Succinct summation of week’s events:

Positives
1)Refi’s rise 17% to highest since May ’09 on lower mortgage rates
2)July IP better than expected but auto seasonal distortion a caveat
3)Bundesbank raises German ’10 GDP est to 3% from 1.9%
4)German ZEW current conditions well above expected
5)UK retail sales higher than forecasted
6)US bank lending standards ease a touch
7)Ireland eases concerns with its finances after good bond auctions.
8)M&A activity

Negatives
1)Greek debt concerns flaring again
2)Japanese Q2 GDP up only .4%, Nikkei just shy of lowest since Nov ’09 also on strong yen
3)ZEW 6 mo outlook lowest since Apr ’09
4)Philly Fed mfr’g unexpectedly contracts
5)NY Fed mfr’g new orders negative for 1st time since June ’09
6)Initial Claims poor
7)Home builder sentiment lowest since Mar ’09
8)Purchase apps near lowest since ’97
9)Housing starts and permits weak.

Category: Markets

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

18 Responses to “Succinct Summation of Week’s Events (August 20)”

  1. Petey Wheatstraw says:

    Refi’s are good, in that they reduce monthly obligations of the borrower, but you have to wonder how long it would take to recoup closing costs (in light of the value of cash in this environment), as well as a recommitment to a declining asset (in most areas, and, I suspect, on an accelerating basis, once again).

    Other than that, 6, 7, 8, and 9 on the negative side of the ledger far outweigh the positives.

    Don’cha just get the feeling that we’re on the verge of some really nasty times? “Nasty” as in far worse than the little warm-up we’ve had over the past couple of years? Acid test: what do you think Xmas retail season will be like this year?

    Seems to me that them what ain’t yet been bankrupted, or unemployed, or had a house fall on them — or any combination thereof — are fixin’ to take another shellackin’ at the hands of those workin’ for the Lord.

  2. I see the negatives as positives, and the positives as negatives, particularly the one about refi’s going up, if for no other reason than it means the massive taxpayer subsidy of the GSE’s will continue apace.

    Of course, 2/3rds or so of the taxpayers are also homeowers, so it’s really just a circle jerk.

    But these are both (your post and my comment) opinions (so far as you deem them “positives” or “negatives”). See, it’s really hard to objectively know anything is conclusively true.

  3. gordongekko00 says:

    Petey, I couldn’t agree more. Two respected players in the hedge fund world folding their cards last 2 days. This market will stay in a range until it doesn’t. Considering we are weak and heading into 2 of the roughest months of the year for the stock market….shouldn’t be long until the range breaks to the downside. I will stay open minded about a sustainable move higher at that point in time but my optimism is waning.

  4. icm63 says:

    ..”Ireland eases concerns with its finances after good bond auctions.”..

    Yeah right ! Irish Banks take up bond auction, then run off to the ECB and swap for real (german) repo money. That’s exactly how Spain also had a successful bond auction.

  5. louis says:

    The last hope of euphoria for the working stiff is a reduction of principal on debt, not just FF loans but mass restructuring, if not prepare the city for a long siege. Call a truce and go to the barbershop together.

  6. globaleyes says:

    Succinct Summation is totally cool but what’s happening in Greece is a bad omen for global investors.

  7. crabby says:

    @louis:

    ” The last hope of euphoria for the working stiff is a reduction of principal on debt”

    And what exactly does that accomplish?

    “Long siege” ? As in “blackmail” or “extortion” ? Didn’t we go through that when Detroit was burned? And the result was what?

    Excuse me, but in a functional society individuals accept responsibility for their choices, and suffer the rewards or consequences. And I am not a neocon or con.

    Education and communication help.

    Granted lots of people lost their jobs unexpectedly.

    But that’s life. It can be very cold and cruel. Ask our original settlers.

    Guess we’re some kind of soft expecting our gov to rescue us so we can keep on consuming to juice the GDP, or vote the right party.

