~ Green Shoots or Grub Worms?

Being an avid gardener, I was heartened to hear earlier this year that so many economic landscape experts were predicting and hailing the advent of “green shoots” this spring. So I set out to patiently wait and watch for the first sign of those precious little sprouts of green. But none appeared.

The spring rain came, then the summer sun. And still no shoots. So I started looking over fences to see how others were doing – see if they were having better luck. And as you might expect I did find some green shoots, but I also found a few other things that I thought you might find interesting. So I went ahead and put together a little garden report on what I’ve been finding so far.

Will it surprise you to learn, Wall Street has managed to pull off a bumper crop in the midst of a recession and is eagerly awaiting a rich harvest of green.

Big Pay Packages Return to Wall Street:

Business is back on Wall Street. If the good times continue to roll, lofty pay packages may be set for a comeback as well.

Based on analysts’ earnings forecasts for 2009, Goldman Sachs Group Inc. is on track to pay out as much as $20 billion this year, or about $700,000 per employee. That would be nearly double the firm’s $363,000 average last year, and slightly higher than the $661,000 for the average Goldman employee in fiscal 2007, according to analyst estimates reviewed by The Wall Street Journal.

And AIG too. After a little deferred gratification is feeling lush and flush enough in green to seek the governments blessing for about $250 million in promised bonuses that come due during the next nine months.

AIG in Talks With U.S. Over Another $250 Million in Bonuses

AIG has asked the government to rule on several categories of bonuses, said a person familiar with the discussions. These include millions of dollars in payments owed to top corporate executives in coming days, and the troubled insurer has been seeking consent from senior Treasury official Kenneth R. Feinberg in the hope this would provide the company with political cover.

But of greater concern to both sides is what to do about the vastly larger sum that comes due in March 2010, when AIG is scheduled to pay more than $200 million in bonuses aimed at retaining executives at AIG Financial Products, the unit whose complex derivative contracts nearly wrecked the insurance giant last fall.

AIG Seeks Clearance For More Bonuses:

AIG’s proxy statement filed last month explains why AIG initially instituted the retention payments. The company stated that after the federal bailout began in September, “we needed to confront the fact that many of our employees, perhaps the majority, knew that their long-term future with us was limited, and our competitors knew that our key producers could perhaps be lured away. . . . Allowing departures to erode the strength of our businesses would have damaged our ability to repay taxpayers for their assistance.”

On the other hand, many American’s (outside of Wall Street and other bailout industries) found themselves trying to spread their Independence day picnic blankets over unsightly brown spots that seems to have taken over their front lawns.

Layoffs undermine consumers’ ability to ignite economy

In an economy in which consumers account for roughly 70% of the demand for goods and services, their ability to earn a paycheck is key to a lasting recovery. …”For any economy, the most important thing is income in the form of wages, and having a job or not having a job is the biggest impact on spending,” says Charles Biderman, CEO of TrimTabs. “You can’t get more basic than that.”

But it’s not just those ugly brown spots on their lawns, that have home owner worried. There seems to be plant wilt and leaf droop that is also spreading through neighborhoods.

As economy drops jobs, paychecks drop some weight

The recession has taken out 6.5 million jobs in about a year and a half. All told, nearly 15 million people were considered unemployed in June.

Illustrating how hard it is to land a job, 29 percent of the unemployed have been out of work six months or longer. That’s the most on records dating to just after World War II. The unemployment rate for teenagers is 24 percent, the highest since 1983.

Including laid-off workers who have given up looking for jobs or have settled for part-time work, the so-called underemployment rate was 16.5 percent in June — the highest on records dating to 1994.

The falling wages come from furloughs, pay freezes and pay cuts imposed by employers across the country. Many also have cut hours: The average work week in June fell to 33 hours, the lowest on records dating to 1964.

Average weekly earnings fell about $2 in June to $611.49, the lowest in nearly a year and the first month-to-month drop since March.

And apparently brown spots on your lawn can’t necessarily be stimulated back to life with a little fertilizer and water. And if the condition starts to radically deteriorate, a grub worm infestation is your prime suspect. Grub worms, which are beetle larvae, eat away at the roots of plants, flowers and grasses. Basically, starving your lawn or garden plant of the water and nutrients it needs to function properly, leaving the affected plant to slowly wither and die.

