Pension Problems Royale!

Personally I have avoided reading much about pension problems as neither I nor my extended family are dependent on pensions. Nonetheless, the stress in this area of retirement savings is hard to ignore, especially with GM and Chrysler going through bankruptcy. I am just passing this on for those perhaps focused on pension issues. Good luck.

http://pensionpulse.blogspot.com/2009/07/jerseys-jitters-omen-for-public-plans.html

Like many economic pictures, not good.

Turtle Crossing?

An airport closed by turtles? Yes it is possible, apparenetly.

http://www.telegraph.co.uk/news/newstopics/howaboutthat/5782121/JFK-runway-shut-for-crossing-turtles-delaying-flights-for-over-an-hour.html

If a plane take-off can be disabled by birds I suppose a landing could be interrupted by turtles, perhaps. My wife once stopped her car to save a family of turtles crossing the road. As she cleared one cars came by and ran over the others, mostly hitting the edge of the shells and sending them off into the roadside. Imagine, turtle after turtle shooting off into the distance as my wife tries do pull them off the road. And that, folks, is one of the reasons I love her.

Good night. No disclosures here unless you are investing in a turtle farm.

Green Shoot Wilting Fast

Headlines at Bloomberg not looking too good today:



•Yen Rises to Five-Week High Versus Dollar as Recession Spurs Safety Demand
•S&P 500 Slumps to Lowest Level Since May 1 on Concerns Over Tech Spending
•Bank of Japan May Extend Emergency Lending as Companies Struggle to Borrow
•Japan Machinery Orders Unexpectedly Fall for Third Month as Profits Slide
•Rio Says Chinese Authorities Detain Four Employees From Shanghai Office



Now that is a rosy picture, ain't it. Don't blame me, I am just the messenger. And I have been delivering this story for much longer than I have had any desire to do so. I just have not seen the fundamentals improving and apparently now some others are not now either. We will see.



Next Time - Let Them Fail



I know certain individuals in government - like those who came from big financial institutions (Paulson) or that received big pay checks for work for them ( Summers) - believed it was essential to save the financially too-big-to-fail to the tune of trillions of dollars, but the leading reason (as I understood it) was to unfreeze credit. Well it seems to be a bit unfrozen at the moment. One problem, those that need it still cannot get it and those that can get it are trying to reduce, not increase, debt. Sudden Debt explains this well:



http://suddendebt.blogspot.com/2009/07/memo-to-fed-and-ecb-raise-rates.html



Sure, there are plenty of other reasons to save these institutions, but incresingly there seem to be some reasons to regret saving them. First there was the continuing bonuses, apparently paid for with taxpayer dollars. Now I read recently that some were getting around the bonus restrictions the government has been seeking to impose by simply increasing salaries, so this equally has me fuming. Second, dividends. I wrote to my Congresspeople over a year ago complaining about us supporting corporations still giving out dividends. I got the usual form letters explaining to me how these were difficult times and, implicitly, I did not understand what the heck I was saying. I still am complaining that taxpayers have been giving money to companies that pass it on to shareholders. Rule one, no bonuses or raises for officers or directors of companies receiving taxpayer support. Rule two, no freaking dividends to their shareholders. Period.



And if all this was not enough to get your dander up (not sure what that means) now those very institutions we enabled to survive are now unwilling to return the favor and help out those of us taxpayers in need. They have announced that they are unwilling to take California IOUs and pay out cash in return. Either they are telling us that they do not give a damn about the taxpayers that saved them or they are still in such desperate financial condition that they need to conserve every little cent. I cannot think they have any doubt that California (or the federal government on its behalf) will eventually pay the IOUs. I just view it as another sign that we saved the idiots that got us in this mess and they are shoving it in our faces. If this were not a family oriented blog I would not mince words so much. Mish tells it in better detail here:



http://globaleconomicanalysis.blogspot.com/2009/07/tell-wells-fargo-bank-of-america-jp.html



Foreclosure News Getting Worse, Not Better



As Calculated Risk reports, the divergence between completed foreclosures versus default is mounting as a result of government intervention. Now I must add this is a report from one market, San Diego, which does not mean a national trend. Yet, perhaps disturbing if this is a bit more wide-spread.



http://www.calculatedriskblog.com/2009/07/more-evidence-of-foreclosure-backlog.html



How Can Someone from Lehman Be So Smart?



The CEO of Lehman in charge of the wind-down, Bryan Marsal, had some interesting comments during a CNBC interview. Scary thing for me is that I agree with pretty much all he has to say. So why did they fail? He had this to say in the interview:

"One of my partners said yesterday that we are going to call this phase the "extend and pretend" phase in our economy. Which is you extend someone's maturity - because they are going to default - and you pretend that business will come back or that leverage factor is going to come back.Then we'll enter phase two, which he said is the request to extend or "amend".Then "send". In other words send the keys.That is the phases we are in right now. Everyone is trying to buy time, as opposed to dealing with the leverage, they are trying to buy time. Whether you are a banker or a company, they are all trying to buy time. I don't see the leverage coming back, and I don't see the consumption of good and services coming back.

