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BEA 4th Quarter GDP 1st Estimate 0.7% Q&A: Why Did GDPNow Rise After Durable Goods? When are Construction Revisions Coming? US interest rates will plunge from 4.5pc to 2pc as the American economy suffers its first consumer recession since 1991, Merrill Lynch has forecast. The investment bank warned in its annual economic outlook that America is under attack by the 'Four Horsemen' of soaring energy prices, unemployment, a housing slump and an ongoing credit squeeze, but it remained optimistic about prospects for the rest of the world in 2008. The one significant exception to this global 'rebalancing' is Britain where a 'notable slowdown' is predicted. Merrill Lynch's North America economist David Rosenberg presented an almost unremittingly gloomy forecast for the US economy next year. 'The US consumer is on the precipice of experiencing its first recessionary phase since 1991 - the last time we had the combination of high, punishing energy prices weak

Following are a few charts of interest for February 27, 2007.Click on any chart for a better view. NYSE Declining VolumeNYSE Advancing VolumeNYSE Declining IssuesNYSE Advancing Issues$Nasdaq Declining Volume$Nasdaq Advancing VolumeNasdaq Declining IssuesNasdaq Advancing IssuesVIXVXN BEA 4th Quarter GDP 1st Estimate 0.7% Q&A: Why Did GDPNow Rise After Durable Goods? When are Construction Revisions Coming? The content on this site is provided as general information only and should not be taken as investment advice. All site content, including advertisements, shall not be construed as a recommendation to buy or sell any security or financial instrument, or to participate in any particular trading or investment strategy. The ideas expressed on this site are solely the opinions of the author(s) and do not necessarily represent the opinions of sponsors or firms affiliated with the author(s). The author may or may not have a position in any company or advertiser referenced above. Any acti

BEA 4th Quarter GDP 1st Estimate 0.7% Q&A: Why Did GDPNow Rise After Durable Goods? When are Construction Revisions Coming? Do not expect to see as many refis as when home prices were rising. Refis will be hampered by people being underwater on their mortgages, unemployment rising, and credit card defaults rising. All three of those will have a negative effect on FICO scores at a time when refis are going to require better FICO scores. Most importantly, those who most need to refinance will not find it so easy, especially if they are upside down on their mortgage or out of a job. Refinance relief and lower mortgage rates are starting to become available, but only for those who least need it. I think the reported numbers are suspect. There are so many applications that get turned down today it is not funny. The reasons are: Number 2 is playing a huge role right now because all lenders have now cut the LTV by 5% in any declining area that Freddie or Fannie recognizes. This alone shut

BEA 4th Quarter GDP 1st Estimate 0.7% Q&A: Why Did GDPNow Rise After Durable Goods? When are Construction Revisions Coming? A certain dose of market discipline in the form of lower prices might be healthy, but market forecasters currently project over two million defaults before this current cycle is complete. The resultant impact on housing prices is likely to be close to -10%, an asset deflation in the U. S. never seen since the Great Depression. The ultimate solution, it seems to me, must not emanate from the bowels of Fed headquarters on Constitution Avenue, but from the West Wing of 1600 Pennsylvania Avenue. If we can bail out Chrysler, why can’t we support the American homeowner? The time has come to acknowledge that there are precedents aplenty in the long and even recent history of American policy making. This rescue, which admittedly might bail out speculators who deserve much worse, would support millions of hard working Americans whose recent hours have become ones of fr

The Herald Tribune is reporting JPMorgan Chase, Bank of America and Wachovia join Citi in borrowing $500M each from Fed. BEA 4th Quarter GDP 1st Estimate 0.7% Q&A: Why Did GDPNow Rise After Durable Goods? When are Construction Revisions Coming? Four major banks said Wednesday they each borrowed $500 million (€370.5 million) from the Federal Reserve's discount window, lending weight to its efforts to restore liquidity to tight markets. Citigroup Inc. (C), JPMorgan Chase & Co. (JPM), Bank of America Corp. (BAC) and Wachovia Corp. (WB) each stressed they themselves have 'substantial liquidity' and the ability to borrow money elsewhere. In a joint statement, the latter three said they decided to borrow directly from the central bank to demonstrate 'the potential value of the Fed's primary credit facility' and encourage its use by other banks. It was not clear if other banks had also decided to borrow from the Fed. 'Citi is pleased to inject liquidity int

