When all you read is gloom, turn here for a much different perspective.

Saturday, January 31, 2009

Why Is Confidence Building Again?

"Enthusiasm is Contagious, And So Is The Lack Of It" - Unknown

You've recently read that consumer confidence is now "surprisingly" up. You also may have already noticed that the propensity to report good news also seems to be increasing slightly. (At least in the blogsphere)

Why is this? Because of at least these five factors:

1. There was a basic mistrust of our past president and his administration's ability to do anything meaningful. The honeymoon may be over soon for Obama, but no one can deny that the majority of the US population (and quite possibly the world's) is still enamored with their new bride. The president's job approval ratings are in the 60s, nearly double that of Bush's when he left office several days ago.

2. Since the "big chill" in October, consumers have had plenty of time to re-adjust their spending patterns and reexamine their budgets. Now that they are confident that their personal small town bank is not going to fail and that their fuel and transportation bills are drastically lower, they're able to look beyond the gloomy media headlines and make their own forward-looking judgments. When looking at their personal budgets there is a lot less uncertainty than in October -- no significant new reason to "wait and see," like there was back then.

3. Even as many corporations announced their restructuring plans this past week, significantly more than 90% of people still have their jobs. Additionally for those jobs that are being cut, many carry extended severance payouts that can last for months. If you work in a corporation, you were waiting for the next shoe to fall right before the holidays or right after. You've seen it before during recessions. (and expansions) Year-end is typically when more than any other time all eyes are on the books and human assets get "re-deployed" or cut. For those who have now made the cut, year-end is behind you and the 2008 full-year earnings season is also past. But perhaps more noteworthy is that corporate job holders are currently now observing their internal and external job boards swell with openings for talent that will match corporate growth and income goals for 2009.

4. Beyond just the Obama motorcade, the wheels in DC are turning again. Even though their is political partisan's opposition to the stimulus package, the average US citizen just wants something to get done. Given the make-up of the house and senate, much new legislation no doubt will become law. The public is willing to wait to see if the new policies work, but in the meantime, confidence will improve merely because something -- anything -- is getting done by a new administration and congress.

5. There is growing belief that new energy policy could be just as significant as the computer boom, the Internet boom, or Y2K consumption driver. That burgeoning innovation is making its way into:
More efficient and plug-in cars
Hybrid car batteries.
Decreasing photovoltaic solar costs.
Steadily increased manufacturing of wind farm componentry.
Clean coal advances.
New electrical, transmission, aggregation and right of way assurance planning and implementation.

Obama has an incredible opportunity to demonstrate trustworthiness and speak with clarity to improve consumer confidence. His vision of how to improve the US economy -- perceived or actual -- can have an immediate, on-going and growing impact on public morale.

No doubt you believe it is just fine for us to publicly call on Obama to assist with the psychology of consumer sentiment. Kennedy did it, Reagan did it, and there is every indication that Obama can do it too.

Friday, January 30, 2009

Propensity to Report Good News Increasing

This was probably one of the easiest days for me to find good news to write about in quite some time.

Let's jump right in.

1. The GDP was only down 1%, not 3.8% as many report.
The estimate for the Gross Domestic Product for Q4-2008 was about $11,599B. That is only 0.965% smaller than in Q3 2008. Typically folks take that 0.965% and multiply by 4 to get an yearly number. But because so much Fed activity is occurring, these quarterly rates are likely to change significantly. It make no sense to multiple this number by 4. For example, back in the first quarter of 1982, the GDP "drop" reported was 6.4%... but the overall drop between the peak and valley's in that recession was 2.3%!

2. Consumer Confidence is in a surprise rebound: The preliminary reading of the index for January rose to 61.9 from December's 60.1. Consensus estimates were calling for a fall in confidence to 59.0.

3. There is further evidence that any deflation talk is significantly overstated. For the last month or so the bond market continued to price in an irrational deflationary bias. But in the past two weeks, there has been a significant reversal of this sentiment. Bond prices now reflect the change of that attitude.

4. Housing affordability surged to a record high in Dec. You can find the raw table here.

5. And of course as you've read all week: Fortune 1000 are likely posed and ready to hire more than 700,000 new workers.

The Dow 8,000 looks cheap to me.

Good News?

Thursday, January 29, 2009

Estimate: Top US Firms Have Over 701,900 Job Openings

I am not a statistician and don't play one on TV.

But here is the logic that you've been following all week. First you noticed the Fortune report on the 10 companies that had job openings for about 9,000 jobs. Then you quickly extended that research to 21 companies with over 18,000 job openings. Then yesterday you extended our reach to a sample size of 100 Fortune 1000 companies.

So here is the assumption, the leap, and the question:

If the 100 companies is a representative sample of the Fortune 1000 AND those 100 are recruiting today to fill 70,000 jobs... then doesn't it follow that the 1000 firms that make up the Fortune 1000 must be recruiting today to fill over 700,000 positions?!

Just in from Reader NyxWulf:
Using the T distribution at a 95% confidence level I come up with an estimated average of [495, 923] which results in a number of jobs in the top 1000 from 495,000 to 923,000 with a 95% certainty.
Thanks NyxWulf!

"I not only use all of the brains I have, but all I can borrow."
-Woodrow Wilson


Wednesday, January 28, 2009

70,000 Job Openings (And Still Counting)

Thanks to all of you readers for your help today to compile some staggering jobs numbers.

Yesterday we embarked on a research project to find current job openings. We started with 21 firms (with 18,839 open positions) and now we're up to data from 100 of them. (All Fortune 1000)

The bottom line. These 100 firms are collectively recruiting right now to fill over 70,000 positions.

