Jobs Data Sends GSE's Lower : Updated
The reaction to the weak jobs data was negative for Freddie Mac and Fannie Mae. The stock downdraft is pulling mortgage firms lower as well. At the close Freddie is down 3.7%, Fannie off 2.2%. Countrywide Financial is lower by 2%.
Volume was heavy in all three but especially Freddie Mac, which saw double the average. It was a grueling end to the week for the GSE's, and they have been having a very hard time as of late.
11 Comments:
Ben -
Congrats on the traffic you seem to be getting.
I wish I could find the citation, but coming into this jobs report, the speculation seemed to be that the number might come in *too high* ie. hint at inflation. Interestingly, it seems to have not only come in way low, but still managed to have hinted at inflation anyway in the hourly wages increase. Coupled with a lovely ISM report, 57$ oil and GM and Ford announcing sill more slackening sales, I'm wondering if the day could have been any worse. And the kicker is that the weekly jobless claims for the last week were also a disappointment, and will show up on next month's unemployment reports.
The fed is in a box labelled stagflation Time to break out the emergency supply of disco albums... Farah Fawcett posters... bongs... black lights... If we're lucky the Indians will throw in a 10 cent beer night.
Stagflation is inflation with job decline, right ?
I have a question is it possible to keep interest rates low (fed < 5%) if we get inflation ?
What would inflation do to the housing speculators ? Would the interest rate rise ? Would inflation make their house speculation work better or worse ? It seems as though those of us sitting on cash have the most to lose in that scenario. Is that right ?
anon,
(The fed is in a box labelled stagflation Time to break out the emergency supply of disco albums)
Well, disco made a comeback in some circles and I'm all for 10 cent beer; it is Friday! I think its too early to tell about inflation/deflation; we need to see the effect of these bubbles deflating, then we'll see what oil costs. I am more in the deflationist camp, but who knows? $57 oil? Wow! Is that even priced into the pump yet?
I won't get to read the jobs report till this weekend, so thanks for the early analysis..Now where did I put Farah? Ben
(Stagflation is inflation with job decline, right ?)
The way I remember it, the term was used when the established economic models didn't explain reality, so the "experts" made one up. Basically I think your right.
(I have a question is it possible to keep interest rates low (fed < 5%) if we get inflation ?)
I don't believe so.
(What would inflation do to the housing speculators ?)
Thats where the bubble muddles the picture. If it exists, I don't think it can be inflated away. Housing should come down regardless.
(It seems as though those of us sitting on cash have the most to lose in that scenario. )
I wouldn't mind 12% to 15% return on my money. What we have now is a sort of inflation without real returns; it can't go on.
Thank you for the thoughtful post...Ben
Not Stagflation - Deflation. A contraction of credit will lower the supply of money and increase the demand for cash as people become desperate to pay off debt. As a result, consumers will hold off on purchases as they repair their balance sheets. Again, this is deflation not inflation.
We already have deflation in consumer goods (especially PCs and autos). Oil demand (and prices) will fall when the consumer capitulates and the global economy falls into recession. I suspect that will start later this year.
I am positioned for a full-out deflationary depression more akin to the 30s than the 70s.
( this is deflation not inflation.)
I think you are closer to the truth than stagflation.
(We already have deflation in consumer goods)
Absolutely. I am in your camp.
(I am positioned for a full-out deflationary depression)
Me three, I agree.
Thanks for dropping by..Ben
Ben, Love your blog, I have you on my blog under Favorite Places. Keep it up.
FYI - It was not the jobs report that cooked the GSE's today, it was the erroneously leaked ISM number at 10AM EST that showed increased production costs.
For full details: http://naybob.blogspot.com/2005/04/040105-market-soapbox-closing-update.html
I agree too that it will be deflation, not stagflation. Which is ironic because that is what the fed set out to prevent 3 years ago !
The thing that kills me is that we went from an economy that was investing in unwise stocks to an economy that is now investing in unwise real estate. That is the side effect of speculation: capital is being grossly mis directed into areas where it isn't going to make the economy better.
If we'd spent 1/10th of the money we've spent on artificially inflated housing on products and ideas to counteract our dependency on foreign oil, we wouldn't be in the position we are now wrt oil. UGGGHHHH.
And yet hundreds of people will buy a house this weekend at a stupid, stupid price, expecting to get rich.
I think I'm going to rent forever.
There is a resort community near me where townhouses are selling for $400K and yet they rent out for $900-1100/month. What the hell are investors thinking !!! How stupid does this have to get before people realize the game is OVER !
BTW: I hope it doesn't take 5 years for the prices to moderate. I hope they fall like a rock immediately. However the only way I can see that happening is if there is a credit crisis.
Mr. Naybob,
Thanks for the link, I will read up on it.
Anon,
(it will be deflation, not stagflation. Which is ironic because that is what the fed set out to prevent 3 years ago)
I suspect the problem never left their radar screen. They over-corrected, and we have the current situation.
( the side effect of speculation: capital is being grossly mis directed into areas where it isn't going to make the economy better.
If we'd spent 1/10th of the money we've spent on artificially inflated housing on products and ideas to counteract our dependency on foreign oil)
Excellent point. Central banks are impotent when it comes to directing the paper they print. Think of the economy we could have without them!
--Impotence of Central Banks--
I agree with your assessment of Central Banks. The most successful economies in history; Suisse, Hong Kong and US (pre 1913) had no central bank. Let the market decide what credit is worth!
Anytime you get any government involved in commercial enterprises you ALWAYS get oversupply. In this case we have an oversupply of credit. This envitably leads to a crash to correct the inbalances.
Think about the federal governments involvement in housing; HUD, FDIC, GREs, FRB. We can all squarely put the blame for this unfolding tragity on the US Federal Government (and those that support it). Banks know that they will be bailed out by the tax payer so they take inordinate risk. People who support the welfare state have created and maintain a monster - and will suffer for it.
As for myself, don't blame me, I vote Libertarian:)
Yours in Freedom!
John from Washington State.
PS: I enjoy reading your blog. Thanks for keeping it up!
John,
(Anytime you get any government involved in commercial enterprises you ALWAYS get oversupply. Think about the federal governments involvement in housing; HUD, FDIC, GREs, FRB. We can all squarely put the blame for this unfolding tragity on the US Federal Government)
You nailed it. I will continue to focus on who is to blame because when this thing goes south, the people will be angry. Thanks for the post..Ben
Post a Comment
<< Home