Congress, The Tea Party and Government Regulation: Congress Plays The Race Card Again

The familiar charge of racism levied by our esteemed Congress against American citizens freely associating with the Tea Party Movement. Watch the video below as the Democratic Congress plays the race card against the Government Regulators charged with overseeing Fannie Mae and Freddie Mac.

The financial collapse had little to do with greedy bankers and great deal more to do with greedy politicians who failed to do their jobs. Watch the video as the Congresspeople disparage the Government Regulators who discovered and reported on Fannie & Freddie’s reckless deals …. clearly claiming that the Regulators findings were racially motivated and inaccurate …. well, we all know otherwise today.

As for the need for additional regulation … what good will it do when Congress ignores the Regulators findings?

As to new regulation …. it isn’t necessary …. lets start by enforcing the regulation that is already on the books and lets expand Sarbanes Oxley ……. watch the video ….. Fannie & Freddie are not subject to Sarbanes Oxley! Why did Congress allow this exemption? Isn’t it obvious? Watch the video and then contact your Congressperson and let them know how you feel about Congresspeople playing the race card!    

WATCH THE ACTUAL COMMITTEE TESTIMONY – WHY REGULATION REFORM FOR FANNIE AND FREDDIE WAS BLOCKED

WATCH THE VIDEO HERE: </p>

Can you hear the hatred in the Congresspeople’s voices when it was suggested that the GSE’s (Fannie &amp; Freddie are the GSEs) were making horrible loans and it needed to stop! 

How did the reform get blocked ?  You need 60 Votes to pass a law in the Senate – Democrat Senator Christopher Dodd and his Democratic colleagues blocked the reform of Fannie &  Freddie that could have prevented the Crisis.

The following Articles describe the role of “political ideology” in the Financial Crisis – How Politics & Big Government fueled the crisis:

Professor Stan Liebowitz: “The Real Scandal” style=”color:#105cb6;”>http://www.mises.org/story/2963</span></a></p>
<p><strong>John R Lott, Jr</strong> : <strong>Analysis – Reckless Mortgages Brought Financial Market To Its Knees</strong> <a href=”

Professor Thomas J DiLorenzo: The CRA Scam and its Defenders: http://www.mises.org/story/2963

John R Lott, Jr : Analysis – Reckless Mortgages Brought Financial Market To Its Knees http://www.foxnews.com/story/0,2933,424945,00.html

Geitner’s Flawed Assumptions: TARP & TALF Funds Enrich Investors At Taxpayer Expense – Report By Harvard Business School & Princeton University Center For Finance

The Pricing of Investment Grade Credit Risk 

Joshua D. Coval, Jakub W. Jurek, and Erik Stafford

March 30, 2009

Our analysis suggests that the dramatic recent widening of credit spreads is highly consistent with the decline in the equity market, the increase in its long-term volatility, and an improved investor appreciation of the risks embedded in structured products.

In contrast to the main argument in favor of using government funds to help purchase structured credit securities, we find little evidence that suggests these markets are experiencing fire sales.

[McAuley’s World: This finding directly challenges the veracity of Treasury Secretary Geitner’s claims and the necessity for additional Government intervention – later the report confirms that investors are being unjustly enriched at taxpayor expense]

On March 23, 2009, the Treasury announced that the TALF plan will commit up to $1 trillion to purchase legacy structured credit products. The government’s view is that a disappearance of liquidity has caused credit market prices to no longer reflect fundamentals: Many analysts appear to be looking at large recent price changes and concluding that we must be witnessing distressed pricing and widespread market failure. This conclusion is based on intuition. Our analysis suggests that the dramatic recent widening of credit spreads is highly consistent with the decline in the equity market, the increase in its volatility, and an improved investor appreciation of the risks embedded in these securities.

Our results suggest changes in fundamentals, as reflected in the equity market, account for a large portion of the repricing of credit that has occurred. In particular, the dramatic increase in the price of low cash flow states can account for most, if not all, of the rise in credit spreads for cash bonds. The spreads on credit default swaps, which currently trade at a large and negative basis relative to the underlying bonds, appear too low relative to risk-matched alternatives in the equity market.

We also find that the repricing of the investment grade structured credit securities suggests a correction of an ex ante failure of investors to appropriately charge for systematic risk.“An initial fundamental shock associated with the bursting of the housing bubble and deteriorating economic conditions generated losses for leveraged investors including banks … The resulting need to reduce risk triggered a wide-scale deleveraging in these markets and led to fire sales … [The Public-Private Investment Program] should facilitate price discovery and should help, over time, to reduce the excessive liquidity discounts embedded in current legacy asset prices.”

Policymakers are rapidly moving towards using TARP money to purchase toxic assets primarily tranches of collateralized debt obligations (CDOs) from banks, with the aim of supporting secondary markets and increasing bank lending. The key premise of current policies is that the prices for these assets have become artificially depressed by banks and other investors trying to unload their holdings in an illiquid market, such that they no longer reflect their true hold-to-maturity value. By purchasing or insuring a large quantity of bank assets, the government can restore liquidity to credit markets and solvency to the banking sector.

The analysis of this paper suggests that recent credit market prices are actually highly consistent with fundamentals. A structural framework confrms that bonds and credit derivatives should have experienced a significant repricing in 2008 as the economic outlook darkened and volatility increased.

The analysis also confirms that severe mispricing existed in the structured credit tranches prior to the crisis and that a large part of the dramatic rise in spreads has been the elimination of this mispricing.

If prices currently coming out of credit markets are actually correct, and not reflecting fire sales,this has several important implications. First, correct prices in the secondary market for these assets essentially imply that many major US banks are now legitimately insolvent. This insolvency can no longer be viewed as an artifact of bank assets being marked to artificially depressed prices coming out of an illiquid market. It means that bank assets are being fairly priced at valuations that sum to less than bank liabilities. In turn, any positive valuation assigned by shareholders to their equity claim arises solely from their anticipation of value transfer from firm debtholders or resource transfers from US taxpayers.

Similarly, using government resources to support these markets by insuring assets against furtherl osses amounts to providing insurance at premia that are significantly below what is fair for the risks that the US taxpayer will now bear.

Third, while the pricing of these securities is dramatically different from the way it was a year or two ago, this is because it was wrong then, not now. Efforts to restart this market are focused on resuming the flawed pricing of the past, when there was no charge for risk and investors relied on the accuracy of ratings. Investors have learned from their mistakes and now seem to be pricing these securities in accordance with their true risks.

