Little Ho Ho Ho in the Data (Michael Pento) but the market doesn't care.....yet

The Dow is roughly 21% from its all time,

ever high, set in October 2007

Unemployment rate in October 2007...4.7%

(less than 1/2 of the current, fictitious rate)

Wednesday, December 1, 2010
By: Michael Pento

American consumers are trampling each other to capture the holiday spirit—which sadly has now become Black Friday and Cyber Monday. However, the economic data is flashing a warning sign that may, hopefully, deter shoppers from their recidivistic habits.

The number of mortgage applications in the U.S. fell last week by the most this year as lending rates inched higher. The average rate on a 30-year fixed mortgage increased to 4.56% from 4.50% the prior week. Borrowing costs have been rising since reaching 4.21% during the week ended Oct. 8th, which was the lowest in records going back to 1990.The Mortgage Bankers Association’s index dropped 16.5% in the week ended Nov. 26. The gauge of refinancing fell 21.6%, which was the biggest drop in all of 2010.

Meanwhile, the Challenger, Grey and Christmas report released today showed the pace of downsizing surged to the highest level in 8 months. Planned layoffs jumped 28% from their 37,986 level posted in October, to reach 48, 711 in November.

The ISM Manufacturing Report fell slightly in November to 56.6 from 56.9 in October. The ISM’s U.S. new orders index fell to 56.6 from 58.9, while the production index dropped to 55, the lowest level since June 2009, from 62.7. The employment gauge was little changed at 57.5 from 57.7, and the index of export orders dropped to 57 from 60.5.

Finally, the ADP report for November showed that of the 93,000 private sector jobs created this month, only 14k was in the goods producing sector of the economy. The direction of the ADP number is good but still very much shy of the number of new jobs needed to bring down the unemployment rate.

The economy is barely subsisting despite of, or perhaps more correctly, because of government intervention. When will we learn?

Michael Pento, Senior Economist at Euro Pacific Capital is a well-established specialist in the “Austrian School” of economics. He is a regular guest on CNBC, Bloomberg, Fox Business, and other national media outlets and his market analysis can be read in most major financial publications, including the Wall Street Journal. Prior to joining Euro Pacific, Michael worked for a boutique investment advisory firm to create ETFs and UITs that were sold throughout Wall Street. Earlier in his career, he worked on the floor of the NYSE.

Consumer Price Index recap by Michael Pento (all about owner’s equivalent rent)

Wednesday, November 17, 2010
By: Michael Pento

The facts are that 25% of the Consumer Price Index is derived from owner’s equivalent rent and the BLS substitutes out everything that is increasing in price and then claims that most price increases came from quality enhancements, which are then summarily discounted. Despite those manipulations of the data, the government still reported that consumers paid 1.2% more for goods and services than the previous year. Where is this deflation that the Fed and administration is so concerned about? If one quarter of the CPI measures the rental equivalent derived from a humongous asset bubble that has just popped, it’s simply amazing that the reading on inflation is positive at all.

On the housing front we were treated with some sobering news on just how addicted the U.S. has become to artificially induced growth. I’ve often written about the utter economic devastation that will occur once either the Fed or the market forces interest rates much higher. We had a little taste of this from this week’s mortgage application data.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes loans for home purchases and refinancing, fell 14.4 percent to 713.6 in the week ended November 12, the lowest in four months. Borrowing costs on 30-year fixed-rate mortgages jumped to a two-month high of 4.46 percent in the week, up from 4.28 percent in the previous period.

Therefore, an 18 basis point increase in rates sent mortgage applications tumbling. Just think what will occur to the housing market and the economy in general if I’m correct and the U.S. faces an inexorable rise in interest rates? Those rates may rise well into the double digits due to inflation and a surging supply of debt issuance. Think about that the next time Bush, Geithner or Bernanke takes a victory lap over the “successful” TARP program. I wonder if Mr. Buffett will then write a thank you letter to the NY Times about how government caused America to become an insolvent nation.

Michael Pento, Senior Economist at Euro Pacific Capital is a well-established specialist in the “Austrian School” of economics. He is a regular guest on CNBC, Bloomberg, Fox Business, and other national media outlets and his market analysis can be read in most major financial publications, including the Wall Street Journal. Prior to joining Euro Pacific, Michael worked for a boutique investment advisory firm to create ETFs and UITs that were sold throughout Wall Street. Earlier in his career, he worked on the floor of the NYSE.

Hey Bernanke, have you seen the recent Mortgage Application Results?

WASHINGTON, D.C. (November 17, 2010) — The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending November 12, 2010. The Market Composite Index, a measure of mortgage loan application volume, decreased 14.4 percent on a seasonally adjusted basis from one week earlier. The results do not include an adjustment for Veterans Day. On an unadjusted basis, the Index decreased 15.0 percent compared with the previous week.

