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Auction Part of Treasury's Continued Efforts to Wind Down TARP's Bank Programs Proceeds Deliver Additional Profit for Taxpayers on TARP's Bank Programs WASHINGTON – As part of the strategy it outlined last month for winding down its remaining Troubled Asset Relief Program (TARP) bank investments, the U.S. Department of the Treasury today announced that it priced secondary public offerings of the preferred stock it holds in the following seven financial institutions at the following prices per share: Taylor Capital Group, Inc. (Rosemont, IL), all of its 104,823 shares priced at $893.50 per share (approximately $92 million net proceeds); Ameris Bancorp (Moultrie, GA), all of its 52,000 shares priced at $930.60 per share (approximately $48 million net proceeds); First Defiance Financial Corp. (Defiance, OH), all of its 37,000 shares priced at $962.66 per share (approximately $35 million net proceeds); Farmers Capital Bank Corp. (Frankfort, KY), all of its 30,000 shares priced at $739.89 per share (approximately $22 million net proceeds); LNB Bancorp Inc. (Lorain, OH), all of its 25,223 shares priced at $869.17 per share (approximately $22 million net proceeds); First Capital Bancorp Inc. (Glen Allen, VA), all of its 10,958 shares priced at $920.11 per share (approximately $10 million net proceeds); and United Bancorp Inc. (Ann Arbor, MI), all of its 20,600 shares priced at $825.50 per share (approximately $17 million net proceeds). The aggregate net proceeds to Treasury from the seven offerings are expected to be approximately $245 million, which was an overall total of 15 percent above the minimum prices set for the auctions. The prices above reflect a liquidation amount per share of $1,000 for the preferred stock of each institution. At settlement, winning bidders will be required to pay the clearing price for the preferred stock plus accrued and unpaid dividends on the preferred stock from and including May 15, 2012. TARP's bank programs have already earned a significant profit for taxpayers. Including the expected proceeds from today's transaction, Treasury has now recovered $264 billion from TARP's bank programs through repayments, dividends, interest, and other income – compared to the $245 billion initially invested. Each additional dollar recovered from TARP's bank programs is an additional dollar of profit for taxpayers. Today's auctions are part of the strategy that Treasury outlined last month for winding down its remaining TARP bank investments in a way that protects taxpayer interests, promotes financial stability, and preserves the strength of our nation's community banks. Treasury indicated that it intends to use a combination of repayments, restructurings, and sales to manage and recover those remaining investments. Treasury intends to announce additional CPP preferred stock auctions in the coming weeks. "We're pleased with the results of today's auction, which enabled these community banks to replace temporary government support with new private capital, and keeps us on track to earn a positive return for taxpayers from TARP's bank programs in excess of $20 billion," said Assistant Secretary for Financial Stability Timothy G. Massad. "TARP played a critical role in stabilizing an economy in freefall during the financial crisis, and we are continuing to make good progress in winding down the program and recovering taxpayer dollars." The closing is expected to occur on or about June 19, 2012, subject to customary closing conditions. The offering was priced through a modified Dutch auction. Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and Sandler O'Neill + Partners, L.P. ("Sandler O'Neill") were the auction agents and joint bookrunning managers for the offerings. Houlihan Lokey Capital, Inc. is serving as financial advisor to Treasury with respect to the management and disposition of its Capital Purchase Program investments. Each series of preferred stock is being sold pursuant to an effective shelf registration statement previously filed by the applicable issuer with the Securities and Exchange Commission (the "SEC"). Preliminary prospectus supplements related to each offering were filed with the SEC on June 11, 2012, and a final prospectus supplement related to each offering will be filed by the applicable issuer with the SEC and will be available on the SEC's website at http://www.sec.gov. Copies of the final prospectus supplements relating to the offerings may be obtained, when available, from Merrill Lynch via email at dg.prospectus_requests@baml.com or (800) 294-1322 or from Sandler O'Neill via email at syndicate@sandleroneill.com or (866) 805-4128. Before you invest, you should read the prospectus and prospectus supplement in the registration statement and other documents the applicable issuer has filed with the SEC for more complete information about the issuer and the preferred stock. This news release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction. For more details on Treasury's lifetime cost estimates for TARP programs, please visit Treasury's Monthly 105(a) Report to Congress on TARP at this link. # # #
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Thursday, June 14, 2012
Treasury Department Announces $245 Million in Proceeds from Pricing of Public Offerings of Preferred Stock in Seven Financial Institutions
First Time Jobless Claims
And, of course, if it's Thursday it's all about unemployment[1].
