May 11

Treasury Auctions To Take US Over Debt Ceiling On Monday

by Jeffrey Sparshott and Jeff Bater | Dow Jones | May 12, 2011

The Treasury Department auctioned $56 billion in new debt Tuesday and Wednesday, enough to take the U.S. over its federal debt ceiling when the three- and 10-year notes settle on Monday. Continue reading →

May 11

Forbes: U.S. Likely to Return to Gold Standard in Five Years

by Jon E. Dougherty | News Room America | May 11, 2011

Steve Forbes, the founder of one of the nation’s premier economic magazines and onetime GOP presidential contender, says he believes the nation will return to the gold standard within five years because doing so would solve a number of economic, fiscal and monetary issues. Continue reading →

May 11

Home Value drop accelerates

According to Zillow.com the pummeling housing market continues.  Housing values fell 3% in the first 3 months of the year, a pace not seen since 2008.  Previously anticipating a bottom in the housing market sometime in 2011, Zillow is now pushing that forecast back to 2012 at the earliest.

The slip caused more homeowners to find themselves underwater.  The figure now stands at 28.4%.  More then 1 out of 4 homes are now worth less then what their owners owe on them.

The monthly foreclosure rate also rose slightly to 0.101%.  That’s about 1 out of every 1000 homes was foreclosed on during March.

Read more at Zillow.com

UPDATE:  Let’s also not forget the $8.5 billion dollar bailout that Fannie Mae is now asking for.

May 11

Unemployment back on the rise

The unemployment rate for April rose to 9.0% reversing the ever so slight down trend seen since November.  Of course, our friendly league of economic forecasters was expecting the number to hold at 8.8%.  The upside is 244,000 new jobs were created.  Unfortunately, 62,000 of them came from McDonald’s.

I guess the Fed & C0. were hoping that so many who left the workforce did not return to looking for a job.  The headline unemployment number does not include those that have given up looking for a job, nor those that have settled for part time work.  When including them, the real under/unemployment is closer to 22 or 23%.


May 11

Can you say Stagflation?

Bloomberg:  First-Time Unemployment Claims in U.S. Unexpectedly Increase to 474,000 -That’s a 10% jump from the previous week and the highest since August.  It’s also 64,000 higher than so-called economists expected.  The four-week moving average climbed to 431,250.

Bloomberg:  Food Prices Rise to Near-Record as Inflation Accelerates – But since we exclude food from the “core” inflation rate, nothing to see here …. keep it moving.

May 11

Silver Update

Despite the recent significant correction in silver, the precious metal is still up over 25% this year.  Silver has led the commodity bull market over the past couple of years, significantly out-performing gold.  This sudden drop may be the beginning of a deflationary episode resulting from the Fed’s indication that QE2 will end in June.  However, I do believe that any deflation will soon result in falling asset prices across the board, including housing and equities, as well as an increase in long term interest rates and more struggles in the employment situation.  It is safe to say that the Fed will not allow that to go on for long.  The only question is not will, but when will QE3 begin.  In the mean time we can expect a consolidation in commodities over the coming months.

May 11

FOREX-U.S. economic data pushes dollar down vs euro, yen

by Steven C. Johnson | Reuters via Yahoo! | May 4, 2011

The dollar fell to a fresh three-year low on Wednesday and the euro briefly rose above $1.49 as weaker-than-expected U.S. employment data convinced investors that U.S. interest rates would remain low this year.

The yen also hit a six-week high against the dollar after data showed the pace of growth in the dominant U.S. services sector also slowed unexpectedly in April, another sign the U.S. economy may be hitting a soft patch.

With markets worried about a yawning U.S. budget deficit, traders said signs of slower growth will only add to trouble for the dollar, which fell to a three-year low against major currencies Wednesday. It has lost 7.7 percent in 2011.

“The dollar got beat up pretty badly against the euro,” said Firas Askari, head of foreign exchange trading at BMO Capital Markets. “The U.S. fiscal situation is a concern. Now it seems the U.S. economy isn’t just tepid but actually cooling off again. That’s not encouraging.”

Read the full article