The Difference Between Communist Capitalism (As In China) And Capitalist Capitalism (As In The US)....The China Price…To Drive

It looks like the China story is becoming more and more fishy....... Keep this in mind when the next blowout nominal GDP number out of China is making waves......

Es sieht immer mehr so aus als wenn es im gelobten Land China immer mehr brodelt...... Ohne diese staatlichen Eingriffe könnte man wohl guten Gewissens von einer galoppierenden CPI sprechen....Behaltet diese Themaktik im Auge wenn demnächst wieder sagenhafte nominale Wachstumszahlen aus China die Schlagzeilen beherrschen....Spreche bewußt von CPI ( Consumer Price Inflation ) und nicht Inflation da ich was die Definition angeht mit Mish übereinstimme Inflation: What the heck is it? .

The China price…to drive FT Alphaville
Here is what we consider to be a graphical representation of the difference between Communist capitalism (as in China) and Capitalist capitalism (as in the US) - divergent costs of motoring.

It comes from John Kemp at Sempra Metals, who notes that in China domestic gasoline and diesel prices are set by the government rather than the market, with the National Development and Reform Commission setting a benchmark price. Filling stations are required to sell fuel at a price within plus or minus 8 per cent of the benchmark.

The government has raised the benchmark repeatedly over the last five years but by nowhere near as much as the increase in crude oil prices. Until the end of 2006, the benchmark gasoline and diesel prices were raised broadly in line with crude. But since then the government has authorised only one price increase in Nov 2007. NDRC officials are reluctant to sanction further increases in case they fuel already high rates of inflation or provoke social unrest. Gasoline and diesel prices are being held down in line with many other basic commodities as part of the government’s broader strategy of relying on price controls to bring down the inflation rate.

China’s refiners now make losses on every barrel of imported crude oil they refine and the government has agreed to provide subsidies to the second-largest refiner, Sinopec, amounting to more than $10bn a year.

There are repercussions here:

The artificially low level of the controlled prices means that China’s manufacturers and households are not receiving a strong signal to conserve fuel. Even as crude oil prices rise, China’s consumers and businesses have no incentive to cut gasoline and diesel use. Rising crude oil prices are helping ration demand in the advanced industrial economies, but have no impact on demand in China, which is where all the marginal demand is coming from for increasingly subsidised gasoline and diesel.

Indeed, price controls are not restricted to gasoline and diesel. China has also banned price increases for electricity and a whole host of other raw materials and foodstuffs - keeping commodity demand artificially high despite surging prices and adding to global inflationary pressure despite the slowdown in the United States.

> The latest numbers are even higher....

> Die letzten Daten sind sogar noch extremer......

Such market-bending policies are evident across the Middle East and Asia, Kemp notes, before concluding:

The Great Depression of the 1930s was made deeper when the United States Smoot-Hawley), the United Kingdom (Imperial Preference) and other countries tried to protect their own economies by resorting to price- and trade-distorting tariffs, causing world trade volumes to collapse. The global downturn of 2007-2009 will be made deeper and longer if emerging economies across Asia and the Middle East refuse to allow domestic commodity prices to rise in order to restrain demand, ensuring that inflation worsens even as the economies of the United States and Western Europe slow.

> And lets not forget some other issues with China..... In the longer term these kind of issues will cause probably more headaches for the central planners.......

> Und ich kann mir einfach den Hinweis nicht verkneifen das China auch abseits der Wirtschaft mit einigen Problemen zu kämpfen hat die längerfristig weitaus schwerer wiegen.....

Thanks to Bob Gorrell

> Now back to the regular program....

> Nun wieder weiter mit dem bekannten wirtschaftlichen Blogschwerpunkt.....

China Gas Price Game Starts To Show Cracks 24/7 Wall Street

The large difference between crude prices and gas is beginning to show up more prominently in the P&Ls of China's largest oil operations. According to the AP "China's second-biggest oil company, Sinopec, says its first quarter profit fell 69 percent due to government controls that bar it from passing on record crude costs to consumers." The firm is offers some subsidies to make up the difference, but they are not enough.

Over the last six months, shares in PetroChina (PTR) and China Petroleum (SNP) ,as Sinopec is known, are well down. SNP has fallen by 30% and PTR by 40%. Shares of Exxon (XOM) are flat over that period.

Public shareholders are being punished for the government policy, but it will not end there. If the economy in China slows, the treasury will find it harder and harder to finance the underwriting of gas prices. China may have to pour more money into the market to support its actions. Or, it may have to let the price of fuel move up.

In a country where inflation already borders on double digits, an oil crisis is brewing. It will be not long until it will moves out into the open.

Earnings Risk / Hussman

This should come as no surprise..... Here are more examples of how smart "Wall Street Finest" have acted in the past.... Keep this in mind when you here "the market is cheap based on our 2009 earnings estimates".....

Sollte keinen wirklich überraschen..... Hier ein paar weitere Beispiele für den Scharfsinn von "Wall Street Finest" . Kann nicht schaden sich diese Prognosesicherheit in sGedächnis zu rufen wenn es wie so oft zu hören mal wieder heißt " Auf Basis unserer Gewinnschätziungen für 2009 sind Aktien billig"......


Earnings Risk / Hussman

On the earnings front, we continue to expect significant pressure on profit margins and resulting cost-cutting pressures to weigh on employment. Given that Wall Street analysts continue to build a major second half recovery into earnings projections, it is important to ask whether those earnings estimates are likely to be reliable.

