The most puzzling element in the recent set of economic releases and revisions on GDP growth is the disconnect between overall growth and consumer spending. The initial release for the first quarter showed GDP growth of 1.3% despite a rise in consumer spending of 3.8%; the revisions released last week reduced GDP growth to a […]
Read more...We had anticipated that the ho-hum initial GDP growth figure for the first quarter of 1.3% might be revised downward. Thursday, the Commerce Department changed its GDP estimate to 0.6% and altered many of the components. In particular, it increased its estimate of consumer spending growth from 3.8 to 4.4%. Not only was the 4Q […]
Read more...For those who don’t know about him, Jim Grant of Grant’s Interest Rate Observer has been a long standing and highly regarded advocate of probity, common sense, and historical memory. Of course, that means he is completely out of fashion. But Grant has a loyal following and even those who differ with his skeptical outlook […]
Read more...A colorfully written and informative post by Toro at Seeking Alpha on the overheated state of the commercial real estate market. We’ve commented before that it has somehow gone unnoticed that lending standards in the commercial real estate sector have become as permissive (one might say non-existent) as in the residential sector before the subprime […]
Read more...Since our immediately preceding post reminded readers of the not-so-great quality of many government statistics, what measures can the public use to gauge the health of the economy? John Dizard, in a Financial Times article, “Useful thinking from inside the box,” reminds us of a metric that was once used by some savvy investors (the […]
Read more...Barry Ritholtz via Seeking Alpha gives yet another example of a disheartening trend, namely, that government-issued statistics that investors, economists, and businesses for analytical and planning purposes are increasingly dubious. The case in point is the employment statistics. While the widely cited Bureau of Labor Statistics monthly employment report has showed tepid to reasonable employment […]
Read more...Nouriel Roubini looked at the various stats released last week – the 16% increase in new home sales versus the 1.4% fall in home prices averaged across 32 metropolitan areas (Federal Housing Finance Board survey) and the 2.6% fall in existing home sales from March to April (National Association of Realtors) and focused on the […]
Read more...This Financial Times story, “Growing biofuels demand raises food prices,” highlights increasing prices of grains and other soft commodities. The grain price rise merits particular attention, since it appears to be a structural rather than a cyclical increase. And higher grain prices in turn mean higher meat, milk, and egg prices. What this story does […]
Read more...Thanks to Felix Salmon for pointing this tidbit out to us. Due to leveraged buyouts (notice how the press has started to use that 1980s term once again?), there has been a surge in junk issuance. But since below-investment-grade issuers pay only about 180 basis points more than investment grade issuers, there is virtually no […]
Read more...Unlike its US counterparts, the Financial Times has consistently been on top of the various unsavory elements of the credit market bubble: the near disappearance of risk premia, the growth of leverage on leverage, the lack of investor sophistication. A piece by John Plender does a very good job of connecting some of the dots […]
Read more...Until recently, the stock and bond markets have both signaled a great deal of optimism about the economy. But bond yields have started to creep up, which says that fixed income investors are becoming wary. We’ve noted in several posts that inflation is running at a higher rate than the oft-cited CPI stats would lead […]
Read more...Apologies for the perhaps undue focus on real estate stories, but (unless you want me to write about the Preakness) that’s the most interesting news du jour. We didn’t see any reason for the housing market to improve, particularly since there was a considerable inventory overhang at the end of last year, and the first […]
Read more...One of Barry Rithotlz’s themes has been the idea of “inflation ex-inflation,” meaning the BLS’s predilection to define core inflation in such a way so as to exclude any item, like energy, whose price just might happen to be going up. We’ve noted a more general decline in the accuracy of government-generated economic statistics, particularly […]
Read more...I have a quibble with Nouriel Roubini’s headline, “Housing Recession Deepens and Subprime Credit Crunch Spills Over to Other Mortgages,” but agree with the substance of his post. The difference of opinion is in the idea that the subprime credit crunch is “spilling over.” Lenders have gotten much more stringent with weak borrowers, and somewhat […]
Read more...It’s quite remarkable how indifferent to bad economic data keeps coming in and the markets keep shrugging it off. And what is of particular concern, if you are the worrying sort, isn’t the peppy equity markets (that’s for the optimistic types anyhow), but the near-total indifference to risk in the credit markets. Aside from a […]
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