Morning Report: Greece officially defaults 7/1/15

Stocks are up smartly this morning on stronger economic data and the prospect of a solution in Greece. Bonds and MBS are down.

Mortgage Applications fell 4.7% last week as interest rates spiked on the strong personal spending data. Purchase applications fell 4.1% while refis dropped 5.2%. The average 30 year fixed rate mortgage rose to 4.26%.

The ADP employment survey reported that 237k jobs were created in June, higher than the 218k forecast. The Street is forecasting a rise of 230k for the jobs report tomorrow. Challenger job cuts rose to 44k.

Fed St. Louis President James Bullard spoke last night and said the Fed should consider raising rates at the Sep meeting given the strength of the latest economic data.

Vehicle sales will be coming in all day. Early returns are disappointing.

Construction spending rose .8% in May, beating the .5% estimate. Residential construction rose .3%.

The ISM Manufacturing Index rose in June from 52.8 to 53.5. A reading over 50 indicates expansion. This is good news as the decline in oil prices had depressed activity in the oil patch. New orders and employment drove the increase. The 53.5 reading would typically correspond to a GDP growth rate of 3.3%.

Last night, Greece became the first advanced economy to officially default on an IMF loan. Most Greek banks are out of money, and pensioners who are used to getting 600 euros for the month are being given less than a quarter of that – about 120 euros. ATM deposits are being limited to 60 euros a day. The first snap poll of Greek citizens has pretty convincingly rejected the EU’s offer – 53% “no”, 33% yes.

Greece has told Europe that the latest offer comprises the basis of a compromise. The Europeans are going to wait until the results of the referendum are out on July 5. If the voters say “no” to the European demands, Greece will have no other option than to print its own currency to pay workers and pensioners. IMO, a Greek exit will be bond bullish, as it will probably force a policy response out of the ECB and that means more QE.

While home prices still remain affordable compared to the bubble years, low inventory has pushed up the price / rent ratio. We are back to late 2003 levels. On a nominal (in other words, non-inflation adjusted basis), prices are approaching peak levels, but on an inflation adjusted basis, they still have a ways to go. Of course wage inflation remains muted, so that will act as a drag on home price appreciation, or at least affordability.

The latest CoreLogic Market Pulse is out, and it has some good stuff on the state of the housing economy. They discuss the most overvalued housing markets, and find 4 are in Texas. Not sure how their index works, but there you go. The other ones are Washington DC (duh), Miami FL (huh?) and Charleston SC (huh?). Overall, prices nationwide appear reasonable and sustainable, with many localities still recovering from the collapse.

27 Responses

  1. I hope to help with the vehicle sales numbers later in the year once I sign a new contract. We shall see.

    Oh–frist!

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  2. @Michigoose: Frist off!

    That necessarily and importantly being said, there should have never been a Euro as a basis for a single shared currency. There should have only been, in my opinion, a new shared currency called “galactic credits” (preparing for the future, natch) which could be exchanged with each sovereign nations native currency. Thus, business could have been conducted in galactic credits not just in Europe, but globally and eventually throughout the galaxy, while not completely depriving individual nations of control of their own currency.

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  3. Michi – congrats… still driving the 13 year old beater…

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  4. I heard the creditors are calling it “overdue” not “default” – sort of like being tardy, but not yet absent.

    Brent, my 2006 Forester really is like a Swiss Army Knife. And I keep improving it, whenever I see fit, or am bored and need a DIY project, because it is paid for and seemingly unbreakable. I added a rear view camera radio most recently on the rationale that without it I could not see rugrats low behind the car through my rear view mirror.

    ‘Goose, I recommend Subarus for dependability and driving in less than ideal conditions. Toyota-Lexus and Honda-Acura are also dependable. My own choice would usually be a late model used car after careful evaluation. I have only beaten the late model used deals on end of year pick-up sales. Thus I would usually [2 out of 3 times in 30 years] buy a new truck. YMMV.

