Well, over the weekend it appears that the Big 3 (Big 2½) auto maker bailout has driven the dollar down, and driven oil up, though trading in both was light, though retail gasoline hit a new low.
That being said, the real news is that Japanese exports fell 27% year over year in November as the worldwide recession crushed demand.
27%????? Ouch.
December 2008 Business Outlook Survey – Philadelphia Fed.
Calculated Risk gives us the following graph pr0n on the relation beteween the Philly Fed index and recessions
30-year mortgage lowest in 37 years of Freddie Mac survey – MarketWatch
Also note the Institute for Supply Management’s manufacturing index, which, as Bondad Notes, has fallen off a cliff over the past two months.
If you go to the ISM’s report, you will see that the pretty much everything is down, and down significantly:
The two industries reporting growth in November — listed in order — are: Apparel, Leather & Allied Products; and Paper Products. The industries reporting contraction in November are: Nonmetallic Mineral Products; Fabricated Metal Products; Textile Mills; Printing & Related Support Activities; Machinery; Electrical Equipment, Appliances & Components; Primary Metals; Transportation Equipment; Furniture & Related Products; Plastics & Rubber Products; Computer & Electronic Products; Chemical Products; Petroleum & Coal Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; and Wood Products.
With industrial production cratering, it is no surprise that first time job claims are still at a high level, though they have retreated from last week’s catestrophic numbers, and the 4 week rolling average is up, though continuing claims are down, though I can’t tell if that’s from claim exhaustion, people giving up, or people going back to work, though my money would be on one, or both, of the first two.
Over on the other side of the pond, corporate sentiment is falling in Germany, and the ECB is taking rate cut like steps, even if they are not technically rate cuts, to boost the economy.
In the intersection of real estate and banking, the rate for a 30 year fixed mortgage hit the lowest number ever recorded, and records go back 37 years, though Calculated Risk (again) notes what the rate is for Jumbo loans, which not handled by Fannie and Freddie, who now have an explicit guarantee from the government, the numbers are very different:
As an example Wells Fargo is offering a 30 year fixed at 4.75% (up to $417K), but their rates are 7.375% for loans above that limit.
That’s a 7.375% is 55% more than 4.75%. That’s a lot of flight to safety.
In currency, the dollar is up a bit, which is not surprising. It’s enough time for the shock from the Fed’s rate cut to have worn off.
I still think that hte trend for the dollar is weaker.
In oil, even though OPEC announced large production cuts, fell below $36/bbl.
It could be that oil traders do not believe that the cuts will be followed, or that they think that the economy is so bad that it does not matter, or that there are still people who need cash and are selling oil contracts to get it.
My vote would be for all three.
Starting with real estate, the Architecture Billings Index fell to an all time low in November, surpassing the all time low in October. (H/t Calculated Risk)
Also, if you read about houses moving in Southern California, please remember that 55% of those sales are foreclosures. (Again, H/t Calculated Risk)
We are also seeing treasury yields down in expectation of an abysmal Fed Bank of Philadelphia’s general economic index at 10:00am on Thursday.
In currency, what can you say? The fed cuts rates to basically 0%, and it’s down against other major currencies.
In energy, OPEC pledged cuts of 2.2 million bbl/day from production, but the price fell anyway, to below $40/bbl(!), because investors do not think that it is enough, and because they think that member nations will cheat.
On the other hand, it does appear that retail gasoline has finally bottomed out, as it’s up by $0.006/gal today.
The big news, the Fed basically giving up and lowering its rates to what is effectively zero, I just posted, but that’s not the only central bank news today.
The European Central Bank is considering cutting its overnight deposit rate, and the Bank of Japan is looking at ‘quantitative’ monetary easing, things like buying commercial paper outright.
I think that we may see the printing presses cranking up fairly soon, and as I’ve said before, this might not be a bad thing: inflating our way out of the housing crunch as a way to staunch the bleeding in the credit bubble. (I think I just violated some regulations on mixing metaphors, and the English Instructor Swat Team will come after me, red pencils blazing)
In any case, the Federal reserve cutting rates by ¾% has pushed the dollar down today and pushed treasury yields down to new lows.