Last week, we had an advance figure of 377,000 seasonally-adjusted first time claims for the week ending June 2, 2012. That was considered good news, because it was down 12,000 from the previous week. This week, the Econoday-surveyed analysts are expecting the trend to continue, calling for 375,000 new claims.
For the details on whether or not this optimism is justified, we turn to the Unemployment Insurance Weekly Claims Report from the U.S. Department of Labor. A report that jumps right in and slaps the analysts in the face. The seasonally adjusted advance figure for initial claims for the week ending June 9 comes in at 386,000 - increasing by 9,000 instead of declining by 2,000. So yeah, ouch. Better yet, the figures for June 2 have been revised upwards to 380,000. So that's no fun, either.
The unadjusted number of actual initial claims under state programs comes in at 373,540, up 49,155 from June 2. Meanwhile, the total number of people claiming benefits in all programs for the week ending May 26 fell 145.990 to "only" 5,824,359 people.
So we can distinctly call this "mixed signals" for the marketplace. CPI is better than expected, jobless claims are worse.
[1] Except for Thanksgiving. Then it's all about gorging yourself on turkey, and unemployment happens on Wednesday.
Consumer Price Index News Release
 | Bureau of Labor Statistics |
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FW: Consumer Price Index
We've got a bifecta[1] of major economic data hitting the market at 8:30 this morning: Consumer Price Index and First Time Jobless Claims.
For those of you who aren't familiar with it, CPI is a measure of "the change in the average price of a fixed basket of goods and services purchased by consumers" (to quote Econoday). It is, in essence, a measure of inflation, and tracks month over month change with a one month lag. CPI gets studied intently, because consumer costs drive the market. Rising prices mean (in theory) increasing profits. But the more they rise, particularly in "discretionary" areas, the greater the chances that overall spending in that sector will decline.
Also, CPI has a "core"metric: the change in consumer prices without food and energy factored in. These areas are considered volatile, and so are removed from the official measures of inflation[2]. I'll try not to rant on the subject.
April 2012 saw a 0.0% change in CPI, and a 0.2% change in "core" CPI. For May, the Econoday-surveyed analysts are feeling marginally optimistic. The consensus estimate is for a 0.2% decline in CPI (which is a good thing), and a 0.2% increase in "core" CPI.
And so, without further ado, we turn to the Bureau of Labor Statistics and their Consumer Price Index - May 2012 news release. And, it turns out, that the analysts weren't optimistic enough. CPI declined 0.3%, while "core" CPI increased 0.2%. The decline in overall CPI was driven largely by energy costs, which fell 4.3% in May (mostly on a 6.8% decline in gasoline costs).
So, that's some good news from one half of the bifecta.
[1] Like a "trifecta", except that there's only two things. It's a neologism. Feel free to share it with your friends.
[2] Because everyone knows that dramatically increasing food and/or energy costs doesn't put a pinch on your budget, right?
Monday, May 14, 2012
World News!
Afghanistan
- A bicycle bomb killed nine people in Faryab.
China
- In an effort to get a larger piece of the lucrative (and large) Chinese market, Ford plans to double production in the country by 2015. The car maker anticipates sales will reach 30 million vehicles by 2020, approximately double their U.S. sales.
- China has denied claims that it attempted to assassinate the Dalai Lama by sending female agents to kill him with poisoned hair and scarves[1]. Chinese foreign ministry spokesman Hong Lei said "his sensational allegations are not even worth refuting".
Greece
- Yet another failed round of efforts to form a coalition government has led to increased fears of a Greek default, followed by Greece leaving the Euro zone. the country could run out of funds by June, and currently has no government in place to negotiate the next aid loan from the European Union.
Syria
- Raising increasing questions about the effectiveness of the UN-brokered cease fire, 23 Syrian soldiers were killed in fighting near Rastan
United States
- Ina Drew, chief investment officer of J.P. Morgan Chase, is expected to resign this week in the wake of $2 billion in realized losses from credit default swaps[2] (with the promise of another $1 billion in losses as the company tries to wind the positions down).
