Links 11/30/08 « naked capitalism

Sunday, November 30, 2008

Links 11/30/08

Sorry for the short list tonight, but I need to get on a more normal schedule.

Protection boost for rare gorilla BBC

Obama Team Seeks Possible Change to Aries, Orion Space News

Another View: How to Save the U.S. Auto Industry J. Ronald Trost (who negotiated the Chrysler rescue), DealBook (hat tip Credit Slips). The problem with all these clever financial strategies is that they ignore the consumer. Surveys have found that as many as 80% of carbuyers would not buy a vehicle from a bankrupt manufacturer. Ask people you know. So far, I have gotten a 100% negative response. And failing dealers, who provide service, is also a deterrent.

Why Did TARP Change Course? Roger Ehrenberg. A new line of thought.

Credit-Card Fees Targeted by Retailers Who Say Banks Overcharge Bloomberg, The issue is merchant charges, not those to the consumer.

Do We Overrate Basic Research? Steve Lohr, New York Times. FYI, the author of the research, Amar Bhide, is a friend of mine, and also unfailingly smart and provocative.

Antidote du jour:

25 Comments:

ndk says:

November 30, 2008 at 3:01 am

Bhide’s arguments resonate with me, though they go against my direct interests, since I’m trapped in basic research and receive some NSF dollars, though the field has little appeal to me. I railed against unprofitable venture capital and distortions it causes in markets earlier.

And having worked at National Institutes in foreign developed countries, I also agree with his observations on the quality of the US’ human capital and their innovative capacity. We’re pretty clever and flexible folks.

Max says:

November 30, 2008 at 3:02 am

Black Friday sales up 3% YoY. So much for the “new frugality” nonsense, as well as deflation.

Anonymous says:

November 30, 2008 at 3:14 am

electronic payments coalition?

ndk says:

November 30, 2008 at 3:14 am

Black Friday sales up 3% YoY. So much for the “new frugality” nonsense, as well as deflation.

Careful relying on foot traffic based metrics, Max. They’re notoriously unreliable, and anecdotal evidence suggests they’re worse this year due to more browsing and less buying.

Max says:

November 30, 2008 at 4:16 am

ndk,

I understand, however, the calls for an _abyssmal_ shopping season have been clearly discredited.

Anonymous says:

November 30, 2008 at 4:50 am

One day of shopping for cheap stuffs doth not make a trend. I would have to see a break down of electronics and high to middle end purchases and how much per consumer/regional buying. Before I would say if the pie was good or not.

Buying for kids or are the adults forgoing gifts this year? How are the brewery’s/alcohol sales to date/groggy Holiday?

Skippy

Anonymous says:

November 30, 2008 at 4:58 am

Hay someone tell the person with the critter in the box, that foam packaging gives off chloroform and will kill it OK.

Must be left over insulation from the Katrina emergency housing.

Skippy

Anonymous says:

November 30, 2008 at 6:42 am

Re credit cards, the US interchange fees (charged to merchants) averages ~1.8% and often goes up to 3%, which is what smaller vendors are charged.

Anonymous says:

November 30, 2008 at 6:56 am

Would recommend viewing this program on Australian TV channel SBS.

http://player.sbs.com.au/programs#/programs_08/fullepisodes/latestepisodes/playlist/Judgement-Day-Intelligent-Design-On-Trial-Part-1-Full-Ep/

Part one of two, concerning the Dover, PA court case, involving Intelligent Design vs Evolution and school board members pushing for equal time in study of I.D.

For anyone wondering why I would post this here, my reason is for social progressive attitude. In my book the present condition of Wall St and the body Politic has more to do with social attitude and the factors that create them and until the main factor (social attitude) is addressed, this merry-go-round will never stop and will be revisited over and over again.

Skippy

John from Concord says:

November 30, 2008 at 7:31 am

Max, give it another couple of days before you throw out terms like “clearly discredited.”

Early results I’m seeing and hearing is that real sales are down pretty hard so far this weekend. At least in this area (metro Boston), foot traffic is clearly below seasonal norms despite what has been reported by young reporters who ooh-and-ahhed at the 6 am lines on Friday morning but didn’t stick around to see how the day unfolded. By midday, the crowds have thinned out to normal weekend traffic, and interviews are suggesting that people are buying smallish discounted items but not the bigger-ticket consumer electronics/jewelry/etc items that traditionally move fast on the weekend after Thanksgiving.

I have to file a story on this myself on Monday morning. So far, the angle looks to be, “The Good News: There Was Plenty of Parking.” We’ll obviously have much more data — or at least a saturation of anecdotes — by tonight, and it’s certainly possible that things really are going better than expected. We’ll see.

ruetheday says:

November 30, 2008 at 7:34 am

Re: Why Did TARP Change Course?

Asset purchases weren’t abandoned. You’ve been hoodwinked. In early October, it was announced that Fannie and Freddie would start buying up bad mortgages and MBS on the open market ($40 billion per month). Last Tuesday it was announced that the Fed would buy $500 billion of mortgages and MBS plus $100 billion in agency bonds. Treasury didn’t abandon the plan to buy troubled assets, they simply shifted that responsibility over to the GSEs and the Fed, freeing them to use the $700 billion for other purposes ON TOP of that. Why has no one picked up on this?

John from Concord says:

November 30, 2008 at 7:36 am

On a separate topic… at first read, I think Trost’s proposal for automaker restructuring is exactly right, the best one I’ve seen by far. It neatly answers all of the objections, is workable, and could be enacted quickly.