That second one is part of the goal, the idea that lower yields will move people to more risky investments, but since people have already accepted negative yields, I’m not sure that it will make a difference.
In the mean time, those who worry about a deflationary spiral, are not relaxed folks today, with the CPI in the United States dropping by 1.9% (non-seasonably adjusted) and 1.7% (seasonably adjusted), the biggest drops since 1932 and 1947 respectively.
Anytime you hear an economic statistic, followed by, “since 1932,” it is not a good thing….I’m just saying…
Needless to say, this is hitting with real estate too, with housing construction starts falling 18.9% in November, to 625K, the lowest number since records started being kept on this in 1959.
Anytime you hear an economic statistic, followed by, “since 195,” or, “since records started being kept,” it is not a good thing either….I’m just saying…
In Southern California, one of the areas hardest hit by the housing bubble, prices are down 5% for October-November, and 35% from November last year.
I’ve seen a few stories about how selling is picking up in California, but this really is people scavenging foreclosures and oft-mentioned the dead cat bounce.
In energy, OPEC meeting opened with calls to cut production by 2 million bbl/day, which, along with the falling dollar and Fed rate cut, pushed oil up, but only by a bit less than a dollar.
Retail gasoline was up again today, but still has not moved more than a penny above its recent low.
GM is planning to GM to cut production by 250,000 by closing about 1/3 of its plants, and most of its assembly plants at some point in the firs quarter.
One wonders what this will do to the supply chain.
Also, it looks like GMAC is perilously close to defaulting. They are still trying to become a bank holding company, and if they fail, it is likely that thousands of dealerships will have no access to credit.
Well, retail sales numbers for November are grim, down 7.4% from November 2007, and that’s with an adjustment for a late Thanksgiving that is probably excessive, so it is likely worse.
Consumer sentiment rose, but is still at a pretty awful number.
We also saw wholesale prices fall, which can be either good news, moderating inflation, or bad news, deflation.
Overseas, we have the EU found agreement on an economic stimulus pack, with even Angela Merkel backing off Hoovernomics by a half step.
In Japan, a new economic stimulus package has been announced.
Russia, however, is being hammered by low oil prices, and senior officials are now saying that the nation is in recession.
As to currencies, the dollar was mixed, up versus the Pound, down a smidge versus the Euro, and at a 13 year low versus the Yen.
I’m not sure how much of this is all just a reaction to the Senate auto bailout follies, and the the same goes for the price of oil, which was down, but was likely driven by yesterday’s filibuster.
Additionally, retail gasoline is now below $2 a gallon in the lower 48, with New York State crossing that line today.
Woah, new claims for jobless benefits just jumped by 58,000, to 573,000, a 26 year high.
Continuing claims, which is a far less noisy metric, also jumped to a 26 year high, 4.43 million, up from 4.09 million.
In real estate, the average rate for a 30-year fixed mortgage hit 5.47%, a 4½ year low, and forclosures fell in November, but this appears to be as a result of new state laws requiring more time for the process and/or temporary moratoriums, so there will likely be a significant spike in the next few months.
In the more general economy, we have a first, or at least a first since the Federal Reserve began collecting the data in 1951, the level of consumer debt held in the US has fallen, by 0.8%.
Of course, consumer net worth fell by 4.7%, so it’s a net loss.
In international finance, the Swiss Central Bank cut its interest rate by 50 basis point, and China’s exports fell 2.2% year over year, the steepest drop in nearly a decade.
In currency, the dollar weakened significantly, by about 4¢.
My guess is that it was some combination of extremely low interest rates in the US, or the demonstration of batsh%$ insanity by the Republican senators on the auto bailout vote.
In energy, oil is back above $45/bbl on strong calls by OPEC for production cuts, and retail gasoline prices continued their slide.
Courtesy of Devilstower on Daily Kos.
Note that with the SEC, CFTC, etc., we are still almost off the bell curve.
I normally don’t do stock market numbers, too much noise and mass hysteria there, but this does appear to be a Black Swan moment.
This is the third time since 2004, they, as both KB and FAO Schwartz, did a twofer in 2004.
