The Titans Of Finance

All your stuff are belong to us. The Fed (09.16.08), via Calculated Risk:

"The Federal Reserve Board on Tuesday, with the full support of the Treasury Department, authorized the Federal Reserve Bank of New York to lend up to $85 billion to the American International Group (AIG) under section 13(3) of the Federal Reserve Act. The secured loan has terms and conditions designed to protect the interests of the U.S. government and taxpayers."

FRB: Press Release

"The U.S. government will receive a 79.9 percent equity interest in AIG and has the right to veto the payment of dividends to common and preferred shareholders."

Get A Job

Boy, that economy is really booming now. Bloomberg (03.07.08):

"The U.S. unexpectedly lost jobs in February for the second consecutive month, reinforcing concern the economy is contracting.

Payrolls fell by 63,000, the biggest drop since March 2003, after a decline of 22,000 in January that was larger than initially estimated, the Labor Department said today in Washington."

U.S. Lost 63,000 Jobs in February; Unemployment Rate at 4.8%

"The jobless rate declined to 4.8 percent, reflecting a shrinking labor force as some people gave up looking for work."

Trickle down: get everyone looking for work to give up. That way the jobless rate would be 0.0%!

The smart guys were figuring a gain of 25,000 jobs. Ooops.

Fiscal Responsibility?

Want to know what was driving our economy? The BushII years, in a nutshell. Very fancy house for sale in California. Purchased in 2001 for $397,000. Asking price is $1,195,000. Some context, from the Irvine Housing Blog (01.25.08), via Eschaton:

"This homeowner went to the housing ATM 8 times over a 5 year period and pulled out $820,900. Now they have a property priced at a WTF asking price hoping they can find some knife catcher to come pay off their bills."

Unforgiven

"Even if you wanted to buy this house, would you do it knowing that you were about to pay for $820,900 worth of consumer spending (They may have spent $200,000 on the renovation, but please spare me the BS about investment or illness or any of that crap. Look at the pattern of withdrawals. They spent it, and you know it.)"

Hope the homeowners had a good time.

Note to the chumps holding the mortgage: good luck getting your money back.

Ponies For Everyone

Action will be taken. NYTimes (01.24.08):

"Mr. Bush, after meeting on Wednesday with mayors from across the country, said he was optimistic about reaching swift agreement on a stimulus plan.

'I talked to them about my desire to work with the Congress to get a stimulus package passed, one that’s going to be robust enough to affect the economy, simple enough for people to understand it [ed. - as in us ignorant bastards?] and efficient enough to have an impact,' Mr. Bush said."

Bush and Congress Nearing a Deal on Stimulus

On the other hand. Financial Times (01.23.08):

"Any planned tax rebate as part of an economic stimulus package may not have a big impact on the US economy until Christmas, the director of the US’s Congressional Budget Office said on Tuesday.

Peter Orszag, whose agency provides impartial fiscal and economic advice to Congress, said that it would be a 'major challenge' to send out tax rebates before June as the IRS is tied up with annual tax returns."

US tax rebate to take six months to kick in

"'It is remarkable the world’s leading economic power cannot get [checks] out faster than that,” he told a hearing of the Senate finance committee."

"He added that experience with the 2001 tax rebate suggested the full effect of the move would not be felt for a further six months."

So why even bother? Because it sounds good: "This administration doesn't do policy, they do politics. If Bush says something in a speech, it's because they think it will sound good in a speech, period."

See? Action is being taken.

I Was Gambling In Havana

I took a little risk. Bloomberg (01.22.08):

"Bank of America Corp., the second- largest U.S. bank, said earnings dropped 95 percent after $5.28 billion of mortgage-related writedowns and higher provisions for future loan losses."

Bank of America Earnings Plummet After Loan

Send lawyers, guns and money. Bloomberg (01.22.08):

"Wachovia Corp., the fourth-largest U.S. bank, said profit fell 98 percent to its lowest since 2001 after writedowns for bad loans and mortgage-backed securities."

Wachovia Net Falls 98% on Mortgage-Linked Writedowns

Dad, get me out of this. Bloomberg (01.22.08):

"Ambac Financial Group Inc., the first bond insurer to be stripped of its AAA credit rating, reported its biggest-ever loss and said it is talking to 'a number of potential parties' to help overcome a slump in the value of subprime-mortgage securities it guarantees.

