Good evening Ladies and Gentlemen”
I am giving you the report tonight as I am travelling to
Gold closed up by 3.30 to 733.50. Silver fell by 9 cents to close at 9.97.
Libor fell to 2.29% where it is still 1.29 above the Fed Funds rate. In
This is why the credit balloon is contracting. It has already hit
U.S. October job losses worse than feared
WASHINGTON, Nov 7 (Reuters) - U.S. employers cut payrolls by 240,000 in October, much more severely than expected, while September registered the biggest monthly loss in jobs in nearly seven years, according to a government report on Friday that showed U.S. labor markets were sharply deteriorating. The Labor Department said the national unemployment rate shot up to 6.5 percent from 6.1 percent in September, the highest since March 1994.
October's job cuts were much worse than anticipated by Wall Street economists who had forecast 200,000 would be lost. Even more strikingly, the department revised September's losses to 284,000 - the highest since November 2001 just after the September terror attacks - and also revised August losses
higher to 127,000.
That meant 179,000 more jobs were cut in August and September than previously had been thought. In total over the three months through October, 651,000 jobs have been slashed from payrolls.
In manufacturing alone, a whopping 90,000 jobs were cut in October - a period when 27,000 Boeing Co. assembly workers were on strike. That followed a loss of 56,000 factory jobs in September.
Please note that they revised Sept and August numbers higher. In addition to the 240,000 lost jobs in Oct you must add 179000 further losses from previous months. The total losses for the 3 months came to 651000 jobs slashed from payrolls.
This means less revenue for governments and less money floating around the economy.
I promised you that 2 trillion dollars will be needed. Noriel Roubini agreed with me.
Today, treasury came out and stated that new moneys needed in 2009 will be 1.4 trillion: here is the link
Net new Treasury issuance in '09 estimated to be $1.4 trillion:
"While the gross issuance of Treasury securities has to be netted against redemptions to calculate the net increase in Treasury borrowing, $2 trillion is a lot, and net of redemptions represents about $1.4 trillion in new money. That is unlikely to come from foreign central banks, the principal source of Treasury funding in the last few years. Net foreign purchases of
The estimates are based on a shallow recession. Not in a heartbeat. This is what another café member comments:
Please note that this estimate includes the assumption of a shallow recession, no new bailout programs and no new fiscal stimulus programs. I think we have a better chance of seeing space aliens next year than any of those assumptions working out. Given that Treasury debt increased by roughly $1 trillion from Sept 15 to Oct 15 this year, I think the safer assumption is that net new Treasury issuance in fiscal '09 will be multiples of Goldman's estimate above.
Get ready for mind-numbing hyperinflation. Got gold?
Then we have three stories on General Motors, Ford and GMAC.:
GM Says It May Not Have Enough Cash to Operate This Year
Nov. 7 (Bloomberg) -- General Motors Corp., seeking federal aid to avoid collapse, said it used $6.9 billion in cash in the third quarter and may fall below the minimum it needs to operate before the end of this year.
GM said it will be near its minimum threshold for operating cash for the remainder of 2008 and will be ``significantly short' of that level by the end of June without an improvement in market conditions, a major asset sale or access to new loans or cash support. GM has said it needs at least $11 billion in cash to pay its bills each month…
Ford Has $2.98 Billion Operating Loss as Sales Plunge
Nov. 7 (Bloomberg) -- Ford Motor Co., with U.S. sales shredded by the worst financial crisis since the Great Depression, posted a third-quarter operating loss of $2.98 billion and said it used up $7.7 billion in cash.
The per-share operating loss of $1.31 was wider than the 93-cent average of 10 analyst estimates compiled by Bloomberg. Ford said it would trim more salaried jobs by January, deepen its fourth-quarter production cuts and shrink capital spending by as much as 17 percent….
GMAC Leaves Individuals Holding Car Lender’s Junk
Nov. 7 (Bloomberg) -- GMAC LLC may leave thousands of individuals on the hook for about $15 billion of junk-rated debt unless the auto and home lender finds a way to pay its bills.
GMAC, the largest lender to car dealers of General Motors Corp., issued more than $25 billion of debt called SmartNotes over the past decade to retail investors. While GMAC has paid off the debts as they matured, five straight unprofitable quarters raised doubt about GMAC’s survival, and SmartNotes due in July 2020 have lost about two-thirds of their value.... end
I close with this passage from BILL H:
The world has changed, no one will admit it.
To all; the news today centered on the horrible jobs report early http://biz.yahoo.com/ap/081107/financial_meltdown.html then the news from both Ford and General Motors. http://biz.yahoo.com/ap/081107/earns_ford.html To really understand the situation with the auto companies one only has to look at their market capitalization's. Ford and GM have a combined market cap under $8 Billion, they have just about shrunk to zero. The president of GM was on CNBC and said it was imperative that the government loan the industry $ Billions to survive.
It is clear that the entire global economy has gone into free fall over the last 30-60 days. What has happened can be best described as a light switch. It has been turned "off". The world has become accustomed to running on credit, cheap abundant easy credit. The interruption in credit has set off chain reactions that spread to the four corners of the earth. The world has completely changed yet no one wants to talk about it. Every industry in every country wants and needs a "bailout" to get them through until things return to normal. I've got news for the society of ostriches with their heads buried in the sand, WE'RE NOT EVER GOING BACK TO THE WAY THINGS WERE!
Everything was built on credit and this entire convulsion of panic has been about lack of credit, quality of credit, and the resulting [in]solvency of credit. The credit system grew and grew until it reached "debt saturation". It grew solely by the use of additional credit that was based on a currency that was based on absolutely nothing. These recent bailouts are predicated on saving or continuing the present system. Let's take a look at the auto industry and after reading this piece apply the same logic to other industries. The car makers have spent literally 60 years building a white elephant, and not because cars are out of mode or the public doesn't want new cars. No, the auto industry has spent years embedding fixed overhead. They negotiated contracts with the UAW locking in salaries, health, and retirement benefits that are not competitive globally. They've borrowed and mortgaged all their assets betting that the credit system would continue forever. They gave $10,000 discounts, 0% loans, 6 and 7 year loans etc. constantly trying to stay ahead of where they are now, BANKRUPT! A system has been put in place that cannot possibly make a profit if the world lives within it's means.
In a bankruptcy the company or industry [in this case the entire world] reorganizes. They reorganize to change contracts, debts, and other obligations so that they are affordable and make sense economically. Globally, the
EVERYTHING needs to be "revalued" so that the global economic system can go forward with values that make sense. Currencies, real estate, interest rates, incomes, insurance costs, taxes, equity and bond prices, commodity prices, energy, labor prices, EVERYTHING.
The world has changed and no one in the
He is right. Pay attention to what he is saying.
They just released the Federal Debt. It is now 10.625 trillion dollars or an increase of 58.73 billion dollars in one day. My goodness, the printing presses have been working overtime this week. The total increase for the week has been 125 billion dollars.
Have a great weekend.