Now we face the worst economic times since the Great Depression. The coming year will bring more job losses, bankruptcies, foreclosures, cutbacks. Consumers and companies will spend less, dig out of debt, save what they can. The incoming administration of President-elect Barack Obama will try to do its part -- keeping interest rates low, funding job-creating projects and printing money to stimulate the contracting economy. Recovery will take not months, but probably years.
From Calculated Risk: WSJ: Retailers Brace for Major Change
More Bankruptcies: Corporate-turnaround experts and bankruptcy lawyers are predicting a wave of retailer bankruptcies early next year, after being contacted by big and small retailers either preparing to file for Chapter 11 bankruptcy protection or scrambling to avoid that fate.
Analysts estimate that from about 10% to 26% of all retailers are in financial distress and in danger of filing for Chapter 11. AlixPartners LLP, a Michigan-based turnaround consulting firm, estimates that 25.8% of 182 large retailers it tracks are at significant risk of filing for bankruptcy or facing financial distress in 2009 or 2010. In the previous two years, the firm had estimated 4% to 7% of retailers then tracked were at a high risk for filing.
Store Closings: The International Council of Shopping Centers estimates that 148,000 stores will close in 2008, the most since 2001, and it predicts that there will be an additional 73,000 closures in the first half of 2009.January is usually the busiest month for retailer bankruptcies ... and 2009 will probably be especially busy.
Commercial Real Estate Sector is going to be more bleak in the coming 2009!
Saturday, December 27, 2008
After Christmas Shopping
It took massive discounts, longer store hours and promotional giveaways to even get shoppers to the mall this season. Still that last minute rush could not save stores from double-digit sales declines across virtually every category.A packed parking lot doesn't always translate into holiday cheer for stores. As I went to shopping on Friday, the mall was crowed on the day after Christmas. However, not many people are holding shopping bags (less than 50%).
As stores offered rock-bottom prices and extended return policies, shoppers returned to the malls the day after Christmas. However, everyone was on the hunt for big bargains on specific items or hoping to return unwanted gifts -- not looking to splurge.
Some stores offered sales of up to 50-75% off, and most retailers offered sales of 20-25% on top of the existing sales off clothing and other items. However, they were not enticing enough. Most of the sales were seen before Christmas too.
That was a common refrain among shoppers Friday, who appeared to be searching for a deal unlike any they had seen so far this year.
That kind of focus by shoppers could spell deep trouble for the nation's stores, which are facing the worst holiday shopping season in decades.Holiday sales -- which typically account for 30 percent to 50 percent of a retailer's annual total -- have been less than jolly.
Many stores are likely to report a loss for the fourth quarter, said NPD senior retail analyst Marshal Cohen. The weak spending through Christmas Eve brought overall holiday sales to levels unseen since the 1980s.
Stores were hoping that big discounts the day after Christmas could lure people out and help stem those losses. And although some malls appeared to be busy with bargain-hunters and gift-returners, analysts said traffic appeared to be lighter than in years past.
It is much worse and more difficult than anyone could expect.
Readings for the Day
From Market Watch: Ten Investment Ideas for 2009
From Mish: Asian Economic Crisis: Spotlight on Japan, China, Korea, Vietnam
Bank of Japan considers extraordinary steps, and Japan announces record budget:
Extraordinary measures are a way of life for Japan. From currency intervention to building bridges to nowhere, Japan has taken extraordinary measures for decades. In that timeframe, Japan went from being the largest creditor nation to a nation deep in debt.
As of November 17th, 2008, BusinessMirror notes "Japan's public debt that exceeds 180% of the GDP, limiting the government's ability to stimulate growth".
China Needs More Policies to Spur Consumption:
Economic policies have failed to rebalance growth away from trade and investment, with the share of consumption in gross domestic product falling to less than 50 percent from 60 percent a decade ago.
Premier Wen Jiabao may unveil a second stimulus package as early as next month aimed at spurring consumer spending as the economy is set for its slowest growth in two decades. The government has already increased subsidies for farmers to buy household electronics, cut taxes on property and is preparing policies to revive slumping car sales in the world’s second- biggest auto market.
Consumer spending represents more than two-thirds of the U.S. economy while household consumption’s share of China’s gross domestic product slumped to slightly more than 35 percent last year from 45 percent a decade ago, according to Chinese government data.
