Crazy Nut Job

Population growth in the US, prison. In 1980, there were...

Wed, 10 Mar 2010 04:18:52 -0500

Population growth in the US, prison.

In 1980, there were 319,598 people in prison, representing 0.14% of the US population. In 2008, there were 1,518,559 people in prison, representing 0.5% of the US population. This doesn’t include jail, probation, or parole data.

(source, source)

‘Cinderella’ Valley Vintners May Go Broke After Quake

Wed, 10 Mar 2010 03:22:00 -0500

‘Cinderella’ Valley Vintners May Go Broke After Quake:

If you are a fan of Chilean wines (and who knows, you might be, give ‘em a try), you should probably stock up. I actually read about this earlier, but I went into hoarding mode and didn’t tell you about it until I had the chance to go buy some wine.

You must understand. We’re getting married at a winery. One of our best friends works at a different winery. I am a big fan of other wineries. As a random aside, I’d actually recommend Paso Robles wines over Santa Barbara or Sonoma County wines. We are members of multiple wineries, so we have to drink just to avoid filling our apartment with wine. But the point is, I’d never really sampled Chilean wines. From what I’ve tried, I can’t say they are “must buy” wines. However, I’m not done drinking yet. Perhaps after another few nights of drinking I will have changed my mind. But I now feel comfortable sharing this information with you. If you like Chilean wines, stock up, they may be gone forever.

Also, there was a human tragedy involving a quake in Chile.

Ok, I’m a little embarrassed that I didn’t try that...

Wed, 10 Mar 2010 02:44:00 -0500

Ok, I’m a little embarrassed that I didn’t try that first (in my defense, I googled “zap,” “zapped,” “facebook zap,” etc. before posting. And without a hint of irony, I’m hammered.), but I’d be disappointed in some of the results if it turns out to be a synonym for “tired.” Besides, that’s how I’d use the term. Still a bit worried that definitions #3 and #5 involve drugs.

Hey cool kids, we're hip to your jive...

Wed, 10 Mar 2010 02:23:18 -0500

My fiancée had a research problem for her students. They had to ask a question with a quantitative response. Then they had to find the mean, median, and mode of the data. Us old fogies can’t decode one of the questions. What does it mean, “How many times have you gotten zapped in the past month?” Given the responses, we’re hoping it isn’t slang for getting high (seriously, you’d have to be rich to get high 20 times in one month). Also, if that were the case, she’d have to turn the test into the assistant principal. Santa Barbara is humid enough that noticeable static electric discharge isn’t very common, either. Any ideas?

Obama Foreclosure-Prevention Plan Lagging, New Data Shows

Wed, 10 Mar 2010 01:09:28 -0500

Obama Foreclosure-Prevention Plan Lagging, New Data Shows:

(via)

Only about a third of the homeowners who have successfully completed the trial period of the Obama administration’s mortgage modification program have been offered permanent relief, according to new federal data obtained by the Huffington Post.

The conversion rate — about 33 percent — is woefully short of what the Treasury Department had forecast. Treasury thought the rate would be “ranging up to 75 percent,” Herbert M. Allison Jr., assistant secretary for financial stability, told the Congressional Oversight Panel in October.

Honestly, when the HuffPo is harder on an Obama program than I am, someone had silly expectations (ok, the Treasury Department forecast 75%, but remember that our Treasury Secretary is largely responsible for the Asian currency crisis, was the regulator in charge of AIG when it failed, and couldn’t figure out how to properly use TurboTax). A 33% success rate is phenomenal for any rescue program. Remember, these are people who would be foreclosed on in absence of the program.

Now, we can debate whether or not such a program is a worthwhile expenditure (and I fall into the “nay” category on that one), but can you imagine a program that converts delinquent borrowers into “current” homeowners at anywhere near a 33% success rate in this housing environment that wouldn’t be an open door for fraud an abuse? I mean, aside from the government simply buying people houses (‘cause that’s not ripe for abuse)? Did anyone actually buy the 75% figure anyway?

