>> Housing Bottom Coming in 2015?

Housing Market Bottom Predictions
There have been a few predictions on the housing market bottom: 2009, 2010, & 2012?


Dallas Fed Housing Market Bottom Prediction: 2015 with further 33% price drop?
The Dallas Federal Reserve recently came out with an interesting report recently on the path to a healthy housing market. Some interesting excerpts:

• Public policy goal of increasing the U.S. homeownership rate collided with a huge leap in financial innovation.
• 9.1 million homes were built between 2002 and 2006, a period when 5.6 million U.S. households were formed.
• Real home prices rose 85% to their highest level in August 2006. They have since declined 33 percent.
• Mean reversion: home prices still must fall 23% if they are to revert to their long-term mean; chart below:

Other Observations & Implications from the Economic Letter

• In 2008, 33% homeowners devoted at least a third of household income to housing; 12.5% were burdened with housing costs of 50 percent or more
• in a best-case outcome, 20 to 25 percent of modifications will become permanent. Failed modifications suggest that, without strong income growth, the bounds of affordability can be stretched only so far.

A final note:

With nearly half of total bank assets backed by real estate, both homeowners on the cusp of negative equity and the banking system as a whole remain concerned amid the resumption of home price declines.

Continue reading the economic letter here

>> The Inequality That Matters

Excerpts:

Does growing wealth and income inequality in the United States presage the downfall of the American republic? Will we evolve into a new Gilded Age plutocracy, irrevocably split between the competing interests of rich and poor?

and

One group has the status currency of money and the other has the status currency of intellect, so might they be competing for overall social regard?

and

The numbers are clear: Income inequality has been rising in the United States, especially at the very top. The data show a big difference between two quite separate issues, namely income growth at the very top of the distribution and greater inequality throughout the distribution. The first trend is much more pronounced than the second, although the two are often confused.

and

When it comes to the first trend, the share of pre-tax income earned by the richest 1 percent of earners has increased from about 8 percent in 1974 to more than 18 percent in 2007. Furthermore, the richest 0.01 percent (the 15,000 or so richest families) had a share of less than 1 percent in 1974 but more than 6 percent of national income in 2007.

and

At the same time, wage growth for the median earner has slowed since 1973. But that slower wage growth has afflicted large numbers of Americans, and it is conceptually distinct from the higher relative share of top income earners.

and

For instance, for 2004, nonfinancial executives of publicly traded companies accounted for less than 6 percent of the top 0.01 percent income bracket. In that same year, the top 25 hedge fund managers combined appear to have earned more than all of the CEOs from the entire S&P 500.

Read the full article here

--

About the Author:
Tyler Cowen is a professor of economics at George Mason University and at the Center for the Study of Public Choice. He is the Director of the Mercatus Center.

>> Bernanke Created Half of 234 Years’ Worth of Money Supply

From the BigPicture:

“The U.S. turned 234 years old yesterday, and yet over half of the nation’s money supply was created since Helicopter Ben took over the flight controls four years ago. No wonder gold is in a full fledged bull market . . .”

-David A. Rosenberg Chief Economist & Strategist
Gluskin Sheff + Associates Inc.

>> Roubini: A Crash Course in the Future of Finance

>> Economic Recovery & Small Businesses

Small Business Economic Trends
The NFIB recently released its Small Business Economic Trends Survey Report for April 2010. The outlook for small business is still not good.

The Index of Small Business Optimism lost 1.2 points, falling to 86.8. The persistence of Index readings below 90 is unprecedented in survey history.

From the Report (highlights by yours truly in bold):
... While news about the economy has been positive for two or three quarters, small business owners remain quite pessimistic about the future for the economy.
...
Since small firms produce half the private sector GDP, it is hard to envision a sustained recovery without their participation.
...
Capital spending is on the sidelines as is the demand for loans to finance these activities. A revival of capital spending will require a significantly improved business outlook and some support from reluctant customers. Plans to make capital expenditures over the next few months were unchanged at 20 percent, four points above the 35 year record low.
...
The news about the economy and financial markets has been positive for some time, so the source of this pessimism must be found elsewhere such as Washington D.C., the source of most business uncertainty, but also facts on the ground: 34 percent said weak sales are their top business problem and that is what business is all about.


In Pictures: What Recovery? - Small Business Still Hurting













About the NFIB
The National Federation of Independent Business foundation is one of the leading sources of information about small business in the United States. The foundation conducts research about policy-related issues as well as the business practices and economic impact of small firms through its Small Business Economic Trends reports and other economic research studies.

Further reading:

• SBET April 2010 Report: here
  

>> Part 1 - Banking Cartels Engineered Financial Crisis Endgame

Jul 11, 2009 - 06:36 AM; By: DeepCaster_LLC

“…what is the reason for this “seemingly random monetary mess that multiplies its momentum every day? The answer, in one word, control. The elite/insiders already have control of the financial system, but they wanted more, much more…and it was not random, it was planned.” (emphasis added)

“How will all the above manifest itself in your life? The answer: “All you own will shrink...your income, assets, net worth, will shrink year after year in real terms inflation adjusted and possibly also nominally.” - HS Letter, April 27, 2008.

Continue reading here

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Probable? Possible? Or hogwash? Please post your comments on what you think about this article.

>> Bernanke about the Great Depression - We did it

Here are the words of Ben Bernanke at the Conference to Honor Milton Friedman at University of Chicago, Chicago, Illinois on November 8, 2002:

" Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again. "

Thats right. Bernanke himself said that the Fed indeed "created" the great depression.

Continue reading here

>> Great Depression is here? - A picture is worth a 1000 Words

First 14 months of Depression job losses v/s 14 months of job losses so far in this recession:


Job losses in the last 6 recessions:


And finally, payroll employment data from the last 6 recessions and the 1 depression:


Conclusion: The rate and the extent of job losses now is nowhere near the 1930s.

Source:
- NBER numbers on non-agricultural establishments during those years
- NBER's Macrohistory Database
- Charts courtesy Curious Capitalist @ Time.com

[ Yes, I am too lazy to make my own charts from data :) ]

>> NBER study on Recessions & Depressions

---- Abstract -----

Long-term data for 25 countries up to 2006 reveal 195 stock-market crashes (multi-year real returns of -25% or less) and 84 depressions (multi-year macroeconomic declines of 10% or more), with 58 of the cases matched by timing. The United States has two of the matched events--the Great Depression 1929-33 and the post-WWI years 1917-21, likely driven by the Great Influenza Epidemic. 45% of the matched cases are associated with war, and the two world wars are prominent. Conditional on a stock-market crash, the probability of a minor depression (macroeconomic decline of at least 10%) is 30% and of a major depression (at least 25%) is 11%. In a non-war environment, these probabilities are lower but still substantial--20% for a minor depression and 3% for a major depression. Thus, the stock-market crashes of 2008-09 in the United States and other countries provide ample reason for concern about depression. In reverse, the probability of a stock-market crash is 69%, conditional on a depression of 10% or more, and 91% for 25% or more. Thus, the largest depressions are particularly likely to be accompanied by stock-market crashes, and this finding applies equally to non-war and war events. We allow for flexible timing between stock-market crashes and depressions for the 58 matched cases to compute the covariance between stock returns and an asset-pricing factor, which depends on the proportionate decline of consumption during a depression. If we assume a coefficient of relative risk aversion around 3.5, this covariance is large enough to account in a familiar looking asset-pricing formula for the observed average (levered) equity premium of 7% per year. This finding complements previous analysis that were based on the probability and size distribution of macroeconomic disasters but did not consider explicitly the covariance between macroeconomic declines and stock returns.

Emphasis mine. Continue reading here