by Calculated Risk on 4/14/2009 03:46:00 PM

Up or down more than 1% is just a normal day these days ...

DOW down 1.8%

S&P 500 down 2.0%

NASDAQ down 1.7%

Click on graph for larger image in new window.

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

This is the 2nd worst S&P 500 / DOW bear market in the U.S. in 100 years.

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

The second graph compares four significant bear markets: the Dow during the Great Depression, the NASDAQ, the Nikkei, and the current S&P 500.

See Doug's: "The Mega-Bear Quartet and L-Shaped Recoveries".

And since I haven't posted this for awhile, here are a few credit crisis indicators ...

From The Times: Libor falls at fastest rate since January

This morning, three month dollar Libor continued a fortnight-long fall, going down one basis point to 1.122 per cent ... has fallen from 1.33 per cent a month ago.

The LIBOR peaked at 4.81875% on Oct. 10th, and hit a cycle low of 1.0825% on Jan. 14th.

There has been more improvement in the A2P2 spread. This has declined to 0.62. This is far below the record (for this cycle) of 5.86 after Thanksgiving, but still somewhat above the normal spread.

This is the spread between high and low quality 30 day nonfinancial commercial paper.

Meanwhile the TED spread is holding just below 100 at 96.97. This is the difference between the interbank rate for three month loans and the three month Treasury. The peak was 463 on Oct 10th and a normal spread is around 50 bps. The TED spread has been relatively flat for months (and is being impacted by the Fed and other Central Banks).

by Calculated Risk on 4/14/2009 02:54:00 PM

Update note: this is just one month of data, and not seasonally adjusted.

Port traffic gives us an early hint of changes in the trade deficit. Usually I wait until both Los Angeles and Long Beach ports report monthly traffic, but this rebound might be significant. (I'll add Long Beach when the data is released)

Click on graph for larger image in new window.

This graph shows the loaded inbound and outbound traffic at the port of Los Angeles in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container). Although containers tell us nothing about value, container traffic does give us an idea of the volume of goods being exported and imported.

Inbound traffic was 6% below last March and 35% above last month.

Outbound traffic was 9.8% below March 2008, and 25% above February.

We have to be careful because of the impact of the Chinese New Year on trade in February, but there does appear to be a significant rebound after trade collapsed in February.

by Calculated Risk on 4/14/2009 12:19:00 PM

That was fast ...

From Bloomberg: Goldman Sachs Raises $5 Billion to Repay TARP Funds

Goldman Sachs Group Inc. ... raised $5 billion in the largest stock sale this year to help repay $10 billion in government rescue funds.

The bank sold 40.65 million shares at $123 each ... The price was the same as when Goldman Sachs last sold shares in September.
...
While many analysts and investors applauded Goldman Sachs’s plan to repay the TARP money, others said it may pressure other banks to follow suit or risk appearing dependent on the government.

The government favors letting banks return money if they fare well on stress tests completed by the end of this month and can get private capital, according to people familiar with the matter.

Looks like TARP will have more money for AIG and Citi ...

by Calculated Risk on 4/14/2009 10:35:00 AM

President Obama will speak at 11:30 AM ET.

Here is the CNBC feed.

Here are some excerpts from the WSJ:

... All of these actions – the Recovery Act, the bank capitalization program, the housing plan, the strengthening of the non-bank credit market, the auto plan, and our work at the G20 – have been necessary pieces of the recovery puzzle. They have been designed to increase aggregate demand, get credit flowing again to families and businesses, and help them ride out the storm. And taken together, these actions are starting to generate signs of economic progress. Because of our recovery plan, schools and police departments have cancelled planned layoffs. Clean energy companies and construction companies are re-hiring workers to build everything from energy efficient windows to new roads and highways. Our housing plan has helped lead to a spike in the number of homeowners who are taking advantage of historically-low mortgage rates by refinancing, which is like putting a $2,000 tax cut in your in pocket. Our program to support the market for auto loans and student loans has started to unfreeze this market and securitize more of this lending in the last few weeks. And small businesses are seeing a jump in loan activity for the first time in months.

