Friday, June 7, 2013

Today's links

1---Mr. Market’s Temper Tantrum Over Fed Tapering Talk, naked capitalism

Lordie, the market upset we’ve had over the past week plus over Bernanke using the T, as in “tapering” word, is escalating into a full-blown hissy fit. We now have the Wall Street Journal and other finance-oriented venues telling us how unbelievably important today’s job report is. Huh? One jobs report is just another in a long series of data points.
So why has this one been assigned earth-shaking importance? Let’s look at what is going on in the economy:
1. PMI has slipped into negative territory
2. Refis (a boost to consumer ability to spend) are falling fast
3. Inflation expectations are falling
4. Inflation is falling
5. Unemployment is over the Fed’s target and we still have a ton of discouraged workers and underemployment
6. The sequester will only make 1-5 worse

2---12 Clear Signals That The U.S. Economy Is About To Really Slow Down, zero hedge

.. The average interest rate on a 30 year mortgage has risen above 4 percent for the first time in more than a year.

The decline in the number of mortgage applications last week was the largest drop that we have seen since June 2009.

 Mark Hanson is reporting that "mass layoffs" have occurred at three large mortgage institutions...

This morning I was made aware that three large private mortgage bankers I follow closely for trends in mortgage finance ALL had mass layoffs last Friday and yesterday to the tune of 25% to 50% of their operations staff (intake, processing, underwriting, document drawing, funding, post-closing).
This obviously means that my reports of refi apps being down 65% to 90% in the past 3 weeks are far more accurate than the lagging MBA index, which is likely on its' way to print multi-year lows in the next month.
It was just announced that average hourly compensation in the United States experienced its largest drop since 2009 during the first quarter of 2013.

 As I wrote about the other day, the Institute for Supply Management manufacturing index declined to 49.0 in May.  Any reading below 50 indicates contraction.  That was the first contraction in manufacturing activity in the U.S. that we have seen since 2009.

 The inventory to sales ratio has hit a level not seen since 2009.  That means that there is a lot of inventory sitting out there that people are not buying.

.... Job growth at small businesses is now at about half the level it was at the beginning of the year.

The stock market is starting to understand that all of these numbers indicate that the U.S. economy is really starting to slow down.  The Dow was down 216.95 points on Wednesday, and it dropped below 15,000 for the first time since May 6th.

3---Housing: Recovery … Or Artificial Bubble Which Is About to Pop?, Washington's blog

Look at the chart below, which shows new purchase mortgages through the 3rd quarter of 2012, using data from the Mortgage Bankers Association. For that quarter, buyers took out $129 billion in purchase loans. Not only is that much lower than the numbers from the boom, but it’s less the post-crash levels of 2009. You need to go back to the mid-1990s to get back to numbers like those (and they’re not adjusted for inflation).


institutional investors have been targeting specific markets and then accelerating purchases of REOs in those markets, driving down distressed inventories and leading to notable increases in REO prices that have in turn led to larger market upticks. Institutional investors have focused buying efforts strongly on south and southwestern cities that were hit hardest by the foreclosure crisis. The cities where investors activity has been particularly robust in the past year are Atlanta, Ga., Detroit, Mich., Las Vegas, Nev., Phoenix, Ariz., and Calif.’s Los Angeles, Riverside and Sacramento.
Interestingly, many of these areas have welcomed notable year-over-year price increases as well — though none quite as much as Phoenix, which welcomed a nearly 23% uptick in prices throughout 2012, amid reports of frenzied bidding wars. The share of institutional investors in the desert metropolis was 16% in 2011; it jumped to 26% in 2012. Not surprisingly inventory levels plummeted as demand increased, putting upward pressure on prices that have created a ripple effect. Explains Khater:

“In Q4 2012, Phoenix REO prices were 37% higher than a year ago, followed by Las Vegas (30%) and several California markets. All six markets with rising shares of institutional investors experienced double-digit increases and were among the top nine for REO price appreciation.
“More importantly, the ripple effects are greatly impacting the broader market. Lower-end home prices in markets with rising shares of institutional investors are up 15% from a year ago, compared to only 6% for the remaining markets.”
Institutions are most active in five states: Florida, Georgia, Arizona, Nevada and California
...

In April, the Washington Post pointed out:
Real estate executives say institutional investors — who in some cases are bidding on hundreds of homes a day — account for as much as 70 percent of sales in some Florida markets. Over the past two years, analysts say, they also have accounted for a majority of purchases in other parts of the country where housing prices are rebounding sharply.The influx of investors may explain why home prices have been rising in parts of the country most affected by the housing crash, despite high jobless rates and relatively few new mortgages being issued by lenders....

