Posts Tagged ‘employment’

Occupy Wall Street

The Occupy Wall Street movement appears to be gaining momentum. Thousands have taken to the streets today with hundreds being arrested. The Troll noted that he was concerned that the European riots would make their way to the U.S. (see Washington State. The Big Layoff). While the Troll agrees that Wall Street should be held accountable for their actions leading to current economic conditions, others should be held accountable as well (U.S. Congress). The 2012 elections will go a long way in shaping the path forward. Hopefully, voters will arm themselves with enough information to choose wisely.

The Troll

Mortgage Market Update for 9-14

The Troll wanted to post earlier this week but his loan processor is on vacation and he had to close some loans. Remember he is still a mortgage broker and real estate broker first. It must be this way because he has little trolls to feed. Did you know that little trolls have voracious appetites? Food for thought anyway and now onto the mortgage news.

The releases today were helpful to bonds and mortgage interest rates. The Producer Price Index (PPI)which measures the average change over time in selling prices received by domestic producers for their output came out at zero today. These prices are typically the first commercial transaction for many products and some services. It means that prices are not increasing for manufacturers and inflation is not problematic. Retail sales were also completely flat. These numbers are not indicative of an economic recovery. The Troll doesn’t see a recovery for quite some time. The immediate issues of the day are in Europe, U.S. housing and unemployment. Until these problems are solved, we can expect pretty low interest rates, with some occasional scares along the way.

Sec Treasury Geithner on CNBC this morning saying Europe has the financial strength to avoid defaults in the countries that are on the edge with debt. He said the obvious, that Europe’s problems are causing a lack of confidence in the US. He encouraged Congress to pass the jobs bill offered up by the Administration. He also admitted US growth isn’t what the Administration had expected.

Pessimism about the economy has deepened and confidence in both U.S. political parties has fallen, with only 20% saying the country is on the right course. As little as 9% of Americans say they are confident the economy won’t slide into a recession, according to a Bloomberg National Poll.

As long as the 10 yr note doesn’t climb above 2.10% the positive outlook will continue, a break above it would set up a run up to 2.30% and take mortgage rates up with it. Next week the FOMC will hold a two day meeting, some traders are looking for more Fed help, while others including some FOMC members don’t believe more quantitative easing (QE) is necessary.

The Troll

Obama Jobs Speech and the 10 Year Bond

This evening the President will discuss his proposal to encourage job growth in the United States. The Troll is interested to hear what he has to say about the subject. He is also surprised to hear that the President will not be speaking to the housing crisis in tonight’s speech. It seems to the Troll that the two go hand in hand. You see after every recession/depression in the United States, the job market has historically built its’ way out of malaise. Construction jobs are paramount to the recovery and they have been nearly nonexistent for the past 4 years. The Troll believes that without a housing recovery there will be no economic recovery in any substantial means. We shall see.

The Troll also wanted to address the 10 year bond market. As you may or may not know, the 10 year bond yield affects long term interest rates. Specifically, it affects 30 and 15 year fixed mortgage rates. It has been 60 years since the 10 year bond yield has traded as low as it is today. The yield has broken a significant resistance level of 2.00%. The result of this dramatic development is historic low interest rates.

For those of you that have a 30 year fixed mortgage and have solid income, credit and equity position you may want to consider moving to a 15 year fixed mortgage. Depending on your qualifications, you can obtain a rate on that program in the low 3% range. Truly Unbelievable!

The Troll

Washington State. The Big Layoff

In yesterdays Seattle Times a front page article caught the Trolls eye. It was titled “State government offices-Where are all the people?” The article states that the recent decline in state employment is unprecedented in the 26 years they have tracked the data. I must admit that it comes as no surprise to the Troll that government layoffs have and will continue to play a big role in employment numbers for the foreseeable future. You see, there are a lot of foreclosures and short sales out there. These properties are not current on their debt and therefore are not contributing to the states tax pool in the way of property taxes. Without property taxes coming in there is no where to run and cutbacks are the result. Something else to consider, unemployment benefits are also at unprecedented levels. Unemployment benefits have been extended to a nearly unbelievable 2 year duration which has exhausted the state coffers. As companies layoff employees there is less and less money available to social programs in the way of payroll taxes. A viscous cycle indeed.

It’s tough out there people, we need to look no further than those rioting in England last week over current economic opportunities. It’s a little scary to contemplate the typical 6 month lag for things happening in Europe to reach the United States. And while the domestic economy continues to make tough cuts, this Troll hopes the 6 month lag still only pertains to fashion.

Still, as the Troll wrote yesterday, conditions couldn’t be better for those that have the means to purchase a rental or qualify to refinance at a lower interest rate.

The Troll

The Week Ahead

From our friends at Calculated Risk

The most anticipated event this coming week is Fed Chairman Bernanke’s speech at Jackson Hole on Friday.

The key economic releases this week are July New Home Sales on Tuesday and the second estimate of Q2 GDP on Friday. Several high frequency releases will be closely watched: weekly initial unemployment claims, consumer sentiment (final) and two more regional Fed manufacturing surveys. On Monday, the MBA will release the Q2 National Delinquency Survey.

