RSS Feed
Twitter
Facebook
Email
HomeTune In Sunday Night for NoQuarter Radio’s Sense on Cents with Larry Doyle
Posted by Larry Doyle on May 16th, 2009 11:35 AM |
UPDATE: The show has concluded, but you can listen to a recording of it in its entirety by clicking the Play button on the audio player below. Once the playback has started, you can fast forward or rewind to any portion of the show by clicking at any point along the play bar.
*************************************
Please join me Sunday evening from 8-9 p.m. ET for NoQuarter Radio’s Sense on Cents with Larry Doyle. The developments in the markets, economy, global finance, Wall Street, and Washington are occurring at breakneck speed. I will try to slow things down a bit and provide a sense of perspective. What did we learn in the markets over the last week and what does that mean for the weeks and months ahead? We will address a wide range of issues, including economic statistics released this week, the automotive situation, market performance, and the road ahead. Additionally, I am always happy to address anything on your mind as you navigate your own economic landscape.
I will be joined by a special guest this week, as well. Mike Offit is uniquely positioned to offer piercing insights on the current state of Wall Street, the markets, and the economy. Mike held senior positions at First Boston and Goldman Sachs prior to launching the commercial mortgage and asset-backed securities business unit at Deutsche Bank. He currently consults and writes extensively on a wide range of issues for a number of periodicals including a lifestyles column for Departures, the AMEX Platinum/Black card magazine. Mike has unabashedly always “tilted against windmills.” I look forward to my conversation with him this Sunday evening.
These are truly historic times in the global economy. Let’s “navigate the economic landscape” without the pandering or nonsense found elsewhere! What is on your mind? What would you like to address? Please share your questions and thoughts by calling in to (347) 677-0792, and also join our live chat room, which I’ll start up about 10 minutes before the show begins.
Many thanks to Larry Johnson and the rest of the team at NoQuarterUSA blog for providing such a vibrant vehicle as NoQuarter Radio. I look forward to having you join me Sunday evening as we collectively navigate the economic landscape!!
LD
Economic Update: Jobless Claims and Producer Prices
Posted by Larry Doyle on May 14th, 2009 10:42 AM |
Economic data released this morning included Initial Jobless Claims and Producer Price Index. Let’s dive right in!!
Initial Jobless Claims rose to 637k from last week’s reading of 601k, which was revised to 605k. The expectations for this week’s claims figure was 611k so the reading is disappointing as far as looking for stabilization within labor.
I am not surprised, though, for a few reasons:
1. we know there are going to be layoffs coming in the automotive industry. In fact, a large percentage of the increased unemployment filings came from states with heavy automotive exposure, especially Illinois.
2. as I reported in last Friday’s May Unemployment Report:
The fact that temporary government workers are factored into overall employment, in my opinion, is stretching the integrity of the report.
Thus, I am not surprised to see this week’s claims report higher than expected and I expect subsequent revisions to show higher claims as well.
In regard to the Producer Price Index, it was reported as an increase of .3% and without the volatile food and energy components as an increase of a mere .1%. No big deal, right? Well, it’s no big deal as long as you don’t eat. For those of us who actually look to consume food on a regular basis, this report is very troubling. Why?
Prices of food products rose 1.5%!! Including a rise of 43.7% for eggs, 5.2% for vegetables, 4.5% for beef, and 2.5% for pork.
Sense on Cents did receive very interesting color the other day about the state of produce in California. A reader shared:
The cost of food is on the rise faster than you can eat.
Now the feds have cut off water to the central valley and fields are not being farmed. I do not about you but ya might want to watch the price of a head of lettuce in NYC go through the roof.
Additionally, I was surprised to see a rise in prices for cars of .2% and light trucks of 1.1%. Despite the fact that car and truck sales are at depressed levels, the auto companies are in such desperate straits that they need to squeeze revenue wherever possible. That said, the asking prices of these vehicles may have risen, but who pays asking?
Please share insights on these fronts or any others from your local economies so we all can more effectively navigate the economic landscape!!
