Whew! What a month October was.

Is it just me, or did it feel like it was three months long?

Things happened so quickly, and there was so much news -- at least in the economy -- that it seemed like I had to pack three times as much information into my head.

Here's why -- thanks to a review from the Associated Press:

* The Dow plunged 2,400 points in the first eight trading days of October. 

*Congress passed a $750-billion bailout package.

*The credit crisis squeezed Wall Street institutions big time, forcing banks not to lend money.

*Huge chunks of retirement savings were taken out of stocks.

* The world realized it was in a recession.

* The government took equity stakes in banks.

* Wall Street trading swung more wildly than it ever has.

* Polticians bickered, and we readied for an epic election after an equally epic campaign.

We'll see if November is any busier. Then again, as I say that, I'm glancing at a web site's split screen of the two presidential candidates. Forget it. Next month's going to busy.

All right. Bring it on, world. These are historic times.

 

 

 

 

 

 

 

 

Friday's session gave the market its first back-to-back advances in more than a month. Still, the DOW ended the month down 14.1 percent.

It's a scary time. It seems like everywhere these days we hear stories about the fear that this economy is striking in people.

And yet, the doom and the gloom is benefitting Halloween -- at least the business of Halloween.

People are determined to have a good time today, despite the nation's sump.

I thought that in celebration of the day, I'd review some numbers from a recent story we did.

People's interest in creating their own goblins is driving a modest jump in sales - close to $6 billion - in Halloween-related spending, compared to last year, according to an industry report. 

The average person plans to spend $66.54 on Halloween, a modest spike from $64.82 a year ago, according to the federation's Consumer Intentions and Actions Survey. 

According to the survey, 64.5 percent of consumers plan to celebrate Halloween compared to 58.7 percent a year ago, and all together they will spend an estimated $5.77 billion on everything from Three Musketeers bars at the supermarket to the Gothic Vampire Head I recently saw at local store.

In Los Angeles County, 80 percent of people surveyed celebrate Halloween, and the average L.A. resident plans to spend $43 on candy and deocrations, according to another new survey released by Visa Inc.

 

Buy a (used) Lehman Brothers employee's ID card!

Global stocks rally

How low can the feds go

Foreclosure plan nears completion

The financial non-riots pass unnoticed

The San Gabriel Valley is sprinkled with legacies -- I'm convinced of it.

The legacies I've come across in my coverage so far are at the heart of many local businesses.

In many cases, it's a father handing his knowledge to a son, who continues on with the enterprise.

It's amazing how many times I've heard a story about the father taking a child along with him on a service call -- whether it was an electrical repair or a plumbing business. 

The child might even leave the business for a while, only to come back and help the business thrive.

This all might sound obvious. But if small business truly is the nation's economic driving force, and families are the social units that make us strong, then the San Gabriel Valley -- even with its issue - has some things to be proud of and to learn from.

Those links from generation to generation seem all the more powerful -- not only because of the economics, but because of how they strengthen society and families.

Of course, it doesn't always work. Many don't buy into the family business when they become adults.

But the stories I've come across lately remind me that many do, and that can be a very good thing.

And in these economic times, good things are at a premium. Might as well celebrate them when we can.

 

 

 

 

 

 

 

WASHINGTON (AP) _ The Federal Reserve has slashed a key interest rate by half a percentage point as it seeks to revive an economy hit by a long list of maladies stemming from the most severe financial crisis in decades.

The central bank on Wednesday reduced its target for the federal funds rate, the interest banks charge on overnight loans, to 1 percent, a low last seen in 2003-2004. The funds rate has not been lower since 1958, when Dwight Eisenhower was president.

Europe stocks rise this morning

Consumers feeling the pain, will also be wacked with credit card restrictions

Once recession proof, Hollywood prepares for slide

East West Bancorp, among the largest of community banks, reported third-quarter losses of $31.2 million on Tuesday.

But from the sound of things, it could have been a lot worse for the bank and its 70 branches.

Luckily for them, it sounds like they saw a crisis coming late last year, and took measures to review their loans.

Those loans weren't based on the "toxic," sub-prime mortgages that banks like the now-bankrupt IndyMac got into trouble with.

And even though East West was indirectly tied to the mortgage crisis through its own loans, which had gone to developers, they weren't completely immersed and ultimately brought down by the crisis, the bank's CEO Dominic Ng said. 

And since the bank did a 100% review of those loans earlier in the year and are taking action to unload them, including by selling off reposessed properties -- at an average of a 9% discount -- Ng can at least be more optimistic about the future.

And in this environment, that's probably saying a lot.

"We can't change the destiny of the world," Ng said. "But we can stay focused on what we can control."

That means pairing down costs, he said.

****

Ng also brought up a common theme, which I hear everywhere these days, and which as a reporter has struck a note with me. It's the extent to which fear can affect an entire economy.

I asked him what the biggest lesson he has learned in this whole crisis was.

Here was his answer:

"The biggest lesson? That the market is very much affected by fear. All you need is a rumor going, everybody gets concerned...and it might cause a liquidity crunch in financial insititutions.

"Financial institutions better make sure they have plenty of liquidity to withstand that kind of fear."

Let's hope so.

