David Stockman On The Real Evil Of Monetary Central Planning
37 minutes ago
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Lawrence Yun, NAR chief economist, said these are early signs of what may be a sustained recovery. “The pattern of home sales in recent months demonstrates a market in recovery,” he said. “Record low mortgage interest rates, job growth and bargain home prices are giving more consumers the confidence they need to enter the market.”
NAR President Moe Veissi, broker-owner of Veissi & Associates Inc., in Miami, said more buyers are expected to take advantage of market conditions this year. “The American dream of homeownership is alive and well. We have a large pent-up demand, and household formation is likely to return to normal as the job market steadily improves,” he said. “More buyers coming into the market mean additional benefits for the overall economy. When people buy homes, they stimulate a lot of related goods and services.”
|Late on Thursday Venizelos and Prime Minister Lucas Papademos met again with the head of the Institute of International Finance (IIF), Charles Dallara, for the completion of the agreement.|
Sources said Dallara discussed his new proposal that provides for an average interest rate of 4.25 percent for the new bonds Greece will issue to replace the old ones, leading to 68 percent losses in net present value terms for bondholders.
The IIF proposed a coupon of 3 percent for bonds maturing until 2014, 4 percent from 2015 to 2020, and 4.5 percent for after 2020. For the latter, the proposal includes a rate surplus based on the country’s growth rate. Bondholders are also asking for European Union guarantees for the new bonds.
Before his meeting with Venizelos and Papademos, Dallara told journalists that he hoped the negotiations would quickly lead to an agreement.
Bank officials noted that there have been some substantial and in-depth negotiations in the last few days, and expressed their optimism for an agreement. However, they added that for a deal to be reached, the International Monetary Fund and the eurozone, and Germany in particular, will have to accept interest rates that can support the voluntary character of the agreement.
The IMF, sources say, is firmly insisting that the new bonds’ rate not exceed 3 percent, so that the haircut can lead to a substantial lightening of the debt load for Greece.
And in italy , we see chickens coming homeward bound - as italians pay the price for allowing their country to fall under the control of a Troika installed puppet ! How long before Italy falls totally under the control of the Troika - who knows for sure but the chickens are clucking softly in the distance - soon those sounds will be much closer. Petrol shock as service station managers close their stations doors for ten days , meanwhile Troika puppet Monti tries to peddle Austerity chicken pot pie !
Finally , as we count the chickens coming home and wonder which " other event " will occur next , just note that Special Forces Operatives are operating in the gulf - near Iran. In light of the present tensions , various exercise have taken place , planned to occur ( by both Iran and Israel / US forces ) , throwing more tension into a strained situation could be another bunch of chickens walking around clucking..... we can assume Special Forces are in hot spots around the globe - but why advertise this fact ? Be careful what you agitate for is what I suggest.
Consumer price inflation was nonexistent in December at the headline and core levels. The consumer price index in December was unchanged for the second month in a row with lower energy costs playing a key role. The December figure was lower than market expectations for a 0.1 percent rise. Excluding food and energy, the CPI decelerated to a modest 0.1 percent increase after gaining 0.2 percent in November. Market expectations were for a 0.1 percent rise.
By major components, energy dipped 1.3 percent after declining 1.6 percent in November. Gasoline fell 2.0 percent, following a 2.4 percent decline in November. Food price inflation firmed to 0.2 percent after rising 0.1 percent the prior month.
Within the core, upward pressure was seen in medical care, recreation, and rent. Declines were seen in used cars & trucks, new vehicles, and apparel.
Year-on-year, overall CPI inflation posted at 3.0 percent, compared to 3.4 percent in November (seasonally adjusted). The core rate edged held steady at 2.2 percent on a year-ago basis. On an unadjusted year-ago basis, the headline number was up 3.0 percent in November versus 3.4 percent in November. The core was up 2.2 percent, matching November's rate.
