by Calculated Risk on 4/09/2009 05:51:00 PM

From The Times: China bucks trend with new record in car sales

... Chinese people ... bought 1.10 million vehicles in March, up some five per cent from the previous record of 1.06 million in March last year, data from the China Association of Automobile Manufacturers showed.

The number cemented China in its position as the world’s largest car market, outstripping even the US.
...
Growth in sales had slowed in 2008 to its lowest annual rate in more than a decade as the global financial crisis took its toll towards the end of the year, prompting many Chinese to keep their wallets shut tight in case of more problems ahead. However, the government support measures introduced in February have spurred the market.

Interesting.

For more on China, from Roubini: China’s Economy in 2009 and Beyond

[T]here are greater signs of economic recovery in March from the depths of Q4 2008 and most forward looking indicators suggest that Q2 2009 through Q4 2009 growth will accelerate relative to the dismal Q4 of 2008 and weak Q1 of 2009. In particular, economic data for China (including loan growth, the PMI, recovery in residential sales volume – if not prices, and public investment) do point to a stabilization or even slight improvement but we at RGE Monitor still see risks that Chinese growth will be well below the government target of 8% and even below the 6.5% level that the IMF and World Bank are predicting – a figure of 5-6% seems more likely.

Bob_in_MA also recommends: China Financial Markets by Michael Pettis, a professor at Peking University’s Guanghua School of Management.

by Calculated Risk on 4/09/2009 03:45:00 PM

Another day, another big swing ...

Dow up 3.1% (back above 8,000)

S&P 500 up 3.8%

NASDAQ up 3.9%

Click on graph for larger image in new window.

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

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

The second graph shows the S&P 500 since 1990.




The dashed line is the closing price today.

This puts the recent rally into perspective - the S&P is still off about 45% from the 2007 high.

by Calculated Risk on 4/09/2009 02:18:00 PM

For a little fun ... (ht ARGH)

by Calculated Risk on 4/09/2009 01:26:00 PM

Yesterday I summarized the recent data: mall vacancies up, office vacancies up, apartment vacancies up - and rents falling. For lodging, the measure is occupancy and RevPAR (Revenue per available room), and both are off sharply year-over-year.

From HotelNewsNow.com: STR reports U.S. data for week ending 4 April 2009

In year-over-year measurements, the industry’s occupancy fell 9.9 percent to end the week at 56.2 percent (62.3 percent in the comparable week in 2008). Average daily rate dropped 9.0 percent to finish the week at US$98.79 (US$108.59 in the comparable week in 2008). Revenue per available room for the week decreased 18.0 percent to finish at US$55.49 (US$67.68 in the comparable week in 2008).

Click on graph for larger image in new window.

This graph shows the YoY change in the occupancy rate (3 week trailing average).

The three week average is off 9.3% from the same period in 2008.

The average daily rate is down 9.0%, so RevPAR is off 18.0% from the same week last year.

Data Source: Smith Travel Research, Courtesy of HotelNewsNow.com

by Calculated Risk on 4/09/2009 12:13:00 PM

Larry Summers, Director of the National Economic Council, will speak at to the Economic Club of Washington.

UPDATE: Starting at 12:43 PM ET

Here is the CNBC feed.

Discussion in the comments ...

UPDATE: CSpan Link.

by Calculated Risk on 4/09/2009 11:09:00 AM

From CNBC: Wells Fargo CFO: Wachovia Merger Behind Record Profits

In December we closed the Wachovia acquisition," said [Howard Atkins, CFO, Wells Fargo]. "This is the first quarter the two companies have been combined and because of the move, we thought it was important to get this news out early."

Atkins said that the losses in the acquistion are behind Wells Fargo. "We did write off most of them [losses]and we are enjoying the benefits of the merged companies," said Atkins.

Atkins said details on Wachovia savings are "going to begin to emerge in the second quarter.
...
Atkins went on to say there was "very little impact" on results from a new rule by the Financial Accounting Standards Board that gives banks more freedom to value assets as they would in normal markets rather than at distressed prices.

NIMs (Net Interest Margins) are Edit: Higher than expected - and Atkins doesn't say it, but their borrowing costs have to be close to zero.

by Calculated Risk on 4/09/2009 08:44:00 AM

The collapse in trade continues to be an important story.

The Census Bureau reports:

[T]otal February exports of $126.8 billion and imports of $152.7 billion resulted in a goods and services deficit of $26.0 billion, down from $36.2 billion in January, revised. February exports were $2.0 billion more than January exports of $124.7 billion. February imports were $8.2 billion less than January imports of $160.9 billion.

Click on graph for larger image.

