Friday, October 2, 2009

Q&A: Shiller Sees 5 Years of Stagnant Home Prices

Is the slump in U.S. home prices bottoming out?

Shiller: The situation has definitely changed. With our numbers — the S&P/Case Shiller home price index — going up sharply. It looks like a major turnaround. We’ve been watching that for three months now, and we have some concern that it could be an aberration and temporary. But, at this point, it seems to be evident in just about every city in the U.S. That suggests it’s real. But it probably isn’t the beginning of a major boom, just because the economy is in such bad shape. There’s also a chance that it will reverse. It’s still only three months old, so it’s very hard to be sure at this point. The most likely scenario is that it won’t continue at this high rate of increase, but that it will neither go down a lot, nor up a lot. (more)

Wells Fargo: Ready To Blow?

"Together we'll go far." Wells Fargo's corporate slogan is a pledge to its customers, but it might just as well reflect the San Francisco banking giant's optimism about its takeover of Wachovia, a teetering rival it snatched from under Citigroup's nose last October. Losses from the acquisition are "still in the same zip code" as the sum envisaged at the time, says John Stumpf, Wells's chief executive. In another sign of self-confidence, Dick Kovacevich will step down as chairman at the end of the year, a move that would be hard to imagine if the bank's hands-on former boss were worried about the future.

Others are less convinced, suspecting Wells of understating Wachovia's loan losses and questioning its accounting. Fuelling these worries, says Dick Bove of Rochdale Securities, is "extraordinarily poor" communications and disclosure. Alone among big banks, Wells does not hold a quarterly call for analysts. (more) and (more)

Peak Gold?

Because we're in a world that appears to have encountered peak gold as well as peak oil. If you look at historical production, worldwide gold output reached a top right around the year 2000–2001. Overall output has declined and we're not replacing output from the big mines of the past. Despite discoveries here and there, miners have to dig deeper and deeper into the reserves. In a big mining country such as South Africa, for example, some of the deepest mines now are at 4,000 meters. That's 13,000 feet. (more)

Detroit: Too broke to bury their dead

At 1300 E. Warren St., you can smell the plight of Detroit.

Inside the Wayne County morgue in midtown Detroit, 67 bodies are piled up, unclaimed, in the freezing temperatures. Neither the families nor the county can afford to bury the corpses. So they stack up inside the freezer.

Albert Samuels, chief investigator for the morgue, said he has never seen anything like it during his 13 years on the job. "Some people don't come forward even though they know the people are here," said the former Detroit cop. "They don't have the money." (more)

Hedge funds find new sweet spot in sugar

Sugar is the new crude oil for investment-hungry hedge funds, which are pushing sugar prices near 30-year highs and ushering new global shortages.

After their infamous and massive bets on crude oil sent prices doubling and brought $5-a-gallon gasoline a year ago, hedge funds are now pouring their billions into raw sugar.

Sugar prices have doubled since springtime, causing US officials to consider lifting tariff barriers so that more imported sugar can reach food and candy makers. (more)

Evans-Pritchard: Stock Prices Way Off

The market price of stocks is way off, says British financial journalist Ambrose Evans-Pritchard.

“If you look at the sheer scale of global stimulus this year, what shocks is how little has been achieved,” Evans-Pritchard writes in the U.K. Telegraph.

China's exports were down 23 percent last month and Japan's were down 36 percent, Evans-Pritchard notes.

Moreover, industrial production has dropped by 23 percent in Japan, 18 percent in Italy, 17 percent in Germany, 13 percent in France and Russia, and 11 percent in the U.S.

“Call this a V-shaped recovery if you want,” Pritchard says. (more)

Obama's 'Stealth Taxes' Estimated at Over $1.5 Trillion

Hold on to your wallets. Taxpayers at all income levels are facing a massive hit over the next decade as Democrats launch legislation that could bring well over $1.5 trillion in new taxes, fees, and other costs. It’s a blatant betrayal by a president who promised not to raise taxes "one dime" on those earning less than $250,000 a year.


FDIC Discloses Deposit Insurance Fund Is Now Negative

In an unprecedented disclosure, the FDIC has highlighted that it expects the DIF reserve ratio to be negative as of September 30. As there are a whopping 48 hours before that deadline, one can safely assume that the DIF is now well into negative territory: as of today depositors have no insurance courtesy of a banking system that has leeched out all the capital of the Federal Deposit Insurance Corporation. Let's pray there is no run on the bank soon. (more)

Special Alert – U.S. Dollar At Key Point

The terminally ill U.S. Dollar is trying to remove itself from its respirator for a while. Record low bullish sentiment in the Forex pits combined with it brushing up against the top of a clearly defined downtrend suggests it needs careful watching for the short term at least. A close above the 50-Day M.A. around 78 would be the first real sign a counter-trend rally is underway. Any such rally should be held around the 200-Day M.A. in the 82 area.

Today’s employment number could be the ignition so stay tuned.