http://www.fdic.gov/bank/individual/failed/banklist.html?today=1

Just saying 7 banks failed though does not provide the necessary emphasis. Let me put 7 bank failures in context, last year, 25 banks failed (as a 2008 year total). So to put it another way 35% of the number of banks that failed last year, failed already this year, in a single day (bringing 2009s total to 52 so far). The total cost of these 7 failures to the FDIC is $314.3 million (bringing the FDIC fund’s total cost for failed banks to $12.3 billion this year). That compares with $17.6 billion in all of 2008.

Click here to download or click on the image to see it in full size…

If you look at these trading volumes for program trading, Goldman Sachs almost is the entire composition of the current Stock Market activity.

Program trading is casually defined as the use of computers in stock markets to engage in arbitrage and portfolio insurance strategies. However, the New York Stock Exchange (NYSE) defines the term as “a wide range of portfolio trading strategies involving the purchase or sale of 15 or more stocks having a total market value of $1 million or more” without any direct reference to the use of computers^[1]. The word “program” can be interpreted in its earlier, more general meaning of a defined and pre-arranged sequence of steps, rather than specifically a computer program. Some program trading strategies are subject to regulatory restrictions. For instance, NYSE Rule 80A requires index arbitrage trades to be marked when submitted.

In nuclear physics, critical mass is the material needed to produce a sustained chain reaction — that general use of the idea applies to many things.  Today from  Bloomberg, we get the tally below of exactly what makes up our particular brand of economic critical mass.

The most important take away from the facts presented in the article, is this:  the problems we’re creating with these so-called solutions quite easily exceed the single problem they meant to address.

===========================================================
                                  --- Amounts (Billions)---
                                   Limit          Current
===========================================================
Total                            $12,798.14     $4,169.71
-----------------------------------------------------------
 Federal Reserve Total            $7,765.64     $1,678.71
  Primary Credit Discount           $110.74        $61.31
  Secondary Credit                    $0.19         $1.00
  Primary dealer and others         $147.00        $20.18
  ABCP Liquidity                    $152.11         $6.85
  AIG Credit                         $60.00        $43.19
  Net Portfolio CP Funding        $1,800.00       $241.31
  Maiden Lane (Bear Stearns)         $29.50        $28.82
  Maiden Lane II  (AIG)              $22.50        $18.54
  Maiden Lane III (AIG)              $30.00        $24.04
  Term Securities Lending           $250.00        $88.55
  Term Auction Facility             $900.00       $468.59
  Securities lending overnight       $10.00         $4.41
  Term Asset-Backed Loan Facility   $900.00         $4.71
  Currency Swaps/Other Assets       $606.00       $377.87
  MMIFF                             $540.00         $0.00
  GSE Debt Purchases                $600.00        $50.39
  GSE Mortgage-Backed Securities  $1,000.00       $236.16
  Citigroup Bailout Fed Portion     $220.40         $0.00
  Bank of America Bailout            $87.20         $0.00
  Commitment to Buy Treasuries      $300.00         $7.50
-----------------------------------------------------------
  FDIC Total                      $2,038.50       $357.50
   Public-Private Investment*       $500.00          0.00
   FDIC Liquidity Guarantees      $1,400.00       $316.50
   GE                               $126.00        $41.00
   Citigroup Bailout FDIC            $10.00         $0.00
   Bank of America Bailout FDIC       $2.50         $0.00
-----------------------------------------------------------
 Treasury Total                   $2,694.00     $1,833.50
  TARP                              $700.00       $599.50
  Tax Break for Banks                $29.00        $29.00
  Stimulus Package (Bush)           $168.00       $168.00
  Stimulus II (Obama)               $787.00       $787.00
  Treasury Exchange Stabilization    $50.00        $50.00
  Student Loan Purchases             $60.00         $0.00
  Support for Fannie/Freddie        $400.00       $200.00
  Line of Credit for FDIC*          $500.00         $0.00
-----------------------------------------------------------
HUD Total                           $300.00       $300.00
  Hope for Homeowners FHA           $300.00       $300.00
-----------------------------------------------------------
The FDIC’s commitment to guarantee lending under the
Legacy Loan Program and the Legacy Asset Program includes a $500
billion line of credit from the U.S. Treasury

I bought Sirius a while back. It wasn’t a huge position. I wanted to put a few speculative stocks in my IRA and this was one of those for sure– I was and still am in it for the long haul. In fact, that whole portfolio is long positions. This particular stock has been demolished. I’ve made money elsewhere. So, I can take it. Win some, lose some. But always with your eyes open.

Sirius recently merged with XM Radio to become Sirius XM Satellite Radio after a long battle with the FCC over licensing issues. And then, Sirius got taken to the cleaners by Liberty Media; the terms on something like a $530 million dollar loan needed to stave off bankruptcy were 15% interest, seats on the Board and 40% share in the company — your basic corporate enslavement.  Still, as a result of cost cutting and initial merger synergies, the company turned an operating profit of $31 million dollars — but only if you’re willing to look the way on a bunch of things, and that’s where Liberty Media came in.

Sirius already has long term agreements with auto-makers, should someone be able to provide loans so people can sell/buy cars in the US — not that I think we necessarily need more cars here. And yet as shaky and disjointed as all that sounds, I feel comfortable carrying  my position. Its no more or less risky than when I got in — in fact its cheaper for that same risk. Stocks are risky, any recent chart can tell you that. There is good news though, in the second quarter Sirius XM will launch an iPhone app which will allow the iPhone and iPod Touch to stream their service, with obvious chance of increasing subscribers dramatically. And speaking of stock charts, I think have some good news there too.