The working spreadsheet is available via google docs here. (or I'd be glad to email it to any of you who want to join the effort.) Most of this primary data is taken directly from each company's web job board.

Remember this: Job losses are a lagging indicator. Those losses tell us where the economy has been, not where it is going. This on-going project gives us a good snapshot of where companies plan to go in the future. Those firms who retrench, cower, and fail to invest: they will be bowled over by these firms that are actively hiring. But for the companies listed above with vision and guts, they realize that right now is the time to retool and then (re)invest in the future plans of their firms.

(Is there a statistician out there who can tell us when we have enough of a representative sampling of the Fortune 1000, so that we can then extrapolate and have a relatively decent estimate of the total open positions across all the Fortune 1000?)

Tuesday, January 27, 2009

Help Wanted! Jobs, Jobs, and More Jobs

You continue to hear it. Layoffs here and layoffs there. But you are not going to read about that here. Not today, tomorrow, or next week. This is about the huge number of companies in the country that are aggressively recruiting today.

Even without a stimulus plan in place to fund those many "shovel-ready" projects, there are huge numbers of firms in the US that are adding jobs to their payrolls.

1. From the state of Massachusetts:
Covidien Ltd., adding 50 jobs.
Plymouth Rock Studios, adding 94 jobs.
Manufacturer Magnemotion Inc. is adding 100 jobs.
Health products giant EMD Serono is add 30 jobs for its expansion in Billerica.
Additionally the Massachusetts Alliance for Economic Development, recently recognized 15 Massachusetts companies that continue to add jobs in the state. Among those 15 were: Evergreen Solar Inc., Shire Pharmaceuticals PLC, Aspect Software Inc., Electrochem Inc., and Solutia Inc.

2. In the medical field: the demand for nurses continues to surge. Predictions are that over 50,000 new nursing jobs will need to be filled in 2009. The surge in demand is projected to continue into 2010 and beyond.

3. Social services jobs to the elderly are booming. The Bureau of Labor Statistics (BLS) advises that, "Hourly workers interested in changing roles should get into any role that services the elderly."

4. Computer-related jobs are projected to grow by more than 20 percent in 2009. Even though some technology companies have used this dip to trim and rebalance their staffing levels, the strong earnings posted by IBM, VZ, and AAPL are sure indications that the 20% projection is not just a BLS dream. Further evidence of this demand is indicated by last month's report of the suprising 12.5% rise in orders for computer products, and the additional 5.7% increase in orders for information technology goods.

5. Education jobs abound. "To a great extent, education is recession proof," says Roy Krause, President and CEO of recruiting and staffing company Spherion. In 2009, roughly 38,000 of our economy's new jobs will be created in colleges and universities nationwide." In this jobs sector the BLS adds "There are literally not enough educational programs to generate the volume of health-care workers we'll need. As high school and universities programs expand to meet demand for nurses, computer engineers and IT professionals, the demand for teachers and professors grows commensurately."

6. Many innovative entrepreneurs are taking the opportunity of a lifetime to capitalize on personal cash availability. These jobs numbers are hard to measure, but are surely happening right now in a garage just down the street.

7. And here is the kicker. The piece of this post that I never expected to find. The following companies are ready to hire now.

Collectively they are actively recruiting to add 18,839 jobs right now, not next week, right now.

Ernst & Young.....................2800
T-mobile.............................. 2163
Wegmans Food Markets.... 2000
Verizon................................. 1240
Booz Allen Hamilton........... 1046
Edward Jones...................... 1040
Mayo Clinic.......................... 1000
Publix Super Markets.......... 900
Whole Foods Market............ 800
Baptist Health South Florida 728
Genentech............................... 585
Safeway................................... 536
Accenture................................ 525
Cisco......................................... 500
PricewaterhouseCoopers...... 500
Home Depot............................ 497
Scripps Health........................ 442
Methodist Hospital Systems 400
Burns & McDonnell................ 400
Bright Horizons....................... 387
Google...................................... 350

What was totally unexpected was how easy it was to find these numbers. Folks this is just 21 companies. Let's search the fortune 1000. I suspect when we hit their websites and head to the careers link, there will be significantly more job listings to report by company.

These jobs are better than shovel ready, they are ready for you to apply for today.

And why are these companies investing in new hires in the midst of a media frenzy hell-bent on gloom? Because the wise business person knows, that 2009 is the time to invest and get rich.

(If any of you have time and would like to assist me compile some massive jobs numbers tomorrow, please do. Just hit several of your favorite fortune 1000 company websites. Find the careers link. Most of these firms will have a search capability. Search for all available job openings and then send me the total for that firm. I'll further tally them up in tomorrow's post and then add them to the 18,839 jobs that we uncovered today... send your results to good.news.econ@gmail.com or post your results in the comment's below.)

Monday, January 26, 2009

The 12 Step Program (For The World Economy)

by guest contributor and Good News Economist reader Dick Williams

A better world is possible. To get there, however, we must be honest about our failures. A Pollyanna spin on the current real world, in order to offset the pain that honesty often brings to the poor, will not serve us well. Every recovering alcoholic and every honest gambling addict knows that admitting the unmanageable problem is the first step. I could say, “Greed is okay; it will be balanced out by someone else's greed. I can stop my greediness any time I want.” Or I can look in the mirror every morning and say, “My name is Dick, and I am a raw free-market capitalism addict! Just one more day of resisting material desires and greed, so my family and I can enjoy a committed relationship with each other, other people, and the earth through a simple lifestyle. Just help me with one more day, God.”

One of my main concerns about current economic theory, particularly in Milton Friedman’s "standard model" form, is that its adherents can say so glibly that capitalism has been unequaled in its ability to elevate standards of living. That is true – but for only a relatively small proportion of the developed Western world, only the upper 10-15% of that population.

