Page 3 of
3 CREDIT BUBBLE
BULLETIN Just the
facts Commentary and weekly
watch by Doug Noland
US Bubble
Economy Watch November 12 - Bloomberg
(Vincent Del Giudice): "The US budget deficit
widened in October from a year earlier, reaching a
record for that month ... The excess of spending
over revenue widened to $176.4 billion last month,
compared with a deficit of $155.5 billion in the
same month a year earlier ... Spending for October
declined 2.7% from the same month a year earlier
to $331.7 billion, and revenue and other income
fell 17.9% to $135.3 billion ... Individual income
tax collections fell 29% to $61.2 billion in
October from a year earlier, and corporate tax
receipts last month were a negative $4.5 billion
on the government's books ... Over the past week,
the Treasury auctioned a record $81 billion in its
quarterly sales of long-term debt. The Treasury's
debt-management director ... told
a meeting of bond market
participants last week to anticipate another year
of government debt sales of $1.5 trillion to $2
trillion…"
November 13 - Bloomberg (Bob
Willis): "The trade deficit in the US widened in
September by the most in a decade, reflecting
rising demand for imported oil and automobiles ...
The gap grew a larger-than-anticipated 18% to
$36.5 billion, the highest level since January ...
Imports climbed 5.8%, the most since March 1993,
to $168.4 billion. The figures reflected a $4.1
billion increase in imported oil as the cost of a
barrel of crude climbed to the highest level since
October 2008 and volumes also rose ... Exports
rose 2.9% to $132 billion, the most this year,
propelled by sales of civilian aircraft,
industrial machines and petroleum products."
November 9 - Bloomberg (Sonja Franklin):
"Former Federal Reserve Chairman Alan Greenspan
said a rebound in stocks is 're-liquifying' the US
economy and housing prices are showing early
indications of ending their decline. 'We have been
very fortunate that the stock markets moved back'
and are 're-liquifying the whole process,'
Greenspan said…"
November 12 - Bloomberg
(Bob Willis): "Mortgage applications to purchase
homes in the US plunged last week to the lowest
level in almost nine years ... The Mortgage
Bankers Association's index of applications to buy
a house dropped 12% in the week ended Nov. 6…"
November 9 - Bloomberg (Daniel Taub): "The
number of US homeowners who owe more than their
properties are worth fell in the third quarter as
values stabilized and some homes were lost to
foreclosure, Zillow.com said. About 21% of owners
of mortgaged homes were underwater, down from 23%
in the second quarter…"
November 12 -
Investment News (Jessica Toonkel Marquez): "In an
attempt to keep a low profile, The Goldman Sachs
Group Inc. has told its employees that it won't be
hosting a corporate Christmas party this year. The
investment bank is also prohibiting employees from
funding their own parties, an insider at the firm
told InvestmentNews."
Real Estate
Watch November 12 - Bloomberg (Dan Levy):
"US foreclosure filings surpassed 300,000 for an
eighth straight month as unemployment made it
tougher for homeowners to pay their bills,
RealtyTrac Inc. said. A total of 332,292
properties received a default or auction notice or
were seized by banks in October, up 19% from a
year earlier ... RealtyTrac said…"
Central Banker Watch November 13 - Bloomberg (Steve Matthews and
Mark Deen): "Chicago Federal Reserve Bank
President Charles Evans commented ...
'In our most recent policy statement we said that
we expected rates to be low for an extended period
of time. We included different markers that we
will be monitoring, in terms of very low resource
utilization, very low inflation. We'll be looking
at all of those ... Unless there are unusual
developments, I think the policy is going to be
highly accommodative, as it is now, for quite some
period of time.'"
Fiscal
Watch November 12 - New York Times (David
Steitfeld): "The Federal Housing Administration
said ... that its cash reserves had dwindled
dramatically in the last year after a record drop
in home prices ... The F.H.A., which insures loans
made by private lenders, guaranteed more than $360
billion in mortgages in the last year, four times
the amount in 2007 ... 'As a credit expert, I have
seen this movie before, and the ending is always
the same,' said Edward Pinto, a former executive
with the government mortgage giant Fannie Mae. The
results of the F.H.A.'s annual audit showed the
agency's capital reserves to be 0.53%, far under
the 2% minimum mandated by Congress. A year ago,
the capital reserves were 3%... Nearly one in five
loans made in 2007 are seriously delinquent, the
agency said."
