by Calculated Risk on 7/15/2005 07:19:00 PM

The May numbers are barely dry, and here we go for June, starting with oil. Using the same model (described here) the ERPP (Energy Related Petroleum Products) trade numbers for June are forecast to be:

Forecast: Total NSA ERRP Imports: $19.6 Billion

Total SA ERPP FORECAST:
Imports SA: $19.4 Billion (seasonal factor estimated at 0.9925 for June)
Exports SA: $2.3 Billion
Balance ERPP: $17.1 Billion

DETAIL ALERT: The following are the internal numbers (mostly for my notes) that will cause your eyes to glaze over!

IMPORTS: Energy Related Petroleum Products.
Barrels Crude: 328.0 million barrels.
Barrels Other ERPP: 90.0 million barrels.
DOE Price per barrel (Crude): $45.11
DOE Price per barrel (Other): $51.88

Preliminary - Total NSA ERRP Imports: $19.5 Billion

NOTE: The BLS reports petroleum import prices rose 7.6% in June from May. The above model used DOE prices. After reviewing the prior prices and comparing the DOE and BLS approaches, the DOE has been slightly more accurate. Last month I split the difference between the estimates (the DOE was slightly closer).

This month I think the BLS numbers are too high (the real time data is revised significantly every month). The BLS approach would predict P(crude) = $46.35 compared to the DOE P(crude) = $45.11. I'm not going to split the difference, since I think the BLS is too high. Instead I will modify the DOE price forecast slightly upwards to reflect the BLS data as follows:

BLS/DOE Price per barrel (Crude): $45.40
BLS/DOE Price per barrel (Other): $52.21
Forecast: Total NSA ERRP Imports: $19.6 Billion

Total SA ERPP FORECAST:
Imports SA: $19.4 Billion (seasonal factor estimated at 0.9925 for June)
Exports SA: $2.3 Billion
Balance ERPP: $17.1 Billion

NOTE: This compares to the actual ERPP balance of -$15.8 Billion in May, so Oil is estimated to add $1.3 Billion to the deficit in June. Gen'l Glut has pointed out that the big jump in oil imports will come in July.

by Calculated Risk on 7/15/2005 05:20:00 PM

Earlier I quoted Ben Bernanke, the new chairman of the White House's Council of Economic Advisers suggesting that the boom in house prices was related to job growth:

"... states exhibiting higher rates of job growth also tend to have experienced greater appreciation in house prices."

Now MSNBC's Martin Wolk provides data to show that Bernanke misspoke: Job growth fails to explain soaring home prices (Hat Tip to pgl at Angry Bear)

See the chart "Jobs & Home Prices". The conclusion ... Bernanke is wrong: "Job growth fails to explain soaring home prices".

by Calculated Risk on 7/15/2005 11:19:00 AM

The NY Times is reporting: A Hands-Off Policy on Mortgage Loans

For two months now, federal banking regulators have signaled their discomfort about the explosive rise in risky mortgage loans.

First they issued new "guidance" to banks about home-equity loans, warning against letting homeowners borrow too much against their houses. Then they expressed worry about the surge in no-money-down mortgages, interest-only loans and "liar's loans" that require no proof of a borrower's income.

The impact so far? Almost nil.

"It's as easy to get these loans now as it was two months ago," said Michael Menatian, president of Sanborn Mortgage, a mortgage broker in West Hartford, Conn. "If anything, people are offering them even more than before."

The reason is that federal banking regulators, from the Federal Reserve to the Office of the Comptroller of the Currency, have been reluctant to back up their words with specific actions. For even as they urge caution, officials here are loath to stand in the way of new methods of extending credit.

The regulators think Banks are not in danger because they have shifted the risk to investors and borrowers:

The main issue for regulators is whether banks and other lenders are properly managing their own risk, and the lenders are looking good.

They have hedged their risks by bundling mortgages into securities that are then sold to investors around the world. And if interest rates go higher, they have shifted much of the risk onto consumers because a growing share of home buyers have taken on adjustable-rate mortgages. At the same time, they have built sturdier financial institutions through mergers and the breakdown of barriers to interstate banking.

Bert Ely, an independent banking analyst who was among the first to recognize the crisis at savings and loan institutions in the 1980's, said the banks are far sounder today. "It's a night-and-day difference," Mr. Ely said. "No comparison."

But consumers - and perhaps the broader economy - are taking on more risk.

A couple of comforting thoughts:

"There is a lot of pressure on banks to build market share, and consumers are looking for a quick response," said Barbara J. Grunkemeyer, deputy comptroller for credit risk at the Office of the Comptroller of the Currency. "With respect to these new mortgage products, they are new and have taken off rapidly. We are still in the process of understanding the risk-management systems that surround them."

"If you are the comptroller of the currency or the Federal Reserve, you're looking out for the system of the world," Mr. Frank added. "You're making macroeconomic policy. It's much more fun than looking out for consumers."

by Calculated Risk on 7/14/2005 08:50:00 PM

"The joke now in Lee County [Florida] is when the cops pull you over they ask for your real estate license because not everyone has a driver's license."

From this otherwise serious article: Housing boom fraught with disasters waiting to happen.

And a Las Vegas story: Valley Home Buying Fallout.

Dyan Harmell, a Pulte home buyer, is drowning in a sea of debt. Her living room table is covered with bills and she's not quite sure how to pay them.

"There are bills everywhere. House payments and debt," Harmell told FOX5. She's a long way from those heady days of Las Vegas' real estate boom, when she says Pulte's sales staff pushed and pushed her to buy.

"They call you and say 'you are so lucky .. this just came across.. it's going to be worth 100k before it closes,'"said Dyan Harmell. "We came with the hopes of buying two houses. We left the first day owning four. Within the next week, owning 6 -- all the way up to 19."

But Harmell's story is not unique. Walk around Pulte's Solera neighborhood and it's a ghost town. It seems as if "For Sale" signs are everywhere.

Signs that many people who thought they'd make a killing in Las Vegas' real estate market are now trying to unload homes at deep discounts.

Hat tip to Ben Jones for Vegas story. As the Vegas article says: "The real estate boom that sent Las Vegas home prices skyrocketing may be over, but the hangover is only getting worse."

by Calculated Risk on 7/14/2005 04:37:00 PM

The following graph shows the fiscal year to date increase in the National Debt for each of the last six fiscal years. The "fiscal year" is the accounting period of the federal government. It begins on October 1st and ends on September 30th of the next calendar year. Each fiscal year is identified by the calendar year in which it ends - so fiscal year 2005 ends on September 30, 2005.


Click on graph for larger image.

The Year to Date increase in the National Debt is plotted for fiscal years 2000 through 2005. For 2005 (in RED) the data is plotted through June, 2005. The graph shows that contrary to the claims of the Bush Administration there has only been minor improvement in the overall deficit picture for 2005.


NOTE: There are many methods of looking at the annual budget deficit. The Bush Administration uses the "Enron Method" commonly called the "unified budget deficit". For a comparison of the unified budget deficit, the general fund deficit and the increase in the National Debt method see "Another Budget, Another Disaster".