by Calculated Risk on 12/13/2014 08:09:00 AM

This is an unofficial list of Problem Banks compiled only from public sources.

Here is the unofficial problem bank list for Dec 12, 2014.

Changes and comments from surferdude808:

As anticipated, there were few changes to the Unofficial Problem Bank List this week. After the removal of one bank, the list count is 406 institutions with assets of $123.9 billion. A year ago, the list held 641 institutions with assets of $219.4 billion.

The Ohio State Bank, Marion, OH ($85 million) was removed after if found a merger partner. Next week, we anticipate the OCC will provide an update on its enforcement action activities.

CR Note: The first unofficial problem bank list was published in August 2009 with 389 institutions. The list peaked at 1,002 institutions on June 10, 2011, and is now down to 406.

by Calculated Risk on 12/12/2014 07:51:00 PM

Some excerpts from a research note by economists Sven Jari Stehn and David Mericle at Goldman Sachs:

The economic dataflow has been solid since the October FOMC meeting. ... News on inflation, however, has been mixed. On the one hand, actual inflation measures have firmed a bit since October. But, on the other hand, oil prices have continued to decline and market-implied measures of inflation expectations have dropped further.

We expect modest upgrades to Fed officials’ projections and to the description of growth and the labor market in the FOMC statement, while the inflation forecasts are likely to come down a bit. These expectations for the economic projections would suggest that the “dots” remain broadly unchanged.

We expect the FOMC to modify its “considerable time” forward guidance. One possibility would be to state that the committee will be “patient” in raising the funds rate until it is clear that the economy is on the path to achieving the FOMC’s goals. ... Our forecast for updated guidance is a close call, however, as the committee would want to avoid a tightening of financial conditions in light of the mixed inflation news. We would therefore expect the committee to indicate that the change in guidance is not meant to convey an expectation of an earlier liftoff than previously communicated, either in the statement itself or in Chair Yellen’s press conference.

An area of particular interest for the press conference will be any discussion of the post-liftoff guidance, as recent Fed communication has raised the prospect that views might be starting to shift away from the “shallow glide path.” Our forecast remains for the first hike in September 2015, followed by a steeper path of the funds rate than current market pricing.

The meeting is next Tuesday and Wednesday.

by Calculated Risk on 12/12/2014 05:18:00 PM

From HotelNewsNow.com: STR: US results for week ending 6 December

The U.S. hotel industry recorded positive results in the three key performance measurements during the week of 30 November through 6 December 2014, according to data from STR, Inc.

In year-over-year measurements, the industry’s occupancy rose 3.1 percent to 57.1 percent. Average daily rate increased 4.5 percent to finish the week at US$114.73. Revenue per available room for the week was up 7.7 percent to finish at US$65.48.
emphasis added

Note: ADR: Average Daily Rate, RevPAR: Revenue per Available Room.

The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.

Hotels are now in the slow period of the year.

Click on graph for larger image.

The red line is for 2014, blue is the median, and black is for 2009 - the worst year since the Great Depression for hotels.  Purple is for 2000.

The 4-week average of the occupancy rate is solidly above the median for 2000-2007, and since mid-June, the occupancy rate has been a little higher than for the same period in 2000.

Data Source: Smith Travel Research, Courtesy of HotelNewsNow.com

by Calculated Risk on 12/12/2014 02:10:00 PM

From Lewis Alexander et al at Nomura:

We expect the December FOMC meeting to give us additional insight into the future path of monetary policy. We will receive another round of FOMC forecasts for the first time since September, which will incorporate significant new data. The drop in energy prices will likely lead the FOMC to lower its inflation forecasts, and the Committee will likely have to lower its unemployment rate forecasts, due to the faster-than-expected declines in the unemployment rate.

Moreover, we expect the FOMC to make changes to its forward guidance. Given recent Fed speak and improvement in US economic momentum, we now think it is more likely than not that the FOMC will drop the “considerable time” language in its December policy statement. However, we expect them to replace this with some statement that suggests that rate hikes are not imminent.

From Michael Hanson at Merrill Lynch:

Next week’s FOMC meeting will feature updated forecasts (including the dot plot) and a press conference from Fed Chair Janet Yellen. But most market discussion of late has focused on the “considerable time” phrase: will it stay or will it go? Our base case is that the Fed will replace it with language emphasizing patience, but it is a close call versus keeping the current text. Whether or not that language is changed, we expect Chair Janet Yellen to signal a patient and gradual evolution of policy in a data-dependent context in her post-meeting press conference. The Fed likely wants to gradually guide the markets toward liftoff, not shock them.
...
What is almost certain is that the Fed will not simply drop “considerable time” without any substitute. ... as New York Fed President Bill Dudley reiterated this past week, to be a bit too late than to be too early. Additional reasons for patience include the limited set of policy options should the Fed have to ease further, as well as the hit to credibility of having to soon reverse a hiking cycle. We expect patience will be a main message in the December FOMC meeting and in Yellen’s post-meeting remarks.

Here are the most recent FOMC projections.  It looks like GDP will be revised up for 2014 (and possibly for 2015).

GDP projections of Federal Reserve Governors and Reserve Bank presidents
Change in Real GDP1	2014	2015	2016	2017
Sept 2014 Meeting Projections	2.0 to 2.2	2.6 to 3.0	2.6 to 2.9	2.3 to 2.5
June 2014 Meeting Projections	2.1 to 2.3	3.0 to 3.2	2.5 to 3.0	n.a.

¹ Projections of change in real GDP and inflation are from the fourth quarter of the previous year to the fourth quarter of the year indicated.

The unemployment rate was at 5.8% in both October and November, so the unemployment rate projection for Q4 2014 will be lowered again.

Unemployment projections of Federal Reserve Governors and Reserve Bank presidents
Unemployment Rate2	2014	2015	2016	2017
Sept 2014 Meeting Projections	5.9 to 6.0	5.4 to 5.6	5.1 to 5.4	4.9 to 5.3
June 2014 Meeting Projections	6.0 to 6.1	5.4 to 5.7	5.1 to 5.5	n.a.

² Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated.

As of October, PCE inflation was up 1.4% from October 2013, and core inflation was up 1.6%.  Headline inflation will be even lower in November and December with the decline in oil prices.  It seems likely the FOMC will lower their inflation projections (or move to the lower end of the September range).  The key will be the inflation projections for next year.

Inflation projections of Federal Reserve Governors and Reserve Bank presidents
PCE Inflation1	2014	2015	2016	2017
Sept 2014 Meeting Projections	1.5 to 1.7	1.6 to 1.9	1.7 to 2.0	1.9 to 2.0
June 2014 Meeting Projections	1.5 to 1.7	1.5 to 2.0	1.6 to 2.0	n.a.

Here are the FOMC's recent core inflation projections:

Core Inflation projections of Federal Reserve Governors and Reserve Bank presidents
Core Inflation1	2014	2015	2016	2017
Sept 2014 Meeting Projections	1.5 to 1.6	1.6 to 1.9	1.8 to 2.0	1.9 to 2.0
June 2014 Meeting Projections	1.5 to 1.6	1.6 to 2.0	1.7 to 2.0	n.a.

by Calculated Risk on 12/12/2014 09:55:00 AM

Click on graph for larger image.

The preliminary Reuters / University of Michigan consumer sentiment index for December was at 93.8, up from 88.8 in November.

This was above the consensus forecast of 89.5 and is at the highest level since before the recession. Lower gasoline prices and a stronger economy are probably the reasons for the sharp increase.