Since analyst estimates of earnings are almost invariably higher than current operating earnings, and earnings tend to grow over time, it is easy to assume that analyst estimates usefully “lead” earnings. Unfortunately, this isn't true, particularly at turning points when earnings trends are slowing or improving.

via FAZ Germany Analystenprognosen sind mit Vorsicht zu genießen

In q4 more than 1800 Analystst had predicted a 7.9 percent increase in earnings. In reality the earnings crashed 22.6 percent. This large divergence marked a new record.....

Was im vierten Quartal 2007 passiert ist, war kein Ruhmesblatt für die Branche. Denn mit ihren Prognosen für die amerikanischen Unternehmen in diesem Berichtszeitraum haben die 1800 Analysten der Wall Street um mehr als 30 Prozentpunkte zu hoch gegriffen. Konkret wurde mit Gewinnsteigerungen von 7,9 Prozent gerechnet, letztlich sanken sie aber um 22,6 Prozent. Damit lagen sie so weit daneben wie noch nie.

James Montier at Societe Generale demonstrates this nicely by subtracting the upward linear trend from both operating earnings and analyst estimates. What remains are the deviations of earnings and estimates from their long-term trends.

If analyst estimates anticipate subsequent earnings, the “forecasts” line (black) should turn upward or downward before the “earnings” line (red) turns. But as James notes, “The chart makes it transparently obvious that analysts lag reality. They only change their minds when there is irrefutable proof they were wrong, and then only change their minds very slowly.”

Moreover, as Tim Hayes of Ned Davis Research points out, the difference between GAAP earnings (based on generally accepted accounting principles) and operating earnings “has reached its second widest level on record. What all this means is that the greater the focus on operating earnings, and especially forecasted operating earnings, the greater the vulnerability to disappointment on the GAAP earnings reality. And it supports giving the cyclical bear market downtrend the benefit of the doubt.”

Colbert: Bulls, Bears, Mortgage Crises, Rice Shortage etc....

Have a nice weekend...

Allen ein schönes Wochenende....

BMW Is Taking A Hit From The US

BMW generates almost 20 percent from it´s revenue in the US. On top of this lots of the profit from almost every carmaker comes from their finance unit..... I assume the headwinds from this part of the business is facing some serious headwinds for some time to come.... At the year end report BMW pointed to only a slight increase in delinquencies to 0.46...... Times are changing very quickly......

BMW macht knapp über 20 % vom Umsatz in den USA. Hinzu kommt das bei fast jedem Autohersteller die Gewinne aus dem Finanzarm einen ganz erheblichen Anteil an den Gewinnen haben ( oder sollte ich besser sagen hatten.... ). Zumindest wird es zukünftig deutlich schwieriger hier an die goldenen Zeiten der Vergangenheit anzuknüpfen..... Zitat BMW Ende 2007 :"Dort verschlechterte sich die Risikosituation durch die Kreditkrise im Vorjahresvergleich. Die Quote der Forderungsausfälle im Segment Finanzdienstleistungen stieg gegenüber dem Vorjahr um fünf Basispunkte auf 0,46 %."

The Board of Management of BMW AG decided at the board meeting held today to increase the amount of risk provision recognised in the first quarter of the financial year 2008 in the light of the repercussions of the international financial crisis. The financial crisis has become more severe of late. This has resulted in a drop in pre-owned car selling prices, particularly in North America, and consequently in a reduction of revenues that can be generated on vehicles at the end of lease contracts. This downward trend accelerated during the month of March. For the above reasons, it was necessary to recognise a higher risk provision for lease vehicles on the one hand and for the increased level of bad debts/payment arrears on the other. In total, an expense of euro 236 million was recognised.

BMW Der Vorstand der BMW AG hat in seiner heutigen Sitzung entschieden, angesichts der Auswirkungen der internationalen Finanzkrise die Risikovorsorge im ersten Quartal des Geschäftsjahres 2008 zu erhöhen. Die Finanzkrise hat sich zuletzt verschärft. Infolge dessen sanken insbesondere in Nordamerika die Gebrauchtwagenpreise und damit die Erlöse für Fahrzeuge, die aus Leasingverträgen zurückkommen. Dieser Abwärtstrend hat sich im März verstärkt. Die oben genannten Gründe machten zudem eine höhere Risikovorsorge für den Bestand an Leasingfahrzeugen sowie für erhöhte Kreditausfälle und Zahlungsverzögerungen notwendig. Insgesamt belaufen sich die Ergebnisbelastungen auf 236 Mio. Euro.

> Here is an interesting chart that shows how sometimes irrational markets often appear... GM has only underperformed BMW slightly during the past 3 years ( at least on a nominal basis and when you compare the fundamentals ) .... BMW has had almost 18 billions € in operating cash flow during this timeframe and has an excellent A rating from the agencies....... We all know that GM has probably lost a similar $ amount during the same period and is rated as junk.....

> Hier mal ein nettes Beispiel wie "merkwürdig" sich Aktien teilweise verhalten.... GM had über ienen Zeitraum von 3 Jahren nur unwesentlich schlechter als BMW abgeschnitten ( wenn man die Währung mal aussen vor läßt )... BMW hat in dieser Zeit einen operativen Cash Flow von über 18 Mrd € erzielt und wird mit einem esrtklassigen A Kreditrating ( für einen Automobilhersteller ) von den Ratingagenturen bewertet.... GM hat bekanntermaßen einen noch größeren vergleichbaren Mittelabfluß "erwirtschaftet"und wird folgerichtig selbst von den größtenteils inkompetenten Ratingagenturen mit Junk bewertet.......

