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Posted in Uncategorized |

mtg purchase apps

Now up 1% vs last year which was hit by the cold weather:

MBA Purchase Applications
Mortgage applications for home purchases were flat in the January 23 week, down 0.1 percent for a year-on-year rate of plus 1.0 percent. Refinancing applications fell 5.0 percent in the week. Rates remain very low but did edge higher in the week, up 3 basis points for an average 30-year fixed loan to 3.83 percent for conforming balances ($417,000 or less).


Posted in Housing |

durable goods, Case Shiller, new home sales, Consumer Confidence, Richmond Fed, PMI services flash, GDP comments, 10 yr vs Fed

Down hard and revisions down hard as well, and year over year growth up less than 1%:

Durable Goods Orders
Durables orders unexpectedly fell 3.4 percent in December after dropping 2.1 percent in November. Analysts projected a 0.7 percent rise.

Excluding transportation, the core slipped 0.8 in December following a decline of 1.3 percent in November. Market expectations were for a 0.8 percent boost in December. Transportation plunged a monthly 9.2 percent after dropping 3.9 percent in November. Motor vehicles rose 2.7 percent, nondefense aircraft plunged 55.5 percent, and defense aircraft fell 19.9 percent.

Outside of transportation, weakness was mixed. Industries posting gains were fabricated metals, electrical equipment, and “other.” Declines were seen in primary metals, machinery, and computers & electronics.

Nondefense capital goods orders excluding aircraft dropped 0.6 percent after a decline of 0.6 percent in November. Shipments of this series eased 0.2 percent in December after dropping 0.6 percent the month before.

Overall, manufacturing is soft. The outlook is questionable with the recently sharp boost in the value of the dollar.

Equity futures dropped very sharply on the news. However, earnings concerns also weighed on futures.

Housing still looking like it’s rolling over?


New home sales better than expected!

New Home Sales

Consumer confidence up as well! But don’t forget this is about ‘head count’. That is, consumer confidence can be up for the hundreds of millions saving $11/week on gas, while the cutbacks from those losing high paying jobs and from capex reductions reduce the confidence of far fewer people initially, but the spending lost to the economy is far higher.

Consumer Confidence

Richmond Fed- DC area doing better than Texas…

Richmond Fed Manufacturing Index
Recent History Of This Indicator
The Richmond Fed manufacturing index for December picked up to 7 from 4 in November. New orders showed relative strength, at 4 versus November’s 1, but were still on the soft side. Order backlogs, however, showed outright contraction for a second month, at minus 5 vs minus 2 in November. Shipments showed relative strength to November, at 5 vs 1, but, like new orders, were still on the soft side. A definitive sign of strength, however, came from employment which was up 3 points to a very solid 13 in a reading that points to underlying confidence among the region’s manufacturers. Price data were soft in line with declining fuel costs.

PMI Services Flash
Growth in the nation’s service sector is accelerating but only very slightly this month based on Markit’s sample where the flash index is at 54.0 vs December’s final reading and 10-month low of 53.3 and December’s flash reading of 53.6. The report ties the gain in part to a pick up in consumer spending though new business growth this month continues to moderate and is at a new low in the 5-year history of the report. Amid the slowing, service providers in the sample continue to add to payrolls though at the slowest rate in 9 months. Growth in backlogs is at a 6-month low. Price data show only fractional pressure for inputs and only fractional pricing power for outputs.

Look what spiked up in Q3, and could come down in Q4?


And the 10 year note is now down to 1.75%, which you could say is at odds with the Fed’s forecasts for higher rates.

Wonder who will be correct?




Norfolk Southern Revenue Slips on Coal Weakness (WSJ) Norfolk Southern Corp. profit totaled $511 million, off from $513 million in the same quarter a year earlier. Demand for electricity in the railroad’s territory fell 1% last year, executives said. The railroad’s coal revenue fell 15% to $543 million, while its coal volume declined 6%. In the fourth quarter, Norfolk Southern’s fuel-surcharge revenue declined $45 million compared with the same quarter in 2013.

Siemens Profit Hurt by Weak Economy, Oil (WSJ) Net profit in the three months to Dec. 31 fell to €1.08 billion ($1.21 billion) from €1.43 billion in the same period last year, Siemens said on Tuesday. Revenue rose 5% to €17.42 billion, helped by the euro’s weakness against major currencies. Siemens reiterated that it expects to notch up 15% growth in earnings per share in the year to end-September on unchanged revenue. Still, an 11% decline in new orders to €18.01 billion underscored the pressure Siemens is facing as customers placed fewer large orders at its mobility, wind power and renewables business as well as its process industries and drives unit. The power and gas division’s profit margin shrank to 11.3% from 18.2% in the same period last year, Siemens said.

