The Housing Bubble

I made some comments about Google that really upset one of their employees. She went a bit ballistic.

I said that I’m skeptical of their earnings. Am I wrong? Granted I’m not the average internet user but I’m a pretty big techie. I give Yahoo money for flickr, I give eBay plenty of money. I just don’t see where Google makes THAT much money from advertising.

Fat-Cats have Fires.

Wells Fargo Lowers Conforming Loan Limits
17 Aug 2011 |By: Diana Olick - CNBC Real Estate Reporter

The deadline for ending temporarily higher loan limits at Fannie Mae, Freddie Mac and the FHA is October 1st, but they are effectively ended now.

A Wells Fargo spokesman confirms, “August 15th was the deadline for applications and rate locks for FHA and conventional conforming loans with balances above the limits we expect will be in place after September 30th.”

The loan limits were raised by Congress in 2008 temporarily from $417,000 to $729,000 in the highest priced markets in order to help bring much-needed liquidity to the mortgage market after the sub-prime meltdown that sent investors fleeing. There has been heavy lobbying by the Realtors, mortgage bankers and home builders to extend the limits, but so far to no avail.

Even though the rule goes into effect on October 1st, all loans have to be funded, sold and shipped to the GSE’s by then. Refi volume has been so high lately that it can take 45 days to do a loan, so lenders have to cut off in time.

What does that mean on the street? A check of Wells Fargo’s website shows it offering the 30-yr fixed conforming at 4.25 percent, and jumbos at 4.625 percent. Obviously the rate changes will affect only the highest priced markets, largely on the coasts. This from mortgage expert Mark Hanson:

“The realists note that within certain mid-to-high end communities, which can underpin an entire county’s economy, the majority of houses and borrowers could be impacted, again weakening the macro economic foundation.

Bottom line: The loss of high leverage GSE and FHA loans to $729k will negatively impact mid-to-high end housing. To what extent, I am not sure yet. However, I don’t think it will be trivial. But what I am sure of is that mid-to-high end housing is the segment most at-risk for step-down in sales volume and prices…just look at CA house sales over $500 in July for an example of how volatile this market segment is.”

Car dealers fear economy could scare off buyers
Stock market swings, jittery buyers threaten to stall US car and truck sales

STERLING HEIGHTS, Mich. (AP) — Jeff Swanson was in the market for a new car just a few weeks ago. Then the stock market went crazy.

So Swanson, 25, decided to keep his 10-year-old Pontiac Grand Prix for at least another year. Gyrations in stocks and talk of a weakening economy rattled Swanson’s confidence about taking on another payment, even though his new job running a home for mentally disabled people seems to be secure.

“Everywhere you turn, other people are saying `Oh, I lost my job this week. I lost my job last week,’” says Swanson, who works for a non-profit that gets money from the state. “I want to be a little bit financially set in case something like that happens.”

It’s an increasingly common reaction among would-be car buyers that has dealers and automakers worried. In May, many believed sales would reach a healthy 13.5 million this year — halfway between their peak in 2005 and their 30-year low in 2009. Now, such forecasts seem overly optimistic. Analysts say the swoon in financial markets and economic uncertainty could reduce auto sales by a few percentage points, shrink earnings and delay hiring in an industry that has been a recent leader in job creation.

“If it keeps going this way, yes, it’s going to hurt business,” says Jerry Seiner, who runs a group of dealerships in the Salt Lake City area that includes General Motors, Nissan and Kia.

Any reduction in sales would be especially painful for Toyota and Honda dealers, who are just starting to restock their showrooms after months of shortages brought on by Japan’s earthquake.

In a sign of how sensitive buyers have become to stock swings, showrooms are active on days the market is up, but empty when it’s down, Seiner says. The Dow Jones industrial average has fallen 10 percent since July 22, with wild swings up and down along the way.

Gilbert Baldwin, 66, a retired auto worker from Ypsilanti, Mich., decided to wait for the market to stabilize before replacing his 2002 Ford Explorer. He was shopping for a new car last month, but now he’s worried about higher gas and food prices and the possibility of Social Security cuts as Congress looks for ways to cut the deficit.

The lack of confidence isn’t what car dealers want to hear, especially in August, usually a strong sales month as dealers clear lots of 2011 models to make room for 2012 cars and trucks. Carmakers report August sales in the U.S. on Sept. 1.

In the Washington, D.C., area, which is likely to be hit by government spending cuts, sales at Tammy Darvish’s chain of about two-dozen dealerships fell by more than 2 percent in early August. She’s worried the slow pace could continue for the rest of the month.

But dealers say sales likely won’t collapse in the second half of 2011, as they did in 2009. That’s because banks are lending more freely, and lease deals, which went away during the recession, are making a comeback. Also, older cars will still need to be replaced. The average age of a car in the U.S. is 10.6 years, up more than a full year from 2008, according to the research firm Polk.

So will the “justice” dept. investigate Moodys and Fitch? I highly doubt it. Wonder why they launched this investigation?

~CNBC
ITEM:The Justice Department is investigating whether the nation’s largest credit ratings agency, Standard & Poor’s, improperly rated dozens of mortgage securities in the years leading up to the financial crisis, according to two people interviewed by the government and another briefed on such interviews.

The investigation began before Standard & Poor’s cut the United States’ AAA credit rating this month, but it is likely to add fuel to the political firestorm that has surrounded that action. Lawmakers and some administration officials have since questioned the agency’s secretive process, its credibility and the competence of its analysts, claiming to have found an error in its debt calculations.

In the mortgage inquiry, the Justice Department has been asking about instances in which the company’s analysts wanted to award lower ratings on mortgage bonds but may have been overruled by other S.& P. business managers, according to the people with knowledge of the interviews. If the government finds enough evidence to support such a case, which is likely to be a civil case, it could undercut S.& P.’s longstanding claim that its analysts act independently from business concerns.

Tarp Jr. no compensation restrictions.

4 Mass. banks get $18m from US
Some recipients use funds to repay TARP, raising objections

http://www.boston.com/business/articles/2011/08/18/4_massachusetts_banks_get_18m__from_us/?page=2

Apparently the inconvenience of back loading taxpayer payouts to insolvent banks CEOs was too onerous.

As losses accelerate at Flagstar so do “supplemental” pension payments to Mr. Campanelli. Nearly four million in 2010…nice

From the 2011 Flagstar def14a:

The SERP provides a lump sum payment equal to the actuarial equivalent of an accrued annual benefit payable for 23 years. The annual benefit is the sum of monthly accruals of 1.022% of Mr. Campanelli’s eligible compensation, for a maximum of 60 months provided Mr. Campanelli is employed by us on the date of each such monthly accrual. Eligible compensation includes base salary and share salary. The accrued annual benefit equals the annual benefit less any other retirement benefits provided and funded by us, as well as 50% of the benefits to which Mr. Campanelli is entitled from Social Security. As of December 31, 2010, the aggregate of the monthly accruals with respect to the SERP was $406,245 and the actuarial equivalent of the lump sum payment of such amount for 23 years was $4,752,587. The amount accrued with respect to the supplemental retirement pension, assuming a discount rate of 4.25%, in 2010 was $3,822,124 and, in total, $4,752,587 has been accrued since Mr. Campanelli joined us in 2009.

They want their money now!

Refinancing of TARP CPP Funds

The bill calls on the Treasury to implement regulations to permit eligible institutions to refinance securities issued under the CDCI and the CPP for securities to be issued under the Small Business Lending Fund. While this refinancing would not provide any additional capital, it could both reduce the carrying costs of the capital and eliminate many of the executive compensation restrictions required under TARP. Accordingly, we would expect most eligible institutions with CPP funds to give serious consideration to refinancing. However, institutions that have missed more than one dividend payment due under their existing CPP funds are not eligible refinance under the Small Business Lending Fund.

