Chicago PMI Drops

From the Chicago Purchasing Managers Website:The Chicago Purchasing Managers reported the Chicago Business Barometer fell below neutral, ending 43 months ofpositive readings.- Production advanced while New Orders retreated;- Prices Paid continued to slump toward neutral;- Employment fell to the lowest level in four years;Buying Policy: 3 month average lead-times were longer, but January bucked the trend.The various indexes within the report showed areas of concern. New orders have been dropping for a few months. Employment is at its lowest level...

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FOMC Statement

From the Fed:Recent indicators have suggested somewhat firmer economic growth, and some tentative signs of stabilization have appeared in the housing market. Overall, the economy seems likely to expand at a moderate pace over coming quarters.Readings on core inflation have improved modestly in recent months, and inflation pressures seem likely to moderate over time. However, the high level of resource utilization has the potential to sustain inflation pressures.The Committee judges that some inflation risks remain. The extent and timing of any...

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Globalization Barreling Down the Highway Toward America's Middle Class

When Muhammad Yunus accepted the Nobel Peace Prize last month, the Bangladeshi banker who invented the practice of making small, unsecured loans to the poor, said the globalized economy was becoming a dangerous “free-for-all highway.” According to The New York Times:Its lanes will be taken over by the giant trucks from powerful economies… Bangladeshi...

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4th Quarter GDP Up 3.5%

From the BEA:Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 3.5 percent in the fourth quarter of 2006, according to advance estimates released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 2.0 percent. The Bureau emphasized that the fourth-quarter "advance" estimates are based on source data that are incomplete or subject to further revision by the source agency (see the box on page 4). The fourth-quarter...

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Housing Bottom? Highly Doubtful

From Safehaven:New home sales rose by 4.8% in December, registering a fall of 17.3% on the year with 1.0631 million units sold in 2006, the largest drop in 16 years. Note that to sell these homes, an average of $47K in incentives was included. Also, unit sales are reported at contract signing, so these numbers do not include contracts broken where delivery was not taken by the buyers. Existing home sales fell by the largest amount in 17 years, with 6.48 million units sold for 2006, which is down 8.4% year over year.All of the "soft-landing" economists...

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India Growth Rate Increases

From Bloomberg:India revised the economic growth rate for the year ended March 31, 2006, to 9 percent, the fastest pace on record, the government said.The pace was faster than the 8.4 percent forecast earlier because of greater expansion in agriculture and manufacturing, the government said in a statement in New Delhi today.``It augurs well for the gross domestic product for 2006- 2007,'' Finance Minister Palaniappan Chidambaram said in New Delhi today. ``Although, I must caution that since the base has now increased, we will have to wait and see...

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Migrants Better Than Natives

The Institute of Directors (IoD) has conducted a survey that concludes that migrant workers to the UK are seen as harder working, more reliable and better skilled than natives.The survey found that employers believe immigrants outperform UK employees by “a large margin”.Workers who have come here from abroad are believed to have better skills, education, work ethics and reliability.Miles Templeman, director-general of the IoD, is quoted in the FT as saying:"The UK workforce has got to raise its game on skills and performance."This means that...

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Oil Has a Big Day; Another Nail in the Rate Cut Coffin

From Bloomberg:Crude oil surged to its biggest gain in 16 months on speculation that colder weather and an improving economy will spur U.S. fuel consumption.The National Weather Service predicted that below-normal temperatures will persist in the eastern U.S. for the next two weeks, and the price of natural gas, the country's most common home-heating...

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UPS Issues Lower 2007 Earnings

Fromthe Financial Times:UPS, the world's largest package delivery group, has warned it faces a "challenging year" in the US as the slowing domestic economy puts the brakes on parcel shipments.Shares in the group were down more than 3 per cent on Tuesday afternoon after it issued lower-than-expected earnings guidance for 2007 and said the year got off...

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Housing Bottom? Doubtful

From the Associated Press:Prices of single-family homes across the nation rose in November at the slowest rate in more than a decade, a housing index released Tuesday by Standard & Poor's showed, countering other evidence that the housing slowdown may be nearing an end.The S&P/Case-Shiller composite index showed a 1.3 percent year-over-year increase in the price of a single-family home based on existing homes tracked over time in 10 metropolitan markets.For its 20-city composite index, prices grew 1.7 percent, the slowest rate ever for...

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FSA Calls For MEAF Refunds

The Financial Services Authority (FSA) has called for lenders to justify, and refund, their increased mortgage exit administration fees (MEAF's).MEAF's are charged by lenders when borrowers pay off their mortgage early, or switch to another lender. The theory is that the MEAF covers the administration costs of closing the mortgage early. However, the FSA and others are becoming increasingly suspicious of the recent MEAF increases being foisted on mortgage holders by some lenders.The FSA stated that, with regards to current customers, lenders must...

