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Thursday, May 28, 2009

A Quick Green Shoots Check

FN: There can be no "green shoots" until foreclosure numbers first stabilize and then start falling. The problem is that this can only occur when unemployment rates first stabilize and then start falling. Clearly this is not happening yet. Throw suddenly rising rates into the mix as the global bond markets shudder under the impossible burden of supporting a global quantitative easing campaign and it quickly becomes obvious that there really are no "green shoots" of recovery.

Mortgage Delinquencies Rise to Record on Job Losses (Update1): "Americans fell behind on their mortgages and banks seized homes at a record pace in the fourth quarter as unemployment rose to a 15-year high and real estate values tumbled.

Mortgage delinquencies increased to a seasonally adjusted 7.88 percent of all loans, the highest in records going back to 1972, the Mortgage Bankers Association said today. Loans in foreclosure rose to 3.30 percent, also an all-time high.

The U.S. real estate market lost $2.4 trillion in value last year, according to First American CoreLogic, and unemployment jumped to 6.9 percent in the fourth quarter, the highest since 1993. As the recession enters a second year, unemployment is becoming a major cause of delinquencies, said Jay Brinkmann, the Washington-based trade group’s chief economist.

“When it’s a loan structure issue, you can deal with that, but when it’s an unemployment issue, unless you go out and find them a job there’s not much you can do,” Brinkmann said in an interview. “Eventually that loan will go into foreclosure.”

The combined percentage of loans in foreclosure and at least one past due was 11.18 percent, the highest ever recorded by the Mortgage Bankers. The percentage of loans 60 days past due and 90 days or more past due all broke records set last quarter."

FN: The media loves to spin meaningless statistical noise into something with a silver lining. Jobless claims came in at 623 000. That is a reduction of 13 000 or about 2% from the 636 000 last week. Such a small change is well within the margin of error of this report. Regardless, weekly jobless claims in excess of 500 000 are a very bad thing, especially if they are prolonged.

U.S. Initial Jobless Claims Fall 13,000 to 623,000 (Update1): "Fewer Americans filed claims for unemployment benefits last week, a sign the biggest rounds of firings may be over.

Initial jobless claims fell by 13,000 to 623,000 in the week ended May 23, lower than forecast, from a revised 636,000 the prior week, according to Labor Department figures released today in Washington. The number of people collecting unemployment insurance rose to a record in the prior week for the 17th straight time, reflecting restrained hiring.

Fewer job losses reduce the risk that consumer spending, the biggest part of the economy, will falter, delaying the economic recovery projected for later this year. Still, companies will be reluctant to add workers and increase production until sales show sustained gains."

FN: Durable goods are supposed to be part of the "green shoots" theory. This is what equities have rallied on... in anticipation of.

U.S. Durable-Goods Orders Hover Near 13-Year Low (Update2): " Orders for U.S. durable goods hovered near the lowest level in 13 years in April as demand for business equipment weakened, indicating that investment will be one of the last areas of the economy to recover.

Orders rose 1.9 percent from the previous month after a revised 2.1 percent drop in March that was more than twice as large as previously estimated, the Commerce Department said today in Washington. A rebound in automobile orders and a jump in defense spending spurred the gain in April.

Companies, which have record levels of spare capacity, will probably continue to trim spending on capital equipment such as computers until sales show sustained gains. The worst credit crisis since the Great Depression has prompted economists to scale back forecasts for growth in the second half of the year."


Unknown said...


I know this is off topic but could you comment on this morning's report U.S. crude oil inventories declined by some 5 + million barrels? I'm sure there is an explanation other than "green shoots" and I thought if anyone might be able to shed some light on the issue you could.


Anonymous said...

Will will this "crap" rally end?

Anonymous said...

Looks like the COMPX will lead us higher. Nice hammer and the 100ma has turned up.

Anonymous said...

yo john,
don't worry about the inventory numbers

Anonymous said...

Great article!

Before reading your article, I posted a similar response on the main page at

The cool thing is how we're so much in agreement on the reality of the facts.

- Vooch

Ben Bittrolff said...


I've got nothing insightful to add on the inventory draw, except that the actual levels are still near 'record highs'.

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Warm Regards Team