energyecon
18.08.2009
18.08.2009
Words Fail Me
Res ipsa loquitur
Tagesarchiv für den 18.08.2009
Res ipsa loquitur
Jeff
18.08.2009
18.08.2009
Is Deflation Winning the War?
This remains one of the hottest topics among the pundits.
We saw another little bullgasm in the markets today as the DOW rallied closing up 83 points.
Futures are down after HP's earnings which met expectations. Despite today's little rally, I still believe that sentiment is slowly changing back to doom and gloom. Investors are tired of hearing about earnings beats that were basically achieved as a result of companies slashing costs. Investors now want real growth!
Less bad is no longer cutting it anymore because the markets have moved up 50% from the lows. In order for the markets to continue and rally, earnings and top line revenue growth must start growing. If they don't, stocks are going to start to look highly overvalued because they got way ahead of themselves after a 50% relief rally based on nothing.
Lets get real here: We all know there is ZERO chance for sustainable growth because the consumer remains suffocated in debt. There is no reason to believe that an economic recovery is coming anytime soon.
Signs of economic destruction are everywhere. Commercial real estate, job losses, housing foreclosures, underfunded pensions, massive state deficits, massive USA deficits...Need I go on?
Whats been startling to me lately is the price destruction that's starting to pop up everywhere around me. I see it in restaurants, housing, and consumer products(I still can't believe I paid $360 for a computer the other day).
What I am starting to wonder is this: Is the government starting to lose its battle versus deflation?
The chart below says yes:
My Take:
As you can see above, we are seeing the largest bout of deflation in our economy since WWII. Seeing inflation below zero is a rare occurrence in the history of this nation folks.
What we need to be concerned about given the most recent data is a Japanese style deflationary collapse.
I have discussed this subject many times before. The powerful deflationary forces that we are currently witnessing have to make you wonder if the Fed might be starting to lose the war with deflation.
My biggest fear here is how the Fed reacts to the obvious signs that deflation is beginning to overwhelm the economy. Do they react by doing something reckless like devalue the dollar in a desperate attempt to inflate their way out of this? Let's hope they aren't that stupid.
As you can see in the chart above, the last deflationary death spiral seen in the US was The Great Depression. It was a long and painful 10 years before WWII came along and pulled us out of it. If the war hadn't created millions of new jobs who knows how long this could have lasted.
Japan STILL hasn't recovered from their deflationary death spiral and that began about 30 years ago! Their stock market peaked at around 38,000. It now sits at 10,000 today.
The Bottom Line:
The Fed is praying for inflation but so far its not happening folks. If these trends continue, your investment strategy should be refocused on shorts and hoarding as many US dollars as you can.
I still plan on holding my metals because I am worried that the Fed might be stupid enough to destroy our currency in an attempt to stave off deflation.
The jury is still out, but a deflationary depression could very well be in the cards.
We saw another little bullgasm in the markets today as the DOW rallied closing up 83 points.
Futures are down after HP's earnings which met expectations. Despite today's little rally, I still believe that sentiment is slowly changing back to doom and gloom. Investors are tired of hearing about earnings beats that were basically achieved as a result of companies slashing costs. Investors now want real growth!
Less bad is no longer cutting it anymore because the markets have moved up 50% from the lows. In order for the markets to continue and rally, earnings and top line revenue growth must start growing. If they don't, stocks are going to start to look highly overvalued because they got way ahead of themselves after a 50% relief rally based on nothing.
Lets get real here: We all know there is ZERO chance for sustainable growth because the consumer remains suffocated in debt. There is no reason to believe that an economic recovery is coming anytime soon.
Signs of economic destruction are everywhere. Commercial real estate, job losses, housing foreclosures, underfunded pensions, massive state deficits, massive USA deficits...Need I go on?
Whats been startling to me lately is the price destruction that's starting to pop up everywhere around me. I see it in restaurants, housing, and consumer products(I still can't believe I paid $360 for a computer the other day).
What I am starting to wonder is this: Is the government starting to lose its battle versus deflation?
The chart below says yes:
My Take:
As you can see above, we are seeing the largest bout of deflation in our economy since WWII. Seeing inflation below zero is a rare occurrence in the history of this nation folks.
What we need to be concerned about given the most recent data is a Japanese style deflationary collapse.
I have discussed this subject many times before. The powerful deflationary forces that we are currently witnessing have to make you wonder if the Fed might be starting to lose the war with deflation.