Aso seeks swift passage of extra budget to expand economy (Kyodo) Finance Minister Taro Aso on Monday called for swift passage of the fiscal 2014 supplementary budget to eradicate prolonged deflation and allow Japan’s economy to move onto an expansionary path. “The economy remains on a moderate recovery track, but weakness can be seen in private spending and economic recovery is uneven across regions,” Aso said in a speech. “Immediate passage of the extra budget is necessary,” Aso said, pledging to spur domestic demand by bolstering local economies and supporting households — both plagued by price rises following last April’s consumption tax hike and the weaker yen.

Posted in Bonds, Economic Releases, Fed, GDP, Housing, Interest Rates |

Dallas Fed

who would have thought?…

Dallas Fed Mfg Survey
Texas factory activity was flat in January. The production index, a key measure of state manufacturing conditions, came in at 0.7, indicating output was essentially unchanged from December.

Other survey measures also reflected sluggish activity during the month. The capacity utilization index fell to 5.1, its lowest reading in five months. The shipments index plunged from 20.8 to 6, due to a much higher share of respondents noting a decline in shipments in January than in December. The new orders index moved down from 2.7 to minus 7.7, registering its first negative reading since April 2013.

Perceptions of broader business conditions worsened this month, with both the general business activity index and the company outlook index dropping below zero for the first time in 20 months. The general business activity index dropped to minus4.4, and the company outlook index fell 13 points, coming in at minus3.8.

Labor market indicators reflected unchanged workweeks but continued employment increases. The employment index was 9.0 in January, slightly below last month’s level but close to its average reading over the past two years. Twenty percent of firms reported net hiring compared with 11 percent reporting net layoffs. The hours worked index edged down from 0.7 to minus 0.1, indicating no change in hours worked in January. Wage pressures eased, while input and selling prices declined in January.

Indexes reflecting future business conditions fell notably in January. The index of future general business activity plummeted from 13 to minus 6.4. The index of future company outlook plunged from 21.8 to 2.5, its lowest reading in more than two years. Indexes for future manufacturing activity also declined this month but remained in positive territory.

Posted in Uncategorized |

Credit check, euro slipping on Greece

Yes, bank lending is growing some, but it’s just back to where it was a couple of years back when it took a step back, and below the prior cycle’s growth rate:


No action here:

And commercial paper is down about $85 billion since Dec 3, which means the rise in bank lending has been at the expense of shadow bank lending, and total lending is going nowhere:


Meanwhile, the euro has fallen a bit further vs the dollar after the Greek election results. I still don’t see this leading to any kind of fiscal expansion, and the proposed debt restructuring is functionally just a tax on bondholders that if anything further removes aggregate demand.

Additionally, the ECB’s latest moves, while actually contractionary/deflationary, are perceived as the reverse and Greece and others will likely give them time ‘kick in’ and spur growth. And while lower oil costs are a plus for most euro consumers, the lower cost of imports adds to the trade surplus, which is a force for a stronger euro.

Posted in Credit |

Existing home sales

Yet another report falls short, and with energy capex on the decline something needs to step up soon if there’s going to be any GDP growth:

Existing Home Sales
Existing home sales popped up in December as expected, up 2.4 percent to an annual sales rate of 5.04 million vs a slightly revised 6.3 percent decline in November to 4.92 million. December’s gain, underscoring Wednesday’s housing starts report, was led by single-family homes which rose 3.5 percent to a 4.47 million rate. Condos declined 5.0 percent in the month to a 570,000 rate. The gain for single-family homes is an important signal of strength for first-time home buyers.

The gain in sales drew down available homes on the market to 1.85 million from 2.08 million, in turn sharply lowering supply on the market to 4.4 months from 5.1 months. Lower supply points to sales troubles in next month’s report.

A plus in the report, and underscoring strength in yesterday’s FHFA price report, is a 1.1 percent gain in the median price to $209,500. Year-on-year, the median price is up 6.0 percent in a reading that also points to building strength in the housing sector.

Posted in Housing |

The latest QE policy removes ECB ‘conditionality’

Several years ago Mario Draghi announced the ECB would do what it takes (within the rules) to prevent national govt defaults, which immediately reversed the climb of national govt rates, bringing them down to where they are today. But it also came with ‘conditionality’ regarding fiscal policy, where a violation of the fiscal rules carried the threat of the removal of ECB support.

This time it’s different. As part of this broad based fight to reverse the current deflationary forces, the national CB’s will now be buying their own nation’s debt, thereby, for all practical purposes, eliminating default risk. And with no mention of fiscal conditionality. Taken at its word, this means the latest QE policy has removed the ECB’s leverage over national govt fiscal policy, as the ECB did not tie it’s securities purchases to fiscal compliance.

