Long-feared mortgage meltdown is here

Third-quarter bank earnings will feel an unwelcome jolt as mortgage volume has fallen off a cliff. Banks large and small have been preparing investors for difficult revenue comparisons by preannouncing the bad news. JPMorgan Chase CFO Marianne Lake at a conference on Sept. 9 said the bank expected its mortgage origination business to post a net operating loss for the second half of 2013.

Cardinal Financial of McLean, Va., late on Thursday announced that its third-quarter mortgage loan originations had declined by roughly 40 percent from the second quarter, and that "the marketing gain percentage for mortgages sold has decreased during the third quarter due to increasing competitive pressure related to the changing market conditions."

Cardinal also said "Expense reduction and revenue enhancement measures have been and will continue to be implemented to offset the decrease in mortgage production and the decline in the marketing gain percentage," but that the bulk of the benefit of the cost declines wouldn't be realized until the fourth quarter. The bank was downgraded by several sell-side analysts on Thursday and Friday, and its shares dropped 5 percent Friday to close at $16.76  Read more >>

Gold, Silver In Asian Liquidation Mode

Spot Gold $1426 (from $1564 highs Friday)

As Asia opens to the bloodbath that occurred in precious metals on Friday in the US, it would appear that more than a few traders got the 'tap on the shoulder'. Shanghai futures are limit-down and spot gold and silver prices are plunging once again as we suspect forced margin-calls and the raising of cash (to cover extreme variation margin - or capital reserves) needed in JGB positions, as we explained here.

Liquidation is certainly the theme of the evening - investors are selling JGBs (6th day in a row of multiple-sigma moves in long-dated Japanese bonds 30Y +56bps off its post-BoJ lows at 1.60%!), selling Japanese stocks (Nikkei -128 pts, second biggest down day post-BoJ), selling US Treasuries (futures down), selling gold and silver (gold spot down over $100 from Friday's highs), and despite selling JPY early (retracing 30% of the weakness post-BoJ), JPY is practically unchanged (jerking lower only on the US futures open and Asian equity open) - it seems Mrs.Watanabe is struggling and unwinding some her excessively short JPY and long NKY positions. Read more >>

Sequester cuts are here to stay

Lawmakers and aides say they do not expect Congress to turn off budget sequestration before April and that negotiations to freeze the automatic spending cuts could drag into May or beyond.

Over the last few weeks, there has been increased speculation that the sequester would go into effect Friday but be addressed in a March deal to keep the government funded.
Don’t bet on it.

Sen. Richard Burr (R-N.C.), a member of the Finance Committee, predicted sequestration would last through the end of the year.

“Are we going to roll back the size of the cuts? No. I can promise you that,” said Burr.
President Obama has invited congressional leaders to meet at the White House on Friday, the same day $85 billion in automatic cuts are due to begin.

However, congressional sources do not anticipate a deal at that gathering or any time soon. Read more >>

Gun stores report brisk business after Conn. massacre

Although national firearms sales and data on FBI background checks are not immediately available for the days before and after the second-largest school shooting in U.S. history, there is evidence that firearms sales are moving at a brisk pace.

Some gun dealers in Oregon, Virginia and Texas said Monday that stocks of handguns and shotguns were selling quickly.

"Our sales are astronomical,'' said Karl Durkheimer, owner of Northwest Armory in Portland, Ore. "We have customers coming in who are very worried for their personal safety. There is no question that sales are related'' to Friday's shooting, which left 28 dead including the 20-year-old shooter and his mother, and last week's deadly shooting at a Portland-area shopping mall. Read more >>

Without BLS “adjustments” the real unemployment rate is 23%

They use a birth/death model to create jobs out of thin air, later adjusting those phantom jobs away in a press release on a Friday night. They create new categories of Americans to pretend they aren’t really unemployed.

They use more models to make adjustments for seasonality. Then they make massive one-time adjustments for the Census. Essentially, you can conclude that anything the BLS reports on a monthly basis is a wild ass guess, massaged to present the most optimistic view of the world.

The government preferred unemployment rate of 8.3% is a terrible joke and the MSM dutifully spouts this drivel to a zombie-like public. If the governing elite were to report the truth, the public would realize we are in the midst of a 2nd Great Depression.

