no complaints here.  I invested all I had in the market last fall.  Go baby go.  I projected the Dow to hit 13,000 by June or July but it might do it this month or next for sure it seems.

 

You know, I'm starting to think these days that almost all of our national collective efforts are going into making sure this number increases -- or at least doesn't drop.

So what happens to the people that dropped off the labor statistics? Will they no longer make their bills causing even more future problems in the economy?

Which ones?  Retirements are common at the start of the year, so hopefully they planned ahead.  Another chunk of people that 'dropped off' were holiday workers, such as students home over break.  Another drop off was something that happens every year in January and February for the agricultural and other seasonal workers.  Point being, that number is far from solely comprised of the commonly regurgitated talking point of 'people who have stopped looking'.  That's just a much more simplistic answer which some people who tend to ignore or fail to grasp societal complexities like to hear.  It's a real number, but it is not the sole factor.  Anyone who tells you otherwise is trying to mislead you.

As pointed out in the article, the recent jobs reports was a positive move in a right direction. But, when your have few works than in 2001 on the books and at current growth we won't have full employment again until 2019, its going to be a bumpy ride.

 

Things Are Not O.K.

 

"So, about that jobs report: it was genuinely good, certainly compared with the dreariness that has become the norm. Notably, for once falling unemployment was the real thing, reflecting growing availability of jobs rather than workers dropping out of the labor force, and hence out of the unemployment measure."

 

"That said, our economy remains deeply depressed. As the Economic Policy Institute points out, we started 2012 with fewer workers employed than in January 2001 — zero growth after 11 years, even as the population, and therefore the number of jobs we needed, grew steadily. The institute estimates that even at January’s pace of job creation it would take us until 2019 to return to full employment.

 

And we should never forget that the persistence of high unemployment inflicts enormous, continuing damage on our economy and our society, even if the unemployment rate is gradually declining. Bear in mind, in particular, the fact that long-term unemployment — the percentage of workers who have been out of work for six months or more — remains at levels not seen since the Great Depression."

http://www.nytimes.com/2012/02/06/opinion/krugman-things-are-not-ok.html?_r=1&hp

More Paul Krugman:

 

...And every time we get a bit of good news, the purge-and-liquidate types pop up, saying that it’s time to stop focusing on job creation.

 

Sure enough, no sooner were the new numbers out than James Bullard, the president of the St. Louis Fed, declared that the new numbers make further Fed action to promote growth unnecessary. And the sad truth is that the good jobs numbers have definitely made it less likely that the Fed will take the expansionary action it should. ...

More support for the idea that unemployment is seeing a drop because more and more people are dropping out of the labor force stats. If we keep this up we should have a 'health' 4 or 5% unemployment rate in the next few years. Then all will be well. Add in that a large majority of those that do find jobs are finding jobs paying less than what they had been earning (see previous chart in this thread) and you have a poorer and poorer Main Street in America.

 

Unemployment Decline Masks U.S. Labor Force Drop: Economy

 

"The unemployment rate’s unexpected drop to a three-year low has overshadowed a less-positive labor- market development: fewer Americans are looking for work.

 

Last week’s Labor Department announcement that the jobless rate fell to 8.3 percent in January sent stocks and bond yields higher. The same report showed the share of working-age people in the labor force had declined to the lowest level in 29 years.

 

The so-called participation rate was cited by Federal Reserve Chairman Ben S. Bernanke yesterday to support his assessment that the rate of unemployment obscures vulnerabilities in the job market."

http://www.bloomberg.com/news/2012-02-08/jobless-decline-masks-drop-in-u-s-labor-force-as-fewer-seek-work-economy.html

 

How much higher can Wall Street go and ignore the world around it?

 

The insiders are selling heavily

Commentary: July was last time insiders were equally as bearish

 

"CHAPEL HILL, N.C. (MarketWatch) — Corporate insiders are now selling their companies’ stock at a rate not seen since late last July.

 

That’s a scary parallel indeed, since that late-July spike in selling came just days before one of the more painful two-week periods in the stock market in years."

http://www.marketwatch.com/story/the-insiders-are-selling-heavily-2012-02-09?link=MW_popular

Some clarification from outside the bubble....... (please excluse the long post)

 

More from Krugman:

 

First, about that jobs report: all the usual suspects have jumped on the routine BLS population adjustment to claim that the numbers were cooked. The real story here is that the BLS estimates unemployment based on a monthly survey; this tells us what fraction of workers are unemployed. To turn that into a number of unemployed, the BLS estimates total working-age population; but it updates those estimates only once a year. So there's usually a step up or down in the totals each January, signifying nothing.

