Thursday, August 9, 2012

Today's links

1--Watch out for a correction — or worse, marketwatch

Odds of a stock market correction are now quite elevated. That’s because stock market timers are now more bullish than they were at the May 1 bull market high, even though the market averages are still slightly below those previous highs. This is not good from a contrarian point of view.

2--Worn Down Investors Turn Off CNBC Amid Market Malaise, investorplace

•Squawk Box (6-9 a.m.) is supposed to prime traders before the bell. The show posted its lowest rated its time block since Q4 2006.

•The Closing Bell (3-5 p.m.) is supposed to wrap up the day’s action. The slot posted its fifth-lowest rating in total viewers and second-lowest ratings in the key 25-54 demographic since 1997.

•Fast Money (5-6 p.m.) is focused almost specifically on swing trading stocks. That time slot showed the lowest rating for the 25-54 demo since 1997 — and lowest in total viewers since Fast Money launched in 2006

3--Social Security did not cause the crash, economist's view

For most Eurozone countries, the crisis was not caused by their governments spending in an unsustainable way, but by their private sectors doing so (for example, Martin Wolf here). The politics are such that the government ends up picking up the tab for imprudent lending by banks. ...

It's not just in Europe, the false narrative is thriving in the US as well. Bankers, with the help of their purse string controlled puppets in government, have been able to successfully blame our budget problems on social insurance and other government spending they oppose. According to this narrative, our budget problems have nothing to do with the Bush tax cuts, higher spending on the war, and the the loss of revenue and higher spending on social programs from the recession, it is Social Security and Medicare that are the problem. As for the recession itself, it wasn't financial executives in the private sector who made the bad decisions that caused our problems (as they made a mountain of money along the way), it was bad government housing policy that was somehow to blame. And, of course, to solve the problem we shouldn't use higher taxes to claw back any of those large, large gains those at the top made during the bubble years -- gains that in the end hurt our economic productivity instead of helping it -- instead we should reduce the social insurance for typical, working class households that had nothing to do with causing the crisis. After all, if we were to take back the "rewards" those at the top got for crashing the economy, we'll take away their incentive to do it again. Can't have that. It is much better if the "reward" to middle class households for enduring the problems associated with a crisis caused by the financial sector and the executives in charge is to reduce protection against such problems in the future by taking away or reducing social insurance. The people at the top cause the problems, and everyone else pays the cost. What could possibly create better incentives for growth, and be fairer than that?

4--StanChart begins fightback on Iran allegations, IFR

One British lawmaker said the affair was part of a “political onslaught” in the United States against British banks.

“I think it’s a concerted effort that’s been organised at the top of the U.S. government. I think this is Washington trying to win a commercial battle to have trading from London shifted to New York,” said John Mann, a member of parliament’s finance committee, who also called for a parliamentary inquiry.

A British executive at an institution that ranks among the top 25 shareholders in Standard Chartered also said politics was motivating U.S. officials.

“Are we starting to see an anti-London bias in U.S. regulatory activities?” the executive asked. “Oh yes. Is there any subtle form of banking sector protectionism going on? Yes.”

5--Obama fights ban on indefinite detention of Americans, RT

The White House has filed an appeal in hopes of reversing a federal judge’s ruling that bans the indefinite military detention of Americans because attorneys for the president say they are justified to imprison alleged terrorists without charge.

Manhattan federal court Judge Katherine Forrest ruled in May that the indefinite detention provisions signed into law late last year by US President Barack Obama failed to “pass constitutional muster” and ordered a temporary injunction to keep the military from locking up any person, American or other, over allegations of terrorist ties. On Monday, however, federal prosecutors representing President Obama and Defense Secretary Leon Panetta filed a claim with the 2nd US Circuit Court of Appeals in hopes of eliminating that ban.

The plaintiffs "cannot point to a single example of the military's detaining anyone for engaging in conduct even remotely similar to the type of expressive activities they allege could lead to detention," Obama’s attorneys insist. With that, the White House is arguing that as long as the indefinite detention law hasn’t be enforced yet, there is no reason for a judge to invalidate it....

In section 1021 of the NDAA, the president’s authority to hold a terrorism suspect “without trial, until the end of the hostilities” is reaffirmed by Congress. Despite an accompanying signing statement voicing his opposition to that provision, President Obama quietly inked his name to the NDAA on December 31, 2011. In May, however, a group of plaintiffs including notable journalists and civil liberty proponents challenged section 1021 in court, leading to Judge Forrest to find it unconstitutional one month later.

6--Reuters Runs Interference for Elite Corruption, Scrubs Article That Shows How Banks Get Out of Jail Free, naked capitalism

7--Real Wages Much Lower Than They Were Four Decades Ago, washington's blog
8--Economic growth in eurozone impossible without break-up - Wolfson Prize winner, RT
9--House Prices will decline month-to-month Seasonally later in 2012, cal risk

10--Freddie Mac: Threat of shadow inventory subsides, home prices rise, Housingwire

It's often feared a shadow inventory of homes will flood the housing market derailing the fragile recovery that some now believe is under way. But a new report from Freddie Mac says this view may be too pessimistic given today's rising home prices and falling REO levels.