The first graph shows the monthly U.S. exports and imports in dollars through February 2009. The recent rapid decline in foreign trade continued in February. Note that a large portion of the recent decline in imports was related to the fall in oil prices, however the decline in February was mostly non-oil related.

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

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 slightly to $39.22 in February, from $39.81 in January, and import quantities decreased too - so the petroleum deficit declined by $1 billion.

However most of the decline in the trade deficit was non-oil related.

I suppose a collapse in U.S. imports is one way to rebalance the world economy ...

by Calculated Risk on 4/09/2009 08:30:00 AM

The DOL reports on weekly unemployment insurance claims:

In the week ending April 4, the advance figure for seasonally adjusted initial claims was 654,000, a decrease of 20,000 from the previous week's revised figure of 674,000. The 4-week moving average was 657,250, a decrease of 750 from the previous week's revised average of 658,000.
...
The advance number for seasonally adjusted insured unemployment during the week ending March 28 was 5,840,000, an increase of 95,000 from the preceding week's revised level of 5,745,000.

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 657,250.

Continued claims are now at 5.84 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.

This is another very weak report and shows continued weakness for employment.

by Calculated Risk on 4/09/2009 12:31:00 AM

From Wall Street (1987):

Real Estate Agent Sylvie when Bud Fox goes to buy a condo:

...everybody tells ya they hate the Upper East Side and they wanna live on the West Side but honey when it comes to resale time, believe me the East Side's the one that always moves.

Agent Sylvie when Bud tries to sell:

... well, the market's dead, hon, even the rich are bitching, nothing's moving except termites and cockroaches ...

From the NY Times: Housing Slump Hits Manhattan

Apartment prices have once more become the talk of the town in Manhattan, but this time the talk is of uncertainty and falling numbers. ...

In this year’s first quarter, sales of co-ops and condominiums in Manhattan plunged nearly 60 percent from the first quarter of 2008. Average co-op prices fell as much as 24 percent in the same period, according to various market reports released last week.
...
[Jonathan J. Miller, an appraiser] said that during the last big real estate downtown, when studio apartments were so cheap that he considered buying one on a credit card, people thought the luxury market would never come back. “Conspicuous consumption was out of vogue in 1991,” he said. “The market was back by 1997 or 1998.”

And I was told New York was immune ...

by Calculated Risk on 4/08/2009 09:31:00 PM

From Graham Bowley and Michael de la Merced at the NY Times: U.S. Imagines the Bailout as an Investment Tool

[T]he Obama administration is encouraging several large investment companies to create the financial-crisis equivalent of war bonds: bailout funds.

The idea is that these investments ... would give ordinary Americans a chance to profit from the bailouts that are being financed by their tax dollars. ...

But, as with any investment, there are risks. If, as some analysts suspect, the banks’ assets are worth even less than believed, the funds’ investors could suffer significant losses. Nonetheless, the administration and executives in the financial industry are pushing to establish the investment funds, in part to counter swelling hostility against the financial industry.
...
The new funds are still under discussion, and they are unlikely to be established for several months, if indeed the plans go through at all.

I assume PIMCO, BlackRock and others will charge minimal or no fees for individual investors.

You, too, can help bailout Citigroup and BofA! (in addition to your taxes)

by Calculated Risk on 4/08/2009 06:08:00 PM

Here is the Congressional Oversight Panel page: Assessing Treasury’s Strategy: Six Months of TARP

Here is the April Oversight Report.

by Calculated Risk on 4/08/2009 04:08:00 PM

Here is a summary of the vacancy reports released over the last few days.

On vacancies:

Malls: From Bloomberg: Vacancies at U.S. Retail Centers Hit 10-Year High, Reis Says

The vacancy rate at neighborhood and community shopping centers rose to 9.5 percent from 8.9 percent the previous quarter and 7.7 percent a year ago ...

Offices: Office Vacancy Rate Rises to 15.2% in Q1 and the WSJ: Companies Sold Office Space at a Fast Pace

The office vacancy rate nationwide rose to 15.2% from 14.5% in the previous quarter, and likely will surpass 19.3% over the next year, according to Reis ...

Apartments: From Reuters: US apartment market worsens with economy--Reis

The national apartment vacancy rate rose to 7.2 percent in the first quarter, up 0.60 percentage points from the prior quarter and 1.1 percentage points from a year earlier ...

Hotels: From HotelNewsNow.com: STR reports U.S. data for week ending 28 March

In year-over-year measurements, the industry’s occupancy fell 12.3 percent to end the week at 56.6 percent...

And on rents:

Offices: From the Telegraph: London's empty office space tops 10m sq ft

The slump is placing immense pressure on rents, which have now fallen 27pc in the past year from an average of £65 per sq ft to £47.50.

