October 3, 2008

Global Market Comments for October 3, 2008

1) The September non farm payroll came in at 159,000, worse than even the most dire estimates, and the unemployment rate jumped to 6.1%. Q3 will now almost certainly come in with a negative GDP, the new jobs figure indicating a -0.5% rate, delivering a body blow to business confidence. So far 760,000 jobs have been lost in this recession, compared to 2-3 million for a normal recession. The low number of job losses this year are partly because so few people were hired in the last upturn, because so many jobs were shipped to China. The October payroll figures are expected to be worse as the credit crunch takes hold. Taking into account the diabolical YOY sales figures announced by the car makers earlier in the week (Nissan -40%!) it is clear that the US economy fell off a cliff in September. Put on your hard hat!

2) Borrowing at the Fed window this week shot up from $$360 billion to $520 billion, an unprecedented increase. With the commercial paper market closed the Fed is basically the only game in town. Globally, central banks are flooding the system with liquidity at a record rate. Expect the monetary aggregates to skyrocket over the next few months.

3) Some 4.2 billion square feet of office space in the San Francisco Bay area is occupied by financial companies that have gone bankrupt or been taken over, like AIG, WAMU, Merrill Lynch, Lehman, and Wachovia. That is almost the equivalent of one World Trade Center Tower. WAMU alone has 267,000 sq. ft. in Pleasanton.

4) Apple (AAPL) stock got crushed down to $94, down from $180 in eight weeks, on an earnings downgrade. Apparently the market for cell phones that freeze, drop calls, with chargers that blow up in your face, is not as big as they thought. Go short cults!

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