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Author Topic: Misery Index: The Obama Depression - "Private sector doing just Fine"  (Read 53753 times)
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« on: March 21, 2011, 08:20:55 AM »

Home sales fell 9.6 pct. in February (Median home price hit 9-year low)
AP via Yahoo Finance ^ | 3/21/2011 | Derek Kravitz




WASHINGTON (AP) -- Fewer Americans bought previously occupied homes in February and those who did purchased them at steep discounts. The weak sales and rise in foreclosures pushed home prices down to their lowest level in nearly 9 years.

The National Association of Realtors said Monday that sales of previously occupied homes fell last month to a seasonally adjusted annual rate of 4.88 million. That's down 9.6 percent from 5.4 million in January. The pace is far below the 6 million homes a year that economists say represents a healthy market.

Nearly 40 percent of the sales last month were either foreclosures or short sales, when the seller accepts less than they owe on the mortgage.


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« Reply #1 on: March 21, 2011, 11:12:53 AM »

General Motors lays off workers at NY plant
ap ^ | Mar 21, 2011 | DEE-ANN DURBIN





General Motors Co. on Monday is halting some production and temporarily laying off workers at a Buffalo, N.Y., engine plant.

...

GM spokeswoman Kim Carpenter Carpenter said Tonawanda has the parts it needs to make the engines, but it's not producing the engines because Shreveport doesn't need them.

She said GM doesn't know when production will resume at either plant.


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« Reply #2 on: March 22, 2011, 07:17:25 AM »

Running for the Exits. Hedge funds are dumping US Treasury bonds. Do they know something?
National Review ^ | 03/22/2011 | Jim Lacey





The wisest and most successful bond investor of all time, Bill Gross, has dumped his bond fund’s $150 billion investment in U.S. bonds. One should not ignore the importance of this event. The largest bond fund in America no longer believes that Treasury bonds are a good investment. Moreover, Gross is not alone. Blackrock, the world’s largest money manager, is now underweighting Treasuries overall and reducing the duration of the bonds it still holds. That means they are dumping their long-term bonds, which are the most sensitive to interest-rate changes, in favor of Treasury instruments that mature in a year or less. Other bond funds, such as the $20 billion Loomis Sayles funds, are also forgoing Treasuries in favor of high-yield corporate bonds. Virtually everywhere you look, from great investors such as Warren Buffett to insurance companies such as Allstate, everyone is dumping their long-term U.S. debt and either buying debt that matures in less than a year or moving their money elsewhere.

So who is still buying U.S. debt? According to Bill Gross, the “old reliables” — China, Japan, and OPEC — are still in the market for 30 percent of all new debt. The rest, however, is being purchased by the Federal Reserve. There is no one in else in the market. For the first time ever, Americans are refusing to purchase their own country’s debt.

Gross estimates that the “old reliables” are still good for $500 billion a year in purchases, and will be for some time in the future. This is pretty much the amount they’ve had to buy in the past to rebalance capital flows distorted by the U.S. trade deficit. Gross, however, may be wrong this time. Japan, needing to finance its reconstruction, is much likelier to be a net seller of U.S. debt, while China’s economy is slowing and actually ran a trade deficit in the last quarter. That leaves only one buyer of consequence — the Federal Reserve.

Researchers at Gross’s firm, PIMCO, estimate that in the last quarter, the Fed purchased 70 percent of all new Treasury debt. This is a disaster in the making. By printing new money to buy debt, the Fed is both holding interest rates artificially low and flooding the world with dollars. Fed purchases have lowered rates to the point where there was no room for further decreases. With no more upside potential to holding debt, investors are fleeing on the assumption that the Fed will soon exit the market, causing rates to rise dramatically. Such a rate rise lowers the value of all current U.S. debt: Who will pay $1,000 for a bond paying 3 percent when she can get one paying 5 percent? Anyone who wants to sell a $1,000 bond they already own is therefore forced to lower the price if they wish to attract buyers. No one holding any of the almost $10 trillion in U.S. public debt is getting much sleep these days.

When the Fed’s $600 billion QE2 buying spree ends, there will not be enough buyers left to purchase the $1.4 trillion in debt the administration has built into this year’s budget, at least not at current interest rates. Gross believes interest rates have to rise approximately 1.5 percent (150 basis points) to attract sufficient buyers. This may be optimistic.

The Fed is not only looking to stop buying new debt, it also wants to get rid of the nearly $1.3 trillion currently on its balance sheet. Absorbing $1.4 trillion in new debt, rolling over maturing debt, and simultaneously purchasing debt the Fed bought during its quantitative-easing forays is a lot to ask of the market.

Moreover, there is a real risk that bondholders who see the value of their assets fall will stampede for the doors. There are already signs that the smart money is looking for just such an event. Short sellers — those betting on a bond sell-off — pumped over three-quarters of a billion dollars into short positions in just the last quarter. This compares with a negative flow of short funds in the same period last year. If the short sellers are right, and there is a stampede, all bets are off. The bond-market bubble that the Fed’s purchases created will explode, likely setting off a renewed financial crisis.

Come June, the Fed will be in a bind of its own making. If it stops pumping money into the system, interest rates will increase, and not just on Treasury bonds. Mortgage rates will rise and business credit will become more costly. The recovery could be strangled in its infancy. If it keeps on buying bonds, however, it risks never being able to wean the markets off the equivalent of monetary crack. Worse, the flood of dollars will continue to drive down the value of the dollar, raise commodity prices, and propel global inflation.