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Earnings Management

This chart has been making the econ blog rounds over the last few days:Since October 2002, the lowest percentage of companies to beat earnings expectations is 59%. That's a pretty remarkable number when you think about it. It seems like most companies are going to beat expectations. But -- let's look at the other side of the coin. Companies are...

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Crucial Week For the Dollar

Here's a daily chart of the dollar from Stockcharts:It's up 3.75% since early December. The main reason for the increase is encouraging economic news from the US. Since early December there has been a fair amount of speculation that the housing market has stabilized, job growth has been good, unemployment is low and the "official" retail numbers...

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Mortgage Problems hit GMAC

From Seeking Alpha:GM's announcement last Thursday that it is delaying its Q4 earnings report illustrates the effect the travails of the U.S. mortgage market have had on GMAC Financial Services, a lending unit GM divested in November. Cerberus Capital Management purchased 51% of GMAC for $14 billion, but there is some question whether the $14.4 billion tangible NBV ascribed to GMAC at the time was appropriate. At particular issue is GMAC's ResCap mortgage unit, which has suffered the same pressures that have hurt lenders throughout the industry....

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Banks' Underhand Methods

Banks were accused by Which? of using underhand methods to dissuade customers from seeking refunds, after they have been charged "unfairly" for exceeding their overdrafts.Which? said that banks have threatened to close accounts, pass details on to debt collectors and charge for statements when customers challenge their overdraft fees.Which? claims that it has heard of charges of up to £5 per page for duplicate statements. The law permits a maximum charge of £10.One bank tried to charge £30 an hour labour charges to send duplicates, with a total...

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Fed President Lacker Gets the Wage Picture Right

From a 19 January speech:Let me add a footnote here regarding wage rates and the inflation outlook. Some observers have viewed robust wage growth as a cause of inflationary pressures; I do not share that view. We can have healthy wage growth without inflation as long as we see commensurate growth in labor productivity. In fact, over time, real (inflation-adjusted) compensation tracks productivity growth fairly well, though they do not move in lockstep from quarter to quarter. I would note that the rate of growth of productivity shifted higher beginning...

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10-Year Treasury at 5-month Highs

From BloombergTreasury 10-year note yields rose to the highest level since August this week after government bond sales drew weaker-than-expected demand and industry reports suggested the worst of the housing slump may be over.Investors demanded higher returns on the $41 billion of securities sold as compensation for concern a strengthened economy...

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The Market's Last Week

Let's see how the markets acted last week. Just for review, I use the exchange-traded funds for the S&P 500 (SPY), Nasdaq 100 (QQQQ) and the Russell 2000 (IWN). The DJIA is at best antiquated. Here's a chart for the S&P and QQQQs, which both say the same thing.We had two days of gains followed by two days of selling. However, the selling...

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Weekend Weimar

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New Home Sales Increase 4.8%

From BloombergNew home sales in the U.S. rose more than forecast in December, showing the real-estate market is improving following its biggest slump since 1990.Sales rose 4.8 percent to an annual pace of 1.12 million in December, the most since April, from a 1.069 million rate the prior month, the Commerce Department said today in Washington. For all of last year, sales dropped 17 percent, the biggest decline in 16 years, to 1.061 million from a record 1.283 million in 2005.Buyers were lured back into the market after builders cut prices and sweetened...

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Durable Goods Orders Increase 3.1%

From the Census Bureau:New orders for manufactured durable goods in December increased $6.7 billion or 3.1 percent to $221.9 billion, the U.S. Census Bureau announced today. This was the fourth increase in the last five months and followed a 2.2 percent November increase. Excluding transportation, new orders increased 2.3 percent. Excluding defense, new orders increased 3.9 percent.These numbers jib with the Fed's industrial production figures for December.Excluding transportation, the overall number has decreased each month for the last three...

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Construction Layoffs In Last Unemployment report

For the last few months, I've been looking at the weekly unemployment reports to see how the housing slowdown is impacting construction employment. There have been some pretty sizable layoffs, and last week was no exception.California had 10,000+ layoffs in "construction and service" employment.Minnesota had Pennsylvania had 4000+ layoffs in construction or "construction, trade and service."Florida had 3400 layoffs in "construction, trade, service, and manufacturing industries." I am expecting this slow bleed to continued for some time. We've...

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Richmond Fed -- Another Bad Month

The Richmond Fed issued this report on January 23. Because I was traveling I missed it and am now playing catch-up/.From the Richmond FedManufacturing activity in the central Atlantic region contracted again in January, according to the Richmond Fed’s latest survey. Respondents reported further declines in factory shipments and new orders, although...

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The Long View: Where Is the Trade Deficit?

BruceMcFA long time ago, I looked at the current account blowout in The Long View: Current Account, which ended with a promise to have a look at the make-up of the blow out in terms of both geography and industry.What I am looking at now is the broad outline of the geographic break down.How broad? I am breaking the whole world down into The Americas,...

