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Meredith Whitney: more bearish than ever, but…

Last night, in an e-mail Yves Smith of naked capitalism pointed out an Op-Ed piece by Meredith Whitney which ran in the Financial Times yesterday. It was a fairly somber and downbeat assessment from an analyst who has proved right on the money throughout this credit crisis.

I will provide a highlight here so you get the gist of Whitney’s commentary. But so as not to steal Whitney’s thunder, I will link out to the entire article so you can read it on the FT website.

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ISM Manufacturing Index: Deep recession territory

ISM Manufacturing Index: Deep recession territory

The Institute for Supply Management (ISM) released its monthly report on Manufacturing, the ISM Manufacturing Report on Business®. It showed a reading of 36.2 down from 38.9. Where 50 is the demarcation line between growth and recession, 36.2 says the manufacturing industry in the United States is deep into recession territory.

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Links: 2008-12-01

I am altering my news round-up a bit here in that we have shifted the bulk of the news stories over to the news feed, which gets updated continuously. So, I will use the round-up to highlight a few top stories. The majority of today’s stories come from the British press.

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Quantitative easing: printing money like mad to ward off deflation

Quantitative easing: printing money like mad to ward off deflation

In economic circles, there has been a lot of buzz about Quantitative Easing of late. Basically, the U.S. Federal Reserve has lowered interest rates to near zero percent and the fear is that these cuts will not have enough effect on the willingness to lend in order to reflate the U.S. economy. Therefore, the Fed has decided to take more draconian measures, one of which is Quantitative Easing, flooding the economy with money.

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JPMorgan Chase: Large exposure to real economy downturn

The financial services sector has been the hardest hit sector in the credit crisis so far. Banks with large exposures to mortgage-backed securities like Citigroup, UBS and Merrill Lynch have suffered the most. This is largely because the crisis has been in asset prices — chiefly home prices. However, as credit has become severely restricted, the credit crisis has become a global recession and that means the real economy will be impacted. This spells trouble for JPMorgan Chase.

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Links: 2008-11-29

Below are links to a few posts on the web that I found particularly good. For more posts and news, see the news feed.

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If the Fed were a commercial bank, it might be declared insolvent

If the Fed were a commercial bank, it might be declared insolvent

Recently, I have written quite a few posts demonstrating the U.S. Federal Reserve has a ballooning balance sheet as it increases its purchases of assets at an unprecedented clip. In fact, that balance sheet had $800 billion in assets just this past August. By year’s end, we should expect it to have risen nearly four-fold to $3 trillion. This is a wild experiment without parallel in modern history.

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Stephen Roach: Americans’ abandonment of overconsumption is a good thing

Stephen Roach must feel a certain sense of Schadenfreude because he has been warning since the end of the Technology Bubble that U.S. monetary policy was reckless and would end in a very bad way. The bubble reached heights few anticipated, making Roach seem like a Cassandra for a number of years. However, now that the bubble has burst and his economic predictions have proven right, we would be well advised to listen to him regarding where the global economy is now headed.

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Marc Faber: I advise every American to hold his gold outside of the United States

Marc Faber is a hard money, old school investor who thinks that the U.S. government is going to reflate in order to avoid depression and that means gold. But, for those of you who don’t know economic history, the fact is that this has been tried before, in the Great Depression in the 1930s and the result was that the government had to confiscate Americans’ gold. It was Executive Order 6102 signed on 5 April 1933 right after Franklin Roosevelt came to office and it forbade all Americans from owning physical gold assets.

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German chancellor chastises US for easy money

Angela Merkel, the German Chancellor has rebuked the United States for its easy money policies, suggesting it was kicking the can down the road and setting up a greater problem later. It is high time the debate about monetary policy made it to the political arena.

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US jobless claims down on seasonal adjustments

US jobless claims down on seasonal adjustments

Unemployment claims declined this week to 529,000 from a reading of 542,000 last week. These are very high numbers — the highest figures in this business cycle. Despite the drop, all of the changes were related to seasonal factors as the unadjusted number was a massive 606,877.

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UK: House price fall moderates, prices still down 13.9% in year

UK: House price fall moderates, prices still down 13.9% in year

Today the Nationwide released their monthly UK-wide figures on house prices and the numbers were better. House prices fell 0.4% in the last month, bringing the annual fall to 13.9%, down from 14.6% in October.

Nevertheless, this is the 13th month in a row that house prices have fallen in the UK. Obviously, the UK is poised to have a sharp property fall that is worse than in the early 1990s.

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