Not TARP, but…

The Senate-adopted bill makes clear that the Small Business Lending Fund program is being established as separate and distinct from the Troubled Asset Relief Program, and that institutions shall not, by virtue of a capital investment under the program, be considered a recipient of TARP funds. Accordingly, the executive compensation restrictions that apply to TARP participants will not apply to institutions participating solely in the Small Business Lending Fund.

However, Congress cannot control public opinion or the news media, and therefore participants in the Small Business Lending Fund program may be painted with the same broad (and negative) brush as TARP recipients. If the program is to prove successful, the administration will need to emphasize both the investment nature of the Small Business Lending Fund and the tangible incentives to encourage lending.

Moreover, the bill permits the Treasury Secretary to implement additional terms “in order to manage risks associated with the administration of the Fund in a manner consistent with the purposes of this subtitle.” Accordingly, while the existing TARP executive compensation restrictions do not apply, the Treasury could, if it desires, implement comparable regulations for participants in the Small Business Lending Fund.

That’s likely…

Yeah, better still…

Simsbury Bank’s TARP refi sweet on paper

Farmington Valley lender SBT Bancorp’s partnership with federal taxpayers to boost small business lending offers benefits for both sides, authorities say.

Better still, terms of the new capital arrangement are less onerous than the conditions that accompanied the TARP funding, he said. For instance, TARP limited how much compensation recipients’ top executives could receive.

“It’s a great benefit to the bank, to the shareholders, to the community.” Bisceglio said.

http://www.hartfordbusiness.com/news20018.html

Bachmann: I’ll bring back $2 gas

NEW YORK (CNNMoney) — President Michele Bachmann has a promise: $2 gas.

“Under President Bachmann you will see gasoline come down below $2 a gallon again,” Bachmann told a crowd Tuesday in South Carolina. “That will happen.”
http://money.cnn.com/2011/08/18/news/economy/bachmann_gas_prices/index.htm?iid=HP_LN

If you elect me president I promise candy crapping unicorns, rainbows and big pots of gold. The entire republican primary has turned into something like a freak show.
They hate Ron Paul, in case you haven’t seen this (Jon Stewart on Ron Paul):
http://www.youtube.com/watch?v=3EY5Ofcxjs0
…how did Ron Paul become the 13th floor in a hotel?

We are all delighted Mike….

NORFOLK, Va., Aug. 11, 2011 /PRNewswire/ — Heritage Bankshares, Inc. (the “Company”) (OTCBB: HBKS), the parent of Heritage Bank (the “Bank”), has completed a $7.8 million investment transaction under the Small Business Lending Fund program (the “SBLF rogram”).Simultaneously with its closing of the SBLF Program transaction, the Company used the SBLF investment proceeds to redeem the full remaining balance of $7.8 million of shares of preferred stock held by the Treasury pursuant to the Company’s participation in the TARP Capital Purchase Program, thereby satisfying its remaining financial obligations under and otherwise ending its participation in the TARP program. The Company had previously redeemed approximately $2.6 million shares of TARP preferred stock in March 2011.

http://www.prnewswire.com/news-releases/heritage-bankshares-inc-ends-tarp-participation-and-completes-small-business-lending-fund-investment-127546478.html

Michael S. Ives, President & CEO of the Company and the Bank, commented:

“As I’ve stated previously, we have no regrets about participating in TARP. However, replacing TARP with an investment under the Small Business Lending Fund program presented a much more attractive option for the Company and our shareholders, and we are delighted to have completed this SBLF transaction. Like TARP, the SBLF preferred stock will count as Tier 1 capital for all regulatory purposes. However, participation in the SBLF has been designed to be less onerous than participation in TARP by, among other things, eliminating restrictions on executive compensation, which could have adversely impacted certain of our strategic growth initiatives. Most importantly, participation in the SBLF provides us with the opportunity to reduce our dividend rate on the SBLF preferred stock to as low as 1%. This dividend reduction should be possible through relatively modest increases in our small business lending, which is our primary lending focus anyway, and in fact it appears that our dividend rate will drop to 1% for the fourth quarter of 2011.

Here’s Paul Krugman with more advice:

“For the fact is that right now the economy desperately needs a short-run fix. When you’re bleeding profusely from an open wound, you want a doctor who binds that wound up, not a doctor who lectures you on the importance of maintaining a healthy lifestyle as you get older. When millions of willing and able workers are unemployed, and economic potential is going to waste to the tune of almost $1 trillion a year, you want policy makers who work on a fast recovery, not people who lecture you on the need for long-run fiscal sustainability… What would a real response to our problems involve? First of all, it would involve more, not less, government spending”.

Heh heh…are the Salon editors sure this article was not really meant for the Onion?

Wednesday, Aug 17, 2011 12:45 ET
Tea Party people less popular than many other hated minority groups
They may want “their country” back, but their country doesn’t really want them
By Alex Pareene

Tea Party people less popular than many other hated minority groups
Reuters/Kevin Lamarque

There is a shadowy group of malcontents in America today, plotting a grand takeover of our political institutions in order to completely remake the country according to their wishes. Despite the fact the members of this group are a small minority of the population, and an unpopular one at that, they seek to infiltrate the courts and the government at every level, in order to replace our long-standing system of law with their own extremist, undemocratic religious code. These true believers are especially dangerous because they think they’re doing God’s work, and you ignore them, or play down the threat they pose to America, at your own risk. This tiny band of fanatics is largely distrusted and despised by regular Americans, but a terrified media coddles them and pretends they’re harmless. I am speaking, of course, of the Tea Parties, a group now officially less popular among Americans than Muslims.
…

Too funny….way too funny.

1. Seems like when people are given the CHOICE - not so many want to join a public union.

2. Funny how the WEAC, when it comes to its OWN budget, will layoff at a drop of the hat. When the state needs to do this with its own reduced budget, they fight it tooth and nail.

3. Maybe the teacher union employees should form a union and to on strike against the teacher’s union.

4. How many MILLIONS did the WEAC spend on the recent recall elections? How many jobs could have been saved?????

————————-

WEAC Demonstrates that Union Solidarity is a Thing of the Past
OpenMarket.org | Aug 17, 2011 | TREY KOVACS

The Wisconsin Education Association Council (WEAC), Wisconsin’s paramount teachers union, issued layoff notices to 40 percent of its staff. Union bosses blame Gov. Scott Walkers “union-busting” legislation as the cause for the layoffs. Executive Director of WEAC Dan Burkhalter declared, “We had to make decisions about this budget year that starts in a couple weeks, based on the number of members we have now.” To summarize, the union had to balance their budget.

Study casts doubt on Tea Party’s origin myth. Angry newcomer independents? No. Old school religious/racist Republicans? Yes.

Crashing the Tea Party
By DAVID E. CAMPBELL and ROBERT D. PUTNAM
Published: August 16, 2011
NYTimes
Beginning in 2006 we interviewed a representative sample of 3,000 Americans as part of our continuing research into national political attitudes, and we returned to interview many of the same people again this summer. As a result, we can look at what people told us, long before there was a Tea Party, to predict who would become a Tea Party supporter five years later. We can also account for multiple influences simultaneously — isolating the impact of one factor while holding others constant.

Our analysis casts doubt on the Tea Party’s “origin story.” Early on, Tea Partiers were often described as nonpartisan political neophytes. Actually, the Tea Party’s supporters today were highly partisan Republicans long before the Tea Party was born, and were more likely than others to have contacted government officials. In fact, past Republican affiliation is the single strongest predictor of Tea Party support today.

What’s more, contrary to some accounts, the Tea Party is not a creature of the Great Recession. Many Americans have suffered in the last four years, but they are no more likely than anyone else to support the Tea Party. And while the public image of the Tea Party focuses on a desire to shrink government, concern over big government is hardly the only or even the most important predictor of Tea Party support among voters.

