ragerunner

FedEx waves a yellow flag Commentary: Weaker outlook gives the bulls something to chew on "The Cliff Notes version of FedEx’s comments is that Europe, already a mess, is headed into recession. This is not surprising, given the toll Greece’s debt crisis took on the region. Just imagine Spain or Italy falling down the same drain, as some economists fear they might, and the strain that would put on their neighbors. As for China, the latest data point to a further cooling of the world’s hottest economy. Finally, there is fuel. Soaring fuel prices for a company totally dependent on trucks and planes can kill the bottom line. And there are plenty of reasons (Iran, for one) to believe oil prices have yet to peak. None of this is good for FedEx. But it’s especially unnerving when FedEx, a bellwether stock sensitive to every little blip in parcel volumes worldwide, tells Wall Street analysts they’re being overly optimistic about 2012." http://www.marketwatch.com/story/fedex-waves-a-yellow-flag-2012-03-22?dist=afterbell

Weak PMIs underline euro-zone recession fears "FRANKFURT (MarketWatch)—Weaker-than-expected purchasing managers' index readings from France and Germany on Thursday pointed to an accelerated contraction in private-sector activity across the euro zone, highlighting fears the region slipped into and remains in a recession. The Markit composite purchasing managers' index, or PMI, fell to a three-month low of 48.7 from 49.3 in February. The services index edged down to 48.7 from 48.78 in February, while manufacturing PMI fell to 47.7 from 49.0. A reading of less than 50 indicates a contraction in activity." http://www.marketwatch.com/story/weak-pmis-underline-euro-zone-recession-fears-2012-03-22 China factories slumping amid low demand "HONG KONG (MarketWatch) — Chinese factory activity is slowing sharply, dragging on employment amid a deepening slowdown in global demand and aggravated by a stall in domestic consumption, according to March survey data showing new orders at a four-month low." http://www.marketwatch.com/story/china-factories-slumping-amid-low-demand-2012-03-22 SocGen: “Sharp” Gold Rally As US GDP Surprises “Dramatically” to Downside "Gold will have a “sharp” rally as the U.S. boosts monetary stimulus because of a faltering economy in the coming months, Societe Generale said in a report that was picked up by Bloomberg. Data on U.S. gross domestic product in the first and second quarters will “surprise dramatically to the downside,” the bank said today in a report." http://www.zerohedge.com/news/socgen-%E2%80%9Csharp%E2%80%9D-gold-rally-us-gdp-surprises-%E2%80%9Cdramatically%E2%80%9D-downside U.S. jobless claims fall 5,000 to 348,000 Applications for benefits at lowest level since February 2008 "WASHINGTON (MarketWatch) — Applications for weekly unemployment benefits set a new four-year low, the government reported Thursday, in another sign that the U.S. labor market continues to gradually improve." "Initial claims fell by 5,000 to a seasonally adjusted 348,000, the lowest level since February 2008, the Labor Department said. Claims from the prior week were revised up to 353,000 from an original reading of 351,000." http://www.marketwatch.com/story/us-jobless-claims-fall-5000-to-348000-2012-03-22

Drive until you qualify has become one of America's biggest social, environmental and economic issues. How Housing Prices Burden the Economy "Matthew Yglesias, the Moneybox columnist for Slate, is the author of “The Rent Is Too Damn High,” a short new electronic book. The title refers to an obscure political party in New York: The Rent Is Too Damn High Party. In the book, Mr. Yglesias argues that high rent — by which he means both rents and purchase prices — is a major drag on the American economy and society. “The real value of Yglesias’s book,” John Mangin wrote at The Washington Monthly’s Web site, “lies in its explanatory power, and in its potential to recast an important issue.” High rent, Mr. Yglesias writes, is “bad for the environment; it promotes long commutes, traffic jams, misery and smog. What’s more, high rent is not a fact of nature. It’s the result of bad public policy, and it deserves to be taken seriously as one of the critical problems we face.” "The national average masks enormous variation. Once bubble mania receded, we had a country that contained plenty of affordable places to live. The problem is that those places aren’t necessarily where the job opportunities are. Wages and incomes are generally highest in the big coastal metropolises where housing is scarce and prices are high. That leaves us with lots of people migrating to Sun Belt cities where wages are low and lots of newspaper stories about high-income individuals in big coastal cities who don’t “feel” rich, because the cost of living — which is driven by real estate — is so very high." http://economix.blogs.nytimes.com/2012/03/20/how-housing-prices-burden-the-economy/

I believe that one of the FEDs goal is to inflate all this debt away (the best they can). If they succeed in doing this then the stock market as well as other items may rise (dollar wise). The challenge the FEDs are facing is when does food and gas go to high on their inflation efforts and actually start cause the economy to experience more deflationary pressures in other areas (i.e. housing, car prices, demand, etc). They are walking a very delicate tightrope. Lets hope they don't fall off.

