Morning Economic News - January 23, 2009

Commentary and Overnight Trading

The Nikkei dropped more than 3% Friday and the S&P/ASX200 has dropped more than 4% on bad news from the Australian mining sector. The Hang Seng was down 3% earlier, but is near even now [2:44 AM Eastern]. US stock market futures are down a little less than 1%. Oil prices have dropped but remain well above $42/barrel. The dollar is up strongly against the euro and pound, up a bit against the loonie and down slighlty against the yen.

Thursday's Economic News

Housing Starts - December 2008

• Housing Starts: 550,000


• Monthly Change: Down 15.5%


• Year-to-year Change: Down 45%


• 1-Family Monthly Change: Down 13.5%

Jobless Claims - January 22, 2009

• Initial Claims: 589,000


• Change from Last Week: Up 62,000

Money Supply - January 22, 2009

• M1 Seasonally Adjusted Prior Month: $1595.8 billion


• M1 Annual Change (Unadjusted): $238.3 billion

Weekly Mortgage Applications Survey - January 22, 2009

• Purchase Index: 303.1


• Change: Up 2.5%

German economy took big hit in November

The Leading Index for Germany fell 2.2% in November and the Coincident
Index fell 0.5%, according to a Conference Board report released
Thursday. Only three of the eleven indicators included in the indexes
improved.

What I'm Writing

Markets shrug off another big oil inventory gain

The weekly oil report from the US Energy Department showed a big
increase in total commercial petroleum stocks, including increases in
crude oil and all the major refined products except propane, which is
used heavily for heating in the rural Midwest which just experienced a
cold snap. Other tidbits from the report included a substantial drop in
refinery activity and continued drops year-to-year in gasoline
consumption despite a price drop of 39% from this time last year.

New purchase applications up despite rate increase, trouble in refinances

Despite the increase in rates, the Mortgage Bankers Association reported a 2.5% increase in purchase mortgage applications.

The Banker's Depression

Meanwhile, bankers are just sitting on a pile of new money - the
Federal Reserve has printed and put in bank reserves $238 billion new
dollars in the last 12 months. That's a massive 15% increase in the
monetary base (M1 for the technically minded). But bankers aren't
lending it.

What I'm Reading

Microsoft Job Cuts: Layoffs Good News for Economy

I would bet that these job cuts are going to force a lot of people to
find their inner-entrepreneur. These ex-Microsofties are going to end
up starting a lot of small businsees that may eventually grow in size
to become some pretty profitable companies. Who knows, Microsoft may
inadvertently be creating another Gooogle or Apple or, yes, Microsoft.
Creative destruction, gang

Tough GOPers Stand Up to Geithner; All GOPers Should Counter Keynesian Stimulus

Right now capital is on strike. So are investors. Supply-side incentives will bring them back. This is where the GOP must go.

Fed Likely to Focus on Rates, Loans

Fed officials are likely next week to keep their approach for handling the financial crisis, despite internal divisions.

Housing Starts in U.S. Tumble 16% to Lowest on Record as Credit Dries Up Home prices in the U.S. dropped the
most in at least 18 years and builders broke ground on the
fewest houses since record-keeping began as the recession
deepened, government reports said today.

Australia May Cut Interest Rate Below 2% Amid Deep Recession, Fraser Says Australia’s central bank may more
than halve its benchmark interest rate as the nation enters a
long and deep recession, former Governor Bernie Fraser said.

China's Slowdown to Deepen as Recession Pummels Exports, Asian Suppliers China’s economic slowdown, already
the deepest in seven years, is set to worsen as the global
recession pummels its exports, darkening the outlook for
suppliers from Australia to Taiwan.

Geithner Warning on Yuan May Trigger Renewed U.S.-China Economic Tensions Timothy Geithner’s warning that
President Barack Obama believes China is “manipulating” its
currency may trigger renewed tensions between two of the world’s
three biggest economies.

JPMorgan Forecasts Larger Australian Rate Cut Next Month Amid Global Slump JPMorgan Chase & Co. forecasts the
Australian central bank will cut its benchmark interest rate by
1 percentage point next month, double its previous prediction,
amid a deepening slump in the nation’s major export markets.

Singapore Lowers Corporate Tax, Spends Record Amount Amid Worst Recession Singapore cut corporate taxes for
the second time in three years and said it will tap its reserves
to fund record spending amid efforts to drag the island’s
economy out of its deepest recession since independence.

Roubini Says China Is in Recession Despite `Massaged' Economic Growth Data China is in a recession despite
government statistics today showing the world’s third-largest
economy expanded in the fourth quarter from a year earlier,
according to Nouriel Roubini, the New York University professor
who predicted last year’s economic crisis.

Mining Boom Turns to Bust in Western Australia, Raising Risk of Recession Michael Smith moved 2,500 miles
across Australia in July to earn A$120,000 ($80,000) as a
blaster. Now the 30-year-old explosives expert is a motorcycle
courier making half his former wage.