Weekly Economic Potpourri

The jobs report comes out tomorrow and the overwhelming odds are it will be the 9th consecutive month of job losses. Here are some interesting headlines and quotes from the past week.

Asian Stocks Fall to Three-Year Low, Led by Toyota, Hang Seng

"In my adult lifetime I don't think I've ever seen people as fearful, economically, as they are right now," billionaire Warren Buffett said in an interview with PBS's Charlie Rose yesterday. "They are not wrong to be worried."

Ford, Honda U.S. Sales Plummet as Credit Tightens

Sales at Ford, the second-largest U.S. automaker, fell 35 percent from a year earlier, the Dearborn, Michigan-based company said in a statement today. Honda reported a 24 percent drop.

Industrywide sales probably will fall for the 11th month in a row, the longest slide in 17 years. Ford said its sales fell to 120,788 cars and trucks from 184,612 a year earlier, the 22nd decline in the past 23 months.

U.S. dealership closures to increase into 2009

The number of U.S. car dealerships closing is expected to increase into 2009 with as many as 3,800 dealerships at risk of closure because of dwindling sales and tighter credit, according to a newly released study by Grant Thornton LLP on Wednesday.

"An increasing number of dealers are simply closing their doors because sales have plummeted, credit has dried up, the overall retail environment is increasingly challenging and potential investors are sitting on the sidelines," said Paul Melville, a partner with Grant Thornton LLP.

Bill Heard Enterprises Inc, one of the biggest General Motors Corp Chevrolet dealerships, filed for bankruptcy on Sunday, citing operating losses, decreased demand for vehicles and lack of credit.

U.S. September Job Cuts Rise 33% From Year Ago, Challenger Says

Job cuts announced by U.S. employers climbed 33 percent in September from a year earlier, led by reductions at computer- and automakers, according to a private placement firm.

Firing announcements rose to 95,094 last month from 71,739 in September 2007, Chicago-based Challenger, Gray & Christmas Inc. said in a statement today. Hewlett-Packard Co., the world's largest computer-maker, said last month it would eliminate 24,600 jobs, accounting for much of September's increase, Challenger said.

Major Insurance Company On Verge Of Bankruptcy: Senator Reid

Credit-default swaps on Hartford jumped 165 basis points to a mid-price of 675 basis points, according to broker Phoenix Partners Group. Contracts on Prudential rose 125 basis points to 617 basis points, while MetLife climbed 97 basis points to 583 basis points, CMA Datavision prices show.

"We don't have a lot of leeway on time," Reid told reporters after a luncheon in Washington. "One of the individuals in the caucus today talked about a major insurance company -- a major insurance company -- one with a name that everyone knows that's on the verge of going bankrupt. That's what this is all about."

CalPERS loses $24.9 billion but stays strong, analysts say

The California Public Employees' Retirement System, the pension fund used to pay the retirements of millions of government employees, has lost $24.9 billion over the last three months. The 10.4 percent loss is less than the Standard & Poor's 500, which dropped 13.6 percent in that time.

If the losses continue, California taxpayers could be faced with demands to make up shortfalls in funding the giant pension system. On Monday alone, a dive in the stock markets wiped out $7.8 billion of the pension fund's investments.

UBS Cuts 2,000 Investment Bank Jobs, Reposition Unit

UBS AG, the European bank hardest hit by the credit crisis, said it will cut 2,000 more jobs from its investment banking unit and reposition the division to reduce costs and improve efficiency.

The reductions will bring job cuts at the unit to around 6,000 since the third quarter of 2007, the Zurich-based bank said today in an e-mailed statement. At the end of the year, the investment bank will have around 17,000 employees, UBS said.

UBS said it will exit commodities, apart from precious metals, scale back real estate and securitization as well as proprietary trading. Chairman Peter Kurer "categorically" ruled out a sale of the securities unit yesterday

Office Space Is Emptying Out

Businesses are dumping office space at the fastest pace since the months after the Sept. 11 attacks, increasing the financial stress on commercial-real-estate owners and their lenders, many of them already ailing financial institutions.

Nationwide, rents on office properties -- including landlord concessions and discounts -- were flat in the third quarter, the worst result for office-property owners since late 2004 -- when commercial real estate began to emerge from a prolonged slump, according to Reis Inc., a New York real-estate research firm.

Rent stagnation and increasing vacancies put "strain on borrowers to make payments on mortgages," said Sam Chandan

Asian Money Market Rates Advance on Bank Collapse Concerns

Asian banks' borrowing costs rose to the highest levels in nine months or more after the collapse of lenders in the U.S. and Europe deepened a global credit freeze.

Hong Kong's three-month interbank rate jumped 41 basis points this week to 3.81 percent, and Tokyo's increased 1 basis point to 0.87 percent, both the highest since December.

``The interbank lending market remains clogged up as banks hoard cash,'' said Joshua Williamson, a senior strategist at TD Securities in Sydney. ``Funding pressures look likely to remain high and the longer they stay up there the greater the chance banks will pass on those costs to clients.''

Credit markets have frozen, driving rates higher, as banks including Lehman Brothers Holdings Inc. and the U.K.'s Bradford & Bingley Plc failed. Central banks pumped an unprecedented $1 trillion into the global financial system to ease the turmoil, which has prompted businesses including Australian iron-ore miner Fortescue Metals Group Ltd. and PGG Wrightson Ltd., New Zealand's largest agricultural services provider, to scale back or review expansion plans.

Icelanders Worry 'House of Cards' May Collapse After Glitnir

The government bailed out Glitnir after the bank was unable to secure short-term funding. Glitnir had a deposit-to-loan ratio of about 30 percent, the lowest among Iceland's biggest banks, meaning it had to rely on money markets for financing.

``Because Iceland is so small and because there are extensive cross-shareholdings, if one part collapses, the rest follows like a house of cards,'' said the 48-year-old Glitnir customer.

France, Germany Clash Over Proposal to Bail Out Banks

France and Germany clashed over whether to create a fund to bail out banks pounded by the global credit crunch, kicking off a European version of the debate that has been raging in the U.S. for two weeks.

The conflict between the two biggest euro-region economies undermined efforts to build a consensus European response to the financial crisis as a recession looms. Other fissures emerged, as Ireland's decision to guarantee bank deposits and debts prompted criticism by British bankers yesterday that it "distorted competition."

Before we throw $700 billion down a black hole, someone ought to be asking how it will solve anything. Unfortunately the urge is for Congress to "do something quickly" because of the Bush, Bernanke, and Paulson statements scaring people to death with impending economic mushroom cloud warnings.

Not a single job will be created in the Paulson bail out plan, now renamed by the media as the "rescue plan". Close analysis shows the taxpayer was tossed the anchor in an attempt to give wall street the lifeboat.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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