by Calculated Risk on 12/16/2011 09:35:00 PM

From the NY Times: Senate Leaders Agree on 2-Month Extension of Payroll Tax Cut

Senate leaders said on Friday night that they had reached a deal that would extend a payroll tax cut for two months ... The agreement would also speed the decision process for the construction of an oil pipeline from Canada to the Gulf Coast ...

The Senate agreement would also allow jobless workers to continue receiving unemployment insurance benefits as permitted by current law for two months. For the same period, there would be no cut or increase in fees paid to doctors for treating Medicare patients.

I expect these provisions - the payroll tax cut and the extension of the emergency unemployment insurance benefits - to eventually be extended for all of 2012.

Earlier:
• Lawler: Early Read on Existing Home Sales: Given the Benchmark Revision, a “Challenge”
• Key Measures of Inflation mostly slow in November

by Calculated Risk on 12/16/2011 07:20:00 PM

From the FDIC: Washington Federal, Seattle, Washington, Assumes All of the Deposits of Western National Bank, Phoenix, Arizona

As of September 30, 2011, Western National Bank had approximately $162.9 million in total assets and $144.5 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $37.6 million. ... Western National Bank is the 92nd FDIC-insured institution to fail in the nation this year, and the third in Arizona.

Two today so far ... this is probably the last closing day of the year.

by Calculated Risk on 12/16/2011 06:23:00 PM

Pay no attention!
Don't look behind the curtain!
Hoped Emerald Coast Bank
by Soylent Green is People
From the FDIC: Summit Bank, National Association, Panama City, Florida, Assumes All of the Deposits of Premier Community Bank of the Emerald Coast, Crestview, Florida

As of September 30, 2011, Premier Community Bank of the Emerald Coast had approximately $126.0 million in total assets and $112.1 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $31.2 million. ... Premier Community Bank of the Emerald Coast is the 91st FDIC-insured institution to fail in the nation this year, and the thirteenth in Florida.

Not so premier ...

Earlier:
• Lawler: Early Read on Existing Home Sales: Given the Benchmark Revision, a “Challenge”
• Key Measures of Inflation mostly slow in November

by Calculated Risk on 12/16/2011 04:11:00 PM

CR Note: The NAR is scheduled to release November existing home sales on Wednesday, December 21st at 10:00 AM ET. The NAR will also release the benchmark downward revisions for 2007 through 2011 next Wednesday.

From economist Tom Lawler:

Based on my tracking of regional realtor/MLS reports, I estimate that existing home sales in November as measured by the National Association of Realtors ran at a seasonally adjusted annual rate that was about 1.8% higher than October’s pace, and about 9% higher than last November’s pace.

What that will mean for the NAR’s estimated sales number, however, is not clear, as the NAR announced that it is releasing updated (and lower) existing home sales estimates from 2007 to 2011. While I do NOT know what the revised sales estimates will be, based on various data sources I estimate that the NAR’s estimate of existing home sales for 2010 will be revised down by about 13% or so. As best as I can tell, 2011 sales data will be revised down by about the same amount as 2010 sales data.

As a result, I estimate that the NAR’s estimate for existing home sales for November will be a seasonally adjusted annual rate of around 4.40 million. If no benchmarking were done, I estimate the NAR’s existing home sales estimate would be a SAAR of around 5.06 million for November.

On the inventory side, the NAR said that its “months’ supply” measure will not be revised, implying that inventories will be revised down by the same percentage as sales. Various sources indicate that aggregate active listings fell considerably from October to November, with my tracking suggesting a monthly drop of about 5% -- though NAR inventory numbers don’t always “track” listings data. But if that drop were to happen, I’d estimate that the NAR will report an existing home inventory of about 2.753 million, down about 14.9% from last November.

The NAR has also said that it would not revise its median sales price data. Based on my tracking – which has an at best “so-so” track record in predicting the NAR number – I estimate that the median existing home sales price for November will be down about 4.2% from last November.