Yes, I am using my 20-20 hindsight, but I prefer to think of it as valid empirical data answering the question, "How does capitalism really work?" In its competitive form, not surprisingly, it creates phenomenal winners and lots of losers. My main gripe here is that economists who are addicted to their theories and wish to hang on to capitalism, with all its grim excesses, spin their own 20-20 hindsight by using average (mean) incomes and production figures (GNP, GDP, per capita income). This practice, from a statistician’s point of view is already seriously flawed, because it assumes a normal distribution and wealth and income are far from distributed normally. More enlightened interpreters will use the median income. But even that does not account for the overall distribution of income.

We must face the truth, and the truth is that our “standard economic model” has produced incredible wealth at the very top of the income distribution and unforgivable poverty at a continually increasing percentage (now up to 20% or even 30% in the developed world). Since 1980, although the per-capita income has increased, the real incomes of families in the lower 20-30% of the U.S. population have decreased markedly. The "richest country in the world," the U.S. is 17th among developed nations in the health of its income and wealth distribution. There must be something wrong here.

One of the difficult parts of this scenario is that, in the developed world, the poor tend to be invisible (Bagdikian, The Invisible Poor). It is easy to see the poverty in Bangladesh or Haiti, and the professionals can point to very low per capita incomes, GDPs, etc. The rich, created by Western capitalism, however, are very much there as well. But we tend to hide our poverty problem here in the United States. We scrape off shanty towns and build tacky but cute high rises of “affordable housing” which few residents can afford.

Now, for the good news: I've been quite inspired, in my researches and visits to the developing world, by the unparalleled success of Mohammad Yunus's Grameen Bank and its micro-finance system. This is capitalism to be sure, but of another stripe. It rewards the entrepreneurial spirit and raises the standards of living, not of the few but of entire communities. It also follows the general laws of supply and demand in the choices of enterprises that evolve within it.

It is very important to observe that micro-finance of the Grameen type does not just willy-nilly lend to every individual who wants to start a small business enterprise. It works within the rather tight social structure of associated groups of village women meeting every week, asking each other questions about how they spend their money, such as, "Do your children have shoes?" "Are you sending them to school?" "Is your home kept clean inside and painted on the outside?" "Are you raising a vegetable garden for your family?" And, finally, the group makes sure that everyone has brought their loan payment. One of the women who has learned how to keep records keeps close watch on everyone and assists any who, for some good reason, cannot pay that week to recommit to a more realistic repayment plan. It is peer pressure, but it is both negative and positive. The women are empowered; the men are usually excluded, because in that culture they are considered financially irresponsible.

Now this is capitalism with a cooperative, not competitive, structure. Enterprise is rewarded and the laws of supply and demand still hold. But cooperation is the regulating factor, which tends to create winners and more winners. No wonder that micro-finance is spreading all over the world -- even in the U.S. Let us be careful that it is not used by large financial corporations simply to enrich themselves at the expense of their clients, and that it does not become just another tool for the vulture capitalists!

We all need a twelve-step program toward cooperation and economic responsibility. Every day we must say to each other, “Just one more day in the simple lifestyle. Just one more day without selfish greed and irresponsible speculation for material gain. Just one more day trying to find ways to bring a fulfilling life to others

Dick Williams, Phd for "The Good News Economist" rwillskier@earthlink.net

[Editor's note: Several other organizations like Grameen Bank are demonstrating significant success with international micro-finance models for the poor. See www.mcc.org and www.meda.org for further examples.

As for Grameen Bank, "as of December, 2008, it has 7.67 million borrowers, 97 percent of whom are women. With 2,539 branches, GB provides services in 83,566 villages, covering more than 99 percent of the total villages in Bangladesh.

Grameen Bank's positive impact on its poor and formerly poor borrowers has been documented in many independent studies carried out by external agencies including the World Bank, the International Food Research Policy Institute (IFPRI) and the Bangladesh Institute of Development Studies (BIDS)."

There is no credit crunch at Grameen Bank. Please visit them at http://www.grameen-info.org to find out why.]

(Please keep those emails and article ideas coming. If you have an article, a link, or idea for an upcoming "good news" post, please feel free to send them on to: The Editor, good.news.econ@gmail.com)

Saturday, January 24, 2009

Jack Welch: "TARP is working"

Jack Welch, former CEO of General Electric Inc., says the US Government's TARP program is working well. Mr. Welch made his comments at the recent University of Miami Global Business Forum.

Welch elaborated by saying that the TARP program is starting to "restore financial confidence." He went on to say that the decline in the economy may be ending.

But perhaps Welch's most insightful remarks were directed at our new President. He praised Obama's cabinet picks and encouraged him to foster an environment of teamwork with his staff.

But Welch took a scolding tone concerning Obama's current public stance on the economic situation. Welch advised, "He has to stop protecting himself by saying it will get worse before it gets better. This country needs a boost and every time he goes on television and talks about how bad it's going to get, people are looking for someone to take us out of this."

You know that I agree with Welch that TARP is working. Why do I agree? Because of the overwhelming evidence of mid-market bank strength in the Q4 results this earnings season. As we've seen, many of these regional and community banks are refusing TARP funding because their balance sheets are already strong.
I also agree with Welch that we need a confidence boost.  As the Conference Board prepares its readout of leading economic indicators on Monday, one of the most helpful things that Obama can do is to focus on a message of "economic conditions improving." True to the Obama campaign message of "hope over fear," Obama needs to identify those hopeful indicators of improvement, clearly point to them, and then move forward with stimulus plans that specify the country's "unity of purpose."

Let's all decide to move this economy forward. As Welch says on his website, "First and foremost, we suggest you resolve to make 2009 a year during which you stay outward-facing and on the offensive."