 

Back in the Bush years there were a lot of bogus claims of huge job growth reflecting a step up in the population numbers. Now we have Rush Limbaugh, Fox, etc., claiming that a step down somehow implies fake calculations. Still not true. And the thing that makes this so tiring is that they keep trotting out the same old bogosity, no matter how many times it has been refuted. [The New York Times, The Conscience of a Liberal, 2/5/12]

 

 

Economic Journalist Barry Ritholtz (WashPo):

 

So today following an otherwise pretty darn good jobs report, we get the usual perma-pessimists at Zero Hedge and Rick Santelli over at CNBC proclaiming that the report showed a drop of over 1 million people from the labor force in one month. Of course, as ususal, both Santelli and Zero Hedge have a real reading comprehension problem and completely missed that this million+ people isn't some new January phenomenon, but a result of the BLS using the 2010 census data to have more accurate data. In other words, the changes in the Household Survey to the various measures had taken place over the years prior to 2010, but for simplicity's sake, the BLS incorporates these changes into one month (which they clearly point out).

[The Big Picture, 2/3/12]

 

 

From economist Brian Wesbury, a member of the Academic Advisory Council of the Federal Reserve Bank of Chicago:

 

In his response to the State of the Union Address last week, Indiana Governor Mitch Daniels said that the "percentage of Americans with a job is the lowest in decades."  This echoes the focus of many bearish analysts on the labor force participation rate, which is the share of the population that is either working or looking for work.  Participation was only 64.1% in 2011, the lowest since 1983.   

[...]

The bears don't care that in 2011 private payrolls increased 160,000 per month and the unemployment rate fell almost a full percentage point.  They don't even care that the labor force actually grew.  They argue that the labor force isn't growing fast enough and if it had grown as fast as population growth, the unemployment rate would be significantly higher.  But, even though the labor force participation rate is the lowest in a generation, it is not the negative silver bullet that bearish analysts think.  Data from 1995 and 2005 suggest the participation rate is right about where it should be. [First Trust Portfolios, 2/2/12]

 

 

From The Wall Street Journal's Real Time Economics blog:

 

Today's jobs report carries good news on both fronts. The unemployment rate fell, and the employment-population ratio rose. That means the improvement in the labor market is real -- people actually found jobs.

 

The employment gain wasn't immediately obvious to some observers because of a quirk in this month's report. Every January, the Labor Department readjusts its data to account for changes in the population. The tweaks are especially significant in years like this one that take into account a new decennial census.

 

This year, the population adjustment makes it look like the employment-population ratio didn't change from December to January. In reality, the ratio improved by 0.3 percentage points. The gains were just masked by the population adjustments.

 

Here's what happened: According to the Census Bureau, the civilian population grew by 1.5 million people in 2011. But the growth wasn't distributed evenly. Most of the growth came among people 55 and older and, to a lesser degree, by people 16-24 years old. Both groups are less likely to work than people in their mid-20s to early 50s. So the share of the population that's working is actually lower than previously believed. Taking that into account, the employment-population ratio went up. The unemployment rate wasn't affected.

 

"There was not a big increase in discouraged workers," economist Betsey Stevenson commented on Twitter. "What happened was Census found a bunch of old people we had assumed died." [The Wall Street Journal, 2/3/12]

 

 

From Time:

 

Some Obama opponents are struggling to find a cloud in the silver lining of January's jobs numbers, which estimated that there was a 243,000-job boost and a big drop in the unemployment rate, from 8.5% to 8.3%, last month. Their biggest gripe focuses on the size of the labor force: As the unemployment rate has trended down over the last few months, anti-Obama commentators have argued that the official percentage for those without jobs is deceptive because the Bureau of Labor Statistics doesn't count those who have stopped looking for work. In Friday's report, they found a sharp increase in that group: More than 1.2 million people joined the non-job seeking pool of working-age Americans last month.

 

[...]

