* Is a Recession Looming?<\/strong><\/a> by David Moenning<\/p>\n * Double-Dip Recession Signs Materializing<\/strong><\/a> by Markos Kaminis<\/p>\n * Economic Pullback Warning<\/strong><\/a> by John Hussman<\/p>\n * Divining the Future According to Dividends<\/strong><\/a> by Ironman at Political Calculations<\/p>\n The hollowing of our manufacturing base.<\/strong><\/span> The locals had jobs paying $20+\/hour in manufacturing with benefits. Now the jobs are service without benefits at less than $10 an hour. You earned $50,000 in manufacturing. You now earn $18,000 “if you’re lucky.” These are numbers from the Toledo area.<\/p>\n One desperate (and perhaps apocryphal) story:\u00a0 A man botches up a bank holdup, gets caught and now gets room, board and decent food for the next few years.<\/p>\n Cockroach stock.<\/strong> I did short BP. There is now talk of bankruptcy in BP’s future (which I doubt).\u00a0 My short has done well:<\/span><\/span><\/p>\n But it hasn’t been without it agonizing moments as the stock bounced — usually following some brilliant analyst writing that it was a bargain at some price (always higher than where it is now).<\/p>\n This chart showing movements every 60 minutes shows the pain of shorting as it bounces up and down.<\/p>\n Barry Ritholtz sees housing prices falling further:<\/strong><\/span><\/p>\n A Closer Look at the Second Leg Down in Housing<\/strong><\/p>\n Our story so far:<\/p>\n Following the 2000-03 DotCom crash, then Fed Chair Alan Greenspan brought Fed Funds rates down to ultra-low levels. Under 2% for 3 years, and at 1% for more than a year.<\/p>\n Rates this low – and for that long – were simply unprecedented. They wreaked havoc with the traditional fixed income market. Bond managers were forced to scramble for yield; they found it in investment grade, triple-A rated residential mortgage-backed securities (RMBS). The higher yield was created by securitizing mortgages, using an unhealthy slug of riskier, sub-prime mortgages.<\/p>\n The demand for RMBS paper was nearly insatiable. Wall Street sucked up as much sub-prime paper as could be legitimately, then illegitimately, produced. The Lend-to-securitize-nonbank mortgage writers responded to the demand by abdicating traditional lending standards. These firms handed out 30-year mortgages to people who in no conceivable way could afford to repay them. The mortgage underwriter’s hope was for no default over the warranty period of the mortgage \u2013 typically, just 90 or 180 days. After that, the loans were Wall Street’s problem.<\/p>\n The Greenspan Fed, in charge of supervising financial lending institutions, looked the other way.<\/p>\n The net result was a massive national credit bubble, and a housing boom. (A true housing bubble only formed in a handful of regions). The credit bubble allowed tens of millions of Americans to become, however temporarily, home-owners.<\/p>\n Consider: In 1992, some 4 million homes per year were being purchased. A decade later, that number had risen 25% to annual sales of five million. A mere three years later, annual sales were over 7 million units – a 40% increase.<\/p>\n From 2002 to 2007, the abdication of lending standards – who cares about credit scores, incomes, debt load, assets, even a job! – helped to create millions of new homeowners. And thanks to the ultra low rates, prices had exploded. The combination of new, unsophisticated buyers and rapidly rising prices was a dangerous combination.<\/p>\n Buyers of limited financial means \u2013 who en masse overpaid for their houses at historically low rates \u2013 were recipes for disaster. As the Fed began its cyclical tightening, price appreciation slowed, than reversed. As sales plummeted, prices fell. Since 2006, five million of those buyers were foreclosed upon, with another 4-5 million likely to come.<\/p>\n Which more or less brings you up to date.<\/p>\n Today, residential real estate confronts numerous headwinds: Credit, once given to anyone who could fog a mirror, is now tight. Today, demand is far below what it was during most of the past decade. Home prices are still unwinding from artificially high levels, and remain over-priced. Inventory is elevated. A huge supply of shadow inventory is out there: Speculators and flippers who overpaid but have held onto their properties await modestly higher prices to sell. Bank owned real estate (REOs) continues to increase. That’s before we get to the fact that unemployment remains high, and is unlikely to improve anytime soon. Oh, and wages have been flat for a decade.<\/p>\n This are not encouraging factors about housing.<\/p>\n This is known, or at least should be by those who have looked at the data. I cannot explain why some economists still have not figured this out.<\/p>\n In my analysis, price stands out as being the prime mover of the next leg down. High unemployment, and a decade of flat wages aren’t helping to create any new housing demand. And the millions in homes they cannot afford will eventually add more pressure to inventory and prices. Indeed, we are still working<\/p>\n But the bottom line is Home prices remain too high: There can be no doubt that home prices have moved way down from the 2005-06 peaks. How did I reach the conclusion that, even after a 33% decrease in prices, home prices are high?<\/p>\n By using traditional metrics: Whether we are looking at US housing stock as a percentage of GDP or Median income versus home prices or even ownership versus renting costs, prices remain elevated. Indeed, we see prices remain above historic means.<\/p>\n You can read his full analysis here here.<\/strong><\/a><\/p>\n The longest tennis match in history.<\/strong><\/span> John Isner survived the longest tennis match in history last Thursday at Wimbledon, only to lose the next day in the shortest men’s match of the tournament. He presented\u00a0“Top Ten Thoughts That Went Through John Isner’s Mind During the 11-Hour Tennis Match<\/em>” on\u00a0 the Late Show with David Letterman.\u00a0 Isner’s list included:<\/p>\n 6. “I’m gonna lay back until 51-50 and then make my move.”![\"\"](\"https:\/\/www.technologyinvestor.com\/wp-content\/uploads\/2010\/06\/BPShort.jpg\" "\\"BPShort\\"")
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\n5. “I’m asleep.”
\n4. “Why couldn’t I have played Federer? It would’ve been over in 15 minutes.”<\/p>\n
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