Update:

Moody's Investors Service on Friday lowered the rating outlook for General Motors Corp. to negative from stable because of weakness at GMAC LLC's subsidiary, ResCap LLC. Moody's affirmed GM's B3 corporate family rating and its SGL-1 speculative grade liquidity rating. "The change in outlook reflects Moody's concerns that GMAC LLC's ability to provide retail and wholesale funding in support of GM's automotive operations may be eroded by the operating weakness at its subsidiary, ResCap LLC," Moody's said in a statement. About $35 billion of GM debt is affected by the ratings

HUNGER PANGS : Restaurants Feel Sting Of Surging Costs, Debt

Add the latest news from Starbucks to the mix and is getting harder almost on a daily basis even for permabulls to spin things in their favour..... Needless to say that this will put massive pressure on the commercial real estate market.....

Nimmt man noch die gestrige Warnung von Starbucks hinzu wird es selbst für den versiertesten Daueroptimisten immer schwieriger die Dinge in einem positiven Licht erscheinen zu lassen....Da lag ich mit meinem Kommentar aus den Anfängen des Blogs Mitte 2006 wohl doch nicht ganz verkehrt...starbucks / sbux als barometer . Überflüssig zu erwähnen das diese Entwicklung heftigen Druck auf den gewerblichen Immobiliensektor ausüben wird.....

Starbucks
Citing "the sharp weakness in the U.S. consumer environment," ... Starbucks said U.S. comparable-store sales fell by the mid-single digits on a percentage basis amid lower traffic. ...

Thanks to Matt Davies

HUNGER PANGS: Restaurants Feel Sting Of Surging Costs, Debt WSJ - The $558 billion restaurant industry is hitting rough times, squeezed by many of the same woes affecting other sectors of the economy: tightfisted consumers, scarce credit and surging commodity prices. Adding to the pressure is a big jump in the minimum wage starting this summer, which will boost wages by 12% in some states.

That's sent the industry into its worst slump in decades. Many chains have scaled back expansion plans or cut costs by skimping on things like extra sauce and free sour cream. Some are shuttering sites and laying off workers. Private-equity firms, which plunged into the business earlier this decade using gobs of borrowed money, are now especially vulnerable as those debts come due.

This week's earnings results, despite some glimmers of good news, paint a sobering picture. McDonald's Corp., the world's largest restaurant chain, saw U.S. sales at restaurants open at least 13 months fall 0.8% in March, the first decline in monthly same-store sales in five years

The slowdown has broad implications for the economy. The industry employs 13.1 million people, making it the nation's third-largest employer, behind the U.S. government and the health-care industry, according to the National Restaurant Association, a trade group. Many of those jobs are held by the poor and immigrants who have few other options for work.

> Keep this in mind when the BLS will still be reporting job gains in the birth death model .... Heren is more on the BLS Black Box via Mish

> Behaltet das im Hinterkopf wenn in den nächsten Monaten das Bureau of Labor Statistics trotzdem noch immer massive Jobzuwächse in diesem Segment berichten wird.... Kann jedem empfehlen BLS Black Box von Mish zu lesen. Mit dieser Methodik hätten auch wir in Deutschland gute Chancen auf eine Vollbeschäftigung.....

Moody's Investors Service has downgraded seven prominent national and regional chains, including Landry's Restaurants and the parent of Pizzeria Uno, to its lowest liquidity rating -- the most restaurants to be given this rating at once since it was created in 2002.

Restaurants overexpanded in recent years, too. There were 524,286 eating and drinking places in the U.S. in 2006 -- a 45% increase from 1990, according to the National Restaurant Association. The U.S. population rose 20% during that period, according to census figures.

In part because of the glut, overall same-store sales at about 70 restaurant chains were flat or down in the fourth quarter, says Wachovia Capital Markets. Dips are rare in a business that has seen growth in all but two of the past 26 years, according to Wachovia.

> Now to the private equity part with all their "smart" money.........

> Nun zum Teil der sich mit den "smarten" Private Equity Investoren befasst....

At Vicorp -- which owns 400-plus Village Inn and Bakers Square restaurants in cities like Chicago, Denver and Phoenix -- chief executive Ken Keymer is trying to adapt and wring out costs one ounce at a time

Same-store sales at both Village Inn and Bakers Square declined, and a slight profit in 2005 turned to growing losses the next two years. Through the first nine months of 2007, Vicorp had a loss of $20.9 million on sales of $336 million. Vicorp's debt-to-equity level ballooned from four times to 10 times on its $127 million in public debt.

Like many restaurant chains, Vicorp was a target of private-equity investors earlier this decade, which loaded it up with debt the company later couldn't cover. Flush with cash in the past few years, private-equity funds saw restaurants as relatively cheap investments that could potentially be turned around quickly by a management change or new menu concept.

Condo Desperation.....Lehman Offers Money Back Guarantee

Thank god their balance sheet is strong...... :-) . For more insights on Lehman see what Mish has to say Questions Linger Over Lehman's Balance Sheet & April Fool's Offering At Lehman . I also recommend to take a view of the table Level 2 "mark to model" & Level 3 "mark to a hope & a prayer" .

Zum Glück ist deren Bilanz ja bekanntermaßen kerngesund........ :-) Wer mehr zu der "starken" Lehman Bilanz wissen möche wirft am besten einen Blick auf das was Mish zu sagen hat Questions Linger Over Lehman's Balance Sheet & April Fool's Offering At Lehman. Zudem empfehle ich einen kurzen Blick auf die Bilanzpositionen der großen US Banken Level 2 "markt to model" & Level 3 "mark to a hope & a prayer"

Condo Comfort / WSJ
In a move that speaks volumes about the glut in the condominium market, Lehman Brothers Holdings Inc. is promising some luxury-condo buyers their money back after three years of ownership.