Conclusion

Second, if current market prices are fair, any taxpayer dollars allocated to supporting these markets will simply transfer wealth to the current owners of these securities. To the extent that these assets reside in banks that are now insolvent, the owners are essentially the bondholders of these banks. The reason their bonds are currently trading far below par is that the assets backing up their claim are just not worth enough (nor expected to become worth enough when their bonds mature) to repay them. And so while they will be cheered by any government overpayment for the toxic assets backing up their claims, their happiness will be at the taxpayer’s expense since – to the extent that current prices are fair – they will be receiving more than fair value for their investments.

The main objective of this paper is to determine whether fire sales are required to explain prices currently observed in credit markets.

Other potential sources of repricing include a correction of  ex ante mispricing due to incorrect forecasts of expected losses (i.e. incorrect ratings – earnings expectation), a correction of ex ante mispricing arising from a failure of investors to charge for systematic risk, and rational change in prices reflective of a change in fundamentals.

A key distinction between the fire sale view and the other possibilities is that only the fire sale view requires that current prices are incorrect. (If the current prices are correct – massive Government spending will only serve to manipulate the market to reward investors at taxpayer expense – the market manipulation will create temporary gain – then the market will seek equilibrium again)

And given that fundamentals have changed dramatically during the past 2 years, and that ex ante mispricing was likely present in many of the structured credit markets, the conclusion that the large spread changes are evidence of fire sales is, at best, a premature one.

From this perspective, policies that attempt to prevent a widespread mark-down in the value of credit-sensitive assets are likely to only delay – and perhaps even worsen  – the day of reckoning.

Read the full paper (with formulas & footnotes) here: http://www.anderson.ucla.edu/Documents/areas/fac/finance/CJS_2009_v1.pdf

Coval: Harvard Business School; jcoval@hbs.edu. Jurek: Bendheim Center for Finance, Princeton University ;jjurek@princeton.edu. Sta¤ord: Harvard Business School; esta¤ord@hbs.edu. We thank Stephen Blythe, Ken Froot,

WHAT FORMULA IS GEITNER USING FOR HIS “STRESS TESTS”? WHY IS IT A SECRET FORMULA? WHY DOES THE FORMULA CHANGE FROM BANK TO BANK?

Ask your Congressperson if they know the answer. Ask them if they have read this report: http://www.usa.gov/Contact.shtml  

TARP & TALF Based On Faulty Assumptions: Report By Harvard Business School/Princeton University Center For Finance

The Pricing of Investment Grade Credit Risk 

 

Joshua D. Coval, Jakub W. Jurek, and Erik Stafford

March 30, 2009

Our analysis suggests that the dramatic recent widening of credits preads is highly consistent with the decline in the equity market, the increase in its long-term volatility, and an improved investor appreciation of the risks embedded in structured products.

In contrast to the main argument in favor of using government funds to help purchase structured credit securities, we find little evidence that suggests these markets are experiencing fire sales.

[McAuley’s World: This finding directly challenges the veracity of Treasury Secretary Geitner’s claims and the necessity for additional Government intervention – later the report confirms that investors are being unjustly enriched at taxpayer expense]

On March 23, 2009, the Treasury announced that the TALF plan will commit up to $1 trillion to purchase legacy structured credit products. The government’s view is that a disappearance of liquidity has caused credit market prices to no longer reflect fundamentals: Many analysts appear to be looking at large recent price changes and concluding that we must be witnessing distressed pricing and widespread market failure. This conclusion is based on intuition. Our analysis suggests that the dramatic recent widening of credit spreads is highly consistent with the decline in the equity market, the increase in its volatility, and an improved investor appreciation of the risks embedded in these securities.

Our results suggest changes in fundamentals, as reflected in the equity market, account for a large portion of the repricing of credit that has occurred. In particular, the dramatic increase in the price of low cash flow states can account for most, if not all, of the rise in credit spreads for cash bonds. The spreads on credit default swaps, which currently trade at a large and negative basis relative to the underlying bonds, appear too low relative to risk-matched alternatives in the equity market.

We also find that the repricing of the investment grade structured credit securities suggests a correction of an ex ante failure of investors to appropriately charge for systematic risk.“An initial fundamental shock associated with the bursting of the housing bubble and deteriorating economic conditions generated losses for leveraged investors including banks … The resulting need to reduce risk triggered a wide-scale deleveraging in these markets and led to fire sales … [The Public-Private Investment Program] should facilitate price discovery and should help, over time, to reduce the excessive liquidity discounts embedded in current legacy asset prices.”

Policymakers are rapidly moving towards using TARP money to purchase toxic assets primarily tranches of collateralized debt obligations (CDOs) from banks, with the aim of supporting secondary markets and increasing bank lending. The key premise of current policies is that the prices for these assets have become artificially depressed by banks and other investors trying to unload their holdings in an illiquid market, such that they no longer reflect their true hold-to-maturity value. By purchasing or insuring a large quantity of bank assets, the government can restore liquidity to credit markets and solvency to the banking sector.

The analysis of this paper suggests that recent credit market prices are actually highly consistent with fundamentals. A structural framework confrms that bonds and credit derivatives should have experienced a significant repricing in 2008 as the economic outlook darkened and volatility increased.

The analysis also confirms that severe mispricing existed in the structured credit tranches prior to the crisis and that a large part of the dramatic rise in spreads has been the elimination of this mispricing.

If prices currently coming out of credit markets are actually correct, and not reflecting fire sales,this has several important implications. First, correct prices in the secondary market for these assets essentially imply that many major US banks are now legitimately insolvent. This insolvency can no longer be viewed as an artifact of bank assets being marked to artificially depressed prices coming out of an illiquid market. It means that bank assets are being fairly priced at valuations that sum to less than bank liabilities. In turn, any positive valuation assigned by shareholders to their equity claim arises solely from their anticipation of value transfer from firm debtholders or resource transfers from US taxpayers.

Similarly, using government resources to support these markets by insuring assets against furtherl osses amounts to providing insurance at premia that are significantly below what is fair for the risks that the US taxpayer will now bear.

Third, while the pricing of these securities is dramatically different from the way it was a year or two ago, this is because it was wrong then, not now. Efforts to restart this market are focused on resuming the flawed pricing of the past, when there was no charge for risk and investors relied on the accuracy of ratings. Investors have learned from their mistakes and now seem to be pricing these securities in accordance with their true risks.

