US - Economic Data & News 01 (May 08 - Jul 08)

[kennynah]

Leading Indicators Index Unexpectedly Increases By 0.1% In May
6/19/2008 11:15 AM ET

(RTTNews) - Thursday morning, the Conference Board released its report on leading economic indicators in the month of May, showing that its leading indicators index unexpectedly showed a modest increase compared to the previous month.




The report showed that the leading indicators index edged up 0.1 percent in May, matching the increase that was seen in April. The modest increase came as somewhat of a surprise to economists, who had expected the index to come in unchanged.

The modest increase by the index came as large positive contributions from the interest rate spread and stock prices more than offset declines in real money supply, consumer expectations, and building permits.

While the Conference Board noted that the six-month rate of decline in the leading index slowed to -0.7 percent in May from -2.4 percent in the six-month period through January, it noted that the weaknesses among the leading indicators have remained fairly widespread in recent months.

The report also showed that the coincident index rose 0.1 percent in May, marking the first increase in seven months. Additionally, the Conference Board said that the lagging index rose 0.2 percent in May after coming in unchanged in April.

[winston]

Death of America's Suburbs Is Greatly Exaggerated: Joe Mysak

June 20 (Bloomberg) -- Don't write off the American suburbs just yet.

With gasoline at $4-plus a gallon, lots of thinking people see the U.S. undergoing a vast demographic shift, with millions of people moving back to cities. The suburbs, and those places beyond the suburbs, the exurbs, will dry up and blow away.

The notion appeals especially to people who like to think they'll be in charge after the revolution. They would apparently love nothing more than for the population to be confined to Soviet-style concrete-block high-rises and be forced to take state-run streetcars to their little jobs at the mill.

Or something like that. It would all be so much more convenient, so much more environmentally friendly, too, according to these master planners.

I went to a wedding in Vermont last weekend, and driving to the reception, out in the woods and down a long road that became a dirt road, I thought that all the people who lived out there were in a fine pickle. My language was a bit more salty.

People who live out there have to carry out every transaction, even the smallest, with an automobile. Gasoline at $4-plus a gallon hurts.

It's easy to become hysterical and call for the end of the world as we know it. Wail: What's going to happen because of the high price of gasoline?

No Catastrophe

People will pay more to drive their cars.

Some people will sell their houses and move to the city, or closer to a city. Some people won't be able to sell their houses, and some people will lose their houses. Some towns may become ghost towns.

Taxes will go up for the survivors who remain, and they will find fewer and fewer businesses to fulfill their needs. States that are more rural will find it in their best interests to try and pay people to live there, and offer subsidies for them to buy food and fuel. The implications for state and local credit ratings are profound.

The high price of gasoline is a relatively short-term problem, not a catastrophe that is going to cause a massive population shift. When whale oil became scarce in the 19th century, people didn't sit in the dark; they came up with new ways to light their lamps.

Virtue and Vice

The suburbs aren't unreasonable. They aren't symptoms of selfishness, greed and extravagance. They sprouted up because cities are inherently cramped, and the continental U.S. is enormous. It's not a matter of virtue (cities) and vice (suburbs, exurbs). So everyone stop being silly.

Cities are cramped, unless you are rich. Of course Tom Wolfe captured the subject perfectly, and long ago, well before the real-estate bubble started to inflate. There's a scene in his 1987 novel, ``The Bonfire of the Vanities,'' where one of the characters, a lawyer who works in the prosecutor's office, bumps into his wife's pantyhose and stockings hanging up and drying in their tiny city bathroom. But precisely! -- as Wolfe would write.

I think the bride whose wedding I attended in Vermont, and who lives in New York City, wants to buy a house. Is this somehow unreasonable? She wants a little more space.

I was looking at a real-estate Web site this week, and came across a nice house on Schermerhorn Street in Brooklyn Heights. And as I looked at the pictures of the place, I thought, ``Hey, I know this house.'' We used to live across the street. Right out the front parlor's windows I could see our old front door.

The Airedales

We rented an apartment in a townhouse back then, 20 years ago it must be, and could see into the house, and admire the front parlor. We called the people who lived there the Airedales, because they had an Airedale improbably named Pedro, and imagined the privileged and perfect lives they led in this nice house. I remember the time the fabulous chatelaine came home on a Christmas Eve afternoon in a taxi full of bags of presents.

