Foreclosures Pick Up

U.S. foreclosures pick up and spread beyond typical areas. U.S. residential foreclosures accelerated and expanded in area during the summer, researcher RealtyTrac said. From July to September, Arizona, California, Florida and Nevada remained the hardest hit regions, but increased foreclosures also were seen in Illinois and Washington state. USA TODAY/The Associated Press (28 Oct.)

USA Article Link

US Auctions Negative Yields

Demand pushes 5-year TIPS into negative yield. Treasury Inflation-Protected Securities sold at a negative yield Monday for the first time since the U.S. launched them in the 1990s. Buyers paid $105.50 for $100 worth of debt, effectively paying the government to hold their money. The New York Times (free registration) (25 Oct.) , The Business Insider (25 Oct.)

NY Times Article

Cost of Rescuing Fannie and Freddie Is Expected to Hit $154 billion

Bailing out Fannie Mae and Freddie Mac could require an additional $124 billion, but the amount likely will be about $19 billion, making the total price tag $154 billion, according to the U.S. Federal Housing Finance Agency. The regulator of Fannie and Freddie said the amount might soar to $259 billion if the nation slips into a double-dip recession. The Washington Post (22 Oct.) , The New York Times (free registration) (21 Oct.)

Washington Post Link

From Currency to Trade War

By Nouriel Roubini:

Currency tensions have reached a boiling point. Everyone desires a weaker currency to sustain growth via net export improvement. But the zero-sum game in currencies and net exports means one country’s gain is some other country’s loss, and a competitive devaluation war has ensued. Currency wars eventually lead to trade wars, as the recent U.S. trade legislation threatening China shows. With the U.S. unemployment rate at almost 10% and Chinese growth at almost 10%, it is no wonder that the drums of trade wars are beating harder.

Source:RGE Daily Top 5

What’s Holding Back the Recovery?

U.S. Small Business Sector: What’s Holding Back the Recovery?

The National Federation of Independent Business Index of Small Business Optimism improved by 0.2 in September, rising to 89.0. Still, the index remains in recession territory. The downturn may be officially over, but small business owners have for the most part seen no evidence of it. Indicators of activity in the small business sector have continued to show weakness in 2010 even as GDP growth returned to positive territory in H2 2009, suggesting that the nature of the recovery has been uneven and largely concentrated in larger businesses.

Source: RGE Monitor - Daily Top 5

Sept. 2010 Fed Minutes - Continue to be Accomadative

Members of the Federal Open Market Committee (FOMC) stated at the September 2010 meeting that additional "accommodation may be appropriate before long," though the decision will depend on the future economic situation. The meeting minutes revealed that debate over the method of additional stimulus centered on the purchase of Treasurys and possible steps to affect inflation expectations. There are high expectations that the committee will announce an additional round of stimulus at their November meeting.

Translation: Fed is doing everything and anything to create inflation.

Is The Market a Ponzi Game?

Attached is an article that addresses this questions. John Hussman of the Hussman Funds, states it very clearly:

To some extent, I view current market conditions as something of a “Ponzi game” in that valuations appear neither sustainable nor likely to produce acceptably high long-term returns, and speculators increasingly rely on finding a greater fool. As the mathematician John Allen Paulos has observed, “people generally worry only about what happens one or two steps ahead and anticipate being able to get out before a collapse… In countless situations people prepare exclusively for near-term outcomes and don’t look very far ahead. They myopically discount the future at an absurdly steep rate.” Undoubtedly, we have periodically missed returns due to our aversion to risks that rely on the ability to find a “greater fool” in order to get out safely. But it is important to recognize that speculative risks are not a source of durable long-term returns. At a Shiller P/E of 21 and a historical peak-to-peak S&P 500 earnings growth rate of 6%, a simple reversion to the historical (non-bubble) Shiller norm of 14 would require seven years of earnings growth and yet zero growth in prices. Stocks are not cheap here.

Meanwhile, the U.S. financial system appears to be a nicely painted dam, behind which a massive pool of delinquent debt is obscured. A significant correction in valuations and resolution of the growing backlog of delinquent debt may finally restore strong “investment merit” to the U.S. stock market, but only after a greater amount of pain and adjustment than most investors seem to anticipate.

I'm not going to call it a Ponzi Game; but in my view stocks are overvalues. But in the long run Stock will outperform Bonds and Cash, based on history.

Seeking Alpha Link

Did the US Forget The Growth Option?

After trying many different government intervention programs maybe focusing on simple economic growth is best. Growth defined as "what they do best: innovate, compete and work -- things that are brought by long-term economic growth". Both monetary and fiscal policies have come up short. So let's try a KISS (Keep it Simple) approach.


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