Thursday, July 25, 2013

Today's links

1---About That US hedge
Whenever the annual change in core capex, also known as Non-Defense Capital Goods excluding Aircraft shipments goes negative, the US has traditionally entered a recession. Where is this number now: +0.8%, and declining fast. Feeling lucky?


2---Watchdog: Borrowers in Obama housing program re-defaulting, CNN
                         306,000 borrowers have re-defaulted on their loans, SIGTARP says

Nearly 1.2 million mortgage modifications have been completed since the Home Affordable Modification Program (HAMP) was first launched four years ago. Yet more than 306,000 borrowers have re-defaulted on their loans and more than 88,000 are at risk of following suit, the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) found in its quarterly report to Congress.
In addition, the watchdog found that the longer a homeowner stays in the HAMP modification program, the more likely they are to default. Those who have been in the program since 2009, are re-defaulting at a rate of 46%, the inspector general found.
HAMP, which was launched by the Treasury Department at the height of the foreclosure crisis, aimed to help as many as 4 million borrowers avoid foreclosure by making their payments more affordable through reduced interest rates, extended loan terms or, in some cases, reduced mortgage principals.
Not only has the program fallen far short of that goal but with each year of the program, a growing number of homeowners have re-defaulted, the inspector general found.
"Treasury needs to research why so many borrowers are dropping out of the program," said Christy Romero, the head of SIGTARP.
Abenomics is working," says Klaus Baader, from Societe Generale. The economy has roared back to life with growth of 4pc over the past two quarters – the best in the G7 bloc this year. The Bank of Japan's business index is the highest since 2007. Equities have jumped 70pc since November, an electric wealth shock.
"Escaping 15 years of deflation is no easy matter," said Mr Abe this week, after winning control over both houses of parliament, yet it may at last be happening.
Prices have been rising for three months, and for six months in Tokyo. Department store sales rose 7.2pc in June from a year earlier, the strongest in 20 years. ...

Above all, Abenomics has shifted the yen," said Mr Baader. The 22pc devaluation since October has held, rather than snapping back as usual. The psychology of yen appreciation is breaking. Exports have jumped 7.4pc from a year ago.
The nasty side-effect is a deflationary trade shock for China, now paying the price for pegging its currency to the US dollar. Veterans will remember the Asian crisis in 1997-98 when Fed tightening slowly choked China's economy.

Yet for Japan the weak yen is the Holy Grail. We forget that it rose 45pc on a trade-weighted basis from 2007 to late 2012, and by 70pc against the euro and 90pc against Korea's won. The strong yen -"Endaka" – had itself become the driving force of deflation....

Mr Abe has created a tailwind before he launches his blast of Thatcherite reforms, or "Third Arrow", intended to drag Japan's pre-modern service sector kicking and screaming into the 21st century, to open the rice paddies to commercial farming, to open the country to the world and, in theory, to demolish the edifice of vested interests, using the Trans Pacific Partnership as a sledgehammer.

5---US healthcare now double the global average, Bloomberg video

6---The Systematic, Unrelenting Deterioration Of Japan’s Trade, Testosterone Pit 
The all-out effort by Japanese Prime Minister Shinzo Abe to print money, stir up inflation, devalue the yen, blow asset bubbles, and pile on even more government debt – a newfangled religion called Abenomics – is bearing fruit. But the primary objective, creating a trade surplus to crank up the real economy, is failing miserably.

Exports rose 7.4% in June, but imports jumped 11.8%, and the balance of trade swung from a surplus in June 2012 to a deficit of ¥180 billion ($1.8 billion). By US standards, that would be great: a deficit so small that it would disappear in statistical noise. We’d jubilate because we haven’t seen anything this good since the no-holds-barred offshoring boom took off in earnest in the early 1990s. But Japan’s June trade deficit confirms a terrible trend – for an economy that has become dependent on a trade surplus.

In June 2012, Japan had a surplus of ¥60.3 billion, one of the only two surpluses of the year. In June 2011, it had a surplus of ¥69.3 billion, one of five surpluses that year. By that time, the shutdown of its nuclear reactors had already started. In June 2010, before the shutdowns, the trade surplus was ¥670 billion. Even during the financial crisis, when major trade aberrations occurred, Japan had a trade surplus in June. Since the beginning of the data series in 1979, Japan has always had a trade surplus in June.