CNBC reported in May:
“If you think about all of the major institutions maybe owning 70,000 total homes compared to the market size of 14 million homes, the long term potential is enormous. Institutions are literally a fly on an elephant,” said Aaron Edelheit, CEO of The American Home, an Atlanta-based company that owns and manages about 2,500 homes. “We may look back and realize that the REO [real estate owned] to rental space was only the foundation for an exponentially larger industry with institutions owning hundreds of thousands, if not millions, of homes..

Nationwide, 68 percent of the damaged homes sold in April went to investors, and only 19 percent to first-time home buyers, according to Campbell HousingPulse.

4---The REAL Reason Housing Prices Have Skyrocketed, Washington's blog

5---Anger swells after NSA phone records court order revelations, Guardian

Senior politicians reveal that US counter-terrorism efforts have swept up personal data from American citizens for years

The Center for Constitutional Rights said in a statement that the secret court order was unprecedented. "As far as we know this order from the Fisa court is the broadest surveillance order to ever have been issued: it requires no level of suspicion and applies to all Verizon [business services] subscribers anywhere in the US.
"The Patriot Act's incredibly broad surveillance provision purportedly authorizes an order of this sort, though its constitutionality is in question and several senators have complained about it."

Russell Tice, a retired National Security Agency intelligence analyst and whistleblower, said: "What is going on is much larger and more systemic than anything anyone has ever suspected or imagined."
Although an anonymous senior Obama administration official said that "on its face" the court order revealed by the Guardian did not authorise the government to listen in on people's phone calls, Tice now believes the NSA has constructed such a capability.
"I figured it would probably be about 2015" before the NSA had "the computer capacity … to collect all digital communications word for word," Tice said. "But I think I'm wrong. I think they have it right now."

6---The collapse of the austerity consensus brings no change in policy, NYT

it’s hard to think of any previous episode in in the history of economic thought in which we had as thorough a showdown between opposing views, and as thorough a collapse, practical and intellectual, of one side of the argument.

And yet nothing changes. Not only don’t the policies change; by and large even the people don’t change. Reinhart and Rogoff may get a bit fewer high-profile invites, as will Alesina and Ardagna; but Bowles and Simpson are still touring, the same people at the BIS and the OECD are still issuing dire warnings about the dangers of easy money, George Osborne is still making pronouncements, Paul Ryan is still the intellectual leader of his party.
OK, I know I’m hyperventilating a bit. But the lack of accountability, for ideas and people, is truly remarkable in a time of massive policy failure.

7---The spite club, NYT

A new study from the RAND Corporation ... examines the consequences if 14 states whose governors have declared their opposition to Medicaid expansion do, in fact, reject the expansion. The result ... would be a huge financial hit: the rejectionist states would lose more than $8 billion a year in federal aid, and would also find themselves on the hook for roughly $1 billion more to cover the losses hospitals incur when treating the uninsured.
Meanwhile, Medicaid rejectionism will deny health coverage to roughly 3.6 million Americans, with essentially all of the victims living near or below the poverty line. And since past experience shows that Medicaid expansion is associated with significant declines in mortality, this would mean a lot of avoidable deaths: about 19,000 a year, the study estimated.
Just think about this... It’s one thing when politicians refuse to spend money helping the poor and vulnerable; that’s just business as usual. But here we have a case in which politicians are, in effect, spending large sums, in the form of rejected aid, not to help the poor but to hurt them.

8---The Facts of the Case and Why We’re Not Following Them, jared bernstein

Inflation remains a phantom menace.  Calls for eliminating fiscal and especially monetary stimulus have often been made with great urgency as those those policies are sure to stoke inflationary pressures.  Except there are none, i.e., inflationary pressures.  The figure shows the core PCE price index, which is clearly decelerating and most recently clocked in at a dis-inflationary 1%.
This should not surprise anyone.   With labor demand only slowly ramping up and unemployment still high, there’s no pressure on labor costs.  Averaging (noisy) annual growth rates in unit labor costs, which measure employers’ real compensation costs per unit of output, since 2012 gets you 1.1%.
lin5

9---Dodd Frank, no implementation, yet, WA Post

What happened to the other 245 rules? Well, 117 have been proposed but not finalized. But 128 haven’t even been proposed yet. More concerning still, regulations around banking, asset-backed securities, and “liquidation authority” — perhaps the regulations most directly related to the causes of the 2007-08 crisis and bailout — are particularly slow in being implemented:
usatoday_doddfrank_2So who’s to blame here? Edwards and Gary Rivlin of The Nation argue that persistent industry lobbying has slowed down rule-making and, where rules were produced, made them more industry-friendly.

