Author Archives: WARREN MOSLER

2008-08-20 US Economic Releases

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MBA Mortgage Applications (Aug 15)

Survey n/a
Actual -1.5%
Prior -1.5%
Revised n/a

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MBA Purchasing Applications (Aug 15)

Survey n/a
Actual 314.0
Prior 315.2
Revised n/a

Been flat for several weeks now.

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MBA Refinancing Applications (Aug 15)

Survey n/a
Actual 1034.5
Prior 1074.6
Revised n/a

Still drifting lower.

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MBA TABLE 1 (Aug 15)

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MBA TABLE 2 (Aug 15)

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MBA TABLE 3 (Aug 15)

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MBA TABLE 4 (Aug 15)


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2008-08-18 Weekly Credit Graph Packet

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Moving sideways.

IG On-the-run Spreads (Aug 18)

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IG6 Spreads (Aug 18)

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IG7 Spreads (Aug 18)

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IG8 Spreads (Aug 18)

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IG9 Spreads (Aug 18)


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2008-08-19 US Economic Releases

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ICSC-UBS Store Sales WoW (Aug 19)

Survey n/a
Actual 0.1%
Prior 1.1%
Revised n/a

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ICSC-UBS Store Sales YoY (Aug 19)

Survey n/a
Actual 2.4%
Prior 2.6%
Revised n/a

Doing just fine, especially considering the financial sector is gone.

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Redbook Store Sales Weekly YoY (Aug 19)

Survey n/a
Actual 1.3%
Prior 1.5%
Revised n/a

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ICSC-UBS Redbook Comparison TABLE (Aug 19)

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Producer Price Index MoM (Jul)

Survey 0.6%
Actual 1.2%
Prior 1.8%
Revised n/a

Up more than expected.

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PPI Ex Food & Energy MoM (Jul)

Survey 0.2%
Actual 0.7%
Prior 0.2%
Revised n/a

Core nudging up a touch…

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Producer Price Index YoY (Jul)

Survey 9.3%
Actual 9.8%
Prior 9.2%
Revised n/a

Just a little blip up that’s starting to make the 1970s look tame.

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PPI Ex Food & Energy YoY (Jul)

Survey 3.2%
Actual 3.5%
Prior 3.0%
Revised n/a

Cute little break out here too.

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PPI TABLE 1 (Jul)

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PPI TABLE 2 (Jul)

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PPI TABLE 3 (Jul)

Karim writes:

  • PPI for July up 1.2% and 0.7% ex-food and energy

  • Core driven by cars and trucks the past 2mths (seems out of line w/cpi data) and medical

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Housing Starts (Jul)

Survey 960K
Actual 965K
Prior 1066K
Revised 1084K

A bit higher than expected, and last month revised up.

Averaging out the last couple of months or so to smooth the NY situation indicates a leveling off and probably a bottom.

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Building Permits (Jul)

Survey 970K
Actual 937K
Prior 1091K
Revised 1138K

Down, but last month revised up. Same as above.

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Housing Starts TABLE 1 (Jul)

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Housing Starts TABLE 2 (Jul)

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Housing Starts TABLE 3 (Jul)

Karim writes:

  • Starts fall 11% after upward revision to June (now up 10.4%)

  • Noise in data still surrounds multi-family due to change in NYC building code (multi-family dropped 23.6% after rising 41.3% in June)

  • Single family drops another 2.9% after 3.2% drop in June and now down 39.2% y/y

  • Same story with permits, down 17.7% m/m after 16.4% rise in June

  • Single family permits down 5.2% m/m after -3% in June and down 41.4% y/y

  • Multi-family down 32.4% m/m after up 52.2% m/m in June

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ABC Consumer Confidence (Aug 17)

Survey -50
Actual -49
Prior -50
Revised n/a

very low, may be bottoming, confidence being hurt by inflation.


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AP: Foreclosure digestive process at work

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Prices stabilizing as volumes increase:

SoCal home prices fall in July, sales up

by Elliot Spagat

(AP) A research firm says Southern California home prices fell 31 percent in July from last year, while the number of homes sold hit its highest level since March 2007.

MDA DataQuick said in its report Monday that the median price for new and resale homes and condos dropped to $348,000 last month in the six-county region. That’s down from the market peak of $505,000 in July 2007 and down slightly from $355,000 in June.

