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Reuters reports: “According to US Treasury data issued Monday, Beijing owned 763.5 billion dollars in US securities in April, down from 767.9 billion dollars in March.”

We’ve got another trillion or so to borrow in the next year — who we gonna call?

First quarter ad sales were off 5% versus Q1 ‘08, the IAB estimates. This is the first year-over-year decline in quarterly Internet advertising since 2002.

Versus the holiday-bloated Q4, the Q1 number was an even more horrendous decline, down 17%.

Relative to the rest of the economy, the Internet advertising decline doesn’t look outrageous. But the rest of the economy isn’t still pumping out product — more cars, more hotdogs, more washingmachines, more homes — with reckless abandon. Producers have cut back to reduce costs and avoid stockpiling goods nobody will buy.

The same isn’t true online. New dotcoms are still being conceived and birthed daily, and CGM (postings on Youtube, Myspace, Flickr etc) is still doubling yearly.

Malthusian pricing Armageddon impends.

Update: Here’s more data on overall advertising trends. The Internet’s Q1 decline looks wonderful relative to things like ad spends in local Sunday supplements (-38%) and B2B magazines (-30%) and spot TV 101-210DMAs (29%.)

WSJ:

The BoE has made clear one of its main objectives in buying £125 billion ($189 billion) of gilts is to drive down gilt yields. In theory, this should be impossible since, as senior Bank officials admit, the gilt market is extremely liquid and deviations in yields away from market interest rate expectations should be quickly arbitraged away.

But these are not normal times. The U.K. government’s decision to borrow 220 billion pounds this year and £600 billion over the next five years means gilts yields have been well above levels implied by the swaps market. Without quantitative easing, gilt yields would be much higher.

…

In fact, the BoE’s efforts to manipulate the gilt markets may actually be exacerbating the problem. Credit market participants are increasingly uncertain about the true risk-free rate and the market’s interest rate expectations. That makes it harder to price assets — and may drive yields higher even as the BoE is trying to drive them lower though quantitative easing.

…

In an ideal world, a strong independent central bank would tell the government to get a grip on its borrowing, rather than mopping it up. Instead, the U.K. financial framework requires the BoE to accommodate itself to the government’s reckless fiscal policy. The weakness will eventually have to be addressed — but it might take a crisis to get there.

Same goes for the Fed.

TheStreet.com gets the scoop on its own ad sales:

TheStreet.com Inc.(TSCM Quote), an online financial media company and the publisher of this Web site, swung to a loss in the fiscal first quarter and said revenue declined 26% from the same period a year ago. For the first quarter ended March 31, total revenue was $14 million, down from $18.9 million in the same quarter of 2008.

Does anyone know of a “publisher dead pool” that we can link to?

Emily Steele reports:In a sign that marketers have begun to deepen their cutbacks, TNS Media Intelligence, an ad-tracking firm owned by WPP PLC, reported Monday that ad spending in the fourth quarter fell 9.2% from a year earlier.That’s a lot worse than any numbers we’ve heard yet elsewhere.

WSJ:

But these bailouts are hugely risky — as reflected in the high cost of insuring government debt. Credit Derivatives Research’s government-risk index, which measures credit-default swap premiums on seven large sovereign borrowers including the U.S., U.K. and Japan, continued to rise this year even as the VIX fell. It currently stands at 75 compared to a pre-boom level of around 3 and implies a VIX in the 60s, according to CDR.

Though the Fed has been buying hundreds of billions in Treasuries and corporate bonds to keep a lid on rates, the government’s skyrocketing debt sales to fund the deficit, the gradual erosion of the foreign appetite for US debt and the fear that the Fed’s bond buying will itself eventually fuel inflation, make it inevitable that 30-year t-bond yields, currently at 4%, will be far higher in coming months and years.

Geography of jobs.

Swine flu map.

On a recent trip to New York, we stopped through Brooks Brothers on 44th and Madison, where I bought suits while I worked on Wall Street in the 80s.

Brooks Brothers, once Wall Street’s bustling official dressing room, was a silk-strewn and worsted-wool-festooned desert.

Of course, two seconds of thinking made it obvious that no sane banker is today spending $80 on a hank of silk to wrap around his neck when in doubt about his job prospects. A simple rope will do.

And who wants to spend $1600 on a suit, below, and then find himself only wearing said suit to Starbucks to sip coffee and browse TheLadders? A track suit will suffice.

Suits are useless as anything other than social devices traditionally deployed to signal that the wearer is not a manual laborer, that the wearer is a cut or three above the hoi polloi. White collar and all that, don’t ya know.

But now, of course, a suit is worn predominantly by folks who made a bunch of lousy bets with other people’s money or who are now living large on the public dole.