I looked at the listing, and now got to see inside, with the photographs, and the floor-plan, and you know what? It's a house, a very nice house, but not especially grand, not what anyone would really call a mansion or a palace. The price: $5,895,000.

Do you really think the cost of a gallon of gasoline is going to doom suburbia?

[millionairemind]

It aint over till its over...

Goldman SIV deal shows banks urged to come clean

By Elena Moya - Analysis

LONDON (Reuters) - Goldman Sachs's (GS.N: Quote, Profile, Research, Stock Buzz) bail-out of a $7 billion Structured Investment Vehicle shows investors are pushing hard for banks to clean up troubled assets -- and could speed up billions worth of new writedowns.

The proposed restructuring of Cheyne Finance, together with accountancy firm Deloitte DLTE.UL, could cut a Gordian knot and free up a backlog of unsold toxic assets in a sellers-only market that has neither buyers, nor prices.

But the deal, announced this week, may also be the starting point of a new round of bank writedowns, bringing new losses and overshadowing any resulting transparency.

"Investors are definitely pushing banks to kitchen-sink their bad assets," Jim Irvine, head of Structured Products at Henderson Global Investors said.

"They want them to come out clean -- there's great concern that certain banks, including German banks, still haven't done that."

Markets are still grappling with a huge overhang of devalued assets after the crisis, and Europe alone has a backlog of about $116 billion of unsold leverage loans that banks are feeling under pressure to offload, according to estimates.

There are billions of dollars worth of assets in SIVs -- off-balance sheet vehicles banks have set up to boost their financial firing power -- that need revaluing.

In subprime mortgage-related assets, global banks have already disclosed losses of $165 billion or 80 percent of the forecast total, leaving the remainder still to be announced, according to Fitch ratings agency research.

Investors are wary of sudden losses such as those from UBS (UBSN.VX: Quote, Profile, Research, Stock Buzz), the Swiss bank that wrote down assets in three consecutive rounds totaling $37 billion, making it Europe's biggest victim of the credit squeeze.

STEEP DISCOUNTS

In a sign just how much more money is still at risk, the Cheyne restructuring -- which aims to free assets in the SIV by pricing and selling some of the portfolio through an auction -- is expected to lead to steep discounts.

The fund's value -- $7 billion at receivership -- is expected to stand around $4 billion now.

One restructuring banker, speaking under the condition of anonymity, said he expected a discount of five to 10 basis points in the auction, so that the portfolio could be sold for about 55 to 60 pence in the pound.

"The auction is likely to derive extremely low bids, given the volume of paper and the fact that few are expected to be sold," credit strategist Suki Mann at SocGen said in a note.

Under the much-awaited plan Deloitte will auction some 10 percent of the portfolio, to value the assets, a number that sources familiar with the situation said corresponds to the minority of creditors who want to cash out.

Goldman Sachs will then set an off-balance-sheet investment vehicle that will issue securities to former SIV senior creditors, who will hold the rest of the assets.

"Considering almost half of the SIV portfolio's underlying assets were linked to U.S. residential mortgages (...), the senior noteholders may crystallize significant losses," a recent research note by Calyon said.

The Cheyne deal is innovative because it offers senior creditors different options -- either cashing in or holding on to the assets -- despite the fact that they all are equally entitled to remaining value in the fund.

MARK-TO-MYTH

In a sign the credit crisis is far from over, U.S. investment bank Lehman Brothers (LEH.N: Quote, Profile, Research, Stock Buzz) last week announced plans to raise $6 billion, following its first quarterly loss as a public company. Goldman Sachs earlier this week disclosed losses of $775 million in credit products.

Investment banks' losses are partially based on their mark-to-model practices, which confuses the market because the valuations are not based on actual trades, but on models, with each bank using its own specific methods.

"You price something but you don't know if anybody in the market is going to meet you at that price," a person familiar with the methods said, under the condition of anonymity. "You need real trades to be transparent."

Yet slowly, transparency and liquidity are returning to even the most arcane corners of the market, allowing banks to reduce those assets that are exclusively valued by models, said Tom Jenkins, a credit analyst at Royal Bank of Scotland.

