The Dog Ate My Home. By: Anirban Basu Sage Policy Group, Inc. January 11, 2012

Transcription

1 The Dog Ate My Home By: Anirban Basu Sage Policy Group, Inc. January 11, 2012

2 Penny wise, Euro foolish

3 Top 12 Stock Exchanges 2008 Growth Rank Exchange Index 2008 % Change 3 London SE FTSE % 1 NYSE Group DJI A -33.8% 12 Swiss Exchange Swiss Market -34.2% 9 TSX Group S&P TSX Composite -35.4% 2 Nasdaq NASDAQ Composite -39.6% 8 Bolsa De Medrid Madrid General -40.0% 6 Frankfurt SE DAX -40.2% 4 Tokyo SE Nikkei % 5 Euronext CAC % 11 Hong Kong Exchanges Hang Seng Index -47.9% 10 Borsa Italiana MIBTel -48.5% 7 Shanghai SE Shanghai Composite -65.4% Source: Yahoo! Finance

4 Top 12 Stock Exchanges 2009 Growth Rank Exchange Index 2009 % Change 7 Shanghai SE Shanghai Composite 77.2% 11 Hong Kong Exchanges Hang Seng Index 51.4% 2 Nasdaq NASDAQ Composite 43.7% 9 TSX Group S&P TSX Composite 31.2% 6 Frankfurt SE DAX 29.9% 1 NYSE Group DJI A 26.8% 8 Bolsa De Medrid Madrid General 26.7% 3 London SE FTSE % 5 Euronext CAC % 10 Borsa Italiana FTSE MIB 19.5% 12 Swiss Exchange Swiss Market 18.4% 4 Tokyo SE Nikkei % Source: Yahoo! Finance

5 Top 12 Stock Exchanges 2010 Growth Rank Exchange Index 2010 % Change 2 Nasdaq NASDAQ Composite 16.9% 6 Frankfurt SE DAX 16.1% 9 TSX Group S&P TSX Composite 14.4% 1 NYSE Group DJI A 11.0% 3 London SE FTSE % 11 Hong Kong Exchanges Hang Seng Index 5.3% 12 Swiss Exchange Swiss Market -1.7% 4 Tokyo SE Nikkei % 5 Euronext CAC % 10 Borsa Italiana FTSE MIB -13.2% 7 Shanghai SE Shanghai Composite -14.3% 8 Bolsa De Medrid Madrid General -19.2% Source: Yahoo! Finance

6 Top 12 Stock Exchanges 2011 YTD Growth through Third Quarter Rank Exchange Index % Change 1 NYSE Group DJI A -5.7% 2 Nasdaq NASDAQ Composite -9.0% 3 London SE FTSE % 9 TSX Group S&P TSX Composite -13.5% 8 Bolsa De Medrid Madrid General -14.0% 12 Swiss Exchange Swiss Market -14.1% 4 Tokyo SE Nikkei % 7 Shanghai SE Shanghai Composite -16.0% 6 Frankfurt SE DAX -20.4% 5 Euronext CAC % 11 Hong Kong Exchanges Hang Seng Index -23.6% 10 Borsa Italiana FTSE MIB -26.5% Source: Yahoo! Finance

7 Top 12 Stock Exchanges 2011 Growth Rank Exchange Index % Change 1 NYSE Group DJI A 5.5% 2 Nasdaq NASDAQ Composite -1.8% 3 London SE FTSE % 12 Swiss Exchange Swiss Market -7.8% 9 TSX Group S&P TSX Composite -9.2% 8 Bolsa De Medrid Madrid General -14.6% 6 Frankfurt SE DAX -14.7% 5 Euronext CAC % 4 Tokyo SE Nikkei % 11 Hong Kong Exchanges Hang Seng Index -20.0% 7 Shanghai SE Shanghai Composite -21.7% 10 Borsa Italiana FTSE MIB -25.2% Source: Yahoo! Finance

8 S&P 500 Performance Through YE 2011 Index 2011Q4 3-year 5-year S&P 500 Total Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecommunication Services Utilities Source: Horizon Investments, LLC

9 All dressed up with no place to go

10 Recession Watch as of May 2009 Source: Moody s Economy

11 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Index (2007 = 100) 105 Industrial Production January 2001 through November Source: Federal Reserve The industrial production index measures the real output of the manufacturing, mining, and electric and gas utilities industries.

