Thursday, November 01, 2007

Foreclosures Just Keep On Rising

Foreclosure filings rise with more on the horizon as interest rates jump on a record number of adjustable mortgages.
Foreclosure filings climbed during the third quarter of 2007 with no relief in sight, according to a report released Thursday.

The report by RealtyTrac, an online marketer of foreclosure properties, showed the number of filings rose 30 percent from the previous quarter and nearly doubled from a year earlier.

"Given the number of loans due to reset through the middle of 2008, and the continuing weakness in home sales, we would expect foreclosure activity to remain high and even increase over the next year in many markets," James J. Saccacio, chief executive of RealtyTrac said in a statement.

More than 635,000 foreclosure filings were reported nationwide - one for every 196 households. The filings include everything from default notices to auction sale notices to actual bank repossessions.

"August and September were the two highest monthly foreclosure filing totals we've seen since we began issuing our report in January 2005," said Saccacio.
There is not much to add to such a bleak housing picture except that the housing situation and the coming recession is the worst possible news for the Republican party. They have driven the economy into the ground and the American people are finally waking up and realizing that. They will be severely punished at the ballot box in 2008 and it could not happen to a nicer bunch of fools.

Consumer Spending Lowest in Three Months

Can you smell the recession? Gee what a surprise!!! The American consumer is tapped out? Could it be the $915 billion in credit card debt? Could it be the end of easy credit for homeowners? Could it be the wealth effect now that homeowners are looking at declining values? This is trickle down economics when the trickle has almost completely stopped.
American consumers, battered by a steep downturn in housing and a severe credit crunch, slowed spending growth in September to the weakest performance in three months.

The Commerce Department reported Thursday that consumer spending rose by 0.3 percent in September, slightly lower than the 0.4 percent increase that analysts had been expecting. Incomes grew by 0.4 percent, matching the August gain, and in line with analysts' forecasts.

Economists are worried that consumers, the main support for the economy, may cut back on their visits to the malls in coming months as they struggle with the housing slowdown, tighter credit and now record-high oil prices.

The Federal Reserve on Wednesday cut a key interest rate for the second time in six weeks in an effort to make sure the economy does not tumble into a recession.

The news about inflation from the consumer spending report was good. Prices paid by consumers on the Fed's preferred inflation gauge rose a moderate 0.2 percent in September, excluding food and energy.

This measure is up 1.8 percent over the past 12 months, inside the Fed's comfort zone of increases in core inflation of between 1 percent and 2 percent.
How are we supposed to take the inflation numbers seriously? Food and energy are excluded and with oil now topping $95.00 per barrel the average consumer will see real inflation no matter what this government report shows. In the real world food and energy are two very large components of daily life.

The average consumer is suffering and its time that government reports reflect that!!

Tuesday, October 30, 2007

Americans Owe $915 Billion in Credit Card Debt

Americans have record credit-card debt and banks are starting to sweat an uptick in default rates, reports Fortune's Peter Gumbel. Why some fear this could be the next subprime.

Do you still beleive there is an American midle class or has that been replaced by the working poor using credit to live a middle class lifestyle? This is a ticking time bomb waiting to explode.
This past summer's subprime meltdown involved about $900 billion in now-suspect securitized debt, reckless lending, and consumers who buckled under the weight of loans they couldn't afford. Now another link in the consumer debt chain - credit cards - is starting to show signs of strain. And the fear that the $915 billion in U.S. credit card debt (an uncannily similar figure) may blow up has major financial institutions like Citigroup, American Express, and Bank of America strapping on their Kevlar vests.

Last month, as banks reported their worst quarterly results since 2001, concerns about rising credit card delinquencies began to make their way onto earnings announcements alongside mentions of subprime woes.

Dennis Moroney, an analyst at TowerGroup, expects credit card delinquencies will rise as consumers, who have until now used home-equity lines of credit to pay off their cards, start ratcheting up higher card debt. When housing prices were rising, it was easy for consumers to tap the escalating values of their homes to keep borrowing. With the home-equity spigot turned off, over-leveraged consumers may have trouble keeping up with payments.

The doomsday scenario would play out something like this: Just like CDOs and other asset-backed securities, credit card debt is sliced, diced, and sold off again as packages of securities. Rising delinquencies would hurt not only the banks involved but the securities backed by the credit card receivables. Those securities would decline in value as consumers defaulted, leading to bank losses as well as portfolio losses in the hedge funds, institutions, and pensions that own the securities. If the damage is widespread enough, it could wreak havoc on the economy much as the subprime crisis has done.
This is the result of trickle down economics. Much like only a trickle of water will eventually make you die of thirst, the voodoo economics of the Republican party have killed the American middle class.

Monday, October 29, 2007

Interest Rate Cut Will Mean Higher Oil Prices

How a Fed rate cut raises oil prices.Everyone only sees the bright side of an interest rate cut but a rate cut will most likely mean even higher oil prices.
If the Fed cuts rates, it will probably push oil prices higher," said Adam Sieminski, chief energy economist at Deutsche Bank.

There are a couple of reasons lower interest rates usually cause higher oil prices. The first is lower interest rates are designed to spur economic growth by making money for investment cheaper to borrow. Stronger economic growth usually entails using more energy, so traders bid up oil prices on the expectation of higher demand.

Second, lower interest rates usually cause the dollar to fall, as they make dollar-denominated investments like Treasurys less attractive for foreign investors.

Oil, like many other commodities, is priced in dollars worldwide. If the dollar falls, oil producing nations, like those in OPEC, need a higher price per barrel to maintain a the same level of revenue. While oil producing countries don't set the price of oil in the market, they do have control over production and are less likely to increase it when faced with the declining dollar. Also, foreign consumers have less incentive to reduce demand if oil is, relatively, getting cheaper for them.
Those who keep telling you that a falling dollar is good for our economy are only presenting half of the story. It is theoretically good for our trade imbalance and causes more visitors to come to our shores. Our trade imbalance, although better has not seen the narrowing you would expect from the historically low dollar and a report was recently issued that said tourism was actually down. Still think the falling dollar is good news?

Remember that a falling dollar will eventually cause interest rates to spike or we will not be able to finance our ever growing debt. The Federal Reserve is putting a band aid on a gun shot wound and eventually the blood will come rushing out.