Of course, many of these people will still end up getting foreclosed on at some point in the future, but absent significant principle reductions, that’s just a fact of life. This program still exceeded rational expectations. Also, it’s nowhere near as stupid as the homebuyer tax credit, which cost taxpayers an amount greater than the median home price for each additional home sold (yes, it would have been more efficient for the government to simply buy people homes. Now who has a problem with HAMP?—Aside from me, that is).

Making Sure Wrong Home Isn't Seized

Tue, 09 Mar 2010 20:03:55 -0500

Making Sure Wrong Home Isn't Seized:

This article is rather timely (via).

Reports of lenders repossessing the wrong home are further tarnishing the banking industry’s image, already bruised by bailouts and bonuses.

The mix-ups have been perpetuated by the sheer number of foreclosures being processed today as well as the various layers of communication involved. Addresses and other information passed from one department to another, or from a contractor to a subcontractor, can get garbled along the way.

…

Though such gaffes are rare, they have happened enough times to lead at least one major servicer to rethink and retool its default-management process. Bank of America Corp., the nation’s largest servicer, is updating its contractor-training tools and adding a step when securing a property to ensure that the right home receives the repossession notice.

B of A “rekeys” - changes the locks - on about 16,000 properties a month, said Rebecca Mairone, the Charlotte company’s head of servicing. In the last seven months, B of A is aware of just 11 mistakes. That gives it an accuracy rate of about 99.99%.

For those on the losing end of those 11 mistakes, the consequences can be rather severe. Still, the consequences are less than those for the death penalty, and we don’t claim to have nearly as high an accuracy rate on that. Ok, that was unnecessary and non-topical snark. I really just wanted to share this article because it actually provided some numbers for things I had previously only seen single cases reported on.

Most Americans still unprepared for retirement

Tue, 09 Mar 2010 19:24:28 -0500

Most Americans still unprepared for retirement:

The percentage of workers who said they have less than $10,000 in savings grew to 43% in 2010, from 39% in 2009, according to the Employee Benefit Research Institute’s annual Retirement Confidence Survey. That excludes the value of primary homes and defined-benefit pension plans.

Workers who said they had less than $1,000 jumped to 27%, from 20% in 2009.

This is being reported everywhere today (I first saw it here). Is it any wonder that 7 in 10 Boomers are delaying retirement for financial reasons? I don’t actually fault most of these workers. Our monetary and tax policies discourage saving and promote borrowing as a means of expanding our economy. By some measures, this strategy has certainly worked. There are some costs, though. Austerity seems to be coming to the US. Some will adopt it by choice (frugality), others will have it thrust upon them (poverty).

Oh dear. I also didn’t intend to be too critical of...

Mon, 08 Mar 2010 21:57:05 -0500

Oh dear. I also didn’t intend to be too critical of bankers. One of my good friends is a banker… though I did catch him saying “If I reverse your fees, it comes out of my bonus.” I assume he was joking.

Reality Check on “Produce The Note” Strategy

Mon, 08 Mar 2010 20:58:48 -0500

Reality Check on “Produce The Note” Strategy:

squashed:

I think you’re more or less right on this one. I tend to use the “Produce the Note” defense as more of a “Go back, get your papers straightened out, then let me talk to the one guy who was competent enough to straighten out the paper.” In a lot of the cases, the whole mess could have been avoided if the banks or servicers had been on top of things from the beginning.

Often there will be a pattern where a borrower realizes they are going to have trouble making payments, calls the bank, and is told they qualify for a modification. They wait for the promised paperwork. It doesn’t show up. They call again. Different person, similar story. This happens repeatedly. Then they get a notice of a foreclosure suit and a letter demanding that a few thousand dollars of the bank’s attorneys fees be repaid in order to consider a reinstatement of the loan.

Just to be clear, I wasn’t actually taking a position on the matter. In fact, given that BofA has successfully foreclosed on people who had paid off their home and never had their mortgage through BofA in the first place, I think the “Produce The Note” strategy is both necessary and good. You are not the only lawyer who has reported on the disarray of the bankers’ records. I thought the article itself was broadly interesting (otherwise I would have simply emailed you the link and asked for your opinion).