So what do Tea Partiers have in common? They are overwhelmingly white, but even compared to other white Republicans, they had a low regard for immigrants and blacks long before Barack Obama was president, and they still do.

More important, they were disproportionately social conservatives in 2006 — opposing abortion, for example — and still are today. Next to being a Republican, the strongest predictor of being a Tea Party supporter today was a desire, back in 2006, to see religion play a prominent role in politics. And Tea Partiers continue to hold these views: they seek “deeply religious” elected officials, approve of religious leaders’ engaging in politics and want religion brought into political debates. The Tea Party’s generals may say their overriding concern is a smaller government, but not their rank and file, who are more concerned about putting God in government.

Census: Bigger percentage of Palm Beach County households renting in 2010

By Adam Playford and Ana Valdes
Palm Beach Post Staff Writer
Posted: 12:08 a.m. Thursday, Aug. 18, 2011

WEST PALM BEACH — By the end of the decade, Palm Beach County residents had shifted away from the stereotypical “American Dream” of owning their homes toward living some of the prime years of their lives in homes they rent, new 2010 Census numbers show.

In 2010, the percentage of people renting instead of buying was the highest it has been in any census since 1980, according to the new data, which will be released today but was provided in advance to The Palm Beach Post and other news organizations.

http://www.palmbeachpost.com/news/state/census-bigger-percentage-of-palm-beach-county-households-1757358.html - -

Did October arrive two months early this year?

Aug. 18, 2011, 7:51 a.m. EDT
U.S. stock futures slump on growth fears
Weekly jobless claims and CPI data awaited
By William L. Watts, MarketWatch

FRANKFURT (MarketWatch) — U.S. stock futures slumped on Thursday, as fears over global growth prospects and Europe’s ongoing sovereign-debt woes weighed on equity markets around the world.

Futures on the Dow Jones Industrial Average (DJ1U -1.78%) fell 173 points to stand at 11,208. Standard & Poor’s 500 index futures (SP1U -1.98%) dropped 21.2 points to 1,168.70, while Nasdaq 100 futures (ND1U -1.98%) lost 43.25 points to trade at 2,132.
…
P.S. A one-month increase of 0.5% in retail-level inflation occurs at an annualized rate of (1.005^12-1)*100 = 6.2%.

And weekly new claims for unemployment running above 400,000 is considered consistent with recessionary conditions.

Bulletin
U.S. retail-level inflation rises 0.5% in July; initial jobless claims climb to 408,000

Today’s houses:

First, the tear down.

http://www.zillow.com/homedetails/16710-Oak-Hill-Rd-Silver-Spring-MD-20905/37126304_zpid/#{scid=hdp-site-map-list-address}

1931 2/1 on ~0.5 acres of land.
Sep 2006 Zestimated as high as $400K.
Aug 2010 Listed at $150K
Now: Pending: $59K

This is a tear-down, no question; but it serves as a price point for nearly raw land. If it were on city water and sewer, I could understand the $60K for a half-acre. But it’s on well and septic.

——–

And the doable re-hab begging for a lowball.

http://www.zillow.com/homedetails/506-Midland-Rd-Silver-Spring-MD-20904/37129650_zpid/#{scid=hdp-site-map-list-address}

4/1 1951 brick rambler 1400 aq ft. The main picture is the back of the house. Idiot flippage going on:

05/22/2011 Listed for sale $249,000
08/02/2006 Sold $600,000
07/14/2003 Sold $359,900
04/23/2001 Sold $235,000

The price is close to the 2002 price, which is what I believe the near-bottom will be in the DC area. However, this house was probably in much better shape in 2002. Now, it won’t pass FHA. Basement is gutted, main house needs cosmetic work, roof is trashed. But it’s on a nice 1-acre lot. My strategy would be to lowball by $70K and spend $50K on fixup and carve out a half-bath.

And more of today’s houses. I admit it, I want one.

Child’s Play, Grown-Up Cash

By KATE MURPHY
Published: July 20, 2011

“APART from the open bar by the swimming pool, the main attraction at parties held at the Houston home of John Schiller, an oil company executive, and his wife, Kristi, a Playboy model turned blogger, is the $50,000 playhouse the couple had custom-built two years ago for their daughter, Sinclair, now 4. ”

http://www.nytimes.com/2011/07/21/garden/playhouses-childs-play-grown-up-cash.html?_r=1&scp=1&sq=play%20houses&st=cse

[There's still a touch of the old strike-a-model-pose in Kristi's posture.]

[247 comments, most full of justified disgust.]

Click on the slideshow on the left. Nice smattering of cutie-patootie homes populated by filthy rich white kids with arrogant names. Honestly, with some winterizing and a added bath, I could almost live in a couple of these houses myself.

Jobless Claims Rise 9,000 - Reuters

New U.S. claims for unemployment benefits rose more than expected last week, according to a government report on Thursday that suggested hiring in August was steady but not robust.

Dax down 4.65% and CAC down almost 4% as of 14:12 their time. Another fun day ahead.

North Las Vegas to close rec centers and layoff 21 teamsters
By Heather Klein

North Las Vegas, NV (KTNV) - The city of North Las Vegas finally balances its budget, but the price is too high for some of its citizens. This latest budget decision will close all of the city’s recreation centers. The vote will also cost 21 more teamsters in the city to lose their jobs.

In a special meeting held before the city council meeting, members voted to raise rates and fees to help save parks and recreation, but during the regular meeting Action News learned it wouldn’t be enough. They need 1.5 million to keep them open.

“We will be filing a lawsuit, not a temporary restraining order, we’re going to take them to court because enough is enough,” Steve Harvey, the Vice President of Teamsters Local 14, says.

Teamsters say they will file a lawsuit immediately to stop the layoffs.

Treasury yields still seem to be trying to price in a double-dip recession. If there is a silver lining to the latest Wall Street crash, then at least interest rates are low. Why not go out and buy ten investment homes, while the low rate environment lasts?

P.S. I can’t help but wonder how Bill Gross feels at this point on his decision earlier this year to get out of U.S. Treasurys, as it seems like there has never been a better time to own them.

Aug. 18, 2011, 9:15 a.m. EDT
Treasury yields head back toward record lows
By Deborah Levine, MarketWatch

NEW YORK (MarketWatch) — Treasury prices rose on Thursday, pushing yields back toward record lows set earlier this month, as global stock markets dropped and worries about European banks increased.

Yields on 10-year notes (10_YEAR -5.54%), which move inversely to prices, fell 8 basis points to 2.09%. They touched 2.08% before the data, heading back to the record low of 2.03% set on Aug. 9. A basis point is 1/100th of a percentage point.

Yields on 2-year notes (2_YEAR -6.03%) slipped 1 basis point to 0.18%, after falling within 1 basis point of the all-time low of 0.16%.

Capital market volatility may have declined, but worries about global growth are still driving stock indexes sharply lower. The Federal Reserve’s annual get-together in Wyoming next week will have a lot to live up to.

Thirty-year bond yields (30_YEAR -4.07%) declined 9 basis points to 3.48%.

U.S. stock futures pointed to a lower opening, with futures for the Dow Jones Industrial Average (DJ1U -1.00%) showing the index losing another 200 points. See more on U.S. stock futures.

“Lower domestic equities and a refocus on the weakening economic outlook supported the long-end of the Treasury market,” said strategists at CRT Capital Group.
…

Cry me a river.

Big banks slammed

Wall Street swoons as selling in bank shares spreads across from the Atlantic to Wall Street. Tech sector’s also hit hard. Shell-shocked investors flee for the safety of bonds and gold.

