Political Economy category archive

They give good value for the money, but who’s buying new clothes these days?

Men’s Wearhouse late Wednesday reported fourth-quarter profit fell as sales of its dress suits and tuxedos slid. Men’s Wearhouse posted net income of $1.5 million, or 3 cents a share, compared to net income of $14.8 million, or 28 cents a share, in the year-earlier quarter.

Credit card accounts, the next frontier:

Credit-card delinquencies and losses have risen with higher unemployment and personal bankruptcies, according to Moody’s Investors Service. Those trends will continue through 2009, even as issuers reduce credit limits and scale back on offers to entice clients.

Canadian card losses in the third quarter rose to 3.1 percent of average balances, the seventh straight period of year- over-year increases, according to Moody’s. By comparison, U.S. card losses rose to 6.6 percent of balances.

In the U.S., consumer credit is shrinking faster than estimates and credit-card line reductions are the greatest on record, analyst Meredith Whitney of Meredith Whitney Advisory Group LLC said yesterday in a note. About $2.7 trillion worth of credit lines will be removed from U.S. consumers due to the credit crisis and regulatory changes, 35 percent higher than her November estimate, Whitney said.

Digby:

I’m being driven nearly mad by the new Republican line propagated by McCain and Shelby that we need to “let these banks fail” instead of nationalizing them. I’m an idiot when it comes to economics, but even I’m not that dumb. (And I didn’t have nearly 50 million people vote for me for president either.)

(snip)

Others much smarter than John McCain and I don’t understand why the Treasury Dept is so reluctant to nationalize these big banks after all this time and money has been spent propping them up to no apparent avail. But the fact is that nationalization is exactly what will happen if these banks are “allowed to fail.”

The campaign showed that McCain is one of the dumbest members of congress on economics and it’s clearer ever day that the world dodged a bullet with that one. It’s bad enough that we are all feel like our minds are swimming in quicksand when it comes to understanding this banking crisis. To have these “leaders” out there saying completely stupid things in the face of it is simply breathtaking.

A soon-to-lawyer surveys the job market.

The fruits of Republican Economic Theory (emphasis added):

The job market may get worse before it gets better, according to the latest Manpower survey of U.S. employers’ hiring plans. For the first time since the survey started in 1962, the seasonally adjusted net employment outlook — the number of firms hiring minus those firing workers — turned negative.

A net -1% of firms expect to hire in the April through June period, down from 10% in the first quarter and 15% for the second quarter a year ago, on a seasonally adjusted basis, according to Manpower’s quarterly survey. The previous low point was in 1982, when a net 1% of firms planned to hire in the third quarter.

When the lights go out, all over the world . . . .

The global economy is likely to shrink this year for the first time since World War II and developing countries will face a financing shortfall as private sector creditors shun emerging markets, the World Bank said Sunday.

In a paper for next Saturday’s meeting of the Group of 20 finance ministers and central bank governors, the World Bank said its forecasts show the world’s economic growth will be at least 5 percentage points below potential. Global industrial production by the middle of 2009 could be as much as 15% lower than 2008 levels.

Headline:

Some banks try to escape TARP trap

Excerpt:

Wells Fargo’s decision Friday to slash its dividend may help the bank repay its $25 billion government investment sooner.

However, analysts say it will still take years, not months, for big banks to extricate themselves from the Treasury’s Troubled Asset Relief Program, or TARP.

More accurate headline:

Clowns trapped in clown car; regret designing it

Furrfu.

Bonddad analyzes the unemployment figures. Follow the link for the full analysis:

1.) The best read of job growth for the last expansion is a total of 8.2 million jobs created. 2.6 million jobs were lost in the last 4 months, or 31%. Since the recession began, we’ve lost 4.4 million jobs or 53%. There is no way to spin those numbers as anything except terrible.

2.) The number of people who worked part-time for economic reasons increased by 787,000. That’s also a ton of people. That number has increased by 3.7 million over the last 12 months — also a ton of people. That facts tells us two relevant data points. First, businesses are still cutting back sharply. Secondly, there is probably at least one more month of horrible job losses in the works; that number is simply too high for there not to be another serious round of job losses coming down the pike.

3.) Year over year, the unemployment rate of service occupations has increased from 6.7% to 9.1% the unemployment rate of natural resources, construction and maintenance has increased from 9.1% to 17.7% and the unemployment rate of production, transportation and material employment has increased from 6.6% to 13.1%.

