Stocks slipped in early trade following disappointing but not overly significant economic data. RealtyTrac reports that foreclosure activity fell in April to 188,780 events a 5-year low, 5% less than March and 14% below April of last year. Some of this is because banks are opting for short sales instead of foreclosure due to lower loss ratios, about time they figured that one out. Average period between 60-days delinquent and forced liquidation is 31 months for judicial states and 24-months for non-judicial states. Regardless lower comps and prices is still the result and will delay a true housing bottom until such time as the foreclosure and or shadow inventory is finally liquidated.

The various manufacturing indexes continue their yo-yo like behavior as the Philly Fed records a big miss in May plunging 14.3 points to -5.8, new orders and employment also went negative. Good thing it’s a relatively small part of the total economy.

Like Australia and the US and Europe in years past, China is now experiencing a full blown real estate collapse, the result of building empty cities and tower blocks unaffordable by your average Chinese amongst other items. A report by Patrick Chovanec, a professor at Tsinghua University’s School of Economics and Management in Beijing details an 80% decline in foreign funding, land sales down 57% and starts down 27%. Commercial and residential sales are also falling sharply as the year progresses while inventory is ballooning. The usual movie with the usual ending I would imagine as real estate markets tend to be a function of supply and confidence. With confidence breaking the supply becomes grossly excessive. What follows is the necessary but very painful adjustment to price required to restore confidence, something just beginning in China yet still underway in the west despite a half dozen or so wrenching years.

The middle class is doomed by some very basic dynamics. Economic historian David Hackett Fischer laid out the fundamental dynamic in his book The Great Wave: Price Revolutions and the Rhythm of History.

According to the Census figures, the median annual income for a male full-time, year-round worker in 2010 — $47,715 — was virtually unchanged, in 2010 dollars, from its level in 1973, when it was $49,065.

Overall, median household income adjusted for inflation declined by 2.3 percent in 2010 from the previous year, to $49,445. That was 7 percent less than the peak of $53,252 in 1999.

Now that the average household is heavily indebted with student loans, vehicle loans, credit card debt and mortgages, its ability to leverage a declining income into more debt is seriously impaired. So filling the gap between rising costs and declining wages with debt is no longer a possibility. – This was the catalyst for the current crisis in 2006, Editor.

We can further understand the precariousness of many American households by examining IRS tax data. The top 25% of taxpayers–34 million workers out of a workforce of 160 million and 140 million wage earners–pay almost 90% of all Federal income taxes.

The dwindling middle class, now at best perhaps 25% of the workforce, has been reduced to tax donkeys supporting those above and below who are dependent on Federal largesse.

Fisher found that this cycle ends in transformational political upheaval. No wonder; even as the class paying most of the taxes shrinks and is pressured by higher costs, the class of dependents expands as the economy deteriorates and the super-wealthy Power Elites continue to control the levers of Central State power.

The whole thing can be found here it contains some great charts and is well worth a read.

Stocks struggle into the close mixed despite generally positive economic data. As the fallout from the JP Morgan fiasco and Europe’s recent election results continue.

The April CPI was unchanged following a large drop in energy prices, the annualized rate was also unchanged at 2.3% well below the historical average of 3.1%. The Cleveland Fed median CPI rose .2% in April as the annualized rate came in at 2.3%, this index is designed to measure ex-food and energy core inflation.

The NAHB Confidence Index hit a 5-year high in May as it gained 5 points to 29. Current conditions and traffic rose 5-points each while sales expectations increased 3-points to 34. Significant progress for the index without a doubt, that said a neutral reading is 50 so we still have a long, long way to go before we reach breakeven with this one.

Retail sales increased .1% in April as per Census, on a year ago basis sales are up 6.4%, the two previous months were revised lower by .1% each. Nothing really noteworthy in this month’s report.

The Empire manufacturing survey posted a nice rebound in May as it jumped 10.5 points to 17.1. New orders and employment both showed small gains.

The March TIC Report, or Treasury International Capital Flows showed net foreign purchases of 36.2 billion. Treasuries and equities were popular while the Chinese increased their Treasury holdings to 1.17 Trillion.

Buy low and sell high, sage advice from Warren Buffet and easier said than done. Oil and Gold continue to fall and in fact quite a number of other markets have recently broken key technical support levels including the S&P 500 and Nikki. On the commodities side Cotton, Copper, Oil and Gold have all broken support with Gold slightly negative year to date. Other notables breaking key support include the Euro and Australian Dollar.

Stocks struggled to begin the week as fallout from JP Morgan’s 2 billion Dollar derivatives loss weighs on the markets along with continued Euro Zone jitters. Commodities continue to fall, much of the reason the various price measuring metrics continue to show little if any inflationary pressures of late and on a declining trend. Commodities hit a 2-year low after falling another 1% to begin the week. Notable declines in both Gold and Oil of late serve to underscore the importance of value when it comes to investing and that success is much more likely when one buys low and sells high as opposed to buying high and trying to sell higher. History in general reinforces this, as do the recent busts involving dot-bomb stocks and real estate.

