April 5, 2010

Data highlighted in RED updated this week.

Note: The Bank Credit data is continually revised, so we are only

publishing the change YTD from now on.

Closely watched 3-10 & 30yr bill and note sales upcoming this week.

Links:

.Gillian Tett, Are Swap Spreads a Canary in the Coal Mine?

Inflation Debate at the FED - WSJ

A Deeper Dive Into the Inflation Debate- WSJ

Commodities Poised to Decline as China Clamps Down?

Pimco Fears UK Debt Trap

Click on graph for larger image in new window.

Refinance Index drops as mortgage rates rise.

Jobs..Unemployment (including "marginally attached" workers aka

U6) Ticks up to 16.9%

Click on graph for larger image.

This graph shows the job losses from the start of the employment recession, in percentage terms - but this time aligned at the bottom of the recession. This assumes that the 2007 recession has reached bottom.

The current recession has been bouncing along the bottom for a few months - so the choice of bottom is a little arbitrary (plus or minus a month or two).

This graph shows the employment-population ratio; this is the ratio of employed Americans to the adult population.

The Employment-Population ratio ticked up slightly to 58.6% in March, after plunging since the start of the recession. This is about the same level as in 1983.

M3 Dropping at a rate of 4%, vs. 3.5% last reading...

National ISM Mfg. at 59.6 vs. 56.3 expected

Domestic Motor Vehicle Sales at 8.8mm rate vs. Feb's 7.7mm rate

Reis estimates CRE vacancies peaking:

Click on graph for larger image in new window.

This graph shows the office vacancy rate starting 1991.

Reis is reporting the vacancy rate rose to 17.2% in Q1 2010, up from 17.0% in Q4, and up from 15.2% in Q1 2009. The peak following the previous recession was 16.9%.

Debt Productivity Plunges

Bank Credit: $8,853 bn.Bank credit has contracted $145 bn since Dec. 2009, vs. a contraction of $280 bn for all of 2009.

Rates: 10yr: 3.94%(++) Fed Funds: 0.25% (=) See Chart Here.

S&P eps estimate: $80 (+) P/E: 14.3x See Source Here.

Dollar Index: 98.42, down vs. 99.5 on gains in oil and gold last week...Index rebased to 100 on 1.1.10.

Weightings: US Broad Dollar Index: 60%/Gold 20%/Oil 20%

DXY index: 103.67 vs. last week's 104.78. (for reference) rebased to 100 on 1.1.10.

BIC est. 2010 gdp growth: 8.9%, raised from 8.75% due to China forecast

raised by 0.5% by the World Bank.

Weightings: China 60%/India 20%/Brazil 20%.

China Rates: Tightening bias through loan restrictions: (=/-)

======================================================================

Tipping Points:

STATISTICS FROM THE US GOVT.

(Billions)

US GDP 2010: $14,620

US Gross Debt: $12,464

US Official (net) Debt 2010 $9,300, as % of GDP: 64%

Gross Federal Debt: $12,450: as a % of GDP: 85%

State &Local debt: $2,200, (approx)

US Deficit 2010: $1,556, as % of spending: 42%

US interest expense: $310, as a % of Federal Revenues: 17% US interest expense including FUNDED Social Security and Medicare is $310, or 17% of Federal Revenues. We should use this figure, because this is money that is has been spent already, but is still owed for entitlements.

• Federal Interest Costs/Federal Revenues: 17% .The Tipping Point is 30%.
• USA Gov deficit as % of expenditures: 42%. The Bernholz definition of the tipping point is 40%.
• USA Gov Debt (net)/GDP: 64% (Gross debt is 85% which includes SS & M-care non funded obligations). Tipping Point is 90-100% as defined by Rogoff & Reinhart. There is an additional $440bn of GSE debt in default that could also be added. The current gross debt ceiling, which will be breached in 12 months, is $14.3Tn.
• Protectionism Meter: 5.5 on a scale of 10. Rising trend. Premier Wen's speech.
• Federal Reserve QE post March 2010 status: TBD

Official Debt is borrowings held by the public.
Gross Debt includes debt issued by the govt to itself, with the resulting debt held by the Social Security and Medicare Trust Funds. However, proceeds have already been spent on general budgetary items.