Thread: Bank failure(s)

So OF, time to buy a house yet?

Originally Posted by oldfogey

Toyota Stuck With California Dilemma as GM Ditches Joint Plant - Bloomberg.com .

Does Toyota “take full ownership of a plant that’s in the most expensive place in the U.S., and that’s also got a UAW workforce, or close it and eliminate thousands of jobs?,” said Ed Kim, director of industry analysis at AutoPacific Inc. in Tustin, California. “Both scenarios are bad.”

The Longshoremen shut them down several years back too, which Toyota definitely will not forget.

This plant actually voted the union out for a time, but management started losing confidence again...and the UAW was back in a flash.

Originally Posted by luvtolean

So OF, time to buy a house yet?

If I could interest my wife in the US, I would think a holiday place would be very attractive at current exchange rates and prices. Sadly, SWMBO has yet to set foot in the US and is hard to convert from European destinations...

I think you're doing the right thing, though any comment from me on the regional market dynamics would be useless .

Originally Posted by oldfogey

I think you're doing the right thing, though any comment from me on the regional market dynamics would be useless .

Understood, I was just talking from the macroeconomic level. Housing prices seem to have stabilized, though I think we'll see inventories stay high as the ARMs from the peak continue to reset, and as the poor workers that are laid off burn through their savings and lose their homes. The flip side is, interest rates have inflected, and inflation must be coming...

What we're seeing locally is shocking. With all loans needing full documentation, it's taken million dollar homes and pushed them under $729,000, which is the maximum for a low down, government backed FHA loan in our county.

Unless it's recovered, in SoCal (where you might be interested in a vacation property) the drop was even more precipitous...

I don't think anything sharply positive is likely for a while, but conditions do seem right for a bottom forming in the housing market in the US.

Thanks for the sanity check.

Originally Posted by Shenders1

Time to buy that house, LTL

Yeah, we're working on it.

I feel so...old.

Wall Street ended 1% down and Latin America and Asia followed 1-2% down. European markets, having closed yesterday in line with Wall Street's fall, are up 1-2% this morning. The dollar is mixed, little changed.

German retail sales rose 0.4% month-on-month in April, the third monthly gain in a row. Australian retail sales rose an unexpectedly strong 1.0% in May, boosted by tax refunds. Japan's Tankan survey of business opinion showed improvements, though less than expected. The large manufacturers' confidence index rose from -58 in March to -48 in June.


Chrysler Slows Cash Losses After Restructuring, Marchionne Says - Bloomberg.com
California Misses Deadline to Avoid the Need for IOUs (Update1) - Bloomberg.com

The latest Case-Shiller survey shows home prices rose in eight of the cities measured on a monthly basis, led by Dallas, where home values rose 1.7% month-on-month. Values also gained in Denver, Cleveland, the District of Columbia, San Francisco, Boston, Atlanta and Seattle. The bad news is that home prices fell again in 12 of the 20 cities covered by this survey. From the peak, the national average is down 32.2% based on the Case-Shiller survey and 25.1% based on data collected by the National Association of Realtors.

Based on the ratios of home prices to personal income at the national level tracked by the S&P/Case-Shiller Home Price Indexes, these P/Es are already at record lows.

Wall Street modestly higher and Latin America and Asia narrowly mixed. Europe is opening 1% down, having closed when Wall Street was close to its peak yesterday. The dollar is marginally higher today, up 1% against a few emerging market currencies.

The US ISM manufacturing index rose to 44.8 in June from 42.8 in May, another "getting better but not strong" indicator. Only China's, India's and Sweden's manufacturing ISM indices are above the 50 growth level in June. US vehicle sales declined to 9.7m in June from 9.9m in May.

Edit: US non-farm payroll data shows a loss of 467k jobs in June, with a jobless rate of 9.5%, slightly worse than expected.
TNT to Outline Cost-Reduction, Job-Cut Plans to Employees Today - Bloomberg.com .
The Opel saga continues: Beijing Automotive plans Opel bid: report | Deals | Reuters

What do you make of this, oldfogey?

How Much Money Inflation? - Howard S. Katz - Mises Institute

Originally Posted by ND4SPD

What do you make of this, oldfogey?

How Much Money Inflation? - Howard S. Katz - Mises Institute

I need to go back to school and get a degree in economics...