 

The demographic adjustments had no effect on the unemployment rate, says Mary Bowler, the resident expert in these matters at the BLS. And when it comes to labor force estimates, the steep jump in the number of those not seeking work came entirely from the census adjustment, which added 1.25 million people to that group. If you take out the census adjustment, the labor force numbers stayed essentially the same, as reflected by the labor force participation rate of 63.7%. In other words, the spike in the number of people no longer looking for work is entirely the result of some people at the Labor Department adding numbers to their spread sheets rather than an actual observed shift anywhere in the real economy. [Time, 2/3/12]

 

 

From Conservative (yet intellectually honest) blog American Spectator:

 

[ZeroHedge.com analyst and writer Tyler] Durden says that the civilian non-institutional population rose by 1.7 million month-over-month but doesn't mention that almost all of that increase was due to an adjustment by Bureau of Labor Statistics based on the results of the 2010 census, plus smaller annual adjustments.

*  *  *  *  *

I don't want to overstate the significance of Durden's oversight, which conservative voices around the media and the web are also making, namely the idea that the participation rate dropped 0.3 percent and the labor force dropped more than 1.2 million in the past month. Those things are simply not true no matter how loudly people scream "conspiracy" and "propaganda." (Having been trading financial markets for about 25 years, I've heard these same accusations about economic data being manipulated to help the incumbent president -- whether Democrat or Republican -- so many times, they just bore me now.)

 

And while the actual participation rate might in fact be this new lower number, that would also mean that prior numbers were lower. In other words, the top-line change -- caused almost entirely by using new census population numbers -- is an artifact of the new census data, but few people have read to the end of the BLS report to get that important piece of information. [The American Spectator, 2/3/12]

 

thanks for the summary, Hts121

Hopefully they can clean the clogged pipe and allow things to finally move on in a few years. We shall see.

 

Foreclosure Deal to Spur U.S. Home Seizures

 

"The $25 billion settlement with banks over foreclosure abuses may trigger a wave of home seizures, inflicting short-term pain on delinquent U.S. borrowers while making a long-term housing recovery more likely.

 

Lenders slowed the pace of foreclosures as they negotiated with attorneys general in all 50 states for more than a year over allegations of faulty and fraudulent paperwork used to repossess homes. With today’s agreement, banks are likely to resume property seizures."

http://www.bloomberg.com/news/2012-02-09/foreclosure-deal-to-spur-new-wave-of-u-s-home-seizures-help-heal-market.html

 

 

There will be a lot of 'damage control' in the media this weekend in an effort to put more lipstick back on this pig. If this PIIG goes belly up Wall Street has not priced it in. Add in the large selling by insiders and you have a not so pleasant outcome if this goes south. Of course Bernanke has promised to protect American banks from any fallout from the Greece.

 

Debt crisis: live

 

"The Greek Government heads for a reshuffle as five cabinet members resign and cast doubt over the implementation of tough austerity measures required to secure a €130bn bailout package, while PM Lucas Papademos warns default would be "uncontrolled chaos".

http://www.telegraph.co.uk/finance/debt-crisis-live/9073437/Debt-crisis-live.html

 

Greek police union wants to arrest EU/IMF officials

 

"(Reuters) - Greece's largest police union has threatened to issue arrest warrants for officials from the country's European Union and International Monetary Fund lenders for demanding deeply unpopular austerity measures.

 

In a letter obtained by Reuters Friday, the Federation of Greek Police accused the officials of "...blackmail, covertly abolishing or eroding democracy and national sovereignty" and said one target of its warrants would be the IMF's top official for Greece, Poul Thomsen."

http://www.reuters.com/article/2012/02/10/us-greece-police-idUSTRE8190UC20120210

 

 

Hah!  I'd be interested to see on what charges those Greek police want to arrest the IMF officials on.  "Threatening laving government benefits" is not a crime, to the best of my knowledge.

 

As for "covertly abolishing or eroding democracy and national sovereignty," there's nothing "covert" about the euro.

 

The Greek police should be careful what they wish for (though they may also have a point).  To regain their monetary sovereignty, they'd need to exit the euro and return to the drachma.  That would result in severe inflation in Greece (because the drachma would be vastly weaker than the euro, particularly the euro no longer sandbagged by the Greek tragedy).  Even if Greece went beyond that and repudiated its euro-denominated debts, it would gain them much because being absolved of debt may allow one to keep more of what one produces--but it doesn't make one any more productive.

 

Of course, just because that would happen doesn't mean that it wouldn't be appropriate for Greece and for the rest of the Eurozone.