Flashback - President George W. Bush in 2001:
"My fellow Americans, at long last, we have reached the end of the dark period in American history that will come to be known as the Clinton Era, eight long years characterized by unprecedented economic expansion, a sharp decrease in crime, and sustained peace overseas. The time has come to put all of that behind us." (h/t econlog)

As the government spends (throw away) billions to help businesses, it should take into account the worth of some of these deals. A Chrysler investor, Daimler AG, believes the auto company is worth nothing.  And now the government (taxpayers really) are going to probably spend $5 billion and $10 billion to help GM merge with it.

Cost of the crash (so far)

Govt pushing auto merger

What are they thinking making a profit for their shareholders

CalPERS losing money but confident

Sounds like Wal-Mart is going to ride out the economic storm pretty well going into the holidays, according to the company's CEO and President Lee Scott.

"This is Wal-Mart time," he told investors Monday.

I guess you can't go wrong when you sell what people need rather than what they want, and when you know your customer.

Because when times are tough, like they are now, we are buying what we need. Wal-Mart realized that as it surveyed its customers.

That was part of Wal-Mart U.S. CEO Eduardo Castro-Wright's message last week in Los Angeles, when he told a Town Hall Los Angeles leadership forum that the fundamentals of consumer behavior "are changing as we speak."

They sure are.

"Consumers are looking for a better value," he said.

Wal-Mart seems to be proof of that.

The retail behemoth is going into the holidays with a bolstered share price and a good knowledge of its customer base.

That must be scary for competing retailers, who based their business plans on selling more discretionary goods -- things people want.

 

Dr. Doom should change his name to the Grim Reaper:

"Even using the nuclear option of guaranteeing everything, providing unlimited liquidity, nationalising the banks, making clear that nobody of importance is going to be allowed to fail, even that has not helped. We are reaching a breaking point, frankly."
He believes governments will have to come up with an even bigger international rescue, and that the US is facing "multi-year economic stagnation".

With hedge funds paying out money (at a loss) to wary investors, could they be the next to fall?

America's most overrated product...the bachelor's degree.

An Apple a day keeps same-sex marriages OK.

It's the Communists' fault.

The above photo came from a story about company layoffs.

Once again, overseas markets plunge

Yipee for the Wii

Another fed rate cut coming

We're dealing with some pretty big extremes these days when it comes to housing.

Los Angeles County's median home price fell 35.3 percent in September compared with the same period a year ago. But home sales -- fueled by a frenzied buying up of foreclosed properties -- rose a whopping 82.9 percent, according to figures released Friday.

Those extremes bear testimony to the volatility that has battered the nation's housing sector over the past year. And Marty Rodriguez, owner of Century 21 Marty Rodriguez in Glendora, is in the thick of it.

Rodriguez said 30 percent of the transactions her office handles are either home foreclosures or short sales.

"That's the highest it's been for us, but I don't think we're through," she said. "I think that could probably get up to 40 percent ... and maybe even 50 percent."

Whew ...

Unemployment is on the minds of a lot people these days, including journalists.

What is causing job loss is still a matter of discussion, if not debate, though.

Job loss and recession have traditionally been related to businesses not being able to sell goods, said Sven Arndt, professor of Money, Credit and Trade at
Robert Day School of Economics and Finance.

The job losses in this downturn could be different, Arndt said, in that they might be related to the fact that businesses simply can't get financing for their operations.

Interesting IM exchange between John Carney and Felix Solomon debating whether it was a good or bad idea to let Lehman Brothers to fail.

Solomon: With hindsight, letting Lehman fail was clearly a mistake...because bank creditors realized they could be wiped out so no one wanted to lend to banks any more
including other banks.

Carney: That's good...Bank creditors need to be aware of risk...the main thing we need is less reckless lending...Your position is that we need more credit to solve problems of debt.

End note:"The view that we make the financial system more stable rather than less by propping up insolvent banks is the real disaster."

Asian markets plunge this morning

State law slowing foreclosures for now

News alert: economists " wrong 40% of the time." 

Oil production cut; prices fall

With all the talk about companies struggling to stay afloat in the wake of their corporate greed, it's nice to hear about a business that goes out of its way to operate in an eco-friendly manner.

Carpet manufacturer Bentley Prince Street is one such business.

On Wednesday, the California Integrated Waste Management Board announced that it has chosen the Industry-based company as the recipient of the 2008 CalRecycle Sustainable Business Award.

The award honors businesses that take extraordinary measures to reduce waste by cutting the amount of trash they produce, conserving resources and reducing waste disposal in landfills.

"We're pretty excited," said Kim Matsoukas, Bentley Prince's sustainability manager. "We won it in 2000, and when the opportunity came up to apply for it again, we did. We really do go above and beyond. Ninety percent of our waste is diverted from landfills."

And that equates to significant  savings. 

The company's voluntary waste reduction efforts since 1994 have saved the company nearly $70 million in cumulative avoided waste disposal costs.

    In a hearing today before the House Oversight Committee, the credit rating agencies are being portrayed as profit-hungry institutions that would give any deal their blessing for the right price.
   Case in point: this instant message exchange between two unidentified Standard & Poor's officials about a mortgage-backed security deal on 4/5/2007:
Official #1: Btw (by the way) that deal is ridiculous.
Official #2: I know right...model def (definitely) does not capture half the risk.
Official #1: We should not be rating it.
Official #2: We rate every deal. It could be structured by cows and we would rate it. (Economist)

That's not completely true; some of these financiers blame others too, just never themselves.

Foreclosures high, but not as high as last month

Quelle Surpise: Prez pols in denial, plans add to national debt

China economy slows

Gas is cheaper, but not Texas cheaper

Parsons, the engineering and construction firm based in Pasadena, announced Wednesday that it won a pretty sizable contract -- $98 million -- to construct a public road in Idaho.