TARP seems to be working, more positive economic indicators will be released on Monday, and our national resolve is clear. Let's get to work on some "shovel-ready" projects.

Friday, January 23, 2009

Regional Banks on TARP Funding: "No Thanks!"

"We need no shelter from the elements. We don't need a TARP to cover anything up. We are strong and continue to do just fine on our own."

Those are my words. But around the country, they may just be an accurate paraphrase of many a conservative bank CEO.

First let's look at three snippets from Wikipedia. They may explain why the majority of strong bank leadership these days has said "No Thanks" to TARP assistance.

1) The Troubled Asset Relief Program (TARP) is a program of the United States government to purchase assets and equity from financial institutions in order to strengthen the financial sector. It is the largest component of the government's measures in 2008 to address the subprime mortgage crisis.

2) Tarps have multiple uses, including as shelter from the elements.

3) The word tarpaulin originated as a compound of the words tar and palling, referring to a tarred canvas pall used to cover objects.

Ok, so let's look at some examples (I own none of these bank stocks):

From the Mountain Time Zone, you may remember, Glacier Bank (GBCI)... On Dec 30, 2008, Glacier issued this statement: "We greatly appreciate the federal government's recognition of our financial strength in approving Glacier's participation in the TARP Capital Purchase Program. However, with the $94 million in net proceeds from our successful common stock offering, we are already one of the most strongly capitalized banking companies in the country, with total risk-based capital of approximately 16%. Consequently, we do not believe that participation in TARP is in our shareholders' best interests."

On the West Coast, the Bank of Napa (BNNP) announced right before Christmas that, "it will not participate in the Department of Treasury’s Capital Purchase Program (TCPP), and will not accept TARP funds. CEO Tom LeMasters stated, “Having considered our strong balance sheet, well capitalized position, and solid credit quality we determined that TCPP provided no material benefit to the shareholders and customers of Bank of Napa.”

With assets of $32.1 billion, New York Community Bancorp, Inc. (NYB) is the 29th largest US bank and a leading producer of multi-family loans in New York City and the northeast. Last week it announced, "that it has declined to participate in the Capital Purchase Program of the U.S. Treasury’s Troubled Asset Relief Program (“TARP”)." Chairman, President, and Chief Executive Officer Joseph R. Ficalora continued, “We believe that our current capital position is sufficient to support the communities we serve and to enhance shareholder value by growing our assets, our franchise, and our earnings capacity."

From the Mid-Atlantic region, Bryn Mawr Bank Corp, (BMTC) also has declined TARP help: Bryn Mawr CEO Ted Peters said the bank has enough capital and access to a variety of liquidity sources to support its loan growth initiatives. Peters said the bank decided it wasn’t necessary to participate in the program. “As a community bank we did not make sub-prime loans and as a result of our conservative lending practices our balance sheet is strong,” Peters said in a statement. “We are very optimistic about our ability to serve the future borrowing needs of the communities we serve.”

And today from Fort Lauderdale, OptimumBank Holdings (OPHC) Chairman of the Board, Albert J. Finch said, "After careful consideration of all factors associated with receipt of TARP funds and the fact that the Company has capital well in excess of that required to be considered well-capitalized under banking regulations, we have decided to decline the TARP money."

So from across the country you see banks with strong balance sheets, access to liquidity, well capitalized asset portfolios, and solid credit quality. Why is that not highlighted in the national press headlines?

It is indeed frustrating, because you know that given all the data, there is no credit crunch at most banks.

Thursday, January 22, 2009

Some Hopeful Shovel Ready Projects

"...we have chosen hope over fear, and unity of purpose over conflict..." -Barack Obama, Jan 20, 2009

Obama has proposed spending billions of federal dollars on infrastructure projects nationwide to boost the economy. The specific directions of the program have not been fully determined, so it is too soon to say exactly which projects might get funded. However, the new administration hints that preference is given to those plans that are "shovel-ready" -- those starting the moment that funding is approved.  Those that will generate new jobs quickly and at the same time advance our nation's future.

Here are several of those hopeful projects.  It seems that they have tremendous potential to give something back for your hard-earned taxpayer investment:

A $84 million plans to continue improvements of Louisiana's interstate interchanges in high congestion areas. The Louisiana Department of Transportation and Development presented an eight-page document outlining the plans to the new administration. The plan states the programs could be underway in 180 days or less and completed within two years.

Much light rail planning in Colorado is now complete after years of study. A massive plan to extend rail to Denver's Northern suburbs has significant popular support, but pragmatically stalled because of the system's price tag. Officials have been waiting to get started on the build until they could raise close to $1B in private capital. $1B in stimulus funding "could allow construction of the train to DIA and other FasTracks projects" to begin this quarter.

But one of the most impressive shovel ready plans is born in the City of Angels. Los Angeles is initiating "Solar LA." The program is the largest solar project undertaken by any single city in the world. It lays out a swift action plan to create a 1.3 gigawatt solar network of residential, commercial and municipally-owned solar systems. According to the plans, every 10 megawatts (MW) of new solar potentially has the effect of creating 200 to 400 jobs. These "green-collar" jobs are associate with research and development, manufacturing, installation, maintenance and repair.

The multi-billion dollar plan, lays out a four phase approach between now and 2020. The 
majority of the plan’s power (500 MW) will come from private facilities in the Mojave Desert...

You've listened to 100 billion dollar bailout plans for the elite banks. Amidst that backdrop, it's very good news to see concrete plans such as those listed here under consideration for our stimulus dollar.

With respect to "Unity of Purpose,"  it's time to get started, now.

