by ilene - October 24th, 2010 10:43 pm
Courtesy of Comstock Partners
(H/t Pragcap)
The current market rally is not based on a self-sustained typical economic recovery, but on blind faith that the Fed can pull out a magic wand and cure everything with another round of quantitative easing (QE2). As we pointed out last week, this a desperate attempt by the Fed to try non-conventional means to get the economy going again after a massive dose of conventional measures resulted in failure. The members of the FOMC know this, but with further fiscal measures off the table, they are aware that they are the only game in town. The Fed’s acknowledgement that the economy is in trouble is again highlighted by the latest Beige Book released yesterday. The following are some excerpts from the report:
“National economic activity continued to rise, albeit at a modest pace..consumer spending was steady to up slightly, but consumers remained price-sensitive, and purchases were mostly limited to necessities and non-discretionary items..Housing markets remained weak..Most reports suggested overall home sales were sluggish or declining..Home inventories were elevated or rising..Conditions in the commercial real estate market were subdued, and construction was expected to remain weak.Reports suggested that rental rates continued to decline for most commercial property types..industry contacts appeared to believe that the commercial real estate and construction sectors would remain weak for some time..Hiring remained limited, with many firms reluctant to add to permanent payrolls, given economic softness..Future capital spending plans appeared to be limited”
So there you have an outline of the anemic economic picture in the Fed’s own words. To be sure, they indicated some strong points as well. But the weakness in consumer spending, housing, capital expenditures, commercial real estate and employment pretty much accounts for some 85% of the overall economy.
In addition some of the major problems that worried the market earlier have not really gone away. The sovereign debt problems of the weaker EU nations have been papered over without being solved and are still lingering just beneath the surface. The looming currency wars that were shoved down the road by the recent G-20 meeting are also a major threat to the global economy.
Furthermore the Chinese housing bubble previously highlighted by bearish investor Jim Chanos and others has now appeared on the front page of the New York Times. A new district of the city of Ordos,…
Tags: Bank of America, Beige Book, Blackrock, Chinese housing bubble, commercial real estate market, economic recovery, Economy, FOMC, Freddie Mac, Met Life, Neuberger Berman, New York Federal Reserve Bank, PIMCO, QE2, quantitative easing, rally, Stock Market
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by Zero Hedge - May 28th, 2009 12:36 pm
Courtesy of Tyler at ZH
Til Schuermann, VP of Financial Intermediation at the Federal Reserve Bank of New York, is testifying today on issues in Commercial Real Estate, and his prepared remarks essentially drown the prospect of green shoots in the context of CRE.
The same cannot be said for loan demand. The SLOOS reports that the net fraction of loan officers reporting weaker demand in April 2009 was 60% for C&I and 66% for CRE loans, a historical low for CRE demand. Weak demand bears emphasis, as it indicates that the observed slowdown in overall credit is partly due to firms’ reluctance to borrow, and not entirely to banks reluctance to lend [someone finally pointing out the obivious].
The combination of acute stresses in the financial markets, together with stresses on bank balance sheets, in the middle of the worst recession in a generation, should caution us from believing that recovery is just around the corner.
His full prepared testimony is provided below.
Testimony before the TARP Congressional Oversight Panel, Hearing on Commercial & Industrial and Commercial Real Estate Lending, New York City
Members of the Panel, thank you for giving me the opportunity to discuss with you some of the recent trends in commercial lending, and especially the role banks have played and are playing in the provision of credit to this important sector. My name is Til Schuermann, and I am a vice president of the Federal Reserve Bank of New York. I wish to preface my remarks by noting that they do not reflect the official views of the Federal Reserve Bank of New York or any other component of the Federal Reserve System.
In early 2007, just before the crisis hit, U.S. commercial banks had $10 trillion of assets on their balance sheets. About 60% was composed of what we may think of as traditional banking assets in the form of loans and leases, and of that about $1.2 trillion or 20% was in the form of commercial & industrial (C&I) lending, and about $1.4 trillion or 24% in commercial real estate (CRE) lending, the topics of today’s hearing.1 Meanwhile, the sum total of assets at other important non-bank intermediaries
…
Tags: Commercial Real Estate, CRE, green shoots, loan demand, New York Federal Reserve Bank
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
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