BEA 4th Quarter GDP 1st Estimate 0.7% Q&A: Why Did GDPNow Rise After Durable Goods? When are Construction Revisions Coming? Ambac Financial Group Inc., struggling to avoid the crippling loss of its AAA credit rating, took out insurance on $29 billion in securities it guarantees. The world's second-biggest bond insurer agreed to transfer the risk that the securities will default to Assured Guaranty Ltd., according to a statement today. Reinsuring the debt will free up capital backing those bonds, Ambac said. Ambac guarantees $556 billion of securities and the loss of its AAA rating jeopardizes the rankings on that debt as well as threatens the New York-based company's biggest source of revenue. 'Reinsurance is a valuable, capital-efficient and shareholder-friendly tool for managing risk and capital,' Ambac Chief Executive Officer, Robert Genader said in the statement. My Comment: Reinsurance on $29 billion out of $556 billion is unlikely to do anything but waste mone

BEA 4th Quarter GDP 1st Estimate 0.7% Q&A: Why Did GDPNow Rise After Durable Goods? When are Construction Revisions Coming? The U. S. economy slowed to a crawl in the first quarter, held back by falling investments in homes, shrinking inventories and a large trade gap, The economy grew at a 0.6% annualized pace in the quarter, revised down from the initial estimate of 1.3%, the government said in its second estimate of quarterly gross domestic product. It was the slowest growth since late 2002. The economy has grown just 1.9% in the past four quarters, well below the 3% growth most economists say is the long-run potential. It's the weakest year-over-year growth in four years. 'The details of the report suggest some reasons for even more optimism for the second quarter,' wrote Drew Matus, an economist for Lehman Bros. The faster businesses cut their inventories, the sooner they'll be ready to ramp up production again. Considering the large upward revision to consumer

Economic Zugzwang is when there are no winning economic moves. Here is the diagram in chess terms. An economic recap follows. Trebuchet Whoever has to move loses. It's Bernanke's move. Major Economic Zugzwang Situations BEA 4th Quarter GDP 1st Estimate 0.7% Q&A: Why Did GDPNow Rise After Durable Goods? When are Construction Revisions Coming? where homebuilders 'can't make money by building and can't make money by not building' is yet another version of Economic Zugzwang. For more on the mothball strategy please see Caroline Baum and Paul Kasriel seem to be on board the Economic Zugzwang bandwagon even though neither used the term explicitly. Caroline has the right game though, chess. Her point of view was expressed in As we head into a recession look for more instances of Economic Zugzwang. The global economic imbalances in conjunction with excessive leverage everywhere guarantees it. The content on this site is provided as general information only and shoul

There was a nice expose on CBS 60 Minutes this weekend called House Of Cards. I seldom watch TV but happened to catch it. Steve Kroft reports on how the U. S. sub-prime mortgage meltdown, in which risky loans drove a housing boom that went bust, is now roiling capital markets worldwide. Click here to play video. Steve Kroft: 'It sounds complicated but it's really very simple. Banks lent hundreds of billions of dollars to homebuyers that can't pay them back. Wall Street took the risky debt, dressed it up as fancy securities and sold them round the world as safe investments. If it sounds a little bit like a shell game or a ponzi scheme, in some ways it was'....'Matt and Stephanie Valdez say they knew exactly what they were doing when they bought this small two bedroom house for $355,000.'....They cannot refinance because the value of the house fell below the existing mortgage. They say they can afford the higher payments but see no point in making them. Matt: The

