economist at Barclays Capital… While the annual rate of loan growth to the
private sector slowed to 11% in November from 11.2% in the previous month ..."
January 4 - Market News International: "The number of UK mortgage approvals
slumped further in November, to their lowest level since January 2005 ... M4
rose 0.5% on the month and 11.7% on the year in November. M4 lending also eased
up, rising ... 12.8% on the year ..."
January 3 - Financial Times (Delphine Strauss): "[UK]
Manufacturing activity slowed more than expected last month as growth in new
orders slackened, according to a survey that raised hopes of a further swift
cut in interest rates and added to downward pressures on sterling."
December 31 - Bloomberg (Dara Doyle): "Irish mortgage lending grew at the
slowest pace in at least a decade in November as rising borrowing costs and
concern about a property slump deterred prospective homebuyers. Home loans
increased an annual 14.2%... Total lending to households and companies grew an
annual 17.1% in November ..."
January 3 - Bloomberg (Dara Doyle): "Irish second-hand house prices fell 6.8%
in 2007, declining for the first time in at least 16 years, said realtor Sherry
FitzGerald. Costs in Dublin fell 9.9% ... Prices in Cork, the second-biggest
city, declined 4.5%."
January 3 - Bloomberg (Andreas Cremer): "Germany's unemployment rate fell to
the lowest in almost 15 years in December as manufacturers of cars and
industrial equipment hired staff to work off a backlog of orders. The jobless
rate…slid to 8.4%..."
January 4 - Bloomberg (Simone Meier): "Swiss inflation unexpectedly accelerated
to the fastest pace in more than 12 years in December, led by higher energy
costs. Consumer prices increased 2% from a year earlier ..."
January 3 - Bloomberg (Ben Sills): "Spanish inflation accelerated to the
fastest pace in more than a decade in December even after economic growth
slowed, led by higher food and energy costs. The inflation rate rose to 4.3%,
the highest since the European-standard index was introduced in 1997."
January 3 - Bloomberg (Jonas Bergman): "Swedish household credit growth
accelerated in November as falling unemployment and tax cuts fueled borrowing.
The growth rate rose to 11.9% from 11.7% in October."
January 3 - Bloomberg (Tasneem Brogger): "Denmark's jobless rate dropped to
2.8% in November, the lowest since 1974, adding to pressure on employers to
raise salaries and threatening to undermine the economy's competitiveness."
January 4 - Bloomberg (Robin Wigglesworth): "Norway's domestic credit growth
unexpectedly accelerated to 14.7% in November on increased corporate
borrowing."
January 3 - Bloomberg (Ali Berat Meric and Ayla Jean Yackley): "Turkish
electricity prices will rise by as much as 20% this year, more than the figures
previously announced by the government, the energy regulator said."
Bursting bubble Economy Watch January 5 - New York Times (Peter S Goodman and Michael M Gyrnbaum):
"The unemployment rate surged to 5% in December as the economy added a meager
18,000 jobs, the smallest monthly increase in four years, the Labor Department
reported... Economists viewed the report as the most powerful indication to
date that the United States could well be falling into a recessionary
downturn."
January 3 - Washington Post (Neil Irwin): "For anyone who is worried about the
economy, 2008 is off to a lousy start. The price of oil briefly rose to $100 a
barrel for the first time yesterday and fresh evidence emerged that the economy
is slowing. To investors, the news raised the specter of stagflation, the toxic
mix of stagnant economic growth and price inflation that made for hard times in
the 1970s."
January 2 - Financial Times (Gillian Tett): "A decade ago, Tadashi Nakamae, a
prominent Japanese economist, was fretting about a credit crunch: a property
bubble had burst in Japan, leaving local banks engulfed in bad loans and
prompting a financial crisis. Ten years later, Mr Nakamae feels an unexpected
sense of déjà vu. For as 2008 gets under way, bad loans are yet again
undermining major banks, partly due to falling property prices. But this time,
the epicentre of the shock is on the other side of the Pacific, in America.
