by Calculated Risk on 7/14/2014 01:59:00 PM

The second half of this video is the best part. Liesman walks through a number of Santelli's predictions - all wrong.

I've only picked on Santelli once when he misread the employment report, but Santelli is generally clueless about economics. 

by Calculated Risk on 7/14/2014 09:25:00 AM

In November 2012, I was interviewed by Joe Weisenthal at Business Insider. One of my comments during our discussion on state and local governments was:

I wouldn’t be surprised if we see all of a sudden a report come out, “Hey, we’ve got a balanced budget in California.”

At the time that was way out of the consensus view. And a couple of months later California announced a balanced budget, see The California Budget Surplus

The situation has improved since then. Here is the most recent update from California State Controller John Chiang: Controller Releases June Cash Update

State Controller John Chiang today released his monthly cash report for the month of June, and announced that the state's General Fund -- the primary account from which California funds its day-to-day operations and programs -- ended the fiscal year with a positive cash balance for the first time since June 30, 2007. A positive cash balance means that the state had funds available to meet all of its payment obligations without needing to borrow from Wall Street or the $23.8 billion available in its more than 700 internal special funds and accounts.
...
According to the monthly report covering California's cash balance, receipts and disbursements in June 2014, the General Fund had $1.9 billion in cash on June 30, marking the first time it has ended the fiscal year in the black since 2007, when it ended the year with $2.5 billion in the bank.

For the 2013-14 fiscal year, revenues came in at $101.6 billion, or $2.1 billion (2.1 percent) more than projected in the Governor’s budget released in January.

This is just one state, but I've been expecting local and state governments (in the aggregate) to add to both GDP and employment in 2014.

This graph shows total state and government payroll employment since January 2007. State and local governments lost jobs for four straight years.

Note: Scale doesn't start at zero to better show the change.

In June 2014, state and local governments added 24,000 jobs.  State and local government employment is now up 138,000 from the bottom, but still 606,000 below the peak.

It is pretty clear that state and local employment is now increasing. 

Note: Federal government layoffs have slowed (actually added 2,000 in June), but Federal employment is still down 23,000 for the year.

by Calculated Risk on 7/13/2014 10:10:00 PM

An update on funding the Highway Trust Fund from the WSJ: Officials From Both Parties Call for Congress to Consider Raising Gas Tax to Ensure More Stable Revenue for Roads

Some governors at their summer meeting here, both Democrats and Republicans, said Congress should consider increasing the gas tax to provide a more reliable revenue stream for the Highway Trust Fund. They also called for finding ways to ensure that electric and fuel-efficient vehicles help pay the costs of maintaining the nation's roads.

The trust fund is financed mostly by diesel and gasoline taxes that haven't increased since 1993 even as fuel economy has improved for most new vehicles, leaving the government without enough money to cover its share of spending on road repairs and highway construction.

At least this is supported by members of both parties at the state level, but this used to be supported by Congress and Republican Presidents too (read Reagan's comments when he raised the gasoline tax in 1982).  Oh well ... I expect a bill to be passed again, but only a short term bill. 

Next year (a non-election year) is shaping up to be very ugly politically.

Weekend:
• Schedule for Week of July 13th

From CNBC: Pre-Market Data and Bloomberg futures: the S&P futures are up 4 and DOW futures are up 33 (fair value).

Oil prices moved down the last week with WTI futures at $100.76 per barrel and Brent at $106.70 per barrel.

Below is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are around $3.61 per gallon (about the same as a year ago).  If you click on "show crude oil prices", the graph displays oil prices for WTI, not Brent; gasoline prices in most of the U.S. are impacted more by Brent prices.

Orange County Historical Gas Price Charts Provided by GasBuddy.com

by Calculated Risk on 7/13/2014 06:25:00 PM

The NAR will report June Existing Home Sales on Tuesday, July 22nd. The consensus isn't available yet, but eonomist Tom Lawler estimates the NAR will report sales of 4.96 million on a seasonally adjusted annual rate (SAAR) basis up from 4.89 million SAAR in May.

