Anonymous_IHB
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Economic Commentary
- Thread starter BondTrader_IHB
- Start date
NEW -> Contingent Buyer Assistance Program
awgee_IHB
New member
[quote author="BlackVault CM" date=1235087196]Further proof that America is corrupt just like any other corrupt nation.
Wouldn't it be funny if the Madoff ponzi scheme of 50B is just a drop in the pond. Wait till we one day read about how America robbed you and me.
Either get rid of corruption or create more so I can participate in it too.</blockquote>
What are fractional reserve banking and the social security system if not ponzi schemes? Are they not ponzi schemes because they are sponsored by the government?
Wouldn't it be funny if the Madoff ponzi scheme of 50B is just a drop in the pond. Wait till we one day read about how America robbed you and me.
Either get rid of corruption or create more so I can participate in it too.</blockquote>
What are fractional reserve banking and the social security system if not ponzi schemes? Are they not ponzi schemes because they are sponsored by the government?
tenmagnet_IHB
New member
[quote author="BlackVault CM" date=1235087196]Further proof that America is corrupt just like any other corrupt nation.
Wouldn't it be funny if the Madoff ponzi scheme of 50B is just a drop in the pond. Wait till we one day read about how America robbed you and me.
Either get rid of corruption or create more so I can participate in it too.</blockquote>
More and more of these scams are coming to light.
R. Allen Stanford is now on the run after bilking investors for $8 Billion
Wouldn't it be funny if the Madoff ponzi scheme of 50B is just a drop in the pond. Wait till we one day read about how America robbed you and me.
Either get rid of corruption or create more so I can participate in it too.</blockquote>
More and more of these scams are coming to light.
R. Allen Stanford is now on the run after bilking investors for $8 Billion
BondTrader_IHB
New member
Most of the stuff I posted were from my reading off bloomberg and research reports/economic commentaries written by economists from major banks on the street. I usually takes 45mins in the morning and sometime during lunch to quickly go through some of those emails (impossible to read all of them) and post whatever I believe will be interesting to readers here. I'm glad you guys enjoy reading all the bad news I put out there, 
jbenko_IHB
New member
[quote author="BondTrader" date=1235095286]Most of the stuff I posted were from my reading off bloomberg and research reports/economic commentaries written by economists from major banks on the street. I usually takes 45mins in the morning and sometime during lunch to quickly go through some of those emails (impossible to read all of them) and post whatever I believe will be interesting to readers here. I'm glad you guys enjoy reading all the bad news I put out there, </blockquote>
It's fantastic. I have live streaming news through Ameritrade, that covers everything you mention. The only disadvantage is I get more news that I care to read, so its' hard to follow. I don't care that Alan Greenspan attended a b-day party for his little grandchild.
You give quick summary snapshots of current events. Thank you for doing this.
</blockquote>It's fantastic. I have live streaming news through Ameritrade, that covers everything you mention. The only disadvantage is I get more news that I care to read, so its' hard to follow. I don't care that Alan Greenspan attended a b-day party for his little grandchild.
You give quick summary snapshots of current events. Thank you for doing this.
freedomCM_IHB
New member
calculated risk has much of the information too. it is a relatively quick read if you ignore the comments (which are often the best part, though)
BondTrader_IHB
New member
<strong>In the final chapter of this home price deflation</strong>
That 245K level of single-family starts in January compares to the new home
sales rate of 330K in December. In other words, builders have managed to pull
the growth rate of new housing supply below the prevailing growth in new
demand. So, we can now say with a reasonably high level of comfort that we are
hopefully entering a new and final chapter of this unprecedented decline in
residential real estate prices.
<strong>It will still be a very long chapter</strong>
But make no mistake ? it is going to be a very long chapter. The builders waited
far too long to embark on this process of taking supply off the market, and as a
result, we still have a near-record 2.3 million homes that are unoccupied and have
a ?For Sale? sign on the front lawn. The ?frictional? level is closer to 1.2 million
(where the long-run normalized level is), which means that the ?excess? supply
overhanging the market is around 1.1 million units. Again, that is close to an alltime
high, and while we would now expect to start seeing this backlog of vacant
homes for sale decline, it will take years before it reverts to the mean.
<strong>Will take years to revert to the mean</strong>
For example, if the builders simply kept the level of starts at their current
depressed levels, and under the proviso that new home sales stay where they
are, it would take thirteen years for the inventory problem to disappear. If the
builders were to cut single-family housing starts in half from their already recordlow
levels, it would still take three years to eliminate the excess housing
inventory. In fact, the homebuilders can slice starts all the way to zero ? declare
a moratorium ? and it would take two years to bring the unsold inventory down to
levels that will allow home prices to stabilize!
<strong>We do not expect a sharp pickup in sales</strong>
Of course, if demand was to revive, new home sales would have to surge 300% ?
quadruple, in other words ? to near all-time highs of 1.35 million to soak up the
excess. With employment declining, credit hard to come by and attitudes towards
homeownership undergoing a secular change, we are not willing to assume that
the problem of massive home inventories is going to be solved via a sharp pickup
in sales. That said, it may not be unreasonable to expect that home sales
recover at some point from what can only be described as depression-like levels.