And with a new economic stimulus package on the way, Parsons and companies like it -- many of which are in the San Gabriel Valley -- could be in for more.

Congress is in the early stages of talking about a $150-billion stimlus package, part of which could include nearly $40 billion in public infrastructure funding.

That money could go to private companies, who would then contract with others to build public projects.

People are optimistic about such a package, for what it could mean to the region's economy.

"I would love to see us investing in the rebulding of America in a way that puts Americans to work in good paying jobs and gets our economy moving again, said Rep. Adam Schiff, who represents the area.

The prospect of another government injection of money into the economy has Parsons' attention.

"If they were going to fund something like that, it would be in our best interest as a business to look into that," said Tim Davis, project engineer for Parsons. 

 

 

 

 

 

  

 

 

Asian markets tumble

Bankruptcy no bar against 'easy money' offerings

"I'm a patient, not a profit"

Apple rises; Yahoo falls

 

Wal-Mart's U.S. CEO spoke in downtown Los Angeles as part of the Town Hall Los Angeles leadership forum.

The gist of it for me was -- as Wal-Mart goes, so does the rest of retail. Though it may be that Wal-Mart and the rest of retail are going in different directions. As CEO Eduardo Castro-Wright pointed out, Wal-Mart, the world's largest retailer, is uniquely positioned to ride out the nation's economic downturn because it sells not only what people want, but what they need -- and for cheap prices.

Since Wal-Mart is kind of a barometer of consumer sentiment, it was interesting to see what Wal-Mart is finding in the concerns and buying patterns of the company's customers.

For one thing, no longer are healthcare and gas prices the top concerns of most of Wal-Mart's customers. The top concern for 80% of them is now financial security.

Everything follows from that concern, it seems:

*Credit as a form of payment is declining.

*Private brands are growing at 2.5 times the rate of national brands.

*Higher gases prices are impacting when and how often people shop.

*Paycheck cycles are becoming increasingly pronounced. That is, people are buying based on when they get paid rather than spreading out their buying patterns over a month.

The event also offered an opportunity to check in with a group of students on what they thought of the nation's economic woes.

The Economics and Business Society at Cal State LA was in the audience to see Castro-Wright speak.

"It's definitely diffucult," society member Lisa Duong, 21, said of the slumping economy. "Graduates are worried about finding jobs."

But its wasn't all gloomy for this group.

"It's a good time to invest," society Vice President Sabin Kith, 23, said. "It's like Christmas."

 

 

 

 

 

 

Sounds like an ingenious Republican plan, but Obama/Biden put it together.

Uhm. Only kidding. (I hope)

Since the first one worked sooo well, the feds plan another stimulus payment

Gov't wants fewer banks

Benefit of falling oil prices; annoying countries face reckoning

Healthcare vs profit (The Chosen One will fix it, I tell ya)

Tech companies hold off public stock offerings

If I were a retailer, I'd probably be gripping the arms of my chair right now - with white knuckles. Because the outlook for this holiday shopping season is looking grim.

How grim, you might ask?

Well, a report says Circuit City may soon close about 20 percent of its stores - at least 150 locations - and cut thousands of jobs to stave off a Chapter 11 filing. This comes on the heels of Mervyn's announced liquidation, a move that will shutter its remaining 149 stores.

Both companies have struggled to remain viable in a fiercely competitive retail environment. And with all of economic turmoil that's hit the fan lately, consumers are not exactly feeling energized to go out and buy clothing, electronics, cars, toys and other merchandise.

In Circuit City's case, the store closures would allow the company to liquidate $350 million in
inventory that could be used to pay real-estate costs, including leases on abandoned
sites.

Mervyn's, which now operates mainly in California, has seen its sales drop more significantly  as the state is among the hardest hit by the real estate slump.

The most distressing part of all this may be the uncertainty that lies ahead. I don't think these are by any means the last retailers that will announce closures this year.

I'd lay money on it. 

Richard Giss, a retail analyst with DeLoitte & Touche, recently summed up his thoughts about this year's holiday shopping season.

"The retail landscape is a minefield right now," Giss said. "Retailers are walking on eggshells. They're facing consumers that increasingly want to keep their hands in their pockets. And that's not the kind of consumer that bodes well for the holiday season." 

In the past several weeks, the NY Times has rolled out long features on key players who created the current economic crisis. Last week, it was Alan Greenspan. This weekend it was Bill Clinton's top administration's top housing official in the mid-1990s, Henry Cisneros:
"He also remains bullish on home building, despite the current carnage.

"We're not selling cigarettes," he says. "We're not drawing people into casino gambling. We're building the homes they're going to raise their families in."'
[except of course before they get evicted]

Debt? No worries. We'll be long dead before it's paid off

Day laborer jobs dwindle

Small banks shrug at government's money offer

Economy stalls LA area projects

In the midst of a financial crisis, some media are showing major gains. Like the Wall Street Journal

President Bush is expected today to give a pep talk to the nation and give a more detailed explanation of what the government is doing to battle the financial crisis.

The seasick market again rises

Students (at very expensive schools) feel the squeeze

Falling oil prices help consumers and some people aren't happy about it

Social Security increases

Ad clickers help Google stock

 

If our economy ever starts rolling along again, and people start making lots of money, behavioral economists say it might do us all well not to lose sight of human nature and its affect on the U.S. economy -- and the world's -- as we are expanding some new bubble.

