by Calculated Risk on 1/30/2009 08:47:00 PM

After the excellent stock market returns in January (just kidding - actually the worst January ever), it is probably time to check in on the Four Bad Bear markets ... first, from MarketWatch: U.S. stocks end worst January on record with more losses

The S&P 500 index fell 19 points, or 2.3%, to 825. For the month, the broad index fell 8.6%, its worst performance on record.

Click on graph for updated image in new window.

This graph is from Doug Short of dshort.com (financial planner): "Four Bad Bears". There is much more at the site.

Doug has added the market recoveries (light red and green) for the 1970s and early 2000s bear markets.

Note that the Great Depression crash is based on the DOW; the three others are for the S&P 500.

by Calculated Risk on 1/30/2009 08:05:00 PM

This might be interesting. It is on PBS on February 17th (this is a 1 min 22 sec preview):

by Calculated Risk on 1/30/2009 06:30:00 PM

From the FDIC: Bank of Essex, Tappahannock, Virginia, Acquires All the Deposits of Suburban Federal Savings Bank, Crofton, Maryland

Suburban Federal Savings Bank, Crofton, Maryland, was closed today by the Office of Thrift Supervision, and the Federal Deposit Insurance Corporation (FDIC) was named receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Bank of Essex, Tappahannock, Virginia, to assume all of the deposits of Suburban Federal.
...
As of September 30, 2008, Suburban Federal had total assets of approximately $360 million and total deposits of $302 million. In addition to assuming all of the failed bank's deposits, Bank of Essex agreed to purchase approximately $348 million in assets at a discount of $45 million. The FDIC will retain the remaining assets for later disposition.
...
The FDIC estimates that the cost to the Deposit Insurance Fund will be $126 million. Bank of Essex's acquisition of all deposits was the "least costly" resolution for the FDIC's Deposit Insurance Fund compared to alternatives. Suburban Federal is the fifth bank to fail in the nation this year. The last bank to be closed in Maryland was Second National Federal Savings Bank, Salisbury, on December 4, 1992.

And #6 from the FDIC: CenterState Bank Acquires All the Deposits of Ocala National Bank, Ocala, Florida

Ocala National Bank, Ocala, Florida, was closed today by the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation (FDIC) was named receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with CenterState Bank of Florida, Winter Haven, Florida, to assume all of the deposits of the Ocala National Bank.
...
As of December 31, 2008, Ocala National Bank had total assets of $223.5 million and total deposits of $205.2 million. In addition to assuming all of the failed bank's deposits for a premium of 1.7 percent, CenterState agreed to purchase approximately $23.5 million in assets. The FDIC will retain the remaining assets for later disposition.
...
The transaction is the least costly resolution option, and the FDIC estimates the cost to its Deposit Insurance Fund will be $99.6 million. Ocala National is the sixth FDIC-insured institution to be closed this year. Ocala National Bank is the first bank to fail in Florida since Freedom Bank, Bradenton, on October 31, 2008.

Three down today, more to come?

Update: Friday Failure Haiku
Sub Fed Sunk
TodayBank of Essex saves the day
Are there more to come?

Florida bank toast
Ocala, rhymes like Orange?
Asset base has burnt
by Soylent Green is People.

by Calculated Risk on 1/30/2009 05:13:00 PM

Note: DCRogers points out in the comments that this is mostly an Atlanta area bank. From the Atlanta Business Chronicle in Nov 2008: Troubled Magnet Bank looking to raise capital

... a cease-and-desist order jointly issued Oct. 1 by the Federal Deposit Insurance Corp. ... The Salt Lake City-based bank was founded by an Atlanta investor group and retains much of its operations in Atlanta and Raleigh, N.C., offices. ... Magnet opened in 2005 and grew as home construction lending exploded.

