Michigan Consumer Sentiment Rebounds; Flat Year over Year

Reuters reports:

U.S. consumer confidence rebounded in April to the highest levels since September before investors panicked about the collapse of Lehman Brothers and the global banking system's near implosion, a survey showed on Friday. The Reuters / University of Michigan Surveys of Consumers said its preliminary April reading of consumer sentiment rose to a level of 61.9, up from 57.3 in March and was the highest since 70.3 recorded in September.

Source: St. Louis Fed

Citi Losing Non-US Deposits

Back in October, Bloomberg reported:

The Federal Deposit Insurance Corp. will temporarily guarantee new senior unsecured debt and fully protect non-interest-bearing deposits at banks in a bid to restore confidence in the financial system.

"All of us are prepared to do whatever it takes, to fix whatever problems arise, and to work with Wall Street and Main Street to unclog the financial system,'' FDIC Chairman Sheila Bair said today during a Treasury news conference.

The program is the latest effort by the FDIC to shore up confidence in the U.S. banking system in the wake of 15 bank failures this year. The $700 billion U.S. financial industry rescue law raises FDIC coverage of bank deposits to $250,000 per customer from $100,000 through 2009.

Looking at the shift in Citi's deposit base over the last year, the added insurance looks very timely as non-interest bearing deposits spiked, helping to offset a portion of the rather large drop in deposits outside of the U.S. (though more than half of the decline outside of the U.S. was due to FX adjustments).

Change in Deposit Base

Cumulative Percent Change in Deposit Base by Type / Region

Source: Citigroup

Reader Opinion Friday.... Is this Sustainable?

Are you a buyer at these levels and importantly (whether a buyer or seller)... WHY?



Lets hear it....

Philly Fed Index... "Business Sucks Now, BUT WILL Improve" Edition

Felix Salmon (now at Reuters) with the details:

The Philadelphia Fed said its business activity index came in at minus 24.4 in April compared with minus 35.0 in March. A reading below zero indicates contraction in the region's manufacturing sector.

The median forecast among economists polled by Reuters was minus 32.0.

Among the survey's relative bright spots, the new orders index came in at minus 24.3 compared with minus 40.7 in March, while the employee gauge stood at minus 44.9 against March's minus 52.0.

The outlook among Mid-Atlantic companies also improved in April. The Philadelphia Fed's six-month conditions index bounced up to 36.2 from 14.5 in March. The April outlook figure was the highest since October 2007 prior to the start of the current recession.

Source: Philadelphia Fed

No Foreign Demand for US "Risk" Assets

Brad Setser reports:

It is a good thing the US trade deficit has come down, because foreign demand for US financial assets — actually foreign demand for US assets other than short-term Treasury bills — has dried up.

Foreign investors bought $68 billion of T-bills in February. Russia alone (likely Russia’s central bank) bought close to $14 billion. Private investors — seemingly Japanese private investors — also bought $23.5b of longer-term Treasury notes. Otherwise, though, foreign investors didn’t buy much of anything. And Americans also didn’t buy many foreign assets.

It will be interesting to see if March's rally in risk assets corresponded to an increase in demand by foreigners.

Source: Treasury

Eurozone Industrial Production Collapse

Bloomberg details:

Industrial production in Europe contracted by the most on record in February as the deepening global recession curtailed demand for manufactured goods around the world. Output in the euro region fell 18.4 percent from the year-earlier month, the biggest drop since the data series began in 1986, after a revised 16 percent decline in January, the European Union’s statistics office in Luxembourg said today.

Source: Eurostat

State Tax Collections Decline.... Sales Taxes with a Record Drop

Bond Buyer with the details:

State tax collections for the fourth quarter of 2008 declined for the first time in more than six years, and sales taxes were dealt a record-setting blow during that period, according to a report issued yesterday by the Nelson A. Rockefeller Institute of Government.

Source: Rockefeller Institute via The Bond Tangent

Deflation Camp: Under-utilized Capacity

Finfacts reports:

Outside of manufacturing, the output of mines fell 3.2% in March, as oil and gas well drilling continued to drop. After a relatively mild February, a return to more seasonal temperatures pushed up the output of utilities. The capacity utilization rate for total industry fell further to 69.3%, a historical low for this series, which begins in 1967.Early this morning saw the release of Capacity Utilization data.