“This shows there is huge potential to boost consumer credit and encourage people to buy homes and cars,” Yi said. Does anyone learn? Credit bubbles caused the great depression, and the great recession that we are in. One might think that someone in authority would learn something from this. But they never do. China wants to follow the US to ruin.
It it not possible to have too much savings. It is possible however to have too much debt and that is where the US is right now.
From Mish: Asian Economic Crisis: Spotlight on Japan, China, Korea, Vietnam
Bank of Japan considers extraordinary steps, and Japan announces record budget:
Extraordinary measures are a way of life for Japan. From currency intervention to building bridges to nowhere, Japan has taken extraordinary measures for decades. In that timeframe, Japan went from being the largest creditor nation to a nation deep in debt.
As of November 17th, 2008, BusinessMirror notes "Japan's public debt that exceeds 180% of the GDP, limiting the government's ability to stimulate growth".
China Needs More Policies to Spur Consumption:
Economic policies have failed to rebalance growth away from trade and investment, with the share of consumption in gross domestic product falling to less than 50 percent from 60 percent a decade ago.
Premier Wen Jiabao may unveil a second stimulus package as early as next month aimed at spurring consumer spending as the economy is set for its slowest growth in two decades. The government has already increased subsidies for farmers to buy household electronics, cut taxes on property and is preparing policies to revive slumping car sales in the world’s second- biggest auto market.
Consumer spending represents more than two-thirds of the U.S. economy while household consumption’s share of China’s gross domestic product slumped to slightly more than 35 percent last year from 45 percent a decade ago, according to Chinese government data.
“This shows there is huge potential to boost consumer credit and encourage people to buy homes and cars,” Yi said. Does anyone learn? Credit bubbles caused the great depression, and the great recession that we are in. One might think that someone in authority would learn something from this. But they never do. China wants to follow the US to ruin.
It it not possible to have too much savings. It is possible however to have too much debt and that is where the US is right now.
Friday, December 26, 2008
Credit Default Swap Update
From Big Picture: Credit Crisis - Signs of Progress
Junk bond yields remain at high levels, as shown by the Merrill Lynch US High Yield Index. However, a slight decline of 200 basis points has taken place since the Index’s record high of 2,182 on December 15. This means the spread between high-yield debt and comparable US Treasuries was 1,982 basis points by the close of business on Tuesday. With the US 10-year Treasury Note yield at 2.18%, high-yield borrowers have to pay 22.00% per year to borrow money for a ten-year period. At these rates it is practically impossible for companies with a less-than-perfect credit status to conduct business profitably.
Barron’s Confidence Index: This Index is calculated by dividing the average yield on high-grade bonds by the average yield on intermediate-grade bonds. The discrepancy between the yields is indicative of investor confidence. A declining ratio indicates that investors are demanding a higher premium in yield for increased risk. The Index is at an all-time low, indicating a lack of confidence in the economy.
The graphs of the CDX indices are shown below:
CDX (North America - High Yield) Index
Since a month ago the cost of insuring against government bankruptcy through CDSs has risen for all but nine countries in Bespoke’s list of 38 countries. The table below shows the current
CDS prices, together with month-ago and start-of-year prices.
Argentina, Venezuela and Iceland have the highest default risk. Interestingly, Germany, Japan and France all have a lower default risk than the US at the moment. It now costs $67 per year to insure $10,000 against US default for the next five years. “While this may not seem high, it was at $8 earlier in the year, and $36 one month ago,” said Bespoke.
Junk bond yields remain at high levels, as shown by the Merrill Lynch US High Yield Index. However, a slight decline of 200 basis points has taken place since the Index’s record high of 2,182 on December 15. This means the spread between high-yield debt and comparable US Treasuries was 1,982 basis points by the close of business on Tuesday. With the US 10-year Treasury Note yield at 2.18%, high-yield borrowers have to pay 22.00% per year to borrow money for a ten-year period. At these rates it is practically impossible for companies with a less-than-perfect credit status to conduct business profitably.
The graphs of the CDX indices are shown below:
CDX (North America - High Yield) Index
Since a month ago the cost of insuring against government bankruptcy through CDSs has risen for all but nine countries in Bespoke’s list of 38 countries. The table below shows the currentCDS prices, together with month-ago and start-of-year prices.