Quantitative easing and the investor "Quantitative easing (QE) has been with us since early 2009. It has rendered many tried-and-true market indicators impotent since price/volume action in leading indices has become somewhat less reliable. Stock market timing techniques since 2009 have been more or less decimated with only the exception of this website and a couple of others, and that said, it has not been an easy environment." "QE is an effective manner to manipulate the stock market higher, often on anemic volume, creating the illusion of wealth and an improving economy. And since people vote with their portfolio pocketbooks, such investors are more likely to buy stocks in such a stealth bull market environment, creating a further illusion of wealth. Meanwhile, the slow destruction of the dollar and other currencies ensues, as central banks around the world continue to print money." http://www.marketwatch.com/story/quantitative-easing-and-the-investor-2012-03-14?dist=afterbell

50%+ 'forced' write down of debt is a default in most books. It's like choosing chapter 13 bankruptcy over chapter 7 bankruptcy. One reduces the debt and the other eliminates it. But at the end of the day they are both bankruptcies and are a default on debt.

There will be more to come. It will not stop with Iceland and Greece. Portugal Yield at 13% Says Greek Deal Not Unique: Euro Credit "The good news is Greece won’t default on March 20, and 10-year borrowing costs for Spain and Italy have dropped below 5 percent. The bad news is similar- maturity Portuguese bonds still yield more than 13 percent." "Unlimited European Central Bank loans to banks have halted a bond-market rout that prompted investors to drive German yields to record lows and yield premiums on the securities of its regional peers to euro-era highs. The Italian 10-year yield has dropped more than 150 basis points and the rate on similar- maturity Spanish debt is about 80 basis points lower since the ECB announced Dec. 8 it would offer loans to financial institutions through two longer-term refinancing operations. “The ECB liquidity is life support,” said Robin Marshall, director of fixed income in London at Smith & Williamson Investment Management, which oversees about $18 billion. “They’ve bought time but they must use the time to implement proper reform. It’s hard to see there not being more defaults, more private sector involvement. It makes it more likely we’re going to get another market rout later in the year.” http://www.bloomberg.com/news/2012-03-12/portugal-yield-at-13-says-greek-deal-not-unique-euro-credit.html

Solid growth for February in retail. Gas played a noticable roll and so does real inflation, but other items had decent growth as well. U.S. retail sales climb 1.1% in February Growth rates revised higher for January and December "WASHINGTON (MarketWatch) — Retail sales climbed the fastest in five months in February, as rising gasoline prices weren’t enough to choke off U.S. consumers’ demand for cars, clothing and other goods, government data showed Tuesday. But excluding autos as well as sales at gasoline stations, February’s sales climbed a strong but less impressive 0.6%. With average prices 20 cents a gallon higher at the pump than in January, gasoline stations were expected to have a banner month, and they did: Monthly sales jumped 3.3%, the best advance since March." http://www.marketwatch.com/story/us-retail-sales-climb-11-in-february-2012-03-13

We can now say Greece has 'officially defaulted' and this will play out in a lot of ways financial. This also sets up bigger issues with Portugal, Spain, Italy, etc. The European problem is going to be around for a long time to come. ISDA confirms Greece has defaulted, enacting CDS payouts Debt crisis and Greek bond swap: live "ISDA ruling means debt insurance payouts can begin, as Greek PM Lucas Papademos releases statement hailing the efforts of the Greek people to move the country away from 'quicksand'." http://www.telegraph.co.uk/finance/debt-crisis-live/9132596/Debt-crisis-and-Greek-bond-swap-live.html FITCH DOWNGRADES GREECE TO 'RESTRICTED DEFAULT' FROM 'C' "Fitch Ratings-London-09 March 2012: Fitch Ratings has downgraded Greece's Long-term foreign and local currency Issuer Default Ratings (IDRs) to 'RD' ('Restricted Default') from 'C' following today's confirmation from the Greek government and eurozone officials that the exchange of Greek government bonds will proceed." http://www.zerohedge.com/news/fitch-downgrades-greece-c-restricted-default-full-text

