Mish's Global Economic Trend Analysis

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Socialization of Credit: Video with James Grant; Federal Guarantees for Small Auto Dealer Floorplan Loans; Government Partnerships Posted: 01 Oct 2010 11:33 AM PDT James Grant, editor of Grant's Interest Rate Observer, talks about the overhaul of U.S. financial regulation and says we are on the road to Socialization of Credit. Grant also discusses Federal Reserve monetary policy. Federal Guarantees for Small Auto Dealer Floorplan Loans Inquiring minds are reading Bill aimed at giving auto dealers more credit is signed into law The federal government is keeping up its effort to stimulate the economy, while the economy is keeping up its resistance to those efforts. The latest effort to prod spending comes in a bill that, among other things, increases the federal guarantee for small dealer floorplan loans from the Small Business Administration from $2 million to $5 million. Part of the bill would also reinstate fee waivers that ran out in May, meaning loan applicants could save more than $50,000 in fess alone on a $2 million loan. The bill passed the House and Senate along party lines and President Obama signed it into law yesterday afternoon. This is expected to be the last jobs bill to leave Congress before the midterm elections in November. Public-Private Partnerships We have already seen Paulson force government money down the throats of banks at bazooka point. More recently, Congress passed a bill to have government "partner" with banks to make billions of dollars available to community banks for loans to small businesses. Fortunately both banks and corporations have resisted this effort. For details, please see ... $30 Billion Offer No One Wants - Small Businesses Hit by Deflation Ass Backwards: Senate to Shelve Bush Tax Cuts for Individuals; House to Pass Small Business Tax Cuts Socialization of Credit Well Underway Given the vast majority of housing loans are Fannie Mae, Freddie Mac, and the FHA, and given ongoing efforts by the Fed and Congress to "stimulate lending", it is safe to say that socialization of credit is already here. This is not a good thing. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Manufacturing ISM Expands , Rate Slows, Internals Weak Posted: 01 Oct 2010 08:26 AM PDT Inquiring minds are digging into details of the September 2010 Manufacturing ISM Report On Business® Economic activity in the manufacturing sector expanded in September for the 14th consecutive month, and the overall economy grew for the 17th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business®. "While the headline number shows relative strength this month as the PMI reading of 54.4 percent is still quite positive, the overall picture is less encouraging. The growth of new orders continued to slow, as the index is down significantly from its cyclical high of 65.9 percent (January 2010). Production is currently growing at a faster rate than new orders, but it typically lags and would be expected to weaken further in the fourth quarter. Manufacturing has enjoyed a stronger recovery than other sectors of the economy, but it appears that weaker growth is the expectation for the fourth quarter. Both the Inventories and Backlog of Orders Indexes are sending strong negative signals of weakening performance in the sector." September ISM Manufacturing at a Glance New Orders June Thu September Falloff in the rate of growth of new orders is persistent and dramatic. Inventories June Thu September The backlog of orders is now contracting, and judging from the persistent trend in orders, it is highly likely orders will contract next month. Meanwhile inventories continue to rise. This situation cannot last. Production is headed for a plunge if orders and backlog start contracting in a meaningful way, as appears likely. Manufacturing ISM has likely peaked. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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