And the Cheyne restructuring is a sign that regulators, auditors, rating agencies and powerful investors such as sovereign wealth funds are pushing banks to finally address the issue and price assets at a realistic level.

"It's not in banks' interest to try to camouflage their assets," Jenkins said.

[millionairemind]

From buy-backs to sell-backs
Jun 19th 2008
From The Economist print edition

Shareholders beware. Companies are clinging on to their cash

The credit crunch is having a little-noticed effect on the stockmarket. It is reducing the supply of share buy-backs, where companies acquire their own stock with (often borrowed) cash. Will that remove a plank that has helped support share prices?

Figures from the Federal Reserve show that corporations have been easily the biggest buyers of shares since 2005; indeed households have been net sellers almost ever since the dotcom bubble burst in 2000. But the annualised pace of share repurchases by companies fell from around $1 trillion last year to $200 billion in the first quarter of 2008.

It makes sense, given today's markets, for companies to hang on to what cash they have, rather than hand it back to shareholders. Indeed any share-repurchase programmes still under way may be offset by share sales, not least from banks patching up their tatty balance sheets.

The supposed merits of buy-backs are complicated by what looks like a conflict between theory and practice. In theory, investors should be indifferent about whether they receive money as dividends or buy-backs (and, indeed, firms should not care how they hand over the money). In practice, however, tax alters the investor's view. If capital-gains tax rates are lower than income-tax rates (as they were in America before George Bush's tax reforms of 2003), an investor may prefer to sell his shares into a buy-back.

Executives may also prefer buying back shares to paying dividends. In normal circumstances, a buy-back boosts earnings per share, making it easier for the company to meet market estimates and for its executives to profit from their stock options. If it fails, the penalties for managers can be severe—they may even lose their jobs. In addition, buy-backs can be one-off whereas dividend payments are seen as more permanent; it is easier for a company to buy fewer of its own shares than to cut its dividend.

Whether buy-backs should boost the share price of the average company is another tricky question. Paul Marsh, of the London Business School, says studies suggest that, in the American market, the announcement of a buy-back boosts the share price by around 2%, compared with around half that in Britain.

In theory (again), it should make no difference whether a company decides to fund itself with shares or debt. To the extent that the company issues debt to buy equity, that might indeed boost earnings per share. But the company's balance sheet would then be riskier, which should affect the multiple that shareholders are willing to assign to those earnings.

So why (apart from tax) would there be any positive effect on the shares? It is often argued that investors see buy-backs as a sign that executives believe their firm is undervalued. But in the light of today's rights issues that argument looks weak. Take HBOS, a British bank that bought back shares at an average of £10 (then worth $20.60) each in 2007 and is now selling them at £2.75. Technically, it does not matter to investors that companies like HBOS have been buying high and selling low, since by definition the shareholders have done the reverse. However, it does suggest that executives are not necessarily the shrewdest at market timing.

mm comments - don't read too much into company buybacks on the future of the company ??

And so back to the question of whether the overall market will be hurt by the decline in share repurchases. Mr Marsh argues that the causation is the other way round. Rather than the pace of company buy-backs driving the stockmarket, stockmarket conditions are affecting the pace of buy-backs.

But Smithers & Co, an economic consultancy, reckons that the decline is a bearish signal, given that the demand by companies for shares has been “the driving force” behind the stockmarkets' recovery in recent years. At the margin, it does make sense that buy-backs affect the balance of supply and demand. Without demand from companies, who else will there be to buy?

One argument of the bulls is certainly looking threadbare. Going by its dividend-yield, Wall Street has looked pricey for some time, offering a meagre income of just 2%. That did not matter, said the bulls, given that investors were also getting their money in the form of buy-backs. With no net buy-backs, they will have to come up with another line of reasoning.

Another debate that may revive is whether executives should always hand over their spare cash to investors. True, it stops managers from doing stupid things with the shareholders' money. But the cash you have given away in the good years is much harder to get back from a cash-constrained public when times turn bad. Just ask the banks.

[winston]

Interest rate futures trading yesterday suggests that 90% expect the Federal Reserve will, at the end of its 2-day FOMC meeting starting today in Washington, keep its benchmark fed funds rate unchanged at 2%.

This has however already been hinted by a Fed official last week that Bernanke “saw no reason to raise rates this month, or indeed until the autumn”, and which has drawn much criticism, considering Bernanke’s earlier stance of “maintaining a stable dollar”.

