Why
do people constantly return to the refrigerator with hopes that
something new
to eat will have materialized? Is that like economists and analysts
continuing
to go back to the news about the economy hoping something is better? Yesterday’s
Beige Book, which summaries the economic activity in the 12 Fed regions
here in
the US, indicates that economic activity is either stabilizing or
improving in
most regions. Of course, consumers have to have confidence and
start
spending money to help push it along – most folks that I know seem more
inclined to save their money than to go out and buy a car or a new TV.
All but
one region (St. Louis) indicated economic activity either was
"stable," showed "signs of stabilization" or had
"firmed," according to the Fed's survey.
So
let’s reconcile that versus the latest U.S. foreclosure numbers, if
that's possible. Filings in
August were 18% higher than a year ago, although they were down about
1% from
July. According to RealtyTrac, 1 of every 357 U.S. housing units is
in grim
shape. In Nevada, where Las Vegas has 70% of that state’s population, 1
in
every 62 units was subject to a foreclosure filing in August. Florida
was #2 at
1 in every 140 units receiving a filing, and California was #3, at 1 in
every
144 units. And talking about foreclosure losses, take a look at this
one: http://www.nytimes.com/2009/09/10/nyregion/10stuy.html?_r1&hp
Foreclosure
rates on prime jumbo loans, which many in NY, FL, and CA made their
livings
doing, surpassed the 2.98% average for all loan types in July, and
continue to
rise faster than any other loan type. Prime jumbo foreclosure
rates are up a staggering 634% versus January 2008 levels, according to
LPS
Applied Analytics. And other figures show that Alt-A loan problems
could stabilize
in the coming months.
In
addition, a good chunk of brokers and originators made some ducats off
of the Option
ARM product, in the days when most thought that real estate prices
and
incomes did nothing but go up. According to Fitch Ratings, who like
S&P and
Moody’s miscalculated the risk on mortgage securities in the last 2-3
years, determined
$134 billion of loans with option ARM’s will recast in 2011. And
many of
those have seen negative amortization. According to their report, an
option ARM
recasts when it reaches a balance cap typically ranging from 110%-125%
of the
original mortgage or 60 months of age, at which point the monthly
payment
obligation then increases from the minimum amount to a fully amortizing
principle and interest payment resulting in a payment shock. Just what
we need…
And
when one talks about a recovery driven by the consumer, if you’re out
of work,
or in foreclosure, you’re not going to be a big spender. Typically,
rates
will move higher if the economy is doing well, or expected to do well,
since
basic supply & demand rules apply. But so far rates have been
relatively
steady, even in spite of the huge debt needs of our government,
suggesting that
the bond market is not convinced that the economy is going to take off.
Yesterday’s
markets saw a little improvement in both stocks and bonds. In the bond
market,
the Treasury’s $20 billion 10-yr auction went pretty well, with a
bid-to-cover ratio
of 2.77 and indirect bids hitting 55%. Today we have a 30-yr bond
auction today,
and traders are hoping it goes as well as the last two. We did have
some news
this morning. The U.S. trade deficit widened the most in more than 10
years in
July, with imports up almost 5% attributed to our demand for foreign
cars,
consumer goods and oil. The trade gap expanded 16.3 percent in July to
$32.0 billion.
We also saw weekly Jobless Claims drop last week to 550,000, compared
to
forecasts of 560,000 versus 576,000 the prior week. After the news
we find
the new 10-yr yielding 3.44% and mortgage security prices better by
between
.125 and .250.
I
caught some flack yesterday for a mention of the UN’s suggestion that
the world
moves to one currency. Hey, I don’t make this stuff up. http://www.cbsnews.com/blogs/2009/09/09/taking_liberties/entry5298305.shtml
One
person wrote to me saying, “Have you lost your mind? I could talk for
days on
the cons associated with a unified currency. And the UN? The UN
couldn't break
up a food fight at a Cub Scout jamboree, and we're supposed to base our
international
policy on their whims?”
A Sheriff in a small town in Texas walks out in the street and sees a
blonde-haired
cowboy coming toward him with nothing on but his cowboy hat, his gun
and his
boots. He arrests him for indecent exposure.
As he is locking him up, he asks, 'Why in the world are you walking
around like
this?'
The cowboy says, “Well it's like this Sheriff ...I was in this bar down
the road
and this pretty little red head asks me to go out to her motor home
with her.
So I did. We go inside and she pulls off her top and asks me to pull
off my
shirt. So I did. Then she pulls off her skirt and asks me to pull off
my pants.
So I did. Then she pulls off her panties and asks me to pull off my
shorts. So
I did. Then she gets on the bed and looks at me kind of sexy and says,
'Now go
to town cowboy.’”
“And here I am.”
Blonde
men do exist.
Rob
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