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  5. 2014 Mustang GT (Premium)

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    • Convertible? Color?

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    • McWing:

      2014 Mustang GT (Premium)

      My dad has a 2011 (I think). I knew my mom’s AZ had seriously progressed when I went up to visit and he had the new Mustang in the driveway, with him trying to convince me “She agreed to get it!”

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  6. Brent–thanks. Mine’s 14, almost 15 years old and has had to have a series of repairs this year (first time ever)(it’s a Honda CR-V, btw). The last one was almost 1/3 of the trade-in value of the car, so I’ve decided it’s time to bite the bullet and take on a car payment again–or at least a lease payment.

    Mark and McWing–I’m leaning toward a Honda Fit or Civic. Although I lust after a Mini Cooper S.

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    • ‘Goose, the Fit has a stunning amount of interior space in a small package – like Dr. Who’s Tardis. But dollar for dollar the Civic will prove a better buy, I’m willing to bet, and less prone to being blown off the road by the windstream of a semi. Civics are somewhat of an exception to the late model used car rule – a new one is not 35% higher than a one year old one. In fact, the difference is often less than 10%. Still, if you want to save a little, look at Hertz’s certified deals in your area. I think they handle Civics.

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  7. Ruby Red Metallic, hardtop. I’d add a picture but you need to be an admin.

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  8. You are an admin, aren’t you?

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  9. I like my ’15 Ford Escape.

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  10. I don’t think so…

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  11. nothing says badass as much as a gray 2009 VW sportwagon with a booster seat in the back. it’s the diesel that really turns heads.

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  12. my sister in law has a mini. it’s in the shop alot.
    but she doesn’t really know what she’s doing either.

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  13. Thanks for the tip re Hertz, Mark; I’ll probably have either USAA or Costco buy the car for me. When I was a married woman I drove our Civic and Brian drove the CR-V; I would have rather ended up with the Civic, but. . .

    nothing says badass as much as a gray 2009 VW sportwagon with a booster seat in the back

    *snort* The SO drives a gold 2002 Honda Odyssey. Talk about sexy! 🙂

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  14. 2002 Honda Odyssey. Talk about sexy!

    Hey, baby, I just won the Trojan war and I’m on my way to Ithaca. want to be my Penelope? .

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    • TV Land cancels its re-runs of The Dukes of Hazzard.

      We live in extremely bizarre, and somewhat scary, times.

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      • They just need to digitally edit every episode to make the General Lee more politically correct.

        At least the Duke Boys can now get married to each other since first cousins are allowed to do so in Georgia. But not Kentucky for some reason.

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  15. The SO drives a gold 2002 Honda Odyssey. Talk about sexy!

    We went through our minivan phase for about six years. They are astoundingly versatile vehicles as they can carry lots of passengers, cargo, or a combination thereof. We got rid of it when our son started driving and my wife got tired of having to get a tugboat to help park it everywhere.

    My current vehicle is a Hyundai Santa Fe whose main redeeming feature is that I can fit my bicycle in without taking off the front wheel.

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  16. But not Kentucky for some reason.

    Why the “for some reason”?

    I should ask, why does this seem to surprise you?

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    • I should ask, why does this seem to surprise you?

      The states which do NOT allow first cousins to marry is rather random:

      Arkansas
      Delaware
      Idaho
      Iowa
      Kansas
      Kentucky
      Louisiana
      Michigan
      Minnesota
      Mississippi
      Missouri
      Montana
      Nebraska
      Nevada
      New Hampshire
      North Dakota
      Ohio
      Oklahoma
      Oregon
      Pennsylvania
      South Dakota
      Texas
      Washington
      West Virginia
      Wyoming

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  17. It begins.

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  18. “The states which do NOT allow first cousins to marry is rather random:”

    Clearly a 14th Amendment violation.

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    • Is Montana now violating the constitution? Only one way to tell: ask Kennedy and the four musketeers if they personally approve of polygamy.

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