Interesting list of debt levels and stats.

 

The 10 Countries Deepest in Debt

 

"1. Japan

> Debt as a pct. of GDP: 233.1%

> General government debt: $13.7 trillion

> GDP per capita (PPP): $33,994

> Nominal GDP: $5.88 trillion

> Unemployment rate: 4.6%

> Credit rating: Aa3

 

2. Greece

> Debt as a pct. of GDP: 168.2%

> General government debt: $489 billion

> GDP per capita (PPP): $28,154

> Nominal GDP: $303 billion

> Unemployment rate: 19.2%

> Credit rating: Ca

 

3. Italy

> Debt as a pct. of GDP: 120.5%

> General government debt: $2.54 trillion

> GDP per capita (PPP): $31,555

> Nominal GDP: $2.2 trillion

> Unemployment rate: 8.9%

> Credit rating: A3

 

4. Ireland

> Debt as a pct. of GDP: 108.1%

> General government debt: $225 billion

> GDP per capita (PPP): $39,727

> Nominal GDP: $217 billion

> Unemployment rate: 14.5%

> Credit rating: Ba1

 

5. Portugal

> Debt as a pct. of GDP: 101.6%

> General government debt: $257 billion

> GDP per capita (PPP): $25,575

> Nominal GDP: $239 billion

> Unemployment rate: 13.6%

> Credit rating: Ba3

 

6. Belgium

> Debt as a pct. of GDP: 97.2%

> General government debt: $479 billion

> GDP per capita (PPP): $37,448

> Nominal GDP: $514 billion

> Unemployment rate: 7.2%

> Credit rating: Aa1

 

7. United States

> Debt as a pct. of GDP: 85.5%

> General government debt: $12.8 trillion

> GDP per capita (PPP): $47,184

> Nominal GDP: $15.13 trillion

> Unemployment rate: 8.3%

> Credit rating: Aaa

 

8. France

> Debt as a pct. of GDP: 85.4%

> General government debt: $2.26 trillion

> GDP per capita (PPP): $33,820

> Nominal GDP: $2.76 trillion

> Unemployment rate: 9.9%

> Credit rating: Aaa

 

9. Germany

> Debt as a pct. of GDP: 81.8%

> General government debt: $2.79 trillion

> GDP per capita (PPP): $37,591

> Nominal GDP: $3.56 trillion

> Unemployment rate: 5.5%

 

10. United Kingdom

> Debt as a pct. of GDP: 80.9%

> General government debt: $1.99 trillion

> GDP per capita (PPP): $35,860

> Nominal GDP: $2.46 trillion

> Unemployment rate: 8.4%

> Credit rating: Aaa"

 

Read more: The 10 Countries Deepest in Debt - 24/7 Wall St. http://247wallst.com/2012/02/14/the-tencountries-deepest-in-debt/#ixzz1mOtIAS5w

You dont hear much about Japan being in deep water.  And we have the same debt rate as France?  heh.

Japan is not completely off the hook, though it's certainly managing a 233%+ debt-to-GDP ratio far better (so far) than anyone had any right to expect:

 

http://online.wsj.com/article/SB10001424052970204624204577182424205452462.html

 

Concerns Are Rising on Japan's Debt

Default-Insurance Costs Climb as Raters Weigh Downgrades; 'Absurdly Unsustainable'

 

TOKYO—Jitters from Europe's sovereign-debt crisis are now touching Japan, a country with a long-calm bond market despite fiscal deficits far larger than those of Greece or Italy.

 

In recent weeks, the cost of insuring against default on Japanese government bonds—a measure of perceived credit risk—has increased sharply, nearing the historic peak at the height of the Greek debt crisis in October. The price for default insurance, through derivatives known as credit-default swaps, exceeds levels seen last March, immediately after natural disasters and a nuclear crisis darkened Japan's outlook.

 

Investors will be watching two things closely in coming weeks: the credit-ratings firms and the Japanese parliament. Two top raters—Standard & Poor's and Fitch Ratings—have put Japan's government debt on watch for possible downgrade, with verdicts possible over the next month. A key factor in their assessment, and the market's, will be whether Prime Minister Yoshihiko Noda can push a sales-tax increase through the legislature by March. He is battling criticism from opposition parties, and even qualms in his own ruling party.

