Tuesday, April 9, 2013

Today's links

1---QE and the Housing Market, Chris Whalen, AEI

QE has changed investor risk preferences
Large investor participation in market for residential homes
Mom & Pop, institutional investors involved broadly in price rally

Recovery is not supported by traditional fundamentals

Declining bank lending, agency volumes
Weak employment, GDP, home ownership

End of bank refinancing boom not a function of QE
Policy drivers behind refinancing boom have run course
Streamlined refinancing rules likely to have modest impact in 2013

Falling yields may cool investor passion
Gross yields on public rental strategies imply net 4-5% net returns

2----Small Business Hiring Outlook Falls To 1-Year Low, IBD

Small businesses, who employ the bulk of American workers, don't plan to hire additional staff, in another sign the job market is deteriorating again.

The National Federation of Independent Business said Tuesday that confidence among small firms dropped, with its index dipping to 89.5 in March from 90.8 in February.
The share of firms planning to grow employment minus the share planning to shrink it fell to a net 0%, the lowest in a year, from 4% in the prior month....

"After another false start, small-business confidence has sputtered and stalled again," said Bill Dunkelberg, NFIB's chief economist, in a statement Tuesday. "For the sector that produces half the private GDP and employs half the private sector workforce — the fact that they are not growing, not hiring, not borrowing and not expanding like they should be, is evidence enough that uncertainty is slowing the economy."
4---'US-trained death squads' organized torture sites across Iraq, RT

The Guardian/BBC Arabic report describes how, during that time, each torture site was under the bureaucratic command of its own interrogation committee.

Each one was made up of an intelligence officer and eight interrogators,” Samari said. “This committee will use all means of torture to make the detainees confess, like using electricity or hanging him upside down, pulling out their nails, and beating them on sensitive parts.”

The hour-long documentary about Steele is the result of a 15-month investigation by the British media giants sparked by the release of the same classified military documents leaked by Private Bradley Manning. Manning, 25, could be sentenced to 20 years in prison if convicted of exposing the torture routines.

Maggie O’Kane, a multimedia editor and director of investigations at The Guardian, told Democracy Now why the report on Steele needed to be released.

When the WikiLeaks documents came out in December of 2011…there was a reference to Frago 242, which was a US military order instructing US soldiers to ignore Iraqi-on-Iraqi torture,” she said. “This incidence, this Frago 242, came up over 1,000 times in the documents as we looked at it and we wondered why this order was issued and what was the story behind it…The Wikileaks documents, because they were the actual documents and what the State Department was sending back to Washington about what was going on, that this was a real treasure trove that we should explore.”

5---The Commission on Portugal: Is This for Real?: A quick note on Portugal. Let’s start from three facts:
  • Austerity did not work. Portugal is in a recessionary cycle. The economy will shrink by 2.3 per cent this year, more than twice as much as the previous government forecast (and the slowdown of exports to the rest of the eurozone is not helping).
  • Austerity is self defeating: the deficit-to-GDP ratio widened from 4.4 per cent in 2011 to 6.4 per cent last year, and is forecasted to be 5.5 per cent in 2013. Far above the target of 3 per cent that the government had agreed with the Troika. My guess is that it will be even larger than that.
  • The magic wand of confidence is not magic. The budgetary cuts did not boost private spending, and expectations remain gloomy. The Financial Times article cites the Portuguese daily P├║blico writing “Portugal has entered a recessionary cycle. People have no reason to believe the future will be any better. The [adjustment] programme has failed and has to be changed.” So long for the confidence fairy…
6---Did Thatcher Turn Britain Around?, NYT
7---America’s Most Profitable Export Is Cash, NYT

8---Vanishing workforce weighs on growth, WA Post

The vanishing trend is more than a decade old, but it accelerated during the Great Recession. Throughout 2012, economists held out hope that it had stopped. But then came Friday’s jobs report, and hopes were dashed.
The Labor Department reported that the U.S. labor force — everyone who has a job or is looking for one — shrank by 500,000 people in March. That brought the civilian labor force participation rate to 63.3 percent in March, its lowest level since May 1979. And it left the workforce several million members smaller than the Congressional Budget Office estimates that it should be, given the nation’s demographics.
Perplexingly, the driving force behind the decline does not appear to be baby boomers beginning to retire, an event economists have long predicted would shrink the size of the workforce. It’s people in the prime of their working years, ages 25 to 54, who began tumbling out of the job market in the early 2000s and have continued to disappear during the recovery.

9--How likely is a sudden rise in mortgage rates?, oc housing
A 1% rise in interest rates would remove 15% of the affordability in the market. Prices could absorb that without declining, but it would spell the end to appreciation. A 3% point rise would be a catastrophe resulting in the reversal of the housing market rally and declining home prices



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