Market Pulse Archives
Aug. 18, 2011, 9:37 a.m. EDT
B. of A. falls 6% as financials drive market lower
By Greg Morcroft

NEW YORK (MarketWatch) — U.S. financial stocks fell sharply in early trade on Thursday, pacing declines of more than 1% in the broader market after European banks swooned on a report that the government is signaling concerns about the strength of their U.S operating arms. The latest economic data from the U.S., showing rising jobless claims and retail inflation did nothing to lighten investors’ dour mood. All of the nation’s top handful of banks fell at least 2% to 4%. Bank of America Corp (BAC -8.24%) led decliners with a 6% drop. Citigroup Inc (C -9.25%) fell 5%, J.P. Morgan Chase & Co. (JPM -4.68%) fell 3.5%, Morgan Stanley (MS -6.00%) shed 5%, Wells Fargo & Co. (WFC -4.54%) dropped 2.9% and Goldman Sachs (GS -3.65%) lost 3.6%. The Financial Select Sector SPDR RETF (XLF -5.07%) dropped almost 4%

I have a chart through 2010 for food stamp participation rates using SNAP data. Does anyone have a chart updated through Q2 2011?

Rate on 30-year mortgage falls to lowest on record
Average rate on 30-year fixed mortgage falls to 4.15 percent, lowest on records dating to 1971

WASHINGTON (AP) — The average rate on a 30-year fixed mortgage has fallen to its lowest level on records dating to 1971.

The rate on the most popular mortgage dipped to 4.15 percent from 4.32 percent a week ago, Freddie Mac said Thursday. Its previous low of 4.17 percent was reached in November.

The last time long-term rates were lower was in the 1950s, when 30-year loans weren’t widely available. Most long-term home loans lasted 20 or 25 years.

Few expect even record-low rates to energize the depressed home market. Over the past year, the average rate on the 30-year fixed mortgage has been below 5 percent for all but two weeks. Yet prices and sales remain unhealthy and are holding back the overall economy.

Five years ago, the average 30-year fixed rate was near 6.5 percent. In 2000, it exceeded 8 percent.

After previous recessions, housing accounted for 15 percent to 20 percent of overall economic growth. This time, in 2009 and 2010, housing contributed just 4 percent to the economy.

So what’s happening with the stock market today? Is it just savvy investors taking some profits? LOL!

Wonder what Kudblow & Cramer are saying… Buy,Buy,Buy!

Looks like people can’t get mortgages…

Sales of existing homes fall 3.5% in July
Marketwatch | 8.18.11 | Steve Goldstein

WASHINGTON (MarketWatch) — Sales of existing homes fell 3.5% in July to an eight-month low, with a high cancellation rate again taking its toll on an already troubled market, according to data released Thursday.

The National Association of Realtors said sales fell to a seasonally adjusted annual rate of 4.67 million…Economists polled by MarketWatch had expected a 4.99 million annual rate.

The numbers for the second straight month went against the increase in pending home sales, again showing the difference between agreed and closed transactions.

J6P seems to be waking up

This is not my style however it seems to be floating around today especially among my friends who also happen to be Rush Limba following nuts. (Please beware of profanity being used in this episode).

http://www.youtube.com/embed/-McpNtHet3w

Philly Fed factory activity index worst in 2-1/2 yrs
August 18, 2011

NEW YORK (Reuters) - A gauge of factory activity in the Mid-Atlantic region plummeted in August, falling to the lowest level since March 2009 and casting more doubts on the strength of the economic recovery, a survey showed on Thursday.

The Philadelphia Federal Reserve Bank said its business activity index dropped to minus 30.7 from positive 3.2 the month before and was far below economists’ expectations for positive 3.7, according to a Reuters poll. It missed the poll’s lowest forecast for minus 10.0.

It was the biggest month-over-month drop since October 2008, during the heart of the credit crisis.

Any reading above zero indicates expansion in the region’s manufacturing. The survey covers factories in eastern Pennsylvania, southern New Jersey and Delaware.

It is seen as one of the first monthly indicators of the health of U.S. manufacturing leading up to the larger national report by the Institute for Supply Management.

U.S. stocks extended losses immediately following the report, sending the S&P 500 down more than 4 percent. U.S. Treasuries prices added to gains, while the dollar extended its gains against the euro.

New orders fell to minus 26.8 from positive 0.1. The employment components worsened, with the gauge of the number of employees falling to minus 5.2 from positive 8.9, and the average work week index dropping to minus 14.4 from minus 5.4.

“It looks pretty bad across the board, especially with new orders,” said Gus Faucher, director of macroeconomics at Moody’s Analytics in West Chester, Pennsylvania.

“It shows demand is softening. Businesses are anxious at this point.”

NetApp’s Blunt Comments On Demand Blow Up The Tech Sector

http://news.yahoo.com/netapps-blunt-comments-demand-blow-tech-sector-153044206.html

“Tech stocks are getting shellacked this morning, thanks in part to some blunt and disturbing remarks on enterprise IT spending trends made on yesterday afternoon’s NetApp earnings call. The bottom line: demand is falling off a cliff, in particular in the U.S. federal and financial sectors.”

“Unfortunately, business softened dramatically during the last few weeks of July under the weight of the debt ceiling crisis and macroeconomic uncertainty,” NetApp CFO Steve Gomo said on the call, which followed a highly disappointing July quarter earnings report. “Our growth rate in July ended up at about half of our growth rate in May.“

Eurozone fights over collateral for Greek bailout

BRUSSELS (AP) — A 109 billion euro ($157 billion) international bailout for Greece ran into trouble Thursday after at least five countries demanded that the Greek government give them cash as collateral in exchange for their contributions to the rescue fund.

The Netherlands, Slovenia, Austria and Slovakia said Thursday they wanted hundreds of millions of euros in collateral just like Finland, which struck a deal with the Greek government on Tuesday to receive cash as security for the Finnish part of the bailout.

The pro-European Finnish government demanded the collateral from Greece in response to the increasing popularity of an anti-bailout nationalist party that made sizable gains in April elections.

Even with five nations demanding extra security for their loans in response to the Finnish deal, the amount of cash would probably not be large enough to scuttle the bailout entirely. But it could drive up the overall cost of the bailout, as Greece would need extra funds to put up collateral on top of servicing its debts, paying workers’ salaries and meeting other financial obligation.

The demands for collateral also reveal growing fissures in the eurozone’s efforts to rescue Greece and other struggling countries and ultimately safeguard the common currency.

With the Finnish collateral deal, “a message is being sent to countries (that) if you have a euro-sceptic vote, you are actually being rewarded for it,” said Pieter Cleppe, the head of the Brussels office of think tank Open Europe.

See that’s what folks like ’bout Hope & Change, occasionally it comes round about!

August 18, 2011, 12:33 pmMergers & Acquisitions
Hewlett-Packard Said to Be Near $10 Billion Deal and P.C. Spinoff
By DEALBOOK

Hewlett is also planning to spin off its personal computer business, Bloomberg says. The technology company reports its quarterly results after the stock market closes on Thursday.

Shares of Hewlett-Packard, which had been down sharply along with the rest of the technology sector, surged after the report before a circuit breaker paused trading in the shares.

“Cut with the negative waves Kelly, it’s gonna be a mother-beautiful $pin-off!”

The first golf club to become a “victim” on the grand strand in several years.

- Island Green will be latest Myrtle Beach area course to close
Golf club another apparent victim of tough economy
By Alan Blondin - thesunnews.com

Members of the 31-year-old Bill Mooney design off S.C. 707 in Myrtle Beach were greeted Wednesday at the clubhouse with a photocopied printout stating the course will be permanently closing.

Island Green’s closing could be the first of multiple course closings along the Grand Strand as a market that has approximately 90 courses vying for public rounds between Southport, N.C., and Georgetown continues to feel the effects of a recession.

The 6,382-yard par-72 layout is one of seven Strand courses managed by Signature Golf Group, and is on the lower end of greens fees in the area.

Course superintendent Damon Ryba would not comment on the closing and several Signature Golf Group executives and employees did not return phone calls and messages seeking comment Wednesday night.