My biggest fear here is how the Fed reacts to the obvious signs that deflation is beginning to overwhelm the economy. Do they react by doing something reckless like devalue the dollar in a desperate attempt to inflate their way out of this? Let's hope they aren't that stupid.
As you can see in the chart above, the last deflationary death spiral seen in the US was The Great Depression. It was a long and painful 10 years before WWII came along and pulled us out of it. If the war hadn't created millions of new jobs who knows how long this could have lasted.
Japan STILL hasn't recovered from their deflationary death spiral and that began about 30 years ago! Their stock market peaked at around 38,000. It now sits at 10,000 today.
The Bottom Line:
The Fed is praying for inflation but so far its not happening folks. If these trends continue, your investment strategy should be refocused on shorts and hoarding as many US dollars as you can.
I still plan on holding my metals because I am worried that the Fed might be stupid enough to destroy our currency in an attempt to stave off deflation.
The jury is still out, but a deflationary depression could very well be in the cards.
Querschuss
18.08.2009
18.08.2009
“US-Baubeginne wieder schwächer”
Die Gegenbewegung an den US-Immobilienmärkten, falls man sie überhaupt so nennen kann, schwächt sich im Juli 2009 wieder ab. Nach den heutigen Daten des Census Bureau fallen die US-Baubeginne (Housing Starts) um -1% zum Vormonat auf 581'000 Neubaubeginne (SAAR), nach revidierten 587'000 im Vormonat.
Im Vergleich zum Vorjahresmonat handelt es sich immer noch um einen Einbruch von -37,7% und um einen gewaltigen Einbruch von -74,34% zum letzten Hoch im Januar 2006 mit 2,273 Millionen Wohneinheiten. Das Allzeittief seit 1959 wurde im April 2009 mit 479'000 Baubeginnen markiert!
Auch die Baugenehmigungen sind im Juli 2009 wieder gesunken, sie beschreiben die Bauaussichten. Die Zahl der Baugenehmigungen sank um -1,8% zum Vormonat auf 560'000 Wohneinheiten (SAAR)! Im Vergleich zum Vorjahresmonat sind es immer noch -39,4% und zugleich der fünfttiefste Stand seit Beginn der Datenerhebung im Januar 1960! Das letzte Hoch bei den Baugenehmigungen lag mit 2,263 Millionen Einheiten im September 2005, ein Minus seitdem von -75,25%! Das Tief wurde im April 2009 mit 498'000 Baugenehmigungen markiert.
Auch die nicht saisonbereinigten und auf das Jahr hochgerechneten Baubeginne und Baugenehmigungen sind deutlich gesunken, die Baubeginne um -5,92% zum Vormonat und die Baugenehmigungen sogar um -8,73% zum Vormonat. Die Baubeginne, not seasonally adjusted, liegen mit 55'600 Einheiten auf dem tiefsten Stand, welcher seit 1959 in einem Juli generiert wurde. Der zweitschlechteste Juli war 2008 mit 86'000 Baubeginnen! Quelle: PDF Census.gov
Die Stimmung am US-Bau stabilisiert sich allerdings weiter auf niedrigen Niveau:
> Seit dem Hoch im Januar 2007 gingen 1,589 Millionen Jobs am Bau verloren! Im Juli 2009 sind es noch 6,148 Mio. Arbeitsplätze am Bau! <
Im Vergleich zum Vorjahresmonat handelt es sich immer noch um einen Einbruch von -37,7% und um einen gewaltigen Einbruch von -74,34% zum letzten Hoch im Januar 2006 mit 2,273 Millionen Wohneinheiten. Das Allzeittief seit 1959 wurde im April 2009 mit 479'000 Baubeginnen markiert!
> Die US-Baubeginne (blau) mit 581'000 neuen Wohneinheiten im Juli 2009 saisonbereinigt und auf das Jahr hochgerechnet (SAAR). Die Baugenehmigungen (rot) mit 560‘000 Einheiten. Beide Indikatoren bewegen sich weiterhin in der Nähe der historischen Tiefs! Quelle Daten: XLS Census.gov/housing starts, XLS Census.gov/permits <
Auch die Baugenehmigungen sind im Juli 2009 wieder gesunken, sie beschreiben die Bauaussichten. Die Zahl der Baugenehmigungen sank um -1,8% zum Vormonat auf 560'000 Wohneinheiten (SAAR)! Im Vergleich zum Vorjahresmonat sind es immer noch -39,4% und zugleich der fünfttiefste Stand seit Beginn der Datenerhebung im Januar 1960! Das letzte Hoch bei den Baugenehmigungen lag mit 2,263 Millionen Einheiten im September 2005, ein Minus seitdem von -75,25%! Das Tief wurde im April 2009 mit 498'000 Baugenehmigungen markiert.
