Mortgage Rates 8/26/2010 – Yet Another All Time Low
… mortgage rates for the conventional 30 year mortgage have continued their decline to now 4.36%, a historical all time low.
Actually there is also an update for this week from Friddie Mac, according to which rates have already dropped to 4.32%:
Mortgage rates fell to the lowest level in decades for the tenth time in 11 weeks, as investors worried about the economy.
The average rate for a 30-year fixed loan was 4.32 percent this week, down from 4.36 percent last week, mortgage buyer Freddie Mac said Thursday. That’s the lowest since Freddie Mac began tracking rates in 1971.
The average rate on 15-year fixed loan dropped to 3.83 percent from 3.86 percent the previous week. That’s the lowest on records starting in 1991.
July 2010 – New One Family Home Sales at All Time Low; ZERO Units Over 750K Sold!!
Two days ago the data on new home sales was published for July. What caught my (and probably everybody else’s) eye was the all time low in new one family home sales, at 276,000:
And how’s the high end market doing? See Breakfast with Dave:
The high-end market, in particular, is under tremendous pressure. In fact, it is becoming non-existent. Guess how many homes prices above $750k managed to sell in July. Answer — zero, nada, rien; and for the second month in a row. Only 1,000 units priced above 500,000 moved last month. That’s it!
This is really as bad as it gets. Mish sums it up succinctly:
Inventory is up, sales are down, sentiment has soured, and tax credits have gone poof.
Prices will follow.
Krugman vs Krugman – Take 2
Alright, time for some more wisdom:
November 2008 – Krugman in “Stimulus Math – Wonkish”:
When I put all this together, I conclude that the stimulus package should be at least 4% of GDP, or $600 billion.
That’s twice what the unreliable rumor says. So if there’s any truth to the rumor, my advice to the powers that be (or more accurately will be in a couple of months) is to think hard – you really, really don’t want to lowball this.
July 2010 – Krugman in How Did We Know the Stimulus Was too Small:
Those of us who say that the stimulus was too small are often accused of after-the-fact rationalization: you said this would work, but now that it hasn’t, you’re just saying it wasn’t big enough. The quick answer to that accusation is that people like me said that the stimulus was too small in advance.
(…)
To close a gap of more than $2 trillion — possibly a lot more, if the budget office projections turn out to be too optimistic — Mr. Obama offers a $775 billion plan. And that’s not enough.
This stuff is just too hysterical for words …
July Home Sales Likely Worst Month in a Decade
The AP Writes July home sales likely plunged:
The housing market is taking a turn for the worse.
Tuesday’s report from the National Association of Realtors about sales of previously occupied homes is expected to show sales plunged in July. Economists are predicting as much as a 26 percent drop from a month earlier to a seasonally adjusted annual rate of 3.95 million. That would be the worst month for sales in more than a decade.
Many say the market is hurting because buyers and sellers are in a standoff over home prices. Sellers have unrealistic expectations about their home values and are listing properties on the high end.
Buyers are afraid home prices will start falling after being flat nationally for about a year and even rising in some parts of the country.
These are the inevitable workings of a slip back into recession, a double dip recession if you consider the phony reflation efforts of the past year to have been a break from the recession (which I would have my doubts about … but these are minor details in the grand scheme).
In short … The Great Depression 2.0:
Once existing stimulus programs and credit expansion attempts subside, there won’t be much left to pick up the slack. The consumer won’t be able to go back to business as usual unless he goes through a long period of reduced consumption, deleveraging, and savings, a period during which the majority of production and spending inside the US will have to be focused on capital goods, so as to restore a balanced ratio between the production of consumer goods and the production of capital goods.
At the point when these government stimuli wind down, Keynesian clowns will be jumping out of the bushes left and right, and demand that the government take on more debt and spend more money. But at some point their mindless tirades will no longer appeal to an overtaxed and overleveraged populace. Their ivory tower nonsense will be way too far detached from simple realities.