Argentina, Venezuela and Iceland have the highest default risk. Interestingly, Germany, Japan and France all have a lower default risk than the US at the moment. It now costs $67 per year to insure $10,000 against US default for the next five years. “While this may not seem high, it was at $8 earlier in the year, and $36 one month ago,” said Bespoke.As shown in Bespoke’s table below, the UK, Greece, the US, Austria and Australia have seen default risk rise the most over the last month. Notably, the US has risen by 87%.
More on Commercial Real Estate
From Mish: Economic Potpourri December 26, 2008
Metlife Drops as Commercial Mortgage Defaults Loom
MetLife Inc. and Prudential Financial Inc., the largest U.S. life insurers, declined in New York trading on concern that losses on commercial mortgages will surge as the recession deepens.
The industry, which puts about 10 percent of its invested assets in commercial mortgages, may see losses rise to the highest levels since the early 1990s.
Commercial mortgage defaults are “certainly on the forefront of the radar screen."
The Commercial Real Estate is overleveraged. There is rampant overcapacity in restaurants, furniture stores, appliance stores, nail salons, clothing stores, and anything else you can think of. The way to solve it if for a wave of bankruptcies to shake out the weak.
As retail sales shrank on record, more and more retailers are going to close stores, file bankruptcies. Mall owners need to reduce the rents to prevent losing leases, vacancies are going to soar, empty malls with no tenants will file bankruptcy, all these definitely won't help the commercial real estate market.
Metlife Drops as Commercial Mortgage Defaults Loom
MetLife Inc. and Prudential Financial Inc., the largest U.S. life insurers, declined in New York trading on concern that losses on commercial mortgages will surge as the recession deepens.
The industry, which puts about 10 percent of its invested assets in commercial mortgages, may see losses rise to the highest levels since the early 1990s.
Commercial mortgage defaults are “certainly on the forefront of the radar screen."
The Commercial Real Estate is overleveraged. There is rampant overcapacity in restaurants, furniture stores, appliance stores, nail salons, clothing stores, and anything else you can think of. The way to solve it if for a wave of bankruptcies to shake out the weak.
As retail sales shrank on record, more and more retailers are going to close stores, file bankruptcies. Mall owners need to reduce the rents to prevent losing leases, vacancies are going to soar, empty malls with no tenants will file bankruptcy, all these definitely won't help the commercial real estate market.
Holiday Sales Tumble as U.S. Consumers Cut Spending
From MarketWatch: Fresh Survey shows gloomy U.S. retail sales
Data released by MasterCard Inc.'s SpendingPulse unit showed total retail sales, excluding automobiles, fell by 5.5% in November over the year-earlier period and by 8% in December through Christmas Eve. 2008 holiday season is going to be one the worst in decades.
Data released by MasterCard Inc.'s SpendingPulse unit showed total retail sales, excluding automobiles, fell by 5.5% in November over the year-earlier period and by 8% in December through Christmas Eve. 2008 holiday season is going to be one the worst in decades.
Sales of luxury goods, including jewelry, plunged by 34.5%. Excluding gasoline sales, the fall in overall retail sales was more modest, with a 2.5% drop in November and a 4% decline in December.
Retailers went from 'Ho-ho' to 'Uh-oh' to 'Oh-no.'"
With the U.S. and global economies in recession, consumers have all but frozen their spending on anything nonessential, leading retailers to slash prices deeper and earlier than usual to attract sales during their biggest selling period.
Results have been lackluster to this point, with the International Council of Shopping Centers slashing its December forecast and projecting retailers' worst November-to-December period on record.
From Bloomberg: Holiday Sales Tumble as U.S. Consumers Cut Spending
Consumers spent at least 20 percent less on women’s clothing, electronics and jewelry during November and December, resulting in what may be the biggest holiday-shopping sales decline in four decades.
From Nov. 1 through Dec. 24, women’s clothing sales dropped 23 percent and men’s fell 14 percent. Combined electronics and appliance sales tumbled 27 percent, with purchases over $1,000 suffering the most. Purchases over the Internet fared better, with a 2.3 percent decline. Historically, Web sales have posted 15 percent to 20 percent year-over-year sales gains.
But with gift card sales down this holiday season and consumers looking to save money rather than spend it, even the big discounts may not be enough to salvage what looks to be one of the most dismal holiday shopping seasons in years.
Retailers went from 'Ho-ho' to 'Uh-oh' to 'Oh-no.'"
Amazon.com Inc. said that the 2008 holiday season finished as its best ever, with over 6.3 million items ordered worldwide on the peak day, Dec. 15 -- a record-breaking 72.9 items per second.
