Home-Equity Loss Rate Rises to Most Since 2001

Bloomberg.com: Bonds: "Sept. 27 (Bloomberg) -- The rate of losses on U.S. home- equity loans in June reached its worst level since 2001 because of more foreclosures, Moody's Investors Service said.
The loss rate climbed to 1.05 percent of total loans from 0.8 percent in June 2005, Moody's said in a statement yesterday. The amount of loans with payments more than 60 days late rose to 6.76 percent from 5.86 percent. There were $551.1 billion of securities backed by home-equity loans outstanding at the end of last year, according to the Bond Market Association.
Destruction from Hurricane Katrina in Louisiana, Mississippi and Alabama last year along with layoffs in the Detroit area by carmakers Ford Motor Co. and General Motors Corp. this year have left more people unable to pay bills, said Michael Youngblood, a Friedman Billings Ramsey & Co. analyst.
``We have seen much greater weakness in the rust belt cities than anticipated,'' Youngblood said in an interview today.
The share of mortgages entering foreclosure at the end of June was the highest since the fourth quarter of 2004, according to a Sept. 13 report by the Mortgage Bankers Association in Washington. And prices of existing homes fell last month for the first time in 11 years as sales dipped to the lowest level since early 2004, the National Association of Realtors said yesterday. "

PAKISTAN: MULLAH OMAR BEHIND PEACE DEAL BETWEEN GOVT. AND TALIBAN, REPORT

PAKISTAN: MULLAH OMAR BEHIND PEACE DEAL BETWEEN GOVT. AND TALIBAN, REPORT: "London, 25 Sept. (AKI/DAWN) - The fugitive Taliban commander Mullah Omar has emerged as the key player behind the controversial peace deal between the Pakistani government and the pro-Taliban rebels in the tribal region of Waziristan. The online edition of the British daily Telegraph reported that the Taliban’s one-eyed spiritual leader, who has a 10 million dollars price on his head for refusing to hand over Osama bin Laden after the September 11 attacks, signed a letter explicitly endorsing the recently announced truce."

U.S. real estate crash could cause global ripples

globeandmail.com : U.S. real estate crash could cause global ripples: "VANCOUVER -- The United States real estate market has entered a period of 'unprecedented volatility,' and banks, insurance providers, and government housing agencies should brace for global ripple effects, Yale economist and author Robert Shiller told a conference yesterday.
'There is a serious risk of worldwide recession coming up in the next couple of years because of the turning of the real estate market,' said Mr. Shiller, speaking at the annual congress of the International Union for Housing Finance (IUHF) in Vancouver."

Global Growth Downgrades Continue

BCA Research - Independent Investment Research Since 1949: "The ZEW survey of analyst expectations for the euro area and the global economy slipped again in September. The global indicator is now near past cyclical lows, with the U.S. component notably weak. The euro area measure also continues to fall, which is in marked contrast to other surveys that indicate momentum remains strong. While the global economy is clearly cooling, the ZEW measures overstate the pace of the deceleration. However, the weakness of the euro zone reading calls into question the ability of the region to de-couple from U.S. and global trend. Bottom line: the developing global growth slowdown will be broad-based, with all major regions moderating. "

SAC's Cohen sees risk of mass hedge fund exit: WSJ | Business News | Reuters.com

SAC's Cohen sees risk of mass hedge fund exit: WSJ | Business News | Reuters.com: "NEW YORK (Reuters) - Steven Cohen, the billionaire founder of SAC Capital Advisors, said in an interview with the Wall Street Journal that there may eventually be a sharp fall in the stock market, exacerbated by hedge funds crowding into similar shares.
In the interview, published on Sunday, the 50-year-old head of one of the world's most closely watched investment firms also said he was now making bigger bets and holding stocks for a longer time.
'It's hard to find ideas that aren't picked over, and harder to get real returns and differentiate yourself,' Cohen said in the interview. 'We're entering a new environment. The days of big returns are gone.'
The highly secretive investor, whose net worth Forbes magazine estimates to be around $2.5 billion, was also quoted as saying there were risks in burgeoning hedge funds investing in the same stocks.
'There will be a real decline that may devastate hedge funds that have crowded into the same stocks,' he said, adding that he was not worried about that happening this year.
'Hedge funds are bigger than they used to be. Their positions are bigger,' he said. 'I worry that if everyone were to sell, could we get out?'
© Reuters 2006. All Rights Reserved."

Situation Called Dire in West Iraq - washingtonpost.com

Situation Called Dire in West Iraq - washingtonpost.com: "The chief of intelligence for the Marine Corps in Iraq recently filed an unusual secret report concluding that the prospects for securing that country's western Anbar province are dim and that there is almost nothing the U.S. military can do to improve the political and social situation there, said several military officers and intelligence officials familiar with its contents.
The officials described Col. Pete Devlin's classified assessment of the dire state of Anbar as the first time that a senior U.S. military officer has filed so negative a report from Iraq."

