Recap 5-9-12

Main Items:

· Dow Jones reports Spanish banks will be required to provision 30% against performing developer loans, up from the present 7%.

· Fannie Mae earned 2.7bn in 1Q

Overseas:

  • China Apr Passenger Car Sales rose 12.5% vs 11.3% est
  • China may delay its five-year congress by a few months because of an internal debate over the size and composition of the nine-member committee.

Upcoming Data:

  • Wed: Australia Employment
  • Thurs: China Trade Balance, Japan Eco watchers Survey, UK MPC, US Import Prices, Initial Jobless Claims, China CPI, Money Supply
  • Fri: China IP, Retail Sales, UK PPI, CanadaUnemployment, US PPI, U Michigan Confidence
  • Mon: Swiss Producer & Import Prices, RBA Minutes,
  • Tues: French CPI, German 1Q GDP, French Payrolls, German Zew, US CPI, Empire Manufacturing, Retail Sales, NAHB Housing Market Index
  • Wed: UK Claimant Count Rate, EU CPI, Swiss ZEW survey, EU Trade Balance, BoE Inflation Report

Commentary:

The deceleration in global growth momentum since the end of March in conjunction with fears of a Grexit continues to make non-tactical directional bets in most markets unattractive. And unless the global macro data starts to get better, market participants are likely to continue focusing on Grexit risks through the mid-June Greek election. Despite the rhetoric, the major players are well incentivized to avoid the catastrophic outcome, but it’s not clear if market dynamics are likely to reflect this without some sort of catalyst. In the meantime, based on price action in precious metals & energy futures, portfolio deleveraging appears to be spreading.

Turning away from Europe, I spent a little time thinking about the ballooning in student loan debt today. We are all aware that it has growth very quickly. (110bn or ~70bps of GDP in the past year) What is less well publicized is what kind of people are borrowing.

Fortunately, the Dept of Education has enrollment data for institutions of higher education, although complete data only exists through 2009. Nevertheless here are some interesting factoids:
– Compared to the 2001-2006 average, total enrollment increased by 110% in 2008 and 225% in 2009. Enrollment increased by 855k in 2008 and 1.3mm in 2009, vs an average annual increase of 408k.
– The surge was especially strong for those older than 22, and strongest for those over 30
– About 60% of the increase came from full-time students.
– 86% of enrollment was at an undergraduate institution
– As a result, there may be a roughly 250k increase in the labor force this summer, composed mostly of graduates older than 22. This figure jumps to 550k in 2013.
– Fortunately, the JOLTS data this week shows job openings continue to increase, suggesting that a large portion of these graduates are likely to find jobs

Sex, age, and attendance status 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
All students 15,312 15,928 16,612 16,911 17,272 17,487 17,759 18,248 19,103 20,428
14 to 17 years old 140 161 162 184 184 210 204 202 193 200
18 and 19 years old 3,473 3,561 3,525 3,542 3,560 3,640 3,777 3,912 4,090 4,048
20 and 21 years old 3,104 3,291 3,405 3,519 3,634 3,676 3,717 3,751 3,929 3,891
22 to 24 years old 2,602 2,769 3,079 3,137 3,211 3,104 3,191 3,310 3,480 3,691
25 to 29 years old 1,963 2,023 2,130 2,195 2,306 2,397 2,421 2,561 2,737 3,059
30 to 34 years old 1,244 1,284 1,358 1,333 1,354 1,365 1,391 1,422 1,482 1,719
35 years old and over 2,786 2,839 2,954 3,001 3,022 3,095 3,058 3,091 3,191 3,820
Change Change Change Change Change Change Change Change Change
14 to 17 years old Chg 21 2 22 -1 26 -6 -2 -9 7
18 and 19 years old Chg 89 -36 17 18 79 137 135 179 -43
20 and 21 years old Chg 187 114 114 116 42 41 34 179 -38
22 to 24 years old Chg 167 310 59 74 -108 88 119 170 211
25 to 29 years old Chg 60 107 66 111 91 24 140 176 322
30 to 34 years old Chg 40 74 -25 22 11 26 31 59 237
35 years old and over Chg 53 114 48 21 73 -38 33 101 629
2001-2006 2007 2008 2009
Avg % of Avg % of Avg % of Avg
14 to 17 years old Chg 11 -14% -89% 69%
18 and 19 years old Chg 51 265% 352% -84%
20 and 21 years old Chg 102 33% 175% -37%
22 to 24 years old Chg 98 121% 173% 214%
25 to 29 years old Chg 76 183% 231% 421%
30 to 34 years old Chg 24 128% 243% 970%
35 years old and over Chg 45 73% 223% 1390%
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