- Brazilian-born Facebook co-founder Eduardo Saverin has renounced his US citizenship to become a resident of Singapore. Some estimates are that this will allow him to avoid some $600 million in taxes. An analysis by Forbes magazine disputes this, however.
[1] The said nothing about other methods they may have employed, however.
[2] You remember credit default swaps, don't you? The things that tried to destroy the market a few years back? Sure you do.
Sunday, May 13, 2012
Producer Price Index News Release
Bureau of Labor Statistics
The latest Producer Price Index news release has been posted on the BLS website at http://www.bls.gov/news.release/pdf/ppi.pdf and also archived at http://www.bls.gov/news.release/archives/ppi_05112012.pdf. Highlights are below. The Producer Price Index for finished goods falls 0.2% in April; finished core rises 0.2%
05/11/2012
The Producer Price Index for finished goods fell 0.2 percent in April. Prices for finished goods were unchanged in March and increased 0.4 percent in February. The index for finished goods less foods and energy rose 0.2 percent.
Thursday, May 10, 2012
FW: World News!
Pakistan
- Following the beheading of a British nurse, the International Committee of the Red Cross has suspended humanitarian activities in Peshawar and Karachi.
South Korea
- In "eeeewww" news, South Korea is stepping up customs inspections in an effort to crack down on the trade in powdered human flesh.
Syria
- A car bomb exploded near an office of the Palestine Branch (one of the 20 Syrian secret police organizations) in Damascus, killing 55 and wounding 372. The Syrian government blames "terrorists", and the opposition says the government set the bombs off to discredit them.
United States
- James Anaya, the UN special Rapporteur on the Rights of Indigenous Peoples, called on the United States to return some of the land stolen from American Indian tribes as part of a program of ending "systemic and also specific instances of ongoing discrimination".
- In "maybe there is a such thing as bad publicity" news, ten alleged members of the white supremacist group "The American Front" were arrested near Disney World.
- The Florida Supreme Court is set to hear oral arguments in Roman Pino v Bank of New York Mellon. The case revolves around "robo-signing" - the process of banks hiring low-wage workers to sign legal documents without checking them for accuracy - and could result in tens of thousands of mortgages becoming unenforceable.
International Trade
International Trade is the shorthand for the U.S. International Trade Deficit[1], a measure of how much we import vs. how much we export. If the number is positive, that means we're exporting more than we're importing. If it's negative, then it's the other way around. The report is lagging, looking at the balance from two months in the past.
This metric is huge, mostly because it directly influences that biggest of all economic big dogs, Gross Domestic Product. GDP is, by definition, private consumption plus private sector investments plus government spending plus (exports minus imports). So, if we're exporting more than we're importing, that's a boost for the economy.
Again, we haven't had a trade surplus since 1975. So our trade balance has been a drain on the U.S. economy for 37 years. By definition.
February saw a trade balance level of $-46.0 billion. The Econoday-surveyed analysts are bearish for March, expecting to see the trade deficit expand to $-49.5 billion. And to find out if they are right, we turn to the US Census Bureau.
The title of the article, Goods and services Deficit Increases in March 2012 is, at best, an inauspicious beginning. But hey, the analysts were expecting that. What they weren't expecting was for the trade deficit to increase to not $-49.5 billion but to $-51.8 billion. We did see a $5.3 billion increase in overall exports (which is good), driven primarily by exports of industrial supplies and materials ($2.4 billion increase) and capital goods ($1.2 billion increase). Imports increased by $11.7 billion, driven by capital goods ($3.5 billion increase), consumer goods ($3.3 billion increase), and industrial supplies and materials ($2.5 billion).
[1] Technically, that should be U.S. International Trade Balance. But we haven't had a trade surplus since 1975.
Unemployment Insurance Weekly Claims Report
It is, of course, Thursday. And if it's Thursday, it's time for unemployment!
If you recall from last week, we had an advance figure for seasonally adjusted initial claims for the week of April 28 come in at 365,000, beating expectations. The advance figure for seasonally adjusted insured unemployment also declined to 3,276,000. Even the unadjusted numbers were good: the advance figure for actual initial claims came in at 330,476, and the total number of people claiming benefits in all programs (as of April 14) was 6,597,492.