12 1990Q1 1990Q4 1991Q3 1992Q2 1993Q1 1993Q4 1994Q3 1995Q2 1996Q1 1996Q4 1997Q3 1998Q2 1999Q1 1999Q4 2000Q3 2001Q2 2002Q1 2002Q4 2003Q3 2004Q2 2005Q1 2005Q4 2006Q3 2007Q2 2008Q1 2008Q4 2009Q3 2010Q2 2011Q1 Percent Change from Preceding Period (SAAR) Gross Domestic Product 1990Q1 through 2011Q Q3: 1.8% Source: Bureau of Economic Analysis

13 Recession Watch as of April 2010 Source: Moody s Economy

14 Recession Watch as of October 2011 Source: Moody s Economy

15 U.S. Economy Hits Soft Patch The Institute for Supply Management-Chicago business barometer rebounded in September to 60.4 from August s reading of Employment expanded to its highest level in four months and new orders erased net declines accumulated since April. Order backlogs remained in contraction at a 23-month low. The Empire State Manufacturing Survey s general business conditions index remained negative in October at The new orders index hovered around zero while the shipments index rose above zero to 5.3. The Pennsylvania Federal Reserve District s (PA, NJ, DE) Business Outlook Survey suggests that regional manufacturing is showing signs of recovery after several months of decline. The diffusion index of current activity increased from 17.5 in September to 8.7, the first positive reading in three months. Retail sales fell again in August in the Richmond Federal Reserve District (VA, MD, NC, SC, WV), pulling the revenues index to -32 following July s reading of 11.

16 Temporary Causal Factors High Gas Prices The average price for regular gasoline across the country was $3.46 a gallon as of October 24 th, an increase of 23 percent since last year. Crude oil prices were $93.17 as of October 25 th, up 12.9 percent from prices the same time last year. Weak Housing Market Indicators for the second quarter of 2011 show fragile recovery. While the national house price index rose 1.2 percent in the second quarter, the index is down 6 percent on a year-over-year basis. High Staple Prices According to the IMF, year-over-year, wheat prices have surged 16.3 percent while cotton prices are 11.4 percent higher, through October According to the Bureau of Labor Statistics, fresh fruit and vegetable prices were up 7.6 percent year-over-year as of September Failing Consumer Confidence The Conference Board s index of consumer confidence fell sharply to 39.8 in October from 46.4 in September a level last seen during the recession.

17 Thousands Net Change in U.S. Jobs, BLS January 2001 through December Between December 2010 and December 2011, the nation gained 1,640,000 jobs. 12/11: +200K -900 Sep-11 May-11 Jan-11 Sep-10 May-10 Jan-10 Sep-09 May-09 Jan-09 Sep-08 May-08 Jan-08 Sep-07 May-07 Jan-07 Sep-06 May-06 Jan-06 Sep-05 May-05 Jan-05 Sep-04 May-04 Jan-04 Sep-03 May-03 Jan-03 Sep-02 May-02 Jan-02 Sep-01 May-01 Jan-01 Source: Bureau of Labor Statistics

18 National Nonfarm Employment by Industry Sector Groups December 2010 v. December 2011 Professional and Business Services Education & Health Services Trade, Transportation, and Utilities Leisure & Hospitality Manufacturing Mining and Logging 91 Construction Other Services Financial Activities Information Government All told 1,640K Jobs Gained Thousands, SA Source: Bureau of Labor Statistics

19 Monthly Net Change (thousands) National Construction Employment Monthly Net Change February 2000 December 2011 Feb-00 Aug-00 Feb-01 Aug-01 Feb-02 Aug-02 Feb-03 Aug-03 Feb-04 Aug-04 Feb-05 Aug-05 Feb-06 Aug-06 Feb-07 Aug-07 Feb-08 Aug-08 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Aug Industry Sector Dec-11 Nov-11 Dec-10 1-net 12-net 12-% Construction 5,544 5,527 5, % Residential Building % Nonresidential Building % Heavy and Civil Engineering Construction % Specialty Trade Contractors 3, , , % Source: Bureau of Labor Statistics Construction Annual Job Growth: 2011: +46K; 2010: -149K; 2009: -1,053K

20 Missouri Nonfarm Employment by Industry Sector Groups (SA) November 2010 v. November 2011 Absolute Change Manufacturing 11,500 Professional & Business Services Trade, Transportation, and Utilities 3,400 5,200 Educational & Health Services 1,300 Mining and Logging Other Services Leisure & Hospitality Financial Activities Construction Government Information ,300-1,900-2,900-4,100-4,300-5,400 MO Total: +1.4K; +0.1% US Total: +1,592K; +1.2% -10,000-5, ,000 10,000 15,000 Source: Bureau of Labor Statistics

21 Kansas City MSA Nonfarm Employment by Industry Sector Groups (NSA) November 2010 v. November 2011 Absolute Change Manufacturing Educational & Health Services Trade, Transportation, and Utilities Government Professional & Business Services 3,400 2,600 1,900 1,600 1,300 Other Services Construction, Mining and Logging Financial Activities -1,900-2, KC Total: +0.3K; +0.1% MO Total: +1.4K; +0.1% Information Leisure & Hospitality -3,600-2,300 US Total: +1,592K; +1.2% -5,000-3,000-1,000 1,000 3,000 5,000 Source: Bureau of Labor Statistics

22 St. Louis, MO-IL MSA Nonfarm Employment by Industry Sector Groups (NSA) November 2010 v. November 2011 Absolute Change Manufacturing 6,000 Trade, Transportation, and Utilities Leisure & Hospitality 3,800 3,500 Other Services 1,200 Professional & Business Services Educational & Health Services St. Louis Total: +5.9K; +0.5% Financial Activities Information Government Construction, Mining and Logging -4,100-2,900-1, MO Total: +1.4K; +0.1% US Total: +1,592K; +1.2% -6,000-4,000-2, ,000 4,000 6,000 8,000 Source: Bureau of Labor Statistics

23 Unemployment Rates, Largest 20 Metros (NSA) November 2011 Rank MSA UR Rank MSA UR Minneapolis-St. Paul-Bloomington, MN- New York-Northern New Jersey- 1 WI Long Island, NY-NJ-PA Washington-Arlington-Alexandria, DC- VA-MD-WV San Francisco-Oakland-Fremont, CA Boston-Cambridge-Quincy, MA-NH Atlanta-Sandy Springs-Marietta, GA Baltimore-Towson, MD San Diego-Carlsbad-San Marcos, CA San Antonio-New Braunfels, TX Miami-Fort Lauderdale-Pompano Beach, FL Dallas-Fort Worth-Arlington, TX Detroit-Warren-Livonia, MI 9.5 Chicago-Joliet-Naperville, IL- 7 Houston-Sugar Land-Baytown, TX IN-WI Phoenix-Mesa-Glendale, AZ Seattle-Tacoma-Bellevue, WA Philadelphia-Camden-Wilmington, PA- 10 NJ-DE-MD Tampa-St. Petersburg-Clearwater, FL 10.3 Los Angeles-Long Beach-Santa Ana, CA 10.7 Riverside-San Bernardino-Ontario, CA 12.5 Source: Bureau of Labor Statistics

24 Unemployment Rates, U.S. States (SA) November 2011 Rank State Rate Rank State Rate Rank State Rate 1 NORTH DAKOTA MASSACHUSETTS WASHINGTON NEBRASKA MONTANA INDIANA SOUTH DAKOTA ALASKA NEW JERSEY NEW HAMPSHIRE WISCONSIN OREGON VERMONT DELAWARE TENNESSEE IOWA PENNSYLVANIA KENTUCKY WYOMING WEST VIRGINIA MICHIGAN MINNESOTA ARKANSAS GEORGIA OKLAHOMA COLORADO SOUTH CAROLINA VIRGINIA NEW YORK FLORIDA UTAH TEXAS ILLINOIS HAWAII MISSOURI NORTH CAROLINA KANSAS CONNECTICUT MISSISSIPPI NEW MEXICO IDAHO RHODE ISLAND LOUISIANA OHIO DISTRICT OF COLUMBIA MARYLAND ALABAMA CALIFORNIA MAINE ARIZONA NEVADA 13.0 Source: Bureau of Labor Statistics U.S. Unemployment Rate: November 11 = 8.7%

25 Unemployment Rates, Missouri MSA s (NSA) November 2011 v. November 2010 St. Louis, MO-IL St. Joseph, MO-KS Springfield, MO Kansas City, MO-KS Joplin, MO Jefferson City, MO Fayetteville-Springdale-Rogers, AR-MO Columbia, MO Nov-10 Nov Unemployment Rate Source: Bureau of Labor Statistics

26 It could be worse, right??

27 Rate 15-Year & 30-Year Fixed Mortgage Rates January 1995 through December % 9% 8% 15-yr 30-yr 7% 6% 5% 4% 3% Source: Freddie Mac

28 Thousands, SAAR U.S. New Home Sales January 1999 through November ,600 1,400 1,200 1, Source: Economy.com, Census Bureau

29 Jan-99 Aug-99 Mar-00 Oct-00 May-01 Dec-01 Jul-02 Feb-03 Sep-03 Apr-04 Nov-04 Jun-05 Jan-06 Aug-06 Mar-07 Oct-07 May-08 Dec-08 Jul-09 Feb-10 Sep-10 Apr-11 Nov-11 Thousands, SAAR 2,700 U.S. Housing Starts January 1999 through November ,200 1,700 1, Source: Economy.com

30 1995Q2 1996Q1 1996Q4 1997Q3 1998Q2 1999Q1 1999Q4 2000Q3 2001Q2 2002Q1 2002Q4 2003Q3 2004Q2 2005Q1 2005Q4 2006Q3 2007Q2 2008Q1 2008Q4 2009Q3 2010Q2 2011Q1 2011Q4 Net Percentage of Domestic Respondents Supply and Demand for Commercial Real Estate Loans 1995Q2 through 2011Q4 100 Tightening Standards for Loans 80 Stronger Demand for Loans Source: Federal Reserve

31 Dec-07 Feb-08 Apr-08 Jun-08 Aug-08 Oct-08 Dec-08 Feb-09 Apr-09 Jun-09 Aug-09 Oct-09 Dec-09 Feb-10 Apr-10 Jun-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Architecture Billings Index December 2007 through November Source: The American Institute of Architects

32 Nonresidential Construction Put-in-Place June 2006 through November 2011 SAAR ($billions) Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep Oct. 08: $719.0 billion Nov. 11: $555.7 billion -22.7% Source: U.S. Census Bureau Type Value % Oct-11 % Nov-10 Private $ % 4.5% Public $ % -4.4% Total $ % -0.1%

33 National Nonresidential Construction Spending by Subsector November 2011 v. November 2010 Manufacturing Commercial Power Educational Highway and street Public safety Office Health care Transportation Sewage and waste disposal Amusement and recreation Communication Water supply Lodging Religious Conservation and development month %Change Source: U.S. Census Bureau

34 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul month % Change Inputs to Construction PPI January November % 10% 5% 0% -5% -10% Source: Bureau of Labor Statistics

35 Jan-01 Oct-01 Jul-02 Apr-03 Jan-04 Oct-04 Jul-05 Apr-06 Jan-07 Oct-07 Jul-08 Apr-09 Jan-10 Oct-10 Jul-11 Jan-01 Oct-01 Jul-02 Apr-03 Jan-04 Oct-04 Jul-05 Apr-06 Jan-07 Oct-07 Jul-08 Apr-09 Jan-10 Oct-10 Jul month % Change 12-month % Change Jan-01 Oct-01 Jul-02 Apr-03 Jan-04 Oct-04 Jul-05 Apr-06 Jan-07 Oct-07 Jul-08 Apr-09 Jan-10 Oct-10 Jul-11 Jan-01 Oct-01 Jul-02 Apr-03 Jan-04 Oct-04 Jul-05 Apr-06 Jan-07 Oct-07 Jul-08 Apr-09 Jan-10 Oct-10 Jul month % Change 12-month % Change Key Commodity Prices January November Iron & Steel PPI Softwood Lumber PPI Concrete Products PPI NYMEX Crude Oil Source: BLS: EIA

36 Aug-07 Nov-07 Feb-08 May-08 Aug-08 Nov-08 Feb-09 May-09 Aug-09 Nov-09 Feb-10 May-10 Aug-10 Nov-10 Feb-11 May-11 Aug-11 Nov-11 One-month Percent Change Conference Board Leading Economic Indicators Index August 2007 through December % 1.0% 0.5% 0.0% -0.5% -1.0% December 2011 = 94.3 where 2004= % Source: Conference Board

37 It s difficult to forecast, particularly the future Economy hit a soft patch; Construction now in recovery; Recession no longer imminent; Black swan threats: (1) Iran (2) Israel/Iran (3) Europe; Many headwinds remain and the nascent recovery could easily falter; and Recovery is now almost exclusively driven by private construction;