Wednesday, June 3, 2009

Links 06/03/2009

ADP Shows Private Employment Decreased 532,000 in May – Calculated Risk

GM bankruptcy forever linked to Harlem dealership – Reuters

Before GM filed its historic bankruptcy on Monday, Chevrolet-Saturn of Harlem made its own Chapter 11 filing. The dealership's move gave the automaker legal access to its preferred bankruptcy court in Manhattan.

Normally a Detroit-based company such as GM would file in Michigan or Delaware, where it is incorporated. The only way for it to file in New York would be through a subsidiary that did most of its business in New York or was incorporated in the state.

Court papers appear to describe a car dealer that sold significantly more corporate bonds than Camaros, running up $40 billion of debts and obligations to unions.

Promised Help Is Elusive for Some Homeowners – The New York Times

Yes, she was teetering toward delinquency. She was among millions of homeowners rapidly sliding toward danger for whom the Obama administration had devised an aid program — some already in foreclosure proceedings, others headed that way as they ran out of means to make their payments. But unlike those in imminent peril of losing their homes, Ms. Ulery had never missed a payment.

“I don’t know who this bailout is helping,” she said. “We’ve given these banks all this money and they’re not doing what they say they’re doing. Something’s not working right. They keep saying they’re doing all this, but we don’t see it down here at this level.”

Job Openings vs Unemployed – The Big Picture

Jim Rogers: S&P Could Go To 50,000 – Clusterstock

Privacy study shows Google’s eyes are everywhere – The San Francisco Business Times

Health Insurers Balk at Some Changes – The New York Times

But so far, the industry has made no such promises about another segment of the health insurance market, one responsible for many people being uninsured in the first place: the market for small employers. By some estimates, about half of the nation’s uninsured are people who are self-employed or work for a small business.

In other words, policy analysts and others say, unless the insurance industry is willing to give some of the same ground to small businesses that they have ceded to individual policy holders, a big part of what is wrong with the nation’s health care system may not get fixed.

Pending Home Sales: Watch The Birdie! – The Market Ticker, Karl Denniger

Case-Shiller and CAR Housing Declines Since Peak - May Report – Mish

S.F. budget cuts 1,600 jobs, trims services – The San Francisco Chronicle

State's unemployment fund short by billions – The San Francisco Chronicle

In 2009 and 2010, the state expects to pay out $29 billion in benefits. It will collect just $11 billion. Counting the small positive balance that was in the fund at the end of 2008, the result is a $17.8 billion deficit at the end of 2010.

GM: The Road to Hell Is Paved with Good Incentives – Minyanville, Minyan Peter

And, at least to me, here's where incentives put the final nail in the car coffin. Rather than reassessing its basic business model, the US automobile industry went for the ultimate incentive: short-term leasing. And not just normal leasing, but 2- to 3-year leases with inflated residual value assumptions. As a result, cars went from being an investment to being disposable.

At that point, GM and others had completely mortgaged their future - taking on not just consumer credit risk, but doubling down with residual risk. Now GM worried not only about the profit & loss impact of new-car prices, but used-car prices as well.

The Time for Bearishness Has Passed – Minyanville, Kevin Depew

Recently I took some heat from people who demanded to know how I could claim we are in the middle of a deflationary debt unwind while at the same time saying I want to add exposure to stocks just below 800, given a 10-plus year time horizon.

Let's pause for a moment and consider where we are: The S&P 500 closed below 900 on a weekly basis just 56 times over the past decade. That's 520 weekly closes. Fifty-six below 900. All told there were 28 closes below 900 in the 2001-2002 period, and 28 recently. There have only been five weekly closes below 800 over the past decade, each one occurring this year.

Here's the thing. I agree there is a some probability we trade below 600, a lesser probability we overshoot and trade in a range of 400-500. But going down, and staying down, are not the same thing.

Analysis: The Fed's Currency Collapse Gambit – Minyanville

This won’t hurt a bit.

That, at least, was the assurance offered by the Fed in a working paper that recently turned-up on its website. According to the authors of Currency Crashes in Industrial Countries: Much Ado About Nothing?, we’re all far too uppity about the value of our currency. Indeed, the paper concludes that “crashes caused by rising unemployment or external deficits have always had good economic consequences with stable or falling inflation rates.”

That’s right - your central bank just juxtaposed the words "crash" and "good." In so doing, they've eradicated any scintilla of doubt we might have had that the Fed was willing to risk currency collapse. As I've long argued, when confronted with the Hobson’s choice between allowing rates to rise or the currency to fall -- in order to lure creditors to buy more of our increasingly dubious claims -- the Fed was sure to opt for the latter. So sure, in fact, that gold began pricing in this outcome the moment Ben Bernanke put it on the table back in mid-2003.

Frugality turns fashionable as recession hits the wealthy – The Los Angeles Times

Months before financial markets collapsed in fall 2008, boutique proprietor Lee-Lee Sprenger noticed that her usually free-spending customers were flinching at $900 price tags on sweaters fresh from Italy. Sales at Mélange on Montana Avenue in Santa Monica have been sinking ever since.

"We're barely making it here on Montana," she said. "Most of the businesses have had a 60% drop in sales."

Saying Goodbye to Your Stuff – The Wall Street Journal