Stock futures in the US are sharply down overnight following European reaction to various banking actions in the UK. Britain has expanded its bank bailout; Royal Bank of Scotland did particularly badly falling 67% in trading as many investors now assume it will be nationalised. The Telegraph is calling for a Biblical "Jubilee," or mass forgiveness of debts. Ireland did very badly as well, following nationalisation of Anglo Irish Bank, with the banking sector there down tremendously. Irish economist David McWilliams says Ireland should threaten to leave the Euro if it doesn't get more economic help; that will either do very strange and misleading things to the US Dollar index, or the threat will do very interesting and bad things to European banking. (The Globe and Mail (Toronto) talks about the emerging Euro breakup debate, here. The Daily Mail (London) talks about stresses here.) Karl at Market Ticker says policy makers need to realise this bailout system is not working, and the hole is deep enough, it's time to stop digging and let bankruptcies happen.
Ironically, on Friday, Minyanville had asked whether we've seen a retest of the lows, and over the weekend, in Marketwatch, Peter Brimelow and Edwin S. Rubenstein asserted that US stocks can't go much lower without reaching "unsustainable depths." However, I am not convinced that past-performance-as-future-result is a good methodology in this climate; certainly not in the short (six-month) term. Dr. Roubini at RGE Monitor thinks it's time for the next stock leg down.
Meanwhile, Spain has lost its AAA rating from S&P. There are riots in Latvia over the economic situation. Ukraine's economy is collapsing, and is generally expected to default. Brazil saw massive - record-setting - job losses in December. George Soros says the TARP programme was a disaster and that global economies are falling off a cliff. Singapore-based Jim Rogers - who unfortunately in this case has a very good track record - says that the UK is "finished" for now and urges everyone get money out. He believes the Pound Sterling will drop below the record low of US$1.05. This will do highly disproportionate things to the US dollar index, by the way; be highly aware of this. (It climbed on this and similar news all day Monday, despite falling against the Yen.)
China continues to make strong statements against US and European suggestions that China is primarily responsible for the credit crisis. There's more commentary to that effect here, in China Daily. Chinese central bank research head Zhang Jianhua called the US commentary "gangster logic." Please do tie these comments together with TIC data showing a rather significant negative flow back to the US in November, and Federal Reserve plans to start buying Treasuries themselves to "ease credit." (And tie that back to my earlier notes about the Federal Reserve Bank's plans to issue their own debt.) However - and this is a big however! - Brad Setzer says that most of the drop was a changeover from long-term Treasury purchases to short-term Treasury purchases, and that we are not yet seeing a true reversal. Regardless, credit-default swaps against US government debt default spiked up to record highs on Monday.
The Canadian (newspaper) reports 16,000 or so job losses in Alberta in December, as energy prices fall due to collapsing demand. Also, U.S. mortgage insurance companies want the Ottawa government to fully guarantee home insurance policies. (Currently, there is Federal backing, but not complete.) We'll see whether Mr. Harper bites. There's a rate-hike decision tomorrow (or later today, depending upon where and when you read this); it's expected central bank core rates will be cut 50 basis points to 1%.
Mish Shedlock offered a nice little selection of bon mots over the weekend, starting with a statement from the Bush White House on the way out so detached from economic reality as to be "galling," claiming that his administration's actions are "show[ing] some early results," and meaning that in a positive way.* Mish is incensed:
Bush is attempting to take credit for a recovery that has not happened yet, and in fact will not happen at all. His entire eight year term has consisted of nothing but lies, distortions, wasted money, failures to address natural disaster like Katrina, an unfounded war on trumped up lies, trampling of human rights, trampling the constitution, and policy decisions that helped sink the economy.He also notes the deflationary CPI report, calling out that if housing were calculated sanely, the numbers would be even moreso. He's also posted a roundup on the California situation, but it doesn't include California joining the list of states with overwhelmed unemployment insurance management systems. He also has a substantial roundup of large-corporation layoffs so far in January - 120,000 or so as of Friday evening. (It includes the Circuit City liquidation, but does not include newer reports such as the additional 4,000 layoffs at Bank of America.) The small business report from ADP isn't looking at all encouraging either, unfortunately.
There is not a single major thing Bush did right, and hundreds of things he did wrong including this ridiculous attempt to take credit for a bailout plan that has clearly failed.
Bush is the epitome of arrogance, gall, stubbornness, and stupidity all wrapped up in a single package. He will go down in history as one of the all time worst presidents. Ironically, the gall of his statements today will help seal that fate, so perhaps we should be thankful for them.
Revisiting, for the moment, the housing crisis, Countrywide Home Loans mocks its own loan modification assurances - used in commercials - in court, calling their own ads "mere commercial puffery," in defending itself against a lawsuit brought by a borrower whose modification request was turned down:
"It’s breathtaking," attorney Mary Frances Stewart of Concord, N.H., said of Countrywide's response to the lawsuit she and co-counsel Krista Atwater filed in Merrimack County Superior Court. In its response, "Countrywide is saying, 'We don't have any obligation or even necessarily the intention of actually modifying these loans,' and yet they’re representing that they do."Were I Bank of America - the new owners of Countrywide - I would be having words with my legal team. Strong words, because the public reaction to this will not be good.
And that's as good a segue into social mood indicator news as any; you might find this roundup of automobiles stocked up unsold around the world illuminating - not the image series per se', but the fact that it's a feature at a major newspaper. Amusingly, Fiat has just bought 35% of Chrysler; Daimler couldn't hep the company, I don't think Fix It Again Tony can either, but who knows? Anecdotally, vandals declare war on US Bank branch. But mostly, read Kevin Depew's commentary on the crisis of the real. I think he's late to the party where he talks about a re-assertion of centralisation - and in economics, "late" is "wrong" - but not necessarily wrong about another attempt. (C.f. my pervious commentaries about the changing nature of power and expectations of reassertions of central control.) But his note that "the downside as social mood darkens will be the recoil we face as society fights for a 'return' to 'controlled' capitalism and a 're-institution' of morality, structure, control and authority" strikes me as generally on target.
And that's all for now. Good luck.
*: I'd say they're showing some results all right - just not good ones.
eta: Dr. Roubini notes that last year’s worst-case scenarios came true, and that, unfortunately, this year will be worse, not better, and that "Only very aggressive, coordinated, and effective action by policymakers will ensure that 2010 will not be even worse than 2009 is likely to be." Worse, I think he's talking a little behind on some of his 2009 forecasts, which makes me nervous. If Dr. Doom is behind the curve, that's... nervousness-inducing.