Category: Economics & Business

Mail call

Apparently there is some possibility the Postal Service may have to cut back to 5-day delivery. I’ve been wondering ever since I carried the mail during summers when I was in graduate school why they didn’t eliminate Saturday delivery.

Anyone care if they have to wait until Monday for the Bed, Bath & Beyond coupon?

I suppose their behavior is not precisely illegal

… but some of these guys need to be wearing orange jump suits and picking up trash alongside the highway.

Merrill CEO (now former CEO) John Thain lavished his office with $1.22 million worth of area rugs, wall sconces, chandeliers, and a $35,000 “commode” after inheriting a struggling investment bank that would have been liquidated had it not been for its shot-gun marriage with Bank of America.

Thain, according to documents reviewed by The Daily Beast, spent another $233,000 on a driver for the past year—more than twice as much as most CEOs. He personally signed off on the expenses, which were paid with company money. He did not reimburse the company for the expense, according to a person close to the firm.

The Daily Beast

Still Missing the Housing Bubble

Americans lost $8 trillion in home equity over the past few years (and another $7 trillion in stock value last year). No wonder we aren’t spending money like we were. Many that write or talk about the economy seem oblivious to this rather basic fact.

The Washington Post, which was famous for relying on David Lereah, the chief economist of the National Association of Realtors (NAR), as its main expert on housing (also the author of Why the Housing Boom Will Not Bust and How You Can Profit from It), is still missing the housing bubble.

An article that discusses aspects of the bubble and how it has hit a family in California refers to the “mortgage mess.” Of course the mortgage mess is secondary. The problem stems from the fact that prices became hugely inflated and have now crashed. If house prices had followed a normal pattern of rising in step with inflation, the problems presented by the bad mortgages issued during this period would be relatively minor.
. . .

Dean Baker

Another idle thought

NewMexiKen always felt and said that buying stuff from Circuit City was too much like buying it out of the back of a truck — annoying, snide, self-important jerks1 — but now the truck has gone.

Circuit City Will Be Liquidated, Sources Say – CNBC.com

__________

1 Not all 35,000 employees of Circuit City, of course, nor perhaps all 567 stores. I do feel badly for their personal loss.

Why Aren’t Stocks Falling?

Felix Salmon is feeling like a grouchy bear this morning:

The lesson of the past two years is that the stock market is a lagging, not a leading, indicator. I have no faith in this rally whatsoever; I hope that I’m wrong, but I just don’t see the current stock market reflecting an economy which is hugely reliant on retail spending and where holiday-season sales were the weakest in four decades. It’s always calmest before the storm, and I fear another gale might be brewing.

That’s his conclusion; go read his analysis.

Desperation

Car dealers ARE getting desperate. Today the mail brought a first class envelope from a local Jeep-Chrysler dealer addressed to the guy who used to live my house.

I bought the house 10 years ago!

That’s REALLY working the Rolodex.

The End of the Financial World as We Know It

I thought this was good, not great, but it’s all the rage today so maybe you should take a look at Michael Lewis and David Einhorn’s The End of the Financial World as We Know It from Sunday’s New York Times.

The link is to the first of two parts. The second part is How to Repair a Broken Financial World.

In this morning’s column Krugman says, “The fact is that recent economic numbers have been terrifying, not just in the United States but around the world. Manufacturing, in particular, is plunging everywhere. Banks aren’t lending; businesses and consumers aren’t spending. Let’s not mince words: This looks an awful lot like the beginning of a second Great Depression.”

Random stuff

I read somewhere that a survey sent to economists asking when they thought the recession would end did not even include any dates in 2009.

We saw Slumdog Millionaire Wednesday evening and it lived up to its hype. Definitely one you should see and a likely prospect to take the best picture Oscar. The audience stayed longer into the titles than any in my recent memory and I’m thinking they didn’t want the experience to be over. (It’s a story of a young man who succeeds remarkably on India’s version of “Who Wants to Be a Millionaire?” He is accused of cheating and explains how he knew the answers with flashbacks to his growing up. The child actors are phenomenal; the whole film fascinating and poignant.)