Housing economist Tom Lawler has been sending me his predictions of what the NAR will report for 4 years.  The table below shows the consensus for each month, Lawler's predictions, and the NAR's initial reported level of sales. 

Lawler hasn't always been closer than the consensus, but usually when there has been a fairly large spread between Lawler's estimate and the "consensus", Lawler has been closer.

Over the last four years, the consensus average miss was 150 thousand with a standard deviation of 170 thousand.  Lawler's average miss was 70 thousand with a standard deviation of 50 thousand.

Note: Many analysts now change their "forecast" after Lawler's estimate is posted, so the consensus has been doing a little better recently!

Existing Home Sales, Forecasts and NAR Report millions, seasonally adjusted annual rate basis (SAAR)
Month	Consensus	Lawler	NAR reported1
May-10	6.20	5.83	5.66
Jun-10	5.30	5.30	5.37
Jul-10	4.66	3.95	3.83
Aug-10	4.10	4.10	4.13
Sep-10	4.30	4.50	4.53
Oct-10	4.50	4.46	4.43
Nov-10	4.85	4.61	4.68
Dec-10	4.90	5.13	5.28
Jan-11	5.20	5.17	5.36
Feb-11	5.15	5.00	4.88
Mar-11	5.00	5.08	5.10
Apr-11	5.20	NA	5.05
May-11	4.75	4.80	4.81
Jun-11	4.90	4.71	4.77
Jul-11	4.92	4.69	4.67
Aug-11	4.75	4.92	5.03
Sep-11	4.93	4.83	4.91
Oct-11	4.80	4.86	4.97
Nov-11	5.08	4.40	4.42
Dec-11	4.60	4.64	4.61
Jan-12	4.69	4.66	4.57
Feb-12	4.61	4.63	4.59
Mar-12	4.62	4.59	4.48
Apr-12	4.66	4.53	4.62
May-12	4.57	4.66	4.55
Jun-12	4.65	4.56	4.37
Jul-12	4.50	4.47	4.47
Aug-12	4.55	4.87	4.82
Sep-12	4.75	4.70	4.75
Oct-12	4.74	4.84	4.79
Nov-12	4.90	5.10	5.04
Dec-12	5.10	4.97	4.94
Jan-13	4.90	4.94	4.92
Feb-13	5.01	4.87	4.98
Mar-13	5.03	4.89	4.92
Apr-13	4.92	5.03	4.97
May-13	5.00	5.20	5.18
Jun-13	5.27	4.99	5.08
Jul-13	5.13	5.33	5.39
Aug-13	5.25	5.35	5.48
Sep-13	5.30	5.26	5.29
Oct-13	5.13	5.08	5.12
Nov-13	5.02	4.98	4.90
Dec-13	4.90	4.96	4.87
Jan-14	4.70	4.67	4.62
Feb-14	4.64	4.60	4.60
Mar-14	4.56	4.64	4.59
Apr-14	4.67	4.70	4.65
May-14	4.75	4.81	4.89
Jun-14	---	4.96	---
1NAR initially reported before revisions.

by Calculated Risk on 7/12/2014 11:14:00 AM

The key reports this week are June Retail Sales on Tuesday and June Housing Starts on Thursday.

For manufacturing, the June Industrial Production and Capacity Utilization report, and the July NY Fed (Empire State) and Philly Fed surveys, will be released this week. 

Fed Chair Janet Yellen will present the Semiannual Monetary Policy Report to the Congress on Tuesday and Wednesday.

----- Monday, July 14th -----
No economic releases scheduled.

----- Tuesday, July 15th -----
8:30 AM ET: Retail sales for June will be released.

This graph shows retail sales since 1992 through May 2014. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline). On a monthly basis, retail sales increased 0.3% from April to May (seasonally adjusted), and sales were up 4.3% from May 2013.

