Written by Steven Hansen
The headlines for existing home sales say that sales improved in April . Our analysis shows sales (based on comparing year-over-year growth) is a little above average for the growth evidenced over the last 12 months. This month looks good analytically.
Econintersect Analysis:
- Sales up 6.0% month-over-month, Up 13.5% year-over-year – growth rate trend is accelerating
- Prices down 0.5% month-over-month, Up 9.4% year-over-year
- The homes for sale inventory grew again this month, and is historically normal for Aprils.
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Written by Adam Whitehead, KeySignals.com
In Housing Smoke and Mirrors (4)[i] and (5),[ii] to confront the threat of the deteriorating bad mortgage vintages -
“the Federal Reserve and the Federal Government were observed to be running swiftly into the housing market.”
The latest data, on the HOPE NOW programme, has confirmed that the ratio of modifications to foreclosures was two-to-one in the first quarter of this year.[iii]
Housing Smoke and Mirrors (6)[iv] suggested that the governance rules of the GSEs were about to be changed, so that they could modify mortgage principle values. This would then allow them to securitize their “Zombie Home” mortgages into MBS, that could then be bought by the Fed.
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Written by Keith Jurow, Capital Preservation Real Estate Report
Here We Go Again
On March 27, 2013, the Federal Housing Finance Administration (FHFA) announced the introduction of still another mortgage modification program. Entitled the Streamlined Modification Program, it was intended to enable distressed borrowers to more easily qualify for a modification.
Unlike the HAMP modification program, borrowers will not have to show any financial hardship whatsoever in order to qualify. If their first lien is owned or guaranteed by either Fannie Mae or Freddie Mac, the only requirement is that they be delinquent for 90 days or more and complete a 3-month trial period. Also – they cannot be delinquent for more than two years and cannot have had two or more previous modifications.
Nice deal, huh? The obvious criticism is that it will only encourage borrowers to default in order to qualify. FHFA’s answer is that it will minimize losses to Fannie and Freddie by reducing foreclosures. Really?
Continue reading →
Posted in Banking News, Government, Home Sales and Home Prices, aa syndication
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Tagged 90 day delinquent, FHFA, HAMP, HELOC, Keith Jurow, mortgage modification, mortgage mods, second mortgages, Streamlined Modification Program, underwater mortgages
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The battle for the Syrian city of Al-Qusayr, which came under regime artillery fire May 19, is actually part of a larger battle for the highly coveted Homs governorate. As we noted in 2012, the battle has wide-reaching ramifications for the Syrian rebels since Al-Qusayr sits along a major transit point for rebel supplies and reinforcements coming in from Lebanon. But it is equally important to loyalist forces. If the Syrian regime loses control of the Orontes River Valley and its major road junctions, Damascus will be largely cut off from Aleppo and the Alawite-dominated coast, which would limit the regime’s access to supply lines from port cities.
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by Nicholas Crafts
This article was originally published by Voxeu.org on May 12, 2013
The UK escaped a liquidity trap in the 1930s and enjoyed a strong economic recovery. This column argues that what drove this recovery was ‘unconventional’ monetary policy implemented not by the Bank of England but by the Treasury. Thus, Neville Chamberlain was an early proponent of ‘Abenomics’. This raises the question: is inflation targeting by an independent central bank appropriate at a time of very low nominal-interest rates?
In mid-1932, the UK had experienced a recession of a similar magnitude to that of 2008-09, was engaged in fiscal consolidation that reduced the structural budget deficit by about 4% of GDP, had short-term interest rates that were close to zero, and was in a double-dip recession (Crafts and Fearon 2013). The years from 1933 through 1936 saw a very strong recovery with growth of over 4% in every year. The Chancellor of the Exchequer, Neville Chamberlain (in office from November 1931 to May 1937) was the architect of this recovery. Given the similarities with the situation now facing George Osborne, is there anything he could learn from the policies adopted by his predecessor? Continue reading →
Posted in Economics, Government, UK, macroeconomics, money
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Tagged consumer confidence, Economy, GDP, home sales, housing, inflation, Nicholas Crafts, recession, recovery, trade balance, Voxeu
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Written by Steven Hansen
The economy was almost statistically unchanged in April 2013 – and this index is suggesting the economy is expanding just below the historical trend rate of growth – with the Chicago Fed National Activity Index (CFNAI) 3 month moving (3MA) average increasing from -0.5 to -0.4. The 3MA has now been in negative territory for two months, but still well above the levels associated with recessions.