The current level of demand at 330K units compares to underlying demographic
demand of around 520K units at an annual rate.
<strong>Still have another 15% downside to home prices</strong>
In any event, if there is one part of the forecast we are extremely confident in at
this point, it is that we still have at least 15% more downside to average home
prices nationwide. This comes on top of the record 25% decline so far in this
down-cycle. That additional 15% decline, as an aside, would be enough to wipe
out the remaining capital at the large banks and would double the number of
people who are upside-down on their mortgage from 13 million to 25 million. This
means that half of the 51 million households with a mortgage would then be in a
negative net equity position, so the process of fiscal stimulus, government
incursion into the banking sector and loan modifications didn?t end in this latest
go-around of government policy initiatives.
That 245K level of single-family starts in January compares to the new home
sales rate of 330K in December. In other words, builders have managed to pull
the growth rate of new housing supply below the prevailing growth in new
demand. So, we can now say with a reasonably high level of comfort that we are
hopefully entering a new and final chapter of this unprecedented decline in
residential real estate prices.
<strong>It will still be a very long chapter</strong>
But make no mistake ? it is going to be a very long chapter. The builders waited
far too long to embark on this process of taking supply off the market, and as a
result, we still have a near-record 2.3 million homes that are unoccupied and have
a ?For Sale? sign on the front lawn. The ?frictional? level is closer to 1.2 million
(where the long-run normalized level is), which means that the ?excess? supply
overhanging the market is around 1.1 million units. Again, that is close to an alltime
high, and while we would now expect to start seeing this backlog of vacant
homes for sale decline, it will take years before it reverts to the mean.
<strong>Will take years to revert to the mean</strong>
For example, if the builders simply kept the level of starts at their current
depressed levels, and under the proviso that new home sales stay where they
are, it would take thirteen years for the inventory problem to disappear. If the
builders were to cut single-family housing starts in half from their already recordlow
levels, it would still take three years to eliminate the excess housing
inventory. In fact, the homebuilders can slice starts all the way to zero ? declare
a moratorium ? and it would take two years to bring the unsold inventory down to
levels that will allow home prices to stabilize!
<strong>We do not expect a sharp pickup in sales</strong>
Of course, if demand was to revive, new home sales would have to surge 300% ?
quadruple, in other words ? to near all-time highs of 1.35 million to soak up the
excess. With employment declining, credit hard to come by and attitudes towards
homeownership undergoing a secular change, we are not willing to assume that
the problem of massive home inventories is going to be solved via a sharp pickup
in sales. That said, it may not be unreasonable to expect that home sales
recover at some point from what can only be described as depression-like levels.
The current level of demand at 330K units compares to underlying demographic
demand of around 520K units at an annual rate.
<strong>Still have another 15% downside to home prices</strong>
In any event, if there is one part of the forecast we are extremely confident in at
this point, it is that we still have at least 15% more downside to average home
prices nationwide. This comes on top of the record 25% decline so far in this
down-cycle. That additional 15% decline, as an aside, would be enough to wipe
out the remaining capital at the large banks and would double the number of
people who are upside-down on their mortgage from 13 million to 25 million. This
means that half of the 51 million households with a mortgage would then be in a
negative net equity position, so the process of fiscal stimulus, government
incursion into the banking sector and loan modifications didn?t end in this latest
go-around of government policy initiatives.
BondTrader_IHB
New member
<strong>Bailouts everywhere</strong>
See ?US Eyes Large Stake in Citi? on the front page of the WSJ. How greater
government involvement in major banks, with the prospect of future share
dilution, is bullish is truly beyond us. The incremental and reactionary nature of
policymaking in dealing with the financial crisis remains very disturbing to us and
much more Japan-like than Sweden-like. And the government incursion is
increasingly global too ? see ?Dubai Gets $10 Billion Bailout to Ease Debt: on the
front page of the WSJ as well; ?Crisis Spurs Call for Bigger Bailouts? on page A6
(all about which European leaders are calling on the IMF to fund a $500 bln war
chest for the eastern periphery which is in financial and economic disarray); and
?France Seeks to Increase Bank Control? on page A10. Also see ?Carmakers
Seek Canada Aid? on page 15 of the FT. At least we may be getting closer to
Chapter 11 filings for the auto companies, which would actually allow them to
shed their unsustainable legacy costs (see ?Bankruptcy Funding Solicited for Car
Makers?) on page C1 of today?s WSJ (and while it is still deemed that several
banks are too big to fail, we see that in actuality, bankruptcy in general is not the
end of the world ? see the rays of hope in ?There is Life After Bankruptcy for
Some Companies? on page C1of the WSJ. Finally, the global financial turmoil is
also now pitting one country?s rules against another, as the US government is
demanding that UBS hand over the identity of some 52,000 private account
holders (see article on page A6 of the WSJ).