I'm slowly reading/studying this book right now, and it's definitely giving me ideas about how to position our household for what I believe is coming. (especially important as it details Volcker in this type of environment. One of the liberal author's striking early assertions is inflation is good for the masses.)

Here's a von Mises book on banking too: http://www.mises.org/Books/mysteryofbanking.pdf

Wall Street was down nearly 3% yesterday, Latin America followed down 1-3%. Asia has been more mixed, +/-1% and Europe has opened a touch higher. The dollar is narrowly mixed with the Aussie and New Zealand dollars a little stronger.

The Swedish Riksbank lowered interest rates 0.25% to 0.25% (and its deposit rate to -0.25%!). US factory orders rose 1.2% in May month-on-month. China electricity demand rose 3.6% year-on-year in June, indicating stronger production. Brazil's industrial production rose 1.3% month-on-month in June but is still 11.3% down year-on-year. The UK's construction PMI fell to 44.5 in June from 45.9 in May. The employment data out yesterday was taken badly, but the increase in the rate of unemployment has slowed drastically, and the "jobs hard to get" index from the Conference Board Survey peaked in March, and this is generally a leading indicator. I'd take these together as clear signs of the change in the economy from falling like a stone to some version of stabilising.

Wiedeking?s Porsche Era Runs on Fumes of VW Backfire (Update1) - Bloomberg.com .

Originally Posted by ND4SPD

What do you make of this, oldfogey?

How Much Money Inflation? - Howard S. Katz - Mises Institute

This commentator seems to be focussing on a detail, because he is overwhelmed when he tries to look at the overall situation. In monetary theory, the quantity times the velocity is what you try to keep constant. The velocity has collapsed with the banking system, so the Fed is pumping up the volume to keep the combination steady(ish). The difficulty will arise when the velocity starts recovering and the Fed has to remove the excess quantity of money. This will only be the case when both the banks want to lend and the agents in the economy want to borrow. Neither condition is in place today. Incidentally, econometrics says inflation takes 3.5 years to appear after this point has been reached, if we get there.

The more difficult part is the fiscal stimulation which will need removing when the economy starts to recover or else interest rates in long bonds will shoot up and stop investment (crowding out). Politicians are less professional in their management of fiscal stimulation than central bankers are of the removal of their monetary stimulation.

Since we have the worry of future inflation (and it is no more than that at this stage), one thing we can be sure of is that the variability of the market expectation of inflation will be high for several years to come.

Thanks for the explanation!

Real Estate not bottomed?

5 Housing Markets That Have Further to Fall - Yahoo! Real Estate-

We were poking around earlier, most of the zip codes around the Silicon Valley are down 30+%.

The areas with the fancy zip codes and good schools that everyone says haven't fallen at all are down 20-25%....

“There will be regional differences in the turnaround,” says Maureen Maitland, vice president of index services at Standard & Poor’s. “Most economists I talk to are expecting the beginning of the turnaround to be sometime next year,” she says. However, she added, “the last market may not turn around for two or three years.”

- seems reasonable .

Without a lead from Wall Street on Friday, Latin American and Asian markets are +/- 1%. Europe is opening 1-2% down with the dollar 0.5%-1% higher.

Turkey's industrial output fell 16.7% year-on-year in May, an improvement on the 18.5% decline in April. Capacity utilisation is estimated to have risen to 74% from 70 in April. Spanish industrial production fell 20.5% year-on-year in May after a 19.4% decline in April, confirming that the Euro bloc is the last area yet to show signs of stabilisation. Indian stocks declined 4% as the government announced the budget deficit would rise to 6.8% in the year to end March, the third losing day in a row. Hong Kong property sales volumes rose 20.5% month-on-month in May to a 17-month high: values rose 26.1% month-on-month. Losses on US credit cards rose to 10.44% in June, growing in line with unemployment levels.

It's Magna after all: GM Europe head says to sell Opel to Magna soon: report | Deals | Reuters ?

China Investment Corp invests $1.5bn in Teck Resources, Canada's largest diversified miner.

Originally Posted by oldfogey

“There will be regional differences in the turnaround,” says Maureen Maitland, vice president of index services at Standard & Poor’s. “Most economists I talk to are expecting the beginning of the turnaround to be sometime next year,” she says. However, she added, “the last market may not turn around for two or three years.”