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Written by Adam Whitehead, KeySignals.com
From Terminal Velocity (3) – “The Pyramid Scheme”[i]:
Reading between the lines, it is clear that the Fed intends to maintain a large balance sheet of assets for some time; even after interest rates have begun to normalize. The Fed will then use a rolling form of Operation Twist, across the Yield Curve and across asset classes, in order to target particular areas that it believes need influencing. The overall size of the balance sheet and its composition will then be managed, to achieve a background of benchmark interest rates for specific capital market sectors and the economy in general. This balance sheet management will involve increases and decreases in overall size, in addition to substitution of different assets and maturities. In this way, the Fed intends to anticipate and prevent bubbles or excessive tightness in liquidity from occurring.
It therefore looks as though the Fed will allow QE to roll off via expiry; and that it is quite prepared to provide specific monetary support to specific credit instruments, even as interest rates are rising in general. The intention and capability are to make the economic recovery sustainable during the rising rate environment.
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Posted in Economics, Federal Reserve, macroeconomics, money, money and banking
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Tagged Adam Whitehead, BEA, China, consumer confidence, Economy, Federal Reserve, GDP, inflation, recovery
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by John Mauldin, Thoughts from the Frontline
The evils of this deluge of paper money are not to be removed until our citizens are generally and radically instructed in their cause and consequences, and silence by their authority the interested clamors and sophistry of speculating, shaving, and banking institutions. Till then we must be content to return, quo ad hoc, to the savage state, to recur to barter in the exchange of our property, for want of a stable, common measure of value, that now in use being less fixed than the beads and wampum of the Indian, and to deliver up our citizens, their property and their labor, passive victims to the swindling tricks of bankers and mountebankers. ≈ Thomas Jefferson, in a letter to John Adams, 21 March 1819 Continue reading →
Posted in Economics, Government, Japan, Trade Data, macroeconomics, money, money and banking, stock markets
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Tagged consumer confidence, Economy, exports, GDP, industrial production, inflation, Japan, John Mauldin, recovery, trade balance
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The Ideology to End Ideologies – A Response to Corey Robin on Nietzsche, Hayek, Mises, and Marginalism
by Philip Pilkington
This article was first published by Naked Capitalism (May 13, 2013)
Editor’s Note: Econintersect considers this a fundamentally important discussion of the philosophical underpinnings of 20th and 21st century economic thinking. It is contentious, to the point of being “in your face”, and is a far more complex subject than many would try to address in an essay of this length. However, the author has succeeded illustriously in his effort. The reader is encouraged to take the time to read this carefully and critically. We think it is well worth the effort.
The political philosopher Corey Robin recently published an interesting essay on what he thinks to be the connection between the late German philosopher Friedrich Nietzsche and the economic theory of marginalism which Robin associates with the Austrian school (but which, of course, is also a mainstay of mainstream neoclassical economics). I should start by saying that I respect Robin’s work a great deal; I respect it to the extent that I did an interview with him for this very site when his last book appeared. However, his latest piece is grossly misguided and reflective of the fact that, when it comes to theoretical economics, academic critics on the left simply do not know their enemy at all. Continue reading →
Written by Steven Hansen
There have been several posts over the past few weeks discussing college / university education. Goldman Sachs economist Jan Hatzius stated:
[T]he faster job growth among college graduates is entirely due to faster growth in the size of the college-educated population; the employment/population ratio among college graduates has in fact fallen sharply,
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Posted in Employment, Weekly Economic Summary, aa syndication
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Tagged college, dropout, Economy, employment, GDP, high school, recovery, Steven Hansen, unemployment, university, weekly review
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by Lee Adler, Wall Street Examiner
The media exhibited much consternation today as economists’ consensus guess on first time unemployment claims turned out to be way too optimistic this week. That raised two questions in my mind. Was the number really that bad, and even if it was, does it matter?
The Labor Department reported that the seasonally adjusted (SA) representation of first time claims for unemployment rose by 32,000 to 360,000 from a revised 328,000 (was 323,000) in the advance report for the week ended May 11, 2013. The consensus estimate of economists of 330,000 for the SA headline number was too optimistic after 3 weeks of guesses that were too pessimistic. Call it “evening things up.” They were wrong one way 3 times in a row, so they overcompensated the other way this week. It’s a ridiculous game, but everybody plays anyway. Forecasters are virtually always wrong, not just because economic forecasting is quackery, but also because the seasonally adjusted number, being made-up, is impossible to consistently guess (see endnote). Continue reading →
by Doug Short, Advisor Perspectives/dshort.com
The University of Michigan Consumer Sentiment preliminary number for May came in at 83.7, a major advance over the April final reading of 76.4. This is the highest level since July of 2007, prior to the Great Recession. The Briefing.com consensus was for 78.5.
See the chart below for a long-term perspective on this widely watched index. I’ve highlighted recessions and included real GDP to help evaluate the correlation between the Michigan Consumer Sentiment Index and the broader economy.