Conclusion

Second, if current market prices are fair, any taxpayer dollars allocated to supporting these markets will simply transfer wealth to the current owners of these securities. To the extent that these assets reside in banks that are now insolvent, the owners are essentially the bondholders of these banks. The reason their bonds are currently trading far below par is that the assets backing up their claim are just not worth enough (nor expected to become worth enough when their bonds mature) to repay them. And so while they will be cheered by any government overpayment for the toxic assets backing up their claims, their happiness will be at the taxpayer’s expense since – to the extent that current prices are fair – they will be receiving more than fair value for their investments.

The main objective of this paper is to determine whether fire sales are required to explain prices currently observed in credit markets.

Other potential sources of repricing include a correction of  ex ante mispricing due to incorrect forecasts of expected losses (i.e. incorrect ratings – earnings expectation), a correction of ex ante mispricing arising from a failure of investors to charge for systematic risk, and rational change in prices reflective of a change in fundamentals.

A key distinction between the fire sale view and the other possibilities is that only the fire sale view requires that current prices are incorrect. (If the current prices are correct – massive Government spending will only serve to manipulate the market to reward investors at taxpayer expense – the market manipulation will create temporary gain – then the market will seek equilibrium again)

And given that fundamentals have changed dramatically during the past 2 years, and that ex ante mispricing was likely present in many of the structured credit markets, the conclusion that the large spread changes are evidence of fire sales is, at best, a premature one.

From this perspective, policies that attempt to prevent a widespread mark-down in the value of credit-sensitive assets are likely to only delay – and perhaps even worsen  – the day of reckoning.

Read the full paper (with formulas & footnotes) here: http://www.anderson.ucla.edu/Documents/areas/fac/finance/CJS_2009_v1.pdf

Coval: Harvard Business School; jcoval@hbs.edu. Jurek: Bendheim Center for Finance, Princeton University ;jjurek@princeton.edu. Sta¤ord: Harvard Business School; esta¤ord@hbs.edu. We thank Stephen Blythe, Ken Froot,

WHAT FORMULA IS GEITNER USING FOR HIS “STRESS TESTS”? WHY IS IT A SECRET FORMULA? WHY DOES THE FORMULA CHANGE FROM BANK TO BANK?

Ask your Congressperson if they know the answer. Ask them if they have read this report: http://www.usa.gov/Contact.shtml  

Auto Bubble Bursts – March 09 Auto Sales Down 40% – Tax Dollars To Fund High Risk Auto Loans

Just 2 days ago certain commentators incorrectly reported a  25% sales jump  

Too many cars, and they’re not on the road

After ‘car bubble’ collapses, excess inventory creates a backlog

WASHINGTON – The sea of new cars, 57,000 of them, stretches for acres along the Port of Baltimore. They are imports just in from foreign shores and exports waiting to ship out — Chryslers and Subarus, Fords and Hyundais, Mercedeses and Kias. But the customers who once bought them by the millions have largely vanished, and so the cars continue to pile up, so many that some are now stored at nearby Baltimore-Washington International Marshall Airport.

The backlog exists because many of the factors that contributed to the collapse of the housing bubble — cheap credit, easy financing, excessive production, consumers buying more than they could afford — undermined another large and vital American industry.

“There was a car bubble,” Steven Rattner, who President Obama recruited to head a Treasury Department group charged with finding solutions to the mountain of problems facing the American auto industry, said in an interview last month. “We had this artificially high sales rate.”

During the boom years of the early and mid-2000s, automakers were selling more than 16 million cars a year in the United States. They are on pace to sell fewer than 10 million this year. General Motors posted a 44.5 percent drop in March compared with the same month a year ago. Ford’s sales tumbled 41.3 percent. Chrysler’s fell 39.3 percent. Toyota’s sales fell 39 percent, and Honda’s dropped 36.3 percent.

One of the key questions the auto task force must answer is figuring out a sustainable number of annual auto sales. Only then can it determine the best way forward for U.S. automakers. “You had a huge number of cars being sold,” Rattner said, “so I don’t think it is prudent to assume the sale levels are going to back to those levels.”

Confidence and easy cash
What drove sales so high in the first place?

In short, the same confluence of confidence and easy cash that fueled the housing boom.

“Consumers felt good about their future,” said Mark Pregmon, a SunTrust Bank executive and chairman of the automotive finance committee of the Consumer Bankers Association. “It was riding the wave of the ‘go’ economy. Stocks were rising. Equity in houses was rising. People felt they could just borrow off their house. Their house was their ATM machine.”

Car companies did their part to entice consumers.

“Loose credit, incentives, leasing — it really kind of fed the beast,” said Jeff Schuster, executive director of forecasting for J.D. Power and Associates. “That made many cars that might have been out of reach affordable.”

 

In turn, Americans bought more cars and bought them more frequently. They spent more money than they could afford, thanks to loans that stretched six years or longer, even for buyers with shaky credit. Rental car companies and municipalities turned over their vehicle fleets more often. And the automakers kept churning out cars to meet the very demand they had helped create.

“You keep doing what you’re doing, and you just keep assuming that growth is going to go on forever. And then at some point it just drops out from under you,” said Alan Pisarski, a transportation expert and author of “Commuting in America.” He compared the years of overproduction to putting a Burger King on every street corner. “The world just can’t use that many hamburgers,” he said.

When the bottom finally fell out, many people found themselves with loans worth more than the cars, just as millions of Americans owe more on their mortgages than their homes are worth.

“People were taking all kinds of risks buying cars beyond their means,” said John Townsend, a spokesman for AAA Mid-Atlantic. “The cars that they drive are not worth what they owe on the car.”

The result has been an increase in the repossession rate for autos, he said, as well as higher delinquency rates on car loans and fewer people venturing onto the nation’s car lots.

“The uncertainty in the economy is causing consumers to postpone making big-ticket purchases,” said Jesse Toprak, an analyst with Edmunds.com. “Cars are the second-most expensive purchase a consumer can make after their homes. We are seeing consumers holding on to cars longer than in the past. The average used to be 4 1/2 years, and now is probably going to go over six years.”

In addition, many auto repair shops and do-it-yourself retailers such as AutoZone have seen a boost in business as the GMs and Chryslers of the world have suffered.

“The big question is, how do you jump-start auto sales again? Or can you?” Townsend said.

The big automakers are certainly trying.

GM and Ford have announced programs that assist buyers with up to nine months of car payments if they lose their job. Car loans in many markets are becoming easier to get, though most buyers have to show that they are employed and earn enough to cover both a mortgage and a car payment. GM announced this week that it would lend to buyers who had credit scores below 620, which is considered a high-risk, subprime consumer market. A few months ago, the credit score threshold was 700.