Any temporary recovery we witness now, is likely to be remembered as just that, a temporary phenomenon. All actions taken so far have set the perfect stage for a double dip recession of enormous proportions, the worst possible prolongation of the necessary correction.
If it was our dear government’s objective to repeat the playbook from the Great Depression one by one, then they have indeed succeeded phenomenally.
It should be clear by now to the most adamant believers … there was, is, and will be no recovery anytime soon.
Mortgage Rates at All Time Low
The 30 year mortgage rate has dropped to an average of 4.44% on August 12th 2010:
This is a historical all time low:
Treasury rates are also headed south again, to now 2.61%:
These are classical phenomenons of deflation.
This is why I wrote about a year and a half ago:
Treasury yields have developed as expected over the past few months. I expect the same direction for mortgage rates: They will continue to drop much much lower than where they are now. As Treasury yields move toward zero, mortgage rates will drop to between 2% and 3%. Whoever thinks of getting in now to get a “great bargain” should think again and wait.
I said in that post that I expect 30 yr mortgage rates to drop to such low levels because I am drawing from examples from the Japanese deflation.
Gerald Celente – And Now We’re Headed For The GREATEST Depression
“When people lose everything, and they have nothing left to lose, they lose it.”
The Root Causes of the Financial Crisis
I would like to take some time and outline the different angles from which, in my opinion, government policies in the United States have systematically created an environment that has made the occurrence of financial crises, such as the one of 2008, rather inevitable.
I have of course predicted this crisis myself, in particular from the viewpoint of credit expansion policy. I have also talked about the other concepts you will read here many times before. But I never really took the time to package them all up in one article.
But I do think that almost 2 years into a new administration that promised you “change”, it might be worth mulling over which of the root problems in the financial system they have actually, at least remotely, addressed.
The Federal Reserve Bank (Fed)
In 1913 Congress established the Federal Reserve System, a system of central banking, with the enactment of Federal Reserve Act. It granted 13 regional reserve banks, overseen by a central board in Washington, a monopoly over the issuance of the country’s fiat currency, the US Dollar, and tasked it with the oversight and regulation of all deposit banks (fractional reserve banks) in the country. The Great Depression of the 1930s was the first significant crisis that the US experienced as a result of the speculative excesses of the 1920s, a direct result of the newly established central banking system.
A pivotal point in the history of money in the US, it enabled federal government bureaucrats and politically connected bankers to be in control of the issuance of money and credit, and transfer huge sums of wealth from the common man to the politically connected via a deliberate policy of credit expansion, a devaluation of the currency since its establishment of more than 95%, and constantly recurring business cycles of booms, busts, inflation, and deflation, which are at the root of all speculative bubbles, credit bubbles, and the ensuing financial crises.
In particular, inquiring minds should take note of the fact that it was in mid 2000 that the Fed began purchasing mortgage backed securities for the first time. This is how the Fed did its small part in helping fuel the housing bubble that would lead up to the financial crisis of 2008.
Government Sponsored Enterprises (GSE)
From Wikipedia:
The government-sponsored enterprises (GSEs) are a group of financial services corporations created by the United States Congress. Their function is to enhance the flow of credit to targeted sectors of the economy and to make those segments of the capital market more efficient and transparent. The desired effect of the GSEs is to enhance the availability and reduce the cost of credit to the targeted borrowing sectors: agriculture, home finance and education. Congress created the first GSE in 1916 with the creation of the Farm Credit System; it initiated GSEs in the home finance segment of the economy with the creation of the Federal Home Loan Banks in 1932; and it targeted education when it chartered Sallie Mae in 1972 (although Congress allowed Sallie Mae to relinquish its government sponsorship and become a fully private institution via legislation in 1995). The residential mortgage borrowing segment is by far the largest of the borrowing segments in which the GSEs operate. GSEs hold or pool approximately $5 trillion worth of mortgages.