Fear, overconfidence and irrationality are powerful forces that threaten the economy. But if you really want a zinger, consider that the economy -- as rational as it may be in theory -- is not rational at all in the world outside of a textbook.

It's entirely subject to human nature and our own fallibility, says Dan Ariely, professor of behavioral economics at Duke University and author of the book "Predictably Irrational."

"In fact, it's our lack of understanding of those irrational forces that brought us to this point," Ariely said.

If we could build an economy that accounts for those irrational forces, maybe we'd have a better world, he argues.

Take a look at Ariely's most recent blog entry at http://www.predictablyirrational.com/?p=305&date=1:

 

Isn't behavioral economics a depressing view of human nature?

16th October 2008, 06:42 am

It is true that from a behavioral economics perspective we are fallible, easily confused, not that smart, and often irrational. We are more like Homer Simpson than Superman.  So from this perspective it is rather depressing.  But at the same time there is also a silver lining. There are free lunches!

Take the physical world for example. We build products that work with our physical limitations. Chairs, shoes, and cars are all designed to complement and enhance our physical capabilities. If we take some of the same lessons we've learned from working with our physical limitations and apply them to things that are affected by our cognitive limitations-insurance policies, retirement plans, and healthcare-we'll be able to design more effective policies and tools, that are more useful in the world.... 

Want some good news?

Noriel Roubini, the professor who predicted the financial crisis in 2006, figures the U.S. is in for its worst recession in 40 years, a scenario that is causing the rally in the stock market to ``sputter.''

Well, we've certainly seen a few "sputters" over the past several days. In fact, Wall Street's schizophrenic activity this week had more in common with the Viper rollercoaster at Six Flags Magic Mountain than it did with any semblance of sanity.

Roubini offers this:

``There are significant downside risks still to the market and the economy,'' Roubini, 50, a New York University professor of economics, said in an interview with Bloomberg Television. ``We're going to be surprised by the severity of the recession and the severity of the financial losses.''

The economist said the recession will last 18 to 24 months, driving unemployment to 9 percent, and already depressed home prices will fall another 15 percent. The U.S. government will need to double its purchase of bank stakes and force lenders to eliminate dividends to save them from bankruptcy, Roubini added. Treasury Secretary Henry Paulson said he plans to use $250 billion of taxpayer funds to purchase equity in thousands of financial firms to halt a credit freeze that threatened to drive companies into bankruptcy and eliminate jobs.

Treasury Secretary Henry Paulson isn't exactly taking the blame.

But he did express regret for a lot of errors that led to the biggest financial crisis in seven decades. Still, he insists the Bush administration is pursuing the right course in addressing these problems.

In an interview on Fox Business Network, Paulson said, "We're not proud of all the mistakes that were made by many different people, different parties, failures of our regulatory system, failures of market discipline that got us here."

Truth be told, there's plenty of blame to go around.

You could start with the over-eager lenders who threw rules - and sane thinking - out the window in their rush to give loans to people who in many cases didn't have jobs, let alone the ability to make mortgage payments.

Other more marginal borrowers who did have jobs were also given loans. But many of them were certainly not able to keep up with their monthly mortgage payments once those payments began to reset at higher levels.

And a large piece of the blame goes squarely on the shoulders of borrowers themselves. Granted, some may have been issued loans without getting a full explanation as to how they would eventually ramp up with higher payments.

But others - many of whom should have known better - simply jumped in without any kind of due dilligence. They just saw a piece of the American Dream and grabbed it.

And now we circle back to the lenders. As increasing numbers of these loans began to default, mortgage lenders saw their revenue streams - and their liquidity - begin to dry up. Federal regulators should have jumped in long before all of this hit the fan. And when they finally did jump in, it was too late.

Now taxpayers are footing the bill for a massive bailout plan and a dire economic situation that has sent economic shockwaves throughout the financial world.

Great way to head into the holiday season.

Federal Reserve Chairman Ben S. Bernanke signaled an end to the Fed's decades-old aversion to interfering with asset-price bubbles as the financial crisis reshapes some of the central bank's most firmly held views

Playboy flees Santa Monica, and in (unrelated?) news, dentists feeling pinch.

Europe and Asia stocks plunge

"Amid fresh signs that the nation is in recession" The foreclosed homes, closing businesses and lost jobs weren't enough to convince the media we're in a recession. Can we just stop saying this phrase? And to alleviate the one we're in now, taxpayers will paying for more deficit spending. Geez.

That's what you want in a downturn, force companies to increase costs

What deficit? California increases debt
"While California will have enough cash to pay its bills through February, leaders have not resolved the state's revenue problem, a result of an economic slowdown."
- No. The state has had a long time budget problem. Now, they can just blame it on the (shhh) recession.

Congressional Democrats are considering new economic stimulus legislation.

This from Rep. Adam Schiff's weekly e-newsletter:

Congress to Explore Additional Economic Stimulus Measure
On Monday, the House leadership convened an economic forum with some of America's leading economists many of whom urged new recovery measures that focus on creating jobs and helping those struggling to make ends meet. Chairmen of several House committees will be holding hearings next week to reach a consensus on legislation designed to speed the recovery effort. The new proposal could be brought to the House floor in November, although the date has not been finalized.

Housing prices are expected to decline throughout much of California next year, but sales of existing homes will continue to rise, according to a report by the California Association of Realtors.

