Nice Kasriel Rant!

Paul Kasriel is really one of the best! Make sure you read the entire piece and the rant ( it´s a rant by his standards) and click on the Headline.

Der Mann hat es einfach drauf! Kann jedem empfehlen das gesamte Werk zu lesen. Klickt dafür bitte auf die Überschrift.

...It is the combination of the behavior of a yield spread and the CPI-adjusted monetary base. The yield-spread variable is the difference between the yield on the Treasury 10-year security and the federal funds rate. The monetary base consists of the reserves created by the Federal Reserve for the banking system and the currency held by the public.

As the chart below shows, since 1970, whenever the four-quarter moving average of the yield spread has turned negative and, at the same time, the year-over-year change in the quarterly average of the CPI-adjusted monetary base has turned negative, a recession has occurred. Guess what? In each of the first two quarters of 2007, this combination of a negative yield spread and contracting real monetary base has obtained.

> Keep this in mind when everybody on Wall Street is spinning and pulling up several useless indicators that suggest the economy is doing ok........

> Behaltet das im Hinterkopf wenn alle demnächst wieder rosarot sehen und haufenweise Statistiken aus dem Hut zaubern die erklären sollen warum es der Wirtschaft doch gut geht..........

If Leveraged Buybacks, Why Not Leveraged Dividends? / Kasriel

Kasriel from Northern Trust asks the right question. The management will be forced to do more "bondholder value" management. I recommend to read the Expedia story to see how the sentiment has collapsed within 3 weeks.

Kasriel stellt hier eindeutig die richtige Frage. Das Management wird sich zukünftig wohl immer mehr um die Belange der Anleihebesitzer kümmern müssen. Ein gutes Beispiel wie schnell die Stimmung gekippt kann man am Beispiel von Expedia sehen.

The equity investing community seems to get giddy when it hears the words "stock buyback." And why not if the stock is being bought back out of current profits? But what if the corporation is increasing its debt to fund its stock buybacks?

The chart below suggests that is what is occurring now and what occurred in the late 1980s and late 1990s. The red bars in the chart represent the dollar amount of the net issuance of equities of nonfinancial corporations. Readings below zero, which predominate, signify the net "retirement" of equities. As the chart shows, record amounts of nonfinancial corporate equities are being retired in this cycle. The blue line in the chart represents nonfinancial corporate borrowing as a percent of their nominal capital spending. If the percentage is rising, as it is now, then this indicates corporations are borrowing for purposes other than to fund their capital spending. If corporate borrowing is rising relative to capital spending and corporations are retiring equity, then it is likely that they are borrowing to fund their share buybacks.

Equity investors do not seem alarmed that corporations are leveraging themselves to fund stock buybacks. Would corporate borrowing to increase dividend payments be greeted equally as gleefully?

As an aside, with some risk starting to be priced into the credit market, funding stock buybacks via borrowing is getting more expensive. Ask Expedia . It recently had plans to buyback 42% of its shares, predominantly with borrowed funds. But with the credit markets having turned more discriminating in recent weeks, Expedia has scaled back its repurchase plan to only 8% of its shares.

Liquidity Slowing? / Paul Kasriel

i think we can eliminate the questionsmark.......

Meiner Meinung nach kann man das Fragezeichen bereits jetzt weglassen.....
It sure is with regard to how much U.S commercial banks are providing of late. Adjusted by the CPI, the year-over-year change in U.S. total bank credit (loans and investments) hit a recent peak of about 9% in October 2006. As of May, that year-over-change had slowed to about 4.8% (see Chart). As mortgage defaults continue to rise and regulators issue new more restrictive mortgage lending "guidelines," bank credit growth is likely to slow still more.

And goodness knows what will happen if a few of the private equity loan deals sour.

>AMEN!

People's Bank of China Takes With One Hand, Gives With The Other? / Kasriel

please click on the headline to read the entire excellent piece about china

klickt bitte auf die überschrift um die vollständige analyse zu lesen.

The People's Bank of China (PBOC) announced today that it was raising the required reserve ratio on its constituent banks by 0.5 percentage points to 11.5%. This would be the eighth increase in the required reserve ratio since June 2006 when the ratio was 7.5%. You would think that with the PBOC mandating that banks now hold more reserves, the cost of reserve credit would be moving up. Think again. Chart 1 shows that the Chinese overnight interbank interest rate, the equivalent of the U.S. fed funds rate, stood at 1.57% in March (latest data that I have available) - 12 basis points lower than where it was in June 2006, before the required reserve ratio started its ascent....
If the demand for something has gone up, in this case, the dictated demand for bank reserves, how can the price of that something, the overnight interest rate on bank reserves, stay almost the same? .....

And U.S. banks can only look on in envy at Chinese banks that can fund themselves overnight at 1.6% and lend for one-year at 6.57%. In sum, it does not look as though the steps taken today by the PBOC on reserve requirements and interest rates will do much to slow down bank credit / money supply growth and, thus, consumer price and asset price inflation unless these steps are taken in conjunction with a sharp slowdown in the PBOC's provision of bank reserves.......

an autopsy on the march jobs report / northern trust - kasriel (pdf)

here is a summary of comments on the surprising strong job numbers. i highly recommend to click on the headline to see what paul kasriel from northern trust has to say.

hier folgt ne zusammenfassung des letzten überraschend starken arbeitsmarktberichtes. ich empfehle unbedingt auf die überschrift zu klicken um zu sehen was paul kasriel von northern trust zu sagen hat.

he is digging into the numbers and after reading his report there are some more doubts that the numbers are as good as they looked at first glance.

er geht ins detail der daten und nachdem man sich seine sicht der dinge angesehen hat bestehen einige zweifel ob die lage wirklich entspannt ist

just one highlight from kasriel: / nur ein beispiel von kasriel

With so many people being employed in retailing at relatively low hourly earnings, I guess it is not surprising that there has been a sharp increase in folks working multiple part-time jobs now that their adjustable rate mortgages are resetting. Chart 7 shows that in March 2007 vs. year-ago, there was an 11.15% increase in people working multiple part-time jobs. more from

mish http://tinyurl.com/326rom

calculated risk http://tinyurl.com/2m5f8w

barry ritholtz http://tinyurl.com/2ubbux

tim " the mess that greenspan made" iacono http://tinyurl.com/yw3sd7

morgan stanley http://tinyurl.com/2gllxo

economic policy institute (epi) http://tinyurl.com/ytbtug

thanks to epi and mish for the chart

größer/bigger http://tinyurl.com/23hwak

"us current account deficit / kasriel !"

make sure you read the full piece . klick on the headline.

ihr solltete den ganzen bericht lesen (überschrift anklicken)

What I found most interesting about the third quarter current account data was not that the U.S. deficit ran at a record annualized rate of $902.2 billion, nor that this represented 6.8% of nominal GDP, the second highest percentage since Q4:2005's 7.0%.

No, what I found most interesting was, as shown in Chart 1, that for the fourth consecutive quarter, the U.S. ran a deficit in the income account. That is, for the fourth consecutive quarter, the income earned on foreign assets owned by U.S. entities was less than the income earned on U.S. assets owned by foreign entities. As Chart 1 shows, in the past 45 years it was a rare occurrence for the U.S. income account to be in deficit. Prior to the most recent four quarters, a deficit in the income account has occurred only four other times since 1960.