Source: Federal Reserve

Investment Grade Corporate Bond Yield

We've detailed similar thoughts here and here, but worth repeating. While the borrowing cost for corporations that have been able to maintain their AAA or AA rating (not many) has stayed relatively flat, for other Investment Grade borrowers... not so much.



Source: Barclays

Industrial Production Slump Continues

Bloomberg reports:

Industrial production in the U.S. fell for the 14th time in the last 15 months as factories trimmed unwanted stockpiles. Output at factories, mines and utilities dropped 1.5 percent last month, more than anticipated and matching the prior month’s decrease, according to a report from the Federal Reserve today in Washington. The amount of industrial capacity in use fell to 69.3 percent, the lowest level since records began in 1967.

Source: Federal Reserve

CPI Down; Solely Due to Transportation

BLS details:

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent in March, before seasonal adjustment, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. The index has decreased 0.4 percent over the last year, the first 12 month decline since August 1955.

Looking at the chart below, we see the only area that saw price declines year over year was transportation, dropping 12.5% year over year.



This 12.5% had a weighted impact on CPI of -2%, thus CPI "ex transportation" was at 1.6% year over year. Remarkably, the change in the price of gasoline itself had an impact of -1.2% of that -2%.

Source: BLS

Inventories Continue to Fall...

Yesterday we saw another monthly decline in business inventories. Xinhuanet with the details:

Inventories held by U.S. businesses on shelves and backlots fell 1.3 percent in February, marking the sixth straight monthly decline, the Commerce Department reported Tuesday.

The 1.3 percent drop in business inventories matched the January decline and close to the 1.2 percent fall that economists had expected.

The sixth consecutive decline is the longest stretch since the country's businesses cut their stockpiles for 15 straight months ending in April 2002, a period that covered the last recession.

The February drop in inventories came as businesses' sales edged up by 0.2 percent, rebounding from a 1.2 percent decline in January.

Source: Census

New Baseball Fields and (Empty) Corporate Boxes

I am a HUGE Mets fan and I was fortunate enough to spend WAY too much money scalping tickets to last night's home opener (which happened to be the first ever regular season game at the new Citi Field). My initial thoughts of the stadium; absolutely beautiful, but it oddly doesn't feel like it was built for the Mets. The all green seats / green wall when the Mets colors are Blue and Orange, plus the new dimensions that actually cost the Mets the game because Ryan Church (the Mets rightfielder) isn't used to the new dimensions of the outfield, all felt slightly off...

Anyhow, the place was PACKED... with one odd exception. As most new ballparks have ridiculously new pricing for the best seats, these best seats now ALL go to... corporations. Yes, I understand this has been a growing trend in recent years, but the pricing discrepancy has moved to a new level with these new stadiums. The result per Ticketnews:

Overall, the Mets raised ticket prices 8.6 percent – against the tide of what many MLB teams have done. According to the just-released April 2009 Major League Baseball Team Marketing Research (TMR), 16 MLB teams either cut, maintained or raised ticket prices by less than 1 percent for 2009. Four others raised ticket prices by less than the MLB average of 5 percent. The Mets average ticket price is $36.99, $10.35 above the MLB average.

This would all be fine if all those clients actually enjoyed baseball and were fans, but lets take these two pictures as proof that they are not. These were both taken in the 7th inning of a 1 run game.

First the upper / nose-bleed seats in right field... packed!




Now the best seats in the house, those right behind the plate...



Unless these fans were dressed like empty seats, they had already taken off. Is it worth it for a non-baseball fan to go out of there way for a ball-game? I have a feeling no, thus we'll see a lot of empty seats going forward...

Retail Sales Fall (March)

WSJ reports:

U.S. retail sales unexpectedly plunged during March in a broad-based decrease that threw a shadow over recent signs of improvement in the slumping economy. Retail sales decreased by 1.1% compared to the prior month, the Commerce Department said Tuesday. Economists expected an increase of 0.3%.

Sales in February were revised up, increasing 0.3% instead of dipping 0.1% as originally reported. January sales were revised up to an increase of 1.9% from aan increase of 1.8%.

