"Beige Shoots"

I would like to say the title is my original thought but I borrowed it from Calculated Risk, which is why I put it in quotations. The Fed came out with its Beige Book today and according to some mainstream press it showed that the downturn is "moderating." Now you really need to carefully consider the words chosen and what they mean. One thing is for sure, everything will not go to zero. Housing will not become worth zero, employment will not go to zero, GDP will not fall to zero and so forth and so on. So the pace of decline has no choice but to eventually moderate. This is not a positive sign, just a less pessimistic one.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aqcOKnqxzW5E

Not all the information in the report terrible but it is hard to describe any of it as rosy. Commercial real estate in particular is rather ugly. As the folks at Calculated Risk (an excellent site on real estate) have repeatedly noted, CRE cliff diving commonly follows residential real estate cliff diving and this time is no exception.

http://www.calculatedriskblog.com/2009/06/feds-beige-book-econditions-remained.html

Calculated Risk has some other data that is not too rosy worth consideration. First, California is simply running out of money - very quickly. What happens when it cannot pay its bills? I guess we may all find out soon.

http://www.calculatedriskblog.com/2009/06/california-state-controller-out-of-cash.html

More disturbingly, mortgage rates are back up again. A good friend of mine owns a title company, does real estate closings and, in fact, I just closed on refinancing with her tonight. Last month I locked in my rate at 5% and just missed getting 4.75% because an error on my credit report delayed my lock in on the rate. In any event I am quite pleased at 5%. My friend - let's just call her Ann - told me rates on 30 year mortgages hit 6% today, just a month after I locked in 5%. Did I mention I am very happy with 5%?

I have not seen stats on this but have to believe that rates being quite low for the past few months have had a major economic benefit on main street. Certainly the people who can refinance is a limited crowd due to homeowners under water, unemployment and other factors, but for each household that was able to refinance, it probably means hundreds a month in more disposable cash, which is a major benefit that is (a) where it needs to be to stimulate our economy, (b) long term and (c) not coming out of taxpayer dollars. This was one of the better things I have seen for the economy this year and it now seems to be coming to a close rather quickly. And this is not just a refinancing issue, of course. The Beige Book noted that housing sales seemed to be stabilizing in many regions but that was in part due to low rates, which are now disappearing. Other factors are at play but the influence of low rates is at least for now going or gone.

http://www.calculatedriskblog.com/2009/06/mortgage-rates-and-ten-year-yield.html

Another worrisome factor is the quickly rising price of gasoline. I do not see the rise as sustainable and, from what I have read, it has some suspect origins, yet the price has been rising and that is not a favorable factor - at least in the short term - for any economic recovery.

Overall, the green shoots seem limited, the brown shoots are still there and now we have a lot of beige shoots. I still do not see a lot of cause to celebrate. Nonetheless, the market rebounded well today from some significant drops mid-day. I have read some posts about some suspicions on perhaps some entities painting the tape. Volume has been light so it is something that could happen. We will see if these conspiracy theories play out.

Thank You for 100

Lest my editor at Seeking Alpha consider this post not worthy, this should be my 100th article for Seeking Alpha. I do greatly appreciate being able to contribute and hope I have added to the overall equation. For those that have read me, thank you. I especially have appreciated all the thoughtful commentary (and even some of the less thoughtful commentary).

Disclosures: None.