ragerunner

Will we see another push to goose up the housing market in 2012? In an election year everyone on both sides of the isle get nervous. Some how some way, they have got to get the housing party going again. No matter how unsustainable it may be, long term or even more short term. Even if its mean using taxypayer supported Fannie and Freddie to take on all the risk. I think we are in a place where all we can do is prolong the day of reckoning as long as possible. Extend and pretend. Fed Urges Action on Housing Bank Warns Congress That Tight Lending Standards Threaten Wider Economy. "The Federal Reserve, in an unusual foray into housing policy, expressed alarm over the battered home market and called for more aggressive action from Congress and other policy makers. Housing policy is outside the traditional purview of the central bank, but Fed Chairman Ben Bernanke and others are clearly worried that housing has stymied the effect of the bank's low-interest-rate policies. In a 26-page paper sent to top lawmakers on congressional banking committees, the Fed warned that tight mortgage- lending standards threaten to hold back the economy. The Fed also signaled support for more aggressive use of Fannie Mae and Freddie...." http://online.wsj.com/article/SB10001424052970203471004577140882700118076.html What's a few 'tens of billions' of dollars among friends. Bailout concerns mounting for federal housing agency "NEW YORK (CNNMoney) -- Concerns are growing that the Federal Housing Administration will need to be bailed out by taxpayers. The agency's latest monthly outlook report revealed a spike in serious delinquencies for FHA-insured loans, posing a further threat to the agency's already depleted cash reserves. According to the report, the percentage of loans in the FHA's portfolio with three missed payments or more rose to 9.3% in November, up from 8.4% in August. "It's highly likely that the FHA will need a taxpayer bailout over the next three to five years," said Joseph Gyourko, a real estate professor at the University of Pennsylvania's Wharton School and author of a report entitled "Is FHA the Next Big Housing Bailout?." http://money.cnn.com/2011/12/30/real_estate/federal_housing_bailout/index.htm

Here is quick look at some larger job cut announcements over the last week or so. Pepsi mulls 4,000 job cuts: report http://finance.yahoo.com/news/pepsi-mulls-4-000-job-100503600.html;_ylt=ApuMyl0RpHMxWBuvEPOokC6iuYdG;_ylu=X3oDMTNyYmJxNTIyBG1pdANGUCBUb3AgU3RvcnkgTGVm RBS may cut as many as 10,000 jobs: report http://www.urbanohio.com/forum2/index.php?action=post;topic=17905.3300;last_msg=595903 Boeing to close Wichita facility by end of 2013 Boeing to close Wichita facility by end of 2013, move tanker work to Texas, Okla., Wash. "Wednesday's announcement means the loss of 2,100 well-paying jobs at its Kansas facility, which was once considered the centerpiece of Wichita's claim as the air capital of the world. It also dashes hopes for an additional 7,500 direct and indirect jobs that the company once promised to bring to Wichita with the Air Force air refueling tanker contract." http://finance.yahoo.com/news/boeing-close-wichita-facility-end-164854935.html Philly Schools Send Layoff Notices to 1,400 http://www.nbcphiladelphia.com/news/local/Philly-Schools-Send-Layoff-Notices-to-1400-136582568.html

U.S. private payrolls swell in December, ADP says "According to ADP, private payrolls gained 325,000, far outpacing growth in prior months. However, analysts warn that seasonal-adjustment issues have led to past ADP estimates for December substantially missing key employment data produced by the U.S. Labor Department. ADP reported that employment rose 273,000 for the service-providing sector, and 52,000 for the goods-producing sector. By firm size, employment rose 148,000 at small businesses, 140,000 at medium businesses and 37,000 at large businesses." http://www.marketwatch.com/story/us-private-payrolls-swell-in-december-2012-01-05 U.S. jobless claims fall 15,000 to 372,000 Data suggests gradual improvement in weak labor market "New requests for unemployment benefits fell by 15,000 last week to a seasonally adjusted 372,000, the U.S. Labor Department said Thursday. Claims from two weeks ago were revised up to 387,000 from 381,000, based on more complete state data." http://www.marketwatch.com/story/us-jobless-claims-fall-15000-to-372000-2012-01-05