—– Monday, Aug 22nd —–

8:30 AM ET: Chicago Fed National Activity Index (July). This is a composite index of other data.

10:00 AM: Mortgage Bankers Association (MBA) 2nd Quarter 2011 National Delinquency Survey (NDS)

The MBA reported 8.32% of mortgage loans were delinquent at the end of Q1, seasonally adjusted, and another 4.52% were in the foreclosure process (total of 12.84%). The delinquency rate probably decreased in Q2, but the in-foreclosure rate probably increased.

Expected: The Moody’s/REAL Commercial Property Price Indices (commercial real estate price index) for June.

—– Tuesday, Aug 23rd —–

10:00 AM: New Home Sales for July from the Census Bureau.  The consensus is for a slight increase to 313 thousand SAAR in July.

10:00 AM: Richmond Fed Survey of Manufacturing Activity for August. The consensus is for the index to be at minus 7, down from minus 1 in July. (below zero is contraction).

—– Wednesday, Aug 24th —–

7:00 AM: The Mortgage Bankers Association (MBA) will release the mortgage purchase applications index. This index has been very weak over the last several months, although refinance activity probably increased sharply last week.

8:30 AM: Durable Goods Orders for July from the Census Bureau. The consensus is for a 2.0% increase in durable goods orders after decreasing 2.1% in June.

10:00 AM: FHFA House Price Index for June 2011. This is based on GSE repeat sales and is no longer as closely followed as Case-Shiller (or CoreLogic).

—– Thursday, Aug 25th —–

8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for an increase to 415,000 from 408,000 last week.

11:00 AM: Kansas City Fed regional Manufacturing Survey for August. The index was at 3 in July.

—–Friday, Aug 26th —–

8:30 AM: Q2 GDP (second estimate). This is the second estimate for Q2 GDP from the BEA.

The first estimate was for 1.3% annualized growth in Q2. The consensus is for a downward revision to 1.1% annualized real GDP growth.

9:55 AM: Reuters/University of Mich Consumer Sentiment final for August. The consensus is for a slight increase to 56.0 from the preliminary August reading of 54.9.

10:00 AM: Fed Chairman Ben Bernanke speaks at the Federal Reserve Bank of Kansas City Economic Symposium, Jackson Hole, Wyoming, “Near- and Long-Term Prospects for the U.S. Economy”

Daily Pfenning 8-19

* Gold sets new highs with every tick higher!
* Risk Off Day except for Gold!
* Blinder talks QE.

It’s All About Gold!

Well folks, it’s all about Gold tody.  Gold this, Gold that, and hey you should know
that Gold right now is trading at $1,866! The expectations of slower global
growth means interest rates won’t be rising. That keeps Gold at the top of
investor’s lists. Well, what about inflation expectations? Hmmm. Interesting don’t
you think, that I mentioned inflation, in the same paragraph as slower global
growth? I’m talking monetary inflation from all the printing presses working
overtime. (more on that in a bit) Silver is hanging on to Gold’s coattails but
lagging at best.

The way Gold has traded in the past week, one would have to think that Gold has
come to the forefront of what people consider money. I went through that
explanation yesterday, so I won’t go there again. But consider this. With Gold
as money, then there would be a “Gold monetary system”. When the Gold
Monetary System ramped up its price like this in a week, one would have to
think that the monetary system is pricing in big black clouds for the markets.

So the question right now is. Should investors rush out to buy more Gold or
hopefully not their first purchase of Gold with Gold at $1,866? Hmmm. Well,
let’s go back to when Gold was trying to gain past $1,000, didn’t people have
qualms about buying Gold at $1,000? Then the same for $1,100, and $1,200, and
$1,300, and $1,400? And all the way up to now. Yes, they did but trees don’t
grow to the moon, right? Well with all the money in the world sitting around,
one has to think that there’s no stopping here. And all those analysts that
have been calling for Gold at $2,000, are smiling like Cheshire Cats this
morning.

Frank Trotter (the Big Boss), and I have long said that we believed that Gold
could go to $2,000, but agreed that we didn’t want to see what kind of shape
the U.S. economy was if Gold was $2,000.

As I keep saying over and over again and over again, this dance is gonna be a
drag. Wait! What I’ve said over and over again is to think of the dollar and
the euro as two junk cars. They are beat up, wrecked, and rusted, but the euro
car seems to look just a bit better than the dollar car. The euro car starts
every morning, and gets you to work, while the dollar car starts and stalls,
over and over again.

OK. If you didn’t like that one, how about a real explanation! The euro is the
offset currency to the dollar, period. If there is dollar weakness then the
euro gains, and vice versa. So, obviously, the markets feel as though the
problems in the U.S. are far worse than the Eurozone even though they beat the Eurozone
every day like a rented mule! (no animals were hurt in that description!)

Yesterday, the data cupboard was very busy here in the U.S. with CPI, and
everything else printing. CPI (consumer inflation) was stronger and the Weekly
Initial Jobless Claims climbed back over 400,000 with last week’s number being
revised up to 399,000. Leading Indicators weakened (that’s not a good sign),
and Existing Home Sales weakened. So, all-in-all it was not a good day for U.S.
economic data.