Auch die nicht saisonbereinigten und auf das Jahr hochgerechneten Baubeginne und Baugenehmigungen sind deutlich gesunken, die Baubeginne um -5,92% zum Vormonat und die Baugenehmigungen sogar um -8,73% zum Vormonat. Die Baubeginne, not seasonally adjusted, liegen mit 55'600 Einheiten auf dem tiefsten Stand, welcher seit 1959 in einem Juli generiert wurde. Der zweitschlechteste Juli war 2008 mit 86'000 Baubeginnen! Quelle: PDF Census.gov
Die Stimmung am US-Bau stabilisiert sich allerdings weiter auf niedrigen Niveau:
> Der Stimmungsindikator der US-Bauunternehmer (National Association of Home Builders/Wells Fargo) steigt im August leicht auf 18 Punkte, nach 17 Punkten im Juli! Aber auch der Langfristchart des NAHB Housing Market Index, seit 1985, zeigt in welchen Tiefen sich der Stimmungsindikator der Bauwirtschaft bewegt. <
Eine Recovery-Show sieht anders aus!
Massenhafte Zwangsversteigerungen und ein hoher Bestand an gebrauchten Immobilien, welche an neue Eigentümer gebracht werden wollen, können natürlich die niedrige Anzahl der Neubaubeginne erklären. Trotzdem bleibt auch hier die Frage, wo sollen die Jobs und die Einkommen herkommen, wenn die Baubeginne im Juli 2009 bei einem Drittel des Volumens von 1959 dümpeln! Bereits 25 Monate in Folge kommt es in der US-Bauwirtschaft zu einem Arbeitsplatzabbau:
> Seit dem Hoch im Januar 2007 gingen 1,589 Millionen Jobs am Bau verloren! Im Juli 2009 sind es noch 6,148 Mio. Arbeitsplätze am Bau! <Seit Beginn der Rezession im Dezember 2007 sind in den USA 6,664 Millionen Stellen abgebaut worden! Im verarbeitenden Gewerbe (Manufacturing) waren es 1,96 Mio. und am Bau 1,38 Millionen Jobs weniger. Ohne eine kräftige Erholung beim privaten Wohnungsbau und bei der Industrieproduktion wird es kaum eine Trendwende für die gesamte Wirtschaft geben, denn bei der heutigen US-Finanz- und Wirtschaftspolitik sind keine neuen Wirtschaftsektoren und Technologien in Sicht, die Millionen neue Jobs schaffen könnten.
Dabei wäre es eigentlich simpel, entwaffnete Finanzmärkte - statt Billionen Dollar für das US-Finanzsystem, z.B. nur eine Billion in erneuerbare Energien und damit in Jobs, Einkommen, in die Senkung des Verbrauches von fossilen Brennstoffen und damit in die Zukunftsfähigkeit der Wirtschaft!
Reloaded: "23,7 Billionen Dollar - eine unvorstellbare Summe", "Cantarell im gnadenlosen Decline"
Quelle Daten: PDF Census.gov, Nahb.orgKontakt: info.querschuss@yahoo.de
Ben Bittrolff
18.08.2009
18.08.2009
Shanghai: Parabolic Moves Always End in Tears
FN: Parabolic moves always end in tears. Always. BTW, thats where the Chinese stimulus money went. From the central banks it went into the corporations and retail investors... and from there straight into the equity markets.
Gary
18.08.2009
18.08.2009
Cyclical bull?
At great many signs are pointing to a new cyclical bull market (within the context of a much larger secular bear). Not the least of which is the Dow Theory primary trend change. The fact that almost everyone believes that has me worried. I'm going to go out on a limb and say I doubt it! I think what we are seeing is probably just the normal human response to the extreme negative sentiment generated last year as the market crashed (along with plenty of liquidity from the Fed and stimulus from the government).
In 2001 the events surrounding 911 caused an extreme downward move in the stock market. After the selling finally exhausted itself the market bounced back strongly taking two complete weekly cycles to roll over and make new lows.