The big decline in March sales was a disappointment. The increases in January and February sales had temporarily ended a freefall in consumer spending during the second half of 2008. People seemed to be braving a pitiless job market and pulling out their wallets again, which is good for the economy. Consumer spending makes up 70% of gross domestic product, the broad measure of economic activity.

Source: Census

Deflation, Here We Come (PPI March)

Year over Year


Month over Month


Source: BLS

Only Now Moody's Downgrades Ambac to Below Investment Grade?

I understand Moody's ratings don't necessarily apply directly to equity, BUT this does tell the story rather well...

Click for Larger Chart


And now... a full year too late The Bond Tangent details:

According to Marketwatch, Moody's cut Ambac to Ba3 from Baa1. Ambac senior debt was cut to Caa1 (highly speculative). Moody's cites significantly increased loss estimates, especially on Alt-A transactions.

One question at this point... why bother at this point?

Taxpayers Subsidizing Paper?

In the latest installment of "Greed that Makes Me Want to Throw up in my Mouth" we have International Paper. It started innocently enough with the following press release on March 24th:

In January 2009, the company was notified that its registration as an alternative fuel mixer was approved. On March 20, 2009, the company received its first check from the Internal Revenue Service in the amount of $71.6 million related to an alternative fuel mixture produced and used at 15 of its mills for the period of November 14 to December 14, 2008. The company will continue to submit refund claims based on actual mill production and use of an alternative fuel mixture and will provide investors with information relating to future credits during its regular quarterly earnings calls.

No doubt in part to that new taxpayer revenue source, International Paper's stock soared to its most recent peak, up more than 100% from when the S&P hit bottom on March 9th (to be fair, the stock had gotten slammed before this run-up). A win-win-win right? International Paper gets a "first check" of $71.6 million from taxpayers (thoughts are it could become as much as $1 billion this year), while helping the environment, AND the U.S. becomes less dependent on oil... right?

Core Economics with the abridged reasoning as to why that is incorrect:

Congress passes bill to encourage fuel mixtures as a way to weaning the economy off oil. Subsidises usage of that fuel to the tune of 50c per gallon. Paper producers, who had been using a by-product of their process as a fuel for decades, now add diesel to it in order to claim the subsidy.

The Nation with the full details (bold mine):

Since the 1930s the overwhelming majority of paper mills have employed what's called the kraft process to produce paper. Here's how it works. Wood chips are cooked in a chemical solution to separate the cellulose fibers, which are used to make paper, from the other organic material in wood. The remaining liquid, a sludge containing lignin (the structural glue that binds plant cells together), is called black liquor. Because it's so rich in carbon, black liquor is a good fuel; the kraft process uses the black liquor to produce the heat and energy necessary to transform pulp into paper. It's a neat, efficient process that's cost-effective without any government subsidy.

By adding diesel fuel to the black liquor, paper companies produce a mixture that qualifies for the mixed-fuel tax credit, allowing them to burn "black liquor into gold," as a JPMorgan report put it. It's unclear who first came up with the idea--Wrobleski (Ann Wrobleski is International Paper's vice president for global government relations) told me it was "outside consultants"--but at some point last fall IP and Verso, another paper company, formerly a part of IP, began adding diesel to its black liquor and applied to the IRS for the credit. (Verso nabbed $29.7 million at just one of its mills in the final quarter of 2008 for its use of mixed fuel.)

Despite the obvious contrivance of the procedure, Wrobleski is unapologetic: "The credit is supposed to encourage the use of green fuel." Sure, I said, but isn't it a bit weird you're now adding diesel fuel to the process in order to take advantage of it? "It is what it is," she said.

"It is what it is"? Maybe IP should have their traditional PR contact handle these types of media requests going forward....

Source: Yahoo

Global Equity Rebound

Source: Investment Postcards

If Goldman's Selling... Beware of Buying

If I've learned anything, it is that when the "smart money" is selling, you SHOULD NOT be buying. The WSJ reports:

Goldman Sachs Group Inc., riding a rising market, is considering making a multibillion-dollar offering of its shares to investors as part of an effort to repay a $10 billion government loan, according to people familiar with the matter.

