October 2010 U.S. Economic Fundamentals
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U.S. Home prices rise 0.6%
Home prices rose in July for the fourth straight month, but many cities are bracing for declines in the year ahead.
The Standard & Poor`s/Case-Shiller 20-city home price index increased 0.6 per cent in July from June and 3.2 per cent from a year ago. Twelve cities showed monthly price gains. Cleveland`s prices were flat.
Read the full article here.
Home prices rose in July for the fourth straight month, but many cities are bracing for declines in the year ahead.
The Standard & Poor`s/Case-Shiller 20-city home price index increased 0.6 per cent in July from June and 3.2 per cent from a year ago. Twelve cities showed monthly price gains. Cleveland`s prices were flat.
Read the full article here.
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U.S. consumers feeling grim
Americans` view of the economy turned grimmer in September amid escalating job worries, falling to the lowest point since February.
The downbeat report, released Tuesday, raises more fears about the tenuous U.S. economic recovery.
The Conference Board, based in New York, said its monthly Consumer Confidence Index now stands at 48.5, down from the revised 53.2 in August. Economists surveyed by Thomson Reuters were expecting 52.5.
The reading marked the lowest point since February`s 46.4. It takes a reading of 90 to indicate a healthy economy – a level not approached since the recession began in December, 2007.
Economists watch confidence closely because consumer spending accounts for about 70 per cent of U.S. economic activity and is critical to a strong rebound.
The index – which measures how shoppers feel about business conditions, the job market and the next six months – had been recovering fitfully since hitting an all-time low of 25.3 in February 2009, but Americans are just as downbeat as they were a year ago.
Read the full article here.
Americans` view of the economy turned grimmer in September amid escalating job worries, falling to the lowest point since February.
The downbeat report, released Tuesday, raises more fears about the tenuous U.S. economic recovery.
The Conference Board, based in New York, said its monthly Consumer Confidence Index now stands at 48.5, down from the revised 53.2 in August. Economists surveyed by Thomson Reuters were expecting 52.5.
The reading marked the lowest point since February`s 46.4. It takes a reading of 90 to indicate a healthy economy – a level not approached since the recession began in December, 2007.
Economists watch confidence closely because consumer spending accounts for about 70 per cent of U.S. economic activity and is critical to a strong rebound.
The index – which measures how shoppers feel about business conditions, the job market and the next six months – had been recovering fitfully since hitting an all-time low of 25.3 in February 2009, but Americans are just as downbeat as they were a year ago.
Read the full article here.
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U.S. jobless claims rise
WASHINGTON - New U.S. claims for unemployment benefits rose unexpectedly last week, government data showed on Thursday, highlighting continued labour market weakness.
Initial claims for state unemployment benefits increased 12,000 to a seasonally adjusted 465,000, the Labor Department said, breaking two straight weeks of declines.
Analysts polled by Reuters had forecast claims unchanged at 450,000. The government revised the prior week`s figure up to 453,000.
Last week`s claims data covered the survey period for the government`s closely watched employment report for September, scheduled for release early next month.
A Labor Department official said only one state had been estimated for last week`s claims report and noted that applications for jobless benefits tend to rise in the week following a holiday.
Read the full article here.
WASHINGTON - New U.S. claims for unemployment benefits rose unexpectedly last week, government data showed on Thursday, highlighting continued labour market weakness.
Initial claims for state unemployment benefits increased 12,000 to a seasonally adjusted 465,000, the Labor Department said, breaking two straight weeks of declines.
Analysts polled by Reuters had forecast claims unchanged at 450,000. The government revised the prior week`s figure up to 453,000.
Last week`s claims data covered the survey period for the government`s closely watched employment report for September, scheduled for release early next month.
A Labor Department official said only one state had been estimated for last week`s claims report and noted that applications for jobless benefits tend to rise in the week following a holiday.
Read the full article here.
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Analyst who got U.S. meltdown right is ringing alarm bells again
Unless you`re a stock jockey, a bank analyst or a CNBC watcher, you`ve probably never heard of Meredith Whitney.
But in rarefied financial circles, the former Oppenheimer bank analyst has built a formidable reputation as an astute iconoclast who isn`t afraid to call it as she sees it. (Translation: she scares the hell out of investors.)
Back in 2006, when the U.S. housing market was red hot, Whitney smelled trouble. She was among the first to draw the links between the explosion in subprime mortgages, the proliferation of subprime-backed paper being peddled by the wizards on Wall Street, and the threat these toxic assets posed to the global banking system.
