Mike Shedlock

Inquiring minds note China, Germany Plan to Settle More Trade in Yuan, Euros.

Germany and China plan to conduct an increasing amount of their trade in euros and yuan, the two nations said in a joint statement after talks between Chancellor Angela Merkel and Chinese Premier Wen Jiabao in Beijing on Thursday.

"Both sides intend to support financial institutions and companies of both countries in the use of the renminbi and euro in bilateral trade and investments," said the text of the statement.

It also said that both parties welcomed investments in China's interbank bond market by German banks and supported the settlement of business in the yuan by German and Chinese banks and the issuance of yuan-denominated financial products in Germany.

Announcement Mean Anything?

That's the announcement, and I have no doubt people who do not understand trade math will trump this up as if it's news of big significance.

Well, it's not. The announcement is a common sense function of math.

There is more bilateral trade between Germany and China, so fundamentally it makes sense that this agreement would be worked out. Indeed, mathematically, the markets would eventually force such an agreement.

If Germany goes back to the Deutschmark, then one should expect bilateral trade between the countries to be in Deutschmarks and Yuan.

The only relevance to the dollar is if Germany is taking away US trade with China. If not, the announcement is a meaningless function of math.

 

Foreclosure Stats From You Walk Away

Here are some interesting stats courtesy of Jon Maddux, CEO of You Walk Away.

State % of You Walk Away Clients With No Foreclosure Notice Average Months Without Foreclosure Notice
Washington

79%

13

Nevada

79%

13

Georgia

75%

12

Michigan

73%

18

Virginia

72%

18

Oregon

69%

13

Pennsylvania

66%

12

Hawaii

60%

21

California

59%

15

New York

57%

16

New Jersey

53%

14

Arizona

52%

14

Colorado

52%

8

Florida

45%

17

Ohio

37%

19


Says Maddux
In Florida, 45% of our clients are in pre-foreclosure status. On average, these Florida homeowners are 17 months delinquent and have yet to receive even their first formal foreclosure notice. 59% of our California clients are in pre-foreclosure status. These California borrowers are an average of 15 months delinquent and also have yet to receive their first formal foreclosure notice. Eighty-five percent of the homeowners we’re working with are in pre-foreclosure and have not made a mortgage payment for an average of 14 months.
Structural Issues

  • Kids graduating from college are deep in debt and holding off home buying, getting married, and starting families.
  • Boomers looking to retire and downsize have few candidates able and willing to buy larger homes, even with deep discounts
  • Shadow inventory and pent-up foreclosure list are huge.

Maddux believes the data points to significant backlog, eventual foreclosure activity and a drop in value for home prices.

I think home prices are bottoming in many areas, but even if so, prices in general are not going anywhere fast because of aforementioned structural issues.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Mike Shedlock

Mike Shedlock is a registered investment advisor representative for Sitka Pacific Capital Management.