The consensus is for retail sales to increase 0.6% in June, and to increase 0.5% ex-autos.

8:30 AM: NY Fed Empire Manufacturing Survey for July. The consensus is for a reading of 17.0, down from 19.3 in June (above zero is expansion).

10:00 AM: Testimony by Fed Chair Janet Yellen, Semiannual Monetary Policy Report to the Congress, Before the Senate Banking, Housing, and Urban Affairs Committee, Washington, D.C.

10:00 AM: Manufacturing and Trade: Inventories and Sales (business inventories) report for May.  The consensus is for a 0.6% increase in inventories.

----- Wednesday, July 16th-----
7:00 AM: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:30 AM: The Producer Price Index for June from the BLS. The consensus is for a 0.3% increase in prices.

9:15 AM: The Fed will release Industrial Production and Capacity Utilization for June.

This graph shows industrial production since 1967.

The consensus is for a 0.4% increase in Industrial Production, and for Capacity Utilization to increase to 79.2%.

10:00 AM: The July NAHB homebuilder survey. The consensus is for a reading of 50, up from 49 in June.  Any number above 50 indicates that more builders view sales conditions as good than poor.

10:00 AM: Testimony by Fed Chair Janet Yellen, Semiannual Monetary Policy Report to the Congress, Before the House Financial Services Committee

2:00 PM: Federal Reserve Beige Book, an informal review by the Federal Reserve Banks of current economic conditions in their Districts.

----- Thursday, July 17th -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to increase to 310 thousand from 304 thousand.

8:30 AM: Housing Starts for June.

Total housing starts were at 1.001 million (SAAR) in May. Single family starts were at 625 thousand SAAR in May.

The consensus is for total housing starts to increase to 1.020 million (SAAR) in June.

10:00 AM: the Philly Fed manufacturing survey for July. The consensus is for a reading of 15.5, down from 17.8 last month (above zero indicates expansion).

----- Friday, July 18th -----
9:55 AM: Reuter's/University of Michigan's Consumer sentiment index (preliminary for July). The consensus is for a reading of 83.0, up from 82.5 in June.

10:00 AM: Regional and State Employment and Unemployment (Monthly) for June 2014

by Calculated Risk on 7/12/2014 08:11:00 AM

This is an unofficial list of Problem Banks compiled only from public sources.

Here is the unofficial problem bank list for July 10, 2014.

Changes and comments from surferdude808:

For the second time this year, there are no changes to the Unofficial Problem Bank List to report. So the list remains unchanged at 465 institutions with assets of $147.6 billion. For comparison purposes, a year ago the list held 742 institutions with assets of $271.3 billion. Next week there will be some changes to report as the OCC should be issuing an update on its enforcement action activity on Friday.

CR Note: The first unofficial problem bank list was published in August 2009 with 389 institutions. The list peaked at 1,002 institutions on June 10, 2011, and is now down to 465.

by Calculated Risk on 7/11/2014 08:42:00 PM

Economist Tom Lawler sent me the preliminary table below of short sales, foreclosures and cash buyers for several selected cities in June.

Comments from CR: Tom Lawler has been sending me this table every month for several years. I think it is very useful for looking at the trend for distressed sales and cash buyers in these areas. I sincerely appreciate Tom sharing this data with us.

On distressed: Total "distressed" share is down in all of these markets, mostly because of a sharp decline in short sales.

Short sales are down in all of these areas.

Foreclosures are down in most of these areas too, although foreclosures are up a little in Nevada and Mid-Atlantic.

The All Cash Share (last two columns) is mostly declining year-over-year. As investors pull back, the share of all cash buyers will probably continue to decline.