From Bloomberg: San Francisco Office Rents Fall Most Since 2001

San Francisco office rents dropped 24 percent in the first quarter from a year earlier ... The average rent fell citywide to $38.80 a square foot from $50.92 ...

From Bloomberg: Manhattan Office Rents Fall Most in Quarter Century

Manhattan office rents ... dropped 6 percent from the fourth quarter to $65.01 a square foot [Note: 24% annual rate] ... The decline is the most in records dating back to 1984 ...

Apartments: From the LA Times: Apartment rents fall in Southern California

... The average rent in Los Angeles County fell almost 4% in 2008 ...

From Reuters: US apartment market worsens with economy--Reis

Asking rents fell by 0.6 percent to $1,046 per month, the largest single-quarter decline since Reis began reporting quarterly performance data in 1999.

Malls: From Bloomberg:

Landlords’ asking rents for regional malls fell 1.2 percent from the prior quarter, the most in five years, said Reis.

Hotels: From HotelNewsNow.com:

[D]aily rate dropped 8.8 percent to finish the week at US$99.77 ... Revenue per available room for the week decreased 20.0 percent to finish at US$56.50

by Calculated Risk on 4/08/2009 02:48:00 PM

From Bloomberg: San Francisco Office Rents Fall Most Since 2001 (ht Dwight)

San Francisco office rents dropped 24 percent in the first quarter from a year earlier ... The average rent fell citywide to $38.80 a square foot from $50.92 for the highest-quality, best-located space, known as Class A space, according to a preliminary report by commercial brokerage Colliers International. The office vacancy rate rose to 13.2 percent from 12.6 percent in the previous quarter and up from 10.2 percent a year earlier.

And from the Atlanta Journal-Constitution: Landmark Equitable building in foreclosure (ht jp, Bradford)

Downtown Atlanta’s Equitable building, an iconic 30-plus story office tower that once dominated the city’s skyline, has fallen into foreclosure.

A foreclosure notice said the 40-year-old skyscraper is scheduled to be auctioned on the Fulton County courthouse steps on May 5.

by Calculated Risk on 4/08/2009 02:00:00 PM

Here are the minutes for the March FOMC meeting.

Excerpts:

Staff Economic Outlook

In the forecast prepared for the meeting, the staff revised down its outlook for economic activity. The deterioration in labor market conditions was rapid in recent months, with steep job losses across nearly all sectors. Industrial production continued to contract rapidly as firms responded to the falloff in demand and the buildup of some inventory overhangs. The incoming data on business spending suggested that business investment in equipment and structures continued to decline. Single-family housing starts had fallen to a post-World War II low in January, and demand for new homes remained weak. Both exports and imports retreated significantly in the fourth quarter of last year and appeared headed for comparable declines this quarter. Consumer outlays showed some signs of stabilizing at a low level, with real outlays for goods outside of motor vehicles recording gains in January and February. .... The staff's projections for real GDP in the second half of 2009 and in 2010 were revised down, with real GDP expected to flatten out gradually over the second half of this year and then to expand slowly next year as the stresses in financial markets ease, the effects of fiscal stimulus take hold, inventory adjustments are worked through, and the correction in housing activity comes to an end. The weaker trajectory of real output resulted in the projected path of the unemployment rate rising more steeply into early next year before flattening out at a high level over the rest of the year. The staff forecast for overall and core personal consumption expenditures (PCE) inflation over the next two years was revised down slightly. Both core and overall PCE price inflation were expected to be damped by low rates of resource utilization, falling import prices, and easing cost pressures as a result of the sharp net declines in oil and other raw materials prices since last summer.
emphasis added

And the worsening outlook led the FOMC to agree to "substantial additional purchases of longer-term assets":

In the discussion of monetary policy for the intermeeting period, Committee members agreed that substantial additional purchases of longer-term assets eligible for open market operations would be appropriate. Such purchases would provide further monetary stimulus to help address the very weak economic outlook and reduce the risk that inflation could persist for a time below rates that best foster longer-term economic growth and price stability.

by Calculated Risk on 4/08/2009 12:26:00 PM

From Bloomberg: Pulte to Buy Centex for $1.3 Billion in Survival Bid

Pulte Homes Inc. agreed to buy Centex Corp. for $1.3 billion in an all-stock deal that creates the largest U.S. homebuilder by revenue ...

“This is really good because not only are there too many homes, there are too many homebuilders,” said Vicki Bryan, a senior high-yield bond analyst for New York-based Gimme Credit LLC.
...
Because of complementary geographic presence and market segments, the new company will save $350 million annually, [Pulte Chief Executive Officer Richard Dugas] said.

This is a stock swap (no cash).

