by Anonymous on 6/15/2007 02:48:00 PM

This is a drag:

June 15 (Bloomberg) -- Ronco Corp., maker of the Veg-O-Matic vegetable slicer and the Pocket Fisherman, filed for bankruptcy two years after founder and television pitchman Ron Popeil sold the iconic company.

Ronco, which marketed products as perfect for ``grads and dads,'' sought protection from creditors owed more than $32.7 million. It listed $13.9 million in assets yesterday in U.S. Bankruptcy Court in Woodland Hills, California.

by Calculated Risk on 6/15/2007 12:29:00 PM

This is really just an excuse to graph a long running series (see second graph). Industrial production data is available since 1919!

MarketWatch reports: U.S. industrial output flat in May

Output at the nation's mines, factories, and utilities was flat in May, the Federal Reserve said. In addition, production was weaker in April that initially estimated ...

Analysts said the report had a soft tone, but said they still expected production to pick up in the next few months.

"With the inventory correction having run its course, the manufacturing sector should be poised for faster growth ahead," said Michelle Girard, an economist at RBS Greenwich Capital in a research note.

Click on graph for larger image.

This is just more of the mixed data that we have seen recently. This graph shows the year-over-year change in Industrial Production.

The numbers are weak, but not recessionary weak - like many economic numbers, excluding housing (housing is in a depression).

And here is the same graph since 1919.

The huge swings in industrial production are no longer a feature of the U.S. economy.

NOTE: Several readers have asked about Tanta. She is a little exhausted, but "nothing frightening". I'm sure she will return soon.

by Calculated Risk on 6/15/2007 12:24:00 AM

From the WSJ: New Reality For Real Estate. This article is about Commercial Real Estate (CRE) (hat tip Sam).

[There is a] growing concern in the commercial real-estate world that higher interest rates are killing deals or causing prices to be renegotiated lower. ...

"Lenders are becoming a lot more careful about the borrower," says Phil Feder, a real-estate attorney at New York law firm Paul, Hastings, Janofsky & Walker LLP. "... I have seen approval for new loans slowing and it's generally becoming more difficult for real-estate funds and other investors to get financing for their projects."

The change in borrowing costs was triggered April 11, when Moody's Investors Service fired a warning flare about Commercial Mortgage Backed Securities, or pools of real-estate loans that are sold to investors as bonds. Moody's said lenders' underwriting standards had become too lax during the real-estate frenzy. That warning scared investors and forced bankers to raise yields on CMBS offerings to attract investors, sending shock waves through the real-estate lending world.

The situation got worse last week when Treasury bond yields, on which the loans are based, shot up.

"It's going to bring the price of real estate down," says Gary Mozer, principal with George Smith Partners, a Los Angeles-based commercial real-estate finance firm. The "meltdown" in the CMBS market, as Mr. Mozer calls it, has caused a "sea change" in the amount that real-estate investors can borrow.

An incipient CRE credit crunch?

by Calculated Risk on 6/14/2007 06:24:00 PM

From DataQuick: Bay Area home sales drop, prices up

Bay Area homes continued to sell at their slowest pace in 12 years last month, as the median sales price edged up to a new peak, a real estate information service reported.
...
Sales have decreased on a year-over-year basis the last 28 months. Last month's sales count was the lowest for any May since 6,615 homes were sold in 1995.
...
The median has increased the last four months, in part because sales of lower-cost homes have dropped more than sales in other categories.

This final point is important on prices. Since DataQuick reports the median price, and sales are apparently dropping faster at the low end, compared to the high end, this change in mix pushes up the median price - even if actual prices are stable or even falling slightly.

by Calculated Risk on 6/14/2007 10:35:00 AM

From AP: Foreclosures Up on Subprime Mortgages (hat tip Dirk)

Late payments and new foreclosures on adjustable-rate home mortgages made to people with spotty credit histories spiked to all-time highs in the first three months of this year.

The Mortgage Bankers Association, in its quarterly snapshot of the mortgage market released Thursday, reported that the percentage of payments that were 30 or more days past due for "subprime" adjustable-rate home mortgages jumped to 15.75 percent in the January-to-March quarter.

That was a sizable increase from the prior quarter's delinquency rate of 14.44 percent and was the highest on record ...

