Tuesday, August 24, 2010
By: Michael Pento
Apparently, this morning’s existing home sales report was shocking to most observers and sent the Dow Jones tumbling over 130 points. But the only people who should have been surprised are Wall St. sheeple and Washington shills. After the government finished—at least temporarily--buying houses for consumers and printing at least $1.5 trillion in order to push interest rates down, here are the results:
Existing home sales in July plunged over 27%, while transactions plummeted to a 3.83 million annual pace, the lowest in a decade. The National Association of Realtors also revised downward the June sales figure down to 5.26 million from a previously reported 5.37 million. Purchases of single-family homes also dropped 27 percent, the biggest one-month decrease in data going back to 1968. July’s single family 3.37 million annual rate was the lowest since May 1995. Compared with a year earlier, existing home sales fell 26% on an unadjusted basis.
Most troubling was the increase in the nominal number of homes for sale and the months’ supply. The number of previously owned homes on the market rose 2.5% to 3.98 million. At the current sales pace, it would take 12.5 months to sell those houses, compared with 8.9 months in June. The months’ supply of single-family homes at 11.9 months was the highest since 1983, according to the NAR!
The reality of this news is that the government will redouble their borrowing and spending efforts in order to artificially prop up home prices even further. More savings will be misallocated towards real estate and greater imbalances in the market will be created. The budget deficit will swell and economic growth will suffer to an even greater degree. And of course, thanks to government’s meddling with into the free market, the double-dip recession has now arrived. Unfortunately, this double-dip is only the overture to the next depression.
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.
Wednesday, August 25, 2010
Diana Olick recaps the New Home Sales Report
Diana Olick of CNBC (who remains one of the few worthy of watching) recaps today's New Home Sales results which basically stunk. She also notes the discussion of the potential of mergers and acquisitions within the publically traded homebuilder stocks. OF COURSE there is discussion as what is left to move up the stocks? One larger homebuilder in a downward spiral market is better than two smaller homebuilders in a downward spiral market....this is how the Wall Street folks get their "important" clients out of a losing position at a higher price.
Morgan Stanley Says Government Defaults Inevitable
By Matthew Brown
Aug. 25 (Bloomberg) -- Investors will face defaults on government bonds given the burden of aging populations and the difficulty of securing more tax revenue, according to Morgan Stanley.
“Governments will impose a loss on some of their stakeholders,” Arnaud Mares, an executive director at Morgan Stanley in London, wrote in a research report today. “The question is not whether they will renege on their promises, but rather upon which of their promises they will renege, and what form this default will take.” The sovereign-debt crisis is global “and it is not over,” the report said.
Borrowing costs for so-called peripheral euro-region nations such as Greece and Ireland surged today, resuming their ascent on concern that governments won’t be able to narrow their budget deficits. Standard and Poor’s downgraded Ireland’s credit rating yesterday on concern about the rising costs to support nationalized banks.
Mares said debt as a percentage of gross domestic product is a false indicator of an economy’s health given it doesn’t reflect governments’ available revenue and is “backward- looking.” While the U.S. government’s debt is 53 percent of GDP, one of the lowest ratios among developed nations, its debt as a percentage of revenue is 358 percent, one of the highest, the report said. Conversely, Italy has one of the highest debt- to-GDP ratios, at 116 percent, yet has a debt-to-revenue ratio of 188, Mares said.
Mares once worked at the U.K.’s Debt Management Office and is a former senior vice-president at credit-rating company Moody’s Investors Service.
“Note that a double-dip recession would not invalidate this conclusion,” Mares’ report said. “It would cause yet further damage to the governments’ power to tax, pushing them further in negative equity and therefore increasing the risks that debt holders suffer a larger loss eventually.”
Investors’ concern that the U.S. may fall back into recession has grown in recent weeks as U.S. economic data missed economists’ estimates. A Citigroup Inc. index of U.S. economic data surprises fell to minus 59 last week, the least since January 2009.
Dec. 17 (Bloomberg) -- Morgan Stanley, the securities firm that spent more than $8 billion on commercial property in 2007, plans to relinquish five San Francisco office buildings to its lender two years after purchasing them from Blackstone Group LP near the top of the market.
The bank has been negotiating an “orderly transfer” of the towers since earlier this year, Alyson Barnes, a Morgan Stanley spokeswoman, said yesterday in a telephone interview. AREA Property Partners will take over the buildings. Barnes declined to say when the transfer will occur.
