The Abyss of the Double Dip
Certain portions of the economy and related data remain in a void.
Certain portions of the economy and related data remain in the abyss: CB Consumer Confidence at 55 is well below the neutral range of 90 to 120. The NAHB Housing Market Index is 16 well below the 50 neutral reading. Initial Jobless Claims are well above the Recessionary 350,000 milestone.
The FDIC Quarterly Banking Profile shows the banking system shedding assets with many categories of consumer and real estate loans rapidly falling into default and foreclosure. At January's pace of 15 bank failures, 180 will fail in 2010 with the Deposit Insurance Fund burning through three years of member fees.
"Volcker Rule" Rules
I've always been a Paul Volcker fan and he has a chance to make a difference again as President Obama's top economic advisor.
I agree that commercial banks shouldn't be involved with pure proprietary trading, but can trade to capture customer flow of business. This is essential to eliminate the mantra of "too big to fail."
According to Paul Volcker, "Hedge funds, private equity funds and trading activities unrelated to customer needs, unrelated to continuing banking relationships, should stand on their own, without the subsidies implied by public support for depository institutions."
More Evidence of a "Job-Loss Recovery"
According to the Labor Department, the unemployment rate rose in 306 of 372 metro Main Streets in December. The unemployment rate was above 10% in 138 metro areas up from 125 in November. In the past year unemployment was up in 371 of these metro areas.
Housing: A Buyers Market -- If You Can Get a Mortgage
According to a monthly report from Zillow, buyers paid 2.7% below the list price in December versus 2.6% in November. A year ago the buyer had a 4.5% advantage. As buying power starts to increase again, house prices are likely to renew their decline, which will force more mortgages underwater and deepen "The Great Credit Crunch."
More than 5 million homeowners will be underwater by 25% or more this year.
Banks and mortgage companies are happy to take bailout money that's intended to keep homeowners in their homes, but when the home is valued 75% below the mortgage, the trend is to simply walk away.
Because of the speculative bubble for house prices that began at the turn of the century, those who bought in 2005 and 2006 just paid way too much. Then the bubble popped, with home values plunging more than 30% in some cities. President Obama's home modification programs were supposed to help 4-7 million may have helped about 100,000, and the homes on the cusp that weren't refinanced will become foreclosures and short sales in 2010. This will further depress home prices continuing the housing depression. Even homeowners who can afford their mortgages are being advised by some mortgage brokers to do a "strategic" default then rent a similar home for a much smaller monthly payment.
The urge to default could spread to 10% of all homeowners in 2010 after being frustrated by the lack of help from their bankers, the near-impossible mortgage modifications programs and tougher lending standards by the FHA, Fannie Mae (FNM), and Freddie Mac (FRE). If the $700 billion TARP was allocated to help homeowners on Main Street instead of the Fat Cats on Wall Street and global investors, the US economy would likely be better off today. The term used against this idea in 2007 was called "moral hazard." Now many who said that are walking away from their homes.
The euro, gold, crude oil and the Dow are alleviating oversold conditions on their daily charts.
The euro is oversold with weekly support at 1.3658 and quarterly resistance at 1.4327.
Comex gold has rising MOJO with my quarterly pivot at $1084.9, a monthly pivot at $1093.5, my annual pivot at $1115.2, and semiannual resistance at 1139.7.
Nymex crude oil has rising MOJO with my weekly pivot at $75.87, my annual pivot at $77.05, and monthly resistance at $79.90.
The daily chart for the Dow has rising MOJO with daily support at 10,003 with weekly and annual resistances are 10,341 and 10,379. The 21-day and 50-day simple moving averages are set for a negative cross-over at 10,449 and 10,433 as the new market ceiling.
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