Mortgage Rates & Auto Loan Rates at close 07/23/13

  Mortgage Rates & Auto Loan Rates
                                                       Rate             52 weeks
                                                             WK

                                                LAST   AGO       Hi        Low

30-year mortgage, fixed	4.45	4.63	4.78	3.54	0.78	-0.26
15-year mortgage, fixed	3.55	3.75	3.84	2.80	0.45	-0.63
Jumbo mortgages, $417,000-plus	4.74	4.99	5.11	3.97	0.45	-0.90
Five-year adj mortgage (ARM)	3.72	3.84	4.06	2.80	0.60	-0.21
New-car loan, 48-month	2.64	2.65	3.72	2.42	-0.43	-3.59

 Source: WSJ

Government Bond Quotes at close 07/23/13

Government Bonds
                                                                                                           Yield
                                                                                  Price Change       %

U.S. 5 Year			-2/32	1.324
U.S. 10 Year			-2/32	2.519
U.S. 30 Year			-6/32	3.591
Germany 2 Year			-2/32	0.140
Germany 10 Year			-10/32	1.552
Italy 2 Year			-2/32	1.974
Italy 10 Year			-6/32	4.353
Japan 2 Year			0/32	0.129
Japan 10 Year			1/32	0.778
Spain 2 Year			-1/32	1.910
Spain 10 Year			-16/32	4.679
U.K. 2 Year			0/32	0.327
U.K. 10 Year			-11/32	2.307

Precious Metals Prices

Gold Price    3months futures     US$ 1,341.69

Silver Price  3months futures     US$      20.31

US Regulators plan to relax mortgages rules introduced after the financial crisis

Concerned that tougher mortgage rules could hamper the housing recovery, regulators are preparing to relax a key plank of the rules proposed after the financial crisis.

The watchdogs, which include the Federal Reserve and Federal Deposit Insurance Corp., want to loosen a proposed requirement that banks retain a portion of the mortgage securities they sell to investors, according to people familiar with the situation.

The plan, which hasn't been finalized and could still change, would be a major U-turn for the regulators charged with fleshing out the Dood-Frank financial-overhaul law passed three years ago.

Source: WSJ

China: HSBC/Markit PMI Index fell to 47.7 in July

Activity in China's vast manufacturing sector slowed to an 11-month low in July as new orders faltered and the job market darkened, a preliminary survey showed on Wednesday, suggesting the world's second-largest economy is still losing momentum.

The flash HSBC/Markit Purchasing Managers' Index fell to 47.7 this month from June's final reading of 48.2, marking a third straight month below the watershed 50 line which demarcates expansion of activities from contraction.

It was the weakest level since August 2012.

"The lower reading of the July HSBC Flash China Manufacturing PMI suggests a continuous slowdown in manufacturing sectors thanks to weaker new orders and faster destocking," said Hongbin Qu, chief China economist of HSBC.

"This adds more pressure on the labour market," he said.

A sub-index measuring employment slid to 47.3 in July, the weakest since March 2009. It stood at 47.6 in June and has been below 50 for four months in a row.

The new orders sub-index fell to its lowest level in 11 months, and stayed below 50 for a third straight month. Output declined to 10-month low and remained in contraction for a second month.

Source: Reuters

China's consumer confidence rose in Q2

China's consumer confidence rose in the second quarter of the year despite an economic slowdown, according to survey results issued by global marketing research company AC Nielsen on Tuesday.

The company's index for consumer confidence stood at 110 points in the April-June period, up 2 points from the previous quarter and 4 points from the same period last year, the survey showed.

Yan Xuan, president of Nielsen Greater China, attributed the rise to consumers' greater willingness to spend and improving personal finances.

AC Nielsen calculates its quarterly index based on online research among 3,500 shoppers across China. A reading above 100 points indicates optimism.

The firm's study also showed that consumers in first-tier cities had the strongest confidence in spending compared with their counterparts in smaller cities and rural areas.

China has been emphasizing the significance of domestic consumption as part of its switch away from export- and investment-led economic growth.

Doug Holand: Inflationphobia

From a classic economics analysis Mr Holand explores, the present monetary policy of both U.S. and
Japan's Central Banks. Both convinced of the merits of easy money, more worried of deflation and
not of the distortions and the misallocations of resources,that are the result of low interest rates.
Their focus is more on the price of asset classes,stocks, real state and bonds, no matter if they are
boosted to bubble levels.