For the week ending May 5, the Econoday-surveyed analysts are bearish. But they're so mildly bearish that it hardly counts, expecting the new claims level to rise to 366,000. Are they right? Only the Department of Labor knows for sure.
Speaking of the DoL, let's have a look at the Unemployment Insurance Weekly Claims Report for May 5. The advance figure for seasonally adjusted initial claims came in at 367,000. Technically, that misses expectations. But it missed by so little that I think we can give it to them; it certainly won't crush anybody's spirits. The initial claims figure for April 28 was also adjusted upwards to 368,000; again, not as bad as it could have been.
The advance figure for for seasonally adjusted insured unemployment comes in at 3,229,000, a decline from last week. Even if you ignore the upward revision of last week's level to 3,290,500.
Looking at unadjusted numbers, the actual initial claims for May 5 came in at 338,418 and the total number of people claiming benefits in all programs for the week ending April 21 came in at 6,423,383.
So, overall, a week that met expectations.
U.S. Import and Export Price Indexes News Release
| Bureau of Labor Statistics |
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Import and Export Prices
Import and Export Prices is exactly what it looks like. A measure of the change in the prices we receive for exporting goods and services, and and a measure in the change in prices for goods and services we import. It's a separate report from International Trade (go figure), and it is a one month lagging indicator.
March saw a 0.8% increase in export prices, and a 1.3% increase in import prices. The Econoday-surveyed analysts are mildly bullish on this one, expecting a 0.2% increase in export prices for April, and a 0.2% decrease in import prices. But are they right? Let's go check the Bureau of Labor Statistics and find out.
Looking at the U.S. Import and Export Price Indexes - April 2012 report, it actually turns out they weren't bearish enough. U.S. import prices declined 0.5% in April, and export prices increased 0.4%. That's good news for domestic companies, at least[1].
The decline in import costs was led by a 2.1% drop in fuel import prices, which breaks down to a 1.8% decline in imported petroleum prices and a 14.1% decline in imported natural gas prices. The increase in export costs was driven by a 2.0% increase in agricultural prices, led by a 7.4% increase in soybean prices.
[1] The ones that don't import everything from overseas to resell in the US markets, that is.
Monday, May 7, 2012
Employment Situation
This is clearly a few days late, but I don't work on Fridays anymore.
Well, more accurately, I don't come in to the office on Fridays. Having a 19-month-old means I still work on Fridays. But that's neither here nor there. The point is, this is a few days late.
The Employment Situation Report is one of the big reports. It's put out by the U.S. Department of Labor's Bureau of Labor Statistics, and it is the official word on how - wait for it, you may not guess from the name - non-farm employment looks in the United States[1]. It's a lagging report, looking at the previous, and it has the power to shake the heavens. Or to, at least, shake the markets for the day. It is, after all, a look at the health of the economy.
The Econoday-surveyed analysts were pretty optimistic before the report came out on Friday. They were looking to see 165,000 new nonfarm jobs added in April, to see the unemployment rate remain steady at 8.2%[2], to see average hourly earnings increase 0.2%, and for the average workweek for employees to remain at 34.5 hours.
I won't try to build any suspense out of this, because the data came out something like 72 hours ago. Instead, let's just go ahead and jump right into the optimism-crushing news delivered by The Employment situation - April 2012 Report. Nonfarm payroll employment rose by 115,000 (missing expectations terribly), and unemployment shrank mildly to 8.1%. The average workweek remained steady at 34.5 hours, and average hourly wages rose $0.01 (or about 0.04%).
Now, let's have a look at that 8.1% unemployment rate. That represents about 12.342 million people (5.1 million of whom have been out of work for 27 weeks or longer), and constitutes people that are not currently working but who have looked for work in the past 4 weeks. That number decreased by 0.159 million from March. But here's something interesting.
There are two categories of people that are not considered unemployed, that many economists believe should be. These are people "marginally attached to the labor force" and people who work "part time for economic reasons". "Marginally attached to the labor force" means that you are out of work, that you want to work and can work, and that you have not looked for work for at least 4 weeks. There are 2.363 million people in this category (an increase of 0.011 million from March), 1 million of whom have given up hope of finding work. "Part time for economic reasons" means people who are working a part-time job, who want full time employment but can't find it. There are 7.853 million of these people (up 0.181 million from March, handily absorbing the entire decline in the official unemployment rate). Factoring these people in, you get an unemployment rate of 14.8%.