The unemployment rate during the Great Depression reached 25%. Without the BLS “adjustments” the real unemployment rate in this country is 23%. Read more >>

Corn inventory drops to eight-year low

The country's corn, soybean and wheat inventory fell steeply from last year, according to a report released Friday by the U.S. Department of Agriculture. In its latest grain survey, the agency reported that as of Sept. 1, old corn stocks -- grain harvested last year -- totaled 988 million bushels, a decline of 12% from the same time last year. That is the lowest level since 2004.

Shortly after the survey was released, corn futures prices jumped by the 40-cent limit on the Chicago Mercantile Exchange on Friday, with delivery for December corn at $7.56 per bushel.

Prices were already high as the worst drought in decades has decimated the country's corn crop. In August, corn futures rose to a record high of $8.49 per bushel. But prices eased after the Midwest saw some rainfall. Read more >>

Olive Garden, Red Lobster sales struggle

Darden Restaurants Inc. said Friday that its fiscal first-quarter net income rose 4 percent even as it struggled to grow a key revenue figure at its flagship Olive Garden and Red Lobster chains.

Its earnings beat Wall Street expectations, and its shares rose more than 4 percent in premarket trading. At Olive Garden, the company’s biggest chain, Darden has been trying to increase sales by retooling its marketing message and updating its menu. Although traffic at established restaurants declined during the quarter, the company said a key sales figure edged up 0.3 percent on higher prices.

At Red Lobster, sales at restaurants open at least a year fell 2.6 percent as traffic declined. The sales metric is a key indicator of health because it strips out the impact of newly opened and closed locations. Read more >>

Spain Unemployment Hits New High

Spanish unemployment rate has hit record levels, with nearly one quarter of the labour force unable to find work and young people fearing the worst. The unemployment rate rose in the second quarter to 24.63 per cent and a huge 53 per cent among the young, despite the start of the tourist season, official figures showed on Friday.

The unemployment rate rose from 24.4 per cent recorded in the first quarter - already the highest in the industrial world - as Spain entered its third straight quarter of economic contraction. Among those aged 16 to 24, the rate rose to a huge 53.27 per cent from 52.01 per cent the previous quarter, reflecting the ongoing impact of Spain's double-dip recession following the collapse of a construction boom in 2008.

The number of households in which all eligible members are unemployed rose by 9,300, reaching more than 1.73 million overall. The country is in its second recession in four years, hit hard by the bursting of the property bubble that threw millions out of work and badly affected the country's banks. Read more >>

Greek Economy Keeps on Crumbling

Greece's economy shrank further in the first three months of 2012, shriveling at a yearly rate of 6.5 percent against a backdrop of painful wage cuts, tax hikes and record unemployment. The data, released on Friday, will add fodder to politicians campaigning against terms of an international bailout ahead of a June 17 parliamentary election.

Painful budget austerity has deepened Greece's economic malaise, turning voters away from mainstream political parties that backed a European Union/International Monetary Fund rescue deal. Supporters and opponents of the bailout are running neck and neck in opinion polls for the June vote, seen as crucial for the country's future in the euro zone.

The first quarter Gross Domestic Product preliminary projection was based on seasonally unadjusted data. It topped a previous -6.2 percent year-on-year flash estimate and follows a 7.5 percent year-on-year GDP decline in the last quarter of 2012, statistics service ELSTAT said. A narrower trade deficit provided some relief but was not enough to make up for sharp falls in consumer and investment spending. Read more >>

Gold and Dow Flash the Same Warning Signal

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On Friday, both gold and the Dow flashed the same warning signal—the economy is in deep trouble.  The Dow plunged nearly 275 points on the news of a weak jobs report, and gold rocketed higher by $66 on speculation global bankers are going to print money to resuscitate a dying financial system.  You do not get this kind of tandem move in opposite directions by coincident.  Last week, both the stock and gold markets appeared to stop pretending and acknowledged the vortex of debt and insolvency that could suck us all into a black hole.

Renowned gold expert Jim Sinclair of JSMineset.com said Friday, “Those popular gold writers calling for much lower gold prices are simply out of their mind and disconnected from reality.”  Sinclair has been calling for “QE to infinity” (money printing) for years now, and he’s been right.  Of course, money printing masked the recession/depression since 2008; and now, it looks like more of the same bad medicine is on the way—only a much higher dose.  My only question is when does the money printing stop working and turn the currency into confetti?  It appears we will find out sooner than later. Read more >>