Monday, November 17, 2008

Monday Update...

Well, Japan joined Germany in officially declaring a recession earlier today. For all of the talk about emerging economies like India and China, people often forget how important Japan and Germany are in the global economy. The US is by far the global GDP leader, but Japan and Germany are the next two largest economies in the world.

The Japanese and German economies slipping into recession is not a surprise, but it fits with the theme that our global economy is still extremely linked. Note that fewer and fewer people are using the "decoupling" word on TV (decoupling is the idea that Asian and European countries were growing on their own and not dependent on the US for growth - I don't think anyone is going to win a Nobel prize for that idea anytime soon).

1) Citigroup is looking to cut 50,000 (!!) jobs - It's not clear where these job cuts will come from but 50,000 white collar jobs is another big hit to the economy. Citi remains a giant franchise in disarray and their CEO (Mr. Pandit), seems to have little ability to inspire the troops.

2) Genworth Pulls a Fast One - Genworth and Hartford Financial both figured out a way to steal from the US Taxpayer....... I mean gain access to the TARP. Most people don't know Genworth, but they were the enormous insurance arm of General Electric that sold insurance and financial products. The stock has fallen from $30 a year ago to about $0.90 on Friday. Ah, Congress in with all their financial expertise must have prevented loopholes in the TARP, right?
Hartford Financial agreed to buy a small savings and loan company on Friday, then convert themselves into an S&L and poof! Now they were a DISTRESSED BANK not a distressed insurer and they can get access to the TARP.
Genworth, loved that idea so much they did the same thing over the weekend. It's unclear what Genworth paid to buy Interbank fsb but with just $1 billion in assets, they probably didn't pay very much. The stock has doubled since Friday on this news. So by making a small investment in a midwestern S&L this enormous insurance company now gets access to the TARP.
I'm looking to buy an S&L if anyone has one for sale.........
3) Tech Slowdown - There was a good piece in the NY Times that highlighted many of the issues that I've been hearing. October "was like turning a switch".... pretty accurate.
In the span of just a few weeks, orders for both business and consumer tech products have collapsed, and technology companies have begun laying off workers. The plunge is so severe that some executives are comparing it with the dot-com bust in 2000, when hundreds of companies disappeared and Silicon Valley lost nearly a fifth of its jobs.

October “was like turning a switch,” said Robert Barbera, chief economist at the Investment Technology Group, a research and trading firm. “Everything pretty much shut down.”
Thanks again to the WWNY for hosting me on Friday. I think the video is still online here.

1 comment:

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