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Tuesday, April 15, 2008

Just More of the Same

Just more of the same…

Dollar Overnight Libor Rate Jumps the Most in April, BBA Says: “The cost of borrowing in dollars overnight climbed the most in two weeks, according to the British Bankers' Association.

The London interbank offered rate, or Libor, for dollars climbed 27 basis points, to 2.67 percent today, the BBA said. The three-month rate rose less than a basis point, to 2.72 percent.

The three-month pound rate was little changed at 5.93 percent. The comparable euro rate gained less than 1 basis point to 4.76 percent.”

U.S. Foreclosures Jump 57% as Homeowners Walk Away (Update2): “U.S. foreclosure filings jumped 57 percent and bank repossessions more than doubled in March from a year earlier as adjustable mortgages increased and more owners gave up their homes to lenders.

More than 234,000 properties were in some stage of foreclosure, or one in every 538 U.S. households, Irvine, California-based RealtyTrac Inc., a seller of default data, said today in a statement. Nevada, California and Florida had the highest foreclosure rates. Filings rose 5 percent from February.

About $460 billion of adjustable-rate loans are scheduled to reset this year, according to New York-based analysts at Citigroup Inc. Auction notices rose 32 percent from a year ago, a sign that more defaulting homeowners are “simply walking away and deeding their properties back to the foreclosing lender” rather than letting the home be auctioned, RealtyTrac Chief Executive Officer James Saccacio said in the statement.

About 2.5 million foreclosed properties will be on the market this year and in 2009, Lehman Brothers Holdings Inc. analysts led by Michelle Meyer said in an April 10 report. U.S. home price declines will probably double to a national average of 20 percent by next year, with lower values most likely in metropolitan areas in California, Florida, Arizona and Nevada, mortgage insurer PMI Group Inc. said last week in a report.

Borrowers who owe more on their mortgages than their homes are worth may be buffeted by increasing job losses in a “very substantial recession,” Rosen said. About 8.8 million borrowers had home mortgages that exceeded the value of their property, Moody's said last week.

Bank seizures climbed 129 percent from a year earlier, according to RealtyTrac, which has a database of more than 1 million properties and monitors foreclosure filings including defaults notices, auction sale notices and bank repossessions. March was the 27th consecutive month of year-on-year monthly foreclosure increases. In February, foreclosure filings rose 60 percent.”

“We're not near the bottom of this at all. The foreclosure process will accelerate throughout the year.” -Kenneth Rosen, chairman of Rosen Real Estate Securities LLC

“At least 2 million jobs will be lost because of this recession, so we'll get a cumulative negative spiral. A normal recession is 10 months. We think this one may be twice as long.” -Kenneth Rosen, chairman of Rosen Real Estate Securities LLC

U.S. Producer Prices Climbed Almost Twice as Much as Forecast: “Prices paid to U.S. producers rose almost twice as much as forecast in March, reflecting higher fuel and food costs that threaten a pickup in inflation.

The 1.1 percent gain followed a 0.3 percent increase in the prior month, the Labor Department said today in Washington. So- called core producer prices that exclude fuel and food increased 0.2 percent, as forecast.

Rising raw-material costs are hurting profits as slowing demand makes it difficult for companies to pass increases on to consumers. The need to avert a deeper economic slump will prompt Federal Reserve policy makers to lower the benchmark interest rate again this month even as inflation accelerates.”

“Cost pressures are building and will continue to build for a few quarters before they recede. That means margins will get crimped and profits will shrink. The Fed will cut rates again.” -Michael Gregory, a senior economist at BMO Capital Markets in Toronto

Being a financial ninja and all, I just have to drop kick Michael Gregory; senior economic or not. So let me get this straight, higher inflation which is reflected in rapidly rising input costs will lay the smack-down on profits. So far so good. THEREFORE, the Fed will have to cut again? WTF? More cuts will result in further declines in the dollar, which will therefore result in higher or stable commodity prices. This in turn means inflation pressures WON’T recede.

10%! Hahaha.. That isn’t supposed to happen in first world economies. Then again, maybe first world status is about to be a thing of the past…

“So far this year, wholesale costs are up 10.2 percent at an annual pace compared with 8.4 percent at the same time last year. The core rate has increased at a 5 percent annual pace compared with 2 percent in the first three months of 2007.”

The US dollar (USD Index) has begun to consolidate after significant declines. Expect the USD to digest these recent declines before attempting another larger move. A break about the $73.00 area would change the picture significantly. A break below the $71.00 area would result in more of the same, namely: Resumption of the commodity rally.

New records in crude… $113… like it was nothing. Uh oh. Something snapped somewhere. No es bueno.

Crude is blowing through new highs pre-market even as the dollar rallies... (Spread traders that are short oil and long gold are getting squeezed out. So says the word on the street.)

Prices pulled back and tested the $100 mark twice before busting up and through the $110 area. Prices could easily gravitate towards 'nice round numbers' like $115 and $120 because there really is no other reference point in this kind of speculative blow out. There are a few Fibonnacci projections around $114.82 and $117.86.

Commodity price strength will ANNIHILATE the already MORTALLY wounded U.S. economy... Strangely, equities seem to be fine with that...


Anonymous said...

I love your site and specifically your last comment about equities... I think something smell in NY'ville. Could the PPT be holding the market up?? If so, how damn long can this continue? Are we at the state where we government totally controls the "free" markets? If so, I'm getting out fast!!!

Anonymous said...

So let me get this straight ... you think oil can still move up ... or is your take that it will correct like gold recently did?

Ben Bittrolff said...

Oil can move up on pure momentum here. There is nothing in place to stop it. Hot money is moving in because 'its the only thing working right now'.

It will correct though... and probably soon. Notice how the CAD and other commodity currencies haven't been rallying with crude the way the have in the past?

Anonymous said...

I guess there is money to be made then if you have the balls to go short crude... any predictions on how far it can "correct"?

Great blog BTW - one of my daily reads. Gartman now has some competition...

Anonymous said...

Looks like gold all over again. Huge analyst coverage at $1000/oz then tank to $900. Is oil setting up for the same fall? Hmmm

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