In light of Friday's Futures Fireworks and Moral Hazards Bernanke better have a spare helicopter ready just in case he burns out the motor in his current one too quickly. I have located one for him already. In a hedge fund blowup liquidation sale John Devaney who previously put his boat 'Positive Carry' up for sale is now seeking to dump his helicopter for $11 million. The reason cited for the sale was 'changing corporate travel requirements'.And just as Devaney's need is diminishing, it is increasingly clear that Helicopter Ben needs some emergency backup. It's funny how the market works that way. Mike Shedlock / Mishhttp://globaleconomicanalysis. blogspot. com/

Let's take a look at what happens when guarantors go bust through the eyes of CIBC, a large Canadian bank. Canadian Imperial Bank of Commerce CIBC has a big skeleton in its vault. BEA 4th Quarter GDP 1st Estimate 0.7% Q&A: Why Did GDPNow Rise After Durable Goods? When are Construction Revisions Coming? CIBC's lightly guarded secret is the name of a 'U. S. financial guarantor' that faces a possible downgrade on its A credit rating and is 'not necessarily rated by both Moody's & S&P.' The company's identity matters because the bank said these hedged CDOs were worth just $1.76 billion at Oct. 31, down almost half from their face amount. If the guarantor goes poof, CIBC loses its hedge on these derivative contracts. And the Toronto-based bank would have to recognize the loss, which is growing. Should the masked insurer fail, CIBC would have to bring the CDOs' full face amounts onto its balance sheet and record losses for any declines in their

There has been plenty of automotive sector news recently, so let's take a quick look:After today's closing bell MarketWatch reports that Ford Motor Co. (F) cut its 2005 earnings forecast to $1.25 to $1.50 a share, citing difficult business conditions in the automotive sector. Ford previously said it expected 2005 earnings of between $1.75 and $1.95 a share. Analysts polled by Thomson First Call are currently expecting 2005 earnings of $1.64 a share. The automotive giant also said that it doesn't expect to reach its goal of $7 billion in pre-tax profits, excluding special items, as early as 2006. Ford said it expects its first-quarter earnings to exceed its previous forecast of 25 cents to 35 cents a share. Analysts are looking for first-quarter earnings of 36 cents a share. The company said it still expects its automotive operating cash flow to be positive for the year. The S&P revised Ford's credit outlook rating to 'negative' from stable. S&P said the

BEA 4th Quarter GDP 1st Estimate 0.7% Q&A: Why Did GDPNow Rise After Durable Goods? When are Construction Revisions Coming? Amid Wisconsin's deepening mortgage foreclosure crisis, Legal Aid Society of Milwaukee on Tuesday announced an inquiry into what went wrong. 'We need to find out who are the people being foreclosed, who are their servicers and original lenders, and what kinds of loans did they get,' said Catey Doyle, the organization's chief staff attorney. 'There are a lot of questions about who bears responsibility for this situation, (and) the only way to find out who the players are is to manually go through court files.' Volunteers working under the group's supervision recently launched a review of all Milwaukee County Circuit Court cases filed since June 2006, Doyle said. She said the group will report its findings this fall by lender, zip code, loan type and other factors. 'Loans made in the last year got progressively more and more outra

BEA 4th Quarter GDP 1st Estimate 0.7% Q&A: Why Did GDPNow Rise After Durable Goods? When are Construction Revisions Coming? Core consumer price inflation increased just 0.1% in April, bringing the year-over-year increase down to 2%, just inside the Federal Reserve's target, the Commerce Department reported Friday. It's the first time in 14 months that core prices have been inside the Fed's unofficial target zone of 1% to 2%. Core inflation peaked at 2.4% in February it was 2.1% in March. The deceleration in core inflation is welcome news at the Fed, but officials have stressed that they still believe inflation could accelerate again despite the recent improvements. With the Fed on guard against inflation and brushing off the slump in the economy as temporary, financial markets are no longer expecting any rate cuts from the Fed this year. The consumer price inflation referred to in the article is the PCE not the CPI but let's take a look at both starting with the Loo

