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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.
Let’s see… The latest predictions for tomorrow’s nonfarm payrolls report is an increase of 500,000 or 600,000 in May, however, almost a half million of these are expected to be temporary Census jobs. That doesn’t bode well for the nation’s crop of new graduates.
From the Joe Heller archive at the Green Bay Press-Gazette.
Caroline Baum is back from vacation and has these thoughts to share about the relationship between how much money the government takes in and how much it spends.
Pick up any newspaper and you’re bound to see a prominently featured story about someone somewhere losing a government benefit and enduring hardship as a result.
The New York Times is publishing a series of such stories under the rubric, “The New Poor.” Last week’s installment focused on a 22-year-old unemployed single mom from Arizona who qualified for state-run subsidized child care but was placed on a waiting list because budgetary constraints forced cutbacks in the program.
We feel for this mom whose work options are limited by the need to care for her 3-year-old daughter. We all know someone who has been left jobless, financially strapped and emotionally bereft by the recession. Yet, at the risk of sounding hard- hearted, the U.S. can’t afford to provide everyone with food, clothing and shelter, not to mention medical and child care, college tuition, a low-interest mortgage and a Social Security check until death.
As much as this single mom’s plight tugs at our heart strings, using deficit financing to provide her with government subsidized child care is dangerous to her child’s health. That child will have to shoulder the bill. That’s the pain we don’t feel or hear about; the pain that doesn’t make its way into news stories, at least not in human terms; the pain that’s no less real, just less pressing.
That sort of makes you think twice about little girls like this whose parents may have a different view of where this might all lead.
From Mortgage News Daily (not a group prone to hyperbole, though I don’t really know for sure) comes this report of the “housing industry unraveling” due to record declines in mortgage purchase applications now that the free government money has stopped.
Recall that the first round of homebuyer tax credits expired on December 1st, so, to see the May plunge far outpace the previous decline is a bit surprising. Of course, the combination of government giveaways and seasonal adjustments will continue to wreak havoc with all the housing data for some time to come, the area indicated in red above being the latest example. Since mortgage purchases applications would normally be rising at this time of the year due to the pickup in buying in the spring, but, instead, they are falling, a smaller than expected number is seasonally adjusted downward producing the result shown above.
That’s funny. We were out and about yesterday morning when they were talking about the surge in April pending home sales on CNBC, a result of buyers racing to get their sales contracts signed before the tax credit expired, and we heard nary a word on the XM radio feed about a housing double-dip, CNBC anchors fawning instead over rising stock prices.
Diana Olick’s commentary from yesterday provides a very different view of things:
Everybody take a nice long look at today’s Pending Home Sales Index from the National Association of Realtors, because it’s just about the last positive picture we’re going to see for a while.
Yes, the index rose even more than expected, as buyers rushed in to take advantage of the home buyer tax credit.
And yes, those numbers will show up in Existing Home Sales in May and June, but then look out.
This index is based on contracts signed in April, and that’s how the credit was set up; you had to sign your contract by April 30th and close by June 30th in order to get your $8000 if you’re a first time buyer and $6500 if you’re a move up buyer.
And then came May, traditionally the height of the spring housing season.
Mortgage applications to purchase a home began to sink. Now, four weeks later, mortgage purchase applications are down nearly 40 percent from a month ago to their lowest level since April of 1997. Yes, you can argue that a larger-than normal share of buyers today are all cash, but those are largely investors.
That means real organic buyers are exiting in droves.
Yikes! Apparently there was more to the story than which stock sectors might benefit most from the rebound. It’s always an odd experience to look at economic data like this through the mainstream financial media lens rather than the more discerning view of alternative media such as blogs. Olick was no doubt on the air at CNBC sometime yesterday and may have even talked about a double-dip, but that was probably just a brief foray back to reality.
Charlie Gasparino and Liz Claman of Fox Business News talk about Warren Buffett’s media interviews and testimony at the FCIC (Financial Crisis Inquiry Commission) yesterday, Gasparino noting that he’s lost some respect for the man due to the ease with which he’ll invest in companies that might be considered “sleazy”.
Buffett doesn’t think that smoking is good for you, but he’s more than happy to buy Phillip Morris stocks and bonds and, like cigarettes, he never used the ratings agencies’ products either but was fine with owning millions of shares of Moody’s because they were making money hand-over-fist as the housing bubble inflated.
TOP STORIES
Housing Double Dip a Done Deal – Olick, CNBC
Realtors Want Congress to Tweak Tax Credit Timeline – WSJ
Buffett denies that Moody’s executives flagged bad bonds – McClatchy
Buffett Says He Expects `Terrible Problem’ for Municipal Debt – Bloomberg
I Want It All, Even Better If You Pay for It – Baum, Bloomberg
The senator who wants to save your retirement – Fortune
Why China is not buying IMF gold – Commodity Online
California may bar city bankruptcies – CNN/Money
Have these these links delivered to your inbox every weekday.
MARKETS/INVESTING
Oil rises above $74 as US crude supplies drop – AP
Gold eases as data improves risk appetite – Reuters
A line in the sand? Stocks again manage to rally off May lows – LA Times
Econophysicist Accurately Forecasts Gold Price Collapse – Technology Review
Market’s rebound vindicates a worried bull – MarketWatch
EIA: Hard Core Peak Oil Forecast – EconBrowser
By Tim Iacono, Since 2005
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