Recession watch: April

i dont get it how that can be possible man? The trade deficit in the past has been humongous and needs a lot of consumption contraction to rebalance. In spite of that, the fed keeps making it worse by printing and borrowing more money so the inevitable rise in interest rates as inflation sets in will crush the economy even harder then it would now.

1. Who cares about the trade deficit? And even if you are concerned about it, the current account deficit has been shrinking rapidly since September.

2. On money: we need to get beyond this freshman, 101-level understanding of monetary policy. Normally that's plenty, but these are not normal times, and the Fed is doing slightly more complicated things nowadays. To start, I recommend Robert Hall on interest on bank reserves as they relate to combating inflation and Bernanke's remarks at LSE in January.

--

Now, I'm a bit more pessimistic than JH. I also think that 1979-1981 is a good baseline for assessing the depth of the recession, but ultimately I fear that this one will be more severe due to the exhaustion of traditional monetary policy tools. It shouldn't become a 'second great depression', but it will be more severe than 1981.
 
If you listened to the conference call that's not the case at all. Earnings from FICC were broad based and virtually all of the revenue trading was in very liquid products. P&L was rounded to zero from AIG and very little was related to a reversal of negative marks. Average real loan marks was in the high 50s for their commercial real estate and low 50's for their leveraged loan (which is a joke considering these are senior collateralized loans).

The fact is credit spreads are huge and the competitive landscape has rewarded the survivors with Wachovia, Lehman, Bear and Merrill either consolidated or gone from trading. IE most of the Merrill traders were kept but the B of A traders have either been moved to other products or were let go. This doesn't even include the foreign institutions that are either distressed or gone from the competitive landscape.
Sorry Whomp, I don't understand. How can all these banks have massive losses in one quarter, then massive profits in the next? What were they trading that could have made all those banks so much money, when stock markets are going down and staying down, and businesses are scaling back and defaulting left right and centre? It doesn't make sense to me, which is why "they did something dodgy" seems to me the most likely explanation.
 
Sorry Whomp, I don't understand. How can all these banks have massive losses in one quarter, then massive profits in the next? What were they trading that could have made all those banks so much money, when stock markets are going down and staying down, and businesses are scaling back and defaulting left right and centre? It doesn't make sense to me, which is why "they did something dodgy" seems to me the most likely explanation.
This has nothing to do with stock markets since their equity business, investment banking business, wealth management and asset management businesses were all down (but still very profitable) this quarter (but profitable in the 4th quarter unlike FICC) versus last year. This has everything to do with the largest market they trade in which is fixed income (and currencies which dwarf equities) and that market simply did not work in the 4th quarter especially after all the consolidations and players that disappeared from the market. Add to that cost of funds at near zero and spreads on interest rates are very profitable.

Here's generally what they said on the conference call along with what I've already mentioned. If you feel it's dodgy then you need to wait for the 10Q. I doubt shareholders would find dodgy reasonable.

They experienced significantly altered competitive landscape. Many of their traditional competitors have retreated from the marketplace, either due to financial distress, mergers, or a shift in strategic priorities. Credit also posted strong revenues due to increased trading of cash and other liquid credit products.

On sustainability of FICC revenues - Revenues at FICC were very broad-based. The quarter benefited from higher spreads and less competition even with volumes low. In the future, spreads could narrow but that would likely come at a time when there would be higher volumes. While they can't give you sustainability on the number, they did say they tend to perform in many economic environments.
 
Sorry Whomp, I don't understand. How can all these banks have massive losses in one quarter, then massive profits in the next? What were they trading that could have made all those banks so much money, when stock markets are going down and staying down, and businesses are scaling back and defaulting left right and centre? It doesn't make sense to me, which is why "they did something dodgy" seems to me the most likely explanation.


I have come to the conclusion that much of the so called profits in the four or
five good years before 2007 were fictitious, the product of false accounting.

This is why the reported losses in 2007 are so great.

Apart from actually making actual losses in those years, the reported loss
is increased to write back the fictional profits in the preceeding years.

In this matter, the banks have just followed the various accounting lies of
the preceding dot.com and telco booms and busts.
 
jm041709image004_5F00_7E4649F2.jpg


An interesting graph...it bascially shows US GDP growth if financial innovations, in this case Mortgage Equity Withdrawl hadn't been used. Not too impressive. Here's the article related to it: http://www.ritholtz.com/blog/2009/04/the-trend-may-not-be-your-friend/
 
That really is an interesting graph. Add up all the differences between the blue and the red, then subtract what GDP we'll lose to the recession, and I bet it will still come out positive.
 
