a-double-dip

Diane Francis: Eurogate — The New Fannie, Freddie and AIG

by Diane Francis on February 8, 2010

“This is a statistical recovery and a human recession.” — Larry Summers It was the best one-liner I heard come out of the recent World Economic Forum in Davos. Of course one week later, speculation rife in sessions entitled, “Will there be a double dip?” were overtaken by the Double Dip itself. Markets began roiling after the European Union’s central banker and various leaders admitted that they had not ever undertaken, nor required, independent audits to monitor the financial behavior of the Euro’s 16 user-nations. They took their finance ministers’ words for it. Sounds like the Bush regime which took their Wall Streeters’ words for it. We enter a new currency melee which gives “Beware the Greeks” new meaning. Greece is only the beginning of a new Euro Plague, whose value will be drubbed by a complete failure to supervise members — a governance lapse every bit as reckless as the deregulatory religion that brought down the U.S. and British economies. The Euro’s woes will drives up the bailouts required by Germany and France, the uber-Euro nations, and will lead to more collapses. Enter the “PIGS” — Portugal Italy, Spain as well as Greece — which have been a currency headache to many since 2008. These countries are the Fannie Mae, Freddie Mac and AIG of Europe and the loans required to keep them afloat promise to be Europe’s sub-prime equivalents. This is because these basketcase countries are cheaters when it came to the voluntary rules and regulations that were designed to uphold the integrity and value of the Euro. So much for Sarkozy’s Gallic finger-wagging in Davos at the Anglo-Saxon economies and their laissez faire regulatory regime that brought about the world’s collapse in 2007-08. Conclusion? China rising. Too bad we cannot invest in their currency because it would be going through the roof.

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Diane Francis: Eurogate — The New Fannie, Freddie and AIG

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December Home Sales Take Largest Monthly Drop In More Than 40 YEARS

by The Huffington Post News Team on January 25, 2010

WASHINGTON — Sales of previously occupied homes took the largest monthly drop in more than 40 years last month, sinking more dramatically than expected after lawmakers gave buyers additional time to use a tax credit. The report reflects a sharp drop in demand after buyers stopped scrambling to qualify for a tax credit of up to $8,000 for first-time homeowners. It had been due to expire on Nov. 30. But Congress extended the deadline until April 30 and expanded it with a new $6,500 credit for existing homeowners who move. “It’s ‘exit stage left’ for first-time homebuyers,” wrote Guy LeBas, an analyst with Janney Montgomery Scott. December’s sales fell 16.7 percent to a seasonally adjusted annual rate of 5.45 million, from an unchanged pace of 6.54 million in November, the National Association of Realtors said Monday. Sales had been expected to fall by about 10 percent, according to economists surveyed by Thomson Reuters. The report “places a large question mark over whether the recovery can be sustained when the extended tax credit expires,” wrote Paul Dales, U.S. economist with Capital Economics. The median sales price was $178,300, up 1.5 percent from a year earlier and the first yearly gain since August 2007. However, some of that increase could be due to a drop-off in purchases from first-time buyers who tend to buy less expensive homes. Sales are now up 21 percent from the bottom a year ago, but down 25 percent from the peak more than four years ago. The big question hanging over the housing market this spring is whether a tentative recovery will stumble after the government pulls back support. The Federal Reserve’s $1.25 trillion program to push down mortgage rates is scheduled to expire at the end of March – a month before the newly extended tax credit runs out. Last year, first-time buyers were the main driver of the housing market, but their presence is on the decline. They accounted for 43 percent of purchases in December, down from about half in November, the Realtors group said. The inventory of unsold homes on the market fell about 7 percent to 3.3 million. That’s a 7.2 month supply at the current sales pace, close to a healthy level of about 6 months. Total sales for 2009 closed out the year at 5.16 million, up about 5 percent from a year earlier. That was the first annual sales gain since 2005. But prices fell dramatically last year, declining 12.4 percent to a median of $173,500, the largest decline since the Great Depression. Though the results missed Wall Street’s expectations, the Realtors’ group says there are signs the market is finally stabilizing. “There is some sustainable momentum building in the housing market right now,” said Lawrence Yun, the group’s chief economist. However, he cautioned that the recovery will depend on whether the economy starts adding jobs in the second half of the year. Many experts project home prices, which started to rise last summer, will fall again over the winter. That’s because foreclosures make up a larger proportion of sales during the winter months, when fewer sellers choose to put their homes on the market. Despite fears that home prices are starting to fall again, some analysts still believe the worst is over. “We do not believe it is fair to consider this a double dip in the housing market,” Michelle Meyer, an economist with Barclays Capital, wrote last week. “The recovery is still under way, but hitting some bumps in the road.” (This version CORRECTS pct decline in graf 11.)