There are already signs that inflation, while still subdued in the United States, is looking to break out. It has begun wrecking havoc through many areas of the globe, for example providing the catalyst for much of the upheaval in the Middle East. And when it strikes here, the Fed will be out of options. It will have to turn off the money pumps, raise interest rates, and batten down the financial hatches. The resulting recession will be long and nasty.

It is time to face facts. Spending is so out of control that Treasuries are no longer a safe haven for investors. The markets are saturated with U.S. debt and increasingly unwilling to absorb more. There is only one way out of this mess — cut spending, fast and deep.

Given that the Congressional Budget Office last week stated that the administration’s budget would raise the debt by $2.3 trillion more than the White House Budget Office claims, these cuts are going to hurt. They will probably hurt a lot. That is the cost of fending off a true catastrophe.

— Jim Lacey is the professor of strategic studies at the Marine Corps War College and the author of the forthcoming book The First Clash. The views in this article are the author’s own and do not in any way represent the views or positions of the Department of Defense or any of its members.

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« Reply #3 on: March 22, 2011, 10:07:04 AM »

Economic Fears Spike as Gas, Food Prices Rise: All-America Survey
The Financial ^ | March 22, 2011





Deep pessimism about future economic growth is weighing on Americans as they hunker down from the effects of higher gas and food prices and fear that those prices could remain elevated for years, a poll from CNBC has found.

Results of Survey was published on late Friday on CNBC website. It reveals that Americans’ attitudes toward home ownership and expectations for housing prices are both deteriorating sharply. An astonishing one out of every two Americans knows someone who is being foreclosed upon or facing the threat of foreclosure, writes Steve Liesman, Senior Economics Reporter of CNBC.

The survey of 800 Americans, from across the nation, income groups and ages, finds the percentage of Americans who believe the economy will get worse in the next year spiking to 37 percent, a 15 point gain from December. It’s now just five points below the all-time high in the series of 43 percent in June 2008, which came in the midst of a surge in gasoline prices.

Those negative attitudes were registered just before the disaster in Japan and, if anything, could have worsened since then.

Americans see inflation as widespread and are cutting back on non-essentials to make ends meet. On average, respondents see prices rising 6.6 percent over the next 12 months, up from 3 percent in December and the second highest median gain in the survey’s four-year history. Three-quarters of Americans says they have seen food prices rise over the past six months, and 61 percent believe the increases will last longer than a year. A similar percentage believes that higher gas prices are here to stay.

When it comes to coping with those higher prices, more than 60 percent of Americans say they are either saving, traveling or driving less. More than 70 percent say they are spending fewer dollars on restaurants, movies and concerts, making leisure cutbacks the number one way the nation is economizing in the face of higher gas and food prices.

In one of the most dramatic responses to the survey, Americans also do not believe that their wages will keep up with rising prices. Americans see their wages falling by 1.1 percent in the next 12 months, the biggest expected decline in the survey’s history. Less than a third of the nation expects wage gains in the next year, and most of these see only a modest 1 percent to 3 percent boost to their paychecks.

Americans expect their home values to fall along with their wages. After a brief blip upwards in December, expectations for housing price declines resumed in the latest survey, with Americans looking for a 1.2 percent mean decline, compared with the 0.3 percent increase they expected in the December survey. It’s the biggest drop in the mean in the survey’s history.

The survey also found that attitudes toward owning a home have gotten more negative. Just 63 percent of Americans believe it is better to own than rent, which compares with 89 percent registered in a 1996 survey by Fannie Mae. And 48 percent of the nation know someone who has been foreclosed upon or is facing the threat of foreclosure, up from 33 percent in September 2008, wrote Steve Liesman, Senior Economics Reporter of CNBC.

Still, 73 percent of Americans believe that owning a home is an essential part of the American dream, compared with 25 percent who say it is not.

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« Reply #4 on: March 22, 2011, 10:11:42 AM »

Fed's Fisher: U.S. debt situation at tipping point
Reuters via Yahoo Finance ^ | 3/22/2011 | Marc Jones and Sakari Suoninen




FRANKFURT (Reuters) - The U.S. debt situation is at a "tipping point," Dallas Federal Reserve Bank President Richard Fisher said on Tuesday, and urged the U.S. central bank to refrain from any further stimulus measures.

"If we continue down on the path on which the fiscal authorities put us, we will become insolvent. The question is when," Fisher said in a speech at the University of Frankfurt.

Fisher, seen by economists as one of the most hawkish policymakers within the Fed, said that although debt-cutting measures would be painful, he expected the U.S. to take the necessary actions.

"The short-term negotiations are very important. I look at this as a tipping point."

[Snip]

Fisher warned there were signs that the speculative style of trading that had helped fuel the financial crisis was beginning to resurface.

"We are seeing speculative activity that may be exacerbating (price rises in ) key commodities such as oil."


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« Reply #5 on: March 22, 2011, 10:31:09 AM »

Insolvency Looms as States (and Puerto Rico) Drain U.S. Disability Fund
Wall Street Journal ^ | March 22, 2011 | DAMIAN PALETTA




CAGUAS, Puerto Rico—This mountainside town is home to a picturesque cathedral, a tobacco museum and a Wal-Mart Supercenter. Another defining feature: Caguas's 00725 zip code has more people who receive a disability check than any other in the U.S.

