“After getting off to a positive start this year, many key economic data points like manufacturing and job numbers have disappointed. And the risks of a U.S. recession are on the rise.
In today’s Breakfast With Dave report, Gluskin Sheff economist David Rosenberg says we are seeing some incredibly rare things happen. He points to 7 key signs that recession risks are rising:”
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“UBS technical analysts Michael Riesner and Marc Müller make some grim predictions for the stock market in their latest weekly market commentary.
Riesner and Müller write that the continued outperformance of U.S. stocks versus the rest of the world does not seem sustainable.
From their note:
Last week we highlighted the increasing divergences on the inter-market side between the still resilient SPX and the weak picture in Asian markets, underperforming cyclical sectors, declining inflation expectations, and the intact bull trend in the US dollar. All this finally results in a major divergence forming in the SPX versus the MSCI World, which was not able to break its May 2011 reaction high.
Last week we said that pressure in the financial system is building. If we are correct then it is very likely that this pressure will unfold in a short and sharp correction and the most likely timeframe for this move/event will be later Q3 and/or Q4.
They think 1325 is an especially important level to watch on the S&P 500, saying that if the index breaks below that level, the next stop could be somewhere in the 1100s”
Comments »“Call it a case of man bites dog. Since the start of the housing crash, millions of Americans have lost their homes to foreclosure. Many of them lived in homeowner or condo associations.
These are organizations that collect monthly dues to pay for amenities, like added security, maintenance and recreational areas; one in five Americans currently lives in an association-governed community.
These associations have been hit hard by thehousing crisis, as many delinquent borrowers stopped paying their monthly HOA dues. In some cases, HOA’s, which do have the authority in many states, managed to foreclose on properties even before the banks, by using the back dues as liens.”
Comments »Everyone from Paul Krugman to Steve Waldman to Yichuan Wang is giving their spin on the plunging nominal interest rates.
It’s beginning to look like Keynes was wrong about liquidity traps, at least when he argued that there’s a certain minimum nominal yield that government bond investors demand, and that long term rates can be reduced no further. Wherever people draw a line, bond yields just seem to plunge right through, to one record low after another. And we know from Japan that they can go even lower. But what does this mean?
It probably means multiple things. For instance it suggests that the Keynesian/market monetarist AD pessimists and the Great Stagnation AS pessimists are both right. We are looking at BOTH low inflation and low real GDP growth for many years to come. Why don’t I think AD explanations are enough? Partly because even the 20 year T-bond now has a negative real yield. Indeed it suggests the Bernanke “global savings glut” hypothesis is also correct, a point I’ve argued previously. Japan is the future of the world.
Comments »After trying to pare some losses the market has begun to fall apart. DOW of 146 points currently….
[youtube://http://www.youtube.com/watch?v=4x8wZsWxZ5M 450 300]
Comments »“Apple Inc. (NASDAQ: AAPL) is set to report earnings after the close on Tuesday. With a great sell-through in iPads but a weaker iPhone demand ahead of the upcoming iPhone 5, everyone is looking for guidance, and it could boil down to the computer sales being the ultimate driver today. Of course, you better be looking for any hint and projection around the Apple television release.”
Comments »“People aren’t going to buy cars every two or three years anymore, an automotive website says based on an unscientific poll it conducted online.
Now, 78% of the more than 4,000 people polled by AutoMD.com says they will keep their cars at least 10 years.”
Comments »Here is some commentary and charts to help you rethink whether one should buy the dips.
Comments »Watch closely friends. These are the times that unclever men craft quotes which will be held eternally above their heads.
China’s economic resilience is under the spot light following a slowdown in growth rates in recent months. The big question facing investors in China and the global economy is can the world’s second biggest economy avoid a hard landing.
A rather interesting argument over the future of the Chinese economy has erupted following Jim Roger’s, the CEO of Rogers Holdings decision to call out two China bears in an interview with Investment Week.
Rogers dismissed fears over a hard landing and said both Hugh Hendry, who runs the Eclectica Absolute Return Fund and SocGen’s Albert Edwards are dead wrong to be so negative on the Chinese economy.
“Hugh has been dead wrong about China for three years now and China has not collapsed as he predicted, loudly, verbally and widely” said Rogers. Hendry used an interview with the Financial Times last week to predict bad things for investors and the global economy but has otherwise been keeping a low profile after betting on difficult times for China.
Rogers dismissed Edwards as being negative on everything, even Catholic saints.