The move, which could be announced as early as next week, comes as the firm prepares to report solid first-quarter earnings Tuesday. Goldman executives haven't determined the exact size of the offering, but it is expected to be at least several billion dollars, these people say. They caution a final decision isn't made, and will be based partly on market conditions.

Although Goldman's stock price has been far from immune during this global downturn, a sale at today's equity valuation would be a substantial improvement (more than 2x) than seemed possible just a few months back.



Tyler Durden at Zero Hedge with the conspiracy theory behind this recent run-up (he also makes the case that this low volume rally is poised to crash):

Key to note here is that Goldman's program trading principal to agency+customer facilitation ratio is a staggering 5x, which is multiples higher than both the second most active program trader and the average ratio of the NYSE, both at or below 1x. The implication is that Goldman Sachs, due to its preeminent position not only as one of the world's largest broker/dealers (pardon, Bank Holding Companies), but also as being on the top of the high-frequency trading/liquidity provision "food chain", trades much more often for its own (principal) benefit, likely in tandem with the other top dogs on the list: RenTec, Highbridge (JP Morgan), and GETCO. In this light, the program trading spike over the past week could be perceived as much more sinister. For conspiracy lovers, long searching for any circumstantial evidence to catch the mysterious "plunge protection team" in action, you should look no further than this.

Below is the data he references in chart form...



In other words, Goldman Sachs own trading has made up a HUGE portion of the program trading volume on the NYSE since the market turned in early March (here is a link to the past week of data, a week in which program trading was suspiciously higher than past weeks and one in which we saw a massive rally in financials). The chart below details how unprecedented this level of "program trading share" by Goldman is as compared to the first week of 2007 and 2008.



Goldman's principal trading amounted to 20%+ of all program trading reported on the NYSE, up from between 3-5% one and two years back. In other words, leading up to a period when Goldman may be issuing several billion dollars in an equity offering, their own principal trading has amounted to 4-5x more volume than what had been typical, in an illiquid market, potentially driving up the value of financial equities in the process... interesting.

Update: Zero Hedge has an update to the original post that makes Goldman a part of the run-up, but not the reason for the run-up (i.e. they are just delta hedging their book)

Source: Yahoo

EconomPics of the Week (4/10/09)

It was a quiet week of news... lets hope the lack of drama continues....

Economic Data
Good News Alert! Imports Down, Exports Up, Trade Balance Crash
Good News Alert! Wholesale Sales Up, Inventories Crash
The Prime Loan (Under)Performance Problem
Credit Down 5th Time in 7 Months, Before that Once in 15 Years
Japanese Export Recession
Euro Area GDP Breakdown
Same Store Sales (March)

Markets / Asset Classes
Hedge Fund Returns (March)
Abnormal Markets...
Yen Continues Sell-Off... Plenty of Room to Go
Don't Read too Much into the VIX
No Room for Walmart in Rebound
Market Bottom or Bear Market... Invest Wisely
Crude at Levels Not Seen in 16+ Years + Tiny Distillate Drop = “Shocked” Traders

Government Financing
Budget Deficit Close to $1 Trillion in First Six Months
Are Long Bonds About to Break Through or Bounce Back

Other
Absolute Domination Defined...

Budget Deficit Close to $1 Trillion in First Six Months

Marketwatch reports:

The U.S. federal budget deficit rose to a record $956.8 billion in the first six months of the fiscal year after the government stepped up spending to cope with a recession that has depressed tax receipts, the Treasury Department reported Friday.
The deficit is well on its way to the $1.75 trillion -- or 12.3% of gross domestic product -- that the White House has estimated for the full fiscal year, which ends in September.

The deficit through the first six months is more than three times higher than it was at this time last year. The government has borrowed $1 trillion from the public so far this fiscal year.

Source: Treasury

Same Store Sales (March)

The NY Times presents:

Only a handful of chains on Thursday reported an increase in sales at stores open at least a year, a measure of retail health. Wal-Mart Stores, the nation’s largest retailer and a bellwether for the industry, had a 1.4 percent increase over March 2008, not including fuel. Other discount stores like TJX and Ross Stores, as well as some teenage apparel chains, also fared well.

