by Calculated Risk on 3/13/2009 08:30:00 AM

The sharp decline in both imports and exports continues to be an important story.

The Census Bureau reports:

[T]otal January exports of $124.9 billion and imports of $160.9 billion resulted in a goods and services deficit of $36.0 billion, down from $39.9 billion in December, revised. January exports were $7.6 billion less than December exports of $132.5 billion. January imports were $11.5 billion less than December imports of $172.4 billion..

Click on graph for larger image.

The first graph shows the monthly U.S. exports and imports in dollars through January 2009. The recent rapid decline in foreign trade continued in January. Note that a large portion of the decline in imports is related to the fall in oil prices - but not all.

The graph includes both goods and services. The import and export of services has held up pretty well; most of the collapse in trade has been in goods. Imports of goods has declined by one third from the peak of last July!

The second graph shows the U.S. trade deficit, with and without petroleum, through January.

The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

Import oil prices fell to $39.81 in January, and import quantities decreased too - so the petroleum deficit declined by $4 billion.

The trade deficit is now mostly China ($20.6 billion NSA in January) and oil.

by Calculated Risk on 3/12/2009 09:15:00 PM

The market rallied back to 1997 and ...

The Fed reported that household wealth plunged, from MarketWatch:

U.S. households saw their net worth fall by $11.2 trillion, or 18%, to $51.5 trillion at the end of 2008, wiping out five years of gains

Here are several graphs on household wealth and household equity (record low) based on the Fed's Flow of Funds report.

Meanwhile, the employment outlook is still grim. See: Unemployment Claims: Continued Claims at Record 5.3 Million

But retail sales should some signs of stabilization - at a much lower level - off almost 10% from a year ago. There are reasons to be skeptical of the data, but this is a small positive.

Also, the counterparty risk issue with mortgage insurers is heating up again.

Another interesting day ... best to all.

by Calculated Risk on 3/12/2009 06:41:00 PM

Tell me if you've heard this somewhere before ...

Earlier today from MarketWatch: Lewis warns against U.S. seizures, says bank doesn't need more U.S. aid

Lewis stressed that he thinks Bank of America won't need more public support.

"I'm confident we'll pass the stress test," he said

And from CNBC: Citigroup Does Not Need Further US Capital Injections: Chairman

by Calculated Risk on 3/12/2009 05:20:00 PM

A couple of mortgage insurer stories ...

From the WSJ: MBIA's Split of Businesses Raises Ire of Banks, Hedge Funds

Representatives of about 15 financial institutions will meet Thursday with New York State Insurance Superintendent Eric Dinallo to complain about MBIA Inc.'s decision to split its bond-insurance unit into two companies...

The group includes many banks that feel disadvantaged by MBIA's move last month to separate its municipal-bond insurance business from its commitments to insure mortgage-backed bonds and other structured securities. The banks are counterparties to MBIA on derivatives called credit-default swaps that were written on securities they own ... These institutions were left holding contracts with a financially weaker insurer when MBIA transferred about $5 billion in capital from its main unit to another company that guarantees only U.S. municipal bonds.

And from Dow Jones (no link): MGIC Dn 35% As Payment-Deferral Points To Liquidity Issues

MGIC Investment Corp. ... said in a late-Wednesday regulatory filing it deferred its interest payment on some debentures by 10 years.

The filing, which revealed MGIC is likely having liquidity issues ...

... Fitch Ratings put its credit ratings on MGIC and two of its units on watch for possible downgrade Thursday. ... Mortgage insurers such as MGIC cover potential lender losses on loans to borrowers who can't come up with a 20% down payment. The sector continues to struggle with soaring claims and declining new business ...

Actually the mortgage insurers were lucky - they were cut out of the worst deals because Wall Street happily securitized 100% financing with 2nds and no MI. But the losses are still piling up. And so are the counterparty risks ...

by Calculated Risk on 3/12/2009 03:58:00 PM

The only thing that is certain recently is volatility.

DOW up 3.5%

S&P 500 up 4.1%

NASDAQ up 4.0%

The S&P has now rallied back to 1997 prices!

Click on graph for larger image in new window.

This graph is from Doug Short of dshort.com (financial planner): "Four Bad Bears".

This is still the 2nd worst S&P 500 / DOW bear market in the U.S. in 100 years.

Note that the Great Depression crash is based on the DOW; the three others are for the S&P 500.

by Calculated Risk on 3/12/2009 03:01:00 PM

From Dow Jones: S&P: Home-Loan Delinquencies Grow In January

Standard & Poor's said delinquencies of home-related loans climbed in January, with the rate surging in particular from December for home-equity lines of credit and prime-rated jumbo mortgages.
...
S&P said the smallest month-to-month increase as of the January distribution date was subprime mortgages ... The delinquency rates, though, still range from 42% of current total pool balances for 2005 to 49% for 2007.
emphasis added

Subprime delinquency rates are still much higher than other categories, but HELOCs and Jumbo primes delinquencies are increasing at a faster rate. The delinquencies are moving up the value chain - we're all subprime now!

by Calculated Risk on 3/12/2009 12:13:00 PM

The Fed released the Q4 2008 Flow of Funds report today: Flow of Funds.

