by Calculated Risk on 3/15/2009 11:59:00 PM

AIG released (pdf) a list of counterparties.

Bernanke was on 60 Minutes.

Hamilton asked "What will recovery look like?"

And CNBC reported Obama Plan for Bad Bank Assets Could Come This Week

Just another Sunday ... here is an open thread, a few sources for futures and the foreign markets.

Bloomberg Futures.

CBOT mini-sized Dow

CME Globex Flash Quotes

Futures from barchart.com

And the Asian markets.

And a graph of the Asian markets.

Best to all.

by Calculated Risk on 3/15/2009 08:53:00 PM

AIG released a list of Counterparties to CDS, GIA and Securities Lending Transactions (PDF) (ht David)

And from the Financial Times: AIG publishes counterparty list (ht Dwight)

AIG caved in to political pressure Sunday and released a list of some of the financial counterparties that benefited from its $160bn US government rescue, including some of Europe’s largest banks.
...
IG paid out $22.4bn of collateral related to credit default swaps, $27.1bn to help cancel swaps and another $43.7bn to satisfy the obligations of its securities lending operation. The payments were made between September 16 and the end of last year.

Goldman Sachs, which has also accepted US government support, received payments worth $12.9bn. Three European banks – France’s Société Générale, Germany’s Deutsche Bank and the UK’s Barclays – were paid the next-largest amounts. SocGen received $11.9bn; Deutsche $11.8bn; and Barclays $7.9bn.

by Calculated Risk on 3/15/2009 07:48:00 PM

Fed Chairman Ben Bernanke was interviewed on 60 Minutes tonight.

Here is a picture of Bernanke from his college days ... his forecasting skills weren't much better then (Ok, slightly edited!)

From CBS 60 Minutes: Ben Bernanke's Greatest Challenge

"Mr. Chairman, I'm gonna start with a question that everyone wants me to ask: when does this end?" 60 Minutes correspondent Scott Pelley asked Bernanke.

"It depends a lot on the financial system," he replied. "The lesson of history is that you do not get a sustained economic recovery as long as the financial system is in crisis. We've seen some progress in the financial markets, absolutely. But until we get that stabilized and working normally, we're not gonna see recovery. But we do have a plan. We're working on it. And I do think that we will get it stabilized, and we'll see the recession coming to an end probably this year. We'll see recovery beginning next year. And it will pick up steam over time."

The transcript is available at 60 minutes.

Here is the interview:

by Calculated Risk on 3/15/2009 06:10:00 PM

Professor Hamilton provides a number of graphs on the temporal order of a recovery: What will recovery look like?

This adds to my post: Business Cycle: Temporal Order

Here is the table I provided of a simplified temporal order for emerging from a recession. The table shows when each area typically starts to recovery relative to the end of the recession.

During Recession	Lags End of Recession	Significantly Lags End of Recession
Residential Investment	Investment, Equipment & Software	Investment, non-residential Structures
PCE	Unemployment(1)

And this graph from Professor Hamilton shows the average pattern for all the recessions since 1947.

Credit: Professor Hamilton Econbrowser

Average cumulative change in 100 times the natural log of real GDP or its respective component beginning from the business cycle peak for the 10 recessions between 1947 and 2001. Horizontal axis denotes quarters after the peak.

And here is what the current recession looks like. The record slump in RI has changed the scale of the graph, but the order appears the same.

Credit: Professor Hamilton Econbrowser

Cumulative change in 100 times the natural log of real GDP or its respective component beginning in 2007:Q4. Horizontal axis denotes quarters after 2007:Q4.

For recovery, we know what to watch: Residential Investment (RI) and PCE. The increasingly severe slump in CRE / non-residential investment in structures will be interesting, but that is a lagging indicator for the economy.

Unfortunately there are reasons that RI (excess supply) and PCE (too much debt) won't rebound quickly, but they are still the areas to watch.

And here is an excerpt from a research note by Jan Hatzius, Chief Economist at Goldman Sachs, sent out this afternoon:

"Although we still think real GDP will fall by about 7% annualized in Q1 and the labor market numbers remain awful, the good news is that the weakness is shifting from more leading to more lagging sectors."

(1) In recent recessions, unemployment significantly lagged the end of the recession. That is very likely this time too.

by Calculated Risk on 3/15/2009 12:18:00 PM

Here is another area of domestic non-residential investment that will slump in 2009.

From the NY Times: As Oil and Gas Prices Plunge, Drilling Frenzy Ends

The great American drilling boom is over.

The number of oil and gas rigs deployed to tap new energy supplies across the country has plunged to less than 1,200 from 2,400 last summer, and energy executives say the drop is accelerating further.

The following graph compares real domestic investment in petroleum and natural gas with real gasoline prices.

Click on graph for larger image in new window.

After the oil shock of 1973, oil exploration investment (real dollars) has tracked real gasoline prices pretty closely.

This graph shows oil investment in 2000 dollars. Investment in 2008 was $138 billion in nominal dollars.

The recent rapid decline in gasoline prices suggests investment in petroleum and natural gas exploration and wells could decline by 1/3 or more in 2009 from the $138 billion invested in 2008. This is another area of non-residential structure investment that will decline sharply in 2009 - along with investment in offices, malls and hotels.

Note: Real gasoline prices are annual prior to 1980. The gasoline data is from the EIA.