February builder sentiment rises for fifth month

 

"The National Association of Home Builders/Wells Fargo housing market index rose to 29 in February from 25 in January, meaning the gauge has more than doubled since September. Economists polled by MarketWatch had expected a reading of 26.

 

Though that’s still far below the level considered “good” — the seasonally adjusted gauge needs a reading of 50 to do that, which hasn’t been the case since April 2006 — it does indicate improving sentiment for builders."

http://www.marketwatch.com/story/builder-sentiment-in-feb-climbs-for-fifth-month-2012-02-15

 

New York factory activity improves in February

Manufacturing off to solid start in 2012

 

"WASHINGTON (MarketWatch) — An index tracking manufacturing activity in the New York region jumped in February to its highest level since June 2010, the Federal Reserve Bank of New York reported Wednesday.

 

Although the details of the report were softer than the headline index suggested, economists said the data show that manufacturing is on solid footing at the start of the year."

http://www.marketwatch.com/story/new-york-factory-activity-improves-in-february-2012-02-15

 

Here is a more detailed breakdown of the data that looks past the headline.

 

Despite Two Thirds Of Components Declining, Empire Fed Prints At Highest Since June 2010

 

"Chalk this one to "seasonal adjustments" or something, cause we no longer have any clue what is going on with the data fudging in America. When it comes to banana republic economic indicators the US is rapidly eclipsing China - case in point the Empire State Manufacturing Survey, which despite seeing the majority, or 6 out of 9 sub indices, declining in February, managed to not only rise, but beat the highest Wall Street estimate, printing at 19.53, the highest since June 2010, on expectations of 15.00, and compared to a previous print of 13.48. What lead to this epic surge? Why nothing short of a decline in just about two thirds of the components: New Orders declined from 21.69 to 22.79, Unfilled Orders declined from -5.49 to -7.06; Inventories declined from 6.59 to -4.71, Prices Paid declined from 26.37 to 25.88; Prices received declined from 23.08 to 15.29, and Number of Employees declined from 12.09 to 11.76. What increased? Shipments, Average Employee Workweek, and, drumroll, Delivery Times."

http://www.zerohedge.com/news/despite-two-thirds-components-declining-empire-fed-prints-highest-june-2010

I heard that report on Manufacturing increasing, but thought it was nationwide, not just the NY Fed district?

 

 

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

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

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

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

They haven't "officially defaulted."  There is quite a difference between what they are doing and a true default.  They are not out of the woods, but they aren't "officially defaulting." 

Oh yes they have defaulted.  They defaulted months ago actually, when they stopped paying all their debt obligations.  Just because they are selectively paying some still, that doesn't exclude them from defaulting.  This is just a spin to make the situation look less dire than what it really is.

 

All this is just playing with the facts to sort out the process of how things will be handled with Greece, to set the precedent of how the other countries will be handled.

One spin makes it look less dire and the other spin would have you believe the appocalypse is upon us.  I'm all spun out.

I'm more interested in how big a "predefined quorum" is in this newly-imposed CACs.  Does this mean 51% of voting securities can change the terms, or is there some other threshold?

Things must be bad in Greece; one of my favorite internet radio stations called Discomania was out of Greece shut down. It was a fun mix of Italo Disco, Sandra, Whitesnake and Saxon.

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

 

^ I don't know how this impacts CMBS, but in a traditional commercial bank portfolio, most of the commercial properties have been re-appraised within the last 2 years. Anything in workout is getting re-appraised annually, driven not just by internal policies, but by Federal regulators mandating it. Where there is a collateral shortfall, banks have been seeking either paydowns, or additional collateral.

 

There's still some pain to be realized, to be sure, but I'm not entirely sure I buy the doom and gloom as portrayed in the above article.

^ I don't know how this impacts CMBS, but in a traditional commercial bank portfolio, most of the commercial properties have been re-appraised within the last 2 years. Anything in workout is getting re-appraised annually, driven not just by internal policies, but by Federal regulators mandating it. Where there is a collateral shortfall, banks have been seeking either paydowns, or additional collateral.

 

There's still some pain to be realized, to be sure, but I'm not entirely sure I buy the doom and gloom as portrayed in the above article.

 

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.