(…)
Some of the GSEs (such as Fannie Mae and Freddie Mac until 2008) have been privately owned but publicly chartered; others, such as the Federal Home Loan Banks, are owned by the corporations that use their services. GSE securities carry no explicit government guarantee of creditworthiness, but lenders grant them favorable interest rates, and the buyers of their securities offer them high prices. This is partly due to an “implicit guarantee” that the government would not allow such important institutions to fail or default on debt. This perception has allowed Fannie Mae and Freddie Mac to save an estimated $2 billion per year in borrowing costs. This implicit guarantee was tested by the subprime mortgage crisis, which caused the U.S. government to bail out and put into conservatorship Fannie Mae and Freddie Mac in September, 2008.
As Wikipedia outlines correctly, setting up these GSEs has done its part in fundamentally influencing the flow of credit into certain areas of the economy and thus, naturally, away from others.
According to Fed data, the total mortgage volume in the US at this point is roughly $14 billion, down from its peak (and the general peak of all credit in fact) in 2008 of $14.6 trillion, with GSE mortgages at $5 trillion out of that. This means that 36% of all mortgage debt is being held by GSEs, by institutions who are able to operate because of either an explicit or an implicit guarantee that the government will throw tax money at their management, were they to ever begin losing money.
Is it surprising to anybody that such an arrangement would do a major part in encouraging over excessive mortgage credit lending, lead up to a housing bubble, and culminate in a default crisis sooner or later?
(The same general concepts apply to the government corporation FDIC, only in the realm of bank deposits. I will not here delve into more detail on this particular institution, but merely point out the fact that it exists and that it manipulates deposit banks’ behavior and attitudes toward risk taking in the same manner as the GSEs above.)
The Credit Rating Cartel
You hear this talk all over the place: “The credit rating agencies S&P, Moody’s, and Fitch applied OUTRAGEOUSLY optimistic ratings when evaluating the risk inherent in assets such as mortgage backed securities. It’s their fault. Period. We need the government to take a firmer stance on overseeing the agencies.”
Well, it is instructive indeed to study the history of these agencies before arriving at such conclusions.
First of all, one simple question comes to mind: Why are there three big agencies that are in charge of pretty much all ratings? Why is there not more competitive pressure in the business of asset ratings? Surely if there was, the managers in charge would be a lot more careful. How has such a cartel been made possible? How come these agencies are STILL big in the business after failing to properly identify gigantic risks in countless asset classes, such as MBS?
Well, maybe some history and context helps:
The rating agencies were originally research firms. They were paid by those looking to buy bonds or make loans to a company. If a rating company did poorly it lost business. If it did poorly too often it went out of business.
Low and behold the SEC came along in 1975 and ruined a perfectly viable business construct by mandating that debt be rated by a Nationally Recognized Statistical Rating Organization (NRSRO). It originally named seven such rating companies but the number fluctuated between 5 and 7 over the years.
Establishment of the NRSRO did three things (all bad):
1) It made it extremely difficult to become “nationally recognized” as a rating agency when all debt had to be rated by someone who was already nationally recognized.
2) In effect it created a nice monopoly for those in the designated group.
3) It turned upside down the model of who had to pay. Previously debt buyers would go to the ratings companies to know what they were buying. The new model was issuers of debt had to pay to get it rated or they couldn’t sell it. Of course this led to shopping around to see who would give the debt the highest rating.With that I have to sit back and laugh at one of the original opening statements in this article: “I do not think that the market can discipline ratings agencies sufficiently,” said Mr Mindich, chief executive of Eton Park Capital and a former colleague of Hank Paulson, the Treasury secretary, at Goldman Sachs, the investment bank.
Clearly Mr. Mindich does not understand the free market. The problems arose because the free market was disrupted by a misguided mandate by the SEC.
Those interested in more information on this topic can read Removing a Regulatory Barrier by Senate Republican Jon Kyl or Creating a Competitive Rating Agency Sector by the American Enterprise Institute. Also note that the number of rating agencies is back up to 7 from 5 as of September 25 2007. See SEC Reanoints Rating Agencies.
