Fed sharply lowers forecasts, hints of rate cut - Nov. 19, 2008
WASHINGTON (AP) — The Federal Reserve on Wednesday sharply lowered its projections for economic activity this year and next, and signaled that additional interest rate reductions may be needed to help combat the worst financial crisis to jolt the country in more than a half-century.
With the economy forecast to lose traction, or even jolt into reverse, unemployment will move higher, the Fed predicted.
Facing the likelihood of “significant weakness” in the economy, some Fed officials suggested “additional policy easing could well be appropriate at future meetings,” according to documents from the Fed’s most recent closed-door deliberations on interest rate policy at the end of October.
Fed sharply lowers forecasts, hints of rate cut - Nov. 19, 2008.
Sorry, but when I read this report of the Fed’s Minutes, I had two main thoughts:
- I wonder what their thoughts are about the economy right now, including the GM/auto industry mess.
- I wonder what they are going to do when we get down to a 0% Fed Funds Rate.
No answers for those tonight, too much to do and not enough time to write it all tonight anyway.
More later.
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Fed sharply lowers forecasts, hints of rate cut - Nov. 19, 2008
Are we having a Happy Wednesday?
If you are, then one of two things:
1. Watch what Dr. Roubini says and your Happy Wednesday will turn into a sad Thursday.
2. Don’t watch and keep having a Happy Wednesday.
But remember, Dr. Roubini has a pretty consistently accurate track record when everyone (well almost everyone) has been saying that it’s not that bad.
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Are we having a Happy Wednesday?
Poll: Michigan voters hold management and labor responsible for auto industry crisis - Talking Politics - The Grand Rapids Press - MLive.com
Michigan voters put the onus on management, labor and government for the crisis confronting the U.S. auto industry in a poll (PDF link) released today.
North Carolina-based Public Policy Polling surveyed 600 likely voters here on Nov. 15 and found that 43 percent said management alone bears the blame, while 25 percent put the burden solely on the United Auto Workers.
Asked a more general way, some 92 percent think corporate executives share some responsibility, while 81 percent feel the same about the UAW and 72 percent felt that way about the government.
But even while respondents were harder on management, only 42 percent said they had an overall positive view of the UAW. In fact, 18 percent said they would be more likely to vote for a candidate backed by the UAW, while 39 percent said they would be less likely to do so.
The poll came out the same day that Mitt Romney argued that bankruptcy is the only way to save the U.S. automakers.
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S & P 500
thanks to Calculated Risk for the chart
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Mortgage Rates Update for November 19, 2009
Mortgage Rates have been updated.
Due to the lower CPI report and the lower housing starts that came out this morning, I’m recommending:
1 Day - Lock
15 Day - Lock
30 Day - Lock
Normally, those reports would push mortgage rates substantially lower than they are. However, there is a huge amount of volatility in the markets right now and that volatility and the concerns about the amount of government spending are keeping the rates higher than they should. I expect that to continue.
Post from: Straight Talk About Mortgages and Real Estate
Mortgage Rates Update for November 19, 2009
Housing starts fall to record-low level in October - MarketWatch
WASHINGTON (MarketWatch) - U.S. home builders reduced their starts of new homes by 4.5% in October, driving new construction to the lowest level since just after World War II, the Commerce Department estimated Wednesday.
Housing starts dropped to a seasonally adjusted annual rate of 791,000 in October, the slowest pace since similar records were first kept during the housing boom in the late 1940s.
Housing starts have now fallen 38% in the past year and are down about 70% from the peak in early 2006.
Building permits, which are typically less volatile than the starts data, fell 12% to a record-low seasonally adjusted annual rate of 708,000 in October, down 40% in the past year. Building permits for single-family homes, considered by many analysts as the most important number in the report, fell 14.5% to a 460,000 pace, the slowest in 26 years.
Housing starts fall to record-low level in October - MarketWatch.
Okay, a closer look at these numbers:
- Housing Starts are down 4.5% to the slowest pace since the WWII housing boom in the late 40’s.
- Starts are now down 70% since early 2006.
- Building permits fell 14.5% for single family homes, the lowest since I was a junior in high school.