One thing I noted from the article (I'm not all the way through it) is that a lot of the empty spaces in the article is that they are the work of either mergers, corporate mistakes, technological changes (Blockbuster) or stores that just aren't "cool" (Sears, KMart, Best Buy) any more. The author has to be talking about Atlanta since it's the only place that had both Donato's and Safeways around except Smithsonians. When McDonald's owned Donato's they went bezerk opening 30+ Donato's all over Atlanta, blasting them with Midwestern pizza that they may or may not have wanted -- at least in that quantity. So, I don't totally buy the doom as well, at least for popular, conservatively growing stores and restaurants. But it's the developers' own faults for overbuilding and convincing companies to move the party to the next freeway exit every 10 years.

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

but I'm not entirely sure I buy the doom and gloom as portrayed in the above article.

 

Consider the source.  Not that the blog is not informative.  It is far from drivel.  But its contributors clearly have an agenda.

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

 

 

 

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

 

And the other half of the story.... http://www.politifact.com/truth-o-meter/statements/2012/feb/29/national-republican-congressional-committee/nrcc-ad-blames-barack-obama-food-stamp-use-rising-/

Those "zerohedge" posts are polemic to the point of being "not useful"

It's the income inequality, stupid.

 

Income goes up...especially for the rich

http://economy.money.cnn.com/2012/03/05/income-goes-up-especially-for-the-rich/

 

After two years of declines, Americans' income finally rose in 2010. The Internal Revenue Service provided a first peek at taxpayers' returns and it showed that adjusted gross income totaled $8 trillion, up 5.2% from 2009.

 

But a closer look at the data reveals that only the wealthiest Americans will be popping the Cristal.

 

Taxpayers earning more than $250,000 saw their total adjusted gross incomes rise by 13.8%, while those bringing home between $200K and $250K enjoyed at 6.7% increase, according to a CNNMoney analysis.

The proper venacular is "job-creators", stupid.

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

The proper venacular is "job-creators", stupid.

 

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

I wish someone would tell that to the boomers

The proper venacular is "job-creators", stupid.

 

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 proper venacular is "job-creators", stupid.

 

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.

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/

Most of the school levies in NEO passed yesterday.  JMO.... but that is significant in terms of how people view the economy.

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/

I figure things will be in stasis until after the election...then its back to economic brinksmanship btw Obama and the GOP Congress.

 

 

 

The problem is those types of jobs have become more and more a part of the picture. The balance is being lost.

 

..this was the comment during the Clinton years, that job creation was at the lower end of the wage spectrum, that "jobs are plentiful but you needed two to survive".  Thats what this recovery will look like.  Probably locking into a higher rate of structural unemployment and then weak job creation at lower-paying jobs.

 

 

 

 

From February.  Dont know if this has been posted or not, but the leading indicators point to a growing economy:

 

LEI Increases Again

 

Released: Friday, February 17, 2012

 

The Conference Board Leading Economic Index® (LEI) for the U.S. increased 0.4 percent in January to 94.9 (2004 = 100), following a 0.5 percent increase in December and a 0.3 percent increase in November.

 

Said Ataman Ozyildirim, economist at The Conference Board: “This fourth consecutive gain in the LEI reflected fairly widespread strength among its components, pointing to somewhat more positive economic conditions in early 2012. The LEI’s increase in January was led not only by improving financial and credit indicators, but also rising average workweek in manufacturing. These both offset consumers’ outlook about the economy, which remained pessimistic, though slightly less so. Meanwhile, the CEI rose again in January as employment, income, and sales data all point to improving current economic conditions despite a lack of contribution from industrial production.”

 

 

From February.  Dont know if this has been posted or not, but the leading indicators point to a growing economy:

 

LEI Increases Again

 

Released: Friday, February 17, 2012

 

The Conference Board Leading Economic Index® (LEI) for the U.S. increased 0.4 percent in January to 94.9 (2004 = 100), following a 0.5 percent increase in December and a 0.3 percent increase in November.

 

Said Ataman Ozyildirim, economist at The Conference Board: This fourth consecutive gain in the LEI reflected fairly widespread strength among its components, pointing to somewhat more positive economic conditions in early 2012. The LEIs increase in January was led not only by improving financial and credit indicators, but also rising average workweek in manufacturing. These both offset consumers outlook about the economy, which remained pessimistic, though slightly less so. Meanwhile, the CEI rose again in January as employment, income, and sales data all point to improving current economic conditions despite a lack of contribution from industrial production.

 

 

 

Jeffery,

Thank you for posting the data.

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