Wednesday, January 21, 2009

Q4 Trifecta Pays $6.2B

The Apple (AAPL) results are in. As expected (if you've been reading here), Apple was the third in the trilogy of players reporting "unexpected" profits during this earnings season.

Last week we saw Intel (INTC) positioned by the pundits to falter. No faltering there.

Earlier this week IBM was also expected by many to disappoint. Instead, a dose of market reality.

And now, the Trifecta is complete. AAPL blows away most analysts' expectations. You'll remember that these earnings are in Q4 2009...

Chart Source: Google Finance

So all three companies have now reported from the track. The results of the first race are in:
Billions in Earnings. Very limited job losses. "Expect a bright 2009."

Their financial teams have seen the leading indicators and are ready to focus on innovation, growth, and profits.

Are you ready to take that bet?

(Tomorrow we'll look at significant jobs creation initiatives. There are specifics behind what the congress/obama is proposing. The wise jurisdictions already have plans in place. We'll have a look at three exciting ones. If you have a good news story send it to good.news.econ@gmail.com)

Tuesday, January 20, 2009

Big Blue Charges into 2009

So last week you heard the good news from Intel.  

And this week it is Big Blue (IBM) leading the technology earnings charge into the new year.

You'll remember last week Intel suggesting that despite earlier (and eager press) reports, they were *not* going to layoff any workers.  And that they fully expected healthy margin levels later in 2009.

Similiarly today, IBM announced that it sees a strong profit outlook in 2009.  It easily beat the street earnings estimates for Q4.  So strong was its profit report that it had some analysts in total disbelief:  Peter Misek, an analyst with Canaccord Adams was stunned, "They just executed really well — really, really, really well."

Those expecting IBM to announce widespread job cuts got no such news.  Instead, overall head count is expected to keep rising as the company adds jobs in faster-growing regions and more profitable divisions.

The news should be no surprise.  You'll remember that incredible 12.5% rise in orders for computer products, and a 5.7% increase in orders for information technology goods in November.   (See Leading Indicators)

Some times the good news is really hard to believe -- really, really, really hard to believe.

Monday, January 19, 2009

King: "The Fierce Urgency of Now"

"We have come to this hallowed spot to remind America of the fierce urgency of now.", Martin Luther King Jr., I have a Dream Speech, 1963

"The ultimate measure of a man is not where he stands in moments of comfort and convenience, but where he stands at times of challenge and controversy," King, Strength to Love, 1963

I doubt that we will ever see two days in a row in modern times that link the two African American orators of our day, like Monday and Tuesday of this week.

How will these days affect the US markets? Of course no one knows.

What is clear to those celebrating the holiday this Monday is that King was to the mountain top and saw the other side. His message was a message of hope in the midst of endless despair. And for many, by noon-time Tuesday, they will have "reached the promise land."
You have seen a political campaign this year like none other. The issues changed along the trial, and by October, the economy was center stage. But well beyond the financial issues, the voters cast ballots for the ideologies of "change" and "hope."

And yet the majority of reporting today on our financial markets, our banking systems, and world economy attempts to paint a dismal scene. But the US taxpayer, coveted consumer, and small business owner, remembers the words of President John F. Kennedy.  He called Inauguration Day "a celebration of freedom - symbolizing an end, as well as a beginning - signifying renewal, as well as change."

The majority Americans are no doubt ready to concretely embrace that change and choose hope over fear. They are looking to leaders that can inspire confidence, renewal, and resolve to meet the challenge and controversy of now.

You've seen the consumer confidence rebound last week.

You've seen perma-bears turn optimistic quickly

You've seen the data on jobs losses slowing.

You've seen banks failures subside and additional funding released to help if needed.

                                                                               Source: AQAL
King knew, Obama knows, and you probably know that no matter the facts and data, the human psyche is the most bizarre, illogical trait of
 your existence. It enables your extrasensory perceptions, encourages your drive, motivation and judgment. It feeds your emotional balance and frequently permits you to undertake feats that your conscious being could never even conceive.

So more than the financial data and beyond the bank bailouts and stimulus sizes, tomorrow indeed will mark an historic turning point in our country. A turning point for those waiting for generations for this day. And no doubt a significant turning point for the financial psyche of our people.  Now.

Saturday, January 17, 2009

Bull Run Begins This Week

Are you ready for a significant move up to begin in the stock markets this week? Why a move now?

Here are five reasons for you to consider:

1. Because individual stocks continue to shake off negative news. Indeed some have even moved higher. Of particular note is that negative news seems to be producing little if any downward movement in individual issues.

Several examples this past week include:
  • Intel (INTC), the Chip maker's net income dropped 90% from a year earlier.
  • Sealy Corporation (ZZ), the bedding maker said fourth quarter sales fell 26%.
  • Apple Corp (AAPL), whose leader Steve Jobs announces a leave of absence for health concerns.
The markets watched these events this week, nodded, and moved on.

2. Because disappointing news in the macro market is becoming nothing short of blasé. Stock markets are now numb to the bad news beats. News of more large bank bailouts and massive write offs did move stocks somewhat lower, but any actions were no match for the lows seen in November when the uncertainty of the extent of those bailouts was much greater. With even more large bank blood on the street, the market apathetically moved higher in its run into the weekend.

3. Because there is now a cease fire in Gaza. Stability in the region takes one more uncertainty off the market's table. Mid-east experts will be quick to show us why balance in that region has a calming effect in world markets.

4. Because a signal for sea-change in economists' sediment may be indicated in the conference board's report due out this week. You'll remember that their November reading, (reported in December), already showed 4 of 10 leading indicators moving positive. With current reports already out that are used as reference by the board, it is likely you'll see a move to 6 or 7 out of ten readings staying or moving to the positive column.