CAR's 2009 California Housing Market Forecast, to be released Thursday, predicts that California's median price will fall 6 percent next year to $358,000 compared with a projected median of $381,000 for this year.

Sales for 2009 are projected to increase 12.5 percent to 445,000 units, compared with 395,600 units (projected) in 2008.

Robert Kleinhenz, CAR's deputy chief economist, said those projections weren't exactly unexpected.

"Having observed the way the housing cycle has behaved in the past, in both the 80s and 90s, this is not surprising," he said. "The nice thing is that we've already turned the corner in terms of sales activity. The real question is when prices will turn around."

CAR's forecast is being presented today during the California Realtor Expo at Long Beach Convention Center.

"If anything has been surprising over the past year it's been the fact that California's median has fallen, not just rapidly, but by such significant margins," Kleinhenz said. "It's totally unprecedented. We've never seen double-digit, year-over-year decreases like this."

As a poll today shows, people want more regulation. Now how far do we go? We're throwing so much money out there, which banks might use to loosen credit or might just hoard, and still investors are fleeing the market. When do we say that a recession is here and let's try to soften the landing  a bit?

An offer banks couldn't refuse

Despite rally, recession fears grow

Shocker: Nine out of ten say economy doing badly

State debt grows

The federal government's action Tuesday to make $250 billion in preferred stock available to banks might be Treasury Secretary Henry M. Paulson's hope for getting the economy going again. But it was not a panacea for many, who feel the action is a socialistic attempt to interfere in the free market.

"It's the most ludicrous thing I've ever heard," said David Hornberger, a former banking executive who lives in San Gabriel.

 

 

 

Government moves again to unclog credit lines
By MARTIN CRUTSINGER
AP Economics Writer

Or so says state Treasurer Bill Lockyear about the state's gimmicky budget. Of course at the same time he'll be asking for billions in short term loans to help out the state. That'll lure investors I'm sure.

When will I receive a dividend check?
Taxpayers will be paying out $250 billion for banks and guarenteeing more types of deposits.

Just don't call it nationalizing

Japanese and Europe stocks rebound

Everyone is being bailed out nowadays. Where's mine? Not that it's always about me. But Where's mine?

Britain partially nationalizes some banks

Stocks too cheap

European dand Asian markets bounce back

Taxpayer's grandchildren will still be paying if nearly $80 billion worth of bonds pass

Financial heat cools climate change deal

but we're going to fix it, darn it.

Friday capped a seven-day streak of market losses, making for Wall Street's worst week ever.

The Dow Jones industrials fell 696 points shortly after the market opened. But when the dust settled, the index finished the day with a decidedly more muted loss of just 128 points. That gave the blue chips an eight-day loss of just under 2,400.

Financial experts have dickered over whether the nation is or isn't in a recession, but economist Christopher Thornberg of Beacon Economics says we're already there.

"Give me a break - unemployment in California has gone up 2.2 percentage points in a year," Thornberg said Thursday. "That's a recession. In the end, the economy is made up of people. And unemployment is the primary measure that defines a recession."

But there may be some hope - and I place heavy emphasis on "some." Here's more from the AP:

There were signs Friday that some investors might believe the market was at or near a bottom. Just one day earlier, selling accelerated in the last hour of trading, giving the Dow a loss of 678 points, as many market players fled, while Friday, many people were clearly buying. And the Russell 2000 index, which tracks the movements of smaller company stocks, had a 4.66 percent gain Friday; small-cap stocks are often first on investors' shopping lists when they think a market turnaround is at hand.

"Nobody wants to miss the bottom," said Anton Schutz, president of Mendon Capital Advisors in Rochester, N.Y., who said of the Dow's performance, "I view it as a victory that we only finished down 100."

 

 

 

  

While the rest of the world comes crashing down, (except for Warren Buffet, of course) Iraq's stocks have risen 40 percent. Will we get any credit for that? Unlikely, methinks. Best quote:
"You can't have a totally free market. You have to have rules. From what I understand of why the credit crisis happened, I can only describe their administration as stupid."
- Oh, now they're all knowing.

So Congress passes $25 billion loan guarentee package for automakers then this:
WSJ: General Motors Corp. and Ford Motor Co. saw their share prices plunge on Thursday as concerns grew that the struggling auto makers may not have enough cash to survive the deepening downturn in the U.S. economy.
- So what happens with the $25 billion?

Asia markets plunge; In Japan, "the worst one-day loss since the stock market crash in 1987".

In the busiest day in NYSE history, panicky investors dumped stocks en masse.

Bush to meet with world's finance ministers tomorrow (reportedly, he will say, "oops, my bad")

Fear and foreboding on Wall Street. (D'oh moment: "...investors became convinced that the nation is on the verge of a deep and prolonged recession" ya'think?)

Is it safe? (Silly reference to Marathon Man)

If you thought it couldn't get worse, you were sadly mistaken.

Wall Street suffered yet another mega decline on Thursday, with the Dow Jones industrials weathering a drop of 679 points, pushing the index well below 9,000.

The Blue Chip index ended the day at 8,579, its lowest level in five years. The Dow has lost 5,585 points, or 39.4 percent, since closing at 14,164.53 on Oct. 9, 2007. 

"Psychologically, now is a tough time for any investor, whether you're invested in a company-sponsored profit-sharing plan or a mutual fund," said Nancy D. Sidhu, vice president and senior economist with the Los Angeles County Economic Development Corp.

