NEW$ & VIEW$ (29 NOVEMBER 2012)

THE “GRAND BARGAIN”: FIRST OVERTURE?

Obama Flexible on Top Tax Rates

Obama signaled he wouldn’t insist tax rates on upper-income Americans rise to Clinton-era peaks as part of a deficit-reduction deal.

President Barack Obama signaled he wouldn’t insist tax rates on upper-income Americans rise to Clinton-era peaks as part of a deficit-reduction deal, showing new flexibility as he tries to accelerate talks with congressional Republicans. (…)

A full return to Clinton-era rates would have households paying a 36% rate on income earned between $250,000 and $388,000, compared with 33% today, and 39.6% rate on income above that level, up from 35%.

The White House’s flexibility, first described by Democrat Erskine Bowles after meetings with Mr. Obama and others, and confirmed by administration officials, could envision tax rates increase from their current levels but less than Clinton-era levels.

The trade-off, Mr. Bowles said, would be limits or curbs in tax deductions, which GOP leaders have expressed openness to.

U.S. HOUSING

Sales of New U.S. Homes Fell 0.3% in October

Sales dropped 0.3 percent to a 368,000 annual pace following a 369,000 rate in September that was 20,000 lower than initially reported.

While the Commerce Department said superstorm Sandy had “minimal” impact on sales last month, the breakdown did show differences among regions. Purchases surged 62.2 percent in the Midwest, to the highest level in almost three years, and jumped 8.8 percent in the West to the fastest pace since July 2008.

Home purchases dropped 32.3 percent in the Northeast, the area most affected by the storm.

Foreclosure Wave Averted as Doomsayers Defied: Mortgages

(…) When banks pulled back on foreclosures two years ago following a government investigation into allegations of faulty practices, market researchers, academics and Wall Street analysts said that a surge of delinquent homes would deluge the U.S. market once lenders resolved the claims and worked through backlog, driving down prices for years to come. (…)

In fact, the flood failed to materialize, even after the five biggest U.S. mortgage servicers reached a $25 billion settlement with federal and state regulators in February. Instead, the number of properties for sale shrank to the fewest in a decade, prices appreciated at the fastest pace since 2005, and the gradual healing of the housing market helped boost consumer confidence and the economy. (…)

Banks have stepped up foreclosure alternatives to avoid legal challenges. They’re forgiving debt, modifying payment plans and approving short sales that allow homeowners to sell for less than they owe.

The federal government, (…) is also helping to stem the crisis. Expanded loan-modification programs have gained traction, and the Federal Reserve has kept bank interest rates near zero. Investors including Blackstone Group LP (BX) and Colony Capital LLC are purchasing thousands of foreclosed homes in bulk before they even hit the market, further limiting new supply. (…)

The so-called shadow inventory of pending foreclosures, which may be larger than the visible supply of previously owned homes for sale, is shrinking as new defaults decline and banks work through their backlog of bad loans. Home loans that were more than 90 days late or in the foreclosure process, a proxy for the shadow inventory, fell to 7.03 percent of properties with a mortgage in the third quarter, the lowest share since 2008, the Mortgage Bankers Association said two weeks ago. (…)

The shadow inventory — which also includes properties owned by banks but not for sale — fell from an estimated 8.8 million homes in 2010 to 5.36 million as of this month, a faster decline than expected as fewer loan modifications re-defaulted, according to Tirupattur. (…)

More households, more demand

One reason that U.S. housing starts have flared higher is that household formation has rebounded to about a 1 mln/year pace (it stalled completely during the financial crisis). Long-term formation tends to be
somewhere in the 1-1.5 mln/year range, but given the extended period of overbuilding during the 2000s, homebuilding might settle in at the low end of that range—not unlike what we saw in Canada during the 1990s. Still, that leaves healthy upside from current levels. (BMO Capital)

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Auto Car Makers Say No Looking Back

The U.S. auto industry is expected to post November sales at another four-year high and project year-over-year gains continuing into 2013.

Industry executives interviewed ahead of this week’s Los Angeles Auto Show said November results, due out next week, should continue the year’s big gains. Some analysts estimate November sales could hit an annualized selling pace of 15.2 million cars and light trucks—the strongest single monthly showing since 2008. (…)

The average car on the road in the U.S. is now a record 11 years old, industry executives say and about 20% are 16 years old. When customers wheel their rattletraps into showrooms, they’re also finding credit is relatively cheap and available.

Car Demand Slower Outside the U.S.

On Wednesday, forecasting firm LMC Automotive cuts its 2013 outlook for global automotive sales by 1.8 million vehicles. It now projects a 2.6% increase over 2012 to 82.9 million cars and light trucks, down from a prior forecast of 84.7 million.

Its estimate for 2012 is unchanged at a 5.3% gain over 2011, to 80.8 million vehicles. (…)

In Germany, the new car market is expected to shrink by about 6.5% to 2.9 million vehicles in 2013 from 3.1`million this year, the German Federation for Motor Trades and Repairs projected last week.

Two charts from RBC Capital show the long term trends.

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Japan’s Retail Sales Fall in October as Car Sales Drop  Japan’s retail sales fell in October by the most in 11 months as consumers purchased fewer cars and televisions, adding pressure on the government to stimulate an economy that may be entering a recession.