In Peak Gold! A Primer on True Hedging, Part Two Antal E. Fekete points out Fraudulent Hedging practices and a Double Standard related to gold. Let's explore those ideas. BEA 4th Quarter GDP 1st Estimate 0.7% Q&A: Why Did GDPNow Rise After Durable Goods? When are Construction Revisions Coming? Antal E. Fekete points out Fraudulent Hedging practices and a Double Standard related to gold. Let's explore those ideas. In earlier papers I have explained that virtually all activities of gold mines that go under the name 'hedging' are fraudulent. To the extent hedges go out into the future more than one year, or they exceed the quantity of one year's production, they are naked forward sales, carrying unlimited risk (the risk that the gold price goes to infinity, as it has in the wake of every hyperinflation). Most 'hedged' gold mines are in violation of the important restriction that downstream hedges must not exceed one year's gold output and they must be l

BEA 4th Quarter GDP 1st Estimate 0.7% Q&A: Why Did GDPNow Rise After Durable Goods? When are Construction Revisions Coming? Moody's Investors Service on Thursday placed Ambac Financial Inc (ABK), which insures more than $500 billion in bonds, on review for a possible ratings cut, an event that could trigger similar downgrades on billions of dollars of debt. A cut could mean the ratings on the bonds it insured -- which amount to $556 billion in value -- would also be lowered, forcing the owners of those bonds to mark down the value of their portfolios. Moody's announcement came after Ambac, hard hit by the turmoil in credit markets, said it was recording a $3.5 billion write-down, equivalent to nearly two-thirds of its net worth, and plans to raise $1 billion in new capital to maintain its ratings. MBIA Inc (MBI), the world's biggest bond insurer, sold $1 billion of surplus notes last week to shore up capital and preserve its crucial triple-A rating. 'The markets are

In the last two recessions unemployment was a lagging indicator peaking approximately 18 months after the recession officially ended. In the four recessions between 1970 and 1982 unemployment was a coincident indicator, starting to rise with the recession and pretty much peaking as the economy was just starting to recover. In no instances was unemployment a leading indicator. The chart speaks for itself. The above chart thanks to Bart at NowAndFutures.(Click on chart for an enhanced view)ConclusionThose expecting some sort of huge advance warning in unemployment stats in advance of the next recession are unlikely to find it. Mike Shedlock / Mishhttp://globaleconomicanalysis. blogspot. com/

BEA 4th Quarter GDP 1st Estimate 0.7% Q&A: Why Did GDPNow Rise After Durable Goods? When are Construction Revisions Coming? The crash in the Chicago-area market for new homes has claimed its biggest casualty. Suburban builder Neumann Homes Inc. said Monday it will file for bankruptcy and has laid off most of its employees. Warrenville-based Neumann blamed its predicament on a drop of more than 50 percent in annual sales within the Chicago and Denver markets. It also pointed to a decision in 2005 to invest in the Detroit market, a move it said cost the company more than $60 million. Neumann said it will file for a Chapter 11 bankruptcy and that its lenders have agreed to provide limited additional funding so that its assets can be evaluated and sold. It also said the earnest money of customers whose new homes haven’t started construction is safe in escrow. Neumann said it will ask a bankruptcy judge to approve refunds from those accounts. It also said it will work with lenders to en

