Month: March 2009

Al-Marri Detention Suit Dismissed by SCOTUS

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So the issue of indefinite detention is unresolved, though according to ScotusBlog, we have half a loaf:

The Fourth Circuit Court, in a splintered decision, upheld that authority under the 2001 Resolution, but did not rule on the government’s alternative claim that the President’s constitutional power as Commander-in-Chief supported the action. While the Supreme Court’s order Friday does not indicate how the Justices would have ruled had they gone ahead with their review, the order “vacated” the Circuit Court ruling, meaning that it no longer is a binding precedent on the issues it decided.

I’d rather see a ruling declaring the detention illegal, but the dismissal a bit better than the status quo.

Economics Update

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Scary Pix Courtesy of Barron’s Econoday

So the unemployment rate jumped ½% in February, from 7.6% to 8.1%. and 651,000 jobs were lost.

Additionally, U6, the broadest measure of un and under employment is at 14.8%, and note that U6 is the statistic closest to the 20+% unemployment rates recorded in the great depression.
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Delightful.

If that weren’t bad enough, 20% of all mortgaged properties are under water, and something around 1 in 9 mortgages are either in foreclosure or delinquent, so any turn around in residential real estate is are greatly exaggerated.

It also looks like the FDIC is asking Congress to lend it $500 billion, because its insurance fund is depleted.

We do have Baltic Dry Index, a measure of the demand for cargo shipping, one piece of good news, in that the just hit its highest level this year, which indicates more international trade.

Meanwhile, the jump in unemployment has driven the dollar down, and oil up.

Zimbabwe Update

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I guess that the lede is that Morgan Tsvangirai has been injured in car accident, though at this time, his injuries appear “non critical”, though it has also been reported that his wife was killed.

The rest of developments have judicial with human rights campaigner Jestina Mukoko having been freed, but reporter Brian Hungwe is still in detention, albeit at a hospital.

We also had a judge ordering that MDC activist, and Deputy Minister of Agriculture designate, Roy Bennett be released on bail, though he is still in detention pending a review by the Supreme court, and the judge who issued the bail order has been arrested.

Needless to say, things in Zimbabwe remain unsettled.

Remember What I Said About the Marine Insurance Act of 1746?

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If not, see here, but once again, we are seeing the effects of ignoring this 346 year old lesson, because investors have made bets on the failure of bonds that they do not hold through Credit Default Swaps (CDS), and in so doing, look likely to be driving otherwise solvent companies into bankruptcy:

Amusement-park operator Six Flags Inc. and automaker Ford Motor Co. may be pushed toward bankruptcy by bondholders trying to profit from credit-default swaps that protect against losses on their high-yield debt.

By employing a so-called negative-basis trade, investors could buy Six Flags bonds at 20.5 cents on the dollar and credit- default swaps at 71 cents. If the New York-based chain defaults, the creditors would receive the face value of the debt, minus costs. In a Feb. 27 note, Citigroup Inc.’s high-yield strategists put that profit at 6 percentage points, or $600,000 on a $10 million purchase.

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It was recognized centuries ago that you should not be allowed to use insurance to do this, because it leads to fraud and panics, but the free market mousketeers decided that that was old thinking, and that they had no need for no stinking insurance regulations.

Obama Health Care Plan: No Single Payer

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So, Obama sets up a summit on health care reform, and invites everyone but advocates for single payer, and finally, when the screaming gets too loud, relents, and invites a hand full of them.

This does not bode will for his plan.

First, if he is not more ambitious in his initial proposal than his basic desires, it will be cut down to nothing in Congress, and second, the insurance companies are evil, and any plan that makes supporting their business model a central tenet is doomed to fail.

Economics Update

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Busy day, so let’s start with the central banks: The Bank of England cuts rates by 50 basis points (½%), and is engaging in quantitative easing (printing money) in the form of buying £75 billion ($US 106 B), and the European cut its benchmark rate by 50 basis points to 1.5%, and is also looking at “further non-standard measures” (see quantitative easing).

Considering that the ECB has no charge except to manage inflation, this is extraordinary.

Unsurprisingly, the rates cuts have driven the dollar up.

As Brad Delong Notes, “It is overwhelmingly likely that the current downturn-in-progress will then surpass the united 1979-1982 downturn as the worst downturn since the Great Depression itself.“

In employment, first time jobless claims fell to 639,000, but the less volatile 4 week moving average rose to 641,750, the “highest since October 1982,” and productivity dropped 0.4% in Q4 of 2008.

Bumpy ride, folks.

On the brighter side Bonddad’s credit indicators show a thaw in lending over the past few months, and February retail sales beat expectations, though the numbers are still pretty bad.

In autos, GM is saying that there is “substantial doubt” about whether it can survive in an SEC filing, not a surprise, and implies Chapter 11, which further implies liquidation for Chrysler.

Mortgage rates rose last week.

Oil, meanwhile fell in response to the generally anemic economic news.

Wishing that I Was German

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Yes, that’s number 217 of the things that I never expected to say, but when I read that Angela Merkel’s governing coalition is looking to put statutory limits on executive pay, that is what I thought. When the conservatives in government argue that, in addition to encouraging bad behavior, “that growing wage disparities “pose a threat” to social cohesion,” I wonder why our policies are run by John Galt wannabes.

Securities Trading Tax Goes Mainstream

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I knew that there were some proposals kicking around, but the idea has become mainstream enough that New York Stock Eexchange CEO Duncan Niederauer has gone public with his opposition.

It appears that Rep. Peter DeFasio’s (D-0R-4) proposal for a ¼% transaction tax on stocks and derivatives, in part to fund the bailout of the banking industry.

It’s a very good idea. ¼% is inconsequential to long term investors, but to speculator types, such as day traders, it makes their business model, and the problems that they bring, much less sustainable.

It exists in most of the rest of the world, and (IIRC) existed in the US until some point in the 1960s, so it’s not the end of the world that these folks forsee, though it might cut down a bit on their commissions from churning clients investments.