Showing posts with label recession. Show all posts
Showing posts with label recession. Show all posts

Wednesday, 2 September 2009

Wine

From the FT:

Things are looking up in the world of wine.
The industry’s leading benchmark, the Liv-ex 100 Fine Wine Index, rallied 5 per cent in August compared with the same period a month ago, to 225. The index has risen 10 per cent up year to date, but is 14 per cent down year on year.




This must be what those bankers who have had a ‘good recession‘ are spending their bonuses on. It’s more discreet than getting another car, after all.
What’s more, the 2009 Bordeaux vintage is expected to be another excellent one, following on from a highly rated 2008 and even more lauded 2005. As Decanter reported, the weather in the region has been perfectly warm and dry, and producers are hoping that September doesn’t bring too much rain.
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Thursday, 27 August 2009

New home sales in the US: get real, folks

This was the headline
‘July New Home Sales up 9.6%’
From Realmoney.com we borrow following chart in order to put this number in perspective:



Look out: SAAR means seasonal adjusted. So this figure can be meaningful but at the other hand: it’s still worse than 95% of all the other months over the last 50 years.
Anyway, the pace of the downfall we experienced last two years will slow down. We hope.
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Wednesday, 26 August 2009

Consumer sentiment

There exist a couple of consumer sentiment indices. Some are glowing, other not. Thos made up by the government are getting better. Others are less cheerfull. As the ABC News poll index released yesterday. The consumer comfort index rose from -46 to -45.
The consumer comfort index was based on a random survey of 1,000 respondents nationwide ended Aug. 23. The index measures typical Americans' confidence in three areas: the national economy, their own finances, and their willingness to spend money, according to the report.

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Friday, 14 August 2009

It's going better, isn't it?

Everything goes better.
That’s what we have to believe.
But:

From HousingWire.com

The number of foreclosure notices delivered to homeowners increased nearly 7% from June to July, and are up 32% from July 2008, according to Irvine, Calif-based RealtyTrac's Foreclosure Market Report.
Foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 360,149 US properties during the month, about one in every 355 households.
“July marks the third time in the last five months where we’ve seen a new record set for foreclosure activity,” RealtyTrac CEO James Saccacio said in a statement. “Despite continued efforts by the federal government and state governments to patch together a safety net for distressed homeowners, we’re seeing significant growth in both the initial notices of default and in the bank repossessions.”

From Bloomberg

Sales at U.S. retailers unexpectedly fell in July as a boost from the cash-for-clunkers automobile incentive program failed to overcome cuts in other spending.
The 0.1 percent decrease in sales, the first drop in three months, followed a revised 0.8 percent gain in June that was larger than previously estimated, Commerce Department figures showed today in Washington. Purchases excluding automobiles fell 0.6 percent, also more than anticipated.
Today’s report underscores the threat to spending from the continued deterioration in the job market; a separate government report today showed more Americans than forecast filed claims for unemployment insurance last week. Retailers such as Wal-Mart Stores Inc. and Macy’s Inc. are cutting costs and inventories to bolster profits as households cut back on non-essential items.

From the Wall Street Journal

Only last week, Ginnie announced that it issued a monthly record of $43 billion in mortgage-backed securities in June. Ginnie Mae President Joseph Murin sounded almost giddy as he cheered this “phenomenal growth.” Ginnie Mae’s mortgage exposure is expected to top $1 trillion by the end of next year—or far more than double the dollar amount of 2007. . . Earlier this summer, Reuters quoted Anthony Medici of the Housing Department’s Inspector General’s office as saying, “Who would have predicted that Ginnie Mae and Fannie Mae would have swapped positions” in loan volume?
Ginnie’s mission is to bundle, guarantee and then sell mortgages insured by the Federal Housing Administration, which is Uncle Sam’s home mortgage shop. Ginnie’s growth is a by-product of the FHA’s spectacular growth. The FHA now insures $560 billion of mortgages—quadruple the amount in 2006. Among the FHA, Ginnie, Fannie and Freddie, nearly nine of every 10 new mortgages in America now carry a federal taxpayer guarantee.
Herein lies the problem. The FHA’s standard insurance program today is notoriously lax. It backs low downpayment loans, to buyers who often have below-average to poor credit ratings, and with almost no oversight to protect against fraud. Sound familiar? This is called subprime lending—the same financial roulette that busted Fannie, Freddie and large mortgage houses like Countrywide Financial.
On June 18, HUD’s Inspector General issued a scathing report on the FHA’s lax insurance practices. It found that the FHA’s default rate has grown to 7%, which is about double the level considered safe and sound for lenders, and that 13% of these loans are delinquent by more than 30 days. The FHA’s reserve fund was found to have fallen in half, to 3% from 6.4% in 2007—meaning it now has a 33 to 1 leverage ratio, which is into Bear Stearns territory. The IG says the FHA may need a “Congressional appropriation intervention to make up the shortfall.”
… Then there is the booming refinancing program that Congress has approved to move into the FHA hundreds of thousands of borrowers who can’t pay their mortgage, including many with subprime and other exotic loans. HUD just announced that starting this week the FHA will refinance troubled mortgages by reducing up to 30% of the principal under the Home Affordable Modification Program. This program is intended to reduce foreclosures, but someone has to pick up the multibillion-dollar cost of the 30% loan forgiveness. That will be taxpayers.
In some cases, these owners are so overdue in their payments, and housing prices have fallen so dramatically, that the borrowers have a negative 25% equity in the home and they are still eligible for an FHA refi. We also know from other government and private loan modification programs that a borrower who has defaulted on the mortgage once is at very high risk (25%-50%) of defaulting again.

