Short Day

Not much today as I have my company Holiday Party tonight, so my usual evening reading is preempted. But I did want to post this link to Barry Ritholtz at The Big Picture. Earlier this week he put the bailout committment to date at over $8 tillion, whereas the more commonly quoted figure of $7.4 trillion I believe comes from the New York Times. Barry's post today provides some nice graphic comparisons between what is happening today and what we spent in other key periods in history. It also compares the U.S. spending, as a percentage of GDP, to other countries. On that basis, not too bad. On some of the other comparisons, it looks really bad. Guess it's all relative.

http://www.ritholtz.com/blog/2008/12/more-bailout-comparisons/

Job Loss

533,000 jobs lost in November, according to the Labor Department. Unemployment now up to 6.7%, its highest in 15 years. The number of jobs lost last month was the largest one month drop in 34 years. A legitimate argument can be made that the 6.7% figure is a vast understatement. The figure is massaged with Birth/Death assumptions (on companies, not people). Rather than me trying to explain it, I'll let Mike Shedlock do so. He points us to the U6 number of 12.5%, which may be more accurate. Certainly better explains the pain.

http://globaleconomicanalysis.blogspot.com/2008/12/jobs-contract-11th-straight-month.html

One consequence of the job loss is a further loss of taxes paid to the federal, state and local governments (hat tip Cody for pointing this out). This comes at a time when we cannot afford it. California has a $28 billion two year deficit to deal with, which is one third of all states combined. They intend to possibly start paying their bills with warrants, i.e. IOUs that pay 5% interest. Last I checked, you cannot eat a warrant. Technically you can, but it is probably not on the FDA food pyramid, so if you are trying to feed a family, you are SOL. How long do you think small mom and pop businesses are going to keep doing state work if they are only being paid in warrants? They may not have many alternatives, but they will certainly start looking for them. It is no wonder that there are reports of numerous tent cities popping up out West. And California is not alone in its pain.

http://globaleconomicanalysis.blogspot.com/2008/12/california-may-pay-with-ious-minnesota.html

If you are looking for some good news, and find it, let me know. Things are looking down right nasty today. If you don't believe me, check out the Bloomberg "Breaking News" headlines:

•Stocks in U.S. Fall as Payroll Drop Exceeds Estimates: Alcoa, Boeing Slide
•Employers in U.S. Cut 533,000 Jobs, Most in 34 Years, as Recession Deepens
•U.S. Mortgage Delinquencies, Foreclosures Rise to Record as Prices Plummet
•Legg Mason Cuts 8% of Jobs to Save $120 Million a Year in `Severe' Market
•Auto Industry Failure Would Be a `Disaster,' Exacerbate Crisis, Frank Says
•Merrill May Be Toughest Test for Bank of America's Serial Dealmaker Lewis
•Loan Risk Soars to Record as Global Economy Weakens, Joblessness Increases
•India Broadens Security Alert to Include Government Buildings, Refineries
•Obama Says Job Losses Point to `Urgent' Need for Economic-Stimulus Package

Bigger Not Better

I noted yesterday that big institutions becoming bigger is not necessarily a good thing (and I obviously view it as a bad thing in many cases). Well, it seems others are also viewing bigger as not necessarily better. This piece from the Economist discusses the point. It seems larger corporations are having credit issues because lenders are scared of the unknowns that are on their books. The article also notes how difficult things might become for some corporations if this downturn lasts beyond next year, especially with credit resuming its quick freeze. With Chapter 11 not an option, due to lack of DIP financing, there will be some major corporations going under the next few years, so choose your investments wisely. It would be wise to avoid companies with a lot of debt that needs to be rolled-over in the next few years. According to the article, there are a lot of them as U.S. and European companies have a trillion a year that needs to roll over each year for the next three years. For those that can roll it over, it will be at high cost and with a lot of covenants, which will put further burdens on already burdened companies.

http://www.economist.com/finance/displayStory.cfm?story_id=12725088

I Agree

Some may remember Robert Reich, former Secretary of Labor. If you go to his post for today, he talks about the job losses. More importantly, he talks about what he thinks we should be doing. I am posting it as I agree with what he says. I am sure he will draw comfort from me agreeing with him.

http://robertreich.blogspot.com/