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Existing Homes Sales Decrease .8%

From BloombergSales of previously owned homes in the U.S. declined in December for the first time in three months, capping the biggest annual drop since 1989, a slide that's shown signs of bottoming.Purchases dropped 0.8 percent to an annual rate of 6.22 million, the National Association of Realtors said today in Washington. For the entire year, sales fell 8.4 percent from 2005's record. In a sign the slide may be nearing an end, the number of homes on the market decreased for a second month.``This grinding sort of correction will continue for...

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Council Tax Blunder

According to The Telegraph there has been a blunder in the council tax bandings, that may mean that many people may be entitled to claim a rebate.The article notes that "hundreds of people are receiving money back from local authorities after challenging the council tax banding of their properties".Seemingly many of the 1991 valuations were performed by estate agents who would just drive past the house, without so much as "poking their noses round the door".You can check what your neighbours are paying on the Valuation Office Agency website (www.voa.gov.uk),...

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Credit Reports

As is widely known, credit reports compiled by companies such as Experian are a "public" record of an individual's financial deeds and misdeeds.They are used by credit card companies, banks, loans companies, phone networks etc to provide an assessment of an individual's credit worthiness. Those with a "poor" rating are deemed to be a greater risk than those with an "excellent" rating; as such, those with the "poor" score may have their application for credit refused, or have higher than normal charges imposed.It well known that having negative...

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Financial Brokers Exposed

The Publican warns of two financial brokers who are scamming licensees:"Gateway Finance.co.uk and Funds4Business, the brokers exposed by The Publican after ripping off licensees, are making it onto TV. BBC South’s investigative programme Inside Out has been looking into their director Gary Thomas, and has interviewed victims of the financial broker. The Publican unveiled the company in February 2005 following investigations, which revealed that licensees were left out of pocket after loans promised by the company failed to materialise. The company...

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State of the Union: A Nation Off Track

So, we’re all eagerly awaiting President Bush’s State of the Union address to hear the honest facts about the nation’s economy, among other key issues.OK, not.Looks like we’ll have to dig up the real deal on our own by taking a gander at some of the recent data and what they portend for us working types.Tonight, Bush likely will talk about the great...

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Traveling

I am traveling today and tomorrow. Posting will resume on Thursday afternoon...

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FSA Fines Banks

In the coming weeks, ten banks and lenders will be fined by the Financial Services Authority (FSA) for mis-selling payment protection insurance (PPI).It is expected that these, yet to be named, bodies will each receive fines of about £1M.It is also expected that the news of the fines will prompt customers to launch their own compensation claims, for the mis-selling of these insurance policies. Some cynics dub the selling of these policies as a "protection racket".In 2006 the OFT conducted a 5 month investigation into PPI, describing it as a type...

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UK's Second Largest Ever Islamic Finance Deal

The UK's second largest Islamic finance deal has just been concluded, with the purchase of the Grosvenor House Apartments Ltd by Park Lane Properties Ltd.Park Lane Properties are co-owned by Kuwait based ADEEM Investment Company (ADEEM) and The Investment Dar (TID). The £100M refinancing was arranged with Lloyds TSB Corporate Markets. The deal has been structured in accordance with Shariah principles, and using a series of sequential Murabaha transactions. Mustafa Al-Saleh, Managing Director and Chief Executive Officer of ADEEM said: "We are delighted...

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10-Year Treasury and Housing

Talk of a housing bottom started sometime in October. Since then we've gotten more news on new and existing home sales to stoke talk of a housing bottom (We've also had home builders report some really lousy earnings reports). In addition, interest rates started to drop about that same time. Here's a chart of the 10-year Treasury from stockcharts.comRates...

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Cleveland Median CPI +.3%

From the Cleveland Federal Reserve:According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.3% (3.5% annualized rate) in December. The median CPI is a measure of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics’ (BLS) monthly CPI report.Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers rose 0.5% (6.7% annualized rate) in December. The CPI less food and energy rose 0.2% (2.3% annualized rate) on a seasonally...

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The Markets Last Week

Let's take a look at how the markets performed last week. All charts below are from stockcharts.comHere's the chart for the SPY (S&P 500).Remember the market's were closed on Monday.Four days with a slight downward bias that followed three strong upward bars. That indicates several points. First, there was no news strong enough to send the market...

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Phily Fed Up Moderately

From the Phily Fed:The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, increased from a revised reading of -2.3 in December to 8.3 (see Chart).* This month, 25 percent of the firms reported increased activity; 17 percent reported decreased activity. The new orders and shipments indexes offer mixed signals...