The second-largest bond insurer posted a $3.26 billion loss after writing down the value of guarantees on subprime debt by $5.21 billion, according to a statement by the New York-based company today."

Ambac Reports Loss, Talks With 'Potential Parties'

Now I'm hiding in Honduras. NYTimes (01.22.08):

"The Federal Reserve, responding to an international stock sell-off and the likelihood of a sharp drop in America on Tuesday morning, cut its benchmark interest rate by three-quarters of a percentage point.

The Federal Open Market Committee lowered its target for the federal funds rate on overnight loans between banks to 3.5 percent, from 4.25 percent."

Fed Makes Emergency 0.75% Rate Cut

I'm a desperate man. The Guardian (01.22.08):

"Hopes of more interest rate cuts lent much-needed support to leading London shares today but they failed to erase yesterday's savage losses as talk of an impending US recession continued to rattle nerves.

Following steep sell-offs in Asian stock markets overnight, the FTSE 100 plunged more than 200 points within minutes of the open, adding to a sharp fall the previous session."

Global share rout continues

Send lawyers, guns and money. Bloomberg (01.22.08):

"U.S. stock-index futures tumbled on concern an emergency interest rate cut by the Federal Reserve will fail to halt a worsening global economic slowdown."

U.S. Stock Futures Drop on Concern Rate Cut Won't Stop Slowdown

The shit has hit the fan.

"'People may see it as an extreme step and feel that it's a sign the situation is worse than they had anticipated,'" said John Carey, who helps oversee about $13 billion at Pioneer Investment Management in Boston. 'This will definitely wake people up who were thinking the economy was just fine.'"

Get Ready

Tomorrow's gonna be pretty crazy here in the good old USA. The Bush Boom blew up the rest of the world today. Bloomberg (01.22.08):

"Almost half of the world's biggest stock indexes fell into a bear market as mounting concern about a U.S. recession dragged down banking and retail shares across Asia, Europe and Latin America."

Stock Drop Pulls 38 Indexes Into Bear Market; Banks Lead Plunge

London Times (01.22.08):

"More than £77 billion was wiped off the value of Britain’s stock market yesterday in its biggest one-day percentage loss since September 11, 2001. Shares across the world plunged over fears that the threatened US recession will undermine the global economy."

World markets plunge on US recession fears

This is not going to be the legacy George was looking for, not by a long shot.

See Ya

Damned consumers have quit buying stuff. Bastards. LATimes (01.18.08):

"Taking stock of a rough holiday season, retailers are shuttering stores and trimming expansion plans as they stare down edgy consumers.

Industry analysts said Thursday that there was little mystery behind the plans announced by several chains this month."

Dismal holiday season leads retailers to shutter stores

"'We're in poor economic times, and when you're in poor economic times, retailers close stores and reduce the number they plan to open, said Eric Beder of Brean Murray, Carret & Co. 'That will accelerate into the second half of 2008.'"

Zale's is closing 60 stores in the immediate future, and "several dozen more" this year.

Liz Claiborne "is pulling the plug on its 54-store Sigrid Olsen chain".

Ethan Allen is closing 12 stores and two service centers.

Talbots is closing "78 Talbots Kids and Talbots Men's stores".

Pacific Sunwear is closing "the last 154 stores in its struggling demo chain".

And yes, even Macy's (!!) is closing nine stores.

It's Here!

And it's not the Bush Boom, Larry. NYTimes (01.17.08):

"Stock markets plunged on Thursday as investors confronted a troubling manufacturing report and new indications of the depth of subprime losses and housing woes. The Dow Jones industrial average lost more than 300 points.

The Standard and Poor’s 500-stock index, a broad measure of the financial markets, tumbled below its low for last year, set in March."

Dow Plunges More Than 300 Points on Grim Outlook

What is it? It would be this.

"'Basically every day now, you have more and more investors leaning toward the camp that yes, this is going to be a recession, and it could be a severe one,' said David Kovacs, a quantitative investment strategist at Turner Investment Partners in Berwyn, Pa."

Please remain seated. Ride's gonna be a little bumpy for a while. Like Duncan said:

"I don't make predictions about the stock market because, well, what do I know, but the degree of optimism from supposed experts over the past year about the broader economy has been somewhat amusing.

I think today's the day it died."