So anyway, in a "better late than never" sort of way, you now have a little more insight into what happened to the markets last week.
[1] No, I don't know why they don't consider farm employment to be employment.
[2] And we'll be looking hard at that percentage in a moment.
Thursday, May 3, 2012
Breaking News, Again
Facebook has filed Amendment No. 5 with the Securities and Exchange Commission to take its stock public with an offering price between $28 and $35. the form still does not state an official date.
Looks like the "source familiar with" was pretty familiar.
Breaking News! It's Coming!
According to "a source familiar with the IPO", Facebook, Inc plans to price its IPO at a range with a mid-point of $31.50. That would give the company a valuation around $90 billion. The final pricing is expected in about two weeks, and "people familiar with the matter" say that the company will begin pitching its stock to investors on Monday.
So far, though, this is all "source familiar with" and "people familiar with", without any official announcement. Take it all with a grain of salt, until the actual announcement happens.
Challenger Job Cut Report
More properly, this is the Challenger, Gray & Christmas Job Cut Report.
Challenger, Gray & Christmas is an outplacement consulting firm. They are brought in when a company is laying employees off, to assist those employees in looking for new jobs. they primarily cater to executives and middle management, but they - rather like ADP - have access to a great deal of information about layoffs as a result. And, like ADP, they use this information to compile a report about the state of employment in the US.
This report has a rather unique feature as well. It focuses on the number of layoffs announced in a given month, without regard for when those layoffs will actually occur. As a result, this report isn't as hotly anticipated as the ADP Employment Situation Report. Not that it's worthless, but it just doesn't provide a clear lagging or leading indicator.
So, let's turn to the report and see what it does tell us. US-based employers announced 40,559 job cuts in April, up from the 37,880 announced in March. Texas is the big "winner", accounting for 29,324 of those planned layoffs. By Industry, Education has the most planned layoffs (9,027) - nearly as many as the second, third, and fourth place figures combined.
Unemployment Insurance Weekly Claims Report
Also known as "jobless claims", this is the Department of Labor's weekly report on... wait for it... how many people are applying for unemployment insurance.
I'll bet you would never have guessed that, from the name. Right?
Anyway, back to being serious about this. The Unemployment Insurance Weekly Claims Report is a lagging report, providing information for the previous week. It discusses both new claims and continuing claims, on a raw data and a seasonally adjusted level. Analysts love this report (when they don't hate it), because it's another snapshot of the health of the economy. Declining new jobless claims imply fewer layoffs, and declining continuing jobless claims imply people getting back to work[1].
And what are the analysts thinking of this week. Well, last week there were 388,000 claims for the week ending April 21. This week, the Econoday-surveyed analysts are looking at the initial claims to fall to 378,000. So, they're feeling optimistic. But are they justified in this feeling? Let's find out.
Looking at the report, we find that the advance figure for seasonally adjusted initial claims for April 28 is 365,000 - substantially beating estimates. On the downside, the seasonally adjusted claims for April 21 have been revised upwards to 392,000[2]. The advance figure for seasonally adjusted insured unemployment for April 21 was 3,276,000, down 53,000 from April 21's revised level of 3,329,250.
Turning to the unadjusted numbers[3], the advance figure for actual initial claims for April 28 came in at 330,475, a drop of 40,158 from April 21. And the total number of people claiming benefits in all programs for the week ending April 14[4] is 6,597,492, down 85,523 from April 7.
So really, except for the upwards revision of April 21's figures, this was a heaping helping of good news to start the morning out.
[1] Or running out of benefits. But we'll look at that when we cover the Employment Situation tomorrow.
[2] This happens frequently. Why anyone gets excited about the initial figures is beyond me, really.