<strong>
Shortcomings of the federal fiscal stimulus</strong>
Below we highlight some of the shortcomings we see to the federal fiscal stimulus
package ? the emphasis on tax credits and not tax rates; the fact that the
spending is back-loaded to the out years; that we think it will be next to
impossible to meet the employment goals (which could never be verified in any
event ? how can anyone prove that a job was ?saved??) since much of the
spending is aimed at products that are imported into the USA. And now we see
that some of the state Governors are balking at accepting some of the funds
associated with welfare, education, health and especially unemployment
insurance because the federal assistance lasts two years and the local levels of
government have little capacity to fund these programs thereafter ? see
?Governors v. Congress?, which is the lead editorial on page A14 of today?s WSJ.
See ?US Eyes Large Stake in Citi? on the front page of the WSJ. How greater
government involvement in major banks, with the prospect of future share
dilution, is bullish is truly beyond us. The incremental and reactionary nature of
policymaking in dealing with the financial crisis remains very disturbing to us and
much more Japan-like than Sweden-like. And the government incursion is
increasingly global too ? see ?Dubai Gets $10 Billion Bailout to Ease Debt: on the
front page of the WSJ as well; ?Crisis Spurs Call for Bigger Bailouts? on page A6
(all about which European leaders are calling on the IMF to fund a $500 bln war
chest for the eastern periphery which is in financial and economic disarray); and
?France Seeks to Increase Bank Control? on page A10. Also see ?Carmakers
Seek Canada Aid? on page 15 of the FT. At least we may be getting closer to
Chapter 11 filings for the auto companies, which would actually allow them to
shed their unsustainable legacy costs (see ?Bankruptcy Funding Solicited for Car
Makers?) on page C1 of today?s WSJ (and while it is still deemed that several
banks are too big to fail, we see that in actuality, bankruptcy in general is not the
end of the world ? see the rays of hope in ?There is Life After Bankruptcy for
Some Companies? on page C1of the WSJ. Finally, the global financial turmoil is
also now pitting one country?s rules against another, as the US government is
demanding that UBS hand over the identity of some 52,000 private account
holders (see article on page A6 of the WSJ).
<strong>
Shortcomings of the federal fiscal stimulus</strong>
Below we highlight some of the shortcomings we see to the federal fiscal stimulus
package ? the emphasis on tax credits and not tax rates; the fact that the
spending is back-loaded to the out years; that we think it will be next to
impossible to meet the employment goals (which could never be verified in any
event ? how can anyone prove that a job was ?saved??) since much of the
spending is aimed at products that are imported into the USA. And now we see
that some of the state Governors are balking at accepting some of the funds
associated with welfare, education, health and especially unemployment
insurance because the federal assistance lasts two years and the local levels of
government have little capacity to fund these programs thereafter ? see
?Governors v. Congress?, which is the lead editorial on page A14 of today?s WSJ.
BondTrader_IHB
New member
<strong>On the corporate front</strong>
On the corporate front, we see a report in today?s WSJ that AIG is preparing to
report an expected $60 bln quarterly loss, possibly forcing the government to
expand its bailout package that already has grown to $150 bln. Lots of chatter as
well in today?s morning papers over the potential ?quasi-nationalization? of Citi
(the third injection being discussed, which would reportedly involve a switch from
preferred to common stock, could have Uncle Sam owning 40% of the bank). On
the policy side, we are rather amazed that the President is now talking about
having to shrink the deficit down the road (shades of 1937-38?) ? isn?t it a tad
early to be talking about fiscal restraint (see ?Obama Tries to Address Worries
About Widening Deficit? on page A3 of the WSJ).
<strong>Bottom will likely be in 550-650 range</strong>
As an aside, we have penned in $46 for operating EPS for this year, so on our
estimates the market is basically operating with a 16x multiple. Call us when we
get down to a classic recession trough multiple of 12x ? we are at $54 for 2010E
and at one point we will start to discount next year?s earnings stream ? which, on
our estimates, means the bottom will likely be in a 550-650 range.
<strong>Problems ahead in corporate credit?</strong>
S&P reported that 75 companies (with debt outstanding of $175 bln) are potential
?fallen angels? according to Bloomberg News (these are investment-grade
companies at risk of being taken down to junk) ? this is the highest number of
candidates in 18 years. Credit default swaps on the Markit CDX North America
Investment-Grade index stand at an uncomfortably high 217 bps. Note as well
that the Libor-OAS spread is back above 100 bps and the Market LCDX index of
default swaps on 100 U.S. leveraged loans has collapsed back to 73% from 82%
a month ago ? the lowest levels since last December. The WSJ (page C12) also
reports that spreads on nearly all tranches of the CMBX index (tracks default
swaps on 25 U.S. commercial mortgage-backed securities) have widened back to
record levels after a brief respite in January. As for how bonds in the banking
sector are trading ? don?t ask (if you really must know, have a peek at
?Uncertainty Mounts Over Outstanding Bank Bonds? on page 29 of the FT). So if
anything, the credit crunch has actually intensified, and financial conditions in
general have tightened, since the Fed cut the funds rate to 0%.
On the corporate front, we see a report in today?s WSJ that AIG is preparing to
report an expected $60 bln quarterly loss, possibly forcing the government to
expand its bailout package that already has grown to $150 bln. Lots of chatter as
well in today?s morning papers over the potential ?quasi-nationalization? of Citi
(the third injection being discussed, which would reportedly involve a switch from
preferred to common stock, could have Uncle Sam owning 40% of the bank). On
the policy side, we are rather amazed that the President is now talking about
having to shrink the deficit down the road (shades of 1937-38?) ? isn?t it a tad
early to be talking about fiscal restraint (see ?Obama Tries to Address Worries
About Widening Deficit? on page A3 of the WSJ).