Men’s and women’s golf groups based at Island Green are playing their final matches Thursday, and a representative for Signature Golf Packages said Wednesday he was told not to book rounds on the course after Wednesday.

Island Green was a 27-hole course until nine holes closed in 2005 for redevelopment.

It’s the first 18-hole Strand course to close in nearly four years. The Strand lost 20 courses between 2005 and 2007 during a housing building boom, but the housing market plummeted shortly after many of the courses closed, building plans fell through and most properties remain undeveloped. It appears Island Green may suffer the same idle fate for the foreseeable future.

A number of golf groups and social groups have been based at Island Green.

“A lot of us knew each other there from the beginning,” said Gail Boyd, who has been a member there with her husband for about 25 years. “It was one of the friendliest courses on the Strand. A lot of us will be hurting. Island Green is really dear to us.”

Sears Hardware closing in Grafton,Wisconsin
By Doris Hajewski of the Journal Sentinel Aug. 18, 2011

Sears will close a hardware store at 1715 Wisconsin Ave. in Grafton In December as part of a nationwide shutdown of 29 stores.

Sears Holdings Inc. announced the store closings as part of the company’s second quarter financial report Thursday. Sears lost $146 million in the quarter ended July 30.

I reported earlier on the closing of the Kmart store in Burlington in November as part of the same national reduction of stores. The 29 stores include 10 Kmart stores, three Sears stores, 12 hardware and appliance stores, two Sears Auto Centers and two Great Indoors stores.

Sears also will convert 14 Sears Grand stores to Kmarts, and will close seven product repair centers.

In addition to the jobs lost to the closings, the company will eliminate 250 support positions.

More nations may see credit downgraded
By Kathy Chu, USA TODAY

The U.S.’ loss of its triple-A rating is the latest in a string of ratings downgrades for developed economies as their growth slows and debt rises. Portugal, Greece and Ireland are among the nations that have seen their credit ratings cut in the past year by at least one of the three major U.S. ratings agencies. Spain and Japan have been warned their ratings could be lowered.

There was speculation in global markets that France could be downgraded. However, Standard & Poor’s, Moody’s Investors Service and Fitch Ratings all affirmed their triple-A ratings on French bonds in response to market fears.

The U.S. is the world’s largest economy, but S&P’s new rating of AA+ on U.S. debt “reinforces the broader trend of Western developed markets seeing their creditworthiness decline” at the same time that emerging markets are becoming better credit risks, says Frederic Neumann, co-head of Asian economic research at HSBC.

Many of the world’s largest economies have a “much-diminished ability” to expand, create jobs and lift consumer spending, given high deficit and debt levels, wrote Edward Marrinan, a macro credit strategist for RBS Global Banking & Markets, in an Aug. 5 report.

As the global economy recovers from a recession, further downgrades are “certainly possible,” Marrinan said in an interview. “We saw a rating action on a borrower that was widely thought to be the strongest credit.”

Two other triple-A-rated nations, the United Kingdom and France, are likely to be downgraded due to growth and credit concerns, predicts Win Thin, global head of emerging markets strategy for Brown Bros. Harriman in New York. And it’s only a “matter of time” before Belgium is downgraded, Thin wrote in an Aug. 8 report, while Japan, Spain, Italy, Ireland and Portugal could also see their ratings cut.

European Shares Fall Most Since March 2009
Thursday, 18 Aug 2011 | By: Reuters

European equities suffered their biggest daily fall in two and a half years on Thursday, as a slew of data cast further doubt on the strength of the recovery in the world’s biggest economy.

German shares [.GDAXI 5602.80 -346.14 (-5.82%) ] lost most, with traders citing the effects of a short-selling ban on financial stocks in other parts of Europe and intensifying worries about politicians’ lack of a plan to address the euro zone sovereign debt crisis.

The European banking sector [.SX7P 137.76 -9.95 (-6.74%) ], exposed to the euro zone debt crisis, fell 6.6 percent and is down 29.7 percent this year.

Heavyweight fallers included Barclays [BARC-LN 154.00 -19.95 (-11.47%) ] and Societe Generale [SOGN.PA 21.60 -3.04 (-12.34%) ] both down 11.6 percent.

Germany’s Commerzbank [CBKG.DE 1.899 -0.221 (-10.42%) ] fell 10.5 percent.

The FTSEurofirst 300 index [.FTEU3 925.19 -46.68 (-4.8%) ] of top European shares ended the session provisionally 4.9 percent lower at 923.85 points, the biggest fall since March 2009.

“The market is beginning to price in a recession. The Philadelphia Fed number was an absolute abomination,” Michael Hewson, market analyst at CMC Markets, said.

“And until we get some clear idea of how policymakers are going to deal with euro zone sovereign debt problems, it’s not getting to get any better.”

Los Angeles to Standard & Poor’s: You’re fired
(CBS/AP) August 18, 2011

LOS ANGELES - The city of Los Angeles will no longer hire Standard & Poor’s to rate its $7 billion general investment pool because the firm recently downgraded the city’s portfolio from AAA to AA.

Interim Treasurer Steve Ongele says the city has lost faith in S&P’s judgment. Los Angeles isn’t alone in receiving negative attention from a ratings agency. Bloomberg News reported Wednesday that Fitch Ratings downgraded the rating of New Jersey’s general obligation bonds to AA-, the agency’s fourth-highest grade.

The Los Angeles Times reports Ongele told the City Council’s Budget and Finance Committee this week that the city should be proud for cutting ties with S&P.

He notes the market crash that came with the real estate debacle occurred because rating agencies like S&P gave unworthy corporations AAA ratings. Ongele says canceling the contract will save the city $16,000 a year.

NYCHA faces massive layoffs, homes that can’t be repaired
Therealdeal.com

The New York City Housing Authority will face a $200 million budget shortfall that could result in 3,000 service job layoffs or 70,000 apartments going without “even basic repairs,” according to a blog post by John Rhea, NYCHA’s chairman, reported by City Limits.

Despite some federal financial assistance during the recession and the sale of some assets, NYCHA is in dire straits because Congress has allocated less than $4 billion to national public housing authorities, despite the $5 billion City Limits said the agencies need to fully operate.

The budget shortfall has become a growing problem for NYCHA, as public housing complexes in the East Village and Lower East Side, in particular, have more than 100,000 backlogged repair orders, according to previous reports, and undermanned safety inspectors are allegedly taking shortcuts to meet quotas. As of February, the agency oversees 178,882 apartments in the five boroughs.

The agency has warned of possible layoffs for some time, but until the federal Department of Housing and Urban Development determines how much it can allocate in funding — which it should announce in December — NYCHA will take no action.

Oh man, I love this…

China’s newly rich are flaunting wealth — and giving Communist rulers a headache. By Keith B. Richburg, Thursday, August 18 W.Post

BEIJING — China’s new rich love luxury products — imported French handbags, Italian sports cars — and even more, they love to show off their bling.

That seems to be creating headaches for China’s Communist rulers, who after three decades of exhorting their subjects to get rich are facing growing discontent over a widening income gap. Officials now talk about making sure wealth is more evenly distributed, and how to get the rich to tone it down.

As the global economy melts down, and China tries to accelerate its shift to a more consumer-led growth model, Beijing’s leaders see luxury items as a lucrative revenue source. Many Chinese now buy luxury products in Hong Kong or abroad to avoid China’s high taxes, so officials are debating a move to slash tariffs to encourage consumers to shop at home.

But government is loath to be seen as taking any new measures to support the sliver of the population that can afford that pricey new Hermes bag or latest Ferrari, and has delayed any decision on cutting tariffs, according to Chinese media reports and industry analysts.

“The government is facing a conflict,” said Michael Ouyang, representative of the World Luxury Association in China. “They don’t want to promote luxury because they are worried people who cannot afford it will see the advertisements. But they don’t want to limit luxury products because it’s good for the economy. So they’re facing a dilemma.”

