A simple question not linked to todays headlines. Not on some geopolitical agenda regarding Ukraine but in the big picture.
Gold bugs ranting of manipulation. Naysayers echoing the cry of barbarous relic. Which one is correct and which is FOS?
Maybe some facts can shed some light.
In a classic blaming-the-victim statement Ronald Reagan said that “people who are sleeping on the grates…the homeless…are homeless, you might say, by choice.”
As the story goes a gentlemen walks into his BofA branch to make his mortgage payment.
What unfolds next has me still perplexed.
Imagine a world where sixteen hour days and .70¢ hr is the prevailing wage. Now imagine the company you worked for earned $10B in profit in 2010 and by all accounts will make $30B in profit in 2011. Now finally put yourself in a work setting where the chairman referred to the employees as "animals" and managing them gave him "a headache". The aforementioned chairman also hired a zoo keeper to give a 'peptalk' to his senior managers.
The place I am referring to manufactures many of those high tech gadgets you probably have in your house. Companies like Apple, Sony, Nintendo and HP, among many others are produced by Foxconn.
Do you like the internet? Do you like the freedom to distribute your information and the interaction you receive while surfing, blogging or just entertainment?
“SOPA" H.R.3261 and PIPA S. 978 are designed to change all that
Today on Tout TV Jim Cramer tossed softball after softball to Tim Geithner all while contorting himself into odd positions to kiss Timmy Geithner's ass. The interview here:
By now Bernard Madoff is old news and relegated to his prison cell. At the time he ran the largest ponzi scheme in financial history.
Not any longer.
I have been writing about housings downturn for sometime and housing has been trending downward for the last 57 months straight. Even with all the government support, various moratoriums, delays, refinances, loan reworks and a plethora of other gadgetry the trend still remains.
Now I am ready to call a crash. But before I get to that specific information lets look at some recent data.
If you only listen to the talking heads you may find it surprising that the housing correction is still ongoing. Quite simply put, with all the efforts of the US government, the Federal Reserve, and various agencies the best they have accomplished is to delay the decline. Now that all the capital is spent, all the programs finished the decline ensues. The only thing left in the bag is MOPE (Management of Perspective Economics).
What is MOPE? In a nutshell its a pathetic attempt to 'talk' people into an action. The theory goes that if you say its sunny outside, and its a torrential downpour, yet everyone leaves the house without an umbrella then the concept works.
For housing the concept is the same. Is everyone telling you that its sunny and "now is a great time to buy" and the justification they use is "look how much prices have come down" as evidence? The first thing I always ask these people is "Can you tell me when when would be a bad time to buy?". In hindsight they will all mention a few years ago ... but when the mania was at hand they were the very same touting the "housing never goes down in price" mantra.
What is left is wishful thinking and its pretty pathetic.
D.R. Horton's Donald Horton:
"Market conditions in the homebuilding industry are still challenging, with high foreclosures, significant existing home inventory, high unemployment, tight mortgage lending standards and weak consumer confidence. However, housing affordability remains near record highs, interest rates are favorable and new home inventory is still very low," Horton said. "We continue to focus on providing affordable homes for the first-time buyer while having product available for move-up buyers, further adjusting our cost structure relative to our current sales pace."
Translation: We're still in the dumps, but we're lowering prices, so come on and buy.
Pulte's Richard Dugas: "Over the near term, we expect the industry will continue to face low levels of demand and that overall operating conditions will remain highly competitive." Dugas then said he expects a return to profitability in the "back half of the year."
Translation: Still bad, but it has to get better, right?
Meritage's Steven Hilton:
"The market has obviously softened since the federal home buyer tax credit expired in April last year, as reflected in total U.S. home sales as well as our own sales and closings. As a result, we have offered larger incentives in some of our communities, resulting in lower margins that offset the improvements we are achieving in our new higher-margin communities...the spring selling season for the last few months is off to a tepid start, and we have not produced sales at the pace we would have hoped this far into the 2011 selling season. We believe the housing market in general is still bouncing along the bottom, with pockets of strength in certain of our markets."
Translation: We're lowering prices, throwing in upgrades, and it's not really working.
News that serious delinquencies are on the decline suggesting that those left standing in their homes will remain. Kyle Lundstedt of LPS Applied Analytics aka Dr. Doom reports that mortgage delinquencies, down more than 11 percent month-over month, are at the lowest level since 2008.