<strong>Bottom will likely be in 550-650 range</strong>
As an aside, we have penned in $46 for operating EPS for this year, so on our
estimates the market is basically operating with a 16x multiple. Call us when we
get down to a classic recession trough multiple of 12x ? we are at $54 for 2010E
and at one point we will start to discount next year?s earnings stream ? which, on
our estimates, means the bottom will likely be in a 550-650 range.
<strong>Problems ahead in corporate credit?</strong>
S&P reported that 75 companies (with debt outstanding of $175 bln) are potential
?fallen angels? according to Bloomberg News (these are investment-grade
companies at risk of being taken down to junk) ? this is the highest number of
candidates in 18 years. Credit default swaps on the Markit CDX North America
Investment-Grade index stand at an uncomfortably high 217 bps. Note as well
that the Libor-OAS spread is back above 100 bps and the Market LCDX index of
default swaps on 100 U.S. leveraged loans has collapsed back to 73% from 82%
a month ago ? the lowest levels since last December. The WSJ (page C12) also
reports that spreads on nearly all tranches of the CMBX index (tracks default
swaps on 25 U.S. commercial mortgage-backed securities) have widened back to
record levels after a brief respite in January. As for how bonds in the banking
sector are trading ? don?t ask (if you really must know, have a peek at
?Uncertainty Mounts Over Outstanding Bank Bonds? on page 29 of the FT). So if
anything, the credit crunch has actually intensified, and financial conditions in
general have tightened, since the Fed cut the funds rate to 0%.
[quote author="BondTrader" date=1235520424]<strong>On the corporate front</strong>
On the corporate front, we see a report in today?s WSJ that AIG is preparing to
report an expected $60 bln quarterly loss, possibly forcing the government to
expand its bailout package that already has grown to $150 bln. Lots of chatter as
well in today?s morning papers over the potential ?quasi-nationalization? of Citi
(the third injection being discussed, which would reportedly involve a switch from
preferred to common stock, could have Uncle Sam owning 40% of the bank). On
the policy side, we are rather amazed that the President is now talking about
having to shrink the deficit down the road (shades of 1937-38?) ? <strong>isn?t it a tad
early to be talking about fiscal restraint </strong>(see ?Obama Tries to Address Worries
About Widening Deficit? on page A3 of the WSJ).
<strong>Bottom will likely be in 550-650 range</strong>
As an aside, we have penned in $46 for operating EPS for this year, so on our
estimates the market is basically operating with a 16x multiple. Call us when we
get down to a classic recession trough multiple of 12x ? we are at $54 for 2010E
and at one point we will start to discount next year?s earnings stream ? which, on
our estimates, means the bottom will likely be in a 550-650 range.
<strong>Problems ahead in corporate credit?</strong>
S&P reported that 75 companies (with debt outstanding of $175 bln) are potential
?fallen angels? according to Bloomberg News (these are investment-grade
companies at risk of being taken down to junk) ? this is the highest number of
candidates in 18 years. Credit default swaps on the Markit CDX North America
Investment-Grade index stand at an uncomfortably high 217 bps. Note as well
that the Libor-OAS spread is back above 100 bps and the Market LCDX index of
default swaps on 100 U.S. leveraged loans has collapsed back to 73% from 82%
a month ago ? the lowest levels since last December. The WSJ (page C12) also
reports that spreads on nearly all tranches of the CMBX index (tracks default
swaps on 25 U.S. commercial mortgage-backed securities) have widened back to
record levels after a brief respite in January. As for how bonds in the banking
sector are trading ? don?t ask (if you really must know, have a peek at
?Uncertainty Mounts Over Outstanding Bank Bonds? on page 29 of the FT). So if
anything, the credit crunch has actually intensified, and financial conditions in
general have tightened, since the Fed cut the funds rate to 0%.</blockquote>
Personally I would have loved to see him get "serious" about fiscal restraint before agreeing to spend $1 trillion on a social policy bill. If you look at the numbers, the 1st year of the Obama administration was projected to have a $1.2 trillion budget deficit BEFORE the $1 trillion social policy bill was passed.
Now it looks like we will run the deficit to $2.2 trillion this year.
Cutting that deficit in half brings it "down" to $1.1 trillion a year - about twice the highest deficit on record prior to the Obama administration.
Are we supposed to think that this is fiscal restraint?
On the corporate front, we see a report in today?s WSJ that AIG is preparing to
report an expected $60 bln quarterly loss, possibly forcing the government to
expand its bailout package that already has grown to $150 bln. Lots of chatter as
well in today?s morning papers over the potential ?quasi-nationalization? of Citi
(the third injection being discussed, which would reportedly involve a switch from
preferred to common stock, could have Uncle Sam owning 40% of the bank). On
the policy side, we are rather amazed that the President is now talking about
having to shrink the deficit down the road (shades of 1937-38?) ? <strong>isn?t it a tad
early to be talking about fiscal restraint </strong>(see ?Obama Tries to Address Worries
About Widening Deficit? on page A3 of the WSJ).
