May 2011 U.S. Economic Fundamentals
- Thread starter Ally
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Suddenly it's 2008 again, but there's one huge difference
Suddenly the economy sucks and everyone is comparing this year to 2008.
If that's true, then there's one huge difference.
There's no dry powder for the government to ease. Actually, the government could do more, on the fiscal side, but not only is it not going to happen, it's going to be the reverse. The US is about to get fiscal austerity.
And pray to God if there are concerns about the banking system again, because there's no way anything like TARP could get passed in the current environment. No way.
Read the full article here.
Suddenly the economy sucks and everyone is comparing this year to 2008.
If that's true, then there's one huge difference.
There's no dry powder for the government to ease. Actually, the government could do more, on the fiscal side, but not only is it not going to happen, it's going to be the reverse. The US is about to get fiscal austerity.
And pray to God if there are concerns about the banking system again, because there's no way anything like TARP could get passed in the current environment. No way.
Read the full article here.
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Inflation? What inflation?
He`s the Man with the Golden Touch. As Federal Reserve chairman Ben Bernanke went public with a Fed policy statement and press conference Wednesday, traders watched as every word seemed to add a few cents to the price of gold. After hitting US$1,530 late in trading, gold backed back down a bit, but the story was clear.
The euro gained and U.S. treasury bond yields went up. Also moving in directions that were inconsistent with the Fed chairman`s world view was the American dollar, which went down.
Somebody clearly wasn`t getting, or didn`t quite believe, Mr. Bernanke`s message. Inflation is not a problem, said Mr. Bernanke, and the Fed will take no action against inflation until it begins to see it in the whites of the eyes of consumers and businesses in the form of `inflation expectations.`
Read the full article here.
He`s the Man with the Golden Touch. As Federal Reserve chairman Ben Bernanke went public with a Fed policy statement and press conference Wednesday, traders watched as every word seemed to add a few cents to the price of gold. After hitting US$1,530 late in trading, gold backed back down a bit, but the story was clear.
The euro gained and U.S. treasury bond yields went up. Also moving in directions that were inconsistent with the Fed chairman`s world view was the American dollar, which went down.
Somebody clearly wasn`t getting, or didn`t quite believe, Mr. Bernanke`s message. Inflation is not a problem, said Mr. Bernanke, and the Fed will take no action against inflation until it begins to see it in the whites of the eyes of consumers and businesses in the form of `inflation expectations.`
Read the full article here.
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Defending the weak dollar
Ben Bernanke may defend the Fed against calls it has debased the U.S. dollar at the central bank`s first-ever post-FOMC meeting news conference on Wednesday afternoon.
A broad-dollar index (26 currencies representing the main U.S. trading partners) on Tuesday closed at its lowest level since the summer of 2008 and is about 4% away from its 1995 low.
The narrower U.S. dollar index hit a three-year low of 73,493, inching toward its March 17, 2008 all-time low of 70.698. The Canadian dollar traded at US$1.0472 at midday Wednesday
Given that the Fed is unlikely to change its policy stance until later in the second half of 2011, this is probably where the currency is headed, says StÃfane Marion, chief economist and strategist at National Bank Financial.
Read the full article here.
Ben Bernanke may defend the Fed against calls it has debased the U.S. dollar at the central bank`s first-ever post-FOMC meeting news conference on Wednesday afternoon.
A broad-dollar index (26 currencies representing the main U.S. trading partners) on Tuesday closed at its lowest level since the summer of 2008 and is about 4% away from its 1995 low.
The narrower U.S. dollar index hit a three-year low of 73,493, inching toward its March 17, 2008 all-time low of 70.698. The Canadian dollar traded at US$1.0472 at midday Wednesday
Given that the Fed is unlikely to change its policy stance until later in the second half of 2011, this is probably where the currency is headed, says StÃfane Marion, chief economist and strategist at National Bank Financial.
Read the full article here.
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How low can the U.S. dollar go?
The Canadian dollar soared above US$1.05 for the first time since November 2007 on Wednesday, but the loonie`s rise was really a story of U.S. dollar weakness ` a weakness that left economists wondering how much lower the greenback could go.