The Refinance Index decreased 16.5 percent from the previous week and is at the lowest level observed since July of this year. The seasonally adjusted Purchase Index decreased 5.0 percent from one week earlier, the first decrease after three consecutive weekly increases. The unadjusted Purchase Index decreased 8.2 percent compared with the previous week and was 11.3 percent lower than the same week one year ago.

“Rates increased sharply last week due to stronger economic data and lingering uncertainty regarding the structure and impact of the Fed’s QE2 program. Mortgage applications, particularly for refinances, dropped in response,” said Michael Fratantoni, MBA’s Vice President of Research and Economics.

The four week moving average for the seasonally adjusted Market Index is down 2.8 percent. The four week moving average is up 1.3 percent for the seasonally adjusted Purchase Index, while this average is down 3.7 percent for the Refinance Index.

The refinance share of mortgage activity decreased to 80.3 percent of total applications from 81.7 percent the previous week. The adjustable-rate mortgage (ARM) share of activity remained constant at 5.3 percent of total applications.

The average contract interest rate for 30-year fixed-rate mortgages increased to 4.46 percent from 4.28 percent, with points increasing to 1.13 from 1.04 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. This is the highest 30-year fixed-rate observed in the survey since the week ending September 10, 2010. The effective rate also increased from last week.

The average contract interest rate for 15-year fixed-rate mortgages increased to 3.87 percent from 3.64 percent, with points decreasing to 0.91 from 1.08 (including the origination fee) for 80 percent LTV loans. This is the highest 15-year fixed-rate observed in the survey since the week ending September 17, 2010.The effective rate also increased from last week.

Mortgage Bankers Association maintain Homeowner Structured Defaults create a moral hazard...

John Courson, President of the Mortgage Bankers Association states the consequences are dire when homeowners walk away from their mortgage. He also notes the existence of a moral hazard when homeownesr simply walk away from their mortgages.

It appears Mr. Courson and the Mortgage Bankers Association are exempt from dire consequences and moral hazard when they walked away from their corporate headquarters building recently. They purchsing the property 3 years ago for $79 million. Clearly Mortgage Bankers do not have the same moral obligation nor responsibility as mere mortals who sign a promissory note.

Mortgage Bankers Association Web Page

The Mortgage Bankers Association (MBA) is the national association representing the real estate finance industry, an industry that employs more than 280,000 people in virtually every community in the country. Headquartered in Washington, D.C., MBA invests in communities across the nation by ensuring the continued strength of the nation's residential and commercial real estate markets; expanding homeownership and extending access to affordable housing to all Americans and supporting financial literacy efforts. _

Make no mistake about it; we are an organization dedicated to helping our members do their business. We actively advocate for our members, and have done so for nearly a century. We have seen the real estate finance industry evolve into one of the strongest and most sophisticated of global markets.

We promote fair and ethical lending practices and foster professional excellence among real estate finance employees through a wide range of educational programs and a variety of publications. We have over 2,400 member companies, including all elements of real estate finance: mortgage companies, mortgage brokers, commercial banks, thrifts, life insurance companies and others in the mortgage lending field.

The Daily Show With Jon Stewart	Mon - Thurs 11p / 10c
Mortgage Bankers Association Strategic Default
www.thedailyshow.com
Daily Show Full Episodes Political Humor Rally to Restore Sanity

Mortgage loan application volume, decreased 8.9 percent (Mortgage Bankers Association)

WASHINGTON, D.C. (September 15, 2010) — The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending September 10, 2010. The Market Composite Index, a measure of mortgage loan application volume, decreased 8.9 percent on a seasonally adjusted basis from one week earlier. This week's results include an adjustment to account for the Labor Day holiday. On an unadjusted basis, the Index decreased 27.4 percent compared with the previous week.

The Refinance Index decreased 10.8 percent from the previous week. The seasonally adjusted Purchase Index decreased 0.4 percent from one week earlier. The unadjusted Purchase Index decreased 21.9 percent compared with the previous week and was 39.7 percent lower than the same week one year ago.

The four week moving average for the seasonally adjusted Market Index is down 0.8 percent. The four week moving average is up 2.0 percent for the seasonally adjusted Purchase Index, while this average is down 1.4 percent for the Refinance Index.

The refinance share of mortgage activity decreased to 80.5 percent of total applications from 81.9 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 6.2 percent from 6.1 percent of total applications from the previous week.

The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.47 percent from 4.50 percent, with points increasing to 1.08 from 0.96 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The effective rate is unchanged from last week.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.96 percent from 4.00 percent, with points increasing to 1.03 from 0.87 (including the origination fee) for 80 percent LTV loans. The effective rate is unchanged from last week.

The average contract interest rate for one-year ARMs decreased to 6.89 percent from 7.00 percent, with points increasing to 0.23 from 0.21 (including the origination fee) for 80 percent LTV loans.