In 2001 the market dropped about 23% below the 200 DMA. Last fall the market moved 40% below the 200 DMA. I think we are now witnessing the upside surge as human nature tries to swing as far on the upside as it did on the downside last year.
However, I don't think we saw a 77 month 4 year cycle. The longest in history was 66 months. I believe the 4 year cycle bottomed in March of last year and we are still in the most extreme left translated 4 year cycle in history. That means we probably have much further to go on the downside than almost anyone thinks at this point.
A rally with this kind of momentum probably isn't going to roll over and die easily. I suspect just like the rally out of the 01 bottom this thing is going to chop around for a while before finally breaking down and moving to new lows possibly by the end of Nov.
Ben Bittrolff
18.08.2009
18.08.2009
S&P 500 Percent of Stocks Above 200 Day Moving Average
FN: The percent of stocks above their 200 day moving averages peaked at 91.6% on Thursday last week. The last reading over 90% was in March 2007, just before the market corrected.
Bull Bear Trader
18.08.2009
18.08.2009
Transparency Will Need To Go Global
The tremendous growth of the Chinese economy and stock market has many wondering how long it will take before China once again regains it spot as the top economy (The Business Insider). When looking at purchasing power parity, some analysts are expecting that China will regain the crown as the top economy by 2015, after 125 years of the U.S. holding the number one spot. Yet for China and any other global market or economy to be a long-term destination for investment, further transparency and disclosure will no doubt be necessary. Just yesterday I discussed some recent academic research that found investors tend to trade foreign equities more often than their domestic counterparts (Bull Bear Trader). In short, the authors of the study found that the level of trading is higher for stocks in markets for which there are weaker investor protections, or for markets that have lower disclosure standards. The portfolio turnover or churn rate was higher as the quality of information and level of familiarity decreased.
This information appears to not be lost on some international markets. Wealth Briefing Asia reports that as investor look across the globe for alternative investments, they will demand more in-depth information on investment products in the wake of the recent financial crisis. To meet this need, services are already being offered to help investors discover transparent managers, and regulatory bodies are increasing requirements for transparency within various markets. Both the demand and the will seem to be in place, yet more will have to be done, with such transparency continuing down to the company level as investor seek assurances regarding future investments. This is happening in Japan, where after two decades of poor returns, Japanese investors are beginning to challenge management teams that are not delivering for shareholders (Financial Times).
Therefore, as investors continue to look for alternative investments and ways to diversify globally, international markets will need to increase transparency as the economic links between the U.S., China, Japan, Europe, Brazil, India, and Russia, among others, continue to grow. In doing so, markets will be able to lower equity turnover rates (Bull Bear Trader), thereby reducing volatility and allowing them to attract the type of long-term investment and capital necessary to grow their markets. Whether China continues to rises to the level of market leadership is still to be seen, but even if the U.S. retains it top position, a more transparent market in China and elsewhere will help all markets given that full decoupling has not happen, and will most likely never fully occur in the new global market place.
This information appears to not be lost on some international markets. Wealth Briefing Asia reports that as investor look across the globe for alternative investments, they will demand more in-depth information on investment products in the wake of the recent financial crisis. To meet this need, services are already being offered to help investors discover transparent managers, and regulatory bodies are increasing requirements for transparency within various markets. Both the demand and the will seem to be in place, yet more will have to be done, with such transparency continuing down to the company level as investor seek assurances regarding future investments. This is happening in Japan, where after two decades of poor returns, Japanese investors are beginning to challenge management teams that are not delivering for shareholders (Financial Times).
Therefore, as investors continue to look for alternative investments and ways to diversify globally, international markets will need to increase transparency as the economic links between the U.S., China, Japan, Europe, Brazil, India, and Russia, among others, continue to grow. In doing so, markets will be able to lower equity turnover rates (Bull Bear Trader), thereby reducing volatility and allowing them to attract the type of long-term investment and capital necessary to grow their markets. Whether China continues to rises to the level of market leadership is still to be seen, but even if the U.S. retains it top position, a more transparent market in China and elsewhere will help all markets given that full decoupling has not happen, and will most likely never fully occur in the new global market place.
Ben Bittrolff
18.08.2009
18.08.2009
First Major Distribution Day Since July
FN: Yesterday was the first Major Distribution day since the first week of July. Since they tend to come in clusters, expect more over the next weeks accompanied by price weakness.
