Important News - Jan. 02

• 1) U.S. Stocks Drop as Crisis Causes S&P 500’s First Decade Loss

“This year’s rally wasn’t enough to restore money lost in two bear markets after the Internet bubble collapsed in 2000 and more than $1.7 trillion in global bank losses sent the index to a 38 decline in 2008. The S&P 500 posted an average decrease of 0.9 percent a year since 1999 including dividends, the first negative return for a decade since data began in 1927, according to S&P analyst Howard Silverblatt.”

• 2) Job Losses Cut Into U.S. Driving

“Motor travel was expected to increase in 2009 after a jump in prices at the pump and the economic downturn led drivers to cut back a year earlier. In 2008, U.S. highway officials didn’t record a year-over-year increase for the first time in 25 years.

But a tally of miles driven by U.S. passenger and commercial vehicles for the 12 months ending in October, the latest available, indicates that drivers still avoided their cars in 2009.

In fact, it is possible that final 2009 numbers from the Federal Highway Administration will show that Americans drove fewer miles than in 2008.”

• 3) U.S. to Lose $400 Billion on Fannie, Freddie, Wallison Says

“Taxpayer losses from supporting Fannie Mae and Freddie Mac will top $400 billion, according to Peter Wallison, a former general counsel at the Treasury who is now a fellow at the American Enterprise Institute.

“The situation is they are losing gobs of money, up to $400 billion in mortgages,” Wallison said in a Bloomberg Television interview. The Treasury Department recognized last week that losses will be more than $400 billion when it raised its limit on federal support for the two government-sponsored enterprises, he said.”

• 4) Is The Government Misrepresenting Unemployment By 32%? (Zerohedge)

“Yet what struck us is the when this chart is presented from 2007 until today. Something unusual emerges. An absolute chart of the money spent by the government superimposed with the total insured unemployed is presented below:

What becomes obvious is that a correlation which used to be almost 1.000 has diverged massively, and now the relative outlays surpass what the government highlights are the number of people actually collecting benefits by 32%! This implies two things: either the average unemployment monthly paycheck has surged, which is not the case, or there is some gray unemployment area which is not disclosed by the government, and which accounts for a shadow unemployed insurance economy.”

• 5) The Hidden Depression In The Great Recession (M.W.)

The story of the Great Depression is often told in pictures: photographs of bank runs and bread lines continue to pack a punch, almost 80 years after they were first snapped. But the Great Depression’s position as our absolute standard for economic disaster carries an unintended consequence: The power of its images seem to overwhelm — and minimize — the economic troubles of our own time. After all, if it doesn’t look like a Depression, how tough could things be?

• 6) Three Reasons Home Prices Are Heading Lower (M.W.)

Most forecasts predict price declines in 2010, with possible losses ranging from anywhere from 3% on up. Fiserv Lending Solutions, a financial analytics firm, forecasts that prices will fall in all but 39 of the 381 markets it covers, with an average drop of 11.3%.