When the economy comes back, will the suit return too? Not if banking loses its aura as an esteemed dynamo of capitalist innovation. You don’t find a soul wearing a suit at SXSW, where the creative class — programmers, designers, writers and ad execs — gather to hobnob every March. Suits may soon the way of the top hat, the cummerbund and 3% ten year US T-notes.

Newspapers plummeting versus last March:

USA TODAY — 2,113,725 – (-7.46%)
THE WALL STREET JOURNAL — 2,082,189 — 0.61%
THE NEW YORK TIMES — 1,039,031 — (-3.55%)
LOS ANGELES TIMES — 723,181 — (-6.55%)
THE WASHINGTON POST — 665,383 — (-1.16%)

DAILY NEWS (NEW YORK) — 602,857 — (-14.26%)
NEW YORK POST — 558,140 — (-20.55%)
CHICAGO TRIBUNE — 501,202 — (-7.47%)
HOUSTON CHRONICLE — 425,138 — (-13.96%)
THE ARIZONA REPUBLIC — 389,701 — (-5.72%)

THE DENVER POST (02/28/2009 to 03/31/2009) — 371,728 — N/A
NEWSDAY — 368,194 — (-3.01%)
THE DALLAS MORNING NEWS — 331,907 — (-9.88%)
STAR-TRIBUNE, MINNEAPOLIS — 320,076 — (-0.71%)
CHICAGO SUN-TIMES — 312,141 — (-0.04%)

SAN FRANCISCO CHRONICLE — 312,118 — (-15.72%)
THE BOSTON GLOBE — 302,638 — (-13.68%)
THE PLAIN DEALER, CLEVELAND — 291,630 — (-11.70%)
DETROIT FREE PRESS — 290,730 — (-5.90%)
THE PHILADELPHIA INQUIRER — 288,298 — (-13.72%)

THE STAR-LEDGER, NEWARK, N.J. — 287,082 — (-16.82%)
ST. PETERSBURG (FLA.) TIMES — 283,093 — (-10.42%)
THE OREGONIAN, PORTLAND — 268,512 — (-11.76%)
THE ATLANTA JOURNAL CONSTITUTION — 261,828 — (-19.91%)
SAN DIEGO UNION-TRIBUNE — 261,253 — (-9.53%)

I didn’t want to miss Microsoft’s report last week. CNN reported: “Microsoft’s Online Services division, which includes the online portal MSN and its Internet advertising sales, lost $575 million in the quarter, and sales in the division were down 14% from the same quarter a year earlier. Microsoft said the loss in its ad sales division was due to the significant decline of average rates in display advertising.”

“Marketing services revenues from Yahoo owned and operated sites slipped 10% to $872 million in the first quarter from $966 million last year, driven by a 3% decline in search advertising revenue and a 13% drop in display advertising revenue.”

AP reports: “While most of the erosion was concentrated in the Times Co.’s newspapers, its Internet ad revenue also sagged by 8 percent, or $3.6 million.”

The online advertising pie is still growing slightly even in the recession, but the number of publishers with forks is growing much faster.

It’s worth reading “The Quite Coup” in this week’s Atlantic Magazine.

In its depth and suddenness, the U.S. economic and financial crisis is shockingly reminiscent of moments we have recently seen in emerging markets (and only in emerging markets): South Korea (1997), Malaysia (1998), Russia and Argentina (time and again). In each of those cases, global investors, afraid that the country or its financial sector wouldn’t be able to pay off mountainous debt, suddenly stopped lending. And in each case, that fear became self-fulfilling, as banks that couldn’t roll over their debt did, in fact, become unable to pay. This is precisely what drove Lehman Brothers into bankruptcy on September 15, causing all sources of funding to the U.S. financial sector to dry up overnight. Just as in emerging-market crises, the weakness in the banking system has quickly rippled out into the rest of the economy, causing a severe economic contraction and hardship for millions of people.

But there’s a deeper and more disturbing similarity: elite business interests—financiers, in the case of the U.S.—played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive. The government seems helpless, or unwilling, to act against them.

This graph tells the whole story:

WSJ reports:

State and local sales taxes, among the largest sources of revenue for municipalities, fell 6.1% in the fourth quarter of last year, as consumers bought fewer clothes, ate out less and canceled vacations. Revenue from personal income taxes was down 1.1% in the fourth quarter; corporate income taxes dropped 15.5%, reflecting weaker profits.

The declines have continued through the beginning of this year. In the first two months of 2009, the 41 states that have reported tax revenue saw total receipts decline 12.8%, versus the same period a year ago.

Gotta take an hour to plow through these graphs.

