Tuesday, February 18, 2014

Today's links

1---Abenomics: Extreme monetary easing results in slow growth, wsj

Japan said Monday its economy grew an annualized 1.0% in the last quarter of 2013. For 2013 as a whole, growth came to 1.6%. Is this good or bad? Here are five takeaways from Japan’s latest gross domestic product data:

1. Disappointment for Abenomics
The fourth quarter figure is a disappointment for Abenomics–Prime Minister Shinzo Abe’s economic reform drive. Many economists had looked for growth far exceeding 3% in the third and fourth quarters, following a 4% expansion in 2013′s first two quarters. But both July-September and October-December undershot expectations, pointing to a clear deceleration of the Japanese economy. Put in an international perspective, the 1.0% growth is weaker than the 3.2 % growth in the U.S. and 1.1% growth recorded in the euro zone during the same quarter. The annual 1.6% growth comes in bit below 1.9% for the U.S., but much stronger than a 0.4% contraction for the euro zone....

Private consumption, which had been Japan’s growth engine in the past year, grew 0.5% from the previous quarter, but was also below the 0.7% increase on average forecasted by economists. The number shows that the so-called “rush buying”—the front-loading of expenses—ahead of the sales tax rise in April hasn’t taken off, contrary to expectations. That indicates that a jump in consumption has been limited to some big-ticket items, such as automobiles, which rose 11.4% on quarter, and that households remain cautious over rising inflation and the planned tax hike as wages have yet to rise significantly...

Capex Still Lukewarm
Weak capital spending was one of the missing links in Abenomics, which aims to create sustained, private-led growth after an initial spark from monetary and fiscal stimuli. Has the baton been passed? Corporate investment grew for the third straight quarter, but only a modest 5.3%. With leading indicators for capital spending flagging a warning sign lately, the outlook for capital spending remains uncertain. The latest GDP number is likely to increase calls for deregulation and corporate tax cuts to stimulate business spending

2---The stimulus worked, the fiscal stimulus, that is, smirking chimp

Did the “stimulus” work? Republicans claim it was a failure, a waste of money, and was the reason the deficit soared. So let’s see what happened. And I do mean “see.”
(Actually, the deficit soared in Bush’s last budget year — all the way to $1.4 trillion! The stimulus kicked in after that. And now the deficit is down by more than half from where Bush left it. But hey, apparently repetition of lies is better than knowledge of facts…)
Anyway … did the stimulus work? See for yourself:

The very left side of this chart shows the last few months of the Bush administration. Those lines going down and down and down show job losses. By the time Bush left we were losing over 800,000 jobs per month.
Then the stimulus kicked in. See how the lines start going up and up and up? After a year the country was gaining jobs again, and has been ever since.
The stimulus worked, but it was not enough

3---This was the second largest dump (of US Treasuries) by China in history with the sole exception of December 2011., zero hedge

Chinese Treasury holdings plunged by the most in two years, after China offloaded some $48 billion in paper, bringing its total to only $1268.9 billion, down from $1316.7 billion, and back to a level last seen in March 2013! ...

Belgium to the rescue!

4---Housing Affordability Drops in California, DS News

5---Share of All-Cash Sales Reaches New High in November, REO Sales Share Increases for Third Consecutive Month, repeat Yahoo

6---Housing Inventory Continues Fall in January, DS News

7---71% Of Obama Voters "Regret" His Re-Election, zero hedge

8---Is Housing Set To Lift Off? (Spoiler Alert: No!), zero hedge

If we take a look at actual loan demand, we find a much different picture of the real estate market.  The following two charts show that demand for loans have peaked and are now on the decline.  This leaves the hopes of an economic recovery based on housing somewhat at risk.



 The rising risk to the housing recovery story lies in the Fed's ability to continue to keep interest rates suppressed.  It is important to remember that individuals "buy payments" rather than houses.  With each tick higher in mortgage rates so goes the monthly mortgage payment.  With wages remaining suppressed, 1 out of 3 Americans no longer counted as part of the work force, or drawing on a Federal subsidy, the pool of potential buyers remains constrained

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