These numbers reinforce a couple of things:
- The housing market continues to adjust to the new realities of today’s market.
- The pain isn’t done.
- The economy is in an ugly mood right now.
What do you think?
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Housing starts fall to record-low level in October - MarketWatch
Consumer prices fall record 1% on record energy drop - MarketWatch
U.S. consumer prices declined a record 1% in October, seasonally adjusted, as energy prices fell a record 8.6%, the Labor Department reported Wednesday. Data on the overall CPI date back to 1947, and the energy data go back to 1957.
Meanwhile, food prices in October rose 0.3%, the smallest gain since May.
The core consumer price index - which excludes food and energy prices - fell 0.1%, the first time there’s been a decline in the core rate since 1982.
Economists surveyed by MarketWatch had expected the overall October CPI to fall 0.9%, and for the core to rise 0.1%.
Consumer prices fall record 1% on record energy drop - MarketWatch.
Okay, let’s look at this step by step:
1. The overall CPI dropped 1% - mainly because energy fell 8.6%. No surprises there, except for the fact that it’s the largest drop on record and they’ve been keeping the records since my Dad was 10.
2. Food prices rose .3% but that’s the smallest gain since May.
3. Core consumer prices (without food and energy) dropped .1%. Normally this would be a market moving event and so far this morning, the 10 year bond is plummeting. Time will tell if mortgage rates will follow or whether other issues will counteract that with mortgages.
Stay tuned, could be an interesting day!
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Consumer prices fall record 1% on record energy drop - MarketWatch
Let Detroit Go Bankrupt - by Mitt Romney
IF General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed.
Detroit needs a turnaround, not a check….
I have several prescriptions for Detroit’s automakers…
First, their huge disadvantage in costs relative to foreign brands must be eliminated. That means new labor agreements to align pay and benefits to match those of workers at competitors like BMW, Honda, Nissan and Toyota……
Second, management as is must go. New faces should be recruited from unrelated industries — from companies widely respected for excellence in marketing, innovation, creativity and labor relations.
……The need for collaboration will mean accepting sanity in salaries and perks. At American Motors, my dad cut his pay and that of his executive team, he bought stock in the company, and he went out to factories to talk to workers directly. Get rid of the planes, the executive dining rooms — all the symbols that breed resentment among the hundreds of thousands who will also be sacrificing to keep the companies afloat…..
But don’t ask Washington to give shareholders and bondholders a free pass — they bet on management and they lost.
The American auto industry is vital to our national interest as an employer and as a hub for manufacturing. A managed bankruptcy may be the only path to the fundamental restructuring the industry needs. It would permit the companies to shed excess labor, pension and real estate costs. The federal government should provide guarantees for post-bankruptcy financing and assure car buyers that their warranties are not at risk.
In a managed bankruptcy, the federal government would propel newly competitive and viable automakers, rather than seal their fate with a bailout check.
Op-Ed Contributor - Let Detroit Go Bankrupt - NYTimes.com.
All I’m going to say about this is two things:
1. Go to the link above and read the entire article. He lays out a convincing case.
2. When the Republican primary was held in Michigan, I voted for Mitt Romney because I felt he had the type of business sense that we need for this type of economic challenge.
Have a good day!
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Let Detroit Go Bankrupt - by Mitt Romney
Hoekstra plans to propose bailout alternatives
Federal tax credits on new car purchases and delaying fuel-efficiency mandates are options that should be considered before Congress cuts a bailout package to domestic automakers, U.S. Rep. Peter Hoekstra planned to tell a House committee today.
But he said if lawmakers are inclined to dole out $25 billion to Ford, General Motors and Chrysler, executives at the Detroit Three and the thousands of employees across the nation need to make concessions, including slashing pay and developing new business models.
“It’s very simple: If you want taxpayer money, it’s going to come with tough strings attached,” Hoekstra said Tuesday, the night before he was to testify before the House Committee on Financial Services on a potential bridge loan.
I’ll have to admit, I’m somewhat biased because Pete Hoekstra comes from “my” district and I’ve met him a couple of times, but I like the way he thinks about it…..
What do you think?
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Hoekstra plans to propose bailout alternatives
Stock Market Rollercoaster
courtesy of The Big Picture
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