Good afternoon everyone
Just a quick update here on the data this morning. The jobs number was terrible. Here it is from Bloomberg:
"Sept. 5 (Bloomberg) -- The U.S. lost more jobs than forecast in August and the unemployment rate climbed to a five- year high of 6.1 percent, a sign that the economic slowdown is worsening two months before Americans elect their next president.
Payrolls fell by 84,000 in August, and revisions added another 58,000 to job losses for the prior two months, the Labor Department said today in Washington. The increase in the jobless rate sent the misery index, which adds unemployment to inflation, to 11.7 percent, the highest level since 1991.
The deteriorating labor market raises the likelihood the Federal Reserve will postpone any increase in interest rates until next year, futures trading shows. Today's figures increase the risk that President George W. Bush will become the first president since Richard Nixon to oversee two recessions, and may hurt fellow Republican John McCain's campaign to succeed him.
``It certainly increases the probability that we really are in a recession,'' William Poole, former president of the Federal Reserve Bank of St. Louis"
Analysts had projected that the unemployment rate would stay at 5.7%. Nice call! NOT. My friends, things are worsening at an alarming rate. The market is trying to rally from this morning lows but I doubt it holds. I wouldn't surprised to see us pull back again this afternoon. There is simply no catalyst out there to rally equities. All of these rallies are turning out to be nothing but bounces as we slide deeper into the abyss.
Many are trying to play a bounce on the short term theory that we are oversold at these levels.
Hideous Mortgage Update
The Mortgage Bankers Association released new foreclosure numbers today. Overdue loans reached 6.41% which was an all time high:
"Sept. 5 (Bloomberg) -- Foreclosures accelerated to the fastest pace in almost three decades during the second quarter as interest rates increased and home values fell, prompting more Americans to walk away from homes they couldn't refinance or sell.
New foreclosures increased to 1.19 percent, rising above 1 percent for the first time in the survey's 29 years, the Mortgage Bankers Association said in a report today. The total inventory of homes in foreclosure reached 2.75 percent, almost tripling since the five-year housing boom ended in 2005. The share of loans with one or more payments overdue rose to a seasonally adjusted 6.41 percent of all mortgages, an all-time high, from 6.35 percent in the first quarter.
The share of new foreclosures on prime ARMs was 1.82 percent, triple the 0.58 percent in the year-earlier quarter, and the total foreclosure inventory was 4.33 percent, up from 1.29 percent, the report said. The share of seriously delinquent prime ARMs was 6.78 percent, rising from 2.02 percent a year ago."
I don't know what to say here folks. I am speechless. these numbers are atrocious. The fact that prime borrowers are starting to roll over means death to Wall St. if this trend continues. Prime borrowers are not supposed to fail folks! They are now getting foreclosed on at triple the ratefrom a year ago.
This tells me that prime borrowers were as stupid as the subprime borrowers. They can't afford what they bought and now they are starting to lose their jobs.
I really don't know how this story ends folks. Things are deteriorating at a much faster rate than I expected. Foreclosure inventory is exploding which is going to continue to push home prices down.
This is looking more and more like a death spiral to me until houses fall all the way back to levels where people can buy them using the current lending standards. I am guessing in the bubble areas this may be a 50% decline peak to trough.
Some areas like Miami might see even bigger declines. I read a piece yesterday explaining that Miami now has a 5 year inventory of condos based on current sales levels.
Someone needs to start finding solutions to this crisis. We are getting close to the point where any reform is going to be too late to stop this train wreck. The government must end the smoke and mirror game on Wall St. immediately, and come up with a solution to this crisis.
A collapse is imminent if something isn't done. I hate to say it but Bill Gross is right in some aspects of his financial tsunami predictions.
I am concerned about the financial system folks. We may end up having to rebuild it from scratch.
Lets hope we find away out of this.