The Economy Guy » Geithner

State Of The Union

cuible — Mon, 25 Jan 2010 22:36:21 +0000

All the markets moved sideways today. Stocks are flirting with technical support areas to determine if this market will bounce up again, or die a painful death by losing a significant amount of its recent gains. On the news front, everyone is waiting to see if Congress and the President will be changing course, or not.

In the news today…..

Existing Home Sales – fell 17% in December. This is a disaster. The drop was the greatest drop in over 40 years. Surprisingly, the drop was caused by first time home buyers who were getting the $8000 tax credit – even though this program expires in April, not now. The median sales price was $178,300 – up 1.5% over the prior year. But, since first time buyers weren’t buying, and they normally buy lower priced homes; the median price would be skewed higher. So, was there really an increase in home prices? I don’t think so. The one and only measure of a solution to the home glut is a reduction in home inventory to “normal” levels. We are far from that even right now.

Goldman Sachs – warns the FED that it is too early to start raising interest rates. They say it would be a disaster for the markets. If you are one of those people who think that Goldman controls the FED, then you can see what will happen at future FED meetings. No interest rate hikes soon.

Ben Bernanke – is more likely to be reconfirmed as the FED Chairman. The White House and Tim Geithner lobbied all weekend for Ben, and this increases his odds of being confirmed. Best quote: “He’s the best we’ve got.” I personally doubt that statement. I still feel that Geithner has a great chance of losing his job.

Wild Card???? – Osama bin Laden made a broadcast that could be the trigger to start more attacks against the west. If this comes to pass, I wonder who will die? Do these poor souls have any faith in our President to protect us? If any Americans die, then you can bet the right wing will launch an all out assault on the President for not keeping Americans safe. Listen for the phrase “If the President had allowed water-boarding, we would have known about this attack before it happened, and we could have prevented the loss of life.” If the attack Is big enough, you can bet that all markets will react to the news. Generally, there is a rush to the Dollar, and you can see gold strength as a bastion of safety.

Tonight’s Dinner Conversation…..

State of the Union Speech – there are rumors coming out of the White House that President Obama will be suggesting another package of spending to help Americans. Should be interesting to analyze, as this will cost money, and will add to the deficit. How much – is the key question.

It is hard to argue against increasing child tax credits for the poor, and helping with student loans. However, these measure don’t attack the main issues in the economy. The questions to ask are “What caused the poor to need more child tax credits?” “Why do students need help with their student loans?” Then look at the proposals, and you will definitely see that the solutions being proposed by the President don’t attack the causes.

The main problems in the US from the population’s perspective is unemployment – in other words, jobs. The President is smart enough to know to give lip service to the jobs problem, but will he be able to propose anything that actually would create jobs?

Here are the last numbers for today:
Dow Jones 30 Industrial – 10,197 (up 24)
10 Year Treasury Bond – 3.63% (up 0.03%)
Euro – $1.4152
Gold – $1095 (up $6)
Oil – $75.12 (up $0.58)
Gasoline – $2.00 (up $0.04)

Geithner Bails CIT

cuible — Wed, 09 Dec 2009 21:55:00 +0000

Stocks were slightly up today, and bonds also went sideways. The dollar gained, and then lost value – ending sideways.

Gold went sideways.

Oil and gasoline continued their downward slide. This is beginning to look like we might get lower gas prices.

In the news today…..

Wholesale Inventories – rose 0.3% in October. This rise is after 13 months of straight declines. This could be good news, if wholesalers are restocking to be ready for an increase in retail sales. Wholesale sales rose 1.2% in October – and helped fuel the inventory buildup. Wholesalers sit between manufacturers and retail stores and provide a distribution function. Inventories are held about equally by manufacturers, retailers and wholesalers.

Sovereign Debt – this could be the subject of 2010 – as we can add Spain to the list reported yesterday. Also, Ireland is in very bad financial condition.

CIT will emerge from bankruptcy – and the taxpayer will lose $2.3B in TARP money lent to it in exchange for common shares. The taxpayer gets screwed again on TARP. CIT is the largest lender of smaller loans to businesses, and is an important part of financial systems of the US – it’s just that we don’t hear about it much. I just wonder what would have happened if Geithner hadn’t given it the TARP money. Naturally, it would have gone bankrupt, and gone bankrupt sooner. And, the taxpayer wouldn’t have lost money. Is that all? If so, then I condemn Geithner for his lousy decision.