Regulators aim to curb speculators’ influence on oil prices

“In the past couple of years the U.S. taxpayer has taken a kick in the teeth on prices they pay for a loaf of bread, a gallon of gas, even the palladium that goes in the catalytic converter in your car – and it’s the responsibility of the CFTC to ensure, not high or low prices, but fair prices,” said Bart Chilton, a CFTC commissioner, in a statement to McClatchy Newspapers.

“I think that the CFTC has not done enough to ensure that speculative limits or levels were enforced aggressively and that exemptions from these important regulations were granted appropriately. And, I believe that American consumer paid the price … for that lack of diligence.”

The exemptions he referred to involve big Wall Street firms such as Goldman Sachs, Morgan Stanley and others, which have been exempted from limits on how much they can trade.

These financial players are treated as commercial players although they have never taken possession of the product. That allows them to hedge bets they have made in the unregulated swaps market, where private bets between two parties take place outside a regulated exchange.

NYSE Halts Transparency, Feels Goldman Program Trading Disclosure Is Unnecessary

In a move set to infuriate and send many Zero Hedge readers over the top, the NYSE has taken action to make sure that nobody will henceforth be able to keep track of the complete dominance that Goldman Sachs exerts over the New York Stock Exchange. This basically ends our weekly Program Trading updates disclosed every Thursday indicating that Goldman has singlehandedly captured all of NYSE’s program trading.

In addition to the expense and damage to your garden caused from the grub worm infestation itself, grub worms attract other pests to your yard. A variety of mammals (gophers, moles and the like) will burrow underground to feed on grub worms, leaving a nasty trail of furrows and holes in your lawn and garden.

Goldman Sachs Loses Grip on Its Doomsday Machine

Aleynikov, 39, is the former Goldman computer programmer who was arrested on theft charges July 3… two days after Goldman (Sachs) told the government he had stolen its secret, rapid-fire, stock- and commodities-trading software in early June during his last week as a Goldman employee. …

It wasn’t just Goldman that faced imminent harm if Aleynikov were to be released, Assistant U.S. Attorney Joseph Facciponti told a federal magistrate judge at his July 4 bail hearing in New York. … “The bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways.”

… Facciponti said the bank told the government that “they do not believe that any steps they can take would mitigate the danger of this program being released.” He added: “Once it is out there, anybody will be able to use this, and their market share will be adversely affected.”

Unfortunately, there seems to be no way to completely prevent or eliminate grub worms. Cultivating Robins and other songbirds that love to eat grub worms is probably the most beneficial long-term control solution. Along with keeping a vigilant eye on your landscaping so you can tackle an infestation as soon as it start. And it is always a good idea to contact your local agricultural extension for information that may apply to your area, and particularly before apply any chemicals insecticides.

U.S. Job Report Suggests that Green Shoots are Mostly Yellow Weeds

The job market report is essentially the tip of the iceberg. It’s a significant signal of the weaknesses in the economy. It affects consumer confidence. It affects labor income. It affects consumption. It affects the willingness of firms to start increasing production. It has significant consequences of the housing market. And it has significant consequences, of course, on the banking system.

Home prices have already fallen from their peak by about 30 percent. Based on our analysis, they are going to fall by at least 40 percent from their peak, and more likely 45 percent, before they bottom out. They are still falling at an annualized rate of over 18 percent. That fall of at least 40-45% percent of home prices from their peak is going to imply that about half of all households that have a mortgage – about 25 million of the 51 million that have mortgages – are going to be underwater with negative equity in their homes, and therefore will have a significant incentive to just walk away from their homes.

For the time being, of course, there are massive deflationary pressures in the economy: the slack in the goods markets, with demand falling relative to supply-and-excess capacity. The rising slack in labor markets, which are controlling wages and labor costs and pushing them down, implies that deflationary pressures are going to be dominant this year and next year.

But eventually, large budget deficits and their monetization are going to lead – towards the end of next year and in 2011 – to an increase in expected inflation that may lead to a further increase in ten-year treasuries and other long-term government bond yields, and thus mortgage and private-market rates. Together with higher oil prices driven up in part by this wall of liquidity rather than fundamentals alone, this could be a double whammy that could push the economy into a double-dip or W-shaped recession by late 2010 or 2011. So the outlook for the US and global economy remains extremely weak ahead.

So what’s happening in your garden? Did those ‘green shoots’ arrive as predicted. Were those shoots properly stimulated to grow into strong and healthy plants? Are you looking out at a lush green jungle? Or did the Grub Worms get to your garden too?

[Cross posted at No Quarter]



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