by Calculated Risk on 7/18/2010 08:45:00 AM

From Roger Vincent at the Los Angeles Times: Office vacancies rise, rents drop in Southland again

Overall vacancy in Los Angeles, Orange, San Bernardino and Riverside counties rose to nearly 20% from 17% a year earlier, while average asking rents dropped to $2.37 a square foot per month from $2.52 ...

The weakest market was the Inland Empire, where vacancy surpassed 25% in the second quarter. Orange County was also weak, with 22% of its office space unleased.

More excess supply, but at least the new construction has stopped.

by Calculated Risk on 7/17/2010 07:47:00 PM

The frequency of "double dip" searches keeps increasing, see Google Trends ...

Paul Krugman writes: De Facto Double Dips

Let’s be clear: a recovery that involves growth so slow that unemployment and excess capacity rise, not fall, isn’t really a recovery. If we have only have 1 1/2 percent growth, that will amount to a double dip in all the senses that matter.

I've been focused on a technical double dip (see Recession Dating and a "Double Dip"), but I agree with Krugman that a further slowdown - following the below trend first half of 2010 - will definitely feel like a recession - and it will probably lead to an unemployment rate "double dip".

And from Nouriel Roubini: Double-Dip Days

The global economy, artificially boosted since the recession of 2008-2009 by massive monetary and fiscal stimulus and financial bailouts, is headed towards a sharp slowdown this year as the effect of these measures wanes.
...
At best, we face a protracted period of anemic, below-trend growth in advanced economies as deleveraging by households, financial institutions, and governments starts to feed through to consumption and investment.
...
The global slowdown – already evident in second-quarter data for 2010 – will accelerate in the second half of the year. ... The likely scenario for advanced economies is a mediocre U-shaped recovery, even if we avoid a W-shaped double dip. In the US, annual growth was already below trend in the first half of 2010 (2.7% in the first quarter and estimated at a mediocre 2.2% in April-June). Growth is set to slow further, to 1.5% in the second half of this year and into 2011.
...
Fasten your seat belts for a very bumpy ride.

The 2nd half slowdown is here. I still think we will avoid a technical double-dip recession, but it will probably feel like one.

Some day growth will pickup again. The debt problems will be with us for some time, but one of the keys for more growth is absorption of excess capacity. New investment is already happening for semiconductor manufacturing (see AMAT and other semi-equipment manufactures, and the WSJ Applied Materials Boosts Revenue Forecast)

But there is too much capacity in most of the economy. We see this in housing (the good news is there will be a record low number of new housing units delivered this year), and in overall industrial capacity utilization. As an example, domestic auto production is still about 25% below the level of 2006 - so there is no need to expand production. There is also excess capacity in office space, retail space, and other categories of commercial real estate.

The U.S. population is still growing, new households are being formed, and eventually this excess capacity will be absorbed. Until then the recovery will be sluggish and choppy (at best) ... and there are still the debt issues.

As Nouriel wrote: "Fasten your seat belts for a very bumpy ride."

by Calculated Risk on 7/17/2010 04:13:00 PM

Note: this is an unofficial list of Problem Banks compiled only from public sources.

Here is the unofficial problem bank list for July 16, 2010.

Changes and comments from surferdude808:

The Unofficial Problem Bank List underwent several changes this week as the FDIC resumed shuttering banks and the OCC release their actions through the middle of June. There were nine additions and nine deletions, which leaves the total number of institutions on the Unofficial Problem Bank List unchanged at 796.

Deletions include the six failed institutions -- First National Bank of the South ($682 million Ticker: FNSC), Metro Bank of Dade County ($442 million), Woodlands Bank ($379 million), Turnberry Bank ($263 million), Olde Cypress Community Bank ($169 million), and Mainstreet Savings Bank, FSB ($97 million Ticker: MSFN). Other removals for action termination include West Coast Bank ($2.7 billion Ticker: WCBO), First National Community Bank ($155 million), and The First National Bank of Logan ($25 million).

Additions include Monroe Bank & Trust, Monroe, MI ($1.4 billion Ticker: MBTF); Bank of Whitman, Colfax, WA ($786 million); American Bank of Texas, National Association, Marble Falls, TX ($756 million); Landmark Bank, National Association, Fort Lauderdale, FL ($351 million); The Central National Bank of Alva, Alva, OK ($246 million); Pilot Bank, Tampa, FL ($238 million); Trans-Pacific National Bank, San Francisco, CA ($176 million); The First National Bank of Grant Park, Grant Park, IL ($123 million); and Community National Bank at Bartow, Bartow, FL ($75 million).

Other changes include the OTS issuing a Prompt Corrective Action order against Bayside Savings Bank ($66 million) and the OCC converting a Formal Agreement to a Consent Order against Merchants Bank of California, National Association ($91 million). Next week, we anticipate the FDIC will release its actions for June, so the list will likely undergo many changes.

by Calculated Risk on 7/17/2010 11:48:00 AM

From Lauren Etter at the WSJ: Roads to Ruin: Towns Rip Up the Pavement

Paved roads ... are being torn up across rural America and replaced with gravel or other rough surfaces as counties struggle with tight budgets and dwindling state and federal revenue. State money for local roads was cut in many places amid budget shortfalls.

Back to the stone age ...

by Calculated Risk on 7/17/2010 08:24:00 AM

For those that missed any part of the series ...

Part 1: How Large is the Outstanding Value of Sovereign Bonds?

Part 2. How Often Have Sovereign Countries Defaulted in the Past?

Part 2B: More on Historic Sovereign Default Research

Part 3. What are the Market Estimates of the Probabilities of Default?

Part 4. What are Total Estimated Losses on Sovereign Bonds Due to Default?

UPDATE on Sunday: Part 5A. What Happens If Things Go Really Badly? $15 Trillion of Sovereign Debt in Default

Coming soon: Part 5B. What Happens If Things Go Really Badly? More Things Can Go Badly: Credit Default Swaps, Interest Swaps and Options, Foreign Exchange.