It doesn’t help the government’s case when the rich keep showing off their bling.

Ga. jobless rate increases to 10.1 percent in July
Associated Press, 08.18.11

ATLANTA — Georgia’s seasonally adjusted unemployment rate rose to 10.1 percent in July, up two-tenths of a percentage point from 9.9 percent in June and the same as a year earlier, state Labor Commissioner Mark Butler said.

Butler said the increase announced Thursday was due primarily to seasonal layoffs, with about 80 percent of them in state and local education, similar to the pattern of job losses reported in June.

Georgia lost 30,200 jobs in July, as total jobs dropped eight-tenths of a percentage point to 3,789,600. In addition to 24,500 jobs lost in government and education, business services lost 2,200, while construction lost 1,800.

Butler said there were 28,400 fewer jobs than in July of last year, although manufacturing jobs increased by 1,400.

Is the Fed Preventing a Housing Market Rebound?
theatlantic August 18, 2011

Its latest policy to keep interest rates near zero through mid-2013 could backfire and prevent home sales instead of encouraging them

Basic economic theory says that when mortgage interest rates are low, consumers should feel more encouraged to buy a home. But right now, that intuitive theory might not hold. Kathleen Madigan at Real Time Economics proposes that the Federal Reserve’s latest proclamation — that short-term interest rates would be kept near zero through mid-2013 - might discourage home buying. Could this be possible?

When Certainty Can Hurt

This might seem like a backwards idea. To be sure, the last thing that the Fed would aim for is to make the housing market worse off. So why would it allow one of its policies to keep home sales artificially low? This might be an unfortunate and unintended consequence of its desire to calm the broader market.

The logic works here because home prices are declining. Nobody is sure how far they might fall or when they’ll finally hit bottom. But we can feel fairly confident that prices aren’t there yet. But what do we now know? Interest rates will be low for another two years. So why hurry to buy a home now?

Savvy potential home buyers who can wait the market out now have a good reason to do so. They don’t have to worry about interest rates rising before the market bottoms. Instead, they can wait for the market to continue to decline. If it appears to bottom out in the next two years, then they can step in and finally buy at that time. But if prices keep declining over this period, then they’ll be smart to buy in the first half of 2013, just before interest rates might begin rising. In the near-term, you might be better off waiting.

This actually makes a lot of sense. Prior to the Fed’s August revelation, one of the best arguments for why it might make sense to buy a home in the near future was that interest rates will rise. As long as the Fed is holding them down, then this argument begins to disintegrate.

Global Worries Slam Wall Street; VIX Soars 40%- AP

Like an out-of-control cyclone, speculation that Europe’s banks are beginning to suffer the contagion of Europe’s sovereign debt crisis ripped across global markets, taking bank shares and equities markets lower. That speculation, collided in a perfect storm, with a string of weak U.S. economic reports, which helped fan worries about waning global growth

I was watching the Dow over on Marketwatch to see if the PPP would get it over 11,000 at the close, and it was enough to make me put on a tin foil hat.

With less than 3 minutes to go, a bunch of buying pushed the index over the 11,000 mark a 1 minute to go, but they struck to soon. Someone started selling as soon as they got to 11,000, and the market ended below that level.

More fun than a horse race.

…… because Realtors Are Liars®……That’s why.

Aug. 18, 2011, 3:26 p.m. EDT

Confidence is collapsing around us
Commentary: Drop in Philly Fed worrisome, but doesn’t prove recession
By MarketWatch

WASHINGTON (MarketWatch) — Confidence, the foundation of our economy and our markets and our democracy, is collapsing around us.

You can see it in the extreme volatility in the stock market, where 2% declines (interrupted occasionally with a 2% gain) have become commonplace. Investors are in a panic, rushing for the safest assets, such as cash, bonds, and gold.

And we’re seeing it in the economic data. Manufacturing firms in the Philadelphia region reported Thursday morning that business is horrible.
The Philly Fed index has been plunging like a stone.

Nearly half of the respondents to the monthly Philly Fed survey said business conditions had worsened in late July and early August. Forty-seven percent said new orders declined, while more than a third said shipments decreased. Read our complete story on Philly Fed factory index in free fall.

The 34-point drop in the Philly Fed index was the largest since October 2008, when the global economy was reeling from the failure of Lehman Bros. and the near-death of many other significant banks.

The drop in the Philly Fed index to negative 30.7 in August follows a weaker-than-expected survey from the New York Federal Reserve Bank earlier in the week. The news from these two Fed banks is that something awful is happening to business confidence.

Wasn’t the big fight in Washington and Europe over debts supposed to restore confidence?
…

The “Real World Chevy Volt Report”

Guy I work with bought one a couple of weeks ago.

Current miles driven (10 mile commute)……approx 500.

Total gallons of gas burned in 500 miles = TWO (as in 2.0)

Takes about 7-8 hours to top off the battery (he charges it overnight).
Is working on getting a 220-240 outlet to the garage…..this will cut the charge time in half.

Florida courts clear 201,000 foreclosure cases from backlog, but 260,000 remain

By Kimberly Miller Palm Beach Post Staff Writer
Posted: 3:29 p.m. Thursday, Aug. 18, 2011

Florida’s courts cleared 201,524 foreclosure cases from its backlog last year with the help of an additional $6 million from lawmakers, but more than half of the cases were dismissals possibly initiated by banks needing to redo faulty paperwork.

The statewide foreclosure backlog now stands at 260,815 cases, including 23,725 in Palm Beach County, according to the Office of State Courts Administrator.

Foreclosure defense attorneys say the number of cases cleared last year is an injustice to homeowners at the hands of courts pushing to reduce the backlog.

“It was money well spent for the banks and the courts, but not for Floridians and homeowners,” said Boca Raton-based foreclosure defense attorney Ron Kaniuk.

This year, there’s no additional money to hire extra foreclosure judges.

That could mean courts are stymied further by new foreclosure filings and the possibility that at least some of those 104,126 dismissals will be refilled.

http://www.palmbeachpost.com/money/foreclosures/florida-courts-clear-201-000-foreclosure-cases-from-1760197.html - -

Palm Beach County home sales up 21 percent in July, median sales price drops to $187,900

By Kimberly Miller Palm Beach Post Staff Writer
Posted: 10:39 a.m. Thursday, Aug. 18, 2011

Palm Beach County home sales and prices slumped in July following months of robust purchasing that most hoped would continue through the fall.

A Florida Realtors report released Thursday found 972 single-family Palm Beach County homes traded hands in July, a 21 percent increase from the same time in 2010, but an 18 percent drop from the previous month.

The median sales price in Palm Beach County fell 17 percent from last year to $187,900 – a price not seen consistently since 2002.

Statewide, sales of existing homes fell 12 percent in July from the previous month, but were up 12 percent compared to July 2010. The median sales price of $136,500 remained mostly stable.

Realtors said Thursday that the fire-sale prices continue to draw buyers.

Still, the stuttering economy has sidelined some skittish investors.

“We’ve closed on a few properties for Northeasterners who see they can get a waterfront condo for $150,000 and think that’s a dream come true,” said Rodney Forbes, Realtor/Broker of Forbes Realty of South Florida.

http://www.palmbeachpost.com/money/real-estate/palm-beach-county-home-sales-up-21-percent-1759060.html - -

Real time data on cost to build new in CA.

City fees/impact fees for a 1,200 square foot townhome in a Southern California City=$27.78 per square foot.

http://www.cnbc.com/id/44191317

Fascinating times we live in…

http://market-ticker.org/akcs-www?post=192543

SAN FRANCISCO — Attorney General Kamala D. Harris today announced that the California Department of Justice, in conjunction with the State Bar of California, has sued multiple entities accused of fraudulently taking millions of dollars from thousands of homeowners who were led to believe they would receive relief on their mortgages.