Here are the last numbers for today:
Dow Jones 30 Industrial – 10,337 (up 51 points)
10 Year Treasury Bond – 3.42% (up 0.03%)
Euro – $1.4731
Gold – $1131 (down $12)
Oil – $70.80 (down $1,82)
Gasoline – $1.86 (down $0.07)

Trickster Geithner

cuible — Fri, 20 Nov 2009 21:59:56 +0000

Stocks continued their downward slide, but like most down days, they recover at the end of the day. (Have you ever asked yourself WHY?)

All other markets went sideways too.

In the news today……

Geithner called to resign – over the auditor report of his handling of the AIG affair while he was Fed Chairman of the NY Fed. Remember that it has been leaked that the “Fed” wasn’t tough enough on AIG which resulted in Goldman Sachs getting billions – whereas a tougher negotiator would have reduced the amount Goldman would have received. Why would he resign? He didn’t leave when it was revealed he didn’t pay all his income taxes.

Geithner (trickster) – is going to sell all the “warrants” that it received as part of TARP money lent to banks. Those warrants will be sold on the open market. But, what happened to Goldman Sachs is a “special case.” For Goldman, Geithner agreed to sell the warrants to Goldman directly for $1.1B, and not sell them on the open market for the then market value of $1.24B. The taxpayer got screwed out of $114M by Geithner, and Goldman besides saving the money, didn’t dilute its shares as the sale of a warrant does. Just another scumbag at work – you can tell them by their actions.

Tonight’s Dinner Conversation…..

You know the housing market just about brought down the entire world’s financial systems. And, here is a chart showing the commercial real estate market going away. Banks have these bad loans, and those banks are in deep trouble. What do you think this will do to our entire economy? And Why? A composition question.

Commercial Real Estate Prices

The title on this chart “Pray and Delay” is the tactics that our government is currently using in our economic meltdown. They are hoping, like Big Bird with his head in the sand, that the problem will just go away if it waits long enough. Good luck. Perhaps it might be good to prepare – just in case – this gets much worse in the future.

Here are the last numbers for today:
Dow Jones 30 Industrial – 10,318 (down 14 points)
10 Year Treasury Bond – 3.36% (up 0.01%)
Euro – $1.4862
Gold – $1146 (up $5)
Oil – $76.72 (down $0.74)
Gasoline – $1.98 (up $0.01)

The Czar Society

admin — Thu, 11 Jun 2009 21:32:14 +0000

Stocks were up all day, but closed at their lows – basically a sideways day again.

Bonds gained in value (decreased in interest rates) as profit taking and squaring of shorts moved bonds. Higher interest rates appear to be with us for some time.

The Dollar lost over 1 cent against the Euro today, and is testing a recent high for the Euro.

Oil and gasoline hit recent highs. Speculators are rife in this market as oil doesn’t move up $20/barrel in one month without speculators.

Gold was up a little today, and appears to have tested its bottom and has set a new resistance point just above $950/ounce. Providing this resistance point holds, gold is poised to test a new high within the next month.

In the news today….

Bank of America CEO Lewis – was forced to complete the purchase of Merrill Lynch by the FED and the Treasury according to his testimony to Congress today. Apparently an email trail shows that Lewis was threatened with his job if he didn’t cooperate. He was also told to keep the details of the Merrill Lynch deal confidential. Apparently Lewis tried to back out of the deal, and try his luck in the courts by breaking the deal, rather than complete the purchase. That’s when the real pressure from government hit him.

Bernanke denies having told Lewis that he shouldn’t withhold information on the Merrill Lynch purchase, and Bernanke and Paulson will both testify to Congress on this subject sometime in the future.

I must apologize to Mr. Lewis as I previously accused him of being a scumbag when I thought he purchased Merrill Lynch and Countrywide and drove Bank of America into the sewer. It appears the government had its hand in his being a scumbag.

Retail Sales – rose 0.5% in May. Good news??? Perhaps a little good news, but the main driver in this number was the higher gasoline prices. So, it’s difficult for me to see how paying more for gasoline is good for the US economy – which is what the headlines want you to believe. If people are spending more on gasoline, a necessity, they have less money left in their pockets for other goods.

Jobless Claims – also fell last week, and were 601,000. While this trend is actually good news, it is still above the magic 400,000 number, so the unemployment number is still climbing. While it would be nice to call the bottom of the jobless claims graph before it happens, that is just impossible – so, it’s much better to let the jobless claims level out with NO increase in the unemployment number, and that’s when it’s time to break out the champagne. No sooner.