[3] A quick word about "seasonal adjustment" vs.. "unadjusted numbers": The unadjusted numbers are the raw numbers. The total number of actual claims. Seasonal adjustment is "a statistical method for removing the seasonal component of a time series that is used when analyzing non-seasonal trends" (to quote Wikipedia). the idea is that, if you remove spikes and dips created by seasonal events (such as the massive increase in employment around Thanksgiving, when the seasonal employees get hired), you can get a more accurate idea of trends. I'm not certain I agree, but I'm also not a statistician. So take my skepticism with a degree of skepticism.
[4] Yeah. This particular component is on a two-week delay.
Wednesday, May 2, 2012
World News
Egypt
- Eleven people were killed and more than 160 wounded after armed men[1] attacked protesters demanding an end to army rule in Egypt.
Germany
- A court in Mannheim ruled that Microsoft has infringed Motorola Mobility's patents and has ordered that the Xbox 360 and Window 7 OS be removed from the German market. A US district court has granted an injunction preventing Motorola from enforcing the court order, though, and the ruling is not expected to have a significant impact on Microsoft's European sales.
Greece
- Standard and Poor's has upgraded Greece's credit rating from "selective default" to "CCC". That still leaves them on a scale between "garbage" and "why are you buying this?", but it is an improvement.
North Korea
- Lee Kyung-woo, deputy director of the Korea Communications Commission, has charged North Korea with jamming the GPS navigation systems on at least 250 domestic South Korean flights.
United States
- A "source familiar with the process" reports that the roadshow for Facebook, Inc's initial public offering is scheduled to start on May 7. If true, this means that the company could be going public as soon as May 18. Facebook has declined to comment.
- Charles "Skip" Pitts died in a Memphis hospital at the age of 65. You know him as the blues guitarist that played the the theme music for Shaft.
- Five men have been charged in an alleged plot to blow up a bridge 15 miles from Cleveland.
- The SEC has charged Kevin Sepe and ten associates with having conducted "pump and dump" schemes with two microcap securities. Six of the individuals involved have already agreed to approximately $3.2 million in settlements - about three times the alleged earnings.
[1] And the Egyptian government wants to assure you that they were "unidentified thugs", not soldiers.
Employment Week and the ADP Employment Report
It's the first week of the month, which means that the market is looking with bated breath towards Friday and the Employment Situation report. Analysts will be scrutinizing the preliminary information in an effort to gauge which way the news will swing, and that preliminary information comes in three flavors:
- The ADP Employment Report (and more on that in a moment)
- The Challenger Job-Cut Report (out tomorrow)
- The Department of Labor's Unemployment Insurance Weekly Claims Report (also due out tomorrow)
Of the three reports, the Department of Labor is the biggest. But people still pay attention to the others, because every scrap of information has its place.
So. the ADP Employment Report. ADP, in case you're wondering who they are and why anyone would care, is also known as Automatic Data Processers, Inc. They are, according to their web site, "one of the world's largest providers of business outsourcing solutions," and they offer "a wide range of human resource, payroll, tax and business administration solutions". This gives them an enormous amount of information about private sector employment trends, and they use it to compile a monthly report about job gains and/or losses by sector.
The Econoday-surveyed analysts that follow this report are mildly bearish on the subject. The March report shoed a gain of 209,000 private sector jobs, but the consensus is for only 183,000 new jobs in April. That's not great because, while employment growth is a sign of a healthy economy, slowing employment growth is an indicator that the economy may be slowing down as well. After all, businesses don't hire if they don't have a need for the workers.
Let us now turn to the April 2012 ADP National Employment Report and see if the analysts will be correct and happy. According to the report, employment in the US nonfarm private business sector increased by 119,000 in April, missing expectations by 64,000. Not great news. Also, the March job growth figures have been revised downwards to only 201,000 new jobs. The service-providing sector saw a gain of 123,000 jobs, while the good-producing sector lost 4,000 jobs and the manufacturing sector lost 5,000 jobs[1]. Large payroll companies saw a gain of 4,000 jobs, medium payroll companies saw a gain of 57,000 jobs, and small payroll companies saw a gain of 58,000 jobs[2].
So, our buildup to the Employment Situation starts out mixed. Not great news, but a far cry from terrible.
[1] I'm not entirely certain what the difference between "manufacturing" and "goods-producing" is. Sounds like a topic to research for later.
[2] Large payroll is defined as 500+ employees, medium payroll is defined as 50 to 499 employees, and small payroll is defined as up to 49 employees.
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