Market Talk

- Microsoft (MSFT) insists one of its top priorities is to bring a Windows-based tablet to market sooner than later. Sounds straightforward. The problem is, [Microsoft] doesn’t always manage to do things really right,” Digital Daily blogger John Paczkowski says. “Certainly, it didn’t manage it with Windows Vista. Or Windows Mobile. Or Zune. Or, more recently, Kin. Who’s to say this time will be any different?”

- Tough to get true read on what’s happening in the stock market these days. “The cross-currents lately are absolutely cartoonish — back-to-back-to-back triple digit rallies while each morning we are treated to fresh evidence of ‘Slouching Housing, Hidden Consumer,’” Joshua Brown writes at The Reformed Broker.

- Hank Paulson says government policies promoting homeownership should be blamed as a major cause of the financial crisis, but FusionIQ CEO Barry Ritholtz disagrees, saying the former Treasury secretary ignores facts and is rewriting history. “His commentary is thinly veiled attempt to rewrite what actually occurred, and to shift his own sad role from conductor of the theft, to hapless victim of long standing government policy. If this exercise wasn’t such a transparent attempt at self-exoneration, it would be amusing.”

- Facebook isn’t planning to go public until 2012, Bloomberg reports. “That certainly sounds plausible,” MediaMemo blogger Peter Kafka says, especially considering Facebook likely doesn’t need to raise cash for operations. And if Facebook doesn’t IPO anytime soon, expect social games giant Zynga to face less pressure to go public too.

- “There is good news and bad news,” Ryan Avent writes at Economist’s Free Exchange blog, regarding 2Q GDP report. “Underlying growth looks quite weak, and in quarters to come the contribution from both government and inventory shifts will fall, or turn negative. All indicators suggest that second half growth will be no faster than first half growth.”

- GDP growth rate of only 2.4% isn’t nearly enough for the economy to properly recovery. “This shows clearly that Congress and the Fed should have taken a more aggressive posture already, not doing so was a mistake, and it’s a clear signal that the economy still needs more help,” Mark Thoma writes at MoneyWatch.

- But NYT’s Floyd Norris still thinks the recovery will pick up steam in near future. He notes this was third-straight quarter in which private sector investment rose at an annual rate of more than 25%. “The last time that figure rose as rapidly was in 1984, in the midst of a very strong recovery,” Norris says. “To be sure, private investment is coming off a very depressed level. But it is worth recalling that 1984′s recovery was also widely doubted.”

- As the Fed grapples with methods to support flagging economic growth, Monument Securities economist Stephen Lewis says (via Alphaville) that central bankers “seem close to recognizing” that their actions don’t determine the economy’s performance. “They can no longer demonstrate, or credibly claim, the omnipotence attributed to them by credulous markets in the era of the Greenspan cult.”

- Slate Group, the Washington Post’s (WPO) online unit, is shutting The Big Money, a business site it launched in September 2008, Kafka reports. “The problem, in a nutshell, is that the site is not pointed toward profitability on a fast enough timetable,” Slate said.

- “The global corporate-bond boom is gathering steam as companies rush to take advantage of some of the lowest borrowing costs in history,” WSJ says.

- Record low new-home sales don’t deter surging stocks. “New home sales are far more important for the economy than existing home sales, and new home sales will remain under pressure until the overhang of excess housing inventory declines much further,” Calculated Risk says. “Obviously this is another extremely weak report.” Still, Dow rallies 91 points.

- Supplementary Financing Program, the Treasury’s program for assisting with the Fed’s balance sheet, is making a sudden and dramatic comeback, James Hamilton writes.

- “The Volcker rule is following the tried and true path of all Obama ‘reforms,’ meaning an idea announced with great fanfare is being whittled back to meaninglessness,” Yves Smith says.

- Martin Wolf offers quite the depressing economic outlook, predicting a sovereign debt crisis on the horizon. “This, in turn, would surely result in defaults, probably via inflation,” he says. “In essence, stretched balance sheets threaten mass private sector bankruptcy and a depression, or sovereign bankruptcy and inflation, or some combination of the two.”

- Princeton economist Paul Krugman adds his two cents: “”What we really need now is… higher spending and lower trade surpluses in surplus nations, China especially but also Germany,” he says. And “some big driver of investment, such as green technology. Absent those things, it’s hard to see how we get a durable recovery.”

- Drop in bank lending truly is “epic.”

- $15 billion jobs-creation bill seems to have some limitations, Time’s Curious Capitalist blogger notes.

- Washington Post’s sales slump improves, sort of. “As always: remember what the economy was like a year ago when you think about these year-over-year comparisons,” Peter Kafka says.

- Consumer confidence data falling ten points has only happened 21 times since Conference Board began its monthly survey in 1977. “Almost every such ten-point drop can be attributed to an unusual market-moving event,” Jim Bianco says. “This is not meant to imply a cause and effect relationship, but is certainly something worth watching over the following months.”

- Critics rip new short-sale rules. “This puts a government thumb on the scale of stock prices,” says legendary short seller Jim Chanos. “Efforts to prop up stock prices where the fundamentals will not sustain them will inevitably fail.”

It's still too expensive

So not only are senators close to a deal that will extend the first-time home buyer tax credit, but now the deal may expand to some buyers who already own a home.

Dow Jones reporter Jessica Holzer says the credit could get extended to April 30 and certain “step up” buyers – who’ve been in their current home at least five years – would qualify.

There’s been lots of pressure to extend the tax credit, especially as housing prices are starting to recover. Home prices recorded their third straight monthly increase in August, according to Case-Shiller.

Still, some market observers remain critical. The credit effectively “boosts the price of a transaction that would have happened anyway,” Simon Johnson and James Kwak write on a Washington Post blog.

Sure it may help increase transactions and temporarily stabilize the housing market, but intervening in the economic cycle usually doesn’t end well.

“If someone could not have afforded a house without the tax credit, then what is he or she going to do when the tax credit goes away and the price of the house falls?” the bloggers ponder. “In effect, the tax credit is a way of making houses temporarily affordable that would not otherwise be affordable, and we know where that leads.”

Critics also scoff at the price of the credit. Calculated Risk does the back-of-the-envelop math and figures if 350,000 new sales occur because of the credit, as pegged by the National Association of Realtors, the government is essentially paying $43,000 for every extra house sold.

The tax credit is merely a “weak attempt to price fix a collapsing market,” the Pragmatic Capitalist blogger says.

“The problems in housing are secular in nature and cannot be fixed with some short-term government stimulus,” blog says.

The same thing occurred with cash for clunkers this past summer and auto sales collapsed once the program ended. “The only way to create sustainable economic growth is by promoting good business practices, ethical lending, fiscal prudence and innovation,” blog says.

“We aren’t going to create a short-term fix for a long-term problem.”

Washington Post (WPO) is ending its hyperlocal news experiment, marking another blow to newspapers hoping to discover new business models amid a slowing advertising market and declining revenues.

WaPo will shut down LoudounExtra.com, a site that covered local news in Loudon County, Va., according to NYT’s Bits blog, as the publisher says it’s experiment wasn’t a “sustainable model.” Hyperlocal websites essentially give readers all the news and information they can imagine about their neighborhood and town.

From Bits:

The idea behind these sites is that while readers are abandoning major metro newspapers, they still care deeply about news that is happening down the street. Meanwhile, local businesses theoretically want to advertise to local readers, potentially offering a business model to pay for the local news.

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