Puerto Rico has emerged in recent years as one of the easiest places in the U.S. to get payments from the Social Security Disability Insurance program, created during the Eisenhower administration to help people who can't work because of a health problem. In 2010, 63% of applicants there won approval, four percentage points higher than New Jersey and Wyoming, the most-generous U.S. states. In fact, nine of the top 10 U.S. zip codes for disabled workers receiving benefits can be found on Puerto Rico.

The SSDI is set to soon become the first big federal benefit program to run out of cash—and one of the main reasons is U.S. states and territories have a large say in who qualifies for the federally funded program. Without changes, the Social Security retirement fund can survive intact through about 2040 and Medicare through 2029. The disability fund, however, will run dry in four to seven years without federal intervention, government auditors say.

In addition to the uneven selection process, SSDI has been pushed to the brink of insolvency by the sour economy. A huge wave of applicants joined the program over the past decade, boosting it from 6.6 million beneficiaries in 2000 to 10.2 million in 2010. New recipients have come from across the country, with an 85% increase in Texas over 10 years and a 69% increase in New Hampshire.

Over the years, Puerto Rico's dependence on SSDI has grown particularly stark, exacerbated by the closure of factories and U.S. military installations, an exodus of skilled workers and a number of corruption scandals.


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« Reply #6 on: March 22, 2011, 11:12:24 AM »

GARY SHILLING: And Now House Prices Will Drop Another 20%
TBI ^ | 3-22-2011 | Gary Shilling


GARY SHILLING: And Now House Prices Will Drop Another 20%

Gary Shilling, A. Gary Shilling & Co.
Mar. 22, 2011, 12:46 PM



Image: A Gary Shilling & Co.


Last October, when everyone was jubilant about the housing "recovery," Gary Shilling of A. Gary Shilling & Co., predicted that house prices would fall another 20%.

In the five months since, house prices have resumed their decline.

In his most recent research note, Gary sticks by his "20%" decline prediction. We've included a summary and updated charts from his argument below.

(Gary is offering a special discount on his research service for Business Insider readers. To learn more, please visit Gary's web site or call 1-888-346-7444. Please mention Business Insider.)

Housing: Great Expectations vs. Reality

Last spring, many believed that not only was the housing collapse over but that a robust rebound was underway. Investors were crowding into foreclosed house sales and bidding up prices in California, often the bellwether state for new trends.

The tax credit of up to $8,000 for new homebuyers that expired in April spurred buyers and promised to kick-start housing activity nationwide. TheHomeAffordable Modification Program was trumpeted by the Administration to help 3 million to 4 million homeowners with underwater mortgages by paying lenders to reduce monthly payments to manageable size and then paying homeowners to continue to make those payments.

But then a funny—or not so funny—thing happened on the way to housing recovery...


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« Reply #7 on: March 22, 2011, 11:30:48 AM »

US Approaching Insolvency, Fix To Be 'Painful': Fisher
Published: Tuesday, 22 Mar 2011 | 10:10 AM ET Text Size By: Reuters

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The United States is on a fiscal path towards insolvency and policymakers are at a "tipping point," a Federal Reserve official said on Tuesday.

"If we continue down on the path on which the fiscal authorities put us, we will become insolvent, the question is when," Dallas Federal Reserve Bank President Richard Fisher said in a question and answer session after delivering a speech at the University of Frankfurt.

"The short-term negotiations are very important, I look at this as a tipping point."

But he added he was confident in the Americans' ability to take the right decisions and said the country would avoid insolvency.

"I think we are at the beginning of the process and it's going to be very painful," he added.

Fisher earlier said the US economic recovery is gathering momentum, adding that he personally was extremely vigilant on inflation pressures.


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Fisher added that the U.S. Federal Reserve had ways to tighten its monetary policy other than interest rates, including by selling treasuries, changing reserves levels and using time deposits.

Copyright 2011 Thomson Reuters. Click for restrictions.
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« Reply #8 on: March 23, 2011, 07:33:59 AM »

Sales of new U.S. homes tumble 16.9% to record low
CBS Marketwatch ^ | March 23, 2011 | by Steve Goldstein




~ EXCERPT ~

WASHINGTON (MarketWatch) — Sales of new single-family homes collapsed in February, the Commerce Department reported Wednesday, as a combination of high unemployment, tumbling prices and a glut of cheaper alternatives brought activity to a near-standstill.

New-home sales fell 16.9% to a seasonally adjusted annual rate of 250,000 in February, though January’s figures were revised higher to 301,000 from 284,000. Compared to February 2010, sales collapsed by 28%.

Every region but the West saw record lows, and in the Northeast, sales dropped by 50% compared to year-earlier levels.


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« Reply #9 on: March 23, 2011, 08:10:14 PM »

Illinois teacher pension system nearly $40 billion in the hole
Chicago Tribune ^ | 9:24 p.m. CDT, March 22, 2011 | By Diane Rado
Posted on Wednesday, March 23, 2011 10:27:26


The Teachers' Retirement System, the largest and costliest Illinois pension program, is almost $40 billion short to cover future benefits — the deepest financial hole in 20 years of state records.

And with lawmakers looking to rein in the massive costs of public retirement programs, teachers worry that the nest egg they've always considered a sure thing might shrink, while school district officials fear local taxpayers might pick up more of the tab.