So June 2013 became the first modern June on record when Japan ran a trade deficit. It set another record: it was the 12th month in a row of trade deficits. And another record: for the first half of 2013, the trade deficit jumped 70% from the same period last year to ¥4.8 trillion!

Japan has entered a new frontier. June was the worst June ever, May the worst May ever, April the worst April ever..... The deterioration has been systematic, unrelenting, and fierce. The chart, going back to 2011, shows how the trade deficit in each month of 2013 deteriorated from the equivalent month in 2012; and how it had deteriorated in 2012 from the equivalent month in 2011. ...

Part of it was due to the yen that dropped 22% against the dollar from June last year and thus inflated the value of imports. Part of it was the wealth effect and corporate optimism that induced Japan Inc. and wealthy individuals, flush with freshly printed money, to splurge

7---Bankers own the world, information clearinghouse

8---More bad news on China's economy, sober look

9---House listings increase, but MLS inventory still at very low levels, oc housing

10--New-Home Sales Surge But Home Builders Still Crumble, Barron's

Yet the report did include some disappointments. Sales in May were weaker than initially reported. The figure was revised down to a 459,000 annual rate from an initially reported 476,000.
It’s been a rough week for housing. Recent data on housing starts, existing home sales and home prices all missed expectations. And today, home building stocks were down across the board.

11---Why slower U.S. home sales signal a good recovery, Fortune

12---Investor frenzy over housing has peaked, Fortune

13---With  stagnant wages, what will cause rents and home prices to rise?, oc housing
Average hourly wages were unchanged from May to June after adjusting for inflation, the latest sign of households struggling to gain purchasing power in the aftermath of the Great Recession.

The flat result stemmed from a 0.4% increase in average hourly earnings being offset by a rise in the consumer price index. Over the last 12 months, inflation-adjusted hourly wages have risen by just 0.4%.
Given that the CPI readings on inflation has been tame, even nominal wages are growing very slowly. ....

14----Leading Economic Indicators Flat in June, DS News

The Conference Board’s Leading Economic Index (LEI) for the United States was unchanged at 95.3 in June following increases in April and May, the group reported.
“Declines in building permits, new orders and stock prices were offset by gains in consumer expectations, initial claims for unemployment insurance, and other financial indicators,” said Ataman Ozyildirim, economist for the Conference Board. “However, the LEI’s six-month growth rate remains positive, suggesting the economy will continue expanding through the end of the year.”

15---Softened Mortgage Rule Said to Be Proposed Soon by U.S. Agencies, Bloomberg

16---Survey: Current Homeowners Increase Purchases, Investors Exit Market, DS News

17---Softened Mortgage Rule Said to Be Proposed Soon by U.S. Agencies,

A panel of six financial regulators is close to proposing a softened version of a pending rule requiring lenders to keep a stake in risky mortgages that they securitize, according to five people with knowledge of the discussions.
The Federal Reserve and the Securities and Exchange Commission, among others, plan to suggest that lenders must keep a share in the risk of mortgages issued to borrowers who spend more than 43 percent of their income on debt, said the people, who asked to remain anonymous because the discussions are not yet final.

The move would mark a victory for a coalition that includes the National Association of Realtors, the Mortgage Bankers Association, and dozens of other housing-industry participants and consumer groups who protested when the agencies in 2011 released a more stringent draft of the rule, commonly known as the Qualified Residential Mortgage or QRM rule. That proposal would have required lenders to keep a share of mortgages with down payments of less than 20 percent and those issued to borrowers spending more than 36 percent of their income on debt
“If what we’ve heard about the proposed QRM rule is true, then we are very pleased that the agencies are moving towards a broad definition that will benefit the American people by ensuring access to safe, affordable options for buying a home,” Gary Thomas, president of the National Association of Realtors, said today in an e-mailed statement.
Dodd-Frank Act

18---Pacifist Japan no more? Tokyo to consider pre-emptive strike strategy, RT

19---Bagram: The other Guantanamo, Rolling Stone

20---Obama combines demagogy and right-wing policies in speech on economy, wsws

21---Treasury yields climb, WSJ

22---Mortgage rates reverse, Wa Post

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