Foreclosures, Weekly Job Losses & Economic Pessimism Up
Welcome to Thursday, where bad news might be good for investors. Let's get the data points out of the way:
- Foreclosure activity up 4 percent in Q3: Amid the crazy foreclosure fiasco (see below), RealtyTrac said that foreclosure filings - default notices, scheduled auctions and bank repossessions - were reported on 930,437 properties in Q3. That means that one in every 139 US housing units received a foreclosure filing during the quarter. For the first time EVER, bank repossessions have surpassed the 100,000 mark in a single month. A record 102,134 were reported in September.
- Foreclsoure-Gate Update: Yesterday, all 50 attorneys general announced that they would launch a joint investigation into whether banks and other lenders have used false signatures and documents to justify foreclosures.
- Weekly jobless claims: rose by a larger than expected 13,000 to 462,000 in the week ended October 9. The number of people continuing to receive jobless benefits dropped by 112,000 in the week ended October 2 to 4.4 million, the lowest level since November 2008.
- Americans Pessimistic: A newly-released CBS News poll finds that 27 percent of Americans believe that the economy is getting worse. Just 22 percent of Americans say the economy is getting better, while one in two say it's staying the same.
The housing market is mired not only in the after-shock of a bubble bursting, but now we have to contend with a potentially massive disruption as the robo-signing fiasco has gone viral. JP Morgan Chase CEO Jamie Dimon admitted as much during the JPM earnings call yesterday, saying "We've identified issues relating to the mortgage foreclosure affidavits and those include signers not having personally reviewed the underlying loan files but instead having relied upon the work of others."
Wow--doesn't look like the AGs will have much to do except knock out a mega-settlement after a statement like that! Maybe this will be an opportunity to scrap the failed HAMP plan and replace it with a program that forces principal reductions (or bankruptcy cram-downs) on first and secondary lien-holders (banks have been fighting this like crazy). I don't expect anything to happen until after the mid-terms, at which time some sort of Federal component to the AG's settlement will be necessary to clear the cloud of uncertainty.
Jobs...it's just ugly out there. After last week's jobs report, I noted that there were three reasons to worry: part-time employment is exploding; broad unemployment is nearing record levels; and long-term unemployment remains high. The weekly jobs report may be just a week, but the downbeat trends are still in place.
Stocks are trading slightly lower this morning, but generally, investors have been buoyed by all of this bad news. Why? The answer is a perverse twist of Wall Street reasoning: if the economy is still weak, the Fed will have to act to pump more money into the system to stimulate the economy by purchasing as much as $500 billion worth of US bonds. This is referred to as "Quantitative Easing" or "QE". Because it would be the second time the Fed went on a shopping spree, the proposed action is being called "QE2"-get it? Like the ship...QE2...setting sail...the problem is that a lot of Americans won't be on board.
Image by Flickr User Alan M Hughes, CC 2.0
