Financial Headlines 7/15/2009

• Industrial production decreased 0.4% in June on the heels of a 1.2% decline in May. For the second quarter as a whole, output fell at an annual rate of 11.6%. If you like your data delivered with a bullish bent, click on the Bloomberg link which claims that the continued decline, albeit at a slower pace, is a sure sign that the economy is on the mend. Alternatively, you can visit the realists at Calculated Risk, who point out that capacity utilization for total industry declined in June to 68%, a level 12.9% below its average for 1972-2008. Prior to the current recession, the low over the history of the series which began in 1967 was 70.9% in December 1982. Little reason for new investment in production facilities until capacity utilization recovers.
• CPI rose 0.7%, but if you strip out that pesky food and energy component that nobody really purchases anyway, the core rose 0.2%.
• The MBA index increased 4.3% to 514.4 from the prior week. The increase was mostly due to a surge in refi activity, as the purchase index actually declined 9.4%. The average interest rate for 30-year fixed rate mortgages declined to 5.05% from 5.34%. Good news again for those cash strapped home owners who have yet to refinance. Unless, of course, they can't get a decent appraisal, which is a whole other story.
• Intel reported a loss, due mostly to a $1.45 billion anti-trust fine. However, quarterly revenues were sequentially higher by 13% to $8.02 billion, although still 15% below year earlier levels. The tech giant forecast a surprisingly strong third quarter, calling for revenues to hit $8.9 billion. The positive guidance has sparked a rally in tech stocks.
• The folks over at Calpers are steaming mad and plan to take action. The California pension fund manager has filed a lawsuit against the three biggest rating agencies accusing them of "wildly inaccurate and unreasonably high" ratings. It's funny that the pension holders of California haven't filed a lawsuit against Calpers for "being too lazy to do any of its own investment analysis and depending on a rating from a firm that derives its revenues from the sellers of the securities." I find these lawsuits to be really annoying. If you're a professional investor tasked with managing money, take your job seriously and know what you're investing in. Did somebody put a gun to Calpers head and ask them to invest $1.3 billion in three separate SIVs with AAA ratings that happened to own buckets of collateral probably secured by subprime mortgages? No. They did it because it offered higher returns. Higher returns = higher risk. Sack up and face the consequences of your stupid investment decisions.