Dugas talks about signs of a housing bottom, but the last sentence makes it clear that this merger is about layoffs and cost savings.

by Calculated Risk on 4/08/2009 11:06:00 AM

From Carolyn Said at the San Francisco Chronicle: Banks aren't reselling many foreclosed homes (ht Starburst)

Lenders nationwide are sitting on hundreds of thousands of foreclosed homes that they have not resold or listed for sale, according to numerous data sources.
...
"We believe there are in the neighborhood of 600,000 properties nationwide that banks have repossessed but not put on the market," said Rick Sharga, vice president of RealtyTrac ...

"There is a real danger that there is much more (foreclosure) inventory than we are measuring," said Celia Chen, director of housing economics at Moody's Economy.com in Pennsylvania.
...
In the Bay Area, a Chronicle analysis of data from San Diego's MDA DataQuick shows that more than one-third of foreclosures are in shadow territory - that is, they are not registering in county records as having been resold.

For the 26 months from January 2007 through February 2009, banks repossessed 51,602 homes and condos in the nine-county Bay Area, according to DataQuick. Yet in the same period, only 30,823 foreclosures were resold, leaving about 20,000 bank repos unaccounted for.

I'm not convinced. There might just be a built in a lag between when the banks foreclose to when the properties are finally sold. Instead of using aggregate statistics, it would probably be better to do a survey - follow some number of foreclosures and see what happens to them each month.

by Calculated Risk on 4/08/2009 09:18:00 AM

Roger Vincent writes in the LA Times: Apartment rents fall in Southern California

... The average rent in Los Angeles County fell almost 4% in 2008 as apartment occupancy rates dropped and new units came online. The decline should continue this year as more renters lose their jobs, according to the annual USC Casden Forecast expected to be released by the university today.

"In L.A. County alone, 41,000 people moved out of apartments last year compared to the 29,000 people who moved in during the last five years," said forecast director Delores Conway.
...
Orange County is generally stronger than the rest of the region, the report said, though rents came down 2% last year ...

Falling rents. Rising vacancies. Same story for apartments, malls, and offices ...

by Calculated Risk on 4/08/2009 12:32:00 AM

From Bloomberg: Vacancies at U.S. Retail Centers Hit 10-Year High, Reis Says

Retail vacancies at shopping centers were the highest since Reis began publishing quarterly data in 1999 and reflected a net decrease in occupied space of 8.7 million square feet, the biggest drop for a single quarter and more than the 8.65 million square feet given back during all of 2008.

Rents paid by tenants fell 1.8 percent from the previous quarter and 2.9 percent from a year ago ...

The vacancy rate at neighborhood and community shopping centers rose to 9.5 percent from 8.9 percent the previous quarter and 7.7 percent a year ago ...

Vacancies at regional malls and super-regional malls ... climbed to 7.9 percent from 7.1 percent in the fourth quarter and 5.9 percent a year earlier ...

Click on image for larger graph in new window.

This graph shows the strip mall vacancy rate since Q2 2007.

Double digits, here we come ...

More from Reuters: Vacancies soar at US strip and regional malls-Reis

Barring a significant economic change, Reis does not expect vacancies to stabilize until sometime in the middle of 2012 if an overall U.S. economic recovery appears next year.

by Calculated Risk on 4/07/2009 09:25:00 PM

The WSJ reports: Treasury Plans to Extend TARP to Life Insurers

The Treasury is expected to announce within the next several days the inclusion of life insurers that are bank holding companies or own a thrift...

This is apparently for life insurers that are bank holding companies or own a thrift. These bank holding were already eligible for TARP money.

The WSJ mentions that Prudential, Hartford, and Lincoln National have all applied.

by Calculated Risk on 4/07/2009 05:39:00 PM

From Reuters: US apartment market worsens with economy--Reis

... The national apartment vacancy rate rose to 7.2 percent in the first quarter, up 0.60 percentage points from the prior quarter and 1.1 percentage points from a year earlier ...

It was the highest vacancy rate since the first quarter of 2002. That was right before the last downturn bottomed out, but Reis expects the picture to get a lot darker as "we are arguably only at the beginning of the current downturn."

Behind the rising vacancy rate is a build-up of available apartments ...

Asking rents fell by 0.6 percent to $1,046 per month, the largest single-quarter decline since Reis began reporting quarterly performance data in 1999.

This puts more pressure on house prices, and also raises more questions about the BLS measure of "Owners' equivalent rent" (that is showing an increase).

With new supply coming online, and families doubling up, it appears rents will decline for some time. Here are some comments from BRE properties in February:

We believe we are looking at a negative rent curve for the next two years.

We believe on a composite basis, market rents in 2009 could fall between 3 and 6% from peak levels in 2008. And the rent cuts in 2010 could be deeper ...