The American dollar`s retreat came largely as investors continue to gain more of a risk appetite and gravitate toward equities and commodities. Strong earnings results from tech giants IBM Corp. and Intel Inc. on Tuesday night helped feed the appetite for stocks, while continuing strength in oil and gold continues to draw investor cash.
One thing is for certain: the weakness in the greenback has certainly outstripped most expectations, leaving many questioning how much lower can it go. We asked three currency strategists about their thoughts on what happens next.
Read the full article here.
The Canadian dollar soared above US$1.05 for the first time since November 2007 on Wednesday, but the loonie`s rise was really a story of U.S. dollar weakness ` a weakness that left economists wondering how much lower the greenback could go.
The American dollar`s retreat came largely as investors continue to gain more of a risk appetite and gravitate toward equities and commodities. Strong earnings results from tech giants IBM Corp. and Intel Inc. on Tuesday night helped feed the appetite for stocks, while continuing strength in oil and gold continues to draw investor cash.
One thing is for certain: the weakness in the greenback has certainly outstripped most expectations, leaving many questioning how much lower can it go. We asked three currency strategists about their thoughts on what happens next.
Read the full article here.
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TSX flat as commodity prices rise
The Toronto Stock Exchange was essentially flat at closing time Thursday following some better-than-expected earnings reports from Canadian companies and rising commodity prices, but disappointing U.S. economic data.
The benchmark S&P/TSX composite index was up 1.83 points, or 0.01 per cent, to 13,894.40 as the trading day ended. The commodity sectors, which often dictate the overall direction of the TSX, was split with energy stocks up and materials down.
Potash Corp. of Saskatchewan Inc. and Jean Coutu Group Inc. both reported earnings that surpassed analysts' expectations. Despite this, Potash stock was down 3.03 per cent to $52.54 in Toronto near day's end, while Jean Coutu gained 1.24 per cent to $10.58.
Read the full article here.
The Toronto Stock Exchange was essentially flat at closing time Thursday following some better-than-expected earnings reports from Canadian companies and rising commodity prices, but disappointing U.S. economic data.
The benchmark S&P/TSX composite index was up 1.83 points, or 0.01 per cent, to 13,894.40 as the trading day ended. The commodity sectors, which often dictate the overall direction of the TSX, was split with energy stocks up and materials down.
Potash Corp. of Saskatchewan Inc. and Jean Coutu Group Inc. both reported earnings that surpassed analysts' expectations. Despite this, Potash stock was down 3.03 per cent to $52.54 in Toronto near day's end, while Jean Coutu gained 1.24 per cent to $10.58.
Read the full article here.
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Housing bust: The scary sequel
The housing bust horror flick is now giving way to a very unwelcome sequel: a big squeeze on the cost of renting.
The number of renters paying more than half of their income towards rent has hit record levels, according to a new study by the Joint Center for Housing Studies (JCHS) of Harvard University.
Rental affordability is a critical issue for seniors, who live on fixed incomes and already are coping with low yields on their savings, fast-rising healthcare expenses and stagnant Social Security benefits. Yet the struggle with affordability is found most often among low-income Americans; JCHS found that 75 percent of renters in the lowest quartile of income are spending more than half of their income on housing. JCHS also found that lower-middle class renters also are having trouble finding affordable rental housing.
Read the full article here.
The housing bust horror flick is now giving way to a very unwelcome sequel: a big squeeze on the cost of renting.
The number of renters paying more than half of their income towards rent has hit record levels, according to a new study by the Joint Center for Housing Studies (JCHS) of Harvard University.
Rental affordability is a critical issue for seniors, who live on fixed incomes and already are coping with low yields on their savings, fast-rising healthcare expenses and stagnant Social Security benefits. Yet the struggle with affordability is found most often among low-income Americans; JCHS found that 75 percent of renters in the lowest quartile of income are spending more than half of their income on housing. JCHS also found that lower-middle class renters also are having trouble finding affordable rental housing.
Read the full article here.
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When Washington shuts the tap
U.S. first-quarter GDP growth of 1.8 per cent ` below estimates and significantly lower than 3.1 per cent in the fourth quarter of last year ` was `encouraging," White House economic adviser Austan Goolsbee says.
To which wags may ask: How slow does it have to get before the growth number is `discouraging`?
Read the full article here.
