RSS Feed by Calculated Risk on 7/02/2009 04:00:00 PM
Thursday, July 02, 2009
Naught for the Naughts?
On the '00s (the "Naughts") ...
Employment Dec 1999: 130.53 million
Employment Jun 2009: 131.69 million
A gain of just 1.16 million. What are the odds that the economy loses another 1.16 million jobs over the next 6 months? Pretty high. That would mean no net jobs added to the economy for the naughts: Naught for the Naughts!
And for the stock market?
S&P 500, Dec 31, 1999: 1469.25
S&P 500, July 2, 2009: 897.29
Equity investors wish they went Naught for the Naughts.
Click on graph for larger image in new window.
The first graph shows the S&P 500 since 1990.
The dashed line is the closing price today.
The S&P 500 is up almost 33% from the bottom (221 points), and still off almost 43% from the peak (668 points below the max).
This 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.
Personal Bankruptcy Filings increase 40% in June (YoY)
by Calculated Risk on 7/02/2009 02:57:00 PM
From Bloomberg: Consumer Bankruptcy Filings Rose 36.5% in First Half, ABI Says (ht Ron)
U.S. consumers made 675,351 bankruptcy filings in the first half, a 36.5 percent increase from a year ago, according to the American Bankruptcy Institute.The monthly rate slowed in June (from May), but monthly ups and downs are not unusual for this data.
June filings by consumers totaled 116,365, up 40.6 percent from the same period in 2008 ...
Click on graph for larger image in new window.This graph shows the non-business bankruptcy filings by quarter.
Note: Quarterly data from Administrative Office of the U.S. Courts, Q1 and Q2 2009 based on monthly data from American Bankruptcy Institute.
The quarterly rate is close to the levels prior to when the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) took effect. There were over 2 million bankruptcies filed in Calendar 2005 ahead of the law change.
The American Bankruptcy Institute is predicting over 1.4 million new bankruptcies by year end - I'll definitely take the over!
FDIC on Private Equity Acquisitions of Failed Banks
by Calculated Risk on 7/02/2009 02:02:00 PM
This is BFT (Bank Failure Thursday), and there are a couple of large banks that might fail (Corus Bank and Guaranty Bank), so this is timely ...
First, from MarketWatch: FDIC chills private-equity bank bidders
The Federal Deposit Insurance Corporation on Thursday urged tough capital requirements on private equity firms buying battered banks, and said any firms they buy must be held for at least three years.From the FDIC: FDIC Board Approves Proposed Policy Statement on Qualifications for Failed Bank Acquisitions
...
"Private-equity investors are probably going to lose their zeal for investing in this undervalued market because the upfront costs will be too much," said Lawrence Kaplan, of counsel in the banking and financial institutions group at law firm Paul Hastings and a former special counsel at the Office of Thrift Supervision.
"The FDIC is saying to private-equity firms that 'while we like your money, we're going to make it too expensive,'" he added.
FDIC Chairman Sheila Bair's Statement
I am particularly concerned with new owners’ ability to support depository institutions with adequate capital, management expertise, and a long term commitment to provide banking services in a safe and sound manner. Obviously, we want to maximize investor interest in failed bank resolutions. On the other hand, we don’t want to see these institutions coming back. I remain open minded on many aspects of this proposal, including the categories of investors to whom it should apply, the appropriate level of upfront capital commitments, and the operation of cross guarantee provisions and limits on affiliate transactions. I look forward to receiving comments in these areas.Federal Register Notice
I support the transactions we have completed to date which have involved sales to private equity owners. We have imposed some special restrictions on these, including higher capital requirements. However, some have suggested that capital requirements should be even higher, given the difficulties in enforcing source of strength obligations outside the initial capital investment made by the acquirers in so-called “shell” structures. I know that this will be a contentious area, and we are opening high, with a proposed 15% requirement.
I am also troubled by the opacity of some of the ownership structures that we have seen in our bidding process, though these have not been winning bids. We have seen bids where it has been difficult to determine actual ownership. We have seen bidders who have wanted permission to immediately flip ownership interests. We have seen structures organized in the secrecy law jurisdictions. So based on the experiences we have gathered, I think it is prudent to put some generic policies in place which tell non-traditional investors that we welcome their participation, but only if we have essential safeguards to assure that they will approach banking in a way that is transparent, long term, and prudently managed.
Hotel RevPAR off 17.4%
by Calculated Risk on 7/02/2009 12:20:00 PM
From HotelNewsNow.com: STR reports U.S. hotel performance for week ending 27 June 2009
In year-over-year measurements, the industry’s occupancy fell 8.7 percent to end the week at 65.4 percent. Average daily rate dropped 9.5 percent to finish the week at US$97.49. Revenue per available room for the week decreased 17.4 percent to finish at US$63.74.No wonder some expect as many as 20% of U.S. hotels to default on their loans ...
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 10.3% from the same period in 2008.
The average daily rate is down 9.5%, so RevPAR is off 17.4% from the same week last year.
Note: the occupancy rate has risen to 65% - this is just seasonal. The hotel occupancy rate is usually the highest during the peak vacation months of June, July and August (with declines on weeks with holiday weekends).
Employment-Population Ratio, Part Time Workers, Hours Worked
by Calculated Risk on 7/02/2009 10:33:00 AM
A few more graphs based on the (un)employment report ...
Employment-Population Ratio
Click on graph for larger image in new window.
This graph show the employment-population ratio; this is the ratio of employed Americans to the adult population.
Note: the graph doesn't start at zero to better show the change.
The general upward trend from the early '60s was mostly due to women entering the workforce. As an example, in 1964 women were about 32% of the workforce, today the percentage is close to 50%.
This measure is at the lowest level since the early '80s and shows the weak recovery following the 2001 recession - and the current cliff diving!
Part Time for Economic Reasons
From the BLS report:
The number of persons working part time for economic reasons (sometimes referred to as involuntary part-time workers) was little changed in June at 9.0 million. Since the start of the recession, the number of such workers has increased by 4.4 million.Note: "This category includes persons who would like to work full time but were working part time because their hours had been cut back or because they were unable to find full-time jobs."
Not only has the unemployment rate risen sharply to 9.5%, but the number of workers only able to find part time jobs (or have had their hours cut for economic reasons) is at 9.0 million.Of course the U.S. population is significantly larger today (about 305 million) than in the early '80s (about 228 million) when the number of part time workers almost reached 7 million. That is the equivalent of about 9.3 million today, so population adjusted this isn't quite a record - but close.
Average Weekly Hours
From the BLS report:
In June, the average workweek for production and nonsupervisory workers on private nonfarm payrolls fell by 0.1 hour to 33.0 hours--the lowest level on record for the series, which began in 1964.
The average weekly hours has been declining since the early '60s, but usually falls sharply during a recession. As the BLS noted, average weekly hours in June was at the lowest level since the series began in 1964.Note: the graph doesn't start at zero to better show the change.
Several analysts follow this series to look for the end of a recession. Usually companies increase the work week before they start hiring, so the average weekly hours increases as a recession ends. Something to watch ...
Earlier employment posts today:
