Euro Zone Kicks the Greek Can Down the Road
- Feb 22, 2012
Greece is getting its 130-billion-euro infusion (about $172 billion) from the EU and the IMF, so the immediate threat of a hard default by the Hellenic Republic next month has disappeared. But few see the deal as anything like a permanent fix, either for Greece or more importantly for sickly, debt-swollen economies such as Spain, Portugal and especially the too-big-to-fail Italy.
Investors were cheerful for a short time after the deal was announced, pushing the European exchanges and the euro up for a little while, but not for long. It was probably hard to shake the notion that all the effort in recent weeks was really just a matter of kicking a very large can down the road a rather short way.
Or it could be the beginning of something important for holders of euro-denominated debt—something they wouldn’t like much at all. In the recent deal, Greek bondholders are “voluntarily” taking a large haircut (the kind you get upon enlisting in the Marines); how long can it be before the panjandrums of the euro-zone are seriously suggesting that holders of Spanish, Portuguese and even Italian debt take a haircut for the team, too? Greece, in other words, might start to be seen as the euro-debt template, something that could easily unnerve bondholders and financial markets once again.
Residential delinquencies high, but declining
LPS (Lender Processing Services), a mortgage data specialist, reported on Tuesday that U.S. residential delinquencies (over 30 days, but not foreclosed yet) were down from from 8.15 percent in December to 7.97 percent in January. Since the rate was 8.9 percent during January 2011, the overall delinquency rate was down nearly a full percentage point year-over-year in January 2012. At that rate of decline, the percentage of delinquent residential mortgages will be “normal”—because there’s always some—in 2015 or thereabouts, when the rate will drop below 5 percent.
As for home loans in foreclosure, LPS says that the rate in January 2012 is 4.15 percent, a small uptick from the month before, when it was 4.11 percent. Compared with a year ago, the January 2012 foreclosure rate isn’t much different, either. The rate was 4.16 percent in January 2011.
The company noted that there are now nearly 4 million U.S. residential properties that are 30 to 90 days past due—3.998 million, to be precise, while 1.772 million properties are more than 90 days past due, but not in foreclosure yet. The number of properties in foreclosure that are “pre-sale inventory” is a shade more than 2 million (that is, the lenders haven’t gotten around to, or been able to, sell the things). LPS says that the states with the highest percentage of non-current loans (delinquent and in foreclosure combined) are Florida, Mississippi, Nevada, New Jersey and Illinois. Montana, Arkansas, Wyoming and the Dakotas have the lowest rate of vexed residential properties.
Chicago Fed says U.S. still growing
The Chicago Fed reported on Tuesday that its National Activity Index showed growth in January, though not as much as in December. The index declined from +0.54 in December to +0.22 in January, while the three-month moving average, the alphabet-soup-designated CFNAI-MA3, increased from +0.06 in December to +0.14 in January, which is the average’s highest level since March 2011.
The employment- and production-related components of the index continued to make positive contributions to the pace of U.S. economic growth, as they have in previous months. The consumption- and especially housing-related components of the index continued to be in negative territory. That is, they’re growing at below historic norms.
For the Dow Jones Industrial Average, 13,000 is supposedly a “psychologically important” level. Whatever the validity of that idea, Wall Street witnessed the index cross the threshold for a short time on Tuesday. But the advance wasn’t sustainable—investors are a fickle lot, after all—and the Dow ended only in the 12,960s, up 15.82 points, or 0.12 percent. The S&P 500 gained 0.07 percent and the Nasdaq lost 0.11 percent.