28 August 2009

Economics Update

Consumer confidence is at a 4 month low for August, Reuters/University of Michigan Surveys of Consumers, which compares with the Conference Board's reading, which was up a few days back.

Both results are consistent in that they beat expectations, but this confuses the hell out of me. I think that future sentiment has a bigger role in the Conference Board's survey, which may explain the difference.

We saw consumer spending rise by 0.2% in July, though income was flat, but this should be taken with a grain of salt, as the increase was entirely a consequence of the "Cash for Clunkers" program.

Meanwhile, in banking, the Federal Reserve is reducing the size of its Term Auction Facility (TAF) cash for sh$#pile auctions to banks, largely on the basis of reduced demand for them:
Banks are increasing lending to buyers of high-yield company loans and mortgage bonds at what may be the fastest pace since the credit-market debacle began in 2007.


“I am surprised by how quickly the market has become receptive to leverage again,” said Bob Franz, the co-head of syndicated loans in New York at Credit Suisse. The Swiss bank has seen increasing investor demand for financing to buy loans in the past two months, he said.
I'm not surprised. Modern investment banking is about making big bucks by scamming rubes like the one pictured on the right.

Unfortunately, said rube has the power to make every American taxpayer pay for his decisions.

Meanwhile, on the other side of both ponds, we have record unemployment and record deflation, while businesses in the UK cut investment spending at a record rate, so there is not much in the way of green shoots there.

In currency, the dollar fell, and more significantly, the "cost of borrowing dollars for three months slipped below the rate on similar loans in yen for the first time since 1993," which implies that in the event of a flight to safety, that money will go toward Japan, where returns are now marginally higher.

In energy, oil rose slightly.


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