In The Meantime

In between time, ain't we got fun? Wonder how Larry will try to explain this away. AP (01.15.08):

"Wholesale inflation last year shot up by the largest amount in 26 years while retailers suffered their worst December shopping season in five years as mounting economic woes caused consumers to put away their wallets.

The Labor Department reported that wholesale inflation was up 6.3 percent for all of 2007, reflecting a huge increase for the year in various types of energy costs ranging from gasoline to home heating oil.

Wholesale Prices Rise 6.3 Percent in '07

"Meanwhile, retail sales fell by 0.4 percent in December, the worst showing in six months, the Commerce Department reported. Consumer confidence has plunged, reflecting the worsening housing slump and a lingering credit crisis."

Bush Boom

Bloomberg is just loaded with the good news this morning (01.15.07):

"Sales at U.S. retailers unexpectedly fell in December, capping the weakest year since 2002."

U.S. Retail Sales Unexpectedly Declined in December

Did that suck? Yep. "A sustained slump in consumer spending brought on by falling property values and rising unemployment would mean the end of the six-year expansion, economists say. The report underscores Federal Reserve Chairman Ben S. Bernanke's concern that risks to growth are intensifying."

"'Growth stalled out at the end of the fourth quarter and into the new year,' Joshua Feinman, chief U.S. economist at Deutsche Asset Management in New York, said before the report. 'The economy will narrowly be able to avoid recession.'"

Our friends, the bankers. Bloomberg (01.15.08):

"Citigroup Inc. posted the biggest loss in the U.S. bank's 196-year history as surging defaults on home loans forced it to write down the value of subprime-mortgage investments by $18 billion."

Citigroup Posts Record Loss on $18 Billion Writedown

The hotshots at Citi "racked up record losses as [they] misjudged the depth of the mortgage crisis. The writedown for subprime home loans and related securities was almost double what the company expected as recently as November. The bank also said it set aside $4.1 billion more in the fourth quarter of 2007 to cover loan losses."

And what does the future hold? "'Things are still bad out there for financials, and there's more bad news to come,' said Jon Fisher, who helps oversee $22 billion at Minneapolis-based Fifth Third Asset Management. 'The balance sheet is a mess, they've got to raise capital, and the charges keep going up every day.'"

Citi's markdown is the biggest so far, "exceeding the $14 billion reported by Zurich-based UBS AG, Europe's biggest bank", so at least they've got that going for 'em.

Bloomberg (01.15.08):

"Merrill Lynch & Co., the U.S. bank battered by subprime mortgages losses, raised $6.6 billion by selling preferred shares to a group including the Kuwaiti Investment Authority and Japan's Mizuho Financial Group Inc."

Merrill Lynch Gets $6.6 Billion From Kuwait, Mizuho

See if you can get this kind of deal anywhere. "The mandatory convertible securities carry a 9 percent annual dividend and a 17 percent conversion premium."

From the Through Clenched Teeth Department: "'We look forward to our relationship with Kuwait Investment Authority providing Merrill Lynch with additional opportunities to grow its presence there,' Merrill Chief Executive Officer John Thain said in today's statement."

Merrill also said the "investors won't have a say in how [it] is run", but who are they kidding.

Thank goodness the lawyers are doing well. Bloomberg (01.15.08):

"State Street Corp., the world's largest money manager for institutions, said fourth-quarter earnings fell 28 percent after setting aside $618 million to settle legal claims stemming from losses on subprime mortgages."

State Street's Earnings Fall 28% on Legal Fund Costs

And such a sweet sound it is, lawyers making money.

Holes In The Balance Sheet

Bloomberg (01.14.08):

"Citigroup Inc., Bank of America Corp. and Merrill Lynch & Co. may report their worst-ever quarter, beset by $35 billion of writedowns that threaten to crimp profit through 2008.

The losses have depleted the banks' capital, forcing New York-based Citigroup and Merrill to seek more than $13 billion from foreign investors [ed. - Merrill, $4 billion from Kuwait; Citigroup, $13 billion from China and Kuwait], and hobbled their ability to make new loans.

Wall Street's $35 Billion Writedown Puts Squeeze on '08 Profits

"Other sources of fees, including credit cards, are also in jeopardy as the U.S. economy slows, said CreditSights Inc. analyst David Hendler, who estimates Citigroup, Bank of America and Merrill won't earn more this year than they did in 2006."

