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REMINDER: All investment, economics, and finance related material now appears at the new IaconoResearch.com. For the time being at least, this has become a personal blog covering a variety of mostly unrelated topics.
Megan McArdle of The Atlantic talks to Diane Sawyer of ABC News about how society changed during the Great Depression and of a similar transformation now underway.
Right at the end – at about the 2:50 mark – there’s a screen shot of Edward Harrison’s post the other day titled “It’s Unanimous – Propping up underwater mortgages is a bad idea“.
It’s a small financial blogger world…
I don’t know. I’m obviously biased on this particular matter, but I think my headline for this morning’s report on the S&P Case-Shiller Home Price Index at the bottom of the list below was the best of a very confusing lot:
Actually, that second-to-last story from CBS News had a much longer title that couldn’t be squeezed into the width available above without producing an unsightly wrap:
U.S. Home Prices Both Fall and Stop Falling In Latest Readings, Apparently Defying Laws of Physics (see , it doesn’t even fit here…)
If there’s one thing that everyone can agree on about this report, it is that it was confusing.
In case you were wondering about the thoughts offered earlier today on the impact of seasonal adjustments on the latest Case-Shiller Home Price Index, here’s the explanation.
The chart you see below shows the SA (seasonally adjusted) monthly change minus the NSA (not seasonally adjusted) monthly change and, as is clear to see, the upward seasonal adjustment has just reached its annual peak in the January report.
What this means is that, due to the normal slowdown in sales activity and the natural downward pressure on prices in the November to January period (remember this index is a three-month average), the January NSA change of -0.4 percent has 0.7 percentage points added to it to produce the +0.3 percent SA change that was widely reported.
While a lot of people cheered this number as a sign that home prices are continuing to rise, it belies the fact that on an unadjusted basis, prices have fallen for four straight months now, the only reason for the positive SA numbers being the positive seasonal adjustment which happened to come in a report that was still seeing the benefits of the buying frenzy last fall as the first round of the homebuyer tax credit was about to expire.
The New York Times files this report on the growing debt load of states around the country and how it is even bigger than official numbers indicate.
California, New York and other states are showing many of the same signs of debt overload that recently took Greece to the brink — budgets that will not balance, accounting that masks debt, the use of derivatives to plug holes, and armies of retired public workers who are counting on benefits that are proving harder and harder to pay.
And states are responding in sometimes desperate ways, raising concerns that they, too, could face a debt crisis.
New Hampshire was recently ordered by its State Supreme Court to put back $110 million that it took from a medical malpractice insurance pool to balance its budget. Colorado tried, so far unsuccessfully, to grab a $500 million surplus from Pinnacol Assurance, a state workers’ compensation insurer that was privatized in 2002. It wanted the money for its university system and seems likely to get a lesser amount, perhaps $200 million.
Connecticut has tried to issue its own accounting rules. Hawaii has inaugurated a four-day school week. California accelerated its corporate income tax this year, making companies pay 70 percent of their 2010 taxes by June 15. And many states have balanced their budgets with federal health care dollars that Congress has not yet appropriated.
That last one is a gem – the expectation that billions of dollars are coming from Washington, these billions just getting tacked on to the $1.6 trillion federal budget deficit and the $13 trillion national debt.
Once again, data from the S&P Case-Shiller Home Price Index is providing a confusing picture of what’s happening to U.S. home prices and, once again, the Standard & Poor’s website is incapable of handling the 9AM EST traffic on the last Tuesday of the month.
From accounts like this report at MarketWatch, it looks like seasonally adjusted prices rose 0.3 percent in January while unadjusted home prices fell by 0.4 percent as shown below.
Note: The image above is an animated .gif – it should changing.
When you think about it, this shouldn’t be surprising. First, the Case-Shiller data comes out a month later than most economic reports, so, the data reported today is for January, not February. More importantly, this index is not a reading for just a single month – it is a three-month moving average – and nearly every home price index shows prices rising last fall as the first round of the homebuyer tax credit was about to expire.
Perhaps more important than either of the above, the unadjusted data is likely providing a truer gauge for home prices than the one that is adjusted for normal seasonal variations because the variations that were seen last fall were anything but normal.
TOP STORIES
State Debt Woes Grow Too Big to Camouflage – NY Times
Half of Commercial Mortgages to Be Underwater: Warren – CNBC
Greek Bonds Decline on Funding Concern After New Debt Sales – Bloomberg
Wall Street banks asked for details on trading in state bond – LA Times
Lazy Portfolios or a 2012 Collapse: It’s OK to believe in both – MarketWatch
Vale, BHP End Annual Ore Talks; Vale Wins 90% Jump – Bloomberg
Is There Excess Bullishness or Malaise (or both)? – The Big Picture
Fannie & Freddie: The biggest bailout – NY Post
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MARKETS/INVESTING
Oil futures trade flat ahead of inventory, economic data – MarketWatch
Gold Rises to One-Week High on Demand for Alternative to Dollar – Bloomberg
Collapsing Spreads and Booming Junk: Time to Get Short – Dollar Collapse
China Gold Demand May Double Within Decade, WGC Says – Reuters
CFTC Gold and Silver Hearing Is Old News – Seeking Alpha
Dreamlike – Saut, Raymond James
By Tim Iacono, Since 2005
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