Click on graph for larger image in new window.

This is the Households and Nonprofit Net Worth as a percent of GDP.

This includes real estate and financial assets (stocks, bonds, pension reserves, deposits, etc) net of liabilities (mostly mortgages).

This ratio was relatively stable for almost 50 years, and then ... bubbles!

Rex Nutting at MarketWatch has more: Household net worth plunges 18% in 2008

Hit by the double whammy of declining home prices and a falling stock market, U.S. households saw their net worth fall by $11.2 trillion, or 18%, to $51.5 trillion at the end of 2008, wiping out five years of gains ...

Household percent equity was at an all time low of 43.0%.

This graph shows homeowner percent equity since 1952.

When prices were increasing dramatically, the percent homeowner equity was declining because homeowners were extracting equity from their homes. Now, with prices falling, the percent homeowner equity is Cliff Diving!

Note: approximately 31% of households do not have a mortgage. So the 50+ million households with mortgages have far less than 43.0% equity.


The third graph shows household real estate assets and mortgage debt as a percent of GDP. Household assets as a percent of GDP is now declining rapidly. Mortgage debt as a percent of GDP was up slightly in Q4, and is only declining slowly.

It's an old lesson: Assets values can fall quickly, but debt lingers!

by Calculated Risk on 3/12/2009 08:30:00 AM

On a monthly basis, retail sales decreased slightly from January to February (seasonally adjusted), but sales are off 9.5% from February 2008 (retail and food services decreased 8.6%). Automobile and parts sales decline sharply 4.3% in February (compared to January), but excluding autos, all other sales climbed 0.7%.

The following graph shows the year-over-year change in nominal and real retail sales since 1993.

Click on graph for larger image in new window.

To calculate the real change, the monthly PCE price index from the BEA was used (February PCE prices were estimated as the same as January).

Although the Census Bureau reported that nominal retail sales decreased 9.5% year-over-year (retail and food services decreased 8.6%), real retail sales declined by 10.0% (on a YoY basis). The YoY change decreased slightly from last month.

The second graph shows real retail sales (adjusted with PCE) since 1992. This is monthly retail sales, seasonally adjusted.

NOTE: The graph doesn't start at zero to better show the change.

This shows that retail sales fell off a cliff in late 2008, but have been stable the last three months.

Here is the Census Bureau report:

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for February, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $346.8 billion, a decrease of 0.1 percent (±0.5%)* from the previous month and 8.6 percent (±0.7%) below February 2008. Total sales for the December 2008 through February 2009 period were down 9.4 percent (±0.5%) from the same period a year ago. The December 2008 to January 2009 percent change was revised from +1.0 percent (±0.5%) to +1.8 percent (±0.2%).

All things considered, this is a decent retail sales report. Q1 retail sales are still about 1.4% below sales in Q4, but it appears that sales might have stabilized - especially ex-auto.

It now appears that Q1 GDP will be very weak - because investment is falling off a cliff and there is a significant inventory correction in progress - but Q1 PCE might only be slightly negative.

Note: February is typically the weakest retail month of the year, so the seasonal adjustment is the largest - and during periods of rapid change this can distort the data a little.

by Calculated Risk on 3/12/2009 08:29:00 AM

The DOL reports on weekly unemployment insurance claims:

In the week ending March 7, the advance figure for seasonally adjusted initial claims was 654,000, an increase of 9,000 from the previous week's revised figure of 645,000. The 4-week moving average was 650,000, an increase of 6,750 from the previous week's revised average of 643,250.
...
The advance number for seasonally adjusted insured unemployment during the week ending Feb. 28 was 5,317,000, an increase of 193,000 from the preceding week's revised level of 5,124,000. The 4-week moving average was 5,139,750, an increase of 124,250 from the preceding week's revised average of 5,015,500.

Click on graph for larger image in new window.

The first graph shows weekly claims and continued claims since 1971.

The four week moving average is at 650,000 the highest since 1982.

Continued claims are now at 5.317 million - the all time record.

The second graph shows the 4-week average of initial weekly unemployment claims (blue, right scale), and total insured unemployed (red, left scale), both as a percent of covered employment.

This normalizes the data for changes in insured employment, and shows the initial unemployment and continued claims are both at the highest level since the early '80s.

Another very weak report.

by Calculated Risk on 3/11/2009 11:33:00 PM

Thursday morning: Retail sales for February.

The futures: (U.S. off a little)

Bloomberg Futures.

CBOT mini-sized Dow

CME Globex Flash Quotes

Futures from barchart.com

And the Asian markets. (Nikkei off about 1.0%)

And a graph of the Asian markets.

Best to all.