Sales fell 1.2 percent from a year earlier, the Trade Ministry said in Tokyo today, after a 0.4 percent advance in September. (…)

Japanese wages dropped for seven of the 12 months through September. Large companies cut winter bonuses by 2.7 percent from last year to 781,396 yen, a business lobby group said earlier this month.

CONTAGION CONTINUES

German Unemployment Rose for an Eighth Month in November

The number of people without a job increased a seasonally adjusted 5,000 to 2.94 million, the Federal Labor Agency in Nuremberg said today.  The adjusted jobless rate held at 6.9 percent. (…)

Storm cloud Schaeffler AG, the German roller-bearing maker that’s the biggest investor in car-parts manufacturer Continental AG, this month lowered its 2012 sales forecast because of weaker demand in Europe and Asia.

Storm cloud Hornbach Holding AG, a home-improvement retailer, cut its annual sales and earnings forecasts on Nov. 27, citing weakening consumer confidence across Europe.

Swedish Economic Growth Slows as Euro Crisis Hurts Sales

Gross domestic product expanded a seasonally adjusted 0.5 percent, compared with growth of 0.7 percent the prior quarter, Stockholm-based Statistics Sweden said today. Annual growth slowed to 0.7 percent from 1.3 percent, the agency said. (…)

Sweden’s central bank has signaled it may cut interest rates again next month, after three reductions since last year, as a recession in the euro area hurts exporters in the largest Nordic economy. (…)

Exports fell an annual 2.3 percent in the period, while consumer spending rose 1.3 percent. Investments slid 0.4 percent from a year earlier. A separate report from the agency today showed that retail sales declined 1.7 percent in October, falling for the second month out of the past three. (…)

Manufacturing confidence in the $500 billion economy fell to its lowest level in more than three years this month, while consumer sentiment slid to the lowest in a year.

“Industry forecasts further staff cuts and unchanged output volume for the next few months,” Sweden’s National Institute of Economic Research said on Nov. 27. “Consumer confidence in the Swedish economy and labor market developments are considerably more negative than normal.”

Money  ECB Data Show Healing Banks

The pressure on banks appears to be falling, but the broader economy has shown little improvement.

Deposits in the banking system rose by €105 billion ($135.91 billion) in October, driving a surge in headline measures of the money supply to their highest level in more than a year. That suggests that the financial system is slowly healing from the disruption caused as markets bet on a breakup of the euro zone earlier this year, and that banks are again getting funding from traditional sources.

M3, the ECB’s preferred measure of the broad money supply, rose 3.9% on the year, its fastest rate since early 2009, while the narrower M1 aggregate, which has been a more accurate reflection of economic output over recent years, rose 6.2%, its fastest since September 2011.

Most of the increase in deposits came in “core” euro-zone countries such as Germany, France, Austria and the Netherlands, but they also rose in Ireland and in Greece, where they hit their highest level since May.

Lending to the private sector continued to fall, with an €8 billion drop in loans to companies more than offsetting a €4 billion increase in loans to households. Overall, private credit was down 0.7% on the year, a modest improvement from a 0.9% drop in the year through November.

CAPITULATION?

China’s Stocks Drop as Valuations Reach Low; Brokerages Plunge  Chinese stocks declined for a fourth day, dragging valuations on the benchmark index to their lowest level on record, as brokerages tumbled amid speculation they may cut trading fees.

(…) Regulatory data showed the number of stock-trading accounts that had transactions last week was the lowest since at least January 2008, excluding weeks that had holidays. The value of shares traded on the Shanghai stock exchange slumped to 33.1 billion yuan ($5.3 billion) on Nov. 26, the least since November 2008 and about a third of the 102 billion yuan daily average over the past five years.

Shares on the Shanghai Composite trade at an average 10.8 times reported earnings, the lowest level since at least 1997, according to data compiled by Bloomberg.

Interesting charts from RBC Capital Markets:

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Hmmm…

STRANGE QUOTE:

President Obama met privately with some of the country’s most important corporate titans on Wednesday to bury the hatchet from a rough campaign season and talk through the fiscal crisis confronting Washington.

Mr. Obama conceded that there had been friction between the White House and big business in the past, but he expressed hope that such rancor was now behind them, according to one chief executive who asked not to be named describing a private conversation.

“He said, ‘I really want you guys to succeed, I don’t have to campaign anymore,’ ” the executive said. (NYT)

 
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One thought on “NEW$ & VIEW$ (29 NOVEMBER 2012)

  1. thank you
    housing watch ..is really the consecuences the bank’s left behind
    i am sur will fix with capital and this is one very easy for the gv why? because they have to sell houses under the cost prices and ,this is first step .(is better than stay stock ) without income IN other side have open job (infrastructure)
    urbanistce
    -AUTO industry ok this is up down allways because the concurance but never will close (maybe coorporation btw )
    we need car’s we need houses generations doesn’t have limit SO ..this is difficult periode ..
    -GER unemployment is normal but we have to worry about this because if GER have unemployment 6.9% (mini job’s) not full time ..euro with finish for good
    SW this country is ready 5 y in problem but they trying to keep up by very good (seves–economia) ..everywere
    -Bank’sECB i think they don’t have power .so soon we will see what is next.
    –OBAMA..if he try to do what is good for the USA this 4 y will be in history .(because now he don’t try to do for election ) but for really intres of the USA
    we HOP ..timing show ..
    nice analysis ..

    .

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