Wednesday, August 5, 2009

Day in Review

Below is part of an email I sent to a friend in finance. Sums up the important news I read today. The truth is read this stuff everyday. Until it matters in the market it hardly is worth posting on.

Anyway, below is just a brief look at my today's reading. Only today. Somehow through all of this the markets basically yawned with financials up 3.5% and REITs up over 4%.

1) Deutsche Bank Report

The percentage of properties “underwater” is forecast to rise to 48 percent, or 25 million homes, as property prices drop through the first quarter of 2011, according to [Deutsche Bank] analysts Karen Weaver and Ying Shen.

I guess they didn't get the memo that house prices have bottomed (as a reference point they estimate that 26% are underwater currently.

2) 12th largest U.S. mortgage lender told to cease operations by the U.S. Department of Housing and Urban Development. It was the the 3rd larges FHA loan originator in May

3) BRE confernce call yesterday - apartment REIT operator in west

our current views have not changed from the start of the year, specifically the rent curve should continue to decline well into 2010. Cumulative rent loss may be double digits and pricing power will not return until jobs turn positive which may be late 2010....This environment calls to mind the Churchhill comment,”if you are going through hell, keep going.”

The CEO of the gigantic REIT Boston Properties has been selling his stock by the bucket load.

All this and the REIT Index is up 13% in the last five days!!! Up 90% in the last 5 months. (I have no position in REITs)

4) Procter and Gamble expects sales down 0 to 3% in Q3. More revenue disappearance....BTW this was forecasted yesterday by Multi-Color who makes labels for consumer product companies (19% of Q1 sales to P&G)....from their conference call Yes, order flow actually was pretty decent during the month of June, better than May, and then as July came in, July began looking more like May,

5) ADP report very negative with non fram payrolls decreasing 371,000

6) From the Challenger job-cut report

Planned layoffs at U.S. firms increased in July for the first time in six months, signaling more uneasy times for workers and a continued drag on consumer spending and the broader economy.

Planned job cuts announced by U.S. employers totaled 97,373 last month, up 31 percent from June when it had hit a 15-month low

7) ISM non-manufacturing index came in at 46.4 below the 47 in July and below analysts expectations of 48

8) James Lockhart III announcing his resignation from the Federal Housing Finance Agency. He was supposed to be overseeing Fannie and Freddie. Wonder if it has anything to do with the Moody's report yesterday that the government is going to start winding these two entities down? What? No more Fannie and Freddie?

9) On some good news (if you can call it that) Government Sachs only lost money on 2 trading days in Q2. A record 46 of 65 trading days they made $100 million or more during that day. This of course supplied by Uncle Sam. Frontrunning, leaks? How do the best traders in the world lose money only for two days??

10) ABC Weekly Consumer Confidence Index fell to 47 from 49 which is back to where it was 2 months ago when it sparked a huge rally. Well that was the excuse given anyway.

11) Trim Tabs research on very questionable government data

“The personal income report the Bureau of Economic Analysis released Tuesday contained huge downward revisions to wage and salary growth,” said Biderman. “Now that the BEA is using unemployment insurance reports from the first quarter to estimate current wage and salary growth, its data confirms what we have been reporting for months.”

The BEA’s estimates of wages and salary growth changed from year-over-year declines of 0.8% in April and 1.1% in May to year-over-year declines of 4.0% in April and 4.2% in May. Also, the BEA reported that wages and salaries dropped even more sharply in June, falling 4.7% year-over-year.
“Two months ago, we asked BEA economists how they reconciled the huge declines in real-time tax deposits with their report of a modest decline in wages and salaries,” said Biderman. “They could not answer our question. We know now that by ignoring real-time data, the BEA was providing an inaccurate view of the economy’s health.”

12) Lower Lending by the banks

For the second week in a row, bank-wide mortgage lending fell $22.0 billion for the week ending July 22. Consumer lending fell $1.1 billion and has now declined for eight weeks running (cumulative loss of $16.0 billion or a 13% annualized slide). Commercial & Industrial loans contracted $8.0 billion during the latest reporting week and has collapsed at a 15% annual rate over the past two months — interesting way to embark on a restocking phase: with no inventory financing! All told, bank lending to households and businesses shrunk $31.0 billion during the July 22nd week and is down a record $114.0 billion or an 11% annual rate over the past eight weeks.

But the banks did add $12.0 billion to their cash hoard that week, bringing the total accumulation to $118 billion over the past three weeks.

13) Three very big banks are set for failure. Colonial, Guaranty, and Corus. These should be taken over by the FDIC in the next couple of months if not weeks. My understanding is that any one of three will bankrupt the FDIC which means they will have to borrow from the Treasury. Speculation? What do 10 year treasury yields do when this is made known to the world? What kind of shock does this enter the system. As far as Corus, at this point tier 1 capital is negative 2.1%. My understanding is the only reason it hasn't been taken over is the FDIC has no idea what to do with it. Their book is almost 100% condos in Florida though based out of Chicago. No real branches and very little in true deposits (all cd's).

14) This was actually yesterday -

BIRMINGHAM, Ala. – The sheriff in Alabama's most populous county may call for the National Guard to help maintain order, a spokesman said Tuesday, after a judge cleared the way for cuts in the sheriff's budget and hopes dimmed for a quick end to a budget crisis.

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