On December 24, we posted an update on Germany's gold repatriation process: a year after the Bundesbank announced its stunning decision, driven by Zero Hedge revelations, to repatriate 674 tons of gold from the New York Fed and the French Central Bank, it had managed to transfer a paltry 37 tons. This amount represents just 5% of the stated target, and was well below the 84 tons that the Bundesbank would need to transport each year to collect the 674 tons ratably over the 8 year interval between 2013 and 2020. The release of these numbers promptly angered Germans, and led to the rise of numerous allegations that the reason why the transfer is taking so long is that the gold simply is not in the possession of the offshore custodians, having been leased, or worse, sold without any formal or informal announcement. However, what will certainly not help mute "conspiracy theorists" is today's update from today's edition of Die Welt, in which we learn that only a tiny 5 tons of gold were sent from the NY Fed. The rest came from Paris
2---(Auto) Dealers were sitting on $100 billion in new vehicles – which automakers had already recognized as sales on their books, Testosterone Pit
The auto industry plays an outsized role in the US economy, in manufacturing, services, and retail (accounting for nearly 20% of total retail sales). Booming production and sales have been pushing economic growth when hardly anything else was......
AutoNation CEO Mike Jackson poured cold water on it all. He should know. He runs the largest chain of dealerships in the country, an empire of 225 stores that sold 296,419 new retail units in 2013, about 2.24% of total US retail sales. He warned about the out-of-whack inventories.
Dealers were sitting on $100 billion in new vehicles – which automakers had already recognized as sales on their books. Channel stuffing. There were 3.45 million units waiting to be sold. While sixty days’ supply would be “an accepted inventory figure,” as he said, current levels are far above it. The figures were even worse with fleet sales taken out of the equation. He put his finger where it hurts, where it has always hurt....
And now sales have started to slow down. .... overcapacity, overproduction, steep rebates, hollowed-out balance sheets, bloated inventories, and a host of other problems that suddenly came in contact with crashing sales.
3---Loans-to-deposits ratio hits a new low, (QE gets the Banks "lending again?) sober look
Earlier this week, CNN Money ran a story on JPMorgan's quarterly results. Instead of focusing on the earnings, the author's (Stephen Gandel) discussed the fact that JPMorgan's loan-to-deposit ratio (LTD) hit a new low.
FORTUNE: - The nation's largest banks are healthier than they have been in years. Someone, apparently, forgot to tell their loan officers.While JPMorgan's LTD is particularly low, the bank is by no means unique. As discussed earlier (see post), LTD in the US is at the lows not seen in decades. On an absolute basis the gap between deposits and loans is now at some $2.4 trillion and growing. This divergence seems completely unique to the post-financial crisis environment.
JPMorgan Chase reported its 2013 profits on Tuesday. The news was mostly good -- bottom line: $18 billion -- but there was one significant black spot, not just for the bank, but for the economy in general. A key lending metric, the ratio of the bank's loans-to-deposits, hit a new low.
In 2013, JPMorgan on average lent out just 57% of its deposits. That's down from 61% a year ago and the lowest that ratio has been in at least a decade. Back in 2004, JPMorgan's loan-to-deposit percentage was as high as 88%.
4---The Mortgage Market Just Cratered And The Fed Should Be Worried, mark gongloff
The mortgage market cratered in the fourth quarter of 2013, Wells Fargo and JPMorgan Chase reported on Tuesday, as higher interest rates all but murdered demand for mortgage refinancing.
The nation's biggest mortgage lender, Wells Fargo, said its mortgage volume tumbled to $50 billion in the quarter, down 60 percent from $125 billion a year ago. The second-biggest lender, JPMorgan Chase, said its mortgage originations, that includes new home purchases and refinancings, fell 54 percent to $23.3 billion from $51.2 billion a year ago. (Story continues after chart of ugliness.)
These two banks are key indicators for the state of the housing market. Wells Fargo issued nearly 23 percent of all U.S. home loans last year, to JPMorgan Chase's 11 percent, according to industry tracker Inside Mortgage Finance.