Another reason GDP is staying positive. This is a very good article and is worth the read. David Rosenberg On The Coming Gunfight At The OK Corral Between Mr Market And Mr Data "Let's do some arithmetic to help explain what has happened on the spending side. First, since mid-2011, gasoline prices have plunged 60-cents, which is in effect an $80 billion tax cut for the household sector. The problem is that this windfall is behind us, sadly enough. Eighty billion dollars at an annual rate is akin to a 4% pay raise for the average worker in real terms. That's hardly trivial for the likes of Bob Cratchit, we can assure you. Second, since June, the personal savings rate has plunged from 5% to 3.5%. This sort of decline over such a short time span has occurred but five times in the past 12 years. This in turn freed up $150 billion at an annual rate in real terms yet again for spending purposes. So we have a total of $230 billion of support that temporarily bolster the consumer since the mid part of 2011. Yet real consumer spending since June has only risen by $105 billion at an annual rate in real terms. That means that in the absence of these dual effects — lower gas prices AND lower savings rates — we would have seen real PCE contract $125 billion or at a 3% annual rate since mid-2011 (looking at the monthly GDP estimates, there would have also been zero growth in the overall economy). Instead, real PCE managed to eke out a 2.7% annualized gain — but aided and abated by non-recurring items. Yes, employment growth has held up, but from an income standpoint, the advances in low paying retail and accommodation jobs have not compensated the losses in high paying financial sector and government employment." http://www.zerohedge.com/news/david-rosenberg-coming-gunfight-ok-corral-between-mr-market-and-mr-data

Americans’ Incomes Have Dropped 6.7 Percent During the ‘Recovery’ "New evidence suggests there’s a reason why this economic “recovery” hasn’t felt much like a recovery. Figures from the Census Bureau’s Current Population Survey, compiled by Sentier Research, show that the “recovery” has actually been harder on most Americans than the recession from which they’ve allegedly been recovering." "According to the report — which has been referenced by both the Wall Street Journal and the New York Times — in early 2000, Americans’ median annual household income was $55,836, in real (inflation-adjusted, June 2011) dollars. By the start of the recession (in December 2007), Americans’ real incomes had fallen 0.9 percent, to $55,309 — a decline of $527. During the recession (which ended in June 2009), their incomes fell an additional 3.2 percent, to $53,518 — a decline of another $1,791. During the first two years of the “recovery” (from June 2009 to June 2011), they fell an additional 6.7 percent, to $49,909 — a decline of another $3,609." "In fact, the anemic economy has meant that Americans’ incomes have declined during the “recovery” even without adjusting for inflation. According to Green, in actual (non-inflation-adjusted) dollars, the median American household income was $51,140 at the start of the “recovery,” but it fell to $49,909 two years later." http://www.weeklystandard.com/blogs/americans-incomes-have-dropped-67-percent-during-recovery_607640.html

What is amazing to me is how most of these trends are really not improving (most are continuing to get worse). I think the GDP growth chart is directly related to the Federal Debt Trend Chart. If we had kept at our normal debt growth from 2007 forward that we had between 2000 and 2007 we would still have negative GDP. We are simply trying to print our way to a positive GDP.

Well another year is over. I thought it might be interesting to look at some charts that show trends over the last decade or so. These charts and more can be found at zerohedge.com - http://www.zerohedge.com/news/11-ends-11-charts-11-disturbing-11-year-trends Have a safe New Year. Someone seems to be struggling more and more at releasing good GDP data on the first release. Intersting how this revision and most of the others all go in one direction.

The Federal Reserve's Covert Bailout of Europe When is a loan between central banks not a loan? When it is a dollars-for-euros currency swap. "America's central bank, the Federal Reserve, is engaged in a bailout of European banks. Surprisingly, its operation is largely unnoticed here. The Fed is using what is termed a "temporary U.S. dollar liquidity swap arrangement" with the European Central Bank (ECB). There are similar arrangements with the central banks of Canada, England, Switzerland and Japan. Simply put, the Fed trades or "swaps" dollars for euros. The Fed is compensated by payment of an interest rate (currently 50 basis points, or one-half of 1%) above the overnight index swap rate." http://online.wsj.com/article/SB10001424052970204464404577118682763082876.html?mod=wsj_share_tweet Here is a little more info on this from zero hedge. Did The Fed Quietly Bail Out A Bank On Tuesday? "We know two things with certainty: In the week ended December 13 (14th excluded) one or more banks, most likely European, borrowed up to $2.5 billion from the Fed's Primary Credit Discount Window. And since US banks are drowning in dollar-based liquidity, any need to approach the Discount Window now, in the context of trillions of Excess Reserves, carries with its exponentially greater stigmata than it ever did during Lehman days. Also, in the week ended December 14, the Fed did a mid-month settlement of $31 billion in MBS purchases - a transaction which allowed a Primary Dealer to source critical liquidity, based on $30 billion in buyback authorization granted for the period beginning December 13." http://www.zerohedge.com/news/did-fed-quietly-bail-out-bank-tuesday

