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solarbirdGood afternoon. I'm still trying to restrict my typing, tho' by no means always succeeding, as the length of this monster no doubt reveals.
Back on October 9th, I posted - behind friendslock, I'm afraid - the kind of thing I hate to post: an immediate warning about the banking system, telling people to have some cash on hand in case there of an unscheduled bank holiday in the immediate future. I didn't post it in public because I didn't want to be part of a bank panic, but there were just too many bad numbers coming out of too many bad places, so I told people to have a few days' worth of cash on hand, like you should anyway for, say, a major earthquake. Assume debit cards wouldn't work, banks wouldn't be open, cheques would be sketchy at best, and so on. I'm not unscreening it because there are many comments that were posted with awareness of that screening. (I may post a copy in comments, if there's interest.)
Of course, there wasn't such a holiday, which is good, because October was bad enough as it was. But as it turns out, the risk was both real and imminent:
But now, today's news.
Layoffs are ramping up sharply, with 50,000 large-company layoffs announced this morning alone. Some numbers: Caterpillar, 20,000; Sprint, 8,000; Pfizer/Wyeth, 8,000/11,000 respectively; ING, 7,000; Philips, 6,000; Home Depot, 5000, including the disassembly of the Expo design group and a couple of other experimental spinoff stores; Corus, 5000; GM, another 2,000 beyond previous announcements, and so on. (eta: TI, 3400 positions, in 1800 layoffs and 1600 retirements without replacement.) Australia is seeing serious upswings in bankruptcies, as well.
The developing world is in terrible shape as well. Brad Setzer here talks about massive falloffs in Brazil, China, and many other important countries. Job growth in India's IT sector has fallen sharply, and there's talk that Britain will ban advertising domestic job openings to overseas labour markets. Mmmm, protectionism.
Talking of, there's a clause in the US stimulus package guaranteeing that only US-made steel be used in US$64B of infrastructure projects. Exporters are begging to have the clause removed, fearing retaliation in an already... salty environment. And Sakakibara Eisuke expects the Japanese government to intervene to keep down the Yen should the US dollar fall below 円85.
Predictably, large homes are going out of style as the McMansion fad implodes. I'm amused by this quote: "Butler says she is seeing more interest in 'Wii-sized spaces' -- family rooms that are flexible enough to accommodate a variety of activities, from video games to fitness systems." There's a bit of an uptick in sales - or at least pending sales - as home prices fell by the most in 70 years, but get this: "45% of the transactions in December were considered distress sales, either a short sale or a home in foreclosure." 45%. Jesus. Meanwhile, even CNN has caught on to the hidden backlog of inventory stuck away inside bank repossession paperwork, so it must be pretty obvious by now - so there's lost more of this kind of action to come.
Spiegel says the German banking sector is a real mess, which we kind of know already, but there's an article on it for you. Former Merril CEO John Thain - and doesn't "Thain" sound like a name for some Star Trek alien? - says Bank of America knew everything they claimed not to have known on Friday, in advance - the billions in bonus payment looting on the way out the door, the 4th Quarter losses - and says they're trying to scapegoat him. Hopefully, this will turn even uglier, and enough will spill out to get some prosecutions going. There are also reports coming out about an October crisis in the Swiss banking system as well. Mish Shedlock is pleased about the Obama administration's plans to eliminate conflicts of interest in credit ratings, which he thinks long overdue and will - eventually - help. But he's still quite unhappy about Fed actions.
A social-attitude note: Marketwatch is trying to fight the tide by talking down saving up and talking up credit. Have fun sweeping back that tide, guys. And McDonald's turned in lower but better-than-expected profit numbers this morning, but - and this is key - sales missed to the downside. Not just lower, but lower than expected; the profit boost presumably came from a higher ratio of higher-profit items, which means what? Soda. It's a cheap menu item and it's big, and it makes assloads of money. Work that out in your head a little.
Leading economic indicators came in higher in December, but frankly, the number is bullshit; all the upside is due to increases in M2 money supply via massive injections of "liquidity," either directly (most of it) or indirectly (slow improvement in TED/LIBOR spreads). And on that topic, Mish has a rather disturbing graph here showing a year-to-year base-money spike not seen since the Great Depression and World War II, from his post on why Peter Schiff was more wrong than right, here.
But what everyone's waiting for is the GDP numbers from 4th quarter. Ambrose Evans-Pritchard at the Telegraph expects an annual rate of -6% GDP, which is a 1931 print, but he lurches towards the O SHI side a bit much, so we'll see. Marketwatch expects -5.5% annualised, the worst since 1982. We get that number on Friday. But historically, the kind of data we get on Friday gets revised down - often sharply - two months later, so if it's bad, you'll know the real data is really bad. Minyanville's Bennet Sedacca says that no matter how you slice this, it's a Depression. Similar calls are being made in the UK, with talk of a debt disaster, with some debt-to-GDP charts that really should scare anyone. Mish has more analysis here, and fortunately reprints the charts, because the Guardian's website is currently screwed up and not showing them.