[millionairemind]

Bernanke Plays `Dangerous Game' Balancing Rate Talk With Action

By Scott Lanman

June 24 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke, by voicing concern about inflation and the slumping dollar, has fanned investor expectations for an interest-rate increase as soon as August. He may regret it.

Raising rates may exacerbate the economic slowdown and roil banks whose losses sent their stocks down the most in a decade this month. Forgoing a rate boost next quarter risks damaging the Fed's credibility and deepening its divisions. Already this year, three officials have dissented on rate decisions.

While Bernanke's warning that the Fed will ``strongly resist'' a jump in inflation expectations led traders to bet on a rate increase, economists are more skeptical. All 101 in a Bloomberg News survey said the Federal Open Market Committee will keep the benchmark rate unchanged tomorrow and most analysts this month predicted officials will stand pat until 2009.

``That's the dangerous game,'' said Scott Anderson, senior economist in Minneapolis at Wells Fargo & Co., the fourth- largest U.S. bank by market value. ``Instead of putting the shot across the bow on inflation,'' Bernanke might have ``held off a few more months to let the credit crisis heal a little bit more.''

The Fed chief shifted stance after soaring costs of energy and imported goods threatened to stoke consumer price expectations. Gasoline climbed 37 percent in the past year, according to AAA. Import prices excluding petroleum rose the most since 1988 in the 12 months to May, government figures show.

Bernanke's Message

Bernanke said at a Boston Fed conference June 9 the risk of a ``substantial downturn'' in the economy had diminished and accelerating inflation ``would be destabilizing for growth.'' The previous week, he said the falling dollar caused an ``unwelcome'' increase in domestic prices and the Fed was ``attentive'' to the problem.

There are widespread expectations among traders for a rate rise in the next three months: There are 36 percent odds of a boost in August and 93 percent in September, according to futures contracts on the Chicago Board of Trade. Economists in a monthly Bloomberg survey through June 11 projected the Fed will keep the rate at 2 percent this year, according to the median estimate.

The FOMC begins gathering today in Washington and will issue its statement tomorrow around 2:15 p.m.

`No Bite'

``Unless the inflation expectations and the numbers come down, they're going to have to raise rates,'' William Ford, a former Atlanta Fed chief who's now at Middle Tennessee State University in Murfreesboro, said in a Bloomberg Radio interview. ``If he's saying we're going to fight inflation but he's all bark and no bite, division is what's going to happen.''

Dallas Fed President Richard Fisher, Philadelphia Fed chief Charles Plosser and William Poole, who retired from the St. Louis Fed in March, dissented on rate decisions this year.

The FOMC usually has seven Fed board members and five district-bank heads. Two board positions are now vacant, and a third opens in August with Governor Frederic Mishkin's departure.

That means the presidents, who tend to dissent more than governors, may get a majority. The Senate has yet to confirm the Bush administration's board nominees, though Democratic Senator Christopher Dodd of Connecticut, who chairs the Senate Banking Committee, has said he may hold a vote on at least one of the picks.

Officials are increasingly sounding the alert that they're prepared to raise rates this year.

`Act Preemptively'

``If we don't take action and stay on top of the situation,'' inflation will probably accelerate, James Bullard, Poole's successor, said June 11. Bullard doesn't vote this year. The Fed must ``act preemptively,'' Plosser said June 12.

Consumers anticipate annual inflation of 3.4 percent in the coming five years, a 13-year high, a Reuters/University of Michigan survey showed this month. A measure of price expectations based on 10-year Treasury inflation-protected securities has also risen this year, to 2.46 percent.

A measure of prices tied to consumer spending has averaged annual gains of 3.3 percent so far this year, up from 2.5 percent in 2007. Excluding food and energy costs, the Commerce Department's index has averaged 2 percent increases this year, compared with a 1.8 percent average pace since 1998.

Bernanke has said the slowdown should alleviate price pressures. The economy expanded 0.9 percent in the first quarter, capping the weakest six-month performance in five years.

Bank Losses

The downturn is weakening U.S. banks already struggling with the credit crisis and the worst housing slump in a quarter century.

The Standard & Poor's 500 Banks Index is down 20 percent in June, on course for the worst month since August 1988. More than 100 lenders have been forced to close, halt operations or sell themselves since the beginning of last year.

