A trio of economic reports released this morning bring fresh clues about the outlook for the macro trend, but all three offer only more reason to wonder if the economy can maintain positive momentum in the months ahead.
Monthly Archives: May 2011
Strategic Briefing | 5.31.2011 | U.S. Housing Market
Home Prices in U.S. Probably Kept Falling as Housing Absent From Recovery
Bloomberg | May 31
U.S. home prices probably slumped in March by the most in 16 months, indicating residential real estate will keep weighing on the expansion, economists said before a report today… “Weak demand and a deluge of discounted sales of distressed properties have weighed significantly on prices,” said Aaron Smith, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania. “It’s hard to be enthusiastic about the economy’s prospects as long as house prices are falling.” A backlog of foreclosures poised to reach the market means prices may stay depressed, dissuading builders from taking on new-home construction projects.
Book Bits For Saturday: 5.28.2011
● I Am John Galt: Today’s Heroic Innovators Building the World and the Villainous Parasites Destroying It
Summary via publisher, Wiley
Inspired by Ayn Rand’s characters in Atlas Shrugged
Consumer Income & Spending Rise In April, But Warning Signs Persist
Disposable personal income and personal consumption spending rose last month, the U.S. Bureau of Economic Analysis reports. But after adjusting for inflation, the nominal rise fades to zero for income and posts only the smallest of increases for consumption. As such, today’s income and spending report is likely to give bears and bulls something to chew on.
New Jobless Claims Rise By 10,000 Last Week
Today’s update on initial jobless claims suggests that the recovery is at risk of stalling. Indeed, the April surge in new filings for unemployment benefits warned as much. Although the surge has moderated this month, the data appears stuck in a range that implies weak economic growth at best.
New Durable Goods Orders Tumble In April
New orders for durable goods suffered a hefty fall last month, dropping 3.6% in April on a seasonally adjusted basis, the Census Bureau reports. That’s the biggest monthly slide since last October’s 3.7% retreat. This isn’t news we want to hear right now, given renewed worries of an economic slowdown. What’s more, there’s no statistical hiding spot: April’s drop in new orders was broad based. But the trend is still positive on an annual basis, and that counts for something. Indeed, given the unusually high rate of recent gains on a rolling 12-month basis for new orders was destined to slow and so it’s not terribly surprising to see a bit of red ink.
Strategic Briefing | 5.25.2011 | Will There Be A QE3?
QE3 Has Already Started
OilPrice.com | May 24
The new QE3 is the “RISK OFF” trade. QE2 ended up pouring $600 billion into stocks, commodities, oil, gold, and silver. Since April 29, the prospect of slowing economic growth has prompted this hot money to take flight and bail from these assets classes. Think of it as the same $600 billion stampeding into risky markets, doing a 180, and then stampeding right back out against. Where is all this money going? Into the Treasury bond market. We have in fact been in new bull market for bonds since February, taking the yield on the ten year Treasury down from 4.10% to 3.10%. If the current “RISK OFF” trade continues, or even accelerates, we could see ten year yields down to 2.0%-2.5% by the end of the summer.
Is The Core Inflation Concept Rotten?
St. Louis Fed President James Bullard recently attacked the concept of core inflation, which excludes volatile food and energy prices. The “core is rotten,” he argued in a speech last week. “One popular argument for focusing on core inflation is that core inflation is a good predictor of future headline inflation,” he said. “I think this is wrongheaded, as well as wrong.”
Tactical ETF Review: 5.23.2011
The economy may be facing new headwinds, but the depth of the threat is still an open debate for those who worship at the altar of momentum and technical analysis. Representative ETFs for the major asset classes are no longer making new highs, but the selling so far has been modest. That’s no assurance that all’s well, of course, although the fact that prices have held up relatively well in the face of fresh macro worries is impressive. In fact, the latest round of anxiety has inspired the U.S. bond market to rally sharply, albeit for all the wrong reasons. Indeed, caution is in the air elsewhere. The week ahead may be a potent test for the crowd’s resiliency as updates arrive in the days to come for durable goods orders, initial jobless claims, and personal income and spending. Meantime, here’s a closer look at how the major asset classes stack up via proxy ETFs as of Friday’s close:
Book Bits For Saturday: 5.21.2011
● Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led to Economic Armageddon
By Gretchen Morgenson and Joshua Rosner
Summary via publisher, Times Books
In Reckless Endangerment, Gretchen Morgenson, the star business columnist of The New York Times, exposes how the watchdogs who were supposed to protect the country from financial harm were actually complicit in the actions that finally blew up the American economy. Drawing on previously untapped sources and building on original research from coauthor Joshua Rosner—who himself raised early warnings with the public and investors, and kept detailed records—Morgenson connects the dots that led to this fiasco. Morgenson and Rosner draw back the curtain on Fannie Mae, the mortgage-finance giant that grew, with the support of the Clinton administration, through the 1990s, becoming a major opponent of government oversight even as it was benefiting from public subsidies. They expose the role played not only by Fannie Mae executives but also by enablers at Countrywide Financial, Goldman Sachs, the Federal Reserve, HUD, Congress, the FDIC, and the biggest players on Wall Street, to show how greed, aggression, and fear led countless officials to ignore warning signs of an imminent disaster.