<strong>Bottom will likely be in 550-650 range</strong>
As an aside, we have penned in $46 for operating EPS for this year, so on our
estimates the market is basically operating with a 16x multiple. Call us when we
get down to a classic recession trough multiple of 12x ? we are at $54 for 2010E
and at one point we will start to discount next year?s earnings stream ? which, on
our estimates, means the bottom will likely be in a 550-650 range.
<strong>Problems ahead in corporate credit?</strong>
S&P reported that 75 companies (with debt outstanding of $175 bln) are potential
?fallen angels? according to Bloomberg News (these are investment-grade
companies at risk of being taken down to junk) ? this is the highest number of
candidates in 18 years. Credit default swaps on the Markit CDX North America
Investment-Grade index stand at an uncomfortably high 217 bps. Note as well
that the Libor-OAS spread is back above 100 bps and the Market LCDX index of
default swaps on 100 U.S. leveraged loans has collapsed back to 73% from 82%
a month ago ? the lowest levels since last December. The WSJ (page C12) also
reports that spreads on nearly all tranches of the CMBX index (tracks default
swaps on 25 U.S. commercial mortgage-backed securities) have widened back to
record levels after a brief respite in January. As for how bonds in the banking
sector are trading ? don?t ask (if you really must know, have a peek at
?Uncertainty Mounts Over Outstanding Bank Bonds? on page 29 of the FT). So if
anything, the credit crunch has actually intensified, and financial conditions in
general have tightened, since the Fed cut the funds rate to 0%.</blockquote>
Personally I would have loved to see him get "serious" about fiscal restraint before agreeing to spend $1 trillion on a social policy bill. If you look at the numbers, the 1st year of the Obama administration was projected to have a $1.2 trillion budget deficit BEFORE the $1 trillion social policy bill was passed.
Now it looks like we will run the deficit to $2.2 trillion this year.
Cutting that deficit in half brings it "down" to $1.1 trillion a year - about twice the highest deficit on record prior to the Obama administration.
Are we supposed to think that this is fiscal restraint?
BondTrader_IHB
New member
<strong>Purchase-only index rose in December</strong>
The FHFA home price index (formerly known as OFHEO) rose 0.1% in
December. This was the first increase in the index in ten months. However, the
year-on-year pace in home sale prices dropped a steep 8.7%. The median of
analysts? expectations was a decline in home prices of 1.7%. For the fourth
quarter, home prices dropped 13.8% (annualized) and 8.5% versus the year-ago
level. Both declines are records. Note that this index captures only conforming
conventional (Fannie/Freddie) loans. By way of contrast, the Case-Shiller home
price index, which was reported earlier today and includes both jumbo and subprime
mortgages and covers the 20 largest metro areas, dropped 2.5% in
December and 18.6% over the past year.
In the regional breakdown, there were declines in the Pacific, New England,
Middle Atlantic and South Atlantic regions. The South Atlantic region, where
home foreclosures and excessive inventories remain highest, posted the largest
decline. Going forward, slowing economic activity, tight credit conditions and
excessive inventories should continue to restrain sale prices.
The FHFA home price index (formerly known as OFHEO) rose 0.1% in
December. This was the first increase in the index in ten months. However, the
year-on-year pace in home sale prices dropped a steep 8.7%. The median of
analysts? expectations was a decline in home prices of 1.7%. For the fourth
quarter, home prices dropped 13.8% (annualized) and 8.5% versus the year-ago
level. Both declines are records. Note that this index captures only conforming
conventional (Fannie/Freddie) loans. By way of contrast, the Case-Shiller home
price index, which was reported earlier today and includes both jumbo and subprime
mortgages and covers the 20 largest metro areas, dropped 2.5% in
December and 18.6% over the past year.
In the regional breakdown, there were declines in the Pacific, New England,
Middle Atlantic and South Atlantic regions. The South Atlantic region, where
home foreclosures and excessive inventories remain highest, posted the largest
decline. Going forward, slowing economic activity, tight credit conditions and
excessive inventories should continue to restrain sale prices.
BondTrader_IHB
New member
<strong>Initial claims post another cycle-high with more to come</strong>
Initial claims for unemployment benefits increased 36K to 667K for the week
ended February 21. The consensus estimate was 625K and the BAS-ML
projection was 700K. Claims are at a cycle high and are at their highest level
since late 1982. Claims for the week of February 14 were revised from a
preliminary estimate of 627K to 631K. The four-week moving average, which
tends to smooth out the week-to-week volatility, jumped from a prior average of
620K to 639K. The upward trend in initial claims and the four-week average is not
surprising given the surge in layoff announcements. We think these figures will
continue to move higher in the months ahead as economic activity slows.
<strong>Continuing claims increase for sixth week</strong>
Continuing claims, which increased by 483K in the prior five weeks, increased by
114K to a record 5.112M for the week of February 14. The rise in continuing
claims indicates that businesses are reluctant to add labor inputs. Another 1.4M
workers received ?extended benefits? from the Federal government after
exhausting their regular state-sponsored benefits. This puts the total pool of
unemployed at over 6.5M. We are projecting a February payroll decline of 700K
and a rise in the unemployment rate from 7.6% in January to 8.0% for February.