This is not particularly complicated to figure out: Government intervention, in this case via the SEC, created an environment where a few politically appointed agencies had the exclusive privilege to rate debt and where the company whose debt was rated had to pay the agency to perform a rating, rather than the investor or investor’s associations choosing freely whom they would like to see in charge of rating prospective investments.
Free markets? Anyone?
Tax Policy and Incentives
You may, at times, ask yourself a very simple question: Why do so many people care about the stock market? Why is there so much money sloshing around in it.
This is a very important question. The pieces of paper called mortgage backed securities, which promise the buyer a share in the monthly mortgage payments of homebuyers were being purchased by numerous mutual funds and stock market investors all other the world. (I already explained above why the agencies rating those investment vehicles had no competitive pressure to perform.)
There is a reason why there was so much money available to be invested in such securities, amongst others of course. Governments across the globe fundamentally encourage investing in the stock market in one way or another, be it mutual funds, government bonds, or outright securities.In the US this is done through retirement plans like 401k and ROTH IRAs.
The concept is simple: Invest a portion of your money or else the tax collector will gladly take it away from you. This is how trillions of dollars are herded into the stock market, ready for mutual fund managers to be played with.
One major player in the stock market is … you guessed it … the government itself. Currently about $12 trillion is invested in government Treasury securities. To give you some perspective: As I outlined before, the total invested in US stocks is just about $10 trillion!
Is it conceivable that such incentive policies might possibly have played some sort of role in the huge demand that was created for mortgage backed securities at one point or another? Could it be that, for the sake of propping up demand for government bonds among other things, government officials will always have some significant incentive to herd money into the stock market? Could it be that they will do everything they can on their end to ensure people will stay invested for as long as humanly possible?
You might also be interested in this clip as far as this topic is concerned:
The President’s Working Group on Financial Markets aka ” The Plunge Protection Team”
The market is a system of elements that are in constant flux.
In a free society where individuals are allowed to make choices by themselves so long as they don’t infringe upon their fellow men’s life, health, and property, entrepreneurs use natural resources, transform them and/or combine them with previously produced factors of production, and turn them into either consumer goods or other factors of production. They employ workers in the process who provide the production factor labor.
They exchange consumer goods on the market against money obtained from consumers. They exchange factors of production against money obtained from other entrepreneurs.
When a business squanders factors of production which, from the consumers‘ point of view, would satisfy more urgent and/or ample needs in other lines of production, it operates at a loss. This sends a signal to the entrepreneur running the business to do one of the following, lest his operation contribute to a deterioration of the welfare of society:
- find a better use for the factors of production employed (produce different, more demanded goods)
- find more effective ways to employ them (increase the output of the factors employed)
- abort the operation, make the factors available to entrepreneurs who plan to employ them in more urgent lines of production, thus releasing them from their current occupation (declare bankruptcy)
Those are the choices he has under a capitalistic system on a market where the consumer, the common man, is supreme, a market based upon voluntary action. Any of these steps would swiftly remedy the misallocation of the resources and align them to the benefit of the common people, the consumers.
If an investor has invested in a company stock at a price that he deemed to be reflective of that company’s future earnings, but it turns out that consumers actually do not demand the company’s goods as expected, then the investor is punished via a drop in the stock price. This ensures that investors tend to try and invest in businesses which produce the most urgently demanded goods first, all ultimately in the service of the consumer.
However, when a group of people within society obtains resources via the initiation of violence or the threat thereof, then we are leaving the realm of the market and of voluntary choice and we enter the realm of compulsory action, viz. the government.
The government always and by definition manipulates the transfer of money in a way that is contrary to people’s voluntary value preferences. If it uses the money it has obtained in order to purchase stocks with the intent to support its price, it messes with the fundamentally most important indicator of a company’s performance in meeting consumer demands. It creates an environment of uncertainty and corruption, as investors will immediately flock toward this powerful group in order to ensure they get such special treatment. It prolongs the period during which a business engages in activities that it should and would have stopped engaging in much sooner, and thus always sets the stage for speculative booms and subsequent abrupt crashes in the future.