[Isn’t that how we got here – making loans to people who could not pay them back – The same thing is happening in the Mortgage Market. The Sub-prime market is opening again] 

GMAC, the financing arm of GM, has taken steps to reduce the cash crunch many dealers face by temporarily waiving some dealer fees, eliminating loan payments on aging unsold cars and postponing wholesale interest charges. It also announced that it would make $5 billion available over the next two months to expand lending to potential car buyers. [$5 Billion of taxpayer money to expand risky auto loan programs]

 

Employment is key

Most analysts agree that the auto market will probably not rebound until people feel more secure in their jobs. As with housing, an intrinsic link exists between the health of the economy and the health of the auto industry.

“There’s a tremendous correlation between people who work and own automobiles,” Pisarski said. “If you look at where the cars are, that’s where the workers are. If employment doesn’t grow, car ownership doesn’t grow.”

The shaky economy has kept consumers at bay. Nine hundred car dealers closed in 2008. The National Automobile Dealers Association calculates that another 1,200 will shutter this year.

While it lasted, the car bubble effectively masked significant structural problems at GM, Ford and Chrysler, as well as at foreign automakers like Toyota, which ramped up production in the United States in recent years but suddenly found itself burdened with inventory it couldn’t sell.

The bursting of the bubble has exposed the precarious nature of the industry and made clear that bankruptcy might be the most feasible option for U.S. carmakers.

In the meantime, new cars nobody wants to buy continue to pile up in Baltimore and at ports around the globe. Last month, when space filled up at one Swedish port, Toyota was forced to lease a cargo ship as a sort of floating parking garage for 2,500 unsold cars.

http://www.msnbc.msn.com/id/30024711

Has The Economic Recovery Started? Is The Worse Over? The Unvarnished Economic Data

This headline greeted me this morning:

World markets surge as US data boost recovery hope

http://news.yahoo.com/s/ap/20090402/ap_on_bi_ge/world_markets

US Data? What US data can they be talking about? GM, Chrysler and Ford posted huge additional losses. http://news.yahoo.com/s/ap/20090402/ap_on_bi_ge/world_markets

The article then went on to say some very surprising things: “Nearly every sector in Asia charged higher, with carmakers like Toyota Motor Corp. and Nissan Motor Co. rallying on U.S. auto figures that were less dismal than feared.” Really, rallying on US auto figures – just what were those figures? Less dismal? They seem very dismal to me – after all you didn’t expect car sales to be zero did you?

‘Investors were encouraged after U.S. car sales jumped by nearly 25 percent last month from February, beating the typical rise and underpinning hopes of a turnaround in the American auto market — critical for Asia’s giant auto companies.’ What? Auto sales “jumped” by 25% last month – I don’t believe it, do you? (I don’t believe it for good reason – I know the real numbers).

SEE: http://www.msnbc.msn.com/id/30024711

https://mcauleysworld.wordpress.com/2009/04/03/auto-bubble-bursts-march-09-auto-sales-down-40-tax-dollars-to-fund-high-risk-auto-loans/

“A rebound in pending U.S. home sales in February from a record low, as well as improving manufacturing activity, added to a growing belief the most severe global downturn in decades may be moving close to a bottom.’ What? Housing sales are up? Where? By whose count? Manufacturing activity is up? By what measure and whose numbers? I’ll provide the unvarnished numbers shortly …..

“Still, the upbeat evidence distracted investors from more sobering news the U.S. private sector continued to shed hundreds of thousands of jobs last month — a worrisome sign as investors brace for Friday’s report on nationwide job cuts.” Yes, those pesky unemployment numbers – preliminary projects announced yesterday were absolutely awful – specifics to follow.

You can imagine my surprise when 3/4 of the way through this same article the following sentence appears,

“With the economic crisis still far from over, analysts warned of more painful market volatility as the recession unfolds.”

Recession unfolds? Unfolds? One would think the recovery was underway based on the previous statements. This is beyond shoddy journalism, this is unethical reporting.  

My point is this, the data suggest we have not hit bottom, plain and simple. I’m looking forward to the “turn around” as much as the next person. I’m looking forward to it more than youmight guess. Unfortunately, that turnaround is expected to beging in 6 to 12 months and today’s data does not dignal an earlier start. Misrepresenting where we are at now can cost individuals a fortune with bad investment advise and can harm the recovery by setting false expectations that can only lead to disapointment. The truth is this; the economic elevator from hell that we are all riding, is still heading down. It’s descent may be slowing but there is no sign that it is about to stop.

I’m glad to see that stock prices are rebounding from their 12 year lows, but as unemployment continues to grow and as the prosepcts for profits and dividends remain bleak, there is more than a possibility that these gains will be surrendered and that the markets will test new all time lows. Spending, taxes and the possibility of runaway inflation remain serious concerns.

Remember this, the Stock Market is not the economy. During many of the years which made up the Great Depression (1929 – 1941) , the stock market “went up” while the economy deteriorated. In fact the DJIA went up in 6 of the 12 years of “The Great Depression”. http://www.nyse.tv/dow-jones-industrial-average-history-djia.htm 

Wildly incorrect headlines maybe spurring people to re-enter the markets prematurely. Without a return to broad based profitability and dividend payments increased stock prices may not hold. Beware a “Bear Market Bounce” and don’t confuse “trading activity” with “investment activity”. Good Luck and lets hope for the best.

Hope aside – here are the unvarnished numbers.

Auto Sales: 

US Auto sales are down, horrifically down. The report above so badly misrepresents the true state of auto sales in the US, I have to question the author’s ethics. The numbers simply don’t support, in anyway, the statement made above. The statement above can actually be harmful. If one were to believe auto sales were on there way back, one might fight necessary change to correct “broken business models”. What do the numbers show?

Sales of new cars and trucks are down 36.8% in March 2009 compared to March 2008.

The Boston Globe reported this yesterday: “Automakers began 2008 expecting the worst year for U.S. auto sales in a decade. So far, they’re getting what they anticipated. Sales dropped by double digits in March, even for usual stalwarts like Toyota. And with fragile consumer confidence, falling home values, tightening credit and high energy prices, it may be some time before auto sales recover. http://www.boston.com/business/articles/2008/04/01/us_auto_sales_fall_in_march/

Current sales figures indicate 1,000,000 fewer cars will be sold in the US in 2009 than last year and last year was one of the worst years in memory.  http://www.boston.com/business/articles/2008/04/01/us_auto_sales_fall_in_march/ Continued sales reductions mean continued cutbacks, not growth , new jobs or new auto plants. 

