The Big Picture - Macro Perspective on the Capital Markets, Economy, Technology, and Digital Media

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Nice interactive WSJ graphic looking at how the new FinReg bill impacts various finance sectors:
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click for interactive graphic

Source: WSJ.com

June Existing Home Sales were a better than expected 5.37mm annualized vs the forecast of 5.1mm BUT remember, this reflects closings where the contracts were likely signed BEFORE the expiration of the home buying tax credit on Apr 30th and sales are down from 5.66mm in May. However, even with the better sales number, months supply rose to 8.9 from 8.3 to the highest since Aug ’09 as the absolute number of homes for sale rose by 99k to 3.992mm homes. Sales fell in the West, South and Midwest but rose in the Northeast. Distressed sales made up 32% of the total and the median price rose 1% y/o/y. Bottom line, the data reflects the ‘old’ economics for 1st time home buyers and looking out to the rest of the year, “only when jobs are created at a sufficient pace will home sales return to sustainable healthy levels,” says the NAR chief economist.

Tribute to Escher in Barcelona

Via boingboing

The FT interviewed FDIC Chairman Sheila Bair about the upcoming Basel III accords:

Sheila Bair, chairman of the Federal Deposit Insurance Corporation, has said some members of the committee setting international capital standards are “succumbing” to “disingenuous” lobbying from large banks.

In an interview with the Financial Times, Ms Bair also said she would not hesitate to use newly acquired powers to break up an institution if it could not provide a credible “living will” describing how it could be wound up in the event of failure.

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click for video

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Source:
FDIC chief warns over capital standards
Tom Braithwaite
FT, July 20 2010  
http://www.ft.com/cms/s/0/40271298-9428-11df-a3fe-00144feab49a.html

Initial Jobless Claims totaled 464k, 19k above expectations and up from a revised 427k last week. The distortion of the seasonal auto shutdowns that didn’t happen at GM combined with the July 4th holiday has made the initial claims portion of the data too cloudy to analyze week to week and we thus should average the prior couple of weeks. The 4 week average is 456k, just shy of the lowest since late May but still remains very elevated for an economy that is this far into a recovery. Continuing Claims fell a sharp 223k but comes after rising 276k in the week prior. Extended Benefits fell a net 368k after a fall of 278k in the week prior and 345k the week before. This sharp drop has been more due to people falling off the rolls because of the expiration of benefits. With the extension likely to be reinstated up to 99 weeks, this trend should reverse as the labor market still remains lackluster.

European stocks took off at 4am after July Euro Region manufacturing and services composite index rose to a 3 mo high at 56.7 vs expectations of 55.5 and up from 56 in June. While the gain was led by Germany, who is in a much stronger position than the rest of the continent, it was a gain nonetheless. Also, both French business and consumer confidence rose above forecasts, May Industrial Orders for the Euro region unexpectedly rose by 3.8% vs an expected drop of .1% and UK retail sales were good. The euro and pound are higher in response. Bernanke said how uncertain the economic outlook is and seems to be realizing that his bag of tricks is shrinking. We all know the outlook is uncertain but many need to realize the Fed is becoming more impotent in dealing with another downturn. Chinese stocks rose for a 4th day to a 4 week high and copper is now at an 8 week high. Joining India, Taiwan, Canada, Australia, Malaysia SK and Thailand, Brazil raised rates.

Earlier today, I listened to Byron King — who knows the energy sector as well as anyone — explain how US energy policy is going to chase away all of the deep sea rigs from the Gulf of Mexico. That means we ae going to be in deep trouble in the future.

King is a really sharp guy. But I was relieved to see that Exxon Mobil, Chevron, Royal Dutch Shell and ConocoPhillips are even sharper: The four majors are trying to make the case that they should be allowed to drill in the Gulf, and that they have a plan — unlike BP — to deal with future disasters:

“Four of the world’s largest oil companies are creating a strike force to stanch oil spills in the deep waters of the Gulf of Mexico in a billion-dollar bid to regain the confidence of the White House after BP PLC’s disaster . . .

The new system, consisting of several oil-collection ships and an array of subsurface containment equipment, resembles the one developed by BP during three months of trial and error after its leased rig exploded April 20, unleashing the worst offshore oil spill in U.S. history. But the companies say it will be ready to go at all times and can be used on the wide variety of equipment found in the deepwater Gulf.”

That is very good news for energy consumers. It gives a face saving resolution to everyone, let’s the White House declare victory, and lets the oil keep on flowing.

Whenever I find myself as the most bullish guy at a conference, I always look around and go “Huh?” To be blunt, the end of civilization discussions I keep hearing are no fun to listen to. Tiresome, truth be told.

Regardless, this is an excellent announcement — now let’s see if they follow through on it.

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Source:
Oil Majors Building Disaster-Response System
ANGEL GONZALEZ
WSJ, JULY 21, 2010, 6:18 P.M.
http://online.wsj.com/article/SB10001424052748704684604575381422950478384.html

I hate it when two people I know and like do battle. This week, it is Mike Shedlock of MISH’s global economic analysis squaring up against my friend and work neighbor, Lakshman Achuthan of the Economic Cycle Research Institute (ECRI).

Mish ripped ECRI in an unsparing critique this morning: ECRI Weekly Leading Indicators at Negative 9.8; Has the ECRI Blown Yet Another Recession Call?.

I tagged Laksman about it — he is traveling out West on personal business. But he suggested that a fair and balanced approach would point out the CNBC clip on ECRI’s homepage (left column) as it “refutes Mish’s suggestion that we’re blind.”

Here is Lakshman:

“Despite Mish’s narrative, the main issue for investors is when the slowdown in growth was likely to start. Back in Feb 2010 we showed our Long Leading Index (not the Weekly Leading Index) and warned that the slowdown would begin by midyear. BTW, CNBC wouldn’t run our chart of the Long Leading Index vs. S&P but Carl went against the script and held up a printout for the camera.”

When he returns from his trip next week to NY, I will see if I can impose on Lakshman to write up something new for our consideration.

In his testimony, Bernanke is saying he is ready to deal with anything that comes the Fed’s way. If the economy improves, they will continue to plan for withdrawing accommodation. If the economy turns lower again, “we remain prepared to take further policy actions as needed.” Considering everything they’ve done already, it will be alarming when the time comes that they feel they need to do more. With respect to the economy, he acknowledges how uncertain the outlook is although he believes the expansion is “proceeding at a moderate pace.” He highlights the risk in Europe and its impact on growth and a US banking system that is still dealing with bad loans and weak credit demand. He, as expected, is very sanguine on the inflation outlook for the next several years. He also outlines what steps, when the time comes, of reducing the size of their balance sheets.