Thursday's performance offered a sobering contrast to the market conditions of a year ago, when the Dow hit its all-time high.

This from the Associated Press:

"The story is getting to be like that movie 'Groundhog Day,'" said Arthur Hogan, chief market analyst at Jefferies & Co. He pointed to the still-frozen credit markets, and Libor, the bank-to-bank lending rate that remains stubbornly high despite interest rate cuts this week by the Federal Reserve and other major central banks.

"Until that starts coming down, you'll be hard-pressed to find anyone getting excited about stocks," Hogan said. "Everything we're seeing is historic. The problem is historic, the solutions are historic, and unfortunately, the sell-off is historic. It's not the kind of history you want to be making."

Stocks up in Europe this morning; Asian markets  mixed

Time to buy; or maybe not

Feds considering buying stakes in banks

Former Federal Reserve Chairman Alan Greenspan's legacy tittering

The market has historically had its ups and downs, but investments can come out OK, if you can hang in there with your money and hang on for dear life. That's what an analysis by Ludwig Chincarini, assistant professor of economics at Pomona College, seems to bear out.

He took a look at gains and losses on the Nasdaq Stock Market over time, and came up with some interesting numbers.

For instance, let's go back to 1981 and the economic woes of the time. From a peak in May of that year to its trough in July 1982, stocks lost 25% of their value: a -25% return.

But from July 1982 to July 1987, they had a return of 160%.

Here's another example:

From  a peak in February 2000 to the market's lowest point in January 2003, there was  a return of -72%,

But from January 2003 to January 2008, there was a return of 80%.

From February 2000 to January 2008 there was a return of -49%.

Whew...

The professor's point? Hang on. It could be wise not to take your money of the stock market, given that overall, stocks can take a beating but can keep on ticking and in time regain value.

 

 

 

 

 

 

I don't make much money, but I'm not losing much either.
"Americans' retirement plans have lost as much as $2 trillion in the past 15 months, Congress' top budget analyst estimated Tuesday.

The upheaval that has engulfed the financial industry and sent the stock market plummeting is devastating workers' savings, forcing people to hold off on major purchases and consider delaying their retirement, said Peter Orszag,  the head of the Congressional Budget Office." 

Jeff Poor: "Largely ignored by the media were the abuses of former executives of Fannie Mae and Freddie Mac. Fannie's former CEO, Franklin Raines, a former Clinton budget director and adviser to Obama, was embroiled in an accounting scandal involving changing his own pay procedures for higher compensation.

 

     Also overlooked by the media in the wake of the Fannie and Freddie bailout, as pointed out in an Oct. 7 column by Media Research Center president Brent Bozell, was former Fannie Mae CEO Daniel Mudd. Mudd received $13.4 million, plus $5.4 million in stock awards in 2007, despite the Fannie's heavy losses and eventual bailout."

Home resales are up: ``Vulture investors buying foreclosed homes are likely the key driver of the rise,'' said Ian Shephedson, chief U.S. economist at High Frequency Economics Ltd. in Valhalla, New York, who forecast a 4 percent increase. ``But sales are sales and they all take inventory off the market. The key test now is what happens in September and October, but these numbers today are welcome.'' (Bloomberg)

World leaders meeting to stop financial meltdown

World-wide rate cut

It's his fault; no, it's his fault

Shocker: state spending more than it takes in (headline good for any time in the last ten years)

"State financial woes worry governor" (That's an actual headline. How about, "Owner concerned over lost home."

Homes are in foreclosure, banks are topping and the nation's credit markets are tight.

But Goya Foods Inc. is going strong. In fact, the Secaucus, N.J.-based business - the largest, Hispanic-owned food company in the United States - is on track to generate $1 billion in sales this year.

"When we talk to our sales people and plan our marketing strategy we see no reason why we shouldn't grow 20 to 25 percent over the next five years," said Evelio Fernandez, Goya's vice president.

In the short term, that growth will include an expansion of the company's Salt Lake Avenue facility in Industry, which serves as Goya's West Coast distribution center.

Well, it's nice to know that at least ONE company is doing well in this economic climate ... 

Cuts 1,000 people then spends a billion on new companies.

"The U.S. Federal Reserve is reportedly looking at getting into unsecured lending, an extreme step that could allow it to directly purchase commercial paper, according to a report in the Financial Times. The report said the Fed had never done so in its history, but doing so could allow it to participate in the frozen inter-bank money market and the contracting commercial paper market." Market Watch

Bailout; a pebble tossed into a churning sea (But at least those arrows are safe)

Is it ever going to end?

Is now a good time to panic?( what's with the questions marks?)

Former Lehman CEO grilled; Freddie and Frannie no shows  Best line: "The people in my block in Baltimore, if they perform poorly, they get fired."
- Except of course if one is a politician then you are immune

Red ink swamps state

In these times, I wish I was a little more savvy about the way capital markets and mutual funds work. I'm learning, but it comes at you pretty quick these days.

It made me wonder what others think about the need for a little more financial literacy. Is there a disconnect in this country from important knowlege about our financial and economic systems?

"I think there's a huge disconnect," said Nancy Sidhu, vice president and senior economist at the Los Angeles County Economic Development Corp.

Sidhu remembered her own education: In seventh-grade arithmetic her class was given 1040 tax forms to study. SEVENTH GRADE!!! The next year her class advanced to mock investing with fake money.

