Back on October 9th, I posted - behind friendslock, I'm afraid - the kind of thing I hate to post: an immediate warning about the banking system, telling people to have some cash on hand in case there of an unscheduled bank holiday in the immediate future. I didn't post it in public because I didn't want to be part of a bank panic, but there were just too many bad numbers coming out of too many bad places, so I told people to have a few days' worth of cash on hand, like you should anyway for, say, a major earthquake. Assume debit cards wouldn't work, banks wouldn't be open, cheques would be sketchy at best, and so on. I'm not unscreening it because there are many comments that were posted with awareness of that screening. (I may post a copy in comments, if there's interest.)
Of course, there wasn't such a holiday, which is good, because October was bad enough as it was. But as it turns out, the risk was both real and imminent:
Britain was just three hours away from going bust last year after a secret run on the banks, one of Gordon Brown's Ministers has revealed.And you know how I keep harping about treasury yields and interest rates paid on government debt and how that will affect spending? Karl at Market Ticker is worried that we're hitting that point. I wouldn't react that way on this little data, but the data that's there does indicate something is up. Brad talks about 2008 treasuries in some depth here, and asks whether the US is more or less dependant upon China for financing now than before.
City Minister Paul Myners disclosed that on Friday, October 10, the country was 'very close' to a complete banking collapse after 'major depositors' attempted to withdraw their money en masse.
But now, today's news.
Layoffs are ramping up sharply, with 50,000 large-company layoffs announced this morning alone. Some numbers: Caterpillar, 20,000; Sprint, 8,000; Pfizer/Wyeth, 8,000/11,000 respectively; ING, 7,000; Philips, 6,000; Home Depot, 5000, including the disassembly of the Expo design group and a couple of other experimental spinoff stores; Corus, 5000; GM, another 2,000 beyond previous announcements, and so on. (eta: TI, 3400 positions, in 1800 layoffs and 1600 retirements without replacement.) Australia is seeing serious upswings in bankruptcies, as well.
The developing world is in terrible shape as well. Brad Setzer here talks about massive falloffs in Brazil, China, and many other important countries. Job growth in India's IT sector has fallen sharply, and there's talk that Britain will ban advertising domestic job openings to overseas labour markets. Mmmm, protectionism.
Talking of, there's a clause in the US stimulus package guaranteeing that only US-made steel be used in US$64B of infrastructure projects. Exporters are begging to have the clause removed, fearing retaliation in an already... salty environment. And Sakakibara Eisuke expects the Japanese government to intervene to keep down the Yen should the US dollar fall below 円85.
Predictably, large homes are going out of style as the McMansion fad implodes. I'm amused by this quote: "Butler says she is seeing more interest in 'Wii-sized spaces' -- family rooms that are flexible enough to accommodate a variety of activities, from video games to fitness systems." There's a bit of an uptick in sales - or at least pending sales - as home prices fell by the most in 70 years, but get this: "45% of the transactions in December were considered distress sales, either a short sale or a home in foreclosure." 45%. Jesus. Meanwhile, even CNN has caught on to the hidden backlog of inventory stuck away inside bank repossession paperwork, so it must be pretty obvious by now - so there's lost more of this kind of action to come.
Spiegel says the German banking sector is a real mess, which we kind of know already, but there's an article on it for you. Former Merril CEO John Thain - and doesn't "Thain" sound like a name for some Star Trek alien? - says Bank of America knew everything they claimed not to have known on Friday, in advance - the billions in bonus payment looting on the way out the door, the 4th Quarter losses - and says they're trying to scapegoat him. Hopefully, this will turn even uglier, and enough will spill out to get some prosecutions going. There are also reports coming out about an October crisis in the Swiss banking system as well. Mish Shedlock is pleased about the Obama administration's plans to eliminate conflicts of interest in credit ratings, which he thinks long overdue and will - eventually - help. But he's still quite unhappy about Fed actions.
A social-attitude note: Marketwatch is trying to fight the tide by talking down saving up and talking up credit. Have fun sweeping back that tide, guys. And McDonald's turned in lower but better-than-expected profit numbers this morning, but - and this is key - sales missed to the downside. Not just lower, but lower than expected; the profit boost presumably came from a higher ratio of higher-profit items, which means what? Soda. It's a cheap menu item and it's big, and it makes assloads of money. Work that out in your head a little.
Leading economic indicators came in higher in December, but frankly, the number is bullshit; all the upside is due to increases in M2 money supply via massive injections of "liquidity," either directly (most of it) or indirectly (slow improvement in TED/LIBOR spreads). And on that topic, Mish has a rather disturbing graph here showing a year-to-year base-money spike not seen since the Great Depression and World War II, from his post on why Peter Schiff was more wrong than right, here.
But what everyone's waiting for is the GDP numbers from 4th quarter. Ambrose Evans-Pritchard at the Telegraph expects an annual rate of -6% GDP, which is a 1931 print, but he lurches towards the O SHI side a bit much, so we'll see. Marketwatch expects -5.5% annualised, the worst since 1982. We get that number on Friday. But historically, the kind of data we get on Friday gets revised down - often sharply - two months later, so if it's bad, you'll know the real data is really bad. Minyanville's Bennet Sedacca says that no matter how you slice this, it's a Depression. Similar calls are being made in the UK, with talk of a debt disaster, with some debt-to-GDP charts that really should scare anyone. Mish has more analysis here, and fortunately reprints the charts, because the Guardian's website is currently screwed up and not showing them.
Finally, watch your money-market funds very carefully. Peter at Minyanville has been talking about what he calls "forced migration of retail investors out of risk-free assets into riskier investments" for a while now, and he's just been, as he puts it, handed his backpack. Yes, it's legal. No, he doesn't like it. Be alert.