The folks in Boston remind us:

The gap of confidence between small companies and big ones is growing. We used to rely on the security of big companies. That’s why we worked for them. And hired them. And put our money in them.

But with the virtual collapse of AIG, Lehman, Citibank, GM, Chrysler, and many more — now even GE is in trouble — all that’s changed. Now it’s a risk to do business with the big ones.

We simply don’t trust companies anymore. We trust people. And in big companies, it’s hard to even find a person to trust as we scream “operator” into our telephones only to get transferred to another menu whose options have changed.

Here’s Geithner’s infamous non-defense of the dollar, when asked about Chinese central bank suggestions to reduce reliance on the dollar as a reserve currency:

“As I understand his proposal, it’s a proposal designed to increase the use of the IMF’s special drawing rights. And we’re actually quite open to that suggestion. But you should think of it as rather evolutionary, building on the current architectures, rather than moving us to global monetary union,” Geithner said during an interview in New York with the Council on Foreign Relations.

“It is very important just to underscore that the future evolution of the dollar’s role in the system depends really primarily on how effective we are in the U.S. in getting not just recovery back on track, our financial system repaired, but we get our fiscal position back to the point where people will judge it as sustainable over time,” he said.

Later in the day, Geithner protested that his comments were misinterpreted and stood firm for a strong dollar. (Anyone know where I can find this text?) Strong currencies don’t have to plead their case.

The bad news is that no currency is safe as central banks print money to fill holes left by worthless securities. The Chinese need to get more of their reserves into gold rather than worrying about SDRs.

The Google search bar helpfully tries to autofill when you’re doing a search. Start typing in the letters h and a and it prompts “haute couture” and “Harry Potter.” I assume this based on the frequency of other searchers’ terms.

Start typing in Geithner, and this is what it prompts:

Is that really what Google searchers are most interested in?

Google’s documentation explains: “As you type a search query into the new Toolbar’s search box, you’ll see a list of useful suggestions based on popular Google searches, spelling corrections and your own Toolbar search history and bookmarks.”

Looking at the results for the “Geithner jewish” search, the fifth is to another blogger’s previous observations on the same disturbing trend.

Mashing up two of the fastest growing phenom of our time: http://twitter.com/nationaldebt.

Why would anyone buy low-yield fixed income securities when we know governments around the world are preparing to unload trillions of the things? Bonds are going to be priced like sand at the beach. If you’ve got the bucket — take as much as you want. It looks like UK buyers are starting to rebel as the government starts selling “gilts” as the UK government bonds are called. Bloomberg reports:

U.K. gilts slumped after demand at an auction of bonds fell short of the amount offered, the first time the Treasury failed to attract enough bids at a sale of regular debt in 14 years.

Investors bid for 1.63 billion pounds ($2.4 billion) of the 40-year securities, less than the 1.75 billion pounds of 4.25 percent notes slated for sale, the U.K. Debt Management Office said today in a statement from London.

“Basically it’s the first failed auction,” said John Wraith, head of sterling interest-rate strategy at RBC Capital Markets in London. “They didn’t receive enough to cover it all so the market has obviously sold off extremely heavily.”

The yield on the 10-year gilt jumped 10 basis points to 3.43 percent by 11:45 a.m. in London. The 4.5 percent security due March 2019 slipped 0.84, or 8.4 pounds per 1,000-pound face amount, to 109.02. The yield on the two-year note rose six basis points to 1.30 percent. Yields move inversely to bond prices.

In my thirty years of watching the US treasury market, we’ve never had a failed auction in the US. How long before we see one?

Bloomberg:

The 8.875 percent 30-year bond that the government sold in February 1989 yields 0.44 percentage point, or 44 basis points, more than the current 10-year 2.75 percent note, which is the most comparable security and yields 2.89 percent. That amounts to about $44,000 a year in interest on a $10 million investment.

In laymen’s language: current buyers of US treasuries are not long-term investors, but flight-to-quality money-stashers. Not a sound base for an rate curve and a sign of much higher rates to come. And higher rates mean fewer home buyers & slower economy.

Madoff “lost” or “stole” $65 billion. That’s the headline of the day.

How is that possible when Madoff hasn’t even been trading for at least 15 years?

More likely Madoff “redistributed” $65 billion in the form of dividends and cash distibutions to investors.

Or, the bulk of the $65 billion is bogus paper profits. But you can’t really lose money that never really existed, right? (If I wrote you a check for $5 million and it bounced, would we say you’d “lost” $5 million?)

In the week ending March 7, the advance figure for seasonally adjusted initial claims was 654,000, an increase of 9,000 from the previous week’s revised figure of 645,000. The 4-week moving average was 650,000, an increase of 6,750 from the previous week’s revised average of 643,250.