And the story they're telling is stark: Higher rates have hurt demand. The average interest rate for a 30-year fixed-rate mortgage has jumped to 4.5 percent from a record low of 3.3 percent in early 2013, according to government-backed mortgage giant Freddie Mac.
5---Sanders: "U.S. housing is now the most unaffordable that it even has been." HW
"Given that existing home sales make up more than 90% of all home sales, a key question is whether the current slump will prove temporary or permanent."
Diggle goes on to consider various factors that could hurt sales. Most are well known but one no one looks enough at is housing prices. Combined with slowly rising rates, inflated home prices have reduced mortgage availability.
"The share of respondents to Fannie Mae’s monthly housing survey who think that now is a good time to buy a home dropped from 76% in May to 64% in November, while NAR’s index of buyer traffic declined from 72 to 53 between April and October," Diggle reports.
Whether housing is in a bubble depends on how a bubble is defined, of course, but there are some startling disparities in home prices and incomes.
The current spike in prices is not being driven by first-time homebuyers entering the market.
Homes are best priced relative to incomes, and that relationship is approaching 2007 bubble levels.
The median income today is about $51,000, while the median home price is $328,000. As noted in a post by Phoenix Capital Management, that means the average price is 6.4 times more than median incomes.
In 2007, when the bubble was its fattest, homes cost 6.8 times median incomes.
And while home prices have been rising (to the delight of real estate agents), incomes have been stagnant or declining. Median income today is close to levels seen in 1987.
Anthony Sanders, distinguished professor of real estate finance at George Mason University, has been sounding the alarm about this for a while.
"After decades of “affordable” housing policies from HUD and the Federal government, U.S. housing is now the most unaffordable that it even has been," he writes. "Note the decline in real median household income since peaking in 1999 and is now $5,000 lower (or 9% lower). Average U.S. house prices are, on the other hand, 68.4% higher today than in December 1999."
As Kerri Panchuk notes, it’s really hitting younger, would-be first-time buyers. They are either living at home with their parents, or else choosing to live in multifamily much longer than previous generations. It’s not because they want to but because they are priced out of home ownership.
The big driver of rising home prices has not been incomes or sales, but rather institutional investors buying up swathes of vacant properties which they turn into rentals.
That, along with an all-stops policy on the part of the Federal Reserve to keep liquidity in the market and interest rates suppressed have fueled what recovery we've seen.
"The simple reality is that there has really been very little actual recovery in housing. With five years of economic recovery now in the rear view mirror, it is clear that the average American is really not recovering as evidenced by the lowest level of home ownership since 1980," says Lance Roberts, at STA Wealth Management. "As I stated previously, the optimism over the housing recovery has gotten well ahead of the underlying fundamentals."
6---In U.S., 67% Dissatisfied With Income, Wealth Distribution, Gallup
Democrats and independents are more dissatisfied than Republicans
WASHINGTON, D.C. -- Two out of three Americans are dissatisfied with the way income and wealth are currently distributed in the U.S. This includes three-fourths of Democrats and 54% of Republicans.
Mood of the Nation survey included a question asking Americans how satisfied they are with income and wealth distribution in the U.S. Few, 7%, report that they are "very satisfied" with the distribution, while 39% of Americans say they are "very dissatisfied.".....
Americans are much less optimistic about economic opportunity now than before the recession and financial crisis of 2008 unfolded. Prior to that, at least two in three Americans were satisfied, including a high of 77% in 2002.
7---Americans' Satisfaction With Economy Sours Most Since 2001, Gallup
Public more satisfied on most other issues today than 13 years ago
The biggest change in satisfaction has been with the state of the economy -- now much lower than it was then, at the end of the dot-com boom and before the major recession of 2008-2009.
The state of the nation's economy 2001--68% satisfied
2114 --28% (40 pt difference)
8---The top 10 percent of workers are now earning half of the total income in the United States, according to a new report released Thursday by the U.S. Congress Joint Economic Committee. cvbt
The United States now has one of the largest disparities in incomes among advanced economies, according to the Organisation for Economic Co-operation and Development. Income inequality in the United States is also worse than in many emerging economies. According to the World Bank, income inequality in the United States is higher than in India, Russia and Jordan.