Attorney General Harris sued Philip Kramer, the Law Offices of Kramer & Kaslow, two other law firms, three other lawyers, and 14 other defendants who are accused of working together to defraud homeowners across the country through the deceptive marketing of “mass joinder” lawsuits. “Mass joinder” lawsuits are lawsuits with hundreds, or more, individually named plaintiffs. This is the first consumer action by the Attorney General’s Mortgage Fraud Strike Force.

Kramer’s firm and other defendants were placed into receivership on Monday, Aug. 15. The legal actions were designed to shut down a scheme operated by attorneys and their marketing partners, in which defendants used false and misleading representations to induce thousands of homeowners into joining the mass joinder lawsuits against their mortgage lenders. Defendants also had their assets seized and were enjoined from continuing their operations. Nineteen DOJ special agents participated as the firms were taken over Wednesday, Aug. 17, along with 42 agents and other personnel from HUD’s Office of Inspector General, the California State Bar, and the Office of Receiver Thomas McNamara at 14 locations in Los Angeles and Orange Counties. Sixteen bank accounts were seized.

“The defendants in this case fraudulently promised to win prompt mortgage relief for millions of vulnerable homeowners across the country,” said Attorney General Harris. “Innocent people, already battered by the housing crisis, were targeted for fraud in their moment of distress.”

“The number of lawyers who have tried to take advantage of distressed homeowners in these tough economic times is nothing short of shocking,” said State Bar President William Hebert. “By taking over the practices of four attorneys accused of fraudulent marketing practices, the State Bar can put a stop to their deplorable conduct as part of our ongoing effort to protect the public.”

It is believed that at least two million pieces of mail were sent out by defendants to victims in at least 17 states. Defendants’ revenue from this scam is estimated to be in the millions of dollars.

As alleged in the lawsuit, defendants preyed on desperate homeowners facing foreclosure by selling them participation as plaintiffs in mass joinder lawsuits against mortgage lenders. Defendants deceptively led homeowners to believe that by joining these lawsuits, they would stop pending foreclosures, reduce their loan balances or interest rates, obtain money damages, and even receive title to their homes free and clear of their existing mortgage. Defendants charged homeowners retainer fees of up to $10,000 to join as plaintiffs to a mass joinder lawsuit against their lender or loan servicer.

Consumers who paid to join the mass joinder lawsuits were frequently unable to receive answers to simple questions, such as whether they had been added to the lawsuit, or even to establish contact with defendants. Some consumers lost their homes shortly after paying the retainer fees demanded by defendants.

This mass joinder scam began with deceptive mass mailers, the lawsuit alleges. Some mailers, designed to appear as official settlement notices or government documents, informed homeowners that they were potential plaintiffs in a “national litigation settlement” against their lender. No settlements existed and in many cases no lawsuit had even been filed. Defendants also advertised through their web sites.

When consumers contacted the defendants, they were given legal advice by sales agents, not attorneys, who made additional deceptive statements and provided (often inaccurate) legal advice about the supposedly “likely” results of joining the lawsuits. Defendants unlawfully paid commissions to their sales representatives on a per client sign-up basis, a practice known as “running and capping.”

No way! Gov. Rick Scott accidentally deleted a bunch of emails.

http://www.tampabay.com/news/gov-rick-scotts-original-transition-e-mails-were-accidentally-deleted/1186726

Gold!

So the banks are taking a much greater hit than the general market?

Good!

IMO this is a welcome sign that the puffed-up-all-out-of-proportion financial sector is being stripped of its God status and is in the process of settling down (perhaps few hundred billion dollars lighter) and becoming an entity that serves the economy rather than acting as it were an economy of itself.

I like it. I love it. I want some more of it.

No double dip recession here… move along, people.

Market Pulse Archives

Aug. 18, 2011, 11:06 p.m. EDT
Bank of America to slash jobs: WSJ

SYDNEY (MarketWatch) — Bank of America Corp. BAC -6.03% is planning to cut 3,500 jobs this quarter, the Wall Street Journal reported Friday citing people familiar with the situation. The bank will undertake an aggressive overhaul that could result in the elimination of at least 10,000 jobs, according to the report.

Who’d've thunk that gold, Treasurys and safe haven currencies would be the international financial market’s assets of choice at this stage of economic recovery? Traders are already worried the headline U.S. stock market indexes could lop off another 5% tomorrow. It’s shocking, folks, and nobody could have seen it coming.

ASIA MARKETS
AUGUST 19, 2011, 2:34 A.M. ET

Asia Falls on Global Selloff
By LESLIE SHAFFER And GA-WOON PHILIP VAHN

On Asia Today: Global stocks are sinking again following a slew of grim U.S. economic data. Over in China, it looks like the bull run is over for the property markets with prices stabilizing. WSJ’s Jake Lee and Isabella Steger discuss.

SINGAPORE—Asian shares were sharply lower Friday as renewed concerns the global economy will tip back into recession gripped investors, with exporter stocks in many markets tumbling on concerns about weakening demand.

Investors scurried to the safe-haven gold and yen, sending the metal surging to a an all-time high and the Japanese currency just under its record high.

A rout on Wall Street on Thursday rattled investors in Asia, and “it is difficult for risk assets to make any sort of sustained run at the moment given the fear that another 5% decline on Wall Street could happen literally any day,” said Tim Waterer, a senior forex dealer at CMC Markets.

Australia’s S&P/ASX 200 fell 2.7%, Japan’s Nikkei Stock Average was down 1.9%, while South Korea’s Kospi Composite lost 5%. Hong Kong’s Hang Seng Index dropped 2.4%, India’s Sensex declined 1.4%, and the Shanghai Composite Index was down 1.3%.

Dow Jones Industrial Average futures were down 76 points in screen trade.

Spot gold was recently at its new record high of $1,841.70 per troy ounce, up $16.80 from New York on Thursday. “People are generally nervous and the knee-jerk reaction this morning in Asia was to buy,” said Jonathan Barratt, managing director of Commodity Broking Services.

As a safe-haven bet, the yen continued to strengthen against the U.S. dollar, keeping markets on high-alert for yen-selling intervention by Japanese authorities. Meanwhile, the equities selloff dented the euro.

“It appears as though the markets will take their near term cues from the equities,” said MF Global’s macro analyst Jessica Hoversen. “We expect safe haven currencies to stay in vogue with gold, (Swiss franc and the yen) in the lead,” she added.
…

Aug. 18, 2011, 3:03 p.m. EDT
Recession or not? You be the judge
Vote in poll on final page

At least one brave economist has pushed out his predicted timeline for ongoing U.S. housing market malaise through “at least 2014.”

Fear rises on jobs, housing reports
By Paul Davidson, USA TODAY
Updated 8h 9m ago

A batch of disappointing economic reports and worries that the European debt crisis may be spreading deepened recession fears and sent stocks plunging on Thursday.

Reports on jobless claims, home sales and manufacturing in the mid-Atlantic all fell short of economists’ estimates, while inflation was higher than forecast, raising the ugly specter of stagflation — or slow growth and rising prices.

Economists say that’s highly unlikely, noting inflation should ease soon. And some of the reports may have been skewed at least in part by recent gloom created by the standoff in Congress about raising the debt ceiling and the downgrade of the U.S. credit rating.

“I think they show that economic growth is still very weak,” says Paul Dales, senior U.S. economist for Capital Economics. “However, we believe a recession will be avoided.”

The number of Americans applying for unemployment insurance jumped 9,000 to 408,000 last week, the Labor Department said. Claims above 400,000 indicate the economy isn’t creating jobs quickly enough to lower the jobless rate. Still, the four-week average of claims fell 4,000 to 403,000.

The current level “is consistent with job growth of 100,000 to 150,000 a month,” says Diane Swonk, chief economist of Mesirow Financial. That’s enough to keep unemployment, now 9.1%, stable, she says.