5. But probably the most significant market mover over the next several weeks will be the Obama factor. One of the great orators of our times will inspire the world this week. It is likely that he will jolt confidence and innovation into action. In turn, Obamamania will stir consumer confidence. A one, two punch no less. One at the Inauguration on Tuesday and the other at the state of the union address in the next several weeks.

So to recap: individual stocks are now shrugging off any negative news. The macro market is growing disenchanted with its gloom diet. A major mid-east conflict is now under the terms of a cease fire. The conference board report moves to a positive bias. And an international orator takes center stage with an inspiring message of hope.

I'm ready. You're ready. And so are the markets.

(Keep those stories coming. Thanks to those of you that have already sent in good news stories from around the country. I hope to compile the best of those in an upcoming post. Send your story to good.news.econ@gmail.com)

Friday, January 16, 2009

Deflationary Prices? Only Energy is Down...

The "Economics Writers" at Yahoo Finance got it wrong yet again. (But of course fear sells right?)

Here is their opening sentence today. "Consumer prices tumbled yet again in December, and inflation last year logged its smallest advance since the early 1950s, fanning new fears that the country may face a dangerous bout of deflation."

What fear? Fear itself perhaps? Fear of the "D" word.

Let's look at their chart first:

Looks like some pretty big drops right?

"I think deflation is setting in," said Mark Zandi, chief economist at Moody's Economy.com. "Given the sliding economy, businesses are under extreme pressure to lower prices to maintain sales."

Mark please, let's have a look at some details. The only prices that are coming down are oil prices. The chart is created to fan fear when in fact their is good news in the raw numbers...

Let's have a closer look at the chart from the Department of Labor's actual report:

Transportation and Energy prices are indeed down. But the core rate of inflation (excluding food and energy has been flat.) Even during the past three months of turmoil, the core rate has been almost perfectly steady.

Meanwhile the past three months have given us lower heating bills, lower gasoline prices and a reduction in airline ticket prices.

Deflation is no where to be seen in the details. Did we notice in the midst of this barrage of negative Yahoo headlines, that in fact our cost of living is down... significantly.

Now that's Good News. Let's enjoy it while we can.

(Do you have a misleading headline or news-story that you'd like covered here? Send your suggestions to good.news.econ@gmail.com Together, we'll make it right.)

Thursday, January 15, 2009

Intel Beats Estimates, Heads Higher

The headlines were already written before Intel (INTC) announced its numbers. And you know the drill by now... gotta beat that gloom and doom drum.

But surprise. Intel beat its numbers. And all the focus was on negative headlines. Yahoo picked up the story from Alleyinsider and cross-posted the gloom on at least 7 of their different tech ticker channels:

The market however in after hours trading shrugged off the headlines. And INTC turned higher.

It is tired of this same old drum beat. What was more salient news earlier in the week was that despite recent predictions that the company might be cutting another 6,000 employees from its payroll, Intel has clarified that no new job cuts are coming or required. Additionally management fully expects margins to bounce back to "healthy" levels by the second half of 2009.

Perhaps management at Intel has indeed taken note of the fact that even though we had the big credit freeze in October, that in November we saw an incredible 12.5% rise in orders for computer products, and a 5.7% increase in orders for information technology goods. (See Leading Indicators)

That seems to bode well for chips to me. And the after hours market agrees.

Wednesday, January 14, 2009

Banks with Muscle

While most banks only insure up to $250,000 of your interest-bearing deposits through the FDIC, Banks with separate "charters" make it possible for your deposits to be insured well over the $250,000 advertised by the federal government's protection/deposit insurance program.

Frequently as banks merge, they re-brand themselves under one name. Some decide to drop the charters and additional paperwork filing associated with each separate banks in order to reduce overhead. Others however decide to keep their separate charters with the FDIC. The trade-offs are judged by and announced by the surviving management of the remaining bank and the actions typically have little to do with the size of the bank.

For instance, Fifth Third Bank holds 3 separate charters with the FDIC. It therefore can pass on up to $750,000 of insurance to depositors using its three different charters.

Glacier Bank of Kalispell, Montana conducts business as First Security Bank of Missoula, Valley Bank of Helena, Big Sky Western Bank of Bozeman, Western Security Bank of Billings, First Bank of Montana of Lewistown; as well as Mountain West Bank in Idaho, Utah and Washington; It also has charters with 1st Bank in Wyoming, Citizens Community Bank in Idaho, and First National Bank of Morgan in Utah. I'll let you do the math.

Impressively, FirstBank of Colorado advertises on their website: "FirstBank's 25 separate charters make it possible for your deposits to be insured up to $6.25 million, keeping your money safe and secure."

Do I see weakness here? No.

In fact Glacier Bank (GBCI), placed an additional 6,325,000 shares of common stock at a price of $15.50 per share, including their over-allotment of 825,000 shares in the midst of this "economic crisis." They bankrolled, $94,000,000 in that public placement on November 19, 2008. Several week later they further flexed their muscle with the acquisition of the Bank of the San Juans in Durango, Colorado. They announced a dividend payout to their shareholders several weeks later.

Does it get any better than that for a bank given the perceived financial turmoil? Yes.

On Dec 30, 2008, Glacier issued this statement: "We greatly appreciate the federal government's recognition of our financial strength in approving Glacier's participation in the TARP Capital Purchase Program. However, with the $94 million in net proceeds from our successful common stock offering, we are already one of the most strongly capitalized banking companies in the country, with total risk-based capital of approximately 16%. Consequently, we do not believe that participation in TARP is in our shareholders' best interests."