Therefore Greece and Italy, the two members desiring fiscal expansion, are operationally free to do so without the threat of default driving up their interest rates. They may face EU penalties, etc. but those are a very different matter than the prior default risk.

So the door is now open to anyone bold enough to step through. However they probably don’t know it and probably wouldn’t go there if they did…

And, as previously discussed, QE per se is a deflationary/contractionary strong euro bias in the process of making a very bad situation that much worse.

Posted in ECB |

rental income from oil and gas

Looks to me like about $200 billion of annual income comes from increased oil and gas revenues over the last few years, just looking at the change in ‘slope’ and the difference between where it is now and where it would have been had the prior slope continued.

And I also suspect most of that increase is in the process of vanishing…

From the BEA:

Rental income of persons with capital consumption adjustment is the net income of persons (except those primarily engaged in the real estate business) from the rental of real property, the imputed net rental income of owner occupants of dwellings, and the royalties received by persons from patents, copyrights, and rights to natural resources.



I just got a note from a friend who did a lot more work on this than my simple extrapolation and he believes oil and gas revenue increases added about $65 billion last year. Still a very substantial figure but short of my $200 billion guestimate. He attributes much of the difference to an increase in owner equiv. rent, which I had simply assumed would grow as indicated by the prior slope, as anecdotally home building has remained depressed and the increases in owner equiv. rents used in the CPI calculations have been relatively small.

Posted in Oil |

Kelton in the news

Some errant criticism and cheap shots, but that goes with the territory.
It’s happening!

(And note my comment at the end…)

A Socialist Sets the Budget

By Martin Longman

Posted in MMT |

ECB, Jobless Claims, Sea Container Counts, Housing Starts, Purchase apps, Architecture Billings, miles driven, Redbook sales, my take on consequences of $50 oil

Like the carpenter with the piece of wood “no matter how much I cut off it’s still too short”

Draghi has yet to realize rate cuts/QE/etc. are a deflationary/contractionary bias:


Jobless Claims
Jobless claims have been inching higher and are not pointing to increasing strength for the January employment report. Initial claims did fall 10,000 in the January 17 week but to a 307,000 level that is just outside the high end of the Econoday consensus range (289,000 to 305,000).

The January 17 week is the sample week for the monthly employment report and a comparison with the December sample week shows a sizable 18,000 increase. The current 4-week average at 306,500 is up 6,500 from the prior week for the highest reading since way back in July. A sample-week to sample-week comparison for the average shows a 7,750 increase this month.

Continuing claims, which are reported with a 1-week lag, have also been on the increase. Continuing claims for the January 10 week rose 15,000 to 2.443 million with the 4-week average up 9,000 to 2.427 million. This average has also been on the rise and is up 8,000 from the month-ago comparison. The unemployment rate for insured workers is unchanged at 1.8 percent.

December 2014 Sea Container Counts Continue to Show Softness in Trade

By Steven Hansen

Export container counts continue to weaken, which is usually awarning that the global economy is slowing. Export three month rolling averages continue to decelerate – being in negative territory year-over-year. However, there are serious labor issues at all West Coast ports, and it is hard to understand the effect on the container counts. One should also consider that exports have been decelerating most of 2014 – well before the labor disputes.

Housing Starts

Permits lead housing:

MBA Purchase Applications

This isn’t going anywhere:
Miles driving per capital even worse than this:

This isn’t supposed to be soft with the consumer saving so much on gas and oil:
So here’s the latest ‘back of the envelope’ mainstream take on oil:

Consumer saves $200 billion, but
Capex down by $100 billion =
Unambiguous Net Gain of $100 billion

Except they all left out the fact that if the consumer is saving $200 billion other agents are losing $200 billion of income.

And that foreign capex that totaled over $500 billion in 2014 is being cut back as well, with some of those cutbacks translating into reduced US exports.

Not to mention the US consumer only spends part of that $200 billion saved, and what is spent on imports doesn’t add to US GDP.

So my back of the envelope remains:

Consumers who save $200 billion spend only $120 billion on domestic output. Agents who lose $200 billion of income cut spending on domestic output by $120 billion That all nets to 0, consistent with weak December retail sales, for example.

Additionally, US capex falls $100 billion, and US exports fall $50 billion, both also supported by recent data releases.

Therefore $50 oil is an unambiguous negative for the US economy.

Posted in ECB, Employment, Housing, Oil |

credit check, oil capex

A zig down here often means a similar increase in bank lending as one substitutes for the other:



Steepest Oil-Rig Drop Shows Shale Losing Fight to OPEC

Posted in Uncategorized |