And the drama continues to the 'potential' last minute. I still don't believe they will let this PIIG go down, at least not now. Greece in last ditch scramble to avoid default Greek politicians rounded on their own pension providers in a nail-biting scramble that secured the biggest bond restructuring in history. But it was still unlikely to be enough to avoid default. "Officials in Athens estimated that between 75pc and 80pc of private creditors had accepted the €206bn (£173bn) bond swap shortly before the 8pm GMT deadline. The level is enough for the deal to go through, but only if the government uses its controversial Collective Action Clauses (CACs). "Ratings agencies have warned they will declare a default if Greece activates the CACs, which allow the government to impose the deal on the remaining bondholders. The CACs will be used if the take up falls below the desired 95pc level but above the required 66pc. The International Swaps and Derivatives Association (ISDA) is poised to convene again to decide if the vast restructuring amounts to a "credit event" that should trigger billions of euros of credit default insurance. Athens said the figures would be revealed at 6am GMT tomorrow. The 17 eurozone finance ministers have scheduled a conference call at lunchtime to review the deal. They will meet on Monday to decide if Greece's €130bn bail-out funds can now be released." http://www.telegraph.co.uk/finance/financialcrisis/9132244/Greece-in-last-ditch-scramble-to-avoid-default.html

Jeffery, Thank you for posting the data.

Wall Street and the stock market are not going to like it if the flow of this easy money is cut off. They have clearly used QE to make a quick buck and send the markets higher. Dallas Fed Says Wall Street 'Hooked On Monetary Morphine,' Don't Expect QE3 "In an unusually blunt and frank speech, Dallas Fed President Richard Fisher told Wall Street it has become “hooked on the monetary morphine” the Fed delivered during the financial crisis. Fisher said delivering QE3 would be the equivalent of medical malpractice, while telling Congress and President Obama to get their act together, emulate Texas and Mexico, and spark job creation once again. It is rare to see a Fed President, who happens to also be a member of the FOMC, be so straightforward regarding his views. Fisher did exactly that. He bashed the political establishment and Wall Street, telling them to put money back into the real economy to foster growth." http://www.forbes.com/sites/afontevecchia/2012/03/05/dallas-fed-says-wall-street-hooked-on-monetary-morphine-dont-expect-qe3/

Some of the latest from Europe. This things has more lives than Frisky the cat and more ups and downs than Cedar Point. Press Release: Public Dept Management Agency "The Republic’s representative noted that Greece’s economic programme does not contemplate the availability of funds to make payments to private sector creditors that decline to participate in PSI. Finally, the Republic’s representative noted that if PSI is not successfully completed, the official sector will not finance Greece’s economic programme and Greece will need to restructure its debt (including guaranteed bonds governed by Greek law) on different terms that will not include co-financing, the delivery of EFSF notes, GDP-linked securities or the submission to English law. The expiration deadline for the invitations is 9.00 pm CET on 8 March 2012, subject to the Republic’s right to extend, re-open, amend or terminate the invitations as provided therein." http://www.minfin.gr/portal/en/resource/contentObject/id/f64969e6-11b5-4c40-8319-869171a55190 BREAKING ….as bondholder acceptance revealed to be a miserable 20%, Greek finance ministry stuns world with details of German banker meeting. "This feels ominously like the Germans declaring UDI and saying no deal. I have to assume that ‘official sector’ means all central banks and sovereign holders – perhaps plus EU, but then why hasn’t the release come from Brussels? Major stock markets and banking sectors in France, the UK and Germany just fell off the Matterhorn, so I have to assume that they see it the same way. The CAC 40 in Paris has now fallen 3pc. French banks are leading the falls. Credit Agricole is down 6.3pc Societe Generale has shed 6pc and BNP Paribasis also down nearly 6pc. In Germany, Commerzbank is the biggest faller in the DAX 30, down 6.5pc at €1.776. Finally, I just contacted A senior respected UK wealth manager Chairman who concurs: it’s game over, and default. It also, on the face of it, looks like amputation. Over to Washington?" http://hat4uk.wordpress.com/2012/03/06/breaking-as-bondholder-acceptance-revealed-to-be-a-miserable-20-greek-finance-ministry-stuns-world-with-details-of-german-banker-meeting/