While her critics called her crazy, Whitney insisted that Wall Street`s banks were on far shakier ground than most investors and analysts realized. She also predicted that bank giant Citigroup, an icon of the financial establishment, was about to slash its dividend.
Despite fierce denials from the suits on Wall Street and even some death threats, Whitney stood firm. She was proved right.
Read the full article here.
Unless you`re a stock jockey, a bank analyst or a CNBC watcher, you`ve probably never heard of Meredith Whitney.
But in rarefied financial circles, the former Oppenheimer bank analyst has built a formidable reputation as an astute iconoclast who isn`t afraid to call it as she sees it. (Translation: she scares the hell out of investors.)
Back in 2006, when the U.S. housing market was red hot, Whitney smelled trouble. She was among the first to draw the links between the explosion in subprime mortgages, the proliferation of subprime-backed paper being peddled by the wizards on Wall Street, and the threat these toxic assets posed to the global banking system.
While her critics called her crazy, Whitney insisted that Wall Street`s banks were on far shakier ground than most investors and analysts realized. She also predicted that bank giant Citigroup, an icon of the financial establishment, was about to slash its dividend.
Despite fierce denials from the suits on Wall Street and even some death threats, Whitney stood firm. She was proved right.
Read the full article here.
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Number of the Week: 41.7 Million spend too much on Housing
41.7 million: U.S. households who face excessive housing costs
In the conventional narrative of the recession and recovery, one bright spot has been the speed with which U.S. households are shedding their debts and getting their finances back in order.
The latest data from the Census Bureau, though, offer a less encouraging picture: Even as the average household debt burden improves, an increasing number of households are finding themselves financially stretched.
As of 2009, some 41.7 million U.S. households, or 36.7% of the total, faced housing costs that exceeded 30% of their pretax income — a level typically defined as the threshold of affordability. That`s an increase of 1.5 million from 2007, despite a sharp drop in house prices and policy makers` extraordinary efforts to bring down mortgage payments.
At first glance, the numbers seem incongruous. By most measures economists and policy makers follow, U.S. households` finances are getting better. Their debt burden, expressed as mortgage and consumer debt outstanding as a share of disposable income, has been falling ever since September 2007, from a peak of 130% to 119% in June 2010. Over the same period, payments on that debt have decreased from 18.9% to 17.0% of disposable income — the lowest level since 1998. To be sure, much of the improvement is coming as a result of defaults, but it still suggests consumers are getting in a better position to start spending again.
Read the full article here.
41.7 million: U.S. households who face excessive housing costs
In the conventional narrative of the recession and recovery, one bright spot has been the speed with which U.S. households are shedding their debts and getting their finances back in order.
The latest data from the Census Bureau, though, offer a less encouraging picture: Even as the average household debt burden improves, an increasing number of households are finding themselves financially stretched.
As of 2009, some 41.7 million U.S. households, or 36.7% of the total, faced housing costs that exceeded 30% of their pretax income — a level typically defined as the threshold of affordability. That`s an increase of 1.5 million from 2007, despite a sharp drop in house prices and policy makers` extraordinary efforts to bring down mortgage payments.
At first glance, the numbers seem incongruous. By most measures economists and policy makers follow, U.S. households` finances are getting better. Their debt burden, expressed as mortgage and consumer debt outstanding as a share of disposable income, has been falling ever since September 2007, from a peak of 130% to 119% in June 2010. Over the same period, payments on that debt have decreased from 18.9% to 17.0% of disposable income — the lowest level since 1998. To be sure, much of the improvement is coming as a result of defaults, but it still suggests consumers are getting in a better position to start spending again.
Read the full article here.
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Pheonix an oasis for Canadians in hunt for homes
As a cop, Diane Olson once patrolled the gritty streets of Winnipeg, her hometown.
But after marrying an American citizen, she relocated to sunny Phoenix in the late 1990s, where she became a realtor.
It proved to be a prescient move. A decade later, Olson heads one of the busiest residential real estate offices in the desert state, with a staff of 22 people.
By focusing her marketing efforts on prospective Canadian buyers -- including a visit to Edmonton on Monday, followed by stops in Red Deer and Calgary later next week -- Olson has parlayed the biggest meltdown in U.S. housing market history into a booming business.