Remember, the delinquency rate doesn't include homes in foreclosure. Last quarter, the total for adjustable subprime loans was 14.4% delinquent plus 4.5% in foreclosure, for a total of 18.9% either delinquent or in foreclosure.

by Calculated Risk on 6/14/2007 10:19:00 AM

From the Department of Labor:

In the week ending June 9, the advance figure for seasonally adjusted initial claims was 311,000, unchanged from the previous week's revised figure of 311,000. The 4-week moving average was 311,250, an increase of 3,750 from the previous week's revised average of 307,500.

Click on graph for larger image.

This graph shows the four moving average weekly unemployment claims since 1968. The four week moving average has been trending sideways, and the level is low and not much of a concern.

by Calculated Risk on 6/14/2007 02:24:00 AM

I've confirmed with a reliable source that Managing Director and homebuilding Equity Research Analyst Ivy Zelman has left Credit Suisse. (hat tip Cal)

Ms. Zelman gained fame among housing bloggers when she confronted Toll Brothers CEO Bob Toll during an analyst conference call in 2006 by asking: "Which Kool-aid are you drinking?"

Beyond the conference call quips, Zelman is a serious and award winning analyst. Zelman was honored as the highest rated housing analyst in the nation by both the Institutional Investors All American Research Team and the Greenwich Associates Institutional Research Services Poll.

Zelman's research was thoughtful and thorough. She always called it straight, and she never drank the Kool-Aid.

I wish her all the best in her future endeavors.

by Calculated Risk on 6/13/2007 11:33:00 PM

From the WSJ: Bear's Fund Is Facing Mortgage Losses

A hedge fund managed by Bear Stearns Cos. is scrambling to sell large amounts of mortgage securities, a setback for a Wall Street firm known for its savvy debt-market trading.

The fund makes bets on bonds backed by mortgages, many of which are subprime, meaning they go to especially risky borrowers.

Faced with losses on its investments, the fund, called High-Grade Structured Credit Strategies Enhanced Leverage Fund, together with a sister fund, is trying to sell about $4 billion in mortgage-backed bonds to raise cash, according to people close to the fund and traders who have been solicited to buy the bonds.

It appears the fund is selling it's best assets first:

Bids for the sale of bonds are due at 10 a.m. EDT today -- shortly after Bear announces its results.

... On the list were roughly 150 of the funds' most easily traded, investment-grade bonds, which are backed by subprime mortgages. The estimated value of the bonds ranges from $1 million to nearly $110 million apiece.

by Calculated Risk on 6/13/2007 08:09:00 PM

From the WSJ: Bleak Mood Drags Down Support for Bush, Congress

"... just 19% of Americans now say the nation is head in the right direction. More than three times that proportion, 68%, say things in the U.S. are "off on the wrong track." That's approaching the most pessimistic mood in the history of the WSJ/NBC poll.

At the same time, Mr. Bush's job approval rating has fallen to his lowest-ever level of 29% ..."

Of course some of this pessimism is due to the continuous negative news concerning Iraq, but from an economic perspective, this might also fit with this sentence in the Fed's Beige Book:

Consumer spending and retail sales were generally up in late April and May, with a number of Districts reporting that luxury items were selling better than lower-end merchandise.
emphasis added

This might explain the slight decline in Household Debt Service to Disposable Personal Income (DPI). DPI is an aggregate number, and perhaps the top few percent are doing very well (and so are luxury items), but the majority of Americans could be struggling.

by Calculated Risk on 6/13/2007 05:29:00 PM

From the Fed's Beige Book:

The real estate and construction industries were marked by continued weakness in the residential sector and increasing strength in the commercial sector.

The surprise here is the increasing strength in the commercial sector. IMO, continued strong investment in commercial real estate (CRE) is one of the keys to avoiding a recession later this year.

There was widespread improvement in commercial real estate markets in recent months. More than half the Districts reported that leasing activity was picking up in most of their major markets and vacancy rates were falling. Boston, New York, Philadelphia, and San Francisco also mentioned increases in office rents. Four Districts (Philadelphia, Richmond, Minneapolis, and Dallas) reported strong demand for industrial space, especially warehouse space. Chicago, on the other hand, reported that industrial development was sluggish. All the Districts that mentioned commercial construction activity gave positive reports.

Recent reports have indicated that vacancy rates were rising, so, if vacancy rates are falling again, this is a significant positive for continued investment in CRE.