Results have been lackluster to this point, with the International Council of Shopping Centers slashing its December forecast and projecting retailers' worst November-to-December period on record.
From Bloomberg: Holiday Sales Tumble as U.S. Consumers Cut Spending
Consumers spent at least 20 percent less on women’s clothing, electronics and jewelry during November and December, resulting in what may be the biggest holiday-shopping sales decline in four decades.
Discounts of 70 percent off or more by Macy’s Inc., AnnTaylor Stores Inc. and other retailers failed to prevent a spending drop of as much as 4 percent during the final two months of the year, according to data from SpendingPulse. Including fuel, sales tumbled as much as 8 percent. The decline is the worst since MasterCard Advisors started tracking data in 2002 to provide the SpendingPulse service.
From Nov. 1 through Dec. 24, women’s clothing sales dropped 23 percent and men’s fell 14 percent. Combined electronics and appliance sales tumbled 27 percent, with purchases over $1,000 suffering the most. Purchases over the Internet fared better, with a 2.3 percent decline. Historically, Web sales have posted 15 percent to 20 percent year-over-year sales gains.
It took massive discounts, longer store hours and promotional giveaways to even get shoppers to the mall this season. Still that last minute rush could not save stores from double-digit sales declines across virtually every category. Sales above $300 were at a virtual standstill.
That weak spending through Christmas Eve brought overall holiday sales to levels unseen since the 1980s. The results are well below the plus 2.2 percent forecast made by the National Retail Federation in September.
The high-end stores were hit the hardest. Jewelry, handbags and other luxury items sat on shelves. Luxury results through December 24th were down minus 34.5 percent. Stripping out jewelry, sales dropped minus 21.2 percent. When shoppers did splurge, they mainly spent in the $500 to $800 range. How they buy will determine whether some stores have enough cash to survive through 2009.
From Yahoo! Finance: Retailers slash prices to entice holiday shoppers
But with gift card sales down this holiday season and consumers looking to save money rather than spend it, even the big discounts may not be enough to salvage what looks to be one of the most dismal holiday shopping seasons in years.
"The last week of December represents about 14 percent of Christmas sales," said C. Britt Beemer, chairman of America's Research Group. "You can't save a season with only one-seventh of the sales to go." The holiday season -- which typically accounts for 30 percent to 50 percent of a retailer's annual total sales -- has been less than jolly for most retailers.
Oil Could be on a way to $20 a Barrel
From CNBC: Oil Could be on Way to $20 a Barrel: Gulf CEO
The steep drop in oil prices may not be over yet, says the CEO of Gulf Oil.
The steep drop in oil prices may not be over yet, says the CEO of Gulf Oil.
The price of US light, sweet crude could yet move as low as $25, and even $20 if current conditions persist.
Several factors are critical in the move lower, particularly the pressure set against traders in the oil markets, and the control sovereign foreign governments, as opposed to private entities, have exerted on the market since the summer price shock that sent gasoline prices at the pump above $4 a gallon.
"They have a tendency to sell more on the way down, not less," Petrowski said of the governments ruling the energy trade.
In all, he thinks those who believe oil is due for a rebound aren't seeing the global economic factors that are playing into energy prices.
From CNBC: Oil Rises above $36 after UAE cuts supplies
Oil rose above $36 a barrel on Friday after the United Arab Emirates joined leading exporter Saudi Arabia in deepening supply curbs in line with OPEC's biggest ever output cut announced last week.
Abu Dhabi National Oil (ADNOC), the main producer in the UAE, the world's fifth-largest oil exporter, said it would cut supplies of February Murban and Upper Zakum allocations by 15 percent and Lower Zakum and Umm Shaif by 10 percent each.
From Yahoo! Finance: Retail gasoline prices drift to 58-month low
Retail gasoline prices tumbled Friday to the lowest level in nearly five years (58-month low). And while crude futures rose, analysts believed it was a temporary pause in an extended, downward arc as the recession spreads. "We're paying about a billion dollars per day less than we were in July" for gasoline.
Pump prices were driven down mostly because Americans are staying home more. The travel habits of Americans are "fundamentally changing" as drivers clocked 9 billion fewer miles in October, even as gas prices plunged.
Crude futures are down more than 60% so far this year, poised for their worst year on record since crude started futures trading on the New York Mercantile Exchange in 1983.