Remember 1 year ago, March 2008, GM sales figures were down 19% compared to March 2007, Ford’s sales were down 14% over March 2007. http://articles.latimes.com/2008/apr/02/business/fi-carsales2  Chryslers sales were down  21.2% in March 2008 from March 2007. http://www.autoobserver.com/2008/03/march-car-sales-down-j-d-power-report-says.html .

Having a year in which year to prior year sales drop 40%, after a nearly 20% drop in the prior year, is horrific. There has been zero increase in auto sales – not a 25% increase – net auto sales are down 40%.  

The March 2009 sales drop is twice as large as the sales drop in 2008. You may be asking, what did they base these incredible claims of increased car sales on – it is this – car sales increased from February to March. The fact is Car sales always increase from February to March. Car sales last year, one of the worst years for car sales in memory, still reflected an increased number of cars sold between February and March. The important or meaningful comparison is March 2008 to March 2009 sales numbers. By that measurement sales are down by almost 40%. As to car sales, the economic elevator has not even begun to slow, it is still acelerating. To misrepresent this number does a disservice to everyone.  To claim that the data presents a picture of a recovering car market is false. Year to year sales are down 40%. In 2008 when sales were down 1/2 that amount the press described the drop as “falling of a cliff”. Now that the sales drop is twice that large, it is being reported as signs of a turnaround. GM’s sale decrease between January 2008 and Jaunuary 2009 was 49%. http://www.thetorquereport.com/2009/02/gm_sales_plunge_49_percent_for.html GM’s auto sales in February 2009 were down 53.1% from February 2008. http://www.mlive.com/business/index.ssf/2009/03/auto_sales_continued_slide_gm.html  These numbers are simply horrible. To suggest this paints a picture of a “recovery” or “turnaround” is dishonest.

Home Sales:

First, some related news, “Modified Mortgage Refinances Continue to Re-default”, “US bank regulators continue to report escalating re-default rates on mortgage loan modifications. Data being assembled by bank regulators is showing a steady trend of rising month-over-month loan work-outs falling back into delinquency within six months.” “One very troubling point is that, whether measured using 30-day or 60-day delinquencies, re-default rates increased each month and showed no signs of leveling off after six months or even eight months,” John Dugan, head of the Office of the Comptroller of the Currency, said in a statement. Defaults rose consistently across all loan types, but subprime loans understandably had the highest re-default average.” http://www.mortgageloan.com/modified-mortgage-refinances-continue-to-redefault-2743

Mortgage refinancing is up, but refinancing does not indicate an increase in home sales. Real estate investment purchasing is down 18.1% from a year prior. http://news.nationalrelocation.com/2008/03/

Last year (March 2008) existing home sales fell 19.1%. The median home price was $200,700, down 7.7% from March 2007. http://www.realtor.org/press_room/news_releases/2008/04/existing_home_sales_slip_in_march  March 2009 home sales have declined 8.6% from last year. http://www.realestateabc.com/outlook.htm The median price of a home today is $170,3000. So despite a drop in price (Value) of the medican home by $30,000,(17%) sales continue to decline year to year. The percentage decrease is smaller this year, but I’m not sure that is a signal that the elevator is slowing. As mortgage defaults or forelcosures continue and as unemployment numbers continue to worsen, I don’t know that a housing recovery can be predicted. What doesn’t need to be predicted, it can be stated, Home Sales did not incease as reported, they decreased again, from March 2008 to March 2009. The decrease was by 8.6%. Home sales were said to be at “crisis” levels in March 2008 and we have a further reduction so far this year. While there is no need to panic, these numbers so no signs of a pending recovery. Claiming that home sales increased is  a simple lie. The are down by 8.6%.

New home sales posted 331,000 seasonally adjusted annualized units in December. New home sales were off 13.9% from November’s pace and 44.8% below the pace in December 2007. http://www.garealtor.com/ConsumerInformation/LeadingEconomicIndicators/tabid/394/Default.aspx

Meanwhile US banks experienced a 149% increase in bad loans in 2008. http://news.yahoo.com/s/ap/20090402/ap_on_bi_ge/world_markets

“banks face many risks in the coming months due to souring loans and investments which will impair capital through large credit writedowns. The central tenet of this site is that writedowns = reduced capital = reduced credit = reduced growth prospects.” “Loan losses for U.S. commercial banks are expected to rise to 3 percent by the end of 2010, from 1.5 percent in the third quarter of 2008, hurt by an increased percentage of bad loans, greater consumer leverage and faster problem recognition by banks”, ” Loan losses might even surpass the 3.4 percent loss levels reached in 1934 during the Great Depression as the industry has taken on increased structural risk in addition to mortgages that should become more apparent during the cyclical slowdown” http://www.creditwritedowns.com/2009/01/deutsche-bank-loan-losses-will-double-in-2009.html

Unemployment

In it’s Budget Plan the Obama Administration predicted that the recession would bottom out some time before year end 2009 or in a worse case scenario, in early in 2010. Unemployment levels were predicted to bottom out at 8.1%. This prediction was made 3 weeks ago, in early March 2009.  http://seekingalpha.com/article/124458-obama-s-unemployment-forecast-much-too-rosy . Those predictions have already proved to be overly optimistic as the February unemployment numbers (released in March) indicated that the unemployment rate had, in fact, already hit 8.1%. http://www.bls.gov/news.release/empsit.nr0.htm  An additional 651,000 jobs were lost in February 2009. Unemployment increased 1/2 a percentage point in February. Unemployment last year (February 2008) was 4.8%. Unemployment increased 60% in the 12 months between February 2008 & February 2009 . http://www.bls.gov/news.release/laus.nr0.htm

Preliminary unemployment numbers for March continue to be bleak. “There is no sign of even a temporary easing in the downward pressure on employment,”Ian Shepherdson, chief U.S. economist at High Frequency Economics, wrote in a client note. http://www.nydailynews.com/money/2009/03/19/2009-03-19_new_jobless_claims_fall_more_than_expect-2.html

Initial claims have topped 600,000 for seven straight weeks, a level that many economists say is consistent with another huge drop in net payrolls when the Labor Department issues its monthly employment report next month. Net job losses could top 700,000 in March, Shepherdson said, which would bring total losses to above 5 million jobs since the recession began in December 2007. http://www.nydailynews.com/money/2009/03/19/2009-03-19_new_jobless_claims_fall_more_than_expect-2.html

Unemployment for March 2009 may hit 9%. The unemployment rate in March 2008 was 5.1%. Unemployment this March is almost twice as high. http://www.bls.gov/opub/ted/2008/apr/wk1/art01.htm 