At 28, social studies teacher Patrick Sheridan is only in his fourth year of teaching, but he's already on edge about retirement, wondering if he'll ever get the pension checks he was promised.

"It's very scary and very frustrating being a younger teacher, and not having any certainty," said Sheridan, who teaches and coaches at Cook County's Elmwood Park High School.

More than 350,000 suburban Chicago and downstate educators, retirees and other members eligible for benefits make up the TRS system, whose assets and liabilities dwarf the other four state pension systems. But the pension plan is only 48.4 percent funded, slipping from 52.1 percent the prior year, according to the most recent financial report.

Fixing the pension mess won't be easy, and proposals in Springfield that cut future benefits to save on pension costs aren't popular with educators who've been paying into their pensions all these years.

They blame their retirement system's financial hole on the state, for failing to make all payments into government pension systems.

"The state has not met its obligation, yet teachers are being blamed for bankrupting the state. The reality is, we paid our dues, we paid what we owe," said Richard Lesniak, president-elect of the Illinois Association of School Business Officials and director of business services in Lockport Township High School District 205.


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« Reply #10 on: March 25, 2011, 06:29:24 PM »

Mass. job fair canceled because of lack of jobs (Hope & Change)
Boston.com ^ | 3-25-2011 | AP



TAUNTON -- A Massachusetts employment organization has canceled its annual job fair because not enough companies have come forward to offer jobs.


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« Reply #11 on: March 26, 2011, 07:30:29 AM »

Home / News / Local News
Caterpillar CEO's letter talks of leaving Illinois
StoryDiscussionCaterpill ar CEO's letter talks of leaving Illinois
By Kurt Erickson | Lee Springfield Bureau pantagraph.com | Posted: Friday, March 25, 2011 4:47 pm | Loading

http://www.pantagraph.com/news/local/article_3c23590c-572a-11e0-afc0-001cc4c002e0.html

SPRINGFIELD -- The chairman and CEO of Peoria-based Caterpillar Inc. is raising the specter of moving the heavy equipment maker out of Illinois.

In a letter sent March 21 to Gov. Pat Quinn, Caterpillar chief executive officer Doug Oberhelman said officials in at least four other states have approached the company about relocating since Illinois raised its income tax in January.

"I want to stay here. But as the leader of this business, I have to do what's right for Caterpillar when making decisions about where to invest," Oberhelman wrote in the letter obtained Friday by the Lee Enterprises Springfield bureau. "The direction that this state is headed in is not favorable to business and I'd like to work with you to change that."

Oberhelman said he's being actively courted to move.

"I have been called, 'cornered' in meetings and 'wined and dined' -- the heat is on," Oberhelman wrote. "Before, I never really considered living anywhere else and certainly never considered the possibility of Caterpillar relocating. But I have to admit, the policymakers in Springfield seem to make it harder by the day."

Cat spokesman Jim Dugan said the letter was designed to show Quinn that Oberhelman wants to be involved in finding solutions that benefit the company, which employs 23,000 people in Illinois.

"I view it as an olive branch to offer our help," Dugan said.

Quinn plans on discussing the letter with Oberhelman April 5 when the two meet at a conference in Peoria. The governor also plans on touring Caterpillar facilities at that time, spokeswoman Brie Callahan said Friday.

"The governor welcomes frank and open exchanges between the business community and government, and we are always open to new ideas that can help our businesses grow, innovate and create jobs," Callahan said.

Oberhelman didn't single out any specific problem with the state's policies in his one-page letter, but Dugan said the recent income tax increase -- signed into law by Quinn in January -- played a significant role in triggering the note.

The tax hike has led to attempts by other states, including Wisconsin, Indiana and New Jersey, to try and poach companies that don't want to stay in the Land of Lincoln.

Oberhelman also sent along correspondence Cat has received from other states.

"I stand ready to help convince you to relocate or expand in the fiscally conservative, low-tax Lone Star State," wrote Texas Gov. Rick Perry in a Jan. 24 letter.

"I encourage you to consider South Dakota as a place for your business to grow and prosper," noted J. Pat Costello, secretary of the South Dakota governor's economic development office.

Nebraska Gov. Dave Heineman wrote in February to say, "In Nebraska, we balance our budget by controlling spending, not by raising taxes."

Republican leaders, who unsuccessfully fought Quinn on the tax hike, say the letter confirms why they were opposed to the increase.

"These are the kinds of letters we fear," said Patty Schuh, spokeswoman for Senate Minority Leader Christine Radogno, R-Lemont. "Even more worrisome are the hundreds of businesses being wooed that we don't know about."

Schuh said the tax hike and the state's worker compensation costs on businesses "make Illinois a hostile environment, prime for the picking."
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« Reply #12 on: March 26, 2011, 01:18:22 PM »

Unpaid jobs: The new normal? (HopeyChangey...)
CNN Money ^ | 03/26/2011 | CNN Money




FORTUNE -- With nearly 14 million unemployed workers in America, many have gotten sodesperate that they're willing to work for free. While some businesses are wary of the legal risks and supervision such an arrangement might require, companies that have used free workers say it can pay off when done right.

"People who work for free are far hungrier than anybody who has a salary, so they're going to outperform, they're going to try to please, they're going to be creative," says Kelly Fallis, chief executive of Remote Stylist, a Toronto and New York-based startup that provides Web-based interior design services. "From a cost savings perspective, to get something off the ground, it's huge. Especially if you're a small business."