The offer applies to some 200 condo units, priced between $480,000 and $2 million, in West Bay Club , a Lehman-owned resort community in Estero, Fla., near Naples on the Gulf of Mexico.

>Add the news via Calculated Risk and it is no wonder some are getting nervous....... Especially when you have a condo to sell in Miami

> Wenn man dann noch diese Daten via Calculated Risk hinzunimmt sollte es wenig verwundern das einige langsam aber sicher extrem nervös werden..... Das gilt besonders dann wenn man ein Condo in Miami verkaufen möchte

The new building comes on top of unprecedented supply....Lenders of all sizes have $42 billion of condominium debt on their books, according to Foresight Analytics. In just three months -- between the third and fourth quarters of last year -- the delinquency rate rose to 10% from 5.9%, says the Oakland, Calif., research firm.

In an effort to jump-start sales in a skittish market, Lehman says that for every buyer until June 1, it will guarantee that the resort will either sell or buy back the residence at the "full cost of the purchase price three years after closing."

> Charts & Stats via Inventory Tracker from my old friend Soldatthetop and his superb blog Paper Money

Naples, FL Condo Statistics

Current Count: 6863 Historical Low: 5547 Historical High: 7768 Average Range: $500,000.00 - $550,000.00 Median Range: $300,000.00 - $325,000.00 Listed Market Cap: $3,759,455,000.00

Statistics for Naples collected between 07-24-2006 and 04-23-2008

The gamble is that prices will recover during that time, and buyers will hold on to their condos.

A spokeswoman for Lehman said no one was available to discuss details of the guarantee program, which appears to exclude 10 penthouse units in two towers.

Jack McCabe, a real-estate consultant in Deerfield Beach, Fla., said other developers desperate to move unsold condo inventory might have to follow Lehman's lead in offering price guarantees as market values continue to slide and thousands more condo units in Florida come on line this year

> In the end it is probably still better to make this kind of creative offer to move inventory than to wait for things to get better........This will put lots of pressure on other players to match this kind of offer...Not good news for players like disaster stocks like WCI :-) It will be interesting to see how they will manage the accounting..... UPDATE: I also recommend to read this from Mish Condo Credit Squeeze

> Im Endeffekt ist diese Art des Marketings wohl immer noch eine der besseren Möglichkieten die Ladenhüter zu vertickern. Darauf zu warten das sich die Zeiten bessern dürfte extrem langwierig werden.... Das dürfte den Druck auf andere Speiler im Condomarkt erheblich verschärfen....Das dürfte dem übelsten Spieler WCI wohl demnächst den endgültigen Todesstoß versetzen. Man darf gespannt sein unter welchen Punkt solch geartete Geschäfte in der Bilanz auftauchen...... UPDATE: Zum Themenkomplex Condo´s sollte man zudem noch mal einen Blick auf Condo Credit Squeeze via Mish richten

Details BOE £50bn Special Liquidity Scheme / "Market Maker Of Last Resort" / Bailout

Another attempt to keep the credit flowing again. Here is the BOE "Bailout" Release . For more insights see Bank of England Swaps Bonds to Revive Bank Lending / Bloomberg & Helpful but…the SLS verdict FT Alphaville. More updates at the end of the post.

Ein neuerlicher Versuch das Unvermeindliche zu vehindern. Hier der offizielle Text BOE "Bailout" Release . Mehr von Bloomberg Bank of England Swaps Bonds to Revive Bank Lending sowie FT Alphaville Helpful but…the SLS verdict. Weitere Updates am Ende des Postings

Funny how they are claiming that they won´t accept no US mortgages ("It will not accept securities backed by US mortgages") and in the next sentence they are willing to take the smallest haircuts on Freddie Mac,Fannie Mae and Federal Home Loans..... But overall i have to admit that the haircuts seem to give the taxpayer some cushion.... But (and this is a big but) comparing the haircut with the following chart......

Schon belustigend wie in einem Satz behauptet wird das keine US Hypotheken als Papiere zugelassen sind und im nächsten Satz die Papiere von Freddie Mac,Fannie Mae and Federal Home Loans zu den mit den geringsten Sicherheitsabschlägen gehören. ...... Immerhin sieht es so aus als wenn die Sicherheitsabschläge dem Steuerzahler einen gewissen Sicherheitspuffer zu geben scheinen......Sobald man aber die Sicherheitsabschläge mit dem nachfolgenden Chart ins Verhältnis setzt erscheinen die angeblich so großen Risikoabschläge in einem anderen Licht...........

I had expected more generous terms from the BOE. It´s somewhat scary to see that despite the poor performance from the rating agencies they still dominate all kinds of models. This makes Moody´s probably a good buy....Sarcasm off....To keep this move into perspective one has to admit that they are only playing catch up with other central banks. Here are more charts & reports from UK

Ich persönlich hatte eine bankenfreundliche Regelung von der BOE erwartet. Es hätte also schlimmer kommen können und unterm Strich bleibt festzuhalten das die BOE sich im Grundsatz nur die Politik anderer Notenbanken aneignet. Hier gibt es mehr "beindruckenden" Charts & News zur Bubblehochburg UK. Befremdlich bleibt trotz alledem das trotz der unterirdischen Leistungen der Ratingagenturen anscheinend immer noch auf deren Wertungen vertraut wird. Evtl. ist Moody´s ja doch ein Kauf.... :-)

I suggest to read the entire paper / Empfehle den kompletten Link zu lesen SPECIAL LIQUIDITY SCHEME / BOE (Full of details!)