Pollution costs China 511.8 billion yuan in 2004

Pollution costs China 511.8 billion yuan in 2004: "BEIJING -- Environmental pollution caused China to suffer 511.8 billion yuan (about US$64 billion) in economic losses in 2004, which amounted to 3.05 percent of GDP that year, according to a government research report released on Thursday.
It is China's first research report on China's 'green national economy', also called 'green GDP', which is calculated by subtracting the cost of natural resources used and the cost of environmental degradation from the GDP.
'This marks only the beginning of our efforts in Green GDP calculation. Our formula is still not complete and we have to keep working hard to improve it,' said Pan Yue, deputy director of the State Environmental Protection Administration (SEPA), at a press conference in Beijing.
The report was jointly released by the SEPA and the National Bureau of Statistics.
The 'Green GDP' calculation system is based on the cost of using five kinds of natural resources - land, minerals, forest, water and fisheries - and the cost of two kinds of environmental degradation - environmental pollution and ecological damage. "

"Smoking gun" evidence uncovered in Ohio of massive vote fraud

Wayne Madsen Report - Home: "After the November 2004 presidential election, this editor reported on massive vote fraud, particularly in Ohio. The relevant articles are found here, here, here, and here. Sources within the U.S. Intelligence Community provided information on the financing -- via foreign funding sources, covert intelligence networks, and illegal pseudo-banking routes -- of programmers, election officials, and others to ensure that Bush and Cheney captured Ohio's critical 20 electoral votes.
Pursuant to a federal law that permits the destruction of ballots, including absentee ballots, 22 months after a federal election, ballots from the 2004 Ohio election were scheduled to be destroyed on Sept. 2, but the intervention of Columbus-based attorney Cliff Arnebeck and the New York-based Center for Constitutional Rights with the U.S. Court in Columbus resulted in a protective order being issued for ballots and voting records in all 88 Ohio counties. This decision upset the corrupt Ohio Republican Party and its gubernatorial standard bearer Kenneth Blackwell, the Secretary of State who helped engineer the 2004 electoral vote fraud coup in his state, who wanted to begin the document shredding process in Sept. 2. "

"Smoking gun" evidence uncovered in Ohio of massive vote fraud

Wayne Madsen Report - Home: "After the November 2004 presidential election, this editor reported on massive vote fraud, particularly in Ohio. The relevant articles are found here, here, here, and here. Sources within the U.S. Intelligence Community provided information on the financing -- via foreign funding sources, covert intelligence networks, and illegal pseudo-banking routes -- of programmers, election officials, and others to ensure that Bush and Cheney captured Ohio's critical 20 electoral votes.
Pursuant to a federal law that permits the destruction of ballots, including absentee ballots, 22 months after a federal election, ballots from the 2004 Ohio election were scheduled to be destroyed on Sept. 2, but the intervention of Columbus-based attorney Cliff Arnebeck and the New York-based Center for Constitutional Rights with the U.S. Court in Columbus resulted in a protective order being issued for ballots and voting records in all 88 Ohio counties. This decision upset the corrupt Ohio Republican Party and its gubernatorial standard bearer Kenneth Blackwell, the Secretary of State who helped engineer the 2004 electoral vote fraud coup in his state, who wanted to begin the document shredding process in Sept. 2. "

If You Can't Trust a Poll

White Collar Crime Prof Blog: March 7, 2005 - March 13, 2005: "Everyone reads reports about surveys and political polls as if they were gospel, but what if the pollster is taking liberties with the data? An indictment returned in the District of Connecticut presents that very scenario involving DataUSA Inc . (now called ViewPointUSA Inc.), which has been charged along with its owner (Tracy Costin) and a manger (Darryl Hylton) with conspiracy and wire fraud for providing political and business clients with falsified data. The indictment alleges that employees were told to speak with cats and dogs for information. The company's website (www.datausainc.com) has the following statement: 'DataUSA upheld the highest standards in data collection as demonstrated in the excellence of our data. DataUSA's predictions of voting behavior and consumer behavior routinely reflected to be within 1% to 2% of actual behavior. We are proud of the quality data collected and want to thank you for teaming with DataUSA and for your support over the years.'
A press release by the U.S. Attorney described the allegations:
According to the Indictment, DATAUSA INC. (“DataUSA”) conducts surveys and political polls for numerous clients throughout the United States. The surveys or polls are conducted through the use of computers and telephones. COSTIN, the owner and director of operations for DataUSA, was charged with conspiracy to engage and engaging in a wire fraud scheme to defraud clients of DataUSA by falsifying and fabricating survey results. According to the Indictment, both COSTIN and HYLTON, a DataUSA manager, and others not named in the indictment, engaged in a scheme to defraud by unilaterally instructing DataUSA employees to alter survey data and to fabricate surveys and otherwise falsify their contents"