I just lost a truly massive post due to the upgrade, so here's a condensed summary. These are the more important indicators released last week.

Economic Indicators from 4/15 to 4/17

Regional reports

New York Fed: The Empire State Manufacturing Survey indicates that conditions for New York manufacturers continued to deteriorate in April, but at a much slower pace than in recent months.

Spoiler :
The Empire State Manufacturing Survey indicates that conditions for New York manufacturers continued to deteriorate in April, but at a much slower pace than in recent months. The general business conditions index climbed 24 points from its March record low, to -14.7. The new orders index shot up 41 points to a reading just below zero, and the shipments index rose 25 points, also reaching a level near zero. The inventories index continued to fall, hitting a record low -36.0. The indexes for both prices paid and prices received remained negative. The index for number of employees, while negative, improved in April, but the average workweek index fell. Future indexes were much improved, with the future general business conditions, new orders, and shipments indexes rising sharply to levels not seen since September of last year. The capital spending and technology spending indexes remained below zero, although they were considerably above last month’s levels.

In response to a series of supplementary questions, manufacturers generally indicated that factors other than tight credit were largely responsible for weakness in sales (see Supplemental Report tab). A majority of those surveyed reported that their sales had fallen more than 10 percent below their levels in “normal” times. The weak economy and uncertainty about the business outlook were widely cited as factors dampening demand for respondents’ products and services. Most respondents cited little or no difficulty obtaining financing for either long-term commitments (capital investment) or short-term needs (operating expenses). Moreover, fewer than 10 percent of those surveyed indicated that problems obtaining credit had adversely affected their production or sales.


Philadelphia Fed regional report (April 2009 Business Outlook): The region's manufacturing sector contracted less severely this month, according to firms polled for the April Business Outlook Survey. Indexes for general activity, new orders, and employment remained negative but improved somewhat from March.

Spoiler :
The region's manufacturing sector contracted less severely this month, according to firms polled for the April Business Outlook Survey. Indexes for general activity, new orders, and employment remained negative but improved somewhat from March. Indicative of continued weakness, firms reported declines in input prices and prices for their own manufactured goods, and the corresponding price indexes reached record lows this month. Most of the survey's broad indicators of future activity improved notably this month, suggesting that the region's manufacturing executives expect declines to bottom out over the next six months.

Some Indicators Suggest Declines May Be Diminishing

The survey's broadest measure of manufacturing conditions, the diffusion index of current activity, increased from -35.0 in March to -24.4 this month. Although clearly indicating continued overall decline, this reading is the highest since January. The index has been negative for 16 of the past 17 months, a span that corresponds to the current recession (see Chart). The new orders index remained negative but showed similar improvement, increasing 16 points from a 29-year low in March. The survey's shipments index decreased nine points, to -35.7, its lowest reading since the beginning of the survey in 1968. The survey's index of current inventories increased 15 points from its record low reading of -55.6 last month. The survey's indexes for delivery times and unfilled orders showed similar improvement this month but continued to reflect overall weakness.

Employment losses remained widespread this month, with over 45 percent of the firms reporting declines. The current employment index, though still negative at -44.9, increased seven points from its record low reading last month. Over 44 percent of the firms also reported fewer work hours this month, and the average workweek index decreased 10 points.

Price Indexes Reach Record Lows

Firms reported declines in the prices paid for inputs and the prices received for their own manufactured goods; corresponding price indexes also reached record lows this month. Thirty-six percent of the firms reported paying lower prices for inputs; only 5 percent reported paying higher prices this month. The prices paid index decreased only slightly but reached a record low reading of -31.5. Over 41 percent of the firms reported receiving lower prices for their own manufactured goods; no firms reported receiving higher prices. The prices received index remained negative for the sixth consecutive month, reaching a record low of -41.4 after dropping nine points.

