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Wednesday, June 09, 2010

Out Of Ammo

Credit card rates are high on risk. And now the mortgage refi boom has run out. With mortgage rates still below 5%, both purchase apps and refi apps have plummeted in the last week. The collapse in refis is the most ominous sign, because everyone knew purchases would drop after the expiration of the housing tax credit. People who were going to buy bought early, leaving a paucity of buyers for the rest of the normal spring selling season. But the collapse in refis probably means that most who could refi already have. CR's got a nice graph.

Wholesale trade full report. This covers April:

The graph shows that we had some left in the barrel as of April, because sales were still growing faster than inventory builds.

BUT - more recent indicators, such as MAY WIET and this week's petroleum report, show warning signs. Usually growth in YoY gas consumption is positively correlated with growth in wages and salaries (and thus our fiscal health). As of this week, we turned in a YoY four-week drop in gasoline consumption.

I claim, almost without evidence, that the gasoline consumption is more related to fleet replacement than anything else. However, the fact that the YoY growth in WIET just about stopped in May is worrisome and does not support my claim! This is gonna be a squeaker. I do have one positive piece of evidence on the petroleum side. Although YoY growth in gas consumption ceased, diesel demand was still up over 12% YoY. It has dropped, though - the high was around 17%.

We have an overabundance of oil supply currently, but the pricing is reflecting the belief (surely well-grounded) that production costs can only grow as a result of the Gulf drilling accident.

Watch out for falling home prices.
a bit from consumer metrics:


"As we have mentioned before, this pattern is unique and unlike the 'V' shaped recovery (or even the 'W' shaped double-dip) that many had expected. From our perspective the unique pattern is more interesting than the simple fact of an ongoing contraction event. At best the pattern suggests an extended but mild slowdown in the recovery process. But at worse the pattern may be the early signs of a structural change in the economy."
The harvest is passed, the summer is ended, and we are not saved.
Ben Bernanke says that economic growth is gaining steam and Barry Ritholtz says a double dip is impossible because it has never happened before (in modern times) so I think we can all relax and buy BIDU and AAPL. Have at it.
Thank you for those reassuring words, GYC. After you, Alphonse.
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