Reality Check on “Produce The Note” Strategy

Mon, 08 Mar 2010 20:28:35 -0500

Reality Check on “Produce The Note” Strategy:

Homeowners facing foreclosure are, understandably, looking for hope. News reports of homeowners successfully asserting the “produce the note” defense to stop foreclosure have sparked that hope in many. It seems only logical that a company commencing a foreclosure action should be required to demonstrate that it is the real party in interest before that action can move forward. But simply demanding that a mortgage servicer produce the note or establish itself as the real party in interest isn’t the magic bullet it sometimes appears in the popular press.

Bank Failure Friday

Fri, 05 Mar 2010 23:16:15 -0500

It’s been a while since I’ve made one of these posts. I’ve been taking Fridays off. The FDIC has not. This Friday, four banks were added to the FDIC Failed Bank List:

Centennial Bank, Ogden, UT - $205.1 million in total deposits and an estimated hit to the Deposit Insurance Fund (DIF) of $96.3 million. This is a true closing, with the FDIC authorizing a payout of insured deposits. The FDIC estimates the bank had $1.8 million in uninsured deposits. There will be some unhappy customers.
Waterfield Bank, Germantown, MD - $156.4 million in deposits and an estimated hit to the DIF of $51.0 million. The FDIC created a new bank to ease the transition of assets to other banks.
Bank of Illinois, Normal, IL - $198.5 million in total deposits and an estimated hit to the DIF of $53.7 million. The FDIC entered into a loss-share agreement with Heartland Bank and Trust Company of Bloomington, Illinois on $166.6 million of Bank of Illinois’s assets.
Sun American Bank, Boca Raton, FL - $443.5 million in total deposits and an estimated hit to the DIF of $103.8 million. The FDIC entered into a loss-share agreement with First-Citizens Bank & Trust Company of Raleigh, North Carolina on $433.0 million of Sun American Bank’s assets.

26 banks have failed this year. Based on the actions of regulators, including the hiring of additional FDIC closing teams, bank failures are expected to increase substantially before the end of the year. The DIF has a negative balance (but this includes losses that have yet to be paid out. Cash still exists). Banks have already paid their insurance premiums for the next several quarters. The FDIC will be forced to tap their line of credit at the Treasury, it is only a matter of time.

Unemployment: 9.7%

Fri, 05 Mar 2010 10:37:05 -0500

The unemployment rate held steady in February’s Employment Situation Report. On a seasonally adjusted basis, 36,000 jobs were lost. On an unadjusted basis, 473,000 jobs were added. The Bloomberg consensus range for the adjusted number was quite large, ranging from -150,000 to 30,000. From the report:

Nonfarm payroll employment was little changed (-36,000) in February, and the unemployment rate held at 9.7 percent, the U.S. Bureau of Labor Statistics reported today. Employment fell in construction and information, while temporary help services added jobs. Severe winter weather in parts of the country may have affected payroll employment and hours; however, it is not possible to quantify precisely the net impact of the winter storms on these measures. For more information on the effects of the severe weather on employment estimates, see the box note at the end of the release.

…

Construction employment fell by 64,000 in February, about in line with the average monthly job loss over the prior 6 months. Job losses were concentrated in nonresidential building (-10,000) and among nonresidential specialty trade contractors (-35,000). Since December 2007, employment in construction has fallen by 1.9 million.

Employment in the information industry dropped by 18,000 in February. Since December 2007, job losses in information have totaled 297,000. In February, employment in transportation and warehousing continued to trend down.

Employment in manufacturing was essentially unchanged in February. Small job gains in a number of component industries were offset by job losses in motor vehicles and parts and in chemicals.

Retail trade employment was unchanged in February, after a sizeable increase in January. Over the month, job gains in building material and garden supply stores (7,000) and in department stores (6,000) were offset by declines in food and beverage stores (-9,000).

In February, temporary help services added 48,000 jobs. Since reaching a low point in September 2009, temporary help services employment has risen by 284,000. Health care employment continued to trend upward in February.

In February, employment in the federal government edged up. The hiring of 15,000 temporary workers for Census 2010 was partially offset by a decline in U.S. Postal Service employment.