Banks will be required to pay a fee to borrow the Treasury Bills. The fee charged will be the spread between the 3-month London Interbank interest rate (Libor) and the 3-month interest rate for borrowing against the security of government bonds, subject to a floor of 20 basis points.

The Bank of England will decide the margin between the value of the Treasury bills borrowed and the value of the assets banks are required to provide as security. For example, if a bank were to provide £100 of AAA-rated UK residential mortgage-backed securities, it would, depending on the specific characteristics of the assets, receive somewhere between £70 and £90 of Treasury Bills.

Each participant may deliver as collateral only eligible securities held on balance sheet as at 31 December 2007....

Eligible securities will be valued by the Bank using observed market prices that are independent and routinely publicly available. The Bank reserves the right to use its own calculated prices. If an independent market price is unavailable, the Bank will use its own calculated price and apply a higher haircut. The Bank’s valuation is binding.

ELIGIBLE SECURITIES ( Highlights or Lowlights...)

AAA-rated tranches of UK, US and EEA Asset-Backed Securities (ABS) backed by credit cards ....

Conventional debt issued by the US Government Sponsored Enterprises (Freddie Mac, Fannie Mae and Federal Home Loans), rated AAA.

HAIRCUTS

Additional notes:
An additional 3pp will be added to haircuts to allow for currency risk when securities are nonsterling.

An additional 5pp will be applied to own-name eligible covered bonds, RMBS and credit card ABS.

An additional 5pp will be applied to securities for which no market price is observable.

Banks to Pay Steep Cost in BOE Plan WSJ - The new plan also hopes to tackle the stigma that dogged some of the central bank's other lending. Like most central banks, the Bank of England runs a facility through which commercial banks can borrow overnight funds anonymously. But the central bank had to publicize when the overnight window was tapped, which "led to the great bank hunt," Mr. King said, to learn the identity of banks seeking funds.

To avoid that hunt, the central bank won't disclose the amounts being swapped by banks through its new program until the borrowing window closes in six months.

The BoE’s £50bn ‘baby’ comes not before time, Buiter FT Alphaville - With this move, says Buiter, the Bank is now “wholeheartedly committed” to acting as market marker of last resort for systemically important securities for which the markets have become illiquid, not to say defunct, since the start of the crisis in August 2007.

The market maker of last resort “provides market liquidity in the transactions-based model of financial capitalism the same way the lender of last resort provides funding liquidity to banks in the relationships-based model of financial capitalism,” he adds.

Consumer Spending Break-Down / Hester

Nice quote via William Hester from his piece Consumer Spending Break-Down .

Nettes Zitat via William Hester aus Consumer Spending Break-Down

Following a Bull's game in the 90's where Michael Jordan scored 69 points and the newly acquired Stacey King contributed one point, the rookie quipped, “I'll always remember this as the night Michael Jordan and I combined to score 70 points.” Whether you're handicapping basketball games or the economy, it's always best to figure out how the major producer will perform.

It´s still amazing that some are still in denial.....

Schon erschreceknd das bei den meisten "Experten" der Groschen noch immer nicht gefallen ist.....

A quick look at economist's expectations for the economy this year shows that much is riding on the forecast of a mild slowdown. The level of GDP should be essentially unchanged the first two quarters of this year, and then expand at almost 2 percent in the second half, according to a Bloomberg poll. Underlying those estimates is the forecast for spending to grow at an average rate of one half percent in each of the first two quarters, and at about 2 percent in the second half

But they are probably betting on the never ending story of creative accounting from the government level ( Pre-Revision CPI: 9%, Disappearing Economic Indicators, Unemployment Soars, Jobs Collapse etc ) to mask the real damage. At least the officials haven´t gotten so far as the pentagon ( Behind Analysts, the Pentagon’s Hidden Hand )..... :-)

Wahrscheinlich werden hier schon die "kreativen" Berechnungsmethoden von Staatsseite eingepreist ( Pre-Revision CPI: 9%,Disappearing Economic Indicators, Unemployment Soars, Jobs Collapse usw ) die nur ein Ziel haben die Wirklichkeit in einem besseren Licht erscheinen zu lassen. Das mag kurzfristig sogar funktionieren, mittel bis längerfristig wird hier aber enormer Schaden angerichtet. Immerhin sind Sie noch nicht soweit wie das Pentagon gegangen (Bush kaufte TV-Militärexperten ).... Obwohl ich ir da auch nicht immer ganz sicher bin .... :-)

Workers Get Fewer Hours, Deepening the Downturn

The report from the NYT offers some good hints what is going on beneath the radar. Add to this that the reported jobs numbers are more or less a farce and you know why the recession that already started will be much longer than most people think. Scary that some are still in denial ....

Make sure to read this from Mish about the "Enron" like unemployment data Unemployment Soars, Jobs Collapse. Even i would have thought that this kind of Black Box report is almost impossible to top, but wait...... Martin Hutchinson via Barry Ritholtz Pre-Revision CPI: 9% has made it...... UPDATE: More unbelievable stuff via Barry Disappearing Economic Indicators

Dieser kleine Lagebericht der NYT gibt einen guten Einblick was sich unterhalb der nackten Zahlen so abspielt.Wenn man jetzt noch bedenkt das die monatlich verkündeten Daten zum US Arbeitsmarkt bestenfalls was in der Muppetshow zu suchen haben und Enron in nichts nachstehen kann man sich sehr leicht ausrechnen das die USA für lange lange Zeit in einer bereits begonnenene Rezession stecken werden. Muß jedes mal wieder schmunzeln wenn ich höre das noch über die Möglichkeit einer Rezession gesprochen wird. Immerhin scheint sich bei einigen die Meinung zu verfestigen das diese "mild" sein wird. Sind halt "Permabullen".... :-)