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Explain This To Me

From Bloomberg:``Central banks will get naughtier,'' said Jan Loeys, global head of market strategy at JPMorgan Chase & Co. ``They will see inflation and they will have to raise rates.''OK -- I've been reading financial press for about 20 years. I have never see a central bank described as naughty. Maybe it's an English thing.....

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FT For Sale

It is reported that the Financial Times (FT), or the "Pink 'Un" as it is known by those who work in the City, is up for sale.Pearson, its owner, is reportedly looking for around £650M for the paper and its associated website.The FT is now profitable, and 2006 year end figures are expected to show profits of around £10M.It is rumoured that the US firm, Kohlberg Kravis Roberts may be interested buying the ...

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New Nome Construction Increases 4.5%

From CBSMarketwatchNew construction on homes in the United States rose for the second straight month in December, reflecting year-end strength in apartment construction, the Commerce Department estimated Thursday.Meanwhile, the number of new building permits issued rose for the first time in 11 months.Economists said weather played a major role in...

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CPI Up .5%; Core Up .2%

From the Bureau of Labor Statistics:On a seasonally adjusted basis, the CPI-U increased 0.5 percent in December, the first advance since August. Energy prices, which had declined in each of the preceding three months, rose 4.6 percent in December. Within energy, the index for petroleum-based energy increased 7.7 percent and the index for energy services increased 1.2 percent. The food index was unchanged in December. The index for all items less food and energy, which was virtually unchanged in November, increased 0.2 percent in December....

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Beige Book's Inflation News is Fair

From the Beige Book:Overall prices increased moderately. Prices for energy and a number of materials have eased, and competition has kept prices for final goods in check. Atlanta, Chicago, Minneapolis and Kansas City described price pressures as easing or moderating. Manufacturers in the Boston and Cleveland Districts reported that input prices were stable, although contacts noted some increases in metal prices. Meanwhile, manufacturers in the New York District indicated some increases in input price pressures. Retail prices were steady in the...

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Misleading Insurance Adverts

Those of you who have tried to claim on an insurance policy, only to be disappointed and have your claim rejected by the invocation of the small print, may raise a faint smile at the news that the Financial services Authority (FSA) have rebuked the industry for making misleading claims in their adverts.The FSA reviewed the press advertisements of 57 insurance firms, and has subsequently warned companies in the home, travel and car insurance markets to stop using saving claims in their advertising that mislead consumers.The FSA has also threatened...

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Industrial Production Increases .4%

From CBSMarketwatch.comU.S. industrial production rose by an overall 0.4% in December, as the high-technology and motor-vehicle industries posted strong output for the month, the Federal Reserve said Wednesday.....Bear Stearns economists said that, coupled with other recent data, the industrial output figure showed the economy improved at the end of the year."Data on employment, retail sales, and production suggest that the economy's momentum was picking up at the end of 2006," the economists wrote in a research note. Let's look inside the report,...

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Homebuilder Lennar Swings to Loss

From the Street.comThe Miami-based homebuilder lost $196 million, or $1.24 a share, for the quarter ended Dec. 31, reversing the year-ago profit of $581 million, or $3.54 a share. Revenue slipped 15% from a year ago to $4.27 billion.Analysts surveyed by Thomson Financial were looking for an loss of 81 cents a share on sales of $4.15 billion.The latest quarter includes write-offs of option deposits and pre-acquisition costs of $111.1 million and valuation adjustments of $382.8 million. Lennar said it posted a latest-quarter homebuilding operating...

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PPI Increases .9% in December

From the BLS:The Producer Price Index for Finished Goods increased 0.9 percent in December, seasonally adjusted, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. This rise followed a 2.0-percent advance in November and a 1.6-percent decline in October. At the earlier stages of processing, prices received by manufacturers of intermediate goods moved up 0.5 percent in December after climbing 0.7 percent a month earlier, and the crude goods index increased 2.9 percent following a 15.7-percent gain in November.Finished...

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FSA Chief Quits

John Tiner, the CEO of the Financial Services Authority (FSA), announced his resignation yesterday. He will leave in July 2007, having held the post for four years. Tiner said that he was leaving because he wanted to take up a fresh challenge in the private sector, before thinking about retirement. He joined the FSA in April 2001 as managing director of the consumer, investment and insurance directorate and was appointed chief executive in 2003. FSA chairman Callum McCarthy said: "He has been a leader in developing international regulation through...

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More Mortgage Industry Job Cuts

From ReutersResCap, the holding company for the real-estate financing business of GMAC, said on Tuesday it would cut 1,000 jobs -- about 7 percent of its work force -- in a cost-cutting triggered by a slack U.S. housing market.ResCap said it would incur a charge of about $10 million as a result of the job cuts, but expected to save $65 million in 2008 as a result of the reduction in its payroll.The company said in a filing with U.S. securities regulators that it would cut 800 jobs by October and eliminate another 200 unfilled positions. The majority...

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