Its about the quality of the jobs that the 'creators' are creating. McDonald's won't get the job done. McDonald's won't get the job done for a white collar career. As an entry-level employer for young people (a first job ever for many) and something to get people off welfare rolls, though, it and employers like that are going to be part of the picture. The problem is those types of jobs have become more and more a part of the picture. The balance is being lost.

Its about the quality of the jobs that the 'creators' are creating. McDonald's won't get the job done.

Warren says its over, good times ahead. Hope he is right, we shall see. Warren Buffett vs. the profiteers of doom Commentary: ‘Buffy the Vampire Slayer,’ meet your Wall Street ally "MIAMI, Fla. (MarketWatch) — Buffy the Vampire Slayer, meet Buffett the Doom Slayer. The Oracle of Omaha, Warren Buffett, is firmly entrenched with optimists who believe the worst is over for both the U.S. economy and the stock market. “It’s a terrible mistake to get pessimistic on America,” Buffett said on CNBC last month. “It has not worked since 1776 and it’s not going to work now.” http://www.marketwatch.com/story/warren-buffett-vs-the-profiteers-of-doom-2012-03-05?dist=countdown

Something those on Main Street are very aware of no matter what the government would like to claim. Inflation: Not as low as you think "Forget the modest 3.1 percent rise in the Consumer Price Index, the government's widely used measure of inflation. Everyday prices are up some 8 percent over the past year, according to the American Institute for Economic Research." "That means they don't look at the price of houses, furniture, appliances, cars, or computers. Instead, AIER focuses on Americans' typical daily purchases, such as food, gasoline, child care, prescription drugs, phone and television service, and other household products." "Over the past year, the EPI is up just over 8 percent, according to the economics group. The biggest factor: Motor fuel and transportation costs are up 21.06 percent from year-ago levels. The cost of food, prescription drugs, and tobacco also have increased faster than the government's inflation measure, rising 3.56 percent, 4.21 percent, and 3.4 percent, respectively." http://www.cbsnews.com/8301-505144_162-57387655/inflation-not-as-low-as-you-think/

iFoodstamps "As of December, per SNAP this number just hit another record high of 46.5 million, an increase of 384,000 in one month (and ending the trend of declines from October and November), 2.4 million in 2011 (about as many as have dropped out of the Labor force, hmmmm), ...." http://www.zerohedge.com/news/ifoodstamps

Fed chair warns that US is heading for 'massive fiscal cliff' "The central banker faced nearly three hours of questioning from House lawmakers, who tried to nudge the chairman into hinting where the government should trim its federal budget deficit. While Mr Bernanke agreed with Republican lawmakers that a careful eye must be trained on rising health-care costs, he refrained from making any political assessments of where the federal budget should be cut. Mr Bernanke repeated a warning that the country faces a "massive fiscal cliff" at the end of the year when the Bush-era tax cuts and the current payroll-tax break expire and automatic spending cuts are scheduled to kick in. "If it all hits the economy at the same time, it'll be very hard to adjust to that," he said, urging lawmakers to figure out a way to implement gradual changes that would not imperil the economic recovery." http://www.theaustralian.com.au/business/economics/fed-chair-warns-that-us-is-heading-for-massive-fiscal-cliff/story-e6frg926-1226285743870

It will be interesting to see how this plays out. I personally struggle with the idea that if they have been playing pretend and extend, why not keep the game going? Plus we are in an election year.