Fifth Third Bancorp, Ohio's second-biggest bank, said June 18 most of its quarterly profit will evaporate after already posting nine consecutive declines.

``The issue here is whether the Fed is willing to risk an escalation of inflation and then a bigger recession later, or acts earlier, taking a risk of a smaller recession, but preventing inflation from getting out of hand,'' Poole said in a Bloomberg Television interview.

To contact the reporter on this story: Scott Lanman in Washington at [email protected]

[winston]

U.S. Consumer Confidence in June Probably Fell to 15-Year Low
By Timothy R. Homan

June 24 (Bloomberg) -- Consumer confidence probably fell this month to the lowest level in more than 15 years, raising the risk that Americans will retrench after spending their tax rebates, economists said before reports today.

The Conference Board's confidence index fell to 56, the lowest level since October 1992, from 57.2 in May, according to the median estimate in a Bloomberg News survey. A separate report may show home prices dropped at a faster pace.

Falling property values, rising unemployment and higher food and fuel bills have shaken consumers and may cause purchases to slump once the rebate money is gone. While price increases signal the Federal Reserve may raise borrowing costs later this year, policy makers are forecast to hold the target rate unchanged tomorrow as concern over growth lingers.

``Some of the decline in consumer confidence reflects the stagflationary element -- the higher costs as well as the reduced employment opportunities,'' said Peter Kretzmer, a senior economist at Bank of America Corp. in New York. ``The Fed at this point is on hold.''

The Conference Board, a private New York-based research group, is due to issue its confidence report at 10 a.m. Estimates of the 69 economists surveyed ranged from 50 to 60.

Earlier this month, the Reuters/University of Michigan preliminary index of consumer sentiment for June fell to the lowest level since 1980. The report also showed Americans forecast inflation for the next five years will be 3.4 percent, matching May's reading as the highest since 1995.

House Prices

A report from S&P/Case-Shiller at 9 a.m. may show house prices in 20 U.S. metropolitan areas plunged 16 percent in April from a year earlier, the most since records began in 2001, according to the median estimate of economists surveyed. Forecasts ranged from declines of 15.4 percent to 17 percent.

The housing slump and concerns over rising food and energy costs mean the Fed has to contend with a slowing economy and increases in commodity prices. Investors project the Fed will raise the benchmark rate at their September meeting, according to futures prices.

Economists are less convinced the Fed's preferred inflation gauge, known as the core rate because it excludes food and energy costs, will spiral out of control.

``A very weak economy will limit core inflation and continue to boost the unemployment rate, thereby keeping the Fed on the sidelines for the foreseeable future,'' said Joshua Shapiro, chief U.S. economist, Maria Fiorini Ramirez Inc. in New York.

Slower Growth

The economy will probably expand at a 0.5 percent annual pace from April through June, according to the median estimate of economists surveyed by Bloomberg News earlier this month. It would be the slowest rate of growth since 2002.

Consumer spending, which accounts for more than two- thirds of the economy, has been hampered by the jump in food and fuel costs, causing Americans to cut back on purchases of more expensive items like automobiles.

Ford Motor Co., the second-biggest U.S. automaker, last week said U.S. sales of large pickup trucks will decline significantly because of $4-a-gallon gasoline.

Alan Mullaly, chief executive officer of the Dearborn- Michigan-based company, said in a statement that demand for pickups and sport-utility vehicles is ``at one of the lowest levels in decades.''

[millionairemind]

Strapped on your seat belts bros, cos' Wall Street is starting its Round II

Financial Firms May Make Deeper Cuts, Eliminate 175,000 Jobs

By Josh Fineman and Deirdre Bolton

June 24 (Bloomberg) -- The world's biggest financial firms may lose as many as 175,000 jobs by this time next year as Citigroup Inc. and other banks shed workers amid slowing revenue and billions in writedowns, executive recruiters say.

Financial companies have announced plans to trim more than 83,000 jobs since last July, according to figures compiled by Bloomberg. As more employees are fired, workforce reductions may exceed those from the market slump of 2000 to 2003 when technology-related shares collapsed, recruiters said.