“Albert has been bearish on everything for a long time. So if you are telling me he is bearish on China and bullish on everything else that would be different. But no, he is bearish on everything, including you, me and Mother Teresa” said Rogers in the interview with Investment Week.
Read here:
Comments »“Cisco Systems is preparing to lay off about 1,300 workers just a few months after the world’s largest maker of computer networking equipment warned that growing economic uncertainty is making it tougher to close sales with its customers.
The cuts announced Monday represent about 2 percent of Cisco System payroll of 65,000 workers.”
Comments »“Harry Dent, the financial newsletter writer and CEO of economic forecasting firm HS Dent, has one of the most bearish calls on stocks we’ve heard in a while.
Appearing on CNBC yesterday, Dent explained the demographics-driven thesis behind his Dow 3000 call:”
Comments »U.S. equities slid right from the open. The trough was not as bad as yesterday and we are beginning to pare our losses. For all intensive purposes the markets appear to have a bid under them as opposed to just out right buyers coming in.
Telecom and industrials are leading the downside in the U.S.
European markets did not seem to pare any losses. Brussels got hammered the most, Spain and Italy are in second place down 3+%, while Amsterdam, Russia, and the U.K. tie for third place being down 0.7-0.8%,
Comments »I absolutely hate eminent domain – but this was interesting enough to post anyway. Here’s the thing; if you’re going to pay “fair value” (presumably a steep discount) for these mortgages, why not just put the banks into bankruptcy? It’s tantamount to the same thing – sans the supra-legal initiatives.
It’s been nearly six years since the housing bubble burst but the aftermath of the crash continues to wreak havoc in the towns and cities most affected by the destruction.
Home prices have yet to stabilize and foreclosures remain an acute problem for homeowners, banks and mortgage servicers. The housing market’s troubles have dragged down economic growth and stymied an economic recovery.
Steven Gluckstern, chairman of San Francisco-based Mortgage Resolution Partners, believes he may have the answer for the country’s housing problems.
Using three California communities in San Bernardino Valley as a microcosm of the broader housing market, his venture capital firm wants municipalities to seize troubled mortgages in the name of eminent domain. The communities would refinance these mortgages at rates that reflect the current property value of the home and then resell the mortgages back to the troubled homeowners at a lower rate. This program would apply to homeowners that are underwater on their mortgages, or those who owe more than their houses are worth.
Real estate information provider CoreLogic projects that almost 43 percent of homes in San Bernardino County were underwater in April. Sixteen million homes across the U.S. are estimated to be underwater and homes with second mortgages are twice as likely to be underwater.
Gluckstern says his proposal directly benefits the homeowner.
“This is a program that’s designed to help communities deal with underwater mortgages by using eminent domain to acquire the mortgages that underlie these houses,” he says in the accompanying video. “The objective of the program is to keep [homeowners] in their homes. [We] use the power of eminent domain to take the underlying mortgage and then restructure it for that homeowner in a way that’s much more appropriate given today’s environment.”
This controversial initiative has caught the attention of the mortgage industry and investor and bank lobbying groups including the Securities Industry and Financial Markets Association. Critics argue that using eminent domain to seize and restructure underwater mortgages would be costly to homeowners, make future mortgages more expensive, bring losses for public pension and 401(k) plans and could be unconstitutional. Gluckstern disagrees.
The proposal is “absolutely legal,” he says. “The vast bulk of mortgages in this country are owned by trusts. Trusts that are run by trustees and services. Not by banks. It would be the trusts that would be giving up the mortgage and be paid fair value for it.”
Whether Gluckstern’s plan will be given the green light in California could be determined this summer. Gluckstern says his firm will submit its proposal to San Bernardino officials, and if accepted, the plan could go in to effect before year’s end.
The White House has not officially commented on Gluckstern’s proposal but according to a report in The Wall Street Journal, the Obama administration is “skeptical” that seizing mortgages by eminent domain is the savior the housing market desperately needs. Gluckstern’s plan does not involve government funds but his firm does charge a $4,500 fee for every mortgage that it restructures.
Read here:
Comments »“Stock prices were essentially flat in the decade through 2009, but the next 10 years will turn out a lot better, according to Seth Masters, chief investment officer of Asset Allocation and Bernstein Global Wealth Management.
He sees the Dow Jones Industrial Average reaching 20,000 within five to 10 years. That represents a 58 percent gain from recent levels.
“This argument may seem provocative,” Masters told The New York Times. “But that’s only because market conditions are so unusual, and so many people have become so pessimistic.”
He – and plenty of other experts – says the United States, Europe and emerging markets will ultimately recover from their woes.”
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