The report says a total of 20,329 homes and condos were sold during the month, up 13.8 percent from July 2007 and up 16.7 percent from June.

It says foreclosures accounted for 43.6 percent of all resold properties last month, up from 7.9 percent in July 2007 and a revised 41.8 percent in June.

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2008-08-18 US Economic Releases

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NAHB Housing Market Index (Aug)

Survey 16
Actual 16
Prior 16
Revised n/a

What has been looking like a bottom is now again softening, but it’s so low seems it will go mostly sideways before it goes up.

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NAHB TABLE 1 (Aug)

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NAHB TABLE 2 (Aug)


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AVM Repo Commentary

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Good report, thanks, and another example of blood flowing around the clot.

Scorecard:

  • Financial sector in a shambles
  • A2 GDP now forecast at 3% or more helped by tax cuts/rebates

    • So as the financial sector worsens the government can cut taxes to sustain output and growth.

    Seems like a good trade off to me – cut taxes and shut down the financial sector!


    Report from Jeff:

    Not only has this become a major focus of the Repo market and gotten some regulator attention, but it has gotten a lot of interest and questions from AVM Repo Commentary readers. I am speaking about Direct Repo or non-Traditional Repo. So, I will explain the concept further. This is the expansion of the Repo market to improve liquidity by pairing collateral providers directly with cash providers. This enhances the liquidity typically provided by the broker/dealers (who pair collateral providers with cash providers among themselves in the interdealer broker market and BrokerTec). These broker/dealers are currently balance sheet constrained due to: reduced capital and difficulty raising capital; taking on their SIVs’ collateral ; taking on their ARS collateral; and management directive to reduce balance sheet and reserve it for assets with higher ROA than repo. The broker/dealers are actively financing their collateral with the Federal Reserve, but have little dry powder to take on collateral from typical Repo collateral providers. This has a ripple effect in the Repo market, causing not only the collateral providers to scramble for financing but also the cash providers to eventually have trouble finding enough Repo collateral offered by the broker/dealers. The first ripple is already being felt by the market and the second ripple may now be showing up. So, the Repo market is evolving to transact Direct Repo between the cash providers and the collateral providers, which helps the broker/dealers, who still want to sell collateral to clients but don’t have the room on their balance sheet to then finance that collateral. It also, logically, compresses the bid/offer spread, which has widened dramatically due to the new ROA guidelines at most broker/dealers. As an example, Agency MBS pools have a 50bp bid/offer spread 1month (as opposed to the traditional 10bp) and Investment Grade Corporates have a 70bp bid/offer spread 1month. Direct Repo could result in significant savings for both the cash provider and the collateral provider. Other terms, such as length of trade and haircut, may also be more favorable to both sides in Direct Repo. Obviously, both the cash provider and the collateral provider would have to do Credit analysis of their counterparties, but they do that already with their broker/dealers as counterparties. Also, Direct Repo can be done as Triparty Repo, reaping the benefits of that product (no fails, less administrative work, third party pricing, third party oversight, etc.) So, this Direct Repo does not replace traditional Repo through broker/dealers, but just picks up the slack in the market, reduces the balance sheet bottleneck, and helps the broker/dealers continue to do business without having to turn away Repo clients. Anyway, I don’t want to bore you any further, so if you would like more information of how AVM Solutions can provide Direct Repo and pair cash providers with collateral providers, as well as broker/dealers, give me a call or an email.
     
     

    COLLATERAL PROVIDERS CASH PROVIDERS
    Hedge Funds Money Funds
    Asset Managers Money/Investment Managers
    Credit Unions Credit Unions
    Central Banks International Banks
    Thrifts/Community Banks Municipalities
    Pension Funds Seclending Agents (Reinvestment)
    Seclending Agents Corporations
    Beneficial Owners Broker/Dealers
    Regional Dealer clients.


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2008-08-15 US Economic Releases

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Empire Manufacturing (Aug)

Survey -4.0
Actual 2.8
Prior -4.9
Revised n/a

Yet another series that could be making a comeback, albeit from very low levels.

Even the work week went up.

Prices paid still way high, and prices received high and moved higher.

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Empire Manufacturing ALLX (Aug)

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Net Long-term TIC Flows (Jun)

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Total Net TIC Flows (Jun)

Survey n/a
Actual $51.1B
Prior -$2.5B
Revised $12.3B

Should be slowing with trade flows reversing.