And that brings us to what I feel and have felt for a long time,
what is the Fed going to do about all this economic and stock market weakness? I
think former Fed Vice Chairman Alan Blinder said it best yesterday when he told
Bloomberg TV that, “he sees a reasonably high chance of QE3 this
year.”

Now for the big finish. I heard that Bank of America is going to slash 3,500 jobs.

That’s it for today. Did you know the NFL preseason is under way? My beloved
Cardinals are in Chicago at Wrigley Field for the weekend, those are always fun
weekends.

Chuck
Butler
President
EverBank World Markets

Market Update for 8-16

Mortgage Backed Securities have rallied this a.m.

A mixed bag of news is causing bonds to rise slightly and stocks to fall. Germany is showing signs of trouble and concerns stocks. We also had a weak housing start number (bond friendly) and Fitch has affirmed their AAA rating for US bonds. Nice!

Treasuries and mortgages started a little better this morning with the stock indexes trading lower, suggesting a weak opening at 9:30. Mortgage markets stalled here for the last few days with markets consolidating recent strong moves. The stock market put three consecutive days up or the best showing in weeks, this morning a little pullback on the open.

At 8:30 July housing starts were expected down 3.5% but declined just 1.5%; building permits were right on forecasts, down 3.2%. Housing still in depression and likely will continue to be well into next year. Housing starts so far this year are running on a 566,000 pace for all of 2011. The result compares with last year’s tally of 587,000 starts, the second-fewest on record. Home construction totaled 554,000 units in 2009, the lowest since record-keeping began in 1959. During the past decade’s housing boom, starts reached a peak of 2.07 million in 2005. (data from Bloomberg)

July import prices were up 0.3% while US export prices declined 0.4%. Paying more for imports while earning less on exports. July imports followed a revised 0.6% drop in June.

At 9:15 July industrial production, expected +0.4%, increased 0.9%; July capacity utilization, expected at 77.0% from 76.7% in June increased to 77.5%. Better than expectations pushed treasuries down a little and mortgages lower. The better reports on housing starts and industrial production and capacity utilization helped take some pressure off stock indexes which were down 100 points on the DJIA to -55.

Fitch came out this morning affirming US credit rating at AAA; S&P lowered the US rating to AA2 and sent the stock market into a tail spin before recovering the last three days. S&P is feeling the pressure over its US downgrade. Eleven days after lowering the credit rating on the U.S. for the first time, the rating agency is suffering a downgrade among global investors as American bonds are proving world beaters — undermining S&P’s mathematical assumptions — and prompting disbelief among political scientists months after the company upgraded China because of the stability fostered by Communist Party rule.

At 9:30 the DJIA opened -90, the 10 yr note +3/32 at 2.30% and mortgage markets, choppy this morning, down 2/32 (.06 bp) at 9:30.

No growth in Germany in Q2, or in the euro zone overall. Germany’s GDP rose 0.1% from the first quarter, when it jumped a revised 1.3%. Economists had forecast growth of 0.5%. A separate report today showed euro-area economic growth slowed in the second quarter more than economists had forecast. Gross domestic product in the 17-nation euro area rose 0.2% from the first quarter, when it increased 0.8%; estimates were for an increase of 0.3%. The German DAX declined to, the first decline in four days, on the soft economic data.

German chancellor Merkel and French Pres Sarkozy will meet later; according to press reports there will be no discussions regarding issuing euro bonds in an effort to shore up those debt ridden economies in the zone.

The wider look for US interest rates remains positive, but we are becoming concerned that the benchmark 10 yr note tested and failed to break below 2.00% last week; below 2.00% would be the lowest rate on the 10 yr note since back in the 50s. The 10 hit 2.00% back in 2008 as the subprime crisis unfolded and took down Lehman Bros and others. It is less likely now that rates will fall much over the next couple of weeks as markets are likely to swing around with not much changing until the Jackson Hole conference that begins August 26th.

The Troll

Spring Break Fun and Local News

The Troll has been able to keep up his torrid work schedule by enlisting the help of an old ally, Grandpa Troll. With the kids out of school for the week the Troll had the foresight to fly in a ringer. Yes, Grandpa Troll to the rescue. Items on the schedule this week include the Star Wars exhibit at the Pacific Science Center (really cool), the newly released Hop, a Mariners day game and some well timed outdoor activities (is that the sun?). And since the Troll has a quiet office he can relay some news.

I drove by the Bill and Melinda Gates Foundation yesterday and saw that it was nearly completed. It appears that it will be ready for operations this summer. The Gates Foundation is currently hiring for numerous positions in global health and will employ in the neighborhood of 2,000 in its new Seattle Headquarters.

Vulcan Inc. (Paul Allen) is also in the final stages of completing the new Amazon Headquarters. The estimates on that project (11 buildings and 1.6 million SqFt) reveal that approximately 6,000 Amazon employees will be working in South Lake Union.  The new jobs are a welcome sight and should provide a boost in demand for our local housing market.

In other news, Mercer St was closed this past weekend and will be closed an additional 20 weekends.

The Troll

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