James
18.08.2009
18.08.2009
Zillow COO’s housing prediction
Zillow.com's Chief Operating Officer, Spencer Rascoff, gives his prediction for the housing market:
"In the second half of 2009, home values are going to continue to decline. Foreclosures are going to keep making up a significant part of the sales, probably about a quarter of all sales in the back half of 2009 nationwide will be foreclosures," says Rascoff, adding, "I think you'll have those homes clear off the market but new foreclosures come on the market right behind them."
Rascoff believes we are a full year away from a true national bottom in housing, but even then, he says, don’t expect to make money fast. "You're not going to see a return to rapid appreciation from a couple of years ago," he opines. "This is probably going to be an L-shaped recovery where home values stay relatively constant once they hit the bottom."
Querschuss
18.08.2009
18.08.2009
“US-Kreditausfälle steigen weiter!”
Gestern veröffentlichte die US-Notenbank in ihrem Federal Reserve Statistical Release die Daten zu den Kreditausfallraten der US-Geschäftsbanken für das 2. Quartal 2009! Die gesamte Delinquency Rate (Schuldner mit über 30 Tagen in Zahlungsverzug) schießt auch im Q2 in die Höhe, um +16,3% auf 6,49%, nach 5,58% im Vorquartal und 3,37% im Vorjahresquartal.
> Die Entwicklung der gesamten Kredite mit 30 Tagen in Zahlungsverzug. Alle Daten jeweils saisonbereinigt (SA). <
Im Detail schlagen vor allem bei den privaten Hypothekennehmern die säumigen Schuldner negativ zu Buche.
> Die säumigen Schuldner der privaten Immobilienkredite explodieren auf 8,84%, nach 7,85% im Vorquartal. Der Anstieg seit Q4 2006 beträgt +458,03%! Die in Verzug geratenen Bedienung der Kredite für gewerbliche Immobilien beginnt gerade mit dem Steilflug nach oben, sie steigen auf 7,91% und auch die Zahlungsrückstände der Kreditkartennutzer steigt auf 6,7% laut den Angaben der FED. <
> Die Entwicklung der gesamten Kredite mit 30 Tagen in Zahlungsverzug. Alle Daten jeweils saisonbereinigt (SA). <Im Detail schlagen vor allem bei den privaten Hypothekennehmern die säumigen Schuldner negativ zu Buche.
> Die säumigen Schuldner der privaten Immobilienkredite explodieren auf 8,84%, nach 7,85% im Vorquartal. Der Anstieg seit Q4 2006 beträgt +458,03%! Die in Verzug geratenen Bedienung der Kredite für gewerbliche Immobilien beginnt gerade mit dem Steilflug nach oben, sie steigen auf 7,91% und auch die Zahlungsrückstände der Kreditkartennutzer steigt auf 6,7% laut den Angaben der FED. < Die Charge-Off Rates steigen in Folge stark an, das sind die von den Banken tatsächlich endgültig ausgebuchten Kredite.
> Im 2. Quartal 2009 liegt die Charge-Off Rates bei 2,65%, ein Anstieg um +30,5% von 2,03% zum Vorquartal, mehr als eine Verdoppelung im Vergleich zum Vorjahresquartal mit damals 1,26% und ein Anstieg von +646% zu Q4 2006 mit einer Charge-Off Rate von 0,41%! Alle Daten saisonbereinigt. <
Hierbei stechen vor allem die Ausfälle der Kreditkartenkredite hervor, unglaubliche 9,55% aller Kreditkartenkredite wurden in Q2 2009 als Totalausfall registriert. Die Charge-Off Rates der privaten Hypothekenkredite stieg auf 2,34%, dies klingt wenig ist aber ein Anstieg von unglaublichen +1950% zu Q4 2006 von damals 0,12%!
Einen Hinweis um welche Volumen es sich bei den Kreditausfällen handelt, liefert das ausstehende private Hypothekenvolumen von 10,463 Billionen Dollar (FED, PDF Seite 16), zuletzt in Q1 2009 veröffentlicht. Eine Ausfallrate von 2,34% dieser Kredite entspricht immerhin einem Volumen von 244 Mrd. Dollar an Totalausfall für die US-Banken. Die Charge-Off Rate für alle privaten Konsumentenkredite, darin sind die Kreditkartenkredite enthalten, betrug in Q2 2009 immerhin 5,66%! Bei einem ausstehenden Konsumentenkreditvolumen von zuletzt 2,5959 Billionen Dollar kommen noch mal 146,9 Mrd. Dollar an Totalausfall dazu! Jetzt kommen noch die Ausfälle der gewerblichen Immobilienkredite mit einer Charge-Off Rate von 2,11%, die C&I Loans (Unternehmensdarlehen) mit einer Ausfallrate von 2,32% und die Ausfälle von 0,52% für vergebene Kredite an die Landwirtschaft hinzu.