From DNAIndia.com

An outspoken Communist Party official in China has confirmed long-held suspicions that GDP data was being massaged and exaggerated by regional party leaders to show higher economic growth, in the process "squandering social resources."
In a brutally honest and searing speech recently, Wang Yang, the reformist-minded party secretary of Guangdong province in southern China, laid bare the dishonest means party leaders at the provincial level were employing "to polish their numbers." Since Wang is one of the few provincial party leaders who is also a member of the decision-making central Politburo, his words -- and the fact that even the official media has reported them -- is being seen as a signal that Beijing is wary of the accuracy of GDP data reported by the provinces.
"Some of our GDP data sure looks rosy," Wang told party officials. "But they do not amount to growth of social wealth; in fact, social resources are being wasted to show GDP growth." For instance, he said, provincial party officials build a bridge, which contributes to GDP; they then "dismantle" and rebuild the bridge, each time contributing to GDP. "We may have boosted our GDP this way, but this is a huge waste of social resources."
Likewise, he said, some regional governments registered GDP growth by encouraging "polluting industries", and then showed even higher growth by cleaning up the pollution.
Wang said that such practices, which went against "the laws of a market economy", were causing him deep disquiet. "Amidst the economic downturn, when everyone is eager to show 'rosy' numbers, all manner of backward productive forces are being revived," he said.
Chinese policymakers have set a target of 8% GDP growth for this year, and going by the 7.9% GDP growth reported for the first half of 2009, that looks like it will be achieved. But independent economists have expressed scepticism about the authenticity of the official data.
Others have voiced concern that an excessive preoccupation with the pace of growth (as opposed to the quality of growth) was spawning structural distortions in the Chinese economy.
Indicatively, the provincial GDP data for the first half of 2009, released by China's 31 provinces over the past week, adds up to 1 trillion yuan higher (or about 10% more) than the national GDP data released by Beijing earlier this month. Strikingly, 24 of the 31 provinces reported growth rates higher than the national average --- which, while not statistically impossible, is highly improbable, according to economists.
Party leader Wang argues that instead of artificially boosting GDP data, provincial leaders should focus on "restructuring and transforming" the industrial structure -- that is, move away from labour-intensive, low-technology, polluting and energy-inefficient industries.
It's an odd world
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Thursday, 13 August 2009

Earnings in the States

Earning season is almost done with 88% of all companies in the S&P500 having reported now for the second quarter of 2009. Earnings have declined over 98% since peaking in the third quarter of 2007.
Real earnings have dropped to a record low.
Why is this reality not captured by investors?
Because reported earning are beating the estimations set by various analysts. This is a relative performance. Versus expectations
But in absolute terms the situation is just horrendous.
Given the decidedly lackluster expectations, it’s relatively easy for a company to “outperform" those expectations. Secondly, much if not all of any gains in profitability are the result of slashing overhead (read "workers") and not a pick-up in sales. Finally, as you can see in the chart, in no sense are the earnings being posted anywhere remotely close to prior levels.

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Monday, 10 August 2009

Baltic Dry Index

We have written it before: the Baltic Dry Index went up only because the demand from China was huge for ore and other bulk freight.
Last week however, the index lost almost 20%.
Is this movement the precursor of something else?
Or is a rebound imminent…

Since its high for 2009, this index has slumped with 35%.


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Wednesday, 22 July 2009

Oh dear, my local pub...

From Bloomberg:
"The U.S. recession may not be coming to an end and there is a risk the economy may experience a “double-dip” contraction, said Martin Feldstein, a professor of economics at Harvard University. “There is a real danger this is going to be a double dip and that after six months or so we’ll have some more bad news,” Feldstein, the former head of the National Bureau of Economic Research and Reagan administration adviser, said today in an interview on Bloomberg Television. “We could slide down again in the fourth quarter.” The economy could “flatten out” or “even be positive” in the third quarter, and then it’s likely to contract again in the last three months of the year as the effects of the federal stimulus program wear off and companies finish rebuilding inventories, he said."