Six-Month Indicators Show Marked Improvement

Broad indicators of future activity showed significant improvement this month. The future general activity index remained positive for the fourth consecutive month and increased markedly from 14.5 in March to 36.2, its highest reading in 18 months (see Chart). The indexes for future new orders and shipments also improved — increasing 23 and 24 points, respectively. Despite the expected improvement in general activity, firms still indicated that employment will continue to fall over the next six months: The future employment index remained negative for the seventh consecutive month, although it increased five points. More than twice as many firms expect employment to decline over the next six months (23 percent) as expect it to rise (11 percent). The six-month capital expenditure index showed improvement, increasing from a record low reading of -21.8 in March to -4.0 this month.

In special questions this month, firms were asked about the impact of credit conditions on their operations (see Special Questions). About 27 percent of the firms indicated they were having difficulty obtaining financing for long-term uses such as capital spending (7 percent cited substantial difficulty and 3 percent extreme difficulty). Moreover, 22 percent of the firms indicated difficulty obtaining credit for financing short-term uses such as paying workers or acquiring inventories (8 percent cited substantial difficulty and 3 percent extreme difficulty). Sixteen percent of the responding firms indicated that difficulty obtaining credit had reduced production or sales.

Summary

According to respondents to the April survey, activity in the region's manufacturing sector continued to decline this month, but some indexes suggest that the declines are diminishing. However, indicators for general activity, new orders, shipments, and employment all remained negative. Even more strongly indicative of continued weakness were the indexes for prices, which reached record lows. In contrast, most broad indicators for future business conditions improved this month, suggesting that the region's manufacturing executives expect a recovery in business activity over the next six months.




Economic Activity and Macrodata

BLS CPI: Overall CPI was down 0.1% in March 2009 (down 0.4% y-o-y, the first deflationary year since 1955). Core CPI was up 0.2% in March 2009 and up 1.8% year-over-year.

Spoiler :
The Consumer Price Index for All Urban Consumers (CPI-U) increased
0.2 percent in March, before seasonal adjustment, the Bureau of Labor
Statistics of the U.S. Department of Labor reported today. The index has
decreased 0.4 percent over the last year, the first 12 month decline since
August 1955.

On a seasonally adjusted basis, the CPI-U decreased 0.1 percent in
March after rising 0.4 percent in February. The decrease was due to a
downturn in the energy index, which declined 3.0 percent in March after
rising 3.3 percent the previous month. All the energy indexes decreased,
particularly the indexes for fuel oil, natural gas, and motor fuel. The
food index declined 0.1 percent for the second straight month to virtually
the same level as October 2008. The food at home index declined 0.4
percent, the second straight such decrease, as the index for dairy and
related products continued to decline.

The index for all items less food and energy increased 0.2 percent
for the third month in a row. An 11.0 percent increase in the index for
tobacco and smoking products accounted for over sixty percent of the March
rise, with a 0.6 percent increase in the new vehicles index also
contributing. In contrast, the indexes for lodging away from home, used
cars and trucks, and airline fares continued to decline. The index for
all items less food and energy has risen 1.8 percent over the past year.


Fed Industrial Production: Preliminary reports show capacity utilization at 69.3% and manufacturing capacity utilization at 65%.

Spoiler :
Industrial production fell 1.5 percent in March after a similar decrease in February. For the first quarter as a whole, output dropped at an annual rate of 20.0 percent, the largest quarterly decrease of the current contraction. At 97.4 percent of its 2002 average, output in March fell to its lowest level since December 1998 and was nearly 13 percent below its year-earlier level. Production in manufacturing moved down 1.7 percent in March and has registered five consecutive quarterly decreases. Broad-based declines in production continued; one exception was the output of motor vehicles and parts, which advanced slightly in March but remained well below its year-earlier level. Outside of manufacturing, the output of mines fell 3.2 percent in March, as oil and gas well drilling continued to drop. After a relatively mild February, a return to more seasonal temperatures pushed up the output of utilities. The capacity utilization rate for total industry fell further to 69.3 percent, a historical low for this series, which begins in 1967.


Office of Workforce Security, initial claims: In the week ending April 11, the advance figure for seasonally adjusted initial claims was 610,000, a decrease of 53,000 from the previous week's revised figure of 663,000. The 4-week moving average was 651,000, a decrease of 8,500 from the previous week's revised average of 659,500.

Spoiler :
SEASONALLY ADJUSTED DATA

In the week ending April 11, the advance figure for seasonally adjusted initial claims was 610,000, a decrease of 53,000 from the previous week's revised figure of 663,000. The 4-week moving average was 651,000, a decrease of 8,500 from the previous week's revised average of 659,500.