Japan's Recession Deepens
From Yahoo! Finance: Japan auto production marks worst drop since 1967
Vehicle production in Japan, home to Toyota Motor Corp. and other major automakers, plunged 20.4 percent in November compared to the same month a year ago to 854,171 vehicles. That marked the second straight month of one-year declines and the percentage slide was the biggest since the group began compiling such data in 1967.
Earlier this month, the Japan Automobile Manufacturers Association said it expected demand in Japan will dive next year to its lowest in about three decades. Sales of new autos are expected to stand at 4.86 million in 2009, down 4.9 percent from what it's projecting for this year at 5.11 million. New vehicle sales in Japan have never dipped below the 5 million mark since 1980. They reached 7.78 million in 1990, during this nation's heyday "bubble" economy.
From Bloomberg: Japan’s Recession Deepens as Factory Output Plummets
Japan’s recession deepened in November as companies cut production at the fastest pace in 55 years and rising unemployment prompted households to pare spending.
Vehicle production in Japan, home to Toyota Motor Corp. and other major automakers, plunged 20.4 percent in November compared to the same month a year ago to 854,171 vehicles. That marked the second straight month of one-year declines and the percentage slide was the biggest since the group began compiling such data in 1967.
Earlier this month, the Japan Automobile Manufacturers Association said it expected demand in Japan will dive next year to its lowest in about three decades. Sales of new autos are expected to stand at 4.86 million in 2009, down 4.9 percent from what it's projecting for this year at 5.11 million. New vehicle sales in Japan have never dipped below the 5 million mark since 1980. They reached 7.78 million in 1990, during this nation's heyday "bubble" economy.
From Bloomberg: Japan’s Recession Deepens as Factory Output Plummets
Japan’s recession deepened in November as companies cut production at the fastest pace in 55 years and rising unemployment prompted households to pare spending.
Factory output plunged 8.1 percent from October, more than the 6.8 percent estimated by economists. The jobless rate climbed to 3.9 percent from 3.7 percent. Household spending slid 0.5 percent, a ninth drop.
The decline in production was the biggest since comparable figures were first made available in February 1953. Shipments also fell the most on record. Japan's exports plunged 26.7% in November, the sharpest drop since at least 1980.The yen’s 23 percent gain against the dollar this year is compounding exporters’ woes by eroding their profits. Japan’s currency surged to a 13-year high of 87.14 on Dec. 17.
The ratio of jobs available to each applicant dropped for a 10th month in November to 0.76, extending the longest losing streak since 1998. Wages fell 1.9 percent, the most in four years, underscoring why consumer sentiment slumped to a record low. Retail sales slid 0.9 percent from a year earlier, the biggest drop in 16 months. Weaker personal spending is prompting retailers to reconsider investments.
Thursday, December 25, 2008
Wednesday, December 24, 2008
Stock Market - The Icon of January
From CNBC: January Effect
Why? Because in 31 of the last 36 years, a rally in January was followed by a full-year of gains.
“January is the first month of the year when people set their forecasts. And there’s the state of union address and important agendas laid out,” he says. All those things set the tone for the year.
The January Effect is accurate 91% of the time.
Jan. Change Year Change
2004 +1.7% +9.0%
2005 -2.5% +3.0%
2006 +2.5% +13.6%
2007 +1.4% +3.5%
2008 -6.1% -40.31(YTD)
What’s the bottom line? As the S&P goes in January, so goes rest of year.
2009 Outlook continues to be ugly
From Mish: 2009: Already looking bleak
Destruction of household wealth, bleak employment situation and wage conditions
Housing plunges, declining corporate profits
Destruction of household wealth, bleak employment situation and wage conditions
Housing plunges, declining corporate profits
From CNBC: Outlook '09: Likely Bad, but Just How Ugly Will It Get?
Forget about the good. It’s about the bad and the ugly when it comes to the US economy next year. The big questions are how ugly things will get and how they’ll compare to recessions of the past.
Forget about the good. It’s about the bad and the ugly when it comes to the US economy next year. The big questions are how ugly things will get and how they’ll compare to recessions of the past.
Many economists now expect the economy to contract as much as 5 percent on an annualized basis in the first quarter, followed by a small contraction in the second quarter. Bank of America’s chief economist Mickey Levy is forecasting a decline in every quarter of 2009 and doesn’t see a return to trend, or normal, growth until early to mid 2010.
