Weekend Thoughts

• In January and February 2009, BMW sold only 33 of the 7 Series cars in ALL of North America, down from 2,212. And only 10 were sold in February, meaning that the pace got worse. Sales of all models were down 27.7% for the first two months versus the previous year.
• There have been a cluster of very low debt recoveries so far in this Depression. Expect that trend to continue.
• Zero Hedge is my new favorite blog. Here he prints an awesome Merrill/David Rosenberg report on the economy.Key points, among others: huge one-day rallies happen in bear markets andseasonal factors skewing the February data [The seasonal adjustment for new home sales, for example, was the strongest since 1982. For orders, it was the strongest since the data were first released in 1992. The retail sales number in February in non-seasonally adjusted terms was the worst, a 3% decline actually, on record, and yet again a strong seasonal adjustment factor made it look flat.]
• If it's possible for private investors AND the FDIC/Treasury to make money buying the "legacy"/"troubled" assets, why do the banks need to get rid of them?
• I was listening to the FDIC conference call. A small bank executive was complaining that if he sells loans to this program at a discount, it will reduce his capital (duh), and is there anything the FDIC can do? He flat out wanted to sell assets at a loss and not report a loss. How about no more deposit insurance for moron bankers?
• The cult of stock (equities) worship in this country needs to go away before I buy back in. It is not gone yet. Relative performance vs bonds.
• "If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform."
• Oh,Bama has gone from community grifter to full scale shakedown commando.

Stats of the Day

Edmunds.com predicts for March: Chrysler will sell 89,000 vehicles, down 46 percent compared to March 2008 and up 7.1 percent from February.

Civilian Employment Population Ratio

Is GE a Zero?

From the WSJ:

To meet investor demand for more details about GE Capital, managers held an investor day Thursday, during which they gave out much new, and welcome, information about the unit's $637 billion of assets. One detail: Large amounts of GE Capital's loans are to borrowers with junk, or sub-investment-grade, ratings.

For instance, 81% of the $55 billion of equipment leases in the Americas is to borrowers below investment grade, and 40% are rated B+ or lower. On the $38 billion leveraged loan book, 76% of the borrowers are rated below B+, and 28% are below B-.

For instance, management is expecting $333 million of credit losses on its leveraged loans in 2009 -- less than 1% of the total amount. The unit aims to have reserves at 1.2% of the book this year.

GE Capital's consumer portfolio also contains a lot of loans to lower-grade borrowers. The company said 58% of its $183 billion in consumer loans were to prime borrowers, implying a sizable 42% were to non-prime borrowers.

Why This is Not the Bottom

Insane bullishness. There is a panic to buy equities. Bearishness and the depression were forgotten in a week! Look at the equity put/call ratio. It is at a level recently associated with short term tops.

Astonishing - scenes from the recession:

• I have seen residential lots like this sell for $1000. They cost 10x that to create. Loss severity.
• See this picture? It is really expensive to get rid of those weeds. Loss severity.
• The future of car dealerships: auctions being held in these car storage spaces at ports.
• Is this bullish for Best Buy? Bigger piece of much smaller pie.

What do these four pictures have in common: they describe completely broken sectors of the economy - housing, autos, and retail.

Have you heard any plans to fix the auto industry? Not prop it up, but figure out how many cars a non-bubble economy needs annually, and then figure out an economical way to produce that quantity?

The Deck Chairs Are Fine Where They Are

The Deck Chairs Are Fine Where They Are

Even those who claim to support the free market see nothing amiss in a monopoly central bank with the monopoly power to create money out of thin air. They spend their time talking about what our Soviet commissar in charge of money and interest rates should do, instead of asking whether we need central planning of money and interest rates in the first place.

Market

I have been reducing my net market exposure throughout the week, covering shorts and picking up some longs.

I am not bullish, I think the market has lower to go, but for the first time I don't feel indignant about how high the market is.

P.S. The option arb I posted about earlier is no good.. the options are not being adjusted for a rights offering taking place.