The S&P/Case-Shiller index’s 18.6 percent decrease compares with a record 19 percent decline the month before. The gauge has fallen every month since January 2007, and year-over-year records began in 2001. For the first time since the measure started dropping in 2007, the 20-city index didn’t post a record year-over-year decline in February.

Declining prices, Federal Reserve efforts to bring mortgage rates down, and government tax credits for first-time buyers may continue to support sales after an almost four-year slide. Still, mounting unemployment means purchases are unlikely to rebound quickly.

This Bear market stills showing its claws…

Fears that a swine flu outbreak could turn into a global pandemic intensified on Monday, as governments across the globe stepped up their response and tensions rose between Europe and the US following a warning by a senior EU health official against all but non-essential travel to America.

On the first day of trading, financial markets were volatile  after warnings that the flu outbreak in Mexico could become a pandemic and damage any prospect of a fragile economic recovery. Airline, travel, tourism and meat producer stocks fell sharply on swine virus worries, but pharmaceutical stocks rose.

There is no vaccine to prevent the spread of A/H1N1, and even if officials were to start work on one today it would take months to produce.

On the positive side this virus is, at least for now, responding to common antiviral treatments such as Tamiflu. The WHO has an emergency stockpile of 5m or so antiviral drugs, which it plans to make available for the hardest-hit countries.

COMMERCIAL REAL STATE 

The guys from Foresight Analytics (a research firm) say that $594 billion of commercial mortgages will mature in America alone between 2009 and 2011. Many of these borrowers will have a big problem when their loans mature. Just as in residential property, the financing terms that were available to property and construction firms got too laxe as the bubble inflated. Loan-to-value ratios of 85-95% were common in 2006 and 2007. These have now tightened to 60-65% and below for new lending.

That would be bad enough if prices were static. They are not. Commercial-property prices have fallen by 35% or so in America. Richard Parkus, of Deutsche Bank, thinks that 70% of all CMBS issued recently in America will not be able to refinance without a big increase in the capital that borrowers stump up.

Similar story with bank lending. Many banks are extending loan terms, hoping that the problem will go away. It will not. A growing overhang of debt will only make it harder for the market to recover. And the full effects of the bust are only just beginning to be felt. Losses on commercial property tend to lag behind rises in the unemployment rate by a year or so, largely because lease terms protect landlords from immediate falls in rental income.

The pain is now arriving. Office vacancies in America’s city centres increased to 12.5% in the first quarter, up from 9.9% a year earlier. Delinquencies are spiralling. Write-offs on bank-held commercial-property loans rose sevenfold in 2008.

Banks have $1.1 trillion in core commercial real estate loans on their books according to the FDIC, another $590 billion in construction loans, $205 billion in multifamily loans and $63 billion in farm loans. The precise maturity schedule for these loans is not definitive, however bank loans tend to have short-term durations, and the assumption is that all will mature by 2013, exhibiting moderate increases in maturities due to activity pick up over the last 2-3 years.

Adding the life insurance company estimate of $222 billion in direct loans maturing through 2018 per the Mortgage Bankers Association, increases annual maturities by another $15-25 billion.

In summation as presented below, the total maturities by 2018 are just under $2 trillion, with $1.4 trillion maturing through 2013.

Who said this mess is OVER ?

The Taliban appeared to be consolidating control in the district, Buner, on Thursday after moving in and establishing checkpoints on last Wednesday. Residents said Taliban militants held a meeting, or jirga, with local elders and the local administration on Thursday. 

President Asif Zardari this week, “fighting a battle for its own survival” says THE ECONOMIST.

In the latest violence 24 people were killed on April 5th in a suicide-bomb attack, calculated to foment sectarian hostility, on a Shia mosque in Chakwal in Punjab province. 

“This concession represents a serious development and reflects both the growing strength of the Pakistani Taliban and the inability of the Pakistani army to conduct successful counterinsurgency operations,” said Senator Jack Reed, a Rhode Island Democrat. 

As Secretary Clinton´s said on Thursday referring to the country’s nuclear arsenal: “You know, we spend a lot of time worrying about Iran — Pakistan already has them ( NUKES ) and they are widely dispersed in the country.”

Meanwhile GOLD is becoming again, a safe bet .

The number of Spanish unemployed rose sharply in the first quarter of this year to more than 4m, confirming Spain’s position as the European Union state worst affected by job losses during the global economic crisis.

Unemployment rose to 4.01m, or 17.4 per cent of the workforce, up from 13.9 per cent in the fourth quarter of last year, the National Statistics Institute said Friday.

The figures are worse than expected and will come as a blow to José Luis Rodríguez Zapatero, the Socialist prime minister.

