Host Katherine Lanpher talks with TIME business and economics reporters to sort through the headlines, forecasts, news and numbers that will help you weather these challenging times.
Here's the kind of interesting stuff you can learn reading this morning's monthly foreign trade report from the Census Bureau:
Overall U.S. trade deficit for September: $36.5 billion
Trade deficit in petroleum products: $20.5 billion
Trade deficit with China: $22.1 billion
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Goldman Sachs economist Jan Hatzius writes that bad times among small businesses, which are harder for government statisticians to measure than the doings of big businesses, probably means the economy is growing slower than the feds say it is:
We have argued that the weakness of the small business sector may mean that real GDP in the third quarter in fact grew more slowly than the 3.5% “advance” estimate. The reason is that the GDP data may not fully capture the performance of small firms, and specifically the formation and dissolution—i.e. the “birth” and “death”—of small firms ...
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The Wine Economist reports that Australia's overproduction of wine has reached a crisis point:
Australia has an accumulated surplus of 100 million cases of wine that will double in the next two years if current trends continue, according to the report. The annual surplus is huge – equal to all UK export sales and there is no clear prospect of finding additional demand, either domestic or foreign, to fill this gap. ...
The news that AIG CEO Robert Benmosche is thinking of leaving (now he says he's staying; see update below) because he's sick of dealing with those mean, mean federal regulators—especially the ones who want to cap his and his employees' pay—raised two conflicting thoughts:
1) The federal government isn't very good at running corporations.
2) Who the &%$#@ does Robert Benmosche think he is?
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BlackRock's Larry Fink, who you'd have to say has emerged as one of the winners from the financial crisis, says we shouldn't worry all too much about too-big-to-fail financial firms staying too big to fail. That's because the feds are already shrinking them. "They are doing that by reducing leverage," he said at a breakfast put on by the Wall Street Journal this morning (video will be online later).
First, Fink said, the remaining investment banks are way down from the 30-to-1 and 40-to-1 leverage ratios that prevailed before the financial crisis (Goldman's leverage ratio is currently 15-to-1, Morgan Stanley's 16-to-1), and will be forced to keep leverage down by new regulation.
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As part of my frightening yet potentially lucrative new career as a Person Who Sits/Stands at the Front of the Room and Says Stuff While Other People Sit in Chairs and Listen Semi-Attentively, I'm on a panel tonight at the Barnes & Noble at Broadway and 66th in Manhattan with Bruce Bartlett, Robert Samuelson and some guy I don't know named James Matthews. The (pretty danged broad) topic is "The Recession, Obama and the Future – where do we go from here?" I'm supposed to come up with an opening statement. So, in the interest of repurposing every last brainwave as blog content, here are the first few thoughts that popped into my head:
1. We go to 2010 from here. Then 2011, I think. After that, maybe 2012.
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Titan of academic finance Gene Fama writes in his blog:
The premise of the Fox book is that our current economic problems are largely due to blind acceptance of the efficient markets hypothesis (EMH), which posits that market prices reflect all available information. The claim is that the world's investors and their advisors in the financial industry bought into this model. Because they ceased to investigate the true value of assets, we have been hit with "bubbles" in asset prices. The most recent is the rise and sharp decline in real estate prices which froze financial markets and led to the worst recession since the Great Depression of the 1930s.
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There's been a lot of chatter recently about whether or not the Federal Housing Administration (FHA) is going to need a bailout. The FHA insures—but does not write—home loans, and thanks to the housing bust, the agency has had to dip a little further into its reserves than it probably would have liked to. That means the FHA might fall below its mandated 2% capital reserve ratio. We were supposed to get the agency's annual actuarial study today, but last night the FHA said the report would be delayed. As HousingWire reports, FHA asked its inspector general to run some additional risk scenarios. The inspector general did—and based on those results the FHA called into question the accuracy of the report. All of which might make you think the bailout talk will have to wait for another day. Wrong!
Last week I greeted a couple pieces of good economic news, the reports that GDP grew 3.5% in the third quarter and house prices rose 1.2% in August, with a shrug and worries that things might be about to take a turn for the worse. So it seems only fair to point out that, this week, the news has only been getting better. The manufacturing sector is going strong, and even hiring people for the first time in 14 months. Pending home sales are way up. Construction spending is up. And while Friday's employment report for October will surely reveal a 22nd straight month of job losses, early signs are that the losses will be smaller than in previous months—possibly even below the 200,000 mark for the first time since August 2008.
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