I do want to point out that those numbers are all seasonally adjusted. It seems silly to talk about “sizeable” increases in retail jobs in January when 500,000 jobs were lost, as opposed to saying “fewer jobs than usual were lost.” I also find it interesting that the seasonal adjustment halved the number of census jobs. Either the census hiring is seasonally anticipated, in which case it should have been zero, or it’s non-seasonal, and the whole number should be used.

On an unadjusted basis, the biggest jobs changes occurred in education and health services (247k), government (399k, almost entirely state and local, not federal), and retail trade (-168k).

The alternative measures of labor underutilization can be found in table A-15. U-6, the broadest measure of unemployment, crept up from 16.5% to 16.8% (unadjusted, it decreased from 18% to 17.9%). This is often cited as the “real” unemployment rate.

Now for the weather. The BLS released a statement including a discussion about the weather’s impact on unemployment:

In the establishment survey, workers who do not receive any pay for the entire pay period are not counted as employed. Therefore, it is possible that the storms had some negative impact on payroll employment. However, not every closure or temporary absence causes a drop in employment. Workers are counted as employed in the establishment survey if they are paid for a single hour during the reference pay period, whether they worked or not. Also, half of all workers have bi-weekly, semi-monthly, or monthly pay periods. I would assume that most of them worked during the part of the pay period that preceded or followed the snow events. In addition, we do not know how many workers may have been added to payrolls for snow removal, cleanup, and repairs due to the storms. Nor do we know how new hiring or separations were affected by the weather. For those reasons, we cannot say how much February’s payroll employment was affected by the severe weather.

In our household survey, persons with a job who miss work for weather-related events are counted as employed whether or not they are paid for the time off.

At Bloomberg, an article points out that historically, changes from such storms are quite small.

This report wasn’t particularly bad (many consider it good). The employment situation, on the other hand, is still terrible. The only sectors to add jobs over the last year are education and health services and the federal government. Every other private and government sector shows job losses over the year. Since our working population is estimated to expand at roughly 125,000 a month, there’s a significant hole to dig ourselves out of. With 7 in 10 boomers putting off retirement for financial reasons, that trend won’t reverse easily.

Iced Trenta coffee? Starbucks tries bigger drinks

Thu, 04 Mar 2010 17:00:21 -0500

Iced Trenta coffee? Starbucks tries bigger drinks:

31 ounce iced beverage to compete with Dunkin’ Donuts and McDonald’s? This is why we can’t have nice things.

Unemployment: New Claims Down

Thu, 04 Mar 2010 10:54:00 -0500

This was a bit of critical news that worked out as needed. The Unemployment Insurance Weekly Claims Report has been released. Last week I stated that we would need one more bad data point before admitting that another trend up in new claims was happening. This was largely because of the weather’s unknown impact on the underlying trend. This week rejects the establishment of an uptrend. Initial claims dropped to 469,000. Unfortunately, last week’s figure was revised up 2,000. This week’s drop placed new claims toward the low end of the Bloomberg consensus range of 460k to 490k. From the report:

In the week ending Feb. 27, the advance figure for seasonally adjusted initial claims was 469,000, a decrease of 29,000 from the previous week’s revised figure of 498,000. The 4-week moving average was 470,750, a decrease of 3,500 from the previous week’s revised average of 474,250.

The advance seasonally adjusted insured unemployment rate was 3.5 percent for the week ending Feb. 20, a decrease of 0.1 percentage point from the prior week’s revised rate of 3.6 percent.

The advance number for seasonally adjusted insured unemployment during the week ending Feb. 20 was 4,500,000, a decrease of 134,000 from the preceding week’s revised level of 4,634,000. The 4-week moving average was 4,575,750, a decrease of 29,250 from the preceding week’s revised average of 4,605,000.

The flip side of this news is that the nice trend down we were enjoying also hasn’t been re-established. We’re in limbo as far as the trend goes. That ever-elusive 400k mark for seasonally adjusted claims may have some more time before being crossed. Removing the seasonal adjustment doesn’t improve anything this week. New claims of actual unemployed people increased:

The advance number of actual initial claims under state programs, unadjusted, totaled 471,720 in the week ending Feb. 27, an increase of 17,128 from the previous week. There were 645,827 initial claims in the comparable week in 2009.