Economic Output

“Reports from the twelve Federal Reserve Districts suggest that national economic conditions deteriorated further during the reporting period of January through late February.  Ten of the twelve reports indicated weaker conditions or declines in economic activity; the exceptions were Philadelphia and Chicago, which reported that their regional economies “remained weak.”  The deterioration was broad based, with only a few sectors such as basic food production and pharmaceuticals appearing to be exceptions.  Looking ahead, contacts from various Districts rate the prospects for near-term improvement in economic conditions as poor, with a significant pickup not expected before late 2009 or early 2010. http://www.federalreserve.gov/fomc/beigebook/2009/20090304/FullReport.htm

“US economic output slumps.” “The United States economy shrank at a rate of 3.8 per cent in the fourth financial quarter of 2008, formally plunging the country into recession, the US government has said. The figure marked a sharp drop compared to the third financial quarter, in which the growth rate fell by only 0.5 per cent, the commerce department said on Friday.” http://english.aljazeera.net/news/americas/2009/01/20091301517711306.html , http://www.cbo.gov/ftpdocs/99xx/doc9957/01-07-Outlook.pdf

World growth is projected to fall to ½ percent in 2009, its lowest rate since World War II. Despite wide-ranging policy actions, financial strains remain acute, pulling down the real economy. http://www.imf.org/external/pubs/ft/weo/2009/update/01/index.htm

Economic Report: Industrial Production: US industrial production, output at the nation’s factories, mines, and utilities, decreased a hefty 1.8% in the month of January, after falling a downwardly-revised 2.4% in December, according to the Federal Reserve. After declines in five of the last six months, production has decreased 10% in the past year, an astonishing number. The report was significantly below estimations, as economists were expecting a 1.5% decrease in output. Capacity utilization, a key gauge of inflationary pressures, fell to 72% from 73.6%. This is the lowest level since February 1983, and 9 percentage points below its average level from 1972 to 2007. Lower capacity usually leads to slower inflation, as producers compete with each other for work. http://alhambrainvestments.com/blog/2009/02/18/economic-report-industrial-production-3/

Global Business Cycle Indicators: Leading Economic Indicators declined in February. The weaknesses among the leading indicators have remained widespread in recent months. http://www.conference-board.org/economics/bci/pressRelease_output.cfm?cid=1

National Economic Update: “Recently released data indicate that the economic contraction has intensified at a pace associated with severe recessions. Two consecutive quarters of negative real growth, striking job losses and deep declines in both manufacturing and services output defined year-end 2008. While the economic outlook remains bleak for the first half of 2009, a few indicators suggest that the pace of contraction may slow in coming months.” http://dallasfed.org/research/update-us/2009/0901.cfm The rate of contraction “maybe” slowing in the months ahead – not that the descent on the economic elevator to hell is slowing at this time. 

Durable Good Orders Drop: Durable good orders also painted a grim outlook. “Demand for U.S.-made durable goods fell for the sixth straight month in January.  Orders for durable goods  such as PC’s,  planes,  and washing machines fell 5.2% in January. Orders fell in every major sector”. http://www.chartingstocks.net/2009/02/jobless-claims-jump-durable-good-orders-drop/ After a small uptick  in February early indications for March are not good. For both the Philly and New York Fed manufacturing reports, the new orders index fell in both February and March. Both surveys have data for a given reference month that overlaps two actual months (the March report includes data from both late February and early March). http://gain.econoday.com/byshoweventfull.asp?fid=437975&cust=gain

The datum does not suggest the recovery has started, but the descent into hell maybe slowing. We are still descending, but not as quickly. Lets hope the policies being implement are the correct ones and we don’t suddenly accelerate into oblivion. I, for one, doubt that we can spend our way out of recession or borrow our way out of debt.

Is The Worst Over? Economic Recovery? The Unvarnished Numbers Tell The Story.

This headline greeted me this morning:

World markets surge as US data boost recovery hope

http://news.yahoo.com/s/ap/20090402/ap_on_bi_ge/world_markets

US Data? What US data can they be talking about? GM, Chrysler and Ford posted huge additional losses. http://news.yahoo.com/s/ap/20090402/ap_on_bi_ge/world_markets

The article then went on to say some very surprising things: “Nearly every sector in Asia charged higher, with carmakers like Toyota Motor Corp. and Nissan Motor Co. rallying on U.S. auto figures that were less dismal than feared.” Really, rallying on US auto figures – just what were those figures?

‘Investors were encouraged after U.S. car sales jumped by nearly 25 percent last month from February, beating the typical rise and underpinning hopes of a turnaround in the American auto market — critical for Asia’s giant auto companies.’ What? Auto sales “jumped” by 25% last month – I don’t believe it, do you? (I don’t believe it for good reason – I know the real numbers).

See: http://www.msnbc.msn.com/id/30024711 https://mcauleysworld.wordpress.com/2009/04/03/auto-bubble-bursts-march-09-auto-sales-down-40-tax-dollars-to-fund-high-risk-auto-loans/

“A rebound in pending U.S. home sales in February from a record low, as well as improving manufacturing activity, added to a growing belief the most severe global downturn in decades may be moving close to a bottom.’ What? Housing sales are up? Where? By whose count? Manufacturing activity is up? By what measure and whose numbers. I’ll provide the unvarnished numbers shortly …..

“Still, the upbeat evidence distracted investors from more sobering news the U.S. private sector continued to shed hundreds of thousands of jobs last month — a worrisome sign as investors brace for Friday’s report on nationwide job cuts.” Yes, those pesky unemployment numbers – preliminary projections announced yesterday were absolutely awful – the specifics to follow.

You can imagine my surprise when 3/4 of the way through this same article the following sentence appears,

“With the economic crisis still far from over, analysts warned of more painful market volatility as the recession unfolds.”

Recession unfolds? Unfolds? One would think the recovery was underway based on the previous statements. This is beyond shoddy journalism, this is unethical reporting.  

My point is this, the data suggest we have not hit bottom, plain and simple. I’m looking forward to the turn around as much as the next person. That turnaround is expected to beging in 6 to 12 months. Misrepresenting where we are at now can cost individuals a fortune with bad investment advice and can harm the recovery by setting false expectations that can only lead to disapointment. The truth is this; the economic elevator from hell, that we are all riding, is still heading down. It’s descent may be slowing but there is no sign that it is about to stop.

I’m glad to see that stock prices are rebounding from their 12 year lows, but as unemployment continues to grow and as the prosepcts for profits and dividends remain bleak, there is more than a possibility that these gains will be surrendered and that the markets will test new all time lows. Spending, taxes and the possibility of runaway inflation remain serious concerns.