A few years back there was a lot of talk about how the commercial real estate industry was going to blow up just like the residential industry did. Then everything went pretty quiet. Why? Did the values and vacancy rates in the commercial industry improve? Here is an interesting read on why things went quiet and why that calm maybe about over. Time will tell. Note: This is a length article so I only posted parts and broke each part out seperately. Extend And Pretend Coming To An End "The fact is that commercial property prices are currently 42% below the 2007 – 2008 peak. The slight increase in the national index is solely due to strong demand for apartments, as millions of Americans have been kicked out of their homes by Wall Street bankers using fraudulent loan documentation to foreclose on them. The national index has recently resumed its fall. Industrial and retail properties are leading the descent in prices according to Moodys. The master plan of extend and pretend was implemented in 2009 and three years later commercial real estate prices are 10% lower, after the official end of the recession." "Office vacancies remain at 17.3%, close to 20 year highs, as 12.3 million square feet of new space came to market in 2011. Vacancies are higher today than they were at the end of the recession in December 2009. The recovery in cash flow has failed to materialize for commercial developers. Strip mall vacancies at 11% remain stuck at 20 year highs. Regional mall vacancies at 9.2% linger near all-time highs. Vacancies remain elevated, with no sign of decreasing. Despite these figures, an additional 4.9 million square feet of new retail space was opened in 2011." ______________________________________ "A recent article from the Urban Land Institute provides some insight into the current state of the market: "Ann Hambly, who previously ran the commercial servicing departments at Prudential, Bank of New York, Nomura, and Bank of America said a wave of defaults is coming in commercial mortgage–backed securities (CMBS). And Carl Steck, a principal in MountainSeed Appraisal Management, an Atlanta-based firm that deals in the commercial real estate space, said property values are still falling." "Noting that CMBS investors booked $6 billion in real losses in 2011 and have already taken on $2 billion more in losses so far this year, Hambly told reporters in a private briefing that “it’s going to take a miracle” for many borrowers to refinance their deals when they come due between now and 2017." Carl Steck said that lenders who are taking over the portfolios of failed institutions are finding that the values of the loans “are coming in a lot lower than they ever thought they would.” And as a result, he thinks a “fire sale” of commercial loans is just over the horizon." _______________________________________ "His company deals with distressed commercial real estate. This segment of his business was booming in 2009 and into the middle of 2010. Then magically, there was no more distress as the “extend and pretend” plan was implemented by the governing powers. The distressed market dried up completely until November 2011. Miller describes what happened next:" “All of a sudden, right after Thanksgiving in 2011, the floodgates opened again. In the last six weeks we probably picked up seven or eight receiverships – and we’re now seeing some really big-ticket properties with major loans on them that have gone into distress, and they’re all sharing some characteristics in common. In 2008 and 2009, these borrowers were put on a workout or had a forbearance agreement put into place with their lenders. In 2009, their lenders were thinking, “Let’s do a two- or three-year workout with these guys. I’m sure by 2012 this market is going to get a lot better.” Well, 2012 is here now, and guess what? It’s not any better. In fact I would argue that it’s still deteriorating.” Why the sudden surge in distressed properties coming to market in late 2011? It seems the FASB finally decided to grow a pair of balls after being neutered by Bernanke and Geithner in 2009 regarding mark to market accounting. They issued an Accounting Standards Update (ASU) that went into effect for all periods after June 15, 2011 called Clarifications to Accounting for Troubled Debt Restructurings by Creditors. Essentially, if a lender is involved in a troubled debt restructuring with a debtor, including a forbearance agreement or a workout, the property MUST be marked to market. Andy Miller understands this is the beginning of the end for “extend and pretend”: “I believe it’s a huge deal because it means you don’t have carte blanche anymore to kick the can down the road. After all, kicking the can down the road was a way to avoid taking a big hit to your capital. Well, you can’t do that anymore. It forces you to cut through the optical illusions by writing this asset to its fair market value.” http://www.zerohedge.com/news/guest-post-extend-and-pretend-coming-end

In other words they have offically defaulted and are forces (retroactive) the holders of their debt to take loses and can do more strategic writedowns on their debt in the future. Who is going to be next at the candy counter? Spain, Portegual, Italy, etc. S&P downgrades Greece to selective default "SAN FRANCISCO (MarketWatch) -- Standard & Poor's said late Monday it downgraded the sovereign credit ratings of Greece to selective default, or SD, because collective action clauses recently put into certain debt agreements. S&P had previously had a CC long-term rating and a C short-term rating on Greece. "The effect of a CAC is to bind all bondholders of a particular series to amended bond payment terms in the event that a predefined quorum of creditors has agreed to do so," S&P said in a statement. "In our opinion, Greece's retroactive insertion of CACs materially changes the original terms of the affected debt and constitutes the launch of what we consider to be a distressed debt restructuring." In a response, the Greek finance ministry said the SD rating was expected and will have no impact on the country's banking sector." http://www.marketwatch.com/story/sp-downgrades-greece-to-selective-default-2012-02-27