“This isn’t a default or foreclosure situation,” Barnes said. “We are going to give them the properties to get out of the loan obligation.” Link to Bloomberg Article
Aug. 25 (Bloomberg) -- Investors will face defaults on government bonds given the burden of aging populations and the difficulty of securing more tax revenue, according to Morgan Stanley.
“Governments will impose a loss on some of their stakeholders,” Arnaud Mares, an executive director at Morgan Stanley in London, wrote in a research report today. “The question is not whether they will renege on their promises, but rather upon which of their promises they will renege, and what form this default will take.” The sovereign-debt crisis is global “and it is not over,” the report said.
Borrowing costs for so-called peripheral euro-region nations such as Greece and Ireland surged today, resuming their ascent on concern that governments won’t be able to narrow their budget deficits. Standard and Poor’s downgraded Ireland’s credit rating yesterday on concern about the rising costs to support nationalized banks.
Mares said debt as a percentage of gross domestic product is a false indicator of an economy’s health given it doesn’t reflect governments’ available revenue and is “backward- looking.” While the U.S. government’s debt is 53 percent of GDP, one of the lowest ratios among developed nations, its debt as a percentage of revenue is 358 percent, one of the highest, the report said. Conversely, Italy has one of the highest debt- to-GDP ratios, at 116 percent, yet has a debt-to-revenue ratio of 188, Mares said.
Double Dip
“Outright sovereign default in large advanced economies remains an extremely unlikely outcome, in our view,” the report said. “But current yields and break-even inflation rates provide very little protection against the credible threat of financial oppression in any form it might take.”Mares once worked at the U.K.’s Debt Management Office and is a former senior vice-president at credit-rating company Moody’s Investors Service.
“Note that a double-dip recession would not invalidate this conclusion,” Mares’ report said. “It would cause yet further damage to the governments’ power to tax, pushing them further in negative equity and therefore increasing the risks that debt holders suffer a larger loss eventually.”
Investors’ concern that the U.S. may fall back into recession has grown in recent weeks as U.S. economic data missed economists’ estimates. A Citigroup Inc. index of U.S. economic data surprises fell to minus 59 last week, the least since January 2009.
Grandpa
Morgan Stanley knows a thing or two about walking away from an obligation.Dec. 17 (Bloomberg) -- Morgan Stanley, the securities firm that spent more than $8 billion on commercial property in 2007, plans to relinquish five San Francisco office buildings to its lender two years after purchasing them from Blackstone Group LP near the top of the market.
The bank has been negotiating an “orderly transfer” of the towers since earlier this year, Alyson Barnes, a Morgan Stanley spokeswoman, said yesterday in a telephone interview. AREA Property Partners will take over the buildings. Barnes declined to say when the transfer will occur.
“This isn’t a default or foreclosure situation,” Barnes said. “We are going to give them the properties to get out of the loan obligation.” Link to Bloomberg Article
Durable Orders TANK....Welcome to the "Recovery Summer"
White House Press Release
"Recovery Summer"
June 17, 2010
WASHINGTON, DC – The Administration today kicks off “Recovery Summer,” a six-week-long focus on the surge in Recovery Act infrastructure projects that will be underway across the country in the coming months – and the jobs they’ll create well into the fall and through the end of the year. The Recovery Act has already funded tens of thousands of projects and put about 2.5 million Americans to work, but summer 2010 is actually poised to be the most active Recovery Act season yet, with tens of thousands of projects underway across the country that will help to create jobs for American workers and economic growth for businesses, large and small. Census Bureau Press Release
"Reality Summer"
August 25, 2010
July durable goods orders came in at 0.3%, significantly below the 3.0% that analysts were expecting.Excluding autos, durable goods orders actually TANKED 3.8%, while analysts were looking for small growth.
New orders for manufactured durable goods in July increased $0.6 billion or 0.3 percent to $193.0 billion, the U.S. Census Bureau announced today. This increase followed two consecutive monthly decreases including a 0.1 percent June decrease. Excluding transportation, new orders decreased 3.8 percent. Excluding defense, new orders increased 0.3 percent.
Transportation equipment, also up following two consecutive monthly decreases, had the largest increase, $6.1 billion or 13.1 percent to $52.6 billion. This was due to nondefense aircraft and parts, which increased $4.0 billion.
July versus June Change
-15.0% Machinery-New Orders
-12.7% Computers and Related Products-New Orders
Link to complete Census Bureau Report
Report summary
Credit Card Debt at Lowest level in 8 years...What's In Your Wallet?
