by Calculated Risk on 3/31/2009 10:59:00 PM

Here is an open thread for discussion.

Case-Shiller reported house prices fell sharply in January.

The Philly Fed State indexes showed all 50 states in recession (check out the map!).

The Restaurant Performance Index showed continued contraction.

Bloomberg Futures.

CBOT mini-sized Dow

CME Globex Flash Quotes

Futures from barchart.com

And the Asian markets.

And a graph of the Asian markets.

Best to all.

by Calculated Risk on 3/31/2009 09:06:00 PM

Update from Reuters: Obama thinking on GM, Chrysler unchanged -official

"Nothing has changed on this," the official said when asked about a Bloomberg report that the president has determined that a prepackaged bankruptcy is the best way for GM to restructure and become competitive. "This report is not accurate."

From Bloomberg: Obama Said to Conclude Bankruptcy Best Option for GM, Chrysler

President Barack Obama has determined that a prepackaged bankruptcy is the best way for General Motors Corp. to restructure ...

Obama also is prepared to let Chrysler LLC go bankrupt ...

“quick and surgical” bankruptcy ... appears to be inevitable ...

This seems like the end for Chrysler. Hopefully GM will emerge as an efficient and competitive (and smaller) automaker.

by Calculated Risk on 3/31/2009 06:50:00 PM

The Organisation for Economic Co-operation and Development (OECD) released an Interim Economic Outlook today. I thought it would be interesting to compare their forecast with the "more adverse" scenario from the Stress Test.

Click on graph for larger image in new window.

The first graph compares the quarterly OECD U.S. GDP forecast with the quarterly stress test scenario (more adverse).

Clearly the OECD is more pessimistic than the more severe stress test scenario for the U.S. banks.

The second graph compares the OECD unemployment rate forecast with the more severe scenario.

Once again, the OECD is slightly more pessimistic.

Earlier I compared both the baseline stress test scenario and the more adverse scenario with forecasts from Northern Trust and Goldman Sachs. At this point I think we can just ignore the old baseline scenario.

The "more adverse" scenario is the new baseline.

by Calculated Risk on 3/31/2009 04:16:00 PM

First, the graph from Doug ...

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.

And a few misc notes ...

Almost a 'Half Off' sale (the auction has closed): Hancock Tower sells for $660m at auction

The John Hancock Tower was sold today for $660.6 million at a foreclosure auction in New York City. ... the Hancock's previous owner, Broadway Partners of New York, defaulted on some of the loans it used to buy property for $1.3 billion in late 2006.

More Vegas disaster: Riviera misses interest payment, warns of possible bankruptcy (ht Howard)

"The deteriorating trends in revenue and earnings experienced during the first three quarters of 2008 continued as evidenced by our fourth quarter results and accelerated during the first quarter of 2009. We expect this situation to continue as long as competitors in the Las Vegas market follow a strategy of sacrificing ADR (average daily room rate) to maximize room occupancy and the decline in convention business is unabated."

Yeah, blame your competitors for cutting prices!

And from an analyst on Case-Shiller and housing:

The acceleration in the rate of decline in the US Case-Shiller 20-city house price index is a bit disappointing given that other evidence suggested conditions in the housing market may have stabilised since the turn of the year. The annual growth rate fell from 18.6% in December to a new record low of 19.0% in January. Although the monthly data need to be treated with a great deal of caution (this series is not seasonally adjusted) ...

I forgot to mention CS is not seasonally adjusted (an important point), but I think the first sentence is incorrect. There will probably be two bottoms for housing - the first for single family starts and new home sales, and the 2nd - later, perhaps much later - for existing home prices. The Case-Shiller price declines are not "disappointing" with regards to the other data. Even if starts bottom sometime this year, I expect house prices to continue to fall. See More on Housing Bottoms.

by Calculated Risk on 3/31/2009 02:52:00 PM

The following graph is based on the Case-Shiller Tiered Price Indices for San Francisco. Case-Shiller has data for all 20 cities in the Composite 20 index.

Click on graph for larger image in new window.

This shows that prices increased faster for lower priced homes than higher priced homes. And prices have also fallen faster too.

It now appears mid-to-high priced homes are overpriced compared to lower priced homes - although prices will probably continue to fall for all three tiers.

Distressed properties - foreclosures and short sales - have dominated sales in the lower priced areas. This has pushed the prices down quicker than in the higher priced areas.

As an example, DataQuick reported this month:

[F]oreclosure resales last month ranged from 12.1 percent of resales in San Francisco to 69.5 percent in Solano County.

With so many foreclosures, prices have fallen quicker in Solano County than in San Francisco.

But over time, prices will probably equilibrate between the low and high priced areas. It will take longer for prices to fall in San Francisco, and I expect the lower priced areas to bottom (especially in real terms) before the higher priced areas.