Frightful news on this Halloween....

Scary Cliff:The National Association of Manufacturers has released a report showing thatif all the scheduled spending cuts and tax increases took effect when the Fiscal Cliff hits, it would cost 6mm jobs and push unemployment to 11% by 2014.

 

Muni Retirement Risk:A Pew study finds the gap between state assets and obligations nationwide is now $1.4T, up about 9% from the prior year.

 

Euro Stress:The latest data shows unemployment in the Euro Zone hit another record in Sept., reaching 11.6%. This compares to 7.8% in the U.S. and 7.9% in the U.K. Overall, Spain was in the worst shape at 25.8%, followed by Greece at 25.1%. The data shows problems in the EU are far from resolved and more is needed to get things moving again. This is particularly important to the U.S. because the EU accounts for about 21% of overall U.S. exports.

 

Debt Owed: The latest data from the Treasury shows every household in the U.S. owes about $47,495 to foreign countries, a 72% increase since 2008 (the largest amount, about $10,000, is owed to China).

 

(source: PCBB Newsletter)

GDP Grows 2.0% in 3Q

GDP grew 2.0% in the third quarter, beating expectations of 1.8%. This is slightly better than the 1.3% growth rate seen in Q2.

Looking at the various components of GDP -

- Personal consumption grew at a 2.0% rate, up from 1.5% in Q2.

- Government spending grew 3.7%, following eight consecutive quarters of contraction.

- Business investment, what has been a strong area of growth during the recovery, dropped 1.3%.

- However, housing was up 14% for the quarter. Unfortunately, housing is such a small part of the economy now that even a 14% rate of growth did not make a meaningful impact to the total numbers.

All in all, this GDP report illustrates moderate growth in the economy once again. The consumer continues to muddle along, business spending has slowed, and housing is recovering. There is no new news in that.

The Market Today ONLINE

The real U.S.GDP growth rate was lifted by government for the first time since 2010.

CPI YOY

Looks like we are headed back into the 2.00% + range – is this a blip (comparable to the first part of this year) or will we see more pricing pressure (movement in commodity prices working their way through the system) begin to move the meter upward and create additional stress for the Fed!

 

Interesting note for this data set: the high was on 10/31/06 and the low was on 10/31/10!

CPI Year-Over-Year

 

 

trend lines

Looks like volatility to me!

Should we begin calling this trend the “Tigger” bounce?

And with everything that we have coming up as we head toward the end of this year, I would ponder to say we shall see more of this bouncing…

Continued domestic economic stress, election season unknowns, fiscal cliff coming, European stress continues, China’s continued economic slow down…a lot of stuff happening to continue volatility’s active presence.

 

 

perspective on housing starts

The beginning of some positive signs of improvement in the housing sector are very welcome after such a long period of entrenchment. But when we look at the numbers from the perspective of past performance one can see that we have a way to go to get out of the valley. The ‘amazing-ness’ of this graph’s depiction of the precipitous drop in housing starts is truly mind numbing. The question to ask is - how do we return to the consistent growth trend line levels of earlier times? While understanding that the steep growth trend that took place from 2002 – 2006 was not built upon a viable financial model.

 

• September Housing Starts Surge Was Marginally Significant
But Not Credible

Shadow Government Statistics, American Business Analytics & Research LLC

http://www.shadowstats.com/

housing update

Some positive news on the housing front. Interesting component is the continued strong trend in multi-family growth.

 

We received two strong housing reports this morning. Housing starts jumped 15% in September to an annualized rate of 872k, the best pace of growth since July 2008.

Single family starts grew 11% while multi-family starts jumped 25%. Building permits, a future indicator for starts, also rose by double digits, increasing 11.6%.

 

The Market Today ONLINE

 

 

mbs spread

QE3 working its magic….quite a drop!

Where will we end…nobody knows!

But it appears that the refi window will remain open for business….

 

One interesting thing to note is the continued drop in MBS security yields. The spread between a 30-year mortgage and the 7-year Treasury has dropped almost 100 basis points in the past two months. This is dropping mortgages rates. The 30-year mortgage rate, as quoted by Freddie Mac, is back to the record-low rate of 3.49%. Fifteen-year mortgage rates are now at 2.69%. This drop will likely spur on more refinance activity which we are already seeing in the MBA refi index.

 

The Market Today ONLINE