Meanwhile, existing-home sales slipped 3.5% in July to a seasonally adjusted annual rate of 4.7 million, according to the National Association of Realtors. In the housing boom, sales exceeded 7 million a year. The news surprised economists, particularly after recent reports showing pending home sales rising smartly in May and June.

The Realtors’ group attributed much of the poor showing to a high rate of cancellations — 16% of NAR members reported at least one last month — caused by rejected mortgage applications or appraisals that were lower than the negotiated price.

But Patrick Newport of IHS Global Insight says buyers are more worried about home prices that continue to fall, as well as an anemic economy. Dales agrees, saying a rebound in consumer confidence could bolster home sales, though only marginally. He expects sales to languish until at least 2014, citing the high jobless rate and the large share of Americans whose mortgages exceed the value of their homes.

A far brighter spot in the economy, manufacturing, also showed signs of wobbling. An index of manufacturing activity in the Mid-Atlantic plummeted in August, with new orders hitting the lowest level since March 2009. The fall unnerved economists following a strong report earlier this week on factory output in July.
…

The solution to unaffordably high U.S. housing costs and rents seems pretty easy to solve: Simply disallow banks and GSEs to horde shadow inventory.

Housing Bust Is No Balm for Renters: The Ticker
By Mark Whitehouse Aug 18, 2011 8:32 AM PT

A moribund real-estate market should have the advantage of reducing peoples’ housing costs. Unfortunately, for the growing ranks of U.S. families who rent their homes, the opposite is happening.

Shelter costs in the U.S. — a category that includes houses, apartments, hotels and college dorms — rose at an annualized rate of 2.7 percent in the three months through July, the Labor Department reported Thursday. That’s the fastest rate of growth since January 2008, just after the recession began (see chart).

The trend reflects increasing demand for rentals as foreclosures force some people out of the ownership market, tight-fisted banks prevent others from getting mortgage loans, and falling housing prices make homes less attractive as an investment. As of June, the U.S. rental vacancy rate stood at 9.2 percent, the lowest level since 2002.

Rising rents present a problem for Federal Reserve Chairman Ben S. Bernanke as he tries to balance his inflation-fighting mandate with the need to support an exceedingly weak recovery. Shelter, which accounts for about 32 percent of the consumer-price index, has the potential to produce enough inflation to tip the scales against another round of monetary stimulus.

The government is considering one lever to ease shelter costs: Rent out some of the hundreds of thousands of homes on which Fannie Mae and Freddie Mac have foreclosed. It’s hard to know whether doing so would make much difference, because many of the homes might be in places where people don’t want to live. But it’s probably worth a try.

Oops!

Foreclosure on Homes; Business at 21-Yr. High
Closer Checking of Credit for Buyers by FHA May Result From Increase
Los Angeles Times
Apr 11, 1962
…

Has the Fed’s role in the economy diminished to the point where it is mainly about manipulating the stock market through its various pronouncements and liquidity injections?

The Irish Times - Friday, August 19, 2011
Fed to meet against dismal backdrop

In this section »
Dana Strong, chief executive of UPC Ireland
Involuntary job cuts in public sector a critical issue
Planet Business
Evidence leans towards new recession

WHEN FEDERAL Reserve chairman takes the podium next week at the central bank’s annual meeting in Jackson Hole, Wyoming, his sense of deja vu may be overwhelming.

Stocks have been giving up gains won after last year’s speech, when Bernanke hinted at plans to pump more money into the financial system. Oil prices are higher and there’s been little improvement in the job market. Bond yields are down, though, because the outlook has deteriorated.

It’s almost as if QE2, the Feds $600 billion bond-buying programme first mentioned at last year’s meeting and designed to boost the economy, never happened. That’s not to say investors doubt the central bank’s resolve to act again if the US economy keeps losing steam. Last week, it surprised markets with an unprecedented pledge to hold interest rates near zero until at least 2013.

But given questions about the efficacy of monetary stimulus to date and a political backlash against the Fed’s policies, investors expect it to keep its powder dry at this year’s Jackson Hole symposium from August 25th-27th.

“The Fed already shocked the world when it indicated its ultra-low interest rate policy would remain in place until 2013,” said Fred Dickson, strategist at DA Davidson in Lake Oswego, Oregon. “That telegraphed the economy is going to stay weak. But monetary and fiscal policies haven’t worked very well, so I don’t expect we’ll get a QE3 announcement.”

It is not that the central bank doesn’t have a few tricks left up its sleeve. Bernanke has previously detailed what he could do next. This includes buying long-dated treasuries to push down long-term rates, and cutting interest on bank deposits held at the Fed to encourage more lending.

Still, there’s the problem of ever-diminishing returns. The benchmark SP 500 index rallied more than 4 per cent when the Fed on August 9th said it would keep rates low into 2013, but fell more than 4 per cent the next day. At about 1,200, the index is off its August 8th low but trading remains volatile.
…

July inflation spike won’t stop QE3
Aug 18, 2011 18:01 EDT

Let’s face it: inflation is a lagging indicator and Federal Reserve officials look at it that way. So for all the talk that the Fed now faces a higher bar for a third round of quantitative easing, the rise in core consumer prices to 1.8 percent in July is likely to be seen as temporary. As analysts from Commerzbank put it, “the weak economy should help to contain inflationary pressure.”

More worrying for policymakers, particularly the more dovish members of the Federal Open Market Committee, are hints the third quarter may not be showing a lot of the improvements built into official forecasts. A string of reports ranging from consumer sentiment to manufacturing suggest things may have actually taken a turn for the worse in August. From a Goldman Sachs note:

The Philadelphia Fed index unexpectedly fell to -30.7 in August. In the past, this level for the index has only been observed in or immediately prior to recessions (though the index was around -20 in 1995 for a brief period, and the economy did not fall into recession).

Some analysts point to the three dissents against the Fed’s decision this month to promise to keep rates near zero for another two years as making it harder for Fed Chairman Ben Bernanke to push for additional stimulus despite signs of economic weakness. Steven Ricchiuto, chief economist at Mizuho:

Recent comments by members of the FOMC who dissented from last week’s policy decision to maintain excessively low short-term rates through mid-2013 suggests that there is a bigger rift between the inflation hawks and the pro-growth faction on the policy making board. In fact, yesterday’s comments by Philadelphia Fed President Charles Plosser suggest that there is little room for the Fed chairman to push for any further accommodative steps when he addresses the Kansas City Fed conference in Jackson Hole next week.

That view may be a bit strong. The core of the committee is dovish, activist and it appears very concerned about a prolonged period of sluggish growth. Some would probably like to act sooner rather than later and the Jackson Hole speech at the end of this month would be the perfect setting in which to do it.
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Rising Prices May Embolden Fed Dissenters in Opposing Moves to Spur Growth
By Shobhana Chandra, Alex Kowalski and David J. Lynch - Aug 18, 2011 9:00 PM PT

Signs that consumer prices are rising even as the U.S. economy slows may delay additional moves by Federal Reserve Chairman Ben S. Bernanke to spur growth.

The Fed chairman, who is scheduled to speak at a Jackson Hole, Wyoming, conference on Aug. 26, used the annual gathering of economists last year to hint at a second round of so-called quantitative easing, in which the Fed purchased $600 billion of Treasuries from November 2010 to June.

Investors, such as Barton Biggs, managing partner and co- founder of Traxis Partners LP, have called for the Fed to embark on a new round of asset purchases. Yesterday’s announcement that the consumer price index rose 0.5 percent from June, more than twice the 0.2 percent median forecast of economists surveyed by Bloomberg News, may embolden Fed policy makers who oppose further such measures.

“It’s hard to say we have stagflation, but we do have inflation too high for the Fed to do QE3,” said Marc Chandler, global head of currency strategy for Brown Brothers Harriman & Co. in New York.
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