Eileen AJ Connelly
Associated Press
NEW YORK — The amount consumers owed on their credit cards in this year's second quarter dropped to the lowest level in more than eight years as cardholders continued to pay off balances in the uncertain economy.
The average combined debt for bank-issued credit cards – like those with a MasterCard or Visa logo – fell to $4,951 in the three months ended June 30, down more than 13 percent from $5,719 in the same period a year ago, according to TransUnion.
The credit reporting agency said it was the first three-month period during which card debt fell below $5,000 since the first quarter of 2002.
Credit card debt remained the highest in Alaska, but slid 7 percent there to $7,148. A total of 22 states recorded debt higher than the national average.
Residents of Alabama paid off the most debt, dropping their average balance by 27 percent to $4,753.
More borrowers also made payments on time. The rate of cardholders past due by 90 days or more fell to 0.92 percent in the second quarter, from 1.17 percent last year.
That's the first time the delinquency rate has been below 1 percent since the second quarter of 2007, before the recession, said Ezra Becker, director of consulting and strategy in TransUnion's financial services unit. The rate fluctuates during the year, he said, but the improvement is more evidence that consumers are working to make sure their credit cards remain in good standing.
That concern reflects several economic factors, from the fear of unemployment to the fact that the collapsed housing market means it's harder to cash in on home equity when money gets tight. "You can't buy groceries with your house anymore," Becker said.
Reflecting the weak economies in the states hardest hit by the housing crisis, the delinquency rate was highest in Nevada, at 1.5 percent of cardholders, followed by Florida, 1.24 percent, Arizona, 1.11 percent and California, 1.08 percent. In all, 16 states fared worse than the national average for delinquencies.
The lowest delinquency rates remained in North Dakota, at 0.54 percent, and South Dakota, at 0.55 percent.
In a twist, Becker said the foreclosure crisis could be helping to improve the timeliness of credit card payments and lower balances. When people don't make mortgage payments, he suggested, they have a short-term cash boost.
"That can provide extra money to pay down credit cards," he said.
Besides paying down debt, consumers are getting fewer new cards. Nationwide, the number of new accounts opened dropped almost 6.5 percent from last year.
TransUnion predicts that the national delinquency rate will remain below 1 percent for the rest of the year. However, on the high end, the Nevada rate is forecast to edge up to 1.6 percent.
Associated Press
NEW YORK — The amount consumers owed on their credit cards in this year's second quarter dropped to the lowest level in more than eight years as cardholders continued to pay off balances in the uncertain economy.
The average combined debt for bank-issued credit cards – like those with a MasterCard or Visa logo – fell to $4,951 in the three months ended June 30, down more than 13 percent from $5,719 in the same period a year ago, according to TransUnion.
The credit reporting agency said it was the first three-month period during which card debt fell below $5,000 since the first quarter of 2002.
Credit card debt remained the highest in Alaska, but slid 7 percent there to $7,148. A total of 22 states recorded debt higher than the national average.
Residents of Alabama paid off the most debt, dropping their average balance by 27 percent to $4,753.
More borrowers also made payments on time. The rate of cardholders past due by 90 days or more fell to 0.92 percent in the second quarter, from 1.17 percent last year.
That's the first time the delinquency rate has been below 1 percent since the second quarter of 2007, before the recession, said Ezra Becker, director of consulting and strategy in TransUnion's financial services unit. The rate fluctuates during the year, he said, but the improvement is more evidence that consumers are working to make sure their credit cards remain in good standing.
That concern reflects several economic factors, from the fear of unemployment to the fact that the collapsed housing market means it's harder to cash in on home equity when money gets tight. "You can't buy groceries with your house anymore," Becker said.
Reflecting the weak economies in the states hardest hit by the housing crisis, the delinquency rate was highest in Nevada, at 1.5 percent of cardholders, followed by Florida, 1.24 percent, Arizona, 1.11 percent and California, 1.08 percent. In all, 16 states fared worse than the national average for delinquencies.
The lowest delinquency rates remained in North Dakota, at 0.54 percent, and South Dakota, at 0.55 percent.
In a twist, Becker said the foreclosure crisis could be helping to improve the timeliness of credit card payments and lower balances. When people don't make mortgage payments, he suggested, they have a short-term cash boost.
"That can provide extra money to pay down credit cards," he said.
Besides paying down debt, consumers are getting fewer new cards. Nationwide, the number of new accounts opened dropped almost 6.5 percent from last year.
TransUnion predicts that the national delinquency rate will remain below 1 percent for the rest of the year. However, on the high end, the Nevada rate is forecast to edge up to 1.6 percent.
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