Such is the case with The President’s Working Group on Financial Markets, also known as the “Plunge Protection Team”:
The Working Group on Financial Markets (also, President’s Working Group on Financial Markets, the Working Group, and colloquially the Plunge Protection Team) was created by Executive Order 12631,[1] signed on March 18, 1988 by United States President Ronald Reagan.
The Group was established explicitly in response to events in the financial markets surrounding October 19, 1987 (”Black Monday“) to give recommendations for legislative and private sector solutions for “enhancing the integrity, efficiency, orderliness, and competitiveness of [United States] financial markets and maintaining investor confidence”.[1]
As established by Executive Order 12631, the Working Group consists of:
- The Secretary of the Treasury, or his designee (as Chairman of the Working Group);
- The Chairman of the Board of Governors of the Federal Reserve System, or his designee;
- The Chairman of the Securities and Exchange Commission, or his designee; and
- The Chairman of the Commodity Futures Trading Commission, or his designee.
“Plunge Protection Team” was originally the headline for an article in The Washington Post on February 23, 1997, and has since become a colloquial term used by some mainstream publications to refer to the Working Group. Initially, the term was used to express the opinion that the Working Group was being used to prop up the markets during downturns. Financial writers for British newspapers The Observer and The Daily Telegraph, along with U.S. Congressman Ron Paul and writers Kevin Phillips (who claims “no personal firsthand knowledge” and is “not interested in becoming a conspiracy investigator”) and John Crudele, have charged the Working Group with going beyond their legal mandate. Claims about the Working Group, which are labeled conspiracy theories by some writers, generally include that it is an orchestrated mechanism that attempts to manipulate U.S. stock markets in the event of a market crash by using government funds to buy stocks, or other instruments such as stock index futures—acts which are forbidden by law. In August 2005, Sprott Asset Management released a report that argued that there is little doubt that the PPT intervened to protect the stock market. However, these articles usually refer to the Working Group using moral suasion to attempt to convince banks to buy stock index futures.
I will not here try to figure out as to weather or not this PPT has actually intervened in the markets. There are so many other ways via which the government overtly interferes way out in the open that the accuracy of the above claims does not matter in the slightest to assess the validity of the theories I am presenting here.
I will merely say that it is undeniable that plausible evidence exists to corroborate the idea that the government is using the PPT as yet another means to manipulate events on the market.
Moral Suasion
I believe that the importance of moral suasion is underestimated. If people are brought up in schools where they are told to pledge allegiance to their country then that will obviously affect their future attitude toward the government. If then representatives from that government publicly announce how important it is to own a house, how they aspire to create an “ownership society”, then it can surely be argued that that kind of suasion will do its part, whether small or large I don’t know, to get people to take on the extra loan to buy a house. Statements such as the following have to be examined in that light:
We’re creating… an ownership society in this country, where more Americans than ever will be able to open up their door where they live and say, welcome to my house, welcome to my piece of property. – President George W. Bush, October 2004.
Summary
The size and scope of the government’s intrusion into our lives has, at this point, grown to about 40%, up from 7% in 1930.
The number of pages in the Federal Register in 1936 was 2,620. By the year 2000 it was 83,294; a humble 3179% increase, or “deregulation” as some people seem to be referring to it these days.
The Great Depression of the 1930s was a convenient excuse for the government to grab more power than it had ever dared to before. Now we are in that same situation again. The state will continue to do whatever it can to justify its growth.
You, dear reader, might want to ask yourself a fundamental question if you haven’t already: How much more until we consider doing the opposite of what we have been doing? How much more of our personal liberties should we surrender in order to fix the problem? What have the thousands upon thousands of executive orders and acts of Congress given us other than digging us a deeper hole?
How many times have you heard any government bureaucrat seriously address the things that I listed above? How many times have you seen them consider that maybe their very existence is at the root of our problems. (Haha, too funny to imagine.)