The advance seasonally adjusted insured unemployment rate was 4.5 percent for the week ending April 4, an increase of 0.1 percentage point from the prior week's unrevised rate of 4.4 percent.

The advance number for seasonally adjusted insured unemployment during the week ending April 4 was 6,022,000, an increase of 172,000 from the preceding week's revised level of 5,850,000. The 4-week moving average was 5,796,000, an increase of 146,000 from the preceding week's revised average of 5,650,000.

The fiscal year-to-date average for seasonally adjusted insured unemployment for all programs is 4.781 million.

UNADJUSTED DATA

The advance number of actual initial claims under state programs, unadjusted, totaled 607,971 in the week ending April 11, a decrease of 18,892 from the previous week. There were 370,949 initial claims in the comparable week in 2008.

The advance unadjusted insured unemployment rate was 4.7 percent during the week ending April 4, a decrease of 0.1 percentage point from the prior week. The advance unadjusted number for persons claiming UI benefits in state programs totaled 6,305,445, a decrease of 146,611 from the preceding week. A year earlier, the rate was 2.3 percent and the volume was 3,088,902.


Extended benefits were available in Alaska, California, Connecticut, Idaho, Indiana, Massachusetts, Michigan, Montana, Nevada, New Jersey, North Carolina, Oregon, Pennsylvania, Puerto Rico, Rhode Island, South Carolina, Vermont, Washington, and Wisconsin during the week ending March 28.

Initial claims for UI benefits by former Federal civilian employees totaled 1,074 in the week ending April 4, a decrease of 4 from the prior week. There were 1,707 initial claims by newly discharged veterans, a decrease of 124 from the preceding week.

There were 18,597 former Federal civilian employees claiming UI benefits for the week ending March 28, an increase of 516 from the previous week. Newly discharged veterans claiming benefits totaled 28,752, an increase of 304 from the prior week.

States reported 2,148,241 persons claiming EUC (Emergency Unemployment Compensation) benefits for the week ending March 28, a decrease of 103,543 from the prior week. EUC weekly claims include both first and second tier activity.

The highest insured unemployment rates in the week ending March 28 were in Michigan (8.0 percent), Oregon (7.9), Rhode Island (7.1), Idaho (7.0), Wisconsin (7.0), Pennsylvania (6.7), Nevada (6.2), Alaska (6.0), Montana (6.0), and Vermont (5.9).

The largest increases in initial claims for the week ending April 4 were in Michigan (+5,408), Missouri (+4,986), Texas (+3,734), New Jersey (+2,368), and Pennsylvania (+2,194), while the largest decreases were in California (-4,708), Ohio (-2,716), Alabama (-2,421), Florida (-1,539), and Wisconsin (-1,078).


US Census Bureau, New Residential Construction (March 2009): Housing starts fell 10% last month and are down 48% year-over-year.

Spoiler :
NEW RESIDENTIAL CONSTRUCTION IN MARCH 2009
The U.S. Census Bureau and the Department of Housing and Urban Development jointly announced the following new residential construction statistics for March 2009:

BUILDING PERMITS

Privately-owned housing units authorized by building permits in March were at a seasonally adjusted annual rate of 513,000. This is 9.0 percent (±4.1%) below the revised February rate of 564,000 and is 45.0 percent (±4.1%) below the March 2008 estimate of 932,000.

Single-family authorizations in March were at a rate of 361,000; this is 7.4 percent (±3.5%) below the revised February figure of 390,000. Authorizations of units in buildings with five units or more were at a rate of 132,000 in March.

HOUSING STARTS

Privately-owned housing starts in March were at a seasonally adjusted annual rate of 510,000. This is 10.8 percent (±11.6%)* below the revised February estimate of 572,000 and is 48.4 percent (±5.9%) below the March 2008 rate of 988,000.

Single-family housing starts in March were at a rate of 358,000; this is unchanged (±16.2%)* from the revised February figure of 358,000. The March rate for units in buildings with five units or more was 116,000.

HOUSING COMPLETIONS

Privately-owned housing completions in March were at a seasonally adjusted annual rate of 824,000. This is 3.5 percent (±12.7%)* above the revised February estimate of 796,000, but is 30.9 percent (±8.4%) below the March 2008 rate of 1,192,000.