"The melt-up continues. Federal Reserve chairman Ben Bernanke on July 10 buttressed global markets with his "If financial conditions were to tighten to the extent that they jeopardized the achievement of our inflation and employment objectives, then we would have to push back against that" comment. 

In last week's congressional testimony, he followed up his market-pleasing ways with a notably dovish spin on the inflation outlook. Bernanke is now signaling that extraordinary monetary stimulus is in the cards until inflation "normalizes" back to the rate-setting Federal Open Market Committee's 2% target rate.
  He also said in his testimony to congress that "he was prepared prepared to significantly boost the US$85 billion quantitative easing (QE) in the event of a downside inflation surprise". "From my analytical perspective, there are strong arguments that an inflation rate is an even a poorer data point than unemployment for basing the scope of aggressive experimental monetary stimulus". 

"So expect the inflation discussion to become even more topical. Bruce Bartlett is in the middle of a series of "Inflationphobia" articles for the New York Times. He compares classical economists to "generals and admiral ... always fighting the last war... " with "strategies that are inherently out of date".

Economists learned from the Great Depression that easy money and fiscal stimulus could stimulate growth. Pre-Depression classical economics had been based on a rigid balanced budget requirement for government and a gold standard that provided no discretion for the monetary authorities. The new economic orthodoxy became associated with the theories of the British economist John Maynard Keynes and came to be called Keynesian economics. Supporters of classical economics were relegated to the sidelines of economic discussion, but they never went away...

Fortunately, the Fed was led by Ben Bernanke, whose expertise as an academic economist was the Great Depression. He knew that the Fed's errors had contributed mightily to the depression's origins, length and depth, and resolved not to make the same mistakes twice... But the classical economists, whose ranks were much strengthened by the failure of Keynesian economics in the fight against inflation and the apparent triumph of classical policies in the 1980s and 1990s, immediately saw an inevitable replay of the 1970s. They were fighting the last war...             While the Fed has generally maintained an easy money policy, inflation has remained dormant... 

But the constant drumbeat of attacks on the Fed for fostering inflation has constrained its actions, condemning the economy to slower growth and higher unemployment than necessary.The roots of inflationphobia go back at least to the Great Depression, when inflationphobes made the same arguments year after year despite continuing deflation - a falling price level. The defining characteristic of the Great Depression was deflation, which began in 1927, two years before the stock market crash... The great economist Irving Fisher thought that the increasing real burden resulting from deflation was the core cause of the Great Depression.

        I  have a few issues with the current "inflation" "debate". As I've noted previously, it's misguided to compare the current backdrop to the Great Depression. If anyone is mistakenly "fighting the last war", it's the Bernanke Federal Reserve and inflationism more generally. Second, it is equally misguided to focus the "inflation" discussion simply on an aggregate measure of consumer price inflation. For one, it shouldn't be ignored that some of contemporary history's greatest bubbles were inflated during periods of seemingly benign consumer prices (notably, the Twenties and Japan 1980s) bubble. 

 For me, the primary focus on credit always resonated. An expansion of debt - "credit inflation" - will have consequences, although the nature of the inflationary effects can differ greatly depending on the nature of the underlying credit expansion, the particular prevailing flow of the new purchasing power and, importantly, the structure of the real economy (domestic and global). The increase in purchasing power may or may not increase a general measure of consumer prices. It might be directed to imports and inflate trade and current account deficits. It may fuel investment. Or it could flow into housing and securities markets - perhaps inflating asset bubbles. 
  I had the opportunity to assist the great german economist  Dr Kurt Richebacher with his monthly publication for a number of years back in the '90s.
Dr Richebacher persuasively argued that rising consumer price inflation was the least problematic inflationary manifestation, as it could be rectified by determined (Volcker-style) monetary tightening. Presciently, Richebacher viewed asset inflation and bubbles as the much more dangerous inflationary strain - too easily tolerated, accommodated or even propagated. 