The recession we are experiencing is going to be at least as bad as 1973-1975 and 1980-1982 periods if not worse. Also, this recession is going to be long and deep, and we won't see recoveries soon.
“With another eight months of declines in home prices, you start to get some modest pickup in sales, followed by a stabilization in construction, not a bounceback,” warns Levy.
Another key yardstick of any recession is unemployment. The jobless rate is widely expected to rise steadily from its current rate of 6.7 percent to 9-percent (or 10%) in 2009 or early 2010. If so, that would be double the expansionary low of 4.4% set in December 2006, something that didn't happen in either of the past two recessions.
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Rich Pedroncelli / AP |
David Rosenberg, chief North American economist at Merrill Lynch, sees another 15 percent decline in house prices. “We don't have a lot of pent up demand,” he told CNBC. “The supply needs to go down.”
The MBA expects rates on 30-year fixed mortgages to plateau at about 5 ¼ percent in the first half of the year, but tighter credit borrowing standards will continue to keep would-be buyers out of the market. Meanwhile, prices will continue to decline, but more moderately.
Obama's stimulus package: "Six-hundred billion (dollars) is the minimum,” says Behravesh “If they can make it bigger -- $700-800 billion, even a $1 trillion. The latter might make sure we come out of it this summer”.
Thus far, a big part of the funds in what’s likely to be a two-year package appears to be earmarked for infrastructure spending, with the usual social safety net measures and some kind of tax cut for low-and middle-income earners.
“There's a limit to how much fiscal stimulus you can do,” says Resler, who, like other critics worries about waste, fraud and pork barrel politics in an infrastructure program.
One traditional worry missing from the list of many economists is inflation. At best, all the money and fiscal stimulus will succeed in stimulating demand, the thinking goes, without accompanying wage and price pressures.
"The increase (in money supply) is necessary but a not sufficient condition for inflation," says Levy. "The turbo-charged Fed easing prevents deflation."
That deflation worry is back on the list.
Allen Sinai of Decision Economics said the economy is in for another three to six months of dismal performance; real recovery will wait until 2010. The stimulus will work; lots of government spending will lift GDP, but the real question will be whether the health of the private section can be restored.U.S. Store Traffic Fell 24% on Pre-Christmas Weekend
From Bloomberg: U.S. Store Traffic Fell 24% on Pre-Christmas Weekend
From Yahoo! Finance: Holiday season magnifies shoppers' frugality
Over the past year, shoppers have drastically changed their spending habits in ways not seen since the 1970s, switching to store brands and discounters like Wal-Mart. During the holiday shopping season, they cut back on their spending, took advantage of big discounts and bought practical gifts.
One of the big worries for stores is what to do with the mounds of items they still have to sell. If 75 percent off before Dec. 25 didn't make people splurge, will even bigger deals afterward do the trick? Another problem is that shoppers shunned gift cards this season. That means they are less likely to return to the stores after the holiday. The new consumer mantra for this coming year is: If I don't need it, I won't buy it.
The retail industry could be looking at its biggest contraction in 35 years, according to Burt P. Flickinger, III, managing director of consulting firm Strategic Resource Group. He estimates that 160,000 stores will have closed in 2008 and predicts that an additional 200,000 will shutter next year. In March and April of 2009, Flickinger expects 2,000 to 3,000 malls to shutter.
A full picture of the holiday season will not be known until Jan. 8, when major retailers report their sales figures.
U.S. retail store traffic fell 24 percent last weekend from a year earlier as deepened discounts failed to entice consumers to spend during what may be the worst holiday-shopping season in four decades. Retail sales declined 5.3 percent Dec. 19 through Dec. 21 because of inclement weather and a slowing U.S. economy.
Many retail stores have offered discounts of as much as 70 percent to lure shoppers seeking bargains, and retailers’ profit margins may suffer as a result.
Traffic decreased 6.5 percent for the week through Dec. 20 from a year earlier. U.S. customer traffic on Dec. 20, also known as “Super Saturday,” fell 17 percent from the corresponding day a year earlier, Dec. 22, 2007.
Same-store sales in November and December may drop as much as 2 percent, the International Council of Shopping Centers said yesterday, more than the previously projected 1 percent decline. That would make it the worst Christmas sales season in at least 40 years.
From Yahoo! Finance: Holiday season magnifies shoppers' frugality
Over the past year, shoppers have drastically changed their spending habits in ways not seen since the 1970s, switching to store brands and discounters like Wal-Mart. During the holiday shopping season, they cut back on their spending, took advantage of big discounts and bought practical gifts.