Wildly incorrect headlines maybe spurring people to re-enter the markets prematurely. Without a return to broad based profitability and dividend payments increased stock prices may not hold. Beware a “Bear Market Bounce” and don’t confuse “trading activity” with “investment activity”. Good Luck and lets hope for the best.

Hope aside – here are the unvarnished numbers.

Auto Sales: 

US Auto sales are down, horrifically down. The report above so badly misrepresents the true state of auto sales in the US, I have to question the author’s ethics. The numbers simply don’t support, in anyway, the statement made above. The statement above can actually be harmful. If one were to believe auto sales were on there way back, one might fight necessary change to “broken business models”. What do the numbers show?

Sales of new cars and trucks are down 36.8% in March 2009 compared to March 2008.

The Boston Globe reported this yesterday: “Automakers began 2008 expecting the worst year for U.S. auto sales in a decade. So far, they’re getting what they anticipated.Sales dropped by double digits in March, even for usual stalwarts like Toyota. And with fragile consumer confidence, falling home values, tightening credit and high energy prices, it may be some time before auto sales recover. http://www.boston.com/business/articles/2008/04/01/us_auto_sales_fall_in_march/

Current sales figures indicate 1,000,000 fewer cars will be sold in the US in 2009 than last year and last year was one of the worst years in memory.  http://www.boston.com/business/articles/2008/04/01/us_auto_sales_fall_in_march/ Continued sales reductions mean continued cutbacks, not growth , new jobs or new auto plants. 

Remember 1 year ago, March 2008, GM sales figures were down 19% compared to March 2007, Ford’s sales were down 14% over March 2007. http://articles.latimes.com/2008/apr/02/business/fi-carsales2  Chryslers sales were down  21.2% in March 2008 from March 2007. http://www.autoobserver.com/2008/03/march-car-sales-down-j-d-power-report-says.html .

Having a year in which year to prior year sales drop 40%, after a nearly 20% drop in the prior year, is horrific.

The March 2009 sales drop is twice as large as the sales drop in 2008. You may be asking, what data did they base these incredible claims of increased car sales on – it is this – car sales increased from February 2008  to March 2008. The fact is Car sales always increase from February to March. Car sales last year, one of the worst years for car sales in memory, still reflected an increased number of sales between February and March. The important or meaningful comparison – March 2008 to March 2009 sales numbers. By that measurement sales are down by almost 40%. As to car sales, the economic elevator has not even begun to slow, it is still acelerating. To misrepresent this number does a disservice to everyone.  To claim that the data presents a picture of a recovering car market is false. Year to year sales are down 40%. In 2008 when sales were down 1/2 that amount(20%)  the press described the drop as “falling of a cliff”. Now that the sales drop is twice that large, it is being reported as signs of a turnaround. GM’s sale decrease between January 2008 and Jaunuary 2009 was 49%. http://www.thetorquereport.com/2009/02/gm_sales_plunge_49_percent_for.html GM’s auto sales in February 2009 were down 53.1% from February 2008. http://www.mlive.com/business/index.ssf/2009/03/auto_sales_continued_slide_gm.html   

 Home Sales:

First, some related news, “Modified Mortgage Refinances Continue to Re-default”, “US bank regulators continue to report escalating re-default rates on mortgage loan modifications. Data being assembled by bank regulators is showing a steady trend of rising month-over-month loan work-outs falling back into delinquency within six months.” “One very troubling point is that, whether measured using 30-day or 60-day delinquencies, re-default rates increased each month and showed no signs of leveling off after six months or even eight months,” John Dugan, head of the Office of the Comptroller of the Currency, said in a statement. Defaults rose consistently across all loan types, but subprime loans understandably had the highest re-default average.” http://www.mortgageloan.com/modified-mortgage-refinances-continue-to-redefault-2743

Mortgage refinancing is up, but refinancing does not indicate an increase in home sales. Real estate investment purchasing is down 18.1% from a year prior. http://news.nationalrelocation.com/2008/03/

Last year (March 2008) existing home sales fell 19.1%. The median home price was $200,700, down 7.7% from March 2007. http://www.realtor.org/press_room/news_releases/2008/04/existing_home_sales_slip_in_march  March 2009 home sales have declined 8.6% from last year. http://www.realestateabc.com/outlook.htm The median price of a home today is $170,3000. So despite a drop in price (Value) of the medican home by $30,000,(17%) sales continue to decline year to year. The percentage decrease is smaller this year, but I’m not sure that is a signal that the elevator is slowing. As mortgage defaults or forelcosures continue and as unemployment numbers continue to worsen, I don’t know that a housing recovery can be predicted. What doesn’t need to be predicted, it can be stated, Home Sales did not incease, they decreased again, from March 2008 to March 2009. The decrease was by 8.6%. Home sales were said to be at “crisis” levels in March 2008 and we have a further reduction so far this year. While there is no need to panic, these numbers so no signs of a pending recovery.

New home sales posted 331,000 seasonally adjusted annualized units in December. New home sales were off 13.9% from November’s pace and 44.8% below the pace in December 2007. http://www.garealtor.com/ConsumerInformation/LeadingEconomicIndicators/tabid/394/Default.aspx

Meanwhile US banks experienced a 149% increase in bad loans in 2008. http://news.yahoo.com/s/ap/20090402/ap_on_bi_ge/world_markets

“banks face many risks in the coming months due to souring loans and investments which will impair capital through large credit writedowns. The central tenet of this site is that writedowns = reduced capital = reduced credit = reduced growth prospects.” “Loan losses for U.S. commercial banks are expected to rise to 3 percent by the end of 2010, from 1.5 percent in the third quarter of 2008, hurt by an increased percentage of bad loans, greater consumer leverage and faster problem recognition by banks”, ” Loan losses might even surpass the 3.4 percent loss levels reached in 1934 during the Great Depression as the industry has taken on increased structural risk in addition to mortgages that should become more apparent during the cyclical slowdown” http://www.creditwritedowns.com/2009/01/deutsche-bank-loan-losses-will-double-in-2009.html

