2008. When he told the bartender about his misfortune, his next round was on the house.
“I did everything right. I came into work every day, I put in long hours, and I still got punched in the face,” Mr. Ferdman said. “People shouldn’t want to work in this industry anymore.”
Being young on Wall Street once meant having it all: style, smarts and too much money to spend wisely. Now, twenty-somethings in the finance industry are losing both cash and cachet.
Andrew Sullivan for The New York TimesSam Meek, 27, of Greenwich, Conn., was laid off from his job at a hedge fund. “I’m scraping by right now,” he said.Three years after the global financial crisis nearly brought Wall Street firms to the brink, the nation’s largest banks are again struggling. As profits wane, layoffs have claimed thousands of jobs and those still employed have watched their compensation shrink. These problems are set against the morale-crushing backdrop of the Occupy Wall Street movement, which has made a villain of a once-lionized industry.
Much of the burden of Wall Street’s latest retrenchment has fallen on young financiers. The number of investment bank and brokerage firm employees between the ages 20 and 34 fell by 25 percent from the third quarter of 2008 to the same period of 2011, a loss of 110,000 jobs from layoffs, attrition and voluntary departures.
By comparison, industry headcount dropped by 17 percent in the same period, according to an analysis by The New York Times of data for New York City provided by the Bureau of Labor Statistics. The number of staff members over the age of 55 decreased by only 11 percent.
Young financiers have experienced setbacks in the past. Bankers and traders who rushed wide-eyed to Wall Street in the halcyon days of the 1980s were waylaid by the stock market crash of Oct. 19, 1987, known as Black Monday. Then they got pummeled in 2000 by the dot-com collapse and the recession that followed.
But experts say that today’s doldrums, unlike previous downturns, are here to stay.
“A lot of the positions that are being cut right now aren’t coming back,” said Leslie K. Hild, a vice president with the recruiting firm Right Management. “It’s an emotional roller coaster for almost everyone.”
The industry’s woes have also affected the plans of undergraduate and graduate students at the nation’s top colleges.
At Harvard Business School, where a relatively high 39 percent of this year’s graduates went into finance, compared to 34 percent last year, there has been a “heck of a lot more anxiety” about next year’s hiring season, according to William A. Sahlman, a professor of business administration.
“People used to think of some of these organizations, like a Morgan Stanley or aGoldman Sachs, as safe career bets,” Professor Sahlman said. “Those firms are not going away, but they’re going to hire half the people they hired before.”
Several large firms are not recruiting new entry-level analysts for their investment banking divisions this fall, having filled their entire incoming class with last summer’s interns. At the University of Pennsylvania, whose Wharton School is the closest thing that exists to a Wall Street farm team, Goldman Sachs canceled its informational session.
The mood is even darker outside the Ivy League. Matthew Slotnick, a senior economics major at Boston College, said that he had sent more than 100 résumés to contacts on Wall Street and received several interviews. But he has not gotten any offers. Mr. Slotnick, who has wanted to work at an investment bank since entering college, is now applying to smaller banks and firms outside of New York.
“People are saying it’s sort of a 2007, 2008-type hiring climate,” he said. “I haven’t given up, but it’s a bit depressing.”
Any sympathy for Wall Street’s huddled masses yearning to get rich should be tempered by the fact that financial sector recessions often deal a soft blow. Laid-off financial workers typically get large severance packages, including the use of outplacement services. During their job hunt, many can draw on substantial savings built off past bonuses, on top of collecting unemployment.
But for those laid-off Wall Street workers whose golden tickets have vanished, the disillusionment is real.
Sam Meek, 27, who was laid off in September when his Connecticut hedge fund decided to downsize, used to spend $500 on charity dinners and lavish golf outings. Now, it’s home-cooked meals and beer on the sofa. Recently, Mr. Meek and his roommate, another unemployed banker who spoke on the condition of anonymity because he did not want to jeopardize his job search, sat together in the kitchen filing for unemployment and drinking a bottle of Champagne.
“I’m scraping by right now,” he said.
Mr. Meek, a former Marine, says he is pursuing several job options, including an opportunity to help develop a social network for the military. But he remains reluctant to commit to a new company.