'Japan's banking crisis in the 1990s might prove an important lesson for
America's subprime woes,' Mr Nakamae concludes ... Wall Street financiers have
generally assumed that their own financial system was greatly superior to that
in Japan (or almost anywhere else in the world). Indeed, confidence in American
finance was so high that in recent years Washington officials have regularly
travelled to Tokyo to 'tell the Japanese what to do with their banks', admits
one former US Treasury official. However, with America's subprime saga now
entering its seventh month, this latest crunch has turned far uglier than
initially thought. Consequently, while Japan is not the only historical
parallel for the current woes - banking crises have actually been fairly common
in the past century - the events in Tokyo offer a useful prism for analysing
events. In particular, they raise a crucial question: will Washington and Wall
Street prove better at dealing with their banking shock than Tokyo? Or is the
west now destined to face years of financial pain - as Japan did a decade ago?
By any standards, the challenges dogging western policymakers are huge."
January 4 - Bloomberg (William Selway): "From Sacramento and Albany to Boston
and Tallahassee, politicians in state capitals across the US are wrestling with
the biggest increase in borrowing costs in three years as they struggle to
shore up budget deficits widening on the national housing slump. The extra
yield investors require on 10-year bonds from California, Florida,
Massachusetts and New York relative to benchmark tax-exempt rates doubled since
July to the widest since at least 2004."
January 3 - Bloomberg (Bill Koenig and Alan Ohnsman): "General Motors Corp.,
Ford Motor Co. and Toyota Motor Corp. said US auto sales fell in December,
capping the worst year in a decade, and predicted that 2008 probably won't be
any better."
January 3 - Dow Jones (Jacqueline Palank): "Chapter 11 filings jumped by nearly
25% in 2007, hitting the highest levels since Congress enacted laws in 2005
designed in part to discourage bankruptcy filings ... The total number of new
bankruptcies in 2007 - both consumer and business - increased by 40% from 2006,
according to AACER. Last year saw 826,578 new filings, compared with 590,568 in
2006."
December 31 - The Wall Street Journal (Laura Mandaro): "Market analysts warn
that more US businesses are likely to hang 'in bankruptcy' signs this year as
slower economic growth and pricey commodities force the weakest companies to
seek refuge from creditors. The pain, they predict, is likely to spread beyond
mortgage lenders, home builders and consumer-oriented companies, which
contributed to a 40% jump in bankruptcy filings in 2007. While these industries
are expected to play a role in 2008’s misery, Global Insight Inc… puts
electronics makers, coal miners, agriculture companies and makers of durable
goods such as machinery among the industries at risk for the biggest increases
in Chapter 11 filings this year."
January 2 - Reuters (Anastasija Johnson): "US states, cities and counties were
able to sell a record $423 billion of debt in 2007 to pay for schools, roads
and other public projects despite credit market turbulence ... Municipal bond
issuance was up 10.5% in 2007 from $383 billion sold in 2006 ... Thomson
Financial said… Debt volume broke the previous record of $406 billion set in
2005 even though some issuers were forced to postpone or delay deals in the
second part of the year due to turbulent market conditions."
January 3 - Bloomberg (Zachary R. Mider): "Foreign investors exploited the
declining US dollar during the past three months to snap up American companies
at the fastest pace in at least a decade. Buyers from Dubai to the Netherlands
accounted for 46% of the $230.5 billion of US mergers and acquisitions
announced in the fourth quarter, the biggest share since 1998 when Bloomberg
started compiling the data. The total excludes $17.9 billion of so-called
passive investments by state-run funds in Asia and the Middle East in US banks,
including New York-based Citigroup Inc."
Latin America Watch January 2 - Bloomberg (Eliana Raszewski): "Argentina's tax revenue
rose to a record in December, fueled by a jump in sales tax collection as the
economy heads to its sixth straight year of growth. Tax revenue climbed 39% to
19.6 billion pesos ($6.2bn)..."
January 3 - Bloomberg (Alex Emery): "Peru's inflation accelerated last year at
the fastest pace since 1998, increasing the chances the country’s central bank
may raise lending rates this week. Consumer prices climbed 3.93% in 2007."