``The worst is yet to come,'' Russ Gerson, head of New York- based recruiting firm Gerson Group, said yesterday in an interview. ``We are going to have a major contraction. This is affecting all areas of the investment banking universe and it's affecting all areas globally.''

Mortgage defaults have caused firms to incur almost $400 billion of writedowns and losses. New York-based Citigroup, the biggest U.S. bank by assets, has announced more than 13,000 job cuts, about 4 percent of its worldwide workforce. It may shrink further under a plan to trim the trading and investment-banking divisions by 10 percent, said a person with knowledge of the matter.

``For financial services this is about as bad as I can remember,'' John Challenger, chief executive officer of Chicago- based outplacement firm Challenger, Gray & Christmas Inc., said in a phone interview. ``The deal flow is not there. You just don't need as many people.''

Companies have announced more than $1.5 trillion of merger and acquisition deals this year, a 33 percent drop from the same period in 2007, according to data compiled by Bloomberg.

`Chopping Heads'

About 17 percent of banking and securities jobs in New York were wiped out from 2000 to 2003, the Bureau of Labor Statistics said. The current round of cuts may claim 35 percent to 40 percent of the industry, said Gary Goldstein, chairman of New York-based financial recruitment firm Whitney Group.

``They just keep chopping heads,'' Goldstein said. ``They'll wake up one day and realize that they've cut too deep and now these businesses have come back and they don't have anybody to do them.''

New York-based Bear Stearns Cos. is cutting more than 9,000 jobs, or 66 percent of its workforce, as it was acquired by JPMorgan Chase & Co. Zurich-based UBS AG has announced 7,000 job cuts, and Lehman Brothers Holdings Inc. has trimmed 6,300 employees.

The Independent Budget Office in Manhattan said in a report issued last month that it expects 33,300 finance jobs in the city, or 7.1 percent of the total, to be cut from the peak in 2007. The industry lost 52,500 jobs in New York during the 2000- to-2003 market drop.

Wall Street's Tendency

``Wall Street has a tendency to over-hire in bull markets and over-fire in down markets,'' Goldstein said. ``This is just another example of that.''

New York has lost 10,000 financial services jobs since last August, a 3.5 percent decline, according to the Bureau of Labor Statistics in Washington. Those figures don't tell the whole story because employees receiving severance remain on payrolls.

London will suffer 19,225 finance-job reductions in 2008 and 2009, or 5.4 percent of the total, according to estimates from the Centre for Economics and Business Research in London. That compares with 15,340 jobs, or 4.7 percent, from 2000 to 2002, the CEBR's data show.

``This is unprecedented,'' Gerson said. ``A lot of jobs are going to go away.''

To contact the reporters on this story: Josh Fineman in New York at [email protected]; Deirdre Bolton in New York at [email protected].

[millionairemind]

W - like your new avatar... looks like you have seen THE LIGHT

Home prices fall 15.3% in past year, Case-Shiller says

By Rex Nutting
Last update: 9:10 a.m. EDT June 24, 2008

WASHINGTON (MarketWatch) -- Home prices in 20 major U.S. cities have dropped 15.3% in the past year, according to the Case-Shiller home price index released Tuesday by Standard & Poor's.

Prices were down 16.3% in a smaller subset of 10 homes that have been tracked over a longer period. Home prices fell in 12 of 20 cities in April compared with March, but are down in all 20 cities compared with a year earlier.

Prices are now down 17.8% from the peak two years ago. The Case-Shiller index tracks sales of the same homes over time, so it's not influenced by the mix of homes sold in a period.

[kennynah]

24 Jun 2008 14:01 GMT
US DATA: Jun Richmond Fed mfg index -12 vs -3, as shipments and new orders fell.

24 Jun 2008 14:00 GMT

US DATA: June Conference Bd consumer confidence is below expectations at 50.4, vs up-revised 58.1.

Present Situation 64.5, Expectations 41.0.

This is the 5th lowest reading ever, and Conf Board says maybe it is nearing a bottom! Poll was taken thru June 18, when stocks fell and gas prices rose.

Jobs Hard to Get was 30.5 vs 28.3;

Jobs Plentiful 14.1 vs 16.1, illustrating underlying hardship.

These readings are certainly consistent with recession or consumer pull-back.

Plans to buy fell across the board but 1y inflation expectations were steady at 7.7% (vs 5.4% a year ago).