Throughout the month of February the stock basically bled out, selling down to as low as 0.05 per share.  The sheer price, the flirting with bankruptcy, but more importantly the volume on that selling pressure might mean the stock has gone through classic capitulation;

Market capitulation refers to the threshold in a severe down trending market after which large numbers of investors can no longer tolerate the financial losses incurred as a result of the current downturn.^[1]. This majority group of investors then capitulates (gives up) and sells in panic or finds that their pre-set sell stops have been triggered thereby automatically liquidating their shares of a given stock. This dramatic increase in the number of sellers causes a further increase in the speed and severity of the stock’s price decline. Margin calls and mutual fund and hedge fund redemptions significantly contribute to capitualtions^[2]. In other words market capitulation occurs when there is a sudden steep decline in price caused by high volume selling^[3],  The peak in volume may precede an actual bottom.

The three bears story makes a lot of sense given the turns of our stock market recently. Buy the rumor, sell the news– its worked for me. One of the more terrifying ideas for professional traders though, is that the market is in lockset with whats going on in Washington D.C., causing the market sentiment to experience what could be called “The Bears Effect”.  A situation where market psychology becomes the tell-all for direction. 

Having lost any real direction provided by fundamentals, because the validity of those fundamentals remains in question, political chatter has been put in the market driver’s seat, since it plays more on psychology than any other fundamental market force. Political rhetoric sets expectations and the market having only that to feel confident about, finds the sustainance as either too hot, too cold, or just right.  The rhetoric of the “just right” persuasion has been in short supply — but only because it turns out that it’s only rhetoric.  Its as if Goldie was told about a perfect bowl of food but when she got there, it was empty.

Agencies of the US government continue to discuss a non-existent holistic approach and denounce only methods they used so far– a jumble of ad hoc reponses to an unknown diagnosis. They talk about the economy as if it were a patient.  However, if any doctor treated patients this way, they would immediately lose their license– “Hmm, sore throat, maybe you’re talking to much, we’ll try a course of cyclobenzaprine!” — muscle relaxors.  

Papa Bear

The stock market is a forward looking economic indicator, it can suggest whats going to happen. For anyone unwilling to recognize what the stock market has been predicting for the last year, here it is put simply. This chart indicates we’re already in the worst bear market since the Great Depression. It also suggests that many aspects of rate of the change also match that of the decline associated with the Great Depression. While no data directly confirms the coming of another “Great” depression, from the stock market’s view, there is no reasonable impetus for defining this as any kind of classical recession. The market indicates we’re well beyond classical recession.

Labor force data is a lagging economic indicator.  So, it can only tell you whats happened to the labor force already.  And, as was covered in Super-bust: Labor Shows Depression, the labor force and unemployment data seems to indicate depression conditions are here already as well. 

Mama Bair

The FDIC has requested an increase in its ability to borrow from the Treasury to $500 billion, up from just $30 billion. The FDIC chairwoman is someone who fought a Congresss unwilling to collect insurance premiums from banks prior to her current role in the administration. Bair has said, this is because the “safety net” fund used by the FDIC was dramatically depleted as a result of both the many bank failures last year, but that from 1996 to 2006, prior to her taking the chair, the FDIC collected no insurance premiums from banks. 

The FDIC is also trying to institute new fees which it would collect from healthy institutions to support the less healthy — which in my view will simply over-leverage those careful institutions, who in this environment, might be finding it difficult to just stay a float.  The new fees increase their collection base substantially and arguably dimish capital at healthy instituions with equal substance. Last year they collected just $3 billion, with a much larger institution base then they will have going forward, but with the new fee the FDIC expects to collect $27 billion from that smaller group (and in crisis). 

The hope is the money burrowed from Treasury will help offset the need for such a steep rise in the collected fees. Overall, I expect these changes to further drain life out of the economy via dimishing the financial sector.

Baby Bare

The naked truth about the child Emperor of the global economy — America — begins with the governments subsidization of debt-fueld consumption. The clearest view on what’s currently going on in the US, is that the US government is taxing its citizens, then loaning that money to financial institutions at 0%.  In turn these same financial institutions are then lending some of that money back to these same people at between 4-6% (and as much as double digit percentages of 15-26% on credit card debt).  

If these institutions can not turn a profit selling you back your own money at a substantially better rate, how is this ever going to work for anyone, let alone everyone?

So, we’re getting a good bit of snow here at casa de Matt That– but, I saw something even weirder on the weather.com’s interactive radar. Part of the storm that is coming up the north-eastern United States has stopped. And it’s just been spinning there, counter-clockwise near Charlotte, NC for about three hours straight. Weird… 

I no longer think its accurate to use recessionary to describe the current US labor  market conditions. I would officially declare this a depression in the labor market, at the very least. The trend shown below doesn’t fit any previous recession. I’ll explain, because, I don’t want you to feel like our president.

They managed to get rid of me — some people would call that a great accomplishment. In reality, I gave up on most social networking sites when they gave up on their own societies — and it didn’t take long for these tools to become another way to barrage people with advertising. Another interesting accomplishment of these sites and their communities  and probably the most well known, was making  ‘friend’ a verb.  Here’s an interesting look at how those communities breakdown demographically.