Finally, watch your money-market funds very carefully. Peter at Minyanville has been talking about what he calls "forced migration of retail investors out of risk-free assets into riskier investments" for a while now, and he's just been, as he puts it, handed his backpack. Yes, it's legal. No, he doesn't like it. Be alert.
Back on October 9th, I posted - behind friendslock, I'm afraid - the kind of thing I hate to post: an immediate warning about the banking system, telling people to have some cash on hand in case there of an unscheduled bank holiday in the immediate future. I didn't post it in public because I didn't want to be part of a bank panic, but there were just too many bad numbers coming out of too many bad places, so I told people to have a few days' worth of cash on hand, like you should anyway for, say, a major earthquake. Assume debit cards wouldn't work, banks wouldn't be open, cheques would be sketchy at best, and so on. I'm not unscreening it because there are many comments that were posted with awareness of that screening. (I may post a copy in comments, if there's interest.)
Of course, there wasn't such a holiday, which is good, because October was bad enough as it was. But as it turns out, the risk was both real and imminent:
Britain was just three hours away from going bust last year after a secret run on the banks, one of Gordon Brown's Ministers has revealed.And you know how I keep harping about treasury yields and interest rates paid on government debt and how that will affect spending? Karl at Market Ticker is worried that we're hitting that point. I wouldn't react that way on this little data, but the data that's there does indicate something is up. Brad talks about 2008 treasuries in some depth here, and asks whether the US is more or less dependant upon China for financing now than before.
City Minister Paul Myners disclosed that on Friday, October 10, the country was 'very close' to a complete banking collapse after 'major depositors' attempted to withdraw their money en masse.
But now, today's news.
Layoffs are ramping up sharply, with 50,000 large-company layoffs announced this morning alone. Some numbers: Caterpillar, 20,000; Sprint, 8,000; Pfizer/Wyeth, 8,000/11,000 respectively; ING, 7,000; Philips, 6,000; Home Depot, 5000, including the disassembly of the Expo design group and a couple of other experimental spinoff stores; Corus, 5000; GM, another 2,000 beyond previous announcements, and so on. (eta: TI, 3400 positions, in 1800 layoffs and 1600 retirements without replacement.) Australia is seeing serious upswings in bankruptcies, as well.
The developing world is in terrible shape as well. Brad Setzer here talks about massive falloffs in Brazil, China, and many other important countries. Job growth in India's IT sector has fallen sharply, and there's talk that Britain will ban advertising domestic job openings to overseas labour markets. Mmmm, protectionism.
Talking of, there's a clause in the US stimulus package guaranteeing that only US-made steel be used in US$64B of infrastructure projects. Exporters are begging to have the clause removed, fearing retaliation in an already... salty environment. And Sakakibara Eisuke expects the Japanese government to intervene to keep down the Yen should the US dollar fall below 円85.
Predictably, large homes are going out of style as the McMansion fad implodes. I'm amused by this quote: "Butler says she is seeing more interest in 'Wii-sized spaces' -- family rooms that are flexible enough to accommodate a variety of activities, from video games to fitness systems." There's a bit of an uptick in sales - or at least pending sales - as home prices fell by the most in 70 years, but get this: "45% of the transactions in December were considered distress sales, either a short sale or a home in foreclosure." 45%. Jesus. Meanwhile, even CNN has caught on to the hidden backlog of inventory stuck away inside bank repossession paperwork, so it must be pretty obvious by now - so there's lost more of this kind of action to come.
Spiegel says the German banking sector is a real mess, which we kind of know already, but there's an article on it for you. Former Merril CEO John Thain - and doesn't "Thain" sound like a name for some Star Trek alien? - says Bank of America knew everything they claimed not to have known on Friday, in advance - the billions in bonus payment looting on the way out the door, the 4th Quarter losses - and says they're trying to scapegoat him. Hopefully, this will turn even uglier, and enough will spill out to get some prosecutions going. There are also reports coming out about an October crisis in the Swiss banking system as well. Mish Shedlock is pleased about the Obama administration's plans to eliminate conflicts of interest in credit ratings, which he thinks long overdue and will - eventually - help. But he's still quite unhappy about Fed actions.
A social-attitude note: Marketwatch is trying to fight the tide by talking down saving up and talking up credit. Have fun sweeping back that tide, guys. And McDonald's turned in lower but better-than-expected profit numbers this morning, but - and this is key - sales missed to the downside. Not just lower, but lower than expected; the profit boost presumably came from a higher ratio of higher-profit items, which means what? Soda. It's a cheap menu item and it's big, and it makes assloads of money. Work that out in your head a little.