GSE Watch November
7 - Wall Street Journal (Nick Timiraos): "Freddie
Mac said it didn't need any additional federal aid
for the second straight quarter as it reported a
loss of $6.3 billion for the third quarter ... But
the company said it expected to ask for more
handouts from the US Treasury in the future ...
Together with Fannie Mae, which said ... it would
need a $15 billion capital injection, the tab for
the US government's bailout of both
mortgage-finance giants has climbed over the past
year to $112 billion, making it one of the
costliest government interventions ever to
stabilize housing and financial markets."
Muni Watch November 11 -
Financial Times (Nicole Bullock): "Some of the
same financial troubles that have pushed
California toward economic disaster are wreaking
havoc in nine other states and posing a threat to
the nascent recovery, according to research ...
'California's fiscal problems are in a league of
their own,' says Susan Urahn, managing director of
the Pew Center on the States ... 'but the Golden
State is hardly alone.' Arizona, Florida,
Illinois, Michigan, Nevada, New Jersey, Oregon,
Rhode Island and Wisconsin join California as the
most troubled US states ... For residents, fiscal
problems have meant higher taxes, layoffs of state
workers, longer waits for public services, more
crowded classrooms and less support for the poor."
November 12 - Bloomberg (Darrell Preston):
"US states, which are closing $250 billion of
budget deficits, will be forced to grapple with
diminished revenue until at least 2012, a survey
of fiscal officials found. The only thing that
kept states from 'draconian' spending cuts has
been $135 billion of funding under President
Barack Obama's economic stimulus package,
according to a report from the National Governors
Associations and the National Association of State
Budget Officers. Revenue fell 7.5% in fiscal 2009,
forcing states to close budget gaps of $72.7
billion. 'These are the worst numbers we've ever
seen,' said Scott Pattison, executive director of
the budget directors group ... 'States have been
forced to lay off and furlough employees, raise
taxes, drain rainy day funds and sharply cut state
spending.'"
New York
Watch November 12 - Bloomberg (Ken Prewitt
and Michael Quint): "New York legislators must act
quickly to narrow a $10 billion, two-year budget
deficit and solve a December cash squeeze,
Governor David Paterson told Bloomberg radio. 'Our
actions have to be taken now, they must be stern,
they must be swift,' he said…"
November 11
- Bloomberg (Dan Levy): "Manhattan apartment rents
fell as much as 9% in October from a year earlier
... according to Citi- Habitats Inc. Average rents
dropped for all apartment sizes and the vacancy
rate rose 0.15 percentage point to 1.86%, the
highest since November 2008…"
California Watch November 10 -
Bloomberg (Michael Weiss): "California's tax
receipts rose $285 million, or 7.1%, from the
prior year, Controller John Chiang said ...
'October's receipts are a welcome break from a
largely negative trend line for the last two
years,' Chiang said, noting the state's overall
cash position was $1.2 billion ahead of state
projections."
Speculation
Watch November 10 - Bloomberg (Bei Hu):
"Hedge fund assets may top the previous $2
trillion high by the end of next year as
double-digit average returns lure investors, said
Barry Bausano, Deutsche Bank AG's global co-head
of prime finance."
Crude Liquidity
Watch November 13 - Bloomberg: "Saudi
Arabia ... has started to expand and upgrade its
oil and gas production and refining business at a
cost of $100 billion to tap rising demand in Asia,
Oil Minister Ali al-Naimi said. 'China's and
Asia's demand are projected to be met mainly from
supplies from Saudi Arabia and other Gulf states,'
al- Naimi said…"
November 9 - Bloomberg
(Zainab Fattah): "Saudi Arabia will face a
'substantial' housing shortage by 2015 as a
growing population and rising employment fuel
demand, Deutsche Bank AG said. The kingdom will
require an estimated 1.2 million additional homes
by 2015, compared with a projected supply of just
900,000.."
Doug Noland is a
market strategist for the Prudent Bear Funds.
(Republished with permission from PrudentBear.com.
Copyright 2005-2009 David W Tice & Associates.
All rights reserved.)
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