LD
Let’s Get Some Chinese: A Review of Economic Activity in China
Posted by Larry Doyle on May 13th, 2009 11:59 AM |
China’s stock market closed today at the highest level since August ’08. Is that an indication that China is ready to resume its economic expansion and can literally pull the global economy right along with it? Well, let’s check out a number of items on the menu:
1. The Baltic Dry Index has rebounded over the last few weeks. The BDI is extremely volatile. It plummeted approximately 95% from its high in early 2008, rebounded strongly earlier this year only to suffer a setback in March as our equity market started to regain its legs. The recent rebound in the BDI is again credited to increased shipping activity of commodities into China. Prices of commodities (copper, oil, iron ore) have been very highly correlated with the BDI as a result.
So far, so good . . . let’s try some more items on the menu.
2. How about Chinese lending activity? Is the well directed Chinese stimulus precipitating an increase in activity by non-governmental borrowers? The FT reports, China Cuts Lending Amid Asset Bubble Fears.
I will give those in charge of China’s fiscal stimulus and government programs credit. As this article highlights, these authorities have real concerns about inflation and irresponsible lending practices.
The FT reports:
Chinese bank lending slowed dramatically in April because of fears that loan growth in the first quarter had been excessive and could pave the way for loans of deteriorating quality, so possibly creating a new round of asset bubbles.
That led to fears among regulators that money was being funnelled illegally into the stock market and handed out to state-sponsored stimulus projects of dubious commercial value that could become non-performing assets.
Some regulators also worried about the potential for rampant inflation. Those fears were somewhat eased by price measurements released on Monday showing China remained in deflationary territory in April for the third consecutive month.
Wow! Can you imagine if a regulator in our country had the integrity to voice concerns about government funds being utilized illegally or fraudulently?
This item did not taste so good in regard to leading the global economy to greener pastures, but I commend the Chinese for addressing potential pitfalls in their programs.
3. Away from the government stimulus, the Chinese economy remains largely dependent on exports. Let’s take a taste! Again, our friends at the FT provide some spice, Slide In Chinese Exports Will Hit Growth Strategy:
The FT reports,
Chinese exports fell steeply in April for a sixth month in succession, suggesting that the worst might not be over for the world’s third largest economy.
The total value of Chinese exports fell 22.6 per cent to $91.9bn (£60.2bn) last month compared with the same month a year earlier – a faster rate of decline than the 17.1 per cent year-on-year drop in March.
Why are Chinese exports falling? Well, please review our first post this morning which highlighted that domestic retail sales here fell by .4% after a decline of over 1% last month. If American consumers aren’t buying, Chinese producers aren’t exporting.
4. LD, it is only a matter of time, though, before the American consumer returns to his old ways of spending and the Chinese exporters will be happy, right? Let’s go for the fortune cookie and see what it says: U.S. Lawmakers In Threat To Raise Tariffs On China.
Congress is raising this threat given rising unemployment here at home and concerns that China manipulates its currency. Will this tariff fly? Perhaps.
The FT reports:
a group of lawmakers from manufacturing-dominated states are determined to give it another try and some analysts think the US recession could help build support this time. The charge in the Senate will be led by Debbie Stabenow, a Democrat from Michigan, and Jim Bunning, a Republican from Kentucky. In the House, it will be pushed by Tim Ryan, a Democrat from Ohio, and Tim Murphy, a Republican from Pennsylvania.
Whether these tariffs are the right maneuver or not, increased protectionsist measures are not one way streets. If we are looking to grow our own economy without being dependent on the American consumer, we will need global trade lines to be open.
So, what did you think of our sampler?
To me it was more sour than sweet. In my opinion, our future/fortune remains decidedly mixed at best.
LD
For more in depth BDI analysis, check out Baltic Dry Index and Commodity Graphs
Does HSBC See Green Shoots?
Posted by Larry Doyle on May 12th, 2009 11:41 AM |
Are those green shoots or dandelions or a mix of the two?
As the “lawn” comes in, we hope the roots grow deep and the grass is lush. That said, we can not blindly accept a prospective landscaper’s vision of what our yard may look like next quarter or later this year. 
I don’t subscribe to using products like Miracle-Gro. Given that virtually every “gardener” is employed or connected to “Uncle Sam’s Lawn Patrol,” who else can give us a “lay of the land”? Let’s talk to the gardeners at HSBC!