Where are we planning to be in 2010 MR Zapatero ?

The Group of Eight leading nations called last Monday “for increasing public and private investment” in agriculture, but their communiqué after the first meeting on the subject acknowledged that efforts to tackle hunger were lagging.

G8 agriculture ministers, meeting in northern Italy, said that the world was “very far from reaching” the United Nations’ goal of halving by 2015 the world’s proportion of malnourished people, after they reviewed what they called “alarming data” on hunger.

The United Nations’ Food and Agriculture Organisation told the G8 that the number of chronically hungry people is set to increase by 75-100m this year as result of persistently high food prices and the economic crisis, bringing the number of malnourished well above the one billion mark.

While agricultural commodities prices had fallen from last year’s record highs, they were “well above previous lows in many countries”.

“The depth of the current economic recession means that the number of people who are poor and, consequently, hungry has increase since last year,” the statement said. “Structural factors may affect prices over the medium term, and increased volatility and demand raise important question about food security in the future.”

In recent weeks financial markets have relied on to the “green-shoots” thesis, rising smartly as an array of statistics turned out to be less dire than expected. Policymakers, too, have begun to sound less pessimistic.

Optimism may be fashionable, but there are plenty of reasons to fear it is premature.The danger is that too much emphasis on the stock cycle misses the underlying characteristics of this downturn. This is mainly a balance-sheet recession precipitated by a financial crisis. And it is a downturn that it is unusually synchronised around the globe.

Recoveries from globally synchronised recessions take 50% longer than other recoveries as an analysis in the IMF’s new World Economic Outlook makes clear.

Banks worldwide have written down their assets by $1.1 trillion. The final tally is expected to be double that or even triple !! The pain is only now starting to spread through commercial property and commercial loans and banks have been the “cheerleaders” of this ” green-shoots” theoretic recovery.

Maybe too much hope…

Growing populations, falling energy sources and food shortages will create the “perfect storm” by 2030, UK government’s chief scientist Professor John Beddington has said in BBC .

The world faces a permanent food crisis and global instability unless countries act now to feed a surging population by doubling agricultural output, a report drafted for ministers of the Group of Eight nations has warned.

The policy document, prepared by the G8’s Italian presidency for its first ministerial meeting on agriculture and seen by the Financial Times, says “immediate interventions” are needed.

It warns that global agriculture production must double by 2050 for the world’s fast-growing population to have enough to eat and to deal with the effects of climate change. Otherwise, the report says, the food crisis of the past two years in much of the world “will become structural in only a few decades”.

The report says that further food crises will have “serious consequences, not merely on business relations but equally on social and international relations, which in turn will impact directly on the security and stability of world politics”.

Goldman Sachs, the most-profitable securities firm before converting to a bank last year, received more cash from AIG after the Federal Reserve rescued it last year than any other counterparty. Their 09 first quarter numbers are “questioned” by the Street.

“Actual Macro Data are already worse than the more adverse scenario for 2009 in the Stress Tests. The Stress Tests fail the basic criterion of Reality Check even before they are concluded”, says Nouriel Roubini…

And , if you look at the actual data today for Q1 on the three variables used in the stress tests – growth rate, unemployment rate, and home price depreciation – are already worse than those in FDIC baseline scenario for 2009 and even worse than those for the more adverse stressed scenario for 2010.  Thus, the stress test results are meaningless as actual data are already running worse than the worst case scenario.

The FDIC and Treasury used assumptions for the macro variables in 2009 and 2010 both the baseline and more adverse scenarios that are so optimistic that actual data for 2009 are already worse than the adverse scenario. And for some crucial variables such as the unemployment rate – that is key to proper estimates of default rates and recovery rates (given default) for residential mortgages, commercial mortgages, credit cards, auto loans, student loans and other banks loans – current trend show that by the end of 2009 the unemployment rate will be higher than the average unemployment rate assumed in the more adverse scenario for 2010, not for 2009 !!!

And our question is,  how are we going to make realistic observations and investment decisions if the WHOLE SYSTEM is flawed ?

http://www.fdic.gov/news/news/press/2009/

Providers of consumer goods and services and retailers are definitely feeling the pinch.

In the long-run this is healthy but if we acknowledge that the primary investment savings and wealth creating vehicle for most Americans is their home and consider that the National Association of Realtors (NAR) estimates that from the peak of 2007 thru January 2009 the median home price has declined aprox.-25% and that the stock market, S&P 500 -45% since the October 2007 peak-to-date, then a lot of people have some serious bootstrap catching up to do.

Anyone who has experienced any of this wealth destruction is more inclined to rebuild wealth instead of spending hard earned cash. For those who refuse to modify spending and saving habits and use credit, it will be difficult to find.