by Calculated Risk on 12/30/2009 04:55:00 PM

From the Treasury: Treasury Annouces [SIC] Resturcturing of Commitment To GMAC

Treasury will commit $3.8 billion of new capital to GMAC ... Prior to today's actions, Treasury had invested $12.5 billion in preferred stock of GMAC. Treasury owns $13.1 billion in preferred stock in GMAC, through purchases and the exercise of warrants, and 35 percent of the common equity in GMAC.

From the WaPo: U.S. taking majority ownership of GMAC

The Treasury Department said it will increase its stake in GMAC to 56 percent from 35 percent. It also will hold about $14 billion in what amount to loans that GMAC may eventually be required to repay.

by Calculated Risk on 12/30/2009 03:12:00 PM

I've added two polls on the right sidebar.

Predict the 2010 GDP growth and the Dec 2010 unemployment rate.

I'll post the poll results here tomorrow and post my own thoughts over the weekend.

Please feel free to post your predictions in the comments too - and I'll link to this post next year.

Best to all

by Calculated Risk on 12/30/2009 12:35:00 PM

Here is a comparison of real house prices and the unemployment rate using the LoanPerformance national house price data (starts in 1976) and Case-Shiller Composite 10 index (starts in 1987). Both indexes are adjusted by CPI less shelter. This is an update to a post earlier this year.

Click on image for larger graph in new window.

The two previous national declines in real house prices are evident on the graph (early '80s and early '90s). The dashed green lines are drawn at the peak of the unemployment rate following the peak in house prices.

In the early '80s, real house prices declined until the unemployment rate peaked, and then increased sluggishly for a few years. Following the late 1980s housing bubble, real house prices declined for several years after the unemployment rate peaked.

Although there are periods when there is no relationship between the unemployment rate and house prices, this graph suggests that house prices will not bottom (in real terms) until the unemployment rate peaks (or later, especially since the current bubble dwarfs those previous housing bubbles). This also suggests that real house prices are probably 10% or more too high on a national basis.

by Calculated Risk on 12/30/2009 09:51:00 AM

From MarketWatch: Chicago purchasing index reaches 16-month high

More businesses in the Chicago region were expanding in December than at any time in the past 16 months, based on the latest data from the Chicago purchasing managers index. The business activity index rose to 60.0% from 56.1% in November...

Readings above 50% indicate expansion, and below 50% indicate contraction, so this suggests business activity is increasing.

This index is for both manufacturing and service activity in the Chicago region. In general the Chicago area is considered representative of the mix of manufacturing and non-manufacturing business activity in the nation.

The national ISM manufacturing index will be released Monday, and the ISM non-manufacturing index next Wednesday.

by Calculated Risk on 12/30/2009 07:56:00 AM

From The Times: Japan pledges to end economic spiral (ht Jonathan)

Japan’s four-month-old Government ... today vowed to enlarge the economy by 150 trillion yen (£1 trillion) ...

The Democratic Party of Japan said that the scheme would deliver annual real GDP growth of at least 2 per cent between now and 2020 and ... is thought to be an attempt by the Government to quash rising domestic fears over the country’s gargantuan mound of public debt. The debt equates to about 180 per cent of GDP and will probably hit 200 per cent in the wake of the record budget announced last week.

Halfway through the Government’s ten-year plan, Japan's debt relative to GDP may rise to 246 per cent, according to analysts from the International Monetary Fund.
...
Since its property bubble burst 20 years ago, Japan has borrowed heavily to stimulate the economy and recent years have seen the level of debt spiral wildly.

Talk about a high level of debt to GDP.