10-- Labor's share falls everywhere, Tim Taylor

11---Time for a fiscal reset, Mother Jones

You've seen versions of these charts before, but Michael Linden of CAP has now updated them. They send a pretty clear message: Over the past two years, the federal deficit has been slashed by about $2.5 trillion, mostly via spending cuts. As a result, our medium-term deficit picture has brightened considerably.
And now? It's time to stop. The economy is still fragile, austerity has failed utterly in Europe, and we don't need any more of it here. For now, at least, a deficit of around 3 percent of GDP is, if anything, too low. It's time to hit the reset button. The full report is here.

12-- The Unknown Patriot Who Exposed the Government's Verizon Spy Program, Atlantic

In praise of whistle-blowers whose risky disclosures of official wrongdoing make the nation stronger rather than weaker
 
13--Outside agitators, antiwar
 
A Cairo court has convicted 43 men and women of using foreign funds to foment unrest inside Egypt in connection with the overthrow of President Hosni Mubarak.Sixteen of those convicted were Americans. All but one, Robert Becker of the National Democratic Institute, had already departed. Becker fled this week rather than serve two years in an Egyptian prison...

While U.S.-funded democracy promotion is portrayed as benign, the National Endowment for Democracy, the International Republican Institute, DNI, and Freedom House have been linked to revolutions that brought down regimes in Serbia, Ukraine, Georgia, Uzbekistan, and Kyrgyzstan, and nearly succeeded in Belarus.
People who pride themselves on bringing about revolutions should not whine when targeted regimes treat them like troublemakers.

And who directs these “pro-democracy” groups?
Before 2011, Freedom House was headed by ex-CIA Director Jim Woolsey, who says we are in “World War IV.” The IRI is chaired by John McCain, who pushed for U.S. intervention in the Russia-Georgia war and is clamoring for airstrikes on Syria.
The DNI chairman is ex-Secretary of State Madeleine Albright, who says: “We are the indispensable nation. We stand tall, and we see further than other countries into the future.”

14---Police-State ‘Progressivism’, antiwar


The bombshell dropped by Glenn Greenwald and the Guardian has exploded any pretenses to being the linchpin of American liberalism Barack Obama may have retained until this point. In a story that broke yesterday [Wednesday, June 5], Greenwald revealed that the US government has been spying not just on targeted alleged “terrorists,” but on each and every one of us:
The National Security Agency is currently collecting the telephone records of millions of US customers of Verizon, one of America’s largest telecoms providers, under a top secret court order issued in April.
The order, a copy of which has been obtained by the Guardian, requires Verizon on an “ongoing, daily basis” to give the NSA information on all telephone calls in its systems, both within the US and between the US and other countries.
The document shows for the first time that under the Obama administration the communication records of millions of US citizens are being collected indiscriminately and in bulk – regardless of whether they are suspected of any wrongdoing.”
Just to be clear: at the instigation of the Obama administration, a secret court issued a secret order that a top-secret program to spy on all Americans is legal, necessary, and will continue indefinitely.
.....

So this administration’s progressive amen corner would have us believe. Like any religious belief, however, it is impervious to challenge, since it is an article of faith. The Greenwald revelations debunk this dogma, and that indeed is what Glenn has been doing for his entire career as a journalist and public figure – challenging “liberal” shibboleths and exposing the hypocrisy of self-styled “progressives” who look the other way as their hero shreds the Constitution, conducts a ruthless and cowardly drone war, and extends the shroud of secrecy that envelopes his disgraceful record in the name of “national security.”....

The upshot of all this is it looks like the old Bush administration era “Total Information Awareness” program is alive and kicking. Although Congress passed legislation abolishing the program in 2003, the government simply changed its name to Terrorist Information Awareness and kept doing what it was doing – keeping tabs on all Americans. The Bush administration claimed this was being done only with overseas calls, but that turned out to be a lie – and now the lie is the law, with the Obama regime claiming it’s all legal under section 215 of the Patriot Act, and under the provisions of FISA, the Foreign Intelligence Surveillance Act, under which the FISA “courts” and the whole apparatus of our emerging police state has been legalized.
It all comes back to our foreign policy of global intervention and our continuing and relentless “war on terrorism...

As Michael Scheuer points out in his invaluable book, Imperial Hubris, Uncle Sam is the best friend Al Qaeda ever had – a point the Obamaites may be in the process of confirming beyond a reasonable doubt, as the “let’s help the Syrian rebels” movement gains new momentum within the administration.