It's no coincidence that periods of low consumer price inflation preceded the Great Depression and the bursting of the Japanese bubble. I would further note that consumer price inflation was relatively contained prior to the bursting of the tech and mortgage finance bubbles. But to claim this dynamic was caused by tight monetary policy is flawed thinking. It was just the opposite. 
I would argue that major monetary inflations, along with attendant investment and asset bubbles, tend to boost the supply of goods and services. Myriad outlets arise that readily absorb inflated spending levels, working to avail the system of a rapid increase in aggregate consumer prices. Booming asset markets become magnets for inflationary monetary flows, while a boom-time surge in more upscale and luxury spending patterns also works to restrain general price inflation. Moreover, a boom in trade and international flows ensures strong capital investment and an increased supply of inexpensive imports (think China, Asia and technology). 
The thrust of the analysis is that low consumer price inflation has been integral to central banks accommodating the most precarious credit bubbles. I've always been leery of the notion of "inflation targeting", believing that such an approach risked institutionalizing central bank accommodation of credit excess and asset inflation. 
I'm not afflicted with inflationphobia. Instead, I have a rational aversion to credit and speculative excess. At this point, it should be obvious that a huge issuance of mis-priced debt is problematic. Central banks should avoid accommodating speculative leveraging. The Fed should be very leery of engineering market risk (mis)perceptions. After all, we have witnessed a more than two-decade period of serial global booms and busts. The Fed believes we're in a post-bubble environment, although officials have repeatedly stated it's not possible to recognize the existence a bubble while it's inflating. Then isn't it dangerous to embark on an experimental monetary inflation, especially when the Fed is devoid of a framework that would prevent it from again accommodating dangerous financial bubble excess? 
The structure of the consumption and services-based US economy has evolved over the years to easily absorb credit excess with minimal impact on the consumer price index. After dropping to as low as $25 billion during the 2009 recession, the monthly US trade deficit recently jumped back up to $45 billion. China and Asia can these days produce quantities of iPads, smartphones and tech products sufficient to absorb enormous amounts of purchasing power . That a large proportion of the population is stuck with stagnant income also works to keep consumer inflation in check. As always, the late phase of credit booms sees inequitable wealth redistribution and a small segment of the population enriched by outsized gains. 
There's another side to the seemingly placid US inflationary backdrop. For the past 20 years, Federal Reserve accommodation has been instrumental in unending booms and busts around the globe. In contrast to the US, the structure of the developing economies is generally much more susceptible to destabilizing inflation dynamics. We're now five years into a historic inflationary cycle in China and throughout many developing economies. The deleterious inflationary consequences have reached the point that a strong case can be made that this spectacular bubble period has begun to falter. 

The global economy is increasingly vulnerable to the downside of the emerging market (EM) credit cycle. With abundant liquidity courtesy of Fed and Bank of Japan QE, there still remains ample fuel to worsen the wide divergence building between economic fundamentals and securities prices. All bets are off in the event of market de-risking and de-leveraging. 
At $2 trillion, the Fed had constructed a reasonably well-defined "exit strategy" that it was to implement to normalize its balance sheet. Now, briskly on the way to $4 trillion, the Bernanke Fed is adamant in signaling to the markets that it is determined to avoid normalization. In the most gingerly way imaginable, the Fed recently signaled its intention to, in coming months, begin cautiously backing off from $85 billion monthly QE. Well, the markets threw a fit and the Fed abruptly back-peddled".

The Gulf Cooperation Council

The Gulf Cooperation Council (GCC) was formed in 1981 to create economic, scientific and business cooperation among its oil-exporting members. These Middle East countries share the common faith of Islam, an Arabian culture, and an economic interest separate from OPEC. On a per capita basis, they are among the richest countries in the world. The Gulf Cooperatoin Council headquarters is in Riyadh, the capital of Saudi Arabia, its largest member. Together, they supply one third of U.S. oil and own up to $225 billion of U.S. debt. These countries are seeking to diversify their rapidly growing economies away from oil.

The GCC consists of six members:

1. The Kingdom of Bahrain - Its 1.2 million people enjoy a GDP per capita  of $40,500. Its economy grew 4.5% in 2010.
2. Kuwait - Its population is double that of Bahrain. They enjoy the 10th highest standard of living ($48,900 per person). The country holds 9% of the world's oil reserves.
3. The Sultanate of Oman - Its dwindling oil reserves means it's increasingly relying on tourism to improve the lifestyle of its 3 million residents.
4. Qatar - The richest country in the world, with a GDP per capita of $179,000 for its 848,000 residents. It has 25 billion barrels of proven oil reserves and 14% of the world's natural gas reserves.
5. The Kingdom of Saudi Arabia - The largest of the GCC countries (26 million people) has 20% of the world's proven oil reserves. Its GDP per capita is only $24,200.
6. The United Arab Emirates (UAE) - Its 5.1 million people enjoy a per capita GDP of $49,600 thanks to a diversifying economy that includes Dubai. 