U.S. first-quarter GDP growth of 1.8 per cent ` below estimates and significantly lower than 3.1 per cent in the fourth quarter of last year ` was `encouraging," White House economic adviser Austan Goolsbee says.
To which wags may ask: How slow does it have to get before the growth number is `discouraging`?
Read the full article here.
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Do official statistics cosmetically enhance America's economic appearance?
COSMETIC surgery is more popular in America than in Europe. Statistics, too, may be making things there look less saggy. For several headline economic gauges, America uses a different (and more flattering) measure from that employed on the other side of the Atlantic. The number-crunchers are not deliberately massaging the figures but the effect of some of America`s official statistics is to Botox its performance relative to Europe`s.
Take public-sector debt. The definition used in Washington, DC, is `federal government debt held by the public`, which stood at 62% of GDP at the end of 2010. But if you instead use Europe`s preferred measure`general government gross debt, which also includes the borrowing of state and local governments and Treasury securities held by other government bodies, such as the Social Security Trust Fund`it jumps to 92% of GDP (see left-hand chart). That is on a par with Portugal`s level of public debt. Likewise, America`s budget deficit of 8.9% of GDP last year would have been 10.6% using Europe`s preferred measure.
Read the full article here.
COSMETIC surgery is more popular in America than in Europe. Statistics, too, may be making things there look less saggy. For several headline economic gauges, America uses a different (and more flattering) measure from that employed on the other side of the Atlantic. The number-crunchers are not deliberately massaging the figures but the effect of some of America`s official statistics is to Botox its performance relative to Europe`s.
Take public-sector debt. The definition used in Washington, DC, is `federal government debt held by the public`, which stood at 62% of GDP at the end of 2010. But if you instead use Europe`s preferred measure`general government gross debt, which also includes the borrowing of state and local governments and Treasury securities held by other government bodies, such as the Social Security Trust Fund`it jumps to 92% of GDP (see left-hand chart). That is on a par with Portugal`s level of public debt. Likewise, America`s budget deficit of 8.9% of GDP last year would have been 10.6% using Europe`s preferred measure.
Read the full article here.
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In the U.S., 'the mother of all jobless recoveries'
When U.S. Federal Reserve chairman Ben Bernanke held court during his historic first press conference last week, he mentioned inflation, which is half of the central bank`s twin mandate, more than 80 times.
The other half of the mandate ` employment ` rated only 16 references. That`s partly because of the questions that were posed and partly because the central bank simply doesn`t have the weapons to tackle stubbornly high unemployment.
It also underscores the remarkable lack of enthusiasm in U.S. policy circles for attacking the most serious fallout from the housing and credit collapse and subsequent severe recession. Even as millions of Americans run out of extended jobless benefits, politicians at every level are turning their attention to belt-tightening and the Federal Reserve is again preoccupied with the risks of inflation.
Read the full article here.
When U.S. Federal Reserve chairman Ben Bernanke held court during his historic first press conference last week, he mentioned inflation, which is half of the central bank`s twin mandate, more than 80 times.
The other half of the mandate ` employment ` rated only 16 references. That`s partly because of the questions that were posed and partly because the central bank simply doesn`t have the weapons to tackle stubbornly high unemployment.
It also underscores the remarkable lack of enthusiasm in U.S. policy circles for attacking the most serious fallout from the housing and credit collapse and subsequent severe recession. Even as millions of Americans run out of extended jobless benefits, politicians at every level are turning their attention to belt-tightening and the Federal Reserve is again preoccupied with the risks of inflation.
Read the full article here.
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U.S. home foreclosures spike 33% in March as inventory reaches record highs
Based on the March Mortgage Monitor report released this week by Lender Processing Services (NYSE:LPS), foreclosure activity picked up during the month.
As of the end of March, foreclosure inventory stood at 2.2 million - an all-time high - while foreclosure starts increased by 33 percent since the end of February. Foreclosure sales increased significantly as well, suggesting that the halt in activity due to various moratoria may be passing.
Delinquencies continued to decline in March, dropping by more than 11 percent month-over-month - the lowest level since 2008 - as more delinquent loans either cured or were moved into foreclosure. Delinquencies are down nearly 20 percent since this time last year.
Read the full article here.
Based on the March Mortgage Monitor report released this week by Lender Processing Services (NYSE:LPS), foreclosure activity picked up during the month.