In the last three years, Fallis has used about 50 unpaid interns for duties in marketing, editorial, advertising, sales, account management and public relations. She's convinced it's the wave of the future in human resources. "Ten years from now, this is going to be the norm," she says.


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« Reply #13 on: March 26, 2011, 01:31:55 PM »

some of that news is understandable.

if you don't believe house prices were overvalued in the last decade, you're NUTS.

They charged insane prices cause everyone was approved. 

I'd be pissed if there was NOT a correction of house prices going on right now.
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« Reply #14 on: March 26, 2011, 01:36:30 PM »

Cost of Living in U.S. Reaches New Record High
Wisconsin Ag Connection ^ | March 24, 2011






The cost of living in the United States is as high as ever, even worse than before the financial meltdown during the past few years. A Labor Department index measuring the actual cost of living, known as the chained consumer price index, hit 127.4 in February, beating a previous record high 126.9 in July 2008, just as the housing crisis began to tighten its grip, CNBC reports.

That's bad news for most Americans, especially considering the record comes at a time of weak economic activity and high unemployment rates.

"The Federal Reserve continues to focus on the rate of change in inflation," says Peter Bookvar, equity strategist at Miller Tabak, according to CNBC.

Food prices continue to rise. The regular inflation rate, known as the consumer price index, increased 0.5 percent last month, the fastest pace in 18 months, although the Federal Reserve tends to set interest rates at inflation rates stripped of food and energy, which rose by just 0.2 percent.

Some say a new methodology is needed and needed now.

"This speaks to the need for the Fed to include food and energy when they look at inflation rather than regard them as transient costs," says Stephen Weiss of Short Hills Capital.

"Perhaps the best way to look at this is to calculate a moving average over a certain period of time in order to smooth out the peaks and valleys."

Even though headline inflation rates may have been nominally much higher in the past, most notably in the early eighties, rising consumer prices hurt just as bad today with incomes remaining flat, if not worse.

Thirty years ago, people earned raises to cope with higher prices and investments returned more: banks would pay nearly 16 percent on a six-month CD. Today, however, money market rates are a fraction of what they were, wages are essentially frozen if not dipping and Social Security recipients have gone two straight years with no increase in benefits.

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« Reply #15 on: March 28, 2011, 08:01:36 AM »

Disposable income falls as prices jump, data show
Marketwatch ^ | 3.28.11 | Greg Robb




U.S. PCE inflation up 0.4%, most since July 2008; spending up 0.3%


Real disposable income declined in February as consumer prices jumped by the largest amount in 2 1/2 years, the Commerce Department reported Monday.


Economists said the data show that higher prices for gasoline is starting to take some of the steam out of the economy.


The personal consumption expenditure index, which Federal Reserve officials say is a more accurate gauge of inflation than the better-known consumer price index, increased 0.4% on the month, the largest monthly gain since July 2008.


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« Reply #16 on: March 28, 2011, 11:19:43 AM »

13% of all U.S. homes are vacant
CNN Money ^ | 3/28/11 | Les Christie





New York - High residential vacancies are killing many housing markets, as foreclosed homes sit on the market and depress sale prices and property values. And it's only getting worse: The national vacancy rate crept up to just over 13% according to last week's decennial census report. That's up from 12.1% in 2007. "More vacant homes equal more downward pressure on home prices," (Snip) Maine had the highest proportion of empty housing stock, at 22.8%. Other states with gluts of empty houses included Vermont (20.5%), Florida (17.5%), Arizona (16.3%) and Alaska (15.9%).


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« Reply #17 on: March 29, 2011, 10:24:47 AM »

More housing hell
By STEPHEN B. MEISTER



http://www.nypost.com/p/news/opinion/opedcolumnists/more_housing_hell_Yx3o5ibqPKHQGfnO7KOfyH



Last Updated: 7:35 AM, March 29, 2011

Posted: 11:52 PM, March 28, 2011

The latest home-sales data paint a bleak picture: The housing market is in a double dip and still years away from a true recovery. The Obama administration's policies have only prolonged the agony.

Sales of existing homes dropped 9.6 percent in February to their lowest level since 2002 -- 4.88 million per year. And that's the good news.

Sales of new homes have collapsed. In February, they dropped 16.9 percent to an all-time-record low -- 250,000 a year, down from 900,000 in early 2007. As the nearby chart shows, these fell off a cliff at the end of last year, because the first-time homebuyer's tax credit only "borrowed" future sales, and now the future is here.

Home prices are following suit. The median price of an existing home dropped 5.2 percent to $156,100, while the median new-home price is down 13.9 percent, to $202,100. Indeed, a look at the Case-Shiller 20-City Home Price Index shows that housing entered a double dip in the middle of last year.

This mess was years in the building. Nearly two decades of massive federal housing subsidies -- cheap low-downpayment loans by Fannie Mae and Freddie Mac plus Federal Housing Administration loan guarantees, along with the longstanding tax deductiblity of mortgage interest -- resulted in a huge overbuilding.

That is, homebuilders built millions of homes we didn't need as people who couldn't really afford them -- and should have remained renters -- bought with low or no downpayments. Now these folks are becoming renters again, as they lose their homes (and savings) to foreclosure -- leaving a gigantic glut of inventory on the market.

The official statistics show an inventory of 3.67 million new and existing homes -- 8.6 months' worth at the present anemic sales rate. But the real inventory is likely double that, once you count the homes now in the foreclosure pipeline.