“I’m doing full due diligence,” he said.
Older financiers are having problems, too. Ian C. Horowitz, 40, a former equity researcher at Rafferty Capital Markets, was laid off in June when his firm decided to outsource its research division. Mr. Horowitz currently collects $400 a week in unemployment benefits and has been mowing lawns and doing odd jobs around his New Jersey town to support his wife and two children.
Mr. Horowitz, who lived through the downturn of 2001, said that the latest cuts felt different.
“There have been economic moments where things were bad, but you knew the pendulum would swing the other direction,” he said. “This is structural. The playing field has changed.”
Wall Street’s social scene has also changed, thanks to Occupy Wall Street and the fear of reproach from industry outsiders. Today’s young bankers no longer brag about their jobs, especially in public. One twenty-something Goldman Sachs employee, who spoke on the condition of anonymity because he was not allowed to speak on the record, said he now told new acquaintances he worked at a consulting firm.
The mood has darkened so much that even the young Wall Street workers who still have prestigious jobs are considering letting go of the brass ring.
“It’s lost its luster,” said a former Goldman analyst who left the financial sector this year. The former analyst, who spoke on the condition of anonymity because he signed a confidentiality agreement with the firm, said that in addition to losing some of the monetary benefits of their jobs, his friends who remained in finance were suffering from peer envy. “The new status jobs aren’t at Goldman Sachs. They’re at Google, Apple and Facebook.”
For many of the high-achieving, type-A young professionals who end up on Wall Street, being tossed around by an industry in tumult can amount to the first real failure of their lives. Even if the industry recovers, some may not stick around long enough to see their fortunes improve.
“I’m still scratching my head,” said a former employee of Nomura, the large Japanese bank, who was laid off on Oct. 1. “I went to the right schools, I know the right people and I’m very good at what I do. But when you have to cut costs, you have to cut costs.”
The ex-Nomura employee, who spoke on the condition of anonymity because a confidentiality clause is attached to her severance package, said she had recently come across a group of Occupy Wall Street protesters in Lower Manhattan. While she said she did not support all their ideals, she could now sympathize with their frustrations about high unemployment and a growing sense of economic hopelessness.
“I’m in the same boat as these guys,” she said of the protesters. “I just want to start working.”
SOURCE: THE NEW YORK TIMES DEALBOOK
Comments »Barton Biggs Puts Chance of Recession @ 60-70%
Japan’s Exports Fall More Than Expected in October
“Japanese exports dropped more than forecast in October, Singaporesaid its growth may slow to 1 percent next year and China signaled the global economy faces an extended slide.
The reports may raise pressure on policy makers in export- reliant Asia to implement further stimulus measures. A record of the Bank of Japan’s Oct. 27 meeting today showed one board member favored adding 10 trillion yen ($130 billion) in asset purchases, and Chinese Vice Premier Wang Qishan said his nation must adopt more “forward looking” and flexible monetary policy.
“Things are going to get worse before they get better,” said Vishnu Varathan, a Mizuho Corporate Bank Ltd. economist in Singapore. “Export growth will slow across Asia and we may see financial shocks coming through. Asian policy makers are going to become stimulatory all over again.”
Comments »Michigan business loan program gets bank support
Comments »NOVI, Mich. (AP) — A program to make loan money more available to Michigan-based businesses is getting a boost from Fifth Third Bank, Gov. Rick Snyder announced Friday.
Snyder and an official with Cincinnati-based Fifth Third Bank say the bank has the capacity to make new loans totaling $2.5 billion to Michigan businesses in 2012. Word of the additional money was part of an update to the state’s Pure Michigan Business Connect program and brings the multi-year loan program’s capacity from $3 billion to $8 billion.
“It’s about Michigan’s comeback — it’s about job-creation,” Snyder said of the program, which launched about six months ago and involves about 700 state companies and organizations. He said program’s basic premise is “asking Michigan businesses to do business with one another.”
Snyder said the Fifth Third Bank’s 2012 participation is the largest commitment by a financial institution to date. David Girodat, president of Fifth Third Bank Eastern Michigan, said it means an additional $5 billion in access to loans, including another $2.5 billion available for consumers.