Unemployment

In it’s Budget Plan the Obama Administration predicted that the recssion would bottom out some time before year end 2009 or early in 2010. Unemployment levels were predicted to bottom out at 8.1%. This prediction was made 3 weeks ago, in early March 2009.  http://seekingalpha.com/article/124458-obama-s-unemployment-forecast-much-too-rosy . Those predictions have already proved to be overly optimistic as the February unemployment numbers (released in March) indicated that the unemployment rate had, in fact, already hit 8.1%. http://www.bls.gov/news.release/empsit.nr0.htm  An additional 651,000 jobs were lost in February 2009. Unemployment increased 1/2 a percentage point in February. Unemployment last year (February 2008) was 4.8%. Unemployment increased 60% in the 12 months between February 2008 & February 2009 . http://www.bls.gov/news.release/laus.nr0.htm

Preliminary unemployment numbers for March continue to be bleak. “There is no sign of even a temporary easing in the downward pressure on employment,”Ian Shepherdson, chief U.S. economist at High Frequency Economics, wrote in a client note. http://www.nydailynews.com/money/2009/03/19/2009-03-19_new_jobless_claims_fall_more_than_expect-2.html

Initial claims have topped 600,000 for seven straight weeks, a level that many economists say is consistent with another huge drop in net payrolls when the Labor Department issues its monthly employment report next month. Net job losses could top 700,000 in March, Shepherdson said, which would bring total losses to above 5 million jobs since the recession began in December 2007. http://www.nydailynews.com/money/2009/03/19/2009-03-19_new_jobless_claims_fall_more_than_expect-2.html
Unemployment for March 2009 may hit 9%. The unemployment rate in March 2008 was 5.1%. http://www.bls.gov/opub/ted/2008/apr/wk1/art01.htm
The unemployemnt rate has risen from 7.6% in January 2009 http://www.bls.gov/opub/ted/2009/feb/wk2/art02.htm to  what might be 9% at the end of March 2009, an increase of 1.4% in 90 days. The unemployment rate increased 2.7% (from 4.9% January to 7.6% in December) in all of 2008.

Unfortunately, the unemployment numbers show no signs of imporvement or that a recovery is at hand.“Reports from the twelve Federal Reserve Districts suggest that national economic conditions deteriorated further during the reporting period of January through late February.  Ten of the twelve reports indicated weaker conditions or declines in economic activity; the exceptions were Philadelphia and Chicago, which reported that their regional economies “remained weak.”  The deterioration was broad based, with only a few sectors such as basic food production and pharmaceuticals appearing to be exceptions.  Looking ahead, contacts from various Districts rate the prospects for near-term improvement in economic conditions as poor, with a significant pickup not expected before late 2009 or early 2010. http://www.federalreserve.gov/fomc/beigebook/2009/20090304/FullReport.htm

Economic Activity 

 

 

Economic Output

“US economic output slumps.” “The United States economy shrank at a rate of 3.8 per cent in the fourth financial quarter of 2008, formally plunging the country into recession, the US government has said. The figure marked a sharp drop compared to the third financial quarter, in which the growth rate fell by only 0.5 per cent, the commerce department said on Friday.” http://english.aljazeera.net/news/americas/2009/01/20091301517711306.html , http://www.cbo.gov/ftpdocs/99xx/doc9957/01-07-Outlook.pdf

World growth is projected to fall to ½ percent in 2009, its lowest rate since World War II. Despite wide-ranging policy actions, financial strains remain acute, pulling down the real economy. http://www.imf.org/external/pubs/ft/weo/2009/update/01/index.htm

Economic Report: Industrial Production: US industrial production, output at the nation’s factories, mines, and utilities, decreased a hefty 1.8% in the month of January, after falling a downwardly-revised 2.4% in December, according to the Federal Reserve. After declines in five of the last six months, production has decreased 10% in the past year, an astonishing number. The report was significantly below estimations, as economists were expecting a 1.5% decrease in output. Capacity utilization, a key gauge of inflationary pressures, fell to 72% from 73.6%. This is the lowest level since February 1983, and 9 percentage points below its average level from 1972 to 2007. Lower capacity usually leads to slower inflation, as producers compete with each other for work. http://alhambrainvestments.com/blog/2009/02/18/economic-report-industrial-production-3/

Global Business Cycle Indicators: Leading Economic Indicators declined in February. The weaknesses among the leading indicators have remained widespread in recent months. http://www.conference-board.org/economics/bci/pressRelease_output.cfm?cid=1

National Economic Update: “Recently released data indicate that the economic contraction has intensified at a pace associated with severe recessions. Two consecutive quarters of negative real growth, striking job losses and deep declines in both manufacturing and services output defined year-end 2008. While the economic outlook remains bleak for the first half of 2009, a few indicators suggest that the pace of contraction may slow in coming months.” http://dallasfed.org/research/update-us/2009/0901.cfm The rate of contraction “maybe” slowing in the months ahead – not that the descent on the economic elevator to hell is slowing at this time. 

Durable Good Orders Drop: Durable good orders also painted a grim outlook. “Demand for U.S.-made durable goods fell for the sixth straight month in January.  Orders for durable goods  such as PC’s,  planes,  and washing machines fell 5.2% in January. Orders fell in every major sector”. http://www.chartingstocks.net/2009/02/jobless-claims-jump-durable-good-orders-drop/ Early indications for March are not good. For both the Philly and New York Fed manufacturing reports, the new orders index fell in both February and March. Both surveys have data for a given reference month that overlaps two actual months (the March report includes data from both late February and early March). http://gain.econoday.com/byshoweventfull.asp?fid=437975&cust=gain

The datum does not suggest the recovery has started, but the descent into hell maybe slowing. We are still descending, but not as quickly. Lets hope the policies being implement are the correct ones and we don’t suddenly accelerate into oblivion. I, for one, doubt that we can spend our way out of recession or borrow our way out of debt.

Remember this, the Stock Market is not the “economy”. The Stock market can rise without any underlying economic improvement. During many of the years of the Great Depression (1929 – 1941) the Stock Market rose while Economic conditions deteriorated. In fact the DJIA increased in 6 of the 12 years of the Great Depression. http://www.nyse.tv/dow-jones-industrial-average-history-djia.htm

Obama, Geithner get failing grades from economists for economic recovery plan

(Reuters) – Obama, Geithner get low grades from economists: report

President Barack Obama and Treasury Secretary Timothy Geithner received failing grades for their efforts to revive the world’s largest economy, according to participants in the latest Wall Street Journal forecasting survey.

 

A majority of the 49 economists polled said they were dissatisfied with the administration’s economic policies, according to the paper, a stark contrast to Obama’s popularity ratings with the general public.

 

On average, the economists gave the president a grade of 59 out of 100, and although there was a broad range of marks, 42 percent of respondents rated Obama below 60, the paper said. Geithner received an average grade of 51.

http://www.reuters.com/article/politicsNews/idUSTRE52B16M20090312

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