Someone should tell me what I’m missing.

Roger says:

November 30, 2008 at 10:09 am

ruetheday, I left my response over for you at Information Arbitrage. You are not addressing the issue I took on in my post. I certainly agree with your facts, but my post is focused on the banks.http://www.disqus.com/people/infoarbitrage/#main

Anonymous says:

November 30, 2008 at 10:47 am

“..problem with all these clever financial strategies is that they ignore the consumer. Surveys have found that as many as 80% of carbuyers would not buy a vehicle from a bankrupt manufacturer. Ask people you know. So far, I have gotten a 100% negative response.”

Of course as we know, the value of surveys can only be know when there is a close scrutiny of the questions.
A BK GM is not a BK GM with Federal backup. People are perfectly happy to continue dealing with a BK bank because they trust the FDIC.
Typical scare tactic

Another scare is the “3 millions will be laid off” by big3 BK.
Well the industry has IIRC 385,000 workers. Add possible problems down the line, sister cousins and aunts to get 3 million.

So would these layoffs in Auto industry be any worse then the layoffs of 385K in say big box stores?
Basil Patterson suggests that the collapse of the Financials will total 225K layoffs in NYState. Although US is bailing them out it is not to save jobs.
Then these workers are not unionized with UAW clout.
plschwartz

Yves Smith says:

November 30, 2008 at 11:28 am

Anon of 7:34 AM,

With all due respect, we followed the TARP from its ugly birth and it has changed course. The initial purpose, which was not discussed candidly by Paulson, was to buy TROUBLED assets, as in the worst dreck the banks owned, like CDOs and other complex credits, via a price mechanism that was never discussed candidly (various ideas were bandied about). The only way the original TARP made sense was if the Treasury overpaid for the assets to have a back-door recapitazlization for the bank, and establish phony marks for the dodgy assets in question, so that banks with assets they could argue were similar could carry them at higher prices. Voila! You get a multiplier since the bank who mark up the prices also get an apparent equity boost.

This latest TARP move is designed to get down the spread between agency MBS and Treasuries to provide better terms to mortgage borrowers, Both the target (type of paper being bought) and the objective are completely different. Agency MBS have a de facto government guarantee (explicit with Ginnes, in the form of a “no negative net worth” pledge for Fannie and Freddie).

Anon of 10:47 AM,

I used to do survey research and am well aware of its vagaries. I also must tell you that when asked whether they will make a certain purchase, the propensity among consumers in the vast majority of surveys is for them to OVERSTATE their likelihood of making the purchase.

I happened to run into a few GM car owners over the holidays. I asked them if they would buy a car from a manufacturer that had filed for bankruptcy, The answer was no, and the reason was concern about resale value and servicing. And I found out later in probing their purchases that they has NOT used financing to buy their cars. With reports in the media of GM’s dealers being at risk, a GM BK likely introduces too much perceived risk for likely buyers. Why should anyone expose themselves to that risk when there are plenty of other choices?

Anonymous says:

November 30, 2008 at 11:51 am

Yves, My wife tells me that the attitude to have is that I will sleep more when I’m dead. YMMV

Thanks for your site and postings.

donna says:

November 30, 2008 at 12:35 pm

Well, I can never find Aries anyway, but I hope they leave Orion’s belt alone, since that’s one of the easiest things to find in the sky.

ruetheday says:

November 30, 2008 at 1:04 pm

Yves – Im not arguing that the TARP proper did not change course, I’m arguing that the asset purchases themselves still ended up (or will end up) taking place. We can quibble over the exact composition of assets being purchased (though the market for non-GSE MBS is much smaller than for GSE-backed MBS), however, I still believe that even when Paulson was focused on asset purchases (assuming he was at some point) that he never really intended to buy the real exotic stuff – that is, I believe the intent was to stabilize the underlying whole mortgages and MBS with the notion that the CDO and other downstream derivatives would then sort themselves out.

Don says:

November 30, 2008 at 5:23 pm

Is that a ferret? I only ask because I actually live with one.

Don the libertarian Democrat

Yves Smith says:

November 30, 2008 at 6:14 pm

Don,

Don’t know for certain, but I thought so when I put the pix up.

Juan says:

November 30, 2008 at 6:46 pm

Max,

Along with points raised in other comments, you might want to consider what seems to be an inventory glut, or, some evidence of overproduction of consumer goods as brought out in this AP article: For stores, the holiday season may be over

Mr. L says:

November 30, 2008 at 7:44 pm

http://www.ft.com/cms/s/0/bd051b0c-bf13-11dd-ae63-0000779fd18c.html

The closing of the tax havens starts to make a move.

Anonymous says:

November 30, 2008 at 9:03 pm

http://www.theaustralian.news.com.au/business/story/0,28124,24732323-36418,00.html

Anonymous says:

December 1, 2008 at 12:42 am

Skippy said: “Hay someone tell the person with the critter in the box, that foam packaging gives off chloroform and will kill it OK.”

OK, but I think it will take too long. If they move real fast they might be able to tape it closed before getting bitten, tie the box to a brick, and throw it off a bridge.

Ugh. Is that someone’s pet? People sure have strange ideas about pets. “Weasel” – the word, for years, was synonymous with ‘evil little animal’, until it was appropriated by central bankers as a term of endearment for each other. Or, so I am told.

Yves Smith says:

December 1, 2008 at 1:06 am

I have never owned one, but ferrets are supposed to make great pets. They are very smart and very playful

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