- seems reasonable .

Agreed. We were looking at crawl charts of housing prices, and they're really zip code dependent in my area, some are all down, some have turned up, but not for long enough to know if it's a trend or not.

The owners of our house tried to sell it to us for $650,000 in '07, we looked it up on the online estimators last night and they're saying it's worth about $350,000.

Things seem to be picking up around here some from what I can tell anyway. Several of my friends that have been waiting for a little while are in the process of snatching up houses and there are others that have managed to sell theirs relatively quick. One family I know got full asking price for their house within hours of it being listed.

Then again, things were never that bad around here.

Wall Street is confused as to where it's supposed to lead:

Stocks slide on conflicting signs about economy - Yahoo! News

So, Wall Street ended higher after a wobble. Latin America closed down 1-2% and Asia down 1%. Europe has opened modestly higher and the dollar is little changed.

Peugeot First-Half Sales Decline 14% on Europe, Latin America - Bloomberg.com
Fiat Finds New China Partner, Ending Two-Year Hiatus (Update1) - Bloomberg.com

US lurching towards 'debt explosion' with long-term interest rates on course to double - Telegraph

Z, that's very much in line with what I was saying about stage two of the removal of stimulus - first the Fed removes the monetary stimulus; second the politicians need to reduce the budget deficit. If the second doesn't happen, then higher interest rates will result, crowding out private credit demand.

Wall Street finally managed its down day, down 2%. Latin America and Japan followed suit, with other Asian markets down less. Europe, having fallen yesterday afternoon, is down another 1% this morning. The dollar is 0.5%-0.75% higher. The yen is staging a rally, up 1% on the day.

U.S. consumers fall behind on loans at record pace | Small Business | Reuters

German factory orders fell 29.4% year-on-year in May compared to -37.1% in April, a rise month-on-month of 4.4%, and the biggest gain for two years. Japanese machinery orders fell 38.3% year-on-year in May after -32.8% in April, a fall of 3% month-on-month. Japanese bank lending growth slowed to 3.1% year-on-year in May from 3.9% in April. Canadian building permits rose 14.4% month-on-month in May and the Ivey PMI rose to 58.2 in June from 48.4 in May, both indicators much better than expected. The US non-manufacturing ISM rose to 47 in June, taking the composite ISM to 46.1. A level of 45 and above is consistent with growth in the economy and 46 is consistent with 1% gdp growth.

Originally Posted by oldfogey

Z, that's very much in line with what I was saying about stage two of the removal of stimulus - first the Fed removes the monetary stimulus; second the politicians need to reduce the budget deficit. If the second doesn't happen, then higher interest rates will result, crowding out private credit demand.

Unfortunately, I don't see this administration reducing deficits/creating money anytime soon.

The US closed little changed: Latin America and Asia generally are within +/-1% and Europe has opened up to 1% higher. The dollar is also narrowly mixed, though I note sterling has lost 4c in a week against the dollar.

China Car Sales Jump 48% on Support, Most Since 2006 (Update2) - Bloomberg.com
Indonesia May Be ?Superstar? as Yudhoyono Wins Vote (Update1) - Bloomberg.com
Budget solutions still evade some U.S. states | U.S. | Reuters

Borrowing by US consumers dropped $3.2bn in May and has dropped a record $80bn in the six months since December (the biggest six-month fall since the 1940's). Mortgage debt outstanding has declined on a year-on-year basis for the first time since WW2. Chinese new bank lending doubled month-on-month to $220bn in June, perhaps a temporary peak in the government-induced stimulus. Global trade volumes have averaged a 22% decline year-on-year between October 2008 and March 2009. A typical recession produces a 2% decline year-on-year on a full year basis: the previous post WW2 low was -14% for the year to October 1982. I think these stats say most of what you need to know about the nature of the current economic crisis.

Total US consumer debt now stands at about 130% of disposable income. Prior to the 20-year-long credit boom, it averaged between 60%-70%. In order to get back to those levels, consumers have to pay down an amount of debt equal to 65% of disposable income. If the savings rate stabilises at 7%, or near current levels, and assuming that all the savings are used to pay down debt and that nominal income remains stagnant, it would take over nine years to reduce debt/income ratios to the levels seen in the 1980s. The UK is in a very similar position.