As of the end of March, foreclosure inventory stood at 2.2 million - an all-time high - while foreclosure starts increased by 33 percent since the end of February. Foreclosure sales increased significantly as well, suggesting that the halt in activity due to various moratoria may be passing.
Delinquencies continued to decline in March, dropping by more than 11 percent month-over-month - the lowest level since 2008 - as more delinquent loans either cured or were moved into foreclosure. Delinquencies are down nearly 20 percent since this time last year.
Read the full article here.
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Private sector in U.S. adds 179,000 jobs in April
NEW YORK ` U.S. private employers added fewer jobs than expected in April, disappointing some who had been looking for stronger growth ahead of Friday`s key jobs report.
The ADP Employer Services report on Wednesday showed private payrolls rose by 179,000 jobs last month, shy of economists` expectations for a gain of 198,000. The report is jointly developed with Macroeconomic Advisers LLC.
March`s figure was revised up to an increase of 207,000 from a previously reported 201,000.
Read the full article here.
NEW YORK ` U.S. private employers added fewer jobs than expected in April, disappointing some who had been looking for stronger growth ahead of Friday`s key jobs report.
The ADP Employer Services report on Wednesday showed private payrolls rose by 179,000 jobs last month, shy of economists` expectations for a gain of 198,000. The report is jointly developed with Macroeconomic Advisers LLC.
March`s figure was revised up to an increase of 207,000 from a previously reported 201,000.
Read the full article here.
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U.S. new jobless claims jump to 8-month high
WASHINGTON ` New U.S. claims for unemployment aid unexpectedly rose last week to touch their highest level in eight months, pushed up by factors ranging from spring break layoffs to the introduction of an emergency benefits program, a government report showed on Thursday.
Initial claims for state unemployment benefits rose 43,000 to a seasonally adjusted 474,000, the highest since mid-August, the Labor Department said
Economists polled by Reuters had forecast claims dropping to 410,000. The prior weeks figure was revised up to 431,000 from the previously reported 429,000.
The four-week moving average of unemployment claims, a better measure of underlying trends, increased 22,250 to 431,250, the highest since November.
The data falls outside the survey period for the governments closely watched employment report for April, which will be released on Friday. Nonfarm payrolls will be reported up 186,000 for last month, according to a Reuters survey, after rising by 216,000 in March ` which was the most in 10 months.
Read the full article here.
WASHINGTON ` New U.S. claims for unemployment aid unexpectedly rose last week to touch their highest level in eight months, pushed up by factors ranging from spring break layoffs to the introduction of an emergency benefits program, a government report showed on Thursday.
Initial claims for state unemployment benefits rose 43,000 to a seasonally adjusted 474,000, the highest since mid-August, the Labor Department said
Economists polled by Reuters had forecast claims dropping to 410,000. The prior weeks figure was revised up to 431,000 from the previously reported 429,000.
The four-week moving average of unemployment claims, a better measure of underlying trends, increased 22,250 to 431,250, the highest since November.
The data falls outside the survey period for the governments closely watched employment report for April, which will be released on Friday. Nonfarm payrolls will be reported up 186,000 for last month, according to a Reuters survey, after rising by 216,000 in March ` which was the most in 10 months.
Read the full article here.
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Don't be tempted by U.S. fire sale
Canadians have a piggy bank with a lot of money in it, making the fire sale going on in the United States housing market a great temptation.
It seems like a once in a lifetime opportunity. Interest rates are low, the loonie is above par versus the greenback and the average price of a Canadian home has more than doubled over the past 15 years while U.S. prices have dropped by as much as 50% in some markets.
Last year, the average price of a home sold in Canada in 2010 was $339,030. Back in 1995, it was just $150,720.
Price appreciation has led to major increases in equity in Canadian homes, says the Canadian Association of Accredited Mortgage Professionals.
Read the full article here.
Canadians have a piggy bank with a lot of money in it, making the fire sale going on in the United States housing market a great temptation.
It seems like a once in a lifetime opportunity. Interest rates are low, the loonie is above par versus the greenback and the average price of a Canadian home has more than doubled over the past 15 years while U.S. prices have dropped by as much as 50% in some markets.
Last year, the average price of a home sold in Canada in 2010 was $339,030. Back in 1995, it was just $150,720.
