The GDP factoid that disturbs us the most is that imports were revised 1.5% lower to a decline of 17.5%, which boosts GDP, yet there was no revision to personal consumption …PS – The peculiarity of GDP accounting is that a decline in imports, which usually signifies economic ebbing, increases GDP.
John Williams: Against reporting of underlying economic series, the annualized quarterly contraction likely was in excess of 7% for the fourth quarter, but the latest revised 6.3% estimate remains the closest to reality reported by the BEA in a long time. Nonetheless, GDP reporting remains virtually worthless and is little more than political propaganda…
With a widening discrepancy versus GDP, the theoretically-equivalent GDI showed a real fourth-quarter annualized contraction of 7.54%...
http://www.shadowstats.com/article/flash-update-79
The FT: The decline in corporate profits also sapped government coffers, as taxes paid on corporate income fell by 33.1 per cent.
"All the incoming data suggest that the economy will contract by a staggering 7 to 8 per cent in the first quarter, before the economy begins to stabilise," said Nariman Behravesh, chief economist at IHS Global Insight.
http://www.ft.com/cms/s/0/9a973c12-19fe-11de-9f91-0000779fd2ac.html
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You can see that the GDP is better because of lower imports. The consumer who represents 70% of GDP showed contraction in the area of 7%. IHS Global Insight believes contraction will be in the area of 7-8%.
Ok lets start with new economic numbers. Feb personal income fell by .2% but personal spending rose by .2%. The economy is still in the dumpster. Here is the report:
08:30 Feb Personal Income (0.2%) vs. consensus (0.1%); Personal Spending 0.2% vs. consensus 0.2%
PCE Deflator y/y 1.0% vs. consensus 0.8%. PCE Core (m/m) 0.2% vs. consensus 0.2%. Jan Income revised to 0.2% from 0.4%. Jan Spending revised to 1.0% from 0.6%.
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Michigan confidence levels frose to 57.3 from 56.8 a slight improvment. Here is the report:
09:55 Mar Univ. of Michigan Confidence 57.3 vs. consensus 56.8
Prior reading was 56.6.
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This is the biggest story of the day and reinforces another Bloomberg article on the subject on Thursday. Here is the report:
Soros Says Commercial Property Values Will Fall 30%
March 26 (Bloomberg) -- Billionaire investor George Soros said U.S. commercial real estate will probably drop at least 30 percent in value, causing further strains on banks.
"Commercial real estate has not yet fallen in value," Soros, speaking at a forum in Washington, said. "It is inevitable, it is written, everybody knows it, there are already some transactions which reflect and anticipate it, so we know, they will drop at least 30 percent."
U.S. commercial real estate values have fallen 30 percent from the 2007 peak as cheap financing disappeared and the recession reduced occupancies, RREFF, the real estate investment unit of Deutsche Bank AG, said yesterday in its 2009 forecast. Total returns in a commercial property index used by pension funds may decline as much as 11 percent this year, the group said.
Soros, 78, said the risk of further declines in property prices is reason for the administration of PresidentBarack Obama to move quickly to recapitalize banks. Soros said Obama acted too slowly on a banking overhaul and should have moved immediately upon taking office…
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Wow! JPM is now saying that the first quarter is not going to be as rosy as they told the world only a month ago!
http://finance.yahoo.com/news/Wall-St-adds-losses-after-rb-14768628.html?sec=topStories&pos=main&asset=TBD&ccode=TBD
Another Friday night bank closure:
U.S. govt seizes Omni Natl Bank after losses
WASHINGTON, March 27 (Reuters) - Georgia-based Omni National Bank was seized on Friday and placed into receivership under the Federal Deposit Insurance Corp, the U.S. government said on Friday.
The bank had about $980 million in assets at the end of 2008, the Office of the Comptroller of the Currency said in a statement.
Omni National Bank had six branches in Atlanta and Dalton, Georgia; Chicago, Illinois; Tampa, Florida; and Houston and Dallas, Texas, the government said. It also had two loan production offices in Birmingham, Alabama, and Philadelphia, Pennsylvania.
The bank, with approximately $980 million in assets at Dec. 31, 2008, was established in 2000.
The bank was seized after finding Omni National Bank had "experienced substantial dissipation of assets and earnings due to unsafe and unsound practices," the comptroller's office said. Losses at the bank have depleted most of its capital and there is "no reasonable prospect" that Omni National Bank would become adequately capitalized without federal assistance, it said.
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This willl play havoc on the world:
New Rule Would Allow Banks To Choose Values Of Their Assets
March 26, 2009 12:00 PM
The Financial Accounting Standards Board quietly buckled to banking-industry pressure last week and proposed new accounting practices that would allow banks to value assets at a higher price than they could currently be sold for.
Banks have long demanded the "mark-to-market" accounting rule change, arguing that it’s unfair to require them to mark toxic assets down to current market prices because the very market for those assets is frozen.
The move marks a shift for Robert Herz, head of the FASB, who recently told a panel of lawmakers that the harshest critics of mark-to-market accounting practices have been the very same banks that have gone under when regulators would not let them adjust their accounting. Herz and other regulators have been under intense congressional pressure to reform the rules.
"I will tell you that I get calls and visits from some of those institutions that are now in government hands, about two weeks before they get taken over, trying to get the accounting changed," he said. "Clearly some of the most vocal opponents of fair value and mark-to-market have been some of those institutions that ultimately failed and have had to have billions of taxpayer dollars put into them."
House Speaker Nancy Pelosi (D-Calif.) said that she’s been consulting with former Federal Reserve Chairman Paul Volcker regarding the reform.
"I’ve talked to Mr. Volcker about this, who knows a great deal about it. And I think caution is important in it, but I think attention is necessary," said Pelosi in a brief interview with the Huffington Post.
She said that she’s following the issue closely. "I think it has to be done with care. But we have to pay some attention to it because the current system is not working," she said. "It’s the whole thing: If you mark it too low, what’s the price?"
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The key event day will be April 2.09 when the Group of 20 meet. Will they seek a new reserve currrency. We will just have to wait.
Harvey.
