Thursday Financial Briefing

Sheboygan has a new economic dynamo! "Green shoots" indeed!

The Dickinson, ND Roughrider Days Fair & Expo will be conducting a livestock sale. Remember: no beef is ever as tasty as the beef you slaughter yourself! (You can buy your bone saw and drag hook here if you're not already set up.)

Alas, this was the pretty much the extent of the good economic news.

Equities stood indecisively on the ledge for much of the day, but took a dive in the last hour and hit the pavement with a wet smack. The S&P 500 closed at 1,030.71 and the Dow closed at 9,774.02. The Dow was down 10% for the quarter.

Fun facts: the S&P 500 on June 30, 2000 stood at 1,454.60; the Dow on June 30, 2000 stood at 10,447.89. That flushing sound you just heard is a whole decade going straight down the toilet.

Well, at least they said "less than expected" rather than "unexpectedly". I wonder what kind of magic the feds are going to use on the unemployment numbers to keep the rate below that mystical 10% this time?

Nouriel Roubini, agent provocateur? Or suave double-agent in Her Majesty's Secret Service? "The name is Roubini. Nouriel Roubini. Or as you may call me: Dr. Doom!"

How do you revive the US job market? For one thing, give business owners some clarity on where tax and fiscal policy is going. It's governmental ineptitude, and lack of both clarity and focus on the part of the government, that is retarding job-growth. No one wants to hire until they understand the lay of the land, but the Obama Administration is changing the ground beneath their feet every single day.

This story reminds me of a kid who, after expecting his favorite beans and weenies dinner, instead gets liver and onions. When he complains to Mom about it, she scolds him and says he should be happy to have any food at all, and that poor people in Africa would be glad to have it. Junior then wonders how an uneaten (and rather overdone) piece of liver in rural America matters fuck-all to some starving bushman in Africa, one way or the other. Junior begins to wonder if Mom is hitting the sauce again.

The June unemployement numbers are coming out on July 2. Anybody want to guess how many times the business press whips out the old "unexpectedly" adjective again? Census hiring is tailing off, and the private sector's hiring sure as hell hasn't picked up.

Insty provides a bracing tonic for idiot econ-bloggers like me who have incurred the wrath of the "experts" over at the Fed. (I'd totally forgotten about Scholes' involvement with the LTCM debacle. Scholes was famous for the Black-Scholes equation, which did so much to drive the massive explosion of the trade in derivatives since the 1970's. Just goes to show that being really, really smart is no protection against being really, really wrong.)

It may "take years" for credit to return to pre-crisis levels. Frankly, I don't see that as a bad thing. Too much credit was one of the main drivers of the problem in the first place. Yes, it will slow the pace of business growth; but it will also force the growth to be more real and not built on a mountain of debt.

Remember back when munis were a nice, safe, boring investment choice? Well, guess what?

Pickett gathers the remnants of his shattered troops and begins another charge up Cemetery Ridge.

Joseph Cassano, the CEO of AIG (a wholly-owned subsidiary of the US Government), defends the AIG subprime mortgage swaps. "It was simply company policy to do the stupidest possible thing in any given situation," Mr. Cassano said in testimony. "If there was a right way to do something, and a wrong way to do it, AIG policy was to do it the wrong way. Because the Wrong Way is the AIG Way, as our company motto goes. It was my call to make, and I stand by it." Then Mr. Cassano put a piece of meat on his head and meowed like a cat. Robert Lewis, AIG's chief risk officer, was interviewed next and said only: "We were wrong to hew so closely to our cherised AIG stupidity ethos. Perhaps a bit of basic intelligence and common sense might have made all the difference, but that's just not part of AIG's corporate culture. Hindsight is 20-20, you know. Stupidity and ineptitude had always worked for us in the past."

God Damn it, I knew it! The Russkis are after my gold! Well, just try to take it from me, Ivan! Wolverines!!!

Well, this could be a thing: Spain's AAA rating is on review for downgrade by Moody's. Yeah, I know -- the ratings agencies are idiots, they'd rate a dogturd at AAA, etc. But a downgrade still will cause a lot of angst. And remember, the ratings agencies were the Pollyannas of the subprime bubble, not the Cassandras. The problem was with undeserved high ratings, not low ones. More on this from FT's Alphaville. Fitch and Standard & Poor's have already stripped Spain of AAA status; Moody's was the last holdout.

Remember back in the 1990's when Microsoft could actually execute on a business plan? Now it's like watching some drunk piss all over himself.

This story counts as economic news because riots and social unrest will deal a huge financial blow to an already-wobbly California as markets dive on the news and lenders tighten credit. I've been warning for a long time that this summer would see much social unrest, but things have actually been pretty quiet until now. If this situation blows up, my prediction may come true after all. And California at that point will truly be looking into the abyss.

About this I can only say this.

Today's Briefing brought to you by a very dapper Cary Grant.

posted by Monty at 06:33 AM

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