Single-family housing completions in March were at a rate of 550,000; this is 5.0 percent (±15.9%)* above the revised February figure of 524,000. The March rate for units in buildings with five units or more was 263,000.




Longer reports

Federal Reserve Beige Book: get it here

BLS State and Local Unemployment: get it here. (PDF, 19 pages)


----

Links to full reports are in my signature.
 
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Looks like the markets will make a downward reaction from the last ~ 6 weeks of rallying.

I doubt we're going to end up on snorrius' predictions, but it's quite possible we'll see DJ below 6K and S&P down to ~ 600. I'm kinda waiting for the final sell off when everyone almost everyone is willing to give up on stocks and markets are still far too volatile.

JH: I'm not interested in the DJ or other stock indices for their own sake. It's just that historically, stocks have been one of few trustworthy leading indicators as to when the economy will turn imhso. Hoping it's soon rather than later, but I'm not too sure.

I can't believe what the banks are doing (being allowed to do) atm. One after the other they report huge earnings, but I doubt many are fooled by that. Imhso, gov ownership of US banks would solve the crisis faster. But that kinda hinges on how the public would view the takeover, and I may underestimate the psychologic effect it would have on americans there...
 
From BBC

The International Monetary Fund (IMF) has warned that potential losses from the credit crunch could reach $4 trillion (£2.75tn) and damage the financial system for years to come.

It says that even if urgent action is taken to clean up the banking system, the process will be "slow and painful", delaying economic recovery.

It says that banks may need $1.7 trillion in additional capital.

But it warns that political support for further bank bail-outs is waning.

One year ago, the IMF estimated that total losses from the credit crunch would be $1 trillion, which has been exceeded, showing how rapidly the financial meltdown has escalated.


COST OF REBUILDING BANKS
US banks: $275bn
Eurozone banks: $725bn
UK banks: $250bn
Other European banks: $225bn
Source: IMF, based on 6% capital/assets ratio
The IMF now says that banks are likely to lose $2.7 trillion, but other financial institutions such as insurance companies and pension funds are also now coming under strain.

And it says that emerging market economies, which will need $1.8 trillion in refinancing next year, will be hard-hit by the collapse of cross-border lending, and it predicts that there will be no net private lending at all to developing countries this year.

The report comes as the IMF and World Bank are beginning their spring meeting in Washington, after receiving a promise of $750bn in fresh funds agreed at the G20 summit.

Policy response


Systemic risks remain high and the adverse feedback loop between the financial system and the real economy has yet to be arrested

IMF
The IMF's latest Global Stability Report says that the banking system has not yet been stabilised, despite the billions of dollars spent by governments.

But it warns that they may be "a real risk that governments will be reluctant to allocate enough resources to solve the problem" because the public has become "disillusioned by what it perceives as abuse of taxpayer funds".

This is the situation especially in the US, where Congress appears reluctant to allocate additional bail-out funds above the $700bn approved last autumn despite the inclusion of another $750bn in President Obama's latest budget proposal.

The US Treasury has instead proposed a private-public partnership to buy up troubled assets underwritten by loans from the Federal Reserve.

But the IMF comments that "uncertainty about political reactions may undermine the likelihood that the the private sector will constructively engage in finding orderly solution to financial stress."

Deeper recession

The IMF says that restoring the banking system so that it functions normally is likely to take several years, and this will make the recession longer and deeper than usual.

But it warns that if policies are unclear or not implemented forcefully and promptly, "the recovery process is even more delayed and the costs, in terms of taxpayer money and economic activity, are even greater."

It says that the worldwide recession has deepened the financial crisis.

"Systemic risks remain high and the adverse feedback loop between the financial system and the real economy has yet to be arrested, despite the wide range of policy actions and some limited improvement in market functioning.

"Further effective government action - particularly geared toward cleansing balance sheets and strengthening institutions - will be required to stabilise the global financial system and to provide the foundation for a sustainable economic recovery."

On Wednesday, the IMF will present its world economic forecast.

It is expected to be the gloomiest for 60 years, with the world falling into a global recession, and an even sharper decline in output in the rich countries.

