A Random Walk, before the 4th of July holiday…
Housing Hit Bottom?
Michael Menatian, of Sanborn Mortgage Corp., and Michelle Meyer, of Barclays, discuss whether the housing market has hit bottom, with CNBC’s Diana Olick
While a relative UNKNOW (not unlike US) we think Menatian’s premise is a sound one AND there are others out there who might draw some of the same conclusions, albeit travelling down different roads to get there. Billy ‘O, now of GCM and Billy Gross of PIMCO are a couple of that come to mind, for example.
With this in mind, we offer to you a video of Sanborn Mortgage guy suggesting that there can be NO economic recovery until housing is fixed. Here’s that clip:
WHY DO WE CARE? Well yesterday we mentioned a bit of research from the NYFed that WE found EXTREMELY interesting and supportive of the above. The research note is titled, “Below the Line: Estimates of Negative Equity among Nonprime Mortgage Borrowers”. This new NY Fed study finds that causes are smaller down-payments and falling home prices and it suggests that negative equity will affect delinquency rates. Really? NOW all of a sudden borrowers are thinking and making smart financial choices (to walk away from their obligations as they are not sound financial decisions any more? REALLY?). The authors estimate at end-2008 nearly half of all nonprime borrowers in seventeen key cities had negative equity in their homes.
THIS IS THE SORT OF MUNDANE CRAP THAT WE THINK MATTERS AND WILL MEAN A VERY SMALL POSSIBILITY FOR A ‘V’ SHAPED ECONOMIC RECOVERY.
NOW, moving on then to more current assessment of that ‘V’ bottom that WILL prove elusive to the Brian Wesbury’s and Mike Darda’s and Dennis Kneale’s of the world, we got a look at June’s NFP. The ONE thing that jumped off the page at US was the ‘Average Weekly Hours’ came in at 33.0 vs 33.1. WHY DO WE CARE? Because the professionals told us to. FIRST A VISUAL:
Finally, we point you BACK to what we offered yesterday from DBs Lavorgna who asked IF NFP is overstating things and considered Average Weekly Hours specifically. THE POINT IS THAT IF CONSUMERS AREN’T WORKING, HOW AND WHAT ARE THEY GONNA SPEND. CLICK HERE FOR LAVORGNA’S COMMENTS OF YESTERDAY.
THIS thought of NOT spending – AKA SAVINGS – is a perfect seguay for us into two final items for business BEFORE Treasury announces it’s intentions AND BEFORE we here at GP experience a very thinly staffed environment that leads to it’s EARLY CLOSE!
John Crudele offer’s HIS thoughts about the savings rate. HIS POINTS are that while officials view that savings rate as UP due to fact that tax receipts are DOWN is sorta backwards. Tax receipts are DOWN – it’s the economy stupid! Hey, who you calling STUPID? Weak economy leads to lower tax receipts SO perhaps these lower tax receipts are NOT a product of HIGHER SAVINGS. CLICK HERE TO JUMP OVER TO Crudele’s thoughts in today’s NYPost.
MORE ON SAVINGS RATE – hey, who you calling a moron? (nope, that joke just never gets old!) – we offer the following from the old Dallas Fed President – Bob McTeer, which we pointed out to SOME on Monday:
Bob McTeer Jun 29, 2009 10:59 AM – Show original item
A substantial increase in the personal saving rate was announced last Friday to much fanfare. I hate to be a killjoy, but it was all an illusion.
The national saving rate is composed of the personal saving rate, the business saving rate, and the government saving rate. The personal saving rate is disposable income minus consumption; government saving is equal to its budget surplus. A budget deficit represents negative saving by the government.
What happened in May was that the government increased its budget deficit (increased negative saving), borrowed the money, and paid it to individuals as part of the stimulus package. Since individuals saved less than 100 percent of their higher income, they added less to saving than the government subtracted from it.
Assuming no offsetting increase in business saving, the national saving rate declined in May. Chances are, however, that business saving declined as well. If so, the decline in national saving was even greater.
A decline in national saving will necessarily be matched by a decline in national investment if it isn’t made up by more saving imported from abroad. We import foreign saving by running a larger current account deficit, which requires an equally larger capital inflow to finance it. For many years now, we’ve had to supplement domestic saving with foreign saving to finance domestic investment. This runs up our total debt owned by foreigners and increases the burden of servicing that debt in the future.
I’m sorry, but borrowing the money to save doesn’t work.