Ironically, it wasn`t really planned. It just happened naturally. Although Olson grew up in a real estate family -- her father and brother are both developers -- her success evolved out of her extensive network of friends and family contacts in Winnipeg.
"When the Phoenix housing market started crashing (in late 2006), my phone began ringing. My friends, my brother`s friends, my dad`s friends, they were all saying: `Hey, can you help me get a house in Arizona?` " Olson recalls.
Read the full article here.
As a cop, Diane Olson once patrolled the gritty streets of Winnipeg, her hometown.
But after marrying an American citizen, she relocated to sunny Phoenix in the late 1990s, where she became a realtor.
It proved to be a prescient move. A decade later, Olson heads one of the busiest residential real estate offices in the desert state, with a staff of 22 people.
By focusing her marketing efforts on prospective Canadian buyers -- including a visit to Edmonton on Monday, followed by stops in Red Deer and Calgary later next week -- Olson has parlayed the biggest meltdown in U.S. housing market history into a booming business.
Ironically, it wasn`t really planned. It just happened naturally. Although Olson grew up in a real estate family -- her father and brother are both developers -- her success evolved out of her extensive network of friends and family contacts in Winnipeg.
"When the Phoenix housing market started crashing (in late 2006), my phone began ringing. My friends, my brother`s friends, my dad`s friends, they were all saying: `Hey, can you help me get a house in Arizona?` " Olson recalls.
Read the full article here.
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Which cities face the biggest housing risks?Four years into the U.S. housing bust some communities hardest hit initially remained under stress in 2009, particularly in California and Florida, according to recently released data from U.S. Census Bureau.
Real Time Economics has worked up a simple housing-stress indicator for most of the major U.S. metropolitan areas that combines three factors — the fraction of mortgage-holding homeowners in a community with a monthly housing payment in excess of 30% of income, the percentage of all people in the region without health insurance and the fraction of the population without a job. The indicator uses 2009 data from Census`s American Community Survey.
Within more than 500 metro areas, the top 20 most stressed include nine in California and six in Florida, where the housing bust has been particularly acute. Among the most populous cities, Miami tops the list, followed by California`s Inland Empire, Los Angeles and San Diego.
California and Florida ranked third and fourth, respectively, in foreclosure rates in the third quarter, according to real-estate web site RealtyTrachttp://http://www.realtytrac.com/foreclosure/foreclosure-rates.html. Nevada, which has the nation`s highest foreclosure rate (1 in every 23 households), and No. 2 Arizona also are well represented on the list. Among the 49 most populous cities in the nation, Las Vegas has the fifth highest stress index number, Phoenix is 11th.
Read the full article here.
Real Time Economics has worked up a simple housing-stress indicator for most of the major U.S. metropolitan areas that combines three factors — the fraction of mortgage-holding homeowners in a community with a monthly housing payment in excess of 30% of income, the percentage of all people in the region without health insurance and the fraction of the population without a job. The indicator uses 2009 data from Census`s American Community Survey.
Within more than 500 metro areas, the top 20 most stressed include nine in California and six in Florida, where the housing bust has been particularly acute. Among the most populous cities, Miami tops the list, followed by California`s Inland Empire, Los Angeles and San Diego.
California and Florida ranked third and fourth, respectively, in foreclosure rates in the third quarter, according to real-estate web site RealtyTrachttp://http://www.realtytrac.com/foreclosure/foreclosure-rates.html. Nevada, which has the nation`s highest foreclosure rate (1 in every 23 households), and No. 2 Arizona also are well represented on the list. Among the 49 most populous cities in the nation, Las Vegas has the fifth highest stress index number, Phoenix is 11th.
Read the full article here.
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The latest updated foreclosure ratesIRVINE, Calif. – Oct. 15, 2009 — RealtyTrac® (www.realtytrac.com), the leading online marketplace for foreclosure properties, today released its U.S. Foreclosure Market Report™ for Q3 2009, which shows that foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 937,840 properties in the third quarter, a 5 percent increase from the previous quarter and an increase of nearly 23 percent from Q3 2008. One in every 136 U.S. housing units received a foreclosure filing during the quarter — the highest quarterly foreclosure rate since RealtyTrac began issuing its report in the first quarter of 2005.
Foreclosure filings were reported on 343,638 properties in September, a 4 percent decrease from the previous month but a 29 percent increase from September 2008. Despite the monthly decrease, September`s total was still the third highest monthly total since the RealtyTrac report began in January 2005, behind only July and August of this year.