This is all welcome and encouraging news, but it does not mean that hard times are over. 2009 will continue to be a difficult year for America’s economy. The severity of this recession will cause more job loss, more foreclosures, and more pain before it ends. ...

There is no doubt that times are still tough. By no means are we out of the woods just yet. But from where we stand, for the very first time, we are beginning to see glimmers of hope. And beyond that, way off in the distance, we can see a vision of an America’s future that is far different than our troubled economic past.

by Calculated Risk on 4/14/2009 08:30:00 AM

On a monthly basis, retail sales decreased 1.1% from February to March (seasonally adjusted), but sales are off 10.7% from March 2008 (retail and food services decreased 9.4%). Automobile and parts sales declined 2.3% in March (compared to February), but excluding autos, all other sales declined -0.9%.

The following graph shows the year-over-year change in nominal and real retail sales since 1993.

Click on graph for larger image in new window.

To calculate the real change, the monthly PCE price index from the BEA was used (March PCE prices were estimated as the same increase from January to February).

Although the Census Bureau reported that nominal retail sales decreased 10.7% year-over-year (retail and food services decreased 9.4%), real retail sales declined by 11.6% (on a YoY basis).

The second graph shows real retail sales (adjusted with PCE) since 1992. This is monthly retail sales, seasonally adjusted.

NOTE: The graph doesn't start at zero to better show the change.

This shows that retail sales fell off a cliff in late 2008, but have been somewhat stable the last four months.

Here is the Census Bureau report:

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for March, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $344.4 billion, a decrease of 1.1 percent (±0.5%) from the previous month and 9.4 percent (±0.7%) below March 2008. Total sales for the January through March 2009 period were down 8.8 percent (±0.5%) from the same period a year ago. The January 2009 to February 2009 percent change was revised from -0.1 percent (±0.5%)* to +0.3 percent (±0.3%).

Gasoline stations sales were down 34.0 percent (±1.5%) from March 2008 and motor vehicle and parts dealers sales were down 23.5 percent (±2.3%) from last year.

Seasonally adjusted Q1 retail sales are still about 1.5% below sales in Q4, but have been at about the same level since December.

Although Q1 GDP will be very weak - because investment fell off a cliff and there was apparently a significant inventory correction - Q1 PCE will probably be close to neutral.

by Calculated Risk on 4/13/2009 10:51:00 PM

From the WSJ: General Growth Bondholders Ask Trustee to Sue (ht bearly)

A group of bondholders have ratcheted up the pressure on General Growth Properties Inc. by asking their trustee to sue the debt-laden mall owner for payment of their past-due bonds.
...
The bondholders' action pushes General Growth closer to a bankruptcy filing but doesn't mean that one is imminent.

Here is the story from Reuters: General Growth bondholders seek to sue company--WSJ

by Calculated Risk on 4/13/2009 08:54:00 PM

A number of forecasters have mentioned Unemployment Claims as an important indicator of the end of a recession. Professor Hamilton mentioned this last week: Initial unemployment claims and the end of recessions. Historically this is a useful indicator.

Back on March 28th, the WSJ quoted Robert J. Gordon, an economist at Northwestern University and a member of the National Bureau of Economic Research committee:

[Gordon] points to one indicator in particular with a remarkable track record: the number of Americans filing new claims for unemployment benefits. In past recessions, it has hit its peak about four weeks before the economy hit a trough and began to grow again. As of right now, the four-week average of new claims hit its peak of 650,000 in the week ended March 14. Based on the model, "if there's no further rise, we're looking at a trough coming in April or May," he said, which is far earlier than most forecasts currently anticipate.

Since then, the four-week average has risen further (now at 657,250). So much for a trough in April ...

Click on graph for larger image in new window.

This graph shows the four-week average of initial unemployment claims and recessions.

Typically the four-week average peaks near the end of a recession.

Also important - in the last two recessions, initial unemployment claims peaked just before the end of the recession, but then stayed elevated for a long period following the recession - a "jobless recovery". There is a good chance this recovery will be very sluggish too, and we will see claims elevated for some time (although below the peak).

