Harry Potter & The US Economic Puzzle
August Non farms payroll report marked the first negative reading since Aug 2003 and biggest factory firing since July 2003.
Media spin: Real GDP forecasts for the second half of the year might be shaved a bit, but will probably still stay near 2%.
Our Nattering: It is unlikely that Real GDP will be near 2%. Negative employment is here, negative growth is upon us.
Such soothing words... White House economic adviser Ed Lazear: "There's always a chance of recession. We don't think it is likely."
Commerce Secretary Carlos Gutierrez: "The economic fundamentals are solid and they say that the likelihood of growth and of expansion is a lot greater than recession."
Dallas Fed Head Fisher said he "doesn't see the dynamics of a very strong economy changing overnight in the face of the financial turmoil that we've recently seen".
No Bingin Da Beazer?? On Aug. 21, Beazer Homes asked a federal court to block investors from declaring the company in default on $1.3 billion in debt.
Today, Beazer Homes received notices of default from a bondholders' group for failing to file a quarterly report with regulators. Shares down 13%.
The notices from U.S. Bank National Association, a trustee for debt investors, cover notes due 2011 to 2016.
Beazer: "The motivation for this effort is clear: many of the noteholders, including various hedge funds and other opportunistic investors...
have purchased Beazer's bonds at depressed prices in the market and are now improperly seeking to secure a windfall by demanding accelerated repayment in full."
The FBI is investigating Beazer for potential fraud and the Securities and Exchange Commission has opened a probe of the company.
Fed Realism? St. Louis Fed Head Poole said that he sees evidence for a 'further leg down' in housing, that there was "no question" financial problems would worsen.
Treasury Secretary Henry Paulson: The moribund housing sector...
"is going to extract a penalty on growth, and what we're going through in the credit markets is very apt to extract a penalty on growth, but the economy is going to continue to grow in the second half of the year."
Biker spill? Harley-Davidson reduced its forecast for motorcycle shipments, revenue and EPS.
What is Hank watchin these days? Paulson: "I'm focused on the asset-backed paper market, some of the more complex products...
those parts of the credit markets and the capital markets that aren't functioning as normal, and we're vigilant there." Oh yeah.
To cut or not to cut? The 10 year note yield hitting lows not seen since Jan 2006...
Goldman Sachs indicating that they are looking for a 50 bp rate cut at the Fed Sept meeting, while Bear Stearns suggested a 25 bp cut.
The chart of the day shows the spread between three-month Libor and the federal funds rate.
The 20-day moving average of the spread has surged to more than 100 basis points from about 13 basis points. You say, so what Nattering One?
Credit Suisse economists: "This is particularly disquieting as a sizeable fraction of adjustable-rate mortgages, particularly subprime mortgages, are pegged to the Libor rate.
We think the Fed will be persuaded that the still dysfunctional situation in credit markets will warrant some insurance against downside risks to the economy."
Mass. House Rep. Barney Frank: "The deeply troubling August employment report should end any debate... A strong response is required, specifically, a meaningful interest-rate cut."
Wake up little Suzy... In the survey this spring co-sponsored by the Chicago Council on Foreign Relations and WorldPublicOpinion.org, 60% of American respondents said globalization was mostly good. Only 35% judged it was mostly bad.
But just a few weeks later, the FT/Harris poll posed virtually the same question and only 18% of Americans responded that globalization is having a positive effect on the US, while 43% said it was having a negative effect.
In line with our preivous comments, reiterated in today's economic reports re: globalization. Roger Kubarych comments in Harry Potter and the US Economic Puzzle:
"If economic growth should falter next year, both political parties are bound to put at least part of the blame on foreign countries.
Thus, globalization may turn out to be the “Voldemort” of the tale."
Shades of Voldemort... Former Federal Reserve Chairman Alan Greenspan:
"The behavior in what we are observing in the last seven weeks is identical in many respects to what we saw in 1998, what we saw in the stock-market crash of 1987."