Along with some of the reasons listed, I would add the ability to be fexible to move for job needs/changes in today's volital economy is a huge plus. New American Dream is renting to get rich "It's the American Dream to own a home, but whoever said that didn't do the analysis on it," says Arzaga, knowing he's taking a contrarian stance to conventional wisdom. Examining 250 properties around the U.S., and going through close to 40 client files to project the financial impact of owning real estate versus liquidating it, Arzaga, an adjunct professor in personal finance at the University of California at Berkeley, found that, "100 percent of the time it was better to rent, rather than own." That's right: 100 percent." http://www.reuters.com/article/2012/02/15/us-housing-americandream-idUSTRE81E1LG20120215 After a year-long reprieve from rising foreclosures, the numbers are going up again. "One in every 624 U.S. households received a foreclosure filing in January, up 3 percent from the previous month, according to a new report from RealtyTrac. Foreclosure activity froze in many states in 2011, due to processing delays after fraud, or so-called "Robo-signing," were uncovered in the fall of 2010. The thaw is now on. "We expect the pattern of increasing foreclosures to continue in the coming months, especially given the finalized mortgage and foreclosure settlement reached in early February between 49 state attorneys general and five of the nation's largest lenders," said RealtyTrac's CEO Brandon Moore in a written release." "While states that do not require a judge to preside over foreclosure proceedings, like California, saw a jump in filings toward the end of last year, judicial states have all but stalled. That will now change, thanks to the $26 billion dollar government-lender/servicer settlement. There will still be some delays on individual state levels, but the wheels are turning again, and that means more bank repossessions and more foreclosed properties heading to the re-sale market." http://www.cnbc.com/id/46401756

Here is a look at the unemployment claims with the adjusted numbers as well as the unadjusted numbers. When looking at the unadjusted numbers you get more of a mixed bag of results. We definitely have improvement in these numbers year over year. Of course this doesn't really tell us much about the millions that have been dropping out of this data because they no longer can received unemployment benefits, quite looking, etc. Also, like clock work they revised last weeks numbers up. UNEMPLOYMENT INSURANCE WEEKLY CLAIMS REPORT "In the week ending February 11, the advance figure for seasonally adjusted initial claims was 348,000, a decrease of 13,000 from the previous week's revised figure of 361,000. The 4-week moving average was 365,250, a decrease of 1,750 from the previous week's revised average of 367,000." "The advance number of actual initial claims under state programs, unadjusted, totaled 361,928 in the week ending February 11, a decrease of 39,328 from the previous week. There were 424,400 initial claims in the comparable week in 2011." "The total number of people claiming benefits in all programs for the week ending January 28 was 7,681,911, an increase of 18,304 from the previous week." "States reported 3,002,475 persons claiming EUC (Emergency Unemployment Compensation) benefits for the week ending January 28, an increase of 16,568 from the prior week." http://www.dol.gov/opa/media/press/eta/ui/eta20120296.htm

Is this really a long term strategy that will work. To have the EU 'financial police' telling countries what they can and can't do. Last I looked the 'United States of Europe' is not in place yet and each country is its own sovereign nation. The European Union is a train wreck in slow, slow, motion. The only way you could believe the EU will survive is if they truly become the 'United States of Europe'. I think the chances of that are about 0. The alternative then is that the current EU will slowly fall apart and many countries will default financial. EU to Punish Spain for Deficits, Inaction "The European Union is likely to take action against Spain's newly installed government by May for delaying austerity measures ahead of a regional election next month, sources familiar with the situation have told Reuters. Spanish and EU officials said in response to Reuters' story that the government in Spain was working hard to reduce its deficit and that it was premature to say the country might be punished. Three senior EU officials told Reuters that a final decision still has to be made, but the European Commission believes the new government overstated the deficit figures for 2011 so the current year's data would look better. Spain is also not addressing quickly enough the deterioration in public finances expected in 2012, risking the country's longer-term growth, the officials said." http://www.moneynews.com/FinanceNews/EU-Punish-Spain/2012/02/14/id/429399