Making matters worse, more defaults will come: Nearly one in four borrowers -- more than 11 million households -- owes more than the house is worth. Another 2.4 million homeowners have less than 5 percent equity, putting them right on the edge. And those numbers will all soar as prices slide further.

Not all underwater homeowners will default, but it's a sure bet millions more eventually will.

All this means there's a backlog of some 10 million homes that must get sold before housing can truly recover. But fewer than 5 million homes now trade hands in a year -- and that's mostly sales of nondistressed homes, which aren't even part of the glut. So it's clear that home prices are bound to go down further and remain down for years.

Every economist knows you get more of what you subsidize. Due to all the overbuilding from years of federal housing subsidies, today a staggering 18.4 million homes are empty year-round. (That's down from 18.9 million a year ago, as lower prices have lured investors who've rented out homes bought at foreclosure.)

Given that there are 112.5 million occupied housing units (including rentals) in America, that means that there's one vacant home for every six occupied ones.

Short of bulldozing the millions of unneeded homes, it will take years of population growth and household formations to absorb the excess.

The good news (such as it is) is that free-market clearing processes are working. Today, one in five homebuyers is an investor, and one of every three sales is all-cash. Distressed sales account for 40 percent of the market.

Since the mid-'90s, when liberal activists really started pushing "affordable homeownership," banks have poured trillions of dollars into mortgage loans (now defaulted and mostly government guaranteed) instead of loans to businesses -- the proceeds of which would have gone into plants, equipment and software, all engines of job growth.

So now, nearly two years after the recession "ended," we're stuck with millions of unneeded homes, and millions of unemployed people. The feds have finally realized that stricter lending policies are necessary, but it will still take several more years for housing (and probably everything else) to recover.

What should we do? More federal subsidies are no answer. Hastening the foreclosure process (rather than slowing it, as our leaders mostly seem to be trying to do) is a good place to start. Keeping in place borrowers who haven't made a mortgage payment in over a year will only further delay the housing recovery.

We might even want to import buyers: Economist Gary Shilling has suggested granting permanent residency to any immigrant who buys a home.


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« Reply #18 on: March 29, 2011, 07:16:49 PM »

Unmanipulated US "Misery Index" Hits All Time High
Zero Hedge ^ | 03/29/2011 18:08 -0400 | Submitted by Tyler Durden



www.zerohedge.com



While everyone knows that the CPI in the US is manipulated beyond repair (a topic far too broad to be discussed here suffice to say that as disclosed previously true inflation in the US is currently runrating at over 8%), inflation as actually represented by US consumers and reported by Zero Hedge earlier, in the form of the 1 year inflation expectation index of the Conference Board lack of confidence index, is near all time highs.

So if one takes this data series and adds to it the narrow unemployment definition (U3) one would get an adjusted Misery Index for US citizens (using inflation expectations instead of manipulated CPI). As the chart below shows, the Misery Index, which is merely inflation plus unemployment, constructed as such, would now be at an all time high. Hardly in keeping with Bernanke's wealth effect prerogative, but surely in line with record food stamp usage reported month after month.

That said, the silver lining to that particular mushroom cloud is our confidence that as the bulk of Americans live in record "misery", they will be comforted to know that their 20 shares of NFLX are trading at a four digit EPS multiple. And the other good news is that we have the Brits beat again: whereas the US is at a record, the UK is merely at a 20 year high, proving once again that only the US never does anything half-assed.

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« Reply #19 on: March 30, 2011, 03:03:10 PM »

America is Burning
Townhall.com ^ | March 30, 2011 | Ben Shapiro




Two weeks ago, I visited New York City with my wife, who was interviewing at a local medical school located in the Bronx. I dropped her at the school. Since I was lacking a car, I hopped on a public bus, intending to take it to the local subway station.

I have never been so frightened for my country in my life.

The bus itself was fine; all the people on it had places to be. It was the subway station that was truly scary. The station itself looked like a bomb had hit it. Debris covered the shattered tile floor. The stench of vomit and urine permeated the place. Rust layered the tracks; wooden boards between the tracks moldered into dust. The station had clearly been beautiful at one point, but now it looked like a leftover set from "The Omega Man."

Elderly people sat holding their cheap knockoff bags, quietly avoiding eye contact with the younger crowd. Young people gathered in small groups, speaking in broken English into their expensive cell phones. I saw a couple of young men pass small plastic bags to one another.

Then I got on the train. As the Bronx rushed past, shattered images stuck to the smeared windows like flies to a windshield: buildings with graffiti on every air conditioner, on every window, on every door; empty lots covered in garbage; apartments with hundreds of broken windows; the Bronx River, pieces of wreckage sticking at obtuse angles from the muddy water. The landscape of hopelessness.

This isn't how the Bronx used to be. Two generations ago, the Bronx was a diverse and thriving lower- to middle-class enclave, full of upwardly mobile people. The area was largely immigrant and hummed with the excitement of a population looking to take advantage of the American dream. Myriads of intellectuals grew up in the Bronx, ranging from Don DeLillo to E.L. Doctorow to Harold Bloom to David Halberstam to Chaim Potok to William Safire, entertainers like Woody Allen, Paddy Chayefsky and Stanley Kubrick, and entrepreneurs ranging from Ralph Lauren to Eli Broad to Calvin Klein.