  8. obsvr-1 says:

    Negatives

    * US says bankruptcies reach nearly 5-year high
    http://www.cnbc.com/id/38752780

    * Hardship withdrawals from 401k
    http://www.marketwatch.com/story/more-401k-savers-take-loans-withdrawals-2010-08-20

  9. Fidelity: 401(k) hardship withdrawals, loans up

    In the wake of news about a spike in new applications for unemployment benefits comes another potentially troubling sign: A record number of workers made hardship withdrawals from their retirement accounts in the second quarter.

    What’s more, the number of workers borrowing from their accounts reached a 10-year high, according to a report issued Friday by Fidelity Investments.

    http://tinyurl.com/33m6rgp

  10. Marcus says:

    The “Succinct Summation of Week’s Events” overview that you publish, makes an important point. There was no single event during the week that would drive the markets up, or in example of this week, drive markets down. No headline like “U.S. invades Kuwait” happened this week with the weight to move a market.

    Every day we read statements of the myopic obvious followed by a dilettante explanation, e.g., “The DOW rises (obvious) on investor relief that unemployment figures were lower than pundits had projected (dilettante explanation).”

    These “headlines” are worthless for predicting future market direction, or making intelligent investment decisions about general market trends, or gauging the timing needed to buy or sell any individual stock. They overlook the much larger issues that do drive markets, like systemic risks that overhang most governmental entities; such as the tenuous debt situation for most European Countries and most U.S. States. Taken in their totality, general public debt should sink the world economy, and the decision to stay in cash or “safe” alternatives makes sense. Making investments based on individual “events” does not make sense.

    Sane investment decisions are hard to come by. And using positives and negatives for the week don’t show the way forward.

    Great stuff however. This is a valuable tool to sift through the contradictions. Thank you for doing it.

  11. JustinTheSkeptic says:

    Wow! Read this article and see how laissez-faire economics has gotten so discombobulated in its understanding: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/08/19/EDS31F0F5P.DTL

  12. ancientone says:

    Crabby, you really need to read Dean Baker’s column, “When Wall Street Rules, We get Wall Street Rules” on huffingtopost.com. Our problems will not be solved by “individual responsibility” efforts, but by changing the structure of our economic system. Otherwise. we will continue to spiral downward, and the super rich will continue to rake in more and more.

  13. louis says:

    And what exactly does that accomplish? – It gives people their dignity back and let’s them stay in a home. It keeps them in a home that the bank will turn around and sell for the same price that could have been restructured. It keeps strategic defaulters from putting one more property in the shadow inventory. I’m talking about people that can pay but cannot refi. Many proposals have been floated around here. BR outlined this in the book.

    “Long siege” ? As in “blackmail” or “extortion” ? – As in a big FU to the bank if you won’t work something out. The bank is the one who has started the blackmail scenario with strategic defaulters. The debtor has the final word in this.

    “Excuse me, but in a functional society individuals accept responsibility for their choices.” – Like an investment bank that must live with its decisions??? Does your society advocate two sets of rules for bad decisions?

    Education and communication help. – I thought rating agencies had been educated on what to look for and communicated their findings. I guess they need to go back to school and learn how to communicate.

    Granted lots of people lost their jobs unexpectedly. – And what decisions were made that led to that unexpected outcome?

    But that’s life. It can be very cold and cruel. Ask our original settlers- I would love to have the minds of those that risked their lives to establish this country at the table on these issues. What would Adams, Jefferson, and Washington say about all this? Why don’t we have a summit on housing with economist and intellectuals, or have we already done that? Yes life can be cold and cruel; it just hurts more when you see that it did not have to be.

    Your “functional society” is the part you need to think about. Does a functional society see how many citizens it can rob in a securitization scheme that involves their shelter? Does a functional society give an independent board vast power on monetary policy that can keep interest rates at low levels for a prolonged period of time? Do we learn nothing from Fed Chairs that are allowed to fuel these speculative bubbles? Does a functional society let this power keep information from its elected leaders who represent the people? Does a functional society allow large financial institutions to survive and receive vast amounts of handouts while citizens are forced to live with their decisions?

