Bloody Mary Morning: Dow Down 434 Points, US Treasury 10 Yield Down 17 BPS (Goldman Downgrades Q3/Q4 GDP Forecast)

As Willie Nelson used to sing “It’s a Bloody May Morning.”

The economic news this morning was not good. Retail sales were weaker than expected, as was the Empire Manufacturing index.


And Goldman Sachs downgraded Q3/Q4 GDP in this report:

BOTTOM LINE: Business inventories rose less than expected in August. In light of the disappointing September retail sales report and slower-than-expected inventory growth in August, we reduced our Q3 GDP tracking estimate by three-tenths to +3.2%. We also moved our Q4 GDP forecast down a quarter point to +3.0%.


1. Business inventories rose 0.2% in August (vs. consensus +0.4%). Retail inventories—the only component of the report not already known for the month—declined 0.3%. Auto and auto parts inventories declined 0.7%, while ex-autos inventories were flat.

2. In light of the disappointing September retail sales report and slower-than-expected inventory growth in August, we reduced our Q3 GDP tracking estimate by three-tenths to +3.2%. We also moved our Q4 GDP forecast down a quarter point to +3.0%, due to weaker momentum in consumer spending heading into the quarter.

Markets did not react well.

The Dow is down 434 points as of 1:42pm EST.


US Treasury 10 year yields are down 18 basis points to near 2.0%.


Across the bond, Greek 10 year yields are UP 77 basis points, Portugal’s UP 22 basis points and Italy’s UP 12.5 basis points.


And the US Dollar against The Gyro? I mean Euro


Opa! opa2

And to quote The Bard from King Lear …


Orkin: Chicago “Rattiest” City in USA, Followed By Los Angeles and Washington DC

Orkin, the pest extermination company, has released its ranking of the most rat-infested cities in the USA.

Leading the list is Chicago, followed by Los Angeles and Washington DC. And then by New York City and San Francisco.


It is a shame that the some of the nation’s most expensive cities have the worst rat problems.


At least the lack of recovery of house prices in Chicago and New York City can help explain the “rattiness” of Chitown and The Big Apple.


But San Francisco, Los Angeles and Washington DC have little excuse for their rattiness.

Perhaps Tony Bennett can sing “I left my cheese in San Francisco.”


Oddly, this is exactly what our pizza delivery person looks like too!


Labor Participation Rate Drops To 36 Year Low, Wage Growth Zero, Bernanke Turned Down For Mortgage Refi

Today’s jobs report is ugly, yet if I turn on Fox Business and CNBC I will hear only joyous headlines: unemployment rate drops to 5.9!


What’s NOT to like about the employment report?

First, U6 unemployment (full-time and marginally attached) still remains higher than at anytime prior to September 2008 at 11.8%.


Second, civilian labor force participation dropped to 36 year lows. Back when Jimmy Carter was President.


Third, people not in the labor force rose to a new record high, increasing by 315,000 to 92.6 million!


Fourth, average hourly earnings (MoM) fell to zero while average hourly earnings (YoY) fell to 2.0%.


Finally, former Federal Reserve Chair Ben Bernanke was turned down for mortgage refinancing.

The former Federal Reserve chairman, speaking at a conference in Chicago yesterday, told moderator Mark Zandi of Moody’s Analytics Inc. — “just between the two of us” — that “I recently tried to refinance my mortgage and I was unsuccessful in doing so.”

Just between the two of us? Now the entire world knows that even the former Federal Reserve Chair can’t get a mortgage refi approval.


Bernanke suffered from not being with the same employer for two years.

Obama: “Are You Better Off Than 6 Years Ago?” Answer In Two Charts

In a 60 Minutes interview, President Barack Obama channeled President Ronald Reagan and asked “Are you better off than 6 years ago” referring to when President Obama was elected for the first time.

Here is the answer in two charts, Mr. President!

If you were able to take advantage of The Fed’s massive distortion of asset prices (such as the stock market and both residential and commercial real estate), you are better off!


But if you are one of the middle class, the answer is no.


If you are a minority, the answer is no.


But if you are in the top earner group, you are better off. All others? No.


OK, Rick Sharga noticed that it actually took me 4 charts, not two. So, just focus on the first two!!

And former Attorney General Eric Holder is far better off. He is now making $77 million with JPMorganChase.


Here is The March of The Federal Reserve!

Los Angeles Remains The Housing Bubble King In The USA! What $665K Buys You In LA (Not Much)

Yes, Los Angeles is the winner of the housing bubble derby, followed by Riverside placing and Miami showing.


San Francisco is in fourth place. Las Vegas and Phoenix are a distant fifth and sixth place. Trailing the pack by several lengths is …. Cleveland.

Here is what $665,000 buys you in Pasadena, a suburb of Los Angeles. A two bedroom, 1 bath cottage with only 1,100 square feet. (Courtesy of Dr Housing Bubble).


Notice that all the bubble cities are recovering at roughly the same speed. You can thank investors (foreign and domestic) and all-cash buyers for the “recovery.”


Let’s see if the recovery is sustainable with investors pulling out of markets. Or if The Fed stops printing money.


Here is a photo of dedicated George Mason University student Inderbir Bal studying my on-line real estate finance course notes over a healthy drink of orange and carbohydrates.


Initial Jobless Claims Near 14-Year Lows While M2 Velocity At All-time Lows and Real Median Household Income Only At 1995 Levels

Today’s economic news is pretty weak. First, new durable goods orders are way down.


Second, initial jobless claims fell to near 14-year lows. But why is this weak news? Here is why.


M2 Money Velocity is at an all-time low and real median household income is only at 1995 levels. Average hourly wage growth is down about 40% since President Obama took office.

So the claimed “recovery” does not apply to wages and income, only to initial jobless claims and unemployment rates.

And U6 full-time and part-time unemployment is at 12% while it was around 8% in 2007. That translates to U6 unemployment being 50% higher than in 2007.


Once again, this failed economic recovery explains why mortgage purchase applications stink.


We are in an economic Bizarro World!