"Bank repossessions, or REOs, jumped 21 percent from the second quarter to the third quarter, corresponding to jumps in defaults and scheduled auctions in the previous two quarters," said James J. Saccacio, chief executive officer of RealtyTrac. "REO activity increased from the previous quarter in all but two states and the District of Columbia, indicating that lenders may be starting to work through some of the pent-up foreclosure inventory caused by legislative delays, loan modification efforts and high volumes of distressed properties."
Report methodology
The RealtyTrac U.S. Foreclosure Market Report provides a count of the total number of properties with at least one foreclosure filing reported during the month or quarter — broken out by type of filing at the state and national level. Data is also available at the individual county level for both Q1 2009 and March 2009. Data is collected from more than 2,200 counties nationwide, and those counties account for more than 90 percent of the U.S. population. RealtyTrac`s report incorporates documents filed in all three phases of foreclosure: Default — Notice of Default (NOD) and Lis Pendens (LIS); Auction — Notice of Trustee Sale and Notice of Foreclosure Sale (NTS and NFS); and Real Estate Owned, or REO properties (that have been foreclosed on and repurchased by a bank). If more than one foreclosure document is filed against a property during the month or quarter, only the most recent filing is counted in the report.
Read the full article here.
Foreclosure filings were reported on 343,638 properties in September, a 4 percent decrease from the previous month but a 29 percent increase from September 2008. Despite the monthly decrease, September`s total was still the third highest monthly total since the RealtyTrac report began in January 2005, behind only July and August of this year.
"Bank repossessions, or REOs, jumped 21 percent from the second quarter to the third quarter, corresponding to jumps in defaults and scheduled auctions in the previous two quarters," said James J. Saccacio, chief executive officer of RealtyTrac. "REO activity increased from the previous quarter in all but two states and the District of Columbia, indicating that lenders may be starting to work through some of the pent-up foreclosure inventory caused by legislative delays, loan modification efforts and high volumes of distressed properties."
Report methodology
The RealtyTrac U.S. Foreclosure Market Report provides a count of the total number of properties with at least one foreclosure filing reported during the month or quarter — broken out by type of filing at the state and national level. Data is also available at the individual county level for both Q1 2009 and March 2009. Data is collected from more than 2,200 counties nationwide, and those counties account for more than 90 percent of the U.S. population. RealtyTrac`s report incorporates documents filed in all three phases of foreclosure: Default — Notice of Default (NOD) and Lis Pendens (LIS); Auction — Notice of Trustee Sale and Notice of Foreclosure Sale (NTS and NFS); and Real Estate Owned, or REO properties (that have been foreclosed on and repurchased by a bank). If more than one foreclosure document is filed against a property during the month or quarter, only the most recent filing is counted in the report.
Read the full article here.
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IMF revises down U.S. growth for this year and next
WASHINGTON - U.S. economic growth will be much weaker this year and in 2011 than previously thought and that dims hopes for bringing down a very high unemployment rate anytime soon, the International Monetary Fund said on Wednesday.
In a sober assessment of the U.S. outlook, the IMF pulled down its estimate for 2010 growth to 2.6% from the 3.3% it published in July and said gross domestic product or GDP will expand 2.3% in 2011 instead of 2.9%.
"The most likely prospect for the U.S. economy is for a continued but slow recovery, with growth far weaker than in previous recoveries, considering the depth of the recession," the
IMF said in its World Economic Outlook published ahead of weekend semi-annual meetings of it and the World Bank.
The IMF said the main reason the U.S. recovery is so weak is that consumer spending is sluggish and suggests it is little wonder that is the case. Falling home prices have reduced household wealth, 9.6% of the workforce is unemployed, banks wont lend and people are scared into saving.
Read the full article here.
WASHINGTON - U.S. economic growth will be much weaker this year and in 2011 than previously thought and that dims hopes for bringing down a very high unemployment rate anytime soon, the International Monetary Fund said on Wednesday.
In a sober assessment of the U.S. outlook, the IMF pulled down its estimate for 2010 growth to 2.6% from the 3.3% it published in July and said gross domestic product or GDP will expand 2.3% in 2011 instead of 2.9%.
"The most likely prospect for the U.S. economy is for a continued but slow recovery, with growth far weaker than in previous recoveries, considering the depth of the recession," the
IMF said in its World Economic Outlook published ahead of weekend semi-annual meetings of it and the World Bank.
