Economics Update (a Day Late)

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Foreclosures hitting high end homes


Hotel Pulse Index


Baltic Dry Index, a Measure of Shipping Demand, Courtesy Barry Ritholtz

You know, there are very few guaranteed money makers, but one is owning baseball club, and the Chicago Cubs have just filed for bankruptcy, which says something about the state of the economy.

I know that this is really an artifact of Sam Zell's completely idiotic business model, which seemed to be:

1. Collect Underpants
2. ?
3. Profit

Except, of course, Zell was collecting short term loans, rather than underpants.

Of course, it's not only big debtors like Zell who are getting into trouble. You are seeing foreclosures increasing among more expensive homes, which gives the lie to the constant refrain from many in the right wing that it's all the fault of those n*gg*rs irresponsible borrowers.

It's going to get worse, and it's likely to create another crisis if Wells-Fargo's numbers on Option ARMs carry across the industry, which are unbelievably grim:

“Several of our investors have questioned the current loss severity in light of negative amortization and home price decline,” researchers wrote in the report. “Our analysis suggests that option ARM loss severity will likely range between 60% and 70% provided home prices have stabilized.”

So 60+% of the option ARM are expected to go bad, even if house prices are not falling any further.

We are also seeing a continued drop in hotel activity, which implies that both consumer and corporate travel remain moribund.

The bottom piece of chart pr0n is the Baltic Dry Index, basically an index of shipping costs, though it is also a very good proxy for shipping demand, and this appears to indicate that the need for shipping, and hence the level of international trade, is still well off.

We are some seeing some interesting activity in US Treasuries now, with bonds rising, and their yields thus falling, on the expectation that the Fed will print more money and that inflation will remain low, but Treasury Inflation Protected Securities (TIPS) are also showing signs of expanded demand, which implies that at least part of the bond market is betting on increased inflation in the relatively near term.

We have some good news, in that the recession appears to be well and truly over.....In New Zealand, with retail sales jumping there.

This would explain why both the $NZ and the $Aus rose significantly yesterday....Well, that and the fact Australia's central bank raised rates last week.

The US dollar was otherwise mixed, weaker vs. the Euro, but up vs. the Pound Sterling and Yen.

Oil rose yesterday too, as a result of a combination of cold weather in the US and optimism about the economy.