Foreclosures – fell 6% in May over April. However, the rate of foreclosures is way too high, and foreclosures lead to distressed sales by banks and this leads to lower property prices. This problem is far from being resolved.

More on the Pay Czar…..

President Obama has appointed a “Pay Czar”. Isn’t that nice? He wants to regulate the pay of the top 100 people’s pay in companies that receive taxpayer bailout money, TARP money. I agree. When we bail out a scumbag company that helped cause the economic mess we’re in, they should be “controlled” by the government on our behalf.

However, the President’s desires go far beyond companies with bailout money. He wants to regulate the pay of all companies. He has backed down from his statement that a CEO can’t make more than $500,000 per year. He did this under a barrage of criticism, but his real reason was that Congress was passing legislation that would restrict bonuses to 1/3 of total compensation. In other words, a CEO could get $750,000 in compensation including bonuses, and this is acceptable to the President.

Today, the Treasury announce “guidelines” for ALL companies to follow regarding executive pay. Isn’t it interesting that while the rhetoric says Obama doesn’t want to control executive pay, he puts out guidelines anyway!!!! Actions speak louder than words.

Having Big Government setting salaries – no matter how egregious those salaries have been, and are right now – is a fundamental intrusion in our capitalist system.

Calmer heads are prevailing, and people are actually talking about strengthening the rights of shareholders in companies to have a major say in the salary of the company officers. The boardrooms of America need a major shakeup to accomplish this type of shareholder control. We’ll see how far this actually goes. My cynical side says that all this smoke and mirrors is meant to show that the government is doing something, when in reality, it is doing nothing.

Oh, and by the way, doesn’t the word ‘czar’ imply “dictator?” If I remember right Obama has now appointed over 20 Czars.

Here are the last numbers for today:
Dow Jones 30 Industrial – 8771 (up 32 points)
10 Year Treasury Bond – 3.86% (down 0.07%)
Euro – $1.4102
Gold – $962 (up $7)
Oil – $72.68 (up $1.35) – another near term high
Gasoline $2.06 (up $0.05)

“Stress” Tests

admin — Mon, 06 Apr 2009 21:45:46 +0000

Stocks fell a little today, and are awaiting earnings reports to determine its future path.

Bonds also moved sideways, as did the Dollar.

Oil and gasoline fell slightly.

Gold fell a lot, being down $25 today. The new price has broken a trend line on the downside, and gold must test recent support levels at $850 to $860 before we know what the future might hold. So my advice is to wait for the test of these levels, and see if it bounced upward or continues downward. One of the two will happen.

In the news today……

Unemployment was reported at 8.5% last week. However, one of the equally important statistics is Underemployment. This represents people who are not looking for a new job any longer because they’ve given up and are doing something else (like going back to school) or have taken a part time job. Underemployment is currently running at 15.6%. Together this means that 24.1% of the people in the US are either unemployed or making a lot less at a part time job (or something else) than they want to make. Another way to look at this is that the Unemployment statistic of BOGUS!!!!!!!

The FED set up currency swap agreements with Japan, the UK, the ECB and the Swiss today so they can acquire those four currencies at any time. Why would the FED do this? It could be very innocent – like they want to reciprocate with those countries as they have already provided Dollars in the other direction. However, there is usually more than one explanation for a major FED action, and I just haven’t figured this one out yet. Is the FED anticipating a downturn in the Dollar that they can counter with those currencies? Are there “friends of the FED” who might need those currencies on a weekend?

The “Stress Test” being performed by the US Treasury is a SHAM. The Treasury has already stated that the Big Banks are too big to fail, so they are basically excused from the stress test, or the stress test will be structured in such a way that they pass. The results of the “stress test” are anticipated to be announced at the end of this month. All the Big Banks are “friends of Geithner”. I fear for the mid-level sized banks who hold some toxic securities and are not “friends of Geithner” as the Secretary can shut them down at a whim.

One small history lesson on “stress tests.” Fannie and Freddie had legislated (required by law) stress tests in their charter, and long ago before the Freddie and Fannie scandals came out, Freddie and Fannie ALWAYS passed their stress test. However, these industries turned out to be insolvent, and the taxpayer picked up the bill. Herein ends the history lesson.

Here are the last numbers for today:
Dow Jones 30 Industrial – 7976 (down 42 points)
10 Year Treasury Bond – 2.94% (up 0.03%)
Euro – $1.3413
Gold – $873 (down $25)
Oil – $51.05 (down $1.46)
Gasoline – $1.48 (down $0.02)