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Two facts that should give pause for thought.
1) Japanese data released on Thursday showed that exports fell yet again in July. They are down 39.5pc to the US, and 26.5pc to China.
Japan is the world’s second biggest economy. It lives on exports. It is also a key part of the supply chain for the Chinese economy. How can this hard data be reconciled with the extreme V-shaped recovery already priced in by the markets?
By the way, Toyota is suspending a key production line at its Takaoka plant in central Japan. It is cutting global capacity by 1m vehicles.
2) The Baltic Dry Index measuring freight rates for bulk goods and commodities has been falling almost continuously for eleven weeks, dropping from 4,290 to 2,778 on Thursday.
Is this just a glut of ships or is this telling us what the Shanghai market is also telling us, that credit tightening by the Chinese government is pulling the rug from underneath the latest commodity bubble?
There is something wrong with the entire recovery tale, which ignores the fact that excess plant is still at the highest level since the Great Depression (capacity use is 70pc in Europe, 68pc in the US, 65pc in Japan, and as low as 50pc in some countries, according to the World Bank’s Justin Lin). Companies will have to cut jobs and investment.
Soaring “confidence” indicators have decoupled from reality. The world economy is still prostrate. GDP has shrunk 4pc, 6pc, 8pc, even 12pc or more in a large group of countries. There it more or less sits, like a deflated soufflé.
An end to technical recession in France, Germany, and Japan because Q2 ( and undoubtedly Q3 to come) ekes out a rise from a collapsed base does not mean anything – except that zero interest rates worldwide, and a massive fiscal stimulus that is pushing public debts towards 100pc across the OECD states (and cannot easily be repeated once the first sugar rush subsides), has mercifully prevented the Great Contraction from turning into an immediate catastrophe.
As the Bank of England’s Governor Mervyn King puts it: “It’s the level, stupid”. The level of economic activity is years away from full recovery.
The Bundesbank’s Axel Weber says it will take until 2013 for Germany to get back to where it was. He also warns, by the way, that there will be a second wave of the credit crisis as Germany’s home-grown troubles come to the fore. Round one was imported havoc from the US: round two will be rising defaults at home and a credit squeeze as ratings downgrades force banks to set aside fresh capital. (I enclose the Weber link for German readers www.sueddeutsche.de...)
FDIC Problem Bank List Surges, Putting Fund at Risk (Update1)
Aug. 27 (Bloomberg) -- The U.S. added 111 lenders to its list of “problem banks,” a jump that suggests rising bank failures may force the Federal Deposit Insurance Corp. to deplete a reserve fund that shrank 40 percent this year.
A total of 416 banks with combined assets of $299.8 billion failed the FDIC’s grading system for asset quality, liquidity and earnings in the second quarter, the most since June 1994, the Washington-based FDIC said in a report today. Regulators didn’t identify companies deemed “problem” lenders.
The U.S. has taken over 81 banks this year, including Guaranty Financial Group Inc. in Texas and Colonial BancGroup Inc. in Alabama, amid the worst financial crisis since the Great Depression. The surge forced regulators to charge banks an emergency fee to raise $5.6 billion for its insurance fund, which fell to $10.4 billion as of June 30 from $13 billion in the previous quarter, the agency said. The total was the lowest since the savings-and-loan crisis in 1993.
The $10.4 billion insurance fund balance reflects its net worth and doesn’t include an additional $32 billion the agency has set aside to cover losses from anticipated bank failures, according to agency data.
FDIC-insured banks reported a net loss of $3.7 billion in the second quarter, compared with a $5.5 billion gain in the first quarter.
Originally posted by GreenBicMan
reply to post by stander
You should be using those pivot points my friend.. almost right on the number today where we bottomed out at
FDIC Dissembling Again
According to Chris Whalen the number is more than four times your claimed number. I believe Chris. Readers may believe whatever they would like, but given the FDIC's record of refusing to close clearly-insolvent banks, including those who declare negative Tier 1 ratios in public filings, I wouldn't believe anything that comes out of the FDIC.
Additions to the contingent loss reserve during the second quarter caused the fund balance to decline from $13.0 billion to $10.4 billion.
And yet the true losses keep turning out to be much higher than estimated. Worse, these balances reflect only cash paid out, not estimates - which of course are not realized losses until the so-called "resolution" is complete and contingent liabilities are either realized or extinguished.