You know how sometimes after you’ve been driving too long, even after you get out of the car it still feels like you are moving? Yesterday when I finally turned off the TV after the Orange Bowl (way to go Virginia Tech!), I could still hear football announcers in the house. Three games back-to-back is really too much for me.

But I must confess I switched back and forth a lot during the Orange Bowl to the movie Waitress on HBO. The film had all the signs of a Lifetime channel movie, but was entertaining nonetheless, perhaps because Keri Russell is about the cutest person on the planet.

The guy that invented the button on the remote that jumps back-and-forth between two channels ought to be given a damn Nobel Prize.

When do you take down your Christmas decorations (including the tree)?

In a Year, 6 Years of Market Gains Are Lost

The markets were headed for a higher close Wednesday, but overall, it was a very bad year to own stocks, any stocks — indeed, one of the worst ever. The Dow Jones industrial average will end the year down more than 34 percent, the worst year for the index since 1931, and the broader Standard & Poor’s 500-stock index more than 38 percent. Blue-chips like General Motors, Citigroup and Alcoa lost more than 70 percent of their value.

All told, about $7 trillion of shareholders’ wealth — the gains of the last six years — will be wiped out in a year marked by violent market swings.

But what is striking is not just the magnitude of the declines, staggering as they are, but also their breadth. All but 2 of the 30 Dow industrials, Wal-Mart and McDonalds, fell by more than 11 percent.

NYTimes.com

Dubious value line of the day

“That’s why how stocks fare in the first five trading days of January is key. The last 36 times stocks rose at the start of the month, they were higher at year’s end 31 times, the [Stock Trader’s] Almanac says.”

USATODAY.com

There had never been an NFL team go 0-16 before this year, or 16-0 before last year either. I’m guessing the odds on those events were a lot longer than the odds the first five trading days of 2009 being indicative (7.2 to 1).

Ramblings

FedEx is reducing the pay of its salaried employees 5% effective January 1. Do I hear the D-word (deflation)?

Dean Baker wonders why news articles about the auto industry mention employee pay, but similar articles about the newspaper industry don’t.

Calculated Risk has an update graph of the Four Bad Bears. (Be sure to click on the chart to get the readable version.) Doesn’t look to me like the game is over yet. Am I waiting too long to get back in equities?

ZIRP

That’s our acronym of the day: ZIRP.

It stands for Zero Interest Rate Policy.

That’s what the Fed did today when it announced a target range of 0 to .25 percent.

Since the Committee’s last meeting, labor market conditions have deteriorated, and the available data indicate that consumer spending, business investment, and industrial production have declined. Financial markets remain quite strained and credit conditions tight. Overall, the outlook for economic activity has weakened further.

In other words, “the Fed is scared right now. I mean really scared. And they will do anything even remotely possible right now,” says Hale “Bonddad” Stewart.

Put another way, “that’s the equivalent of ‘Abandon Ship! Every man, woman, and child for themselves!'” says Andrew Leonard.

A defining moment for both Detroit and newspapers

The publisher of the Detroit Free Press, the country’s 20th largest paper by weekday circulation, is expected to announce next week that it will cease home delivery of the print edition of the newspaper on most days of the week, according to a person familiar with the company’s thinking.

The publisher hasn’t made a final decision, said this person, but the leading scenario set to be unveiled Tuesday would call for the Free Press and its partner paper, the Detroit News, to end home delivery on all but the most lucrative days—Thursday, Friday and Sunday.

WSJ.com

The Stock Market Still Hopes For a Bailout

Another instance of the old stock market axiom — buy on the rumor, sell on the news.

Look, for instance, at what happened to the auto stocks today. Ford was as low as $2.12 a share in the opening moments of trading, but as news spread that the bailout might still happen, it rocketed upward, and at one point it reached $3.21. In other words, it rose forty-five per cent in a couple of hours. G.M. needs the government’s money more than Ford does, and so its upward spurt was even more impressive: after being as low as $2.66, its shares reached $4.23. That’s a sixty per cent move. It’s simply implausible to believe that this would have happened if investors were not expecting some form of government intervention.

The Balance Sheet: The New Yorker