by Calculated Risk on 12/18/2009 04:35:00 PM

From Bloomberg: Moody’s Reviews $143 Billion of Jumbo-Mortgage Bonds (ht Bob_in_MA)

Moody’s Investors Service placed $143 billion of jumbo-mortgage bonds under review for downgrades ... The revisions were prompted by “the rapidly deteriorating performance of jumbo pools in conjunction with macroeconomic conditions that remain under duress,” Moody’s said.

... An “overhang of impending foreclosures will impact home prices negatively,” with values likely to decline 9 percent more ... U.S. unemployment will rise to peak at about 10.6 percent ...

Moody’s also said it expects the U.S. government’s effort to curb foreclosures to be less effective than it previously expected because the programs have “failed to gain traction.”
emphasis added

The problems are moving on up the value chain.

This is a follow-up to this story yesterday: Luxury-Home Owners in U.S. Use ‘Short Sales’ as Defaults Rise (many hts!)

by Calculated Risk on 12/18/2009 03:08:00 PM

"The 1980s trained macroeconomics -- like Greg Mankiw and Ben Bernanke and so forth -- became a very complacent group, very ill adapted to meet with a completely unpredictable and new situation, such as we've had. I looked up ... Mankiw's bestseller, both the macro book and his introductory textbook, I went through the index to look for liquidity trap. It wasn't there!"
Paul Samuelson, June 2009

Here is an interview with Paul Samuelson from June (Dr. Samuelson passed away last weekend at the age of 94):

An Interview With Paul Samuelson, Part One (ht Jonathan)

An Interview With Paul Samuelson, Part Two

On Greenspan and the stock bubble:

"I can remember when some of us -- and I remember there were a lot of us in the late 90s -- said you should do something about the stock bubble. And he kind of said, 'look, reasonable men are putting their money into these things -- who are we to second guess them?' Well, reasonable men are not reasonable when you're in the bubbles which have characterized capitalism since the beginning of time."

by Calculated Risk on 12/18/2009 12:45:00 PM

Update comment: I feel torn about digging into Chairman Bernanke's private affairs, but this seems to be in the public interest based on Bernanke's comments, his position, and the current crisis.

Effective Demand has some more details: So I pulled Bernanke's mortgage...

Bernanke bought in May 2004 for $839,000. He had a 5/1 ARM for $671,200 at 4.125% that adjusted to 12 month Libor in June of each year after his fixed period ended. To calculate his rate you take 12 month Libor on that date and add 2.250%, it can't adjust more than 2% in any one year due to restrictions on the note. He also had a purchase money second $83,900 but for some reason I can't find the interest rate on that one, nor do I see an ARM rider for it so it could very well be fixed. Both notes indicate they are amortizing loans.

So what does this all mean? Well according to the terms I see for Bernanke's first and the little information on historic LIBOR I can find (here)... his rate actually went down.

How did it "explode" if his rate went down?

I was assuming this was an Option ARM and Chairman Bernanke was paying the negatively amortizing payment. Then, when the loan recast to amortize over the remaining term (25 years), the payment would have increased significantly.

But Effective Demand's information raises several questions: Why did Bernanke refi? What did he mean by "explode", and was his home underwater when he refinanced since he bought in 2004 and apparently borrowed 90% LTV with only 10% down.

by Calculated Risk on 12/18/2009 10:54:00 AM

In general the unemployment rates declined in November along with the national rate, however the unemployment rate hit new record highs in Florida and South Carolina.

From the BLS: Regional and State Employment and Unemployment Summary

Regional and state unemployment rates were generally lower in November. Thirty-six states and the District of Columbia recorded over-the-month unemployment rate decreases, 8 states registered rate increases, and 6 states had no rate change, the U.S. Bureau of Labor Statistics reported today. Over the year, jobless rates increased in all 50 states and the District of Columbia.
...
Michigan again recorded the highest unemployment rate among the states, 14.7 percent in November. The states with the next highest rates were Rhode Island, 12.7 percent, and California, Nevada, and South Carolina, 12.3 percent each. North Dakota continued to register the lowest jobless rate, 4.1 percent in November, followed by
Nebraska, 4.5 percent, and South Dakota, 5.0 percent. The rate in South Carolina set a new series high, as did the rate in Florida (11.5 percent).
emphasis added

Click on graph for larger image in new window.

This graph shows the high and low unemployment rates for each state (and D.C.) since 1976. The red bar is the current unemployment rate (sorted by the current unemployment rate).

Fourteen states and D.C. now have double digit unemployment rates. New Jersey, Indiana, and Mississippi are all close.

Two states are at record unemployment rates: Florida and South Carolina, and several other states are close.

by Calculated Risk on 12/18/2009 09:18:00 AM

Note: this is not seasonally adjusted. There is a very distinct seasonal pattern for imports, but not for exports. LA area ports handle about 40% of nation's container port traffic.

Sometimes port traffic gives us an early hint of changes in the trade deficit. The following graph shows the loaded inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container). Although containers tell us nothing about value, container traffic does give us an idea of the volume of goods being exported and imported.

Click on graph for larger image in new window.

Loaded inbound traffic was 13.1% below November 2008. (-15.1% over last three months)

Loaded outbound traffic was 11.4% above November 2008. (+0.8% three months average)

U.S. exports fell off a cliff in November 2008, but it took a little longer for imports to decline sharply (because the ships were already underway).

There was a clear recovery in U.S. exports earlier this year; however exports have been mostly flat since May. Still this year will be the 3rd best year for export traffic at LA area ports, behind 2007 and 2008.

For imports, traffic is below the November 2003 level, and 2009 will be the weakest year for import traffic since 2002.

Note: Imports usually peak in the August through October period (as retailers import goods for the holidays) and then decline in November.

The lack of further export growth to Asia is definitely discouraging.