(Bloomberg) Confidence among U.S. consumers unexpectedly fell in September to a one-year low, a sign Americans will be less inclined to ramp up spending.
The Thomson Reuters/University of Michigan preliminary index of consumer sentiment dropped to 66.6 following a reading of 68.9 in August, the group said today. Economists forecast the measure would rise to 70, according to the median estimate in a Bloomberg News survey.
Japan Yen Intervention Violates International Currency Accords, Dodd Says
(Bloomberg) Senate Banking Committee Chairman said Japan’s decision this week to intervene in the currency market breaks international accords.
“We saw Japan the other day begin to manipulate its currency,” Dodd, a Democrat from Connecticut, said today in an interview on Bloomberg Television. “This is a complete violation, of course, of the agreements that have been in place” on exchange-rate policies, he said.
“It’s too early, obviously, to tell what the effects of Japan’s action will have on U.S. economic interests,” Dodd said at the hearing. “But one thing’s very clear: unilateral currency intervention by Japan, China or any other nation represents a gap in international cooperation on exchange-rate policy.”
Investor Sentiment is manic!
--The AAII Investor Sentiment Survey shows one of the largest cumulative jumps in bullish sentiment since April 2004. The bullish sentiment jumped to a whopping 50.9% from just 20.7% a month ago, while bears plunged from 49.5% to 24.2% over the same period. This means that the majority of investors are now positive about the prospects for stocks in the next six months. Unfortunately, when things appear obvious, they may be obviously wrong. Think like a contrarian here.
The trendline may hold treasury bonds
-- Treasuries rose on concern the sovereign-debt crisis is deepening in Ireland and Portugal and falling consumer confidence, encouraging demand for the safety of government securities. In addition, the Bank of Japan made it clear that it would use the proceeds from its currency intervention to buy U.S. Treasuries. This appears to have “put a floor” under bond prices and may give rise to another leg up. The trendline forewarned us that bonds might find support there.
Gold makes an historic new high
--Gold futures climbed to a record for the third time this week as investors stepped up demand for a haven from financial turmoil.
Before today, gold gained 16 percent this year, outperforming stocks, bonds and many commodities as sovereign- debt concerns and an uneven economic recovery roil financial markets. It may now be ready to take a rest.
Bank of Japan intervenes in the currency market
--After much speculation and many flying rumors, Japanese government stepped in on Wednesday, Sep. 15 and intervened--sell yen, buy dollar--for the first time in six years. The yen had risen about 10% against the dollar this year, and just reached yet another new 15-year high against the US dollar, an eight-year high against the euro, on Tuesday, Sep. 14. In the context of a slowing economy, the rapid rise of yen is bad news as it hurts exports, stalls domestic consumptions, and further aggravates the existing macro problem (also known as deflation).
Volatility in the Chinese market is rising
-- China stocks fell, capping the benchmark index’s biggest weekly loss since July, as speculation regulators will raise borrowing costs overshadowed gains by brewers on prospects of higher sales during upcoming holidays. The Shanghai Composite Index lost 3.78, or 0.2 percent, to 2,598.69 at the 3 p.m. close, after swinging between gains and losses more than 10 times. The gauge declined 2.4 percent this week, the most in more than two months, amid concern government measures to curb lending and energy consumption will slow economic and earnings growth.
Bank of China says “put a lid on dollar volatility”
--(Bloomberg) China’s central bank said swings in the value of the dollar may threaten the global recovery, defending the benefits of currency stability after the U.S. stepped up pressure for faster gains in the yuan. A rapid depreciation of the dollar could boost the price of commodities and cause asset bubbles, the People’s Bank of China said in a 2010 financial stability report posted on its website today. Fast gains could put pressure on commodity and capital markets, it said.
RealtyTrac Reports Bank Repossessions Hit All Time Record
-- RealtyTrac reported overnight that general foreclosure activity (i.e., default notices, scheduled auctions and bank repossessions) — were reported on 338,836 properties in August, a 4 percent increase from the previous month. One in every 381 U.S. housing units received a foreclosure filing during the month. The spin is that this was a modest decline (5%) from August 2009, but represents another inflection point in a trend which up to now had been declining.
Gasoline prices are becoming more volatile.