Um zu verstehen wie die US Arbeitsmarktzahlen frisiert werden ist der nachfolgende Link von Mish Unemployment Soars, Jobs Collapse Pflicht! Und immer wenn man denkt man hätte in Scahen US Zahlenakrobatik alles gesehen kommt ein neues "Highlight. Dieses Mal von Martin Hutchinson via Barry Ritholtz Pre-Revision CPI: 9% UPDATE: Mehr selbst für mich kaum fassbares erneut von Barry Disappearing Economic Indicators

Workers Get Fewer Hours, Deepening the Downturn NYT
Not long ago, overtime was a regular feature at the Ludowici Roof Tile factory in eastern Ohio. Not anymore. With orders scarce and crates of unsold tiles piling up across the yard, the company has slowed production and cut working hours, sowing worry and thrift among its workers.

“We don’t just hop in the car and go shopping or get something to eat,” said Kim Baker, whose take-home pay at the plant has recently dropped to $450 a week, from more than $600. “You’ve got to watch everything. If we go to town now, it’s for a reason.”

“We don’t just hop in the car and go shopping or get something to eat,” said Kim Baker, whose take-home pay at the plant has recently dropped to $450 a week, from more than $600. “You’ve got to watch everything. If we go to town now, it’s for a reason.”

The gradual erosion of the paycheck has become a stealth force driving the American economic downturn. Most of the attention has focused on the loss of jobs and the risk of layoffs. But the less-noticeable shrinking of hours and pay for millions of workers around the country appears to be a bigger contributor to the decline, which has already spread from housing and finance to other important areas of the economy.

While official unemployment has risen only modestly, to 5.1 percent, the reduction of wages and working hours for those still employed has become a primary cause of distress, pushing many more Americans into a downward spiral, economists say.

Last month, the hours worked by those on American payrolls dropped, compared with six months earlier, according to an index maintained by the Labor Department. The last time the index moved into negative territory was February 2001, when the economy was on the doorstep of recession. A similar slide emerged in August 1990, one month into what proved an even more severe downturn.

At the end of last month, more than 4.9 million people were working part time either because they could not find full-time jobs or because their companies had cut hours in the face of slack business, according to a Labor Department survey. That represented an increase of 400,000 since November.

Paychecks are diminishing just as millions of Americans are finding their access to credit constricted as well. Borrowing against the value of real estate — a crucial artery of household finance in recent years — has been pared back as home prices have plummeted and as banks have tightened lending standards in the aftermath of the collapse of the housing bubble.

“At this point, those avenues are blocked,” said Jared Bernstein, senior economist at the labor-oriented Economic Policy Institute in Washington. “Consumption going forward is going to be in large part a good old-fashioned function of paychecks and incomes.”

Even before the rollback in working hours, pay was barely keeping up with the rising costs of gas and food. From February to September of last year, the average hourly earnings for workers in the private sector was still growing at a slightly faster clip than the pace of inflation, according to the Labor Department. But from November through March, as employers began to scale back in a variety of ways, wage growth fell below the pace of inflation, meaning that paychecks were effectively shrinking.

> And this even on the base of the "reported" CPI ...

> Und das auf bereits auf Basis der absolut lächerlichen offiziellen CPI Nummer.....

Now, work opportunities are themselves declining, as the downturn snuffs out business

Pure Comedy Again From Wall Street Finest "Wachovia Offers Deep Deep Value"

You just cannot make this up..... I assume the the value on Wachovia after today's blockbuster news including a net loss, slashing the dividend, massive dillution etc is even getting deeper......I´ll bet that news like fail to change the view from "Wall Street Finest" that ranked Wachovia at number 6 pointing to the dividend yield of 9.5 percent and the low pe...... For more details see Wachovia presentation

Es wird Zeit für eine neue Folge aus dem Tolllhaus mit dem Titel "Was machen Wall Street Finest eigentlich beruflich ?........ Evtl. waren Förtsch, Prior und co doch nicht so übel........ Mal gucken ob sich die Sicht der Dinge nach der heutigen Granatenmeldung von Wachovia geändert hat. Dort werden so nebensächliche Dinge wie eine massive Kapitalerhöhung die den Wert erheblich verwässern wird, eine drastische Kürzung der Dividende, ein Nettoverlust usw angekündigt. Denke die Dividendenrendite von 9,5% ( siehe Nr. 6) sowie das angepriesenen niedrige KGV dürfte wohl zukünftig nicht mehr zum "Deep Value Play" von diesem selbsternannten Experten gehören..... Für noch genauere Infos siehe Wachovia Präsentation

WSJ

Wachovia Corp. said it will raise $7 billion in capital through stock sales and cut its dividend by 41%, a consequence of its ill-timed move into becoming a major mortgage player, as it posted a first-quarter net loss caused by $2 billion in "market-disruption" losses and sinking credit quality.

The infusion represents Wachovia's second dip into the capital trough this year. In January and early February, Wachovia pocketed a total of $8.3 billion in capital by issuing preferred stock and other securities to investors

Credit-loss provision were increased to $2.83 billion from $177 million as net charge-offs soared to 0.66% of average net loans from 0.15%. Nonperforming assets, those loans near default, ballooned to 1.70% of loans from 0.42%. Net interest margin, the difference between interest earned on loans and paid on deposits, dropped to 2.92% from 3.06%.

Citi, UBS & co: deep, deep value FT Alphaville
Not for the faint-hearted. Lehman is making the case for shifting away from growth stocks and towards value. Which means financials.

Just as Meredith Whitney gets going on her latest round of predicting outsize writedowns....