I see we're having another big swing towards pessimism this week... I wish they'd make their minds up
 
From BBC



I see we're having another big swing towards pessimism this week... I wish they'd make their minds up

Honestly, I think whether politicians show pessimism or optimism has more to do with what is coming up on the agenda. Need to get a committee bill passed? You'll hear The sky is falling! :run: Need to get people to stop feaking out and saving TOO much? You'll hear them talk up the "signs of recovery".

Don't forget that the media itself has to keep switching it up too. Screming like "Chicken Little" helps ratings but eventually people will stop listening... Too much bad news and too many people may tune out, hurting ratings. They have to show a "surprisingly positive" tidbit at regular intervals to keep their cash cow healthy.

I'm already premanently off the market. Once I realized ratings are now the only thing TV exists for, I refuse to watch any television news at all. PBS might have worked, but it is terribly boring and not worth my time.

NPR (national public radio) is one of the few holdouts who actually appear to make a modest effort to bring me relevant news, and they try not to sound too "Chicken Little" about it... even then, I listen only when I'm already in the car driving.

edit - Sorry for falling off topic. My point is that I believe that "making up their mind" is counterproductive from the point of view of the people who are trying to keep you watching their show (not just Fox news, but every news "bored"cast I have seen in the past five years or so) or supporting their political agenda (no party affiliation implied... I understand it's just how the system works. Doesn't mean I have to like it.)
 
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It is officially unofficial, Australia is in recession too. Previously we knew what the truth was, but now people at the top have said it.
Reserve relents, admits recession is here

* Tim Colebatch
* April 22, 2009

PRIME Minister Kevin Rudd has flagged that next month's budget will deliver a third stimulus package for the economy, as Reserve Bank governor Glenn Stevens one-upped the PM by declaring that Australia is in recession already.

New forecasts released overnight by the International Monetary Fund show Australia clearly in recession this year, although recovering next year. The IMF also lifted its estimate of the total write-offs by banks and other investors to $US4 trillion ($A5.7 trillion), equivalent to five years of Australia's output.

It estimates that two-thirds of those losses will have been generated in the US. Banks will bear most of the losses.

Releasing its half-yearly Global Financial Stability report, the IMF also warned that it will take years before credit conditions in Europe and the US return to normal.

In a report in which Australia appears as an island of relative stability, the IMF also warned that many developing countries are now being starved of credit.

The Federal Government already had the IMF's forecasts, which is why Mr Rudd got in first by conceding on Monday that a recession is inevitable.

Yesterday he promised a further package of stimulus in the May 12 budget. "The global economic recession means that a recession was inevitable in Australia, unemployment will therefore rise further, and as a result, continued strong economic stimulus will be necessary through the budget."

Macquarie Bank economist Rory Robertson yesterday summed up the reaction among economists. "Recession in Australia is inevitable, of course, mainly because it's already well under way."

Yesterday Mr Stevens agreed, telling a business audience in Adelaide: "I think the reasonable person, looking at all the information available now, would come to the conclusion that the Australian economy is in recession."

But in a deliberate attempt to shift public opinion, Mr Stevens spent the second half of his speech arguing strongly for Australians to remain confident, saying the country's medium-term prospects are exceptionally good.

Highlighting Australia's political stability, profitable banks, low public debt, "sensible policy frameworks", openness to investment and engagement with Asia, Mr Stevens concluded: "Few countries have the potential to offer so attractive a proposition to international capital, and to their own citizens, in the years ahead."

Minutes of the last Reserve Bank board meeting also sounded surprisingly positive notes, given that the board ended up cutting interest rates again. Members forecast that domestic demand will begin recovering in the second half of the year, implying that the recession will be short and shallow.

Economists agreed the minutes implied that rates will remain on hold next month, although further cuts are likely later this year.

Goldman Sachs JBWere chief economist Tim Toohey said Mr Stevens sees Australia's downturn as being driven by a loss of confidence rather than the credit crunch.

"Today's speech is a clear pep talk for Australian households and businesses to be optimistic about Australia's economic prospects," Mr Toohey said. "Confidence is the crucial aspect that is missing."

The latest IMF report reveals that the rest of the world has much deeper problems. "Shrinking economic activity has put further pressure on banks' balance sheets," it says.
 
FWIW, markets are reacting to the uncertainty of the delayed stress test results

Not like we dont know what those results are...

Stupid inefficient markets
 
That really is an interesting graph. Add up all the differences between the blue and the red, then subtract what GDP we'll lose to the recession, and I bet it will still come out positive.