15---Unemployment jumps to 7.6%, cal risk

16---Barack Obama’s health care counterrevolution, wsws

One of the most despicable provisions of the legislation is one that penalizes companies that offer higher-priced insurance that could be considered more comprehensive in the current insurance market. Dubbed “Cadillac plans,” such insurance is valued at over $10,200 a year for individual coverage or $27,500 for a family. Companies or health insurers that continue to offer these plans will face a 40 percent excise tax on the amount exceeding this threshold.
The aim of this provision is clear: to encourage employers to junk these plans and replace them with cut-rate insurance with higher deductibles and co-pays and drastically reduced benefits.
...

. As the World Socialist Web Site stated following the passage of the health care legislation, “All of Obama’s policies have been geared toward increasing social inequality… The claim that the health care overhaul is an oasis of progress in this desert of social reaction is simply a lie.” Backers of the health care overhaul—in the unions, among Democratic Party hangers-on and the pseudo left—have desperately sought to promote the illusion that there must be something progressive in the law. In fact, it is a thoroughly reactionary. ...


On March 21, 2010, two days before signing the health care bill into law, Barack Obama declared that it represented “another stone firmly laid in the foundation of the American Dream.” More than two years later, this statement has been exposed as a cynical lie. From the beginning, the legislation has been crafted to serve the interests of private insurers, pharmaceuticals and giant health care chains, while cutting costs for corporations and the government, all at the expense of working families and the poor....

As states and the federal government begin to establish the insurance exchanges where individuals and families without employer or government-provided insurance will be required to purchase coverage from private carriers, the Obama administration’s claims that the Affordable Care Act would expand access to quality health care for millions are being refuted on virtually a daily basis. (See “US health reform to slash care, leave millions uninsured”)

A brutal assault on Medicare has always been a central component of the ACA, which will reduce reimbursements to the government-run program by more than $700 billion over 10 years, severely limiting access to medical services for close to 50 million seniors and the disabled.
A reform that was touted by Obama and the Democrats as providing “near universal health care coverage” will leave an estimated 30 million people uninsured in 2016, according to a study released Thursday by a research team from Harvard Medical School and the City University of New York School of Public Health.

This will be the case for some 5.7 million people in the 26 US states that are refusing to expand Medicaid coverage under the ACA. Most states do not provide Medicaid for the entire poor population, and this will remain the case in those states where the program is not being expanded. In a cruel twist, due to the way the law is written, some of the very poorest of the uninsured will also be denied government subsidies to purchase insurance on the exchanges

17---Info dragnet; Fishing expedition to strengthen Obama politburo, wsws

The entire political establishment, Democratic and Republican, along with the mass media, is complicit in a conspiracy against the American people. There can be little doubt that the major media outlets in the US knew about the program and kept it concealed at the request of the Obama and Bush administrations. It is significant that the newspaper that leaked the FISA court order was not American, but British.
In response to the Guardian revelations, administration officials and leading figures in both political parties moved quickly to defend the program.

A senior administration official insisted that “all three branches of government are involved” in approving the spying and that Congress “is regularly and fully briefed on how it is used.” He declared that there is a “robust legal regime in place governing all activities conducted pursuant to the Foreign Intelligence Surveillance Act.”

Claims of a “robust legal regime” are a fraud. The FISA courts simply rubber stamp government requests for spying, approving virtually every submission...

The leaked court order on phone records is only the latest in a series of developments over the past six months exposing the advanced state of preparations for an American police state and the domination of the military-intelligence apparatus over political affairs in the US. These include:
* The leaked “White Paper” in February arguing that the president has the right to unilaterally and secretly order the assassinations of US citizens, along with statements from Holder indicating that such assassinations could be carried out within the country.

* The response to the Boston Marathon bombing in April, including the shut-down of the city under conditions of de facto martial law, followed by the FBI assassination of a key witness in the case.
* The revelation in May that the government has secretly seized the phone records of Associated Press reporters, followed by the report that the administration seized the emails of a Fox News reporter, having charged in a warrant request that he was criminally complicit in the leaking of classified information.

* The opening this week of the court martial of Bradley Manning, who is being prosecuted under the Espionage Act for leaking documents exposing war crimes committed by the US in Iraq and Afghanistan that had been covered up by the media.
As with every attack on democratic rights, the administration is seeking to justify its dragnet of phone records as a necessary part of the “war on terror.” The real target of these actions, however, is not “international terrorism,” but the working class. These police state measures will be employed against social and political opposition to the American financial aristocracy’s policies of austerity, poverty and war
 
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