Emphasizing that subprimes, Alt-A's, the bad lending of the housing boom, have largely moved through the system already, not to mention that big banks and servicers are getting far more aggressive with loan modifications.
If anything this statement is more MOPE. Taken together I would agree. However Alt-A loans were not confined to just subprime lending. Many Alt-A loans were also prime which is where we find ourselves today with prime resets and recasts.
Dr. Doom finishes by stating "It's progress; it's not game-changing."
The foreclosure pipeline, that is loans 90+ days delinquent or in the foreclosure process, is enormous. Foreclosure inventory is at a new all-time high. There are so many loans still waiting to go into foreclosure...in fact the total number of loans 90+ delinquent is 45 times the size of the current monthly foreclosure sale number.
At the current REO sales rate it would take 48 months to clear the backlog. And this is just inventory in the pipeline, not counting the current shadow inventory or selling the delinquent inventory into the market. All that foreclosure inventory, for that long period of time, will weigh on prices no question.
And what about those aggressive writedowns Dr Doom mentions. Well according to the new MBA president David H. Stevens, who previously helmed the FHA for just a couple years before resigning to join the MBA, (at a hefty increase in salary I'm sure) noted that there are “only so many refis.”
Per the MBA forecast, the refinance share will drop to 26 percent in 2012, down from 37 percent this year and 66 percent in 2010. What seems to be remaining is the backlog of foreclosure inventory as the cure rate for many of these delinquent loans will diminish considerably.
I should include the caveat that all housing is local. Meaning what RE is doing in the flyover states may not be reflected in previous bubble states.
It seems there may only be one place on the entire planet not experiencing crushing inflation ... at the Federal Reserve.
The Federal Reserve would have you believe that everything is fine, focusing on core inflation rates and ignoring broader measures of inflation as they affect food and energy. These commodity-driven prices, as our central banking overlords would have you believe, are naturally more volatile and shouldn't be overstated.
As measured by the CRB inflation is raging having risen by nearly 33% y-0-y. Measured by the commodity price index it is over 25%.
So what makes up these indexes and how are the individual components performing y-o-y?
For all those who had been hoping for swift but fair judicial treatment for criminal bank actions ... dont hold your breath. "The Office of the Comptroller of the Currency, the Federal Reserve and the Office of Thrift Supervision have spent the past few days completing the settlements with some of the largest U.S. banks, including Bank of America Corp, Wells Fargo & Co, JPMorgan Chase and Citigroup Inc. The pacts would resolve only part of a large probe involving a group of 50 state attorneys general and about a dozen federal agencies." But don't worry, banks won't actually have to part with even one dollar:
For all the "investigations" into criminal behavior by the largest Wall Street banks it is Main Street that has felt the pain. According to the NYT some 6.7 million homes have already been lost in the housing bust, and another 3.3 million will be lost through 2012. According to Zillow a staggering $9 trillion in home equity has been lost since the real estate market peaked in June 2006.
Caused in large part by reckless lending and excessive risk taking by major financial institutions, no senior executives have been charged or imprisoned, and a collective government effort has not emerged. This stands in stark contrast to the savings and loan crises in the late 1980s. In the wake of that debacle, special government task forces referred 1,100 cases to prosecutors, resulting in more than 800 bank officials going to jail.
A lawsuit filed against the SEC over the Madoff ponzi scheme was ruled on Tuesday. The suit alleged that the SEC had been repeatedly tipped off to the Madoff situation and flat-out failed to address it.
In any event, a federal judge on Tuesday dismissed the suit, which alleged the SEC had acted with “gross negligence.” U.S. District Judge Laura Swain ruled that the plaintiffs had failed to “identify any specific, mandatory duty that the SEC violated.”
Nevertheless, Swain excoriated the SEC, calling its behavior “sloppy,” “uninformed,” and “irresponsible.” That said, continued Swain, “that the conduct in question defied common sense and reeked of incompetency does not indicate that any formal, specific, mandatory policy was ‘likely’ violated.”
It has become all to apparent that in todays Washington, Wall Street environment that being a bumbling idiot, even to the point of criminal will only get you a "strongly" worded reprimand and, quite possibly, a promotion.
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