	Short Sales Share		Foreclosure Sales Share		Total "Distressed" Share		All Cash Share
	June-14	June-13	June-14	June-13	June-14	June-13	June-14	June-13
Las Vegas	10.8%	31.0%	10.1%	9.0%	20.9%	40.0%	34.7%	55.3%
Reno**	10.0%	24.0%	7.0%	6.0%	17.0%	30.0%
Phoenix	3.8%	12.7%	6.2%	8.7%	10.0%	21.5%	25.6%	37.5%
Sacramento	7.0%	19.7%	6.5%	7.3%	13.5%	27.0%	19.8%	29.9%
Mid-Atlantic	4.8%	7.6%	7.5%	6.3%	12.2%	13.9%	16.5%	15.9%
Hampton Roads					20.1%	22.8%
Northeast Florida					32.3%	37.3%
Toledo							28.4%	31.5%
Des Moines							14.9%	17.5%
Tucson							26.1%	28.1%
Omaha							16.3%	14.9%
Georgia***							24.6%	N/A
Houston			4.4%	8.4%
Memphis*			13.0%	18.9%
Birmingham AL			14.0%	19.4%
Springfield IL**			8.5%	11.8%
*share of existing home sales, based on property records **Single Family Only ***GAMLS

by Calculated Risk on 7/11/2014 06:11:00 PM

From housing economist Tom Lawler:

Based on local realtor association/MLS reports released so far, I estimate that existing home sales as measured by the National Association of Realtors ran at a seasonally adjusted annual rate of about 4.96 million in June, up 1.4% from May’s pace, but down 3.9% from last June’s seasonally adjusted pace.

Based on a combination of realtor/MLS reports and reports from entities that track listings, I “gueestimate” that the NAR’s existing home inventory estimate for June will be 2.350 million, up about 3.1% from May and up 8.8% from last June. Finally, based on local realtor reports I predict that the NAR’s estimate for the median SF home sales price in June be up 3.9% from last June.

CR Note: The NAR is scheduled to release June existing home sales on Tuesday, July 22nd. 

On inventory,  if Lawler is correct, this would put inventory in June at about the same level as in June 2012 (two years ago) when prices started increasing faster.  Now this should mean slower price increases.  Note: the NAR reported inventory at 2.280 million in May, up 6.0% from May 2013. 

by Calculated Risk on 7/11/2014 02:55:00 PM

One of the metrics we'd like to follow is a ratio of house prices to incomes. Unfortunately most income data is released with a significantly lag, and there is always a question on what income data to use (the average total income is skewed by the income of a few people). 

And for key measures of house prices - like Case-Shiller and CoreLogic - we have indexes, not actually prices.

But we can construct a ratio of the house price indexes to some measure of income.

For this graph I decided to look at house prices and the National Average Wage Index from Social Security.

Click on graph for larger image.

This graph shows the ratio of house price indexes divided by the National Average Wage Index (the Wage index is first divided by 1000).

This uses the annual average CoreLogic index since 1976, and also the National Case-Shiller index since 1987.

As of 2013, house prices were just above the historical ratio.  Prices have increased further in 2014, but it appears house prices relative to incomes is still below the 1989 peak.

Going forward, I think it would be a positive if wages outpaced, or at least kept pace with house prices increases for a few years.

Notes: The national wage index for 2013 is estimated using the same increase as in 2012.

by Calculated Risk on 7/11/2014 12:11:00 PM

Here is another graph on framing lumber prices. Early in 2013 lumber prices came close to the housing bubble highs. Then prices declined over 25% from the highs by mid-year 2013.

The price increases in early 2013 were due to a surge in demand (more housing starts) and supply constraints (framing lumber suppliers were working to bring more capacity online).

Prices didn't increase as much early in 2014 (more supply, smaller "surge" in demand), however prices haven't fallen as sharply either.

Click on graph for larger image in graph gallery.

This graph shows two measures of lumber prices: 1) Framing Lumber from Random Lengths through last week (via NAHB), and 2) CME framing futures.

Right now Random Lengths prices are up about 15% from a year ago, and CME futures are up about 11% year-over-year.