Monday Muse

my favorite Ani DiFranco cut

[more at http://www.righteousbabe.com/ani/]

Maine Still Losing Jobs

[click to enlarge]

BLS news release, 11-20-09:

another 1,400 Maine jobs lost in October...
a total of 29,400 since the cycle peak.

[For an eye-catching time-lapse graphic on the rise in unemployment nationwide, go here.]

Mortgage Apps Rolling Over

MBA Purchase Index hits a 12-year low.

Wednesday is "Hump Day" for a reason. That's the day we get our weekly reminder from the Mortgage Bankers Association that, for more and more Americans, the prospect of home ownership is a hill too high to climb. Featured periodically in this column, the MBA's Market Composite Index tracks the volume of loan applications for both new mortgages and the refinancing of existing mortgages. That index was down 2.5% from the week earlier on a seasonally adjusted basis.

Almost three of every four loan applications are for refinancing, not surprising given today's low interest rates. If we look only at applications for newly acquired homes, the figures are a source of concern for those looking for a "bottom" in housing. The MBA's seasonally adjusted Purchase Index (charted above) declined for the sixth straight week and 4.7% from the week earlier, reaching a level not seen since November 1997. The weakness was confirmed by data released this morning by U.S. Commerce Department on new-home construction: building starts tailed off 10.6% in October. It would seem that low interest rates (the average rate on a 30-year fixed-rate loan fell to 4.83% last week) are not stimulating sales to the degree hoped for by government officials.

"Now that the Fed’s program [to buy housing debt] has been extended and the government has extended its [first-time homebuyer's tax credit], I would expect things to improve,” economist Christopher Low told Bloomberg News. “If you don’t see an improvement within the next couple of weeks, that would indicate a problem."

[update 11-19-09:]
Let's turn our attention away from new home loans and examine the ones already outstanding. Today the MBA's chief economist, Jay Brinkmann, reported that 14.41% of all home mortgages in the third quarter were either in foreclosure or at least one payment past due. That's one in seven. Four million mortgages were at least 90 days past due or in foreclosure. These figures point to a huge shadow inventory of houses waiting to hit the market. Perhaps that explains the lull in new purchases. Buyers are waiting for fire-sale prices!

Meltdown Countdown, Part Deux

[Bloomberg]

Liu Mingkang, Chairman of the China Banking Regulatory Commission, November 15, 2009:

The continuous depreciation in the dollar, and the U.S. government’s indication, that in order to resume growth and maintain public confidence, it basically won’t raise interest rates for the coming 12 to 18 months, has led to massive dollar arbitrage speculation...[It has] seriously affected global asset prices, fueled speculation in stock and property markets, and created new, real and insurmount- able risks to the recovery of the global economy, especially emerging-market economies.

Get Ready for the Second Wave

First the subprimes, now the option ARMs...

[John Hussman's weekly market comment, November 9, 2009:]

The problem is that these Option ARM and Alt-A structures were specifically designed as “teasers” – allowing loans to be made without documentation of creditworthiness, in return for post-reset interest terms that were generally higher than a documented lender would have paid... Similarly, Option ARM mortgages typically have very permissive payment schedules prior to the reset date, which have allowed homeowners to essentially live in these houses (at least temporarily) with fairly discretionary payments. The data suggest that most of these borrowers have allowed their mortgages to “negatively amortize,” allowing the loan balances to grow larger even as property values have depreciated. Once again, the resets on these are problematic for borrowers with questionable credit- worthiness, who bought the homes largely in anticipation of price appreciation. For these borrowers, the transition from discretionary payments to more demanding terms is unlikely to be smooth.

Investing in the Future? Not.

[analysis from Annaly Capital Management:]

Companies are not reinvesting at a fast enough pace to keep track with depreciation, i.e. they are getting smaller in the face of reduced sales. On bank balance sheets, we’re seeing loans falling as banks lend less (and companies demand less credit), but securities on the balance sheet are rising…the banks are playing the curve by buying up securities, not lending. Unless we see a serious resurgence in end demand, which would mean a serious resurgence in wages, employment and credit availability, you won’t see a GDP boost from capital expenditures...you may indeed see a pick-up in mergers and acquisitions, analogous to banks buying existing loans in the form of securities instead of making new loans.

Instead of investing in new projects and innovation, companies are cutting costs, buying each other, buying their own stock, or just hoarding cash...We cannot shrink ourselves to prosperity.

[update, headlines for November 12: General Electric sells its security business to United Technologies, 3Com sells itself to Hewlitt-Packard]

Twenty Years Ago Today...

...Checkpoint Charlie was opened, Nov. 9, 1989.
So began the dismantling of the 28-year-old Berlin Wall.

Boston Globe Photo Gallery

James Carroll: "the greatest date of our lifetimes"

Rising From the Napalm

...where the green shoots are real.

The Mad Hedge Fund Trader gives a lesson in demographics:

http://madhedgefundtrader.com/November_6__2009.html

Pick-a-Stat

Gone: another 190,000 jobs. So says this morning's press release from the Bureau of Labor Statistics. This number--the one that gets all the headlines--is from the "establishment" survey (CES), and it is plenty bad. Worse, though, is the "population" survey (CPS) number, which comes in three times higher at -589K. BLS tries to reconcile the two figures with the so-called "adjusted household survey." That one falls somewhere in between: -402K.

Does any of these numbers spell "recovery?" I didn't think so.

And now (thanks to Jake at EconomPic) for the number that has governors across the land reaching for their medication: hours worked per week per capita, now at 19.3. This means more dependents in a shrinking economy less able to support them.

TARP Money Goes Up in Smoke

Congress thought it had a better idea. A year ago it allocated $700 billion to a new Troubled Assets Relief Program to prevent a run on some of the nation's biggest banks. The Treasury Department used a good chunk of the $700B to buy preferred shares in those banks (think Bank of America and Citigroup), as well as in insurers (AIG) and other lenders (CIT). Taxpayers were sweet-talked into believing that these were "investments." TARP, it was said, would actually become a profit center for the federal government, with quarterly dividends generating an annual return of 5%. Not bad with real interest rates below zero.

Trouble is, many of the investments are turning sour. Yesterday, while most of the nation was diverted by NFL action, CIT announced that it is seeking bankruptcy protection. The resulting reorganization, once approved by the courts, will mean a 30-percent haircut for bondholders and a virtual wipeout for stockholders. Not only do we taxpayers lose our direct "investment" in CIT of $2.33B (as reported by Bloomberg), but as partial owners of Bank of America we lose another $2.25B in the debt swap. Meanwhile, 33 banks missed their TARP payments in August, up from the 15 who missed their May payments. Think we'll ever see any of that money?

TARP is scheduled to expire at the end of next month, which, as the Wall Street Journal pointed out last week, would be none too soon. Treasury treats TARP as a revolving fund, which means that as money is returned, it gets redirected back out again. It will keep getting "invested" in ever riskier enterprises until it doesn't come back. Congress can lock up the remaining money by doing nothing. But given its propensity to subsidize losers like Cash for Clunkers and Cash for Bunkers, nothing dollarable (as John Muir used to say) is safe.