Initial claims for unemployment benefits increased 36K to 667K for the week
ended February 21. The consensus estimate was 625K and the BAS-ML
projection was 700K. Claims are at a cycle high and are at their highest level
since late 1982. Claims for the week of February 14 were revised from a
preliminary estimate of 627K to 631K. The four-week moving average, which
tends to smooth out the week-to-week volatility, jumped from a prior average of
620K to 639K. The upward trend in initial claims and the four-week average is not
surprising given the surge in layoff announcements. We think these figures will
continue to move higher in the months ahead as economic activity slows.
<strong>Continuing claims increase for sixth week</strong>
Continuing claims, which increased by 483K in the prior five weeks, increased by
114K to a record 5.112M for the week of February 14. The rise in continuing
claims indicates that businesses are reluctant to add labor inputs. Another 1.4M
workers received ?extended benefits? from the Federal government after
exhausting their regular state-sponsored benefits. This puts the total pool of
unemployed at over 6.5M. We are projecting a February payroll decline of 700K
and a rise in the unemployment rate from 7.6% in January to 8.0% for February.
BondTrader_IHB
New member
<strong>Households not favoring idea of taking on new credit</strong>
We can spend all the resources possible to underpin the financial system but the
reality is that the experiment with massive doses of leverage from 2002 to 2007 has
left the household sector, at the margin, in complete disgust, if not fear, when it
comes to taking on new credit. This is evident in the Fed flow-of-funds data
showing the first net consumer debt paydown ever, the Fed loan officer survey, the
record-low NACM index and of course, as we saw yesterday, the 2.6% slide in
mortgage applications for new home purchases in the February 20th week ? and
down a whopping 30% from year-ago levels despite record low mortgage rates
and record-high affordability levels. Housing turnover down 5.3% in January (to a
12-year low) and median home prices down 15% YoY (and down 26% from the
peak) tell the tale that housing today is about as desirable a consumer asset as the
Lincoln convertible was back in 1973. People are content renting and forgoing the
risk of taking on a mortgage ? or the experience of investing in an ever-deflating
asset for that matter.
<strong>Home sales data, as weak as it was, was not even organic</strong>
As an aside, the home sales data, as weak as they were, were not even ?organic?
? 45% of the activity were foreclosure/distressed property sales (which is why
home sales were flat in the West and down 7.1% in the rest of the country ? those
massive foreclosure auctions are taking place largely in CAL). And there is
precious little chance that home prices in the resale market are going to make a
low with 9.6 months? supply of unsold inventory overhanging the market, in our
view. And the inventory data are likely grossly understated because, according to
RealtyTrac, banks are holding on to between 500,000 and 600,000 foreclosed
homes that they have not yet listed. In other words, the ?real? inventory level is
equivalent to 11.2 months? supply (as if 9.6 wasn?t bad enough) ? and this spells
more real estate deflation ahead. Perhaps the Geithner stress test of a further
25% decline in home prices from here isn?t aggressive enough.
We can spend all the resources possible to underpin the financial system but the
reality is that the experiment with massive doses of leverage from 2002 to 2007 has
left the household sector, at the margin, in complete disgust, if not fear, when it
comes to taking on new credit. This is evident in the Fed flow-of-funds data
showing the first net consumer debt paydown ever, the Fed loan officer survey, the
record-low NACM index and of course, as we saw yesterday, the 2.6% slide in
mortgage applications for new home purchases in the February 20th week ? and
down a whopping 30% from year-ago levels despite record low mortgage rates
and record-high affordability levels. Housing turnover down 5.3% in January (to a
12-year low) and median home prices down 15% YoY (and down 26% from the
peak) tell the tale that housing today is about as desirable a consumer asset as the
Lincoln convertible was back in 1973. People are content renting and forgoing the
risk of taking on a mortgage ? or the experience of investing in an ever-deflating
asset for that matter.
<strong>Home sales data, as weak as it was, was not even organic</strong>
As an aside, the home sales data, as weak as they were, were not even ?organic?
? 45% of the activity were foreclosure/distressed property sales (which is why
home sales were flat in the West and down 7.1% in the rest of the country ? those
massive foreclosure auctions are taking place largely in CAL). And there is
precious little chance that home prices in the resale market are going to make a
low with 9.6 months? supply of unsold inventory overhanging the market, in our
view. And the inventory data are likely grossly understated because, according to
RealtyTrac, banks are holding on to between 500,000 and 600,000 foreclosed
homes that they have not yet listed. In other words, the ?real? inventory level is
equivalent to 11.2 months? supply (as if 9.6 wasn?t bad enough) ? and this spells
more real estate deflation ahead. Perhaps the Geithner stress test of a further
25% decline in home prices from here isn?t aggressive enough.
[quote author="awgee" date=1235699003]Just because credit becomes easier does not mean that folks will necessarily borrow.</blockquote>
We're talking about Americans here. The only thing that will stop us from spending money that we don't have is having the lenders cut us off.
