Five Things You Need to Know: 157,000 New Butler Jobs Created in May; Pending Home Spin; Hedge Funds to Force People From Homes; Parking Spots of the Rich and Famous; The Butler Did It!
What you need to know (and what it means)!
Minyanville's daily Five Things You Need to Know to stay ahead of the pack on Wall Street:
1. 157,000 New Butler Jobs Created in May
A slew of economic data hit the tape this morning, led by employment figures, consumption and income. Below are the highlights, and what they mean.
- Before we get to the employment figures, the most important piece of data the market is focusing on is the core consumer price inflation, which increased 0.1% in April, according to the Commerce Department.
- That's down from a 0.8% increase in March.
- More importantly, the year-over-year core rate is running at 2%, now within the 1-2% range the Fed has said is acceptable.
- Also garnering praise this morning is the unexpected increase in personal spending, which rose 0.5%, more than the 0.4% increase expected.
- What's receiving less attention, naturally, is the drop in personal incomes.
- Personal incomes fell 0.1%, far worse than the increase of 0.3% that was expected.
- And still receiving even less attention is the Personal Savings rate, which thanks to a jump in consumer spending, combined with a decline in personal incomes, worsened to negative 1.3% from negative 0.7% the previous month.
- Meanwhile, the Labor Department reported the economy added 157,000 payroll jobs in May, up from 80,000 in April.
- Miraculously, the Birth/Death Model was responsible for the addition of 40,000 construction jobs in May, which comes to an annualized rate of 480,000 construction jobs... even as housing starts are declining at a 15.7% annualized pace!
- But so what? As number Five today will demonstrate, there are more than 1.5 million new butler jobs out there just waiting to be created.
2. Pending Home Spin
Pending sales of U.S. homes fell by 3.2% in April, the National Association of Realtors said.
- Pending home sales are now running at a rate that is more than 10% below last year's.
- "It looks like we may be leaving a period of market disruptions, and for the past two months the pending home sales index has been similar in year-ago comparisons, which means home sales might ease but should be fairly stable in the months ahead," NAR senior economist Lawrence Yun said without any justification or basis in reality whatsoever.
- "In April, existing-home sales declined in part because some subprime lenders went out of business and disrupted the market, but the impact appears to be diminishing and mortgage applications have risen in the last month," Yun added, completely contradicting what Fed bureaucrats and politicians have been saying for months, that subprime issues are contained.
- Wait, what about those rising mortgage applications stabilizing the market?
- Well, if you're a borderline borrower with fewer mortgage options thanks to the demise of more than 77 mortgage lenders in less than a year, you'll now need to submit not just one mortgage application for cursory examination and approval, but multiple mortgage applications.
Minyanville's Boo Looks at Housing Stabilization on Hoofy & Boo's News & Views
3. Hedge Funds to Force People From Homes
A group of more than 25 hedge funds has asked the International Swaps and Derivatives Association (ISDA) to look into their concerns that banks that sell derivatives that pay out when mortgage loans run into problems, while also handling mortgage payments, could be making concessions to homeowners just to avoid making good on the contracts.
- According to the Financial Times, the dispute revolves (almost literally) around derivatives contracts that pay out to investors (such as hedge funds) when bonds backed by subprime mortgage loans run into trouble.
- The funds fear that banks are making concessions on the underlying mortgages to homeowners simply to avoid making good on derivatives contracts that pay off in cases of default, the FT said.
- The heart of the hedge funds' concerns focus on loan modifications that banks often used to help overextended borrowers keep up with payments.
- According to the FT, credit analysts say 40% of the modified loans fall back into arrears within a year.
- One member of the group that wrote to the ISDA said that hedge funds are not trying to force subprime borrowers from their homes.
- No, of course not.
- The hedge funds aren't interested in forcing subprime borrowers from their homes.
- They're only interested in forcing the banks to force subprime borrowers from their homes.
4. Parking Spots of the Rich and Famous
In a story loosely related to hedge funds forcing banks to force poor people from their homes, the most expensive parking spot in Manhattan now costs at least $1,183 a month. That's one thousand, one hundred and eighty-three dollars a month. For parking. It's a parking spot. See, you can't really do anything to it but park your car in it. For more than $1,100 a month.
- The spot, located at 2 E 60th St. between Fifth and Madison, is the most expensive parking spot in Manhattan.
- What's more, it charges more than $1,300 a month if you have an "exotic" car, such as a Rolls, Bentley or Maserati.
- According to the New York Sun, New York City is the only city in America that charges more for luxury cars.
- "Parking is supply and demand economics in its purest form," a parking consultant with Walker Parking Consultants, Andrew Hill, told the Sun.
- Takes a lot of subprime mortgage credit default payouts to own a parking space in this baby.
5. The Butler Did It!
What do you get when there's an ongoing devaluation of the U.S. dollar, a negative personal savings rate, declining personal incomes, the erosion of a middle class and the richest 1% of Americans possess more wealth than the bottom 90% of Americans? A boom in butlers, of course!
- According to the Wall Street Journal, today's rich, with their high-tech estates, globe-trotting schedules and complicated lives, need more than a traditional butler to run things.
- "They want a hands-on manager, a kind of chief operating officer for My Life Inc."
- As of 2004, there were more than 1.4 million U.S. households worth at least $5 million and more than 530,000 worth more than $10 million, according to the Federal Reserve.
- Forget about today's employment data where the Birth/Death Model mysteriously added construction jobs last month at what comes out to a 480,000 annual pace.... even as residential construction is declining at a 15.7% annual pace, there's nearly 2 million job openings out there for butlers!
- Worried that you may not have what it takes to wait on rich people hand and foot?
- Friends, fear not, just make your way to the Starkey International Institute for Household Management. Seriously. (Note: Surprisingly, Butler University is not a university for butlers, as the name clearly implies.)
- In just eight weeks Starkey students learn how to cook, clean, polish, dust, wash and fold for rich people.
- "They learn how to iron a pair of French cuffs in seconds flat. They learn how to clip a 1926 Pardona cigar, how to dust a de Kooning canvas and whether to pair an oaky chardonnay with roasted free-range game hen. They learn how long it takes to clean a 45,000-square-foot mansion (20 to 30 hours depending on the art and antiques), where to find 1,020-thread-count sheets (Kreiss.com), and how to design a "stationery wardrobe" -- envelopes and letterhead specially designed to reflect the owner's wealth and social standing. They will be taught that sable stoles should never be stored in a cedar closet (it dries them out), and that Bentleys should never, ever be run through the car wash," the Wall Street Journal says.
- If anyone requires evidence of the strength of the U.S. economy, then this is it.
- Butlers, after all, earn a salary of $70,000 to $120,000 a year, according to the Journal.
- Moreover, this is a kind of trickle down, self-perpetuating profession.
- All you have to do is work for a few years as a butler, save your money, then take your wealth and move into your own mansion and hire your own butler!
- See, this creates new job opportunities for future butlers who will, thanks to their high salary as butlers, one day become wealthy and go on to hire butlers themselves; a never-ending stream of former butlers hiring butlers hiring butlers.
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