Economic Rebound, Not Yet! Rates to Remain Great.

The American Trucking Associations’ advance seasonally adjusted (SA) For-Hire Truck Tonnage Index rose for the first time since February 2009, gaining 3.2 percent in May. May’s increase, which raised the SA index to 102.3, wasn’t large enough to offset the March through April cumulative reduction of 6.7 percent. ...

Compared with May 2008, tonnage contracted 11 percent, which was the best year-over-year result in three months. Despite the improvement from April’s 13.2 percent plunge, May’s decrease is still historically large.

ATA Chief Economist Bob Costello said the month-to-month improvement was encouraging, but cautioned that tonnage is unlikely to surge anytime soon. “I am hopeful that the worst is behind us, but I just don’t see anything on the economic horizon that suggests freight transportation is ready to explode,” Costello said. “The consumer is still facing too many headwinds, including employment losses, tight credit, rising fuel prices, and falling home values, to name a few, that will make it very difficult for household spending to jump in the near term.” He also noted that he doesn’t expect tonnage to deteriorate much further and that any growth in tonnage over the next few months is likely to be modest.

Note on the impact of trucking company failures on the index: Each month, ATA asks its membership the amount of tonnage each carrier hauled, including all types of freight. The indexes are calculated based on those responses. The sample includes an array of trucking companies, ranging from small fleets to multi-billion dollar carriers. When a company in the sample fails, we include its final month of operation and zero it out for the following month, with the assumption that the remaining carriers pick up that freight. As a result, it is close to a net wash and does not end up in a false increase. Nevertheless, some carriers are picking up freight from failures, and it may have boosted the index. Due to our correction mentioned above, however, it should be limited.

Trucking serves as a barometer of the U.S. economy, representing nearly 69 percent of tonnage carried by all modes of domestic freight transportation, including manufactured and retail goods ...

repost from our favorite blog: Calculated Risk.

Expect to see good conforming and jumbo loan rates for the next six months at least. It will take some time for the inflation rate to budge and force rates higher.

Recession Over? Wall St Thinks So..

I think not. Chart of the day:

Let's use the US Government Credit Card.

The latest topic swirling around is the Bush proposal to put checks in the mailboxes of every taxpayer to stimulate the economy. That is equivalent of using the government HELOC to once again bail the republic out of the latest crisis. The government is 10 TRILLION dollars in debt now. That is what we all owe as of now. The recession could move into a depression and that is what Washington and Wall St are trying to avoid at all cost.


The check in every mailbox reminds me of Hebert Hoover who won election in 1928 on the slogan, "a chicken in every pot and a car in every garage." Seven months after his inauguration the 1929 crash occurred and the country went into the great depression. Any parallels? Winston Churchill said, " A nation that forgets it's past is doomed to repeat it." I am an optimist by nature but the fiscal meltdown that is occurring throughout the economy coupled with our mind numbing future obligations to Medicare and Social Security make me wonder when the party will end and the bill finally come due. Sober up and watch this video from 60 mins:

What will happen to jumbo loan rates in 08?

Broadly, jumbo loan mortgage rates fell in 2007. It's befuddling because there are two major reasons why mortgage rates should have increased in 2007:
The U.S. dollar took a precipitous decline against world currencies, devaluing mortgage bonds
Inflation ran beyond the top of the Fed's comfort zone for most of the year, devaluing mortgage bonds
When mortgage bonds get devalued, there should be less demand for them. But that wasn't the case. If mortgage rates are lower now than they were a year ago, it means that demand for mortgage bonds must be higher.

There is an inverse relationship between the demand for mortgage bonds and mortgage rates. As demand increases, mortgage rates fall. As demand wanes, mortgage rates increase.
So, in 2007, mortgage rates fell because global investors' desire to hold U.S. mortgage bonds outweighed their desire to sell them -- despite the constant drag against their value.
We can hypothesize that mortgage rates would have fallen much, much more had the dollar been stronger, or inflationary pressures been weaker.
One way to envision this is to think of a runner with a parachute apparatus attached to his back.
The athlete is moving forward but the parachute is adding a tremendous amount of drag. Once the parachute detaches, the athlete picks up a lot of speed.
In this sense, a stronger dollar or weaker inflation could dramatically drop mortgage rates in 2008. It would be like cutting the parachute loose and letting mortgage markets run at full-speed.
The U.S. dollar is another hot spot. A weaker dollar should discourage foreign investment in mortgage bonds. In this sense, the U.S. dollar represents the parachute and the weaker it gets, the larger the canopy.

The "Recession versus Inflation" should be a hot topic through June 2008.
With every sign that recession is winning, expect mortgage rates to fall. When inflation grabs the lead, expect mortgage rates to rise. And watch out for world events that can change the landscape in an instant.

Recession and possible depression. Can I get some prozac with that?

Finally the "recession" talk is making headlines. The only thing right now that drives me wild is that there is still a discussion that the US will face a recession.... If the US would use a more "realistic" formula I assume that the recession is already here.... The clearest sign might be that Starbucks reported the first decline ever in customer visits. Hmm, five dollar coffee is a necessity right? Watch for 7-11 to pick up all the old Starbucks customers who downgrade. The good old substitution effect. Take a look at the warnings we have seen from Coach, Kohl's, JC Penny, etc. They are all reporting sharp drop offs in traffic YOY. Walmart is reporting various signs of consumer downgrading as well. But Ferrari is sold out for the year. So at least the rich are still doing well. I know you were worried for a minute that we were in serious trouble.


IN 1929, days after the stockmarket crash, the Harvard Economic Society reassured its subscribers: “A severe depression is outside the range of probability”. In a survey in March 2001, 95% of American economists said there would not be a recession, even though one had already started. Today, most economists do not forecast a recession in America, but the profession's pitiful forecasting record offers little comfort Recession in America / America's vulnerable economy

Also in case you think BusinessWeek and The Economist forgot to take their anti-depressants I would encourage you to think about what the CEO of the one largest banks in the US said today:

Wells Fargo CEO John Stumpf dropped the "D" word today: "We have not seen a nationwide decline in housing like this since the Great Depression," Stumpf said at a banking conference in New York. Stumpf said the second-largest U.S. mortgage lender and fifth-largest U.S. bank was "not immune" from the storm, but was well-positioned to ride it out, despite expectations for "elevated" credit losses from home equity loans into 2008. Are we in a recession? Post your thoughts or anecdotal evidence. Free speech still works here.