While the real estate market has its share of distressed loans and assets looming on the sidelines, the nation's excess supply of vacant properties continues to fall, simultaneously making room for more REO absorption, Freddie said in its August "U.S. Economic & Housing Market Outlook" report.

"This continuing shrinkage in excess vacant stock is important because it means that in most markets the REO homes on the for-sale market are not competing with an oversized vacant housing inventory," the government-sponsored enterprise asserted in its report. "Thus, REO homes may be more attractive to investors and first-time buyers because fewer vacant homes are available, and REO sales will have less effect on other home sales or home values."

Thirty-four states and the District of Columbia saw home values rise during the 12-month period leading up to June 2012, the largest number of states with positive annual appreciation in five years.

Just a few years ago, the nation faced an "unprecedented oversupply of housing stock," Freddie said. But with homebuilding suppressed for years and more households finally forming, a great deal of that excess inventory has already been absorbed, the GSE said.

11--No More Growth Miracles,  Dani Rodrik,  Project Syndicate

 A year ago, economic analysts were giddy with optimism about the prospects for economic growth in the developing world. ... Today, such talk has been displaced by concern... Recent economic data in China, India, Brazil, and Turkey point to the weakest growth performance in these countries in years..., there are strong reasons to believe that rapid growth will prove the exception rather than the rule in the decades ahead.

12--Too much oil,

OPEC pumped 2.1 million barrels a day more than projected demand in April through June, the biggest overproduction for any quarter since 1998, the International Energy Agency estimates. Brent will fall to $93 by September and $83 by year-end, according to the Centre for Global Energy Studies. .... While the world faces the slowest pace of growth in fuel demand since the 2009 recession, crude rallied above $110 this week amid heightened political tensions in Syria.

“There is an overhang of producible oil in the world,” Ed Morse, Citigroup’s global head of commodities research, said in a July 31 phone interview from Houston

13--China: deflation is still the problem,

Looking ahead, we think upward inflation pressures – especially from food prices – are going to dominate the CPI trend till the year-end, pushing the headline back above 3% in late Q4. However, PPI is likely to remain deeply negative in yoy terms until early 2013.

This combination of consumer price inflationary pressure with producer price deflation creates a monetary policy dilemma, she says. Which is just what the PBoC doesn’t need right now.

14--Zillow – The Housing Market has Bottomed, prag cap

15--More Than 50% of Poll Respondents Expect Economy to Get Worse, WSJ

16--Twin Reports Stoke Cautious Optimism for Rebound in the Housing Market, NYT

The mortgage giants have moved into the black as American home prices have increased, delinquency rates have continued to fall and what analysts have cautiously described as a housing recovery has begun to take hold.

This week, CoreLogic, a real estate data firm, said that home prices rose 2.5 percent in June compared with a year ago. There has also been a surge in refinancing, as homeowners have taken advantage of record low interest rates.

“At the halfway point, 2012 is increasingly looking like the year that the residential housing market may have turned the corner,” Anand K. Nallathambi, CoreLogic’s president, said in a statement. “While first-half gains have given way to second-half declines over the past three years, we see encouraging signs that modest price gains are supportable across the country in the second half of 2012.”

Both mortgage financiers said that loans made during the housing bubble — loans on which homeowners were more likely to default — were becoming smaller proportions of their portfolios. That means that the two mortgage giants expect smaller losses on bad loans and better earnings on good ones.

Freddie said loans that originated from 2005 to 2008 accounted for about a quarter of their portfolio of single-family mortgages, and loans originated after 2008 were more than half.

Housing experts caution that the increase in home prices might not augur a housing turnaround — and that further losses might still lie ahead for the Washington-based mortgage financiers. Though prices increased in June, home sales declined by 5.6 percent, the largest drop in 16 months, according to Capital Economics...

Fannie and Freddie have required about $190 billion in federal assistance. They have paid back about $46 billion in dividend payments.

17--Real estate’s high end is finally getting whacked, oc housing news

I believe the low end of the housing market is finding a bottom. Due to the timely processing of subprime foreclosures, prices crashed hard at the low end, and shadow inventory is much less abundant. Low interest rates and lower prices pushed affordability to record highs, and investor interest has helped absorb the visible MLS inventory. As a result, properties priced below the median in most markets is probably not going to go down much from here.

The high end is another story....

Even the rich aren’t immune to the pressures of the housing market.

Prices for homes priced at $1 million or more have fallen a 20 percent this year, according to RealtyTrac. The average sale price for top-tier real estate has fallen to just over $2 million, from $2.5 million in 2011.

Those prices cuts stand in stark contrast to the broader housing market, which is seeing early signs of price stability and even price increases for the first time in years.

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