"Green shots" in our economy

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Illinois bank is 5th failure Friday, 69th of year

Harvey, Ill.-based Mutual Bank was closed by regulators Friday, the 69th U.S. bank to fail this year amid the ongoing credit crunch. Mutual Bank had $1.6 billion in assets and $1.6 billion in deposits as of July 16, the Federal Deposit Insurance Corp. said, and its failure will cost the federal deposit insurance fund $696 million. Garland, Tex.-based United Central Bank has agreed to assume the failed bank's deposits, the FDIC said.

http://www.marketwatch.com/story/illinois-bank-is-5th-failure-friday-69th-of-year-2009-07-31

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Can't even spell "shoots" ... o well.  Must have been a rough day that day.

Another example of "green shoots" in our economy.

Got a mortgage readjustment statement from my mortgage holder.  Starting in September, they will require a 2 month cushion for escrow.  Must pay $2k now or it will be bleed from me over 12 months.

So, I guess the little vacation I was planning will have to be canceled because my bank wants a 0 interest loan from me.

Any other "green shoots" out there?

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Another "Green shoot" in our economy.  Gives me the warm & fuzzies that things better already.   

Oh yea, to the dumb fucks that claim that unemployment & bankruptcies are lagging indicators, I say, our economy is 70% consumer-based.  No recovery in jobs... no mf recovery.

http://www.abiworld.org/AM/Template.cfm?Section=Home&CONTENTID=58351&TEMPLATE=/CM/ContentDisplay.cfm

CONSUMER BANKRUPTCY FILINGS REACH HIGHEST MONTHLY TOTAL SINCE 2005 BANKRUPTCY LAW OVERHAUL

August 4, 2009, Alexandria, Va.— U.S. consumer bankruptcy filings reached 126,434 in July, the highest monthly total since the Bankruptcy Abuse Prevention and Consumer Protection Act was implemented in October 2005, according to the American Bankruptcy Institute (ABI), relying on data from the National Bankruptcy Research Center (NBKRC). The July 2009 consumer filing total represented a 34.3 percent increase nationwide from the same period a year ago, and an 8.7 percent increase over the June 2009 consumer filing total of 116,365. Chapter 13 filings constituted 28.3 percent of all consumer cases in July, slightly above the June rate.

"Today's bankruptcy filing number reflects the sustained and growing financial stress on U.S. households," said ABI Executive Director Samuel J. Gerdano. "Rising unemployment on top of high pre-existing debt burdens is a formula for higher bankruptcies through the end of this year."

###

ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes more than 12,000 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abiworld.org. For additional conference information, visit http://www.abiworld.org/conferences.html.

NBKRC is an online research center that offers subscribers access to up-to-date research and statistics on bankruptcy filings. The database contains complete information dating back to 1995. For more information on NBKRC, please visit http://www.nbkrc.com.

*Definitions from Bankruptcy Overview: Issues, Law and Policy, by the American Bankruptcy Institute.

Chapter 7 of the Bankruptcy Code is available to both individual and business debtors. Its purpose is to achieve a fair distribution to creditors of the debtor's available non-exempt property.  Unsecured debts not reaffirmed are discharged, providing a fresh financial start. 

Chapter 11 of the Bankruptcy Code is available for both business and consumer debtors. Its purpose is to rehabilitate a business as a going concern or reorganize an individual's finances through a court-approved reorganization plan.

Chapter 12 of the Bankruptcy Code is designed to give special debt relief to a family farmer with regular income from farming.

Chapter 13 of the Bankruptcy Code is available for an individual with regular income whose debts do not exceed specific amounts; it is typically used to budget some of the debtor's future earnings under a plan through which unsecured creditors are paid in whole or in part.

[n01_important]

Another "green shoot"... more bank failures!!

On the serious side, the last statement at the end, first I'm hearing of any grand estimate of 1000 bank failures.  If that estimation has any cred, the remaining banks are going to clean house with 100s of less competitors.