Price appreciation has led to major increases in equity in Canadian homes, says the Canadian Association of Accredited Mortgage Professionals.
Read the full article here.
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U.S. housing market is in a double-dip recession
Last week, I was disheartened to read that Fannie Mae (OTC BB: FNMA.OB) is asking U.S. taxpayers to pony up an additional $8.5 billion to cover the company`s mortgage losses. This brings the company`s total government bailout to a staggering $100 billion, none of which (other than via dividend payments made on government-owned preferred stock) will ever be paid back. As I wrote last year in Greed Caused Fannie and Freddie to Fail, the blame for Fannie`s demise lays squarely with former CEO Daniel Mudd, who in 2006 reportedly told his employees: `get aggressive on risk-taking, or get out of the company." It angers me that Mudd received $80 million in executive compensation for leading Fannie Mae into the abyss and has not been required ` or voluntarily offered ` to return any of the ill-gotten money.
Equally outrageous, after the U.S. government took over Fannie in September 2008 and forced out Mudd for his incompetence, he subsequently latched on as CEO of private equity firm Fortress Investment Group (NYSE: FIG) where he is being paid $25.7 million per year! Fortune Magazine ranks him as the 24[sup]th[/sup] highest-paid executive in the U.S. While millions of Americans are facing massive losses from having their depreciating homes foreclosed on them, Mudd made a $4 million profit in 2009 when he sold his 11,500-square-foot, six-bedroom home in Washington D.C.
Read the full article here.
Last week, I was disheartened to read that Fannie Mae (OTC BB: FNMA.OB) is asking U.S. taxpayers to pony up an additional $8.5 billion to cover the company`s mortgage losses. This brings the company`s total government bailout to a staggering $100 billion, none of which (other than via dividend payments made on government-owned preferred stock) will ever be paid back. As I wrote last year in Greed Caused Fannie and Freddie to Fail, the blame for Fannie`s demise lays squarely with former CEO Daniel Mudd, who in 2006 reportedly told his employees: `get aggressive on risk-taking, or get out of the company." It angers me that Mudd received $80 million in executive compensation for leading Fannie Mae into the abyss and has not been required ` or voluntarily offered ` to return any of the ill-gotten money.
Equally outrageous, after the U.S. government took over Fannie in September 2008 and forced out Mudd for his incompetence, he subsequently latched on as CEO of private equity firm Fortress Investment Group (NYSE: FIG) where he is being paid $25.7 million per year! Fortune Magazine ranks him as the 24[sup]th[/sup] highest-paid executive in the U.S. While millions of Americans are facing massive losses from having their depreciating homes foreclosed on them, Mudd made a $4 million profit in 2009 when he sold his 11,500-square-foot, six-bedroom home in Washington D.C.
Read the full article here.
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U.S. dollar a 'total disaster' in the long ter: Jim Rogers
The U.S. dollar is going to be a "total disaster" in the long term because of the country's position as the world's largest debtor and the policies being pursued by Federal Reserve Chairman Ben S. Bernanke, according to investor Jim Rogers.
The Chinese yuan is likely to be a "safe" currency, although it is difficult for investors to buy, Rogers, the chairman of Rogers Holdings, told a conference in Edinburgh.
"The situation is getting worse and I expect to see severe problems in the U.S.," Rogers said today. "Dr Bernanke doesn't understand economics, he doesn't understand finance, he only understands printing money and we can't quadruple the amount of money in the next slowdown."
Read the full article here.
The U.S. dollar is going to be a "total disaster" in the long term because of the country's position as the world's largest debtor and the policies being pursued by Federal Reserve Chairman Ben S. Bernanke, according to investor Jim Rogers.
The Chinese yuan is likely to be a "safe" currency, although it is difficult for investors to buy, Rogers, the chairman of Rogers Holdings, told a conference in Edinburgh.
"The situation is getting worse and I expect to see severe problems in the U.S.," Rogers said today. "Dr Bernanke doesn't understand economics, he doesn't understand finance, he only understands printing money and we can't quadruple the amount of money in the next slowdown."
Read the full article here.
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U.S. must get control of debt, Flaherty warns
WASHINGTON ` Finance Minister Jim Flaherty on Wednesday pressed senior American congressional leaders to quickly produce a plan to control the U.S. government's skyrocketing deficit and debt, saying action is needed to avoid future financial crises.