Wake up. Think about it. There are alternatives out there. I know they may sound new and alien to you. But maybe, just maybe, it is conceivable that the voluntaryists, you know, these crazy people who say things like “the initiation of violence or the threat thereof against peaceful persons is immoral and should be universally proscribed”, have a point here. Maybe they did indeed spend some time on thinking this stuff through, supplying evidence, and rigorously demanding logical consistency.
This post is just another attempt of many to open people’s eyes to what I believe (based on what I am able to gather, reason through, and see all around us) is happening in reality.
As logic and evidence permeate society, the mad fantasy that is the government will vanish. The more we see how much damage it has done, is doing, and will continue to do, the sooner this will happen.
And if you have made it til here without having fallen asleep, then I hope I have given you some valuable information to at least consider in your own quest for truth and knowledge.
Why Are You Unemployed?
McCullough: Is this finally the economic collapse?
McCullough of Hedgeeye writes Is this finally the economic collapse?:
FORTUNE — The Great Depression. Wall Street in 1987. Japan in 1997. Points of economic collapse are generally crystal clear in the rear-view mirror. Professional politicians in Japan have been telling stories for 20 years as to why they can prevent economic stagnation. In the US, the storytelling started in 2007. All the while, stock market and real-estate prices have repeatedly rallied to lower-highs, then collapsed again, to lower-lows.
Despite the many differences between Japan and the US, there is one similarity that continues to matter most in the risk management model my colleagues and I use at Hedgeye, our research firm — debt as a percentage of GDP. Now that the US can’t cut interest rates any lower, the only option left on the table is what the Fed just announced it would start doing — buying Treasury debt. And that could lead the country to the brink of collapse: According to economists Carmen Reinhart & Ken Rogoff, whose views we share, crossing the 90% debt/GDP threshold is the equivalent of crossing the proverbial Rubicon of economic growth. It’s a point from which it’s almost impossible to return.
On July 2nd, we cut both our third quarter 2010 and full year 2011 GDP estimates for the US to 1.7%. At the time, the consensus around US economic growth estimates was about 3%. Now we’re starting to see both big brokerage analysts and the Federal Reserve gradually cut their GDP estimates, but not by enough. Even our estimate for 2011 is still too high.
Slowing growth, both domestically and in China, is core to our bearish views on both the strength of the US dollar and US equities. There will be a downward bias to our US growth estimates as long as debt-financed-deficit-spending continues to be the solution politicians and central bankers turn to as a fix to our financial crisis.
Markets trade on expectations. Yesterday’s zig-zag in the S&P 500 was unlike most sleepy August trading days in America. That’s because the ‘government is good’ crowd leaked word that this second round of “quantitative easing,” known as QE2, was coming, and that Ben Bernanke was going to respond to our buy-and-hope begging. (The first round of quantitative easing was the Fed’s unprecedented purchase of agency debt to prop up the housing market, along with credit facilities for big banks, which began in 2008 and ended earlier this year.)
To think that we have institutionalized market expectations to this degree is downright frightening. It seems impossible but true that all rallies start and end with rumors about what Fed Chairman Ben Bernanke, a humble looking man of government, had to say at 2:15 PM EST yesterday afternoon, or any other day he makes a statement.
So now what?
With 40.8 million Americans on food stamps (record high) and 45% of the unemployed having been seeking employment for 27 weeks or more (record high), what’s left if (or when) QE2 doesn’t kick start GDP growth? Should we start begging for QE3? Should we cancel the bomb of the National Association of Realtors’ existing home sales report, scheduled for public release on August 24th? Or should we bite the bullet and accept that current economic policy dictates 0% returns-on-savings, even as Washington continues to lever-up our future to the point of economic collapse?
Before the Fiat Fools — Hedgeye’s name for political actors and bankers who have placed their hopes of economic recovery in printing endless supplies of new cash — run out campaigning for QE3, maybe they should analyze some real time market results to yesterday’s announcement of QE2:
1)The US dollar is battling for resuscitation after 9 consecutive down weeks — down 9% since June.