Japan is worse? Bloomberg:

The world’s second-biggest economy shrank an annualized 12.7 percent last quarter, the government said Feb. 16, the biggest contraction since the 1974 oil crisis. Capital spending excluding software dropped 18.1 percent in the three months ended Dec. 31, the seventh quarter of declines, a separate government report showed on March 5.

A Cabinet Office report on March 11 may show machinery orders slumped 40.2 percent in January from a year earlier, according to a Bloomberg News survey.

Signs of a deepening recession dragged the Nikkei 225 Stock Average down 5.2 percent this week. Ten-year yields had a correlation of 0.7 with the Nikkei in February, Bloomberg data show. A value of 1 would mean the two moved in lockstep.

“While falling stocks normally push yields down, we need to be alert to the risk that Japanese financial institutions, which suffered heavy equity losses, will sell bonds to generate profits before the fiscal year ends this month,” said Chotaro Morita, chief strategist at Barclays Capital Japan Ltd. in Tokyo. “Such selling of bonds may emerge as the Nikkei 225 comes closer to or falls below 7,000.”

Of course, Japanese banks own plenty of US bonds too. How high do US long term yields go when UST cancels auctions of TIPS, the inflation adjusted security, and tries to sell 100 billion worth of 30 year bonds — 15%? Unless of course, the Fed prints more money and buys the bonds itself.

More assurances that there’s nothing to worry about in Hungary.

Hungary PM says bank deposits are safe, guaranteed

BUDAPEST, March 6 (Reuters) - Hungarian bank deposits are safe and the government provides a comprehensive guarantee for client deposits, the prime minister said on Friday.

‘We have made very important steps (during this crisis). It is a very big thing that depositors in Hungary need not worry,’ Prime Minister Ferenc Gyurcsany told a meeting of business leaders.

‘They can be safe during a global financial crisis,’ he said.

Gyurcsany also said the government was ready to consider deeper and more comprehensive reforms than the measures laid out last month.

It’s a truism among money market mavens that any bank that has to proclaim its health is almost dead.

So it is with great sadness that I read this story tonight, datelined 03.05.09, 05:56 PM EST.

Hungary cbank, regulator say bank system stable

BUDAPEST, March 5 (Reuters) - Hungary’s central bank (NBH) and financial market regulator PSZAF said on Thursday that the financial situation of banks in Hungary was stable and bank clients’ money was safe.

‘The Hungarian central bank and PSZAF are closely monitoring the situation of banks,’ the bank’s spokeswoman Nora Hevesi and PSZAF spokesman Istvan Binder told Reuters.

‘The financial situation of the Hungarian banking system is stable, the money of depositors is in safety,’ they added.

The forint, having traded at 300 to the Euro just a week ago and having closed today in Budapest at 309 to the Euro is at 315 tonight.

Make that 316.

I got to know Andras Simor, the guy who today runs Hungary’s central bank, in the 1990s when I was living in Budapest and writing about business in the former Soviet bloc. Simor ran the securities arm of Creditanstalt Securities and was always generous with his insights.

Simor is in a tough spot now, because every currency speculator in the world is trying to bludgeon the IMF’s $15.7 billion loan out of his vaults and into their own wallets.

A devaluing forint hurts Hungarians who’ve borrowed avidly in Euros and Swiss Francs. And it puts great pressure on the banks in Europe (Creditanstalt being high on the list) who have loaned this money. The dominoes are tumbling.

(For Blogads’ business partners, it’s worth noting that this craziness is benign: Hungary’s tailspin means Budapest staff get paid more in local terms and we can hire more great programmers.)

I’d missed this passage in Warren Buffett’s annual report:

This debilitating spiral has spurred our government to take massive action. In poker terms, the Treasury and the Fed have gone “all in.” Economic medicine that was previously meted out by the cupful has recently been dispensed by the barrel. These once-unthinkable dosages will almost certainly bring on unwelcome aftereffects. Their precise nature is anyone’s guess, though one likely consequence is an onslaught of inflation. Moreover, major industries have become dependent on Federal assistance, and they will be followed by cities and states bearing mind-boggling requests. Weaning these entities from the public teat will be a political challenge. They won’t leave willingly.

“In the week ending Feb. 28, the advance figure for seasonally adjusted initial claims was 639,000, a decrease of 31,000 from the previous week’s revised figure of 670,000. The 4-week moving average was 641,750, an increase of 2,000 from the previous week’s revised average of 639,750.”

Good news, though probably a statistical blip.

The hotel industry is begging Congress to not kill junkets.