Ahhh, Citigroup. CNBC (01.14.08), via Eschaton:

"Citigroup plans to announce a writedown of as much as $24 billion and layoffs of up 24,000 due to subprime and credit-related losses, CNBC has learned."

Citigroup Layoffs Could Reach 24,000 This Year

Bush Boom

NYTimes (01.14.08):

"Strong evidence is emerging that consumer spending, a bulwark against recession over the last year even as energy prices surged and the housing market sputtered, has begun to slow sharply at every level of the American economy, from the working class to the wealthy.

The abrupt pullback raises the possibility that the country may be experiencing a rare decline in personal consumption, not just a slower rate of growth.

Americans Cut Back Sharply on Spending

"Such a decline would be the first since 1991, and it would almost certainly push the entire economy into a recession in the middle of an election year."

Down at Penney's; down at Macy's; down at Kohl's; down at Target. Even Sears. Bloomberg (01.14.08):

"Sears Holdings Corp., the retailer run by investor Edward Lampert, fell the most in more than six weeks after forecasting profit that will trail analysts' estimates following a drop in holiday sales."

Sears Stock Falls on Holiday Sales Drop, Downgrades

Not looking too good for '08, either.

Better cut them taxes again, huh.

Don't Look Now

Or you'll miss the Bush Boom. The seventh consecutive year, Larry says. Bloomberg (01.10.08):

"Profits at U.S. companies probably fell in back-to-back quarters for the first time in almost six years as financial firms led by Citigroup Inc. and Merrill Lynch & Co. lost billions of dollars and retailers suffered what may have been the worst holiday shopping season since 2002."

Profits at U.S. Companies May Drop on Subprime Losses

Christmas retail sucked too.

Why Does Goldman-Sachs Hate America?

On the heels of Merrill-Lynch. Bloomberg (01.09.08):

"Goldman Sachs Group Inc. said the U.S. economy is probably slipping into recession and forecast the Federal Reserve to respond by slashing interest rates."

Goldman Says U.S. Economy Slipping Into Recession

Women and children first. Bloomberg (01.09.08):

"MBIA Inc., facing the crippling loss of its AAA credit rating, sliced its dividend and will raise $1 billion in the sale of notes. The shares jumped in early trading."

MBIA Cuts Dividend, to Raise $1 Billion After Losses

They are hurting. "The value of contracts made to protect securities has fallen by $2.1 billion, creating losses of $200 million last quarter, MBIA said."

They're not the only ones, either.

Warren's gotta be loving it.

The Boom

Bloomberg (01.08.08):

"Treasury Secretary Henry Paulson said the housing decline will continue, and a program aimed at heading off a wave of foreclosures may need to be expanded beyond subprime borrowers.

'There is no evidence it is bottoming,' Paulson today said of the housing decline on CNBC television during a trip to New York."

Paulson Sees 'No Evidence' Housing Decline Is Ending

"'The evidence would be that it has further to run.'"

Other than that, the Bush Boom is just humming along.

Just don't call it a recession, you Commie bastards.

Why Does Merrill Hate America?

They're just pissed because of all the money they lost. The Telegraph (01.08.08):

"Merrill, itself one of Wall Street's biggest casualties of the sub-prime crisis, is the first major bank to declare that a recession in the world's biggest economy is now underway.

David Rosenberg, the bank's chief North American economist, argues that a weakening employment picture and declining retail sales signal the economy has tipped into its first month of recession."

US recession is already here, warns Merrill

"Mr. Rosenberg, who is well-respected on Wall Street, argues: 'According to our analysis, this [recession] isn't even a forecast any more but is a present day reality.'"

We're already hosed, sez Jim (not this Jim) Bloomberg (01.07.08):

"The U.S. economy is heading for a recession that will be the worst 'in a while' and investors should sell the dollar as global currencies weaken, investor Jim Rogers said."

Rogers Says U.S. to Have Worst Recession `in a While'

Even George is getting nervous. "'Recent economic indications have become increasingly mixed,'" sez the Prez.

Meanwhile, back at the ranch. Bloomberg (01.08.08):

"Credit-default swaps, used to help protect against the risk a company won't pay its debt, may be the 'most egregious' instruments created by the banking system and could cause losses of $250 billion, Pacific Investment Management Co.'s Bill Gross said."

Credit-Default Swaps May Lose $250 Billion, Pimco's Gross Says U.S.

Bill Gross was named as Morningstar's fixed-income manager of the year for 2007, so why listen to him?