Friday, September 5, 2008

Unemployment rises to 6.1%

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"

Quick Take:

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.

Prime Mortgages

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."

Final Take:

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.

Bottom Line:

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.

1 comment:

Jeff said...

The masses are getting angry. Expect more of this stuff as the crisis worsens:
"Sep 4, 2008 12:12 am US/Pacific

Anna Werner SAN FRANCISCO (CBS 5) ¯ A San Francisco Wachovia branch was under siege Wednesday afternoon by people on the verge of losing their homes. Those people accuse the bank of giving them mortgages that the bank knew they couldn't afford. Wachovia is the owner of the former Oakland-based World Savings, a bank that CBS 5 has been investigating for months.

The bank is one of the Bay Area's largest, but one that advocates say repeatedly refuses to modify loans and help keep customers in their homes.

A CBS5 investigation revealed a pattern of loans to elderly minority homeowners in Oakland and other cities, loans many now say they didn't understand, and could never afford.

One of those people is 81-year-old Nell Walker of San Francisco, whose family said in 2006 received a "Pick-A-Pay" loan for over $300,000 even though she's on a fixed retirement income.

"I think a lot of it was misleading and it wasn't explained," said Walker.

"They gave it to my mom and to this day we still don't know how. She has never worked a day in her life," said her daughter Jacqueline Phillips.

Now the minimum payment is about to go up, and Walker may lose her home of over 40 years. "It's awful! I'm 81 years old," she said.

"We got fooled into loans that we couldn't understand, and I think they need to show a little good faith and renegotiate our loans," said her daughter.

Phillips, who belongs to community organizing group Acorn, took her frustrations directly to the teller counter at this downtown Wachovia office.

The demand: that the branch fax a letter to Wachovia's new CEO. "We would like you to fax this to your CEO," she told the branch manager.

"We will not," he replied. As she later put it to us: "Just like Wachovia, that's what you get. The brushoff."

A few hours later the bank did agree to fax the letter, which calls for Wachovia to renegotiate the protesters' loans."


"Sep 4, 2008 12:12 am US/Pacific

Anna Werner SAN FRANCISCO (CBS 5) ¯ A San Francisco Wachovia branch was under siege Wednesday afternoon by people on the verge of losing their homes. Those people accuse the bank of giving them mortgages that the bank knew they couldn't afford. Wachovia is the owner of the former Oakland-based World Savings, a bank that CBS 5 has been investigating for months.

The bank is one of the Bay Area's largest, but one that advocates say repeatedly refuses to modify loans and help keep customers in their homes.

A CBS5 investigation revealed a pattern of loans to elderly minority homeowners in Oakland and other cities, loans many now say they didn't understand, and could never afford.

One of those people is 81-year-old Nell Walker of San Francisco, whose family said in 2006 received a "Pick-A-Pay" loan for over $300,000 even though she's on a fixed retirement income.

"I think a lot of it was misleading and it wasn't explained," said Walker.

"They gave it to my mom and to this day we still don't know how. She has never worked a day in her life," said her daughter Jacqueline Phillips.

Now the minimum payment is about to go up, and Walker may lose her home of over 40 years. "It's awful! I'm 81 years old," she said.

"We got fooled into loans that we couldn't understand, and I think they need to show a little good faith and renegotiate our loans," said her daughter.

Phillips, who belongs to community organizing group Acorn, took her frustrations directly to the teller counter at this downtown Wachovia office.

The demand: that the branch fax a letter to Wachovia's new CEO. "We would like you to fax this to your CEO," she told the branch manager.

"We will not," he replied. As she later put it to us: "Just like Wachovia, that's what you get. The brushoff."

A few hours later the bank did agree to fax the letter, which calls for Wachovia to renegotiate the protesters' loans."

"Sep 4, 2008 12:12 am US/Pacific

Anna Werner SAN FRANCISCO (CBS 5) ¯ A San Francisco Wachovia branch was under siege Wednesday afternoon by people on the verge of losing their homes. Those people accuse the bank of giving them mortgages that the bank knew they couldn't afford. Wachovia is the owner of the former Oakland-based World Savings, a bank that CBS 5 has been investigating for months.

The bank is one of the Bay Area's largest, but one that advocates say repeatedly refuses to modify loans and help keep customers in their homes.

A CBS5 investigation revealed a pattern of loans to elderly minority homeowners in Oakland and other cities, loans many now say they didn't understand, and could never afford.