4.) Hours worked is decreasing across a wide swath of industries.

Simply put, this is an incredibly ugly report.

It’s about time.

Calling it a “very difficult decision,” Wells Fargo & Co. on Friday slashed its quarterly dividend 85%, to 5 cents a share from 34 cents, in an effort to save $5 billion and help the company pay back the government’s recent investment in the firm.

Companies that are drowning who pretend they are still healthy by paying normal dividends act like fools.

No, wait.

Companies that pretend they are growing by selling boxes of air act like fools.

No, wait.

Wall Street bankers act like selfish gits.

There. Got it right.

Lloyd’s.

Bloomberg explains how certain Wall Street practices encourage the destruction of companies.

When you cut through the gibberish, it means, “The hell with stockholders, employees, customers, and the economic health of the country. I got mine.”

“Say you’ve lent $100 million to a company and you had bought $100 million in credit-default swaps,” said Henry Hu, a law professor at the University of Texas in Austin. “In that circumstance, the creditor really doesn’t care whether or not the company goes under.”

Following a meltdown last year in the relationship between prices on bonds and credit swaps after the Lehman Brothers Holdings Inc. bankruptcy, basis traders often stand to make the most money if companies default. They can also profit by holding the trade until the debt matures or unwinding the position after the market value gap between the bonds and derivatives closes.

This, my friends, is fiduciary responsibility and good financial citizenship at its best.

And pigs fly.

The Promised Land of Republican Economic Theory. Bloomberg:

More than 600,000 Americans filed first-time claims for unemployment benefits last week for a fifth straight time as companies kept trimming costs.

First-time unemployment applications decreased by 31,000 to 639,000 in the week that ended Feb. 28, less than anticipated, from a 26-year high of 670,000 the prior week, the Labor Department said today in Washington. The number of people staying on benefit rolls eased from a record.

It’s not thousands of banks. It’s JPMorgan Chase, Citigroup, Bank of America and Wells Fargo who possess 64% of the nation’s banking assets. Paul Krugman:

One objection you keep hearing to nationalization pre-privatization as part of a bank restructuring effort is that the US financial system is just too big and complex.

(snip)

So as far as this discussion is concerned, we’ve got, like, four banks. The “thousands of banks” line is just a diversion.

Via Susie.

Writing resumes for a fee.

From Atrios:

There really is a growing disconnect between the world portrayed on the teevee and reality. For most people getting booted out of their homes and losing their jobs, or just being underemployed, is a far bigger deal than a crashing stock market.

The worst problems are limited to very few states.

Read the column here.

Via Andrew Sullilvan.

Ten companies, led by ConocoPhillips, Time Warner Inc. and recently acquired Merrill Lynch, are behind the bulk of the carnage that helped fuel the worst two-month start ever for the S&P 500 Index, which on Monday made another run through its November lows.

While the companies that make up the S&P 500 tallied a collective $114 billion in losses in the still-being-reported fourth quarter, the scenario would be remarkably different — and profitable — if 10 companies behind $131 billion in losses were removed from the picture, according to S&P’s senior index analyst Howard Silverblatt.

The other seven companies the article refers to are Freeport-McMoRan Copper & Gold Inc., Citigroup Inc., Wachovia Corp. (newly acquired by Wells Fargo & Co.), General Motors Corp., Symantec Corp., Devon Energy Corp., and Regions Financial Corp.

You know, the Masters of the Universe who pay bonuses for performance to retain highly talented executives.

Here.

I agree. If the Repulsicans threaten filibuster, let ’em filibuster. I’d be curious to know which cookbooks John “Boner” Boehner likes anyway.

(Yeah, I know he’s in the House, but who can pass up a name like that?)

Follow the link for the analysis:

. . . the problems in investment started in the residential area, but have since moved to all major subgroups. In addition, at the macro level, the drop in residential investment has been strong enough to make 8 of the last 11 quarters negative. In other words — it’s been bad for sometime.

(chart snipped)

Exports were the one solid performer — until last quarter when they dropped over 20%. Imports dropped as well due to the lack of consumer demand.

The bottom line is simple: there is no area of the economy looking good right now.

AIG is changing its name.

The new name:

Aaaaaarrrrrrrrrrrrggggggghhhhhhhhh.