U.S. bank failures rise to 72 in 2009
Regulators seize three banks in Florida and Oregon

Florida regulators closed Community National Bank of Sarasota County in Venice, Fla., and First State Bank of Sarasota, Fla. Stearns Bank, N.A., of St. Cloud, Minn., will assume the deposits of both failed banks.

The failures bring the state's 2009 total to six.

Home Federal Bank of Nampa, Idaho, will buy all deposits of the failed Community First Bank of Prineville, Ore.

Bank failures have surged this year as a lingering recession and rising unemployment leaves the industry nursing heavy loan losses.

More than 1,000 banks may fail during the next three to five years, analysts at RBC Capital Markets estimated in February.

[n01_important]

Yet another "green shoot" in our economy.  Eliminating homeless tent cities that sprung up after people lost their homes. 

Well, the people aren't finding new homes... the states are just evicting them.  But that still counts as progress, doesn't it?   

If your getting tired of me bringing up "green shoots" it's because I'm mf tired of hearing the Obama administration attempt to hype of these "our economy is improving" much the same way Bush hyped up "terrorist threat... Orange alert!!!  Red alert!!!"  Obama = Bush.

Another point to make... we have 1000s of empty homes... and 1000s of people needing homes.  Can't we figure something out?  I mean, wtf... I'm all for picking yourself from your bootstraps... but this is just INSANE!

State tries to close Tent Cities, evict homeless

A Superior Court hearing is scheduled today to officially evict homeless populations from state property, namely those encamped in a growing number of make-shift tent cities in Providence and East Providence.

The Rhode Island Department of Administration and Department of Transportation filed the complaint, claiming that the "tent cities" create a public health issue. Without clean water, bathrooms, and a proper trash service, the state says the campers are starting to attract rats.

The original tent city, Camp Runamuck, has been mostly abandoned, but its second incarnation, Camp Runamuck II, still operates in East Providence, on the bank of the Seekonk River. Another encampment, Hope City, is located in Providence on the bank of the Providence River, situated under a former part of Rt 195.

Read the rest here
http://www.examiner.com/x-6179-Providence-Top-News-Examiner~y2009m8d7-State-tries-to-close-Tent-Cities-evict-homeless

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In the 1960s, Johnson's Great Society plus one war ('Nam) caused a spending boom.  In response, Illinois Senator Dirksen said, "A billion here, a billion there... pretty soon, you're talking real money."

In Obama's New Society plus two wars (Iraq & Afagn), we would say that trillion is the new billion.

Well, it seems our original $12T was not enough to bail out this economy.  Why is that?  I thought this economy was starting to recover?  hmmm  Hey, they should start paying back some of the money if we are doing so well, not borrowing more.

Geithner asks Congress for higher U.S. debt limit

WASHINGTON (Reuters) - U.S. Treasury Secretary Timothy Geithner formally requested that Congress raise the $12.1 trillion statutory debt limit on Friday, saying that it could be breached as early as mid-October.

"It is critically important that Congress act before the limit is reached so that citizens and investors here and around the world can remain confident that the United States will always meet its obligations," Geithner said in a letter to Senate Majority Leader Harry Reid that was obtained by Reuters.

You can read the rest here.
http://www.reuters.com/article/wtUSInvestingNews/idUSTRE57706N20090808

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Another sign our economy is ready to ruuuuuummmble!!

Our state/municipal governments are trying to defy the rules of gravity.

Cities Turn to State for Pension Relief

Huntington and other cities are looking to the Legislature to help come up with a plan to deal with massive pension obligations.

CHARLESTON  -- City officials from around the state say their communities can no longer afford to cover the benefits of retired police officers and firefighters, so they are asking the state Legislature for help.

Specifically, they want state lawmakers to redirect a portion of state surcharges on insurance premiums to helping cities cover their retirement pension obligations. They also want to enroll new hires in new pension plans that help them save money.

