Bank failures in 3 months = all of 2008
Will China copy Big Business or US success?
In the race to the bottom, the winner will be land prices. After that, other free-falling sectors can bounce back up. We trim, blend, and append five 2009 articles from: (1) MarketWatch, Apr 13, on China; (2) Reuters, Apr 24, on US home sales; (3) Reuters, Apr 23, on US jobless claims by Lucia Mutikani; (4) Reuters, Apr 17, on bank closures; and (5) the New York Times, Apr 6, on Wall St and GM by Frank Rich.
by MarketWatch, by Reuters, by Mutikani, by Reuters, and by Rich
China urban property prices dip 1.3% in March
Property prices in Chinese cities slipped 1.3% in March from a year earlier, marking the fourth straight month of declines. In February, they dropped 1.2% from the year before. However, measured against the prior month, urban property prices were up 0.2%, snapping seven consecutive month-on-month declines in prices. Nationwide, the value of property totaled 505.9 billion yuan ($74.5 billion) in the first quarter, up 23.1% from a year earlier.
JJS: Do these mixed figures indicate that China’s land market is relatively stable? That there’s enough affordable or available land for businesses and residents? That there is no bubble? That speculation has not gotten out of hand? That their economy will soon shift back into high gear? If the central government does allow workers to become consumers, the nation might sail past the stormy waters others are caught in. Like the US.
US home sales drop in March
Sales of newly built US single-family homes dropped 0.6% in March, but the stock of homes for sale nevertheless plummeted 5.2%, the largest drop in more than 45 years, leaving the supply of homes available for sale at 10.7 months' worth, compared to February's 11.2 months. The year-on-year plunge of 33.7% was the largest on record. Distressed sales made up about half of the sales.
The median sales price for a new home fell to $201,400 from $208,700 in February. The average price, however, rose slightly to $258,000 from $255,100. The median price for all homes was $175,200, up 4.2% from February, boosted by seasonal factors and perhaps the $8,000 tax credit for first-time buyers. However, prices were still down 12.4% from the same period a year ago.
JJS: Land prices must bottom out -- and according to the 18-year land-price they will in about 12 months -- before the economy can recover.
US jobless claims rise, home sales fall
The number of newly laid off US workers filing claims for unemployment aid rose last week. First-time claims for jobless benefits rose 27,000 to 640,000 last week. The number of people still drawing benefits after an initial week of aid jumped 93,000 to a record 6.14 million in the week ended April 11.
It was the 14th straight week in which continuing claims hit an all-time high. While initial filings rose, they remained below the 26-1/2 year high of 674,000 touched in late March. The four-week average of new jobless claims, which suggests coming trends, slipped to 646,750 from 651,000 the previous week.
The swelling jobless rolls lifted the insured unemployment rate -- which measures the percentage of the insured labor force who are jobless -- to 4.6%, the highest since 1983 January, from 4.5% the previous week.
The US recession, which officially began in late 2007, is on track to become the longest since the Great Depression next month.
JJS: The jobless can’t make mortgage payments, and homeowners can’t borrow when their underlying land values fall.
US closed banks match total for all of 2008
Regulators have closed 25 banks this year, matching the number that failed throughout all of 2008, which was up sharply from only three in 2007. Failures deplete hundreds of millions of dollars from the FDIC. In September, Washington Mutual became the biggest bank to fail in US history.
JJS: Regulators should’ve shut down big brokers, too, rather than Congress bail them out.
Land, GM, and Wall Street
Wall Street and GM made similar mistakes:
* Financial institutions and GMAC, the GM financial affiliate whose phantom profits were used to cover the parent company’s losses, both bet on the housing bubble.
* The housing boom’s collapse left holders of AAA-rated mortgage-backed derivatives with worthless paper; the oil price spike left makers of SUVs with tiny market share and owners of SUVs with vastly reduced resale value.
* When sales stalled at home, banks peddled risky financial products in countries like Iceland; GM looked to South America and Russia.
* Both cooked their books, GM by removing its health care liabilities for retirees.
* The same rich people sat on the boards of GM and also Morgan Stanley, Goldman Sachs, and SunTrust Banks (all recipients of bailouts). All the boards richly rewarded their executives for failure.
The latest ABC News/Washington Post poll found that 80% of the country blames banks for the financial meltdown -- a percentage even larger than that blaming George W. Bush (70%). Barack Obama remains popular, with a 66% approval rating. Yet (his appointee’s) Timothy Geithner’s plan merely rescues the same well-connected banking crowd that created the mess.
Jeffery J. Smith runs the Forum on Geonomics.
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