HSBC purchased Household Finance in 2003. I am sure they regret making that purchase. HSBC was trying to emulate the “originate to distribute” model which filled the coffers of so many other Wall Street banks. The fact is, though, HSBC was literally the last entrant to the “lawn” party and their experience has been nothing short of a whole lot of crabgrass.
As the WSJ reports, HSBC Points To More Pain In U.S., we receive a diagnosis on the U.S. economy that is much less sanguine but, in my opinion, more realistic than Uncle Sam’s gardening crew. The WSJ highlights the fact:
HSBC, which was among the first banks to signal the subprime-mortgage troubles that set off the global financial crisis, said its U.S. consumer-finance operation had seen a slight slowdown in the deterioration of its mortgage and other secured loans in the first quarter compared with the fourth of quarter of 2008 — a shift executives attributed in part to U.S. tax refunds, higher savings rates and the bank’s efforts to help borrowers by changing the terms of their loans.
While those signs of a slowdown in loan deterioration may be viewed as a “green shoot,” HSBC is an honest “gardener” and allows that the positive trend may not continue.
North America Chief Executive Brendan McDonagh attributed the change to several factors, including a seasonal bounce, tax refunds, loan modifications and the bank’s previous efforts to pull back in mortgage lending. “We are slightly encouraged by it, but I am reluctant to draw too many conclusions,” Mr. McDonagh said.
HSBC Chief Executive Michael Geoghegan said loan-loss rates could increase again in the third or fourth quarters of the year. “We expected two difficult years in consumer finance over all,” he said.
Given the fact that HSBC is not connected to Uncle Sam’s gardening, I appreciate the honest assessment and “more realistic” prognosis. Miracle Gro may sell well on late night TV, but I prefer a “gardener” who is straight and honest while informing me that it may be a few years before the lawn comes in.
Speaking of lawns and gardening, here’s a shout out to my good friends Rocky and his pop!!
LD
Goldilocks Economy
Posted by Larry Doyle on May 8th, 2009 1:15 PM |
Will the wizards in Washington be able to recreate the Goldilocks economy, in which we can generate moderate growth with limited inflation and near full employment? Well, that economic dream is still off in the distance, but the Goldilocks analogy is appropriate. How’s that? Much like the cherished tale, the wizards are faced with three choices in virtually every situation: too much, too little, just right.
Fiscal policy
– too much spending and/or improperly targeted spending will drive interest rates higher via massive deficits and potential hyperinflation.
– too little spending and/or improperly targeted will not properly stimulate the economy and may lead to a bout of deflation.
– just the right amount of spending and properly targeted will support the economy and stabilize prices.
Monetary Policy
– too much gas on this fire will massively grow the money supply and lead to hyperinflation.
– not enough gas or a slow delivery (the concern in Europe) will not stop the economy from sliding into a deeper recession.
– just right will lead to support for the economy. However, our wizards must be prescient and know exactly when to turn the gas line down and then off. If this procedure is not executed with precision, our house may go up in the flames of hyperinflation. Many wise and elderly wizards, including none other than Paul Volcker, have this concern.
Regulatory
– overly restrictive regulations will inhibit an entrepreneurial spirit and drive business overseas.
– ineffective, inappropriate, or insufficient regulations will lead to further moral hazards and an economic foundation akin to a pile of sand. Dare I say, our house is suffering from this problem currently.
– just right would compel new regulators with real teeth to redraft the rules by which we play. Paul Krugman wrote “Stressing The Positive” in yesterday’s New York Time and addressed this topic. Krugman offers:
. . . what worries me most about the way policy is going isn’t any of these things. It’s my sense that the prospects for fundamental financial reform are fading.
Does anyone remember the case of H. Rodgin Cohen, a prominent New York lawyer whom The Times has described as a “Wall Street éminence grise”? He briefly made the news in March when he reportedly withdrew his name after being considered a top pick for deputy Treasury secretary.
Well, earlier this week, Mr. Cohen told an audience that the future of Wall Street won’t be very different from its recent past, declaring, “I am far from convinced there was something inherently wrong with the system.” Hey, that little thing about causing the worst global slump since the Great Depression? Never mind.