The latest CPI report continues to give the Fed leeway for continued loose monetary policy. Between favorable jobless claims, housing starts & permits, and low inflation, equity futures are moderately positive.
New residential construction slipped in December but remains somewhat healthy after the jump the prior month. Permits are encouraging. Started declined 4.1 percent, after surging 9.1 percent in November. December's annualized pace of 0.657 million fell short of market expectations for 0.678 million units and is up 24.9 percent on a year-ago basis. The dip in the latest month was led by a 20.4 percent drop in the multifamily component, following a 23.0 percent boost in November. The single-family component advanced 4.4 percent after rising 3.0 percent the month before.
By region, the decline in starts was led by a 41.2 percent drop in the Northeast. Other regions showing decreases were the West, down 17.6 percent, and the South, 3.0 percent. The Midwest rebounded a sharp 54.8 percent. Seasonal factors are large this time of year and small unadjusted changes can lead to hefty seasonally adjusted changes.
Homebuilders remain modestly optimistic. Housing permits held steady, nudging down a mere 0.1 percent, following a 5.6 percent advance in November. The December rate of 0.679 million units annualized came in essentially equal to the consensus forecast for 0.680 million. Permits in November are up 7.8 percent on a year-ago basis.
The November ease in permits was led by a 3.7 percent decrease in multifamily permits after a 13.0 percent boost the month before. Single-family permits rose 1.8 percent, following a 1.9 percent increase in November.
Given that November was unexpectedly strong, the December dip in starts still reflects a recent and modest uptrend. And yesterday's NAHB housing market index gain adds to the view of modest upward momentum. Nonetheless, it still appears to be mainly in the multifamily component as the year-ago gain is stronger there-up 78.1 percent versus up 11.6 percent. And there is still plenty of supply for single-family homes.
A very large weekly drop in initial jobless claims offers a splashy, but not definitive, indication of rising strength in the jobs market. Initial claims fell 50,000 in the January 14 week to 352,000 for the biggest drop since September 2005 when economic expansion was in full gear (prior week revised to 402,000). But weekly data early in the year are often choppy, the result of shortened holiday weeks. The 4-week average, down 3,500, points to less strength with the level of 379,000 not convincingly lower than the mid-December level of 380,750.
Continuing claims likewise show huge improvement, down 215,000 to 3.432 million. Here the 4-week average is down 34,000 to a recovery low of 3.576 million. While declines in initial claims point to an easing in layoffs, declines in continuing claims represent a mix of new hirings and new drop outs from the jobs market. The unemployment rate for insured workers slipped one tenth to 3.2 percent.
Today's report is certain to support the stock market, though questions over holiday factors will likely limit its impact. Yet should this improvement hold in next week's report, expectations for strong monthly employment data would really begin to build.
An adjustment for New Years Day clouds what are enormous weekly gains for mortgage application data. The purchase index jumped 10.3 percent in the January 13 week to recover recent losses with the index back to where it was in mid December. The four-week average is up 2 percent. The refinancing index rose 26.4 percent and returns to its best level since August. The four-week average for refinancing is up 7 percent. Rates keep moving lower with the average 30-year conforming loan at 4.06 percent, down five basis points in the week. Next data on housing will be the monthly housing market index later this morning at 10:00 a.m. ET
At the producer level in December, inflation was tugged down by gasoline and food costs but the core was warmer than expected. Producer prices edged down 0.1 percent after rebounding 0.3 percent the prior month. The latest number posted lower than market expectations for no change.
By major components, energy declined 0.8 percent, after nudging up 0.1 percent in November. Within energy, gasoline fell 2.3 percent, following a 0.1 percent dip in November. Food cost inflation eased to a 0.8 percent decline after jumping 1.0 percent the month before.
At the core level, the PPI firmed 0.3 percent after rising a modest 0.1 percent in November. A big part of this acceleration was due to reduced discounting for motor vehicles by dealers. Leading the core up were passenger cars, light trucks, pharmaceuticals, and tobacco.
