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Mark's Market Blog

10-2-09: Lord Sidious, Lloyd C. Blankfein

By Mark Lawrence

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The market made another end of week adjustment on bad manufacturing and unemployment news. I expect we'll get past this and the market will rebound next week a bit. The party is winding down, the room is a little dirtier and less crowded, the conversation is getting spectacularly inane, but our hosts, the world's central banks, still have wine and guacamole in the fridge.

S&P 500 March 6 2009 to October 2 2009

Unemployment is on the raise again. The official government number is 9.8%; however the number including people who have given up looking for work, which the labor department calls U-6, is 17%. The average work week is down again to 33 hours, so the outlook for business hiring is exceptionally poor. World Bank president Robert Zoellick said the global economy was on unsteady legs and that "2009 will continue to be a difficult year and 2010, when much of the stimulus action will run out, remains a highly uncertain economic year." Joe Biden says "Less bad is not our measure of success." Bad news, Joe: less bad is all you got right now. You might be looking back on today in 6 months thinking this was pretty good.

On the plus side, a bit over 20% of the new unemployment last month was government workers. The nation's 16 million state and local government workers form a large, growing, and well-compensated class in society. State and local workers earned $36 per hour in wages and benefits in 2005, on average, compared to $24 per hour for U.S. private-sector workers, according to the U.S. Bureau of Labor Statistics. Unions represented 9 percent of private-sector workers and more than 40 percent of state and local workers.

Cash for clunkers is over, and the following month's sales is in. It's not pretty. Ford is down 5%. GM and Chrysler are down about 45%. At current sales rates, Ford is #2 behind Toyota, GM is #4 behind Honda, and Chrysler possibly won't last out the year.

House prices are back to 2008 levels. However, this observation completely ignores the fact that banks are sitting on roughly 2,000,000 foreclosed properties that they don't want to sell into the current market, and there's a forecast of another 2,000,000 to be foreclosed in the next 18 months or so. It also neglects to mention that the Fed has committed about $1.5T to keeping mortgage rates down, but the Fed says they're program is winding down. Housing prices are, in my opinion, completely artificial right now.

The FDIC is planning on shutting down several hundred banks in the next year, and they're nearly out of money. So, they've just announced a new program: banks are to pay their FDIC premiums for three years in advance. This is ridiculously unfair, as premiums are paid on only the first $250,000 in each account; this means small banks pay a far greater percentage of deposits than large banks, as few people put several million on deposit with Mom & Pop Bank and Cappuccino. Meanwhile, the big banks, the ones who needed the huge bailouts, they're now doing great. Their market cap, which is the price you would pay to buy all the outstanding stock at the current price, has jumped hugely in the past year. Personally, were I the head of the FDIC, I would get my money by nationalizing Goldman Sachs, the center of the evil empire and home of the Sith Emperor. Shown at right: Lloyd C. Blankfein, Chairman and CEO, Goldman Sachs. It's worth remembering that in the movie Lord Sidious controlled both the trade unions and the robots, and as prime minister controlled the Jedi and the Republic's troups. Much can be made out of chaos, and Mr. Blankfein is expert at this.

Biggest Jumps in Market Cap from Sept. 2008

Company Name Mkt Cap 9-14-09Mkt Cap 9-15-08$ Change% Change
Goldman Sachs Group $91B $53B $37B 70%
JPMorgan Chase $172B $138B $34B 25%
Apple $156B $125B $31B 25%
Wells Fargo $130B $103B $27B 27%
Bank Of America $147B $121B $26B 21%
Schering-Plough $47B $29B $17B 59%
Oracle $114B $98B $16B 16%
Google $150B $136B $14B 10%
Ford Motor $24B $11B $12B 110%

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