"massive amounts"

I mean - "massive amounts" - come on, its getting nearly comical:

NEW YORK (Reuters) - Banks in the United States have been quietly borrowing "massive amounts" from the U.S. Federal Reserve in recent weeks, using a new measure the Fed introduced two months ago to help ease the credit crunch, according to a report on the web site of The Financial Times.

So what is really going on? I think there are probably several banks that are having a real liquidity crunch - they won't lend to each other, so they are taking what the fed is giving. Is it something to worry about? I think yes, but it isn't the end of the world - yet.

Kunstler

"But that system was considered too awkward and "reserves" were then denoted in just currencies themselves, or certificates that represented the existence of currencies held elsewhere, or pixels on a screen representing the movement of alleged piles of currency from one place to another, or the intention to move a notional pile of currency to a theoretical destination, and then that became an algorithm purporting to represent the future arrival of a notional pile of money at theoretical destination to-be-named-later, and so on...

He can get carried away but I love him - this week's post is on the money.

Understatement of the day

"People have been living off the equity in their houses and their credit cards. Now, both of those things are ending," Provencher said. "It's going to create an interesting problem."

Ya think? There is more here.

Natomas Area Commercial Real Estate Photolog

Just an absolute jaw dropping post "Natomas Area Commercial Real Estate Photolog" - you have to visit this site and see the photos for yourself. Interesting that in the comments lots of people have responded with things like "looks like where I live" from various states around the nation. This kind of hyper over development just smacks of greed and corruption. How could all this excess space get built? The sheer number of people not exercising common sense in this process (owners, banks, planners, local government, construction companies) is staggering in itself.

I mean - just how much shit were people in Sacramento supposed to buy? Check out this chart - and it is dated already. Do you think any of those countries would be horrible places to live?

"arcane financial instruments"

A $45.5 trillion dollar unregulated market... something just isn't right here. I am really starting to believe that this financial mess isn't even understood by Paulson, Bernanke, and the rest of them. They are just holding on for dear life. There is no way that this whole credit default swap story doesn't unwind into a giant mess. The only issue is when:

"No one knows how troubled the credit swaps market is, because, like the now-distressed market for subprime mortgage securities, it is unregulated. But because swaps have proliferated so rapidly, experts say that a hiccup in this market could set off a chain reaction of losses at financial institutions, making it even harder for borrowers to get loans that grease economic activity."

Retail sales?

"Retail sales unexpectedly climbed in January, given a boost by demand for cars and gasoline in a positive sign for the economy."

You know I really don't understand this - demand for cars and gasoline? How about gas costs more, and people are maybe trading in their gas guzzlers for more economical models. I would love to see finer grains in this report. It sounds like a lot of crap to me.

Aha - as I am writing this and check the link it appears that the wording on this article has changed:

"Part of the gain, however, stemmed from higher gasoline prices. Retail-sales data aren't adjusted for inflation.

In addition, economists were puzzled by a 0.6% increase in auto sales, since other industry reports show auto sales declined"

I don't know who could take this as good news...

Mortgage Crisis Spreads Past Subprime Loans

From conversations with some American friends I am not so sure (anecdotally) that people are quite getting the breadth and scope of what has happened (is still happening) in the mortgage and housing markets. You really just have to look at a chart (thanks to Calculated Risk) to see it - this is an historic collapse. And it continues to spread, as this new article from the NY Times explains:

"The credit crisis is no longer just a subprime mortgage problem.

As home prices fall and banks tighten lending standards, people with good, or prime, credit histories are falling behind on their payments for home loans, auto loans and credit cards at a quickening pace, according to industry data and economists.

The rise in prime delinquencies, while less severe than the one in the subprime market, nonetheless poses a threat to the battered housing market and weakening economy, which some specialists say is in a recession or headed for one."

This is going to be a lot more than a little downturn and maybe a few layoffs. My fear is that it is going to the kind of event that may take a decade or more for the country to properly adjust to - or that it may actually be an end to business as usual as we know it (which of course is probably silly - but - possible).