Filing for bankruptcy as a tow store less than 3 weeks before Christmas?
Looks like liquidation this time.
Here is the obligatory scare quote:
Sales were little changed from Feb. 3 until Oct. 4, KB Toys said. Since then, sales have dropped almost 20 percent, the company said.
Sales fell as the Xmas season buying frenzy ramped up….Not good.
Well, now we have a report from MasterCard saying that gasoline consumption rose year over year for the first time since April, which I guess gives us an indication of just how quickly American consumers go back to their old ways when fuel prices fall.
In the meantime, Calculated Risk’s Credit Crisis Indicators have shown a bit of improvement, though with people taking negative interest to be in US treasuries, I’m not sure how reassuring that it.
In any case, it’s now clear that last week’s surge in mortgage applications was from people scrambling to lock in rates and this week, we have the application rate plunge, because this week’s applicants rushed to apply last week.
Meanwhile, consumer spending looks to post the biggest drop since just after Pearl Harbor, which is really pretty scary when you think of it.
And there won’t be much help on the export markets, with both China and Europe showing more signs of slowing themselves.
Which leads one to wonder when they will stop lending to us, because the U.S. budget deficit was $164.4 billion in November, up from $98.2 billion in November 2007.
Finally, we have oil rising on a Saudi supply cut, retail gasoline dropping for the 84th straight day, and the Dollar was mixed again today.
We already knew that Japan was in a recession, but the updated data is worse than the initial data. The preliminary number was 0.1%, the prediction was 0.2%, and it came in at 0.5%.
Barry Ritholtz notes that the 4 Week T-Bill was paying 0%, down from 0.4%, and notes that the only reason to do this is if you expect that the next 4 week T-Bill will have a negative interest rate, i.e. that you pay the government money for the honor of lending them your money.
Turns out that he was a a little bit premature, because the 3 month T-Bills actually traded at negative interest rates, “If you invested $1 million in three-month bills at today’s negative discount rate of 0.01 percent, for a price of 100.002556, at maturity you would receive the par value for a loss of $25.56.”
If you want to feel concerned note that this is the Lowest Rate Since 1929…1929….That year sounds familiar.
In the meantime, the Bank of Canada cut its key rate by 75 basis points to a 50-year low, because they are in recession too.
In real estate, the Pending Home Sales index fell, though not by much, and listing prices for homes have continued to fall.
Calculated Risk has a summary of the commercial real estate market, and it ain’t pretty.
In energy, oil is down a bit, likely spooked by the complications on a bailout deal.
The dollar was mixed today, up a bit vs the Pound and Euro, and down a bit vs. the Yen.
Someone thinks that there is a need, because someine is aggressively marketing Morocco’s Errachidia Airport for long term desert storage (i.e. boneyard).
Because thinks that there is a need to have a place to park hundreds, or perhaps thousands of aircraft.
Someone is betting on recession here.
I’ve never been entirely sure why, but Fridays tend to be OMFG kinds of days, and this one is a doozy.
We have the jobs report out, and it is unbelievably grim, with 533,000 job losses, and the unemployment rate going from 6.5% to 6.7%.
By way of perspective, the so-called experts has predicted job losses of “only” 335,000.
It’s the worst monthly job losses since 1974.
The numbers are actually worse, since this does not count the 422,000 people who just stopped looking for work.
BTW, the unemployment number quoted, the U3 is considered, by me at least, to be over restrictive and understate unemployment. The broader U6, it hits 12.5%:
The U-6 rate only has comparable history back to 1994, but November’s rate is by far the highest since then and the swift rise to that elevated level also far surpasses similar moves during the recessions in 2001 and 1990-91. Previously, the Labor Dept. kept a similar gauge with history back to 1970, showing a high of 14% unemployment during the deep recession in 1982.
The U-6 rate rose sharply in November, from 11.8% in October, and is markedly higher now than the 8.4% recorded in November 2007.
It sucks north of the border too, where Canada Lost 70,600 jobs, which is more on a per capita basis…but Steven Harper wants to try Hoovernomics for a few months to see if it will fix things, which is why the hereditary enemies Liberal, NDP, and BQ parties are trying to desperately form a coalition government to kick his ass to the curb.