Diving headlong into America's most heated domestic political debate, Flaherty told a trio of high-ranking Republican lawmakers that a U.S. failure to tackle its deficit problem could threaten the global economic recovery.
"Obviously there is concern about deficit and debt in the United States and a plan to resolve those issues and show the way forward. . . . We think it's important for the world, and for Canada, that there be a plan in place," Flaherty told reporters, ahead of a meeting with Rep. Paul Ryan, Republican chairman of the House budget committee.
Read the full article here.
WASHINGTON ` Finance Minister Jim Flaherty on Wednesday pressed senior American congressional leaders to quickly produce a plan to control the U.S. government's skyrocketing deficit and debt, saying action is needed to avoid future financial crises.
Diving headlong into America's most heated domestic political debate, Flaherty told a trio of high-ranking Republican lawmakers that a U.S. failure to tackle its deficit problem could threaten the global economic recovery.
"Obviously there is concern about deficit and debt in the United States and a plan to resolve those issues and show the way forward. . . . We think it's important for the world, and for Canada, that there be a plan in place," Flaherty told reporters, ahead of a meeting with Rep. Paul Ryan, Republican chairman of the House budget committee.
Read the full article here.
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U.S. economy runs into trouble
WASHINGTON ` The number of Americans filing new claims for jobless benefits fell last week, but other data on home sales and regional factory activity suggested the economy remained on a moderate growth path.
Initial claims for state unemployment benefits fell 29,000 to a seasonally adjusted 409,000, the Labor Department said on Thursday, continuing to unwind the prior weeks` spike.
Though the drop exceeded economists` expectations for a fall to 420,000, claims stayed above above the 400,000 level that is normally associated with stable job growth for a sixth straight week.
Read the full article here.
WASHINGTON ` The number of Americans filing new claims for jobless benefits fell last week, but other data on home sales and regional factory activity suggested the economy remained on a moderate growth path.
Initial claims for state unemployment benefits fell 29,000 to a seasonally adjusted 409,000, the Labor Department said on Thursday, continuing to unwind the prior weeks` spike.
Though the drop exceeded economists` expectations for a fall to 420,000, claims stayed above above the 400,000 level that is normally associated with stable job growth for a sixth straight week.
Read the full article here.
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U.S. corporate profits contract
NEW YORK ` The U.S. economy`s struggle to regain speed was underscored by data that showed growth slowing in the first quarter as consumers cut back spending and more Americans filing for jobless benefits last week.
U.S. after-tax corporate profits contracted in the first quarter for the first time in more than two years and the economy grew at the same pedestrian pace as previously estimated, government data showed on Thursday.
New U.S. claims for unemployment benefits unexpectedly climbed to 424,000 last week from a revised 414,000 in the prior week, pointing to a painfully slow improvement in the nation`s job markets.
Read the full article here.
NEW YORK ` The U.S. economy`s struggle to regain speed was underscored by data that showed growth slowing in the first quarter as consumers cut back spending and more Americans filing for jobless benefits last week.
U.S. after-tax corporate profits contracted in the first quarter for the first time in more than two years and the economy grew at the same pedestrian pace as previously estimated, government data showed on Thursday.
New U.S. claims for unemployment benefits unexpectedly climbed to 424,000 last week from a revised 414,000 in the prior week, pointing to a painfully slow improvement in the nation`s job markets.
Read the full article here.
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U.S. economic slowdown confirmed by growth figures
This compares with an annualised growth rate of 3.1% in the final three months of 2010.
The slowdown was blamed on corporate profits unexpectedly contracting for the first time in more than two years.
Many analysts had been expecting the growth figure to be revised upwards to about 2%.
'Soft patch'
US GDP is expressed as an annualised rate, or annual pace, which shows what the three months' economic activity would mean if it carried on for a year.
Read the full article here.
This compares with an annualised growth rate of 3.1% in the final three months of 2010.
The slowdown was blamed on corporate profits unexpectedly contracting for the first time in more than two years.
Many analysts had been expecting the growth figure to be revised upwards to about 2%.
'Soft patch'
US GDP is expressed as an annualised rate, or annual pace, which shows what the three months' economic activity would mean if it carried on for a year.
Read the full article here.