Economic Outlook--Good, Bad or ?? Published 9-6-06

Doubts Raised on Big Backers of Mortgages NYTimes front page story by Charles Duhigg

A front page story in today's NY Times reports more potentially very bad news that some financial experts are concerned that Fannie Mae and Freddie Mac who handled 80 percent of mortgages bought by investors in the first quarter, are "operating dangerously close to the edge especially if home prices go through another steep decline....The companies are sitting on $19 billion in additional losses that they have not yet fully acknowledged....Bush administration officials, the Federal Reserve and lawmakers all believe tht the companies' financial safety cushion is far too thin and have pleaded with them to raise more capital from investors..."

Here's a link to the article--

http://www.nytimes.com/2008/05/06/business/06fannie-web.html?_r=1&ref=business&oref=slogin

http://biz.yahoo.com/cnbc/080425/24311464.html?.v=1

May 18, 2007

Federal Reserve chief, Ben Bernanke says home foreclosures will not sink the U.S. economy.

The Federal Reserve does not foresee a broader economic impact from the growing number of mortgage defaults and home foreclosures, its chairman said yesterday. And he cautioned that heavy-handed regulation of lenders could have the unintended effect of adding to the strain on the troubled housing market.

http://www.nytimes.com/2007/05/18/business/18fed.html?ref=business

5-9 The Fed acknowledged that the economy is slowing but left the Fed Funds ratet rate unchanged at 5.25% and offered no hint of a future interest rate cut. Here's a link from The NY Times:

http://www.nytimes.com/2007/05/10/business/10fed-web.html?hp

4-46-07 Continuing a trend from 2006, Detroit pasted the highest rate of foreclosures of the nation's largest 100 metro areas during the first three months of 2007, with ONE FORECLOSURE FOR EVERY 51 HOUSEHOLDS.

Michigan, which ranked fourth highest among states, saw an increase in foreclosures of nearly 30% from a year ago.

HIGHEST METRO AREA RATES OF FORECLOSURE

Detroit 1 for every 51 households

Las Vegas 1 for every 57 households

Riverside, CA 1 for every 68 households

Sacramento 1 for every 69

Stockton, CA 1 for every 69

HIGHEST STATE RATES

1. Nevada 1 in 75.........up 128.5%

2. Colorado 1 in 111....up 23.88%

3. Georgia 1 in 138......down 8.31%

4. Michigan 1 in 143.....up 29.5%

5. California 1 in 152....up 172%

12-13 The Fed leaves short-term rates alone. Inflation warning offers little hope for rate cut in early 2007.

http://www.nytimes.com/2006/12/13/business/13fed.html?ref=business

12-5 LABOR DEPT REPORT ON PRODUCTIVITY AND COMPENSATION EASES INFLATION FEARS BUOYS THE STOCK MARKET

The Labor Department revised its earler estimate of unit labor cost increases downward from 3.8 percent to 2.3 percent, easing inflation concerns and buoying the stock market.

http://www.nytimes.com/2006/12/05/business/05cnd-econ.html

http://www.nytimes.com/aponline/business/AP-Wall-Street.html

KRUGMAN: ECONOMIC STORM SIGNALS--BOND MARKET SIGNALING A RECESSION

In his column dated 12-1 Princeton economist says pay attention to the bond market and the housing market, not the stock market which has predicted "nine of the last five recessions." Rising bond prices are signaling an expectation that a weakening economy will force the Federal Reserve to cut the discount rate. Although the majority of economists are still optimistic about the economic outlook, Krugman says that the odds are 2 to 1 that 2007 will be a very tough year.

He concludes on this optimistic note: "Luckily, we've got good leadership for the coming economic storm: the White House is occupied by a man who's ideologically flexible, listens to a wide variety of views, and understands that policy has to be based on careful analysis, not gut instincts. Oh, wait!"

http://select.nytimes.com/2006/12/01/opinion/01krugman.html?hp

11-29 Commerce Dept. Statistics show a Gently Slowing Economy

http://www.nytimes.com/2006/11/29/business/30econcnd.html?ref=business

11-28 BEN BERNANKE SAYS ECONOMY SLOWING AS EXPECTED

This may mean no additional Fed tightening of interest rates, but Bernanke didn't offer hope of cuts as some on Wall Street had hoped.

http://www.nytimes.com/reuters/business/business-usa-fed-beigebook.html

11-27 The stock market declines sharply and broadly as investors cash in their gains.

http://www.nytimes.com/2006/11/27/business/28stoxcnd.html?hp&ex=1164690000&en=b2f3a1cb3d954445&ei=5094&partner=homepage

11-17 Housing Construction Plunges to 6-year Low in October

http://www.nytimes.com/2006/11/17/business/18econcnd.html?hp&ex=1163826000&en=eaacf5014899576c&ei=5094&partner=homepage

11-4 Jobless Rate Hits 5-year Low http://www.nytimes.com/2006/11/04/business/04job.html?ref=business

11-4 Mortgage Lesson No. 1: Your Home is Not a Piggy Bank http://www.nytimes.com/2006/11/04/business/04money.html?ref=business

10-27 U.S. ECONOMIC GROWTH SLOWED IN THIRD QUARTER

"The economy grew more slowly in the third quarter than at any time since early 2003, held back by the deflating housing market.

"The Commerce Department reported this morning that the nation's gross domestic product expanded at an annual rate of just 1.6 percent from July through September. That preliminary estimate compares with a rate of 2.6 percent in the second quarter and the robust 5.6 percent pace recorded in the first.

"The slowdown in the third quarter was worse than economists were expecting. The consensus forecast was for 2 percent growth. [NYTimes http://www.nytimes.com/2006/10/27/business/28econcnd.html?hp&ex=1162008000&en=52d45fc64f29930a&ei=5094&partner=homepage

10-27 NEW HOME PRICES FALL SHARPLY

Home builders, struggling to keep ahead in a weakening market, cut prices and offered a vairety of other discounts in September to help sell their newly constructed houses, the latest government and industry statistics show.

The commerce Department reported yesterday that the median price of a new home plunged 9.7 percent last month, compared with Sept 2005, falling to $217,000, the biggest drop since December 1970.

NY Times article by Jeremy W. Peters 10-27-06 http://www.nytimes.com/2006/10/27/business/27econ.html?_r=1&ref=business&oref=slogin"

10-26 The FED again left the discount rate unchanged. <a href=http://www.nytimes.com/2006/10/25/business/25cnd-fed.html?hp&ex=1161835200&en=2c8becffad2d312f&ei=5094&partner=homepage

9-2 The FED left the discount rate unchanged at 5.25%, reporting"A moderation in economic growth, partly reflecting a cooling in the housing market." [Full text of FED statement linked below.}

9-7"...A new Labor Department report released yesterday suggested that the threat of inflation had not diminished and that further monetary restraint might be needed in order to hold prices down. The report found unit labor costs--which take into account changes in productivity and hourly wages--increased much more sharply in the first half of the year than the government first calculated."

[See the NYTimes article linked below for more on the bad news for the economy and possibly for the stock market. ]