If nothing changes, cities such as Huntington could have fewer police officers and firefighters on the streets as they are forced to cut back staffs because of increasing pension obligations. The city's last six police and fire department retirees will likely draw $1.5 million each in pension benefits over the course of their retirements, even though each person made less than $900,000 during his or her career, according to Deputy Mayor Tom Bell said.

"What happened here is we just can't afford to dedicate that amount of money" to pensions, Bell said.

Huntington is in the worst shape, but other cities around the state also are struggling to cover their pensions.

Collectively, city governments are facing $700 million in unfunded liability thanks to what officials say are the generous benefits paid out of the firefighters and police officers.

The West Virginia Municipal League, which represents the state's cities, wants state lawmakers to meet in special session either in August or September to consider municipal pension reforms.

"The benefit package was a package that was designed by the Legislature back in a time when cities were flourishing and they had larger populations," said Lisa Dooley, executive director of the League. "The economy was doing well, and there was expected to be growth in the cities."

But cities such as Charleston have been losing their populations in recent years. There is a possibility that after the 2010 census, no city in West Virginia will have a population of more than 50,000, a rarity among states.

State requirements also help drive up the cost of covering pensions.

You can read the rest here.
http://www.statejournal.com/story.cfm?func=viewstory&storyid=64166

[OakParkSpartan]

Berwyn  is currently negotiating with the police union over a new contract.  I hope the city represents the taxpayers interests.

[berwyn1983]

Berwyn  is currently negotiating with the police union over a new contract.  I hope the city represents the taxpayers' interests.

You're kidding. The last time an elected official represented the taxpayers interest the union made sure that he lose.

[Classof67]

Berwyn  is currently negotiating with the police union over a new contract.  I hope the city represents the taxpayers' interests.

You're kidding. The last time an elected official represented the taxpayers interest the union made sure that he lose.

+1  Unions always trump local goverment

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Another "green shoot".. Unemployment went down!

Well it did go down, allegedly by 247,000 jobs or 1/4 M, beating the market's estimates of 320,000 jobs.  Hurray, let's all drink the punch!

What wasn't reported was the 247,000 beat estimates with the help of three factors:

• Birth / Death Rate  Already discussed on a previous thread.  This month has the lowest impact of BDR... increasing jobs by 32,000.  Remember, there is no statistical weight using the BDR, just a "correction" factor that was derived during the boom times.
• Seasonal Adjustments  Sectors like the auto industry allegedly gained 28,000 jobs to help in the retooling of cars for the 2010 model year.  I know, cars are selling so well, 28,000 seems so small!
• Not looking - you don't count  The US includes only people actively looking for work.  So if you got laid off, fall into a depression and are thinking of ending your pitiful life because this economy has taken any sense of human dignity from you... then you don't count as "unemployed" because you are are not looking for work.

Oh yea, let's not forget the 8M people working part-time that wish they were working full-time.

But the real news wasn't any of that... the real news is how long those without jobs are staying without jobs.  The median length continue to climb.

For some reason, I can't post any images... so google search for yourself.

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Another great story about the health of our economy.

GM is opening up factories!!!  Doesn't that news feel great?!?  After the billions in bailouts we gave them, made it all worth it. 

Oh yea, did I mention the factories are in China?  Details details.

General Motors expands in China

General Motors has signed up to a 2bn yuan ($293m; £180m) joint venture with the Chinese state-owned carmaker FAW to make light trucks and vans.

The vehicles will initially be sold in China under the FAW brand, but could in future be exported under the GM brand.

They will be produced at existing FAW facilities in the cities of Changchun and Harbin.

GM sold 818,442 vehicles in China in the first six months of 2009, compared with 1,094,561 in the whole of 2008.

The rest of the story.
http://news.bbc.co.uk/2/hi/business/8229353.stm

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Unemployment reaches 9.7%!  Oh my!

http://www.nytimes.com/2009/09/05/business/economy/05jobs.html?bl&ex=1252296000&en=aca08736a6e52505&ei=5087

So, about 14.7M are out of work.  But there are three points that are hardly mentioned.