One of those people is 81-year-old Nell Walker of San Francisco, whose family said in 2006 received a "Pick-A-Pay" loan for over $300,000 even though she's on a fixed retirement income.

"I think a lot of it was misleading and it wasn't explained," said Walker.

"They gave it to my mom and to this day we still don't know how. She has never worked a day in her life," said her daughter Jacqueline Phillips.

Now the minimum payment is about to go up, and Walker may lose her home of over 40 years. "It's awful! I'm 81 years old," she said.

"We got fooled into loans that we couldn't understand, and I think they need to show a little good faith and renegotiate our loans," said her daughter.

Phillips, who belongs to community organizing group Acorn, took her frustrations directly to the teller counter at this downtown Wachovia office.

The demand: that the branch fax a letter to Wachovia's new CEO. "We would like you to fax this to your CEO," she told the branch manager.

"We will not," he replied. As she later put it to us: "Just like Wachovia, that's what you get. The brushoff."

A few hours later the bank did agree to fax the letter, which calls for Wachovia to renegotiate the protesters' loans."

"Sep 4, 2008 12:12 am US/Pacific

Anna Werner SAN FRANCISCO (CBS 5) ¯ A San Francisco Wachovia branch was under siege Wednesday afternoon by people on the verge of losing their homes. Those people accuse the bank of giving them mortgages that the bank knew they couldn't afford. Wachovia is the owner of the former Oakland-based World Savings, a bank that CBS 5 has been investigating for months.

The bank is one of the Bay Area's largest, but one that advocates say repeatedly refuses to modify loans and help keep customers in their homes.

A CBS5 investigation revealed a pattern of loans to elderly minority homeowners in Oakland and other cities, loans many now say they didn't understand, and could never afford.

One of those people is 81-year-old Nell Walker of San Francisco, whose family said in 2006 received a "Pick-A-Pay" loan for over $300,000 even though she's on a fixed retirement income.

"I think a lot of it was misleading and it wasn't explained," said Walker.

"They gave it to my mom and to this day we still don't know how. She has never worked a day in her life," said her daughter Jacqueline Phillips.

Now the minimum payment is about to go up, and Walker may lose her home of over 40 years. "It's awful! I'm 81 years old," she said.

"We got fooled into loans that we couldn't understand, and I think they need to show a little good faith and renegotiate our loans," said her daughter.

Phillips, who belongs to community organizing group Acorn, took her frustrations directly to the teller counter at this downtown Wachovia office.

The demand: that the branch fax a letter to Wachovia's new CEO. "We would like you to fax this to your CEO," she told the branch manager.

"We will not," he replied. As she later put it to us: "Just like Wachovia, that's what you get. The brushoff."

A few hours later the bank did agree to fax the letter, which calls for Wachovia to renegotiate the protesters' loans."

"Sep 4, 2008 12:12 am US/Pacific

Anna Werner SAN FRANCISCO (CBS 5) ¯ A San Francisco Wachovia branch was under siege Wednesday afternoon by people on the verge of losing their homes. Those people accuse the bank of giving them mortgages that the bank knew they couldn't afford. Wachovia is the owner of the former Oakland-based World Savings, a bank that CBS 5 has been investigating for months.

The bank is one of the Bay Area's largest, but one that advocates say repeatedly refuses to modify loans and help keep customers in their homes.

A CBS5 investigation revealed a pattern of loans to elderly minority homeowners in Oakland and other cities, loans many now say they didn't understand, and could never afford.

One of those people is 81-year-old Nell Walker of San Francisco, whose family said in 2006 received a "Pick-A-Pay" loan for over $300,000 even though she's on a fixed retirement income.

"I think a lot of it was misleading and it wasn't explained," said Walker.

"They gave it to my mom and to this day we still don't know how. She has never worked a day in her life," said her daughter Jacqueline Phillips.

Now the minimum payment is about to go up, and Walker may lose her home of over 40 years. "It's awful! I'm 81 years old," she said.

"We got fooled into loans that we couldn't understand, and I think they need to show a little good faith and renegotiate our loans," said her daughter.

Phillips, who belongs to community organizing group Acorn, took her frustrations directly to the teller counter at this downtown Wachovia office.

The demand: that the branch fax a letter to Wachovia's new CEO. "We would like you to fax this to your CEO," she told the branch manager.

"We will not," he replied. As she later put it to us: "Just like Wachovia, that's what you get. The brushoff."

A few hours later the bank did agree to fax the letter, which calls for Wachovia to renegotiate the protesters' loans."