by Calculated Risk on 2/11/2015 06:55:00 PM

From Reuters: Euro zone, Greece fail to agree way forward following meeting

We explored a number of issues, one of which was the current program," Jeroen Dijsselbloem, who chaired the meeting, told a news conference in the early hours on Thursday in Brussels.

"We discussed the possibility of an extension. For some that is clear that is preferred option but we haven't come to that conclusion as yet. We will need a little more time."

Quote of the day:

“We are not negotiating the bailout; it was cancelled by its own failure.” Greek Prime Minister Alexis Tsipras

Earlier I posted some of the details of the failed agreement: Did Austerity in Greece Deliver?

Greece delivered on a primary surplus, but the details on unemployment and GDP show the "program" was the wrong policy.  Time to change the policy!

Thursday:
• At 8:30 AM ET, the initial weekly unemployment claims report will be released. The consensus is for claims to increase to 285 thousand from 278 thousand.

• Also at 8:30 AM, Retail sales for January will be released. The consensus is for retail sales to decrease 0.5% in January, and to decrease 0.5% ex-autos.

• At 10:00 AM, Manufacturing and Trade: Inventories and Sales (business inventories) report for December. The consensus is for a 0.2% increase in inventories.

by Calculated Risk on 2/11/2015 04:54:00 PM

From CNBC: EU, Greece come to agreement in principle, meetings to continue: Source

Greece has reached an agreement, in principle, with the European Union to stay in an EU bailout program, a source familiar with the matter told CNBC Wednesday.

No details.

by Calculated Risk on 2/11/2015 01:30:00 PM

Oil prices are down today, with Brent at $55.05 per barrel, and WTI at $49.47. Note: There is less investment now, but current wells are still pumping.

Here is an excerpt from the Weekly Petroleum Status Report

U.S. crude oil refinery inputs averaged about 15.6 million barrels per day during the week ending February 6, 2015, 20,000 barrels per day more than the previous week’s average. Refineries operated at 90.0% of their operable capacity last week. ...

U.S. crude oil imports averaged 7.3 million barrels per day last week, down by 101,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 7.3 million barrels per day, 3.6% below the same four-week period last year. ...

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 4.9 million barrels from the previous week. At 417.9 million barrels, U.S. crude oil inventories are at the highest level for this time of year in at least the last 80 years.
emphasis added

It is difficult to forecast oil and gasoline prices due to world events - and the response of producers to price changes, but currently the EIA expects gasoline prices to average $2.94/gal in 2015 according to the Short Term Energy Outlook released yesterday:

• EIA forecasts that Brent crude oil prices will average $58/bbl in 2015 and $75/bbl in 2016, with 2015 and 2016 annual average West Texas Intermediate (WTI) prices expected to be $3/bbl and $4/bbl, respectively, below Brent. This price outlook is unchanged from last month's forecast. ...

• Driven largely by falling crude oil prices, U.S. weekly regular gasoline retail prices averaged $2.04/gallon (gal) on January 26, the lowest since April 6, 2009, before increasing to $2.19/gal on February 9. EIA expects U.S. regular gasoline retail prices, which averaged $3.36/gal in 2014, to average $2.33/gal in 2015. The average household is now expected to spend about $750 less for gasoline in 2015 compared with last year because of lower prices. The projected regular gasoline retail price increases to an average of $2.73/gal in 2016.
emphasis added

Right now gasoline prices are down to around $2.22 per gallon nationally according to the Gasbuddy.com.

The following graph is from Gasbuddy.com. Note: If you click on "show crude oil prices", the graph displays oil prices for WTI, not Brent.

Orange County Historical Gas Price Charts Provided by GasBuddy.com

by Calculated Risk on 2/11/2015 10:35:00 AM

Back in 2010, Greece agreed to a number of austerity measures. In general, Greece met their obligations and is currently running a primary surplus.

Greece was told by the IMF, the Germans, and other that this would turn the Greek economy around. Greece clearly needed some austerity, however many of us argued austerity alone would be a disaster for Greece, and for Europe in general.

Below are the forecasts for Greece (IMF) and the actual results (Eurostat).

Clearly austerity alone failed. Sadly European officials like German Finance minister Wolfgang Schauble have not changed their views and apologized to the Greeks.

Here is an actual quote from Schauble in 2013:

"Nobody in Europe sees this contradiction between fiscal policy consolidation and growth,” Schauble said. “We have a growth-friendly process of consolidation, and we have sustainable growth, however you want to word it.”

A "growth friendly process"? "Sustainable growth"? Nonsense.

Obviously there is a contradiction between "fiscal policy consolidation and growth". And not everyone is blind to the obvious - some people in Europe see the obvious contradiction (just look at the data for Europe as a whole and Greece in particular).

It is time to stop blaming Greece (they mostly did what they were told), and start blaming the Germans and others for pushing the wrong policies.  And give Greece a little relief.

Greece: Annual GDP, Forecast and Actual1
Year	Promised	Actual
2009	-2	-4.4
2010	-4	-5.4
2011	-2.6	-8.9
2012	1.1	-6.6
2013	2.1	-3.9
2014	2.1
2015	2.7
1IMF Forecasts and Eurostat Actual

Greece: Annual Unemployment Rate, Forecast and Actual1
Year	Promised	Actual
2009	9.4	9.6
2010	11.8	12.7
2011	14.6	17.9
2012	14.8	24.5
2013	14.3	27.5
2014	14.1	26.82
2015	13.4
1IMF Forecasts and Eurostat Actual 22014 is Q1, Q2, Q3 average

by Calculated Risk on 2/11/2015 07:01:00 AM

From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey

Mortgage applications decreased 9.0 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending February 6, 2015. ...

The Refinance Index decreased 10 percent from the previous week. The seasonally adjusted Purchase Index decreased 7 percent from one week earlier.
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 3.84 percent, the highest level since January 9, 2015, from 3.79 percent, with points increasing to 0.31 from 0.29 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate increased from last week.
emphasis added

Click on graph for larger image.


The first graph shows the refinance index.

2014 was the lowest year for refinance activity since year 2000.

It looks like 2015 will see more refinance activity than in 2014, especially from FHA loans!

The second graph shows the MBA mortgage purchase index.  

According to the MBA, the purchase index is up 1% from a year ago.