The IMF said the main reason the U.S. recovery is so weak is that consumer spending is sluggish and suggests it is little wonder that is the case. Falling home prices have reduced household wealth, 9.6% of the workforce is unemployed, banks wont lend and people are scared into saving.
Read the full article here.
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U.S. private payrolls fall, raising Fed easing chance
NEW YORK - U.S. private employers unexpectedly shed jobs in September, reinforcing the belief that the U.S. Federal Reserve will embark on another round of monetary policy stimulus to support the economic recovery as early as next month.
ADP`s national employment report on Wednesday said U.S. private employer payrolls fell by 39,000 jobs in September. By contrast a Reuters consensus forecast was for an increase of 24,000 jobs.
"It`s not earth-shatteringly bad, but it`s worse than expected," said Zach Pandl, U.S. economist at Nomura Securities in New York.
Over the past six months the ADP number has underperformed nonfarm payrolls by 80,000, Mr. Pandl said.
The Federal Reserve`s decision, due at their early November policy meeting, will likely hinge on inflation and labor market developments, and the monthly U.S. Labor Department report on employment on Friday.
U.S. nonfarm payrolls on Friday will likely show an unchanged reading in September as a further unwinding of temporary Census jobs and layoffs at state and local governments offset a slight pickup in private hiring, according to a Reuters survey.
Read the full article here.
NEW YORK - U.S. private employers unexpectedly shed jobs in September, reinforcing the belief that the U.S. Federal Reserve will embark on another round of monetary policy stimulus to support the economic recovery as early as next month.
ADP`s national employment report on Wednesday said U.S. private employer payrolls fell by 39,000 jobs in September. By contrast a Reuters consensus forecast was for an increase of 24,000 jobs.
"It`s not earth-shatteringly bad, but it`s worse than expected," said Zach Pandl, U.S. economist at Nomura Securities in New York.
Over the past six months the ADP number has underperformed nonfarm payrolls by 80,000, Mr. Pandl said.
The Federal Reserve`s decision, due at their early November policy meeting, will likely hinge on inflation and labor market developments, and the monthly U.S. Labor Department report on employment on Friday.
U.S. nonfarm payrolls on Friday will likely show an unchanged reading in September as a further unwinding of temporary Census jobs and layoffs at state and local governments offset a slight pickup in private hiring, according to a Reuters survey.
Read the full article here.
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U.S. loses 95,000 jobs
A wave of government layoffs in September outpaced weak hiring in the private sector, pushing down the nation`s payrolls by a net total of 95,000 jobs.
The unemployment rate held at 9.6 per cent last month, the Labor Department
said Friday. The jobless rate has now topped 9.5 percent for 14 straight months, the longest stretch since the 1930s.
Read the full article here.
A wave of government layoffs in September outpaced weak hiring in the private sector, pushing down the nation`s payrolls by a net total of 95,000 jobs.
The unemployment rate held at 9.6 per cent last month, the Labor Department
said Friday. The jobless rate has now topped 9.5 percent for 14 straight months, the longest stretch since the 1930s. Read the full article here.
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Bank of America halts foreclosure
Potential flaws in foreclosure documents are threatening to throw the real estate
industry into a full-blown crisis, as Bank of America Corp.(BAC-N13.17-0.14-1.05%) on Friday became the first bank to stop sales of foreclosed homes in all 50 states.
The move, along with another decision on foreclosures by PNC Financial Services Inc. (PNC-N53.110.010.02%), adds to growing concerns that mortgage lenders have been evicting homeowners using flawed court papers.
Read the full article here.
Potential flaws in foreclosure documents are threatening to throw the real estate
industry into a full-blown crisis, as Bank of America Corp.(BAC-N13.17-0.14-1.05%) on Friday became the first bank to stop sales of foreclosed homes in all 50 states. The move, along with another decision on foreclosures by PNC Financial Services Inc. (PNC-N53.110.010.02%), adds to growing concerns that mortgage lenders have been evicting homeowners using flawed court papers.
Read the full article here.
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Faulty foreclosures may prolong the slump
Howard Cohen hasn`t paid the loan on his Tukwila (Wash.) home in a year, and when he heard in mid-September that Ally Financial`s (GJM) GMAC Mortgage unit was suspending foreclosure evictions in 23 states, it gave him hope. "Maybe I`ll stay in my house, too," says Cohen, a 57-year-old commercial-loan broker whose business fell off after the financial crisis. Cohen was encouraged even though his mortgage servicer, Bank of America (BAC), hasn`t reported any irregularities.
