by Calculated Risk on 7/23/2010 09:57:00 AM

Tech Ticker quotes Euro Pacific Capital's Peter Schiff:

"I don't know where anyone thinks prices are falling," Schiff says, citing rising prices for food, healthcare and energy. "I don't know where most people do their shopping but I don't see falling prices. To me, prices are rising."

And from Reuters:

Safeway executives said the strength of that push on pricing caught them by surprise.

"Deflation continues in price per item and is not expected to significantly improve until the fourth quarter," said Chief Executive Steve Burd, who oversees supermarkets including Safeway, Vons and Dominick's.

Burd acknowledged that retail deflation was much greater than expected in the second quarter and drove a decline in identical-store sales.

Maybe Schiff should shop at Safeway.

More seriously there is little deflation so far, but general deflation would be a bad bad thing.

by Calculated Risk on 7/23/2010 08:42:00 AM

From Bloomberg: Hungary Credit Rating May Be Cut to Junk After IMF Talks Fail

Standard & Poor’s said it is reviewing Hungary’s credit rating for possible downgrade after the collapse of negotiations with the International Monetary Fund and European Union. A cut would give Hungary’s debt a junk rating.

From Reuters: Ratings agencies threaten Hungary with downgrade

Moody's placed Hungary's Baa1 local and foreign currency government bond ratings on review, citing increased fiscal risks after the International Monetary Fund and the European Union suspended talks over their 20 billion euro ($25 billion) financing deal at the weekend.

by Calculated Risk on 7/22/2010 09:47:00 PM

Click on graph for larger image in new window.

This graph shows the Notices of Default (NOD) by year through 2009, and for the first half of 2010, in California from DataQuick.

Although the pace of filings has slowed, it is still very high by historical standards.

From DataQuick: California Mortgage Defaults Hit Three-Year Low; Foreclosures Rise

The number of California homes pushed into the formal foreclosure process between April and June dropped for the fifth consecutive quarter to the lowest level in three years. The declines were greatest in the most affordable areas, where foreclosure activity continues to fall from extremely high levels over the past two years, a real estate information service reported.

A total of 70,051 Notices of Default ("NODs") were filed at county recorder offices during the April-to-June period. That was down 13.6 percent from 81,054 for the prior quarter, and down 43.8 percent from 124,562 in second-quarter 2009, according to San Diego-based MDA DataQuick.

Last quarter's total was the lowest since second-quarter 2007, when 53,943 NODs were recorded. The peak was in first-quarter 2009 when 135,431 homeowners received foreclosure notices.

"Obviously, motivated sellers and accommodating lenders have played a part in bringing the default filings down, especially when it comes to short sales. Public policy has also been a factor. We also need to remember that prices have come up off bottom over the past year. If they continue to rise, fewer homeowners will find themselves under water, which is a significant factor in letting a home go," said John Walsh, DataQuick president.
...
The number of Trustees Deeds (TDs) recorded, which reflect the number of houses or condo units lost at the end of the foreclosure process, totaled 47,669 during the second quarter. That was up 11.2 percent from 42,857 for the prior quarter, and up 4.4 percent from 45,667 for second-quarter 2009. The all-time peak was 79,511 in third- quarter 2008.

As I've noted before, in terms of new NOD filings the peak was probably in 2009. A few key points:

Because of the number of homes in the foreclosure pipeline, the number of distressed sales (foreclosures and short sales) will probably increase throughout 2010 - even as NODs decline.

As prices fall later this year, we might see another pick up in NODs.

Although NODs will decline in 2010 from 2009, the number will still be very high. The number of filings in the first half alone is at the peak of the previous housing bust.

by Calculated Risk on 7/22/2010 06:04:00 PM

Tomorrow the Committee of European Banking Supervisors (CEBS) will release the stress test results for 91 European Banks.

The results will be released at 6:00 PM CEST (Central European Summer Time). That would be noon ET, although a few reports have suggested earlier release times (perhaps time conversion problems - something I'm familiar with).

Here is the press release on timing:

The results of the stress test will be released, both on an aggregated and on a bank-by-bank basis, on 23 July 2010, starting at 18.00 hrs CEST.

At 18.00 hrs CEST, CEBS will publish on its website the results of the exercise on an aggregated basis, in the form of a summary report, accompanied by a press release presenting the main conclusions as regards the resilience of the EU banking sector.

From 18.00 hrs CEST, the banks' individual results of the exercise will be published by banks and/or their national supervisory authorities, on their respective websites.

A summary of the 91 bank-by-bank results, sorted by country, will be republished on CEBS’s website with links to the websites of the participating national authorities, foreseen around 18.30 hrs CET.

A restricted press conference will be held at CEBS’s premises in London at 19:00 hrs CEST. Invitations will be sent separately. A broadcast of the press conference will be available via CEBS’s website.

In advance, here is a look at European bond spreads from the Atlanta Fed weekly Financial Highlights released today (graph as of July 21st):

Click on graph for larger image in new window.

From the Atlanta Fed:

Peripheral European bond spreads (over German bonds) have declined from recent highs but remain extremely elevated.

Since the June FOMC meeting, the 10-year Greece-to-German bond spread has narrowed by nearly 40 basis points (bps) (from 8.01% to 7.62%) through July 20. Other European peripherals’ spreads have also narrowed, with Portugal lower by 25 bps over the period and Spain 24 bps lower.

Note: The Atlanta Fed data is a couple days old. Nemo has links to the current data on the sidebar of his site.

Here are the spreads for the 10-year relative to the German bonds:

Country	Spreads July 22nd	Spreads July 7th	Spreads June 16th	Spreads June 2nd
Greece	7.75%	7.64%	6.40%	5.03%
Portugal	2.88%	2.75%	2.74%	1.95%
Ireland	2.77%	2.62%	2.83%	2.19%
Spain	1.7%	2.06%	2.09%	1.62%

With the exception of Spain, the spreads have widened a little over the last couple of weeks.

by Calculated Risk on 7/22/2010 03:27:00 PM

Note: on Existing Home sales, please see:Existing Home Sales decline in June and Existing Home Inventory increases 4.7% Year-over-Year

The Department of Transportation (DOT) reported that vehicle miles driven in May were up just 0.1% compared to May 2009:

Travel on all roads and streets changed by +0.1% (0.3 billion vehicle miles) for May 2010 as compared with May 2009.
...
Cumulative Travel for 2010 changed by -0.1% (-1.6 billion vehicle miles).

Click on graph for larger image in new window.

This graph shows the rolling 12 month total vehicle miles driven.

On a rolling 12 month basis, vehicle miles driven are mostly moving sideways. Miles driven are still 2.0% below the peak - and only 0.6% above the recent low.

Back in 2008, vehicle miles turned strongly negative on a "month over the same month of the prior year" basis, and that was one of the pieces of data that helped me correctly predict oil prices would decline sharply in the 2nd half of 2008. So far we haven't seen a sharp decline in vehicle miles - and also not a strong increase.