The FED will only try to slow down the process as it should so that the system does not go into 'shock'. These drops in price points are inevitable unless Americans start making a whole lot more money. The scale of median sales prices vs. median salary needs to be balanced. Something along the lines of 3x median salary sounds about right. At the rate we are going the US housing market might just meet the salary market around 2013-2014. It will then probably over shoot to the downside and potentially hit a bottom after that.

I am not sure where the positive data is coming from, but more declines are definitely coming in 2012. (Unless the FEDs try to juice the system again.) RBC: HOUSE PRICES TO DROP UP TO 30% IN 2012 “Tom Porcelli, chief US economist at RBC Capital Markets, says he is not buying the recent positive data on US housing. He sees US home prices dropping another 10% – 30% in 2012.” http://pragcap.com/rbc-house-prices-to-drop-up-to-30-in-2012

Looks like we have another trustworthy financial institution? Internal BNY Mellon Documents Show Panic "An informant in a state fraud case against Bank of New York Mellon Corp. has provided prosecutors a rare inside peek into how the bank allegedly scrambled to contain the fallout from a fast-growing government investigation, according to hundreds of pages of confidential documents." "As investigators sought to determine whether the bank overcharged clients to execute their currency trades, a senior BNY Mellon executive nicknamed "Rambo" urged traders not to tell clients how much money they made on trading, according to the informant. Bank officials worried clients would switch to negotiating their own foreign-exchange trades..." http://online.wsj.com/article/SB10001424052970204879004577108630218485566.html?mod=WSJ_hp_LEFTTopStories

This is a HUGE revision. Their stats were off by about 750,000 homes per year. Its nice to see the MSM using the NAR data less and less since it becoming pretty clear its not that trustworthy. Existing-home sales revised down 14% November sales up 4% from October; median price falls to $164,200 "WASHINGTON (MarketWatch) — An average of 14% fewer existing homes were sold annually between 2007 and 2010, according to revisions reported Wednesday by the National Association of Realtors, pointing to a housing market that was even weaker than previously believed." "During the revision’s time period, there were average annual sales of about 4.42 million existing homes, compared with prior estimates of about 5.16 million. NAR revised the data to correct for some sampling and data-reporting problems." "Analysts said the downward revisions reflect the depth of weakness that the economy had already been feeling." http://www.marketwatch.com/story/existing-home-sales-revised-down-14-2011-12-21

RTD board OKs hotel plan for Denver Union Station "The transit agency’s board voted 14-0, with one abstention, in support of a $48 million proposal by a consortium called Union Station Alliance (USA), said RTD assistant general manager Scott Reed. The USA plan calls for redeveloping the upper levels of the historic train depot as a 130-room hotel, with retail and restaurants on the ground floor." http://www.bizjournals.com/denver/news/2011/12/20/rtd-board-approves-hotel-plan-for.html

