Headline Financial News 2/26/2009

Much to discuss today:

• GM lost $9.6 billion in the fourth-quarter which explains why CEO Rick Wagoner will be pleading for more government funds today.
• Durable goods fell 5.2%, much worse than expected and for the record sixth month in a row. 
• Jobless claims rose 36,000 to 667,000 last week.  The number of people collecting benefits is now over the 5 million mark.  Economists were expecting declines.
• Moody's has placed ALL 2005, 2006, and 2007 subprime-mortgage bonds for review for downgrades.  This covers debt totaling $680 billion in original balances.  Moody's has raised the expected losses on the underlying loan pools from 22% to roughly 28% to 32%.  It's funny because the guy behind the counter at the Quickie Mart last night told me that his estimates for sub-prime mortgage losses were more in the range of around 40%.  I personally have my estimates at around 45%.  But really Moody's?  You want to downgrade this stuff NOW?  When most of it is already trading at 20 cents on the dollar?  I'm thinking that maybe the guys at Moody's need to expand into a new line of business, maybe buy a bakery, because their financial analysis is worthless.     
• RBS will get yet another injection from the UK of 25.5 billion pounds giving the government a 70% stake in the formerly royal bank.  The government will also guarantee another 325 billion pounds of worthless assets.  Well, at least it's not our government, but possibly just a foreshadowing of things to come for a couple of US owned giant banking duds.
• Obama put forward a budget that aims to raise taxes on high income earners, proposes an additional $250 billion for bank stabilization and aims to overhaul the health care system.  The 134-page budget, which I did not read, estimates that the deficit will swell to $1.75 trillion this year.  Given how lousy our government is at ever estimating the deficit, let's just assume it'll hit $2 trillion on its way to $3 trillion.

Despite all the gloom and doom in the headlines, futures are actually higher.  Go figure.