Economics Update

With all this talk of green shoots, its worth noting that the evidence in the underlying economy does not really indicate much in the way of a recovery, which is why the decline in retail sales in April should come as no surprise.

That's a big portion of the US economy right there, and what's not is real estate, which is showing little in the way or recovery either, with foreclosures at a new record in April, though actual repossession of property fell, because the banks are worried about the costs of actually having to take care of the property when they finally assume ownership, along with changes in laws that have drawn out the process in many of the hardest hit states.

The number of foreclosures were up 1% over an already record March, and up 32% year over year.

We also saw a drop in mortgage applications as refinancing slowed with the increase in interest rates.

There is not a whole bunch of economic recovery in the Euro zone either, with industrial output falling more than 20% year over year.

We are seeing some good news on the credit front again though, because LIBOR hit a 2 month low, though in the real world, where it's lending to real businesses, as opposed to banks, real interest rates, interest minus inflation, are at a 25 year high and it is curtailing all sorts of capital activity.

It also looks like BankUnited may be heading to a headline on Friday Night Bank failures, with a late filing with the SEC saying that they need to raise over $1 billion in capital, because, "the Board of Directors of the Bank entered into a Stipulation and Consent to Prompt Corrective Action Directive (the “PCA Agreements”) with the OTS." (Office of Thrift Supervision).

In any case, the bad consumer spending figures pushed oil down on demand concerns, and pushed the dollar up as investors fled to safety.