Michael Spence: China's end of Exuberance.

"China’s growth has slowed considerably since 2010, and it may slow even more – a prospect that is rattling investors and markets well beyond China’s borders. With many of the global economy’s traditional growth engines – like the United States – stuck in low gear, China’s performance has become increasingly important. 

But now growth rates for Chinese exports and related indices in manufacturing have fallen, largely owing to weak external demand, especially in Europe. And the Chinese authorities are now scaling back the other major driver of their country’s growth, public-sector investment, as low-return projects seem to generate aggregate demand but prove unsustainable fairly quickly.

The government is using a variety of instruments, including financial-sector credit discipline, to rein in investment demand. Essentially, the government guarantee associated with financing public-sector investment is being withdrawn – as it should be.

But a shadow banking has developed bringing distortions,misallocation of resources, excessive leverage,

on consumer credit,real state,corporate and government sectors.And dangers associated inadequate regulation.

As a result investors are worried of a high leveraged growth of the economy, a model that has been proved

by developing countries with extremely poor results

Much has been made of domestic consumption as a driver of Chinese growth in the future. But Justin Lin , a former chief economist at World Bank, has argued forcefully that investment will and should remain a key growth driver, and that domestic consumption in China’s growth pattern should not be pushed beyond its natural limits into a high-leverage model based on rising consumer debt.

 That seems right. The risk is that Lin’s warning will be interpreted as an argument for sticking with an investment-led model, which would imply more low-return public-sector projects and excess capacity in selected industries. The right target for generating growth is domestic aggregate demand based on the right mix of consumption and high-return investment.

With significant elements of the global economy and external demand facing headwinds, China’s acceptance (so far) of a growth slowdown, while its new growth engines kick in, is a good sign, in my view. It suggests that policymakers are playing for longer-run sustainable growth and have become warier of policies that, if used persistently, amount to a defective, unsustainable growth model. 

Watching for progress on these key elements of structural change and reform seems to be the right stance. If markets are confused or pessimistic about China’s longer-term agenda, but if the direction of structural change and reform is positive, there may be investment opportunities that were absent in the more exuberant recent past".

Michael Spence
Nobel laureate in Economics
Project Syndicate

Robert Schiller:Bubbles forever

"You might think that we have been living in a post-bubble world since the collapse in 2006 of the biggest-ever worldwide real-estate bubble, and the end of a major worldwide stock-market bubble the following year. But talk of bubbles keeps reappearing – new or continuing housing bubbles in many countries, a new global stock-market bubble, a long-term bond-market bubble in the United States and other countries, an oil-price bubble, a gold bubble, and so on.
 For example in a recent visit to Colombia a taxi driver told  me about the local real-state bubbles pointing out several homes that had been sold for million of dollars.
Colombia's Central bank maintains a home price index for 3 cities: Bogota, Medellin and Cali.
The index has risen 69%in real terms since 2004, with most of the increase coming after 2007. That rate of price growth recalls the US experience, with the S&P/Case-Shiller Ten-City Home Price Index for the US rising 131% 
in real terms from its bottom in 1997 to its peak in 2006. 
In the second edition of my book Irrational Exuberance, I tried to give a better definition of a bubble. A “speculative bubble,” I wrote then, is “a situation in which news of price increases spurs investor enthusiasm, which spreads by psychological contagion from person to person, in the process amplifying stories that might justify the price increase.” This attracts “a larger and larger class of investors, who, despite doubts about the real value of the investment, are drawn to it partly through envy of others’ successes and partly through a gambler’s excitement.”
The story in every country is different, reflecting its own news, which does not always jibe with news in other countries. For example, the current story in Colombia appears to be that the country’s government, now under the well-regarded management of President Juan Manuel Santos, has brought down inflation and interest rates to developed-country levels, while all but eliminating the threat posed by the FARC rebels, thereby injecting new vitality into the Colombian economy. That is a good enough story to drive a housing bubble.

A new speculative bubble can appear anywhere if a new story about the economy appears, and if it has enough narrative strength to spark a new contagion of investor thinking.

