From CNBC: "The recovery is going to be subpar," [Nouriel] Roubini said. "I see a one percent growth in the economy in the next few years. There will also be 11 percent unemployment next year and the recovery is going to be slow. It's going to feel like a recession even when it ends." ... When asked about the economy Monday, Roubini said, "We may be out of a freefall for the financial system," said Roubini. "We have seen the worst in that sense. But in my view there is a sluggish U shaped recovery that might go into a W double dip if we don't fix the problems in the economy." ... On a second stimulus: "I think there will be another one toward the end of the year. We need to have more shovel ready labor intensive infrastructure projects. We'll need it."

From Bloomberg: (ht Brian, Bob_in_MA) Banks have failed to make adequate provision for the losses on loans and securities they face before the end of next year ... U.S. banks may incur about $470 billion of losses and writedowns by the end of 2010, which may cause the banks to be unprofitable in the period ... “Large loan losses have yet to be recognized in the banking system,” Moody’s said. “We expect to see rising provisioning needs well into 2010.” This can't just be regional and community banks - this must include some of the stress test 19. Maybe it is time for another round of stress tests.

From Dow Jones: Commercial real-estate prices fell 7.6% in May ... The indexes are down 29% from a year ago and 35% from their October 2007 peak. According to Moody's, CRE prices fell in 8.6% in April (about 16% in two months). Talk about cliff diving!

Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., reduced holdings of mortgage debt last month and added to cash and equivalent securities. Gross cut the $161 billion Total Return Fund’s investment in mortgage bonds to 54 percent of assets, the lowest in almost two years, from 61 percent in May, according to a report on Pimco’s Web site. Gross trimmed holdings of government-related bonds to 24 percent of assets, the least since February, from 25 percent.

Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., reduced holdings of mortgage debt last month and added to cash and equivalent securities. Gross cut the $161 billion Total Return Fund’s investment in mortgage bonds to 54 percent of assets, the lowest in almost two years, from 61 percent in May, according to a report on Pimco’s Web site. Gross trimmed holdings of government-related bonds to 24 percent of assets, the least since February, from 25 percent.

Source: Henry Blodget, Aaron Task Tech Ticker, July 17, 2009 01:15pm EDT http://finance.yahoo.com/tech-ticker/article/284985/Another-Plan-To-Fix-The-Housing-Market-Rent-To-Own

A roundup of economic news from around the Web. Writing for voxeu, William C. Wheaton says house prices are ready to bottom out. “During the last decade, net new household formation averaged approximately 1.4 million per year. Last year, the Census reported that the U.S. added only 544,000 new households – during severe contractions the young stay at home, singles “double up”, and household formation (normally) slows. Even with declining demographics, however, most analysts foresee new household growth resuming to a level of at least 1 million by 2010 and beyond. If we conservatively add 200,000 demolitions per year, the US economy will “need” at least 1.25 million new units yearly in the near future. With today’s currently depressed construction, this generates a yearly deficit of 750,000 units. At that rate, the current excess inventory of units for sale or rent will be back below normal by 2011. Prices historically have a strong relationship with sales “duration” – the ratio of inventory-to-sales. Hence under reasonable conditions, in two years we will have to increase construction considerably and prices will have to justify the cost of that construction.” On his Maverecon blog, Willem Buiter looks at the Fed’s holdings from the rescue of Bear Stearns. “By any measure, the Fed is in the hole with all three SPVs. Its own estimates are that the amount by which the fair value of the net portfolio assets of each vehicle falls short of the outstanding balance of the loans extended to each of these vehicles (including accrued interest) is US$ 3.77 billion for Maiden Lane I, US$ 1.97 billion for Maiden Lane II and US$ 2.82 billion for Maiden Lane III. This is likely to be an underestimate of the true loss, because the reported fair value of the assets in the Maiden Lane vehicles is likely to overstate the present value of their held-to-maturity net cash flows. Much of the assets is illiquid, especially those in the AIG-related SPVs, Maiden Lane II and III.” Writing for...

Yesterday, I posted and wondered why “Some people were calling for a housing bottom.” That generated a ton of emails asking about for further . The people I referred to were the usual happy talk TV suspects (and Cramer) who have been perpetually wrong about Housing for nigh about 3 years. I not only disagree with them, but don’t respect their opinion — essentially headline reading gut instinct big-money-losers. No thanks. Then there were the slew of MSM who insist each month on reporting that 3% (+/- 11%) is a positive integer. We disposed of that on Friday. But the crux of the email was over . There are a handful of people whom I disagree with, but nonetheless have a great deal of respect for their methodology and process. Over the past year, these have included Doug Kass and and Bill of . We may reach different conclusions about a given issue, or disagree on timing, but these are the folks whose opinions force me to sharpen my own. When I tossed up that chart yesterday, I had not yet seen Bill’s on the subject — but he is one of those people I can respectfully disagree with. We simply have reached different conclusions about the timing and shape of the eventual Housing lows. There are a plethora of reasons why I believe we are nowhere near a bottom in Housing prices or activity. Here are a few: • Prices : By just about every measure, Home prices on a national basis remain elevated. They are now far off their highs, but are still remain about ~15% above their historic metrics. I expect prices will continue lower for the next 2-4 quarters, if not longer, and won’t see widespread Real increases for many years after that; Indeed, I don’t expect to see nominal increases for anytime soon; • Mean Reversion : As prices revert back towards historical means, there is the very high probability that they will careen past the median. This is the pattern we see after extended periods of mispricing. Nearly all overpriced asset classes revert not merely to their historic trend line...

This week, it's all Ben Bernanke, all the time. The Federal Reserve chairman will be under the spotlight four times in the next six days in what adds up to an unusual publicity blitz for a central banker. On Tuesday and Wednesday, he delivers his semiannual testimony on monetary policy to House a...

The lender on Sunday approved a deal with some of its major bondholders to help it avert a bankruptcy filing through a $3 billion emergency loan, according to people briefed on the matter.