One of my readers recently asked if I read the 10Q financial statements of individual banks. You bet I do: "More of them than I care to admit publicly." The more that you do read of these disclosures, the more you realize that this banking "crisis" is very narrowly focused on the top 10 banks with a over-allocation of "junk" in their asset collections. Conversely, these second tier banks (highlighted in this post) have quite impressive capital portfolios. (For some other excellent examples take a peek at the fine banks that Peter Cohan reviews.) These firms all are strong, safe, secure, and committed to a solid US banking system. We should reward them in every way possible.

Overall it's just another reminder of the assertion back in November: "There really is no credit crunch at most US banks..."

(Do you have a example of a strong bank in your area? Please comment below, or send an email to good.news.econ@gmail.com)

Tuesday, January 13, 2009

January's FDIC CRA Exams Show Healthy Lending

The FDIC conducts monthly Community Reinvestment Action (CRA) Examinations to determine whether or not banks are meeting their lending obligations in the communities they serve. The complete exam ratings are posted on the FDIC site.

But here is the cliff notes version:

O is Outstanding:
The bank is exceeding expectations for lending in their area.

S is Satisfactory:
The bank is meeting the expectations and lending well.

NI is Needs to Improvement:
The bank is lending to the community but could do better.

SN is Substantial Non-compliance:
An officer of the FDIC is probably on the phone.

What did the January 2009 report show?

Source: FDIC

The detailed report shows East Bridgewater Saving Bank in East Bridgewater, MA needs some improvement and that the only bank reported as substantial non-compliant would be Reynolds State Bank in Reynold, IL.

So we've now established that bank failures have slowed significantly since Dec 12, 2008.
Further, the snapshot FDIC lending exam shows banks on Main St. lending well. Credit crunch... where?

For those 151 worthy lenders out there who passed the examination this month: Bank On!

(Tomorrow we'll take a look at why the new FDIC insurance policies may be able to insure your savings well beyond the published $250,000. Do you have a good news story to report? Please send them to The Editor at good.news.econ@gmail.com)

Monday, January 12, 2009

Banks are No Longer Failing

It has been over a month since Cerent released their contrarian report on the "credit crisis." You had a preliminary look at that report when reading, "No Credit Crunch (For Most Banks.)"

According to the FDIC, no additional banks have failed since that report. Zilch, Nada, None.
[Editor's note: Since this original posting two more banks failed in January. Although the data in this report is still salient, it appears as if there were several more shakeouts from the October distress]

Why have failures slowed? Because only a few big banks placed irresponsible banking bets based on complex "paper instruments." Those convoluted contracts and certificates are still not completely understood by those who created them or those who bought them. (Don't even try to read or understand them. They are what most conservative bank leaders call "junk.")

More importantly though, several of those large banks that were about to fail, got bailed out by the government. Those that were unable to get rid of the their "junk" in exchange for federal assistance, failed.

Source: Cerent

Source: USA Today

Most of the drama charted above took place in October, November, and the first week in December 2008. But thanks to the swift policy action on behalf of the Federal Reserve, the US Treasury, and other governments and world banks, the US bank failures have slowed significantly. (See the total list of FDIC failed banks.)

The even better news continues to be backed up by the Fed's own current data:

- Overall lending by US banks is at a record high and has increased...

- Consumer credit is at record highs and also has increased during the "crisis..."

- Deposits at all banks continues to increase....

- Loans by banks to businesses continues to grow rapidly.

And a quick glance at any daily trade publication shows that commercial paper markets are now back to operating within their normal ranges as are the municipal bond markets.

Let's call this debacle what it was: A crisis of the elite banks and their failed leadership. Most governments have now bailed them out.

The rest of the banks and their fine leadership are doing well. I for one will continue to trust such leadership with my personal bank deposits.

(Tomorrow I'll have a look at how the FDIC conducts its on-going evaluations of bank lending and why those current evaluations show on-going lending health. Do you have a good news story to report? Please send them to Editor at good.news.econ@gmail.com)

Saturday, January 10, 2009

A Look at Leading Indicators - Most Times They're Late

So here we are close to mid-January and many are still looking at and reporting economic indicators that are weeks if not months old. What indicators should we be watching? The leading ones.

A great compilation/glossary on the definitions of the top ten "leading" indicators is provided at The Street.

But history indicates that it's difficult to track all those indicators on a timely basis. Why is timely tracking of them important? Because it is in these indicators that you first spot a slowdown or speed-up of the economy. For an economy in recession, it's where you spot the good news; glimmers of hope for recovery.

The Conference Board (CB) is a great place to start. These folks track the indicators and report every month their findings. With a close look of their report, you'll notice that their latest release in December is summarizing November's data. Isn't that a long time ago? But wait! Even back in November, the CB reported that:

"Four of the ten indicators that make up the leading index increased in November. The positive contributors — beginning with the largest positive contributor — were real money supply, the interest rate spread, manufacturers' new orders for non-defense capital goods, and manufacturers' new orders for consumer goods and materials."

Okay, so that's only 4 positive signs out of 10. But that was back in November.

Let's have a look at what has happened since then.

The Institute for Supply Management (ISM) released its report on non-manufacturing services this past Tuesday. Their business activity index came in at 40.6 on their scale, compared to 37.3 in November. (See their chart at left)

Production, new domestic orders, employment, backlogs, and new export orders all ticked higher than in December. Their overall-business-activity index was higher by 6.6% November to December. And get this: the segment reporting the largest increase in business activity? Are you sitting down? Retail.

A factory-orders report is also not yet out for December, but have a look at November over October... Orders for long-lasting durable goods for November declined by only 1.5% compared to an 8.5% decline reported for October. Not super news, but nevertheless a slowing decline. However there were three very impressive pieces of positive news. (Little reported of course - and usually buried in a gloomy headline.) Those tidbits included a 3.9% jump in orders for non-defense capital goods, a 12.5% rise in orders for computer products, and a 5.7% increase in orders for information technology goods. All three of those areas were negative in October, and a turn around in demand for them indicates that businesses were again purchasing equipment and spending on infrastructure in November already.