We're talking about Americans here. The only thing that will stop us from spending money that we don't have is having the lenders cut us off.
awgee_IHB
New member
<strong>U.S. Treasuries Fall for Third Day on Supply, Spending Concern </strong>
By Susanne Walker and Kim-Mai Cutler
Feb. 26 (Bloomberg) -- Treasuries fell for a third day as the government sold $22 billion of seven-year notes in the last of three auctions this week as it issues an unprecedented amount of debt to spur the U.S. economy.
Declines were led by 10- and 30-year securities. The administration forecasts a budget deficit of $1.75 trillion in the fiscal year ending Sept. 30. That?s 23% higher than a forecast by economists at primary dealer Goldman Sachs Group Inc., and equivalent to about 12 percent of the nation?s gross domestic product.
?The more spending you have to have, the more Treasuries you will have to issue, and that means more pressure on prices,? said Andrew Brenner, co-head of structured products and emerging markets in New York at MF Global Inc.
The two-year yield rose one basis point, or 0.01 percentage point, to 1.09 percent at 2:57 p.m. in New York, according to BGCantor Market Data. It touched 1.11 percent, the highest since Nov. 28. The 0.875 percent security due in February 2011 fell 1/32, or 31 cents per $1,000 face amount, to 99 18/32. The rate climbed from a record low of 0.60 percent on Dec. 17.
The 10-year note?s yield rose five basis points to 2.98 percent. It slid to a record low of 2.04 percent on Dec. 18 and averaged 4.65 percent in the past decade. The 30-year bond yield increased six basis points to 3.65 percent.
U.S. stocks declined, with the Standard & Poor?s 500 Index falling 1.3 percent.
<strong>?It Never Ends?</strong>
Treasuries pared losses after today?s seven-year note sale yielded 2.748 percent, compared with an average forecast of 2.715 in a Bloomberg News survey of seven trading firms. The government last issued seven-year notes in April 1993, when it sold $9.76 billion. The notes at that auction drew a yield of 5.58 percent. The government sold a record $94 billion of notes this week.
The seven-year auction?s so-called bid-to-cover ratio, which gauges demand by comparing the number of bids to the amount of securities sold, was 2.11. Indirect bidders, a class of investors that includes foreign central banks, were awarded 38.7 percent of today?s sale. Comparable data is not available from the government.
?The biggest difficulties will be in the next few seven- year auctions,? said William O?Donnell, a U.S. government bond strategist at UBS Securities LLC in Stamford, Connecticut, one of the 16 primary dealers required to bid at Treasury auctions. ?We?re going to get a very hefty slug of supply. As the saying goes, if you miss an auction this week, you?ll get another auction next week. It never ends.?
<strong>Possibility of Default</strong>
The U.S. is borrowing so much that it may have trouble paying the money back, said Jaemin Cheong, a bond trader in Seoul at Industrial Bank of Korea, the nation?s largest lender to small- and mid-sized companies.
?Yields are headed higher,? Cheong said in an interview. ?More issuance will be needed to support the economy. The possibility of default is more and more as time passes.?
President Barack Obama is depending on investors from overseas to help fund his $787 billion economic plan. China is the largest overseas holder of Treasuries, with $696.2 billion, followed by Japan, which has $578.3 billion.
The administration forecast gross domestic product to shrink 1.2 percent in 2009, followed by an expansion of 3.2 percent in 2010. That?s more optimistic than economists? estimates for a 2 percent contraction this year and 1.8 percent growth next year, according to the median forecast in a Bloomberg News survey.
The White House forecast an annual average yield for 10-year Treasury notes of 2.8 percent this year and 4 percent in 2010.
The 10-year note yield will reach 3.08 percent by the fourth quarter of this year, according to the weighted average of 58 economists surveyed by Bloomberg News, and 3.69 percent by the second quarter of 2010, according to the weighted average of 43 economists.
<strong>The Three Elements</strong>
China?s top banking regulator said today the country will pay attention to safety, liquidity and profitability when deciding whether to buy more U.S. debt.
?How much we will invest in U.S. Treasuries will depend on the three elements,? said China Banking Regulatory Commission Chairman Liu Mingkang at a press conference in Beijing.
Losses by U.S. Treasuries are 0.3 percent in February and 3.4 percent so far in 2009, compared with a 1.7 percent gain in the same period a year ago, according to Merrill Lynch & Co.?s U.S. Treasury Master Index.
The yield gap between two- and 10-year notes widened by four basis points to 1.87 percentage points.
<strong>TED Spread</strong>
Money markets show the world?s biggest banks see no recovery before 2010.
The premium banks charge each other for short-term loans, the so-called Libor-OIS spread, rose above 1 percentage point last week for the first time since Jan. 9. Contracts traded in the forward market indicate the gauge, which measures banks? reluctance to lend, will remain higher for the rest of the year than before Sept. 15, when the bankruptcy of Lehman Brothers Holdings Inc. froze credit markets.
The difference between what banks and the Treasury pay to borrow money for three months, the so-called TED spread, rose to 99 basis points from 91 basis points on Feb. 10.
By Susanne Walker and Kim-Mai Cutler
Feb. 26 (Bloomberg) -- Treasuries fell for a third day as the government sold $22 billion of seven-year notes in the last of three auctions this week as it issues an unprecedented amount of debt to spur the U.S. economy.