From the FDIC: FDIC Approves the Payout of the Insured Deposits of MagnetBank, Salt Lake City, Utah

The Federal Deposit Insurance Corporation (FDIC) approved the payout of the insured deposits of MagnetBank, Salt Lake City, Utah. The bank was closed today by the Utah Department of Financial Institutions and the FDIC was named receiver.

After an extensive marketing process, the FDIC was unable to find another financial institution to take over the banking operations of MagnetBank. ...

MagnetBank, as of December 2, 2008, had total assets of $292.9 million and total deposits of $282.8 million. It is estimated that the bank did not have any uninsured funds.
...
MagnetBank is the fourth FDIC-insured institution to fail this year and the first in Utah since Bank of Ephraim, was closed on June 25, 2004.

It is Friday. Probably more to come ...

Update: Friday Failure Haiku

Magnet Bank, Utah
Failure on Friday is here
Their loss is ours now.
by Soylent Green is People.

by Calculated Risk on 1/30/2009 02:55:00 PM

Note: This is a new "record low", but the index has only been compiled since 2002, so this is the first recession for the index.

From the National Restaurant Association (NRA): Restaurant Industry Outlook Softens as the Restaurant Performance Index Fell to a Record Low in December

The outlook for the restaurant industry continued to weaken in December, as the National Restaurant Association's comprehensive index of restaurant activity fell to another record low. The Association's Restaurant Performance Index (RPI) - a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry - stood at 96.4 in December, down 0.2 percent from November and its 14th consecutive month below 100.

The December decline in the Restaurant Performance Index was the result of a drop in the current situation component. Same-store sales results were the softest in the history of the Restaurant Performance Index, with nearly two-thirds of restaurant operators reporting lower sales in December.
...
Capital spending activity in the restaurant industry deteriorated along with sales and traffic in recent months. Thirty-four percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, the lowest level on record.

Click on graph for larger image in new window.

Unfortunately the data for this index only goes back to 2002.

The index values above 100 indicate a period of expansion; index values below 100 indicate a period of contraction.

Based on this indicator, the restaurant industry has been contracting since November 2007.

by Calculated Risk on 1/30/2009 02:04:00 PM

From Bloomberg: Simon Falls on Plan to Pay Part of Dividend in Stock (hat tip Sam)

David Simon [Chief Executive Officer, Simon Property Group Inc., the biggest U.S. shopping mall owner] ... said the company doesn’t plan to begin construction on new projects or major redevelopments in 2009 and there will be little new U.S. retail construction for years to come.

“The new development business is dead for a decade,” Simon said on today’s call. “Maybe it’s eight years. Maybe it’s not completely dead. Maybe I’m over-dramatizing it for effect.”

In Q3, investment in U.S. malls was at a $33 billion annual pace, but that includes renovations (there are always renovations). Still I'd expect mall investment to decline in half or more by the end of 2009. I'll have more on mall investment in a few days (when the supplemental GDP data is released).

by Calculated Risk on 1/30/2009 01:22:00 PM

The rebalancing of the U.S. economy is ongoing. The savings rate is rising, consumption is falling, and the trade deficit is declining ...

Click on graph for larger image in new window.

The first graph shows Personal Consumption Expenditures (PCE) as a percent of GDP. Note: the graph doesn't start at zero to better show the change.

PCE as a percent of GDP declined to 69.6% in Q4, the lowest level since Q2 2001.

Some analysts think the U.S. will return to the days of Ozzie and Harriet with PCE as a percent of GDP in the low 60s, but I think a decline to around 68% is more likely.

Net exports as a percent of GDP has declined sharply to 3.7% of GDP. This is the smallest deficit since the end of the '01 recession.

Since GDP = C + I + G + (X − M), the decline in C is being offset by the improvement in net trade (X - M).

As we all know, I (investment) is declining and some components of investment (like non-residential investment in structures) will decline sharply in 2009. G (government) will increase with the Obama stimulus package, and the goal is to increase G until Investment bottoms out. We will see, but the rebalancing of the U.S. economy that we discussed several years ago is now happening.