For anyone who has ever seen pictures or watch videos of the MASSIVE amounts of empty residential and retail space in China, know it will be hard for them not to crash land. They make Florida, Arizona and Nevada overbuilding look like childs play. Documentary by SBS Dateline (Australian TV) about the Chinese real estate market. - China's epic hangover begins "China's credit bubble has finally popped. The property market is swinging wildly from boom to bust, the cautionary exhibit of a BRIC's dream that is at last coming down to earth with a thud. It is hard to obtain good data in China, but something is wrong when the country's Homelink property website can report that new home prices in Beijing fell 35pc in November from the month before. If this is remotely true, the calibrated soft-landing intended by Chinese authorities has gone badly wrong and risks spinning out of control. The growth of the M2 money supply slumped to 12.7pc in November, the lowest in 10 years. New lending fell 5pc on a month-to-month basis. The central bank has begun to reverse its tightening policy as inflation subsides, cutting the reserve requirement for lenders for the first time since 2008 to ease liquidity strains." "There is so much spare capacity that they will start dumping goods, risking a deflation shock for the rest of the world. It no surpise that China has just imposed tariffs on imports of GM cars. I think it is highly likely that China will devalue the yuan next year, risking a trade war," he said." China's $3.2 trillion foreign reserves have been falling for three months despite the trade surplus. Hot money is flowing out of the country. "One-way capital inflow or one-way bets on a yuan rise have become history. Our foreign reserves are basically falling every day," said Li Yang, a former central bank rate-setter." "The economy is badly out of kilter. Consumption has fallen from 48pc to 36pc of GDP since the late 1990s. Investment has risen to 50pc of GDP. This is off the charts, even by the standards of Japan, Korea or Tawian during their catch-up spurts. Nothing like it has been seen before in modern times." http://www.telegraph.co.uk/finance/china-business/8957289/Chinas-epic-hangover-begins.html

Slowly but surely more and more info leaks out about how the boom and bust was manipulated by the banks and the NAR. Shocking. :wink: Inflated home sales figures from 2007-10 to be lowered "WASHINGTON – National home sales figures will be lowered dating back to 2007 after the private trade group that collects them said the numbers were too high." "CoreLogic estimated that the Realtors group overstated sales in 2010 by at least 15%." http://www.usatoday.com/money/economy/housing/story/2011-12-12/Home-sales-revision/51838420/1

Looks like the Holiday season is turning out not be as great as the Retail Association headlines would have lead everyone to believe over the last few weeks. Would a trade organization really mislead people with happy headlines? Say it not so. The actual number came in about 40% of what the economist had predicted, that a pretty big miss. Look for the retailers to have some ugly numbers on profits in the near future. They are/had to discount significantly to get things off the selves, reducing profit magins significantly. U.S. retail sales rise slightly in November Consumers snap up electronics, spend less on food and drinks "Sales at U.S. retailers increased a seasonally adjusted 0.2% in November, the Commerce Department reported Tuesday. Excluding the volatile automobile sector, sales also rose 0.2%. Automobile sales can swing sharply from month to month and obscure underlying retail trends. Economists were expecting stronger sales in light of robust demand for automobiles and a record increase in spending during the Thanksgiving holiday weekend, which kicks off each year with the Black Friday shopping bonanza. Economists surveyed by MarketWatch expected retail sales to rise by 0.5% overall, or by 0.4% excluding the auto sector." http://www.marketwatch.com/story/us-retail-sales-rise-slightly-in-november-2011-12-13 The real problem is people are taped out financially. Credit card debit is rising quickly again in the US and its not become people feel richer, its because they are broke and trying to hang on. Inflation is much hotter than what is being reported. Keep printing Bernanke and you will finally collapse the US economy. Holiday Sales Appear to Stall: Are Big Discounts Next? After early bird discounts fueled a Black Friday buying boom, retailers are seeing sales dry up halfway through the holiday sales period, a consumer survey completed Sunday showed. The trend may force discounts as deep as 70 percent on coats and flat panel TVs as Christmas Eve approaches. Forty percent of consumers are completely done with their holiday shopping at this point, up from just 28 percent who were finished at the same time last year, according to the America’s Research Group/UBS Christmas Forecast Survey. “You could push them over the edge at this point with a 60 to 70 percent discount,” said Britt Beemer, CEO of ARG, who has been conducting the phone survey and marketing research for 27 years. “But most would probably use a credit card, as their budgets are depleted.” http://www.cnbc.com/id/45643812