Dollar falls as stocks regain some ground
NEW YORK (MarketWatch) -- The U.S. dollar fell against major counterparts on Thursday, as stocks -- partly helped by a successful auction of Treasury bonds -- staged a come-back in afternoon trade, leading traders to abandon some safe-haven positions in low-yielding currencies.
In thin trading volumes, the Dow Jones Industrial Average /quotes/comstock/10w!i:dji/delayed (INDU 9,581, +37.48, +0.39%) gained nearly 40 points, helped by big gains in shares of Boeing /quotes/comstock/13*!ba/quotes/nls/ba (BA 51.77, -0.02, -0.03%) .
Stocks gained ground after the U.S. sold $28 billion in 7-year notes, capping $227 billion in sales this week.
In a very volatile session, the dollar index (DXY 78.07, -0.59, -0.75%) , which tracks the greenback against a trade-weighted basket of six major currencies, stood at 77.997, down from 78.660 late Wednesday.
The dollar traded at 93.36 Japanese yen, down from 94.22 yen Wednesday.
Toyota to pull out of California plant: sources
DETROIT/WASHINGTON (Reuters) - Toyota Motor Corp has decided to end production at a California plant it has shared with General Motors for 25 years, industry sources said on Thursday.
Toyota's board met earlier in the day and decided to shut the plant in March, according to two sources, who had direct knowledge of the decision but were not authorized to speak on the record.
The Japanese automaker's operations at the Fremont, California, facility employ about 4,500 people.
FDIC says it doesn’t need to borrow, for now
It’s now slipped to 0.22 percent of insured deposits, below a congressionally mandated minimum of 1.15 percent.
At the same time, Bair reaffirmed the likelihood of an additional fee on U.S. banks this year to help replenish the fund, atop the estimated $5.6 billion from a new emergency premium that took effect June 30.
“The banking industry continues to provide the financial backstop for the FDIC and will pay nearly $18 billion in premiums in 2009 to cover losses from bank failures,” James Chessen, chief economist of the American Bankers Association, said in a statement.
Besides the insurance fund, the FDIC has $21.6 billion in cash available in reserve to cover losses at failed banks, down from $25 billion at the end of the first quarter.
Federal Reserve Says Disclosing Loans Will Hurt Banks (Update1)
Japan's jobless rate rises to record 5.7 percent in July.
Japan’s Unemployment Rate Rose to Record 5.7% in July (Update2)
Aug. 28 (Bloomberg) -- Japan’s unemployment rate rose to a record in July, signaling households are unlikely to help sustain a recovery from the country’s worst postwar recession.
The jobless rate advanced to 5.7 percent, eclipsing the previous worst of 5.5 percent last seen in April 2003, the statistics bureau said today in Tokyo. Economists predicted 5.5 percent.
Companies from Toyota Motor Corp. to Japan Airlines Co. are scaling back and cutting jobs as demand weakens at home and abroad. Today’s report deals a blow to Prime Minister Taro Aso two days before an election that may oust his ruling Liberal Democratic Party for the second time in 54 years.
Japanese Opposition's Vow to Cut Construction May Curb Economic Stimulus
Japan’s opposition vows to slash public works spending if it wins this month’s election, as polls indicate. Keeping that promise may be tough in a nation where construction is the No. 5 employer and a political fundraiser.
Japan's Deflation Deepened in July as Consumer Prices Slumped Record 2.2%
Japan’s consumer prices fell at a record pace in July, adding to signs that deflation will hamper a rebound from the nation’s worst postwar recession.
Japan Should Work Toward Asian Currency, Hatoyama Writes in New York Times
Japan should work with other Asian countries to create a single regional currency and bolster alliances to make it possible, opposition leader Yukio Hatoyama wrote in the New York Times.
State Unemployment Report Not Good
The state's regional unemployment numbers are out and mid-Michigan has taken another hit. State officials broke down the unemployment rate for regions across the state. Statewide the jobless rate for July was at a national high of 15%. That's actually down a little bit from the month before, but in most of mid-Michigan counties reported an increase in unemployment.
Here's what that means for some of our areas: for the area including Clinton, Ingham and Eaton counties, the jobless rate is at 12.7%. That's an increase from the 12.4% reported in June. For Jackson County, the rate is now at 15.9%, that's up from the 15.5% reported in June. In Hillsdale, the rate is now at a whopping 20%, up from 19.9%. Hillsdale is one of the hardest hit areas throughout Michigan when it comes to unemployment.
Originally posted by Rockpuck
C at $5? .. Never thought I'd see the day. 500% rally in a few short months. What's changed at the bank? ..... Nothing? ... Oh...