Those are frightening words. They suggest that while the Federal Reserve and the Obama administration continue to insist that they’re committed to tighter financial regulation and greater oversight, Wall Street insiders are taking the mildness of bank policy so far as a sign that they’ll soon be able to go back to playing the same games as before.
Uncle Sam’s intervention
– too much involvement means private enterprise will either not play in our markets or charge a higher price in the form of higher interest rates (this is VERY likely to happen given the disregard for property rights and the validity of contracts).
– too little and the economy may take another leg down in the form of a triple dip.
– just right . . . how do we compel Uncle Sam to be a benevolent Old Man and not encroach on the principles of capitalism, free markets, and private enterprise as he tries to push forward with a massive social agenda and enormous spending plans?
The trail on which we are proceeding will be LONG. Will we be able to find that warm home in the woods? Do we have the fortitude and courage to sacrifice as need be or do we have leaders who are blinded by ambition and agendas which will cause us to lose our way?
Bring extra supplies.
LD
Navigating the “Murky Waters” of Financial Services
Posted by Larry Doyle on May 7th, 2009 7:57 PM |
I am thrilled to have Rick Johnson as my guest on NoQuarter Radio’s Sense on Cents with Larry Doyle this Sunday evening May 10th. As Forbes recently reported:
JACKSONVILLE, Fla., May 1 /PRNewswire/ — Rick Johnson, author of the book Keep Your Assets. Take My Advice, applauds the Financial Planning Coalition’s effort to establish an oversight board to regulate financial advisers. The Financial Planning Coalition,
according to a recent update emailed to Certified Financial Planners, is proposing an oversight board with fiduciary standards, training and ethics requirements for financial planning advice that favors consumers. FINRA is trying to influence the Securities and Exchange Commission in order to regulate registered investment advisers, as stated in a recent speech by Richard G. Ketchum, Chairman and CEO of FINRA, before the Committee on Banking, Housing and Urban Affairs. The Financial Planning Coalition “wants to preclude FINRA from consideration as the oversight body … ” as stated in their April 27, 2009 email update. “This is a battle between lobbying groups with consumers caught in the crossfire,” according to Johnson.
In an April 27th FINRA News Release, FINRA has proposed closing a glaring gap in their Broker Check system that previously allowed advisers with revoked licenses to have their backgrounds dropped from the FINRA Broker Check system after two years. In his book, Keep Your Assets Take My Advice, Johnson pointed out this exact problem.
The suggestion from Johnson’s book is to close the background check loopholes. As quoted, “We need one disciplinary disclosure system for all insurance agents, FINRA-registered representatives and investment adviser representatives of registered investment advisers.”
In his book, Johnson breaks down why the fiduciary standard of care is what all consumers should demand. “You cannot do what is in the best interest of the consumer and have a sales quota. It is impossible. As long as these sales quotas remain, there is no chance at a fiduciary standard of care,” says Johnson.
Johnson educates his readers about the fiduciary standard of care, how to do annual background checks on financial advisers and he provides unique financial planning ideas typically not found in recently published financial advice books. Readers of his book will be “armed to the teeth,” according to Johnson, to navigate the “murky waters” of financial services.
Who is looking out for you? Sense on Cents and Rick Johnson this Sunday evening on NoQuarter Radio.
LD
NoQuarter Radio’s Sense on Cents with Larry Doyle Tonight at 8PM
Posted by Larry Doyle on May 3rd, 2009 7:38 AM |
UPDATE: The show has concluded, but you can listen to a recording of it in its entirety by clicking the Play button on the audio player below. Once the playback has started, you can fast forward or rewind to any portion of the show by clicking at any point along the play bar. Topics this evening included: the Chrysler bankruptcy situation, Bank Stress Tests, and Auction Rate Securities.
******************************
Please join me Sunday evening from 8-9 p.m. ET for NoQuarter Radio’s Sense on Cents with Larry Doyle. The developments in the markets, economy, global finance, Wall Street, and Washington are occurring at breakneck speed. I will try to slow things down a bit and provide a sense of perspective. What did we learn in the markets over the last week and what does that mean for the weeks and months ahead? We will address a wide range of issues, including: the auto industry, government bond market, and economic statistics.
These are truly historic times in the global economy. Let’s “navigate the economic landscape” without the pandering or nonsense found elsewhere! What is on your mind? What would you like to address? Please share your questions and thoughts by calling in to (347) 677-0792, and also join our live chat room, which I’ll start up about 10 minutes before the show begins.