Recession will be much worse, say economists "Britain will suffer a much worse recession than previously imagined but it will not be as bad as in Europe, leading economists forecast today. Experts from Standard Chartered Bank are warning that the UK’s economy has already begun to shrink, as companies are laying off workers and household spending is under pressure. The bank’s financial forecasters believe Britain’s economy will continue to falter until at least half way through next year, reducing by 1.3 per cent overall in 2012. However, they predict that economies of eurozone countries, including France and Germany, are likely to see a worse drop of 1.5 per cent as they struggle with the area’s debt problems." http://www.telegraph.co.uk/finance/financialcrisis/8949742/Recession-will-be-much-worse-say-economists.html China Econs Warn On Recession As Euro Crisis Drags On: Press "BEIJING (MNI) - Chinese government economists have joined the ranks of sceptics arguing that the latest efforts by European leaders to resolve the single currency union's debt crisis are inadequate, and that China needs to prepare for another recession in the advanced economies. State Information Center economist Zhang Monan said the agreements finalized at last week's contentious European summit won't fundamentally resolve the crisis and warned that a wave of sovereign downgrades is inevitable in the coming year. She said the imposition of overly-aggressive austerity packages on European economies will trigger greater social and political turmoil in the region. "Solving the European debt crisis may have become more difficult than we can imagine," Zhang said." https://mninews.deutsche-boerse.com/index.php/china-econs-warn-recession-euro-crisis-drags-press?q=content/china-econs-warn-recession-euro-crisis-drags-press

They better not run out of workable ammo before things are stabilized or its going to explode like a supernova on them. Fed, BoE bond buys moved markets, study finds "WASHINGTON (MarketWatch) — Large-scale bond purchases made by the U.S. Federal Reserve and the Bank of England made big impacts on the market, a study released by the Bank for International Settlements on Sunday found. The U.S. Federal Reserve has purchased $2.3 trillion worth of securities under the programs widely known as QE1 and QE2, and the Bank of England has set out to buy 275 billion pounds worth of bonds." http://www.marketwatch.com/story/fed-boe-bond-buys-moved-markets-study-finds-2011-12-11

Add in some nice inflation during that time period and they are even poorer. US household wealth takes biggest hit since 2008 US household wealth takes biggest hit since 2008 as stock and home values drop "WASHINGTON (AP) -- Americans' wealth last summer suffered its biggest quarterly loss in more than two years as stocks, pension funds and home values lost value. At the same time, corporations raised their cash stockpiles to record levels. Household net worth fell 4 percent to $57.4 trillion in the July-September quarter, according to a Federal Reserve report released Thursday. It was the sharpest drop since the tumultuous period after the September 2008 bankruptcy of investment bank Lehman Brothers. And it was the second straight quarterly fall." http://finance.yahoo.com/news/us-household-wealth-takes-biggest-170743179.html

Good luck with this latest attempt to kick the can down the road a little more. Many of these countries will legally need to have a referendum on these measures. Something tells me we will see a lot of new riots and protest in Europe over the next 3 to 4 months. Why Merkel-Sarkozy pact is doomed to fail Commentary: Greece and Portugal have no reason to accept plan "BOSTON (MarketWatch) — If you want to understand the latest Franco-German proposal to “save” the euro, imagine this. Imagine the governments of China and Japan demanding they be given the legal right to override the U.S. budget’s legislative process if needed, and to impose tax hikes and spending cuts on the American people as needed. After all, China and Japan are our biggest creditors. The U.S. government owes them trillions. We’re not quite as deeply in debt as a share of our economic output, as Europe’s naughtiest Nellies. But we’re not far behind either." "Why would the Portuguese accept the right of Germany to impose budget cuts on their country? Why would the Greeks? Would we accept that role for the Chinese and the Japanese, the biggest holders of Treasury debt? How would you feel if you opened the paper to be told that the new Sino-Japanese “Fiscal Stability Commission” in Washington had just slashed your grandma’s Social Security checks by one-third, scaled back federal highway repairs, and that it would impose a 10% national sales tax? That is, after all, effectively what is being offered to the people of Greece, Italy, Spain, Portugal and Ireland." http://www.marketwatch.com/story/why-merkel-sarkozy-pact-is-doomed-to-fail-2011-12-09

It looks like Mr. Volcker believes we never left the recession and it will continue well into the future. I think he is right. The only main reason GDP went positive is because of the printing presses. Without them GDP would still be negative. Paul Volcker Says It's Recession and Inflation for the U.S. "In a talk given on Wednesday night to a small audience at the Wall Street location of the American Museum of Finance, former Fed Chair Paul Volcker said the U.S. will be mired in recession for many more years and that it faces an inflation problem in the future. Volcker was the Fed Chair that tamed inflation in the 1980s. In a talk given to a small audience at the American Museum of Finance on Wednesday evening, former Federal Reserve Chair Paul Volcker stated that there was an ongoing recession in the U.S. and that we will be seeing inflation in the future because of the actions of the Fed and Treasury during the 2008 Credit Crisis." "We're not going to end the recession in the next month or the next year. It's going to take several years before the recession is over." The U.S. government claims that the last recession ended in June 2009 and has repeatedly said that the U.S. has not fallen back into recession even though unemployment and consumer confidence have continuously remained at recession levels." http://www.etfguide.com/research/726/23/Paul-Volcker-Says-It%27s-Recession-and-Inflation-for-the-U.S./