The program is a public-private initiative involving the Michigan Economic Development Corp., state agencies and major Michigan companies and organizations. The announcement was made in the Detroit suburb of Novi at the Global Access Exporter Forum.
Europe faces lost decade
Comments »The austerity measures being rolled out in countries across Europe will have a devastating effect on the living standards of its population, an economist told CNBC Friday.
“These reforms are going to be devastatingly impacting on the population in these countries.
We are looking at a decade of lost living standards across most of Europe. The austerity measures are part of the solution but they are also going to deepen the downturn,” James Shugg, senior economist at Westpac, told CNBC.
He added that countries would be facing a prolonged period of hardship because tax revenues would also be hit.
“Europe needs to pull out all the stops and learn from its mistakes to ensure it can come through this with the least possible damage.
There is no easy solution to this, it will be hugely painful,” he said.
SocGen Gets Behind #OWS
An Idea or Two
Reading and posting news for iBC has gotten me to read a bit more than i usually would. That is a good thing and I had some ideas I wanted to share with the interwebs.
My first controversial suggestion if to flat out cut all interest on money by 50%. It has been estimated that the cost of everything we buy has about 40% of the total price in interest.
Usury is a very disgusting concept when you think about money as an instrument of trade. When you trade something for something there is no interest. It is simply an exact exchange. Money should also carry this philosophy as it is an element that we use to trade for something else.
As an example if your neighbor came for a cup of sugar; would you insist on getting a cup of sugar plus say another 1/4 cup for your neighborly generosity ? Granted sugar is not as important as money when considering a time element, but you get the point.
I do not want to kill the banks of their usury ways, but if they are going to use the tax payers money to write down toxic assets and to pay themselves bonuses while main street suffers a fucked up economy; well then they should thank us for saving their skin, not putting them in jail, and make life a bit easier for all the citizens that are essentially helping to save this economy.
This 50% cut in interest would make it easier for existing business to breathe during the economic malaise and allow for new business to start up.
If we could take 20%, half of that 40%, off the top of everything we buy..well then we would all have a bit more money to stimulate the economy. It would result in more consumption.
The second thing I want to suggest is how to fix the housing market. Prices will remain depressed until most of the foreclosure inventory is largely expelled from the market place.
There is much trouble over trying to rewrite existing mortgages that are under water. Since the banks, who have the tax payers money keeping them afloat, do not want to suffer losses on a underwater property; they should devote some of this free money they are getting to bridge the loss gap.
If the banks do not want to do this then uncle Sam should create its own bank to borrow money at 0.25% and perform their own version of QE. They would make the spread off a 30 year bond and like the banks would generate free cash flow.
This free cash flow, which is the taxpayers money to begin with, could be used to to right size all the under water properties and help to speed up the process of helping America to refinance their home. This would freeze or at least dramatically slowdown the foreclosure process and ultimately heal the housing market quicker than what is currently being projected.
The last idea I wanted to share is how to create jobs. First and foremost education is the key to this answer over the long term. Please watch the documentary Waiting for Superman on your NFLX account.
In the short term we should take some of the free cash flow and retool America. Corporations have increased the amount of jobs available, but we have not enough educated and qualified people to fill those jobs.
We have many citizens that have been out of work so long that they are no longer current and are passed over for consideration. Why not help some of these citizens develope new skills, and or provide education so they could fill those jobs going to H1 Visas.
Sure we won’t fill those jobs right away, but at least we will get more people back into society as a producing citizen. I mean seriously how many citizens can work as a janitor or pizza maker ? There are only so many survival jobs out there.
Lastly, we must find a way to improve how institutions graduate students. Without limiting choice and the freedom of choice, we need to steer students towards those degrees that will be readily used in the real world.
My only suggestion to this would be to document the hardships of many lives that could have had better results if the right education was chosen. In a similar way of sending teens to a jail to show them why they do not want to end up there; perhaps we could make students better understand the consequences of their choices.
[youtube://http://www.youtube.com/watch?v=SybgWaQy7_c 450 300] [youtube://http://www.youtube.com/watch?v=nUTXb-ga1fo 450 300] [youtube://http://www.youtube.com/watch?v=wOaXTg3nAuY&feature=related 450 300]
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