Friday, May 07, 2010

Economy - Crunching the Numbers

Take 231,000 and add 66,000 and you should get 297,000... right? Well, according to this story in it's only 290,000. Had my 9 year old son responded with their answer, he would have received an F on his math paper -- and that's what is driving me NUTS right now -- the deliberate fudging of the numbers going on in the economic headlines these days, and the deliberate "spin" in political circles.

For example... unemployment WENT UP to 9.9% and yet most everyone is celebrating the "story" that payrolls jumped 290,000 last month, supposedly "indicating the recovery is becoming self-sustaining."

Say WHAT?!?

Here are the numbers I'm seeing...

Unemployment Up: now 9.9%
Dow Down: ended down 347.8 points yesterday (after near disaster-level plunge)
Foreclosures Up: 1 in every 138 homes received foreclosure notices in the first quarter 2010
Freddie Mac: Going for another $10.6 Billion in Fed dollars
Commercial Mortgage-Backed Securities Delinquencies: rose 69 basis points in March
GM: gets an additional $3.3 Billion in Govt funds (say what?)

Let's crunch a few numbers...

Approximately 920,000 Govt. temporary workers will be hired for Census taking from April through June. I'm thinking, "Watch out July." What about the new graduates coming into the workforce pool? Has anyone even taken a count?

A few astute economists that I've been following have predicted a dramatic pull-back in home-building/home sales come July as well... which leads me to guesstimate we'll be seeing unemployment skyrocketing yet again as home building contractors struggle to find work (and speculators come out to short the home builders market again) and related support industries begin another pull back. Worse yet - "Bank of America is projecting a 600% increase in its already large number of monthly foreclosures." (link)

Now... with the glut of foreclosed homes on the market adding to the new homes inventory, what effect do you see this having on property taxes? Watch out education budgets.

IMPORTANT NOTE: You really gotta read this article on the Irvine Housing Blog to appreciate how much of the mess is being deliberately shoved into 2012. You think Obama cares whether or not he gets re-elected? He'll probably step down with a big grin of relief. Too bad we can't hold him and his Administration accountable... but that's another story for another day.

Sidenote: It comes as no surprise to me that Bank of America's CEO plans to vote for Barney Frank this fall. Maybe he thinks they'll get the same protections Fannie and Freddie have received from Frank over the past decade?

But I digress...

Now let's talk about the GM number crunching lie.

GM actually increased the size of their bailout but hid under a veil of accounting chicanery IMHO... here is how it worked. They took $6.7 Billion from their Working Capital loan (part of the Equity bailout money) to pay off their $6.7 Billion straight loan (not the entire $49.5 Billion they actually got) so they could get a $10 Billion loan from the DOE... which essentially increased the total they owe the govt by $3.3 Billion but reduced the interest rate on that new $10 Billion dollar candy they snatched.

I guess it wouldn't have been so bad if they had at least been honest about it... but noooooo... they go and spend a small fortune (of whose money, exactly?) on an advertising campaign saying they paid off their Government loan in full. (Considering they're 72.5% Govt. owned now, which Govt. Administrator/Overseer approved this ad?)

The reason I bring it up here isn't just because of the fuzzy "accounting" terminology they used to essentially lie to us. No. I bring it up because of the fact that they went for even more money than they initially received in bailout dollars. Another $3.3 Billion. To retool to meet new Corporate Average Fuel Economy standards (aka CAFE)... Didn't the initial bailout have them covered for retooling to meet this glorious new future? Anyone else besides me thinking they're having financial problems already?

Back to what I mentioned with respect to Fannie and Freddie...

Freddie Mac is tapping the Treasury for another $10.6 billion. Together, the two giants (Fannie and Freddie) have drawn $136.5 billion from Treasury's unlimited equity line since they were seized in September 2008... and here we are, still going up, up and up... but not too many are talking about it today. With the DOW teetering back and forth so much this morning, I don't find that surprising.

The PPT will step in before the end of the day. Just a guess.

Obama's little "pep talk" this morning did little to comfort me, but there are those who are still drinking at the hopium cooler. God Bless them...

(Compare the F&F financing to the Greek tragedy -- the European/IMF rescue amount for Greece is in the neighborhood of $139 billion. Combined, Fannie and Freddie rescues will now amount to more than rescuing a small country. -- Think about it.)

Add salt to the wounds... with the Gulf Coast mess and traditional summer gas price goose mixed together this year, I'm guessing hefty price increases at the pumps (which will probably be due more to the sneaky EPA strong arming being attempted right now to bypass voters yet again).

As grim as all of the above might look, that's not even the worst of it... the way I see it.

No sirree...

This Admin has scraped so much under the carpet, there's no carpet left under which to hide some to the dirt showing up with respect to their new Health Care Bill and the Stimulack numbers. It's no wonder people are jumping nervously over the supposed "Financial Reform Bill" has all but evaporated among steamed citizens.

In a vain attempt to hang onto as many Democrat seats as they (Democrats) possibly can; come the mid-term elections, I am betting we're about to see spin like we've never seen spin before... I'll liken it to a carnival ride known as the Twister. IMHO, it will be near impossible to separate the lies from the facts as facts become more and more distorted to suit political agendas on all sides. Better have plenty of gravel pills on hand. The ride isn't going to be pretty over the next few months.

Heck, it isn't going to be pretty at all over the next few years.

PS: Notice how one computer generated trade can send the entire market into a tail spin? I shudder to think what hackers around the world might be contemplating over that little fiasco!