Then the government got involved.

Over the course of the 1960s and 1970s, in an attempt to fight poverty, the New York City government instituted higher property taxes and rent control. The idea behind the property taxes was simple redistributionism -- tenants should be given more money from the pockets of landlords. The same held true for rent control -- the unspoken idea was that landlords had been gypping their tenants.

The unintended consequences were disastrous. Poorer and poorer populations began moving to the Bronx, driving out the aspiring lower middle class. Landlords who had already been operating at profit minimums began losing money. It became simpler for them to burn down their buildings than to fix them up. Similarly, tenants began torching buildings in the hope that the government would build new public housing at the sites. The result became a national catch phrase when Howard Cosell, during the 1977 World Series, commented on an aerial shot of the city: "There it is, ladies and gentlemen: the Bronx is burning."

Today, the Bronx is barren. All the talk of urban renewal is papier-mache pomposity. Even as the elite crowd celebrates the "diversity" and "artistic regrowth" of the Bronx, the Bronx remains a crime and poverty center. In the South Bronx, nearly 50 percent of residents live below the poverty line. Rap and art nouveau will not heal an area destroyed by government interventionism and the substitution of top-down economics for bottom-up entrepreneurialism. The culture of dependency has poisoned the groundwater. The Bronx River is infected with it.

Today, when Americans look at places like Detroit and South Central Los Angeles and the Bronx, they see outliers, locations thrown by fortune or luck to the bottom of the heap. They do not see the policies that led to these areas' fall from grace. And so we continue to elect the same politicians who made the Bronx of literature and jazz into the Bronx of graffiti and hip-hop and prostitution and drugs. Politics and culture had consequences for the Bronx, and they have consequences for America more broadly.


________________________ ________________________ ________________


"I have never been so frightened for my country in my life."




________________________ _____-


Hey Ben - the Bronx is no place for a little nerdy Jewish account type you putz. 
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« Reply #20 on: March 30, 2011, 07:43:16 PM »

Going Broke: Treasury Down to $58.6B in Cash, $130.5B Borrowing Authority
CNSNews ^


Posted on Wednesday, March 30, 2011 7:35:59

Going Broke: Treasury Down to $58.6B in Cash, $130.5B Borrowing Authority Wednesday, March 30, 2011 By Terence P. Jeffrey

(CNSNews.com) - Imagine that you had an average monthly income of about $170 balanced against average monthly expenses of about $940--and that you were more than $14,000 in debt.

Then imagine that as of today, you had only $58.60 in cash left in your bank account and $130.50 left on your line of credit.

Now multiply these numbers by 1 billion and you will have the up-to-date financial situation of the U.S. government.

According to the Daily Treasury Statement released by the U.S. Treasury Department today at 4:00 p.m., the Treasury had $58.6 billion in cash in its accounts as of the close of business on Tuesday. That was down from $190.6 billion at the beginning of March and $309.8 billion at the beginning of this fiscal year on Oct. 1, 2010.


(Excerpt) Read more at cnsnews.com ...
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« Reply #21 on: March 31, 2011, 06:55:10 AM »

Bill Gross calls U.S. budget a Greek tragedy (worse than Greece)
fortune ^ | March 31, 2011 5:40 am | Colin Barr


Posted on Thursday, March 31, 2011

Gross runs Pimco, the $1.2 trillion investment manager that has spent recent months selling Treasury bonds, citing their low yields and poor prospects. He explains in his monthly investment outlook posted Wednesday evening that U.S. government bonds "have little value" in a world of bloated budgets.

While outstanding federal debt totals $9.1 trillion, he estimates the government's actual liability at $75 trillion, counting promises made under Medicare, Medicaid and Social Security.

"The incredible reality is that the $9.1 trillion federal debt that constitutes the next-to-tiniest ball in our chart is nothing compared to unfunded Medicaid and Medicare. It is like comparing Pluto to Saturn and Jupiter," Gross writes.

That starry-eyed talk is only the latest warning out of Gross. He predicted a bond market turkey shoot in October, while calling the borrow-from-the-future mindset of our elected leaders a "Sammy scheme."

He has since warned that the U.S. is losing its competitive edge thanks to a political failure to confront our structural problems, such as declining education standards and eroding infrastructure, and predicted the end of Fed bond buying will wrack markets of all kinds.

But now the gloves are off. To drive his latest point home, Gross compares the U.S. to Europe's least solvent nation, and not favorably.

"This country appears to have an off-balance-sheet, unrecorded debt burden of close to 500% of GDP!" Gross exclaims. "We are out-Greeking the Greeks, dear reader."


(Excerpt) Read more at finance.fortune.cnn.com ...
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« Reply #22 on: March 31, 2011, 07:01:58 AM »

Grassley Warns of Bailed-out Banks’ Repaying Bail-outs With Government Funds
Chuck Grassley Senate site ^ | 03/29/2011 | Chuck Grassley




WASHINGTON – Sen. Chuck Grassley is asking the Treasury secretary for assurances that banks bailed out with government funds will not be allowed to use another government program to pay back their bailouts.

“The reports that banks from New York to Nashville are using federal dollars from the so-called Small Business Lending Fund to increase profits and ‘pay back’ TARP make this look like another TARP-style money shuffle,” Grassley said. “Replacing one form of government subsidy with another wasn’t a repayment when GM did it and it still isn’t. The Treasury Department has an obligation to put the brakes on any tricky bookkeeping that misleads the American taxpayer and subverts what this program was supposed to do.”

