Market Update — June 25, 2012

A few interesting numbers from my weekend reading…

You’ve got to love politicians.  One-hundred-thirty members of Congress (or their families) have bought and sold between $85 million and $218 million in 323 companies registered to lobby on legislation that appeared before them.   This finding is based on an examination of all 45,000 individual congressional stock transactions contained in computerized financial disclosure data from 2007 to 2010.  Almost one in every eight trades — 5,531 — intersected with legislation. The party affiliation of the lawmakers was almost evenly split between Democrats and Republicans, 68 to 62.

Housing shortage?  There are currently 2.49 million homes for sale – 20% less than a year ago.  Supply of low-end homes is particularly low; this is where investors have been active.

Higher home prices are misleading.  The median price of an existing home, as reported by the Realtors, rose 7.9 percent in May (YOY).  Apparently, this is more of a “mix-shift” (away from the low-end).

Mortgage modification.  Forty-two percent of borrowers who get a mortgage modification end up being delinquent again in a year, and 59% are delinquent in 18 months.

Spain’s bad debt.  Spain’s central bank estimated this week that bad debts held by Spanish banks were more than €150 billion in April, an 18-year high.

New pension rules.  New GASB rules may mean that pension liabilities at 126 state and municipal pension plans would increase by approximately $600 billion (18%).  This would reduce the 2010 funding level from 76% to 57%.

States cutting back.  More than 40 states have already moved to trim pension costs since the financial crisis by raising contributions from employees or cutting back benefits for new workers.  GASB’s new rules would force underfunded plans to use a lower rate for some of their obligations.

Everyone talks about the young unemployed people.  But, more than 3.5 million Americans between the ages of 45 and 64 were unemployed as of May.  Thirty-nine percent of these unemployed people have been unemployed for a year or more.   In the 1990s, the unemployment rate among 45- to 64-year-olds peaked at 5.7%. In the 1980s, that rate barely topped 7%. This time, it topped out at 8.2%.  As of May, the unemployment rate for people ages 45 to 64 was 6%.

Not confident enough to quit?  Only 2.1 million people quit their jobs in March, down from the 2.9 million people who quit in December 2007, the first month of the recession.

Bill Gross on monetary policy and financial markets.  Gross, who manages $261 billion for the Pimco, said in a Twitter post that risk markets are vulnerable as the “monetary bag of tricks empties.”

Similar comments from the BIS.  The general manager of the Bank for International Settlements (the central bank to the central banks) said that prolonged monetary stimulus might make structural or fiscal adjustments seem less urgent.

People wonder if China is in worse position than the stats say.  The annual growth rate for industrial production has edged below 10 percent, while electricity generation was up only 3.2 percent in May from a year earlier and up only 1.5 percent in April.

So this is the party that the markets wanted to win the Greek elections?  Party leaders want to cancel planned layoffs in the public sector.  Greece’s lenders had called for 150,000 public sector job cuts by 2015.

Hourly wages.  The real entry-level hourly wage for men who recently graduated from high school fell to $11.68 last year, from $15.64 in 1979, according to data from the Economic Policy Institute. And the percentage of those jobs that offer health insurance has plummeted to 22.8 percent, from 63.3 percent in 1979.

Do you ever wonder what Apple Store employees make?  From a NY Times article, it sounds like they made approximately $11 – $12 / hour.  This is higher than the $7.25 minimum wage.  Apple store employees also receive health insurance, 401k plans, etc.  The company’s 327 stores took in more money per square foot than any other store.  In fact, they almost doubled the sales-per-square foot of the number-two store (Tiffany).  (Apple should put the iPad in a little blue box and double the price.)  Approximately 30,000 of the 43,000 US-based Apple employees work in stores.  Technicians at the genius bar make around $40,000.

My rotten kids.  A new study from U.S. Trust says that only half of millionaire baby boomers think it’s important to leave money to their kids. A third of them said they would rather leave the money to charity than their kids.  Other age groups are different…more than two thirds of those aged 18 to 46 and those over 67 say it’s important to leave a financial inheritance to their children.

Have a great week.

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