The result is a very European-heavy, financials-heavy list of names. Here’s their top 20:

Carolina dreamin'Commentary: Wachovia ignored the risks in Golden West deal

Wachovia Corp.'s struggles today can be traced back to a single, mistaken deal: the purchase of Golden West Financial Corp. in 2006. Two years ago, the Charlotte, N.C.-based Wachovia agreed to $24.2 billion for Golden West, an Oakland, Calif.-based savings and loan run by Herb and Marion Sandler, the legendary husband-and-wife banking team that took over the S&L in 1963 and built GW into one of California's biggest lenders

Unfortunately, Golden West was a business built on adjustable-rate mortgages. Even though analysts questioned Wachovia's chief financial officer, Tom Wurtz, about the prudence of adding exposure to that market, he brushed it off.

"It's a very complicated process to put in place all of the discipline and process that they have to get the in-house appraisers, get them trained and to create the working knowledge by the broker community that they been able to achieve through a long-standing period of training with those brokers and delivering on their commitment," Wurtz said in a conference call announcing the deal. "And so from that standpoint there is extraordinary value in their mortgage operations."

Ouch!

Which “inning” of the mortgage crisis are we in? / Hussman

Once again nice "Anti Spin" from Hussman. And don´t forget that after the mortgage crises we will see the commercial real estate crises, the credit card crises, the auto loan crises.......

Einmal mehr wohltuend sachliches von Hussman der einmal mehr die in den Raum geworfenen Behauptungen in ein rechtes Licht zu rücken versucht. Ist zwar bei dem ganzen Müll ein fast aussichtsloses Unterfangen aber bewahrt vielleicht den ein oder anderen den "Rattenfängern" oder Permabullen auf den Leim zu gehen. Und man sollte im Hinterkopf verankert haben das nach der Hypothekenkrise, die Krise der gewerblichen Immobilien, die der Kreditkarten, der Autofinanzierungen usw. kommt.

Which "Inning" of the Mortgage Crisis Are We In?

One of the fascinating aspects of Wall Street is the ability of analysts to provide opinions without the faintest backing from evidence. Among the latest topics of opinion is how far the mortgage crisis has to go. Evidently, the idea is that the recession that these analysts didn't forecast is already over, so it is time to “look across the valley” on the belief that most of the writedowns are behind us.

A good way to estimate where we are in the process of writedowns and foreclosures is to revisit the schedule of resets for adjustable rate mortgages.

The chart doesn't extend out to 2010 ( see extra chart Credit Suisse), where another spike in resets will occur in the third quarter of that year, but it is enough to recognize that resets are only now entering the heavy period.

To understand the implications of this schedule, it is important to recognize the foreclosure timeline. Once a reset occurs, it takes up to 30 days for the first payment to be missed. After 90 days of attempts to catch up on missed payments, the homeowner is served with a “Notice of Default.” It then takes another 90 days with the homeowner in default for a “Notice of Trustee Sale” to be delivered, shortly after which the property is sold in a foreclosure. In short, there is generally a span of about 6 months from reset to foreclosure, which means that we have to lag the data to get the profile of anticipated loan losses.

Fortunately, only a portion of the mortgages that reset will actually go into default, but we estimate which “inning” we are currently in by calculating the cumulative amount of mortgages that will have reset at each point in time (i.e. integrating the curve), and lagging it by 6 months (roughly the span between reset and foreclosure). That produces the following profile for the cumulative losses that can be expected. Again, these are not dollar amounts, since only a portion of even sub-prime mortgages will default. While we will also undoubtedly observe losses from credit cards, commerical real estate, and home equity loans, the point here is only about the general shape of the cumulative loss curve:


Clearly, as we enter April 2008, we appear to be quite early in the mortgage crisis, with only about a quarter of the cumulative resets having occurred. That places us near the start of the third inning, where we can expect each of the nine “innings” to be about three months in duration. Unfortunately, the next three innings (quarters) are when the heavy hitters on the opposing team will come up to the plate, as the cumulative amount of resets will surge. With that surge, loan losses and foreclosures will also predictably spike higher.

Moreover, because of the bundling, securitization*, and slicing and dicing of mortgage obligations, financial companies have little ability to take the required writedowns in advance, because they don't know yet which ones will go into default. To opine that we are in some late “inning” of the mortgage problem, without reference to the reset data, is just naïve. If anything, the probable rate of foreclosure on later resets will be higher, not lower, than the earlier resets, because those later resets represent the mortgages initiated at the peak of home prices and the trough of lending standards.

Goldman recommends short selling Washington Mutual

I hope this is not from the same analysts that drove WM with his neutral rating down from close to $40 for the last few years ...... At least they woke up and cut to a sell in February. Why they have still a price target close to 10 is beyond me. With massive dilution already in place & on the way & no earnings in sight for years only "Wall Street Finest" are able to come to such an accurate number...... At least they have the balls to call a stock a short candidate. To my knowledge a very rare event. Too bad that they missed the easy money from $40 to $12..... Short interest in WAMU is already close to 20 percent ..... And when i start reading comments like this via Morgan Stanley Draaisma: “2008 the Best Period for Shorting Since 2002″ you have to ask where were those guys during 2007.......... One more similar story during this afternoon and i´m viewing this as an contrary indicator and i´m starting to get bullish....... ;-)