"That's the sort of thing that's missing," she said. "While economists are working hard to increase literacy, there is no requrement that this should be done in schools."

Food for thought...

 

 

Wall Street plummeted sharply early Monday, with the Dow Jones industrials falling below the 10,000 mark for the first time in nearly four years.

Nervous investors are apparently nonplussed by the government-approved $700 billion bailout package that's designed to rid banks of toxic, mortgage-related debt and jumpstart lending again.

It was hoped the bill would loosen credit markets in the near term, but it remains to be seen when that will begin to happen.

People are scared - scared that this financial meltdown has a lot further to go before things finally hit bottom. And when fear figures into this heavily into the mix, businesses are relucant to borrow,  investors sell off and the market tanks.

Here's what Nouriel Roubini, otherwise known as Dr. Doom, had to say last week:

This is indeed a cardiac arrest for the shadow and non-shadow banking system and for the system of financing of the corporate sector. The shutdown of financing for the corporate system is particularly scary: solvent but illiquid corporations that cannot roll over their maturing debt may now face massive defaults due to this illiquidity. And if the financing of the corporate sectors shuts down and remains shut down the risk of an economic collapse similar to the Great Depression becomes highly likely.

 

Will today's market close be as bad as last Monday? Stay tuned.  

 

LAT: "Home loans held by illegal immigrants in California and across the nation generally have had fewer delinquencies than similar loans held by U.S. citizens, in part because of stricter lending requirements, according to banks, insurers and Realtors." (h/t LO)

- I love this one, "The identification numbers, known as ITINs, were designed for foreign-born residents living legally in the U.S. but are widely acknowledged to be used primarily by illegal immigrants." I truly don't want to get the yahoos out there excited, but isn't that considered, uhm. fraud.

Politico: "To ensure that the United States remains an "innovation superpower" in the 21st century, the 44th president must increase funding for research and development, improve the math and science skills of America's work force, and reform our nation's immigration laws to attract the "best and brightest" to our shores."

I've become a fan of theNPR show, and its revealing and understandable explanation of the housing crisis is an example of why.

Now it's Germany's turn

Saving your money is unpatriotic, apparently

Countrywide helps borrowers two years too late

Former Lehman CEO will find someone else to blame today

Suitors lining up for Wachovia; judge will decide

Credit crunch + housing bust + slowing economy = reopening the budget

Elegant density or urban nightmare

They're still not calling it a recession, now it's a 'bad slowdown.'

Pathetic "panglossian reassurances"  [yeah, I had to look it up]

 

USC Assistant Professor Lars Perner, who studies consumer behavior, had credit on his mind in a recent conversation with me. But it wasn't just the current so called "credit crisis" gripping the country.

 

Perner brought up another troubling thought, which I haven't seen much talk about in recent news.

 

Here's what he said about credit card debt.:

 

 "...I suspect a lot of people have been racking up credit card debt. At some point, that has to be paid back. It's a huge problem. The problem is when this goes on for a long period of time. You get into a problem of denial about just how much has accumulated."

 

It got me Google-ing. Check out this article.

It finally happened, and it probably came a little quicker than many had predicted.

The House has approved a the $700 billion bailout for the financial system, reversing course to authorize what may be the most expensive government intervention in history.

To quote the New York Post:

The crucial vote was 263-171, passing by a comfortable bipartisan margin. Most Democrats voted in favor (172 yeas to 63 nays), while a slighter majority of Republicans voted against (91 yeas to 108 nays). Every member of the House voted. (There is one vacancy, created by recent death of Stephanie Tubbs Jones of Ohio.)

At 1:21 p.m., applause and cheers echoed through the House chamber as the number of "aye" votes crossed the threshold needed for passage with just seconds remaining in the official 15-minute voting period.

 

When Sen. Charles Schumer said he was worried that IndyMac Bancorp was on the brink of failure, the Pasadena Star News reported it. Because, you know, it was news. The ensuing run and collapse of IndyMac was then blamed on the messenger, not Schumer or IndyMac's practices. You wonder when someone is going to say, Why did the press write about Sen. Henry Reid's "bankrupt" quote about insurers?

"The events of the last few weeks say we're one accident away from a systemic financial meltdown," says (Nouriel) Roubini (NYU economics professor). He points to previous accidents that nearly caused a universe-eating financial black hole: Bear Stearns in March, Fannie and Freddie in July and Lehman and AIG a couple of weeks ago. "We're seeing the beginning of a silent run on the shadow and traditional banking system," he says. "There's a generalized panic" in the financial markets.
- Roubini was one of the few predicting disaster two years. He thinks the bailout is flawed and will have little long-term effect on the markets

``In my adult lifetime I don't think I've ever seen people as fearful, economically, as they are now,'' (Warren) Buffet said in an interview with Charlie Rose. ``The economy is going to be getting worse for a while.' ...The credit freeze is ``sucking blood'' from the U.S. economy, he added.
- Buffet believes the bailout needs to pass

House likely to pass pork-ladened bailout

State needs $7 billion loan from feds. Now, says Schwarzenegger

Fed banking agency gains power during crisis

Obscure SEC ruling began the investment bank borrowing deluge

Echoes of Savings and Loans scandal

Swampland on bailout's other goodies: "Special interest tax breaks and pork"-barrel boondoggles are to Congress what cheap credit is to the nation's banks -- the liquidity that allows the system to function. If you can't get the votes on a particular bill, you just load it up with goodies for various politicians."

Allfast Fastening Systems Inc. is typically always busy.