2) US Treasury yields are making record lows on the short end of the curve, with 2-year yields striking 0.49%.
3) The yield spread (in this case the difference in return between 10-year and 2-year Treasury bills, which shows a long-term confidence when high) continues to collapse, down another 4 basis point day-over-day to 223 basis points.
4) The S&P 500 is down below its 200-day moving average (a common signpost for the health of a market or stock) of 1115.
5) US Volatility (VIX) is spiking from its recent stability.
6) In Japan, long time quantitative easing specialists found their markets closing down overnight by 2.7%, which makes them down 11.9% for the year to date.
Lest our doom and gloom seem built entirely on technical measurements, what they boil down to is actually quite simple — an idea about our country which dates back to 1835. Alexis De Tocqueville, author of Democracy in America, which was published that year, seemed to warn of this day when he wrote: “The American Republic will endure until the day Congress discovers that it can bribe the public with the public’s money.”
What I have seen mentioned on several occasions now is the 90% debt threshold as the “ok-now-we’re-definitely-screwed”-indicator. I think it’s based on historical research but then it seems a little arbitrary in the big picture because the true public US debt is of course already waaaay past that, more like 385% of it.
I agree on most of the market outlook, and in particular I have been following and predicting ongoing strength in Treasurys, alongside consistently falling mortgage rates and interest rates in general.
It seems like the author is suggesting some weakness in the dollar when actually the Dollar has just been taking a little break for a few weeks from a fundamental rally. A rally that I expect to resume against other major currencies (including the Yuan, but probably excluding the Yen), when the market begins to tank seriously again.
And here’s Mish, as always an avid watcher of the Yield curve, noting that 2 Yr Yields are below 0.5% for the first time ever:
Yield Curve as of 2010-08-06
Curve Watchers Anonymous is once again watching the yield curve. Here are a couple of charts.
The above chart shows today’s reaction to the monthly jobs report: Jobs Decrease by 131,000, Rise by 12,000 Excluding Census; Unemployment Steady at 9.5%; June Revised from -125,000 to -221,000
The following chart shows the yield curve over time.
click on chart for sharper image
The chart depicts weekly closes. 10-year yields did slightly exceed 4% in April but those highs do not show in the above chart. Thus, the decrease in yields is even more dramatic than shown.
Note the huge rally on 5 and 10 year treasuries as compared to the 30-year long bond. It appears as if someone is putting on a long-10 short-30 spread.
If the economic data continues to be poor (and I believe it will be), the low in 10-year yields may not even be in even if the low in the 30-year long bond is in.
So much for the idea that an end in the Treasury rally is near … expect the Dollar to catch that wind again soon.
Consumer Credit in June 2010 – Contraction Continues
Since the peak that I called in December 08, consumer credit has now contracted and Americans have reduced their consumer credit balances by a total of $160 billion or $1,400 per household. That just goes to show you: It still is a loooong way down from Peak Credit and there is nothing that will stop this contraction.
Attitudes have changed a while back already. Only few people understood it. Now more and more are waking up to it. A general fatigue has set in as people realize that the government’s attempts to stimulate us out of this trough have done nothing to bring about a recovery, nothing to get people back to work, nothing to get us out of debt, and in fact everything to prolong the agony, keep unemployment high for years and years to come, and get us in more debt than ever before.
This, my friends, is The End of Consumerism in action and nothing will stop it.
Community Activity- Kent Neal became a registered member September 3, 2010
- Cory Shelton wrote a new blog post: Welcome to my new blog! September 3, 2010
- Frederick Lawson wrote a new blog post: Whelan eager to make up for World Cup misery September 2, 2010
- Frederick Lawson wrote a new blog post: Cunningham fitness boost for Saints September 2, 2010
- Frederick Lawson wrote a new blog post: News Roundup: 'Glee' Promo Teases Relationship Drama, 'Buffy' Star ... September 2, 2010
Recommended Books
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