Victims of Foreclosure, Predatory Mortgages on the Rise California Foreclosure Attorney Cites Reasons and Troubling Statistics

Victims of Foreclosure, Predatory Mortgages on the Rise California Foreclosure Attorney Cites Reasons and Troubling Statistics: "San Diego, CA (PRWEB) September 7, 2006 -- According to San Diego County records, mortgage defaults have skyrocketed an astounding 219% since the same time last year. In July 2005 there were 345 defaults. In July 2006 there were 756 defaults, a first step toward a lender’s foreclosure on a property. In July 2005 there were 91 trustee sales of homes.

In the same month this year there were 299 trustee sales, more than three times the year before. California foreclosure attorney John F. Brady, who specializes in rescuing homeowners from mortgages in default, credits the rise in defaults and trustee sales to the influx of inexperienced real estate agents, aggressive new mortgage brokers, naïve first time buyers, little or no money down below-market adjustable interest rate loans and predatory mortgage lending practices.

According to HUD and the Center for Responsible Lending, a national watchdog organization, predatory mortgage lending involves a wide array of abusive practices including excessive fees, abusive prepayment penalties, kickbacks to brokers, loan flipping, unnecessary products, mandatory arbitration, and steering & targeting. “You would think mostly low income folks would be the victim’s of predatory mortgages, says Brady,“however recent studies show that three out of four loans were made to borrowers with middle and upper incomes.” "

CPAs Pessimistic about Economy

CPAs Pessimistic about Economy - - CFO.com: "More than half of certified public accountants polled by the American Institute of Certified Public Accountants, many of them CFOs or controllers, are pessimistic about the state of the U.S. economy. The opinions of 54 percent of accountants polled ranged from neutral to very pessimistic. That's up from 41 percent expressing similar sentiments in December 2005, the last time the AICPA conducted this kind of survey.
'The lack of enthusiasm for the state of the economy among these CPA executives seems to mirror that of consumers in general,' said John Morrow, AICPA Vice President for members in business and industry, in a statement."

US: Bullish or Bearish?

Morgan Stanley: "On balance, I remain constructive on the structural prognosis while I have turned more pessimistic on the cyclical outlook.
Four months ago, I dared to pen my first constructive piece on the global macro outlook in years (see my 1 May dispatch, “World on the Mend”). Yet recently, I have warned of the mounting downside risks to world economic growth in 2007 (see my 14 August dispatch, “Not Much Fizz Left in the Global Economy”). How do I reconcile these seemingly contradictory points of view?
My optimistic assessment was primarily a call on the global policy architecture -- the structural framework that governs the cross-border interplay between national economies and world financial markets. I was encouraged because the so-called stewards of globalization finally seemed to be taking the threat of mounting global imbalances seriously. The 22 April meetings of the G-7 and the IMF were watershed events -- singling out global imbalances as an increasingly worrisome threat to sustainable growth in the world economy. The IMF introduced a new paradigm of surveillance and consultation that moved from a single-country to a multilateral framework. I drew added encouragement from pro-consumption rumblings in China that pointed to a rebalancing of that economy away from excess dependence on exports and fixed investment. For years, I worried that the authorities were asleep at the switch as an increasingly unbalanced world veered toward a highly disruptive strain of global rebalancing. With global policy makers finally waking up to the threat, I argued that it made sense to reduce the odds of a crisis endgame"

mish's latest

Thursday, August 31, 2006
On the Cusp
The Detroit Free Press has a Michigan Census Snapshot that I would like to share.

In a dramatic sign of its ailing economy, Michigan's household income dropped, more children joined the ranks of poor people and the number of people living below the poverty level jumped in the suburbs, according to census figures released Tuesday.

The figures show Michigan's median household income fell more than any other state's during the last six years. It was $46,039 in 2005 -- 12% less than what it was in 1999 when adjusted for inflation. None of the 28 counties and 21 municipalities for which data were reported showed a rise in median household income between 1999 and 2005, the estimates show.

The news was grim in other areas, too. In 2005:

• 19% of children in Michigan lived in poverty, up from six years ago.

• Almost a third of the state's African Americans lived below the poverty level.

• Detroit remained one of the poorest big cities in the country with almost a third of its residents living below the poverty line.

• Cities and townships posted drops in median household incomes ranging from 24% to 6% and poverty rates increased in all but three cities.

"I hate to superimpose worse news on top of bad news, but this is not a cycle," said David Littman, a senior economist for the Mackinac Center for Public Policy, a Midland-based think tank. "We're in a secular decline here in Michigan. As the economy slows nationally, we're going to sink much farther relative to the other states. We've only just begun.