The advance unadjusted insured unemployment rate was 4.3 percent during the week ending Feb. 20, unchanged from the prior week. The advance unadjusted number for persons claiming UI benefits in state programs totaled 5,571,085, an increase of 24,534 from the preceding week. A year earlier, the rate was 4.7 percent and the volume was 6,231,080.

It’s appropriate to throw out a reminder that new claims are the important data in this report. High new claims indicates high churn in the jobs market. While it is conceivable that new jobs could be added in such an environment, historically that appears not to be the case. Convincing moves below 400k are associated with a recovery in employment. Continuing claims are historically a good indicator of employment recovery, but once the duration of a downturn crosses some threshold, its utility as an indicator falls. That threshold is difficult to pin down, but is where EUC (emergency unemployment compensation, as distinguished from UI) becomes a significant factor. It is safe to say that we are well past that point.

The good / bad lists tell an unusual story this week (about the week ending 2/20).

The good list (-1000 or more): CA, NC, FL, MI, OH, AR, OR, PR, WA, TN, SC, TX

The bad list (+1000 or more): IL, DE, MD, MO, CT, MA, NJ

NJ (the worst) was +4,879 vs CA (the best) at -12,000. It’s good to see California stay in the top spot (though some of the reduction was credited to a shorter work week). But what was unusual was not the lists, but the comments. Two states (DE, MD) blamed the weather for a backlog that increased their claims. Two other states (CT, MA) blamed school closings for the increase in claims. Ouch. New Jersey had both the weather and a statewide furlough day the prior week compound their backlog.

I mentioned last night that an extension to unemployment benefits was passed by the Senate and signed by Obama on March 2. This extends both EUC and COBRA subsidies for one month. What this doesn’t do is extend the duration of coverage of EUC by an additional month. People exhausting their benefits are waiting on a different bill.

This report is consistent with additional job losses in February. Tomorrow’s employment situation report will be released along with a statement of what adjustments were made to compensate for the weather. The census probably added 30,000 jobs in February (source). That’s significant compared to the monthly change levels we’ve been experiencing. Will it be enough?

The "Meh" Indicators

Wed, 03 Mar 2010 22:25:00 -0500

Various economic reports were released today. They all indicated a fairly slow recovery.

The first was the ADP employment report. It roughly correlates with the monthly employment situation report, except that it excludes government jobs. It came in “meh” with only -20,000 jobs. There was a brief weather disclaimer:

Two large blizzards smothered parts of the east coast during the reference period for the BLS establishment survey. The adverse weather had only a very small effect on today’s ADP Report due to the methodology used to construct it. However, the adverse weather is widely expected to depress the BLS estimate of the monthly change in employment for February, but boost it for March. Therefore, it would not be unreasonable to expect the BLS estimate for February (due out this Friday) to be less than today’s ADP Report even though the BLS estimate will include the hiring of temporary Census workers not captured in the ADP Report.

The second report was the ISM Non-Manufacturing Report On Business. The index hit its highest since the recession at 53%. Unfortunately, the employment indicator came in at 48.6%, indicating further job losses. I don’t consider this report to be as indicative of industry strength as the manufacturing report.

The third report, which is widely followed, was the Fed Beige Book. The summary wasn’t great (“modest” is quite accurate):

Reports from the twelve Federal Reserve Districts indicated that economic conditions continued to expand since the last report, although severe snowstorms in early February held back activity in several Districts. Nine Districts reported that economic activity improved, but in most cases the increases were modest. Overall conditions were described as mixed in the Atlanta and St. Louis Districts, though St. Louis noted further signs of improvement in some areas. Richmond reported that economic activity slackened or remained soft across most sectors, due importantly to especially severe February weather in that region.

Unfortunately, these reports are all consistent with expectations of job losses in Friday’s employment situation report. On the plus side, there’s been a piecemeal extension to unemployment benefits.

