Market Talk

Dateline Washington: “Treasury Secretary Timothy Geithner on Tuesday told policy makers and entrepreneurs that U.S. small businesses need greater access to capital in order to spur innovation,” Newswires’ reporter Jeff Sparshott reports today.

“The financial crisis caused a great deal of damage to the capacity of innovators to access capital, and we can’t promote innovation and investment in the United States unless we help innovative companies get the funding they need to succeed,” the secretary continued.

Makes for a nice sound bite, but it seems Geithner hasn’t kept his finger on the pulse of small business. They aren’t clamoring for capital. In fact, here’s what they said about credit markets in the latest monthly survey by the National Federation of Independent Businesses:

Overall, 92 percent reported that all their credit needs were met or that they were not interested in borrowing. Eight percent reported that not all of their credit needs were satisfied, and 51 percent said they did not want a loan.

NFIB said a net 11% reported loans “harder to get” compared to their last attempt — asked of regular borrowers only — up from 10% in January. The organization also says 28% of owners said weak sales continues to be their top problem, and “the historically high percent of owners who cite weak sales means that, for many owners, investments in new equipment or new workers are not likely to ‘pay back’.”

Seems pretty simple, but it’s really more business that small businesses need, not more capital, right now. And demand spurs innovation (remember necessity is the mother of invention?), not capital. Sounds like Geithner, and the White House, doesn’t get that.

We accept a certain degree of hyperbole from industry trade groups, but statements today from the National Association of Home Builders are about as kooky as they come.

Association chairman Bob Jones, a builder in Bloomfield Hills, Michigan, noted in today’s release of the October builder sentiment index that builders “are starting to see some flickers of interest among potential buyers,” and they hope that means more sales are on the way.

Fair enough, Bob. Starting to see “some flickers of interest” seems like a measured way of describing the situation, no problem there.

But here’s where Jones goes a little loco; he continues:

However, because most builders still have no access to credit for building homes, there is a real concern that we will not be able to meet the pent-up demand when consumers are ready to get back in the market. This problem threatens to severely slow the housing and economic recovery.

Whoa, whoa, whoa Bobby. Easy, guy. First off, pent-up demand? There’s nearly fifteen million people unemployed (not in the buying mood), enough used homes for sale to last almost year at the current sales pace and new-home sales bumping along historically low levels. What pent-up demand? There’s no un-pent demand, never mind pent-up demand.

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- Yves Smith at naked capitalism doesn’t see much substance in China’s pledge to make its currency exchange rate more flexible. “While this does represent an announcement of an intent to liberalize, it lacks any particulars as to timing and mechanisms.”

- China pledging to make its exchange rate more flexible is, at this point, just an announcement “which may or may not be followed through,” Barry Ritholtz writes at The Big Picture. “As such, we should treat it as a precursor, and not the significant shift the market seems to be making of the announcement.”

- UC San Diego economics professor James Hamilton still sees deflationary forces swirling through the economy even as inflation is the bigger longer-term risk. “America needs leaders willing to talk honestly about our long-run fiscal challenges and what needs to be done to address them,” he says. “I can dream, can’t I?”

- The IPO market has become a “sad tale,” says Fred Wilson. “The cost is just too high and the benefits are just too low for most companies these days.”

- The biggest headwind to US growth isn’t the state of Europe, it’s a lack of credit here. it’s a lack of credit here. “Two years ago, when the government rushed to bail out Wall Street, the justification was always the same. We have to do it. If we don’t, the banks will stop lending. And then the world will end,” Henry Blodget writes at Business Insider. “So we bailed out Wall Street. And the world didn’t end. But the banks still aren’t lending (And you can’t blame them, really.)”

- Apple’s (AAPL) iPad will hurt Kindle sales for Amazon (AMZN), but it won’t be a Kindle-killer, MediaMemo blogger Peter Kafka says. Keep in mind AMZN still offers a wider range of e-books than AAPL and sells them for much less. “My guess is that even after Apple eats into Kindle’s share, Amazon is going to find plenty of people who just want an e-reader.”

- China’s announced currency move probably won’t amount to much in the short term, Michael Schuman writes at Time’s Curious Capitalist blog. “This is a baby step on a long road to a truly market-determined yuan exchange rate,” he says. “Until China allows a free-floating currency, controversy over its value will persist, and the yuan will play a limited role in the global economy.”

- The stock market has reached an important inflection point, as “valuations remain uncomfortably rich and market action is tenuous,” writes John Hussman. “When an overvalued market loses support from market internals, it frequently produces discontinuous outcomes ranging from brief ‘air pockets’ to ‘panics’ to ‘crashes,’” Hussman says.

- Former IMF chief economist Simon Johnson remains less than impressed with financial regulatory reform, labeling it “dead on arrival.”

- China isn’t the first country that has pledged to make its currency exchange rate more flexible. “Exiting up does not doom the economy to a Japanese-style lost decade,” VoxEU says.

- It’s been a wacky week for home sales. One day they’re up, the next they’re down. What gives?

- Regardless, home buyer tax credit clouds true housing demand.

- S&P 500 breaking through a 15-month high, but more importantly, watch financials as a gauge for future market performance, Bespoke says.

- Rising mortgage rates don’t present a serious concern, yet. “The big test will come with the turn of the calendar,” Tom Petruno says. “Come January, will investors figure that long-term Treasury yields are high enough to be attractive again – or still too low to compensate for the risks to bonds from a bona fide economic rebound?”

-The Blackberry outage has gotten a lot of attention. Maybe it’ll influence Research In Motion to incorporate a decent real-time status page where it can update users about any disruptions to its networks, Paul Kedrosky says.

- Fred Wilson also weighs in on the situation, suggesting RIM should stick to what it’s good at. “The Blackberry approach to providing services via the carrier networks is not ideal,” he says. “They are playing carrier, software provider, and hardware provider all in one. That’s not good.”

- On the bright side, the outage shows how attached people truly are to their blackberrys. “As discouraging to the company as no doubt such outages are, they do perversely prove the loyalty and dependence of the customer base. Not bad things for a business,” Neal Lipschutz says.

- It’s no secret the nation’s biggest banks have cut back lending dramatically. The reason also isn’t surprising. “It’s the rational thing to do,” Barry Ritholtz says.

- VIX below 20 doesn’t mean selloff is coming.

- Ratio of existing home sales to new home sales in November hit a new all-time high, Calculated Risk says.

- Here’s a glimmer of hope for the 2-26 NJ Nets. Their Brooklyn arena appears inevitable with financing deal.