Good News, Bad News on Economy

If we can take a moment to look away from Wall Street's gyrations and focus on the underlying, or real, economy, there were a couple developments this morning that had a good news/bad news aspect to them.

On housing, the good news: The National Association of Realtors showed a surprise 8 percent jump in pending housing sales in August.

The bad news: Many of those sales were of homes that had been foreclosed on.

On retail sales, the bad news: September sales were down across the board, with giants such as Target reporting a bigger-than-expected sales drop.

The good news: Leading-edge indicator Wal-Mart reported strong sales in September, but there's a hint of bad news even in this. Sales were solid for groceries and other essentials, but softer for discretionary items.

On CNBC this morning, billionaire/former presidential candidate/noted flat-taxer Steve Forbes said the federal government needs to do two things, and pronto:

1) Eliminate mark-to-market accounting, which requires companies to value assets on their books for the price they'd sell for right now. Banks carrying toxic assets -- such as the mortgage-back securities based on failed loans -- are having to record them at fire-sale values, thanks to mark-to-market. If mark-to-market accounting were eliminated, or suspended, banks could value these assets at what they're likely to be worth when the economy recovers (if it recovers), helping out the banks in the short-term.

2) "Start shoveling out" the $700 billion Wall Street bailout/rescue money. "Don't worry about criticism that you may be paying too much for the assets," Forbes said. "Get this stuff off the books."

-- Frank Ahrens

October 8, 2008; 10:28 AM ET  | Category:  business
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Same deal here. I open the door to go up on the roof and it's raining. Good for the garden and flowers, bad for my plan. The rain wasn't due until noon. It looks like they were wrong, right as rain.

Posted by: Anonymous | October 8, 2008 10:39 AM

Turning the tide.
Mayor of Marino, said the engineers had inadvertently misdirected the flow of wine into the domestic supply.

At least the taps were wet. No good for cleaning though.

Posted by: Anonymous | October 8, 2008 10:57 AM

The crisis started with low interest rates and easy credit for everbody. The FED now believes that low interest rates will bring easy credit for everybody.

Wrong!!! Those with cash are not lending anymore... much less now that interest rates have been cut.

Posted by: Scooby | October 8, 2008 10:59 AM

If we're going to be nationalizing everything I think I'd prefer the gov't snatching up these assets at fire sale prices so we can turn it around and pay off our debts down the line. Of course businesses are trying to avoid selling at current worth; it affects executive bonuses directly.

Posted by: Mike | October 8, 2008 11:14 AM

We are truly entering historic, unprecendented ground here.
I hope everyone has seen this: http://www.greenfaucet.com/traders-talk/another-notch-tighter/75137#comment-8269
It's a chart that shows that 4 horrible days of this magnitude has happened only once- 10/1987.
Ohoo.

Posted by: Graham | October 8, 2008 11:16 AM

If the amount of currency increases while payrolls decrease, well you get the idea. It looks like more borrowing is needed just to meet payroll, so the lower rates ease the pain. It's not the perfect solution. Until energy lets up the pressure is on. People are going to be borrowing just to cover higher energy costs. Oil has to come down, so until then it's going to stay rough and the cost of business is going to stay high. Basically oil is being used as a weapon. Look at the carnage in aviation and trucking. It just keeps spreading. We can't afford to run the trucks and what next? Oil should be at less than 50.00. Find somebody who can justify 130.00 or even 90.00.

Posted by: Anonymous | October 8, 2008 11:36 AM

Yes, we should definitely do whatever flat tax Silver Spoon Steve says, especially if it involves more cooked books.

Posted by: HeavyJ | October 8, 2008 11:49 AM

Forbes is a clown, whatever he said to do, do the opposite.

Posted by: Boston | October 8, 2008 12:16 PM

where's the cake?

Posted by: abe polin | October 8, 2008 12:20 PM

Cake doesn't change.
The mill wheel. Symbol of civilization and progress.
Nature's Bounty+Man's Industry=Plenty
Flour from the mill+Woman's Ingenuity=Good eating.

The cake is where it has always been.

Posted by: Anonymous | October 8, 2008 1:04 PM

forbes would NEVER do what he advises with his own money. let us raise his taxes and use his money to overpay for "bad mortgages"!

Posted by: wallstreethater | October 8, 2008 2:20 PM

Let me get this straight: according to Forbes, the problem is that the banks had to value their assets based on the ACTUAL VALUE of those assets, and if only the government had let them value those assets as of today based on what they will be worth some time in the future when they will be worth more than they are today, then everything would be hunky-dory.

Future value based on whose crystal ball, folks?

And are we adjusting for inflation in these estimates, or not?

I'd like to sell some of my stock and real estate assets at 2010 prices, since I am 1,000% sure they will be worth lots more then than they are now. Any takers out there?

Posted by: incredulousinBoyntonBeach | October 8, 2008 3:07 PM

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