Economic Statistics for November

http://www.treas.gov/offices/economic-policy/macroecon/monthly_economic_data.pdf

I am not sure which of those figures is the ugliest. The spread between 10-year Treasuries and corporate bonds is pretty bad -- nearly 6 points. It makes me wonder if we're still not seeing the worst of the equity market if the perception of risk of bond default has any grounding in reality.

The jobs loss figures are also staggering, but that has been discussed everywhere.

Retail sales are down over 6% for the year, but only down 1.8% if you take out autos and auto parts. Makes me wish I had enough money to go buy a car on discount!

The housing and oil trends basically tell the whole story of the economy. Oil spiked this summer with the weak dollar. Demand plummeted due to decreased use of cars -- a consumer driven reduction in demand. Then, the oil market dropped as manufacturers and others decreased output and scaled back growth -- a producer driven reduction in demand. That's the real economy in microcosm.

With housing, the market was still fairly strong back in springtime. As the subprime defaults piled up, and the derivatives became personan non grata amongst the securities and collateral cliques, consumers got the message: housing is too expensive to buy. Plus, savvy home buyers started thinking about the correction and vultures (not meant to be pejorative) started thinking about foreclosures. Have you divested your stock in Pulte Homes yet?

As much as it pains me, the only domestic solution to the economic and financial crisis is restoring value to the toxic assets. That means 1) insuring the stupid things at par value (which no one wants to do because of the fear of placing cash anywhere but in reserve right now), or 2) bail out the home owners. Option 1 allows the housing market to correct, and it gives some value to the CDOs and MBSs and whatever else -- so those things can be pledged as collateral to get the secondary lending market back on track. Of course, the formation of the insurance pool would require such an outlay of funds that the banks wouldn't have any cash to lend anyway. Catch 22, I guess. I suppose that is why the banks rejected this plan back in April when Bernanke and Paulson demanded that the banks work out the subprime debacle on their own.

Option 2, the homeowner bailout. This keeps people in their homes, but it will preserve the artificially inflated home values, which will crush demand. People will keep their homes, but they'll be stuck in them.