Jeff Saut in Housing Making You 'Homesick'? is proposing we are not in a 'credit crunch' but a 'collateral crunch' BEA 4th Quarter GDP 1st Estimate 0.7% Q&A: Why Did GDPNow Rise After Durable Goods? When are Construction Revisions Coming? For the last few years I have argued that the housing situation was likely going to get worse. I also roiled against the increasingly complex “fancy financing” vehicles that allowed many home buyers to “lever” into homes they really could not afford. Still, the housing/financing bubbles continued to expand driven by the mantra, “you can’t lose money in real estate.” As with all bubbles, however, this one too has burst. Nevertheless, I have opined that historically real estate has never pulled the economy into recession since it is an “effect” and not a “cause.” For example, in the early 1970s I moved to Atlanta and considered buying a $200,000 condominium. By 1975 that same condo was selling at bankruptcy auction for under

BEA 4th Quarter GDP 1st Estimate 0.7% Q&A: Why Did GDPNow Rise After Durable Goods? When are Construction Revisions Coming? Sales of new homes fell again in November to their lowest level since September 2001 as builders continued to be hammered by canceled deals, the local Building Industry Association reported Wednesday. A separate analysis of sales during the six weeks ending Nov. 15 shows a particularly sharp decline in new homes sold in West Sacramento and Lincoln. Both are areas where prices have zoomed in recent years to levels that analysts said might not prove sustainable. 'Some local markets appear to be overvalued, and in those markets there may be some price adjustments to bring sales and pricing back in line,' said analyst Greg Paquin of the Gregory Group, a Folsom-based real estate data and consulting firm. 'In other markets, it may already be in line, but we're not projecting significant price increases over the next year or two.' The 368 new home

BEA 4th Quarter GDP 1st Estimate 0.7% Q&A: Why Did GDPNow Rise After Durable Goods? When are Construction Revisions Coming? 'Commercial real estate is a full-blown bubble that feels very much at a bursting point,' said Christian Stracke, an analyst in London at CreditSights Inc., a fixed-income research firm. 'There's a fairly toxic mix of factors at work.' The seven-year rally in offices and retail properties ended in September when prices fell an average of 1.2 percent, according to Moody's Investors Service. Banks worldwide are holding $54 billion of unsold commercial mortgages, according to data compiled by New York-based Citigroup Inc. that includes fixed and floating-rate debt. Lenders are struggling to sell loans to investors after losses on debt backed by subprime mortgages to people with poor credit caused financial markets to seize up in July and August. Bonds with AAA ratings secured by properties ranging from the Sears Tower in Chicago to trailer

Let's take a look at two of the hotter markets for 2004San Diego County California and Las Vegas NevadaSan Diego Home Prices and SalesSan Diego Home Sale TrendsIn San Diego County year over year sales are down 20.8% and average sale time (days on the market) has risen 50% from 40 days to 60 days. Somehow the median price has risen by 18%. Is the average buyer now being priced out of the market and some of the froth coming off? It sure seems like it. Las Vegas NevadaLas Vegas Home SalesLas Vegas Home Sale TrendsIn Las Vegas year over year sales are down 10.5% and average sale time (days on the market) has risen 45% from 33 days to 48 days. Again we see a divergence in median sales price. Those figures are as of December. Current figures are not yet available. That is just a snapshot of two markets but it is indicative of nationwide trends: Sales times are ticking up along with inventories. At some point rising inventories will put price pressures on houses if in fact it has not star

Yesterday we discussed 'The Way Forward'.The bulk of those ways involved moving jobs to Mexico while closing US plants and offering worker buyouts. One of the options being considered is taking Ford private. On August 24th, the USA Today reported Ford Motor considers going private BEA 4th Quarter GDP 1st Estimate 0.7% Q&A: Why Did GDPNow Rise After Durable Goods? When are Construction Revisions Coming? DETROIT — Ford Motor (F) is considering taking the company private, a move that could give the ailing automaker time to restructure operations outside the glare of critics, a source with direct knowledge of the discussions said Wednesday. 'The family is willing to look at anything,' said the source, who didn't want to be identified because the discussions are ongoing. 'A lot of different scenarios are being gamed out.' With Ford's shares trading around an anemic $8.25, going private could cost interested parties as little as $13.34 billion. 'The bi