We stand on our October 31st date for a Fed cut.
Media spin: Real GDP forecasts for the second half of the year might be shaved a bit, but will probably still stay near 2%.
Our Nattering: It is unlikely that Real GDP will be near 2%. Negative employment is here, negative growth is upon us.
Such soothing words... White House economic adviser Ed Lazear: "There's always a chance of recession. We don't think it is likely."
Commerce Secretary Carlos Gutierrez: "The economic fundamentals are solid and they say that the likelihood of growth and of expansion is a lot greater than recession."
Dallas Fed Head Fisher said he "doesn't see the dynamics of a very strong economy changing overnight in the face of the financial turmoil that we've recently seen".
No Bingin Da Beazer?? On Aug. 21, Beazer Homes asked a federal court to block investors from declaring the company in default on $1.3 billion in debt.
Today, Beazer Homes received notices of default from a bondholders' group for failing to file a quarterly report with regulators. Shares down 13%.
The notices from U.S. Bank National Association, a trustee for debt investors, cover notes due 2011 to 2016.
Beazer: "The motivation for this effort is clear: many of the noteholders, including various hedge funds and other opportunistic investors...
have purchased Beazer's bonds at depressed prices in the market and are now improperly seeking to secure a windfall by demanding accelerated repayment in full."
The FBI is investigating Beazer for potential fraud and the Securities and Exchange Commission has opened a probe of the company.
Fed Realism? St. Louis Fed Head Poole said that he sees evidence for a 'further leg down' in housing, that there was "no question" financial problems would worsen.
Treasury Secretary Henry Paulson: The moribund housing sector...
"is going to extract a penalty on growth, and what we're going through in the credit markets is very apt to extract a penalty on growth, but the economy is going to continue to grow in the second half of the year."
Biker spill? Harley-Davidson reduced its forecast for motorcycle shipments, revenue and EPS.
What is Hank watchin these days? Paulson: "I'm focused on the asset-backed paper market, some of the more complex products...
those parts of the credit markets and the capital markets that aren't functioning as normal, and we're vigilant there." Oh yeah.
To cut or not to cut? The 10 year note yield hitting lows not seen since Jan 2006...
Goldman Sachs indicating that they are looking for a 50 bp rate cut at the Fed Sept meeting, while Bear Stearns suggested a 25 bp cut.
The chart of the day shows the spread between three-month Libor and the federal funds rate.
The 20-day moving average of the spread has surged to more than 100 basis points from about 13 basis points. You say, so what Nattering One?
Credit Suisse economists: "This is particularly disquieting as a sizeable fraction of adjustable-rate mortgages, particularly subprime mortgages, are pegged to the Libor rate.
We think the Fed will be persuaded that the still dysfunctional situation in credit markets will warrant some insurance against downside risks to the economy."
Mass. House Rep. Barney Frank: "The deeply troubling August employment report should end any debate... A strong response is required, specifically, a meaningful interest-rate cut."
Wake up little Suzy... In the survey this spring co-sponsored by the Chicago Council on Foreign Relations and WorldPublicOpinion.org, 60% of American respondents said globalization was mostly good. Only 35% judged it was mostly bad.
But just a few weeks later, the FT/Harris poll posed virtually the same question and only 18% of Americans responded that globalization is having a positive effect on the US, while 43% said it was having a negative effect.
In line with our preivous comments, reiterated in today's economic reports re: globalization. Roger Kubarych comments in Harry Potter and the US Economic Puzzle:
"If economic growth should falter next year, both political parties are bound to put at least part of the blame on foreign countries.
Thus, globalization may turn out to be the “Voldemort” of the tale."
Shades of Voldemort... Former Federal Reserve Chairman Alan Greenspan:
"The behavior in what we are observing in the last seven weeks is identical in many respects to what we saw in 1998, what we saw in the stock-market crash of 1987."
We stand on our October 31st date for a Fed cut.
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