February Auto Numbers

Tue, 02 Mar 2010 21:19:46 -0500

The February numbers have come in from the automakers (source, source).

Ford up 43.1%
GM up 11.5%
Toyota down 8.7%
Honda up 12.7%
Nissan up 29.4%
Hyundai up 11%
Chrysler/Fiat flat (up 399 vehicles)
Subaru up 38%

Overall, that was an SAAR of 10.38 million cars and trucks. That’s up from 9.17 million a year ago, but down from 10.8 million in January (not a directly comparable figure). Most notable is the fact that Ford outsold GM in February. That’s a first in 12 years.

In other auto related news, GM recalls 1.3 million compact cars over steering.

"I’m going to be the best Robot Unicorn Attack player ever!"

Tue, 02 Mar 2010 17:03:47 -0500

“I’m going to be the best Robot Unicorn Attack player ever!”

- My coworker, setting a goal for himself.

If you haven’t played the game, you are missing something.

OK Go - This Too Shall Pass - RGM version via the usual...

Tue, 02 Mar 2010 12:59:29 -0500

OK Go - This Too Shall Pass - RGM version

via the usual coworker, reddit

ISM: Still Bullish

Mon, 01 Mar 2010 22:28:49 -0500

This is the third strong (February 2010) Manufacturing ISM Report On Business in as many months. The ISM PMI (Purchasing Managers’ Index) came in at 56.5, down from 58.4 (unrevised) last month. This came in near the low end of the Bloomberg consensus range of 55.0 to 60.0. Elsewhere, this was reported as missing expectations. Meh. As usual, the notes on employment and inventories are of primary interest to me. First, employment:

ISM’s Employment Index registered 56.1 percent in February, which is 2.8 percentage points higher than the seasonally adjusted 53.3 percent reported in January. This is the third month of growth in manufacturing employment, and the highest reading since January 2005 (58.7 percent). An Employment Index above 49.8 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

Ten of the 18 manufacturing industries reported growth in employment in February…

Unfortunately, while manufacturing hiring was strong, it won’t be enough to give us jobs growth for the month of February (manufacturing isn’t a big enough source of jobs overall). This is still good news, though. In fact, it’s better than the good news from last month.

We continue to look at the inventory data for confirmation of inventory expansion. We score a partial victory this month.

Manufacturers’ Inventories:

Manufacturers’ inventories contracted at a slower rate in February as the Inventories Index registered 47.3 percent. The index is 0.8 percentage point higher than the seasonally adjusted January reading of 46.5 percent. An Inventories Index greater than 42.6 percent, over time, is generally consistent with expansion in the Bureau of Economic Analysis’ (BEA) figures on overall manufacturing inventories (in chained 2000 dollars).

Customers’ Inventories:

The ISM Customers’ Inventories Index registered 37 percent in February, 5 percentage points higher than in January when the index registered 32 percent, and the 11th consecutive month the Customers’ Inventories Index has been below 50 percent. The index indicates that respondents believe their customers’ inventories are too low at this time.

The only industry reporting higher customers’ inventories during February is Furniture & Related Products.

Well, at least Manufacturers’ Inventories are consistent with last quarter’s GDP report. The previous ISM reports were not for either inventory measure. I was troubled by this, and went to the BEA’s Methodology Site. The story told by the ISM inventory data is likely to be more accurate. However, the actual GDP number is unlikely to be significantly revised. Errors tend to cancel out for various reasons (though there may be quarterly fluctuations). I’m still expecting a downward revision to the GDP data at some point (it was revised up in the last revision, but some of the data comes in at 5 year intervals, not every 3 months). I must admit that the historical evidence doesn’t support this position, though. Overall, I think this inventory data still qualifies as less bad.

The overall ISM report is quite bullish. The inventory data is no longer terrible, and the employment data continues to improve from already good numbers.

Fannie Seeks $15.3 Billion in Aid After 10th Loss

Fri, 26 Feb 2010 18:57:19 -0500

Fannie Seeks $15.3 Billion in Aid After 10th Loss:

This is why fear about research at the LHC is unfounded. We already have made black holes on Earth.