Geithner Gone By June?

Chris Whalen of Institutional Risk Analytics says that Tim Geithner will be gone by June. Also in this brief piece, he says Citigroup will be resolved by some kind of liquidation process, about time. Let's hope he's right on both scores but I have a feeling we may be disappointed.

February Another Horrible Month for US Jobs

US non-farm payrolls shed 651k jobs in February. However, as usual the more interesting numbers are the revisiosn and they shoeed a continuation of an already bad trend. The trend in recent months is for revisions to be on the downside and this month was no exception.

December payrolls were revised from a loss of -577k to a loss of -681k whilst January was revised from a loss of -598k to a loss of -655k. Job losses are clearly worse than the headline number indicate. Revisions to January (each month undergoes two revisions) and February could easily push losses for those months in excess of 700k.

In the past 4 months, 2.6 million jobs have been lost, the most in any 4 month period since the 4 months from June to September 1945 when 2.8 million jobs were lost.

Of course that needs to be put into perspective. 2.8 million jobs in 1945 amounted to a massive 6.8% of the labor force whereas the current 4 month contraction amounts to 1.9%. That is not meant to minimize the current situation, the US economy is shedding jobs at an alarming rate.


The US unemployment rate leapt to 8.1% in February, surpassing the peak of the early 90's recession and reaching heights not seen since December 1983. If you include people who currently want a job but are not actively looking and those working part-time but that would like to work full-time, the unemplyment rate is 14.8%.



The US employment picture gets more grim with each passing month. Job losses are intensifying although an absolute peak in monthly declines may not be too far off. At current rates it is clear that the US unemployment rate is set to push through 9% by the summer and looks likely to hit double digits by the end of the year or early in 2010.

However, as employment is a lagging indicator of interest will be when the monthly declines peak and start getting smaller, that still appears to be a few months away and wll only be obvious after revisions come through to prior months.

The Daily Show Rips CNBC Apart

Absolutely one of the best clips I've seen in a long time. A host of CNBC muppets really get their commuppance on this clip although you'd need a movie length version to do it justice

The Daily Show With Jon StewartM - Th 11p / 10c

CNBC Gives Financial Advice

Daily Show Full Episodes
Important Things With Demetri Martin

Political Humor
Joke of the Day

Jim Chanos on Incompetence and Criminality

Always worth listening to, Jim Chanos on the distinction between incompetence and criminality. Basically Chanos says we should expect to see Enron style investigations into some of the wildly misleading statements by bank executives over the last couple of years. Chanos reveals how some institutions were pricing securities using two sets of books to make their financial position look better as just one example.

Australian Economy Contracts -0.5% in 4Q08

Back in December in The Recession We Couldn't Avoid, I wrote the following:

"There is no doubt in my mind that the Australian economy is now in recession."

The evidence back then showed that the manufacturing, services and construction sectors had all been contracting for at least 6 straight months each and that surveys of business conditions confidence were at recessionary levels. Today we got more confirmation that a recession has been underway for a least a quarter with the latest GDP numbers.


After tepid GDP growth of just 0.1% in 3Q08, Australian GDP contracted for the first time in 8 years falling -0.5% in the fourth quarter. This would seem at odds with what the RBA announced just yesterday after their decision to leave interest rates unchanged at their March meeting:

"on the basis of currently available information, the Australian economy has not experienced the sort of large contraction seen elsewhere".

True, Australia hasn't seen declines as big as Japan or the US, but the fact is demand is undergoing a significant contraction in the non-farm sector. Excluding the farm sector, GDP was down -0.8% in the fourth quarter.

Also of interest in the above quote is the phrase "currently available data", as noted yesterday, the RBA is a data dependent and therefore a backward looking gauge of the economy. Remember that less than a year ago, the RBA was still waffling on about the threat of inflation and last March actually raised interest rates.

The RBA's ability to forecast the future is no better than anyone else's and so whilst they may be able to formulate a coherent narrative of where we have been, their forecasts for the future should be taken with a large grain of salt.


Year over Year GDP growth rose a paltry 0.3% in 4Q08 the slowest pace since the -0.9% recorded in the 12 months to December 1991, not surprisingly occurring just after the end of the last recession.

Despite the Rudd Stimulus package in December and consecutive interest rate cuts the Australian economy has been unable to avoid a contraction in the fourth quarter of 2008. Whilst Rudd Stimulus mark II will get underway in March and April it is unlikely that these measures can do more than soften the decline in economic activity in 2009.

RBA Keeps Rates Unchanged

The RBA decided to leave the cash rate unchanged at 3.25% at their board meeting today. From the statement by RBA Governor Glenn Stevens it seems clear that the RBA wants to sit back and evaluate the effect of the interest rate cuts and fiscal policy to date.

As usual, the RBA is behind the eight ball. The Rudd Government throwing money at people so they can buy houses and other stuff they can't afford and the RBA cutting interest rates when monetary policy is all but impotent, is not a recipe for an economic recovery.

As the global and therefore Australian economy continues to deteriorate into 2009, the RBA's hand will be forced into cutting interest rates again. To be clear, I'm not arguing that the RBA should have cut rates. I beleive, as was borne out in the US recently, that interest rate cuts do very little in a deflationary debt unwind.

It's quite possible that the Australian economy could sail through to the middle of the year on the back of Rudd Stimulus mark II in relatively good shape. January's retail sales numbers out today were no doubt buoyed by Rudd Stimulus no. 1.


However, once it becomes clear that the second half of 2009 is going to be worse than the first half, (I think it's already clear but the RBA will wait for the data to tell them it is) the RBA will be cutting rates again.

XAO Makes it 6 in a Row in February

The All Ordinaries fell -5.2 in February after a -5.0% fall in January. That makes the sixth consecutive month decline in the XAO which is the first time that has happened in the last 25 years. The XAO has shed -9.9% for the year so far which, from the glass half full perspective, is slightly better than 2008 when the XAO shed -11.6% in the first 2 months of the year.

Once again a new closing low was made in February (although the intraday low was not breached). However, those new lows remain only slightly below the lows of November last year. It is still my belief that we will close significantly lower than the current closing low of 3281.5 at some stage this year, more than likely below 3000.


As mentioned many times before, a common feature of bear markets is a series of short sharp rallies that fail and ultimately end in lower lows. As shown by the shaded area on the chart above, a rally of the short sharp kind has been noticeably absent since the market rallied about 14.5% in the space of 7 trading days from the November intraday low.

There has been a lot of talk about the market being oversold and that we are therefore due for a rally. I tend to agree, however remember last year that there was a lot of talk about needing a final cathartic sell-off to make a bottom, we got the sell-off in November, but not the bottom. Stock market lore is full of such platitudes just waiting to be debunked.

The point is, just because we are due for a rally does not necessarily mean we will get one. That said I believe we will finish higher in March. Whilst the fundamental picture for the global economy and corporate earnings continues to deteriorate, I believe some type of rally is in order. As usual though my predictions should be taken with a grain of salt....and don't forget to vote in this months poll.