Attorneys general in Iowa, Illinois, and Texas started investigating Ally`s GMAC unit after it disclosed that one of its employees said in a December 2009 deposition that he had signed thousands of foreclosure documents without verifying their accuracy. The company also faces inquiries from officials in Ohio, Colorado, and North Carolina. A JPMorgan Chase (JPM) executive has said she signed thousands of documents without checking loan records, according to a deposition she made in a court case in Palm Beach, Fla., in May. JPMorgan spokesman Thomas Kelly declined to comment. On Sept. 29 the bank asked judges to postpone rulings in pending foreclosure cases while it reviews and possibly resubmits statements.
"Regrettably, a procedural error was found to have occurred in certain affidavits required in certain states," GMAC said in a Sept. 24 statement, adding that the problem "is not related to the accuracy of the underlying transaction." The "error" was the employee`s failure to sign the documents in the presence of a notary public or signing them without "direct personal knowledge of all the information," GMAC said. The U.S. government, which has been pressing lenders to reduce foreclosures as evictions hit record levels, owns 56 percent of Detroit-based Ally. The company, formerly known as GMAC, has benefited from more than $17 billion in bailouts.
Read the full article here.
Howard Cohen hasn`t paid the loan on his Tukwila (Wash.) home in a year, and when he heard in mid-September that Ally Financial`s (GJM) GMAC Mortgage unit was suspending foreclosure evictions in 23 states, it gave him hope. "Maybe I`ll stay in my house, too," says Cohen, a 57-year-old commercial-loan broker whose business fell off after the financial crisis. Cohen was encouraged even though his mortgage servicer, Bank of America (BAC), hasn`t reported any irregularities.
Attorneys general in Iowa, Illinois, and Texas started investigating Ally`s GMAC unit after it disclosed that one of its employees said in a December 2009 deposition that he had signed thousands of foreclosure documents without verifying their accuracy. The company also faces inquiries from officials in Ohio, Colorado, and North Carolina. A JPMorgan Chase (JPM) executive has said she signed thousands of documents without checking loan records, according to a deposition she made in a court case in Palm Beach, Fla., in May. JPMorgan spokesman Thomas Kelly declined to comment. On Sept. 29 the bank asked judges to postpone rulings in pending foreclosure cases while it reviews and possibly resubmits statements.
"Regrettably, a procedural error was found to have occurred in certain affidavits required in certain states," GMAC said in a Sept. 24 statement, adding that the problem "is not related to the accuracy of the underlying transaction." The "error" was the employee`s failure to sign the documents in the presence of a notary public or signing them without "direct personal knowledge of all the information," GMAC said. The U.S. government, which has been pressing lenders to reduce foreclosures as evictions hit record levels, owns 56 percent of Detroit-based Ally. The company, formerly known as GMAC, has benefited from more than $17 billion in bailouts.
Read the full article here.
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Is it time for a federal moratorium on foreclosures?
The jobs numbers released this past Friday show unemployment continues unabated even as the federal stimulus program winds down and states and local governments continue to cut back on jobs. The lack of new jobs and the high rate of unemployment especially among the "Echo Boomers" who should be buying their first homes, estimated by some to be over 30%, will keep household formation, now a quarter of what it would normally be, low and housing demand stalled.
Read the full article here.
The jobs numbers released this past Friday show unemployment continues unabated even as the federal stimulus program winds down and states and local governments continue to cut back on jobs. The lack of new jobs and the high rate of unemployment especially among the "Echo Boomers" who should be buying their first homes, estimated by some to be over 30%, will keep household formation, now a quarter of what it would normally be, low and housing demand stalled.
Read the full article here.
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U.S. growth outlook downgraded
NEW YORK - The U.S. growth outlook has darkened significantly in the latest Reuters poll, even though the Federal Reserve is unanimously expected to embark on a fresh round of asset purchases to prop up the economy.
Economists have chopped their outlook for gross domestic product (GDP) through to the third quarter of 2011, with no prospect of an interest rate hike until the end of next year.
All 52 analysts who answered the question expected a second round of quantitative easing (QE2), which would likely include expanded Fed purchases of government bonds. And the vast majority expect an announcement at the central bank`s policy meeting in November.
