Today in the economy

[Kel]

I just found out yesterday that I'm facing redundancy, well it says 'at risk' which really only means unless something drastic happens I've lost my bloody job. It's gonna be a struggle to find more work and I will probably end up earning a shitty wage somewhere because I always need money coming in.

Like many others I'm in the shit

[killersheep]

I just found an ETF that inverslely tracks consumer confidence, when consumer confidence goes down, it's value goes up. It's riding at $109 a share I wish I would have had it last december it paid out a $33 dividend per share

If anyone's interested in researching it (I am not advising you to buy or sell any securities) here's a link

SCC: Summary for ULTRASHORT CONSUMER - Yahoo! Finance

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2/27/09

USA - GDP

Actual-6.20%|Forecast-5.40%|Previous-3.80%

The gross domestic product measures the total market value of all final goods, thus serving as an indicator for national income and output.
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USA - Michigan sentiment

Actual56.30|Forecast56.00|Previous56.20

This survey, conducted by Michigan University, gathers consumer expectations concerning the economy thus reflecting the overall level of consumer confidence.

[VictorCharlie]

Kirk I know the short term would be horrible but if the Govt just allowed the Big Banks to fail (bankruptcy etc) wouldn't smaller banks pick up the slack? Am I wrong in thinking that there are plenty of smaller banks that are not full of toxic assets to would move quickly to fill the void? I wouldn't even call myself an economic novice but is seems that if there is a market someone would step up. I just really hate the idea of propping up failing industries and rewarding failure.

[killersheep]

Kirk I know the short term would be horrible but if the Govt just allowed the Big Banks to fail (bankruptcy etc) wouldn't smaller banks pick up the slack? Am I wrong in thinking that there are plenty of smaller banks that are not full of toxic assets to would move quickly to fill the void? I wouldn't even call myself an economic novice but is seems that if there is a market someone would step up. I just really hate the idea of propping up failing industries and rewarding failure.

Small banks cannot afford to loan to the level that the large chain banks were.

[Trainer Monkey]

Kirk I know the short term would be horrible but if the Govt just allowed the Big Banks to fail (bankruptcy etc) wouldn't smaller banks pick up the slack? Am I wrong in thinking that there are plenty of smaller banks that are not full of toxic assets to would move quickly to fill the void? I wouldn't even call myself an economic novice but is seems that if there is a market someone would step up. I just really hate the idea of propping up failing industries and rewarding failure.

They arent really rewarding failure right now,unlike Bush who wanted it no ties attached for the same bailout,Obama put a rider in that limits executive pay for banks asking for bailout money.
In other words,short of the execs being fire by the banks in question,their pay is being governed and if the banks wont themselves wont punish their own piss poor governance,Obama has put it in,that the government will,or no damned money.

[Kirkland Laing]

Kirk I know the short term would be horrible but if the Govt just allowed the Big Banks to fail (bankruptcy etc) wouldn't smaller banks pick up the slack? Am I wrong in thinking that there are plenty of smaller banks that are not full of toxic assets to would move quickly to fill the void? I wouldn't even call myself an economic novice but is seems that if there is a market someone would step up. I just really hate the idea of propping up failing industries and rewarding failure.

The big banks have already failed which is why they're not lending anymore. But small banks are all under pressure too and even if they weren't don't have the kind of capital to make the size of loans required to supply the market with adequate credit. Small banks are currently failing at the rate of two a week and the government takes them over, wipes the shareholders out, converts the debt into equity and sells the equity (bank shares) to new investors. That's what they should do with big banks like Citi and BOE but they're not doing it unfortunately. They'll have to eventually so hopefully they're just slow-walking the country towards nationalisation, but right now it really looks like they're going to keep bailing the black hole out.

[Kirkland Laing]

Kirk I know the short term would be horrible but if the Govt just allowed the Big Banks to fail (bankruptcy etc) wouldn't smaller banks pick up the slack? Am I wrong in thinking that there are plenty of smaller banks that are not full of toxic assets to would move quickly to fill the void? I wouldn't even call myself an economic novice but is seems that if there is a market someone would step up. I just really hate the idea of propping up failing industries and rewarding failure.

They arent really rewarding failure right now,unlike Bush who wanted it no ties attached for the same bailout,Obama put a rider in that limits executive pay for banks asking for bailout money.
In other words,short of the execs being fire by the banks in question,their pay is being governed and if the banks wont themselves wont punish their own piss poor governance,Obama has put it in,that the government will,or no damned money.