The Industry-based company makes the riviets that are used to hold most commercial and military aircraft together. So as you might imagine, things are usually hopping.

But company founder and President Jim Randall said things have slowed considerably for two reasons - a strike by Boeing's machinists' union and tightened credit markets.

"Before the strike, things had already leveled out," Randall said. "And with uncertainty in the credit markets, we don't know how revenues will be in the fourth quarter. Fifty-five percent of air travelers are from banks or other financial institutions. But with things slowing down ... people aren't flying."

Tight credit is also taking a toll on manufacturing and jobs. Unemployment lines were deeper than expected last week and orders to U.S. factories plunged by the largest amount in two years, according to government data released Thursday.

California has already suffered the loss of thousands of manufacturing jobs over the past several years.

These new trends don't bode well for the future. 

 

 

That's Rep. Maxine Waters, D-Los Angeles, in 2003. The big critics now, Rep. Barney Frank and Sen. Charles Schumer, also talk about the safety and soundness of Freddie and Fran.
Great quote from Frank: "I want to roll the dice a little bit more in this situation towards subsidized housing. . . ."

You keep hearing this blather that House Republicans, and Speaker Pelosi's silly speech, were the reason that the bailout wasn't approved Monday. Except a House vote doesn't need Republicans. Democrats are in control. Let's see how many Democrats vote against the bill again.

Bloomberg: "The U.S. Federal Reserve may lose as much as $6 billion on a portfolio of mortgage-backed assets it took over from Bear Stearns Cos., according to Bank of America Corp. analysts."
- Replace US fed reserve with us and now we're closer to the truth. Vultures are making money off this but it won't be the taxpayer.

Fear not greed causing panic

Crisis trickles down to small businesses

Tax breaks thrown at Hollywood

FHA homeowner rescue plan starts

U.S. Initial Jobless Claims Reach Seven-Year High

SEC extends "short sell" ban despite investors pleas

Looks like I was wrong. House members who opposed the bill Monday look like they are going to cave Friday.
Best quote: "If [Senate leaders Harry] Reid [D-Nev.] and [Mitch] McConnell [R-Ky.] want to 'Christmas tree' the bailout because they can't get the Senate to pay for things, I don't see much anyone can do to stop them," one aide to a Blue Dog said. "Bipartisan fiscal irresponsibility is a time-tested way to win votes."

The Senate finally passed the revised $700 billion dollar bailout bill tonight. Unsurprisingly, the bill is stocked with extras including "a landmark health care provision demanding that insurance companies provide coverage for mental health treatment--such as hospitalization--on parity with physical illnesses."  I have a feeling this is destined for another downfall on Friday. For some light reading, here's the 451 page bill.
Update: Absurd:"Senators attached a provision repealing a 39-cent excise tax on wooden arrows designed for children to an historic $700 billion bank rescue..."

California Controller John Chiang issued a press release this afternoon announcing that the state will likely run out of money by the end of October and will need to borrow $7 billion to meet its obligations through the end of the fiscal year (that's June 30, 2009). With the national credit crisis looming large, that borrowing won't be easy. Chiang urges Congress to take quick action to restore confidence in the financial markets.

His quote:

"There is no question that today's economic uncertainties and a tight credit market may create enormous challenges to the State to borrow at one time the entire $7 billion I have determined the State will need to meet its obligations through the end of the fiscal year. The difficulty is also compounded by the short window of time between now and the final days of October, the period in which my office has projected the State will likely run out of cash.

"It is critical that Congress take swift action to adopt an economic recovery plan that can calm the fears of American consumers, stabilize the market and loosen the credit stream we will need to continue to provide quality programs and services Californians expect and deserve."

Earlier today, Gov. Arnold Schwarzenegger sent a letter to California's Congressional delegation, urging them to support the bailout plan, stressing that "this plan is not a 'bailout' for Wall Street. To the contrary, the plan is about protecting Main Street."

Unless Congress acts quickly, Schwarzenegger warned, "California will be unable to sell voter-approved bonds for the highway, school, housing and water construction projects that our state is relying on to help carry us through this difficult economy."

Bottom line: "I am writing to urge you to vote in favor of the Emergency Economic Stabilization Act. This plan is critical to the well-being of every community in California and across the nation. Swift action in Congress is needed to restore confidence in our financial system.

It's certainly been a wild week in our nation's financial sector. And the scary part? It's only  Wednesday.

Things kicked off nicely on Monday when the Dow Jones industrials suffered their biggest one-day plunge ever - a screaming dive that carried the index down nearly 800 points. The Dow recovered on Tuesday with a 485-point gain, but we're far from out of the woods. 

With the Senate poised to vote today on a revamped version of a proposed $700 billion bailout plan, everyone is holding their breath. There's been a lot of partisan wrangling over the idea of a rescue plan with this kind of price tag, but I think most people would agree we've got to move forward with something. 

Lending on the part of banks has become tight and carefully regulated. Businesses in need of loans to expand, make payroll and buy needed products are often running into a brick wall, as credit markets have significantly tightened.

So is this plan the best course of action?

Nancy D. Sidhu, vice president and senior economist with the Los Angeles County Economic Development Corp., put it this way: "I think the bailout might help," she said. "It's hard to see how it could hurt."

And Sidhu figures things could get worse.

If a rescue plan isn't put into place, credit markets will eventually tighten even more, she said,  making it tougher for businesses to borrow the money they need to stay in operation.