Many Believe US Already in a Recession

Interesting article from the AP:

WASHINGTON (AP) -- Empty homes and for-sale signs clutter neighborhoods. You've lost your job or know someone who has. Your paycheck and nest egg are taking a hit.

Could the country be in recession?

Sixty-one percent of the public believes the economy is now suffering through its first recession since 2001, according to an Associated Press-Ipsos poll.

The fallout from a depressed housing market and a credit crunch nearly caused the economy to stall in the final three months of last year. Some experts, like the majority of people questioned in the poll, say the economy actually may be shrinking now. The worry is that consumers and businesses will hunker down further and pull back spending, sending the economy into a tailspin.

''Absolutely, we're in a recession,'' said Hilda Sanchez, 44, of Waterford, Calif.

More here.

D.R. Horton Swings to 1Q Loss on Charges

Hefty Write-Down Charges Drive D.R. Horton to Post 1st-Quarter Loss, Revenue Drops Sharply

Hefty Write-Down Charges Drive D.R. Horton to Post 1st-Quarter Loss, Revenue Drops Sharply

FORT WORTH, Texas (AP) -- D.R. Horton Inc., the nation's largest homebuilder, said Thursday it swung to a loss in its fiscal first quarter, due to hefty charges to write off inventory and land values as the housing slump continues to worsen.

Losses for the quarter ended Dec. 31 totaled $128.8 million, or 41 cents per share, compared with profit of $109.7 million, or 35 cents per share, a year ago. The 2008 quarter includes $245.5 million in pretax charges to write down inventory and the value of land deposits...

"Market conditions remained challenging in our December quarter as inventory levels of both new and existing homes remained high while pricing remained very competitive,"

"Challenging" is the new code word for "our business is in the shitter".

Amateurs

"I have no idea why I wouldn't call Ms. Sanchez a real estate speculator, since as far as I can tell she was speculating in real estate. I'm sure she's an amateur speculator, but that's rather the point, isn't it"

Great quote from Calculated Risk - go read.

Economy Fitful, Americans Start to Pay as They Go

It is just one article, and I think a lot of the evidence is anecdotal, but still - there seems to be either a sentiment change about "living beyond your means", or at least an awareness in the media that some people are not spending like they used to:

“We don’t use our credit cards anymore,” said Lisa Merhaut, a professional at a telecommunications company who lives in Leesburg, Va., and whose family last year ran up credit card debt it could not handle.

Today, Ms. Merhaut, 44, manages her money the way her father did. Despite a household income reaching six figures, she uses cash for every purchase. “What we have is what we have,” Ms. Merhaut said. “We have to rely on the money that we’re bringing in.”

The shift under way feels to some analysts like a cultural inflection point, one with huge implications for an economy driven overwhelmingly by consumer spending.

While some experts question whether most Americans, particularly baby boomers, will ever give up their buy-now/pay-later way of life, the unraveling of the real estate market appears to have left millions of families with little choice, yanking fresh credit from their grasp.

“The long collapse in the United States savings rate is over,” said Ethan S. Harris, chief United States economist for Lehman Brothers. “People are going to start saving the old-fashioned way, rather than letting the stock market and rising home values do it for them.”

Read the whole article - it is worth it.

"This is a stunning fall"

From Bloomberg:

Feb. 5 (Bloomberg) -- U.S. service industries unexpectedly shrank in January at the fastest pace since the last recession as the housing slump deepened and consumer spending cooled.

The Institute for Supply Management's non-manufacturing index, which reflects almost 90 percent of the economy, fell to 41.9, the lowest since October 2001, from 54.4 the prior month, the Tempe, Arizona-based ISM said. A reading of 50 is the dividing line between growth and contraction.

"This is a stunning fall,'' said Michael Moran, chief economist at Daiwa Securities America Inc. in New York. "If accurate, it's dire news on the economy.''

The momentum of reality is starting to wash across the landscape. The economy is in rough shape, credit is getting tighter, all sorts of loans are going bad, the labor market is weakening, and its the middle of winter!

I like how this article is framed as if this number was as surprise - I mean what the hell were they expecting?

Back from a long weekend...

and have some catching up to do obviously. More soon -