"QE2 in November is all but certain and the only debate stands over the details of implementation. Count us as skeptical if not on the likelihood of QE2 then certainly on its effectiveness," said Jeffrey Rosenberg, head of global credit strategy at BofAML in New York.
The median of forecasts provided put the size of the next round of asset purchases at US$500-billion. Estimates ranged from US$500-billion to US$1.25-trillion, roughly similar to a Reuters poll last week just of the Wall Street bond dealers.
Read the full article here.
NEW YORK - The U.S. growth outlook has darkened significantly in the latest Reuters poll, even though the Federal Reserve is unanimously expected to embark on a fresh round of asset purchases to prop up the economy.
Economists have chopped their outlook for gross domestic product (GDP) through to the third quarter of 2011, with no prospect of an interest rate hike until the end of next year.
All 52 analysts who answered the question expected a second round of quantitative easing (QE2), which would likely include expanded Fed purchases of government bonds. And the vast majority expect an announcement at the central bank`s policy meeting in November.
"QE2 in November is all but certain and the only debate stands over the details of implementation. Count us as skeptical if not on the likelihood of QE2 then certainly on its effectiveness," said Jeffrey Rosenberg, head of global credit strategy at BofAML in New York.
The median of forecasts provided put the size of the next round of asset purchases at US$500-billion. Estimates ranged from US$500-billion to US$1.25-trillion, roughly similar to a Reuters poll last week just of the Wall Street bond dealers.
Read the full article here.
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Foreclosure-gate is Deepwater Horizon all over again
The evolution of the foreclosure-gate is starting to feel more and more Deepwater-Horizon like every day.
What really makes it similar -- and this is a point we made yesterday while chatting with Tadas Viskanta on Abnormal Returns TV (watch here!) -- is the seemingly unquantifiable risk to the banks.
It could be an enormous problem. It could be modest. There are so many moving parts to this that any guesses are bound to be just that: guesses.
Deepwater Horizon was similar. At one point in the middle of the summer, there was serious talk about BP going bankrupt and the entire Gulf of Mexico being permanently sullied. It was really, really difficult for anyone to say. And in the end, the fact that the pollution was not at catastrophic levels seemed to surprise almost everyone.
Beyond that, the arc of the story is similar. As Yves Smith notes, the story is now starting to actually hurt the share prices of banks, similar to how BP shares were fairly unscathed in the early days of the crisis, but then really collapsed as people realized how big of a deal it was.
Read the full article here.
The evolution of the foreclosure-gate is starting to feel more and more Deepwater-Horizon like every day.
What really makes it similar -- and this is a point we made yesterday while chatting with Tadas Viskanta on Abnormal Returns TV (watch here!) -- is the seemingly unquantifiable risk to the banks.
It could be an enormous problem. It could be modest. There are so many moving parts to this that any guesses are bound to be just that: guesses.
Deepwater Horizon was similar. At one point in the middle of the summer, there was serious talk about BP going bankrupt and the entire Gulf of Mexico being permanently sullied. It was really, really difficult for anyone to say. And in the end, the fact that the pollution was not at catastrophic levels seemed to surprise almost everyone.
Beyond that, the arc of the story is similar. As Yves Smith notes, the story is now starting to actually hurt the share prices of banks, similar to how BP shares were fairly unscathed in the early days of the crisis, but then really collapsed as people realized how big of a deal it was.
Read the full article here.
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- Mar 24, 2009
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U.S. probing use of `robo-signers` in mortgage industry
NEW YORK — All 50 U.S. states launched a joint investigation of the mortgage industry on Wednesday, a move some experts fear will cause uncertainty and threaten the recovery of the fragile housing market.
The state attorneys general are looking at allegations some banks used shoddy or fraudulent paperwork to remove struggling borrowers from their homes during a foreclosure crisis that is one of the most visible wounds of the 2007-2009 recession.
"We are in the fourth year of a housing and economic crisis that was brought on by lax practices of the mortgage lending industry," Minnesota Attorney General Lori Swanson said in a statement. "The latest allegations of corner cutting and slipshod paperwork are troubling, but perhaps not surprising."
Industry experts warn the investigation could put the brakes on foreclosure proceedings. One of every four homes sold in the second quarter was a foreclosed property and any slowing could have an impact on the broader economy, as the housing market traditionally drives recoveries after a downturn.
The United States has an $11 trillion residential mortgage market.
Read the full article here.