Grassley wrote to Treasury Secretary Timothy Geithner, citing media reports and a bank earnings statement to investors that banks in Pennsylvania, Nashville and New York that received money through the $700 billion Troubled Asset Relief Program (TARP) are considering paying back that bailout with money received through the federal Small Business Lending Fund. One bank touted increased “profitability” in converting TARP funds to Small Business Lending Funds in its quarterly earnings report.

Grassley asked Geithner for assurances that a repayment shuffle will not take place. He asked for a description of Treasury’s oversight plans to prevent such a shuffle and for information including a list of banks that have applied for loans under the small business program.

Last year, Grassley exposed the misleading nature of claims from the Treasury Department and General Motors that the company repaid a TARP loan through a business turn-around. In fact, its repayment was via federal money held by the government.

The text of Grassley’s letter to the Treasury secretary is available here:

http://grassley.senate.gov/about/upload/3-22-2011-Geithner-Letter-SBLF.pdf



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« Reply #23 on: March 31, 2011, 07:14:37 AM »

Wal-Mart CEO Bill Simon expects inflation
By Jayne O'Donnell, USA TODAY
Updated
10h 34m ago |







 

U.S. consumers face "serious" inflation in the months ahead for clothing, food and other products, the head of Wal-Mart's U.S. operations warned Wednesday.


By Spencer Platt, Getty Images

The nation's largest retailer needs to get back to its roots as the lowest priced one-stop shop for consumers, Walmart CEO Bill SImon said.

The world's largest retailer is working with suppliers to minimize the effect of cost increases and believes its low-cost business model will position it better than its competitors.

Still, inflation is "going to be serious," Wal-Mart U.S. CEO Bill Simon said during a meeting with USA TODAY's editorial board. "We're seeing cost increases starting to come through at a pretty rapid rate."

CEO: Says Wal-Mart to go back to low prices, broad-based inventory

VIDEO: Wal-Mart CEO answers five questions about the future of the retailer

ECONOMY: Inflation worries push consumer confidence lower in March

Along with steep increases in raw material costs, John Long, a retail strategist at Kurt Salmon, says labor costs in China and fuel costs
for transportation are weighing heavily on retailers. He predicts prices will start increasing at all retailers in June.

"Every single retailer has and is paying more for the items they sell, and retailers will be passing some of these costs along," Long says. "Except for fuel costs, U.S. consumers haven't seen much in the way of inflation for almost a decade, so a broad-based increase in prices will be unprecedented in recent memory."

Consumer prices — or the consumer price index — rose 0.5% in February, the most since mid-2009, largely because of surging food and gasoline prices. Core inflation, which excludes volatile food and energy costs, rose a more modest 0.2%, though that still exceeded estimates.

The scenario hits Wal-Mart as it is trying to return to the low across-the-board prices it became famous for. Some prices rose as the company paid for costly store renovations.

"We're in a position to use scale to hold prices lower longer ... even in an inflationary environment," Simon says. "We will have the lowest prices in the market."

Major retailers such as Wal-Mart are the best positioned to mitigate some cost increases, Long says. Wal-Mart, for example, could have "access to any factory in any country around the globe" to mitigate the effect of inflation in the U.S., Long says.

Still, "it's certainly going to have an impact," Long says. "No retailer is going to be able to wish this new cost reality away. They're not going to be able to insulate the consumer 100%."


http://www.usatoday.com/money/industries/retail/2011-03-30-wal-mart-ceo-expects-inflation_N.htm#

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« Reply #24 on: March 31, 2011, 09:05:07 AM »

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The Truth About The Economy: We're Heading Back Toward A Double Dip
TBI ^ | 3-31-2011 | Robert Reich

Posted on Thursday, March 31, 2011 12:09:11 PM by blam

The Truth About The Economy: We're Heading Back Toward A Double Dip

Robert Reich
Mar. 31, 2011, 10:31 AM


Why aren’t Americans being told the truth about the economy? We’re heading in the direction of a double dip – but you’d never know it if you listened to the upbeat messages coming out of Wall Street and Washington.

Consumers are 70 percent of the American economy, and consumer confidence is plummeting. It’s weaker today on average than at the low point of the Great Recession.

The Reuters/University of Michigan survey shows a 10 point decline in March – the tenth largest drop on record. Part of that drop is attributable to rising fuel and food prices. A separate Conference Board’s index of consumer confidence, just released, shows consumer confidence at a five-month low — and a large part is due to expectations of fewer jobs and lower wages in the months ahead.

Pessimistic consumers don’t buy as much. And fewer sales spells big economic trouble ahead.

What about the 192,000 jobs added in February? (We’ll know more Friday about how many jobs were added in March.) It’s peanuts compared to what’s needed. Remember, 125,000 new jobs are necessary just to keep up with a growing number of Americans eligible for employment. And the nation has lost so many jobs over the last three years that even at a rate of 200,000 a month we wouldn’t get back to 6 percent unemployment until 2016.

But isn’t the economy growing again – by an estimated 2.5 to 2.9 percent this year? Yes, but that’s even less than peanuts. The deeper the economic hole, the faster the growth needed to get back on track. By this point we’d expect growth of 4 to 6 percent. In 1934, emerging from

[snip]


(Excerpt) Read more at www.businessinsider.com

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