One of the big worries for stores is what to do with the mounds of items they still have to sell. If 75 percent off before Dec. 25 didn't make people splurge, will even bigger deals afterward do the trick? Another problem is that shoppers shunned gift cards this season. That means they are less likely to return to the stores after the holiday. The new consumer mantra for this coming year is: If I don't need it, I won't buy it.
The retail industry could be looking at its biggest contraction in 35 years, according to Burt P. Flickinger, III, managing director of consulting firm Strategic Resource Group. He estimates that 160,000 stores will have closed in 2008 and predicts that an additional 200,000 will shutter next year. In March and April of 2009, Flickinger expects 2,000 to 3,000 malls to shutter.
A full picture of the holiday season will not be known until Jan. 8, when major retailers report their sales figures.
Oil = $35
From Calculated Risk: Oil Prices: Cliff Diving
Crude-oil futures fell for a third session Wednesday, tumbling 9.3% to close at $35.35 a barrel as government data showed inventories at a key delivery point hit a record.
Crude inventories at Cushing, Okla., the delivery point for crude futures contracts traded on the New York Mercantile Exchange, reached 28.7 million barrels in the week ended Dec. 19. It was the highest since at least April 2004, when the government started collecting Cushing data.
The low oil price definitely effected Gulf countries and Russia's economy.
Crude-oil futures fell for a third session Wednesday, tumbling 9.3% to close at $35.35 a barrel as government data showed inventories at a key delivery point hit a record.
Crude inventories at Cushing, Okla., the delivery point for crude futures contracts traded on the New York Mercantile Exchange, reached 28.7 million barrels in the week ended Dec. 19. It was the highest since at least April 2004, when the government started collecting Cushing data.
The low oil price definitely effected Gulf countries and Russia's economy.
Coforming Rates Fall Lure Refiance Applications
From CNBC: Mortgage Demand at 5-Year High as Rates Plunge
The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended Dec. 19 soared 48.0 percent to 1,245.4, the highest reading since the week ended July 18, 2003.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended Dec. 19 soared 48.0 percent to 1,245.4, the highest reading since the week ended July 18, 2003.
Interest rates are sharply below the peak of 6.59 percent reached during the summer and below a mere month ago when they were at 5.99 percent, according to the trade group. Interest rates were also well below year-ago levels of 6.10 percent.
The MBA's seasonally adjusted purchase index rose 10.6 percent to 316.5. The index, however, came in well below its year-ago level of 394.5, a drop of 19.8 percent. Overall mortgage applications last week were 106.3 percent above their year-ago level. The four-week moving average of mortgage applications, was up 28.8 percent.
The group's seasonally adjusted index of refinancing applications jumped 62.6 percent to 6,758.6, the highest reading since the week ended July 4, 2003, when it reached 6,768.3. The index was up 252.9 percent from its year-ago level of 1,915.3. The refinance share of applications increased to 83.2 percent from 76.9 percent the previous week. The adjustable-rate mortgage share of activity decreased to 0.8 percent, down from 1.1 percent the previous week.
From Calculated Risk: Conforming Mortgage Rates Fall, Jumbo Spread at Record
The average 30-year fixed rate for home loans of more than $729,750 remains almost 2 percentage points above conforming rates and the spread between them may set a record this month. The difference between the two averaged 2.13 percentage points in December, 10 times the spread from 2000 to 2006 and above last month’s 1.95 percentage points that was the highest on record.
It's jumbos rates that matter for most of California and other higher priced markets.
GMAC approved as Bank for seeking aids
From Yahoo! Finance: Fed grants GMAC authority to seek bailout funds
The Federal Reserve approved GMAC Financial Services' request to become a bank holding company, allowing it to apply for a portion of the $700 billion bailout fund and get emergency loans directly from the Fed.
The Federal Reserve approved GMAC Financial Services' request to become a bank holding company, allowing it to apply for a portion of the $700 billion bailout fund and get emergency loans directly from the Fed.
Analysts had speculated that without financial help, GMAC would have had to file for bankruptcy protection or shut down, dealing a serious blow to GM's own chances for survival. The Fed cited "emergency conditions" in justifying its decision.
The move to rescue an auto financing company was just the latest extension of the federal bailout program, which has designed to shore up ailing banks but has grown to include insurers and credit card companies.
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