CR Note: Tom's estimate for inventory includes adjusting for the benchmark downward revision. This would put months-of-supply at around 7.5 months, and would put listed inventory at the lowest level since mid-2005.

by Calculated Risk on 12/16/2011 02:36:00 PM

European bond yields have fallen recently ...

The Italian 2 year yield is down to 5.29% - the lowest level since October, and the 10 year yield is at 6.59%.

The Spanish 2 year yield is down sharply to 3.46%, and the 10 year yield is down to 5.31%.

But there are plenty of negative headlines:

From the Financial Times: EFSF considers euro warning clause (ht Brian)

In the latest draft of the prospectus, seen by the Financial Times, a summary of the dangers to investors includes: “[R]isks arising from a Reference Sovereign ceasing to use the euro as its lawful currency . . . or the cessation of the euro as a lawful currency”.
excerpt with permission

That would be quite a warning clause.

And here is some downbeat testimony from Deputy Assistant Treasury Secretary Mark Sobel today: What the Euro Crisis Means for Taxpayers and the U.S. Economy

The European Economic Outlook is Weakening
Over the past year, economic and financial stresses in Europe have spread to some of Europe’s largest economies, and the crisis now facing Europe is deeper and more entrenched. Sovereign bond yields have risen sharply in many countries. Many European financial institutions have faced difficulties in obtaining funding from markets and are de-leveraging in order to strengthen their capital adequacy. European equities have fallen by a quarter since April.

These developments have resulted in a sharp weakening in Europe’s current growth performance and significant markdowns in growth projections for 2012. Growth in the euro area is projected by most analysts to be negative this quarter and into early 2012, with weak growth persisting in 2012. For example, the OECD, which earlier this year had projected annual average European growth in 2012 of 2.0 percent, just revised its estimate to 0.2 percent. Many private forecasters are more pessimistic.

Europe’s problems are a serious risk for the U.S. outlook
In the United States, the pace of recovery has strengthened recently and most analysts expect continued moderate growth next year. But given Europe’s strong trade and financial linkages with the rest of the world, other regions could feel the impact as well. Indeed, Europe’s problems are a serious risk for the U.S. economic outlook.

• The European Union buys nearly 20 percent of U.S. goods exports ($242.6 billion in 2010) and over 30 percent of U.S. service exports ($170.2 billion). The European Union accounts for 63 percent of the stock of foreign direct investment (FDI) into the United States, at $1.5 trillion, and 56 percent of new investment in 2010. Therefore, when European growth slows, U.S. jobs, exports, and FDI inflows decline.

• Global financial markets are strongly interconnected. When European financial markets tighten, it can adversely impact U.S. banks’ confidence and their willingness to lend and invest. That, in turn, can hurt American businesses and jobs, particularly in smaller firms that depend on credit from their banks to grow and innovate.

• When EU stocks decline, U.S. equity markets often do as well, hitting the savings and wealth of Americans.

To make these linkages more concrete, for instance, exports to the European Union represent over 24, 20 and 18 percent, respectively, of merchandise exports from New York, North Carolina, and Illinois. In each of these states, over 150,000 jobs – and over 250,000 in Illinois – are export-related. A decline in exports to Europe will inevitably adversely impact America.

And there is some evidence of tightening. The TED spread is increasing and is now up to 56.8 (This hit 463 on Oct 10, 2008), and the two year swap spread is up to 49.5 (This spread peaked at near 165 in early October 2008). Still not too bad.

From the WSJ: Fitch Affirms France as AAA, Warns on Six Others

Fitch Ratings lowered its outlook on France's triple-A rating to "negative" from "stable," indicating there is a 50-50 chance the nation could lose its top investment-grade rating over the next two years.
...
The ratings firm also put on downgrade watch several investment-grade-rated euro-zone nations that already had a negative outlook. In addition to Italy and Spain, that action snared Belgium, Slovenia, Ireland and Cyprus. Fitch said it expects to complete the review by the end of January. It said it would likely downgrade the ratings by one or two notches.

And there is a rumor of an S&P downgrade of France after the market today.