Declines were led by 10- and 30-year securities. The administration forecasts a budget deficit of $1.75 trillion in the fiscal year ending Sept. 30. That?s 23% higher than a forecast by economists at primary dealer Goldman Sachs Group Inc., and equivalent to about 12 percent of the nation?s gross domestic product.
?The more spending you have to have, the more Treasuries you will have to issue, and that means more pressure on prices,? said Andrew Brenner, co-head of structured products and emerging markets in New York at MF Global Inc.
The two-year yield rose one basis point, or 0.01 percentage point, to 1.09 percent at 2:57 p.m. in New York, according to BGCantor Market Data. It touched 1.11 percent, the highest since Nov. 28. The 0.875 percent security due in February 2011 fell 1/32, or 31 cents per $1,000 face amount, to 99 18/32. The rate climbed from a record low of 0.60 percent on Dec. 17.
The 10-year note?s yield rose five basis points to 2.98 percent. It slid to a record low of 2.04 percent on Dec. 18 and averaged 4.65 percent in the past decade. The 30-year bond yield increased six basis points to 3.65 percent.
U.S. stocks declined, with the Standard & Poor?s 500 Index falling 1.3 percent.
<strong>?It Never Ends?</strong>
Treasuries pared losses after today?s seven-year note sale yielded 2.748 percent, compared with an average forecast of 2.715 in a Bloomberg News survey of seven trading firms. The government last issued seven-year notes in April 1993, when it sold $9.76 billion. The notes at that auction drew a yield of 5.58 percent. The government sold a record $94 billion of notes this week.
The seven-year auction?s so-called bid-to-cover ratio, which gauges demand by comparing the number of bids to the amount of securities sold, was 2.11. Indirect bidders, a class of investors that includes foreign central banks, were awarded 38.7 percent of today?s sale. Comparable data is not available from the government.
?The biggest difficulties will be in the next few seven- year auctions,? said William O?Donnell, a U.S. government bond strategist at UBS Securities LLC in Stamford, Connecticut, one of the 16 primary dealers required to bid at Treasury auctions. ?We?re going to get a very hefty slug of supply. As the saying goes, if you miss an auction this week, you?ll get another auction next week. It never ends.?
<strong>Possibility of Default</strong>
The U.S. is borrowing so much that it may have trouble paying the money back, said Jaemin Cheong, a bond trader in Seoul at Industrial Bank of Korea, the nation?s largest lender to small- and mid-sized companies.
?Yields are headed higher,? Cheong said in an interview. ?More issuance will be needed to support the economy. The possibility of default is more and more as time passes.?
President Barack Obama is depending on investors from overseas to help fund his $787 billion economic plan. China is the largest overseas holder of Treasuries, with $696.2 billion, followed by Japan, which has $578.3 billion.
The administration forecast gross domestic product to shrink 1.2 percent in 2009, followed by an expansion of 3.2 percent in 2010. That?s more optimistic than economists? estimates for a 2 percent contraction this year and 1.8 percent growth next year, according to the median forecast in a Bloomberg News survey.
The White House forecast an annual average yield for 10-year Treasury notes of 2.8 percent this year and 4 percent in 2010.
The 10-year note yield will reach 3.08 percent by the fourth quarter of this year, according to the weighted average of 58 economists surveyed by Bloomberg News, and 3.69 percent by the second quarter of 2010, according to the weighted average of 43 economists.
<strong>The Three Elements</strong>
China?s top banking regulator said today the country will pay attention to safety, liquidity and profitability when deciding whether to buy more U.S. debt.
?How much we will invest in U.S. Treasuries will depend on the three elements,? said China Banking Regulatory Commission Chairman Liu Mingkang at a press conference in Beijing.
Losses by U.S. Treasuries are 0.3 percent in February and 3.4 percent so far in 2009, compared with a 1.7 percent gain in the same period a year ago, according to Merrill Lynch & Co.?s U.S. Treasury Master Index.
The yield gap between two- and 10-year notes widened by four basis points to 1.87 percentage points.
<strong>TED Spread</strong>
Money markets show the world?s biggest banks see no recovery before 2010.
The premium banks charge each other for short-term loans, the so-called Libor-OIS spread, rose above 1 percentage point last week for the first time since Jan. 9. Contracts traded in the forward market indicate the gauge, which measures banks? reluctance to lend, will remain higher for the rest of the year than before Sept. 15, when the bankruptcy of Lehman Brothers Holdings Inc. froze credit markets.
The difference between what banks and the Treasury pay to borrow money for three months, the so-called TED spread, rose to 99 basis points from 91 basis points on Feb. 10.
PeterUK_IHB
New member
The crazy situation is thousands of empty houses and thousands of homeless people and no way to unite the two.
O
Oscar_IHB
Guest
[quote author="PeterUK" date=1235750339]The crazy situation is thousands of empty houses and thousands of homeless people and no way to unite the two.</blockquote> Send them to Detroit, Feds buy the house and give it to a homeless person... whole thing would cost us maybe $50 a house. Of course, without a job they'll have no power, no water, and no heat... so they will need a job. Maybe we can pay them to work...