Salary is only a tiny fraction of total earnings for bank executives. It's just a cosmetic announcement, won't have any real effect on executive earnings. Unfortunately as far as the financial crisis goes the Obama administration looks like a Bush administration third term.

[Trainer Monkey]

Kirk I know the short term would be horrible but if the Govt just allowed the Big Banks to fail (bankruptcy etc) wouldn't smaller banks pick up the slack? Am I wrong in thinking that there are plenty of smaller banks that are not full of toxic assets to would move quickly to fill the void? I wouldn't even call myself an economic novice but is seems that if there is a market someone would step up. I just really hate the idea of propping up failing industries and rewarding failure.

They arent really rewarding failure right now,unlike Bush who wanted it no ties attached for the same bailout,Obama put a rider in that limits executive pay for banks asking for bailout money.
In other words,short of the execs being fire by the banks in question,their pay is being governed and if the banks wont themselves wont punish their own piss poor governance,Obama has put it in,that the government will,or no damned money.

Salary is only a tiny fraction of total earnings for bank executives. It's just a cosmetic announcement, won't have any real effect on executive earnings. Unfortunately as far as the financial crisis goes the Obama administration looks like a Bush administration third term.

Not even close son
I mean here's the ballpark,and here there is you,youre not in it
Apparently between you and Lyle,there's liberal,conservative,and Ive got to sit here being the realist

[Kirkland Laing]

Mr. Roubini -- a month short of 50 -- is in huge media demand, the nearest thing to a rock-star among the economists who hold our fate in their hands these days.....

The man has instant impact on public debate. An idea he floated only last week -- that our "zombie banks" be temporarily nationalized -- aired first on Forbes.com, where he writes a weekly column. It has evolved, in the space of just a few days, from radical solution to almost received wisdom.

Nouriel Roubini says nationalising the banks is the market-friendly solution.
Wall Street Journal
February 21st, 2009




The US government may have to nationalise some banks on a temporary basis to fix the financial system and restore the flow of credit, Alan Greenspan, the former Federal Reserve chairman, has told the Financial Times.
In an interview, Mr Greenspan, who for decades was regarded as the high priest of laisser-faire capitalism, said nationalisation could be the least bad option left for policymakers.
”It may be necessary to temporarily nationalise some banks in order to facilitate a swift and orderly restructuring,” he said.

Greenspan backs bank nationalisation
Financial Times
February 18th 2009




"We may need to nationalise the banks."

Senator Lindsey Graham (R-SC)
Meet The Press
February 16th 2009



The Fed is now buying commercial paper and the commercial debt market is showing signs of life, but banks are all still terrified to lend to anybody else. Until we find out where the bodies are buried (may take years) that'll be the case. Until then the central banks will have to do everything, from guaranteeing commercial debt to effectively nationalising the banking industry in their respective countries.

Kirkland Laing
October 10th 2008

[Kirkland Laing]

They arent really rewarding failure right now,unlike Bush who wanted it no ties attached for the same bailout,Obama put a rider in that limits executive pay for banks asking for bailout money.
In other words,short of the execs being fire by the banks in question,their pay is being governed and if the banks wont themselves wont punish their own piss poor governance,Obama has put it in,that the government will,or no damned money.

Salary is only a tiny fraction of total earnings for bank executives. It's just a cosmetic announcement, won't have any real effect on executive earnings. Unfortunately as far as the financial crisis goes the Obama administration looks like a Bush administration third term.

Not even close son
I mean here's the ballpark,and here there is you,youre not in it
Apparently between you and Lyle,there's liberal,conservative,and Ive got to sit here being the realist

Hank Paulson was Bush's last Treasury Secretary. His highest ever official salary was around a million dollars a year but that's just walking around money when you live in Manhattan, send your kids to school there etc. When he retired he had over $700 million in th bank.

We can watch and see how much the execs of banks who are taking government welfare continue to earn over the next few years. I should get a nice piece of quote art or two out of it.

[Trainer Monkey]

Salary is only a tiny fraction of total earnings for bank executives. It's just a cosmetic announcement, won't have any real effect on executive earnings. Unfortunately as far as the financial crisis goes the Obama administration looks like a Bush administration third term.

Not even close son
I mean here's the ballpark,and here there is you,youre not in it
Apparently between you and Lyle,there's liberal,conservative,and Ive got to sit here being the realist

Hank Paulson was Bush's last Treasury Secretary. His highest ever official salary was around a million dollars a year but that's just walking around money when you live in Manhattan, send your kids to school there etc. When he retired he had over $700 million in th bank.

We can watch and see how much the execs of banks who are taking government welfare continue to earn over the next few years. I should get a nice piece of quote art or two out of it.