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TIC ALLX (Jun)

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TIC TABLE 1 (Jun)

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TIC TABLE 2 (Jun)

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TIC TABLE 3 (Jun)

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Industrial Production MoM (Jul)

Survey 0.0%
Actual 0.2%
Prior 0.5%
Revised 0.4%

A little better than expected.

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Industrial Production YoY (Jul)

Survey n/a
Actual -0.1%
Prior 0.2%
Revised n/a

Certainly not a collapse.

Being helped by the relatively weak USD.

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Capacity Utilization (Jul)

Survey 79.8%
Actual 79.9%
Prior 79.9%
Revised 79.8%

No collapse here either.

The Fed’s counting on slack to bring prices down.

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Capacity Utilization TABLE 2 (Jul)

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Capacity Utilization TABLE 3 (Jul)

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U of Michigan Confidence (Aug P)

Survey 62.0
Actual 61.7
Prior 61.2
Revised n/a

This too looks like it has bottomed from very low levels.

‘Inflation’ still hurting confidence.


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2008-08-14 US Economic Releases

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Consumer Price Index MoM (Jul)

Survey 0.4%
Actual 0.8%
Prior 1.1%
Revised n/a

Out of control, but if the recent commodity sell off holds headline will moderate some for awhile. Lots of pass-throughs and cost push forces in place.

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CPI Ex Food & Energy MoM (Jul)

Survey 0.2%
Actual 0.3%
Prior 0.3%
Revised n/a

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Consumer Price Index YoY (Jul)

Survey 5.1%
Actual 5.6%
Prior 5.0%
Revised n/a

The Fed has to be concerned that the 2% FF rate is way too accommodative, especially with Q2 GDP no forecast at over 3% and Q3 looking like 2%.

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CPI Ex Food & Energy YoY (Jul)

Survey 2.4%
Actual 2.5%
Prior 2.4%
Revised n/a

Could be headed much higher as cost push pass-throughs starting to register.

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CPI Core Index SA (Jul)

Survey n/a
Actual 216.230
Prior 215.526
Revised n/a

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Consumer Price Index NSA (Jul)

Survey 219.075
Actual 219.964
Prior 218.815
Revised n/a

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CPI TABLE 1 (Jul)

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CPI TABLE 2 (Jul)

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CPI TABLE 3 (Jul)

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Initial Jobless Claims (Aug 9)

Survey 435K
Actual 450K
Prior 455K
Revised 460K

Up, but confused by new extended benefits.

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Continuing Jobless Claims (Aug 2)

Survey 3310K
Actual 3417K
Prior 3311K
Revised 3303K

Not looking good either, but how bad can it actually be with GDP north of 3%?

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Jobless Claims TABLE 1 (Aug 9)

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Jobless Claims TABLE 2 (Aug 9)


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Last week’s initial claims summary

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On Fri, Aug 8, 2008 at 2:47 PM, Cesar writes:

  • federal extension of benefits SHOULD have no DIRECT impact on initial claims like they did in 2002
  • in 2002 part of the law required people to make an initial claim in the state system to become eligible for federal benefits, but that is not the case in 2008. The way it should work now is that the state evaluates if you are eligible for the state program when you are applying for federal program. If you are eligible for the state program you make a claim with the state and that shows up in initial claims data. If you are not eligible for the state program you make a federal claim that is counted separately and is not part of the weekly initial claims data.
  • however, the millions of notification letters that have been sent out to people who are potentially eligible for the federal program could have yielded some folks that show-up to get federal benefits, but learn they have state benefits they must exhaust first (anyone getting state benefits first would show up in initial claims)- this is a potential source for an INDIRECT “distortion” of initial claims
  • i saw Ohio had some of the highest claims data last week so i called up to learn how applications were being handled. On both calls i made they said they would file an initial claim with the state program first to make sure i was not eligible, then apply for the federal program. Applying for the state program would show up as an initial claim even if i was later rejected (interesting to note that for the last twelve months before 3/31/2008 less than 50% of people who made “initial claim” actually got first payment). If Ohio and possibly other states are actually filing an initial claim in the state system that gets counted in the weekly data in order to determine eligibility for all people applying for the federal program this would lead to a much larger distortion.


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