Die Finanzkrise ist nicht vorbei, sie wurde nur mit Scheingeld der Notenbank und des Staates überdeckt!
Quelle Daten: Federalreserve.gov
Kontakt: info.querschuss@yahoo.de
James
18.08.2009
18.08.2009
Dow Jones: Home prices have not bottomed
Jeff
18.08.2009
18.08.2009
It’s All About Housing
Whoa! That was a pretty damn ugly wasn't it?
This move down kinda came out of nowhere. It all started in Asia last night. All of the major indices plunged substantially as Japan's GDP#'s came in a little light.
China's market has now dropped 12% from their recent highs. I think the longs are starting to realize that if China can't continue to grow then who in the hell can? We know the US and Europe will be dead for several years.
China and their large reserves are the only hope for world growth. The question now becomes this: Was the recent spending binge by China on commodities growth/demand oriented? Or is this stuff just sitting in a giant storage bin collecting dust?
If I had to guess I would choose option two. I mean lets face it: China only grows if the world consumes. The recent consumer data in the US basically told us that the consumer is on life support.
I doubt China can continue to have robust growth if their factories are shut down as as our consumer binges come to a complete standstill.
In The US: It's All About Housing
Calculated Risk had a great chart today on the disturbing default rates in real estate:
My Take:
I am sure this chart keeps a lot of bank CEO's up late at night. I can't even begin to explain how ugly this is. As you can see, the default rates are absolutely parabolic in both commercial and residential real estate.
Here is the default data from the Fed today and how it compares historically:
"WASHINGTON (MarketWatch) -- Delinquency rates for loans and leases at U.S. banks increased to a record 6.49% in the second quarter from 5.58% in the first quarter, the Federal Reserve announced Monday. The Fed began collecting the data in 1985. The charge-off rate rose from a record 2.03% to a record 2.65%. Before this recession, the highest charge-off rate had been 1.70%. Delinquency rates for real estate loans rose from 7.10% to 8.27%, the highest since the data began in 1987. Delinquency rates for commercial and industrial loans rose from 3.12% to 3.73%, while delinquencies for consumer loans rose to from 4.69% to 4.92%, also a 22-year high."
Continued Take:
I think I need a drink after reading this. Folks, the reality here is default rates are at record highs and show ZERO signs of slowing down. In fact, the moves look totally parabolic! Anyone thinking that housing prices won't continue to collapse afterr seeing this needs their head examined.
Peter Schiff said on Fast Money today that he believes that housing could still drop an additional 50% as credit worthy buyers continue to disappear.
I mean who in the hell is going to be able to qualify to buy a house as default rates soar, unemployment rises, and lending standards continue to tighten?
Speaking of lending standards, take a look at this from Bloomberg:
"Aug. 17 (Bloomberg) -- U.S. banks tightened standards on all types of loans in the second quarter and said they expect to maintain strict criteria on lending until at least the second half of 2010, a Federal Reserve Report showed today.“Domestic banks indicated that they continued to tighten standards and terms over the past three months on all major types of loans to businesses and households,” the Fed said in its quarterly Senior Loan Officer survey. “The net percentages of banks that tightened declined compared with the April survey.”The report suggests that lenders and borrowers are wary of taking on more risk until the U.S. economy shows clear signs of growth.
Most banks expected standards across all loan categories“would remain tighter than their average levels over the past decade until at least the second half of 2010,” the report said."
My Take Continued:
I thought the recession was over and the banks were going to start lending again?HA! They are such lying fools! Guys, this collapse is so obvious now that I believe the spin coming out of Wall St is no longer going to be effective. This could be an important pschological shift by investors in terms of how the market reacts to news.
Perhaps the market will begin selling off when the news is bad versus going up based on nothing but a hope and a prayer.
I mean lets face it: The bulltards credibility is rapidly falling apart as they scream RECOVERY everyday in the face of worsening data.
The Bottom Line
As long as housing remains in a tailspin there will be no recovery. The only way housing recovers is if prices collapse back to affordable levels.