Walked away with
As in past tense

[Kirkland Laing]

Not even close son
I mean here's the ballpark,and here there is you,youre not in it
Apparently between you and Lyle,there's liberal,conservative,and Ive got to sit here being the realist

Hank Paulson was Bush's last Treasury Secretary. His highest ever official salary was around a million dollars a year but that's just walking around money when you live in Manhattan, send your kids to school there etc. When he retired he had over $700 million in th bank.

We can watch and see how much the execs of banks who are taking government welfare continue to earn over the next few years. I should get a nice piece of quote art or two out of it.

Walked away with
As in past tense

Large banks like Citi that have large brokerage and M and A divisions have modelled themselves and their executive compensation on investment banks like Goldman as over the past couple of decades the investment banks have been making all the big money. And the investment banks only exist to reward the talent that runs them. Goldman for instance share over 75% of all their profits among their partners (and it used to be 100% till the partners sold off a chunk of their firm in stock to make themselves even more money.)

Goldman has a hundred of so guys with a small share and another fifty or so with a larger share. At the end of the year they divvy up six or eight billion between them (that's roughly the Goldman yearly profit over the past few years.) Now these guys earn depending on how much they earned the firm. And in a dog-eat-dog world if some superstar lower in the firm (or a partner or rising star elsewhere) has outperformed the Goldman guy in his field then the existing guy may get the push from his partnership after years of climbing the greasy pole. People get partnerships if they bring a lot of investors with them, etc.

So individuals move from firm to firm earning on the basis of what they bring in, investors/firms who'll follow them from place to place as they trust their expertise in their field. These indiviauals will actually ask for the lowest salary possible (living expenses for twelve months usually) so that their earnings can be paid to them in other ways, deferred salary, company stock etc. That's so that it can all be taxed at a far lower rate than their salary is. They'll pay 45+% of their salary in taxes when you include NY State taxes but in the low teens on everything else.

And if they really did make a serious attempt to keep overall compensation for executives at welfare banks to a million a year then the firm's moneymakers will up sticks, taking their expertise/clients/investors to other firms and the government will be left with a shell of a firm that doesn't make any actual profits anymore as their profit-drivers have all buggered off leaving a profitless mountain of debt and disaster for the government to deal with. So the government has no choice other than to let these banks, which it will eventually own and need to run, staffed by people who can make some money when it does take them over.

[VictorCharlie]

Okay once you've nationalized the banks and cleared out the toxic assets how do you go back to private ownership? Do the CEOs and board members keep their jobs?

[CGM]

I just found an ETF that inverslely tracks consumer confidence, when consumer confidence goes down, it's value goes up. It's riding at $109 a share I wish I would have had it last december it paid out a $33 dividend per share

If anyone's interested in researching it (I am not advising you to buy or sell any securities) here's a link

SCC: Summary for ULTRASHORT CONSUMER - Yahoo! Finance
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huh? that is bizarre. Surely you don't mean it really does track consumer confidence. I could read up on it, but I'd rather hear you describe the mechanism by which an etf can inversely track consumer confidence. I mean, how can you have shares in that?

[killersheep]

I just found an ETF that inverslely tracks consumer confidence, when consumer confidence goes down, it's value goes up. It's riding at $109 a share I wish I would have had it last december it paid out a $33 dividend per share

If anyone's interested in researching it (I am not advising you to buy or sell any securities) here's a link

SCC: Summary for ULTRASHORT CONSUMER - Yahoo! Finance
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.
.
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huh? that is bizarre. Surely you don't mean it really does track consumer confidence. I could read up on it, but I'd rather hear you describe the mechanism by which an etf can inversely track consumer confidence. I mean, how can you have shares in that?

It doesn't invest in consumer confidence, but it plays against consumer services things like food, vitamins, clothing and other perishables, of course a decrease in stock values (belief of value of ownership) of this nature has a direct correlation to consumer confidence. Consumer confidence is a measure of how much consumers plan to spend vs. save today and in the future. Since the fund shorts stocks of manufacturers, retailers and distributers of said items it is always betting that consumer confidence as well as demand is declining. The 207 companies this fund invests in are believed to be a good cross section of what the average consumer would be expected to spend their money in a given year, it's mostly average income things like Autozone, Bed, Bath and beyond, Chipotle, burger king, eBay and things like that.
This is a bear market security and is expected to do very well in bear markets, but extremely poorly in bull markets. Make sense?

Bottom line you can expect this fund to go up when consumer confidence goes down and down when consumer confidence goes up.