    Nothing is working so far on this problem. I think that this problem is still in Ostrich phase. Nothing with teeth has worked yet and it still drags on the recovery of this nation. Many smart minds have proposed solutions to the housing issue and no one in power wants to look at it. Why is that? Because you’re functional society is run by financial institutions that cannot see beyond their broken business model. Think about it for a minute, the magnitude of what they have been given for their bad decisions compared to what has been given to the American People.

  14. VennData says:

    Positive: Chinese nationals paying cash for California homes below $1M, where there are good schools.

    http://en.secretchina.com/realchina/3772.html

    Reality: All those “homes” in the vile suburbs are done for. Warren Buffett likes to use the “If someone from Mars came here and…” to discuss “Obective Reality.” Mars, China… same thing as far as a the “Objective Reality” our esteemed host seeks and reveals…

    ….these Chinese investors see what’s what. A good school district is an incredibly valuable thing. Much more so than the nearby mall, proximity to sports stadiums, or – wait for it – low tax rates. They see the value, while there is none in in these god-forsaken low-tax, suburbs, where the foreclosures continue to consume our resources, and low tax lovers congregate.

    Yeah China, with their 10% y-o-y growth and 40% tax rates… you hear that Larry Kudlow?

  15. TakBak04 says:

    It was a “Shitty Week.”

    I think we need to take a break and wait until late September……… All the stuff over the Summer seems to be very HYSTERICAL..

    Let’s take a “breather in cash” and see how it sorts out going forward.

  16. GeorgeBurnsWasRight says:

    Crabby et al,

    I doubt that a government program to compel principal write-downs makes all that much difference to the banks’ bottom line, assuming that the program requires the value of the house be significantly under the mortgage balance, and the buyer has to show ability and commitment to paying revised mortgage.

    Here’s my thinking, assuming a mortgage of $100K on a house now worth $70K in today’s market:
    - With government program, mortgage is written down to $70K, bank loses $30K but current owner continues to pay on the new $70K mortgage.
    - Without a government program, the current owner defaults. Bank now owns the house, which it sells to someone who then takes out a $70K mortgage.

    In either case, as I see it, without the program the bank gets to pretend that it hasn’t lost the $30K yet, when in fact it very likely has.

    There’s a few wrinkles that would make one option slightly preferable, but they’re hard to quantify. For example, does the program help slow or stop the decline in housing values by sharply reducing the number of repossessed houses on the market? What are the relative costs and savings to a bank between the cost of paperwork to keep someone in their current mortgage with revised terms versus the same costs and savings for a bank to underwrite a new mortgage with associated fees plus the costs to get the repossessed house ready for sale? And finally, which hurts our country more: the “moral cost” and precedent from the government bailing out homeowners versus the long-term impact of a much larger number of repossessions will have on people’s desire to ever own a home again?

    And the political assumptions don’t necessarily match reality. “Strategic defaults” are primarily occurring in the higher-dollar homes, so wealthy homeowners may benefit more from the program, relatively, than people with cheaper houses.

  17. uneekconstraint says:

    I haven’t seen anything about the class action suit that was just filed against Westwood College, is this the start of something? Does anyone see anything in the f0r-profit education space other than a momentary “hitch in their giddy-up”? I saw where the Obama admin was looking at reforms to the Title IV loan practices, considering how much rev comes from that source it could shake Apollo, Corinthian, etc., between that and the “quality” some of these educators provide, the lower middle class runs the risk of getting skarewed…again. Speaking of “strategic defaults”, these student loans are exempt from bankruptcy filing, and you can’t squeeze blood from a stone, while it could be years I wonder when/if these institutions of higher learning will look for a bailout/stimulus.