This is a very good point. For all the demonization of financial markets going on, fact is with or without the recession, the innovations and deregulation of the last decades still have a very positive net result.
 
This has nothing to do with stock markets since their equity business, investment banking business, wealth management and asset management businesses were all down (but still very profitable) this quarter (but profitable in the 4th quarter unlike FICC) versus last year. This has everything to do with the largest market they trade in which is fixed income (and currencies which dwarf equities) and that market simply did not work in the 4th quarter especially after all the consolidations and players that disappeared from the market. Add to that cost of funds at near zero and spreads on interest rates are very profitable.

Here's generally what they said on the conference call along with what I've already mentioned. If you feel it's dodgy then you need to wait for the 10Q. I doubt shareholders would find dodgy reasonable.

Why are you so credulous?
:p
 
Why are you so credulous?
:p
I guess it's part playing devil's advocate and part politician/media skeptic. I trust politicians and newspeople less than I trust businessmen.
 
From BBC

The global economy is set to decline by 1.3% in 2009, in the first global recession since World War II, the International Monetary Fund (IMF) says.

In January, the IMF had predicted world output would increase by 0.5% in 2009.

It now projects that UK will see its economy shrink by 4.1% in 2009, and by a further 0.4% in 2010.

But other major economies are predicted to shrink even more, with Germany declining by 5.6%, Japan by 6.2%, and Italy by 4.4% in 2009.

The prospects for the advanced economies are not much brighter in 2010, with an overall forecast of zero growth.


ECONOMIC GROWTH FORECAST 2009
UK: -4.1%
US: -2.8%
Germany: -5.6%
France: -3.0%
Japan: -6.2%
source: IMF
The IMF says this represents "by far the deepest post-World War II recession" with an actual decline in output in countries making up 75% of the world economy.

Currently, output is falling by an "unprecedented" 7.5% annual rate in the rich countries in the last quarter of 2008, and the IMF expects the same rate of decline in the first quarter of this year.

Only a recovery in developing and emerging market countries will propel the world economy back into positive growth in 2010, albeit at a relatively weak level of 1.9%.

The prospects for world trade are even gloomier, with the IMF now forecasting world trade volumes to decline by 11% in 2009, and barely grow at all in 2010.

After 60 years as the engine of world growth, the sharp fall in trade is now hitting many of the leading exporting nations, particularly in Asia.

Gloomy UK

The IMF says that "the recession is expected to be... quite severe in the United Kingdom, which is being hit by the end of the boom in real estate and financial services".

It is predicting that UK unemployment will rise to 9.2% by the end of 2010, compared to 6.7% at the moment.

And it is warning that the UK budget deficit will rise to 11% of GDP, "reflecting mainly automatic stabilisers and asset-price related revenue shortfalls rather than discretionary stimulus".

The UK is also facing the cost of paying for the banking bail-outs, which the IMF estimated in an earlier report at 9.4% of GDP, or £130bn, after correcting an earlier figure of £200bn.

Financial problems

At the heart of the crisis is the continuing overhang of losses in the financial sector, which the IMF now estimates at $4tn, four times higher than it projected just one year ago.

And it warns that the current outlook is "exceptionally uncertain, with risks still weighting on the downside."

It says the main risk is that "policies may be insufficient to arrest the negative feedback between deteriorating financial conditions and weakening economies in the face of limited public support for policy actions."

Among the risks are that rising household and corporate debt cause further falls in asset prices and losses by financial institutions.

And it says that any recovery will be slower than in the past.

There will be a smaller financial sector, with financing harder to come by than in the past, especially for developing countries, which will cramp their growth.

And rich countries will face the burden of reducing their budget deficits which have soared during the crisis, at a time when their ageing populations means they will have lower tax revenues.

In addition, households may be reluctant to resume their previous spending habits, as saving rates have risen sharply in the US and the UK.

The IMF says it is important to take urgent action to shore up the banks, and to continue with short-term fiscal stimulus plans, in order to shorten the length of the recession.

Pretty bad, eh?
 
I guess it's part playing devil's advocate and part politician/media skeptic. I trust politicians and newspeople less than I trust businessmen.

And given how businessmen have acted and performed since 2003 this really says something (after the Lehman debacle, I don't think trusting anyone even on a relative basis is a good idea.)
 
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