Bryan Marsal, CEO of Lehman Brothers Holdings.

I will end here as I cannot say it any better. Government stimulus has been desperately trying to simply buy time for many, many companies. And time is running out.

Disclosures: None.

Where is the Market Going?

Where is the market going? Well traders seem to fear more to the downside than the up. At least they are paying more for protection against the former than the latter.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aAIJo685vdz4

Now I cannot blame them. The market increase has been rather spectacular. Much more of a climb much sooner than most economic recoveries after a recession, and it was the worst recession since the Great Depression. Go figure. I know the market was down drastically in March, but for good reason. It is the massive run-up that has me scratching my head.

That Fiscal Thingy

There is little I can say that can add or better summarize what is said in this linked piece, though I have to say it has me a bit worried on where the market is going over the long term. I for one am giving serious thought to moving to another country. Seriously, I love the U.S., but if it is screwed fiscally for the rest of my life then, well, why would I waste the rest of my life dealing with the problems? The world is big and there are places not in our pitiful state. Nonetheless, this is where I seem to be stuck for now, so I am going to continue to focus on it (and keep my passport up to date).

The best you can say today is that the U.S. is skating on fiscal thin ice. How far can we go before our lenders cut us off? Are we going to devalue our own dollar to screw our lenders? Will health care years from now make this the end of days for the U.S.? All legitimate questions. No answers here as the jury is still out. Nonetheless, they all present reason for pause.

http://www.nakedcapitalism.com/2009/07/america-fiscal-train-wreck.html

Do other countries fear America could go as California. I doubt it, but when our a (formerly) financially vibrant state is about to go under, they cannot be happy that it is happening. Giving out IOUs and getting a credit downgrade next to junk is not a confidence builder. How can the most populous state and biggest economy state get a near junk rating? Not hard to answer the question. Better question, how did we let ourselves get here? Either way, this must be a positive for the long term market - not.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aFtGuPKB2uWE

http://www.calculatedriskblog.com/2009/07/s-increases-loss-estimates-for-alt-and.html

Seven More Down

I took the weekend off, so forgive me if this is old news. The FDIC closed seven banks on Thursday (usually Friday but that was a market holiday). now without doing a lot of research I believe this is the most closings in one week since the S&L crisis. Certainly the most for the past several years. Now that has to be a good sign for the market?

Founders Bank, Worth, IL Millennium State Bank of Texas, Dallas, TX The First National Bank of Danville, Danville, ILThe Elizabeth State Bank, Elizabeth, ILRock River Bank, Oregon, ILThe First State Bank of Winchester, Winchester, ILThe John Warner Bank, Clinton, IL

http://www.calculatedriskblog.com/2009/07/fdic-bank-failures-by-week.html

Here is Another Good Market Sign - Rising Foreclosures

I have reported here on real estate market conditions, both residential and commercial, on a regular basis. The commercial side is just getting started on its bad news and I reported on it last week, so let me focus on the residential side again. For one thing, option ARMs (those adjustable rate mortgages that give people options on how much to pay - even an option to pay LESS than the monthly interest) are peaking late this year and next. And, apparently, subprime losses have still not bottomed out.

http://www.calculatedriskblog.com/2009/07/s-increases-loss-estimates-for-alt-and.html

For another, prime and jumbo mortgage defaults are on the increase. These are high value mortgages that cause a lot of pain. For a third, homes are under water at record amounts so there is jingle mail. And for a fourth, unemployment is still mounting. So banks, including (by FDIC closures) local and regional banks, are in a world of hurt for months to come. Yep, that bodes well for the market.

http://www.calculatedriskblog.com/2009/07/la-times-another-wave-of-foreclosures.html

And as I mentioned last week, commercial real estate is not doing well, not well at all. There exists many billions in refinancing need in CRE and the credit simply is not there. Yep, that bodes well for the market.

http://www.calculatedriskblog.com/2009/07/dc-office-market-vacancies-increase.html

http://www.calculatedriskblog.com/2009/07/cre-half-off-sale-in-san-francisco-and.html

So after all these very positive market signs I have to admit that I am mostly on the sidelines in my investments. There is no clear direction. I truly believe the worst is not behind us but the markets have solidly punished my expectations for a few months. Either way, I look at fundamentals and simply shake my head. I do not see the 2 + 2 that supports the markets recent rise or it staying there (and yes I know it is a fair amount off its recent peak). Let me know if you think otherwise.

Disclosures: None.