MBS/ABS/CDO/CP/Money Funds and Derivatives Watch January 2 - Bloomberg (Jody Shenn): "Moody's Investors Service is
reviewing a collateralized debt obligation managed by NIBC Holding NV as
investors fight over how they will be repaid following a decision by some
owners to accelerate the notes' maturity ... The trustee for the Orion CDO
2006-2 Ltd. is seeking a court opinion on the terms to resolve 'differing views
regarding the distribution' of interest and principal, Moody's said, after the
CDOs controlling class decided all notes should be immediately due following a
so-called default event."
GSE Watch January 3 - Bloomberg (Jody Shenn): "Fannie Mae and Freddie Mac ...
guaranteed a record amount of new securities backed by interest-only mortgages
last year, newsletter Inside Mortgage Finance reported. The share of ...Fannie
Mae’s home-loan securities backed by interest-only debt rose to 16%, from 14.9%
in 2006 ... The share for ... Freddie Mac rose to 22.6%, from 16.7%..."
Mortgage Finance Bust Watch January 2 - The Wall Street
Journal (Greg Ip): "US house prices 'likely would have to fall considerably' to
return to a normal relationship with rents, says a study by one former and two
current Federal Reserve economists. The study ...suggests prices would have to
fall 15% over five years, assuming rents rose 4% a year."
December 31 - Bloomberg: "Defaults on privately insured US mortgages rose 35%
in November from the same month last year ... The number of insured borrowers
falling more than 60 days late on payments jumped to 61,033 last month from
45,325, according to data from ... the Mortgage Insurance Companies of
America."
Financial Sphere bubble Watch January 3 - Bloomberg (Kabir Chibber): ICAP Plc, the world's largest
broker of transactions between banks, said trading on its computer-based
systems rose 27% last year to a record $806 billion a day ... Trading soared as
investors bet on or hedged against losses linked to record US home
foreclosures."
California Watch January 1 - Reuters: "Most Californians believe the state is in a poor
economic condition that will continue through 2008, according to a recent poll.
Fifty-two percent said California was in bad economic times, and 20% said it
was in good economic times. When asked about the next 12 months, 70% said they
expected the state's economy to worsen or stay the same."
Speculator Watch January 3 - Financial Times: "Is 'quant' a busted flush? Since last
summer's crisis, when fund managers following quantitative strategies started
blaming black swans, most have suffered net outflows, while many of the weaker
funds have been badly hurt. Even where money has stayed put, no fund-of-funds
manager or other investor is looking at quant in quite the same way. Quant
strategies have been around in various guises for more than 20 years, but
managers have rarely seen anything like the turmoil of that single week in
August. The problem was an overcrowded market where a lot of funds had similar
positions, especially in US small and mid-capitalisation equities ... Globally,
there is at least $1,000bn invested in quant strategies, and probably double
that."
Crude Liquidity Watch January 3 - The Wall Street Journal
(Neil King Jr., Chip Cummins and Russell Gold): "The surging price of oil, from
just over $10 a barrel a decade ago to $100 yesterday, is altering the wealth
and influence of nations and industries around the world. These power shifts
will only widen if prices keep climbing ... Costly oil already is forcing
sweeping changes in the airline and auto sectors. It is intensifying the
politics of climate change and adding urgency to the search both for fresh
sources of crude and for oil alternatives once deemed fringe. The long
oil-price boom is posing wrenching challenges for the world's poorest nations,
while enriching and emboldening producers in the Middle East, Russia and
Venezuela. Their increasing muscle has a flip side: a decline of US clout in
many parts of the world."
January 3 - Bloomberg (Arif Sharif and Sean Cronin): "Gulf Arab states ... face
the prospect of higher prices as $100 crude floods the region with
petrodollars, Standard Chartered Plc said ... High oil prices will result in
more money flowing into the region and 'translate into greater pressure on
inflation and on goods and asset prices', Marios Maratheftis, Standard
Chartered Plc's head of research for the Middle East, said."
Doug Noland is a market strategist for
the Prudent Bear Funds.
(Republished with permission from
PrudentBear.com. Copyright 2005-2007 David
W Tice & Associates. All rights reserved.)
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