Note:
C = Personal Consumption expenditures.
I = Gross private domestic investment.
G = Government consumption expenditures and gross investment.
X = exports
M = imports.

by Calculated Risk on 1/30/2009 12:11:00 PM

From Fannie Mae: Fannie Mae Extends Eviction Suspension Another Month (hat tip Bradley)

Fannie Mae (FNM/NYSE) today announced that it will extend its suspension of evictions from Fannie Mae-owned single-family properties through February 28, 2009. The suspension applies to all single-family properties including owner-occupied properties that have been foreclosed upon as well as foreclosed properties occupied by renters.

The company this month began implementing its National Real Estate Owned (REO) Rental Policy that allows qualified renters in Fannie Mae-owned foreclosed properties to stay in their homes. The new policy applies to renters occupying any type of single-family foreclosed properties at the time Fannie Mae acquires the property. Eligible renters will be offered a new month-to-month lease with Fannie Mae or financial assistance for their transition to new housing should they choose to vacate the property. The properties must meet state laws and local code requirements for a rental property. On behalf of the company, property managers are contacting renters in Fannie Mae-owned foreclosed properties to notify them of their options.

It is usually easier to sell a vacant home, but with the glut of homes on the market, and because the foreclosure is not the fault of the renter, this policy seems to make sense.

by Calculated Risk on 1/30/2009 09:09:00 AM

Here are a couple of graphs on the investment slump. Residential real residential fixed investment decreased at an a 23.6% annualized rate in Q4.

Click on graph for larger image in new window.

This graph shows residential investment (RI) as a percent of GDP since 1947. Residential investment has fallen to 3.07% of GDP. This is the lowest residential investment, as a percent of GDP, since WW II.

I'll post more on the components of RI in a few days when the supplemental data is released.

The second graph shows non-residential investment as a percent of GDP.

Investment in software and equipment declined at a 27.8% annualized rate in Q4. Cliff diving! This investment is at the lowest rate since the '70s.

However investment in non-residential structures only declined at a 1.8% annualized rate. As a percent of GDP, non-residential structure investment actually increased slightly in Q4. This story will change in 2009, and non-residential structure investment will be a significant drag on GDP.

I'll have much more on non-residential structures in a few days ...

This investment slump is a huge part of the recession story. Residential led the economy into recession (as is typical) and now non-residential investment is falling off a cliff - or, as in the case of non-residential structures, will fall off a cliff in 2009.

by Calculated Risk on 1/30/2009 08:31:00 AM

I'll have more a little later ...

From the BEA: GROSS DOMESTIC PRODUCT: FOURTH QUARTER 2008 (ADVANCE)

From MarketWatch:

U.S. Q4 GDP down 3.8%, inventories limit downturn The U.S. economy contracted at a 3.8% annualized rate in the fourth quarter but the decline would have been worse except that the government counts an unwanted buildup of goods on store shelves as growth.

A clearer picture of the scope of the weakness in the fourth quarter, which excludes the inventory buildup, contracted at a 5.1% pace, the weakest in 28 years.
...
Consumer spending fell 3.5%, including a 7.1% drop in spending on services, a 3.5% drop in spending on durable goods and a 22.4% decline in spending on nondurable goods, the weakest in 21 years.

Business investment fell 20.1% in the fourth quarter, subtracting 2.3 percentage points from growth. ...

Investments in equipment and software dropped 27.8%, the weakest in 50 years.

Investments in structures fell 19.1%, the largest decline since the first quarter of 1975.

Exports fell 19.7% in the fourth quarter, while imports, which are a subtraction from the calculation of GDP, fell 15.7%. As a result, the narrowing trade deficit added 0.09 percentage points to growth.

Government spending increased 1.9% after rising 5.8% in the third quarter. ...

Businesses added $6.2 billion to their inventories after cutting them by $29.6 billion in the third quarter. The change in inventories added 1.32 percentage points to growth.

Residential investment fell 23.6% in the fourth quarter ...