the visible hand

it is the theory which decides what can be observed – einstein

Archive for April, 2009

glimmering PCE

Posted by ecoshift on April 29, 2009

I assume most of you with any interest in the topic are finding plenty of economic analysis on the front pages these days… While it’s difficult to connect some of the dots on a daily basis (e.g. GDP down 6.1% and DJIA up 2.1%) it seems pretty clear that we are in for another leg down in the markets when the gamesmanship with accounting practices, PPIP and bailout funds tapers off and the collapse (investment down, imports down, exports down, unemployment up, housing prices down) in the real economy plays itself out. Much is being made of the small rise in personal consumption expenditures yet it’s difficult to see how the PCE bump can pull us into recovery without significant increases in wages or personal income for the typical consumer. Maybe if we all make a commitment to buy a new refrigerator on the same day the crisis will be over…

Not that a decline in the rate of decline is a bad thing.

Silver lining of shrinking economy: consumer spending up |

“Rising unemployment rates represent a hit to personal incomes, but Bryson notes that spending power is being buoyed now by modest new tax cuts and cooler inflation. Falling energy prices acted as a kind of income boost for the first quarter of 2009, for example…

The potential for households to add to GDP is constrained by the decline in personal wealth during the recession. For many families, lost wealth in home values and retirement accounts means that a priority now is to pare debt, control spending, and rebuild savings.

Still, in the first quarter Americans were able to expand their savings rate even as they boosted spending. Savings rose to 4.2 percent of overall disposable income, more than double the savings rate in 2008 and far above the prior two years.”


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Dealers may buy Saturn

Posted by ecoshift on April 16, 2009

Dealers may buy Saturn | | Detroit Free Press
Group says it could save 10,000 jobs

A group of Saturn dealers said they could save about 10,000 jobs at 440 Saturn dealerships in the United States and Canada — along with the costs of closing those stores — if General Motors Corp. sells the brand to them.

Telesto Ventures said it would not build vehicles and would only keep a skeletal design crew on hand to adapt models from other automakers to a Saturn look. It also said it would focus future models on fuel-efficient and electric vehicles from other automakers.

While such a business model doesn’t exist today, Telesto’s backers say the global overcapacity among automakers and the growing number of start-up firms in China and elsewhere would give the reformulated Saturn several possible sources of new vehicles.

Finding automakers to work with “is not a tremendous concern,” said John Pappanastos, a group spokesman. “It would allow manufacturers not in the United States to launch without incurring the largest expense they would otherwise face, setting up a distribution network.”

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Biggest drop in industrial output since VE Day

Posted by ecoshift on April 15, 2009

Biggest drop in industrial output since VE Day – MarketWatch
By Rex Nutting
Last update: 9:15 a.m. EDT April 15, 2009

WASHINGTON (MarketWatch) – The output of the nation’s factories, mines and utilities fell 1.5% in March despite higher production of motor vehicles and boost from utilities, the Federal Reserve reported Wednesday. Industrial production is down 13.3% since the recession began in December 2007, the largest percentage decline since the end of World War II. Output fell at a 20% annual rate in the first quarter, and is now at the same level as December 1998. Factory production fell 1.7% in March. Factory output has fallen 15.7% during the recession, also the largest decline since 1945-1946. Capacity utilization fell by a full percentage point to 69.3%, the lowest since the data series begins in 1967.

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California asks feds to back its IOUs

Posted by ecoshift on April 15, 2009

California asks feds to back its IOUs – Sacramento Bee
By Steve Wiegand
Published: Wednesday, Apr. 15, 2009 – 12:00 am | Page 1A

Facing what could be the largest cash flow problem in state history, California officials are asking the federal government to back billions of dollars in short-term loans the state must seek in July.

“We’re going to need cash-flow borrowing the likes of which California has never seen, at a time when market and economic forces are stacked against us,” said Tom Dresslar, spokesman for state Treasurer Bill Lockyer. “That’s a recipe for calamity.”

While the state routinely borrows money at the start of fiscal years on July 1 by issuing interest-bearing Revenue Anticipation Notes, or RANs, a combination of factors have conspired to form a mountainous hurdle this time around.

Those factors include the sheer size of the amount needed – at least $13 billion – the state’s woeful credit rating and the generally sorry state of the nation’s financial markets.

Lockyer and other state and local officials have been quietly exploring the idea of doing what hordes of private financial and insurance enterprises have done in the past year: Ask Uncle Sam for help.

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CA state revenue falls far short of projections

Posted by ecoshift on April 14, 2009

State revenue falls far short of projections
Wyatt Buchanan, Chronicle Staff Writer
Tuesday, April 14, 2009
(04-14) 04:00 PDT Sacramento —

In another sign that the California government’s money problems appear to be deepening, two reports show that the state’s revenue in March fell hundreds of millions of dollars short of estimates in the 2-month-old budget.

The reports come as Wednesday’s income-tax filing deadline looms, perhaps the year’s most important week for revenue in the state – when more than a billion dollars a day can flow into state coffers.

“These numbers clearly reflect the fact that we are working our way through the most significant economic downturn in years,” said H.D. Palmer, spokesman for the California Department of Finance.

The agency reported Monday that the state’s revenue was $415 million below what was forecast in the budget deal in mid-February. For the year, the budget is off by $737 million, according to the finance department.

Those estimates come on the heels of a report Friday from State Controller John Chiang that found revenue down $178 million for the month…

The shortfall comes as unemployment continues to rise, new home construction is faltering and home prices continue to fall…

Under current worst-case scenarios, including the failure of three budget-related measures on the May 19 special election ballot, lawmakers may be looking at a $14 billion budget shortfall.

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Community Coalition Purchases 47 Homes in Foreclosure

Posted by ecoshift on April 1, 2009

HousingWire || financial news for the mortgage market
Community Coalition Purchases 47 Homes in Foreclosure
April 1, 2009 1:07 PM CST

The first large-scale purchase of defaulted mortgages by an alliance of U.S. nonprofit organizations was announced Wednesday. HANDS, Inc. said it has acquired the defaulted mortgages on 47 vacant homes in the greater Newark area, all of which are vacant and abandoned.

HANDS purchased the mortgages from J.P. Morgan Chase (JPM: 28.14 +5.87%), as part of a new strategy to reclaim neighborhoods hard-hit by foreclosure, and is working with its partners in Operation Neighborhood Recovery to rehabilitate the properties so they may become “cornerstones for productive change in their surrounding communities,” instead of magnets for increased crime and vandalism, creating general neighborhood blight.

“Time is our enemy and early intervention is the key to battling the destabilizing influence of abandoned and foreclosed properties on neighborhoods,” said Patrick Morrissy, executive director of HANDS, a member of the NeighborWorks network. “We knew that as time passed, the properties would continue to deteriorate, their values would plummet, as would the home values in the overall neighborhood.”

HANDS will ultimately convey groups of the properties to Operation for Neighborhood Recovery partners that work in the properties’ respective neighborhoods, and who have agreed to rehabilitate the properties and make them available for affordable homeownership.

One may ask how such an organization acquired the funds to purchase, repair and maintain 47 homes — a cost which is anticipated to total around $5.4 million. New Jersey Community Capital, a community development financial institution working throughout New Jersey, took a lead role in the transaction, according to a HANDS press statement.

The institution coordinated the provision of debt and equity from Prudential Social Investment, Local Initiatives Support Corporation-Greater Newark & Jersey City, NeighborWorks America, and Enterprise Community Partners.

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