9---Housing Recovery Is Here to Stay, Dallas Fed Says , wsj (uh huh)
... according to the Oxfam data, the richest 1 percent of people across the globe have $110 trillion, or 65 times the total wealth of the bottom half of the planet’s population – which effectively “presents significant threat to inclusive political and economic systems.”
12---Civil war in Mexico?, Raimondo
An all out civil war in Mexico would have to mean millions of refugees crossing the border into the US in a veritable floodtide – one that could not be stopped by our Border Patrol, or, indeed, anything short of a massive military mobilization. The military conflict would inevitably spill over the border: for the first time since the Mexican-American war, the American southwest could conceivably become a battle zone.
Will Mexico’s civil strife be played out on the streets of American cities? This is a question our political class ought to be asking about now, but they’re too fixated on the wars in far-off Afghanistan, Syria, and Iraq to fully appreciate (or even notice) the fire burning right on their doorstep.
13---Despite the anti-snoden propaganda, "Among younger people—18 to 29 years old—this sentiment has been even more overwhelming, with 77 percent indicating support for Snowden’s actions.", wsws
The latest Quinnipiac poll, conducted earlier this month, showed support for Snowden has only grown in recent months, with 57 percent calling him a whistle-blower, as opposed to 34 percent—barely one third—agreeing with Obama and the leadership of both major parties, who portray him as a traitor. Among younger people—18 to 29 years old—this sentiment has been even more overwhelming, with 77 percent indicating support for Snowden’s actions. Support is also substantially higher among Americans with incomes of $50,000 or less than among those taking in $100,000 or more.
That this popular support for Snowden finds no expression within the political establishment or mass media only underscores the vast gulf separating working people, the vast majority of the population of the United States and the entire planet, from the moneyed oligarchy that controls both political parties, as well as the major newspapers and television networks.
The support for Snowden goes hand-in-hand with growing popular anger over record levels of social inequality and the US government’s policy of transferring social wealth to the rich while attacking the social and democratic rights of the working class and preparing new wars.
14---ALBERT EDWARDS: We're On The Cliff Of Deflation And Markets Don't Seem To Care, bus insider
15---California single-family home and condominium sales down 18.4 percent from a year ago, property radar
For the fifth consecutive month, December 2013 California property sales declined on a year-over-year basis, confirming that the 115-basis-point increase in mortgage interest rates since May has been a drag on the California real estate market. In addition, the double-digit monthly increases in median home prices that occurred in 2012 and the first half of 2013 came to an abrupt stop in June 2013 and median prices have been more or less unchanged ever since. The slowdown in price appreciation is good news for homebuyers who found themselves priced out of the market earlier last year.
Now that the Federal Reserve has begun to unwind their QE3 bond-buying program, in 2014 we expect 30-year mortgage interest rates to gradually rise from their current 4.5 percent level to 5.0 percent sometime later this year. While some believe that the rise in mortgage interest rates will have little effect on the California property market, I believe the sluggish pace of income and job growth, hallmarks of the current recovery, will continue to weigh down the real estate markets which will likely see slower growth and price appreciation
16---Squeezing out the working class through higher rents: 11.3 million Americans spend more than half their income on rent in 2011, a jump of 28 percent from 2007., Dr Housing Bubble
Welcome to landlord nation. People need a place to live and a recent Harvard analysis found that more Americans are spending a larger portion of their income on housing. More to the point, there are now 11.3 million Americans that spend half of their income on rent. This is a significant jump of 28 percent from 2007
17---Risky mortgage lending is back?, DS News
....researchers conclude that less than half of the home purchase loans extended in recent months can be considered low risk—despite claims that today’s credit standards are too tight. All index results for purchase loans with a federal guarantee are high relative to prudent standards, and they've begun to edge up lately.
18---Lenders Continue to Lower Credit Requirement Thresholds, DS News