Given these numbers, it’s no surprise that a record number of Americans are on food stamps.
Meanwhile, in real estate, delinquencies and foreclosures hit record highs, loans in foreclosure are now at 2.97%, and delinquencies rose to 6.99%.
Meanwhile, it’s clear that the central banks are pushing on a string, and the Bank of England is looking at finding new ways to give away money, because rate cuts are not working:
The Bank of England is working on radical plans to inject cash directly into the British economy as a last resort to reverse a slide into recession, a newspaper reported on Friday.
…
The Daily Telegraph said the Bank was “working on radical plans to inject cash directly into the economy — the nuclear option to be used only when interest rates approach zero.” The report said the Bank was considering engaging in “quantitative easing” — printing more money to reflate the economy.
“Measures under consideration include direct purchases of assets, such as government debt or commercial investments, by the Bank or the Treasury, as well as expanding the Bank’s balance sheet, a means of pumping extra cash into the banking sector,” the newspaper said.
This is end of days economics…..They are literally considering throwing money out the window.
Meanwhile, the markets behaved in ways that make no sense to me, once again indicating that anything beyond simple index funds is not a good investment option for me:
because….Honestly, I have no clue as to why.
In the meantime, oil fell to $40.81/bbl, the lowest since December 10, 2004, and Gasoline?: $1.773/gallon retail.
First, Calculated Risk’s Credit Crisis Indicators are either flat or down, and the 3 month treasure note is still at 0.005%, which means that people basically put their cash in a mattress, so that is how freaked investors are, and how much they look for a safe haven.
Of course, what with the Bank of England cutting its rate by 100 basis points to 2%, it’s not like there is a whole bunch out there that is going to generate decent return anyway.
The weekly jobless claims posted a surprise drop, but continuing claims rose to a 26 year high.
Additionally, we have factory orders falling by the most in 8 years, which is completely unsurprising, as factories do not order much if consumers are not buying, and we are seeing double digit drops in buying this holiday season.
Considering that demand for commodities is falling with the economy, it’s not a surprise that oil has fallen to less than $44/bbl, and retail gasoline price has falls below $1.80/gallon.
Well, some employment numbers are out, and they suck wet farts from dead pigeons. Job cuts in November were up 148% from last year, 181,671 according to Challenger Gray & Christmas said and 250,000 according to ADP.
Other metrics are bad too, with the Fed’s Beige Book showing economic slowdown in every one of the Federal reserve districts, and the Institute for Supply Management’s Non-Manufacturing Index dropped off a cliff, falling to 37.3 from 44.4 in October.
Service activity in Europe is falling, with the Euro Zone service activity falling to a 10 year record.
In retail, we have Retail Tracker more than tripling its estimate as to the decline in this years holiday shopping season.
There is some bright news, with mortgage applications rising 112% in last week, though I tend to believe this analysis, that this is not new demand, but people scrambling to lock in the rate.
It’s one of those things that makes week to week stats noisy.
What isn’t noisy is the fact that Manhattan empty office space has doubled, and if there is a glut of office space there, there’s a glut of office space everywhere.
In international finance, we have, VEB, a Russian State Bank asking for a $34 billion cash injection, and the Kiwis% and the Thais central banks slashing their rates by 150 and 100 basis points (1% and 1.5%) respectively.
This makes it no surprise that the dollar gained against the euro and pound.
In energy, despite OPEC’s announcement of its intent to cut wasdown again today, and retail gas prices fell for the 77th straight day.
Where the hell did manufacturing go?
Seriously, with the ISM’s factory index falling faster than it has in 20 years in the US, and similar gauges dropping like epileptic ducks in the UK, Euro Zone, and Chine, I’m expecting global manufacturing’s face to show up on a milk carton.
If there is any solace, it is that oil prices fell on reports that OPEC is holding off on further cuts for now, as did retail gasoling (75th straight day!).
Meanwhile, another indicator of the credit crunch Treasury yields, are still plumbing record lows, indicating that money is still too frightened to do anything.
Yes, Virginia, we are officially in recession, and we have been since December, 2007.