NEW YORK — All 50 U.S. states launched a joint investigation of the mortgage industry on Wednesday, a move some experts fear will cause uncertainty and threaten the recovery of the fragile housing market.
The state attorneys general are looking at allegations some banks used shoddy or fraudulent paperwork to remove struggling borrowers from their homes during a foreclosure crisis that is one of the most visible wounds of the 2007-2009 recession.
"We are in the fourth year of a housing and economic crisis that was brought on by lax practices of the mortgage lending industry," Minnesota Attorney General Lori Swanson said in a statement. "The latest allegations of corner cutting and slipshod paperwork are troubling, but perhaps not surprising."
Industry experts warn the investigation could put the brakes on foreclosure proceedings. One of every four homes sold in the second quarter was a foreclosed property and any slowing could have an impact on the broader economy, as the housing market traditionally drives recoveries after a downturn.
The United States has an $11 trillion residential mortgage market.
Read the full article here.
- Joined
- Mar 24, 2009
- Messages
- 16,743
Stocks have nowhere to go but down
FORTUNE -- Don`t believe the bulls who predict a new era of rising stock prices. Sure, their arguments sound convincing: Confidence will surge following the arrival of a new, business-friendly Congress, the U.S. economy always rebounds strongly after a deep recession -- it`s just taking longer this time. Or, it`s the nature of the market to post big gains after a decade or more of poor returns.
Unfortunately, the basic math doesn`t support the optimists` case. Put simply, the stock market is in a box that makes high future returns virtually impossible for people who invest in the S&P 500 or another index replicating the overall market. The reason is that corporate earnings are far outpacing the slow, grinding recovery. In fact, they`re practically at a cyclical peak -- and possibly in a mini-bubble. At the same time, investors are paying an extremely big price for those already robust profits.
Today`s premium multiples wouldn`t be a problem if profits could grow at a rapid pace -- in theory at least, high price-to-earnings ratios are a signal that they`re destined to do just that.
It won`t happen this time, for a simple reason: When earnings are already at lofty levels, they typically stagnate or fall rather than grow. Hence, one route to rising equity prices is effectively blocked by the rise in profits that`s already occurred, and the other is closed by high prices. Even if the economy improves dramatically, prices are far more likely to fall than rise. The rich rewards will go the patient contrarians who buy not at these prices, but after a major correction.
Read the full article here.
FORTUNE -- Don`t believe the bulls who predict a new era of rising stock prices. Sure, their arguments sound convincing: Confidence will surge following the arrival of a new, business-friendly Congress, the U.S. economy always rebounds strongly after a deep recession -- it`s just taking longer this time. Or, it`s the nature of the market to post big gains after a decade or more of poor returns.
Unfortunately, the basic math doesn`t support the optimists` case. Put simply, the stock market is in a box that makes high future returns virtually impossible for people who invest in the S&P 500 or another index replicating the overall market. The reason is that corporate earnings are far outpacing the slow, grinding recovery. In fact, they`re practically at a cyclical peak -- and possibly in a mini-bubble. At the same time, investors are paying an extremely big price for those already robust profits.
Today`s premium multiples wouldn`t be a problem if profits could grow at a rapid pace -- in theory at least, high price-to-earnings ratios are a signal that they`re destined to do just that.
It won`t happen this time, for a simple reason: When earnings are already at lofty levels, they typically stagnate or fall rather than grow. Hence, one route to rising equity prices is effectively blocked by the rise in profits that`s already occurred, and the other is closed by high prices. Even if the economy improves dramatically, prices are far more likely to fall than rise. The rich rewards will go the patient contrarians who buy not at these prices, but after a major correction.
Read the full article here.
- Joined
- Mar 24, 2009
- Messages
- 16,743
U.S. home sales rise 10%
Sales in the U.S. of previously occupied homes rose last month after the worst summer for the housing market
in more than a decade. And the industry fears lawsuits over flawed foreclosure documents could keep buyers on the sidelines in the final months of the year.
Sales grew 10 per cent in September to a seasonally adjusted annual rate of 4.53 million, the National Association of Realtors said Monday.
Read the full article here.
Sales in the U.S. of previously occupied homes rose last month after the worst summer for the housing market
in more than a decade. And the industry fears lawsuits over flawed foreclosure documents could keep buyers on the sidelines in the final months of the year.Sales grew 10 per cent in September to a seasonally adjusted annual rate of 4.53 million, the National Association of Realtors said Monday.
Read the full article here.