"We're going to see Michigan sink to levels that no one has ever seen. We're going to be looking at the highest unemployment rates in the nation for the next five to 10 years."

Following is a chart showing the income drop of Michigan vs. other states.



The next two charts show how various counties in Michigan have fared.





Thanks to the Detroit Free Press for all of the above charts.
More statistics and a better chart can be found in this PDF.

I believe Michigan is a harbinger of times to come for much of the US. So do a few others.

Regli on Silicon Investor writes "Michigan will be called unrepresentative until people realize in a few years to a decade that it is not. The only advantage it has is that it came first."

John Vosilla on Silicon Investor is asking "Is Florida going to follow in Michigan's footsteps?"

Vosilla was referring to the St. Petersburg Times article Economic gloom tightens grip

Battered by fuel prices, a housing slump and storm fears, Floridians are less confident in the economy than at any time since 1993.

Floridians' confidence in the economy plunged this month to its lowest level in 13 years, University of Florida economists said Tuesday.

The chill in the housing market, higher interest rates and fuel prices appear to be taking their toll. National confidence numbers also fell in August, but not as much as they did in Florida.

The Florida Consumer Confidence Index fell 11 points to 76, while the national index, compiled by the Conference Board, went from 107 to 99.6.

The Florida drop is very similar to the one that occurred last September in the wake of Hurricane Katrina, only this time there was no hurricane to blame. Chris McCarty, director of survey research at the University of Florida's Bureau of Economic and Business Research, thinks the changed outlook for housing is at least partly responsible.

"Florida is in a position to really be affected by a decline in housing," McCarty said.

"There are a lot of overvalued markets in Florida, and there are a lot of risky loans, some of which are going to readjust right about now," he said. "Also, a lot of employment increases over the last few years have been related to housing."

When projects get canceled or put on hold, that has a direct impact on jobs and a secondary impact on sales of appliances and furniture, he said.

Many consumers also are feeling the pinch of higher energy prices at the gas pump and in their utility bills.

"The feedback I get from people when they cancel their appointments at the last minute is that they're broke," said Valerie Bohr, 41, who owns Brilliance Color and Hairstyles in Largo. "Just this week I had two people tell me they got electric bills over $400. People can't afford to come in and get their hair done if they're working to pay an electric bill like that."

She worries about being able to keep her salon open.

Hmmm. People can't afford to come in and get their hair done if they're working to pay an electric bill like that." She worries about being able to keep her salon open.

Translation: Regardless of what it costs to run that salon, Brilliance Color and Hairstyles in Largo simply is in no position to even attempt to raise prices.

Bennigan's restaurant dropped the price of their half pound burger from $7.99 to $4.99.
That's a drop of $3 or 37.54 percent! That can't happen can it? At least that is what I am told with rising input costs on food and energy. OK, Bennigan's is just one restaurant, big deal. No, it's not just one restaurant, and yes it is indeed a very big deal. It is all about discretionary spending and a slow change from consumption to saving.

I talked about that idea recently (along with Kevin Depew) and was mainly scoffed at judging by the blog responses to The Psychology of Deflation.

The facts are what they are and here they are:

* Prices of homes are dropping.
* Land prices are dropping.
* Prices at restaurant are dropping.
* Prices at some nail salons are dropping.
* Now we see that hair salon owners might not be able to stay in business.

Hey, what's the problem?
Concrete prices rising, energy prices rising, copper prices rising?
The solution is simple: Just raise your prices!

I am told that "must" happen.

Meanwhile I watch the opposite happen.
I talked about PPI prices in Intermediate vs. Finished PPI.

Input prices rising?
What's the problem?
Just raise output prices.
It has to happen. Right?
Well why isn't it?

Am I declaring victory in my call for deflation?
No way. I will instead sit back (probably for quite some time) and watch the inflationists explain away things that "can not happen" that are happening.

Here are a couple more facts to consider.

1. The $CRB just busted a 5 year trendline.
2. Changes in secular trends do not change easily or overnight.

Actually I think we are about to see a cyclical change in the $CRB but a secular change in regards to consumption and savings. The implications of those two points will make the Fed's problem all the more difficult.

Will the Fed counteract? Yes they will. Indeed, the reaction to the next few moves by the Fed over the next year or so will be the proof of the pudding. That makes it too early to declare victory even as all sign are currently pointed "down town".

We will see what "Helicopter Drop" Bernanke has up his sleeves (or not).
We are now at an economic inflection point. There may be a headfake at this point in either direction.

I will offer this prediction.
It is an easy one, yet one that few believe.
Many more states will follow the path of Michigan.
We are indeed on the cusp..... of deflation.
It is ironic that the Fed unleashed the very beast they feared by fighting it too early, at a time when there simply was no threat. Now that the threat is real, no one sees it.