Ich hoffe das dies nicht derselbe Analyst ist der WM mit seinem neutralen Rating über mehrere Jahre und Kursen von ca $ 40 nach unten geritten hat. Immerhin haben die im Februar endlich auf Verkaufen gestellt. Um bei einer so gewaltigen Verwässerung sowie keinerlei Aussicht auf Gewinne in absehbarer Zukunft und nachweislich einem des übelsten Managements auf ein KZ von $10 kommen kann ist wohl nur erfassen wenn man zum inneren Zirkel von "Wall Street Finest" gehört Die nächste KZ Reduzierung kommt dann wohl mit der nächsten Kapiaterhöhung..... Immerhin haben Sie "die Eier" eine bestimmte Aktie als Short zu brandmarken....Kommt ja nicht alle Tage vor. Blöd nur das dieser Rat nicht $30 früher gekommen ist.... Short Interest beträgt bereits jetzt satte 20% ...... Wenn ich dann noch Ratschläge wie diesen von Morgan Stanley lese Draaisma: “2008 the Best Period for Shorting Since 2002″ muß man sich schon fragen wo der im Jahr 2007 Urlaub gemacht hat..... Noch eine solch geartete Meldung mehr an diesem Nachmittag und ich werde bullish... ;-)

Goldman recommends short-selling Washington Mutual

Goldman Sachs recommended short-selling Washington Mutual in a note to clients on Friday, and cut its price target to $10 from $12. "The bad news is that our new product-by-product analysis of its mortgage portfolio suggests $17 billion to $23 billion of embedded losses in WaMu's current book of business, of which only $3 billion have been absorbed so far; subsequently, we forecast a $14bn provision charge in 2008," the broker said. The good news is that it believes WaMu's $7 billion capital raise should be sufficient, seeing a year-end tangible-equity-to-tangible-assets ratio in excess of 7%.

Let´s hope the chinese Walls have prevented a conflict of interest......

Bleibt zu hoffen das die Chinese Walls innerhalb von Goldman funktionieren.....

I Want My Buyback Back..... Washington Mutual Edition Part II

They really should have hired Homer or Paris Hilton to run the company.... No joke! After attending the conference call back in Jan 07 ( see Flashback January 2007 ) even the dumbest outside Wall Street could have predicted this outcome. Here is more from Mish . Mish has done another update WaMu Raises Cash, Skeptical Eyebrows

Denke Homer oder Paris Hilton hätten das besser hinbekommen....... Traurig aber wahr! Jeder der wie ich im Januar 2007 ( siehe Flashback January 2007 ) sich den Call angetan hat konnte genau das vorhersehen. Voraussetzung natürlich man arbeitet nicht an der Wall Street......Hier gibt es mehr von Mish . Hier ein weiteres lesenswertes ein Update WaMu Raises Cash, Skeptical Eyebrows von ihm.

Flashback January 2007

On Jan. 3, 2007, the company entered into an accelerated share repurchase agreement with a dealer, buying back $2.7 billion of its common stock ( Stock close to $ 40 )

Fast forward April 2008 Washington Mutual Gets $7 Billion From TPG-Led Group

Wahington Mutual the largest U.S. savings and loan, got $7 billion from a group of investors led by David Bonderman's TPG Inc. after losses on subprime loans ate up capital and erased 74 percent of its market value.

Washington Mutual sold 176 million shares at $8.75 a piece, 33 percent below yesterday's closing price on the New York Stock Exchange, and preferred shares, the company said in a statement today

Bravo!

It will be interesting to see how long this infusion will last......

Bleibt abzuwarten wie lange diese Kapitalspritze vorhalten wird......

No Kidding....Mortgage trouble for the mortgage bankers association

You just cannot make this up..... Better than most of April Fools jokes i have heard this year.... SCHADENFREUDE !

Das kann man sich wirklich nicht besser ausdenken... Das stellt selbst die besten Aprilscherze die ich dieses Jahr gehört habe in den Schatten.....Ich hoffe das die Lobbygruppe der US Hypothekenbänker noch richtig lange auf der "Ruine" sitzen bleibt. Die Saat für zukünftig jahrelangen Leerstand hat nicht zuletzt die MBA selber in einer unsäglichen Art und Weise selber gesät. Selten war die Schadenfreude so angebracht wie in diesem speziellen Fall.


Mortgage trouble for the mortgage bankers association FT Alphaville !

A year ago the Mortgage Bankers Association - the lobbying group representing US mortgage lenders - started scouting around for new headquarters.

It found 1331 L St, Washington: “state of the art” office with a “superb” location near Franklin Park and Thomas Circle.

… [with] more than 170,000 square feet of space–approximately 65,000 square feet of which MBA will initially occupy–on 10 above-grade levels, including retail on the first floor.

The office even has its own fancy website, which you can view here.

…a crystalline glass tower element dominates the front corner, complete with crown, and is offset by a reveal, which connects to French limestone at the retail level. The white mullion and glass facades allow for an abundance of natural light and panoramic skyline views of the city.

Unfortunately, though, as the Washington Post reports, things haven’t quite worked out for the Mortgage Bankers Association. It’s having trouble with its mortgage:

The lobbying group is about to sign the final papers to buy the 12-story building on L Street NW for about $100 million. Like many of the companies it represents, the organization is facing a triple whammy of woes: Its financing costs are up, its income is down, and the leasing market is slow, leaving it, so far, without a single tenant.

The association is faced with a deposit 10 per cent higher than it had previously thought, with greatly increased interest charges to boot. “We’re looking at cutting expenses across the board” the MBA’s communications VP told the WaPo.

Some irony, of course, that all of this has been caused by the reckless lending orchestrated by the mortgage lenders the MBA represents and has stridently defended.

On the off chance that you are actually interested in leasing any Washington office space from the MBA (N.B. “the stunning entrance lobby exudes quiet elegance and warmth”), you can contact them here.

Colbert´s Bears & Balls " Bailout Edition"

Colbert rocks!