Unfortunately, if this adjustment occurs, the banking system collapses as a result of the losses that they will be forced to take on all of those bubble loans.
Folks, what can I say? This isn't going to end pretty. Was today the beginning of a huge correction or just a pullback? Too soon to tell.
What I do know is the data is not getting any better and housing is collapsing at a much faster pace than I anticipated.
Playing the short side might not be a bad idea here. I feel a deflationary storm on the horizon in the near term.
This move down kinda came out of nowhere. It all started in Asia last night. All of the major indices plunged substantially as Japan's GDP#'s came in a little light.
China's market has now dropped 12% from their recent highs. I think the longs are starting to realize that if China can't continue to grow then who in the hell can? We know the US and Europe will be dead for several years.
China and their large reserves are the only hope for world growth. The question now becomes this: Was the recent spending binge by China on commodities growth/demand oriented? Or is this stuff just sitting in a giant storage bin collecting dust?
If I had to guess I would choose option two. I mean lets face it: China only grows if the world consumes. The recent consumer data in the US basically told us that the consumer is on life support.
I doubt China can continue to have robust growth if their factories are shut down as as our consumer binges come to a complete standstill.
In The US: It's All About Housing
Calculated Risk had a great chart today on the disturbing default rates in real estate:
My Take:
I am sure this chart keeps a lot of bank CEO's up late at night. I can't even begin to explain how ugly this is. As you can see, the default rates are absolutely parabolic in both commercial and residential real estate.
Here is the default data from the Fed today and how it compares historically:
"WASHINGTON (MarketWatch) -- Delinquency rates for loans and leases at U.S. banks increased to a record 6.49% in the second quarter from 5.58% in the first quarter, the Federal Reserve announced Monday. The Fed began collecting the data in 1985. The charge-off rate rose from a record 2.03% to a record 2.65%. Before this recession, the highest charge-off rate had been 1.70%. Delinquency rates for real estate loans rose from 7.10% to 8.27%, the highest since the data began in 1987. Delinquency rates for commercial and industrial loans rose from 3.12% to 3.73%, while delinquencies for consumer loans rose to from 4.69% to 4.92%, also a 22-year high."
Continued Take:
I think I need a drink after reading this. Folks, the reality here is default rates are at record highs and show ZERO signs of slowing down. In fact, the moves look totally parabolic! Anyone thinking that housing prices won't continue to collapse afterr seeing this needs their head examined.
Peter Schiff said on Fast Money today that he believes that housing could still drop an additional 50% as credit worthy buyers continue to disappear.
I mean who in the hell is going to be able to qualify to buy a house as default rates soar, unemployment rises, and lending standards continue to tighten?
Speaking of lending standards, take a look at this from Bloomberg:
"Aug. 17 (Bloomberg) -- U.S. banks tightened standards on all types of loans in the second quarter and said they expect to maintain strict criteria on lending until at least the second half of 2010, a Federal Reserve Report showed today.“Domestic banks indicated that they continued to tighten standards and terms over the past three months on all major types of loans to businesses and households,” the Fed said in its quarterly Senior Loan Officer survey. “The net percentages of banks that tightened declined compared with the April survey.”The report suggests that lenders and borrowers are wary of taking on more risk until the U.S. economy shows clear signs of growth.
Most banks expected standards across all loan categories“would remain tighter than their average levels over the past decade until at least the second half of 2010,” the report said."
My Take Continued:
I thought the recession was over and the banks were going to start lending again?HA! They are such lying fools! Guys, this collapse is so obvious now that I believe the spin coming out of Wall St is no longer going to be effective. This could be an important pschological shift by investors in terms of how the market reacts to news.
Perhaps the market will begin selling off when the news is bad versus going up based on nothing but a hope and a prayer.
I mean lets face it: The bulltards credibility is rapidly falling apart as they scream RECOVERY everyday in the face of worsening data.
The Bottom Line
As long as housing remains in a tailspin there will be no recovery. The only way housing recovers is if prices collapse back to affordable levels.
Unfortunately, if this adjustment occurs, the banking system collapses as a result of the losses that they will be forced to take on all of those bubble loans.
Folks, what can I say? This isn't going to end pretty. Was today the beginning of a huge correction or just a pullback? Too soon to tell.
What I do know is the data is not getting any better and housing is collapsing at a much faster pace than I anticipated.
Playing the short side might not be a bad idea here. I feel a deflationary storm on the horizon in the near term.