You've been reading positive news on home sales here since late November. One in five major markets now report increases in home values. Applications for new mortgages continue to surge into the new year. And now the urban markets hit hardest by the downturn out West, are up 27 percent since their August 2007 bottom.

Can you find gloom in commercial construction? Again, not in the November reports. And the good news is only buried under a dour headline about residential construction. Activity actually rose 0.7 percent annually in November, and was up 12.1 percent if you include the three months prior. That construction activity includes a strong pickup in nonresidential construction — which includes office buildings, shopping centers and hotels. Of particular note is that October activity numbers were revised upward from an original estimate that construction had dropped 1.2 percent that month.

When examining the November personal-income report from the Bureau of Economic Analysis, you'll see that real disposable income jumped 1 percent for the month and is up 7.1 percent at an annual rate over the past three months. Real consumer spending in that report actually rose 0.6 percent in November.

If you've been reading this blog since November, that revelation comes as no surprise. Why? Gasoline prices. Since the July peak, the unleaded price at the pump is now $2.50 per gallon less. (A buck 33 in my back yard.) Currently, the US consumes about 300M gallons per day. So let's do the math again. That's a $750,000,000 "gas tax cut" per day for the US commuter. A bi-partisan "stimulus" to the US economy of close to $275B for 2009. (Provided of course that prices stay put at current levels.)

You've also seen illustrated here several times, that LIBOR rates are way down since the big chill in October. The chilly credit conditions continue to warm. The three-month LIBOR rate is all the way back down to 1.4 percent. Corporate bond rates continue to decline, an additional sign that private capital markets are starting to function again.

And contrary to all the gloom reported in jobs markets late last week. The leading indicator for jobs data has actually turned positive. Yes, total jobs losses increased, but the *rate* of those losses has slowed significantly. (Note the negative numbers in the chart released last Thursday)

For a more historic look have a quick peek at the chart that accompanies this article at seekingalpha.com. It demonstrates quite clearly the spike downward in initial unemployment claims and how that relates to previous exits from recessions.

So back to the conference board. What do you think they will report for December? All indications point to an up-tick in their index; Some more positive news indicating an economy on the mend.

Unfortunately for the mainstream media and for US citizens searching for any good news, it may be a month late.

Friday, January 9, 2009

Eternally Economic Pessimist Sees The Light

For those of you who may not know John Cassidy, he is a Contributing Editor at Condé Nast Portfolio and also a staff writer at The New Yorker. From his own self description: "when it comes to issuing gloomy warnings about the U.S. economy, I’ve established myself as something of an authority."

But Mr. Cassidy abruptly flip-flopped this past week. His new thesis: "It’s possible that this downturn could end quicker than anyone thinks." (See "The Case for Optimism")

Say what? This is the same Cassidy that on Nov 11 wrote "The Worst of Times." In that gloomy piece his pessimistic verse proclaims that "most economists predict a recovery late next year. Don’t bet on it."

In less than 60 days, he has changed his mind.

Careful not to label himself a "heady optimist" (I guess that would be me), he goes on to make strong arguments for his quick about-face. He asserts, "As the economy goes down, we could be overemphasizing the negative just as we exaggerated the positive on the way up." He summarizes the significant and swift policy actions put in place in Q4 2008. There are now many signs that those swift actions are bearing fruit.

Additionally we have an energetic and hopeful new president-elect. An orator that can calm fearful spirits and re-instill confidence. After describing what went wrong last year and successfully making his case for stimulus, Obama may also begin to restore the appropriate psychologically trust needed to nudge consumers and businesses in positive economic directions again.

Because of all this appropriate policy action, Cassidy concludes, "By the end of this year, if all goes well, there could be tentative signs of an upturn. How seriously do I take this rosy scenario? Recently, I moved some of my savings from cash into stocks. If the past two years have taught us anything, it’s that popular economic wisdom is often mistaken."

Sound familiar?

Thursday, January 8, 2009

Listen to your Elders

"Ask the former generations and find out what their fathers learned, for we were born only yesterday and know nothing..." - Job 8:8-9

One of our readers recently commented, "Stop quoting top economists!" To that wonderful reader, the humble reply is, "Listen to your Elders."
Who can be sure which sage of economics finally caused such a reaction. Was there a tipping point?

Was it Galbraith with "The majority is always wrong"? Or perhaps, Hirschey with "The dire commentary on the US economy is overblown"? Or maybe it was the Buffet quote "Now is the time to invest and get rich."

No matter. You know that I will continue to seek out the good news where ever it can be found. Past or present. So why quote history? Because where better to find those nuggets of truth than from those with proven track records dead or alive.

So here is some wisdom for today from the top 5 economists of the 20th Century:

Keynes: "The day is not far off when the economic problem will take the back seat where it belongs, and the arena of the heart and the head will be occupied or reoccupied, by our real problems - the problems of life and of human relations, of creation and behavior and religion."

Schumpeter: "Economic progress, in capitalist society, means turmoil."

Galbraith: "The study of money, above all other fields in economics, is one in which complexity is used to disguise truth or to evade truth, not to reveal it."

Sen: "The progress of the pure theory of social choice with an expanded informational base was, in this sense, quite crucial for my applied work as well."

Robinson: "The purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists."

Perhaps the reader was correct. I should stop quoting these folks. I need to come up with my own ideas and write about them only.

Well, perhaps tomorrow, because as author Peter Drucker reminds us, "Business, that's easily defined - it's other people's money."

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