Leading economic indicators came in higher in December, but frankly, the number is bullshit; all the upside is due to increases in M2 money supply via massive injections of "liquidity," either directly (most of it) or indirectly (slow improvement in TED/LIBOR spreads). And on that topic, Mish has a rather disturbing graph here showing a year-to-year base-money spike not seen since the Great Depression and World War II, from his post on why Peter Schiff was more wrong than right, here.
But what everyone's waiting for is the GDP numbers from 4th quarter. Ambrose Evans-Pritchard at the Telegraph expects an annual rate of -6% GDP, which is a 1931 print, but he lurches towards the O SHI side a bit much, so we'll see. Marketwatch expects -5.5% annualised, the worst since 1982. We get that number on Friday. But historically, the kind of data we get on Friday gets revised down - often sharply - two months later, so if it's bad, you'll know the real data is really bad. Minyanville's Bennet Sedacca says that no matter how you slice this, it's a Depression. Similar calls are being made in the UK, with talk of a debt disaster, with some debt-to-GDP charts that really should scare anyone. Mish has more analysis here, and fortunately reprints the charts, because the Guardian's website is currently screwed up and not showing them.
Finally, watch your money-market funds very carefully. Peter at Minyanville has been talking about what he calls "forced migration of retail investors out of risk-free assets into riskier investments" for a while now, and he's just been, as he puts it, handed his backpack. Yes, it's legal. No, he doesn't like it. Be alert.
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no subject
Date: 2009-01-26 08:36 pm (UTC)My reasoning is that if there is a systemic lurch or seizure, then it is conceivable that the transport of goods will be interrupted. I can easily imagine going and buying some second-hand jeans if I need them, but I really don't ever think that second-hand underwear and socks are going to be popular.
no subject
Date: 2009-01-26 09:13 pm (UTC)Yep, sounds like http://memory-alpha.org/en/wiki/Enabran_Tain :D
Here's my post from 9 October
Date: 2009-01-26 09:13 pm (UTC)Friendslocked. Do not link or forward. Also, do not joke at me about this, I'm much too much stressed out.
Okay, look, I hate being That Paranoid Person, okay? But the numbers I'm looking at and the panic atmosphere combined with the Lehman Brothers CDS auction going down tomorrow are telling me there's a small but nontrivial shot of an asymptotic bank event tomorrow. If that happens, there's a small but nontrivial chance of an unscheduled bank holiday in the very near future. Like, I dunno, Monday.
Let me stress that I am not saying your money will be gone. Since people tend to not read stuff, let me stress again: I do not think your money will be gone in this event. It will not be gone.
But it might be unavailable to you for maybe a couple of or a few days. You might want to get cash enough for a few days out of the bank. I am not saying to empty your account. I am not telling you to, I dunno, go long gold. Hell, I am not saying this event is even likely! I think it is not likely. Everyone already expects the worst out of the Lehman auction and there's really very little but upside available for surprises.
But interbank lending has fallen over dead, the LIBOR is crazy, the TED is crazy. Yes, crazier. Treasuries are in selloff. People are pulling money out of markets en masse. I haven't seen anybody give evidence of corporate bonds being snapped up either; people are just hoarding cash.
I hope that will clear up once we're not surprised to the downside by this Lehman Brothers CDS auction, and I hope there aren't any more nasty surprises coming out of Europe.
But the odds of worse things happening are high enough that if you don't have some earthquake money already stored away with your 3-day kit, now might be a good time to do so. Just enough cash that you're okay for a few days without banks, credit cards, debit cards, or cheques. Enough to get you through a surprise long weekend.
Again, here is what I am NOT saying:
- I am NOT saying that banks are falling over dead.
- I am NOT saying that this is guaranteed, or even a 50/50 chance. Just that it's possible.
- I am NOT saying all your money is going away.
- I am NOT saying to take all your money out of the bank.
I'm just suggesting that if you don't have the few days' worth of earthquake money you should already have out in cash anyway, that now is a good time to get it. And don't spend it.(As always, I am not a financial advisor, and this is not financial advice. Friendslocked because I don't want people going off half-cocked and screaming panic and starting a bank run or some damn thing. Do whatever you're gonna.)
The above is a REPOST from 9 October 2008. It is not new data and it is NOT current. It is from LAST OCTOBER, and is referenced in today's economics post above.
no subject
Date: 2009-01-26 09:17 pm (UTC)I've thrown my 9 October post in comments, btw.
no subject
Date: 2009-01-26 11:03 pm (UTC)no subject
Date: 2009-01-26 11:06 pm (UTC)But everybody knows "three-day pack" so I build upon that base.
Your comments
Date: 2009-01-27 01:01 am (UTC)Re: Your comments
Date: 2009-01-27 02:21 am (UTC)