by Calculated Risk on 4/10/2009 02:02:00 AM

From Bloomberg: Fed Said to Order Banks to Stay Mum on ‘Stress Test’ Results (ht Justin)

The U.S. Federal Reserve has told Goldman Sachs Group Inc., Citigroup Inc. and other banks to keep mum on the results of “stress tests” that will gauge their ability to weather the recession ...

The Fed wants to ensure that the report cards don’t leak during earnings conference calls scheduled for this month. ...

“If you allow banks to talk about it, people are just going to assume that the ones that don’t comment about it failed,” said Paul Miller, an analyst at FBR Capital Markets in Arlington, Virginia.

What ever happened to transparency? This suggests the results are very ugly for some banks.

It's amusing that the article mentions Citi - I doubt Citi wants the results released!

by Calculated Risk on 4/09/2009 10:55:00 PM

The markets are closed on Friday.

CR will be open.

The following article is mostly about workers' pay, but there are some interesting stats on the New York hotel market.

From the NY Times: With More Rooms Empty, Hotels Seek to Cut Worker Pay

With the city’s hotels in the midst of a sudden slowdown in business, operators are seeking wage cuts and other concessions from the unions representing 27,500 bellhops, housekeepers and waiters.
...
The average occupancy rate at New York City hotels in the first two months of this year was 61.8 percent, down from 73.5 during the same period last year, according to Smith Travel Research, a national hotel research firm. At the same time, the average daily room rate dropped to $196.30, from $232.25.
...
The industry’s problems are compounded by the prospect of 10,000 new hotel rooms in 2009 and 2010.

“We’re in this classic economic model where we’ve got declining demand because of the economy and added supply,” said John Fox, a hotel consultant with PKF Consulting.

by Calculated Risk on 4/09/2009 07:55:00 PM

UPDATE: Here is the paper: Credit Market Shocks and Economic Fluctuations: Evidence from Corporate Bond and Stock Markets (ht MrM who writes: "Please note that the authors construct their own bond indices, so one should not draw conclusions about their paper by looking at Moody's charts")

Justin Lahart reports in the WSJ on a new research paper: Giving Corporate Credit Its Due (ht James)

In a forthcoming paper in the Journal of Monetary Economics [economists Simon Gilchrist and Vladimir Yankov at Boston University, and Egon Zakrajsek at the Federal Reserve] show that spreads on low- to medium-risk corporate bonds, particularly those with 15 or more years until maturity, predicted changes in the economy phenomenally well, forecasting the ups and downs in both hiring and production a year before they occurred. Since writing the paper, they extended their analysis back to 1973 and found bonds' predictive ability still held.

With the massive widening in corporate-bond spreads last fall, the economists' model predicts industrial production will fall another 17% by the end of the year, and the economy will lose another 7.8 million jobs on top of the 5.1 million it has shed since the recession began. Ouch.emphasis added

I haven't seen the paper yet, but here are the spreads I've been following based on 30 year corporate bonds.

Click on graph for larger image in new window.

This graph shows the spread between 30 year Moody's Aaa and Baa rated bonds and the 30 year treasury.

It looks like this spread has predicted a few extra recessions! I'm looking forward to the paper.

by Calculated Risk on 4/09/2009 05:51:00 PM

From The Times: China bucks trend with new record in car sales

... Chinese people ... bought 1.10 million vehicles in March, up some five per cent from the previous record of 1.06 million in March last year, data from the China Association of Automobile Manufacturers showed.

The number cemented China in its position as the world’s largest car market, outstripping even the US.
...
Growth in sales had slowed in 2008 to its lowest annual rate in more than a decade as the global financial crisis took its toll towards the end of the year, prompting many Chinese to keep their wallets shut tight in case of more problems ahead. However, the government support measures introduced in February have spurred the market.

Interesting.

For more on China, from Roubini: China’s Economy in 2009 and Beyond

[T]here are greater signs of economic recovery in March from the depths of Q4 2008 and most forward looking indicators suggest that Q2 2009 through Q4 2009 growth will accelerate relative to the dismal Q4 of 2008 and weak Q1 of 2009. In particular, economic data for China (including loan growth, the PMI, recovery in residential sales volume – if not prices, and public investment) do point to a stabilization or even slight improvement but we at RGE Monitor still see risks that Chinese growth will be well below the government target of 8% and even below the 6.5% level that the IMF and World Bank are predicting – a figure of 5-6% seems more likely.

Bob_in_MA also recommends: China Financial Markets by Michael Pettis, a professor at Peking University’s Guanghua School of Management.

by Calculated Risk on 4/09/2009 03:45:00 PM

Another day, another big swing ...

Dow up 3.1% (back above 8,000)

S&P 500 up 3.8%

NASDAQ up 3.9%

Click on graph for larger image in new window.

The first graph is from Doug Short of dshort.com (financial planner): "Four Bad Bears".

Note that the Great Depression crash is based on the DOW; the three others are for the S&P 500.

The second graph shows the S&P 500 since 1990.




The dashed line is the closing price today.

This puts the recent rally into perspective - the S&P is still off about 45% from the 2007 high.