California’s budget situation is close to going over the edge following overly optimistic revenue forecasts and excess spending that threaten a new state level fiscal crisis with a 16 billion Dollar deficit. Once again education is in the cross hairs as our so called political representatives threaten to raise taxes, California has the 3rd highest income tax rate in the country and the second highest sales tax rate both are proposed to increase. Certainly everyone needs to pay their fair share, including corporations, but really this is simply the logical extension of the intellectually and morally bankrupt leadership that plagues this state, the nation and in fact the world. Growth based on the assumption of debt and a society promised things that cannot be delivered is going to end badly at some point. For many this point has arrived, for others it is coming. It is well passed time for us to demand real change and real leadership that works for the benefit of the republic and its human citizenry not the synthetic citizenry that is corporations and their vision of an unlimited lobbyist funding derived fascist state which we are well on our way to realizing.

Euro zone jitters continue to plague the markets as Spain’s recent nationalization of BFA Bank is just the latest chapter of the ongoing Euro crisis. Here at home dire predictions are making the rounds should the Fed not embark on QE 3 this summer. That said the major averages enter the final hour with small gains.

Import prices fell a much larger than expected .5% in April as the annualized rate dropped to just .5%. Once again commodities prices demonstrate that they are the primary drivers of price in the current environment. The trade deficit increased to 51.8 billion in March as imports surged, oil was of course a big part of the total. That said both gasoline and oil usage continue to slip with gasoline use back to levels seen early 2002 while oil usage has plunged to levels last seen in early 1998.

REO inventory held by the various agencies, Fannie, Freddie and the FHA has been steadily trending lower since late 2010, but recent data from the FHA suggests that this trend may be reversing as conveyances in March jumped sharply. Further FHA delinquencies are also trending higher of late along with loans entering the foreclosure process as roughly half of its previously modified loans slip back into default. Continued deterioration in the FHA’s loan portfolio could well drive it into the arms of Uncle Sam requiring us taxpayers to fund yet another bailout. Once again zero or low down payments, remember the FHA’s 3.5% down program, leads to high default rates. Worse with the Fed’s home buyer tax credits we were effectively paying people to buy houses, that once again they couldn’t afford, hence the defaults. How does it go, “the best definition of insanity is continuing to do the same thing expecting a different outcome.”

Stocks opened lower following the latest political news out of Europe featuring a public discussion of Greece leaving the Euro zone and the Spanish premier stating that credit markets were effectively closed in his country.

Fannie Mae reports its first post crisis profit as it earned 2.7 billion in the first quarter a dramatic improvement over the 6.5 billion it lost in the first quarter of last year. REO inventory continues to decline as the taxpayer backed and owned entity continues to sell distressed properties at a faster rate than it acquires them. With a little luck Freddie Mac and the FHA will follow Fannie’s lead and turn a profit as well. So maybe just maybe us taxpayers will see the return of funds borrowed to date. This includes 116.2 billion by Fannie Mae, Freddie Mac has borrowed 72.3 billion while the, on the ropes, FHA got bailed out to the tune of a billion as part of the robo-signing fraudclosure settlement. So combined the two wards of the state agencies owed us taxpayers a cool 188.5 billion as of the end of 2011.

The MBA reports higher purchase activity on record low mortgage rates, the 30-year contract rate fell to 4.01% while the 15-year slipped to 3.29%. Additionally early reports indicate that the oh-so import spring real estate selling season has gotten off to its best start in 5-years. The EIA reports another big jump in crude inventories as they increased 3.7 million barrels to 379.5 million last week.

European election losses continue to spook the markets as the citizenry voices its disapproval of recent government policies. Here’s a question, could it happen here, personally I won’t be surprised if it does.

Consumer’s continue their borrow and spend ways as the March Consumer Credit report increased more than double expectations or 21.4 billion it largest monthly increase since November 2001. Led by student loan debt, gains were also seen in revolving or credit card use which increased 5.2 billion after 2-months of declines. Consumer credit outstanding is now just 1.6% shy of the 2008 peak of 2.58 trillion. The senior Loan Officers Survey shows that not only are banks willing to lend but consumer demand for loans has also increased dramatically, marking a 6th straight quarter of improvement. Color me surprised and very skeptical, as the employment and wage picture does not support a new record consumer debt level.

CoreLogic reports that its home price index increased .6% in March, on a year ago basis prices remain .6% lower. The usual spring bounce will see what happens at the end of the year.

The NFIB reports that its optimism index increased 2 points in April on increases in plans for spending and hiring. Positive sales trends hit their highest level since 2006.