• Underemployement rate (U6) has reached 16.8%.  It got a one line blurb on the article but it is of greater importance.  Please refer to previous posts as to U6 vs. U3.
• Birth/Death adjustments.  The July numbers include 188k jobs adder to factor in Birth/Death.  Please refer to earlier posts on the fallacy of such adjustment.  More importantly, this "adjustment" has meant an addition of about 1M jobs for 2009.  If you assume the adjustment to be zero (I would say a negative number but lets take 0 for now)... our unemployment (U3) number would be 10.2%.
• State unemployment reports won't come in for another 9 months that will revise that number.  If the past is any indication of the present, the number will be adjusted painting a gloomier picture.

But what kills me about all of this is those that attempt to put lipstick on this pig keep pointing to an argument... "unemployment lags recovery and we have signs of recovery".  My view is that may be the case in small recessions... but once you reach critical mass of unemployment in a 70% consumer-based economy... you can't have recovery until you stabilize job losses or underemployment.

A few factors are still looming ahead:

• Long cycle businesses.  Many of these businesses have had orders in their books for months ahead.  Some of these products need to have orders placed 2-3 years in advance (i.e. airplanes, mining equipment, and other heavy machinery).  The orders are being filled now were placed when the economy was still growing but no new orders are coming in.  As this recession continues and no new orders are filling up the pipeline, these companies will have to make some very tough decisions.  Those tough decisions start end of this year (to adjust for 2010 deliveries) and will continue throughout 2010 (to adjust for 2011 deliveries).
• State & Local governments.  It seems that every taxing body is having a budget crisis.  Most of them are delaying the inevitable hoping the economy recovers and they continue business as usual (as in past non-consumer led recessions).  To resolve the budget shortfalls, it will mean more taxes and less services... which means public sector jobs will have the same plight as private sector.  How this will impact the economy?  Hardly anyone talks about. 

From all the numbers I can see... this economy has stabilized.  A few items that will act as headwind (long cycle business & government budget shortfalls) may knock us down another notch.  The only positive force I see is some businesses have reduced inventories so much, they have to place orders again to have something to sell.  That signal could be hyped up as recovery when in fact those orders are adjusting for a new normal (lower expected sales).

I'm also putting my money where my mouth is... I bought back in the market earlier in the year and enjoyed a NICE 40% gain.    

In the last month, I sold everything to sit on cash.  I could be wrong about this and the economy recovers.  The US economy is a complicated beast.  If so, big deal, I made a return while others lost money.  BTW, thanks Uncle-O for hyping up the economy, I don't think I could have made such a high return without your help!   

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Unemployment numbers released for September.  263k (full time) jobs lost last month, greater than expected and greater than the previous month.

The true number remains masked by factors described in detail in earlier posts:

• Birth/Death rate contributed 34k positive jobs this month and 600k+ jobs in that last couple of months.  October, the birth/death model may contribute ~100k jobs.  Using a factor derived during the boom times is asinine, at best or deceitful, at worst.
• Hardly anyone mentioned the true unemployment.  U6 number which includes not only full time jobs but all those working part-time wishing they can work full-time.  That number is over 16%, even with our government fudging the numbers.

We continue to have headwind on jobs, primarily in two areas:

• Long cycle business - these business have started to adjust for a flat 2010.  These businesses have been eating up their backlog and with few orders replacing them.  They have started permanent lay offs.
• Local government - with budget deficits, at some point these useless & delusional bureaucrats will have to face reality.  Their past practice on other downturns of stalling and hoping things recover just won't work.  No white knight will come save them... they need to slash services & jobs and/or raise taxes.

I love hearing that line, "jobless recovery", like an "engine-less car".  You don't have a car without an engine... you don't have a recovery without jobs.

I'll stay in cash for now, thank you very much.

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Interesting how one needs to look to foreign media to know what is really happening in one's own country.  They used to say, "As California goes, so goes the country".  Let's hope they are wrong.