Many thanks to Larry Johnson and the rest of the team at NoQuarterUSA blog for providing such a vibrant vehicle as NoQuarter Radio. I look forward to having you join me Sunday evening as we collectively navigate the economic landscape!!
LD
Review of Economy, Fed Reserve Statement, and Market
Posted by Larry Doyle on April 29th, 2009 2:57 PM |
The Federal Reserve released its regular statement on the economy at 2:15pm. The statement includes:
1. no change in the Fed’s interest rate policy with the Fed Funds rate remaining between 0-.25%.
2. no change in the Fed’s asset purchase program of government and mortgage-backed securities.
3. overall economic activity remains weak but the pace of decline is slowing.
4. inflation remains below the Fed’s long term target.
5. the Fed will employ all available tools at its disposal to help the economy recover.
The equity markets are having a strong upward move today based not on the Fed’s statement but reaction to the DRAMATIC decline in inventories reflected in this morning’s VERY weak GDP report. If an equity market rallying after a VERY weak GDP report seems counterintuitive it is due to the fact that if and when consumer demand picks up it will drive production.
In my opinion, banking on a pickup in consumer demand is a big if. With credit tight and likely to remain tight, I believe our economy needs to and will adjust to lessened demand.
The WSJ comments on this economic activity, U.S. Economy Shrank At 6.1% In First Quarter:
Weaker investment in housing combined with the enormous inventory adjustment to pull the economy downward. But the aggressive drawdown of stockpiles of goods, while hurting the economy in the short run, is beneficial because it is an important step toward bringing inventories under control and ending a production freefall. U.S. industrial production retreated a fifth straight month in March, recent data show. Over the past 12 months, output was down nearly 13%. Capacity use by industries receded to 69.3%, a historical low since records began in 1967.
One area of concern for me is the uptick in prices. Although economists and analysts are panning the near term inflation risks, in my opinion, this risk should not be underestimated. The increase in prices in today’s GDP report has received little coverage, but
Price indicators within Wednesday’s report suggested inflationary pressures rose in first-quarter 2009, easing fears of deflation. For instance, the price index for personal consumption expenditures fell by 1.0%, a decline much smaller than the fall of 4.9% in the fourth-quarter 2008. The PCE price gauge excluding food and energy rose 1.5%, after increasing 0.9% in the fourth quarter.
Free money in the form of a 0-.25% Fed Funds rate will continue to help banks recover but government deficits as far as the eye can see must be addressed. If the economy stabilizes, look for interest rates to ratchet higher.
In fact, in today’s trading government bonds are down and rates are back to the highs seen last November.
LD
Tune in Sunday Evening to NoQuarter Radio’s Sense on Cents with Larry Doyle
Posted by Larry Doyle on April 26th, 2009 9:25 PM |
UPDATE: The show has concluded, but you can listen to it in its entirety by clicking on the Play button on the audio player below. Once the playback has started, you can fast forward or rewind to any portion of the show by clicking at any point along the play bar.
********************************************
Please join me Sunday evening from 8-9 p.m. ET for NoQuarter Radio’s Sense on Cents with Larry Doyle. The developments in the markets, economy, global finance, Wall Street, and Washington are occurring at breakneck speed. I will try to slow things down a bit and provide a sense of perspective. What did we learn in the markets over the last week and what does that mean for the weeks and months ahead? We will address a wide range of issues, including: Hank Paulson blindsiding Ken Lewis, 1st quarter earnings (their transparency and quality), market performance this week, month, and year to date, the outlook for our financial regulatory structure, and upcoming bank stress test results.
These are truly historic times in the global economy. Let’s “navigate the economic landscape” without the pandering or nonsense found elsewhere! What is on your mind? What would you like to address? Please share your questions and thoughts by calling in to (347) 677-0792, and also join our live chat room, which I’ll start up about 10 minutes before the show begins.
Many thanks to Larry Johnson and the rest of the team at NoQuarterUSA blog for providing such a vibrant vehicle as NoQuarter Radio. I look forward to having you join me Sunday evening as we collectively navigate the economic landscape!!
LD