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Written by Steven Hansen
The Conference Board Leading Economic Index (LEI) for the U.S. improved 0.6% in April to 95.0 (2004 = 100). Overall, the index value has been slowly trending up, and one month is not a trend.
This index is designed to forecast the economy six months in advance. The market expected a 0.3% improvement in the LEI (versus the +0.6% reported).
Both the LEI and ECRI’s WLI are forecasting improving growth for the next six months.
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Tanju Yorulmazer, Federal Reserve Bank of New York
One of the most interesting phenomena marking the recent financial crisis was the disruptions in the interbank market, where banks borrow and lend reserves to each other. This post draws upon my paper with Douglas Gale, “Liquidity Hoarding,” to discuss this practice by banks during times of increased uncertainty about future liquidity needs and its consequences for the efficient transfer of liquidity in the interbank market.
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Written by Steven Hansen
The Philly Fed Business Outlook Survey fell into negative (contraction) – after two months in positive territory. This survey has been negative for 9 of the last 13 months. Key element new orders slipped further into contraction territory.
This is a very noisy index which readers should be reminded is sentiment based. The Philly Fed historically is one of the most negative of all the Fed manufacturing surveys.
The market was expecting the index value of 2.0 to 2.5 (actual was -5.2). Positive numbers indicate market expansion, negative numbers indicate contraction.
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Posted in Manufacturing, Retail & Business Sales, aa syndication
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Tagged backlog, business, conditions, manufacturing, new orders, orders, Philly Fed, philly_man, Steven Hansen
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Written by Steven Hansen
Residential building permits and construction completions in April 2013 continues to show the industry growth.
- Our analysis paints a slightly different picture than the headline data.
- Apartment building permits comparing April 2012 to April 2013 are stronger this month.
- The rate of annual growth for building permits in the last 12 months for this sector has been mostly in a channel between 25% and 40%. This month is above this channel.
- Please note that the media concentrates on housing starts as a single metric for this data series – while Econintersect focuses on the general growth trends of the sector (permits versus completions) which are the best indicator of trends which show the health of this sector. Housing starts would give an indication of construction contribution to GDP.
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by Doug Short and Steven Hansen
The April 2013 Consumer Price Index (CPI-U) year-over-year inflation rate fell from 1.5% to 1.1% . Core inflation (CPI less food and energy) fell slightly also from 1.9% to 1.7%.
The dynamics were large decreases from the gasoline index (which is not part of core inflation), and some inflationary pressures from electricity and natural gas.
The Producer Price Index (released yesterday) showed finished goods fell to a 0.6% year-over-year inflation rate.
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Posted in Prices - PPI, CPI and More, aa syndication
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Tagged Advisor Perspectives, consumer prices, CPI, Doug Short, dshort.com, energy, export prices, finished goods, food, gasoline, inflation, PPI, producer prices, Steven Hansen
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Written by Steven Hansen
For the second month in a row, both import and export container counts are contracting year-over-year – comparing same months in 2012 and 2013.
- Economically intuitive imports however are “less bad” (but are still growing year-to-date);
- exports are also “less bad” in April but continues to contract year-to-date.
Continue reading →
Housing Smoke and Mirrors (Part 6)
“It was the best of times, it was the worst of times.”
Written by Adam Whitehead, KeySignals.com
Click to enlarge
We thought it would be amusing to start this discussion with the latest “Smoke and Mirrors” from RealtyTrac. They clearly have an interesting perspective and “scale” in relation to measuring the housing recovery. If a picture can be worth a thousand words, hyperbole has just reached a new level. No prizes for guessing what the consensus view on the housing market is. Continue reading →
by Reda Cherif and Fuad Hasanov, Voxeu.org
This article was originally published by Voxeu.org (May 3, 2013)
Europe’s austerity-first approach has triggered research-based efforts to evaluate the effectiveness of debt-reduction strategies. This column, based on a US empirical study, suggests that an ‘austerity shock’ in a weak economy may be self-defeating. Public-debt reduction historically occurs gradually amid improved growth. If policymakers, firms and households respond as in the past, we should expect lower deficits amid higher growth and, eventually, decreasing debt ratios.
In many advanced countries, in the wake of the 2008 global financial crisis, deficits skyrocketed and public debt ballooned (see Figure 1). In fact, fiscal stimulus accounted for only a small fraction of the increase in debt, whereas collapsing revenues and higher unemployment and social benefits contributed the largest share (IMF 2011). Continue reading →
Posted in Economics, International Economic data, macroeconomics
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Tagged austerity, consumer confidence, Economy, Federal Reserve, Fuad Hasanov, GDP, inflation, recession, recovery, Reda Cherif
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