One of the overlaps between my old job duties and my new duties is monitoring an effort to improve our service to a key customer. As with a similar initiative about a year ago, I am frustrated with merely noting the problems we are having. I don’t think using extraordinary focus to compensate for systemic Click Here to continue reading.
Freddie Mac issued its quarterly “report” and gave clues as to how to paint lipstick on pigs and actually get away with it. The trick is to put $157 billion (from $32 billion before) over to Level 3, where absolutely no haircut is then reported. Readers may recall that Level 3 essentially allows the reporter to make up their own prices separate from market prices. In the case of Freddie, management has determined that “market prices don’t make any sense”, hence the move. This writer would argue that the quasi-official institutions like the GSE and foreign central banks themselves are creating massively distorted Soviet Union style prices that if anything makes even the market prices that Freddie dismisses too high.
From Macro Man (Click on link for graphs)……
Regular readers will recall that when the Fed cut 50 bps in September, Macro Man opined that the dollar was toast. When BB and co. slashed rates by 75bps when the stock market got Kerviel’ed, it seemed like they were hitting the panic button. And what’s happened since then? Median one year inflation expectations have rocketed from 3.1% to 5.2%. Sadly, Bloomberg doesn’t have historical data for average 12 month inflation expectations; those are now a resounding 7%!!! It seems as if not everyone is living in the Fed’s hedonically and seasonally adjusted, core goods world.
The rise in inflation expectations is all the more remarkable when put into historical context; they are now the highest since February 1982. Now, just because you expect higher inflation and demand higher wages doesn’t mean you’ll get ’em, especially in the context of an incipient recession. But with the balance of probability favouring a Democratic sweep come November, what odds that there emerges a legislative response to the juxtaposition of near-record corporate profits as a % of GDP along with stagnant/negative real wage growth?
From the Daily Rap via Calculated Risk……
The truth is their data is wrong. The market has, obviously, taken the view that the worst of the writedowns are behind us, and if anything it’s now just a macroeconomic problem we face. I think that’s dead wrong. We’re now entering the phase where the macro impacts earnings, but also the stage where real cash losses start to hit the banks (subprime and Alt-A is primarily a mark-to-market issue, but HELOCs are going to be large, outright losses). Once WAMU, WFC, BAC and JPM start to get data through on how rapidly their HELOC portfolios are deteriorating, watch the losses pile up. I’m talking realised losses, not mark-to-market writedowns.”
Courtesy Of Marginal Revolution, I came a across this quote from this essay from Interfluidity…..
If the Fed were to blow through the rest of its current stock of Treasuries, it would have invested more than $2500 for every man, woman, and child in America. Public investment in the financial sector would have exceeded the direct costs to date of the Iraq War by a wide margin. Would that that be enough? If not, how much more? Just how large a risk should taxpayers endure on behalf of companies that arguably deserve to fail, to prevent “collateral damage”? Have we considered other approaches to containing damage, approaches that shift costs and risks towards those who benefited from bad practices, rather onto the shoulders of taxpayers and nominal-dollar wage earners? Does this sort of policy choice belong within the purview of an independent central bank?
In case you have not been keeping track, it has already blown through more then half its stock of Treasuries.
From the AP (Hat Tip, Crunchy Con)……
The Bush administration on Friday urged a federal appeals court to stop meatpackers from testing all their animals for mad cow disease, but a skeptical judge questioned whether the government has that authority.
The government seeks to reverse a lower court ruling that allowed Arkansas City, Kan.-based Creekstone Farms Premium Beef to conduct more comprehensive testing to satisfy demand from overseas customers in Japan and elsewhere.
Less than 1 percent of slaughtered cows are currently tested for the disease under Agriculture Department guidelines. The agency argues that more widespread testing does not guarantee food safety and could result in a false positive that scares consumers.
If you don’t read calculated Risk, here are some stories you missed this week…
Consumer credit increased by $15.3 billion for the month to $2.56 trillion, the biggest monthly rise since November, the Federal Reserve said today in Washington. In February, credit rose by $6.5 billion, previously reported as an increase of $5.2 billion.
Vallejo, California, officials voted to file for bankruptcy because the San Francisco suburb isn’t able pay its bills after costs for police and firefighters soared and the housing market’s slide cut into tax revenue.
Pretty soon people are going to be complaining about how the rating agencies rated municipal debt.
From the Wall Street Journal…..
Fannie Mae announced plans to shore up its capital after recording a loss of $2.19 billion for the first quarter and warning that losses stemming from mortgage defaults are likely to be even worse next year.
The government-sponsored provider of funds for home mortgages expects to raise about $6 billion through the sale of common and preferred shares. Regulators have been prodding Fannie and its main rival, Freddie Mac, to bolster their capital to provide more protection against the growing costs of mortgage defaults.
The latest plan comes on top of $7 billion Fannie raised in December …
They are going to need a government bail out before long.
The Pentagon’s $1 Trillion Problem will not tell you anything you don’t already know. But every now and again it is good to be reminded just how dysfunctional the government is.
I spent a considerable portion of the week angry, and in fact woke up angry Monday morning after dreaming about workplace injustices. I don’t care to revisit the details, but, like Western pioneers marking bad water, I will give a brief notice on these ill fortunes. Perhaps when some history has accumulated around these events Click Here to continue reading.
This from Brad Setser’s blog….
Incidentally, the $8.7b in average weekly purchases of Treasuries over the last 8 weeks would – if sustained — be enough to finance a $454b budget deficit without selling a single Treasury bond to private investors. Sometimes I think the US should drop the façade of auctioning off Treasuries and just negotiate private placements with the People’s Bank of China and the Saudi Monetary Agency.
What’s more, all this financing was provided more or less unconditionally, with the United States creditors taking on the risk of future dollar depreciation. Further dollar depreciation against the euro – and, perhaps more importantly, the risk of further dollar depreciation against their own currencies.
It goes without saying that this flow is far, far larger than the $30b or so sovereign funds committed to troubled US financial institutions in December and January ($40b if UBS is considered a US financial institution). Yet it has attracted far less attention.
Two of the most notable changes made by the A-Team were imposing a strict separation of duties between assemblers and material handlers and the sharp increase in the number of material handlers. They felt we would gain more efficiency by not letting the assemblers more so much as an inch away from their posts to Click Here to continue reading.
UPS says that in 2007 it saved itself 3 million gallons of gas by routing trucks using a technology that emphasizes safety and efficiency — meaning delivery routes are planned as a series of loops with as few left turns as possible. UPS says it’s a safer driving practice because drivers aren’t turning in front of oncoming traffic as often, and it saves fuel because they spend less time idling in left-turn lanes waiting to turn.