This is what happened in the bull market of the 1920’s in the US, with the peak in 1929. We have distorted that history  by thinking of bubbles as a period of dramatic price growth, followed by a sudden turning point and a major and definitive crash. In fact, a major boom in real stock prices in the US after “Black Tuesday” brought them halfway back to 1929 levels by 1930. This was followed by a second crash, another boom from 1932 to 1937, and a third crash.

Speculative bubbles do not end like a short story, novel, or play. There is no final denouement that brings all the strands of a narrative into an impressive final conclusion. In the real world, we never know when the story is over"


Robert Schiller
Project Syndicate

U.S. Sharp price Rise of homes and Cautious Mortgage lending.prevents increase in First Time Buyers

"First-time home buyers, long a key underpinning of the housing market, are increasingly getting left behind in the real-estate recovery.

Such buyers, typically couples in their late 20s or early 30s, have accounted for about 30% of home sales over the past year. They represented 40% of sales, on average, over the past 30 years, and accounted for more than 50% in 2009, when recession-era tax credits fueled the first-time market, according to data from the National Association of Realtors.

First-time home buyers are the foundation of the real-estate market and are major contributors to their local economies, often buying up older homes, revitalizing communities and spending money on furniture and renovations.

In June, first-time buyers accounted for 29% of purchases of existing homes, compared with 32% in June a year ago, according to the NAR's June existing home-sales report released Monday.

The national median existing-home price was $214,200 in June, up 13.5% from a year ago".

From  WSJ

China's Indexes higher after IPO delays report

   Chinese shares jumped on Tuesday as the country's securities regulator is reportedly delaying massive resumption of initial public offering, easing investors' concerns over market liquidity. The benchmark Shanghai Composite Index rose 1.95 percent, or 39.11 points, to end at 2,043.88, and the Shenzhen Component Index jumped 3.64 percent, or 279.48 points, to 7,963.7.
An IPO relating to more than 80 authorized enterprises was expected to be launched before the end of July. However, it has been delayed as some firms have been asked by China's securities regulator to submit recen financial data The delay helped boost trading Tuesday.

 The government started regulatory campaigns against the rare earth industry, which stimulated the non-ferrous metal sector up 3.34 percent with two shares hitting the daily increase limit of 10 percent.

The railway sector also surged as an investment scheme is expected to be submitted to the State Council, China's cabinet, in September in order to maintain the steady development of the industry. The shares of China Railway Group Limited, the country's largest construction giant, went up 5.16 percent to 2.65 yuan per share.

Source:  Xinhua

Japan joins TPP free trade negotiations

Japanese participation in the Trans-Pacific Partnership free trade negotiations was formally approved on Tuesday after the United States completed domestic procedures that were the last obstacle to Japan's entry.

The 18th round of the TPP talks is being held in Kota Kinabalu, Malaysia, until July 25th.The Japanese delegation will join discussions at working groups that are deliberating rules for intellectual property and public procurement.
Japanese officials will have access to documents that show the current status of the negotiations in various working groups.
The officials also plan to hold separate meetings with negotiators from other countries to gather information and seek understanding for Japan's positions.

China introduces a 5 year ban on new government buildings

Central authorities on Tuesday introduced a five-year ban on the construction of new government buildings as part of an ongoing frugality campaign.

The General Office of the Communist Party of China (CPC) Central Committee and the General Office of the State Council jointly issued a directive that calls for an across-the-board halt to the construction of any new government buildings in the coming five years.

The ban also covers expensive structures built as training centers or hotels.

The directive said some departments and localities have built government office compounds in violation of regulations.

The directive called on all CPC and government bodies to be frugal and ensure that government funds and resources be spent on developing the economy and boosting the public's well-being.

According to the directive, the construction, purchase, restoration or expansion of office compounds that is done in the guise of building repair or urban planning is strictly forbidden.

The directive also bans CPC and government organizations from receiving any form of construction sponsorship or donations, as well as collaborating with enterprises, in developing construction projects.

While allowing restoration projects for office buildings with dated facilities, the directive stresses that such projects must be exclusively aimed at erasing safety risks and restoring office functions.

According to the instruction, such projects must be approved first by related administrative departments and luxury interior decoration is prohibited, with criteria and spending to be set in accordance with local conditions.

The directive stipulates that expenditures on office building restoration should be included in CPC and government budgets.

According to the instruction, buildings with reception functions, such as those related to accommodation, meetings and catering, should not be restored.

Precious Metals Prices

Gold Price     3months futures         US$ 1,328.69

Silver Price   3months futures         US$      20.20