What is sure is that at best, what is happening in California is the extreme of what is happening to all of us.

What I can be sure of is... too much debt, unconscionable spending and worshiping the All Mighty... Dollar, got us in this mess... and I can assure you, that won't get us out.

Will California become America's first failed state?

Los Angeles, 2009: California may be the eighth largest economy in the world, but its state staff are being paid in IOUs, unemployment is at its highest in 70 years, and teachers are on hunger strike. So what has gone so catastrophically wrong?

California has a special place in the American psyche. It is the Golden State: a playground of the rich and famous with perfect weather. It symbolises a lifestyle of sunshine, swimming pools and the Hollywood dream factory.

But the state that was once held up as the epitome of the boundless opportunities of America has collapsed. From its politics to its economy to its environment and way of life, California is like a patient on life support. At the start of summer the state government was so deeply in debt that it began to issue IOUs instead of wages. Its unemployment rate has soared to more than 12%, the highest figure in 70 years. Desperate to pay off a crippling budget deficit, California is slashing spending in education and healthcare, laying off vast numbers of workers and forcing others to take unpaid leave. In a state made up of sprawling suburbs the collapse of the housing bubble has impoverished millions and kicked tens of thousands of families out of their homes. Its political system is locked in paralysis and the two-term rule of former movie star Arnold Schwarzenegger is seen as a disaster – his approval ratings having sunk to levels that would make George W Bush blush. The crisis is so deep that Professor Kenneth Starr, who has written an acclaimed history of the state, recently declared: "California is on the verge of becoming the first failed state in America."

The rest of the story...
http://www.guardian.co.uk/world/2009/oct/04/california-failing-state-debt

[Ted]

  I think California is a microcosm of the problems local and state governments all over the country are experiencing. It's no different than the state of Illinois or the county of Cook or the city of Chicago or the city of Berwyn.  At some point, the chickens are going to roost and the tax payers will find themselves in an untenable position regarding pensions, wages, benefits and government employee contracts.  And, there won't be a nice way out of the mess. Someone (or everyone) is going to lose.

 Ted

[n01_important]

I absolutely agree.  The sooner we face reality and do something, the better.

What is funny is seems that the local governments look to the county/state to save them... county looks to the state... state looks to the federal government.  The federal government looks to the Federal Reserve to continue printing money and foreign powers to buy our IOUs.

The foreign powers have already stated that they want to diversify their debt holdings and currency reserves.  So what ever we can't borrow, the Federal Reserve will have to print money.

We can't print our way nor borrow ourselves out of this mess.

We must act responsibly.  First, within our own households then demanding our local governments to do the same.

[Ted]

Yesterday on the George Stephonopoulos show, it was stated that federal, state and local governments make up 40% of the GDP.  That is not good.

  Ted

[n01_important]

I've been looking to find figures like that.  Thanks.

I did see a chart on how currently 4.8 workers for every government employee.  That also isn't good.

[n01_important]

Another "green shoot"... falling residential rents!  Falling rents were expected as those that bought houses/condos to flip but got caught in the housing drop resorted to renting their property.  They will attempt to ride out the housing decline.

Does anyone have any stats on just Berwyn rents?  If we are lucky, this might just keep pressure against home prices going up... if we are not so lucky... further price reductions.

Dropping Rents Will Drag House Prices Down with Them


The vacancy rate for rental apartments in the U.S. is now 7.8% and climbing, says the Wall Street Journal.  This is the highest vacancy rate in 23 years.

Worse, the vacancy rate is expected to keep climbing through the winter, ultimately hitting the highest rate on record.

This is good news for renters and bad news for landlords.  It's also bad news for anyone who owns and would like to sell a house.

Why are rising rental vacancies bad news for homeowners?

The rest of the story...
http://finance.yahoo.com/tech-ticker/article/349606/Dropping-Rents-Will-Drag-House-Prices-Down-with-Them?tickers=^dji,^gspc,hd,l,kbh