What took the National Bureau of Economic Research (NBER) so long?
Well, it looks like today was the day for all the stuff you wanted to dump before a 4 day weekend.
First, consumer spending fell 1%, well beyond the prediction of 0.7%.
Remember that these days, the Christmas season starts in October for a lot of people.
This is a crushing figure, and it’s not just due to falling energy prices, because people are paying down debt too.
The consumer confidence numbers reinforce this. The index is at 55.3, the lowest number since 1980, though still above the record of 51.7 in May, 1980.
Confidence not any better on the business side of things, with
durable goods orders falling 6.2% in October, and no, that’s not an annual rate, that is the shrinkage for the month.
The unemployment stats say that weekly jobless claims fell last week, but I’m taking that with a grain of salt for the following reasons:
Just in case you are wondering how bad this will get, note that Fitch just cut its ratings on Toyota’s bonds to AA from AAA.
Seriously this is a Stay-Puft Marshmallow Man news.
The credit markets are freezing up, though applications for mortgages are up, largely on insanely low interest….I wonder how many applications are rejected though.
I would also note that new home sales declined to the lowest level since 1982, so its not like there are a sh^%load of buyers out there.
As a result of all this, we are seeing a number of rescue packages world wide, with the European Commission announcing a €200 stimulus plan, ]China’s central bank cutting rates.
These are probably what drove the dollar up today, and it also drove oil up
That being said, I think that the most troubling indicator is the fact that the 10-year Treasury yield fell below 3%, a new record, and this indicates that the flight to the relative safety of US Treasuries is continuing unabated.
Gee, the updated numbers for US GDP are in, and they have gotten worse, going from an annual rate of contraction of -0.3% to -0.5%.
In an effort to staunch the bleeding, the Federal Reserve has announced a new sh#@pile buy:
The Federal Reserve announced on Tuesday that it will initiate a program to purchase the direct obligations of housing-related government-sponsored enterprises (GSEs)–Fannie Mae, Freddie Mac, and the Federal Home Loan Banks–and mortgage-backed securities (MBS) backed by Fannie Mae, Freddie Mac, and Ginnie Mae. Spreads of rates on GSE debt and on GSE-guaranteed mortgages have widened appreciably of late. This action is being taken to reduce the cost and increase the availability of credit for the purchase of houses, which in turn should support housing markets and foster improved conditions in financial markets more generally.
They are also opening up a facility for
consumer and small business loans.
This took down 30 year mortgage rates to a record low, down 1-1/8 percentage point to 4-7/8.
Of course, right now, the banks are so skittish that they are unlikely to do a mortgage unless the property is sold at a seriously depressed price anyway.
This is actually good sense, as the Case-Schiller home price index fell 17.4% year over year.
That’s probably why the Libor is trending up again. Too much uncertainty, so banks want more for their overnight loans.
Then again with the number of banks characterized as “troubled” by the FDIC jumped from 117 in the 2nd quarter to 171 in the 3rd quarter, the highest number in 13 years.
It’s no wonder that some of the technical wonks who watch the stock market are noting that this is the most volatile market ever, with average daily swings over the last 50 trading days of 3.82%.
By way of comparison, this number was 0.33% in February.
Oil fell a bit to day, to $50.77/bbl, and I think that the markets are starting to wonder about just how much money that the Federal Reserve will print, so the dollar fell on the news of the new Fed lending facilities.
Well, let’s start with where I got it really wrong, energy, where oil closed below $50/bbl, and retail gasoline prices fall below $2.00/gallon.
I was completely wrong on both counts about my predictions.
In the meantime, the credit crunch is savaging an industry highly dependent on venture capital, biotech.
In the long run, that may be a good thing, because when they aren’t making money, they aren’t lobbying Congress, which makes health care reform, at least for prescription drugs, that much easier.
In terms of the overall credit crisis, things still stink, though Calculated Risk’s Credit Crisis Indicators are neutral in terms of spreads, there has been an incredible flight to US Treasuries, driving rates down to record lows.
Of course, we could be in Europe, where both manufacturing and services are dropping like a stone, and the Euro bank Prez is telegraphing another rate cut