--The Energy Information Agency weekly report observes, “At .72 per gallon, the U.S. average price for regular gasoline was four cents above last week and __spamspan_img_placeholder__.14 higher than a year ago. Prices increased in all major regions except for the West Coast. The average on the East Coast increased two cents to .62 per gallon. The Midwest tallied the largest increase after soaring more than a dime to .78 per gallon.”
Natural gas prices remain very low
-- The U.S. Energy Information Administration reports, “Although the hottest temperatures of the year are clearly over, consumption in the electric power sector remained strong this week as much of the country continued to experience warm weather and air-conditioning demand likely increased. Consumption in the electric power sector increased an estimated 2.3 percent in comparison with the previous week, while overall U.S. consumption was an estimated 2.0 percent higher.”
Fed confirms Household Net Worth Plunges By Most Since Q4 2008
(ZeroHedge) Arguably the most useful report to come out each quarter out of the Federal Reserve is the Z.1, or the Flow of Funds report, which was released minutes ago. And it's a doozy: household net worth (assets less liabilities) in Q2 2010 plunged by .5 trillion, almost exclusively due to a plunge in Corporate Equities (__spamspan_img_placeholder__.9 trillion) and Pension Fund holdings (__spamspan_img_placeholder__.7 trillion). In other words, the net wealth of the US household continues to track the performance of the stock market tick for tick. And one wonders why the Fed, per Alan Greenspan's admission, is only focused on ramping stocks up to all time highs.
GSE Inventory Of Homes For Sales Surges, Home Prices Drop As Fannie, Freddie Sales Pick Up
(ZeroHedge) As the administration continue to recreate the ponzi bubble using the very same criminal methods that reflated the first housing bubble, more and more homes are being handed back to the original mortgage lenders - Fannie and Freddie (which incidentally are all now owned by everyone in America, ever since the GSEs were nationalized by the US, after Barney Frank's experiment in the early 2000s went so wrong, it nearly cost the default of America. How that human is still allowed to draft law after corrupt and worthless law, is beyond us). And today we discover that at the end of June, Fannie and Freddie are now the proud owners of 191,000 homes (double what they owned at the end of 2009) and rising with each passing day. And shockingly, the GSEs have decided to do the prudent thing and start selling this real estate, before the plunges really plunge and leave them straddled with millions of homes. On the other hand, this action alone will likely be sufficient to force the next leg lower in home prices. Because it gets worse: "Once they take homes back, Fannie and Freddie must not only cover the utility bills and property taxes, but they are also relying on thousands of real-estate agents and contractors to rehabilitate homes, mow lawns and clean pools. Fannie took a billion charge during the second quarter just on carrying costs for its properties.
The Market Recovered From The Flash Crash Not Due To Buying But Lack Of Selling And A Short Covering Ramp
(ZeroHedge) The folks at Nanex have done another very interesting forensic analysis looking at the volume on either side of the flash crash, i.e., between 14:43 and 14:45 when the most vicious part of the selling took place, and on the rebound, between 14:46 and 14:49, when the bounce to unchanged took the market right back up. Not at all surprisingly, there is a huge mismatch, at least on the SPY (which, however, being the most traded security in the market, is a pretty good representation of overall volume trends): selling volume is orders of magnitude, and far more concentrated than the bid side on the bounce. This leads Nanex to conclude that "Basically, when the shelling stopped, there was no one left standing with good pricing information -- and when the shorts went to cover and buy back stock they found prices rocketing skyward with almost no effort."
How Student Debt Wrecks Marriages, Inhibits Family Formation, and Delays the Housing Recovery (link)
(Mish) The New York Times had an interesting article last week on how student debt is affecting family formations. Please consider How Debt Can Destroy a Budding Relationship
Nobody likes unpleasant surprises, but when Allison Brooke Eastman’s fiancé found out four months ago just how high her student loan debt was, he had a particularly strong reaction: he broke off the engagement within three days.
Ms. Eastman said she had told him early on in their relationship that she had over $100,000 of debt. But as the couple got closer to their wedding day, she took out all the paperwork and it became clear that her total debt was actually about $170,000. “He accused me of lying,” said Ms. Eastman, 31, a San Francisco X-ray technician and part-time photographer who had run up much of the balance studying for a bachelor’s degree in photography. “But if I was lying, I was lying to myself, not to him. I didn’t really want to know the full amount.”