Oh dear… reading this, hurts:
From the UK Times:
"The rate of pub closures is accelerating, with 52 going out of business every week at a cost of 24,000 jobs over the past year, figures show. Almost 2,400 pubs and bars have vanished from villages and towns in the past 12 months, according to research for the British Beer & Pub Association (BBPA). Local pubs serving small communities have been the worst hit, the association said. The number of closures represents the steepest rate of decline since records began in 1990 and has risen by a third compared with the same period last year, when 36 pubs were closing every week."


Let’s have a quick look if the pub in the harbor is still there…
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Wednesday, 15 July 2009

We repeat: the US is not Japan... or is it?

I still remember those days that Greenspan assured us that never ever the US would be submitted to a Japan-like slump. No way would a deflation à la Japan hit the States. Moreover, the United States couldn’t afford to wait deflation out the way the Japanese did/do: too many people who owe too much money to too many creditors. But hey, there we are: falling prices, big output gap, rising unemployment and credit losses that surpass the monetary and fiscal stimulus in a huge way.

And the government is trying to prop up the creditors. Just like they did in Japan. The banks have gotten trillions in loans and guarantees. Is this stimulating the economy?
Hehe...
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Tuesday, 14 July 2009

Goldman Sachs delivers ... of course: bonus time

Expiration week and results of Goldman Sachs (let us all act surprised) were delivering an explosive positive Monday after another down week. Europe is still enjoying some upward momentum this morning. We’ll have to wait how far this will reach.

For the moment this doesn’t alter our views:
°the stabilizing economic figures are nothing else than the reaction on the abrupt production stop some months ago. These inventories are worked off now resulting in a modest reprise of production. But nothing more so far…
° the correction we’re observing in stocks, can last a little longer and is not over (yet), but will give way eventually to another rally. As far as we can time these things, we think we will enjoy this rally in August.
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Wednesday, 8 July 2009

After slamming the brakes...

Stock markets are not longer a proxy for the ‘real’ economy neither is the price action in some other asset classes.
However, we are convinced that the ‘green shoots’ of last months are nothing more than the logical reaction of the economy after we hit the brakes last September with the Lehman and AIG-drama.
Economic activity came abruptly to a halt. The following months, inventories were depleted and the economic activity we experience now is nothing more than an effort to replenish these inventories.
There is economic activity but on a low level.
The global economy is recovering very slowly and it’s not coming to an end soon.
So the recession is here to stay, people will spend less and no way there is inflation in the pipeline.
That means that after the shake-out of dollar and bonds, they will come back in vogue and that is not good news for other markets.
Although we thing that after this correction in stocks another sharp rally can follow.

And there is Europe: 15% of the British economy is linked to the financial industry (in the States only 5%). This oversized sector is still in a downturn and this can hurt the pound. Spain, Portugal, Ireland and Italy can not cut rates in order to deal with the local economic weakness. As a result they must take on more debt, increasing the probability of more rating downgrades. The risk they will leave the EU and go back to their own currencies is growing. Fast.
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Tuesday, 24 March 2009

Why the FED better succeed

This a story from ABC news.
It could have been everyone of us.
Hat tip to Trader Mark.
For the first 45 years of Ken Karpman's life, everything was close to perfect. He graduated from UCLA with a bachelor's degree and M.B.A., then got a high-paying job as an institutional equity sales trader. He married his dream girl, had two children and traveled the world on expensive vacations.
Over the span of Karpman's impressive 20-year career as a trader, he climbed the company ladder, reaching a salary of $750,000 a year. "Life was good, we were making a lot of money -- and why wouldn't this just continue on?" Karpman said.
From all appearances, Ken and Stephanie Karpman were living the American dream in Tampa, Fla., nestled in their 4,000-square-foot home that sits on a golf course. "I had no idea what anything cost in a store," he said. "I'd just put it in the cart and buy."
Karpman was so confident in his good fortune and the strong economy that he left his job in 2005 to start his own hedge fund. To pay for the new business and their standard of living, Karpman quickly burned through $500,000 in savings and, like so many Americans, took a line of credit against his house.
But in the reversal of fortune that followed, Karpman was unable to attract investors and was forced to dissolve his hedge fund. He found himself jobless in a job market that had collapsed. After a lengthy and fruitless job search, the Karpmans were shocked to find themselves in financial dire straits, with zero savings, hundreds of thousands of dollars in debt and their home in foreclosure.
Karpman's salary plummeted from six figures to $7.29 an hour -- plus tips -- but it's money that he's grateful to earn, even when it means delivering to neighbors or his old office building. The Karpmans are now on food stamps and a tight budget that doesn't nearly cover their children's $30,000 private school tuition. But thanks to an anonymous donor, the Karpmans children's tuition has been covered through next year and they are deeply appreciative.
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