All in all a lot of positive data that suggests things continue to move back towards a more normal state of economic affairs. That said I remain more than a little skeptical as previously stated. Particularly in light of the declining employment and wage trends, because the reason the economy crashed in 2006 was too much debt, plain and simple. Debt that we as a nation collectively choked on because we couldn’t afford the payments. Interest rates may be lower but the same thing will happen again absent employment and wage growth, mark my words.

Stocks struggled to begin the week as the French and Greek election results spooked the markets. There is little economic data today, consumer credit comes out after the close, and expectations are for credit use to expand further.

Yet another former housing bear, Lewis Ranieri, has joined the crowd calling for a housing bottom this year. A fairly astute individual he joins a growing chorus of well informed people that figure housing has reached fair value or is close to it. Certainly there is considerable data to support this argument, that said Robert Schiller noted that prices can overshoot on the downside. Something I figure is all but guaranteed based on the historical data related to three standards of deviation events, the real estate bubble did exactly that in 2006 if memory serves.

As one would expect with home ownership rates falling back towards their long-term average demand for rentals is soaring, along with rents of course. In fact this has caused several markets to become ownership friendly as a result. With President Bush’s ownership society on its way to becoming a rentership society one has to wonder is the American Dream of homeownership on the way out as an article in the Wall Street Journal by Daniel Gross noted. Certainly, there are strong arguments for both choices. It all depends on whether or not a person views this period as one of paradigm change. I do and think this is just one of many significant societal changes that will occur as a result.

Stocks continue to slip in the second quarter with only the NASDAQ holding on to a double-digit year to date gains. Since Monday, the DOW has lost a little less than 200 points or 1.4% while the NASDAQ has given up nearly 100 points or about 3%.

Today’s big news is of course the April payrolls number from the BLS. At 115,000 new jobs it missed big against expectations for 170,000. The official unemployment rate fell to 8.1% as more people leave the workforce and are no longer counted. In fact the labor force participation rate hit a new cycle low of just 63.6% while the employment to population ratio fell to 58.4%. The average workweek was unchanged at 34.5 hours; the average hourly wage increased a penny to $23.38. On a year ago basis wages are up 1.8%, less than inflation, so real wages continue to fall. Since the beginning of the year 803,000 new jobs have been added as per the BLS, an average of 200,000 per month, a decent figure that is ahead of demographic demand.

Other highlights form the report include professional and business services accounting for more than half of April’s employment gains while the Net Birth/Death Statistical Model added 206,000 jobs to the total figure. A weak report that shows once again that employment growth is stumbling and unable to support real economic recovery or expansion. Recent credit data notwithstanding the idea that the current economic recovery can continue based on the assumption of additional debt without solid employment and income growth, is wishful thinking at best.

Freddie Mac reports that mortgage interest rates are averaging all time record lows with the 30-year fixed rate down to 3.84% while the 15-year is averaging just 3.07%. With rates like this and real estate inventory as low as it is prices should be not only stable but also increasing. The fact that they are neither speaks volumes about the impact of distressed sales and the psychology of potential buyers, myself being a prime example as I live in a rented house despite having the means and the desire to buy since 2005.

A falling earnings beat rate, its currently just over 64% and mixed economic data sends stocks into the final hour with modest losses. Productivity fell .5% in the first quarter as unit labor costs jumped 2%. On a year ago basis productivity is up .5% while unit labor costs are 2.1% higher than last year.

The April ISM Services Index posted a big miss as it fell 2.5 points to 53.5. New orders dropped 5.3 to 53.5, employment slipped 2.5 to 54.2, prices plunged 10.3 points to 53.6. The ISM price indexes were some of the last to show notable price pressures with readings above 60.

HSBC Bank finds itself in hot water yet again for money laundering crimes as it was cited in 2010 for lapses as well. By no means alone it joins Wachovia Bank, now part of Wells Fargo, who got charged with money laundering in 2010 and Zions Bank that got charged last year. If the penalties either are not enforced or not sufficiently robust to deter the banks and their executives form their errant ways, nothing will change. Dallas Fed Governor Richard Fischer wants to put an end to “too big to fail” and also punish executives of bailed out banks with unemployment and claw backs. A great start, it sadly will probably end up like a lot of other well intentioned proposals, lots of talk and ultimately no action as the bankster lobbyists will be sure to kill or neuter any proposal before it sees the light of day. For the record, Fed Chairman Ben Bernanke is already against the idea.

Bloomberg is out with a list of the top 10 strongest banks globally. Canada leads with 4 banks in the top ten. Followed by Singapore with the strongest bank and 3 in the top ten. Hong Kong has 2 while Sweden has one to round out the top ten. The best the good old USA could manage was JP Morgan Chase at 13, PNC Bank number 17 while BB &T Bank came in at 22. We used to lead the world in so many positive categories, and then something changed because now our 3 biggest claims to fame are weapons, food production and fraud. As America, once a beacon of hope, freedom and democracy that the rest of the world looked up to is steadily being replaced by a fascist police state for the benefit of the 1%.