But a majority of the nation’s retailers continued to suffer sales declines. Abercrombie & Fitch was most notable, with a stunning 34 percent drop that analysts attributed to its strategy of not offering the same deep discounts as its competitors. Sales at other mall apparel chains and department stores remained weak.

Market Bottom or Bear Market... Invest Wisely

The Big Picture details the importance of understanding the difference between a "real thing" (i.e. market bottom) and a bear market rally. Here is point #1 of 3:

Follow the Playbook: The smart investor’s playbook is very different in bear markets than bull markets. In a Bull Market, you buy the dips. Lower prices are an opportunity to buy into equities at cheaper valuations. Most sales are disappointing, as prices eventually go higher. Buy & hold is the simplest, most cost effective investment strategy.

Bear markets call for a very different set of plays: You sell the rallies; higher prices are opportunities to sell equities at premium valuations. Most buys are disappointing, as prices eventually go lower. Buy & hold is a losing strategy – trading what the market presents to you is the best risk management strategy.

The goal during bull markets is to grow your capital; the goal during bear markets is to protect your capital.

Source: Yahoo

No Room for Walmart in Rebound

WSJ reports:

Major U.S. averages soared Thursday, but shares of Wal-Mart Stores were left in the dust as the nation’s largest retailer reported disappointing same-store sales for March, driven largely by home, health and grocery divisions. The shares, thus far, have dropped 4.2% on a day when major averages gained more than 2%. Since the market bottomed on March 9, however, investors have been looking elsewhere for a source of potential returns. While the Standard & Poor’s 500 has gained 22% since that day’s close, a 12-year low, shares of Wal-Mart are up just 7%, lagging the overall market.

Source: Yahoo

Crude at Levels Not Seen in 16+ Years + Tiny Distillate Drop = "Shocked" Traders

Reuters reports:

U.S. crude oil futures reversed course and rose sharply Wednesday after government inventory data showed that, despite crude inventories rising to their highest level in nearly 16 years, distillate stocks fell much more than had been forecast for last week, stunning traders.

"The big distillate draw is a big surprise and shocked everybody and that has a lot to do with crude turning to the upside here," said Mark Waggoner, president of Excel Futures in Huntington Beach, California. Domestic crude stocks rose for the fifth straight time last week, by 1.7 million barrels to 361.1 million barrels --- the highest level since the week to July 16, 1993, when stocks hit 362.2 million barrels, EIA data showed.

I'll agree crude rose (and rose to levels seen not 16 years, but closer to 19 years ago)....



But the shock about the "big" draw? While I'm no expert, in the grand scheme of things, this doesn't appear all that "big".



Source: EIA

Good News Alert! Imports Down, Exports Up, Trade Balance Crash

Okay, first I need to brag as I pretty much nailed we'd see a relative strength in exports (and the dollar) in this DECEMBER 8TH post.

Now that I got that out of the way, Marketwatch reports:

Imports into the United States fell sharply again in February and the U.S. trade deficit narrowed to $26 billion, the smallest since 1999, the Commerce Department reported Thursday. Imports of goods and services fell 5.1% to $152.7 billion, the lowest in more than four years. Exports of goods and services rose 1.6% to $126.8 billion, the first increase since July. The February deficit was much smaller than the $36.2 billion forecast by economists surveyed by MarketWatch. After adjusting for price changes, the real trade gap in goods fell in February to the lowest level since May 2001.

Trade Balance


Import / Export Breakdown by Goods / Services


Trade Balance by Goods / Services


Source: Census

Don't Read too Much into the VIX

Bespoke details:

Even though the market is barely up on the day at the moment, the VIX volatility index is down more than a point and has broken below 40. As shown in the long-term chart of the VIX below, prior to the current bear market, the VIX seldomly moved above 40. However, since last September, the VIX has remained solidly above 40. Since the VIX is widely considered a "fear" gauge that rises along with investor nervousness, the bulls would like to see the index break solidly below 40 for a longer period of time.

Rather than a measure of fear, the VIX has been closer to a reflection of actual volatility of the market. As the chart below details, the VIX has moved almost one-for-one with the actual volatility of the S&P 500, as measured by the rolling one-month standard deviation of daily price movements of the S&P 500 annualized (assuming 252 trading days in a year).