Maybe its because the 'too big to fail' group is 'too big to prosecute'. These guys own Congress, they even had/have the SEC destroying documents for them. http://www.marketwatch.com/story/sec-may-have-destroyed-documents-senator-says-2011-08-17?dist=afterbell

Cleveland and Cuyahoga County are not the only ones that are in this boat and it goes way beyond the goverment, property owners and businesses are feeling these deflationary declines in property values as well. We are not at the bottom yet. Cleveland, Cuyahoga County Property Values May Plunge Next Year, Fed Says "Declining property values in Cuyahoga County and Cleveland, its largest city, may force local governments to raise taxes or cut services after parcels are reappraised in 2012, a report by Federal Reserve Bank of Cleveland researchers said. Falling prices suggest that property values could be up to 45 percent lower than 2010 county estimates, according to a study issued today by Thomas J. Fitzpatrick IV and Mary Zenker. The impact on tax collections in municipalities already facing tight budgets, especially in Cleveland and its inner-ring suburbs, “could be significant,” the researchers said." "Property values may be 38 percent to 45 percent lower than county estimates in Cleveland and 26 percent to 30 percent lower in inner-ring suburbs, the report said. “If appraisals come in close to this far below the 2010 county estimates, Cleveland and the inner-ring suburbs may face a significant tax revenue shock in 2012,” the researchers said." http://www.bloomberg.com/news/2011-12-06/cleveland-cuyahoga-county-property-values-may-plunge-fed-says-in-report.html

I can help the unemployment rate a lot. Get another 3 million Americans to give up looking for a job or have them run out of unemployment benefits and our unemployment rate will look like a healthy 4 percent. But its still means millions continue to be out of work. I also read that the Birth Death model (which the Labor Department has admitted doesn't works so well in a bad economy) added 102,000 jobs to the numbers. Add in seasonal hiring and the need for over 100,000 new jobs just to keep up with the incoming workforce and this number is not very good for the core of the holiday hiring season. But, the headline looks great and that is what Wall Street and Washington are looking for. Jobless rate falls to over 2-year low of 8.6% Unemployment at lowest level since 2009 as labor force shrinks "WASHINGTON (MarketWatch) — The U.S. economy created 120,000 jobs in November and the unemployment rate fell to 8.6%, its lowest level in more than two and a half years, the Labor Department said Friday. The big drop in the jobless rate, which stood at 9.0% in October, stemmed mainly from a decline in the size of the labor force. Some 315,000 people stopped looking for jobs last month, which is usually not a good sign." http://www.marketwatch.com/story/us-jobless-rate-falls-to-86120000-jobs-added-2011-12-02

I believed when the US was diving into the great recession all the actions being taken was to soften the landing as much as possible. It was never about not having a recession, that was already in the cards. The same holds true today, its about trying to soften the landing since another recession for most of the western world is already in the cards. Factories stall worldwide, U.S. jobless claims rise "(Reuters) - Manufacturing activity is contracting across Europe and most of Asia, data showed on Thursday, and a Chinese official declared that the world economy faces a worse situation than in 2008 when Lehman Brothers collapsed. Factory activity shrank even further in the euro zone, reinforcing the view that the debt-strapped region is in recession, while British manufacturing contracted at the fastest pace in two years, raising the risk that the UK economy may suffer the same fate." "China's official purchasing managers' index (PMI) showed factory activity shrank in November for the first time in nearly three years, while a similar PMI showed Indian factory growth slowed close to stall speed." "The big picture here is this is an unwinding of a 20-year debt bubble," said Peter Dixon, global financial economist at Commerzbank. "It's going to be painful, and it's going to be nasty. What policymakers are aiming for is a smoothing of the path." http://www.reuters.com/article/2011/12/01/us-global-economy-pmi-idUSTRE7B00WJ20111201