We need to see a significant decline in the four-week average before we start talking about the peak. In a note today, Goldman Sachs economist Seamus Smyth estimated a significant decline as:

Roughly speaking, a 20,000 decline in the 4-week moving average corresponds to a 50% probability that the peak has already been reached, and a 40,000 improvement to a 90% probability.

So we need to see the four-week average decline by 20,000 to 40,000 or more. Don't hold your breathe ...

by Calculated Risk on 4/13/2009 06:29:00 PM

Here is the 2nd part of the VoiceofSanDiego article: A Staggering Swindle: How It Could Happen in 2008

In 2008, when the loans were made to McConville's buyers, some of the only companies still willing to buy these bundles of mortgages were Fannie Mae and Freddie Mac, even though the mortgage mess had affected them, too.

At the tail end of McConville's deals, last September, the federal government took over Fannie and Freddie, assuming more direct control of the companies' day-to-day operation and pumped in funding to absorb their losses. Now the taxpayers own 79.9 percent of Fannie Mae and Freddie Mac.

"You and I are getting stuck with these inflated loans, via Fannie and Freddie," [Real estate appraiser Todd Lackner] said.

There is a way out, as long as the smaller lenders who made the loans to McConville's buyers still exist. On any loans Fannie and Freddie bought, if they discover fraud or faults in underwriting in the loans, they'll send them down the chain, requiring the investor that sold the loans to the giants to buy them back. Ultimately, the original lenders might face those buybacks, said Michael Lea, a former chief economist for Freddie Mac.

But the small lenders who made these mortgages might not be in business anymore -- like Nazari's All American Finance.

Ask Wall Street what happens when they push back loans to the small lenders - they just close up shop.

Here was Part I: Rented Identities, Extravagant Prices and Foreclosure: A Post-Boom Real Estate Scam

And a related article: Mafia-Esque Charges Brought Against Alleged Mortgage Fraud Ring

by Calculated Risk on 4/13/2009 04:29:00 PM

From MarketWatch: Goldman Sachs swings to profit, plans $5 billion offering

Goldman Sachs Group Inc. said Monday it swung to a profit in the first-quarter, and announced it has commenced a public offering of $5 billion of its common stock. Goldman Sachs said net earnings for the period ended in March were $1.8 billion ... compared to a loss of $2.1 billion ... in the same period a year earlier.

The $5 billion will be used to repay the TARP money Goldman received last year.

by Calculated Risk on 4/13/2009 04:09:00 PM

From Oregon.gov (ht Justin):

This graph is from Oregon’s Employment Situation: March 2009 and shows the Oregon unemployment rate since Jan 2000.

The unemployment rate is at the peak level of the 1982 recession - the highest since record keeping started in 1947. The unemployment rate is increasing rapidly, and the rate of increase appears to be accelerating.

Oregon’s seasonally adjusted unemployment rate rose to 12.1 percent in March from 10.7 percent (as revised) in February. The state’s unemployment rate has risen rapidly and substantially over the past nine months, from a rate of 5.9 percent in June 2008.
...
Manufacturing shed 2,100 jobs in March, during a time of year when a flat employment pattern is typical. Employment stood at 171,600 in March, which was by far the lowest employment level since comparable records began in 1990.
...
Construction losses steepened, dropping 1,700 jobs at a time of year when a gain of 700 was the expected normal seasonal movement. The rate of seasonally adjusted losses in construction has quickened, as the industry is down 12,600 jobs or 13.6 percent over the past six months.

Seasonally adjusted construction employment, at 80,000, is now below its level of approximately 83,000 jobs seen during much of 1997 through 2000. Despite a drop of more than 25,000 jobs since reaching its peak in 2007, construction is still slightly above its low point over the past dozen years—75,500, which was reached in June 2003.
...
Oregon’s seasonally adjusted unemployment rate rose to 12.1 percent from 10.7 percent in February. This tied Oregon’s unemployment rate in November 1982, the highpoint of the early 1980s recession. While historical records prior to 1976 are not exactly comparable, it appears clear that the 12.1 percent level is Oregon’s highest since 1947, when the Employment Department first started publishing unemployment rates.