Source: Yahoo

Good News Alert! Wholesale Sales Up, Inventories Crash

As the saying goes, inventories can't go negative. Thus, at some point these businesses will have to reorder. Especially if sales continue to surprise to the upside.

Per the WSJ:

U.S. wholesale inventories in February fell by the most ever even as sales rose modestly, according to a report that suggested businesses were getting control of their stocks of goods. Wholesale inventories decreased by 1.5% compared to the prior month, falling to a seasonally adjusted $419.34 billion, the Commerce Department said Wednesday.

Inventories fell a revised 0.9% in January; originally, supplies were seen down 0.7%. Sales of U.S. wholesalers climbed by 0.6% in February to a seasonally adjusted $319.73 billion. The last time sales climbed was June 2008, so the increase was a promising sign for an economy that went into recession in December 2007. January 2009 sales fell a revised 2.4%; originally, sales for the month were estimated 2.9% lower.

Sales


Inventories

Source: Census

Abnormal Markets...

High yield bonds are outperforming investment grade corporate bonds, which are outperforming equities (year to date 2009).



How rare is this? Well, this hasn't happened over a full year since 1993 when all three were positive.



And the last time high yield had positive returns, while investment grade bonds and equities had negative returns... well I don't have enough data to tell if that's ever happened.

Japanese Export Recession

Bloomberg reports:

Japan’s current-account surplus narrowed in February as the global recession eroded demand for the nation’s exports.

The surplus shrank 55.6 percent to 1.117 trillion yen ($11 billion) from a year earlier, the Ministry of Finance said in Tokyo today. The median estimate of 24 economists surveyed by Bloomberg News was for a gap of 1.07 trillion yen. Japan had a 172.8 billion yen deficit in January, its first in 13 years.

The world’s second-largest economy is headed for its worst recession since 1945 as plunging overseas demand forces companies from Nissan Motor Corp. to Panasonic Corp. to cut production and fire workers. Confidence among Japan’s biggest manufacturers fell to a record low in March and executives signaled more spending and job cuts, the Bank of Japan’s Tankan survey showed last week.

Source: Customs.Go.JP

Credit Down 5th Time in 7 Months, Before that Once in 15 Years

Marketwatch reports:

Total outstanding consumer credit, including both revolving and nonrevolving credit, fell at a 3.5% annual rate, or $7.5 billion, to a seasonally adjusted $2.56 trillion, the Fed said. Credit has declined in five of the past seven months. Prior to that, credit had declined in only one month in the previous 15 years. "No other recession has seen monthly changes in consumer credit contract this many times or so deep before going back to January 1943, which is how far the data go back," wrote Young Kim, an analyst for Stone & McCarthy Research. The retrenchment reflects "less available credit, less consumer demand for credit, and consumers' new found propensity to pay down debt."

Below is a chart showing revolving credit (i.e. credit cards), which fell 9.7% annualized in February and 6% annualized over the last three months. Like so many other things, we are in unprecedented territory.

Source: Federal Reserve

Euro Area GDP Breakdown

The WSJ reports:

The record contraction in the euro-zone economy in the fourth quarter was even sharper than initially estimated, fueling fears that it will take longer for the currency block to recover from recession, final figures showed.

Gross domestic product contracted 1.6% from the third quarter and 1.5% from a year earlier in the final three months of 2008 in the 15 countries that then used the euro, the biggest contraction by both measures since records began in 1995, the European Union's Eurostat statistics agency said. The euro zone added a 16th country, Slovakia, on Jan. 1.

"Worryingly, it is far from inconceivable that euro-zone GDP contraction was even deeper in the first quarter of 2008, given largely dire data and survey evidence," said Howard Archer, chief U.K. and European economist at IHS Global Insight.

Source: Eurostat

Are Long Bonds About to Break Through or Bounce Back?

The WSJ reports:

A fresh batch of Treasurys up for sale this week sent prices on long-end Treasury futures lower Monday, sending anticipated yields higher even as investors sought safety from falling stocks.