For the overall PPI, the year-ago rate in December was 4.8 percent, compared to 5.9 in November (seasonally adjusted). The core rate in December edged up to 3.0 percent from 2.9 percent the month before. On a not seasonally adjusted basis for December, the year-ago headline PPI was up 4.8 percent versus 5.7 percent in November. The core firmed to 3.0 percent from 2.9 percent on an NSA year-ago basis.
Industrial production in December posted a healthy gain but the manufacturing component was even more robust. Overall industrial production rebounded 0.4 percent after dipping 0.3 percent in November. The latest number came in slightly lower than the consensus forecast for a 0.5 percent jump. By major components, manufacturing made a 0.9 percent comeback, following a 0.4 percent drop in November. The market median forecast for the manufacturing component was for a 0.5 percent gain. Econoday has added this component to its consensus forecasts. In December, utilities fell 2.7 percent while mining output expanded 0.3 percent.
Within manufacturing, durable goods rose 0.9 percent in December. Wood products, primary metals, and machinery registered gains of more than 2 percent. Some weakness was seen in nonmetallic mineral products, aerospace and miscellaneous transportation equipment, and furniture. Nondurable goods advanced 0.8 percent in December. Textile & product mills, petroleum & coal products, chemicals, and plastics & rubber products all gained 1.0 percent or more. Paper and apparel & leather fell.
Overall capacity utilization rebounded to 78.1 percent from 77.8 percent for November. Market expectations were for 78.1 percent.
The manufacturing sector appears to have regained some momentum and it is broad based.
The traditional non-NAICS numbers for industrial production may differ marginally from the NAICS basis figures.
What to take from this talk ? First , there won't be a 10 trillion LTRO , I hardly believe you see a 1 trillion LTRO either. but that's not really the point. What did we saw happen with the first LTRO of 489 billion ? Were the billions borrowed by the banks taking the money at one percent from the ECB lent to businesses , did we see an increase in lending to each other in the interbank market ? No , what we have seen is an increase of funds deposited at the ECB in exchange for .25 percent interest - the sums at the ECB now exceed 500 billion ? And while the LTRO has allowed sovereigns to sell debt of very short duration , the question remains can they sell debt longer than 5 years , which would fall outside the ambit of the LTRO ? If the banks are as badly fractured as many surmise - zombies desperately trying to patch holes in their balance sheets and roll hundreds of billion in bank debt coming due in 2012 , will providing another 489 / 600 billion change the pattern of hoarding ? I think the answer is no , but let's see what happens Feb 29th when the second LTRO happens.February’s second 3-year LTRO looks set to be extremely large. Really extravagant claims (we have heard reports of €10 tn) are probably wide of the mark because this will not be a complete collateral free-for-all (unless NCBs choose to make it so, which for some of them is admittedly an open question; again, see rational player section below). But the idea of path-finder lightning springs to mind (High-speed cameras reveal that lightning evolves “bang BANG”, essentially); the last LTRO has removed any stigma, making managements who do not exploit the value on offer arguably careless at best. This is, on the face of it, very cheap protection indeed against any possibility of a liquidity crisis for three years.
Manufacturing activity in the New York region is picking up nicely so far this month with growth back at a healthy hum. The Empire State index rose more than 5 points to 13.48 with the 6-month outlook up nearly 10 points to 54.87. Levels, after sinking in an 8-month hole, are now back where they were during the first half of last year.
Details show strength in new orders and, in a stand out result, strength in employment. Shipments are strong and inventories are being rebuilt. Contraction in delivery time points to plenty of spare capacity to be drawn on should activity continue to pick up steam. Negatives in the report are continuing declines in the sample's backlog orders and a jump higher in the cost of inputs, one that's likely tied to rising energy prices. But today's report is on balance very positive and, in what is the calendar's first look at January, points to building momentum for the manufacturing sector.