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December Home Sales Take Largest Monthly Drop In More Than 40 YEARS

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Gold, Treasuries Rally After U.S. Unemployment Rate Climbs to 26-Year High

November 6, 2009

By Matt Townsend Nov. 6 (Bloomberg) — Gold rose to a record, Treasuries gained and the dollar fell after U.S. unemployment reached a 26- year high, reinforcing speculation the Federal Reserve will keep interest rates near zero into next year. The Standard & Poor’s 500 Index gained 0.3 percent after an initial drop following the Labor Department saying the unemployment rate last month jumped to 10.2 percent, the highest level since 1983. Gold touched $1,101.90 an ounce, surpassing an all-time high for the third time this week. Oil fell for a second day on concern the jobless rate will hurt energy demand. “The job market will have to stabilize and maybe get better before we see the Fed doing anything,” said Jay Mueller , who manages about $3 billion of bonds at Wells Fargo Capital Management in Milwaukee. “This is going to be a slow grind in terms of recovery.” The S&P 500 rose to 1,069.30 at 4:01 p.m. in New York. The Dow Jones Industrial Average added 17.46 points, 0.2 percent, to 10,023.42. Both benchmarks rallied 3.2 percent this week. Employers eliminated 190,000 jobs in October after a reduction of 219,000 in the previous month, the government reported. The median estimate of 84 economists in a Bloomberg survey was for a reduction of 175,000. The jobless rate rose from 9.9 percent. GE, Macy’s, AIG “Even with unemployment coming in at 10.2 percent, people are still saying the worst is behind us at this point and that we could see improvement in the next few months,” said Jason Cooper , who oversees about $2.5 billion at 1st Source Investment Advisors in South Bend, Indiana. “We’re still on the path to recovery.” General Electric Co. gained the most in the Dow, surging 6.2 percent to $15.33 as analysts said risks to its finance unit have diminished. Macy’s Inc. rallied 6.5 percent to $19.18, leading a measure of retailers 1.7 percent higher, after JPMorgan Chase & Co. said the second-biggest U.S. department store chain probably beat analysts’ third-quarter profit estimates and raised its rating to “overweight” from “neutral.” American International Group Inc. tumbled 9.7 percent to $35.48. The insurer bailed out by the U.S. government posted sales declines at its property-casualty and life insurance divisions. Gold for December delivery rose for the fifth day, climbing $6.40, or 0.6 percent, to $1,095.70 on the Comex division of the New York Mercantile Exchange. The price has gained 5.3 percent this week after setting records on Nov. 3 and 4. ‘Exploding the Deficit’ “Until Washington stops exploding the deficit, the dollar will continue to weaken, and gold is going higher,” said Tom Pawlicki , an analyst at MF Global Ltd. in Chicago. The U.S. currency initially advanced as much as 0.4 percent versus the euro on reduced demand for riskier assets after the employment report. The greenback erased its gain about an hour later on speculation the Fed will trail other central banks in raising borrowing costs. The employment report “adds to the uncertainty of the recovery, but it also reinforces how much longer we are going to need lower rates,” said David Tien , a money manager at Fischer Francis Trees & Watts in New York, with $19 billion in assets. “It solidifies the outlook for plentiful liquidity going into the middle of next year.” Rate Bets Decrease Traders reduced bets that the Fed will increase borrowing costs in the first half of next year. Fed funds futures showed a 52 percent chance that policy makers would raise their benchmark by at least a quarter-percentage point by the June meeting. A week ago the likelihood was 63 percent. The dollar decreased 0.9 percent to 89.88 yen from 90.71 yesterday. It fetched $1.4847 per euro, compared to $1.4871 and lost 0.9 percent this week. Treasury two-year note yields touched 0.8321 percent, the lowest since May 21, as the record joblessness coupled with the Fed’s statement on Nov. 4 maintaining it will leave rates low for an extended period spurred demand for government debt. Two-year notes rose for a second week as the 1 percent security maturing in October 2011 today rose 2/32, or 63 cents per $1,000 face amount, to 100 9/32. Ten-year note yields fell two basis points to 3.50 percent and rose 11 basis points for the week. Crude oil for December delivery fell $2.24, or 2.8 percent, to $77.38 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. The commodity earlier fell as much as 3.7 percent. “The unemployment report raises fears that there will be a double dip to the recession,” said Michael Lynch , president of Strategic Energy & Economic Research in Winchester, Massachusetts. “This doesn’t bode well for consumption of commodities such as oil.” To contact the reporter on this story: Matt Townsend in New York at mtownsend9@bloomberg.net

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