Futures contracts on 30- and 10-year Treasurys declined as the U.S. government announced that it will sell $59 billion in 10-year notes, 10-year Tips and three-year notes in coming days, the latest debt issuance as the government seeks to fund a bevy of financial rescue efforts.

"This is the Treasurys looking at the supply we have coming in this week," Lesh said. "If we didn't have equities down the way they are, I'd imagine the 10-years would be worse."

The impending glut of new Treasurys canceled out investors' renewed trepidation around the prospects of big banks and general wariness around first-quarter earnings reports, which begin this week.

Source: Yahoo

Absolute Domination Defined...

I am no UNC fan, but I have never seen that dominating a performance throughout a final four.



Source: ESPN

The Prime Loan (Under)Performance Problem

OCC and OTS Release Mortgage Metrics Report for Fourth Quarter 2008 (hat tip Calculated Risk):

The Office of the Comptroller of the Currency and the Office of Thrift Supervision today jointly released their quarterly report on first lien mortgage performance for the fourth quarter of 2008. The report covers mortgages serviced by nine large banks and four thrifts, constituting approximately two-thirds of all outstanding mortgages in the United States.

Of these loans, the chart below details the performance of those loans labeled "seriously delinquent mortgages":

Seriously delinquent mortgages, defined as mortgages that are 60 or more days delinquent plus loans to bankrupt borrowers who are 30 or more days delinquent, ncreased to 4.60 percent of the total portfolio in the fourth quarter from 3.54 percent in the third quarter.

Seriously delinquent mortgages increased across all loan categories during the fourth quarter, continuing the trend reported in prior quarters. Serious delinquencies were highest for subprime loans at 16.40 percent and lowest for prime loans at 2.40 percent, reflecting the higher overall risk profile of subprime loans. Prime loans experienced a significant increase in serious delinquencies, increasing from 1.67 percent in the third quarter to 2.40 percent in the fourth quarter—an increase of nearly 44 percent.

While Subprime and Alt-A loans are dramatically underpeforming Prime loans, the shear volume of Prime loans (there are more of them) has resulted in the number of delinquent Prime loans to outnumber Subprime loans.

Yen Continues Sell-Off... Plenty of Room to Go

Reuters reports:

The yen fell broadly on Monday, hitting its weakest against the dollar and the euro in nearly six months as investors took on perceived riskier assets on the view that a global economic downturn may have hit a bottom. The dollar rose as high as 101.45 yen, according to Reuters data, vaulting above 101 yen for the first time since last

"As long as stocks can retain their buoyancy ... risk appetite and risk-based trades will be in vogue and investors will continue to add to and rebuild yen short positions," said Jeremy Stretch, currency strategist at Rabobank in London.

Hedge Fund Returns (March)

A bit busy, but the chart below shows March and YTD returns through March. All bar charts show absolute returns (i.e. Emerging Markets returned 5.54% in March and 1.25% YTD).



Source: Barclays Hedge

EconomPics of the Week (April 3rd)

Asset Classes

Are Corporate Bonds a Screaming Buy?

TIPS Rockin'

Stocks for the Long Run... Why Does Intra-Year Volatility Matter?

Uggghhhh.... 2009 Returns Looking All Too Similar

Market Up 30% Pre-Open!!!!

Economic Data

Population vs. Labor Force vs. Employed

Unemployment to 8.5%, Broader Measure Rockets to 1...

The Public Construction Boost

Autos Breakdown: Ugly, But at Least the Hummers Dead

ISM Manufacturing (March)

ADP Payroll Bloodbath

Consumer Confidence: The Present is "Bad", The Future is “Less Bad”

Chicago PMI to the Downside

Case Shiller Price Index Level at -5% YoY in January

Wealth Concentration in the U.S.

Other

China Isn't the Issue... Part II

TARP Running Dry

Box Office Bonanza Continues

Population vs. Workforce vs. Employed

Making this an early weekend, but one more chart before I go...

What this shows is the population is growing, the labor force is shrinking, and those employed is crashing. Not a surprise, but this puts the #'s in context.

Everyone have an enjoyable, long weekend!

Unemployment to 8.5%, Broader Measure Rockets to 15.6%

Source: BLS