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.

by Calculated Risk on 4/09/2009 02:18:00 PM

For a little fun ... (ht ARGH)

by Calculated Risk on 4/09/2009 01:26:00 PM

Yesterday I summarized the recent data: mall vacancies up, office vacancies up, apartment vacancies up - and rents falling. For lodging, the measure is occupancy and RevPAR (Revenue per available room), and both are off sharply year-over-year.

From HotelNewsNow.com: STR reports U.S. data for week ending 4 April 2009

In year-over-year measurements, the industry’s occupancy fell 9.9 percent to end the week at 56.2 percent (62.3 percent in the comparable week in 2008). Average daily rate dropped 9.0 percent to finish the week at US$98.79 (US$108.59 in the comparable week in 2008). Revenue per available room for the week decreased 18.0 percent to finish at US$55.49 (US$67.68 in the comparable week in 2008).

Click on graph for larger image in new window.

This graph shows the YoY change in the occupancy rate (3 week trailing average).

The three week average is off 9.3% from the same period in 2008.

The average daily rate is down 9.0%, so RevPAR is off 18.0% from the same week last year.

Data Source: Smith Travel Research, Courtesy of HotelNewsNow.com

by Calculated Risk on 4/09/2009 12:13:00 PM

Larry Summers, Director of the National Economic Council, will speak at to the Economic Club of Washington.

UPDATE: Starting at 12:43 PM ET

Here is the CNBC feed.

Discussion in the comments ...

UPDATE: CSpan Link.

by Calculated Risk on 4/09/2009 11:09:00 AM

From CNBC: Wells Fargo CFO: Wachovia Merger Behind Record Profits

In December we closed the Wachovia acquisition," said [Howard Atkins, CFO, Wells Fargo]. "This is the first quarter the two companies have been combined and because of the move, we thought it was important to get this news out early."

Atkins said that the losses in the acquistion are behind Wells Fargo. "We did write off most of them [losses]and we are enjoying the benefits of the merged companies," said Atkins.

Atkins said details on Wachovia savings are "going to begin to emerge in the second quarter.
...
Atkins went on to say there was "very little impact" on results from a new rule by the Financial Accounting Standards Board that gives banks more freedom to value assets as they would in normal markets rather than at distressed prices.

NIMs (Net Interest Margins) are Edit: Higher than expected - and Atkins doesn't say it, but their borrowing costs have to be close to zero.

by Calculated Risk on 4/09/2009 08:44:00 AM

The collapse in trade continues to be an important story.

The Census Bureau reports:

[T]otal February exports of $126.8 billion and imports of $152.7 billion resulted in a goods and services deficit of $26.0 billion, down from $36.2 billion in January, revised. February exports were $2.0 billion more than January exports of $124.7 billion. February imports were $8.2 billion less than January imports of $160.9 billion.

Click on graph for larger image.

The first graph shows the monthly U.S. exports and imports in dollars through February 2009. The recent rapid decline in foreign trade continued in February. Note that a large portion of the recent decline in imports was related to the fall in oil prices, however the decline in February was mostly non-oil related.

The second graph shows the U.S. trade deficit, with and without petroleum, through February.

The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

Import oil prices fell slightly to $39.22 in February, from $39.81 in January, and import quantities decreased too - so the petroleum deficit declined by $1 billion.

However most of the decline in the trade deficit was non-oil related.

I suppose a collapse in U.S. imports is one way to rebalance the world economy ...